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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, 1997 0-5613
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REXX ENVIRONMENTAL CORPORATION
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(Exact name of registrant as specified in its charter)
New York 13-2625545
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
350 Park Avenue, New York, New York 10022
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(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
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(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 6, 1998, 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
$7,750,000.
As of March 6, 1998, the registrant had 2,467,576 shares of $.02 par value
common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of Form 10-K
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Portions of definitive proxy statement for As referred to in
the 1998 Annual Meeting of Shareholders Part III - Items
to be filed pursuant to Regulation 14A 10, 11, 12 and 13.
under the Securities Exchange Act
of 1934.
Exhibit index of pages 36 - 38
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REXX ENVIRONMENTAL CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR YEAR ENDED DECEMBER 31, 1997
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.
With its origins in asbestos-abatement and recent diversification into
the demolition and lead paint-abatement markets, WCI is striving to provide a
larger complement of contracting services to the performance-sensitive customer.
The market will continue to demand quality performance, and WCI will endeavor to
meet these demands through a unified focus on safety, customer satisfaction,
financial performance and personnel development.
General - Historical
REXX Environmental Corporation (the "Company") 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.
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. The total consideration consisted of (a) $3,600,000 in
cash, using cash on hand, (b) 400,000 shares of restricted common stock of the
Company, 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.
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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 services in
California, Nevada and New Mexico and generally provides such services with
unionized labor. WCI is licensed to conduct demolition and dismantling services
in California and provides such services with unionized 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 manage properly the financial,
regulatory and safety-related risks associated with an asbestos or demolition
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 rental costs. While large abatement contracts may last
more than one year, the majority of WCI's projects are completed within two
months of inception.
Project Management
Each project is coordinated and supervised by a project manager who
selects the requisite equipment, ensures contract compliance and supervises all
personnel. WCI employs a computerized job cost system which allows it to track
project profitability on an ongoing basis. The project manager reviews the
progress of the project, which includes any subsequent change orders. The
day-to-day documentation
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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. In compliance with
the EPA's Asbestos Hazard Emergency Response Act ("AHERA") Model Accreditation
Plan ("MAP"), all asbestos-abatement supervisors and workers are required to
attend and satisfactorily pass a written examination both initially and during
annual refresher training. To meet the medical surveillance and respiratory
protection requirements of the Occupational Safety and Health Administration
("OSHA") standards, all asbestos-abatement personnel entering an asbestos
atmosphere and all demolition personnel entering a lead atmosphere must first
undergo an initial, and then annual, medical examination, which includes a
complete medical and work history, pulmonary function testing and a chest
roentgenogram. In addition to the required wearing of protective clothing and
other personal protective equipment, all individuals leaving a contaminated area
are required to undergo stringent decontamination procedures. 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. In either
process, it is WCI's policy to comply with all regulatory and safety
requirements. Comprehensive documentation is an important part of the
asbestos-abatement and demolition and dismantling processes.
The Abatement Process
WCI's workers remove asbestos in accordance with the regulations of the
Environmental Protection Agency ("EPA"), OSHA and applicable state and local
regulations. Before any removal can begin, the work area must be sealed off from
the interior building environment as well as from the outdoor environment. The
containment of the work area requires the construction of barriers, made of
plastic sheeting sealed at the seams, on the walls and floors. Air locks are
built for entry of personnel and equipment, and a negative pressure H.E.P.A. air
filtration system is required to prevent the escape of any asbestos fibers from
the work area. WCI constructs a worker decontamination area which is generally
comprised of a clean area where workers prepare for the work shift and an area
where the workers shower after leaving the sealed-off work area. Workers are
fitted with respirators and disposable suits prior to entering the work area.
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
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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.
The Demolition and Dismantling Process
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.
WCI performs a site specific safety survey of every project prior to
beginning work. An engineering survey of the equipment, structures or buildings
to be dismantled or demolished is prepared outlining potential hazards and
methods used to alleviate the hazards. During the course of the project, daily
safety meetings are conducted to discuss that day's activities, potential
problems and measures to overcome the problems. Industrial dismantling involves
removing structures and equipment in manufacturing facilities. WCI's workers,
utilizing specially-designed equipment and attachments, carefully dismantle the
structures and equipment from the top down. Materials are either recycled or
disposed of in a licensed landfill. 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 currently 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.
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 and 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 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.
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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 businesses are
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) its asbestos business is labor intensive whereas its
demolition business is equipment intensive; (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 of asbestos-abatement activities 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 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 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. The Company carries an umbrella policy of $9,000,000 which, when added
to the base policy limits of $1,000,000, extends coverage under general
liability, automobile liability and workers' compensation policies to
$10,000,000 each. Effective as of January 1, 1998, the Company's retained
liability per occurrence under the general liability policy is $5,000, and the
Company's liability under the automobile liability policy and under the workers'
compensation policy is covered 100%, without retention, up to the policy limits.
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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.
The Company has an existing surety relationship with AIG Environmental
Management, Inc. (American International Group).
Employees
As of December 31, 1997, REXX Environmental Corporation (including WCI)
had approximately 150 employees, of which approximately 20 were employed as
managers or executives, approximately 5 provided technical or engineering
services, approximately 5 were employed in sales, clerical and data processing
activities and approximately 120 were employed in other capacities, principally
hourly labor. During 1997, the number of hourly-rate employees of the Company
ranged from 60 to 150. At December 31, 1997, approximately 120 of WCI's
employees were represented by various unions under several collective bargaining
agreements. WCI is a party to a number of collective bargaining agreements with
several unions which represent employees based upon geographic area or the
nature of work performed by such employees. Such collective bargaining
agreements expire at various times. 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.
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.
