SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: August 30, 2002
(Date of earliest event reported)
DCAP GROUP, INC.
----------------
(Exact name of Registrant as specified in charter)
Delaware 0-1665 36-2476480
---------------------------- -------------------- ---------------------
(State or other jurisdiction (Commission File No.) (IRS Employer
incorporation) Identification Number)
1158 Broadway, Hewlett, New York 11557
--------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 374-7600
--------------
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
-------------------------------------------
(i) Consolidated Balance Sheets of Barry Scott Companies, Inc. ("BSC")
at December 31, 2001 and 2000.
(ii) Consolidated Statements of Operations and Retained Earnings of
BSC for the years ended December 31, 2001 and 2000.
(iii) Consolidated Statements of Cash Flows of BSC for the years ended
December 31, 2001 and 2000.
(iv) Consolidated Balance Sheet of BSC at June 30, 2002.
(v) Consolidated Statements of Operations and Retained Earnings of BSC
for the six months ended June 30, 2002 and 2001.
(vi) Consolidated Statements of Cash Flows of BSC for the six months
ended June 30, 2002 and 2001.
(b) Pro Forma Financial Information.
-------------------------------
(i) Pro Forma Condensed Consolidated Balance Sheet of the Registrant
as of June 30, 2002.
(ii) Pro Forma Condensed Consolidated Statement of Operations of the
Registrant for the six months ended June 30, 2002.
(iii) Pro Forma Condensed Consolidated Statement of Operations of the
Registrant for the fiscal year ended December 31, 2001.
(c) Exhibits.
--------
Exhibit No. Description
2.1 Share Purchase Agreement dated as of August 30, 2002 by and
between Progressive Agency Holdings Corp. and Blast
Acquisition Corp.(1)
--------
(1) Previously filed.
BARRY SCOTT COMPANIES, INC.
AND SUBSIDIARIES
Audited Financial Statements
For the Years Ended December 31, 2001 and 2000
TABLE OF CONTENTS
Page
Independent Auditor's Report 1
Consolidated Balance Sheets 2
Consolidated Statements of Operations and
Retained Earnings 3
Consolidated Statements of Cash Flows 4
Notes to Consolidated Financial Statements 5
Board of Directors
Barry Scott Companies, Inc.
Albany, NY
Independent Auditor's Report
We have audited the accompanying consolidated balance sheets of Barry Scott
Companies, Inc. and subsidiaries as of December 31, 2001 and 2000 and the
related consolidated statements of operations, retained earnings and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Barry
Scott Companies, Inc. and subsidiaries as of December 31, 2001 and 2000, the
consolidated results of its operations and its cash flows for the years then
ended in conformity with accounting principles generally accepted in the United
States of America.
August 26, 2002 A.W. Guthman & Company
BARRY SCOTT COMPANIES, INC.
Consolidated Balance Sheets
As of December 31, 2001 and 2000
ASSETS 2001 2000
-------- --------
CURRENT ASSETS
Cash $166,580 $ 24,474
Commissions Receivable (Note 2) 175,000 155,000
Prepaid Expenses 25,124 39,502
Deferred Taxes (Note 2) - 55,317
Other Assets 2,405 21,276
-------- --------
Total Current Assets 369,109 295,569
NON-CURRENT ASSETS
Equipment, Furniture and Leasehold
Improvements, Less Accumulated
Depreciation (Note 2) 66,156 107,589
Security Deposits 24,595 19,627
-------- --------
TOTAL NON-CURRENT ASSETS 90,751 127,216
-------- --------
TOTAL ASSETS $459,860 $422,785
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $121,651 $168,411
Due to Parent Company (Note 5) 601,272 341,404
Due to Affiliates (Note 5) 4,760 30,489
Agency Purchase Liability (Note 3) 136,966 5,274
Note Payable (Note 4) 38,854 47,700
-------- --------
TOTAL CURRENT LIABILITIES 903,503 593,278
LONG-TERM LIABILITIES
Agency Purchase Liability, Net of
Current Portion (Note 3) 42,632 -
Note Payable, Net of Current Portion - 35,696
-------- --------
TOTAL LONG-TERM LIABILITIES 42,632 35,696
-------- --------
TOTAL LIABILITIES 946,135 628,974
SHAREHOLDER'S EQUITY
Common Stock 93 93
Retained Earnings (486,368) (206,282)
-------- --------
TOTAL SHAREHOLDER'S EQUITY (486,275) (206,189)
-------- --------
TOTAL LIABILITIES AND SHAREHOLDER'S
EQUITY $459,860 $422,785
======== ========
See accompanying notes to financial statements.
-2-
BARRY SCOTT COMPANIES, INC.
Consolidated Statements of Operations and Retained Earnings
For the Years Ended December 31, 2001 and 2000
2001 2000
INCOME
Commissions, Net $2,175,415 $2,105,436
2119 Fees 875,388 1,105,829
Other Service Fees 77,919 98,922
Miscellaneous 13,193 17,112
---------- ----------
TOTAL INCOME 3,141,915 3,327,299
EXPENSES
Salaries 1,945,869 2,130,615
Rent 303,730 296,594
Advertising 173,880 354,313
Office Supplies 131,171 115,616
Telephone and Communications 112,777 127,566
Utilities 56,670 58,825
Postage and Delivery 83,819 83,007
Insurance 32,544 17,954
Repairs and Maintenance 26,340 26,410
Professional Fees 10,220 25,205
Depreciation 66,397 100,567
Interest 6,223 11,415
Agency Purchases (Note 3) 267,018 102,773
DMV Reports 39,711 71,343
Bounced Check and Other Bank Charges 116,014 79,221
State and Local Taxes (Note 2) 32,743 36,889
Miscellaneous 85,304 98,138
---------- ----------
TOTAL EXPENSES 3,490,430 3,736,451
NET INCOME BEFORE FEDERAL INCOME TAXES (348,515) (409,152)
Provision for Federal Income Taxes
(Note 2) (68,429) (143,203)
---------- ----------
NET LOSS (280,086) (265,949)
RETAINED EARNINGS - Beginning of Year (206,282) 59,667
---------- ----------
RETAINED EARNINGS - End of Year $ (486,368) $ (206,282)
========== ==========
See accompanying notes to financial statements.
