<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
Quarterly report pursuant to Section 13 or 15(d) of the Securities
X Exchange Act of 1934
- -------
For the quarterly period ended September 30, 1999 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
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(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
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(Address or 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 September 30, 1999:
1,912,359 Class A Shares and 624,953 Class B Shares.
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
A. Balance Sheets
<TABLE>
<CAPTION>
ASSETS September 30, 1999 December 31, 1998
------ ------------------ -----------------
(unaudited) (audited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,519,000 $ 3,383,000
Short term investments 3,026,000 3,510,000
Accounts receivable, less
allowances of $83,000
and $208,000 1,863,000 2,315,000
Inventories, at lower of cost or
market:
Raw materials 423,000 1,089,000
Work in process 103,000 219,000
Finished goods 2,965,000 2,244,000
----------- -----------
3,491,000 3,552,000
Other current assets 543,000 276,000
Refundable income taxes 112,000 -
Deferred income taxes 954,000 740,000
----------- -----------
TOTAL CURRENT ASSETS 14,508,000 13,776,000
Property, plant and equipment,
at cost:
Land 47,000 41,000
Buildings and improvements 3,032,000 2,961,000
Machinery and equipment 6,469,000 6,358,000
----------- -----------
9,548,000 9,360,000
Less accumulated depreciation
and amortization 7,176,000 6,974,000
----------- -----------
2,372,000 2,386,000
Other assets 219,000 278,000
----------- -----------
TOTALS $17,099,000 $16,440,000
=========== ===========
</TABLE>
See Notes to Financial Statements
2
<PAGE>
A. Balance Sheets (continued)
<TABLE>
<CAPTION>
LIABILITIES September 30, 1999 December 31, 1998
- ----------- ------------------- ------------------
(unaudited) (audited)
<S> <C> <C>
CURRENT LIABILITIES:
Notes Payable-Current Portion $ 49,000 $ 49,000
Accounts payable and other
current liabilities 3,879,000 4,333,000
Income Taxes Payable - 285,000
---------- ----------
TOTAL CURRENT LIABILITIES 3,928,000 4,667,000
---------- ----------
LONG-TERM LIABILITIES:
Notes Payable, less Current Portion 1,710,000 1,745,000
Pension Liability 424,000 424,000
Deferred Tax Liability 323,000 323,000
---------- ----------
2,457,000 2,492,000
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY
- --------------------
<S> <C> <C>
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
Accumulated other comprehensive loss (623,000) (206,000)
Retained earnings 8,540,000 6,574,000
Less treasury stock at cost:
874,959 shares and 836,859 shares of
Class A Common stock &
304,153 shares and 285,553 shares of
Class B Common stock, respectively (1,233,000) (1,117,000)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 10,714,000 9,281,000
----------- -----------
TOTALS $17,099,000 $16,440,000
=========== ===========
</TABLE>
See Notes to Financial Statements
3
<PAGE>
B. Statements of Income
<TABLE>
<CAPTION>
For the Three-Month Period Ended For the Nine-Month Period Ended
-------------------------------- -------------------------------
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Net sales $4,005,000 $4,742,000 $15,538,000 $15,594,000
Cost of sales 2,450,000 3,208,000 9,375,000 10,834,000
---------- ---------- ----------- -----------
Gross profit 1,555,000 1,534,000 6,163,000 4,760,000
Selling, general and
administrative expenses 889,000 1,301,000 3,527,000 4,273,000
---------- ---------- ----------- -----------
Operating profit 666,000 233,000 2,636,000 487,000
Interest expense 24,000 25,000 90,000 94,000
Other income 128,000 82,000 433,000 304,000
---------- ---------- ----------- -----------
Income before provision
for income taxes 770,000 290,000 2,979,000 697,000
Provision for
income taxes 262,000 97,000 1,013,000 235,000
---------- ---------- ----------- -----------
Net income $ 508,000 $ 193,000 $ 1,966,000 $ 462,000
========== ========== =========== ===========
Basic and diluted income
per common share $ .20 $ .07 $ .77 $ .17
========== ========== =========== ===========
</TABLE>
See Notes to Financial Statements
4
<PAGE>
C. Statements of Cash Flow
<TABLE>
<CAPTION>
For the Nine-Month Period Ended
--------------------------------
September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
Operating activities:
Net income $1,966,000 $ 462,000
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and Amortization 202,000 305,000
Provision for bad debts (125,000) 31,000
Accrued interest income (147,000) -
Increase (decrease) in cash attributable to changes in
assets and liabilities:
Accounts receivable 577,000 (70,000)
Inventories 61,000 445,000
Other current assets (267,000) 421,000
Refundable income taxes (112,000) -
Other assets 59,000 243,000
Accounts payable and other
current liabilities (739,000) (777,000)
---------- -----------
Net cash provided by operating activities 1,475,000 1,060,000
---------- -----------
Cash flows from investing activities:
Purchase of property and equipment (188,000) (106,000)
Purchase of Short-Term Investments - (1,471,000)
---------- -----------
Net cash used in investing activities (188,000) (1,577,000)
---------- -----------
Cash flows (used in) financing activities:
Payments on Notes Payable (35,000) (80,000)
Purchase of Treasury Stock (116,000) (117,000)
---------- -----------
Net cash (used in) financing activities (151,000) (197,000)
---------- -----------
Net increase (decrease) in cash and cash equivalents 1,136,000 (714,000)
Cash and cash equivalents
beginning of period 3,383,000 3,654,000
---------- -----------
Cash and cash equivalents,
end of period $4,519,000 $ 2,940,000
========== ===========
</TABLE>
See Notes to Financial Statements
5
<PAGE>
C. Statements of Cash Flow (continued)
<TABLE>
<CAPTION>
For the Nine-Month Period Ended
-------------------------------
September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash Paid during the year for:
Interest $ 90,000 $ 77,000
Income taxes 1,300,000 -
</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 September 30, 1999 and 1998
- -------
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, 1998.
