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, 2000
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,
2000.
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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 - Six and
Three Months ended September 30, 2000 and 1999 3-4
Condensed Balance Sheets - as of
September 30, 2000 and March 31, 2000 5-6
Condensed Statements of Cash Flows -
Six Months Ended September 30, 2000
and 1999 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,
-----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Investment income
Interest from small business concerns $ 225,904 $ 264,104
Interest from invested idle funds 427,751 67,536
Other income 11,538 38,092
------------ ------------
Total investment income 665,193 369,732
------------ ------------
Expenses
Interest 879,173 722,625
Payroll and payroll related expenses 343,781 316,160
General and administrative expenses 176,104 136,702
Other operating expenses 157,271 331,990
------------ ------------
Total investment expenses 1,556,329 1,507,477
------------ ------------
Investment loss - net ( 891,136) ( 1,137,745)
Realized gain on investments 6,908,989 40,954
Change in unrealized appreciation of
investments ( 16,938,590) ( 1,478,913)
------------ ------------
Net (decrease) in shareholders'
equity resulting from operations ($10,920,737) ($ 2,575,704)
============ ============
Per share net (decrease) in shareholders'
equity resulting from operations
Basic ($ 2.04) ($ .49)
============ ============
Diluted ($ 2.04) ($ .49)
============ ============
</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,
-----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Investment income
Interest from small business concerns $ 109,769 $ 116,111
Interest from invested idle funds 204,664 34,444
Other income 3,733 14,580
------------ ------------
Total investment income 318,166 165,135
------------ ------------
Expenses
Interest 416,227 407,167
Payroll and payroll related expenses 179,310 160,919
General and administrative expenses 72,542 64,795
Other operating expenses 112,607 216,595
------------ ------------
Total investment expenses 780,686 849,476
------------ ------------
Investment loss - net ( 462,520) ( 684,341)
Realized gain on investments 697,563 40,954
Change in unrealized appreciation of
investments 15,864,683 4,418,892
------------ ------------
Net increase in shareholders'
equity resulting from operations $ 16,099,726 $ 3,775,505
============ ============
Per share net increase in shareholders'
equity resulting from operations
Basic $ 3.01 $ .72
============ ============
Diluted $ 2.66 $ .63
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED BALANCE SHEETS
------------------------
<TABLE>
<CAPTION>
ASSETS
------
September 30, March 31,
2000 1999
------------ ------------
<S> <C> <C>
Loans and investments
Loans and notes receivable $ 3,185,245 $ 6,573,132
Equity interests in small business
concerns 83,275,555 95,943,961
Assets acquired in liquidation 222,086 222,086
------------ ------------
Total investments 86,682,886 102,739,179
Cash and cash equivalents
16,763,406 23,314,112
Receivable on sale of investment 648,316 --
Accrued interest receivable 74,262 142,243
Furniture and equipment (net of
accumulated depreciation of
$26,323 at September 30, 2000
and $23,313 at March 31, 2000) 17,078 12,580
Other assets 557,863 659,507
------------ ------------
Total assets $104,743,811 $126,867,621
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED BALANCE SHEETS
------------------------
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
September 30, March 31,
2000 1999
------------ ------------
<S> <C> <C>
Liabilities
Debentures payable to the U.S. Small
Business Administration $ 20,550,000 $ 20,850,000
Subordinated debentures payable 1,085,596 1,065,177
Income taxes payable -- 10,690,254
Accrued expenses 304,076 535,472
Deferred income 2,770 4,612
------------ ------------
Total liabilities 21,942,442 33,145,515
------------ ------------
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 - 30,000,000 shares
September 30, 2000 and 10,000,000
shares March 31, 2000
Issued and outstanding - 5,346,084
at September 30, 2000 and
March 31, 2000 53,461 53,461
Additional paid-in capital 26,915,076 26,915,076
Accumulated earnings 55,832,832 66,753,569
------------ ------------
Total shareholders' equity 82,801,369 93,722,106
------------ ------------
Total liabilities and
shareholders' equity $104,743,811 $126,867,621
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF CASH FLOWS
----------------------------------
<TABLE>
<CAPTION>
Six Months Ended
September 30,
-----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net (decrease) in shareholders'
