<PAGE> 1
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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 MARCH 31, 2000
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 April 30, 2000, 1,359,274 common shares of the registrant were issued and
outstanding.
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<PAGE> 2
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, 2000 and the results of operations for the interim three-month
periods ending March 31, 2000 and 1999. 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> 3
ITEM 1. FINANCIAL STATEMENTS
SIXX HOLDINGS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(ROUNDED TO NEAREST HUNDRED, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
(UNAUDITED)
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH $ 174,600 $ 63,300
ACCOUNTS RECEIVABLE 64,200 68,900
RECEIVABLE FROM AFFILIATE 46,100 46,100
INVENTORIES 83,300 93,100
PREPAID EXPENSES 80,600 63,200
------------ ------------
TOTAL CURRENT ASSETS 448,800 334,600
------------ ------------
PROPERTY AND EQUIPMENT (NET) 1,327,900 1,360,900
OTHER ASSETS 11,800 11,800
------------ ------------
$ 1,788,500 $ 1,707,300
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 81,800 $ 62,900
ACCRUED LIABILITIES 301,800 248,300
PAYABLE TO AFFILIATES 586,100 549,300
------------ ------------
TOTAL CURRENT LIABILITIES 969,700 860,500
------------ ------------
DEFERRED RENT LIABILITIES 29,800 30,400
------------ ------------
TOTAL LIABILITIES 999,500 899,900
------------ ------------
STOCKHOLDERS' EQUITY:
COMMON STOCK OF $.01 PAR VALUE:
AUTHORIZED 12,000,000 SHARES; 1,359,274
SHARES ISSUED AND OUTSTANDING 13,600 13,600
ADDITIONAL PAID-IN CAPITAL 4,408,900 4,408,900
ACCUMULATED DEFICIT (SINCE AUGUST 1, 1989) (3,633,500) (3,606,100)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 789,000 816,400
------------ ------------
$ 1,788,500 $ 1,707,300
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
Page 3 of 10
<PAGE> 4
SIXX HOLDINGS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(ROUNDED TO NEAREST HUNDRED, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2000 1999
------------ ------------
<S> <C> <C>
RESTAURANT REVENUES $ 1,747,300 $ 1,626,800
COSTS AND EXPENSES:
COST OF SALES 513,000 467,800
RESTAURANT EXPENSES 944,500 917,400
DEPRECIATION AND AMORTIZATION 68,800 91,000
GENERAL AND ADMINISTRATIVE EXPENSES 248,200 172,400
------------ ------------
TOTAL COSTS AND EXPENSES 1,774,500 1,648,600
LOSS FROM OPERATIONS (27,200) (21,800)
NONOPERATING INCOME (EXPENSE):
INTEREST EXPENSE - STOCKHOLDER -0- (8,100)
OTHER INCOME (EXPENSE) (200) (400)
------------ ------------
NET LOSS $ (27,400) $ (30,300)
============ ============
NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.02) $ (0.02)
============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 1,359,274 1,359,274
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
Page 4 of 10
<PAGE> 5
SIXX HOLDINGS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(ROUNDED TO NEAREST HUNDRED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
NET LOSS $ (27,400) $ (30,300)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 68,800 91,000
CHANGES IN ASSETS AND LIABILITIES:
ACCOUNTS RECEIVABLE 4,700 21,500
INVENTORIES 9,800 1,800
PREPAID EXPENSES (17,400) 4,300
ACCOUNTS PAYABLE 18,900 44,000
ACCRUED LIABILITIES 53,500 34,400
PAYABLE TO AFFILIATES 36,800 4,900
DEFERRED RENT LIABILITIES (600) -0-
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 147,100 171,600
------------ ------------
CASH FLOWS USED IN INVESTING ACTIVITIES -
ADDITIONS TO PROPERTY AND EQUIPMENT (35,800) (14,300)
CASH FLOWS USED IN FINANCING ACTIVITIES:
REPAYMENT OF NOTES PAYABLE TO STOCKHOLDER, NET -0- (85,000)
PAYMENTS OF CAPITAL LEASE OBLIGATIONS -0- (900)
------------ ------------
(-0-) (85,900)
NET INCREASE IN CASH 111,300 71,400
CASH AT BEGINNING OF PERIOD 63,300 127,400
------------ ------------
CASH AT END OF PERIOD $ 174,600 $ 198,800
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
Page 5 of 10
<PAGE> 6
SIXX HOLDINGS, INCORPORATED AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(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
Company's interim financial statements should be read in conjunction
with its annual financial statements included on Form 10-KSB.
