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 December 31, 1997
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 No. 2-98747-D
OXFORD CAPITAL CORP.
(Exact name of small business issuer as specified in its charter)
Nevada 87-0421454
______________________________ _______________________________
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4245 North Central Expressway, Suite 300, Dallas, Texas 75205
(Address of principal executive offices) (Zip Code)
(214) 520-0100
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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. Yes No X
As of February 12, 1998, 10,334,638 shares of Common Stock of the issuer
were outstanding.
<PAGE>
OXFORD CAPITAL CORP.
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - December 31, 1997
and June 30, 1997.............................................. 3
Condensed Consolidated Statements of Operations - For the
three and six months ended December 31, 1997
and 1996....................................................... 5
Condensed Consolidated Statements of Cash Flows - For the
six months ended December 31, 1997 and 1996 ................... 6
Notes to Unaudited Consolidated Financial Statements........... 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................... 16
SIGNATURES ............................................................... 17
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OXFORD CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
December 31, 1997 June 30, 1997
------------------- ---------------
<S> <C> <C>
Assets:
Current Assets:
Cash $ 373,457 $ 437,410
Accrued Payroll Receivable 0 415,860
Accounts Receivable, Net of
Allowance for Doubtful
Accounts of $121,866 and
$66,629 at December 31, 1997
and June 30, 1997, respectively 2,231,032 141,210
Inventories 0 53,495
Notes Receivable 48,375 0
Employee Advances & Loans Receivable 278,515 0
Prepaid Expenses and Other Assets 18,455 13,900
----------- -----------
Total Current Assets 2,949,834 1,061,875
----------- -----------
Fixed Assets:
Furniture, Fixtures & Equipment 774,044 209,678
Accumulated Depreciation (183,597) (30,385)
----------- -----------
Total Fixed Assets 590,447 179,293
----------- -----------
Other Assets:
Goodwill, Net of Accumulated
Amortization of $1,322,524 at
December 31, 1997 11,159,432 0
Covenant Not to Compete, Net of
Accumulated Amortization of $20,000 at
December 31, 1997 651,991 0
Notes Receivable 348,634 0
Accounts Receivable - Related Party 0 46,284
Accounts Receivable - Cost 0 45,140
Deferred Acquisition Costs - Webster 0 81,991
Other Assets 478,458 337
------------ -----------
Total Other Assets 12,638,515 173,752
------------ -----------
Total Assets $ 16,178,796 $ 1,414,920
============ ===========
</TABLE>
See Notes to Financial Statements
2
<PAGE>
OXFORD CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Cont'd)
<TABLE>
December 31, 1997 June 30, 1997
------------------- -------------
<S> <C> <C>
Liabilities & Shareholders Equity
Current Liabilities
Bank Overdraft $ 240,445 $ 159,643
Accrued Payroll Payable 335,300 287,056
Accounts Payable 2,542,721 90,749
Accrued Expenses 156,028 98,174
Payroll Taxes Payable 4,689,081 4,037,601
Note Payable 6,187,500 0
Current Portion of Long-Term Debt 67,685 77,563
-------------- ------------
Total Current Liabilities 14,218,760 4,750,786
-------------- ------------
Long-Term Debt 5,804,783 399,028
-------------- ------------
Total Liabilities 20,023,543 5,149,814
-------------- ------------
Shareholders Equity
Preferred Stock 100 0
Common Stock 10,334 33,064
Additional Paid-In Capital 1,439,549 1,370,475
Retained Earnings (5,294,730) (5,138,433)
--------------- ------------
Total Shareholders Equity (3,844,747) (3,734,894)
--------------- ------------
Total Liabilities & Shareholders
Equity $ 16,178,796 $ 1,414,920
=============== ============
</TABLE>
See Notes to Financial Statements
3
<PAGE>
OXFORD CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
Three Months Ended Six Months Ended
December 31, December 31,
---------------------- ---------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
------------ ------------- ------------- ------------
Revenues: $30,315,516 $ 5,263,859 $ 41,076,927 $ 10,357,375
Cost of Goods Sold 28,605,987 4,904,862 38,597,041 9,533,003
------------ ------------- ------------- ------------
Gross Profit 1,709,529 358,997 2,479,886 824,372
------------ ------------- ------------- ------------
Expenses:
Selling, General &
Administrative 1,071,629 489,412 1,912,206 1,286,087
Development Expenses 31,443 309,751 221,726 72,959
