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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 2000 COMMISSION FILE NUMBER 33-94322
WINFIELD CAPITAL CORP.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 13-2704241
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(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
237 MAMARONECK AVENUE, WHITE PLAINS, NEW YORK 10605
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (914) 949-2600
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, par value $.01
per share ......................... Nasdaq National Market
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X] The aggregate market value of the voting
stock held by non-affiliates of the registrant as of June 22, 2000 was
approximately $54,973,070.
The number of outstanding shares of the registrant's common stock as of
June 22, 2000 was 5,346,084 shares.
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RISKS
Pursuant to Section 64(b) of the Investment Company Act of 1940, we are
required to advise you annually that Winfield Capital Corp. (the "Company") is
engaged in a high risk business. Loans to and other investments in small
business concerns are extremely speculative. Most of such concerns are privately
held. Even if a public market for the securities of such concerns exists, the
loans and other securities purchased by the Company are often restricted from
sale or other transfer for specified and significant periods of time. Thus, such
loans and other investments have little, if any, liquidity, and the Company and
you, as its shareholders, must bear significantly larger risks, including
possible losses on such investments, than otherwise would be the case with
traditional investment companies.
In addition, the Company's capital structure includes a large amount of
debt securities, mostly debentures issued to the Small Business Administration
(the "SBA") at fixed interest rates. Therefore, unless and until the Company is
able to invest all or substantially all of the proceeds from such debt
securities at annualized interest or at other rates of return that substantially
exceed annualized rates of interest the Company is required to pay the SBA under
these debentures, the Company's operating results will be adversely affected
which, in turn, may depress the market value of the Company's shares of common
stock.
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PART I
ITEM 1. BUSINESS.
Winfield Capital Corp. (the "registrant" or the "Company") was
incorporated as a New York corporation in 1972. It is a small business
investment company ("SBIC") that was licensed by the Small Business
Administration (the "SBA") in 1972 under the Small Business Investment Act of
1958, as amended (the "Small Business Investment Act"). The Company is a
non-diversified investment company that has elected to be regulated as a
business development company ("Business Development Company"), a type of
closed-end investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Company is qualified as a "regulated investment
company" for U.S. federal income tax purposes. The Company's offices are located
at 237 Mamaroneck Avenue, White Plains, New York 10605 where its telephone
number is (914) 949-2600. The Company can also be reached via its websites, at
www.winfieldcapitalcorp.com and www.winfieldcap.com.
As an SBIC, the Company uses funds borrowed from the SBA, together with
its own capital, to provide loans to, and to make equity investments in,
unaffiliated business concerns that (i) do not have a net worth in excess of $18
million and do not have average net income after U.S. federal income taxes for
the two years preceding any date of determination of more than $6 million, or
(ii) meet size standards set by the SBA that are measured by either annual
receipts or number of employees, depending on the industry in which such
concerns are primarily engaged ("Eligible Concerns"). The types and dollar
amounts of the loans and other investments the Company may make are limited by
the 1940 Act, the Small Business Investment Act and the regulations of the SBA
(the "SBA Regulations"). The SBA is authorized to examine the operations of the
Company, and the Company's ability to obtain funds from the SBA is also governed
by the Small Business Investment Act and the SBA Regulations.
The Company has no independent investment advisor. The Company's loan
and other investment decisions are made by its officers, in accordance with the
Company's established investment policies and objectives, subject to oversight
by its Board of Directors. Historically, the Company has relied on its officers
to identify new financing opportunities. Following its initial public offering
("IPO") late in 1995, the Company expanded its marketing efforts and sought
transaction referrals from venture capitalists, investment bankers, attorneys,
accountants and commercial bankers. Prior to its IPO, the Company's investments
in portfolio companies were generally structured as straight loans, or as loans
with warrants to subscribe for the purchase of equity securities of the
portfolio companies. After its IPO, the Company has sought to enter into more
transactions with portfolio companies having equity components than previously
was the case. In connection with its loans to portfolio companies with equity
components, the Company has sought and will continue to seek security interests
in and liens on the assets of the borrower. To the extent it deems necessary,
the Company also seeks to obtain personal guaranties from the principals of its
borrowers and security interests in certain of the assets of such principals.
CHARACTERISTICS OF THE COMPANY'S INVESTMENTS
The Company invests in all kinds and classes of securities issued by
portfolio companies, including, but not limited to, notes and bonds, straight,
senior, subordinated, convertible and interest-paying debentures, preferred
stock, common stock, and options and warrants to purchase the foregoing. The
Company does not have a policy that limits the amount that may be invested in
any kind or class of security, except that it intends to invest approximately
(i.) one-third of its assets in straight loans or debt securities and (ii.)
two-thirds of its assets in loans or debt securities with equity components,
such as conversion and exchange rights and warrants, or in direct equity
investments (common stock and preferred stock).
When the Company's investments are structured as loans, they typically
are evidenced by promissory notes or equivalent instruments with a specified
maturity or due upon demand, and often are accompanied by warrants to acquire
equity interests in the borrower for nominal consideration. The loans are
usually secured by assets of the borrower, which security interests frequently
are senior to any other secured debt financing the borrower may have in place.
When appropriate, a personal guaranty of a borrower's major stockholder or
stockholders is sought, which may also be secured by such stockholders' personal
assets. The Company's loans typically have a fixed rate of interest subject to
the maximum rate allowed by the SBA (see "SBA Regulation" below), although lower
rates may be negotiated depending on the creditworthiness of the borrowers and
other relevant factors. Typically (although there may be exceptions), such loans
require periodic payments of principal and interest that fully amortize the loan
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at maturity, and mature in five years. In addition, the Company intends to
pursue "bridge loan" opportunities (e.g., with maturity dates not more than one
year) as and to the extent permitted by the SBA Regulations. Management believes
that although there can be no assurance, the performance of its investment
portfolio could be enhanced by increasing the Company's equity investments,
relative to its loan portfolio. Accordingly, the Company's management intends to
continue seeking more financing opportunities with equity participation and more
investments with equity components than previously were sought by the Company.
There can be no assurance that the Company will find such opportunities on terms
favorable to the Company, if at all.
INVESTMENT OBJECTIVES AND STRATEGIES
The Company seeks both current income and long-term growth in the value
of its assets. The Company's investments are made, and are intended to continue
to be made, with the intention of having the loan repaid within five years and
any equity investment liquidated within 5 to 10 years. Situations may arise,
however, where the Company may hold an equity interest for a longer or shorter
period of time.
Prior to May 2, 1995, when there was a change in management of the
Company, the Company's investments were made primarily in very small local
retail and service businesses. Today, the Company focuses on investments in
privately held "Eligible Concerns" in growing industries, including, but not
limited to, e-commerce, new media, technology and other so-called "new economy"
businesses, computer hardware/software, and consumer products manufacturers and
distributors. There can be no assurance that the Company will continue to be
able to locate investments in such businesses on terms favorable to it. If the
Company is unable to identify such investments, it would seek to reevaluate its
overall investment strategies. The Company typically concentrates its
investments in entities that are headquartered and incorporated in the
Northeastern United States, but considers investments in other parts of the
country if they are otherwise consistent with the Company's loan and other
investment selection criteria.
Generally, the Company's existing portfolio companies are expansion
stage businesses, although some are start-up and development stage companies,
including some with negative net worth and net operating losses. Under
applicable SBA Regulations, the Company may not invest more than 20% of its
"Private Capital" in any single company without SBA approval. Under the Small
Business Investment Act and the SBA Regulations, "Private Capital" is defined as
the total of paid-in capital, other than capital obtained from federal sources
(such as the SBA) and paid-in surplus. In most instances, the Company
participates in loans and other investments with other investors. Accordingly,
the Company has been able to become involved in transactions larger than would
otherwise be possible under the investment limit of 20% of its own Private
Capital.
SELECTION OF LOAN AND OTHER INVESTMENT OPPORTUNITIES
Given the Company's objective to emphasize equity investments, the
Company uses the following criteria in selecting investment opportunities:
Potentially Profitable Operations. The Company attempts to
identify companies that are profitable or that it believes will
become profitable in the future.
Development Stage Companies. The Company attempts to identify
and invest in development stage companies, that is, companies with a
product or service that is beyond the testing stage. The Company
generally seeks to avoid so-called "seed capital" and start-up
companies.
Experienced Management Team. The Company seeks investments in
portfolio companies that have experienced management with a
substantial ownership interest and a demonstrated ability, or the
potential, to accomplish the objectives set forth in such companies'
business plan.
Liquidation Value of Assets. Although the Company is not an
"asset-based" lender, the value of assets securing its loans is an
important consideration in its loan decisions. Emphasis is placed on
balance sheet assets such as inventory, plant, property and
equipment.
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Growth. In addition to generating sufficient cash flow to
service their debt, the Company requires that prospective borrowers
have what management believes to have a good chance of achieving
substantial annual growth.
Exit Strategy. Another investment consideration is whether
there is an opportunity to liquidate the investment in a potential
portfolio company in the future. Such opportunity generally would
allow the Company to realize a gain on its equity interests and
include public offerings, sales of the portfolio company or
repurchases by the portfolio company of the Company's equity
interests. In this connection, the Company often seeks to obtain
registration rights (demand and "piggyback") as a condition to its
equity investments.
Depending on the availability of attractive investments, the Company
may, from time to time, deviate in immaterial respects from the foregoing
criteria.
CERTAIN NON-COMPLIANCE BY PORTFOLIO COMPANIES
Although the Company's agreements with its portfolio companies require
them to furnish the Company with periodic and/or annual financial statements and
to include financial and other covenants by its borrowers in its loan
agreements, certain of its portfolio companies fail to supply the financial
statements or to otherwise comply with the covenants required of them. The
Company deals with these failures on a case-by-case basis, and the exercise by
the Company of appropriate remedies are often influenced by the payment records
of such companies.
The aggregate face amount of the Company's outstanding loans and the
value of other portfolio investments was $35,940,762 as of March 31, 2000 with
loans and notes receivable comprising 19% (96% were performing in accordance
with their terms and 4% were non-performing), equity interests 80% and assets
acquired in liquidation of defaulted loans 1%.
WRITE-OFFS
During the past three fiscal years, the Company has written off loans
and investments and disposed of, at a loss, assets acquired in liquidation, in
the aggregate amount of $1,608,184 as described in the following table:
YEAR ENDED MARCH 31,
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1998 1999 2000
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Amount written off ....................... $289,570 $466,919 $864,657
Amount written off as a percentage of
aggregate loans and investments and
assets acquired in liquidation
as of the beginning of the year.......... 6.2% 3.5% 1.9%
SBA FUNDING
The Small Business Investment Act and the regulations thereunder
provide for the purchase by the SBA of subordinated debentures issued by SBICs
and the guaranty by the SBA of debentures issued by SBICs to third parties. An
SBIC can issue such debentures in a principal amount up to either 200% or 300%
of its Private Capital, depending upon various factors.
Under the current SBA Regulations, the Company is considered to have,
subject to SBA approval, as of March 31, 2000, Private Capital of approximately
$27,000,000, which would enable it to sell debentures to, or with a guaranty by,
the SBA up to a maximum principal amount of approximately $81,000,000 (300% of
its Private Capital). The Company's ability to sell such debentures is subject
to the availability of SBA program funds and other funding limitations and
compliance with the SBA Regulations. See "SBA Regulation" below.
The SBA offers eligible SBICs the opportunity to sell "participating
securities" (preferred stock or debentures having interest payable only to the
extent of earnings) to the SBA or to entities that receive SBA guaranties in the
amount up to 200% of the SBIC's Private Capital. Although the Company has the
minimum amount of Private Capital necessary to be eligible for the SBA's
participating securities program (i.e., $10,000,000),
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the issuance of the Debentures in the Company's public offering may disqualify
the Company from participating in the program under the provisions of the SBA
Regulations and the 1940 Act. In addition, the Company believes that, to date,
only partnerships have been allowed to issue participating securities and that
corporations will not be allowed to issue participating securities.
