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 September 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: 3,163,711 shares of Common Stock, par
value $.01 per share, outstanding on November 8, 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
September 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 - September 30, 1996 (Unaudited) 3-4
Consolidated Statement of Operations - For the Three and Nine
Months Ended September 30, 1996 and 1995 (unaudited) 5-6
Consolidated Statement of Cash Flows - For the Nine Months Ended
September 30, 1996 and 1995 (unaudited) 7-8
Notes to The Financial Statements For the Nine Months Ended
September 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
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 13
Item 6. Exhibits and Reports on Form 8-K 13
2
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
--------------------------
PART I
FINANCIAL INFORMATION
Consolidated Balance Sheet
As at September 30, 1996
(unaudited)
--------------------------
Assets
Current Assets:
Cash $ 153,000
Accounts and notes receivable, trade, net 6,826,000
Prepaid expenses and other current assets 278,000
Marketable securities 253,000
----------
Total current assets 7,510,000
Fixed Assets, net 357,000
Other Assets:
Security deposits and other assets 274,000
----------
Total $8,141,000
==========
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 September 30, 1996
(unaudited)
--------------------------
Current liabilities:
Accounts payable and accrued expenses $3,685,000
Credit facility debt 26,000
Capital lease obligation 66,000
----------
Total current liabilities 3,777,000
Deferred Rent 357,000
Deferred Credit - net (Note 2) 68,000
Long-term portion of credit facility debt 500,000
Long-term portion of credit lease obligation 53,000
----------
Total liabilities $4,755,000
==========
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 3,147,371 shares 32,000
Additional paid-in capital 4,404,000
Accumulated deficit (1,120,000)
Unrealized gain on securities held
available-for-sale, net 70,000
----------
Total stockholders' equity $3,386,000
----------
Total $8,141,000
==========
SEE ACCOMPANYING NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.
4
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
--------------------------
Consolidated Statement of Operations
For the Three Months ended September 30, 1996 and 1995
(Unaudited)
--------------------------
1996 1995
---- ----
Revenue:
Placement fees and related income $10,669,000 $7,656,000
----------- ----------
Operating expenses:
Compensation and other benefits 7,823,000 5,722,000
Selling, general and administrative 2,307,000 1,704,000
Amortization of intangibles - 38,000
----------- ----------
10,130,000 7,464,000
----------- ----------
Income from operations 539,000 192,000
----------- ----------
Interest expense, net 17,000 38,000
----------- ----------
Income before provision for income
taxes 522,000 154,000
Provision for income taxes 209,000 46,000
----------- ----------
Net Income $ 313,000 $ 108,000
=========== ==========
Primary and fully
diluted net income
per common share (Note 4) $0.09 $0.03
===== =====
Weighted average number of common
shares outstanding
Primary 3,397,737 3,180,373
Fully diluted 3,409,309 3,180,373
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 Nine Months ended September 30, 1996 and 1995
(Unaudited)
--------------------------
1996 1995
---- ----
Revenue:
Placement fees and related income $29,091,000 $22,779,000
----------- -----------
Operating expenses:
Compensation and other benefits 21,711,000 16,868,000
Selling, general and administrative 6,154,000 5,070,000
Amortization of intangibles - 114,000
----------- -----------
27,865,000 22,052,000
----------- -----------
Income from operations 1,226,000 727,000
----------- -----------
Interest expense, net 119,000 153,000
----------- -----------
Income before provision for income taxes 1,107,000 574,000
Provision for income taxes 427,000 185,000
----------- -----------
Net Income $ 680,000 $ 389,000
=========== ===========
Primary and fully
diluted net income
per common share (Note 4) $0.20 $0.12
===== =====
Weighted average number of common shares
outstanding
Primary 3,290,434 3,171,858
Fully diluted 3,363,104 3,171,858
UNAUDITED - SEE ACCOMPANYING NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
6
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
--------------------------
Consolidated Statement of Cash Flows
For the Nine Months ended September 30, 1996 and 1995
(Unaudited)
--------------------------
1996 1995
------ ------
Cash Flows from operating activities:
Net income $ 680,000 $ 389,000
Charges and credits to net income not
affecting cash:
Depreciation and amortization 94,000 206,000
Provision for doubtful receivables 32,000 25,000
Deferred rent (22,000) (19,000)
Deferred (income) loss recognized 7,000 47,000
Changes in assets and liabilities:
(Increase) in Accounts receivable (1,042,000) (640,000)
Decrease in Prepaid expenses and
other current assets 26,000 5,000
(Increase) Decrease in Security
deposits and other assets 45,000 (188,000)
Increase in Accounts payable and
accrued expenses 954,000 210,000
----------- ---------
Net cash provided by (used in) operating
activities 774,000 35,000
----------- ---------
Cash flows (used in) investing activities:
Purchases of fixed assets (64,000) (49,000)
----------- ---------
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 Nine Months ended September 30, 1996 and 1995
(Unaudited)
--------------------------
1996 1995
---- ----
Cash flows from financing activities:
Proceeds from (payments on)
short term and long-term
debt (656,000) (163,000)
Proceeds from exercise of
options 10,000 1,000
Repayment of capital leases (55,000) --
--------- ---------
Net cash provided by (used in)
financing activities (701,000) (162,000)
Net increase (decrease) in
cash 9,000 (176,000)
Cash at beginning of period 144,000 293,000
--------- ---------
Cash at end of period $ 153,000 $ 117,000
========= =========
Supplemental cash flows
information:
Cash paid during the period for:
Interest
$ 154,000 $ 206,000
--------- ---------
Income taxes 92,000 140,000
--------- ---------
UNAUDITED - SEE ACCOMPANYING NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.