------------ ------------- ------------- ------------
Total Expenses 1,103,072 799,163 2,133,932 1,359,046
------------ ------------- ------------- ------------
Earnings (Loss) Before
Interest, Taxes, Depreciation
& Amortization 606,457 (440,166) 345,954 (534,674)
------------ ------------- ------------- ------------
Other Income (Expense)
Interest (112,492) (15,581) (153,396) (31,296)
Minority Interest 27,883 28,657
Depreciation (48,113) (7,996) (68,184) (10,846)
Amortization (173,101) (77,088) (280,670) (77,088)
------------ ------------- -------------
Total Other Income
(Expense) (333,706) (72,782) (502,250) (90,573)
Income Taxes -0- -0- -0- -0-
------------ ------------- ------------- ------------
Net Income (Loss) $ 272,751 $ (512,948) $ (156,296) $ (625,247)
============ ============= ============= ============
Weighted Average Shares
Outstanding 12,820,371 31,988,454 22,942,328 18,498,609
============ ============= ============= ============
Income (Loss) per share $ 0.02 $ (0.02) $ (0.01) $ (0.03)
============ ============= ============= ============
</TABLE>
See Notes to Financial Statements
4
<PAGE>
OXFORD CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
Six Months Ended December 31,
-------------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
Cash Flow From Operting Activites:
Net Loss $ (156,296) $ (625,247)
Depreciation 68,184 10,846
Amortization 280,670 77,089
Inventory Write-Down 53,495
Adjustments to Reconcile Net Loss with Net 0
Cash Provided By Operating Activities
Decrease (Increase) in Accounts Receivable (948,498)
Decrease (Increase) in Accrued Payroll Receivable 415,860 240,505
(Increase) in Inventory 0 (140,610)
Minority Interest 0 (28,657)
(Increase) in Notes Receivable 223,265
(Increase) in Prepaid Expenses and Employee
Advances (274,786) 0
Increase (Decrease) in Accounts Payable (252,882) (28,319)
Increase (Decrease) in Accrued Payroll 94 880,110
(Decrease) in Accrued Expenses 57,854 0
Increase (Decrease) in Payroll Taxes Payable 2,686 0
Other 36,878 181
------------- -------------
Net Cash Provided By (Used In) Operating Activities (493,476) (385,898)
------------- -------------
Cash Flows From Investing Activities:
Purchases of Property, Plant & Equipment (51,218) (197,596)
Cash Acquired Through Acquisitions 361,304 31,316
Decrease In Deferred Acquisition Costs 81,991 0
Decrease In Accounts Receivable - Crest 45,140 0
Decrease In Accounts Receivable - Related Party 46,284 0
Decrease In Other Assets 29,406 26,621
------------- -------------
Net Cash (Used In) Investing Activities 512,907 (139,659)
------------- -------------
Cash Flows From Financing Activities:
Bank Overdraft 80,802 0
Increase (Decrease) in Promissory Notes (164,186) (12,115)
------------- -------------
Net Cash Used In Investing Activities (83,384) (12,115)
------------- -------------
Increase In Cash (63,953) 234,124
Beginning Cash 437,410 2,963
------------- -------------
Ending Cash $ 373,457 $ 237,087
============= =============
</TABLE>
See Notes to Financial Statements
5
<PAGE>
OXFORD CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
Six Months Ended December 31,
------------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Supplemental disclosures of cash flow information
Non cash investing and financing activities
Purchase of goodwill by issuance of short-term
and long-term debt $ 12,481,956
Debentures payable converted to shares of common
stock $ 169,789
Accounts payable converted to warrants to acquire $ 757,752
common stock
</TABLE>
See Notes to Financial Statements
6
<PAGE>
OXFORD CAPITAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
1. INTERIM PRESENTATION
The accompanying interim financial statements are prepared in accordance
with generally accepted accounting principles for interim financial information
and with instructions for Form 10-QSB and Rule 10-01 of Regulation S-X. The June
30, 1997 balance sheet data was derived from audited financial statements
included in Form 10-KSB dated June 30, 1997. The interim financial statements
and notes thereto do not include all information required by generally accepted
accounting principles for complete financial statements and should be read in
conjunction with the financial statements included in Form 10-KSB for the period
ended June 30, 1997. The interim financial statements reflect all adjustments of
a normal recurring nature which are, in the opinion of management, necessary for
a fair presentation of the financial position, results of operations and of cash
flows for the interim periods presented.
