-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NhdCP6Zt99ncM4YutebyeUjGTSook3b0Rq43j1H7qsIsY066qfx45BV7oj/TwF6O h9MFY3hhhL2fpB3U3Tte4A== 0000950130-97-001416.txt : 19970401 0000950130-97-001416.hdr.sgml : 19970401 ACCESSION NUMBER: 0000950130-97-001416 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXX INC/NV/ CENTRAL INDEX KEY: 0000089261 STANDARD INDUSTRIAL CLASSIFICATION: GAMES, TOYS & CHILDREN'S VEHICLES (NO DOLLS & BICYCLES) [3944] IRS NUMBER: 880325271 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-05654 FILM NUMBER: 97569516 BUSINESS ADDRESS: STREET 1: 3900 PARADISE ROAD SUITE 109 CITY: LAS VEGAS STATE: NV ZIP: 89109 BUSINESS PHONE: 7027378811 MAIL ADDRESS: STREET 1: 3900 PARADISE RD STREET 2: SUITE 109 CITY: LAS VEGAS STATE: NV ZIP: 89109 FORMER COMPANY: FORMER CONFORMED NAME: SFM CORP DATE OF NAME CHANGE: 19920703 10-K405 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K (Mark One) X Annual report pursuant to Section 13 or 15(d) of the Securities Exchange - ----- Act of 1934 For the fiscal year ended December 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 (I.R.S. Employer Identification No.) Incorporation or Organization) 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) Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of each class on Which Registered - ------------------------------- ------------------- Common Stock Par Value $.01 Class A American Stock Exchange - ----------------------------------- ----------------------- Common Stock Par Value $.01 Class B American Stock Exchange - ----------------------------------- ----------------------- Securities registered pursuant to Section 12(g) of the Act: None - -------------------------------------------------------------------------------- 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 --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference on Part III of this Form 10-K or any amendment to this Form 10-K. [X] Number of shares of Common Stock, Par Value $.01 per share, outstanding as of March 21, 1997: 2,027,942 Class A shares and 667,314 Class B --------- ------- shares(exclusive of 759,376 Class A shares and 261,792 Class B shares ------- ------- held in registrant's treasury). Of the shares outstanding, 1,084,208 Class --------- A shares and 352,736 Class B shares are held by non-affiliates. The market ------- value of the shares held by non-affiliates is $4,761,502 based on $3.375 and $3.125 per share, respectively of the closing price of the registrant's Class A and Class B common stock on the American Stock Exchange on March 21, 1997. Documents incorporated by reference are: Registrant's Proxy Statement dated April, 1997 for the Annual Meeting of Stockholders to be held in May, 1997, Form S-4 Registration Statement dated July 25, 1994, Form S-4 Amendment No. 1 dated August 16, 1994, Form 8-K Report dated February 3, 1997, and Form 8-K Report dated October 28, 1994, and Form 10-K Report dated March 28, 1996. PART 1 ------ Item 1. Business. - ----------------- EXX INC ("EXX") is the holding Company resulting from the Reorganization of SFM Corporation ("SFM") as approved by its shareholders at a special meeting on October 18, 1994 and effective on October 21, 1994. The purpose of adapting a holding company structure was to enhance the Company's ability to obtain new financing by enabling potential investors to clearly focus on the strengths and diversity of EXX's businesses and to protect each of EXX's businesses to the extent possible from the business risks which arise out of its other businesses. As part of the reorganization each outstanding share of SFM Common stock was converted into three shares of EXX Class A Common Stock and one share of EXX Class B Common Stock. The new stock is substantially identical to the old stock in rights and privileges except that holders of 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 holders of outstanding shares of the Class A Common Stock have the right to elect the remaining directors of the Company. Under the Reorganization SFM became a wholly-owned subsidiary of EXX and each of SFM's wholly-owned subsidiaries became wholly-owned subsidiaries of EXX with each subsidiary retaining its assets and liabilities and continuing its business. In order to effect the transactions, SFM distributed as a dividend to EXX all the outstanding stock of each of its subsidiaries as well as SFM's cash, cash equivalents and certain promissory notes. EXX through its subsidiaries, is engaged in the design, production and sale of consumer goods in the form of "impulse toys", watches and kites. In addition, it is engaged in the design, production and sale of electric motors geared toward the (OEM) original equipment market, and the design, production and sale of cable pressurization equipment sold to the telecommunications industry. It formerly manufactured machine tools and machine tool replacement parts. It continues to receive royalty income from machine tools and replacement parts as part payment for its sale of a subsidiary's assets. Continuing operations are conducted through five wholly-owned subsidiaries. Henry Gordy International, Inc. ("Gordy") was formed during the ------------------------------- third quarter of 1987 to conduct the business associated with certain assets purchased from Henry Gordy, Inc. and Gordy International, Inc. Gordy markets a line of "impulse" toys through a national network of commissioned sales representatives, together with its own sales staff. Its products are distributed directly or through wholesalers to a wide range of retail outlets including, but not limited to, toy stores, department stores, discount chains, drug stores and supermarkets. 2 The majority of the merchandise is manufactured in the Far East to Gordy's specifications and shipped as required. No difficulties have been encountered in obtaining sources for the products, nor are any expected for the current year. Inventories are maintained against anticipated orders. Gordy believes that its practices relating to all working capital items, including its inventory practices, do not materially differ from those used by other companies in similar endeavors and comparable in size to Gordy. Gordy operates in a highly competitive market. It competes with many other companies, some of which have substantially greater resources and assets than Gordy. 