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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 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-b-2 of the Exchange Act).
Yes [ ] No [X]
Registrant had 5,346,084 shares of common stock outstanding as of February 10,
2005.
This report consists of 25 pages
Form 10-Q Quarterly Report
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Condensed Statements of Operations - Nine and Three Months
ended December 31, 2004 and 2003 (unaudited) 3 - 4
Condensed Balance Sheets - as of December 31, 2004
(unaudited) and March 31, 2004 5 - 6
Condensed Statements of Cash Flows - Nine Months Ended
December 31, 2004 and 2003 (unaudited) 7
Notes to Condensed Financial Statements (unaudited) 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 16 - 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
SIGNATURES 21
Exhibit 31.1 - Section 302 Officer Certification 22
Exhibit 31.2 - Section 302 Officer Certification 23
Exhibit 32.1 - Section 906 Officer Certification 24
Exhibit 32.2 - Section 906 Officer Certification 25
-2-
Item 1.
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF OPERATIONS
----------------------------------
(unaudited)
Nine Months Ended
December 31,
---------------------------
2004 2003
------------ ------------
Investment income
Interest from small business concerns $ 685,785 $ 1,059,107
Interest from invested idle funds 28,414 63,007
Other income -- 7,076
------------ ------------
Total investment income 714,199 1,129,190
------------ ------------
Expenses
Interest 837,497 1,305,449
Payroll and payroll-related expenses 422,618 460,347
General and administrative expenses 196,788 240,171
Other operating expenses 218,554 212,711
------------ ------------
Total investment expenses 1,675,457 2,218,678
------------ ------------
Investment loss - net (961,258) (1,089,488)
Realized gain on investments 363,308 107,934
Change in unrealized depreciation
of investments (389,760) 2,180,230
------------ ------------
Net (decrease) increase in shareholders'
equity resulting from operations $ (987,710) $ 1,198,676
============ ============
Per share net (decrease) increase in
shareholders' equity resulting from operations
Basic $ (0.18) $ 0.22
============ ============
Diluted $ (0.18) $ 0.22
============ ============
The accompanying notes are an integral part
of these condensed financial statements.
-3-
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF OPERATIONS
----------------------------------
(unaudited)
Three Months Ended
December 31,
---------------------------
2004 2003
------------ ------------
Investment income
Interest from small business concerns $ 72,016 $ 359,488
Interest from invested idle funds 1,917 15,726
Other income -- 2,225
------------ ------------
Total investment income 73,933 377,439
------------ ------------
Expenses
Interest 157,830 384,360
Payroll and payroll-related expenses 143,568 156,705
General and administrative expenses 61,120 71,351
Other operating expenses 33,320 33,297
------------ ------------
Total investment expenses 395,838 645,713
------------ ------------
Investment loss - net (321,905) (268,274)
Realized (loss) gain on investments (426,131) 143,811
Change in unrealized depreciation
of investments 582,332 870,194
------------ ------------
Net (decrease) increase in shareholders'
equity resulting from operations $ (165,704) $ 745,731
============ ============
Per share net (decrease) increase in
shareholders' equity resulting from operations
Basic $ (0.03) $ 0.14
============ ============
Diluted $ (0.03) $ 0.14
============ ============
The accompanying notes are an integral part
of these condensed financial statements.
-4-
WINFIELD CAPITAL CORP.
