SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A
(Mark One)
  [X]       ANNUAL  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
            EXCHANGE ACT OF 1934

                   For the Fiscal Year Ended December 31, 2000

                                       OR

  [ ]       TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934

                          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                       877-431-2942
             New York, New York 10022                  (Registrant's telephone number,
(Address and zip code of principal executive offices)      including area code)

        Securities registered pursuant to Section 12(b) of the Act: None

          Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.001 per share
                     ---------------------------------------
                                (Title of Class)

            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 if disclosure of delinquent  filers  pursuant
to  Item  405 of  Regulation  S-K is  not  contained  herein,  and  will  not be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information  statements  incorporated by reference in Part III of this Form 10-K
or any amendment to this form 10-K. [ ]

            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 [ ]

            Based upon the closing  price of the issuer's  Common Stock on March
22, 2001,  the aggregate  market value of the  4,366,866  shares of Common Stock
held by non-affiliates of the issuer was $5,897,508.  Solely for the purposes of
this calculation,  shares held by directors and officers of the issuer have been
excluded. Such exclusion should not be deemed a determination or an admission by
the issuer that all such individuals are, in fact, affiliates of the issuer.

            As of March 22, 2001, 4,366,866 shares of the issuer's Common Stock,
$.001 par value (the "Common Stock") were issued and outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None





                                TABLE OF CONTENTS

                                     PART I
                                                                        Page No.
                                                                        --------

Item 1.    Business                                                        1

Item 2.    Properties                                                      3

Item 3.    Legal Proceedings                                               3

Item 4.    Submission of Matters to a Vote of Security Holders             3

                                     PART II

Item 5.    Market for Registrant's Common Equity and Related
           Stockholder Matters                                             4

Item 6.    Selected Financial Data                                         5

Item 7.    Management's Discussion and Analysis of Financial
           Condition and Results of Operations                             6

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk      9

Item 8.    Financial Statements and Supplementary Data                    10

Item 9.    Changes In and Disagreements With Accountants on
           Accounting and Financial Disclosure                            10

                                    PART III

Item 10.   Directors and Executive Officers of the Registrant             11

Item 11.   Executive Compensation                                         13

Item 12.   Security Ownership of Certain Beneficial Owners and Management 14

Item 13.   Certain Relationships and Related Transactions                 16

                                     PART IV

Item 14.   Exhibits, Financial Statement Schedules, and Reports
           on Form 8-K                                                    17

Signatures                                                                18







PART I

Item 1. Business

Overview

            WebFinancial   Corporation  (formerly  Rose's  Holdings,   Inc.),  a
Delaware  corporation  (the  "Company"),  was  incorporated  in 1997 to act as a
holding  company for Rose's  Stores,  Inc.,  an operator of general  merchandise
discount stores ("Stores") and a wholly owned subsidiary of the Company.

             On September 5, 1993, Stores filed a voluntary  petition for Relief
under  Chapter 11, Title 11 of the United States  Bankruptcy  Code in the United
States  Bankruptcy  Court  for the  Eastern  District  of  North  Carolina  (the
"Bankruptcy  Court").  Stores  Modified and Restated First Amended Joint Plan of
Reorganization  (the  "Plan") was approved by Order of the  Bankruptcy  Court on
April 24, 1995. On April 28, 1995, the Plan became effective.

            In August  1997,  Stores  was  reorganized  into a  holding  company
structure and became a wholly owned  subsidiary  of the Company.  On December 2,
1997, the Company  consummated the sale of Stores to Variety  Wholesalers,  Inc.
("Variety")  of all of the  outstanding  capital  stock of Stores  (the  "Sale")
pursuant to a stock purchase  agreement,  dated as of October 24, 1997,  between
the Company and Variety (the "Stock  Purchase  Agreement").  The total  purchase
price for the Sale was  $19,200,000.  The  proceeds of the Sale,  net of certain
transaction, closing, and other costs, were $15,331,000.

            On August 31,  1998,  the  Company,  through  WebFinancial  Holdings
Corporation  ("Holdings"),  a wholly-owned Delaware subsidiary,  acquired 90% of
the outstanding  common stock of WebBank,  a Utah  industrial loan  corporation,
pursuant to an assignment (the  "Assignment")  from Praxis Investment  Advisers,
LLC, a Nevada limited liability company ("PIA"),  of a stock purchase agreement,
dated  January  20,  1998  (the  "Purchase  Agreement"),  between  PIA and Block
Financial Corporation  ("Block"),  relating to the purchase by PIA of all of the
issued  and  outstanding  shares of common  stock of  WebBank.  Pursuant  to the
Assignment, the Company paid Block $4,783,000 for the shares of WebBank's common
stock  to be  purchased  from  Block  pursuant  to the  Purchase  Agreement.  In
addition,  the Company paid $288,000 in acquisition  costs, for a total purchase
price of $5,071,000.

            On August 31, 1998, the Company formed Praxis  Investment  Advisers,
Inc., a Delaware corporation ("Praxis"),  that together with Holdings and Andrew
Winokur, the holder of the 10% of Praxis not owned by the Company,  entered into
a management  agreement (the "Management  Agreement").  The Management Agreement
provided that Praxis may make recommendations to and consult with the management
and board of directors of WebBank about the deployment of WebBank's capital, the
development  of  its  business   lines,   its  acquisition  of  assets  and  its
distributions to its stockholders. During the first quarter of 2000, the Company
significantly reduced the level of operations at Praxis.

            On May 26, 1999, the Company formed WebFinancial Government Lending,
Inc., a Delaware  corporation  ("Lending"),  as a wholly owned subsidiary of the
Company to concentrate  on holding and servicing U.S.  Department of Agriculture
("USDA") Loans.

            On August 11, 1999, Web Film Finance,  Inc., a Delaware  corporation
("Film"),  was formed as a wholly  owned  subsidiary  of Lending to finance  the
production  and  distribution  of a  motion  picture.  The only  motion  picture
commitment expired on December 30, 1999, and the Company subsequently determined
to discontinue business operations at this subsidiary.

            The  principal  executive  offices of the Company are located at 150
East 52nd Street, 21st Floor, New York, New York 10022.


Description of Business

            The Company,  through its  subsidiaries,  operates in niche  banking
markets. WebBank provides commercial and consumer specialty finance transactions
utilizing U.S. Government credit enhancement.  The benefits of

                                       1



WebBank's  special  charter allow it to "export" Utah's  regulatory  environment
(interest rates,  late charges,  and prepayment fees, etc.) to forty-eight other
states.  WebBank is a small,  business oriented institution that is FDIC insured
and  examined  and  regulated  by the  State  of Utah  Department  of  Financial
Institutions. The business plan of WebBank represents a non-traditional approach
to  growing  within  the  context  of the  regulatory  standards  of safety  and
soundness.  Prudent  business goals and protection of WebBank's  charter are the
key elements of the Company's  business  strategy for WebBank.  Pursuant to this
strategy, WebBank has focused on several lines of business as described below:

            PRIVATE LABEL CREDIT CARD processing is a highly competitive product
and service that WebBank is actively  pursuing  based on its relative small size
and significant  staff  experience  that allows WebBank to offer  customized and
rapid  service  as well as Utah's  favorable  banking  environment.  WebBank  is
issuing  credit  cards for part of the  recreation  vehicle  division of a large
multinational  company and expects to expand  services to other segments of that
division.

            E-COMMERCE  CREDIT CARD  processing  represents  a variation  on the
private  label credit card that  management  considers to be a new business line
because  it  involves  the  creation  of a "Virtual  Credit  Card" or an account
debiting  system  customized  to the  needs of the  Internet.  WebBank  recently
announced that it is partnering with a California  based  e-commerce  company to
provide  e-tailers with a secure and  proprietary  system for their customers to
access and safely complete  purchases of large ticket items directly through the
popular "drop-ship" method.

            USDA BUSINESS AND INDUSTRY  (B&I)  LENDING is a commercial  loan
product  70% to 90%  guaranteed  by the full  faith and  credit  of the  Federal
government.  The loan program is administered by the United States Department of
Agriculture  to  assist   businesses   located  in  rural  areas  (under  50,000
population) to promote industrial modernization and job creation.

            STRUCTURED  SETTLEMENT  LENDING  is a form of secured  lending  that
gives  customers  the  opportunity  to cash-in  long-term  annuities  or payment
streams that are subjects of financial  settlements  to allow the owners of such
settlements  access to the  current  value of their  award.  This  program  is a
fee-for-service  oriented  business in which the entire purchased cash stream is
sold to a third party shortly after the purchase.

            PAYDAY  ADVANCE  processing  is a form of lending that provides high
returns  to the lender  through  fees for  cashing  borrowers'  checks.  WebBank
provided fee based  processing  services to three  lenders under this program in
2000. However, WebBank expects to exit this line of business by the end of April
2001 due to current regulatory conditions regarding such lending programs.

            The Company  continues to evaluate its different  business lines and
consider various  alternatives to maximize the aggregate value of its businesses
and increase  stockholder  value. Some of these  alternatives  include insurance
related deposit gathering programs,  consumer e-lending programs,  and selective
acquisitions,  divestitures or the  discontinuance of an existing business line.
Various alternatives may be implemented from time to time.

Competition

            The banking and financial  services industry is highly  competitive.
The increasingly competitive environment is primarily attributable to changes in
regulation,  changes  in  technology  and  product  delivery  systems,  and  the
accelerating  pace of  consolidation  among financial  services  providers.  The
Company,  through its subsidiaries,  competes for loans, deposits, and customers
with other  commercial  banks,  savings and loan  associations,  securities  and
brokerage companies, mortgage companies, insurance companies, finance companies,
money  market  funds,   credit  unions,  and  other  nonbank  financial  service
providers.  Many of these  competitors  are much  larger  in  total  assets  and
capitalization, have greater access to capital markets and offer a broader range
of financial services than the Company.  In addition,  management  believes that
recent federal legislation may have the effect of further increasing the pace of
consolidation within the financial services industry.

                                       2



Regulation

            WebBank is regulated by the FDIC and the State of Utah Department of
Financial  Institutions.  As a result,  WebBank is subject to various regulatory
capital requirements administered by federal and state banking agencies. Failure
to meet minimum capital  requirements can initiate certain actions by regulators
that, if undertaken,  could have a direct material effect on WebBank's financial
statements.  Under capital adequacy guidelines and the regulatory  framework for
prompt  corrective  action,  WebBank must meet specific capital  guidelines that
involve  quantitative  measures of WebBank's  assets,  liabilities,  and certain
off-balance  sheet items as calculated  under regulatory  accounting  practices.
WebBank's  capital  amounts and  classification  are also subject to qualitative
judgments  by the  regulators  about  components,  risk  weightings,  and  other
factors.  Management  believes that, as of December 31, 2000,  WebBank meets and
exceeds all capital adequacy requirements to which it is subject.

Employment

            As of March 22, 2001, the Company had 10 employees, all of whom were
full-time  employees.  The Company  believes  that its  employee  relations  are
satisfactory.

Item 2.  Properties

            The Company  leases 832 square feet of office  space  located at 150
East 52nd Street,  New York,  New York,  10022,  from Gateway  Industries,  Inc.
("GWAY") for use of such space as a corporate  office on a non-exclusive  basis.
This lease runs through  March 31, 2001,  and may be  terminated by either party
with 90 days  notice.  Mr.  Lichtenstein,  the  Company's  President  and  Chief
Executive Officer, is the Chairman of the Board of Directors and Chief Executive
Officer  of GWAY.  Mr.  Lichtenstein  is also the sole  managing  member  of the
General  Partner of Steel Partners II, L.P. that owns  approximately  38% of the
common stock of GWAY. Steel Partners Services,  Ltd. ("SPS"),  which is owned by
an entity  controlled by Mr.  Lichtenstein,  also  subleases  part of the office
space from GWAY.

            On March 20,  2000,  WebBank  entered  into a lease for 4,630 square
feet of  headquarters  office  space in Salt Lake  City,  Utah.  The lease  runs
through March 19, 2005.

            On August 2, 2000,  WebBank entered into a lease for 600 square feet
of office space in Washington,  D.C. The lease runs through August 31, 2001. The
space is used by the Chairman of WebBank.

            During the year 2000, Lending leased 500 square feet of office space
in St. Helena, California. This lease expired on August 9, 2000.

Item 3.  Legal Proceedings

            In January 2000,  Andrew  Winokur,  a former  executive  officer and
director of one of the Company's  subsidiaries,  Praxis,  filed a lawsuit in the
Superior Court of the State of  California,  County of Napa against the Company,
Praxis and Holdings. The lawsuit alleges that Praxis has breached its employment
agreement with Mr.  Winokur.  The lawsuit also asserts  claims for  interference
with contract and unjust enrichment based upon the alleged wrongful  termination
of Mr. Winokur's  employment  contract with Praxis. The lawsuit seeks damages of
an  unspecified  amount and  compliance by Praxis with the  termination  pay out
provisions in Mr.  Winokur's  employment  agreement  relating to purchase of Mr.
Winokur's 10% interest in Praxis and WebBank (both 90% owned subsidiaries of the
Company)  at their fair  market  value.  The Company and Praxis deny that Praxis
wrongfully  terminated Mr. Winokur's  employment and intend to vigorously defend
this  matter.  At the present  time,  the parties have agreed to have the matter
submitted to binding  arbitration  before three retired judges. The Company does
not  believe  that this  lawsuit  will  have a  material  adverse  impact on its
financial condition or results of operations.

Item 4.     Submission of Matters to a Vote of Security Holders

            None.

                                       3



PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters

            The Company's  Common Stock was listed on the Nasdaq National Market
System until March 11, 1998, at which time the Common Stock was delisted because
the Company had no commercial  operations.  From March 11, 1998 until August 22,
1999,  the Common Stock traded on the OTC Bulletin  Board,  initially  under the
symbol  "RSES"  and then under the symbol  "WEFN."  As of August 22,  1999,  the
Company's  Common  Stock was  listed on the NASDAQ  Small Cap  Market  under the
symbol  "WEFN." The table below sets forth the high and low sales  prices of the
Common  Stock for the  periods  indicated  on such  quotation  systems and stock
exchanges.  All over-the-counter  market quotations reflect inter-dealer prices,
without  retail  mark-ups,  markdowns or  commissions,  and may not  necessarily
represent  actual  transactions.  All prices  presented  have been  restated  to
reflect a one-for-two reverse stock split effected on November 20, 1998.


