<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1O-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
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Act of 1934
For the quarterly period ended March 31, 1997 or
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Transition report pursuant to Section 13 or 15(d) of the Securities
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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.)
1350 East Flamingo Road, Suite 689, Las Vegas, Nevada 89119-5263
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(Address or Principal Executive Offices) (Zip Code)
(702) 598-3223
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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
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Number of shares of common stock outstanding as of March 31, 1997:
2,027,942 Class A Shares and 667,314 Class B Shares.
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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A. BALANCE SHEETS
ASSETS March 31, 1997 December 31, 1996
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(unaudited) (audited)
CURRENT ASSETS:
Cash and cash equivalents $ 2,599,000 $ 3,092,000
Short term investments 1,800,000 1,800,000
Accounts receivable, less
allowances of $950,000
and $872,000 2,753,000 2,284,000
Inventories, at lower of cost or
market:
Raw materials 579,000 563,000
Work in process 168,000 176,000
Finished goods 2,606,000 2,312,000
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3,353,000 3,051,000
Other current assets 1,139,000 705,000
Prepaid income taxes 700,000 599,000
Deferred income taxes 535,000 535,000
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TOTAL CURRENT ASSETS 12,879,000 12,066,000
Property, plant and equipment,
at cost:
Land 47,000 35,000
Buildings and improvements 2,524,000 1,179,000
Machinery and equipment 12,614,000 6,087,000
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15,185,000 7,301,000
Less accumulated depreciation
and amortization 11,921,000 6,471,000
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3,264,000 830,000
Other assets 789,000 523,000
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TOTALS $16,932,000 $13,419,000
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See Notes to Financial Statements
2
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A. Balance Sheets (continued)
LIABILITIES March 31, 1997 December 31, 1996
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(unaudited) (audited)
CURRENT LIABILITIES:
Accounts payable and other
current liabilities $ 5,615,000 $ 4,018,000
Current portion - Long-Term debt 533,000 -
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TOTAL CURRENT LIABILITIES 6,148,000 4,018,000
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LONG-TERM LIABILITIES:
Deferred income taxes 260,000 260,000
Long term debt 1,573,000 -
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1,833,000 260,000
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STOCKHOLDERS' EQUITY
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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 5,846,000 6,036,000
Less treasury stock at cost:
759,376 shares of Class A Common stock &
261,792 shares of Class B Common stock (925,000) (925,000)
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TOTAL STOCKHOLDERS' EQUITY 8,951,000 9,141,000
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TOTALS $ 16,932,000 $ 13,419,000
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See Notes to Financial Statements
3
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B. STATEMENTS OF INCOME
For the Three-Month Period Ended
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March 31, 1997 March 31, 1996
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Net sales $ 6,131,000 $ 4,735,000
Cost of sales 4,607,000 3,688,000
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Gross profits 1,524,000 1,047,000
Selling, general and
administrative expenses 1,859,000 1,996,000
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Operating profit (loss) (335,000) (949,000)
Interest expense 36,000 25,000
Other income 80,000 87,000
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Income (loss) before provision
for income taxes (291,000) (887,000)
Provision (credit) for
income taxes (101,000) (302,000)
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Net income (loss) $ (190,000) $ (585,000)
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Income (loss) per
common share: $ (.07) $ (.22)
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See Notes to Financial Statements
4
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C. STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
For the Three-Month Period Ended
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March 31, 1997 March 31, 1996
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<S> <C> <C>
Operating activities:
Net income (loss) $ (190,000) $ (585,000)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation 145,000 71,000
Amortization of intangibles 61,000 58,000
Deferred income taxes - -
Provision for bad debts 2,000 136,000
Increase (decrease) in cash attributable to changes in
assets and liabilities:
Accounts receivable (94,000) 341,000
Inventories 1,041,00O 245,000
Other current assets (321,000) (338,000)
Prepaid income taxes (101,000) -
Other assets 76,000 (79,000)
Accounts payable and other
current liabilities (727,000) (803,000)
Deferred income taxes - -
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Net cash provided by (used in) operating activities (108,000) (954,000)
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Cash flows from investing activities:
Purchase of property and equipment (52,000) (142,000)
Proceeds from maturities of short-term investments, net - -
Purchase of short-term investments - (460,000)
Proceeds from notes receivable - (26,000)
Purchase of common stock less cash acquired 26,000 -
Purchase of notes (350,000) -
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Net cash provided by (used in) investing activities (376,000) (628,000)
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Cash flows (used in) financing activities:
Long term debt (9,000) _
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Net cash (used in) financing activities (9,000) -
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Net increase (decrease) in cash and cash equivalents (493,000) (1,582,000)
Cash and cash equivalents
beginning of period 3,092,0000 4,728,000
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Cash and cash equivalents,
end of period $ 2,599,000 $ 3,146,000
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</TABLE>
See Notes to Financial Statements
5
<PAGE>
C. Statements of Cash Flow (continued)
For the Three-Month Period Ended
--------------------------------
March 31, 1997 March 31, 1996
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Supplemental disclosure of cash flow
information:
Cash Paid during the year for:
Interest $ 28,000 $ 25,000
Income taxes -- --
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, 1997 and 1996
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reflect all adjustments which are necessary in the opinion of management 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, 1996.
Note 2: On February 3, 1997, Steven Toy Inc., a newly formed subsidiary,
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acquired all of the outstanding capital stock of Handi-Pac, Inc., d/b/a Steven
Manufacturing Co. (Handi-Pac). Handi-Pac manufactures and sells several types
of toys, including pre-school, ride-on, classic and other educational toys. The
purchase price for all of the outstanding stock of Handi-Pac was $50,000 in cash
and the issuance of five year options to purchase 50,000 shares of the Company's
Class A common stock, at an exercise price of $5.00 per share. In addition, Hi-
Flier Inc., a subsidiary of the Company, paid $350,000 to a trust established
for the benefit of the seller to acquire all of its right, title and interest in
certain secured promissory notes made by Handi-Pac with a principal balance of
$350,000.