CONDENSED BALANCE SHEETS
------------------------
ASSETS
------
December 31, March 31,
2004 2004
------------ ------------
(unaudited)
Investments at value:
Loans and notes receivable $ 2,312,053 $ 8,483,825
Equity interests in small business
concerns 7,220,880 9,817,227
------------ ------------
Total investments 9,532,933 18,301,052
Cash and cash equivalents 463,650 5,473,063
Accrued interest receivable 63,579 62,070
Furniture and equipment (net of
accumulated depreciation of
$50,952 at December 31, 2004
and $47,316 at March 31, 2004) 7,452 11,088
Other assets 57,994 71,406
------------ ------------
Total assets $ 10,125,608 $ 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
------------------------------------
December 31, March 31,
2004 2004
------------ ------------
(unaudited)
Liabilities
Debentures payable to the U.S. Small
Business Administration $ 8,438,858 $ 19,536,660
Deferred income -- 101,922
Accrued expenses 46,716 1,652,353
------------ ------------
Total liabilities 8,485,574 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 December 31, 2004 and
at March 31, 2004 53,461 53,461
Additional paid-in capital 18,391,954 18,391,954
Accumulated deficit (3,500,503) (2,902,553)
Unrealized depreciation on investments -
Net (13,304,878) (12,915,118)
------------ ------------
Total shareholders' equity 1,640,034 2,627,744
------------ ------------
Total liabilities and
shareholders' equity $ 10,125,608 $ 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)
Nine Months Ended
December 31,
---------------------------
2004 2003
------------ ------------
Cash flows from operating activities
Net (decrease) increase in shareholders'
equity resulting from operations $ (987,710) $ 1,198,676
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) (20,385)
Change in unrealized depreciation
on investments 389,760 (2,180,230)
Realized (gain) on investments (363,308) (107,122)
Depreciation and amortization 3,636 4,159
(Accretion) amortization of interest to
face value of notes and treasury bills (118,495) (306,779)
Changes in assets and liabilities
Accrued interest receivable (1,509) 4,682
Other assets 13,412 21,134
Accrued expenses (1,605,637) 898,700
------------ ------------
Net cash used in operating activities (2,771,773) (487,165)
------------ ------------
Cash flows from investing activities
Proceeds from short-term marketable
securities -- 2,150,000
Proceeds from sale of investments/return
of capital 8,913,548 657,980
Investments originated (54,949) (85,920)
Proceeds from collection of loans 1,563 423,085
Purchase of furniture and fixtures -- (3,278)
------------ ------------
Net cash provided by investing activities 8,860,162 3,141,867
------------ ------------
Cash flows from financing activities
Repayment of debentures payable to the
U.S. Small Business Administration (11,097,802) (5,113,340)
------------ ------------
Net cash used in financing activities (11,097,802) (5,113,340)
------------ ------------
Decrease in cash and cash equivalents (5,009,413) (2,458,638)
Cash and cash equivalents - beginning
of period 5,473,063 4,396,206
------------ ------------
Cash and cash equivalents - end of period $ 463,650 $ 1,937,568
============ ============
The accompanying notes are an integral part
of these condensed financial statements.
-7-
WINFIELD CAPITAL CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
---------------------------------------
(unaudited)
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 - Earnings (Loss) per Common Share:
The computation of basic and diluted (loss) income per common share is
as follows:
Nine Months Ended
December 31,
---------------------------
2004 2003
------------ ------------
Net (loss) income available for
common stock equivalent shares
deemed to have a dilutive effect $ (987,710) $ 1,198,676
============ ============
(Loss) income per common share
Basic $ (0.18) $ 0.22
============ ============
Diluted $ (0.18) $ 0.22
============ ============
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 nine months ended December 31, 2004 and December 31, 2003, the
effect of exercising the outstanding stock options for 778,563 shares
would have been anti-dilutive in fiscal 2004 due to the loss and in
fiscal 2003, the common stock market price was lower than the exercise
price. Therefore, the use of common stock equivalent shares was not
considered.
-8-
WINFIELD CAPITAL CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
---------------------------------------
(unaudited)
Note 2 - Earnings (Loss) per Common Share: (Cont'd)
The computation of basic and diluted (loss) income per common share is
as follows:
Three Months Ended
December 31,
---------------------------
2004 2003
------------ ------------
Net (loss) income available for
common stock equivalent shares
deemed to have a dilutive effect $ (165,704) $ 745,731
============ ============
(Loss) income per common share
Basic $ (0.03) $ 0.14
============ ============
Diluted $ (0.03) $ 0.14
============ ============
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 December 31, 2004 and December 31, 2003,
the effect of exercising the outstanding stock options for 778,563
shares would have been anti-dilutive due to the loss in fiscal 2004
and in fiscal 2003, the common stock market price was lower than the
exercise price. 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
---------------------------------------
(unaudited)
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 $8.5 million as of December 31, 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 December 31,
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
---------------------------------------
(unaudited)
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 December 31, 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 those plans had an exercise price equal to
the market value of the underlying common stock on the date of the
grant. For the nine months and three months ended December 31, 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.
Note - 7 Subsequent Events
During January and February to date in 2005, the Company sold a portion
of its equity position in Open Solutions, Inc. and redeemed its entire
debt position in RITA Medical Systems, Inc. The sale and the redemption
resulted in total proceeds of approximately $740,000 which were then
used by the Company to repay certain debentures to the U.S. Small
Business Administration.
-11-
Item 2.
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
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 nine month period ended December 31,
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.
Nine Months Ended December 31, 2004 and December 31, 2003
- ---------------------------------------------------------
Investment Income
- -----------------
Investment income decreased by $414,991 to $714,199 for the nine month period
ended December 31, 2004 from $1,129,190 for the same period ended December 31,
2003. This primarily reflected a decrease in interest from small business
concerns of $373,322 as a result of the Company's sale of a loan investment.
