As filed with the Securities and Exchange Commission on November 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 September 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 September 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_____
The number of shares outstanding of each of the registrant's classes of
common stock as of October 31, 2003 were as follows:
Class A Common Stock non-voting, par value $.01 per share - 1,567,216 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, 2003
INDEX
Page
Number
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet
-(Unaudited) September 30, 2003 3
Condensed Consolidated Statements of Income (Loss)
-(Unaudited) Nine Months Ended September 30, 2003
and September 30, 2002 4
Condensed Consolidated Statements of Cash Flows
-(Unaudited) Nine Months Ended September 30, 2003
and September 30, 2002 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation 13
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, 2003 15
Item 5. None
Item 6. Exhibits and Reports on Form 8-K 16
CERTIFICATION SIGNATURES 19
2
WINMILL & CO. INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 2003
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalent $ 1,419,377
Marketable securities (Note 2) 6,389,835
Other receivables 181,536
Prepaid expenses and other assets 71,352
Refundable income tax 7,370
---------
Total Current Assets 8,069,470
---------
Equipment, furniture and fixtures, net 58,545
Intangible assets, net 595,295
Other 360,330
---------
1,014,170
Total Assets $ 9,083,640
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 239,274
---------
Total Current Liabilities 239,274
---------
Deferred tax credit 400,000
---------
Total Liabilities 639,274
---------
Shareholders' Equity: (Notes 2, 4, 5, and 6)
Common Stock, $0.1 par value
Class A, 10,000,000 shares authorized
1,645,187 shares issued and outstanding 16,452
Class B, 20,000 shares authorized;
20,000 shares issued and outstanding 200
Additional paid-in capital 6,838,849
Retained earnings 2,307,355
Treasury Stock (214,858)
Notes receivable for common stock issued (503,632)
---------
Total Shareholders' Equity 8,444,366
---------
Total Liabilities and Shareholders' Equity $ 9,083,640
===========
See accompanying notes to the condensed consolidated financial statements.
3
WINMILL & CO. INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
--------------------------- ---------------------------
2003 2002 2003 2002
---- ---- ---- ----
Revenues:
Management, distribution and other fees $ 359,221 $ 357,762 $ 1,029,741 $ 1,069,135
Dividends, interest and other 39,093 58,219 118,479 180,624
Net unrealized appreciation (depreciation) of publicly
held affiliates and unrealized and
realized gains (losses) on proprietary trading 414,635 (411,281) 1,063,266 (72,099)
------------- ------------- ------------- -------------
812,949 4,700 2,211,486 1,177,660
------------- ------------- ------------- -------------
Expenses:
General and administrative 220,277 232,775 571,686 692,696
Marketing 124,895 118,390 327,326 365,572
Expense reimbursements to the Funds (Note 9) 39,378 43,371 116,465 139,100
Professional fees 5,000 39,020 39,000 111,100
Amortization and depreciation 17,800 17,138 51,988 32,301
------------- ------------- -------------- ------------
407,350 450,694 1,106,465 1,340,769
------------- ------------- -------------- ------------
Income (loss) before income taxes 405,599 (445,994) 1,105,021 (163,109)
Income taxes (credit) provision (Note 8) 167,946 (173,386) 447,546 (66,086)
------------- ------------- -------------- ------------
Net income (loss) $ 237,653 $ (272,608) $ 657,475 $ (97,023)
============= ============= ============== ============
Per share net income (loss):
Basic $ 0.15 $ (0.17) $ 0.41 $ (0.06)
Diluted $ 0.14 $ (0.17) $ 0.39 $ (0.06)
Average shares outstanding:
Basic 1,607,848 1,628,320 1,608,251 1,655,017
Diluted 1,710,287 1,628,320 1,668,106 1,660,836
See accompanying notes to the condensed consolidated financial statements.