2. DISCONTINUANCE OF OPERATIONS OF SFCI
The results of marketing and sales efforts of the Company's wholly-owned
subsidiary, Safety and Fatigue Consultants International, Inc. ("SFCI") have not
met expectations and, accordingly, in an effort to reduce operating costs and
overhead, management discontinued its operations effective as of December 31,
1997.
3. ACQUISITIONS
The following acquisitions were accounted for under the purchase method of
accounting.
(a) Insource America, Inc.
On July 31, 1997, the Company acquired substantially all of the assets
of Insource America, Inc. (Insource), an employee leasing firm with
operations in Portland, Oregon and Missoula, Montana, it subsequently
entered into a management contract to operate United Staffing of Utah,
Inc. ("USU"), a Salt Lake City, Utah subsidiary of Insource. The
assets were acquired by United Staffing Corp. ("USC"), a newly formed
wholly-owned subsidiary incorporated under the laws of the State of
Nevada. USC issued a promissory note guaranteed by Oxford to Insource
in the amount of $6,187,500 due and payable on or before June 30,
1998, with a 10% principal payment due on or before January 5, 1998.
This payment date was extended to April 15, 1998 because the audits of
Insource and its subsidiary have not been completed, a condition
precedent to the acquisition. The note was subsequently extended to
July 31, 1998. Insource owes approximately $5,700,000 to the IRS. The
IRS has levied the note given by USC to Insource.
7
<PAGE>
(b) PRC Enterprises, Inc.
On September 2, 1997, but effective September 1, 1997, the Company
acquired 100% of the issued and outstanding shares of PRC Enterprises,
Inc. (PRC), headquartered in Houston, Texas. PRC provides
employee-leasing services for approximately 1,950 employees. In
exchange for the shares of PRC, the Company issued a note in the
amount of $4,500,000. The note, which is collateralized with the PRC
stock, bears interest of 8%, is due as follows:
(i) Principal and interest are due annually in an amount equal to the
greater of 30% of the gross profits of PRC, as defined, or $450,000.
(ii) Any unpaid principal and interest is due three years from the
date of execution.
The PRC note is convertible into shares of Oxford as follows:
(i) The payee is entitled to convert any unpaid principal at the then
market price of the Oxford stock in minimum amounts of $250,000 no
more frequently than once during any one six-month period.
After paying all accrued interest and principal except $1,000,000, the
outstanding $1,000,000 is convertible to shares of Oxford at the then
market price at the option of the Company.
(c) Crest Outsourcing, Inc.
On February 14, 1997, the Company agreed to acquire 100% of the issued
and outstanding shares of Crest Outsourcing Inc. (Crest) in exchange
for 5,333,333 newly issued shares of Oxford common stock and 500,000
newly issued shares of Series A Redeemable Convertible Preferred
Stock. On March 1, 1997, Oxford guaranteed a Crest note payable to
Continental Casualty Company in the amount of $885,000. On September
30, 1997, the Company amended the purchase agreement. Under the
amended agreement, the Company issued 100,000 newly issued shares of a
Series A Redeemable Convertible Preferred Stock, a note in the amount
of $250,000 and warrants to purchase 250,000 common shares of Oxford.
