UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to _________________
Commission File Number 33-94322
WINFIELD CAPITAL CORP.
Incorporated in the IRS Employer Identification
State of New York Number 13-2704241
237 Mamaroneck Avenue
White Plains, New York 10605
(914) 949-2600
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.
--- ---
Registrant had 5,023,361 shares of common stock outstanding as of September 30,
1998.
This report consists of 13 pages
<PAGE>
Form 10-Q Quarterly Report
INDEX
Part I - Financial Information Page No.
--------
Condensed Statements of Operations -
Six and Three Months ended September 30, 1998
and 1997 3-4
Condensed Balance Sheets - as of
September 30, 1998 and March 31, 1998 5-6
Condensed Statements of Cash Flows -
Six Months Ended September 30, 1998
and 1997 7
Notes to Condensed Financial Statements 8-9
Management's Discussion and Analysis
of Financial Condition and Results
of Operations 10-12
Part II - Other Information 13
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF OPERATIONS
==================================
<TABLE>
<CAPTION>
Six Months Ended
September 30,
1998 1997
----------- --------
<S> <C> <C>
Investment income
Interest from small business concerns $ 234,985 $190,306
Interest from invested idle funds 115,476 351,761
Other income 75,989 33,944
----------- --------
Total investment income 426,450 576,011
----------- --------
Expenses
Interest 394,340 420,469
Payroll and payroll related expenses 240,227 256,251
General and administrative expenses 138,058 127,107
Other operating expenses 188,726 124,180
----------- --------
Total investment expenses 961,351 928,007
----------- --------
Investment loss - net (534,901) (351,996)
Realized loss on investments (12,689) (82,468)
Change in unrealized appreciation of
investments 7,934,523 (387,086)
----------- --------
Net increase (decrease) in shareholders'
equity resulting from operations $ 7,386,933 ($821,550)
=========== ========
Per share net increase (decrease) in shareholders'
equity resulting from operations
Basic $ 1.47 ($ .16)
=========== ========
Diluted $ 1.45 ($ .16)
=========== ========
The accompanying notes are an integral part of this statement.
</TABLE>
-3-
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF OPERATIONS
==================================
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1998 1997
----------- --------
<S> <C> <C>
Investment income
Interest from small business concerns $ 104,705 $ 82,151
Interest from invested idle funds 57,087 196,716
Other income 33,733 29,420
----------- --------
Total investment income 195,525 308,287
----------- --------
Expenses
Interest 197,948 208,551
Payroll and payroll related expenses 116,264 127,433
General and administrative expenses 69,878 59,369
Other operating expenses 103,405 100,251
----------- --------
Total investment expenses 487,495 495,604
----------- --------
Investment loss - net (291,970) (187,317)
Realized loss on investments (7,775) (82,468)
Change in unrealized appreciation of
investments (2,353,809) (359,256)
----------- --------
Net (decrease) in shareholders'
equity resulting from operations ($ 2,653,554) ($629,041)
=========== ========
Per share net (decrease) in shareholders'
equity resulting from operations
Basic ($ .53) ($ .12)
=========== ========
Diluted ($ .53) ($ .12)
=========== ========
</TABLE>
The accompanying notes are an integral part of this statement.
-4-
<PAGE>
<TABLE>
<CAPTION>
WINFIELD CAPITAL CORP.
CONDENSED BALANCE SHEETS
========================
ASSETS
September 30, March 31,
1998 1998
---------- ----------
<S> <C> <C>
Loans and investments
Loans and notes receivable $ 4,866,743 $ 6,598,875
Equity interests in small business
concerns 16,013,839 6,051,901
Assets acquired in liquidation 683,210 713,935
----------- -----------
Total investments 21,563,792 13,364,711
Cash 2,376,695 848,777
Short term marketable securities 1,229,154 3,462,587
Accrued interest receivable 142,877 164,556
Furniture and equipment (net of
accumulated depreciation of
$71,406 at September 30, 1998
and $68,250 at March 31, 1998) 15,459 18,615
Other assets 310,662 373,869
----------- -----------
Total assets $25,638,639 $18,233,115
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
-5-
<PAGE>
<TABLE>
<CAPTION>
WINFIELD CAPITAL CORP.
