<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    Form 10-K

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
              ----------------------------------------------------
                         SECURITIES EXCHANGE ACT OF 1934
                         -------------------------------

For the fiscal year ended                                 Commission File Number

    December 31, 1999                                               0-5613
-------------------------                                        ---------------

                         REXX ENVIRONMENTAL CORPORATION
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

         New York                                            13-2625545
-------------------------------                  -------------------------------
(State or other jurisdiction of                  (I.R.S. Employer Identification
 incorporation or organization)                               Number)

    445 Park Avenue, New York, New York                              10022
-------------------------------------------                    -----------------
(Address of principal executive offices)                           (Zip Code)

Registrant's telephone number, including area code (212) 750-7755
                                                   --------------

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

                          Common Stock, par value $.02
--------------------------------------------------------------------------------
                                (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 the
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]

Based on the closing price on March 3, 2000, the aggregate market value of
voting stock held by nonaffiliates of the registrant (assuming that all the
stock referred to under Item 12 hereof is held by affiliates) was approximately
$17,000,000.

As of March 3, 2000, the registrant had 2,467,576 shares of $.02 par value
common stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

                   Document                                   Part of Form 10-K
                   --------                                   -----------------
Portions of definitive proxy statement for                    As referred to in
the 1999 Annual Meeting of Shareholders                       Part III - Items
which may be filed pursuant to Regulation                     10, 11, 12 and 13.
14A under the Securities Exchange Act of
1934.

Exhibit index at pages 36 - 39


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                         REXX ENVIRONMENTAL CORPORATION

                           ANNUAL REPORT ON FORM 10-K

                        FOR YEAR ENDED DECEMBER 31, 1999

                                     PART I

Item 1. Business:

General - Current

         REXX Environmental Corporation's operating subsidiary, Watkins
Contracting, Inc. ("WCI"), is a leading regional provider of asbestos-abatement
services, demolition and dismantling services and other related specialty
contracting services, including lead paint abatement, to a broad range of
governmental, commercial, industrial and institutional clients located primarily
in California.

         On June 15, 1999, REXX Environmental Corporation (the "Company" or
"REXX") announced that it had signed a definitive agreement to sell WCI to Greg
Watkins and Daren Barone (or their permitted assignees) for $1,300,000 in cash
and 125,000 shares of REXX Environmental Corporation common stock, as well as
certain other consideration. Subsequently, the terms were amended to provide
that Messrs. Watkins and Barone could pay the Company $171,875 in cash in lieu
of the 125,000 shares of REXX common stock, at their option at the time of
closing. The sale of WCI is subject to the approval of the Company's
shareholders. Based on preliminary estimates, if the Company's shareholders
approve the sale of WCI and it closes, on closing the Company will record a loss
on the sale of WCI of approximately $2,800,000 which represents the difference
between the net proceeds that the Company will receive and the combined value of
the investment and goodwill that is recorded on the Company's books. This
preliminary estimate is subject to further review and valuations at the time the
proposed sale closes.

         On December 9, 1999, the Company announced that it had signed a
definitive agreement for a subsidiary of TWG, Inc. to merge with and into REXX,
subject to the approval of REXX's shareholders and certain other conditions,
including the closing of the sale of WCI. TWG, Inc. would become the publicly
traded parent company. In January 2000, TWG, Inc. changed its name to Newtek
Capital, Inc. ("Newtek"). If the Company's shareholders approve the transaction
and it closes, Newtek's current shareholders are expected to own 18,250,000
shares of Newtek common stock and the Company's shareholders are expected to own
1 share of Newtek for each share of the Company's common stock they currently
own, or a total of 2,467,576 shares.

         Newtek is primarily engaged in the business of investing in small, high
growth businesses through the structuring, funding, and development of early
stage companies, principally focused on technology and the internet. As of
January 10, 2000, Newtek had debt, equity or hybrid investments in seven
portfolio companies.

         Following the Newtek/REXX merger, the business of REXX will consist
exclusively of winding down and liquidating the remaining REXX assets. The
environmental remediation business conducted by REXX prior to the WCI sale will
no longer be owned or operated by REXX.


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Newtek does not contemplate any new business activity through REXX although such
is possible if an attractive opportunity is available.

         REXX has filed a preliminary proxy statement and Newtek will file a
Registration Statement with the Securities and Exchange Commission for
shareholder approval of the WCI sale and the Newtek transaction. These documents
will include information about each of the companies, their subsidiaries, REXX's
proposed sale of WCI, and the merger of a subsidiary of Newtek with and into
REXX. As soon as practicable after Securities and Exchange Commission filings
become effective, the proxy/prospectus will be mailed to REXX's shareholders and
they will be asked to vote for the approval of both the sale of WCI and the
merger with Newtek. If REXX shareholders approve both transactions, it is
expected that the sale of WCI and the merger with Newtek will close in April or
May 2000.

         The Board of Directors of REXX has approved the sale of WCI, the merger
and a recommendation that shareholders vote for the approval of both of these
transactions.

         In the event that the WCI transaction is not completed, the Newtek/REXX
merger will not be consummated, unless Newtek waives the requirement that the
WCI transaction be completed, and REXX will explore all viable alternatives,
including attempting to locate another possible purchaser of some or all of WCI.
There can be no assurance that a purchaser can be located, or that a suitable
transaction can be negotiated on terms acceptable to REXX. Based upon its and
WCI's current financial resources, competitive conditions in the asbestos
abatement, demolition and remediation services industries, and REXX's experience
with WCI, REXX believes that WCI will not be capable of producing sufficient
profits to generate an acceptable rate of return on REXX's investment in WCI,
unless it obtains additional financing to expand WCI's operations. REXX believes
that it and WCI will continue to be unable to obtain appropriate institutional
financing. However, other alternatives, if they exist and can be located,
probably will involve above market rates, require personal guarantees and/or
cause substantial dilution of current shareholders' equity. There can be no
assurance that any financing will be available on terms acceptable to REXX or at
all or that personal guarantees can be obtained.

General - Historical

         REXX Environmental Corporation was incorporated in New York in 1967 as
Computronic Sciences Inc. The Company changed its name in 1969 to Bio-Medical
Sciences, Inc. and, from 1969 to 1979, the Company was primarily a manufacturer
and marketer of disposable thermometers and sterilization monitors. In 1979, the
Company acquired substantially all of the assets of Oak Hill Sportswear, Inc.,
and became primarily engaged in the manufacture and marketing of women's apparel
and accessories. In 1983, the Company changed its name to Oak Hill Sportswear
Corporation. In 1984, the Company sold its disposable medical devices business.
From 1984 to 1995, the Company was engaged exclusively in the importation,
manufacture, marketing and distribution of women's apparel and accessories. As
of June 30, 1995, the Company sold its women's apparel business. Its accessories
business was phased out and its operating assets were sold during 1996 and 1997.

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         On October 21, 1997, the Company completed the acquisition of 100% of
the outstanding shares of WCI, a privately-owned, San Diego-based environmental
remediation contractor. On February 18, 1998, in order to more accurately
reflect its current business operations, the Company changed its name to REXX
Environmental Corporation pursuant to an amendment to its certificate of
incorporation.

Asbestos-Abatement and Demolition Operations

         WCI provides asbestos-abatement, demolition and dismantling services
and other specialty contracting services from its headquarters office located in
San Diego, California. WCI is licensed to conduct asbestos-abatement, demolition
and dismantling services in California and currently provides such services with
non-union labor. WCI also often utilizes subcontractor and temporary labor.

         An asbestos-abatement or demolition program is focused on meeting the
needs of the facility owner or operator to effect the abatement or demolition
and manage properly the financial, regulatory and safety-related risks
associated with a project. WCI's abatement and demolition services require the
coordination of several processes: marketing, estimating, bidding and
contracting, project management, health and safety programs and the actual
asbestos removal or dismantling and demolition. WCI's management maintains
administrative and operational control over all phases of a project, from
estimating and bidding through project completion.

The Bidding and Contract Process

         WCI obtains work and performs services under contract, often on the
basis of plans, specifications or requirements prepared by the client or the
client's agent. While some of its contracts are entered into directly with its
clients without a formal bidding process, WCI receives the majority of its
asbestos-abatement and demolition and dismantling contracts through a bidding
process. The majority of WCI's projects are contracted on a fixed-price basis,
while the remainder are contracted either on a time and materials or a
unit-price basis. Contracting opportunities are identified by management and the
local sales force and are entered into following competitive bidding or direct
negotiations with the customer or its agent. Generally, these contracts
encompass supplying project management, labor, tools, equipment and materials.
In most cases, a significant portion of the total costs incurred by WCI's
asbestos-abatement operations is attributable to labor, while a significant
portion of the total costs of its demolition and dismantling operations is
attributable to equipment costs and hauling and disposal charges. While large
abatement contracts may last more than one year, the majority of WCI's projects
are completed within two months of inception. In accordance with industry
standards, a 10% retention amount is withheld from gross billings by customers
on certain projects until the final completion of such projects.


Project Management

         Each asbestos-abatement and demolition project is coordinated and
supervised by a project manager who selects the requisite equipment,


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ensures contract compliance and supervises all personnel. The project manager
reviews the progress of the project, which includes any subsequent change
orders. The day-to-day documentation of air testing, lead monitoring and final
clearance analysis is an important part of the process and is generally provided
by the client's consultants.

Health and Safety

         WCI's written Safety Program, which is issued to all supervisory
personnel, contains specific outlines for all safety, health and regulatory
requirements associated with an asbestos-abatement project. During the
asbestos-abatement process, WCI engages in daily personal air monitoring, and
during the demolition and dismantling process WCI engages in daily personal air
monitoring as well as lead, heavy metal and other contaminant testing. It is
WCI's policy to comply with all regulatory and safety requirements.

