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 June 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Commission File Number 0-631
WebFinancial Corporation
(formerly ROSE'S HOLDINGS, INC.)
(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 July 22, 1999
Common Stock, par value $.001 4,430,964 Shares
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q INDEX
PART I--FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets
as of June 30,1999 and as of December 31, 1998.................. 3
Condensed Consolidated Statements of Operations
for the three months ended June 30, 1999 and
the thirteen weeks ended August 1, 1998......................... 4
Condensed Consolidated Statements of Operations
for the six months ended June 30, 1999 and
the twenty-six weeks ended August 1, 1998....................... 5
Condensed Consolidated Statements of Cash Flow
for the six months ended June 30, 1999 and
the twenty-six weeks ended August 1, 1998....................... 6
Notes to Condensed Consolidated Financial Statements............ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk...... 13
PART II--OTHER INFORMATION
Item 1. Legal Proceedings............................................... 14
Item 2. Changes in Securities........................................... 14
Item 3. Defaults Upon Senior Securities................................. 14
Item 4. Submission of Matters to a Vote of Security Holders............. 14
Item 5. Other Information............................................... 14
Item 6. Exhibits and Reports on Form 8-K................................ 14
Signatures.............................................................. 16
Exhibits Index.......................................................... 17
Exhibit 11.............................................................. 18
<PAGE>
PAGE 3 OF 19
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 except per share amounts)
(Unaudited)
June 30, December 31,
1999 1999
Assets:
Cash and cash equivalents ...................... $ 10,330 $ 8,681
Cash restricted in escrow ...................... 332 2,018
Investment securities available for sale ....... 1,692 2,081
Investment securities held to maturity ......... 40 --
Prepaid expenses ............................... 43 33
Commercial loans, net of allowance for loan
losses of $56 and $0 ........................ 3,566 1,081
Accrued interest receivable .................... 63 41
Property and equipment, net .................... 90 116
Other assets ................................... 308 196
Goodwill, net of accumulated amortization
of $106 and $41 ............................. 1,668 1,733
-------- --------
$ 18,132 $ 15,980
======== ========
Liabilities:
Demand deposits ................................ $ 100 $ 105
Time deposits .................................. 2,555 --
Accounts payable and accrued expenses .......... 540 326
Income taxes payable to subsidiary's
former parent ............................... 309 309
-------- --------
Total liabilities before minority interests ........ 3,504 740
Minority interests ................................. 474 553
Stockholders' Equity:
Preferred stock, authorized 10,000
shares; none issued .......................... -- --
Common stock, authorized 50,000 shares;
$.001 par value; issued 4,430 & 4,310,
at 6/30/99 & 12/31/98, respectively .......... 4 4
Paid-in capital ............................... 36,595 36,155
Accumulated deficit ............................ (22,445) (21,472)
-------- --------
Total stockholders' equity ......................... 14,154 14,687
-------- --------
$ 18,132 $ 15,980
======== ========
See accompanying notes to condensed consolidated financial statements.
<PAGE>
PAGE 4 OF 19
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
June 30, 1999 August 1, 1998
<S> <C> <C>
Interest and fees on commercial loans .................... $ 61 $ --
Interest on cash and cash equivalents .................... 129 185
Interest on investment securities available for sale ..... 44 --
--------- ---------
Total interest income ............................ 234 185
Interest expense ......................................... 34 --
--------- ---------
Net interest income before loan loss provision ... 200 185
Loan loss provision ...................................... 30 --
--------- ---------
Net interest income after loan loss provision .... 170 185
Operating income:
Gain on sale of commercial loans ..................... 64 --
Other income ......................................... 109
--------- ---------
Total operating income ........................... 173 --
Operating expenses:
Salaries ............................................. 390 --
Occupancy ............................................ 50 --
Goodwill amortization ................................ 33 --
Selling, general and administrative .................. 385 297
--------- ---------
Total operating expenses ......................... 858 297
Loss before minority interests ................... (515) (112)
--------- ---------
Loss attributable to minority interests .................. 36 --
--------- ---------
Net loss ......................................... $ (479) $ (112)
========= =========
Basic and diluted net loss per share ..................... $ (.11) $ (.03)
Weighted average number of common shares and
common share equivalents, basic and diluted ............ 4,408 4,316
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
PAGE 5 OF 19
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the Six For the Twenty-Six
Months Ended Weeks Ended
June 30, 1999 August 1, 1998
<S> <C> <C>
Interest and fees on commercial loans ...................... $ 98 $ --
Interest on cash and cash equivalents ...................... 246 393
Interest on investment securities available for sale ....... 80 --
--------- ----------
Total interest income .............................. 424 393
Interest expense ........................................... 49 --
--------- ----------
Net interest income before loan loss provision ..... 375 393
Loan loss provision ........................................ 56 --
--------- ----------
Net interest income after loan loss provision ...... 319 393
Operating income:
Gain on sale of commercial loan ........................ 236 --
