SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark one)
[X X] Quarterly Report Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934
For the quarterly period ended June 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
Number)
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 July 31, 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 June 30, 1995 and the results
of operations for the interim three-month and six-month periods
ending June 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.
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<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS
Sixx Holdings, Incorporated and Subsidiaries
Consolidated Balance Sheets
(Rounded to nearest hundred, except shares and per share amounts)
June 30, December 31,
1995 1994
(Unaudited)
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $173,900 $251,100
Accounts receivable 2,600 61,300
Inventories 86,300 79,900
Prepaid expenses 68,600 97,100
Deferred federal income taxe 23,300 23,300
Total Current Assets 354,700 512,700
Property and equipment (net) 2,411,700 2,557,400
Other assets 23,500 24,100
$2,789,900 $3,094,200
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Accounts payable $ 49,700 $ 42,500
Accrued liabilities 224,100 212,300
Payable to affiliates 102,200 39,500
Notes payable to stockholder 209,600 209,600
Total Current Liabilities 585,600 503,900
Deferred rent liabilities 102,300 99,000
Deferred federal income taxes 23,300 23,300
TOTAL LIABILITIES 711,200 626,200
STOCKHOLDERS' EQUITY
Common stock of $.01 par value
Authorized 12,000,000 shares; 10,881,356 shares
issued and outstanding at June 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) (2,232,000) (1,842,700)
TOTAL STOCKHOLDERS' EQUITY 2,078,700 2,468,000
$2,789,900 $3,094,200
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Sixx Holdings, Incorporated and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(Rounded to nearest hundred, except per share amounts)
Three Months Three Months Six Months Six Months
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Restaurant revenues $1,538,700 $1,587,800 $2,755,800 $2,489,400
Restaurant costs and expenses:
Cost of sales 457,400 448,900 815,300 696,100
Operating expenses 842,700 891,200 1,568,800 1,583,900
Depreciation and amortization 76,100 95,000 157,000 124,800
Total restaurant costs and expenses 1,376,200 1, 435,100 2,541,100 2,404,800
Income (loss) from
restaurant operations 162,500 152,700 214,700 84,600
General and administrative
expenses 324,300 262,500 608,600 612,600
Nonoperating income, net 2,400 10,700 4,600 38,100
Net loss ($159,400) ($99,100) ($389,300) ($489,900)
Net loss per common share ($0.01) ($0.01) ($0.04) ($0.05)
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Sixx Holdings, Incorporated and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(Rounded to nearest hundred)
Six Months Six Months
Ended Ended
June 30, 1995 June 30, 1994
Cash flows from operating activities:
<S> <C> <C>
Net loss ($389,300) ($489,900)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 168,100 132,900
Changes in assets and liabilities,
net of effect of merger:
Accounts receivable 58,700 50,200
Inventories (6,400) (32,700)
Prepaid expenses and other assets 29,100 (105,700)
Accounts payable 7,200 (397,200)
Accrued liabilities 11,800 29,000
Payable to affiliates 62,700 1,200
Deferred rent liabilities 3,300 (12,500)
Net cash used in operating activities (54,800) (824,700)
Cash flows used in investing activities--
Additions to property and equipment,
net of effect of merger (22,400) (712,700)
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 in financing activities --- (2,002,700)
Net decrease in cash and equivalents,
net of effect of merger (77,200) (3,540,100)
Cash and cash equivalents at beginning of period 251,100 3,860,000
Cash and cash equivalents at end of period $173,900 $319,900
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
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(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 six-month
periods ended June 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
Page 6 of 11
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Sixx Holdings, Incorporated and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
June 30, 1995
funds advanced by him in connection with the construction of
Patrizio II aggregating approximately $2,365,600.
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 six months
ended June 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 totalled $3,594,060 at March 31,
1994. As of June 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 July 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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Page 9 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 six-month
period ending June 30, 1995, revenues from restaurant operations
increased 11%; income from restaurant operations increased from
$84,000 in 1994 to $214,000 in 1995; and net loss decreased from
$489,900 in 1994 to $389,300 in 1995.
Restaurant revenues for the six month period ended June 30,
1995 increased $266,400 (11%) from the same period in 1994,
primarily because Patrizio II opened in Plano, Texas on March 14,
1994. Patrizio I accounted for 61% and 66% of the revenues for
the six-month periods ended June 30, 1995 and 1994, respectively.
Restaurant costs and expenses for the six-month period ended
June 30, 1995 increased $136,300 (6%) from the same period in
1994, reflecting operating costs for Patrizio II during the
entire six-month period in the current year compared to
approximately three and one-half months during 1994.
General and administrative expenses for the six-month period
ended June 30, 1995 decreased $4,000 (.7%) from the six-month
period ended June 30, 1994.
Nonoperating income declined $33,500 during the first six
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 $3,594,060 on March
31, 1994 to $173,900 on June 30, 1995. As of July 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.
Page 10 of 11
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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 11 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 12 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
/s/ Jack D. Knox Chairman of the BoardAugust 11, 1995
Jack D. Knox President and Director
(Principal Executive
Officer)
/s/ Jean S. Baggett Chief Financial Officer August 11, 1995
Jean S. Baggett (Principal Financial
and Accounting Officer)
Page 13 of 11
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<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000832407
<NAME> SIXX HOLDINGS, INCORPORATED
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 173,900
<SECURITIES> 0
<RECEIVABLES> 2,600
<ALLOWANCES> 0
<INVENTORY> 86,300
<CURRENT-ASSETS> 354,700
<PP&E> 2,411,700
<DEPRECIATION> 84,200
<TOTAL-ASSETS> 2,789,900
<CURRENT-LIABILITIES> 585,600
<BONDS> 0
<COMMON> 108,800
0
0
<OTHER-SE> 4,201,900
<TOTAL-LIABILITY-AND-EQUITY> 2,789,900
<SALES> 1,538,700
<TOTAL-REVENUES> 1,538,700
<CGS> 457,400
<TOTAL-COSTS> 1,376,200
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (159,400)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (159,000)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
