225 NORTH MILITARY CORPORATION
d/b/a MIRACLE MILE MOTORS
AND
PALM BEACH FINANCE COMPANY, INC.
COMBINED FINANCIAL STATEMENTS
AND SUPPLEMENTARY INFORMATION
December 31, 1996 and 1995
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Stockholder of 225 North Military Corporation
d/b/a Miracle Mile Motors
and Palm Beach Finance Company, Inc.
We have audited the accompanying combined balance sheets of 225 North
Military Corporation d/b/a Miracle Mile Motors and Palm Beach Finance
Company, Inc. as of December 31, 1996 and 1995 and the related
combined statements of income and retained earnings, and cash flows
for the years then ended. These combined financial statements are
the responsibility of the Companies' management. Our responsibility
is to express an opinion on these combined financial statements based
on our audits.
We conducted our audits 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, the 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 audits provide
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 225 North Military Corporation d/b/a Miracle Mile Motors
and Palm Beach Finance Company, Inc. as of December 31, 1996 and
1995, and the combined results of their operations and their combined
cash flows for the years then ended in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic combined financial statements taken as a whole. The
supplementary combining balance sheets, and the combining statements
of income and retained earnings, as of December 31, 1996 and 1995 and
for the years then ended, are presented for purposes of additional
analysis and are not a required part of the basic combined financial
statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic combined financial
statements and, in our opinion, is fairly stated in all material
respects in relation to the basic combined financial statements taken
as a whole.
Spence, Marston, Bunch, Morris & Co.
Certified Public Accountants
April 10, 1997
225 NORTH MILITARY CORPORATION
d/b/a MIRACLE MILE MOTORS AND
PALM BEACH FINANCE COMPANY, INC.
COMBINED BALANCE SHEETS
December 31, 1996 and 1995
1996 1995
ASSETS
Cash and contracts in transit $ 192,999 $ 304,914
Finance receivables, net 4,057,682 3,620,623
Inventory 799,358 860,105
Property and equipment, net 10,086 104,010
Other assets 48,275 24,859
$5,108,400 $4,914,511
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Drafts payable $ 220,887 $ 317,875
Accounts payable and accrued expenses 128,206 256,577
Loan from stockholder - 50,880
Note payable 300,000 45,000
Total liabilities 649,093 670,332
Stockholder's equity:
Common stock 800 800
Additional paid-in capital 20,000 20,000
Retained earnings 4,438,507 4,223,379
Total stockholder's equity 4,459,307 4,244,179
Commitments - -
$5,108,400 $4,914,511
225 NORTH MILITARY CORPORATION
d/b/a MIRACLE MILE MOTORS AND
PALM BEACH FINANCE COMPANY, INC.
COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
For the years ended December 31, 1996 and 1995
1996 1995
Revenue:
Sales $10,784,322
$11,393,704
Interest income 1,214,525 1,090,692
Total revenue 11,998,847 12,484,396
Cost of sales and expenses:
Cost of sales 8,446,683 9,118,158
Selling, general, and administrative 1,877,065 1,994,632
Provision for credit losses 1,110,989 961,416
Interest expense 22,593 18,248
Depreciation 1,748 3,262
Total cost of sales and expenses 11,459,078 12,095,716
Net income 539,769 388,680
Retained earnings, beginning of year 4,223,379 3,971,944
Distributions to stockholder (324,641) (137,245)
Retained earnings, end of year $ 4,438,507 $ 4,223,379
225 NORTH MILITARY CORPORATION
d/b/a MIRACLE MILE MOTORS AND
PALM BEACH FINANCE COMPANY, INC.
