UNITED STATES
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 fiscal quarter ended: Commission file number:
JANUARY 31, 2002 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)
P.O. BOX 5020, WINTER PARK, FLORIDA
(Address of principal executive offices)
32793
(Zip Code)
(321) 383-4209
(Registrant's telephone number, including area code)
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 reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding at
Title of Each Class March 12, 2002
Common stock, par value $.01 per share 8,590,547
PART I
ITEM 1. FINANCIAL STATEMENTS SMART CHOICE AUTOMOTIVE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
January 31, 2002
(unaudited) April 30, 2001
----------- --------------
Assets:
Cash and cash equivalents $ 192,364 $
Prepaid and other assets 128,553 371,055
Florida Finance Group assets held for sale 3,736,639 97,577,626
Paaco assets held for sale 97,103,697 92,225,714
------------ ------------
$101,161,253 $190,174,395
============ ============
Liabilities and stockholders' equity:
Accounts payable and accrued liabilities $ 447,772 $ 2,295,674
Other borrowings 1,599,563 1,882,344
Florida Finance Group liabilities 2,932,178 93,980,956
Paaco liabilities 74,385,722 76,070,298
------------ ------------
Total liabilities 79,365,235 174,229,272
------------ ------------
Contingent redemption value of put options 453,371 453,371
Stockholders' equity:
Preferred stock, par value $.01 per share, 2,000,000 shares
authorized; none issued or outstanding
Common stock, par value $.01 per share, 50,000,000 shares
authorized; 9,762,270 issued and outstanding 97,623 97,623
Additional paid-in capital 13,832,832 13,832,832
Retained earnings 7,412,192 1,561,297
------------ ------------
Total stockholders' equity 21,342,647 15,491,752
------------ ------------
$101,161,253 $190,174,395
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
2
CONSOLIDATED STATEMENTS OF OPERATIONS SMART CHOICE AUTOMOTIVE GROUP, INC.
(UNAUDITED)
Three Months Ended Nine Months Ended
January 31, January 31,
2002 2001 2002 2001
---- ---- ---- ----
Costs and expenses:
Selling, general and administrative $ 176,082 $ 189,538 $ 629,046 $ 661,915
----------- ---------- ---------- ----------
(Loss) from continuing operations (176,082) (189,538) (629,046) (661,915)
Discontinued operations:
Income (loss) net of taxes 40,867,952 (537,813) 6,479,941 2,169,237
----------- ---------- ---------- ----------
Net income (loss) 40,691,870 (727,351) 5,850,895 1,507,322
=========== ========== ========== ==========
Basic earnings (loss) per share:
Continuing operations $ (.02) $ (.02) $ (.06) $ (.07)
Discontinued operations 4.19 (.05) .66 .22
----------- ---------- ---------- ----------
Total $ 4.17 $ (.07) $ .60 $ .15
=========== ========== ========== ==========
Diluted earnings (loss) per share:
Continuing operations $ (.02) $ (.02) $ (.06) $ (.07)
Discontinued operations 4.19 (.05) .66 .22
----------- ---------- ---------- ----------
Total $ 4.17 $ (.07) $ .60 $ .15
=========== ========== ========== ==========
Weighted average number of shares outstanding:
Basic 9,762,270 9,794,103 9,762,270 9,800,027
Diluted 9,762,270 9,794,103 9,762,270 9,800,027
The accompanying notes are an integral part of these consolidated financial
statements.
3
CONSOLIDATED STATEMENTS OF CASH FLOWS SMART CHOICE AUTOMOTIVE GROUP, INC.
