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 June 30, 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: 3,147,205 shares of
Common Stock, par value $.01 per share, outstanding on August 9, 1996.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
Quarterly Report on Form 10-Q for the
Quarter Ended June 30, 1996.
TABLE OF CONTENTS
-----------------
Page
----
PART I - FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
The following financial statements of the Registrant
are included:
Consolidated Balance Sheet - June 30, 1996 (Unaudited) 3-4
Consolidated Statement of Operations - For the Three and
Six Months Ended June 30, 1996 and 1995 (unaudited) 5-6
Consolidated Statement of Cash Flows - For the Six Months
Ended June 30, 1996 and 1995 (unaudited) 7-8
Notes to The Financial Statements For the Six
Months Ended June 30, 1996 and 1995 9-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 11-12
PART II - OTHER INFORMATION 13-14
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security-Holders 13
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
2
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
-----------------------
PART I
------
FINANCIAL INFORMATION
---------------------
CONSOLIDATED BALANCE SHEET
As at June 30, 1996
(unaudited)
-----------------------
ASSETS (Note 4)
Current Assets:
Cash $ 110,000
Accounts and notes receivable, trade, net 6,329,000
Prepaid expenses and other current assets 164,000
Marketable securities 210,000
----------
Total current assets 6,813,000
Fixed Assets, net 334,000
Other Assets:
Security deposits and other assets 325,000
----------
Total $7,472,000
==========
Consolidated Balance Sheet
Continued On Next Page.
SEE ACCOMPANYING NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.
3
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
-----------------------
CONSOLIDATED BALANCE SHEET
As at June 30, 1996
(unaudited)
-----------------------
Current liabilities:
Accounts payable and accrued expenses $3,065,000
Credit facility debt (Note 4) 318,000
Capital lease obligation 66,000
----------
Total current liabilities 3,449,000
Deferred Rent 365,000
Deferred Credit - net (Note 2) 52,000
Long-term portion of credit facility debt 500,000
Long-term portion of credit lease obligation 75,000
----------
Total liabilities $4,441,000
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
3,147,205 shares 31,000
Additional paid-in capital 4,404,000
Accumulated deficit (1,432,000)
Unrealized gain on securities held available-
for-sale, net 28,000
----------
Total stockholders' equity $3,031,000
----------
Total $7,472,000
==========
SEE ACCOMPANYING NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.
4
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
-----------------------
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months ended June 30, 1996 and 1995
(Unaudited)
-----------------------
1996 1995
---- ----
Revenue:
Placement fees and related income $9,289,000 $7,909,000
---------- ----------
Operating expenses:
Compensation and other benefits 6,923,000 5,879,000
Selling, general and administrative 1,988,000 1,737,000
Amortization of intangibles - 38,000
---------- ----------
8,911,000 7,654,000
---------- ----------
Income from operations 378,000 255,000
---------- ----------
Interest expense, net 44,000 58,000
---------- ----------
Income before provision for income taxes 334,000 197,000
Provision for income taxes 133,000 42,000
---------- ----------
Net Income $ 201,000 $ 155,000
========== ==========
Primary and fully
diluted net income
per common share $0.06 $0.05
===== =====
Weighted average number of common shares
outstanding
Primary 3,262,421 3,188,399
Fully diluted 3,309,675 3,188,399
Consolidated Statement of Operations
Continued On Next Page.
