As filed with the Securities and Exchange Commission on November 14, 2002
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 September 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 September 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
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(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 October 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 September 30, 2002
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Condensed Consolidated Balance Sheet
- (Unaudited) September 30, 2002 3
Condensed Consolidated Statements of Income (Loss)
- (Unaudited) Nine Months Ended September 30, 2002
and September 30, 2001 4
Condensed Consolidated Statements of Cash Flows
- (Unaudited) Nine months Ended
September 30, 2002 and September 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
Item 3. Controls and Procedures 15
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a vote of Security Holders During
Third Quarter of the Year ended December 31, 2002 15
Item 6. Exhibits and Report on Form 8-K 15
MANAGEMENT'S REPRESENTATION 16
2
WINMILL & CO. INCORPORATED
CONSOLIDATED BALANCE SHEET
September 30, 2002
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 1,567,627
Marketable securities (Note 2) 4,784,518
Other receivables 166,038
Prepaid expenses and other assets 287,298
-------------
Total Current Assets 6,805,481
-------------
Equipment, furniture and fixtures, net 59,695
Excess of cost over net book value of
subsidiaries, net 634,213
Deferred income taxes (Note 8) 120,100
Other 372,042
-------------
1,186,050
Total Assets $ 7,991,531
=============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accrued liabilities $ 278,560
------------
Total Current Liabilities 278,560
------------
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
6,807,986
Retained earnings 1,415,528
Notes receivable for common stock issued (527,041)
Accumulated other comprehensive income 15
------------
Total Shareholders' Equity 7,712,971
------------
Total Liabilities and Shareholders' Equity $ 7,991,531
============
See accompanying notes to consolidated financial statements.
3
WINMILL & CO. INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
2002 2001 2002 2001
---- ---- ---- ----
Revenues:
Management, distribution and other fees $ 357,762 $ 366,694 $ 1,069,135 $ 1,409,463
Consulting fee - - - 246,923
Dividends, interest and other 58,219 70,290 180,624 213,082
--------- -------- --------- ---------
Revenue before net realized and unrealized
(losses)on investments 415,981 437,484 1,249,759 1,869,468
Net realized and unrealized
(losses) from investments (411,281) (145,236) (72,099) (110,320)
--------- -------- --------- ---------
4,700 292,248 1,177,660 1,759,148
--------- -------- --------- ---------
Expenses:
General and administrative 232,775 208,262 692,696 705,630
Marketing 118,390 138,670 365,572 562,456
Expense reimbursements to the Funds (Note 9) 43,371 65,150 139,100 228,690
Professional fees 39,020 13,611 111,100 155,332
Amortization and depreciation 17,138 11,085 32,301 35,621
Write-down of intangible assets - 51,674 - 51,674
---------- ------- --------- ---------
450,694 488,452 1,340,769 1,739,403
---------- ------- --------- ---------
Income (loss) before income taxes (445,994) (196,204) (163,109) 19,745
Income taxes provision (credit)(Note 8) (173,386) (68,055) (66,086) 18,700
--------- -------- --------- ---------
Net Income (loss) $ (272,608) (128,149) $ (97,023) $ 1,045
========== ======== ========= ==========
Per share data:
Basic
Net income (loss) $ (0.17) $ (0.08) $ (0.06) $ 0.00
Diluted
Net income (loss) $ (0.17) $ (0.08) $ (0.06) $ 0.00
Average Shares Outstanding:
Basic 1,628,320 1,655,017 1,628,320 1,655,017
Diluted 1,628,320 1,655,017 1,628,320 1,660,836
See accompanying notes to the consolidated financial statements.