EPA regulations under the Clean Air Act include requirements for
wetting of the asbestos-containing material, the use of exhaust ventilation and
filtration systems meeting certain specifications and procedures for
transporting and disposing of asbestos-containing material. Prior to commencing
most removal projects, contractors are
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required to provide the EPA with written notification containing
certain information, including the address of the project, the anticipated
starting and completion dates, methods to be used to comply with the emission
standards, the amount of asbestos-containing material involved in the project
and the location of the EPA-approved disposal site.
The Toxic Substances Control Act ("TSCA"), as amended by AHERA, and the
regulations promulgated pursuant thereto, require inspection of schools for
asbestos and public notice of the inspection results, which often leads to
demands for abatement. In addition, TSCA imposes asbestos standards for state
and local government employees. The EPA has also adopted regulations under AHERA
which require schools to use accredited inspectors to inspect school buildings
for asbestos- containing materials. If asbestos-containing materials are found
and are damaged, the school must develop an asbestos management plan which
outlines its management practices for the materials. Response actions may
include encapsulation, enclosure, repair or removal of the asbestos-containing
materials by an accredited contractor. The AHERA regulations impose affirmative
obligations on the accredited contractor who performs the work on school
building projects. These obligations include proper worker, employee and
occupant protections. In addition, AHERA incorporated the OSHA standards for
packaging, transportation and disposal of asbestos waste. If the asbestos-
containing material is not damaged, continued inspection and monitoring by the
school is required.
OSHA regulations establish maximum airborne asbestos, airborne lead and
heavy metal exposure levels in the workplace for employees, including
asbestos-abatement and demolition and dismantling workers. Such regulations
require workplace air monitoring to ensure compliance with maximum exposure
levels and prescribe engineering controls and workplace practices intended to
reduce airborne asbestos, lead and heavy metal exposure in the workplace.
Included in the workplace practice provisions is the required use of appropriate
respirators, protective clothing and decontamination units for the asbestos-
abatement and demolition and dismantling worker exposed to certain levels of
asbestos or lead and heavy materials.
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.
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The Company 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 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 management believes that WCI is in substantial compliance with all
regulatory requirements, because of the changing regulatory environment, 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.
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 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, 1997 was approximately $6,400,000. WCI's backlog at December 31,
1997 is expected to be substantially completed in the current calendar year.
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Item 2. Properties:
The Company's executive offices are located at 350 Park Avenue, New
York, New York 10022 in leased premises of 3700 square feet, approximately 2300
of which the Company subleases to unaffiliated parties.
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.
WCI owns a parcel of land in Flagstaff, Arizona, which is carried as an
asset held for sale, as WCI and the Company were seeking to sell the property at
December 31, 1997. Pursuant to the stock purchase agreement between the Company
and the former owners of WCI, the former owners of WCI were obligated to
purchase the property from WCI in the event it was not sold to an unaffiliated
party within a specified period of time. During December 1997, WCI received a
deposit of $152,000 from the former owners of WCI towards the purchase of the
property. During February 1998, the Small Business Administration loan secured
by the property was repaid by the former owners of WCI. As of March 6, 1998, WCI
is in the process of transferring title to the property to the former owners of
WCI. WCI and the Company will recognize no gain or loss on the sale of the
property.
WCI leases a parcel of land in San Diego, California from two officers
of WCI for use as storage for large machinery.
The Company owns a warehousing facility in Mississippi which is
approximately 64,000 square feet. At December 31, 1996 and 1997, 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, with
an option to purchase, 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 1997 to a vote of
the Company's shareholders.
At a Special Meeting of Shareholders held on February 17, 1998, the
Company's shareholders approved proposals to change the Company's corporate name
to REXX Environmental Corporation and amend the Company's Non-Qualified Stock
Option plan.
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Item 5. Market for the registrant's common stock and related security holder
matters:
The Company's common stock, trading symbol REXX (since February 19,
1998, prior to which the trading symbol was OHSC), is traded on The Nasdaq Stock
Market and is designated as a National Market security (NMS). Through the
facilities of the NASDAQ/NMS reporting system, actual sale prices of the
Company's common stock are available. The table below sets forth the high and
low prices for the common stock.
Prices
High Low
1996:
1st quarter 2 5/8 2
2nd quarter 2 3/8 1 7/8
3rd quarter 2 1/4 1 7/8
4th quarter 2 1/8 1 1/8
1997:
1st quarter 1 5/8 1 1/4
2nd quarter 1 5/8 1 1/4
3rd quarter 1 9/16 1 3/16
4th quarter 5 1 3/8
1998:
1st quarter
(to March 6, 1998) 5 1/4 3 3/4
As of March 6, 1998, there were approximately 448 holders of record and
800 beneficial holders of the Company's common stock.
The Company 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,
1997 1996 1995 1994 1993
(In thousands except per share amounts)
Revenues $2,298 $ 75 $ 38 $ 0 $ 0
Net loss from
continuing operations ( 167) ( 218) ( 70) ( 206) ( 266)
(Loss) income from
discontinued
operations - ( 792) ( 4,908) 435 427
Loss on disposal of
discontinued
operations - ( 300) ( 1,861) - -
Net (loss) income ($ 167) ($1,310) ($6,839) $ 229 $ 161
====== ====== ====== ======= =======
Per share data, basic and diluted:
Net loss from
continuing operations ($ .08) ($ .11) ($ .03) ($ .10) ($ .13)
(Loss) income from
discontinued
operations - ( .38) ( 2.39) .21 .21
Loss on disposal of
discontinued
operations - ( .15) ( .90) - -
------ ------ ------ ------- -------
Net (loss) income ($ .08) ($ .64) ($ 3.32) $ .11 $ .08
====== ====== ====== ======= =======
Weighted average common
shares and equivalents
outstanding:
Basic and diluted 2,137 2,058 2,058 2,067 2,058
Balance sheet:
Total assets $9,055 $6,880 $9,115 $27,364 $25,498
Long-term debt $ 180 $ 0 $ 0 $ 1,581 $ 1,715
See notes to 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, 1997 was $1,469,000 as compared to
$4,736,000 at December 31, 1996. The decrease of $3,267,000 was primarily due to
the Company paying $3,600,000 in cash, plus expenses, in connection with the
acquisition of Watkins Contracting, Inc. ("WCI"), offset in part by the addition
of WCI's working capital.
