U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 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 AUGUST 14, 1997, 9,172,517 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 Sheet as of June 30, 1997
(unaudited) and December 31, 1996 5
Condensed Consolidated Statement of Operations for the Three
Months and Six Months Ended June 30, 1997 (unaudited) 7
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1997 (unaudited) 8
Notes to Condensed Consolidated Financial Statements 10
LIBERTY FINANCE COMPANY, INC. AND AFFILIATES
Condensed Combined Balance Sheet as of December 31, 1996 14
Condensed Combined Statement of Operations for the Period
January 1, 1997 to February 12, 1997 (unaudited) 16
Condensed Combined Statement of Cash Flows for the Period
January 1, 1997 to February 12, 1997 (unaudited) 17
Condensed Combined Statement of Income for the Three Months
and Six Months Ended June 30, 1996 (unaudited) 18
Condensed Combined Statement of Cash Flows for the Six
Months Ended June 30, 1996 (unaudited) 19
-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 20
Condensed Combined Statement of Operations for the Period
January 1, 1997 to January 28, 1997 (unaudited) 22
Condensed Combined Statement of Cash Flows for the Period
January 1, 1997 to January 28, 1997 (unaudited) 23
Condensed Combined Statement of Income for the Three Months
and Six Months Ended June 30, 1996 (unaudited) 24
Condensed Combined Statement of Cash Flows for the Six
Months Ended June 30, 1996 (unaudited) 25
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 26
Condensed Combined Statement of Income for the Period
January 1, 1997 to February 14, 1997 (unaudited) 28
Condensed Combined Statement of Cash Flows for the Period
January 1, 1997 to February 14, 1997 (unaudited) 29
Condensed Combined Statement of Income for the Three Months
and Six Months Ended June 30, 1996 (unaudited) 30
Condensed Combined Statement of Cash Flows for the Six
Months Ended June 30, 1996 (unaudited) 31
ECKLER INDUSTRIES, INC.
Condensed Balance Sheet as of December 31, 1996 (unaudited) 32
Condensed Statement of Operations for the Period January 1,
1997 to January 28, 1997 (unaudited) 34
Condensed Statement of Cash Flows for the Period January 1,
1997 to January 28, 1997 (unaudited) 35
Condensed Statement of Income for the Three Months and Six
Months Ended June 30, 1996 (unaudited) 36
Condensed Statement of Cash Flows for the Six Months Ended
June 30, 1996 (unaudited) 37
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 38
PART II-OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 47
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 SHEET
(UNAUDITED) AS OF
AS OF JUNE 30, 1997 DECEMBER 31, 1996
-------------------- -----------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 991,194 $ --
Accounts Receivable 987,029 25,000
Finance Receivables:
Principal Balances, Net 33,285,920 --
Less: Allowance for Credit Losses (6,311,534) --
------------ --------
Finance Receivables, Net 26,974,386 --
Inventories, at Cost 7,290,642 --
Land Held for Resale 1,050,000 --
Property and Equipment, Net 3,037,714 22,454
Notes Receivable 3,320,373 400,000
Deferred Tax Asset 330,610 --
Deferred Acquisition Costs 90,828 194,101
Deferred Debt Costs 489,699 24,735
Goodwill 20,828,896 --
Prepaid Expenses 1,128,812 --
Deposits 886,432 50,000
Other Assets 111,419 --
------------ --------
$ 67,518,034 $716,290
============ ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE>
<TABLE>
<CAPTION>
SMART CHOICE AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
AS OF JUNE 30, 1997 AS OF DECEMBER 31, 1996
------------------- ------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Bank Overdraft $ -- $ 82,884
Accounts Payable 2,088,388 438,890
Accrued Expenses 2,042,331 183,314
Deferred Income 143,263 --
Floorplan Payable 2,966,324 --
Customer Deposits 174,148 --
Notes Payable 38,691,684 60,000
Deferred Income Taxes 402,814 --
Convertible Debt 562,000 262,000
Acquisition Debt 9,208,698 --
Other Liabilities 1,067,655 --
------------ -----------
Total Liabilities 57,347,305 1,027,088
------------ -----------
Stockholders' Equity:
Preferred Stock 3,950 1,983
Common Stock 9,161 5,488
Additional Paid In Capital 19,105,327 385,519
Deficit (7,969,911) (703,788)
Unearned Compensation (977,798) --
------------ -----------
Total Stockholders' Equity 10,170,729 (310,798)
------------ -----------
$ 67,518,034 $ 716,290
============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
6
<PAGE>
<TABLE>
<CAPTION>
SMART CHOICE AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1997
------------------ ----------------
<S> <C> <C>
VEHICLE AND RELATED REVENUES:
Sales of Used Vehicles $ 7,003,702 $ 11,788,779
Income on Finance Receivables 1,927,736 2,450,675
Income from Insurance & Training 388,976 651,256
Income from Parts & Accessories 5,473,447 7,972,200
------------ -------------
14,793,861 22,862,910
------------ -------------
COST OF VEHICLE AND VEHICLE RELATED REVENUES:
Cost of Used Vehicles Sold 5,304,253 8,694,545
Cost of Insurance & Training 23,149 36,714
Cost of Parts & Accessories Sold 3,347,344 4,909,266
Provision for Credit Losses 499,131 1,548,811
------------ -------------
9,173,877 15,189,336
------------ -------------
