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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, 1998
--------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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 December 31,
1998.
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This report consists of 14 pages
<PAGE>
Form 10-Q Quarterly Report
--------------------------
INDEX
-----
Part I - Financial Information Page No.
--------
Condensed Statements of Operations -
Three and Nine Months ended December 31, 1998
and 1997 ................................................... 3-4
Condensed Balance Sheets - as of
December 31, 1998 and March 31, 1998 ....................... 5-6
Condensed Statements of Cash Flows -
Nine Months Ended December 31, 1998
and 1997 ................................................... 7
Notes to Condensed Financial Statements ...................... 8-10
Management's Discussion and Analysis
of Financial Condition and Results
of Operations .............................................. 11-13
Part II - Other Information ........................................... 14
-2-
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF OPERATIONS
----------------------------------
Three Months Ended
December 31,
------------
1998 1997
-------- --------
Investment income
Interest from small business concerns ............ $ 134,806 $147,398
Interest from invested idle funds ................ 35,009 102,766
Other income ..................................... 32,530 75,471
----------- --------
Total investment income .................... 202,345 325,635
----------- --------
Expenses
Interest ......................................... 197,596 198,193
Payroll and payroll related expenses ............. 115,122 132,764
General and administrative expenses .............. 24,772 62,798
Other operating expenses ......................... 101,417 27,987
----------- --------
Total investment expenses ................. 438,907 421,742
----------- --------
Investment loss - net ..................... (236,562) (96,107)
Realized gain on disposition of investments .......... -- 17,591
Change in unrealized appreciation
(depreciation) of investments .................... 17,130,415 (713,393)
----------- --------
Net increase (decrease) in shareholders'
equity resulting from operations ....... $16,893,853 ($791,909)
=========== ========
Per share net increase (decrease) in shareholders'
equity resulting from operations
Basic ........................................ $ 3.36 ($ .16)
======== ========
Diluted ...................................... $ 2.95 ($ .16)
======== ========
The accompanying notes are an integral part of this statement.
-3-
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF OPERATIONS
----------------------------------
Nine Months Ended
December 31,
------------
1998 1997
-------- --------
Investment income
Interest from small business concerns ......... $ 369,791 $ 337,704
Interest from invested idle funds ............. 150,485 454,527
Other income .................................. 108,519 109,415
----------- ----------
Total investment income ................... 628,795 901,646
----------- ----------
Expenses
Interest ...................................... 591,936 618,662
Payroll and payroll related expenses .......... 355,349 389,015
General and administrative expenses ........... 162,830 189,905
Other operating expenses ...................... 290,143 152,167
----------- ----------
Total investment expenses ................. 1,400,258 1,349,749
----------- ----------
Investment loss - net ..................... (771,463) (448,103)
Realized (loss) on disposition of
investments ................................... (12,689) (64,877)
Change in unrealized appreciation
(depreciation) of investments ................. 25,064,938 (1,100,479)
----------- ----------
Net increase (decrease) in
shareholders' equity resulting
from operations ......................... $24,280,786 ($1,613,459)
=========== ==========
Per share net increase (decrease) in share-
holders' equity resulting from operations
Basic ..................................... $ 4.83 ($ 0.32)
========== ==========
Diluted ................................... $ 4.58 ($ 0.32)
========== ==========
The accompanying notes are an integral part of this statement.
