<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
(MARK ONE)
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-16808
SIXX HOLDINGS, INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 75-2222883
(State of Incorporation) (IRS Employer Identification No.)
300 Crescent Court, Suite 1630
Dallas, Texas 75201
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (214) 855-8800
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 XX NO
---- ----
As of November 7, 1995, 10,881,356 common shares of the registrant were
issued and outstanding.
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PART I. FINANCIAL INFORMATION
The consolidated financial statements of Sixx Holdings, Incorporated
(the "Company") and its subsidiaries included herein have been prepared by
the registrant in conformity with generally accepted accounting principles.
The consolidated financial statements and information included herein are
unaudited; however, they reflect all adjustments which are, in the opinion of
management, necessary to reflect a fair presentation of the Company's
financial position as of September 30, 1995 and the results of operations for
the interim three-month and nine-month periods ending September 30, 1995 and
1994. Reference is made to Notes to Unaudited Consolidated Financial
Statements found elsewhere in this document for additional information
concerning the consolidated financial statements.
Management is responsible for the fairness and reliability of the
consolidated financial statements and other financial data included in this
report. In the preparation of the consolidated financial statements, it is
necessary to make informed estimates and judgments based on currently
available information on the effects of certain events and transactions.
The Company maintains accounting and other controls which management
believes provide reasonable assurance that financial records are reliable,
assets are safeguarded, and that transactions are properly recorded in
accordance with management's authorizations. However, limitations exist in
any system of internal control based upon the recognition that the cost of
the system should not exceed benefits derived.
Page 2 of 11
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SIXX HOLDINGS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(ROUNDED TO NEAREST HUNDRED, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 123,600 $ 251,100
Accounts receivable 3,000 61,300
Inventories 73,300 79,900
Prepaid expenses 55,800 97,100
Deferred federal income taxes 23,300 23,300
----------- -----------
Total Current Assets 279,000 512,700
----------- -----------
Property and equipment (net) 2,331,800 2,557,400
Other assets 23,500 24,100
----------- -----------
$ 2,634,300 $ 3,094,200
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Accounts payable $ 69,200 $ 42,500
Accrued liabilities 194,300 212,300
Payable to affiliates 27,600 39,500
Notes payable to stockholder 209,600 209,600
----------- -----------
Total Current Liabilities 500,700 503,900
----------- -----------
Deferred rent liabilities 102,300 99,000
Deferred federal income taxes 23,300 23,300
----------- -----------
TOTAL LIABILITIES 626,300 626,200
----------- -----------
STOCKHOLDERS' EQUITY
Common stock of $.01 par value
Authorized 12,000,000 shares; 10,881,356 shares
issued and outstanding at September 30,1995
and December 31, 1994 108,800 108,800
Additional paid-in capital 4,201,900 4,201,900
Deficit (since August 1, 1989) (2,302,700) (1,842,700)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 2,008,000 2,468,000
----------- -----------
$ 2,634,300 $ 3,094,200
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</TABLE>
See accompanying notes to unaudited consolidated financial statements.
Page 3 of 11
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SIXX HOLDINGS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Rounded to nearest hundred, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Restaurant revenues $1,515,900 $1,525,300 $4,271,700 $4,014,800
---------- ---------- ---------- ----------
Restaurant costs and
expenses:
Cost of sales 465,900 430,000 1,281,200 1,126,200
Operating expenses 868,100 835,000 2,436,800 2,419,000
Depreciation and
amortization 82,000 97,600 239,000 222,300
---------- ---------- ---------- ----------
Total restaurant costs and
expenses 1,416,000 1,362,600 3,957,000 3,767,500
---------- ---------- ---------- ----------
Income from restaurant
operations 99,900 162,700 314,700 247,300
---------- ---------- ---------- ----------
General and administrative
expenses 174,200 292,900 782,900 905,400
---------- ---------- ---------- ----------
Nonoperating income, net 3,700 (2,900) 8,200 35,100
---------- ---------- ---------- ----------
Net loss ($70,600) ($133,100) ($460,000) ($623,000)
========== ========== ========== ==========
Net loss per common share ($0.01) ($0.01) ($0.05) ($0.06)
========== ========== ========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
Page 4 of 11
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SIXX HOLDINGS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Rounded to nearest hundred)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(460,000) $(623,000)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 255,700 222,300
Changes in assets and liabilities, net of effect of merger:
Accounts receivable 58,300 51,000
Inventories 6,700 (51,600)
Prepaid expenses and other assets 41,900 (89,500)
Accounts payable 26,700 (425,800)
Accrued liabilities (18,000) 9,100
Payable to affiliates (12,100) 102,400
Deferred rent liabilities 3,500 14,000
--------- ----------
Net cash used in operating activities (97,300) (791,100)
--------- ----------
Cash flows used in investing activities--
Additions to property and equipment, net of effect of merger (30,200) (814,500)
--------- ----------
Cash flows used in financing activities:
Payment to stockholder in connection with merger -- (602,100)
Additions to loans from stockholder -- 1,157,000
Repayment of loans to stockholder -- (2,365,600)
Distributions to stockholder -- (192,000)
--------- ----------
Net cash used by financing activities -- (2,002,700)
--------- ----------
Net decrease in cash and equivalents, net of effect of merger (127,500) (3,608,300)
Cash and cash equivalents at beginning of period 251,100 3,860,000
--------- ----------
Cash and cash equivalents at end of period $123,600 $251,700
========= ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
Page 5 of 11
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SIXX HOLDINGS, INCORPORATED AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(1) BASIS OF PRESENTATION
In the opinion of management of the Company, all adjustments (all of
which are normal and recurring) have been made which are necessary to
present fairly the accompanying consolidated financial statements. The
consolidated statements of operations and cash flows for the Company
have been restated for the three-month and nine-month periods ended
September 30, 1994, as described in Note 2 below, to reflect the
consolidation of entities under common control subject to the merger,
as if it had occurred on January 1, 1994, the effective date of common
control.
