UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
AMENDMENT NO. 1
(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, 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 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 (I.R.S Employer Identification No.)
incorporation or organization)
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: 13,452,944 shares as of July
30, 1999
<PAGE>
INDEX
DCAP GROUP, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet - June 30, 1999 (Unaudited)
Condensed Consolidated Statements of Operations - Six months
ended June 30, 1999 and 1998 (Unaudited)
Condensed Consolidated Statements of Operations - Three months
ended June 30, 1999 and 1998 (Unaudited)
Condensed Consolidated Statements of Cash Flows - Six months
ended June 30, 1999 and 1998 (Unaudited)
Notes to Condensed Consolidated Financial Statements - Six
months ended June 30, 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
2
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PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
DCAP GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
June 30, 1999
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,295,608
Accounts receivable 598,831
Prepaid expenses and
other current assets 64,331
---------
Total current assets 1,958,770
----------
PROPERTY AND EQUIPMENT, net 1,357,097
---------
OTHER ASSETS:
Receivable from stockholders 570,261
Goodwill, net 3,532,649
Other intangibles, net 195,319
Deposits and other assets 176,075
---------
Total other assets 4,474,304
---------
$ 7,790,171
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 982,694
Current portion of long-term debt 369,263
Debentures payable 154,200
Due to related party 31,800
---------
Total current liabilities 1,537,957
---------
OTHER LIABILITIES:
Long-term debt 537,564
Deferred revenue 198,814
----------
Total other liabilities 736,378
----------
MINORITY INTEREST 906,497
----------
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value; authorized,
25,000,000 shares; issued and outstanding,
13,452,944 shares 134,529
Capital in excess of par 8,914,827
Deficit (4,212,017)
----------
4,837,339
Subscription receivable (228,000)
----------
$ 4,609,339
-----------
$ 7,790,171
===========
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,
1999 1998
--------- ---------
Revenues:
Rooms $ 524,161 $ 444,331
Commissions & Fees 3,010,681 - 0 -
Other 15,163 10,204
Interest 27,126 42,216
--------- --------
Total revenues 3,577,131 496,751
--------- --------
Costs and expenses:
General, administrative
and sundry 1,897,828 258,868
Departmental 146,815 146,598
Depreciation and amortization 239,901 19,851
Energy costs 10,005 10,441
Interest 70,458 -0-
Lease rentals 105,644 90,473
Marketing 1,110,856 10,067
Property operation
and maintenance 13,166 13,177
Provision for bad debt 1,200 1,100
--------- --------
3,595,873 550,575
--------- --------
Loss before income taxes
and minority interest (18,742) (53,824)
Provision for income taxes 22,289 -0-
---------- --------
Loss before minority interest (41,031) (53,824)
Minority interest 56,760 -0-
---------- ---------
Net loss $ (97,791) $ (53,824)
========== =========
Net loss per common share:
Basic $ (.01) $ ( .01)
=========== =========
Diluted $ (.01) $ ( .01)
=========== =========
Weighted average number of shares outstanding:
Basic 10,093,869 5,591,367
========== =========
Diluted 10,093,869 5,591,367
========== =========
4
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DCAP GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended
June 30,
1999 1998
----------- -----------
Revenues:
Rooms $ 244,403 $ 182,010
Commissions & fees 2,211,182 - 0 -
Other 7,063 5,767
Interest 8,145 24,265
----------- -----------
Total revenues 2,470,793 212,042
----------- -----------
Costs and expenses:
General, administrative
and sundry 1,325,289 131,638
Departmental 47,057 67,497
Depreciation and amortization 200,987 10,021
Energy costs 4,981 4,961
Interest expense 63,372 -0-
Lease rentals 48,736 37,910
Marketing 845,546 4,395
Property operation
and maintenance 7,079 7,265
Provision for bad debt 600 600
----------- ----------
2,543,647 264,287
----------- ----------
Loss before income taxes
and minority interest (72,854) (52,245)
Provision for income taxes 12,752 -0-
----------- ----------
Loss before minority interest (85,606) (52,245)
Minority interest 45,790 -0-
----------- ----------
Net loss $ (131,396) $ (52,245)
=========== ===========
Net loss per common share:
Basic $ (.01) $ (.01)
=========== ===========
Diluted $ (.01) $ (.01)
=========== ===========
Weighted average number of shares outstanding:
Basic 12,415,511 5,591,367
=========== ==========
Diluted 12,415,511 5,591,367
=========== ==========
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,
1999 1998
----------- ---------
Cash flows from operating activities:
Net (loss) $ (97,791) $ (53,824)
Adjustments to reconcile net (loss) to
net cash (used in) operating activities:
Depreciation and amortization 239,901 19,851
Provision for bad debts 1,200 1,100
Minority interest in net earnings 56,760 -0-
Decrease (increase) in assets:
Accounts receivable (189,135) (13,316)
Prepaid expenses and other
current assets 102,779 (30,102)
