<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 MARCH 31, 1997
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 April 30, 1997, 1,359,274 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 March 31, 1997 and the results of operations for the
interim three-month periods ending March 31, 1997 and 1996. 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)
MARCH 31, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 7,700 $ 118,100
ACCOUNTS RECEIVABLE 77,100 57,400
INVENTORIES 78,200 75,800
PREPAID EXPENSES 69,100 56,400
----------- -----------
TOTAL CURRENT ASSETS 232,100 307,700
PROPERTY AND EQUIPMENT (NET) 1,996,100 2,082,400
OTHER ASSETS 11,300 13,700
----------- -----------
$ 2,239,500 $ 2,403,800
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 67,600 $ 262,500
ACCRUED LIABILITIES 231,200 196,100
PAYABLE TO AFFILIATES 222,900 179,200
NOTES PAYABLE TO STOCKHOLDER 659,600 579,600
----------- -----------
TOTAL CURRENT LIABILITIES 1,181,300 1,217,400
DEFERRED RENT LIABILITIES 24,200 31,200
----------- -----------
TOTAL LIABILITIES 1,205,500 1,248,600
----------- -----------
STOCKHOLDERS' EQUITY:
COMMON STOCK OF $.01 PAR VALUE:
AUTHORIZED 12,000,000 SHARES;
1,359,274 SHARES ISSUED AND
OUTSTANDING AT MARCH 31, 1997
AND DECEMBER 31, 1996 13,600 13,600
ADDITIONAL PAID-IN CAPITAL 4,408,900 4,408,900
ACCUMULATED DEFICIT (SINCE AUGUST 1,
1989) (3,388,500) (3,267,300)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,034,000 1,155,200
----------- -----------
$ 2,239,500 $ 2,403,800
----------- -----------
----------- -----------
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)
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1997 1996
----------- ----------
RESTAURANT REVENUES $1,540,300 $1,471,500
RESTAURANT COSTS AND EXPENSES:
COST OF SALES 451,800 421,600
RESTAURANT EXPENSES 876,500 834,800
DEPRECIATION AND AMORTIZATION 92,600 94,500
GENERAL AND ADMINISTRATIVE EXPENSES 237,100 259,800
--------- ---------
TOTAL COSTS AND EXPENSES 1,658,000 1,610,700
LOSS FROM OPERATIONS (117,700) (139,200)
NONOPERATING INCOME (EXPENSE):
INTEREST EXPENSE - STOCKHOLDER (14,100) (5,500)
INTEREST INCOME --- 300
OTHER INCOME, NET 10,600 10,400
--------- ---------
NET LOSS ($121,200) ($134,000)
--------- ---------
--------- ---------
NET LOSS PER COMMON SHARE
($0.09) ($0.10)
--------- ---------
--------- ---------
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>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING
ACTIVITIES:
NET LOSS ($121,200) ($134,000)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH FROM
OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 92,600 94,500
GAIN ON SALE OF PROPERTY AND EQUIPMENT --- (7,900)
CHANGES IN ASSETS AND LIABILITIES:
ACCOUNTS RECEIVABLE (19,700) (2,100)
INVENTORIES (2,400) (1,300)
PREPAID EXPENSES (12,700) (6,700)
OTHER ASSETS 2,400 9,900
ACCOUNTS PAYABLE (194,900) (55,700)
ACCRUED LIABILITIES 35,100 (12,800)
PAYABLE TO AFFILIATES 43,700 27,300
DEFERRED RENT LIABILITIES (7,000) (9,800)
--------- --------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES (184,100) (98,600)
--------- --------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
ADDITIONS TO PROPERTY AND EQUIPMENT AND
LEASE INCENTIVES, NET (6,300) 8,900
PROCEEDS FROM SALE OF PROPERTY AND EQUIPMENT --- 9,700
--------- --------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES (6,300) 18,600
--------- --------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
ADDITIONS TO NOTES PAYABLE TO STOCKHOLDER 80,000 20,000
--------- --------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 80,000 20,000
--------- --------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (110,400) (60,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 118,100 99,200
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,700 $ 39,200
--------- --------
--------- --------
</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
MARCH 31, 1997
(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 1996 Annual Report on Form 10-KSB.
