Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Financial Information
Explanatory Headnote (Unaudited)
Introduction
On October 28, 1996, Eckler Industries, Inc. (Eckler) entered into an
Agreement and Plan of Reorganization (the Agreement) with Smart Choice
Automotive Group, Inc. (SCHI). SCHI had previously entered into agreements
to acquire the outstanding capital stock or net assets of other companies.
The closing of the transaction between Eckler and SCHI occurred on January
28, 1997. The transactions between SCHI and the other companies closed on
January 28, 1997 (prior to the Eckler and SCHI closing), February 12, 1997
and February 14, 1997.
Based on the controlling interest in Eckler obtained by SCHI as a result of
this transaction, the transaction will be accounted for as an acquisition
of Eckler by SCHI (a reverse acquisition in which SCHI is considered the
acquirer for accounting purposes).
SCHI was incorporated on June 21, 1996 and had no significant operations or
assets until it acquired Eckler and the other companies. The acquisition of
Eckler and the other companies will be accounted for as a purchase, with
the assets acquired and liabilities assumed recorded at their estimated
fair values.
The pro forma condensed consolidated balance sheets as of December 31, 1996
assume the transactions were consummated as of December 31, 1996, and the
pro forma condensed consolidated statements of operations for the year
ended December 31, 1996 and the three months ended December 31, 1996
assumes the transactions were consummated as of January 1, 1996.
The pro forma condensed consolidated financial statements may not be
indicative of the actual results of the transactions. In particular, the
pro forma condensed consolidated financial statements are based on
management's current estimate of the allocations of purchase price, the
actual allocation of which may differ.
In the opinion of management, all adjustments have been made that are
necessary to present fairly the pro forma data.
Acquisition of Liberty Finance Company, Inc. and Affiliates
The outstanding capital stock of Liberty was acquired for $1,500,000 notes
due to the seller, the equivalent of 352,156 shares of common stock valued
at $3.375 per share ($1,188,527) and $54,026 in acquisition costs. Prior to
the acquisition, the selling stockholder contributed debt amounting to
$628,941 to the capital of Liberty.
The purchase price for Liberty is anticipated to be allocated as follows:
Fair value of assets acquired $15,818,914
Excess of cost over net assets acquired 1,633,463
17,452,377
Fair value of liabilities assumed 14,709,824
Total purchase price $2,742,553
Acquisition of Florida Finance Group, Inc. and Affiliates
The outstanding capital stock of Florida Finance and the net assets of its
affiliated companies were acquired for $892,722 notes due to the seller,
the issuance of 285,714 shares of common stock valued at $3.375 per share
($964,285) and $40,643 in acquisition costs.
The purchase price for Florida Finance is anticipated to be allocated as
follows:
Fair value of assets acquired $5,015,224
Excess of cost over net assets acquired 3,238,721
8,253,945
Fair value of liabilities assumed 6,356,295
Total purchase price $1,897,650
Acquisition of 225 North Military Trail Corporation and Affiliate
The net assets of 225 North Military Trail and Affiliate were acquired for
$3,000,000 cash, $1,250,000 notes due to the seller, 285,714 shares of
common stock valued at $3.375 per share ($964,286) and $53,299 in
acquisition costs.
The purchase price for 225 North Military Trail is anticipated to be
allocated as follows:
Fair value of assets acquired $5,108,400
Excess of cost over net assets acquired 808,278
5,916,678
Fair value of liabilities assumed 649,093
Total purchase price $5,267,585
Acquisition of Dealer Development Services, Inc.
The outstanding capital stock of Dealer Development Services, Inc. was
acquired for $384,615 notes due to the seller and $3,934 in acquisition
costs.
The purchase price for Dealer Development Services is anticipated to be
allocated as follows:
Fair value of assets acquired $101,116
Excess of cost over net assets acquired 892,426
993,542
Fair value of liabilities assumed 604,993
Total purchase price $388,549
Acquisition of Dealer Insurance Services, Inc.
The outstanding capital stock of Dealer Insurance Services, Inc. was
acquired for $365,385 notes due to the seller and $20,627 in acquisition
costs.
The purchase price for Dealer Insurance Services is anticipated to be
allocated as follows:
Fair value of assets acquired $132,461
Excess of cost over net assets acquired 421,485
553,946
Fair value of liabilities assumed 167,934
Total purchase price $386,012
Acquisition of Eckler Industries, Inc.
The acquisition of Smart Choice Holdings, Inc. by Eckler will be accounted
for as an acquisition of Eckler by SCHI (a reverse acquisition in which
SCHI is considered the acquirer for accounting purposes). The purchase
price for Eckler is computed by valuing the outstanding shares of common
stock of Eckler (the equivalent of 2,757,500 shares) at $3.375 or
$9,306,563 and acquisition costs of $100,119.
