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, 2002
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to ________________
Commission File Number 33-94322
WINFIELD CAPITAL CORP.
Incorporated in the IRS Employer Identification
State of New York Number 13-2704241
237 Mamaroneck Avenue
White Plains, New York 10605
(914) 949-2600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No |_|
Registrant had 5,346,084 shares of common stock outstanding as of December 31,
2002.
- --------------------------------------------------------------------------------
This report consists of 22 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,
2002 and 2001 3-4
Condensed Balance Sheets - as of
December 31, 2002 and March 31, 2002 5-6
Condensed Statements of Cash Flows -
Nine Months Ended December 31, 2002
and 2001 7
Notes to Condensed Financial Statements 8-12
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 13-17
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 17-18
Item 4. Controls and Procedures 18-20
PART II - OTHER INFORMATION
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
Exhibit 99.1 - Officer Certification 22
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF OPERATIONS
Nine Months Ended
December 31,
2002 2001
----------- -----------
Investment income
Interest from small business concerns $ 122,623 $ 155,913
Interest from invested idle funds 274,079 698,704
Other income 7,278 8,803
----------- -----------
Total investment income 403,980 863,420
----------- -----------
Expenses
Interest 1,384,859 1,416,772
Payroll and payroll-related expenses 651,777 639,887
General and administrative expenses 278,382 261,234
Other operating expenses 325,159 334,343
----------- -----------
Total investment expenses 2,640,177 2,652,236
----------- -----------
Investment loss - net (2,236,197) (1,788,816)
Realized gain (loss) on investments 198,062 (1,539,439)
Change in unrealized depreciation
of investments (2,460,102) (4,419,948)
----------- -----------
Net (decrease) in shareholders'
equity resulting from operations ($4,498,237) ($7,748,203)
=========== ===========
Per share net (decrease) in shareholders'
equity resulting from operations
Basic ($ 0.84) ($ 1.45)
=========== ===========
Diluted ($ 0.84) ($ 1.45)
=========== ===========
The accompanying notes are an integral part of these condensed financial
statements.
-3-
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended
December 31,
2002 2001
----------- -----------
Investment income
Interest from small business concerns $ 92,015 $ 8,521
Interest from invested idle funds 17,862 177,316
Other income 2,225 2,225
----------- -----------
Total investment income 112,102 188,062
----------- -----------
Expenses
Interest 440,010 440,111
Payroll and payroll-related expenses 212,688 233,838
General and administrative expenses 101,133 88,888
Other operating expenses 137,076 86,948
----------- -----------
Total investment expenses 890,907 849,785
----------- -----------
Investment loss - net (778,805) (661,723)
Realized gain (loss) on investments 243,574 (2,908,868)
Change in unrealized depreciation
of investments (593,046) 2,721,121
----------- -----------
Net (decrease) in shareholders'
equity resulting from operations ($1,128,277) ($ 849,470)
=========== ===========
Per share net (decrease) in shareholders'
equity resulting from operations
Basic ($ 0.21) ($ 0.16)
=========== ===========
Diluted ($ 0.21) ($ 0.16)
=========== ===========
The accompanying notes are an integral part of these condensed financial
statements.
-4-
WINFIELD CAPITAL CORP.
CONDENSED BALANCE SHEETS
ASSETS
December 31, March 31,
2002 2002
----------- -----------
Investments at value
Loans and notes receivable $ 8,539,552 $ 1,176,887
Equity interests in small business
concerns 10,313,383 12,784,997
Assets acquired in liquidation 77,063 167,350
----------- -----------
Total investments 18,929,998 14,129,234
Cash and cash equivalents 2,793,190 4,416,989
Short-term marketable securities 5,618,292 12,753,178
Accrued interest receivable 324,252 341,806
Receivable from escrow account -- 197,369
Furniture and equipment (net of
accumulated depreciation of
$40,459 at December 31, 2002
and $36,195 at March 31, 2002) 14,667 18,931
Other assets 674,328 640,579
----------- -----------
Total assets $28,354,727 $32,498,086
=========== ===========
-5-
WINFIELD CAPITAL CORP.
