U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Under Section 13 or 15(d) Of The Securities Exchange Act
of 1934: For the quarterly period ended March 31, 1996
[ ] Transaction 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 (I.R.S. Employer
of incorporation or organization) Identification No.)
535 Fifth Avenue, New York, New York 10017-3662
- -----------------------------------------------
(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: (l) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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.
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: 2,923,833 shares of Common Stock, par
value $.01 per share, outstanding on May 13, 1996.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
Exhibit Index appears on page 11. Page 1 of 16.
<PAGE>
WINSTON RESOURCES, INC., AND SUBSIDIARIES
Quarterly Report on Form 10-Q for the
Quarter Ended March 31, 1996
Table of Contents
-----------------
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The following financial statements of the Registrant
are included:
Consolidated Balance Sheet - March 31, 1996 (Unaudited) 1-2
Consolidated Statement of Operations - For the Three Months
Ended March 31, 1996 and 1995 (unaudited) 3
Consolidated Statement of Cash Flows - For the Three Months
Ended March 31, 1996 and 1995 (unaudited) 4-5
Notes to The Financial Statements For the Three
Months Ended March 31, 1996 and 1995 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 8
PART II - OTHER INFORMATION 9
Item 6. Exhibits and Reports on Form 8-K 9
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
-----------------------
Consolidated Balance Sheet
As at March 31, 1996
(unaudited)
-----------------------
Assets (Note 4)
Current Assets:
Cash $ 340,000
Accounts and notes receivable, trade, net 6,130,000
Prepaid expenses and other current assets 220,000
Marketable securities 210,000
-------
Total current assets 6,900,000
Fixed Assets, net 336,000
Other Assets:
Security deposits and other assets 317,000
-------
Total $7,553,000
==========
Consolidated Balance Sheet
Continued On Next Page.
SEE ACCOMPANYING NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.
1
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
-----------------------
Consolidated Balance Sheet
As at March 31, 1996
(unaudited)
-----------------------
Current liabilities:
Accounts payable and accrued expenses $2,794,000
Credit facility debt (Note 4) 871,000
Capital lease obligation 66,000
------
Total current liabilities 3,731,000
Deferred Rent 372,000
Deferred Credit - net (Note 2) 40,000
Long-term portion of credit facility debt 500,000
Long-term portion of credit lease obligation 90,000
------
Total liabilities $4,733,000
Contingencies (Note 5)
Stockholders' equity (Note 3):
Preferred stock - $100 per value; authorized
2,000,000 shares, no shares issued
Common stock, $.01 par value; authorized
10,000,000 shares, issued and outstanding
2,923,833 shares 29,000
Additional paid-in capital 4,397,000
Accumulated deficit (1,634,000)
Unrealized gain on securities held available-
for-sale, net 28,000
------
Total stockholders' equity $2,820,000
-----------
Total $7,553,000
===========
SEE ACCOMPANYING NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.
2
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
-----------------------
Consolidated Statement of Operations
For the Three Months ended March 31, 1996 and 1995
(Unaudited)
1996 1995
---- ----
Revenue:
Placement fees and
related income $9,133,000 $7,214,000
---------- ----------
Operating expenses:
Compensation and other benefits 6,965,000 5,267,000
Selling, general and administrative 1,859,000 1,630,000
Amortization of intangibles 38,000
--------- ------
8,824,000 6,935,000
--------- ---------
Income from operations 309,000 279,000
------- -------
Interest expense, net 58,000 57,000
------ ------
Income before provision for income taxes 251,000 222,000
Provision for income taxes 85,000 96,000
------ ------
Net Income $ 166,000 $ 126,000
========== ==========
Primary and fully
diluted net income
per common share $0.05 $0.04
===== =====
Weighted average number of common shares
outstanding
Primary 3,112,954 3,150,432
Fully diluted 3,129,030 3,158,739
UNAUDITED - SEE ACCOMPANYING NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
3
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
-----------------------
Consolidated Statement of Cash Flows
For the Three Months ended March 31, 1996 and 1995
(Unaudited)
-----------------------
1996 1995
------ ------
Cash Flows from operating activities:
Net income $166,000 $126,000
Charges and credits to net income not
affecting cash:
Depreciation and amortization 30,000 69,000
Provision for doubtful receivables (1,000) 25,000
Deferred rent (7,000) (7,000)
Deferred (income) loss recognized (21,000)
Changes in assets and liabilities:
(Increase) decrease in Accounts
receivable (314,000) (435,000)
(Increase) decrease in Prepaid
expenses and other current
assets 84,000 (39,000)
(Increase) decrease in Security
deposits and other assets 2,000 (91,000)
Increase in Accounts payable
and accrued expenses 98,000 239,000
--------- ---------
Net cash provided by (used in) operat-
ing activities 37,000 (113,000)
--------- ---------
Cash flows (used in) investing
activities:
Purchases of fixed assets (13,000) (22,000)
--------- --------
Statement of Cash Flows
Continued On Next Page.
