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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, 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 X NO
--- ---
As of July 31, 1997, 1,359,274 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 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, 1997 and the results of operations for the
interim three-month and six-month periods ending June 30, 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
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ITEM 1. FINANCIAL STATEMENTS
SIXX HOLDINGS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(ROUNDED TO NEAREST HUNDRED, EXCEPT SHARES AND PER SHARE AMOUNTS)
<TABLE>
JUNE 30, DECEMBER 31,
1997 1996
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 99,400 $ 118,100
ACCOUNTS RECEIVABLE 95,800 57,400
INVENTORIES 77,100 75,800
PREPAID EXPENSES 72,900 56,400
------------ ------------
TOTAL CURRENT ASSETS 345,200 307,700
PROPERTY AND EQUIPMENT (NET) 1,935,700 2,082,400
OTHER ASSETS 11,300 13,700
------------ ------------
$ 2,292,200 $ 2,403,800
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 42,500 $ 262,500
ACCRUED LIABILITIES 269,400 196,100
PAYABLE TO AFFILIATES 272,100 179,200
NOTES PAYABLE TO STOCKHOLDER 689,600 579,600
------------ ------------
TOTAL CURRENT LIABILITIES 1,273,600 1,217,400
CAPITAL LEASE OBLIGATIONS 6,200 ---
DEFERRED RENT LIABILITIES 26,700 31,200
------------ ------------
TOTAL LIABILITIES 1,306,500 1,248,600
------------ ------------
STOCKHOLDERS' EQUITY:
COMMON STOCK OF $.01 PAR VALUE:
AUTHORIZED 12,000,000 SHARES; 1,359,274 SHARES
ISSUED AND OUTSTANDING AT JUNE 30, 1997
AND DECEMBER 31, 1996, RESPECTIVELY 13,600 13,600
ADDITIONAL PAID-IN CAPITAL 4,408,900 4,408,900
ACCUMULATED DEFICIT (SINCE AUGUST 1, 1989) (3,436,800) (3,267,300)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 985,700 1,155,200
------------ ------------
$ 2,292,200 $ 2,403,800
------------ ------------
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
Page 3 of 10
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SIXX HOLDINGS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(ROUNDED TO NEAREST HUNDRED, EXCEPT PER SHARE AMOUNTS)
<TABLE>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
RESTAURANT REVENUES $1,842,000 $1,763,400 $3,382,300 $3,234,900
RESTAURANT COSTS AND EXPENSES:
COST OF SALES 530,400 514,700 982,200 936,300
RESTAURANT EXPENSES 967,700 973,200 1,844,200 1,808,000
DEPRECIATION AND AMORTIZATION 93,300 91,900 185,900 186,400
GENERAL AND ADMINISTRATIVE EXPENSES 293,000 298,400 530,100 558,200
---------- ---------- ---------- ----------
TOTAL COSTS AND EXPENSES 1,884,400 1,878,200 3,542,400 3,488,900
---------- ---------- ---------- ----------
LOSS FROM OPERATIONS (42,400) (114,800) (160,100) (254,000)
NONOPERATING INCOME, EXPENSE
INTEREST EXPENSE - STOCKHOLDER (16,100) (5,700) (30,200) (11,200)
INTEREST INCOME --- 300 --- 600
OTHER INCOME, NET 10,200 8,000 20,800 18,400
---------- ---------- ---------- ----------
NET LOSS $ (48,300) $ (112,200) $ (169,500) $ (246,200)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
LOSS PER COMMON SHARE $(0.04) $(0.08) $(0.12) $(0.18)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
Page 4 of 10
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SIXX HOLDINGS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(ROUNDED TO NEAREST HUNDRED)
<TABLE>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1997 1996
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
NET LOSS ($169,500) ($246,200)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH FROM
OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 185,900 186,400
GAIN ON SALE OF PROPERTY AND EQUIPMENT --- (7,900)
CHANGES IN ASSETS AND LIABILITIES:
ACCOUNTS RECEIVABLE (38,400) 34,500
INVENTORIES (1,300) (9,400)
PREPAID EXPENSES (16,500) (900)
OTHER ASSETS 2,400 9,900
ACCOUNTS PAYABLE (220,000) (47,800)
ACCRUED LIABILITIES 73,300 52,400
PAYABLE TO AFFILIATES 92,900 63,200
DEFERRED RENT LIABILITIES (4,500) (19,600)
-------- --------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (95,700) 14,600
-------- --------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
ADDITIONS TO PROPERTY AND EQUIPMENT AND
LEASE INCENTIVES, NET (39,200) (7,100)
PROCEEDS FROM SALE OF PROPERTY AND EQUIPMENT --- 9,700
-------- --------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (39,200) 2,600
-------- --------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
ADDITIONS TO NOTES PAYABLE TO STOCKHOLDER, NET (NOTE 3) 110,000 20,000
ADDITIONS TO CAPITAL LEASE OBLIGATIONS 6,200 ---
-------- --------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 116,200 20,000
-------- --------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (18,700) 37,200
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 118,100 99,200
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 99,400 $136,400
-------- --------
-------- --------
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS.
