U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
--------------------------
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)
---------------------
(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 November 22, 1999, 8,328,248 shares of the Registrant's Common Stock were
issued and outstanding.
SMART CHOICE AUTOMOTIVE GROUP, INC.
Form 10-Q
TABLE OF CONTENTS
HEADING PAGE
------- ----
PART I. FINANCIAL STATEMENTS
Item 1. Consolidated Financial Statements
Balance Sheet - September 30, 1999 and December 31, 1998.................................3
Statements of Operations - Three and nine months ended September 30, 1999 and 1998.......4
Statements of Stockholders Equity - Nine months ended September 30, 1999.................5
Statements of Cash Flows - Nine months ended September 30, 1999 and 1998.................6
Notes to Consolidated Financial Statements.............................................7-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................................10-16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................................................16
Item 2. Changes in Securities...................................................................16
Item 3. Defaults Upon Senior Securities.........................................................17
Item 4. Submission of Matters to a Vote of Securities Holders...................................17
Item 5. Other Information.......................................................................17
Item 6. Exhibits and Reports on Form 8-K.......................................................17-27
SIGNATURES.........................................................................................28
2
PART I
ITEM 1. FINANCIAL STATEMENTS.
Smart Choice Automotive Group, Inc. and Subsidiaries
Consolidated Balance Sheets
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
(UNAUDITED)
Assets
Cash and cash equivalents ............................................... $ 220,503 $ 1,268,589
Accounts receivable ...................................................... 961,163 1,206,710
Finance receivables
Principal balances, net ................................................ 92,578,129 79,342,835
Less: allowance for credit losses ...................................... (16,082,762) (12,157,569)
------------- -------------
76,495,367 67,185,266
Inventories .............................................................. 11,695,213 20,004,600
Property and equipment, net .............................................. 6,861,301 7,655,324
Note receivable .......................................................... -- 425,000
Deferred debt costs, net ................................................. 158,579 226,152
Goodwill, net ............................................................ 5,263,056 23,871,080
Prepaid expenses ......................................................... 432,663 1,263,858
Deposits and other assets ................................................ 550,558 485,454
------------- -------------
$ 102,638,403 $ 123,592,033
============= =============
Liabilities and Stockholders' Equity
Liabilities:
Bank overdraft ........................................................... $ 1,093,096 $ 3,112,930
Accounts payable ......................................................... 4,108,141 4,746,157
Accrued expenses ......................................................... 6,261,680 3,664,651
Line of credit, net of discount .......................................... 68,368,419 63,612,433
Floorplan payable ........................................................ 11,540,656 8,701,968
Capital lease obligations ................................................ 687,092 997,916
Notes payable ............................................................ 19,845,734 28,343,479
Reserve for loss on disposal of discontinued operations .................. 3,909,756 --
Deferred income .......................................................... 822,360 --
------------- -------------
Total liabilities ............................................................. 116,636,934 113,179,543
Contingent redemption value of common stock put options ....................... 1,539,148 1,539,148
Redeemable convertible preferred .............................................. 10,000 10,000
Stockholders' equity:
Preferred stock ............................................................... 5,891,410 5,891,410
Common stock .................................................................. 83,283 66,765
Additional paid in capital .................................................... 31,993,291 30,054,488
Common stock notes receivable ................................................. (115,200) (115,200)
Accumulated deficit ........................................................... (53,400,463) (27,034,112)
------------- -------------
Total stockholders' equity .................................................... (15,547,679) 8,863,351
------------- -------------
. ............................................................................. $ 102,638,403 $ 123,592,033
============= =============
See accompanying notes to consolidated financial statements
3
Smart Choice Automotive Group, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
THREE MONTHS ENDED SEPT. 30, NINE MONTHS ENDED SEPT. 30,
------------------------------ ----------------------------
1999 1998 1999 1998
------------- ------------ ------------ ------------
Revenues:
Sales at used car stores ........................... $ 14,508,943 $ 23,306,072 $ 55,228,784 $ 63,908,603
Income on finance receivables ...................... 5,416,235 4,967,012 15,807,621 11,617,917
Income from insurance and training ................. 78,676 635,809 401,133 1,061,841
------------ ------------ ------------ ------------
Total revenues ..................................... 20,003,854 28,908,893 71,437,538 76,588,361
------------ ------------ ------------ ------------
Cost and expenses:
Costs of sales at used car stores .................. 10,653,343 16,892,001 41,854,237 43,745,213
Provision for credit losses ........................ 6,057,669 3,652,797 13,561,263 8,380,051
Cost of insurance and training ..................... 16,149 16,758 55,262 76,353
Restructuring charges .............................. 3,413,585 -- 3,413,585 --
Write-off of goodwill .............................. 12,328,918 -- 12,328,918 --
Selling, general and administrative expenses ....... 4,823,662 8,407,524 17,361,129 18,694,374
------------ ------------ ------------ ------------
Total costs and expenses .......................... 37,293,326 28,969,080 88,574,394 70,895,991
------------ ------------ ------------ ------------
Income from operations .................................. (17,289,472) (60,187) (17,136,856) 5,692,370
Other income (expense):
Interest expense ................................... (2,590,553) (2,293,475) (7,304,147) (6,019,896)
Other income ....................................... 29,418 334,181 195,011 577,063
------------ ------------ ------------ ------------
(2,561,135) (1,959,294) (7,102,136) (5,442,833)
------------ ------------ ------------ ------------
Net income (loss) from continuing operations ............ (19,850,607) (2,019,481) (24,245,992) 249,537
Discontinued operations:
Income from discontinued operations ..................... (630,311) (74,239) (420,794) 882,063
Estimated loss on sale of discontinued operations ....... (400,000) -- (1,200,000) --
------------ ------------ ------------ ------------
(1,030,311) (74,239) (1,620,794) 882,063
------------ ------------ ------------ ------------
Net income (loss) ....................................... (20,880,918) (2,093,720) (25,866,786) 1,131,600
Preferred Stock dividends ............................... (140,699) (173,246) (499,565) (337,084)
------------ ------------ ------------ ------------
Net income (loss) available to common stock............. $(21,021,617) $ (2,266,966) $(26,366,351) $ 794,516
============ ============ ============ ============
Basic income (loss) per common share:
Continuing operations ................................ $ (2.52) $ (0.33) $ (3.37) $ (0.01)
Discontinued operations .............................. (0.13) (0.01) (0.22) 0.14
------------ ------------ ------------ ------------
$ (2.65) $ (0.34) $ (3.59) $ 0.13
============ ============ ============ ============
Diluted income (loss) per common share:
Continuing operations ................................ $ (2.52) $ (0.30) $ (3.37) $ (0.01)
Discontinued operations .............................. (0.13) (0.01) (0.22) 0.12
------------ ------------ ------------ ------------
$ (2.65) $ (0.31) $ (3.59) $ 0.11
============ ============ ============ ============
Weighted average number of common shares and share
equivalents outstanding:
Basic ................................................ 7,919,270 6,578,698 7,333,155 6,056,234
============ ============ ============ ============
Diluted .............................................. 7,919,270 7,430,665 7,333,155 7,033,419
============ ============ ============ ============
See accompanying notes to consolidated financial statements
4
Smart Choice Automotive Group, Inc. and Subsidiaries
Consolidated Statements Of Stockholders' Equity
PREFERRED STOCK COMMON STOCK
------------------ ---------------------- COMMON
NUMBER NUMBER ADDITIONAL STOCK
OF OF PAR PAID-IN NOTES ACCUMULATED
SHARES VALUE SHARES VALUE CAPITAL RECEIVABLE DEFICIT TOTAL
------ ---------- ----------- -------- ------------ ----------- ------------ -----------
BALANCE, December 31, 1998 .. 595 $5,891,410 6,676,545 $ 66,765 $ 30,054,488 $(115,200) $(27,034,112) $ 8,863,351
Unaudited:
Issuance of common stock for
conversion of debt ..... -- -- 1,651,703 16,518 1,938,803 -- -- 1,955,321
Preferred stock dividends ... -- -- -- -- -- -- (499,565) (499,565)
Net loss .................... -- -- -- -- -- -- (25,866,786) (25,866,786)
---- ---------- ----------- -------- ------------ ---------- ------------ -----------
BALANCE, September 30, 1999
(unaudited) 595 $5,891,410 8,328,248 $ 83,283 $ 31,993,291 $ (115,200) $(53,400,463) $(15,547,679)
==== ========== ========= ======== ============ ========== ============ =============
See accompanying notes to consolidated financial statements
5
Smart Choice Automotive Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1999 1998
------------ ------------
Cash flows from operating activities:
Net income/ (loss) ............................................ $(25,866,786) $ 1,131,600
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Provision for credit losses ................................ 13,707,087 8,380,051
Depreciation and amortization .............................. 1,297,975 1,928,636
Write-off of goodwill ...................................... 12,328,918 --
Non-cash restructuring charges ............................. 3,413,585
(Gain) Loss on disposal of property and equipment .......... -- (43,381)
Deferred warranty contracts earned ......................... (177,640) --
Provision for loss on sale of discontinued operations ...... 1,200,000 --
Cash provided by (used for):
Accounts receivable ...................................... (168,127) (2,012,670)
Inventory ................................................ 6,690,038 (4,200,159)
Prepaid expenses ......................................... 54,113 (956,111)
Accounts payable ......................................... 972,661 704,312
Accrued expenses and other liabilities ................... (52,927) (1,325,322)
------------ ------------
Net cash provided by operating activities ........................ 13,398,897 3,606,956
------------ ------------
Cash flows from investing activities:
Increase in finance receivables ............................... (22,871,364) (38,000,242)
Sale of Subsidiary ............................................ 10,570,315 --
Proceeds from disposal of property and equipment .............. -- 1,093,381
(Increase) / decrease in deposits ............................. (31,161) (54,015)
(Increase) / decrease in other assets ......................... (242,528) (1,716)
Payment of notes receivable ................................... -- 46,280
Purchase of property and equipment ............................ (382,242) (1,057,971)
------------ ------------
Net cash used in investing activities ............................ (12,956,980) (37,974,283)
------------ ------------
Cash flows from financing activities:
Principal payments on notes payable ........................... (9,346,595) (3,628,509)
Proceeds from issuance of notes payable ....................... 2,005,000 6,497,448
Proceeds from issuance of preferred stock ..................... -- 5,891,411
Proceeds from issuance of common stock ........................ -- 394,476
Proceeds from issuance of convertible debt .................... -- 340,000
Proceeds from exercise of common stock options and warrants ... -- 46,250
Proceeds from line of credit borrowings ....................... 4,693,861 27,250,000
Decrease in bank overdraft .................................... (2,019,834) --
Net proceeds (repayment) from floorplan notes payable ......... 2,838,688 (1,484,080)
Proceeds from warranty contracts advance ...................... 1,000,000 --
Payments of dividends ......................................... (488,116) (212,864)
Deferred financing costs ...................................... (10,000) (727,788)
Deferred stock offering costs ................................. -- (551,492)
Proceeds from capital lease obligations ....................... -- 403,916
Payments on capital lease obligations ......................... (163,007) (309,806)
------------ ------------
Net cash provided by financing activities ........................ (1,490,003) 33,908,962
------------ ------------
Net increase / (decrease) in cash and cash equivalents ........... (1,048,086) (458,365)
Cash and cash equivalents at beginning of period ................. 1,268,589 1,066,949
------------ ------------
Cash and cash equivalents at end of period ....................... $ 220,503 $ 608,584
============ ============
See accompanying notes to consolidated financial statements
6
Smart Choice Automotive Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements of Smart Choice
Automotive Group, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for a complete financial statement
presentation. In the opinion of management, such unaudited interim information
reflect all adjustments, consisting only of normal recurring adjustments,
necessary to present the Company's financial position and results of operations
for the periods presented. The results of operations for interim periods are not
necessarily indicative of the results to be expected for a full fiscal year. The
consolidated balance sheet as of December 31, 1998 was derived from the audited
consolidated financial statements as of that date but does not include all the
information and notes required by generally accepted accounting principles.
