UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission File Number 0-631
WEBFINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 56-2043000
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 East 52nd Street, 21st Floor
New York, New York
10022
(Address and zip code of principal executive offices)
877-431-2942
(Registrant's telephone number, including area code)
Indicate by check mark 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 ( )
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes (X) No ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
CLASS OUTSTANDING AT NOVEMBER 8, 1999
Common Stock, par value $.001 4,430,964 Shares
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q INDEX
PAGE
PART I--FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets
as of September 30, 1999 and December 31, 1998 3
Condensed Consolidated Statements of Operations
for the three months ended September 30, 1999 and
the thirteen weeks ended October 31, 1998 4
Condensed Consolidated Statements of Operations
for the nine months ended September 30, 1999 and
the thirty-nine weeks ended October 31, 1998 5
Condensed Consolidated Statements of Cash Flow
for the nine months ended September 30, 1999 and
the thirty-nine weeks ended October 31, 1998 6
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
PART II--OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
Exhibits Index 19
Exhibit 11 20
<PAGE>
PART I--FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
(Amounts in thousands except per share amounts)
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------------------
<S> <C> <C>
Assets:
Cash and cash equivalents .............................. $ 7,142 $ 8,681
Cash restricted in escrow .............................. 331 2,018
Investment securities available for sale ............... 1,236 2,081
Investment securities held to maturity ................. 38 --
Prepaid expenses ....................................... 73 33
Commercial loans, net of allowance for loan
losses of $144 and $0 ............................... 9,829 1,081
Accrued interest receivable ............................ 92 41
Property and equipment, net ............................ 87 116
Other assets ........................................... 416 196
Goodwill, net of accumulated amortization
of $138 and $41 ..................................... 1,636 1,733
-------- --------
$ 20,880 $ 15,980
======== ========
Liabilities:
Demand deposits ........................................ $ 250 $ 105
Time deposits .......................................... 5,436 --
Accounts payable and accrued expenses .................. 394 326
Income taxes payable to subsidiary's former parent ..... 310 309
-------- --------
Total liabilities before minority interests ................ 6,390 740
Minority interests ......................................... 483 553
Stockholders' Equity:
Preferred stock, authorized 10,000
shares; none issued .................................. -- --
Common stock, authorized 50,000 shares;
$.001 par value; issued 4,431 & 4,310,
at 9/30/99 & 12/31/98, respectively .................. 4 4
Paid-in capital ....................................... 36,903 36,155
Deferred compensation ................................. (65) --
Accumulated deficit ................................... (22,835) (21,472)
-------- --------
Total stockholders' equity ................................. 14,007 14,687
-------- --------
$ 20,880 $ 15,980
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the Three For the Thirteen
Months Ended Weeks Ended
September 30, October 31,
1999 1998
------------------------
<S> <C> <C>
Interest and fees on commercial loans .................... $ 167 $ --
Interest on cash and cash equivalents .................... 135 162
Interest on investment securities available for sale ..... 50 --
------- -------
Total interest income ............................ 352 162
Interest expense ......................................... 67 --
------- -------
Net interest income before loan loss provision ... 285 162
Loan loss provision ...................................... 88 --
------- -------
Net interest income after loan loss provision .... 197 162
Operating income:
Gain on sale of commercial loans ..................... 67 --
Loan servicing income ................................ 131 --
Other income ......................................... 136 --
------- -------
Total operating income ........................... 334 --
Operating expenses:
Salaries ............................................. 382 --
Occupancy ............................................ 47 --
Goodwill amortization ................................ 32 --
Selling, general and administrative .................. 481 297
------- -------
Total operating expenses ......................... 942 297
Loss before minority interests ................... (411) (135)
------- -------
Loss attributable to minority interests .................. 21 27
------- -------
Net loss ......................................... $ (390) $ (108)
======= =======
Basic and diluted net loss per share ..................... $ (.09) $ (.02)
Weighted average number of common shares and
common share equivalents, basic and diluted ............ 4,432 4,328
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the Nine For the Thirty-nine
Months Ended Weeks Ended
September 30, October 31,
1999 1998
-----------------------
<S> <C> <C>
Interest and fees on commercial loans ..................... $ 265 $ --
Interest on cash and cash equivalents ..................... 381 555
Interest on investment securities available for sale ...... 130 --
------- -------
Total interest income ............................. 776 555
