UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 June 30, 2000
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 Number: 0-1665
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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 incorporation or organization) (I.R.S Employer
Identification No.)
90 Merrick Avenue, East Meadow, New York 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. ( X ) Yes ( ) 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: 15,068,018 shares as of July
24, 2000.
<PAGE>
INDEX
DCAP GROUP, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet - June 30, 2000 (Unaudited)
Condensed Consolidated Statements of Operations - Six Months ended June
30, 2000 and 1999 (Unaudited)
Condensed Consolidated Statements of Operations - Three months
ended June 30, 2000 and 1999 (Unaudited)
Condensed Consolidated Statements of Cash Flows - Six months
ended June 30, 2000 and 1999 (Unaudited)
Notes to Condensed Consolidated Financial Statements - Six
months ended June 30, 2000 and 1999 (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
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
DCAP GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
June 30, 2000
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,095,965
Accounts receivable, net 476,371
Prepaid expenses and
other current assets 191,337
----------
Total current assets 1,763,673
----------
PROPERTY AND EQUIPMENT, net 1,223,284
----------
OTHER ASSETS:
Receivable from stockholders 225,000
Goodwill, net 3,150,383
Other intangibles 522,537
Deposits and other assets 673,019
-----------
Total other assets 4,570,939
-----------
$7,557,896
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $1,570,909
Current portion of long-term debt 75,000
Current portion capital lease obligations 246,432
Debentures payable 154,200
----------
Total current liabilities 2,046,541
----------
OTHER LIABILITIES:
Long-term debt 262,060
Capital lease obligations 253,368
Deferred revenue 44,320
----------
Total other liabilities 559,748
----------
MINORITY INTEREST 53,122
----------
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value; authorized,
25,000,000 shares; issued and outstanding,
15,068,018 shares 150,680
Capital in excess of par 9,752,410
Deficit (4,776,605)
----------
5,126,485
Subscription receivable (228,000)
----------
4,898,485
----------
$7,557,896
==========
See notes to condensed consolidated financial statements.
3
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DCAP GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Six months ended
June 30,
2000 1999
---------- ---------
Revenues:
Commissions & Fees $3,996,517 $3,010,681
Rooms 518,227 524,161
Other 28,409 15,163
Interest 28,717 27,126
---------- ----------
Total revenues 4,571,870 3,577,131
---------- ----------
Costs and expenses:
General and administrative 3,961,081 3,019,889
Departmental 194,738 146,815
Depreciation and amortization 426,495 239,901
Interest 64,759 70,458
Lease rentals 104,940 105,644
Property operation
and maintenance 16,425 13,166
---------- ----------
4,768,438 3,595,873
---------- ----------
Loss before income taxes
and minority interest (196,568) (18,742)
Provision for income taxes 9,550 22,289
---------- ----------
Loss before minority interest (206,118) (41,031)
Minority interest 6,219 56,760
---------- -----------
Net loss $ (212,337) $ (97,791)
========== ==========
Net loss per common share:
Basic $ (.01) $ (.01)
========== ==========
Diluted $ (.01) $ (.01)
========== ==========
Weighted average number of shares outstanding:
Basic 14,432,865 10,093,869
========== ==========
Diluted 14,432,865 10,093,869
========== ==========
4
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DCAP GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended
June 30,
2000 1999
---------- ---------
Revenues:
Commissions & Fees $1,867,884 $2,211,182
Rooms 232,544 244,403
Other 22,101 7,063
Interest 14,810 8,145
---------- ----------
Total revenues 2,137,339 2,470,793
---------- ----------
Costs and expenses:
General and administrative 1,902,787 2,176,416
Departmental 114,635 47,057
Depreciation and amortization 211,059 200,987
Interest 33,005 63,372
Lease rentals 46,675 48,736
Property operation
and maintenance 9,741 7,079
---------- ----------
2,317,902 2,543,647
Loss before income taxes
and minority interest (180,563) (72,854)
Provision for income taxes 463 12,752
---------- ----------
Loss before minority interest (181,026) (85,606)
Minority interest 14,713 45,790
---------- ----------
Net loss $ (195,739) $ (131,396)
=========== ===========
Net loss per common share:
Basic $ (.01) $ (.01)
========== ==========
Diluted $ (.01) $ (.01)
=========== ==========
Weighted average number of shares outstanding:
Basic 14,557,668 12,415,511
========== ==========
Diluted 14,557,668 12,415,511
========== ==========
See notes to condensed consolidated financial statements.