-3-
BARRY SCOTT COMPANIES, INC.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2001 and 2000
2001 2000
--------- ---------
OPERATING ACTIVITIES
Net Loss $(280,086) $(265,949)
Adjustments to reconcile Net Loss to
Net Cash Used in Operating Activities:
Depreciation 66,397 100,567
Changes in Operating Assets and Liabilities
Increase/Decrease in Commissions
Receivable (20,000) 8,414
Increase/Decrease in Prepaid Expenses 14,378 (22,230)
Increase in Income Taxes Recoverable (121,980) (143,203)
Decrease in Deferred Taxes 55,317 -
Decrease in Other Assets 18,871 27,987
Increase in Security Deposits (4,968) -
Decrease in Accounts Payable (46,760) (91,359)
--------- ---------
NET CASH USED IN
OPERATING ACTIVITIES (318,831) (385,773)
FINANCING ACTIVITIES
Increase in Due to Parent Company 381,847 456,619
Decrease/Increase in Due to Affiliates (25,729) 15,188
Increase/Decrease in Agency Purchase
Liabilities 174,324 (3,316)
Decrease in Note Payable (44,542) (38,308)
--------- ---------
NET CASH PROVIDED IN
FINANCING ACTIVITIES 485,900 430,183
INVESTING ACTIVITIES
Fixed Asset Acquisitions (24,963) (23,094)
NET INCREASE IN CASH 142,106 21,316
CASH - Beginning of Year 24,474 3,158
--------- ---------
CASH - End of Year $ 166,580 $ 24,474
========= =========
See accompanying notes to financial statements.
-4-
BARRY SCOTT COMPANIES, INC.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2001 and 2000
NOTE 1 - ORGANIZATION
Barry Scott Companies, Inc., consolidated (the Company) is comprised of its
holding company, Barry Scott Companies, Inc., and three insurance agencies,
Barry Scott Agency, Inc., Barron Cycle Agency, Inc. and AARD-VARK Agency, Ltd.,
a wholly-owned subsidiary of Barry Scott Acquisition Corp. The insurance
agencies are represented by eighteen branches located throughout New York State
which derive substantially all of their income from commissions associated with
the sale of auto insurance.
The Company has been a wholly-owned subsidiary of Progressive Agency Holdings
Corp., (the Parent), since November 10, 1999. For reporting and corporate income
tax purposes, the Company's results of operations are consolidated with the
Parent.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Assets, liabilities, income and expenses are recorded using the accrual basis of
accounting.
Principles of Consolidation
The consolidated financial statements include the accounts of Barry Scott
Companies, Inc., and its wholly-owned subsidiaries Barry Scott Agency, Inc.,
Barron Cycle Agency, Inc., and Barry Scott Acquisition Corp. All material
intercompany transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America, requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements. Also affected are the reported amounts of revenue and
expenses during the reporting period. Actual results may differ from these
estimates.
-5-
BARRY SCOTT COMPANIES, INC.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2001 and 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
Fixed Assets
Property and equipment are recorded at cost and depreciated using the straight
line method over their estimated useful lives, ranging from three to twenty
years. Such assets were comprised of the following as of December 31, 2001 and
2000.
Description 2001 2000
Computer and Office Equipment $567,926 $ 898,810
Leasehold Improvements 159,443 159,443
Vehicles 9,026 44,300
Furniture and Fixtures 130,088 127,134
-------- ---------
Total 866,483 1,229,687
Less Accumulated Decpreciation
and Amortization 800,327 1,122,098
-------- ---------
Net Property and Equipment $ 66,156 $ 107,589
======== =========
In 2001, the Company retired fully depreciated computer equipment totaling
$352,893 and transportation equipment totaling $35,274.
Commission Income
Commission income is recognized when policies become effective and substantially
all required services have been performed. Commissions receivable represent
management's estimate of the uncollected commissions on policies written less
estimated return commissions on cancelled policies. A liability for customer
deposits results when policies are written but have not yet become effective.
The Company is required by state insurance regulations to maintain cash balances
in an amount at least equal to such customer deposits. Such amounts, included in
accounts payable, were not considered material for both years.
-6-
BARRY SCOTT COMPANIES, INC.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2001 and 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
Income Taxes
State and local income taxes are determined and booked at the Company level.
Quarterly estimated payments are expensed and based on quarterly net income
adjusted for the appropriate federal M-1 items and other state and local
modifications for each subsidiary separately. Due to the immateriality of such
taxes in relation to the statement of operations, accruals of any underpayments
or overpayments are not recorded at year end.
The Company's federal income tax return is consolidated with The Progressive
Corporation, the parent company to Progressive Agency Holdings Corp. The
Company's provision for recovery of federal income taxes was estimated at 35% of
the net loss before federal income taxes. Amounts allocated to the Company are
included in Due to Parent Company in the balance sheet.
Deferred taxes arising from timing differences prior to the Parent's acquisition
of the Company, were written off in 2001.