                                        Year Ended                             Year Ended
                                     December 31, 2000                      December 31, 1999
                                   High               Low                High                 Low
                                   ----               ---                ----                 ---
1st Quarter                       $ 6.63             $ 5.00             $ 6.10              $ 4.10
2nd Quarter                       $ 6.13             $ 3.13             $45.00              $ 5.06
3rd Quarter                       $ 4.06             $ 2.66             $ 9.00              $ 5.31
4th Quarter                       $ 3.50             $ 2.19             $ 8.29              $ 5.06

            As of March 22, 2001, there were 553 record holders of the Company's
Common Stock.

            The Company  paid no  dividends on its Common Stock in 2000 or 1999.
The Company  intends to retain any future earnings for working capital needs and
to finance  potential  future  acquisitions and presently does not intend to pay
cash dividends on its Common Stock for the foreseeable future.

                                       4




Item 6.      Selected Consolidated Financial Data

            The following table summarizes  certain  selected  financial data of
the Company  and should be read in  conjunction  with the  related  Consolidated
Financial  Statements  of the Company  and  accompanying  Notes to  Consolidated
Financial Statements included elsewhere herein.

(Amounts in thousands except per share amounts. The last two columns not covered
by Independent Auditors' Report)


                                     Year               Year           Eleven-month              Year                  Year
      Consolidated                   Ended              Ended          Period Ended              Ended                 Ended
      Statements of                December           December           December               January               January
    Operations Data:               31, 2000           31, 1999           31, 1998            31, 1998(1)             25, 1997(1)
                                   --------           --------           --------            -----------             --------

Net interest income
   before provision
   for loan losses                 $ 1,339         $     847        $       676          $         418              $       -

Other operating
   income                          $ 3,395         $   1,567        $         -          $           -              $       -
Net income (loss)
   before minority
   interests                       $   (54)        $  (1,774)       $      (774)         $     (25,538)             $     380

(Income) loss attributable
   to minority interests                (3)              134                 59                      -                      -
                                   --------        ---------        -----------          -------------              ---------

Net income (loss)                  $   (57)        $  (1,610)       $      (715)         $     (25,538)             $     380
                                   ========        ==========       ============         ==============             =========

Basic net earnings (loss)
 per common share                  $ (0.01)        $   (0.37)       $     (0.17)         $       (5.91)             $     .04

      Consolidated
      Balance Sheet               December         December             January
          Data:                   31, 2000         31, 1999             31,1998
                                  --------         --------             -------

Cash, cash equivalents
   and available for sale
   investment securities         $   6,625         $   8,124           $ 10,762

Loans                            $  11,054         $  10,396           $  1,081

Total assets                     $  24,795         $  20,942           $ 15,980

Deposits                         $  10,132         $   4,889           $    105

Stockholders' equity             $  13,424         $  13,435           $ 14,687

--------
1    Financial  condition  data for the years ended January 25, 1997 and January
     25, 1997 is omitted from the table because of the Company's  involvement in
     bankruptcy  and  reorganization,  which  make  that  data  meaningless  for
     comparative  purposes.  The Company completely disposed of its prior retail
     business.  With the cash remaining after the bankruptcy and reorganization,
     the Company entered into the banking business in September 1998 through the
     purchase of WebBank.

                                       5




Item 7.   Management's  Discussion  and  Analysis  of  Financial  Condition  and
          Results of Operations

Overview

            The Company was  incorporated  in August 1997 as a holding  company.
The former name of the Company, Rose's Holdings,  Inc., was changed by a vote of
the  stockholders  at the 1999 annual meeting held on June 15, 1999. In December
1997, the Company divested itself of Stores, then its only operating subsidiary.
On August 31,  1998,  the Company  acquired a 90%  interest  in WebBank,  a Utah
industrial loan corporation,  and Praxis. Praxis,  formerly based in St. Helena,
California,  provided research and development in creating  financial  products,
followed by implementing  practical  realization of those  products.  During May
1999,  Lending was  incorporated as a wholly owned  subsidiary of the Company to
concentrate on holding and servicing U.S.  Department of Agriculture  Loans.  On
August 11,  1999,  Film was formed as a wholly  owned  subsidiary  of Lending to
finance the production and distribution of a motion picture.

            The only motion  picture  commitment of Film expired on December 30,
1999,  and the Company  terminated  Film's  operations at that time.  During the
first quarter of 2000 management  began winding down Praxis.  On April 30, 2000,
Lending  transferred all of its assets, with the exception of a $2 million loan,
to WebBank in exchange for WebBank common stock.

            The Company  through  its  subsidiaries  operates  in niche  banking
markets. WebBank provides commercial and consumer specialty finance transactions
utilizing U.S. Government credit enhancement in certain instances.  The benefits
of WebBank's special charter allow it to "export" Utah's regulatory  environment
(interest rates,  late charges,  and prepayment fees, etc.) to forty-eight other
states.  WebBank is a small,  business oriented institution that is FDIC insured
and  examined  and  regulated  by the  State  of Utah  Department  of  Financial
Institutions. The business plan of WebBank represents a non-traditional approach
to growing a highly successful profitable  institution within the context of the
regulatory  standards  of  safety  and  soundness.  Prudent  business  goals and
protection of WebBank's  charter are the key elements of the Company's  business
strategy for WebBank. Pursuant to this strategy,  WebBank has focused on several
lines of business as described elsewhere in this document.

            In 1998, the Company  changed its fiscal year end from January 31 to
December 31, and has presented financial results for the year ended December 31,
2000, December 31, 1999, and the eleven-month period ended December 31, 1998.

Results of Operations

Year ended December 31, 2000 compared to the year ended December 31, 1999.

            The net loss was  $(57,000) or $(0.01) per common share for the year
ended  December 31, 2000,  compared to a net loss of  $1,610,000  or $(0.37) per
common share for the year ended  December 31, 1999. A comparison  of the changes
in major components of net income between the two years is summarized below.

            Interest  Income.  Interest income  increased by $1,143,000 or 111%.
This increase was primarily due to a $1,058,000 or 252% increase in interest and
fees on loans.  The majority of the increase  occurred at WebBank  where average
gross loan balances grew from $3,700,000 in 1999 to $10,884,000 in 2000. Most of
this growth was in the commercial (USDA B&I) loan category. Average balances
in consumer  loans  (payday  advance  loans)  increased  from $61,000 in 1999 to
$1,319,000 in 2000. In addition, the prime rate, used as the variable rate index
for most of WebBank's  loans,  increased  steadily from  approximately  7.75% in
early 1999 to 9.50% by the middle of 2000 where it remained  for the rest of the
year.

            Interest  Expense.  Interest  expense  increased by $651,000 or 364%
from 1999 to 2000.  The  majority of the  Company's  interest  expense  increase
occurred  at  WebBank.  WebBank  relied  primarily  on time  deposits  (brokered
certificates  of  deposit) to fund loan  growth  during both years.  The average
balance of time  deposits for 2000 was  $3,930,000  in 1999 and  $12,368,000  in
2000.  The majority of the fixed rate time deposits were issued during late 1999
and early 2000 with maturities that helped to decrease  funding costs as general
market interest rates increased.  In October 2000,  WebBank secured a $2,500,000
Federal  Funds  Purchased  line of credit from a local bank in order to decrease
reliance on brokered certificates of deposit.

                                       6



            Provision for Loan Losses.  The loans loss provision  increased from
$475,000 in 1999 to $917,000 in 2000.  Most of the increase was  attributable to
the loan  balance  increase and  seasoning  of the USDA B&I loan  portfolio.
WebBank  provided  $400,000  at the end of 2000  for a loan to a  borrower  that
unexpectedly declared bankruptcy in January 2001.

            Noninterest Income.  Noninterest income increased from $1,567,000 in
1999 to  $3,395,000  in 2000,  a change  of  $1,828,000  or 117%.  Approximately
$1,038,000 of the difference was due to increases in fee income for various loan
programs such as payday  advances,  private label credit cards,  and  structured
settlements. Most of these programs were initiated in late 1999.

            Noninterest  Expense.  Noninterest expense increased from $3,683,000
in 1999 to  $3,871,000  in 2000, a change of $188,000 or 5%. The primary  reason
why noninterest expense increased only nominally between years was the reduction
in  operating  activity at Praxis in early  2000.  In 1999,  Praxis  noninterest
expense  totaled  $1,183,000.  In 2000,  the amount had  decreased  to virtually
nothing. Offsetting this decrease,  WebBank's noninterest expense increased from
$1,472,000  to  $2,766,000,  an increase of  $1,294,000 or 88%. The increase was
spread over all categories of expense and occurred primarily because WebBank was
still a start-up company in 1999, the first full year of operations.

            Income  Taxes.  No income taxes were expensed in either year because
of the use of net operating loss carryforwards at the consolidated level.

Year ended December 31, 1999 compared to the eleven-month  period ended December
31, 1998.

            The Company had a net loss of $1,610,000 or $(0.37) per common share
for the year ended  December  31,  1999  compared  to a net loss of  $715,000 or
$(0.17) per common  share for the eleven  months  ended  December  31,  1998.  A
comparison  of the  changes in major  components  of net loss  between  years is
described below.

            Interest  Income.  Interest  income  increased  by  $350,000  or 52%
between  years,  from $676,000 in 1998 to $1,026,000 in 1999.  This increase was
primarily due to a $388,000  increase in interest and fees on loans,  which grew
from $30,000 in 1998 to $418,000 in 1999. Both WebBank and Lending were start-up
companies during the two-year time period.

            Interest   Expense.   No  interest   expense  was  incurred  in  the
eleven-month  period ended  December 31, 1998  compared to $179,000 for the year
ended December 31, 1999. WebBank recorded all of the interest expense in 1999.

            Provision for Loan Losses.  The loans loss provision  increased from
$0 in 1998 to $475,000 in 1999.  Most of the increase was  attributable  to loan
balance  increases and  seasoning of the USDA B&I loan  portfolio at WebBank
and Lending. WebBank expensed $279,000 and Lending expensed $196,000 of the 1999
provision for loan losses.

            Noninterest Income.  Noninterest income increased from $0 in 1998 to
$1,567,000 in 1999.  Approximately  $913,000 of the Company's noninterest income
in 1999 was realized from the sale of guaranteed  portions of USDA B&I loans
at WebBank and Lending.  Most of the Company's  current fee based programs began
in late 1999 and had a nominal effect on earnings that year.

            Noninterest  Expense.  Noninterest expense increased from $1,450,000
in 1998 to  $3,683,000  in 1999,  a change of  $2,233,000  or 154%.  The primary
reason for this change was an increase of $1,042,000 in  noninterest  expense at
Praxis between years. In 1999, Praxis noninterest expense totaled $1,183,000. In
1998 the amount was $141,000.  Another  $939,000 of the increase in  noninterest
expense was  contributed by WebBank.  Both companies were starting up during the
two-year period.

            Income  Taxes.  No income taxes were expensed in either year because
of the use of net operating loss carryforwards at the consolidated level.

                                       7



Liquidity and Capital Resources

            The  Company's  cash  and cash  equivalents  totaled  $6,162,000  at
December  31, 2000, a decrease of  $1,104,000  from the year ended  December 31,
1999.  The  Company's  management  believes  that  the  Company's  cash and cash
equivalents as well as its anticipated near term cash flows are adequate to meet
its near term liquidity requirements.

            The Company is continuing  to seek  additional  acquisitions  and/or
merger  transactions.  No firm  commitments have been realized and no letters of
intent have been signed at this time. There can be no assurance that the Company
will be able to locate or purchase a business, or that such business, if located
and  purchased,  will be  profitable.  In order to finance an  acquisition,  the
Company may be required to incur or assume indebtedness and/or issue securities.

New Accounting Pronouncements

            The  Financial   Accounting  Standards  Board  issued  Statement  on
Financial  Accounting  Standards  ("SFAS") No. 133,  Accounting  for  Derivative
Instruments and Hedging Activities in 1998. SFAS No. 133 establishes  accounting
and reporting standards for derivative instruments, including certain derivative
instruments   embedded  in  other   contracts   (collectively   referred  to  as
derivatives),  and for hedging  activities.  It requires that entities recognize
all  derivatives  as either assets or  liabilities in the statement of financial
position and measure  those  instruments  at fair value.  For a  derivative  not
designated as a hedging instrument,  changes in the fair value of the derivative
are recognized in earnings in the period of change. As a result of SFAS No. 137,
SFAS No. 133 has been adopted in 2001. The Company does not believe the adoption
of SFAS No. 133 will have a material effect on the financial position or results
of operations of the Company.


            On December 3, 1999, the SEC staff issued Staff Accounting  Bulletin
("SAB")  No. 101,  Revenue  Recognition  in  Financial  Statements.  SAB No. 101
summarizes   certain  of  the  staff's  views  in  applying  generally  accepted
accounting  principles  to revenue  recognition  in  financial  statements.  The
Company began to implement the guidance of SAB No. 101 in the fourth  quarter of
fiscal 2000.  The adoption of SAB No. 101 did not have a material  effect on the
financial position or results of operations of the Company.

            The  Financial   Accounting  Standards  Board  issued  Statement  of
Financial  Accounting  Standards ("SFAS") No. 140,  Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. This Statement
replaces  SFAS No. 125,  Accounting  for  Transfers  and  Servicing of Financial
Assets  and  Extinguishments  of  Liabilities  and  revises  the  standards  for
accounting  for  securitizations  and other  transfers of  financial  assets and
collateral and requires  certain  disclosures,  but carries over most of SFAS No
125's provisions without  reconsideration.  It provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishments of
liabilities. The Company does not believe the adoption of SFAS No. 140 will have
a material  effect on the  financial  position or results of  operations  of the
Company.