Net accounts receivable were $2,353,000 at December 31, 1997 as
compared to $41,000 at December 31, 1996, an increase of $2,312,000. The
increase was due to the addition of WCI's accounts receivable.
Management believes that the Company's cash and cash equivalents at
December 31, 1997 in addition to WCI's working capital line of credit and
equipment line of credit, obtained in February 1998, and the Company's cash flow
from operations, will provide it with all the funds necessary for its working
capital and capital expenditures.
The Company intends to pursue potential acquisitions in its industry.
As of December 31, 1997, no commitments had been made and no material
expenditures had been incurred in connection with any such potential
acquisition. There is no assurance that the Company will complete any such
potential acquisition. In the event the Company completes an acquisition, it may
require additional capital for the acquisition consideration and/or the
additional working capital needs of an acquired business.
The Company has performed an assessment of its Year 2000 issues.
Management believes that the Company's material operating systems, including
hardware and software, are Year 2000 compliant. Management believes that the
Company will not incur material expenses or face material adverse consequences
associated with Year 2000 issues.
Results of operations:
1997 Compared to 1996 -
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.
Revenues in 1996 consisted solely of consulting income. Contract revenues in
1997 were $2,248,000. Consulting income, which arose from the Company's
agreement with a purchaser of its former Sportswear Division, decreased in 1997
as compared to 1996 due to a contractual reduction in the consulting fee from
$75,000 in 1996 to $50,000 in 1997. The consulting agreement expired on December
31, 1997 and was not renewed.
Gross profit in 1997 amounted to $962,000 as compared to $75,000 in
1996, an increase of $887,000. The increase is attributable to the addition of
WCI's gross profit from October 21, 1997 to December 31, 1997.
General and administrative expenses rose in 1997 compared to 1996
principally as a result of three factors: (1) the addition of WCI's general and
administrative expenses for the period from October 21, 1997 to December 31,
1997; (2) the growth in expenses in connection with the Company's acquisition
search, including increased personnel expenses; and (3) expenses which were no
longer allocated to discontinued operations.
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Interest income-net decreased to $137,000 in 1997 from $247,000 in
1996, a reduction of $110,000. The decrease was due to the Company's lower
average cash balance in 1997, particularly after the acquisition of WCI and the
related reduction of cash of more than $3,600,000, and to interest expense
incurred by WCI.
Amortization of goodwill and other income did not exist in 1996. In
1997, they were attributable to the acquisition of WCI, which was accounted for
as a purchase.
Provision for income taxes grew to $48,000 in 1997 from $9,000 in 1996,
an increase of $39,000. The increase was due to the Company's new status in 1997
as a taxpayer in California. In both 1997 and 1996, the Company recorded no
provision for federal income taxes as the Company incurred net losses in both
years, and has a net operating loss carryforward to offset non-deductible
expenses. State income taxes for states other than California represents
franchise taxes in both years.
1996 compared to 1995 -
Revenues in both 1996 and 1995 consisted of consulting income, which
arises from the Company's agreement with a purchaser of its former Sportswear
Division. It rose in 1996 as compared to 1995 due to the agreement being in
effect for twelve months in 1996 versus six months in 1995.
General and administrative expenses rose in 1996 compared to 1995
primarily as a result of expenses which were no longer allocated to its
discontinued operations. During 1995, many of such expenses were allocated to
the Company's discontinued operations until the sale of the Sportswear Division
as of June 30, 1995.
Interest income-net increased to $247,000 in 1996 from $121,000 in
1995. The increase was due to the fact that the Company generates interest
income on its net cash balances only, and during 1996 had a net cash balance for
twelve months as compared to 1995 when the Company did not generate a net cash
balance until July.
Provision for taxes for 1996 relative to 1995 decreased as a result of
the Company's lower asset base. The Company was taxed in both periods based on a
franchise basis, rather than an income basis, in both state and local
jurisdictions. There is no provision for federal income taxes as the Company
incurred net operating losses in 1996 and 1995.
The decrease in losses from discontinued operations in 1996 compared to
1995 was primarily due to two factors. During 1996, the Company operated only
its Harmal Division, which continued to experience operating losses and which
caused a loss on the disposal of certain of this division's assets. During 1995,
the Company operated its Sportswear Division for only the first half of the
year, its seasonally weak period, and the Harmal Division had significantly
lower revenues than were necessary to achieve profitability. Additionally, in
1995, the Company suffered one-time losses relating to the disposal and
discontinuance of the Sportswear and Harmal Divisions.
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,"
14 OF 44 PAGES
<PAGE>
"expectation," "growing," "will be," "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 growing 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 for growth and potential acquisitions, the availability of suitable
acquisitions on terms management deems acceptable, 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.
15 OF 44 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 17
Consolidated balance sheets at December 31, 1997 and 1996 18
Consolidated statements of operations for the years ended
December 31, 1997, 1996 and 1995 19
Consolidated statements of stockholders' equity for the years
ended December 31, 1997, 1996 and 1995 20
Consolidated statements of cash flows for the years ended
December 31, 1997, 1996 and 1995 21
Notes to consolidated financial statements 23-34
16 OF 44 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, of stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
REXX Environmental Corporation (formerly Oak Hill Sportswear Corporation) and
its subsidiaries at December 31, 1997 and 1996 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
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
generally accepted auditing standards 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.