SBA REGULATION
SBICs, such as the Company, are licensed by the SBA as part of a
program designed to stimulate the flow of private debt and/or equity capital to
"Eligible Concerns" and "Smaller Concerns." Under current SBA Regulations and
the Small Business Investment Act, an independently owned and operated business
concern that does not have a net worth in excess of $18 million and does not
have average net income after federal income taxes for the preceding two years
of more than $6 million, or meets size standards prescribed by the SBA relating
either to annual receipts or number of employees, depending on the industry in
which such business primarily operates, is eligible to receive financial
assistance from an SBIC (hence, it is referred to in this Form 10-K as an
"Eligible Concern"). The SBA Regulations also define a "Smaller Concern," which
is a concern with a net worth of $6 million or less and average annual net
profits after taxes of $2 million or less, or depending on the industry in which
the business operates, meets criteria based on the number of its employees or
its annual receipts. Commencing with its fiscal year ended March 31, 1996, the
Company was required by the SBA Regulations to earmark at least 10% of its
financing to Smaller Concerns and in each subsequent fiscal year to earmark at
least 20% of its financing to Smaller Concerns.
SBA Regulations place certain limitations on the terms of loans by
SBICs. The maximum maturity of these loans may not exceed 20 years and, subject
to certain exceptions, the minimum maturity is five years. A borrower from an
SBIC cannot be required during the first five years to repay, on a cumulative
basis, more principal than an amount calculated on a straight-line, five-year
amortization schedule. On straight loans (without equity components), an SBIC
can charge an interest rate of up to 19% and on loans with equity components, an
annualized interest rate of up to 14%. Notwithstanding the above, an SBIC can
charge more by first computing a base rate using either the SBA debenture rate
currently in effect, plus an applicable charge permitted by the SBA, or a base
rate using the weighted average cost of the SBIC's borrowings from the SBA and
qualified third party lenders such as banks. On loans with equity components, an
SBIC may charge interest equal to 6% above the base rate used and, in the case
of a straight loan, 11% above the base rate used.
SBICs may invest directly in the equity of their portfolio companies.
However, they may not become a general partner of a non-incorporated entity or
otherwise become jointly or severally liable for the general obligations of a
non-incorporated entity. An SBIC may acquire options or warrants in its
portfolio companies. Such options and warrants may also have redemption
provisions, subject to certain restrictions. In general, however, SBICs may not
control a portfolio company. "Control", for this purpose, is defined as the
ownership (or control) of a 50% interest in the outstanding voting securities of
a portfolio company if it is held by fewer than 50 shareholders, or if there are
50 or more shareholders, a 20% to 25% interest (depending on the holdings of
other shareholders of the portfolio company).
With certain limited exceptions, SBICs may not invest overseas, in real
estate or in passive businesses, that is, businesses that are not regular and
continuous.
REGULATION AS A BUSINESS DEVELOPMENT COMPANY
The Company is a closed-end, non-diversified investment company that
has elected to be regulated as a Business Development Company under the 1940 Act
and, as such, is subject to regulation under that Act. Among other things, the
1940 Act contains prohibitions and restrictions relating to transactions between
the Company and its affiliates, principal underwriters and affiliates of those
affiliates or underwriters and requires that a majority of the Company's
directors be persons other than "interested persons," as defined in the 1940
Act. In addition, the 1940 Act prohibits the Company from changing the nature of
its business so as to cease to be, or to withdraw its election as, a Business
Development Company unless so authorized by the vote of the holders of a
majority of its outstanding voting securities.
A Business Development Company is permitted, under specified
conditions, to issue multiple classes of indebtedness and one class of stock
having rights as to voting, liquidation and dividends which are senior to the
Company's common stock (collectively, "Senior Securities," as defined in the
1940 Act) if the asset coverage, as
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defined in the 1940 Act, of any Senior Security is at least 200% immediately
after each such issuance and certain other conditions are met. On the other
hand, because the Company is an SBIC, the only asset coverage requirement
applicable to it would give the holders of its Senior Securities constituting
indebtedness, including the Debentures, the right to elect a majority of the
Board of Directors, if on the last business day of each of 12 consecutive
calendar months, the Company failed to maintain at least 100% asset coverage.
Also, while Senior Securities constituting preferred stock are outstanding
(other than preferred stock issued to or guaranteed by the SBA), provision must
be made to prohibit any distributions to shareholders or the repurchase of such
securities or shares unless the applicable asset coverage ratios are met at the
time of the distribution or repurchase. The Company may also borrow amounts from
banks evidenced by notes not to be publicly distributed or for temporary
purposes if the borrowing does not exceed 5% of the value of its total assets. A
loan is presumed to be for temporary purposes if it is repaid within sixty days
and is not extended or renewed.
Under the 1940 Act, a Business Development Company may not acquire
any asset, other than assets of the type listed in Section 55(a) of the 1940 Act
("Qualifying Assets") unless, when the acquisition is made, such Qualifying
Assets represent at least 70% of its total assets. The principal categories of
Qualifying Assets relevant to the business of the Company are the following:
(1) Securities purchased in transactions not involving any public
offering from the issuer of such securities, which issuer is
an eligible portfolio company. An "eligible portfolio company"
is defined, in pertinent part, in the 1940 Act as any issuer
which:
(a) is organized under the laws of, and has its principal
place of business in, the United States;
(b) is not an investment company other than another SBIC that
is wholly-owned by the Company;
(c) and does not have any class of securities with respect to
which margin credit may be extended under federal law.
(2) Securities of any eligible portfolio company that is
controlled by the Business Development Company.
(3) Securities received in exchange for or distributed on or with
respect to securities described in items (1) or (2) above, or
pursuant to the exercise of options, warrants or rights
relating to such securities.
(4) Cash, cash items, government securities, or high quality debt
securities maturing in one year or less from the time of
investment.
In addition, a Business Development Company must have been organized
(and have its principal place of business) in the United States for the purpose
of making investments in the types of securities described in items (1) or (2)
above and, in order to count the securities as Qualifying Assets for the purpose
of the 70% test, the Business Development Company must either control the issuer
of the securities or make available to the issuer of the securities significant
managerial assistance. Making available significant managerial assistance means,
among other things, any arrangement whereby a Business Development Company,
through its directors, officers or employees, offers to provide, and, if
accepted, does so provide, significant guidance and counsel concerning the
management, operations or business objectives and policies of a portfolio
company; or in the case of an SBIC (such as the Company), making loans to a
portfolio company.
FUNDAMENTAL AND OTHER INVESTMENT POLICIES
The Company's investment objectives are to achieve a high level of
current income from interest and long-term growth through equity interests in
its portfolio companies.
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Fundamental Policies
In making investments and managing its portfolio, the Company will
adhere to the following fundamental policies, which may not be changed without
the approval of the holders of 50% or more of the Company's outstanding voting
securities, or the holders of 67% or more of the Company's outstanding voting
securities present at a meeting of security holders at which holders of 50% or
more of such securities are present in person or by proxy:
1. The Company will conduct its business so as to retain its
status as an SBIC and as a Business Development Company, and to qualify
as a "regulated investment company" (as defined under the Internal
Revenue Code of 1986, as amended). In order to retain its status as an
SBIC, the Company must limit its investments to Eligible Concerns and
meet the minimum financing obligations applicable to Smaller Concerns
(see "SBA Regulation"). In order to retain its status as a Business
Development Company, the Company may not acquire assets (other than
non-investment assets necessary and appropriate to its operations as a
Business Development Company) if, after giving effect to such
acquisition, the value of its Qualifying Assets is less than 70% of the
value of its total assets. See "Regulation as a Business Development
Company". In order to qualify as a "regulated investment company," the
Company is required, among other things, to diversify its holdings as
required under the Internal Revenue Code of 1986, as amended. The
Company qualified as a "regulated investment company" for the fiscal
year ended March 31, 2000.
2. The Company will not borrow money except through the
issuance of its subordinated debentures, other debentures ranking on an
equal basis with its subordinated debentures, the SBA Debentures and
through one or more bank lines of credit.
3. The Company may issue preferred stock with such terms as
the Board of Directors may determine, subject to the requirements of
the 1940 Act and the Small Business Investment Act.
4. The Company will not (i) act as an underwriter of
securities (except to the extent it may be deemed to be an
"underwriter" as defined in the Securities Act of 1933, as amended (the
"Securities Act") of securities purchased by it in private
transactions), (ii) purchase or sell real estate or interests in real
estate or real estate investment trusts (except that the Company may
acquire real estate which collateralizes its loans or guaranties of its
loans upon defaults of such loans and may dispose of such real estate
as and when market conditions permit), (iii) sell securities short,
(iv) purchase securities on margin (except to the extent that the
registrant may be deemed to have done so as a result of its acquisition
of securities in connection with loans made to portfolio companies
which are funded with borrowed money), or (v) purchase or sell
commodities or commodity contracts, including futures contracts (except
where necessary in working out distressed loans or investments).
5. The Company may write or buy put or call options in
connection with loans to, and other investments in, portfolio
companies, or rights to require the issuer of such securities to
repurchase such loans and other investments under certain
circumstances.
6. The Company has no policy with respect to concentration of
investments in a particular company, industry or groups of industries,
except that it will not loan money to, or invest in, any company if
such loan or investment exceeds 20% of the Company's Private Capital,
without SBA approval.
7. The Company may make straight loans and loans with equity
components to the extent permitted under the Small Business Investment
Act and the 1940 Act.
Other Investment Policies
The Company's investment policies described below are not fundamental
policies, and may be changed, subject to the Small Business Investment Act and
the SBA Regulations, by the Company's Board of Directors without shareholder
approval:
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1. Except for subsidiaries organized by the Company to hold
assets acquired in foreclosures of defaulted loans, the Company will not
acquire (i) 50% or more of the outstanding voting securities of any issuer
held by fewer than 50 shareholders, (ii) 25% or more of the outstanding
voting securities of any issuer having 50 or more shareholders, or (iii)
20% or more of the outstanding voting securities of any issuer having 50
or more shareholders if, as a result of such acquisition, the Company
would hold a number of voting securities equal to or greater than the
largest other holding of such securities.
2. The Company will not invest in companies for the purpose of
controlling management of such companies.
3. The Company will not invest in finance companies, foreign
companies, passive businesses or real estate companies, except as
permitted by the SBA.
4. The Company has no policy with respect to portfolio
turnover. Moreover, because borrowers have certain prepayment rights
pursuant to SBA Regulations, the Company cannot control or predict the
frequency of portfolio turnover.
5. Pending the investment of its funds in Eligible Concerns
(including Smaller Concerns) or as otherwise permitted by the SBA, the
Company may invest its funds in direct obligations of, or obligations
guaranteed as to principal and interest by, the United States which mature
in 15 months or less, repurchase agreements with federally insured
institutions with respect to such obligations which mature in seven days
or less, or certificates of deposit issued by a qualified federally
insured institution which mature in one year or less, or will be deposited
in a qualified federally insured institution in accounts which may be
subject to withdrawal restrictions not to exceed one year.
COMPETITION
Many entities, including banks, lending companies (including other
SBICs), venture capital funds and other sources of capital, compete for loan
originations and investments similar to those made by the Company. The Company's
competition is not limited to entities that operate in the same geographical
area as the Company, as many of the Company's competitors operate throughout the
United States. Furthermore, competition for loan origination has increased as
the financial strength of the banking community has improved over the last few
years. Many of the Company's competitors have far greater financial and
personnel resources than the Company. In addition, many other SBICs use
professional investment advisors to seek and evaluate potential investments. The
Company does not have an independent investment advisor nor does it intend to
retain one.
FACILITIES; PERSONNEL
The Company operates its executive offices from rented quarters,
consisting of approximately 2,000 square feet, located in a four story office
building under a lease expiring in November, 2002. The lease is cancelable at
the Company's option on 90 days prior written notice. Management considers that
such quarters will be adequate for the near term for the conduct of the
Company's business. The Company maintains its investment and business records at
its executive offices.
