<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 June 30, 1997 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.)
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
----- -----
Number of shares of common stock outstanding as of June 30, 1997:
2,027,942 Class A Shares and 667,314 Class B Shares.
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<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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A. Balance Sheets
<TABLE>
<CAPTION>
ASSETS June 30, 1997 December 31, 1996
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(unaudited) (audited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,557,000 $ 3,092,000
Short term investments 1,800,000 1,800,000
Accounts receivable, less
allowances of $968,000
and $872,000 1,715,000 2,284,000
Inventories, at lower of cost or
market:
Raw materials 515,000 563,000
Work in process 187,000 176,000
Finished goods 2,868,000 2,312,000
----------- -----------
3,570,000 3,051,000
Other current assets 1,124,000 705,000
Prepaid income taxes 737,000 599,000
Deferred income taxes 535,000 535,000
----------- -----------
TOTAL CURRENT ASSETS 13,038,000 12,066,000
Property, plant and equipment,
at cost:
Land 47,000 35,000
Buildings and improvements 2,618,000 1,179,000
Machinery and equipment 12,505,000 6,087,000
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15,170,000 7,301,000
Less accumulated depreciation
and amortization 12,036,000 6,471,000
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3,134,000 830,000
Other assets 714,000 523,000
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TOTALS $16,886,000 $13,419,000
=========== ===========
</TABLE>
See Notes to Financial Statements
2
<PAGE>
A. BALANCE SHEETS (continued)
<TABLE>
<CAPTION>
LIABILITIES June 30, 1997 December 31, 1996
----------- ------------- -----------------
(unaudited) (audited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and other
current liabilities $5,677,000 $4,018,000
Current portion - Long-Term debt 422,000 -
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TOTAL CURRENT LIABILITIES 6,099,000 4,018,000
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LONG-TERM LIABILITIES:
Deferred income taxes 260,000 260,000
Long term debt 1,649,000 -
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1,909,000 260,000
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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 5,773,000 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)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 8,878,000 9,141,000
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TOTALS $16,886,000 $13,419,000
=========== ===========
</TABLE>
See Notes to Financial Statements
3
<PAGE>
B. STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For The Three-Month Period Ended For the Six-Month Period Ended
-------------------------------- -------------------------------
June 30, 1997 June 30, 1996 June 30, 1997 June 30,1996
------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
Net sales $5,852,000 $4,844,000 $11,983,000 $ 9,579,000
Cost of sales 3,817,000 3,828,000 8,424,000 7,516,000
---------- ---------- ----------- -----------
Gross profits 2,035,000 1,016,000 3,559,000 2,063,000
Selling, general and
administrative expenses 2,253,000 1,608,000 4,112,000 3,604,000
---------- ---------- ----------- -----------
Operating profit (loss) (218,000) (592,000) (553,000) (1,541,000)
Interest expense 52,000 - 88,000 25,000
Other income 160,000 82,000 240,000 169,000
---------- ---------- ----------- -----------
Income (loss) before provision
for income taxes (110,000) (510,000) (401,000) (1,397,000)
---------- ---------- ----------- -----------
Provision (credit) for
income taxes (37,000) (173,000) (138,000) (475,000)
---------- ---------- ----------- -----------
Net income (loss) $ (73,000) $ (337,000) $ (263,000) $ (922,000)
========== ========== =========== ===========
Income (loss) per
common share: $ (.03) $ (.12) $ (.10) $ (.34)
=========== ========== =========== ===========
</TABLE>
See Notes to Financial Statements
4
<PAGE>
C. STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
For the Six-Month Period Ended
--------------------------------
June 30, 1997 June 30,1996
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Operating activities:
<S> <C> <C>
Net income (loss) $ (263,000) $ (922,000)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation 309,000 143,000
Amortization of intangibles 119,000 117,000
Deferred income taxes - -
Provision for bad debts 18,000 65,000
Increase (decrease) in cash attributable to changes in
assets and liabilities:
Accounts receivable 928,000 661,000
Inventories 824,000 365,000
Other current assets (306,000) (549,000)
Prepaid income taxes (138,000) -
Other assets 93,000 (160,000)
Accounts payable and other
current liabilities (665,000) (798,000)
Deferred income taxes - -
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Net cash provided by (used in) operating activities 919,000 (1,078,000)
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Cash flows from investing activities:
Purchase of property and equipment (86,000) (202,000)
Proceeds from maturities of short-term investments, net - -
Purchase of short-term investments - (478,000)
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 (410,000) (654,000)
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Cash flows (used in) financing activities:
Long term debt (44,000) -
---------- -----------
Net cash (used in) financing activities (44,000) -
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Net increase (decrease) in cash and cash equivalents 465,000 (1,732,000)
Cash and cash equivalents
beginning of period 3,092,000 4,728,000
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Cash and cash equivalents, $ 3,557,000 $ 2,996,000
end of period ========== ===========
</TABLE>
See Notes to Financial Statements
5
<PAGE>
C. STATEMENTS OF CASH FLOW (continued)
<TABLE>
<CAPTION>
For the Six-Month Period Ended
------------------------------
June 30, 1997 June 30, 1996
------------------------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid during the year for:
Interest $ 67,000 $ 25,000
Income taxes - -
</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 June 30, 1997 and 1996 reflect
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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 a five year option 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:
<TABLE>
<CAPTION>
June 30, 1997
--------------
<S> <C>
Notes Payable - SBA Loans $1,064,000
Other Long-Term payables 137,000
Capital Lease payable 870,000
----------
2,071,000
Current Portion of Long-Term Debt (422,000)
----------
$1,649,000
==========
</TABLE>
As of June 30, 1997, there was no other bank debt for the other
subsidiaries.
