SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: February 25, 1999
(Date of earliest event reported)
DCAP Group, Inc.
(Exact name of Registrant as specified in charter)
Delaware 0-1665 36-2476480
(State or other jurisdiction (Commission File No.) (IRS Employer Identification
incorporation) Number)
90 Merrick Avenue, East Meadow, New York 11554
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 794-6300
EXTECH Corporation
(Former Name, if Changed Since Last Report)
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
(i) Combined Balance Sheet of the DCAP Companies as of December
31, 19981.
(ii) Combined Statement of Operations of the DCAP Companies for
the fiscal year ended December 31, 19981.
(iii)Combined Statement of Cash Flows of the DCAP Companies for
the fiscal year ended December 31, 19981.
(iv) Combined Statement of Stockholders' Deficit of the DCAP
Companies for the fiscal year ended December 31, 19981.
(v) Notes to Combined Financial Statements of the DCAP Companies
for the fiscal year ended December 31, 19981.
(vi) Combined Balance Sheet of the DCAP Companies as at December
31, 19971.
(vii)Combined Statement of Operations of the DCAP Companies for
the fiscal year ended December 31, 19971.
(viii) Combined Statement of Shareholders' Deficit of the DCAP
Companies for the fiscal year ended December 31, 19971.
(ix) Combined Statement of Cash Flows of the DCAP Companies for
the fiscal year ended December 31, 19971.
(x) Notes to Combined Financial Statements of the DCAP Companies
for the fiscal year ended December 31, 19971.
(b) Pro Forma Financial Information.
(i) Pro Forma Condensed Consolidated Balance Sheet of the
Company as of December 31, 19981.
(ii) Pro Forma Condensed Consolidated Statement of Income of the
Company for the fiscal year ended December 31, 19981.
(c) Exhibits.
2.1 Agreement dated as of May 8, 1998 by and among the Company,
Morton L. Certilman, Jay M. Haft, Kevin Lang and Abraham
Weinzimer (including Schedules A and B and exhibits
thereto), as amended2.
- --------
1 Filed herewith.
2 Included as Appendix A to the Company's definitive Proxy Statement dated
February 9, 1999 (File No. 0-1665) and incorporated herein by reference.
2
<PAGE>
DEALERS CHOICE AUTOMOTIVE
PLANNING, INC.
AND AFFILIATED COMPANIES
COMBINED FINANCIAL STATEMENTS
Year Ended December 31, 1998
<PAGE>
DEALERS CHOICE AUTOMOTIVE
PLANNING, INC.
AND AFFILIATED COMPANIES
COMBINED FINANCIAL STATEMENTS
Year Ended December 31, 1998
<PAGE>
DEALERS CHOICE AUTOMOTIVE PLANNING, INC.
AND AFFILIATED COMPANIES
CONTENTS
Report of Independent Accountants 1
Combined Financial Statements:
Combined Balance Sheet 2
Combined Statement of Operations 3
Combined Statement of Cash Flows 4
Combined Statement of Stockholders' Deficit 5
Notes to Combined Financial Statements 6 - 12
<PAGE>
Report of Independent Accountants
Board of Directors
Dealers Choice Automotive Planning, Inc.
East Meadow, New York
We have audited the accompanying combined balance sheet of Dealers Choice
Automotive Planning, Inc. and Affiliated Companies as of December 31, 1998, and
the related combined statements of operations, cash flows and stockholders'
deficit for the year then ended. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these combined financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Dealers
Choice Automotive Planning, Inc. and Affiliated Companies as of December 31,
1998, and the combined results of their operations and their cash flows for the
year then ended in conformity with generally accepted accounting principles.
The combined financial statements referred to above have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations,
and has a stockholders' deficit and negative working capital. These conditions
raise substantial doubt as to the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 1. The combined financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ Margolin, Winer & Evans LLP
May 14, 1999, except for
Notes 1 and 13, as to which
the date is June 10, 1999
1
<PAGE>
DEALERS CHOICE AUTOMOTIVE PLANNING, INC. AND
AFFILIATED COMPANIES
<TABLE>
<CAPTION>
COMBINED BALANCE SHEET
December 31, 1998
- ------------ ----
ASSETS
<S> <C>
Current Assets:
Cash $ 7,246
Commissions receivable from insurance companies 283,209
Current portion of note receivable (Note 3) 20,638
Prepaid expenses and other current assets 50,503
------
Total Current Assets 361,596
Property and Equipment - net of accumulated depreciation
and amortization of $1,727,921 (Notes 4, 6 and 7) 1,324,401
Note Receivable, net of current portion (Note 3) 36,238
Due from Stockholders (Note 5) 379,583
Deposits and Other Assets 67,401
------
Total Assets $2,169,219
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Current portion of:
Long-term debt (Note 6) $ 43,233
Obligations under capital leases (Note 7) 284,111
-------
327,344
Notes Payable - DCAP Group, Inc. (Note 8) 782,000
Note payable - bank (Note 9) 170,000
Accounts payable and accrued expenses 1,177,444
Deferred revenue 197,982
Cash overdraft 143,993
Premiums payable 159,543
Income taxes payable 42,684
Other current liabilities 6,094
-----
Total Current Liabilities 3,007,084
Long-Term Debt - net of current portion (Note 6) 306,815
Obligations Under Capital Leases - net of current portion (Note 7) 327,354
Due to Stockholders 31,800
Deferred Revenue 39,650
------
Total Liabilities 3,712,703
Commitments and Contingencies (Note 12) -
Minority Interest in Affiliated Companies (Note 10) 898,026
Stockholders' Deficit (2,441,510)
----------
Total Liabilities and Stockholders' Deficit $2,169,219
==========
The accompanying notes are an integral part of this combined statement.
