Acquisition / Disposition

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549   FORM 8-K/A AMENDMENT NO. 3 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report:   June 30, 2009 (Date of earliest event reported) KINGSTONE COMPANIES, INC. (formerly 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. As previously reported in a Current Report on Form 8-K for an event dated June 30, 2009 (the “Form 8-K”), Kingstone Companies, Inc. (formerly DCAP Group, Inc.) (the “Company" or “Kingstone”) completed the acquisition of Commercial Mutual Insurance Company (“CMIC”)  (renamed Kingstone Insurance Company) on July 1, 2009 pursuant to the conversion of CMIC from an advance premium cooperative to a stock property and casualty insurance company.  This Amendment No. 3 on Form 8-K/A amends and supplements the Form 8-K, as amended, to include pro forma financial information. Item 9.01.  Financial Statements and Exhibits . (a)  Financial Statements of Business Acquired. The financial statements required by Item 9.01(a) of Form 8-K were included in Amendment No. 2 on Form 8-K/A filed on November 13, 2009. (b) Pro Forma Financial Information. The following unaudited condensed consolidated pro forma financial information required by Item 9.01(b) of Form 8-K is included:  (i) Selected Pro Forma Consolidated Financial Information  (ii) Unaudited Condensed Consolidated Pro Forma Balance Sheets of the Company as of December 31, 2008 and June 30, 2009  (iii) Unaudited Condensed Consolidated Pro Forma Statements of Income of the Company for the year ended December 31, 2008 and the six months ended June 30, 2009      (iv) Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements 1      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.       KINGSTONE COMPANIES, INC.           November 17, 2009 By: /s/ Barry B. Goldstein       Barry B. Goldstein       President             2     SELECTED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION Effective July 1, 2009, Commercial Mutual Insurance Company (“CMIC”) converted (demutualized) from an advance premium cooperative insurance company to a domestic stock property and casualty insurance company. Upon the effectiveness of the conversion, CMIC’s name was changed to Kingstone Insurance Company (“KICO”). As of June 30, 2009, Kingstone held two surplus notes issued by CMIC in the aggregate principal amount of $3,750,000. Previously accrued and unpaid interest on the notes as of June 30, 2009 was approximately $2,246,000. Pursuant to the plan of conversion, Kingstone acquired a 100% equity interest in KICO in consideration of the exchange of the $3,750,000 principal amount of surplus notes of CMIC. In addition, Kingstone forgave all accrued and unpaid interest of $2,246,000 on the surplus notes as of the date of conversion.  The following unaudited condensed consolidated pro forma financial information consolidates the historical consolidated statements of income and consolidated balance sheet of Kingstone and the historical consolidated statements of income and consolidated balance sheet of KICO. These historical financial statements were prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). The unaudited condensed consolidated pro forma financial information has been prepared using the assumptions described in the notes thereto. The unaudited condensed consolidated pro forma financial information below should be read in conjunction with the notes thereto and the historical consolidated financial statements of Kingstone included in its Annual Report on Form 10-K for the year ended December 31, 2008 and Quarterly Report on Form 10-Q for the six months ended June 30, 2009. This unaudited condensed consolidated pro forma financial information is presented for informational purposes only and is not necessarily indicative of the financial position or results of operations of the consolidated company that would have actually occurred had the acquisition been effective during the periods presented or of the future financial position or future results of operations of the consolidated company. The consolidated financial information as of June 30, 2009 and December 31, 2008 and for the periods presented may have been different had the companies actually been consolidated as of that date or during those periods due to, among other factors, possible revenue enhancements, expense efficiencies and integration costs. Additionally, as discussed in Note 1, the actual allocation of the purchase price to the acquired assets and liabilities may vary materially from the assumptions used in preparing the unaudited condensed consolidated pro forma financial information. 3      KINGSTONE COMPANIES, INC. UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET June 30, 2009     Historical     Pro Forma                   Kingstone           Acquistion           Pro Forma       As Reported (1)     CMIC     Adjustments     Notes     Consolidated                                    Asset s                                Short term investments   $ -     $ 811,738     $ -           $ 811,738    Fixed maturiy securities, available for sale,                                        at fair value     -       9,266,253       -             9,266,253    Equity securities, available-for-sale, at fair value     -       1,823,045       -             1,823,045    Total investments     -       11,901,036       -             11,901,036    Cash and cash equivalents     167,835       1,327,057       -             1,494,892    Investment income receivable     -       70,216       -             70,216    Premiums receivable, net of provision for                                        uncollectible amounts     -       4,418,094       -             