As of June 22, 2000, the Company had four full-time employees (three of
whom are Messrs. Paul A. Perlin, Chief Executive Officer, David Greenberg,
Managing Director, and R. Scot Perlin, Chief Financial Officer, and one of whom
handles clerical matters). In addition to its salaried employees, the Company
has from time to time engaged the services of independent consultants as and
when needed. The Company considers its relations with employees to be
satisfactory.
LEGAL PROCEEDINGS
From time to time in the ordinary course of business, the Company
initiates legal proceedings against borrowers in default and, where warranted,
their guarantors to seek payment of loan obligations and to take possession of
collateral. In the latter instances, these proceedings are sometimes followed by
court-authorized liquidations. All such proceedings require outside counsel with
attendant professional fees and expenses.
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The Company has never been named as a defendant in any material
litigation.
ITEM 2. PROPERTIES.
For a description of the Company's loans and other investments as of March
31, 2000 and March 31, 1999 see Pages F-16 to F-20.
ITEM 3. LEGAL PROCEEDINGS.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The registrant's common stock trades in the Nasdaq National Market under
the symbol, "WCAP". On November 30, 1999, the registrant's common stock ceased
trading on the Nasdaq SmallCap Market and the Boston Stock Exchange, where its
common stock had previously traded. The registrant transferred the listing of
its common stock to the Nasdaq National Market to increase the liquidity
thereof. The reported high and low bid quotations for the registrant's common
stock on the Nasdaq SmallCap Market from April 1, 1998 to November 29, 1999 and
on the Nasdaq National Market from November 30, 1999 to June 22, 2000 were as
follows:
COMMON STOCK
------------------------
HIGH LOW
-------- -------
April 1 - June 30, 1998 ............. $ 1.625 $1.000
July 1 - September 30, 1998 .......... 8.50 1.375
October 1 - December 31, 1998 ........ 7.125 1.5625
January 1 - March 31, 1999 ........... 20.25 6.250
April 1 - June 30, 1999 .............. 65.063 18.0625
July 1 - September 30, 1999 .......... 28.25 9.875
October 1 - December 31, 1999 ........ 56.00 13.875
January 1 - March 31, 2000 ........... 46.00 18.875
April 1 - June 22, 2000 .............. 20.75 9.125
--------------------------------------------------------------------------------
The foregoing quotations reflect inter-dealer prices, without retail
markup, markdown or commission, and do not necessarily represent actual
transactions.
As of June 22, 2000, the Company estimates that its shares of common stock
are held by 7,380 beneficial holders.
The Company has made no dividend distributions during the fiscal year
ended March 31, 2000, but may elect to do so in the future.
ITEM 6. SELECTED FINANCIAL DATA.
See Summary of Financial Information for the years ended March 31, 2000,
1999, 1998, 1997, and 1996 on the following page:
8
<PAGE>
<TABLE>
WINFIELD CAPITAL CORP.
SUMMARY OF FINANCIAL INFORMATION
<CAPTION>
Years Ended March 31,
----------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Total investment income .................... $ 873,445 $ 839,897 $ 1,118,127 $ 1,436,957 $ 599,537
Total investment expenses .................. $ 3,432,819 $ 2,052,031 $ 1,844,342 $ 1,731,499 $ 995,985
Net realized gains (losses) on
disposition of investments ............... $ 30,851,848 $ 740,829 $ (184,206) $ 57,349 $ 77,550
Unrealized appreciation (depreciation)
on loans and investments ................. $ 42,284,344 $25,323,076 $(1,074,053) $ 581,745 $ (133,195)
Net income (loss) .......................... $ 70,576,818 $24,851,771 $(1,984,474) $ 344,552 $ (452,093)
Earnings (loss) per share .................. $ 13.36 $ 4.95 $ (0.40) $ 0.07 $ (0.13)
Weighted average number of shares
outstanding .............................. 5,282,131 5,023,361 5,023,361 5,023,361 3,484,630
OTHER OPERATING DATA
Number of loans and other investments
outstanding at end of period ............. 64 52 46 42 43
Number of loans and other investments
originated ............................... 22 13 16 7 3
Principal amount of loans and other
investments originated ................... $ 18,624,388 $ 9,420,696 $11,314,223 $ 3,959,335 $ 1,157,090
Investment expenses as a percentage
of average net assets .................... 4.8% 8.1% 19.5% 16.6% 19.3%
BALANCE SHEET DATA
Loans and investment portfolio
including assets acquired in
liquidation .............................. $102,739,179 $45,311,218 $13,364,711 $ 4,908,905 $ 3,977,593
Total assets ............................... $126,867,621 $50,128,912 $18,233,115 $20,748,682 $15,852,084
SBA debentures ............................. $ 20,850,000 $15,300,000 $ 8,300,000 $ 8,900,000 $ 4,500,000
Common stock (including additional
paid-in capital) ......................... $ 26,968,537 $ 9,264,680 $ 9,492,599 $10,901,063 $10,901,063
Accumulated deficit ........................ $ (44,848) $ (301,434) $ (58,048) $ (556,091) $ (318,898)
Total shareholders' equity ................. $ 93,722,106 $33,477,319 $ 8,625,548 $10,610,022 $10,265,470
</TABLE>
9
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Years Ended March 31, 2000, 1999, and 1998
INVESTMENT INCOME
Investment income increased by $33,548 from $839,897 for the year ended
March 31, 1999 to $873,445 for the year ended March 31, 2000, an increase of
4.0%. This reflected principally $42,755 in increased interest from temporarily
invested funds as a result of the Company's sale of investments (mostly
non-income producing equity investments) and higher prevailing interest rates.
There was also an increase in other income of $55,759 principally due to a
portfolio company stock dividend of $65,794. These increases were partially
offset by decreases in interest from small business concerns and loan processing
fees of $17,242 and $47,724, respectively due to a decrease in loan investments.
The Company's investment income decreased by $278,230 from $1,118,127
for the year ended March 31, 1998 to $839,897 for the year ended March 31, 1999,
a decrease of 24.9%. This reflected principally $326,692 in decreased interest
from temporarily invested funds as a result of the Company's investments
originated (mostly non-income producing equity investments) and lower prevailing
interest rates. This was partially offset by increases in other income of
$12,843, reflecting higher earnings on commitment fees, interest from small
business concerns of $23,258 and loan processing fees of $12,361.
RETENTION OF NET LONG-TERM CAPITAL GAIN
The Company elected to retain an undistributed net long-term taxable
capital gain of $30,543,582 for the year ended March 31, 2000. The Company has
accrued federal capital gains tax in relation to this gain of $10,690,254 and
was subject to state tax. The Company's financial results for the year ended
March 31, 2000 reflects the retention of this net long-term capital gain.
Pursuant to the requirements of Subchapter M of the Internal Revenue Code, the
Company timely notified shareholders that they will be required to include their
portion of the undistributed net long-term capital gain as income for the tax
year that includes March 31, 2000.
INTEREST EXPENSE
Interest expense increased by $653,416 from $876,538 for the year ended
March 31, 1999 to $1,529,954 for the year ended March 31,2000 due to new
indebtedness of $5,550,000 incurred in 2000 and $7,000,000 indebtedness to the
SBA incurred in the last month of the prior year. Interest expense increased by
$62,229 from $814,309 for the year ended March 31, 1998 to $876,538 for the year
ended March 31, 1999 due to the increased indebtedness of $7,000,000 to the SBA.
OPERATING EXPENSES
The Company's operating expense increased from $1,175,493 for the year ended
March 31, 1999 to $1,902,865 for the year ended March 31, 2000, primarily as a
result of an increase in professional fees of $220,812 due to legal fees
incurred in the pending investigation relating to the indictments filed in July
1999 against the Company's former underwriter as well as increased accounting
fees of $62,894. Payroll and payroll related expenses increased by $131,689 due
to increased officer salaries. Stock record and financial printing costs
increased by $114,725 due to the cost of listing the Company on the Nasdaq
National Market along with increases in both stock transfer and printing costs.
The Company accrued $100,000 for state taxes, as a result of the retained
realized gains and insurance expense increased $50,457 due to increases in both
officers and directors liability and fidelity bond coverage.
The Company's operating expenses increased from $1,030,033 for the year
ended March 31, 1998 to $1,175,493 for the year ended March 31, 1999, primarily
as a result of an increase in professional fees of $152,200 and smaller
increases in depreciation and amortization of $18,839, other operating costs of
$7,405 and payroll and payroll related expenses of $4,145. These increases were
partially offset by a decrease in general and administrative expenses of
$37,129.
10
<PAGE>
REALIZED GAINS OR LOSSES ON EQUITY INVESTMENTS
The Company realizes gains or losses on its equity investments or
rights to acquire equity investments upon the disposition or write-offs thereof.
The realized gain for the year ended March 31, 2000 of $30,851,848 primarily
reflected long term capital gains on equity securities of $31,578,579, short
term gains on equity securities of $96,972 and a bad debt recovery of $40,954
offset by write-offs totaling $864,657. The realized gain for the year ended
March 31, 1999 of $740,829 primarily reflected gains on equity sales of
$1,213,016 principally offset by write-offs totaling $466,919 and lesser
miscellaneous net participant payments of $5,268.
UNREALIZED APPRECIATION OR DEPRECIATION OF LOANS AND INVESTMENTS.
As an investment company, the Company evaluates its investment
portfolio periodically to determine the fair value of the portfolio and,
accordingly, does not maintain an allowance for loan losses similar to
commercial banks. Any change in the fair value of loans and other investments is
reflected in unrealized appreciation or depreciation of loans and investments,
but has no impact on net investment income. There was unrealized appreciation on
loans and investments of $42,284,344 for the year ended March 31, 2000
(principally reflecting the increased market price of six publicly traded
portfolio companies offset by the decreased market price of two publicly traded
portfolio companies) compared with unrealized appreciation of $25,323,076 for
the year ended March 31, 1999 (principally reflecting the market price of equity
investments in two publicly traded portfolio companies) and unrealized
depreciation of $1,074,053 for the year ended March 31, 1998. As of June 9,
2000, certain investments in the portfolio experienced a substantial reduction
in market value from March 31, 2000. The most significant declines in market
value were to Cyberian Outpost, Inc., which decreased from $8.50 per share at
March 31, 2000 to $5.094 per share and Commerce One, Inc., which decreased from
$149.250 per share at March 31, 2000 to $107.625 per share (unadjusted for a 2:1
stock split for comparison purposes).
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company had cash and short-term bank money
market investments totaling $23,314,112. Subsequent to March 31, 2000, the
Company paid $10,690,254 in undistributed long-term capital gain federal income
tax on behalf of its shareholders. The Company also paid subsequent to fiscal
year-end 2000 a New York State tax of $103,688 in relation to this gain that is
not subject to pass through to its shareholders. Subsequent to year-end, the
Company sold shares in a portfolio company for gross proceeds of $5,866,495 and
repaid an SBA debenture of $300,000 that matured. In October 2000, the Company
will repay its subordinated debentures in the amount of $1,089,000. The Company
believes that its cash and 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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Page
----
Reports of Independent Accountants.......................... F-1
Balance Sheets ............................................. F-2
Statements of Operations ................................... F-3
Statements of Changes in Shareholders' Equity .............. F-4
Statements of Cash Flows ................................... F-5
Financial Highlights (Per Share Data and
Ratios/Supplemental Data) ................................. F-6
Notes to Financial Statements .............................. F-7 through F-15
Portfolio of Investments ................................... F-16 through F-20
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
11
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Incorporated by reference to the registrant's definitive proxy statement to
be filed not later than 120 days after March 31, 2000.
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated by reference to the registrant's definitive proxy statement to
be filed not later than 120 days after March 31, 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated by reference to the registrant's definitive proxy statement to
be filed not later than 120 days after March 31, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated by reference to the registrant's definitive proxy statement to
be filed not later than 120 days after March 31, 2000.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Financial Statements:
See Item 8 of Part II hereof.