</TABLE>
<PAGE>
DEALERS CHOICE AUTOMOTIVE PLANNING, INC. AND
AFFILIATED COMPANIES
<TABLE>
<CAPTION>
COMBINED STATEMENT OF OPERATIONS
Year Ended December 31, 1998
- ----------------------- ----
Revenue:
<S> <C>
Commissions $4,477,059
Fees and other (including franchising income of $598,046) 3,391,836
---------
Total Revenue 7,868,895
Operating Expenses:
Selling 2,599,263
General and administrative 6,204,490
Depreciation and amortization 453,345
-------
Total Operating Expenses 9,257,098
---------
Loss From Operations (1,388,203)
Other Income (Expenses):
Gain on sale of book of business (Note 3) 80,870
Net loss on disposition of assets (35,894)
Interest (253,489)
--------
Loss Before Income Taxes (1,596,716)
Provision for Income Taxes (Note 11) 113,061
-------
Loss Before Minority Interest (1,709,777)
Minority Interest in Affiliated Companies (281,727)
--------
Net Loss $(1,428,050)
===========
The accompanying notes are an integral part of this combined statement.
</TABLE>
<PAGE>
DEALERS CHOICE AUTOMOTIVE PLANNING, INC. AND AFFILIATED COMPANIES
COMBINED STATEMENT OF CASH FLOWS
Year Ended December 31, 1998
- ----------------------- ----
Cash Flows from Operating Activities:
Net loss $(1,428,050)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 453,345
Gain on sale of book of business (80,870)
Net loss on disposition of assets 35,894
Decrease in commissions receivable from
insurance companies 264,852
Decrease in prepaid expenses and other current assets 10,736
Increase in deposits and other assets (3,389)
Decrease in deferred taxes 42,700
Increase in accounts payable and accrued expenses 579,729
Increase in premiums payable 137,234
Increase in income taxes payable and other liabilities 11,669
Decrease in deferred revenue (81,784)
-------
Net Cash Used in Operating Activities (57,934)
-------
Cash Flows from Investing Activities:
Acquisition of property and equipment (96,992)
Proceeds from sale of book of business 85,000
Proceeds from disposition of assets 31,489
Increase in note receivable (65,000)
Repayment of note receivable 8,124
Increase in due from stockholders (24,737)
Decrease in due from related companies 76,455
------
Net Cash Provided by Investing Activities 14,339
------
Cash Flows from Financing Activities:
Principal payments under capital lease obligations (274,427)
Increase in notes payable - DCAP Group, Inc. 457,000
Increase in long-term debt 25,000
Principal payments of long-term debt (97,712)
Decrease in note payable - bank (25,195)
Shareholder contributions to capital 106,113
Decrease in minority interest in affiliated companies (281,727)
Increase in cash overdraft 141,789
-------
Net Cash Provided by Financing Activities 50,841
------
Net Increase in Cash $ 7,246
Cash - beginning of year -
------
Cash - end of year $ 7,246
======
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 177,293
Cash paid for income taxes 64,786
Supplemental Disclosure of Noncash Investing and
Financing Activities:
During 1998, the withdrawal of certain minority stockholders
resulted in an increase in stockholders' equity and a
corresponding decrease in minority interest in affiliated
companies int he amount of $1,619.
During 1998, certain stockholders contributed to capital
loans payable to them in the amount of $48,000.
The accompanying notes are an integral part of this combined statement.
<PAGE>
DEALERS CHOICE AUTOMOTIVE PLANNING, INC. AND
AFFILIATED COMPANIES
<TABLE>
<CAPTION>
COMBINED STATEMENT OF STOCKHOLDERS' DEFICIT
Year Ended December 31, 1998
- --------------------------------------------------------------------------------
Common Paid-in Accumulated Treasury
Stock Capital Deficit Stock Total
----- ------- ------- ----- -----
<S> <C> <C> <C> <C> <C>
Balance - January 1, 1998 $32,583 $326,199 $(1,432,402) $(95,572) $(1,169,192)
Contributions to Capital - 154,113 - - 154,113
Net loss - - (1,428,050) - (1,428,050)
Withdrawal of
Minority Interests 650 185,800 (184,831) - 1,619
------ ------- ---------- ------- ---------
Balance -
December 31, 1998 $33,233 $666,112 $(3,045,283) $(95,572) $(2,441,510)
======= ======== =========== ======== ===========
</TABLE>
The accompanying notes are an integral part of this combined statement.
<PAGE>
DEALERS CHOICE AUTOMOTIVE PLANNING, INC. AND
AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. Oraganization Nature of business - Dealers Choice Automotive Planning,
and Financial Inc. ("DCAP") and Affiliates (collectively, the "Company")
Statement operates a network of retail offices engaged in the sale of
Presentation retail auto, motorcycle, boat, life, business and
homeowner's insurance. The Company also realizes revenue
from franchise fees, the sale of automobile club memberships
and income tax preparation.
Combination - The combined financial statements include the
accounts of DCAP; DCAP Management Corp. (the franchisor of
twenty-eight DCAP locations); and three entities performing
income tax and motor club services. All of these entities
have common ownership. In addition, the combined financial
statements include thirty-five affiliates. As used herein,
an affiliate is an agency operating a retail office under
the DCAP name, where the shareholders of the above entities
own at least fifty percent of the stock of the agency. All
significant intercompany transactions and balances have been
eliminated in combination.
Going concern - The Company's financial statements have been
prepared assuming that the Company will continue as a going
concern. Over the past several years, the Company has
suffered recurring losses from operations and as of December
31, 1998 has a stockholders' deficit of $2,441,510 and
negative working capital of $2,645,488. For the past few
years the Company has relied on loans and the sales of books
of business to supplement operating revenue and meet its
working capital needs. Management believes that the
additional cash infusion from DCAP Group, Inc. (formerly
Extech Corporation) ("DCAP Group") in February 1999 together
with approximately $1.44 million in net proceeds DCAP Group
raised in June 1999 in a private placement will be
sufficient to meet the Company's cash flow needs for the
coming year (see Note 13). Ultimately, the Company's ability
to continue as a going concern is dependent on its ability
to return to profitable operations. The financial statements
do not include any adjustments that might result from the
outcome of this uncertainty.