4,418,094    Receivables - reinsurance contracts     -       1,137,832       -             1,137,832    Reinsurance receivables, net of provision for                                        uncollectible amounts     -       20,049,199       -             20,049,199    Accounts receivable, net     70,017       -       -             70,017    Notes receivable-CMIC     5,996,461       -       (5,996,461 )    A         -    Investment in subsidiary     -       -       5,996,461      A         -                         5,401,860      C                                   (11,398,321 )    F              Notes receivable-sale of business     1,104,499       -       -               1,104,499    Deferred acquisition costs     -       2,665,802       -               2,665,802    Deferred income taxes     26,000       475,782       -               501,782    Intangible assets     -       -       4,850,000      E         4,850,000    Property and equipment,                                          net of accumulated depreciation     74,829       1,369,570       288,923      D         1,733,322    Equities in pools and associations     -       191,136       -               191,136    Other assets     23,412       340,855       -               364,267    Assets of discontinued operations     6,837       -       -               6,837    Total asset s   $ 7,469,890     $ 43,946,579     $ (857,538 )           $ 50,558,931     (1)   Certain amounts from Kingstone’s historical consolidated financial statements have been reclassified to conform to the CMIC presentation. 4       KINGSTONE COMPANIES, INC. UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET (CONTINUED) June 30, 2009       Historical     Pro Forma                   Kingstone           Acquistion           Pro Forma       As Reported (1)     CMIC     Adjustments     Notes     Consolidated                                    Liabilitie s                                Loss and loss adjustment expenses   $ -     $ 16,191,784     $ -           $ 16,191,784    Unearned premium     -       13,879,374       -             13,879,374    Reinsurance balances payable     -       2,005,590       -             2,005,590    Deferred ceding commission revenue     -       2,700,376       -             2,700,376    Accounts payable, accrued liabilities                                        and other liabilities     683,411       1,157,829       -             1,841,240    Deferred income taxes     -       -       1,747,234      K         1,747,234    Other liabilities     -       4,994                       4,994    Notes payable     547,141       -                       547,141    Surplus notes payable     -       5,996,461       (5,996,461 )    A         -    Mandatorily redeemable preferred stock     1,299,231       -       -               1,299,231    Liabilities of discontinued operations     79,163       -       -               79,163    Total liabilitie s     2,608,946       41,936,408       (4,249,227 )             40,296,127                                              Stockholders' Equity                                          Common stock     37,888       -       1,500,000      A         37,888                         (1,500,000 )    F              Capital in excess of par     11,976,022       -       4,496,461      A         11,976,022                         2,010,171      B                                   288,923      D                                   4,850,000      E                                   (1,747,234 )    K                                   (9,898,321 )    F              Retained earnings     (5,932,584 )     -       5,401,860      C         (530,724 )  Policyholders' surplus     -       2,010,171       (2,010,171 )    B         -         6,081,326       2,010,171       3,391,689               11,483,186    Treasury stock     (1,220,382 )     -       -               (1,220,382 )  Total stockholders' equity     4,860,944       2,010,171       3,391,689               10,262,804                                              Total liabilities and stockholders' equity   $ 7,469,890     $ 43,946,579     $ (857,538 )           $ 50,558,931     5      KINGSTONE COMPANIES, INC. UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET December 31, 2008       Historical     Pro Forma Adjustments                   Kingstone           Previously     Previously     Acquistion           Pro Forma       As Reported (1)     CMIC     Reported (2)     Reported (3)     Adjustments     Notes     Consolidated                                                Asset s                                            Short term investments   $ -     $ 1,213,460     $ -     $ -     $ -           $ 1,213,460    Fixed maturiy securities, available for sale, at fair value     -       7,597,123       -       -       -             7,597,123    Equity securities, available-for-sale, at fair value     -       903,717       -       -       -             903,717    Total investments     -       9,714,300       -       -       -             9,714,300    Cash and cash equivalents     142,949       5,248,159       417,718       (20,000 )     -             5,788,826    Investment income receivable     -       59,120       -       -       -             59,120    Premiums receivable, net of provision for                                                        uncollectible amounts     -       4,143,669       -       -       -             4,143,669    Receivables - reinsurance contracts     -       355,370       -       -       -             355,370    Reinsurance receivables, net of provision for                                                        uncollectible amounts     -       17,722,546       -       -       -             