NET REVENUES FROM VEHICLE SALES AND VEHICLE
RELATED ACTIVITIES 5,619,984 7,673,574
------------ -------------
EXPENSES:
Operating Expenses 4,938,188 10,019,848
Compensation Expense Related to
Employee Stock Options 88,890 3,214,767
------------ -------------
5,027,078 13,234,615
------------ -------------
INCOME (LOSS) FROM OPERATIONS 592,906 (5,561,041)
------------ -------------
OTHER EXPENSE (INCOME):
Interest Expense 1,055,996 1,748,613
Other Income (104,576) (113,749)
Miscellaneous Expense 5,274 70,218
------------ -------------
956,694 1,705,082
------------ -------------
NET LOSS $ (363,788) $ (7,266,123)
============ =============
NET LOSS PER SHARE $ (0.04) $ (0.87)
============ =============
WEIGHTED AVERAGE NUMBER OF SHARES
AND SHARE EQUIVALENTS OUTSTANDING 8,936,308 8,397,713
============ =============
</TABLE>
See accompanying notes to condensed consolidated financial statements
7
<PAGE>
<TABLE>
<CAPTION>
SMART CHOICE AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30, 1997
----------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (7,266,123)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Provision for credit losses 1,222,230
Common stock and options issued for consulting fees 150,000
Loss on disposal of fixed assets 2,176
Stock option compensation 3,214,767
Depreciation and amortization 750,846
Cash provided by (used for), net of effect of acquisitions:
Accounts receivable (186,743)
Inventory (2,368,124)
Prepaid expenses 189,081
Other assets (37,395)
Accounts payable (395,807)
Accrued expenses 1,955,475
Deferred income 13,156
Other liabilities 1,011,578
Customer deposits (290,247)
Floorplan payable 2,105,804
------------
Net cash provided by operating activities 70,674
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in finance receivables (3,631,742)
Cash for acquisitions, net of cash acquired (8,100,020)
Issuance of notes receivable (2,343,673)
Increase in deposits (822,200)
Increase in deferred acquisition costs (51,717)
Purchase of property and equipment (250,192)
Proceeds from sale of property and equipment 28,475
Decrease in other assets 24,924
------------
Net cash used in investing activities $(15,146,145)
------------
</TABLE>
CONTINUED ON NEXT PAGE
8
<PAGE>
SMART CHOICE AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(CONTINUED)
SIX MONTHS ENDED
JUNE 30, 1997
----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable $ (2,408,441)
Proceeds from issuance of Sirrom debt 7,500,000
Proceeds from issuance of notes payable 10,714,902
Increase in deferred debt costs (533,322)
Proceeds from issuance of preferred stock 590,000
Purchase of treasury stock (13,590)
Proceeds from issuance of convertible debentures 300,000
Bank overdraft (82,884)
------------
Net cash provided by financing activities 16,066,665
------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 991,194
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD --
------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 991,194
============
See accompanying notes to condensed consolidated financial statements
9
<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 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
10
<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 from 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).
11
<PAGE>
SMART CHOICE AUTOMOTIVE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
================================================================================
NOTE 3 - SUMMARY OF FINANCE RECEIVABLES
The following is a summary of principal balances, net as of June 30, 1997:
JUNE 30, 1997
-------------
Contractually Scheduled Payments $ 44,590,026
Less: Unearned Finance Charges (11,304,106)
-------------
Principal Balances, Net $ 33,285,920
=============
NOTE 4 - PRESENTATION OF DEALERSHIP REVENUES AND COST OF REVENUES
Revenues from Company dealership operations consist of Sales of Used Cars,
Income on Finance Receivables, Income from Insurance and Training, and Sales of
Parts and Accessories. Vehicle and Vehicle Related cost of Revenues is comprised
of Cost of Vehicles Cars Sold, Provision for Credit Losses, Costs of Insurance
and Training and Cost of Parts and Accessories Sold.
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 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 of Used Cars less Cost of Used Cars Sold.
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.
12
<PAGE>
NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION
In connection with the acquisitions described in Note 2, the Company issued the
following securities and notes:
Common Stock 4,006,084 shares, valued at $13,773,661
===========
Promissory Notes $ 9,784,272
===========
Cash paid for interest $ 1,198,871
===========
NOTE 7 - AMENDMENT TO FORM 10-Q
This document is an amended Form 10-Q of the Company which reflects the changes
in year-to-date financial information as of June 30, 1997 resulting from an
amendment of the Company's Form 10-Q for the quarter ended March 31, 1997. That
amendment was filed to amend financial information primarily associated with the
recognition of expense associated with stock and stock options issued or
exchanged in connection with the mergers and acquisitions which occurred in the
first quarter of 1997.
