<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x Quarterly report pursuant to Section 13 or 15(d) of the Securities
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Exchange Act of 1934
For the quarterly period ended March 31, 1995 or
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_______ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number 1-5654
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EXX INC
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(Exact Name of Registrant as Specified in Its Charter)
Nevada 88-0325271
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
3900 Paradise Road, Suite 109, Las Vegas, Nevada 89109
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(Address of Principal Executive Offices) (Zip Code)
(702) 737-8811
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(Registrant's Telephone Number, Including Area Code)
NONE
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(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
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
--- ---
Number of shares of common stock outstanding as of March 31, 1995:
2,031,042 Class A Shares and 677,014 Class B Shares.
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1
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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A. Balance Sheets
<TABLE>
<CAPTION>
ASSETS March 31, 1995 December 31, 1994
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(unaudited) (audited)
<S> <C> <C>
CURRENT ASSETS:
Cash & Cash Equivalents $ 2,260,000 5,640,000
Short term investments 2,629,000 3,256,000
Accounts receivable, net of
allowance for doubtful
accounts of $3,029,000 and 880,000 1,560,000
$3,029,000
Inventories, at lower of cost or
market:
Raw materials 897,000 729,000
Work in process 59,000 174,000
Finished goods 3,801,000 2,883,000
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4,757,000 3,786,000
Note receivable - current 138,000 73,000
Other current assets 1,976,000 399,000
Deferred income taxes 1,477,000 1,477,000
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TOTAL CURRENT ASSETS 14,117,000 16,191,000
Property, plant and equipment, at
cost:
Land 35,000 35,000
Buildings and improvements 1,151,000 1,151,000
Machinery and equipment 4,703,000 4,703,000
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5,889,000 5,889,000
Less accumulated depreciation
and amortization (5,228,000) (5,179,000)
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661,000 710,000
Note receivable - net of
current maturities 481,000 620,000
Other assets 336,000 119,000
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TOTALS $15,595,000 $17,640,000
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</TABLE>
See Notes to Financial Statements
2
<PAGE>
A. Balance Sheets (continued)
<TABLE>
<CAPTION>
LIABILITIES March 31, 1995 December 31, 1994
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(unaudited) (audited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 2,938,000 $ 1,752,000
Accrued expenses 2,752,000 3,812,000
Note Payable Officer 351,000 351,000
Income taxes payable 269,000 2,942,000
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TOTAL CURRENT LIABILITIES 6,310,000 8,857,000
Deferred income 104,000 117,000
Deferred income taxes 203,000 203,000
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TOTAL LIABILITIES $ 6,617,000 $ 9,177,000
STOCKHOLDERS' EQUITY
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Preferred stock, $.01 par value;
Authorized 5,000,000 shares, none issued
Common stock, Class A $.01 par value, Authorized
25,000,000 shares; 2,787,318 shares issued 28,000 28,000
Common stock, Class B $.01 par value, Authorized
1,000,000 shares, 929,106 shares issued 9,000 9,000
Capital in excess of par value 3,993,000 3,993,000
Retained earnings 5,845,000 5,330,000
Less treasury stock, at cost:
756,276 shares of Class A Common stock and
252,092 shares of Class B Common stock (897,000) (897,000)
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TOTAL STOCKHOLDERS' EQUITY 8,978,000 8,463,000
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TOTALS $ 15,595,000 $ 17,640,000
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</TABLE>
See Notes to Financial Statements
3
<PAGE>
B. Statements of Income
<TABLE>
<CAPTION>
For the Three-Month Period Ended
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March 31, 1995 March 31, 1994
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<S> <C> <C>
Net sales $ 7,507,000 $5,984,000
Cost of sales 4,326,000 4,211,000
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Gross profit 3,181,000 1,773,000
Selling, general
and administrative
expenses 2,475,000 1,519,000
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Operating profit 706,000 254,000
Interest expense --- ---
Other income 119,000 20,000
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Income before provision
for income taxes 825,000 274,000
Provision for
income taxes 310,000 110,000
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Net income $ 515,000 $ 164,000
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Income per
common share: $ .19 $ .06 (a)
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</TABLE>
(a) Reflects the reorganization of SFM Corporation into EXX INC and the four
for one stock split effective October 21, 1994.