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. This acquisition strengthened our toy segment by providing product lines that compliment those of the Henry Gordy International Inc. subsidiary. The Howell Electric Motors Division ("Howell") is engaged in ----------------------------------- the manufacture and sale of alternating current, fractional and small integral motors ranging from 1/4 to 10 horsepower. Howell's product line consists of such specialty items as blower motors designed for use in air conditioning systems, flat-type motors used in floor scrubbing and polishing machines, and motor pump assemblies used in food machinery products and a variety of other applications. In recent years, a substantial portion of Howell's sales have been to the floor care service industry and the food machinery industry, and have been effected through Howell's own marketing personnel and several independent sales representatives working on a commission basis. The principal raw materials used by Howell are steel, copper, aluminum and grey-iron or aluminum casting, all of which are purchased from various suppliers on a competitive basis. During the period covered by this report, Howell experienced no significant difficulty in obtaining these raw materials, and, barring some presently unforeseen event, Howell does not expect to encounter any difficulties in obtaining such supplies during the current year. Raw material inventories for Howell are maintained largely against known requirements, i.e., they are held against firm orders, or, in the case of certain items with a variety of applications to Howell's products, are held against anticipated orders. Inventories of finished goods consist predominately of products ready for shipment. Howell believes that its practices relating to all working capital items, including its inventory practices, do not materially differ from those used by other companies in similar endeavors and comparable in size to Howell. Howell is in a highly competitive business, and believes that it is not a very significant factor in the industry. It competes with many other companies which have significantly greater assets and resources. 3 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. The TX Systems Inc. acquisition together with the activities of another newly formed subsidiary - TX Technology Corp. - broadened our activities in the capital goods segment, allowing us entry to the dynamic and rapidly growing telecommunications industry. The TX Companies operate the cable pressurization and monitoring system business. Material Customers. ------------------ The registrant's business is not dependent to a material extent on any single customer or group of customers. Employees. --------- The registrant employs approximately 145 full-time employees, of whom approximately 63 are employed by Howell, 15 by TX Technology Corp., 65 by Gordy, and 2 for all other activities of the registrant combined. Item 2. Properties. - ------------------- SFM Corp., the registrant's wholly owned subsidiary, owns a brick and masonry building in Plainfield, New Jersey containing approximately 120,000 square feet of manufacturing area and 10,000 square feet of office space, where the operations of Howell and Gordy are located. This facility is held by the registrant subject to a mortgage securing the registrant's line of credit. (See Note 7 to the Consolidated Financial Statements page F-14). The registrant through subsidiaries currently leases 11,000 square feet of warehousing and office space in Randolph, New Jersey for its telecommunication operations. In addition, the registrant's subsidiaries lease office and/or showroom space in New York City, Dallas, Texas and Las Vegas, Nevada. The registrant considers its facilities and the equipment contained therein adequate and suitable to meet its current and foreseeable requirements. Item 3. Legal Proceedings. - -------------------------- None other than in the normal course of business Item 4. Submission of Matters to a Vote of Security Holders. - ------------------------------------------------------------ Not applicable. 4 Part II ------- Item 5. Market for the Registrant's Common Stock and Related Security Holder - ------------------------------------------------------------------------------ Matters. - ------- Principal Market: American Stock Exchange ------------------------------------------ Quarterly Price Information ---------------------------
1996 1995 -------------------------------- ----------------------------------- Class A Class B Class A Class B ------- ------- ------- ------- High Low High Low High Low High Low ---- --- ---- --- ---- --- ---- --- First Quarter 9 4-5/8 8-1/4 4-1/8 26-7/8 12-3/8 25-3/4 12-1/8 Second Quarter 6-7/8 4-1/4 6-1/2 4-1/4 22-3/4 14 20-3/4 14-1/8 Third Quarter 4-5/8 2-1/2 4-1/4 2-3/8 20-7/8 10-1/2 18-1/2 10-1/2 Fourth Quarter 8-7/8 1-3/4 8-3/8 1-7/8 12 5 11-3/8 4-1/2
Stockholders: As of March 21, 1997, there were ------------ approximately 1100 stockholders of record of Class A shares and 500 ---- --- stockholders of record of Class B shares. Dividend Information: No dividends were paid in 1996 or -------------------- 1995. The registrant's current ability to pay dividends is governed by provisions in a loan agreement with its principal bank. No cash dividend may be paid unless the registrant 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. In addition, no dividend may be paid which would have the effect of reducing the Company's net worth below $4,000,000. These restrictions prohibit the payment of a dividend at the present time. There is no present intention to make any dividend payments. 5 Item 6. Selected Financial Data. - --------------------------------
Sales and Income 1996 1995 1994 1993 1992 - ---------------- ---- ---- ---- ---- ---- Net sales $19,746,000 $30,522,000 $45,490,000 $18,037,000 $18,427,000 Net Income (loss) (1,624,000) 2,330,000 2,682,000 611,000 509,000 Per Share Data (A) - -------------- Net income (loss) $ (.60) $ .86 $ .99 $ .23 $ .19 Cash dividends declared -- -- -- -- -- Book value 3.38 3.99 3.13 2.14 1.91 Financial Position - ------------------ Current assets $12,066,000 $13,591,000 $16,191,000 $6,518,000 $6,404,000 Total Assets 13,419,000 15,418,000 17,640,000 7,972,000 7,615,000 Current liabilities 4,018,000 4,372,000 8,857,000 1,869,000 2,316,000 Current ratio 3.0 to 1 3.1 to 1 1.8 to 1 3.5 to 1 2.8 to 1 Working capital 8,048,000 9,219,000 7,334,000 4,649,000 4,088,000 Property and equipment, net 830,000 998,000 710,000 622,000 789,000 Long-term debt - 0 - - 0 - - 0 - - 0 - - 0 - Stockholders' equity 9,141,000 10,793,000 8,463,000 5,781,000 5,170,000