COMBINED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1996 and 1995
1996 1995
Cash flows from operating activities:
Net income $ 539,769$ 388,680
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,748 3,262
Change in operating assets and liabilities:
(Increase) decrease in inventory 60,747 (16,069)
Increase in other assets (23,416) (6,663)
Increase (decrease) in drafts payable (96,988) 46,627
Increase (decrease) in accounts
payable and accrued expenses (128,371) 7,649
Total adjustments (186,280) 34,806
Net cash provided by operating
activities 353,489 423,486
Cash flows from investing activities:
Increase in finance receivable, net (437,059) (332,006)
Purchase of property and equipment (8,851) (3,386)
Net cash used in investing
activities (445,910) (335,392)
Cash flows from financing activities:
Increase in note payable 255,000 44,000
Repay stockholder loan (50,880) -
Distributions to stockholder (223,614) (137,245)
Net cash used in financing
activities (19,494) (93,245)
Net decrease in cash and contracts in transit(111,915) (5,151)
Cash and contracts in transit,
beginning of year 304,914 310,065
Cash and contracts in transit, end of year$ 192,999 $ 304,914
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest on borrowings $ 21,149 $ 17,243
Noncash investing and financing transaction:
Property distributed to
stockholder (Note 7) $ 101,027 $ -
225 NORTH MILITARY CORPORATION
d/b/a MIRACLE MILE MOTORS AND
PALM BEACH FINANCE COMPANY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) ORGANIZATION AND NATURE OF OPERATIONS
The accompanying financial statements include 225 North Military
Corporation d/b/a Miracle Mile Motors (Miracle Mile) and Palm Beach
Finance Company, Inc. (PBF), (collectively, the Company). The
Company sells used automobiles and trucks to retail and wholesale
purchasers through its independent dealership located in West Palm
Beach, Florida. A majority of its retail sales are financed pursuant
to installment sales contracts requiring periodic payments over terms
ranging from one to three years.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of combination - The accompanying financial
statements include the accounts of Miracle Mile and PBF. All
significant intercompany accounts, transactions, and profits have
been eliminated in the combination.
Contracts in transit - The Company's policy is to treat
contracts in transit as a cash equivalent. The contracts in transit
amounted to $106,164 and $196,325, respectively, at December 31, 1996
and 1995.
Revenue recognition - Sales of vehicles are recorded on an
accrual basis. Interest income from finance receivables is
recognized using the interest method. Accrual of interest income is
suspended when management deems the loan to be uncollectible.
Vehicles are repossessed and the loan balances written off based on
management's review of loans on a loan-by-loan basis.
Allowance for credit losses - Provisions for credit losses are
charged to income in amounts sufficient to maintain the allowance at
a level considered adequate to cover losses in the existing
portfolio. The Company charges or credits the allowance for
repossessions and charge-offs.
Material estimates that are particularly susceptible to
significant change relate to the determination of the reserve of
possible loan losses. Accordingly, the ultimate collectibility of
the finance receivables is susceptible to changes in economic and
market conditions. Therefore, actual losses in future periods could
differ materially from amounts provided in the current period and
could result in a material adjustment to future results of
operations.
Inventory - Inventory consists of used vehicles and is stated at
the lower of cost or market, on a specific unit basis.
Property and equipment - These assets are carried at cost.
Major additions are capitalized while replacements, maintenance, and
repairs which do not improve or extend the life of the respective
assets, are expensed currently. When property is retired or
otherwise disposed of, the cost of the property is eliminated from
the asset account, accumulated depreciation is charged with an amount
equal to the depreciation provided and the difference, if any, is
charged or credited to income.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which are as follows:
Sales office 40 years
Furniture and fixtures 7 years
Loan origination costs - Direct costs incurred for the
origination of finance receivables are deferred and amortized over
the contractual lives of the loans.
225 NORTH MILITARY CORPORATION
d/b/a MIRACLE MILE MOTORS AND
PALM BEACH FINANCE COMPANY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Advertising costs - Advertising costs are generally charged to
operations in the year incurred and totaled $150,096 in 1996 and
$151,697 in 1995.
Income taxes - The sole stockholder for Miracle Mile and PBF has
elected for each corporation to be treated as an S corporation for
federal income tax purposes. In accordance with the provisions of
such election, each corporation's income and losses are passed
through to its stockholder; accordingly, no provision for income
taxes has been made in the accompanying combined financial
statements.
Drafts payable - Drafts payable represent non-interest bearing
amounts due to wholesalers for vehicle purchases.
Off-balance sheet risk and concentration of credit risk - The
Company maintains deposits in excess of federally insured limits.
Statement of Financial Accounting Standards No. 105 requires
disclosure, regardless of the degree of risk. Concentration of
credit risk exists as substantially all of the Company's loans have
been granted to customers in the Company's market area which is
primarily West Palm Beach, Florida.
Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires the
use of estimates that affect certain reported amounts and
disclosures. These estimates are based on management's knowledge and
experience. Accordingly, actual results could differ from these
estimates.
(3) FINANCE RECEIVABLES
Receivables arise principally from retail sales of vehicles
under installment contracts to credit challenged individuals who
cannot qualify for traditional automobile financing. The Company
investigates the credit worthiness of potential customers and
requires substantial down payments and frequent periodic payments on
installment contracts. Such finance receivables are stated net of
unearned interest, bear interest at rates ranging from 20% to 26%,
and are collateralized by the vehicles sold.
