U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required]
For the transition period to
------------------------- -------------------------
Commission File No. 1-9629
WINSTON RESOURCES, INC.
-----------------------------------------------------
(Name of small business issuer in its charter)
Delaware 13-3134278
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
535 Fifth Avenue, New York, New York 10017
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (212) 557-5000
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange
- -------------------
on which Registered
-----------------------
Common Stock, $.01 par value
American Stock Exchange
Securities registered under Section 12(g) of the Exchange Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 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
----- -----
Exhibit Index Starts on Page 28
--
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The registrant's revenues for the fiscal year ended December 31, 1995 were
$30,989,000.
On March 22, 1996, (i) the aggregate market value of Common Stock held by
non-affiliates of the registrant was approximately $1,865,000 and (ii) there
were 2,920,833 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Definitive Proxy Statement of the registrant to be filed with the
Commission on or before April 30, 1996.
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<PAGE>
PART I
Item 1. Business
--------
Winston Resources, Inc., a Delaware corporation (the "Company"), is
the successor to a personnel recruitment and placement service business founded
in 1967. The Company and its subsidiaries (collectively, the "Company" or the
"Winston Companies") together provide a wide range of personnel supply services
to businesses, institutions and governmental agencies, through their own offices
and through offices operated by independent franchisees under licenses from the
Company.
Through its own offices, the Company recruits and places employees in
entry-to-high-level permanent salaried positions in the New York City
metropolitan area (consisting of New York City, Nassau, Suffolk and Westchester
Counties, New York and parts of northern New Jersey and southern Connecticut)
and in the Boca Raton-Fort Lauderdale corridor of Florida. Such services are
provided on a contingent fee basis under which the Company collects a fee only
if it successfully places a job candidate with a client. Through its Fisher
Todd Associates division, the Company also provides specialized services for
business and industry clients across the United States recruiting upper level
executives on a retainer fee basis and on a contingency fee basis.
Offices owned by the Company also supply temporary help with
professional, secretarial, clerical, medical, light industrial and data and word
processing skills to business clients in the New York City, Long Island and New
Jersey areas, as well as in the Palm Beach-Fort Lauderdale corridor of Florida.
Since 1989, the Company has supplied temporary help with accounting skills in
the New York Metropolitan area. Temporary employees perform services at the
client's premises under the client's supervision and direction. For each
temporary employee, the client is charged an hourly rate that includes the
employee's direct labor rate, associated labor costs (such as payroll taxes and
insurance) and a mark-up to cover the Company's overhead and profit.
In addition to services furnished through its own offices, the Company
licenses independent franchisees to provide personnel services under the trade
names and service marks owned by the Company. Franchisees of the Company
provide employment agency and executive search services under the name "Roth
Young," permanent personnel recruitment and placement services under the names
"Division 10," "Alpha" and "Winston Personnel" and temporary office support
personnel under the names "Division 10 Temps" and "Alpha Temps" in a total of
seventeen cities and towns across the United States.
The Company does not have any client for permanent recruitment and
placement or temporary help services which accounts for more than ten percent of
its net revenues.
Permanent Recruitment and Placement Services
--------------------------------------------
The Winston Companies provide recruitment and placement services for
entry-level to high-level professional and management positions that pay annual
salaries ranging generally form $17,500 to $200,000.
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The Company employs 32 placement counselors and executive recruiters,
each of whom specializes in recruiting and placing job candidates in a
particular industry or profession. Among the principal industries for which the
Company provides permanent placement services are the apparel, textile and
health care industries. The Company primarily recruits and places personnel
with skills in accounting, finance and office support services and recruits and
places professionals with skills in banking, insurance, publishing, real estate,
securities, human resources, marketing and market research, management services,
systems and data processing, corporate facilities and architecture, as well as
lawyers and paralegals.
The Company creates and maintains files of qualified job candidates
based on interviewing and screening procedures. Upon receiving a job order from
a client, the Company attempts to match the specifications required by the
client with qualified candidates from its files and also recruits additional
qualified candidates. It then arranges interviews between the client and
qualified candidates. If the Company successfully places a candidate, it
charges a fee as a percentage of the candidate's estimated annual salary for the
first year of his or her employment. The fees are always paid by the employer.
During the year ended December 31, 1995, the Winston Companies placed
applicants in permanent professional and clerical positions with approximately
500 clients. Approximately fifty percent of the Company's contingent fee
permanent placement clients during that year were repeat customers.
In addition to its contingent fee permanent recruitment and placement
services, through its Fisher-Todd Associates division, the Company specializes
in recruiting executives to meet specific requirements of clients. In June
1990, Winston sold substantially all of the operating assets of its physician
search business. See Note 3 of Notes to Financial Statements. Winston
continues to operate its executive search business under the name of "Fisher-
Todd Associates." The Company now employs approximately three executive
recruiters who specialize in recruiting candidates for upper level executive
positions, generally at salaries for such candidates in excess of $65,000 per
year.
The Company's recruiting specialists work closely with each client to
define the requirements of the position and establish candidate specifications.
The Company then contacts appropriate candidates who are identified through
extensive research, networking, data base searches and, where required,
advertisements. Such candidates are screened through interviews and other
procedures and those most qualified are referred to the clients. The Company's
counselors assist the client in evaluating each candidate, in determining an
appropriate compensation package and, in some cases, negotiating the final
agreement.
Temporary Help Services
-----------------------
The Company furnishes to businesses, on a temporary basis, the
services of individuals with accounting, paraprofessional, banking, secretarial,
clerical, office support, word processing, data processing, health care, light
industrial and professional skills. Temporary help assignments usually last
from one day to several weeks. Such assignments are generally made to fill
vacancies in a client's
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work force caused by vacations, illnesses, terminations or reassignments of the
client's full-time employees or to supplement the client's normal work force to
meet peak work loads, handle special projects or provide special expertise.
Some clients elect to staff a portion of their personnel requirements on a
longer term basis with temporary personnel employed and provided by the Company.
In all cases, the work is performed at the client's facilities under the
client's supervision and direction. The client is charged an hourly rate
comprised of the direct labor rate of the personnel provided, associated labor
costs (such as payroll taxes and insurance) and a mark-up to cover the Company's
overhead and profit. All employees on temporary assignment to the Company
clients are on the Company's payroll only during the periods of their
assignments. By prior understanding, their employment is continued after
completion of an assignment only if another suitable assignment is available.
Clients that hire, on a permanent basis, employees initially placed with them on
temporary assignment, pay a liquidation fee to the Company.
