f8k.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

_________


FORM 8-K


CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934


Date of Report:  February 1, 2008
(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
of Incorporation)
  
(Commission File No.)
  
(IRS Employer Identification
Number)

1158 Broadway, Hewlett, NY
    11557 
(Address of Principal Executive Offices)
(Zip Code)


Registrant's telephone number, including area code: (516) 374-7600

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

____
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
____
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
____
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
____
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.01.
Completion of Acquisition or Disposition of Assets.
   
     On February 1, 2008, Payments Inc. (“Payments”), a wholly-owned subsidiary of DCAP Group, Inc., sold its outstanding premium finance loan portfolio to Premium Financing Specialists, Inc. (“PFS”).  The salient terms of the sale are as follows:
 
· The purchase price for the acquired loan portfolio was approximately $11,845,000, of which approximately $268,000 was paid to Payments.  The remainder of the purchase price was satisfied substantially by the assumption of liabilities of Payments, including the satisfaction of Payments’ premium finance revolving credit line obligation to Manufacturers and Traders Trust Company.
 
· Payments shall be entitled to receive an additional amount based upon the net earnings generated by the acquired loan portfolio.
 
· PFS has agreed that, during the five year period ending January 31, 2013 (subject to automatic renewal for successive two year terms under certain circumstances), it will purchase, assume and service all eligible premium finance contracts originated by Payments in the states of New York, New Jersey and Pennsylvania.  In connection with such purchases, PFS shall be obligated to pay to Payments a fee generally equal to a percentage of the amount financed.
   
Item 9.01.
Financial Statements and Exhibits.
 
                 (b)
 
Pro Forma Financial  Information:
(i) Explanatory Note with regard to Unaudited Pro Forma Condensed Consolidated Financial Statements
(ii) Pro Forma Condensed Consolidated Balance Sheet of the Company as of September 30, 2007
(iii) Pro Forma Condensed Consolidated Statement of Income for the nine months ended September 30, 2007
(iv) Pro Forma Condensed Consolidated Statement of Income for the year ended December 31, 2006
(v) Notes to Unaudited Pro Forma Financial Statements
                 (d)
Exhibits:
   
 
2.1
Amended and Restated Purchase and Sale Agreement, dated as of February 1, 2008, by and among Premium Financing Specialists, Inc., Payments Inc. and DCAP Group, Inc.
 
DCAP GROUP, INC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
EXPLANATORY NOTE

The following unaudited pro forma condensed consolidated financial statements give effect to the sale (the "Sale") of the premium finance receivable assets of Payments Inc. (“Payments”), a wholly-owned subsidiary of DCAP Group, Inc. (the "Registrant"), to Premium Financing Specialists, Inc. (“PFS”) and the assumption of certain liabilities (primarily premiums payable) and the liquidation of the revolving credit line of Payments by PFS.  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 Sale 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 September 30, 2007, giving effect to the Sale as though it had been consummated on that date.  Pro Forma Condensed Consolidated Statements of Income are provided for the nine months ended September 30, 2007, giving effect to the Sale as though it had occurred on January 1, 2007, and the year ended December 31, 2006, giving effect to the Sale as though it had occurred on January 1, 2006.

The pro forma financial statements are based on preliminary estimates of values and transaction costs.  Accordingly, the actual recording of the transaction may differ from these pro forma financial statements.

The pro forma condensed consolidated financial statements presented as of September 30, 2007 and for the nine months then ended and for the year ended December 31, 2006 are derived from the separate historical consolidated financial statements of the Registrant 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, 2006 and Quarterly Report on Form 10-QSB for the period ended September 30, 2007).
DCAP GROUP, INC. AND
  
SUBSIDIARIES
  
Pro Forma Condensed Consolidated Balance Sheet
  
9/30/2007 (unaudited)
  
         
 
              
Assets
  
As Reported
    
Pro Forma
Adjustments
          
Pro Forma
  
                         
Current Assets:
                        
Cash and cash equivalents
   $ 1,000,725     $ 279,659      
A
     $ 1,225,384  
              (25,000 )    
D
          