The Abatement and Demolition Process

         WCI's workers remove asbestos in accordance with the regulations of the
Environmental Protection Agency ("EPA"), OSHA and applicable state and local
regulations. Throughout the abatement process, air samples are taken to indicate
the level of airborne fibers both inside and outside the work area to protect
the workers and the building occupants. The environmental consultant, engineer
or industrial hygienist tests air samples from the work area both during and
upon completion of the project to monitor compliance with job specifications.

         A thorough cleaning of the work area is conducted after removal, which
includes high-efficiency particulate air filter vacuuming and wet mopping of all
surfaces. All barriers erected during the asbestos-abatement project are
dismantled and disposed of in the same manner as asbestos waste. WCI
encapsulates the area from which asbestos was removed by applying a penetrating
encapsulant in an effort to seal off remaining fibers.

         WCI performs commercial and governmental demolition and industrial
dismantling for public and private customers, primarily in California. All work
is done in accordance with the specifications prepared by the owner and in
accordance with all applicable OSHA, EPA, and state and federal governmental
regulations.

     Commercial and governmental demolition involves demolishing high-rise
office buildings, hospitals, apartment complexes and other buildings. WCI's
workers, utilizing specialized equipment, demolish the buildings and remove the
debris off site. Materials generated from demolition activities are either
recycled or disposed of in a licensed landfill.

Markets and Customers

         California is WCI's primary market for its asbestos-abatement,
demolition and dismantling and other specialty contracting services. WCI's
headquarters is located in San Diego, California.



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         WCI believes that its primary clients, which include general
contractors, governmental agencies, large industrial processing and
manufacturing corporations, insurance companies, real estate development
companies and owners and tenants of large commercial and governmental
facilities, tend to emphasize quality and safety along with price considerations
in making their decision. WCI typically contracts directly with general
contractors, owners, operators or tenants of properties and works closely with
the environmental consultant of the customer in performing removal services.

         WCI markets its services directly to companies that are in need of
asbestos-abatement or demolition and dismantling services, to general
contractors who oversee large renovation projects, and to asbestos-abatement
consulting firms from which WCI receives asbestos project referrals because of
its reputation and experience. During 1999 and 1998, one customer accounted for
approximately 13% of the Company's revenues for the year. No other customer
accounted for more than 10% of 1999 or 1998 revenues. During the short period
from the date of the Company's acquisition of WCI, October 21, 1997, to December
31, 1997, one customer accounted for approximately 28% of the Company's revenues
due to the completion of a large project during the period.

Seasonality

         WCI's business is subject to variations in revenue and net income for
interim periods and from year to year, and increased revenue may not always
result in a corresponding increase in net income. These conditions are due to a
number of characteristics shared by WCI to varying degrees with most other
members of the industry, including the following: (1) its business is affected
by the scheduling of work at commercial properties, fiscal funding of projects
by government entities, outages at utilities and shutdowns at other industrial
facilities; (2) it sees fluctuations in percentages of labor intensive asbestos
abatement and equipment intensive demolition within its projects; (3) its
performance on a given project is often dependent on the performance of other
contractors, who are working on the same job, over which WCI has no control; and
(4) costs ultimately incurred by WCI on a job may be materially affected by such
risks as technical problems, labor shortages and disputes, time extensions,
weather, delays caused by external sources and fluctuations in the prices of
materials. Revenue and operating results may also be affected by the timing of
large contracts, especially if all or a substantial part of the performance of
such contracts occurs within one or two quarters. Accordingly, quarterly results
or other interim results should not be considered indicative of results to be
expected for any other quarter or for the full fiscal year.

Competition

         The market for WCI's services is fragmented and highly competitive.
WCI's ability to compete as a provider of asbestos-abatement and demolition and
dismantling services depends upon pricing its services competitively, having the
ability to respond promptly and with adequate amounts of resources, having a
reputation for quality and safety, being able to obtain appropriate bonding and
insurance, and hiring, training and retaining qualified personnel, particularly


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in the areas of estimating and project management. While WCI is a significant
participant in the asbestos-abatement and demolition and dismantling services
market in California, it experiences competition from national, regional and
local firms, some of which have greater resources and experience.

Insurance and Bonding

         WCI has established an insurance program that has been tailored to meet
the mutual risk management needs of its customers and WCI. The primary package
begins with commercial general liability, automobile liability and workers'
compensation policies. This plan is written with an A. M. Best Rated A+ XV
carrier. WCI carries an umbrella policy of $9,000,000 which, when added to the
base policy limits of $1,000,000 per occurrence ($2,000,000 aggregate), extends
coverage under general liability, automobile liability and workers' compensation
policies to $10,000,000 per occurrence ($11,000,000 aggregate) each. Effective
as of July 1, 1998, WCI's retained liability per occurrence under the general
liability policy is $0 for defense and $5,000 for indemnity, WCI's retained
liability under the automobile liability policy is $1,000 per occurrence and
liability under the workers' compensation policy is covered 100%, without
retention, up to the policy limits.

         Public asbestos-abatement and demolition and dismantling projects
require that WCI post surety bonds as guarantees of performance of WCI's
contracts. The bonds are required to protect the interests of the general
public, as public funding is utilized in project financing. Additionally, surety
bonds also guarantee that WCI will pay all of its bills, including suppliers and
subcontractors who are working on projects for WCI. Similarly, many private
projects also require surety bonds to serve as protection and provide guarantees
for private owners.

         WCI has existing surety relationships with ECS Underwriting, Inc.
(Reliance Insurance Companies) and AIG Environmental Services. Beginning in June
1999, certain executive officers of WCI have issued their guarantees to ECS
Underwriting and AIG Environmental Services in connection with the issuance of
surety bonds for WCI.

Employees

         As of December 31, 1999, REXX (including WCI) had approximately 157
employees (including 1 leased employee), of which 5 were employed as executives,
5 provided project management, technical or engineering services, 6 were
employed in sales, clerical and data processing activities and approximately 141
were employed in other capacities, principally hourly labor. During 1999, the
number of hourly-rate employees of the Company ranged from 106 to 175. WCI
considers its relations with its employees to be satisfactory and has not
experienced any work stoppages or slowdowns.

Patents and Service Marks

         The Company and WCI do not own any patents or service marks.




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Governmental Regulation

         The asbestos-abatement and demolition and dismantling process is
regulated by the federal government through the EPA, OSHA and the Department of
Transportation ("DOT"). EPA regulations establish standards for the control of
asbestos fiber and airborne lead emissions into the environment during removal
and demolition projects. AHERA mandates that public schools inspect for levels
of asbestos contamination and prepare a specific management plan for appropriate
remedial action. OSHA regulations establish maximum airborne asbestos fiber,
airborne lead and heavy metal exposure levels applicable to asbestos and
demolition employees and set standards for employee protection during the
demolition, removal or encapsulation of asbestos, as well as storage,
transportation and final disposition of asbestos and demolition debris.

         DOT regulations cover the management of the transportation of asbestos
and demolition debris and establish certain certification labeling and packaging
requirements. In addition, under the Comprehensive Environmental Response,
Compensation and Liability Act, also known as the Superfund Act, companies which
arrange for the transportation and disposal of asbestos waste materials may be
exposed to liability relating to the disposal of such material at sites which
are or may be designated as national priority list sites.

         The states in which WCI currently operates have adopted laws and
regulations governing the conduct of asbestos-abatement contractors. Such laws
and regulations generally require the training and licensing of
asbestos-abatement contractors and their workers and notice before the
commencement of any asbestos-abatement project and specify standards of
performance for the asbestos removal process. In addition, some states authorize
municipalities to adopt more stringent standards.

         WCI's management believes that governmental authorities are likely to
adopt further, similar laws and regulations and that existing laws and
regulations are going to become more restrictive. The regulations concerning
asbestos-abatement are primarily promulgated on the state and local level. In
addition, although subject to change, OSHA has adopted regulations to which
WCI's operations are subject. Many of the regulations are complex and frequently
amended and, therefore, WCI's management is unable to predict what, if any,
impact such regulations will have on its revenues, results of operations or
financial condition. As a result of the extensive regulation, WCI is, has been
and may in the future be, subject to audits and investigations by federal, state
and local governmental agencies. Although its management believes that WCI is in
substantial compliance with all regulatory requirements, because of the changing
regulatory environment and the complexity of its operations, there can be no
assurance that violations by WCI of federal, state or local laws and regulations
may not have occurred, or will not occur in the future, or that changes in such
laws and regulations would not have an adverse effect on WCI's business or
position. Failure to comply with regulations could result in the imposition of
civil and criminal penalties, any of which could have a material adverse effect
upon WCI's business.



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Licensing Requirements

         States in which WCI operates require that WCI obtain asbestos licenses
to provide asbestos-abatement services and contractor licenses to provide
demolition and dismantling services. These licenses are generally subject to
annual renewal. WCI has been able to obtain the renewal of its licenses without
unusual difficulty or delay, and WCI's management believes that it is in
substantial compliance with all current state licensing requirements where WCI
intends to conduct business. In addition, certain states have adopted
regulations which require state-specific training, testing and licensing of
employees engaging in asbestos-abatement or demolition and dismantling
activities.

Backlog

         The majority of WCI's asbestos-abatement and demolition and dismantling
services are contracted on a fixed-price basis, while the remainder are
contracted either on a time and materials or a unit-price basis. WCI's backlog
at December 31, 1999 was approximately $9,100,000, compared to approximately
$7,700,000 at December 31, 1998. WCI's backlog at December 31, 1999 is expected
to be substantially completed in the current calendar year; however, working
capital constraints and third party schedules could result in a portion of the
backlog work being completed in 2001.








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Item 2.  Properties:

         The Company's executive offices are located at 445 Park Avenue, New
York, New York 10022 in leased premises which the Company subleases from an
unaffiliated company on a month-to-month basis.