Each preferred stock share is convertible into 1 share of common stock
and warrants to acquire 1 newly issued common share of Oxford at the
following prices: 25,000 at $1 per share; 25,000 at $1.50 per share;
and 50,000 at 80% of the then market price of Oxford common stock. The
$250,000 note payable bears 6% interest and is payable over a period
of 58 months. The warrants to acquire 250,000 common shares are
exercisable at $1 per share for a period of three years. On October 1,
1997, the acquisition of Crest was consummated.
(d) Webster Leasing, Inc.
On March 13, 1997, the Company agreed to acquire 100% of the issued
and outstanding
8
<PAGE>
shares of Webster Leasing, Inc. (Webster), in exchange for 772,393
shares of Oxford common stock. The former owners of Webster continue
to operate Webster under a management contract pending completion of
an audit of Websters books and records. The acquisition was concluded
on December 1, 1997.
4. PRO FORMA INFORMATION
The following unaudited pro forma financial information gives effect to the
combined historical results of operations of the Company, USC, Insource,
PRC, Crest and Webster for the three months ended December 31, 1997 and
1996, and assumes that the acquisitions had been effective as of the
beginning of each such period. The pro forma information is not indicative
of the actual results, which would have occurred had the acquisitions been
consummated at the beginning of such periods, or of future operations of
the Company. The pro forma financial information is based on the purchase
method of accounting and reflects adjustments to eliminate non-recurring
expenses, to amortize the excess purchase price over the underlying value
of net assets and to reflect additional interest expense.
<TABLE>
For the Three Months Ended For the Six Months ended
December 31, December 31,
------------------------------ -----------------------------
1997 1996 1997 1996
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue $ 32,753,282 $ 40,816,674 $61,762,620 $76,318,002
Net Income (Loss) 324,948 5,021,510 (106,132) (5,568,215)
Income (Loss) per share $ 0.03 $ (0.15) $ (0.00) $ (0.30)
</TABLE>
The decrease in revenue and net income (loss) as reflected in the preceding
pro forma financial information for the three and six month period ended
December 31, 1997, as compared to the three and six month period ended
December 31, 1996, is principally attributable to the Companys efforts to
terminate client contracts that do not meet its profitability criteria and
unusual expenses in the 1996 periods such as workers compensation
insurance, over staffing and uncollectability of certain receivables.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Certain Factors Pertaining to Forward Looking Statements
The statements contained herein which are not historical facts are
forward-looking statements that involve various risks and uncertainties.
Therefore, the actual results of the future events described in such forward-
looking statements in this Form 10-QSB could differ materially from those stated
in such forward-looking statements. Among the factors which could cause the
actual results to differ materially are the risks and uncertainties described
both in this Form 10-QSB and the uncertainties set forth from time to time in
the Company's other public reports, filings and public statements. Many of these
factors are beyond the control of the Company, any of which, or a combination of
which, could materially affect the results of the Company's operations and
whether the forward-looking statements made by the Company ultimately prove to
be accurate.
Overview
The Company through its subsidiaries provides small and medium-sized
businesses with an outsourcing solution to the complexities and costs related to
employment and human resources. The Company's integrated employment related
services consists of human resource administration, employment regulatory
compliance management, workers' compensation coverage, health care and other
employee benefits. The Company establishes a co- employer relationship with its
clients and contractually assumes substantial employer responsibilities with
respect to a company's work site employees. In addition, the Company offers
certain specialty managed care services on a stand alone basis to health and
workers' compensation insurance companies, HMOs, managed care providers and
large, self insured employers.
Financial Presentation
The following discussion should be read in conjunction with, and is
qualified in its entirety by, the foregoing and the Company's Consolidated
Financial Statements and Notes thereto.All references to the Company are of its
operating subsidiaries.
The Company's revenues include billings to clients for gross salaries and
wages, related employment taxes, and health care and workers' compensation
coverage of work site employees. The Company is obligated to pay the gross
salaries and wages, related employment taxes as well as health care and workers'
compensation costs of its work site employees whether or not the Company's
clients pay the Company on a timely basis, or at all. The Company believes that
including such amounts as revenues appropriately reflects the responsibility,
which the Company bears for such amounts and is consistent with industry
practice. In addition, the Company's revenues are subject to fluctuations as the
result of (i) changes in the volume of work site employees serviced by the
Company, (ii) changes in the wage base and employment tax rates of work site
employees, and (iii) changes in the mark up charge by the Company for its
services.
