<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1999 Commission File Number 0-5613
------------------ -------
REXX ENVIRONMENTAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 13-2625545
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S Employer
of incorporation) Identification Number)
350 PARK AVENUE, NEW YORK, NEW YORK 10022
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 750-7755
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. YES _X_ NO ___
As of November 12, 1999, the registrant had 2,467,576 shares of common stock
outstanding.
Page 1
<PAGE>
REXX ENVIRONMENTAL CORPORATION
INDEX
PART I - Financial Information PAGE
Unaudited financial statements:
Consolidated balance sheets -
September 30, 1999 and December 31, 1998 3
Consolidated statements of operations -
three months ended September 30, 1999 and 1998 4
Consolidated statements of operations -
nine months ended September 30, 1999 and 1998 5
Consolidated statements of cash flows -
nine months ended September 30, 1999 and 1998 6
Notes to consolidated financial statements 7-9
Management's discussion and analysis of
financial condition and results of operations 10-14
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Page 2
<PAGE>
REXX ENVIRONMENTAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share amounts)
(Unaudited)
September 30, December 31,
1999 1998
Assets
Current assets:
Cash and cash equivalents $ 172 $ 68
Accounts receivable - net 3,694 4,749
Costs in excess of billings 545 223
Assets held for sale 780 780
Other current assets 294 164
------ -------
Total current assets 5,485 5,984
Property and equipment, net 1,424 1,487
Goodwill 2,756 2,914
Other assets 22 37
------ -------
$9,687 $10,422
====== =======
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $ 654 $ 668
Notes payable-banks 1,410 1,681
Accounts payable 1,939 1,872
Billings in excess of costs 98 409
Accrued expenses 592 311
Income taxes payable 98 100
------ -------
Total current liabilities 4,791 5,041
------ -------
Long-term debt, net of current portion 657 738
------ -------
Stockholders' equity:
Preferred stock, $1.00 par value, authorized
1,000,000 shares; -0- shares issued
Common stock, $.02 par value, authorized
12,000,000 shares; 5,279,828 shares issued 105 105
Capital in excess of par value 27,925 27,925
Accumulated deficit (6,786) (6,379)
Common stock held in treasury, at cost
(2,812,252 shares) (17,008) (17,008)
------ -------
Total stockholders' equity 4,236 4,643
------ -------
$9,687 $10,422
====== =======
See notes to consolidated financial statements.
Page 3
<PAGE>
REXX ENVIRONMENTAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
Three months ended
September 30,
1999 1998
Revenues $ 4,205 $ 3,285
Cost of services 3,374 2,116
------- -------
Gross profit 831 1,169
General and administrative expenses 807 987
------- -------
Income from operations 24 182
Other expenses (income):
Interest expense, net 71 38
Other expense (income) 16 (16)
------- -------
(Loss) income before provision
for taxes (63) 160
Provision for taxes 0 11
------- -------
Net (loss) income ($ 63) $ 149
======= =======
Per share data:
Basic ($.03) $.06
Diluted ($.03) $.06
Weighted average shares outstanding:
Basic 2,468 2,468
Diluted 2,468 2,500
See notes to consolidated financial statements.
Page 4
<PAGE>
REXX ENVIRONMENTAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
Nine months ended
September 30,
1999 1998
Revenues $12,357 $10,859
Cost of services 9,913 7,280
------- -------
Gross profit 2,444 3,579
General and administrative expenses 2,583 2,939
------- -------
(Loss) income from operations (139) 640
Other expenses (income):
Interest expense, net 200 69
Other expense (income) 59 (41)
------- -------
(Loss) income before provision
for taxes (398) 612
Provision for taxes 9 54
------- -------
Net (loss) income ($ 407) $ 558
======= =======
Per share data:
Basic ($.16) $.23
Diluted ($.16) $.22
Weighted average shares outstanding:
Basic 2,468 2,468
Diluted 2,468 2,517
See notes to consolidated financial statements.