5
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DCAP GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six months ended
June 30,
2000 1999
----------- ---------
Cash flows from operating activities:
Net loss $ (212,337) $ (97,791)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Depreciation and amortization 426,495 239,901
Loss on sale of ownership interests
in joint ventures 75,822 -
Provision for bad debts 1,200 1,200
Minority interest in net earnings 6,219 56,760
Decrease (increase) in assets:
Accounts receivable 52,415 (189,135)
Prepaid expenses and other
current assets (19,302) 102,779
Deposits and other 49 1,802
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 216,375 (160,087)
Deferred revenue (76,467) ( 23,635)
--------- -----------
Net cash provided by (used in)
operating activities 470,469 (68,206)
--------- -----------
Cash flows from investing activities:
(Increase) in notes and other
receivables, net (108,153) (1,258,038)
Acquisition of property and equipment (75,261) (34,144)
--------- ----------
Net cash used in
investing activities (183,414) (1,292,182)
--------- ----------
Cash flows from financing activities:
Proceeds from issuance of stock - 2,342,565
Proceeds from long-term debt 41,000 -
Principal payment of long-term
debt and capital lease obligations (175,266) (40,000)
--------- ----------
Net cash (used in) provided by
financing activities (134,266) 2,302,565
--------- ----------
Net increase in cash and
cash equivalents 152,789 942,177
Cash and cash equivalents,
beginning of period 943,176 353,431
--------- ----------
Cash and cash equivalents,
end of period $1,095,965 $1,295,608
========= =========
See notes to condensed consolidated financial statements.
6
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DCAP GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
1. The Condensed Consolidated Balance Sheet as of June 30, 2000, the Condensed
Consolidated Statements of Operations for the three and six months ended
June 30, 2000 and 1999 and the Condensed Consolidated Statements of Cash
Flows for the six months ended June 30, 2000 and 1999 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 June
30, 2000, results of operations for the three and six months ended June 30,
2000 and 1999 and cash flows for the six months ended June 30, 2000 and
1999. This report should be read in conjunction with the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1999.
2. Summary of Significant Accounting Policies:
a. Principles of consolidation
The accompanying consolidated financial statements include the accounts
of all subsidiaries in which the Company exercises significant
influence over all decision making related to the ongoing major
operations. All significant intercompany accounts and transactions have
been eliminated.
b. 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 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. Premium
financing fee revenue is recognized when financing is provided to the
insured.
Revenues from room sales are recorded at the time services are
performed.
3. The results of operations and cash flows for the six months ended June 30,
2000 are not necessarily indicative of the results to be expected for the
full year.
4. 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, DCAP Insurance Agencies, Inc.
(formerly Dealers Choice Automotive Planning Inc.) ("DCAP"), and related
entities (collectively, the "DCAP Companies") is engaged primarily in
placing various types of insurance, including automobile, motorcycle, boat,
life, business and homeowner's insurance, and excess coverage, with
insurance underwriters on behalf of its customers. In addition, the DCAP
Companies offer income tax return preparation services, automobile club
services for roadside emergencies and premium financing services for their
customers. 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
7
<PAGE>
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.
This transaction was accounted for under the purchase method of accounting.
Accordingly, the Company's condensed consolidated statements of operations
include the revenues and expenses of the DCAP Companies from February 25,
1999.
During 1999, the Company also acquired the interests of its joint venture
partners in various DCAP retail insurance stores. These transactions have
been accounted for under the purchase method of accounting.
The following pro forma results were developed assuming that the
acquisition of the DCAP Companies and the joint venture interests had
occurred as of January 1, 1999. The Company's actual results for the six
months ended June 30, 2000 are also reflected below.
Six Months Ended
June 30,
----------------------------
2000 1999
---- ----
(actual) (pro forma)
Revenues $4,571,870 $4,740,971
Net loss (212,337) (476,586)
Loss per share (.01) (.03)
The pro forma net loss includes amortization of goodwill and other
purchased intangibles of $183,769 for the six months ended June 30, 1999.
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
period or the joint venture interests had been acquired as of January 1,
1999.
5. 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.
Summarized financial information concerning the Company's reportable
segments is shown in the following table:
8
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Six months ended
June 30, 2000
DCAP
Companies Hotel Other(1) Total
--------- ----- -------- -----
Revenues $4,000,445 $529,902 $ 41,523 $4,571,870
Net income (loss) (22,508) 82,342 (272,171) (212,337)
Six months ended
June 30, 1999
DCAP
Companies Hotel Other(1) Total
--------- ----- -------- -----
Revenues $3,010,681 $540,707 $ 25,743 $3,577,131
Net income (loss) (19,495) 97,645 (175,941) (97,791)
------------
(1) Column represents corporate-related items and, as it relates to segment
net income (loss), income and expense, including expenses for amortization
of goodwill and other intangibles ($183,769 for the six months ended June
30, 2000), not allocated to reportable segments.