Interest expense .......................................... 116 --
------- -------
Net interest income before loan loss provision..... 660 555
Loan loss provision ....................................... 144 --
------- -------
Net interest income after loan loss provision...... 516 555
Operating income:
Gain on sale of commercial loan ....................... 303 --
Loan servicing income ................................. 131 --
Other income .......................................... 260 --
------- -------
Total operating income ............................ 694 --
Operating expenses:
Salaries .............................................. 1,185 --
Occupancy ............................................. 148 --
Goodwill amortization ................................. 97 --
Selling, general and administrative ................... 1,243 841
------- -------
Total operating expenses .......................... 2,673 841
Loss before minority interests ............................ (1,463) (286)
------- -------
Loss attributable to minority interests ................... 100 27
-------
Net loss ......................................... $ (1,363) $ (259)
======== =======
Basic and diluted net loss per share ...................... $ (.31) $ (.06)
Weighted average number of common shares and
common share equivalents, basic and diluted ............. 4,381 4,328
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
For the Nine For the Thirty-nine
Months Ended Weeks Ended
September 30, October 31,
1999 1998
-------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ................................................... $ (1,363) $ (259)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Minority interest ........................................ (100) (27)
Depreciation and amortization ............................ 46 9
Loan loss provision ...................................... 144 --
Amortization of loan premiums ............................ 18 12
Amortization of goodwill ................................. 97 18
Amortization of premiums for available-for-sale securities -- 10
Amortization of premiums for held-to-maturity securities . 1 --
Amortization of deferred gains on sale of loans .......... (6) --
Amortization of servicing assets ......................... 2 --
Amortization of deferred compensation on stock options ... 61 --
Common stock granted in lieu of cash ..................... 23 --
Gain on sale of commercial loans ......................... (303) --
Net changes in:
Cash restricted in escrow .............................. 1,687 --
Prepaid expenses ....................................... (40) (22)
Accrued interest receivable ............................ (51) (8)
Other assets ........................................... (100) (152)
Accounts payable and accrued expenses .................. 68 19
-------- --------
Net cash provided by (used in) operating activities .. 184 (400)
-------- --------
Cash flows from investing activities:
Purchase of subsidiary ..................................... -- (2,848)
Principal payments received on available-for-sale securities 1,050 --
Purchase of available-for-sale securities .................. (205) --
Payments on held-to-maturity securities .................... 10 --
Purchase of held-to-maturity securities .................... (49) --
Purchase of property, plant and equipment .................. (17) (26)
Principal payments received on loans ....................... 62 --
Funding and purchases of commercial loans .................. (16,372) --
Proceeds on sale of commercial loans ....................... 7,554
Deferred loan origination fees ............................. 155 --
Servicing asset on sale of commercial loans ................ (122) --
-------- --------
Net cash used in investing activities ................ (7,934) (2874)
-------- --------
</TABLE>
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (CONT'D)
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Cash flows from financing activities:
Demand deposits ............................................ 145 --
Net increase in time deposits .............................. 5,436 --
Minority interest .......................................... 30 611
Stock options exercised .................................... 416 --
Contribution of capital .................................... 184 --
-------- --------
Net cash provided by financing activities ............ 6,211 611
-------- --------
Net decrease in cash and cash equivalents .................... (1,539) (2,663)
Cash and cash equivalents at beginning of period ............. 8,681 15,385
-------- --------
Cash and cash equivalents at end of period ................... $ 7,142 $ 12,722
======== ========
Supplemental disclosure of additional cash activities:
Cash paid for interest ..................................... $ 101 $ --
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except per share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation--The accompanying interim condensed consolidated
financial statements of WebFinancial Corporation (formerly Rose's Holdings, Inc.
and subsidiaries) (the "Company") are unaudited and have been prepared in
conformity with the requirements of Regulations S-X promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), particularly
Rule 10-01 thereof, which governs the presentation of interim financial
statements. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The accompanying interim condensed consolidated financial
statements should be read in conjunction with the Company's significant
accounting policies as set forth in Note 1 to the consolidated financial
statements in the 1998 Annual Report on Form 10-K.