(A) As adjusted for a four for one stock split effective October 21, 1994, Class A and Class B shares retroactively shown. 6 Item 7. Management's Discussion and Analysis of Financial Condition and - ------------------------------------------------------------------------- Results of Operations. - ---------------------- 1996 Compared to 1995 - --------------------- Net sales in 1996 were $19,746,000 compared to $30,522,000 which was a decrease of $10,776,000. This year's sales represents 65% of the prior year sales. The Toy Segment's sales were $9,505,000 compared to $21,373,000 in 1995, a decrease of $11,868,000. The current year's sales represent 44% of the prior year sales. The Mechanical Equipment Group had total sales of $10,242,000 in 1996 compared to $9,149,000 in 1995, an increase of $1,093,000. The current year sales represent 112% of the prior year sales. Gross profits were $4,135,000 compared to last year's $11,471,000, a decrease of $7,336,000. The Toy Segment accounted for a $7,219,000 decrease in gross profit while the Mechanical Equipment Group accounted for the remaining difference. Selling and G&A expenses were $6,891,000, a decrease of $1,390,000 from $8,281,000 in 1995. The decrease in expenses directly relates mostly to the substantial decreased sales volume in the Toy Segment. Operating losses of $(2,756,000) represented a reduction of $5,946,000 from the prior year's operating profits of $3,190,000. The Toy Segment's operating losses of $(2,281,000) represented a reduction of $5,112,000 from $2,831,000 in 1995 while the Mechanical Equipment Group sustained an operating profit of $289,000, a decrease of $654,000 from 1995. Corporate and other operating expenses increased to $764,000 from $584,000 last year. Interest expense decreased to $25,000 from $84,000 in the prior year. The amount of company borrowing was minimal during the year. The Company generated a net loss of $(1,624,000) or $(.60) per A & B share compared to net income of $2,330,000 or $.86 per Share A & B share in 1995. The Company reported a deferred tax asset totaling $585,000 at December 31, 1996. Management believes this asset will be realized by taxable earnings in the future. 1996 was truly a year of retrenchment for the Toy Division. The reduction in sales continued mainly due to the lackluster results from the Mighty Morphin Power Rangers Inc. license. The lack of successful new licenses during the year is reflective of the industry and consumer market. Management continues to review and add to its licensing structure based on new items in the market. Management can make no prediction regarding the availability of new licenses or their acceptance in the marketplace. The Mechanical Equipment group sales increase relates to the Howell segment, solidifying its market share. The average decrease in operating profit in the Group reflects a soft market in the Telecommunications industry. Management anticipates that the Mechanical Equipment Group will remain profitable in the coming year. 7 1995 Compared to 1994 - --------------------- Net sales in 1995 were $30,522,000 compared to $45,490,000 which was a decrease of $14,968,000. This year's sales represents 67% of the prior year sales. The Toy Segment's sales were $21,373,000 compared to $37,188,000 in 1994, a decrease of $15,815,000. The current year's sales represent 57% of the prior year sales. The Mechanical Equipment Group had total sales of $9,149,000 in 1995, compared to $8,302,000 in 1994, an increase of $847,000. The current year sales represent 110% of the prior year sales. Gross profits were $11,471,000 compared to last year's $16,982,000. The Toy Segment accounted for a $6,765,000 decrease in gross profit while the Mechanical Equipment Group accounted for the counterbalancing increase. Improved operating results in the Mechanical Equipment Group accounted for this difference. Selling and G&A expenses were $8,281,000, a decease of $4,437,000 from $12,718,000 in 1994. The decrease in expenses directly relates to the substantial decreased sales volume in the Toy Segment. Operating profits of $3,190,000 were $1,074,000 less than the prior year's $4,264,000. The Toy Segment's operating profits decreased to $2,831,000 from $5,280,000 while the Mechanical Equipment Group sustained an operating profit of $943,000, an increase of $1,027,000 from 1994. Corporate and other operating expenses decreased to $584,000 form $932,000 last year. Interest expense increased slightly to $84,000 from $18,000 in the prior year. The amount of company borrowing was minimal during the year. The Company generated net income of $2,330,000 or $.86 per A & B share compared to net income of $2,682,000 or $.99 per share A & B share in 1994 as adjusted for a four for one split. The Company reported a deferred tax asset totaling $824,000 at December 31, 995. Management believes this asset will be realized by taxable earnings in the future. Accrued expenses decreased substantially over the prior year. Royalties payable were $728,000 at year end compared to $1,490,000 at December 31, 1994 and commissions payable were $245,000 at year end compared to $468,000 at the end of the prior year. The large decrease in both of the categories relates to the large decrease in sales in the Toy Segment and the payments of the prior accounts payable during the year. The decrease in the accrual in payroll and related costs to $301,000 at December 31, 1995 from $955,000 in the prior year is due to salaries and bonuses disbursed or reclassified during the year. 8 The Toy Segment's reduction in sale was attributable to reduced sales of licensed goods mostly particularly the Mighty Morphin Power Ranger line of products which during the year had reached a level of market maturity. The prior year's sales reflected an increase specifically due to a positive market condition, the continuation of which was not predictable. Management continues to review and add to its licensing structure based on new items in the market. The new management people added during the year have demonstrated an ability to positively impact on future operations. Management can make no prediction regarding the availability on new licenses or their acceptance in the market place. As described last year, for various reasons, namely the nature of the product sold, the economic climate and industry practices, management conservatively provided for returns or allowances relating to the products sold and delivered. During the year a portion of the provision was utilized. Management continues to reevaluate this situation in adequately reserving for possible occurrences of this nature. The Mechanical Equipment Group's results reflect the first full year of operations of the TX Technology business. Increases in sales volume and operating profit occurred in both the Howell and TX segments of the business. Management anticipates that the TX business will continue it growth in 1996 and Howell will sustain operations in 1996. 