         WCI's offices and warehouse are located at 5490 Complex Street, Suite
603, San Diego, California 92123, in leased premises of approximately 6,000
square feet, under a lease which expires March 31, 2000. Effective March 1,
2000, WCI is leasing approximately 11,000 square feet of office and warehouse
space and outdoor storage for large machinery, located at 5776 Ruffin Road, San
Diego, CA 92123. This property is being leased from an entity controlled by two
executive officers of WCI.

         The Company owns a warehousing facility in Mississippi which is
approximately 64,000 square feet. At December 31, 1998 and 1999, the property
was carried as an asset held for sale and the Company is currently seeking to
sell the property. Since November 14, 1997, the property has been leased to an
unaffiliated company.

Item 3.  Legal proceedings:

         There are no material pending legal proceedings involving the Company
or WCI.

Item 4. Submission of matter to a vote of security holders:

         No matter was submitted during the fourth quarter of 1999 to a vote of
the Company's shareholders.









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                                     PART II

Item  5. Market for the registrant's common stock and related security holder
matters:

         The REXX common stock has been listed on The American Stock Exchange
since May 14, 1998 and traded under the symbol "REX." Prior to May 14, 1998, the
REXX common stock was traded on The Nasdaq National Market under the symbol
"REXX" ("OHSC" prior to February 19, 1998). The table below sets forth the high
and low reported closing sale prices per share for the REXX common stock as
reported by the AMEX and Nasdaq.
                                                        Prices

                                                    High       Low

                  1998:
                     1st quarter                   5 5/16     3 3/4
                     2nd quarter                   5 1/4      3 1/2
                     3rd quarter                   3 3/4      2 1/2
                     4th quarter                   2 13/16    1 3/4


                  1999:
                     1st quarter                   2 1/2      1 3/8
                     2nd quarter                   2 1/16       7/16
                     3rd quarter                   1 9/16       3/4
                     4th quarter                   4 3/16      11/16

                  2000:
                     1st quarter
                       (through March 3, 2000)     11 3/8      2 3/4

         Based upon inquiries made by REXX in connection with its upcoming
annual meeting, REXX estimates that there are approximately 1,000 record and
beneficial holders of REXX common stock.

         REXX has not paid any cash dividends and it does not expect to in the
foreseeable future.









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Item 6.  Selected financial data:

                                   For the years ended December 31,

                             1999      1998      1997      1996      1995

                               (In thousands except per share amounts)

Revenues                   $15,895   $13,743    $2,298    $   75    $   38
                           =======   =======    ======    ======    ======

Net loss from
 continuing operations    (    736) (    496)  (   167)  (   218)  (    70)

(Loss) income from
 discontinued
 operations                      -         -         -   (   792)  ( 4,908)

Loss on disposal of
 discontinued
 operations                      -         -         -   (   300)  ( 1,861)
                           -------   -------    ------    ------    ------

Net (loss) income         ($   736) ($   496)  ($  167)  ($1,310)  ($6,839)
                           =======   =======    ======    ======    ======


Per share data, basic
 and diluted:

  Net loss from
   continuing operations     ($.30)    ($.20)    ($.08)    ($.11)   ($ .03)

  (Loss) income from
   discontinued
   operations                    -         -         -     ( .38)   ( 2.39)

  Loss on disposal of
   discontinued
   operations                    -         -         -     ( .15)   (  .90)
                              ----      ----      ----      ----     -----

  Net (loss) income          ($.30)    ($.20)    ($.08)    ($.64)   ($3.32)
                              ====      ====      ====      ====     =====


Weighted average common
shares and equivalents
outstanding:
  Basic                      2,468     2,468     2,137     2,058     2,058
  Diluted                    2,468     2,468     2,137     2,058     2,058

Balance sheet:
  Total assets              $8,617   $10,422    $9,055    $6,880    $9,115
  Long-term debt               606   $   738    $  180    $    0    $    0

Dividends paid per share:        -         -         -         -         -





See consolidated financial statements.

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Item 7. Management's discussion and analysis of financial condition and results
of operations:

Liquidity and capital resources:

     Working capital at December 31, 1999 was $415,000 as compared to $943,000
at December 31, 1998. The decrease of $528,000 was primarily due to the net loss
for the period.

     Net accounts receivable were $2,629,000 at December 31, 1999 as compared to
$4,749,000 at December 31, 1998, a decrease of $2,120,000. The decrease was
principally due to increased collection efforts, lowered retention balances and
the occasional granting of discounts for early payments.

     WCI executed, effective November 10, 1998, a revolving credit agreement
with Wells Fargo Bank, N.A. The credit agreement, as amended, which expires June
9, 2000, calls for interest payable at Wells Fargo's prime rate, as in effect
from time to time, plus 2% and borrowings up to 75% of eligible accounts
receivable subject to a maximum of $2,000,000 (reduced by approximately $100,000
of equipment loans made to WCI by Wells Fargo). At December 31, 1999, WCI had
$785,000 borrowed under the credit agreement, in addition to approximately
$80,000 of equipment loans made by Wells Fargo to WCI. The Company has
guaranteed WCI's borrowings under the credit agreement, which is also secured by
WCI's accounts receivable and all other assets (with the exception of vehicles
and equipment subject to purchase contract lending agreements with third party
lenders.) In addition, the credit agreement provides for certain financial
covenants based upon WCI's financial condition, including its current ratio and
tangible net worth. WCI's breach of certain financial covenants under its
secured credit agreement as of December 31, 1999 and earlier dates were waived
by Wells Fargo.

     In order to meet its working capital needs at the corporate level, the
Company has negotiated a line of credit with HSBC Bank (USA) (formerly Republic
National Bank of New York), which provided, at December 31, 1999, for $250,000
in borrowings, secured by REXX's assets, and interest payable at HSBC's
reference rate plus 1%. This line of credit was evidenced by a demand grid note
in the maximum amount of $250,000, as of December 31, 1999. At December 31,
1999, the Company had $245,000 borrowed under the line of credit. Subsequent to
year end, this line of credit was increased to $450,000 and a demand grid note
in that maximum amount was executed to replace the $250,000 grid note. The
Company's borrowings under this line of credit have been guaranteed by its
Chairman of the Board, Arthur L. Asch and, subsequent to year end, also became
secured by a certificate of deposit in the amount of $200,000 deposited by Mr.
Asch with the bank. Mr. Asch is not being compensated by the Company for
providing the guarantee and additional collateral. The Company's management
believes that, if the shareholders approve the WCI sale and the sale closes,
this line of credit will be sufficient to provide the Company with the necessary
working capital to meet its needs through the completion of the WCI sale.
However, there is no assurance that (i) the line of credit will, in fact, be
sufficient to provide for the Company's corporate level working capital needs
until the completion of the WCI sale; (ii) repayment of all or a portion of the
Company's borrowings under this line of credit will not be demanded prior to
April 30, 2000; (iii) HSBC Bank will extend this line of credit beyond April 30,
2000, if requested by the Company; or (iv) Mr. Asch will continue to provide his
guarantee and collateral beyond April 30,


                                 13 OF 40 PAGES


<PAGE>





2000. The discontinuance of this line of credit, by any action of HSBC Bank, as
a result of Mr. Asch's failure to continue his guarantee or collateral beyond
April 30, 2000 or otherwise, could have a material adverse effect on the
Company.

     On June 15, 1999, the Company announced that it had signed a definitive
agreement to sell WCI to Greg Watkins and Daren Barone (or their permitted
assignees) for $1,300,000 in cash and 125,000 shares of REXX Environmental
Corporation common stock, as well as certain other consideration. Subsequently,
the terms were amended to provide that Messrs. Watkins and Barone could pay the
Company $171,875 in cash in lieu of the 125,000 shares of REXX common stock, at
their option at the time of closing. The sale of WCI is subject to the approval
of the Company's shareholders. Based on preliminary estimates, if the Company's
shareholders approve the sale of WCI and it closes, on closing the Company will
record a loss on the sale of WCI of approximately $2,800,000 which represents
the difference between the net proceeds that the Company will receive and the
combined value of the investment and goodwill that is recorded on the Company's
books. This preliminary estimate is subject to further review and valuations at
the time the proposed sale closes.

     On December 9, 1999, the Company announced that it had signed a definitive
agreement for a subsidiary of TWG, Inc. to merge with and into REXX, subject to
the approval of REXX's shareholders and certain other conditions, including the
closing of the sale of WCI. TWG, Inc. would become the publicly traded parent
company. In January 2000, TWG, Inc. changed its name to Newtek Capital, Inc.
("Newtek"). If the Company's shareholders approve the transaction and it closes,
Newtek's current shareholders are expected to own 18,250,000 shares of Newtek
common stock and the Company's shareholders are expected to own 1 share of
Newtek for each share of the Company's common stock they currently own, or a
total of 2,467,576 shares.

     Newtek is primarily engaged in the business of investing in small, high
growth businesses through the structuring, funding, and development of early
stage companies, principally focused on technology and the internet. As of
January 10, 2000, Newtek had debt, equity or hybrid investments in seven
portfolio companies.

     Following the Newtek/REXX merger, the business of REXX will consist
exclusively of winding down and liquidating the remaining REXX assets. The
environmental remediation business conducted by REXX prior to the WCI sale will
no longer be owned or operated by REXX. Newtek does not contemplate any new
business activity through REXX although such is possible if an attractive
opportunity is available.

     REXX has filed a preliminary proxy statement and Newtek will file a
Registration Statement with the Securities and Exchange Commission for
shareholder approval of the WCI sale and the Newtek transaction. These documents
will include information about each of the companies, their subsidiaries, REXX's
proposed sale of WCI, and the merger of a subsidiary of Newtek with and into
REXX. As soon as practicable after Securities and Exchange Commission filings
become effective, the proxy/prospectus will be mailed to REXX's shareholders and
they will be asked to vote for the approval of both the sale of WCI and the
merger with Newtek. If REXX shareholders approve both transactions, it is
expected that the sale of WCI and the merger with Newtek will close in April or
May 2000.


