-----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, Kj9ctJISGbu4gSqTy0fgU0o0PB0NboCzQ174/BpPdIqIEaovZlRG/YAaF5akHxQD +sfAuoiHJ3IPHHkTHh62jQ== 0000950130-98-004014.txt : 19980814 0000950130-98-004014.hdr.sgml : 19980814 ACCESSION NUMBER: 0000950130-98-004014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 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-Q SEC ACT: SEC FILE NUMBER: 001-05654 FILM NUMBER: 98686377 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-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X Quarterly report pursuant to Section 13 or 15(d) of the Securities --- Exchange Act of 1934 For the quarterly period ended June 30, 1998 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 June 30, 1998: 2,027,942 Class A Shares and 667,314 Class B Shares. - --------- ------- PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ------- -------------------- A. BALANCE SHEETS ASSETS June 30, 1998 December 31, 1997 ------ -------------- ----------------- (unaudited) (audited) CURRENT ASSETS: Cash and cash equivalents $ 4,174,000 $ 3,654,000 Short term investments 1,800,000 1,800,000 Accounts receivable, less allowances of $504,000 and $481,000 2,360,000 2,620,000 Inventories, at lower of cost or market: Raw materials 667,000 883,000 Work in process 248,000 179,000 Finished goods 2,757,000 2,210,000 ----------- ----------- 3,672,000 3,272,000 Other current assets 559,000 741,000 Refundable income taxes 330,000 330,000 Deferred income taxes 544,000 544,000 ----------- ----------- TOTAL CURRENT ASSETS 13,439,000 12,961,000 Property, plant and equipment, at cost: Land 47,000 47,000 Buildings and improvements 3,012,000 3,009,000 Machinery and equipment 6,754,000 6,716,000 ----------- ----------- 9,813,000 9,772,000 Less accumulated depreciation and amortization 7,391,000 7,186,000 ----------- ----------- 2,422,000 2,586,000 Other assets 55,000 304,000 ----------- ----------- TOTALS $15,916,000 $15,851,000 =========== =========== SEE NOTES TO FINANCIAL STATEMENTS 2 A. BALANCE SHEETS (continued) LIABILITIES June 30, 1998 December 31, 1997 ----------- ------------- ----------------- (unaudited) (audited) CURRENT LIABILITIES: Accounts payable and other current liabilities $4,593,000 $4,729,000 Current portion - Long-Term debt 93,000 93,000 ---------- ---------- TOTAL CURRENT LIABILITIES 4,686,000 4,822,000 ---------- ---------- LONG-TERM LIABILITIES: Deferred income taxes 318,000 318,000 Long term debt, less current portion 1,725,000 1,793,000 ---------- ---------- 2,043,000 2,111,000 ---------- ---------- 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 Retained earnings 6,082,000 5,813,000 Less treasury stock at cost: 759,376 shares of Class A Common stock & 261,792 shares of Class B Common stock (925,000) (925,000) ----------- ----------- TOTAL STOCKHOLDERS' EQUITY 9,187,000 8,918,000 ----------- ----------- TOTALS $15,916,000 $15,851,000 =========== =========== SEE NOTES TO FINANCIAL STATEMENTS 3 B. STATEMENTS OF INCOME
For the Three-Month Period Ended For the Six-Month Period Ended --------------------------------- --------------------------------- June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997 ------------- ------------- --------------------------------- Net sales $5,197,000 $5,852,000 $10,852,000 $11,983,000 Cost of sales 3,663,000 3,817,000 7,626,000 8,424,000 ---------- ---------- ----------- ----------- Gross profits 1,534,000 2,035,000 3,226,000 3,559,000 Selling, general and administrative expenses 1,279,000 2,253,000 2,972,000 4,112,000 ---------- ---------- ----------- ----------- Operating profit (loss) 255,000 (218,000) 254,000 (553,000) Interest expense 36,000 52,000 69,000 88,000 Other income (16,000) 160,000 222,000 240,000 ---------- ---------- ----------- ----------- Income (loss) before provision for income taxes 203,000 (110,000) 407,000 (401,000) Provision (credit) for income taxes 69,000 (37,000) 138,000 (138,000) ---------- ---------- ----------- ----------- - - Net income (loss) $ 134,000 $ (73,000) $ 269,000 $ (263,000) ========== ========== =========== =========== Income (loss) per common share (basic and diluted): $ .05 $ (.03) $ .10 $ (.10) ========== ========== ========== ===========
SEE NOTES TO FINANCIAL STATEMENTS 4 C. STATEMENTS OF CASH FLOW