(UNAUDITED)
Nine Months Ended
January 31,
2002 2001
---- ----
Operating activities:
Net income $ 5,850,895 $ 1,507,322
Add: Income from discontinued operations (6,479,941) (2,169,237)
----------- -----------
Loss from continuing operations (629,046) (661,915)
Adjustments to reconcile (loss) from continuing operations to net cash Provided
by (used in) operating activities: Changes in operating assets and
liabilities:
Prepaids and other assets 242,502 166,501
Accounts payable and accrued liabilities (1,847,902) (527,233)
----------- -----------
Net cash used in operating activities (2,234,446) (1,022,647)
----------- -----------
Financing activities:
Repayments of other borrowings (282,781) (281,538)
----------- -----------
Net cash used in financing activities (282,781) (281,538)
----------- -----------
Cash used in continuing operations (2,517,227) (1,304,185)
Cash provided by (used in) discontinued operations 6,557,831 (142,268)
----------- -----------
Increase (decrease) in cash and cash equivalents 4,040,604 (1,446,453)
Cash and cash equivalents at: Beginning of period 436,262 1,882,716
----------- -----------
End of period 4,476,866 436,263
Less: Cash and cash equivalents of discontinued operations (4,284,502) (436,263)
----------- -----------
Cash and cash equivalents of continuing operations $ 192,364 $
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) SMART CHOICE AUTOMOTIVE GROUP, INC.
A - DESCRIPTION OF BUSINESS
Smart Choice Automotive Group, Inc. ("Smart Choice") and collectively
with all of its subsidiaries (the "Company") was in the business of selling and
financing used automobiles and trucks principally to consumers with limited or
damaged credit histories. Smart Choice's Florida-based subsidiaries are referred
to as the "Florida Finance Group" or "FFG". Smart Choice's Texas-based
subsidiaries, which include Paaco Automotive Group, L.P. and Premium Auto
Acceptance Corporation, are referred to as "Paaco". As of January 31, Paaco
operated 13 used car dealerships in Texas (principally in the cities of Dallas
and Houston).
As discussed in Note B, the Company has disposed of all of its
operations.
B - SETTLEMENT AGREEMENT WITH FINOVA
On November 8, 2001, Smart Choice, the Florida Finance Group and Paaco,
entered into a forbearance agreement with Finova that resulted in the
foreclosure of the Florida Finance Group's receivables and inventory, and the
probable sale of Paaco to Finova.
Pursuant to the forbearance agreement, on November 9, 2001, the
collateral for the Florida Finance Group's credit facility was sold at a public
foreclosure sale to Finova for $55 million. Prior to the foreclosure sale, the
Florida Finance Group owed Finova $88.4 million. Thus, after applying the
proceeds from the foreclosure sale, the Florida Finance Group owes Finova $33.4
million (the "Deficiency").
Further, as part of the forbearance agreement, Smart Choice granted
Finova (i) an option to purchase Paaco (the "Paaco Option") for an amount equal
to the Deficiency, subject to shareholder approval and an appraisal indicating
the value of Paaco is not greater than the Deficiency, and (ii) an option to
purchase up to 100% of Smart Choice's remaining shares of authorized but
unissued common stock (approximately 39 million shares) (the "Smart Choice Stock
Option") at a price of $0.30 per share. The Smart Choice Stock Option will
terminate upon the closing of the exercise of the Paaco Option.
On December 12, 2001 Finova exercised its option to purchase Paaco
subject to certain conditions. Finova subsequently assigned its option to
purchase Paaco to Motive Group, L.P., a Texas limited partnership. On March 8,
2002 Motive Group, L.P. exercised its option and purchased Paaco. Under the
purchase agreement, Motive Group, L.P. will assume all debt of Paaco. Smart
Choice will no longer have any operations of substance and its remaining assets
will be sold in an effort to repay its obligations to unsecured creditors to the
extent possible. Smart Choice's remaining assets consist of certain improved and
unimproved real estate in Titusville, Florida, including a 35,000 square-foot
office facility, and certain other current and fixed assets.
C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the nine-month
period ended January 31, 2002 are not necessarily indicative of the results that
may be expected for the year ended April 30, 2002. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's annual report on Form 10-K for the year ended April 30, 2001.
Discontinued operations
As a result of the Finova agreement and the lack of other available
capital, on November 9, 2001 the Florida Finance Group began to wind-down its
operations. The Florida Finance Group has been accounted for as a discontinued
operation. Prior year amounts have been restated to conform to the fiscal 2002
presentation for comparative purposes.
As a result of the exercise of the Paaco option on March 8, 2002, Paaco has also
been accounted for a discontinued operation. Prior year amounts have been
restated to conform to the fiscal 2002 presentation for comparative purposes.
