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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-K/A

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934
         FOR THE FISCAL YEAR  ENDED          DECEMBER 31, 1998
                                     ---------------------------------

[ ]      TRANSITION REPORT UNDER 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
        INCORPORATION OR ORGANIZATION)                       IDENTIFICATION NO.)

5200 S. WASHINGTON AVENUE, TITUSVILLE, FLORIDA                      32780
----------------------------------------------                    ----------
   (ADDRESS OF  PRINCIPAL EXECUTIVE OFFICES)                      (ZIP CODE)


                                 (407) 269-9680
                          ---------------------------
                          (ISSUER'S TELEPHONE NUMBER)

                 -----------------------------------------------

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

TITLE OF EACH CLASS                    NAME OF EACH EXCHANGE ON WHICH REGISTERED
-------------------                    -----------------------------------------

COMMON STOCK                           THE NASDAQ STOCK MARKET

REDEEMABLE COMMON STOCK                THE NASDAQ STOCK MARKET
  PURCHASE WARRANTS

      SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT:

                                  COMMON STOCK
                    REDEEMABLE COMMON STOCK PURCHASE WARRANTS
                    -----------------------------------------
                                (TITLE OF CLASS)

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 BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED,
TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [X]

         AGGREGATE MARKET VALUE OF THE COMMON EQUITY HELD BY NON-AFFILIATES OF
THE REGISTRANT $8,731,034.00 AS OF APRIL 14, 1999.

         AS OF APRIL 15, 1999, 6,676,545 SHARES OF THE REGISTRANT'S COMMON STOCK
WERE OUTSTANDING.

                       DOCUMENTS INCORPORATED BY REFERENCE

         THE REGISTRANT'S DEFINITIVE PROXY STATEMENT WITH RESPECT TO ITS 1998
ANNUAL MEETING OF SHAREHOLDERS IS INCORPORATED HEREIN BY REFERENCE.

--------------------------------------------------------------------------------

<PAGE>


                                TABLE OF CONTENTS

PART 1
                                                                            PAGE
                                                                            ----

         Item 1     Business                                                   1

         Item 2     Properties                                                 9

         Item 3     Legal Proceedings                                          9

         Item 4     Submission of Matters to a Vote of Security Holders       10

         Item 4A    Executive Officers of the Registrant                      10

PART II

         Item 5     Market for the Registrant's Common Equity Securities
                    and Related Stockholder Matters                           11

         Item 6     Selected Consolidated Financial Data                      12

         Item 7     Management's Discussion and Analysis of Financial
                    Condition and Results of Operations                       14

         Item 7A    Quantitative and Qualitative Disclosures about
                    Market Risk                                               34

         Item 8     Consolidated Financial Statements and Supplementary
                    Data                                                      35

         Item 9     Changes In and Disagreements with Accountants on
                    Accounting and Financial Disclosures                      35

PART III

         Item 10    Directors and Executive Officers of the Registrant        35

         Item 11    Executive Compensation                                    35

         Item 12    Security Ownership of Certain Beneficial Owners and
                    Management                                                35

         Item 13    Certain Relationships and Related Transactions            35

PART IV

         Item 14    Exhibits, Consolidated Financial Statement Schedules
                    and Reports on Form 8-K                                   36

Appendix A - Report of Independent Certified Public Accountant               F-1


<PAGE>


                                     PART I
                               ITEM 1 -- BUSINESS

GENERAL

         Smart Choice Automotive Group, Inc. ("Smart Choice" or the "Company")
currently operates 17 stores in Florida that sell used cars under the "First
Choice" brand name. The Company's First Choice cars are three to six years old,
have less than 80,000 miles and have undergone thorough inspection,
reconditioning and, as necessary, repair. The Company also sells used cars that
may not meet the First Choice criteria through four additional stores in Florida
that operate under the "Team" brand name. Sales of First Choice and Team Cars
are "self financed" through Florida Finance Group, Inc. ("FFG"), a finance
company subsidiary. FFG provides financing for the Company's customers by
originating retail automobile installment sales contracts ("finance receivables"
or "finance contracts") secured by the cars the Company sells. The Company's
customers typically are "credit-impaired", that is, they have limited credit
histories, low incomes and/or past credit problems.

         Retail sales of new and used cars in the United States totaled
approximately $673 billion in 1997. Used cars represented approximately 75% of
cars sold in the United States and 55% of total sales in 1997, with
approximately 41 million used cars sold at an average price of $9,029 per unit.
Retail sales of used cars in Florida in 1997 totaled more than $24.4 billion
(over 2 million vehicles). Approximately 36% of Florida's used car sales in 1997
(not including sales of used cars at new car dealerships) occurred at
approximately 2,800 self-financed used car stores.

         Management believes that the quality and reliability of the Company's
First Choice cars (i) reduce the probability of product failure (which
management believes is a leading cause of defaults on finance contracts in the
Company's industry), (ii) reduce losses on the Company's repossessions of cars
and (iii) define the First Choice brand. Due to the quality and reliability of
its First Choice cars, the Company is able to provide a 24 month/24,000 mile
service contract to its customers, which is underwritten by a third party. The
Company sells used cars at its First Choice stores for an average retail price
of approximately $9,100, including the service contract on all cars sold. The
Company's Team stores generally sell older and higher mileage cars than First
Choice cars. Team cars, which sell for an average retail price of approximately
$8,100, are primarily cars that have been repossessed by the Company, have been
traded in by customers or have not been sold by the First Choice stores within
approximately 180 days. Cars sold at Team stores are covered by a 12
month/12,000 mile service contract.

         The automobile financing industry is the third largest consumer finance
market in the country (after mortgage debt and credit card debt) with more than
$466 billion in contracts on new and used cars originated in 1997. Credit
impaired customers, that is, borrowers with "C" and "D" credit profiles,
accounted for approximately $122 billion of the overall market in 1997, up from
$55.4 billion in 1990. Recent surveys show that the number of these borrowers
has increased to 34.9% in 1997 from 21.8% in 1991 at franchised new car dealers
and to 55.8% in 1997 from 39.5% in 1991 at independent used car dealers. The
Company believes that the portion of the automobile finance market attributable
to used car borrowers has grown significantly in recent years and will continue
to grow. Factors contributing to such growth include (i) the rise in lower
skilled service industry jobs, (ii) the rise in consumer debt and (iii) the
increase in sales of used cars relative to new cars in recent years due
principally to increased new car prices and the number of late model used cars
coming off lease.


<PAGE>

OPERATING STRATEGY

         The Company's operating strategy emphasizes the following points:

o    SELL RELIABLE, QUALITY CARS. The Company sells reliable, quality used cars.
     Management believes that product failure is a leading cause of defaults on
     finance contracts in the self-financed used car industry. The Company
     utilizes guidelines in purchasing, inspecting, reconditioning and servicing
     First Choice cars to minimize defaults.

o    UTILIZE CENTRALIZED CREDIT APPROVAL AND STRICT UNDERWRITING PRACTICES. The
     Company separates the credit approval function and sales process for its
     used cars. The Company's credit underwriting process strictly adheres to
     objective underwriting standards that have resulted in improved collection
     experience since February 1997. The Company regularly reviews its
     collection results to assess the effectiveness of its underwriting
     standards.

o    APPLY RIGOROUS COLLECTION PRACTICES. The Company diligently and proactively
     pursues the collection of its finance receivables while maintaining a
     professional, customer-friendly atmosphere. The Company's collection policy
     includes telephoning a borrower if the borrower's payment is one day late,
     and repossession procedures generally begin when the customer is two
     payments past due. As of December 31, 1998, 93.6% of the Company's finance
     receivables were current.

o    MAXIMIZE RECOVERY ON REPOSSESSIONS. Management believes that the Company
     generally experiences lower losses on repossessions than other lenders in
     the self-financed used car industry due to (i) the quality of the cars it
     sells, (ii) the timeliness of its repossessions and (iii) its ability to
     remarket repossessions. The Company reconditions and remarkets
     approximately 64% of its repossessions through its Team stores, rather than
     through auctions (where cars are generally sold at lower prices). These
     practices allowed the Company to recover 51% (on a retail basis) of the
     principal amount of loans charged off for the year ended December 31, 1998.

o    INCREASE OPERATING EFFICIENCY. Since late 1997, in an effort to increase
     operating efficiency by reducing administrative costs and enhancing
     administrative functions, the Company has combined certain administrative
     functions, such as accounting, treasury, insurance, employee benefits,
     strategic marketing and legal support. During 1998, the Company believes it
     further increased its operating efficiency in such areas as advertising,
     reconditioning and purchasing and transporting inventory.

o    EMPLOY INTEGRATED MANAGEMENT INFORMATION SYSTEMS. Each used car store is
     linked to an integrated computer-based management information system (the
     "MIS") that allows the Company to obtain "real time" information on its
     operations. The Company uses the MIS to transmit data between its
     headquarters and its stores, to evaluate store performance daily, monitor
     inventory, sales, costs and customer payments and facilitate the Company's
     underwriting and collection of its finance contracts.

o    PROMOTE FIRST CHOICE BRAND. The Company believes that its First Choice
     brand is synonymous with quality cars and customer service. By seeking to
     maintain continuity in the appearance of its store locations, the Company
     expects to promote its name recognition. The


                                       2
<PAGE>

     Company attempts to maintain a consistency between its facilities and its
     marketing materials through the use of standardized logos and a white, blue
     and yellow color theme.

o    AVOID THIRD PARTY FINANCE RECEIVABLES. As part of its operating philosophy,
     the Company only originates and services finance receivables on used cars
     sold at its used car stores. The Company does not intend to purchase third
     party finance receivables.

INSURANCE PRODUCTS

         During 1998, the Company developed a program offering collision and
liability insurance to its used car customers through a separate subsidiary,
Easy Pay Insurance, Inc.

COMPANY GROWTH

         The Company commenced used car sales in January 1997 and expanded
significantly throughout 1997 through acquisitions. In 1998, the Company's
growth has been through internal expansion. The Company regularly reviews its
store locations to assess the effectiveness of its sales operations.

SELF-FINANCED USED CAR STORES

         The Company currently owns and operates 17 self-financed used car
stores under the First Choice name and four used car stores under the Team name.
Cars that have less than 80,000 miles are placed at First Choice locations,
while cars that have more than 80,000 miles (usually repossessions or trade-ins)
are placed at Team stores. The Company's used car stores are divided into three
regions (the Tampa-St. Petersburg, Orlando and West Palm Beach, Florida
metropolitan areas), and each region is managed by a regional manager. Each
store is managed by a sales manager who oversees a sales staff. The Company
upgrades the facilities it acquires with fresh exterior and interior paint and
new signage (with an emphasis on the blue, yellow and white colors of First
Choice), replaces furniture and fixtures as necessary to be similar to the
existing locations and installs upgraded computer systems.

         The Company's First Choice stores generally maintain an approximate
average of 60 used cars (ranging from 35 to 130) per store, featuring a wide
variety of makes and models (with ages generally ranging from three to six
years) and a range of sale prices, all of which enable the Company to meet the
preferences and budgets of a wide range of potential customers. The Company
believes that by selling higher quality used cars and providing a service
agreement to cover major repairs, improved customer satisfaction and fewer
defaults on finance contracts result.

         The Company provides, through a third-party underwriter, a 24
month/24,000 mile service contract with each used car sold at a First Choice
store and a 12 month/12,000 mile service contract to purchasers of the Company's
Team cars. Under the service contracts, the Company's customers may have their
First Choice or Team cars repaired nationally by any one of approximately
375,000 ASE (Automotive Service Excellence) certified technicians. The Company
does not perform any repairs under these service contracts, which cover most
major repairs due to mechanical breakdown or failure. Customers are responsible
for payment of up to a $100 deductible during each repair visit under the
service contract.

         The Company acquires its used cars primarily at auto auctions. All cars
are subjected to a 110 point inspection program, reconditioning and, as
necessary, repair at the Company's


                                       3
<PAGE>

reconditioning facilities. The Company outsources all painting and body work.
The Company invests approximately $678 per car in repairs prior to delivering
the cars to the individual stores for sale. The Company's regional managers
determine the number and types of cars for the stores in their regions. If a car
is not sold in 90 days, it is moved to another First Choice store in the same
region for an additional 90 days, after which, if not sold, it is moved to a
Team location or sold wholesale to other dealers.

         RECONDITIONING CENTERS. The Company has used two reconditioning centers
in its used car operations. Both centers process used cars through the Company's
110 point inspection, perform minor body work and apply detailing, as necessary.
The main reconditioning facility, based in Lakeland, Florida, has total square
footage of 31,286 and is located on a 6.7 acre parcel. As of December 31, 1998,
the Lakeland operation had 20 bays and was capable of reconditioning
approximately 1,500 cars per month. The Company believes that the parcel of land
could be used to expand reconditioning capacity by adding more bays. The
Lakeland facility also contains the Company's off-site disaster recovery
operations center.

         MARKETING AND SALES. A primary focus of the Company's marketing
strategy for its used car stores is its ability to finance consumers with poor
credit histories. The Company has initiated marketing programs designed to
attract credit-impaired customers, assist such customers in re-establishing
their credit, reward those customers who pay on time, develop customer loyalty
and increase referral and repeat business. The Company created value-added
programs for its customers including providing quality cars through a
comprehensive inspection and refurbishment program, a service agreement on all
used cars sold at the Company stores, rapid loan application processing and
pre-qualification over the telephone by calling a toll-free number. The Company
reports monthly to credit bureaus, allowing customers the opportunity to work
toward re-establishing their credit while providing an avenue for them to
purchase newer cars as their credit improves.

         In general, the Company's advertising for its used car stores
emphasizes its multiple locations, wide selection of quality used cars, ability
to provide financing to many credit-impaired borrowers and additional
value-added programs such as service agreements and loan pre-qualifications. The
Company advertises extensively in the radio and television media. In addition,
management believes that the Company's upgraded facilities provide effective
advertising and attract drive-by traffic to visit the stores because their
appearance fosters the image of a used car store that offers quality cars. The
Company believes that its advertising and marketing approach creates brand name
recognition and promotes its image as a professional, customer oriented
business.

         The Company utilizes various telemarketing programs to promote its used
cars. For example, potential customers are contacted within several days of
their visit to a Company store to follow up on leads and obtain information
regarding their experience while at a Company store. In addition, used car
customers with satisfactory payment histories are contacted several months
before contract maturity and are offered an opportunity to purchase another car
with a nominal down payment requirement.

         The Company employs a dedicated on site sales force. The Company
continually seeks to develop and retain qualified salespersons. The
salesperson's sole responsibility is the sale of cars. The salespersons who sell
used cars do not in any way participate in the financing aspects of the sale.
The Company employed 92 full-time salespersons at its used car stores as of
December 31, 1998. The salespersons are compensated primarily through
commissions.


                                       4
<PAGE>

         COMPETITION. The used car business in which the Company competes is
highly fragmented and very competitive. The Company may face increased
competition from automobile consolidators such as Ugly Duckling Corporation and
"superstores" such as CarMax and AutoNation USA. Others, such as Auto-By-Tel,
Calling All Cars, AutoVantage and Auto Web International are marketing cars on
the Internet. In addition, certain regional and national car rental companies
have begun to operate retail used car lots to dispose of their used rental cars.
Many of these competitors have significantly greater financial, marketing and
other resources than the Company.

         The used car superstores typically use a mega-dealer approach with
substantial investments in real estate and extensive inventory at each store. In
contrast, the Company maintains several medium to large stores in each of its
marketing areas. The Company believes that by covering more territory with
multiple locations in a market area rather than having one superstore serving a
large geographic area, the Company's stores are more easily accessible to a
wider population and the Company benefits from more visibility in its market
area. Also, the existence of multiple locations gives the Company greater
flexibility in responding to a change in market conditions.

         The Company's used car stores do not directly compete with superstores
such as CarMax or AutoNation which offer newer, more expensive cars than the
Company sells and do not target credit-impaired borrowers. Of the large
companies that have entered the credit-impaired car business, only Ugly Duckling
Corporation has announced an intention to focus on the credit-impaired borrower.
However, the Company believes that it competes effectively with the other
self-financed dealers and can compete effectively with Ugly Duckling Corporation
because the Company's cars are generally newer, lower mileage cars. Further, the
Company provides each customer with a service agreement on each used car sold at
the Company's stores. The Company distinguishes its direct sales and financing
operations from those of typical self-financed used car retailers by providing
multiple locations, upgraded facilities, large inventories of used automobiles,
centralized purchasing, value-added marketing programs and dedication to
customer service. In addition, the Company has developed underwriting guidelines
and techniques to facilitate rapid credit decisions, as well as an integrated,
technology-based corporate infrastructure that enables the Company to monitor
and service its finance contracts. The Company believes that it is the largest
used car store chain in Florida that focuses on credit-impaired customers.

         The credit-impaired segment of the used car financing business is also
highly fragmented and very competitive. In recent years, several consumer
finance companies have completed public offerings in order to raise the capital
necessary to fund expansion and support increased purchases of finance
contracts. In addition, there are numerous financial services companies serving,
or capable of serving, this market. While traditional financial institutions,
such as commercial banks, savings and loans, credit unions and captive finance
companies of major automobile manufacturers, have not consistently serviced
credit-impaired borrowers, the high rates of return earned by companies involved
in credit-impaired financing have encouraged certain of these traditional
institutions to enter, or contemplate entering, this market.

FINANCING CUSTOMERS WITH IMPAIRED CREDIT

         The Company offers financing to its customers who purchase used cars at
its used car stores. The Company does not have any loans from persons who are
not customers except for finance contracts purchased in the Company's used car
dealership acquisitions. The Company has established a policy not to acquire
third party originated finance contracts. It provides financing


                                       5
<PAGE>

only for its own customers, thereby relying on its own underwriting standards
and not those of third parties. Sales and financing are separate functions
performed by different Company subsidiaries. All credit and financing review and
decisions are made by experienced financing personnel at the Company's
headquarters. The Company uses a standardized sales contract that typically
provides for down payments of approximately 10% of the purchase price with the
balance of the purchase price financed at an average annual percentage rate of
approximately 26% over periods ranging from 12 to 48 months. The Company
finances approximately 98% of the used car sales through finance contracts that
the Company originates and services.

         CUSTOMER CREDIT PROFILE. The Company targets customers with "C" or "D"
credit profiles. A "C" rated consumer may have an inconsistent employment record
or unresolved problems with credit in the past. This borrower will generally not
be able to obtain a loan to finance a late model or older used car purchase from
a captive finance subsidiary or a bank otherwise available to customers with "A"
or "B" credit ratings. A "D" rated consumer has an unfavorable employment
history and other credit problems, such as personal bankruptcy. This borrower's
primary choice is to finance his or her used car purchase, which is often from a
self-financed used car store, through an independent finance company that is
active in this market segment. Based on a random sample by the Company of its
loan portfolio in October 1997, the Company's average customer (at the time such
customer applies for or is originally approved for credit) has gross annual
household income of approximately $30,000, and an average length of employment
at his or her current job of approximately 3.3 years and has resided in the same
area for approximately 4.9 years.

         CREDIT EVALUATION PROCEDURES. The Company applies uniform underwriting
and credit approval standards in originating its used car loans. The most
important criteria the Company uses in evaluating a loan are the applicant's
creditworthiness, the collateral value of the car, employment and residence
histories, income information, personal references, income and expense
information and credit bureau reports. The sales managers at the Company's used
car stores submit the customer's credit application to the Company's
headquarters in Titusville, Florida, where the customer's creditworthiness is
analyzed. The Company utilizes a credit evaluation system it developed to
determine a customer's creditworthiness. Financing decisions are made by an
experienced loan staff with a minimum of five years of experience and an average
of ten years of experience in car financing. For applicants who fall outside of
the guidelines, the ultimate financing determination is made by senior
management. Further, members of senior management regularly review credit
decisions made by the Company's employees to assure uniformity in underwriting
standards. Periodically, the Company retains credit underwriting consultants to
review the Company's loan quality, collection and underwriting procedures and
recommend areas for improvement. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Credit Losses" for information
about the Company's loan loss and delinquency experience.

         CONTRACT SERVICING. The Company services its finance contracts through
the use of servicing procedures which have been specifically tailored to the
Company's customers and include: (i) monitoring loans and related collateral,
(ii) accounting for and posting all payments received, (iii) responding to
borrowers' inquiries, (iv) taking all necessary action to maintain the security
interest granted in the financed automobile, (v) investigating delinquencies and
communicating with borrowers to obtain timely payments, (vi) pursuing
deficiencies on loans, and (vii) when necessary, repossessing the financed
automobile.

         COLLECTION POLICY. The Company is strict in its collection policies,
believing that by acting promptly and working with the customers, the Company is
able to minimize its loss exposure. The Company employs a credit counselor in
each of its major market areas to work


                                       6
<PAGE>

directly with delinquent customers. The Company begins collection efforts when
an account balance becomes one day past due. Generally, the Company's policy is
to work with the customer to permit the customer to keep the automobile and
continue making payments, and to take more aggressive action if the customer
fails to continue making payments.

         REPOSSESSIONS. The Company begins the process of repossession when two
payments are past due. Repossessions are handled by independent licensed, bonded
and insured repossession firms engaged by the Company. The Company reconditions
and remarkets approximately 64% of its repossessions through the Company's Team
stores, rather than through auctions (where cars are generally sold at lower
prices). These practices allowed the Company to recover 51% (on a retail basis)
of the principal amount of loans and accrued interest charged off for the year
ended December 31, 1998.

         COMPETITION. The market for financing credit-impaired customers is
highly competitive. The Company's competitors include local, regional and
national automobile dealers, used car finance companies and other sources of
financing for automobile purchases, many of which are larger and have greater
financial and marketing resources than the Company. Historically, commercial
banks, savings and loan associations, credit unions, captive finance
subsidiaries of automobile manufacturers and other consumer lenders have not
competed for financing for credit-impaired used car buyers. During the past two
years, however, several companies, including large, well-capitalized public
companies, have devoted considerable resources to acquisitions in the Company's
market for credit-impaired customers.

         THIRD PARTY FINANCE RECEIVABLES AND ACCOUNTING. As part of its
operating philosophy, the Company only originates and services finance
receivables on used cars sold at its used car stores and new car dealerships.
The Company does not intend to purchase receivables not originated by the
Company.

MANAGEMENT INFORMATION SYSTEMS

         The Company's management information system allows the Company to
manage its operations uniformly and efficiently through "real time" information.
Utilizing its MIS, the Company is able to bar code inventory, track sales and
costs, and provide its stores access to inventory available at other Company
stores from one integrated platform. The Company also employs financial software
to facilitate the Company's underwriting and credit approval process, track
collections and monitor its loan portfolio. The Company has assimilated loan
tracking software utilized by the finance companies it acquired in connection
with acquisitions of self-financed used car dealerships. The Company has
installed financial software for its finance contracts that will integrate all
loan monitoring and servicing functions into one uniform system. The Company has
a recovery system in the event of a natural disaster (e.g., hurricanes,
tornadoes, fire, lightning) under which all systems can be rerouted to a remote
location and be fully operational within 24 hours. The Company has the ability
to customize and upgrade its software in-house with its own staff of MIS
personnel and to trouble-shoot any interruptions that may occur. The Company
foresees no material problems in becoming Year 2000 compliant. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

REGULATION, SUPERVISION AND LICENSING

         The Company's operations are subject to ongoing regulation, supervision
and licensing under various federal, state and local statutes, ordinances and
regulations. Among other things,


                                       7
<PAGE>

these laws require that the Company obtain and maintain certain licenses and
qualifications, limit or prescribe terms of the contracts that the Company
originates and/or purchases, require specified disclosures to customers, limit
the Company's right to repossess and sell collateral, and prohibit the Company
from discriminating against certain customers. The Company is also subject to
federal and state franchising and insurance laws.

         The Company typically charges interest rates ranging from 25.0% to
29.9% per annum on the finance contracts originated at its used car stores.
Currently, all of the Company's used car sales activities are conducted in, and
its finance contracts are originated in, Florida, which limits the interest rate
that a lender may charge.

TRADEMARKS AND PROPRIETARY RIGHTS

         The Company does not have any registered trademarks or service marks.

EMPLOYEES

         At December 31, 1998, the Company employed 386 persons, of which 53
were employed in the Company's executive and administrative offices, 273 were
employed in its Company dealership operations and 86 were employed in the
Company's credit and collection activities. None of the Company's employees are
covered by a collective bargaining agreement. The Company considers its
relations with its employees to be good.

DISCONTINUED OPERATIONS

         In January 1999, management committed to a plan to sell the new car
dealerships in Stuart, Florida which had been acquired in August 1997, and to
sell Eckler's, the Corvette parts and accessories subsidiary acquired in January
1997. The rationale to sell these business segments was to raise capital to
focus on car operations in the self-financed, used car industry.

o        CORVETTE PARTS AND ACCESSORIES

         Eckler's is a manufacturer and supplier of aftermarket Corvette parts
and accessories. Eckler's generates revenues through catalog sales and, to a
limited extent, showroom sales. For the year ended December 31, 1998, Eckler's
accounted for approximately 13.5% of the Company's revenues. Eckler's has a
Reproduction and Service Part Tooling License Agreement with General Motors
Corporation, Service Parts Operations ("GM") (the "GM Agreement"). Under the GM
Agreement, Eckler's is licensed to manufacture, sell, distribute and market
numerous parts discontinued by GM which Eckler's may sell under the GM
Restoration Parts trademark for various Corvette model years. Eckler's and GM
have agreed to enter into a new GM Agreement with a term through December 31,
2003. Of Eckler's approximately 95,000 customers, no single customer accounted
for more than 5% of its total revenues during 1998. At December 31, 1998,
Eckler's employed 93 persons.

o        NEW CAR DEALERSHIPS

         The Company owns and operates two new car dealerships in Stuart,
Florida, a Nissan and a Volvo dealership. Stuart Nissan and Stuart Volvo sell
new and used cars at these locations and provide parts and services. These
dealerships accounted for 19.8% of the Company's revenues during the year ended
December 31, 1998 and employed approximately 64 persons.