2. Summary of Revenue recognition - The Company recognizes commission
Significant revenue from insurance policies at the beginning of the
Accounting contract period, on income tax preparation when the services
Policies are completed and on automobile club dues equally over the
contract period. Franchise fee revenue received by DCAP
Management Corp. is recognized when substantially all the
Company's contractual requirements under the franchise
agreement are completed. Refunds of commissions on the
cancellation of insurance policies are reflected at the time
of cancellation.
Cash and cash equivalents - The Company considers all highly
liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.
Property and equipment - Property and equipment are stated
at cost. Depreciation and amortization are computed by the
straight-line method based on the estimated useful lives of
the related assets or the shorter of the lease terms or
useful life for the leasehold improvements.
The useful lives of property and equipment for purposes of
computing depreciation are:
Computer hardware and software 5 years
Office equipment 5 years
Transportation equipment and
entertainment facility 5 - 10 years
Office furniture and fixtures 7 years
Leasehold improvements Term of related lease
Maintenance and repairs are charged to operations when
incurred. Betterments and major renewals or replacements are
capitalized. When property and equipment is sold or
otherwise disposed of, the asset account and related
accumulated depreciation account are relieved, and any gain
or loss is included in operations.
Advertising - The Company expenses all advertising costs
when incurred. Advertising expense was approximately
$722,000 in 1998.
Income taxes - Income taxes are accounted for under
Financial Accounting Standards Board Statement No. 109,
Accounting for Income Taxes. Statement No. 109 requires
recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been
included in the financial statements or tax returns. Under
this method, deferred tax assets and liabilities are
determined based on the difference between the financial
statement and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the
differences are expected to reverse. Under Statement No.
109, the effect on the deferred tax assets and liabilities
of a change in tax rates is recognized in income in the
period that includes the enactment date.
Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual
results could differ from those estimates.
3. Note Receivable In June 1998, the Company sold all potential future
commissions on renewal policies belonging to one of its
stores for $85,000. The Company received $20,000 in cash and
a note for $65,000 which is payable in monthly installments
of $2,037, including interest at 8.0%, through June 30,
2001.
4. Property and Property and equipment consist of:
Equipment
Computer hardware and software $1,324,802
Office equipment 197,110
Transportation equipment 31,047
Office furniture and fixtures 706,665
Entertainment facility 200,538
Leasehold improvements 592,160
-------
3,052,322
Less accumulated depreciation
and amortization 1,727,921
---------
$1,324,401
==========
5. Due From Amounts due from stockholders consist primarily of
Stockholders non-negotiable promissory notes due from the stockholders of
DCAP. The notes are due on December 31, 2003, together with
accrued interest at the rate of 6.6% per annum. Interest
income accrued on such notes for the year ended December 31,
1998 amounted to approximately $22,000.
6. Long-Term Debt Long-term debt consists of the following:
Notes payable to former stockholders, due in
monthly installments aggregating $3,178,
including interest at rates ranging from 6%
to 10%, maturing at varying dates through
September 2002. $ 90,391
Note payable to franchisee, due in varying
monthly installments ranging from $1,700
to $2,000 per month through April 2003,
including interest at approximately 24%
per annum. $ 65,243
Mortgage payable, due in monthly installments of
$1,803, including interest at 8.99%, maturing
in May 2017. The obligation is collateralized
by the Company's entertainment facility which
has a net book value of $170,457 as of
December 31, 1998. 194,414
-------
350,048
Less current portion 43,233
------
$ 306,815
==========
The aggregate maturities of long-term debt for each of the
five years subsequent to December 31, 1998 are as follows:
Years ending December 31:
1999 $ 43,233
2000 50,398
2001 39,049
2002 35,231
2003 13,846
Thereafter 168,301
-------
$ 350,058
==========
7. Capitalized Included in property and equipment are the following assets
Leases held under capital leases:
Computer hardware and software $1,051,646
Office equipment 168,444
Transportation equipment 31,047
------
1,251,137
---------
Less accumulated amortization 730,677
-------
$ 520,460
==========
Minimum future lease payments for assets under capital
leases at December 31, 1998 are as follows:
Years ending December 31:
1999 362,765
2000 255,021
2001 94,517
2002 11,697
2003 6,908
Thereafter 1,151
-----
Total minimum lease payments 732,059
Less amount representing interest 120,594
-------
Present value of net minimum lease payments 611,465
Less current maturities 284,111
-------
Long-term obligation 327,354
=======
Interest rates on capitalized leases vary from 7.0% to
28.3%.
8. Notes Payable - During the period from November 1997 through December 1998,
DCAP Group, Inc. the Company was advanced a total of $782,000 by DCAP Group.
The borrowings are evidenced by notes payable bearing
interest at 10% per annum. As of the balance sheet date, the
maturity of these notes had been extended to February 28,
1999, at which time they became demand notes. (See Note 13.)
Interest expense on these notes payable for the year ended
December 31, 1998 amounted to $62,000 and is included in
accrued expenses as of December 31, 1998.
9. Note Payable - Note payable - bank consists of a 90 day note due January 1,
Bank 1999 bearing interest at 1.5% above the bank's prime rate
(8.75% at December 31, 1998). The note was renewed upon
maturity for an additional 45 days and was repaid utilizing
a portion of the proceeds of the additional DCAP Group loans
(see Note 13).
10. Minority The Company has opened retail offices under the DCAP name,
Interest with the stockholders of the Company owning no less than
fifty percent of the new business entities. The minority
stockholders are required to provide an initial capital
investment to be used for working capital, equipment and
store improvements. Typically, profits and losses are shared
proportionately.
11. Income Taxes Each of the companies included in these combined financial
statements files its own separate income tax returns. In
addition, seventeen of the affiliates have elected "S"
Corporation status and, accordingly, all items of income and
loss from these corporations pass through to the
shareholders for federal and state tax purposes.
The provision for income taxes for the year ended December
31, 1998 consists of federal and state tax provisions for
those members of the combined group who had income in 1998,
minimum state tax provisions for loss companies, and the
reversal of net deferred tax assets in the amount of
$42,700, which existed at the beginning of the year.
