Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Financial Information
Explanatory Headnote (Unaudited)
Introduction
On October 28, 1996, Eckler Industries, Inc. (Eckler) entered into an Agreement
and Plan of Reorganization (the Agreement) with Smart Choice Holdings, Inc.
(SCHI). SCHI had previously entered into agreements to acquire the outstanding
capital stock or net assets of other companies. The closing of the transaction
between Eckler and SCHI occurred on January 28, 1997. The transactions between
SCHI and the other companies closed on January 28, 1997 (prior to the Eckler and
SCHI closing), February 12, 1997 and February 14, 1997.
Based on the controlling interest in Eckler obtained by SCHI as a result of this
transaction, the transaction will be accounted for as an acquisition of Eckler
by SCHI (a reverse acquisition in which SCHI is considered the acquirer for
accounting purposes).
SCHI was incorporated on June 21, 1996 and had no significant operations or
assets until it acquired Eckler and the other companies. The acquisition of
Eckler and the other companies will be accounted for as a purchase, with the
assets acquired and liabilities assumed recorded at their estimated fair values.
On June 27, 1997, Smart Choice Automotive Group, Inc. acquired certain assets
and assumed certain liabilities of Strata Holding, Inc. and Ready Finance, Inc.,
which were under common ownership.
The pro forma condensed consolidated balance sheets as of December 31, 1996
assume the transactions were consummated as of December 31, 1996, and the pro
forma condensed consolidated statements of operations for the year ended
December 31, 1996 and the six months ended June 30, 1997 assumes the
transactions were consummated as of January 1, 1996.
The pro forma condensed consolidated financial statements may not be indicative
of the actual results of the transactions. In particular, the pro forma
condensed consolidated financial statements are based on management's current
estimate of the allocations of purchase price, the actual allocation of which
may differ.
In the opinion of management, all adjustments have been made that are necessary
to present fairly the pro forma data.
Acquisition of Liberty Finance Company, Inc. and Affiliates
The outstanding capital stock of Liberty was acquired for $1,500,000 in notes
due to the seller, 352,156 shares of restricted common stock valued at $3.375
per share ($1,188,527) and $54,026 in acquisition costs. Prior to the
acquisition, the selling stockholder converted debt amounting to $628,941 to the
capital of Liberty.
The purchase price for Liberty is anticipated to be allocated as follows:
Fair value of assets acquired $ 15,818,914
Excess of cost over net assets acquired 1,633,463
--------------
17,452,377
Fair value of liabilities assumed 14,709,824
--------------
Total purchase price of net assets acquired $ 2,742,553
==============
Acquisition of Florida Finance Group, Inc. and Affiliates
The outstanding capital stock of Florida Finance and the net assets of its
affiliated companies were acquired for $892,722 in notes due to the seller, the
issuance of 285,714 shares of restricted common stock valued at $3.375 per share
($964,285) and $40,643 in acquisition costs.
The purchase price for Florida Finance is anticipated to be allocated as
follows:
Fair value of assets acquired $ 5,015,224
Excess of cost over net assets acquired 3,238,721
--------------
8,253,945
Fair value of liabilities assumed 6,356,295
--------------
Total purchase price of net assets acquired $ 1,897,650
==============
Acquisition of 225 North Military Trail Corporation and Affiliate
The net assets of 225 North Military Trail and Affiliate were acquired for
$3,000,000 cash, $1,250,000 in notes due to the seller, 285,714 shares of
restricted common stock valued at $3.375 per share ($964,286) and $53,299 in
acquisition costs.
The purchase price for 225 North Military Trail is anticipated to be allocated
as follows:
Fair value of assets acquired $ 5,108,400
Excess of cost over net assets acquired 808,278
--------------
5,916,678
Fair value of liabilities assumed 649,093
--------------
Total purchase price of net assets acquired $ 5,267,585
==============
Acquisition of Dealer Development Services, Inc.