The use by clients of temporary help provided by the Company allows
them to hire only such permanent employees as are required for their regular
work loads. Clients are thus able to shift to the Company the cost and
inconvenience associated with the employment of temporary personnel, including
advertising, interviewing, screening, testing, record keeping, payroll taxes and
insurance. The Company is able to absorb such costs more effectively than its
clients because its employees, once recruited, are generally assigned to a
succession of temporary positions with different clients.
The Company screens its temporary personnel through personal
interviews, testing and other procedures and maintains continuously updated
records on job performance. These procedures enable it to classify its
temporary personnel by preference for job location, hours of employment and work
environment and by suitability for particular types of assignments. Persons who
do temporary work usually are registered with more than one temporary help firm
at any one time.
During 1995, the Company provided the services of temporary employees
to approximately 500 clients each week. The Company estimates that a majority
of the clients to whom it supplied temporary help during 1995 were repeat
customers.
Franchise Operations
--------------------
On November 1, 1988, the Company, through a wholly-owned subsidiary,
acquired as of September 30, 1988, substantially all of the assets (other than
cash items) of Roth Young Personnel Service, Inc. and two affiliated
corporations, Roth Young Personnel Services of New York City, Inc. and Delta 10,
Inc. Prior to the acquisition, Roth Young had sold licenses for the operation
of personnel agency and executive search businesses under the name "Roth Young"
for approximately twenty-two years and for the operation of personnel agencies
for clerical and office services personnel under the name "Division 10" for
approximately ten years. The Company commenced operations of personnel agencies
supplying temporary support personnel under the name "Division 10 Temps" during
1989. At March 22, 1996, there were sixteen Roth Young, one Division 10, one
Division 10 Temps, and one Winston office in a total of seventeen cities in the
United States. All of these offices are owned and operated by independent
franchisees. At March 22, 1996, the Company had an aggregate of nineteen Roth
Young Division 10 and Division 10 Temps franchises, representing a loss of
twenty-five Roth
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Young franchises since the acquisition. In addition, although the Company has
sold two Division 10 franchises since November 1988, ten such franchises have
closed. All of the franchises that have closed have done so for reasons related
to the financial circumstances of the franchisees.
In August 1988, the Company acquired all of the assets of Search
Group, Inc., which, all the time, was engaged in the business of servicing
franchises for the operation of permanent personnel agencies under the name
"Alpha." The Company commenced operations of personnel agencies supplying
temporary support personnel under the name Alpha Temps during 1989. At March
22, 1996, there was one Alpha office providing permanent and temporary placement
services on Long Island, New York. This represents a loss of four such
franchises since the acquisition of Search Group, one of which converted to a
Roth Young franchise. The Company also has one Winston Personnel franchise in
North Carolina which provides employment agencies and executive search services
in a variety of industries.
Franchisees operating under Roth Young licenses generally provide
employment agency and executive search services, principally to the food, drug,
hospitality, retail and health care industries, although licensees are
encouraged to expand their services to other industries. The Division 10
franchise is restricted to providing employment agency services for office
support, accounting, finance and data processing personnel. Division 10
franchises have been offered both individually and as an adjunct to a Roth Young
franchise. The Division 10 franchise currently outstanding is held by a Roth
Young franchisee.
The Company believes that its relationship with its independent
franchisees generally are good. The Company serves as a clearing house for the
collection and dissemination of information of common interest to franchisees.
It holds training and refresher courses for franchisees and their employees at
its offices in New York and provides franchisees with basic operating manuals
describing its systems. The Company's predecessor held, and the Company has
continued to hold, periodic seminars for its Roth Young and Division 10
franchisees, at which franchisees and their employees exchange information and
attend lectures on various pertinent subjects.
Franchisees operate their businesses autonomously, subject to the
requirements of their respective franchise agreements. The franchise agreements
authorize franchisees to operate Winston, Roth Young, Division 10, Division 10
Temps, Alpha or Alpha Temps offices within designated geographic areas. The
franchise agreements do not, however, restrict the franchise holders from
competing with franchisees in other geographic areas, nor do they prevent the
Company or other licensees of the Company from competing with franchisees under
other trade names and service marks within their designated geographic areas.
The agreements provide for monthly payments of royalties to the Company based on
the franchise's cash collections and generally cover a term of ten years
renewable at the franchisee's option for two consecutive, ten-year terms. Each
franchisee pays the Company an initial fee and pays royalties for the license of
the Company's know-how and tradenames.
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Recruitment Advertising
-----------------------
The Company's recruitment advertising division places recruitment
advertisements in publications on behalf of the Company, the Company's clients
and other third parties. The Company believes that the services offered by this
division enhances its competitive position in the temporary help and permanent
placement markets by broadening the scope of the services it offers to clients.
Marketing
---------
The Company's marketing efforts for its temporary help services and
for most permanent recruitment and placement services are largely concentrated
within the areas contiguous to its offices. The services of the Company's
executive search division are marketed nationally. The Company relies primarily
on telephone solicitation, sales visits to existing and prospective clients and,
to a lesser extent, on direct mail, yellow pages and newspaper advertising.
The Company coordinates a national advertising program for its Roth
Young franchise system. It also provides franchisees with promotional
materials, press kits and advertising layouts to assist them in their individual
marketing efforts.
Recruiting
----------
The Company recruits qualified applicants for entry and middle-level
permanent positions and temporary employees primarily through direct
recruitment, referrals from other applicants and newspaper advertising.
Competition
-----------
The personnel supply services industry is highly competitive, with
clients generally using more than one company to satisfy their personnel
requirements. In the permanent recruitment and placement market, the Company
and its franchisees compete with numerous local and regional firms and, to a
lesser extent, a few national firms. Based on its knowledge of the industry,
the Company believes that it is the leading permanent recruitment and placement
firm for the textile and apparel industries.
The Company faces intense competition from national temporary help
service firms as well as from local and regional firms. All of the national and
many of the regional and local firms have substantially greater resources than
the Company. Competition for franchisees is also intense. The Company solicits
franchisees through advertising, direct mail, trade show activities and
referrals by existing franchisees.
The principal competitive factors in the personnel services industry
are the availability and quality of permanent job applicants and temporary
personnel, the level and integrity of the service provided by individual offices
and, to varying degrees, the prices of such services. The Company believes that
its ability to offer a fully integrated personnel service, providing temporary
help,
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permanent recruitment and placement services, executive and physician
recruitment and recruitment advertising, enhances its competitive position in
those markets.