CONDENSED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31, March 31,
2002 2002
------------ ------------
Liabilities
Debentures payable to the U.S. Small
Business Administration $ 24,650,000 $ 24,650,000
Accrued expenses 581,401 362,420
Deferred income 135,897 --
------------ ------------
Total liabilities 25,367,298 25,012,420
------------ ------------
Commitments and contingencies (Notes 4 and 5)
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, 2002 and
March 31, 2002 53,461 53,461
Additional paid-in capital 22,982,698 22,982,698
Accumulated deficit (6,065,520) (4,027,385)
Unrealized depreciation on investments -
net (13,983,210) (11,523,108)
------------ ------------
Total shareholders' equity 2,987,429 7,485,666
------------ ------------
Total liabilities and
shareholders' equity $ 28,354,727 $ 32,498,086
============ ============
The accompanying notes are an integral part of these condensed financial
statements.
-6-
WINFIELD CAPITAL CORP.
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
December 31,
2002 2001
------------ ------------
Cash flows from operating activities
Net decrease in shareholders'
equity resulting from operations ($ 4,498,237) ($ 7,748,203)
Adjustments to reconcile net decrease
in shareholders' equity
resulting from operations to net cash
(used in) operating activities
Amortization of deferred income -- (927)
Change in unrealized depreciation
on investments 2,460,102 4,393,243
Realized (gain) loss on investments (198,153) 1,539,439
Depreciation and amortization 4,264 4,575
Amortization of debenture costs 58,660 58,872
Amortization of interest on
treasury bills and loans 23,929 26,705
Changes in assets and liabilities
Due from broker -- 46,599
Accrued interest receivable 17,554 (106,256)
Other assets (92,409) (38,192)
Accrued expenses 218,981 212,130
Income taxes payable -- (23,404)
------------ ------------
Net cash (used in) operating activities (2,005,309) (1,635,419)
------------ ------------
Cash flows from investing activities
Purchases of short-term marketable
securities (6,387,954) (13,427,706)
Proceeds from sales of short-term
marketable securities 13,474,602 14,593,475
Proceeds from sale of investments/return
of capital 757,928 4,330,104
Investments originated (7,526,053) (54,690)
Proceeds from collection of loans 62,987 103,987
Purchase of furniture and equipment -- (4,124)
------------ ------------
Net cash provided by investing activities 381,510 5,541,046
------------ ------------
Cash flows from financing activities
Repayment of debentures payable to the
U.S. Small Business Administration -- (900,000)
Dividends paid -- (1,276,189)
------------ ------------
Net cash (used in) financing activities -- (2,176,189)
------------ ------------
(Decrease) increase in cash and cash
equivalents (1,623,799) 1,729,438
Cash and cash equivalents - beginning
of period 4,416,989 1,993,337
------------ ------------
Cash and cash equivalents - end of period $ 2,793,190 $ 3,722,775
============ ============
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, 2002.
Note - 2 (Loss) per Common Share:
The computation of basic and diluted loss per common share is as
follows:
Nine Months Ended
December 31,
2002 2001
----------- -----------
Net (loss) available for common
stock equivalent shares deemed
to have a dilutive effect ($4,498,237) ($7,748,203)
=========== ===========
(Loss) per common share
Basic ($ 0.84) ($ 1.45)
=========== ===========
Diluted ($ 0.84) ($ 1.45)
=========== ===========
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, 2002 and December 31, 2001 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) per Common Share: (Cont'd)
The computation of basic and diluted loss per common share is as
follows:
Three Months Ended
December 31,
2002 2001
----------- -----------
Net (loss) available for common
stock equivalent shares deemed
to have a dilutive effect ($1,128,277) ($ 849,470)
=========== ===========
(Loss) per common share
Basic ($ 0.21) ($ 0.16)
=========== ===========
Diluted ($ 0.21) ($ 0.16)
=========== ===========
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, 2002 and December 31, 2001 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 if the Company elects 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
The Company is required to be in compliance with the capital
impairment rules, as defined by Regulation 107.1830 of the SBA
Regulations. As of December 31, 2002, the Company had an impairment
of its capital. As such, the SBA could declare the entire
indebtedness including accrued interest immediately due and payable.
