SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(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, 1996
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 July 31, 1996, 1,360,169 common shares of the registrant were issued and
outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
The consolidated financial statements of Sixx Holdings, Incorporated and
its subsidiaries (the "Company") 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, 1996 and the results of operations for the interim three-month and
six-month periods ending June 30, 1996 and 1995. 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 10
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
Sixx Holdings, Incorporated and Subsidiaries
Consolidated Balance Sheets
(Rounded to nearest hundred, except shares and per share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 136,400 $ 99,200
Accounts receivable 44,000 78,500
Inventories 77,200 67,800
Prepaid expenses 64,500 63,600
---------- ----------
Total Current Assets 322,100 309,100
Property and equipment (net) 2,254,700 2,435,800
Other assets 13,500 23,400
---------- ----------
$2,590,300 $2,768,300
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Accounts payable $ 68,100 $ 115,900
Accrued liabilities 289,800 237,400
Payable to affiliates 97,500 34,300
Notes payable to stockholder 379,600 359,600
---------- ----------
Total Current Liabilities 835,000 747,200
Deferred rent liabilities 49,800 69,400
---------- ----------
TOTAL LIABILITIES 884,800 816,600
---------- ----------
STOCKHOLDERS' EQUITY
Common stock of $.01 par value:
Authorized 12,000,000 shares; 1,360,169 shares
issued and outstanding at June 30, 1996
and December 31, 1995 (note 3) 13,600 13,600
Additional paid-in capital 4,413,000 4,413,000
Deficit (since August 1, 1989) (2,721,100) (2,474,900)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 1,705,500 1,951,700
---------- ----------
$2,590,300 $2,768,300
========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
Page 3 of 10
<PAGE>
Sixx Holdings, Incorporated and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(Rounded to nearest hundred, except per share amounts)
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Restaurant revenues $1,763,400 $1,538,700 $3,234,900 $2,755,800
Restaurant costs and expenses:
Cost of sales 514,700 457,400 936,300 815,300
Operating expenses 973,200 842,700 1,808,000 1,568,800
Depreciation and amortization 84,700 76,100 171,700 157,000
---------- ---------- ---------- ----------
Total restaurant costs and expenses 1,572,600 1,376,200 2,916,000 2,541,100
---------- ---------- ---------- ----------
Income from
restaurant operations 190,800 162,500 318,900 214,700
General and administrative expenses 311,300 324,300 584,100 608,600
Nonoperating income, net 8,300 2,400 19,000 4,600
Net loss ($112,200) ($159,400) ($246,200) ($389,300)
========== ========== ========== ==========
Net loss per common share ($0.08) ($0.12) ($0.18) ($0.29)
========== ========== ========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
Page 4 of 10
<PAGE>
Sixx Holdings, Incorporated and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(Rounded to nearest hundred)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1996 June 30, 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss ($246,200) ($389,300)
Adjustments to reconcile net loss to net cash from
operating activities:
Depreciation and amortization 186,400 168,100
Gain on sale of property and equipment (7,900) ----
Changes in assets and liabilities:
Accounts receivable 34,500 58,700
Inventories (9,400) (6,400)
Prepaid expenses (900) 28,500
Other assets 9,900 600
Accounts payable (47,800) 7,200
Accrued liabilities 52,400 11,800
Payable to affiliates 63,200 62,700
Deferred rent liabilities (19,600) 3,300
-------- --------
Net cash provided by (used in) operating activities 14,600 (54,800)
-------- --------
Cash flows from investing activities:
Additions to property and equipment and
lease incentives, net (7,100) (22,400)
Proceeds from sale of property and equipment 9,700 ---
-------- --------
Net cash provided by (used in) investing activities 2,600 (22,400)
Cash flows from financing activities:
Additions to loans from stockholder 20,000 ---
-------- --------
Net cash provided by financing activities 20,000 ---
-------- --------
Net increase (decrease) in cash and equivalents 37,200 (77,200)
Cash and cash equivalents at beginning of period 99,200 251,100
-------- --------
Cash and cash equivalents at end of period $136,400 $173,900
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
Page 5 of 10
<PAGE>
Sixx Holdings, Incorporated and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
June 30, 1996
(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.