Paaco and Florida Finance Group comprise all the operations of Smart Choice and
therefore no continuing operations are reported for the period included herein.
It is not anticipated that Smart Choice will have any future operations.
Reclassifications
Certain prior year amounts in the accompanying financial statements
have been reclassified to conform to the fiscal 2002 presentation.
5
D - FINANCE RECEIVABLES
As discussed in Note B, on November 9, 2001, the collateral for the
Florida Finance Group's credit facility with Finova, which consisted principally
of receivables and inventory, was sold at a public foreclosure sale to Finova
for $55 million. In addition, Paaco was sold March 8, 2002 pursuant to
assignment by Finova of its Paaco option. All financed receivables for Florida
Finance Group and Paaco are included in assets held for sale on the accompanying
balance sheet.
E - DEBT
A summary of debt as of January 31, 2002 and April 30, 2001 is as
follows:
Other Borrowings
-----------------------------------------------------------------------------------------------------------------------------
Facility Interest Balance at
Borrower Lender Amount Rate Maturity January 31, 2002 April 30, 2001
-------- ------ ------ ---- -------- ---------------- --------------
Smart Choice High Capital et al N/A 10.0% Nov 2001 725,000 725,000
Florida Fin. Grp Individuals N/A Various Various 401,007 565,948
Various Various N/A Various Various 473,556 591,396
---------- ----------
$1,599,563 $1,882,344
========== ==========
F - DISCONTINUED OPERATIONS
Since January 2001 Florida Finance Group has been over-advanced on
their revolving credit facility with Finova. On November 8, 2001, Florida
Finance Group and Paaco entered into an agreement with Finova that resulted in
the foreclosure of Florida Finance Group's receivables and inventory. The
Florida Finance Group ceased operations in November 2001 and Paaco was sold
March 11, 2002. Smart Choice's remaining assets consist principally of a 35,000
square foot office building and certain other current and fixed assets. The
building and other fixed assets will be sold or conveyed by Smart Choice in an
effort to realized the maximum value for these assets and repay its obligations
to unsecured creditors to the extent possible.
As a result of the foreclosure of Florida Finance Group's receivables
and inventory and the agreement with Finova that the deficiency of approximately
$33 million be satisfied by the sale of Paaco, Smart Choice recorded income from
forgiveness of indebtedness from write off of the outstanding balance of the
Finova loan of $88,394,135. This was partially offset by the effect of the
foreclosure and other items resulting in a gain of $40,691,870 for the quarter
ending January 31, 2002.
G - EARNINGS (LOSS) PER SHARE
A summary reconciliation of basic earnings (loss) per share to diluted
earnings (loss) per share for the Nine Months Ended January 31, 2002 and 2001 is
as follows:
Three Months Ended Nine Months Ended
January 31, January 31,
2002 2001 2002 2001
---- ---- ---- ----
Net income (loss) $40,691,870 $ (727,351) $5,850,895 $1,507,322
=========== ========== ========== ==========
Average shares outstanding-basic 9,762,270 9,794,103 9,762,270 9,800,027
Dilutive options
----------- ---------- ---------- ----------
Average shares outstanding-diluted 9,762,270 9,794,103 9,762,270 9,800,027
=========== ========== ========== ==========
Earnings (loss) per share:
Basic $ 4.17 $ (.07) $ .60 $ .15
Diluted $ 4.17 $ (.07) $ .60 $ .15
Antidilutive securities not included:
Options and warrants 426,021 404,686 426,021 404,686
=========== ========== ========== ==========
6
H - COMMITMENTS AND CONTINGENCIES
Other Litigation
In the ordinary course of business, the Company has become a defendant
in various other types of legal proceedings. The Company cannot determine at
this time the amount of the ultimate exposure, if any, these ordinary course of
business lawsuits may have on the Company.
I - SUPPLEMENTAL CASH FLOW INFORMATION
Cash flows from continuing operations represent cash used for expenses to wind
down the operations of Florida Finance Group's operations and for repayment of
certain other borrowings. Cash balances as of January 31, 2002 in the amount of
$192,364 will be used to pay off accounts payable and accrued expenses to the
extent possible. As of the filing date, March 15, 2002 two employees remain in
Florida Finance Group to provide final reporting and negotiate creditor
settlements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the
Company's consolidated financial statements and notes thereto appearing
elsewhere in this report.
FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. Certain information included in
this Quarterly Report on Form 10-Q contains, and other materials filed or to be
filed by the Company with the Securities and Exchange Commission (as well as
information included in oral statements or other written statements made or to
be made by the Company or its management) contain or will contain,
for--ward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933,
as amended. 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. The Company undertakes no obligation to
publicly update or revise any forward-looking statements. Such forward-looking
statements are based upon management's current plans or expectations and are
subject to a number of uncertainties and risks that could significantly affect
current plans, anticipated actions and the Company's future financial condition
and results. As a consequence, actual results may differ materially from those
expressed in any forward-looking statements made by or on behalf of the Company
as a result of various factors. Uncertainties and risks related to such
forward-looking statements include, but are not limited to, those relating to
the sale of Paaco to Finova pursuant to the Paaco Option, the ability of Smart
Choice to sell its remaining assets and repay unsecured creditors to the extent
possible, continuation of Paaco's borrowings from Finova, changes in interest
rates, competition, dependence on existing management, economic conditions
(particularly in the State of Texas), changes in tax laws or the administration
of such laws and changes in lending laws or regulations. Any forward-looking
statements are made pursuant to the Private Securities Litigation Reform Act of
1995 and, as such, speak only as of the date made.
RESULTS OF OPERATIONS
Smart Choice Automotive Group, Inc. ("Smart Choice") and collectively
with all of its subsidiaries (the "Company") was in the business of selling and
financing used automobiles and trucks principally to consumers with limited or
damaged credit histories. Smart Choice's Florida-based subsidiaries are referred
to as the "Florida Finance Group" or "FFG". Smart Choice's Texas-based
subsidiaries, which include Paaco Automotive Group, L.P. and Premium Auto
Acceptance Corporation, are referred to as "Paaco". As of January 31, Paaco
operated 12 used car dealerships in Texas (principally in the cities of Dallas
and Houston).
As discussed in Note B, on November 9, 2001 the Company has closed
Florida Finance Group and sold Paaco. As a result of the foreclosure of Florida
Finance Group's receivables and inventory and the agreement with Finova that the
deficiency of approximately $33 million be satisfied by the sale of Paaco, Smart
Choice recorded income from forgiveness of indebtedness from write off of the
outstanding balance of the Finova loan of $88,394,135. This was partially offset
by the effect of the foreclosure and other items resulting in a gain of
$40,691,870 for the quarter ending January 31, 2002.
7
LIQUIDITY AND CAPITAL RESOURCES
As discussed in Note B, on November 9, 2001 the Company began to wind-down its
Florida-based operations. Further, Smart Choice granted Finova Capital
Corporation ("Finova"), the primary lender to its subsidiaries, an option to
purchase Paaco. On December 12, 2001 Finova exercised its option to purchase
Paaco. Finova subsequently assigned its option to purchase Paaco to Motive
Group, L.P., a Texas limited partnership. On March 8, 2002 Motive Group, L.P.
exercised its option and purchased Paaco. Under the purchase agreement, Motive
Group, L.P. will assume all debt of Paaco.
Florida Finance Group has no further sources of income or cash flow. All future
operations and wind down activities will be funded from current cash balances.
It is anticipated that current cash balances will be sufficient to fund a
limited operation and settle outstanding non-secured creditor obligations to the
extent possible.
SMART CHOICE / FLORIDA FINANCE GROUP
On November 8, 2001, Smart Choice, the Florida Finance Group and Paaco,
entered into a forbearance agreement with Finova, the primary lender to Smart
Choice's subsidiaries, that resulted in the foreclosure of the Florida Finance
Group's receivables and inventory, and the probable sale of Paaco to Finova.
Prior to November 9, 2001, the Florida Finance Group sold and financed
used cars and trucks in Florida. Paaco sells and finances used cars and trucks
in Texas. The Florida Finance Group had, and Paaco continues to have, a
revolving credit facility with Finova. Prior to November 9, 2001, the Florida
Finance Group was over-advanced on its revolving credit facility ($25 million
over-advanced at September 30, 2001), which constituted an event of default
under the facility.