Page 5
<PAGE>
REXX ENVIRONMENTAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
1999 1998
Cash flows used in operating activities:
Net (loss) income ($ 407) $ 558
Adjustments to reconcile net (loss) income
to net cash used in operating activities:
Depreciation and amortization 365 279
------ ------
( 42) 837
Changes in assets and liabilities 653 ( 1,992)
------ ------
Net cash provided by (used in)
operating activities 611 ( 1,155)
------ ------
Cash flows from investing activities:
Capital expenditures ( 172) ( 698)
Net proceeds on disposal of assets 31 0
Decrease in assets held for sale 0 570
Deposit on asset held for sale 0 ( 152)
------ ------
Net cash used in investing activities ( 141) ( 280)
------ ------
Cash flows from financing activities:
Net short-term (repayments) borrowings ( 271) 750
Principal (payment) increase of long-term debt ( 95) 56
------ ------
Net cash (used in) provided by
financing activities ( 366) 806
------ ------
Net increase (decrease) in cash 104 ( 629)
Cash at beginning of period 68 710
------ ------
Cash at end of period $ 172 $ 81
====== ======
Supplemental disclosures of cash flow information:
Changes in assets and liabilities:
Accounts receivable $1,055 ($1,561)
Costs in excess of billings ( 322) ( 281)
Other current assets ( 130) ( 24)
Other assets 15 15
Billings in excess of costs ( 311) ( 202)
Accounts payable and accrued expenses 348 274
Income taxes payable ( 2) ( 168)
Other liabilities 0 ( 45)
------ ------
$ 653 ($1,992)
====== ======
Cash paid - net during the period for:
Interest $ 200 $ 78
Income taxes (including interest thereon) $ 6 $ 216
Page 6
<PAGE>
REXX ENVIRONMENTAL CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 - Consolidation and General
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, Watkins Contracting, Inc. ("WCI") and Oak
Hill Sportswear Holding Corporation, which was inactive. The accompanying
financial statements have been prepared without audit and do not include all
footnotes and disclosures required under generally accepted accounting
principles. Management believes that the results herein reflect all adjustments
which are, in the opinion of management, necessary to fairly state the results
and current financial condition of the Company for the respective periods. All
such adjustments reflected herein are of a normal, recurring nature. These
financial statements should be read in conjunction with the Company's financial
statements contained in its Annual Report on Form 10-K for its year ended
December 31, 1998.
Note 2 - Net income (loss) per share:
In 1997, The Company adopted Statement of Financial Accounting Standards
No. 128 ("FAS 128"), Earnings per Share. FAS 128 prescribes that companies
present basic and diluted earnings per share amounts, as defined, on the face of
the statement of operations. Net income (loss) per share is based on the
weighted average number of shares outstanding. The number of shares used in the
computations for basic and diluted net income per share for the third quarter
and nine months ended September 30, 1999 were 2,467,576 for both computations,
for the quarter ended September 30, 1998 were 2,467,576 and 2,500,232,
respectively, and for the nine months ended September 30, 1998 were 2,467,576
and 2,517,432, respectively.
Net income (loss) used in the computation of basic and diluted net income
(loss) per share is not affected by the assumed issuance of stock under the
Company's stock option plan and is therefore the same for both calculations.
Options to purchase 304,000 shares at prices ranging from $2.00 to $5.00
per share were outstanding at September 30, 1999, but were not included in the
computation of diluted net loss per share because during the third quarter, the
Company's stock price was below the lowest option exercise price and during the
nine months ended September 30, 1999 the effect of their inclusion would have
been antidilutive. Options to purchase 254,000 shares at prices ranging from
$2.00 to $5.00 per share were outstanding at September 30, 1998. The dilutive
impact of such options is the addition of 32,656 shares to weighted average
diluted shares outstanding for the third quarter of 1998 and less than $0.01
decrease in earnings per share. For the nine months ended September 30, 1998,
the dilutive impact of such options is the addition of 49,856 shares outstanding
and less than $.01 decrease in earnings per share.
Page 7
<PAGE>
Note 3: Potential Sale of Watkins Contracting, Inc.:
The Company previously disclosed that on June 10, 1999 it signed a definitive
agreement to sell WCI to Greg Watkins and Daren Barone for $1,300,000 in cash
and 125,000 shares of REXX Environmental Corporation common stock. Messrs.
Watkins and Barone sold WCI to REXX Environmental Corporation in October 1997.
The sale of WCI under the definitive agreement to Messrs. Watkins and Barone is
subject to the approval of the shareholders of REXX Environmental Corporation.
Based on preliminary estimates, if the shareholders approve the transaction, and
it closes, the Company will record a loss on the sale of Watkins Contracting,
Inc. of approximately $3,100,000 which represents the difference between the
price that it will receive and the combined value of WCI's net book value and
goodwill that is recorded on REXX Environmental Corporation's books. This
preliminary estimate is subject to further review and valuations at the time the
transaction closes.
