UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2054912
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 0-1665 Number:
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DCAP GROUP, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 36-2476480
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(State or other jurisdiction of (I.R.S Employer Identification No.)
incorporation or organization)
90 Merrick Avenue, East Meadow 11554
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(Address of principal executive offices) (Zip Code)
(516) 794-6300
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. ( ) Yes ( ) No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 11,930,260 shares as of
April 30, 1999
<PAGE>
INDEX
DCAP GROUP, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet - March 31, 1999 (Unaudited)
Condensed Consolidated Statements of Operations - Three months
ended March 31, 1999 and 1998 (Unaudited)
Condensed Consolidated Statements of Cash Flows - Three months
ended March 31, 1999 and 1998 (Unaudited)
Notes to Condensed Consolidated Financial Statements - Three
months ended March 31, 1999 and 1998 (Unaudited)
Item 2. Management's Discussion and Analysis or Plan of Operation
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
DCAP GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
March 31, 1999
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 343,723
Accounts receivable 450,006
Prepaid expenses and
other current assets 39,044
-----------
Total current assets 832,773
----------
PROPERTY AND EQUIPMENT, net 1,453,830
---------
OTHER ASSETS:
Receivable from stockholders 570,261
Goodwill, net 3,624,021
Other intangibles 196,219
Deposits and other assets 153,045
-----------
Total other assets 4,543,546
---------
$6,830,149
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expense $1,260,233
Current portion of long-term debt 369,263
Debentures payable 154,200
Due to related party 31,800
------
Total current liabilities 1,815,496
---------
OTHER LIABILITIES:
Long-term debt 557,564
Deferred revenue 215,546
-------
Total other liabilities 773,110
-------
MINORITY INTEREST 860,707
-------
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value; authorized,
25,000,000 shares; issued and outstanding,
11,930,260 shares 119,303
Capital in excess of par 7,570,154
Deficit (4,080,621)
------------
3,608,836
Subscription receivable (228,000)
--------
3,380,836
---------
$6,830,149
==========
See notes to condensed consolidated financial statements.
3
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DCAP GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 1998
--------------- -----------
Revenues:
<S> <C> <C>
Rooms $ 279,758 $ 262,321
Commissions & fees 799,499 -0-
Other 8,100 4,437
Interest 18,981 17,951
---------- ----------
Total revenues 1,106,338 284,709
--------- ----------
Costs and expenses:
General, administrative
and sundry 572,539 127,230
Departmental 99,758 79,101
Depreciation and amortization 38,914 9,830
Energy costs 5,024 5,480
Interest expense 7,086 -0-
Lease rentals 56,908 52,563
Marketing 265,310 5,672
Property operation
and maintenance 6,087 5,912
Provision for bad debt 600 500
---------- ----------
1,052,226 286,288
---------- ----------
Income (loss) before income taxes
and minority interest 54,112 (1,579)
Provision for income taxes 9,537 -0-
----- -
Income (loss) before minority interest 44,575 (1,579)
Minority interest 10,970 -0-
---------- -------------
Net income (loss) $ 33,605 $ (1,579)
========== ============
Net income (loss) per common share:
Basic $ .00 $ .00
============= ============
Diluted $ .00 $ .00
============= ============
Weighted average number of shares outstanding:
Basic 7,746,430 5,591,367
========= =========
Diluted 7,746,430 5,591,367
========= =========
See notes to condensed consolidated financial statements.