(2) MERGER TRANSACTION
On April 25, 1994, Patrizio Restaurant, Inc., a Texas corporation
("Patrizio I") and Patrizio North, Inc., a Texas corporation ("Patrizio
II") were merged (the "Merger") with and into Patrizio Acquisition,
Inc., a Texas corporation and wholly owned subsidiary of the Company.
At the effective date of the Merger, the name of Patrizio Acquisition,
Inc. was changed to Patrizio Restaurant, Inc.
Prior to the Merger, Jack D. Knox, the president, chief executive
officer and a director of the Company, owned 100% of the outstanding
capital stock of Patrizio I and Patrizio II and approximately 51% of
the Company's outstanding common stock. Pursuant to the terms of the
Agreement and Plan of Merger (the "Merger Agreement"), Mr. Knox exchanged
the outstanding shares of capital stock of Patrizio I and Patrizio II
for, in the aggregate, approximately $2,967,700 (of which $2,365,600
went to repay Mr. Knox for personal funds advanced to build the
Patrizio II restaurant) and 6,163,934 shares of the Company's common
stock; of which 4,717,896 shares are restricted and unregistered. As a
result of the common control of the entities, which occurred
effective January 1, 1994, the Merger was treated in a manner similar
to a pooling of interests for financial accounting purposes.
Accordingly, the assets acquired and liabilities assumed are
presented at their historical costs in the accompanying consolidated
financial statements and the results of operations of Patrizio I and
II are included from the effective date at which common control was
established.
The consideration received by Mr. Knox pursuant to the Merger
Agreement was determined by negotiations between the parties, and is
supported by appraisals prepared by three separate independent
business valuation companies and a fairness opinion prepared by one of
the valuation companies. The cash portion of the purchase price paid
to Mr. Knox in the Merger was funded from the Company's existing cash
and included payment to Mr. Knox for personal funds advanced by him
in connection with the construction of Patrizio II aggregating
approximately $2,365,600.
Page 6 of 11
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SIXX HOLDINGS, INCORPORATED AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
Prior to the Merger, Patrizio I owned and operated an upscale Italian
food restaurant in Dallas, Texas which opened for business in 1989, and
Patrizio II owned and operated a similar restaurant in Plano, Texas,
since its opening on March 14, 1994. All assets acquired in the Merger,
which included the two existing restaurants, the "Patrizio" concept,
design and motif, and other assets used in the day-to-day operations of
the two existing restaurants, continue to be utilized in operating the
existing two restaurants.
(3) ACCOUNTING POLICIES
During the interim periods presented, the Company has followed the
accounting policies set forth in its consolidated financial
statements and related notes thereto, included in its 1994 Annual
Report on Form 10-KSB. Such document should be referred to for
information on accounting policies and further financial details.
Page 7 of 11
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Prior to April 25, 1994, the Company's assets consisted primarily of
cash and cash equivalents. On that date, Patrizio I and Patrizio II were
merged with and into a subsidiary of the Company in exchange for the
payment by the Company of approximately $3.0 million in cash and
6,163,934 shares of the Company's common stock. Prior to the Merger,
Patrizio I owned and operated an upscale Italian food restaurant in
Dallas, Texas and Patrizio II owned and operated a similar restaurant in
Plano, Texas. All assets acquired in the Merger, which include the two
existing restaurants, the "Patrizio" concept, design and motif, and other
assets used in the day-to-day operations of the two existing restaurants,
continue to be utilized in operating the existing two restaurants.
Prior to the Merger, Jack D. Knox, the chairman, president, and a
director of the Company, owned 100% of the outstanding capital stock of
Patrizio I and Patrizio II and approximately 51% of the Company's
outstanding common stock. As a result of the common control of entities,
which occurred effective January 1, 1994, the Merger was treated in a
manner similar to a pooling of interests for financial accounting
purposes. Accordingly, the assets acquired and liabilities assumed were
recorded at their historical costs and the results of operations of
Patrizio I and Patrizio II are consolidated from the effective date at
which common control was established. Thus, the Company's financial
position and results of operations as of and for the nine months ended
September 30, 1994 present the consolidated financial information of the
Company and its subsidiaries as if the Merger occurred January 1, 1994.