These consolidated financial statements should be read in conjunction with the
company's audited consolidated financial statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998.
Note 2 - Finance Receivables
The Company's finance receivables ("Finance Receivables" or "Finance Contracts")
are automobile retail installment sale contracts originated by the Company on
sales of used cars at its automobile dealerships. The following shows the
principal balances of the Company's Finance Receivables as of September 30,
1999:
Contractually scheduled payments............................. $ 129,771,030
Less: unearned finance charges............................... (38,434,550)
----------------
Principal balances........................................... 91,336,480
Add: loan origination costs.................................. 1,241,649
----------------
Principal balances, net...................................... 92,578,129
Less: allowance for credit losses............................ (16,082,762)
----------------
Principal balances, net...................................... $ 76,495,367
===============
Note 3 - Presentation of Revenues and Cost of Revenues
The prices at which the Company sells its used 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. 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 finance receivables originated at the
Company as well as a cost of the sales 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 cars less cost of
cars sold.
Note 4 - Deferred Income
Deferred income represents the net value received by the company in 1999 in
connection with a long term service protection plan agreement whereby the
Company earns a commission on warranty contracts sold in connection with used
car sales. Extended warranty coverage is provided by an independent third party.
Note 5 - Earnings (Loss) per Common Share
Net income (loss) per common share is based on the weighted average number of
common shares and potential common shares outstanding during each period.
Potential common shares for 1999 have not been included since their effect would
be antidilutive. Potential common shares of 851,967 and 977,185 for the three
and nine months ended September 30, 1998, respectively include options, warrants
and shares underlying convertible debt.
7
Note 6 - Supplemental Cash Flow Information
Cash paid for interest during the nine months ended September 30, 1999 and 1998
was $7,188,919 and $5,747,262 respectively.
The Company's non-cash investing and financing activities were as follows:
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1999 1998
------------- ------------
Partial settlement of note receivable and note payable............................ 140,000 --
Common stock issued for conversion of debt and related interest.................... 1,955,321 1,336,132
Exchange of note payable for Accounts Payable.................................... 452,240
Exchange of note receivable for note payable...................................... 140,000 --
Common stock issued for conversion of preferred stock and accrued dividends.. -- 4,592,704
Common stock issued for settlement of accrued expenses............................. 525,765 --
Accrual of Preferred Stock dividends.............................................. 11,449
Exchange of inventory for note payable............................................ 40,000 --
Note 7 - Segment Information
The following table shows certain financial information by reportable segment as
of and for the three and nine months ended September 30, 1999 and 1998 and
excludes the operations of the discontinued segments:
Used Car Financing Corporate Discontinued
THREE MONTHS ENDED SEPT. 30, STORES SERVICES AND OTHER OPERATIONS COMBINED
---------------------------- -------------- ----------- --------- -------------- ---------
1999
----
Revenue from external customers $ 14,508,943 $ 5,416,235 $ 78,676 $ -- $ 20,003,854
Intercompany revenues -- 69,582 -- -- 69,582
Operating income (loss) 541,852 (1,242,101) (16,472,420) -- (17,213,972)
Depreciation and amortization 295,717 165,520 561,207 304,502 1,326,946
Interest expense 315,388 1,925,180 347,130 -- 2,590,553
Identifiable assets 12,016,871 85,784,083 (6,194,780) 11,032,229 102,638,403
Capital expenditures 26,468 700 7,222 57,951 92,341
1998
----
Revenue from external customers $ 23,306,072 $ 4,967,012 $ 635,809$ -- $ 28,908,893
Intercompany revenues -- 1,518,696 -- -- 1,518,696
Operating income (loss) (1,487,659) (957,499) (1,838,104) - (4,283,262)
Depreciation and amortization 104,070 46,442 248,973 92,198 491,683
Interest expense 270,088 1,517,496 505,891 - 2,293,475
Identifiable assets 21,949,287 73,610,813 8,566,240 22,014,272 126,140,612
Capital expenditures 74,092 3,000 69,076 18,642 164,810
USED CAR FINANCING CORPORATE DISCONTINUED
NINE MONTHS ENDED SEPTEMBER 30, STORES SERVICES AND OTHER OPERATIONS COMBINED
------------------------------- -------------- ----------- --------- -------------- ---------
1999
----
Revenue from external customers $ 55,228,784 $ 15,807,621 $ 401,133 $ -- $ 71,437,538
Intercompany revenues -- 1,633,114 -- -- 1,633,114
Operating income (loss) 1,081,471 2,220,429 (20,363,256) -- (17,061,356)
Depreciation and amortization 200,866 213,739 469,757 368,416 884,362
Interest expense 366,442 5,655,344 1,291,464 -- 7,304,147
Identifiable assets 12,016,871 85,784,083 (6,194,780) 11,032,229 102,638,403
Capital expenditures 157,250 5,914 86,918 183,374 433,456
1998
----
Revenue from external customers $ 63,908,603 $ 11,617,917 $ 1,061,841 $ -- $ 76,588,361
Intercompany revenues -- 4,223,075 -- -- 4,223,075
Operating income (loss) 5,011,337 4,885,200 (4,204,167) - 5,692,370
Depreciation and amortization 369,809 162,600 817,349 336,130 1,685,888
Interest expense 447,105 3,891,763 1,681,028 - 6,019,896
8
Identifiable assets 21,949,287 73,610,813 8,566,240 22,014,272 126,140,612
Capital expenditures 537,211 234,682 157,538 128,539 1,057,970
Note 8 - Discontinued Operations
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. The new car dealerships segment operated
two new car dealerships in Florida. The Corvette parts and accessories segment
sold and distributed Corvette parts and accessories throughout the United
States, primarily through its catalog.
On August 26, 1999 the Company sold the Corvette parts and accessories segment.
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. These 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 by the Company for working capital
purposes.
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 the Corvette
parts and accessories segment of $610,000. Based on the knowledge, experience
and economic strength of Stephens, 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.
On November 11, 1999 the Company sold the new car dealerships segment (see note
9 "Subsequent Events"). During the first quarter of 1999, the Company adjusted
the original estimated net gain on disposal and recorded an estimated loss on
disposal of $800,000. The provision for the estimated loss was necessary due to
the lower estimated sales proceeds from the discontinued segments. The Company
anticipates that it will be required to recognize an additional loss on the
disposal of its discontinued operations as a result of the sale of the new car
dealerships segment and has provided an additional $400,000 estimated loss on
disposal during the third quarter ending September 30, 1999.
Revenues of the discontinued operations were $8,666,560 and $10,516,624 during
the three months ended September 30, 1999 and 1998, respectively and were
$35,476,201 and $35,277,358 during the nine months ended September 30, 1999 and
1998, respectively. Consolidated interest that is not attributable to other
operations of the Company was allocated to discontinued operations based upon
net assets of the discontinued operations to the total net assets of the
consolidated Company. The amount of interest allocated to discontinued
operations was $338,328 and $134,702 during the three months ended September 30,
1999 and 1998, respectively and was $719,774 and $273,449 during the nine months
ended September 30, 1999 and 1998, respectively.
