UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
AMENDMENT NO. 1
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission File Number: 0-1665
EXTECH CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 36-2476480
(State or other jurisdiction (I.R.S Employer
of incorporation or organization) Identification No.)
90 Merrick Avenue, East Meadow, New York 11554
(Address of principal executive offices) (Zip Code)
(516) 794-6300
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. (X) Yes ( ) No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. ( )Yes ( ) No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 5,591,367 shares as of
October 20, 1998
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Results of Operations:
The Company's net loss for the nine months ended September 30, 1998 was
$75,109 as compared to a net loss of $86,788 for the nine months ended September
30, 1997. The loss for the nine months ended September 30, 1998 was caused by
lower room occupancies of $56,208 as compared to the nine months ended September
30, 1997. The reduced loss was partially the result of increased interest income
of $19,006 as a result of a loan made in November 1997 to Dealers Choice
Automotive Planning Inc. ("DCAP Insurance") which bears interest at the rate of
10% per annum (see "Prospects" below) and lower expenses of $49,972. The
foregoing were partially offset by lower room occupancies of $56,208 for the
nine months ended September 30, 1998 as compared to the nine months ended
September 30, 1997.
Liquidity and Capital Resources:
As of September 30, 1998, the Company had $406,275 in cash and cash
equivalents and a working capital surplus of $1,086,927. As of December 31,
1997, the Company had $1,040,389 in cash and cash equivalents and a working
capital surplus of $1,150,732. The reduction in cash was due primarily to loans
in the aggregate amount of $425,000 made to DCAP Insurance during the nine
months ended September 30, 1998 as well as losses from operations.
Except as described below under "Prospects," the Company did not have any
material commitments for capital expenditures as of September 30, 1998.
During the eight months ended August 31, 1998, the combined operating loss
for the DCAP Companies (as defined below) was $476,394. In addition, as of
August 31, 1998, the combined working capital deficiency for the DCAP Companies
was $1,465,601. DCAP has plans to diversify its operations into the areas of
premium financing and income tax preparation, and to increase advertising
efforts in order to grow the combined operations. It is contemplated that, as
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discussed below under "Prospects," concurrently with the closing of the DCAP
Agreement, the Company will consummate the sale of shares of Common Stock to
Eagle Insurance Company and will receive approximately $1,000,000 in net
proceeds. The Company anticipates that such proceeds, together with anticipated
revenues from operations, will be sufficient to permit the Company to continue
to conduct operations in the manner currently conducted by it and the DCAP
Companies (including the proposed expansion plans). However, EXTECH anticipates
that additional funds in an amount in excess of $1,000,000 will be required to
implement the contemplated increased advertising effects that DCAP believes is
necessary for growth. No additional financing arrangements are in place and no
assurances can be given that any such financing will be available upon
commercially reasonable terms or otherwise.
Prospects:
DCAP:
On May 8, 1998, the Company entered into an agreement with respect to the
acquisition of all of the issued and outstanding Common Shares of DCAP Insurance
as well as interests in certain entities affiliated with DCAP Insurance
(collectively, the "DCAP Companies")(the "DCAP Agreement"). The DCAP Companies
are privately-held and are engaged primarily in the following businesses: (i)
retail automotive, motorcycle, boat, life, business and homeowner's insurance
brokerage; (ii) income tax preparation; and (iii) automobile club for roadside
emergencies. DCAP Insurance has an aggregate of approximately 56 wholly-owned,
joint venture and franchise locations in the New York metropolitan area.
The DCAP Agreement provides that, in consideration for the shares of the
DCAP Companies, the Company will issue 3,300,000 shares of its Common Stock. In
addition, the DCAP Agreement contemplates that the shareholders of DCAP
Insurance (the "DCAP Shareholders"), together with Morton L. Certilman,
President of EXTECH, and Jay M. Haft, Chairman of the Board of EXTECH, will
purchase, in the aggregate, the 1,800,000 shares of Common Stock of the Company
beneficially owned by Sterling Foster Holding Corp. ("Sterling Foster") (the
"Sterling Foster Shares") as well as an aggregate of 1,402,000 other shares of
Common Stock from the Company. Sterling Foster has entered into an agreement
with each of the DCAP Shareholders and Messrs. Certilman and Haft providing for
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the purchase and sale of the Sterling Foster Shares concurrently with the
closing of the DCAP Agreement (the "Sterling Foster Agreement"). Each of the
parties has the right to terminate the Sterling Foster Agreement if the closing
shall not have occurred by December 31, 1998.
The DCAP Agreement provides further that the purchases by the DCAP
Shareholders will be made following loans of funds by the Company for such
purpose (with respect to the purchases from Sterling Foster) or by the delivery
of promissory notes as part of the purchase price (with regard to the additional
shares to be acquired from the Company).
Simultaneously with the signing of the DCAP Agreement, the Company advanced
$311,000 to DCAP Insurance (increasing its aggregate advances to DCAP Insurance
to $750,000). The outstanding advances, together with interest at the rate of
10% per annum, are payable on December 31, 1998.
The consummation of the DCAP Agreement is subject to the satisfaction of a
number of conditions, including stockholder and certain third party and
governmental approvals. Each of the parties has the right to terminate the DCAP
Agreement if the closing shall not have occurred by December 31, 1998. No
assurances can be given that the acquisition will take place upon the terms
described above or otherwise.
Eagle:
On October 2, 1998, the Company and Eagle Insurance Company ("Eagle")
entered into a Subscription Agreement (the "Eagle Agreement") which provides for
the issuance and sale by the Company to Eagle of 1,486,893 shares of Common
Stock for an aggregate purchase price of approximately $1,000,000 (the "Eagle
Issuance"). The Eagle Issuance is to be made concurrently with the closing of
the DCAP Agreement. Each of the parties has the right to terminate the Eagle
Agreement if the closing shall not have occurred by December 31, 1998. The
closing of the Eagle Agreement is subject to a number of other conditions.
Eagle is a New Jersey insurance company wholly-owned by The Robert Plan
Corporation ("The Robert Plan"). Pursuant to separate agency agreements between
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certain DCAP Companies and certain insurance company subsidiaries of The Robert
Plan, such DCAP Companies have been appointed agents of the insurance companies
with regard to the offering of automobile and other insurance products.
In the event of the closing of the DCAP Agreement, the Sterling Foster
Agreement and the Eagle Agreement, the DCAP Shareholders will own an aggregate
of approximately 43.8% of the outstanding Common Stock of the Company, Messrs.
Certilman and Haft will own an aggregate of approximately 26% of such
outstanding Common Stock and Eagle will own approximately 12.6% of such
outstanding Common Stock.
Year 2000:
The Company's wholly-owned subsidiary, IAH, Inc. ("IAH"), owns and operates
the International Airport Hotel (the "Hotel") at San Juan International Airport,
Puerto Rico. IAH does not have any information technology systems ("IT
Systems"). Of the non-IT Systems that comprise part of the Hotel's operations,
the switchboard is the only such system that contains imbedded technology not
Year 2000 ("Y2K") - compliant. The Hotel has a plan in place, which is designed
to avoid any Y2K difficulties, both before and after January 1, 2000. The plan
consists primarily of a series of physical and practical alterations in the
Hotel's switchboard procedures, and does not involve any replacement of
equipment or any significant effort or cost. All other non-IT Systems are
operated manually.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
EXTECH CORPORATION
Dated: December 23, 1998 By:/s/ Morton L. Certilman
-----------------------
MORTON L. CERTILMAN
President (Chief
Operating Officer and
Principal Financial
Officer)
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