-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RDc5TzfV6EiriAK69lle/2GQdYsZKLK58guGsI0+I6NtUmaktLgFWuJh5lesBDdS mFmyXNQXx0lZMPrJcASWbQ== /in/edgar/work/20000815/0000950116-00-002010/0000950116-00-002010.txt : 20000922 0000950116-00-002010.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950116-00-002010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000815 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REXX ENVIRONMENTAL CORP CENTRAL INDEX KEY: 0000012203 STANDARD INDUSTRIAL CLASSIFICATION: [4955 ] IRS NUMBER: 132625545 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14121 FILM NUMBER: 702307 BUSINESS ADDRESS: STREET 1: 350 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2127507755 MAIL ADDRESS: STREET 1: 1411 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10018 FORMER COMPANY: FORMER CONFORMED NAME: OAKHILL SPORTSWEAR CORP /NY/ DATE OF NAME CHANGE: 19940131 FORMER COMPANY: FORMER CONFORMED NAME: BIO MEDICAL SCIENCES INC DATE OF NAME CHANGE: 19830725 FORMER COMPANY: FORMER CONFORMED NAME: COMPUTRONIC SCIENCES INC DATE OF NAME CHANGE: 19690415 10-Q 1 0001.txt QUARTERLY REPORT 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 June 30, 2000 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) 445 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 August 15, 2000, the registrant had 2,467,576 shares of common stock outstanding. Page 1 REXX ENVIRONMENTAL CORPORATION INDEX PART I - Financial Information PAGE Unaudited financial statements: Consolidated balance sheets - June 30, 2000 and December 31, 1999 3 Consolidated statements of operations - three months ended June 30, 2000 and 1999 4 Consolidated statements of operations - six months ended June 30, 2000 and 1999 5 Consolidated statements of cash flows - six months ended June 30, 2000 and 1999 6 Notes to consolidated financial statements 7 Management's discussion and analysis of financial condition and results of operations 8-11 PART II - Other Information Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13 Page 2 REXX ENVIRONMENTAL CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands except share amounts) (Unaudited)
June 30, December 31, 2000 1999 -------- ------------ Assets Current assets: Cash and cash equivalents $ 646 $ 85 Accounts receivable - net 3,376 2,629 Costs in excess of billings 781 831 Assets held for sale 780 780 Other current assets 218 194 -------- -------- Total current assets 5,801 4,519 Property and equipment, net 1,722 1,378 Goodwill 2,597 2,703 Other assets 35 17 -------- -------- $ 10,155 $ 8,617 ======== ======== Liabilities and stockholders' equity Current liabilities: Current portion of long-term debt $ 614 $ 639 Notes payable-bank 965 1,030 Accounts payable 1,814 1,749 Billings in excess of costs 787 126 Accrued expenses 938 465 Income taxes payable 85 95 -------- -------- Total current liabilities 5,203 4,104 -------- -------- Long-term debt, net of current portion 382 606 -------- -------- 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 (6,452) (7,115) Common stock held in treasury, at cost (2,812,252 shares) (17,008) (17,008) -------- -------- Total stockholders' equity 4,570 3,907 -------- -------- $ 10,155 $ 8,617 ======== ========
See notes to consolidated financial statements. Page 3 REXX ENVIRONMENTAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share amounts) (Unaudited)
Three months ended June 30, 2000 1999 ---- ---- Revenues $ 4,931 $ 4,652 Cost of services 3,423 3,453 ------- ------- Gross profit 1,508 1,199 General and administrative expenses 762 816 ------- ------- Income from operations 746 383 Other expenses: Interest expense, net 56 75 Other expense 10 30 ------- ------- Income before provision for taxes 680 278 Provision for taxes 4 6 ------- ------- Net income $ 676 $ 272 ======= ======= Per share data: Basic $.27 $.11 Diluted $.26 $.11 Weighted average shares outstanding: Basic 2,468 2,468 Diluted 2,568 2,468
See notes to consolidated financial statements. Page 4 REXX ENVIRONMENTAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share amounts) (Unaudited)
Six months ended June 30, 2000 1999 ---- ---- Revenues $ 8,938 $ 8,152 Cost of services 6,505 6,539 ------- ------- Gross profit 2,433 1,613 General and administrative expenses 1,603 1,776 ------- ------- Income (loss) from operations 830 ( 163) Other expenses: Interest expense, net 118 129 Other expense 45 43 ------- ------- Income (loss) before provision for taxes 667 ( 335) Provision for taxes 4 9 ------- ------- Net income (loss) $ 663 ($ 344) ======= ------- Per share data: Basic $.27 ($.14) Diluted $.26 ($.14) Weighted average shares outstanding: Basic 2,468 2,468 Diluted 2,591 2,468