The purchase price for Eckler is anticipated to be allocated as follows:
Fair value of assets acquired $6,366,508
Excess of cost over net assets acquired 7,004,572
13,371,080
Fair value of liabilities assumed 3,964,398
Total purchase price $9,406,682
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Balance Sheets
(Unaudited)
SCHI Liberty
Pro Forma (4) Pro Forma Florida
December 31, 1996 SCHI Adjust. Liberty Adjust. Finance
Assets:
Cash $ $(2,950,000)(6)$ 163,184$ $ 20,272
2,950,000 (2)
Accounts receivable25,000 17,765
Notes receivable 400,000
Finance receivables 11,383,431 4,383,759
Inventories 2,861,848 440,317
Paid expenses 26,940
Land held for sale 1,050,000
Deferred tax asset
Property and
equipment, net 22,454 272,543 141,576
Investment in
subsidiaries 2,742,553 (4)
1,897,650 (5)
5,267,585 (6)
388,549 (7)
386,012 (8)
9,406,682 (9)
Excess of cost over
net assets acquired
Debt issue costs, net of
accum. amortization24,735 4,154
Deposit on acquisition50,000 (50,000)(6)
Deferred acquisition
costs 194,101 117,657 (3)
(54,026)(4)
(40,643)(5)
(53,299)(6)
(3,934)(7)
(20,627)(8)
(100,119)(9)
Other assets 83,754 2,360
$716,290$19,884,040 $15,818,914$ -0-$5,032,989
See accompanying headnote and notes to pro forma consolidated financial
statements (unaudited).
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Balance Sheets (Continued)
(Unaudited)
225 North Dealer
Military Develop Dealers EliminatingConsolidated
December 31, 1996 Trail mentInsurance Eckler Entries Pro Forma
Assets
Cash $ 192,999 $ 94,892$ 1,288$ 241,652$ $ 714,287
Accts. receivable 115,050 153,285 311,100
Notes receivable 326,700 726,700
Finance
receivables4,057,682 19,824,872
Inventories 799,358 1,307,525 5,409,048
Prepaid expenses 5,3851,385,398 1,417,723
Land held for sale 1,050,000
Deferred tax asset 330,610 330,610
Property and
equipment, net10,086 5,037 9,3562,512,645 2,973,697
Investment in
subsidiaries (2,742,553)
(1,897,650)
(5,267,585)
(388,549)
(386,012)
(9,406,682)
Excess of cost
over net assets
acquired 13,998,945 13,998,945
Debt issue costs, net of
accum. Amortization 28,889
Deposit on acquisition
Deferred acquisition
costs 39,110
Other assets 48,275 1,187 1,382 108,693 245,651
$5,108,400 $101,116 $132,461$6,366,508$(6,090,086)$47,070,632
See accompanying headnote and notes to pro forma consolidated financial
statements (unaudited).
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Balance Sheets
(Unaudited)
SCHI Liberty
Pro Forma (4) Pro Forma Florida
December 31, 1996 SCHI Adjust. Liberty Adjust. Finance
Liabilities and
Stockholders Equity:
Accounts Payable $438,890$ 117,657 (3)$ 473,088$ $ 47
,791
Bank overdraft 82,884
Notes payable 60,000 2,950,000 (2)14,438,582 (628,941)(4)6,175,193
1,500,000 (4)
892,722 (5)
1,250,000 (6)
384,615 (7)
365,385 (8)
Advance from related
parties 197,237
Accrued expenses 183,314 229,858 16,505
Deferred income 134,571
Customer deposits
Deferred income taxes
Convertible debentures262,000
Total liabilites 1,027,088 7,460,37915,338,765 (628,941) 6,374,060
Stockholders'
equity (deficit)(310,798) 1,188,527 (4) 480,149628,941 (4)(1,341,071)
964,285 (5)
964,286 (6)
9,306,563 (9)
$716,290 $19,884,040$15,818,914$ -0-$5,032,989
See accompanying headnote and notes to pro forma consolidated financial
statements (unaudited).
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Balance Sheets (Continued)
(Unaudited)
225 North Dealer
Military Develop Dealers EliminatingConsolidated
December 31, 1996 Trail mentInsurance Eckler Entries Pro Forma
Liabilities and
Stockholders Equity:
Accounts payable$ 349,093$ 1,002$ 94,319$ 545,765$ $ 2,067,605
Bank overdraft 82,884
Notes payable 300,000 16,500 27,1662,706,206 30,437,428
Advance from related
parties 197,237
Accrued expenses 177,816 46,449 309,613 963,555
Deferred income 134,571
Customer deposits 409,675 409,675
Deferred income taxes 402,814 402,814
Convertible debentures 262,000
Total liabilities649,093 604,993 167,9343,964,398 34,957,769
Stockholders' equity
(deficit) 4,459,307(503,877) (35,473)2,402,110(6,090,086)12,112,863
$5,108,400 $101,116 $132,461$6,366,508$(6,090,086)$47,070,632
See accompanying headnote and notes to pro forma consolidated financial
statements (unaudited).
