As filed with the Securities and Exchange Commission on August 14, 2002
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the
-----
Securities Exchange Act of 1934
For the quarterly period ended June 30, 2002
or
_____ Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From _____________ to ____________
For Quarter Ended June 30, 2002 Commission File Number 0-9667
WINMILL & CO. INCORPORATED
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-1897916
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11 Hanover Square, New York, New York 10005
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
212-785-0900
- --------------------------------------------------------------------------------
(Company's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes__X__ No_____
The number of shares outstanding of each of the registrant's classes of
common stock, as of July 31, 2002, were as follows:
Class A Common Stock non-voting, par value $.01 per share - 1,628,320 shares
Class B Common Stock voting, par value $.01 per share - 20,000 shares
WINMILL & CO. INCORPORATED
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 2002
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet
- (Unaudited) June 30, 2002 3
Condensed Consolidated Statements of Income (Loss)
- (Unaudited) Six Months Ended June 30, 2002
and June 30, 2001 4
Condensed Consolidated Statements of Cash Flows
- (Unaudited) Six Months Ended
June 30, 2002 and June 30, 2001 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders During
Second Quarter of the Year Ended December 31, 2002 14
Item 6. Exhibits and Reports on Form 8-K 14
Management's Representation and Signatures 15
2
WINMILL & CO. INCORPORATED
CONSOLIDATED BALANCE SHEET
June 30, 2002
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 2,285,695
Marketable securities (Note 2) 4,878,722
Other receivables 151,091
Prepaid expenses and other assets 306,828
-------------
Total Current Assets 7,622,336
-------------
Equipment, furniture and fixtures, net 62,683
Excess of cost over net book value of
subsidiaries, net 186,323
Other 363,792
-------------
612,798
-------------
Total Assets $ 8,235,134
=============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accrued liabilities $ 127,710
Other current liabilities 81,105
-------------
Total Current Liabilities 208,815
-------------
Deferred Tax Credit 46,300
-------------
Total Liabilities 255,115
-------------
Shareholders' Equity: (Notes 2, 5, 6 and 7)
Common Stock, $.01 par value
Class A, 10,000,000 shares authorized;
1,628,320 shares
issued and outstanding 16,283
Class B, 20,000 shares authorized;
20,000 shares issued and outstanding 200
Additional paid-in capital 6,807,985
Retained earnings 1,688,137
Notes receivable for common stock issued (539,314)
Accumulated other comprehensive income 6,728
-------------
Total Shareholders' Equity 7,980,019
-------------
Total Liabilities and Shareholders' Equity $ 8,235,134
=============
See accompanying notes to consolidated financial statements.
3
WINMILL & CO. INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2002 2001 2002 2001
---- ---- ---- ----
Revenues:
Management, distribution and other fees $ 367,757 $ 587,909 $ 711,373 $ 1,042,769
Consulting fee - 196,923 - 246,923
Net realized and unrealized gains
(losses) from investments 21,998 107,517 339,182 34,916
Dividends, interest and other 58,433 73,286 122,405 142,292
---------- -------- --------- ---------
448,188 965,635 1,172,960 1,466,900
---------- -------- --------- ---------
Expenses:
General and administrative 229,458 235,941 459,921 497,368
Marketing 122,530 222,259 247,182 432,300
Expense reimbursements to the Funds (Note 9) 46,279 79,689 95,729 163,540
Professional fees 33,640 49,244 72,080 133,207
Amortization and depreciation 6,244 10,912 15,163 24,536
---------- -------- --------- ----------
438,151 598,045 890,075 1,250,951
---------- -------- --------- ----------
Income before income taxes 10,037 367,590 282,885 215,949
Income taxes provision (Note 8) 2,550 142,500 107,300 86,755
---------- -------- --------- ----------
Net Income $ 7,487 $225,090 $ 175,585 $ 129,194
========== ======== ========= ==========
Per share data:
Basic
Net income $ 0.00 $ 0.14 $ 0.11 $0.08
Diluted
Net income $ 0.00 $ 0.14 $ 0.11 $0.08
Average Shares Outstanding:
Basic 1,628,320 1,655,017 1,628,320 1,655,017
Diluted 1,628,925 1,657,244 1,629,529 1,656,131
See accompanying notes to the consolidated financial statements.