In addition, the SBA could avail itself of any remedy available to
the SBA to effect the repayment of the Debentures, including
transferring the Company to the SBA's Office of Liquidation. If the
SBA were to require the Company to immediately pay back the entire
indebtedness including accrued interest, certain private security
investments would need to be disposed of in a forced sale which may
result in proceeds less than their carrying value. As such, this
impairment could have an immediate material adverse effect on the
Company's financial position, results of operations and cash flows
and the Company may not be able to continue to fund operations in
the ordinary course of business after March 31, 2003. The Company is
in ongoing discussions with the SBA to cure this impairment.
Note 5 - The Nasdaq Stock Market, Inc. (the "Nasdaq") Letters
On June 17, 2002, the Company received notice from the Nasdaq Stock
Market, Inc. ("Nasdaq") that for the preceding 30 consecutive
trading days, the Company's common stock had not maintained the
minimum Market Value of Publicly Held Shares of $5,000,000 as
required for continued inclusion by Marketplace Rule 4450(a)(2) (the
"Rule") on the Nasdaq National Market. Therefore, in accordance with
Marketplace Rule 4450(e)(1), subject to appeal, the Company had 90
calendar days, or until September 16, 2002, to regain compliance.
On July 23, 2002, the Company received notice from Nasdaq that for
the preceding 10 consecutive trading days, the Company's common
stock had not closed at the minimum $1.00 per share as required for
continued inclusion by Marketplace Rule 4450 (a) (5) (the "Rule") on
the Nasdaq National Market. Therefore, in accordance with
Marketplace Rule 4450 (e) (2), subject to appeal, the Company had 90
calendar days, or until October 21, 2002, to regain compliance.
-10-
WINFIELD CAPITAL CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 5 - The Nasdaq Letters (Cont'd)
On September 25, 2002, the Company was notified that the staff of
the Nasdaq Listing Qualifications Department had approved the
Company's application to transfer the listing of its common stock
$.01 par value, from the Nasdaq National Market to the Nasdaq
SmallCap Market. Trading on the Nasdaq SmallCap Market commenced on
September 26, 2002 under the symbol "WCAP". Winfield Capital's
common stock will no longer be traded on the Nasdaq National Market.
The Company currently meets all of the continued inclusion criteria
for the Nasdaq SmallCap Market, except for the minimum $1.00 bid
price per share requirement which must be complied with by January
21, 2003 unless the Company is granted an additional grace period.
On January 22, 2003, the Company received a determination of the
staff (the "Staff Determination") of the Nasdaq Listing
Qualifications Department (the "Staff") indicating that the Company
fails to comply with the minimum bid price of its common stock
requirement for continued listing set forth in Marketplace Rule
4450(a)(5) and that its securities are, therefore, subject to
delisting from the Nasdaq SmallCap Market effective January 31,
2003. The Company was granted a hearing on March 6, 2003 before a
Nasdaq Listing Qualifications Panel (the "Panel") to review the
Staff Determination. This hearing will stay the delisting of the
Company's common stock pending the Panel's decision. There can be no
assurance that the Panel will grant the Company's request for
continued listing. If the Company's request for continued listing on
the Nasdaq SmallCap Market is not granted by the Panel, the
Company's securities will be eligible for quotation on the OTC
Bulletin Board. The Company cannot predict what effect, if any, such
delisting from the Nasdaq SmallCap Market would have on the trading
of its securities.
-11-
WINFIELD CAPITAL CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 6 - Stock-Based Employee Compensation Plan
At December 31, 2002, 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 grant. The following table illustrates
the 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.
Nine Nine
Months Ended Months Ended
December 31, December 31,
2002 2001
------------- -------------
Net loss, as reported ($ 4,498,237) ($ 7,748,203)
Deduct: Total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax
effects -- (17,628)
------------- -------------
Pro forma net income ($ 4,498,237) ($ 7,765,831)
============= =============
Earnings per share:
Basic - as reported ($ 0.84) ($ 1.45)
Basic - pro forma ($ 0.84) ($ 1.45)
Three Three
Months Ended Months Ended
December 31, December 31,
2002 2001
------------- -------------
Net loss, as reported ($ 1,128,277) ($ 849,470)
Deduct: Total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax
effects -- (17,628)
------------- -------------
Pro forma net income ($ 1,128,277) ($ 867,098)
============= =============
Earnings per share:
Basic - as reported ($ 0.21) ($ 0.16)
Basic - pro forma ($ 0.21) ($ 0.16)
-12-
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Nine Months Ended December 31, 2002 and December 31, 2001
Investment Income Investment income decreased by $459,440 to $403,980 for the
nine month period ended December 31, 2002 from $863,420 for the same period
ended December 31, 2001. This primarily reflected a decrease in earnings from
temporarily invested funds of $424,625 as a result of a decrease in interest
rates and a decrease in the idle funds that were invested. Interest from Small
Business concerns decreased by $33,290 due mainly to the financial difficulties
of a portfolio company that generated interest of $120,000 in 2001 and $0 in
2002 offset by interest on new loans.