UNAUDITED - SEE ACCOMPANYING NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
5
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
-----------------------
CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months ended June 30, 1996 and 1995
(Unaudited)
-----------------------
1996 1995
---- ----
Revenue:
Placement fees and related income $18,422,000 $15,123,000
----------- -----------
Operating expenses:
Compensation and other benefits 13,888,000 11,146,000
Selling, general and administrative 3,847,000 3,366,000
Amortization of intangibles - 76,000
---------- -----------
17,735,000 14,588,000
----------- -----------
Income from operations 687,000 535,000
----------- -----------
Interest expense, net 102,000 115,000
----------- -----------
Income before provision for income taxes 585,000 420,000
Provision for income taxes 218,000 139,000
----------- -----------
Net Income $ 367,000 $ 218,000
=========== ===========
Primary and fully
diluted net income
per common share $0.11 $0.09
===== =====
Weighted average number of common shares
outstanding
Primary 3,176,901 3,176,003
Fully diluted 3,291,450 3,183,740
UNAUDITED - SEE ACCOMPANYING NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
6
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
-----------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months ended June 30, 1996 and 1995
(Unaudited)
-----------------------
1996 1995
------ ------
Cash Flows from operating activities:
Net income $367,000 $281,000
Charges and credits to net income not
affecting cash:
Depreciation and amortization 60,000 138,000
Provision for doubtful receivables (3,000) 25,000
Deferred rent (14,000) (13,000)
Deferred (income) loss recognized (9,000)
Changes in assets and liabilities:
(Increase) in Accounts receivable (510,000) (365,000)
(Increase) Decrease in Prepaid
expenses and other current
assets 140,000 (73,000)
(Increase) in Security
deposits and other assets (6,000) (139,000)
Increase (Decrease) in Accounts
payable and accrued expenses 369,000 (231,000)
------- ---------
Net cash provided by (used in) operat-
ing activities 394,000 (377,000)
------- ---------
Cash flows (used in) investing
activities:
Purchases of fixed assets (41,000) (28,000)
-------- --------
Statement of Cash Flows
Continued On Next Page.
UNAUDITED - SEE ACCOMPANYING NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
7
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
-----------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months ended June 30, 1996 and 1995
(Unaudited)
-----------------------
1996 1995
---- ----
Cash flows from financing
activities:
Proceeds from (payments on)
short term and long-term
debt (364,000) (230,000)
Proceeds from exercise of
options 10,000 -
Repayment of capital leases (33,000) -
-------- ---------
Net cash provided by (used in)
financing activities (387,000) (230,000)
Net increase (decrease) in
cash (34,000) (175,000)
Cash at beginning of period 144,000 293,000
-------- --------
Cash at end of period $110,000 $118,000
======== ========
Supplemental cash flows
information:
Cash paid during the period
for:
Interest $ 49,000 $ 141,000
-------- ---------
Income taxes 18,000 140,000
-------- ---------
UNAUDITED - SEE ACCOMPANYING NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.
8
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
-----------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months ended June 30, 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 June 30, 1996, the results
of its operations for the six and three months ended June 30, 1996 and
June 30, 1995 and changes in its cash flows for the six months ended
June 30, 1996 and June 30, 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 six and three months ended June 30, 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 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 $1,091,000 from purchaser resulting in a deferred credit
of $52,000.
3. Stock option activity is summarized as follows:
Option Price
Shares (per share)
------ ------------
Balance at
January 1, 1996 15,317 $ .3750-$ 2.2000
Granted 160,500 $1.1250-$ 1.2375
Exercised 243,121 $ .3750-$42.0000
-------
Balance at
June 30, 1996 432,656
=======
At June 30, 1996, 290,850 options are available for grant.
9
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
-----------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months ended June 30, 1996 and 1995
-----------------------
4. 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.
10
<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 June 30, 1996 compared to
- --------------------------------------------------------------------------
the Three Months ended June 30, 1995.
- -------------------------------------
Revenues
- --------
Revenues increased by approximately $1,380,000 or 17%. The increase in the
quarter ended June 30, 1996 is primarily due to the increase in temporary
help revenues as compared to the corresponding period in 1995.
Operating Expenses
- ------------------
Operating expenses increased approximately 17% in the quarter ended June
30, 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. Additional increases resulted
from additions to the sales force.
Net interest expense decreased during 1996 due mainly to the maintenance of
a lower average loan balance as compared to 1995.
Operating Results
- -----------------
Net income for the three month period ended June 30, 1996 was approximately
$201,000 or $.06 per common share as compared to net income of
approximately $155,000 or $.05 per common share in the prior year's
quarter. The results reflect increased revenues partially being offset by
the increase in operating expenses. The Company anticipates that future
operating results will benefit from increased revenues which should result
from its continued investment in added operating costs.