(2) 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 1995 Annual Report on Form 10-KSB.
Such document should be referred to for information on accounting policies
and further financial details.
(3) Reverse Stock Split
On February 19, 1996, the Board of Directors of the Company approved a
one-for-eight reverse stock split effective March 15, 1996. The reverse
split reduced the Company's issued stock by 9,521,187 shares. Common stock
was reduced by $95,200, with a corresponding increase to additional paid-in
capital, retaining the $.01 par value per share. The Company's consolidated
financial statements and all share amounts have been restated to reflect
the reverse stock split. There has been no change in the authorized common
shares.
Page 6 of 10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company owns and operates two upscale Italian food restaurants.
Patrizio I, located in Dallas, Texas, was opened in 1989 and Patrizio II,
located in Plano, Texas opened in 1994.
Capital Resources and Liquidity:
As of June 30, 1996 and 1995, the Company's cash and short-term investments
were approximately $136,400 and $173,900 respectively. 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.
Results of Operations:
As described in more detail below during the six-month period ended June
30, 1996, revenues from restaurant operations increased 17%; income from
restaurant operations increased from $214,700 in 1995 to $318,900 in 1996; and
net loss decreased from $389,300 in 1995 to $246,200 in 1996.
Restaurant revenues for the six month period ended June 30, 1996 increased
$479,100 (17%) from the same period in 1995, primarily due to increased revenues
generated from Patrizio II. Patrizio I accounted for 57% and 61% of the revenues
for the six-month periods ended June 30, 1996 and 1995, respectively.
Restaurant costs and expenses for the six-month period ended June 30, 1996
increased $374,900 (15%) from the same period in 1995. Cost of sales as a
percent of restaurant revenues decreased from 29.6% for the six months ended
June 30, 1995 to 28.9% for the same period in 1996.
General and administrative expenses for the six-month period ended June 30,
1996 decreased $24,500 from the six-month period ended June 30, 1995.
Nonoperating income increased during the first six months of 1996 compared
to the same period of 1995 primarily due to the sale of certain equipment held
at the corporate headquarters.
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. Enactment of
recent legislation would increase the minimum wage by $.90 per hour over a
two-year period effective October 1, 1996. 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 taxes, maintenance and insurance all have an impact on the Company's
occupancy costs, which continued to increase during the period. Management
Page 7 of 10
<PAGE>
believes the current practice of maintaining operating margins through a
combination of infrequent menu price increases and cost controls, careful
evaluation of property and equipment needs, and efficient purchasing practices
is the most effective means to manage the effects of inflation, including the
increase in the minimum wage.
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 8 of 10
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K: None
Page 9 of 10
<PAGE>
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, August 5, 1996
/s/ Jack D. Knox President and Director
- ---------------- (Principal Executive
Jack D. Knox Officer)
/s/ Catherine E. Blair Chief Financial Officer August 5, 1996
- ---------------------- (Principal Financial and
Catherine E. Blair Accounting Officer)
Page 10 of 10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 136,400
<SECURITIES> 0
<RECEIVABLES> 44,000
<ALLOWANCES> 0
<INVENTORY> 77,200
<CURRENT-ASSETS> 322,100
<PP&E> 2,254,700
<DEPRECIATION> 186,400
<TOTAL-ASSETS> 2,590,300
<CURRENT-LIABILITIES> 835,000
<BONDS> 0
0
0
<COMMON> 13,600
<OTHER-SE> 1,691,900
<TOTAL-LIABILITY-AND-EQUITY> 2,590,300
<SALES> 1,763,400
<TOTAL-REVENUES> 1,763,400
<CGS> 514,700
<TOTAL-COSTS> 1,572,600
<OTHER-EXPENSES> 311,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (112,200)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (112,200)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