17,722,546    Accounts receivable, net     201,787       -       -       (134,522 )     -             67,265    Notes receivable-CMIC     5,935,704       -       -       -       (5,935,704 )    A         -    Investment in subsidiary     -       -       -       -       5,935,704      A         -                                         4,779,996      C                                                   (10,715,700 )    F              Notes receivable-sale of business     -       -       -       200,000       -               200,000    Deferred acquisition costs     -       2,498,700       -       -       -               2,498,700    Deferred income taxes     -       899,266       -       -       -               899,266    Intangible assets     -       -       -       -       4,850,000      E         4,850,000    Property and equipment,                                                          net of accumulated depreciation     90,493       1,414,871       -       (7,876 )     288,923      D         1,786,411    Equities in pools and associations     -       194,912       -       -       -               194,912    Other assets     136,553       230,857       -       (106,674 )     -               260,736    Assets of discontinued operations     2,913,147       -       (1,847,013 )     -       -               1,066,134    Total asset s   $ 9,420,633     $ 42,481,770     $ (1,429,295 )   $ (69,072 )   $ (796,781 )           $ 49,607,255     (1) Certain amounts from Kingstone’s historical consolidated financial statements have been reclassified to conform to the CMIC presentation. (2) On April 22, 2009, Kingstone filed a Current Report on Form 8-K disclosing the sale of substantially all of the assets of Barry Scott Agency, Inc. and DCAP Accurate, Inc. (collectively, “Seller”), wholly-owned subsidiaries of the Company.  Seller operated the Company’s 16 New York State retail business locations. (3) On May 12, 2009, Kingstone filed a Current Report on Form 8-K disclosing the sale of all of the outstanding stock of the subsidiaries that operated the Company’s DCAP franchise business.     6       KINGSTONE COMPANIES, INC. UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET December 31, 2008       Historical     Pro Forma Adjustments                   Kingstone           Previously     Previously     Acquistion           Pro Forma       As Reported (1)     CMIC     Reported (2)     Reported (3)     Adjustments     Notes     Consolidated                                                Liabilitie s                                            Loss and loss adjustment expenses   $ -     $ 15,587,000     $ -     $ -     $ -           $ 15,587,000    Unearned premium     -       13,047,510       -       -       -             13,047,510    Reinsurance balances payable     -       786,131       -       -       -             786,131    Deferred ceding commission revenue     -       3,270,164       -       -       -             3,270,164    Accounts payable, accrued liabilities and other liabilities     976,550       938,718       (657,281 )     -       -             1,257,987    Taxes payable     -       717,819       -       -       -             717,819    Deferred income taxes     184,000       -       -       16,000       1,747,234      K         1,947,234    Other liabilities     -       267,974       -       -       -               267,974    Mortgage payable     -       542,443       -       -       -               542,443    Notes payable     2,008,828       -       (379,843 )     -       -               1,628,985    Surplus notes payable     -       5,935,704       -       -       (5,935,704 )    A         -    Mandatorily redeemable preferred stock     780,000       -       (267,282 )     -       -               512,718    Liabilities of discontinued operations     213,685       -       130,918       -       -               344,603    Total liabilitie s     4,163,063       41,093,463       (1,173,488 )     16,000       (4,188,470 )             39,910,568                                                              Stockholders' Equity                                                          Common stock     37,888       -       -       -       1,500,000      A         37,888                                         (1,500,000 )    F              Capital in excess of par     11,962,512       -       -       -       4,435,704      A         11,962,512                                         1,388,307      B                                                   288,923      D                                                   4,850,000      E                                                   (1,747,234 )    K                                                   (9,215,700 )    F              Retained earnings     (5,522,448 )     -       (255,807 )     (85,072 )     4,779,996      C         (1,083,331 )  Policyholders' surplus     -       1,388,307       -       -       (1,388,307 )    B         -         6,477,952       1,388,307       (255,807 )     (85,072 )     3,391,689               10,917,069    Treasury stock     (1,220,382 )     -       -       -       -               (1,220,382 )  Total stockholders' equity     5,257,570       1,388,307       (255,807 )     (85,072 )     3,391,689               9,696,687                                                              Total liabilities and stockholders' equity   $ 9,420,633     $ 42,481,770     $ (1,429,295 )   $ (69,072 )   $ (796,781 )           $ 49,607,255   7      KINGSTONE COMPANIES, INC. UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF INCOME For the six months ended June 30, 2009       Historical     Pro Forma                   Kingstone           Acquistion           Pro Forma       As