Deferred tax assets at December 31, 1998 are comprised of
the following:
Net operating loss carryovers $432,300
Cash versus accrual reporting for
tax return purposes 284,700
-------
Total deferred tax asset 717,000
Less valuation allowance (717,000)
--------
Net deferred tax asset $ -
=========
The Company has recorded a valuation allowance amounting to
the entire deferred tax asset balance because the Company's
financial condition and its lack of a history of consistent
earnings give rise to uncertainty as to whether the deferred
tax asset is realizable. In addition, as a result of the
Company's change in ownership in February 1999 (see Note
13), any future benefit of net operating losses existing at
the time of the change in ownership will be severely limited
under applicable sections of the Internal Revenue Code and
the regulations thereunder.
12. Commitments Operating leases - The Company and each of its affiliates
and lease office space under noncancelable operating leases
Contingencies expiring at various dates through the year 2006. Many of the
leases include additional rent for real estate taxes and
other operating expenses. The minimum future rentals under
lease commitments for leased facilities and office equipment
are as follows:
<TABLE>
<CAPTION>
Total Facilities Equipment
----- ---------- ---------
Years ending December 31,
<S> <C> <C> <C>
1999 $ 669,218 $ 641,830 $ 27,388
2000 574,786 556,803 17,983
2001 522,790 520,905 1,885
2002 454,833 454,833 -
2003 323,421 323,421 -
Thereafter 369,616 369,616 -
--------- ------- ------
Total $2,914,664 $2,867,408 $ 47,256
========== ========== ========
</TABLE>
Rent expense for the year ended December 31, 1998
approximated $820,000.
Litigation - In November 1996, an action was commenced in
the United States District Court for the Eastern District of
Pennsylvania by Regent National Bank ("Regent") against the
Company alleging that the Company breached a contract in
connection with Regent's agreement to provide funding to
finance the purchase of automobile insurance for customers
of the Company. Regent claims the Company is liable to it
for the losses that Regent allegedly suffered as a result of
unpaid loans made through the Company. Regent claims damages
of $825,000. The Company has interposed several affirmative
defenses and has asserted counterclaims in the amount of
$40,000 against Regent for breach of contract and fraud.
Inasmuch as the outcome of these matters cannot presently be
determined, no provision for any liability has been made in
the financial statements. The Company intends to continue to
defend and pursue its counterclaim vigorously. In March
1997, the Company brought a separate action against, among
others, Regent in the Supreme Court of the State of New York
alleging, among other things, breach of contract, negligence
and fraud and seeking damages of at least $2,000,000 as well
as punitive damages in the amount of $2,000,000. Such action
has been stayed pending the resolution of the Pennsylvania
action.
13. Subsequent In February 1999, pursuant to an agreement entered into in
Events May 1998, the stockholders of DCAP exchanged all of their
stock in the Company for 3,300,000 shares of common stock of
DCAP Group, a publicly traded company.
Concurrent with the exchange, DCAP Group issued additional
common stock to an unrelated party in consideration of $1
million, of which $920,000 was then advanced to the Company
as additional loans.
In June 1999, DCAP Group issued common stock and warrants in
a private placement and received net proceeds of
approximately $1.44 million.
<PAGE>
DEALERS CHOICE
AUTOMOTIVE PLANNING, INC.
AND AFFILIATED COMPANIES
FINANCIAL STATEMENT
DECEMBER 31, 1997
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Dealers Choice Automotive Planning, Inc.
and Affiliated Companies
East Meadow, New York
We have audited the accompanying Combined Balance Sheet of Dealers Choice
Automotive Planning, Inc. and Affiliated Companies as of December 31, 1997 and
the related Combined Statements of Operations, Stockholder's Equity and Cash
Flows for the year then ended. 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 have conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Dealers Choice Automotive
Planning, Inc. and Affiliated Companies as of December 31, 1997 and the results
of its operations for the year 1997 in conformity with generally accepted
accounting principles.
<PAGE>
- 2 -
The financial statements referred to above have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered losses, has a capital deficit and
has negative working capital. These conditions raise substantial doubt as to the
Company's ability to continue as a going concern. While the Company plans to
raise additional capital, there can be no assurance that such efforts will be
successful. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Deutsch, Marin & Company, LLP
Uniondale, New York
January 20, 1999
<PAGE>
DEALERS CHOICE AUTOMOTIVE PLANNING, INC.
AND AFFILIATED COMPANIES
COMBINED BALANCE SHEET
AS AT DECEMBER 31, 1997
ASSETS
Current Assets
Accounts receivable (Note 1) $ 548,061
Prepaid expenses and other current assets 61,239
------
Total Current Assets 609,300
Fixed assets (Notes 1,2) 1,752,267
Due from related companies (Note 3) 76,455
Loan receivable - shareholders 352,346
Loan receivable - minority shareholders (Note 3) 2,500
Deferred taxes (Note 1) 92,500
Deposits and other assets 64,012
---------
$2,949,380
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt (Note 4) $ 334,641
Notes payable - Extech Corporation (Note 5) 325,000
Notes payable - other (Note 6) 230,583
Cash overdraft 2,204
Accounts payable and accrued expenses 597,715
Premiums payable 22,309
Income taxes payable (Note 9) 37,109
---------
Total Current Liabilities 1,549,561
Long-term debt (Note 4) 938,623
Loans payable - minority shareholders (Note 3) 79,800
Deferred revenue 319,416
Deferred income taxes (Note 1) 49,800
Commitments and contingencies (Note 10) -
Minority interest in affiliated companies (Note 7) 1,181,372
Shareholders' Equity (Deficit) (Note 11) (1,169,192)
----------
$2,949,380
==========
The accompanying notes are an integral part of these combined statements
<PAGE>
DEALERS CHOICE AUTOMOTIVE PLANNING, INC.
