================================================================================
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, 1999
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 5,346,084 shares of common stock outstanding as of September 30,
1999.
================================================================================
This report consists of 14 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, 1999 and 1998 3-4
Condensed Balance Sheets - as of
September 30, 1999 and March 31, 1999 5-6
Condensed Statements of Cash Flows -
Six Months Ended September 30, 1999
and 1998 7
Notes to Condensed Financial Statements 8-9
Management's Discussion and Analysis
of Financial Condition and Results
of Operations 10-13
Part II - Other Information 14
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF OPERATIONS
==================================
<TABLE>
<CAPTION>
Six Months Ended
September 30,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Investment income
Interest from small business concerns $ 264,104 $ 234,985
Interest from invested idle funds 67,536 115,476
Other income 38,092 75,989
----------- -----------
Total investment income 369,732 426,450
----------- -----------
Expenses
Interest 722,625 394,340
Payroll and payroll related expenses 316,160 240,227
General and administrative expenses 136,702 138,058
Other operating expenses 331,990 188,726
----------- -----------
Total investment expenses 1,507,477 961,351
----------- -----------
Investment loss - net (1,137,745) (534,901)
Realized gain (loss) on investments 40,954 (12,689)
Change in unrealized appreciation of
investments (1,478,913) 7,934,523
----------- -----------
Net (decrease) increase in shareholders'
equity resulting from operations ($2,575,704) $ 7,386,933
=========== ===========
Per share net (decrease) increase in shareholders'
equity resulting from operations
Basic ($.49) $1.47
=========== ===========
Diluted ($.49) $1.45
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF OPERATIONS
==================================
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Investment income
Interest from small business concerns $ 116,111 $ 104,705
Interest from invested idle funds 34,444 57,087
Other income 14,580 33,733
----------- -----------
Total investment income 165,135 195,525
----------- -----------
Expenses
Interest 407,167 197,948
Payroll and payroll related expenses 160,919 116,264
General and administrative expenses 64,795 69,878
Other operating expenses 216,595 103,405
----------- -----------
Total investment expenses 849,476 487,495
----------- -----------
Investment loss - net (684,341) (291,970)
Realized gain (loss) on investments 40,954 (7,775)
Change in unrealized appreciation of
investments 4,418,892 (2,353,809)
----------- -----------
Net increase (decrease) in shareholders'
equity resulting from operations $ 3,775,505 ($2,653,554)
=========== ===========
Per share net increase (decrease) in shareholders'
equity resulting from operations
Basic $.72 ($.53)
=========== ===========
Diluted $.63 ($.53)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED BALANCE SHEETS
========================
ASSETS
September 30, March 31,
1999 1999
----------- -----------
Loans and investments
Loans and notes receivable $ 4,354,646 $ 5,134,357
Equity interests in small business
concerns 43,030,803 39,954,775
Assets acquired in liquidation 222,086 222,086
----------- -----------
Total investments 47,607,535 45,311,218
Cash 2,020,099 3,427,719
Accrued interest receivable 91,509 135,007
Receivable from broker -- 782,624
Furniture and equipment (net of
accumulated depreciation of
$77,098 at September 30, 1999
and $74,827 at March 31, 1999) 10,526 12,797
Other assets 460,995 459,547
----------- -----------
Total assets $50,190,664 $50,128,912
=========== ===========
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED BALANCE SHEETS
========================
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, March 31,
1999 1999
----------- -----------
Liabilities
Debentures payable to the U.S. Small
Business Administration $17,550,000 $15,300,000
Subordinated debentures payable 1,044,759 1,024,340
Accrued expenses 321,614 302,958
Deferred income 14,453 24,295
----------- -----------
Total liabilities 18,930,826 16,651,593
----------- -----------
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 - 5,346,084
at September 30, 1999 and 5,023,361
at March 31, 1999 53,461 50,234
Additional paid-in capital 9,569,442 9,214,446
Accumulated earnings 21,636,935 24,212,639
----------- -----------
Total shareholders' equity 31,259,838 33,477,319
----------- -----------
Total liabilities and
shareholders' equity $50,190,664 $50,128,912
=========== ===========
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF CASH FLOWS
==================================
Six Months Ended
September 30,
----------------------------
1999 1998
----------- -----------
Operating activities
Net (decrease) increase in shareholders'
equity resulting from operations ($2,575,704) $ 7,386,933
Adjustments to reconcile net (decrease)
increase in shareholders' equity
resulting from operations to net cash