                                       8
<PAGE>

                              ITEM 2 -- PROPERTIES.

         The Company owns approximately 5.6 acres of real property at its main
facilities in Titusville, Florida. Three buildings comprise the Company's main
facilities--an administrative building, a manufacturing facility and a warehouse
and shipping facility--with total square footage of 87,825. These facilities,
aside from the administration building, are used in Eckler's operations. The
Company also owns 5.3 acres of undeveloped property adjacent to its main
facilities, as well as a First Choice store located in Melbourne, Florida.

         As of December 31, 1998 the Company leased 26 facilities, consisting of
24 used car stores and its main reconditioning facility in Lakeland, Florida. In
addition, as noted above, the Company owns the Melbourne, Florida used car
store. The lease on the Lakeland reconditioning facility has been renewed
through May 11, 1999 with additional renewal provisions of four one year terms.

         The rent expense on the Company's facilities was approximately $2.7
million for the twelve months ended December 31, 1998. See "Certain
Relationships and Related Transactions."

         In addition, facilities are leased for the discontinued operations--the
two new car dealerships and Eckler's. The lease at the Volvo dealership expires
in 2004, while the lease for the Nissan dealership expires in 2003. A
reconditioning center is leased as part of the Stuart Nissan new car dealership.

                          ITEM 3 -- 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
at this time, and there can be no assurance that the litigation will not have a
material adverse impact on our financial condition and results of operations.

         The Company is involved in other legal and administrative proceedings
in the ordinary course of business. The Company believes that none of these
actions will have a material adverse effect on the Company's financial
condition, results of operations or cash flows.


                                       9
<PAGE>

         ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         None.

                ITEM 4A -- EXECUTIVE OFFICERS OF THE REGISTRANT.

NAME                   AGE     POSITION AND OFFICE
----                   ---     -------------------

Robert J. Abrahams     72      Chairman of the Board
Gary R. Smith          46      President, Chief Executive Officer
Ronald W. Anderson     52      Executive Vice President, Chief Operating Officer
Joseph A. Alvarez      43      Executive Vice President and Chief Sales Officer
Robert J. Downing      41      Senior Vice President and Chief Legal Officer

         Robert J. Abrahams has been Chairman of the Board of the Company since
1997. For the past ten years, Mr. Abrahams has been self employed as an
independent consultant in the financial services industry. Mr. Abrahams also
serves on the Board of Directors of two public companies, HMI Industries, Inc.
and Ugly Duckling Corporation, and six private, independent consumer finance
companies. Prior to that time, Mr. Abrahams spent 28 years with Heller Financial
Corporation ("Heller"), an international financial services company, in charge
of its consumer finance activities. Mr. Abrahams held various titles at Heller,
including Executive Vice President from 1985 to 1988. Mr. Abrahams serves as a
member of the Executive Committee and Compensation Committee of the Board of
Directors of the Company.

         Gary R. Smith has been the President and Chief Executive Officer of the
Company since 1997. From 1990 until January 1997, Mr. Smith was the President,
Chief Executive Officer and owner of Florida Finance Group, Inc. Mr. Smith also
served, from 1981 until January 1997, as the President, Chief Executive Officer
and owner of Suncoast Auto Brokers, Inc., an automobile dealership, and Suncoast
Auto Brokers Enterprises, Inc., a used car dealership. Mr. Smith served as
President of the Florida Independent Automobile Dealers Association in 1993 and
currently serves as a member of that association's Board of Directors. Mr. Smith
also serves as a member of the Board of Directors of the National Independent
Automobile Dealers Association.

         Ronald W. Anderson joined the Company as Executive Vice President and
Chief Operating Officer in 1997. From June 1996 to March 1997 he was Vice
President of Marketing for North American Mortgage Insurance Group. From 1989
through June 1996, he served as Executive Vice President for Operations of the
Riverside Group, a diversified holding company, the business of which included
real estate, insurance and retail building supplies.

         Joseph A. Alvarez has served as Executive Vice President of the Company
since 1997, in which capacity he is in charge of the Company's automobile sales
activities. Prior to joining the Company, Mr. Alvarez was general manager of the
following factory franchised new car dealerships: Lokey Automobile Group
(1996-1997), Carlisle Motors (1994-1996), and Dimmitt Cadillac (1988-1994).

         Robert J. Downing joined the Company as Senior Vice President and Chief
Legal Officer in 1998. From 1990 through 1998, he was the principal shareholder
in Downing & Associates, a law firm with offices in Miami, Florida and
previously in Albuquerque and Santa Fe, New Mexico. Mr. Downing also acted as of
counsel to Cohen & Cohen, P.A., a Santa Fe, New Mexico law firm, from 1994 until
1997 and as of counsel to Montgomery & Andrews, P.A., an Albuquerque, New Mexico
law firm, from 1991 until 1992. Mr. Downing holds a Juris Doctor


                                       10
<PAGE>

degree from Columbia University School of Law and a Masters degree in Business
Administration from Columbia University Graduate School of Business.

                                     PART II

                    ITEM 5 -- MARKET FOR REGISTRANT'S COMMON
                     EQUITY AND RELATED STOCKHOLDER MATTERS.

         The Company's Common Stock, $.01 par value per share ("Common Stock"),
and Redeemable Common Stock Purchase Warrants ("Public Warrants") are listed on
the Nasdaq SmallCap Market. There were approximately 1,431 beneficial holders of
the Common Stock and 246 beneficial holders of the Public Warrants. The
following table sets forth the high and low closing sale prices of Common Stock
and the Public Warrants, as reported by the Nasdaq SmallCap Market, for the
periods indicated.

        1997                                HIGH          LOW
        ----                                ----          ---

        COMMON STOCK
             First Quarter                  6.13         4.63
             Second Quarter                 6.75         4.00
             Third Quarter                  7.00         4.19
             Fourth Quarter                 6.25         3.50

        PUBLIC WARRANTS
             First Quarter                  1.31          .75
             Second Quarter                 1.88          .75
             Third Quarter                  1.50          .75
             Fourth Quarter                 1.16          .50

        1998
        ----

        COMMON STOCK
             First Quarter                  9.13         3.88
             Second Quarter                11.94         7.63
             Third Quarter                 11.63         4.38
             Fourth Quarter                 4.56         2.88

        PUBLIC WARRANTS
             First Quarter                   .72          .31
             Second Quarter                 1.50          .59
             Third Quarter                  1.50          .31
             Fourth Quarter                  .44          .16

        1999
        ----

        COMMON STOCK
             First Quarter                  5.25         1.56

        PUBLIC WARRANTS
             First Quarter                   .38          .13


                                       11
<PAGE>

         Continued inclusion of the Common Stock and Public Warrants on the
Nasdaq SmallCap Market requires the Company to maintain certain criteria such as
market value, public float, capital and surplus. As of October 26, 1998, the
Company was notified by Nasdaq that it was not in compliance with certain
listing criteria which became applicable to SmallCap Market listed companies on
that date. Nasdaq notified the Company that the Common Stock and Public Warrants
would be scheduled for delisting unless the Company earned at least $500,000 net
income for the fiscal year ended December 31, 1998. The Company did not earn
that amount, but because it intends to sell both the two new car dealerships and
its Eckler's business segments and take other actions, believes it will meet the
$2 million net tangible asset requirement upon completing sales on or before
December 31, 1999.

         The Company has not paid dividends on its Common Stock since its
initial public offering of Common Stock in 1995. The Company has no present
plans to pay cash dividends in the foreseeable future and intends to retain
earnings for the future operation and expansion of the business. Any
determination to declare or pay dividends in the future will be at the
discretion of the Company's Board of Directors and will depend on the Company's
results of operations, financial condition, any contractual restrictions,
considerations imposed by applicable law and other factors deemed relevant by
the Board of Directors. The Company's current obligations to Finova Capital
Corporation, Huntington National Bank, and Sirrom Capital Corporation restrict
the Company's ability to declare or pay dividends.

RECENT SALES OF UNREGISTERED SECURITIES

         Described below are all sales of securities by the Company during the
fourth quarter of 1998 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 offerees as "accredited investors."

         As of December 1, 1998, the Company issued options to purchase shares
of Common Stock to Gary R. Smith and Robert J. Abrahams in accordance with the
1998 Executive Incentive Compensation Plan. Messrs. Smith and Abrahams each
received stock options to purchase 50,000 shares at an exercise price of $3.38
per share.

                       ITEM 6 -- SELECTED FINANCIAL DATA.

SELECTED CONSOLIDATED FINANCIAL INFORMATION.

         On January 28, 1997, the Company, which was then named Eckler
Industries, Inc. and was operating exclusively in the Corvette parts and
accessories business, acquired Smart Choice Holdings, Inc. ("SCHI") in a
transaction accounted for as an acquisition of Eckler's by SCHI ("Predecessor
Acquisition"). Accordingly, the financial statements of the Company for the
periods from June 21, 1996 to January 28, 1997 are those of SCHI, which was
incorporated on June 21, 1996 and was a development stage company prior to the
Predecessor Acquisition. Eckler's changed its name to Smart Choice Automotive
Group, Inc. after the Predecessor Acquisition. From the date of the Predecessor
Acquisition through February 14, 1997, the Company acquired three automotive
sales and finance companies. Together with Eckler's, these companies are treated
and referred to as predecessors of the Company (the "Predecessors"). The


                                       12
<PAGE>

financial data for the four Predecessors are presented on a combined basis. Such
data is not comparable to that of the Company. See Note 1 to the Company's
Consolidated Financial Statements.

         The selected combined consolidated financial data of the Predecessors
as of and for the fiscal years ended December 31, 1994, 1995 and 1996 were
derived from the audited combined financial statements of the four predecessors.
The selected consolidated financial data of the Company was derived from the
audited consolidated financial statements include herein. The selected
consolidated financial data are qualified by reference to, and should be read in
conjunction with, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements and notes thereto of the
Company and the Predecessors included elsewhere in this report.

<TABLE>
<CAPTION>
                                                             PREDECESSORS                    THE COMPANY
                                                ----------------------------------     ---------------------
                                                                       YEAR ENDED DECEMBER 31,
                                                ------------------------------------------------------------
                                                  1994         1995         1996         1997         1998
                                                --------     --------     --------     --------     --------
                                                            (In thousands, except per share data)
<S>                                             <C>          <C>          <C>          <C>          <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
  Sales at used car stores                      $ 26,043     $ 27,521     $ 33,867     $ 35,279     $ 78,227
  Income on finance receivables                    3,194        4,614        5,949        6,899       15,710
  Income from insurance and training                  --           --           --        1,178        1,448
                                                --------     --------     --------     --------     --------

Total Revenues                                    29,237       32,135       39,816       43,356       95,385
Total costs of sales                              21,343       23,531       31,219       30,667       70,692
Selling, general and administrative expenses       5,328        6,725        7,075       17,599       22,739
Compensation expense related to employee
Stock options                                         --           --           --        4,650          216
Restructuring charges                                 --           --           --        2,118           --
Abandoned offering costs                              --           --           --           --        1,063
                                                --------     --------     --------     --------     --------

Income (loss) from operations                      2,566        1,879        1,522      (11,678)       1,738
Interest expense                                  (1,003)      (1,577)      (2,070)      (5,573)      (8,752)
Other income (expense)                                (8)        (452)          --           (5)         777
                                                --------     --------     --------     --------     --------

Net income (loss) from continuing operations       1,555         (150)        (548)     (17,256)      (7,300)
Income (loss) from discontinued operations            (6)          16         (316)      (1,393)         429
                                                --------     --------     --------     --------     --------
Net income (loss)                                  1,549         (134)        (864)     (18,649)      (6,871)
Net income (loss) applicable to common stock       1,549         (134)        (864)     (18,982)      (7,348)

Basic net loss per common share from                  --           --           --     $  (3.90)    $  (1.18)
continuing operations
Weighted average common shares
outstanding during the period                         --           --           --        4,430        6,193

<CAPTION>
                                                             PREDECESSORS                    THE COMPANY
                                                ----------------------------------     ---------------------
                                                                     AS OF DECEMBER 31,
                                                ------------------------------------------------------------
                                                  1994         1995         1996         1997         1998
                                                --------     --------     --------     --------     --------
                                                                       (In thousands)
<S>                                             <C>          <C>          <C>          <C>          <C>
BALANCE SHEET DATA:
Finance receivables, net                        $ 11,477     $ 16,399     $ 19,825     $ 33,227     $ 67,185
Inventories                                        3,781        4,899        5,409       15,516       20,005
Total assets                                      21,851       28,569       32,555       89,105      123,592
Total debt                                        14,563       19,760       23,723       69,654      101,656
Redeemable convertible preferred stock                --          477           --        4,942           --
Total stockholders' equity                         4,143        3,503        5,854        1,680        8,863
</TABLE>


                                       13
<PAGE>

      ITEM 7 --MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS.

         THIS REPORT CONTAINS CERTAIN "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934. THE WORDS "BELIEVE," "EXPECT," "ANTICIPATE,"
"ESTIMATE," "PROJECT," "INTEND" AND SIMILAR EXPRESSIONS IDENTIFY FORWARD-LOOKING
STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE EACH SUCH STATEMENT WAS MADE.
FORWARD-LOOKING STATEMENTS MAY INCLUDE, BUT NOT BE LIMITED TO, PROJECTIONS OF
REVENUES, INCOME OR LOSS, PLANS FOR ACQUISITIONS AND EXPANSION, INTEGRATION OF
NEW OPERATIONS, FINANCING NEEDS, INDUSTRY TRENDS, CONSUMER DEMAND AND LEVELS OF
COMPETITION, YEAR 2000 COMPLIANCE AS WELL AS ASSUMPTIONS RELATING TO THESE
MATTERS. THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND
UNCERTAINTIES, SOME OF WHICH CANNOT BE PREDICTED OR QUANTIFIED. FUTURE EVENTS
AND ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE EXPRESSED IN, CONTEMPLATED
BY OR UNDERLYING ANY SUCH FORWARD-LOOKING STATEMENTS. STATEMENTS CONTAINED IN
THIS "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," IN "RISK FACTORS," IN THE NOTES TO THE FINANCIAL STATEMENTS AND
ELSEWHERE IN THIS REPORT DESCRIBE FACTORS, AMONG OTHERS, THAT COULD CONTRIBUTE
TO OR CAUSE SUCH DIFFERENCES.

         The following discussion and analysis regarding the Company's
consolidated financial position and consolidated results of operations should be
read in conjunction with the financial statements and related notes thereto
included elsewhere in this report.

OVERVIEW

         Smart Choice Automotive Group, Inc. currently operates 17 locations in
Florida that sell used cars under the "First Choice" brand name. The Company
also sells used cars that may not meet the First Choice criteria through four
additional stores in Florida that operate under the "Team" name. Through 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.

         THE PREDECESSOR ACQUISITION. On January 28, 1997, the Company, which
was then named Eckler Industries, Inc. and was operating exclusively in the
Corvette parts and accessories business, acquired SCHI through the Predecessor
Acquisition. SCHI was engaged in the business of acquiring various automobile
sales and finance companies. After the Predecessor Acquisition, the Company's
name was changed to Smart Choice Automotive Group, Inc.

         In the Predecessor Acquisition, shareholders of SCHI were issued Common
Stock having a majority of the voting rights of the Company. Therefore, the
Predecessor Acquisition was accounted for as a purchase of Eckler's by SCHI (a
reverse acquisition in which SCHI was considered the acquirer for accounting
purposes). Accordingly, the financial statements of the Company are those of
SCHI, which was incorporated on June 21, 1996, and was a development stage
company prior to the Predecessor Acquisition.

         PREDECESSOR COMPANIES AND LACK OF COMPARABILITY. At approximately the
same time as the Predecessor Acquisition, the Company acquired various
automobile sales and finance companies. The Company accounted for the
acquisition of each of these companies as a purchase, recording the assets
purchased and liabilities assumed at their estimated fair values and including
their results of operations in the consolidated financial statements of the
Company from their respective dates of acquisition. For accounting purposes, the
following companies are treated as


                                       14
<PAGE>

Predecessors for purposes of financial statement presentation: Eckler's, FFG and
affiliates, Liberty Finance Company and affiliates ("Liberty"), and Palm Beach
Finance and Mortgage Company and affiliates ("PBF"). The Predecessors lacked a
common year end, had different cost bases, had different elections for income
taxation, had different target customers for used car sales, and had different
credit underwriting and loss reporting policies. Accordingly, the Predecessors'
historical results of operations are not comparable to those of the Company.

         Eckler's previously had a fiscal year ending September 30 for financial
reporting purposes. As a result of the Predecessor Acquisition in which SCHI was
the acquirer for accounting purposes, the Company's fiscal year end became
December 31, which was the fiscal year end of SCHI.

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

<TABLE>
<CAPTION>
                                                         YEAR ENDED             YEAR ENDED
                                                     DECEMBER 31, 1998       DECEMBER 31, 1997
                                                     -----------------       -----------------
                                                              (Dollars in thousands)
<S>                                                  <C>          <C>        <C>          <C>
     Sales at used car stores                        $78,227      100.0%     $35,279      100.0%
     Cost of sales at used car stores (a)             62,668       80.1%      27,951       79.2%
                                                     -------    -------      -------    -------
       Gross profit                                   15,559       19.9%       7,328       20.8%
     Operating expenses                               11,148       14.3%       7,256       20.6%
                                                     -------    -------      -------    -------
       Operating income                              $ 4,411        5.6%     $    72         .2%
                                                     =======    =======      =======    =======
</TABLE>

         (a)      Includes intercompany costs from FFG of $5,434 and $2,311 for
                  the years ended 1998 and 1997, respectively.

         Sales at used car stores increased to $78.2 million for the year ended
December 31, 1998 compared to $35.3 million for the same period in 1997. The
increase in sales reflect the sale of 8,338 cars at the 26 used car stores that
were open during the 1998 period as compared to the sale of 3,750 cars at the 20
used car stores that were open during the 1997 period.

         Gross profit increased to $15.6 million during the year ended December
31, 1998 from $7.3 million during the year ended December 31, 1997. Gross profit
as a percentage of sales decreased slightly to 19.9% for the year ended December
31, 1998 as compared to 20.8% for the year ended December 31, 1997.


                                       15
<PAGE>

FINANCING OF USED CAR SALES

<TABLE>
<CAPTION>
                                                         YEAR ENDED             YEAR ENDED
                                                     DECEMBER 31, 1998       DECEMBER 31, 1997
                                                     -----------------       -----------------
                                                              (Dollars in thousands)
<S>                                                  <C>          <C>       <C>          <C>
     Income on finance receivables(a)                $ 21,144     100.0%    $ 9,209      100.0%
     Provisions for credit losses                     (13,371)    (63.3)%    (4,942)     (53.7)%
     Operating expense                                 (2,840)    (13.4)%    (1,238)     (13.4)%
                                                     --------   -------     -------   --------
       Operating income                                 4,933      23.3%      3,029       32.9%
     Interest expense on finance receivables           (5,629)    (26.6)%    (2,902)     (31.5)%
                                                     --------   -------     -------   --------
       Net income (loss)                             $   (696)     (3.3)%   $   127        1.4%
                                                     ========   =======     =======   ========
</TABLE>

(a)      Includes intercompany revenues from First Choice Auto Finance, Inc.
         ("FCAF") of $5,434 and $2,311 for the years ended 1998 and 1997,
         respectively.

         Income on finance receivables increased to $21.1 million for the year
ended December 31, 1998 from $9.2 million for the same period in 1997. The
increase reflects the increase in the average net finance receivables
outstanding to $63.7 million for the year ended December 31, 1998 from $25.1
million for the same period of 1997. This increase results from the
corresponding increase in the financing sales of used cars during the year ended
December 31, 1998.

         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 accrued 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 year ended December 31, 1998 was $13.4 million compared to $4.9
million for the same period in 1997. The increase reflects the significantly
higher amount of finance receivables outstanding.

         Interest expense on finance receivables increased to $5.6 million for
the year ended December 31, 1998 from $2.9 million for the same period in 1997.
The increase reflects the higher level of finance receivables, which was only
partially offset by the reduction in the weighted average interest rate on the
borrowed funds to 10.97% for the year ended December 31, 1998 from 11.45% for
the year ended December 31, 1997.

         The net loss for the year ended December 31, 1998 was approximately
$696,000 compared to a net income of $127,000 for the same period in 1997 as a
result of a higher provision for credit losses as a percentage of income on
finance receivables.

COMPARISON OF THE THREE YEARS ENDED DECEMBER 31, 1998

         The following comparison of the results of operations for the three
years ended December 31, 1998 compares the results of the Company for the year
ended December 31, 1998 and 1997 to the results of the Predecessors on a
combined basis for the year ended December 31, 1996.

         REVENUES. The Company's revenues for the fiscal year ended December 31,
1998 were $95.4 million representing a 120% increase over the revenues of $43.4
million in 1997. The


                                       16
<PAGE>

increase was primarily the result of growth of the Company's receivables
portfolio. That growth related to an increase of $42.9 million in the Company's
used car sales as a result of the opening of additional used car stores and
increasing the number of car sales per store.

         The Company's revenues for the fiscal year ended December 31, 1997 were
$43.4 million representing a 9.0% increase over the revenues of $39.8 million in
1996 for the Predecessors. The increase was primarily the result of the
acquisition of a used car and financing company in 1997 after the Predecessor
Acquisition.

         COSTS AND EXPENSES. The Company's cost of sales of used cars sold was
$57.2 million for 1998 compared to $25.6 million for the same period during
1997, representing an increase of $31.6 million, or 123%. The gross profit
margins decreased slightly to 26.8% for the year ended December 31, 1998,
compared to the gross profit margin of 27.3% for the same period in 1997.

         The Company's cost of sales of used cars sold was $25.6 million for
1997 compared to $28.3 million during the same period during 1996 for the
combined operations of the Predecessor Acquisition, representing a decrease of
$2.7 million, or 9.5%. The gross profit margin increased to 27.3% for the year
ended December 31, 1997, compared to the gross profit margin of 16.3% for the
same period in 1996.

         The Company's provision for credit losses was 17.1% of sales of used
cars in 1998 as compared to the provision for credit losses over sales of used
cars in 1997 of 14%. The higher provision primarily reflects the significantly
greater number of finance receivable contracts originated during 1998.

         The Company's selling, general and administrative expenses (including
depreciation and amortization) were $22.7 million for 1998, compared to the
selling, general and administrative expenses of $17.6 million for 1997. The
higher amount reflects expenses related to an increase in the number of used car
stores and continued development of the Company's corporate infrastructure.
Selling, general and administrative expenses as a percentage of gross revenues
for 1998 was 23.8% for the year ended December 31, 1998 compared to 40.6% for
the year ended December 31, 1977.

         During the year ended December 31, 1998, compensation expense of
$215,875 was recognized on common stock options granted to directors. During the
year ended December 31, 1997, compensation expense of $3,809,826 was recognized
on common stock options granted to employees and directors. These options were
granted by trusts created by two major stockholders to purchase shares of the
Company's common stock owned by the trusts. The trusts will receive the
proceeds, if any from the exercise of these options. Additional compensation
expense was recognized during 1997 as a result of the issuance of 160,000 shares
of common stock by the aforementioned trusts in exchange for stock options for
680,000 shares of common stock relinquished by a former employee. The 160,000
shares were valued at approximately $800,000 based upon the market price at the
date of their issuance. Since the stockholders of these trusts were, in effect,
fulfilling an obligation of the Company, the value of these shares was recorded
as compensation expense.

         The Company incurred $1 million in charges related to a withdrawn
public offering during 1998 which were not comparable to any charges incurred by
the Company in 1997 and which the Company believes will not recur in the future.


                                       17
<PAGE>

         INTEREST EXPENSE AND OTHER INCOME. The Company's interest expense
totaled $8.8 million for 1998, compared to $5.6 million for 1997, an increase of
$3.2 million or 57%. This resulted primarily from higher outstanding
indebtedness needed to finance higher levels of finance receivables and
inventory as the Company expanded its operations.

         NET LOSS. The Company's net loss for the year ended December 31, 1998
of $6.9 million was less than the loss of $18.6 million for the year ended
December 31, 1997. The net loss for 1997 included one-time charges of $4.6
million for compensation expense related to employees' stock options and $2.1
million for restructuring charges.

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 allowance decreased from 17.3% of outstanding principal balances as
of December 31, 1997 to 15.5% as of December 31, 1998. The following table
reflects activity in the allowance for the year ended December 31, 1998 and
1997.

<TABLE>
<CAPTION>
                                                              YEAR ENDED             YEAR ENDED
                                                           DECEMBER 31, 1998     DECEMBER 31, 1997
                                                           -----------------     -----------------
                                                                        (Dollars in thousands)
<S>                                                             <C>                   <C>
         Balance, beginning of period                           $  6,857              $     --
         Balance at dates of acquisitions                             --                 5,628
         Provision for credit losses                              13,371                 4,941
         Net charge offs                                          (8,070)               (3,712)
                                                                --------              --------
         Balance, end of period                                 $ 12,158              $  6,857
         Allowance as a percentage of  finance receivables          15.5%                 17.3%
</TABLE>

         NET CHARGE OFFS. The Company's policy is to charge off finance
receivables when they are deemed uncollectible but in any event 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 accrued 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 year ended December 31, 1998 and 1997.

