SEC Filing - Kingstone Companies, Inc.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (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, 1996 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 31, 1996 This document consists of 10 sequentially numbered pages.

INDEX EXTECH CORPORATION AND SUBSIDIARIES PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheet - September 30, 1996 (Unaudited) Condensed Consolidated Statements of Operations - Nine months ended September 30, 1996 and 1995 (Unaudited) Condensed Consolidated Statements of Operations - Three months ended September 30, 1996 and 1995 (Unaudited) Condensed Consolidated Statements of Cash Flows - Nine months ended September 30, 1996 and 1995 (Unaudited) Notes to Condensed Consolidated Financial Statements Nine months ended September 30, 1996 and 1995 (Unaudited) Item 2. Management's Discussion and Analysis or Plan of Operation PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Defaults upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K SIGNATURES 2

PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS EXTECH CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) September 30, 1996 ------------------ ASSETS - ------ CURRENT ASSETS: Cash and cash equivalents $1,084,534 Accounts receivable 58,382 Notes and other receivables 67,706 Inventories 4,728 Prepaid expenses and other current assets 263,660 --------- Total current assets 1,479,010 ========= PROPERTY AND EQUIPMENT, net 167,690 --------- OTHER ASSETS: Operating equipment, net 14,210 Deposits 10,000 --------- Total other assets 24,210 --------- $1,670,910 ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 6,693 Accrued expenses 103,706 Debentures payable 154,200 Accrued taxes payable 10,711 --------- 275,310 --------- MINORITY INTEREST 560 --------- STOCKHOLDERS' EQUITY: Common Stock, $.01 par value; authorized, 10,000,000 shares; issued and outstanding, 5,591,367 shares 55,914 Capital in excess of par 5,264,950 Deficit (3,925,824) ---------- 1,395,040 --------- $1,670,910 ========== See notes to condensed consolidated financial statements. 3

EXTECH CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Nine months ended September 30, 1996 1995 --------------------- Revenues: Rooms $ 735,275 $ 697,069 Other 17,366 51,617 Interest 27,543 13,855 --------- --------- Total revenues 780,184 762,541 --------- --------- Costs and expenses: General, administrative and sundry 382,863 274,944 Departmental 234,336 229,428 Depreciation and amortization 38,676 38,312 Energy costs 12,157 14,303 Lease rentals 146,168 141,278 Marketing 18,582 18,815 Property operation and maintenance 17,872 11,583 Provision for bad debt 1,800 3,840 --------- --------- 852,454 732,503 --------- --------- Net (loss) income $ (72,270) $ 30,038 =========== ========= Income per common share: Net (loss) income $ (.02) $ .01 =========== ========== Weighted average number of common shares outstanding 3,781,148 2,391,367 =========== ========== See notes to condensed consolidated financial statements. 4

EXTECH CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three months ended September 30, 1996 1995 ---------------------- Revenues: Rooms $ 229,113 $ 244,398 Other 4,975 25,985 Interest 12,502 5,703 --------- --------- Total revenues 246,590 276,086 --------- --------- Costs and expenses: General, administrative and sundry 175,176 94,123 Departmental 82,829 80,728 Depreciation and amortization 12,844 12,770 Energy costs 4,846 4,731 Lease rentals 44,937 48,502 Marketing 5,382 6,738 Property operation and maintenance 7,446 2,851 Provision for bad debt 600 1,740 --------- --------- 334,060 252,183 --------- --------- Net (loss) income $ (87,470) $ 23,903 ========== ========= Income per common share: Net (loss) income $ ( .02) $ .01 =========== ========= Weighted average number of common shares outstanding 5,591,367 2,391,367 ========== ========== See notes to condensed consolidated financial statements. 5

EXTECH CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine months ended September 30, 1996 1995 -------------------- Cash flows from operating activities: Net (loss) income $(72,270) $ 30,038 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 38,676 38,312 Provision for bad debts 1,800 3,840 Decrease (increase) in assets: Accounts receivable (7,761) (12,774) Inventories 2,462 2,920 Prepaid expenses and other current assets (256,773) 27,501 Notes receivable (28,526) 4,168 Other assets (1,407) (3,961) Deposits (10,000) -0- Increase (decrease) in liabilities: Accounts payable 3,137 107 Accrued expenses (35,795) (22,822) Accrued taxes payable 10,711 11,072 ---------- --------- Net cash(used in)provided by operating activities (355,746) 78,401 --------- --------- Cash flows from investing activities: Purchases of property and equipment ( 4,676) (615) ---------- --------- Net cash (used in) investing activities: ( 4,676) (615) ---------- --------- Cash flows from financing activities: Proceeds from issuance of stock 800,000 -0- ---------- --------- Net cash provided by financing activities 800,000 -0- ---------- --------- Net increase in cash and cash equivalents 439,578 77,786 Cash, beginning of period 644,956 482,359 ----------- --------- Cash, end of period $1,084,534 $ 560,145 =========== ========= See notes to condensed consolidated financial statements. 6

