<PAGE> 1
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[ ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
---------------- --------------
Commission file number 1-9629
WINSTON RESOURCES, INC.
----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 13-3134278
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
535 Fifth Avenue, New York, New York 10017-3662
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(Address of principal executive offices)
(212) 557-5000
---------------------------
(Issuer's telephone number)
NOT APPLICABLE
----------------------------------------------------
(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 X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 2,919,133 shares of Common
Stock, par value $.01 per share, outstanding on November 10, 1995.
<PAGE> 2
WINSTON RESOURCES, INC., AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1 Financial Statements
Consolidated Balance Sheet
-September 30, 1995 (unaudited) 1&2
Consolidated Statements of Operations
-Three months ended September 30, 1995
and 1994 (unaudited) 3
-Nine months ended September 30, 1995
and 1994 (unaudited) 4
Consolidated Statements of Cash Flows
-Nine months ended September 30, 1995
and 1994 (unaudited) 5
Notes to Consolidated Financial Statements 6&7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 8&9
PART II - OTHER INFORMATION
----------------------------
Item 6 Exhibits and Reports on Form 8-K 10
</TABLE>
<PAGE> 3
WINSTON RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS AT SEPTEMBER 30, 1995
(Unaudited)
ASSETS
(Note 4)
<TABLE>
<S> <C>
Current assets:
Cash $ 117,000
Accounts and notes receivable, trade, net 5,490,000
Prepaid expenses and other current assets 118,000
-----------
Total current assets 5,725,000
Fixed Assets, net 289,000
Other assets:
Long-term portion of notes receivable 141,000
Security deposits and other assets 577,000
Restrictive covenants and other
intangibles, net 858,000
-----------
Total $ 7,590,000
===========
</TABLE>
See Notes to Consolidated Financial Statements.
Page 1
<PAGE> 4
WINSTON RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS AT SEPTEMBER 30, 1995
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C>
Current liabilities:
Accounts payable and accrued expenses $ 2,564,000
Credit facility debt (Note 4) 577,000
Capital lease obligation 46,000
-----------
Total current liabilities 3,187,000
Deferred rent 379,000
Deferred credit - net (Note 2) 42,000
Long-term portion of credit facility debt 500,000
Long-term portion of capital lease obligation 36,000
-----------
Total liabilities 4,144,000
Contingencies (Note 5)
Stockholders' equity (Note 3):
Preferred stock - $100 par value; authorized
2,000,000 shares, no shares issued
Common stock, $.01 par value; authorized
10,000,000 shares, issued and outstanding
2,917,133 shares 29,000
Additional paid-in capital 4,395,000
Accumulated deficit (978,000)
-----------
Total stockholders' equity 3,446,000
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Total $ 7,590,000
===========
</TABLE>
See Notes to Consolidated Financial Statements.
Page 2
<PAGE> 5
WINSTON RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
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<S> <C> <C>
Revenue:
Placement fees and related income $ 7,656,000 $ 6,342,000
------------ ------------
Operating expenses:
Compensation and other benefits 5,722,000 4,673,000
Selling, general and administrative 1,704,000 1,355,000
Amortization of intangibles 38,000 39,000
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7,464,000 6,067,000
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Income from operations 192,000 275,000
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Interest expense, net 38,000 8,000
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Income before provision for income taxes 154,000 267,000
Provision for income taxes 46,000 82,000
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Net income $ 108,000 $ 185,000
============ ============
Primary and fully diluted net income
per common share $ 0.03 $ 0.06
============ ============
Weighted average number of common shares
outstanding
Primary 3,180,373 3,147,024
Fully diluted 3,180,373 3,162,957
</TABLE>
See Notes to Consolidated Financial Statements.
