As filed with the Securities and Exchange Commission on August 14, 2003
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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, 2003
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, 2003 Commission File Number 0-9667
WINMILL & CO. INCORPORATED
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(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
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(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
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The number of shares outstanding of each of the registrant's classes of
common stock, as of July 31, 2003, were as follows:
Class A Common Stock non-voting, par value $.01 per share - 1,588,520 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, 2003
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet
- (Unaudited) June 30, 2003 3
Condensed Consolidated Statements of Income (Loss)
- (Unaudited) Six Months Ended June 30, 2003
and June 30, 2002 4
Condensed Consolidated Statements of Cash Flows
- (Unaudited) Six Months Ended
June 30, 2003 and June 30, 2002 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
Item 3. Controls and Procedures 15
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders During
Second Quarter of the Year Ended December 31, 2003 15
Item 6. Exhibits and Reports on Form 8-K 16
CERTIFICATION SIGNATURE 19
2
WINMILL & CO. INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 2003
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalent $ 1,274,654
Marketable securities (Note 2) 5,982,587
Other receivables 150,253
Prepaid expenses and other assets 69,137
Refundable income tax 173,294
-------------
Total Current Assets 7,649,925
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Equipment, furniture and fixtures, net 58,914
Intangible assets, net 608,795
Other 423,452
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1,091,161
Total Assets $ 8,741,086
=============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities 178,566
-------------
Total Current Liabilities 178,566
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239,000
Total Liabilities 417,566
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Shareholders' Equity: (Notes 2,4,5, and 6)
Common Stock, $.01 par value
Class A, 10,000,000 shares authorized
1,588,520 shares issued and outstanding 15,885
Class B, 20,000 shares authorized;
20,000 shares issued and outstanding 200
Additional paid-in capital 6,750,276
Retained earnings 2,069,700
Notes receivable for common stock issued (512,649)
Accumulated other comprehensive gain 108
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Total Shareholders' Equity 8,323,520
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Total Liabilities and Shareholders' Equity $ 8,741,086
=============
See accompanying notes to consolidated financial statements.
3
WINMILL & CO. INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
2003 2002 2003 2002
---- ---- ---- ----
Revenues:
Management, distribution and other fees $ 333,638 $ 367,757 $ 670,520 $ 711,373
Dividends, interest and other 40,739 58,433 79,386 122,405
Net unrealized appreciation of publicly
held affiliates and unrealized and
realized gains on proprietary trading 872,038 21,998 648,631 339,182
---------- ---------- ---------- ---------
1,246,415 448,188 1,398,537 1,172,960
Expenses:
General and administrative 169,647 229,458 351,409 459,921
Marketing 102,798 122,530 202,431 247,182
Expense reimbursements to the Funds (Note 9) 38,549 46,279 77,087 95,729
Professional fees 17,000 33,640 34,000 72,080
Amortization and depreciation 17,129 6,244 34,188 15,163
----------- ----------- --------- --------
345,123 438,151 699,115 890,075
----------- ----------- --------- --------
Income before income taxes 901,292 10,037 699,422 282,885
Income taxes provision (Note 8) 369,400 2,550 279,600 107,300
----------- ----------- -------- --------
Net income $ 531,892 $ 7,487 $ 419,822 $ 175,585
=========== ========== ========= ========
Per share net income:
Basic $ 0.33 $ 0.00 $ 0.26 $ 0.11
Diluted $ 0.32 $ 0.00 $ 0.26 $ 0.11
Average shares outstanding:
Basic 1,608,520 1,648,320 1,608,520 1,648,320
Diluted 1,643,652 1,648,925 1,633,033 1,649,529
See accompanying notes to the consolidated financial statements.