Management provides an allowance for credit losses based on its
experience with collections and repossessions. 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 or
credited to the allowance for credit losses.
225 NORTH MILITARY CORPORATION
d/b/a MIRACLE MILE MOTORS AND
PALM BEACH FINANCE COMPANY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
(3) FINANCE RECEIVABLES, CONTINUED
Finance receivables at December 31, 1996 and 1995 are summarized
as follows:
1996 1995
Contractually scheduled payments $6,227,510 $5,360,589
Less: unearned interest income (1,307,027) (1,012,754)
Installment sales contract principal balances4,920,483 4,347,835
Loan origination costs, net 64,780 62,792
Other receivables 56,419 84,996
Principal balances, net 5,041,682 4,495,623
Less: allowance for credit losses (984,000) (875,000)
Finance receivables, net $4,057,682$3,620,623
The allowance for credit losses for the years ended December 31,
1996 and 1995 is summarized as follows:
Balance, beginning of the year $ 875,000$ 618,000
Provision for credit losses 1,110,989 961, 416
Charge-offs and repossessions (1,001,989) (704,416)
Balance, end of the year $ 984,000$ 875,000
Finance receivables are pledged as collateral for the note
payable (Note 5). See Note 2 regarding the allowance for credit
losses. Due to the relatively short-term nature of the contracts
underlying the receivables and the low likelihood that all of the
contracts will reach maturity, contractual maturities have not been
disclosed.
(4) PROPERTY AND EQUIPMENT
Sales office (Note 7) $ -$ 114,370
Furniture and fixtures 12,236 3,386
12,236 117,756
Less: accumulated depreciation (2
,150) (13,746)
$ 10,086$ 104,010
225 NORTH MILITARY CORPORATION
d/b/a MIRACLE MILE MOTORS AND
PALM BEACH FINANCE COMPANY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
(5) NOTE PAYABLE
December 31,
1996 1995
Line of credit payable to First United
Bank, interest payable monthly at prime
plus 1%. Maximum available is
$400,000. The line of credit contains
loan covenants which restrict changes
in the capital structure and prohibits
certain related party capital
transactions and new borrowings. The
note is collateralized by finance
receivables and is guaranteed by the
stockholder. The line of credit
matures in 1997. $ 300,000$ 45,000
(6) LOAN FROM STOCKHOLDER
Uncollateralized non-interest bearing
loan payable to stockholder on demand,
repaid during 1996. $ -$ 50,880
(7) RELATED PARTY TRANSACTIONS
The Company leases its operating facilities from the stockholder
under a five-year operating lease for $12,000 per month. The lease
is effective January 1, 1995 through December 31, 1999. Rent expense
for the years ended December 31, 1996 and 1995 was $144,000 and
$144,445, respectively. The approximate future minimum rental
payments under this lease are $144,000 per year for 1997 through
1999.
The Company also paid the stockholder $25,500 in 1996 and
$23,375 in 1995 for the use of other facilities for promotional
purposes.
Miracle Mile provided collection, administrative and accounting
services to PBF for $204,000 in each of the years 1996 and 1995. The
fees have been eliminated in the combined financial statements.
During 1996, the Company transferred ownership of the sales
office (Note 4) to the stockholder and recorded a stockholder
distribution of $101,027 based on the asset's net book value.
Management believes the net book value approximates the market value.
Vehicle installment notes receivable are purchased by PBF from
Miracle Mile at a 30% discount. The discount is amortized and the
income recognized over the life of the loan. At December 31, 1996
and 1995, the remaining unamortized discount of $1,476,980 and
$977,785, respectively, have been eliminated in the combined
financial statements.
(8) PROFIT SHARING PLAN
The Company maintains a discretionary profit sharing plan for
eligible employees who have completed one year of service.
Contributions under this plan amounted to $39,810 in 1996 and $52,930
in 1995.