Note 2: Notes Payable
- ------- -------------
Notes Payable represents obligations of the Handi-Pac subsidiary
as follows:
September 30, 1999
------------------
Notes Payable - SBA Loans $ 907,000
Capital Lease payable 852,000
----------
1,759,000
Current Portion of Long-Term Debt 49,000
----------
$1,710,000
==========
During the first quarter 1998, the Company opened a limited credit facility
with a bank for two subsidiaries which includes a $300,000 sub-limit for direct
borrowings and a $150,000 sub-limit for documentary letters of credit all
secured by certain of the Company's money market funds.
As of September 30, 1999, there was no other bank debt for the other
subsidiaries except as noted above.
Note 3: Computation of income per common share for the comparative three
- -------
month and nine month periods ended September 30, 1999 and September 30, 1998,
was based on 2,537,312 and 2,544,701 common shares and 2,678,814 and 2,687,035
common shares outstanding, being the average number of shares outstanding during
the respective periods.
Note 4: Effective March 30, 1998, options to purchase 300,000 shares of Class
- -------
A and 100,000 shares of Class B stock were issued to the Chief Executive Officer
in accordance with an agreement between the Company and the Chief Executive
Officer canceling the officer's right to have the Company purchase all or any
part of the shares of the Company owned by the Chief Executive Officer and/or
members of his family. Please refer to footnote 12 in the 10K report for the
year ended December 31, 1997.
See Notes to Financial Statements
7
<PAGE>
Note 5: Subsequent Event
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On October 29, 1999, EXX INC announced the purchase for investment
purposes of 596,300 shares or 12.1% of the outstanding common stock of Newcor
Inc. a Bloomfield Hills, Michigan corporation engaged in Precision Machined
Products, Rubber and Plastic and Special Machines. In addition, David A. Segal,
Chairman of EXX also purchased 24,000 shares of Newcor for his own account. The
combined total purchase represented 12.6% of the outstanding stock of Newcor.
Please refer to Form 13D filed October 29, 1999.
Note 6: Comprehensive Income
- ------- ---------------------
Comprehensive Income is as follows:
<TABLE>
<CAPTION>
For the Three-Month Period Ended For the Nine-Month Period Ended
--------------------------------------- --------------------------------------
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998
--------------------------------------- --------------------------------------
<S> <C> <C> <C> <C>
Net income $508,000 $193,000 $1,966,000 $462,000
Unrealized losses on debt
securities net of taxes: (85,000) - (417,000) -
-------- -------- ---------- ---------
Comprehensive Income $423,000 $193,000 $1,549,000 $462,000
======== ======== ========== =========
</TABLE>
See Notes to Financial Statements
8
<PAGE>
Note 7: The following information is reported for industry segment disclosure.
- -------
<TABLE>
<CAPTION>
Three Months Ended September 30, 1999
-------------------------------------
Mechanical
Toys Equipment Consolidated
---- ---------- ------------
<S> <C> <C> <C>
Sales $1,187,000 $2,818,000 $4,005,000
========== ========== ============
Operating income $ 209,000 $ 573,000 $ 782,000
========== ==========
General corporate expenses 116,000
Interest expense 24,000
Interest income 126,000
Other income 2,000
------------
Income before income taxes $ 770,000
============
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1999
------------------------------------
Mechanical
Toys Equipment Consolidated
---- ---------- ------------
<S> <C> <C> <C>
Sales $5,120,000 $10,418,000 $15,538,000
========== =========== ============
Operating income $ 548,000 $ 2,674,000 $ 3,222,000
========== ===========
General corporate expenses 586,000
Interest expense 90,000
Interest income 344,000
Other income 89,000
------------
Income before income taxes $ 2,979,000
============
</TABLE>
See Notes to Financial Statements
9
<PAGE>
Note 7 - Con't
- --------------
<TABLE>
<CAPTION>
Three Months Ended September 30, 1998
-------------------------------------
Mechanical
Toys Equipment Consolidated
---- ---------- ------------
<S> <C> <C> <C>
Sales $1,655,000 $3,087,000 $4,742,000
========== ========== ============
Operating income $ (240,000) $ 449,000 $ 209,000
========== ==========
General corporate expenses (24,000)
Interest expense 25,000
Interest income 57,000
Other income 25,000
------------
Income before income taxes $ 290,000
============
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998
------------------------------------
Mechanical
Toys Equipment Consolidated
---- ---------- ------------
<S> <C> <C> <C>
Sales $7,243,000 $8,351,000 $15,594,000
========== ========== ============
Operating income $ (11,000) $1,001,000 $ 990,000
========== ==========
General corporate expenses 503,000
Interest expense 94,000
Interest income 217,000
Other income 87,000
------------
Income before income taxes $ 697,000
============
</TABLE>
See Notes to Financial Statements
10
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations
-------------
Sales for the third quarter of 1999 were $4,005,000 compared to $4,742,000 in
1998, a 16% decrease. For the nine month period, 1999 sales were $15,538,000
compared to $15,594,000 in 1998. The Toy Segment's third quarter sales totaled
$1,187,000 compared to $1,655,000 in 1998, while the nine month 1999 sales
totaled $5,120,000 compared to $7,243,000, in 1998. The Mechanical equipment
group's third quarter sales totaled $2,818,000 compared to $3,087,000 in 1998,
while the nine month sales totaled $10,418,000 compared to $8,351,000 in 1998.
Gross profit for the third quarter 1999 totaled $1,555,000 compared to
$1,534,000 in 1998. For the nine-month period, 1999 gross profits were
$6,163,000 compared to $4,760,000 in 1998. While the gross profit in the toy
division continued to decline for the three and nine month periods, the
Mechanical Equipment Group, primarily the TX Group, accounted for the overall
increase in gross profit.
Third quarter toy division sales have continued to decline, consistent with the
industry. The decline in sales is evident for both the large manufacturers as
well as smaller competitors. The lack of any major license or product continues
to hamper any growth. Management has continued placing its efforts in reviewing
product mix, distribution cost and customer base as well as personnel structure
in attempt to improve operating results.
Third quarter Mechanical Equipment sales represent a small decrease in
comparison to the comparable quarter in 1998. Management remains hopeful that
the fourth quarter of 1999 will reflect positive results from the enhanced
telecommunications product line as well as an improvement in Motor operations
market share.
Operating profit was $666,000 for the third quarter 1999 compared to a profit of
$233,000 in 1998. For the nine months, operating profit was $2,636,000 compared
to a profit of $487,000 in 1998.
Interest expense was $24,000 for the third quarter 1999 compared to $25,000 in
the same period last year. For the nine months, interest expense was $90,000
compared to $94,000 for 1998.
The net income for the third quarter of 1999 was $508,000 or 20 cents per share,
compared to $193,000 or 7 cents per share (basic and diluted) in the comparable
period of 1998. On a nine month basis, the net income was $1,966,000 or 77
cents per share compared to $462,000 or 17 cents per share (basic and diluted)
for the 1998 period.
See Notes to Financial Statements
11
<PAGE>
B. Liquidity and Capital Resources
-------------------------------
For the nine months ended September 30, 1999, the Company was provided
with $1,475,000 from operating activities as compared to a benefit of $1,060,000
in the corresponding period of the preceding year. For the nine months ended
September 30, 1999, the Company used $188,000 for investing activities, for the
purchase of property and equipment. In the corresponding period of the
preceding year, the Company used $1,577,000 for investing activities,
principally for the purchase of short-term investments. Cash flows used in
financing activities during the nine months ended September 30, 1999 of $151,000
relate principally to the purchase of treasury stock. For the corresponding
period of the preceding year, the company used $197,000 in financing activities
also principally for the purchase of treasury stock.
At September 30, 1999, the Company had working capital of
approximately $10,580,000 and a current ratio of 3.7 to 1. In addition, as
described in Notes to Financial Statements, the Registrant's Handi-Pac
subsidiary has $907,000 of long-term debt outstanding with the SBA. During the
first quarter 1998, the Company opened a limited credit facility with a bank for
two subsidiaries which includes a $300,000 sub-limit for direct borrowings and a
$150,000 sub-limit for documentary letters of credit all secured by certain of
the Company's money market funds. 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
SIGNATURE
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
Chief Executive Officer
Chief Financial Officer
Date: November 12, 1999
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM * AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,519,000
<SECURITIES> 3,026,000
<RECEIVABLES> 1,863,000
<ALLOWANCES> 0
<INVENTORY> 3,491,000
<CURRENT-ASSETS> 14,508,000
<PP&E> 9,548,000
<DEPRECIATION> 7,176,000
<TOTAL-ASSETS> 17,099,000
<CURRENT-LIABILITIES> 3,928,000
<BONDS> 0
0
0
<COMMON> 37,000
<OTHER-SE> 10,677,000
<TOTAL-LIABILITY-AND-EQUITY> 17,099,000
<SALES> 15,538,000
<TOTAL-REVENUES> 0
<CGS> 9,375,000
<TOTAL-COSTS> 3,527,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 90,000
<INCOME-PRETAX> 2,979,000
<INCOME-TAX> 1,013,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,966,000
<EPS-BASIC> .77
<EPS-DILUTED> .77
</TABLE>