Deposits and other assets 1,802 (3,133)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (160,087) (37,838)
Deferred revenue (23,635) -0-
--------- ---------
Net cash (used in)
operating activities (68,206) (117,262)
Cash flows from investing activities:
Increase in notes and
other receivables (1,258,038) (450,110)
Acquisition of property and equipment (34,144) (10,342)
Other - 0 - -0-
--------- ---------
Net cash (used in)
investing activities (1,292,182) (460,452)
Cash flows from financing activities:
Proceeds from issuance of stock 2,342,565 -0-
Principal payment of long-term
debt (40,000) -0-
--------- ---------
Net cash provided by
financing activities 2,302,565 -0-
Net increase (decrease) in cash and
cash equivalents 942,177 (577,714)
Cash and cash equivalents,
beginning of period 353,431 1,040,389
--------- ---------
Cash and cash equivalents,
end of period $1,295,608 $ 462,675
========= ==========
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, 1999 AND 1998 (UNAUDITED)
1. The Condensed Consolidated Balance Sheet as of June 30, 1999, the Condensed
Consolidated Statements of Operations for the three and six months ended
June 30, 1999 and 1998 and the Condensed Consolidated Statements of Cash
Flows for the six months ended June 30, 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 June
30, 1999, results of operations for the three and six months ended June 30,
1999 and 1998 and cash flows for the six months ended June 30, 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 six months ended June 30,
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.
Six Months Ended
June 30,
1999 1998
---- ----
Revenues $4,701,890 $4,456,089
Net loss $ (411,825) $ (732,036)
Loss per share $(.03) $(.06)
The pro forma net loss includes amortization of goodwill and other
purchased intangibles of
7
<PAGE>
$119,000 for the six months ended June 30, 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:
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) 97,64 5 (175,941) (97,791)
------------
(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.
6. On June 2, 1999, the Company sold, through a placement agent, 33.5 Units
(consisting of Common Shares and warrants) at a purchase price of $50,000
per Unit (or aggregate gross proceeds of $1,675,000). The proceeds of the
offering are intended to be used for advertising, the establishment of
premium finance operations, computer upgrades and working capital purposes.
The securities offered in the private placement have not been 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. Certain registration rights were granted to the purchasers of the
offered securities.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
---------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 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 55 "DCAP" offices in the New York metropolitan area. Four are
wholly-owned by the Company; 23 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.
On June 2, 1999, the Company sold, through a placement agent, 33.5 Units
(consisting of Common Shares and warrants) at a purchase price of $50,000 per
Unit (or aggregate gross proceeds of $1,675,000). The proceeds of the offering
are intended to be used for advertising, the establishment of premium finance
operations, computer upgrades and working capital purposes.
The securities offered in the private placement have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), and may not
be offered or sold in the United States
9
<PAGE>
absent registration under the Securities Act or an exemption from the
registration requirements thereof. Certain registration rights were granted to
the purchasers of the offered securities.
Results of Operations
The Company's net loss for the six months ended June 30, 1999 was $97,791
as compared to a net loss of $53,824 for the six months ended June 30, 1998. 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. The results of operations
for the six months ended June 30, 1998 do not reflect any of the operations of
the DCAP Companies.
The increase in the loss for the six months ended June 30, 1999 as compared
to the six months ended June 30, 1998 was the result primarily of the
amortization of intangible assets generated by the acquisition of the DCAP
Companies, higher rent expense of $15,139 (since the Hotel's rental expense is
based upon revenues received) and lower interest income of $15,090 (since,
during the 1998 period, the Company recognized interest income from loans made
to DCAP and such interest income recognition ceased effective with the closing
of the DCAP acquisition). Such amounts were offset by higher room rental
revenues from the Hotel of $79,830 and lower general and administrative expenses
of $19,710 (without regard to the DCAP Companies).
The operations of the DCAP Companies from February 25, 1999 through June
30, 1999, on a stand-alone basis, generated a net loss of $19,495. The
operations of the Hotel during the six months ended June 30, 1999, on a
stand-alone basis, generated a net income of $97,645. Corporate- level expenses,
not allocable to either the DCAP Companies or the Hotel, resulted in the net
loss for the six months ended June 30, 1999.