225 NORTH MILITARY CORPORATION
d/b/a MIRACLE MILE MOTORS AND
PALM BEACH FINANCE COMPANY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
(9) STOCKHOLDER'S EQUITY
Additional
Common Paid-in Retained
Stock Capital Earnings
Total
December 31, 1996:
225 North Military Corporation:
No par value; 60 shares authorized,
issued, and outstanding $ 300$ 20,000$3,583,463$3,603,763
Palm Beach Finance Company, Inc.:
$1 par value; 1,000 shares
authorized; 500 shares issued
and outstanding 500 - 855,044 855,544
$ 800$ 20,000$4,438,507$4,459,307
December 31, 1995:
225 North Military Corporation:
No par value; 60 shares authorized,
issued, and outstanding $ 300$ 20,000$3,476,516$3,496,816
Palm Beach Finance Company, Inc.:
$1 par value; 1,000 shares
authorized; 500 shares issued
and outstanding 500 - 746,863 747,363
$ 800$ 20,000$4,223,379$4,244,179
(10) SUBSEQUENT EVENT
During February 1997, the Company sold substantially all of
their business and assets to Smart Choice Holdings, Inc. (Smart
Choice), a wholly-owned subsidiary of Eckler Industries, Inc. Eckler
is a publicly-held Florida corporation. The following consideration
was received in connection with the sale:
Cash $3,000,000
Short-term promissory note 205,574
Convertible debenture 467,601
Secured convertible note 800,000
$4,473,175
In addition, the Company received 142,857 shares of unregistered
Class B Common Stock of Eckler. The Company will recognize a gain on
the sale equal to the fair value of the consideration received over
the book value of assets sold during 1997.
SUPPLEMENTARY INFORMATION
225 NORTH MILITARY CORPORATION
d/b/a MIRACLE MILE MOTORS AND
PALM BEACH FINANCE COMPANY, INC.
COMBINING BALANCE SHEETS
December 31, 1996
255 North Palm Beach
Military Finance Combining Combined
Corporation Company, Inc. Entries
Totals
ASSETS
Cash and contracts in transit$ 176,120$ 16,879$ -$
192,999
Finance receivables, net 64,779 3,992,903 - 4,057,682
Inventory 799,358 - - 799,358
Property and equipment, net 10,086 - - 10,086
Other assets 48,275 - - 48,275
Intercompany receivable 1,677,258 - (1,677,258) -
$2,775,876$4,009,782$(1,677,258)$5,108,400
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Drafts payable $ 220,887$ -$ -$ 220,887
Accounts payable and accrued
expenses 128,206 - - 128,206
Note payable 300,000 - - 300,000
Deferred finance revenue - 1,476,980(1,476,980) -
Intercompany payable - 1,677,258 (1,677,258)
- -
Total liabilities 649,093 3,154,238 (3,154,238) 64
9,093
Stockholder's equity:
Common stock 300 500 - 800
Additional paid-in capital 20,000 - - 20,000
Retained earnings 2,106,483 855,044 1,476,980 4,43
8,507
Total stockholder's equity 2,126,783 855,544 1,476,980
4,459,307
Commitments - - -
- -
$2,775,876$4,009,782$(1,677,258)$5,108,400
225 NORTH MILITARY CORPORATION
d/b/a MIRACLE MILE MOTORS AND
PALM BEACH FINANCE COMPANY, INC.
COMBINING STATEMENTS OF INCOME AND RETAINED EARNINGS
For the year ended December 31, 1996
255 North Palm Beach
Military Finance Combining Combined
Corporation Company, Inc. Entries
Totals
Revenue:
Sales $10,784,322$ -$ -$10,784,322
Interest income 685,082 1,245,512 (716,069) 1,214,525
Administrative fee 204,000 - (204,000) -
Total revenue 11,673,404 1,245,512 (920,069) 11,9
98,847
Cost of sales and expenses:
Cost of sales 8,446,683 - - 8,446,683
Selling, general, and administrative1,849,229 231,598 (204,000)
1,877,065
Provision for credit losses205,494 905,733 - 1,110,989
Discount on sale of receivables1,215,264 -(1,215,264) -
Interest expense 22,593 - - 22,593
Depreciation 1,748 - - 1,748
Total cost of sales and
expenses 11,741,011 1,137,331 (1,419,264) 11,45
9,078
Net income (loss) (67,607) 108,181 499,195 539,769
Retained earnings, beginning
of year 2,498,731 746,863 977,785 4,223,379
Distributions to stockholder (324,641) - -
(324,641)
Retained earnings, end of year$ 2,106,483$ 855,044$ 1,476,980$
4,438,507
225 NORTH MILITARY CORPORATION
d/b/a MIRACLE MILE MOTORS AND
PALM BEACH FINANCE COMPANY, INC.