Reported (1)     CMIC     Adjustments     Notes     Consolidated                                    Revenue s                                Net premiums earned   $ -     $ 4,489,207     $ -           $ 4,489,207    Ceding commission revenue     -       4,157,347       -             4,157,347    Net investment income     -       163,644       -             163,644    Net realized losses on investments     -       (124,126 )     -             (124,126 )  Other income     224,560       189,350       -             413,910    Total revenues     224,560       8,875,422       -             9,099,982                                            Expense s                                        Loss and loss adjustment expenses     -       2,874,857       -             2,874,857    Commission expense     -       2,124,272       -             2,124,272    Other operating expenses     666,896       2,351,519       (92,521 )    I         2,784,471                         (141,423 )    J              Depreciation and amortization     8,594       117,510       3,704      D         367,665                         237,857      E              Interest expense     133,351       71,587       (60,757 )    G         144,181    Total expenses     808,841       7,539,745       (53,140 )             8,295,446                                              Operating (loss) income     (584,281 )     1,335,677       53,140               804,536                                              Other (expense) income:                                          Gain on acquistion of KICO                     5,401,860      C         5,401,860    Interest income - notes receivable     67,782       -       (60,757 )    G         7,025    Interest expense - mandatorily                                          redeemable preferred stock     (52,452 )     -       -               (52,452 )  Forgiveness of debt     132,836       -       -               132,836    (Loss) income from continuing operations                                          before income taxes     (436,115 )     1,335,677       5,394,243               6,293,805    Income tax expense (benefit)     (209,752 )     437,607       2,961      K         230,816    (Loss) income from continuing operations     (226,363 )     898,070       5,391,282               6,062,989    Loss from discontinued operations,                                          net of income taxes     (183,773 )     -       -               (183,773 )  Net (loss) incom e   $ (410,136 )   $ 898,070     $ 5,391,282             $ 5,879,216                                             Basic and Diluted Net Loss (Income) Per Common Share:                                   (Loss) income from continuing operations   $ (0.08 )                           $ 2.04   Loss from discontinued operations   $ (0.06 )                           $ (0.06 ) (Loss) income per common share   $ (0.14 )                           $ 1.98                                             Number of weighted average shares used in                                         computation of basic and diluted (loss) income                                         per common share     2,972,746                               2,972,746     (1) Certain amounts from Kingstone’s historical consolidated financial statements have been reclassified to conform to the CMIC presentation. 8      KINGSTONE COMPANIES, INC. UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF INCOME For the year ended December 31, 2008       Historical     Pro Forma Adjustments                   Kingstone           Previously     Previously     Acquistion           Pro Forma       As Reported (1)     CMIC     Reported (2)     Reported (3)     Adjustments     Notes     Consolidated                                                Revenue s                                            Net premiums earned   $ -     $ 9,523,753     $ -     $ -     $ -           $ 9,523,753    Ceding commission revenue     -       5,835,593       -       -       -             5,835,593    Net investment income     4,338       354,913       -       5,759       -             365,010    Net realized losses on investments     -       (182,901 )     -       -       -             (182,901 )  Other income     911,225       555,413       -       (483,806 )     -             982,832    Total revenues     915,563       16,086,771       -       (478,047 )     -             16,524,287                                                            Expense s                                                        Loss and loss adjustment expenses     -       5,653,491       -       -       -             5,653,491    Commission expense     -       4,004,367       -       -       -             4,004,367    Other operating expenses     1,860,485       3,940,295       -       (631,220 )     (32,896 )    I         5,107,078                                         (29,586 )    J              Depreciation and amortization     69,624       174,015       -       (32,850 )     475,714      E         693,912                                         7,408      D              Interest expense     270,646       219,178       (85,762 )     -       (188,672 )    G         215,390    Total expenses     2,200,755       13,991,346       (85,762 )     (664,070 )     231,969               15,674,238                                                              Operating (loss) income     (1,285,192 )     2,095,425       85,762       186,023       (231,969 )             850,049                                                              Other (expense) income:                                                          Gain on acquistion of CMIC     -       -       -       -       4,779,996      C         