</TABLE>
4
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DCAP GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 1998
----------- -------------
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ 33,605 $ (1,579)
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 38,914 9,830
Provision for bad debts -0- 500
Minority interest in net earnings: 10,970 -0-
Decrease (increase) in assets:
Accounts receivable (39,110) (24,366)
Prepaid expenses and other
current assets 128,066 4,952
Other assets (232) 1,947
Deposits (105,357) -0-
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 117,452 (26,581)
Deferred revenue (6,903) -0-
----------- ------------
Net cash provided by (used in)
operating activities 177,405 (35,297)
--------- ---------
Cash flows from investing activities:
Increase in notes and
other receivables (1,258,038) (123,864)
Acquisition of property and equipment ( 20,494) (5,020)
Other (7,299) -0-
------ -
Net cash (used in)
investing activities (1,285,831) (128,884)
----------- ----------
Cash flows from financing activities:
Proceeds from issuance of stock 1,118,718 -0-
Principal payment of long-term
debt (20,000) -0-
------- -
Net cash provided by
financing activities 1,098,718 -0-
========= =
Net decrease in cash and
cash equivalents (9,708) (164,181)
Cash and cash equivalents,
beginning of period 353,431 1,040,389
---------- ----------
Cash and cash equivalents,
end of period $ 343,723 $ 876,208
========= ========
</TABLE>
See notes to condensed consolidated financial statements.
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DCAP GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
1. The Condensed Consolidated Balance Sheet as of March 31, 1999, the
Condensed Consolidated Statements of Operations for the three months ended
March 31, 1999 and 1998 and the Condensed Consolidated Statements of Cash
Flows for the three months ended March 31, 1999 and 1998 have been prepared
by the Company without audit. In the opinion of the Company, the
accompanying unaudited condensed consolidated financial statements contain
all adjustments necessary to present fairly its financial position as of
March 31, 1999, results of operations for the three months ended March 31,
1999 and 1998 and cash flows for the three months ended March 31, 1999 and
1998. This report should be read in conjunction with the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1998.
2. The results of operations and cash flows for the three months ended March
31, 1999 are not necessarily indicative of the results to be expected for
the full year.
3. DCAP Acquisition; Pro Forma Information. Since February 25, 1999, the
Company has been engaged in two lines of business. In one, the Company,
through its wholly-owned subsidiary, Dealers Choice Automotive Planning
Inc. ("DCAP"), and related entities (collectively, the "DCAP Companies"),
is engaged primarily in placing various types of insurance with insurance
underwriters on behalf of its customers. The categories of insurance placed
include automobile, motorcycle, boat, life, business and homeowner's
insurance. In addition, the DCAP Companies offer tax preparation services
and automobile club services for roadside emergencies. The DCAP Companies
also provide services with regard to obtaining insurance premium financing
and personal and automobile loans from third parties. The DCAP Companies
also intend to provide direct insurance premium financing services to their
clients. The Company has been in this business since its February 25, 1999
acquisition of the DCAP Companies.
In its other line of business, the Company, through its wholly-owned
subsidiary, IAH, Inc., operates the International Airport Hotel in San
Juan, Puerto Rico (the "Hotel"). The Hotel caters generally to commercial
and tourist travelers in transit.
As indicated above, on February 25, 1999, the Company acquired all of the
outstanding stock of DCAP as well as interests in the other DCAP Companies.
The Company's condensed consolidated statements of operations include the
revenues and expenses of the DCAP Companies from February 25, 1999.
The following pro forma results were developed assuming the acquisition of
the DCAP Companies had occurred as of January 1, 1998.
Three Months Ended
March 31,
1999 1998
Revenues $2,231,097 $1,924,597
Net loss $ (287,893) $ (277,472)
Loss per share $ (.02) $(.02)
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The pro forma net loss includes amortization of goodwill and other
purchased intangibles of $35,600 for the three months ended March 31, 1999
and 1998. The above unaudited pro forma condensed consolidated financial
information is presented for illustrative purposes only and is not
necessarily indicative of the condensed consolidated results of operations
in future periods or the results that actually would have been realized had
the Company and the DCAP Companies been a combined company during the
specified periods.
4. Segment and Related Information. In 1999, the Company adopted SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information, which
changes the way the Company reports information about its operating
segments. The Company has two business units with separate management teams
that provide different products and services. Prior to the acquisition of
the DCAP Companies, the Company was engaged in one line of business.