NOTE 3 - PURCHASE LIABILITIES
The components of the Company's purchase liabilities are as follows:
Company Acquired 2001 2000
Blue Star Brokerage Corp. $ 7,460 $5,274
AARD-VARK Agency, LTD. 172,138 -
-------- ------
Total $179,598 $5,274
======== ======
Amounts due to the seller of Blue Star Brokerage Corp., an auto insurance agency
located in Brooklyn, NY, stem from the terms of Barron Cycle Agency, Inc.'s
(BCA) purchase agreement which was consummated in 1998 and provided as follows:
(1) $50,000 to be paid at the closing and (2) sixty monthly payments in amounts
which are equal to the lesser of a) 50% of the gross insurance commissions and
NY State Insurance Law section 2119 fees derived by BCA from the business of the
seller for each of the first sixty full calendar months following the closing or
b) $16,667. In the event that the sum of the first twelve monthly payments is
equal or greater than $200,000, the buyer agrees that the last forty-eight
payments must, in the aggregate, total at least $400,000. In the event that the
sum of the first twelve monthly payments is equal to or greater than $200,000
and the last forty-eight payments as calculated above do not total at least
$400,000, the buyer shall pay to the seller the difference between $400,000 and
the sum of the last forty eight payments due. Such difference will be paid by
BCA as part of the final monthly payment to the seller. Until such time as the
purchase price has been paid in full, the seller has a security interest in
BCA's commissions receivable and all assets that were acquired in the purchase.
-7-
BARRY SCOTT COMPANIES, INC.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2001 and 2000
NOTE 3 - PURCHASE LIABILITIES (CONT'D)
Amounts due to the seller of AARD-VARK Agency, Ltd., an auto insurance agency
located in Queens, NY, stem from the terms of Barry Scott Acquisition Corp.'s,
(BSAC) 1998 purchase agreement which provides that the purchase be based on the
future income of the agency acquired. In accordance with the terms of the
purchase agreement, the purchase price of $170,718 as derived by management, was
calculated at four times the average annual earnings before taxes during the
twenty-four month period that began on April 16, 1999. The balance outstanding
as of December 31, 2001, includes accrued interest of $1,420.
As of the date of this report, the seller, who has received all scheduled
payments as determined by the Company, has rejected management's calculation of
the purchase price. See note 8 for further details.
NOTE 4 - NOTE PAYABALE
The note payable, which is due to an employee and former owner of the AARD-VARK
Agency, Ltd., was assumed by the Company in connection with its acquisition of
the agency in 1998. As of May 31, 1999, the Company discounted the balance
outstanding on the note ($162,995) by 5% to $149,529. Payments totaling $47,700
for 2001 and 2000 included interest of $3,158 and $5,865 respectively.
NOTE 5 - RELATED PARTIES
As discussed in Note 1, the Company is a wholly owned subsidiary of Progressive
Agency Holdings Corp. The Company, which earns commissions from a variety of
insurance carriers, derives approximately 33% and 26% for 2001 and 2000
respectively of such income from Progressive's auto insurance companies. Amounts
due to Progressive consist of advertising costs paid on behalf of the Company,
cash advances, and amounts allocated to the Company for federal income taxes.
The Company shares its office space, telephone systems, accounting system and
certain accounting and administrative employees with Capital Payment Plan, Inc.
(CPP), which prior to November 10, 1999, was also a wholly owned subsidiary of
Barry Scott Companies, Inc. Such costs along with supplies and postage are
allocated according to mutually agreed upon percentages and evaluated
periodically. The aggregate amount of expenses allocated by the Company to CPP
in 2001 and 2000 was approximately $269,000 and $541,000 respectively.
-8-
BARRY SCOTT COMPANIES, INC.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2001 and 2000
NOTE 5 - RELATED PARTIES (CONT'D)
Amounts due to affiliates arising from normal business operations and
non-interest bearing, consisted of the following:
2001 2000
Due to Progressive $601,272 $341,404
Due to Capital Payment Plan 5,211 27,391
Due from/to Other Affiliates (451) 3,098
-------- --------
Total $606,032 $371,893
======== ========
The Company leases office space for one of its branches from a related party.
The Company's rental commitment of $1,400 per month for this location expires in
2003. See note 7 for further details.
NOTE 6 - EMPLOYEE BENEFITS
The Company maintains a 401(K) profit sharing plan along with CPP covering
substantially all employees who meet certain age and service requirements. The
plan allows for employee elective contributions not to exceed 15% of eligible
compensation and Company matching contributions in an amount equal to 25% of
each participant's contribution to a maximum of 6% of the participant's eligible
compensations. The plan also allows for Company discretionary contributions. An
employee's interest in the Company's matching and discretionary contributions is
fully vested after six years of service. Employer matching contributions were
$12,261 and $12,317 for 2001 and 2000 respectively.
NOTE 7 - LEASE COMMITMENTS
Office Space
Rent expense for the Company's headquarters and branch offices amounted to
$303,730 and $296,594 for 2001 and 2000 respectively. The Company's minimum
lease commitment for rental of its headquarters and other branch offices is as
follows:
2002 - $180,881
2003 - 146,435
2004 - 77,953
2005 - 52,980
2006 - 38,159
2007 - 5,733
The Company also leases other office space on a month to month basis or with
terms of one year or less.
-9-
BARRY SCOTT COMPANIES, INC.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2001 and 2000
NOTE 7 - LEASE COMMITMENTS (CONT'D)
Office Equipment
The Company's minimum lease commitment for rental of its copiers and
transportation equipment is as follows:
2002 - $45,099
2003 - 24,308
2004 - 6,111
2005 - 2,267
NOTE 8 - CONTINGENCIES
On October 16, 1998 BSACQ entered into an agreement to acquire all of the
outstanding stock of AARD-VARK Agency, Ltd. As explained more fully in Note 3,
the agreement required BSACQ to pay the sellers a purchase price equal to four
times the average annual earnings before taxes of AARD-VARK during a twenty-four
month period which ended March 31, 2001 in exchange for 100% of the outstanding
AARD-VARK stock. In April, 2001 BSACQ used the formula prescribed by the
agreement to derive a purchase price of $170,718. Dissatisfied with the BSACQ's
determination, the sellers filed their initial complaint in the Supreme Court of
the State of New York, Queens County, alleging six causes of action including
claims for breach of contract, breach of fiduciary duty and fraudulent
misrepresentation. Attorneys for Progressive, acting on behalf of BSACQ, moved
to dismiss the action based on the plaintiff's failure to properly state a
claim. On March 27, 2002 the Court granted Progressive's motion dismissing the
initial Complaint in its entirety. The Plaintiffs, who did not appeal the
decision, resubmitted the same Complaint containing an almost verbatim
reassertion of the initial claims. Progressive's attorneys and Company
management are confident that the case will be dismissed again. Consequently, no
accrual for any estimated loss, arising from the outcome of the case, has been
recorded in the financial statements.
