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 June 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 June 30, 1998.
This report consists of 11 pages
<PAGE>
Form 10-Q Quarterly Report
INDEX
Part I - Financial Information Page No.
--------
Condensed Statements of Operations -
Three Months ended June 30, 1998 and 1997 3
Condensed Balance Sheets - as of
June 30, 1998 and March 31, 1998 4-5
Condensed Statements of Cash Flows -
Three Months Ended June 30, 1998
and 1997 6
Notes to Condensed Financial Statements 7-8
Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9-10
Part II - Other Information 11
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF OPERATIONS
=================================
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1998 1997
------------ ------------
<S> <C> <C>
Investment income
Interest from small business concerns $ 130,280 $ 108,155
Interest from invested idle funds 58,389 155,045
Other income 42,256 4,524
------------ ------------
Total investment income 230,925 267,724
------------ ------------
Expenses
Interest 196,392 211,918
Payroll and payroll related expenses 123,963 128,818
General and administrative expenses 68,180 67,738
Other operating expenses 85,321 23,929
------------ ------------
Total investment expenses 473,856 432,403
------------ ------------
Investment loss - net (242,931) (164,679)
Realized loss on investment (4,914) --
Change in unrealized appreciation of
investments 10,288,332 (27,830)
------------ ------------
Net increase (decrease) in shareholders'
equity resulting from operations $ 10,040,487 ($ 192,509)
============ ============
Per share net increase (decrease) in shareholders'
equity resulting from operations
Basic $ 2.00 ($ .04)
============ ============
Diluted $ 1.95 ($ .04)
============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
-3-
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED BALANCE SHEETS
========================
ASSETS
June 30, March 31,
1998 1998
----------- -----------
Loans and investments
Loans and notes receivable $ 5,262,024 $ 6,598,875
Equity interests in small business
concerns 17,212,645 6,051,901
Assets acquired in liquidation 683,210 713,935
----------- -----------
Total investments 23,157,879 13,364,711
Cash 1,578,145 848,777
Short term marketable securities 2,983,231 3,462,587
Accrued interest receivable 130,335 164,556
Furniture and equipment (net of
accumulated depreciation of
$69,828 at June 30, 1998
and $68,250 at March 31, 1998) 17,037 18,615
Other assets 367,026 373,869
----------- -----------
Total assets $28,233,653 $18,233,115
=========== ===========
The accompanying notes are an integral part of this statement.
-4-
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED BALANCE SHEETS
=======================
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, March 31,
1998 1998
------------ ------------
Liabilities
Debentures payable to the U.S. Small
Business Administration $ 8,300,000 $ 8,300,000
Subordinated debentures payable 993,712 983,502
Accrued expenses 245,228 279,162
Deferred income 28,678 44,903
------------ ------------
Total liabilities 9,567,618 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 June 30, 1998 and March 31, 1998 50,234 50,234
Additional paid-in capital 9,442,365 9,442,365
Accumulated earnings (deficit) 9,173,436 (867,051)
------------ ------------
Total shareholders' equity 18,666,035 8,625,548
------------ ------------
Total liabilities and
shareholders' equity $ 28,233,653 $ 18,233,115
============ ============
The accompanying notes are an integral part of this statement.
-5-
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF CASH FLOWS
======================================
Three Months Ended
June 30,
1998 1997
------------ ------------
Operating activities
Net increase (decrease) in shareholders'
equity resulting from operations $ 10,040,487 ($ 192,509)
Adjustments to reconcile net increase
(decrease) in shareholders' equity
resulting from operations to net cash
used in operating activities
Amortization of deferred income (16,225) --
Amortization of debenture costs 10,210 10,209
Change in unrealized (appreciation)
depreciation on investments (10,288,332) 27,830
Loss on investments 4,914 --
Depreciation and amortization of
fixed assets 1,578 1,365
Amortization of bond expenses 7,182 7,182
(Increase) decrease in
Accrued interest receivable 34,221 (8,785)
Other assets 27,065 15,036
(Decrease) in accrued expenses (33,934) (46,469)
------------ ------------
Net cash (used in) operating activities (212,834) (186,141)
------------ ------------
Investing activities
Short term marketable securities - net 479,356 1,180,529
Investments originated (41,493) (2,231,785)
Proceeds from collection of loans 504,339 106,956
Purchase of furniture and equipment -- (4,394)
------------ ------------
Net cash provided by (used in) investing
activities 942,202 (948,694)
------------ ------------
Increase (decrease) in cash 729,368 (1,134,835)
Cash - beginning of period 848,777 3,314,875
------------ ------------
Cash - end of period $ 1,578,145 $ 2,180,040
============ ============
The accompanying notes are an integral part of this statement.