Accordingly, segment information has been omitted for 1998.
Summarized financial information concerning the Company's reportable
segments is shown in the following table:
Three months ended
March 31, 1999
DCAP
Companies Hotel Other(1) Total
Revenues $799,499 $288,616 $18,223 $1,106,338
Net income (loss) 8,346 61,753 (36,494) 33,605
- -------------
(1) Column represents corporate-related items and, as it relates to
segment net income (loss), income and expense not allocated to
reportable segments.
5. On February 25, 1999, concurrently with the acquisition of the DCAP
Companies, Eagle Insurance Company ("Eagle") purchased 1,486,893 Common
Shares of the Company for an aggregate purchase price of approximately
$1,000,000 or $.67 per share. Eagle is a New Jersey insurance company
wholly-owned by The Robert Plan Corporation, an insurance holding company
that is engaged in providing services to insurance companies.
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION.
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
Background
During 1998 and prior to February 25, 1999, the sole business of DCAP
Group, Inc. (the "Company") was the operation, through a wholly-owned
subsidiary, IAH, Inc., of the International Airport Hotel in San Juan, Puerto
Rico (the "Hotel").
On February 25, 1999, the Company acquired all of the issued and
outstanding shares of Common Stock of Dealers Choice Automotive Planning Inc.
("DCAP") as well as interests in certain companies affiliated with DCAP
(collectively with DCAP, the "DCAP Companies"). The DCAP Companies are engaged
primarily in placing various types of insurance, including automobile,
motorcycle, boat, life, business and homeowner's insurance, with insurance
underwriters on behalf of their customers. In addition, the DCAP Companies offer
income tax return preparation services and automobile club services for roadside
emergencies. The DCAP Companies also provide services with regard to obtaining
insurance premium financing and personal and automobile loans from third
parties. The DCAP Companies also intend to provide direct insurance premium
financing services to their clients.
The DCAP Companies are compensated for their insurance-related services
by commissions paid by insurance companies; the commission is usually a
percentage of the premium paid by the insured. The DCAP Companies do not engage
in underwriting activities and therefore do not assume underwriting risks.
There are 56 "DCAP" offices in the New York metropolitan area. Four are
wholly-owned by the Company; 24 are owned partially by the Company (directly or
beneficially, generally ranging between 50% and 67%) and partially by other
persons who generally operate the location; and 28 are franchises in which the
Company has no equity interest; the franchisor, DCAP Management Corp., however,
is wholly-owned by the Company.
Concurrently with the closing of the DCAP acquisition, the Company
issued and sold to Eagle Insurance Company ("Eagle") 1,486,893 Common Shares for
an aggregate purchase price of approximately $1,000,000.
Eagle is a New Jersey insurance company wholly-owned by The Robert Plan
Corporation ("The Robert Plan"), an insurance holding company that is engaged in
providing services to insurance companies. Pursuant to separate agency
agreements between certain DCAP Companies and certain insurance company
subsidiaries of The Robert Plan, such DCAP Companies have been appointed agents
of the insurance companies with regard to the offering of automobile and other
insurance products.
Results of Operations
The Company's net income for the three months ended March 31, 1999 was
$33,605 as compared to a net loss of $1,579 for the three months ended March 31,
1998. The results of
8
<PAGE>
operations for the three months ended March 31, 1999 included the results of
operations of the DCAP Companies from February 25, 1999, the date of the
acquisition by the Company of the DCAP Companies. The income for the three
months ended March 31, 1999 was the result primarily of higher room rental
revenues of $17,437 and lower general and administrative expenses of $43,482
(without consideration of the DCAP Companies) as compared to the three months
ended March 31, 1998, offset by increased Hotel departmental expenses of
$20,657. The operations of the DCAP Companies from February 25, 1999 contributed
$8,346 to the Company's net income during the three months ended March 31, 1999.