Note 4 - Bank financing:
WCI executed, effective November 10, 1998, a revolving credit agreement
with Wells Fargo Bank, N.A. The credit agreement, which expires November 9,
1999, calls for interest payable at Wells Fargo's prime rate, as in effect from
time to time, and borrowings up to 75% of eligible accounts receivable subject
to a maximum of $2,000,000 (reduced by approximately $100,000 of equipment loans
made to WCI by Wells Fargo). At September 30, 1999, WCI had $1,300,000 borrowed
under the credit agreement, in addition to approximately $82,000 of equipment
loans made by Wells Fargo to WCI. The Company has guaranteed WCI's borrowings
under the credit agreement, which is also secured by WCI's accounts receivable
and all other assets of WCI (with the exception of vehicles and equipment
subject to purchase contract lending agreements with third party lenders). In
addition, the credit agreement provides for certain financial covenants based
upon the Company's consolidated financial condition, including its current ratio
and tangible net worth. WCI's breach of certain financial covenants under its
secured credit agreement as of December 31, 1998 and March 31, 1999 were waived
by Wells Fargo. Watkins Contracting, Inc. has signed an amendment to its secured
credit agreement with its bank which adjusts the financial covenants and
increases the interest rate to 2% over the prime rate. The bank has orally
notified WCI and the Company that it will extend the expiration date of the
credit agreement to February 9, 2000. As of November 12, 1999, WCI, the Company
and the bank are in the process of documenting the extension and related
adjustments in financial covenants.
Effective March 1, 1999, and as a condition to the continued lending by
Wells Fargo Bank to WCI under the credit agreement, WCI and the Company agreed
that no funds would be transferred from WCI to the Company until further
agreement with Wells Fargo Bank. As a result, in order to meet its working
capital needs at the corporate level, the Company has negotiated a line of
credit with Republic National Bank of New York. This line of credit currently
provides for up to $250,000 in borrowings, secured by REXX's assets. This line
of credit is evidenced by a demand grid note in the maximum amount of $250,000.
Republic Bank has indicated to the Company's management that it does not intend
to demand payment on the note prior to January 31, 2000. The Company's
borrowings under this line of credit have been guaranteed by its Chairman of the
Board, Arthur L. Asch. Mr. Asch is not being compensated by the Company for
providing the guarantee. The Company's management believes that, if the
shareholders approve the transaction, and the sale closes, this line of credit
will be sufficient to provide the Company with the necessary working capital to
Page 8
<PAGE>
meet its needs through the completion of the WCI transaction. However, there is
no assurance that the line of credit will, in fact, be sufficient to provide for
the Company's corporate level working capital needs until the completion of the
WCI transaction, repayment of all or a portion of the Company's borrowings under
this line of credit will not be demanded prior to January 31, 2000, that
Republic National Bank will extend this line of credit beyond January 31, 2000,
if requested by the Company, or that Mr. Arthur L. Asch will continue to provide
his guarantee beyond January 31, 2000. The discontinuance of this line of
credit, by any action of Republic National Bank, as a result of Mr. Asch's
failure to continue to provide his guarantee beyond January 31, 2000 or
otherwise, could have a material adverse effect on the Company.
Page 9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and capital resources:
Working capital at September 30, 1999 was $694,000 as compared to
$943,000 at December 31, 1998. The decrease of $249,000 was primarily due to the
net loss for the period.
Net accounts receivable were $3,694,000 at September 30, 1999 as compared to
$4,749,000 at December 31, 1998, a decrease of $1,055,000. The reduction in
accounts receivable was due to aggressive collection efforts in the first nine
months of 1999, including enlisting additional staff personnel in the collection
process and granting discounts in certain circumstances to accelerate the timing
of the actual receipt of cash from customers.