CONDENSED BALANCE SHEETS
========================
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, March 31,
1998 1998
------------- -----------
<S> <C> <C>
Liabilities
Debentures payable to the U.S. Small
Business Administration $ 8,300,000 $ 8,300,000
Subordinated debentures payable 1,003,921 983,502
Accrued expenses 307,307 279,162
Deferred income 14,930 44,903
----------- -----------
Total liabilities 9,626,158 9,607,567
----------- -----------
Commitments and contingencies
Shareholders' equity
Preferred stock - .001 par value;
Authorized 1,000,000 shares
Issued and outstanding - none
Common stock - $.01 par value;
Authorized - 10,000,000 shares;
Issued and outstanding - 5,023,361 at
September 30, 1998 and March 31, 1998 50,234 50,234
Additional paid-in capital 9,442,365 9,442,365
Accumulated earnings (deficit) 6,519,882 (867,051)
----------- -----------
Total shareholders' equity 16,012,481 8,625,548
----------- -----------
Total liabilities and
shareholders' equity $25,638,639 $18,233,115
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
-6-
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF CASH FLOWS
==================================
Six Months Ended
September 30,
-----------------------------
1998 1997
----------- -----------
Operating activities
Net increase (decrease) in shareholders'
equity resulting from operations $ 7,386,933 ($ 821,550)
Adjustments to reconcile net increase
(decrease) in shareholders' equity
resulting from operations to net cash
used in operating activities
Amortization of deferred income (29,973) --
Amortization of debenture costs 20,419 20,419
Change in unrealized (appreciation)
depreciation on investments (7,934,523) 387,086
Realized loss on investments 12,689 82,468
Depreciation and amortization 14,732 11,768
Amortization of bond expenses 14,365 14,365
(Increase) decrease in
Accrued interest receivable 21,679 (45,057)
Other assets 37,266 37,444
Increase in accrued expenses 28,145 29,392
----------- -----------
Net cash (used in) operating activities (428,268) (283,665)
----------- -----------
Investing activities
Short term marketable securities - net 2,233,433 4,164,770
Investments originated (1,201,407) (5,065,800)
Proceeds from collection of loans 924,160 158,920
Purchase of furniture and equipment -- (4,394)
----------- -----------
Net cash provided by (used in) investing
activities 1,956,186 (746,504)
----------- -----------
Financing activities
Repayment of debentures to SBA -- (600,000)
----------- -----------
Net cash used in financing activities -- (600,000)
----------- -----------
Increase (decrease) in cash 1,527,918 (1,630,169)
Cash - beginning of period 848,777 3,314,875
----------- -----------
Cash - end of period $ 2,376,695 $ 1,684,706
=========== ===========
The accompanying notes are an integral part of this statement.
-7-
<PAGE>
WINFIELD CAPITAL CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
=======================================
Note - 1 Interim Financial Statements
The interim financial statements of Winfield Capital Corp. (the
"Company") have been prepared in accordance with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all information and disclosures necessary for a presentation
of the Company's financial position, results of operations and cash
flows in conformity with generally accepted accounting principles. In
the opinion of management, these financial statements reflect all
adjustments consisting only of normal recurring accruals, necessary
for a fair presentation of the Company's financial position, results
of operations and cash flows for such periods. The results of
operations for any interim periods are not necessarily indicative of
the results for the full year. These financial statements should be
read in conjunction with the financial statements and notes thereto
contained in the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1998.