                           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 ANNUAL  REPORT ON FORM 10-K 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  OPERATING  RESULTS  MAY VARY  SIGNIFICANTLY.  INVESTORS  SHOULD  NOT USE
HISTORICAL  TRENDS TO  ANTICIPATE  FUTURE  RESULTS  AND SHOULD BE AWARE THAT THE

                                       8



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 BELOW.

Risk Factors

            The following paragraphs discuss certain factors that may affect the
Company's  financial  condition  and  operations  and  should be  considered  in
evaluating the Company.

            Interest  Rates.  The  Company's  earnings  are impacted by changing
interest  rates.  Changes in interest rates impact the level of loans,  deposits
and  investments,  the credit profile of existing  loans,  the rates received on
loans and securities and the rates paid on deposits and borrowings.  Significant
fluctuations  in  interest  rates may have an  adverse  affect on the  Company's
financial condition and results of operations.

            Government  Regulation and Monetary Policy.  The banking industry is
subject to extensive federal and state  supervision and regulation.  Significant
new laws or changes in existing  laws, or repeals of existing laws may cause the
Company's  results  to change  materially.  Further,  federal  monetary  policy,
particularly as implemented  through the Federal  Reserve System,  significantly
affects  credit  conditions  for the  Company  and a  material  change  in these
conditions  could  have a material  adverse  impact on the  Company's  financial
condition and results of operations.

            Competition.  The banking and financial  services  businesses in the
Company's lines of business are highly competitive. The increasingly competitive
environment  is a result of changes in  regulation,  changes in  technology  and
product  delivery  systems,  and the accelerating  pace of  consolidation  among
financial  services  providers.  The  results  of  the  Company  may  change  if
circumstances affecting the nature or level of competition change.

            Credit Quality.  A source of risk arises from the  possibility  that
losses will be sustained because  borrowers,  guarantors and related parties may
fail to perform in  accordance  with the terms of their  loans.  The Company has
adopted  underwriting  and credit  monitoring  procedures  and credit  policies,
including the establishment and review of the allowance for credit losses,  that
management  believes are  appropriate  to minimize  this risk by  assessing  the
likelihood of  nonperformance,  tracking loan  performance and  diversifying the
Company's  credit  portfolio.  These policies and procedures,  however,  may not
prevent  unexpected  losses  that could have a  material  adverse  effect on the
Company's results.

            Non-banking  Activities.  The Company may expand its operations into
new  non-banking  activities  in 2001.  Although the Company has  experience  in
providing bank-related services, this expertise may not assist in expansion into
non-banking  activities.  As a  result,  the  Company  may be  exposed  to risks
associated with, among other things,  (1) a lack of market and product knowledge
or awareness of other industry  related  matters and (2) an inability to attract
and retain qualified employees with experience in these non-banking activities.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

MARKET RISK AND ASSET LIABILITY MANAGEMENT

            Market  risk is the risk of loss  from  adverse  changes  in  market
prices and rates.  The Company's market risk arises primarily from interest rate
risk inherent in its lending and deposit taking  activities and other investment
activities.  To that end,  management actively monitors and manages its interest
rate risk exposure.

            In connection with the Company's lending and deposit activities, its
profitability  may be affected by  fluctuations  in interest rates. A sudden and
substantial  decrease  in  interest  rates may  adversely  impact the  Company's
earnings to the extent that the interest  rates borne by assets and  liabilities
do not change at the same speed, to the same extent,  or on the same basis.  The
Company  monitors the impact of changes in interest on its net  interest  income
using  several  tools.  One measure of the Company's  exposures to  differential
changes in interest  rates between  assets and  liabilities  is an interest rate
risk management test. This test measures the impact on net interest income of an
immediate change in interest rates in 100 basis point increments. After a review
of the Company's

                                       9



portfolio,  we believe that in the event of a hypothetical  one percent increase
or  decrease  in interest  rates,  the  resulting  effect on the  Company's  net
interest income would not be material.

            The Company's primary objective in managing interest rate risk is to
minimize the adverse  impact of changes in interest  rates on the  Company's net
interest income and capital,  while  structuring  the Company's  asset-liability
structure to obtain the maximum yield-cost spread on that structure. The Company
relies primarily on its asset-liability structure to control interest rate risk.
As an example,  during 2000 WebBank relied primarily on fixed rate  certificates
of  deposit  to fund its  variable  rate loan  portfolio.  During  the period of
moderately  rising rates during April 2000,  the Bank locked in the funding cost
for periods of three months to one year,  creating increased interest margins as
rates  increased  but creating a risk of  decreasing  interest  margins as rates
began to decline.  In order to guard against the impact of future  interest rate
decreases,  WebBank secured a $2,500,000 Federal Funds Purchased line in October
2000  with a local  correspondent  bank.  This line will  decrease  reliance  on
certificates  of deposit for short term funding needs and more closely match the
variable rate structure of the B&I loan portfolio.

            In connection with the consolidated Company's other investments, the
primary objective is to manage the investment  portfolio to preserve  principal,
maintain  liquidity to meet operating needs, and maximize yields. The securities
held in our investment  portfolio are subject to limited interest rate risk. The
Company  employs  established  policies  and  procedures  to manage  exposure to
fluctuations  in interest rates.  The Company places its  investments  with high
quality  issuers,  limits the amount of credit  exposure to any one issuer,  and
does not use derivative financial instruments in the investment  portfolio.  The
Company  maintains  an  investment  portfolio  of various  issuers,  types,  and
maturities,  which consist  mainly of fixed rate  financial  instruments.  These
securities are primarily classified as available-for-sale and, consequently, are
recorded  on the  balance  sheet at fair value with  unrealized  gains or losses
reported as a separate  component in  stockholders'  equity.  At any time, sharp
changes in interest rates can affect the fair value of the investment  portfolio
and its interest earnings.  Currently, the Company does not hedge these interest
rate  exposures.  After a  review  of its  marketable  securities,  the  Company
believes that in the event of a hypothetical one percent increase or decrease in
interest  rates,  the  resulting  fluctuation  in the fair  market  value of its
marketable  investment  securities  would  be  insignificant  to  the  financial
statements.


Item 8.   Financial Statements and Supplementary Data

            See the Company's  Consolidated  Financial  Statements  beginning on
page F-1.


Item 9.   Changes  in and  Disagreements  with  Accountants  on  Accounting  and
          Financial Disclosure

            None.

                                       10




PART III


Item 10.   Directors and Executive Officers

Directors

            The following  sets forth the name,  present  principal  occupation,
employment and material occupations,  positions, offices and employments for the
past five years and ages as of March 22, 2001, for the directors of the Company.
Members of the Board of Directors shall be elected at the next annual meeting of
stockholders and until their respective  successors shall have been duly elected
and qualified.

DIRECTORS AND EXECUTIVE OFFICERS


NAME AND AGE                             OCCUPATION AND OTHER DIRECTORSHIPS
------------                             ----------------------------------

Warren G. Lichtenstein (35)              Mr.   Lichtenstein   has  served  as  a
(term expires 2001)                      director of the Company  since 1996 and
                                         President and Chief  Executive  Officer
                                         of the Company since December 1997. Mr.
                                         Lichtenstein has served as the Chairman
                                         of  the   Board,   Secretary   and  the
                                         Managing   Member  of  Steel  Partners,
                                         L.L.C.   ("Steel  LLC"),   the  general
                                         partner  of  Steel  Partners  II,  L.P.
                                         ("Steel"), since January 1, 1996. Prior
                                         to such time, Mr.  Lichtenstein was the
                                         Chairman   and  a  director   of  Steel
                                         Partners,  Ltd., the general partner of
                                         Steel Partners Associates,  L.P., which
                                         was the general partner of Steel,  from
                                         1993 and prior to January 1, 1996.  Mr.
                                         Lichtenstein  was the  acquisition/risk
                                         arbitrage    analyst   at    Ballantrae
                                         Partners,  L.P.,  a private  investment
                                         partnership  formed  to  invest in risk
                                         arbitrage,   special   situations   and
                                         undervalued  companies,  from  1988  to
                                         1990. Mr. Lichtenstein is a director of
                                         the following  publicly held companies:
                                         Tandycrafts,  Inc., a  manufacturer  of
                                         picture frames and framed art;  Gateway
                                         Industries,   Inc.,   a   provider   of
                                         database development and website design
                                         and  development   services;   Puroflow
                                         Incorporated,     a    designer     and
                                         manufacturer  of  precision  filtration
                                         devices;  ECC  International  Corp.,  a
                                         manufacturer     and     marketer    of
                                         computer-controlled    simulators   for
                                         training     personnel    to    perform
                                         maintenance and operator  procedures on
                                         military  weapons;  and  CPX  Corp.,  a
                                         company with no  significant  operating
                                         business.  He is a former  director  of
                                         Saratoga   Beverage   Group,   Inc.,  a
                                         beverage  manufacturer and distributor;
                                         Alpha     Technologies,     Inc.,    an
                                         electronics   component   manufacturer;
                                         Tech-Sym  Corporation,  an  electronics
                                         engineering and manufacturing  company;
                                         and   PLM   International,   Inc.,   an
                                         equipment    leasing    company.    Mr.
                                         Lichtenstein also served as Chairman of
                                         the  Board  of  Aydin  Corporation,   a
                                         provider  of  products  and systems for
                                         the  acquisition  and  distribution  of
                                         information       over       electronic
                                         communications  media,  from October 5,
                                         1998    until    its    sale   to   L-3
                                         Communications   Corporation  in  April
                                         1999.

Jack L. Howard (39)                      Mr.  Howard has served as a director of
(term expires 2001)                      the   Company   since   1996  and  Vice
                                         President,  Secretary, and Treasurer of
                                         the Company since  December  1997.  Mr.
                                         Howard has been a  principal  of Mutual
                                         Securities,    Inc.,    a    registered
                                         broker-dealer, since prior to 1993. Mr.
                                         Howard   has  also   been  the   Acting
                                         President and Chief  Financial  Officer
                                         of  Gateway   Industries,   Inc.  since
                                         September   1994.   Mr.   Howard  is  a
                                         director of the following publicly held
                                         companies:  Gateway

                                       11


                                         Industries,   Inc.,   a   provider   of
                                         database development and website design
                                         and   development    services;    Pubco
                                         Corporation,    a   manufacturer    and
                                         distributor  of printing  supplies  and
                                         construction  equipment;   Castelle,  a
                                         maker  and   marketer  of   application
                                         server devices; and US Diagnostic Inc.,
                                         an  operator of  outpatient  diagnostic
                                         imaging.

James Benenson, Jr. (65)                 Mr.  Benenson has been Chief  Executive
(term expires 2001)                      Officer  of  Vesper   Corporation,   an
                                         industrial manufacturing company, since
                                         1979,   and   of   Arrowhead   Holdings
                                         Corporation,   Vesper's  parent,  since
                                         1983. Mr.  Benenson has been a director
                                         of  B.H.I.T,   a  mortgage   investment
                                         company since 2000. Prior to such time,
                                         Mr.    Benenson   served   in   various
                                         capacities with F. Eberstadt & Co.,
                                         Walker,   Hart  &   Co.  and  James
                                         Benenson  &  Co. Mr.  Benenson  has
                                         served  as a  director  of the  Company
                                         since 1999 when he was appointed by the
                                         Company's  Board of  Directors  to fill
                                         the vacancy  created by the resignation
                                         of J. David Rosenberg.

Earle C. May (82)                        Mr. May has served as a director of the
(term expires 2001)                      Company  since July  1997.  Mr. May has
                                         been  an   executive   officer  of  May
                                         Management,    Inc.,    an   investment
                                         management firm, since prior to 1993.

Joseph L. Mullen (53)                    Mr.  Mullen has served as a director of
(term expires 2001)                      the Company  since 1995.  Since January
                                         1994, Mr. Mullen has served as Managing
                                         Partner  of Li Moran  International,  a
                                         management  consulting company, and has
                                         functioned   as   a   senior    officer
                                         overseeing    the    merchandise    and
                                         marketing    departments    for    such
                                         companies as Leewards  Creative  Crafts
                                         Inc.;  Office Depot of Warsaw,  Poland;
                                         and  Camelot   Music.   Mr.  Mullen  is
                                         currently  serving  as Vice  President,
                                         General Merchandising Manager-Hard Line
                                         of   Retail   Exchange.com,   Inc.,   a
                                         business-to-business  Internet  company
                                         that operates an online marketplace for
                                         excess consumer goods.

Executive Officers

            The following  sets forth the name,  present  principal  occupation,
employment and material occupations,  positions, offices and employments for the
past five years and ages as of March 22, 2001, for the executive officers of the
Company.

NAME AND AGE                             OCCUPATION AND OTHER DIRECTORSHIPS
------------                             ----------------------------------

Glen M. Kassan (57)                      Mr. Kassan has served as Vice President
                                         and  Chief  Financial  Officer  of  the
                                         Company  since June 2000. He has served
                                         as Vice  President  of  Steel  Partners
                                         Services Ltd. since October 1999.  From
                                         1997 to 1998,  Mr.  Kassan was Chairman
                                         and  Chief  Executive  Officer  of Long
                                         Term Care  Services,  Inc., a privately
                                         owned healthcare services company which
                                         he  co-founded  in 1994,  and initially
                                         served  as  Vice   Chairman  and  Chief
                                         Financial Officer. Mr. Kassan serves on
                                         the Board of Directors of  Tandycrafts,
                                         Inc., a manufacturer  of picture frames
                                         and framed art, and US Daignostic Inc.,
                                         an  operator of  outpatient  diagnostic
                                         imaging.

James R. Henderson (42)                  Mr.   Henderson   has  served  as  Vice
                                         President of  Operations of the Company
                                         since  September 2000. He has served as
                                         Vice-President   of  Steel   LLC  since
                                         August  1999.  From 1996 to July  1999,
                                         Mr.  Henderson  was employed in various
                                         positions  with  Aydin  Corporation,  a
                                         defense-electronics manufacturer, which
                                         included  a  tenure  as  president  and
                                         Chief  Operating  Officer  from October
                                         1998  to  June   1999.   Prior  to  his
                                         employment with Aydin Corporation,  Mr.
                                         Henderson  was employed as an executive
                                         with UNISYS Corporation,  an e-business
                                         solutions

                                       12



                                         provider.  Mr.  Henderson is a director
                                         of   ECC    International    Corp.,   a
                                         manufacturer     and     marketer    of
                                         computer-controlled    simulators   for
                                         training     personnel    to    perform
                                         maintenance and operator  procedures on
                                         military weapons.