equity resulting from operations ($10,920,737) ($ 2,575,704)
Adjustments to reconcile net
(decrease) in shareholders' equity
resulting from operations to net cash
(used in) operating activities
Amortization of deferred income ( 1,842) ( 9,842)
Amortization of debenture costs 66,444 34,784
Change in unrealized depreciation
(appreciation) on investments 16,938,590 1,478,913
Realized (gain) on investments ( 6,908,989) ( 40,954)
Depreciation and amortization 3,010 2,271
Changes in assets and liabilities
Receivable from broker and others -- 782,624
Accrued interest receivable 53,814 43,498
Other assets 55,619 (15,813)
Accrued expenses (231,396) 18,656
Income taxes payable ( 10,690,254) --
------------ ------------
Net cash (used in) operating activities ( 11,635,741) ( 281,567)
------------ ------------
Cash flows from investing activities
Proceeds from sale of investments 8,643,076 --
Investments originated ( 3,953,175) ( 4,574,139)
Proceeds from collection of loans 702,642 839,863
Purchase of furniture and equipment ( 7,508) --
------------ ------------
Net cash provided by (used in) investing
activities 5,385,035 ( 3,734,276)
------------ ------------
Cash flows from 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 ( 300,000) ( 750,000)
------------ ------------
Net cash (used in) provided by financing
activities ( 300,000) 2,608,223
------------ ------------
(Decrease) in cash ( 6,550,706) ( 1,407,620)
Cash and cash equivalents - beginning
of period 23,314,112 3,427,719
------------ ------------
Cash and cash equivalents - end of period $ 16,763,406 $ 2,020,099
============ ============
</TABLE>
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, 2000.
Note - 2 Earnings (Loss) per Common Share:
The reconciliation of basic and diluted (loss) per common share
computation is as follows:
<TABLE>
<CAPTION>
Six Months Ended
September 30,
-----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Net (loss) available for common
stock equivalent shares
deemed to have a dilutive effect ($10,920,737) ($ 2,575,704)
============ ============
(Loss) per common share
Basic ($ 2.04) ($ .49)
============ ============
Diluted ($ 2.04) ($ .49)
============ ============
Shares used in computation:
Basic:
Weighted average common shares
5,346,084 5,218,186
============ ============
Diluted:
Weighted average common shares 5,346,084 5,218,186
Common stock equivalents (A) (A)
------------ ------------
5,346,084 5,218,186
============ ============
</TABLE>
(A) For the six months ended September 30, 2000 and 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 earnings per common share
computation is as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------
2000 1999
----------- -----------
<S> <C> <C>
Net earnings available for common
stock equivalent shares deemed
to have a dilutive effect $16,099,726 $3,775,505
=========== ==========
Earnings per common share
Basic $ 3.01 $ .72
=========== ==========
Diluted $ 2.66 $ .63
=========== ==========
Shares used in computation:
Basic:
Weighted average common shares 5,346,084 5,269,703
=========== ==========
Diluted:
Weighted average common shares 5,346,084 5,269,703
Common stock equivalents 705,275 723,914
----------- ----------
6,051,359 5,993,617
=========== ==========
</TABLE>
Note - 3 Subsequent to September 30, 2000 the Company sold shares in five
equity investments (including all of its equity positions in Juno
Online Services, Inc., E-Stamp Corporation and Styleclick.com Inc.)
for approximately $1,292,176 resulting in a realized loss of
$2,311,977 and an increase in unrealized appreciation of $2,048,804
for a total loss of $263,173.
The Company's subordinated debentures became due October 31, 2000 and
the principal balance of $1,089,000 and interest thereon was paid.
-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, 2000 and September 30, 1999
Investment Income
Investment income increased by $295,461 from $369,732 for the six month period
ended September 30, 1999 to $665,193 for the same period ended September 30,
2000, an increase of 80.0%. This primarily reflected $360,215 in increased
earnings from temporarily invested funds as a result of proceeds received from
the sale of investments (non-income producing equity investments) and higher
prevailing interest rates. Other investment income, principally amortization of
deferred commitment and application fees, and income from both notes receivable
and assets acquired in liquidation, decreased by $64,754.
Interest Expense
Interest expense increased from $722,625 for the six months ended September 30,
1999 to $879,173 for the same period ended September 30, 2000 due to additional
net borrowings of $2,550,000 from the Small Business Administration (the "SBA").