The Company's primary direct costs are (i) salaries, wages and the
employer's portion of social security taxes, Medicare premiums and federal
unemployment taxes, (ii) health care and workers'compensation costs, and (iii)
state unemployment taxes and other direct costs. The Company can significantly
impact its gross profit margin by actively managing the direct costs described
in item (ii) and (iii). The Company's health care costs consist of medical
insurance premiums, payments of and reserves for claims subject to deductibles
and the costs of vision care, disability, employee assistance and other similar
benefit plans. The Company's health care benefit plans consist of a mixture of
fully insured, minimum premium arrangements, partially self-insured plans and
guaranteed cost programs. Under minimum premium arrangements and partially
self-insured plans, liabilities for health care claims are recorded based on the
Company's health care loss history.
10
<PAGE>
Workers' compensation costs include medical costs and indemnity payments
for lost wages, administrative costs and insurance premiums related to the
Company's workers' compensation coverage. Workers' compensation costs for fiscal
1997 also include reserves for claims, which have been incurred but not
reported, and for anticipated loss.
The Company's primary operating expenses are administrative personnel,
other general and administrative expenses and sales and marketing expenses.
Administrative personnel expenses include compensation, fringe benefits and
other personnel expenses related to internal administrative employees. Other
general and administrative expenses include rent, office supplies and expenses,
legal and accounting fees, insurance and other operation expenses. Sales and
marketing expenses include compensation of sales executives and the marketing
staff, as well as marketing and advertising expenses.
Material Changes in Results of Operation
During the quarter ended December 31, 1997, the Company completed the
acquisitions of (i) the assets of Crest Outsourcing, Inc., ("Crest"); and (ii)
Webster leasing, Inc., ("Webster"). Crest provides staff leasing services from
offices in Albuquerque, New Mexico and Los Angles, California and Webster
provides staff leasing services from offices in Waco, Texas.
11
<PAGE>
Results of Operation
The following table sets forth, for the periods indicated, certain
selected income statement data expressed as a percentage of revenues:
<TABLE>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
1997 1996 1997 1996
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
100.0% 100.0% 100.0% 100.0%
Revenues 94.36 93.18 93.96 92.04
Direct cost
Gross profit 5.64 6.82 6.04 7.96
Expenses:
Selling, general and administrative 3.53 9.29 4.65 12.41
Development 0.10 5.88 .53 .70
Total expenses 3.63 15.17 5.18 13.11
Earnings before interest, depreciation
and amortization 2.00 (8.36) .84 (5.16)
Other income (expenses) (1.10) (1.38) (1.22) (.86)
Income (loss) before taxes .89 (9.74) (.38) (6.03)
Provision for income taxes - - - -
Net income (loss) .89% (9.74)% (.38)% (6.03)%
</TABLE>
Three Months Ended December 31, 1997 Compared to Three Months Ended December 31,
1996
Revenue. Gross revenues totalled $30,315,516 for the three months ended December
31, 1997 compared to $5,263,859 for the three months ended December 31, 1996, an
increase of $25,051,657 or 476%. The increase was attributable to the aggregate
contribution of gross revenues from the inclusion of Insource, Webster PRC and
Crest, and partially offset by a decrease in Rx Staffing gross revenues. Without
the inclusion of the acquired businesses, revenues for the three months ended
December 31, 1997 would have totalled $4,912,167 a decrease of 351,692 or 6.7%
from the corresponding period of the prior year. Rx Staffing terminated a
client, (which accounted for approximately 25% of its business in 1996) because
of excessive workers compensation losses and a high incident of State
unemployment claims. The average number of worksite employees paid per month
during the three months ended December 31, 1997 was 4,595 compared to 1,060
during the three months ended December 31, 1996, while monthly revenue per
worksite employee was $2,199 during the three months ended December 31, 1997 as
compared to $3,257 during the three months ended December 31, 1996.
