U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report August 26, 1999
Commission file number 1-14082
SMART CHOICE AUTOMOTIVE GROUP, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 59-1469577
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5200 S. Washington Avenue, Titusville, Florida 32780
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(Address of principal executive offices)
(Zip Code)
(407) 269-0834
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
SMART CHOICE AUTOMOTIVE GROUP, INC.
Form 8-K
TABLE OF CONTENTS
HEADING PAGE
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Item 2. Disposition of Assets ...........................................3
Item 5. Other Information ...............................................3
Item 7. Exhibits ........................................................4
SIGNATURES..................................................................4
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ITEM 2. DISPOSITION OF ASSETS.
On August 26, 1999 the Company sold two of its wholly owned subsidiaries,
Ecklers Industries, Inc. and Eckler's Racing Bodies, Inc. by means of a merger
of these subsidiaries into Ecklers Industries LLC ("LLC"). LLC is a newly formed
wholly owned subsidiary of Sun Automotive Partners L.P. The Company received
$10,250,000 in cash proceeds that were used primarily to repay two 10% term
notes totaling $8.5 million in principal, plus accrued interest. The notes were
collateralized by substantially all of the assets as well as all of the issued
and outstanding capital stock of Eckler Industries, Inc. the remainder of the
proceeds were used for working capital purposes.
The cash consideration received from this merger is subject to a Working Capital
Adjustment to be determined thirty days after the closing. This adjustment is to
be computed based on the difference of the then results of a Working Capital
formula compared to the Working Capital Target. The Company does not believe
that this adjustment will materially affect, either positively or negatively,
the amount of cash consideration already received.
In addition, the Company issued 488,000 shares of its common stock to Stevens
Inc. as payment for broker fees due in connection with the sale of Ecklers
Industries, Inc. and Eckler's Racing Bodies, Inc. valued at $610,000. Based on
the knowledge, experience and economic strength of Stevens Inc., the company
believes this transaction was exempt from registration with the Commission under
section 4(2) of the Securities Act of 1933, as amended.
These two subsidiaries of the Company represented the Corvette parts and
accessories segment, which sold and distributes Corvette parts and accessories
throughout the United States, primarily through its catalog. In January 1999,
management of the Company made a decision to discontinue the operations of the
new car dealerships segment and the Corvette parts and accessories segment in
order to focus the Company's continuing operations exclusively on the retail
sale of used cars through its used car stores, as well as the financing of the
used cars sold.
During the first quarter of 1999, the Company recorded an estimated loss on the
disposal of discontinued operations of $800,000. The actual net proceeds
received as a result of the sale of the Corvette parts and accessories segment
of these discontinued operations is approximately $600,000 less than the value
used in determining the estimated loss at the end of the first quarter of 1999.
The Company anticipates that it will be required to recognize an additional loss
on the disposal of its discontinued operations of approximately $400,000 during
the third quarter ending September 30, 1999.
Additionally, on August 26, 1999 the Company entered into a lease with Eckler
Industries LLC ("Tenant") for the lease of certain parcels of land, buildings,
machinery and equipment, fixtures and improvements located at the Company's
headquarters in Titusville, Florida. The terms of this lease include an annual
basic rent of $130,000, payable monthly, for a period of ten (10) years with two
five (5) year renewal options. The lease requires the Tenant to pay all real
estate taxes, special and general assessments, insurance premiums, and the
maintenance and repair costs and expenses relating to the Premises. The Company
has provided a sum not to exceed $275,000 to be used for tenant improvements to
the premises.
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ITEM 5. OTHER EVENTS.
On August 27, 1999 the Company announced that Crown Group Inc. had entered into
a non-binding Letter of Intent which provides for the merger of Crown Group,
Inc.'s Paaco Automotive Group, Inc. subsidiary into the Company in exchange for
approximately 51 million shares of the company's common stock. Additional
provisions of the agreement include, the conversion of approximately $20 million
of the Company's outstanding indebtedness and preferred stock into approximately
30 million shares of the Company's common stock, the sale of up to 4 million
shares of the Company's common stock for $2 million to Crown Group Inc. and a
loan to the Company by Crown Group of $1 million in the form of a secured
debenture convertible into the Company's common stock at $0.50 per share.
This proposed transaction is subject to the execution of a Definitive Agreement
and conditions of closing, including the negotiation of an agreement with the
Company's senior lender, approval by both companies' boards of directors and the
Company's shareholders, satisfactory completion of due diligence, necessary
regulatory approvals, and the conversion of substantially all of the $20 million
of indebtedness and preferred stock into the Company's common stock. The
Company's senior lender and respective holders of the indebtedness and preferred
stock have not yet agreed to the terms of the proposal; consequently, there is
no assurance that these transactions can be completed.
If this transaction is completed, Crown will become the major shareholder of the
Company, which will remain a publicly-traded company.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits filed herewith.
EXHIBIT
NO. EXHIBIT DESCRIPTION
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2.1 Agreement and Plan of Merger by and among Smart Choice
Automotive Group, Inc., Eckler Industries, Inc., Eckler's
Racing Bodies, Inc., Eckler Industries LLC and Sun Automotive
Partners L.P. without Exhibits.
10.92 Lease between the Company, Lessor and Eckler Industries LLC,
Lessee, dated August 26, 1999 with attached Exhibit "F" Tenant
Work Letter.
99.1 Press release dated August 27, 1999 announcing the Crown
Group's intent to acquire a majority ownership of the
Company.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized on September 9, 1999.
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: /s/ GARY R. SMITH
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Gary R. Smith, President
and Chief Executive Officer
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