SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
-------------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange act of 1934
Date of Report: June 27, 1997
(Date of earliest event reported)
-----------------------------------------------
SMART CHOICE AUTOMOTIVE GROUP, INC.
(Exact name of registrant as specified in its charter)
------------------------------------------------
Florida 1-14082 1-14082 59-1469577
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation or
organization)
5200 South Washington Avenue, Titusville, Florida 32780
(Address of principal executive offices) (Zip Code)
(407) 269-9680
Registrant's telephone number, including area code:
-----------------------
<PAGE>
This Amendment No. 1 supplements the Report on Form 8-K Filed with the
Securities and Exchange Commission on June 27, 1997 by Smart Choice Automotive
Group, Inc., formerly known as Eckler Industries, Inc. (the "Registrant") to
file (a) the financial statements of the acquired companies and (b) the pro
forma financial information relating to the business combination of the
Registrant and the acquired companies.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
The following financial statements of businesses acquired are included
herein pursuant to Item 7(a):
STRATA HOLDING, INC. and READY FINANCE, INC.
Independent Auditors Report
Combined Balance Sheet as of December 31, 1996
Combined Statement of Operations for the Year Ended
December 31, 1996
Combined Statement of Stockholders' Equity for the Year
Ended December 31, 1996
Combined Statement of Cash Flows for the Year Ended
December 31, 1996
Notes to Combined Financial Statements
Independent Auditor's Report on Supplemental Material
Supplemental Combining Balance Sheet as of December 31, 1996
Supplemental Combining Statement of Operations for the Year
Ended December 31, 1996
(b) Pro Forma Financial Information
The following pro forma financial information is included herein
pursuant to Item 7(b):
SMART CHOICE AUTOMOTIVE GROUP, INC.
Pro Forma Consolidated Financial Information -
Explanatory Headnote (unaudited)
Pro Forma Consolidated Balance Sheets as of December 31, 1996
(unaudited)
Pro Forma Consolidated Statement of Operations for the Year
Ended December 31, 1996 (unaudited)
Pro Forma Consolidated Statement of Operations for the Six
Months Ended June 30, 1997 (unaudited)
Notes to Pro Forma Consolidated Financial Information
(unaudited)
<PAGE>
(c ) Exhibits
The Exhibits to this report are set forth in the Exhibit Index set
forth herein.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated: September 10, 1997 SMART CHOICE AUTMOTIVE GROUP, INC.
By: /s/ Gary R. Smith
Gary R. Smith, President
<PAGE>
Exhibit Index
99.1 Combined Financial Statements of Strata Holding, Inc. and Ready
Finance, Inc. as of December 31, 1996, and the related combined
statement of operations, stockholder's equity and cash flows for the
year then ended, together with the report of BDO Seidman, L.L.P.
99.2 Pro Forma Financial Statements.
Strata Holding, Inc.
and Ready Finance, Inc.
Combined Financial Statements
and Supplemental Material
Year ended December 31, 1996
<PAGE>
Strata Holding, Inc.
and Ready Finance, Inc.
Contents
Independent auditors' report 3
Financial statements
Combined balance sheet 4
Combined statement of operations 5
Combined statement of stockholders' equity 6
Combined statement of cash flows 7
Notes to combined financial statements 8 - 14
Supplemental material
Independent auditors' report on supplemental material 16
Combining balance sheet 17
Combining statement of operations 18
<PAGE>
BDO Seidman, LLP
Accountants and Consultants
201 S. Orange Avenue, Suite 950
Orlando, FL 32801-3241
Telephone: (407) 841-6930
Fax: (407) 841-6347
Independent Auditors' Report
Strata Holding, Inc. and Ready Finance, Inc.
West Palm Beach, Florida
We have audited the accompanying combined balance sheets of Strata Holding Inc.
and Ready Finance, Inc. (collectively "the Company") as of December 31, 1996 and
the related combined statements of operations, stockholders' equity, and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Strata
Holding, Inc. and Ready Finance, Inc. as of December 31, 1996, and the results
of their combined operations and their combined cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ BDO Seidman, LLP
Orlando, Florida Certified Public Accountants
September 7, 1997
<PAGE>
Strata Holding, Inc.
and Ready Finance, Inc.
Combined Balance Sheet
<TABLE>
December 31 1996
- ----------- ----
<S> <C>
Assets (Note 5)
Cash $ 86,000
Accounts receivable 171,592
Finance receivables, principal balances (Note 2) 5,627,381
Less allowance for credit losses (Note 2) (1,158,712)
-----------
Finance receivables, net 4,468,669
Inventories (Note 3) 1,530,253
Property and equipment, net (Note 4) 69,180
Other 91,135
-----------
$ 6,416,829
-----------
Liabilities and stockholders' equity
Liabilities
Accounts payable $ 271,882
Sales taxes payable 23,370
Note payable - bank (Note 5) 1,640,000
Notes payable - related parties (Note 5) 2,514,625
-----------
Total liabilities 4,449,877
-----------
Commitments (Note 7) --
Stockholders' equity (Note 6)
Common stock 2,000
Retained earnings 1,964,952
-----------
Total stockholders' equity 1,966,952
-----------
$ 6,416,829
-----------
See accompanying notes to combined financial statements.
</TABLE>
<PAGE>
<TABLE>
Strata Holding, Inc.
and Ready Finance, Inc.