NOTE 9 - SUBSEQUENT EVENT
On or about August 30, 2002, the Parent is scheduled to sell 100% of the
Company's stock to another insurance agency. Apart from efficiency measures,
both parties expect that operations will continue as usual. As of the date of
this report, Parent's management is not aware of any plans, on the part of the
buyer, that would have a material impact on the carrying value of the Company's
assets as stated in this report.
BARRY SCOTT COMPANIES, INC.
AND SUBSIDIARIES
Reviewed Financial Statements
For the Six Month Periods Ended June 30, 2002 and 2001
TABLE OF CONTENTS
Page
Independent Auditor's Report 1
Consolidated Balance Sheet 2
Consolidated Statements of Operations and
Retained Earnings 3
Consolidated Statements of Cash Flows 4
Notes to Consolidated Financial Statements 5
Board of Directors
Barry Scott Companies, Inc.
Albany, NY
Independent Auditor's Report
We have reviewed the consolidated balance sheet of Barry Scott Companies, Inc.
and subsidiaries as of June 30, 2002 and the related consolidated statements of
operations, retained earnings and cash flows for the six month periods ended
June 30, 2002 and 2001. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with accounting principles generally accepted in the United
States of America.
October 11, 2002 A.W. Guthman & Company
BARRY SCOTT COMPANIES, INC.
Consolidated Balance Sheet
As of June 30, 2002
ASSETS 2002
-----------
CURRENT ASSETS
Cash $ 124,520
Commissions Receivable (Note 2) 191,600
Prepaid Expenses 161,766
Due from Affiliates 17,563
Other Assets 9,321
-------
TOTAL CURRENT ASSETS 504,770
NON-CURRENT ASSETS
Equipment, Furniture and Leasehold
Improvements, Less Accumulated
Depreciation (Note 2) 38,718
Security Deposits 25,550
-------
TOTAL NON-CURRENT ASSETS 64,268
-------
TOTAL ASSETS $ 569,038
=========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ 109,367
Due to Parent Company (Note 5) 770,308
Due to Affiliates 5,439
Agency Purchase Liability (Note 3) 67,420
Note Payable (Note 4) 15,736
-------
TOTAL LIABILITIES 968,270
SHAREHOLDER'S EQUITY
Common Stock 93
Retained Earnings (399,325)
---------
TOTAL SHAREHOLDER'S EQUITY (399,232)
---------
TOTAL LIABILITIES AND SHAERHODLER'S
EQUITY $ 569,038
=========
See accompanying notes to financial statements.
-2-
BARRY SCOTT COMPANIES, INC.
Consolidated Statements of Operations and Retained Earnings
For the Six Month Periods Ended June 30, 2002 and 2001
2002 2001
---------- ----------
INCOME
INCOME
Commissions, Net $1,302,588 $ 965,172
2119 Fees 442,341 449,308
Miscellaneous 4,663 17,688
---------- ----------
TOTAL INCOME 1,749,592 1,432,168
EXPENSES
Salaries and Fringe Benefits 951,162 971,156
Rent 152,318 160,517
Advertising 90,902 92,816
Office Supplies 57,999 58,757
Telephone and Communications 71,369 57,522
Utilities 25,865 32,147
Postage and Delivery 42,750 42,761
Insurance 20,616 15,806
Repairs and Maintenance 15,273 12,652
Professional Fees 31,847 2,729
Depreciation 27,438 33,864
Interest 2,092 3,124
Agency Purchases (Note 3) 59,552 215,126
DMV Reports 10,300 22,661
Bounced Check and Other Bank Charges 20,632 53,399
State and Local Taxes (Note 2) 743 1,565
Miscellaneous 34,791 45,249
---------- ----------
TOTAL EXPENSES 1,615,649 1,821,851
NET INCOME BEFORE FEDERAL INCOME TAXES 133,943 (389,683)
Provision for Federal Income Taxes
(Note 2) 46,900 (136,177)
---------- ----------
NET INCOME (LOSS) 87,043 (253,506)
RETAINED EARNINGS - Beginning of Period (486,368) (206,282)
---------- ----------
RETAINED EARNINGS - End of Period $ (399,325) $ (459,788)
========== ==========
See accompanying notes to financial statements
-3-
BARRY SCOTT COMPANIES, INC.
Consolidated Statements of Cash Flows
For the Six Month Periods Ended June 30, 2002 and 2001
2002 2001
--------- ----------
OPERATING ACTIVITIES
Net Income (Loss) $ 87,043 $(253,506)
Adjustments to reconcile Net Income to
Net Cash Used in Operating Activities:
Depreciation 27,438 33,864
Changes in Operating Assets and Liabilities
Increase in Commissions Receivable (16,600) (25,000)
Increase in Prepaid Expenses (136,642) (5,772)
Decrease/Increase in Income Taxes
Recoverable 46,900 (155,550)
Increase in Due from Affilaites (6,916) -
Decrease in Deferred Taxes - 35,955
Increase/Decrease in Other Assets (17,563) 11,201
Increase in Security Deposits (955) (5,518)
Decrease/Increase in Accounts Payable
and Accrued Expenses (12,286) 19,781
--------- ---------
NET CASHED PROVIDED IN
OPERATING ACTIVITIES (29,581) (344,545)
FINANCING ACTIVITIES
Increase in Due to Parent Company 122,138 351,653
Increase/Decrease in Due to Affiliates 679 (27,233)
Decrease/Increase in Agency Purchase
Liabilities (112,178) 174,229
Decrease in Note Payable (23,118) (21,993)
--------- ---------
NET CASH USED IN
FINANCING ACTIVITIES (12,479) 476,656
INVESTING ACTIVITIES
Acquisition of Fixed Asset - (16,803)
NET DECREASE/INCREASE IN CASH (42,060) 115,308
CASH - Beginning of Year 166,580 24,474
--------- ---------
CASH - End of Year $ 124,520 $ 139,782
========= =========
See accompanying notes to financial statements.