4
WINMILL & CO. INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30, 2002
Cash Flows from Operating Activities:
Net income (loss) $ (97,023)
-----------
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 34,171
Net realized and unrealized gains from investments 240,853
Cash value of life insurance (24,750)
Other (1,559)
(Increase) decrease in: Management, distribution and other
fees receivable (36,075)
Prepaid expenses and other assets 105,686
Deferred tax credits (29,100)
Increase (decrease) in:
Accrued income taxes (20,702)
Accounts payable (13,425)
Accrued professional fees 12,814
Accrued payroll and other related costs 8,915
Accrued other expenses 3,019
-----------
Total adjustments 279,847
-----------
Net cash provided by operating activities 182,824
-----------
Cash Flows from Investing Activities:
Proceeds from sales of investments 21,380
Purchases of investments (600,863)
Intangible assets (479,407)
-----------
Net cash used in investing activities (1,058,890)
-----------
Net decrease in cash and cash equivalents (876,066)
Cash and Cash Equivalents:
At beginning of period 2,443,693
-----------
At end of period $ 1,567,627
===========
Supplemental disclosure:
The Company paid $0 and $172,000 in Federal income taxes during the nine months
ended September 30, 2002 and 2001.
See accompanying notes to the consolidated financial statements.
5
WINMILL & CO. INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 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 two
closed-end funds 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 September 30, 2002, the Company and subsidiaries had
invested approximately $1,275,000 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
September 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 September 30, 2002 accumulated depreciation amounted to
approximately $822,500.
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 "Goodwill 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 September 30, 2002,
accumulated amortization amounted to approximately $160,500.
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
September 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 Nine Months
Ended September 30, Ended September 30,
2002 2001 2002 2001
---- ---- ---- ----
Numerator for basic and diluted
earnings per share:
Net (loss) income $ (272,608) $ (128,149) $ (97,023) $ 1,045
========== ========== ========== =======
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 - - - 5,839
---------- ---------- ---------- ----------
Denominator for diluted earnings per share
adjusted weighted-average shares and
assumed conversions 1,628,320 1,655,017 1,628,320 1,660,836
========== ========== ========== ==========
2. MARKETABLE SECURITIES
At September 30, 2002, marketable securities, at market, consisted of:
Broker/dealer subsidiary
Affiliated investment companies $3,865,940
Equity securities 915,896
----------
Total broker/dealer securities (cost $5,006,342) 4,781,836
----------
Other subsidiaries' available-for-sale securities
Unaffiliated investment companies 2,682
Equity securities -
----------
Total available-for-sale securities (cost $2,682) 2,682
----------
$4,784,518
==========
At September 30, 2002, the Company had $0, 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 $2,113,797 or approximately 23% of the outstanding
shares of Bexil Corporation and $1,741,983 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, but have not yet received SEC approval.
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
September 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 September 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 September 30, 2002, the subsidiary had net capital of
approximately $4,506,800; net capital requirements of $100,000; excess
net capital of approximately $4,406,800; and the ratio of aggregate
indebtedness to net capital was approximately 0.03 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 Nine Months
Ended September 30, Ended September 30,
2002 2001 2002 2001
---- ---- ---- ----
Net income(loss)As Reported $ (272,608) $ (128,149) $ (97,023) $ 1,045
Pro forma $ (274,671) $ (132,336) $ (104,687) $ (8,703)
Earning per share
Basic As Reported $ (.17) $ (.08) $ (.06) $ 0.00
Pro forma $ (.17) $ (.08) $ (.06) $ (0.01)
Diluted As Reported $ (.17) $ (.08) $ (.06) $ 0.00
Pro forma $ (.17) $ (.08) $ (.06) $ (0.01)
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
September 30, 2002 and 2001
(Unaudited)
A summary of the status of the Company's stock option plans as of
September 30,2001 and changes during the period ending on that date is
presented below:
Number
of Weighted-Average
Stock Options Shares Exercise Price
Outstanding at December 31, 2001 221,000 $1.60
Outstanding at September 30, 2002 221,000 $1.60
There were 194,000 options exercisable at September 30, 2002 with a
weighted-average exercise price of $1.59. There were no options granted
during the three months ended September 30, 2002.