The net assets of the discontinued operations included in the September 30, 1999
consolidated balance sheets consist of the following:
Cash and cash equivalents............................ $ 88,625
Accounts receivable.................................. 500,421
Inventories.......................................... 4,560,590
Prepaid expenses..................................... 38,644
Property and equipment, net.......................... 597,143
Goodwill, net........................................ 5,258,712
Other assets......................................... (11,906)
Bank Overdraft....................................... (34,206)
Accounts payable..................................... (152,199)
Accrued expenses..................................... (291,724)
Notes payable........................................ (650,639)
Floor plans payable.................................. (4,501,192)
Capital lease obligations............................ 0
-------------
Net assets of discontinued operations................ $ 5,402,269
=============
Note 9 - Restructuring Charges
During the three month period ending September 30, 1999 the Company recorded a
restructuring charge to operations in the amount of $3,413,585. This charge
included the costs of employee severance, the write-off of certain assets
associated
9
with the closure of used car lot locations, estimated loss on the disposition of
the company airplane and estimated costs of settlement of outstanding litigation
against the Company. The charge-off amounts are:
Employee severance $ 710,000
Litigation costs 1,185,000
Airplane disposition 400,000
Used car lot closure 850,000
Write-off assets 268,585
Total Restructuring Charges $ 3,413,585
Note 10 - Subsequent Events
On October 1, 1999 the Company closed its four West Palm Beach used car lots and
its Melbourne location. During the month of November 1999 the company opened a
used car lot in Winter Park bringing the total number of used car lots to
eleven.
On November 11, 1999 the Company sold the business and selected net assets of
First Choice Stuart 1, Inc. d/b/a Stuart Nissan and First Choice Stuart 2, Inc.
d/b/a Stuart Volvo to L&J Automotive Investments, Inc d/b/a Oceanside Nissan and
Oceanside Motorcars, Inc, d/b/a Oceanside Volvo. These two subsidiaries
represented the new car dealership segment of the Company. The Company received
$1.3 million in cash proceeds that were used primarily to repay two 10% term
notes totaling $591,109 in principal, plus accrued interest. The notes were
collateralized by substantially all of the assets of First Choice Stuart 1, Inc.
The remainder of the proceeds were used for working capital purposes.
In January 1999, management of the Company made a decision to discontinue the
operations of the new car dealerships 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 nine months ended September 30, 1999, the Company recorded an
estimated loss on the disposal of discontinued operations of $1,200,000 (see
note 8 "Discontinued Operations").
ITEM NO. 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion and analysis of the Company's consolidated financial
position and consolidated results of operations should be read in conjunction
with the Company's condensed consolidated financial statements and related notes
thereto included in Item 1.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements. Additional written or oral
forward looking statements may be made by the Company from time to time in
filings with the Securities and Exchange Commission or otherwise. Such forward
looking statements are within the meaning of the term in Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Such statements may include, but not be limited to,
projections of revenues, income, or loss, estimates of capital expenditures,
plans for future operations, products or services, and financing needs or plans,
as well as assumptions relating to the foregoing. The words "believe," "expect,"
"anticipate," "estimate," "project," and similar expressions identify forward
looking statements, which speak only as of the date the statement was made.
Forward-looking statements are inherently subject to risks and uncertainties,
some of which cannot be predicted or quantified. Future events and actual
results could differ materially from that set forth in, contemplated by, or
underlying the forward-looking statements. The Company undertakes no obligation
to publicly update or revise any forward looking statements, whether as a result
of new information, future events, or otherwise. The following disclosures, as
well as other statements in this Report on Form 10-Q, and in the notes to the
Company's condensed consolidated financial statements, describe factors, among
others, that could contribute to or cause such differences, or that could affect
the Company's stock price.
OVERVIEW
Smart Choice Automotive Group, Inc. operates 14 locations in Florida that sell
used cars under the "First Choice" brand name. Through Florida Finance Group,
Inc. ("FFG"), its finance company subsidiary, the Company provides financing for
its customers by originating retail automobile installment sales contracts
secured by the cars it sells. Based on the results of operations for the year
ended December 31, 1998, the Company began a significant reorganization of its
management structure and operational activities. Starting in April of 1999 the
Company reduced the number of its store locations from 24 at December 1998 to 14
locations as of September 30, 1999. The financial impact of these actions began
to take effect late in the Company's second quarter ended June 30, 1999.
10
RESULTS OF OPERATIONS FROM CONTINUING OPERATIONS
SEGMENT INFORMATION
The Company is comprised of two segments: used car stores and financing of used
car sales. The Company's results of operations are most meaningful when analyzed
and discussed by segment. The Company also has two other segments which have
been discontinued. These segments are discussed separately below under
"Discontinued Operations."
USED CAR STORES
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
(Dollars in thousands) 1999 1998 1999 1998
---- ---- ---- ----
Sales at used car stores.............. $ 14,509 100.0% $ 23,306 100.0% $ 55,228 100.0% $ 63,909 100.0%
Cost of sales at used car stores(a)... 10,554 72.8% 18,411 79.0% 43,457 78.6% 47,968 75.1%
-------- ------- -------- ------ -------- ------ -------- -----
Gross profit......................... 3,955 27.2% 4,895 21.0% 11,771 21.3% 15,940 24.9%
Operating expenses.................... 3,413 23.5% 3,679 15.8% 10,690 19.3% 10,929 17.1%
-------- ------- -------- ------ -------- ------ -------- -----
Operating income..................... $ 542 3.7% $ 1,217 5.2% $ 1,081 2.0% $ 5,011 7.8%
======== ======== ======== ====== ======== ====== ======== =====
(a) Includes intercompany costs from FFG of $(70) and $1,519 for the quarters
ended 1999 and 1998, respectively, and $1,633 and $4,223 for the nine
months ended September 30, 1999 and 1998, respectively.
Sales revenue at used car stores decreased to $14.5 million for the three months
ended September 30, 1999 compared to $23.3 million for the same period in 1998.
The lower sales revenue reflects the sale of 1,440 cars at the average of 14
used car stores that were open during the third quarter of 1999 as compared to
the sale of 2,191 cars at the average of 25 used car stores that were open
during the third quarter of 1998.
Sales revenue at used car stores decreased to $55,228 for the nine months ended
September 30, 1999 compared to $63,909 for the same period in 1998. The sales
revenue reflects the sale of 5,617 cars at the average of 19 used car stores
that were open during the first nine months of 1999 as compared to the sale of
6,624 cars at the average of 23 used car stores that were open during the first
nine months of 1998.
Gross profit declined to $3.9 million during the three months ended September
30, 1999 from $4.9 million during the three months ended September 30, 1998.
Excluding intercompany costs, gross profits declined by $2.4 million for the
three months ended September 30, 1999 compared to the same period in 1998. Lower
gross profit resulted from reduced revenues during the comparative three month
period.
Gross profit declined to $11.8 million during the nine months ended September
30, 1999 from $15.9 million during the nine months ended September 30, 1998.
Excluding intercompany costs, gross profits declined by $6.8 million for the
nine months ended September 30, 1999 compared to the same period in 1998. The
lower gross profit resulted from the liquidation of approximately $5 million in
high cost used car inventory at below standard margins as the Company reduced
its operations as well as reduced revenues during the comparative periods.
FINANCING OF USED CAR SALES
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
1999 1998 1999 1998
---- ---- ---- ----
(Dollars in thousands)
Income on finance receivables(a)...... $ 5,347 100.0 % $ 6,486 100.0 % $ 17,441 100.0 % $ 15,841 100.0%
Provisions for credit losses.......... (6,041) (113.0)% (3,653) (56.3)% (13,537) (77.6)% (8,380) (52.9)%
Operating expense..................... (548) ( 10.2)% (2,272) (35.0)% (1,684) (9.7)% (2,576) (16.3)%
------- ------- ------- ------ -------- ------ -------- ------
Operating income...................... (1,242) (23.2)% 561 8.6% 2,220 12.7% 4,885 30.8 %
Interest expense on finance
receivables (2,255) (42.2)% (1,432) (22.2)% (6,679) (38.3)% (3,753) (23.7)%
-------- ------ ------- ------ -------- ------ -------- ------
Net income (loss)..................... $ (3,497) (65.4)% $ (871) (13.4)% $ (4,459) (25.6)% $ 1,132 7.1 %
======== ======= ======= ======= ======== ====== ======== =======
(a) Includes intercompany revenues from First Choice Auto Finance, Inc.
("FCAF") of $(70) and $1,519 for the quarters ended 1999 and 1998,
respectively, and $1,633 and $4,223 for the nine months ended September 30,
1999 and 1998, respectively.
Income on finance receivables decreased to $5.3 million for the three months
ended September 30, 1999 from $6.5 million for the same period in 1998. The
decrease reflects the decrease in intercompany revenues from First Choice Auto
Finance, Inc. Excluding intercompany revenues income on finance receivables
increased to $5.4 million for the three months ending September 30, 1999 from
$5.0 million for the same period in 1998. This increase resulted from an
increase in net finance receivables outstanding to $78.7 million for the three
months ended September 30, 1999 from $58.1 million for the same period of 1998.