-4-
BARRY SCOTT COMPANIES, INC.
Notes to Consolidated Financial Statements
For the Six Month Periods Ended June 30, 2002 and 2001
NOTE 1 - ORGANIZATION
Barry Scott Companies, Inc., consolidated (the Company) is comprised of its
holding company, Barry Scott Companies, Inc., and three insurance agencies,
Barry Scott Agency, Inc., Barron Cycle Agency, Inc. and AARD-VARK Agency, Ltd.,
a wholly-owned subsidiary of Barry Scott Acquisition Corp. The insurance
agencies are represented by eighteen branches located throughout New York State
which derive substantially all of their income from commissions associated with
the sale of auto insurance.
The Company has been a wholly-owned subsidiary of Progressive Agency Holdings
Corp., (the Parent), since November 10, 1999. For reporting and corporate income
tax purposes, the Company's results of operations are consolidated with the
Parent.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Assets, liabilities, income and expenses are recorded using the accrual basis of
accounting.
Principles of Consolidation
The consolidated financial statements include the accounts of Barry Scott
Companies, Inc., and its wholly-owned subsidiaries Barry Scott Agency, Inc.,
Barron Cycle Agency, Inc., and Barry Scott Acquisition Corp. All material
intercompany transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America, requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements. Also affected are the reported amounts of revenue and
expenses during the reporting period. Actual results may differ from these
estimates.
-5-
BARRY SCOTT COMPANIES, INC.
Notes to Consolidated Financial Statements
For the Six Month Periods Ended June 30, 2002 and 2001
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
Fixed Assets
Property and equipment are recorded at cost and depreciated using the straight
line method over their estimated useful lives, ranging from three to twenty
years. Such assets were comprised of the following as of June 30, 2002.
Description Amount
Computer and Office Equipment $567,926
Leasehold Improvements 159,443
Vehicles 9,026
Furniture and Fixtures 130,088
--------
Total 866,483
Less Accumulated Depreciation
and Amortization 827,765
--------
Net Property and Equipment $ 38,718
========
In August 2001, the Company retired fully depreciated computer equipment
totaling $352,893 and transportation equipment totaling $35,274.
Commission Income
Commission income is recognized when policies become effective and substantially
all required services have been performed. Commissions receivable represent
management's estimate of the uncollected commissions on policies written less
estimated return commissions on cancelled policies. A liability for customer
deposits results when policies are written but have not yet become effective.
The Company is required by state insurance regulations to maintain cash balances
in an amount at least equal to such customer deposits. Such amounts, included in
accounts payable, were not considered material for both years.
-6-
BARRY SCOTT COMPANIES, INC.
Notes to Consolidated Financial Statements
For the Six Month Periods Ended June 30, 2002 and 2001
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
Income Taxes
State and local income taxes are determined and booked at the Company level.
Quarterly estimated payments are expensed and based on quarterly net income
adjusted for the appropriate federal M-1 items and other state and local
modifications for each subsidiary separately. Due to immateriality of such taxes
in relation to the statement of operations, accruals of any underpayments or
overpayments are not recorded at year end.
The Company's federal income tax return is consolidated with The Progressive
Corporation, the parent company to Progressive Agency Holdings Corp. The
Company's provision for recovery of federal income taxes was estimated at 35% of
the net loss before federal income taxes. Amounts allocated to the Company are
included in Due to Parent Company in the balance sheet.
Deferred taxes arising from timing differences prior to the Parent's acquisition
of the Company, were written off as of December 31, 2001.
NOTE 3 - PURCHASE LIABILITIES
The components of the Company's purchase liabilities as of June 30, 2002 are as
follows:
Company Acquired Amount
Blue Star Brokerage Corp. $ 8,138
AARD-VARK Agency, LTD 59,282
---------
TOTAL $ 67,420
=========
Amounts due to the seller of Blue Star Brokerage Corp., an auto insurance agency
located in Brooklyn, NY, stem from the terms of Barron Cycle Agency, Inc.'s
(BCA) purchase agreement which was consummated in 1998 and provided as follows:
(1) $50,000 to be paid at the closing and (2) sixty monthly payments in amounts
which are equal to the lesser of a) 50% of the gross insurance commissions and
NY State Insurance Law section 2119 fees derived by BCA from the business of the
seller for each of the first sixty full calendar months following the closing or
b) $16,667. In the event that the sum of the first twelve monthly payments is
equal or greater than $200,000, the buyer agrees that the last forty-eight
payments must, in the aggregate, total at least $400,000. In the event that the
sum of the first twelve monthly payments is equal to or greater than $200,000
and the last forty-eight payments as calculated above do not total at least
$400,000, the buyer shall pay to the seller the difference between $400,000 and
the sum of the last forty eight payments due. Such difference will be paid by
BCA as part of the final monthly payment to the seller. Until such time as the
purchase price has been paid in full, the seller has a security interest in
BCA's commissions receivable and all assets that were acquired in the purchase.
BARRY SCOTT COMPANIES, INC.