Other income ........................................... 124 --
--------- ----------
Total operating income ............................. 360 --
Operating expenses:
Salaries ............................................... 803 --
Occupancy .............................................. 101 --
Goodwill amortization .................................. 65 --
Selling, general and administrative .................... 762 544
--------- ----------
Total operating expenses ........................... 1,731 544
Loss before minority interests ..................... (1,052) (151)
--------- ----------
Loss attributable to minority interests .................... 79 --
--------- ----------
Net loss ........................................... $ (973) $ (151)
========= ==========
Basic and diluted net loss per share ....................... $ (.22) $ (.04)
Weighted average number of common shares and
common share equivalents, basic and diluted .............. 4,360 4,316
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
PAGE 6 OF 19
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
For the Six For the Twenty-six
Months Ended Weeks Ended
June 30, 1999 August 1, 1998
<S> <C> <C>
Cash flows from operating activities:
Net loss ..................................................... $ (973) $ (151)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Minority interest .......................................... (79) --
Depreciation and amortization .............................. 32 --
Loan loss provision ........................................ 56 --
Amortization of loan premiums .............................. 16 --
Amortization of goodwill ................................... 65 --
Amortization of premiums for available-for-sale securities . 54 --
Amortization of premiums for held-to-maturity securities ... 1 --
Common stock granted in lieu of cash ....................... 23 --
Cash restricted in escrow .................................. 1,686 --
Gain on sale of commercial loans ........................... (236) --
Net changes in:
Prepaid expenses ...................................... (10) --
Accrued interest receivable ........................... (22) --
Other assets .......................................... (112) (223)
Accounts payable and accrued expenses ................. 214 89
-------- --------
Net cash provided by (used in) operating activities.. 715 (285)
Cash flows from investing activities:
Principal payments received on available-for-sale securities 539 --
Purchase of available-for-sale securities .................. (204) --
Purchase of held-to-maturity securities .................... (41) --
Purchase of property, plant and equipment .................. (6) --
Principal payments received on loans ....................... 40 --
Funding and purchases of loans ............................. (6,534) --
Sale of loans .............................................. 4,173
-------- --------
Net cash used in investing activities ............... (2,033) --
Cash flows provided by financing activities-
Net increase in deposits ................................... 2,550 --
Stock options exercised .................................... 417 --
-------- --------
Net cash used in financing activities ............... 2,967 --
Net increase (decrease) in cash and cash equivalents ......... 1,649 (285)
Cash and cash equivalents at beginning of period ............. 8,681 13,465
-------- --------
Cash and cash equivalents at end of period ................... $ 10,330 $ 13,180
======== ========
Supplemental disclosure of additional cash activities:
Cash paid for interest ..................................... $ 13 $ --
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
PAGE 7 OF 19
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months and Six Months Ended June 30, 1999,
Eleven Months Ended December 31, 1998,
and Thirteen and Twenty-six Weeks Ended August 1, 1998
(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 six months ended June 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, and 100% of Web Financial Government Lending, Inc.
("Lending"), a specialty lending company designed to compliment and support the
government lending activities of WebBank and, 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 June 30, 1999 and
August 1, 1998 comprehensive loss was equal to the net loss as presented in the
accompanying statement of operations.
<PAGE>
PAGE 8 OF 19
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 2,552,000 shares outstanding during the three and six month period
ended at June 30, 1999 and 2,547,000 shares outstanding during the thirteen and
twenty-six weeks ended August 1, 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
condensed consolidated 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 $2,018 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 $332 was established
to provide funds to buy back shares from holders of less than 250 shares.
7. DEPOSITS
Deposits are summarized as follows (in thousands):
June 30, 1999 December 31, 1998
----------------------------------------------
Weighted Weighted
Average Average
Interest Carrying Interest Carrying
Rate Value Rate Value
-------- -------- -------- --------
Non-interest bearing-demand 0.00% $ 100 0.00% $ 105
Interest-bearing time
certificates of deposit 4.72% 2,555 --
-------- --------
$ 2,655 $ 105
======== ========
Aggregate amounts of accounts over $100 were $555 at June 30, 1999 and $0
at December 31, 1998, respectively. The table below sets forth the range of
stated interest rates at June 30, 1999:
Interest-bearing-time certificates of deposit 4.25% - 4.85%
At June 30, 1999, certificates by maturity are as follows:
Maturities within three months $ 1,555
Over three months to one year 1,000
--------
$ 2,555
========
<PAGE>
PAGE 9 OF 19
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
June 30, 1999, the Company holds $10,330,000 in cash, has no debt other than the
deposits of its banking subsidiary, 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"), and 100% of Web Financial Government Lending Corporation
("Lending"). 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 $8.7 million of assets and $3.2
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.