The Company competes for franchisees principally on the basis of
established national reputation in certain industries, its offering of a
combined permanent recruitment and temporary personnel service, locations
available, financing of temporary payroll, the degree of competition among
personnel agencies in the area of its available franchises and whether the
franchise system is perceived as having growth potential. The Company has sold
three Roth Young franchises but has not sold any Winston or Alpha franchises
since commencing its franchise operations in 1988. Although it has sold
Division 10 and Division 10 Temps franchises since that time, the closing of
other such franchises has resulted in a decline in their total number.
Regulation
----------
The Company's operations are subject to state laws and regulations
which may require employment agencies and/or temporary help services to be
licensed. The principal requirements of such laws and regulations are
satisfactory prior experience and good moral character. The Company has
obtained all necessary licenses and registrations in the states where it
conducts business. Offerings of franchise programs are subject to Federal
disclosure regulations, and certain states require the filing of a registration
statement with respect to such offerings with a state agency or securities
commission.
Trademarks and Service Marks
----------------------------
The Company owns a number of trademarks, service marks and tradenames,
including the name "Winston Personnel" (with its logo consisting of a sunburst
design and stylized letter W), "Win-Temps," "Roth Young" and "Division 10,"
which are registered with the U.S. Patent and Trademark Office. The name "Roth
Young" is also registered as a trademark in Canada and as a service mark in 21
states.
Employees
---------
At December 31, 1995, the Company employed approximately 100 permanent
employees in its headquarters and branch offices, not including temporary
employees on assignment to clients. The Company is responsible for all worker's
compensation insurance, state and Federal unemployment taxes, social security,
fringe benefits and bonding insurance for its temporary employees.
As a service business, the Company depends to a material degree on its
ability to hire and retain skilled and motivated executive recruiters and
placement counselors. The Company believes that its policy of compensating most
of its placement counselors on a salary and bonus basis, rather than on a
commission basis, has been responsible for a lower-than-average turn-over among
its staff of recruiters and counselors.
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Item 2. Properties
----------
The Company leases a total of approximately 16,000 square feet under
two different leases in an office building at 535 Fifth Avenue, New York, New
York. One lease is for approximately 13,500 square feet and it was entered into
in August 1990 and renegotiated in 1990 and 1992, and expires in 2003. The
other lease was entered into in 1993 for approximately 2,500 square feet, and
expires in 1997. The Company also leases office space in Rutherford and
Parsippany, New Jersey, in Westbury, New York and in Boca Raton, West Palm Beach
and Fort Lauderdale, Florida, under leases expiring between 1996 and 1997. See
Note 8 of Notes to Financial Statements.
Item 3. Legal Proceedings
-----------------
The Company is a defendant in an action commenced on or about October
25, 1995 in the United States District Court, Southern District of New York, by
Susan Athwal, a former employee, whose employment with the Company terminated in
December 1992. The action, brought under Title VII of the Civil Rights Act of
1964 as amended, the New York State Human Rights Law, the New York City Human
Rights Law and New York common law and the Employee Retirement Income Security
Act of 1974, alleges a variety of acts of discrimination. The action seeks an
unspecified amount of damages, including attorneys fees. The Company has, and
intends to continue to vigorously defend against the allegations which it
believes are without merit. No discovery has taken place in the action.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ended December 31, 1995.
Executive Officers of the Registrant
------------------------------------
The Company's executive offices are elected by, and serve at the
discretion of the Board of Directors. The following table sets forth
information concerning the present executive officers of the Company:
Age Position
--- --------
Seymour Kugler 59 Chairman of the Board, President
and Chief Executive Officer
Jesse Ulezalka 47 Chief Financial Officer
Alan E. Wolf 51 Vice President
Todd Kugler 30 Vice President
Gregg Kugler 34 Vice President
David Silver 65 Vice President and Secretary
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Mr. Kugler (who is known generally to clients and employees of the
Company as Sy Kaye) founded the Company in 1967 and has been its chief executive
officer since that time.
Mr. Ulezalka has been the Chief Financial Officer of the Company since
August 4, 1995, having replaced Mr. David Frankel who is no longer with the
Company. Prior to this he was CFO of Consultants for Architects, Inc. from
April 1995 - August 1995, Financial Consultant from April 1994 - April 1995,
CFO, Vice President - Finance of ECCO Staffing Services, Inc. from March 1992 -
April 1994 and Vice President - Finance and corporate secretary of Unity
Healthcare Holding Co., Inc. from January 1989 - March 1992.
Mr. Wolf has been a Vice President of the Company since its inception
and has been an Executive Vice President of the Company's permanent placement
division since 1974.
Mr. Todd Kugler (who is known generally to clients and employees of
the Company as Todd Kaye) has been with the Company since 1988. He became a
Vice President of the Company on November 23, 1995.
Mr. Gregg Kugler (who is known generally to clients and employees of
the Company as Gregg Kaye) has been with the Company since 1983. He became a
Vice President of the Company on August 12, 1993 and is Vice President of the
Permanent Placement Division.
Mr. Silver has been Secretary of the Company since December 31, 1991,
having replaced Melvin A. Winograd who retired. Mr. Silver has been Vice
President - Administration/Human Resources of the Company since November 1987.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
---------------------------------------------------------------------
The Common Stock of the Company is traded principally on the American
Stock Exchange (ticker symbol "WRS"). The following table shows, for each
quarter of the Company's last two fiscal years and through March 22, 1996, the
high and low sales prices of the common stock of the Company as reported on the
American Stock Exchange.
Price Range
--------------------------------
High Low
--------------- ---------------
1996
- ----
First Quarter $ 2 1/2 $1 1/8
1995
- ----
First Quarter $ 2 $1 5/16
Second Quarter 2 1/2 1 3/4
Third Quarter 2 1 1/2
Fourth Quarter 1 15/16 1 1/8
1994
- ----
First Quarter $ 2 13/16 $ 1 3/4
Second Quarter 2 1 5/16
Third Quarter 2 1 1/4
Fourth Quarter 2 1/2 1 1/2
The Company had 161 holders of record of its common stock on March 22,
1996.
The Company has never paid a cash dividend on the Common Stock and
anticipates that for the foreseeable future, earnings will be retained for use
in its business.
