UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
Commission File Number 33-94322
WINFIELD CAPITAL CORP.
Incorporated in the IRS Employer Identification
State of New York Number 13-2704241
----------
237 Mamaroneck Avenue
White Plains, New York 10605
(914) 949-2600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12-6-2 of the Exchange Act).
Yes No X
----- -----
Registrant had 5,346,084 shares of common stock outstanding as of November 11,
2004.
================================================================================
This report consists of 25 pages
Form 10-Q Quarterly Report
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Condensed Statements of Operations - Six and
three Months ended September 30, 2004 and 2003 3-4
Condensed Balance Sheets - as of September 30, 2004
and March 31, 2004 5-6
Condensed Statements of Cash Flows - Six Months Ended
September 30, 2004 and 2003 7
Notes to Condensed Financial Statements 8-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-16
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
Item 4. Controls and Procedures 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 20-21
CERTIFICATIONS
Exhibit 31.1 - Section 302 22-23
Exhibit 31.2 - Section 302 23-24
Exhibit 32.1 - Section 906 24
Exhibit 32.2 - Section 906 25
Item 1.
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF OPERATIONS
==================================
(unaudited)
Six Months Ended
September 30,
2004 2003
------------ ------------
Investment income
Interest from small business concerns $ 613,769 $ 699,619
Interest from invested idle funds 26,497 47,281
Other income -- 4,851
------------ ------------
Total investment income 640,266 751,751
------------ ------------
Expenses
Interest 679,667 921,089
Payroll and payroll-related expenses 279,050 303,642
General and administrative expenses 135,668 168,820
Other operating expenses 185,234 179,414
------------ ------------
Total investment expenses 1,279,619 1,572,965
------------ ------------
Investment loss - net (639,353) (821,214)
Realized gain (loss) on investments 789,439 (35,877)
Change in unrealized depreciation of
investments (592,449) 1,310,036
------------ ------------
Net (decrease) increase in shareholders'
equity resulting from operations ($ 442,363) $ 452,945
============ ============
Per share net (decrease) increase in
Shareholders' equity resulting from operations
Basic ($ 0.08) $ 0.08
============ ============
Diluted ($ 0.08) $ 0.08
============ ============
The accompanying notes are an integral part of these condensed financial
statements.
-3-
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF OPERATIONS
==================================
(unaudited)
Three Months Ended
September 30,
2004 2003
----------- -----------
Investment income
Interest from small business concerns $ 250,978 $ 356,442
Interest from invested idle funds 16,021 23,956
Other income -- 2,226
----------- -----------
Total investment income 266,999 382,624
----------- -----------
Expenses
Interest 318,219 482,134
Payroll and payroll-related expenses 137,973 151,212
General and administrative expenses 70,595 74,260
Other operating expenses 84,451 96,106
----------- -----------
Total investment expenses 611,238 803,712
----------- -----------
Investment loss - net (344,239) (421,088)
Realized gain (loss) on investments 475,226 (126,914)
Change in unrealized depreciation of
investments (25,850) 824,189
----------- -----------
Net increase in shareholders'
equity resulting from operations $ 105,137 $ 276,187
=========== ===========
Per share net increase in shareholders'
equity resulting from operations
Basic $ 0.02 $ 0.05
=========== ===========
Diluted $ 0.02 $ 0.05
=========== ===========
The accompanying notes are an integral part of these condensed financial
statements.
-4-
WINFIELD CAPITAL CORP.
CONDENSED BALANCE SHEETS
========================
ASSETS
------
September 30, March 31,
2004 2004
----------- -----------
(unaudited)
Investments at value:
Loans and notes receivable $ 2,308,170 $ 8,483,825
Equity interests in small business
concerns 7,518,192 9,817,227
----------- -----------
Total investments 9,826,362 18,301,052
Cash and cash equivalents 916,501 5,473,063
Due from broker 217,557 --
Accrued interest receivable 62,720 62,070
Furniture and equipment (net of
accumulated depreciation of
$49,740 at September 30, 2004
and $47,316 at March 31, 2004) 8,664 11,088
Other assets 16,994 71,406
----------- -----------
Total assets $11,048,798 $23,918,679
=========== ===========
The accompanying notes are an integral part of these condensed financial
statements.
-5-
WINFIELD CAPITAL CORP.