4
WINMILL & CO. INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
2003 2002
---- ----
Cash Flows from Operating Activities:
Net income $ 419,822 $ 175,585
----------- ----------
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 34,188 18,541
Net unrealized (appreciation) of publicly held
affiliates and on proprietary securities trading (648,631) (241,888)
Cash value of life insurance (16,530) (16,500)
Other (2,228) -
(Increase) decrease in: Management, distribution and other
fees receivable 21,595 (10,785)
Interest, dividends, and other receivables (1,157) (11,902)
Prepaid expenses and other assets 30,979 22,174
Deferred tax credits 261,000 137,300
Increase (decrease) in:
Accounts payable (9,584) (6,010)
Accrued professional fees (22,125) (16,614)
Accrued payroll and other related costs (25,000) (6,066)
Accrued other expenses 17,860 (50,434)
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Total adjustments (359,633) (182,184)
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Net cash from operating activities 60,189 (6,599)
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Cash Flows from Investing Activities:
Proprietary securities trading 22,747 6,726
Proprietary securities trading purchases (69,602) (197,672)
Capital expenditures (7,600) (18,875)
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Net cash from investing activities (54,455) (209,821)
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Cash Flows from Financing Activities:
Repayment of notes receivable 14,392 58,422
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Net cash provided by financing activities 14,392 58,422
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Net increase (decrease) in cash and cash equivalents 20,126 (157,998)
Cash and Cash Equivalents:
At beginning of period 1,254,528 2,443,693
----------- -----------
At end of period $1,274,654 $2,285,695
=========== ===========
Supplemental disclosure: The Company paid no Federal income taxes during the six
months ended June 30, 2003 and 2002.
See accompanying notes to the consolidated financial statements.
5
WINMILL & CO. INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED June 30, 2003 and 2002
(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 (three open-end funds), two closed-end funds, and
proprietary securities trading. Its publicly held affiliates' businesses include
insurance services and real estate.
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 generally accepted
accounting principles, 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, 2003, the Company and subsidiaries had invested approximately $975,000 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
unrealized gains or losses 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
INCOME TAXES
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. The Company and its
wholly owned subsidiaries file consolidated income tax returns.
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,
2003 accumulated depreciation amounted to approximately $830,100.
INTANGIBLE ASSETS
The Company adopted Statements of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 142") in 2002. In accordance with
SFAS 142, intangible assets with a finite useful life are amortized over the
useful life. In addition, intangible assets are reviewed for impairment and the
remaining useful life evaluated at least annually to determine whether events
and circumstances warrant a revision to the remaining period of amortization. As
such, the Company has amortized its intangible assets over fifteen years using
the straight-line method. At June 30, 2003, accumulated amortization on
intangible assets amounted to approximately $201,900.
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 segments were organized around activities and are
classified into three groups - fund services, investment in publicly held
affiliates and proprietary trading.
7
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 Six Months
Ended June 30, Ended June 30,
---------------- ---------------
2003 2002 2003 2002
---- ---- ---- ----
Numerator for basic and diluted earnings per share:
Net income $ 531,892 $ 7,487 $ 419,822 $ 175,585
Denominator:
Denominator for basic
earnings per share:
weighted-average shares 1,608,520 1,648,320 1,608,520 1,648,320
Effect of dilutive securities:
Employee Stock Options 35,132 605 24,513 1,209
--------- --------- --------- ---------
Denominator for diluted
earnings per share:
adjusted weighted-average shares
and assumed conversion 1,643,652 1,648,925 1,633,033 1,649,529
========== ========== ========== ==========
2. MARKETABLE SECURITIES
At June 30, 2003, marketable securities, at market, consisted of:
Broker/dealer subsidiary
Publicly held affiliates $5,014,405
Proprietary trading 965,549
----------
Total broker/dealer's securities (cost $5,313,173) 5,979,954
----------
Other companies' available-for-sale securities
Unaffiliated investment companies 2,633
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Total available-for-sale securities (cost $2,525) 2,633
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$5,982,587
At June 30, 2003, the Company had $108 of unrealized gain on "available-for-sale
securities" which is reported as a separate component of consolidated
shareholders' equity. Included in the broker/dealer's holding of affiliated
investment companies are $3,034,523 of (approximately 25% of outstanding) shares
of Bexil Corporation and $1,698,098 of (approximately 20% of outstanding) shares
of Tuxis Corporation, both of which have received Board of Director and
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.
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
8
1,000,000 shares of Preferred Stock, $.01 par value, authorized. As of June 30,
2003, 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, 2003, the subsidiary had: net
capital of approximately $5,001,700; net capital requirements of $100,000;
excess net capital of approximately $4,901,700; and the ratio of aggregate
indebtedness to net capital was approximately 0.08 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 2,500 options each on December 10,
2002. 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 according 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 plan
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 Six Months
Ended June 30, Ended June 30,
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2003 2002 2003 2002
---- ---- ---- ----
Net(loss) income As Reported $ 513,892 $7,487 $419,822 $175,585
Pro forma $ 513,892 $3,918 $419,822 $167,921
Earning per share
Basic As Reported $ 0.33 $ 0.00 $ 0.26 $ 0.11
Pro for $ 0.33 $ 0.00 $ 0.26 $ 0.10
Diluted As Reported $ 0.32 $ 0.00 $ 0.26 $ 0.11
Pro for $ 0.32 $ 0.00 $ 0.26 $ 0.10
The fair value of each option grant is estimated as of the date of grant using
the Black- Scholes option-pricing model.