The outstanding capital stock of Dealer Development Services, Inc. was acquired
for $384,615 in notes due to the seller and $3,934 in acquisition costs.
The purchase price for Dealer Development Services is anticipated to be
allocated as follows:
Fair value of assets acquired $ 101,116
Excess of cost over net assets acquired 892,426
--------------
993,542
Fair value of liabilities assumed 604,993
--------------
Total purchase price of net assets acquired $ 388,549
==============
Acquisition of Dealer Insurance Services, Inc.
The outstanding capital stock of Dealer Insurance Services, Inc. was acquired
for $365,385 in notes due to the seller and $20,627 in acquisition costs.
The purchase price for Dealer Insurance Services is anticipated to be allocated
as follows:
Fair value of assets acquired $ 132,461
Excess of cost over net assets acquired 421,485
--------------
553,946
Fair value of liabilities assumed 167,934
--------------
Total purchase price of net assets acquired $ 386,012
==============
Acquisition of Eckler Industries, Inc.
The acquisition of Smart Choice Holdings, Inc. by Eckler will be accounted for
as an acquisition of Eckler by SCHI (a reverse acquisition in which SCHI is
considered the acquirer for accounting purposes). The purchase price for Eckler
is computed by valuing the outstanding shares of common stock of Eckler (the
equivalent of 2,757,500 shares) at $3.375 or $9,306,563 and acquisition costs of
$100,119.
The purchase price for Eckler is anticipated to be allocated as follows:
Fair value of assets acquired $ 6,366,508
Excess of cost over net assets acquired 7,004,572
--------------
13,371,080
Fair value of liabilities assumed 3,964,398
--------------
Total purchase price of net assets acquired $ 9,406,682
==============
Acquisition of Strata Holding, Inc. and Ready Finance, Inc.
Certain net assets of Strata Holding, Inc. and Ready Finance, Inc. (companies
under common ownership) were acquired for $5,000,000 cash and $4,880,089 in
notes due to the seller and $27,271 in acquisition costs.
The purchase price for Strata Holding, Inc. and Ready Finance, Inc. is
anticipated to be allocated as follows:
Fair value of assets acquired $ 6,207,686
Excess of cost over net assets acquired 3,910,984
--------------
10,118,670
Fair value of liabilities assumed 211,310
--------------
Total purchase price of net assets acquired $ 9,907,360
==============
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Balance Sheets
(Unaudited)
SCHI Liberty 225 North Dealer
Pro Forma Pro Forma Florida Military Develop- Dealers
December 31, 1996 SCHI Adjustments Liberty Adjs. Finance Trail ment Insurance Eckler
---- ----------- ------- --------- ------- -------- ------- --------- -----
Assets:
Cash $ $7,950,000 (2) $ 163,184 $ $ 20,272 $ 192,999 $94,892 $ 1,288 $ 241,652
(2,950,000)(6)
(5,000,000)(10)
Accounts receivable 25,000 17,765 115,050 153,285
Notes receivable 400,000 326,700
Finance receivables 11,383,431 4,383,759 4,057,682
Inventories 2,861,848 440,317 799,358 1,307,525
Prepaid expenses 26,940 5,385 1,385,398
Land held for sale 1,050,000
Deferred tax asset 330,610
Property and equipment, net 22,454 272,543 141,576 10,086 5,037 9,356 2,512,645
Investment in subsidiaries 2,742,553 (4)
1,897,650 (5)
5,267,585 (6)
388,549 (7)
386,012 (8)
9,406,682 (9)
9,907,360 (10)
Excess of cost over net
assets acquired
Debt issue costs, net of
accumulated amortization 24,735 4,154
Deposit on acquisition 50,000 (50,000)(6)
Deferred acquisition costs 194,101 144,928 (3)
(54,026)(4)
(40,643)(5)
(53,299)(6)
(3,934)(7)
(20,627)(8)
(100,119)(9)
(27,271)(10)
Other assets 83,754 2,360 48,275 1,187 1,382 108,693
--------- ----------- ----------- ------ ---------- ---------- -------- -------- ----------
$ 716,290 $29,791,400 $15,818,914 $ - $5,032,989 $5,108,400 $101,116 $132,461 $6,366,508
========= =========== =========== ====== ========== ========== ======== ======== ==========
See accompanying headnote and notes to pro forma consolidated financial statements (unaudited).