Page 5 of 10
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SIXX HOLDINGS, INCORPORATED AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 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 six months ended June 30, 1997, the majority shareholder of
the Company loaned to the Company $130,000 under demand promissory notes
bearing interest at 9.25%. In addition, the Company repaid a $20,000
promissory note and the related accrued interest of approximately $600.
Subsequent to June 30, 1997, the Company repaid an additional $20,000
promissory note and its accrued interest of approximately $2,000. In
addition, effective July 1, 1997, loans from shareholders were modified
to bear interest at 9.5% per annum.
Page 6 of 10
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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 June 30, 1997 and 1996 the Company's cash and cash equivalents were
approximately $99,400 and $136,400 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. During the six
months ended June 30, 1997, the majority shareholder of the Company loaned
$130,000 to the Company in exchange for demand promissory notes bearing
interest at 9.25% per annum. In addition, the Company repaid to the majority
shareholder a $20,000 note and the accrued interest thereon. Subsequent to
June 30, 1997, the Company repaid an additional $20,000 promissory note and
the accrued interest thereon.
RESULTS OF OPERATIONS:
Revenues from restaurant operations increased from $3,234,900 to
$3,382,300 (4.6%) for the six months ended June 30, 1996 and 1997,
respectively; loss from operations decreased 37.0% from $254,000 in 1996 to
$160,100 in 1997; and net loss decreased 31.2% from $246,200 in 1996 to
$169,500 in 1997.
Restaurant revenues for the six-month period ended June 30, 1997 increased
$147,400 (4.6%) from the same period in 1996, primarily because of increased
revenues generated by Patrizio II's increased cover count. Patrizio I
accounted for 55% and 57% of the revenues for the six-month periods ended
June 30, 1997 and 1996, respectively.
Restaurant expenses for the six-month period ended June 30, 1997 increased
$36,200 (2.0%) from the same period in 1996 primarily because of the increase
in revenues offset by a decrease in labor costs. Cost of sales as a percent
of restaurant revenues increased from 28.9% for the six months ended June 30,
1996 to 29.0% for the same period in 1997 primarily because of the increase
in food costs.
General and administrative expenses for the six-month period ended June
30, 1997 decreased $28,100 (5.0%) from the six-month period ended June 30,
1996 because of continued cost control measures.
Interest expense - stockholder increased during the first six 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-
Page 7 of 10
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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 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
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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 9 of 10
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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 Board, August 5, 1997
- ---------------------- President and Director
Jack D. Knox (Principal Executive Officer)
/s/ Catherine E. Blair Chief Financial Officer August 5, 1997
- ---------------------- (Principal Financial and
Catherine E. Blair Accounting Officer)
Page 10 of 10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 99,400
<SECURITIES> 0
<RECEIVABLES> 95,800
<ALLOWANCES> 0
<INVENTORY> 77,100
<CURRENT-ASSETS> 345,200
<PP&E> 3,666,800
<DEPRECIATION> (1,731,100)
<TOTAL-ASSETS> 2,292,200
<CURRENT-LIABILITIES> 1,273,600
<BONDS> 0
0
0
<COMMON> 13,600
<OTHER-SE> 972,100
<TOTAL-LIABILITY-AND-EQUITY> 2,292,200
<SALES> 3,382,300
<TOTAL-REVENUES> 3,382,300
<CGS> 982,200
<TOTAL-COSTS> 3,542,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,200
<INCOME-PRETAX> (169,500)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (169,500)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