Note - 2 Earnings (Loss) per Common Share:
The reconciliation of basic and diluted earnings (loss) per common
share computation is as follows:
Six Months Ended
September 30,
----------------------
1998 1997
-------- ------
Net increase (decrease) in shareholders'
equity resulting from operations $ 7,386,933 ($821,550)
=========== ========
Earnings (loss) per common share
Basic $ 1.47 ($ .16)
=========== ========
Diluted $ 1.45 ($ .16)
=========== ========
Shares used in computation:
Basic:
Weighted average common shares 5,023,361 5,023,061
========= =========
Diluted:
Weighted average common shares 5,023,361 5,023,361
Common stock equivalents 62,314 (A)
--------- ---------
5,085,675 5,023,361
========= =========
-8-
<PAGE>
WINFIELD CAPITAL CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
=======================================
Note - 2 Earnings (Loss) per Common Share: (Cont'd)
The reconciliation of basic and diluted earnings (loss) per common
share computation is as follows:
Three Months Ended
September 30,
---------------------
1998 1997
----------- ------
Net increase (decrease) in shareholders'
equity resulting from operations ($ 2,653,554) ($629,041)
=========== ========
Earnings (loss) per common share
Basic ($ .53) ($ .12)
=========== ========
Diluted ($ .53) ($ .12)
=========== ========
Shares used in computation:
Basic:
Weighted average common shares 5,023,061 5,023,061
========= =========
Diluted:
Weighted average common shares 5,023,061 5,023,061
Common stock equivalents (A) (A)
--------- ---------
5,023,061 5,023,061
========= =========
(A) For the three months ended September 30, 1998 and for the three and six
months ended September 30, 1997 the fully diluted computation would be
anti-dilutive and was not considered.
Note - 3 One of the Company's investments, Cyberian Outpost, Inc. made its
initial public offering on July 31, 1998 commencing trading on the
Nasdaq National Market. The securities held by the Company in
connection with this investment are subject to restrictions on
transferability including the underwriter's lock-up of 180 days from
the initial public offering date. Consistent with its accounting
policies, the Company will continue to discount the carrying value of
its investment in Cyberian Outpost, Inc. as long as such restrictions
on transferability exist.
-9-
<PAGE>
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
================================================
Results of Operations
Six Months Ended September 30, 1998 and September 30, 1997
Investment Income
Investment income decreased from $576,011 for the six month period ended
September 30, 1997 to $426,450 for the same period ended September 30, 1998.
This primarily reflected $236,285 in decreased earnings from invested idle funds
due to the increased investment activity in 1997 and 1998. There was also an
increase of $44,679 in interest earned from the Company's investment portfolio
due to new loans generated in 1997 and 1998. Other investment income,
principally amortization of deferred commitment and application fees, and income
from both notes receivable and assets acquired in liquidation, increased by
$42,045.
Interest Expense
Interest expense decreased from $420,469 for the six months ended September 30,
1997 to $394,340 for the same period ended September 30, 1998 due to the
repayment of $600,000 to the Small Business Administration (the "SBA") on
September 1, 1997.
Operating Expenses
The Company's operating expenses increased from $507,538 for the six months
ended September 30, 1997 to $567,011 for the six months ended September 30,
1998. Professional fees increased by $57,332 and travel related expenses
increased by $11,468 reflecting the increased level of investment activity.
Payroll related expenses decreased by $16,024.
Realized Loss on Disposition of Investments
The Company realized a loss of $12,689 on the disposition of two of its
investments in 1998 and a loss of $82,468 on the disposition of one investment
in 1997.
Unrealized Appreciation or Depreciation of Investments
There was an unrealized appreciation of investments of $7,934,523 for the six
months ended September 30, 1998 compared to a decrease in unrealized
appreciation of $387,086 for the same period ended September 30, 1997,
principally related to the market price of one investment in a portfolio company
which recently made its initial public offering.
-10-
<PAGE>
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
=================================================
Results of Operations
Three Months Ended September 30, 1998 and September 30, 1997
Investment Income
Investment income decreased from $308,287 for the three month period ended
September 30, 1997 to $195,525 for the same period ended September 30, 1998.
