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, 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 December 31,
1999.
- --------------------------------------------------------------------------------
This report consists of 14 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, 1999
and 1998 3-4
Condensed Balance Sheets - as of
December 31, 1999 and March 31, 1999 5-6
Condensed Statements of Cash Flows -
Nine Months Ended December 31, 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
==================================
Nine Months Ended
December 31,
1999 1998
------------- -------------
Investment income
Interest from small business concerns $ 402,696 $ 369,791
Interest from invested idle funds 99,021 150,485
Other income 54,874 108,519
------------- -------------
Total investment income 556,591 628,795
------------- -------------
Expenses
Interest 1,092,374 591,936
Payroll and payroll related expenses 476,536 355,349
General and administrative expenses 209,718 162,830
Other operating expenses 575,767 290,143
------------- -------------
Total investment expenses 2,354,395 1,400,258
------------- -------------
Investment loss - net (1,797,804) (771,463)
Realized gain (loss) on disposition of
investments (net of income taxes of
$774,000 on a long term capital gain) 1,126,732 (12,689)
Change in unrealized appreciation
of investments 100,069,878 25,064,938
------------- -------------
Net increase in shareholders'
equity resulting from operations $ 99,398,806 $ 24,280,786
============= =============
Per share net increase in shareholders'
equity resulting from operations
Basic $ 18.89 $ 4.83
============= =============
Diluted $ 17.29 $ 4.58
============= =============
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF OPERATIONS
===================================
Three Months Ended
December 31,
1999 1998
------------- -------------
Investment income
Interest from small business concerns $ 138,592 $ 134,806
Interest from invested idle funds 31,485 35,009
Other income 16,782 32,530
------------- -------------
Total investment income 186,859 202,345
------------- -------------
Expenses
Interest 369,749 197,596
Payroll and payroll related expenses 160,376 115,122
General and administrative expenses 73,016 24,772
Other operating expenses 243,777 101,417
------------- -------------
Total investment expenses 846,918 438,907
------------- -------------
Investment loss - net (660,059) (236,562)
Realized gain on disposition of investments
(net of income taxes of $774,000 on a long
term capital gain) 1,085,778 --
Change in unrealized appreciation
of investments 101,548,791 17,130,415
------------- -------------
Net increase in shareholders'
equity resulting from operations $ 101,974,510 $ 16,893,853
============= =============
Per share net increase in shareholders'
equity resulting from operations
Basic $ 19.07 $ 3.36
============= =============
Diluted $ 16.75 $ 2.95
============= =============
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED BALANCE SHEETS
========================
ASSETS
December 31, March 31,
1999 1999
------------ ------------
Loans and investments
Loans and notes receivable $ 4,177,112 $ 5,134,357
Equity interests in small business
concerns 145,586,689 39,954,775
Assets acquired in liquidation 222,086 222,086
------------ ------------
Total investments 149,985,887 45,311,218
Cash 5,638,447 3,427,719
Accrued interest receivable 86,309 135,007
Receivable from broker -- 782,624
Furniture and equipment (net of
accumulated depreciation of
$78,233 at December 31, 1999
and $74,827 at March 31, 1999) 9,391 12,797
Other assets 669,134 459,547
------------ ------------
Total assets $156,389,168 $ 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
December 31, March 31,
1999 1999
------------ ------------
Liabilities
Debentures payable to the U.S. Small
Business Administration $ 20,850,000 $ 15,300,000
Subordinated debentures payable 1,054,968 1,024,340
Accrued expenses 466,320 302,958
Taxes on long term capital gain 774,000 --
Deferred income 9,532 24,295
------------ ------------
Total liabilities 23,154,820 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 December 31, 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 123,611,445 24 212,639
------------ ------------
Total shareholders' equity 133,234,348 33,477,319
------------ ------------
Total liabilities and
shareholders' equity $156,389,168 $ 50,128,912
============ ============
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF CASH FLOWS
==================================
Nine Months Ended
December 31,
1999 1998
------------- -------------
Operating activities
Net increase in shareholders'
equity resulting from operations $ 99,398,806 $ 24,280,786
Adjustments to reconcile net increase
in shareholders' equity
resulting from operations to net
cash used in operating activities
Realized (gain) loss on disposition
of investments (1,900,732) 12,689
Amortization of debenture costs 52,175 52,175
Change in unrealized appreciation
on investments (100,069,878) (25,064,938)
Amortization of deferred income (14,763) (35,687)
Depreciation and amortization 3,406 22,230
Changes in assets and liabilities
Accrued interest receivable 48,698 11,796
Receivable from broker 782,624 --
