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 December 31, 1997
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,
1997.
- --------------------------------------------------------------------------------
This report consists of 13 pages
<PAGE>
Form 10-Q Quarterly Report
INDEX
PART I - Financial Information Page No.
--------
Condensed Statements of Operations -
Nine and Three Months ended December 31, 1997
and 1996 .............................................. 3-4
Condensed Balance Sheets - as of
December 31, 1997 and March 31, 1997 .................. 5-6
Condensed Statements of Cash Flows -
Nine Months Ended December 31, 1997
and 1996 .............................................. 7
Notes to Condensed Financial Statements ................. 8
Management's Discussion and Analysis
of Financial Condition and Results
of Operations ......................................... 9-11
PART II - Other Information ...................................... 12-13
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF OPERATIONS
Nine Months Ended
December 31,
1997 1996
-------- ------
Investment income
Interest from small business concerns $ 337,704 $ 374,872
Interest from invested idle funds 454,527 491,086
Other income 109,415 171,668
---------- ----------
Total investment income 901,646 1,037,626
---------- ----------
Expenses
Interest 618,662 568,129
Payroll and payroll related expenses 389,015 338,118
General and administrative expenses 189,905 190,796
Professional fees 105,329 60,124
Depreciation and amortization 17,651 14,170
Other taxes - 11,193
Other operating costs 29,187 20,457
---------- ----------
Total investment expenses 1,349,749 1,202,987
---------- ----------
Investment loss - net ( 448,103) ( 165,361)
Realized (loss) gain on disposition of
investments ( 64,877) 124,960
Change in unrealized (depreciation)
appreciation of investments ( 1,100,479) 22,246
---------- ----------
Net decrease in shareholders' equity
resulting from operations ($1,613,459) ($ 18,155)
========== ==========
Per share net decrease in shareholders' equity
resulting from operations
Basic ($ .32) ($ - )
========== ==========
Fully diluted ($ .32) ($ - )
========== ==========
The accompanying notes are an integral part of this statement.
-3-
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF OPERATIONS
==================================
Three Months Ended
December 31,
1997 1996
--------- ---------
Investment income
Interest from small business concerns $ 147,398 $ 172,288
Interest from invested idle funds 102,766 156,239
Other income 75,471 12,240
--------- ---------
Total investment income 325,635 340,767
--------- ---------
Expenses
Interest 198,193 213,491
Payroll and payroll related expenses 132,764 116,445
General and administrative expenses 62,798 56,414
Professional fees 17,754 9,538
Depreciation and amortization 5,883 5,452
Other taxes -- --
Other operating costs 4,350 6,318
--------- ---------
Total investment expenses 421,742 407,658
--------- ---------
Investment loss - net (96,107) (66,891)
Realized gain on disposition of investments 17,591 124,960
Change in unrealized (depreciation)
appreciation of investments (713,393) 22,499
--------- ---------
Net (decrease) increase in shareholders'
equity resulting from operations ($791,909) $ 80,568
========= =========
Per share net (decrease) increase in shareholders'
equity resulting from operations
Basic ($ .16) $ .02
========= =========
Fully diluted ($ .16) $ .02
========= =========
The accompanying notes are an integral part of this statement.
-4-
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED BALANCE SHEETS
========================
ASSETS
------
December 31, March 31,
1997 1997
----------- -----------
Loans and investments
Loans and notes receivable $ 6,527,950 $ 2,552,030
Equity interests in small business
concerns 5,067,606 1,549,304
Assets acquired in liquidation 964,582 807,571
----------- -----------
Total investments 12,560,138 4,908,905
Cash 2,156,736 3,314,875
Short term marketable securities 4,333,221 12,108,274
Accrued interest receivable 163,252 72,088
Furniture and equipment (net of
accumulated depreciation of
$65,912 at December 31, 1997
and $61,817 at March 31, 1997) 12,148 11,849
Other assets 333,265 332,691
----------- -----------
Total assets $19,558,760 $20,748,682
=========== ===========
The accompanying notes are an integral part of this statement.