UNAUDITED - SEE ACCOMPANYING NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
4
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
-----------------------
Consolidated Statement of Cash Flows
For the Three Months ended March 31, 1996 and 1995
(Unaudited)
-----------------------
1996 1995
---- ----
Cash flows from financing
activities:
Proceeds from (payments on)
short term and long-term
debt 189,000 (57,000)
Proceeds from exercise of
options 1,000
Repayment of capital leases (18,000)
-------- --------
Net cash provided by (used in)
financing activities 172,000 (57,000)
Net increase (decrease) in
cash 196,000 (192,000)
Cash at beginning of period 144,000 293,000
-------- -------
Cash at end of period $340,000 $101,000
======== ========
Supplemental cash flows
information:
Cash paid during the period
for:
Interest $ 69,000 $ 60,000
-------- --------
Income taxes $ 32,000 $103,000
------ -------
UNAUDITED - SEE ACCOMPANYING NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.
5
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
-----------------------
Notes To Consolidated Financial Statements
For the Three Months ended March 31, 1996 and 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 March 31, 1996, the results of its
operations for the three months ended March 31, 1996 and March 31, 1995 and
changes in its cash flows for the three months ended March 31, 1996 and
March 31, 1995. 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 three months ended March 31, 1996 are not
necessarily indicative of operating results that may be expected for the
year ending December 31, 1996. The accompanying consolidated financial
statements should be read in conjunction with the Company's Annual Report
to Shareholder and Annual Report in Form 10-KSB for the year ended
December 31, 1995.
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 $1,143,000, offset by notes receivable
of $1,103,000 from purchaser resulting in a deferred credit of $40,000.
3. Stock option activity is summarized as follows:
Option Price
Shares (per share)
------ ------------
Balance at
January 1, 1996 514,317 $ .3750-$2.20
Granted 0 0
Exercised (3,000) $ .3750
-------
Balance at
March 31, 1996 511,317
-------
At March 31, 1996, 51,350 options are available for grant.
6
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
-----------------------
Notes To Consolidated Financial Statements
For the Three Months ended March 31, 1996 and 1995
-----------------------
4. On March 18, 1996, the Company extended 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 2-3/4%
above the finance company's reference rate (8.75% at March 31, 1996), based
on up to 80% of eligible accounts receivables. The credit facility is
collateralized by substantially all the assets of the Company.
On March 18, 1996, the finance company agreed to defer $500,000 of the
credit facility debt until April 16, 1998.
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.
7
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
-----------------------
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations for the Three Months ended March 31, 1996 compared to
- ----------------------------------------------------------------------------
Three Months ended March 31, 1995.
- ---------------------------------
Revenues
- --------
Revenues increased by approximately $1,919,000 or 27%. The increase in the
quarter ended March 31, 1996 is primarily due to the increase in temporary
staffing revenues as compared to the corresponding period in 1995.
Operating Expenses
- ------------------
Operating expenses increased approximately 27% in the quarter ended March 31,
1996 as compared to the corresponding period in 1995. 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 nursing and legal divisions started in 1995.