Other assets (231,134) 26,462
Accrued expenses 163,362 (36,103)
Taxes on long term capital gain 774,000 --
------------- -------------
Net cash used in operating activities (993,436) (730,590)
------------- -------------
Investing activities
Short term marketable securities - net -- 3,462,587
Proceeds from sale of equity interests 3,203,700 --
Investments originated (6,886,237) (3,218,449)
Proceeds from collection of loans 978,478 1,128,706
Purchase of furniture and equipment -- (759)
------------- -------------
Net cash (used in) provided by investing
activities (2,704,059) 1,372,085
------------- -------------
Financing activities
Proceeds from debentures payable to
the SBA 6,300,000 --
Repayment of debentures payable to
the SBA (750,000) --
Exercise of stock options 358,223 --
------------- -------------
Net cash provided by financing
activities 5,908,223 --
------------- -------------
Increase in cash 2,210,728 641,495
Cash - beginning of period 3,427,719 848,777
------------- -------------
Cash - end of period $ 5,638,447 $ 1,490,272
============= =============
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 per Common Share:
The computation of basic and diluted earnings per common share is as
follows:
Nine Months Ended
December 31,
--------------------------
1999 1998
----------- -----------
Net earnings available for
common stock equivalent
shares deemed to have a
dilutive effect $99,398,806 $24,280,768
=========== ===========
Earnings per common share
Basic $ 18.89 $ 4.83
=========== ===========
Diluted $ 17.29 $ 4.58
=========== ===========
Shares used in computation:
Basic:
Weighted average common shares 5,260,813 5,023,361
=========== ===========
Diluted:
Weighted average common shares 5,260,813 5,023,361
Common share equivalents 489,006 274,348
----------- -----------
5,749,819 5,297,709
=========== ===========
-8-
<PAGE>
WINFIELD CAPITAL CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
=======================================
Note - 2 Earnings per Common Share: (cont'd)
Three Months Ended
December 31,
-----------------------------
1999 1998
------------ ------------
Net earnings available for
common stock equivalent
shares deemed to have a
dilutive effect $101,974,510 $ 16,893,853
============ ============
Earnings per common share
Basic $ 19.07 $ 3.36
============ ============
Diluted $ 16.75 $ 2.95
============ ============
Shares used in computation:
Basic:
Weighted average common shares 5,346,084 5,023,361
============ ============
Diluted:
Weighted average common shares 5,346,084 5,023,361
Common share equivalents 743,104 698,414
------------ ------------
6,089,188 5,721,775
============ ============
Note 3 - Income Taxes
No provision for income taxes is necessary with respect to net
investment income and/or net realized short-term capital gains since
the Company has elected to qualify under Subchapter M of the
Internal Revenue Code and therefore, is required to distribute not
less than 90% of such income and/or gains to shareholders. However,
to the extent the Company elects to either retain net realized
long-term capital gains or net realized short-term capital gains,
the Company will pay all applicable income taxes on behalf of its
shareholders.
Note 4 - Subsequent to December 31, 1999 the Company made four new equity
investments totaling approximately $4,425,000. Also, subsequent to
December 31, 1999, the Company sold 62,000 shares of their
investment in Commerce One, Inc. for approximately $13,000,000
resulting in a long term capital gain of approximately $12,800,000
(of which approximately $10,600,000 has already been reflected in
unrealized appreciation as of December 31, 1999).
-9-
<PAGE>
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
================================================
Results of Operations
Nine Months Ended December 31, 1999 and December 31, 1998
Investment Income
Investment income decreased from $628,795 for the nine months ended December 31,
1998 to $556,591 for the same period ended December 31, 1999. This primarily
reflected $51,464 in decreased earnings from invested idle funds due to the
increased investment activity in 1999 and 1998. There was also an increase of
$32,905 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 $53,645.
Interest Expense
Interest expense increased from $591,936 for the nine months ended December 31,
1998 to $1,092,374 for the same period ended December 31, 1999 due to new loans
of $13,300,000 less repayments of $750,000 to the Small Business Administration
(the "SBA").
Operating Expenses
The Company's operating expenses increased from $808,322 for the nine months
ended December 31, 1998 to $1,262,021 for the nine months ended December 31,
1999. Payroll and payroll related expenses increased by approximately $121,000
due to salary increases per employment agreements. Professional fees increased
by approximately $155,000, 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 approximately $104,000 due to an increase in shareholder
stock transfer costs and printing costs and the cost of listing the Company on
the Nasdaq National Market. Amortization of finance costs increased by
approximately $20,000 and there were minor increases in other expenses.