There is currently a letter of credit facility available for $500,000
secured by the Company's cash resources. The Company has allowed its bank line
of credit to expire since there was no present need for a line of credit and the
Company was not willing to bear the expense of maintaining same.
The Company has not had any borrowings under a former credit agreement for
several years, and does not anticipate any borrowings in the immediate future.
7
<PAGE>
Note 4: Computation of income per common share for the comparative three month
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and six month periods ended June 30, 1997 and June 30, 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 and six 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.
<TABLE>
<CAPTION>
EXX Inc. and Subsidiaries
--------------------------
Pro Forma Information
---------------------
For The Three-Month Period Ended For the Six-Month Period Ended
----------------------------------- ------------------------------
June 30, 1997 June 30, 1996 June 30,1997 June 30, 1996
------------- --------------- ------------ -------------
(Actual) (Pro Forma) (Pro Forma) (Pro Forma)
<S> <C> <C> <C>
Net Sales $ 5,852,000 $ 6,121,000 $ 12,176,000 $ 11,792,000
Net (Loss) (73,000) (488,000) (369,000) (1,314,000)
Net (Loss) Per Common Share (.03) (.18) (.14) (.49)
</TABLE>
8
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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A. Results of Operations
---------------------
Results for 1997 include the Handi-Pac operations acquired
February 3, 1997.
Sales for the second quarter of 1997 were $5,852,000 compared to
$4,844,000 in 1996, a 21% increase. For the six month period, 1997 sales were
$11,983,000 compared to $9,579,000 in 1996, a 25% increase. The Toy Segment's
second quarter sales totaled $3,310,000 compared to $2,258,000 in 1996 while the
six month 1997 sales totaled $7,042,00 compared to $4,384,000, a 61% increase
from the prior period. The Mechanical equipment group's second quarter sales
totaled $2,542,000 compared to $2,586,000, a 2% reduction while the six month
Mechanical equipment group sales totaled $4,941,000 compared to $5,195,000 in
1996, a 5% reduction.
Second quarter 1997 Toy Segment sales continue to reflect a small
increase without the inclusion of Handi-Pac. Management is progressing in its
challenge to improve the results of the Toy Group. Special attention is being
given to the synergies that exist within the group. In addition, certain
management changes are being instituted to better coordinate the Group's day to
day operations. Management is also attempting to positively pursue its market
share in spite of the continued negative sales climate and lack of significant
new licenses.
The second quarter Mechanical Equipment Group sales while slightly
less than the prior year's quarter, shows indications of a pickup in business
which should carry through the third quarter and possibly through the remainder
of the year. Management remains 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 $218,000 compared to operating losses of
$592,000 during the second quarter of 1996. The reduction in the loss was due
primarily to cost reductions in the toy segment.
Interest expense was $52,000, compared to $-0- in the same period last
year. There was no bank debt in the second quarter other than at the Handi-Pac
subsidiary.
The net loss for the second quarter of 1997 was $73,000 or 3 cents per
share, compared to a net loss of $337,000 or 12 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
<PAGE>
B. Liquidity and Capital Resources
-------------------------------
At June 30, 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 $1,064,000 of
debt outstanding with the SBA. 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
-----------------------------
David A. Segal
Chairman of the Board and
Chief Executive Officer
Date: August 12, 1997
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
EXX INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,557,000
<SECURITIES> 1,800,000
<RECEIVABLES> 1,715,000
<ALLOWANCES> 0
<INVENTORY> 3,570,000
<CURRENT-ASSETS> 13,038,000
<PP&E> 15,170,000
<DEPRECIATION> 12,036,000
<TOTAL-ASSETS> 16,886,000
<CURRENT-LIABILITIES> 6,099,000
<BONDS> 0
0
0
<COMMON> 37,000
<OTHER-SE> 9,766,000
<TOTAL-LIABILITY-AND-EQUITY> 16,886,000
<SALES> 11,983,000
<TOTAL-REVENUES> 0
<CGS> 8,424,000
<TOTAL-COSTS> 4,112,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 88,000
<INCOME-PRETAX> (401,000)
<INCOME-TAX> (138,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (263,000)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> 0
</TABLE>