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SELECTED FINANCIAL DATA
- -----------------------
Year ended December 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
Income Statement Data:
- ----------------------
(In thousands, except for per share
data and number of shares)
Combined sales:
By Company offices $30,657 $23,822 $17,863 $14,911 $15,462
By franchise 4,175 6,403 6,128 8,152 9,013
----- ----- ----- ----- -----
Total combined
sales 34,832 30,225 23,991 23,063 24,475
------ ------ ------ ------ ------
Net revenue* 30,989 24,297 18,282 15,471 16,176
Income (loss) from
operations (381)(1) 865 329 (435) (1,834)
Net income (loss) (432)(1) 636 225 (473) (1,361)
Net income (loss)
per common share (.15) .20 .07 (.16) (.47)
Weighted average
common shares
outstanding 2,917,662 3,152,530 3,145,663 2,886,500 2,886,500
--------- --------- --------- --------- ---------
*Represents sales by Company, income from franchises and other income
(1) Includes one-time write off of Restrictive Covenant Costs and related
assets associated with Franchise operations of $1.1 million
Year ended December 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
Balance Sheet Data:
- ------------------
(In thousands, except for per share
data and number of shares)
Working capital $ 3,028 $2,201 $1,101 $652 $961
Total assets 7,146 7,123 5,393 4,984 5,123
Long-term debt 606 579 - - 5
Stockholders' equity 2,654 3,055 2,419 2,190 2,663
Stockholders' equity
per share .91 1.05 .83 .76 .92
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Item 6. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
Results of Operations
---------------------
Revenues increased by approximately $6,692,000 or 28% to $30,989,000 as
compared to $24,297,000 in the corresponding period in 1994. The increase is
primarily due to the increase in temporary help revenues of 34% and recruitment
advertising revenues of 45%, as compared to the corresponding period in 1994.
Operating expenses increased approximately 29% 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. Additional increases resulted from additions to the sales force and
administrative areas for the Long Island, New York office opened October 1994
and newly started nursing and legal divisions, as well as increased workers'
compensation insurance expense.
The Company considered the value of its franchise intangibles and related
assets and has determined that an impairment has occurred to the carrying
amounts of those assets. In connection therewith, the Company has written off
the restrictive covenant costs and related assets associated with its franchise
activities in the fourth quarter of its year ended December 31, 1995 in the
amount of $1,122,000. The Company anticipates no further material writeoffs
will be required in the future.
Interest expense increased during 1995 due mainly to the maintenance of a
higher average loan balance on increased receivables as a result of revenue
improvements when compared to 1994.
Included in interest and other income is $163,000 of income related to the
receipt of marketable securities from the demutualization of the Company's
insurance carrier.
Net loss for the twelve month period ended December 31, 1995 was
approximately $432,000 or $.15 per common share as compared to net income of
approximately $636,000 or $.20 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 and the writeoff of
franchise intangibles as discussed above. 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 on December 31, 1995 was approximately $3,028,000 as
compared to $2,201,000 on 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 1996.
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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 activities.
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.
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Item 7. Financial Statements and Supplementary Data
-------------------------------------------
WINSTON RESOURCES, INC. AND SUBSIDIARIES
----------------------------------------
Page
----
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . 16
Consolidated Balance Sheet - December 31, 1995 . . . . . . . . . . . 17
Consolidated Statements of Operations - Years ended
December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . 18
Consolidated Statements of Stockholders' Equity -
Years ended December 31, 1995 and 1994 . . . . . . . . . . . . . 19
Consolidated Statements of Cash Flows - Years
ended December 31, 1995 and 1994 . . . . . . . . . . . . . . . . 20
Notes to Consolidated Financial Statements . . . . . . . . . . . . . 21
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Richard A. Eisner & Company, LLP
Accountants and Consultants
[LOGO]
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Winston Resources, Inc.
New York, New York
We have audited the consolidated balance sheet of Winston Resources, Inc.
and subsidiaries as at December 31, 1995 and the related consolidated statements
of operations, stockholders' equity and cash flows for each of the years in the
two-year period then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements enumerated above
present fairly, in all material respects, the consolidated financial position of
Winston Resources, Inc. and subsidiaries as at December 31, 1995 and the results
of their operations and cash flows for each of the years in the two-year period
then ended in conformity with generally accepted accounting principles.
/s/ Richard A. Eisner & Company, LLP
New York, New York
March 11, 1996
575 Madison Avenue, New York, N.Y. 10022-2597
Member of Summit International Associates, Inc.
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WINSTON RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS AT DECEMBER 31, 1995
A S S E T S
-----------
(Note 5)
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . $ 144,000
Accounts and notes receivable, trade, less allowance for
doubtful accounts of $214,000 (Note 5). . . . . . . . . 5,816,000
Prepaid expenses and other current assets . . . . . . . . 304,000
Marketable securities (Note 1). . . . . . . . . . . . . . 210,000
-----------
Total current assets . . . . . . . . . . . . . . . 6,474,000
Fixed assets - at cost, less accumulated depreciation and
amortization of $726,000 (Notes 1 and 4). . . . . . . . . 353,000
Other assets:
Security deposits and other assets. . . . . . . . . . . . 319,000
-----------
T O T A L. . . . . . . . . . . . . . . . . . . . . $7,146,000
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable and accrued expenses (Note 6). . . . . . $2,696,000
Credit facility debt (Note 5) . . . . . . . . . . . . . . 682,000
Capital lease obligations (Note 5). . . . . . . . . . . . 68,000
-----------
Total current liabilities. . . . . . . . . . . . . 3,446,000
Deferred rent (Note 8) . . . . . . . . . . . . . . . . . . . 379,000
Deferred credit - net (Note 3) . . . . . . . . . . . . . . . 61,000
Long-term portion of credit facility debt (Note 5) . . . . . 500,000
Long-term portion of capital lease obligations (Note 5). . . 106,000
-----------
Total liabilities. . . . . . . . . . . . . . . . . 4,492,000
Commitments and contingencies (Note 8)
Stockholders' equity (Note 9):
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
2,920,833 shares. . . . . . . . . . . . . $ 29,000
Additional paid-in capital. . . . . . . . . 4,396,000
Accumulated deficit . . . . . . . . . . . . (1,799,000)
Unrealized gain on securities held
available-for-sale, net (Note 1). . . . . 28,000
------------
Total stockholders' equity . . . . . . . . . . . . 2,654,000
-----------
T O T A L. . . . . . . . . . . . . . . . . . . . . $7,146,000
===========
See notes to consolidated financial statements.