WCI executed, effective November 10, 1998, a revolving credit agreement with
Wells Fargo Bank, N.A. The credit agreement, which expires November 9, 1999,
calls for interest payable at Wells Fargo's prime rate, as in effect from time
to time, and borrowings up to 75% of eligible accounts receivable subject to a
maximum of $2,000,000 (reduced by approximately $100,000 of equipment loans made
to WCI by Wells Fargo). At September 30, 1999, WCI had $1,300,000 borrowed under
the credit agreement, in addition to approximately $82,000 of equipment loans
made by Wells Fargo to WCI. The Company has guaranteed WCI's borrowings under
the credit agreement, which is also secured by WCI's accounts receivable and all
other assets of WCI (with the exception of vehicles and equipment subject to
purchase contract lending agreements with third party lenders). In addition, the
credit agreement provides for certain financial covenants based upon the
Company's consolidated financial condition, including its current ratio and
tangible net worth. WCI's breach of certain financial covenants under its
secured credit agreement as of December 31, 1998 and March 31, 1999 were waived
by Wells Fargo. Watkins Contracting, Inc. has signed an amendment to its secured
credit agreement with its bank which adjusts the financial covenants and
increases the interest rate to 2% over the prime rate. The bank has orally
notified WCI and the Company that it will extend the expiration date of the
credit agreement to February 9, 2000. As of November 12, 1999, WCI, the Company
and the bank are in the process of documenting the extension and related
adjustments in financial covenants.
The Company previously disclosed that on June 10, 1999, it signed a
definitive agreement to sell WCI to Greg Watkins and Daren Barone for $1,300,000
in cash and 125,000 shares of REXX Environmental Corporation common stock.
Messrs. Watkins and Barone sold WCI to REXX Environmental Corporation in October
1997. The sale of WCI under the definitive agreement to Messrs. Watkins and
Barone is subject to the approval of the shareholders of REXX Environmental
Corporation. Based on preliminary estimates, if the shareholders approve the
transaction and it closes, the Company will record a loss on the sale of Watkins
Contracting, Inc. of approximately $3,100,000 which represents the difference
between the price that it will receive and the combined value of WCI's net book
value and goodwill that is recorded on REXX Environmental Corporation's books.
This preliminary estimate is subject to further review and valuations at the
time the transaction closes.
Page 10
<PAGE>
The Company is in the late stages of documenting a transaction with a
financial services firm. The transaction would result in a business combination
of the Company and this entity. If the business combination is approved by the
Company's directors and shareholders and it closes, the Company's shareholders
will incur substantial dilution of their equity position.
There is no assurance that profitable operations in the future will
materialize or that the sale of Watkins Contracting, Inc. will take place.
Further, there is no assurance that the Company and the financial services firm
will agree to or will consummate a business combination.
In the event the Company does not sell WCI, it will face certain constraints
based upon its working capital requirements and WCI's credit agreement with
Wells Fargo. These constraints will result in continuing the suspension of the
Company's external growth efforts in its environmental and demolition business,
as well as a further reevaluation of the mix of projects WCI bids, contracts for
and performs in the future. In order to exercise greater control over field
expenses and projects, particularly those involving demolition, management
anticipates that WCI will continue to seek less work outside of its primary San
Diego County geographic area. In addition, projects which utilize equipment
owned by WCI rather than third party rentals will be more attractive to WCI in
the bidding process. However, based upon the resetting of the financial
covenants in the credit agreement, it is likely that WCI will not be able to
increase its revenues significantly in 2000 as a result of working capital
constraints.
Effective March 1, 1999, and as a condition to the continued lending by
Wells Fargo Bank to WCI under the credit agreement, WCI and the Company agreed
that no funds would be transferred from WCI to the Company until further
agreement with Wells Fargo Bank. As a result, in order to meet its working
capital needs at the corporate level, the Company has negotiated a line of
credit with Republic National Bank of New York. This line of credit currently
provides for up to $250,000 in borrowings, secured by REXX's assets. This line
of credit is evidenced by a demand grid note in the maximum amount of $250,000.
Republic Bank had indicated to the Company's management that it does not intend
to demand payment on the note prior to January 31, 2000. The Company's
borrowings under this line of credit have been guaranteed by its Chairman of the
Board, Arthur L. Asch. Mr. Asch is not being compensated by the Company for
providing the guarantee. The Company's management believes that, if the
shareholders approve the transaction, and the sale closes, this line of credit
will be sufficient to provide the Company with the necessary working capital to
meet its needs through the completion of the WCI transaction. However, there is
no assurance that the line of credit will, in fact, be sufficient to provide for
the Company's corporate level working capital needs until the completion of the
WCI transaction, repayment of all or a portion of the Company's borrowings under
this line of credit will not be demanded prior to January 31, 2000, that
Republic National Bank will extend this line of credit beyond January 31, 2000,
if requested by the Company, or that Mr. Arthur L. Asch will continue to provide
his guarantee beyond January 31, 2000. The discontinuance of this line of
credit, by any action of Republic National Bank, as a result of Mr. Asch's
failure to continue to provide his guarantee beyond January 31, 2000 or
otherwise, could have a material adverse effect on the Company.
