<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
{X}Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Quarter Ended September 30, 1997.
Or
{ }Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Transition Period From__________ to__________
Commission File Number 000-29032
CHAMPION COMMUNICATION SERVICES, INC.
DELAWARE 76-0448005
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1610 WOODSTEAD COURT THE WOODLANDS, TEXAS
SUITE 330 77380
(Address of Principal Offices) (Zip Code)
(281) 362-0144
(Registrant's Telephone Number, including area code.)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Exchange on which Registered
NONE NONE
Securities registered under Section 12(g) of the Exchange Act:
Title of Each Class Name of Exchange on which Registered
COMMON STOCK, PAR VALUE $.01 PER SHARE NONE
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 periods 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 [ ]
Indicate by check mark if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of the registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of the Form 10-KSB or any amendment to this Form 10-KSB. Yes [X] No [ ]
State issuer's revenues for is most recent fiscal year. $7,136,582.
As of November 13, 1997, there were 6,103,412 shares of common stock, $0.01 par
value, of the registrant issued and outstanding.
<PAGE> 2
CHAMPION COMMUNICATION SERVICES, INC.
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
<S> <C>
Balance Sheets -
September 30, 1997 and December 31, 1996......................................... 1
Statements of Operations -
Three Months and Nine Months Ended September 30, 1997 and 1996................... 2
Statements of Cash Flows -
Three Months and Nine Months Ended September 30, 1997 and 1996................... 3
Statement of Stockholders' Equity -
Nine Months Ended September 30, 1997 and Years Ended
December 31, 1996 and 1995..................................................... 4
Notes to Interim Financials Statements........................................... 5-10
Earnings Per Share Computations -
Three Months and Nine Months Ended September 30, 1997 and 1996.. 11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of operations........................... 12-14
PART II
Items 1 - 6............................................................................... 14
SIGNATURE.......................................................................................... 15
</TABLE>
<PAGE> 3
CHAMPION COMMUNICATION SERVICES, INC.
BALANCE SHEETS
September 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
ASSETS September 30, December 31,
1997 1996
----------------------------
Unaudited
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 129,508 $ 1,087,440
Accounts receivable, net of allowance of $84,335 and $51,606
at September 30, 1997 and December 31, 1996 respectively 550,402 900,061
Inventory 226,333 457,409
Prepaid expenses and other 96,032 70,315
----------- -----------
Total Current Assets 1,002,275 2,515,225
----------- -----------
Communications equipment and related assets, net 4,768,694 5,475,081
----------- -----------
Other assets 1,224,290 607,999
----------- -----------
$ 6,995,259 $ 8,598,305
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 442,989 $ 446,525
Accrued expenses 646,748 690,718
Deferred revenue 475,507 1,586,625
Current maturities of notes payable 220,903 185,785
Current maturities of notes payable to stockholder(s) 110,000 1,179,046
----------- -----------
Total Current Liabilities 1,896,147 4,088,699
----------- -----------
Long Term Liabilities
Notes payable 86,944 151,166
Notes payable to stockholder -- 1,620,535
----------- -----------
Total Long Term Liabilities 86,944 1,771,701
----------- -----------
Stockholders' Equity
Common stock, $0.01 par value, 20,000,000 shares authorized,
6,103,412 shares issued and outstanding at
September 30, 1997 and December 31, 1996 61,034 61,034
Additional paid-in capital 5,166,184 5,166,184
Accumulated earnings (deficit) (215,050) (2,489,313)
----------- -----------
Total Stockholders' Equity 5,012,168 2,737,905
----------- -----------
$ 6,995,259 $ 8,598,305
=========== ===========
</TABLE>
-1-
See accompanying notes to financial statements.
<PAGE> 4
CHAMPION COMMUNICATION SERVICES, INC.