4
WINMILL & CO. INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months
Ended September 30,
-------------------------
2003 2002
---- ----
Cash Flows from Operating Activites
Net income $ 657,475 $ (97,023)
--------- ---------
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 51,989 34,171
Net unrealized (appreciation) depreciation of publicly held
affiliates and on proprietary securities trading (1,063,266) 240,853
Cash value of life insurance (24,780) (24,750)
Other (4,381) (1,559)
(Increase) decrease in: Management, distribution and other
fees receivable (11,396) (36,075)
Interest, dividends and other receivables 10,845 -
Prepaid expenses and other assets 15,072 105,686
Refundable income tax 165,924 -
Deferred tax credits 422,000 (29,100)
Increase (decrease) in:
Accounts payable (740) (13,425)
Accrued professional fees (14,209) 12,814
Accrued payroll and other related costs 17,250 8,915
Accrued other expenses 19,558 (17,683)
--------- ---------
Total adjustments (416,134) 279,847
--------- ---------
Net cash from operating activities 241,341 182,824
--------- ---------
Cash Flows from Investing Activites:
Proprietary securities trading sales 65,103 21,380
Proprietary securities trading purchases (104,681) (600,863)
Intangible assets - (460,532)
Capital expenditures (10,323) (18,875)
--------- ---------
Net decrease in cash from investing activities (49,901) 1,058,890
--------- ---------
Cash Flows from Financing Activities:
Purchase of treasury stock (50,000) -
Repayment of notes receivable 23,409 -
--------- ---------
Net cash provided by financing activities (26,591) -
--------- ---------
Net increase(decrease) in cash and cash equivalents 164,849 (876,066)
Cash and Cash Equivalents
At beginning of period $ 1,254,528 2,443,693
----------- ---------
At end of period $ 1,419,377 1,567,627
=========== =========
Supplemental disclosure: The Company paid no Federal income tax during the nine
months ended September 30, 2003 and 2002. Non Cash Item include 45,542 shares of
common stock received in exchange for the exercise of 56,666 shares of common
stock under outstanding stock options and the repayment of notes receivable
shown under other assets.
See accompany notes to the condensed consolidated financial statements.
5
WINMILL & CO. INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2003 and 2002
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Winmill & Co. Incorporated ("Company") is a holding company. Its
subsidiaries' businesses consist 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' are Bexil Corporation (Amex Symbol: BXL); Tuxis Corporation
(Amex Symbol: TUX); and Foxby Corporation (Amex Symbol: FXX); and Global
Income Fund (Amex Symbol: GIF). Their businesses of Bexil and Tuxis are,
respectively, insurance services and real estate, and Global Income Fund
and Foxby are closed end funds.
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
September 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 of 3 to 10 years. At
September 30, 2003 accumulated depreciation amounted to approximately
$833,700.
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 15 years using the straight-line method. At
September 30, 2003, accumulated amortization on intangible assets amounted
to approximately $215,400.
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 are classified into three groups - fund
services, publicly held affiliates, and proprietary trading.
7
EARNING 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 earning per
share:
Three Months Nine Months
Ended September 30, Ended September 30,
--------------------------- ---------------------------
2003 2002 2003 2002
---- ---- ---- ----
Numerator for basic and diluted earnings per share:
Net income $ 237,653 $ (272,608) $ 657,475 $ (97,023)
Denominator:
Denominator for basic
earning per share:
Weighted-average shares 1,607,848 1,628,320 1,608,251 1,628,320
Effect of dilutive securities: -
Employee stock options 102,439 - 59,855 -
--------- --------- --------- ---------
Denominator for diluted earnings per share:
adjusted weighted-average shares
and assumed conversion 1,710,287 1,628,320 1,668,106 1,628,320
========= ========= ========= =========
2. MARKETABLE SECURITIES
At September 30, 2003, marketable securities, at market, consisted of:
Broker/dealer subsidiary
Publicly held affiliates $5,417,379
Proprietary trading 972,456
----------
Total marketable securities (cost $5,323,428) $6,389,835
----------
Included in the broker/dealer's holding of publicly held affiliates are
$3,528,426 of (approximately 25% of outstanding) shares of Bexil Corporation
(Amex Symbol: BXL) and $1,602,465 of (approximately 20% of outstanding) shares
of Tuxis Corporation (Amex Symbol: TUX), each of which has received approved
from its board of directors and shareholders to change from registered
investment companies to operating companies. In 2002 Bexil filed an application
to deregister with the Securities and Exchange Commission.
3. LEASE COMMITMENTS
The Company leases office space under a lease agreement, which was renegotiated
effective October 1, 2003. The lease expires September 30, 2008. The future
minimum rental amounts for the five year period, including electricity, are as
follows:
Year Amount
---- -------
2004 $97,100
2005 97,100
2006 97,700
2007 100,200
2008 76,600
8
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, $0.1 par value, authorized. As of
September 30, 2003, none of the Preferred Stock was issued.