Combined Statements of Operations
<S> <C>
Year ended December 31, 1996
- ----------------------- ----
Revenues:
Sales of used vehicles $ 9,515,375
Income on finance receivables 1,526,208
-----------
11,041,583
-----------
Cost of Revenues:
Cost of used vehicles sold 6,973,535
Provision for credit losses (Note 2) 1,285,539
-----------
8,259,074
-----------
Net revenues 2,782,509
Operating expenses 2,187,377
-----------
Income from operations 595,132
Interest expense 218,694
-----------
Net income $ 376,438
-----------
</TABLE>
See accompanying notes to combined financial statements.
<PAGE>
<TABLE>
Strata Holding, Inc.
and Ready Finance, Inc.
Combined Statement of Stockholders' Equity
Common Retained
Stock Earnings Total
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1995 $ 2,000 $ 2,098,514 $ 2,100,514
Net income -- 376,438 376,438
Distributions -- (510,000) (510,000)
- -------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 $ 2,000 $1,964,952 $ 1,966,952
- -------------------------------------------------------------------------------------------------------------------
See accompanying notes to combined financial statements.
</TABLE>
<PAGE>
Strata Holding, Inc.
and Ready Finance, Inc.
Combined Statement of Cash Flows
<TABLE>
Year ended December 31, 1996
- ----------------------- ----
<S> <C>
Cash flows from operating activities
Net income $ 376,438
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 18,741
Provision for credit losses 1,285,539
Decrease (increase):
Accounts receivable (82,953)
Inventories (215,678)
Other assets (36,995)
Increase (decrease):
Accounts payable 120,551
Sales taxes payable (8,668)
-----------
Net cash provided by operating activities 1,456,975
-----------
Cash flows from investing activities
Purchase of property and equipment (36,345)
Net increase in finance receivables (1,804,834)
-----------
Net cash used in investing activities (1,841,179)
-----------
Cash flows from financing activities
Net borrowings under line of credit 1,639,900
Net payments on notes payable to related parties (996,730)
Distributions to stockholders (510,000)
-----------
Net cash provided by financing activities 133,170
-----------
Net decrease in cash (251,034)
Cash, beginning of year 337,034
-----------
Cash, end of year $ 86,000
-----------
See accompanying notes to combined financial statements.
</TABLE>
<PAGE>
Strata Holding, Inc.
and Ready Finance, Inc.
Notes to Combined Financial Statements
1. Summary of Significant Accounting Policies
Nature of Business
- ------------------
The principal business activities of Strata Holding, Inc. (dba Don Cook
Motors) and Ready Finance, Inc. (collectively the "Company") are retail and
wholesale sales, and the related financing, of used vehicles in the South
Florida market.
Use of Estimates
- ----------------
In preparing the financial statements in accordance with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements as well as
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Principles of Combination
- -------------------------
The combined financial statements include Strata Holding, Inc. and Ready
Finance, Inc. Ownership of each Company is vested primarily in the same
stockholders, and the Companies are under common management. Because of these
relationships, the financial statements of the Companies have been presented as
if they were a single entity. All material intercompany transactions and
balances have been eliminated in combination.
Revenue Recognition
- -------------------
Vehicle sales are recognized upon delivery.
Interest income from finance receivables is recognized using the straight-line
method which approximates the interest method.
Presentation of Revenues and Cost of Revenues
- ---------------------------------------------
The prices at which the Company sells its cars 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 by the Company 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 of used
vehicles less cost of used vehicles sold.
<PAGE>
Strata Holding, Inc.
and Ready Finance, Inc.
Notes to Combined Financial Statements
1. Summary of Significant Accounting Policies (Concluded)
Allowance for Credit Losses
- ---------------------------
The allowance for uncollectible finance receivables is maintained at a level
which, in management's judgment, is adequate to absorb potential losses inherent
in the loan portfolio. The amount of the allowance is based on management's
evaluation of the collectibility of the loan portfolio, including the nature of
the portfolio, credit concentrations, trends in historical loss experience,
specific impaired loans, collateral values, and economic conditions. Because of
uncertainties associated with regional economic conditions, collateral values,
and future cash flows on impaired loans, it is reasonably possible that
management's estimate of credit losses inherent in the loan portfolio and the
related allowance may change materially in the near term. However, the amount of
change that is reasonably possible cannot be estimated. The allowance for
uncollectible finance receivables is increased by a provision for loan losses,
which is charged to expense. Repossessed vehicles are recorded as inventory at
their estimated fair value. The difference between the balance of the
installment contract and the estimated fair value of the repossessed vehicle is
charged to the allowance for credit losses.
Inventories
- -----------
Inventories are stated at the lower of cost or market, on a specific unit basis.
Property and Equipment
- ----------------------
Property and equipment are stated at cost. Depreciation on equipment is computed
using an accelerated method, and amortization on leasehold improvements is
computed using the straight-line method, over the estimated useful lives of the
assets.
Income Taxes
- ------------
The Company, with the consent of its stockholders, has elected under the
Internal Revenue Code to be "S corporations". In lieu of corporation income
taxes, the stockholders of an S corporation are taxed on the Company's taxable
income. Therefore, no provision or liability for federal income taxes has been
included in these financial statements.
<PAGE>
Strata Holding, Inc.
and Ready Finance, Inc.