(b) No reports on Form 8-K were filed during the fourth quarter of the
registrant's fiscal year ended March, 31, 2000.
(c) Exhibits:
3(A). Certificate of Incorporation, as amended, incorporated by
reference to Exhibit 1(A) to the registrant's registration
statement in SEC File No. 33-94322.
3(B). Certificate of Amendment of Certificate of Incorporation,
incorporated by reference to Exhibit 1(B) to the
registrant's registration statement in SEC File No.
33-94322.
3(C). By-laws, as amended, incorporated by reference to Exhibit 2
to the registrant's registration statement in SEC File No.
33-94322.
4(B). Form of Debenture incorporated by reference to Exhibit 3(C)
to the registrant's registration statement in SEC File No.
33-94322.
4(C). Agency Agreement for the Debentures, incorporated by
reference to Exhibit 3(D) to the registrant's registration
statement in SEC File No. 33-94322.
10(A). Indemnification Agreement, incorporated by reference to
Exhibit 4 to the registrant's registration statement in SEC
File No. 33-94322.
10(B). Stock Option Plan, incorporated by reference to Exhibit 5 to
the registrant's registration statement in SEC File No.
33-94322.
12
<PAGE>
10(C). Registrant's License from SBA, incorporated by reference
to Exhibit 6 to the registrant's registration statement
in SEC File No. 33-94322.
10(E)(2). Stock Option Agreement with Paul A. Perlin, incorporated
by reference to Exhibit 8(B) to the registrant's
registration statement in SEC File No. 33-94322.
10(I). Employment Agreement with Paul A. Perlin, dated June 24,
1999 as of November 1, 1998.
10(J). Employment Agreement with David Greenberg, dated June
24, 1999 as of November 1, 1998.
11. Statement of Computation of Earnings (Loss) Per Share.
27. Financial Data Schedule.
(d) Financial Statement Schedules: The schedules specified under
Regulation S-X are either included in this Form 10-K, not
applicable or are immaterial to the Company's financial
statements for each of the three years in the period ended March
31, 2000.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: June 26, 2000
By: /s/ PAUL A. PERLIN
------------------------------
PAUL A. PERLIN
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Dated: June 26, 2000 By: /s/ PAUL A. PERLIN
-------------------------------------
CHAIRMAN OF THE BOARD
(CHIEF EXECUTIVE OFFICER) AND DIRECTOR
Dated: June 26, 2000 By: /s/ R. SCOT PERLIN
-------------------------------------
R. SCOT PERLIN
(CHIEF FINANCIAL OFFICER &
CHIEF ACCOUNTING OFFICER) AND DIRECTOR
Dated: June 26, 2000 By: /s/ DAVID GREENBERG
-------------------------------------
DAVID GREENBERG
MANAGING DIRECTOR AND DIRECTOR
Dated: June 26, 2000 By: /s/ JOEL I. BARAD
-------------------------------------
JOEL I. BARAD
DIRECTOR
Dated: June 26, 2000 By: /s/ BARRY J. GORDON
-------------------------------------
BARRY J. GORDON
DIRECTOR
Dated: June 26, 2000 By: /s/ BRUCE A. KAUFMAN
-------------------------------------
BRUCE A. KAUFMAN
DIRECTOR
Dated: June 26, 2000 By: /s/ ALLEN L. WEINGARTEN
-------------------------------------
ALLEN L. WEINGARTEN
DIRECTOR
14
<PAGE>
INDEX TO FINANCIAL STATEMENTS
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Page
---------
Report of Independent Accountants .................................... F-1
Balance Sheets
(At March 31, 2000 and 1999) ....................................... F-2
Statements of Operations
(For each of the three years in the period ended March 31, ......... F-3
2000)
Statements of Changes in Shareholders' Equity ........................ F-4
(For each of the three years in the period ended March 31,
2000)
Statements of Cash Flows
(For each of the three years in the period ended March 31, ......... F-5
2000)
Financial Highlights ................................................. F-6
Per Share Data
(For the years ended March 31, 2000 and 1999)
Ratios/Supplemental Data
(For the years ended March 31, 2000 and 1999)
Notes to Financial Statements ........................................ F-7-F-15
Portfolio of Investments ............................................. F-16-F-20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Winfield Capital Corp.
(A Small Business Investment Company licensed by
the U.S. Small Business Administration):
We have audited the accompanying balance sheets of Winfield Capital Corp. as of
March 31, 2000 and 1999, including its portfolio of investments as of March 31,
2000 and 1999, and the related statements of operations, of changes in
shareholders' equity and of cash flows for each of the three years in the period
ended March 31, 2000 and the financial highlights for the periods indicated
thereon. These financial statements and financial highlights are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included verification of
investments owned as of March 31, 2000 and 1999 by examination. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
Winfield Capital Corp. as of March 31, 2000 and 1999, and the results of its
operations and its cash flows for each of the three years in the period ended
March 31, 2000 and the financial highlights for the periods indicated thereon,
in conformity with accounting principles generally accepted in the United States
of America.
/s/ PRICEWATERHOUSECOOPERS LLP
------------------------------
PricewaterhouseCoopers LLP
New York, NY
June 9, 2000
F-1
<PAGE>
<TABLE>
<CAPTION>
WINFIELD CAPITAL CORP.
BALANCE SHEETS
MARCH 31,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
ASSETS
Investments, at value:
Loans and notes receivable (cost: $6,708,130 and $5,327,319,
respectively) ............................................................ $ 6,573,132 $ 5,134,357
Equity interests in small business concerns (cost: $28,908,046 and
$14,342,312, respectively) ............................................... 95,943,961 39,954,775
Assets acquired in liquidation (cost: $324,586 and $1,127,514,
respectively) ............................................................ 222,086 222,086
------------- -------------
TOTAL INVESTMENTS ..................................................... 102,739,179 45,311,218
Cash .......................................................................... 23,314,112 3,427,719
Accrued interest receivable ................................................... 142,243 135,007
Receivable from broker ........................................................ -- 782,624
Furniture and equipment (net of accumulated depreciation of $23,313
and $74,827, respectively) ................................................. 12,580 12,797
Other assets (principally deferred debenture costs) ........................... 659,507 459,547
------------- -------------
TOTAL ASSETS .......................................................... $ 126,867,621 $ 50,128,912
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Debentures payable to the U.S. Small Business Administration .................. $ 20,850,000 $ 15,300,000
Subordinated debentures payable ............................................... 1,065,177 1,024,340
Income taxes payable .......................................................... 10,690,254 --
Accrued expenses .............................................................. 535,472 302,958
Deferred income ............................................................... 4,612 24,295
------------- -------------
TOTAL LIABILITIES ..................................................... 33,145,515 16,651,593
------------- -------------
Commitments and contingencies (Note 7)
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 shares at March 31, 2000
and 5,023,361 shares at March 31, 1999 ................................... 53,461 50,234
Additional paid-in capital ................................................. 26,915,076 9,214,446
Accumulated deficit (dated May 2, 1995) .................................... (44,848) (301,434)
Unrealized appreciation on investments, net ................................ 66,798,417 24,514,073
------------- -------------
TOTAL SHAREHOLDERS' EQUITY ............................................ 93,722,106 33,477,319
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............................ $ 126,867,621 $ 50,128,912
------------- -------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
F-2
<PAGE>
WINFIELD CAPITAL CORP.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
MARCH 31,
--------------------------------------------
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Investment income:
Interest from small business concerns ........ $ 563,283 $ 580,525 $ 557,267
Interest from invested idle funds ............ 235,894 193,139 519,831
Loan processing fees ......................... 3,684 51,408 39,047
Other income ................................. 70,584 14,825 1,982
------------ ------------ ------------
TOTAL INVESTMENT INCOME .............. 873,445 839,897 1,118,127
------------ ------------ ------------
Expenses:
Interest ..................................... 1,529,954 876,538 814,309
Payroll and payroll related expenses ......... 661,974 530,285 526,140
General and administrative expenses .......... 337,767 225,551 262,680
Professional fees ............................ 562,436 341,624 189,424
Depreciation and amortization ................ 58,527 48,610 29,771
Other operating costs ........................ 282,161 29,423 22,018
------------ ------------ ------------
TOTAL INVESTMENT EXPENSES ............ 3,432,819 2,052,031 1,844,342
------------ ------------ ------------
INVESTMENT LOSS - NET ................ (2,559,374) (1,212,134) (726,215)
------------ ------------ ------------
Realized gain (loss) on investments .............. 30,851,848 740,829 (184,206)
Change in unrealized appreciation (depreciation)
of investments ............................... 42,284,344 25,323,076 (1,074,053)
------------ ------------ ------------
GAIN (LOSS) ON INVESTMENTS, NET ...... 73,136,192 26,063,905 (1,258,259)
------------ ------------ ------------
NET INCREASE (DECREASE) IN
SHAREHOLDERS' EQUITY RESULTING
FROM OPERATIONS ................... $ 70,576,818 $ 24,851,771 $ (1,984,474)
------------ ------------ ------------
Per share net increase (decrease) in shareholders'
equity resulting from operations:
Basic ...................................... $ 13.36 $ 4.95 $ (0.40)
------------ ------------ ------------
Diluted .................................... $ 12.09 $ 4.54 $ (0.40)
------------ ------------ ------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
WINFIELD CAPITAL CORP.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
ACCUMULATED DEFICIT
---------------------------
UNDISTRIBUTED NET UNREALIZED
ADDITIONAL NET UNDISTRIBUTED APPRECIATION
COMMON STOCK PAID-IN INVESTMENT REALIZED (DEPRECIATION)ON
SHARES AMOUNT CAPITAL INCOME GAIN/(LOSS INVESTMENTS-NET TOTAL
--------- ------ ----------- ------------ ------------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance -April 1, 1997 ............. 5,023,361 $50,234 $ 10,850,829 $ (556,091) -- $ 265,050 $ 10,610,022
Net decrease in
shareholders'
equity resulting
from operations ................ -- -- -- (726,215) (184,206) (1,074,053) (1,984,474)
Reclassification
pursuant to SOP 93-2
as described in Note 2 ......... -- -- (1,408,464) 1,282,306 126,158 --
--------- ------- ------------ ----------- ------------ ------------ ------------
Balance - March 31, 1998 ........... 5,023,361 50,234 9,442,365 -- (58,048) (809,003) 8,625,548
Net increase (decrease) in
shareholders'
equity resulting
from operations ................ -- -- -- (1,212,134) 740,829 25,323,076 24,851,771
Reclassification
pursuant to SOP 93-2
as described in Note 2 ......... -- -- (227,919) 1,211,148 (983,229)
--------- ------- ------------ ----------- ------------ ------------ ------------
Balance - March 31, 1999 ........... 5,023,361 50,234 9,214,446 (986) (300,448) 24,514,073 33,477,319
Exercise of common
stock options .................. 322,723 3,227 354,996 -- -- -- 358,223
Net increase (decrease) in
shareholders'
equity resulting
from operations ................ -- -- -- (2,559,374) 30,851,848 42,284,344 70,576,818
Deemed distribution on realized gain -- -- -- -- (10,690,254) -- (10,690,254)
Reclassification
pursuant to SOP 93-2
as described in Note 2 ......... -- -- 17,345,634 2,515,512 (19,861,146) -- --
--------- ------ ------------ ----------- ------------ ------------ ------------
Balance - March 31, 2000 ........... 5,346,084 $53,461 $ 26,915,076 $ (44,848) $ -- $ 66,798,417 $ 93,722,106
--------- ------- ------------ ----------- ------------ ------------ ------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
WINFIELD CAPITAL CORP.
STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31,
-------------------------------------------------
2000 1999* 1998*
------------ ------------ ------------
<S> <C> <C> <C>
Operating activities:
Net increase (decrease) in shareholders' equity
resulting from operations ............................................ $ 70,576,818 $ 24,851,771 $ (1,984,474)
Adjustments to reconcile net increase (decrease)
in shareholders' equity resulting from operations
to net cash used in operating activities:
Realized (gain) loss on investment ................................. (30,851,848) (740,829) 184,206
Stock dividends reinvested ......................................... (41,059) -- (159)
Change in unrealized (appreciation)
depreciation on investments ...................................... (42,284,344) (25,323,076) 1,074,053
Depreciation and amortization of fixed assets ...................... 4,771 6,577 6,433
Amortization of debenture costs .................................... 123,322 111,600 92,904
Decrease in receivable from broker ................................. 782,624 -- --
(Increase) decrease in accrued interest receivable ................. (7,236) 29,549 (92,468)
(Increase) decrease in other assets ................................ (91,945) 18,559 (6,724)
Increase (decrease) in deferred income ............................. (19,684) (20,608) 44,903
Increase (decrease) in accrued expenses ............................ 232,514 23,796 (16,833)
------------ ------------ ------------
NET CASH USED IN OPERATING ACTIVITIES ......................... (1,576,067) (1,042,661) (698,159)
------------ ------------ ------------
Investing activities:
Purchases of short-term marketable securities .......................... (338,000) (1,201,919) (4,845,368)
Proceeds from the maturity of short-term marketable securities ......... 434,973 4,664,506 13,491,055
Proceeds from recovery of bad debt ..................................... 40,954 -- --
Cost of assets acquired in liquidation ................................. -- (6,500) --
Proceeds from sale of equity interests ................................. 32,924,581 377,907 105,198
Investments originated ................................................. (18,624,388) (9,420,696) (11,314,223)
Proceeds from collection of loans ...................................... 1,311,171 2,187,485 1,508,598
Acquisition of fixed assets ............................................ (4,554) (759) (13,199)
Proceeds on sale of assets acquired in liquidation ..................... -- 196,579 --
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ........... 15,744,737 (3,203,397) (1,067,939)
------------ ------------ ------------
Financing activities:
Proceeds from debentures payable to the SBA ............................ 6,300,000 7,000,000
Repayment of debentures payable to the SBA and bank note ............... (750,000) (600,000)
Proceeds from exercise of options ...................................... 358,223
Debenture costs paid ................................................... (190,500) (175,000) (100,000)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ........... 5,717,723 6,825,000 (700,000)
------------ ------------ ------------
INCREASE (DECREASE) IN CASH ................................... 19,886,393 2,578,942 (2,466,098)
Cash - beginning of year ............................................... 3,427,719 848,777 3,314,875
------------ ------------ ------------
CASH - END OF YEAR ............................................ $ 23,314,112 $ 3,427,719 $ 848,777
------------ ------------ ------------
Supplemental disclosures of cash flow information:
Cash paid for interest ................................................. $ 1,418,238 $ 799,521 $ 749,723
------------ ------------ ------------
Supplemental schedule of non-cash investing and financing activities:
Federal income tax -- deemed distribution .............................. $ 10,690,254 $ -- $ --
------------ ------------ ------------
Fixed assets fully depreciated and written off to
accumulated depreciation ............................................. $ 56,285 $ -- $ --
------------ ------------ ------------
Assets acquired in liquidation of loans ................................ $ -- $ -- $ 688,809
------------ ------------ ------------
-------------------
* Certain prior year amounts have been reclassified to conform with the 2000
presentation.
The accompanying notes are an integral part of the financial statments.
</TABLE>
F-5
<PAGE>
WINFIELD CAPITAL CORP.
FINANCIAL HIGHLIGHTS
YEARS ENDED MARCH 31,
-----------------------------
2000 1999
------------ ------------
PER SHARE OPERATING PERFORMANCE
Shareholders' equity, beginning
of period .............................. $ 6.66 $ 1.71
------------ ------------
Investment loss - net .................... (0.48) (0.24)
Net realized and unrealized gain
on investments ......................... 13.68 5.19
------------ ------------
Total from investment operations ......... 13.20 4.95
============ ============
Shareholders' equity, end of year ........ $ 17.53 $ 6.66
============ ============
Per share market value, end of year ...... $ 21.38 $ 20.19
------------ ------------
Shares outstanding, end of year .......... 5,346,084 5,023,361
------------ ------------
RATIO/SUPPLEMENTAL DATA
Shareholders' equity, end of period ...... $ 93,722,106 $ 33,477,319
Ratio of investment expenses to average
shareholders' equity ..................... 4.81% 8.12%
Ratio of investment loss, net to average
shareholders' equity ..................... (3.58%) (4.80%)
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
WINFIELD CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
Years Ended March 31, 2000, 1999 and 1998
1. ORGANIZATION:
Winfield Capital Corp. (the "registrant" or the "Company") was
incorporated as a New York corporation in 1972. The Company is a small
business investment company ("SBIC") that was licensed by the U.S. Small
Business Administration (the "SBA") in 1972 under the Small Business
Investment Act of 1958, as amended (the "Small Business Investment Act").
The Company is a non-diversified investment company that has elected to be
regulated as a business development company ("Business Development
Company"), a type of closed-end investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"). Beginning April 1, 1996,
the Company elected to be taxed as a Regulated Investment Company under
Subchapter M of the Internal Revenue Code of 1986, as amended.
The Company uses funds borrowed from the SBA, together with its own
capital, to provide loans to, and make equity investments in, independently
owned and operated business concerns that, in accordance with SBA
Regulations, (i) do not have a net worth in excess of $18 million and do
not have average net income after federal income taxes for the preceding
two years of more than $6 million, or (ii) meet size standards set by the
SBA that are measured by either annual receipts or number of employees,
depending on the industry in which such concerns are primarily engaged
("Eligible Concerns"). The Company invests in all kinds and classes of
securities of portfolio companies, including, but not limited to, notes and
bonds; straight, senior, subordinated, convertible and interest-paying
debentures, preferred stock, common stock, and options and warrants to
purchase the foregoing. The Company seeks both current income and long-term
growth in the value of its assets. The Company's investments are made, and
will continue to be made, with the intention of having loans repaid within
five years and equity investments liquidated within 5 to 10 years.
Situations may arise, however, where the Company may hold an equity
interest for a shorter or longer period.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
VALUATION OF INVESTMENTS
Securities that are traded on a securities exchange or the Nasdaq
National Market, which are not deemed to be restricted investments, are
valued at the security's last sales price on the last trading day of the
period. Securities traded over-the-counter are valued at the closing price
for the valuation date. A valuation discount is applied if the number of
securities held is substantial in relation to the average daily trading
volume.
The Company's investments in restricted securities of public companies
are valued at the closing price on the valuation date less a discount rate
of 10% to 40%, which is determined by the Board of Directors of the Company
(the "Board of Directors") based upon applicable factors such as resale
restrictions, contractual agreement, size of position held and trading
history of the portfolio company. In some cases, a discount of greater than
40% may be used based upon applicable factors including, but not limited to
(by way of example): 1) whether the portfolio company will be financially
solvent at the time such restricted securities become freely tradeable, 2)
whether the Company has knowledge of material non-public information about
the portfolio company which it is not at liberty to disclose in connection
with its sale of the securities of such portfolio company and 3) the risk
that the portfolio company's securities might be delisted from an exchange
or automated trading market with published trading reports.
Loans and other investments for which no public market exists are
stated at "fair value" as determined in good faith by the Board of
Directors.
F-7
<PAGE>
WINFIELD CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Years Ended March 31, 2000, 1999 and 1998
The carrying values of loans to small business concerns are based on
the Board of Directors' evaluation of the financial condition of the
borrowers and/or the underlying collateral. The values assigned are
considered to be amounts which could be realized in the normal course of
business which anticipates the Company holding the loans to maturity and
realizing the face value of the loans. The carrying value of loans normally
corresponds to cost less amortized original issue discount, if any, unless
adverse factors lead to a determination of value at a lower amount. In such
instances, the Company records an increase in unrealized depreciation of
investments to reduce the carrying value of such loans to a value, as
determined by the Board of Directors.
Investments in non-public companies securities (including equity
investments, warrants and convertible instruments) are recorded at fair
value as determined in good faith by the Board of Directors, after
consideration of all pertinent information, including factors such as
significant equity financing by sophisticated, unrelated new investors,
history of positive cash flows from operations, the market for comparable
publicly traded companies (discounted for illiquidity) and other pertinent
factors. The values assigned to these securities are based upon available
information and do not necessarily represent amounts which might ultimately
be realized, since such amounts depend on future circumstances and cannot
reasonably be determined until the individual positions are liquidated.
Certain of the Company's loans are delinquent as to the required
principal and/or interest due under the respective loan agreements. Loans
are generally considered to be in default when they become 180 days past
due pursuant to SBA regulations. However, on a case by case basis,
management will consider, based on available information, the
appropriateness of the continued accrual of interest and the carrying value
of the loan.
At March 31, 2000 and 1999, the investment portfolio included
investments totaling $21,464,505 and $15,507,529, respectively, whose
values had been estimated by the Board of Directors in the absence of
readily ascertainable market values. In addition, investments in restricted
securities, which have been subjected to a discount as determined by the
Board of Directors amounted to $21,703,752. Because of the inherent
uncertainty of the valuations, the values may differ significantly from the
values that would have been used had a ready market for the securities
existed, and the differences could be material.
At March 31, 2000, all investments were in small business concerns
located in the United States of America.
REALIZED AND UNREALIZED GAIN OR LOSS
Realized gains or losses are recorded upon disposition of investments
and calculated as the difference between the proceeds from such
dispositions and the cost basis determined using the specific
identification method. The cost of investments that in the Board of
Directors' judgment have become permanently impaired, in whole or in part,
are written off, and such amounts are reported as realized losses.
All other changes in the valuation of portfolio investments are
included as changes in the unrealized appreciation or depreciation of
investments in the statement of operations.
F-8
<PAGE>
WINFIELD CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Years Ended March 31, 2000, 1999 and 1998
DESCRIPTION OF LOAN TERMS
The Company's loans to small business concerns range up to
approximately $2,200,000 in size, typically have a five-year maturity, and,
in many cases, are convertible into common stock or are accompanied by
warrants to purchase common stock of the borrower at a nominal exercise
price, subject in most cases to certain conditions.
The loans bear interest at rates ranging from 7.5% to 18.0%, per
annum. Interest is payable in monthly, quarterly, or semi-annual
installments with principal payments payable either over the term of the
loan or at maturity. These loans are generally collateralized by the assets
of the borrower, certain of which are subject to prior liens, and/or
guarantees. The Company seeks to maximize the difference, or "spread,"
between the rate at which it borrows funds from the SBA and the rate at
which it lends these funds to small business concerns. Interest rates are
subject to a cap determined by the SBA.
The Company also participates in syndicated loans and equity
investments.
ASSETS ACQUIRED IN LIQUIDATION
Assets acquired in liquidation ("Liquidations") include those loan
balances for which collateral in real estate and other assets have been
obtained by the Company and which have been or are in the process of being
liquidated. These Liquidations are carried at a value as determined in good
faith by the Board of Directors based upon amounts which the Company
expects to realize upon disposition of the collateral, on a discounted
basis, after reasonable selling expenses. The Company capitalizes
expenditures related to Liquidations subsequent to foreclosure on the
collateral, and accrued interest receivable as of the date of such
foreclosure, if the Board of Directors expects such amounts to be recovered
by the Company.
DEFERRED DEBENTURE COSTS
SBA debenture costs are amortized over ten years which represents the
terms of the SBA debentures.
REVENUE RECOGNITION
Interest income is recognized as it is earned on short-term marketable
securities and debt investments. Dividend income from equity investments
is recognized as of the ex-dividend date.
DEFERRED INCOME
Loan origination fees paid to the Company are deferred and amortized
over the terms of the respective loans. Upon prepayment of loans, loan
processing fees are recognized in full.
FURNITURE AND EQUIPMENT
Furniture and equipment are carried at cost. The Company depreciates
furniture and equipment over an estimated useful life of 10 years using
the straight-line method except for computer equipment which is
depreciated under an accelerated method over five years.