PRICE WATERHOUSE LLP
New York, New York
March 4, 1998
17 OF 44 PAGES
<PAGE>
REXX ENVIRONMENTAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31,
1997 1996
Assets
Current assets:
Cash and cash equivalents $ 710 $ 5,314
Accounts receivable - net 2,353 41
Costs in excess of billings 600 0
Assets held for sale 1,350 1,428
Other current assets 142 97
------- -------
Total current assets 5,155 6,880
Property and equipment, net 718 0
Goodwill 3,125 0
Other assets 57 0
------- -------
$ 9,055 $ 6,880
======= =======
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $ 1,015 $ 500
Accounts payable 1,153 71
Billings in excess of costs 238 0
Accrued expenses 752 1,072
Deposit on asset held for sale 152 0
Income taxes payable 376 501
------- -------
Total current liabilities 3,686 2,144
------- -------
Long-term debt, net of current portion 180 0
------- -------
Other long-term liabilities 50 0
------- -------
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 and
4,869,828 shares issued 105 97
Capital in excess of par value 27,925 27,363
Retained earnings (accumulated deficit) (5,883) (5,716)
Common stock held in treasury, at cost
(2,812,252 shares) (17,008) (17,008)
------- -------
Total stockholders' equity 5,139 4,736
------- -------
$ 9,055 $ 6,880
======= =======
See notes to consolidated financial statements.
18 OF 44 PAGES
<PAGE>
REXX ENVIRONMENTAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except
per share amounts)
Years ended December 31,
1997 1996 1995
Revenues $ 2,298 $ 75 $ 38
Cost of services 1,336 0 0
------- ------- -------
Gross profit 962 75 38
General and administrative
expenses 1,226 531 215
------- ------- -------
Loss from operations (264) ( 456) ( 177)
Other income:
Interest income, net 137 247 121
Other income 8 0 0
------- ------- -------
Loss from continuing operations
before provision for
taxes (119) (209) (56)
Provision for taxes 48 9 14
------- ------- -------
Loss from continuing
operations (167) (218) (70)
------- ------- ------
Discontinued operations:
Loss, net 0 (792) ( 4,908)
Loss on disposal, net 0 (300) ( 1,861)
------- ------- ------
0 (1,092) ( 6,769)
------- ------- ------
Net loss ($167) ($1,310) ($6,839)
======= ======= ======
Per share data (basic and diluted):
Loss from continuing
operations ($.08) ($ .11) ($ .03)
----- ----- -----
Discontinued operations:
Loss, net .00 ( .38) ( 2.39)
Loss on disposal, net .00 ( .15) ( .90)
----- ----- -----
.00 ( .53) ( 3.29)
----- ----- -----
Net loss ($.08) ($.64) ($3.32)
===== ===== =====
See notes to consolidated financial statements.
19 OF 44 PAGES
<PAGE>
REXX ENVIRONMENTAL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
Retained Total
Common stock Capital in earnings stock-
Shares Par In excess of (accum. holders'
Issued Value treasury par value deficit) equity
Balance, December
31, 1994 4,870 $97 ($17,008) $27,363 $2,433 $12,885
Net loss for
the year ended
December 31, 1995 ( 6,839) ( 6,839)
----- --- ------- ------ ------ ------
Balance, December
31, 1995 4,870 97 ( 17,008) 27,363 ( 4,406) 6,046
Net loss for
the year ended
December 31, 1996 ( 1,310) ( 1,310)
----- --- ------- ------ ------ ------
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) $5,139
===== ==== ======= ======= ====== ======
See notes to consolidated financial statements.
20 OF 44 PAGES
<PAGE>
REXX ENVIRONMENTAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years ended December 31,
1997 1996 1995
Cash flows from operating activities:
Net loss ($ 167) ($1,310) ($6,839)
Adjustments to reconcile net loss
to net cash provided
by operating activities:
Loss on disposal of disc. operations - 300 1,861
Depreciation and amortization 223 - 251
------- ------ ------
56 ( 1,010) ( 4,727)
Changes in assets and liabilities ( 1,478) 75 2,984
------- ------ ------
Net cash used in
operating activities ( 1,422) ( 935) ( 1,743)
------- ------ ------
Cash flows from investing activities
Acquisition of WCI ( 3,883) - -
Capital expenditures ( 105) - -
Net proceeds on disposal of
discontinued operations 648 926 15,168
Deposit on asset held for sale 143 - -
------- ------ ------
Net cash (used in) provided by
investing activities ( 3,197) 926 15,168
------- ------ ------
Cash flows from financing activities:
Exercise of options 20 - -
Net increase (decrease) in
short term borrowings 17 - ( 7,199)
Principal payment of long-term debt ( 22) (500) (735)
------- ------ ------
Net cash provided by (used in)
financing activities 15 ( 500) ( 7,934)
------- ------ ------
Net (decrease) increase in cash ( 4,604) (509) 5,491
Cash at beginning of year 5,314 5,823 332
------- ------ ------
Cash at end of year $ 710 $5,314 $5,823
======= ====== ======
See notes to consolidated financial statements.
21 OF 44 PAGES
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Supplemental disclosures of cash flow information:
Changes in assets and liabilities:
Accounts receivable ($ 609) $ 438 $9,144
Inventories - - (1,922)
Costs in excess of billings ( 64) - -
Other current assets 80 62 -
Other assets 4 - 308
Billings in excess of costs 23 - -
Accounts payable and accrued expenses ( 526) ( 404) ( 4,732)
Accrued income taxes ( 386) (21) 186
------- ------ ------
($ 1,478) $ 75 $2,984
======= ====== ======
Cash paid during the year for:
Interest $ 38 $ 67 $1,073
Income Taxes (including
interest thereon) 633 30 24
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.
22 OF 44 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 1997 presentation.
B. Cash and 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 1997
was $41,000.