                                 14 OF 40 PAGES


<PAGE>



     The Board of Directors of REXX has approved the sale of WCI, the merger and
a recommendation that shareholders vote for the approval of both of these
transactions.

     In the event that the WCI transaction is not completed, the Newtek/REXX
merger will not be consummated, unless Newtek waives the requirement that the
WCI transaction be completed, and REXX will explore all viable alternatives,
including attempting to locate another possible purchaser of some or all of WCI.
There can be no assurance that a purchaser can be located, or that a suitable
transaction can be negotiated on terms acceptable to REXX. Based upon its and
WCI's current financial resources, competitive conditions in the asbestos
abatement, demolition and remediation services industries, and REXX's experience
with WCI, REXX believes that WCI will not be capable of producing sufficient
profits to generate an acceptable rate of return on REXX's investment in WCI,
unless it obtains additional financing to expand WCI's operations. REXX believes
that it and WCI will continue to be unable to obtain appropriate institutional
financing. However, other alternatives, if they exist and can be located,
probably will involve above market rates, require personal guarantees and/or
cause substantial dilution of current shareholders' equity. There can be no
assurance that any financing will be available on terms acceptable to REXX or at
all or that personal guarantees can be obtained.

Item 7A. Quantitative and qualitative disclosure about market risk:

     The principal market risk (i.e., the risk of loss arising from adverse
changes in market rates and prices) to which the Company is exposed is interest
rates on its debt. A one percent change in interest rates on variable rate debt
would impact interest expense by $14,000, based on principal balances at
December 31, 1999.

Results of operations:

1999 Compared to 1998 -

     Revenues in 1999 rose to $15,895,000 from $13,743,000, an increase of
$2,152,000. The increase was principally due to the continuing trend of larger,
demolition-based, projects becoming available for bid in the marketplace. WCI's
experience has been that projects which contain large segments of demolition
work involve higher total revenues and lower gross margins.

     Gross profit in 1999 amounted to $3,021,000 as compared to $3,419,000 in
1998, a decrease of $398,000. The decrease is attributable to a decline in 1999
gross profit margins to 19% from 25% in 1998, which decline more than overcame
WCI's higher revenues in 1999. The decline in margins was primarily related to
the continuing trend of greater amounts of demolition-related projects in WCI's
mix of jobs.

     General and administrative expenses fell to $3,433,000 in 1999 from
$3,859,000 in 1998, a decrease of $426,000. Decreases in expenses at the
corporate level, principally salaries, represented nearly all of the decrease.

     Interest expense-net was $253,000 in 1999 compared to $126,000 in 1998, an
increase of $127,000. The increase was largely due to significantly higher
average debt outstanding for working capital needed to support higher revenues
and the purchase of equipment during 1999 as compared to 1998.


                                 15 OF 40 PAGES


<PAGE>



     Amortization of goodwill in 1999 remained constant with 1998, as the
Company is utilizing the straight line method of amortizing its goodwill.

     The Company recorded a provision for income taxes of $9,000 in 1999
compared to recording a benefit from income taxes of $45,000 in 1998. The 1999
provision represents state and local franchise taxes, compared to 1998's
reversal of an accrual for income taxes payable from previous years.

1998 Compared to 1997 -

     Revenues in 1998 consisted of solely WCI's contract revenues. Revenues in
1997 consisted of WCI's contract revenues (from October 21, 1997, the date of
the Company's acquisition of WCI) and consulting income. Contract revenues in
1998 were $13,743,000 compared to $2,248,000 in 1997. The increase was due to
the inclusion of a full year of WCI's contract revenues in 1998 as opposed to
only the period from October 21 through December 31 in 1997, as well as an
expansion of WCI's demolition-related revenues in 1998. Consulting income, which
arose from the Company's agreement with a purchaser of its former Sportswear
Division, was $50,000 in 1997. The consulting agreement expired on December 31,
1997 and was not renewed.

     Gross profit in 1998 amounted to $3,419,000 as compared to $962,000 in
1997, an increase of $2,457,000. The increase is attributable to the inclusion
of WCI's gross profit for a full year in 1998 versus the period from October 21
through December 31 in 1997. Gross profit margin decreased to 25% in 1998 from
42% in 1997, principally due to lower margins on demolition-related projects in
1998 and the inclusion of very high margin asbestos projects in the fourth
quarter of 1997.

     General administrative expenses rose to $3,859,000 in 1998 from $1,226,000
in 1997, an increase of $2,633,000. Excluding intercompany charges, $2,262,000
of the increase was incurred at WCI and $371,000 of the increase was incurred at
the corporate level, including a $170,000 increase in the amortization of
goodwill. General and administrative expenses rose principally as a result of
four factors: (1) the inclusion of WCI's general and administrative expenses for
a full year in 1998 compared to the period from October 21 to December 31, 1997;
(2) increased general and administrative expenses at WCI in connection with its
substantial revenue growth in 1998 versus 1997; (3) the growth in corporate
expenses associated with the administration of WCI for a full year, the
Company's external expansion and acquisition efforts, and the related financing
efforts; and (4) expenses which were no longer allocated to discontinued
operations.

     Interest expense-net was $126,000 in 1998 compared to interest income-net
of $137,000 in 1997, a net expense increase of $263,000. The change was due to
the Company's position as a net borrower in 1998 compared to holding a net cash
balance during 1997. The borrowings in 1998 were used to finance the Company's
increase in accounts receivable, purchases of equipment and the net loss for the
year.

     Amortization of goodwill rose in 1998 compared to 1997 as a result of
recording a full year of amortization in 1998 versus recognizing amortization in
1997 for the period from October 21 through December 31.

     The Company recorded a benefit from income taxes in 1998 of $45,000
compared to a provision for income taxes of $48,000 in 1997. The net


                                 16 OF 40 PAGES


<PAGE>



decrease of $93,000 was due to the Company's larger loss in 1998 versus 1997 and
the reversal of an accrual for income taxes payable from prior years.

Forward-Looking Information

     From time to time, the Company or its representatives may have made or may
make forward-looking statements, orally or in writing. Such forward-looking
statements may be included in, but not limited to, press releases, oral
statements made by or with the approval of an authorized executive officer, or
in this report or other filings made by the Company with the Securities and
Exchange Commission. The words or phrases "trend," "expectation," "growing,"
"will be," "will consist," "will use," "will allow," "will require," "likely
result," "expected," "continued," "anticipated," "estimated," "projected,"
"potential," "opportunity," or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. The Company wishes to ensure that such statements
are accompanied by meaningful cautionary statements, so as to maximize to the
fullest extent possible the protections of the safe harbor established in the
said Act. Accordingly, such statements are qualified in their entirety by
reference to and are accompanied by the following discussion of certain
important factors that could cause actual results to differ materially from such
forward-looking statements.

     Investors should also be aware of factors that could have an impact on the
Company's business or financial position or performance. These include
intensified competition and its impact on revenues and profit margins, changes
in competitors business strategies, availability of qualified labor to meet the
Company's needs, ability to retain current labor, adverse changes in national
and local economic conditions, adjustments in fiscal funding levels for
government entities, timing of large contracts, increasingly stringent
requirements for compliance with government regulations, the availability of
capital under WCI's credit agreement, WCI and the Company's continued reliance
upon waivers of noncompliance from Wells Fargo, risks associated with the
proposed sale of WCI, the Company's potential inability to sell WCI due to the
non-approval of the Company's shareholders or other reasons, risks associated
with the proposed business combination with Newtek, the Company's potential
inability to complete a business combination with Newtek, risk of shareholder
dilution, and other factors detailed from time to time in the Company's
Securities and Exchange Commission filings or other readily available or
generally disseminated writings. The risks identified here are not all
inclusive. Reference is also made to other parts of this report that include
additional information concerning factors that could adversely impact the
Company's business or financial position or performance. Moreover, the Company
operates in a changing and very competitive business environment. New risks may
emerge from time to time, and it is not possible for management to predict all
risk factors, nor can it necessarily identify or assess the impact of all such
factors on the Company or the extent to which any factor or combination of
factors may cause actual results to differ materially from those contained in
any forward-looking statement. Accordingly, forward-looking statements should
not be relied upon as a prediction of actual results.



                                 17 OF 40 PAGES


<PAGE>





Item 8.  Financial statements and
          additional financial data



                         REXX ENVIRONMENTAL CORPORATION


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                          FILED WITH THE ANNUAL REPORT
                           OF THE COMPANY ON FORM 10-K


                                                                            Page

Report of independent accountants                                             19

Consolidated balance sheets at December 31, 1999 and 1998                     20

Consolidated statements of operations for the years ended
 December 31, 1999, 1998 and 1997                                             21

Consolidated statements of stockholders' equity for the years
 ended December 31, 1999, 1998 and 1997                                       22

Consolidated statements of cash flows for the years ended
 December 31, 1999, 1998 and 1997                                          23-24

Notes to consolidated financial statements                                 25-35








                                 18 OF 40 PAGES


<PAGE>





                        REPORT OF INDEPENDENT ACCOUNTANTS




To the Board of Directors
and Stockholders of

REXX Environmental Corporation


    In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of REXX
Environmental Corporation and its subsidiaries at December 31, 1999 and 1998 and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

    As more fully described in Note 14 to the consolidated financial statements,
REXX Environmental Corporation has signed definitive agreements to sell its sole
operating subsidiary and merge with another entity.