Notes to Combined Financial Statements
2. Finance Receivables
Finance receivables consist of the following:
December 31, 1996
- -------------------------------------------------------------------------------
Contractually scheduled payments $ 7,137,220
Less unearned finance charges 1,509,839
- -------------------------------------------------------------------------------
Principal balances, net $ 5,627,381
- -------------------------------------------------------------------------------
Finance receivables consist of sales of vehicles under installment sale
contracts with maturities that generally do not exceed 48 months. The
receivables bear interest at rates ranging from 17% to 30% and are
collateralized by the vehicles sold. The Company holds title to the vehicles
until full contract payment is made. Finance receivables are pledged as
collateral under the note payable (see Note 5).
Changes in the allowance for credit losses are as follows:
Year ended December 31, 1996
- ------------------------------------------------------------------------------
Balance at beginning of year $ 875,222
Loans charges off, net of recoveries (1,002,049)
Provision for credit losses 1,285,539
- -------------------------------------------------------------------------------
Balance at end of year $ 1,158,712
- -------------------------------------------------------------------------------
3. Inventories
Inventories consist of the following:
December 31, 1996
- -------------------------------------------------------------------------------
Used vehicles $ 1,512,753
Parts and accessories 17,500
- -------------------------------------------------------------------------------
$ 1,530,253
- -------------------------------------------------------------------------------
<PAGE>
Strata Holding, Inc.
and Ready Finance, Inc.
Notes to Combined Financial Statements
4. Property and Equipment
Property and equipment consists of the following:
Useful
December 31, Lives 1996
- -------------------------------------------------------------------------------
Equipment 5 - 7 $ 146,154
Leasehold improvements 31.5 69,234
- -------------------------------------------------------------------------------
215,388
Less accumulated depreciation and amortization 146,208
- -------------------------------------------------------------------------------
$ 69,180
- -------------------------------------------------------------------------------
5. Notes Payable
Notes payable consist of the following:
Note payable to bank:
December 31, 1996
- -------------------------------------------------------------------------------
$2,000,000 revolving line of credit due
to bank, bearing interest at prime plus
1% (9.75% at December 31, 1996),
collateralized by first lien on business
assets and second mortgage on real estate
(owned by a stockholder), due on demand $1,640,000
- -------------------------------------------------------------------------------
<PAGE>
Strata Holding, Inc.
and Ready Finance, Inc.
Notes to Combined Financial Statements
5. Notes Payable (Concluded)
Notes payable to related parties:
December 31, 1996
- -------------------------------------------------------------------------------
Unsecured notes payable to stockholders
with interest ranging from 6% to 12%,
due December 31, 1996 $1,139,000
Unsecured notes payable to relatives of
stockholders, with interest ranging from
6% to 12% and due from December 31,
1996 to December 31, 1997 507,625
Unsecured notes payable to companies under
common control, interest at 6%, due
December 31, 1996 868,000
- -------------------------------------------------------------------------------
$2,514,625
- -------------------------------------------------------------------------------
The line of credit and notes payable to related parties were paid off in July
1997 in connection with the sale of the Company's assets (see Note 10).
6. Stockholders' Equity
At December 31, 1996 the Company's stockholders' equity consisted of the
following:
Retained
Common Earnings
Stock (Deficit)
- -------------------------------------------------------------------------------
Strata Holding, Inc. par value
$1 per share, 7,500 shares
authorized, 1,000 shares issued
and outstanding $ 1,000 $ (105,770)
Ready Finance, Inc. par value
$1 per share, 7,500 shares
authorized, 1,000 shares issued
and outstanding 1,000 2,070,722
- -------------------------------------------------------------------------------
$ 2,000 $1,964,952
- -------------------------------------------------------------------------------
<PAGE>
Strata Holding, Inc.
and Ready Finance, Inc.
Notes to Combined Financial Statements
7. Lease Commitments
The Company leases an office building and a warehouse from a stockholder. The
future minimum rentals under noncancellable operating leases with this related
party are as follows:
Year ending December 31,
- -------------------------------------------------------------------------------
1997 $105,000
1998 87,000
1999 51,000
2000 22,000
- -------------------------------------------------------------------------------
$265,000
- -------------------------------------------------------------------------------
8. Related Party Transactions
The facilities under operating leases (Note 7) are owned by a stockholder. Total
rent paid to that stockholder for those facilities amounted to $107,890 during
1996.
The building occupied by Ready Finance, Inc. which is owned by a
stockholder is being held for collateral against the line of credit (see
Note 5).
Interest expense on related party notes payable (see Note 5) was $136,689
during 1996.
9. Supplemental Cash Flow Information
Cash paid for interest approximated $444,188 during 1996.
<PAGE>
Strata Holding, Inc.
and Ready Finance, Inc.
Notes to Combined Financial Statements
10. Subsequent Event
On June 27, 1997, the stockholders of Strata Holding, Inc. ("Strata") and Ready
Finance, Inc. ("Ready" entered into an agreement to sell substantially all of
the assets owned or used by Strata and Ready to Smart Choice Automotive Group,
Inc. ("Smart Choice"). In addition, Smart Choice assumed certain liabilities of
Strata and Ready and paid off the related party notes payable (see Note 5).
As consideration for the assets acquired, Smart Choice paid the stockholders
cash of $3.2 million, paid off the Company's line of credit of approximately
$1.8 million (see Note 5), and issued to Ready a subordinated note in the amount
of $3,680,089 and a secured note in the amount of $1,200,000. The notes bear
interest at 9% and are payable in equal monthly installments which total $27,112
until June 1999 when the entire unpaid balances plus accrued interest are due in
full. The secured note is collateralized by certain equipment and inventory.
The transaction described above resulted in the termination of the Company's
election under the Internal Revenue Code to be "S Corporations".