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Balance Sheets
(Unaudited)
Strata Strata/Ready
and Ready Pro Forma Eliminating Consolidated
December 31, 1996 Finance Adjustments Entries Pro Forma
-------- ----------- ----------- ------------
Assets:
Cash $ 86,000 $ (86,000)(10) $ $ 714,287
Accounts receivable 171,592 (32,008)(10) 450,684
Notes receivable 726,700
Finance receivables 4,468,669 24,293,541
Inventories 1,530,253 6,939,301
Prepaid expenses 1,417,723
Land held for sale 1,050,000
Deferred tax asset 330,610
Property and equipment, net 69,180 3,042,877
Investment in subsidiaries (2,742,553)
(1,897,650)
(5,267,585)
(388,549)
(386,012)
(9,406,682)
(9,907,360)
Excess of cost over net
assets acquired 17,909,929 17,909,929
Debt issue costs, net of accumulated
amortization 28,889
Deposit on acquisition
Deferred acquisition costs 39,110
Other assets 91,135 (91,135)(10) 245,651
---------- ----------- ------------- -----------
$6,416,829 $ (209,143) $(12,086,462) $57,189,302
========== =========== ============= ===========
See accompanying headnote and notes to pro forma consolidated financial statements (unaudited).
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Balance Sheets
(Unaudited)
SCHI Liberty 225 North Dealer
Pro Forma Pro Forma Florida Military Develop- Dealers
December 31, 1996 SCHI Adjustments Liberty Adjustments Finance Trail ment Insurance Eckler
-------- ----------- ------- ----------- ------- --------- -------- ---------- -------
Liabilities and Stockholders'
Equity
Accounts payable $ 438,890 $ 144,928 (3) $ 473,088 $ $ 47,791 $ 349,093 $ 1,002 $94,319 $ 545,765
Bank overdraft 82,884
Notes payable 60,000 7,950,000 (2) 14,438,582 (628,941)(4) 6,175,193 300,000 16,500 27,166 2,706,206
1,500,000 (4)
892,722 (5)
1,250,000 (6)
384,615 (7)
365,385 (8)
4,880,089(10)
Advance from related parties 197,237
Accrued expenses 183,314 229,858 16,505 177,816 46,449 309,613
Deferred income 134,571
Customer deposits 409,675
Deferred income taxes 402,814
Convertible debentures 262,000
--------- ---------- ------------ ------- --------- --------- ------- ------- ---------
Total liabilities 1,027,088 17,367,739 15,338,765 (628,941) 6,374,060 649,093 604,993 167,934 3,964,398
Stockholders'equity(deficit) (310,798) 1,188,527 (4) 480,149 628,941(4)(1,341,071) 4,459,307 (503,877) (35,473) 2,402,110
---------- 964,285 (5) ----------- ------- ----------- --------- --------- -------- ----------
964,286 (6)
9,306,563 (9)
-----------
$ 716,290 $29,791,400 $15,818,914 $ - $5,032,989 $5,108,400 $101,116 $132,461 $6,366,508
========= =========== =========== ======== ========== ========== ======== ======== ==========
See accompanying headnote and notes to pro forma consolidated financial statements (unaudited).