D. Pension and profit-sharing plans:
The Company has defined contribution pension and profit-sharing plans
covering eligible employees 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 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 1997, 1996 and 1995 were 2,136,905,
2,057,576 and 2,057,576, 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 195,000, 184,000, and 74,000 shares at prices ranging
from $2.00 to $4.25 per share were outstanding in 1997, 1996 and 1995,
respectively, but were not included in the computation of diluted net income per
share because the options' exercise price was greater than the average market
price of the common shares in the respective years.
23 OF 44 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. Contract Receivables:
The Company uses the reserve method for uncollectible accounts; the allowance
for doubtful accounts totaled $35,000 at December 31, 1997 and $0 at December
31, 1996.
H. 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.
I. Revenues:
Consulting fees are recognized as earned. Consulting income for 1997, 1996
and 1995 was $50,000, $75,000 and $37,500, respectively.
J. Stockholders' equity:
The Board of Directors has been authorized to have the Company issue
preferred stock, to establish and designate series, to fix the number of shares
and to determine the rights and preferences. The shares have not been issued and
the terms, rights and preferences have not been established.
K. 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.
L. 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
24 OF 44 PAGES
<PAGE>
date of the financial statements and the reported amounts of revenues 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.
NOTE 2 - ACQUISITION AND CONSOLIDATED CONDENSED PRO FORMA FINANCIAL
INFORMATION (UNAUDITED)
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. The acquisition was accounted for using the purchase method of
accounting. Acquisition costs in excess of the fair value of net tangible assets
acquired amounted to approximately $3,166,000, representing goodwill. The
purchase price has been 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
==========
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 and 1996. 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 1996
----------- ----------
Revenues $10,350,000 $6,919,000
----------- ----------
Income from operations 1,180,000 563,000
Other income 36,000 47,000
----------- ----------
Income before income taxes 1,216,000 610,000
Income taxes 151,000 85,000
----------- ----------
Net income $ 1,065,000 $ 525,000
=========== ==========
Pro forma net income per share $0.43 $0.21
25 OF 44 PAGES
<PAGE>
NOTE 3 - ACCOUNTS RECEIVABLE:
Accounts receivable at December 31, 1997 and 1996 are as follows:
1997 1996
---------- ---------
Contracts in progress:
Currently receivable $ 902,000 $ 0
Unbilled retentions 149,000 0
---------- ---------
1,051,000 0
---------- ---------
Completed contracts:
Currently receivable 949,000 0
Retentions receivable 361,000 0
---------- ---------
1,310,000 0
---------- ---------
Other accounts receivable 27,000 41,000
---------- ---------
2,388,000 41,000
Less allowance for
doubtful accounts ( 35,000) 0
---------- ---------
$2,353,000 $ 41,000
========== =========
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.
NOTE 4 - CONTRACTS IN PROGRESS:
Contracts in progress at December 31, 1997 are as follows:
Costs incurred on contracts in progress $1,325,000
Estimated earnings on contracts
in progress 704,000
Total costs and estimated earnings 2,029,000
Less billings to date ( 1,667,000)
---------
$ 362,000
==========
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 $ 600,000
Billings in excess of costs and
estimated earnings on contracts
in progress ( 238,000)
----------
$ 362,000
==========
26 OF 44 PAGES
<PAGE>
NOTE 5 - ASSETS HELD FOR SALE:
In connection with the acquisition of WCI, WCI owned certain land for which
WCI had an agreement with Envira Minerals, Inc. ("Envira") whereby Envira (whose
minority stockholders include the former owners of WCI) would purchase the land
from WCI at an agreed-upon price. Until Envira is able to obtain financing for
the acquisition of this land, Envira has agreed to reimburse WCI for all monthly
payments due under a loan from the Small Business Administration. Pursuant to
the stock purchase agreement between the Company and the former owners of WCI,
the former owners of WCI were obligated to purchase the land from WCI in the
event the land was not sold to Envira or any other party during a specified time
period. During December 1997, WCI received a deposit from the former owners of
WCI towards the purchase of the land. During February 1998, the Small Business
Administration loan secured by the land was repaid by the former owners of WCI.
As of March 4, 1998, WCI is in the process of transferring title to the land to
the former owners of WCI. WCI and the Company will recognize no gain or loss on
the sale of the land.
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, with an option to purchase on the part of
the lessee. The Company is currently seeking to sell the facility.
NOTE 6 - PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1997 consisted of:
Machinery and equipment $350,000
Office equipment 90,000
Furniture and fixtures 7,000
Leasehold improvements 41,000
Vehicles 252,000
--------
740,000
Less accumulated depreciation (22,000)
Net property and equipment $718,000
========
Depreciation expense for the year ended December 31, 1997 was $22,000.
NOTE 7 - LONG-TERM DEBT:
The Company has an outstanding mortgage note, which is secured by land and
a building in Mississippi (and, from September 1995 through December 1996, by a
$1,000,000 certificate of deposit and, since December 1996, by a $500,000
certificate of deposit) which carries an interest rate of 5.01%. The principal
balance of the mortgage was $1,000,000 at December 31, 1995. During 1996,
$500,000 of the principal balance of the mortgage was paid. The Company has
classified this as a current liability as it is likely that part or all of such
note will be repaid in 1998.
27 OF 44 PAGES
<PAGE>
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 $313,000 at December 31, 1997. WCI also
acquired vehicles and equipment under the provisions of 2 long-term leases. For
financial reporting purposes, minimum lease payments relating to the equipment
have been capitalized. The two leases expire in December 1998. Leased equipment
under capital lease had a cost of $87,000, accumulated amortization of $2,000
and a net book value of $85,000 at December 31, 1997. Amortization of the leased
equipment is included in depreciation expense.