Liquidity and Capital Resources
As of March 31, 1999, the Company had $343,723 in cash and cash
equivalents and a working capital deficit of $913,923. As of December 31, 1998,
the Company had $353,431 in cash and cash equivalents and a working capital
surplus of $1,064,590.
Cash and cash equivalents remained generally constant between December
31, 1998 and March 31, 1999 due to the following: (i) on February 25, 1999,
concurrently with the closing of the DCAP acquisition, the Company received
proceeds from the sale of stock in the amount of $1,118,718; and (ii) subsequent
to such event, the Company used substantially all of such proceeds to satisfy
accrued liabilities of the Company and the DCAP Companies.
The reduction in working capital between December 31, 1998 and March
31, 1999 was primarily the result of the following: (i) the Company's working
capital surplus as of December 31, 1998 included $846,362, which represented a
note receivable (including accrued interest) from DCAP; such amount was
eliminated in consolidation since DCAP is now a wholly-owned subsidiary of the
Company; and (ii) as of February 25, 1999, the combined working capital
deficiency of the DCAP Companies (exclusive of amounts owed to the Company) was
approximately $888,000.
Based on the Company's working capital deficiency, it requires
additional financing to meet its cash flow needs.
In April 1999, the Company entered into a placement agent agreement
with respect to a private placement of its equity securities. The Company is
currently offering, through a placement agent, up to 40 Units (consisting of
Common Shares and warrants) at a purchase price of $50,000 per Unit (or an
aggregate offering of up to $2,000,000). The proceeds of the maximum offering
are intended to be used for advertising, the establishment of premium finance
operations, computer upgrades and working capital purposes. No assurances can be
given that the offering will be consummated.
The securities offered in the private placement will not be registered
under the Securities Act of 1933, as amended (the "Securities Act"), and may not
be offered or sold in the United States absent registration under the Securities
Act or an exemption from the registration requirements thereof. The placement
agent agreement provides for the grant of certain registration rights to the
purchasers of the offered securities.
9
<PAGE>
Year 2000
DCAP Companies
The Year 2000 ("Y2K") problem is the result of computer programs being
written using two digits, rather than four, to define the applicable year. Any
of the programs of the DCAP Companies that have time-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000, which
could result in miscalculations or system failures. DCAP has implemented a Y2K
compliance program designed to ensure that its computer systems, applications
and embedded operating systems will function properly beyond 1999. DCAP believes
that all of its "mission critical" systems have been identified, and will be
brought into compliance in a timely fashion.
There are only two information technology ("IT") systems that require
Y2K analysis. One of these is in DCAP's headquarters and is currently being
brought into compliance, pursuant to a contract under which the work is
anticipated to be completed by the end of the third quarter of 1999, at a cost
of approximately $10,000. This work will be subject to verification and testing
by an unrelated third party. Such verification, testing and related work may
lead to additional expense and may require time for implementation that may
extend into the fourth quarter of 1999. Management has been informed that such
expense is not likely to exceed a maximum of $50,000.
The second IT system that requires Y2K analysis is the storefront point
of sale system, to which each DCAP store is connected; currently, this system is
not Y2K-compliant. DCAP believes that this second IT system will be fully
compliant by the end of the third quarter of 1999. The remediation of the
storefront computer system will be accomplished in two steps. The first step
consists of the installation of an entirely new system of leased computers. The
programs that have been installed in these computers have been tested by an
independent third party with whom DCAP has had a maintenance contract for the
past four years. The testing of the storefront computer system, which occurred
prior to installation, has been completed. The second step involves revisions to
the programs that structure and give access to the database that each of the
storefronts maintains. The revision to the database programs is expected to be
completed before the end of the third quarter of 1999, and will be tested by the
party performing the work. Other than the testing of the new storefront computer
system and of the database programs revision, DCAP does not anticipate any
independent verification of its Y2K readiness. The lease agreement obligates
DCAP to make payments totaling $92,000; the database work is expected to cost
approximately $20,000. It is anticipated that these costs will be expensed as
incurred and funded through cash from operations.