9 Liquidity and Sources of Capital - -------------------------------- During 1996 the Company generated $450,000 of cash flows from operating activities compared to utilizing $2,720,000 in 1995 due in part to a reduction of inventories, a reduction of other current assets and a build up of accounts payable. The Registrant made property and equipment purchases of $272,000 during 1996. In addition, the company collected $68,000 on a note receivable and had net purchases of $811,000 of short-term investments. At the end of 1996 the Company had working capital of approximately $8,048,000 and a current ratio of 3.0:1. In addition, as described in the Notes to Consolidated Financial Statements, the Company had a Credit Agreement (the "Agreement") with a bank, pursuant to which the bank will provide a line of credit and letters of credit aggregating $2,500,000. The Company gave the bank a security interest in all of its accounts receivable, inventories, machinery and equipment, and building (See Note 7 to the Consolidated Financial Statements Page F-14). The current rate of interest charged by the bank is 3/4/ of 1% over prime. At year end there was no borrowing on the credit facility. The line of credit expired December 31, 1996 and the Company is in the process of extending this credit agreement. In the event that there was a borrowing balance and the Company's bank demanded repayment in full of its revolving credit loan which is considered unlikely, the Company would have options to seek to borrow elsewhere against its receivables or other assets, arrange to collect its receivables early or reach a loan workout agreement with the Bank. At year-end, unused credit under this line amounted to the facility line of $2,500,000. The Company considers this line to be more than adequate to handle its current operating capital needs. The Company has no present plans that will require material capital expenditures for any of the Company's businesses. Capital expenditures are expected to be in the ordinary course of business and financed by cash generated from operations or borrowing under a new credit line. The Company believes the effects of inflation will not have a material effect on its future operations. Item 8 Financial Statements - ----------------------------- The financial statements required by this item may be found beginning with the index page on page F-1 immediately following the signature page. Item 9 Changes in and Disagreements with Accountants on Accounting and - ------------------------------------------------------------------------ Financial Disclosure. --------------------- None 10 Part III - -------- In accordance with General Instruction G to Form 10-K, Items 10 through 13, identified below, have been omitted form this report. The information required in those sections, to the extent applicable, has been included in the registrant's Proxy Statement for the current year, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 1996. The Proxy Statement is herein incorporated by reference. Item 10. Directors and Executive Officers of the Registrant. - ------------------------------------------------------------ Item 11. Executive Compensation. - -------------------------------- Item 12. Security Ownership of Certain Beneficial Owners and Management. - ------------------------------------------------------------------------ Item 13. Certain Relationships and Related Transactions. - -------------------------------------------------------- Part IV ------- Item 14. Exhibits, Schedules to Financial Statements and Reports - ----------------------------------------------------------------- on Form 8-K. ----------- (a) Schedules to Financial Statements --------------------------------- See Schedules to Financial Statements immediately following conclusion of the Notes to Consolidated Financial Statements. (b) Reports on Form 8-K ------------------- Not applicable. SIGNATURES ---------- /s/ JERRY FISHMAN EXX INC - ------------------------------- Jerry Fishman, Director /s/ NORMAN H. PERLMUTTER /s/ DAVID A SEGAL - ------------------------------- --------------------- Norman H. Perlmutter, Director David A. Segal Chairman of the Board Chief Executive Officer /s/ FREDERIC REMINGTON - ------------------------------- Frederic Remington, Director /s/ DAVID A. SEGAL - ------------------------------- David A. Segal, Director Dated: March 31, 1997 11 EXX INC AND SUBSIDIARIES FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT DECEMBER 31, 1996 AND 1995 [GRAPHIC] EXX INC AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (ITEMS 8 AND 14(a)) - -------------------------------------------------------------------------------- Page No. (1) Financial Statements Independent Auditors' Report F-2 Consolidated Financial Statements Balance Sheets December 31, 1996 and 1995 F-3 Statements of Operations Years Ended December 31, 1996, 1995 and 1994 F-4 Statements of Stockholders' Equity Years Ended December 31, 1996, 1995 and 1994 F-5 Statements of Cash Flows Years Ended December 31, 1996, 1995 and 1994 F-6 - 7 Notes to Consolidated Financial Statements F-8 - 21 (2) Financial Statement Schedules VIII - Valuation and Qualifying Accounts and Reserves S-1 OTHER SCHEDULES ARE OMITTED BECAUSE OF THE ABSENCE OF CONDITIONS UNDER WHICH THEY ARE REQUIRED OR BECAUSE THE REQUIRED INFORMATION IS GIVEN IN THE CONSOLIDATED FINANCIAL STATEMENTS OR NOTES THERETO. F-1 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of EXX INC We have audited the accompanying consolidated balance sheets of EXX INC and Subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of EXX INC and Subsidiaries as of December 31, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, and the supporting schedules present fairly the information required to be set forth therein, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index on Page F-1 is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states, in all material respects, the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ROTHSTEIN, KASS & COMPANY, P.C. Roseland, New Jersey February 28, 1997 F-2 [GRAPHIC] EXX INC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------- December 31, 1996 1995 - -------------------------------------------------------------------------------- ASSETS Current assets Cash and cash equivalents $3,092,000 $4,728,000 Short-term investments 1,800,000 989,000 Accounts receivable, less allowances of $872,000 in 1996 and $994,000 in 1995 2,284,000 2,232,000 Inventories 3,051,000 3,901,000 Other current assets 705,000 917,000 Prepaid income taxes 599,000 Deferred income taxes 535,000 824,000 ---------------------- Total current assets 12,066,000 13,591,000 Property and equipment, less accumulated depreciation and amortization 830,000 998,000 Other assets 523,000 829,000 ----------------------- $13,419,000 $15,418,000 ======================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable and other current liabilities $4,018,000 $3,329,000 Note payable, officer 1,043,000 --------------------- Total current liabilities 4,018,000 4,372,000 --------------------- Deferred income taxes 260,000 253,000 --------------------- Commitments and contingencies Stockholders' equity Preferred stock, $.01 par value, authorized 5,000,000 shares, none issued Common stock, Class A, $.01 par value, authorized 25,000,000 shares, issued 2,787,318 shares 28,000 28,000 Common stock, Class B, $.01 par value, authorized 1,000,000 shares issued 929,106 shares 9,000 9,000 Capital in excess of par value 3,993,000 3,993,000 Retained earnings 6,036,000 7,660,000 Less treasury stock, 759,376 and 756,276 shares of Class A common stock and 261,792 and 252,092 shares of Class B common stock, at cost (925,000) (897,000) ----------------------- Total stockholders' equity 9,141,000 10,793,000 ----------------------- $13,419,000 $15,418,000 =======================