<TABLE>
<CAPTION>
                                                              YEAR ENDED             YEAR ENDED
                                                           DECEMBER 31, 1998     DECEMBER 31, 1997
                                                           -----------------     -----------------
                                                                        (Dollars in thousands)
<S>                                                             <C>                   <C>
         Principal Balances:
         Collateral repossessed                                 $17,345               $ 7,920
         Other                                                       --                    37
                                                                -------               -------
         Total principal balances                                17,345                 7,957
         Recoveries, net                                         (9,275)               (4,245)
                                                                -------               -------
         Net charge offs                                          8,070                 3,712
         Average principal balances                             $63,118               $29,037
         Net charge offs as a percentage of
         Average principal balance outstanding                     12.8%                 12.8%
</TABLE>


                                       18
<PAGE>

         The Company's credit loss experience has been improving since the
Predecessor Acquisition. The Company believes that the improvement in its credit
loss experience as a percentage of finance receivables resulted from (i) a
continuing improvement in the application of its underwriting standards and
servicing and collection efforts, (ii) maximization of recoveries on
repossessions and (iii) reduced defaults due to improved operating performance
of used cars sold.

         DELINQUENCIES. Analysis of delinquency trends is also considered in
evaluating the adequacy of the allowance. The following table reflects the
principal balance of delinquent finance receivables as a percentage of total
outstanding principal balances of the Company's finance receivables portfolio as
of December 31, 1998 and 1997.




                                       19
<PAGE>

<TABLE>
<CAPTION>
                                                            YEAR ENDED                    YEAR ENDED
                                                         DECEMBER 31, 1998            DECEMBER 31, 1997
                                                         -----------------            -----------------
                                                                       (Dollars in thousands)
<S>                                                             <C>                         <C>
         Aging Percentages:
         Principal balances current                             93.6%                       91.1%
         Principal balances 31 days to 60 days                  2.9                          4.0
         Principal balances over 60 days                        3.5                          4.9
         Total over 31 days                                     6.4                          8.9
</TABLE>

         The Company's improved delinquency experience on its finance
receivables portfolio is primarily attributable to the factors discussed 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 the securitization of its finance receivables.

         Net cash provided by (used for) operating activities was approximately
$4.3 million, $(5.9) million and ($97,000) for the years ended December 31,
1998, 1997 and 1996, respectively. Net cash provided from operating activities
for the year ended December 31, 1998 primarily reflected operations adjusted for
the non-cash charges for depreciation, amortization and provision of credit
losses, impairment of goodwill and write down of inventories. The Company used
approximately $5.6 million to expand inventory during 1998. In addition to a net
operating loss in 1997, the Company used approximately $6.6 million in 1997 to
expand inventory and accounts receivable. Cash used for operating activities in
1996 is primarily attributable to first year start-up expenses by the Company.

         Cash used in investing activities was approximately $45.9 million,
$26.6 million and $.7 million during the years ended December 31, 1998, 1997,
and 1996, respectively. The 1998 amount primarily reflects increases in finance
receivables. The 1997 amount reflects the Company's growth, including a $13.6
million increase to finance receivables, approximately $12.2 million associated
with acquisitions and $1.3 million related to the acquisition of property and
equipment.

         Cash provided by financing activities was approximately $41.8 million,
$33.6 million and $.8 million during the years ended December 31, 1998, 1997,
and 1996, respectively. In 1998, the Company increased its line of credit
borrowings by $32.3 million. The Company raised approximately $5.9 million in
1998 and $4.6 million in 1997 through the sale of preferred stock. During 1997,
the Company increased its line of credit and floorplan borrowings by
approximately $20.6 million. Notes payable increased by $14.2 million during
1997 with the borrowings primarily used for acquisitions and expansion of
operations.

         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


                                       20
<PAGE>

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 $100,000 or up to 55% of the gross balance
of eligible finance contracts. The Finova Revolving Facility expires in 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 December 31, 1998 and 1997, the principal amount outstanding
under the Finova Revolving Facility was $63.7 million and $31.2 million,
respectively. The Finova Revolving Facility bears interest at the prime rate
plus 2.5% (10.25% as of December 31, 1998). As part of the Finova Revolving
Facility, the Company may finance up to $10 million of its used car inventory
through Finova Capital Corporation. The Company was in violation of certain loan
covenants at December 31, 1998. Finova Capital Corporation granted a waiver of
this violation for December 31, 1998.

         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") which had an outstanding balance of $3.2 million at December
31, 1998 and $2.7 million at December 31, 1997. The maximum commitment under the
Manheim Facility is $3.75 million. The Manheim Facility is secured by the
Company's used car inventory and bears interest at 1.5% over the prime rate
(9.25% as of December 31, 1998). Amounts outstanding are payable on the earlier
of the day after a car is sold or 180 days after the floorplan advance. The
Company is in the process of liquidating the Manheim Facility. As of April 1999,
the outstanding balance was approximately $160,000.

         In March 1997 and May 1997, Sirrom Capital Corporation ("Sirrom")
loaned the Company a total of $7.5 million. The Company issued Sirrom a $3.5
million convertible note that bears interest at 12.0% and is convertible into
Common Stock at a price per of $7.40 per share until its maturity date of June
30, 2000, and a $4.0 million convertible note that bears interest at 12.0% and
is convertible at a price of $15.00 per share until its maturity date of May 12,
2002, subject to adjustment. The Company was in violation of certain loan
covenants at December 31, 1998. Sirrom Capital Corporation granted a waiver of
this violation for December 31, 1998.

         In September 1997, the Company completed the private placement of
convertible notes in the aggregate amount of $1,050,000. The notes bear interest
at the rate of 8.0% per annum and, since December 14, 1997, have been
convertible into Common Stock of the Company at a conversion price of 66 2/3% of
the average closing bid price for the five trading days immediately preceding
the effective date of conversion. All of the debt has been converted into Common
Stock as of December 31, 1998. The Company recorded deferred interest of
$525,000 as a result of the discount on the conversion price which was amortized
from the date of issuance to the first conversion date of the notes.

         In December 1997, Raytheon Aircraft Credit Corporation extended credit
to the Company in the amount of $2.2 million to finance the purchase of
equipment. In December 1998, the Company entered into a sale leaseback agreement
(the "Lease") with GE Capital Corporation in the aggregate amount of $2,160,000
in respect of such equipment. The basic term of the Lease is 120 months at an
interest rate per annum of 9.72% for the first 36 months and an interest rate
per annum of 6.79% for the remainder of the Lease's term.

         In October 1997 and January and May 1998, the Company borrowed a total
of $8.5 million from Stephens Inc. ("Stephens"). The Stephens' loans bear
interest at the rate of 10% per annum and are secured by all of the assets and
common stock of Eckler's. The Company guaranteed the debt. When the planned sale
of Eckler's occurs, the Notes will have to be satisfied


                                       21
<PAGE>

or renegotiated with different terms. Stephens has extended the maturities on
each of the three notes to April 30, 2000.

         In September and December 1997, the Company completed an offering to
institutional investors of 400 units of Series A Redeemable Convertible
Preferred Stock and warrants at a price of $10,000 per unit. Proceeds from the
offering, net of offerings costs, were approximately $3.9 million. Each unit
consisted of one share of Series A Redeemable Convertible Preferred Stock and a
five year warrant to acquire 150 shares of Common Stock for each preferred share
purchased. The exercise prices of the warrants are $16.20 for 45,000 shares and
$10.46 for 15,000 shares. As of December 31, 1998, all but one share of the
Series A Redeemable Convertible Preferred Stock had been converted into Common
Stock.

         In May and December 1997, the Company borrowed $1.0 million from
Bankers Life Insurance Company and its affiliates. On March 29, 1999, Bankers
elected to convert the $1.0 million, plus accrued interest and received 531,732
shares of Company Common Stock.

         In May 1998, the Company sold to a private investment group 220 shares
of the Company's Series B Convertible Preferred Stock for $10,000 per share for
an aggregate of $2.2 million. The Series B Convertible Preferred Stock has an
11.0% dividend per year and is convertible into Common Stock at a conversion
rate of $10.00 per share. After November 5, 1999, the Company may, at its
option, redeem the Series B Convertible Preferred Stock for $10,000 per share.
In connection with the issuance of the Series B Convertible Preferred Stock, the
Company agreed to certain limitations on the issuance of additional shares of
preferred stock by the Company.

         In June 1998, the Company sold to a private investment group 24.98
shares of the Company's Series C Convertible Preferred Stock for $10,000 per
share for an aggregate of $249,800. The Series C Convertible Preferred Stock has
an 11.0% dividend per year and is convertible into Common Stock at a conversion
rate of $11.18 per share. After December 2, 1999, the Company may, at its
option, redeem the Series C Convertible Preferred Stock for $10,000 per share.
In connection with the issuance of the Series C Convertible Preferred Stock, the
Company agreed to certain limitations on the issuance of additional shares of
preferred stock by the Company.

         In June 1998, the Company sold to a private investment group 350 shares
of the Company's Series D Convertible Preferred Stock for $10,000 per share for
an aggregate of $3.5 million. The Series D Convertible Preferred Stock has an
11.0% dividend per year for five years and thereafter has a 20% dividend per
year and is convertible into Common Stock at a conversion rate of $12.00 per
share. After June 22, 2001, the Company may, at its option, redeem the Series D
Convertible Preferred Stock for $10,000 per share. In connection with the
issuance of the Series D Convertible Preferred Stock, the Company agreed to
certain limitations on the issuance of additional shares of preferred stock by
the Company.

         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 increases to 18% per annum on May 1, 1999 and to 22% per annum on October
1, 1999. The High Cap Notes may be prepaid to any time without permission or
penalty.


                                       22
<PAGE>

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 1998. 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.

RECENT ACCOUNTING PRONOUNCEMENTS

         In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133) which becomes effective for
us July 1, 1999. The Company believes the adoption of SFAS No. 133 will not have
a material impact on the Consolidated Financial Statements.

         In June 1998, the AICPA issued SOP 98-5 "Reporting on the Costs of
Start-Up Activities," SOP 98-5 requires costs of start-up activities and
organizational costs, as defined, to be expensed as incurred. The Company does
not expect adoption of the new SOP on January 1, 1999 to materially affect its
consolidated financial statements.


                                       23
<PAGE>

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. These two
segments are expected to be sold at a net gain during 1999.

         Revenues of the discontinued operations were $46.5 million and $25.2
million in 1998 and 1997, respectively. The Company's discontinued operations
achieved an income of $0.4 million for the year ending December 31, 1998, which
is an increase over a net loss of $1.4 million for the same period in 1996. The
improved performance is primarily due to a significant increase in profitability
for the Corvette parts and accessories segment. The profitability increase is
due to an increasing volume of sales for the year ended December 31, 1998
compared to the same period in 1997.

RISK FACTORS

         There are various risks in purchasing the Company's securities or
investing in its business, including those described below.

LIMITED COMBINED OPERATING HISTORY

         The Company has only a limited history of operations as a combined
entity upon which to base its results of operations or prospects. The Company
should be evaluated in light of the risks, expenses and difficulties frequently
encountered by similar companies in early stages of operations. Further, the
historical financial results of the companies considered by the Company to be
its Predecessors are presented on a different basis than the historical
financial results of the Company and, therefore, may not be indicative of the
Company's future operating results or financial condition.

HISTORY OF LOSSES

         The Company incurred a net loss of approximately $6.9 million for 1998,
reflecting the costs of a withdrawn public offering, and the increase in
provision for credit losses associated with the significant increase in the
amount of finance receivables, and the interest expense incurred on a highly
leveraged capital structure. The Company incurred a net loss of approximately
$18.6 million for 1997, reflecting the costs of integration of the acquired
companies, development of the Company's infrastructure, compensation expense
related to stock options, restructuring charges related to the settlement of
various employment and consulting agreements and costs related to acquisitions
that were not completed. Although the Company has experienced growth in revenues
since January 1997 subsequent to the Predecessor Acquisition, there can be no
assurance that growth and future profitability can be achieved. The Company's
ability to maintain profitability and positive cash flow while implementing its
business strategy will depend on a number of factors, including its ability to:
(i) assimilate and manage past and future expansion, (ii) expand revenue
generating operations while not proportionately increasing its administrative
overhead, (iii) originate finance contracts with an acceptable level of credit
risk, (iv) obtain sufficient financing with acceptable terms to fund expansion,
(v) adapt to the increasingly competitive market in which it operates, (vi)
obtain and purchase adequate supplies of cars, and (vii) collect its finance
receivables. There can be no assurance that the Company will be successful in
maintaining or increasing revenues, earnings or positive cash flows in the
future. Any such failure could have a material adverse effect on the Company's
financial condition,


                                       24
<PAGE>

results of operations or cash flows. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

ABILITY TO MANAGE GROWTH; RISKS ASSOCIATED WITH EXPANSION AND CHANGES IN
BUSINESS

         The Company's future growth will depend in large part on its ability to
open additional used car stores, manage expansion, control costs in its
operations, integrate acquisitions into existing operations, underwrite and
collect finance receivables without significant losses, develop the human
resources necessary to support rapid growth and establish and maintain the
infrastructure necessary to execute its business plan. While the Company is
presently focusing on internal expansion, a significant portion of the Company's
growth historically has resulted from acquisitions of existing used car
dealerships and related businesses, including used car finance companies that
lend primarily to credit-impaired customers. The Company will continue to
consider selected acquisitions under appropriate circumstances. See
"Business--Company Growth."

         The Company's growth has placed significant demands on all aspects of
the Company's business, including its management, administrative, operational,
financial reporting and other systems personnel. Additional growth by the
Company may further strain the Company's systems and resources, and there can be
no assurance that the Company's systems, resources, procedures and controls will
be adequate to support further expansion of the Company's operations. As growth
continues, the Company will review its management infrastructure, systems and
financial controls, and any acquired used car dealership operations and make
adjustments or complete reorganizations as appropriate. Additionally, from time
to time, the Company may consider the disposition of certain non-core operating
units. Unforeseen capital and operating expenses, liabilities, barriers to entry
in the markets in which the Company has little or no prior experience, or other
difficulties, complications and delays frequently encountered in connection with
the expansion and integration of operations could inhibit the Company's growth.
In order for the Company to recognize the full benefits of a significant
acquisition, it will need to integrate the acquisition with its administrative,
finance, sales, personnel and marketing organizations.

         The Company's ability to continue to grow its used car business will
also be dependent upon, among other things, the Company's ability to attract and
retain competent management, the availability of capital to fund expansion and
the availability of suitable store locations and, to a lesser extent, suitable
acquisition candidates. The Company intends to finance expansion through a
combination of its available cash resources, borrowings from financial
institutions and, in appropriate circumstances, the issuance of equity and/or
debt securities. Expansion will have a significant effect on the Company's
financial position and could cause substantial fluctuations in the Company's
quarterly and yearly operating results. Acquisitions are also likely to result
in the recording of significant goodwill and intangible assets on the Company's
financial statements, the amortization of which would reduce reported earnings
in subsequent years. In addition, the issuance of additional shares of Common
Stock and other securities in connection with acquisitions may substantially
dilute the interests of existing shareholders.

         The Company's finance receivables portfolio has grown rapidly since the
Company's inception and such growth is expected to continue. This growth creates
the risk that the Company's provision for credit losses will not be sufficient
to cover actual losses on the portfolio. The Company's failure to maintain a
sufficient provision for credit losses could have a material adverse effect on
the Company's financial condition, results of operations or cash flows. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Credit Losses."


                                       25
<PAGE>

         The diversion of management's attention required by the integration of
multiple stores, as well as any other difficulties which may be encountered in
the transition and integration process, could have a material adverse effect on
the financial condition, results of operations or cash flows of the Company.
There can be no assurance that the Company will successfully open additional
used car stores, or identify suitable acquisition candidates or that
acquisitions will be consummated on acceptable terms or that the Company will be
able to integrate successfully the expanded operations or manage the related
increase in personnel.

HIGH RISK OF DEFAULTS ON RECEIVABLES PORTFOLIO

         The self-financed used car business sells to customers that typically
have limited credit histories, low incomes and/or past credit problems
(generally referred to herein as "credit-impaired customers"). Such customers
cannot, generally, obtain a loan from a local financial institution or from the
credit facilities of a major automobile manufacturer (e.g., General Motors
Acceptance Corporation or Ford Motor Credit Company). One industry report
estimated that between 5% and 40% of any group of loans made to credit-impaired
customers will default during the life of that particular group. Consequently,
the Company's finance contracts have a higher probability of delinquency and
default and, as a result, greater servicing costs than loans made to consumers
who pose lesser credit risks. The Company's profitability depends in part upon
its ability to properly evaluate the creditworthiness of credit-impaired
customers and efficiently service its loans. There can be no assurance that
satisfactory credit performance of the Company's customers will be maintained or
that the rate of future defaults and/or losses will be consistent with prior
experience or at levels that will allow the Company to achieve profitability.
Most borrowers' ability to remit payments in accordance with the terms of their
loans is dependent on their continued employment. An economic downturn resulting
in increased unemployment could cause a significant rise in delinquencies and
defaults, which could have a material adverse effect on the Company's financial
condition, results of operations or cash flows. Moreover, increases in the
delinquency and/or loss rates in the Company's loan portfolio could adversely
affect the Company's ability to obtain or maintain its financing sources. See
"Business--Financing Customers with Impaired Credit" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Credit
Losses."

UNSEASONED LOAN PORTFOLIO

         Due to the growth of the Company's loan portfolio during the last
eighteen months, a significant portion of the loan portfolio is unseasoned.
Accordingly, delinquency and loss rates in the portfolio will most likely
fluctuate unpredictably. Cars that serve as collateral will, in most cases, be
worth less than the unamortized principal and interest charges. The resale
prices of used cars will affect the amount realized following repossession of
collateral. Further, the Company may also incur significant legal costs prior to
repossessing a financed vehicle or reselling such vehicle after repossession.
The Company does not intend to purchase insurance to protect against loan
defaults or make up the difference between the principal amount remaining on a
defaulted loan and the net proceeds realized on the resale of a repossessed
vehicle that secured such defaulted loan. There is no assurance that loans made
by the Company to its customers will ultimately be repaid, which would result in
the Company having to write off such loans and would materially and adversely
affect the Company's financial condition, results of operations or cash flows.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Credit Losses."


                                       26
<PAGE>

HIGH LEVERAGE

         The Company is highly leveraged. On December 31, 1998, the Company's
total indebtedness (including discontinued operations) was approximately $113.2
million, or 91.6% of its total assets. A substantial portion of such debt is
collateralized by the Company's finance contracts, automobile inventory and
certain property, plant and equipment. The Company's substantial leverage could
have adverse consequences, including: (i) limiting its ability to obtain
additional financing, (ii) requiring the Company to use substantial portions of
operating cash flow to meet interest and principal repayment obligations, (iii)
exposing the Company to interest rate fluctuations due to floating interest
rates on certain borrowings, (iv) increasing the Company's vulnerability to
changes in general economic conditions and competitive pressures and (v)
limiting the Company's ability to capitalize on potential growth opportunities.
In addition, the Company's loan agreements contain certain covenants that limit,
among other things, the Company's ability to engage in certain mergers and
acquisitions, incur additional indebtedness or further encumber its assets, pay
dividends or make other distributions. The covenants also require the Company to
meet certain financial tests. A default under the Company's borrowing agreements
could have a material adverse effect on the Company's financial condition,
results of operations or cash flows. The Company has a material amount of debt
maturing in the year 2000 and refinancing said debt could result in unfavorable
terms to the Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."

SUBSTANTIAL NEED FOR ADDITIONAL CAPITAL

         The Company will require additional capital in order to fund any
expansion. If adequate funds are not available on terms acceptable to the
Company, the Company may be required to significantly curtail its expansion
plans. Historically, the Company has funded most of its capital expenditures for
the opening of new stores through the issuance of debt and preferred stock,
which, in many cases, is convertible into shares of Common Stock. The Company's
ability to fund the planned expansion of its store base is directly related to
the continued availability of these and other funding sources.

         The operation of used car dealerships and finance companies is capital
intensive. The Company requires capital to: (i) acquire and maintain inventories
of cars and parts, (ii) originate finance contracts, (iii) purchase and maintain
service equipment and (iv) maintain its facilities. The Company finances the
purchase of all of its used car inventory and leases most of the properties on
which it conducts business. Consequently, the Company incurs significant
operating, borrowing and fixed occupancy costs. Should the Company's expansion
plans require additional funding or should its capital requirements exceed
current estimates, the Company could be required to seek additional financing in
the future. There can be no assurance that the Company will be able to raise
such financing when needed or on acceptable terms. As a result, the Company may
be forced to reduce or delay additional expenditures or otherwise delay, curtail
or discontinue some or all of its operations. Further, if the Company is able to
access additional capital through borrowings, such debt will increase the
already substantial debt obligations of the Company, which could have a material
adverse effect on the Company's financial condition, results of operations or
cash flows. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."

         The terms of the Company's financing transactions are affected by a
number of other factors which are beyond the control of the Company, including
among others, conditions in the securities and finance markets generally,
prevailing interest rates and prevailing economic


                                       27
<PAGE>

conditions. If additional funds are raised by issuing equity securities,
dilution to the holders of Common Stock may result.

HIGHLY COMPETITIVE MARKET

         The market for financing credit-impaired customers is highly
competitive. The Company's competitors include local, regional and national
automobile dealers, used car finance companies and other sources of financing
for automobile purchases, many of which are larger and have greater financial
and marketing resources than the Company. Historically, commercial banks,
savings and loan associations, credit unions, captive finance subsidiaries of
automobile manufacturers and other consumer lenders, many of which have
significantly greater resources than the Company, have not competed for
financing for credit-impaired used car buyers. To the extent that such lenders
expand their activities in the credit-impaired market, the Company's financial
condition, results of operations or cash flows could be materially and adversely
affected. During the past two years, several companies, including large,
well-capitalized public companies, have devoted considerable resources to
acquisitions in the Company's market for credit-impaired customers.

         The Company also competes with franchised dealers, individual used car
dealerships, as well as individual buyers and sellers of used cars. Industry
wide gross profit margins on sales of cars generally have been declining, and
the used car market faces increasing competition from non-traditional sources
such as independent leasing companies, brokers, buying services, Internet
companies and used car superstores. Some of the recent market entrants may be
capable of operating on smaller gross margins than the Company. There can be no
assurance that the Company will be able to maintain or increase its size
relative to that of its competitors or to increase profit margins in the face of
increased competition. The Company expects that there will be increasing
competition in the acquisition of other used car dealerships as industry
participants become larger. See "Business--Self-Financed Used Car Stores."

SENSITIVITY TO INTEREST RATES

         A substantial portion of the Company's finance contract income results
from the difference between the rate of interest it pays on the funds it borrows
and the rate of interest it earns pursuant to the finance contracts in its
portfolio. While the finance contracts that the Company services bear interest
at fixed rates, the Company's indebtedness generally bears interest at floating
rates. In the event the Company's interest expense increases, the Company would
seek to compensate for such increases by raising the interest rates on its new
finance contracts or by raising the retail sales prices of its cars. To the
extent the Company is unable to do so because of legal limitations or otherwise,
the net margins on the Company's finance contracts would decrease, thereby
adversely affecting the Company's financial condition, results of operations or
cash flows. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Regulation and Litigation" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."

FLUCTUATIONS IN OPERATING RESULTS

         The Company's operating results have varied in the past and may vary
significantly in the future. Factors causing fluctuations in operating results
include, among other things, seasonality in car purchases, changes in pricing
policies by the Company and its competitors, changes in operating expenses,
changes in the Company's strategy, personnel changes, the failure, delay and
expense in making the Company's software, systems and networks Year 2000
compliant, the


                                       28
<PAGE>

effect of acquisitions and general economic factors. The Company has limited or
no control over many of these factors. As a result, the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indicative of future performance.
Due to all of these factors, it is likely that in some future period the
Company's results of operations will fall below market expectations. This would
likely negatively impact the Company's financial condition, results of
operations or cash flows and cause the price of the Common Stock to decline. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Seasonality."

BUSINESS CYCLES

         Sales of motor vehicles historically have been cyclical, fluctuating
with general economic cycles. During economic downturns, the automotive
retailing industry tends to experience the same periods of decline and recession
as those experienced in the general economy. The Company believes that the
industry is influenced by general economic conditions and particularly by
consumer confidence, employment rates, the level of personal discretionary
spending, interest rates and credit availability. There can be no assurance that
the industry will not experience sustained periods of declines in car sales in
the future. Any such declines would have a material adverse effect on the
Company's financial condition, results of operations or cash flows.

POTENTIAL ADVERSE EFFECT OF ECONOMIC SLOWDOWN

         The Company's business is directly related to sales of used cars, which
are affected by employment rates, prevailing interest rates and other general
economic conditions. A future economic slowdown or recession could lead to
increased delinquencies, repossessions and credit losses that could hinder the
Company's business and planned expansion. Due to the Company's focus on
credit-impaired customers, its actual rate of delinquencies, repossessions and
credit losses on finance contracts could be higher under adverse conditions than
those experienced in the automobile finance industry in general. Economic
changes are uncertain and weakness in the economy could have a material adverse
effect on the Company's financial condition, results of operations or cash
flows.