Notes to Consolidated Financial Statements
For the Six Month Periods Ended June 30, 2002 and 2001
NOTE 3 - PURCHASE LIABILITIES (CONT'D)
Amounts due to the seller of AARD-VARK Agency, Ltd., an auto insurance agency
located in Queens, NY, stem from the terms of Barry Scott Acquisition Corp.'s
(BSAC) 1998 purchase agreement which provides that the purchase be based on the
future income of the agency acquired. In accordance with the terms of the
purchase agreement, the purchase price of $170,718 as derived by management, was
calculated at four times the average annual earnings before taxes during the
twenty-four month period that began on April 16, 1999.
As of the date of this report, the seller, who has received all scheduled
payments as determined by the Company, has rejected management's calculation of
the purchase price. See note 8 for further details.
NOTE 4 - NOTE PAYABALE
The note payable, which is due to an employee and former owner of the AARD-VARK
Agency, Ltd., was assumed by the Company in connection with its acquisition of
the agency in 1998. As of June 30, 1999, the Company discounted the balance
outstanding on the note ($162,995) by 5% to $149,529. Payments totaling $19,875
for each six month periods ended June 30, 2002 and 2001 included interest of
$732 and $1,856 for each period respectively.
NOTE 5 - RELATED PARTIES
As discussed in Note 1, the Company is a wholly owned subsidiary of Progressive
Agency Holdings Corp. The Company, which earns commissions from a variety of
insurance carriers, derived approximately 37% of such income from Progressive's
auto insurance companies during both six month periods ended June 30, 2002 and
2001. Amounts due to Progressive consist of advertising costs paid on behalf of
the Company, cash advances and amounts allocated to the Company for federal
income taxes.
The Company shares its office space, telephone systems, accounting system and
certain accounting and administrative employees with Capital Payment Plan, Inc.
(CPP), which prior to November 10, 1999, was also a wholly owned subsidiary of
Barry Scott Companies, Inc. Such costs, along with supplies and postage, are
allocated according to mutually agreed upon percentages and evaluated
periodically.
-8-
BARRY SCOTT COMPANIES, INC.
Notes to Consolidated Financial Statements
For the Six Month Periods Ended June 30, 2002 and 2001
NOTE 5 - RELATED PARTIES (CONT'D)
Amounts due to affiliates arising from normal business operations and
non-interest bearing, consisted of the following as of June 30, 2002.
Affilaite Name Amount
Due to Progressive $709,217
Due from Capital Payment Plan (12,268)
Due to/from Other Affiliates 144
--------
Total $697,093
========
The Company leases office space for one of its branches from a related party.
The Company's rental commitment of $1,400 per month for this location expires in
2003. See note 7 for further details.
NOTE 6 - EMPLOYEE BENEFITS
The Company maintains a 401(K) profit sharing plan along with CPP covering
substantially all employees who meet certain age and service requirements. The
plan allows for employee elective contributions not to exceed 15% of eligible
compensation and Company matching contributions in an amount equal to 25% of
each participant's contribution to a maximum of 6% of the participant's eligible
compensations. The plan also allows for Company discretionary contributions. An
employee's interest in the Company's matching and discretionary contributions is
fully vested after six years of service. Employer matching contributions were
$6,196 and $6,249 for the six month periods ended June 30, 2002 and 2001
respectively.
NOTE 7 - LEASE COMMITMENTS
Office Space
Rent expense for the Company's headquarters and branch offices amounted to
$152,318 and $160,517 for the six month periods ended June 30, 2002 and 2001
respectively. The Company's minimum calendar year lease commitment for rental of
its headquarters and other branch offices is as follows:
2002 - $180,881
2003 - 146,435
2004 - 77,953
2005 - 52,980
2006 - 38,159
2007 - 5,733
-9-
BARRY SCOTT COMPANIES, INC.
Notes to Consolidated Financial Statements
For the Six Month Periods Ended June 30, 2002 and 2001
NOTE 7 - LEASE COMMITMENTS (CONT'D)
The Company also leases other office space on a month to month basis or with
terms of one year or less.
Office Equipment
The Company's minimum calendar year lease commitment for rental of its copiers
and transportation equipment is as follows:
2002 - $45,099
2003 - 24,308
2004 - 6,111
2005 - 2,267
NOTE 8 - CONTINGENCIES
On October 16, 1998 BSACQ entered into an agreement to acquire all of the
outstanding stock of AARD-VARK Agency, Ltd. As explained more fully in Note 3,
the agreement required BSACQ to pay the sellers a purchase price equal to four
times the average annual earnings before taxes of AARD-VARK during a twenty-four
month period which ended March 31, 2001 in exchange for 100% of the outstanding
AARD-VARK stock. In April, 2001 BSACQ used the formula prescribed by the
agreement to derive a purchase price of $170,718. Dissatisfied with the BSACQ's
determination, the sellers filed their initial complaint in the Supreme Court of
the State of New York, Queens County, alleging six causes of action including
claims for breach of contract, breach of fiduciary duty and fraudulent
misrepresentation. Attorneys for Progressive, acting on behalf of BSACQ, moved
to dismiss the action based on the plaintiff's failure to properly state a
claim. On March 27, 2002 the Court granted Progressive's motion dismissing the
initial Complaint in its entirety. The Plaintiffs, who did not appeal the
decision, resubmitted the same Complaint containing an almost verbatim
reassertion of the initial claims. Progressive's attorneys and Company
management are confident that the case will be dismissed again. Consequently, no
accrual for any estimated loss, arising from the outcome of the case, has been
recorded in the financial statements.
NOTE 9 - SUBSEQUENT EVENT
On August 30, 2002, the Parent sold 100% of the Company's stock to another
insurance agency. Apart from efficiency measures, operations have continued as
usual. As of the date of this report, current management has no plans that would
have a material impact on the carrying value of the Company's assets as stated
in this report.
-10-
PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements give effect to the acquisition (the "Acquisition") by DCAP Group,
Inc. (the "Registrant") of the shares of Barry Scott Companies, Inc. ("BSC")
accounted for as a purchase transaction and the concurrent issuance of Common
Shares of the Registrant to investors in a private placement (the "Issuance").