<PAGE>
Supplemental Material
------------------------
Independent Auditors' Report
on Supplemental Material
Our audits of the combined financial statements included in the preceding
section of this report were made for the purpose of forming an opinion on those
statements taken as a whole. The supplemental material presented in the
following section of this report is presented for purposes of additional
analysis and is not a required part of the combined financial statements. Such
information has been subjected to the auditing procedures applied in the audit
of the combined financial statements and, in our opinion, is fairly stated in
all material respects in relation to the combined financial statements taken as
a whole.
/s/ BDO Seidman, LLP
Orlando, Florida Certified Public Accountants
September 7, 1997
<PAGE>
Strata Holding, Inc.
and Ready Finance, Inc.
Combining Balance Sheet
<TABLE>
Strata Ready Combining Combined
December 31, 1996 Holding, Inc. Finance, Inc. Entries Totals
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Cash $ 20,840 $ 65,160 $ -- $ 86,000
Accounts receivable 171,592 -- -- 171,592
Finance receivables, net -- 4,468,669 -- 4,468,669
Inventory 1,530,253 -- -- 1,530,253
Property and equipment, net 69,180 -- -- 69,180
Intercompany receivable 1,573,000 -- (1,573,000) --
Other assets 50,617 40,518 -- 91,135
- -----------------------------------------------------------------------------------------------
$ 3,415,482 $ 4,574,347 $(1,573,000) $ 6,416,829
- -----------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Liabilities
Accounts payable $ 271,882 $ -- $ -- $ 271,882
Sales tax payable 23,370 -- -- 23,370
Note payable - bank 1,640,000 -- -- 1,640,000
Notes payable - related
parties 1,585,000 929,625 -- 2,514,625
Intercompany payable -- 1,573,000 (1,573,000) --
- -----------------------------------------------------------------------------------------------
Total liabilities 3,520,252 2,502,625 (1,573,000) 4,449,877
- -----------------------------------------------------------------------------------------------
Stockholders' equity
Common stock 1,000 1,000 -- 2,000
Retained earnings (deficit) (105,770) 2,070,722 -- 1,964,952
- -----------------------------------------------------------------------------------------------
Total stockholders' equity
(deficit) (104,770) 2,071,722 -- 1,966,952
- -----------------------------------------------------------------------------------------------
$ 3,415,482 $ 4,574,347 $(1,573,000) $ 6,416,829
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Strata Holding, Inc.
and Ready Finance, Inc.
Combining Statement of Operations
<TABLE>
Year ended Strata Ready Combining Combined
December 31, 1996 Holding, Inc. Finance, Inc. Entries Totals
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Sales of used vehicles $ 9,515,375 $ -- $ -- $ 9,515,375
Income on finance
receivables -- 1,614,588 (88,380) 1,526,208
- ------------------------------------------------------------------------------------------
9,515,375 1,614,588 (88,380) 11,041,583
- ------------------------------------------------------------------------------------------
Cost of Revenues:
Cost of used vehicles sold 6,973,535 -- -- 6,973,535
Provision for credit losses 525,137 509,725 250,677 1,285,539
- ------------------------------------------------------------------------------------------
7,498,672 509,725 250,677 8,259,074
- ------------------------------------------------------------------------------------------
Net revenues 2,016,703 1,104,863 (339,057) 2,782,509
Operating expenses 1,728,265 459,112 -- 2,187,377
- ------------------------------------------------------------------------------------------
Income from operations 288,438 645,751 (339,057) 595,132
Interest expense 390,507 167,244 (339,057) 218,694
- ------------------------------------------------------------------------------------------
Net income (loss) $ (102,069) $ 478,507 $ -- $ 376,438
- ------------------------------------------------------------------------------------------
</TABLE>
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Financial Information
Explanatory Headnote (Unaudited)
Introduction
On October 28, 1996, Eckler Industries, Inc. (Eckler) entered into an Agreement
and Plan of Reorganization (the Agreement) with Smart Choice Holdings, Inc.
(SCHI). SCHI had previously entered into agreements to acquire the outstanding
capital stock or net assets of other companies. The closing of the transaction
between Eckler and SCHI occurred on January 28, 1997. The transactions between
SCHI and the other companies closed on January 28, 1997 (prior to the Eckler and
SCHI closing), February 12, 1997 and February 14, 1997.
Based on the controlling interest in Eckler obtained by SCHI as a result of this
transaction, the transaction will be accounted for as an acquisition of Eckler
by SCHI (a reverse acquisition in which SCHI is considered the acquirer for
accounting purposes).
SCHI was incorporated on June 21, 1996 and had no significant operations or
assets until it acquired Eckler and the other companies. The acquisition of
Eckler and the other companies will be accounted for as a purchase, with the
assets acquired and liabilities assumed recorded at their estimated fair values.
On June 27, 1997, Smart Choice Automotive Group, Inc. acquired certain assets
and assumed certain liabilities of Strata Holding, Inc. and Ready Finance, Inc.,
which were under common ownership.
The pro forma condensed consolidated balance sheets as of December 31, 1996
assume the transactions were consummated as of December 31, 1996, and the pro
forma condensed consolidated statements of operations for the year ended
December 31, 1996 and the six months ended June 30, 1997 assumes the
transactions were consummated as of January 1, 1996.
The pro forma condensed consolidated financial statements may not be indicative
of the actual results of the transactions. In particular, the pro forma
condensed consolidated financial statements are based on management's current
estimate of the allocations of purchase price, the actual allocation of which
may differ.