4
WINMILL & CO. INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
2002 2001
Cash Flows from Operating Activities:
Net income (loss) $ 175,585 $ 129,194
----------- ----------
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 18,541 24,536
Net realized and unrealized gains from investments (241,888) 36,925
Cash value of life insurance (16,500) (16,500)
(Increase) decrease in:
Management, distribution and other
fees receivable (10,785) 31,658
Dividends, interest, and other receivables (11,902) 115,758
Prepaid expenses and other assets 80,596 (75,676)
Deferred tax credits 137,300 138,000
Increase (decrease) in:
Accrued income taxes - (164,097)
Accounts payable (6,010) 9,182
Accrued professional fees (16,614) 18,326
Accrued payroll and other related costs (6,066) (33,128)
Accrued other expenses (50,434) -
---------- ----------
Total adjustments (123,762) 84,984
---------- ----------
Net cash provided by operating activities 51,823 214,178
---------- ----------
Cash Flows from Investing Activities:
Proceeds from sales of investments 6,726 654,434
Purchases of investments (197,672) (832,669)
Capital expenditures (18,875) (3,900)
---------- ----------
Net cash used in investing activities (209,821) (182,135)
---------- ----------
Net increase (decrease) in cash and cash equivalents (157,998) 32,043
Cash and Cash Equivalents:
At beginning of period 2,443,693 3,086,087
---------- ----------
At end of period $2,285,695 $3,118,130
========== ==========
Supplemental disclosure:
The Company paid $0 and $172,000 in Federal income taxes during the six months
ended June 30, 2002 and 2001.
See accompanying notes to the consolidated financial statements.
5
WINMILL & CO. INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002 and 2001
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Winmill & Co. Incorporated ("Company") is a holding company. Its
subsidiaries' business consists of providing investment management and
distribution services for the Midas Funds (open-end funds)and Global
Income Fund, Inc.(a closed-end fund) and proprietary securities
trading.
BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts
of the Company and all of its subsidiaries. Substantially all
inter-company accounts and transactions have been eliminated.
ACCOUNTING ESTIMATES
In preparing financial statements in conformity with accounting
principles generally accepted in the United States of America,
management makes estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts
receivable, accounts payable, and accrued expenses and other
liabilities approximate fair value because of the short maturity of
these items. Marketable securities are recorded at market value, which
represents the fair value of the securities.
CASH AND CASH EQUIVALENTS
Investments in money market funds are considered to be cash
equivalents. At June 30, 2002, the Company and subsidiaries had
invested approximately $2,109,000 in an affiliated money market fund.
MARKETABLE SECURITIES
Marketable securities held by the Company and its non-broker/dealer
subsidiaries are considered to be "available-for-sale" and are marked
to market, with the unrealized gain or loss included in stockholders'
equity. Marketable securities held by the broker/dealer subsidiary are
marked to market with unrealized gains and losses included in
earnings.
6
WINMILL & CO. INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002 and 2001
(Unaudited)
INCOME TAXES
The Company and its wholly owned subsidiaries file consolidated income
tax returns. The Company's method of accounting for income taxes
conforms to Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes". This method requires the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the financial reporting
basis and the tax basis of assets and liabilities.
EQUIPMENT, FURNITURE AND FIXTURES
Equipment, furniture and fixtures are recorded at cost and are
depreciated on the straight-line basis over their estimated lives, 3
to 10 years. At June 30, 2002 accumulated depreciation amounted to
approximately $819,500.
EXCESS OF COST OVER NET BOOK VALUE OF SUBSIDIARIES
The excess of cost over net book value of subsidiaries is capitalized
and amortized over fifteen years using the straight-line method. In
accordance with statement of accounting standards No. 142 "Good Will
and Other Intangible Assets", the Company periodically reassesses the
useful life of the previously recognized intangible assets and adjusts
the remaining amortization periods accordingly. At June 30, 2002,
accumulated amortization amounted to approximately $147,900.
COMPREHENSIVE INCOME
The Company discloses comprehensive income in the financial
statements. Total comprehensive income includes net income and
unrealized gains and losses on marketable securities, which is
reported as other comprehensive income in shareholders' equity.