STATEMENTS OF OPERATIONS
For the three months and nine months ended September 30, 1997 and 1996
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Revenues $ 1,705,070 $ 1,639,732 $ 8,646,423 $ 5,528,759
----------- ----------- ----------- -----------
Costs and expenses:
Cost of sales 1,172,938 1,192,847 3,816,423 4,097,614
Provision for doubtful accounts 29,500 37,500 95,500 90,000
Depreciation and amortization 229,655 199,919 663,463 583,200
General and administrative expenses 411,717 520,224 1,530,014 1,721,368
----------- ----------- ----------- -----------
Total Operating Expenses 1,843,810 1,950,490 6,105,400 6,492,182
----------- ----------- ----------- -----------
Operating Income (Loss) (138,740) (310,758) 2,541,023 (963,423)
----------- ----------- ----------- -----------
Other income (expenses):
Net gain (loss) on disposal of fixed assets (15,072) 9,812 (210,181) 9,201
Loss on sale of service division -- (82,771) -- (82,771)
Interest income 1,954 2,308 19,406 10,278
Interest expense (6,589) (74,330) (75,985) (206,476)
----------- ----------- ----------- -----------
Income (Loss) before income taxes (158,447) (455,739) 2,274,263 (1,233,191)
Income taxes -- -- -- --
----------- ----------- ----------- -----------
Net income (loss) ($ 158,447) ($ 455,739) $ 2,274,263 ($1,233,191)
=========== =========== =========== ===========
Weighted average common shares and common stock
equivalents outstanding 6,103,412 4,783,770 6,103,412 4,744,101
=========== =========== =========== ===========
Net income (loss) per common share ($ 0.03) ($ 0.10) $ 0.37 ($ 0.26)
=========== =========== =========== ===========
</TABLE>
-2-
See accompanying notes to financial statements.
<PAGE> 5
CHAMPION COMMUNICATION SERVICES, INC.
STATEMENTS OF CASH FLOWS
For the three months and nine months ended September 30, 1997 and 1996
Unaudited
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
---------------------------- ----------------------------
1997 1996 1997 1996
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ($ 158,447) ($ 455,739) $ 2,274,263 ($1,233,191)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 229,655 199,919 663,463 583,200
Bad debt expense 29,500 31,500 95,500 84,000
Loss (gain) on disposal/sale of fixed assets 15,072 72,959 210,181 (9,201)
Change in assets and liabilities:
Accounts receivable (46,166) 204,673 349,659 394,266
Inventory 133,917 42,039 394,487 111,504
Prepaid expenses 24,817 26,970 (25,717) 122,529
Other assets (187,853) (106,842) (586,929) (346,429)
Accounts payable 38,541 (509,890) (3,536) 50,618
Accrued expenses (33,756) 134,303 53,738 (267,525)
Deferred revenue (443,357) (554,330) (1,111,116) (1,185,192)
----------- ----------- ----------- -----------
Net cash provided by (used in) operating
activities (398,077) (914,438) 2,313,993 (1,695,421)
----------- ----------- ----------- -----------
Cash flows from investing activities:
Additions to property and equipment -- (160,799) (480,816) (663,673)
Proceeds from sale of fixed assets 62,539 -- 155,968 124,273
----------- ----------- ----------- -----------
Net cash provided by (used in)
investing activities 62,539 (160,799) (324,848) (539,400)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from sale of stock -- 1,768,199 -- 1,768,199
Proceeds from sale of warrants -- -- -- --
Proceeds from the issuance of subscribed stock -- -- -- 51,944
Proceeds from other borrowings 110,000 -- 110,000 308,198
Repayment of notes payable (102,503) (42,528) (3,057,077) (214,924)
----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities 7,497 1,725,671 (2,947,077) 1,913,417
----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (328,041) 650,434 (957,932) (321,404)
Cash and cash equivalents at beginning of period 457,549 200,616 1,087,440 1,172,454
----------- ----------- ----------- -----------
Cash and cash equivalents at end of period $ 129,508 $ 851,050 $ 129,508 $ 851,050
=========== =========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 6,070 $ 11,786 $ 161,419 $ 152,180
=========== =========== =========== ===========
</TABLE>
-3-
See accompanying notes to financial statements.