Realized Gain (Loss) on Disposition of Investments
The Company realized a net long term gain of $1,025,637 after applicable taxes
of approximately $774,000 on the sale of all its shares in WorldGate
Communications, Inc. and net short term gains of $101,095 on the sale of other
securities 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 an increase in unrealized appreciation of investments of $100,069,878
for the nine months ended December 31, 1999 compared to an unrealized
appreciation of $25,064,938 for the same period ended December 31, 1998,
principally related to the fluctuation in market price of six publicly traded
portfolio securities in fiscal 2000 and one publicly traded portfolio security
in fiscal 1999.
-11-
<PAGE>
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
================================================
Results of Operations
Three Months Ended December 31, 1999 and December 31, 1998
Investment Income
Investment income decreased from $202,345 for the three month period ended
December 31, 1998 to $186,859 for the same period ended December 31, 1999. This
primarily reflected $15,748 in decreased earnings from other investment income,
principally amortization of deferred commitment and application fees, and income
from both notes receivable and assets acquired in liquidation.
Interest Expense
Interest expense increased from $197,596 for the three months ended December 31,
1998 to $369,749 for the same period ended December 31, 1999 due to new loans
from the Small Business Administration.
Operating Expenses
The Company's operating expenses increased from $241,311 for the three months
ended December 31, 1998 to $477,169 for the three months ended December 31,
1999. Payroll and payroll related expenses increased by approximately $45,000
due to salary increases per employment agreements. Legal expenses increased by
approximately $90,000 primarily as a result of a pending investigation relating
to indictments filed in July, 1999 against the Company's former underwriter.
Stock record and financial printing costs increased by approximately $58,000 due
the listing of the Company on the Nasdaq National Market and the increase in
shareholder stock transfer costs and printing costs. Amortization of finance
costs increased by approximately $7,000 and there were minor increases in other
expenses.
Realized Gain on Disposition of Investments
The Company realized a net long term gain of $1,025,637 after applicable taxes
of approximately $774,000 on the sale of all of its shares in WorldGate
Communications, Inc. and short term net gains of $60,141 on the sale of other
securities in fiscal 2000. There was no realized gain in fiscal 1999.
-12-
<PAGE>
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
================================================
Unrealized Appreciation of Investments
There was an unrealized appreciation of investments of $101,548,791 for the
three months ended December 31, 1999 compared to an unrealized appreciation of
$17,130,415 for the same period ended December 31, 1998, principally related to
the fluctuation in market price of six portfolio securities in fiscal 2000 and
one publicly traded security in fiscal 1999.
Liquidity and Capital Resources
At December 31, 1999, the Company had cash totaling $5,638,447 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, 1999 will be adequate to meet
its working capital needs and short term investment opportunities. Given the
current pace of investment opportunities, the Company may seek additional funds
through borrowing, sale of publicly traded portfolio securities or sale of
equity securities for long term opportunities.
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 of as its major portfolio companies to determine if they will
be prepared for the Year 2000. While all have indicated they have taken 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.
Reporting on Disposition of Investments
From time to time, in the ordinary course of business, the Company may liquidate
all or a portion of its portfolio investments. In this regard, the Company may
sell a portion of a single investment or sell portions of various investments it
has made. The Company's policy is to publicly report the results of such
transactions in its Form 10-K and Form 10-Q Reports filed with the Securities
and Exchange Commission under the Securities Exchange Act and as otherwise
required by applicable regulations and laws.
-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/ R. SCOT PERLIN
----------------------------------
R. Scot Perlin
Chief Financial Officer
Dated: February 11, 2000
-14-
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 25,401,936
<INVESTMENTS-AT-VALUE> 149,985,887
<RECEIVABLES> 0
<ASSETS-OTHER> 6,403,281
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 156,389,168
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 21,904,968
<OTHER-ITEMS-LIABILITIES> 1,249,852
<TOTAL-LIABILITIES> 23,154,820
<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> (972,506)
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<NET-ASSETS> 133,234,348
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<INTEREST-INCOME> 501,717
<OTHER-INCOME> 54,874
<EXPENSES-NET> 2,354,395
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<APPREC-INCREASE-CURRENT> 100,069,878
<NET-CHANGE-FROM-OPS> 99,398,806
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[AVG-DEBT-OUTSTANDING] 18,964,654
[AVG-DEBT-PER-SHARE] 3.55
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