- 2 - 17 of 33
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended
December 31,
--------------------------
1995 1994
------------ ------------
Revenue:
Placement fees and related income
(Notes 1 and 3). . . . . . . . . . . . . $30,989,000 $24,297,000
------------ ------------
Operating expenses:
Compensation and other benefits (Note 8) . 22,914,000 17,692,000
Selling, general and administrative. . . . 7,195,000 5,584,000
Amortization of intangibles. . . . . . . . 139,000 156,000
------------ ------------
30,248,000 23,432,000
------------ ------------
Write off of restrictive covenant costs and
related assets associated with franchise
activities (Note 2). . . . . . . . . . . . 1,122,000
------------
Income (loss) from operations . . . . . . . . (381,000) 865,000
------------ ------------
Interest expense. . . . . . . . . . . . . . . (268,000) (183,000)
Interest and other income . . . . . . . . . . 217,000 113,000
------------ ------------
(51,000) (70,000)
------------ ------------
Income (loss) before provision for income
taxes. . . . . . . . . . . . . . . . . . . (432,000) 795,000
Provision for income taxes (Note 7) . . . . . - 0 - 159,000
------------ ------------
NET INCOME (LOSS) . . . . . . . . . . . . . . $ (432,000) $ 636,000
============ ============
Primary and fully diluted net income (loss)
per common share . . . . . . . . . . . . . $(.15) $.20
====== =====
Weighted average number of common shares
outstanding (Note 1):
Primary. . . . . . . . . . . . . . . . . 2,917,662 3,152,530
Fully diluted. . . . . . . . . . . . . . 2,917,662 3,152,530
See notes to consolidated financial statements.
- 3 - 18 of 33
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE><CAPTION>
Common Stock -
$.01 Par Value
-------------------
Number Additional Unrealized Gain
of Paid-in (Accumulated on Securities Held
Shares Amount Capital Deficit) Available for Sale Total
--------- ------- ---------- ------------ ------------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1994. . . . 2,914,150 $29,000 $4,393,000 $(2,003,000) $2,419,000
Issuance of common stock . . . . 1,650
Net income . . . . . . . . . . . 636,000 636,000
--------- ------- ---------- ------------ ----------
Balance - December 31, 1994. . . 2,915,800 29,000 4,393,000 (1,367,000) 3,055,000
Issuance of common stock . . . . 5,033 3,000 3,000
Net (loss) . . . . . . . . . . . (432,000) (432,000)
Unrealized gain on securities
held available for sale, net. $28,000 28,000
--------- ------- ---------- ------------ -------- ----------
BALANCE - DECEMBER 31, 1995. . . 2,920,833 $29,000 $4,396,000 $(1,799,000) $28,000 $2,654,000
========= ======= ========== ============ ======== ==========
</TABLE>
See notes to consolidated financial statements.
- 4 - 19 of 33
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended
December 31,
------------------------
1995 1994
---------- ----------
Cash flows from operating activities:
Net income (loss). . . . . . . . . . . . . $ (432,000) $ 636,000
Charges and credits to net income (loss)
not affecting cash:
Depreciation and amortization. . . . . 269,000 266,000
Deferred rent. . . . . . . . . . . . . (19,000) 20,000
Deferred (income) loss recognized. . . 60,000 (9,000)
Write off of restrictive covenant
costs and related assets . . . . . . 1,122,000
Receipt of marketable securities . . . (163,000)
Deferred tax benefit . . . . . . . . . (111,000)
Changes in assets and liabilities:
(Increase) in receivables and
prepaid expenses . . . . . . . . . (1,334,000) (1,562,000)
(Increase) decrease in other assets,
net. . . . . . . . . . . . . . . . 276,000 (140,000)
Increase in liabilities. . . . . . . 299,000 517,000
------------ ------------
Net cash (used in) operating
activities . . . . . . . . . . . (33,000) (272,000)
------------ ------------
Cash flows from investing activities:
Purchases of fixed assets. . . . . . . . . (70,000) (88,000)
------------ ------------
Cash flows from financing activities:
Proceeds (repayment) of notes payable. . . (23,000) 436,000
Proceeds from exercise of options. . . . . 3,000
Repayment of capital leases. . . . . . . . (26,000)
------------ ------------
Net cash provided by (used in)
financing activities . . . . . . (46,000) 436,000
------------ ------------
NET INCREASE (DECREASE) IN CASH . . . . . . . (149,000) 76,000
Cash and cash equivalents - beginning of year 293,000 217,000
------------ ------------
CASH AND CASH EQUIVALENTS - END OF YEAR . . . $ 144,000 $ 293,000
============ ============
Supplemental disclosures of cash flow
information:
Cash payments for interest . . . . . . . $ 255,000 $ 186,000
Cash payments for income taxes . . . . . 219,000 86,000
Supplemental disclosures of noncash investing
and financing activities:
Capitalization of equipment pursuant to
lease obligations. . . . . . . . . . . 83,000 130,000
Unrealized gain on securities held
available for sale, net. . . . . . . . 28,000
See notes to consolidated financial statements.
- 5 - 20 of 33
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NOTE 1) - Principal Business Activity and Summary of Significant
- -----------------------------------------------------------------
Accounting Policies:
-------------------
Business activity:
-----------------
Winston Resources, Inc. and Subsidiaries (the "Company") provide a wide
variety of temporary staffing specialties, permanent placement services,
executive search recruitment, and recruitment advertising to the business
community.
Principles of consolidation:
---------------------------
The accompanying consolidated financial statements include the accounts of
Winston Resources, Inc. and its wholly owned subsidiaries. All significant
intercompany and interdivisional transactions and balances have been eliminated
in consolidation.
Revenue recognition:
-------------------
Permanent placement revenue is recognized when a candidate is accepted for
employment. Provisions are made for estimated losses in realization
(principally due to applicants not remaining in employment for the guarantee
period). Temporary placement revenue is recognized when the temporary personnel
provide the services. Nonrefundable retainer revenue is recognized according to
the terms of the search contract.
Depreciation and amortization:
-----------------------------
Depreciation and amortization of fixed and intangible assets are being
provided for by the straight-line and declining balance methods over the
estimated useful lives of the assets.
Income (loss) per share:
-----------------------
Income (loss) per share is computed using the weighted average number of
common shares outstanding and, when dilutive, common stock equivalents.
Use of estimates:
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
(continued)
- 6 - 21 of 33
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NOTE 1) - Principal Business Activity and Summary of Significant
- -----------------------------------------------------------------
Accounting Policies: (continued)
-------------------
Securities held available for sale:
----------------------------------
The Company has classified their securities as investments available-for-
sale pursuant to Statement of Financial Accounting Standards No. 115 "Accounting
for Certain Investments in Debt and Equity Securities." Accordingly, any
unrealized gain or loss on the investments, net of deferred taxes thereon, is
recorded as a separate component of equity.
