<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, 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
________________________________________________________________________________
(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 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 March 31, 1999:
1,931,159 Class A Shares and 629,453 Class B Shares.
- --------- -------
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
A. Balance Sheets
ASSETS March 31, 1999 December 31, 1998
------ -------------- -----------------
(unaudited) (audited)
CURRENT ASSETS:
Cash and cash equivalents $ 3,031,000 $ 3,383,000
Short term investments 3,244,000 3,510,000
Accounts receivable, less
allowances of $217,000
and $208,000 3,076,000 2,315,000
Inventories, at lower of cost or
market:
Raw materials 519,000 1,089,000
Work in process 175,000 219,000
Finished goods 2,730,000 2,244,000
----------- -----------
3,424,000 3,552,000
Other current assets 594,000 276,000
Refundable income taxes - -
Deferred income taxes 846,000 740,000
----------- -----------
TOTAL CURRENT ASSETS 14,215,000 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 6,354,000 6,358,000
----------- -----------
9,433,000 9,360,000
Less accumulated depreciation
and amortization 7,037,000 6,974,000
----------- -----------
2,396,000 2,386,000
Other assets 202,000 278,000
----------- -----------
TOTALS $16,813,000 $16,440,000
=========== ===========
See Notes to Financial Statements
2
<PAGE>
A. Balance Sheets (continued)
LIABILITIES March 31, 1999 December 31, 1998
- ----------- --------------- ------------------
(unaudited) (audited)
CURRENT LIABILITIES:
Notes Payable - Current Portion $ 49,000 $ 49,000
Accounts payable and other
current liabilities $4,331,000 $4,333,000
Income Taxes Payable 374,000 285,000
---------- ----------
TOTAL CURRENT LIABILITIES 4,754,000 4,667,000
---------- ----------
LONG-TERM LIABILITIES:
Notes Payable, less Current Portion 1,733,000 1,745,000
Pension Liability 424,000 424,000
Deferred Tax Liability 323,000 323,000
---------- ----------
2,480,000 2,492,000
---------- ----------
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
Accumulated other comprehensive loss (414,000) (206,000)
Retained earnings 7,145,000 6,574,000
Less treasury stock at cost:
856,159 and 836,859 shares of
Class A Common stock &
299,653 and 285,553 shares of
Class B Common stock, respectively (1,182,000) (1,117,000)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 9,579,000 9,281,000
----------- -----------
TOTALS $16,813,000 $16,440,000
=========== ===========
See Notes to Financial Statements
3
<PAGE>
B. Statements of Income
For the Three-Month Period Ended
--------------------------------
March 31, 1999 March 31, 1998
-------------- --------------
Net sales $5,470,000 $5,655,000
Cost of sales 3,593,000 3,963,000
---------- ----------
Gross profits 1,877,000 1,692,000
Selling, general and
administrative expenses 1,126,000 1,693,000
---------- ----------
Operating income (loss) 751,000 (1,000)
Interest expense 42,000 33,000
Other income 156,000 238,000
---------- ----------
Income before provision
for income taxes 865,000 204,000
Provision for income taxes 294,000 69,000
---------- ----------
Net income $571,000 $135,000
========== ==========
Basic and diluted
Income per common share : $ .22 $ .05
========== ==========
See Notes to Financial Statements
4
<PAGE>
C. Statements of Cash Flow
<TABLE>
<CAPTION>
For the Three-Month Period Ended
--------------------------------
March 31, 1999 March 31,1998
-------------- -------------
Operating activities:
<S> <C> <C>
Net income $ 571,000 135,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and Amortization 63,000 93,000
Deferred income taxes -
Provision for bad debts 9,000 22,000
Accrued interest income (48,000)
Increase (decrease) in cash attributable to changes in
assets and liabilities:
Accounts receivable (770,000) (400,000)
Inventories 128,000 (180,000)
Other current assets (318,000) (86,000)
Refundable income taxes - -
Deferred income tax - -
Other assets 76,000 205,000
Accounts payable and other
current liabilities 87,000 187,000
Deferred income taxes - -
---------- ----------
Net cash provided by (used in) operating activities (202,000) (24,000)
---------- ----------
Cash flows from investing activities:
Purchase of property and equipment (73,000) (19,000)
---------- ----------
Net cash provided by (used in) investing activities (73,000) (19,000)
---------- ----------
Cash flows (used in) financing activities:
Payments on notes payable (12,000) (54,000)
Purchases of Treasury Stock (65,000) -
---------- ----------
Net cash (used in) financing activities (77,000) (54,000)
---------- ----------
Net increase (decrease) in cash and cash equivalents (352,000) (97,000)
Cash and cash equivalents
beginning of period 3,383,000 3,654,000
---------- ----------
Cash and cash equivalents,
end of period $3,031,000 3,557,000
========== ==========
</TABLE>
See Notes to Financial Statements
5
<PAGE>
a. Statements of Cash Flow (continued)
<TABLE>
<CAPTION>
For the Three-Month Period Ended
--------------------------------
March 31, 1999 March 31, 1998
-------------- --------------
Supplemental disclosure of cash flow information:
Cash Paid during the year for:
<S> <C> <C>
Interest $42,000 $26,000
Income taxes 203,000 ---
</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, 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:
March 31, 1999
--------------
Notes Payable - SBA Loans $ 926,000
Capital Lease payable 856,000
----------
1,782,000
Current Portion of Long-Term Debt 49,000
----------
$1,733,000
==========
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 March 31, 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
- -------
periods ended March 31, 1999 and March 31, 1998, was based on 2,574,705 common
shares and 2,695,256 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: The following information is reported as required for industry segment
- -------
disclosure.