Pursuant to the forbearance agreement, on November 9, 2001, the
collateral for the Florida Finance Group's credit facility with Finova, which
consisted principally of receivables and inventory, was sold at a public
foreclosure sale to Finova for $55 million. Prior to the foreclosure sale, the
Florida Finance Group owed Finova $88.4 million. Thus, after applying the
proceeds from the foreclosure sale, the Florida Finance Group owes Finova $33.4
million (the "Deficiency").
Further, as part of the forbearance agreement, Smart Choice granted
Finova (i) an option to purchase Paaco (the "Paaco Option") for an amount equal
to the Deficiency, subject to shareholder approval and an appraisal indicating
the value of Paaco is not greater than the Deficiency, and (ii) an option to
purchase up to 100% of Smart Choice's remaining shares of authorized but
unissued common stock (approximately 39 million shares) (the "Smart Choice Stock
Option") at a price of $0.30 per share.
As a result of the Finova agreement and the lack of other available
capital, on November 9, 2001 the Florida Finance Group began to wind-down its
operations. On December 12, 2001 Finova exercised its option to purchase Paaco
subject to certain conditions. Finova subsequently assigned its option to
purchase Paaco to Motive Group, L.P., a Texas limited partnership. On March 8,
2002 Motive Group, L.P. exercised its option and purchased Paaco. Under the
purchase agreement, Motive Group, L.P. will assume all debt of Paaco.
As of January 31, 2002 Florida Finance Group had five employees remaining to
perform final accounting and wind down activities. It is anticipated that two
employees will remain with the company indefinitely to finalize creditor
negotiations and other activities necessary to close the Company. It is expected
that current cash balances will be sufficient to support a minimal operation and
settle outstanding non-secured creditor obligations to the extent possible.
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141 ("SFAS 141"), "Business
Combinations", which eliminates the pooling method of accounting for business
combinations initiated after June 30, 2001. In addition, SFAS 141 addresses the
accounting for intangible assets and goodwill acquired in a business
combination. This portion of SFAS 141 is effective for business combinations
completed after June 30, 2001. The Company adopted SFAS 141 effective May 1,
2001. Such adoption did not have any impact on the Company's financial position
or results of operations.
In July 2001, the FASB issued Statement of Financial Accounting
Standards No. 142 ("SFAS 142"), "Goodwill and Intangible Assets", which revises
the accounting for purchased goodwill and intangible assets. Under SFAS 142,
goodwill and intangible assets with indefinite lives will no longer be
amortized, but will be tested for impairment annually, and in the event of an
impairment indicator. SFAS 142 is effective for fiscal years beginning after
December 15, 2001, with earlier adoption permitted. The Company adopted SFAS 142
effective May 1, 2001. Such adoption did not have a material impact on the
Company's financial position or results of operations.
8
In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 144 ("SFAS 144"), "Accounting for the Impairment of Long-Lived
Assets", which requires a single accounting model to be used for long-lived
assets to be sold and broadens the presentation of discontinued operations to
include a "component of an entity" (rather than a segment of a business). A
component of an entity comprises operations and cash flows that can be clearly
distinguished, operationally and for financial reporting purposes, from the rest
of the entity. A component of an entity that is classified as held for sale or
has been disposed of is presented as a discontinued operation if the operations
and cash flows of the component will be (or have been) eliminated from the
ongoing operations of the entity and the entity will not have any significant
continuing involvement in the operations of the component. The Company adopted
SFAS 144 effective August 1, 2001. Such adoption did not have any impact on the
Company's financial position or results of operations.
PART II
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
On November 8, 2001, Smart Choice, the Florida Finance Group and Paaco,
entered into a forbearance agreement with Finova, the primary lender to Smart
Choice's subsidiaries, that resulted in the foreclosure of the Florida Finance
Group's receivables and inventory, and the probable sale of Paaco to Finova.