SEGMENT INFORMATION
The Company's operating segment is organized around services provided
and classified into one group - investment management.
7
WINMILL & CO. INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002 and 2001
(Unaudited)
EARNINGS PER SHARE
Basic earnings per share is computed using the weighted average number
of shares outstanding. Diluted earnings per share is computed using
the weighted average number of shares outstanding adjusted for the
incremental shares attributed to outstanding options to purchase
common stock. The following table sets forth the computation of basic
and diluted earnings per share:
Three Months Ended June 30, Six Months Ended June 30
--------------------------- ------------------------
2002 2001 2002 2001
---- ---- ---- ----
Numerator for basic and diluted earnings
per share:
Net (loss) income $ 7,487 $ 225,090 $ 175,585 $ 129,194
========== ========== ========== ==========
Denominator:
Denominator for basic earnings
per share weighted-average shares 1,628,320 1,655,017 1,628,320 1,655,017
Effect of dilutive securities:
Employee Stock Options 605 2,227 1,209 1,114
---------- ---------- ---------- ----------
Denominator for diluted earnings per share
adjusted weighted-average shares and
assumed conversions 1,628,925 1,657,244 1,629,529 1,656,131
========== ========== ========== ==========
2. MARKETABLE SECURITIES
At June 30, 2002, marketable securities, at market,
consisted of:
Broker/dealer subsidiary
Affiliated investment companies $4,133,196
Equity securities 713,862
----------
Total broker/dealer securities (cost $4,655,580) 4,847,058
----------
Other subsidiaries' available-for-sale securities
Unaffiliated investment companies 3,325
Equity securities 28,339
----------
Total available-for-sale securities (cost $20,672) 31,664
----------
$4,878,722
==========
At June 30, 2002, the Company had $6,728, net of deferred income
taxes, of unrealized gains on "available-for-sale securities" which is
reported as a separate component of consolidated shareholders' equity.
Included in the investments in affiliated investment companies are
investments of $2,171,010 or approximately 23% of the outstanding
shares of Bexil Corporation and $1,952,122 or approximately 19% of the
outstanding shares of Tuxis Corporation, both of which have received
shareholder approval to change from registered investment companies to
operating companies.
3. LEASE COMMITMENTS
The Company leases office space under a lease that expires December 31,
2003. The rent is approximately $109,000 per annum including electricity.
8
WINMILL & CO. INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002 and 2001
(Unaudited)
4. SHAREHOLDERS' EQUITY
The Class A and Class B Common Stock are identical in all respects except
for voting rights, which are vested solely in the Class B Common Stock. The
Company also has 1,000,000 shares of Preferred Stock, $.01 par value,
authorized. As of June 30, 2002, none of the Preferred Stock was issued.
5. NET CAPITAL REQUIREMENTS
The Company's broker/dealer subsidiary is a member firm of the National
Association of Securities Dealers, Inc. ("NASD") and is registered with the
Securities and Exchange Commission as a broker/dealer. Under its membership
agreement with the NASD, the broker/dealer must maintain minimum net
capital, as defined, of not less than $100,000, or 6-2/3% of aggregate
indebtedness, whichever is greater; and a ratio of aggregate indebtedness
to net capital, as defined, of not more than 15 to 1. At June 30, 2002, the
subsidiary had net capital of approximately $4,765,500; net capital
requirements of $100,000; excess net capital of approximately $4,665,500;
and the ratio of aggregate indebtedness to net capital was approximately
0.07 to 1.
6. STOCK OPTIONS
On December 6, 1995, the Company adopted a Long-Term Incentive Plan which,
as amended, provides for the granting of a maximum of 600,000 options to
purchase Class A Common Stock to directors, officers and key employees of
the Company or its subsidiaries. With respect to non-employee directors,
only grants of non-qualified stock options and awards of restricted shares
are available. The three non-employee directors were granted 15,000 options
each on December 12, 2000 and all previously issued options were cancelled.
The option price per share may not be less than the fair value of such
shares on the date the option is granted, and the maximum term of an option
may not exceed ten years except as to non-employee directors for which the
maximum term is five years.