-4-
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED BALANCE SHEETS
------------------------
ASSETS
------
December 31, March 31,
1998 1998
----------- -----------
Loans and investments
Loans and notes receivable ........... $ 4,651,098 $ 6,598,875
Equity interests in small business
concerns ........................... 35,465,323 6,051,901
Assets acquired in liquidation ....... 390,282 713,935
----------- -----------
Total investments ...... 40,506,703 13,364,711
Cash ..................................... 1,490,272 848,777
Short term marketable securities ......... -- 3,462,587
Accrued interest receivable .............. 152,760 164,556
Furniture and equipment (net of
accumulated depreciation of
$73,116 at December 31, 1998
and $68,250 at March 31, 1998) ....... 14,508 18,615
Other assets ............................. 308,496 373,869
----------- -----------
Total assets ........... $42,472,739 $18,233,115
=========== ===========
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,
1998 1998
----------- -----------
Liabilities
Debentures payable to the U.S. Small
Business Administration .................... $ 8,300,000 $ 8,300,000
Subordinated debentures payable .............. 1,014,130 983,502
Accrued expenses ............................. 243,059 279,162
Deferred income .............................. 9,216 44,903
----------- -----------
Total liabilities .............. 9,566,405 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 December 31, 1998 and
March 31, 1998 .......................... 50,234 50,234
Additional paid-in capital ................... 9,442,365 9,442,365
Accumulated earnings (deficit) ............... 23,413,735 ( 867,051)
----------- -----------
Total shareholders' equity ..... 32,906,334 8,625,548
----------- -----------
Total liabilities and
shareholders' equity ......... $42,472,739 $18,233,115
=========== ===========
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,
------------
1998 1997
----------- -----------
Operating activities
Net increase (decrease) in shareholders'
equity resulting from operations ........ $24,280,786 ($1,613,459)
Adjustments to reconcile net increase
(decrease) in shareholders' equity
resulting from operations to net
cash used in operating activities
Realized loss on disposition of
investments ............................. 12,689 64,877
Amortization of debenture costs 30,628 30,628
Change in unrealized (appreciation)
depreciation on investments ............. ( 25,064,938) 1,100,479
Amortization of deferred income ......... ( 35,687) --
Depreciation and amortization ........... 22,230 17,651
Amortization of debenture expenses ...... 21,547 21,547
(Increase) decrease in
Accrued interest receivable ............. 11,796 ( 91,164)
Other assets ............................ 26,462 ( 35,677)
(Decrease) increase in accrued expenses . ( 36,103) ( 114,941)
---------- ----------
Net cash used in operating activities ........... ( 730,590) ( 620,059)
---------- ----------
Investing activities
Short term marketable securities - net ...... 3,462,587 7,775,053
Proceeds from sale of equity interests ...... - 17,591
Investments originated ...................... ( 3,218,449) ( 9,038,687)
Proceeds from collection of loans ........... 1,128,706 204,507
Purchase of furniture and equipment ......... ( 759) ( 4,394)
Increase (decrease) in funds held in escrow . -- 1,107,850
---------- ----------
Net cash provided by investing
activities .................................. 1,372,085 61,920
---------- ----------
Financing activities
Repayment of debentures payable to SBA ...... ( -- ) ( 600,000)
---------- ----------
Net cash (used in) financing
activities .................................. ( -- ) ( 600,000)
---------- ----------
Increase (decrease) in cash ..................... 641,495 ( 1,158,139)
Cash - beginning of period ...................... 848,777 3,314,875
---------- ----------
Cash - end of period ............................ $1,490,272 $2,156,736
========== ==========
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 or 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 computation of basic and diluted earnings (loss) per common share
is as follows:
Nine Months Ended
December 31,
----------------------
1998 1997
---- ----
Net increase (decrease) in
shareholders' equity resulting
from operations ................... $24,280,768 ($1,613,459)
=========== ===========
Earnings (loss) per common
share
Basic ............................. $4.83 ($.32)
===== ====
Diluted ........................... $4.58 ($.32)
===== ====
Shares used in computation:
Basic:
Weighted average common
shares ....................... 5,023,361 5,023,361
========== ==========
Diluted:
Weighted average common
shares ........................ 5,023,361 5,023,361
Common stock equivalents ........ 274,348 (A)
--------- ---------
5,297,709 5,023,361
========= =========
-8-
<PAGE>
WINFIELD CAPITAL CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
---------------------------------------
Note-2 Earnings (Loss) per Common Share: (cont'd)
Three Months Ended
December 31,
----------------------
1998 1997
---- ----
Net increase (decrease) in
shareholders' equity resulting
from operations ................... $16,893,853 ($ 791,909)
=========== ===========
Earnings (loss) per common
share
Basic ............................. $3.36 ($.16)
===== ====
Diluted ........................... $2.95 ($.16)
===== ====
Shares used in computation:
Basic:
Weighted average common
shares ....................... 5,023,361 5,023,361
========== ==========
Diluted:
Weighted average common
shares ........................ 5,023,361 5,023,361
Common stock equivalents ........ 698,414 (A)
--------- ---------
5,721,775 5,023,361
========= =========
(A) For the three and nine months ended December 31, 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.
NOTES TO CONDENSED FINANCIAL STATEMENTS
---------------------------------------
Note-4 Subsequent to December 31, 1998, the Company borrowed $7,000,000 from
the Small Business Administration (SBA) under a five year $10,000,000
commitment made by the SBA.
Subsequent to December 31, 1998, the Company made two equity
investments totaling $2,000,000.