Section 16(a) Beneficial Ownership Reporting Compliance

            Section  16(a) of the  Securities  Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10% of
a  registered  class  of the  Company's  equity  securities,  to file  with  the
Securities and Exchange  Commission  initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Officers,  directors  and  greater-than  10%  shareholders  are  required by SEC
regulation  to furnish the Company  with copies of all Section  16(a) forms they
file.  To the Company's  knowledge,  based solely on its review of the copies of
such reports furnished to the Company, during its fiscal year ended December 31,
2000 all Section 16(a) filing requirements applicable to its officers, directors
and  greater-than  10% beneficial  owners were satisfied,  with the exception of
Earle May and Glen Kassan whose Forms 5 reporting the  acquisition of securities
of the Company were inadvertently filed late.

Item 11.   Executive Compensation

Cash and Other Compensation

            The  following  table  sets  forth all the  compensation  earned for
services rendered in all capacities,  during the fiscal years indicated,  by the
Chief  Executive  Officer of the Company.  No other executive  officer  received
annual compensation in excess of $100,000 during the most recent fiscal year.

                                                               Long-Term
                                                              Compensation
         Name and                                               Awards
    Principal Position              Year                     Options/SARs (#)
    ------------------              ----                     ----------------

Warren G. Lichtenstein              2000                            0
President and                       1999                            0
Chief Executive Officer             1998                      211,145


Stock Options

            The following  table shows  aggregate  option  exercise of the Chief
Executive  Officer  during the year  (there  were no stock  appreciation  rights
granted or  exercised)  and the number and value of options  held as of December
31, 2000 by the Chief Executive Officer.

                                       13




AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES


                                                                     Number of Securities
                                                                    Underlying Unexercised          Value of Unexercised
                            Shares Acquired on        Value                Options                 In-the-Money Options at
            Name               Exercise (#)        Realized ($)      at Fiscal Year-End(#)         Fiscal Year-End ($)(1)
            ----               ------------        ------------      ---------------------         -----------------------

                                                                  Exercisable    Unexercisable   Exercisable     Unexercisable
                                                                  -----------    -------------   -----------     -------------

Warren G. Lichtenstein             0                 0               227,458         0             $191,602            0
------------------------------------------------------------------------------------------------------------------------------

(1)         Based on the market  value,  as reported on the NASDAQ  Small Cap of
            $2.78 per share of Common  Stock at December 31, 2000 and an average
            exercise price of $1.94 per share.

Compensation Committee Interlocks and Insider Participation

            The  Compensation  Committee is composed of Earle May, Joseph Mullen
and James Benenson.  No interlocking  relationship  exists between any member of
the Company's Compensation Committee and any member of any other company's board
of directors or compensation  committee.  No interlocking  relationship  existed
between any member of the  Company's  Board of  Directors  and any member of any
other company's board of directors or other compensation committee in 2000.

Director Compensation

            Each of the three  directors  who is not an officer  has  elected to
receive  his  retainer  fee of $12,000  per year and  meeting  fee  compensation
ranging  from $375 to $1,000 per meeting in the form of grants of common  stock,
to be paid at the time of the annual meeting. The value of the shares granted is
the fair market value at the time of the grant.  Officers who are not  directors
do not receive annual or per meeting compensation. Earle May, as chairman of the
audit committee, receives monetary compensation of $2,500 per quarter.

Item 12.   Security Ownership of Certain Beneficial Owners and Management

            The  following  table  sets  forth  information  as of March 1, 2001
regarding the  beneficial  ownership of the Common Stock by each person known by
the  Company  to own  beneficially  more than 5% of the  Common  Stock,  by each
director and executive officer, individually, and by all directors and executive
officers as a group.

                                               Amount and
                                                Nature of
                                               Beneficial        Percentage
Name and Address                                Ownership         of Class
----------------                                ---------         --------

Warren G. Lichtenstein                      1,808,487  (1)          41.41%
150 East 52nd Street
New York, New York  10022

Steel Partners II, L.P.                     1,578,529  (2)          36.15%
150 East 52nd Street
New York, New York  10022

                                       14




Jack L. Howard                                110,608  (3)           2.53%
182 Farmers Lane
Santa Rosa, CA 95405

Glen M. Kassan                                  8,333  (4)             *
8 Barkley Court
East Brunswick, NJ 08816

James R. Henderson                             16,667  (5)             *
203 E. Jefferson Street
Falls Church, VA 22046

Earle C. May                                  383,529  (6)           8.78%
4550 Kruse Way #345
Lake Oswego, Oregon  97035

Joseph L. Mullen                               24,646  (7)             *
611 Broadway, Suite 801
New York, NY 10012

James Benenson, Jr.                            65,427  (8)           1.50%
One Lexington Ave
New York, NY 10010


All directors and executive officers        2,417,697               55.36%
as a group (seven persons)

----------------------------
*Less than 1%

(1)         Includes:   (a)  2,500   shares  of  Common   Stock   owned  by  Mr.
            Lichtenstein;  (b)  227,458  shares of Common  Stock  issuable  upon
            exercise of options owned by Mr.  Lichtenstein  within sixty days of
            March 1, 2001;  (c) 1,539,345  shares of Common Stock owned by Steel
            Partners II, L.P.;  and (d) 39,184  shares of Common Stock  issuable
            upon the  exercise  of  warrants  owned by Steel  Partners  II, L.P.
            within  sixty days of March 1, 2000.  Mr.  Lichtenstein  is the sole
            managing  member of the general  partner of Steel  Partners II, L.P.
            Mr.  Lichtenstein  disclaims  beneficial  ownership of the shares of
            Common Stock owned by Steel  Partners II, L.P,  except to the extent
            of his pecuniary  interest in such shares of Common Stock,  which is
            less than the amount disclosed.

(2)         Represents  1,539,345  shares of Common  Stock and 39,184  shares of
            Common Stock issuable upon exercise of warrants within sixty days of
            March 1, 2001.

(3)         Represents 34,900 shares of Common Stock and 75,708 shares of Common
            Stock  issuable upon exercise of options  within sixty days of March
            1, 2001.

(4)         Represents  8,333 shares of Common Stock  issuable  upon exercise of
            options within sixty days of March 1, 2001.

(5)         Represents  16,667 shares of Common Stock  issuable upon exercise of
            options within sixty days of March 1, 2001.

(6)         Includes:  (a) 9,618  shares of Common  Stock owned by Mr. May;  (b)
            20,361 shares of Common Stock  issuable upon the exercise of options
            within  sixty days of March 1, 2001  granted to Mr. May;  (c) 23,000
            shares  of  Common  Stock  owned by May  Management,  Inc.;  and (d)
            330,550 shares of Common Stock held in customer accounts as to which
            May Management,  Inc. has

                                       15



            shared dispositive power. Mr. May is the Chief Executive Officer and
            a principal stockholder of May Management, Inc. and may be deemed to
            be the beneficial  owner of shares owned by May Management,  Inc. or
            as to which May Management, Inc. has shared dispositive power.

(7)         Represents  4,285 shares of Common Stock and 20,361 shares of Common
            Stock  issuable upon exercise of options  within sixty days of March
            1, 2001.

(8)         Includes  3,749  shares of Common  Stock owned by Mr.  Benenson  and
            61,678   shares  of  Common  Stock  owned  by   Arrowhead   Holdings
            Corporation,  of which Mr. Benenson is the  controlling  stockholder
            and thus  deemed the  beneficial  owner of all such shares of Common
            Stock.

                              --------------------

Item 13.  Certain Relationships and Related Transactions

          As of March 1, 1998,  the Company  entered into a sub-lease for office
space with GWAY for use of such space as a corporate  office on a  non-exclusive
basis.  This lease runs through March 31, 2001,  but may be terminated by either
party on 90 days notice.  Warren Lichtenstein,  the Company's  President,  Chief
Executive Officer, and Chief Accounting Officer, is the Chairman of the Board of
Directors of GWAY. Mr.  Lichtenstein  is also the Managing Member of the General
Partner of Steel  Partners II, L.P. which owns  approximately  38% of the common
stock of GWAY. SPS, which is owned by an entity controlled by Mr.  Lichtenstein,
also subleases part of the office space from GWAY.

          During the years ended  December  31, 1999 and 2000,  the Company paid
management  fees of  $267,000  and  $310,000,  respectively,  to SPS for certain
management,  consulting  and  advisory  services.  The fees  also  included  the
Company's  one-third  share of rent expense that was paid entirely by SPS during
2000.  The Company  believes  that the cost of obtaining the type and quality of
services rendered by SPS is no less favorable than the cost at which the Company
could obtain from unaffiliated entities.



                                       16




PART IV

Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) Financial Statements

            See index to consolidated financial statements immediately following
the exhibit index.

(b) Reports on Form 8-K filed during the fourth quarter of the period covered by
this report:

            (i) none

(c) Exhibits

            See Exhibit Index immediately following the signature page.



                                       17




                                   SIGNATURES

            Pursuant  to  the  requirements  of  Section  13  or  15(d)  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.


Date: June 7, 2001                            WebFinancial Corporation

                                              By: /s/ Warren G. Lichtenstein
                                                  -----------------------------
                                              Warren G. Lichtenstein
                                              President, Chief Executive Officer

                                              By: /s/ Glen M. Kassan
                                                  ------------------------------
                                              Glen M. Kassan
                                              Vice President and Chief Financial
                                              Officer



                                       18




                                  EXHIBIT INDEX

      3.1         Amended and Restated Certificate of Incorporation,  as amended
                  -  Incorporated  by reference  to Exhibit I-4 to  Registration
                  Statement on Form 8-A12G filed March 27, 1995.

      3.2         By-laws  -  Incorporated   by  reference  to  Exhibit  I-5  to
                  Registration Statement on From 8-A12G filed March 27, 1995.

      10.1        Stock  Purchase  Agreement,  dated  January 20,  1998,  by and
                  between Praxis Investment  Advisors,  Inc. and Block Financial
                  Corporation  -  Incorporated  by  reference  to  Exhibit  1 to
                  Quarterly Report on Form 10-Q filed September 17, 1998.

      10.2        Form of Subscription and Stockholders Agreement,  dated August
                  31, 1998, by and among Andrew Winokur,  Rose's  International,
                  Inc., WebBank Corporation,  Praxis Investment  Advisors,  Inc.
                  and Rose's  Holdings,  Inc. -  Incorporated  by  reference  to
                  Exhibit 2 to Quarterly Report on Form 10-Q filed September 17,
                  1998.

      10.3        Form of Assignment,  Transfer and Delegation Agreement,  dated
                  July  1998,  by and among  Praxis  Investment  Advisors,  LLC,
                  Andrew Winokur and Rose's  International,  Inc. - Incorporated
                  by  reference  to Exhibit 3 to  Quarterly  Report on Form 10-Q
                  filed September 17, 1998.

      10.4        Form of  Employment  Agreement,  dated July 1998, by and among
                  Praxis  Investment   Advisors,   Inc.  and  Andrew  Winokur  -
                  Incorporated by reference to Exhibit 4 to Quarterly  Report on
                  Form 10-Q filed September 17, 1998.

      10.5        Form of Management Agreement,  dated 1998, by and among Rose's
                  International,  Inc.,  Andrew Winokur,  and Praxis  Investment
                  Advisors,  Inc. -  Incorporated  by  reference to Exhibit 5 to
                  Quarterly Report on Form 10-Q filed September 17, 1998.

      21.1        Subsidiaries of Registrant (WebBank;  WebFinancial  Government
                  Lending, Inc.; Praxis Investment Advisors,  Inc.; and Web Film
                  Finance, Inc.)

     *23.1        Consent of KPMG LLP.


     *  Filed herewith.







                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Management's Report on Financial Statements.................................F-2

Report of Grant Thornton LLP, independent certified public accountants,
        on the December 31, 2000 financial statements.......................F-3

Report of KPMG LLP,  independent certified public accountants, on the
          December 31, 1999 and December 31, 1998 financial statements......F-4

Consolidated Statements of Financial Condition as of December 31, 2000
         and December 31, 1999..............................................F-5

Consolidated  Statements  of  Operations  for the year ended
         December  31,  2000,  the year ended  December  31,
         1999, and the eleven-month period
         ended December 31, 1998............................................F-6

Consolidated Statements of Stockholders' Equity for the year
         ended  December 31, 2000,  the year ended  December
         31, 1999, and the eleven-month
         period ended December 31, 1998.....................................F-8

Consolidated  Statements  of Cash  Flows for the year  ended
         December  31,  2000,  the year ended  December  31,
         1999, and the eleven-month period
         ended December 31, 1998............................................F-9

Notes to Consolidated Financial Statements..................................F-12


                                      F-1



                    WEBFINANCIAL CORPORATION AND SUBSIDIARIES


            MANAGEMENT'S REPORT ON CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2000

The consolidated  financial  statement on the following pages have been prepared
by management in  conformity  with  generally  accepted  accounting  principles.
Management  is  responsible  for the  reliability  and fairness of the financial
statement and other financial information included herein.

To meet its responsibilities with respect to financial  information,  management
maintains and enforces  internal  accounting  policies,  procedures and controls
which are designed to provide  reasonable  assurance that assets are safeguarded
and that  transactions  are properly  recorded and executed in  accordance  with
management's  authorization.  Management believes that the Company's  accounting
controls  provide  reasonable,  but  not  absolute,  assurance  that  errors  or
irregularities which could be material to the financial statements are prevented
or would be detected  within a timely period by Company  personnel in the normal
course of  performing  their  assigned  functions.  The  concept  of  reasonable
assurance  is based on the  recognition  that the cost of  controls  should  not
exceed the expected benefits.