In the opinion of management, all adjustments are comprised of normal
recurring accruals necessary for the fair presentation of the interim financial
statements. Operating results for the three and nine months ended September 30,
1999 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1999.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. ORGANIZATION AND RELATIONSHIPS
The Company was incorporated in August 1997. In December 1997, the Company
consummated the sale of all the outstanding capital stock of Rose's Stores, Inc.
("Stores"), then the Company's only operating subsidiary, to Variety
Wholesalers, Inc. ("Variety"). Currently, the Company owns 100% of WebFinancial
Holding Corporation (an intermediary holding company), which owns 90% of WebBank
Corporation ("WebBank"), a Utah-chartered industrial loan corporation, 90% of
Praxis Investment Advisors, Inc. ("Praxis"), a California-based company that
operates primarily as an investment advisor, providing research and development
of financial products, 100% of Web Financial Government Lending, Inc.
("Lending"), a specialty lending company designed to compliment and support the
government lending activities of WebBank, and 100% of Web Film Finance, Inc., a
specialty company which was formed to focus on investment grade financial
products serving the film production and distribution industry.
The Company is a party to a management agreement with Praxis and Andrew
Winokur, the owner of the remaining 10% interests in WebBank and Praxis, under
which Praxis has agreed to provide management services to the Company in
connection with its interest in WebBank. Mr. Winokur serves as the president and
chief executive officer of Praxis pursuant to an employment agreement.
3. COMPREHENSIVE INCOME (LOSS)
The Company adopted Statement of Financial Accounting Standards No. 130
("SFAS 130"), "Reporting Comprehensive Income," effective January 1, 1998. SFAS
130 establishes standards for reporting and display of comprehensive income and
its components in financial statements. For the periods ended September 30, 1999
and October 31, 1998 comprehensive loss was equal to the net loss as presented
in the accompanying statements of operations.
4. LOSS PER COMMON SHARE
Loss per common share was the same for both the basic and diluted
calculations. Common stock equivalents (stock options and warrants) of
approximately 2,585,000 shares outstanding during the three and nine month
period ended September 30, 1999 and 2,547,000 shares outstanding during the
thirteen and thirty-nine weeks ended October 31, 1998 that could potentially
dilute basic earnings per share in the future were not included in the
computation of diluted earnings per share because to do so would have been
anti-dilutive for the periods presented.
5. OPERATING SEGMENT
The Company is engaged in the banking and specialty finance business and in
its current state considers its operations to be a single reporting segment.
Financial results of this reportable segment are presented in the accompanying
financial statements.
6. CONTINGENCIES
As a result of the sale of Stores to Variety, the Company was relieved of
liability for claims against Stores except to the extent of its indemnification
obligation with respect to certain claims. On March 2, 1999 all claims were
settled and the balance of the escrowed amount of $2,041 was disbursed to the
Company. In the opinion of management and counsel, all contingencies are either
adequately covered by insurance or are without merit.
On January 20, 1999 an escrow account in the amount of $331 was established
to provide funds to buy back shares from holders of less than 250 shares. To
date no shares have been bought.
7. DEPOSITS
Deposits are summarized as follows (in thousands):
September 30, 1999 December 31, 1998
------------------ -----------------
Weighted Weighted
Average Average
Interest Carrying Interest Carrying
Rate Value Rate Value
-------- -------- -------- --------
Non-interest bearing-demand 0.00% $ 250 0.00% $ 105
Interest-bearing time
certificates of deposit 4.44% 5,436 --
-------- --------
$ 5,686 $ 105
======== ========
Aggregate amounts of accounts over $100,000 were $1,901 and $0 at September 30,
1999 and December 31, 1998, respectively. The table below sets forth the range
of stated interest rates at September 30, 1999:
Interest-bearing-time certificates of deposit 2.50% - 5.65%
At September 30, 1999, certificates by maturity are as follows:
Maturities within three months $ 3,936
Over three months to one year 1,500
---------
$ 5,436
=========
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion should be read in conjunction with the interim
condensed consolidated financial statements of the Company and the Notes
thereto.