The Company applies APB Opinion 25 and related interpretations in
accounting for its stock option plans. Accordingly, no compensation cost
has been recognized for its stock option plans. Pro forma compensation cost
for the Company's plans is required by Financial Accounting Standards
No.123 "Accounting for Stock-Based Compensation (SFAS 123)" and has been
determined based on the fair value at the grant dates for awards under
these plans consistent with the method of SFAS 123. For purposes of pro
forma disclosure, the estimated fair value of the options is amortized to
expense over the options' vesting period.
The Company's pro forma information follows:
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2002 2001 2002 2001
---- ---- ---- ----
Net income As Reported $ 7,487 $ 225,090 $ 175,585 $ 129,194
Pro forma $ 3,918 $ 222,154 $ 167,921 $ 123,528
Earning per share
Basic As Reported $ .00 $ .14 $ .11 $ 0.08
Pro forma $ .00 $ .13 $ .10 $ 0.07
Diluted As Reported $ .00 $ .14 $ .11 $ 0.08
Pro forma $ .00 $ .13 $ .10 $ 0.07
The fair value of each option grant is estimated as of the date of grant using
the Black-Scholes option-pricing model.
9
WINMILL & CO. INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002 and 2001
(Unaudited)
A summary of the status of the Company's stock option plans as of June 30,
2002 and changes during the period ending on that date is presented below:
Weighted
Number Average
of Exercise
Stock Options Shares Price
Outstanding at December 31, 2001 221,000 $1.60
Outstanding at June 30, 2002 221,000 $1.60
There were 194,000 options exercisable at June 30, 2002 with a
weighted-average exercise price of $1.59. There were no options granted
during the three months ended June 30, 2002.
The following table summarizes information about stock options outstanding
at June 30, 2002:
Options Outstanding
-----------------------------------------------------------
Weighted-Average
Range of Number Remaining Weighted-Average
Exercise Prices Outstanding Contractual Life Exercise Price
--------------- ----------- ---------------- ----------------
$1.50 - $1.65 206,000 3.50 years $1.58
$1.70 - $1.80 15,000 4.00 years $1.80
In connection with the exercise of the options, the Company received from
certain officers notes with interest rates ranging from 2.45% to 2.48% per
annum payable December 15, 2004. The balance of the notes at June 30, 2002
was $539,314, which was classified as "notes receivable for common stock
issued."
7. PENSION PLAN
The Company has a 401(k) retirement plan for substantially all of its
qualified employees. Contributions to this are based upon a percentage of
salaries of eligible employees and are accrued and funded on a current
basis. Total pension expense for the six months ended June 30, 2002 and
June 30, 2001 were $24,771 and $16,112, respectively.
8. INCOME TAXES
The provision (benefit) for income taxes for the six months ended June 30,
2002 and 2001 are as follows:
2002 2001
---- ----
Current
Federal $ (25,700) $ (8,245)
State and local ( 4,300) (50,000)
--------- ---------
(30,000) (58,245)
Deferred 137,300 145,000
--------- ---------
$ 107,300 $ 86,755
========= =========
Deferred tax credits are comprised primarily of unrealized gains on
investments at June 30, 2002.
10
WINMILL & CO. INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002
(Unaudited)
9. RELATED PARTIES
All management and distribution fees are a result of services provided to
the Funds. All such services are provided pursuant to agreements that set
forth the fees to be charged for these services. These agreements are
subject to annual review and approval by each Fund's Board of Directors and
a majority of the Fund's non-interested directors. During the six months
ended June 30, 2002 and 2001, the Funds paid approximately $22,200 and
$56,200 respectively, for record keeping services to ISC, which paid such
amounts to certain brokers for performing such services. These
reimbursements for record keeping services are included in management,
distribution and other fees on the income statement.
In connection with investment management services, the Company's investment
managers and distributor waived management and distribution fees and
reimbursed expenses to the Funds in the amount of approximately $46,300 and
$163,500 for the quarter ended June 30, 2002 and 2001, respectively.
Certain officers of the Company also serve as officers and/or directors of
the Funds.