Three Months Ended March 31, 1999
---------------------------------
Mechanical
Toy Equipment Consolidated
--- --------- ------------
Sales $2,342,000 $3,128,000 $5,470,000
========== ========== ============
Operating income $ 248,000 $ 638,000 $ 886,000
========== ==========
General corporate expenses 136,000
Interest expense 42,000
Interest income 107,000
Other income 50,000
------------
Income before income taxes $ 865,000
============
See Notes to Financial Statements
8
<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 1999 were $5,470,000 compared to
$5,655,000 in 1998, a 3% decrease. The Mechanical Equipment Group had total
sales of $3,128,000, which was 28% more than the prior year's $2,440,000. The
Toy Segment reflected a sales decrease of 27% to $2,342,000 from $3,215,000 in
1998.
Gross profits for the first quarter 1999 totaled $1,877,000 compared
to $1,692,000 for the comparable period in 1998. While gross profits in the Toy
division declined between the periods, the Mechanical Equipment Group accounted
for the net increase. Gross profits as a percentage of sales increased to 34%
compared to last year's 30% because of a higher gross profit percentage earned
by the Mechanical Equipment Group.
First quarter Toy Segment sales continue to reflect an industry
decline. This information has been reported during the past several quarters.
Management continues to make extra efforts to review the Segment's results in
order to improve operations. In addition, management has been diligently
looking at product mix and new designs to attempt to improve same.
First quarter sales of the Mechanical Equipment Group reflects a surge
in sales in the TX Group due mainly to customers' needs in resolving Y2K
problems relating to their installed equipment base. While it is too early to
tell, it is hoped that the remaining quarters will reflect positive results from
these telecommunications sales as well as an improvement in the Motor operations
market share.
Operating income was $751,000 in the first quarter of 1999 compared to
an operating loss of $1,000 during the first quarter of 1998. The increase in
operating income was due primarily to improvements in operations of the
Mechanical Equipment Group.
Interest expense was $42,000, compared to $33,000 the same period last
year.
The net income for the first quarter of 1999 was $571,000 or 22 cents
per share (basic and diluted) compared to a net income of $135,000 or 5 cents
per share (basic and diluted) in the comparable period of 1998.
See Notes to Financial Statements
9
<PAGE>
B. Liquidity and Capital Resources
-------------------------------
For the three months ended March 31, 1999, the Company used $202,000
from operating activities as compared to a use of $24,000 in the corresponding
period of the preceding year. The principal reason for the increased cash flow
in 1999 is the increased net income in the 1999 period. For the three months
ended March 31, 1999, the Company used $73,000 for investing activities,
principally for the purchase of equipment. In the corresponding period of the
preceding year, the Company used $19,000 for investing activities, principally
for the purchase of equipment. Cash flows used in financing activities during
the three months ended March 31, 1999 of $77,000 relate mostly to the purchase
of treasury stock.
At March 31, 1999 the Company had working capital of approximately
$9,461,000 and a current ratio of 3.0 to 1. In addition, as described in Notes
to Financial Statements, the Registrant's Handi-Pac subsidiary has $926,000 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: May 14, 1999
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EXX INC
AND BE QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,031,000
<SECURITIES> 3,244,000
<RECEIVABLES> 3,076,000
<ALLOWANCES> 0
<INVENTORY> 3,424,000
<CURRENT-ASSETS> 14,215,000
<PP&E> 9,433,000
<DEPRECIATION> 7,037,000
<TOTAL-ASSETS> 16,813,000
<CURRENT-LIABILITIES> 4,754,000
<BONDS> 0
0
0
<COMMON> 37,000
<OTHER-SE> 9,542,000
<TOTAL-LIABILITY-AND-EQUITY> 16,813,000
<SALES> 5,470,000
<TOTAL-REVENUES> 0
<CGS> 3,594,000
<TOTAL-COSTS> 1,126,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,000
<INCOME-PRETAX> 865,000
<INCOME-TAX> 294,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 571,000
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