Page 3
<PAGE> 6
WINSTON RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
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<S> <C> <C>
Revenue:
Placement fees and related income $ 22,779,000 $ 17,579,000
------------ -------------
Operating expenses:
Compensation and other benefits 16,868,000 12,747,000
Selling, general and administrative 5,070,000 4,073,000
Amortization of intangibles 114,000 116,000
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22,052,000 16,936,000
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Income from operations 727,000 643,000
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Interest expense, net 153,000 55,000
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Income before provision for income taxes 574,000 588,000
Provision for income taxes 185,000 146,000
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Net income $ 389,000 $ 442,000
============ =============
Primary and fully diluted net income
per common share $ 0.12 $ 0.14
============ =============
Weighted average number of common shares
outstanding
Primary 3,171,858 3,151,662
Fully diluted 3,171,858 3,162,957
</TABLE>
See Notes to Consolidated Financial Statements.
Page 4
<PAGE> 7
WINSTON RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 389,000 $ 442,000
Charges and credits to net income not
affecting cash:
Depreciation and amortization 206,000 181,000
Provision for doubtful receivables 25,000 (30,000)
Deferred rent (19,000) 31,000
Deferred income recognized 47,000 8,000
Changes in assets and liabilities:
(Increase) in Accounts receivable (640,000) (702,000)
(Increase) in Prepaid expenses and
other current assets 5,000 (33,000)
(Increase) in Security deposits and other assets (188,000) (205,000)
Increase (Decrease) in Accounts payable
and accrued expenses 211,000 581,000
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Net cash provided by (used in) operating activities 36,000 273,000
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Cash flows (used in) investing activities:
Purchases of fixed assets (49,000) (42,000)
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Cash flows from financing activities:
Proceeds from (payments on) short term and long-term debt (163,000) (171,000)
Proceeds from issuance of common stock 1,000 0
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Net cash provided by (used in) financing activities (162,000) (171,000)
Net increase (decrease) in cash (176,000) 60,000
Cash at beginning of period 293,000 217,000
------------ ------------
Cash at end of period $ 117,000 $ 277,000
============ ============
Supplemental cash flows information:
Cash paid during the period for:
Interest $ 206,000 $ 127,000
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Income taxes $ 140,000 $ 71,000
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</TABLE>
See Notes to Consolidated Financial Statements.
Page 5
<PAGE> 8
WINSTON RESOURCES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995
1. In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of normal
recurring accruals and adjustments) necessary to present fairly the
financial position of the Company as of September 30, 1995, the results of
its operations for the nine months and three months ended September 30,
1995 and September 30, 1994 and changes in its cash flows for the nine
months ended September 30, 1995 and September 30, 1994. The accompanying
unaudited consolidated financial statements have been prepared in
accordance with the instructions for Form 10-QSB and do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. Operating results for the
nine and three months ended September 30, 1995 are not necessarily
indicative of operating results that may be expected for the year ending
December 31, 1995. The accompanying consolidated financial statements
should be read in conjunction with the Company's Annual Report to
shareholders and Annual Report in Form 10-KSB for the year ended December
31, 1994.
2. The deferred gain resulting from the sale of certain assets of the
Company's wholly-owned subsidiary, E.G. Todd Associates, Inc., to E.G.Todd
Physicians Search, Inc., consists of $1,173,000, offset by notes
receivable of $1,131,000 from purchaser resulting in a deferred credit of
$42,000.
3. Stock option activity is summarized as follows:
<TABLE>
<CAPTION>
Shares Option Price
(per share)
------- ---------------
<S> <C> <C>
Balance at
January 1, 1995 424,000 $ .3750-$2.20
Granted 99,350 $1.3750-$1.8125
Exercised ( 3.333) $ .4375-$.625
-------
Balance at
September 30, 1995 520,017
-------
</TABLE>
At September 30, 1995 47,350 options are available for grant.
Page 6
<PAGE> 9
Winston Resources, Inc., and Subsidiaries
Notes to Consolidated Financial Statements
Nine Months ended September 30, 1995
4. On April 24, 1995, the Company renewed its secured credit facility with a
finance company. The lending facility provides for short term advances to
a maximum of $2,500,000, which currently bear interest at a rate of 3-1/4%
above the finance company's reference rate (8.75% at September 30, 1995),
based on up to 80% of eligible accounts receivable. The credit facility is
collateralized by substantially all the assets of the Company.