PricewaterhouseCoopers LLP

New York, New York
March 3, 2000






                                 19 OF 40 PAGES


<PAGE>





                         REXX ENVIRONMENTAL CORPORATION

                           CONSOLIDATED BALANCE SHEETS

                             (Dollars in thousands)
                                                         December 31,
                                                     1999          1998
             Assets

Current assets:
  Cash and cash equivalents                        $     85       $    68
  Accounts receivable - net                           2,629         4,749
  Costs in excess of billings                           831           223
  Assets held for sale                                  780           780
  Other current assets                                  194           164
                                                   --------       -------

             Total current assets                     4,519         5,984

Property and equipment, net                           1,378         1,487
Goodwill, net                                         2,703         2,914
Other assets                                             17            37
                                                   --------       -------

                                                   $  8,617       $10,422
                                                   ========       =======


             Liabilities and stockholders' equity

Current liabilities:
  Current portion of long-term debt               $     639       $   668
  Notes payable to bank                               1,030         1,681
  Accounts payable                                    1,749         1,872
  Billings in excess of costs                           126           409
  Accrued expenses                                      465           311
  Income taxes payable                                   95           100
                                                  ---------       -------

             Total current liabilities                4,104         5,041
                                                  ---------         -----

Long-term debt, net of current portion                  606           738
                                                  ---------           ---

Stockholders' equity - see accompanying statement:
  Preferred stock, $1.00 par value, authorized
   1,000,000 shares; -0- shares issued
  Common stock, $.02 par value, authorized
   12,000,000 shares; 5,279,828 shares
   issued                                               105           105
  Capital in excess of par value                     27,925        27,925
  Accumulated deficit                                (7,115)       (6,379)
  Common stock held in treasury, at cost
   (2,812,252 shares)                               (17,008)      (17,008)
                                                  ---------       -------

             Total stockholders' equity               3,907         4,643
                                                  ---------       -------

                                                  $   8,617       $10,422
                                                  =========       =======

       See notes to consolidated financial statements.






                                 20 OF 40 PAGES


<PAGE>




                         REXX ENVIRONMENTAL CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                          (Dollars in thousands except
                               per share amounts)


                                            Years ended December 31,

                                          1999        1998         1997

Revenues                                 $15,895     $13,743      $2,298

Cost of services                          12,874      10,324       1,336
                                         -------     -------     -------

Gross profit                               3,021       3,419         962
General and administrative
 expenses                                  3,433       3,859       1,226
                                         -------     -------     -------

Loss from operations                        (412)       (440)       (264)

Other (income) expense:
 Interest expense                            253         135          37
 Interest (income)                             0          (9)       (174)
 Other expense (income)                       62         (25)         (8)
                                        --------     -------     -------

Loss before provision for
  taxes                                     (727)       (541)       (119)

Provision for (benefit from)
  taxes                                        9         (45)         48
                                        --------     -------     -------

  Net loss                                 ($736)      ($496)      ($167)
                                         =======     =======     =======

Per share data (basic and diluted):
    Net loss                               ($.30)      ($.20)      ($.08)
                                           =====       =====       =====






                 See notes to consolidated financial statements.



                                 21 OF 40 PAGES


<PAGE>



                         REXX ENVIRONMENTAL CORPORATION

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (In thousands)




                                                                     Total
                         Common stock        Capital in  Accumu-    stock-
                    Shares   Par      In     excess of   lated      holders'
                    Issued  Value  treasury  par value   deficit    equity


Balance, December
 31, 1996           4,870   $97   ($17,008)   $27,363   ($5,716)   $4,736

Shares issued in
 connection with
 acquisition          400     8                   542                 550

Shares issued
 upon exercise
 of stock options      10     -                    20                  20

Net loss for
 the year ended
 December 31, 1997                                      (   167)  (   167)
                    -----  ----    -------    -------    ------    ------

Balance, December
 31, 1997           5,280   105   ( 17,008)    27,925   ( 5,883)    5,139

Net loss for
 the year ended
 December 31, 1998                                      (   496)  (   496)
                    -----  ----    -------     ------    ------    ------

Balance, December
 31, 1998           5,280  $105   ($17,008)   $27,925   ($6,379)   $4,643

Net loss for
 the year ended
 December 31, 1999                                      (   736)  (   736)
                    -----  ----    -------     ------    ------    ------

Balance, December
 31, 1999           5,280  $105   ($17,008)   $27,925   ($7,115)   $3,907
                    =====  ====    =======    =======    ======    ======






                 See notes to consolidated financial statements.



                                 22 OF 40 PAGES


<PAGE>




                         REXX ENVIRONMENTAL CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

                                                 Years ended December 31,

                                                 1999      1998     1997
Cash flows from operating activities:
  Net loss                                      ($736) ($   496) ($  167)
  Adjustments to reconcile net loss
    to net cash provided by (used by)
    operating activities:
    (Gain) loss on disposal of assets           (   5)       20        -
    Depreciation and amortization                 485       365      223
                                                 ----   -------   ------

                                                ( 256) (    111)      56

  Changes in assets and liabilities             1,245  (  1,898) ( 1,478)
                                                -----   -------   ------

    Net cash provided by (used in)
     operating activities                         989  (  2,009) ( 1,422)
                                                -----   -------   ------

Cash flows from investing activities
  Acquisition of WCI                                -         -  ( 3,883)
  Capital expenditures                           (178) (  1,013) (   105)
  Net proceeds on disposal of
    assets                                         18       640      648
  Deposit on asset held for sale                    -  (    152)     143
                                                -----   -------   ------
  Net cash (used in) provided by
    investing activities                       (  160) (    525) ( 3,197)
                                                -----   -------   ------

Cash flows from financing activities:
  Exercise of options                               -         -       20
  Net (decrease) increase in
    short term borrowings                      (  680)    1,334       17
  Net (decrease) increase in long-term
  debt                                         (  132)      558  (    22)
                                                -----   -------   ------

Net cash provided by (used in)
  financing activities                         (  812)    1,892       15
                                                -----   -------   ------

Net increase (decrease) in cash                    17  (    642) ( 4,604)

Cash and cash equivalents
  at beginning of year                             68       710    5,314
                                                -----   -------   ------

Cash and cash equivalents
  at beginning of year                          $  85   $    68   $  710
                                                =====   =======   ======




                 See Notes to consolidated financial statements.



                                 23 OF 40 PAGES


<PAGE>




                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

Supplemental disclosures of cash flow information:

Changes in assets and liabilities:
  Accounts receivable                          $2,120   ($2,396) ($  609)
  Costs in excess of billings                 (   608)      377  (    64)
  Other current assets                        (    30)  (    22)      80
  Other assets                                     20        20        4
  Billings in excess of costs                 (   283)      171       23
  Accounts payable and accrued expenses            31       278  (   526)
  Accrued income taxes                        (     5)  (   276) (   386)
  Other liabilities                                 -   (    50)       -
                                               ------    ------   ------

                                               $1,245   ($1,898) ($1,478)
                                               ======    ======   ======

Cash paid during the year for:

  Interest                                     $  253    $  147   $   38
  Income taxes (including
    interest thereon)                          $   22    $  219   $  633

Noncash investing activities:

  Capital stock issued for acquisition         $    -    $    -   $  550

Details of acquisition:

  Fair value of assets acquired                $    -    $    -   $6,968
  Liabilities assumed                               -         -  ( 2,535)
  Stock issued                                      -         -  (   550)
                                               ------    ------   ------

  Cash paid                                         -         -    3,883
  Less cash acquired                                -         -  (    27)
                                               ------    ------   ------

Net cash paid for acquisition                  $    -    $    -   $3,856
                                               ======    ======   ======




                 See notes to consolidated financial statements.


                                 24 OF 40 PAGES


<PAGE>





                         REXX ENVIRONMENTAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ACCOUNTING POLICIES:

  A. Basis of presentation and principles of consolidation:

     REXX Environmental Corporation's (the "Company") consolidated financial
statements have been prepared in conformity with generally accepted accounting
principles. The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, Watkins Contracting, Inc. ("WCI")
(since its acquisition by the Company on October 21, 1997) and Oak Hill
Sportswear Holding Corporation, which was inactive. Certain previously reported
amounts have been reclassified to conform to the 1999 presentation.

  B. Cash equivalents:

     Cash equivalents include all highly liquid debt instruments (primarily U.S.
Treasury obligations) purchased with original maturities of less than three
months.

  C. Goodwill:

     Goodwill represents the excess of the cost of the business acquired, WCI,
over the fair value of its net tangible assets. Goodwill is amortized using the
straight line method over a 15 year period. Amortization of goodwill for 1999,
1998 and 1997 was $211,000, $211,000 and $41,000, respectively.

  D. Pension and profit-sharing plans:

     The Company has defined contribution pension and profit-sharing plans
covering eligible employees (which permanently ceased contributions in October
1997) and WCI has a defined contribution 401K plan covering eligible employees.
Costs for these plans are funded as accrued and there are no prior service costs
with respect to these plans.

  E. Net loss per share:

     In 1997, the Company adopted Statement of Financial Accounting
Standards No. 128 ("FAS 128"), Earnings per Share. FAS 128 prescribes that
companies present basic and diluted earnings per share amounts, as defined, on
the face of the statement of operations. Net loss per share is based on the
weighted average number of shares outstanding. The number of shares used in the
computations for basic and diluted net income per share for 1999, 1998 and 1997
were 2,467,576, 2,467,576, 2,136,905, respectively.

     Net loss used in the computation of basic and diluted net loss per
share is not affected by the assumed issuance of stock under the Company's stock
option plan and is therefore the same for both calculations.

     Options to purchase 230,000, 304,000 and 195,000 shares at prices
ranging from $2.00 to $5.00 per share were outstanding in 1999, 1998 and 1997,
respectively, but were not included in the computation of diluted net loss per
share because their inclusion would have been antidilutive.

                                 25 OF 40 PAGES


<PAGE>




  F. Method of Income Recognition:

     The percentage-of-completion method of accounting for construction
contracts is used in the financial statements. Under this method, revenues and
related income are recognized as the work on the contract progresses. Generally,
such income represents the percentage of estimated total income that costs
incurred to date bear to estimated total costs. When current estimates of total
contract costs indicate a loss on a contract, provision is made in the financial
statements for the entire estimated amount of the loss. Changes in job
performance, job conditions and estimated profitability, including those arising
from contract penalty provisions, and final contract settlements may result in
revisions to cost and income and are recognized in the period in which the
revisions are determined.