(NOTE 2) - Franchise Intangibles and Related Assets:
- ---------------------------------------------------
Management periodically evaluates the carrying amount of its long-term
assets by estimating the future cash flows against the carrying value of these
assets. In connection therewith, the Company has written off the restrictive
covenant costs and related assets associated with its franchise activities
(approximately $1,122,000) during the fourth quarter of its year ended
December 31, 1995. Previously, such costs were being amortized over 7 and 15
year periods. The Company anticipates no further material write-offs will be
required in the future.
(NOTE 3) - Deferred Credit:
- --------------------------
This amount represents deferred gain from the sale of certain assets in
prior years of $1,173,000, less notes receivable from the purchaser due in
annual installments to 2002. The deferred income will be recognized as the
notes are collected.
(NOTE 4) - Fixed Assets:
- -----------------------
Fixed assets consists of the following:
Estimated
Useful Life
-------------
Furniture, fixtures and equipment. . $ 796,000 3 to 7 years
Leasehold improvements . . . . . . . 283,000 Life of lease
-----------
1,079,000
Less accumulated depreciation and
amortization. . . . . . . . . . . 726,000
-----------
B a l a n c e. . . . . . . $ 353,000
===========
(continued)
- 7 - 22 of 33
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NOTE 4) - Fixed Assets: (continued)
- -----------------------
At December 31, 1995, fixed assets include approximately $155,000 net of
accumulated depreciation, of telephone equipment, computer equipment and
software under capital leases.
(NOTE 5) - Long-term Debt:
- -------------------------
[a] Credit Facility:
---------------
The Company's secured credit facility, as amended, provides for advances of
$500,000 repayable on April 16, 1998 and additional short-term advances to a
maximum of $2,000,000, both based on up to 80% of eligible accounts receivable.
The Company pays interest on advances at a rate of 2 3/4% above the finance
company's reference rate. At December 31, 1995 the Company was paying interest
on advances at a rate of 11.50%. The credit facility is collateralized by
substantially all the assets of the Company.
[b] Capital lease obligations:
-------------------------
During the years ended December 31, 1995 and December 31, 1994, the
Company leased approximately $83,000 of telephone equipment and $130,000 of
computer equipment, respectively, under capital leases all of which are included
in fixed assets (Note 4). The following is a schedule of the future minimum
lease payments together with the present value of the minimum lease payments as
of December 31, 1995.
Year Ending
December 31,
------------
1996. . . . . . . . . . . . . . . $ 76,000
1997. . . . . . . . . . . . . . . 61,000
1998. . . . . . . . . . . . . . . 21,000
1999. . . . . . . . . . . . . . . 21,000
2000. . . . . . . . . . . . . . . 17,000
---------
T o t a l . . . . . . . 196,000
Less amount representing interest
(effective rates 11% and 15%). 22,000
---------
Present value of the minimum
lease payments . . . . . . . . $174,000
=========
Current portion of capital lease
obligations. . . . . . . . . . $ 68,000
Long-term portion of capital
lease obligations. . . . . . . 106,000
---------
T o t a l . . . . . . . $174,000
=========
(continued)
- 8 - 23 of 33
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NOTE 6) - Accounts Payable and Accrued Expenses:
- ------------------------------------------------
Accounts payable and accrued expenses consist of the following:
Accounts payable - trade. . . . . . . . $ 855,000
Accrued compensation and payroll taxes. 719,000
Accrued commissions . . . . . . . . . . 681,000
Other accrued expenses. . . . . . . . . 441,000
-----------
T o t a l . . . . . . . . . . $2,696,000
===========
(NOTE 7) - Income Taxes:
- -----------------------
The provision for income taxes consists of:
Year Ended
December 31,
---------------------
1995 1994
---------- ---------
Current:
Federal . . . . . . . . . . . $ 79,000 $ 36,000
State and local . . . . . . . 32,000 123,000
Deferred benefit . . . . . . . . (111,000)
---------- ---------
$ - 0 - $159,000
========== =========
A reconciliation of the federal statutory tax rate to the actual effective
rate is as follows:
Year Ended
December 31,
------------------
1995 1994
------- ---------
Statutory rate . . . . . . . . . (34.0)% 34.0 %
State and local income taxes
net of federal benefit. . . . 5.6 9.5
Increase/(decrease) in
valuation allowance . . . . . 16.4 (24.3)
Permanent differences. . . . . . 12.0
Other. . . . . . . . . . . . . . 0.8
------ ------
0 % 20.0 %
====== ======
(continued)
- 9 - 24 of 33
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NOTE 7) - Income Taxes: (continued)
- -----------------------
The deferred tax asset is comprised of the following:
Provision for doubtful accounts. . . $ 86,000
Intangible assets written off. . . . 334,000
Accrued rent . . . . . . . . . . . . 152,000
Gain deferred for tax purposes . . . (65,000)
Other. . . . . . . . . . . . . . . . 12,000
Valuation reserve. . . . . . . . . . (408,000)
----------
T o t a l. . . . . . . . . $ 111,000
==========
During the years ending December 31, 1995 and 1994, the valuation allowance
increased by $29,000 and decreased by $240,000, respectively. At December 31,
1995, the valuation reserve was recorded since realization of the deferred tax
asset beyond the amount recorded is not considered more likely than not.
Permanent differences result from the nondeductible portion of meals and
entertainment and from premiums paid for officers' life insurance policies.
(NOTE 8) - Commitments and Contingencies:
- ----------------------------------------
Operating leases:
----------------
The Company leases office space under noncancelable operating leases which
expire at various dates through 2003. These leases are subject to escalations
for increases in real estate taxes and other expenses.
The aggregate future minimum lease payments required under these leases are
as follows:
Year Ending
December 31,
------------
1996. . . . . . . . . . . . . . . $ 487,000
1997. . . . . . . . . . . . . . . 406,000
1998. . . . . . . . . . . . . . . 385,000
1999. . . . . . . . . . . . . . . 393,000
2000. . . . . . . . . . . . . . . 419,000
Thereafter. . . . . . . . . . . . 966,000
-----------
$3,056,000
===========
Rental expense under operating leases including escalation charges for the
years ended December 31, 1995 and December 31, 1994 approximated $676,000 and
$580,000, respectively.