AND AFFILIATED COMPANIES
COMBINED STATEMENT OF OPERATIONS
FOR THE CALENDAR YEAR 1997
Revenue
From - commissions $4,966,158
- fees and other 3,580,142
---------
Total Revenue 8,546,300
Operating Expenses
Selling 2,649,304
General and administrative 5,933,658
Depreciation and amortization 452,158
---------
Total Operating Expenses 9,035,120
---------
Net Operating (Loss) for Year Before
Other Income/Expense ( 488,820)
Sale of book of business (Note 8) 535,334
Interest expense 67,461
---------
Net (Loss) for Year Before Provision
for Income Taxes ( 20,947)
Provision for income taxes (Note 9) 43,988
---------
Net (Loss) for Year Before Minority Interest ( 64,935)
Minority interest in affiliated companies ( 83,712)
---------
Net Income for Year $ 18,777
=========
The accompanying notes are an integral part of these combined statements
<PAGE>
DEALERS CHOICE AUTOMOTIVE PLANNING, INC.
AND AFFILIATED COMPANIES
COMBINED STATEMENT OF SHAREHOLDERS' DEFICIT
FOR THE CALENDAR YEAR 1997
<TABLE>
<CAPTION>
Common Paid in Accumulated Treasury
Stock Capital Deficit Stock Total
----- ------- ------- ----- -----
<S> <C> <C> <C> <C> <C>
Balance - January 1, 1997 33,417 326,199 ( 1,435,979) ( 47,000) ( 1,123,363)
Issuance of stock 666 - - - 666
Redemption of stock ( 1,500) - - ( 48,572) ( 50,072)
Net income for year - - 18,777 - 18,777
Dividends - - ( 15,200) - ( 15,200)
------- -------- ----------- -------- -----------
Balance - December 31, 1997 $32,583 $326,199 ($1,432,402) ($95,572) ($1,169,192)
======= ======== =========== ======== ===========
The accompanying notes are an integral part of these combined statements
</TABLE>
<PAGE>
DEALERS CHOICE AUTOMOTIVE PLANNING, INC.
AND AFFILIATED COMPANIES
COMBINED STATEMENT OF CASH FLOWS
FOR THE CALENDAR YEAR 1997
Cash Flows from Operating Activities:
Net income for year $ 18,777
Adjustments to reconcile net income to net
Cash provided by operating activities:
Depreciation and amortization 452,158
Deferred taxes ( 11,738)
Changes in assets and liabilities:
Accounts receivable ( 50,983)
Prepaid expenses and other assets ( 7,011)
Deposits ( 9,700)
Accounts payable and accrued expenses ( 57,142)
Premiums payable ( 117,485)
Deferred revenue and taxes ( 77,229)
Income taxes payable ( 10,012)
--------
Net cash provided by operating activities 129,635
--------
Cash Flows from Investing Activities:
(Redemption) of stock ( 49,406)
Purchase of fixed assets ( 417,582)
Dividends ( 15,200)
Increase in minority interest in
affiliated companies 116,101
--------
Net cash (used in) investing activities ( 366,087)
--------
Cash Flows from Financing Activities:
(Increase) due from related companies ( 32,922)
Decrease in loan receivable - shareholders ( 150,151)
Increase in loan payable - minority shareholders 2,500
Increase of long-term debt 98,663
Increase in notes payable 386,410
--------
Net cash provided by financing activities 304,500
----------------------------------------- --------
Net Changes in Cash Equivalents 68,048
Cash overdraft - January 1, 1997 ( 70,252)
--------
Cash overdraft - December 31, 1997 ($ 2,204)
========
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Interest $ 39,984
========
Taxes $ 48,735
========
The accompanying notes are an integral part of these combined statements
<PAGE>
DEALERS CHOICE AUTOMOTIVE PLANNING, INC.
AND AFFILIATED COMPANIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
Note 1: - Business Activities and Significant Accounting Policies
Business Activities - Dealers Choice Automotive Planning,
Inc. (the Company), principally operates as a network of retail
offices, engaged in the sale of retail auto, motorcycle, boat,
life, business and homeowner's insurance, income tax preparation,
and automobile club in the New York metropolitan area.
Going Concern - The Company's financial statements have been
prepared assuming that the Company will continue as a going
concern. The Company has suffered losses for a number of years,
and has negative working capital. The Company has relied on loans
and the sale of its book of business to supplement operating
revenues and sustain its working capital needs. Management
believes that the additional cash infusion from the proposed
transactions with Extech Corporation (see Notes 5 and 11) will be
sufficient to meet its cash flow needs for the coming year.
However, there can be no assurance that the transactions will be
completed. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
Principles of Combination - The combined financial
statements include the accounts of the Company, DCAP Management
Corp., the franchisor of twenty-seven (27) DCAP locations, four
(4) corporations performing income tax, motor club, and premium
financial services, and thirty-two (32) affiliates. An affiliated
company is defined as an independent agency, operating a retail
office under the DCAP name, where the shareholders of the Company
own at least fifty (50%) percent of the agency. All significant
Intercompany transactions and balances have been eliminated in
the combination.
Use of Estimates - The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent 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.
Revenue Recognition - The Company recognizes commission
revenue from insurance policies at the beginning of the contract
period, on income tax preparation when the services are
completed, and on automobile club dues equally over the contract
period. Franchise fee revenue received by DCAP Management Corp.
is recognized at the time when it substantially completes all of
its contractual requirements
<PAGE>
DEALERS CHOICE AUTOMOTIVE PLANNING, INC.
AND AFFILIATED COMPANIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
Note 1: - Business Activities and Significant Accounting Policies
(Continued)
under the franchise agreement. Refunds of commissions on the
cancellation of insurance policies are reflected at the time of
cancellation and no reserves have been established since the
total is immaterial.
Accounts Receivable - A majority of the Company's
receivables are derived from commissions earned from insurance
companies. Concentration of credit risk with respect to its
receivables is considered to be limited due to its regulated
customer base. The Company's policy is not to establish an
allowance for doubtful accounts, but rather to write off bad
debts against earnings when an account is deemed uncollectible.
Fixed Assets and Depreciation - Property and equipment are
stated at cost and are depreciated over the useful life of the
assets on a straight line basis, starting with the date the asset
is placed in service.