CONDENSED BALANCE SHEETS
========================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
September 30, March 31,
2004 2004
------------ ------------
(unaudited)
Liabilities
Debentures payable to the U.S. Small
Business Administration $ 8,778,779 $ 19,536,660
Deferred income -- 101,922
Accrued expenses 84,638 1,652,353
------------ ------------
Total liabilities 8,863,417 21,290,935
------------ ------------
Commitments and contingencies
Shareholders' equity
Preferred stock - $.001 par value;
Authorized 1,000,000 shares
Issued and outstanding - none
Common stock - $.01 par value;
Authorized - 30,000,000 shares;
Issued and outstanding - 5,346,084
shares at September 30, 2004 and
at March 31, 2004 53,461 53,461
Additional paid-in capital 18,391,954 18,391,954
Accumulated deficit (2,752,467) (2,902,553)
Unrealized depreciation on investments - Net (13,507,567) (12,915,118)
------------ ------------
Total shareholders' equity 2,185,381 2,627,744
------------ ------------
Total liabilities and
Shareholders' equity $ 11,048,798 $ 23,918,679
============ ============
The accompanying notes are an integral part of these condensed financial
statements.
-6-
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF CASH FLOWS
==================================
(unaudited)
Six Months Ended
September 30, September 30,
2004 2003
------------ ------------
Cash flows from operating activities
Net (decrease) increase in shareholders'
equity resulting from operations ($ 442,363) $ 452,945
Adjustments to reconcile net (decrease)
increase in shareholders' equity
resulting from operations to net cash
(used in) operating activities
Amortization of deferred income (101,922) (13,590)
Change in unrealized depreciation
on investments 592,449 (1,310,036)
Realized (gain) loss on investments (789,439) 36,689
Depreciation and amortization 2,424 2,554
Accretion of interest to face value
of notes (114,078) (199,646)
Changes in assets and liabilities
Due from broker -- (122,878)
Accrued interest receivable (650) 12,703
Other assets 54,412 83,391
Accrued expenses (1,567,715) 784,837
------------ ------------
Net cash (used in) operating activities (2,366,882) (273,031)
------------ ------------
Cash flows from investing activities
Proceeds from short-term marketable
securities -- 1,650,000
Proceeds from sale of investments/return
of capital 8,622,121 512,693
Investments originated (54,949) (19,924)
Proceeds from collection of loans 1,029 394,478
------------ ------------
Net cash provided by investing
activities 8,568,201 2,537,247
------------ ------------
Cash flows from financing activities
Repayment of debentures payable to the
U.S. Small Business Administration (10,757,881) (3,300,000)
------------ ------------
Net cash (used in) financing activities (10,757,881) (3,300,000)
------------ ------------
Decrease in cash and cash equivalents (4,556,562) (1,035,784)
Cash and cash equivalents - beginning
of period 5,473,063 4,396,206
------------ ------------
Cash and cash equivalents - end of period $ 916,501 $ 3,360,422
============ ============
The accompanying notes are an integral part of these condensed financial
statements.
-7-
WINFIELD CAPITAL CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
=======================================
Note - 1 Interim Financial Statements
The interim financial statements of Winfield Capital Corp. (the
"Company") have been prepared in accordance with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all information and disclosures necessary for a presentation
of the Company's financial position, results of operations and cash
flows in conformity with generally accepted accounting principles in
the United States of America. In the opinion of management, these
financial statements reflect all adjustments, consisting only of
normal recurring accruals, necessary for a fair presentation of the
Company's financial position, results of operations and cash flows
for such periods. The results of operations for any interim period
are not necessarily indicative of the results for the full year.
These financial statements should be read in conjunction with the
financial statements and notes thereto contained in the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 2004.
Note - 2 (Loss) Income per Common Share:
The computation of basic and diluted (loss) income per common share
is as follows:
Six Months Ended
September 30,
------------------------
2004 2003
---------- ----------
Net (loss) income available for
common stock equivalent shares
deemed to have a dilutive effect ($ 442,363) $ 452,945
========== ==========
Income (loss) per common share
Basic ($ 0.08) $ 0.08
========== ==========
Diluted ($ 0.08) $ 0.08
========== ==========
Shares used in computation:
Basic:
Weighted average common shares 5,346,084 5,346,084
========== ==========
Diluted:
Weighted average common shares 5,346,084 5,346,084
Common stock equivalents A A
---------- ----------
5,346,084 5,346,084
========== ==========
(A) For the six months ended September 30, 2004 and September 30, 2003 the
effect of exercising the outstanding stock options would have been
anti-dilutive and therefore, the use of common stock equivalent shares was
not considered.