-5-
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED BALANCE SHEETS
========================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
December 31, March 31,
1997 1997
------------ ------------
Liabilities
Debentures payable to the U.S. Small
Business Administration $ 8,300,000 $ 8,900,000
Subordinated debentures payable 973,293 942,665
Funds held in escrow 1,107,850 --
Accrued expenses 181,054 295,995
------------ ------------
Total liabilities 10,562,197 10,138,660
------------ ------------
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 December 31, 1997 and
March 31, 1997 50,234 50,234
Additional paid-in capital 10,850,829 10,850,829
Accumulated deficit (1,069,071 (556,091)
Unrealized appreciation (depreciation)
on investments, net (835,429) 265,050
------------ ------------
Total shareholders' equity 8,996,563 10,610,022
------------ ------------
Total liabilities and
shareholders' equity $ 19,558,760 $ 20,748,682
============ ============
The accompanying notes are an integral part of this statement.
-6-
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
December 31,
----------------------------
1997 1996
---------- -----------
Operating activities
Net decrease in shareholders' equity
resulting from operations ($1,613,459) ($ 18,155)
Adjustments to reconcile net decrease
in shareholders' equity resulting
from operations to net cash used in
operating activities
Realized loss (gain) on disposition of
investments 64,877 ( 124,960)
Amortization of debenture costs 30,628 30,628
Change in unrealized depreciation
(appreciation) on investments 1,100,479 ( 22,246)
Capitalized interest - 2,911
Depreciation and amortization 17,651 14,171
Amortization of debenture expenses 21,547 21,570
(Increase) decrease in
Accrued interest receivable ( 91,164) ( 45,685)
Other assets ( 35,677) ( 162,941)
(Decrease) increase in accrued expenses ( 114,941) 35,961
---------- -----------
Net cash used in operating activities ( 620,059) ( 268,746)
---------- -----------
Investing activities
Short term marketable securities - net 7,775,053 ( 3,680,030)
Proceeds from sale of equity interests 17,591 124,960
Investments originated ( 9,038,687) ( 3,584,754)
Proceeds from collection of loans 204,507 434,619
Purchase of furniture and equipment ( 4,394) -
Increase (decrease) in funds held in escrow 1,107,850 ( 24,117)
---------- -----------
Net cash provided by (used in) investing
activities 61,920 ( 6,729,322)
---------- -----------
Financing activities
Proceeds from debentures payable to
the SBA - 5,000,000
Repayment of debentures payable to SBA
and bank loan ( 600,000) ( 605,000)
---------- -----------
Net cash (used in) provided by financing
activities ( 600,000) 4,395,000
---------- -----------
(Decrease) in cash ( 1,158,139) ( 2,603,068)
Cash - beginning of period 3,314,875 3,410,572
---------- -----------
Cash - end of period $2,156,736 $ 807,504
========== ===========
The accompanying notes are an integral part of this statement.
-7-
<PAGE>
WINFIELD CAPITAL CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note - 1 In the opinion of the Company, the accompanying unaudited
condensed financial statements contain all adjustments necessary
to present fairly the financial position of the Company as of
December 31, 1997 and the results of operations for the nine and
three months ended December 31, 1997 and 1996 and the cash flows
for the nine months ended December 31, 1997 and 1996. The
operating results of the Company on a quarterly basis may not be
indicative of operating results for the full year.
Note - 2 The funds held in escrow includes $1,097,050 which represents
monies received from and for participants in relation to an
investment which was completed in January, 1998.
Note - 3 In January, 1998 the Company paid a non-refundable commitment
fee of $100,000 to the Small Business Administration to reserve
$10,000,000 of SBA guaranteed debentures through September 30,
2002. The remaining portion of the fee of $200,000 will be
deducted pro rata as commitment proceeds are drawn down.
-8-
<PAGE>
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Nine Months Ended December 31, 1997 and December 31, 1996
Investment Income
Investment income decreased from $1,037,626 for the nine months ended December
31, 1996 to $901,646 for the nine months ended December 31, 1997. This reflects
a decrease in investment income of $135,980. Interest from small business
concerns decreased by $37,168 due to the Company entering into a higher portion
of new equity investments rather than loans. Other income which consists of
commitment and processing fees decreased by $62,253. There are often no
commitment and processing fees on equity investments. Those investments are
oriented towards long term appreciation and in some instances may pay future
dividends. Interest from invested idle funds decreased by $36,559 due to some
funds being used for equity or loan investments. Total new investments for the
nine months ended December 31, 1997 were $9,038,687.
Interest Expense
Interest expense increased from $568,129 for the nine months ended December 31,
1996 to $618,662 for the nine months ended December 31, 1997 due to an increase
in indebtedness of $5,000,000 to the Small Business Administration on June 26,
1996 with interest at 7.71% per annum.