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Balance Sheets
(Unaudited)
Strata Strata/Ready
and Ready Pro Forma Eliminating Consolidated
December 31, 1996 Finance Adjustments Entries Pro Forma
---------- ------------ ------------ ------------
Liabilities and Stockholders'
Equity
Accounts payable $ 295,252 $ (83,942)(10) $ $ 2,306,186
Bank overdraft 82,884
Notes payable 4,154,625 (4,154,625)(10) 40,317,517
Advance from related parties 197,237
Accrued expenses 963,555
Deferred income 134,571
Customer deposits 409,675
Deferred income taxes 402,814
Convertible debentures 262,000
---------- ---------- ------------ ----------
Total liabilities 4,449,877 (4,238,567) 45,076,439
Stockholders' equity (deficit) 1,966,952 4,029,424(10) (12,086,462) 12,112,863
---------- ---------- ------------ -----------
$6,416,829 $ (209,143) $(12,086,462) $57,189,302
========== =========== ============= ===========
See accompanying headnote and notes to pro forma consolidated financial statements (unaudited).
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Statement of Operations (Unaudited)
Year Ended December 31, 1996
225 North Dealer Strata
Florida Military Develop- Dealers and Ready Pro Forma Consolidated
SCHI Liberty Finance Trail ment Insurance Eckler Finance Adjustments Pro Forma
---- ------- ------- ----------- -------- -------- ----------- ----------- ----------- ------------
Revenues $ $21,687,418 $6,064,172 $11,998,847 $698,620 $812,645 $14,893,083 $11,041,583 $ $67,196,368
Costs and
expenses:
Cost of sales 16,122,778 3,702,953 8,446,683 9,648,505 6,973,535 44,894,454
Operating (11)
expenses 670,616 4,852,529 2,084,072 2,989,802 1,206,152 863,344 5,489,776 3,472,916 895,496 22,188,479
(336,224)
(12)
-------- ---------- ---------- ---------- --------- -------- ---------- ---------- ---------- ----------
670,616 20,975,307 5,787,025 11,436,485 1,206,152 863,344 15,138,281 10,446,451 559,272 67,082,933
-------- ---------- --------- ---------- --------- -------- ---------- ---------- ---------- ----------
Income (loss)
from operations (670,616) 712,111 277,147 562,362 (507,532) (50,699) (245,198) 595,132 (559,272) 113,435
Other income
(expense): (13)
Interest expense(33,172) (1,324,437) (675,754) (22,593) (623) (4,294) (332,195) (218,694) (1,328,342) (3,940,104)
Other 79 100,963 101,042
--------- ----------- --------- --------- --------- -------- ---------- --------- ----------- -----------
(33,172) (1,324,437) (675,754) (22,593) (544) (4,294) (231,232) (218,694) (1,328,342) (3,839,062)
--------- ----------- --------- --------- --------- -------- ----------- --------- ----------- -----------
Income (loss)
before income
taxes (benefit) (703,788) (612,326) (398,607) 539,769 (508,076) (54,993) (476,430) 376,438 (1,887,614) (3,725,627)
Taxes on income (14)
(benefit) 204 (161,000) 160,796
Net income
(loss) $ (703,788) $ (612,326) $ (398,811) $ 539,769 $(508,076) $(54,993) $ (315,430)$ 376,438 $(2,048,410) $(3,725,627)
=========== =========== =========== ========= ========== ========= =========== ========= ============ ============
Income (loss)
per share $ (.42)
============
Weighted average
number of common
shares outstanding 8,838,088
============
See accompanying headnote and notes to pro forma consolidated financial statements (unaudited).