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Statement of Operations (Unaudited)
Year Ended December 31, 1996
225 North Dealer
Florida Military Develop-
SCHI Liberty Finance Trail ment
Revenues $ $21,687,418$6,064,172$11,998,847 $698,620
Cost and expenses:
cost of sales 16,122,7783,702,953 8,446,683
Operating expenses 670,616 4,852,529 2,084,072 2,989,802 1,206,152
670,616 20,975,307 5,787,02511,436,485 1,206,152
Income (loss) from
operations (670,616) 712,111 277,147 562,362 (507,532)
Other income (expense):
Interest expense (33,172) (1,324,437) (675,754) (22,593) (623)
Other 79
(33,172) (1,324,437) (675,754) (22,593) (544)
Income (loss) before
income taxes (benefit)(703,788)(612,326) (398,607) 539,769 (508,076)
Taxes on income
(benefit) 204
Net income (loss)$(703,788) $ (612,326)$ (398,811)$ 539,769$(508,076)
Income (loss) per share
Weighted average number of
common shares outstanding
See accompanying headnote and notes to pro forma consolidated financial
statements (unaudited).
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Statement of Operations (Unaudited) (Continued)
Year Ended December 31, 1996
Dealers Pro FormaConsolidted
Insurance Eckler Adjust. Pro Forma
Revenues $812,645$14,893,083$ $56,154,785
Cost and expenses:
cost of sales 9,648,505 37,920,919
Operating expenses) 863,344 5,489,776699,947(10)18,520,014
(336,224)(11)
863,34415,138,281 363,72356,440,933
Income (loss) from
operations (50,699) (245,198) (363,723) (286,148)
Other income (expense):
Interest expense (4,294) (332,195)(657,828)(12)(3,050,896)
Other 100,963 101,042
(4,294) (231,232) (657,828)(2,949,854)
Income (loss) before
income taxes (benefit) (54,993) (476,430)(1,021,551)(3,236,002)
Taxes on income
(benefit) (161,000)160,796(13)
Net income (loss) $ (54,993)$ (315,430)$(1,182,347)$(3,236,002)
Income (loss) per share $ (.35)
Weighted average number of
common shares outstanding 9,169,516
See accompanying headnote and notes to pro forma consolidated financial
statements (unaudited).
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Statement of Operations (Unaudited)
Three Months Ended December 31, 1996
225 North Dealer
Florida Military Develop-
SCHI Liberty Finance Trail ment
Revenues $ $5,360,478$ 893,339$ 2,518,311 $236,316
Cost and expenses:
cost of sales 3,239,488 154,078 1,637,024
Operating expenses)670,616 3,157,227 604,708 965,904 603,461
670,616 6,396,715 758,786 2,602,928 603,461
Income (loss) from
operations (670,616) (1,036,237) 134,553 (84,617) (367,145)
Other income (expense):
Interest expense (33,172) (367,959) (181,965) (8,766) (584)
Other
(33,172) (367,959) (181,965) (8,766) (584)
Income (loss) before
income taxes (benefit)(703,788)(1,404,196)(47,412) (93,383) (367,729)
Taxes on income
(benefit) 204
Net income (loss)$(703,788) $(1,404,196)$ (47,616)$ (93,383)$(367,729)
Income (loss) per share
Weighted average number of
common shares outstanding
See accompanying headnote and notes to pro forma consolidated financial
statements (unaudited).
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Statement of Operations (Unaudited)
Three Months Ended December 31, 1996
Dealers Pro FormaConsolidted
Insurance Eckler Adjust. Pro Forma
Revenues $172,770$2,941,821$ $12,123,035
Cost and expenses:
cost of sales 1,813,371 6,843,961
Operating expenses) 184,056 1,492,939174,987(10)7,487,706
(336,192)(11)
184,056 3,306,310 (191,205)14,331,667
Income (loss) from
operations (11,286) (364,489) 191,205(2,208,632)
Other income (expense):
Interest expense (1,145) (72,673)(164,457)(12)(830,721)
Other 28,155 28,155
(1,145) (44,518) (164,457) (802,566)
Income (loss) before
income taxes (benefit) (12,431) (409,007) 26,748(3,011,198)
Taxes on income
(benefit) (212,798)212,594(13)
Net income (loss) $ (12,431)$ (196,209)$(185,846)$(3,011,198)
Income (loss) per share $ (.33)
Weighted average number of
common shares outstanding 9,169,516
See accompanying headnote and notes to pro forma consolidated financial
statements (unaudited).