This primarily reflected $139,629 in decreased earnings from invested idle funds
due to the increased investment activity in 1997 and 1998. There was also an
increase of $22,554 in interest earned from the Company's investment portfolio
due to new loans generated in 1997 and 1998. Other investment income,
principally amortization of deferred commitment and application fees, and income
from both notes receivable and assets acquired in liquidation, increased by
$4,313.
Interest Expense
Interest expense decreased from $208,551 for the three months ended September
30, 1997 to $197,948 for the same period ended September 30, 1998 due to the
repayment of $600,000 to the Small Business Administration (the "SBA") on
September 1, 1997.
Operating Expenses
The Company's operating expenses increased from $287,053 for the three months
ended September 30, 1997 to $289,547 for the three months ended September 30,
1998. Various expenses increased by $13,663 and payroll and payroll related
expenses decreased by $11,169.
Realized Loss on Disposition of Investments
The Company realized a loss of $7,775 on the disposition of one investment in
1998 and a loss of $82,468 on the disposition of one investment in 1997.
Unrealized Appreciation or Depreciation of Investments
There was a decrease in unrealized appreciation of investments of $2,353,809 for
the three months ended September 30, 1998 compared to a decrease in unrealized
appreciation of $359,256 for the same period ended September 30, 1997,
principally related to the market price of one investment in a portfolio company
which recently had its initial public offering.
-11-
<PAGE>
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
================================================
Liquidity and Capital Resources
At September 30, 1998 the Company had cash and short term marketable securities,
totaling $3,605,849 invested with banks which meet the Federal Deposit Insurance
Corporation's definition of well capitalized financial institutions.
The Company believes that its cash and short term investments at September 30,
1998 will be adequate to meet both its working capital needs and short-term
investment opportunities. Given the current pace of investment opportunities,
the Company may seek additional funds through borrowing from the SBA to satisfy
its long-term investment objective. The Company has a five year commitment from
the SBA which reserves $10,000,000 of SBA guaranteed debentures. The drawing
down of commitment proceeds is contingent upon the Company's creditworthiness
and full compliance with all SBA rules and regulations at the time of the
drawdown.
-12-
<PAGE>
WINFIELD CAPITAL CORP.
PART II - OTHER INFORMATION
===========================
Item 6 - Exhibits and Reports on Form 8-K
a. Exhibit Index
None.
b. Reports on Form 8-K
None.
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.
WINFIELD CAPITAL CORP.
(Registrant)
By: /S/PAUL A. PERLIN
------------------
Paul A. Perlin
Chief Executive Officer
Dated: November 11, 1998
-13-
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 18,044,121
<INVESTMENTS-AT-VALUE> 25,169,641
<RECEIVABLES> 0
<ASSETS-OTHER> 468,998
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25,638,639
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 9,303,921
<OTHER-ITEMS-LIABILITIES> 322,237
<TOTAL-LIABILITIES> 9,626,158
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,492,599
<SHARES-COMMON-STOCK> 5,023,361
<SHARES-COMMON-PRIOR> 5,023,361
<ACCUMULATED-NII-CURRENT> 6,519,882
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,125,520
<NET-ASSETS> 16,012,481
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 350,461
<OTHER-INCOME> 75,989
<EXPENSES-NET> 961,351
<NET-INVESTMENT-INCOME> (534,901)
<REALIZED-GAINS-CURRENT> (12,689)
<APPREC-INCREASE-CURRENT> 7,934,523
<NET-CHANGE-FROM-OPS> 7,386,933
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
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<NET-CHANGE-IN-ASSETS> 7,386,933
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
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<INTEREST-EXPENSE> 394,340
<GROSS-EXPENSE> 961,351
<AVERAGE-NET-ASSETS> 14,434,688
<PER-SHARE-NAV-BEGIN> 1.72
<PER-SHARE-NII> (0.11)
<PER-SHARE-GAIN-APPREC> 1.58
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
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<EXPENSE-RATIO> 6.66
<AVG-DEBT-OUTSTANDING> 9,293,712
<AVG-DEBT-PER-SHARE> 1.85
</TABLE>