8
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
--------------------------
Notes To Consolidated Financial Statements
For the Nine Months ended September 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 September 30, 1996, the results of
its operations for the nine and three months ended September 30, 1996 and
September 30, 1995 and changes in its cash flows for the nine months ended
September 30, 1996 and September 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 nine and three months ended
September 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 on 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 $1,075,000 from purchaser resulting in a deferred credit of $68,000.
3. Stock option activity is summarized as follows:
Option Price
Shares (per share)
------ ----------------
Balance outstanding at
January 1, 1996 515,317 $ .3750-$ 2.2000
Granted 160,500 $1.1250-$ 1.2375
Cancelled or expired (500) $ .4375
Exercised (243,327) $ .3750-$ 2.0000
-------
Balance outstanding at
September 30, 1996 431,990
=======
At September 30, 1996, 290,850 options are available for grant.
9
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
--------------------------
Notes To Consolidated Financial Statements
For the Nine Months ended September 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 September 30, 1996 compared to
the Three Months ended September 30, 1995.
Revenues
Revenues increased by approximately $3,013,000 or 39%. The increase in the
quarter ended September 30, 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 36% in the quarter ended September
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, advertising, professional fees and other costs related to maintaining the
Company's branch operations.
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 September 30, 1996 was approximately
$313,000 or $.09 per common share as compared to net income of approximately
$108,000 or $.03 per common share in the prior year's quarter. The results
reflect increased revenues partially being offset by the increase in operating
expenses.
Results of Operations for the Nine Months ended September 30, 1996 compared to
Nine Months ended September 30, 1995.
Revenues
Revenues increased by approximately $6,312,000 or 28%. The increase for the nine
months ended September 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 26% for the nine months ended
September 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, advertising, professional fees and other costs
related to maintaining the Company's branch operations.
Net interest 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 nine month period ended September 30, 1996 was approximately
$680,000 or $.20 per common share as compared to net income of approximately
$389,000 or $.12 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.
Liquidity and Capital Resources
Working capital at September 30, 1996 was approximately $3,733,000 as compared
to $3,028,000 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
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27. Financial Data schedules for the nine months ended
September 30, 1996
(b) Reports:
None
13
<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: November 8, 1996
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 153,000
<SECURITIES> 253,600
<RECEIVABLES> 6,940,000
<ALLOWANCES> 114,000
<INVENTORY> 0
<CURRENT-ASSETS> 7,510,000
<PP&E> 1,176,000
<DEPRECIATION> 819,000
<TOTAL-ASSETS> 8,141,000
<CURRENT-LIABILITIES> 3,777,000
<BONDS> 0
0
0
<COMMON> 32,000
<OTHER-SE> 3,354,000
<TOTAL-LIABILITY-AND-EQUITY> 8,141,000
<SALES> 29,091,000
<TOTAL-REVENUES> 29,091,000
<CGS> 0
<TOTAL-COSTS> 21,711,000
<OTHER-EXPENSES> 6,154,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 119,000
<INCOME-PRETAX> 1,107,000
<INCOME-TAX> 427,000
<INCOME-CONTINUING> 680,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 680,000
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