F-9
<PAGE>
WINFIELD CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Years Ended March 31, 2000, 1999 and 1998
INCOME TAXES
Effective April 1, 1996, the Company has elected to be taxed as a
regulated investment company ("RIC") under Subchapter M of the Internal
Revenue Code (the "Code"). If the Company, as a RIC, satisfies certain
requirements relating to the source of its income, the diversification of
its assets and the distribution of its net income, the Company is taxed as
a pass-through entity which acts as a partial conduit of income to its
shareholders.
In order to maintain its RIC status, the Company must in general: a)
derive at least 90% of its gross income from dividends, interest and gains
from the sale or disposition of securities b) meet investment
diversification requirements defined by the Code and c) distribute to
shareholders 90% of its net income (other than long-term capital gains).
Pursuant to Statement of Position 93-2, "Determination, Disclosure,
and Financial Statement Presentation of Income, Gain, and Return of Capital
Distributions by Investment Companies," ("SOP 93-2"), the Company may
periodically make reclassifications among certain of their capital accounts
as a result of timing and characterization of certain income and capital
gains distributions determined annually in accordance with federal tax
regulation. The reclassifications may result in reduction of capital. All
reclassifications have been reflected on the statements of changes in
shareholders' equity.
At March 31, 2000 and 1999, the aggregate gross unrealized
depreciation of investments was $2,795,920 and $1,098,390, respectively,
and the aggregate gross unrealized appreciation of investments was
$69,594,337 and $25,612,463, respectively, resulting in a net unrealized
appreciation of $66,798,417 and $24,514,073, respectively.
In the fiscal year ended March 31, 2000, the Company accrued federal
income taxes of $10,690,254 on retained realized gains recorded during the
fiscal year. The accrual was treated as a deemed distribution because taxes
will be paid on behalf of the Company's shareholders. As a result, the
Company did not recognize income tax expense for the accrual, but rather
recorded the amount in the Statement of Changes in Shareholders' Equity.
The Company accrued an additional $100,000 for state taxes as a result
of the retained realized gains.
STOCK OPTIONS
The Company accounts for stock-based compensation relating to its
stock option plan using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations ("APB No. 25"). Under APB No. 25,
compensation cost is measured as the excess, if any, of the quoted market
price of the Company's shares at the date of grant over the exercise price
of the option granted. No compensation cost has been recognized in
connection with the Company's stock option plans. The Company provides
additional pro forma disclosures as required under Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock Based
Compensation" (see Note 8).
PER SHARE DATA
Under SFAS No. 128 "Earnings Per Share", net increase (decrease) in
shareholders' equity per share is computed by dividing net increase
(decrease) in shareholders' equity by the weighted average number of common
shares outstanding during the period. Diluted earnings per share reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock.
F-10
<PAGE>
WINFIELD CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Years Ended March 31, 2000, 1999 and 1998
RISKS AND UNCERTAINTIES
Pursuant to Section 64(b)(1) of the Investment Company Act of 1940,
the Company is required to advise shareholders annually that the Company is
engaged in a high risk business. Loans and other investments to small
business concerns are extremely speculative. Most of such concerns are
privately held. Even if a public market for the securities of such concerns
exists, the loans and other securities purchased by the Company are often
restricted against sale or other transfer for specified periods of time.
Thus, such loans and other investments have little, if any, liquidity, and
the Company must bear significantly larger risks, including possible losses
on such investments, than would be the case with traditional investment
companies. The market value of public securities may fluctuate
significantly in response to factors which are beyond the Company's
control.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of income and expense during the reporting period. The most
significant estimates relate to the valuation of securities. Actual results
could differ from those estimates.
3. FAIR VALUE OF FINANCIAL INSTRUMENTS:
CASH AND SHORT-TERM MARKETABLE SECURITIES
The carrying amount reported in the balance sheet for cash and
short-term marketable securities approximates fair value.
DEBENTURES PAYABLE TO THE U.S. SMALL BUSINESS ADMINISTRATION
The carrying amount of the Company's debentures payable to the SBA
approximates fair value.
4. DEBENTURES PAYABLE TO THE U.S. SMALL BUSINESS ADMINISTRATION:
Debentures payable to the SBA at March 31, 2000, with interest payable
semi-annually, consist of the following:
INTEREST RATE
AMOUNT DUE DATE (PER ANNUM)
--------- ---------- -------------
$ 300,000 ......................... 06/01/2000 9.300%
900,000 ......................... 09/01/2001 8.330%
750,000 ......................... 09/01/2005 6.875%
600,000 ......................... 09/01/2005 6.875%
5,000,000 ......................... 06/01/2006 7.710%
3,000,000 ......................... 03/01/2009 6.240%
4,000,000 ......................... 03/01/2009 6.240%
3,000,000 ......................... 09/01/2009 7.220%
3,300,000 ......................... 03/01/2010 7.640%
------------
$ 20,850,000
============
F-11
<PAGE>
WINFIELD CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Years Ended March 31, 2000, 1999 and 1998
Under the terms of the debentures, the Company may not repurchase or
retire any of its capital stock, make any distributions to its shareholders
other than dividends out of retained earnings pursuant to SBA regulations
or increase officers' salaries without the prior written approval of the
SBA. In January 1998, the Company paid a non-refundable commitment fee of
$100,000 to the SBA to reserve $10,000,000 of SBA Guaranteed Debentures
through September 30, 2002. An additional fee of $175,000 has been charged
to the Company with the drawdown in January 1999 of $7,000,000 of such SBA
Debentures. In November 1999, the Company paid a non-refundable commitment
fee of $33,000 to the SBA to reserve $3,300,000 of Guaranteed Debentures
through September 30, 2003. Additional fees of $82,500 have been charged to
the Company with the drawdown in November 1999 of the $3,300,000.
5. SUBORDINATED DEBENTURES:
In October 1995, in conjunction with its public offering of common
stock, the Company issued 6.5% subordinated debentures due in October 2000
with warrants attached. The debentures are unsecured, have no sinking fund
provision and are not issued under a trust agreement. At March 31, 2000 and
1999, the debentures are carried, net of unamortized discount, as follows:
2000 1999
---------- ----------
Face value of debentures ................ $1,089,000 $1,089,000
Less, unamortized discount .............. 23,823 64,660
---------- ----------
$1,065,177 $1,024,340
========== ==========
The debentures have been discounted to yield an effective interest
rate of 8.0%.
6. TRANSACTIONS WITH AFFILIATES:
Mr. Stanley M. Pechman, the Company's former President, and Maple
Investors, Inc., a corporation whose shares are held in trust for members
of Stanley M. Pechman's family have on occasion participated with the
Company in portfolio investments. During 2000, 1999 and 1998, Mr. Pechman
and Maple Investors, Inc. were participants in loans of approximately
$19,000, $86,000, and $88,000, respectively. During the year ended March
31, 1998, certain officers and directors of the Company acquired
participations totaling $435,000 as part of a loan of $2,000,000 made to a
portfolio company which was satisfied by year end; the Company and all the
other participants received a beneficial interest in a warrant from this
portfolio Company and the warrant was exercised during the year ended March
31, 1999.
7. COMMITMENTS:
The Company has operating leases on real property expiring through
November 30, 2002 with aggregate minimum rental commitments as follows:
Fiscal Year Ending March 31,
------------------- ----------
2001 ....................................... $ 39,988
2002 ....................................... 41,406
2003 ....................................... 28,251
---------
$ 109,645
=========
F-12
<PAGE>
WINFIELD CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Years Ended March 31, 2000, 1999 and 1998
Rent expense was $40,069, $38,948 and $35,579 for the years ended
March 31, 2000, 1999 and 1998, respectively.
8. STOCK OPTION PLAN:
In October 1995 and amended by shareholder vote in September 1997, the
Company adopted the 1995 stock option plan (the "Plan") by which 1,250,000
shares of common stock were reserved for issuance pursuant to options
granted under the Plan. Under the Plan, options intended to qualify as
"incentive stock options" under Section 422 of the Code ("Qualified
Options"), options not intended to qualify as qualified options, stock
appreciation rights ("SARs") and shares of Restricted Common Stock may be
granted or issued.
Qualified Options granted to Eligible Employees under the Plan will be
exercisable at a price equal to the fair market value of the shares at the
time the Qualified Option is granted, or, if no such market value is
determinable, at the current net asset value of such shares, except for
options granted to any employee who owns 10% or more of the outstanding
stock of the Company (a "10% stockholder"), for which the exercise price
may not be less than 110% of the current fair market value of the common
stock. If the aggregate fair market value (determined at the time the
Qualified Option is granted) of the shares exercisable for the first time
by any grantee during any calendar year exceeds $100,000, such excess
shares may not be treated as a Qualified Option. No Qualified Option may be
exercised more than 10 years after the date on which it is granted, except
that such period may not exceed five years in the case of an option granted
to a 10% stockholder.
Options not intended to qualify as qualified options may be granted to
Eligible Employees under the Plan and shall have such exercise prices and
such other terms and conditions as the Compensation Committee (the
"Committee") may determine in its discretion, subject to the requirements
of the 1940 Act.
The Plan is administered by the Board of Directors. The Board of
Directors will determine who is eligible to participate in the Plan and the
number of shares, if any, on which options are to be granted, the SARs, if
any, to be granted with respect to such options and the shares of
restricted Common Stock, if any, to be issued, to eligible parties.
Options granted under the Plan will not be transferable, other than by
the laws of descent and distribution, and during the grantee's life may be
exercised only by such grantee. All rights to exercise options will
terminate upon termination for cause of the holder's employment or
directorship.
The Plan also provides that shares of restricted Common Stock may be
granted to eligible employees on such terms and in such amounts as the
Committee determines. Such shares of Stock will be issued under a written
agreement which will contain restrictions on transfers thereof as may be
required by law and as the Committee may determine in its discretion.
The Plan will terminate when there have been granted shares of Common
Stock and options on the total number of shares authorized by the Plan or
by action of the Board of Directors, but in no event later than June 12,
2005. The authorized number of shares may be increased, and the Plan's date
of termination may be extended, only by shareholder action.
F-13
<PAGE>
WINFIELD CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Years Ended March 31, 2000, 1999 and 1998
Stock option transactions are as follows:
<TABLE>
<CAPTION>
2000 1999 1998
------------------ ------------------ -------------------
Shares Average Shares Average Shares Average
--------- ------- --------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning of fiscal year.......... 1,185,286 $ 1.16 1,249,572 $ 1.16 458,572 $ 1.24
Granted ................................... -- -- 791,000 1.11
Exercised ................................. (322,723) 1.11 -- --
Expired ................................... -- (64,286) 1.16 --
--------- --------- ---------
Balance, end of fiscal year ............... 862,563 1.17 1,185,286 1.16 1,249,572 1.16
========= ========= =========
Options exercisable
at end of fiscal year .................. 778,563 1.14 1,101,286 1.12 980,572 1.13
========= ========= =========
</TABLE>
The Company applies the intrinsic value based method permitted by SFAS
123 in accounting for its stock-based compensation plans and awards.
Accordingly, no compensation expense has been recognized since the options
were granted with exercise prices equal to the market value of the common
stock on the date of grant.
Had the Company measured compensation expense under the fair value
based method, there would be no change to net income and net income per
share for the years ended March 31, 2000 and 1999. For the year ended
March 31, 1998, the Company's net income and net income per share would
have been reduced to the pro forma amounts indicated below:
1998
-------------
Net income - as reported ................................. $ (1,984,474)
Net income - pro forma ................................... $ (2,381,208)
Net income per share - as reported ....................... $ (.40)
Net income per share - pro forma ......................... $ (.47)
The fair value of each option is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants - expected volatility of 40%; risk-free
interest rate of approximately 6.1%; and expected lives ranging from 3 to 6
years.