Such document should be referred to for information on accounting policies
and further financial details.
(3) RELATED PARTY TRANSACTIONS
Effective January 1, 1997, the loans from shareholders with rates less than
9.25% per annum were modified to bear interest at 9.25% per annum. During
the three months ended March 31, 1997, the majority shareholder of the
Company loaned to the Company $80,000 under demand promissory notes bearing
interest at 9.25%. Subsequent to March 31, 1997, the majority shareholder
of the Company loaned to the Company an additional $50,000 under the same
terms.
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 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 March 31, 1997 and 1996 the Company's cash and cash equivalents were
approximately $7,700 and $39,200 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. In addition,
subsequent to March 31, 1997, the majority shareholder of the Company advanced
$50,000 to the Company in exchange for a demand promissory note bearing interest
at 9.25% per annum.
RESULTS OF OPERATIONS:
Revenues from restaurant operations increased from $1,471,500 to
$1,540,300 (4.7%) for the three months ended March 31, 1996 and 1997,
respectively; loss from operations decreased 15.4% from $139,200 in 1996 to
$117,700 in 1997; and net loss decreased 9.6% from $134,000 in 1996 to $121,200
in 1997.
Restaurant revenues for the three-month period ended March 31, 1997
increased $68,800 (4.7%) from the same period in 1996, primarily because of
increased revenues generated from Patrizio II. Patrizio I accounted for 55% and
58% of the revenues for the three-month periods ended March 31, 1997 and 1996,
respectively.
Restaurant expenses for the three-month period ended March 31, 1997
increased $41,700 (5.0%) from the same period in 1996 primarily because of the
increase in revenues. Cost of sales as a percent of restaurant revenues
increased from 28.7% for the three months ended March 31, 1996 to 29.3% for the
same period in 1997 primarily because of the increase in food costs.
General and administrative expenses for the three-month period ended March
31, 1997 decreased $22,700 (8.7%) from the three-month period ended March 31,
1996 because of continued cost control measures.
Interest expense - stockholder increased during the first three months of
1997 compared to the same period of 1996 because of the increase in the
principal balance of loans outstanding and the modification of the interest
rates from 6% per annum in 1996 to 9.25% per annum in 1997.
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. Enactment of recent legislation
increased the minimum wage by $0.90 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 minimal 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 believes the current
Page 7 of 10
<PAGE>
practice of maintaining operating margins through a combination of small 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.
FORWARD-LOOKING STATEMENTS
Certain of the statements made in this report are forward-looking
statements that involve a number of risks and uncertainties. Statements that
should generally be considered forward-looking include, but are not limited to,
those that contain the words "estimate," "anticipate," "in the opinion of
management," "believes," and similar phrases. Among the factors that could
cause actual results to differ materially from the statements made are the
following: general business conditions in the local market served by the
Company's restaurants, competitive factors such as changes in the locations,
menus, pricing or other aspects of competitors' operations, the weather in each
of the locations, expense pressures relating to labor and supplies, and
unanticipated general and administrative expenses, including the costs of
additional acquisitions, expansion or financing.
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 May 12, 1997
/s/ Jack D. Knox Board, President
- --------------------------- and Director
Jack D. Knox (Principal Executive
Officer)
/s/ Catherine E. Blair Chief Financial May 12, 1997
- --------------------------- Officer (Principal
Catherine E. Blair Financial and Accounting
Officer)
Page 10 of 10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 7,700
<SECURITIES> 0
<RECEIVABLES> 77,100
<ALLOWANCES> 0
<INVENTORY> 78,200
<CURRENT-ASSETS> 232,100
<PP&E> 3,633,900
<DEPRECIATION> (1,637,800)
<TOTAL-ASSETS> 2,239,500
<CURRENT-LIABILITIES> 1,181,300
<BONDS> 0
0
0
<COMMON> 13,600
<OTHER-SE> 1,020,400
<TOTAL-LIABILITY-AND-EQUITY> 2,239,500
<SALES> 1,540,300
<TOTAL-REVENUES> 1,540,300
<CGS> 451,800
<TOTAL-COSTS> 1,658,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,100
<INCOME-PRETAX> (121,200)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (121,200)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