Operating Results
- -----------------
Net income for the three month period ended March 31, 1996 was approximately
$166,000 or $.05 per common share as compared to net income of approximately
$126,000 or $.04 per common share in the prior year's first quarter. The
improvement in operating results is primarily due to increased temporary
staffing revenues and a decrease in selling, general and administrative expenses
as a percentage of revenue. The Company anticipates that future operating
results will benefit from increased revenues which should result from its
investment in its operating expenses for our nursing and legal divisions
discussed above.
Liquidity and Capital Resources
- -------------------------------
Working capital at March 31, 1996 was approximately $3,170,000 as compared to
$3,026,00 at December 31, 1995. This increase can be attributed mostly to
revenue improvements resulting in an increase in receivables. The Company has
no material commitments for capital expenditures during 1996. 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.
8
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
-----------------------
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10(a) Agreement between Winston Resources, Inc., and Finova Capital
Corporation dated March 18, 1996.
27 Financial Data Schedules for the three months ended March 31, 1996.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended March 31,
1996.
9
<PAGE>
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.
By:/s/ Seymour Kugler
---------------------------------
Seymour Kugler
Chairman of the Board
and President
By:/s/ Jesse Ulezalka
---------------------------------
Jesse Ulezalka
Chief Financial Officer
Dated: May 8, 1996
10
<PAGE>
Exhibit Index
-------------
Exhibit 10(a) Agreement between Winston Resources, Inc. and
Finova Capital Corporation dated March 18,
1996 . . . . . . . . . . . . . . . . . . . 12
Exhibit 27 Financial Data Schedules for the three months
ended March 31, 1996 . . . . . . . . . . . 14
11
Exhibit 10(a)
-------------
[On Winston Resources, Inc. letterhead]
March 18, 1996
Mr. Phil Cotumaccio
Vice President
Finova Capital Corp.
111 West 40th Street
New York, NY 10018
Re: Winston Resources, Inc. with Finova Capital Corp.
Dear Mr. Cotumaccio:
Reference is made to the Security Agreement (Accounts Receivable) by the between
Winston and Finova Capital Corp., dated April 16, 1992, together with all
documents related thereto and security interests granted thereunder (the
"Financing"). Winston hereby confirms that as of December 31, 1995 it is
obligated to Finova Capital Corp., under the Financing in the amount of
$1,317,811.88 (the "Obligations").
Winston has requested and Finova has agreed to extend the contract until April
16, 1998.
Winston has requested and Finova has agreed that $500,000 of the Obligations
shall be and hereby is reclassified as a long term loan which shall become due
on April 16, 1998, or in Finova's sole and absolute discretion, upon Finova's
demand that Winston is in default in any of the agreements provided for in the
Financing (the "Long Term Loan"). The Long Term Loan shall be subject to all of
the terms and conditions and security interest provided for in the Financing.
In addition, the Long Term Loan shall accrue interest at the same rate of
interest provided for in the Financing which shall be payable monthly. Finova
is hereby authorized to charge Winston's account for all interest due or
becoming due under the Long Term Loan.
In the event of any default under the Financing or under the Loan Term Loan, all
obligations of Winston owing to Finova shall immediately become due and payable
without notice and interest both under the Financing and Long Term Loan shall
accrue thereafter at the default rate provided for in the Financing.
It is specifically understood and agreed that the Long Term Loan shall be
subject to all terms and conditions of the Financing.
12
<PAGE>
Mr. Phil Cotumaccio
March 18, 1996
Page 2.
All other terms and conditions in the Contract as originally written shall
remain in full force and effect.
The Amendment letter of 11/27/95 remains in effect except for paragraph 2.
Very truly yours,
By:/s/ Jesse Ulezalka
-----------------------
Jesse Ulezalka
Chief Financial Officer
Agreed and Accepted:
FINOVA CAPITAL CORP.
By:/s/ Philip Cotumaccio
-----------------------
Philip Cotumaccio
Vice President
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 29,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 9,133,000
<TOTAL-REVENUES> 9,133,000
<CGS> 0
<TOTAL-COSTS> 6,965,000
<OTHER-EXPENSES> 1,859,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58,000
<INCOME-PRETAX> 251,000
<INCOME-TAX> 85,000
<INCOME-CONTINUING> 166,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 166,000
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