The acquisition is being accounted for using the purchase method of
accounting. The financial statements reflect the operations of Handi-Pac from
the date of acquisition. Refer to Form 8-K filed February 18, 1997 and
Form 8-K/A filed April 18, 1997 for a further explanation of the acquisition.
Note 3: Long-Term Debt
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Long-Term Debt represents obligations of the Handi-Pac subsidiary as
follows:
March 31, 1997
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Notes Payable - SBA Loans $ 1,073,000
Other Long-Term payables 162,000
Capital Lease payable 871,000
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2,106,000
Current Portion of Long-Term Debt (533,000)
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$ 1,573,000
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As of March 31, 1997, there was no other bank debt for the other
subsidiaries.
Under the terms of a revolving credit agreement, as amended and extended to
December 31, 1996, a bank provided the Company with a line of credit and a
letter of credit facility for loans and/or letters of credit aggregating up to
$2,500,000 at a rate of 3/4% over prime.
The former line of credit was collateralized by substantially all the
Company's trade accounts receivable, inventories and property and equipment, and
contained dividend and net worth restrictions.
While the Company has not had any borrowings under the former credit
agreement for several years, and does not anticipate any borrowings in the
immediate future, it is currently negotiating a new agreement with the bank on
more favorable terms. It is expected the new agreement will be in place shortly.
See Notes to Financial Statements
7
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Note 4: Computation of income per common share for the comparative three month
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periods ended March 31, 1997 and March 31, 1996, was based on 2,695,256 common
shares and 2,708,056 common shares outstanding, being the average number of
shares outstanding during the respective periods.
Note 5: The following Pro Forma information gives effect to the assumption that
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the purchase acquisition of Handi-Pac was consummated at January 1, 1996 and
compares three month Pro Forma 1997 results with the comparable 1996 results.
The results are not necessarily indicative since the Registrant had no control
of Handi-Pac operations prior to the purchase.
EXX Inc. and Subsidiaries
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Pro Forma Information
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For The Three-Month Period Ended
--------------------------------
March 31, 1997 March 31, 1996
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Net Sales $ 6,324,000 $ 6,525,000
Net (Loss) (296,000) (883,000)
Net (Loss) Per Common Share (.11) (.33)
8
<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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Results for 1997 include the Handi-Pac operations acquired
February 3, 1997.
Sales for the first quarter of 1997 were $6,131,000 compared to
$4,735,000 in 1996, a 29% increase. The Mechanical Equipment Group had total
sales of $2,399,000, which was 9% less than the prior year's $2,609,000. The Toy
Segment reflected a sales increase of 75% to $3,732,000 from $2,126,000 in 1996.
First quarter 1997 Toy Segment sales reflect a small increase
without the inclusion of Handi-Pac. The acquisition presents a challenge to turn
that company around and benefit from the synergies within the Toy Group. The
industry continues to have a negative sales climate. The lack of any significant
new licenses within our segment of the toy business further hurts our sales.
Management continues its ongoing attempt to increase sales and improve the
bottom line.
The first quarter sales of the Mechanical Equipment Group reflect an
overall decrease. Both segments of the group reported a small decrease in sales
and profits for the quarter. Management is hopeful that the introduction of
several new and/or enhanced products by our TX subsidiary will improve sales and
profits in the near to mid-term future.
Operating losses were $335,000 compared to losses of $887,000 during
the first quarter of 1996. The reduction in the loss was due primarily to cost
reductions in the toy segment.
Interest expense was $36,000, compared to $25,000 the same period last
year. There was no bank debt in the first quarter other than at the Handi-Pac
subsidiary.
The net loss for the first quarter of 1996 was $190,000 or 7 cents
per share, compared to a net loss of $585,000 or 22 cents per share in the
comparable period of 1996.
Please refer to Note 2 for a further explanation of the Handi-Pac
acquisition which occurred February 3, 1997.
9
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B. Liquidity and Capital Resources
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At March 31, 1997 the Registrant had working capital of approximately
$6,731,000 and a current ratio of 2.1 to 1. In addition, as described in Notes
to Financial Statements, the Registrant's Handi-Pac subsidiary has $1,073,000
of long-term debt outstanding with the SBA. The Registrant is currently
negotiating a new line of credit with a Bank to replace one that expired
December 31, 1996. The Registrant considers its working capital, 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
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David A. Segal
Chairman of the Board and
Chief Executive Officer
Date: May 21, 1997
10
<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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,599,000
<SECURITIES> 1,800,000
<RECEIVABLES> 2,753,000
<ALLOWANCES> 0
<INVENTORY> 3,353,000
<CURRENT-ASSETS> 12,879,000
<PP&E> 15,185,000
<DEPRECIATION> 11,921,000
<TOTAL-ASSETS> 16,932,000
<CURRENT-LIABILITIES> 6,148,000
<BONDS> 0
0
0
<COMMON> 37,000
<OTHER-SE> 9,839,000
<TOTAL-LIABILITY-AND-EQUITY> 16,932,000
<SALES> 6,131,000
<TOTAL-REVENUES> 0
<CGS> 4,607,000
<TOTAL-COSTS> 1,859,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,000
<INCOME-PRETAX> (291,000)
<INCOME-TAX> (101,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (101,000)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> 0
</TABLE>