F-3 [GRAPHIC] EXX INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS - -------------------------------------------------------------------------------- Years Ended December 31, 1996 1995 1994 - -------------------------------------------------------------------------------- Net sales $19,746,000 $30,522,000 $45,490,000 Cost of sales 15,611,000 19,051,000 28,508,000 --------------------------------------- Gross profit 4,135,000 11,471,000 16,982,000 Selling, general and administrative expenses 6,891,000 8,281,000 12,718,000 --------------------------------------- Operating income (loss) (2,756,000) 3,190,000 4,264,000 Interest expense (25,000) (84,000) (18,000) Interest income 283,000 336,000 156,000 Other income 67,000 88,000 50,000 --------------------------------------- Income (loss) before income taxes (benefit) (2,431,000) 3,530,000 4,452,000 Income taxes (benefit) (807,000) 1,200,000 1,770,000 --------------------------------------- Net income (loss) $(1,624,000) $2,330,000 $2,682,000 ======================================= Income (loss) per common share $ (.60) $ .86 $ .99 ======================================= Weighted average number of common shares outstanding 2,706,000 2,708,000 2,708,000 ======================================= F-4 [GRAPHIC] EXX INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - -------------------------------------------------------------------------------- Years Ended December 31, 1996, 1995, and 1994 - --------------------------------------------------------------------------------
Capital in Common Stock Excess of Retained Treasury Class A Class B Par Value Earnings Stock Total Balances, January 1, 1994 $ 28,000 $ 9,000 $3,993,000 $2,648,000 $(897,000) $5,781,000 Net income 2,682,000 2,682,000 --------------------------------------------------------------------- Balances, December 31, 1994 28,000 9,000 3,993,000 5,330,000 (897,000) 8,463,000 Net income 2,330,000 2,330,000 --------------------------------------------------------------------- Balances, December 31, 1995 28,000 9,000 3,993,000 7,660,000 (897,000) 10,793,000 Purchase of treasury stock (28,000) (28,000) Net loss (1,624,000) (1,624,000) --------------------------------------------------------------------- Balances, December 31, 1996 $ 28,000 $ 9,000 $3,993,000 $6,036,000 $(925,000) $9,141,000 =====================================================================
F-5 [GRAPHIC] EXX INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - --------------------------------------------------------------------------------
Years Ended December 31, 1996 1995 1994 - ------------------------------------------------------------------------------------ Cash flows from operating activities Net income (loss) $(1,624,000) $2,330,000 $2,682,000 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 440,000 291,000 214,000 Amortization of intangibles 296,000 248,000 120,000 Deferred income taxes 296,000 703,000 (1,310,000) Provision for bad debts 13,000 377,000 Write-down of notes receivable 300,000 Other (74,000) (70,000) Increase (decrease) in cash attributable to changes in assets and liabilities: Accounts receivable (52,000) (685,000) 529,000 Inventories 850,000 (115,000) (1,448,000) Other current assets 144,000 (383,000) (218,000) Prepaid income taxes (599,000) Other assets (290,000) (446,000) (41,000) Accounts payable and other current liabilities 689,000 (1,660,000) 4,084,000 Income taxes payable (2,942,000) 2,854,000 ----------------------------------- Net cash provided by (used in) operating activities 450,000 (2,720,000) 7,773,000 ----------------------------------- Cash flows from investing activities Purchases of property and equipment (272,000) (579,000) (302,000) Proceeds from maturities of short-term investments 989,000 2,267,000 Purchase of short-term investments (1,800,000) (3,256,000) Proceeds from notes receivable 68,000 120,000 122,000 Net cash provided by (used in) investing ----------------------------------- activities (1,015,000) 1,808,000 (3,436,000) ----------------------------------- Cash flows from financing activities Payment of note due officer (1,043,000) Purchase of treasury stock (28,000) ----------------------------------- Net cash used in financing activities (1,071,000) ----------------------------------- Net increase (decrease) in cash and cash equivalents (1,636,000) (912,000) 4,337,000 Cash and cash equivalents, beginning of year 4,728,000 5,640,000 1,303,000 ----------------------------------- Cash and cash equivalents, end of year $3,092,000 $4,728,000 $5,640,000 ===================================
F-6 [GRAPHIC] EXX INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) - --------------------------------------------------------------------------------
Years Ended December 31, 1996 1995 1994 - ---------------------------------------------------------------------------------- Supplemental disclosures of cash flow information, cash paid during the years for: Interest $ 120,000 $ 7,000 $ 18,000 ================================== Income taxes $ - $3,193,000 $206,000 ================================== Supplemental schedules of noncash investing and financing activities Accrued officer's salary reclassified to note payable, officer $ - $692,000 $351,000 ==================================