5. NET CAPTIAL 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, 2003, the subsidiary had:
net capital of approximately $5,128,500; net capital requirements of $100,000;
excess net capital of approximately $5,028,500; and the ratio of aggregate
indebtedness to net capital was approximately 0.11 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 Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
2003 2002 2003 2002
---- ---- ---- ----
Net income (loss) As Reported $237,653 $(272,608) $657,475 $ (97,023)
Pro forma $237,653 $(274,671) $657,475 $(104,687)
Earning per share
Basic As Reported $ 0.15 $ (0.17) $ 0.41 $ (0.06)
Pro forma $ 0.15 $ (0.17) $ 0.41 $ (0.06)
Diluted As Reported $ 0.14 $ (0.17) $ 0.39 $ (0.06)
Pro forma $ 0.14 $ (0.17) $ 0.39 $ (0.06)
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 plans as of September 30,
2003 and changes during the period ending on that date are presented below:
Weighted
Number Average
Of Exercise
Stock Options Shares Price
------------- --------------
Outstanding at Decemeber 31, 2002 281,500 $ 1.59
Exercised (56,666) $(1.51)
------------- --------------
Outstanding at September 30, 2003 224,834 $ 1.59
There were 224,834 options exercisable at September 30, 2003 with a
weighted-average exercise price of $1.59. There were no options granted during
the three months ended September 30, 2003. There were 59,354 treasury shares
purchased for $214,858 of which 24,625 shares were used to exercise outstanding
stock options.
The following table summarized information about stock options outstanding at
September 30, 2003:
Weighted-Average
Range of Number Remaining Weighted-Average
Exercise Prices Outstanding Contractual Life Exercise Price
- --------------- ----------- ---------------- ----------------
$1.50 - $1.60 91,500 2.69 years $1.50
$1.60 - $1.66 133,334 2.82 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 September 30, 2003
was $503,632, 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 nine months ended September 30, 2003 and September 30, 2002 were
$34,695 and $36,969 respectively.
8. Income Taxes
The provision (benefit) for income taxes for the nine months ended September 30,
2003 and 2002 is as follows:
2003 2002
---- ----
Current
Federal $ 21,885 $(31,686)
State and local 3,661 (5,300)
------- --------
25,546 (36,986)
Deferred 422,000 (29,100)
------- --------
$447,546 $(66,086)
======== ========
10
Deferred tax credits of $422,000 are derived primarily from net unrealized
appreciation of publicly held affiliates and proprietary trading at September
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 quarters ended September 30, 2003
and 2002, the Funds paid approximately $16,800 and $22,200 respectively, for
record keeping services to the Company's broker/dealer 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.
The Company's investment managers and distributor waived management and
distribution fees and reimbursed expenses to the Funds in the amounts of $39,378
and $43,371 for the quarters ended September 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 by Bexil for
these expenses and for the nine months ending September 30, 2003, the Company
has recorded a receivable of approximately $72,000.
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 September 30, 2003, the policy had a cash
surrender value of approximately $299,000 and is included in other assets in the
balance sheet.
10. FINANCIAL INFORMATION BY BUSINESS SEGEMENT
The following details selected financial information by business segment.
September 30, 2003 Fund Publicly Held Proprietary
Services Affiliates Trading Total
-------------- -------------- -------------- --------------
Revenues $1,074,508 $ 1,027,698 $109,280 $2,211,486
Income from operations 407,710 657,749 39,562 1,105,021
Depreciation and amortization 43,869 6,832 1,287 51,988
Capital expenditures 10,323 - - 10,323
Gross identifiable assets 2,645,367 5,417,379 1,020,894 9,083,640
September 30, 2002 Fund Publicly Held Proprietary
Services Affiliates Trading Total
-------------- -------------- -------------- --------------
Revenues $1,131,911 $ 318,927 $ (273,178) $1,177,660
Income from operations 287,233 (109,951) (340,391) (163,109)
Depreciation and amortization 19,928 12,313 1,930 34,171
Capital expenditures 18,875 - - 18,875
Gross identifiable assets 3,200,880 4,141,585 649,066 7,991,531
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
September 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 Benefit's 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.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three Months Ended September 30, 2003 Compared to Three Months Ended September
- ------------------------------------------------------------------------------
30, 2002
- --------
Declines in the securities markets can have a significant effect on the
Company's business. Poor absolute or relative performance by the Funds may cause
shareholder redemptions to occur. Volatile stock markets may affect management
and distribution fees earned by the Company's subsidiaries, causing either
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 transfer out of
the Funds entirely. Lower net asset levels in the Funds may also cause or
increase fee waivers or expense reimbursements to the Funds as described in Note
9 of the financial statements.
Total revenues of $812,949 increased $808,249 from $4,700, primarily due to net
unrealized appreciation of publicly held affiliates and unrealized and realized
gains on proprietary trading revenue of $414,635 compared to $(411,281) in the
prior period. Offsetting this was a decrease in dividends, interest and other of
$19,126 or 33%. Management, distribution and other fees increased $1,459 due to
higher average net assets in the Funds.