Gross Profit. Gross profit totalled $1,709,529 for the three months ended
December 31, 1997 compared to $358,997 for the three months ended December 31,
1996, an increase of $1,350,532 or 476%. The increase in gross profit was
primarily attributable to the aforementioned increase in gross revenue. The
gross margin for the two periods was 5.64% and 6.82%, respectively. The decrease
in gross margin was primarily attributable to lower margin business acquired
from Insource, Webster, Crest and PRC. Without the inclusion of the acquired
businesses, the gross profit for the three months ended December 31, 1997 would
12
<PAGE>
have totalled $510,587, an increase of $151,590 or 42.2% from the corresponding
period of the prior year. Monthly gross mark-up per worksite employee totaled
$124 during the three months ended December 31, 1997 as compared to $123 during
the three months ended December 31, 1996.
Selling, General and Administrative Expense. Selling, general and administrative
expenses ("S G & A") were $1,071,629 for the three months ended December 31,
1997 compared to $489,412 for the three months ended December 31, 1996, an
increase of $582,217 or 219%. The increase in S, G & A was attributable to the
inclusion of S, G & A for USC, Webster , Crest and PRC, as well as an increase
in corporate expenses. Without the inclusion of the acquired businesses, SG&A
for the three months ended December 31, 1997 would have totalled $389,059 a
decrease of 969,987 or 286% from the corresponding period of the prior year. As
a percentage of sales, S, G & A decreased from 9.29% to 3.53%. The Company is
attempting to reduce expenses by centralizing operating functions and
eliminating excess personnel and other general and administrative costs.
Net Income. Net Income was $272,749 for the three months ended December 31, 1997
compared to a loss of ($512,948) for the three months ended December 31, 1996.
The increase in the net income is primarily attributable to the termination of
the business of SFCI and the acquisitions of USC, Webster, Crest and PRC.
Six Months Ended December 31, 1997 Compared to Six Months Ended December 31,
1996
Revenue. Gross revenues were $41,076,927 for the six months ended December 31,
1997 compared to $10,357,375 for the six months ended December 31, 1996, an
increase of $30,719,552 or 397%. The increase was attributable to the aggregate
contribution of gross revenues from the inclusion of Insource, Webster PRC and
Crest, and partially offset by a decrease in Rx Staffing gross revenues. Rx
Staffing terminated one client, which accounted for approximately 25% of its
business in 1996 because of excessive workers compensation losses and a high
incident of State unemployment claims. Without the inclusion of the acquired
businesses, revenues for the six months ended December 31, 1997 would have
totalled $9,862,904, a decrease of $494,471 or 4.8% from the corresponding
period of the prior year. The average number of worksite employees paid per
month during the six months ended December 31, 1997 was 4,594 compared to 1,060
during the six months ended December 31, 1996, while monthly revenue per
worksite employee was $1,629 during the six months ended December 31, 1997 as
compared to $1,100 during the six months ended December 31, 1996.
Gross Profit. Gross profit was $2,479,886 for the six months ended December 31,
1997 compared to $824,372 for the six months ended December 31, 1996, an
increase of $1,655,5614 or 301%. The increase in gross profit was primarily
attributable to the aforementioned increase in gross revenue. Gross margin for
the two periods was 6.04% and 7.96%, respectively. The decrease in gross margin
was primarily attributable to lower margin business acquired from Insource,
Webster, Crest and PRC. Without the inclusion of the acquired businesses, gross
profit for the six months ended December 31, 1997 would have totalled $927,542,
and increase of $103,170 or 12.5% from the corresponding period of the prior
year. Monthly gross mark-up per worksite employee totaled $90 during the six
months ended December 31, 1997 as compared to $130 during the six months ended
December 31, 1996.
13
<PAGE>
Selling, General and Administrative Expense. Selling, general and administrative
expenses ("S G & A") were $1,912,206 for the six months ended December 31, 1997
compared to $1,286,087 for the six months ended December 31, 1996, an increase
of $626,119 or 149%. The increase in S, G & A was attributable to the inclusion
of S, G & A for USC, Webster , Crest and PRC, as well as an increase in
corporate expenses. As a percentage of sales, S, G & A decreased from 12.41% to
4.65%. Without the inclusion of the acquired businesses, SG&A for the six months
ended December 31, 1997 would have totalled $781,592, a decrease of $504,495 or
39.2% from the corresponding period of the prior year. The Company is attempting
to reduce expenses by centralizing operating functions and eliminating excess
personnel and other general and administrative costs.