This increase results from the continued growth in the financed sales of used
cars.
11
Income on finance receivables increased to $17.4 million for the nine months
ended September 30, 1999 from $15.8 million for the same period in 1998. The
increase reflects the increase in the average net finance receivables
outstanding to $74.9 million for the nine months ended September 30, 1999 from
$48.8 million for the same period of 1998. This increase results from the
continued growth in the financed sales of used cars.
A high percentage of the Company's customers do not make all of their
contractually scheduled payments on their finance contracts, requiring the
Company to charge off the remaining principal balance and any earned interest,
net of recoveries on repossessed cars. The Company maintains on its balance
sheet an allowance for credit losses to absorb such losses. To accrue to the
allowance, the Company records an expense (the "provision") based upon its
estimate of future credit losses on finance receivables originated. The
provision for credit losses for the three months ended September 30, 1999 was
$6.0 million compared to $3.7 million for the same period in 1998. The provision
for credit losses for the nine months ended September 30, 1999 was $13.5 million
compared to $8.4 million for the same nine-month period in 1998. The increase
reflects the growth in the amount of finance receivables outstanding. In
addition, at September 30, 1999 the Company revised its estimated provision for
credit losses from 15.01% of outstanding principal balances to 17.01% of
outstanding principal balances based on a current credit loss analysis and
increased losses experienced on the portfolio. The charge for this rate increase
in the provision for credit losses at September 30, 1999 was $1.8 million.
Excluding this increase the provision for credit losses for the three months
ended September 30, 1999 was $4.2 million compared to $3.7 million for the same
period in 1998 and $11.7 million for the nine months ended September 30, 1999
compared to $8.4 million for the same nine-month period in 1998.
Interest expense increased to $2.3 million for the three months ended September
30, 1999 from $1.4 million for the same period in 1998. This increase is a
result of the higher level of finance receivables which required additional
borrowing under the line of credit. The interest rate on borrowed funds was
approximately the same for the comparable periods.
Interest expense increased to $6.7 million for the nine months ended September
30, 1999 from $3.8 million for the same period in 1998. This increase is a
result of the higher level of finance receivables which required additional
borrowing under the line of credit. The interest rate on borrowed funds was
approximately the same for the comparable periods.
The net (loss) for the three months ended September 30, 1999 was approximately
$(3,497,000) compared to a net (loss) of approximately $(871,000) for the same
period in 1998. This decrease of approximately $2.6 million was a result of a
higher provision for credit losses as a percentage of income on finance
receivables and the additional interest expense on financed receivables.
The net (loss) for the nine months ended September 30, 1999 was approximately
$(4,459,000) compared to a net income of approximately $1,132,000 for the same
period in 1998. This decrease of approximately $5.6 million was a result of a
higher provision for credit losses as a percentage of income on finance
receivables of approximately $5.1 million and the additional interest expense of
approximately $2.9 million on financed receivables offset by additional interest
earned on these receivables of approximately $1.6 million and lower operating
expenses of approximately $900,000.
CONSOLIDATED RESULTS OF OPERATIONS
COMPARISON OF THE RESULTS OF CONTINUING OPERATIONS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 TO THE THREE MONTHS ENDED SEPTEMBER 30, 1998.
REVENUES. The Company's revenues for the three months ended September 30, 1999
were $20.0 million representing a 30.8% decrease under the revenues of $28.9
million in the third quarter of 1998. The increase was the net result of a
decline of the Company's used car sales of approximately $8.8 million offset by
an increase in revenues of approximately $.4 million from the Company's
receivables portfolio. That decline in used car sales is discussed in the
segment information provided above.
COSTS AND EXPENSES. The Company's cost of sales of used cars sold was $10.6
million for the three months ended September 30, 1999 compared to $16.8 million
for the same period during 1998, representing a decrease of $6.2 million, or
37%. The gross profit margins decreased to 26.8% for the three months ended
September 30, 1999, compared to the gross profit margin of 27.5% for the same
period in 1998. As a result of the decrease in sales volume during the three
months ending September 30, 1999 and the decrease in gross profit percentage,
gross margin decreased approximately $2.5 million as compared to the same period
during 1998.
Excluding restructuring charges the Company's selling, general and
administrative expenses (including depreciation and amortization) were $4.8
million for the three months ended September 30, 1999, compared to the selling,
general and administrative expenses of $8.4 million for the three months ended
September 30, 1998. Selling, general and administrative expenses as a percentage
of total revenues for 1999 was 24.1% for the three months ended September 30,
1999 compared to
12
29.1% for the three months ended September 30, 1998. The reduction in these
expenses is due to the reorganization begun in the second quarter of 1999.
During the second quarter of 1999 the Company significantly reorganized its
management structure and operational activities and believes it has eliminated
over $6 million annually from its overhead structure. The Company recorded
restructuring charges of $3.4 million during the quarter ended September 30,
1999. These charges included the establishment of reserves for the closing of
used car sales locations, certain employee termination costs, disposition of the
Company's airplane and anticipated costs to settle current litigation against
the Company. Additionally the Company recorded a write-off of goodwill in the
amount of $12.3 million during the quarter ended September 30, 1999.
INTEREST EXPENSE AND OTHER INCOME. The Company's interest expense totaled $2.6
million for the three months ended September 30, 1999, compared to $2.2 million
for the three months ended September 30, 1998, an increase of approximately
$400,000 or 18%. This resulted primarily from higher outstanding indebtedness
needed to finance higher levels of finance receivables as the portfolio expanded
over the prior year.
NET LOSS. The Company's net loss for the three months ended September 30, 1999
of ($20.8) million compared to a net loss of approximately ($2.1) million for
the same period of 1998 was due to the combined effect of reduced used car
sales, increased interest expense and restructuring charges discussed above.
COMPARISON OF THE RESULTS OF CONTINUING OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 TO THE NINE MONTHS ENDED SEPTEMBER 30, 1998.
REVENUES. The Company's revenues for the nine months ended September 30, 1999
were $71.4 million representing a 6.8% decrease over the revenues of $76.6
million in the first quarter of 1998. The decrease was the result of a decrease
in used car revenues. That decrease in used car revenues is discussed in the
segment information provided above.
COSTS AND EXPENSES. The Company's cost of sales of used cars sold was $41.8
million for the nine months ended September 30, 1999 compared to $43.7 million
for the same period during 1998, representing a decrease of $1.9 million, or
4.3%. The gross profit margins decreased to 24.3% for the nine months ended
September 30, 1999, compared to the gross profit margin of 31.6% for the same
period in 1998. This decrease in gross margins of approximately $6.7 million is
primarily due the increase in the cost of sales resulting from the liquidation
of high cost used car inventory during the first quarter of 1999.
Excluding restructuring charges the Company's selling, general and
administrative expenses (including depreciation and amortization) were $17.4
million for the nine months ended September 30, 1999, compared to the selling,
general and administrative expenses of $18.7 million for the nine months ended
September 30, 1998. Selling, general and administrative expenses as a percentage
of total revenues for 1999 was 24.3% for the nine months ended September 30,
1999 compared to 24.4% for the nine months ended September 30, 1998. As stated
above the Company has significantly reorganized its management structure and
operational activities and believes it has eliminated over $6 million annually
from its overhead structure during the second quarter of 1999.
INTEREST EXPENSE AND OTHER INCOME. The Company's interest expense totaled $7.3
million for nine months ended September 30, 1999, compared to $6.0 million for
the nine months ended September 30, 1998, an increase of approximately $1.3
million or 21.7%. This resulted primarily from higher outstanding indebtedness
needed to finance higher levels of finance receivables as the portfolio
expanded.
NET LOSS. The Company's net loss for the nine months ended September 30, 1999 of
($25.9) million compared to net income of $1.1 for the same period of 1998 was
due to the combined effect of reduced profit margins in used car sales,
increased interest expense and restructuring charges discussed above.
CREDIT LOSSES
GENERAL. The Company has established an allowance to cover anticipated credit
losses on the finance receivables currently in its portfolio. The allowance has
been established by the recognition in the Company's statements of operations of
the provision for credit losses attributed to finance receivables originated by
the Company.
The following table reflects activity in the allowance for the nine months ended
September 30, 1999.
(Dollars in thousands)
Balance, December 31, 1998..................................... $ 12,158
Provision for credit losses.................................... 13,561
Net charge offs................................................ (9,636)
Balance, September 30, 1999.................................... $ 16,083
Allowance as a percentage of finance receivables............... 17.6%
13
The allowance increased to 17.6% of the outstanding balances as of September 30,
1999 from 15.5% as of December 31, 1998.
NET CHARGE OFFS. The Company's current policy is to charge off finance
receivables when they are deemed uncollectible and to fully reserve the
principal balance at such time as a finance receivable is delinquent for 180
days. The net charge off amount is the principal balance of the finance
receivable at the time of the charge off plus earned but unpaid interest, less
any recovery. The Company recognizes recoveries in the amount of the wholesale
value of repossessions. The following table sets forth information regarding
charge off activity for the Company's finance receivables for the nine months
ended September 30, 1999.
(Dollars in thousands)
Principal Balances............................................. $ 23,236
Collateral recoveries, net..................................... (13,600)
Net charge offs................................................ $ 9,636
The Company has experienced an increase in credit losses during the quarter
ending September 30, 1999 due to an increase in the rate of anticipated
delinquent accounts as well as an increase in uncollectible accounts from loans
generated during the high growth period from the second quarter 1998 through the
first quarter of 1999.
