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