The responsibility of our independent auditors, Grant Thornton LLP and KPMG LLP,
is to  conduct  their  audit in  accordance  with  generally  accepted  auditing
standards. In carrying out this responsibility, they planned and performed their
audit to obtain reasonable  assurance about whether the financial statements are
free of material misstatement, whether caused by error or fraud.

The Audit  Committee of the Board of Directors met twice with management and the
independent  auditors to discuss  auditing and  financial  matters and to assure
that each is carrying out its  responsibilities.  The independent  auditors have
full and free access to the Audit Committee and meet with it by telephone,  with
and without management being present,  to discuss the results of their audit and
their opinions on the quality of financial reporting.


By: /s/ Warren G. Lichtenstein
    --------------------------
      Warren G. Lichtenstein
      President, Chief Executive Officer
      and Chief Accounting Officer

By: /s/ Glen M. Kassan
    ---------------------
      Glen M. Kassan
      Vice President and Chief Financial Officer

                                      F-2




                          INDEPENDENT AUDITORS' REPORT




Board of Directors
WebFinancial Corporation


We have audited the accompanying  consolidated  statement of financial condition
of WebFinancial  Corporation  and  subsidiaries as of December 31, 2000, and the
related consolidated  statements of operations,  stockholders'  equity, and cash
flows  for the year  ended  December  31,  2000.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
WebFinancial  Corporation  and  subsidiaries  as of December 31,  2000,  and the
consolidated  results of their operations and their  consolidated cash flows for
the year ended  December  31,  2000 in  conformity  with  accounting  principles
generally accepted in the United States of America.



/s/Grant Thornton LLP
Salt Lake City, Utah
February 9, 2001 (except for the second
   paragraph of note 19 for which the date
   is March 19, 2001)

                                      F-3





                          INDEPENDENT AUDITORS' REPORT



The Board of Directors and Shareholders
WebFinancial Corporation:


We have audited the accompanying  consolidated  statement of financial condition
of WebFinancial Corporation and subsidiaries (formerly Rose's Holdings, Inc.) as
of December 31, 1999,  and the related  consolidated  statements of  operations,
stockholders'  equity,  and cash flows for the year ended  December 31, 1999 and
the eleven-month  period ended December 31, 1998. These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position  of  WebFinancial
Corporation  and   subsidiaries  as  of  December  31,  1999,  and  the  related
consolidated statements of operations,  stockholders' equity, and cash flows for
the year ended December 31, 1999 and the eleven-month  period ended December 31,
1998, in conformity with accounting  principles generally accepted in the United
States of America.


/s/ KPMG LLP
---------------------
Salt Lake City, Utah
March 24, 2000
                                      F-4





                    WEBFINANCIAL CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                    (Amounts in thousands except share data)

                                                                                  December 31,         December 31,
                                                                                    2000                  1999
                                                                                    ----                  ----
           Assets
   Cash and due from banks                                                        $  6,086             $  7,266
   Federal funds sold                                                                   76                 --
      Total cash and cash equivalents                                                6,162                7,266

   Investment securities (note 4)
      Held-to-maturity (estimated fair value of $32 and $37
          at December 31, 2000 and 1999)                                                32                   37
      Available-for-sale                                                               463                  858
                                                                                  --------             --------
          Total investment securities                                                  495                  895

   Loans, net of deferred income (note 5)                                           12,131               10,868
   Less allowance for loan losses (note 6)                                           1,077                  472
                                                                                  --------             --------
          Total loans, net                                                          11,054               10,396


   Premises and equipment,
      net of accumulated depreciation and amortization (note 10)                       110                  101
   Accrued interest receivable                                                         113                  163
   Goodwill, net of accumulated
      amortization of $276 in 2000 and $158 in 1999                                  1,498                1,616
   Other assets (notes 5 and 18)                                                     5,363                  505
                                                                                  --------             --------

                                                                                  $ 24,795             $ 20,942
                                                                                  ========             ========

   Liabilities and Stockholders' Equity
   Deposits:
   Non interest-bearing demand                                                    $    250             $    250
   Certificates of deposit (note 8)                                                  9,882                4,639
                                                                                  --------             --------
Total deposits                                                                      10,132                4,889

Short term borrowings (note 9)                                                        --                  1,100
Other liabilities                                                                      779                1,061
                                                                                  --------             --------
Total liabilities before minority interests                                         10,911                7,050

Minority interests                                                                     460                  457

Commitments and contingencies (notes 9, 13 and 16)

Stockholders' Equity
   Preferred stock, 10,000,000 shares authorized, none issued                         --                   --
   Common stock, 50,000,000 shares authorized;
       $.001 par value, 4,354,280 shares issued and outstanding at
       December 31, 2000 and 4,349,996 shares issued
       and outstanding at December 31, 1999                                              4                    4
   Paid-in capital                                                                  36,559               36,513
   Accumulated deficit                                                             (23,139)             (23,082)
                                                                                  --------             --------
Total stockholders' equity                                                          13,424               13,435
                                                                                  --------             --------

                                                                                  $ 24,795             $ 20,942
                                                                                  ========             ========

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                      F-5




                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (Amounts in thousands except share data)

                                                                                                                Eleven-month
                                                                         Year ended           Year ended        period ended
                                                                        December 31,         December 31,       December 31,
                                                                            2000                1999                1998
                                                                            ----                ----                ----
Interest income
    Interest and fees on loans                                            $ 1,478             $   420             $    30
    Interest on cash equivalents                                              464                 476                 631
    Interest on federal funds sold                                              5                --                  --
    Interest on investment securities                                         222                 130                  15
                                                                          -------             -------             -------
          Total interest income                                             2,169               1,026                 676

Interest expense
    Interest on deposits                                                      812                 150                --
    Interest on short-term borrowings                                          18                  29                --
                                                                          -------             -------             -------
          Total interest expense                                              830                 179                --

               Net interest income before provision
               for loan losses                                              1,339                 847                 676

Provision for loan losses (note 6)                                            917                 475                --
                                                                          -------             -------             -------

               Net interest income after provision
               for loan losses                                                422                 372                 676

Noninterest income
    Gain on sale of loans                                                   1,061                 913                --
    Fee income                                                              1,480                 442                --
    Miscellaneous income                                                      854                 212                --
                                                                          -------             -------             -------
          Total other operating income                                      3,395               1,567                --

Noninterest expenses
    Salaries, wages, and benefits                                           1,680               1,485                 428
    Professional and legal fees                                               532                 617                 242
    Occupancy expense                                                         191                 199                  60
    Amortization of goodwill                                                  118                 117                  41
    Other general and administrative                                        1,350               1,265                 679
                                                                          -------             -------             -------
          Total operating expenses                                          3,871               3,683               1,450
                                                                          -------             -------             -------

               Operating income (loss)                                        (54)             (1,744)               (774)

Income taxes (note 14)                                                       --                  --                  --
                                                                          -------             -------             -------

Loss before minority interest                                                 (54)             (1,744)               (774)

(Income) loss attributable to minority interests                               (3)                134                  59
                                                                          -------             -------             -------

          Net loss                                                        $   (57)            $(1,610)            $  (715)
                                                                          =======             =======             =======

                                   (continued)

                                      F-6



                CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
                    (Amounts in thousands except share data)

                                                                                                                 Eleven-month
                                                            Year ended                 Year ended                period ended
                                                           December 31,               December 31,               December 31,
                                                               2000                       1999                       1998
                                                               ----                       ----                       ----




Basic net income (loss) per common share                   $          (0.01)      $          (0.37)      $          (0.17)
Diluted net income (loss) per common share                 $          (0.01)      $          (0.37)      $          (0.17)

Weighted average number of common shares:
    Basic                                                         4,353,905              4,312,708              4,315,966
    Diluted                                                       4,353,905              4,312,708              4,315,966



The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.






                                      F-7




                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

           Year Ended December 31, 2000, Year Ended December 31, 1999
                and Eleven-Month Period Ended December 31, 1998,
                    (Amounts in thousands except share data)


                                                                  Common stock                                           Total
                                                                  ------------            Paid-in       Accumulated    Stockholders'
                                                             Shares          Amount       capital         deficit        equity
                                                             ------          ------       -------         -------        ------

Balance at January 31, 1998                                4,320,032      $   35,000     $    1,159      $  (20,757)     $   15,402

Net loss                                                        --              --             --              (715)           (715)

Shares retired                                                (9,840)           --             --              --              --

Assignment of par value to
    common stock                                                --           (34,996)        34,996            --              --
                                                          ----------      ----------     ----------      ----------      ----------

Balance at December 31, 1998                               4,310,192               4         36,155         (21,472)         14,687

Net loss                                                        --              --             --            (1,610)         (1,610)
Shares redeemed and
    retired                                                  (78,829)           --             (323)           --              (323)
Shares issued upon
    exercise of options                                      114,307            --              417            --               417
Shares issued for
    services rendered                                          4,326            --               23            --                23
Contribution of
    capital                                                     --              --              180            --               180
Options granted for
    services rendered                                           --              --               61            --                61
                                                          ----------      ----------     ----------      ----------      ----------

Balance at December 31, 1999                               4,349,996               4         36,513         (23,082)         13,435
Net loss                                                        --              --             --               (57)            (57)
Shares issued for
    services rendered                                          4,284            --               24            --                24



Contribution of capital                                         --              --               22            --                22
                                                          ----------      ----------     ----------      ----------      ----------

Balance at December 31, 2000                               4,354,280      $        4     $   36,559      $  (23,139)     $   13,424
                                                          ==========      ==========     ==========      ==========      ==========


The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                      F-8




                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Amounts in thousands)


                                                                                                                        Eleven-month
                                                                                      Year ended          Year ended    period ended
                                                                                      December 31,        December 31,  December 31,
                                                                                          2000               1999           1998
                                                                                          ----               ----           ----
Cash flows from operating activities:
Net income (loss) from continuing operations                                            $   (57)          $(1,610)          $  (715)
Adjustments to reconcile net income (loss) to net cash
    provided by (used in) operating activities:
          Minority interest                                                                   3              (134)              (59)
          Depreciation and amortization                                                      42                65                20
          Premium earned on sale of loans                                                (1,061)             (913)             --
          Gain on sale of investment securities                                            --                 (76)             --
          Permanent writedown of investment securities                                      100              --                --
          Common stock and options granted in lieu of cash                                   24                84              --
          Provision for loan losses                                                         917               475              --
          Amortization/(accretion) of loan fees, net                                        (97)                7                 9
          Amortization of goodwill                                                          118               117                41
          Amortization of premiums for
               available-for-sale securities                                               (163)             --                  24
          Amortization of servicing assets                                                   35                 8              --
Change in operating assets and liabilities:
          Cash restricted in escrow                                                        --               2,018              --
          Loans held for sale                                                             1,312              --                --
          Accounts receivable                                                              --                 (14)             --
          Prepaid expense                                                                  --                 (30)              (33)
          Accrued interest receivable                                                        50              (122)              (20)
          Other assets                                                                     (643)             (118)             (145)
          Other liabilities                                                                (282)              627              --
          Income tax due to former parent                                                  --                (309)             --
                                                                                        -------           -------           -------

               Net cash provided by (used in)
               operating activities                                                         298                75              (566)
                                                                                        -------           -------           -------

                                   (continued)

                                      F-9



                   WEBFINANCIAL CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)


                                                                                                                     Eleven-month
                                                                            Year ended             Year ended        period ended
                                                                            December 31,          December 31,       December 31,
                                                                               2000                   1999                1998
                                                                               ----                   ----                ----

Cash flows from investing activities:
    Purchase of subsidiary                                                         --                 --               (2,946)
    Purchase of investment securities available-for-sale                        (24,836)              --               (1,649)
    Principal payments received on investment
          securities available-for-sale                                          25,294              1,042               --
    Proceeds from sale of available-for-sale securities                            --                  257               --
    Purchase of investment securities held-to-maturity                             --                  (48)              --
    Principal payments received on investment
          securities held-to-maturity                                                 5                 11               --
    Loans originated and principal collections, net                              (5,249)            (8,898)              (191)
    Purchase of loans                                                              (730)              --                 --
    Purchase of premises and equipment                                              (51)               (50)               (47)
    Minority interest                                                              --                 --                  612
    Funds transferred to escrow                                                    --                 --                  (98)
                                                                               --------           --------           --------

               Net cash used in
               investing activities                                              (5,567)            (7,686)            (4,319)
                                                                               --------           --------           --------

Cash flows from financing activities:
    Net increase in demand deposits                                                --                  145                101
    Net increase in certificates of deposit                                       5,243              4,639               --
    Net increase (decrease) in short-term borrowings                             (1,100)             1,100               --
    Issuance of common stock for cash                                              --                  417               --
    Cash paid to redeem shares                                                     --                 (323)              --
    Minority interest contribution                                                 --                   38               --
    Contribution of capital                                                          22                180               --
                                                                               --------           --------           --------

          Net cash provided by financing activities                               4,165              6,196                101
                                                                               --------           --------           --------

Net decrease in cash and cash equivalents                                        (1,104)            (1,415)            (4,784)

Cash and cash equivalents at beginning of period                                  7,266              8,681             13,465
                                                                               --------           --------           --------

Cash and cash equivalents at end of period                                     $  6,162           $  7,266           $  8,681
                                                                               ========           ========           ========

                                   (continued)

                                      F-10




                   WEBFINANCIAL CORPORATION AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

                                                                                                                      Eleven-month
                                                                            Year ended         Year ended             period ended
                                                                            December 31,       December 31,           December 31,
                                                                               2000                1999                    1998
                                                                               ----                ----                    ----


Supplemental disclosure of cash flow information:
    Cash paid for interest                                                  $       731          $  156          $        3

Supplemental disclosure of additional non-cash activities:
Conversion of loan receivable to investment
    securities available-for-sale                                           $         -          $    -          $      216

During 2000 WebBank transferred loans of $4,250 to other assets
to reflect their sale prior to settlement.