F-7 [GRAPHIC] EXX INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. Nature of Operations EXX INC and Subsidiaries (collectively the Company) operate primarily in the toy and electro mechanical industries. Operations in the toy industry involve the design, production and distribution of consumer goods in the form of impulse toys, watches and kites, which are primarily imported from the Far East. Operations in the electro mechanical equipment industry primarily involve the design, production and sale of capital goods, such as electric motors and cable pressurization equipment, for the telecommunications industry. The Company's electro mechanical products are incorporated into customers' products or are used to maintain customers' equipment. 2. Summary of significant accounting policies Reorganization 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 was substantially identical to the former SFM stock in rights and privileges, except that holders of Class B common stock have the right to elect two-thirds or the next higher rounded number of directors and the holders 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. Principles of Consolidation The consolidated financial statements include the accounts of EXX INC and its wholly owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. F-8 [GRAPHIC] EXX INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2. Summary of significant accounting policies (continued) Cash, Cash Equivalents and Short-Term Investments The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. As of December 31, 1996, and at various times during the year, balances of cash at financial institutions exceeded the federally insured limit. The Company has not experienced any losses in such accounts and believes it is not subject to any significant credit risk on cash and cash equivalents. The Company's short-term investments are comprised of readily marketable debt securities with remaining maturities of more than 90 days at the time of purchase. Where the remaining maturity is more than one year, the securities are still classified as short-term investments as the Company's intention is to convert them into cash within one year. Fair Value of Financial Instruments The fair value of the Company's assets and liabilities which qualify as financial instruments under Statement of Financial Accounting Standards No. 107 approximate the carrying amounts presented in the balance sheets. Inventories Certain inventories are valued at the lower of cost, on the last-in, first-out ("LIFO") method, or market. The remainder of the inventories are valued at the lower of cost, on the first-in, first out ("FIFO") method, or market. Impairment of Long-Lived Assets The Company periodically assesses the recoverability of the carrying amounts of long- lived assets, including intangible assets. A loss is recognized when expected undiscounted future cash flows are less than the carrying amount of the asset. The impairment loss is the difference by which the carrying amount of the asset exceeds its fair value. F-9 [GRAPHIC] EXX INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2. Summary of significant accounting policies (continued) Property and Equipment Property and equipment are stated at cost and are depreciated or amortized on the straight-line method over the estimated useful lives of the assets as follows: Building and improvements 10 - 50 years Machinery and equipment 3 - 20 years Maintenance and repairs are charged to operations, while betterments and improvements are capitalized. Other Assets Other assets include packaging design costs which are being amortized over their estimated useful lives of two years on the straight-line method. Advertising Advertising costs are charged to operations as incurred and were $229,000, $215,000 and $262,000 for 1996, 1995 and 1994, respectively. Stock Option Plan The Company adopted the disclosure requirements of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation", effective for the Company's December 31, 1996 financial statements. The Company applies APB Opinion No. 25 and related interpretations in accounting for its plans. Accordingly, compensation cost has been recognized for its stock plans based on the intrinsic value of the stock option at the date of grant (the difference between the exercise price and the fair value of the Company's common stock). F-10 [GRAPHIC] EXX INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2. Summary of significant accounting policies (continued) Income Taxes The Company complies with Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes", which requires an asset and liability approach to financial reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, and based on enacted tax laws and rates applicable to the periods in which the differences are expected to effect taxable income. Valuation allowances are established, when necessary, to reduce deferred income tax assets to the amount expected to be realized. Income (Loss) Per Common Share Income (loss) per common share is based on the weighted average number of common shares outstanding during each year, after giving effect to the reorganization. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-11 [GRAPHIC] EXX INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 3. Inventories Inventories consist of the following at December 31, 1996 and 1995: 1996 1995 Raw materials $ 563,000 $803,000 Work-in-process 176,000 162,000 Finished goods 2,312,000 2,936,000 ------------------------ $3,051,000 $3,901,000 ======================== Inventories stated on the LIFO method amounted to $365,000, $339,000, and $396,000 at December 31, 1996, 1995, and 1994, respectively, which amounts are below replacement cost by approximately $381,000, $336,000, and $300,000, respectively. During 1996, 1995, and 1994, net income (loss) was not materially effected as a result of using the LIFO method. 4. Property and equipment Property and equipment consists of the following at December 31, 1996 and 1995: 1996 1995 Land $ 35,000 $ 35,000 Buildings and improvements 1,179,000 1,151,000 Machinery and equipment 6,087,000 5,843,000 --------------------- 7,301,000 7,029,000 Less accumulated depreciation 6,471,000 6,031,000 --------------------- $ 830,000 $998,000 ===================== F-12 [GRAPHIC] EXX INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 5. Other assets Other assets consist of the following at December 31, 1996 and 1995: 1996 1995 Notes receivable, less current portion $ 98,000 $512,000 Packaging design costs, less accumulated amortization of $508,000 and $783,000 253,000 207,000 Prepaid pension 172,000 110,000 --------------------- $ 523,000 $829,000 ===================== During 1996, the Company recorded an additional $300,000 write-down on the notes receivable to their estimated realizable value. 6. Accounts payable and other current liabilities Accounts payable and other current liabilities consist of the following at December 31, 1996 and 1995: 1996 1995 Trade accounts payable $1,631,000 $1,531,000 Payroll and related costs 410,000 301,000 Royalties payable 464,000 728,000 Commissions payable 311,000 245,000 Professional fees 311,000 298,000 Product liability claim 350,000 Other 541,000 226,000 --------------------- $4,018,000 $3,329,000 ===================== F-13 [GRAPHIC] EXX INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 7. Line of credit Under the terms of a revolving credit agreement, as amended, a bank provided the Company with a line of credit and a letter of credit facility aggregating $2,500,000. Loans under the agreement bear interest at 3/4% per annum in excess of the bank's base lending rate and are collateralized by substantially all of the Company's trade accounts receivable, inventories, and property and equipment. At December 31, 1996 and 1995, there were no balances due. The line of credit expired in December 1996, and the Company is in the process of extending this credit agreement. 