6. 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. Effective June 2,2000, in connection with the Company's June 1999 private
placement offering, an additional 761,342 Common Shares, 253,778 Class A
Warrants, 253,778 Class B Warrants and 253,778 Class C Warrants were issued
to investors. The shares and warrants were issued pursuant to price
protection provisions contained in the offering agreement. Effective June
2, 2000, the exercise prices of the Class A Warrants, Class B Warrants and
Class C Warrants were reduced to $1.10, $1.37 and $1.65, respectively, per
share.
8. In May 2000, the Company sold its ownership interests in four joint
ventures to a related party for $141,000, which will be paid over six
years. Interest at 6% per annum will be payable commencing May 2001. In
connection with the sale, the Company recorded a $75,822 loss.
9
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
---------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
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 DCAP Insurance Agencies, Inc. (formerly
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, and excess coverage, with insurance underwriters on
behalf of their customers. In addition, the DCAP Companies offer income tax
return preparation services, automobile club services for roadside emergencies
and premium financing services for their customers.
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 66 existing "DCAP" offices in the New York metropolitan area. As
discussed below, an additional 12 are anticipated to be opened by October 31,
2000. Of the existing locations, 14 are wholly-owned by the Company, three are
owned partially by the Company (ranging between 50% and 80%) and partially by
other persons who generally operate the location (the "joint venture partner")
and 49 are franchises in which the Company has no equity interest; the
franchisor, DCAP Management Corp., however, is wholly-owned by the Company.
During the last four months of 1999 and initial six months of 2000, the Company
sold an aggregate of 27 franchises. Fifteen of these are currently open for
business. It is anticipated that the remaining 12 franchised stores will open by
October 31, 2000 with the result that there would be 78 "DCAP" locations. In
April 1999, DCAP obtained a license from the State of Connecticut to sell
insurance in that state, and expects to begin placing policies there in the
future.
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.
In June 1999, the Company raised gross proceeds of $1,675,000 through a
private placement of its securities.
10
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Pursuant to various agreements entered into by the Company in December
1999, the Company acquired the interests of its joint venture partners in 15
DCAP retail insurance stores, in exchange for the issuance of approximately
850,000 Common Shares of the Company. These acquisitions were part of the
Company's plan to phase out joint ventures in the DCAP system and to concentrate
on wholly-owned and franchise operations.
Results of Operations
The Company's net loss for the six months ended June 30, 2000 was $212,337
as compared to a net loss of $97,791 for the six months ended June 30, 1999. The
results of operations for the six months ended June 30, 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. On a pro forma basis
(assuming that the acquisition of the DCAP Companies and certain interests of
joint venture partners had occurred as of January 1, 1999), the Company's net
loss for the six months ended June 30, 1999 would have been $476,586.
During the six months ended June 30, 2000, revenues from the operations of
the DCAP Companies were $4,000,445 (including $668,000 in initial franchise
fees, i.e., from the grant of franchises). On a pro forma basis (using the above
assumption), revenues from the operations of the DCAP Companies during the six
months ended June 30, 1999 would have been $4,174,521. No franchises were
granted during the six months ended June 30, 1999. On a pro forma basis, there
was a decline in revenues from the operations of the DCAP Companies (net of
initial franchise fees) of $842,076 between the six months ended June 30, 1999
and 2000 generally due to competitive pressures in the industry and the sale or
closure of certain DCAP offices. Hotel revenues remained generally constant
between the six months ended June 30, 1999 and 2000.
The loss for the six months ended June 30, 2000 as compared to the six
months ended June 30, 1999 was the result primarily of amortization expenses of
$183,769 relating to goodwill and other intangible assets generated primarily by
the DCAP acquisition, which was accounted for under the purchase method of
accounting, and a loss of $75,822 incurred in connection with a sale of
ownership interests in joint ventures (as discussed in Item 5 of Part II
hereof). The operations of the DCAP Companies during the six months ended June
30, 2000, on a stand-alone basis, generated a net loss of $22,508 (after giving
effect to the $75,822 loss referred to above). The operations of the Hotel
during the six months ended June 30, 2000, on a stand-alone basis, generated net
income of $82,342.
Liquidity and Capital Resources
As of June 30, 2000, the Company had $1,095,965 in cash and cash
equivalents and a working capital deficit of $282,868. As of December 31, 1999,
the Company had $943,176 in cash and cash equivalents and a working capital
deficit of $211,777.
Cash and cash equivalents increased between December 31, 1999 and June 30,
2000 due to net cash provided by operating activities in the amount of $470,469,
offset by cash used to acquire property and equipment of $75,261 and to repay
long-term debt and capital lease obligations of $175,266.
Other
In April 1999, DCAP obtained a license from the State of Connecticut to
sell insurance in that state. The Company is in the process of contacting
carriers and expects to begin placing policies
11
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in Connecticut in the near future. The Company intends to add consumer finance
products to its portfolio of services and products, including auto loans and
personal loans, personal lines of credit, and extended auto warranty insurance,
among others. These products are expected to generate new revenues for DCAP.