13
<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
============
14
<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
============
15
<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)
===========
16
<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
---------
17
<PAGE>
<TABLE>
<CAPTION>
LIBERTY FINANCE COMPANY, INC. & AFFILIATES
CONDENSED COMBINED STATEMENT OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1996
------------------ ----------------
<S> <C> <C>
VEHICLE AND RELATED REVENUES:
Sales of Used Vehicles $ 3,975,001 $ 8,280,093
Income on Finance Receivables 767,396 1,464,812
Income from Insurance & Training 92,570 231,865
Income from Parts & Accessories 384,279 767,128
------------ ------------
5,219,246 10,743,898
------------ ------------
COST OF VEHICLE AND VEHICLE RELATED REVENUES:
Cost of Used Vehicles Sold 3,174,192 6,614,813
Cost of Insurance & Training 24,426 90,789
Cost of Parts & Accessories Sold 259,337 476,294
Provision for Credit Losses 35,769 62,156
------------ ------------
3,493,724 7,244,052
------------ ------------
NET REVENUES FROM VEHICLE SALES AND VEHICLE RELATED
ACTIVITIES 1,725,522 3,499,846
------------ ------------
OPERATING EXPENSES 1,079,633 2,167,333
------------ ------------
INCOME FROM OPERATIONS 645,889 1,332,513
------------ ------------
OTHER EXPENSE (INCOME):
Interest Expense 299,973 598,045
Other Income (13,415) (25,079)
Miscellaneous Expense 32,268 34,842
------------ ------------
318,826 607,808
------------ ------------
NET INCOME $ 327,063 $ 724,705
============ ============
</TABLE>
18
<PAGE>
LIBERTY FINANCE COMPANY, INC. & AFFILIATES
CONDENSED COMBINED STATEMENT OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30, 1996
----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 724,705
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 31,782
Cash provided by (used for):
Inventory (461,690)
Other assets 4,707
Accounts and drafts payable 31,238
Accrued expenses 24,600
Floorplan payable 199,567
-----------
Net cash provided by operating activities 554,909
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in finance receivables (2,293,485)
Purchase of property and equipment (36,996)
-----------
Net cash used in investing activities (2,330,481)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments to related party (182,096)
Distributions to stockholder (223,833)
Proceeds from issuance of notes payable 2,285,392
-----------
Net cash provided by financing activities 1,879,463
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 103,891
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 8,368
-----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 112,259
===========
19
<PAGE>
FLORIDA FINANCE GROUP, INC.
SUNCOAST AUTO BROKERS, INC.
SUNCOAST AUTO BROKERS ENTERPRISES, INC.
CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1996
-----------------------
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
===========
20
<PAGE>
FLORIDA FINANCE GROUP, INC.
SUNCOAST AUTO BROKERS, INC.
SUNCOAST AUTO BROKERS ENTERPRISES, INC.
CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1996
-----------------------
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
===========
21
<PAGE>
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
----------------------
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)
=========
22
<PAGE>
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
----------------------
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
=========
23
<PAGE>
<TABLE>
<CAPTION>
FLORIDA FINANCE GROUP, INC.
SUNCOAST AUTO BROKERS, INC.
SUNCOAST AUTO BROKERS ENTERPRISES, INC.
CONDENSED COMBINED STATEMENT OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1996
------------------ ----------------
<S> <C> <C>
VEHICLE AND RELATED REVENUES:
Sales of Used Vehicles $1,068,767 $2,778,769
Income on Finance Receivables 413,434 783,577
---------- ----------
1,482,201 3,562,346
---------- ----------
COST OF VEHICLE AND VEHICLE RELATED REVENUES:
Cost of Used Vehicles Sold 619,661 1,912,423
Provision for Credit Losses 92,068 183,306
---------- ----------
711,729 2,095,729
---------- ----------
NET REVENUES FROM VEHICLE SALES AND VEHICLE
RELATED ACTIVITIES 770,472 1,466,617
---------- ----------
OPERATING EXPENSES 576,339 1,019,006
---------- ----------
INCOME FROM OPERATIONS 194,133 447,611
---------- ----------
OTHER EXPENSE:
Interest Expense 192,921 317,121
---------- ----------
192,921 317,121
---------- ----------
NET INCOME $ 1,212 $ 130,490
========== ==========
</TABLE>
24
<PAGE>
FLORIDA FINANCE GROUP, INC.
SUNCOAST AUTO BROKERS, INC.
SUNCOAST AUTO BROKERS ENTERPRISES, INC.
CONDENSED COMBINED STATEMENT OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30, 1996
----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 130,490
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 16,500
Cash provided by (used for):
Accounts receivable (27,774)
Inventory (29,174)
Prepaid expenses (32,940)
Accounts payable (204,998)
Accrued expenses (18,322)
Deferred income 71,013
---------
Net cash used in operating activities (95,205)
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in finance receivables (855,037)
Purchase of property and equipment (18,906)
Decrease in other assets 10,632
---------
Net cash used in investing activities (863,311)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net advances from related party 222,621
Proceeds from issuance of notes payable 722,168
---------
Net cash provided by financing activities 944,789
---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (13,727)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 50,701
---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 36,974
=========
25
<PAGE>
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
-----------------------
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
===========
26
<PAGE>
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
-----------------------
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
==========
27
<PAGE>
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
----------------------
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
==========
28
<PAGE>
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
----------------------
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
=========
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 INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1996
------------------ ----------------
<S> <C> <C>
VEHICLE AND RELATED REVENUES:
Sales of Used Vehicles $2,686,434 $5,967,996
Income on Finance Receivables 300,885 593,752
---------- ----------
2,987,319 6,561,748
---------- ----------
COST OF VEHICLE AND VEHICLE RELATED REVENUES:
Cost of Used Vehicles Sold 2,266,941 4,798,476
Provision for Credit Losses 56,271 327,128
---------- ----------
2,323,212 5,125,604
---------- ----------
NET REVENUES FROM VEHICLE SALES AND VEHICLE
RELATED ACTIVITIES 664,107 1,436,144
---------- ----------
OPERATING EXPENSES 520,019 965,076
---------- ----------
NET INCOME $ 144,088 $ 471,068
========== ==========
</TABLE>
30
<PAGE>
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)
SIX MONTHS ENDED
JUNE 30, 1996
----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 471,068
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 875
Cash provided by (used for):
Inventory (79,826)
Other assets (80,685)
Accounts payable and accrued expenses (192,977)
Drafts payable 154,195
---------
Net cash provided by operating activities 272,650
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in finance receivables (677,838)
Purchase of property and equipment (8,851)
---------
Net cash used in investing activities (686,689)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit 330,000
Repayment of stockholder loan (50,880)
Distributions to stockholder (130,479)
---------
Net cash provided by financing activities 148,641
---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (265,398)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 304,914
---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 39,516
---------
NON-CASH INVESTING AND FINANCING ACTIVITIES:
PROPERTY DISTRIBUTED TO STOCKHOLDER $ 101,027
=========
31
<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
==========
32
<PAGE>
ECKLER INDUSTRIES, INC.
CONDENSED BALANCE SHEET
(UNAUDITED)
AS OF DECEMBER 31, 1996
-----------------------
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 17,367
shares authorized; 1,736,750 issued and outstanding
Class B Common Stock: $.01 Par Value; 5,000,000 5,104
shares authorized; 510,375 issued and outstanding
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
===========
33
<PAGE>
ECKLER INDUSTRIES, INC.
CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
PERIOD JANUARY 1, 1997
TO JANUARY 28, 1997
----------------------
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)
=========
34
<PAGE>
ECKLER INDUSTRIES, INC.
CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
PERIOD JANUARY 1, 1997
TO JANUARY 28, 1997
----------------------
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
=========
35
<PAGE>
<TABLE>
<CAPTION>
ECKLER INDUSTRIES, INC.
CONDENSED STATEMENT OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1996 JUNE 30, 1996
------------------ ----------------
<S> <C> <C>
VEHICLE AND RELATED REVENUES:
Sales of Parts & Accessories $ 5,064,905 $ 8,338,030
----------- -----------
COST OF VEHICLE AND VEHICLE RELATED REVENUES:
Cost of Parts & Accessories Sold 3,300,586 5,442,627
----------- -----------
NET REVENUES FROM VEHICLE SALES AND
VEHICLE RELATED ACTIVITIES 1,764,319 2,895,403
----------- -----------
OPERATING EXPENSES 1,497,338 2,798,560
----------- -----------
INCOME FROM OPERATIONS 266,981 96,843
----------- -----------
OTHER EXPENSE (INCOME):
Interest Expense 68,449 149,664
Other Income (132,264) (165,501)
----------- -----------
(63,815) (15,837)
----------- -----------
INCOME BEFORE INCOME TAXES 330,796 112,680
----------- -----------
INCOME TAXES (124,300) (46,800)
----------- -----------
NET INCOME $ 206,496 $ 65,880
=========== ===========
</TABLE>
36
<PAGE>
ECKLER INDUSTRIES, INC.
CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30, 1996
----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 65,880
Adjustments to reconcile net income to
net cash used in operating activities:
Deferred income taxes 61,900
Issuance of common stock for consulting fees 27,125
Loss on disposal of fixed assets 160
Depreciation and amortization 147,989
Cash provided by (used for):
Accounts receivable (92,502)
Inventory (499,116)
Prepaid expenses (533,029)
Accounts payable 566,042
Accrued expenses 64,600
---------
Net cash used in operating activities (190,951)
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (47,805)
Proceeds of sale of property and equipment 4,850
Decrease in other assets 20,765
---------
Net cash used in investing activities (22,190)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable (133,623)
Payments on capital leases (14,519)
Deferred financing costs (20,067)
---------
Net cash used in financing activities (168,209)
---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (381,350)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 541,991
---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 160,641
=========
37
<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 JUNE 30,
1997 AND THE COMPANY'S RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED AND SIX
MONTHS ENDED JUNE 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 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).
38
<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 from 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).
RESULTS OF OPERATIONS
COMPARISON OF CONSOLIDATED THREE MONTHS ENDED JUNE 30, 1997 TO COMBINED THREE
MONTHS ENDED JUNE 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 June 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 June 30, 1997 and three
months ended June 30, 1996 are not comparable. Such lack of comparability is
explained in the discussion below.
39
<PAGE>
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
(DOLLARS IN THOUSANDS)
COMPANY (1) COMBINED (2)
<S> <C> <C> <C> <C>
Vehicle and Related Revenues $ 14,794 100.0% $ 14,754 100.0%
Cost of Vehicle and Related Revenues 9,174 62.0% 9,830 66.6%
-------- ------- ------- -------
Net Revenues from Vehicles Sales and 5,620 38.0% 4,924 33.4%
Vehicle Related Revenues
Operating Expenses 5,027 34.0% 3,672 24.9%
-------- ------- ------- -------
Operating Income 593 4.0% 1,252 8.5%
Interest Expense (1,056) (7.1)% (562) (3.8%)
Other Income 99 0.7% 67 .4%
-------- ------- ------- -------
Net Income (Loss) $ (364) (2.4)% $ 757 5.1%
======== ======= ======= =======
</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 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 0.3% increase in
revenues for the three months ended June 30, 1997 compared to the combined
results of its predecessors for the same period in 1996. The increase was the
result of two elements. Income on Finance Receivables increased by $446,021 due
to growth of the Company's receivables portfolio since the merger. Used vehicle
sales decreased $726,000. This was due to reduced inventory levels at the
beginning of the quarter ending June 30, 1997. After the merger, the floorplan
financing arrangements for the predecessors had to be restructured, and the
Company's access to floorplan financing was curtailed for approximately
forty-five days during the first quarter of 1997, resulting in reduced levels of
inventory available for sale at the beginning of the second quarter of 1997.
COST OF VEHICLE AND RELATED REVENUES. Cost of vehicle and related revenues was
$9,173,877 for the three months ended June 30, 1997 compared to $9,829,251 for
the predecessors during the same period in 1996, a decrease of $655,374. The
decrease was primarily the result of three major elements. Cost of used vehicles
sold decreased by $756,541 due to the decrease in sales discussed above.
Provision for credit losses increased $315,023 due to management's assessment of
the increase in finance receivables and the addition of acquired finance
receivables. Cost of parts and accessories sold decreased $212,579 primarily due
to the Corvette parts business for which manufacturing costs have been reduced
significantly due to the implementation of the "GM Restoration Parts Program."
40
<PAGE>
OPERATING EXPENSES. Operating expenses consist of selling and marketing,
general and administrative expenses, and depreciation and amortization.
Operating expenses were $5,027,078 for the three months ended June 30, 1997
compared to $3,673,328 for the predecessors for the same period in 1996 an
increase of 36.9%. 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 $1,055,996 for the three months
ended June 30, 1997 compared to $561,343 for the predecessors during the same
period in 1996, an increase of 88.1%. This resulted primarily from interest on
subordinated debt attributable to the merger and related acquisitions. 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 SIX MONTHS ENDED JUNE 30, 1997 TO COMBINED SIX MONTHS
ENDED JUNE 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 six
months ended June 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)
COMPANY PREDECESSORS COMBINED COMBINED COMBINED
(1) (2) (3) (3) (4)
<S> <C> <C> <C> <C> <C> <C>
Vehicle and Related Revenues $ 22,863 $ 4,569 $ 27,432 100.0% $ 29,206 100.0%
Cost of Vehicle and Related Revenues 15,189 3,444 18,633 67.9% 19,909 68.2%
-------- ------------ -------- ------- --------- -----
Net Revenues from Vehicles Sales and
Vehicle Related Revenues 7,674 1,125 8,799 32.1% 9,297 31.8%
Operating Expenses 13,235 1,226 14,461 52.7% 6,949 23.8%
-------- ------------ -------- ------- --------- -----
Operating Income (Loss) (5,561) (101) (5,662) (20.6)% 2,348 8.0%
Interest Expense (1,748) (268) (2,016) ( 7.3)% (1,065) (3.6)%
Other Income 43 6 49 0.2% 109 .4%
--------- ------------ -------- ------- --------- -----
Net Income (Loss) $ (7,266) $ (363) $ (7,629) (27.8)% $ 1,392 4.8%
========= ============ ======== ======= ========= =====
</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 June 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.
41
<PAGE>
(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 from the
Company and its predecessors.
(4) The financial data for 1996 is the sum of the actual results of the 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 5.9% decrease in revenues for the six months ended June 30, 1997
compared to the combined results of its predecessors for the same period in
1996. The decrease was primarily the result of two elements. Income on Finance
Receivables increased by $448,544 due to growth of the Company's receivables
portfolio since the merger. Due to the merger, the floorplan finance
arrangements for the predecessors had to be restructured, and the Company's
access to floorplan financing was curtailed for approximately forty-five days,
resulting in reduced levels of inventory available for sale. Therefore, the
Company was unable to replenish inventory and sales decreased by $1,774,879.
COST OF VEHICLE AND RELATED REVENUES. Cost of vehicle and related revenues
was $18,633,923 for the six months ended June 30, 1997 compared to $19,908,012
for the predecessors during the same period in 1996, a decrease of $1,274,089.
The decrease was primarily the result of three major elements. Cost of used
vehicles sold decreased by $2,163,289 due to the decrease in sales discussed
above. Provision for credit losses increased $1,168,347 due to management's
assessment of the increase in finance receivables and the addition of acquired
finance receivables. Cost of parts and accessories sold decreased $213,072
primarily due to the Corvette parts business since manufacturing costs have been
reduced significantly due to the implementation of the "GM Restoration Parts
Program."
OPERATING EXPENSES. Operating expenses consist of selling and marketing,
general and administrative expenses, and depreciation and amortization.
Operating expenses were $14,461,890 for the six months ended June 30, 1997
compared to $6,949,974 for the predecessors for the same period in 1996 an
increase of 108%. This increase was primarily due to recognition of
compensation expense of $3,214,767 from the issuance of stock options in the
first quarter of 1997 to attract key management personnel. In addition, the
Company recognized expense of approximately $1,668,000 to settle various
consulting agreements and employment contracts of the predecessors. The increase
also 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 $2,016,568 for the six months
ended June 30, 1997 compared to $1,064,830 for the predecessors during the same
period in 1996, an increase of 89.4%. This resulted primarily from interest on
subordinated debt attributable to the merger and related acquisitions. 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."
42
<PAGE>
ALLOWANCE FOR CREDIT LOSSES. The allowance for credit losses on finance
receivables (the "Allowance") at the Company's used vehicle dealerships was
18.96% of the outstanding principal balance as of June 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 June 30, 1997.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1997
------------------ ----------------
ALLOWANCE ACTIVITY:
Balance, beginning of period $ 4,822,512 $ 4,211,794
Allowance on acquired finance
receivables 1,920,307 1,920,307
Provision for credit losses 499,131 1,548,811
Net charge offs (930,416) (1,369,378)
------------ ------------
Balance, end of period $ 6,311,534 $ 6,311,534
============ ============
CHARGE OFF ACTIVITY:
Principal Balances:
Collateral Repossessed $ 1,997,236 $ 2,401,817
Other -- 36,637
------------ ------------
Total Principal Balances 1,997,236 2,438,454
Recoveries, net 1,066,820 1,069,076
------------ ------------
Net Charge Offs $ 930,416 $ 1,369,378
============ ============
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 June 30, 1997.
June 30, 1997
-------------
AGING PERCENTAGES:
Principal balances current 89.01%
Principal balances 31 to 60 days 5.76%
Principal balances over 60 days 5.23%
43
<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 PREDECESSORS COMBINED COMBINED
(1) (2) (3) (4)
--------- ------------- --------- -----------------
<S> <C> <C> <C> <C>
Net cash provided by operating activities $ 71 $ 453 $ 524 $ 541
Net cash used in investing activities (15,146) (250) (15,396) (3,903)
Net cash provided by (used in) 16,067 (502) 15,565 2,805
financing activities -------- ------------ -------- ----------------
Net increase (decrease) in cash and cash
equivalents $ 992 $ (299) $ 693 $ (557)
======== ============ ======== ================
</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 June 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 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.
Net cash provided by operating activities of $523,674 for the six months ended
June 30, 1997 is primarily due to increases in stock option compensation of
$3,214,767, accrued expenses of $1,955,475, other liabilities of $1,100,468, and
provision for credit losses of $1,222,230. The cash provided by operating
activities of the predecessor companies of $540,670 for the same period in 1996
can be attributed to increases in net earnings, inventory, provision for credit
losses and accounts payable.
Net cash used in investing activities of $15,396,145 for the six months ended
June 30, 1997 is the result of the increase in finance receivables of
$3,631,742, use of cash in the acquisition of the predecessors of $8,100,020,
issuance of notes receivable of $2,343,673 and deposits paid of
44
<PAGE>
$822,200. The cash used in investing activities of the predecessor companies of
$3,902,671 for the same period in 1996 is primarily due to increases in the
finance receivables.
Net cash provided by financing activities of $15,564,665 for the six months
ended June 30, 1997 is the result of borrowings from Sirrom Capital Corporation
("Sirrom") of $7,500,000, notes payable on finance receivables of $6,468,180,
and issuance of preferred stock and convertible debentures of $590,000 and
$300,000, respectively. Net cash provided by financing activities of the
predecessor companies of $2,805,417 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 $20 million to $35 million (2)
obtaining additional funding on May 13, 1997, from Sirrom in the amount of
$4,000,000, and (3) tighter control on overall costs. The Company's management
believes that these actions, in addition to the working capital position at June
30, 1997, will allow the Company to meet its future liquidity needs.
REVOLVING CREDIT FACILITY. The revolving credit facility (the "Revolving
Facility") with Finova has a maximum commitment of up to $35.0 million. Under
the Revolving Facility, the Company may borrow up to 70.0% of the principal
balance of eligible finance contracts. The Revolving Facility expires on
December 31, 1999, at which time the Company has the option to renew the
Revolving Facility. The Revolving Facility is secured by substantially all of
the Company's assets. As of June 30, 1997, the Company's borrowing capacity
under the Revolving Facility was approximately $26.2 million and the aggregate
principal amount outstanding under the Revolving Facility was $24.5 million. The
Revolving Facility bears interest at the governing rate (currently the prime
rate) plus 3%.