Commencing August 1992, the Company obtained a key man life insurance
policy on the life of the Company's Chairman, which provides for the
payment of $1,000,000 to the Company upon his death. As of June 30, 2002,
the policy had a cash surrender value of approximately $258,500 and is
included in other assets in the balance sheet.
10. CONTINGENCIES
From time to time, the Company and/or its subsidiaries are threatened or
named as defendants in litigation arising in the normal course of business.
As of June 30, 2002, neither the Company nor any of its subsidiaries was
involved in any litigation that, in the opinion of management, would have a
material adverse impact on the consolidated financial statements.
In April 2002, the Company entered into a Death Benefit Agreement
("Agreement") with the Company's Chairman. Following his death, the
Agreement provides for annual payments equal to 80% of his average annual
salary received from the Company, its affiliates, subsidiaries, and other
related entities for the three year period prior to his death subject to
certain adjustments to his wife until her death. The Company's obligations
under the Agreement are not secured and will terminate if he leaves the
Company's employ under certain conditions.
11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three Months Ended June 30, 2002 compared to Three Months Ended June 30, 2001
- -----------------------------------------------------------------------------
Drastic declines in the securities markets can have a significant effect on the
Company's business. Volatile stock markets may affect management and
distribution fees earned by the Company's subsidiaries. If the market value of
securities owned by the Funds declines, shareholder redemptions may occur,
either by transfer out of the equity Funds and into the money market fund, which
has lower management and distribution fee rates than the equity Funds, or by
transfer out of the Funds entirely. Lower net asset levels in the Funds may also
cause or increase reimbursements to the Funds pursuant to expense limitations as
described in Note 9 of the financial statements.
Total revenues decreased $517,447 or 54%, which was primarily due to an decrease
in net realized and unrealized gains on investments, in management, distribution
and other fees and consulting fees. The Company had net realized and unrealized
gains of $21,998 on the Company's investments. Management, distribution and
other fees decreased $220,152 or 37% due to lower net assets in the Funds and
the termination of the investment management agreement with Bexil and Tuxis
effective July 31, 2001 and November 30, 2001 respectively. Also in the second
quarter of 2001, the Company earned $196,923 in consulting fees through an
agreement that was terminated during the second quarter of 2001.
Total expenses decreased $159,894 or 27% as a result of decreases in marketing
expenses of $99,729 or 45%, professional fees of $15,604 or 32%, general and
administrative expense of $6,483 or 3%, and amortization and depreciation
expense of $4,668 or 43%. Marketing expenses decreased due to lower fulfillment
and printing expenses. General and administrative expenses decreased due to
lower employee costs, in part due to the assumption by Bexil, effective August
1, 2001, and by Tuxis, effective January 1, 2002, of compensation expense of
certain Company personnel at the annual rates of $200,000 each, or $400,000
total. Expense reimbursement to the Funds decreased $33,410 or 42% primarily due
to the liquidation or merger of certain Funds being reimbursed. Professional
fees decreased $15,604 or 32% primarily due to lower requirements for
professional services.
Net income for the period was $7,487 or $.00 per share on a diluted basis as
compared to net income of $225,090 or $.14 per share on a diluted basis for June
30, 2001
Six Months Ended June 30, 2002 compared to Six Months Ended June 30, 2001
- -------------------------------------------------------------------------
Total revenues decreased $293,940 or 20% which was primarily due to the decrease
in management distribution, service and other fee income, consulting fees and
dividends, interest and other income. Partially offsetting this was an increase
in net realized and unrealized gains on investments. Management, distribution,
service and administrative fees decreased $331,396 or 32% due to lower net
assets in the Funds. Net assets under management were less in the six months
ended June 30, 2002 versus June 30, 2001. Net assets were approximately $140
million at June 30, 2001, $128 million at September 30, 2001, $116 million at
December 31, 2001, and $125 million at March 31, 2002 and $123 million at June
30, 2002. Dividends, interest and other decreased $19,887 due to lower earnings
on the Company's investments. Net realized and unrealized gains resulted in a
gain of $339,182 on investments.