See notes to consolidated financial statements. Page 5 REXX ENVIRONMENTAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Six Months Ended June 30, 2000 1999 ---- ---- Cash flows provided by operating activities: Net income (loss) $ 663 ($ 344) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 266 239 Loss on disposal of assets 35 0 ------ ------ 964 ( 105) Changes in assets and liabilities 450 312 ------ ------ Net cash provided by operating activities 1,414 207 ------ ------ Cash flows used in investing activities: Capital expenditures ( 588) ( 156) Net proceeds on disposal of assets 49 31 ------ ------ Net cash used in investing activities ( 539) ( 125) ------ ------ Cash flows from financing activities: Net short-term (repayments) ( 65) ( 100) Principal payment of long-term debt ( 249) ( 29) ------ ------ Net cash (used in) financing activities ( 314) ( 129) ------ ------ Net increase (decrease) in cash 561 ( 47) Cash at beginning of period 85 68 ------ ------ Cash at end of period $ 646 $ 21 ====== ====== Supplemental disclosures of cash flow information: Changes in assets and liabilities: Accounts receivable ($ 747) $ 226 Costs in excess of billings 50 ( 12) Other current assets ( 24) ( 70) Other assets ( 18) 10 Billings in excess of costs 661 ( 156) Accounts payable and accrued expenses 538 316 Income taxes payable ( 10) ( 2) ------ ------ $ 450 $ 312 ====== ====== Cash paid - net during the period for: Interest $ 116 $ 127 Income taxes $ 14 $ 18
Page 6 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 and Form 10-K/A for its year ended December 31, 1999. 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 net income per share for the second quarter and six months ended June 30, 2000 was 2,467,576, while the number of shares used in the computation of diluted net income per share was 2,568,393 for the second quarter and 2,591,198 for the six months ended June 30, 2000. The number of shares used in the computations for basic and diluted net income per share for the second quarter and six months ended June 30, 1999 were 2,467,576 for both computations. Net loss used in the computation of basic and diluted net 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 210,000 shares at prices ranging from $2.00 to $5.00 per share were outstanding at June 30, 2000. The dilutive impact of such options is the addition of 100,817 and 123,622 shares to weighted average diluted shares outstanding for the second quarter and six months ended June 30, 2000, respectively, and approximately $.01 decrease in earnings per share for both periods. Options to purchase 304,000 shares at prices ranging from $2.00 to $5.00 per share were outstanding at June 30, 1999, but were not included in the computation of diluted net loss per share because the effect of their inclusion would have been antidilutive. Page 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and capital resources: Working capital at June 30, 2000 was $598,000 as compared to $415,000 at December 31, 1999. The increase of $183,000 was primarily due to net income during the period, offset in part by capital expenditures and long-term debt repayment at WCI. Net accounts receivable were $3,376,000 at June 30, 2000 as compared to $2,629,000 at December 31, 1999, an increase of $747,000. The increase in accounts receivable was due to higher revenues in the quarter ended June 30, 2000 as compared to the fourth quarter of 1999. WCI executed, effective November 10, 1998, a revolving credit agreement with Wells Fargo Bank, N.A. The credit agreement, as amended, which expired June 9, 2000, and is currently the subject of discussions for an extension to September 30, 2000, calls for interest payable at Wells Fargo's prime rate, as in effect from time to time, plus 2% and borrowings up to 75% of eligible accounts receivable subject to a maximum of $2,000,000. At June 30, 2000, WCI had $500,000 borrowed under the credit agreement. The Company has guaranteed WCI's borrowings under the credit agreement, which is also collateralized by WCI's accounts receivable and all other assets (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 WCI's financial condition, including its current ratio and tangible net worth. In order to meet its working capital needs at the corporate level, the Company has negotiated a line