-8-
WINFIELD CAPITAL CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
=======================================
Note - 2 (Loss) Income per Common Share: (Cont'd)
The computation of basic and diluted (loss) income per common share
is as follows:
Three Months Ended
September 30,
------------------------
2004 2003
----------- -----------
Net income available for
common stock equivalent shares
deemed to have a dilutive effect $ 105,137 $ 276,187
=========== ===========
Income per common share
Basic $ 0.02 $ 0.05
=========== ===========
Diluted $ 0.02 $ 0.05
=========== ===========
Shares used in computation:
Basic:
Weighted average common shares 5,346,084 5,346,084
=========== ===========
Diluted:
Weighted average common shares 5,346,084 5,346,084
Common stock equivalents B B
----------- -----------
5,346,084 5,346,084
=========== ===========
(B) For the three months ended September 30, 2004 and September 30, 2003 the
effect of exercising the outstanding stock options would have been
anti-dilutive and therefore, the use of common stock equivalent shares was
not considered.
Note - 3 Income Taxes
In accordance with Subchapter M of the Internal Revenue Code, no
provision for income taxes is necessary with respect to net
investment income and/or net realized short-term capital gains since
the Company has elected to distribute not less than 90% of such
income and/or gains to shareholders. However, to the extent the
Company elects to either retain net realized long-term capital gains
or net realized short-term capital gains, the Company will pay all
applicable Federal income taxes on behalf of its shareholders.
-9-
WINFIELD CAPITAL CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
=======================================
Note - 4 Commitments and Contingencies
According to the U.S. Small Business Administration (the "SBA")
Regulations, the Company is required to be in compliance with the
capital impairment rules, as defined by regulation 107.1830 of the
SBA Regulations. The Company was notified by the SBA on April 30,
2003 that the Company was no longer in compliance with the SBA's
capital impairment requirements and that the SBA had accelerated the
maturity date of the Company's debentures. The aggregate principal,
interest and fees due under the debentures totaled approximately
$25.6 million as of April 30, 2003, including interest and fees due
through the next semi-annual payment date. As a result of subsequent
repayments by the Company, the aggregate principal, interest and
fees due under the debentures totaled approximately $8.8 million as
of September 30, 2004, including interest and fees due through the
next semi-annual payment date. The SBA has transferred Winfield
Capital's account to liquidation status where any new investments
and material expenses are subject to prior SBA approval. Based on
discussions and meetings that the Company has had with the SBA to
date, the SBA will not afford the Company the flexibility of a
self-managed liquidation to repay its indebtedness. As a result, the
Company anticipates that it will be required to repay all or
substantially all of the principal and interest owing to the SBA on
a schedule acceptable to the SBA. No definitive agreement has been
reached with the SBA and the SBA maintains the ability to pursue any
remedies they deem appropriate under the law or the instruments
evidencing the Company's indebtedness, including, without
limitation, initiating proceedings for the appointment of the SBA or
its designee as receiver.
If the SBA were to require the Company to immediately pay back the
entire indebtedness including accrued interest, certain private
security investments may need to be disposed of in a forced sale
that may result in proceeds less than their carrying value at
September 30, 2004. As such, this impairment could have a material
adverse effect on the Company's financial position, results of
operations and cash flows that raises substantial doubt about the
Company's ability to continue as a going concern. The Company
continues to explore various strategic alternatives, including a
third party equity infusion, although there can be no assurance that
it will be successful in its ability to consummate or implement
these or any other strategic alternatives.
-10-
WINFIELD CAPITAL CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
=======================================
Note - 5 The Nasdaq Stock Market, Inc.
On April 11, 2003, the Company received notice from the Nasdaq Stock
Market, Inc. that effective April 15, 2003 the Company's securities
were delisted from the Nasdaq Smallcap Market. The Company's
securities are quoted on the OTC Bulletin Board effective April 15,
2003 with the assigned symbol "WCAP".
Note - 6 Stock-Based Employee Compensation Plan
At September 30, 2004, the Company had one stock-based employee
compensation plan. The Company accounts for the plan under the
recognition and measurement principles of APB Opinion No. 25,
Accounting for Stock Issued to Employees, and related
Interpretations. No stock-based employee compensation cost is
reflected in net income, as all options granted under this plan had
an exercise price equal to the market value of the underlying common
stock on the date of the grant. For the six and three months ended
September 30, 2004 and 2003, there would be no effect on net income
and earnings per share if the Company had applied the fair value
recognition provisions of FASB Statement No. 123, Accounting for
Stock-Based Compensation, to stock-based employee compensation, as
no options were granted nor vested during those periods.