Total expenses decreased $360,876 or 29% over this period of last year, as a
result of decreases in marketing expenses of $185,118 or 43%, general and
administrative expense of $37,447 or 8%, and amortization and depreciation
expense of $9,373 or 38%. Marketing expenses decreased due to lower fulfillment
and printing expenses. General and administrative expenses decreased due to
lower employee costs. Expense reimbursements to the Funds decreased $67,811 or
41%. Professional fees decreased $61,127 or 46%. Net income for the period was
$175,585 or $.11 per share on a diluted basis as compared to net income of
$129,194 or $.08 per share on a diluted basis for the six months ended June 30,
2001.
12
Liquidity and Capital Resources
- -------------------------------
The following table reflects the Company's consolidated working capital, total
assets, long term debt and shareholders' equity as of the dates indicated:
June 30, 2002 December 31, 2001
------------- -----------------
Working Capital $7,413,521 $7,063,441
Total Assets $8,235,134 $8,036,785
Long-Term Debt - -
Shareholders' Equity $7,980,019 $7,748,846
Working capital, total assets and shareholders' equity increased $350,080,
$198,349 and $231,173, respectively for the six months ended June 30, 2002.
Working capital, total assets and shareholders' equity increased primarily due
to net income for the first six months of 2002.
As discussed previously, significant changes in the securities markets can have
a dramatic effect on the Company's results of operations. Based on current
information available, management believes that current resources are sufficient
to meet its liquidity needs.
13
Effects of Inflation and Changing Prices
- ----------------------------------------
Since the Company derives most of its revenues from acting as the manager and
distributor of investment companies, it is not possible for it to discuss or
predict with accuracy the impact of inflation and changing prices on its revenue
from continuing operations.
Forward-Looking Information
- ---------------------------
Information or statements provided by or on behalf of the Company from time to
time, including those within this Form 10-QSB Quarterly Report, may contain
certain "forward-looking information", including information relating to
anticipated growth in revenues or earnings per share, anticipated changes in the
amount and composition of assets under management, anticipated expense levels,
and expectations regarding financial market conditions. The Company cautions
readers that any forward-looking information provided by or on behalf of the
Company is not a guarantee of future performance and that actual results may
differ materially from those in forward-looking information as a result of
various factors, including but not limited to those discussed below. Further,
such forward-looking statements speak only as of the date on which such
statements are made, and the Company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events.
The Company's future revenues may fluctuate due to factors such as: the total
value and composition of assets under management and related cash inflows or
outflows in mutual funds; fluctuations in the financial markets resulting in
appreciation or depreciation of assets under management; the relative investment
performance of the Company's sponsored investment products as compared to
competing products and market indices; the expense ratios and fees of the
Company's sponsored products and services; investor sentiment and investor
confidence in mutual funds; the ability of the Company to maintain investment
management fees at current levels; competitive conditions in the mutual funds
industry; the introduction of new mutual funds and investment products; the
ability of the Company to contract with the Funds for payment for services
offered to the Funds and Fund shareholders; the continuation of trends in the
retirement plan marketplace favoring defined contribution plans and
participant-directed investments; and the amount and timing of income from the
Company's proprietary securities trading portfolio. The Company's future
operating results are also dependent upon the level of operating expenses, which
are subject to fluctuation for the following or other reasons: changes in the
level of advertising expenses in response to market conditions or other factors;
the level of expenses assumed by the Company for the Funds as a result of
expense reimbursement plan or waiver of expenses to increase a Fund's
performance; variations in the level of compensation expense incurred by the
Company, including performance-based compensation based on the Company's
financial results, as well as changes in response to the size of the total
employee population, competitive factors, or other reasons; expenses and capital
costs, including depreciation, amortization and other non-cash charges, incurred
by the Company to maintain its administrative and service infrastructure; and
unanticipated costs that may be incurred by the Company from time to time to
protect investor accounts and client goodwill.
The Company's operating results will also depend on the results of its holdings
in Bexil and Tuxis.
The Company's revenues are substantially dependent on revenues from the Funds,
which could be adversely affected if the independent directors of one or more of
the Funds determined to terminate or renegotiate the terms of one or more
investment management agreements.
The Company's business is also subject to substantial governmental regulation,
and changes in legal, regulatory, accounting, tax, and compliance requirements
may have a substantial effect on the Company's business and results of
operations, including but not limited to effects on the level of costs incurred
by the Company and effects on investor interest in mutual funds in general or in
particular classes of mutual funds.