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Pro Forma Consolidated Statement of Operations (Unaudited)
Six Months Ended June 30, 1997
225 North Dealer Strata
Florida Military Develop- Dealers and Ready Pro Forma Consolidated
SCHI (15) Liberty Finance Trail ment Insurance Eckler Finance Adjustments Pro Forma
---------- --------- --------- --------- --------- --------- ------- --------- ------------ -----------
Revenues $22,904,591 $1,813,590 $ 389,037 $1,512,570 $ 104,630 $57,640 $853,881 $6,134,758 $ $33,770,697
----------- ---------- ---------- ---------- ---------- ------- -------- ---------- ---------- -----------
Costs and expenses:
Cost of sales 15,206,441 1,511,731 289,820 1,060,814 582,117 3,866,468 22,517,391
Operating expense 12,172,252 434,243 152,053 207,336 47,940 60,924 432,006 1,916,464 173,573(11) 15,596,791
----------- ---------- ---------- ---------- ---------- ------- -------- ---------- --------- -----------
27,378,693 1,945,974 441,873 1,268,150 47,940 60,924 1,014,123 5,782,932 173,573 38,114,182
----------- ---------- ---------- ---------- ---------- ------- --------- --------- --------- ----------
Income (loss)
from operations (4,474,102) (132,384) (52,836) 244,420 56,690 (3,284)(160,242) 351,826 (173,573) (4,343,485)
Other income (expense):
Interest expense (1,623,500) (176,585) (64,061) (3,694) (122) (171) (23,728) (120,190) (398,137) (2,410,188)
Other 43,531 1,002 6,412 50,945
---------- ----------- ---------- ---------- --------- -------- -------- ---------- --------- -----------
(1,579,969) (176,585) (64,061) (3,694) 880 (171) (17,316) (120,190) (398,137) (2,359,243)
Net income (loss) $(6,054,071)$ (308,969)$ (116,897) $ 240,726 $ 57,570 $(3,455)$(177,558) $231,636 $(571,710) $(6,702,728)
=========== ========== ========== ========= ========== ======= ========= ======== ========= ===========
Loss per share $ (.75)
===========
Weighted average number of common shares outstanding 8,937,193
===========
See accompanying headnote and notes to pro forma consolidated financial statements (unaudited).
Smart Choice Automotive Group, Inc.
(Formerly Eckler Industries, Inc.)
Notes to Pro Forma Consolidated Financial Information
(Unaudited)
1. Pro Forma Adjustments
The pro forma condensed consolidated balance sheet as of December 31, 1996
assumes the transactions were consummated as of December 31, 1996 and the pro
forma condensed consolidated statements of operations for the year ended
December 31, 1996 and the six months ended June 30, 1997 assumes the
transactions were consummated as of January 1, 1996.
2. Borrowings for Acquisitions
Reflects the borrowings necessary to fund the cash portion of the purchase
price of 225 North Military Trail Corporation and Affiliate; Strata
Holding, Inc.; and Ready Finance, Inc.
3. Deferred Acquisition Costs
Reflects the accrual of acquisition costs incurred after December 31, 1996.
4. Acquisition of Liberty Finance Company, Inc. and Affiliates
The outstanding capital stock of Liberty was acquired for $1,500,000 in notes
due to the seller, 352,156 shares of restricted common stock valued at $3.375
per share ($1,188,527) and $54,026 in acquisition costs. Prior to the
acquisition, the selling stockholder converted debt amounting to $628,941 to the
capital of Liberty.
The purchase price for Liberty is anticipated to be allocated as follows:
Fair value of assets acquired $ 15,818,914
Excess of cost over net assets acquired 1,633,463
--------------
17,452,377
Fair value of liabilities assumed 14,709,824
--------------
Total purchase price of net assets acquired $ 2,742,553
==============
5. Acquisition of Florida Finance Group, Inc. and Affiliates
The outstanding capital stock of Florida Finance and the net assets of its
affiliated companies were acquired for $892,722 in notes due to the seller, the
issuance of 285,714 shares of restricted common stock valued at $3.375 per share
($964,285) and $40,643 in acquisition costs.
The purchase price for Florida Finance is anticipated to be allocated as
follows:
Fair value of assets acquired $ 5,015,224
Excess of cost over net assets acquired 3,238,721
--------------
8,253,945
Fair value of liabilities assumed 6,356,295
--------------
Total purchase price of net assets acquired $ 1,897,650
==============
6. Acquisition of 225 North Military Trail Corporation and Affiliate
The net assets of 225 North Military Trail and Affiliate were acquired for
$3,000,000 cash, $1,250,000 in notes due to the seller, 285,714 shares of
restricted common stock valued at $3.375 per share ($964,286) and $53,299 in
acquisition costs.