-11-
Item 2.
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
================================================
Critical Accounting Policies and Estimates
- ------------------------------------------
The preparation of the unaudited condensed financial statements includes
estimates and assumptions made by management. Management bases its estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances. Actual differences could differ from these
estimates under different assumptions or conditions. The Company believes there
have been no significant changes during the six month period ended September 30,
2004 to the items disclosed as significant accounting policies in management's
Notes to Financial Statements in the Company's Annual Report on Form 10-K for
the year ended March 31, 2004.
Results of Operations
- ---------------------
Six Months Ended September 30, 2004 and September 30, 2003
- ----------------------------------------------------------
Investment Income
- -----------------
Investment income decreased by $111,485 to $640,266 for the six month period
ended September 30, 2004 from $751,751 for the same period ended September 30,
2003. This primarily reflected a decrease in interest from small business
concerns of $85,850 as a result of the Company's sale of a loan investment.
Interest from idle funds decreased by $20,784 during this period as a result of
a decrease in idle funds that were invested and other income decreased $4,851.
Interest Expense
- ----------------
Interest expense decreased by $241,422 to $679,667 for the six months ended
September 30, 2004 from $921,089 for the same period ended September 30, 2003.
This decrease resulted from repayments of debentures to the U.S. Small Business
Administration.
Operating Expenses
- ------------------
The Company's operating expenses decreased from $651,876 for the six months
ended September 30, 2003 to $599,952 for the six months ended September 30,
2004. Payroll and payroll-related expenses decreased by $24,592 due to the
termination of a clerical employee, insurance expense decreased by $36,205,
directors fees decreased by $39,250, audit fees decreased by $15,687, offset by
an increase of $72,419 in legal expenses. There were net miscellaneous decreases
of $8,609.
-12-
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
================================================
Realized Gain (Loss) on Disposition of Investments
- --------------------------------------------------
The Company realized a $789,439 gain on the sale of its entire position in three
portfolio companies and a portion of its position in two other portfolio
companies through the second quarter of fiscal 2005. The Company realized a
$35,877 loss on the sales of its entire positions in four portfolio companies
and a portion of its portfolio position in another company, through the second
quarter of fiscal 2004.
Changes in Unrealized Depreciation of Investments
- -------------------------------------------------
There was an increase in unrealized depreciation of investments of $592,449 for
the six months ended September 30, 2004 principally related to the decrease in
fair value of two portfolio companies and the decline in market price of one
publicly traded portfolio Company, compared to a decrease in unrealized
depreciation of investments of $1,310,036 (or $1,317,415 excluding short-term
marketable securities) for the six months ended September 30, 2003.
Results of Operations
- ---------------------
Three Months Ended September 30, 2004 and September 30, 2003
- ------------------------------------------------------------
Investment Income
- -----------------
Investment income decreased by $115,625 to $266,999 for the three month period
ended September 30, 2004 from $382,624 for the same period ended September 30,
2003. This primarily reflected a decrease in interest from small business
concerns of $105,464 as a result of the Company's sale of a loan investment.
Interest from idle funds decreased by $7,935 during this period as a result of a
decrease in idle funds that were invested and other income decreased $2,226.
Interest Expense
- ----------------
Interest expense decreased by $163,915 to $318,219 for the three months ended
September 30, 2004 from $482,134 for the same period ended September 30, 2003.
This decrease resulted from repayments of debentures to the U.S. Small Business
Administration.
-13-
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
================================================
Operating Expenses
- ------------------
The Company's operating expenses decreased from $321,578 for the three months
ended September 30, 2003 to $293,019 for the three months ended September 30,
2004. Payroll and payroll-related expenses decreased by $13,239 due to the
termination of a clerical employee, insurance expense decreased by $9,782, audit
fees decreased by $10,361, directors fees decreased by $18,500, offset by an
increase in legal fees of $21,721. There were miscellaneous net increases of
$1,602.
Realized Gain (Loss) on Disposition of Investments
- --------------------------------------------------
The Company realized a $475,226 gain on the sales of its entire positions in two
portfolio companies and a portion of its position in two other portfolio
companies in the second quarter of fiscal 2005. In the second quarter of fiscal
2004, the Company realized a $126,914 loss on the sales of its entire positions
in three portfolio companies and a portion of its position in another portfolio
company.