DELINQUENCIES. Analysis of delinquency trends is also considered in evaluating
the adequacy of the allowance. The following table reports the balance of
delinquent finance receivables as a percentage of total outstanding balances of
the Company's finance receivables portfolio as of September 30, 1999.
Aging Percentages:
Principal balances current......................................95.5%
Principal balances 31 days to 60 days............................2.8
Principal balances over 60 days..................................1.0
Total over 31 days...............................................4.5
The Company is experiencing consistency in its delinquency rate with an aging of
its portfolio at September 30, 1999 approximately the same as that reported for
the year ended December 31, 1998. This consistency in the aging of the finance
receivables portfolio is primarily attributable to the factors discussed in "Net
Charge - Offs" above.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital to support increases in finance receivables, car
inventory, parts and accessories inventory, property and equipment, and working
capital for general corporate purposes. Funding sources potentially available to
the Company include operating cash flow, third-party investors, financial
institution borrowings, borrowings against finance receivables and used car
inventory.
Net cash provided by operating activities was approximately $13.4 million and
$5.4 million for the nine months ended September 30, 1999, and 1998,
respectively. Net cash provided from operating activities for the nine months
ended September 30, 1999 primarily reflected the loss from operations adjusted
for the non-cash charges for depreciation, amortization, provision of credit
losses, write-off of goodwill and the reduction in inventory and an increase in
accounts payable and accrued expenses. The Company used approximately $8.7
million to expand accounts receivable and inventory during the first nine months
of 1998. Approximately $22.9 million and $38.0 million of cash used by investing
activities for the nine months ended September 30, 1999 and 1998, respectively,
was invested to increase the finance receivables. Approximately $10.6 million
was generated by investing activities from the sale of the Corvette parts and
accessories segment.
Cash provided by financing activities was approximately $(1.5) million and $33.9
million during the nine months ended September 30, 1999 and 1998, respectively.
During the nine months ended September 30, 1999 and 1998, the Company increased
its line of credit borrowing by $4.7 million and $27.2 million, respectively.
The Company repaid notes payable net of the issuance of notes of approximately
$7.3 million during the nine months ended September 30, 1999. The Company issued
notes payable net of repayment of notes of approximately $3.2 million during the
nine months ended September 30, 1998.
The Company has borrowed, and will continue to borrow, substantial amounts to
fund its used car sales and financing operations. The Company has a revolving
credit facility with Finova Capital Corporation to provide funding for finance
receivables from used car sales originated by the Company (the "Finova Revolving
Facility"). The Finova Revolving Facility had a maximum commitment of $35.0
million at December 31, 1997, was increased to a maximum commitment of $75.0
million, effective May 11, 1998, and was increased again to a maximum $100
million effective November 9, 1998. Under the Finova Revolving Facility, the
Company may borrow the lesser of $100 million or up to 50% of the gross
14
balance of eligible finance contracts. The Finova Revolving Facility expires on
December 31, 2001, at which time its renewal will be subject to renegotiation.
The Finova Revolving Facility is secured by substantially all of the Company's
finance receivables. As of September 30, 1999, the principal amount outstanding
under the Finova Revolving Facility was $68.4 million up from a balance of $63.7
million at December 31, 1998. The Finova Revolving Facility bears interest at
the prime rate plus 2.5% (10.75% as of September 30, 1999). As part of the
Finova Revolving Facility, the Company may finance up to $10 million of its used
car inventory through Finova Capital Corporation. As a result of the
restructuring charges and the write-off of goodwill recorded during the quarter
ending September 30, 1999 the Company is currently in default under the
Revolving Facility with Finova.
During 1998 and 1997, the Company financed its used car inventory through a line
of credit with Manheim Automotive Financial Services, Inc. (the "Manheim
Facility"). At September 30, 1999 there was no balance due on the Manheim
Facility, which had an outstanding balance of $3.2 million at December 31, 1998.
The maximum commitment under the Manheim Facility was $3.75 million. The Manheim
Facility was secured by the Company's used car inventory and bore interest at
1.5% over the prime rate. Amounts outstanding were payable on the earlier of the
day after a car was sold or 180 days after the floorplan advance.
In January 1999, pursuant to a Subordinated Loan Agreement dated as of January
31, 1999 ("Subordinated Loan Agreement") by and between the Company and High
Capital Funding, LLC ("High Cap"), the Company borrowed $2 million. The Company
issued 1999 Series A Subordinated Notes ("High Cap Notes") to High Cap and other
purchasers in connection with the Subordinated Loan Agreement. The Notes, which
mature on January 31, 2000, bear interest on the unpaid principal balance at the
rate of 15% per annum, payable monthly in arrears. The interest rate increased
to 18% per annum on May 1, 1999 and will increase to 22% per annum on October 1,
1999. The High Cap Notes may be prepaid at any time without permission or
penalty.
SEASONALITY
Historically, the Company's used car business has 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.
INFLATION
Increases in inflation generally result in higher interest rates. Higher
interest rates on the Company's borrowings would increase the interest expense
related to the Company's existing debt. The Company cannot seek to limit this
risk by increasing interest rates earned on its finance contracts since the
interest charged is at or near the maximum permitted under Florida law. To date,
inflation has not had a significant impact on the Company's operations.
YEAR 2000
At the beginning of the third quarter of 1996, the Company's primary operating
system and its peripherals were made Year 2000 compliant. All new computer
systems and software installations, including the computer systems of the
Company's subsidiaries, are currently Year 2000 compliant. All other systems
including the Company's local and wide area networks, telephone systems,
uninterruptible power supply systems and historical information are or are
expected to be in compliance no later than the fourth quarter of 1999. The
Company continues to evaluate other computerized equipment to include security
systems, fire control systems and power control systems, to determine whether
they are Year 2000 compliant. The anticipated expense associated with the year
2000 compliance project will not include additional hardware cost or external
staffing. The amounts incurred to date and expected to be incurred in the
future, in connection with compliance with Year 2000 are not believed by the
Company to be material. The Company is taking into account whether third parties
with which the Company has material relationships are Year 2000 compliant. In
addition, the Company will develop contingency strategies, as appropriate, in
the event the Company encounters a Year 2000 compliance problem in its own, or
in a third party vendor's, software applications.
DISCONTINUED OPERATIONS
In January 1999, management made a decision to discontinue the operations of the
new car dealerships segment and the parts and accessories segment in order to
focus on the Company's continuing operations. It was estimated that the sale of
these two segments during 1999 would result in a loss of approximately $800,000.
The Corvette parts and accessories
15
segment was sold August 26, 1999 and the new car segment was sold November 11,
1999. Based on the final sales prices and closing costs the estimated loss on
the sale of the two segments is now $1,200,000.
Revenues of the discontinued operations were $8.7 million and $10.5 million in
the three months ended September 30, 1999 and 1998, respectively and $35.5
million and $35.2 million in the nine months ended September 30, 1999 and 1998,
respectively. The Company's discontinued operations resulted in a loss of
approximately ($630,000) for the three months ended September 30, 1999, which
was an increase from a loss of approximately ($202,000) for the same period in
1998. The Company's discontinued operations resulted in a loss of approximately
($421,000) for the nine months ended September 30, 1999, which was an decrease
from a net income of approximately $882,000 for the same period in 1998.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
During March 1999, certain shareholders of the Company filed two putative class
action lawsuits against the Company and certain of the Company's current and
former officers and directors in the United States District Court for the Middle
District of Florida (collectively, the "Securities Actions"). The Securities
Actions purport to be brought by plaintiffs in their individual capacity and on
behalf of the class of persons who purchased or otherwise acquired Company
publicly traded securities between April 15, 1998 and February 26, 1999. These
lawsuits were filed following the Company's announcement on February 26, 1999 a
preliminary determination had been reached that the net income announced on
February 10, 1999 for the fiscal year ended December 31, 1998 was likely
overstated in a material, undetermined amount at that time. Each of the
complaints assert claims for violations of Section 10(b) of the Securities
Exchange Act of 1934 and Rule 10b-5 of the Securities and Exchange Commission as
well as a claim for the violation of Section 20(a) of the Exchange Act. The
plaintiffs allege that the defendants prepared and issued deceptive and
materially false and misleading statements to the public, which caused
plaintiffs to purchase Company securities at artificially inflated prices. The
plaintiffs seek unspecified damages. The Company intends to contest these claims
vigorously. The Company cannot predict the ultimate resolution of these actions.
The two class action lawsuits have subsequently been consolidated.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Described below are the sales of securities by the Company during the first nine
months of 1999 that were not registered under the Securities Act of 1933, as
amended (the "1933 Act"). On the issuance of these securities the Company relied
on the exemption from registration under the 1933 Act set forth in Section 4(2)
thereof, based on established criteria for effecting a private offering,
including the number of offerees for each transaction, access to information
regarding the Company, disclosure of information by the Company, restrictions on
resale of the securities offered, investment representations by the purchasers,
and the qualification of the offerees as "accredited investors."
On March 29, 1999, the Company issued 398,560 shares of common stock to Bankers
Life Insurance Company and 133,172 shares of common stock to Bankers Credit
Insurance Services, Inc. in consideration for the conversion of their notes and
accrued interest with the Company.
On May 14, 1999, the Company issued 88,000 shares of common stock to Mr. Albert
S. Klopf in consideration for the conversion of his note in the principal amount
of $110,000 with the Company.