The following table summarizes information about stock options
outstanding at September 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 3.18 years $1.58
$1.70 - $1.80 15,000 3.70 years $1.80
In connection with the exercise of the options, the Company received
from certain officers notes with an interest rates ranging from 2.45%
to 2.48% per annum payable December 15, 2004. The balance of the notes
at September 30, 2002 was $527,041, 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 nine months ended
September 30, 2002 and September 30, 2001 were $36,969 and $24,257,
respectively.
8. INCOME TAXES
The provision (benefit) for income taxes for the nine months ended
September 30, 2002 and 2001 are as follows:
2002 2001
---- ----
Current
Federal $ (31,686) $ (14,900)
State and local (5,300) (49,400)
---------- ----------
(36,986) (64,300)
Deferred (29,100) 83,000
---------- -----------
$ (66,086) $ 18,700
========== ============
Deferred tax asset are comprised primarily of unrealized losses on
investments at September 30, 2002.
10
WINMILL & CO. INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 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 nine months ended September 30, 2002 and 2001,
the Funds paid approximately $33,000 and $66,200 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 $139,100 and $228,690 for the quarter ended September 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 September
30, 2002, the policy had a cash surrender value of approximately
$266,800 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 September 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 September 30, 2002 compared to Three Months Ended September
30, 2001
- --------------------------------------------------------------------------------
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 revenue before the net realized and unrealized loss on investments
decreased $21,504 or 29%, which was primarily due to lower management,
distribution and other fees and consulting fees. The Company had net realized
and unrealized losses of $411,281 on the Company's investments. Management,
distribution and other fees decreased $8,932 or 2% due to lower net assets in
the Funds, the termination of the investment management agreement with Bexil and
Tuxis upon their adoption of an internal management structure and the assumption
of Bexil and Tuxis of certain expenses, effective July 31, 2001 and November 30,
2001, respectively. Dividends, interest and other decreased $12,572 due to lower
earnings on investments. On July 12, 2002 CEF Advisers, Inc.(a unit of the
Company) became the new investment manager of the closed-end fund Internet
Growth Fund, Inc.
Total expenses decreased $37,758 or 8% as a result of decreases in marketing
expenses of $20,280 or 15% and during the third quarter of 2001 a charge was
taken for the write-down of intangible asset of $51,674. Offsetting this was an
increase in general and administrative, professional fees and amortization and
depreciation. Marketing expenses decreased due to lower fulfillment and printing
expenses. Expense reimbursement to the Funds decreased $21,779 or 33% primarily
due to the liquidation or merger of certain Funds being reimbursed.
Net loss for the period was $272,608 or $.17 per share on a diluted basis as
compared to net loss of $128,149 or $.08 loss per share on a diluted basis for
period ended.
Nine Months Ended September 30, 2002 compared to Nine Months Ended September 30,
2001
- --------------------------------------------------------------------------------
Total revenues decreased $581,488 or 33% which was primarily due to the decrease
in management, distribution and other fee income, consulting fees and dividends,
interest and other income. Partially offsetting this were lower net realized and
unrealized losses on investments. Management, distribution and other fees
decreased $340,328 or 24% due to lower net assets in the Funds, the termination
of the investment management agreement with Bexil and Tuxis upon their adoption
of an internal management structure and the assumption of Bexil and Tuxis of
certain expenses, effective July 31, 2001 and November 30, 2001 respectively.
Average net assets under management were less in the nine months ended September
30, 2002 versus September 30, 2001. Net assets were approximately $128 million
at September 30, 2001, $116 million at December 31, 2001, and $125 million at
March 31, 2002, $123 million at June 30, 2002 and $129 at September 30, 2002.
Dividends, interest and other decreased $32,459 due to lower earnings on the
Company's investments. Net realized and unrealized gains resulted in a loss in
of $72,099 on investments. Also for the nine months ended September 30, 2001,
the Company earned $246,923 in consulting fees through an agreement that was
terminated during the second quarter of 2001.
Total expenses decreased $398,634 or 23% over this period of last year, as a
result of decreases in marketing expenses of $196,884 or 35%, general and
administrative expenses of $12,934 or 2%, and amortization and depreciation
expenses of $3,320 or 9%. Marketing expenses decreased due to lower fulfillment
and printing expenses. General and administrative expenses decreased due to
lower employee costs and the assumption of Bexil and Tuxis of certain expenses.
