<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
---- Exchange Act of 1934
For the quarterly period ended March 31, 1996 or
---------------
Transition report pursuant to Section 13 or 15(d) of the Securities
---- Exchange Act of 1934
For the transition period from_________________to______________________
Commission file number 1-5654
----------------------------------------------
EXX INC
----------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Nevada 88-0325271
- ------------------------------- ----------------------------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
1350 East Flamingo Road, Suite 689, Las Vegas, Nevada 89119-5263
- -------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(702) 598-3223
- -------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code
NONE
-------------------------------------------------------------------------
(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, 1996:
2,031,042 Class A Shares and 677,014 Class B Shares.
- --------- --------
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
A. Balance Sheets
<TABLE>
<CAPTION>
ASSETS March 31, 1996 December 31, 1995
- ---------------------------------- --------------- ------------------
(unaudited) (audited)
<S> <C> <C>
CURRENT ASSETS:
- ---------------
Cash and cash equivalents $3,146,000 $ 4,728,000
Short term investments 1,449,000 989,000
Accounts receivable, less
allowances of 1,130,000
and $994,000 1,755,000 2,232,000
Inventories, at lower of cost or
market:
Raw materials 649,000 622,000
Work in process 174,000 162,000
Finished goods 2,833,000 3,117,000
----------- -----------
3,656,000 3,901,000
Other current assets 1,255,000 917,000
Deferred income taxes 824,000 824,000
----------- -----------
TOTAL CURRENT ASSETS 12,085,000 13,591,000
Property, plant and equipment,
at cost:
Land 35,000 35,000
Buildings and improvements 1,213,000 1,151,000
Machinery and equipment 5,362,000 5,282,000
----------- -----------
6,610,000 6,468,000
Less accumulated depreciation
and amortization (5,541,000) (5,470,000)
----------- -----------
1,069,000 998,000
Other assets 876,000 829,000
----------- -----------
TOTALS $14,030,000 $15,418,000
=========== ===========
</TABLE>
See Notes to Financial Statements
2
<PAGE>
A. Balance Sheets (continued)
<TABLE>
<CAPTION>
LIABILITIES March 31, 1996 December 31, 1995
- --------------------------------- --------------- ------------------
(unaudited) (audited)
<S> <C> <C>
CURRENT LIABILITIES:
--------------------
Accounts payable and other
current liabilities $ 3,569,000 $ 3,329,000
Note payable officer --- 1,043,000
----------- ------------
TOTAL CURRENT LIABILITIES 3,569,000 4,372,000
----------- ------------
Deferred income taxes 253,000 253,000
----------- ------------
STOCKHOLDERS' EQUITY
- --------------------
Preferred stock, $.01 par value;
Authorized 5,000,000 shares;
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 7,075,000 7,660,000
Less treasury stock at cost:
756,276 shares of Class A
Common stock & 252,092 shares of
Class B Common stock (897,000) (897,000)
----------- -----------
TOTAL STOCKHOLDERS'S EQUITY 10,208,000 10,793,000
----------- -----------
TOTALS $14,030,000 $15,418,000
=========== ===========
</TABLE>
See Notes to Financial Statements
3
<PAGE>
B. Statements of Income
For the Three-Month Period Ended
--------------------------------
<TABLE>
<CAPTION>
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Net sales $4,735,000 $7,507,000
Cost of sales 3,688,000 4,326,000
---------- ----------
Gross profit 1,047,000 3,181,000
Selling, general
and administrative
expenses 1,996,000 2,475,000
---------- ----------
Operating profit (loss) (949,000) 706,000
Interest expense 25,000 ---
Other income 87,000 119,000
---------- ----------
Income (loss) before provision
for income taxes (887,000) 825,000
Provision (credit) for
income taxes (302,000) 310,000
---------- ----------
Net income (loss) $ (585,000) $ 515,000
=========== ===========
Income (loss) per
common share: $ (.22) $ .19
========= =========
</TABLE>
See Notes to Financial Statements
4
<PAGE>
C. Statements of Cash Flow
<TABLE>
<CAPTION>
For the Three-Month Period Ended
---------------------------------
March 31, 1996 March 31, 1995
--------------- ----------------
<S> <C> <C>
Operating activities:
Net income (loss) $ (585,000) $ 515,000
Adjustments to reconcile net
income (loss) to net cash provided
by (used in)operating activities:
Depreciation 71,000 49,000
Amortization of intangibles 58,000 69,000
Deferred income taxes --- ---
Provision for bad debts 136,000 ---
Increase (decrease) in cash
attributable to changes in
assets and liabilities:
Accounts receivable 341,000 680,000
Inventories 245,000 (971,000)
Other current assets (338,000) (1,577,000)
Other assets ( 79,000) (286,000)
Accounts payable and other
current liabilities (803,000) 113,000
Income taxes payable --- (2,673,000)
---------- -----------
Net cash provided by (used in)
operating activities (954,000) (4,081,000)
---------- -----------
Cash flows from investing activities:
Purchase of property
and equipment (142,000) ---
Proceeds from maturities of
short-term investments, net --- 627,000
Purchase of short-term
investments (460,000) ---
Proceeds from notes receivable (26,000) 74,000
---------- -----------
Net cash provided by (used in)
investing activities (628,000) 701,000
---------- -----------
Net cash used in financing
activities, --- ---
---------- -----------
Net increase (decrease) in cash
and cash equivalents (1,582,000) (3,380,000)
Cash and cash equivalents,
beginning of period 4,728,000 5,640,000
---------- -----------
Cash and cash equivalents,
end of period $3,146,000 $ 2,260,000
---------- -----------
</TABLE>
See Notes to Financial Statements
5
<PAGE>
C. Statements of Cash Flow (continued)
For the Three-Month Period Ended
--------------------------------
March 31, 1996 March 31. 1995
-------------- --------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid during the year for:
Interest 25,000 ---
Income taxes --- 3,199,747
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, 1996 and for the
- ------
comparative three months ending 1996 and 1995 reflect all adjustments which are
in the opinion of management 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, 1995.