In the opinion of management, all adjustments have been made that are necessary
to present fairly the pro forma data.
Acquisition of Liberty Finance Company, Inc. and Affiliates
The outstanding capital stock of Liberty was acquired for $1,500,000 in notes
due to the seller, 352,156 shares of restricted common stock valued at $3.375
per share ($1,188,527) and $54,026 in acquisition costs. Prior to the
acquisition, the selling stockholder converted debt amounting to $628,941 to the
capital of Liberty.
The purchase price for Liberty is anticipated to be allocated as follows:
Fair value of assets acquired $ 15,818,914
Excess of cost over net assets acquired 1,633,463
--------------
17,452,377
Fair value of liabilities assumed 14,709,824
--------------
Total purchase price of net assets acquired $ 2,742,553
==============
Acquisition of Florida Finance Group, Inc. and Affiliates
The outstanding capital stock of Florida Finance and the net assets of its
affiliated companies were acquired for $892,722 in notes due to the seller, the
issuance of 285,714 shares of restricted common stock valued at $3.375 per share
($964,285) and $40,643 in acquisition costs.
The purchase price for Florida Finance is anticipated to be allocated as
follows:
Fair value of assets acquired $ 5,015,224
Excess of cost over net assets acquired 3,238,721
--------------
8,253,945
Fair value of liabilities assumed 6,356,295
--------------
Total purchase price of net assets acquired $ 1,897,650
==============
Acquisition of 225 North Military Trail Corporation and Affiliate
The net assets of 225 North Military Trail and Affiliate were acquired for
$3,000,000 cash, $1,250,000 in notes due to the seller, 285,714 shares of
restricted common stock valued at $3.375 per share ($964,286) and $53,299 in
acquisition costs.
The purchase price for 225 North Military Trail is anticipated to be allocated
as follows:
Fair value of assets acquired $ 5,108,400
Excess of cost over net assets acquired 808,278
--------------
5,916,678
Fair value of liabilities assumed 649,093
--------------
Total purchase price of net assets acquired $ 5,267,585
==============
Acquisition of Dealer Development Services, Inc.
The outstanding capital stock of Dealer Development Services, Inc. was acquired
for $384,615 in notes due to the seller and $3,934 in acquisition costs.
The purchase price for Dealer Development Services is anticipated to be
allocated as follows:
Fair value of assets acquired $ 101,116
Excess of cost over net assets acquired 892,426
--------------
993,542
Fair value of liabilities assumed 604,993
--------------
Total purchase price of net assets acquired $ 388,549
==============
Acquisition of Dealer Insurance Services, Inc.
The outstanding capital stock of Dealer Insurance Services, Inc. was acquired
for $365,385 in notes due to the seller and $20,627 in acquisition costs.
The purchase price for Dealer Insurance Services is anticipated to be allocated
as follows:
Fair value of assets acquired $ 132,461
Excess of cost over net assets acquired 421,485
--------------
553,946
Fair value of liabilities assumed 167,934
--------------
Total purchase price of net assets acquired $ 386,012
==============
Acquisition of Eckler Industries, Inc.
The acquisition of Smart Choice Holdings, Inc. by Eckler will be accounted for
as an acquisition of Eckler by SCHI (a reverse acquisition in which SCHI is
considered the acquirer for accounting purposes). The purchase price for Eckler
is computed by valuing the outstanding shares of common stock of Eckler (the
equivalent of 2,757,500 shares) at $3.375 or $9,306,563 and acquisition costs of
$100,119.
The purchase price for Eckler is anticipated to be allocated as follows:
Fair value of assets acquired $ 6,366,508
Excess of cost over net assets acquired 7,004,572
--------------
13,371,080
Fair value of liabilities assumed 3,964,398
--------------
Total purchase price of net assets acquired $ 9,406,682
==============
Acquisition of Strata Holding, Inc. and Ready Finance, Inc.
Certain net assets of Strata Holding, Inc. and Ready Finance, Inc. (companies
under common ownership) were acquired for $5,000,000 cash and $4,880,089 in
notes due to the seller and $27,271 in acquisition costs.
The purchase price for Strata Holding, Inc. and Ready Finance, Inc. is
anticipated to be allocated as follows:
Fair value of assets acquired $ 6,207,686
Excess of cost over net assets acquired 3,910,984
--------------
10,118,670
Fair value of liabilities assumed 211,310
--------------
Total purchase price of net assets acquired $ 9,907,360
==============
<PAGE>
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Balance Sheets
(Unaudited)
<TABLE>
SCHI Liberty 225 North Dealer
Pro Forma Pro Forma Florida Military Develop- Dealers
December 31, 1996 SCHI Adjustments Liberty Adjs. Finance Trail ment Insurance Eckler
---- ----------- ------- --------- ------- -------- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Cash $ $7,950,000 (2) $ 163,184 $ $ 20,272 $ 192,999 $94,892 $ 1,288 $ 241,652
(2,950,000)(6)
(5,000,000)(10)
Accounts receivable 25,000 17,765 115,050 153,285
Notes receivable 400,000 326,700
Finance receivables 11,383,431 4,383,759 4,057,682
Inventories 2,861,848 440,317 799,358 1,307,525
Prepaid expenses 26,940 5,385 1,385,398
Land held for sale 1,050,000
Deferred tax asset 330,610
Property and equipment, net 22,454 272,543 141,576 10,086 5,037 9,356 2,512,645
Investment in subsidiaries 2,742,553 (4)
1,897,650 (5)
5,267,585 (6)
388,549 (7)
386,012 (8)
9,406,682 (9)
9,907,360 (10)
Excess of cost over net
assets acquired
Debt issue costs, net of
accumulated amortization 24,735 4,154
Deposit on acquisition 50,000 (50,000)(6)
Deferred acquisition costs 194,101 144,928 (3)
(54,026)(4)
(40,643)(5)
(53,299)(6)
(3,934)(7)
(20,627)(8)
(100,119)(9)
(27,271)(10)
Other assets 83,754 2,360 48,275 1,187 1,382 108,693
--------- ----------- ----------- ------ ---------- ---------- -------- -------- ----------
$ 716,290 $29,791,400 $15,818,914 $ - $5,032,989 $5,108,400 $101,116 $132,461 $6,366,508
========= =========== =========== ====== ========== ========== ======== ======== ==========
See accompanying headnote and notes to pro forma consolidated financial statements (unaudited).