(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 1999 Annual Report on Form
10-KSB. Such document should be referred to for information on
accounting policies and further financial details.
Certain previously reported financial information has been reclassified
to conform to the current presentation.
(3) RELATED PARTY TRANSACTIONS
The Company charges its majority shareholder and affiliates on a
time-incurred basis for certain shared general and administrative
resources. Such charges reduced general and administrative expenses by
$59,400 for the three months ended March 31, 2000 and 1999. The Company
leases the same office space on a month-to-month basis from the
majority shareholder. For the three-month period ended March 31, 2000
and March 31, 1999 respectively, $24,900 was paid to the majority
shareholder under this arrangement.
(4) SEGMENT INFORMATION
In 1998, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise
and Related Information" which requires that public enterprises
disclose certain information about their operating segments and the
geographic areas in which the enterprise operates.
The Company has identified its two Italian concept restaurants as
operating segments and aggregates those segments and its corporate
operations into a single reporting segment.
Page 6 of 10
<PAGE> 7
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 was opened in 1994.
CAPITAL RESOURCES AND LIQUIDITY:
As of March 31, 2000 and 1999 the Company's cash was approximately
$174,600 and $198,800 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.
RESULTS OF OPERATIONS:
Revenues from restaurant operations for the three months ended March
31, 2000 were $1,747,300, representing a 7.4% increase over the same period in
the prior year. This increase was primarily attributable to increased cover
counts at both restaurants. Patrizio I accounted for 58.7% and 55.0% of the
total revenues for the three month periods ended March 31, 2000 and 1999,
respectively.
Cost of sales as a percent of restaurant revenues was 29.4% for the
three months ended March 31, 2000 compared to 28.8% in 1999. This increase from
the prior year was due to increased food costs.
Restaurant expenses for the three-month period ended March 31, 2000
increased $27,100 (2.9%) from the same period in 1999 primarily because of the
increase in sales volume as well as increased labor costs.
Depreciation and amortization were $68,800 for the three-month period
ended March 31, 2000 and $91,000 for the three-month period ended March 31,
1999.
General and administrative expenses for the three-month period ended
March 31, 2000 increased $75,800, or 43.9%, compared to the same period in 1999.
This increase was due primarily to the increased expenditures for insurance,
advertising and personnel costs during the three months ended March 31, 2000 as
compared to the same period in the prior year.
Interest expense - stockholder decreased from $8,100 for the period
ended March 31, 1999 to $-0- for the same period in 2000 because the notes were
paid in full at December 31, 1999.
Loss from operations for the three months ended March 31, 2000 was
($27,200) compared to a loss of ($21,800) for the same period in the prior year.
Net loss decreased from a loss of ($30,300) in 1999 to ($27,400) in 2000.
Page 7 of 10
<PAGE> 8
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. 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 increases 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.
ACCOUNTING MATTERS
In June 1998, Statement of Financial Accounting Standards ("SFAS") No.
133, Accounting for Derivative Instruments and Hedging Activities, was issued.
This statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. As amended by SFAS No. 137, the
provisions of SFAS No. 133 are effective for fiscal years beginning after June
15, 2000, although early adoption is allowed. The Company does not expect the
adoption of this Statement to have a material impact on the Company's financial
condition or reported results of operations.
Page 8 of 10
<PAGE> 9
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> 10
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, May 12, 2000
/s/ Jack D. Knox President and Director
- ------------------------- (Principal Executive
Jack D. Knox Officer)
/s/DeAndra Trepagnier Chief Financial Officer May 12, 2000
- ------------------------- (Principal Financial and
DeAndra Trepagnier Accounting Officer)
Page 10 of 10
<PAGE> 11
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
Exhibit 27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 174,600
<SECURITIES> 0
<RECEIVABLES> 110,300
<ALLOWANCES> 0
<INVENTORY> 83,300
<CURRENT-ASSETS> 445,600
<PP&E> 3,951,700
<DEPRECIATION> 2,623,800
<TOTAL-ASSETS> 1,788,500
<CURRENT-LIABILITIES> 969,700
<BONDS> 0
0
0
<COMMON> 13,600
<OTHER-SE> 775,400
<TOTAL-LIABILITY-AND-EQUITY> 1,788,500
<SALES> 1,747,300
<TOTAL-REVENUES> 1,747,300
<CGS> 513,000
<TOTAL-COSTS> 1,774,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (27,400)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (27,400)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