4,779,996    Interest income - notes receivable     764,899       -       -       -       (569,586 )    H         195,313    Interest expense - mandatorily                                                          redeemable preferred stock     (66,625 )     -       22,830       -       -               (43,795 )  (Loss) income from continuing                                                          operations before income taxes     (586,918 )     2,095,425       108,592       186,023       3,978,442               5,781,564    Income tax expense (benefit)     (391,225 )     803,023       96,480       78,745       (141,044 )    K         445,979    (Loss) income from continuing operations     (195,693 )     1,292,402       12,112       107,278       4,119,486               5,335,585    (Loss) income from discontinued                                                          operations, net of income taxes     (781,513 )     -       147,370       -       -               (634,143 )  Net (loss) incom e   $ (977,206 )   $ 1,292,402     $ 159,482     $ 107,278     $ 4,119,486             $ 4,701,442   9      KINGSTONE COMPANIES, INC. UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF INCOME (CONTINUED) For the year ended December 31, 2008       Historical   Pro Forma Adjustments               Kingstone       Previously   Previously   Acquistion       Pro Forma       As Reported (1)   CMIC   Reported (2)   Reported (3)   Adjustments   Notes   Consolidated                                       Basic and Diluted Net (Loss) Income Per Common Share:                                   (Loss) income from continuing operations   $ (0.07 )                     $ 1.79   Loss from discontinued operations   $ (0.26 )                     $ (0.21 ) (Loss) income per common share   $ (0.33 )                     $ 1.58                                       Number of weighted average shares used in computation                                   of basic and diluted (loss) income per common share     2,972,597                         2,972,597   (1) Certain amounts from Kingstone’s historical consolidated financial statements have been reclassified to conform to the CMIC presentation. (2) On April 22, 2009, Kingstone filed a Current Report on Form 8-K disclosing the sale of substantially all of the assets of Barry Scott Agency, Inc. and DCAP Accurate, Inc. (collectively, “Seller”), wholly-owned subsidiaries of the Company.  Seller operated the Company’s 16 New York State retail business locations. (3) On May 12, 2009, Kingstone filed a Current Report on Form 8-K disclosing the sale of all of the outstanding stock of the subsidiaries that operated the Company’s DCAP franchise business. 10      Kingstone Companies, Inc. Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements 1.   BASIS OF PRESENTATION The unaudited condensed consolidated pro forma financial information gives effect to the acquisition as if it had occurred on June 30, 2009 and December 31, 2008 for the purposes of the unaudited condensed consolidated pro forma balance sheet at June 30, 2009 and December 31, 2008, and at January 1, 2009 and 2008 for the purposes of the unaudited condensed consolidated pro forma statements of income for the six months ended June 30, 2009 and the year ended December 31, 2008. The unaudited condensed consolidated pro forma financial information has been prepared by the Company’s management and is based on Kingstone’s historical consolidated financial statements and CMIC's historical consolidated financial statements. Certain amounts from the Company’s historical consolidated financial statements have been reclassified to conform to the CMIC presentation. This unaudited condensed consolidated pro forma financial information is prepared in conformity with GAAP. The unaudited condensed consolidated pro forma balance sheets as of June 30, 2009 and December 31, 2008, and the unaudited condensed consolidated pro forma statements of income for the year ended December 31, 2008 and the six months ended June 30, 2009, have been prepared using the following information: a.   Unaudited historical consolidated financial statements of Kingstone as of June 30, 2009 and for the six months ended June 30, 2009; b.   Unaudited historical consolidated financial statements of CMIC as of June 30, 2009 and for the six months ended June 30, 2009; c.   Audited historical consolidated financial statements of Kingstone for the year ended December 31, 2008; d.   Audited historical consolidated financial statements of CMIC for the year ended December 31, 2008; and e.   Such other supplementary information as considered necessary to reflect the acquisition in the unaudited pro forma condensed consolidated financial information The pro forma adjustments reflecting the acquisition of KICO under the purchase method of accounting are based on certain estimates and assumptions. The fair value of CMIC’s assets and liabilities have been valued by an independent appraiser as of June 30, 2009.  