COMBINING BALANCE SHEETS
December 31, 1995
255 North Palm Beach
Military Finance Combining Combined
Corporation Company, Inc.Entries
Totals
ASSETS
Cash and contracts in transit$ 299,630$ 5,284$ -$ 3
04,914
Finance receivables, net 834,328 2,786,295 - 3,620,623
Inventory 860,105 - - 860,105
Property and equipment, net 104,010 - - 104,010
Other assets 24,859 - - 24,859
Intercompany receivable 1,015,551 - (1,015,551) -
$3,138,483$2,791,579$(1,015,551)$4,914,511
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Drafts payable $ 317,875$ -$ -$ 317,875
Accounts payable and accrued
expenses 256,577 - - 256,577
Loan from stockholder - 50,880 - 50,880
Note payable 45,000 - - 45,000
Deferred finance revenue - 977,785 (977,785) -
Intercompany payable - 1,015,551 (1,015,551)
- -
Total liabilities 619,452 2,044,216 (1,993,336) 6
70,332
Stockholder's equity:
Common stock 300 500 - 800
Additional paid-in capital 20,000 - - 20,000
Retained earnings 2,498,731 746,863 977,785 4,22
3,379
Total stockholder's equity 2,519,031 747,363 977,785
4,244,179
Commitments - - - -
$3,138,483$2,791,579$(1,015,551)$4,914,511
225 NORTH MILITARY CORPORATION
d/b/a MIRACLE MILE MOTORS AND
PALM BEACH FINANCE COMPANY, INC.
COMBINING STATEMENTS OF INCOME AND RETAINED EARNINGS
For the year ended December 31, 1995
255 North Palm Beach
Military Finance Combining Combined
Corporation Company, Inc.Entries
Totals
Revenue:
Sales $11,393,704$ -$ -$11,393,704
Interest income 382,614 1,610,569 (902,491) 1,090,692
Administrative fee 204,000 - (204,000) -
Total revenue 11,980,318 1,610,569 (1,106,491) 12,4
84,396
Cost of sales and expenses:
Cost of sales 9,118,158 - - 9,118,158
Selling, general, and administrative1,959,783 238,849 (204,000)
1,994,632
Provision for credit losses368,504 592,912 - 961,416
Discount on sale of receivables1,172,189 -(1,172,189) -
Interest expense 18,248 - - 18,248
Depreciation 3,262 - - 3,262
Total cost of sales
and expenses 12,640,144 831,761 1,376,189) 12,095,716
Net income (659,826) 778,808 269,698 388,680
Retained earnings, beginning
of year 3,295,802 (31,945) 708,087 3,971,944
Distributions to stockholder (137,245) - -
(137,245)
Retained earnings, end of year$ 2,498,731$ 746,863$ 977,785$
4,223,379
August 16, 1996
Templeton & Company, P.A.
540 Royal Palm Beach Blvd.
Royal Palm Beach, FL 33411
Gentlemen:
In connection with your review of the combined financial
statements of 225 N. Military Trail Corp. (d/b/a Miracle Mile
Motors) and Palm Beach Finance, Inc. (each S Corporations) as of
December 31, 1995 and for the year then ended for the purpose of
expressing limited assurance that there are no material
modifications that should be made to the statements in order for
them to be in conformity with generally accepted accounting
principles, we confirm, to the best of our knowledge and belief,
the following representations made to you during your review.
1. The combined financial statements referred to above present
the financial position and results of operations and cash
flows of 225 N. Military Trail Corp. (d/b/a Miracle Mile
Motors) and Palm Beach Finance, Inc. (each S. Corporations)
in conformity with generally accepted accounting principles.
In that connection, we specifically confirm that -
a. The Company's accounting principles, and the
practices and methods followed in applying them, are as
disclosed in the financial statements.
b. There have been no changes during the year ended
December 31, 1995 in the Company's accounting principles
and practices.
c. We have no plans or intentions that may materially
affect the carrying value or classification of assets and
liabilities.
d. There are no material transactions that have not
been properly reflected in the financial statements.
e. There are no material losses (such as from obsolete
inventory or purchase or sales commitments) that have not
been properly accrued or disclosed in the financial
statements.
f. There are no violations, or possible violations of
laws or regulations whose effects should be considered
for disclosure in the financial statements or as a basis
for recording a loss contingency, and there are no other
material liabilities or gain or loss contingencies that
are required to be accrued or disclosed.
g. The Company has satisfactory title of all owned
assets, and there are no liens or encumbrances on such
assets nor has any asset been pledged, except as set
forth in the financial statements or the notes thereto.