CONVERTIBLE NOTE. The Company has outstanding $7.5 million in convertible
notes from Sirrom. These notes are convertible into common stock at varying
amounts per share.
MORTGAGE LOAN, LINE OF CREDIT. EII has a long term mortgage payable to a
bank with a current principal balance of approximately $2.3 million. The
mortgage loan is collateralized by substantially all property and equipment of
EII and guaranteed by a stockholder of the Company. Effective April 16, 1997,
modifications to the terms of the original mortgage loan agreement with the
lender were completed. Under the modified mortgage loan agreement, the original
payment schedule remains but the maturity date is modified to provide for a
maturity date of July 1, 1998 rather than September 30, 1999. EII also had a
$1.0 million line of credit to the same bank that had an outstanding balance of
approximately $344,000 at March 31, 1997. Effective April 16, 1997, modificatons
to the terms of the line of credit agreement with the Lender were effected
whereby no further advances under the line of credit were to be made and EII
would begin making principal reductions according to a schedule provided by the
bank. On June 6, 1997, the final payment of $193,894 was made.
ACQUISITION DEBT. On the closing of the acquisitions during the six months
ended June 30, 1997, the Company incurred debt to certain stockholders of the
acquired companies. The payable balance as of June 30, 1997 for the acquisition
debt totaled $9.2 million. There are $4.3 million of the notes that mature at
the earlier of December 31, 1997 or when the Company successfully completes a
secondary offering of its common stock to the public. There are $4.9 million of
notes with monthly principal payments of $27,112 plus interest which mature on
June 27, 1999.
45
<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 will seek to
limit this risk, to the extent market conditions permit, for the Company's
finance receivables, either by increasing the interest rate charged, or 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" ("SFAS 128").
SFAS 128 establishes new standards for computing and presenting earnings per
share ("EPS"). Specifically, SFAS 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. SFAS 128 is effective for financial statements issued
for periods ending after December 15, 1997, earlier application is not
permitted. EPS for the three and six months ended June 30, 1997 and June 30,
1996 computed under SFAS 128 would not be materially different than previously
computed.
46
<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
following unregistered equity securities:
On June 30, 1997, in connection with the acquisition of substantially
all of the assets of Roman Fedo, Inc. and Fedo Finance, Inc., the Company issued
to the sellers 225,000 shares of the Company's Common Stock (the "Shares") as
partial consideration for the acquisition. The issuance of the shares was made
in reliance on the exemption provided under Section 4(2) of the Securities Act
of 1933, as amended (the "Act"). The investors were provided information about
the Company or had access to such information, and were provided opportunities
to review the information about the Company and to ask questions of management
concerning the information provided or made available. The investors gave
written assurance of the investment intent, and the certificate for the
securities bear a legend accordingly.
On April 17, 1997, the Company issued to non-employee directors of the
Company non-transferable options to acquire in the aggregate 62,500 shares of
the Company's Common Stock. The options are exercisable at $5.50 per share
commencing April 17, 1997 and expiring April 16, 2002. The issuance of the
options to the non-employee directors (all accredited investors as defined in
the Act and Regulation D promulgated thereunder) was made in reliance on the
exemption provided under Section 4(2) of the Act.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
LIST EXHIBIT DESCRIPTION PAGE NUMBER OR INCORPORATED BY REFERENCE TO:
---- ------------------- --------------------------------------------
<S> <C> <C>
3.1 Amended and Restated Articles of Exhibit 3.1 to Form SB-2 Registration Statement,
Incorporation of the Company filed on September 1, 1995, File No. 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.
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.
4.3.1 Form of Amendment to Warrant Agreement Exhibit 4.4 to Form 8-A Registration Statement,
filed on April 16, 1997, File No. 1-14082.
10.1 Trademark License Agreement dated effective Exhibit 10.17 to Amendment No. 1 to Form SB-2
October 14, 1992 between the Company and Registration Statement, filed on October 13,
Chevrolet Motor Division, General Motors 1995, File No. 33-96520-A.
Corporation
10.2 Trademark License Agreement dated Exhibit 10.2 to Amendment No. 1 to Form
47
<PAGE>
Effective October 3, 1992 between the SB-2 Registration Statement, filed on October 13,
Company and General Motors Corporation 1995, File No. 33-96520-A.
10.3 Reproduction and Service Parts Tooling Exhibit 10.3.1 to Amendment No. 1 of Form SB-2
License Agreement dated December 22, 1993 Registration Statement, filed on October 13,
between the Company and Service Parts 1995, File No. 33-96520-A.
Operation, General Motors Corporation
("GM License Agreement")*
10.4 Eckler Industries, Inc. Retirement and Exhibit 10.4.1 to Form SB-2 Registration
Savings Plan and Trust Agreement, as Statement, filed on September 1, 1995, File No.
Amended and Restated on September 14, 1992 33-96520-A.
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.
10.7 Registration Rights Agreement by and among Exhibit 10.15 to Amendment No. 1 to Form SB-2
the Company and each of the Purchasers Registration Statement, filed on October 13,
referred to in Schedule 1 thereto, dated 1995, File No. 33-96520-A.
September 20, 1995.