9. CONCENTRATION OF CREDIT RISK:
Financial instruments which potentially subject the Company to
concentrations of credit risk consists of cash of $23,314,112 at March 31,
2000. Cash is invested with banks in amounts that, at times, exceed
insurable limits. In addition, 60% of the Company's total investment market
value is held with two equity securities, Commerce One, Inc. and Cyberian
Outpost, Inc.
F-14
<PAGE>
WINFIELD CAPITAL CORP.
PORTFOLIO OF INVESTMENTS - (Continued)
March 31, 2000
10. EARNINGS (LOSS) PER COMMON SHARE:
The reconciliation of basic and diluted earnings (loss) per common
share computation is as follows:
<TABLE>
<CAPTION>
Years Ended March 31,
----------------------------------------
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Basic and diluted earnings (loss) per common share
Net earnings (loss) available for common stock
equivalent shares deemed to have a dilutive effect $70,576,818 $24,851,771 $(1,984,474)
=========== =========== ===========
Earnings (loss) per common share
Basic ............................................ $ 13.36 $ 4.95 $ (0.40)
=========== =========== ===========
Diluted .......................................... $ 12.09 $ 4.54 $ (0.40)
=========== =========== ===========
Shares used in computation:
Basic:
Weighted average common shares ................. 5,282,131 5,023,361 5,023,361
=========== =========== ===========
Diluted:
Weighted average common shares ................. 5,282,131 5,023,361 5,023,361
=========== =========== ===========
Common stock equivalents ....................... 554,428 453,300 (A)
----------- ----------- -----------
5,836,559 5,476,661 5,023,361
=========== =========== ===========
</TABLE>
-----------------------
(A) For the year ended March 31, 1998, the effect of exercising the
outstanding stock options would have been antidilutive and, therefore,
the use of common stock equivalent shares was not considered.
11. SUBSEQUENT EVENTS:
Subsequent to March 31, 2000, the Company converted its outstanding
loan and interest balance with e-Media, LLC and Pseudo Programs, Inc. into
common shares of those companies. In addition, the Company has warrants to
purchase additional shares of those companies.
During April 2000, the Company sold 70,000 shares of Commerce One,
Inc. for gross proceeds of $5,866,495. After the sale and adjusted for a
2:1 stock split, the Company had 700,146 shares of Commerce One, Inc.
Subsequent to March 31, 2000, the Company repaid an SBA debenture of
$300,000 that matured.
As of June 9, 2000, certain investments in the portfolio experienced a
substantial reduction in market value from March 31, 2000. The most
significant declines in market value were to Cyberian Outpost, Inc. which
decreased from $8.50 per share at March 31, 2000 to $5.094 per share and
Commerce One, Inc., which decreased from $149.250 per share at March 31,
2000 to $107.625 per share (unadjusted for a 2:1 stock split for comparison
purposes).
F-15
<PAGE>
WINFIELD CAPITAL CORP.
PORTFOLIO OF INVESTMENTS
March 31, 2000
<TABLE>
<CAPTION>
LOANS AND NOTES RECEIVABLES
Loan
Maturity Interest % of Total
Company Name Industry Date Rate (%) Cost Value Investments
---------------------------------------------- -------------------- --------- ------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Loans
D&S Diner Rte 7 Cobleskill Diner Corp. (a) (b) Restaurant 16-Oct-00 16.25 $ 30,009 $ 5,009 0.0%
Diversified Development, LLC (c) ............. Land Development 23-Dec-02 16.00 430,000 430,000 0.4%
Diversified Development, LLC ................. Land Development 20-Jun-01 14.00 600,000 600,000 0.6%
e-Media, LLC (d) ............................. Web Design 07-Jun-00 10.00 2,200,000 2,200,000 2.1%
H. Lockings Corp. ............................ Food Service 19-Jul-95 16.25 30,765 30,765 0.0%
HPA Monon Corp. .............................. Trailer Manufacturer 15-May-02 12.00 2,000,000 2,000,000 1.9%
Improved Drinking Water & Pool Co. (c) ....... Swimming Pools 31-Dec-99 12.00 2,000 2,000 0.0%
Matt-Con Services Corp. ...................... Construction 01-Nov-99 10.00 29,209 29,209 0.0%
(formerly Francis A. Lee, Inc.)
No-Name Deli/Grocery, Inc. (a) ............... Food Service 01-Aug-93 16.50 142,484 52,484 0.1%
Phone Management Enterprises, Inc.(a) ........ Communication 18-Sep-01 None 62,839 42,841 0.0%
Pseudo Programs, Inc. (d) .................... Web Media 02-Aug-00 8.50 500,000 500,000 0.5%
Senior Housing Concepts ...................... Assisted Living 12-Sep-00 18.00 380,000 380,000 0.4%
NOTES RECEIVABLE
Gabriel Lamanna .............................. Real Estate 01-Mar-04 11.50 68,012 68,012 0.1%
957 South Elmora, Inc. (a) ................... Real Estate 01-Dec-04 7.50 89,280 89,280 0.1%
Vassar Development Corp. ..................... Real Estate 07-Apr-03 10.00 143,532 143,532 0.1%
---------- ---------- ---
Total Loans and Notes Receivable ..................................................... $6,708,130 $6,573,132 6.4%
========== ========== ===
</TABLE>
------------
(a) non-income producing or past due as to required principal and/or interest
(b) foreclosed upon
(c) repaid subsequent to year end
(d) converted into equity subsequent to year end
See accompanying notes to the financial statements.
F-16
<PAGE>
WINFIELD CAPITAL CORP.
PORTFOLIO OF INVESTMENTS
March 31, 1999
<TABLE>
<CAPTION>
LOANS AND NOTES RECEIVABLES
Loan
Maturity Interest % of Total
Company Name Industry Date Rate (%) Cost Value Investments
------------------------------------------------ -------------------- --------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
LOANS
Bob's Auto Body Shop (a)(c) .................... Auto Repairs 01-Mar-98 15.00 $ 10,023 $ 10,023 0.0%
Carpenito's Restaurant, Inc. (a)(c) ............ Restaurant 01-Feb-01 12.00 135,563 135,563 0.3%
D&S Diner Rte 7 Cobleskill Diner Corp. (a)(b) .. Restaurant 16-Oct-00 16.25 130,982 80,982 0.2%
Diversified Development, LLC ................... Land Development 20-Jun-01 14.00 600,000 600,000 1.3%
Diversified Development, LLC ................... Land Development 20-Jun-01 16.00 430,000 430,000 0.9%
Francis A. Lee, Inc. (a) ....................... Construction 01-Sep-97 15.00 66,186 56,186 0.1%
H. Lockings Corp. (a) .......................... Food Service 19-Jul-95 16.25 33,016 33,016 0.1%
HPA Monon Corp. ................................ Trailer Manufacturer 15-May-02 12.00 2,000,000 2,000,000 4.4%
Improved Drinking Water & Pool Co. (a) ......... Swimming Pools 31-Dec-99 12.00 20,805 10,805 0.0%
Jerusalem Refrigeration Corp. (c) .............. Refrigeration 01-May-00 15.50 24,725 24,725 0.1%
NAI Technologies, Inc. (c) ..................... Computer Systems 15-Jan-01 12.00 400,000 400,000 0.9%
No-Name Deli/Grocery, Inc. (a) ................. Food Service 28-Jul-93 16.50 142,928 52,928 0.1%
Phone Management Enterprises, Inc.(a) .......... Communication 15-Aug-95 None 64,448 44,448 0.1%
Senior Housing Concepts ........................ Assisted Living 12-Mar-00 18.00 800,000 800,000 1.8%
NOTES RECEIVABLE
Barrier Motor Fuels, Inc. (c) .................. Gas Retailing 01-Apr-99 15.00 112,688 112,688 0.2%
Gabriel Lamanna ................................ Real Estate 01-Mar-04 11.50 80,681 80,681 0.2%
Gisante Realty Corp. (a)(d) .................... Real Estate 08-Mar-96 11.00 12,962 -- 0.0%
957 South Elmora, Inc. (a) ..................... Real Estate 01-Dec-04 7.50 103,280 103,280 0.2%
Vassar Development Corp. ....................... Real Estate 07-Apr-03 10.00 159,032 159,032 0.4%
---------- ---------- ----
Total Loans and Notes Receivable ........................................................ $5,327,319 $5,134,357 11.3%
========== ========== ====
</TABLE>
---------------
(a) non-income producing or past due as to required principal and/or interest
(b) foreclosed upon
(c) repaid subsequent to year end
(d) written off subsequent to year end
See accompanying notes to the financial statements.
F-17
<PAGE>
WINFIELD CAPITAL CORP.
PORTFOLIO OF INVESTMENTS
March 31, 2000
<TABLE>
<CAPTION>
EQUITY INTERESTS
Company Name Industry Number of Shares
----------------------------------- ---------------------------------- ------------------------------------------------------
<S> <C> <C>
Big Foot IMS, Inc. E-Marketing Services 52,631 Shares, Unregistered Series A Preferred Stock
Bluestone Software, Inc. (a) Software Provider 87,170 Shares, Restricted Common Stock
Capstone Turbine Corporation Alternative Energy 187,500 Shares, Unregistered Series G Preferred Stock
Commerce One, Inc. (a) Enterprise 252,009 Shares, Common Stock
Procurement Software 165,564 Shares, Restricted Common Stock
Cool Zone, Inc. Cooling Systems 40,000 Shares, Unregistered Common Stock
Creative Foods, Inc. (a) Specialty Baking Warrant to Purchase Common Stock
Cyberian Outpost, Inc. (a) On-Line Retailer 466,330 Shares, Common Stock
375,000 Shares, Common Stock
489,130 Shares, Common Stock
79,395 Shares, Common Stock
Diversified Development, LLC. Land Development Warrant to Purchase Common Stock
Dowling Residences LLC. Dormitory Management Preferred Return Units
DRS Technologies, Inc. (a) Computer Systems Warrant to purchase 25,000 shares of Common Stock
(bought NAI Technologies, Inc.) (from exchange of NAI Technologies, Inc. warrant)
EoExchange, Inc. Portal and Search Engine 233,644 Shares, Unregistered Series D Preferred Stock
Eprise Corporation (a) Web Content Management 127,323 Shares, Restricted Common Stock
E-Stamp Corporation (a) Internet Postage 121,241 Shares, Restricted Common Stock
Service 20,100 Shares, Common Stock
etang.com, Inc. Internet Service Provider 60,000 Shares, Unregistered Series B Preferred Stock
HPA Monon Corp. Trailer Manufacturer 625,000 Shares, Unregistered Convertible -
Preferred Stock
HQ Global Workplaces, Inc. Office Leasing 65,000 Shares, Unregistered Common Stock
(formerly Alliance National, Inc.)