of credit with HSBC Bank (USA) (formerly Republic National Bank of New York), which provides for $600,000 in borrowings, secured by REXX's assets, and interest payable at HSBC's reference rate plus 1%. This line of credit is evidenced by a demand grid note in the maximum amount of $600,000. At June 30, 2000, the Company had $465,000 borrowed under the line of credit. The Company's borrowings under this line of credit have been guaranteed by its Chairman of the Board, Arthur L. Asch and collateralized by a certificate of deposit in the amount of $350,000 deposited by Mr. Asch with the bank. Mr. Asch is not being compensated by the Company for providing the guarantee and additional collateral. The Company's management believes that, if the shareholders approve the WCI sale 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 sale. However, there is no assurance that (i) 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 sale; (ii) repayment of all or a portion of the Company's borrowings under this line of credit will not be demanded prior to September 30, 2000; (iii) HSBC Bank will extend this line of credit beyond September 30, 2000, if requested by the Company; or (iv) Mr. Asch will continue to provide his guarantee and collateral Page 8 beyond September 30, 2000. The discontinuance of this line of credit, by any action of HSBC Bank, as a result of Mr. Asch's failure to continue his guarantee or collateral beyond September 30, 2000 or otherwise, could have a material adverse effect on the Company. On June 15, 1999, the Company announced that it had signed a definitive agreement to sell WCI to Greg Watkins and Daren Barone (or their permitted assignees) for $1,300,000 in cash and 125,000 shares of REXX Environmental Corporation common stock, as well as certain other consideration. Subsequently, the terms were amended to provide that Messrs. Watkins and Barone could pay the Company $171,875 in cash in lieu of the 125,000 shares of REXX common stock, at their option at the time of closing. The sale of WCI is subject to the approval of the Company's shareholders. Based on preliminary estimates, if the Company's shareholders approve the sale of WCI and it closes, on closing the Company will record a loss on the sale of WCI of approximately $3,750,000 which represents the difference between the net proceeds that the Company will receive and the combined value of the investment and goodwill that is recorded on the Company's books. This preliminary estimate is subject to further review and valuations at the time the proposed sale closes. On December 9, 1999, the Company announced that it had signed a definitive agreement for a subsidiary of TWG, Inc. to merge with and into REXX, subject to the approval of REXX's shareholders and certain other conditions, including the closing of the sale of WCI. TWG, Inc. would become the publicly traded parent company. In January 2000, TWG, Inc. changed its name to Newtek Capital, Inc. ("Newtek"). If the Company's shareholders approve the transaction and it closes, Newtek's current shareholders are expected to own 18,514,285 shares of Newtek common stock and the Company's shareholders are expected to own 1 share of Newtek for each share of the Company's common stock they currently own, or a total of 2,467,576 shares. Newtek is primarily engaged in the business of developing, funding and structuring early-stage companies, principally focused on high technology and the internet. Newtek has been working to expand its business development activities, and its goal is to be a premier business partner for its partner companies by helping them implement their business strategies in a manner consistent with Newtek's objectives. Newtek is in the early stages of operation as a holding company for a network of partner companies in a collaborative and coordinated effort to develop successful businesses in a number of emerging, technical areas. Following the Newtek/REXX merger, the business of REXX will consist exclusively of winding down and liquidating the remaining REXX assets. The environmental remediation business conducted by REXX prior to the WCI sale will no longer be owned or operated by REXX. Newtek does not contemplate any new business activity through REXX although such is possible if an attractive opportunity is available. REXX has filed a preliminary proxy statement and Newtek has filed a Registration Statement with the Securities and Exchange Commission for shareholder approval of the WCI sale and the