Since the Company acquired WebBank in August 1998, WebBank has funded $7.9
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 6 months. In general, the company will sell the guaranteed
portions of the loans while retaining the unguaranteed portions and
servicing rights to the loans.
<PAGE>
PAGE 10 OF 19
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 a 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 two
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. 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 and arranging the acquisition of the
guaranteed portions of USDA loans through a program that will be funded by
Greenwich. Upon reaching critical mass the program envisions securitizing these
loans. Praxis will receive a fee for procuring and monitoring 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 arranged the acquisition of $25 million of these assets and is
arranging the acquisition of about $2 million per week. With about $3.5 billion
of these loans in the marketplace and another $1 billion being created in 1999,
Praxis believes its goal of $100 million per year is achievable.
Web Financial Government Lending, Inc.--In late June the Company funded
Lending. Currently Praxis intends to utilize divisions of Lending for the
purpose of focusing on investment grade financial products serving the film
production and distribution industry; and, to compliment and support the
government lending activities of WebBank.
At December 31, 1998, the Company had net operating loss carryforwards of
approximately $37 million which are scheduled to expire during the years ending
2010 through 2018. The Company has treated net operating losses incurred prior
to the Effective Date (the "Effective Date" was April 28, 1995 and refers to the
Company's Modified and Restated First Amended Joint Plan of Reorganization) 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 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.
<PAGE>
PAGE 11 0F 19
RESULTS OF OPERATIONS
Revenue--The Company reported net interest income after loan loss provision
for the three and six months ended June 30, 1999 of $170,000 and $319,000,
respectively, as a result of earnings and investment income. Income from gain on
sales of commercial loans and fee income totaled $173,000 and $360,000,
respectively, for the three and six months ended June 30, 1999. The Company had
no operating revenue for the thirteen and twenty-six weeks ended August 1, 1998
except for interest income on cash and cash equivalents of $185,000 and
$393,000, respectively.
Costs and Expenses--Operating expenses totaled $858,000 and $1,731,000,
respectively, for the three and six months ended June 30, 1999 and consisted
primarily of salary and benefits, facilities rentals, and professional fees.
Operating expenses for the thirteen and twenty-six weeks ended August 1, 1998
included selling, general, and administrative expenses totaling $297,000 and
$544,000, 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 June 30, 1999 the Company's cash and cash equivalents totaled
approximately $10,330,000. As of December 31, 1998 the Company had cash and cash
equivalents totaling approximately $8,681,000. This increase was due to the
disbursement to the Company on March 2, 1999 of the remaining $2,018,000 placed
in escrow in connection with the sale of the Company's operating subsidiary to
Variety in December 1997 and cash paid into the Company of $417,000 from
exercise of Company stock options during the quarter, less the cash needed by
WebBank for loan activity. 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.
The Company's Year 2000 Issue committee constantly monitors the readiness
of the Year 2000 project using guidance from its regulatory agencies. The
Company's action plan contains five phases: awareness, assessment, renovation,
validation and implementation. To date, the awareness, assessment, renovation,
and validation phases of the action plan have been completed and as a result,
the implementation phase has been initiated by the committee and is currently
considered to be 95% complete. Implementation is expected to be complete by
September 30, 1999. Contingency plans have been developed by the committee and
can be implemented in the unlikely event that the core application providers are
not compliant with Year 2000 issues. The Company has spent $10,000 to date and
expects to spend an additional $2,000.
<PAGE>
PAGE 12 OF 19
YEAR 2000 ISSUES (CONT'D)
After evaluating its internal compliance efforts as well as the compliance
with 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.
CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
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>
PAGE 13 OF 19
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>
PAGE 14 OF 19
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.
The following matters were submitted to a vote at the annual meeting of
stockholders of the Company, held on June 15, 1999.
1. To elect one director, Jack Howard, of the Corporation; (FOR: 3,297,809;
AGAINST: 0; ABSTAINED: 24,743). The Board of Directors of the Company
currently consists of Jack Howard, Warren Lichtenstein, Earle May, Joe
Mullen and James Benenson. All of the current members of the Board of
Directors will serve as directors until the next annual meeting of the
Company, and until their successors are duly elected and shall have
qualified.