Long-term debt at December 31, 1997 included:
Debt on assets held for sale $ 918,000
Purchase contracts (at interest
rates of 7.9% to 11.7% and with
maturities from 4/99 to 11/02): 266,000
Capitalized leases:
Total minimum lease payments 12,000
Less amounts representing interest ( 1,000)
----------
11,000
Present value of long-term debt
and capitalized leases 1,195,000
Less current portion of long-term debt 1,015,000
----------
Long-term debt, net of current portion $ 180,000
==========
Maturities on long-term debt and capitalized leases:
1998 $1,015,000
1999 69,000
2000 48,000
2001 33,000
2002 30,000
----------
Total maturities $1,195,000
==========
Interest expense for the years ended December 31, 1997 and 1996 was $38,000
and $52,000, respectively.
NOTE 8 - 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 also approved by a majority of shareholders at the Company's Annual
Meeting held on June 26, 1996. The amendment provides that the Plan is permitted
to grant options to non-employee directors and provides that each director who
is not an employee 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.
28 OF 44 PAGES
<PAGE>
At December 31, 1997, the Company reserved 189,250 shares of its Common
Stock for the purposes of the Plan. At that date, there were 195,000 options
outstanding at exercise prices of $2.00-$4.25. A total of 5,750 of the 195,000
options outstanding at December 31, 1997 were subject to approval by a majority
of the Company's shareholders of amendments to the Plan. The amendments, which
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,
were approved by the Board of Directors, subject to shareholder approval, on
December 3, 1997. Such approval was received at a special meeting of
shareholders held on February 17, 1998.
29 OF 44 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,
1995 174,000 $3.63-$4.25 $4.07 - 25,250
Granted - - - - -
Exercised - - - - -
Terminated (100,000) 3.63- 4.25 3.94 - -
------- ----------- ----- ---- ------
Options
outstanding
at Dec. 31,
1995 74,000 $4.25 $4.25 18,500 125,250
Granted 110,000 2.00 2.00 - -
Exercised - - - - -
Terminated - - - - -
------- ----------- ----- ------ -------
Options
outstanding
at Dec. 31,
1996 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 -
======= =========== ===== ====== =======
As of December 31, 1997, 1996 and 1995, the weighted average remaining
contractual life of outstanding options was approximately 3.8 years, 3.9 years
and 3 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 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.
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 1997 and 1996, respectively: expected volatility of
63.3% and 34.2%, risk free interest rate of 5.48% and 6.37%, expected option
term of 5 years for all options issued and no dividend yield or forfeiture rate
for all options granted.
30 OF 44 PAGES
<PAGE>
NOTE 9 - TAXES:
Provision for taxes consists of the following components:
1997 1996 1995
Current $48,000 $ 9,000 $14,000
Deferred - - -
------- ------- -------
Total $48,000 $ 9,000 $14,000
======= ======= =======
The provisions for 1997, 1996 and 1995 represent state and local taxes.
There is no provision for federal income taxes as the Company had net losses in
1997, 1996 and 1995. At December 31, 1997, the Company has available for Federal
income tax purposes net operating loss carryforwards of approximately
$11,632,000 that begin to expire in the year 2007.
A reconciliation of the statutory income tax rate and the effective tax
rates for 1997, 1996 and 1995 follows:
1997 1996 1995
---- ---- ----
Statutory rate 34.0% 34.0% 34.0%
State and local taxes (26.6) (.5) -
Amortization and other
non-deductible expenses (16.3) (1.1) (.6)
Net operating loss carryforward - -
Valuation allowance (31.4) (33.1) (33.6)
---- ---- ----
(40.3%) ( .7%) .2%
===== ===== =====
The following summarizes the significant components of deferred tax
(liabilities) assets:
December 31, December 31,
1997 1996
------------ ------------
Accrued expenses $ 88,000 $ 110,000
Inventory - 17,000
Operating loss carryforward 3,955,000 3,822,000
Capital loss carryforward 121,000 121,000
--------- ----------
Gross deferred tax assets 4,164,000 4,070,000
--------- ----------
Deferred tax asset valuation
allowance 4,164,000 4,070,000
--------- ----------
Deferred Taxes $ 0 $ 0
========== ==========
During 1995, the Internal Revenue Service ("IRS") completed a field audit
of the Company's tax returns for the years 1990 through 1992. As a result of the
field audit, the IRS issued a "30 day letter," assessing a claim of
approximately $1,400,000, including interest. The Company, believing it had
meritorious defenses against such assessment, filed an appeal. In February 1997,
the Company and the IRS reached a settlement which resulted in the payment of
approximately $550,000 in tax and interest. The major issue of dispute in the
audit process was the timing of a particular
31 OF 44 PAGES
<PAGE>
deduction relating to inventory. Although the settlement includes a disallowance
of a portion of the Company's inventory deduction in the particular year taken,
the Company was entitled to the deduction in a subsequent tax year.
NOTE 10 - PROFIT-SHARING AND PENSION PLANS:
The Company has a non-contributory profit-sharing plan which provides for
annual contributions, at the discretion of the Board of Directors, of between 2%
and 15% of the defined compensation of eligible employees. Profit-sharing
expense was $3,800 in 1997, $7,500 in 1996 and $93,000 in 1995.
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
contributes 1% of the first $20,000 and 4% above $20,000 (limited to an
additional $130,000) of the defined compensation of eligible employees. Pension
expense was $6,400 in 1997, $37,000 in 1996 and $91,000 in 1995.
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 the 1997 period from October 21, to December 31, 1997 were
$1,300. Voluntary employee contributions into the plan for the period from
October 21, 1997 to December 31, 1997 were $5,800.
NOTE 11 - ACCRUED EXPENSES:
Accrued expenses at December 31 consist of:
1997 1996
Salaries, wages and
related expenses $241,000 $ -
Transaction costs 140,000 -
Pension and profit-sharing
plans 12,000 20,000
Accrual related to
discontinued operations 305,000 1,033,000
Other 54,000 19,000
-------- ----------
$752,000 $1,072,000
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.