14
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders During Second
Quarter of the Year Ended December 31, 2002.
No matters were submitted to a vote of security holders during the second
quarter of the year ended December 31, 2002. The Board of Directors generally
takes action at telephonic meetings, by unanimous written consent, and at an
annual in-person meeting.
Item 6. Exhibits and Reports on Form 8-K
(a) (1) Exhibits
(1) Amended Death Benefit Agreement filed herewith.
(b) No reports on Form 8-K were filed during the quarter covered by this
report.
15
MANAGEMENT'S REPRESENTATION
The information furnished in this report reflects all adjustments which
are, in the opinion of management, necessary to a fair statement of the results
of the period.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WINMILL & CO. INCORPORATED
Dated: August 14, 2002 By:/s/ William G. Vohrer
----------------------
William G. Vohrer
Treasurer, Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the date indicated.
Dated: August 14, 2002 /s/ Bassett S. Winmill
----------------------
Bassett S. Winmill
Chairman of the Board,
Director
Dated: August 14, 2002 /s/ Robert D. Anderson
----------------------
Robert D. Anderson
Vice Chairman, Director
Dated: August 14, 2002 /s/ Thomas B. Winmill
---------------------
Thomas B. Winmill, Esq.
President,
General Counsel, Director
Dated: August 14, 2002 /s/ Charles A. Carroll
----------------------
Charles A. Carroll, Director
Dated: August 14, 2002 /s/ Edward G. Webb, Jr.
-----------------------
Edward G. Webb, Jr., Director
Dated: August 14, 2002 /s/ Mark C. Winmill
-------------------
Mark C. Winmill, Director
16
INDEX TO EXHIBITS
(1) Exhibits
(1) Amended Death Benefit Agreement
17
Exhibit 1 - Amended Death Benefit Agreement
AMENDED
DEATH BENEFIT AGREEMENT
THIS AGREEMENT, made and entered into this 16TH day of April, 2002, by and
between WINMILL & CO. INCORPORATED, a corporation organized and existing under
the laws of the State of Delaware (hereinafter referred to as the "Employer")
and BASSETT S. WINMILL (hereinafter referred to as the "Employee").
WHEREAS,
It is the consensus of the Board of Directors of the Employer that the
Employee's service to the Employer in the past has been of exceptional merit and
has constituted an invaluable contribution to the general welfare of the
Employer and to achieving its present status of operating efficiency and
position in its field of activity; and
The ability and experience of the Employee are such that assurance of his
continued services is essential to the growth and performance of the Employer
and it is in the best interests of the Employer to arrange terms of continued
employment for the Employee so as to reasonably assure his remaining in the
Employer's employment until his death; and
It is the desire of the Employer that the Employee's services be retained
as herein provided; and
The Employee is willing to continue in the employ of the Employer provided
the Employer agrees to pay certain benefits in accordance with the terms and
conditions hereinafter set forth;
NOW THEREFORE,
In consideration of services performed in the past and to be performed in
the future by the Employee, as well as of the mutual promises and covenants
herein contained, it is hereby agreed as follows:
Article FIRST: Definitions
For the purposes of this Agreement, the following terms shall have meanings
indicated below:
(1) The term "Employee's Spouse" shall mean Sarah J. Winmill.
(2) The term "CPI - U" shall mean the "Consumer Price Index for All Urban
18
Consumers: U.S. City Average for All Items" published monthly by the Bureau of
Labor Statistics of the United States Department of Labor. If the CPI - U is
discontinued, the Employer shall use in lieu thereof a comparable consumer index
pertaining to the purchasing power of the U.S. dollar published by the United
States government, such comparable index to be chosen by the Employer in its
sole discretion.
(3) The term "Employee's Average Salary" shall mean 80% of the average
annual salary of the Employee, including bonuses, calculated for the three (3)
year period ending December 31 prior to the date of death of the Employee, as
paid by Employer, its affiliates and subsidiaries, and any entities of which
Employer owns at least 10%.