During 1998 the Company acquired 90 percent of the outstanding
stock of WebBank (note 3). The  following is a summary of the
effect of this  transaction  in the Company's consolidated
balance sheet: Assets acquired:
    Investment securities available-for-sale                                $         -          $    -          $     (240)
    Commercial loans                                                                  -               -              (1,115)
    Accrued interest receivable                                                       -               -                 (21)
    Property and equipment                                                            -               -                 (89)
    Other assets                                                                      -               -                 (28)
    Goodwill                                                                          -               -              (1,774)

Liabilities assumed:
    Demand deposits                                                                   -               -                   4
    Accounts payable and accrued expenses                                             -               -                   8
    Income taxes payable to subsidiary's former parent                                -               -                 309
                                                                            -----------          ------          ----------
    Net cash used                                                           $         -          $    -          $   (2,946)
                                                                            ===========          ======          ===========

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                      F-11


                   WEBFINANCIAL CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

           Year Ended December 31, 2000, Year Ended December 31, 1999
                 and Eleven-Month Period Ended December 31, 1998
           (All numbers except shares and per share data in thousands)

1.          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization--The   consolidated  financial  statements  include  the  financial
statements of WebFinancial  Corporation  (the  "Company") and its  subsidiaries:
WebFinancial  Holdings Corporation  ("Holdings"),  WebBank  ("WebBank"),  Praxis
Investment Advisers,  Inc.  ("Praxis"),  WebFinancial  Government Lending,  Inc.
("Lending"), and Web Film Financial, Inc. ("Film"),  collectively referred to as
the Company.  WebBank is a Utah-chartered  industrial loan  corporation,  and is
subject to comprehensive regulation, examination, and supervision by the Federal
Deposit  Insurance  Corporation  ("FDIC"),  and the State of Utah  Department of
Financial  Institutions.  WebBank  provides  commercial  and consumer  specialty
finance  services.   Lending  was  organized  to  provide  U.S.   Department  of
Agriculture  loan  originations,  sales and servicing.  During 2000, most of the
assets of Lending were  transferred  to WebBank in exchange  for WebBank  common
stock. Film was organized to finance the production and distribution of a motion
picture  and  the  Company.  Both  Film  and  Praxis  significantly  wound  down
operations in 2000. All significant  intercompany  balances have been eliminated
in consolidation.

Basis of Presentation--The  preparation of consolidated  financial statements in
conformity with accounting principals generally accepted in the United States of
America  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  consolidated  financial  statements and the
reported  amounts of revenues and expenses during the reporting  period.  Actual
results  could  differ  from  those  estimates.  A  material  estimate  that  is
particularly  susceptible to significant  change in the near-term relates to the
determination  of the allowance for loan losses and the valuation of real estate
acquired  in  connection  with  foreclosures  or in  satisfaction  of loans.  In
connection  with the  determination  of the  allowance  for loan  losses and the
valuation  of  real  estate,   management  obtains  independent  appraisals  for
significant properties.

Cash  and  Cash   Equivalents--Cash   and  cash  equivalents  include  cash  and
noninterest bearing deposits in depository  institutions,  plus interest-bearing
deposits with banks and  investments in cash management  funds.  For purposes of
the  statements  of cash flows,  the Company  considers  all highly  liquid debt
instruments  with  maturities of three months or less when  purchased to be cash
equivalents. Cash equivalents are stated at cost, which approximates market.

Income (loss) Per  Share--Basic  income (loss) per common share is calculated by
dividing  net  income  (loss) by the  weighted-average  number of common  shares
outstanding for the period.  Diluted net income (loss) per common share reflects
the maximum  dilutive  effect of common stock  issuable  upon  exercise of stock
options and stock warrants.

For the year ended December 31, 2000, 42,228 potentially  dilutive common shares
were not  included in the  computation  of diluted  loss per share  because they
would have had an anti-dilutive effect on the 2000 loss per share.

Investment   Securities--The   Company   classifies  its  securities  as  either
available-for-sale  securities or held-to-maturity securities.  Held-to-maturity
securities are those securities that the Bank has the ability and intent to hold
until  maturity.  All other  securities  not  included in  held-to-maturity  are
classified as available-for-sale.

Held-to-maturity  securities  are recorded at amortized  cost,  adjusted for the
amortization   or  accretion  of  premiums  or   discounts.   Available-for-sale
securities  are recorded at fair value.  Unrealized  holding  gains or losses on
available-for-sale  securities  are excluded  from  earnings and reported  until
realized  in  accumulated  other  comprehensive  income  (loss)  as  a  separate
component  of  stockholders'  equity.  A  decline  in the  market  value  of any
available-for-sale or held-to-maturity  security below cost that is deemed other
than temporary is charged to earnings  resulting in the  establishment  of a new
cost for the security. Premiums and discounts are amortized or accreted over the
life  of  the  related  security  as  an  adjustment  to  the  yield  using  the
effective-interest  method.  Dividend and  interest  income is  recognized  when
earned.    Realized   gains   and   losses   for   securities    classified   as
available-for-sale  or held-to-maturity are included in earnings and are derived
using the specific-identification method.

                                      F-12



                   WEBFINANCIAL CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

Loans--Loans are reported at the principal amount outstanding,  net of premiums,
discounts,  and unearned income.  Premiums and discounts are  accreted/amortized
over the life of the related loan under the interest  method.  Unearned  income,
which includes deferred fees net of deferred direct incremental loan origination
costs,  is amortized to interest  income over the  contractual  life of the loan
using an interest method,  adjusted for actual prepayment  experience.  Interest
income is accrued daily as earned.

Allowance for Loan Losses--The  allowance for loan losses is established through
a provision for loan losses charged to expense.  Loan losses are charged against
the  allowance  when  management  believes that the  collectibility  of the loan
principal is unlikely.  Recoveries on loans previously  charged off are credited
to the allowance.

The allowance is an amount that  management  believes will be adequate to absorb
possible  loan losses  based on  evaluations  of  collectibility  and prior loss
experience.  The evaluation takes into  consideration such factors as changes in
the nature and volume of the  portfolio,  overall  portfolio  quality,  specific
problem loans, and current and anticipated  economic  conditions that may affect
the  borrowers'  ability  to  pay.  Management  also  obtains  appraisals  where
considered necessary.

Impaired Loans--Loans are considered impaired when, based on current information
and  events,  it is  probable  that the  Company  will be unable to collect  all
amounts due according to the contractual terms of the loan agreement,  including
scheduled interest payments.

This  assessment  for  impairment  occurs  when  and  while  such  loans  are on
nonaccrual.  When a loan with unique risk characteristics has been identified as
being  impaired,  the amount of the  impairment  will be measured by the Company
using  discounted  cash flows,  except when it is determined  that the remaining
source  of  repayment  for  the  loan is the  operation  or  liquidation  of the
underlying collateral.  In such cases, the current fair value of the collateral,
reduced by costs to sell, will be used in place of discounted cash flows.

If the measurement of the impaired loan is less than the recorded  investment in
the  loan,  including  accrued  interest,  net  deferred  loan fees or costs and
unamortized  premium or discount,  an  impairment  is  recognized by creating or
adjusting an existing allocation of the allowance for loan losses.

Nonaccrual Loans--Accrual of interest is discontinued on a loan when the loan is
90 days past due or when management  believes,  after  considering  economic and
business  conditions  and  collection  efforts,  that the  borrower's  financial
condition is such that  collection of interest is doubtful.  Interest  income on
nonaccrual loans is credited to income only to the extent interest  payments are
received. Loans are restored to accrual of interest when delinquent payments are
received in full.  Additionally,  the Company uses the cost recovery  accounting
method to recognize interest income on impaired loans.

Premises  and  Equipment--Premises  and  equipment  are  stated at cost,  net of
accumulated   depreciation  and  amortization.   Depreciation  of  premises  and
equipment is computed by the  straight-line  method over estimated  useful lives
from one to five years.  Leasehold  improvements are amortized over the terms of
the related leases or the estimated useful lives of the improvements,  whichever
is shorter.  Useful lives of leasehold  improvements  are between three and five
years.

Income  Taxes--The  Company uses the liability  method of accounting  for income
taxes.  Under the  liability  method,  deferred  tax  assets  and  deferred  tax
liabilities  are  recognized  for the future tax  consequences  attributable  to
differences  between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards.  Deferred tax assets and deferred  tax  liabilities  are measured
using  enacted  tax rates  expected  to apply to taxable  income in the years in
which those temporary  differences are expected to be recovered or settled.  The
effect on deferred tax assets and deferred  tax  liabilities  of a change in tax
rates is recognized in income in the period that includes the enactment date.

Loans Held for Sale--The  Company  originates  loans to customers under a United
States  Department of Agriculture  ("USDA") program that generally  provides for
USDA  guarantees of 70 percent to 90 percent of each loan.  The Company plans to
sell the  guaranteed  portion  of each  loan to a third  party  and  retain  the
unguaranteed  portion in its own portfolio.  Loans  held-for-sale are carried at
the  lower  of  cost or  estimated  market  value  in the  aggregate.  A sale is

                                      F-13



                   WEBFINANCIAL CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

recognized  when control over the loans sold is surrendered  and the proceeds of
the sale are other than  beneficial  interests  in the loans  sold.  The Company
allocates basis of the loans sold, the retained portions, and retained servicing
based upon their relative fair market  values.  To the extent the sale of a loan
involves the sale of part of a loan with a  disproportionate  credit  risk,  the
cost basis of the loan is allocated  based upon the relative  fair values of the
portion  sold and the  portion  retained  on the date  such  loan sale was made.
Deferred  income on USDA loans arises on the sale of the  government  guaranteed
portion of the loan and the retention of the unguaranteed portion. Such deferred
income is recognized over the estimated remaining life of the retained portion.

The Company is  required  to retain a minimum of five  percent of each USDA loan
sold and to service the loan for the  investor.  Based on the specific loan sale
agreement that the Company enters into with the investor, the difference between
the yield on the loan and the  yield  paid to the  buyer is the  servicing  fee.
Loans serviced for others amounted to $54,554,056 and $8,289,000 at December 31,
2000 and 1999,  respectively.  These loans are not included in the  accompanying
statements of financial  condition.  Fees earned for servicing  loans for others
are  reported as income when the  related  loan  payments  are  collected,  less
amortization of the servicing asset. Loan servicing costs are charged to expense
as incurred.

Goodwill--The acquisition of WebBank was accounted for under purchase accounting
resulting in goodwill of $1,774 which is being amortized using the straight-line
basis over 15 years. Goodwill is reviewed for possible impairment when events or
changed  circumstances  affect the underlying basis of the asset.  Impairment is
measured by comparing the investment to undiscounted operating income.

Accounting  for  Impairment  of  Long-Lived   Assets--The  Company  reviews  its
long-lived  assets for impairment  whenever  events or changes in  circumstances
indicate  that  the  carrying  amount  of  an  asset  may  not  be  recoverable.
Recoverability  of  assets  held and used is  measured  by a  comparison  of the
carrying amount of the asset to future  undiscounted  net cash flows expected to
be generated by the asset.  If such assets are  considered  to be impaired,  the
impairment  to be  recognized  is measured  by the amount by which the  carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of their carrying amount or fair value less cost to
sell.

Comprehensive  Income  (Loss)--  Components of  comprehensive  income (loss) may
include net income  (loss),  unrealized  gains  (losses)  on  available-for-sale
investment securities, foreign currency translation adjustments,  changes in the
market  value  of  futures  contracts  that  qualify  as a  hedge,  and net loss
recognized as an additional pension liability not yet recognized in net periodic
pension cost. For the years ended December 31, 2000 and 1999, the  comprehensive
income (loss) was $0.

Stock-Based Compensation--The Company employs the footnote disclosure provisions
SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 which allows
entities to account for stock options or similar equity based compensation using
the  intrinsic-value  method of accounting  prescribed by Accounting  Principles
Board  ("APB")  Opinion No. 25  Accounting  for Stock Issued to Employees  ("APB
25").  The Company has elected to continue to apply the provisions of APB 25 and
provide proforma footnote disclosures required by SFAS No. 123.

Reclassification--Certain amounts as of and for the year ended December 31, 1999
and the  eleven-month  period ended December 31, 1998 have been  reclassified to
conform with the 2000 presentation.

Operating Segments--The Company operates in one line of business, commercial and
consumer  specialty  finance  transactions.  As such,  the  Company has only one
reportable operating segment.

New Accounting  Pronouncements--The  Financial Accounting Standards Board issued
Statement on Financial  Accounting  Standards  ("SFAS") No. 133,  Accounting for
Derivative  Instruments and Hedging Activities in 1998. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts  (collectively referred to as
derivatives),  and for hedging  activities.  It requires that entities recognize
all  derivatives  as either assets or  liabilities in the statement of financial
position and measure  those  instruments  at fair value.  For a  derivative  not
designated as a hedging instrument,  changes in the fair value of the derivative
are recognized in earnings in the period of change. As a result of SFAS No. 137,
SFAS No. 133 has been adopted in 2001. The Company does not believe the adoption
of SFAS No. 133 will have a material effect on the financial position or results
of operations of the Company.

                                      F-14



                   WEBFINANCIAL CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:


On December 3, 1999, the SEC staff issued Staff Accounting  Bulletin ("SAB") No.
101, Revenue Recognition in Financial Statements. SAB No. 101 summarizes certain
of the staff's views in applying  generally  accepted  accounting  principles to
revenue recognition in financial statements.  The Company began to implement the
guidance of SAB No. 101 in the fourth  quarter of fiscal  2000.  The adoption of
SAB No. 101 did not have a material effect on the financial  position or results
of operations of the Company.

The  Financial   Accounting   Standards  Board  issued  Statement  of  Financial
Accounting Standards ("SFAS") No. 140, Accounting for Transfers and Servicing of
Financial Assets and  Extinguishments  of Liabilities.  This Statement  replaces
SFAS No. 125,  Accounting  for Transfers  and Servicing of Financial  Assets and
Extinguishments  of  Liabilities  and revises the standards for  accounting  for
securitizations  and other  transfers of  financial  assets and  collateral  and
requires certain disclosures,  but carries over most of SFAS No 125's provisions
without  reconsideration.  It provides  accounting  and reporting  standards for
transfers and servicing of financial assets and  extinguishments  of liabilities
The Company  does not believe the  adoption of SFAS No. 140 will have a material
effect on the financial position or results of operations of the Company.