Changes in Unrealized Depreciation of Investments
- -------------------------------------------------
There was an increase in unrealized depreciation of $25,850 for the three months
ended September 30, 2004 principally related to the decrease in fair value and
market value of two portfolio companies offset by the increase in market price
of one portfolio company, compared to a decrease in unrealized depreciation of
investments of $824,189 (or $832,352 excluding short-term marketable securities)
for the three months ended September 30, 2003.
-14-
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
================================================
Liquidity and Capital Resources
- -------------------------------
At September 30, 2004, the Company held cash and short-term marketable
securities totaling $916,501.
According to the U.S. Small Business Administration (the "SBA") Regulations, the
Company is required to be in compliance with the capital impairment rules, as
defined by regulation 107.1830 of the SBA Regulations. The Company was notified
by the SBA on April 30, 2003 that the Company was no longer in compliance with
the SBA's capital impairment requirements and that the SBA had accelerated the
maturity date of the Company's debentures. The aggregate principal, interest and
fees due under the debentures totaled approximately $25.6 million as of April
30, 2003, including interest and fees due through the next semi-annual payment
date. As a result of subsequent repayments by the Company, the aggregate
principal, interest and fees due under the debentures totaled approximately $8.8
million as of September 30, 2004, including interest and fees due through the
next semi-annual payment date. The SBA has transferred Winfield Capital's
account to liquidation status where any new investments and material expenses
are subject to prior SBA approval. Based on discussions and meetings that the
Company has had with the SBA to date, the SBA will not afford the Company the
flexibility of a self-managed liquidation to repay its indebtedness. As a
result, the Company anticipates that it will be required to repay all or
substantially all of the principal and interest owing to the SBA on a schedule
acceptable to the SBA. No definitive agreement has been reached with the SBA and
the SBA maintains the ability to pursue any remedies they deem appropriate under
the law or the instruments evidencing the Company's indebtedness, including,
without limitation, initiating proceedings for the appointment of the SBA or its
designee as receiver.
If the SBA were to require the Company to immediately pay back the entire
indebtedness including accrued interest, certain private security investments
may need to be disposed of in a forced sale that may result in proceeds less
than their carrying value at September 30, 2004. As such, this impairment could
have a material adverse effect on the Company's financial position, results of
operations and cash flows that raises substantial doubt about the Company's
ability to continue as a going concern. The Company continues to explore various
strategic alternatives, including a third party equity infusion, although there
can be no assurance that it will be successful in its ability to consummate or
implement these or any other strategic alternatives.
-15-
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
================================================
Forward-Looking Statements
- --------------------------
This report and accompanying notes to the financial statements may contain
forward-looking statements. For this purpose, any statements contained in this
report and accompanying notes to the financial statements that are not
statements of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, words such as "may," "will," "could," "would,"
"should", "expect," "believe," "anticipate," "estimate," "continue," "provided,"
or comparable terminology are intended to identify forward-looking statements.
These statements by their nature involve substantial risks and uncertainties,
and actual results may differ materially depending on a variety of factors. The
Company operates in a changing environment in which new factors can emerge from
time to time. It is not possible for management to predict all of these risks,
nor can it assess the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in
forward-looking statements. All forward-looking statements are subject to risks
and uncertainties, including without limitation those identified in the
Company's Annual Report on Form 10-K, which could cause actual results to differ
from those projected. The Company disclaims any obligation to update any
forward-looking statements.
Reporting on Disposition of Investments
- ---------------------------------------
From time to time, in the ordinary course of business, the Company may liquidate
all or a portion of its portfolio investments. In this regard, the Company may
sell a portion of a single investment or sell portions of various investments it
has made. The Company's policy is to publicly report the results of such
transactions in its Form 10-K and Form 10-Q Reports filed with the Securities
and Exchange Commission under the Securities Exchange Act and as otherwise
required by applicable regulations and laws.
-16-
WINFIELD CAPITAL CORP.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
==========================================================
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
- ----------------------------------------------------------
The Company's earnings and cash flows are subject to fluctuations due to changes
in interest rates primarily from its investment of available cash balances in
bank money market funds with portfolios of investment grade corporate and U.S.
government securities, in individual bank certificates of deposit and U.S.
treasuries. Under its current policies, the Company does not use interest rate
derivative instruments to manage exposure to interest rate changes.