The final allocation of the purchase price may differ as a result of the realization of assets and estimates used in the calculation of loss reserves. Therefore, it is likely that the actual adjustments may differ from the pro forma adjustments and it is possible the differences may be material. Kingstone’s management believes that its assumptions provide a reasonable basis for presenting all of the significant effects of the acquisition of KICO and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed consolidated financial information. The unaudited condensed consolidated pro forma financial information does not include the anticipated financial benefits or expenses from such items as expense efficiencies or revenue enhancements arising from the acquisition nor does the unaudited condensed consolidated pro forma financial information include restructuring and integration costs to be incurred by Kingstone. The unaudited condensed consolidated pro forma financial information is not intended to reflect the results of operations or the financial position that would have resulted had the acquisition been effected on the dates indicated and if the companies had been managed as one entity. The unaudited condensed consolidated pro forma financial information should be read in conjunction with the historical consolidated financial statements of Kingstone included in Kingstone’s Annual Report on Form 10-K for the year ended December 31, 2008 and unaudited consolidated financial statements of Kingstone included in Kingstone’s Quarterly Report on Form 10-Q for the six months ended June 30, 2009, as well as the historical consolidated financial statements of CMIC. 11     2.   PURCHASE PRICE AND FINANCING CONSIDERATIONS As of June 30, 2009, Kingstone held two surplus notes issued by CMIC in the aggregate principal amount of $3,750,000. Previously accrued and unpaid interest on the notes as of June 30, 2009 was $2,246,461. Pursuant to the plan of CMIC’s conversion (demutualization), Kingstone acquired a 100% equity interest in KICO in consideration of the exchange of the $3,750,000 principal amount of surplus notes of CMIC. In addition, Kingstone forgave all accrued and unpaid interest of $2,246,461 on the surplus notes as of the date of conversion. The aggregate purchase price of $5,996,461 was less than the $11,398,321 fair value of KICO’s net assets acquired, resulting in a bargain purchase of $5,401,860. Transaction costs related to acquisition were expensed as incurred. Allocation of Purchase Price (a):    Purchase Price   $ 5,996,461              Book value of CMIC at June 30, 2009     2,010,171    Conversion of surplus notes to common stock     5,996,461    Fair value adjustments, net of taxes based on appraisal          of CMIC's identifiable assets at June 30, 2009     3,391,689    Fair value of net assets acquired, net of taxes     11,398,321              Excess of fair value of assets acquied over purchase price (bargain purchase price)   $ (5,401,860 )   (a)The purchase price is allocated to balance sheet assets acquired (including identifiable intangible assets arising from the acquisition) and liabilities assumed based on their estimated fair value. The fair value adjustments to the CMIC historical consolidated balance sheet in connection with the acquisition are described below in Note 3. 3.   PRO FORMA ADJUSTMENTS Adjustments (A)  Record conversion of surplus notes payable and accrued interest to common stock and capital in excess of par on the books of CMIC, and reclassify surplus notes receivable and accrued interest receivable to investment in subsidiary on the books of Kingstone. (B)  Reclassification of CMIC’s historical equity balances to capital in excess of par. (C) Kingstone’s acquisition of KICO resulted in a gain of $5,401,860 as disclosed in Note 2. If the transaction occurred at December 31, 2008 the gain would have been $4,779,996.   (D)  Adjustments to fixed assets of $288,923 represents the fair value adjustment relating to the real estate assets used in CMIC’s operations. The pro forma statements of income reflect depreciation expense for the six months ended June 30, 2009 and the year ended December 31, 2008 of $3,704 and $7,408, respectively. 12     (E)  Represents the recognition of $4,850,000 of identifiable intangible assets, which consist of the following:            Estimated Life  Agency force book of business   $ 3,400,000    10 years  Assembled workforce     950,000    7 years  Insurance licence     500,000    perpetual     $ 4,850,000       The pro forma statements of income reflect amortization expense for the six months ended June 30, 2009 and the year ended December 31, 2008 of $237,857 and $475,714, respectively. The agency force book of business and assembled workforce acquired will be subject to impairment testing. The intangible asset related to the insurance licenses is perpetual and will be subject to annual impairment testing. (F)  Elimination of investment in subsidiary. (G)  Elimination of interest income on the books of Kingstone, and elimination of interest expense on the books of CMIC, of $60,757 on the pro forma income statement for the six months ended June 30, 2009, and elimination of interest expense on the books of CMIC of $188,672 on the pro forma income statement for the year ended December 31, 2008, resulting from the cancellation of surplus notes and accrued interest as disclosed in Note 1. See Note H for the elimination of interest income on the books of Kingstone for the year ended December 31, 2008. (H)  Elimination of amortization of discount on surplus notes and accretion of accrued and unpaid interest related to the acquisition of the notes on the books of Kingstone. (I) Assume the elimination of acquisition costs incurred by Kingstone of $92,521 and $32,896 on the pro forma statements of income for the six months ended June 30, 2009 and the year ended December 31, 2008, respectively. (J) Assume the elimination of conversion costs incurred by CMIC of $141,423 and $29,586 on the pro forma statements of income for the six months ended June 30, 2009 and the year ended December 31, 2008, respectively. (K) Deferred income taxes are adjusted to reflect the income tax effects of the pro forma purchase adjustments which relates to intangibles and the fair value adjustment of real estate assets. The effective tax rate is lower as a result of the bargain purchase price being a non-taxable event. 13