Note 2: In October 1994, the stockholders of SFM Corporation (SFM) approved a
- ------
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
- ------ ------------
As of March 31, 1996 there was no bank debt.
Under the terms of a revolving credit agreement, as amended and
extended to August 31, 1996, 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, 1996, there were no financial or ratio restrictions on the
Company's capital.
The company expects the current revolving credit agreement to be
renewed on substantially the same terms and conditions.
Note 4: Computation of income per common share for the comparative three months
- ------
period ended March 31, 1996 and March 31, 1995, 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
- ------ ---------------------------------------------------------------
Results of Operations
---------------------
A. Results of Operations
---------------------
Sales for the first quarter of 1996 were $4,735,000 compared to
$7,507,000 in 1995, a 37% decrease. The Mechanical Equipment Group had total
sales of $2,609,000, which was 1% less than the prior year's $2,633,000. The
Toy Segment reflected a sales decrease of 56% to $2,126,000 from $4,874,000 in
1995.
First quarter 1996 Toy Segment sales decreased as a result of the
small contribution of the Mighty Morphin Power Rangers products this quarter,
which had been reported previously. Management continues to work on new product
lines and new licenses, in order to increase sales and hopefully increase the
bottom line. Management believes the trend of reduced sales and losses in the
Toy Segment will continue into the second quarter and possibly beyond.
The first quarter results of the Mechanical Equipment Group are
comparable to the prior year's quarter. Small increases in the Howell Motors
Division were counterbalanced by comparable reductions in the telecommunication
business. Management expects the results to be consistent for the year.
Operating losses were $949,000 compared to profits of $706,000 during
the first quarter of 1995. The operating losses reflect the Toy Segment's
decline during this period.
Interest expense was $25,000 compared to $ - 0 - the same period last
year. There was no bank debt in the first quarter of the current year.
Net loss for the first quarter was $585,000 or 22 cents per share,
compared to net income of $515,000 or 19 cents per share in the comparable
period of 1995.
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
<PAGE>
B. Liquidity and Capital Resources
-------------------------------
At March 31, 1996 the Registrant had working capital of approximately
$8,516,000 and a current ratio of 3.4 to 1. In addition, as described in Notes
to Financial Statements, the Registrant has a credit agreement with a Bank
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, 1996, there was no outstanding debit under this facility. The Registrant
considers its working capital, as described above, to be more than adequate to
handle its current operating capital needs.
The line of credit expires on August 31, 1996.
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 14, 1996
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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,146,000
<SECURITIES> 1,449,000
<RECEIVABLES> 1,755,000
<ALLOWANCES> 0
<INVENTORY> 3,656,000
<CURRENT-ASSETS> 12,085,000
<PP&E> 6,610,000
<DEPRECIATION> 5,541,000
<TOTAL-ASSETS> 14,030,000
<CURRENT-LIABILITIES> 3,569,000
<BONDS> 0
0
0
<COMMON> 37,000
<OTHER-SE> 10,171,000
<TOTAL-LIABILITY-AND-EQUITY> 14,030,000
<SALES> 4,735,000
<TOTAL-REVENUES> 0
<CGS> 3,688,000
<TOTAL-COSTS> 1,996,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,000
<INCOME-PRETAX> (887,000)
<INCOME-TAX> (302,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (585,000)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> 0
</TABLE>