              (30,000 )    
B
          
Accounts receivable, net
     878,761       -               878,761  
Finance contracts receivable, net
     13,423,523       (13,423,523 )    
A
       -  
Due from purchaser
     -       294,646      
E
       294,646  
Prepaid expenses and other current assets
     418,291       -               418,291  
Deferred income taxes
     76,000       -               76,000  
Total Current Assets
     15,797,300       (12,904,218 )             2,893,082  
Property and Equipment, net
     465,576       -               465,576  
Goodwill
     2,601,257       -               2,601,257  
Other Intangibles, net
     268,042       -               268,042  
Notes Receivable,net
     4,854,318       -               4,854,318  
Deposits and Other Assets
     170,969       (68,505 )    
C
       102,464  
Total Assets
   $ 24,157,462     $ (12,972,723 )           $ 11,184,739  
                                 
Liabilities and Stockholders' Equity
                                
                                 
Current Liabilities:
                                
Revolving credit line
   $ 9,601,676     $ (9,601,676 )    
A
     $ -  
Accounts payable and accrued expenses
     686,896                       686,896  
Premiums payable
     3,247,542       (3,247,542 )    
A
       -  
Current portion of long-term debt
     2,091,263       -      
 
       2,091,263  
Mandatorily Redeemable Preferred Stock
     780,000       -               780,000  
Other current liabilities
     153,677       -               153,677  
Total Current Liabilities
     16,561,054       (12,849,218 )             3,711,836  
                                 
Long-Term Debt
     653,971       -               653,971  
Deferred Income Taxes
     532,201       -               532,201  
                                 
Commitments
                                
                                 
Stockholders' Equity:
                                
Common stock
     37,505       -               37,505  
Preferred stock
                             -  
Capital in excess of par
     11,773,130       -               11,773,130  
Deficit
     (4,214,619 )     (68,505 )    
C
       (4,338,124 )
              (25,000 )    
D
          
              (30,000 )    
B
          
      7,596,016       (123,505 )             7,472,511  
Treasury stock, at cost
     (1,185,780 )     -               (1,185,780 )
Total Stockholders' Equity
     6,410,236       (123,505 )             6,286,731  
Total Liabilities and Stockholders' Equity
   $ 24,157,462     $ (12,972,723 )           $ 11,184,739  
                                 
Pro Forma Condensed Consolidated Balance Sheet (continued)
9/30/2007 (unaudited)

A) To record net proceeds from sale of premium finance receivables to PFS, liquidation of credit line and payment of unfunded premiums due to insurance carriers by PFS.
B) To record estimated transaction costs associated with the sale.
C) To record write-off of deferred financing costs associated with terminated credit line.
D) To record payment of early termination fee on credit line.
E) To record holdback amount from purchase price that will be adjusted one year after closing date.
DCAP GROUP, INC. AND
  
SUBSIDIARIES
  
Pro Forma Condensed Consolidated Statement of Income
              
Nine Months Ended September 30, 2007 (unaudited)
                        
                       
   
As Reported
    
Pro Forma
Adjustments
          
Pro Forma
  
Revenue:
                        
Commissions and fees
   $ 4,486,855     $ -           $ 4,486,855  
Premium finance revenue
     2,419,506       (2,419,506 )     A        417,265  
   
 
       417,265       B     
 
  
Total Revenue
     6,906,361       (2,002,241 )             4,904,120  
                                 
Operating Expenses:
                                
General and administrative expenses
     5,849,432       (1,084,110 )     A        4,841,259  
              75,937       C           
Provision for finance receivable losses
     396,065       (396,065 )     A        -  
Depreciation and amortization
     287,430       (75,349 )     A        214,716  
              2,635       C           
Interest expense
     498,519       (498,519 )     A        -  
Total Operating Expenses
     7,031,446       (1,975,471 )             5,055,975  
                                 
Operating Income
     (125,085 )     (26,770 )             (151,855 )
                                 
Other (Expense) Income:
                                
Interest income - notes receivable
     971,333       -               971,333  
Interest expense
     (397,963 )     232       A        (397,731 )
Other, net
     72,942       -               72,942  
Total Other (Expense) Income
     646,312       232               646,544  
                                 
Income Before Provision for Income Taxes
     521,227       (26,538 )             494,689  
Provision for Income Taxes
     238,049       (11,942 )     D        226,107  
Net Income
   $ 283,178     $ (14,596 )           $ 268,582  
Net Income Per Common Share:
                                
Basic:
   $ 0.10                     $ 0.09  
                                 
Diluted:
   $ 0.10                     $ 0.09  
                                 
Weighted Average Number of Shares Outstanding:
                                