The ranges of estimated useful lives used in computing
depreciation are as follows:
Computer hardware and software
and other office equipment 5 years
Transportation equipment 5 years
Office furniture and fixtures 7 years
Leasehold improvements 5 - 20 years
Property sold or retired is eliminated from the asset and
accumulated depreciation accounts in the year of disposition. Any
differences between proceeds on disposition and undepreciated
costs are reflected in other income.
Expenditures for ordinary maintenance repairs and minor
renewals which do not naturally extend the life of assets are
charged against earnings when incurred. Additions and major
renewals are capitalized.
Long-lived Assets - Statement of Financial Accounting
Standards No. 121, "Accounting for Impairment of Long-lived
Assets and for Long-lived Assets to be Disposed of" requires that
long-lived assets be reviewed for impairment whenever events of
changes in circumstances indicate that the carrying amounts of
the assets in question may not be recovered. This standard,
adopted in 1996, did not have a material effect on the Company's
result of operations, cash flows or financial position.
<PAGE>
DEALERS CHOICE AUTOMOTIVE PLANNING, INC.
AND AFFILIATED COMPANIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
Note 1: - Business Activities and Significant Accounting Policies
(Continued)
Income Taxes - Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years those
temporary differences are expected to be recovered or settled.
Deferred tax assets are recognized for operating losses that are
anticipated to be utilized in the future.
Advertising Expense - Advertising costs are expensed as
incurred. The total expense for 1997 approximated $835,400.
Note 2: - Fixed Assets
The summary of fixed assets and accumulated depreciation is
stated at cost and is as follows:
Accumulated Net
Cost Depreciation Value
---- ------------ -----
Office furniture and fixtures $ 786,845 $ 505,730 $ 281,115
Computer hardware and software
and other office equipment 1,428,893 576,270 852,623
Leasehold improvements 626,240 236,008 390,232
Boat 200,538 10,027 190,511
Transportation equipment 53,980 16,194 37,786
---------- ---------- ----------
Total $3,096,496 $1,344,229 $1,752,267
========== ========== ==========
Depreciation expense is $448,540 for calendar year 1997.
Note 3: - Related Party Transactions
From time to time, the Company will make and/or receive
advances of working capital to/from related parties. The working
capital advances are usually for short durations, without
collateral and without interest. The Company allocates a portion
of its operating expenses to the related party, based on
management's estimate of expenses incurred.
<PAGE>
DEALERS CHOICE AUTOMOTIVE PLANNING, INC.
AND AFFILIATED COMPANIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
Note 3: - Related Party Transactions (Continued)
The Company has also advanced/received funds to/from
stockholders of several of the affiliated companies. These loans
are non-interest bearing, without a fixed maturity. Management
has classified these loans as a noncurrent asset/liability.
Note 4: - Long-term Debt
Long-term debt is comprised as follows:
Capitalized equipment leases, pay-
able in monthly installments
maturing at various dates $885,892
Notes payable for acquisition of
transportation equipment and
boat, payable in monthly installments,
maturing at various dates 234,440
Notes payable for purchase of
treasury stock, payable in
monthly installments, maturing
at various dates 81,451
Loan for advance payment of franchise
fee, payable in monthly installments,
maturing April 30, 2003 71,481
---------
1,273,264
Less: current maturities of
long-term debt 334,641
----------
Total $ 938,623
==========
The capitalized lease obligations and notes payable are
collateralized by the related equipment.
<PAGE>
DEALERS CHOICE AUTOMOTIVE PLANNING, INC.
AND AFFILIATED COMPANIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
Note 4: - Long-term Debt (Continued)
Maturities of long-term debt, including capital leases, for
1998 to 2003 as of December 31, 1997 are as follows:
1998 $ 334,641
1999 313,247
2000 264,442
2001 125,590
2002 45,666
2003 and thereafter 189,678
----------
$1,273,264
==========
Note 5: - Notes Payable - Extech Corporation
November 26, 1997 Extech Corporation loaned $325,000
evidenced by a promissory note, bearing interest at ten (10%)
percent and maturing on September 30, 1998. In addition in March,
1998 and May, 1998 Extech Corporation also loaned the Company
$114,000 and $311,000 under the same terms and conditions. The
note is secured by the pledge of the majority shareholders stock
pursuant to terms of a pledge agreement. Prior to September 30,
1998 the maturity date of the notes was extended to December 31,
1998.
Note 6: - Notes Payable - Other
At December 31, 1997, the Company has a $250,000 line of
credit from Chase Manhattan Bank of which $195,195 was
outstanding. Advances under the line bear interest at one and one
half (1 1/2) percent above the prime rate. The loan is
collateralized with a security interest in all personal property
of the Company, including equipment, accounts receivable and
intangibles, and is personally guaranteed by the shareholders of
the Company.
At December 31, 1996, the Company had a $150,000 line of
credit from Fleet Bank, of which $169,173 was outstanding. During
1997 the bank required that $133,785 be repaid, leaving $35,388
outstanding as of December 31, 1997. Advances under the line bear
interest at two (2%) percent above the prime rate.
<PAGE>
DEALERS CHOICE AUTOMOTIVE PLANNING, INC.
AND AFFILIATED COMPANIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
Note 7: - Minority Interest
The Company has expanded by opening new retail offices under
the DCAP name, with the shareholders of the Company owning no
less than fifty (50%) percent of the new business entity. The
minority stockholders are required to provide an initial capital
investment to be used for working capital, equipment, and store
improvements. Typically, profit and loss will be shared
proportionately.
The minority interest in affiliated companies consists of
the following:
Common stock $ 14,217
Additional paid-in capital 1,719,901
Retained earnings (deficit) ( 552,746)
----------
Total $1,181,372
==========
Note 8: - Sale of Book of Business
During 1997, the Company sold the potential future
commissions on renewal policies on all Progressive Insurance
Company automobile policies sold prior to May 30, 1997 for
approximately $535,000. Commissions will be received for policies
sold after May 30, 1997, including future renewals.