GEOGRAPHIC CONCENTRATION

         The Company's car sales and financing operations are presently
concentrated in the central and southeast regions of Florida. An economic
slowdown or recession, a change in the regulatory or legal environment, natural
disasters or other adverse conditions in Florida could have a material adverse
effect on the Company's financial condition, results of operations or cash
flows.

SOURCING USED CARS

         The Company acquires a significant amount of its used car inventory
through auctions and, to a lesser extent, from other sources, including
wholesalers and trade-ins at the Company's franchised new car stores. Some of
the auctions for cars are open only to the franchised dealers of specific
manufacturers. Accordingly, there can be no assurance that sufficient inventory
will continue to be available to the Company or will be available at comparable
costs, particularly if changes occur in the type of used cars that are sold in
auctions closed to the Company or if competitive pressures increase as a result
of new entrants into the Company's market. Any reduction in available inventory
or increase in inventory wholesale costs that cannot be reflected


                                       29
<PAGE>

in retail market prices could have a material adverse effect on the Company's
financial condition, results of operations or cash flows. See
"Business--Self-Financed Used Car Stores."

RISKS RELATED TO GOODWILL

         As of December 31, 1998, the Company's total assets were approximately
$123.5 million, of which approximately $23.8 million, or approximately 19.3% of
total assets, was goodwill. Goodwill is the excess of cost over fair market
value of net assets acquired. There can be no assurance that the value of such
goodwill will ever be realized by the Company. The Company's goodwill is being
amortized on a straight-line basis over a period of 40 years, which will produce
an annual charge to operations of approximately $331,000. The Company will
evaluate on a regular basis whether events and circumstances have occurred which
indicate that the carrying amount of goodwill warrants revision or may not be
recoverable. Any future determination requiring the write-off of a significant
portion of unamortized goodwill could adversely affect the Company's financial
condition.

SHARES ELIGIBLE FOR FUTURE SALE

         A total of 1,555,650 shares of Common Stock have been reserved for
issuance under the Company's employee compensation plans and certain outstanding
option agreements. The Company also had outstanding, as of December 31, 1998,
convertible notes, public and non-public warrants, convertible preferred stock,
and certain other rights to acquire a total of 2,379,183 shares of Common Stock,
of which all but approximately 680,012 shares of Common Stock have been
registered for resale on registration statements on Form S-3, including 600,000
shares underlying publicly traded warrants. The beneficial owners of 660,012
shares of Common Stock, issuable upon conversion of currently outstanding
convertible preferred stock and debt have registration rights that allow them to
cause the Company to register their shares for sale under certain circumstances.
Sales of substantial amounts of Common Stock, or the availability of substantial
amounts of Common Stock for future sale, could adversely affect the prevailing
market price of the Common Stock..

REGULATION AND LITIGATION

         The Company's business is subject to extensive federal, state and local
regulation and supervision. Such regulation, among other things, requires the
Company to limit interest rates, fees and other charges related to finance
contracts, make specified disclosures to consumers and adhere to strict limits
in the repossession and selling of collateral. Such regulations exist primarily
for the benefit of consumers, rather than for the protection of dealers or
finance companies and could limit the Company's discretion in operating its
business. Noncompliance with any applicable statutes or regulations could result
in the suspension or revocation of any license at issue, as well as the
imposition of civil fines and criminal penalties.

         Currently, the Company's used car sales activities are conducted and
its finance contracts have been originated in Florida, where existing statutes
limit the interest rate which a lender may charge on consumer finance contracts.
Before the Company expands its operations to states other than Florida, the
Company must consider the impact of usury laws in those states. To the extent
that the interest rates and fees charged by the Company are limited by the
application of maximum allowable interest rates and charges that in the future
may be lower than those currently charged by the Company, the Company's
financial condition, results of operations or cash flows may be adversely
affected. See "Business--Regulation, Supervision and Licensing."


                                       30
<PAGE>

         In addition, due to the consumer-oriented nature of the automobile
finance industry, used car dealerships are frequently named as defendants in
litigation involving alleged violations of federal and state consumer lending or
other laws and regulations. There can be no assurance that the Company will not
become subject to such litigation in the future. A significant judgment against
the Company could have a material adverse effect on the Company's financial
condition, results of operations or cash flows. See "Legal Proceedings."

DEPENDENCE ON KEY PERSONNEL

         The Company's future success depends on the continued services of the
Company's key management personnel as well as the Company's ability to attract
additional members to its management team with experience in the used car sales
and financing industries. The unexpected loss of the services of any of the
Company's key management personnel, or an inability to attract new management
when necessary, could have a material adverse effect upon the Company's
financial condition, results of operations or cash flows.

POTENTIAL VOLATILITY OF STOCK PRICE

         The market price of the Common Stock has been and may continue to be
subject to wide fluctuations in response to, among other things,
quarter-to-quarter variations in operating results, changes in earnings
estimates by analysts, market conditions in the industry and general economic
conditions. Further, the stock market from time to time experiences significant
price and volume fluctuations which may be unrelated to the operating
performance of particular companies. Factors such as the foregoing could have a
material adverse effect on the price of the Common Stock.

ENVIRONMENTAL RISKS

         The Company is subject to federal, state and local laws, ordinances and
regulations which establish various health and environmental quality standards,
and liability related thereto, and provide penalties for violations of those
standards. Under certain laws and regulations, a current or previous owner or
operator of real property may be liable for the cost of removal and remediation
of hazardous or toxic substances or wastes on, under, in or emanating from such
property. Such laws typically impose liability whether or not the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances or wastes. Certain laws, ordinances and regulations may impose
liability on an owner or operator of real property where on-site contamination
discharges into waters of the state, including groundwater. Under certain other
laws, generators of hazardous or toxic substances or wastes that send such
substances or wastes to disposal, recycling or treatment facilities may be
liable for remediation of contamination at such facilities. Other laws,
ordinances and regulations govern the generation, handling, storage,
transportation and disposal of hazardous and toxic substances or wastes, the
operation and removal of underground storage tanks, the discharge of pollutants
into surface waters and sewers, emissions of certain potentially harmful
substances into the air and employee health and safety. The business operations
of the Company are subject to such laws, ordinances and regulations including
the use, handling and contracting for recycling or disposal of hazardous or
toxic substances or wastes, including environmentally sensitive materials such
as motor oil, transmission fluid, antifreeze, freon, waste paint and lacquer
thinner, batteries, solvent, lubricants, degreasing agents, gasoline and diesel
fuels. The Company is subject to other laws, ordinances and regulations as a
result of the past or present existence of underground storage tanks at many of
the Company's properties.


                                       31
<PAGE>

         Certain laws and regulations, including those governing air emissions
and underground storage tanks, are amended periodically to require compliance
with new or more stringent standards as of future dates. The Company cannot
predict what other environmental legislation or regulations will be enacted in
the future, how existing or future laws or regulations will be administered or
interpreted or what environmental conditions may be found to exist in the
future. Compliance with new or more stringent laws or regulations, stricter
interpretation of existing laws, or the future discovery of environmental
conditions may require expenditures by the Company, some of which may be
material.

NO ANTICIPATED DIVIDENDS

         The Company has not paid dividends on its Common Stock since its
initial public offering of Common Stock in 1995, and does not intend to pay any
dividends on its Common Stock for the foreseeable future. It is anticipated that
any earnings which the Company may realize in the foreseeable future will be
retained to finance the development and expansion of its business. In addition,
under certain loan covenants, the Company is prohibited from paying dividends
without the prior consent of the lender. Also, certain series of the Company's
preferred stock provide for cumulative dividends on such preferred stock and
prohibit the payment of dividends on the Common Stock if unpaid dividends are
outstanding on such preferred stock.

NO ASSURANCE OF CONTINUED MARKET FOR COMMON STOCK

         The Company's Common Stock is currently listed on the Nasdaq SmallCap
Market. Continued inclusion on the Nasdaq SmallCap Market requires the Company
to maintain certain criteria such as market value, public float, net tangible
asset value, capital and surplus. The Company is currently not in compliance
with the listing requirements of the Nasdaq SmallCap Market. In the past, the
Company has not met the Nasdaq SmallCap Market requirement of a market
capitalization of $35 million, and Nasdaq commenced the delisting process. The
Company requested a hearing and made a submission against delisting. Based on
the submission and the Company's subsequent compliance with the market
capitalization requirement, Nasdaq terminated the delisting process. However,
when the Company again did not comply with the listing requirements, Nasdaq
again commenced the delisting process. By letter dated October 26, 1998, Nasdaq
allowed the Company to continue its listing, provided that the Company earn at
least $500,000 net income for the fiscal year ended December 31, 1998. The
Company did not earn that amount, but because it intends to sell both the two
new car dealerships and its Eckler's business segments and take other actions,
believes it will meet the $2 million net tangible asset requirements upon
completing sales on or before December 31, 1999.

         If the Company fails to comply with the applicable Nasdaq listing
requirements, it would lose Nasdaq listing and trading in the securities would
be conducted in the over-the-counter market known as the OTC Electronic Bulletin
Board, or the "pink sheets." In such event, purchasers of Common Stock may have
difficulty selling their shares because some brokerage firms will not effect
transactions in securities that are traded in the pink sheets. Further, if for
any reason the Company fails to maintain sufficient qualifications for continued
listing on the Nasdaq SmallCap Market and the market price of the Common Stock
declines to below $5.00 per share, purchasers of Common Stock may have
difficulty selling their shares should they desire to do so because of the penny
stock rules. The Securities and Exchange Commission has adopted regulations
which generally define a penny stock to be any equity security that has a market
price of less than $5.00 per share or an exercise price of less than $5.00 per
share, subject to certain exceptions. The shares of Common Stock are currently
exempt from the definition of penny stock because they are quoted on the Nasdaq
SmallCap Market. If they are later removed from listing


                                       32
<PAGE>

by the Nasdaq SmallCap Market, and are traded at a price below $5.00 per share,
the shares of Common Stock may become subject to the penny stock rules that
impose burdensome sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and institutional
accredited investors, and, thus, the rules will restrict the ability of
broker-dealers to sell the Company's Common Stock. Some brokerage firms will not
effect transactions in securities if such securities trade below $5.00 per
share, and it is unlikely that any bank or financial institution will accept
such securities as collateral, which could have an adverse effect on the
development or maintenance of a market for such securities.

POTENTIAL CONFLICTS OF INTEREST

         Robert J. Abrahams, the Chairman of the Board of the Company, is also a
director of Ugly Duckling Corporation ("Ugly Duckling"), a retailer of used
cars. Although the Company believes that it is not in direct competition with
Ugly Duckling because the Company generally retails later model cars to a
different market segment of customers, Mr. Abrahams may have a conflict of
interest in the future should Ugly Duckling and the Company pursue the same
acquisitions or customers having the same credit profile. In such event, Mr.
Abrahams would be required to recuse himself from both boards of directors
regarding any decisions to be made about business opportunities. See "Executive
Officers of the Registrant."

POTENTIAL INFLUENCE OF EXISTING SHAREHOLDERS

         As of December 31, 1998, the Company's directors and executive
officers, their affiliates, and certain principal shareholders owned or had
voting control of approximately 38.4% of the issued and outstanding Common Stock
of the Company. Further, assuming exercise by all of the Company's directors and
executive officers of all of the outstanding options and warrants to purchase
Common Stock held by them, they would control, as of December 31, 1998
approximately 46.7% of the voting stock. Consequently, management may be able to
direct the election of the Company's directors, effect significant corporate
events and generally direct the affairs of the Company. The concentration of
ownership by the Company's directors and executive officers and certain
principal shareholders may have the effect of approving or preventing a sale or
takeover of the Company on terms unfavorable to other shareholders.

ANTI-TAKEOVER CONSIDERATIONS

         Certain provisions of Florida law and the Company's Articles of
Incorporation as amended or Bylaws as amended ("Articles/Bylaws") could,
together or separately, discourage potential acquisition proposals, delay or
prevent a change in control of the Company and limit the price that certain
investors might be willing to pay in the future for the Company's Common Stock.
The Company is subject to the "affiliated transactions" and "control share
acquisition" provisions of the Florida Business Corporation Act (the "FBCA").
Those provisions require, subject to certain exceptions, that an "affiliated
transaction" be approved by a majority of disinterested directors or by the
holders of two-thirds of the voting shares other than those beneficially owned
by an "interested shareholder." Voting rights must also be conferred on "control
shares" acquired in specified control share acquisitions, generally only to the
extent conferred by resolution approved by the shareholders, excluding holders
of shares defined as "interested shares." In addition, the Company's
Articles/Bylaws, among other things, provide for a classified Board of Directors
for the Company and provide that (i) any action required or permitted to be
taken by the shareholders of the Company may be effected only at an annual or
special meeting of shareholders and not by written consent of the shareholders;
(ii) any special meeting of the shareholders may be called only by the Chairman
of the Board, the President or


                                       33
<PAGE>

the Chief Executive Officer, or upon the written demand of the holders of not
less than 25% of the votes entitled to be cast at a special meeting; (iii) an
advance notice procedure must be followed for nomination of directors and for
other shareholder proposals to be considered at annual shareholders' meetings;
and (iv) a director may be removed only for cause upon approval of holders of
not less than 66 2/3% of the Company's voting stock as such term is used in the
Articles/Bylaws. In addition, the Company is authorized to issue up to 5.0
million shares of preferred stock, in one or more series, having terms fixed by
the Board of Directors without shareholder approval, including voting, dividend
or liquidation rights that could be greater than or senior to the rights of
holders of Common Stock. As of December 31, 1998, the Company had outstanding
595.98 shares of preferred stock. Issuance of additional shares of Common Stock
or new series of preferred stock could have the effect of preventing or delaying
a sale or takeover of the Company which might have been in the best interests of
the Company and its shareholders. See "Description of Capital Stock."

PENDING LITIGATION - PUTATIVE CLASS ACTION LAWSUIT

         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
at this time, and there can be no assurance that the litigation will not have a
material adverse impact on our financial condition and results of operations.

     ITEM 7A -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         The Company does not invest or trade in foreign currency or commodity
transactions which would ordinarily be subject to market risk. The interest rate
on the Company's revolving credit facility with Finova Capital Corporation is
based on the prime rate plus 2.5%. Accordingly, a significant increase or
decrease in the prime rate could affect the Company's earnings in the future.
The Company believes, however, that its financial instruments are disclosed at
their fair values. Fair value estimates are made at a specific point in time and
are based on relevant market information and information about the financial
instrument; they are subjective in nature and involve uncertainties and matters
of judgment and, therefore, cannot be determined with precision. These estimates
do not reflect any premium or discount that could result from offering for sale
at one time the Company's entire holdings of a particular instrument. Changes in
assumptions could significantly affect these estimates. Since fair value
estimates are as of a particular date, the amounts that will actually be
realized or paid in settlement of the instruments could be significantly
different.


                                       34
<PAGE>

         The carrying amount of cash and cash equivalents is assumed to be the
fair value due to the liquidity of these instruments. The carrying amount of the
finance receivables is assumed to be the fair value due to the relative short
maturity and repayment terms of the portfolio as compared to similar
instruments. The carrying amount of accounts payable and accrued expenses
approximates fair value due to the short maturity of these instruments. The
terms of the Company's notes payable approximates the terms in the market place
at which they could be replaced. Therefore, the fair value approximates the
carrying value of these financial instruments.

             ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The financial statements of Smart Choice Automotive Group, Inc. are set
forth in Appendix A hereto.

           ITEM 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                      ACCOUNTING AND FINANCIAL DISCLOSURE.

         None.

                                    PART III

         ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The information contemplated by this Item is incorporated by reference
to the Registrant's definitive proxy statement for its 1998 annual meeting of
shareholders.

                       ITEM 11 -- EXECUTIVE COMPENSATION.

         The information contemplated by this Item is incorporated by reference
to the Registrant's definitive proxy statement for its 1998 annual meeting of
shareholders.

  ITEM 12. -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The information contemplated by this Item is incorporated by reference
to the Registrant's definitive proxy statement for its 1998 annual meeting of
shareholders.

           ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information contemplated by this Item is incorporated by reference
to the Registrant's definitive proxy statement for its 1998 annual meeting of
shareholders.


                                       35
<PAGE>

                                     PART IV

  ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)      The following documents are filed as part of this report:

         (1)      Financial statements

                  Report of Independent Certified Public Accountants

                  Consolidated Balance Sheets of Smart Choice Automotive Group,
                  Inc. and Subsidiaries at December 31, 1998 and 1997.

                  Consolidated Statements of Operations of Smart Choice
                  Automotive Group, Inc. and Subsidiaries for the years ended
                  December 31, 1998 and 1997 and for the period from inception
                  (June 21, 1996) through December 31, 1996

                  Consolidated Statements of Stockholders' Equity for the years
                  ended December 31, 1998 and 1997 and for the period from
                  inception (June 21, 1996) through December 31, 1996

                  Consolidated Statements of Cash Flows for the years ended
                  December 31, 1998 and 1997 and for the period from inception
                  (June 21, 1996) through December 31, 1996

                  Summary of Significant Accounting Policies

                  Notes to Consolidated Financial Statements

         (2)      Financial statement schedules

                  Omitted because not applicable or because data is reflected in
                  the Notes to Financial Statements

         (3)      Exhibits


<TABLE>
<CAPTION>
   EXHIBIT
     NO.         EXHIBIT DESCRIPTION                       FILED HEREWITH OR INCORPORATED BY REFERENCE TO:
     ---         -------------------                       -----------------------------------------------
<S>              <C>                                       <C>
3.1              Amended and Restated Articles of          Exhibit 3.1 to Form SB-2 Registration Statement,
                 Incorporation of Smart Choice             filed on September 1, 1995, File No. 33-96520-A.
                 Automotive Group, Inc. (the
                 "Company")

3.1.1            Articles of Amendment to Articles of      Exhibit 3.2 to Form 10-Q filed on May 20, 1997.
                 Incorporation of  the Company

3.2              Amended and Restated By-Laws of the       Exhibit 3.2 to Form SB-2 Registration Statement,
                 Company                                   filed on September 1, 1995, File No. 33-96520-A.
</TABLE>


                                       36
<PAGE>

<TABLE>
<S>              <C>                                       <C>
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 Certificate         Exhibit 4.1 to Form 8-A Registration Statement,
                                                           filed on April 16, 1997.

4.2              Specimen of Warrant Certificate           Exhibit 4.2 to Form 8-A Registration Statement,
                                                           filed on April 16, 1997.

4.3              Warrant Agreement between the Company     Exhibit 4.5 to Amendment No. 2 to Form SB-2
                 and American Stock Transfer & Trust       Registration Statement, filed on November 6, 1995,
                 Company, as Warrant Agent, dated          File No. 33-96520-A.
                 November 9, 1995

4.3.1            Form of Amendment to Warrant              Exhibit 4.4 to Form 8-A Registration Statement, filed on
                 Agreement                                 April 16, 1997.

10.1             Eckler Industries, Inc. Retirement and    Exhibit 10.4.1 to Form SB-2 Registration Statement,
                 Savings Plan and Trust Agreement, as      filed on September 1, 1995, File No. 33-96520-A.
                 Amended and Restated on September 14,
                 1992

10.1.1           1998 Executive Incentive Compensation     Exhibit A to Proxy Statement filed on June 9, 1998.
                 Plan

10.2             Amendment No. 1 to Eckler Industries,     Exhibit 10.4.2 to Form SB-2 Registration Statement
                 Inc. Retirement and Savings Plan Trust    filed on September 1, 1995, File No. 33-96520-A.
                 Agreement Dated March 28, 1994.

10.3             Eckler Industries, Inc. Non-Qualified     Exhibit 10.6 to Form SB-2 Registration Statement,
                 Stock Option Plan                         filed on September 1, 1995, File No. 33-96520-A.

10.4             Eckler Industries, Inc. 1995 Combined     Exhibit 10.7 to Form SB-2 Registration Statement,
                 Qualified and Non- Qualified Employee     filed on September 1, 1995, File No. 33-96520-A.
                 Stock Option  Plan

10.5             Registration Rights Agreement by and      Exhibit 10.15 to Amendment No. 1 to Form SB-2
                 among the Company and each of the         Registration Statement, filed on October 13, 1995,
                 Purchasers referred to in Schedule 1      File No. 33-96520-A.
                 thereto, dated September 20, 1995.

10.6             Unit Purchase Option Agreement between    Exhibit 1.2 to Amendment No. 2 to Form SB-2
                 the Company and Argent Securities,        Registration Statement, filed on November 6, 1995,
                 Inc. and Certificate dated November       File No. 33-96520-A.
                 15, 1995

10.7             Loan Agreement between the Company and    Exhibit 10.19 to Post-Effective Amendment No. 2 to
                 Barnett Bank, N.A. dated September 30,    Form SB-2 Registration Statement, filed on November
                 1996                                      14, 1996, File No. 33-96520-A.
</TABLE>


                                       37
<PAGE>

<TABLE>
<S>              <C>                                       <C>
10.8             Mortgage and Security Agreement           Exhibit 10.20 to Post-Effective Amendment No. 2 to
                 between the Company and Barnett Bank,     Form SB-2 Registration Statement, filed on November
                 N.A. dated September 30, 1996.            14, 1996, File No. 33-96520-A.

10.9             Promissory Note in the amount of          Exhibit 10.21 to Post-Effective Amendment No. 2 to
                 $2,400,000 from the Company in favor      Form SB-2 Registration Statement, filed on November
                 of Barnett Bank, N.A. dated September     14, 1996, File No. 33-96520-A.
                 30, 1996.

10.10            Assignment of Loan Documents dated        Exhibit 10.10 to Form 10-K filed on April 14, 1998.
                 November 4, 1997 between Barnett Bank,
                 N.A. and The Huntington National Bank
                 ("Huntington")

10.11            Modification of Mortgage Deed and         Exhibit 10.11 to Form 10-K filed on April 14, 1998.
                 Security Agreement dated November 3,
                 1997 between the Company and Huntington

10.12            Future Advance Promissory Note dated      Exhibit 10.12 to Form 10-K filed on April 14, 1998.
                 December 30, 1997, principal amount
                 $260,000, the Company maker,
                 Huntington, payee

10.13            Modification of Mortgage and Mortgage     Exhibit 10.13 to Form 10-K filed on April 14, 1998.
                 Note and Extension Agreement dated
                 December 30, 1997 between the Company
                 and Huntington

10.13.1          Modification of Mortgage Note and         Exhibit 10.13.1 to From S-1 filed on August 21,
                 Extension Agreement dated July 24,        1998, file no. 333-59375.
                 1998 between the Company and
                 Huntington.

10.14            Merger Agreement between Smart Choice     Exhibit 10.1 to Form 8-K, filed on February 12, 1997
                 Holdings, Inc. ("SCHI"), the Company,
                 Thomas E. Conlan and  Gerald C. Parker
                 dated December 30,  1997.

10.15           First Amended and Restated Loan and       Exhibit 4.1 to Form 10-Q, filed on May 20, 1997.
                Security Agreement between Florida
                Finance Group, Inc. ("FFG") and Finova
                Capital Corporation ("Finova"), dated
                February 4, 1997.

10.16           Warrant to Purchase Common Stock of the   Exhibit 4.2 to Form 10-Q, filed on May 20, 1997.
                Company between the Company and Finova,
                dated January 13, 1997.

10.17           Promissory Note by Eckler Industries,     Exhibit 10.1 to Form 8-K filed on March 5, 1998.
                Inc. in favor of Stephens Inc.

10.17.1         Amendment to Guaranty Agreement between   Exhibit 10.4 to Form 8-K filed on March 5, 1998.
                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.
</TABLE>


                                       38
<PAGE>

<TABLE>
<S>              <C>                                       <C>
10.17.3         Form of  Modification Agreement between   Filed herewith.
                the Company and Stephens, Inc. dated
                April 15, 1999.

10.17.4         Extension of Engagement Letter between    Filed herewith.
                Stephens Inc. and Registrant dated
                March 1, 1999.

10.17.5         Warrant Agreement Issued to Stephens      Filed herewith.
                Inc.

10.18           Promissory note dated February 24,        Exhibit 10.9 to Form 8-K filed on March 5, 1998.
                1998, First Choice Auto Finance, Inc.,
                maker, and Manheim Automotive Financial
                Services, Inc., payee.

10.18.1         Guaranty dated March 21, 1997 from the    Exhibit 10.10 to Form 8-K filed on March 5, 1998.
                Company in favor of Manheim Automotive
                Financial Services, Inc.

10.19           Second Amended and Restated Loan and      Filed herewith.
                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.

10.19.1         Guaranty to Finova from the Company       Exhibit 4.5 to Form 10-Q, filed on May 20, 1997.
                dated January 13, 1997.

10.19.2         Guaranty to Finova from the SC            Filed herewith.
                Holdings, Inc.

10.19.3         Guaranty to Finova from the Company.      Filed herewith.

10.20           Eighth Amended and Restated Promissory    Exhibit 10.20 to Form S-1 filed on August 21, 1998,
                Note dated March 27, 1998, between FFG,   File No. 333-59375
                maker, and Finova.

10.20.1         Ninth Amended and Restated Promissory     Exhibit 10.1 to Form 10-Q, filed on May 15, 1998.
                Note dated March 27, 1998, between FFG,
                maker and Finova.