OVERVIEW
Business Description WebFinancial Corporation, formerly Rose's Holdings,
Inc., (the "Company") is a holding company headquartered in New York, NY. As of
September 30, 1999, the Company holds $7,142,000 in cash, has no long term debt,
and owns 100% of WebFinancial Holding Corporation ("Holding"), an intermediary
holding company, which owns 90% of WebBank Corporation ("WebBank"), 90% Praxis
Investment Advisors, Inc. ("Praxis"), 100% of Web Financial Government Lending
Corporation ("Lending"), and 100% of Web Film Financial, Inc. ("Film"). Andrew
Winokur is President and CEO of Holding and owns the other 10% of WebBank and
Praxis.
WebBank, located in Park City, Utah, is a Utah chartered Industrial Loan
Corporation ("ILC") regulated by the Federal Deposit Insurance Corporation
("FDIC") and Utah Department of Financial Institutions and has recently become a
member of the Seattle Federal Home Loan Bank Board. The ILC charter has the
ability to attract FDIC insured deposits (but not demand deposits if total
assets are greater than $100 million), underwrite insurance, and export Utah's
favorable interest rates and terms to 48 of the other states. At present,
WebBank has one office and has no plan to open any other offices. Due to the
benefits and powers of the Utah ILC charter, WebBank is uniquely positioned to
develop loan products and provide other banking services that could be
distributed throughout the United States. WebBank was purchased in August 1998
from H & R Block.
WebBank's business plan contains three facets: Portfolio Income,
Origination of USDA B&I loans and SBA loans (as defined below), and Sourcing
Partnerships.
Portfolio Income--WebBank is acquiring assets for its portfolio, which will
include loans funded under U.S. Government credit enhancement programs such
as USDA Rural Development Business and Industry Loans ("USDA B&I"), Small
Business Administration loans ("SBA"), and investment grade securities.
Deposits accessed from strategic partners, and certificates of deposit
("CD's") acquired through a brokered CD program fund the purchases of these
assets. At present, WebBank has about $11.6 million of assets and $5.6
million dollars of deposits, and believes it will be able to grow its asset
base to $40 million without any additional equity.
Origination of USDA B&I loans and SBA loans--These loan programs are
sponsored by U.S. Government agencies that encourage lending to small
businesses by guaranteeing a portion of the loan (up to 90%) and has the
full faith and credit guarantee of the United States Government. In fiscal
year 1999, the USDA B&I loan guarantee program has the authority to
guarantee up to $1 billion dollars, and since 1994 this program has
guaranteed about $3.5 billion dollars of B & I loans. Generally, USDA B&I
loans tend to be for amounts less than $10 million, and WebBank has been
able to structure these loans with prepayment penalties, adjustable rates,
and other features to enhance the safety and marketability of the loans. To
date, WebBank has funded $10.4 million of these loans, and has signed
commitment letters for about $4.4 million of additional loans of which it
expects to close all $4.4 million in the next 3 months. In general, the
company will sell the guaranteed portions of the loans while retaining the
unguaranteed portions and servicing rights to the loans.
Sourcing Partnerships--Sourcing Partnerships are joint ventures in which
WebBank works with certain specialty loan originators. WebBank's Utah
Industrial Loan Charter allows the originator greater flexibility regarding
loan structure, terms and/or conditions. In general, WebBank and its
Sourcing Partner ("Partner") will jointly agree on underwriting criteria.
The Partner will agree contractually to purchase loans WebBank originates
under the program and to directly reimburse WebBank for any and all costs
of origination, including legal, compliance, management oversight, and
audit costs. WebBank's Partners will contribute marketing, sales, in-depth
industry knowledge and an origination network. WebBank will approve the
credit and establish underwriting standards and originate qualifying loans
presented by the Partners. WebBank may resell the specialized loan to the
Partner, thereby minimizing portfolio and credit risk and securing an
attractive fee. WebBank believes these arrangements can generate consistent
fee based income streams without any significant risks to WebBank or
depositors and with minimal incremental expense to WebBank (since all
expenses will be reimbursed). Additionally, the Partners will place a
deposit in WebBank in excess of the daily production of their loan program,
with WebBank's right to offset any losses against these deposits. At
present, WebBank has three Sourcing Partnerships that are producing loans:
Peachtree Settlement Funding located in Atlanta, Georgia, is in the
structured settlement and lottery refinance business; CheckStop, located in
Salt Lake City, Utah, is in the single payment loan business; and, First
Cash Financial Services located Arlington, Texas is a loan sourcer and
servicer. WebBank is currently negotiating with other specialty loan and
credit card issuers.