On July 20, 1999, the Company issued 32,400 shares of common stock to Mr. John
Thatch in consideration for the conversion of his note in the principal amount
of $20,000 plus accrued interest with the Company.
On July 20, 1999, the Company issued 283,500 shares of common stock to Mr. Edgar
Rosenberry in consideration for the conversion of his note in the principal
amount of $280,000 plus accrued interest with the Company.
On August 26, 1999 the Company issued 488,000 shares of common stock to
Stephens, Inc. in consideration for fees incurred by the Company.
On September 20, 1999 the Company issued 34,015 shares of common stock to
DeFalco Advertising in consideration for liabilities incurred by the Company.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On June 28, 1999, the Company held its 1999 annual meeting of shareholder. At
this meeting the shareholders approved the proposal to grant specific stock
options of an aggregate 190,000 shares of common stock to certain employees of
the Company. For - 4,073,632; against - 491,558; abstain - 20,517.
16
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
EXHIBIT
NO. EXHIBIT DESCRIPTION FILED HEREWITH OR INCORPORATED BY REFERENCE TO:
- -------- ------------------- -----------------------------------------------
2.1 Agreement and Plan of Merger by Exhibit 2.1 to Form 8-K filed on September 8, 1999
and among the Company, Eckler
Industries, Inc., Eckler's Racing
Bodies, Inc., Eckler Industries LLC
and Sun Automotive Partners L.P.
dated August 26, 1999
3.1 Amended and Restated Articles Exhibit 3.1 to Form SB-2 Registration Statement, filed on
of Incorporation of Smart September 1, 1995, File No. 33-96520-A.
Choice Automotive Group, Inc.
(the "Company")
3.1.1 Articles of Amendment to Exhibit 3.2 to Form 10-Q filed on May 20, 1997.
Articles of Incorporation of
the Company
3.2 Amended and Restated By-Laws of Exhibit 3.2 to Form SB-2 Registration Statement, filed on
the Company September 1, 1995, File No. 33-96520-A.
3.2.1 Amendment No. 1 to Amended and Exhibit 3.2.1 to Amendment No. 2 to Form SB-2
Restated Bylaws Registration Statement, filed on November 6, 1995, File
No. 33-96520-A.
3.2.2 Second Articles of Amendment to Exhibit 3.1 to Form 8-K filed on October 9, 1997.
Articles of Incorporation
3.2.3 Third Articles of Amendment to Exhibit 3.1 to Form 10-Q filed on May 15, 1998.
Articles of Incorporation
3.2.4 Fourth Articles of Amendment to Exhibit 3.2.4 to Form S-1 filed on July 17,1998.
Articles of Incorporation
3.2.5 Fifth Articles of Amendment to Exhibit 3.2.5 to Form S-1 filed on July 17, 1998.
Articles of Incorporation
4.1 Specimen Common Stock Exhibit 4.1 to Form 8-A Registration Statement, filed on
Certificate April 16, 1997.
4.2 Specimen of Warrant Exhibit 4.2 to Form 8-A Registration Statement, filed on
Certificate April 16, 1997.
4.3 Warrant Agreement between the Exhibit 4.5 to Amendment No. 2 to Form SB-2 Registration
Company and American Stock Statement, filed on November 6, 1995, File No. 33-96520-A.
Transfer & Trust Company, as
Warrant Agent, dated November
9, 1995
4.3.1 Form of Amendment to Warrant Exhibit 4.4 to Form 8-A Registration Statement,
Agreement filed on April 16, 1997.
10.1 Eckler Industries, Inc. Exhibit 10.4.1 to Form SB-2 Registration Statement, filed
Retirement and Savings Plan and on September 1, 1995, File No. 33-96520-A.
Trust Agreement, as Amended and
Restated on September 14, 1992
17
10.1.1 1998 Executive Incentive Exhibit A to Proxy Statement filed on June 9, 1998.
Compensation Plan
10.2 Amendment No. 1 to Eckler Exhibit 10.4.2 to Form SB-2 Registration Statement filed
Industries, Inc. Retirement and on September 1, 1995, File No. 33-96520-A.
Savings Plan Trust Agreement Dated March 28, 1994.
10.3 Eckler Industries, Inc. Exhibit 10.6 to Form SB-2 Registration Statement, filed
Non-Qualified Stock Option Plan on September 1, 1995, File No. 33-96520-A.
10.4 Eckler Industries, Inc. 1995 Exhibit 10.7 to Form SB-2 Registration Statement, filed
Combined Qualified and on September 1, 1995, File No. 33-96520-A. Option Plan
10.5 Registration Rights Agreement by Exhibit 10.15 to Amendment No. 1 to Form SB-2
and among the Company and each Registration Statement, filed on October 13, 1995,
of the Purchasers referred to File No. 33-96520-A.
in Schedule 1 thereto, dated
September 20, 1995.
10.6 Unit Purchase Option Agreement Exhibit 1.2 to Amendment No. 2 to Form SB-2 Registration
between the Company and Argent Statement, filed on November 6, 1995, File No. 33-96520-A.
Securities, Inc. and Certificate
dated November 15, 1995.
10.7 Loan Agreement between the Exhibit 10.19 to Post-Effective Amendment No. 2 to Form
Company and Barnett Bank, N.A. SB-2 Registration Statement, filed on November 14, 1996,
dated September 30, 1996 File No. 33-96520-A.
10.8 Mortgage and Security Agreement Exhibit 10.20 to Post-Effective Amendment No. 2 to Form
between the Company and Barnett SB-2 Registration Statement, filed on November 14, 1996,
Bank, N.A. dated September 30, File No. 33-96520-A
1996.
10.9 Promissory Note in the amount Exhibit 10.21 to Post-Effective Amendment No. 2 to Form
of $2,400,000 from the Company SB-2 Registration Statement, filed on November 14, 1996,
in favor of Barnett Bank, N.A. File No. 33-96520-A.
dated September 30, 1996.
10.10 Assignment of Loan Documents Exhibit 10.10 to Form 10-K filed on April 14, 1998.
dated November 4, 1997 between
Barnett Bank, N.A. and The
Huntington National Bank ("Huntington")
10.11 Modification of Mortgage Deed Exhibit 10.11 to Form 10-K filed on April 14, 1998.
and Security Agreement dated
November 3, 1997 between the Company
and Huntington
10.12 Future Advance Promissory Note Exhibit 10.12 to Form 10-K filed on April 14, 1998.
dated December 30, 1997, principal
amount $260,000, the Company maker,
Huntington, payee
10.13 Modification of Mortgage and Exhibit 10.13 to Form 10-K filed on April 14, 1998.
Mortgage Note and Extension
Agreement dated December 30, 1997
between the Company and Huntington.
18
10.13.1 Modification of Mortgage Note Exhibit 10.13.1 to From S-1 filed on August 21, 1998,
and Extension Agreement dated file no. 333-59375
July 24, 1998 between the
Company and Huntington.
10.14 Merger Agreement between Exhibit 10.1 to Form 8-K, filed on February 12, 1997.
Smart Choice Holdings, Inc.
("SCHI"), the Company, Thomas E.
Conlan and Gerald C. Parker
dated December 30, 1997.
10.15 First Amended and Restated Loan Exhibit 4.1 to Form 10-Q, filed on May 20, 1997.
and Security Agreement between
Florida Finance Group, Inc.
("FFG") and Finova Capital
Corporation ("Finova"), dated
February 4, 1997.
10.16 Warrant to Purchase Common Stock Exhibit 4.2 to Form 10-Q, filed on May 20, 1997.
of the Company between the
Company and Finova, dated
January 13, 1997.
10.17 Promissory Note by Eckler Exhibit 10.1 to Form 8-K filed on March 5, 1998
Industries, Inc. in favor of
Stephens
10.17.1 Amendment to Guaranty Agreement Exhibit 10.4 to Form 8-K filed on March 5, 1998.
between Registrant and Stephens Inc.
10.17.2 Amendment to Pledge and Security Exhibit 10.5 to Form 8-K filed on March 5, 1998.
Agreement between Registrant and
Stephens Inc.
10.17.3 Loan Extension and Modification Exhibit 10.17.3 to Form 10-K filed on April 15, 1999.
Agreement between Registrant and
Stephens Inc. dated April 15, 1999.
10.17.4 Extension of Engagement Letter Exhibit 10.17.4 to Form 10-K filed on April 15, 1999.
between Stephens Inc. and
Registrant dated March 1, 1999.
10.17.5 Warrant Agreement Issued to Exhibit 10.17.5 to Form 10-K filed on April 15, 1999.
Stephens Inc.
10.18 Promissory note dated February Exhibit 10.9 to Form 8-K filed on March 5, 1998.
24, 1998, First Choice Auto
Finance, Inc., maker, and
Manheim Automotive Financial
Services, Inc., payee.
10.18.1 Guaranty dated March 21, 1997 Exhibit 10.10 to Form 8-K filed on March 5, 1998.
from the Company in favor of
Manheim Automotive Financial
Services, Inc.
10.19 Second Amended and Restated Loan Exhibit 10.19 to Form 10-K filed on April 15, 1999. and Security
Agreement dated November 9, 1998
between FFG, Liberty Finance Company,
Smart Choice Receivable Holdings
Company and First Choice Auto Finance,
Inc., SC Holdings, Inc.,
the Company and Finova Capital
Corporation.
19
10.19.1 Guaranty to Finova from the Exhibit 4.5 to form 10-Q, filed on May 20, 1997.
Company dated January 13, 1997.