Note 9: - Income Taxes
Seventeen (17) of the affiliates have elected Subchapter "S"
Corporation status, whereby both Federal and State income taxes
are paid at the shareholder level. In all instances, New York
City corporation tax, if applicable, is paid at the corporate
level. The provision for income taxes, which includes all
non-Subchapter "S" Corporations, as well as the applicable City
Corporation tax, consists of the following:
Current - Federal $11,439
- State and local 36,549
Tax benefit of net operating
loss carryforwards ( 4,000)
-------
Total $43,988
=======
<PAGE>
DEALERS CHOICE AUTOMOTIVE PLANNING, INC.
AND AFFILIATED COMPANIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
Note 9: - Income Taxes (Continued)
The Company and its affiliates have approximately $1,016,000
net operating loss carryforwards available at December 31, 1997
to reduce future taxable income. These carryforwards expire at
various times and amounts through December 31, 2012.
Note 10: - Commitments and Contingencies
The Company and each of its affiliates lease office space in
different locations. These leases are for various terms and
expire at various dates. The future minimum lease payments under
these rental leases as of December 31, 1997 are as follows:
1998 $ 724,045
1999 624,494
2000 526,465
2001 465,433
2002 386,824
2003-2007 715,204
---- ---- ----------
$3,442,465
==========
The Company and its affiliates lease office equipment under
various operating leases. The future minimum lease payments under
these equipment leases are as follows:
1998 $27,388
1999 27,388
2000 17,983
2001 1,885
Note 11: - Subsequent Events
On May 8, 1998, the principal shareholders of the Company
signed an agreement to exchange all their common stock of the
Company and its affiliated companies and a membership interest in
a certain limited liability company for 3,300,000 shares of
common stock of Extech Corporation, subject to a number of
conditions. The parties intend that this transaction satisfy the
provisions of Section 351 of the Internal Revenue Code. In
addition, as described in Note 5, Extech Corporation has loaned
the Company a total of seven hundred fifty thousand dollars
($750,000).
<PAGE>
DEALERS CHOICE AUTOMOTIVE PLANNING, INC.
AND AFFILIATED COMPANIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
Note 11: - Subsequent Events (Continued)
On October 2, 1998, Eagle Insurance Company signed a
subscription agreement to acquire a certain number of common
shares of Extech Corporation for one million dollars
($1,000,000). The closing of the transaction is subject to a
number of conditions and is anticipated to close simultaneously
with the above transaction.
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements give effect to the acquisition (the "DCAP Acquisition") by DCAP
Group, Inc. (the "Company") of the shares of Dealers Choice Automotive Planning
Inc. and affiliated companies (collectively, the "DCAP Companies") (the "DCAP
Shares") accounted for as a purchase transaction and the issuance of Common
Shares to Eagle Insurance Company (the "Eagle Issuance"). These pro forma
financial statements are presented for illustrative purposes only, and therefore
are not necessarily indicative of the operating results and financial position
that might have been achieved had the DCAP Acquisition occurred as of an earlier
date, nor are they necessarily indicative of the operating results and financial
position which may occur in the future.
A pro forma condensed consolidated balance sheet is provided as of December
31, 1998, giving effect to the DCAP Acquisition and Eagle Issuance as though
they had been consummated on that date. A pro forma condensed consolidated
statement of income is provided for the year ended December 31, 1998, giving
effect to the DCAP Acquisition as though it had occurred on January 1, 1998.
The pro forma financial statements are based on preliminary estimates of
values and transaction costs and preliminary appraisals. The actual recording of
the transactions will be based on final appraisals, values and transaction
costs. Accordingly, the actual recording of the transactions can be expected to
differ from these pro forma financial statements.
The pro forma condensed consolidated financial statements presented as of
December 31, 1998 and for the year then ended are derived from the separate
historical consolidated financial statements of the Company and combined
financial statements of the DCAP Companies, and should be read in conjunction
with the companies' separate financial statements included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1998 (with respect
to the consolidated financial statements of the Company) or elsewhere herein
(with respect to the combined financial statements of the DCAP Companies).
3
<PAGE>
<TABLE>
<CAPTION>
DCAP GROUP, INC.
&
DEALERS CHOICE AUTOMOTIVE PLANNING INC. & AFFILIATED COMPANIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(Unaudited)
Historical Pro Forma
DCAP Group, Inc. DCAP Companies Adjustments Consolidated
------------------- ------------------- ------------------- -------------------
ASSETS
<S> <C> <C> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 353,431 $ 7,246 $ 9,500 (2)$ 1,254,395
113,000 (3)
(225,000) (4)
996,218 (6)
Accounts Receivable, Net 77,116 283,209 360,325
Notes and Other Receivables 846,362 20,638 (844,000) (5) 23,000
Prepaid Expenses and other Current
Assets 142,593 50,503 (126,000) (1) 67,096
------------------- ------------------- ------------------- -------------------
Total Current Assets 1,419,502 361,596 (76,282) 1,704,816
PROPERTY AND EQUIPMENT, NET 102,608 1,324,401 1,427,009
LOAN RECEIVABLE - SHAREHOLDERS 379,583 225,000 (4) 604,583
DEPOSITS 67,401 67,401
NOTES RECEIVABLE 36,238 36,238
GOODWILL 3,392,510 (1) 3,392,510
OTHER 40,000 40,000
------------------- ------------------- ------------------- -------------------
$ 1,562,110 $ 2,169,219 $ 3,541,228 $ 7,272,557
=================== =================== =================== ===================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Accounts Payable and Other Accrued
Expenses $ 200,712 $ 1,487,074 $ (62,000) (5)$ 1,625,786
Notes Payable 952,000 (782,000) (5) 170,000
Debentures Payable 154,200 154,200
Current Portion of Long-Term Debt 327,344 327,344
Deferred Revenue 197,982 197,982
Income Taxes Payable, Current 42,684 42,684
------------------- ------------------- ------------------- -------------------
Total Current Liabilities 354,912 3,007,084 (844,000) 2,517,996
------------------- ------------------- ------------------- -------------------
MINORITY INTEREST 560 898,026 898,586
LONG-TERM DEBT 634,169 634,169
DEFERRED REVENUE 39,650 39,650
DUE TO SHAREHOLDERS 31,800 31,800
Stockholders' Equity:
Common Stock, $.01 par value,
authorized 10,000,000 and 25,000,000
shares, respectively; issued and
outstanding 5,591,267 and 11,780,260
shares, respectively 55,914 33,000 (1) 117,803
9,500 (2)
4,520 (3)
14,869 (6)
Common Stock 33,233 (33,233) (1)
Capital in Excess of Par 5,264,950 666,112 (666,112) (1) 7,374,779
792,000 (1)
228,000 (2)
108,480 (3)
981,349 (6)
Deficit (4,114,226) (3,045,283) 3,045,283 (1) (4,114,226)
------------------- ------------------- ------------------- -------------------
1,206,638 (2,345,938) 4,385,228 3,378,356
Stockholders' Notes Receivable (228,000) (2) (228,000)
Treasury Stock (95,572) 95,572 (1)
------------------- ------------------- ------------------- -------------------
1,206,638 (2,441,510) 4,517,656 3,150,356
------------------- ------------------- ------------------- -------------------
$ 1,562,110 $ 2,169,219 $ 3,541,228 $ 7,272,557
=================== =================== =================== ===================
See accompanying notes to pro forma condensed consolidated financial statements
</TABLE>
<PAGE>
DCAP GROUP, INC.