Expense reimbursements to the Funds decreased $89,590 or 39%. Professional fees
decreased $44,232 or 28%. Net results for the period was a loss of $97,023 or
$.06 per share on a diluted basis as compared to net income of $1,045 or $.00
per share on a diluted basis for the nine months ended September 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:
September 30, 2002 December 31, 2001
------------------ -----------------
Working Capital $ 6,526,921 $ 7,063,441
Total Assets $ 7,991,531 $ 8,036,785
Long-Term Debt - -
Shareholders' Equity $ 7,712,971 $ 7,748,846
Working capital, total assets and shareholders' equity decreased $536,520,
$45,254 and $35,875, respectively for the nine months ended September 30, 2002.
Working capital, total assets and shareholders' equity decreased primarily due
to net loss for the first nine 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
Item 3. Controls and Procedures
(a) Evaluation of disclosure controls and procedures. The Company's chief
executive officer and chief financial officer, after evaluating the
effectiveness of the Company's "disclosure controls and procedures" (as defined
in the Securities Exchange Act of 1934 Rules 13a-14(c)) as of a date (the
"Evaluation Date") within 90 days before the filing date of this quarterly
report, have concluded that, as of the Evaluation Date, the Company's disclosure
controls and procedures were effective.
(b) Changes in internal controls. There were no significant changes in the
Company's internal controls or to the Company's knowledge, in other factors that
could significantly affect the Company's disclosure controls and procedures
subsequent to the Evaluation Date.
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders During Third Quarter
of Year Ended December 31, 2002.
None.
Item 6. Exhibits and Reports on Form 8-K
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: November 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: November 14, 2002 /s/ Bassett S. Winmill
----------------------
Bassett S. Winmill
Chairman of the Board,
Director
Dated: November 14, 2002 /s/ Robert D. Anderson
----------------------
Robert D. Anderson
Vice Chairman, Director
Dated: November 14, 2002 /s/ Thomas B. Winmill
---------------------
Thomas B. Winmill, Esq.
President, General Counsel,
Director
Dated: November 14, 2002 /s/ Charles A. Carroll
----------------------
Charles A. Carroll, Director
Dated: November 14, 2002 /s/ Edward G. Webb, Jr.
-----------------------
Edward G. Webb, Jr., Director
Dated: November 14, 2002 /s/ Mark C. Winmill
-------------------
Mark C. Winmill, Director
16
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 September 30, 2002 and for the nine-month period
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
November 14, 2002
17
Certification- Exchange act rules 13a-14 and 15d-14
I, Thomas B. Wilmill, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Winmill & Co.
Incorporated;
2. Based on my 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 my 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
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant'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. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant'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 registrant's internal controls; and
6. The registrant's other certifying officers and I 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.
Date: November 14, 2002
/s/ Thomas B. Winmill
-----------------------
Chief Executive Officer
18
Certification- Exchange act rules 13a-14 and 15d-14
I, William G. Vohrer, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Winmill & Co.
Incorporated;
2. Based on my 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 my 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
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant'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. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant'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 registrant's internal controls; and
6. The registrant's other certifying officers and I 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.
Date: November 14, 2002
/s/ William G. Vohrer
-----------------------
Chief Financial Officer
19
CEO CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Winmill & Co. Incorporated (the
"Company") on Form 10-Q for the period ending September 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Thomas B. Winmill, Chief Executive Officer of the Company, certify, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.
/s/ Thomas B. Winmill
Thomas B. Winmill
Chief Executive Officer
November 14, 2002
20
CFO CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Winmill & Co. Incorporated (the
"Company") on Form 10-Q for the period ending September 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
William G. Vohrer, Chief Financial Officer of the Company, certify, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.
/s/William G. Vohrer
William G. Vohrer
Chief Financial Officer
November 14, 2002
21