(used in) operating activities
Amortization of deferred income (9,842) (29,973)
Amortization of debenture costs 20,419 20,419
Change in unrealized depreciation
(appreciation) on investments 1,478,913 (7,934,523)
Realized (gain) loss on investments (40,954) 12,689
Depreciation and amortization 2,271 14,732
Amortization of bond expenses 14,365 14,365
(Increase) decrease in:
Receivable from broker 782,624 --
Accrued interest receivable 43,498 21,679
Other assets (15,813) 37,266
Increase in accrued expenses 18,656 28,145
----------- -----------
Net cash (used in) operating activities (281,567) (428,268)
----------- -----------
Investing activities
Short term marketable securities - net -- 2,233,433
Investments originated (4,574,139) (1,201,407)
Proceeds from collection of loans 839,863 924,160
----------- -----------
Net cash (used in) provided by investing
activities (3,734,276) 1,956,186
----------- -----------
Financing activities
Exercise of stock options 358,223 --
Proceeds from debentures payable to the SBA 3,000,000 --
Repayment of debentures payable to the
SBA (750,000) --
----------- -----------
Net cash provided by financing activities 2,608,223 --
----------- -----------
(Decrease) increase in cash (1,407,620) 1,527,918
Cash - beginning of period 3,427,719 848,777
----------- -----------
Cash - end of period $ 2,020,099 $ 2,376,695
=========== ===========
The accompanying notes are an integral part of these financial statements.
-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, 1999.
Note - 2 Earnings (Loss) per Common Share:
The reconciliation of basic and diluted (loss) earnings per common
share computation is as follows:
Six Months Ended
September 30,
---------------------------
1999 1998
------------ ----------
Net (loss) earnings available for
common stock equivalent shares
deemed to have a dilutive effect ($ 2,575,704) $7,386,933
============ ==========
(Loss) earnings per common share
Basic ($.49) $1.47
============ ==========
Diluted ($.49) $1.45
============ ==========
Shares used in computation:
Basic:
Weighted average common shares 5,218,186 5,023,361
============ ==========
Diluted:
Weighted average common shares 5,218,186 5,023,361
Common stock equivalents (A) 62,314
------------ ----------
5,218,186 5,085,675
============ ==========
(A) For the six months ended September 30, 1999 the effect of exercising the
outstanding stock options would have been anti-dilutive and therefore, the
use of common stock equivalent shares was not considered.
-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 (loss) earnings per common
share computation is as follows:
Three Months Ended
September 30,
---------------------------
1999 1998
----------- -----------
Net earnings (loss) available for
common stock equivalent shares
deemed to have a dilutive effect $ 3,775,505 ($2,653,554)
=========== ===========
Earnings (loss) per common share
Basic $.72 ($.53)
=========== ===========
Diluted $.63 ($.53)
=========== ===========
Shares used in computation:
Basic:
Weighted average common shares 5,269,703 5,023,061
=========== ===========
Diluted:
Weighted average common shares 5,269,703 5,023,061
Common stock equivalents 723,914 (A)
----------- -----------
5,993,617 5,023,061
=========== ===========
(A) For the three months ended September 30, 1998 the fully diluted computation
would be anti-dilutive and was not considered.
Note - 3 Subsequent to September 30, 1999 the Company made three new equity
investments totaling approximately $1,312,000.
-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, 1999 and September 30, 1998
Investment Income
Investment income decreased from $426,450 for the six month period ended
September 30, 1998 to $369,732 for the same period ended September 30, 1999.
This primarily reflected $47,940 in decreased earnings from invested idle funds
due to the increased investment activity. There was also an increase of $29,119
in interest earned from the Company's investment portfolio due to new loans
generated. Other investment income, principally amortization of deferred
commitment and application fees, and income from both notes receivable and
assets acquired in liquidation, decreased by $37,897.
Interest Expense
Interest expense increased from $394,340 for the six months ended September 30,
1998 to $722,625 for the same period ended September 30, 1999 due to additional
net borrowings of $9,250,000 from the U.S. Small Business Administration
(the "SBA").
Operating Expenses
The Company's operating expenses increased from $567,011 for the six months
ended September 30, 1998 to $784,852 for the six months ended September 30,
1999. Payroll and payroll related expenses increased by approximately $76,000.
Professional fees increased by approximately $76,000, primarily as a result of
legal fees incurred due to the pending investigation relating to the indictments
filed in July, 1999 against the Company's former underwriter. Stock record and
financial printing costs increased by $46,000 due to the increased number of
shareholders, amortization of finance costs increased by approximately $12,000
and there were minor increases in other expenses.