These pro forma financial statements are presented for illustrative purposes
only, and therefore are not necessarily indicative of the operating results and
financial position that might have been achieved had the Acquisition occurred as
of an earlier date, nor are they necessarily indicative of the operating results
and financial position which may occur in the future.
A Pro Forma Condensed Consolidated Balance Sheet is provided as of June 30,
2002, giving effect to the Acquisition and the Issuance as though they had been
consummated on that date. Pro Forma Condensed Consolidated Statements of
Operations are provided for the six months ended June 30, 2002 and the year
ended December 31, 2001, giving effect to the Acquisition as though it had
occurred on January 1, 2001.
The pro forma financial statements are based on preliminary estimates of
values and transaction costs. The actual recording of the transactions will be
based on final values and transaction costs. Accordingly, the actual recording
of the transactions may differ from these pro forma financial statements.
The pro forma condensed consolidated financial statements presented as of
June 30, 2002 and for the six months then ended, and for the fiscal year ended
December 31, 2001, are derived from the separate historical consolidated
financial statements of the Registrant and BSC and should be read in conjunction
with the audited and unaudited consolidated financial statements of the
Registrant (included in its Annual Report on Form 10-KSB for the year ended
December 31, 2001 and Quarterly Report on Form 10-QSB for the period ended June
30, 2002) and BSC (contained elsewhere herein).
DCAP GROUP, INC. AND SUBSIDIARIES
AND
BARRY SCOTT COMPANIES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2002
(Unaudited)
Historical Pro Forma
---------------------------- -----------------------------
DCAP Barry Scott
Companies Companies Adjustments Consolidated
ASSETS
Current assets:
Cash and cash equivalents $ 256,540 $ 124,520 $ 500,000 (1) $ 556,060
(325,000)(2)
Due from franchises 204,998 - - 204,998
Commissions receivable 191,600 - 191,600
Note receivable from former officer 40,085 - - 40,085
Prepaid expenses and other assets 50,017 188,650 - 238,667
--------- --------- --------- ---------
Total current assets 551,640 504,770 175,000 1,231,410
PROPERTY AND EQUIPMENT, net 323,489 38,718 - 362,207
OTHER ASSETS:
Goodwill 75,000 - 310,653 (2) 593,653
158,000 (4)
50,000 (5)
Other intangibles, net 205,248 - 103,550 (2) 308,798
Deposits and other assets 42,350 25,550 - 67,900
--------- -------- -------- ---------
Total other assets 322,598 25,550 622,203 970,351
--------- -------- -------- ---------
$1,197,727 $ 569,038 $ 797,203 $2,563,968
========= ======== ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 684,797 $ 109,367 $ 50,000 (5) $ 844,164
Current portion of long-term debt 24,049 - 105,000 (4) 129,049
Current portion of capital lease
obligations 73,322 - - 73,322
Deferred revenue 79,169 - - 79,169
Debentures payable 154,200 - - 154,200
Due to officer 33,333 - - 33,333
Due to parent company and affiliate - 775,747 (775,747)(3) -
Agency purchase liability - 67,420 (59,282)(3) 8,138
Note payable - 15,736 - 15,736
--------- -------- -------- ---------
Total current liabilities 1,048,870 968,270 (680,029) 1,337,111
LONG TERM DEBT 171,470 - 525,000 (2) 749,470
53,000 (4)
CAPITAL LEASE OBLIGATIONS 89,571 - - 89,571
DEFERRED REVENUE 27,341 - - 27,341
MINORITY INTEREST 10,859 - - 10,859
STOCKHOLDERS' (DEFICIT) EQUITY
Common stock 150,680 93 10,000 (1) 160,680
(93)(2)
Preferred stock - - - -
Capital in excess of par 9,752,409 - 490,000 (1) 10,242,409
Deficit (9,124,818) (399,325) (435,704)(2) (9,124,818)
- - 835,029 (3) -
--------- -------- -------- ----------
778,271 (399,232) 899,232 1,278,271
Treasury stock (928,655) - - (928,655)
--------- -------- -------- ----------
Total stockholders'
(deficit) equity (150,384) (399,232) 899,232 349,616
--------- -------- -------- ----------
$1,197,727 $ 569,038 $ 797,203 $ 2,563,968
========= ======== ======== ==========
See accompanying notes to pro forma consolidated financial statements
DCAP GROUP, INC. AND SUBSIDIARIES
AND
BARRY SCOTT COMPANIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2002
1. To record amount received from an investor (1,000,000 shares at $.50 per
share) used to purchase Barry Scott Companies concurrently with the
acquisition.
2. To record the purchase price of $850,000 for Barry Scott Companies
acquisition consisting of $325,000 in cash with the balance of $525,000
bearing interest at 5% per annum and the elimination of the historical
equity capitalization of Barry Scott Companies in accordance with the
purchase method of accounting.
The goodwill and intangible assets acquired are valued at $310,653 and
$103,550, respectively. Intangible assets represent customer lists obtained
from Barry Scott Companies and will be amortized over an estimated useful
life of four years. On an ongoing basis, the Company will evaluate the
carrying value of goodwill versus the discounted cash benefit expected to
be realized from the performance of the underlying operations and adjust
for any impairment in value.
3. Represents items not assumed by purchaser.
4. To record estimated remaining contingent obligation in connection with a
previous acquisition by Barry Scott Companies.
5. To record estimated transaction costs in connection with the acquisition of
Barry Scott Companies.