Interest Expense
Interest expense decreased from $1,416,772 for the nine months ended December
31, 2001 to $1,384,859 for the same period ended December 31, 2002 due to a
repayment of $900,000 to the U.S. Small Business Administration (the "SBA") on
September 1, 2001.
Operating Expenses
The Company's operating expenses increased from $1,235,464 for the nine months
ended December 31, 2001 to $1,255,318 for the nine months ended December 31,
2002. Payroll and payroll-related expenses increased by $11,887 principally due
to salary increases. Professional fees decreased by $8,655 due to the decrease
in legal and accounting fees. Insurance expense increased by $26,594, stock
record costs and listing fees increased by $20,634 and there were miscellaneous
decreases of $30,606.
Realized Gain (Loss) on Investments
The Company realized a $198,062 gain on the sale of its entire equity position
in two portfolio companies and a portion of its position in another portfolio
company in fiscal 2003.
In fiscal 2002, the Company realized a $2,382,039 loss on the sale of its entire
interest in five portfolio companies and a portion of its equity position in two
other portfolio companies. The Company also realized a $842,598 gain on calls
sold in two portfolio companies.
-13-
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Changes in Unrealized Depreciation of Investments
There was an increase in unrealized depreciation of investments (excluding
short-term marketable securities) of $2,455,603 for the nine months ended
December 31, 2002 principally related to the decline in fair market value of one
portfolio security and the decline in market prices of publicly traded portfolio
securities, compared to an increase in unrealized depreciation of $4,419,948
(excluding short-term marketable securities) for the nine months ended December
31, 2001, principally related to the decline in market prices of publicly-traded
portfolio securities.
-14-
Item 2.
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended December 31, 2002 and December 31, 2001
Investment Income Investment income decreased by $75,960 to $112,102 for the
three month period ended December 31, 2002 from $188,062 for the same period
ended December 31, 2001. This primarily reflected a decrease in earnings from
temporarily invested funds of $159,454 as a result of a decrease in interest
rates and a decrease in the idle funds that were invested. Interest from small
business concerns increased by $83,494 due primarily to new loans to portfolio
companies.
Interest Expense
Interest expense was $440,010 for the three months ended December 31, 2002 and
$440,111 for the same period ended December 31, 2001.
Operating Expenses
The Company's operating expenses increased from $409,674 for the three months
ended December 31, 2001 to $450,897 for the three months ended December 31,
2002. Payroll and payroll-related expenses decreased by $21,154 principally due
to a matching 401 (K) catch-up expense (the 401 (K) Plan was implemented in
October 2001). Insurance expense increased by $6,329. Professional fees
increased by $40,453 due to an increase in accounting fees and tax return
preparation fees; and stock record costs and listing fees increased by $17,694.
There were miscellaneous decreases of $2,099.
Realized Gain (Loss) on Disposition of Investments
The Company had a $243,574 gain on disposition of one of its portfolio
investments and a portion of its position in another portfolio company for the
three months ended December 31, 2002. There was a $2,908,685 realized loss for
the three months ended December 31, 2001 on the sale of a portion of its equity
position in one portfolio company and the sale of its entire investment in two
portfolio companies.
-15-
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Changes in Unrealized Depreciation of Investments
There was a increase in unrealized depreciation of investments (excluding
short-term marketable securities) of $654,409 for the three months ended
December 31, 2002 principally related to the decrease in fair market value of
one portfolio security compared to a net increase of $2,721,121 in unrealized
appreciation (excluding short term marketable securities) for the same period
ended December 31, 2001 principally related to the sale of portfolio companies
having an unrealized depreciation of $2,966,206.