<PAGE> 6
CHAMPION COMMUNICATION SERVICES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
For the nine months ended September 30, 1997 and
For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
Common Common Additional Total
stock Common stock paid-in Accumulated Stockholders'
shares stock subscribed capital deficit Equity
--------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 4,258,000 $ 37,540 $ 5,040 $ 2,086,420 ($ 12,350) $ 2,116,650
--------- ----------- ----------- ----------- ----------- -----------
Conversion of Common stock
subscribed to Common stock -- 5,040 (5,040) (5,981) -- (5,981)
Issuance of Common stock 437,085 4,371 -- 585,694 -- 590,065
Common stock subscribed -- -- 385 51,559 -- 51,944
Issuance of Common stock
warrants -- -- -- 719,000 -- 719,000
Net loss for 1995 -- -- -- -- (857,999) (857,999)
--------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1995 4,695,085 $ 46,951 $ 385 $ 3,436,692 ($ 870,349) $ 2,613,679
========= =========== =========== =========== =========== ===========
Conversion of Common stock
subscribed to Common stock 38,477 385 (385) -- -- --
Issuance of Common stock 769,850 7,698 -- 1,735,492 -- 1,743,190
Conversion of Common stock
warrants 600,000 6,000 -- (6,000) -- --
Net loss for 1996 -- -- -- -- (1,618,964) (1,618,964)
--------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1996 6,103,412 $ 61,034 $ -- $ 5,166,184 ($2,489,313) $ 2,737,905
========= =========== =========== =========== =========== ===========
Net income for 1997 (unaudited) -- -- -- -- 2,274,263 2,274,263
--------- ----------- ----------- ----------- ----------- -----------
Balance at September 30, 1997 (unaudited) 6,103,412 $ 61,034 $ -- $ 5,166,184 ($ 215,050) $ 5,012,168
========= =========== =========== =========== =========== ===========
</TABLE>
-4-
See accompanying notes to financial statements.
<PAGE> 7
CHAMPION COMMUNICATION SERVICES, INC
NOTES TO FINANCIAL STATEMENTS
Unaudited
(1) Summary of Significant Accounting Policies
(a) Description of Business
Champion Communication Services, Inc. (the Company)
is a provider of high powered community repeater dispatch
services operating within the 450 - 512 MHz and 800 MHz
frequency bands in the United States. The Company's customers
consist primarily of business and government agencies located
in both metropolitan and rural geographic regions. The
Company provides customers with equipment sales, service,
and radio rentals. The Company also engages in the
acquisition and subsequent sale of spectrum in certain
markets as opportunities arise.
(b) Basis of Presentation
The accompanying financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States. The differences between
accounting principles generally accepted in the United States
and Canada would not have a material impact on the
accompanying financial statements.
The financial statements for the nine months ended
September 30, 1997 and 1996 are unaudited and, in the opinion
of management, include all adjustments necessary (which
consist of only normal recurring adjustments) for a fair
presentation of the financial position, results of operations
and cash flows for the interim periods. The financial
information and results of operations for the nine months
ended September 30, 1997 are not necessarily indicative of
the financial position or results of operations that may be
expected at and for the year ended December 31, 1997 or for
any future periods.
(c) Cash and Cash Equivalents
For purposes of the statements of cash flows, the
Company considers all highly liquid financial instruments
purchased with an original maturity of three months or less
to be cash equivalents.
(d) Inventory
The Company's inventory consists primarily of
two-way radios, parts and accessories. The Company uses the
average cost method of accounting for inventory. The balance
recorded at September 30, 1997 and December 31, 1996 is the
lower of average cost or market. The Company also included
$278,000 of costs for spectrum to be sold in 1997 in the
December 31, 1996 inventory balance.
-5-
<PAGE> 8
CHAMPION COMMUNICATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
Unaudited
(1) Summary of Significant Accounting Policies, (continued)
(e) Communications Equipment and Related Assets
Communications equipment and related assets are
recorded at cost. Depreciation is computed on a straight-line
basis over the estimated useful lives of the assets ranging
from five years for other fixed assets to ten years for
communications equipment.
(f) Income Taxes
In accordance with U.S. generally accepted
accounting principles, deferred tax assets and liabilities
are recognized for the future tax consequences attributable
to differences between the financial statement carrying
amounts of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years which those temporary differences are
expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the
enactment date.