Newtek transaction. These documents include information about each of the companies, their subsidiaries, REXX's proposed sale of WCI, and the merger of a subsidiary of Newtek with and into Page 9 REXX. These Securities and Exchange Commission filings became effective on August 14, 2000 and the proxy/prospectus will be mailed shortly to REXX's shareholders. At a shareholders' meeting scheduled for September 19, 2000 REXX's shareholders will be asked to vote for the approval of both the sale of WCI and the merger with Newtek. If REXX shareholders approve both transactions, it is expected that the sale of WCI and the merger with Newtek will close in September 2000. Results of operations: Revenues, which consisted of WCI's contract revenues, were $4,931,000 and $8,938,000 in the second quarter and six months ended June 30, 2000, respectively, compared to $4,652,000 and $8,152,000 in the comparable periods of 1999. The increase in both periods was mainly due to an unusually high revenue project in the second quarter and six months ended June 30, 2000. Gross profit in the six months ended June 30, 2000 amounted to $2,433,000 compared to $1,613,000 in the same period of 1999. Gross profit in the second quarter amounted to $1,508,000 compared to $1,199,000 in the second quarter of 1999. The increase in gross profit in both periods of 2000 as compared to 1999 was principally due to WCI's work on an unusually high revenue, high margin project during the quarter and six months ended June 30, 2000 as compared to historical results. General and administrative expenses declined in the second quarter and six months ended June 30, 2000 to $762,000 and $1,603,000, respectively, from $816,000 and $1,776,000, respectively, in the comparable periods in 1999. The decrease was achieved primarily at the corporate level and WCI as a result of lower compensation expense. Interest expense-net decreased to $56,000 and $118,000 in the second quarter and six months ended June 30, 2000 from $75,000 and $129,000 in the comparable periods of 1999. The decreases were due to WCI's lower borrowing levels from its bank and equipment finance companies during the second quarter and first half of 2000 compared to the comparable periods of 1999, offset in part by higher borrowings at the corporate level during 2000. Amortization of goodwill remained constant in the second quarter and first half of 2000 compared to 1999 as the Company is utilizing straight line amortization. Provision for income taxes fell to $4,000 in the second quarter and six months ended June 30, 2000 from $6,000 and $9,000 in the prior year periods. The 2000 and 1999 provisions represent state and local franchise taxes. In both periods, the Company recorded no provision for federal or state income taxes as the Company utilized net operating loss carryforwards in 2000 and recorded an operating loss in the first half 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 Page 10 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 consist," "will use," "will allow," "will require," "may," "likely result," "expected," "anticipated," "estimated," "projected," "potential," "opportunity," 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 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 continued reliance upon waivers of noncompliance from Wells Fargo, risks associated with the potential sale of WCI, the Company's potential inability to sell WCI due to the non-approval of the Company's shareholders or other reasons, risks associated with the proposed business combination with Newtek, the Company's potential inability to complete a business combination with Newtek, the impact and risk of shareholder dilution, 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, 1999 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 11 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K No report on Form 8-K was filed during the second quarter ended June 30, 2000. Page 12 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: August 15, 2000 By: /s/ Arthur L. Asch -------------------------------------- Arthur L. Asch, Chairman of the Board Date: August 15, 2000 By: /s/ Michael A. Asch -------------------------------------- Michael A. Asch, President and Treasurer Page 13 EX-27 2 0002.txt EXHIBIT 27
5 6-MOS DEC-31-2000 JUN-30-2000 646 0 3,376 0 0 5,801 1,722 0 10,155 5,203 382 0 0 4,570 0 10,155 8,938 8,938 6,505 8,108 45 0 118 667 4 663 0 0 0 663 .27 .26
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