On April 10, 1995, the finance company agreed to defer $500,000 of the
credit facility debt until April 16, 1997.
5. Income per share is computed using the weighted average number of common
shares outstanding. Common stock equivalents, assuming the exercise of
stock options, are included in the calculation of net income per share
when there is a dilutive effect.
Page 7
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Results of Operations for the Three Months ended September 30, 1995 compared to
the Three Months ended September 30, 1994.
Revenues
Revenues increased by approximately $1,314,000 or 21%. The increase in the
quarter ended September 30, 1995 is primarily due to the increase in temporary
help revenues as compared to the corresponding period in 1994.
Operating Expenses
Operating expenses increased approximately 23% in the quarter ended September
30, 1995 as compared to the corresponding period in 1994. The increase is mainly
due to increased compensation and compensation related costs associated with the
increase in revenues, as well as increased workers' compensation insurance
expense. Additional increases resulted from additions to the sales force and
administrative areas for the Long Island, New York office opened October 1994
and recently started nursing and legal divisions.
Net interest expense increased during 1995 due mainly to the maintenance of a
higher average loan balance as compared to 1994 partially offset by lower
interest rates and interest income.
Operating Results
Net income for the three month period ended September 30, 1995 was approximately
$108,000 or $.03 per common share as compared to net income of approximately
$185,000 or $.06 per common share in the prior year's third quarter. The
results reflect increased revenues being offset by the increase in operating and
interest expenses. The Company anticipates that future operating results will
benefit from increased revenues which should result from its investment in added
operating costs for our Long Island office, as well as our nursing and legal
divisions discussed above.
Page 8
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Nine Months ended September 30, 1995 compared to
the Nine Months ended September 30, 1994.
Revenues
Revenues increased by approximately $5,200,000 or 30%. The increase for the
nine months ended September 30, 1995 is primarily due to the increase in
temporary help revenues as compared to the corresponding period in 1994.
Operating Expenses
Operating expenses increased approximately 30% for the nine months ended
September 30, 1995 as compared to the corresponding period in 1994. The
increase is mainly due to increase Compensation and compensation related costs
associated with the increase in revenues, as well as increased workers'
compensation insurance expense. Additional increases resulted from additions to
the sales force and administrative areas for the Long Island, New York office
opened October 1994 and recently started nursing and legal divisions, as well as
increased workers' compensation insurance expense.
Net interest expense increased during 1995 due mainly to the maintenance of a
higher average loan balance as compared to 1994 partially offset by lower
interest rates and interest income.
Operating Results
Net income for the nine month period ended September 30, 1995 was approximately
$389,000 or $.12 per common share as compared to net income of approximately
$442,000 or $.14 per common share in the corresponding period for the prior
year. The results are primarily due to increased revenues being offset by the
increase in operating and interest expenses. The Company anticipates that
future operating results will benefit from increased revenues which should
result from its investment in added operating costs for our Long Island office,
as well as our nursing and legal divisions discussed above.
Liquidity and Capital Resources
Working capital at September 30, 1995 was approximately $2,535,000 as compared
to $2,201,000 at December 31, 1994. This increase can be attributed mostly to
revenue improvements and increased receivables. The Company has no material
commitments for capital expenditures during 1995. Management believes that the
Company's credit facility, working capital and internally generated funds are
sufficient to support current operations and any currently foreseeable increase
in activity.
Inflation
To date, the impact of inflation and changing prices on the Company's business
has been minimal. The Company charges its customers fixed percentages of the
salaries and wages of permanent and temporary employees, which causes its fee
income to increase proportionately as salary and wages increase.