(continued)
- 10 - 25 of 33
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NOTE 8) - Commitments and Contingencies: (continued)
- ----------------------------------------
Operating leases: (continued)
----------------
Pursuant to one of the Company's leases, rent expense charged to operations
differs from rent paid because of the effect of free rent periods and scheduled
rent increases. Accordingly, the Company has recorded deferred rent payable of
$379,000 at December 31, 1995. Rent expense is calculated by allocating total
rental payments, including those attributable to scheduled rent increases, on a
straight-line basis, over the lease term.
The Company has been released from a portion of its rent obligation on
certain premises which it had been subleasing through 2003 but, in the event of
default by the sublessee, it would remain liable for the balance of the rent
obligation, which at December 31, 1995 aggregated to $659,000.
Executive Employment Agreement:
------------------------------
An employment agreement with the chief executive officer expiring in August
1997 provides for an annual salary of $400,000 plus incentive bonuses based on
pre-tax income. The officer waived $37,000 of his compensation for the year
ended December 31, 1994. In addition, the officer is entitled, under certain
circumstances, to termination benefits.
Lawsuits:
--------
There are various lawsuits pending against the Company. In the opinion of
management, after consultation with counsel, the ultimate resolution of these
matters will not have a material adverse effect on the Company's financial
position.
(NOTE 9) - Stock Option Plan:
- ----------------------------
In May 1990, the stockholders of the Company approved an Incentive Program
(the "Program") authorizing the issuance to officers, directors, key employees,
and certain consultants of stock options (both incentive stock options ("ISOs")
which qualify under Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code") and nonqualified options), stock appreciation rights
("SARS") (in tandem with stock options or free-standing), restricted stock and
directors' options issuable pursuant to a formula. Up to 575,000 shares
(approximately 20% of the outstanding Common Stock) are issuable under the
Program either as outright grants or upon exercise of options or SARS awarded
thereunder.
(continued)
- 11 - 26 of 33
<PAGE>
WINSTON RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NOTE 9) - Stock Option Plan: (continued)
- ----------------------------
The selection of participants from among employees and officers and the
determination of the type and amount of awards (except as to the directors'
options) is entirely within the discretion of the Option Committee of the Board
of Directors (the "Committee"). There is no limit on the number or amount of
awards which may be granted to any one person under the Program, except that the
fair market value (determined as of the date of grant) of shares with respect to
which ISOs are first exercisable in any one year as to any participation may not
exceed $100,000.
Restricted stock may be awarded under the Program either at no cost to the
recipient or for such cost as specified by the grant. Unless waived in whole or
in part by the Committee, once a holder of record of restricted stock ceases to
be an employee, officer or director of the Company, all shares of restricted
stock then held and still subject to restriction will be forfeited by such
holder and reacquired by the Company.
Directors of the Company who are not employees are eligible to participate
solely in the nondiscretionary directors' option portion of the Program. All
administrative powers of the Committee with respect to directors' options may be
exercised, in the discretion of the Board of Directors, by an Alternate
Committee comprised of persons not eligible to receive directors' options, one
of whom must be a director. Moreover, in no event, may the number of shares
subject to directors' options issuable to any qualified director in any year
exceed 25,000.
Stock option activity is summarized as follows:
Shares Option Price
-------- -----------------
(per share)
Balance at January 1, 1994. . . . . 317,850 $ .3750 - $ .6250
Granted . . . . . . . . . . . . . . 107,800 $1.50 - $2.20
Exercised . . . . . . . . . . . . . (1,650) $ .4375
--------
Balance at January 1, 1995. . . . . 424,000 $ .3750 - $2.20
Granted . . . . . . . . . . . . . . 99,350 $1.3750 - $1.8125
Exercised . . . . . . . . . . . . . (5,033) $ .4375 - $ .6250
--------
Balance at December 31, 1995
(299,211 exercisable at option
prices $.375 to $2.20) . . . . . 518,317
========
At December 31, 1995, 47,350 options are available for grant.
- 12 - 27 of 33
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
--------------------
No Reportable Events.
PART III
--------
Item 9. Directors and Executive Officers of the Registrant
--------------------------------------------------
The information required by this item is incorporated herein by
reference to the material under the caption "Election of Directors" in the
---------------------
Company's definitive Proxy Statement to be filed on or before April 30, 1996
(the "1996 Proxy Statement"). Reference is also made to the information under
the caption "Executive Officers of the Registrant" contained in Part I of this
------------------------------------
Report.
Item 10. Executive Compensation
----------------------
The information required by this term is incorporated herein by
reference to the material under the caption "EXECUTIVE COMPENSATION" in the 1996
Proxy Statement.
Item 11. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The information required by this item is incorporated herein by
referenced to the Material under the caption "ELECTION OF DIRECTORS" in the 1996
Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The information required by this item is incorporated herein by
reference to the material under the caption "ELECTION OF DIRECTORS - Certain
Transactions" in the 1996 Proxy Statement.
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
----------------------------------------------------------------
14(a). The following financial statements, financial statement
schedules and exhibits are filed as part of this Report:
14(b)1. Financial Statements
--------------------
The following consolidated financial statements of Winston Resources,
Inc. and Subsidiaries are included in Part II, Item 7:
Independent Auditors' Report
28 of 33
<PAGE>
Consolidated Balance Sheet - December 31, 1995
Consolidated Statements of Operations - Years ended
December 31, 1995 and 1994
Consolidated Statements of Stockholders' Equity -
Years ended December 31, 1995 and 1994
Consolidated Statements of Cash Flows - Years ended
December 31, 1995 and 1994
Notes to Consolidated Financial Statements
14(a)3. Exhibits
--------
Exhibit No. Description
- ----------- -----------
*3.1.1 Restated Certificate of Incorporation of the
Company, as filed with the Secretary of State of
Delaware on April 6, 1987 [Registration Statement
No. 33-14913, Exhibit 3.1]
*3.1.2 Agreement and Plan of Merger dated as of April 15,
1987, between Winston Resources, Inc. (New York)
and the Company, as filed with the Secretary of
State of Delaware on April 20, 1987 [Registration
Statement No. 33-14813, Exhibit 3.2]
*3.1.3 Certificate of Amendment of Restated Certificate
of Incorporation of the Company, as filed with the
Secretary of State of Delaware on June 11, 1993
[Form 10-KSB (1993)]
*3.1.4 Composite Copy of Restated Certificate of
Incorporation of the Company, as amended [Form 10-
K (1987), Exhibit 3.3]
* 3.2 By-laws of the Company, as amended June 11, 1993
[Form 10-KSB (1993)]
* 9 Stockholders' Voting Agreement, dated June 8,
1987, among Seymour Kugler, Alec Peters and Melvin
Winograd [Registration Statement No. 33-14913,
Exhibit 9]
* 10.2 Employment Agreement dated as of May 1, 1987, as
amended (the "Employment Agreement"), between the
Company and Seymour Kugler. [Form 10-KSB (1992),
Exhibit 10.2]
29 of 33
<PAGE>
Exhibit No. Description
- ----------- -----------
* 10.3 Supplemental Excess Profit Sharing Plan, dated
December 12, 1984 [Registration Statement No. 33-
14913, Exhibit 10.3]
* 10.4 Incentive Program of the Company [Registration
Statement on Form S-8 No. 33-37476, Exhibit 4]
* 10.5 Agreement of Lease, dated as of August 8, 1990
(the "Lease"), between Nineteen New York
Properties Limited Partnership, and the Company,
as tenant [Form 10-K (1990), Exhibit 10.11].