10.19.2 Guaranty to Finova from SC Exhibit 10.19.2 to Form 10-K filed on April 15, 1999.
Holdings, Inc. dated
November 9,1998.
10.19.3 Guaranty to Finova from the Exhibit 10.19.3 to Form 10-K filed on April 15, 1999.
Company.
10.20 Eighth Amended and Restated Exhibit 10.20 to Form S-1 filed on August 21, 1998, File
Promissory Note dated March 27, No. 333-59375
1998, between FFG, maker, and
Finova
10.20.1 Ninth Amended and Restated Exhibit 10.1 to Form 10-Q, filed on May 15, 1998.
Promissory Note dated March 27,
1998, between FFG, maker and
Finova.
10.20.2 Tenth Amended and Restated Exhibit 10.20.2 to Form 10-K filed on April 15, 1999.
Promissory Note dated November
9, 1998, between FFG, Liberty
Finance Company, Smart Choice
Receivable Holdings Company and
First Choice Auto Finance, Inc.
10.21 Fourth Amended and Restated Exhibit 10.21 to Form S-1 filed on August 21, 1998,
Schedule to Amended and Restated File No. 333-59375
Loan and Security Agreement,
FFG, borrower, Finova, lender,
dated March 27, 1998.
10.21.1 Fifth Amended and Restated Exhibit 10.2 to Form 10-Q filed on May 15, 1998.
Schedule to Amended and Restated
Loan and Security Agreement, FFG,
borrower, Finova, lender.
10.21.2 Schedule to Second Amended and Exhibit 10.21.2 to Form 10-K filed on April 15, 1999.
Restated Loan and Security
Agreement, dated November 9,
1998, FFG, Liberty Finance Company
and First Choice Auto Finance, Inc.,
borrower.
10.21.3 Intercreditor Agreement between Exhibit 10.21.3 to Form 10-K filed on April 15, 1999.
Manheim Automotive Financial
Services, Inc. and Finova
Capital Corporation.
10.22 Stock Purchase Agreement dated Exhibit 10.1 to Form 10-Q, filed on May 20, 1997.
January 28, 1997 between SCHI
and Gary Smith.
10.23 Promissory Note dated January Exhibit 10.2 to Form 10-Q filed on May 20, 1997.
28, 1997, First Choice
Finance, Inc. ("FCAF"), maker,
Gary Smith, payee, in the
principal amount of $1,031,008.
20
10.24 Lease dated April 5, 1997 Exhibit 10.24 to Form S-1 filed on August 21, 1998, File
between Gary R. Smith and Team No. 333-59375
Automobile Sales and Finance, Inc.
10.25 Promissory Note Modification Exhibit 10.25 to Form S-1 filed on August 21, 1998, File
Agreement, dated December 15, No. 333-59375 1997
between FCAF and Gary R.
Smith.
10.26 Asset Purchase Agreement dated Exhibit 10.3 to Form 10-Q, filed on May 20, 1997.
January 28, 1997 between FCAF
and Gary Smith.
10.27 Asset Purchase Agreement among Exhibit 10.17 to Form 8-K, filed on February 26, 1997.
FCAF, Palm Beach Finance and
Mortgage Company ("PBF"), Two
Two Five North Military Corp.
("225"), and David Bumgardner,
and Amendment thereto.
10.28 Loan and Security Agreement Exhibit 10.18 to Form 8-K, filed on February 26, 1997.
between 225 and FCAF dated
February 14, 1997.
10.29 9% Secured Convertible Note of Exhibit 10.20 to Form 8-K, filed on February 26, 1997.
FCAF to 225 and PBF.
10.30 9% Convertible Debenture of SCHI Exhibit 10.21 to Form 8-K, filed on February 26, 1997.
to PBF.
10.31 Lease between David Bumgardner Exhibit 10.22 to Form 8-K, filed on February 26, 1997.
as Lessor and FCAF, Lessee,
dated February 13, 1997.
10.32 Indemnification Agreement in Exhibit 10.23 to Form 8-K, filed on February 26, 1997.
favor of PBF and 225 by FCAF,
dated February 14, 1997.
10.33 Executive Employment Agreement Exhibit 10.15 to Form 10-Q, filed on May 20, 1997.
between the Company and Gary
Smith.
10.34 Executive Employment Agreement Exhibit 10.16 to Form 10-Q, filed May 20, 1997.
between the Company and Robert
Abrahams.
10.35 Executive Employment Agreement Exhibit 10.35 to Form 10-Q filed on August 21, 1998,
dated April 11, 1997 between the File No. 333-59375.
Company and Joseph Alvarez.
10.36 Executive Employment Agreement Exhibit 10.36 to Form S-1 filed on August 21, 1998,
between the Company and Ronald File No. 333-59375.
Anderson.
10.36.1Executive Employment Agreement Exhibit 10.36.2 to Form S-1 filed on August 21, 1998,
dated February 9, 1998 between File No. 333-53975.
the Company and Robert J. Downing.
10.37 Non Qualified Stock Option Exhibit 10.37 to Form S-1 filed on August 21, 1998,
Agreement dated March 5, 1997 File No. 333-53975.
among the Smart Choice Holdings
Management Trusts (the
"Management Trusts"), Eckler
Industries, Inc., and Robert J.
Abrahams.
21
10.38 Non Qualified Stock Option Exhibit 10.38 to Form S-1 filed on August 21, 1998, File
Agreement dated March 5, 1997 No. 333-59375.
among the Management Trusts,
Eckler Industries, Inc., and
Robert J. Abrahams.
10.39 Non Qualified Stock Option Exhibit 10.39 to Form 10-K, filed on April 14, 1998.
Agreement dated April 11, 1997,
among the Management Trusts, the
Company and Joseph Alvarez.
10.40 Stock Option Agreement dated Exhibit 10.40 to Form S-1 filed on August 21, 1998, File
March 24, 1997 between the No. 333-59375.
Company and Ronald Anderson.
10.41 Non-Qualified Stock Option Exhibit 10.41 to Form S-1 filed on August 21, 1998, File
Agreement dated April 17, 1997 No. 333-59375
between the Company and David
Bumgardner.
10.42 Non-Qualified Stock Option Exhibit 10.42 to Form S-1 filed on August 21, 1998, File
Agreement dated April 17, 1997 No. 333-59375
between the Company and Craig
Macnab.
10.43 Stock Option Agreement dated Exhibit 10.43 to Form S-1 filed on August 21, 1998, File
March 19, 1997 between the No. 333-59375
Company and Gerald Parker.
10.44 Non-Qualified Stock Option Exhibit 10.44 to Form S-1 filed on August 21, 1998, File
Agreement dated April 17, 1997 No. 333-59375
between the Company and Gerald Parker.
10.45 Non-Qualified Stock Option Exhibit 10.45 to Form S-1 filed on August 21, 1998, File
Agreement dated April 17, 1997 No. 333-59375.
between the Company and Donald
Wojnowski.
10.46.1Non-Qualified Stock Option Exhibit 10.46.1 to Form S-1 filed on August 21, 1998,
Agreement dated July 29, 1997 File No. 333-59375.
between the Company and
Joseph Alvarez.
10.46.2 Non-Qualified Stock Option Exhibit 10.46.2 to Form S-1 filed on August 21, 1998,
Agreement dated January 29, File No. 333-59375.
1997 between the Company and
Joseph Mohr.
10.46.3 Non-Qualified Stock Option Exhibit 10.46.3 to Form S-1 filed on August 21, 1998,
Agreement dated February 9, File No. 333-59375.
1998 between the Company and
Robert Downing.
10.46.4 Non-Qualified Stock Option Exhibit 10.46.4 to Form S-1 filed on August 21, 1998,
Agreement dated January 29, File No. 333-59375.
1997 between the Company and
Ron Anderson.
10.47 Convertible Senior Promissory Exhibit 10.18 to Form 10-Q, filed May 20, 1997.
Note dated March 13, 1997, the
Company, maker, Sirrom Capital
Corporation ("Sirrom"), payee.
22
10.48 Convertible Senior Promissory Exhibit 10.19 to Form 10-Q, filed May 20, 1997.
Note dated May 13, 1997, the
Company, maker, Sirrom, payee.
between the Company and Sirrom,
10.49 Amended and Restated Exhibit 10.20 to Form 10-Q, filed May 20, 1997.
Registration Rights Agreement
dated May 13, 1997.
10.50 Asset Purchase Agreement Exhibit 10.1 to Form 8-K filed on July 14, 1997.
dated as of June 27, 1997 among
the Company, Strata Holding, Inc.,
Ready Finance, Inc., Donald Cook,
Marilyn Cook and Madie A.
Stratemeyer.
10.51 Form of Convertible Note issued Exhibit 10.1 to Form 8-K filed on October 9, 1997.
by the Company to High Capital Funding,
LLC, and other purchasers.
10.51.1 Form of Warrant issued by the Exhibit 10.2 to Form 8-K filed on October 9, 1997.
Company to High Capital Funding,
LLC, and other purchasers.
10.52 Subordinated Loan Agreement Exhibit 10.52.1 to Form 10-K filed on April 15, 1999.
dated January 30, 1999, between
High Capital Funding, LLC and
the Company.
10.52.1 Company Form of 1999 Series A Exhibit 10.52.1 to Form 10-K filed on April 15, 1999.
Subordinated Note.