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 Exhibit 10.21 to Annual Report on Form 10KSB,
V. Mohr dated November 15, 1995 filed on January 16, 1997, File No. 1-14082.
48
<PAGE>
10.11 Stock Purchase Warrant in favor of G. Exhibit 10.22 to Annual Report on Form 10KSB,
Edward Mills dated November 15, 1995 filed on January 16, 1997, File No. 1-14082.
10.12 Stock Purchase Warrant in favor of Robert Exhibit 10.23 to Annual Report on Form 10KSB,
M. 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 No. 10.16.1 to Form 10-Q, filed on
Company and Barnett Bank dated April 15, August 19, 1997, File No. 1-14082.
1997.
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 November
N.A. dated September 30, 1996. 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 November
September 30, 1996. 14, 1996, File No. 33-96520-A.
10.20 Security Agreement between the Company and Exhibit 10.23 to Post-Effective Amendment No. 2 to
Barnett Bank, N.A. dated September 30, 1996. Form SB-2 Registration Statement, filed on November
14, 1996, File No. 33-96520-A.
49
<PAGE>
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 November
September 30, 1996 14, 1996, File No. 33-96520-A.
10.22 Merger Agreement between Smart Choice Exhibit 10.1 to Form 8-K, filed on February 12,
Holdings, Inc., the Company, Thomas E. 1997, File No. 1-14082.
Conlan and Gerald C. Parker dated
December 30, 1997.
10.23 Non-Qualified Stock Option Agreement in Exhibit 4.1 to Form 8-K, filed on February 12,
favor of Ralph H. Eckler, dated January 28, 1997, File No. 1-14082.
1997.
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 Exhibit 4.1 to Form 10-Q, filed on May 20, 1997,
Security Agreement between Florida Finance File No. 1-14082.
Group, Inc. ("FFG") and Finova Capital
Corporation ("Finova"), dated
February 4, 1997.
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,
1997 between SCHI and Gary Smith. File No. 1-14082.
10.32 Promissory Note dated January 28, 1997, Exhibit 10.2 to Form 10-Q filed on May 20, 1997,
50
<PAGE>
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,
1997 between FCAF and Gary Smith. File No. 1-14082.
10.34 Asset Purchase Agreement dated December 19, Exhibit 10.4 to Form 10-Q, filed on May 20, 1997,
1996 among FCAF, Jack Winters Enterprises, 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, 1997,
March 24, 1997 among FCAF, Jack Winters 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 among the Company, FCAF, and R.C. 1997, File No. 1-14082.
Hill, 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, in the principal amount of 1997, File No. 1-14082.
$800,000.
10.43 9% Convertible Debenture of SCHI to PBF, Exhibit 10.21 to Form 8-K, filed on February 26,
in the principal amount of $467,601. 1997, File No. 1-14082.
51
<PAGE>
10.44 Lease between David Bumgardner as Lessor Exhibit 10.22 to Form 8-K, filed on February 26,
and FCAF, Lessee, 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.
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 Exhibit 10.19 to Form 10-Q, filed May 20, 1997,
May 13, 1997, the Company, maker, Sirrom, File No. 1-14082.
payee.
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 Exhibit 10.1 to Form 8-K, filed on July 15, 1997,
30, 1997 among the Company and Roman Fedo, File No. 1-14082.
Fedo Finance, Inc. and Roman Fedo.
10.54 Asset Purchase Agreement dated as of June Exhibit 10.1 to Form 8-K filed on July 14, 1997,
27, 1997 among the Company, Strata Holding, File No. 1-14082.
Inc., Ready Finance, Inc., Donald Cook,
Marilyn Cook and Madie A. Stratemeyer.
27 Financial Data Schedules.
</TABLE>
52
<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 JUNE 27, 1997.
A CURRENT REPORT ON FORM 8-K ITEM 2 WAS FILED BY
SMART CHOICE AUTOMOTIVE GROUP, INC. ON JUNE 30, 1997.
53
<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 May 22, 1998.
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 May 22, 1998
- -------------------- Officer and Director
Gary R. Smith
/s/ JOSEPH E. MOHR Executive Vice President, May 22, 1998
- -------------------- Chief Financial Officer
Joseph E. Mohr
54
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FORM 10-Q FOR THE QUARTERLY PERIOD ENDING JUNE 30, 1997
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 991
<SECURITIES> 0
<RECEIVABLES> 33,286
<ALLOWANCES> 6,312
<INVENTORY> 7,291
<CURRENT-ASSETS> 36,243
<PP&E> 8,700
<DEPRECIATION> 4,613
<TOTAL-ASSETS> 67,518
<CURRENT-LIABILITIES> 7,097
<BONDS> 51,429
0
4
<COMMON> 9
<OTHER-SE> 10,158
<TOTAL-LIABILITY-AND-EQUITY> 67,518
<SALES> 22,863
<TOTAL-REVENUES> 22,863
<CGS> 15,189
<TOTAL-COSTS> 15,189
<OTHER-EXPENSES> 13,235
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,749
<INCOME-PRETAX> (7,266)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,266)
<EPS-PRIMARY> (0.87)
<EPS-DILUTED> (0.87)
</TABLE>