h. There are no related party transactions or related
amounts receivable or payable that have not been properly
disclosed in the financial statements.
i. We have complied with all aspects of contractual
agreements that would have a material effect on the
financial statements in the event of noncompliance.
j. No events have occurred subsequent to the balance
sheet date that would require adjustment to, or
disclosure in, the financial statements, except as set
forth therein.
k. There are no unasserted claims or assessments that
our lawyer has advised us are probable of assertion and
must be disclosed in accordance with Statement of
Financial Accounting Standards No. 5.
l. We have identified all accounting estimates that
could be material to the financial statements, including
the key factors and significant assumptions underlying
those estimates, and we believe the estimates are
reasonable in the circumstances.
m. There are no such estimates that may be subject to
material change in the near-term that have not been
properly disclosed in the financial statements. We
understand that the near-term means the period within one
year of the date of the financial statements.
2. We have advised you of all actions taken at meetings of
stockholders, board of directors, and committees of the board
of directors (or other similar bodies, as applicable) that
may affect the financial statements.
3. We have responded fully to all inquiries made to us by you
during your review.
Chief Executive Officer
Controller
Gentlemen:
Our auditors, Spence, Marston, Bunch, Morris & Co., 250 North Belcher
Road, Suite 100, Clearwater, Florida 34625-2601, are conducting an
audit of our financial statements. Please furnish to them the
information requested below involving matters as to which you have
been engaged and to which you have devoted substantive attention on
behalf of the Company in the form of legal consultation or
representation. Your response should include matters that existed at
December 31, 1995, and for the period from that date to the date of
your response.
Pending or Threatened Litigation
(excluding undeclared claims and assessments)
Please prepare a description of all litigation, claims, and
assessments (excluding unasserted claims and assessments). The
description of each case should include:
a. the nature of the litigation,
b. the progress of the case to date,
c. how management is responding or intends to respond to the
litigation, e.g., to contest the case vigorously or to seek an
out-of-court settlement, and
d. an evaluation of the likelihood of an unfavorable outcome and
an estimate, if one can be made, of the amount or range of
potential loss.
Unasserted Claims and Assessments
With respect to unasserted claims or assessments which must be
disclosed in accordance with Statement of Financial Accounting
Standards Number 5, please provide a description of (1) the nature of
the matter, (2) how management intends to respond if the claim is
asserted, and (3) an evaluation of the likelihood of an unfavorable
outcome and an estimate, if one can be made, of the amount or range
of potential loss.
We understand that whenever, in the course of performing legal
services for us with respect to a matter recognized to involve an
unasserted possible claim or assessment that may call for financial
statement disclosure, you have formed a professional conclusion that
we should disclose or consider disclosure concerning such possible
claim or assessment, as a matter of professional responsibility to
us, you will so advise us and will consult with us concerning the
question of such disclosure and the applicable requirements of
Statement of Financial Accounting Standards No. 5. Please
specifically confirm to our auditors that our understanding is
correct.
Response
Your response should include matters that existed as of December 31,
1995, and during the period from that date to the effective date of
your response.
Please specifically identify that nature of, and reasons for, any
limitations on your response.
Our auditors expect to have the audit completed on January 17, 1997,
and would appreciate receiving your reply by that date with a
specified effective date no earlier than January 10, 1997.
Other Matters
Please, also indicate the amount we were indebted to you for services
and expenses on December 31, 1995. An envelope is enclosed for your
convenience in replying.
Very truly yours,
The 225 North Military Trail Corporation
(d/b/a Miracle Mile Motors) and
Palm Beach Finance, Inc.
March 26, 1997
First United Bank
980 North Federal Highway
Boca Raton, FL 33432
Gentlemen:
Our auditors, Templeton & Company, P.A., are conducting an audit of
our financial statements. Please confirm directly to them the
following information relating to our note payable to you at December
31, 1996:
Date of note:
Original amount of note: $
Unpaid principal balance: $
Maturity date:
Interest rate:
Date to which interest has
been paid
Description of collateral:
After signing and dating your reply, please mail it directly to
Templeton & Company, P. A., 540 Royal Palm Beach Boulevard, Royal
Palm Beach, Florida 33411-7675 in the enclosed return envelope.
Very truly yours,
To: Templeton & Company, P.A.
The above information regarding the obligation from
_____________________________ agrees with our records at December 31,
1996 with the following exceptions (if any):
If there are any direct or contingent liabilities to you not
otherwise indicated above, please list:
Signed:
Title:
Date: