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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 SEPTEMBER 30, 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 XX NO
---- ---
As of October 31, 2000, 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 September 30, 2000 and the results of operations for the interim three-month
and nine-month periods ending September 30, 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 of 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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ITEM 1. FINANCIAL STATEMENTS
SIXX HOLDINGS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(ROUNDED TO NEAREST HUNDRED, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
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(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH $ 18,400 $ 63,300
ACCOUNTS RECEIVABLE 107,300 68,900
RECEIVABLE FROM AFFILIATE 72,700 46,100
INVENTORIES 84,800 93,100
PREPAID EXPENSES 68,000 63,200
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TOTAL CURRENT ASSETS 351,200 334,600
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PROPERTY AND EQUIPMENT (NET) 1,361,900 1,360,900
OTHER ASSETS 11,800 11,800
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$ 1,724,900 $ 1,707,300
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 95,700 $ 62,900
ACCRUED LIABILITIES 218,600 248,300
PAYABLE TO AFFILIATES 373,200 549,300
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TOTAL CURRENT LIABILITIES 687,500 860,500
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DEFERRED RENT LIABILITIES 29,000 30,400
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TOTAL LIABILITIES 716,500 890,900
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STOCKHOLDERS' EQUITY:
COMMON STOCK OF $.01 PAR VALUE:
AUTHORIZED 12,000,000 SHARES; 1,359,274
SHARES ISSUED AND OUTSTANDING 13,600 13,600
ADDITIONAL PAID-IN CAPITAL 4,408,900 4,408,900
ACCUMULATED DEFICIT (SINCE AUGUST 1, 1989) (3,414,100) (3,606,100)
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TOTAL STOCKHOLDERS' EQUITY 1,008,400 816,400
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$ 1,724,900 $ 1,707,300
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</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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SIXX HOLDINGS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(ROUNDED TO NEAREST HUNDRED, EXCEPT SHARE AND PER SHARE AMOUNTS)
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<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
RESTAURANT REVENUES $ 1,995,100 $ 1,870,000 $ 5,721,800 $ 5,432,900
COSTS AND EXPENSES:
COST OF SALES 589,200 560,800 1,672,000 1,584,000
RESTAURANT EXPENSES 1,072,300 1,024,300 3,071,600 2,974,900
DEPRECIATION AND AMORTIZATION 64,400 36,900 200,300 222,100
GENERAL AND ADMIN. EXPENSES 179,300 160,300 593,600 524,800
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TOTAL COSTS AND EXPENSES 1,905,200 1,782,300 5,537,500 5,305,800
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INCOME
FROM OPERATIONS 89,900 87,700 184,300 127,100
NONOPERATING INCOME (EXPENSE):
INTEREST EXPENSE - STOCKHOLDER -0- (2,900) -0- (17,000)
OTHER INCOME, NET 6,500 (300) 7,800 --
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NET INCOME $ 96,400 $ 84,500 $ 192,100 $ 110,100
============= ============= ============= =============
INCOME PER COMMON SHARE -
BASIC AND DILUTED $ 0.07 $ 0.06 $ 0.14 $ 0.08
============= ============= ============= =============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 1,359,274 1,359,274 1,359,274 1,359,274
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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SIXX HOLDINGS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(ROUNDED TO NEAREST HUNDRED)
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NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 192,100 $ 110,100
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 200,300 222,100
CHANGES IN ASSETS AND LIABILITIES:
ACCOUNTS RECEIVABLE (38,400) 4,100
RECEIVABLE FROM AFFILIATE (26,600) --
INVENTORIES 8,300 (2,800)
PREPAID EXPENSES (4,800) 700
ACCOUNTS PAYABLE 32,800 10,700
ACCRUED LIABILITIES (29,700) 37,600
PAYABLE TO AFFILIATES (176,100) (6,000)
DEFERRED RENT LIABILITIES (1,400) (1,700)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 156,500 374,800
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CASH FLOWS USED IN INVESTING ACTIVITIES:
ADDITIONS TO PROPERTY AND EQUIPMENT (201,400) (59,000)
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CASH FLOWS USED IN FINANCING ACTIVITIES:
REPAYMENT OF NOTES PAYABLE TO STOCKHOLDER, NET -0- (319,600)
PAYMENTS OF CAPITAL LEASE OBLIGATIONS -0- (1,200)
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NET CASH USED IN FINANCING ACTIVITIES -0- (320,800)
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NET DECREASE IN CASH (44,900) (5,000)
CASH AT BEGINNING OF PERIOD 63,300 127,400
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CASH AT END OF PERIOD $ 18,400 $ 122,400
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</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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SIXX HOLDINGS, INCORPORATED AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 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 his affiliates on a
time-incurred basis for certain shared general and administrative
resources. Such charges to the major stockholder and his affiliates
reduced the Company's general and administrative expenses by $178,200
for each of the nine month periods ended September 30, 2000 and 1999.
The Company subleases office space in the majority shareholder's office
on a month-to-month basis. Under this arrangement, the Company paid
$51,000 and $74,700 to the majority shareholder for the nine months
ended September 30, 2000 and 1999, respectively.
(4) SEGMENT INFORMATION
The Company follows the provisions of Statement of Financial Accounting
Standards (SFAS) No. 131, "Disclosures about Segment 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.
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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 was opened in 1994.
CAPITAL RESOURCES AND LIQUIDITY
As of September 30, 2000 and 1999 the Company's cash was approximately
$18,400 and $122,400, 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.
RESULTS OF OPERATIONS
Revenues from restaurant operations for the nine months ended September
30, 2000 were $5,721,800, representing a 5.3% increase over the same period in
the prior year. This increase was primarily attributable to increased cover
counts, primarily at Patrizio I. Patrizio I accounted for 58.6% and 55.8% of the
total revenues for the nine month periods ended September 30, 2000 and 1999,
respectively.
Cost of sales as a percent of restaurant revenues remained flat at
29.2% for the nine month periods ending September 30, 2000 and 1999.
Restaurant expenses for the nine-month period ended September 30, 2000
increased $96,700, or 3.3%, over the same period in 1999 due to increased labor
costs.
Depreciation and amortization were $200,300 for the nine months ended
September 30, 2000 and $222,100 for the nine months ended September 30, 1999.
General and administrative expenses for the nine months ended September
30, 2000 increased $68,800, or 13.1%, over the same period in 1999. This was due
primarily to increases in rent, personnel costs, including employee recruiting,
developer fees, and royalty fees.
Interest expense - stockholder decreased from $17,000 during the first
nine months of 1999 to $0 for the same period of 2000 because the notes were
paid in full at December 31, 1999.
Income from operations for the nine months ended September 30, 2000 was
$184,300 compared to $127,100 for the same period in the prior year. Net income
increased from $110,100 in 1999 to $192,100 in 2000 primarily due to increased
revenues.
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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 infrequent menu price adjustments. The costs of taxes,
maintenance and insurance all have an impact on the Company's occupancy costs,
which continue 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 are 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.
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 after June 15, 2000,
although early adoption is allowed. The Company is not party to any derivative
contracts and does not expect the adoption of this Statement to have a material
impact on the Company's financial conditions or reported results of operations.
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.
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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
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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.
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SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Jack D. Knox Chairman of the Board, November 12, 2000
--------------------------- President and Director
Jack D. Knox (Principal Executive
Officer)
/s/ Carolyn Holden Chief Financial Officer November 12, 2000
--------------------------- (Principal Financial and
Carolyn Holden Accounting Officer)
</TABLE>
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INDEX TO EXHIBITS
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EXHIBIT
NUMBER DESCRIPTION
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27 Financial Data Schedule
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