The only material non-IT system which might be impacted by the Y2K
problem is DCAP's telephone system. DCAP has been assured by the manufacturer of
the system that it has addressed its Y2K problems, and that it is prepared to
upgrade the DCAP phone system, at a cost of $5,000, in order to make the system
Y2K compliant. DCAP management has not yet determined whether to upgrade its
phone system through an agreement with the manufacturer, or otherwise, but it
anticipates that this single non-IT Y2K issue will be fully remediated by the
end of the second quarter of 1999. An inventory and assessment of other
potential non-IT systems, which could have an impact on the business,
operations, and financial position of the DCAP Companies, has been completed by
the management of DCAP. It was determined that no other non-IT systems will pose
any Y2K problem.
10
<PAGE>
DCAP's executive management has been contacted by all of the major
insurance carriers with which it does a significant amount of business. Most of
these major carriers, such as Chubb and Travelers, have notified DCAP that their
Y2K compliance programs are at or near completion, and DCAP therefore
anticipates no Y2K problems with these parties. The object of the contacts by
these companies was to ensure that DCAP itself would be Y2K compliant, in order
to ensure the orderly continuation of business with them. DCAP anticipates
receiving similar communications from all of the major carriers with which it
deals by the end of the third quarter of 1999. However, neither the Company nor
the management of DCAP can assure that the systems of these insurance carriers,
upon which the business of the DCAP Companies depends, will be Y2K compliant on
a timely basis. DCAP is developing contingency plans designed to enable it to
continue its operations in the event of the loss of business from one or more of
these carriers or due to other third party failures.
DCAP's management intends to develop a "worst-case scenario" with
respect to Y2K non-compliance and to develop contingency plans designed to
minimize the effects of such scenario. Both the worst-case scenario and the
contingency plan will involve analysis of (i) the use of alternative sources of
insurance coverage (of which DCAP has several) in the event of the loss of
availability of one or more major carriers, and (ii) the use of alternative,
non-IT methods of processing applications, including manual processing, in the
event of IT-system failure on the part of outside parties. The executive
management of DCAP intends to have its worst-case scenario and contingency plan
fully developed and completely in place by the end of the third quarter of 1999.
Hotel Operations
The Company's wholly-owned subsidiary, IAH, operates the International
Airport Hotel at San Juan International Airport, Puerto Rico. IAH does not have
any IT systems. Of the non-IT systems that comprise part of the Hotel's
operations, the switchboard is the only such system that contains imbedded
technology not Y2K - compliant. The Hotel has a plan in place, which is designed
to avoid any Y2K difficulties, both before and after January 1, 2000. The plan
consists primarily of a series of physical and practical alterations in the
Hotel's switchboard procedures, and does not involve any replacement of
equipment or any significant effort or cost. All other non-IT systems are
operated manually.
Forward Looking Statements
Certain information contained in the matters set forth above are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, and is subject to the safe harbor created by that
act. The Company cautions readers that certain important factors may affect the
Company's actual results and could cause such results to differ materially from
any forward-looking statements which may be deemed to have been made above and
elsewhere in this Quarterly Report or which are otherwise made by or on behalf
of the Company. For this purpose, any statements contained above and elsewhere
in this Quarterly Report that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the generality of the
foregoing, words such as "may," "will," "expect," "believe," "anticipate,"
"intend," "could," "estimate," or "continue" or the negative variations of those
words or comparable terminology are intended to identify forward-looking
statements. Factors which may affect the Company's results include, but are not
limited to, the risks and uncertainties associated with undertaking different
lines of business, the lack of experience in operating certain new business
lines, the volatility of insurance premium pricing, government
11
<PAGE>
regulation, competition from larger, better financed and more established
companies, the possibility of tort reform and a resultant decrease in the demand
for insurance, the uncertainty of the litigation with regard to the Hotel lease,
the dependence on the Company's executive management, uncertainties related to
attempts to achieve Y2K compliance and the ability of the Company to raise
additional capital which will be required in the near term. The Company is also
subject to other risks detailed herein or detailed from time to time in the
Company's Securities and Exchange Commission filings.
