UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 19, 1999
WARRANTECH CORPORATION
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(Exact name of registrant as specified in its charter)
_____Delaware____ ____0-13084____ ___13-3178732____
(State or other juris- (Commission File Number) (IRS Employer
diction of incorporation) Identification No.)
300 Atlantic Street, Stamford, Connecticut ___06901___
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (203) 975-1100
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Item 5. Other Events.
Letter from the Division of Corporation Finance of the Securities and Exchange
Commission
By letter addressed to Warrantech Corporation ("Warrantech" or
"Registrant") dated November 18, 1999, (the "DCF Letter"), the Division of
Corporation Finance of the Securities and Exchange Commission (the "DCF") stated
that it does not object to Warrantech's revenue recognition policy as it is
applied to its dealer - obligor contracts. As a result, with respect to
dealer-obligor contracts, which represent approximately 63% of the Registrant's
business, Registrant will continue to follow the accounting policy that it has
applied over the past eight (8) years by recognizing a substantial portion of
its administrative fee income in the year in which the service contracts are
sold. Furthermore, Warrantech will continue to defer only that portion of the
administrative fee income that pertains to administration of claims over the
life of the contracts.
The DCF had informed Warrantech in an earlier letter dated October 1, 1999
that it believed that the administrative fee income on dealer-obligor contracts
should be recognized on a straight-line basis over the life of the contracts
that Warrantech administers. Warrantech requested the DCF to reconsider its
position and submitted further information to the DCF to support the revenue
recognition policy that Warrantech had been following. Upon the review of this
additional data, the DCF reconsidered its position and issued the DCF Letter of
no objection, which Warrantech received on November 19, 1999. The DCF stated in
its letter of no objection that it relied on Warrantech's conclusion and that of
its independent auditors.
With respect to service contracts in which Warrantech is the obligor, the
DCF informed Warrantech in an earlier communication that, Warrantech should
change its revenue recognition policy to comply with Financial Accounting
Standards Board Technical Bulletin 90-1. Warrantech is currently preparing its
financial statements to comply with this revenue recognition policy. Having
received the DCF's views with respect to the revenue recognition policy for both
dealer-obligor and administrator-obligor contracts, Warrantech's independent
auditors are now in a position to complete their audit of Warrantech's financial
statements for the fiscal year ended March 31, 1999 and to restate financial
statements for prior years. When the audit of the Registrant's financial
statements is completed, which is expected shortly, the Registrant will be in a
position to bring its periodic filings with the Securities and Exchange
Commission current. Once its filings are current, the Registrant can pursue its
efforts to have its common stock again listed on Nasdaq.
The Registrant's Business
The Registrant's common stock continues to trade on the over-the-counter
market. The Registrant, through its subsidiaries, administers and markets
service contracts and after-market warranties on automobiles, automotive
components, recreational vehicles, appliances, consumer electronics, computer
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and computer peripherals for retailers, distributors and manufacturers. The
Registrant continues to expand its domestic and global penetration, and now
provides its services in the United States, Canada, Mexico, the United Kingdom,
Puerto Rico and Latin America.
Safe Harbor Statement Pursuant to the Securities Litigation Reform Act of 1995
This Form 8-K contains forward-looking statements which are subject to
risks and uncertainties. The Registrant's ability to have its common stock
traded on Nasdaq depends on the Registrant's ability to have the Nasdaq Listing
Qualifications Panel (the "Panel") reconsider its decision to delist the
Registrant's common stock, which was based on the delay in the filing of the
Registrant's financial statements. The Registrant also has the right to appeal
the Panel's decision to the Nasdaq Listing and Hearing Review Council. There is
no assurance that the Panel's decision will be reversed upon reconsideration or
through the appeal. Other risks and uncertainties include, but are not limited
to, analysis of the service contracts for the purpose of computing the amount of
any revenue which must be deferred, the number of prior period financial results
which may have to be restated, the continuation of current levels of business
activity, the impact of competitive products, product demand and market
acceptance risks, reliance on key strategic alliances, fluctuations in operating
results and other risks detailed from time to time in the Registrant's filings
with the Securities and Exchange Commission. These risks could cause the
Registrant's actual results for the current fiscal year and beyond to differ
materially from those expressed in any forward - looking statements made by, or
on behalf of, the Registrant.
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.
WARRANTECH CORPORATION
Date: November 23, 1999 By: /s/ Richard F. Gavino
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Richard F. Gavino
Chief Financial Officer
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