CAPITAL RESOURCES AND LIQUIDITY
Since 1990, the Company reviewed numerous opportunities to acquire an
operating business utilizing its cash and cash equivalents. As described
elsewhere in this document, the Company acquired the design and concept
rights of Patrizio and two Patrizio Italian-themed restaurants effective
April 25, 1994. This transaction utilized $2,967,661 of the Company's
cash and short-term investments which totaled $3,594,060 at March 31,
1994. As of September 30, 1995, $213,813 is payable to Mr. Knox for
advances made relating to Patrizio I. In addition to the cash
consideration, the Company issued 6,163,934 shares of common stock to Mr.
Knox.
As of October 31, 1995, the Company's cash and short-term investments
were approximately $125,000. Management believes that sales at the
current annual levels will provide sufficient cash flow to fund
operations at existing restaurants for the foreseeable future. Future
restaurant expansion will require additional capital. Evaluation of
various financing options is under consideration by the Company at this
time.
Page 8 of 11
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RESULTS OF OPERATIONS
The Company entered the casual dining segment of the restaurant industry
as a result of its Merger with Patrizio I and Patrizio II on April 25,
1994. Prior to the Merger, the Company had no operating business.
However, all 1994 operations for the Company prior to the Merger have
been restated effective January 1, 1994, the effective date of common
control.
As described in more detail below during the nine-month period ending
September 30, 1995, revenues from restaurant operations increased 6%;
income from restaurant operations increased from $247,300 in 1994 to
$314,600 in 1995; and net loss decreased from $623,000 in 1994 to
$460,000 in 1995.
Restaurant revenues for the nine-month period ended September 30, 1995
increased $256,900 (6%) from the same period in 1994, primarily because
Patrizio II opened in Plano, Texas on March 14, 1994. Patrizio I
accounted for 61% and 63% of the revenues for the nine-month periods
ended September 30, 1995 and 1994, respectively.
Restaurant costs and expenses for the nine-month period ended September
30, 1995 increased $189,500 (5%) from the same period in 1994, reflecting
operating costs for Patrizio II during the entire nine-month period in
the current year compared to approximately six and one-half months during
1994.
General and administrative expenses for the nine-month period ended
September 30, 1995 decreased $118,700 (40%) from the nine-month period
ended September 30, 1994.
Nonoperating income declined $26,900 during the first nine months of
1995 compared to the same period of 1994 because the Company had fewer
funds invested (because of the consummation of the Merger). Balances
invested declined from $3,594,100 on March 31, 1994 to $123,600 on
September 30, 1995. As of October 31, 1995, $213,813 has not been paid
to Mr. Knox in connection with the Merger.
IMPACT OF INFLATION
The Company is subject to the effect of inflation on its restaurant
labor, food and occupancy costs. The Company employs workers who are paid
hourly rates based upon the federal minimum wage, which last increased in
1991. Operating margins at the restaurant level have been maintained
through rigorous food cost control, procurement efficiencies and, at last
resort, menu price adjustments. Competitive pressures and the Company's
strategy of providing an upscale dining experience for a moderate expense
preclude the Company from frequent menu price adjustments. The cost of
new construction, taxes, maintenance and insurance costs all have an
impact on the Company's occupancy costs, which continued to increase
during the period. Management believes the current practice of
maintaining operating margins through a combination of infrequent menu
price increases and costs controls, careful evaluation of property and
equipment needs, and efficient purchasing practices is the most effective
means to manage the effects of inflation.
SEASONALITY
The Company's business is somewhat seasonal in nature, with restaurant
revenues being stronger in the spring and autumn when patrons can be
seated comfortably on each restaurant's outdoor patio.
Page 9 of 11
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None
(b) Reports on Form 8-K: None
Page 10 of 11
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SIXX HOLDINGS, INCORPORATED
By: /s/ Jack D. Knox
------------------------
Jack D. Knox, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the
capacities and the dates indicated.
SIGNATURE TITLE DATE
Chairman of the Board, November 17, 1995
/s/ Jack D. Knox President and Director
- ---------------- (Principal Executive
Jack D. Knox Officer)
/s/ Jean S. Baggett Chief Financial Officer November 17, 1995
- -------------------- (Principal Financial and
Jean S. Baggett Accounting Officer)
Page 11 of 11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 123,600
<SECURITIES> 0
<RECEIVABLES> 3,000
<ALLOWANCES> 0
<INVENTORY> 73,300
<CURRENT-ASSETS> 279,000
<PP&E> 2,331,800
<DEPRECIATION> 82,000
<TOTAL-ASSETS> 2,634,300
<CURRENT-LIABILITIES> 500,700
<BONDS> 0
<COMMON> 108,800
0
0
<OTHER-SE> 4,201,900
<TOTAL-LIABILITY-AND-EQUITY> 2,634,300
<SALES> 1,515,900
<TOTAL-REVENUES> 1,515,900
<CGS> 466,000
<TOTAL-COSTS> 1,416,100
<OTHER-EXPENSES> 174,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (70,600)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (70,600)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