Operating Expenses
Operating expenses increased from $634,858 for the nine months ended December
31, 1996 to $731,087 for the nine months ended December 31, 1997. Payroll and
payroll related expenses increased by $50,897 as a result of hiring a new
employee in July, 1996 and salary increases in 1997. Professional fees increased
by $45,205 due to legal and consulting fees in connection with new investment
opportunities.
Realized Loss on Disposition of Investments
The Company realized a loss of $64,877 on the disposition of two investments. In
prior periods, the Company had recorded unrealized depreciation of $80,000 on
one of the investments.
-9-
<PAGE>
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unrealized Appreciation or Depreciation of Investments
The unrealized depreciation of investments of $1,100,479 was principally related
to the decline in the market price of two investments in publicly held
companies.
Liquidity and Capital Resources
At December 31, 1997 the Company had cash and short term marketable securities,
totaling $6,489,957 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 December 31,
1997 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 borrowings from the Small Business
Administration to satisfy its long-term investment objectives. The Company has
received a five year commitment from the Small Business Administration which
reserves $10,000,000 of SBA guaranteed debentures. The drawing down of
commitment proceeds is conditioned upon the Company's creditworthiness and full
compliance with all SBA rules and regulations at the time of the draw down.
-10-
<PAGE>
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three Months Ended December 31, 1997 and December 31, 1996
Investment Income
Investment income decreased from $340,767 for the three months ended December
31, 1996 to $325,635 for the three months ended December 31, 1997. Interest from
loans to small business concerns decreased by $24,890 due to a higher portion of
new equity rather than loan investments. Other income increased by $63,231
resulting from an increase in new loans which normally generate processing and
commitment fees. Interest from invested idle funds decreased by $53,473 due to
some funds being used for new equity or loan investments.
Interest Expense
Interest expense decreased from $213,491 for the three months ended December 31,
1996 to $198,193 for the three months ended December 31, 1997 due to the
repayment of $600,000 with interest at 10.350% to the Small Business
Administration on September 1, 1997.
Operating Expenses
Operating expenses increased from $194,167 for the three months ended December
31, 1996 to $223,549 for the three months ended December 31, 1997. Professional
fees increased by $6,384 due to legal and consulting fees in connection with new
investment opportunities. Payroll and payroll related expenses increased by
$16,319 due to salary increases in 1997.
-11-
<PAGE>
WINFIELD CAPITAL CORP.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
a. Exhibit Index
Exhibit II - Computation of Earnings Per Share
b. Reports on Form 8-K
There were no reports on Form 8-K filed for the three months
ended December 31, 1997.
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: February 11, 1998
-12-
<PAGE>
WINFIELD CAPITAL CORP.
COMPUTATION OF EARNINGS PER SHARE
EXHIBIT II
Nine Months Ended
December 31,
------------------------
1997 1996
--------- ---------
Basic and Fully Diluted Loss Per Share
Weighted average number of
shares outstanding 5,023,361 5,023,361
--------- ---------
Net decrease in shareholders' equity
resulting from operations ($1,613,459) ($ 18,155)
---------- ---------
Per share net decrease in shareholders'
equity resulting from operations
Basic ($ .32) ($ - )
========== =========
Fully diluted ($ .32) ($ - )
========== =========
Three Months Ended
December 31,
------------------------
1997 1996
--------- ---------
Basic and Fully Diluted Loss Per Share
Weighted average number of
shares outstanding 5,023,361 5,023,361
--------- ---------
Net (decrease) increase in shareholders'
equity resulting from operations ($ 791,909) $ 80,658
--------- ---------
Per share net (decrease) increase in shareholders'
equity resulting from operations
Basic ($ .16) $ .02
========= =========
Fully diluted ($ .16) $ .02
========= =========
-13-
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 19,885,524
<INVESTMENTS-AT-VALUE> 19,050,095
<RECEIVABLES> 0
<ASSETS-OTHER> 508,665
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 19,558,760
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<SENIOR-LONG-TERM-DEBT> 9,273,293
<OTHER-ITEMS-LIABILITIES> 1,288,904
<TOTAL-LIABILITIES> 10,562,197
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,901,063
<SHARES-COMMON-STOCK> 5,023,361
<SHARES-COMMON-PRIOR> 5,023,361
<ACCUMULATED-NII-CURRENT> (1,069,071)
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<OTHER-INCOME> 109,415
<EXPENSES-NET> 1,349,749
<NET-INVESTMENT-INCOME> (448,103)
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