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 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, and the ability of the Company to raise
additional capital which may 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.
12
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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On June 2, 1999, the Company sold, through Aegis Capital Corp., 33.5 Units,
each Unit initially consisting of 45,453 Common Shares, 15,151 Class A Common
Stock Purchase Warrants ("Class A Warrants"), 15,151 Class B Common Stock
Purchase Warrants ("Class B Warrants") and 15,151 Class C Common Stock Purchase
Warrants ("Class C Warrants"), at a price of $50,000 per Unit (or an aggregate
of $1,675,000), to 43 accredited investors. Pursuant to the offering, the
Company initially issued in the aggregate 1,522,684 Common Shares, 507,570 Class
A Warrants, 507,570 Class B Warrants and 507,570 Class C Warrants.
Effective June 2, 2000, as a result of certain price protection provisions
included as part of the offering, the purchasers of the Units were entitled to
receive an aggregate of 761,342 additional Common Shares, 253,778 additional
Class A Warrants, 253,778 additional Class B Warrants and 253,778 additional
Class C Warrants.
The Class A Warrants were initially exercisable at a price of $1.65 per
share; the Class B Warrants at a price of $2.06 per share; and the Class C
Warrants at a price of $2.48 per share. As a result of the price protection
provisions, effective June 2, 2000, the respective exercise prices of the Class
A Warrants, Class B Warrants and Class C Warrants were reduced to $1.10, $1.37
and $1.65, respectively, per share.
The above offering of additional Common Shares and warrants was a private
transaction not involving a public offering and was exempt from the registration
provisions of the Securities Act pursuant to Section 4(2) thereof and Rule 506
of Regulation D promulgated thereunder. The Company determined that each of the
purchasers was an "accredited investor." The certificates representing the
Common Shares and Warrants 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
None
Item 5. OTHER INFORMATION
Prior to May 31, 2000, four of the DCAP Companies (the "Related Stores")
were owned one- half by the daughter of Morton L. Certilman, Chairman of the
Board of the Company, and one-half by the Company. Effective May 31, 2000, the
Company sold its 50% interest in each of the Related Stores to Mr. Certilman
upon the following material terms and conditions:
13
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(i) The purchase price for the Company's interest in the Related Stores
was approximately $141,000, after certain credits.
(ii) The purchase price is payable as follows: (a) $66,000 is payable at
the rate of $6,000 per month, starting on the first anniversary of the
closing, and (b) the balance of the purchase price is payable over
five years, together with 6% interest, in equal monthly installments
commencing on the second anniversary of the closing.
(iii)The Company agreed to waive all indebtedness owing by the Related
Stores to the Company. As of the closing, the approximate amount of
such indebtedness was $210,000.
(iv) As part of the transaction, the Related Stores became conversion
franchisees, and the first annual franchise charge of $18,000 per
store was paid in full at the closing in consideration for a waiver of
the annual franchise charges during the second year.
(v) The Related Stores entered into franchise agreements with the Company,
which are similar in most respects to the Company's standard
conversion franchise agreement (including standard territorial
rights), except that (a) the Related Stores have a right of first
refusal with regard to franchise locations to be offered in zip codes
adjoining those in which the Related Stores are located, and (b) in
the event the Company sells another franchise to be located in the
territory with respect to which a Related Store currently has certain
rights (which is more expansive than the rights granted pursuant to
the franchise agreements), the annual franchise fee for the particular
Related Store will be waived for six months (such rights being granted
in consideration of the waiver of certain other geographic rights not
granted to other franchisees).
(vi) Certain license fees totaling $40,000 previously prepaid by Mr.
Certilman will be retained by the Company, to be applied generally
against franchise fees for any new franchises granted to Mr. Certilman
or his designee.
14
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Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3(a) Certificate of Incorporation, as amended 1
3(b) By-laws, as amended2
10 Stock Purchase Agreement dated May 17, 2000 by and between the
Company, Dealers Choice Automotive Planning, Inc., Alyssa
Greenvald, Morton Certilman, DCAP Ridgewood, Inc., DCAP Bayside,
Inc., DCAP Freeport, Inc., and MC DCAP, Inc.
27 Financial Data Schedule
(b) Reports on Form 8-K
No Current Report on Form 8-K was filed by the Company during the quarter
ended June 30, 2000.
--------
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.
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.
15
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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: August 14, 2000 By: /s/ Kevin Lang
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Kevin Lang
President
Dated: August 14, 2000 By: /s/ Abraham Weinzimer
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Abraham Weinzimer
Executive Vice President
(Principal Financial Officer)