9
A summary of the status of the Company's stock option plan as of June 30, 2003
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, 2002 281,500 $1.59
Outstanding at June 30, 2003 281,500 $1.59
There were 281,500 options exercisable at June 30, 2003 with a
weighted-average exercise price of $1.59. There were no options granted
during the six months ended June 30, 2003.
The following table summarizes information about stock options
outstanding at June 30, 2003:
Options Outstanding
-----------------------------------------------------------
Weighted-Average
Range of Number Remaining Weighted-Average
Exercise Prices Outstanding Contractual Life Exercise Price
$1.50 - $1.60 121,500 2.89 years $1.50
$1.60 - $1.66 160,000 3.05 years $1.65
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 June 30, 2003 was
$512,649, 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 plan 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, 2003 and June 30, 2002 were $23,130
and $24,771, respectively.
8. INCOME TAXES
The provision (benefit) for income taxes for the six months ended June 30, 2003
and 2002 are as follows:
2003 2002
---- ----
Current
Federal $ 15,800 $ (25,700)
State and local 2,800 (4,300)
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18,600 (30,000)
Deferred 261,000 137,300
---------- ----------
$ 279,600 $ 107,300
========== ==========
Deferred tax credits of $239,000 are comprised primarily of net unrealized
appreciation of publicly held affiliates and unrealized gains on proprietary
trading at June 30, 2003.
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 quarter ended June 30, 2003 and
2002, the Funds paid approximately $16,800 and $22,200 respectively, for record
keeping services to the Company's broker/dealer
10
subsidiary, 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 $38,600 and $46,300 for the quarter ended
June 30, 2003 and 2002, respectively.
Certain officers of the Company also serve as officers and/or directors of the
Funds. Bexil shares common office space and various general and administrative
expenses with the Company. The Company is expected to be reimbursed from Bexil
for these expenses and for the six months ending, the Company has recorded a
receivable of approximately $48,000.
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, 2003, the policy had a cash
surrender value of approximately $290,700 and is included in other assets in the
balance sheet.
10. FINANCIAL INFORMATION BY BUSINESS SEGMENT
The following details selected financial information by business segment.
Fund Publicly Held Proprietary
June 30, 2003 Services Affiliates Trading Total
---------------------------------------------------
Revenues $ 700,050 $ 574,686 $ 123,802 $ 1,398,538
Income from operations 257,620 361,129 80,618 699,422
Depreciation and amortization 6,398 - 790 7,188
Capital expenditures 7,600 - - 7,600
Gross identifiable assets 2,742,504 5,014,405 984,177 8,741,086
Fund Publicly Held Proprietary
June 30, 2002 Services Affiliates Trading Total
---------------------------------------------------
Revenues $ 741,761 $ 461,410 $ (30,216) $ 1,172,960
Income from operations 169,957 192,370 (79,411) 282,885
Depreciation and amortization 3,672 - 371 4,045
Capital expenditures 18,875 - - 18,875
Gross identifiable assets 3,345,639 4,133,195 756,300 8,235,134
11
11. 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, 2003, 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.
The Company has a Death Benefits Agreement ("Agreement") with the Company's
Chairman, which was entered into in 1994 and amended in 2002. Following his
death, the Agreement provides for annual payments, equal to 80% of his average
annual compensation 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.
12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002
- -----------------------------------------------------------------------------
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 increased $798,226 or 178%, which was primarily due to a increase
in net unrealized appreciation of publicly held subsidiaries and affiliates and
unrealized and realized gains on proprietary trading. Offsetting this was a
decrease in management, distribution and other fees and dividends, interest and
other of $51,813 or 12%. In the three months ended June 30, 2003 the Company had
net realized and unrealized gains of $872,038 from the publicly held affiliates
and proprietary securities trading as compared to a gain of $21,998 in the three
months ended June 30, 2002. Management, distribution and other fees decreased
$34,119 or 9% due to lower average net assets in the Funds.