2.          CHANGE IN YEAR END

The Company  applied to the Internal  Revenue  Service to change its fiscal year
end to a calendar year end,  resulting in an eleven-month  reporting  period for
1998. The Internal Revenue Service granted approval of the Company's  request in
February 1999.

3.          ACQUISITION AND FORMATION OF SUBSIDIARIES

On August 31, 1998, Holdings, a newly formed,  wholly-owned  Delaware subsidiary
of the Company,  consummated  the  acquisition of 90 percent of the  outstanding
common stock ("Bank Common  Stock") of WebBank,  pursuant to an assignment  (the
"Assignment")  from  Praxis  Investment  Advisers,  a Nevada  limited  liability
company  ("PIA"),  of a stock  purchase  agreement,  dated January 20, 1998 (the
"Purchase  Agreement"),  between PIA and Block Financial Corporation  ("Block"),
relating to the purchase by PIA of all of the issued and  outstanding  shares of
Bank Common Stock. Pursuant to the Assignment, the Company paid Block $4,783 for
the  shares  of Bank  Common  Stock to be  purchased  by Block  pursuant  to the
Purchase Agreement. In addition, the Company paid $288 in acquisition costs, for
a total  purchase  price of $5,071.  The  acquisition  was  accounted  for under
purchase accounting, resulting in goodwill of $1,774. On August 31, 1998, Praxis
was  formed by a cash  contribution  from the  Company  of $428 for a 90 percent
ownership of newly issued stock.

In connection  with the purchase of Bank Common Stock,  Holdings  entered into a
subscription  and  stockholders  agreement,  dated as of  August  31,  1998 (the
"Stockholders  Agreement")  with  Andrew  Winokur  ("AW"),  the  owner of the 10
percent  of the  outstanding  shares  of Bank  Common  Stock  not  purchased  by
Holdings. Pursuant to the Stockholders Agreement, Holdings agreed to purchase 90
percent,  and AW agreed to  purchase 10 percent,  of the common  stock  ("Praxis
Common Stock") of Praxis.  The Stockholders  Agreement also provides for certain
restrictions on the disposition by AW of his Bank Common Stock and Praxis Common
Stock and certain rights and obligations of Holdings and the Company to purchase
the shares of Bank Common Stock and Praxis Common Stock owned by AW.

Holdings,  AW, and Praxis entered into a management agreement on August 31, 1998
(the  "Management  Agreement")  under  which  Praxis  agreed to provide  certain
management  services to AW and Holdings in  connection  with the  ownership  and
operation of WebBank.

Praxis and AW had also entered into an  employment  agreement  (the  "Employment
Agreement"),  providing for the employment of AW by Praxis. Under the Employment
Agreement, AW agreed to serve as president and chief executive officer of Praxis
for a term of five years  (which may be extended  for one or more years with the
written  agreement  of the  parties).  Under the  Employment  Agreement,  AW was
granted the authority to formulate the  recommendations  to WebBank on behalf of
Praxis  pursuant to the  Management  Agreement.  During January 2000, AW and the
Company terminated their relationship. (See footnote 16.)

                                      F-15



                   WEBFINANCIAL CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

4.          INVESTMENT SECURITIES


Investment securities as of December 31, 2000, are summarized as follows:


                                                                           Held-to-maturity
                                          -----------------------------------------------------------------------------------
                                                                     Gross                 Gross                 Estimated
                                              Amortized            unrealized            unrealized                 fair
                                                cost                  gains                losses                   value
                                          -----------------      -----------------     -----------------     -----------------
      Collateralized MBS                  $              32      $               -     $              -      $              32
                                          =================      =================     =================     =================

                                                                          Available-for-sale
                                          -----------------------------------------------------------------------------------
                                                                     Gross                 Gross                 Estimated
                                              Amortized            unrealized            unrealized                 fair
                                                cost                  gains                losses                   value
                                          -----------------      -----------------     -----------------     -----------------

      Collateralized MBS                  $             447      $               -     $               -     $             447

      Interest-only strip                                16                      -                     -                    16
                                          -----------------      -----------------     -----------------     -----------------
                                          $             463      $               -     $               -     $             463
                                          =================      =================     =================     =================

Investment securities as of December 31, 1999, are summarized as follows:


                                                                           Held-to-maturity
                                          -----------------------------------------------------------------------------------
                                                                     Gross                 Gross                 Estimated
                                              Amortized            unrealized            unrealized                 fair
                                                cost                  gains                losses                   value
                                          -----------------      -----------------     -----------------     -----------------
      Collateralized MBS                  $              37      $               -     $              -      $              37
                                          =================      =================     =================     =================

                                                                          Available-for-sale
                                          -----------------------------------------------------------------------------------
                                                                     Gross                 Gross                 Estimated
                                              Amortized            unrealized            unrealized                 fair
                                                cost                  gains                losses                   value
                                          -----------------      -----------------     -----------------     -----------------
      Collateralized MBS                  $             684      $               -     $               -     $             684

      Interest-only strip                               174                      -                     -                   174
                                          -----------------      -----------------     -----------------     -----------------
                                          $             858      $               -     $               -     $             858
                                          =================      =================     =================     =================

The  amortized  cost and  estimated  market value of  investment  securities  at
December 31, 2000, by contractual maturity, are shown below. Expected maturities
will differ from contractual  maturities because borrowers may have the right to
prepay obligations with or without penalties.


                                                      Held-to-maturity                             Available-for-sale
                                          ----------------------------------------      ----------------------------------------
                                                                   Estimated fair                                Estimated fair
                                            Amortized cost             value              Amortized cost             value
                                          -----------------      -----------------      -----------------      -----------------
      Due beyond five years               $              32      $              32      $             463      $             463
                                          =================      =================      =================      =================

                                      F-16



                   WEBFINANCIAL CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:


5.          LOANS

Loans at December 31, 2000 and 1999 are summarized as follows:

                                             2000                   1999
                                         --------------      ------------------
         Commercial loans                $     11,634        $           8,785
         Installment loans                        947                      982
         Loans held-for-resale                      -                    1,312
         Deferred income                         (450)                    (211)
                                         --------------      ------------------
                                         $     12,131        $          10,868
                                         ==============      ==================

Loans to thirteen customers comprise  approximately 91 percent of total loans at
December 31, 2000. All of the loans in the portfolio are at a variable rate. The
ability of the borrowers to repay their  obligations  is dependent upon economic
conditions within their respective regions as well as the financial condition of
the borrowers.

6.          ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is summarized as follows:

                                               2000                 1999
                                         -----------------    -----------------
         Beginning balance               $            472     $              -
         Additions:
             Provision for loan losses                917                  475
             Recoveries                                 -                    -
         Deduction-loan charge-offs                 (312)                  (3)
                                         -----------------    -----------------
         Ending balance                  $          1,077     $            472
                                         ================    =================

The Company  considers the  allowance  for loan losses  adequate to cover losses
inherent  in loans and loan  commitments  at  December  31,  2000.  However,  no
assurance  can be given that the  Company  will not, in any  particular  period,
sustain loan losses that are sizable in relation to the amount reserved, or that
subsequent  evaluations  of the loan  portfolio,  in light of the  factors  then
prevailing,  including economic conditions and the Company's ongoing examination
process and that of its regulators,  will not require  significant  increases in
the allowance for loan losses. (See footnote 19.)


7.          RELATED PARTY TRANSACTIONS

As of March 31, 1998, the Company entered into a sub-lease for office space with
Gateway Industries, Inc. ("GWAY") for use of such space as a corporate office on
a  non-exclusive  basis.  This lease runs  through  March 31,  2001,  but may be
terminated  by  either  party  with 90 days  notice.  Warren  Lichtenstein,  the
Company's  President,  Chief Executive Officer, and Chief Accounting Officer, is
the  Chairman of the Board of Directors of GWAY.  Mr.  Lichtenstein  is also the
sole managing  member of the General  Partner of Steel Partners II, L.P.,  which
owns  approximately  38% of the common stock of GWAY.  Steel Partners  Services,
Ltd. ("SPS"),  which is owned by an entity controlled by Mr. Lichtenstein,  also
subleases  part of the office  space from GWAY.  In 2000 and 1999,  the rent was
included in a $310 and $267 management fee, respectively,  charged by SPS to the
Company.  Such management fee is included in the Company's selling,  general and
administrative expense. In 1998, the rent was approximately $32 and was included
in overhead  reimbursement  to SPS of $148. As of December 31, 2000 and 1999 the
Company showed,  in relation to SPS,  prepaid expense of $0 and $40 and accounts
payable of $0 and $12, respectively.


                                      F-17


                   WEBFINANCIAL CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:


8.          TIME CERTIFICATES OF DEPOSIT

Time certificates of deposits as of December 31, 2000 are summarized as follows:


                                                            Weighted
                                                            average
                                                              rate            2000
                                                        ----------------    ------------
         Certificates of deposit greater than
           $100,000                                           6.67%        $      8,279
         Other certificates of deposit                        6.76%               1,603
                                                        ----------------    ------------
                                                              6.69%        $      9,882
                                                        ================    ============

A summary of the  maturity of time  certificates  of deposit as of December  31,
2000 follows:

                                                      Within one year
                                                     -----------------

         Greater than $100,000                    $             8,279
         Other certificates of deposit                          1,603
                                                     -----------------
                                                  $             9,882
                                                     =================


9.          SHORT-TERM BORROWINGS

WebBank had an unsecured  operating  line of credit from a commercial  bank that
matured April 30, 2000,  which allowed WebBank to borrow up to $3,000.  Interest
was payable  monthly at the  commercial  bank's prime rate plus 100 basis points
(9.5 percent at December 31, 1999).  The operating line of credit was subject to
certain minimum  financial  covenants.  The average  borrowings on the operating
line of credit for the year ended  December  31,  1999,  were $244,  the maximum
outstanding at any month-end during the year ended December 31, 1999 was $2,600,
and the  average  rate  during  1999 was 9.7%.  The  average  borrowings  on the
operating  line of credit for the year ended  December 31,  2000,  were $64, the
maximum outstanding at any month-end during the year ended December 31, 2000 was
$775,  and the average rate during 2000 was 5.7%.  WebBank did not seek to renew
the line of credit when it expired on April 30, 2000.

On October 26, 2000,  WebBank was approved  for a $2,500  federal  funds line of
credit with another  commercial bank. The interest rate approximates the federal
funds rate and can be  outstanding  for no more than 60 days without  paying the
line  down in full.  The line of credit  will be used to fund loan  originations
prior to sale of the  guaranteed  portion.  The federal funds line of credit was
not utilized in 2000.

10.    PREMISES AND EQUIPMENT

       Premises and equipment at December 31, are summarized as follows:

                                                           2000        1999
                                                           ----        ----
       Leasehold improvements                          $    112   $      49
       Furniture and equipment                              202         137
                                                         ------      ------

                                                            314         186
       Less accumulated depreciation and amortization       204          85
                                                         ------      ------

                                                       $    110   $     101
                                                         ======      ======

                                      F-18


                   WEBFINANCIAL CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:


11.     STOCKHOLDERS' EQUITY

On November 4, 1998, at the annual meeting of stockholders  of the Company,  the
stockholders  approved a  one-for-two  reverse  split of its  common  stock (the
"Reverse  Split").  Pursuant to the Reverse  Split,  which  became  effective on
November 20, 1998 (the "Effective Date"),  every two shares of common stock held
by  stockholders  owning of  record  500 or more  shares of common  stock on the
Effective  Date were  converted  into one share of common stock,  and all shares
held by  stockholders  owning of record fewer than 500 shares of common stock on
the Effective  Date were  converted  into the right to receive a cash payment in
the amount of  $2.0375  per share.  The net effect of the  Reverse  Split was to
reduce the number of shares of common stock outstanding as of the Effective Date
from  8,620,383  shares to 4,310,192  shares.  All  references  to the number of
common  shares and per common share  amounts  have been  restated to reflect the
Reverse Split.

In January of 1999 the Depository  Trust Company made a final  determination  of
78,829  shares to be treated as  representing  positions of holders of less than
250 shares (on a post-split  basis).  Accordingly,  the Company  deposited in an
escrow  account  with First Union  National  Bank $323 for the purpose of paying
cash to holders of less than 250 shares and the  corresponding  shares have been
shown as redeemed and retired.

Members of the  Company's  board of  directors  contributed  cash of $180 to the
Company  in 1999 and $22 in 2000.  No  shares  were  issued as a result of these
transactions.   The  Company   recorded  the  contribution  as  an  addition  to
paid-in-capital.

12.     STOCK OPTIONS AND WARRANTS

The Company's New Equity Compensation Plan was adopted on February 14, 1995. The
Plan  provided  for the  granting of a maximum of 350,000  shares of stock.  The
price of the  options  granted  was not less than 100 percent of the fair market
value of the shares on the date of grant.  The options vested  immediately  with
the Sale of Stores. At that time, all options were canceled 60 days later.

On April 24, 1997,  the Company  adopted a Long Term Stock  Incentive Plan which
provides for the granting to employees and directors of, and consultants to, the
Company  certain  stock-based  incentives  and  other  equity  interests  in the
Company.  A maximum of 250,000  shares was issuable  under the Plan. The options
vest according to varied schedules, are exercisable when vested, and expire five
years from the date of issuance.

The Board of  Directors  of the  Company,  at its meeting on  September 2, 1998,
approved the merger of the New Equity  Compensation Plan (which had been adopted
in 1995)  into the Long Term Stock  Incentive  Plan  (which had been  adopted in
1997) and  certain  amendments  to the Long Term Stock  Incentive  Plan.  At the
annual meeting held November 4, 1998, the  shareholders  approved the merger and
certain  amendments to the new stock option plan (the "Merged  Plan".)  Approved
were the grants of certain stock-based  incentives and other equity interests to
employees,  directors,  and  consultants.  A maximum of 1,000,000  shares may be
issued  under the  Merged  Plan.  The  options  are vested  according  to varied
schedules,  exercisable  when  vested,  and  expire  five years from the date of
issuance.