Basic
     2,962,683                       2,962,683  
                                 
Diluted
     3,288,072                       3,288,072  
A) To eliminate historical revenue and expenses associated with premium financing of insurance contracts. See Note 1 of Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements for a description of pro forma adjustments related to general and administrative expenses.
B) To record estimated fee revenues from the sale of new premium finance contracts to PFS as if the sales commenced on January 1, 2007.
C) To record estimated expenses from the sale of premium finance contracts to PFS as if the sale occured on January 1, 2007. See Note 1 of Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements for a description of pro forma adjustments related to general and administrative expenses.
D) To record tax benefit based on historical tax rate for the period presented.
DCAP GROUP, INC. AND
 SUBSIDIARIES
  
Pro Forma Condensed Consolidated Statement of Income
              
Year Ended December 31, 2006 (unaudited)
                        
         
Pro Forma
              
   
As Reported
    
Adjustments
          
Pro Forma
  
Revenue:
                        
Commissions and fees
   $ 7,121,724     $ -           $ 7,121,724  
Premium finance revenue
     3,960,223       (3,960,223 )    
A 
       687,431  
   
 
       687,431      
B 
    
 
  
Total Revenue
     11,081,947       (3,272,792 )             7,809,155  
                                 
Operating Expenses:
                                
General and administrative expenses
     8,965,066       (1,695,779 )    
A 
       7,346,388  
              77,101      
C 
          
Provision for finance receivable losses
     650,005       (650,005 )    
A 
       -  
Depreciation and amortization
     456,614       (171,430 )    
A 
       288,697  
              3,513      
C 
          
Interest expense
     824,382       (824,382 )    
A 
       -  
Total Operating Expenses
     10,896,067       (3,260,982 )             7,635,085  
                                 
Operating Income
     185,880       (11,810 )             174,070  
                                 
Other (Expense) Income:
                                
Interest income - notes receivable
     1,182,844       -               1,182,844  
Interest expense
     (490,946 )     -               (490,946 )
Other, net
     46,559       -               46,559  
Total Other (Expense) Income
     738,457       -               738,457  
                                 
Income Before Provision for Income Taxes
     924,337       (11,810 )             912,527  
Provision for Income Taxes
     415,952       (5,314 )    
D 
       410,638  
Net Income
   $ 508,385     $ (6,496 )           $ 501,890  
                                 
Net Income Per Common Share:
                                
Basic:
   $ 0.18                     $ 0.17  
                                 
Diluted:
   $ 0.17                     $ 0.17  
                                 
Weighted Average Number of Shares Outstanding:
                                
Basic
     2,888,805                       2,888,805  
                                 
Diluted
     3,250,937                       3,250,937  
                                 
A) To eliminate historical revenue and expenses associated with premium financing of insurance contracts adjusted for certain inter-segment re-allocations.  See Note 1 of Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements for a description of pro forma adjustments related to general and administrative expenses.
B) To record estimated fee revenues from the sale of new premium finance contracts to PFS as if the sales commenced on January 1, 2006.
C) To record estimated expenses from the sale of premium finance contracts to PFS as if the sale occurred on January 1, 2006. See Note 1 of Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements for a description of pro forma adjustments related to general and administrative expenses.
D) To record tax benefit based on historical tax rate for the period presented.
DCAP Group, Inc. and Subsidiaries
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements


1. Pro Forma Adjustments – General and Administrative Expenses

   
Nine Months
  
Year
   
Ended
  
Ended
   
September 30,
  
December 31,
   
2007
  
2006
Historical general and administrative expenses associated
with premium financing of insurance contracts:
    
Customer processing
  
$      (695,497)
  
$ (1,096,600)
Employment costs
  
        (180,129)
  
        (323,276)
Occupancy costs
  
          (37,860)
  
          (43,772)
Other costs and expenses
  
        (170,624)
  
        (232,131)
Total
  
$   (1,084,110)
  
$ (1,695,779)
         
Estimated general and administrative expenses associated with
the sale of premium finance contracts to PFS as if the sale occurred
at the beginning of the periods presented:
    
Employment costs
  
 $          38,367
  
 $         38,367
Other costs and expenses
  
             37,570
  
             38,734
Total
  
 $          75,937
  
 $         77,101
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.
  
       
February 7, 2008
By:
/s/ Barry B. Goldstein  
    Barry B. Goldstein  
    President