(g) Fair Value of Financial Instruments
Fair value estimates are made at discrete points in
time based on relevant market information. These estimates
may be subjective in nature and involve uncertainties and
matters of significant judgment and therefore cannot be
determined with precision.
The Company believes that the carrying amounts of
its current assets and current liabilities approximate the
fair value of such items due to their short-term nature. The
carrying amount of long-term debt approximates its fair value
because the interest rates approximate market and there has
been no significant change in the credit risk of the Company.
(h) Revenue Recognition
The standard industry billing cycle for radio
dispatch service is generally for three, six and twelve month
intervals. The Company defers amounts billed in advance and
recognizes revenue as the related services are provided.
-6-
<PAGE> 9
CHAMPION COMMUNICATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
Unaudited
(1) Summary of Significant Accounting Policies, (continued)
(i) Differences Between Generally Accepted Accounting Principles
in the United States and Canada
The Company prepares its financial statements in
accordance with generally accepted accounting principles in
the United States. The following summarizes significant
differences between United States and Canadian generally
accepted accounting principles:
(i) Income Taxes: Generally accepted accounting principles in
Canada require the deferred method of accounting for income
taxes with the calculation of deferred tax assets and
liabilities through the application of historical tax rates.
Benefits attributable to net operating loss carryforwards
cannot be recorded unless there is virtual certainty that
such net operating loss carryforwards will be utilized.
(ii) Earnings (Loss) per Common Share: Generally accepted
accounting principles in Canada require that common stock
equivalents not be included in the earnings (loss) per share
calculation. As noted above, common stock equivalents have
been ignored due to their antidilutive effect.
(2) Notes Payable
During the nine months ended September 30, 1997, and the year
ended December 31, 1996, the Company incurred installment notes
payable of $49,108 and $256,982, respectively, to finance certain
communication equipment purchases. At September 30, 1997 and December
31, 1996, the total balance outstanding related to the installment
notes payable was $174,253 and $322,161, respectively. The notes are
payable in monthly installments and mature from 1997 to 1999. The
notes bear interest at rates ranging from 11% to 12.75% per year and
are secured by communications equipment.
During 1995, the Company entered into a revolving note
payable with a maximum credit line of $200,000 bearing interest at
17.9% after 90 days. At September 30, 1997 and December 31, 1996, the
outstanding balances on the credit line were $115,108 and $14,790,
respectively. The credit line is being used to finance the acquisition
of inventory and is repaid when inventory is sold or at the agreed
upon date. Each advance expires 360 days from the date of the advance.
-7-
<PAGE> 10
CHAMPION COMMUNICATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
Unaudited
(2) Notes Payable, (continued)
In 1994, Champion Communications Company (CCC) advanced the
Company $3,177,506 for the acquisition of base stations and the
related customers. On November 15, 1995, $377,925 of the note and
$162,075 of accrued interest payable was converted to 400,000 shares
of common stock at $1.35 per share. The remaining balance of
$2,799,581 was paid in full in March 1997. The note bore interest at a
prime rate, (8.25% at December 31, 1996), and was secured by the
Company's communications equipment and spectrum. CCC is a Subchapter S
corporation, wholly owned by Albert F. Richmond, Chief Executive
Officer and a founding stockholder of the Company.
In September 1997, Albert F. Richmond, Chief Executive
Officer, and David A. Terman, President, each advanced $55,000 to the
Company. The notes were issued at an interest rate of 10% and are
unsecured. The balance plus any accrued interest is due on
December 1, 1997. The Company has available additional borrowings of
$390,000.
The combined aggregate maturities of the installment notes
payable and the note payable to stockholders for each of the five
years following December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997 $258,136
1998 92,741
1999 62,240
2000 4,730
2001 --
--------
$417,847
========
</TABLE>
(3) Related Party Transactions
No related party general and administrative expenses were
incurred during the year ended December 31, 1996. During the year
ended 1995, the Company incurred approximately $62,000 in general and
administrative expenses (primarily personnel charges) allocated from
Olympic Natural Gas Company, a company in which Albert F.