HearMe (a) On-Line Communities and 227,273 Shares, Common Stock
(formerly Mpath Interactive, Inc.) Audio Technology
Homepoint Corporation On-line Home Furnishings 10,875 Shares, Unregistered Series B Preferred Stock
InfoSpace.com, Inc. (a) Internet Infrastructure 22,558 Shares, Common Stock
2,506 Shares, Restricted Common Stock
Independence Brewing Co. (a) Brewing 949,941 Shares, Common Stock
Internet Gift Registries, Inc. On-line Gift Registry 50,000 Shares, Unregistered Series B Preferred Stock
Warrant to purchase 60,000 shares of common stock
Juno Online Services, Inc. (a) Internet Service Provider 261,846 Shares, Common Stock
MarketFirst Software, Inc. E-Marketing Solutions 938,881 Shares, Unregistered Series D Preferred Stock
myGeek.com, Inc. On-Line Personal Shopper 287,969 Shares, Unregistered Series A Preferred Stock
NeoPlanet, Inc. Branding Solutions 62,448 Shares, Unregistered Series B Preferred Stock
New York Restaurant Group, Inc. Owns and Manages Restaurants 16,920 Shares, Unregistered Series A Preferred Stock
Open Port Technology, Inc. IP Network Communication 621,118 Shares, Unregistered Series E Preferred Stock
Services Software
Open Solutions, Inc. Electronic Commerce Banking & 281,116 Shares, Unregistered Series F Preferred Stock
Enterprise Processing Applications
Petroleum Place, Inc. Energy Internet Marketplace 25,372 Shares, Unregistered Series C Preferred Stock
and Portal
PNV.net, Inc. Trucking Community 93,750 Shares, Restricted Common Stock
(formerly Park N'View Inc.) (a) Telecommunications. Cable TV 7,018 Shares, Restricted Common Stock
and Internet Access
Pseudo Programs, Inc. On-Line Programming 462,963 Shares, Unregistered Series D Preferred Stock
Rowecom Inc. (a) Intranet Knowledge Subscriptions 153,676 Shares, Common Stock
ScreamingMedia.com, Inc. Digital Content Network 42,000 Shares, Unregistered Series B Preferred Stock
Styleclick.com, Inc. (a) On-Line Retailer 47,000 Shares, Common Stock
SynQuest, Inc. Enterprise Optimization Software 40,300 Shares, Unregistered Series G Preferred Stock
TeraStor Corporation Data Storage Technology 485,437 Shares, Unregistered Series E Preferred Stock
U.S. Wireless Data, Inc. (a) Internet-based Wireless 50,000 Shares, Unregistered Series C Preferred Stock
Transaction Processing
Vivid Semiconductor, Inc. Semi-Conductor 440,000 Shares, Unregistered Series E Preferred Stock
Manufacturer 79,366 Shares, Unregistered Series F-1 Preferred Stock
<CAPTION>
Cost or % of
Contributed Total
Company Name Value Value Investments
----------------------------------- ----------- ------------ -----------
<S> <C> <C> <C>
Big Foot IMS, Inc. $ 499,994 $ 499,994 0.5%
Bluestone Software, Inc. (a) 749,999 2,059,391 2.0%
Capstone Turbine Corporation 750,000 750,000 0.7%
Commerce One, Inc. (a) 586,054 33,851,109 32.9%
499,998 17,297,299 16.8%
Cool Zone, Inc. 200,000 25,000 0.0%
Creative Foods, Inc. (a) - 3,680 0.0%
Cyberian Outpost, Inc. (a) 715,040 3,567,425 3.5%
1,000,000 2,868,750 2.8%
750,000 3,741,845 3.6%
254,930 607,372 0.6%
Diversified Development, LLC. - - 0.0%
Dowling Residences LLC. 198,004 198,004 0.2%
DRS Technologies, Inc. (a) - - 0.0%
(bought NAI Technologies, Inc.)
EoExchange, Inc. 499,998 499,998 0.5%
Eprise Corporation (a) 500,000 1,403,736 1.4%
E-Stamp Corporation (a) 999,998 625,907 0.6%
341,700 133,414 0.1%
etang.com, Inc. 500,000 500,000 0.5%
HPA Monon Corp. - -
HQ Global Workplaces, Inc. - 58,500 0.1%
(formerly Alliance National, Inc.)
HearMe (a) 1,500,001 5,164,779 5.0%
(formerly Mpath Interactive, Inc.)
Homepoint Corporation 725,036 725,036 0.7%
InfoSpace.com, Inc. (a) 450,000 2,952,711 2.9%
50,000 218,681 0.2%
Independence Brewing Co. (a) 4,755 3,819 0.0%
Internet Gift Registries, Inc. 500,000 500,000 0.5%
Juno Online Services, Inc. (a) 1,646,661 3,640,792 3.5%
MarketFirst Software, Inc. 999,908 999,908 1.0%
myGeek.com, Inc. 1,000,000 1,000,000 1.0%
NeoPlanet, Inc. 750,000 750,000 0.7%
New York Restaurant Group, Inc. 163,278 163,278 0.2%
Open Port Technology, Inc. 1,000,000 1,000,000 1.0%
Open Solutions, Inc. 2,620,000 2,620,000 2.6%
Petroleum Place, Inc. 1,499,992 1,499,992 1.5%
PNV.net, Inc. 750,000 295,313 0.3%
(formerly Park N'View Inc.) (a) 65,801 22,109 0.0%
Pseudo Programs, Inc. 500,000 500,000 0.5%
Rowecom Inc. (a) 1,499,997 2,351,241 2.3%
ScreamingMedia.Com, Inc. 470,400 470,400 0.5%
Styleclick.com, Inc. (a) 516,236 465,299 0.5%
SynQuest, Inc. 250,263 250,263 0.2%
TeraStor Corporation 500,000 509,708 0.5%
U.S. Wireless Data, Inc. (a) 500,000 500,000 0.5%
Vivid Semiconductor, Inc. 1,650,000 550,000 0.5%
250,003 99,208 0.1%
------------ ------------ ----
Total Equity Interests $ 28,908,046 $ 95,943,961 93.4%
============ ============ ====
</TABLE>
-----------------------------
(a) Publicly traded at March 31, 2000
See accompanying notes to the financial statements.
F-18
<PAGE>
WINFIELD CAPITAL CORP.
PORTFOLIO OF INVESTMENTS
March 31, 1999
EQUITY INTERESTS
<TABLE>
<CAPTION>
Company Name Industry Number of Shares
------------------------------------ --------------------- -------------------------------------------------
<S> <C> <C>
Commerce One, Inc. Enterprise 258,005 Shares, Unregistered Series D
Procurement Software Preferred Stock
Cool Zone, Inc. Cooling Systems 40,000 Shares, Unregistered Common Stock
Creative Foods, Inc. Specialty Baking Warrant to Purchase Common Stock
Cyberian Outpost, Inc. (a) On-Line Retailer 466,330 Shares, Unregistered Common Stock
(from Series B Preferred Stock)
375,000 Shares, Unregistered Common Stock
(from Series C Preferred Stock)
489,130 Shares, Unregistered Series B
Common Stock (from Series B Preferred)
79,395 shares of Unregistered Common Stock
(from exercise of warrants)
Diversified Development, LLC. Land Development Warrant to Purchase Common Stock
Dowling Residences LLC. Dormitory Preferred Return Units
Management
DRS Technologies, Inc. (a) Computer Systems Warrant to purchase 25,000 shares of Common Stock
(bought NAI Technologies, Inc.) (from exchange of NAI Technologies, Inc. warrant)
HPA Monon Corp. Trailer Manufacturer 625,000 Shares, Unregistered Convertible
Preferred Stock
HQ Global Workplaces, Inc. Office Leasing 65,000 Shares, Unregistered Common Stock
(formerly Alliance National, Inc.)
HearMe (a) On-Line Communities 227,273 Shares Unregistered Common Stock (from
(formerly Mpath Interactive, Inc.) and Audio Technology Series E Preferred Stock)
Improved Drinking Water Swimming Pools 12.75% Preferred Stock, convertible
& Pool Co. into Common Stock
Independence Brewing Brewing 949,941 Shares, Restricted Common Stock
Company (a)
Internet Gift Registries, Inc. On-line Gift Registry 50,000 Shares, Series B Preferred Stock
Warrant to purchase 60,000 shares of common stock
Juno Online Services, Inc. (a) Internet Service and 261,846 Unregistered Common Stock shares
E-mail Provider (from Series B Preferred Stock)
NAI Technologies, Inc. Computer Systems Convertible Note into 200,000 Shares of
(bought by DRS Technologies, Inc.) Common Stock
New York Restaurant Owns and Manages 16,920 Shares, Unregistered Series A
Group, Inc. Restaurants Preferred Stock
Panebello USA Specialty Baking 20.1943% of Class A equity
(subordinated to Class B equity)
PNV.net, Inc. Tracking Community 93,750 Shares, Unregistered Series C
(formerly Park N'View Inc.) Telecommunications, Preferred Stock
Cable TV and Internet
Access
Prio, Inc. (formerly SaveSmart, Inc.) On-line promotions 116,279 Shares, Unregistered Series F
and incentives Preferred Stock
RoweCom Inc. (a) Intranet Knowledge 153,676 Shares, Unregistered Common Stock
Subscriptions (from Series C Preferred Stock)
SynQuest, Inc. Enterprise 40,300 Shares, Unregistered Series G
Optimization Software Preferred Stock
TeraStor Corporation Data Storage 485,437 Shares, Unregistered Series E
Technology Preferred Stock
Vivid Semiconductor, Inc. Semi-Conductor 440,000 Shares, Unregistered Series E
Manufacturer Preferred Stock
79,366 Shares, Unregistered Series F-1
Preferred Stock
WorldGate On-Line Access 93,897 Shares Unregistered Common Stock (from
Communications, Inc. (a) VIA TV Series B Preferred Stock)
Cost or % of
Contributed Total
Company Name Value Value Investments
------------------------------------ --------- ---------- -----------
<S> <C> <C> <C>
Commerce One, Inc. $ 900,000 $ 900,000 2.0%
Cool Zone, Inc. 200,000 100,000 0.2%
Creative Foods, Inc. 4,847 0.0%
Cyberian Outpost, Inc. (a) 715,040 8,289,016 18.3%
1,000,000 6,665,625 14.7%
750,000 8,694,286 19.2%
254,930 1,411,246 3.1%
Diversified Development, LLC.
Dowling Residences LLC. 250,325 250,325 0.6%
DRS Technologies, Inc. (a)
(bought NAI Technologies, Inc.)
HPA Monon Corp.
HQ Global Workplaces, Inc. 58,500 0.1%
(formerly Alliance National, Inc.)
HearMe (a) 1,500,001 1,500,001 3.3%
(formerly Mpath Interactive, Inc.)
Improved Drinking Water 25,000
& Pool Co.
Independence Brewing 4,755 45,787 0.1%
Company (a)
Internet Gift Registries, Inc. 500,000 500,000 1.1%
Juno Online Services, Inc. (a) 1,678,711 1,678,711 3.7%
NAI Technologies, Inc.
(bought by DRS Technologies, Inc.)
New York Restaurant 163,278 163,278 0.4%
Group, Inc.
Panebello USA
PNV.net, Inc. 750,000 750,000 1.7%
(formerly Park N'View Inc.)
Prio, Inc. (formerly SaveSmart, Inc.) 500,000 500,000 1.1%
RoweCom Inc. (a) 1,500,000 4,692,881 10.4%
SynQuest, Inc. 250,263 250,263 0.6%
TeraStor Corporation 500,000 500,000 1.1%
Vivid Semiconductor, Inc. 1,650,000 1,386,000 3.0%
250,003 250,003 0.6%
WorldGate 1,000,006 1,364,006 2.9%
Communications, Inc. (a)
----------- ----------- ----
Total Equity Interests $14,342,312 $39,954,775 88.2%
=========== =========== ====
</TABLE>
-----------------------
(a) Publicly traded at March 31, 1999
See accompanying notes to the financial statements.
F-19
<PAGE>
WINFIELD CAPITAL CORP.
PORTFOLIO OF INVESTMENTS
March 31, 2000 and 1999
ASSETS ACQUIRED IN LIQUIDATION
March 31, 2000
----------------------------------
% of Total
Company Name Cost Value Investments
------------ --------- -------- -----------
Maypat Realty Corp. ....................... $ 162,063 $ 77,063 0.1%
The Partition Corp. ....................... 137,816 137,816 0.1%
Suburban Enterprises, Inc. ................ 24,707 7,207 0.0%
--------- -------- ---
Total Assets Acquired in Liquidation .... $ 324,586 $222,086 0.2%
========= ======== ===
March 31, 1999
-----------------------------------
% of Total
Company Name Cost Value Investments
------------ ---------- -------- -----------
Maypat Realty Corp. ...................... $ 162,063 $ 77,063 0.2%
Panebello USA (a) ........................ 802,928 0 0.0%
The Partition Corp. ...................... 137,816 137,816 0.3%
Suburban Enterprises, Inc. ............... 24,707 7,207 0.0%
---------- -------- ---
Total Assets Acquired in Liquidation ... $1,127,514 $222,086 0.5%
========== ======== ===
(a) written off subsequent to year end
See accompanying notes to the financial statements.
F-20