-10-
<PAGE>
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
----------------------------------------------------------
Investment Income
Investment income decreased from $325,635 for the three month period ended
December 31, 1997 to $202,345 for the same period ended December 31, 1998. This
primarily reflected $67,757 in decreased earnings from invested idle funds due
to the increased investment activity in 1997 and 1998. There was a decrease of
$12,592 in interest earned from the Company's investment portfolio. Other
investment income, principally amortization of deferred commitment and
application fees, and income from both notes receivable and assets acquired in
liquidation, decreased by $42,941.
Interest Expense
Interest expense decreased from $198,193 for the three months ended December 31,
1997 to $197,596 for the same period ended December 31, 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 $223,549 for the three months
ended December 31, 1997 to $241,311 for the three months ended December 31,
1998. Various expenses increased by $35,404 and payroll and payroll related
expenses decreased by $17,642.
Realized Loss on Disposition of Investments
The Company had no losses on the disposition of investments in 1998 and a gain
of $17,591 on the disposition of investments in 1997.
-11-
<PAGE>
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
RESULTS OF OPERATIONS
NINE MONTHS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
---------------------------------------------------------
Investment Income
Investment income decreased from $901,646 for the nine months ended December 31,
1997 to $628,795 for the same period ended December 31, 1998. This primarily
reflected $304,042 in decreased earnings from invested idle funds due to the
increased investment activity in 1997 and 1998. There was also an increase of
$32,087 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, decreased by $896.
Interest Expense
Interest expense decreased from $618,662 for the nine months ended December 31,
1997 to $591,936 for the same period ended December 31, 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 $731,087 for the nine months
ended December 31, 1997 to $808,322 for the nine months ended December 31, 1998.
Professional fees increased by $123,996 reflecting the increased level of
investment activity. Payroll and related expenses decreased by $33,666 and
miscellaneous expenses decreased by $13,095.
Realized Loss on Disposition of Investments
The Company realized a loss of $12,689 on the disposition of its investments in
1998 and a loss of $64,877 on the disposition of its investment in 1997.
Unrealized Appreciation or Depreciation of Investments
There was an increase in unrealized appreciation of investments of $25,064,938
for the nine months ended December 31, 1998 compared to a decrease in unrealized
appreciation of $1,100,479 for the same period ended December 31, 1997,
principally related to the market price of one investment in a portfolio company
which made its initial public offering on July 31, 1998.
-12-
<PAGE>
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
Unrealized Appreciation or Depreciation of Investments
There was an unrealized appreciation of investments of $17,130,415 for the three
months ended December 31, 1998 compared to an unrealized depreciation of
$713,393 for the same period ended December 31, 1997, principally related to the
market price of one investment in the portfolio company which had its initial
public offering on July 31, 1998.
Liquidity and Capital Resources
At December 31, 1998, the Company had cash totaling $1,490,272 invested with
banks which meet the Federal Deposit Insurance Corporation's definition of well
capitalized financial institutions.
The Company believes that its cash at December 31, 1998 is adequate to meet its
working capital needs. Given the current pace of investment opportunities, the
Company, in January 1999 borrowed $7,000,000 from the SBA to satisfy its
long-term investment objective. The Company had received a five year commitment
from the SBA which reserved $10,000,000 of SBA guaranteed debentures. The
drawing down of the additional $3,000,000 commitment proceeds is contingent upon
the Company's creditworthiness and full compliance with all SBA rules and
regulations at the time of the drawdown.
Year 2000
Many computer software systems in use today cannot properly process date-related
information from and after January 1, 2000. This is not an exposure for the
Company since it does not currently rely on any particular software program to
track either its investment portfolio or to provide accounting functions. In
addition, the Company has inquired of its commercial banks and other service
providers as well as of its major portfolio companies to determine if they will
be prepared for the Year 2000. While all have indicated they are taking the
necessary steps to be in compliance, there can be no assurance that all exposure
will be eliminated. It is anticipated that the Company will incur no material
expenses related to the Year 2000 issue.
-13-
<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: February 12, 1999
-14-
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<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 17,741,040
<INVESTMENTS-AT-VALUE> 41,996,975
<RECEIVABLES> 0
<ASSETS-OTHER> 475,764
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 42,472,739
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 9,314,130
<OTHER-ITEMS-LIABILITIES> 252,275
<TOTAL-LIABILITIES> 9,566,405
<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> 23,413,735
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 24,255,935
<NET-ASSETS> 32,906,334
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 520,276
<OTHER-INCOME> 108,519
<EXPENSES-NET> 1,400,258
<NET-INVESTMENT-INCOME> (771,463)
<REALIZED-GAINS-CURRENT> (12,689)
<APPREC-INCREASE-CURRENT> 25,064,938
<NET-CHANGE-FROM-OPS> 24,280,786
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
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</TABLE>