</TABLE>
<PAGE>
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Balance Sheets
(Unaudited)
<TABLE>
Strata Strata/Ready
and Ready Pro Forma Eliminating Consolidated
December 31, 1996 Finance Adjustments Entries Pro Forma
-------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Assets:
Cash $ 86,000 $ (86,000)(10) $ $ 714,287
Accounts receivable 171,592 (32,008)(10) 450,684
Notes receivable 726,700
Finance receivables 4,468,669 24,293,541
Inventories 1,530,253 6,939,301
Prepaid expenses 1,417,723
Land held for sale 1,050,000
Deferred tax asset 330,610
Property and equipment, net 69,180 3,042,877
Investment in subsidiaries (2,742,553)
(1,897,650)
(5,267,585)
(388,549)
(386,012)
(9,406,682)
(9,907,360)
Excess of cost over net
assets acquired 17,909,929 17,909,929
Debt issue costs, net of accumulated
amortization 28,889
Deposit on acquisition
Deferred acquisition costs 39,110
Other assets 91,135 (91,135)(10) 245,651
---------- ----------- ------------- -----------
$6,416,829 $ (209,143) $(12,086,462) $57,189,302
========== =========== ============= ===========
See accompanying headnote and notes to pro forma consolidated financial statements (unaudited).
</TABLE>
<PAGE>
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Balance Sheets
(Unaudited)
<TABLE>
SCHI Liberty 225 North Dealer
Pro Forma Pro Forma Florida Military Develop- Dealers
December 31, 1996 SCHI Adjustments Liberty Adjustments Finance Trail ment Insurance Eckler
-------- ----------- ------- ----------- ------- --------- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Liabilities and Stockholders'
Equity
Accounts payable $ 438,890 $ 144,928 (3) $ 473,088 $ $ 47,791 $ 349,093 $ 1,002 $94,319 $ 545,765
Bank overdraft 82,884
Notes payable 60,000 7,950,000 (2) 14,438,582 (628,941)(4) 6,175,193 300,000 16,500 27,166 2,706,206
1,500,000 (4)
892,722 (5)
1,250,000 (6)
384,615 (7)
365,385 (8)
4,880,089(10)
Advance from related parties 197,237
Accrued expenses 183,314 229,858 16,505 177,816 46,449 309,613
Deferred income 134,571
Customer deposits 409,675
Deferred income taxes 402,814
Convertible debentures 262,000
--------- ---------- ------------ ------- --------- --------- ------- ------- ---------
Total liabilities 1,027,088 17,367,739 15,338,765 (628,941) 6,374,060 649,093 604,993 167,934 3,964,398
Stockholders'equity(deficit) (310,798) 1,188,527 (4) 480,149 628,941(4)(1,341,071) 4,459,307 (503,877) (35,473) 2,402,110
---------- 964,285 (5) ----------- ------- ----------- --------- --------- -------- ----------
964,286 (6)
9,306,563 (9)
-----------
$ 716,290 $29,791,400 $15,818,914 $ - $5,032,989 $5,108,400 $101,116 $132,461 $6,366,508
========= =========== =========== ======== ========== ========== ======== ======== ==========
See accompanying headnote and notes to pro forma consolidated financial statements (unaudited).
</TABLE>
<PAGE>
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Balance Sheets
(Unaudited)
<TABLE>
Strata Strata/Ready
and Ready Pro Forma Eliminating Consolidated
December 31, 1996 Finance Adjustments Entries Pro Forma
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Liabilities and Stockholders'
Equity
Accounts payable $ 295,252 $ (83,942)(10) $ $ 2,306,186
Bank overdraft 82,884
Notes payable 4,154,625 (4,154,625)(10) 40,317,517
Advance from related parties 197,237
Accrued expenses 963,555
Deferred income 134,571
Customer deposits 409,675
Deferred income taxes 402,814
Convertible debentures 262,000
---------- ---------- ------------ ----------
Total liabilities 4,449,877 (4,238,567) 45,076,439
Stockholders' equity (deficit) 1,966,952 4,029,424(10) (12,086,462) 12,112,863
---------- ---------- ------------ -----------
$6,416,829 $ (209,143) $(12,086,462) $57,189,302
========== =========== ============= ===========
See accompanying headnote and notes to pro forma consolidated financial statements (unaudited).