Richmond served as Chief Executive Officer during 1995.
-8-
<PAGE> 11
CHAMPION COMMUNICATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
Unaudited
(3) Related Party Transactions, (continued)
Additionally, during 1995 the Company allocated approximately
$23,000 in general and administrative expenses to Olympic Natural Gas
Company.
(4) Stockholders' Equity
On September 25, 1996, the Company sold 619,350 shares of
common stock in a Canadian initial public offering at $2.73 (Cdn.
$3.70) per share. In connection with the initial public offering, an
additional 150,500 shares of common stock were sold at $2.73 per share
to 41 investors by the Company.
In conjunction with the 769,850 shares of common stock issued
on September 25, 1996, each share of common stock sold included one
common share purchase warrant. The warrants are exercisable at Cdn.
$5.00 per share any time before March 25, 1998. The Company has the
right to accelerate conversion of the warrants if the average price for
the common stock is at least Cdn. $5.50 for ten consecutive days.
The Company granted options to the underwriting agent of the
Canadian initial public offering to purchase 50,000 shares of common
stock for a period of eighteen months from the completion of the public
offering at Cdn. $3.70 per share.
Upon the completion of the initial public offering, a third
party was granted options, in conjunction with the special warrant
offering, to purchase 60,000 common shares during the period of three
years from September 25, 1996 at a price of Cdn. $3.70 per share.
Of the 6,103,412 issued and outstanding shares of common
stock at September 30, 1997 and December 31, 1996, 3,110,400 shares
owned by the chief executive officer and president were placed in
escrow with Equity Transfer Services, Inc., in connection with the
Company's initial public offering in Canada. On April 30, 1997, 10% of
the securities were released and the remaining securities are to be
released from escrow as follows: 20% on each of April 30, 1998, April
30, 1999, and April 30, 2000; and 30% on April 30, 2001.
-9-
<PAGE> 12
CHAMPION COMMUNICATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
Unaudited
(4) Stockholders' Equity, (continued)
During 1996, 38,477 shares of common stock, which were
subscribed as of December 31, 1995, were issued at $1.35 per share.
The 504,000 shares of subscribed common stock as of December 31, 1994
were issued during early 1995.
During November 1995, 600,000 special warrants were issued to
third parties for $1.35 per share, totaling $729,000, net of offering
expenses. The primary terms of the special warrants include the
exchange of one special warrant for one common share in the capital of
Champion for no additional consideration. On October 2, 1996, these
warrants were converted to 600,000 shares of common stock.
(5) Major Suppliers
The Company has entered into dealer agreements with two
principal communication equipment suppliers. Both dealer agreements
may be terminated at any time by the suppliers or the Company without
cost. Termination of either of these agreements would have a
materially adverse effect on the Company.
-10-
<PAGE> 13
CHAMPION COMMUNICATION SERVICES, INC.