Operating Expenses
The Company's operating expenses decreased from $784,852 for the six months
ended September 30, 1999 to $677,156 for the six months ended September 30,
2000, a decrease of 13.7%. Payroll and payroll related expenses increased by
$27,621. Professional fees decreased by $145,496 primarily due to a decrease in
legal fees. Stock record costs and financial printing decreased by $24,109.
Advertising increased by $30,008 due to the costs involved in setting up a web
site. There were miscellaneous increases and decreases with a net increase of
$4,280.
-10-
<PAGE>
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
Realized Gain on Disposition of Investments
The Company realized a $6,908,989 gain on the sale (leaving shares held in
Commerce One, Inc., Bluestone Software, Inc. and InfoSpace.com, Inc. of 685,146,
57,170 and 45,128, respectively) of a portion of its equity position in three
portfolio companies and its entire equity position in two other portfolio
companies in fiscal 2001 (Vivid Semiconductor, Inc. and HQ Global Workplaces,
Inc.). There was a $40,954 realized gain in fiscal 2000.
Changes in Unrealized Appreciation of Investments
There was a decrease in unrealized appreciation of investments of $16,938,590
for the six months ended September 30, 2000 compared to $1,478,913 for the same
period ended September 30, 1999, principally related to the decline in fair
market value and market price of thirteen portfolio securities and the
aforementioned realized gain on the sale of equities, offset by the increase in
market price of three portfolio securities in fiscal year 2001. The decrease in
the unrealized appreciation in fiscal 2000 related to the decrease in market
price of two publicly traded portfolio securities offset by an increase in
market price of five 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, 2000 and September 30, 1999
Investment Income
Investment income increased by $153,031 from $165,135 for the three month period
ended September 30, 1999 to $318,166 for the same period ended September 30,
2000, an increase of 92.7%. This primarily reflected $170,220 in increased
earnings from temporarily invested funds as a result of proceeds received from
the sale of investments (non-income producing equity investments) and higher
prevailing interest rates. Other investment income, principally amortization of
deferred commitment and application fees, and income from both notes receivable
and assets acquired in liquidation, decreased by $17,189.
Interest Expense
Interest expense increased from $407,167 for the three months ended September
30, 1999 to $416,227 for the same period ended September 30, 2000 due to
additional net borrowings of $2,550,000 from the SBA.
Operating Expenses
The Company's operating expenses decreased from $442,309 for the three months
ended September 30, 1999 to $364,459 for the three months ended September 30,
2000, a decrease of 17.6%. Payroll and payroll related expenses increased by
$18,391. Professional fees decreased by $87,173 primarily due to a decrease in
legal fees. Stock record costs and financial printing decreased by $19,040, and
insurance expense increased by $7,370. There were miscellaneous increases and
decreases with a net increase of $2,602.
-12-
<PAGE>
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
Realized Gain on Disposition of Investments
The Company realized a $697,563 gain on the sale of a portion of its equity
position in two portfolio companies (leaving shares held in Commerce One, Inc.
and Bluestone Software, Inc. of 685,146 and 57,170, respectively) and its entire
equity position in two other portfolio companies in fiscal 2001 (Vivid
Semiconductor, Inc. and HQ Global Workplaces, Inc.). There was a $40,954
realized gain in fiscal 2000.
Changes in Unrealized Appreciation of Investments
There was an increase in unrealized appreciation of investments of $15,864,683
for the three months ended September 30, 2000 compared to $4,418,892 for the
same period ended September 30, 1999, principally related to the increase in
market price of five publicly traded portfolio securities and the aforementioned
gain on the sale of equities, offset by the decrease in market price and fair
value of eleven portfolio securities. The increase in the unrealized
appreciation of investments in fiscal 2000 related to the increase in market
price of three publicly traded portfolio securities offset by a decrease in
market price of four publicly traded portfolio securities.
Liquidity and Capital Resources
At September 30, 2000 the Company had cash and short term bank money market
investments totaling $16,763,406 invested with banks which meet the Federal
Deposit Insurance Corporation's definition of well capitalized financial
institutions.
The Company believes that its cash and its short term investments, along with
both its possible use of additional SBA debenture funding and ability to sell
certain of its publicly traded portfolio investments will be adequate to meet
both the investment opportunities that the Company anticipates and its working
capital needs through March 31, 2001.
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.
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
No reports on Form 8-K were filed during the second
quarter of the registrant's fiscal year ending March
31, 2001
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: November 10, 2000
-14-