8. Income taxes The provision (benefit) for income taxes consists of the following: 1996 1995 1994 Current: Federal $ (974,000) $497,000 $2,551,000 State (129,000) 529,000 ---------------------------------- (1,103,000) 497,000 3,080,000 Deferred: Federal 168,000 703,000 (1,131,000) State 128,000 (179,000) ---------------------------------- $ (807,000)$1,200,000 $1,770,000 ================================== Subsequent to the corporate reorganization in 1994, substantially all of the Company's taxable income was generated in states with no state and local income taxes. The difference between the applicable federal statutory income tax rate and the effective income tax rate is reconciled as follows: 1996 1995 1994 Tax at federal statutory rate (34.0)% 34.0% 34.0% State tax, net of federal tax benefit 5.2 Other 1.0 .6 ------------------- Effective income tax rate (33.0)% 34.0% 39.8% ==================== F-14 [GRAPHIC] EXX INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 8. Income taxes (continued) The net deferred tax assets and liabilities as of December 31, 1996 and 1995 are as follows:
1996 1995 Deferred tax assets: Allowance for doubtful accounts $ 229,000 $164,000 Allowance for returns 186,000 233,000 Asset basis difference, property and equipment 80,000 53,000 Asset basis difference, inventories 25,000 42,000 Other 15,000 332,000 --------------------- 535,000 824,000 --------------------- Deferred tax liabilities: Accumulated DISC earnings (202,000) (209,000) Prepaid pension costs (58,000) (44,000) --------------------- (260,000) (253,000) --------------------- Deferred tax asset, net $ 275,000 $571,000 =====================
9. Pension plans The Company participates in two pension plans. One plan covers hourly employees under union contracts and provides for defined contributions based on annual hours worked. Pension expense for these plans was $47,000 in 1996, $72,000 in 1995, and $57,000 in 1994. The Company-sponsored plan is a noncontributory defined benefit pension plan. Benefits are based on years of service and the employees' highest five year average earnings. The Company's funding policy is to contribute annually at least the minimum amount required by the Employee Retirement Income Security Act of 1974. Effective January 1, 1988, the plan was curtailed through an amendment to freeze benefits and future participation. F-15 [GRAPHIC] EXX INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 9. Pension plans (continued)Net pension expense for the Company-sponsored plan is as follows:
1996 1995 1994 Interest cost on projected benefit obligation $72,000 $74,000 $72,000 Actual return on plan assets (50,000) (50,000) (47,000) Net amortization and deferral (1,000) (2,000) (8,000) ----------------------------- $21,000 $22,000 $17,000 =============================
The following table sets forth the funded status of the Company-sponsored plan and the amounts recognized by the Company in the consolidated balance sheets as of December 31, 1996 and 1995.
1996 1995 Actuarial present value of accumulated benefit obligation including vested benefits $ 963,000 $ 958,000 ===================== Actuarial present value of projected benefit obligation for services rendered to date $ (963,000) $(958,000) Plan assets at fair value, primarily unallocated group annuity contracts 789,000 730,000 --------------------- Projected benefit obligation in excess of plan assets (174,000) (228,000) Unrecognized loss 346,000 338,000 --------------------- Pension prepayment $ 172,000 $110,000 =====================
The discount rate and rate of increase in future compensation assumed in determining the actuarial present value of the projected benefit obligation is 8%. The expected long-term rate of return on assets is 10%. F-16 [GRAPHIC] EXX INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 10. Stock option plan During 1994, the Company's Board of Directors adopted, and the stockholders approved, the 1994 stock option plan (the Plan) pursuant to which 1,000,000 shares of Class A common stock were reserved for issuance upon the exercise of options granted to officers, directors, employees and consultants of the Company. Options under the Plan may be incentive stock options, unqualified stock options, or any combination thereof, and the Board of Directors (Committee) may grant options at an exercise price which is not less than the fair market value on the date such options are granted. The Plan further provides that the maximum period in which stock options may be exercised will be determined by the Committee, except that they may not be exercisable after ten years from the date of grant. Unless previously terminated, the Plan shall terminate in October 2004. Options to purchase 1,000 shares of common stock were granted during 1995, which are exercisable at $14.50 per share. These options expire in January 1998. 11. Commitments and contingencies Leases The Company leases showroom and office facilities under noncancellable operating leases. The following is the aggregate future minimum rental payments, as of December 31, 1996, under these noncancelable operating leases: Year ending December 31 1997 $ 114,000 1998 114,000 1999 114,000 2000 77,000 2001 10,000 ----------- $ 429,000 =========== Rent expense for 1996, 1995 and 1994 amounted to $144,000, $122,000 and $129,000, respectively. F-17 [GRAPHIC] EXX INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 11. Commitments and contingencies (continued) Royalty Agreements The Company has licensing agreements relating to the sale of certain products, which expire through December 31, 1998. Under the terms of the agreements, the Company is required to pay royalties of 6% to 12% on the net sales of the related products. In addition, certain agreements require advance payments or payments over the life of the agreement. Employment and Stock Repurchase Agreement The Company has an employment agreement with an officer, who is a principal stockholder, requiring the payment of a minimum annual salary of approximately $300,000, adjusted annually for increases in the consumer price index, plus a bonus based on earnings. The agreement expires in the year 2004 and is renewable for an additional five years unless written notice of non-renewal is given by either party within 90 days prior to its expiration. In addition, the agreement provides that the principal stockholder can require the Company to purchase all of his common stock in the Company on the date his employment terminates, at the greater of fair market value or $10 per share. At December 31, 1996, the stockholder beneficially owned 1,256,712 shares having an approximate fair market value of $5,000,000. Litigation The Company is a party to various legal matters, the outcome of which, in the opinion of management, will not have a material adverse effect on results of operations, cash flows or financial position of the Company. F-18 [GRAPHIC] EXX INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 12. Dependence upon key relationships Approximately 5%, 27% and 51% of the Company's revenues for the years ended December 31, 1996, 1995 and 1994, respectively, were attributable to an agreement with a certain licensor. The agreements with this licensor expire through December 31, 1998. 