-6-
<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 operation 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 per common share computation
is as follows:
Three Months Ended
June 30,
-------------------------
1998 1997
----------- -----------
Net earnings (loss) in shareholders'
equity resulting from operations $10,040,487 ($ 192,509)
=========== ===========
Earnings (loss) per common share
Basic $ 2.00 ($ 0.04)
=========== ===========
Diluted $ 1.95 $ (A)
=========== ===========
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 134,735 (A)
=========== ===========
5,158,096 5,023,361
=========== ===========
(A) For the three months ended June 30, 1997 the fully diluted computation
would be anti-dilutive and was not considered.
-7-
<PAGE>
WINFIELD CAPITAL CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
========================================
Note 3 - Subsequent to June 30, 1998, the Company made an equity investment of
$900,000 in Commerce One, Inc. Also, 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.
-8-
<PAGE>
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
====================================================
Results of Operations
Three Months Ended June 30, 1998 and June 30, 1997
Investment Income
Investment income decreased from $267,724 for the three month period ended June
30, 1997 to $230,925 for the same period ended June 30, 1998. This primarily
reflected $96,656 in decreased earnings from invested idle funds due to the
increased investment activity in 1997. There was also an increase of $22,125 in
interest earned from the Company's investment portfolio due to new loans
generated in 1997. Other investment income, principally amortization of deferred
commitment and application fees, and income from both notes receivable and
assets acquired in liquidation, increased by $37,732.
Interest Expense
Interest expense decreased from $211,918 for the three months ended June 30,
1997 to $196,392 for the same period ended June 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 $220,485 for the three months
ended June 30, 1997 to $277,464 for the three months ended June 30, 1998.
Professional fees increased by $55,796 reflecting the increased level of
investment activity and payroll and payroll related expenses decreased by
$4,855.
Realized Loss on Disposition of Investments
The Company realized a loss of $4,914 on the disposition of one of its
investments.
Unrealized Appreciation or Depreciation of Investments
There was an increase in unrealized appreciation of investments of $10,288,332
for the three months ended June 30, 1998 compared to a decrease in unrealized
appreciation of $27,830 for the same period ended June 30, 1997, principally
related to the market price of one investment in a portfolio company which
recently made its initial public offering.
-9-
<PAGE>
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
====================================================
Liquidity and Capital Resources
At June 30, 1998 the Company had cash and short term marketable securities,
totaling $4,561,376 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 June 30, 1998
will be adequate to meet both its working capital needs and the 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 had received 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.
-10-
<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
Form 8-K dated August 6, 1998 was filed by the Company in
connection with the initial public offering of one of the
Company's portfolio investments.
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: August 14, 1998
-11-
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 18,239,926
<INVESTMENTS-AT-VALUE> 27,719,255
<RECEIVABLES> 0
<ASSETS-OTHER> 514,398
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 28,233,653
<PAYABLE-FOR-SECURITIES> 0
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<OTHER-ITEMS-LIABILITIES> 273,906
<TOTAL-LIABILITIES> 9,567,618
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<PAID-IN-CAPITAL-COMMON> 9,492,599
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<OTHER-INCOME> 42,256
<EXPENSES-NET> 473,856
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<PER-SHARE-NII> 2.00
<PER-SHARE-GAIN-APPREC> 2.05
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