See Notes to Financial Statements
4
<PAGE>
C. Statements of Cash Flow
<TABLE>
<CAPTION>
For the Three-Month Period Ended
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March 31, 1995 March 31, 1994
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<S> <C> <C>
Operating activities:
Net income $ 515,000 $ 164,000
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Depreciation and amortization 49,000 46,000
Provision for losses on
accounts receivable --- 83,000
Changes in operating assets
and liabilities:
Deferred income (13,000) (13,000)
Short-term investments 627,000 ---
Accounts receivable 680,000 (1,006,000)
Inventories (971,000) (275,000)
Note receivable - current (65,000) (14,000)
Other current assets (1,577,000) (400,000)
Note receivable 139,000 29,000
Other assets (217,000) 47,000
Accounts payable 1,186,000 561,000
Accrued expenses (1,060,000) 144,000
Income taxes payable (2,673,000) 74,000
Customer deposits --- (13,000)
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Net cash provided by (used in)
operating activities (3,380,000) (573,000)
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Investing activities:
Purchase of property, plant
and equipment --- (126,000)
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Net cash provided by (used in)
investing activities --- (126,000)
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Financing activities:
Net borrowings (repayments)
under line of credit agreement --- ---
(Repayments) of other long-term
borrowings --- ---
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Net cash provided by (used in)
financing activities --- ---
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Net increase (decrease) in cash
and cash equivalents (3,380,000) (699,000)
Cash and cash equivalents,
beginning of period 5,640,000 1,303,000
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Cash and cash equivalents,
end of period $ 2,260,000 $ 604,000
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</TABLE>
See Notes to Financial Statements
5
<PAGE>
C. Statements of Cash Flow (continued)
<TABLE>
<CAPTION>
For the Three-Month Period Ended
--------------------------------
March 31, 1995 March 31. 1994
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<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid during the year for:
Interest --- ---
Income taxes 3,199,747 41,000
</TABLE>
Supplemental schedule of non-cash investing and financing activities:
NONE
See Notes to Financial Statements
6
<PAGE>
D. Notes to Financial Statements
Note 1: The unaudited financial statements as of March 31,1995 and for the
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comparative three months ending 1995 and 1994 reflect all adjustments which in
the opinion of management are necessary for a fair presentation of the results
for the periods stated. All adjustments so made are of a normal recurring
nature. Certain financial information and footnote disclosure normally included
in financial statements in accordance with generally accepted accounting
principles have been condensed or omitted. The reader is referred to the
audited consolidated financial statements and notes thereto included in the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1994.
Note 2: In October 1994, the stockholders of SFM Corporation (SFM) approved a
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plan of reorganization whereby SFM was merged on a tax-free basis into a
subsidiary of EXX INC. Simultaneous with this merger, each share of common
stock of SFM was converted into three shares of EXX INC Class A common stock
and one share of EXX INC Class B common stock. The EXX INC stock is
substantially identical to the former SFM stock in rights and privileges, except
that the stockholders of the outstanding shares of Class B common stock have
the right to elect two-thirds or the next rounded number of Directors in excess
of two-thirds if the number of Directors is not divisible by three and the
stockholders of the outstanding shares of the Class A common stock have the
right to elect the remaining Directors of the Company. This merger has been
accounted for in a manner similar to a pooling of interests.
Note 3: Note Payable
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As of March 31, 1995 there was no bank debt.
Under the terms of a revolving credit agreement, as amended and
extended to August 31, 1995, a bank provides the Company with a line of credit
and a letter of credit facility for loans and/or letters of credit aggregating
up to $5,000,000 at a rate of 3/4 of 1% over prime.
The line of credit is collateralized by substantially all of the
Company's trade accounts receivable, inventories and property and equipment.
The loan agreement imposes various restrictions on the Company
including the maintenance of minimum net worth of $4,000,000 at the end of any
quarter, and limitations on: capital expenditures, loans and advances, future
borrowings, payment of dividends, and a limit on the purchase of common stock
for the treasury. In addition to any other limitations imposed by the loan
agreement covenants, no cash dividend may be paid unless the Company has had net
income aggregating at least $400,000 during the four calendar quarters
immediately preceding the date of payment, and the aggregate dividends paid over
any four calendar quarters may not exceed 40% of the net income for that period.