Interest from idle funds decreased $34,593 during this period as a result of a
decrease in interest rates and a decrease in idle funds that were invested and
other income decreased $7,076.
Interest Expense
- ----------------
Interest expense decreased by $467,952 to $837,497 for the nine months ended
December 31, 2004 from $1,305,449 for the same period ended December 31, 2003.
This decrease resulted from repayments of certain debentures to the U.S. Small
Business Administration.
Operating Expenses
- ------------------
The Company's operating expenses decreased from $913,229 for the nine months
ended December 31, 2003 to $837,960 for the nine months ended December 31, 2004.
Payroll and payroll-related expenses decreased by $37,729 due to the termination
of a clerical employee, insurance expense decreased by $47,368, directors fees
decreased by $45,500, audit fees decreased by $17,922 offset by an increase in
legal expense of $79,880. There were miscellaneous net decreases of $6,630.
-12-
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
Realized Gain on Disposition of Investments
- -------------------------------------------
The Company realized a $363,308 gain on the sale of its entire position in four
portfolio companies and a portion of its position in two other portfolio
companies through the third quarter of fiscal 2005. The Company realized a
$107,934 gain on the sales of its entire positions in five portfolio companies
through the third quarter of fiscal 2004.
Changes in Unrealized Depreciation of Investments
- -------------------------------------------------
There was an increase in unrealized depreciation of investments of $389,760 for
the nine months ended December 31, 2004 principally related to sales of shares
in one publicly traded portfolio company (which resulted in the reversal of
unrealized depreciation), offset by 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
$2,180,230 (or $2,194,214 excluding short-term marketable securities) for the
nine months ended December 31, 2003 principally related to the increase in
market price of one publicly traded portfolio security, partially offset by the
decrease in fair value of one portfolio security.
Results of Operations
- ---------------------
Three Months Ended December 31, 2004 and December 31, 2003
- ----------------------------------------------------------
Investment Income
- -----------------
Investment income decreased by $303,506 to $73,933 for the three month period
ended December 31, 2004 from $377,439 for the same period ended December 31,
2003. This primarily reflected a decrease in interest from small business
concerns of $287,472 as a result of the Company's sale of a loan investment.
Interest from idle funds decreased $13,809 during this period as a result of a
decrease in interest rates and a decrease in idle funds that were invested.
Other income decreased by $2,225.
Interest Expense
- ----------------
Interest expense decreased by $226,530 to $157,830 for the three months ended
December 31, 2004 from $384,360 for the same period ended December 31, 2003.
This decrease resulted from repayment of certain 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 $261,353 for the three months
ended December 31, 2003 to $238,008 for the three months ended December 31,
2004. Payroll and payroll-related expenses decreased by $13,137 due to the
termination of a clerical employee, insurance expense decreased by $11,163 and
directors fees decreased by $6,250, and legal expense increased by $7,401. There
were miscellaneous net decreases of $196.
Realized Gain on Disposition of Investments
- -------------------------------------------
The Company realized a $426,131 loss on the sale of its entire position in a
portfolio company in the third quarter of fiscal 2005. The Company realized a
$143,811 gain on the sale of its entire position in a portfolio company in the
third quarter of fiscal 2004.
Changes in Unrealized Depreciation of Investments
- -------------------------------------------------
There was a decrease in the unrealized depreciation in the value of investments
of $582,332 for the three months ended December 31, 2004 principally related to
the sale of shares in one publicly held portfolio company (which resulted in the
reversal of unrealized depreciation) and the increase in market price of one
publicly held portfolio company partially offset by the decrease in market price
of one publicly held portfolio company. There was a decrease in unrealized
depreciation of investments of $870,194 (or $876,799 excluding short-term
marketable securities) for the three months ended December 31, 2003, related to
the increase in market price of four publicly traded securities, partially
offset by the decreases in fair value of one portfolio security and two publicly
traded securities in the third quarter of fiscal 2004.
-14-
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
Liquidity and Capital Resources
- -------------------------------
At December 31, 2004, the Company held cash and short-term marketable securities
totaling $463,650.
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 $8.5
million as of December 31, 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 December 31, 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.
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.
-16-
WINFIELD CAPITAL CORP.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
Quantitative and Qualitative Disclosures About Market Risk (Cont'd)
- ----------------------------------------------------------
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 December 31, 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 traded 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 December 31, 2004, the
Company had no option contracts outstanding as part of its portfolio.
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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 of 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 third 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.
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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
None.
Item 5. Other Information
None.
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WINFIELD CAPITAL CORP.
PART II - OTHER INFORMATION CONTINUED
-------------------------------------
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 third quarter of
the Registrant's fiscal year ending March 31, 2005.
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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: February 11, 2005
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