Page 11
<PAGE>
Year 2000 Compliance:
Internal
The Company uses a number of computer software programs, operating systems
and equipment with computer processing chips in its internal operations,
including in its financial business systems and administrative functions. To the
extent that the programs, operating systems and equipment contain source code or
computer chips that are unable to interpret appropriately the upcoming calendar
year 2000, some level of modifications or replacement will be necessary.
The Company has hired consultants and purchased diagnostic software for the
purpose of evaluating critical software, operating systems and equipment for
year 2000 compliance. The Company has completed the inventory/assessment phase
of its evaluation, with some needed remediation taking place. The cost of such
remediation has not been materially different from expenses the Company would
have incurred in the ordinary course of computer and software upkeep and
replacement for obsolescence. The Company has been notified by the vendor of its
financial and payroll software that such software is year 2000 compliant.
Nevertheless, this software and all other hardware and software utilized in
operations was analyzed and tested for compliance. The consultants and
diagnostic software indicate that the Company's systems are currently year 2000
compliant.
From fiscal 1995 through the present, the Company, in its normal course of
business, replaced substantially all of its business systems hardware and
software. To date, expenses associated with year 2000 compliance have been
minimal. The costs necessary to modify or replace any hardware or software which
is found to be non-compliant, or the interruption of administrative or service
processes relating from compliance failure, are not expected to have a material
adverse effect on the Company's business and financial condition or its results
of operations.
External
There can be no assurance that the Company's customers and suppliers are,
or will be, year 2000 compliant. The Company believes the most reasonably likely
result of the failure of key customers to achieve year 2000 compliance would be
the delay of projects and the delay in the collection of accounts receivable
from such customers for an indeterminate period of time. Currently, the Company
is not aware of any customers that are not year 2000 compliant. In order to
address the potential non-compliance with the year 2000 by the Company's
customers and suppliers, the Company is in the process of preparing, sending to
and retrieving from its customers and vendors, questionnaires regarding their
year 2000 plans. Until this process is substantially complete, the Company will
not be in a position to fully assess its year 2000 risks. The Company expects to
complete this process in the fourth quarter of 1999 and is developing a response
program for the possible worst-case scenario, which may include the possible
replacement of non- compliant customers or vendors, and which will be complete
in the fourth quarter of 1999.
Results of operations:
Revenues, which consisted of WCI's contract revenues, were $4,205,000 and
$12,357,000 in the third quarter and nine months ended September 30, 1999,
Page 12
<PAGE>
respectively, compared to $3,285,000 and $10,859,000 in the comparable periods
of 1998. The increase in both periods was mainly due to larger demolition jobs
which were continuing throughout the third quarter and nine months ended
September 30, 1999. These jobs were larger in revenue but lower in gross margins
than jobs completed in the comparable periods of 1998, when the revenue mix
included a greater percentage of abatement projects.
Gross profit in the third quarter ended September 30, 1999 amounted to
$831,000 compared to $1,169,000 in the third quarter of 1998. Gross profit in
the nine months ended September 30, 1999 amounted to $2,444,000 compared to
$3,579,000 in the same period of 1998. The decreases of $338,000 in the third
quarter and $1,135,000 in the nine month period are due to substantially lower
margins, which more than overcame higher revenues, caused primarily by (i) a
larger percentage of revenues being generated from lower margin demolition
activities compared to revenues from abatement activities and (ii) the continued
work on several low margin demolition projects.
General and administrative expenses declined in the third quarter and nine
months ended September 30, 1999 to $807,000 and $2,583,000, respectively, from
$987,000 and $2,939,000, respectively, in the comparable periods in 1998. The
decrease was achieved primarily at the corporate level as a result of lower
compensation expense.
Interest expense-net increased to $71,000 and $200,000 in the third quarter
and nine months ended September 30, 1999 from $38,000 and $69,000 in the
comparable periods of 1998. The increases were primarily due to WCI's
significantly higher borrowing levels from its bank and equipment finance
companies during the third quarter and first nine months of 1999 compared to the
comparable periods of 1998.
Amortization of goodwill remained constant in the third quarter and first
nine months of 1999 compared to 1998 as the Company is utilizing straight line
amortization.
Provision for income taxes fell to $0 and $9,000 in the third quarter and
nine months ended September 30, 1999 from $11,000 and $54,000 in the prior year
periods. The 1999 and 1998 provisions represent state and local franchise taxes.