(4) The term "Index Factor" shall mean a factor equal to the percentage
increase or decrease in the CPI - U as measured from and after the preceding
calendar year.
(5) The term Annual Death Benefit Sum shall mean (i) an amount equal to the
Employee's Average Salary increased or decreased on the first day of each year
next following the date of the Employee's death by an amount which shall be
equal to the product of the Employee's Average Salary multiplied by the Index
Factor and (ii) such amount as shall be required from time to time to pay
premiums for health insurance for the Employee's Spouse during her lifetime that
shall be comparable to the health insurance provided by the Employer to its
employees.
Article SECOND: Death Benefit
The Employer agrees to pay as a death benefit the Annual Death Benefit Sum
in semi- monthly installments to the Employee's Spouse each year during her
lifetime. The first installment shall be due the first day of the month next
following the Employee's death. In no event shall the Employee or his estate
have any right to receive the, death benefit or any installments described
herein or in any way to alter the receipt of such semi-monthly installments.
Article THIRD: Forfeitable Benefits - Voluntary or Other Termination of
Services, or Discharge
In the event that prior to the Employee's death, the Employee shall
terminate his employment with the Employer or shall be discharged for action
inimical to the corporate interests of the Employer, which shall be in the sole
determination of the Board of Directors of the Employer, this Agreement shall
terminate upon the date of such termination of employment or discharge and no
benefits or payments of any kind shall be made hereunder.
Article FOURTH: Non-Alienability
Neither the Employee nor the Employee's Spouse under this Agreement shall
19
have the power or right to transfer, assign, anticipate, mortgage, commute, or
otherwise encumber in advance any installment payable hereunder, nor shall any
said monthly installment be subject to seizure for the payment of any debts or
judgements or be transferable by operation of law in the event of bankruptcy,
insolvency or otherwise. In the event the foregoing restriction is violated, all
installments shall cease and terminate.
Article FIFTH: Participation in Other Plans
Nothing contained in this Agreement shall be construed to alter, abridge or
in any manner affect the rights and privileges of the Employee to participate in
any pension or profit-sharing plan that the Employer may now or hereafter
provide.
Article SIXTH: Benefits and Burdens
This Agreement shall be binding upon and inure to the benefit of the
Employee and the Employee's Spouse and it shall be binding, on the Employer and
any successor organization which shall succeed to substantially all of the
Employer's assets.
Article SEVENTH: Governing Law, Etc.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York. This Agreement sets forth the entire Agreement
between the parties concerning the subject matter thereof, and any amendment or
discharge to this Agreement shall be in writing and signed by the parties
hereto. This Amended Agreement is intended to replace the Death Benefit
Agreement dated July 22, 1994 between the Employer and Employee, which shall be
of no further force or effect.
Article EIGHTH: Not an Employment Contract
This Agreement shall not be deemed to constitute a contract of employment
between the parties hereto, nor shall any provision herein restrict the right of
the Employer to discharge the Employee or restrict the right of the Employee to
terminate his employment.
IN WITNESS WHEREOF, the Employer has caused its name to be hereunder
executed by its duly authorized officer, duly attested by its Secretary, and the
Employee has hereunto set his hand seal the day and year first above written.
WINMILL & CO. INCORPORATED
Attest: /s/____________________ By: /s/_________________________
/s/__________________________ (L.S.)
Bassett S. Winmill
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SECTION 906 CERTIFICATION
The Winmill & Co. Incorporated ("Issuer") 10QSB dated August 14, 2002
("Report") fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and information contained in the Report
represents, in all material respects, the financial condition and results of
operation of the Issuer.
/s/ Thomas B. Winmill Dated: August 13, 2002
- ---------------------------
Thomas B. Winmill, Esq.
Chief Executive Officer
/s/ William G. Vohrer Dated: August 13, 2002
- ---------------------------
William G. Vohrer
Chief Financial Officer
21
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders of
Winmill & Co. Incorporated
We have reviewed the accompanying balance sheet and statements of income
(loss) of Winmill & Co. Incorporated and consolidated subsidiaries as of
June 30, 2002 and for the three-month and six-month periods ended. These
financial statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
Tait, Weller & Baker
Philadelphia, Pennsylvania
August 14, 2002
22