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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
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 DCAP and Payments, Inc. (now a wholly-owned subsidiary of the
Company) alleging that DCAP and Payments, Inc. breached a certain contract in
connection with Regent's agreement to provide funding to finance the purchase of
automobile insurance for customers of DCAP, Payments, Inc. and affiliated
agencies. Subsequently, Regent amended its pleading to add DCAP's principals,
Kevin Lang and Abraham Weinzimer, as defendants. Regent claims that the
defendants are liable to it for the losses Regent allegedly suffered as a result
of unpaid loans made through DCAP agencies. Regent claims damages in excess of
$800,000. DCAP and Payments, Inc. have interposed several affirmative defenses
and have asserted counterclaims against Regent for breach of contract and fraud.
DCAP and Payments, Inc. seek damages of $40,000. The court is currently
considering motions for summary judgment. DCAP believes that it has meritorious
defenses to Regent's claims and intends to continue to defend and pursue its
counterclaim vigorously. In March 1997, DCAP, Payments, Inc. and their
affiliated agencies 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.
Item 2. CHANGES IN SECURITIES
On February 25, 1999, the Company acquired all of the outstanding
shares of DCAP as well as interests in related entities (collectively, the "DCAP
Shares").
In consideration for the transfer of the DCAP Shares, the Company
issued 1,650,000 Common Shares to each of Kevin Lang and Abraham Weinzimer
(3,300,000 Common Shares in the aggregate).
Concurrently with the acquisition of the DCAP Shares, the Company
issued additional Common Shares as follows:
(i) 475,000 Common Shares to each of Messrs. Lang and Weinzimer
(950,000 Common Shares in the aggregate) at a purchase price
of $.25 per share (an aggregate of $237,500), paid as follows:
(a) an amount in cash equal to the par value of the
950,000 Common Shares (an aggregate of $9,500); and
(b) the balance by the delivery by each of Messrs. Lang
and Weinzimer of a promissory note in the principal
amount of $114,000 (an aggregate of $228,000)
(collectively, the "Additional Shares Notes"). The
Additional Shares Notes provide for, among other
things, the following:
(I) interest at the rate of 6% per annum; and
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(II) payment of principal and interest in six
equal annual installments commencing April
15, 2001 and continuing through April 15,
2006, subject to acceleration to the extent
that Mr. Lang or Mr. Weinzimer receives any
proceeds from the sale or other disposition
of any Common Shares;
(ii) 452,000 Common Shares in the aggregate to Morton L. Certilman,
Jay M. Haft and Brian K. Ziegler or their designees (208,500
Common Shares to each of Messrs. Certilman and Haft or his
retirement trust and an aggregate of 35,000 Common Shares to
Mr. Ziegler and his wife) at a purchase price of $.25 per
share (an aggregate of $113,000), paid in cash; and
(iii) 1,486,893 Common Shares to Eagle at a purchase price of $.67
per share (an aggregate of approximately $1,000,000), paid in
cash.
Effective as of March 17, 1999, in consideration for the transfer of
certain contract rights, the Company issued 150,000 Common Shares to East County
Insurance Agency - Shirley, Inc.
The above transactions were private transactions not involving a public
offering and were exempt from the registration provisions of the Securities Act
pursuant to Section 4(2) thereof. The Company determined that each of the
purchasers was an "accredited investor" or otherwise a sophisticated investor.