Praxis Investment Advisors--Praxis is headquartered in St. Helena,
California, and has an office in Washington, D.C. Praxis is a developer of
specialty financing products and programs. The first program is with Greenwich
NatWest. Praxis is currently identifying the guaranteed portions of USDA loans
through a program that is funded by Greenwich. Upon reaching critical mass the
program envisions securitizing these loans. Praxis is receiving fee income from
Greenwich for procuring and managing these loans, and upon securitization will
receive an additional fee as well as 50% of the profits net of the cost of
financing the program. Since this program began in April 1999, it has acquired
$47 million of these assets with another $7 million committed to settle in early
January. With about $3.5 billion of these loans in the marketplace and another
$1 billion being created in 2000, Praxis believes its goal of $100 million per
year is achievable.
Web Financial Government Lending, Inc.--In late June 1999, the Company
funded Lending to compliment and support the government lending activities of
WebBank.
Web Film Finance, Inc.--In September 1999 for the purpose of focusing on
investment grade financial products serving the film production and distribution
industry, Lending and the Company funded Film.
On December 31, 1998, the Company had net operating loss carryforwards of
approximately $37 million that are scheduled to expire during the years ending
2010 through 2018. The Company has treated net operating losses incurred prior
to April 28, 1995 (the "Effective Date").in accordance with Section 382(l)(5) of
the Internal Revenue Code. As a result, there is approximately $27 million in
net operating losses incurred prior to the Effective Date as well as $10 million
incurred subsequent to the Effective Date available as carryovers. At the June
26, 1997 annual meeting the Company's shareholders approved an amendment to the
Corporation's Certificate of Incorporation to prohibit purchases of more than 5%
of the Company's shares. The purpose of this limitation is to help assure that
the consolidated corporation's substantial tax benefits (in the form of net
operating loss carry-forwards) will continue to be available to offset future
taxable income.
RESULTS OF OPERATIONS
Revenue--The Company reported net interest income after loan loss provision
for the three and nine months ended September 30, 1999 of $197,000 and $516,000,
respectively, primarily as a result of interest earned on investments. Servicing
income and other income totaled $334,000 and $694,000, respectively, for the
three and nine months ended September 30, 1999. The Company had no operating
revenue for the thirteen and thirty-nine weeks ended October 31, 1998 since
operation of WebBank began September 1, 1998. Interest income on cash and cash
equivalents for the thirteen and thirty-nine weeks ended October 31, 1998 was
$162,000 and $555,000, respectively.
Costs and Expenses--Operating expenses totaled $942,000 and $2,673,000,
respectively, for the three and nine months ended September 30, 1999 and
consisted primarily of salary and benefits, facilities rentals, and professional
fees. Operating expenses for the thirteen and thirty-nine weeks ended October
31, 1998 included selling, general, and administrative expenses and totaling
$297,000 and $841,000, respectively. The increase in operating expenses in 1999
reflects the culmination of operating activities resulting from the acquisition
of the Company's subsidiaries.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999 the Company's cash and cash equivalents totaled
approximately $7,142,000. As of December 31, 1998 the Company had cash and cash
equivalents totaling approximately $8,681,000. Cash utilized by WebBank for loan
activity offset by increased time deposits are the major factors affecting the
cash and cash equivalent decrease. . Management believes that the Company's
current cash and cash equivalent balances and expected operating cash flows are
adequate to meet its liquidity needs. The Company continues to actively seek
acquisition transactions. There can be no assurance that the Company will be
able to locate or purchase an additional business, or that any such business,
will be profitable. In order to finance an acquisition, the Company may be
required to incur or assume indebtedness or issue securities.
YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs using a two-digit
format, as opposed to four digits, to indicate the year. Any of the Company's
computer programs or other information systems that have time-sensitive software
or embedded microcontrollers may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations.