10.20.2         Tenth Amended and Restated Promissory     Filed herewith.
                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 Schedule to   Exhibit 10.21 to Form S-1 filed on August 21, 1998,
                Amended and Restated Loan and Security    File No. 333-59375.
                Agreement, FFG, borrower, Finova,
                lender, dated March 27, 1998.

10.21.1         Fifth Amended and Restated Schedule to    Exhibit 10.2 to Form 10-Q filed on May 15, 1998.
                Amended and Restated Loan and Security
                Agreement, FFG, borrower, Finova,
                lender.
</TABLE>


                                       39
<PAGE>

<TABLE>
<S>              <C>                                       <C>
10.21.2         Schedule to Second Amended and Restated   Filed herewith.
                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 Manheim   Filed herewith.
                Automotive Financial Services, Inc. and
                Finova Capital Corporation.

10.22           Stock Purchase Agreement dated January    Exhibit 10.1 to Form 10-Q, filed on May 20, 1997.
                28, 1997 between SCHI and Gary Smith.

10.23           Promissory Note dated January 28, 1997,   Exhibit 10.2 to Form 10-Q filed on May 20, 1997.
                First Choice Auto Finance, Inc.
                ("FCAF"), maker, Gary Smith, payee, in
                the principal amount of $1,031,008.

10.24           Lease dated April 5, 1997 between Gary    Exhibit 10.24 to Form S-1 filed on August 21, 1998,
                R. Smith and Team Automobile Sales and    File No. 333-59375
                Finance, Inc.

10.25           Promissory Note Modification Agreement,   Exhibit 10.25 to Form S-1 filed on August 21, 1998,
                dated December 15, 1997 between FCAF      File No. 333-59375
                and Gary R. Smith.

10.26           Asset Purchase Agreement dated January    Exhibit 10.3 to Form 10-Q, filed on May 20, 1997.
                28, 1997 between FCAF and Gary Smith.

10.27           Asset Purchase Agreement among FCAF,      Exhibit 10.17 to Form 8-K, filed on February 26,
                Palm Beach Finance and Mortgage Company   1997.
                ("PBF"), Two Two Five North Military
                Corp. ("225"), and David Bumgardner,
                and Amendment thereto.

10.28           Loan and Security Agreement between 225   Exhibit 10.18 to Form 8-K, filed on February 26,
                and FCAF dated February 14, 1997.         1997.

10.29           9% Secured Convertible Note of FCAF to    Exhibit 10.20 to Form 8-K, filed on February 26,
                225 and PBF.                              1997.

10.30           9% Convertible Debenture of SCHI to PBF.  Exhibit 10.21 to Form 8-K, filed on February 26,
                                                          1997.

10.31           Lease between David Bumgardner as         Exhibit 10.22 to Form 8-K, filed on February 26,
                Lessor and FCAF, Lessee, dated February   1997.
                13, 1997.

10.32           Indemnification Agreement in favor of     Exhibit 10.23 to Form 8-K, filed on February 26,
                PBF and 225 by FCAF, dated February 14,   1997.
                1997.

10.33           Executive Employment Agreement between    Exhibit 10.15 to Form 10-Q, filed on May 20, 1997.
                the Company and Gary Smith.

10.34           Executive Employment Agreement between    Exhibit 10.16 to Form 10-Q, filed May 20, 1997.
                the Company and Robert Abrahams.

10.35           Executive Employment Agreement dated      Exhibit 10.35 to Form S-1 filed on August 21, 1998,
                April 11, 1997 between the Company and    File No. 333-59375.
                Joseph Alvarez.
</TABLE>


                                       40
<PAGE>

<TABLE>
<S>              <C>                                       <C>
10.36           Executive Employment Agreement dated      Exhibit 10.36 to Form S-1 filed on August 21, 1998,
                April 24, 1997 between the Company and    File No. 333-59375.
                Ronald Anderson.

10.36.21        Executive Employment Agreement dated      Exhibit 10.36.2 to Form S-1 filed on August 21,
                February 9, 1998 between the Company      1998, File No. 333-59375.
                and Robert J. Downing.

10.37           Non Qualified Stock Option Agreement      Exhibit 10.37 to Form S-1 filed on August 21, 1998,
                dated March 5, 1997 among the Smart       File No. 333-59375
                Choice Holdings Management Trusts (the
                "Management Trusts"), Eckler
                Industries, Inc., and Robert J.
                Abrahams.

10.38           Non Qualified Stock Option Agreement      Exhibit 10.38 to Form S-1 filed on August 21, 1998,
                dated March 5, 1997 among the             File No. 333-59375
                Management Trusts, Eckler Industries,
                Inc., and Robert J. Abrahams.

10.39           Non Qualified Stock Option Agreement      Exhibit 10.39 to Form 10-K, filed on April 14, 1998.
                dated April 11, 1997, among the
                Management Trusts, the Company
                and Joseph Alvarez.

10.40           Stock Option Agreement dated March 24,    Exhibit 10.40 to Form S-1 filed on August 21, 1998,
                1997 between the Company and Ronald       File No. 333-59375
                Anderson.

10.41           Non-Qualified Stock Option Agreement      Exhibit 10.41 to Form S-1 filed on August 21, 1998,
                dated April 17, 1997 between the          File No. 333-59375
                Company and David Bumgardner.

10.42           Non-Qualified Stock Option Agreement      Exhibit 10.42 to Form S-1 filed on August 21, 1998,
                dated April 17, 1997 between the          File No. 333-59375
                Company and Craig Macnab.

10.43           Stock Option Agreement dated March 19,    Exhibit 10.43 to Form S-1 filed on August 21, 1998,
                1997 between the Company and Gerald       File No. 333-59375
                Parker.

10.44           Non-Qualified Stock Option Agreement      Exhibit 10.44 to Form S-1 filed on August 21, 1998,
                dated April 17, 1997 between the          File No. 333-59375
                Company and Gerald Parker.

10.45           Non-Qualified Stock Option Agreement      Exhibit 10.45 to Form S-1 filed on August 21, 1998,
                dated April 17, 1997 between the          File No. 333-59375
                Company and Donald Wojnowski.

10.46.1         Non-Qualified Stock Option Agreement      Exhibit 10.46.1 to Form S-1 filed on August 21,
                dated July 29, 1997 between the Company   1998, File No. 333-59375
                and Joseph Alvarez.

10.46.2         Non-Qualified Stock Option Agreement      Exhibit 10.46.2 to Form S-1 filed on August 21,
                dated January 29, 1997 between the        1998, File No. 333-59375
                Company and Joseph Mohr.

10.46.3         Non-Qualified Stock Option Agreement      Exhibit 10.46.3 to Form S-1 filed on August 21,
                dated February 9, 1998 between the        1998, File No. 333-59375
                Company and Robert Downing.
</TABLE>


                                       41
<PAGE>

<TABLE>
<S>              <C>                                       <C>
10.46.4         Non-Qualified Stock Option Agreement      Exhibit 10.46.4 to Form S-1 filed on August 21,
                dated  January 29, 1997 between the       1998, File No. 333-59375
                Company and Ron Anderson.

10.47           Convertible Senior Promissory Note        Exhibit 10.18 to Form 10-Q, filed May 20, 1997.
                dated March 13, 1997, the Company,
                maker, Sirrom Capital Corporation
                ("Sirrom"), payee.

10.48           Convertible Senior Promissory Note        Exhibit 10.19 to Form 10-Q, filed May 20, 1997.
                dated May 13, 1997, the Company, maker,
                Sirrom, payee.

10.49           Amended and Restated Registration         Exhibit 10.20 to Form 10-Q, filed May 20, 1997.
                Rights Agreement between the Company
                and Sirrom, dated May 13, 1997.

10.50           Asset Purchase Agreement dated as of      Exhibit 10.1 to Form 8-K filed on July 14, 1997.
                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 by the    Exhibit 10.1 to Form 8-K filed on October 9, 1997.
                Company to High Capital Funding, LLC,
                and other purchasers.

10.51.1          Form of Warrant issued by the Company to   Exhibit 10.2 to Form 8-K filed on October 9, 1997.
                 High Capital Funding, LLC, and other
                 purchasers.

10.52            Subordinated Loan Agreement dated          Filed herewith.
                 January 30, 1999, between High Capital
                 Funding, LLC and the Company

10.52.1          Company Form of 1999 Series A              Filed herewith.
                 Subordinated Note.

10.52.2          Guaranty Agreement between SC Holdings,    Filed herewith.
                 Inc., First Choice Auto Finance, Inc.
                 and High Capital Funding, LLC.

10.53            Promissory Note, principal amount          Exhibit 10.3 to Form 8-K filed on October 9, 1997.
                 $1,500,000 by Eckler Industries, Inc.,
                 maker, Stephens Inc., payee.

10.54            Promissory Note, principal amount          Exhibit 10.1 to Form 8-K filed on March 5, 1998.
                 $3,000,000, Eckler Industries, Inc.,
                 maker, Stephens Inc., payee.

10.55            Guaranty Agreement by the Company to       Exhibit 10.4 to Form 8-K filed on October 9, 1997.
                 Stephens Inc.

10.56            Amendment to Guaranty Agreement between    Exhibit 10.4 to Form 8-K filed on March 5, 1998.
                 the Company and Stephens Inc.

10.57            Pledge and Security Agreement between      Exhibit 10.5 to Form 8-K filed on October 9, 1997.
                 the Company and Stephens Inc.
</TABLE>


                                       42
<PAGE>

<TABLE>
<S>              <C>                                       <C>
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.

10.59            Securities Purchase Agreement between      Exhibit 10.6 to Form 8-K filed on October 9, 1997.
                 the Company and certain buyers
                 represented by Promethean Investment
                 Group, L.L.C.

10.60            Form of Warrant from the Company to        Exhibit 10.7 to Form 8-K filed on October 9, 1997.
                 certain buyers represented by Promethean
                 Investment Group, L.L.C.

10.61            Automotive Wholesale Financing and         Exhibit 10.61 to Form S-1 filed on August 21, 1998,
                 Security Agreement dated July 21, 1997     File No. 333-59375
                 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,
                 Financing and Security Agreement           File No. 333-59375

10.63            Second Addendum to Automotive Wholesale    Exhibit 10.63 to Form S-1 filed on August 21, 1998,
                 Financing and Security Agreement dated     File No. 333-59375
                 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,
                 Agreement dated October 12,  1995          File No. 333-59375
                 between B&B Florida Enterprises, Inc.
                 and NMAC.

10.65            Amendment to Dealer Capital Loan and       Exhibit 10.65 to Form S-1 filed on August 21, 1998,
                 Security Agreement dated September 1,      File No. 333-59375
                 1997 between NMAC and FCS1.

10.66            Dealer Equipment Loan and Security         Exhibit 10.66 to Form S-1 filed on August 21, 1998,
                 Agreement dated October 12, 1995 between   File No. 333-59375
                 NMAC and B&B Florida Enterprises, Inc.

10.67            Amendment to Dealer Equipment Loan and     Exhibit 10.67 to Form S-1 filed on August 21, 1998,
                 Security Agreement dated September 1,      File No. 333-59375
                 1997 between NMAC and FCSI.

10.67.1          Second Amendment to Dealer Equipment       Exhibit 10.67 to Form S-1 filed on August 21, 1998,
                 Loan and Security Agreement.               File No. 333-59375.

10.67.2          Second Amendment to Dealer Capital Loan    Filed herewith.
                 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 Service       Exhibit 10.68 to Form S-1 filed on August 21, 1998,
                 Agreement dated August 29, 1997 between    File No. 333-59375
                 Nissan Motor Corporation in U.S.A., the
                 Company, Smart Cars, Inc. and FCS1.

10.69            Wholesale Financing and Security           Exhibit 10.69 to Form S-1 filed on August 21, 1998,
                 Agreement dated August 11, 1997 between    File No. 333-59375
                 First Choice Stuart 2, Inc. ("FCS2") and
                 Volvo Finance North America, Inc.
</TABLE>


                                       43
<PAGE>

<TABLE>
<S>              <C>                                       <C>
10.70            Authorized Retailer Agreement between      Exhibit 10.70 to Form S-1 filed on August 21, 1998,
                 Volvo Cars of North America, Inc. and      File No. 333-59375
                 FCS2.

10.71            Convertible Subordinated Debenture dated   Exhibit 10.71 to Form S-1 filed on August 21, 1998,
                 November 3, 1997, principal amount         File No. 333-59375
                 $750,000, the Company, maker, Bankers
                 Life Insurance Company, payee.

10.72            Registration Rights Agreement dated        Exhibit 10.72 to Form S-1 filed on August 21, 1998,
                 November 3, 1997 between the Company and   File No. 333-59375
                 Bankers Life Insurance Company.

10.73            Settlement Agreement and Release dated     Exhibit 10.73 to Form S-1 filed on August 21, 1998,
                 January 30, 1998 among the Company,        File No. 333-59375
                 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 May 6,      Exhibit 10.74 to Form S-1 filed on August 21, 1998,
                 1997 between FCS1 and Thomas DeRita, Jr.   File No. 333-59375

10.75            Promissory Note dated December 19, 1997,   Exhibit 1075 to Form S-1 filed on August 21, 1998,
                 principal amount $2,199,000, First         File No. 333-59375
                 Choice Melbourne 1, Inc., maker and
                 Raytheon Aircraft Credit Corporation,
                 payee.

10.76            Guaranty Agreement by the Company to       Exhibit 10.76 to Form S-1 filed on August 21, 1998,
                 Raytheon Aircraft Credit Corporation.      File No. 333-59375

10.77            Security Agreement dated December 19,      Exhibit 10.77 to Form S-1 filed on August 21, 1998,
                 1997 between First Choice Melbourne 1,     File No. 333-59375
                 Inc. and Raytheon Aircraft Credit
                 Corporation.

10.78            Registration Rights Agreement between      Exhibit 10.8 to Form 8-K filed on October 9, 1997.
                 the Company and certain buyers
                 represented by Promethean Investment
                 Group, L.L.C.

10.79            Promissory Note dated February 24, 1998,   Exhibit 10.9 to Form 8-K filed on March 5, 1998.
                 FCAF, maker, Manheim Automotive
                 Financial Services, Inc., payee.

10.80            Guaranty dated March 21, 1997 from the     Exhibit  10.10 to Form 8-K filed on March 5, 1998.
                 Company in favor of Manheim Automotive
                 Financial Services, Inc.

10.81            Intentionally Omitted.

10.82            Manheim Automotive Financial Services,     Exhibit 10.82 to Form S-1 filed on August 21, 1998,
                 Inc. Security Agreement dated March 21,    File No. 333-59375
                 1997 between FCAF and Manheim Automotive
                 Financial Services, Inc.

10.83            Promissory Note dated June 17, 1997,       Exhibit 10.83 to Form S-1 filed on August 21, 1998,
                 principal amount $825,000, FCAF, maker,    File No. 333-59375
                 Carl Schmidt Enterprises, Inc., payee.

10.84            Real Estate Mortgage dated June 17,        Exhibit 10.84 to Form S-1 filed on August 21, 1998,
                 1997, FCAF, mortgagor, Carl Schmidt        File No. 333-59375
                 Enterprises, Inc., mortgagee.
</TABLE>


                                       44
<PAGE>

<TABLE>
<S>              <C>                                       <C>
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,
                 Reproduction and Service Part Tooling      File No. 333-59375
                 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 Tooling      File No. 333-59375
                 License Agreement.

10.89            Thirty-Fourth Amendment to GM              Exhibit 10.89 to Form S-1 filed on August 21, 1998,
                 Reproduction Service Part Tooling          File No. 333-593759375
                 License Agreement.

10.90            Lease between Florida Auto Auction of      Exhibit 10.90 to Form S-1 filed on August 21, 1998,
                 Orlando, Inc. and First Choice Auto        File No. 333-59375
                 Finance, Inc. dated May 12, 1997, for
                 Reconditioning Facility.

10.91            Aircraft Lease between General Electric    Filed herewith.
                 Capital Corporation and the Company,
                 dated December 1998.

11.1             Statement re Computation of Earnings Per   *
                 Share.

21.1             List of Subsidiaries.                      Filed herewith.

23.1             Consent of BDO Seidman, LLP.               Filed herewith.

27.1             Financial Data Schedule.                   Filed herewith.
</TABLE>

* Information regarding the computation of earnings per share is set forth in
  the Notes to Consolidated Financial Statements.



                                       45
<PAGE>

                                   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 May 17, 2000.

                                       SMART CHOICE AUTOMOTIVE GROUP, INC.


                                       By: /s/ JAMES E. ERNST
                                           -------------------------------------
                                           James E. Ernst
                                           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.

<TABLE>
<CAPTION>
         SIGNATURES                         TITLE                               DATE
         ----------                         -----                               ----
<S>                                 <C>                                         <C>
/S/EDWARD MCMURPHY                  Director                                    May 17, 2000
------------------
Edward McMurphy

/S/ ROBERT J. ABRAHAMS              Director                                    May 17, 2000
 ---------------------
Robert J. Abrahams

/S/ GARY R. SMITH                   Director                                    May 17, 2000
-----------------
Gary R. Smith

/S/ T.J. FALGOUT III                Director                                    May 17, 2000
--------------------
T.J. Falgout

/S/LARRY LANGE                      Director                                    May 17, 2000
------------------
Larry Lange

/S/  JOE CAVALIER                   Chief Financial Officer                     May 17, 2000
------------------                  (Principal Financial and Accounting Officer)
Joe Cavalier
</TABLE>



                                       46
<PAGE>

                                            SMART CHOICE AUTOMOTIVE
                                                        GROUP, INC.
                                                   AND SUBSIDIARIES



                                        ========================================

                                              CONSOLIDATED FINANCIAL STATEMENTS
                                          YEARS ENDED DECEMBER 31, 1998 AND 1997



<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                                                        CONTENTS

================================================================================


       REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                    F-2

       CONSOLIDATED FINANCIAL STATEMENTS
           Balance sheets                                              F-3 - F-4
           Statements of operations                                          F-5
           Statements of stockholders' equity                                F-6
           Statements of cash flows                                          F-7
           Summary of significant accounting policies                 F-8 - F-12
           Notes to consolidated financial statements                F-13 - F-45




                                      F-1
<PAGE>


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors
Smart Choice Automotive Group, Inc.
Titusville, Florida

We have audited the accompanying consolidated balance sheets of Smart Choice
Automotive Group, Inc. and subsidiaries as of December 31, 1998 and 1997 and the
related statements of operations, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Smart Choice
Automotive Group, Inc. and subsidiaries as of December 31, 1998 and 1997 and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998 in conformity with generally accepted
accounting principles.




                                                 BDO Seidman, LLP

Orlando, Florida
April 12, 1999


                                      F-2
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                                     CONSOLIDATED BALANCE SHEETS

================================================================================

<TABLE>
<CAPTION>
DECEMBER 31,                                                       1998                1997
------------------------------------------------------------------------------------------------
<S>                                                            <C>                 <C>
ASSETS

Cash and cash equivalents                                      $   1,268,589       $   1,066,949
Accounts receivable                                                1,206,710           1,773,124
Finance receivables:
  Principal balances, net                                         79,342,835          40,084,412
  Less allowance for credit losses                               (12,157,569)         (6,857,265)
------------------------------------------------------------------------------------------------

         Finance receivables, net                                 67,185,266          33,227,147
------------------------------------------------------------------------------------------------

Inventories, at cost                                              20,004,600          15,516,084
Land held for resale                                                      --           1,050,000
Property and equipment, net                                        7,655,324           9,214,207
Notes receivable                                                     425,000              46,280
Deferred financing costs, net of accumulated amortization
  of $343,063 and $207,508                                           226,152             426,823
Goodwill, net of accumulated amortization of $1,117,432
   and $470,897                                                   23,871,080          25,562,162
Prepaid expenses                                                   1,263,858           1,008,229
Deposits and other assets                                            485,454             213,986
------------------------------------------------------------------------------------------------

                                                               $ 123,592,033       $  89,104,991
================================================================================================
</TABLE>


        SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                      F-3
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                                     CONSOLIDATED BALANCE SHEETS

================================================================================

<TABLE>
<CAPTION>
DECEMBER 31,                                                                   1998                1997
------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                 <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
  Bank overdraft                                                           $   3,112,930       $          --
  Accounts payable                                                             4,746,157           5,259,903
  Accrued expenses                                                             3,664,651           4,633,841
  Line of credit, net of discount                                             63,612,433          31,229,600
  Floor plans payable                                                          8,701,968           8,287,092
  Capital lease obligations                                                      997,916             940,280
  Notes payable                                                               28,343,479          29,197,458
  Other liabilities                                                                   --              94,913
------------------------------------------------------------------------------------------------------------

         TOTAL LIABILITIES                                                   113,179,534          79,643,087
------------------------------------------------------------------------------------------------------------

CONTINGENT REDEMPTION VALUE OF COMMON STOCK PUT OPTIONS                        1,539,148           2,840,000

REDEEMABLE CONVERTIBLE PREFERRED STOCK                                            10,000           4,941,834

STOCKHOLDERS' EQUITY:
  Preferred stock $.01 par value, authorized 5,000,000 shares; issued
    and outstanding 595 shares                                                 5,891,410                  --
  Common stock $.01 par value, authorized 50,000,000 shares; issued
    and outstanding 6,676,545 and 4,867,004 shares                                66,765              48,670
  Additional paid-in capital                                                  30,054,488          21,317,126
  Common stock notes receivable                                                 (115,200)                 --
  Accumulated deficit                                                        (27,034,112)        (19,685,726)
------------------------------------------------------------------------------------------------------------

TOTAL STOCKHOLDERS' EQUITY                                                     8,863,351           1,680,070
------------------------------------------------------------------------------------------------------------

                                                                           $ 123,592,033       $  89,104,991
============================================================================================================
</TABLE>


        SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                      F-4
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENTS OF OPERATIONS

================================================================================

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,                                                        1998               1997            1996 (a)
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                <C>                <C>
REVENUES:
  Sales at used car stores                                                 $ 78,227,027       $ 35,279,228       $         --
  Income on finance receivables                                              15,709,539          6,898,694                 --
  Income from insurance and training                                          1,448,261          1,177,903                 --
-----------------------------------------------------------------------------------------------------------------------------

         Total revenues                                                      95,384,827         43,355,825                 --
-----------------------------------------------------------------------------------------------------------------------------

COSTS AND EXPENSES:
  Costs of sales at used car stores                                          57,233,088         25,639,741                 --
  Provision for credit losses                                                13,371,169          4,941,983                 --
  Costs of insurance and training                                                87,909             85,098                 --
  Selling, general and administrative expenses                               22,739,174         17,599,003            670,616
  Compensation expense related to employee and director stock options           215,875          4,649,702                 --
  Restructuring charges                                                              --          2,117,906                 --
  Abandoned public offering costs                                             1,062,962                 --                 --
-----------------------------------------------------------------------------------------------------------------------------

         Total costs and expenses                                            94,710,177         55,033,433            670,616
-----------------------------------------------------------------------------------------------------------------------------

         Income (loss) from operations                                          674,650        (11,677,608)          (670,616)
-----------------------------------------------------------------------------------------------------------------------------

OTHER INCOME (EXPENSE):
  Interest expense                                                           (8,751,661)        (5,573,307)           (33,172)
  Other income (expense), net                                                   777,574             (4,772)                --
-----------------------------------------------------------------------------------------------------------------------------

                                                                             (7,974,087)        (5,578,079)           (33,172)
-----------------------------------------------------------------------------------------------------------------------------

NET LOSS FROM CONTINUING OPERATIONS                                          (7,299,437)       (17,255,687)          (703,788)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS                                      428,838         (1,392,918)                --
-----------------------------------------------------------------------------------------------------------------------------

NET LOSS                                                                     (6,870,599)       (18,648,605)          (703,788)

PREFERRED STOCK DIVIDENDS                                                      (477,787)          (333,333)                --
-----------------------------------------------------------------------------------------------------------------------------

NET LOSS APPLICABLE TO COMMON STOCK                                        $ (7,348,386)      $(18,981,938)      $   (703,788)
=============================================================================================================================

BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE:
  Continuing operations                                                    $      (1.26)      $      (3.97)      $       (.26)
  Discontinued operations                                                           .07               (.31)                --
-----------------------------------------------------------------------------------------------------------------------------

BASIC AND DILUTED LOSS PER COMMON SHARE                                    $      (1.19)      $      (4.28)      $       (.26)
=============================================================================================================================

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING                          6,193,472          4,430,367          2,744,216
=============================================================================================================================
</TABLE>

         SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

            (a) PERIOD FROM INCEPTION (JUNE 21, 1996) THROUGH DECEMBER 31, 1996.