Liquidity and Capital Resources
As of June 30, 1999, the Company had $1,295,608 in cash and cash
equivalents and a working capital surplus of $420,813. 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 increased between December 31, 1998 and June 30,
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 (substantially all of which was used to
satisfy accrued liabilities of the DCAP Companies), and (ii) on June 2, 1999,
the Company's received $1,675,000 in gross proceeds from the sale of its
securities in a private placement, as discussed under "Background."
The reduction in working capital between December 31, 1998 and June 30,
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. The reduction was offset partially by the receipt of the
private placement proceeds discussed under "Background."
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<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 the Company believes that
it has been brought into compliance in all material respects. The compliance
work, which cost approximately $10,000, 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 fourth 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 fourth 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 fourth 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.
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
11
<PAGE>
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. 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 fourth 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 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 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
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
On June 2, 1999, the Company sold, through Aegis Capital Corp., 33.5 Units,
each Unit 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. The placement agent's commission was
$5,000 per Unit (or an aggregate of $167,500).
As indicated above, each Unit was comprised of 45,453 Common Shares, 15,151
Class A Warrants, 15,151 Class B Warrants and 15,151 Class C Warrants. The
number of Common Shares included with a Unit was determined by dividing the per
Unit purchase price of $50,000 by two- thirds of $1.65 (the approximate closing
price of the Company's Common Shares, as reported by the NASD OTC Electronic
Bulletin Board (the "Bulletin Board"), at or about the date of the commencement
of the offering). Such price of $1.65 per share is referred to as the "Base
Market Value". For each three Common Shares included within a Unit, one Class A
Warrant, one Class B Warrant and one Class C Warrant were also included.
If, at the time any of the issued Common Shares become publicly saleable
(either pursuant to Rule 144 promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), or because a registration statement filed under
the Securities Act covering such shares is declared effective by the Securities
Exchange Commission), the preceding 30 trading day average of the closing prices
of the Common Shares (as reported by the Bulletin Board, The Nasdaq Stock Market
or a securities exchange, depending upon where the Company's Common Shares are
then traded or listed) (the "Later Market Value") is less than the Base Market
Value, the purchasers of the Units shall be entitled to receive additional
Common Shares and Warrants as if the offering had been based upon the Later
Market Value instead of the Base Market Value, i.e., two-thirds of the Later
Market Value being used instead of two-thirds of the Base Market Value (but in
no event more than an additional 50% of the original Common Shares and Warrants
issued).
Each Class A Warrant, Class B Warrant and Class C Warrant is exercisable
until June 2, 2004, subject to earlier redemption, under certain circumstances,
as discussed below.
The Class A Warrants are exercisable at a price of $1.65 per share; the
Class B Warrants are exercisable at a price of $2.06 per share; and the Class C
Warrants are exercisable at a price of $2.48 per share. The respective exercise
prices were determined based upon the Base Market Value. The exercise prices of
the Class A Warrants, Class B Warrants and Class C Warrants are equal to 100%,
125% and 150%, respectively, of the Base Market Value. In the event the Later
Market Value is less than the Base Market Value, then the exercise prices of the
Class A Warrants, Class B Warrants and Class C Warrants shall be adjusted to
equal 100%, 125% and 150%, respectively, of the Later Market Value (except that
none of the respective exercise prices may be reduced by more than one- third).
Any such readjustment in the exercise prices of the Warrants shall only apply to
the unexercised portion of the Warrants.
13
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Each of the Warrants is subject to redemption by the Company, at a price of
$.001 per Warrant, in the event the average of the closing prices of the
Company's Common Shares during any 30 consecutive trading day period is at least
125% of the exercise price of the particular Warrants and a registration
statement filed under the Securities Act is in effect covering the resale of the
Common Shares underlying the particular Warrants. The Company shall be required
to give 30 days notice of any such redemption. During the 30 day notice period,
the holders of the particular Warrants shall be entitled to exercise their right
to acquire the underlying Common Shares by paying the exercise price.
The above offering of Units 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
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3(a) Certificate of Incorporation, as amended(1)
3(b) By-laws, as amended(2)
27 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended June 30, 1999, the following Current Reports
on Form 8-K
--------
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.
14
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were filed by the Company:
(i) Date Filed: April 13, 1999
Items Reported: 5 and 7
(ii) Date Filed: June 3, 1999
Items Reported: 5 and 7
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 24, 2000 By: /s/ Morton L. Certilman
Morton L. Certilman
Chairman of the Board
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