Realized Gain (Loss) on Disposition of Investments
The Company realized a gain of $40,954 on the recovery of one of its investments
in fiscal 2000. There was a realized loss of $12,689 on two investments in
fiscal 1999.
-10-
<PAGE>
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
================================================
Changes in Unrealized Appreciation of Investments
There was a decrease in unrealized appreciation of investments of $1,478,913 for
the six months ended September 30, 1999 compared to an unrealized appreciation
of $7,934,523 for the same period ended September 30, 1998, principally related
to the fluctuation in market price of three publicly traded portfolio
securities.
-11-
<PAGE>
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
================================================
Results of Operations
Three Months Ended September 30, 1999 and September 30, 1998
Investment Income
Investment income decreased from $195,525 for the three month period ended
September 30, 1998 to $165,135 for the same period ended September 30, 1999.
This primarily reflected $22,643 in decreased earnings from invested idle funds
due to the increased investment activity in fiscal 2000. There was also an
increase of $11,406 in interest earned from the Company's investment portfolio
due to new loans generated. Other investment income, principally amortization of
deferred commitment and application fees, and income from both notes receivable
and assets acquired in liquidation, decreased by $19,153.
Interest Expense
Interest expense increased from $197,948 for the three months ended September
30, 1998 to $407,167 for the same period ended September 30, 1999 due to the
additional borrowings from the U.S. Small Business Administration (the "SBA").
Operating Expenses
The Company's operating expenses increased from $289,547 for the three months
ended September 30, 1998 to $442,309 for the three months ended September 30,
1999. Professional fees increased by approximately $67,000, primarily as a
result of legal fees incurred due to the pending investigation relating to the
indictments filed in July, 1999 against the Company's former underwriter,
payroll and payroll related expenses increased by approximately $45,000 and
stock record and financial printing costs increased by approximately $37,000 due
to the increased number of shareholders.
Realized Gain (Loss) on Disposition of Investments
The Company realized a gain of $40,954 on the recovery on one of its investments
in fiscal 2000.
The Company realized a loss of $7,775 on the disposition of one investment in
fiscal 1999.
-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 increase in unrealized appreciation of investments of $4,418,892
for the three months ended September 30, 1999 compared to a decrease in
unrealized appreciation of $2,353,809 for the same period ended September 30,
1998, principally related to the changes in market prices of seven investments
in portfolio companies which are publicly traded portfolio securities.
Liquidity and Capital Resources
At September 30, 1999 the Company had cash totaling $2,020,099 invested with
banks which meet the Federal Deposit Insurance Corporation's definition of well
capitalized financial institutions.
The Company believes that its cash at September 30, 1999 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 or sale of equity securities for long-term
opportunities.
The Company has received a commitment from the SBA to reserve $3,300,000 of SBA
Guaranteed Debentures through September 30, 2003.
This analysis may contain forward-looking information within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities and
Exchange Act of 1934, and is subject to the safe harbor created by those
sections.
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
No reports on Form 8-K were filed during the second
quarter of the registrant's fiscal year ending March
31, 2000
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 12, 1999
-14-
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 24,572,375
<INVESTMENTS-AT-VALUE> 47,607,535
<RECEIVABLES> 0
<ASSETS-OTHER> 2,583,129
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 50,190,664
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 18,594,759
<OTHER-ITEMS-LIABILITIES> 336,067
<TOTAL-LIABILITIES> 18,930,826
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,622,903
<SHARES-COMMON-STOCK> 5,346,084
<SHARES-COMMON-PRIOR> 5,023,361
<ACCUMULATED-NII-CURRENT> (1,398,225)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,035,160
<NET-ASSETS> 31,259,838
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 331,640
<OTHER-INCOME> 38,092
<EXPENSES-NET> 1,507,477
<NET-INVESTMENT-INCOME> (1,137,745)
<REALIZED-GAINS-CURRENT> 40,954
<APPREC-INCREASE-CURRENT> (1,478,913)
<NET-CHANGE-FROM-OPS> (2,575,704)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (2,575,704)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 722,625
<GROSS-EXPENSE> 1,507,477
<AVERAGE-NET-ASSETS> 30,707,163
<PER-SHARE-NAV-BEGIN> 6.66
<PER-SHARE-NII> (0.21)
<PER-SHARE-GAIN-APPREC> (0.28)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 5.85
<EXPENSE-RATIO> 4.91
[AVG-DEBT-OUTSTANDING] 17,984,549
[AVG-DEBT-PER-SHARE] 3.36
</TABLE>