2. Proposal to amend the charter to change the name of the Corporation to
WebFinancial Corporation; (FOR: 3,316,785; AGAINST: 1,036; ABSTAINED:
4,731)
3. Ratified the appointment of KPMG LLP, independent accountants, to audit the
financial statements of the Company. (FOR: 3,320,804; AGAINST: 656;
ABSTAINED: 1,092)
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1 Purchase Agreement incorporated by reference to exhibit 1 of the
Company's current report on Form 10-Q for the period ended
August 1, 1998.
10.2 Subscription and Stockholders Agreement incorporated by reference
to exhibit 2 of the Company's current report on Form 10-Q for the
period ended August 1, 1998
10.3 Assignment, Transfer and Delegation Agreement incorporated by
reference to exhibit 3 of the Company's Current Report on Form 10-Q
for the period ended August 1, 1998
10.4 Employment Agreement incorporated by reference to exhibit 4 of the
Company's Current Report on Form 10-Q for the period ended
August 1, 1998
<PAGE>
PAGE 15 OF 19
10.5 Management Agreement incorporated by reference to exhibit 1 of the
Company's Current Report on Form 10-Q for the period ended
August 1, 1998
23.1 Consent of Deloitte & Touche, LLP, Independent Auditors.
incorporated by reference to exhibit of the Company's Current
Report on Form 8-K for the period ended August 1, 1998
23.2 Consent of KPMG LLP, Independent Auditors incorporated by reference
to exhibit of the Company's Current Report on Form 10-K for the
period ended December 31, 1998
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>
PAGE 16 OF 19
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: August 16, 1999
<PAGE>
PAGE 17 OF 19
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
10.1 Purchase Agreement incorporated by reference to exhibit 1 of the
Company's current report on form 10-Q for the period ended
August 1, 1998.
10.2 Subscription and Stockholders Agreement incorporated by reference to
exhibit 2 of the Company's current report on form 10-Q for the period
ended August 1, 1998
10.3 Assignment, Transfer and Delegation Agreement incorporated by reference
to exhibit 3 of the Company's Current Report on Form 10-Q for the period
ended August 1, 1998
10.4 Employment Agreement incorporated by reference to exhibit 4 of the
Company's Current Report on Form 10-Q for the period ended August 1, 1998
10.5 Management Agreement incorporated by reference to exhibit 1 of the
Company's Current Report on Form 10-Q for the period ended August 1, 1998
23.1 Consent of Deloitte & Touche, LLP, Independent Auditors. incorporated by
reference to exhibit of the Company's Current Report on Form 8-K for the
period ended August 1, 1998
23.2 Consent of KPMG LLP, Independent Auditors incorporated by reference to
exhibit of the Company's Current Report on Form 10-K for the period ended
December 31, 1998
11 Statement Regarding Computation of Net Loss Per Share
27 Financial Data Schedule (filed as part of the electronic filing only)
<PAGE>
PAGE 18 OF 19
Exhibit 11
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
Statement Regarding Computation of Net Loss Per Share
For the Six For the Twenty-Six
Months Ended Weeks Ended
June 30, 1999 August 1, 1998
Net loss $ (973,000) $ (151,000)
Basic and diluted weighted average
common shares outstanding *4,359,767 *4,316,000
----------- ------------
Shares used in computation 4,359,767 4,316,000
=========== ============
Net loss per share $ (.22) $ (.04)
*Common stock equivalents (stock options and warrants) of approximately
2,552,000 shares outstanding during the six month period ended at June 30, 1999
and 2,547,000 shares outstanding during the twenty-six weeks ended August 1,
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.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
PAGE 19 OF 19
<ARTICLE> 5
<CIK> 0000085149
<NAME> WebFinancial Corporation
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> JUN-30-1999
<CASH> 10,330
<SECURITIES> 1,732
<RECEIVABLES> 63
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,632
<PP&E> 243
<DEPRECIATION> 153
<TOTAL-ASSETS> 18,132
<CURRENT-LIABILITIES> 3,504
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 14,624
<TOTAL-LIABILITY-AND-EQUITY> 18,132
<SALES> 0
<TOTAL-REVENUES> 799
<CGS> 0
<TOTAL-COSTS> 1,731
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 56
<INTEREST-EXPENSE> 49
<INCOME-PRETAX> (973)
<INCOME-TAX> 0
<INCOME-CONTINUING> (973)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (973)
<EPS-BASIC> (.22)
<EPS-DILUTED> (.22)
</TABLE>