      Contract costs include all direct material and labor costs and those
indirect costs related to contract performance such as indirect labor, supplies,
tools and repairs. Selling, general and administrative costs are charged to
expense as incurred.

     Amounts earned on specific projects in excess of billings are
treated as a current asset and billings in excess of earnings are
treated as a current liability.

  G. Property and Equipment:

      Property and equipment is carried at cost and depreciated using the
straight line method over the estimated useful lives of the individual assets,
generally three to ten years for all assets.

  H. Revenues:

     Consulting fees are recognized as earned. Consulting income received from a
buyer of the Company's former Sportswear division for 1999, 1998, and 1997 was
$0, $0 and $50,000, respectively.

  I. Fair value of financial instruments:

     The fair value of the Company's financial instruments (cash, receivables,
payables and mortgage note) approximates the carrying value due to the
relatively short-term nature of these assets. The fair value of long-term debt
approximates its carrying value as the average interest rates approximate the
rates of the Company's variable debt at December 31, 1999.

  J. Use of estimates:

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues, costs and expenses during the
reporting period. The principal estimates made with respect to these financial
statements relate to job costs and the percentage completion of each job. Actual
results could differ from those estimates.



                                 26 OF 40 PAGES


<PAGE>






  K. Impairment of Long-Lived Assets:

     Management of the Company monitors the carrying value of long-lived assets
(including goodwill) for potential impairment on an on-going basis. Potential
impairment would be determined by comparing the carrying value of these assets
with their expected future net cash flows. Should the sum of the expected future
net cash flows be less than the carrying value, management would recognize an
impairment loss, measured as the amount by which the carrying value of the asset
exceeds its fair value.

NOTE 2 - ACQUISITION AND CONSOLIDATED CONDENSED PRO FORMA FINANCIAL
         INFORMATION

     On October 21, 1997, the Company completed the acquisition of 100% of the
outstanding shares of WCI, a privately-owned, San Diego-based environmental
remediation contractor. Founded in 1991, WCI provides asbestos abatement,
hazardous materials and soil remediation and demolition services, primarily in
California, to commercial and governmental clients. The total consideration
consisted of (a) $3,600,000 in cash, using cash on hand, (b) 400,000 shares of
restricted REXX Environmental Corporation common stock and (c) rights entitling
the former owners of WCI to sell up to 50,000 shares per quarter of the common
stock back to the Company starting in April 1999, at $5.00 per share if WCI
earns in excess of $2,700,000 pretax income during 1998, and to sell up to an
additional 50,000 shares per quarter back to the Company starting in April 2000,
at $5.00 per share if WCI earns in excess of $2,700,000 pretax income during
1999. During 1999 and 1998, WCI did not meet the earnings requirement and,
therefore, these rights expired. The acquisition was accounted for using the
purchase method of accounting. The purchase price was allocated to the assets
purchased and liabilities assumed based upon the fair values on the date of
acquisition, as follows:

             Working capital                   $  685,000
             Property and equipment             1,204,000
             Other assets                          61,000
             Goodwill                           3,166,000
             Other liabilities                   (683,000)
                                               ----------

             Purchase price                    $4,433,000
                                               ==========






                                 27 OF 40 PAGES


<PAGE>







     The following condensed unaudited pro forma statements reflect the results
of operations of the Company as if the acquisition had been consummated at the
beginning of 1997. The unaudited pro forma financial information presented
herein does not necessarily reflect the results of operations and financial
position of the Company had the acquisition actually taken place on these dates.

                        Consolidated Condensed Pro Forma
                            Statements of Operations
                                   (unaudited)

                                                            1997
                                                            ----

Revenues                                                $10,350,000
                                                        -----------
Income from operations                                    1,180,000
Other income                                                 36,000
                                                        -----------
Income before income taxes                                1,216,000
Income taxes                                                151,000
                                                        -----------
Net income                                              $ 1,065,000
                                                        ===========

Pro forma net income per share-basic                          $0.43
                                                              =====


NOTE 3 - ACCOUNTS RECEIVABLE:

     Accounts receivable at December 31, 1999 and 1998 are as follows:

                                                 1999           1998
                                                 ----           ----

     Contracts in progress:
       Currently receivable                   $1,301,000     $1,779,000
       Retentions receivable                     352,000        388,000
                                              ----------     ----------
                                               1,653,000      2,167,000

     Completed contracts:
       Currently receivable                      583,000      1,798,000
       Retentions receivable                     368,000        681,000
                                              ----------     ----------

                                                 951,000      2,479,000

     Other accounts receivable                    60,000        138,000
                                              ----------     ----------
                                               2,664,000      4,784,000

     Less allowance for
        doubtful accounts                        (35,000)       (35,000)
                                              ----------     ----------

                                              $2,629,000     $4,749,000

     During 1999 and 1998, one customer accounted for approximately 13% of the
Company's revenues.

     During 1999, the Company incurred no expense for doubtful accounts.




                                 28 OF 40 PAGES


<PAGE>





NOTE 4 - CONTRACTS IN PROGRESS:

     Contracts in progress at December 31, 1999 and 1998 are as follows:

                                                 1999           1998
                                                 ----           ----

     Costs incurred on contracts in
       progress                               $7,038,000     $4,174,000
     Estimated earnings on contracts
       in progress                               798,000        743,000
                                              ----------     ----------

     Total costs and estimated earnings        7,836,000      4,917,000
     Less billings to date                    (7,131,000)    (5,103,000)
                                              ----------     ----------

                                              $  705,000    ($  186,000)
                                              ==========     ==========

     Contracts in progress are included
       in the accompanying balance sheet
       under the following headings

     Costs and estimated earnings in
       excess of billings on contracts
       in progress                            $  831,000     $  223,000

     Billings in excess of costs and
       estimated earnings on contracts          (126,000)      (409,000)
                                              ----------     ----------

                                              $  705,000     $  186,000
                                              ==========     ==========

NOTE 5 - ASSETS HELD FOR SALE:

     The Company owns a warehousing facility in Mississippi, which is
approximately 64,000 square feet. During November 1997, the Company leased the
facility to an unaffiliated company. The Company is currently seeking to sell
the facility.

NOTE 6 - PROPERTY AND EQUIPMENT:

     Property and equipment at December 31, 1999 and 1998 consisted of:

                                                 1999         1998
                                                 ----         ----

         Machinery and equipment             $1,244,000   $1,163,000
         Office equipment                       145,000      105,000
         Furniture and fixtures                  34,000       29,000
         Leasehold improvements                  57,000       42,000
         Vehicles                               355,000      338,000
                                             ----------   ----------
                                              1,835,000    1,677,000
         Less accumulated depreciation         (457,000)    (190,000)
                                             ----------   ----------

         Net property and equipment          $1,378,000   $1,487,000
                                             ==========   ==========

     Depreciation expense for the years ended December 31, 1999 and 1998 was
$274,000 and $184,000, respectively.


                                 29 OF 40 PAGES


<PAGE>




NOTE 7 - NOTES PAYABLE TO BANK:

     WCI executed, effective November 10, 1998, a revolving credit agreement
with Wells Fargo Bank, N.A. The credit agreement, as amended, which expires June
9, 2000, calls for interest payable at Wells Fargo's prime rate, as in effect
from time to time, plus 2% and borrowings up to 75% of eligible accounts
receivable subject to a maximum of $2,000,000 (reduced by approximately $100,000
of equipment loans made to WCI by Wells Fargo). At December 31, 1999, WCI had
$785,000 borrowed under the credit agreement, in addition to approximately
$80,000 of equipment loans made by Wells Fargo to WCI. The Company has
guaranteed WCI's borrowings under the credit agreement, which is also secured by
WCI's accounts receivable and all other assets (with the exception of vehicles
and equipment subject to purchase contract lending agreements with third party
lenders.) In addition, the credit agreement provides for certain financial
covenants based upon WCI's financial condition, including its current ratio and
tangible net worth. WCI's breach of certain financial covenants under its
secured credit agreement as of December 31, 1999 and earlier dates were waived
by Wells Fargo.

     In order to meet its working capital needs at the corporate level, the
Company has negotiated a line of credit with HSBC Bank (USA) (formerly Republic
National Bank of New York), which provided, at December 31, 1999, for $250,000
in borrowings, secured by REXX's assets, and interest payable at HSBC's
reference rate plus 1%. This line of credit was evidenced by a demand grid note
in the maximum amount of $250,000, as of December 31, 1999. At December 31,
1999, the Company had $245,000 borrowed under the line of credit. Subsequent to
year end, this line of credit was increased to $450,000 and a demand grid note
in that maximum amount was executed to replace the $250,000 grid note. The
Company's borrowings under this line of credit have been guaranteed by its
Chairman of the Board, Arthur L. Asch and, subsequent to year end, also became
secured by a certificate of deposit in the amount of $200,000 deposited by Mr.
Asch with the bank. Mr. Asch is not being compensated by the Company for
providing the guarantee and additional collateral.

NOTE 8 - LONG-TERM DEBT:

     The Company has an outstanding mortgage note, which is secured by land and
a building in Mississippi (and, from December 1996 to April, 1998, by a $500,000
certificate of deposit) which carries an interest rate of 1/2% above the Bank of
Mississippi's Prime Rate (9% at December 31, 1999). The principal balance of the
mortgage was $418,000 at December 31, 1999 and $469,000 at December 31, 1998.
The Company has classified this as a current liability as it is likely that part
or all of such note will be repaid in 2000.

      WCI acquired vehicles and equipment under long-term purchase contracts
which were secured by the related assets. Vehicles and equipment under purchase
contracts had a net book value of $793,000 at December 31, 1999 and $1,076,000
at December 31, 1998.