Total expenses decreased $43,344 or 10% versus the period last year. General and
administrative expenses decreased $12,498 or 5% due to lower employee costs.
Marketing expense increased $6,505 or 5% due to increased marketing activity.
Expense reimbursement to the Funds decreased $3,993 or 9%. Professional fees
decreased $34,020 or 87%. Amortization and depreciation expense increased $662.
Net income for the period was $237,653 or $.14 per share on a diluted basis as
compared to net loss of $272,608 or $.17 per share on a diluted basis for the
quarter ended September 30, 2002.
Nine Months Ended September 30, 2003 compared to Nine Months Ended September 30,
- --------------------------------------------------------------------------------
2002
- ----
Total revenues increased $1,033,826 or 88% primarily due to net unrealized
appreciation of publicly held affiliates and unrealized and realized gains on
proprietary trading. Net unrealized appreciation of publicly held affiliates and
unrealized and realized gains on proprietary securities trading for the nine
months ended September 30, 2003 resulted in revenue of $1,063,266 as compared to
12
$(72,099) in the same period for 2002. Partially offsetting this were lower
management, distributions and other fees of $39,394 or 4% due to lower average
net assets under management. Average net assets under management were $122.3
million and $127.7 for the nine month period ended September 30, 2003 and 2002,
respectively. Dividends, interest and other decreased $62,145 due to lower
earnings on the Company's investments.
Total expenses decreased $234,304 or 17% over this period of last year, as a
result of decreases in general and administrative expenses of $121,010 or 17%
and marketing expenses of $38,246 or 10%. General and administrative expenses
decreased due to lower employee costs and the assumption of certain expenses by
Bexil and Tuxis. Marketing expenses decreased due to lower fulfillment and
printing expenses. Professional fees decreased $72,100 or 65%. Amortization and
depreciation expenses increased by $19,687. Expense reimbursements to the Funds
decreased $22,635 or 16%. Net income for the period was $657,475 or $.39 per
share on a diluted basis, as compared to net loss of $97,023 or $.06 per share
on a diluted basis for the nine months ended September 30, 2002.
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, 2003 December 31, 2002
------------------ -----------------
Working capital $ 7,830,196 $ 6,768,292
Total assets $ 9,083,640 $ 8,106,436
Long term debt - -
Shareholders' equity $ 8,444,366 $ 7,889,020
Working capital, total assets and shareholders' equity increased $1,061,904,
$977,204 and $555,346, respectively, for the nine months ended September 30,
2003.
Working capital, total assets and shareholders' equity increased primarily due
to net income in the nine months ended September 30, 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, publicly held
affiliates, and proprietary securities trading, it is not possible to discuss or
predict with accuracy the impact of inflation and changing prices on its revenue
from 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,
13
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 funds; the ability of the Company to maintain investment
management and distribution fees at current levels; competitive conditions in
the fund services industry; the introduction of new 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 regarding 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 reimbursements or waiver of expenses to improve 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, intangibles, 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 or distribution agreements.
The Company's operating results will also depend on the market fluctuation in
the price of shares of the Company's publicly held affiliates, particularly
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 funds in general or in
particular types of 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
-----------------
Items 4. Submission of Matters to a Vote of Security Holders During Third
- -------- ----------------------------------------------------------------
Quarter of the Year Ended December 31, 2003.
- --------------------------------------------
None
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:
August 18, 2003 - Regulation FD Disclosure - Financial Results for the Second
Quarter and the Six Months Ended June 30, 2003.
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, 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: November 14, 2003 /s/ Bassett S. Winmill
----------------------
Bassett S. Winmill
Chairman of the Board,
Director
Dated: November 14, 2003 /s/ Robert D. Anderson
----------------------
Robert D. Anderson
Vice Chairman, Director
Dated: November 14, 2003 /s/ Thomas B. Winmill
---------------------
Thomas B. Winmill, Esq.
President, General Counsel,
Director
Dated: November 14, 2003 /s/ Charles A. Carroll
----------------------
Charles A Carroll, Director
Dated: November 14, 2003 /s/ Edward G. Webb, Jr.
-----------------------
Edward G. Webb, Jr., Director
Dated: November 14, 2003 /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,
2003 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 3, 2003
17
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 periods 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, 2003
/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 periods 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, 2003
/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-QSB for the period ending September 30, 2003 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, 2003
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-QSB for the period ending September 30, 2003 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, 2003
21