Net Income. Net Income was $156,296 for the six months ended December 31, 1997
compared to a loss of ($625,247) for the six months ended December 31, 1996. The
increase in the net income is primarily attributable to the termination of the
business of SFCI and the acquisitions of USC, Webster, Crest and PRC.
Liquidity and Capital Resources
The Company had cash of $373,457 and a deficit in working capital of
$11,268,926 at December 31, 1997, compared to cash of $437,410 and a deficit in
working capital of $3,688,911 at June 30, 1997. The increase in the Company's
working capital deficit is principally attributable to a note of $6,187,500
issued in connection with the acquisition of Insource, a note of $4,500,000
issued in connection with the acquisition of PRC, a note of $250,000 issued in
connection with the acquisition of Crest and $4,000,000 of payroll taxes payable
which liabilities the Company inherited from the acquired companies.
Cash flows used in operating activities were $493,476 for the six months ended
December 31, 1997 period as compared to $385,898 for the corresponding period of
the prior year. This increase resulted from larger receivables, pre-paid
expenses and a decrease in accrued expenses which were partially offset by
improved earnings.
Cash used in investing activities totaled $512,907 for the six months ended
December 31, 1997 as compared to $139,659 of cash from investing activities for
the corresponding period of the prior year. The decrease in cash used in
investing activity resulted principally from fewer purchases of property, plant
and equipment, cash acquired through acquisition.
Cash flows used for financing activities were $(83,384) for the six months ended
December 31, 1997 compared to cash used in financing activities of $12,115 for
the corresponding period of the prior year. Cash flows used for financing
activities during the six months ended December 31, 1997 consisted primarily of
the decrease in promissory notes which was partially offset by an increase in
the Company's bank overdraft position.
At December 31, 1997, the Company's principal obligations, other than those
relating to its ongoing working capital needs, consisted of a non-interest
bearing note payable of $6,187,500 due July 31, 1998 in connection with the
Company's acquisition of Insource, a second note of $1,068,000, incurred in
connection with the Company's acquisition of Rx Staffing. This note provides for
monthly payments of $6,700 until $1,068,000 has been paid. The note was
originally recorded at a discounted value of $533,650, reflecting a 12% discount
rate. The discounted balance of the note payable at December 31, 1997 was
$386,428; A note in the principal amount of $4,500,0000 in connection with the
Companys acquisition of PRC, and a note in the amount of $250,000 in connection
with the Companys acquisition of Crest.
14
<PAGE>
At December 31, 1997, the Company was obligated under a lease covering its
principal offices and two leases for office equipment expiring December 31, 1999
and 2000. The Company's lease obligations at December 31, 1997 provided for
current minimum annual payments of $193,836, escalating to $222,180 for the
fiscal year ending June 30, 2001.
During the six month period ended December 31, 1997, the Company requested and
received the return to the treasury of 22,730,000 common shares issued in
connection with the acquisition of SFCI. One shareholder and former officer of
SFCI has not to date returned his shares. The Company intends to diligently
pursue the return of those shares.
While management is working to reduce expenses, negotiate favorable terms with
creditors and raise additional equity capital, there can be no assurance that
the Company will be successful in its efforts to alleviate its liquidity
problems. There are no commitments at present from creditors or potential
investors. Without the success of one of these options, the Company does not
have sufficient cash to satisfy its working capital requirements for the next
twelve months.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
NONE
Reports on Form 8-K
NONE
15
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
OXFORD CAPITAL CORP.
Date: March 18, 1998 By:/s/ Robert Cheney
-----------------------------------------
Robert Cheney, Chairman and Principal
Executive Officer
Date: March 18, 1998 By:/s/ Jerry Stovall
-----------------------------------------
Jerry Stovall, Treasurer and Principal
Financial Officer
16