Liquidity and Capital Resources
The Company is required to be in compliance with the capital impairment rules,
as defined by Regulation 107.1830 of the SBA Regulations. As of December 31,
2002, the Company had an impairment of its capital. As such, the SBA could
declare the entire indebtedness including accrued interest immediately due and
payable. In addition, the SBA could avail itself of any remedy available to the
SBA to effect the repayment of the Debentures, including transferring the
Company to the SBA's Office of Liquidation. If the SBA were to require the
Company to immediately pay back the entire indebtedness including accrued
interest, certain private security investments would need to be disposed of in a
forced sale which may result in proceeds less than their carrying value. As
such, this impairment could have a material adverse effect on the Company's
financial position, results of operations and cash flows. The Company is in
ongoing discussions with the SBA to cure this impairment.
At December 31, 2002, the Company had cash and cash equivalents and short-term
marketable securities totaling $8,411,482. The Company believes that its cash
and its short-term investments, along with its 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 December 31, 2003. However, if the SBA declares the entire
indebtedness including accrued interest immediately due and payable, certain
public and private security investments may need to be disposed of in a forced
sale which may result in proceeds less than their current fair value; as such,
by selling its public and private security investments, the Company may not
generate sufficient cash flows to repay the SBA Debentures as well as fund
operations in the ordinary course of business after March 31, 2003.
-16-
WINFIELD CAPITAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
& QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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," or "continue" 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.
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.
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, 2002, the Company
had no publicly-traded debt securities in its portfolio.
-17-
WINFIELD CAPITAL CORP.
QUANTITIATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
CONTINUED & CONTROLS AND PROCEDURES
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 December 31, 2002, the Company
had no option contracts outstanding as part of its portfolio.
Item 4.
Controls and Procedures
a. Evaluation of Disclosure Controls and Procedures
Based on their evaluation of the Company's disclosure controls and
procedures conducted within 90 days of the date of filing this report on
Form 10-Q the Company's Chief Executive Officer and Chief Financial
Officer have concluded that the Company's disclosure controls and
procedures (as defined in Rules 13a-14(c) and 15d-14(c) promulgated under
the Securities Exchange Act of 1934) are effective to ensure that
information required to be disclosed by the Company in reports that it
files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in
Securities Exchange Commission rules and forms.
b. Changes in Internal Controls
There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to
the date of their evaluation. There were no deficiencies or material
weaknesses, and therefore, there were no corrective actions taken.
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CERTIFICATION PURSUANT TO
18 U.S.C.
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
We, Paul A. Perlin, Chief Executive Officer and R. Scot Perlin, Chief Financial
Officer of Winfield Capital Corp. (the "Company"), certify, that:
1. We have reviewed this quarterly report on Form 10-Q of Winfield Capital
Corp.
2. Based on our knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report.
3. Based on our knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Company as of, and for, the periods presented in this
quarterly report.
4. We are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the Company and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Company, is made known to us by
others within the Company particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the Company's disclosure controls and
procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date.
5. We have disclosed, based on our most recent evaluation, to the Company's
auditors and the Audit Committee of the Company's Board of Directors (or
persons performing the equivalent function):
a) all significant deficiencies in the design of internal controls
which could adversely affect the Company's ability to record,
process, summarize and report financial data and have identified for
the Company's auditors any material weaknesses in internal controls;
and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Company's
internal controls.
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6. We have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
/s/ Paul A. Perlin
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Paul A. Perlin
Chief Executive Officer
/s/ R. Scot Perlin
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R. Scot Perlin
Chief Financial Officer
February 12, 2003
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WINFIELD CAPITAL CORP.
PART II - OTHER INFORMATION
Item 5. - Other Information
Mr. David Greenberg resigned as an executive officer and employee of the Company
effective at the close of business on December 31, 2002 in order to pursue other
interests. He will continue to serve as a member of Winfield Capital's Board of
Directors. Present management will assume his responsibilities and the Company
does not currently intend to hire a replacement.
Item 6. - Exhibits and Reports on Form 8-K
a. Exhibit Index
The following Exhibits are filed as part of this Quarterly
Report on Form 10-Q.
Exhibit No. Description
10(K) Employment Agreement with
Paul A. Perlin dated
November 15, 2002 as of
November 1, 2002
99.1 Certification Pursuant to 18
U.S.C. Section 1350, as
adopted pursuant to Section
906 of the Sarbanes-Oxley Act
of 2002
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, 2003.
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 13, 2003
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