Total expenses decreased $93,028 or 21% over this period of last year. General
and administrative expenses decreased $59,811 or 26% due to lower employee
costs. Marketing expense decreased $19,732 or 16% due to lower fulfillment and
printing costs. Expense reimbursement to the Funds decreased $7,730 or 17%.
Professional fees decreased $16,640 or 49%. Amortization and depreciation
expense increased $10,885.
Net income for the period was $531,891 or $.32 per share on a diluted basis as
compared to net income of $7,487 or $.00 per share on a diluted basis for June
30, 2002.
Six Months Ended June 30, 2003 compared to Six Months Ended June 30, 2002
- -------------------------------------------------------------------------
Total revenues increased $225,577 or 19% which was primarily due to the increase
in net unrealized appreciation of publicly held affiliates and unrealized and
realized gains on proprietary trading. Partially offsetting this were lower
management, distributions and other fees of $40,853 or 6% due to lower average
net assets under management. Average net assets under management were $120.6
million and $128.6 for June 30, 2003 and 2002, respectively. Dividends, interest
and other decreased $43,019 due to lower earnings on the Company's investments.
Net unrealized appreciation of publicly held affiliates and unrealized and
realized gains on proprietary securities trading for the six months ended June
30, 2003 resulted in a gain of $648,631, as compared to a gain of $339,182 in
the same period for 2002.
Total expenses decreased $190,960 or 21% over this period of last year, as a
result of decreases in general and administrative expenses of $108,512 or 24%
and marketing expenses of $44,751 or 18%. General and administrative expenses
decreased due to lower employee costs and the assumption of certain expenses by
Bexil and Tuxis. Expense reimbursements to the Funds decreased $18,642 or 19%.
Marketing expenses decreased $44,751 or 18% due to lower fulfillment and
printing expenses. Professional fees decreased $38,080 or 53%. Amortization and
depreciation expenses increased by $19,025. Net income for the period was
$419,822 or $.26 per share on a diluted basis, as compared to net income of
$175,585 or $.11 per share on a diluted basis for the six months ended June 30,
2002.
13
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, 2003 December 31, 2002
------------- -----------------
Working Capital $7,471,355 $6,768,292
Total Assets $8,741,086 $8,106,436
Long-Term Debt - -
Shareholders' Equity $8,323,520 $7,889,020
Working capital, total assets and shareholders' equity increased $703,067,
$634,650 and $434,500, respectively, for the six months ended June 30, 2003.
Working capital, total assets and shareholders' equity increased primarily due
to net income in the second quarter of 2003.
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.
Effects of Inflation and Changing Prices
- ----------------------------------------
Since the Company derives most of its revenues from fund services and
proprietary securities trading, 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.
14
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 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 operating results will also depend on the results of Bexil and
Tuxis held by the Company's broker/dealer subsidiary. Fluctuations in the values
of these holdings, resulting in unrealized gains and losses, will be included in
earnings.
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.
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
-----------------
Items 4. Submission of Matters to a Vote of Security Holders During Second
Quarter of the Year Ended December 31, 2003.
None
15
Item 6. Exhibits and Reports on Form 8-K
Reports on Form 8-K were filed during the quarter covered by this reports
as follows:
April 25, 2003 - Regulation FD Disclosure - Financial Results for the
year ended December 31, 2002.
May 15, 2003 - Regulation FD Disclosure - Financial Results for the
First Quarter ended March 31, 2003.
16
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, 2003 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, 2003 /s/Bassett S. Winmill
----------------------
Bassett S. Winmill
Chairman of the Board,
Director
Dated: August 14, 2003 /s/Robert D. Anderson
----------------------
Robert D. Anderson
Vice Chairman, Director
Dated: August 14, 2003 /s/Thomas B. Winmill
---------------------
Thomas B. Winmill, Esq.
President,
General Counsel, Director
Dated: August 14, 2003 /s/Charles A. Carroll
----------------------
Charles A. Carroll, Director
Dated: August 14, 2003 /s/Edward G. Webb, Jr.
----------------------
Edward G. Webb, Jr., Director
Dated: August 14, 2003 /s/Mark C. Winmill
-------------------
Mark C. Winmill, Director
17
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, 2003
and for the six-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
August 12, 2003
18
Certification- Exchange Act Rules 13a-14 and 15d-14
I, Thomas B. Winmill, 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: August 14, 2003
/s/ Thomas B. Winmill
Chief Executive Officer
19
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: August 14, 2003
/s/ William G. Vohrer
Chief Financial Officer
20