The certificates representing such Common Shares bear restrictive legends
permitting the transfer thereof only upon registration of such securities or
pursuant to an exemption under the Securities Act.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At an annual meeting of stockholders held on February 25, 1999, the
stockholders of the Company elected Morton L. Certilman, Jay M. Haft and Leon
Lapidus as directors of the Company for the coming year. Subsequent to the
consummation of the DCAP acquisition, pursuant to the terms of the acquisition
agreement, Mr. Lapidus resigned as a director of the Company and Kevin Lang and
Abraham Weinzimer were elected as directors; in addition, concurrently
therewith, pursuant to a certain subscription agreement with Eagle, Robert M.
Wallach was also elected a director of the Company.
In addition, at the annual meeting, the stockholders of the Company
approved (i) the Agreement, dated as of May 8, 1998, by and among the Company,
Messrs. Certilman, Haft, Lang and Weinzimer, as amended, with respect to, among
other things, the acquisition of the DCAP Shares; (ii) an amendment to the
Company's Certificate of Incorporation to change the name of the Company to
"DCAP Group, Inc."; (iii) an amendment to the Company's Certificate of
Incorporation to increase the number of authorized Common Shares from 10,000,000
to 25,000,000; (iv) an amendment to the Company's Certificate of Incorporation
pursuant to which, if action is to be taken by the stockholders of the Company
without a meeting, then, under certain circumstances, the written consent of the
holders of all of the shares of capital stock of the Company entitled to vote
14
<PAGE>
on such matter will be required; and (v) the adoption of the Company's 1998
Stock Option Plan.
The number of votes with regard to the foregoing was as follows:
(i) Election of Directors
Voted for Election Number of Proxy
Nominee Votes Withheld
Morton L. Certilma 3,203,079 1,545
Jay M. Haft 3,203,079 1,545
Leon Lapidus 3,203,079 1,545
(ii) Approval of Agreement with respect to DCAP
For: 3,200,617 Against: 1,685 Abstain: 2,322
(iii) Approval of Change of Name
For: 3,200,712 Against: 2,090 Abstain: 1,822
(iv) Approval of Increase in Number of Authorized Common Shares
For: 3,200,265 Against: 2,637 Abstain: 1,722
(v) Approval of Amendment with respect to Stockholder Action
For: 3,201,915 Against: 1,487 Abstain: 1,222
(vi) Approval of 1998 Stock Option Plan
For: 3,201,015 Against: 2,537 Abstain: 1,072
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3(a) Certificate of Incorporation, as amended 1
- --------
1 Denotes document filed as exhibits to the Company's Annual Reports on Form
10-KSB for the years ended December 31, 1993 and 1998 and incorporated herein by
reference.
15
<PAGE>
3(b) By-laws, as amended2
27 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended March 31, 1999, the following Current
Reports on Form 8-K were filed by the Company:
(i) Date Filed: January 19, 1999
Items Reported: 5 and 7
(ii) Date Filed: March 12, 1999
Items Reported: 1, 2 and 7
(iii) Date Filed: March 23, 1999
Item Reported: 5
- --------
2 Denotes document filed as an exhibit to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1998 and
incorporated herein by reference.
16
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DCAP GROUP, INC.
Dated: May 24, 1999 By:/s/ Kevin Lang
---------------------------------
Kevin Lang, President
Dated: May 24, 1999 By: /s/ Abraham Weinzimer
---------------------------------
Abraham Weinzimer
Principal Financial Officer
17
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Mar-31-1999
<EXCHANGE-RATE> 1
<CASH> 343,723
<SECURITIES> 0
<RECEIVABLES> 450,006
<ALLOWANCES> 0
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<CURRENT-ASSETS> 832,773
<PP&E> 3,438,604
<DEPRECIATION> 1,984,774
<TOTAL-ASSETS> 6,830,149
<CURRENT-LIABILITIES> 1,815,496
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0
0
<COMMON> 119,303
<OTHER-SE> 3,261,533
<TOTAL-LIABILITY-AND-EQUITY> 6,830,149
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<INCOME-PRETAX> 43,142
<INCOME-TAX> 9,537
<INCOME-CONTINUING> 33,605
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