Prior to November 9, 2001, the Florida Finance Group sold and financed
used cars and trucks in Florida. Paaco sells and finances used cars and trucks
in Texas. The Florida Finance Group had, and Paaco continues to have, a
revolving credit facility with Finova. Prior to November 9, 2001, the Florida
Finance Group was over-advanced on its revolving credit facility ($25 million
over-advance at September 30, 2001), which constituted an event of default under
the facility.
Pursuant to the forbearance agreement, on November 9, 2001, the
collateral for the Florida Finance Group's credit facility with Finova, which
consisted principally of receivables and inventory, was sold at a public
foreclosure sale to Finova for $55 million. Prior to the foreclosure sale, the
Florida Finance Group owed Finova $88.4 million. Thus, after applying the
proceeds from the foreclosure sale, the Florida Finance Group owes Finova $33.4
million (the "Deficiency").
Further, as part of the forbearance agreement, Smart Choice granted
Finova (i) an option to purchase Paaco (the "Paaco Option") for an amount equal
to the Deficiency, subject to shareholder approval and an appraisal indicating
the value of Paaco is not greater than the Deficiency, and (ii) an option to
purchase up to 100% of Smart Choice's remaining shares of authorized but
unissued common stock (approximately 39 million shares) (the "Smart Choice Stock
Option") at a price of $0.30 per share. The Smart Choice Stock Option will
terminate upon the closing of the exercise of the Paaco Option. Presently, Smart
Choice has approximately 9.8 million shares of common stock outstanding. Both
the Paaco Option and the Smart Choice Stock Option expire March 8, 2002.
As a result of the Finova agreement and the lack of other available
capital, on November 9, 2001 the Florida Finance Group began to wind-down its
operations. On December 12, 2001 Finova exercised its option to purchase Paaco
subject to certain conditions.
As of January 31, 2002, Paaco was also in violation of certain
provisions of its loan agreement with Finova. As a result of Paaco's loan
covenant violations, on November 8, 2001 Finova accelerated the maturity of
Paaco's revolving credit facility such that the entire balance is currently due
and payable.
Finova subsequently assigned its option to purchase Paaco to Motive Group, L.P.,
a Texas limited partnership. On March 8, 2002 Motive Group, L.P. exercised its
option and purchased Paaco. Under the purchase agreement, Motive Group, L.P.
will assume all debt of Paaco.
ITEM 5. OTHER INFORMATION
CHANGE IN CONTROL
Effective March 11, 2002, Crown Group, Inc. ("Crown") sold to
Ed Ernst, the Chief Executive Officer of Smart Choice, all of the 6,857,907
shares of common stock of Smart Choice held by Crown for an aggregate purchase
price of $100.00. Prior to this transaction, Mr. Ernst did not own any
securities of Smart Choice. As a result of the transaction, Mr. Ernst now owns
79.8% of the issued and outstanding shares of common stock of Smart Choice,
based on the 8,890,547 shares issued and outstanding on March 12, 2002.
DISPOSITION OF ASSETS
The disposition by Smart Choice of its Texas-based
subsidiaries is described in Item 2 of this Report, which is incorporated by
reference in response to this Item.
9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: The following exhibits are filed herein.
Exhibit 10.1
Sale and Purchase Agreement between Paaco Automotive Group,
L.P., Premium Auto Acceptance Corporation, Paaco Holdings,
L.L.C., Alouette Trucking, Inc., Smart Choice Automotive
Group, Inc. and Motive Group, L.P.
Exhibit 10.2
Acknowledgement of Assignment of Option between Smart Choice
Automotive Group, Inc., Finova Capital Corporation and Motive
Group, L.P.
(b) Reports on Form 8-K:
During the fiscal quarter ended January 31, 2002, the Company
filed a report on Form 8-K dated November 21, 2001 (event date
November 9, 2001) respecting Florida Finance Group's sale of
receivables and inventory at a public foreclosure sale.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SMART CHOICE AUTOMOTIVE GROUP, INC.
By: \s\ James Edward Ernst
-----------------------------------------------
James Edward Ernst
President and Chief Executive Officer
(Principal Executive Officer)
By: \s\ Larry Kiem
-----------------------------------------------
Larry Kiem
Controller
(Principal Financial and Accounting Officer)
Dated: March 15, 2002
10