                                      F-5
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

================================================================================

<TABLE>
<CAPTION>
                                                                    PREFERRED STOCK                         COMMON STOCK
                                                             ------------------------------      -------------------------------
                                                                    NUMBER                             NUMBER
                                                                       OF                                  OF                PAR
                                                                   SHARES              VALUE           SHARES              VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>      <C>                  <C>             <C>
BALANCE, June 21, 1996 (date of inception)                             --      $         --                --       $         --
Issuance of founders' shares                                           --                --         2,744,216             27,442
Net loss                                                               --                --                --                 --
--------------------------------------------------------------------------------------------------------------------------------

BALANCE, December 31, 1996                                             --                --         2,744,216             27,442

Common stock issued for acquisitions                                   --                --         2,055,476             20,555
Contribution and retirement of common stock                            --                --          (165,714)            (1,657)
Common stock options granted to employees and directors                --                --                --                 --
Common stock options and warrants granted to lenders
  and consultants                                                      --                --                --                 --
Treasury stock purchased and retired                                   --                --            (1,000)               (10)
Issuance of common stock for professional services                     --                --             8,965                 90
Issuance of common stock for conversion of debt                        --                --           221,257              2,212
Exercise of common stock options and warrants, net                     --                --             3,804                 38
Convertible debt issued at a discount                                  --                --                --                 --
Common stock issued by stockholders for
  cancellation of common stock options granted by
  the Company                                                          --                --                --                 --
Contribution to capital                                                --                --                --                 --
Contingent liability of put options                                    --                --                --                 --
Preferred stock dividend                                               --                --                --                 --
Net loss                                                               --                --                --                 --
--------------------------------------------------------------------------------------------------------------------------------

BALANCE, December 31, 1997                                             --                --         4,867,004             48,670

Issuance of common stock for conversion of debt                        --                --           343,943              3,439
Issuance of common stock for conversion of
  preferred stock and accrued dividends                                --                --         1,398,962             13,990
Issuance of common stock for services                                  --                --             4,547                 45
Exercise of common stock options, net                                  --                --            71,250                713
Purchase and retirement of treasury stock                              --                --            (9,161)               (92)
Modification to conversion price of debt                               --                --                --                 --
Common stock warrants granted to preferred stockholders                --                --                --                 --
Common stock options granted to directors                              --                --                --                 --
Decrease in contingent liability of put options                        --                --                --                 --
Preferred stock dividends                                              --                --                --                 --
Issuance of preferred stock, net                                      595         5,891,410                --                 --
Net loss                                                               --                --                --                 --
--------------------------------------------------------------------------------------------------------------------------------

BALANCE, December 31, 1998                                            595      $  5,891,410         6,676,545       $     66,765
================================================================================================================================
<CAPTION>
                                                                                      COMMON
                                                               ADDITIONAL              STOCK
                                                                  PAID-IN              NOTES      ACCUMULATED
                                                                  CAPITAL         RECEIVABLE          DEFICIT              TOTAL
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>                <C>              <C>                <C>
BALANCE, June 21, 1996 (date of inception)                   $         --       $         --     $         --       $         --
Issuance of founders' shares                                      (21,474)                --               --              5,968
Net loss                                                               --                 --         (703,788)          (703,788)
--------------------------------------------------------------------------------------------------------------------------------

BALANCE, December 31, 1996                                        (21,474)                --         (703,788)          (697,820)

Common stock issued for acquisitions                           14,393,325                 --               --         14,413,880
Contribution and retirement of common stock                         1,657                 --               --                 --
Common stock options granted to employees and directors         3,809,826                 --               --          3,809,826
Common stock options and warrants granted to lenders
  and consultants                                               1,957,953                 --               --          1,957,953
Treasury stock purchased and retired                              (13,580)                --               --            (13,590)
Issuance of common stock for professional services                 99,716                 --               --             99,806
Issuance of common stock for conversion of debt                 1,767,844                 --               --          1,770,056
Exercise of common stock options and warrants, net                 41,638                 --               --             41,676
Convertible debt issued at a discount                             827,685                 --               --            827,685
Common stock issued by stockholders for
  cancellation of common stock options granted by
  the Company                                                     800,000                 --               --            800,000
Contribution to capital                                           159,203                 --               --            159,203
Contingent liability of put options                            (2,840,000)                --               --         (2,840,000)
Preferred stock dividend                                          333,333                 --         (333,333)                --
Net loss                                                               --                 --      (18,648,605)       (18,648,605)
--------------------------------------------------------------------------------------------------------------------------------

BALANCE, December 31, 1997                                     21,317,126                 --      (19,685,726)         1,680,070

Issuance of common stock for conversion of debt                 1,494,277                 --               --          1,497,716
Issuance of common stock for conversion of
  preferred stock and accrued dividends                         5,042,066                 --               --          5,056,056
Issuance of common stock for services                              36,331                 --               --             36,376
Exercise of common stock options, net                             403,634           (115,200)              --            289,147
Purchase and retirement of treasury stock                         (93,808)                --               --            (93,900)
Modification to conversion price of debt                           83,333                 --               --             83,333
Common stock warrants granted to preferred stockholders           254,802                 --               --            254,802
Common stock options granted to directors                         215,875                 --               --            215,875
Decrease in contingent liability of put options                 1,300,852                 --               --          1,300,852
Preferred stock dividends                                              --                 --         (477,787)          (477,787)
Issuance of preferred stock, net                                       --                 --               --          5,891,410
Net loss                                                               --                 --       (6,870,599)        (6,870,599)
--------------------------------------------------------------------------------------------------------------------------------

BALANCE, December 31, 1998                                   $ 30,054,488       $   (115,200)    $(27,034,112)      $  8,863,351
================================================================================================================================
</TABLE>


        SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                      F-6
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS

================================================================================

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,                                                             1998               1997              1996(a)
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                                      $ (6,870,599)      $(18,648,605)      $   (703,788)
  Adjustments to reconcile net loss to net cash provided by (used for)
    operating activities:
      Depreciation                                                                   725,107            445,311              2,132
      Amortization                                                                 1,489,089          1,239,929              2,249
      Gain on disposal of property and equipment                                      95,324             (8,166)                --
      Impairment of goodwill                                                       1,045,847                 --                 --
      Write-down of inventory                                                      1,094,096                 --                 --
      Provision for credit losses                                                 13,371,169          4,941,983                 --
      Compensation expense related to stock options                                  215,875          4,649,702                 --
      Issuance of common stock for services and interest                              36,376            374,806              4,968
      Stock options and warrants issued to consultants, lenders and others           254,802          1,296,863                 --
      Modification to conversion price of debt                                        83,333                 --                 --
      Cash provided by (used for), net of effect of acquisitions:
        Accounts receivable                                                          172,514           (662,488)           (25,000)
        Inventories                                                               (5,582,612)        (5,969,719)                --
        Prepaid expenses                                                            (255,629)           679,663                 --
        Accounts payable                                                            (513,746)         2,668,636            438,890
        Accrued expenses and other liabilities                                    (1,064,103)         3,048,563            183,314
-----------------------------------------------------------------------------------------------------------------------------------

Net cash provided by (used for) operating activities                               4,296,843         (5,943,522)           (97,235)
-----------------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Increase in finance receivables                                                (47,329,288)       (13,600,550)                --
  Cash for acquisitions, net of cash acquired                                             --         (7,927,844)                --
  Advances to acquired companies prior to acquisition                                     --         (4,230,761)                --
  Purchase of property and equipment                                              (1,148,386)        (1,356,644)           (24,586)
  Increase in notes receivable                                                      (425,000)                --           (400,000)
  Repayments of notes receivable                                                      46,280            530,420                 --
  Proceeds from disposal of property and equipment                                 3,253,354             24,425                 --
  Other                                                                             (293,572)           (21,981)          (244,101)
-----------------------------------------------------------------------------------------------------------------------------------

Net cash used for investing activities                                           (45,896,612)       (26,582,935)          (668,687)
-----------------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from sale of preferred stock                                            5,891,410          4,554,812            387,022
  Proceeds from sale of common stock                                                      --                 --              1,000
  Proceeds from exercise of common stock options and warrants                        289,147              1,800                 --
  Purchase of treasury stock                                                              --            (13,590)                --
  Increase (decrease) in bank overdraft                                            3,112,930            (82,884)            82,884
  Proceeds from line of credit borrowings                                         32,300,000         16,462,090                 --
  Proceeds from floor plan notes payable                                             414,876          4,201,467                 --
  Proceeds from notes payable                                                      7,096,690         14,163,892            322,000
  Repayment of notes payable                                                      (6,647,539)        (5,271,154)                --
  Proceeds from capital lease obligations                                                 --            251,722                 --
  Repayments of capital lease obligations                                           (258,880)           (67,402)                --
  Payments of dividends                                                             (353,566)                --                 --
  Deferred financing costs                                                           (43,659)          (607,347)           (26,984)
-----------------------------------------------------------------------------------------------------------------------------------

Net cash provided by financing activities                                         41,801,409         33,593,406            765,922
-----------------------------------------------------------------------------------------------------------------------------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                            201,640          1,066,949                 --

CASH AND CASH EQUIVALENTS, beginning of year                                       1,066,949                 --                 --
-----------------------------------------------------------------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS, end of year                                          $  1,268,589       $  1,066,949       $         --
===================================================================================================================================
</TABLE>

         SEE ACCOMPANYING SUMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


            (a) PERIOD FROM INCEPTION (JUNE 21, 1996) THROUGH DECEMBER 31, 1996.


                                      F-7
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

================================================================================

PRINCIPLES OF      The consolidated financial statements include the accounts of
CONSOLIDATION      Smart Choice Automotive Group, Inc. and its wholly-owned
                   subsidiaries (the "Company"). All significant intercompany
                   accounts and transactions have been eliminated in
                   consolidation.

CONCENTRATION      The Company provides sales finance services in connection
OF CREDIT RISK     with the sale of used cars to individuals residing primarily
                   in Central and South Florida.

                   Periodically during the year, the Company maintains cash in
                   financial institutions in excess of the amounts insured by
                   the federal government.

REVENUE            Income on finance receivables is recognized using the
RECOGNITION        interest method. Direct loan origination costs are deferred
                   and charged against finance income over the life of the
                   related installment sales contract as an adjustment of yield.

                   Revenue from the sale of cars is recognized upon delivery,
                   when the sales contract is signed and the agreed-upon down
                   payment has been received.

                   Parts and accessories sales are recognized upon shipment of
                   products to customers.

FINANCE            The Company originates installment sales contracts from its
RECEIVABLES        Company dealerships. Finance receivables consist of
                   contractually scheduled payments from installment sales
                   contracts net of unearned finance charges, direct loan
                   origination costs and an allowance for credit losses. The
                   Company follows the provisions of Statement of Financial
                   Accounting Standards No. 91, "Accounting for Nonrefundable
                   Fees and Costs Associated with Originating or Acquiring Loans
                   and Initial Direct Costs of Leases." Unearned finance charges
                   represent the balance of finance income (interest) remaining
                   from the capitalization of the total interest to be earned
                   over the original term of the related installment sales
                   contract. Direct loan origination costs represent


                                      F-8
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

================================================================================


                   the unamortized balance of costs incurred in the origination
                   of contracts at the Company's dealerships.

ALLOWANCE FOR      The allowance for uncollectible finance receivables is
CREDIT LOSSES      maintained at a level which, in management's judgment, is
                   adequate to absorb potential losses inherent in the loan
                   portfolio. The amount of the allowance is based on
                   management's evaluation of the collectibility of the loan
                   portfolio, which all originated in the State of Florida,
                   including the nature of the portfolio, credit concentrations,
                   trends in historical loss experience, specific impaired
                   loans, collateral values and economic conditions. Because of
                   uncertainties associated with regional economic conditions,
                   collateral values and future cash flows on impaired loans, it
                   is reasonably possible that management's estimate of credit
                   losses inherent in the loan portfolio and the related
                   allowance may change materially in the near term. However,
                   the amount of change that is reasonably possible cannot be
                   estimated. The allowance for uncollectible finance
                   receivables is increased by a provision for loan losses,
                   which is charged to expense. Repossessed vehicles are
                   recorded as inventory at the lower of estimated net
                   realizable value or the related loan balances. The difference
                   between the balance of the installment contract and the
                   amount recorded as inventory for the repossessed vehicle is
                   charged to the allowance for credit losses.

PRESENTATION OF    The prices at which the Company sells its used cars and the
REVENUES AND       interest rate that it charges to finance these sales take
COST OF REVENUES   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 contract receivables
                   originated by the Company as well as a cost of the sale 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.


                                      F-9
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

================================================================================


INVENTORY          Inventory consists of new and used vehicles and vehicle parts
                   and accessories. Vehicle reconditioning costs are capitalized
                   as a component of inventory cost. The cost of new and used
                   vehicles sold is determined on a specific identification
                   basis. Vehicle parts and accessories are valued at the lower
                   of first-in, first-out (FIFO) cost or market. Repossessed
                   vehicles are valued at the lower of estimated net realizable
                   value or the related loan balance.

PROPERTY AND       Property and equipment are stated at cost. Depreciation is
EQUIPMENT          computed over the estimated useful lives of the assets by the
                   straight-line method.

GOODWILL           Goodwill represents acquisition costs in excess of the fair
                   value of net tangible assets of businesses purchased. These
                   costs are being amortized over 40 years on a straight-line
                   basis. Goodwill is evaluated for impairment when events or
                   changes in circumstances indicate that the carrying amounts
                   of the assets may not be recoverable. The Company uses an
                   estimate of the related undiscounted operating income over
                   the remaining life of goodwill in measuring whether it is
                   recoverable.

                   The Company's Dealer Development Services, Inc. and Dealer
                   Insurance Services, Inc. subsidiaries were acquired on
                   January 28, 1997 (see Note 1). However, certain events and
                   changes in circumstances occurred during 1998 which indicated
                   the goodwill of Dealer Development Services, Inc. and Dealer
                   Insurance Services, Inc. may not be recoverable. The
                   operations of Dealer Development Services, Inc. were not
                   growing as expected, and therefore, the Company abandoned the
                   Dealer Development Services, Inc. operations during the
                   fourth quarter of 1998. The remaining goodwill specifically
                   related to the Dealer Development Services, Inc. acquisition
                   of $794,852 was recorded as an impairment charge and is
                   included in selling, general and administrative expenses in
                   the accompanying statement of operations. In September 1998,
                   the net assets of Dealer Insurance Services, Inc. were sold
                   back to the original seller for $425,000 in the form of a
                   note receivable from the buyer. The Company


                                      F-10
<PAGE>
                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

================================================================================


                   retained the Dealer Insurance Services, Inc. name and certain
                   Dealer Insurance Services, Inc. contracts and began focusing
                   the Dealer Insurance Services, Inc. operations on providing
                   credit life, warranty protection and auto insurance to the
                   Company's used car customers. As a result of the sale of a
                   portion of the Dealer Insurance Services, Inc. operations, a
                   portion of the goodwill specifically related to the Dealer
                   Insurance Services, Inc. acquisition was recorded as an
                   impairment charge ($250,995) and a net gain of $201,814 was
                   recorded. The impairment charge was determined based upon
                   projected operating income which was the lowest level of cash
                   flow projected to the remaining Dealer Insurance Services,
                   Inc. operations.

DEFERRED           Deferred financing costs include costs related to obtaining
FINANCING COSTS    debt financing and are being amortized over the term of the
                   debt.

INCOME TAXES       The Company accounts for income taxes using the liability
                   method. Under this method, deferred tax assets and
                   liabilities are determined based on differences between
                   financial reporting and tax bases of assets and liabilities.
                   Measurement of deferred income tax is based on enacted tax
                   rates and laws that will be in effect when the differences
                   are expected to reverse, with the measurement of deferred
                   income tax assets being reduced by available tax benefits not
                   expected to be realized.

IMPAIRMENT OF      Assets are evaluated for impairment when events change or
LONG-LIVED ASSETS  changes in circumstances indicate that the carrying amounts
                   of the assets may not be recoverable. When any such
                   impairment exists, the related assets will be written down to
                   fair value.

USE OF             The preparation of financial statements in conformity with
ESTIMATES          generally accepted accounting principles requires management
                   to make estimates and assumptions that affect the reported
                   amounts of assets and liabilities at the date of the
                   financial statements and the reported amounts of revenues and
                   expenses during the reporting period. Actual results could
                   differ from those estimates.


                                      F-11
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

================================================================================


LOSS PER           Loss per common share is based upon the weighted average
COMMON SHARE       number of common shares outstanding during each period.
                   Potential common shares for 1998, 1997 and 1996 have not been
                   included since their effect would be antidilutive. Potential
                   common shares as of December 31, 1998 include 1,895,375 stock
                   options, warrants exercisable for 919,070 shares, 1,117,135
                   shares underlying the convertible debt and 536,745 shares
                   underlying the convertible preferred stock.

RECLASSIFICATIONS  Certain reclassifications have been made to the prior year
                   financial statements to confirm with the current year
                   presentation.

RECENT ACCOUNTING  In June 1998, the Financial Accounting Standards Board issued
PRONOUNCEMENTS     SFAS 133, "Accounting for Derivative Instruments and Hedging
                   Activities." SFAS 133 requires companies to recognize all
                   derivatives contracts as either assets or liabilities in the
                   balance sheet and to measure them at fair value. If certain
                   conditions are met, a derivative may be specifically
                   designated as a hedge, the objective of which is to match the
                   timing of gain or loss recognition on the hedging derivative
                   with the recognition of (i) the changes in the fair value of
                   the hedged asset or liability that are attributable to the
                   hedged risk or (ii) the earnings effect of the hedged
                   forecasted transaction. For a derivative not designated as a
                   hedging instrument, the gain or loss is recognized in income
                   in the period of change. SFAS 133 is effective for all fiscal
                   quarters of fiscal years beginning after June 15, 1999.
                   Historically, the Company has not entered into derivatives
                   contracts either to hedge existing risks or for speculative
                   purposes. Accordingly, the Company does not expect adoption
                   of the new standard on July 1, 1999 to affect its
                   consolidated financial statements.

                   In June 1998, the AICPA issued SOP 98-5, "Reporting on the
                   Costs of Start-Up Activities." SOP 98-5 requires costs of
                   start-up activities and organizational costs, as defined, to
                   be expensed as incurred. The Company does not expect adoption
                   of the new SOP on January 1, 1999 to materially affect its
                   consolidated financial statements.


                                      F-12
<PAGE>


                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


1. ORGANIZATION    Smart Choice Automotive Group, Inc. (the "Company"), formerly
   AND             named "Eckler Industries, Inc.," operates new car dealerships
   ACQUISITIONS    and used car stores in Florida and underwrites, finances,
                   and services retail installment contracts generated from the
                   sale of used cars by its dealerships. The Company also
                   operates an insurance division as well as Eckler's, a
                   supplier of Corvette parts and accessories.

                   On January 28, 1997, pursuant to an Agreement and Plan of
                   Merger dated December 30, 1996 (the "Agreement"), Eckler
                   Industries, Inc.("EII") acquired all of the issued and
                   outstanding shares of common stock of Smart Choice Holdings,
                   Inc.("SCHI") in exchange for 1,463,969.5 shares of EII Class
                   A and 788,162 shares of EII Class B, common stock. Under the
                   terms of the Agreement, the shareholders of SCHI obtained
                   approximately 64% of the voting rights of EII. Although EII
                   was the parent of SCHI following the transaction, the
                   transaction was accounted for as a purchase of EII by SCHI (a
                   reverse acquisition in which SCHI is considered the acquirer
                   for accounting purposes), since the shareholders of SCHI
                   obtained a majority of the voting rights in EII as a result
                   of the transaction. Accordingly, the financial statements of
                   the Company for the periods prior to January 28, 1997 are
                   those of SCHI. The purchase price for EII was computed by
                   valuing the outstanding shares of common stock of EII (the
                   equivalent of 1,378,750 shares) at $6.75 or $9,306,563 and
                   acquisition costs of $100,119.

                   SCHI was incorporated on June 21, 1996 and was a
                   development-stage corporation prior to January 28, 1997. On
                   August 16, 1996, SCHI acquired the stock of First Choice Auto
                   Finance, Inc. ("FCAF"). On January 28, 1997, in addition to
                   the acquisition of EII, SCHI acquired the stock of Florida
                   Finance Group, Inc. ("FFG"), Dealer Insurance Services, Inc.
                   ("DIS") and Dealer Development Services, Inc. ("DDS"). The
                   purchase price of FFG was $1,181,008 notes due to the seller,
                   142,857 shares of common stock valued at $6.75 per share
                   ($964,285) and acquisition costs of


                                      F-13
<PAGE>
                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


                   $40,643. The purchase price of DDS and DIS was $781,000 notes
                   due to the sellers and acquisition costs of $24,561. FFG
                   underwrites, finances and services automobile retail
                   installment contracts and was based in St. Petersburg,
                   Florida prior to moving to the Company headquarters in
                   Titusville, Florida. FCAF was incorporated on March 22, 1994
                   and had no significant operations or assets until it acquired
                   the assets of Suncoast Auto Brokers, Inc. ("SAB"), and
                   Suncoast Auto Brokers Enterprises, Inc. ("SABE") on January
                   28, 1997. FCAF, based at the Company headquarters in
                   Titusville, Florida, now operates the three used vehicle lots
                   in St. Petersburg and Tampa, previously operated by SAB and
                   SABE. DIS was based in Tampa, Florida and provided insurance
                   services for automobile dealers. DDS was based in Tampa and
                   provided consulting services and training programs to
                   automobile dealers.

                   On February 12, 1997, the Company acquired the stock of
                   Liberty Finance Company ("Liberty"). On the same date, FCAF
                   acquired the stock of Wholesale Acquisitions, Inc. ("WA"),
                   and Team Automobile Sales and Finance, Inc. ("Team"). FFG
                   services the receivables purchased from Liberty, and FCAF
                   operates the five used vehicle lots previously operated by WA
                   and Team in Orlando, Florida. The outstanding capital stock
                   of Liberty and affiliates was acquired for $1,500,000 notes
                   due to the seller, the equivalent of 176,078 shares of common
                   stock valued at $6.75 per share ($1,188,527) and $109,249 in
                   acquisition costs.

                   On February 14, 1997, FCAF acquired the assets of Palm Beach
                   Finance and Mortgage Company ("PBF") and Two Two Five North
                   Military Corp. d/b/a Miracle Mile Motors ("MMM"). FFG
                   services the receivables purchased from PBF, and FCAF
                   operates the used vehicle lot previously operated by MMM
                   located in West Palm Beach, Florida. The net assets of PBF
                   and MMM were acquired for $3,050,000 cash, $1,473,175 notes
                   due to the seller, 142,857 shares of common stock valued at
                   $6.75 per share ($964,285) and $53,299 in acquisition costs.


                                      F-14
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


                   On June 27, 1997, the Company acquired the assets of Strata
                   Holdings, Inc. ("SHI") and Ready Finance, Inc. ("RFI"). FCAF
                   operates the three used vehicle lots previously operated by
                   SHI in West Palm Beach, Florida and FFG services the finance
                   receivables purchased from RFI. The net assets of SHI and RFI
                   were acquired for $5,000,000 cash, $4,880,089 notes due to
                   the seller and $27,271 in acquisition costs.

                   On June 30, 1997, the Company acquired the assets of Roman
                   Fedo, Inc. ("FEDO") and Fedo Finance, Inc. ("FFI"). FCAF
                   operates the used vehicle lot previously operated by FEDO in
                   West Palm Beach, Florida, and FFG services the finance
                   receivables purchased from FFI. The assets of FEDO were
                   acquired for $268,000 cash, 112,500 shares of common stock
                   valued at $9.00 per share ($1,012,500) and $8,741 in
                   acquisition costs.

                   On August 21, 1997, the Company acquired the assets of Jack
                   Winters Enterprises, Inc. ("Winters"). These assets consisted
                   of a retail automobile dealership located in Stuart, Florida
                   for Volvo automobiles and other consumer vehicles. The
                   business is being operated by First Choice Stuart 2, Inc., a
                   100%-owned subsidiary of the Company and is doing business as
                   Motorcars of Stuart. The purchase price of Winters was
                   $442,500 cash, $1,200,000 notes due the seller, 9,161 shares
                   of common stock valued at $10.25 per share ($93,900) and
                   acquisition costs of $49,540.

                   On August 29, 1997, the Company acquired the stock of B&B
                   Enterprises Inc. ("B&B"). B&B operates a retail automobile
                   dealership located in Stuart, Florida for Nissan automobiles
                   and other consumer vehicles. The business is being operated
                   by First Choice Stuart 1, Inc., a 100%- owned subsidiary of
                   the Company and is doing business as Stuart Nissan. The
                   purchase price of B&B was 43,273 shares of common stock
                   valued at $12.625 per share ($546,322) and acquisition costs
                   of $55,385.


                                      F-15
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


                   The acquisitions described above have been accounted for
                   using the purchase method of accounting, and accordingly, the
                   purchase prices have been allocated to the assets purchased
                   and the liabilities assumed based upon the fair values at the
                   dates of acquisition. The excess of the purchase prices over
                   the fair values of the net assets acquired was approximately
                   $26,000,000 and has been recorded as goodwill, which is being
                   amortized on a straight-line basis over 40 years.

                   The operating results of the significant acquired businesses
                   have been included in the consolidated statement of
                   operations from the dates of acquisition. The following pro
                   forma information has been prepared assuming certain of the
                   acquisitions above, which were deemed to be significant
                   acquisitions, had taken place at the beginning of the
                   respective periods. The pro forma information includes
                   adjustments for interest expense that would have been
                   incurred to finance the purchases, additional depreciation
                   based on the fair value of property acquired and the
                   amortization of intangibles arising from the transactions.
                   The pro forma financial information includes the activities
                   of discontinued operations (see Note 19) and is not
                   necessarily indicative of the results of operations as they
                   would have been had the transactions been effected on the
                   assumed dates.

<TABLE>
<CAPTION>
                                                                              UNAUDITED
                                                                   ------------------------------
                   YEAR ENDED DECEMBER 31,                               1997           1996
                   ------------------------------------------------------------------------------
<S>                                                                <C>             <C>
                   Total revenues                                  $   93,247,492  $  90,158,113
                   Net loss applicable to common stock                (19,884,913)    (3,803,046)
                   Basic loss per common share                              (4.32)         (1.34)
                   ==============================================================================
</TABLE>

                   The results of operations of the insignificant acquisitions
                   were not material to the Company's consolidated results of
                   operations.