DCAP GROUP, INC. AND SUBSIDIARIES
AND
BARRY SCOTT COMPANIES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2002
(Unaudited)
Historical Pro Forma
------------------------------- --------------------------------
DCAP Barry Scott
Companies Companies Adjustments Consolidated
---------- ----------- ----------- ------------
Revenues:
Commissions and fees $ 699,235 $ 1,744,929 $ - $ 2,444,164
Rooms 417,685 - - 417,685
Premium finance revenue 427,096 - - 427,096
Other 6,904 4,663 - 11,567
--------- ----------- --------- ----------
Total revenues 1,550,920 1,749,592 - 3,300,512
Operating expenses:
General and administrative 1,240,503 1,495,217 - 2,735,720
Depreciation and amortization 67,458 27,438 12,944 (4) 107,840
Marketing 105,934 90,902 - 196,836
Property operation and maintenance 19,898 - - 19,898
--------- --------- --------- ----------
Total operating expenses 1,433,793 1,613,557 12,944 3,060,294
========= ========= ========= ==========
Operating income 117,127 136,035 (12,944) 240,218
Other (expense) income:
Interest income 2,251 - - 2,251
Interest expense (28,900) (2,092) (13,125)(3) (44,117)
--------- --------- --------- ----------
Total other (expense) income (26,649) (2,092) (13,125) (41,866)
--------- --------- ---------
Income before income taxes and minority interest 90,478 133,943 (26,069) 198,352
Provision for income taxes 1,243 46,900 (46,900)(1) 1,243
Income before minority interest 89,235 87,043 20,831 197,109
Minority interest 1,936 - - 1,936
--------- --------- -------- ----------
Net income $ 87,299 $ 87,043 $ 20,831 $ 195,173
========= ========= ======== ==========
Net income per share:
Basic $ 0.01 (2) $ 0.02
========= ==========
Diluted $ 0.01 (2) $ 0.02
========= ==========
Weighted average number of shares outstanding:
Basic 11,353,402 (2) 12,353,402
========== ==========
Diluted 11,429,673 (2) 12,429,673
========== ==========
See accompanying notes to pro forma consolidated financial statements
DCAP GROUP, INC. AND SUBSIDIARIES
AND
BARRY SCOTT COMPANIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2002
1. To remove income tax provision on Barry Scott Companies based upon the
utilization of net operating loss carryforwards of DCAP Group, Inc.
2. Basic and Diluted pro forma income per share is based on historical
weighted average number of Common Shares and equivalents of DCAP Group
during the six months ended June 30, 2002, adjusted for the shares issued
to an investor concurrently with the acquisition.
3. To record six months of interest expense on the indebtedness incurred in
connection with the acquisition of Barry Scott Companies.
4. Reflects amortization of intangible assets acquired in connection with the
acquisition of Barry Scott Companies. The intangible assets are being
amortized over a 4 year period.
DCAP GROUP, INC. AND SUBSIDIARIES
AND
BARRY SCOTT COMPANIES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2001
(Unaudited)
Historical Pro Forma
-------------------------------- ---------------------------------
DCAP Barry Scott
Companies Companies Adjustments Consolidated
----------- ----------- ----------- ------------
Revenues:
Commissions and fees $ 2,350,094 $ 3,128,722 $ - $ 5,478,816
Rooms 879,918 - - 879,918
Premium finance revenue 259,454 - - 259,454
Other 30,998 13,193 - 44,191
--------- --------- -------- ---------
Total revenues 3,520,464 3,141,915 - 6,662,379
Operating expenses:
General and administrative 2,861,849 3,417,810 - 6,279,659
Provision for bad debts 232,666 - - 232,666
Departmental 357,029 - - 357,029
Depreciation and amortization 293,605 66,397 25,888 (4) 385,890
Lease rentals 409,116 - - 409,116
Property operation and maintenance 60,139 - - 60,139
--------- --------- -------- ---------
Total operating expenses 4,214,404 3,484,207 25,888 7,724,499
--------- --------- -------- ---------
Operating loss (693,940) (342,292) (25,888) (1,062,120)
Other (expense) income:
Interest income 15,960 - - 15,960
Interest expense (47,429) (6,223) (26,250) (3) (79,902)
Gain on sale of DCAP stores 56,043 - - 56,043
Loss on disposal of property and equipment (252,791) - - (252,791)
--------- --------- -------- ---------
Total other (expense) income (228,217) (6,223) (26,250) (260,690)
--------- --------- -------- ---------
Loss before income taxes and minority interest (922,157) (348,515) (52,138) (1,322,810)
Provision (benefit) for income taxes 20,336 (68,429) 68,429 (1) 20,336
--------- --------- -------- ---------
Loss before minority interest (942,493) (280,086) (120,567) (1,343,146)
Minority interest 12,942 - - 12,942
--------- --------- -------- ---------
Net loss $ (929,551) $ (280,086) $ (120,567) $ (1,330,204)
========= ========= ======== =========
Net loss per share:
Basic $ (0.08) (2) $ (0.10)
========= =========
Diluted $ (0.08) (2) $ (0.10)
========= =========
Weighted average number of shares outstanding:
Basic 12,238,222 (2) 13,238,222
========== ==========
Diluted 12,238,222 (2) 13,238,222
========== ==========
See accompanying notes to pro forma consolidated financial statements
DCAP GROUP, INC. AND SUBSIDIARIES
AND
BARRY SCOTT COMPANIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2001
1. To remove income tax benefit taken by Barry Scott Companies as a result of
DCAP having a 100% valuation allowance.
2. Basic and Diluted pro forma income per share is based on historical
weighted average number of Common Shares and equivalents of DCAP Group
during the year ended December 31, 2001, adjusted for the shares issued to
an investor concurrently with the acquisition.
3. To record interest expense on the indebtedness incurred in connection with
the acquisition of the Barry Scott Companies.
4. Reflects amortization of intangible assets acquired in connection with the
acquisition of Barry Scott Companies. The intangible assets are being
amortized over a 4 year period.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DCAP GROUP, INC.
Dated: November 1, 2002 By: /s/ Barry Goldstein
------------------------------------
Barry Goldstein
Chief Executive Officer