</TABLE>
<PAGE>
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Statement of Operations (Unaudited)
Year Ended December 31, 1996
<TABLE>
225 North Dealer Strata
Florida Military Develop- Dealers and Ready Pro Forma Consolidated
SCHI Liberty Finance Trail ment Insurance Eckler Finance Adjustments Pro Forma
---- ------- ------- ----------- -------- -------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ $21,687,418 $6,064,172 $11,998,847 $698,620 $812,645 $14,893,083 $11,041,583 $ $67,196,368
Costs and
expenses:
Cost of sales 16,122,778 3,702,953 8,446,683 9,648,505 6,973,535 44,894,454
Operating (11)
expenses 670,616 4,852,529 2,084,072 2,989,802 1,206,152 863,344 5,489,776 3,472,916 895,496 22,188,479
(336,224)
(12)
-------- ---------- ---------- ---------- --------- -------- ---------- ---------- ---------- ----------
670,616 20,975,307 5,787,025 11,436,485 1,206,152 863,344 15,138,281 10,446,451 559,272 67,082,933
-------- ---------- --------- ---------- --------- -------- ---------- ---------- ---------- ----------
Income (loss)
from operations (670,616) 712,111 277,147 562,362 (507,532) (50,699) (245,198) 595,132 (559,272) 113,435
Other income
(expense): (13)
Interest expense(33,172) (1,324,437) (675,754) (22,593) (623) (4,294) (332,195) (218,694) (1,328,342) (3,940,104)
Other 79 100,963 101,042
--------- ----------- --------- --------- --------- -------- ---------- --------- ----------- -----------
(33,172) (1,324,437) (675,754) (22,593) (544) (4,294) (231,232) (218,694) (1,328,342) (3,839,062)
--------- ----------- --------- --------- --------- -------- ----------- --------- ----------- -----------
Income (loss)
before income
taxes (benefit) (703,788) (612,326) (398,607) 539,769 (508,076) (54,993) (476,430) 376,438 (1,887,614) (3,725,627)
Taxes on income (14)
(benefit) 204 (161,000) 160,796
Net income
(loss) $ (703,788) $ (612,326) $ (398,811) $ 539,769 $(508,076) $(54,993) $ (315,430)$ 376,438 $(2,048,410) $(3,725,627)
=========== =========== =========== ========= ========== ========= =========== ========= ============ ============
Income (loss)
per share $ (.42)
============
Weighted average
number of common
shares outstanding 8,838,088
============
See accompanying headnote and notes to pro forma consolidated financial statements (unaudited).
</TABLE>
<PAGE>
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Statement of Operations (Unaudited)
Six Months Ended June 30, 1997
<TABLE>
225 North Dealer Strata
Florida Military Develop- Dealers and Ready Pro Forma Consolidated
SCHI (15) Liberty Finance Trail ment Insurance Eckler Finance Adjustments Pro Forma
---------- --------- --------- --------- --------- --------- ------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $22,904,591 $1,813,590 $ 389,037 $1,512,570 $ 104,630 $57,640 $853,881 $6,134,758 $ $33,770,697
----------- ---------- ---------- ---------- ---------- ------- -------- ---------- ---------- -----------
Costs and expenses:
Cost of sales 15,206,441 1,511,731 289,820 1,060,814 582,117 3,866,468 22,517,391
Operating expense 12,172,252 434,243 152,053 207,336 47,940 60,924 432,006 1,916,464 173,573(11) 15,596,791
----------- ---------- ---------- ---------- ---------- ------- -------- ---------- --------- -----------
27,378,693 1,945,974 441,873 1,268,150 47,940 60,924 1,014,123 5,782,932 173,573 38,114,182
----------- ---------- ---------- ---------- ---------- ------- --------- --------- --------- ----------
Income (loss)
from operations (4,474,102) (132,384) (52,836) 244,420 56,690 (3,284)(160,242) 351,826 (173,573) (4,343,485)
Other income (expense):
Interest expense (1,623,500) (176,585) (64,061) (3,694) (122) (171) (23,728) (120,190) (398,137) (2,410,188)
Other 43,531 1,002 6,412 50,945
---------- ----------- ---------- ---------- --------- -------- -------- ---------- --------- -----------
(1,579,969) (176,585) (64,061) (3,694) 880 (171) (17,316) (120,190) (398,137) (2,359,243)
Net income (loss) $(6,054,071)$ (308,969)$ (116,897) $ 240,726 $ 57,570 $(3,455)$(177,558) $231,636 $(571,710) $(6,702,728)
=========== ========== ========== ========= ========== ======= ========= ======== ========= ===========
Loss per share $ (.75)
===========
Weighted average number of common shares outstanding 8,937,193
===========
See accompanying headnote and notes to pro forma consolidated financial statements (unaudited).
</TABLE>
<PAGE>
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Notes to Pro Forma Consolidated Financial Information
(Unaudited)
1. Pro Forma Adjustments
The pro forma condensed consolidated balance sheet as of December 31, 1996
assumes the transactions were consummated as of December 31, 1996 and the pro
forma condensed consolidated statements of operations for the year ended
December 31, 1996 and the six months ended June 30, 1997 assumes the
transactions were consummated as of January 1, 1996.
2. Borrowings for Acquisitions
Reflects the borrowings necessary to fund the cash portion of the purchase
price of 225 North Military Trail Corporation and Affiliate; Strata
Holding, Inc.; and Ready Finance, Inc.
3. Deferred Acquisition Costs
Reflects the accrual of acquisition costs incurred after December 31, 1996.