Page 9
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PART II - OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security-Holders
None
Item 6 Exhibits and Reports on Form 8K:
(a) Exhibits:
10(a) Agreement between Winston Resources, Inc., and
Finova Capital Corporation dated April 24, 1995.
27 Financial Data Schedules for the nine months ended
September 30, 1995
(b) Reports:
None
No reports on Form 8K were filed by the Company during the quarter ended
September 30, 1995.
Page 10
<PAGE> 13
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 thereunto duly authorized.
WINSTON RESOURCES, INC.
Date November 10, 1995 By /s/ SEYMOUR KUGLER
-------------------- -----------------------------------
Seymour Kugler
Chairman of the Board
and President
Date November 10, 1995 By /s/ JESSE ULEZALKA
-------------------- -----------------------------------
Jesse Ulezalka
Chief Financial Officer
<PAGE> 14
Exhibit Index
10(a) Agreement between Winston Resources, Inc., and
Finova Capital Corporation dated April 24, 1995.
27 Financial Data Schedules for the nine months ended
September 30, 1995
<PAGE> 1
April 24, 1995
Winston Resources, Inc.
535 Fifth Avenue
New York, N.Y. 10017-3663
Gentlemen:
Notwithstanding anything to the contrary in the Security Agreements - Accounts
Receivable dated April 16, 1992 between FINOVA Capital Corporation formerly
Ambassador Factors Division Fleet Factors Corp. and Winston Resources, Inc.,
("Contract") we hereby agree to the following effective May 1, 1995:
1. The base interest rate as stated in paragraph 6 of the Security
Agreement - Accounts Receivable (AIR Agreement) shall be decreased to 3 1/4% per
annum over the Citibank, N.A. prime rate ("Prime"). In the event that your
average outstanding balance is over $1,500,000 for two consecutive months, the
base interest rate shall be decreased to 2 3/4% over prime. In the event the
average loan balance is less than $1,500,000 for two consecutive months than the
base interest rate shall be increased to 3 1/4%. These rates will remain in
effect as long as Winston Resources, Inc. continues to show earnings on a
quarterly basis. In the event that there is an operating loss the interest rate
will be increased to 4% per annum over the Prime rate effective the first month
following the quarterly loss. The working days allowed to permit bank clearance
and collections pursuant to paragraph 6 of the MR Agreement shall be reduced to
three (3) working days.
2. The Contract shall be extended until April 16, 1997.
3. The Line of Credit is increased up to $2,500,000 in accordance with
and pursuant to the terms of the Security Agreements.
All other terms and conditions contained in the Contract as originally written
shall remain in full force and effect.
This amendment supersedes and replaces all prior amendments except for paragraph
2 of the Amendment letter dated 5/13/94 and the Amendment letter dated 12/14/93
to the "A/R Agreement" which shall continue to be in effect.
Please sign a copy of this letter to indicate your agreement to the above and
retain a copy for your records.
PC:af Very truly yours,
/s/ PHILIP COTUMACCIO
FINOVA Capital Corporation
AGREED AND ACCEPTED: Philip Cotumaccio
Vice President
By: /s/ Sy Kaye
--------------------
President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 117,000
<SECURITIES> 0
<RECEIVABLES> 5,772,000
<ALLOWANCES> 282,000
<INVENTORY> 0
<CURRENT-ASSETS> 5,725,000
<PP&E> 2,284,000
<DEPRECIATION> 1,995,000
<TOTAL-ASSETS> 7,590,000
<CURRENT-LIABILITIES> 3,187,000
<BONDS> 0
<COMMON> 29,000
0
0
<OTHER-SE> 3,417,000
<TOTAL-LIABILITY-AND-EQUITY> 7,590,000
<SALES> 22,779,000
<TOTAL-REVENUES> 22,779,000
<CGS> 0
<TOTAL-COSTS> 16,868,000
<OTHER-EXPENSES> 5,184,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 153,000
<INCOME-PRETAX> 574,000
<INCOME-TAX> 185,000
<INCOME-CONTINUING> 389,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 389,000
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