10.52.2 Guaranty Agreement between SC Exhibit 10.52.2 to Form 10-K filed on April 15, 1999.
Holdings, Inc., First Choice
Auto Finance, Inc. and High
Capital Funding, LLC.
10.53 Promissory Note, principal Exhibit 10.3 to Form 8-K filed on October 9, 1997.
amount $1,500,000 by Eckler
Industries, Inc., maker,
Stephens Inc., payee.
10.54 Promissory Note, principal Exhibit 10.1 to Form 8-K filed on March 5, 1998.
amount $3,000,000, Eckler
Industries, Inc., maker,
Stephens Inc., payee.
10.55 Guaranty Agreement by the Exhibit 10.4 to Form 8-K filed on October 9, 1997.
Company to Stephens Inc.
10.56 Amendment to Guaranty Agreement Exhibit 10.4 to Form 8-K filed on March 5, 1998.
between the Company and Stephens
Inc.
10.57 Pledge and Security Agreement Exhibit 10.5 to Form 8-K filed on October 9, 1997.
between the Company and Stephens
Inc.
10.58 Amendment to Pledge and Security Exhibit 10.5 to Form 8-K filed on March 5, 1998.
Agreement between the Company
and Stephens Inc.
23
10.59 Securities Purchase Agreement Exhibit 10.6 to Form 8-K filed on October 9, 1997.
between the Company and certain
buyers represented by Promethean
Investment Group, L.L.C.
10.60 Form of Warrant from the Company Exhibit 10.7 to Form 8-K filed on October 9, 1997.
to certain buyers represented by
Promethean Investment Group,
L.L.C.
10.61 Automotive Wholesale Financing Exhibit 10.61 to Form S-1 filed on August 21, 1998, File
and Security Agreement dated No. 333-59375
July 21, 1997 between First
Choice Stuart 1, Inc. ("FCS1")
and Nissan Motor Acceptance
Corporation ("NMAC").
10.62 Addendum to Automotive Wholesale Exhibit 10.62 to Form S-1 filed on August 21, 1998, File
Financing and Security Agreement No. 333-59375
10.63 Second Addendum to Automotive Exhibit 10.63 to Form S-1 filed on August 21, 1998, File
Wholesale Financing and Security No. 333-59375
Agreement dated August 11, 1997
between NMAC and FCSI.
10.64 Dealer Capital Loan and Security Exhibit 10.64 to Form S-1 filed on August 21, 1998, File
Agreement dated October 12, No. 333-59375
1995 between B&B Florida
Enterprises, Inc. and NMAC.
10.65 Amendment to Dealer Capital Loan Exhibit 10.65 to Form S-1 filed on August 21, 1998, File
and Security Agreement dated No. 333-59375
September 1, 1997 between NMAC and FCS1.
10.66 Dealer Equipment Loan and Exhibit 10.66 to Form S-1 filed on August 21, 1998, File
Security Agreement dated October No. 333-59375
12, 1995 between NMAC and B&B
Florida Enterprises, Inc.
10.67 Amendment to Dealer Equipment Exhibit 10.67 to Form S-1 filed on August 21, 1998, File
Loan and Security Agreement No. 333-59375
dated September 1, 1997 between NMAC and FCSI.
10.67.1 Second Amendment to Dealer Exhibit 10.67 to Form S-1 filed on August 21, 1998, File
Equipment Loan and Security No. 333-59375.
Agreement.
10.67.2 Second Amendment to Dealer Exhibit 10.67.2 to Form 10-K filed on April 15, 1999.
Capital Loan and Security
Agreement, dated July 29, 1998,
between Nissan Motor Acceptance
Corporation and First Choice
Stuart 1, Inc., dba Stuart
Nissan.
10.68 Nissan Dealer Term Sales and Exhibit 10.68 to Form S-1 filed on August 21, 1998, File
Service Agreement dated August No. 333-59375
29, 1997 between Nissan Motor
Corporation in U.S.A., the
Company, Smart Cars, Inc. and
FCS1.
24
10.69 Wholesale Financing and Security Exhibit 10.69 to Form S-1 filed on August 21, 1998, File
Agreement dated August 11, 1997 No. 333-59375
between First Choice Stuart 2,
Inc. ("FCS2") and Volvo Finance
North America, Inc.
10.70 Authorized Retailer Agreement Exhibit 10.70 to Form S-1 filed on August 21, 1998, File
between Volvo Cars of North No. 333-59375.
America, Inc. and FCS2.
10.71 Convertible Subordinated Exhibit 10.71 to Form S-1 filed on August 21, 1998,
File Debenture dated November 3, No. 333-59375.
1997, principal amount $750,000,
the Company, maker, Bankers Life
Insurance Company, payee.
10.72 Registration Rights Agreement Exhibit 10.72 to Form S-1 filed on August 21, 1998, File
dated November 3, 1997 between No. 333-59375
the Company and Bankers Life
Insurance Company.
10.73 Settlement Agreement and Release Exhibit 10.73 to Form S-1 filed on August 21, 1998, File
dated January 30, 1998 among the No. 333-59375.
Company, FCAF, FCS2, Jack
Winters Enterprises, Inc., Jack
Winters, F. Craig Clements,
Killgore Pearlman, P.A. and Mark
L. Ornstein.
10.74 Stock Purchase Agreement dated Exhibit 10.74 to Form S-1 filed on August 21, 1998, File
May 6, 1997 between FCS1 and No. 333-59375.
Thomas DeRita, Jr.
10.75 Promissory Note dated December Exhibit 1075 to Form S-1 filed on August 21, 1998, File
19, 1997, principal amount No. 333-59375.
$2,199,000, First Choice Melbourne 1, Inc., maker and
Raytheon Aircraft Credit Corporation, payee.
10.76 Guaranty Agreement by the Exhibit 10.76 to Form S-1 filed on August 21, 1998, File
Company to Raytheon Aircraft No. 333-59375.
Credit Corporation.
10.77 Security Agreement dated Exhibit 10.77 to Form S-1 filed on August 21, 1998, File
December 19, 1997 between First No. 333-59375
Choice Melbourne 1, Inc. and
Raytheon Aircraft Credit
Corporation.
10.78 Registration Rights Agreement Exhibit 10.8 to Form 8-K filed on October 9, 1997.
between the Company and certain buyers
represented by Promethean Investment Group, L.L.C.
10.79 Promissory Note dated February Exhibit 10.9 to Form 8-K filed on March 5, 1998.
24, 1998, FCAF, maker, Manheim
Automotive Financial Services,
Inc., payee,
10.80 Guaranty dated March 21, 1997 Exhibit 10.10 to Form 8-K filed on March 5, 1998.
from the Company in favor of
Manheim Automotive Financial
Services, Inc.
25
10.81 Intentionally Omitted.
10.82 Manheim Automotive Financial Exhibit 10.82 to Form S-1 filed on August 21, 1998, File
Services, Inc. Security No. 333-59375
Agreement dated March 21, 1997
between FCAF and Manheim
Automotive Financial Services,
Inc.
10.83 Promissory Note dated June 17, Exhibit 10.83 to Form S-1 filed on August 21, 1998, File
1997, principal amount $825,000, No. 333-59375
FCAF, maker, Carl Schmidt
Enterprises, Inc., payee.
10.84 Real Estate Mortgage dated June Exhibit 10.84 to Form S-1 filed on August 21, 1998, File
17, 1997, FCAF, mortgagor, Carl No. 333-59375
Schmidt Enterprises, Inc.,
mortgagee.
10.85 Intentionally Omitted.
10.86 Intentionally Omitted.
10.87 Twenty-Fourth Amendment to GM Exhibit 10.87 to Form S-1 filed on August 21, 1998, File
Reproduction and Service Part No. 333-59375
Tooling License Agreement.
10.88 Twenty-Sixth Amendment to GM Exhibit 10.88 to Form S-1 filed on August 21, 1998 Reproduction
and Service Part No. 333-59375
Tooling License Agreement.
10.89 Thirty-Fourth Amendment to GM Exhibit 10.89 to Form S-1 filed on August 21, 1998, File
Reproduction Service Part No. 333-593759375
Tooling License Agreement.
10.90 Lease between Florida Auto Exhibit 10.90 to Form S-1 filed on August 21, 1998, File
Auction of Orlando, Inc. and No. 333-59375
First Choice Auto Finance, Inc.
dated May 12, 1997, for
Reconditioning Facility.
10.91 Aircraft Lease between General Exhibit 10.67.2 to Form 10-K filed on April 15, 1999.
Electric Capital Corporation
and the Company, dated
December 1998.
10.92 Lease between the Company, Lessor Exhibit 10.92 to Form 8-K filed on September 8, 1999
and Eckler Industries LLC, Lessee,
dated August 26, 1999.
10.93 Agreement for the sale of the Filed herewith.
business and net assets of
First Choice Stuart 1, Inc. and
First Choice Stuart 2, Inc. to
L&J Automotive Investments, Inc.
and Oceanside Motorcars, Inc.
11.1 Statement re Computation of. *
Earnings Per Share.
27.1 Financial Data Schedule. Filed herewith.
* Information regarding the computation of earnings per share is set forth in
the Notes to Consolidated Financial Statements.
26
(b) Report on Form 8-K
None
27
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 November 22, 1999.
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 and Chief Executive Officer November 22, 1999
- -----------------
Gary R. Smith
/S/ LARRY KIEM Vice President Finance and Chief Accounting Officer November 22, 1999
- --------------
Larry Kiem
28