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Notes to Pro Forma Consolidated Financial Information
(Unaudited)
Pro Forma Adjustments
The pro forma condensed consolidated balance sheet as of December 31, 1996
assumes the transactions were consummated as of December 31, 1996 and the
pro forma condensed consolidated statements of operations for the year
ended December 31, 1996 and the three months ended December 31, 1996
assumes the transactions were consummated as of January 1, 1996.
Borrowings for Acquisitions
Reflects the borrowings necessary to fund the cash position of the purchase
price of 225 North Military Trail Corporation and Affiliate.
Deferred Acquisition Costs
Reflects the accrual of acquisition costs incurred after December 31,
1996.
Acquisition of Liberty Finance Company, Inc. and Affiliates
The outstanding capital stock of Liberty was acquired for $1,500,000 notes
due to the seller, the equivalent of 352,156 shares of common stock valued
at $3.375 per share ($1,188,527) and $54,026 in acquisition costs. Prior to
the acquisition, the selling stockholder contributed debt amounting to
$628,941 to the capital of Liberty.
The purchase price for Liberty is anticipated to be allocated as follows:
Fair value of assets acquired $15,818,914
Excess of cost over net assets acquired 1,633,463
17,452,377
Fair value of liabilities assumed 14,709,824
Total purchase price $2,742,553
Acquisition of Florida Finance Group, Inc. and Affiliates
The outstanding capital stock of Florida Finance and the net assets of its
affiliated companies were acquired for $892,722 notes due to the seller,
the issuance of 285,714 shares of common stock valued at $3.375 per share
($964,285) and $40,643 in acquisition costs.
The purchase price for Florida Finance is anticipated to be allocated as
follows:
Fair value of assets acquired $5,015,224
Excess of cost over net assets acquired 3,238,721
8,253,945
Fair value of liabilities assumed 6,356,295
Total purchase price $1,897,650
Acquisition of 225 North Military Trail Corporation and Affiliate
The net assets of 225 North Military Trail and Affiliate were acquired for
$3,000,000 cash, $1,250,000 notes due to the seller, 285,714 shares of
common stock valued at $3.375 per share ($964,286) and $53,299 in
acquisition costs.
The purchase price for 225 North Military Trail is anticipated to be
allocated as follows:
Fair value of assets acquired $5,108,400
Excess of cost over net assets acquired 808,278
5,916,678
Fair value of liabilities assumed 649,093
Total purchase price $5,267,585
Acquisition of Dealer Development Services, Inc.
The outstanding capital stock of Dealer Development Services, Inc. was
acquired for $384,615 notes due to the seller and $3,934 in acquisition
costs.
The purchase price for Dealer Development Services is anticipated to be
allocated as follows:
Fair value of assets acquired $101,116
Excess of cost over net assets acquired 892,426
993,542
Fair value of liabilities assumed 604,993
Total purchase price $388,549
Acquisition of Dealer Insurance Services, Inc.
The outstanding capital stock of Dealer Insurance Services, Inc. was
acquired for $365,385 notes due to the seller and $20,627 in acquisition
costs.
The purchase price for Dealer Insurance Services is anticipated to be
allocated as follows:
Fair value of assets acquired $132,461
Excess of cost over net assets acquired 421,485
553,946
Fair value of liabilities assumed 167,934
Total purchase price $386,012
Acquisition of Eckler Industries, Inc.
The acquisition of Smart Choice Holdings, Inc. by Eckler will be accounted
for as an acquisition of Eckler by SCHI (a reverse acquisition in which
SCHI is considered the acquirer for accounting purposes). The purchase
price for Eckler is computed by valuing the outstanding shares of common
stock of Eckler (the equivalent of 2,757,500 shares) at $3.375 or
$9,306,563 and acquisition costs of $100,119.
The purchase price for Eckler is anticipated to be allocated as follows:
Fair value of assets acquired $6,366,508
Excess of cost over net assets acquired 7,004,572
13,371,080
Fair value of liabilities assumed 3,964,398
Total purchase price $9,406,682
Amortization of Excess Cost over Fair Value of Assets Acquired
Reflects the amortization of excess cost over fair value of assets acquired
over 20 years.
Compensation Expense
Reflects the change in compensation expense based on the historical
compensation expense of certain executives of the acquired companies
compared to their employment agreements effective on the dates of
acquisition.
Interest Expense
Reflects the net additional interest expense on the indebtedness incurred
as partial payment of the purchase price of the acquired companies, reduced
by the interest expense incurred on debt contributed to capital by the
sellers of one of the acquired companies.
Income Tax Benefit
To eliminate tax benefits in determining pro forma income (loss) from
operations. Management believes that sufficient evidence would not have
existed to recognize a deferred tax asset relating to these losses.