At March 31, 1995 there were no financial or ratio restrictions on the Company's
capital.
Note 4: Computation of income per common share for the comparative three month
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periods ended March 31, 1995 and March 31, 1994, was based on 2,708,056 common
shares and 2,708,056 common shares outstanding, being the average number of
shares outstanding during the respective periods adjusted for the stock split
effective in October 1994. See Note 2.
7
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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A. Results of Operations
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Sales for the first quarter of 1995 totaled $7,507,000 compared to
$5,984,000 in 1994, a $1,523,000 increase. The Toy Segment reflected a sales
increase of $666,000 to $4,874,000 from $4,208,000 in 1994. The Mechanical
Equipment Group had a sales increase of $831,000 to $2,607,000 from $1,776,000
in 1994.
First quarter 1995 sales in our Toy Segment continue to set new records.
The increase in sales reflects successful new products and licenses. Management
looks forward to continuing positive effects of these improvements.
The first quarter results of the Mechanical Equipment Group reflects the
addition of the TX Technology business which was not reflected in the first
quarter of 1994. The Howell Motors division continues to operate profitably in a
mature market segment, and management expects it to continue its present course.
Operating profit was $706,000 reflecting the growth of the Toy Segment
and Mechanical Equipment Group for the quarter compared to operating profit of
$254,000 for the first quarter of 1994.
There was no bank debt in neither the first quarter of 1995 nor 1994.
Net income after income taxes for the first quarter 1995 was $515,000 or
$.19 per share compared to $164,000 or $ .06 per share in the first quarter of
1994.
On October 21, 1994, after Stockholder and Board of Directors approval,
SFM was merged and became a wholly owned subsidiary of EXX INC a holding company
organized to acquire all the outstanding stock of SFM and each of its
Subsidiaries. The quarterly per share results are adjusted for the stock split
which is explained and referenced in Note 2 to the financial statements.
In April, 1994, TX Systems Inc., a newly formed subsidiary of SFM,
acquired the operating assets and businesses of TX Technologies, Inc. and TX
Software, Inc. These companies were engaged in the Cable Pressurization and
Monitoring Systems business.
In February, 1994, Hi-Flier Inc., a newly formed subsidiary of SFM,
purchased the assets of Hi-Flier Manufacturing Co., a leader in the kite
business for more than seventy years.
8
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B. Liquidity and Capital Resources
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At March 31, 1995 the Registrant had working capital of
approximately $7,807,000 and a current ratio of 2.2 to 1. In addition, as
described in Notes to Financial Statements, the Registrant has a Credit
Agreement with a Bank, expiring August 31, 1995, pursuant to which the bank will
provide a line of credit and letters of credit aggregating $5,000,000 at an
interest rate of 3/4 of 1% above prime. At March 31, 1995, there was no
outstanding borrowings under this facility. The Registrant considers its working
capital, coupled with the line of credit, as described above, to be more than
adequate to handle its current operating capital needs.
PART II. OTHER INFORMATION
Not applicable.
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
EXX INC
By: /s/ David A. Segal
_________________________
David A. Segal
Chairman of the Board and
Chief Executive Officer
Date: May 12, 1995
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 2,260,000
<SECURITIES> 2,629,000
<RECEIVABLES> 880,000
<ALLOWANCES> 0
<INVENTORY> 4,757,000
<CURRENT-ASSETS> 14,117,000
<PP&E> 5,889,000
<DEPRECIATION> 5,228,000
<TOTAL-ASSETS> 15,595,000
<CURRENT-LIABILITIES> 6,310,000
<BONDS> 0
<COMMON> 27,000
0
0
<OTHER-SE> 8,941,000
<TOTAL-LIABILITY-AND-EQUITY> 15,595,000
<SALES> 7,507,000
<TOTAL-REVENUES> 0
<CGS> 4,326,000
<TOTAL-COSTS> 2,475,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 825,000
<INCOME-TAX> 310,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 515,000
<EPS-PRIMARY> .19
<EPS-DILUTED> 0
</TABLE>