                                      F-19



                    WEBFINANCIAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

The following table summarizes stock option activity:

                                                                                                                     Eleven-month
                                             Year ended                            Year ended                        period ended
                                          December 31, 2000                    December 31, 1999                   December 31, 1998

                                               Weighted-                             Weighted-                        Weighted-
                                     Number     average           Number              average          Number          Average
                                    of shares   exercise         of shares           exercise         of shares       Exercise
                                    (1,000's)    price           (1,000's)             price          (1,000's)         Price
                                -----------------------------   ---------------------------------- -----------------------------
Options outstanding at
  beginning of year                 442         $   4.08               504            $  3.72                49       $   3.40

Options granted                      27         $   3.44                52            $  6.25               455       $   3.75

Options cancelled                     -         $      -                 -            $     -                 -       $      -

Options exercised                     -         $      -              (114)           $     -                 -       $      -
                                 ------                            -------                              -------

Options outstanding at
  end of year                       469         $   4.04               442            $  4.08               504       $   3.72

Options exercisable at
  end of year                       441         $   4.01               369            $  4.01               268       $   3.95

Weighted-average fair
  value of options granted
  during the year              $   3.44                           $   2.71                             $   1.73

The following table summarizes information about fixed stock options outstanding
at December 31, 2000:

                                        Options outstanding                                                     Options exercisable
                            -----------------------------------------                               -------------------------------
                                  Number                 Weighted                                         Number
                                outstanding               average                Weighted-              exercisable       Weighted-
         Range of                   at                   remaining                average                   at             average
         exercise              December 31,             contractual              exercise              December 31,       exercise
          Prices                   2000                life in years               price                   2000             price
          ------                   ----                -------------               -----                   ----             -----

$     2.875 to 4.313                   368                  2.6               $    3.64                        348      $   3.65
$     4.314 to 6.470                    76                  2.9               $    4.99                         76      $   4.99
$     6.471 to 7.000                    25                  3.6               $    7.00                         17      $   7.00
                                    ------                                                                   -----
                                       469                                    $    4.04                        441      $   4.01
                                     =====                                                                   =====

                                      F-20



                    WEBFINANCIAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

The Company  accounts  for these plans under APB Opinion No. 25,  under which no
compensation  cost has been recognized.  Had  compensation  cost for these plans
been  determined  consistent  with SFAS 123, the Company's net loss and loss per
share would have been changed to the following pro forma amounts:


                                                                                                        Eleven-month period
                                                         Year ended December     Year ended December      ended December 31,
                                                               31, 2000                31, 1999                  1998
                                                                   ----                    ----                  ----

     Net income (loss)                   As reported          $     (57)             $   (1,610)              $    (715)
                                         Pro forma            $    (110)             $   (1,861)              $  (1,192)
     Basic and diluted
       net income (loss) per
       share                             As reported          $   (0.01)             $    (0.37)              $   (0.17)
                                         Pro forma            $   (0.03)             $    (0.43)              $   (0.28)


The fair value of each option  grant is estimated on the date of the grant using
the  Black-Scholes  option  pricing  model with the following  weighted  average
assumptions  for the years  ended  December  31,  2000 and 1999,  and the eleven
month-period  ended December 31, 1998:  risk-free interest rates of 6.3 percent,
4.6  percent,  and 4.7  percent,  respectively;  expected  dividend  yields of 0
percent for all years;  expected  lives of 5 years for all years;  and  expected
volatility of 61 percent,  42 percent,  and 46 percent,  respectively.  The fair
value for options granted to  nonemployees  for services was estimated using the
Black-Scholes   option  pricing  model  with  the  following   weighted  average
assumptions for the year ended December 31, 2000: risk-free interest rate of 6.3
percent,  expected  dividend yield of 0 percent,  expected lives of 5 years, and
expected  volatility of 61 percent.  No options were granted to nonemployees for
services during the eleven-month period ended December 31, 1998. Compensation of
$61 was  charged to expense as a result of  options  issued to  nonemployees  in
1999. No options were granted to nonemployees for services during the year ended
December 31, 2000.

Warrants were issued to stockholders in 1995 related to the Company's Bankruptcy
filing in 1993. The number of Company warrants  exercisable at December 31, 2000
is 4,286.  The exercise price is updated  annually in April and as of April 2000
is $13.04 per warrant.  To acquire one share of Company  stock, a warrant holder
must exercise two warrants and pay $26.08. All warrants outstanding expire April
28, 2002.


13.         Employee Benefit Plan and incentive Program

WebBank has a 401(k)  profit  sharing plan  covering  employees who meet age and
service  requirements.  Plan  participants  are fully vested after five years of
service.  WebBank matches  employee  contributions up to five percent of covered
compensation   at  two   hundred   percent  of  the   employee's   contribution.
Contributions  to the plan  amounted to  approximately  $92, $60, and $8 for the
years  ended  December  31, 2000 and 1999,  and the  eleven-month  period  ended
December 31, 1998.


                                      F-21


                    WEBFINANCIAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:


14.         INCOME TAXES

The  Company  reported  no income  tax  expense  or  benefit  for the year ended
December 31, 2000 and the year ended December 31, 1999.  The difference  between
the expected tax benefit and actual tax benefit is primarily attributable to the
effect of the net  operating  losses,  offset by an  increase  in the  Company's
deferred tax asset valuation allowance. The tax effects of temporary differences
that  give  rise  to  significant  portions  of  the  deferred  tax  assets  and
liabilities were as follows:

                                                        December 31,              December 31,
                                                            2000                      1999
                                                            ----                      ----
             Deferred tax assets:
                  Net operating loss carryforward       $  14,478                 $  14,448
                  Deferred income                               0                        19
                  Accrued bonuses                               0                         8
                  Accrued vacation                             12                        12
                  Allowance for loan loss                     401                       179
                  Premises and equipment                       32                        26
                                                        ---------                 ----------
                     Total deferred tax assets             14,923                    14,692
                       Less valuation allowance           (14,923)                  (14,692)
                                                        ---------                 ---------
             Net deferred tax assets                    $       -                 $       -
                                                        =========                 =========

The net change in the total valuation  allowance for the year ended December 31,
2000 was an increase of $231.

At December 31, 2000,  the Company had certain net operating loss carry forwards
of  approximately  $38,800 that are  scheduled to expire from 2009 through 2019.
The Company has treated such net  operating  losses in  accordance  with Section
382(l)(5) of the Internal  Revenue  Code.  As a result,  there is  approximately
$19,000 in net operating  losses incurred prior to the Effective Date as well as
$19,800 incurred  subsequent to the Effective Date available as carryovers.  All
net operating losses may be subject to certain limitations on utilization.


15.         DISCLOSURES ABOUT THE FAIR VALUES OF FINANCIAL INSTRUMENTS

The carrying value for short-term  financial  instruments that mature or reprice
frequently at market rates  approximates fair value. Such financial  instruments
include:  cash  and  cash  equivalents,   accrued  interest  receivable,  demand
deposits,  accounts payable and accrued  expenses,  time certificates of deposit
and short term borrowing.  The difference  between the fair market value and the
carrying value for loans and investment securities is not considered significant
to the financial statements.


16.         COMMITMENTS AND CONTINGENCIES

The Company has entered  into various  operating  leases for office  space.  The
schedule of future minimum  operating lease payments as of December 31, 2000, is
summarized as follows (in thousands):

                                   2001              $      134
                                   2002                     102
                                   2003                     102
                                   2004                     102
                                   Thereafter                22
                                                       ---------
                                                     $      462
                                                       =========

                                      F-22



                    WEBFINANCIAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:


The  Company's  rental  expense for the year ended  December 31, 2000,  the year
ended  December 31, 1999 and the  eleven-month  period  ended  December 31, 1998
amounted to approximately $147, $199, and $60 respectively.

The Company is a party to financial  instruments with off-balance sheet risk. In
the normal course of business,  these financial  instruments include commitments
to extend  credit in the form of  loans.  At  December  31,  2000 and 1999,  the
Company's undisbursed  commercial loan commitments totaled approximately $12,000
and  $21,000  respectively.  For the same  periods,  the  Company's  undisbursed
consumer credit card loan commitments totaled  approximately $2,700 and $23,500,
respectively.

WebBank has a Cash Management Account ("CMA") with the Federal Home Loan Bank of
Seattle  ("FHLB")  at an  amount  equal to five  percent  of total  assets.  CMA
advances  must be fully  collateralized  according  to the terms of the Advance,
Security,  and Deposit  Agreement that the Bank signed with the FHLB. The CMA is
reviewed on an annual basis and market  interest rates are set at the time funds
are  borrowed.  As of December 31, 2000,  no  borrowings  were drawn on this CMA
account.

In January  2000,  a former  executive  officer and  director  of the  Company's
subsidiary  Praxis (the "officer")  filed a lawsuit in the Superior Court of the
State of  California,  County of Napa against the Company,  Praxis and Holdings.
The lawsuit  alleges that Praxis has breached its employment  agreement with the
officer.  The lawsuit also asserts  claims for  interference  with  contract and
unjust enrichment based upon the purported wrongful termination of the officer's
employment  contract with Praxis.  The lawsuit  seeks damages of an  unspecified
amount and compliance by Praxis with the  termination  pay out provisions in the
officer's  employment  agreement  relating  to  purchase  of the  officer's  10%
interest in Praxis and WebBank (both 90% covered subsidiaries of the Company) at
their  fair  market  value.  The time  for the  Company  to  answer  and  assert
counterclaims  in this matter has not yet  expired.  The Company and Praxis deny
that  Praxis  wrongfully  terminated  the  officer's  employment  and intends to
vigorously  defend this  matter.  The Company does not believe that this lawsuit
will have a material impact on its financial  condition,  results of operations,
or liquidity.

The Company is also a defendant in legal  actions  arising from normal  business
activities.  Management believes that the ultimate liability,  if any, resulting
from such actions will not materially affect the Company's financial position.

17.         REGULATORY REQUIREMENTS

WebBank is subject to various  regulatory capital  requirements  administered by
the federal banking agencies.  Failure to meet minimum capital  requirements can
initiate certain actions by regulators that, if undertaken,  could have a direct
material  effect on the Bank's  financial  statements.  Under  capital  adequacy
guidelines and the regulatory  framework for prompt corrective  action, the Bank
must meet specific capital guidelines that involve quantitative  measures of the
Bank's assets,  liabilities,  and certain  off-balance sheet items as calculated
under  regulatory   accounting   practices.   The  Bank's  capital  amounts  and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require  the Bank to  maintain  minimum  amounts  and ratios of Total and Tier I
capital (as defined in the  regulations) to  risk-weighted  assets (as defined),
and of Tier I capital (as  defined) to average  quarterly  assets (as  defined).
Management  believes,  as of December 31, 2000,  that the Bank meets all capital
adequacy requirements to which it is subject.

As of December 31, 2000, the most recent  notification  from the Federal Deposit
Insurance  Corporation  categorized  the Bank as "well  capitalized"  under  the
regulatory  framework.  To be  categorized as "well  capitalized"  the Bank must
maintain  certain  Total and Tier I capital to  risk-weighted  assets and Tier I
capital to average  quarterly  assets ratios.  There are no conditions or events
since  that  notification  that  management  believes  have  changed  the Bank's
category.

                                      F-23



               WEBFINANCIAL CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

Capital amounts and ratios are summarized as follows (in thousands):

                                                                               Well capitalized            Minimum capital
                                                          Actual                 requirement                  requirement
                                             ---------------------------   ----------------------     ------------------------
                                                 Amount        Ratio         Amount      Ratio           Amount       Ratio
                                             -------------   ----------    --------    -------        ----------    ----------
 As of
December 31, 2000:

Total Capital (Tier 1 +
Tier 2) to risk
weighted assets                             $       5,583    36.2%         $ 1,541        >10.0%      $  1,233          >8.0%
                                                                                          -                             -

Tier I Capital to risk
weighted assets                             $       5,379    34.9%         $   925         >6.0%      $    617          >4.0%
                                                                                           -                            -

Tier I Capital to average assets
(Leverage Ratio)                            $       5,379    28.3%         $   951         >5.0%      $    761          >4.0%
                                                                                           -                            -


18.         SERVICING ASSETS AND LIABILITIES

In connection with certain  businesses in which the Company sells  originated or
purchased  loans with servicing  retained,  servicing  assets or liabilities are
recorded  based on the relative fair value of the  servicing  rights on the date
the loans are sold. Servicing assets and liabilities are amortized in proportion
to and over the  period of  estimated  net  servicing  income  and  expense.  At
December 31, 2000 and 1999,  net servicing  assets,  which are included in Other
Assets,  were  $278 and $6,  respectively.  Servicing  assets  are  periodically
evaluated for impairment based on the fair value of those assets.


19.         SUBSEQUENT EVENTS

During January of 2001 a significant WebBank B&I loan borrower  unexpectedly
filed  for  Chapter  11  bankruptcy.  The loan was  only one  month  past due at
December  31, 2000 and had not been  considered  for  nonaccrual  status at that
time. The total amount of principal outstanding on the loan at December 31, 2000
was  approximately  $915. As a result of the  bankruptcy,  during  January 2001,
WebBank  provided an additional $400 of allowance for loan losses.  This $400 of
additional provision has been recorded in the Company's  consolidated  financial
statements  as of December 31, 2000.  The  allowance at December 31, 2000, is an
amount that management  believes will be adequate to absorb possible loan losses
based on evaluations of collectibility and prior loss experience.

As of March 19,  2001,  the  borrower  backing an  interest-only  strip owned by
WebBank filed for Chapter 11 bankruptcy. The borrower was two months past due at
December 31, 2000 after making a payment on December 29, 2000.  The total amount
of the  interest-only  strip  outstanding  at December  31, 2000 was $116.  As a
result of the bankruptcy,  WebBank  permanently  wrote down $100 of the balance.
The remaining  balance is expected to be recovered in 2001.  This $100 writedown
has been  recorded in the  Company's  consolidated  financial  statements  as of
December 31, 2000.

                                      F-24