32 OF 44 PAGES
<PAGE>
NOTE 13 - COMMITMENTS AND CONTINGENCIES
The Company leases office space and equipment under operating leases.
Future minimum lease payments, net of sublease income, under these leases are as
follows:
1998 $132,000
1999 55,000
--------
$187,000
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 - DISCONTINUED OPERATIONS:
Pursuant to an Asset Purchase Agreement between the Company and Donnkenny
Apparel, Inc. ("Donnkenny"), dated as of May 23, 1995, as amended (the "Asset
Purchase Agreement"), the Company completed, on July 24, 1995, the sale (the
"Sale") of the business and certain assets of its Sportswear Division. The Sale
occurred as of June 30, 1995, subject to the approval of the Company's
shareholders. Such shareholder approval was obtained on July 24, 1995. The
assets sold included the inventory, certain fixed assets, security deposits,
trade names and trademarks, contracts and goodwill of the Company's Sportswear
Division.
The purchase price paid by Donnkenny was $14,616,000 in cash and the
assumption of certain liabilities. The Company retained accounts receivable,
notes payable and accrued expenses relating to the Sportswear Division. The
purchase price was based on an estimate of the net book value of the transferred
tangible assets plus $2,000,000. The cash proceeds, after payment of expenses
related to the transaction, were used primarily to repay the Company's notes
payable to its banks and to BankAmerica Business Credit, Inc. ("BankAmerica").
$1,000,000 of the cash purchase price was placed in a one year escrow to provide
security for the Company's indemnification obligations and its warranty of
certain inventory under the Asset Purchase Agreement and other reconciliations
and obligations. During October 1995 this escrow was terminated in connection
with a partial settlement of post closing adjustments. As of December 31, 1995,
the Company terminated its Loan and Security Agreement with BankAmerica and,
during February 1996, a final settlement was signed with Donnkenny with respect
to post closing adjustments.
During 1995, the Company completed sales of three manufacturing and
warehousing facilities located in Mississippi which were previously utilized in
connection with the operations of the Company's Sportswear Division. In
addition, the Company also sold machinery and equipment formerly located at the
sold facilities and at a manufacturing facility still owned by the Company. The
proceeds of these sales, net of related expenses, are reflected in the loss on
disposal of discontinued operations with respect to the Sportswear Division.
At the Company's 1995 Annual Meeting, held on July 24, 1995, shareholders
approved the future sale of the Harmal Division of the Company. The Company's
Board of Directors had authorized management to seek a purchaser for the Harmal
Division. As of December 31, 1996, the Harmal Division was being treated as a
discontinued operation and its assets are being carried as assets held for sale.
33 OF 44 PAGES
<PAGE>
Harmal's reduced sales level during 1996 was insufficient to cover its
operating expenses, resulting in significant operating losses. These operating
losses prevented the Company from completing a transaction to sell the Harmal
Division. As a result, Management undertook a plan to phase out this business
and sell Harmal's assets on an orderly basis to recoup a portion of the
Company's investment in the Division's operating assets. As of December 31,
1997, the phase out of the Harmal Division's business and the sale of its
operating assets was entirely complete.
Sales made by the Company's Sportswear Division (until its sale as of June
30, 1995) and Harmal Division in the aggregate in 1997, 1996 and 1995 were
$82,000, $3,697,000 and $35,086,000, respectively.
34 OF 44 PAGES
<PAGE>
Item 9. Disagreements on accounting
and financial disclosure:
None.
PART III
Item 10. Directors and executive
officers of the registrant:
Incorporated by reference to information under the caption "Certain
Information Regarding Directors and Nominees" in the Company's definitive proxy
statement to be filed pursuant to Regulation 14A.
Item 11. Executive compensation:
Incorporated by reference to information under the captions "Executive
Compensation", "Compensation Committee Interlocks and Insider Participation",
"Compensation Committee's Report", "Performance Graph" and "Fees Paid
to Directors" in the Company's definitive proxy statement to be filed pursuant
to Regulation 14A.
Item 12. Security ownership of
certain beneficial
owners and management:
Incorporated by reference to information under the captions "Principal
Holders of Common Stock" and "Certain Information Regarding Directors and
Nominees" in the Company's definitive proxy statement to be filed pursuant to
Regulation 14A.
Item 13. Certain relationships and
related transactions:
Incorporated by reference to information under the captions "Fees Paid to
Directors" and "Executive Compensation" in the Company's definitive proxy
statement to be filed pursuant to Regulation 14A.
35 OF 44 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
16 hereof.
2. Financial statement schedule. Report of independent accountants on
financial statement schedule.
Schedule for the three years ended December 31, 1997, 1996 and 1995:
VIII - Valuation and Qualifying Accounts
All other 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)
of Incorporation filed filed herewith
February 18, 1998,
effecting name change 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
36 OF 44 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)
Stock Option Plan, adopted filed herewith
February 17, 1998.
(g) Relating to Note with Deposit
Guaranty National Bank.
(1) Note to Deposit Guaranty Exhibit 10(g)(1) to the
National Bank dated Company's Form 10-K for
July 15, 1992. year ended December 31,
1992.
(2) Land Deed of Trust to Exhibit 10(g)(2) to
Deposit Guaranty the Company's Form
National Bank dated 10-K for its year ended
July 15, 1992. December 31, 1992.
(h) Relating to the Sale of
the Company's sportswear
division.
(1) Asset Purchase Agreement Annex A to the
between Oak Hill Sportswear Company's
Corporation and Donnkenny Proxy Statement dated
Apparel, Inc. dated as June 28, 1995.
of May 23, 1995.
(2) Amendment No. 1 to Asset Annex A to the
Purchase Agreement Company's
between Oak Hill Proxy Statement dated
Sportswear Corporation June 28, 1995.
and Donnkenny Apparel, Inc.
dated as of June 26, 1995.