13. Description of business and industry segments Selected segment and related information is presented in the table below. Operating income is total revenues less operating expenses. In computing operating income, general corporate expenses, interest expense, certain other income and income taxes have been excluded. The LIFO method of valuing inventories of certain electro mechanical equipment decreased operating income for that segment by $45,000, $36,000 and $8,000 in 1996, 1995 and 1994, respectively. Identifiable assets by industry are those assets that are used in the Company's operations in each industry. Export revenues for the three years ended December 31, 1996, 1995, and 1994 were approximately $1,499,000, $1,549,000, and $1,276,000, respectively. Industry segment information for 1996, 1995, and 1994 is summarized as follows:
Mechanical Toy Equipment Consolidated 1996 Sales $9,505,000 $10,241,000 $19,746,000 ====================================== Operating income (loss) $(2,281,000) $ 289,000 $(1,992,000) ========================= General corporate expenses (764,000) Interest expense (25,000) Interest income 283,000 Other income 67,000 ----------- Loss before income taxes (benefit) $(2,431,000) =========== Identifiable assets [A] $5,339,000 $2,621,000 $ 7,960,000 ====================================== Depreciation $ 327,000 $ 113,000 $440,000 ====================================== Capital expenditures $112,000 $ 160,000 $272,000 ======================================
F-19 [GRAPHIC] EXX INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 13. Description of business and industry segments (continued)
Mechanical Toy Equipment Consolidated 1996 Sales $21,373,000 $9,149,000 $30,522,000 ======================================= Operating income $ 2,831,000 $ 943,000 $ 3,774,000 ======================== General corporate expenses (584,000) Interest expense (84,000) Interest income 336,000 Other income 88,000 ----------- Income before income taxes $ 3,530,000 =========== Identifiable assets [A] $ 6,372,000 $2,707,000 $ 9,079,000 ======================================= Depreciation $ 193,000 $ 98,000 $ 291,000 ======================================= Capital expenditures $ 557,000 $ 22,000 $ 579,000 ======================================= 1994 Sales $37,188,000 $8,302,000 $45,490,000 ======================================= Operating income (loss) $ 5,280,000 $ (84,000) $ 5,196,000 ========================= General corporate expenses (932,000) Interest expense (18,000) Interest income 156,000 Other income 50,000 ----------- Income before income taxes $ 4,452,000 =========== Identifiable assets [A] $ 5,607,000 $2,964,000 $ 8,571,000 ======================================= Depreciation $ 73,000 $ 141,000 $ 214,000 ======================================= Capital expenditures $ 156,000 $ 146,000 $ 302,000 =======================================
[A] Excludes corporate assets of $5,459,000, $6,339,000, and $9,069,000 at December 31, 1996, 1995, and 1994, respectively. F-20 [GRAPHIC] EXX INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 14. Quarterly information (unaudited)
THREE MONTHS ENDED MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 1996 Net sales $ 4,735,000 $4,844,000 $5,088,000 $5,079,000 Gross profit 1,047,000 1,016,000 1,694,000 378,000 Net loss (585,000) (337,000) (193,000) (509,000) Loss per common share (.22) (.12) (.07) (.19) 1995 Net sales $ 7,507,000 $8,902,000 $7,761,000 $6,352,000 Gross profit 3,181,000 3,210,000 2,828,000 2,252,000 Net income 515,000 858,000 571,000 386,000 Income per common share 0.19 0.32 0.21 0.14
15. Subsequent events On February 3, 1997, Steven Toy Inc, a newly formed subsidiary, 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. In connection with the acquisition, the seller is prohibited from competing with Handi-Pac in the business of manufacturing or selling toys in the United States, Mexico and Canada for a period of five years. The acquisition will be accounted for using the purchase method of accounting. F-21 [GRAPHIC] EXX INC AND SUBSIDIARIES SCHEDULE VIII VALUATION AND QUALIFYING ACCOUNTS AND RESERVES - --------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Balance at Additions- Deductions Balance Beginning Charged From at End Description of Period to Income Reserves of Period 1996 Reserve for bad debts and allowances $ 411,000 $ $ 38,000 $ 373,000 ========================================================== Reserve for sales returns and other allowances $ 583,000 $ $ 84,000 $ 499,000 ========================================================== Reserve for disposition of inventories $ 211,000 $ $ $ 211,000 ========================================================== 1995 Reserve for bad debts and allowances $ 454,000 $ 13,000 $ 56,000 [A]$ 411,000 ========================================================== Reserve for sales returns and other allowances $2,575,000 $ $ 1,992,000 $ 583,000 ========================================================== Reserve for disposition of inventories $ 554,000 $ $ 343,000 $ 211,000 ========================================================== 1994 Reserve for bad debts and allowances $ 205,000 $ 393,000 $ 144,000 [A]$ 454,000 ========================================================== Reserve for sales returns and other allowances $ $2,905,000 $ 330,000 $2,575,000 ========================================================== Reserve for disposition of inventories $ 107,000 $ 554,000 $ 107,000 $ 554,000 ==========================================================
[A] Including recoveries. S-1 EX-27 2 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 3092000 1800000 3156000 872000 3051000 12066000 7301000 6471000 13419000 4018000 0 0 0 37000 9104000 13419000 19746000 0 15611000 22502000 0 0 25000 (2431000) (807000) 0 0 0 0 (1624000) (.60) 0
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