EXTECH CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED) 1. The Condensed Consolidated Balance Sheet as of September 30, 1996, the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 1996 and 1995 and the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1996 and 1995 have been prepared by the Company without audit. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly its financial position as of September 30, 1996, results of operations for the three and nine months ended September 30, 1996 and 1995 and cash flows for the nine months ended September 30, 1996 and 1995. This report should be read in conjunction with the Company's Annual Report on Form 10-KSB for the year ended December 31, 1995. 2. The results of operations and cash flows for the nine months ended September 30, 1996 are not necessarily indicative of the results to be expected for the full year. 7

EXTECH CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 Results of Operations: - ---------------------- The Company's net loss for the nine months ended September 30, 1996 was $72,270 as compared to a net income of $30,038 for the nine months ended September 30, 1995. Such loss was primarily the result of increased general, administrative and sundry expenses of $107,919 (primarily due to a $54,810 increase in professional fees relating to, among other matters, the transactions discussed below under "Recent Developments", a $24,375 increase in officers compensation expense, and a one-time appraisal fee of $10,000) as well as decreased other revenues of $34,251 (primarily due to the receipt during the 1995 period of $19,214 in royalty income with respect to the Company's pipe harness clamp and $13,468 as a final distribution of proceeds from the sale of the Chicago Executive House Hotel, as compared to no revenue from such sources in 1996). Such increased expenses and decreased other revenues were offset by increased room revenues of $38,206 and increased interest income of $13,688. Liquidity and Capital Resources: - -------------------------------- As of September 30, 1996, the Company had $1,084,534 in cash and cash equivalents and a working capital surplus of $1,203,700. As of December 31, 1995, the Company had $644,956 in cash and cash equivalents and a working capital surplus of $453,377. The increase in cash and cash equivalents and working capital surplus was primarily the result of an $800,000 equity investment made in June 1996 by the President and Chairman of the Board of the Company and another investor. The Company did not have any material commitments for capital expenditures as of September 30, 1996. Recent Developments: - -------------------- In February 1996, concurrently with the execution of a letter of intent providing for the acquisition of Phone America International, Inc. ("Phone America"), the Company loaned $50,000 to Transcends Telecom Corporation ("Transcends"), a wholly-owned subsidiary of Phone America. The note evidencing the loan (the "Note") was payable in August 1996 and the payment thereof was secured by, among other things, a security interest in the accounts receivable of Transcends. As a result of a default in payment by Transcends (which, the Company has been advised, has since discontinued operations), the Company has foreclosed its security interest in such accounts receivable which, the Company believes, exceed the amount due under the Note. No assurance can be given as to the collectibility of such accounts receivable. 8

In July 1996, the Company entered into an agreement for the purchase of a professional sports team for a purchase price of $850,000. The consummation of the purchase was subject to, among other conditions, league approval of both the transaction and the relocation of the team to Long Island. Upon execution of the agreement, the Company paid to the seller, as a deposit, the sum of $250,000, which amount was repayable in the event the transaction was not consummated (other than as a result of a material default by the Company). Due to the inability to obtain league approval, the agreement was terminated and, in October 1996, the Company was repaid the $250,000 deposit. 9

PART II. OTHER INFORMATION ----------------- Item 1. LEGAL PROCEEDINGS ----------------- None Item 2. CHANGES IN SECURITIES --------------------- None Item 3. DEFAULTS UPON SENIOR SECURITIES ------------------------------- None Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- None Item 5. OTHER INFORMATION ----------------- None Item 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (a) Exhibits -------- 3(a) Certificate of Incorporation, as amended 1 3(b) By-laws, as amended 2 27 Financial Data Schedule (b) Reports on Form 8-K ------------------- None - -------- 1 Denotes document filed as an exhibit to the Company's Annual Report on Form 10-KSB for the year ended December 31, 1993 and incorporated herein by reference. 2 Denotes document filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1989 and incorporated herein by reference. 10

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: By:/s/Morton L. Certilman ------------------------------- MORTON L. CERTILMAN President (Chief Operating Officer and Principal Financial Officer) 11

WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

5 9-mos Dec-31-1996 Jan-01-1996 Sep-30-1996 0 1,084,534 0 126,088 0 4,728 1,479,010 263,660 0 1,670,910 275,310 154,200 0 0 55,914 1,339,126 1,670,910 0 780,184 0 467,791 0 1,800 0 (72,270) 0 (72,270) 0 0 0 (72,270) (.02) 0