The 1998 provisions also include California state taxes with respect to income
in the second quarter and first half of 1998. In both periods, the Company
recorded no provision for federal income taxes as the Company utilized a net
operating loss carryforward in 1998 and recorded an operating loss in the third
quarter and first nine months of 1999.
Forward looking information:
From time to time, the Company or its representatives may have made or may
make forward-looking statements, orally or in writing. Such forward- looking
statements may be included in, but not limited to, press releases, oral
statements made by or with the approval of an authorized executive officer, or
in this report or other filings made by the Company with the Securities and
Exchange Commission. The words or phrases "trend," "expectation," "plans to,"
"preparing to," "will be," "will require," "may," "likely result," "expected,"
"anticipated," "estimated," "projected," "potential," "opportunity," "planned,"
or similar expressions are intended to identify "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. The
Company wishes to ensure that such statements are accompanied by meaningful
cautionary statements, so as to maximize to the fullest extent possible the
Page 13
<PAGE>
protections of the safe harbor established in the said Act. Accordingly, such
statements are qualified in their entirety by reference to and are accompanied
by the following discussion of certain important factors that could cause actual
results to differ materially from such forward-looking statements.
Investors should also be aware of factors that could have an impact on the
Company's business or financial position or performance. These include
intensified competition and its impact on revenues and profit margins, changes
in competitors business strategies, availability of qualified labor to meet the
Company's needs, ability to retain current labor, adverse changes in national
and local economic conditions, adjustments in fiscal funding levels for
government entities, timing of large contracts, increasingly stringent
requirements for compliance with government regulations, the availability of
capital under WCI's credit agreement, future borrowing limits and interest rates
under the credit agreement, WCI and the Company's potential continued reliance
upon waivers of noncompliance from Wells Fargo, risks associated with the
potential unavailability of working capital after February 9, 2000, when WCI's
credit agreement (as orally extended) expires, success of actions taken to
improve gross margins and reduce operating expenses, risks associated with the
potential sale of WCI, including the failure to obtain shareholder approval
on a timely basis for the Board approved sale, the Company's potential inability
to sell WCI, risks associated with potential business combinations, the
Company's potential inability to complete a business combination, the impact of
shareholder dilution, potentially lower revenues in 2000, failure of the Company
to become fully year 2000 compliant, failure of key customers to become fully
year 2000 compliant and the effect it might have on the Company's ability to
collect its accounts receivable in a timely fashion or obtain supplies from its
vendors, and other factors detailed from time to time in the Company's
Securities and Exchange Commission filings or other readily available or
generally disseminated writings. The risks identified here are not all
inclusive. Reference is also made to other parts of this report and to the
Company's Form 10-K for its year ended December 31, 1998 that include additional
information concerning factors that could adversely impact the Company's
business or financial position or performance. Moreover, the Company operates in
a changing and very competitive business environment. New risks may emerge from
time to time, and it is not possible for management to predict all risk factors,
nor can it necessarily identify or assess the impact of all such factors on the
Company or the extent to which any factor or combination of factors may cause
actual results to differ materially from those contained in any forward-looking
statement. Accordingly, forward- looking statements should not be relied upon as
a prediction of actual results.
Page 14
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following document is filed as part of this report:
Exhibit no. 27 - Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter
ended September 30, 1999.
Page 15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REXX ENVIRONMENTAL CORPORATION
(Registrant)
Date: November 12, 1999 By: /s/ Arthur L. Asch
----------------------------------------
Arthur L. Asch, Chairman of the Board
Date: November 12, 1999 By: /s/ Michael A. Asch
----------------------------------------
Michael A. Asch, President and Treasurer
Page 16
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 172
<SECURITIES> 0
<RECEIVABLES> 3,694
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,485
<PP&E> 1,424
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,687
<CURRENT-LIABILITIES> 4,791
<BONDS> 657
0
0
<COMMON> 105
<OTHER-SE> 4,131
<TOTAL-LIABILITY-AND-EQUITY> 9,687
<SALES> 12,357
<TOTAL-REVENUES> 12,357
<CGS> 9,913
<TOTAL-COSTS> 12,496
<OTHER-EXPENSES> 59
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 200
<INCOME-PRETAX> (398)
<INCOME-TAX> 9
<INCOME-CONTINUING> (407)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 407
<EPS-BASIC> (.16)
<EPS-DILUTED> (.16)
</TABLE>