                                 30 OF 40 PAGES


<PAGE>





Long-term debt at December 31, 1999 and 1998 included:

                                            1999            1998
                                            ----            ----

Debt on assets held for sale             $  418,000      $  469,000
Purchase contracts (at interest
 rates of 6.34% to 9.64% and with
  maturities through 11/03):                827,000         937,000
                                         ----------      ----------

Total long-term debt                      1,245,000       1,406,000

Less current portion of long-term
 debt                                       639,000         668,000
                                         ----------      ----------

Long-term debt, net of current
 portion                                 $  606,000      $  738,000
                                         ==========      ==========

Maturities on long-term debt:

         2001                                   $231,000
         2002                                    239,000
         2003                                    136,000
                                                --------

         Total maturities                       $606,000
                                                ========

NOTE 9 - STOCK OPTIONS:

     On October 11, 1994, the Board of Directors adopted a Non-Qualified Stock
Option Plan (the "Plan") covering up to 199,250 shares of the Company's Common
Stock. The Plan provides that (1) the option price per share is to be not less
than 50% of the fair market value of the stock on the date of the grant and (2)
options granted shall be for a term of not more than five years and shall become
exercisable in equal installments in each year of the term on a cumulative
basis, other than the first year, or to the extent that the Board of Directors
shall determine. No option may be granted under the Plan after October 11, 2004.
On April 22, 1996, the Board of Directors approved an amendment to the Plan,
which was approved by a majority of shareholders at the Company's Annual Meeting
held on June 26, 1996 and provides that the Plan is permitted to grant options
to outside directors and that each outside director of the Company shall receive
options to purchase 15,000 shares at the then-current market price for the
Company's stock upon joining the Board. On December 3, 1997, the Board of
Directors approved amendments to the Plan, which were also approved by a
majority of shareholders at a Special Meeting of Shareholders held on February
17, 1998. The amendments provide for (1) reserving from the Company's authorized
but unissued shares of Common Stock 250,000 shares for issuance on exercise of
options which may be granted under the Plan, (2) increasing the maximum number
of shares for which a person may receive options under the Plan from 100,000
shares to 150,000 shares and (3) adding the incentive to key employees of any
business which the Company acquires or in which it acquires an interest to
continue in its employ, by the grants of options under the Plan to such
employees, as a purpose of the Plan. At December 31, 1999, the Company reserved
439,250 shares of its Common Stock for the purposes of the Plan. At that date,
there were 230,000 options outstanding at exercise prices of $2.00-$5.00.



                                 31 OF 40 PAGES


<PAGE>



    Additional information concerning stock options under the Plan is summarized
as follows:

                                                              Number of
                                     Weighted    Number of    Options
                          Range of   Average     Options      Available
            Number        Exercise   Exercise    Exercisable  For Future
            of Shares     Prices     Price       At Year End  Grant
            ---------     --------   --------    -----------  ----------

Options
outstanding
at Jan. 1,
1997         184,000    $2.00-$4.25   $2.90       37,000       15,250
Granted       41,000     3.00- 4.00    3.55            -            -
Exercised    (10,000)    2.00          2.00            -            -
Terminated   (20,000)    2.00          2.00            -            -
             -------    -----------   -----       ------      -------

Options
Outstanding
at Dec. 31,
1997         195,000    $2.00-$4.25   $3.18       82,167            -
Granted      119,000     2.00-$5.00    3.74            -            -
Exercised          0              -       -            -            -
Terminated   (10,000)    3.00- 5.00    4.60            -            -
             -------    -----------   -----       ------      -------

Options
Outstanding
at Dec. 31,
1998         304,000    $2.00-$5.00   $3.25      139,583      135,250
Granted            -              -       -            -            -
Exercised          -              -       -            -            -
Terminated   (74,000)    4.25          4.25            -            -
             -------    -----------   -----      -------      -------

Options
Outstanding
at Dec. 31,
1999         230,000    $2.00-$5.00   $3.06      132,250      209,250
             =======    ===========   =====      =======      =======

    As of December 31, 1999, 1998 and 1997, the weighted average remaining
contractual life of outstanding options was approximately 2.8 years, 3.0 years
and 3.8 years, respectively.

    As permitted, the Company applies Accounting Principles Board Opinion No. 25
and related interpretations in accounting for its stock-based compensation plan.
Had compensation cost for the Company's stock-based compensation plan been
determined based on the fair values at the grant dates for awards under the
Plan, consistent with the alternative method of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation, the
Company's 1999 net loss and net loss per share would have been impacted by
$52,000 and $0.02 per share, respectively, the Company's 1998 net loss and net
loss per share would have been impacted by $47,000 and $0.02 per share,
respectively, and the Company's 1997 net loss and net loss per share would have
been impacted by $14,000 and $0.01 per share, respectively. These pro forma
amounts may not be representative of future disclosures because the estimated
fair value of stock options is amortized to expense over the vesting period, and
additional options may be granted in future years.





                                 32 OF 40 PAGES


<PAGE>





     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions for grants in, 1998 and 1997, respectively: expected volatility of
58.9% and 63.3%, risk free interest rate of 5.17% and 5.48%, expected option
term of 5 years for all options issued and no dividend yield or forfeiture rate
for all options granted. There were no options granted during 1999.


NOTE 10 - TAXES:

     Provision for taxes consists of the following components:

                                            1999        1998       1997
                                            ----        ----       ----

     Current                               $9,000    ($45,000)    $48,000
     Deferred                                   -           -           -
                                           ------     -------     -------

        Total                              $9,000    ($45,000)    $48,000
                                           ======     =======     =======

     The provision for 1999 and 1997 represents state and local taxes. There is
no provision for federal income taxes as the Company had net losses in 1999,
1998 and 1997. In 1998, the Company reversed $65,000 of excess federal income
tax accruals and provided $20,000 for state and local taxes. At December 31,
1999, the Company has available for Federal income tax purposes net operating
loss carryforwards of approximately $     that begin to expire in the year 2007.

     A reconciliation of the statutory income tax rate and the effective tax
rates for 1999, 1998 and 1997 follows:
                                              1999       1998       1997
                                              ----       ----       ----

     Statutory rate                           34.0%      34.0%      34.0%
     State and local taxes                   ( 0.8)     ( 2.4)     (26.6)
     Amortization and other
       non-deductible expenses               (19.8)     (13.8)     (16.3)
     Reversal of excess federal accrual          -       12.0          -
     Valuation allowance                     ( 2.6)     (21.4)     (31.4)
     Other                                   (12.0)         -          -
                                              ----       ----       ----

     Effective rate                          ( 1.2%)      8.4%     (40.3%)
                                              =====      =====      =====


     The following summarizes the significant components of deferred tax
(liabilities) assets:

                                       December 31,     December 31,
                                           1999             1998
                                       ------------     ----------

     Accrued expenses                  $   70,000       $   23,000
     Operating loss carryforward        3,971,000        3,997,000
     Capital loss carryforward                  -                -
                                       ----------       ----------
     Gross deferred tax assets          4,041,000        4,020,000
     Deferred tax asset valuation
      allowance                         4,041,000        4,020,000
                                       ----------       ----------
     Deferred Taxes                    $        0       $        0
                                       ==========       ==========


                                 33 OF 40 PAGES


<PAGE>





NOTE 11 - PROFIT-SHARING AND PENSION PLANS:

     The Company has a non-contributory profit-sharing plan which provided for
annual contributions, at the discretion of the Board of Directors, of between 2%
and 15% of the defined compensation of eligible employees until October 21,
1997, at which point all contributions permanently ceased. Profit-sharing
expense was $0 in 1999, $0 in 1998 and $3,800 in 1997.

     The Company also has defined contribution (money purchase) pension plans
that cover employees who meet specified eligibility requirements. The
contributions required under the plans vary; however, the Company principally
contributed 1% of the first $20,000 and 4% above $20,000 (limited to an
additional $130,000) of the defined compensation of eligible employees until
October 21, 1997, at which point all contributions permanently ceased. Pension
expense was $0 in 1999, $0 in 1998 and $6,400 in 1997.

     WCI has a 401(k) profit sharing plan ("the 401(k) Plan") in which employees
become eligible to participate in the 401(k) Plan after six months of service
and having reached the age of 21 years. Participation by the employee is at the
employee's option. WCI's match of the employee's contributions equals 25% of
each participant's salary reduction, not to exceed 6% of the participant's
compensation. WCI may also make discretionary contributions to the 401(k) Plan
for the benefit of the employees.

     Employees are 100% vested in their employee contributions and begin vesting
at 20% in WCI's contributions starting with their first year of service. Their
vesting portion increases by 20% per year of service until the fifth year of
service when the employee is 100% vested in the employer contributions. Employer
contributions for 1999 were $6,000, for 1998 were $6,000 and for the 1997 period
from October 21, to December 31, 1997 were $1,000. Voluntary employee
contributions into the plan for 1999 were $23,000, for 1998 were $24,000 and for
the period from October 21, 1997 to December 31, 1997 were $6,000.

NOTE 12 - CONCENTRATION OF CREDIT RISK:

     The Company's customers, contracts and projects are located primarily in
California. The Company extends credit to its customers, a large percentage of
which are general contractors. The majority of the Company's contracts are
secured or securable by construction liens.

NOTE 13 - COMMITMENTS AND CONTINGENCIES

    The Company, largely at WCI's San Diego location, leases office space and
equipment under operating leases. Future minimum lease payments, net of sublease
income, under these leases (all of which are commitments of WCI, and which
include a 10 year lease for office space signed subsequent to year end) are as
follows:

                 2000                    $  340,000
                 2001                       323,000
                 2002                       289,000
                 2003                       277,000
                 Thereafter               1,077,000
                                         ----------
                 Total                   $2,306,000



                                 34 OF 40 PAGES


<PAGE>




     The Company is involved in various legal matters in the ordinary course of
business. In the opinion of management, these matters are not anticipated to
have a material adverse effect on the results of operations, financial position
or liquidity of the Company.