                                      F-16
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

2. FINANCE         The following is a summary of principal balances, net as of
   RECEIVABLES     December 31, 1998 and 1997:

<TABLE>
<CAPTION>
                                                                          1998              1997
                   --------------------------------------------------------------------------------
<S>                                                           <C>                <C>
                   Contractually scheduled payments           $    113,651,628   $    55,107,232
                   Less: unearned finance charges                  (35,127,485)      (15,510,342)
                   --------------------------------------------------------------------------------

                   Principal balances                               78,524,143        39,596,890
                   Add: loan origination costs                         818,692           487,522
                   --------------------------------------------------------------------------------

                   Principal balances, net                          79,342,835        40,084,412
                   Less: allowance for credit losses               (12,157,569)       (6,857,265)
                   --------------------------------------------------------------------------------

                   Finance receivables, net                   $     67,185,266   $    33,227,147
                   ================================================================================
</TABLE>

                   Finance receivables consist of sales of used cars under
                   installment sale contracts with maturities that generally do
                   not exceed 48 months. The receivables bear interest at rates
                   ranging from 25.0% to 29.9% and are collateralized by the
                   vehicles sold. The Company holds title to the vehicles until
                   full contract payment is made. Finance receivables are
                   pledged as collateral under a line of credit agreement (see
                   Note 5).

                   Changes in the allowance for credit losses are as follows:

<TABLE>
<CAPTION>
                   YEAR ENDED DECEMBER 31,                                1998              1997
                   --------------------------------------------------------------------------------
<S>                                                             <C>               <C>
                   Balance at beginning of year                 $    6,857,265    $           --
                   Balance at dates of acquisitions                         --         5,627,937
                   Loans charged off, net of recoveries             (8,070,865)       (3,712,655)
                   Provision for credit losses                      13,371,169         4,941,983
                   --------------------------------------------------------------------------------

                   Balance at end of year                       $   12,157,569    $    6,857,265
                   ================================================================================
</TABLE>


                                      F-17
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


3. PROPERTY AND    Property and equipment consist of the following:
   EQUIPMENT

<TABLE>
<CAPTION>
                                                      ESTIMATED
                   DECEMBER 31,                     USEFUL LIFE             1998            1997
                   --------------------------------------------------------------------------------
<S>                                                 <C>            <C>             <C>
                   Land                                            $   1,177,091   $   1,177,091
                   Buildings and improvements       10-40 years        4,421,271       4,263,930
                   Leasehold improvements            7-39 years        1,043,221         708,009
                   Machinery and equipment            3-7 years          946,796         909,197
                   Molds                             5-10 years          408,712         310,305
                   Office equipment and furniture     3-8 years        4,239,758       3,542,413
                   Transportation equipment          3-10 years          134,946       2,482,521
                   Signs                                7 years          251,201         152,234
                   --------------------------------------------------------------------------------

                                                                      12,622,996      13,545,700
                   Less accumulated depreciation                       4,967,672       4,331,493
                   --------------------------------------------------------------------------------

                                                                   $   7,655,324   $   9,214,207
                   ================================================================================
</TABLE>

                   Property and equipment is pledged as collateral under a line
                   of credit agreement and various notes payable (see Notes 5
                   and 6).

4. ACCRUED         Accrued expenses consist of the following:
   EXPENSES

<TABLE>
<CAPTION>
                   DECEMBER 31,                                            1998             1997
                   --------------------------------------------------------------------------------
<S>                                                               <C>              <C>
                   Accrued compensation                           $   1,157,793    $     855,806
                   Accrued interest                                     829,114          411,913
                   Accrued professional fees                            337,984          897,837
                   Accrued restructuring charges                        415,412        1,101,266
                   Accrued taxes and other                              924,348        1,367,019
                   --------------------------------------------------------------------------------

                                                                  $   3,664,651    $   4,633,841
                   ================================================================================
</TABLE>


                                      F-18
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


5. LINE OF CREDIT  The Company has a revolving line of credit with a lender
                   which allows the Company to borrow the lesser of $100,000,000
                   or 55% of certain eligible accounts receivable at prime plus
                   2.5%. Interest is payable monthly with all of the outstanding
                   principal due December 2001. The line of credit is
                   collateralized by substantially all the assets of Florida
                   Finance Group, Inc. and is guaranteed by Smart Choice
                   Holdings, Inc.; Smart Choice Automotive Group, Inc.; and
                   First Choice Auto Finance, Inc. The balance at December 31,
                   1998 and 1997 under this line of credit was $63,700,000 and
                   $31,400,000, respectively, and represents the maximum amount
                   available under the line of credit at these dates.
                   Unamortized debt discount was $87,567 and $170,400 at
                   December 31, 1998 and 1997, respectively. The line of credit
                   agreement contains various financial and operating covenants.
                   As of December 31, 1998, the Company was in violation of the
                   net income requirement. The lender waived compliance with
                   this covenant through January 1, 2000.

                   The following summarizes certain information about the
                   borrowings under the line of credit:

<TABLE>
<CAPTION>
                                                                             1998           1997
                   --------------------------------------------------------------------------------
<S>                                                                 <C>            <C>
                   Maximum amount outstanding at any
                     month end                                      $  65,941,239  $  31,681,590
                   Average amount outstanding during the
                     period                                            49,591,667     21,921,484
                   Weighted average interest rate during the
                     period                                                10.97%         11.45%
                   ================================================================================
</TABLE>

                   Interest rates ranged from 10.25% to 11.50% and 11.25% to
                   11.50% and interest expense was $5,373,239 and $2,235,954 for
                   the years ended December 31, 1998 and 1997, respectively.


                                      F-19
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


6. NOTES PAYABLE   Notes payable consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,                                                                              1998               1997
--------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>                 <C>
10% term notes payable, interest payable semiannually, unpaid principal and
  interest due April 2000 or upon the sale of all or substantially all of the
  outstanding stock or assets of Eckler Industries, Inc. or the completion of a
  public offering in which the Company realizes at least $10 million in gross
  proceeds, collateralized by substantially all of the assets as well as
  all of the issued and outstanding stock of Eckler Industries, Inc. and
  guaranteed by Smart Choice Automotive Group, Inc.                               $  7,000,000        $        --

Notes payable issued in connection with various acquisitions, interest ranging
  from 9% to 12%, payable through June 2002.                                         4,776,695          6,029,146

12% unsecured convertible note payable, interest payable quarterly, unpaid
  principal and interest due May 2002, convertible at a rate of one share of
  common stock for every $15.00 of outstanding principal, conversion price
  adjustable upon the occurrence of certain events.                                  4,000,000          4,000,000

12% convertible note payable, net of discount, interest payable quarterly,
  unpaid principal and interest due June 2000, originally convertible at a rate
  of one share of common stock for every $12.00 of outstanding principal,
  conversion price adjustable upon the occurrence of certain events. On December
  31, 1997, the conversion price was adjusted to 90% of the market price of the
  Company's common stock. Accordingly, $282,506 of interest expense has been
  recorded for the year ended December 31, 1997 for the difference between the
  conversion price of the note payable and the fair
  market value of the Company's common stock on the date of adjustment.              3,418,125          3,025,125

Prime + 1.5% (9.25% at December 31, 1998) mortgage note payable, principal
  payments of $14,405 plus interest payable monthly, outstanding principal and
  interest due July 2001, collateralized by property and equipment of Eckler
  Industries, Inc. and guaranteed by Eckler Industries, Inc.                         2,306,903          2,500,000

Variable rate installment loan payable, principal and interest payable monthly,
  outstanding principal and interest due December 2009,
  collateralized by certain property of the Company, repaid in 1998.                        --          2,199,900

Various unsecured notes payable to investors bearing interest at rates ranging
  from 10%-16%, interest payable monthly, outstanding principal balances due
  through December 2001.                                                             1,270,507          1,699,142
</TABLE>


                                      F-20
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

<TABLE>
<CAPTION>
DECEMBER 31,                                                                              1998               1997
--------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>                 <C>
10% term note payable, interest payable monthly, outstanding principal due upon
  the earlier of April 2000, or the sale or transfer of all or substantially all
  of the outstanding stock or assets of Eckler Industries, Inc., collateralized
  by substantially all of the assets as well as all of the issued and outstanding
  capital stock of Eckler Industries, Inc. and guaranteed by Smart Choice
  Automotive Group, Inc.                                                             1,500,000          1,500,000

9% unsecured convertible notes payable, interest and principal due June 2000,
  convertible at a rate of one share of common stock for each $17.50 of
  principal, $800,000 was repaid in 1998.                                              467,601          1,267,601

8% convertible debentures, net of discount (see below)                                      --            965,784

12% unsecured convertible note payable, interest and principal due June 2000,
  convertible at a rate of one share of common stock for each $17.50 of
  principal.                                                                           600,000          1,031,008

Prime plus 1.75% (9.5% at December 31, 1998) notes payable, principal of
  $16,871 plus interest payable monthly, unpaid principal and interest due at
  various dates through July 2003, secured by substantially all the assets of
  First Choice Stuart 1, Inc. and guaranteed by First Choice Auto Finance,
  Inc. and Smart Choice Holdings, Inc. The notes are subject to various
  financial and operating covenants. As of December 31, 1998, the Company was
  in violation of the working capital and cash requirements. The lender has
  waived these violations through January 1, 2000.                                     759,818            894,173

8% note payable, principal and interest of $10,010 payable monthly through
  June 2007, collateralized by certain property of the Company.                        739,062            797,488

Prime (7.75% at December 31, 1998) unsecured convertible subordinated debenture,
  net of discount, interest payable quarterly, unpaid principal and interest due
  December 31, 2000, originally convertible at the rate of one share of common
  stock for every $18.00 of outstanding principal, conversion price adjustable
  upon the occurrence of certain events. On March 6, 1998, the conversion price
  was adjusted to 90% of the market price of the Company's common stock.
  Accordingly, $83,333 of interest expense has been recorded for the difference
  between the conversion price of the debenture and the fair market value of the
  Company's common stock on the date of adjustment. This debenture was converted
  in March 1999 into 398,799 shares of common stock.                                   715,263            697,895

Prime plus 1% unsecured note payable, interest payable monthly, outstanding
  principal repaid in 1998.                                                                 --            600,000

7.75% note payable, principal and interest of $8,683 payable monthly through
  December 2003, secured by certain real property of the Company, repaid in 1998.           --            498,923

12% convertible debentures (see below)                                                 340,000            410,000
</TABLE>


                                      F-21
<PAGE>


                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

<TABLE>
<CAPTION>
DECEMBER 31,                                                                              1998               1997
--------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>                 <C>
Prime plus 1% note payable, interest payable monthly, principal due upon
  demand, repaid in 1998.                                                                   --            300,000

Various notes payable bearing interest at rates from 6% to 12%, principal and
  interest payable through April 2011.                                                 199,505            274,023

10% unsecured note payable, interest payable monthly, outstanding principal
  repaid in 1998.                                                                           --            257,250

Prime plus 1% (8.75% at December 31, 1998) unsecured convertible subordinated
  note payable, interest payable quarterly, unpaid principal and interest due
  June 1999, originally convertible at a rate of one share of common stock for
  every $15.00 of outstanding principal, conversion price adjustable upon the
  occurrence of certain events. On December 31, 1997, the conversion price was
  adjusted to 90% of the market price of the Company's common stock.
  Accordingly, $20,179 of interest expense has been recorded for the year ended
  December 31, 1997 for the difference between the conversion price of the note
  payable and the fair market value of the Company's common stock on
  the date of issuance. This note was converted in March 1999 into 132,933
  shares of common stock.                                                              250,000            250,000
--------------------------------------------------------------------------------------------------------------------

Total notes payable                                                               $ 28,343,479        $ 29,197,458
====================================================================================================================
</TABLE>

                   Aggregate maturities of notes payable over future years are
                   as follows: 1999 - $3,118,952; 2000 - $14,405,735; 2001 -
                   $2,737,175; 2002 - $7,528,895; 2003 - $167,342; thereafter -
                   $385,380.

                   Unamortized debt discount was $116,610 and $611,196 at
                   December 31, 1998 and 1997, respectively.

                   8% CONVERTIBLE DEBENTURES

                   The unsecured convertible debentures bear interest at 8%.
                   Interest is payable monthly, and all outstanding principal is
                   due April 1999. The debentures were convertible from December
                   14, 1997 through April 15, 1998 at a conversion price equal
                   to 66 2/3% of the average closing bid price of the Company's
                   common stock for the five trading days immediately preceding
                   the conversion date.


                                      F-22
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


                   Accordingly, $525,000 of interest expense was recorded for
                   the year ended December 31, 1997 for the difference between
                   the conversion price of the debentures and the fair market
                   value of the Company's stock at the time of issuance. The
                   interest rate and conversion price are both adjustable upon
                   the occurrence of certain events. During the year ended
                   December 31, 1998, $965,784 of the debentures was converted
                   into 276,523 shares of common stock.

                   12% CONVERTIBLE DEBENTURES

                   The convertible debentures bear interest at 12% and were due
                   on November 19, 1997. The debentures were convertible prior
                   to November 19, 1997 into the Company's common stock at a
                   rate of one share of common stock for each $10.00 of
                   outstanding principal. Additionally, holders of the
                   debentures who did not convert prior to the maturity date
                   received, for each $20,000 debenture, a warrant to purchase
                   600 shares of the Company's common stock at $6.00 per share.
                   The warrants are immediately exercisable and expire five
                   years from the date of issuance. During 1998, the maturity
                   date of the convertible debentures was extended to January
                   1999 and the interest rate was increased to 15%.


                                      F-23
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


7. FLOOR PLANS     Floor plans payable consist of the following:
   PAYABLE

<TABLE>
<CAPTION>
DECEMBER 31,                                                                                    1998         1997
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>          <C>
$3,350,000 floor plan line of credit, variable interest rate, interest payable
  monthly, principal balance payable at the earlier of the time a vehicle is
  sold or 360 and 180 days from the time a vehicle is floored for new and used
  vehicles, respectively, guaranteed by Smart Choice Automotive Group, Inc.,
  collateralized by vehicle inventory floored. The line of credit agreement
  contains certain financial ratio covenants.                                             $ 3,007,827  $ 3,285,165

$3,750,000 floor plan line of credit, interest at prime plus 1.5% (9.25% at
  December 31, 1998), interest payable monthly, principal balance payable the
  earlier of (i) 48 hours from the time of sale of a vehicle or within 24 hours
  from the time payment is received from the purchaser of the vehicle or (ii)
  upon demand, collateralized by all inventory, fixed assets, holdback reserves,
  manufacturers' rebates, incentive payments and intangible assets of First
  Choice Auto Finance, Inc., guaranteed by Smart Choice Automotive Group, Inc.              3,190,739    2,659,968

$3,000,000 floor plan line of credit, interest at prime plus 1% (8.75% at
  December 31, 1998), interest payable monthly, principal payable upon sale of
  floored vehicle, guaranteed by Smart Choice Automotive Group, Inc.,
  collateralized by certain assets of First Choice Stuart 1, Inc. The line of
  credit is subject to various financial and operating covenants. As of December
  31, 1998 and December 31, 1997, the Company was in violation of certain of the
  covenants. The lender has waived these covenants through January 1, 2000.                 2,503,402    2,341,959
--------------------------------------------------------------------------------------------------------------------

Total                                                                                     $ 8,701,968  $ 8,287,092
====================================================================================================================
</TABLE>


                                      F-24
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


8. INCOME TAXES    The components of deferred income tax assets consist of the
                   following:

<TABLE>
<CAPTION>
                   DECEMBER 31,                                           1998              1997
                   --------------------------------------------------------------------------------
<S>                                                           <C>                 <C>
                   Deferred income tax assets:
                     Net operating loss carryforwards         $      2,910,000    $    3,476,000
                     Accounts receivable                             4,672,000         2,589,000
                     Stock options                                   1,901,000         1,805,000
                     Charitable contribution carryforwards             303,000           523,000
                     Compensation and accrued vacation                 915,000           423,000
                     Depreciation and amortization                     626,000           243,000
                     Inventory and other                               103,000           149,000
                     Warranty reserve                                  235,000            93,000
                   --------------------------------------------------------------------------------

                   Gross deferred income tax assets                 11,665,000         9,301,000
                   Valuation allowance                             (11,665,000)       (9,301,000)
                   --------------------------------------------------------------------------------

                   Total deferred income tax assets           $             --    $           --
                   ================================================================================
</TABLE>

                   The Company's valuation allowance increased by approximately
                   $2,364,000 and $9,063,000 for the years ended December 31,
                   1998 and 1997, respectively, which represents the effect of
                   changes in the temporary differences and net operating
                   losses. The Company has recorded a valuation allowance to
                   state its deferred tax assets at estimated net realizable
                   value due to the uncertainty related to realization of these
                   assets through future taxable income.

                   At December 31, 1998, the Company had unused federal tax net
                   operating losses (NOLs) to carry forward against future
                   years' taxable income of approximately $8,557,000 expiring in
                   various amounts through 2018. As a result of certain
                   acquisitions, the use of approximately $1,141,000 of the NOLs
                   will be limited each


                                      F-25
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

                   year under the provisions of Section 382 of the Internal
                   Revenue Code of 1986, as amended, and the provisions of
                   Treasury Regulation 1.1502-21 regarding separate return
                   limitation years.

9. COMMITMENTS     LEASES
   AND
   CONTINGENCIES   The Company conducts its operations partially from leased
                   facilities. These leases are classified as operating leases
                   and expire on various dates through 2005.

                   The Company also leases equipment under capital leases which
                   expire on various dates through 2003. The total capitalized
                   cost for this equipment is $1,304,807 and $1,004,961 with
                   accumulated depreciation of $509,444 and $116,015 as of
                   December 31, 1998 and 1997, respectively.

                   As of December 31, 1998, future minimum lease payments under
                   capital leases and future minimum rental payments required
                   under operating leases that have initial or remaining
                   noncancelable lease terms in excess of one year are as
                   follows:

<TABLE>
<CAPTION>
                                                                        CAPITAL         OPERATING
                                                                         LEASES            LEASES
                   ---------------------------------------------------------------------------------
<S>                <C>                                            <C>               <C>
                   1999                                           $     368,993     $   2,257,000
                   2000                                                 351,203         1,848,000
                   2001                                                 280,355         1,702,000
                   2002                                                 189,936         1,158,000
                   2003                                                   1,737           670,000
                   Thereafter                                                 -           804,000
                   ---------------------------------------------------------------------------------

                                                                      1,192,224     $   8,439,000
                                                                                    ==============

                   Less amount representing interest                    194,308
                                                                 --------------

                   Present value of net minimum lease payments    $     997,916
                                                                  =============
</TABLE>


                                      F-26
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


                   Rental expense for the years ended December 31, 1998 and 1997
                   was approximately $2,742,000 and $1,524,000, respectively.

                   EMPLOYMENT AGREEMENTS

                   The Company has entered into employment agreements expiring
                   at various dates through the year 2002. As of December 31,
                   1998, the Company's total noncancellable obligation under all
                   employment agreements is approximately $2,222,000.

                   LITIGATION

                   During March 1999, certain shareholders of the Company filed
                   two punitive 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 for the year ended
                   December 31, 1998 announced on February 10, 1999 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


                                      F-27
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


                   Company cannot predict the ultimate resolution of these
                   actions at this time, and there can be no assurance that the
                   litigation will not have a material adverse impact on the
                   Company's financial condition and results of operations.

                   The Company is involved in other legal and administrative
                   proceedings and claims of various types. While any litigation
                   contains an element of uncertainty, based upon the opinion of
                   the Company's legal counsel, management presently believes
                   that the outcome of such proceedings or claims which are
                   pending or known to be threatened will not have a material
                   adverse effect on the Company's financial position or results
                   of operations since the Company has accrued sufficient
                   amounts to cover the costs expected to be incurred in
                   settlement of these actions.

                   ENVIRONMENTAL MATTERS

                   Some of the Company's past and present operations involve
                   activities which are subject to extensive and changing
                   federal and state environmental regulations and can give rise
                   to environmental issues. As a result, the Company is from
                   time to time involved in administrative and judicial
                   proceedings and administrative inquiries related to
                   environmental matters. Based on advice of counsel, management
                   believes that the outcome of these matters will not have a
                   material impact on the Company's financial position.

10. REDEEMABLE     During December 1996 and January 1997, the Company  sold
    CONVERTIBLE    395,000 shares of Series A redeemable convertible preferred
    PREFERRED      stock. Proceeds from these offerings, net of offering costs,
    STOCK          were approximately $977,000. The liquidation preference of
                   each preferred share is $2.00. Upon the completion of an
                   initial public offering of the Company that raises a minimum
                   of $20 million in gross proceeds, each preferred share will
                   be converted automatically into the higher of: (i) one share
                   of the Company's


                                      F-28
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


                   $.01 par value common stock or (ii) that number of shares of
                   common stock having a value (as measured by a public offering
                   sale price) equal to $9.00. The holders of the Series A
                   shares may require, by a two-thirds vote of the issued and
                   outstanding Series A shares, that the Company offer to redeem
                   the Series A shares at any time after September 30, 1998. The
                   redemption price will equal $2.00 per share. As of December
                   31, 1998, all of these Series A shares had been exchanged for
                   526,500 shares of common stock of the Company.

                   On September 30, 1997, the Company completed an offering of
                   300 units of Series A redeemable convertible preferred stock
                   and warrants at $10,000 per unit. Proceeds from the offering,
                   net of offering costs, were approximately $2,965,000. Each
                   unit consists of one share of Series A redeemable convertible
                   preferred stock and one warrant to acquire 150 shares of
                   common stock for each preferred share purchased at a price
                   equal to $16.20 per share. The warrants expire five years
                   after the date of issuance. The preferred stock is
                   convertible into shares of common stock at a conversion price
                   which, at the option of the buyer, is either fixed at a rate
                   of 135% of the market price of common stock on the date of
                   issuance of the preferred stock, or floating at a rate of
                   100% of the market price of the common stock if converted
                   during the period 90 days after the issuance of the preferred
                   stock and 90% of the market price if converted at any time
                   after that 90-day period. Accordingly, since none of the
                   preferred stock was converted 90 days after issuance, a
                   preferred stock dividend of $333,333 ($.08 per share) has
                   been recorded for the year ended December 31, 1997 for the
                   difference between the discounted conversion price of the
                   preferred stock and the fair market value of the Company's
                   common stock at the time of issuance. The preferred stock is
                   redeemable at the option of the buyer upon the occurrence of
                   certain events at a price per share that is also dependent
                   upon the occurrence of certain events.


                                      F-29
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


                   On December 10, 1997, the Company issued an additional 100
                   units of the Series A redeemable convertible preferred stock
                   and associated warrants for net proceeds of $1,000,000. Each
                   unit consists of one share of Series A redeemable convertible
                   preferred stock and one warrant to acquire 150 shares of
                   common stock for each preferred share purchased at a price
                   equal to $10.46 per share. The warrants expire five years
                   after the date of issuance. The preferred stock has features
                   identical to that of the Series A redeemable convertible
                   preferred stock issued on September 30, 1997. As of December
                   31, 1998, all but one share of Series A redeemable
                   convertible preferred stock issued in September 1997 and
                   December 1997 had been converted into 872,462 shares of
                   common stock.

11. PREFERRED      In May 1998, the Company sold to a private investment group
    STOCK          220 shares of the Company's Series B convertible preferred
                   stock for $10,000 per share. Proceeds from this offering, net
                   of offering costs, were approximately $2,200,000. The Series
                   B convertible preferred stock accrues dividends at a rate of
                   11% per year and is convertible into common stock at a
                   conversion rate of $10.00 per share. After November 5, 1999,
                   the Company may, at its option, redeem the Series B
                   convertible preferred stock for $10,000 per share. In
                   connection with the issuance of the Series B convertible
                   preferred stock, the Company agreed to certain limitations on
                   the issuance of additional shares of preferred stock by the
                   Company.

                   In June 1998, the Company sold to a private investment group
                   24.98 shares of the Company's Series C convertible preferred
                   stock for $10,000 per share. Proceeds from this offering, net
                   of offering costs, were approximately $249,800. The Series C
                   convertible preferred stock accrues dividends at a rate of
                   11.0% per year and is convertible into common stock at a
                   conversion rate of $11.18 per share. After December 2, 1999,
                   the Company may, at its option, redeem the Series C
                   convertible preferred stock for $10,000 per share. In
                   connection with the issuance of the Series C


                                      F-30
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


                   convertible preferred stock, the Company agreed to certain
                   limitations on the issuance of additional shares of preferred
                   stock by the Company.

                   In June 1998, the Company sold to a private investment group
                   350 shares of the Company's Series D convertible preferred
                   stock for $10,000 per share. Proceeds from this offering, net
                   of offering costs, were approximately $3,441,600. The Series
                   D convertible preferred stock accrues dividends at a rate of
                   11.0% per year for five years, after which the rate increases
                   to 20% per year. The Series D convertible preferred stock is
                   convertible into common stock at a conversion rate of $12.00
                   per share. After June 22, 2001, the Company may, at its
                   option, redeem the Series D convertible preferred stock for
                   $10,000 per share. In connection with the issuance of the
                   Series D convertible preferred stock, the Company agreed to
                   certain limitations on the issuance of additional shares of
                   preferred stock by the Company.