During fiscal 1998, the Company completed an initial review of its
information and non- information technology systems. This review included its
existing and planned computer software and hardware. The Company and its
subsidiaries have made initial determinations, based on initial review, that the
costs and/or consequences associated with the Year 2000 issue are not expected
to have a material effect on its business, operations or future financial
condition. A second, more in-depth analysis was also conducted, and included the
testing of information systems. Based on these reviews, the Company presently
believes that the Year 2000 Issue will not pose significant operational problems
for its computer and other information systems. If required, the Company will
utilize both internal and external resources to reprogram, or replace, and test
the software and systems for Year 2000 modifications. If such modifications,
conversions and/or replacements are not made, are not completed timely, or if
any of the Company's suppliers or customers do not successfully deal with the
Year 2000 Issue, the Year 2000 Issue could have a material impact on the
operations of the Company and/or its subsidiaries. The severity of these
possible problems would depend on the nature of the problem and how quickly it
could be corrected or an alternative implemented, which is unknown at this time.
While management has not yet specifically determined the costs associated with
its Year 2000 readiness efforts, monitoring and managing the Year 2000 Issue
will result in additional direct and indirect costs to the Company. Direct costs
include potential charges by third-party software vendors for product
enhancements, costs involved in testing software products for Year 2000
compliance and any resulting costs for developing and implementing contingency
plans for critical software products which are not enhanced. Indirect costs will
principally consist of the time devoted by existing employees in monitoring
software vendor progress, testing enhanced software products and implementing
any necessary contingency plans. Such costs have not been material to date. Both
direct and indirect costs of addressing the Year 2000 Issue will be charged to
earnings as incurred.
After evaluating its internal compliance efforts as well as the compliance
of third parties the Company has developed appropriate contingency plans to
address situations in which various systems of the Company, or of third parties
with which the Company does business, are not year 2000 compliant. Some risks of
the Year 2000 Issue, however, are beyond the control of the Company and its
suppliers and customers. For example, no preparations or contingency plan will
protect the Company from a downturn in economic activity caused by the possible
ripple effect throughout the entire economy caused by the Year 2000 Issue.
FORWARD-LOOKING STATEMENTS
The following important factors, among others, could cause actual results
to differ materially from those indicated by forward-looking statements made in
this Quarterly Report of Form 10-Q and presented elsewhere by management. All
forward-looking statements included in this document are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statements. A number of
uncertainties exist that could affect the Company's future operating results,
including, without limitation, general economic conditions, changes in interest
rates, the company's ability to attract deposits, and the Company's ability to
control costs. Because of these and other factors, past financial performance
should not be considered an indication of future performance. The Company's
future quarterly operating results may vary significantly. Investors should not
use historical trends to anticipate future results and should be aware that the
trading price of the Company's common stock may be subject to wide fluctuations
in response to quarterly variations in operating results and other factors,
including those discussed above.
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company maintains an investment portfolio and participates in
commercial loans. Both of these activities are subject to specific policies that
are focused on preserving principal, maintaining proper liquidity to meet
operating needs, and maximizing yields.
The Company's operations may be subject to a variety of market risks, the
most material of which is the risk of changing interest rates. Most generally,
interest rate risk is the volatility in financial performance attributable to
changes in market interest rates, which may result in either fluctuation of net
interest income or changes to the economic value of the equity of the Company.
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
PART II--OTHER INFORMATION
Item 1. Legal Proceedings.
The registrant is not a party to any material legal proceedings.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information
On July 14, 1999, the Company informed one of its directors that short
swing profits had been generated by his transactions pursuant to Section 16(b)
of the Securities and Exchange Act of 1934, as amended. On August 26, 1999, the
director paid to the Company short swing profits of $189,750 that were generated
by the director's transaction.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
11 Statement Regarding Computation of Net Loss Per Share
27 Financial Data Schedule (filed as part of the electronic
filing only)
(b) Reports on Form 8-K.
None
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
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.
WEBFINANCIAL CORPORATION
By /s/ Warren G. Lichtenstein
Warren G. Lichtenstein
President
By /s/ Jack L. Howard
Jack L. Howard
Vice President
Date: November 15, 1999
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
11 Statement Regarding Computation of Net Loss Per Share
27 Financial Data Schedule (filed as part of the electronic filing only)
<PAGE>
Exhibit 11
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
Statement Regarding Computation of Net Loss Per Share
For the Nine For the Thirty-nine
Months Ended Weeks Ended
September 30, October 31,
1999 1998
---------------------------------
Net loss $ (1,363,000) $ (259,000)
Basic and diluted weighted average
common shares outstanding 4,381,000 4,316,000
Shares used in computation 4,381,000 4,328,000
Net loss per share $ (.31) $ (.06)
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