* 10.6 First Amendment of Lease dated as of March 1,
1992, between Nineteen New York Properties Limited
Partnership and the Company. [Form 10-KSB (1992),
Exhibit 10.6]
* 10.7 Second Amendment of Lease dated as of January 29,
1993, between Nineteen New York Properties Limited
Partnership and the Company. [Form 10-KSB (1992),
Exhibit 10.7]
* 10.8 Third Amendment of Lease dated as of February 19,
1993, between Nineteen New York Properties Limited
Partnership and the Company. [Form 10-KSB (1992),
Exhibit 10.8]
* 10.9 Security and Accounts Receivable Agreement dated
as of April 16, 1992, by and between Ambassador
Factors and the Company. [Form 10-KSB (1992),
Exhibit 10.9]
* 10.10 Agreement between Winston Resources, Inc. and
Ambassador Factors Corporation dated May 13, 1994.
[Form 10-QSB (1994), Exhibit 10(a)]
* 10.11 Agreement between Winston Resources, Inc. and
Ambassador Factors Corporation dated June 30,
1994. [Form 10-QSB (1994), Exhibit 10(b)]
* 10.12 Agreement between Winston Resources, Inc. and
Finova Factors Corp. (formerly Ambassador
Factors), dated April 24, 1995. [Form 10-QSB
(1995), Exhibit 10(a)]
--------------------------------
* Incorporated by Reference and not filed herewith.
30 of 33
<PAGE>
10.13 Agreement between Winston Resources, Inc. and
Finova Factors Corp. (formerly Ambassador
Factors), dated November 27, 1995.
10.14 Agreement between Winston Resources, Inc. and
Finova Factors Corp. (formerly Ambassador
Factors), dated March 18, 1996.
22 Subsidiaries of the Company:
Accountants Today, Inc.
(a New York corporation)
Delta 10, Inc.
(a New Jersey corporation)
Exhibit No. Description
- ----------- -----------
Winston Franchise Corporation
(a New Jersey corporation)
Roth Young Personnel Service, Inc.
(a New York corporation)
Winston Personnel of Boca Raton, Inc.
(a Florida corporation)
Winston Personnel, Inc. of New Jersey
(a New Jersey corporation)
Winston Professional Staffing, Inc.
(a New Jersey corporation)
Winston Staffing Services, Inc.
(a New York corporation)
Winston Cosmopolitan, Inc.
(a Delaware corporation)
14(b). Reports on Form 8-K. No reports on Form 8-K have been filed
-------------------
during the quarters ended December 31, 1995 or March 31, 1996.
31 of 33
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 27, 1996
WINSTON RESOURCES, INC.
By: /s/ Seymour Kugler
---------------------------
Seymour Kugler, Chairman of
the Board and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Signature
---------
/s/ Seymour Kugler Chairman of the Board and March 27, 1995
- -------------------------------
Seymour Kugler President; Principal
Executive Officer; Director
/s/ Jesse Ulezalka Chief Financial Officer March 27, 1995
- -------------------------------
Jesse Ulezalka
/s/ Reuben W. Abrams Director March 27, 1995
- -------------------------------
Reuben W. Abrams
/s/ Martin Fischer Director March 27, 1995
- -------------------------------
Martin Fischer
/s/ Alan E. Wolf Director March 27, 1995
- -------------------------------
Alan E. Wolf
32 of 33
<PAGE>
/s/ Martin Wolfson Director March 27, 1995
- -------------------------------
Martin Wolfson
/s/ Gregg Kugler Director March 27, 1995
- -------------------------------
Gregg Kugler
/s/ Martin J. Simon Director March 27, 1995
- -------------------------------
Martin J. Simon
33 of 33
<PAGE>
EXHIBIT INDEX
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EXHBIT
NO DESCRIPTION
------ -----------
10.13 Agreement between Winston Resources, Inc. and
Finova Factors Corp. (formerly Ambassador
Factors), dated November 27, 1995.
10.14 Agreement between Winston Resources, Inc. and
Finova Factors Corp. (formerly Ambassador
Factors), dated March 18, 1996.
22 Subsidiaries of the Company:
EXHIBIT 10.13
[LOGO]
FINOVA CAPITAL CORPORATION
COMMERCIAL FINANCE
111 WEST 40TH STREET
14TH FLOOR
NEW YORK, NEW YORK 10018
TEL 212 403 0700
FAX 212 403 0913
November 27, 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 Corporation formerly Ambassador
Factors Division Fleet Factors Corp. and Winston Resources, Inc., ("Contract")
we hereby agree to the following effective November 1, 1995.
1. The base interest rate as stated in paragraph 6 of the Security
Agreement - Accounts Receivable (A/R Agreement) shall be decreased to 2 3/4%.
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
A/R 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.
The 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.
Very truly yours,
FINOVA Capital Corporation
/s/ Philip Cotumaccio
Philip Cotumaccio
Vice President
PC:af
AGREED AND ACCEPTED:
By: /s/ Sy Kaye 12/1/95
--------------------
President
EXHIBIT 10.14
WINSTON RESOURCES, INC.
535 Fifth Avenue
New York, NY 10017-3663
Tel: (212) 557-5000
Fax: (212) 972-3364
March 18, 1996
Mr. Phil Cotumaccio
Vice President
Finova Capital Corp.
111 West 40th Street
New York, N.Y.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 along 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 in 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.
<PAGE>
Mr. Phil Cotumaccio
Finova Capital Corp.
March 18, 1996
Page Two
It is specifically understood and agreed that the Long Term Loan shall be
subject to all terms and conditions of the Financing.
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
Divisions
WINSTON Personnel
WINSTON Staffing Services
Fisher-Todd Associates