The purchase price for 225 North Military Trail is anticipated to be allocated
as follows:
Fair value of assets acquired $ 5,108,400
Excess of cost over net assets acquired 808,278
--------------
5,916,678
Fair value of liabilities assumed 649,093
--------------
Total purchase price of net assets acquired $ 5,267,585
==============
7. Acquisition of Dealer Development Services, Inc.
The outstanding capital stock of Dealer Development Services, Inc. was
acquired for $384,615 in notes due to the seller and $3,934 in acquisition
costs.
The purchase price for Dealer Development Services is anticipated to be
allocated as follows:
Fair value of assets acquired $ 101,116
Excess of cost over net assets acquired 892,426
--------------
993,542
Fair value of liabilities assumed 604,993
--------------
Total purchase price of net assets acquired $ 388,549
==============
8. Acquisition of Dealer Insurance Services, Inc.
The outstanding capital stock of Dealer Insurance Services, Inc. was
acquired for $365,385 in notes due to the seller and $20,627 in acquisition
costs.
The purchase price for Dealer Insurance Services is anticipated to be allocated
as follows:
Fair value of assets acquired $ 132,461
Excess of cost over net assets acquired 421,485
--------------
553,946
Fair value of liabilities assumed 167,934
--------------
Total purchase price of net assets acquired $ 386,012
==============
9. Acquisition of Eckler Industries, Inc.
The acquisition of Smart Choice Holdings, Inc. by Eckler will be accounted for
as an acquisition of Eckler by SCHI (a reverse acquisition in which SCHI is
considered the acquirer for accounting purposes). The purchase price for Eckler
is computed by valuing the outstanding shares of common stock of Eckler (the
equivalent of 2,757,500 shares) at $3.375 or $9,306,563 and acquisition costs of
$100,119.
The purchase price for Eckler is anticipated to be allocated as follows:
Fair value of assets acquired $ 6,366,508
Excess of cost over net assets acquired 7,004,572
--------------
13,371,080
Fair value of liabilities assumed 3,964,398
--------------
Total purchase price $ 9,406,682
==============
10. Acquisition of Strata Holding, Inc. and Ready Finance, Inc.
Certain net assets of Strata Holding, Inc. and Ready Finance, Inc.
(companies under common ownership) were acquired for $5,000,000 cash and
$4,880,089 in notes due to the seller and $27,271 in acquisition costs.
The purchase price for Strata Holding, Inc. and Ready Finance, Inc. is
anticipated to be allocated as follows:
Fair value of assets acquired $ 6,207,686
Excess of cost over net assets acquired 3,910,984
--------------
10,118,670
Fair value of liabilities assumed 211,310
--------------
Total purchase price of net assets acquired $ 9,907,360
Assets not acquired and liabilities not assumed are removed from the pro forma
balance sheet.
11. Amortization of Excess Cost over Fair Value of Assets Acquired
This adjustment reflects the amortization of excess cost over fair value of
assets acquired over 20 years.
12. Compensation Expense
This adjustment reflects the change in compensation expense based on the
historical compensation expense of certain executives of the acquired companies
compared to their employment agreements effective on the dates of acquisition.
13. Interest Expense
This adjustment reflects the net additional interest expense on the indebtedness
incurred as partial payment of the purchase price of the acquired companies,
reduced by the interest expense incurred on debt converted to capital by the
sellers of one of the acquired companies and interest expense on debt not
assumed.
14. Income Tax Benefit
This adjustment eliminates the tax benefits in determining pro forma income
(loss) from operations. Management believes that sufficient evidence would not
have existed to recognize a deferred tax asset relating to these losses.
15. Pro Forma Consolidated Statement of Operations - Six Months Ended
June 30, 1997
The financial data for the companies acquired in January and February 1997
subsequent to the dates of acquisition are included with the financial data of
SCHI. Financial data for the period from January 1, 1997 to the dates of
acquisition are included in the respective columns for each Company.