12. CONTINGENT     In connection with the acquisitions in January and February
    REDEMPTION     1997 ("Predecessor Acquisition"), two founding stockholders
    VALUE OF       of SCHI each received 588,695 shares of common stock of the
    PUT OPTIONS    Company in exchange for shares of SCHI common stock. Each of
                   the two founding stockholders were also beneficiaries under
                   two trusts, the Management Trust and the Finance Trust. As
                   part of the Predecessor Acquisition, these trusts received a
                   total of 710,000 shares of common stock in exchange for the
                   SCHI common stock. The founding stockholders have the sole
                   right to receive any proceeds of the sale of the common stock
                   held by the trusts.

                   The trusts shall, after the first to occur of 1) the
                   satisfaction of the purposes of the trusts and the exercise
                   or expiration of all options granted with respect to the
                   shares of the Company's common stock or 2) February 15, 2007,
                   cause shares of common stock held by the trust to be
                   purchased by the Company (the "Put Option"). The purchase
                   price per share for the Finance Trust is $4.00 and for the


                                      F-31
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


                   Management Trust is the average of the closing market price
                   for 20 days immediately preceding the date of the trustees'
                   notice regarding such purchase by the Company. Accordingly,
                   the redemption value of the Put Option of $1,539,148 and
                   $2,840,006 as of December 31, 1998 and 1997, respectively
                   represents the options' price multiplied by the number of
                   shares under option, and is presented in the accompanying
                   consolidated balance sheet as "Contingent Redemption Value of
                   Common Stock Put Options." The decrease in the redemption
                   value of $1,300,852 during 1998 was recorded as additional
                   paid-in capital.

                   Options were granted to employees and lenders under these
                   trusts. The trusts will receive the proceeds, if any, from
                   the exercise of these options. Since these options were not
                   granted by the Company and their exercise will not result in
                   the issuance of any additional common stock, they have been
                   excluded from the tables included in Note 13.

13. CAPITAL        INCREASE IN PAR VALUE AND STOCK SPLIT
    STOCK
                   In March 1997, the Company authorized an increase in the par
                   value of its common stock from $.001 to $.01. On July 23,
                   1998, the Board of Directors authorized a 1-for-2 reverse
                   stock split with respect to the common stock. All common
                   share information included in the accompanying financial
                   statements has been retroactively adjusted to give effect to
                   the increase in par value and the reverse stock split.

                   STOCK OPTIONS

                   The Company applies APB Opinion 25, "Accounting for Stock
                   Issued to Employees," and related interpretations in
                   accounting for options issued to employees. Accordingly, no
                   compensation cost has been recognized for options granted to
                   employees at exercise prices which equal or exceed the market
                   price of the Company's


                                      F-32
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


                   common stock at the date of grant. Options granted at
                   exercise prices below market prices are recognized as
                   compensation cost measured as the difference between market
                   price and exercise price at the date of grant.

                   Statement of Financial Accounting Standards No. 123 (FAS 123)
                   "Accounting for Stock-Based Compensation," requires the
                   Company to provide pro forma information regarding net income
                   and earnings per share as if compensation cost for the
                   Company's employee stock options had been determined in
                   accordance with the fair market value based on the method
                   prescribed in FAS 123. The Company estimates the fair value
                   of each stock option at the grant date by using the
                   Black-Scholes option-pricing model with the following
                   weighted-average assumptions used for grants in the years
                   ended December 31, 1998 and 1997, respectively: no dividend
                   yield, an expected life of 5.0 and 4.9 years; expected
                   volatility of 75% and 61%, and a risk-free interest rate of
                   5.6% and 6%.

                   Under the accounting provisions of FAS 123, the Company's net
                   loss applicable to common stock and loss per share would have
                   been increased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                   YEAR ENDED DECEMBER 31,                       1998           1997        1996
                   --------------------------------------------------------------------------------
<S>                                                      <C>            <C>            <C>
                   Net loss applicable to common
                     stock from continuing operations
                       As reported                       $ (7,777,224)  $(17,589,020)  $(703,788)
                       Pro forma                           (7,998,224)   (21,177,799)   (703,788)

                   Basic loss per common share from
                     continuing operations
                       As reported                       $      (1.26)  $     (3.97)   $    (.26)
                       Pro forma                                (1.29)        (4.76)        (.26)

                   Net loss applicable to common stock
                       As reported                       $ (7,348,386)  $(18,981,938)  $(703,788)
                       Pro forma                           (7,569,386)   (22,570,717)   (703,788)

                   Basic loss per common share
                       As reported                       $      (1.19)  $      (4.28)  $    (.26)
                       Pro forma                                (1.22)         (5.09)       (.26)
                   ================================================================================
</TABLE>


                                      F-33
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


                   The following table summarizes information about employee
                   plan and non-plan stock option activity for the periods ended
                   December 31, 1998, 1997 and 1996:

<TABLE>
<CAPTION>
                                                                                 WEIGHTED-AVERAGE
                                                               WEIGHTED-AVERAGE     FAIR VALUE OF
                                                       SHARES    EXERCISE PRICE   OPTIONS GRANTED
                   --------------------------------------------------------------------------------
<S>                                                 <C>                 <C>                <C>
                   Outstanding, December 31, 1996          --           $   --             $  --
                     Acquired in merger                87,500             5.32                --
                     Granted, at market value         419,000             9.78              5.56
                     Granted, above market value       15,000            13.00              7.10
                     Granted, below market value       25,000             8.14              5.06
                     Exercised                         (6,250)            5.00                --
                     Forfeited                         (1,500)            9.76                --
                   --------------------------------------------------------------------------------

                   Outstanding, December 31, 1997     538,750             9.12                --
                     Granted, at market value         909,200             8.17              5.27
                     Exercised                         (5,000)            5.50                --
                     Forfeited                       (104,575)            9.39                --
                   --------------------------------------------------------------------------------

                   Outstanding, December 31, 1998   1,338,375           $ 8.47             $  --
                   ================================================================================
</TABLE>

                   At December 31, 1998 and 1997, a total of 413,250 and 301,250
                   options were exercisable at a weighted-average exercise price
                   of $7.34 and $8.48, respectively.

                   The following table summarizes information about non-plan
                   stock option activity issued to non-employees for the periods
                   ended December 31, 1998, 1997 and 1996:

<TABLE>
<CAPTION>
                                                                                 WEIGHTED-AVERAGE
                                                               WEIGHTED-AVERAGE     FAIR VALUE OF
                                                       SHARES    EXERCISE PRICE   OPTIONS GRANTED
                   --------------------------------------------------------------------------------
<S>                                                 <C>                 <C>                <C>
                   Outstanding - inception                 --           $   --             $  --
                     Granted, above market value      145,000             9.50                --
                   --------------------------------------------------------------------------------

                   Outstanding, December 31, 1996     145,000             9.50                --
                     Acquired in merger               522,000             7.62                --
                     Granted, at market value         116,250            10.12              5.16
                     Granted, above market value      150,000            16.34              4.56
                     Forfeited                       (340,000)            7.58                --
                     Expired                          (20,000)           10.00                --
                   --------------------------------------------------------------------------------

                   Outstanding, December 31, 1997     573,250            10.82                --
                     Granted, at market value          43,750             6.34              4.16
                     Granted, above market value        6,250             8.75              5.42
                     Exercised                        (66,250)            5.69                --
                   --------------------------------------------------------------------------------

                   Outstanding, December 31, 1998     557,000           $10.14             $  --
                   ================================================================================
</TABLE>


                                      F-34
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


                   At December 31, 1998, 1997 and 1996, a total of 532,000,
                   498,250 and 131,000 options were exercisable at a
                   weighted-average exercise price of $10.17, $10.28 and $9.84,
                   respectively.

                   The following table summarizes information about stock
                   options outstanding and exercisable at December 31, 1998:

<TABLE>
<CAPTION>
                                            OPTIONS OUTSTANDING             OPTIONS EXERCISABLE
                                     ----------------------------------  --------------------------
                                                  WEIGHTED-  WEIGHTED-                  WEIGHTED-
                                                   AVERAGE     AVERAGE                   AVERAGE
                   RANGE OF              NUMBER   EXERCISE   REMAINING         NUMBER   EXERCISE
                   EXERCISE PRICES   OUTSTANDING     PRICE        LIFE    EXERCISABLE      PRICE
                   --------------------------------------------------------------------------------
<S>                                     <C>          <C>     <C>              <C>          <C>
                   EMPLOYEE PLAN AND
                     NON-PLAN OPTIONS
                   $3.38 to $5.00       254,250      $4.10   3.9 years        156,250      $3.96
                   $6.00 to $8.50        96,975       7.59   3.7 years         32,500       7.15
                   $9.00 to $13.00      987,150       9.68   4.0 years        224,500       9.72
                   --------------------------------------------------------------------------------

                                      1,338,375      $8.47                    413,250      $7.34
                   ================================================================================

                   NON-EMPLOYEE
                     NON-PLAN OPTIONS
                   $3.52 to $6.00       127,500      $5.24   3.0 years        127,500      $5.24
                   $8.75 to $13.00      379,500      10.82   3.2 years        354,500      10.90
                   $17.50                50,000      17.50   3.0 years         50,000      17.50
                   --------------------------------------------------------------------------------

                                        557,000     $10.14                    532,000     $10.17
                   ================================================================================
</TABLE>

                   COMMON STOCK OPTIONS ISSUED - COMPENSATION

                   During the year ended December 31, 1998, compensation expense
                   of $215,875 was recognized on common stock options granted to
                   directors. During the year ended December 31, 1997,
                   compensation expense of $3,809,826 was recognized on common
                   stock options granted to employees and directors. These
                   options were granted by trusts created by two major
                   stockholders to


                                      F-35
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


                   purchase shares of the Company's common stock owned by the
                   trusts. The trusts will receive the proceeds, if any, from
                   the exercise of these options. Since these options were not
                   granted by the Company and their exercise will not result in
                   the issuance of any additional common stock, they have been
                   excluded from the tables above. Additional compensation
                   expense was recognized during 1997 as a result of the
                   issuance of 160,000 shares of common stock by the
                   aforementioned trusts in exchange for stock options for
                   680,000 shares of common stock relinquished by a former
                   employee. The 160,000 shares were valued at approximately
                   $800,000 based upon the market price at the date of their
                   issuance. Since the stockholders of these trusts were, in
                   effect, fulfilling an obligation of the Company, the value of
                   these shares was recorded as compensation expense.

                   COMMON STOCK OPTIONS ISSUED - CONSULTANTS

                   During the year ended December 31, 1997, options granted to
                   consultants were valued at $607,700 in accordance with FAS
                   123.

                   COMMON STOCK ISSUED - PROFESSIONAL FEES

                   During the year ended December 31, 1997, the Company issued
                   8,965 shares of common stock as payment for professional
                   services. The shares were valued at $99,806, which represents
                   the fair value of the stock on the date of issuance.

                   COMMON STOCK OPTIONS AND WARRANTS ISSUED - LENDERS

                   During 1997, the Company entered into various agreements with
                   lending institutions and issued options and warrants to
                   purchase 236,250 shares of the Company's common stock at
                   exercise prices ranging from $4.00 to $24.00 per share. The
                   options and warrants expire at various dates ranging from
                   December 1999 through August 2002. During 1998, the exercise
                   price of certain of the


                                      F-36
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


                   options and warrants was reduced pursuant to the provisions
                   of the individual option and warrant agreements.

                   The above common stock options and warrants were valued at
                   $1,350,253 in accordance with the provisions of FAS 123. This
                   amount was recorded as debt discount and is being amortized
                   over the life of the related debt. Interest expense related
                   to these options and warrants was $577,419 and $466,979 for
                   the years ended December 31, 1998 and 1997, respectively.

                   COMMON STOCK WARRANTS ISSUED - PREFERRED STOCKHOLDERS

                   During the year ended December 31, 1998, the Company issued
                   common stock warrants to purchase 40,000 shares of common
                   stock at exercise prices ranging from $10.46 to $16.20 per
                   share to certain of its preferred stockholders. The warrants
                   were valued at $254,802 in accordance with the provisions of
                   FAS 123. This amount was recorded as penalty expense and is
                   included as selling, general and administrative expenses in
                   the accompanying consolidated statements of operations.

                   COMMON STOCK ISSUED - DEBT CONVERSION

                   During the year ended December 31, 1998, the Company issued
                   343,943 shares of common stock in conversion of debt
                   amounting to $1,497,716.

                   During the year ended December 31, 1997, the Company issued
                   221,257 shares of common stock in conversion of debt
                   amounting to $1,770,056.

                   COMMON STOCK - INCENTIVE PLAN

                   During 1998, the Company's Board of Directors and
                   stockholders approved the 1998 Executive Incentive
                   Compensation Plan (the


                                      F-37
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


                   "Plan"). This Plan provides for grants of stock options,
                   stock appreciation rights, restricted stock, deferred stock
                   dividend equivalents and other forms of stock-based and non
                   stock-based compensation. The Plan provides that up to
                   750,000 shares of the Company's common stock may be granted
                   as awards under the Plan.

                   STOCK WARRANTS

                   At December 31, 1998, the Company had the following stock
                   warrants outstanding:

                                                  NUMBER OF
                                                 UNDERLYING         EXERCISE
                   EXPIRATION DATE                   SHARES            PRICE
                   ------------------------------------------------------------
                   December 31, 1999                 35,000        $    4.00
                   November 8, 2000                   6,250        $   12.00
                   November 14, 2000                642,000        $   13.00
                   March 30, 2001                    10,000        $    8.40
                   August 29, 2002                   26,250        $    4.75
                   September 30, 2002                45,000        $   16.20
                   November 19, 2002                 16,560        $    6.00
                   December 10, 2002                 15,000        $   10.46
                   December 24, 2002                 45,000        $    8.00
                   December 30, 2002                    600        $    6.00
                   January 29, 2003                  37,410        $   10.00
                   June 1, 2003                      10,001        $   10.46
                   June 1, 2003                      29,999        $   16.20
                                                ------------

                                                    919,070
                                                ============

                   At December 31, 1998, 919,070 of the warrants were
                   exercisable.


                                      F-38
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


                   SHARES RESERVED

                   At December 31, 1998, the Company has reserved approximately
                   11,985,000 shares of common stock for future issuance under
                   all of the above arrangements, the convertible debt and the
                   convertible preferred stock.

14. RESTRUCTURING  During the fourth quarter of 1997, after all acquisitions
    CHARGE         were completed, the Company implemented a restructuring
                   program (the "Program") designed to enhance overall
                   competitiveness and efficiency through the reduction of
                   operating costs. The Program resulted in a charge to
                   operations of $2,117,906. The charge consists primarily of
                   costs related to employment contract terminations and
                   severance pay. At December 31, 1998 and 1997, approximately
                   $415,000 and $1,101,266 related to disputed employment
                   termination claims was included in accrued expenses.

15. RETIREMENT     The Company sponsors a defined contribution pension plan for
    BENEFIT PLAN   all employees meeting certain eligibility requirements. The
                   plan provides for voluntary employee contributions and
                   contributions by the Company to be determined at the
                   discretion of the Board of Directors. The Company made no
                   contribution to the plan for the years ended December 31,
                   1998 and 1997.


                                      F-39
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


16. SUPPLEMENTAL   The Company considers all highly liquid investments with a
    CASH FLOW      maturity of three months or less to be cash equivalents.
    INFORMATION

<TABLE>
<CAPTION>
                   YEAR ENDED DECEMBER 31,                                    1998          1997
                   --------------------------------------------------------------------------------
<S>                                                                  <C>           <C>
                   Cash paid for interest                            $   8,611,127 $   4,228,339
                   ================================================================================

                   Noncash investing and financing activities:
                     Notes payable and capital lease obligations
                       incurred in connection with the purchase of
                       property and equipment                        $     316,516 $   3,722,670
                     Notes payable issued in connection with
                       acquisitions                                             --    11,015,272
                     Modification to conversion price of debt               83,333            --
                     Increase (decrease) in contingent liability of
                       put options                                      (1,300,852)    2,840,000
                     Common stock issued in connection with
                       acquisitions                                             --    14,413,880
                     Common stock issued for conversion of debt          1,497,716     1,770,056
                     Common stock options granted to employees and
                       directors                                           215,875     3,809,826
                     Common stock options and warrants issued to
                       consultants, lenders and others                     254,802     1,957,953
                     Common stock issued for services                       36,376        99,806
                     Common stock issued by stockholders for
                       cancellation of common stock options granted
                       by the Company                                           --       800,000
                     Common stock issued for stock notes receivable        115,200            --
                     Contribution to capital by stockholder                     --       159,203
                     Debt discount on convertible debt                          --       827,685
                     Common stock issued for conversion of
                       preferred stock and accrued dividends             4,931,835            --
                     Purchase of treasury stock for reduction of
                       accounts receivable and acquisition debt             93,900            --
                     ================================================================================
</TABLE>


                                      F-40
<PAGE>
                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


17. DISCLOSURES     Statement of Financial Accounting Standards No. 107,
    ABOUT FAIR     "Disclosures about Fair Value of Financial Instruments,"
    VALUE OF       requires that the Company disclose estimated fair values for
    FINANCIAL      its financial instruments. The following summary presents a
    INSTRUMENTS    description of the methodologies and assumptions used to
                   determine such amounts:

                   LIMITATIONS

                   Fair value estimates are made at a specific point in time and
                   are based on relevant market information and information
                   about the financial instrument; they are subjective in nature
                   and involve uncertainties, matters of judgment and,
                   therefore, cannot be determined with precision. These
                   estimates do not reflect any premium or discount that could
                   result from offering for sale at one time the Company's
                   entire holdings of a particular instrument. Changes in
                   assumptions could significantly affect these estimates.

                   Since the fair value is estimated as of December 31, 1998,
                   the amounts that will actually be realized or paid in
                   settlement of the instruments could be significantly
                   different.

                   CASH AND CASH EQUIVALENTS

                   The carrying amount is assumed to be the fair value because
                   of the liquidity of these instruments.

                   FINANCE RECEIVABLES, NET

                   The carrying amount is assumed to be the fair value because
                   of the relative short maturity and repayment terms of the
                   portfolio as compared to similar instruments.

                   ACCOUNTS PAYABLE AND ACCRUED EXPENSES

                   The carrying amount approximates fair value because of the
                   short maturity of these instruments.


                                      F-41
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


                   NOTES PAYABLE

                   The terms of the Company's notes payable approximates the
                   terms in the market place at which they could be replaced.
                   Therefore, the fair value approximates the carrying value of
                   these financial instruments.

18. SEGMENT        During 1998, the Company adopted Statement of Financial
    INFORMATION    Accounting Standards No. 131 (SFAS 131), "Disclosures about
                   Segments of an Enterprise and Related Information." SFAS 131
                   requires that public enterprises report certain information
                   about reporting segments in financial statements. It also
                   requires the disclosure of certain information regarding
                   services provided, geographic areas of operation and major
                   customers.

                   The accounting policies of the segments are the same as those
                   described in the summary of significant accounting policies.
                   Intercompany revenues are market based. The Company evaluates
                   performance based on operating earnings of the respective
                   business units.

                   The Company's continuing operations are classified into two
                   reportable segments. The used car stores segment operates a
                   network of 26 used car stores in Florida. The Company
                   primarily sells used vehicles to payment-sensitive non-prime
                   customers who, most likely, would be unable to purchase a
                   vehicle without financing through the Company's financing
                   services segment. These segments exclude the activities of
                   the discontinued operations (see Note 18).

                   The following table shows certain financial information by
                   reportable segment as of and for the years ended December 31,
                   1998, 1997 and 1996 and excludes the operations of the
                   discontinued segments:


                                      F-42
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


<TABLE>
<CAPTION>
                                                               FINANCING          CORPORATE        DISCONTINUED
                                      USED CAR STORES           SERVICES          AND OTHER          OPERATIONS           COMBINED
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                <C>                <C>                 <C>                <C>
            1998
Revenue from external customers         $  78,227,027      $  15,709,539      $   1,448,261       $          --      $  95,384,827
Intercompany revenues                              --          5,434,451                 --                  --          5,434,451
Operating income (loss)                     4,411,292          4,933,046         (7,606,726)                 --          1,737,612
Depreciation and amortization                 181,377             69,469          1,690,551             272,799          2,214,196
Interest expense                              300,527          5,629,078          2,822,056                  --          8,751,661
Abandoned public offering costs                    --                 --          1,062,962                  --          1,062,962
Identifiable assets                        15,918,151         66,174,394         16,913,961          24,585,527        123,592,033
Capital expenditures                          447,039            266,709            409,155             341,999          1,464,902


            1997

Revenue from external customers         $  35,279,228      $   6,898,694      $   1,177,903       $          --      $  43,355,825
Intercompany revenues                              --          2,310,962                 --                  --          2,310,962
Operating income (loss)                        71,502          3,028,598        (14,777,708)                 --        (11,677,608)
Depreciation and amortization                  41,709              8,078          1,270,695             364,758          1,685,240
Compensation expense related to
  options                                          --                 --          4,649,702                  --          4,649,702
Restructuring charges                              --                 --          2,117,906                  --          2,117,906
Interest expense                              153,405          2,902,039          2,517,863                  --          5,573,307
Identifiable assets                        10,273,420         34,763,399         18,719,167          25,349,005         89,104,991
Capital expenditures (exclusive of
  acquisitions)                             1,494,370            178,238          3,182,884             223,822          5,079,314


            1996
Revenue from external customers         $          --      $          --      $          --       $          --      $          --
Operating income (loss)                            --                 --           (670,616)                 --           (670,616)
Depreciation and amortization                      --                 --              4,381                  --              4,381
Interest expense                                   --                 --             33,172                  --             33,172
Identifiable assets                                --                 --            716,290                  --            716,290
Capital expenditures                               --                 --             24,586                  --             24,586
====================================================================================================================================
</TABLE>

19. DISCONTINUED   In January 1999, management of the Company made a decision to
    OPERATIONS     discontinue the operations of the new car dealerships segment
                   and the 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


                                      F-43
<PAGE>

                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================


                   sold. The new car dealerships segment operates two new car
                   dealerships in Florida. The parts and accessories segment
                   sells and distributes Corvette parts and accessories
                   throughout the United States, primarily through its extensive
                   catalog. These two segments are expected to be sold during
                   1999 at a net gain.

                   Revenues of the discontinued operations were $46,499,679 and
                   $25,247,834 during 1998 and 1997, 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 $584,587 and
                   $487,989 during 1998 and 1997, respectively.

                   The net assets of the discontinued operations included in the
                   December 31, 1998 and 1997 consolidated balance sheets
                   consist of the following:

<TABLE>
<CAPTION>
                   DECEMBER 31,                                             1998            1997
                   --------------------------------------------------------------------------------
<S>                                                               <C>              <C>
                   Cash and cash equivalents                      $      448,596   $     489,509
                   Accounts receivable                                   857,293         854,382
                   Inventories                                         6,776,414       7,602,221
                   Notes receivable                                            -          46,280
                   Prepaid expenses                                      960,582         666,512
                   Property and equipment, net                         4,187,687       4,098,723
                   Goodwill, net                                      11,286,075      11,580,303
                   Other assets                                           68,880          11,075
                   Accounts payable                                   (1,405,617)     (1,663,149)
                   Accrued expenses                                     (625,187)       (696,467)
                   Notes payable                                      (3,066,721)     (5,189,282)
                   Floor plans payable                                (5,511,229)     (5,627,123)
                   Capital lease obligations                            (147,817)       (234,381)
                   -------------------------------------------------------------------------------

                   Net assets of discontinued operations          $   13,828,956   $  11,938,603
                   ===============================================================================
</TABLE>

20. FOURTH         During the fourth quarter of 1998 and 1997, the Company
    QUARTER        recorded the following adjustments:
    ADJUSTMENTS

<TABLE>
<CAPTION>
                                                                             1998           1997
                   --------------------------------------------------------------------------------
<S>                                                                   <C>            <C>
                   Expense costs of abandoned public offering         $ 1,062,962    $   479,406
                   Restructuring charge                                        --      2,117,906
                   Expense related to stock options, warrants and
                     beneficial conversion feature                        554,010      1,405,087
                   Increase in allowance for credit losses and
                     other adjustments to finance receivables           3,314,012             --
                   Inventory write-downs                                1,094,096             --
                   Write-down of goodwill from asset sale and
                     impairment                                         1,045,847             --
                   ================================================================================
</TABLE>


                                      F-44
<PAGE>
                                             SMART CHOICE AUTOMOTIVE GROUP, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

                   The effect of the above 1998 fourth quarter adjustments on
                   previous quarters is as follows:

<TABLE>
<CAPTION>
                                                                THREE MONTHS          THREE MONTHS
                                                                       ENDED                 ENDED
                                                                    JUNE 30,         SEPTEMBER 30,
                                                                        1998                  1998
                   ----------------------------------------------------------------------------------
<S>                                                             <C>                   <C>
                   Quarterly adjustment                         $  1,115,783          $  3,661,616
                   ----------------------------------------------------------------------------------

                   Net income (loss) applicable to common stock:
                       As reported                              $  2,355,206          $  1,627,992
                       As restated                                 1,239,423            (2,033,624)

                   Basic earnings (loss) per share:
                       As reported                              $       0.36          $       0.25
                       As restated                                      0.19                 (0.34)

                   Diluted earnings (loss) per share:
                       As reported                              $       0.36          $       0.23
                       As restated                                      0.17                 (0.34)
                   =================================================================================
</TABLE>



                                      F-45