4. Acquisition of Liberty Finance Company, Inc. and Affiliates
The outstanding capital stock of Liberty was acquired for $1,500,000 in notes
due to the seller, 352,156 shares of restricted common stock valued at $3.375
per share ($1,188,527) and $54,026 in acquisition costs. Prior to the
acquisition, the selling stockholder converted debt amounting to $628,941 to the
capital of Liberty.
The purchase price for Liberty is anticipated to be allocated as follows:
Fair value of assets acquired $ 15,818,914
Excess of cost over net assets acquired 1,633,463
--------------
17,452,377
Fair value of liabilities assumed 14,709,824
--------------
Total purchase price of net assets acquired $ 2,742,553
==============
5. Acquisition of Florida Finance Group, Inc. and Affiliates
The outstanding capital stock of Florida Finance and the net assets of its
affiliated companies were acquired for $892,722 in notes due to the seller, the
issuance of 285,714 shares of restricted common stock valued at $3.375 per share
($964,285) and $40,643 in acquisition costs.
The purchase price for Florida Finance is anticipated to be allocated as
follows:
Fair value of assets acquired $ 5,015,224
Excess of cost over net assets acquired 3,238,721
--------------
8,253,945
Fair value of liabilities assumed 6,356,295
--------------
Total purchase price of net assets acquired $ 1,897,650
==============
<PAGE>
6. Acquisition of 225 North Military Trail Corporation and Affiliate
The net assets of 225 North Military Trail and Affiliate were acquired for
$3,000,000 cash, $1,250,000 in notes due to the seller, 285,714 shares of
restricted common stock valued at $3.375 per share ($964,286) and $53,299 in
acquisition costs.
The purchase price for 225 North Military Trail is anticipated to be allocated
as follows:
Fair value of assets acquired $ 5,108,400
Excess of cost over net assets acquired 808,278
--------------
5,916,678
Fair value of liabilities assumed 649,093
--------------
Total purchase price of net assets acquired $ 5,267,585
==============
7. Acquisition of Dealer Development Services, Inc.
The outstanding capital stock of Dealer Development Services, Inc. was
acquired for $384,615 in notes due to the seller and $3,934 in acquisition
costs.
The purchase price for Dealer Development Services is anticipated to be
allocated as follows:
Fair value of assets acquired $ 101,116
Excess of cost over net assets acquired 892,426
--------------
993,542
Fair value of liabilities assumed 604,993
--------------
Total purchase price of net assets acquired $ 388,549
==============
8. Acquisition of Dealer Insurance Services, Inc.
The outstanding capital stock of Dealer Insurance Services, Inc. was
acquired for $365,385 in notes due to the seller and $20,627 in acquisition
costs.
The purchase price for Dealer Insurance Services is anticipated to be allocated
as follows:
Fair value of assets acquired $ 132,461
Excess of cost over net assets acquired 421,485
--------------
553,946
Fair value of liabilities assumed 167,934
--------------
Total purchase price of net assets acquired $ 386,012
==============
9. Acquisition of Eckler Industries, Inc.
The acquisition of Smart Choice Holdings, Inc. by Eckler will be accounted for
as an acquisition of Eckler by SCHI (a reverse acquisition in which SCHI is
considered the acquirer for accounting purposes). The purchase price for Eckler
is computed by valuing the outstanding shares of common stock of Eckler (the
equivalent of 2,757,500 shares) at $3.375 or $9,306,563 and acquisition costs of
$100,119.
The purchase price for Eckler is anticipated to be allocated as follows:
Fair value of assets acquired $ 6,366,508
Excess of cost over net assets acquired 7,004,572
--------------
13,371,080
Fair value of liabilities assumed 3,964,398
--------------
Total purchase price $ 9,406,682
==============
<PAGE>
10. Acquisition of Strata Holding, Inc. and Ready Finance, Inc.
Certain net assets of Strata Holding, Inc. and Ready Finance, Inc.
(companies under common ownership) were acquired for $5,000,000 cash and
$4,880,089 in notes due to the seller and $27,271 in acquisition costs.
The purchase price for Strata Holding, Inc. and Ready Finance, Inc. is
anticipated to be allocated as follows:
Fair value of assets acquired $ 6,207,686
Excess of cost over net assets acquired 3,910,984
--------------
10,118,670
Fair value of liabilities assumed 211,310
--------------
Total purchase price of net assets acquired $ 9,907,360
Assets not acquired and liabilities not assumed are removed from the pro forma
balance sheet.
11. Amortization of Excess Cost over Fair Value of Assets Acquired
This adjustment reflects the amortization of excess cost over fair value of
assets acquired over 20 years.
12. Compensation Expense
This adjustment reflects the change in compensation expense based on the
historical compensation expense of certain executives of the acquired companies
compared to their employment agreements effective on the dates of acquisition.
13. Interest Expense
This adjustment reflects the net additional interest expense on the indebtedness
incurred as partial payment of the purchase price of the acquired companies,
reduced by the interest expense incurred on debt converted to capital by the
sellers of one of the acquired companies and interest expense on debt not
assumed.
14. Income Tax Benefit
This adjustment eliminates the tax benefits in determining pro forma income
(loss) from operations. Management believes that sufficient evidence would not
have existed to recognize a deferred tax asset relating to these losses.
15. Pro Forma Consolidated Statement of Operations - Six Months Ended
June 30, 1997
The financial data for the companies acquired in January and February 1997
subsequent to the dates of acquisition are included with the financial data of
SCHI. Financial data for the period from January 1, 1997 to the dates of
acquisition are included in the respective columns for each Company.