37 OF 44 PAGES
<PAGE>
Filed herewith or
incorporated by
reference to:
-----------------
(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.
(24) (i) Consent of Price Exhibit 24(i) filed
Waterhouse. herewith.
(b) The Company filed a Form 8-K, dated
October 30, 1997, in the fourth
quarter of its fiscal year ending
December 31, 1997, reporting, under
Item 2 thereof, its acquisition
of Watkins Contracting, Inc. Such
Form 8-K was supplemented on January
2, 1998 by Form 8-K/A.
(c) See Item 14(a)(3) above.
(d) See Item 14(a)(2) above.
38 OF 44 PAGES
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
and Stockholders of
REXX Environmental Corporation
Our audits of the consolidated financial statements referred to in
our report dated March 4, 1998 appearing on page 17 of the 1997 Annual Report on
this Form 10-K also included an audit of the financial statement schedule listed
in item 14(a) of this Form 10-K. In our opinion, this financial statement
schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
PRICE WATERHOUSE LLP
New York, New York
March 4, 1998
39 OF 44 PAGES
<PAGE>
SCHEDULE VIII
REXX ENVIRONMENTAL CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
Additions
------------
Balance Charged Charged Balance
at be- to costs to other at end
ginning and accounts Deduc- of
of year expenses (a) tions year
Description
Reserves for allowances
and doubtful accounts
for the year ended
December 31, 1997 $ 0 $ 0 $ 0 $ 0 $ 35(b)
==== ==== ====== = ===== ====
Reserves for allowances
and doubtful accounts
for the year ended
December 31, 1996 $204 $ 0 $ 0 $ 204 $ 0
==== ==== ====== = ===== ====
Reserves for allowances
and doubtful accounts
for the year ended
December 31, 1995 $778 $242 $ 999 $ 1,815 $204
==== ==== ====== = ===== ====
(a) Offset against sales.
(b) Acquired in the purchase of WCI.
40 OF 44 PAGES
<PAGE>
S I G N A T U R E S
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 26, 1998
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 26, 1998 Date: March 26, 1998
/s/ James L. Hochfelder /s/ Joseph Greenberger
- ----------------------------------- -------------------------------------
James L. Hochfelder, Director Joseph Greenberger, Director
Date: March 26, 1998 Date: March 26, 1998
/s/ Brian A. Wasserman
- -----------------------------------
Brian A. Wasserman, Director
Date: March 26, 1998
41 OF 44 PAGES
<PAGE>
Certificate of Amendment
of the Certificate of Incorporation
of
OAK HILL SPORTSWEAR CORPORATION
Under Section 805 of the Business Corporation Law
--------------------
It is hereby certified that:
FIRST: The name of the corporation is Oak Hill Sportswear Corporation.
SECOND: The certificate of incorporation of the corporation was filed
by the Department of State of the State of New York on November 29, 1967 under
the name Computronic Sciences Inc.
THIRD: The certificate of incorporation of the corporation is hereby
amended to change the name of the corporation to "REXX Environmental
Corporation."
FOURTH: To accomplish the foregoing amendment, Article 1 of the
certificate of incorporation of the corporation is hereby amended to read as
follows:
"1. The name of the corporation is REXX Environmental Corporation."
FIFTH: The foregoing amendment of the certificate of incorporation of
the corporation was authorized by the vote of the directors at a meeting of the
Board of Directors of the corporation, followed by the vote of the holders of at
least a majority of all of the outstanding shares of the corporation entitled
to vote on the said amendment of the certificate of incorporation.
IN WITNESS WHEREOF, we have signed this Certificate on the 17th day of
February, 1998, and we affirm under penalties of perjury that the statements
therein are true.
/s/ Arthur L. Asch
--------------------------------------------
Arthur L. Asch, Chairman of the Board
/s/ Joseph Greenberger
--------------------------------------------
Joseph Greenberger, Secretary
42 OF 44 PAGES
<PAGE>
REXX Environmental Corporation
(Formerly known as Oak Hill Sportswear Corporation)
Amendments to Non-Qualified Stock Option Plan (the "Plan")
Adopted by the Shareholders on February 17, 1998
(1) The first sentence of Section 2 of the Plan is amended to read as
follows:
The number of shares which may be issued pursuant to option granted
under the Plan shall not exceed 449,250 shares of the Company's
common stock, par value $.02 ("Common Stock").
(2) The last sentence of Section 2 of the Plan is amended to read as
follows:
The maximum number of shares in respect to which options may be
granted under the Plan to any particular person participating in
the Plan shall be 150,000 shares.
(3) The first sentence of Section 1 of the Plan is amended to read as
follows:
1. Purpose. The purposes of this Non-Qualified Stock Option Plan
(the "Plan") are to provide a continuing incentive to officers,
directors and selected employees of Oak Hill Sportswear
Corporation, a New York corporation (the "Company"), and of any
parent or subsidiary of the Company, and an incentive to selected
employees of any business which the Company acquires or in which it
acquires any interest as an incentive to continue in its employ, by
the grant of non-qualified, non-incentive stock options ("options")
under the Plan.
43 OF 44 PAGES
<PAGE>
Exhibit 24(i)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (No. 33-31587 and
No. 33-31588) of REXX Environmental Corporation (formerly Oak Hill Sportswear
Corporation) of our report dated March 4, 1998 appearing on page 17 of this Form
10-K. We also consent to the incorporation by reference of our report on the
Financial Statement Schedule, which appears on page 39 of this Form 10-K.
PRICE WATERHOUSE LLP
New York, New York
March 30, 1998
44 OF 44 PAGES
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 710
<SECURITIES> 0
<RECEIVABLES> 2,353
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,155
<PP&E> 718
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0
0
<OTHER-SE> 0
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<TOTAL-REVENUES> 2,298
<CGS> 1,336
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<OTHER-EXPENSES> (8)
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