Results of Operations for the Six Months ended June 30, 1996 compared to
- ------------------------------------------------------------------------
Six Months ended June 30, 1995.
- -------------------------------
Revenues
- --------
Revenues increased by approximately $3,300,000 or 22%. The increase for
the six months ended June 30, 1996 is primarily due to the increase in
temporary staffing revenues as compared to the corresponding period in
1995.
11
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
-----------------------
Operating Expenses
- ------------------
Operating expenses increased approximately 22% for the six months ended
June 30, 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. Additional increases
resulted from additions to the sales force.
Net increase expense decreased during 1995 due mainly to the maintenance of
a lower average loan balance as compared to 1995.
Operating Results
- -----------------
Net income for the six month period ended June 30, 1996 was approximately
$367,000 or $.11 per common share as compared to net income of
approximately $281,000 or $.09 per common share in the corresponding period
for the prior year. The results are primarily due to increased revenues
being partially offset by the increase in operating expenses. The Company
anticipates that future operating results will benefit from increased
revenues which should result from its investment in added operating costs.
Liquidity and Capital Resources
- -------------------------------
Working capital at June 30, 1996 was approximately $3,364,000 as compared
to $3,026,00 at December 31, 1995. This increase can be attributed mostly
to revenue improvements and increased 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.
12
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
-----------------------
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
The Company's Annual Meeting of Stockholders was held on May 30, 1996
(the "Meeting"). At the Meeting, the Company's stockholders voted upon and
approved the election of three directors, the adoption of the Company's
1996 Stock Plan, and the ratification of Ernst & Young, LLP as the
independent auditors of the Company for the fiscal year ending December 31,
1996.
The holders of the Company's Common Stock voted on all matters
submitted for a vote at the Meeting. The number of votes cast for, against
or withheld, as well as the number of abstentions, as to each such matter
is set forth below:
Common Stock Total
-----------------------
Election of Directors
- ---------------------
For Withheld
--------- --------
Seymour Kugler 2,590,046 136,197
Alan E. Wolf 2,590,046 136,197
Gregg S. Kugler 2,588,646 137,597
13
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
----------------------------------------
----------------------
Common Stock Total
-------------------------
For Against Abstain
--- ------- -------
Approval of the Company's
1996 Stock Plan 1,604,972 149,597 3,700
Ratification of
Appointment of Auditors 2,706,646 3,700 15,897
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
--------
27. Financial Data schedules for the six months ended
June 30, 1996
(b) Reports:
-------
A report on Form 8-K was filed by the Company on May 7, 1996 reporting
replacement of Richard A. Eisner & Company, LLP as its independent
accountants and simultaneously engaging Ernst & Young, LLP as its new
independent accountants for the current fiscal year.
14
<PAGE>
SIGNATURES
----------
Pursuant to the requirments 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:
--------------------------------
Seymour Kugler
Chairman of the Board
and President
By:
--------------------------------
Jesse Ulezalka
Chief Financial Officer
Dated: August 9, 1996
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
- ----------
WINSTON RESOURCES, INC. AND SUBSIDIARIES
----------------------------------------
FINANCIAL DATA SCHEDULES
FOR THE SIX MONTHS ENDED JUNE 30, 1996
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 110,000
<SECURITIES> 210,000
<RECEIVABLES> 6,408,000
<ALLOWANCES> 79,000
<INVENTORY> 0
<CURRENT-ASSETS> 6,813,000
<PP&E> 1,120,000
<DEPRECIATION> 786,000
<TOTAL-ASSETS> 7,472,000
<CURRENT-LIABILITIES> 3,525,000
<BONDS> 0
0
0
<COMMON> 31,000
<OTHER-SE> 2,924,000
<TOTAL-LIABILITY-AND-EQUITY> 7,472,000
<SALES> 18,422,000
<TOTAL-REVENUES> 18,422,000
<CGS> 0
<TOTAL-COSTS> 13,888,000
<OTHER-EXPENSES> 3,847,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 102,000
<INCOME-PRETAX> 585,000
<INCOME-TAX> 218,000
<INCOME-CONTINUING> 367,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 367,000
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