&
DEALERS CHOICE AUTOMOTIVE PLANNING INC. & AFFILIATED COMPANIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
1. To record the estimated purchase price of $951,000 (including aggregate
estimated related acquisition costs of $126,000 which has been paid as of
December 31, 1998) for the DCAP Acquisition and the elimination of the
historical equity capitalization of the DCAP Companies in accordance with
the purchase method of accounting. Of such estimated purchase price,
$825,000 represents the issuance of 3,300,000 Common Shares of the Company
to Messrs. Lang and Weinzimer (the "Former DCAP Shareholders") in exchange
for the DCAP Shares. The value of the Company Common Shares of $.25 per
share is based on independent appraisal.
The preliminary allocation of the purchase price for the net assets of the
DCAP Companies based upon the estimated fair values of such net assets is
as follows:
Estimated acquisition costs $ 951,000
Historical negative book value of net assets at
December 31, 1998 2,441,510
---------
Acquisition goodwill $3,392,510
==========
On an ongoing basis, the Company will evaluate the carrying value of
intangible assets versus the discounted cash benefit expected to be
realized from the performance of the underlying operations and adjust for
any impairment in value.
2. To record the issuance of 950,000 Common Shares of the Company to the
Former DCAP Shareholders at a purchase price of $.25 per share in
consideration of cash of $9,500 and notes aggregating $228,000. The notes
will be payable in six equal annual installments of principal and interest
commencing April 15, 2001 and will bear interest at the rate of 6% per
annum.
3. To record the issuance of 452,000 Common Shares of the Company to certain
stockholders of the Company at a purchase price of $.25 per share payable
in cash.
4. Represents loans to the Former DCAP Shareholders in connection with the
purchase of 950,000 Common Shares of the Company directly from an existing
Company stockholder. The loans will be payable in six equal annual
installments of principal and interest commencing April 15, 2001 and will
bear interest at the rate of 6% per annum.
5. Elimination of intercompany loans and related accrued interest.
6. To record the issuance of 1,486,893 Common Shares of the Company to Eagle
at a purchase price of $.67 per share concurrently with the closing of the
DCAP Acquisition.
<PAGE>
DCAP GROUP, INC.
&
DEALERS CHOICE AUTOMOTIVE PLANNING INC. & AFFILIATED COMPANIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Historical Pro Forma
DCAP Group, DCAP
Inc. Companies Adjustments Consolidated
----------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Revenues $ 1,031,033 $ 7,868,895 $ 26,000 (4)$ 8,863,928
(62,000) (1)
Operating Expenses 1,138,284 9,465,611 131,000 (2) 10,672,895
(62,000) (1)
----------------- ---------------- ----------------- ---------------
Loss before Provision for Income
Taxes and Minority Interest (107,251) (1,596,716) (105,000) (1,808,967)
Provision for Income Taxes 4,330 113,061 0 117,391
------------------ ----------------- ------------------ ----------------
Loss before Minority Interest (111,581) (1,709,777) (105,000) (1,926,358)
Minority Interest in Net Loss of
Affiliates 0 (281,727) 0 (281,727)
------------------ ----------------- ------------------ ----------------
Net Loss $ (111,581) $ (1,428,050) $ (105,000) $ (1,644,631)
================== ================= ================== ================
Net Loss per Common Share:
Basic $ (0.02) (3)$ (0.14)
================== ================
Diluted $ (0.02) (3)$ (0.14)
================== ================
Weighted Average Number of Shares
Outstanding:
Basic 5,591,367 (3) 11,780,260
================== ================
Diluted 5,591,367 (3) 11,780,260
================== ================
</TABLE>
See accompanying notes to pro forma condensed consolidated financial statements
<PAGE>
DCAP GROUP, INC.
&
DEALERS CHOICE AUTOMOTIVE PLANNING INC. & AFFILIATED COMPANIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1998
1. Elimination of interest charged on intercompany balances.
2. Reflects amortization of goodwill based on the preliminary purchase
accounting allocations related to intangible assets acquired in connection
with the acquisition of the DCAP Companies by the Company. The goodwill is
being amortized over a 25 year life.
3. Basic and Diluted pro forma loss per share is based on historical weighted
average number of Common Shares and equivalents of the Company outstanding
during the year ended December 31, 1998, adjusted for the exchange of DCAP
Shares for Common Shares of the Company.
4. To accrue interest on notes issued in connection with the DCAP Acquisition.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DCAP GROUP, INC.
Dated: July 1, 1999 By:/s/ Kevin Lang
-----------------
Kevin Lang
President