For the Six-Month Period Ended ------------------------------- June 30, 1998 June 30, 1997 ------------- ------------- Operating activities: Net income (loss) $ 269,000 $ (263,000) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 205,000 309,000 Amortization of intangibles - 119,000 Deferred income taxes - - Provision for bad debts 23,000 18,000 Increase (decrease) in cash attributable to changes in assets and liabilities: Accounts receivable 237,000 928,000 Inventories (400,000) 824,000 Other current assets 182,000 (306,000) Refundable income taxes - (138,000) Deferred income tax - Other assets 249,000 93,000 Accounts payable and other current liabilities (136,000) (665,000) Deferred income taxes - - ---------- ---------- Net cash provided by (used in) operating activities 629,000 919,000 ---------- ---------- Cash flows from investing activities: Purchase of property and equipment (41,000) (86,000) Purchase of notes (net) - (324,000) ---------- ---------- Net cash provided by (used in) investing activities (41,000) (410,000) ---------- ---------- Cash flows (used in) financing activities: Long term debt (68,000) (44,000) ---------- ---------- Net cash (used in) financing activities (68,000) (44,000) ---------- ---------- Net increase (decrease) in cash and cash equivalents 520,000 465,000 ---------- ---------- Cash and cash equivalents beginning of period 3,654,000 3,092,000 ---------- ---------- Cash and cash equivalents, end of period $4,174,000 $3,557,000 ========== ==========
SEE NOTES TO FINANCIAL STATEMENTS 5 C. STATEMENTS OF CASH FLOW (continued)
For the Six-Month Period Ended ----------------------------- June 30, 1998 June 30, 1997 ------------- ------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash Paid during the year for: Interest $53,000 $67,000 Income taxes --- ---
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: NONE SEE NOTES TO FINANCIAL STATEMENTS 6 D. NOTES TO FINANCIAL STATEMENTS Note 1: The unaudited financial statements as of June 30, 1998 and 1997 - ------- 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, 1997. Note 2: 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. The acquisition is being accounted for using the purchase method of accounting. The financial statements reflect the operations of Handi-Pac from the date of acquisition. Refer to Form 8-K filed February 18, 1997 and Form 8- K/A filed April 18, 1997 for a further explanation of the acquisition. Note 3: Long-Term Debt - --------- -------------- Long-Term Debt represents obligations of the Handi-Pac subsidiary as follows: June 30, 1998 ------------- Notes Payable - SBA Loans $ 954,000 Other Long-Term payables 2,000 Capital Lease payable 862,000 ---------- 1,818,000 Current Portion of Long-Term Debt 93,000 ---------- $1,725,000 ========== 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 June 30, 1998, there was no other bank debt for the other subsidiaries except as noted above. SEE NOTES TO FINANCIAL STATEMENTS 7 Note 4: Computation of income per common share for the comparative three - ------- month periods ended June 30, 1998 and June 30, 1997, was based on 2,695,256 common shares and 2,695,256 common shares outstanding, being the average number of shares outstanding during the respective periods. Note 5: 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. Note 6: The following information is reported as required for industry segment - ------- disclosure. Three Months Ended June 30, 1998 -------------------------------- Mechanical Toys Equipment Consolidated ---- ---------- ------------ Sales $2,373,000 $2,680,000 $5,053,000 ========== ========== ========== Operating income $ 116,000 $ 559,000 $ 675,000 ========== ========== General corporate expenses 384,000 Interest expense 36,000 Interest income 61,000 Other income (113,000) ---------- Income before income taxes $ 203,000 ========== Three Months Ended June 30, 1998 -------------------------------- Mechanical Toys Equipment Consolidated ---- ---------- ------------ Sales $5,588,000 $5,265,000 $10,853,000 ========== ========== =========== Operating income $ 229,000 $ 552,000 $ 781,000 ========== ========== General corporate expenses 527,000 Interest expense 69,000 Interest income 160,000 Other income 62,000 ----------- Income before income taxes $ 407,000 =========== 8 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results - ------- ----------------------------------------------------------------------- of Operations - ------------- Sales for the second quarter of 1998 were $5,197,000 compared to $5,852,000 in 1997. For the six month period, 1998 sales were $10,852,000 compared to $11,983,000 in 1997, a 10% decrease. The Toy segment's second quarter sales totaled $2,373,000 compared to $3,310,000 in 1997, while the six month 1998 sales totaled $5,588,000 compared to $7,042,000 in 1997. The Mechanical equipment group's second quarter sales totaled $2,680,000 compared to $2,542,000 in 1997, while the six month sales totaled $5,265,000 compared to $4,047,000 in 1997. Gross profits for the second quarter 1998 totaled $1,534,000 compared to $2,035,000 in 1997. For the six month period, 1998 gross profits were $3,226,000 compared to $3,559,000 in 1997. Second 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 placed its efforts in reviewing product mix and customer base as well as personnel structure in attempt to improve operating results. Second quarter Mechanical Equipment sales continue to show a small increase in comparison to the comparable quarter for 1997. While the group is holding its own, management is still hopeful that the remaining quarters of 1998 will reflect positive results from the enhanced telecommunications product line as well as an improvement in Motor operations market share. Operating profit was $255,000 for the second quarter 1998 compared to a loss of $218,000 in 1997. For the six months, operating profit was $254,000 compared to a loss of $553,000 in 1997. Interest expense was $36,000 for the second quarter 1998 compared to $52,000 in the same period last year. For the six months, interest expense was $69,000 compared to $88,000 for 1997. The net income for the second quarter of 1998 was $134,000 or 5 cents per share compared to a loss of $73,000 or 3 cents per share (basic and diluted) in the comparable period of 1997. On a six months basis, the net income was $269,000 or 10 cents per share compared to a loss of $283,000 or 10 cents per share (basic and diluted) for the 1997 period. Please refer to Note 2 for a further explanation of the Handi-Pac acquisition which occurred February 3, 1997. 9 B. Liquidity and Capital Resources ------------------------------- For the six months ended June 30, 1998, the Company was provided with $629,000 from operating activities as compared to a benefit of $919,000 in the corresponding period of the preceding year. For the six months ended June 30, 1998, the Company used $41,000 for investing activities, principally for the purchase of equipment. In the corresponding period of the preceding year, the Company used $410,000 for investing activities, principally for the purchase of notes. Cash flows used in financing activities during the six months ended June 30, 1998 of $68,000 relate to the payment of long-term debt. At June 30, 1998 the Company had working capital of approximately $8,753,000 and a current ratio of 2.9 to 1. In addition, as described in Notes to Financial Statements, the Registrant's Handi-Pac subsidiary has $954,000 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 ITEM 4. Submission of Matters to a Vote of Security Holders. - ------- ---------------------------------------------------- (a) The Annual Meeting of Shareholders was held on May 27, 1998. (c) (1) The proposal to re-elect the three Class A directors was passed by a vote of 1,927,430 shares in favor and 25,865 shares abstaining. (2) The proposal to re-elect the one Class B director was passed by a vote of 622,593 shares in favor and 5,417 shares abstaining. (3) There were no other proposals brought up at this meeting. 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: August 13, 1998 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EXX INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 4,174,000 1,800,000 2,360,000 0 3,672,000 13,439,000 9,813,000 7,391,000 15,916,000 4,686,000 0 0 0 37,000 9,150,000 15,916,000 10,852,000 0 7,626,000 2,972,000 0 0 69,000 407,000 138,000 0 0 0 0 269,000 .10 .10
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