A portion of the Company's investment portfolio consists of fixed-rate debt
securities. Since these debt securities usually have relatively high fixed rates
of interest, minor changes in market yields of publicly-traded debt securities
have little or no effect on the values of debt securities in the Company's
portfolio and no effect on interest income. On the other hand, significant
changes in the market yields of publicly-traded debt securities may have a
material effect on the values of debt securities in the Company's portfolio. The
Company's investments in debt securities are generally held to maturity and
their fair values are determined on the basis of the terms of the debt security
and the financial condition of the issuer. As of September 30, 2004, the Company
had no publicly-traded debt securities in its portfolio.
A portion of the Company's investment portfolio consists of debt and equity
securities of private companies. The Company anticipates little or no effect on
the value of these investments from modest changes in public market equity
valuations. Should significant changes in market valuations of comparable
publicly-owned companies occur, there may be a corresponding effect on
valuations of private companies, which would affect the value and the amount and
timing of proceeds eventually realized from these investments. A portion of the
Company's investment portfolio also consists of restricted common stocks and
warrants to purchase common stocks of publicly-owned companies. The fair values
of these restricted securities are influenced by the nature of applicable resale
restrictions, the underlying earnings and financial condition of the issuer, and
the market valuations of comparable publicly-owned companies. A portion of the
Company's investment portfolio also consists of unrestricted, freely marketable
common stocks of publicly-owned companies. These freely marketable investments
are directly exposed to equity price fluctuations, in that a change in an
issuer's public market equity price would result in an identical change in the
fair value of the Company's investment in such security. The Company may utilize
put and call option contracts to attempt to minimize the market risk of its
investments in publicly-owned companies. As of September 30, 2004, the Company
had no option contracts outstanding as part of its portfolio.
-17-
WINFIELD CAPITAL CORP.
CONTROLS AND PROCEDURES
=======================
Item 4.
Controls and Procedures
- -----------------------
(a) Evaluation of Disclosure Controls and Procedures
- --- ------------------------------------------------
As of the end of the period covered by this Quarterly Report on Form 10-Q,
the Company evaluated, under the supervision its chief executive officer
and chief financial officer, the effectiveness of the design and operation
of its "disclosure controls and procedures" (as defined in the Securities
Exchange Act of 1934, Rules 13a-15(e) and 15d-15(e)). Based on that
evaluation, the Company's management, including its chief executive officer
and chief financial officer, has concluded that as of the date of the
evaluation its disclosure controls and procedures are effective to ensure
that all material information required to be filed in this report has been
made known to them.
(b) Changes in Internal Controls over Financial Reporting
- --- -----------------------------------------------------
There have been no changes in the Company's internal controls over
financial reporting that occurred during the second quarter of the fiscal
year ending March 31, 2005 that have materially affected, or are reasonably
likely to materially affect, the Company's internal controls over financial
reporting.
-18-
WINFIELD CAPITAL CORP.
PART II - OTHER INFORMATION
===========================
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
On September 8, 2004, the Company held its annual meeting of
shareholders in New York, New York. The holders of 5,174,084
shares of Common Stock were present or represented by proxy and,
accordingly, a quorum was present. The following matters were
voted upon and received the votes set forth.
1. All of the following persons nominated were elected as
directors and received the number of votes set opposite
their respective names.
VOTES FOR VOTES WITHHELD
Joel I. Barad 5,095,424 78,660
Barry J. Gordon 5,095,424 78,660
David Greenberg 5,090,324 83,760
Paul A. Perlin 5,090,324 83,760
R. Scot Perlin 5,090,324 83,760
Allen L. Weingarten 5,095,424 78,660
2. The Company's proposal to ratify the appointment of Lazar,
Levine & Felix LLP as the Company's independent auditors for
the fiscal year ending March 31, 2005 received 5,142,994
votes FOR and 27,695 votes AGAINST, with 3,395 ABSENTIONS.
Item 5. Other Information
None.
-19-
WINFIELD CAPITAL CORP.
PART II - OTHER INFORMATION
===========================
Item 6. - Exhibits and Reports on Form 8-K
- ------------------------------------------
a. Exhibits
--------
Exhibit 31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief
Executive Officer
Exhibit 31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief
Financial Officer
Exhibit 32.1 Section 1350 Certification of Chief Executive
Officer
Exhibit 32.2 Section 1350 Certification of Chief Financial
Officer
b. Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the second quarter of
the Registrant's fiscal year ending March 31, 2005.
-20-
WINFIELD CAPITAL CORP.
PART II - OTHER INFORMATION CONTINUED
=====================================
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WINFIELD CAPITAL CORP.
(Registrant)
By: /s/ R. Scot Perlin
-----------------------------
R. Scot Perlin
Chief Financial Officer
Dated: November 11, 2004
-21-