     See Note 2 regarding contingencies related to the acquisition of WCI.

NOTE 14 - PROPOSED SALE OF WATKINS CONTRACTING, INC. AND MERGER WITH
          TWG, INC.

     On June 15, 1999, the Company announced that it had signed a definitive
agreement to sell WCI to Greg Watkins and Daren Barone (or their permitted
assignees) for $1,300,000 in cash and 125,000 shares of REXX Environmental
Corporation common stock, as well as certain other consideration. Subsequently,
the terms were amended to provide that Messrs. Watkins and Barone could pay the
Company $171,875 in cash in lieu of the 125,000 shares of REXX Environmental
Corporation common stock, at their option at the time of closing. The sale of
WCI is subject to the approval of the Company's shareholders. Based on
preliminary estimates, if the Company's shareholders approve the sale of WCI and
it closes, on closing the Company will record a loss on the sale of WCI of
approximately $2,800,000 which represents the difference between the net
proceeds that the Company will receive and the combined value of the investment
and goodwill that is recorded on the Company's books. This preliminary estimate
is subject to further review and valuations at the time the proposed sale
closes.

     On December 9, 1999, the Company announced that it had signed a definitive
agreement for a subsidiary of TWG, Inc. to merge with and into the Company,
subject to the approval of REXX's shareholders and certain other conditions,
including the closing of the sale of WCI. TWG, Inc. would become the publicly
traded parent company. In January 2000, TWG, Inc. changed its name to Newtek
Capital, Inc. ("Newtek"). If the Company's shareholders approve the transaction
and it closes, Newtek's current shareholders are expected to own 18,250,000
shares of Newtek common stock and the Company's shareholders are expected to own
1 share of Newtek for each share of the Company's common stock they currently
own, or a total of 2,467,576 shares.








                                 35 OF 40 PAGES


<PAGE>





Item 9.  Disagreements on accounting and financial disclosure:

     None.

                                    PART III

Item 10.  Directors and executive officers of the registrant:

     To be provided by an amendment to this Form 10-K filed within 120 days of
the Company's fiscal year end or incorporated by reference to information under
the caption "Principal Positions and Offices of REXX's Directors and Executive
Officers" in the Company's definitive proxy statement to be filed pursuant to
Regulation 14A within said 120 days.

Item 11.  Executive compensation:

     To be provided by an amendment to this Form 10-K filed within 120 days of
the Company's fiscal year end or incorporated by reference to information under
the captions "Executive Compensation", and "Directors Compensation" in the
Company's definitive proxy statement to be filed pursuant to Regulation 14A
within said 120 days.

Item 12.  Security ownership of certain beneficial owners and management:

     To be provided by an amendment to this Form 10-K filed within 120 days of
the Company's fiscal year end or incorporated by reference to information under
the caption "Security Ownership" in the Company's definitive proxy statement to
be filed pursuant to Regulation 14A within said 120 days.

Item 13.  Certain relationships and related transactions:

     To be provided by an amendment to this Form 10-K filed within 120 days of
the Company's fiscal year end or incorporated by reference to information under
the captions "Directors Compensation," "Executive Compensation" and "Certain
Relationships and Related Transactions" in the Company's definitive proxy
statement to be filed pursuant to Regulation 14A within said 120 days.





                                 36 0F 40 PAGES


<PAGE>



                                     PART IV

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

                                                        Filed herewith or
                                                        incorporated by
                                                        reference to:
                                                        -------------

(a) Documents filed as part of this Form 10-K:

   1. Consolidated financial statements. The consolidated financial statements
      filed as part of this Form 10-K are listed on the index thereto, on page
      20 hereof.

   2. Financial statement schedules.
      -----------------------------

      All schedules are omitted because they are not required, are inapplicable
      or the information is otherwise shown in the financial statements or notes
      thereto.

   3. Exhibits filed under Item 601 of
      --------------------------------
      Regulation S-K.  (Numbers assigned to
      --------------
      the following exhibits correlate to
      those used in said Item.)

      (3) Articles of Incorporation and By-Laws.

             (a)(1) Certificate of                       Exhibit 3.1 to the
                    Incorporation, as                    Company's Form 10-K's
                    amended.                             for its years ended
                                                         December 31, 1980 and
                                                         December 31, 1983, and
                                                         Exhibit 6 to its Form
                                                         10-Q for its quarter
                                                         ended June 30, 1988.

                (2) Amendment to Certificate             Exhibit 3(a)(2) to the
                    of Incorporation filed               Company's Form 10-K for
                    February 18, 1998,                   its year ended
                    effecting name change                December 31, 1997.
                    to REXX Environmental
                    Corporation.

             (b) By-laws, as amended.                    Exhibit 3(c) to the
                                                         Company's Form 10-K
                                                         for its year ended
                                                         December 31, 1986,
                                                         and Exhibit C-1 to
                                                         its proxy statement
                                                         dated May 13, 1987.





                                 37 OF 40 PAGES


<PAGE>




                                                        Filed herewith or
                                                        incorporated by
                                                        reference to:
                                                        -------------
     10. Material Contracts.
         ------------------

         (f)(1) Non-Qualified Stock                     Exhibit 10 (iii) to
                Option Plan.                            the Company's Form 10-Q
                                                        for its quarter ended
                                                        September 30, 1994.

            (2) Amendment to Non-Qualified              Exhibit 10(f)(2) to the
                Stock Option Plan, adopted              Company's Form 10-K for
                February 17, 1998.                      its year ended December
                                                        31, 1997.


         (i)  Relating to the Purchase of
              Watkins Contracting, Inc.:

              (1) Stock Purchase Agreement,             Exhibit 2.1 to the
                  dated October 21, 1997,               Company's Form 8-K
                  between Oak Hill                      dated October 30, 1997.
                  Sportswear Corporation,
                  as Buyer, and Greg S.
                  Watkins and Daren J.
                  Barone, as Sellers,
                  together with a list
                  identifying the contents
                  of items in a Disclosure
                  Letter provided for in
                  said Agreement pertaining
                  to certain provisions
                  thereof.

              (2) Rights Agreement, dated               Exhibit 2.2 to said
                  October 21, 1997, between             Form 8-K.
                  Oak Hill Sportswear
                  Corporation and Greg S.
                  Watkins.

              (3) Rights Agreement, dated               Exhibit 2.3 to said
                  October 21, 1997, between             Form 8-K.
                  Oak Hill Sportswear
                  Corporation and Daren J.
                  Barone.

              (4) Employment Agreement, dated           Exhibit 2.4 to said
                  October 21, 1997, between             Form 8-K.
                  Watkins Contracting, Inc.
                  and Greg S. Watkins.

              (5) Employment Agreement, dated           Exhibit 2.5 to said
                  October 21, 1997, between             Form 8-K.
                  Watkins Contracting, Inc.
                  and Daren J. Barone.






                                 38 OF 40 PAGES


<PAGE>





                                                        Filed herewith or
                                                        incorporated by
                                                        reference to:
                                                        -------------


         (j) Relating to the Credit Agreement
             between Watkins Contracting, Inc.
             and Wells Fargo Bank:

             (1) Credit Agreement, dated as             Exhibit 10(j)(1) to
                 of November 10, 1998, by               the Company's Form 10-K
                 and between Watkins                    for its year ended
                 Contracting, Inc. and Wells            December 31, 1998.
                 Fargo Bank, N.A.

             (2) Revolving line of Credit               Exhibit 10(j)(2) to
                 Note.                                  said Form 10-K.

             (3) Continuing Guaranty of REXX            Exhibit 10(j)(3) to
                 Environmental Corporation              said Form 10-K.
                 granted to Wells Fargo Bank,
                 N.A. in connection with the
                 Credit Agreement.

             (4) First Amendment to Credit              Exhibit 10(j)(4) filed
                 Agreement                              herewith.

             (5) Second Amendment to Credit             Exhibit 10(j)(5) filed
                 Agreement                              herewith.

         (k) Form of Indemnity Agreement                Exhibit 10(k) to
             dated as of January 4, 1998                the Company's Form
             between the Company and each               10-K for its year
             of its directors and executive             ended December 31,
             officers.                                  1998.

         (l) Stock Purchase Agreement,                  Exhibit 10(l) filed
             dated as of June 10, 1999,                 herewith.
             between Greg S. Watkins and
             Daren J. Barone, as Buyers,
             and REXX Environmental
             Corporation, as Sellers,
             as amended.

         (m) Agreement and Plan of Merger               Exhibit 10(m) filed
             by and between REXX                        herewith.
             Environmental Corporation
             and TWG, Inc. dated
             December 9, 1999, to be
             joined in by REXX
             Acquisition Corp. and
             Whitestone Acquisition Corp.

         (n) Demand grid note issued to                 Exhibit 10(n) filed
             HSBC Bank (USA).                           herewith.

(c) See Item 14(a)(3) above.

(d) See Item 14(a)(2) above.


                                 39 OF 40 PAGES


<PAGE>





                                   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.

(Registrant)  REXX ENVIRONMENTAL CORPORATION


By: /s/ Arthur L. Asch
    ------------------
        Arthur L. Asch, Chairman of the Board (Principal executive officer)


By: /s/ Michael A. Asch
    -------------------
        Michael A. Asch, President and Treasurer (Principal financial officer)

Date: March 24, 2000



     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


/s/ Arthur L. Asch                         /s/ Michael A. Asch
-----------------------------------        -------------------------------------
    Arthur L. Asch, Director                   Michael A. Asch, Director

Date:  March 24, 2000                      Date:  March 24, 2000


/s/ James L. Hochfelder                    /s/ Joseph Greenberger
-----------------------------------        -------------------------------------
    James L. Hochfelder, Director              Joseph Greenberger, Director

Date:  March 24, 2000                      Date:  March 24, 2000


/s/ Brian A. Wasserman
-----------------------------------
    Brian A. Wasserman, Director

Date:  March 24, 2000




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