EARNINGS PER SHARE COMPUTATIONS
For the three months and six months ended September 30, 1997 and 1996
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
---------------------------- ----------------------------
1997 1996 1997 1996
---------------------------- ---------------------------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Net income (loss) applicable to common stock ($ 158,447) ($ 455,739) $ 2,274,263 ($1,233,191)
----------- ----------- ----------- -----------
Shares used in earnings per share computations 6,103,412 4,783,770 6,103,412 4,744,101
Net income (loss) per weighted average common share ($ 0.03) ($ 0.10) $ 0.37 ($ 0.26)
=========== =========== =========== ===========
FULLY DILUTED EARNINGS PER SHARE
Net income (loss) applicable to common stock ($ 158,447) ($ 455,739) $ 2,274,263 ($1,233,191)
----------- ----------- ----------- -----------
Shares used in earnings per share computation 6,103,412 4,783,770 6,103,412 4,744,101
Net income (loss) per weighted average common share ($ 0.03) ($ 0.10) $ 0.37 ($ 0.26)
=========== =========== =========== ===========
COMPUTATION OF SHARES USED IN EARNINGS PER SHARE
COMPUTATIONS - PRIMARY
Outstanding common shares at beginning of period 6,103,412 4,733,562 6,103,412 4,695,085
Weighted average common shares issued during period -- 50,208 -- 49,016
----------- ----------- ----------- -----------
Weighted average common shares used in earnings
per share computation 6,103,412 4,783,770 6,103,412 4,744,101
=========== =========== =========== ===========
COMPUTATION OF SHARES USED IN EARNINGS PER SHARE
COMPUTATIONS - FULLY DILUTED
Outstanding common shares at beginning of period 6,103,412 4,733,562 6,103,412 4,695,085
Weighted average common shares issued during period -- 50,208 -- 49,016
----------- ----------- ----------- -----------
Weighted average common shares used in earnings
per share computation 6,103,412 4,783,770 6,103,412 4,744,101
=========== =========== =========== ===========
</TABLE>
-11-
<PAGE> 14
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Results of Operations - Quarters ended September 30, 1997 and 1996
Revenues for the quarter ended September 30, 1997 were $1,700,000
compared with $1,640,000 for the quarter ended September 30, 1996. Dispatch
revenues were down net $61,000 due to repeater sales, removals and
cancellations exceeding the added LTR units. Equipment sales were up $180,000
from the same quarter 1996, or 125%. Radio rental income decreased $6,000,
spectrum revenue decreased $45,000 and service revenue decreased $8,000 from
1996.
Costs and expenses were down $20,000 to $1,170,000 in 1997 from
$1,190,000 in 1996. Dispatch costs were down $110,000 due to reduced tower
rents from both rent savings and elimination of sites and increased finder's
fee expenses in 1997. Costs of equipment sales were up $135,000 due to
increased equipment sales in 1997. Rental expense was down $15,000 and service
expenses decreased $30,000 due to the discontinuation of the service division.
Depreciation and amortization was up $30,000 in 1997 from the same
quarter in 1996 due to construction and acquisition of licenses.
General and administrative expenses were down to $440,000 for the
third quarter 1997 compared with $560,000 for the third quarter 1996.
Interest expense was down from $74,000 in 1996 to $7,000 in 1997 due
to the repayment of debt in early 1997. Also in 1996, the Company recognized a
loss on the sale of the service division of $83,000 compared with losses on
disposal of assets of $15,000 for the third quarter 1997.
The net loss for the quarter ended September 30, 1997 was $160,000
compared with a net loss of $460,000 for 1996.
Results of Operations - Nine months ended September 30, 1997 and 1996
Revenues were $8,650,000 for the nine months ended September 30, 1997
compared with $5,530,000 for the same period in 1996. This increase of 56% was
the combined result of a $250,000 decrease in dispatch revenues due to community
repeater removals, sales and attrition of customers; a $110,000 decrease in
equipment sales; a decrease of $10,000 in radio rentals; and a decrease of
$210,000 in service revenues. The increase of spectrum revenue of $3,690,000 to
$3,740,000 for the nine months ended September 30, 1997 from $50,000 for the
same period in 1996 was due to the closing of several sales in the first two
quarters of 1997. The decrease in sales, rental and service from 1996 were due
to the elimination of the direct sales and service division for a total
decrease of 30%.
-12-
<PAGE> 15
Costs and expenses were $3,880,000 for the nine months ended September
30, 1997 compared with $4,110,000 for 1996, a decrease of $230,000 or 6%. The
decrease is attributable to a decrease of $130,000 in network services, and
$100,000 in the sales, service and rental division which was eliminated in
1996.
Depreciation and amortization expense has increased $80,000 to
$660,000 for the nine months ended September 30, 1997, as a result of new build
out of the LTR systems and the acquisition of licenses.
General and administrative expenses were down $190,000 from 1996 due
to the changes in staff as a result of the elimination of the direct sales and
service division and the capitalization of salaries expended on the acquisition
of licenses.
Interest expense, net of interest revenue, was down $140,000. The
decrease in interest expense was a result of the repayment of the note payable
to Champion Communications Company in March 1997.
The nine months ended September 30, 1997 reflected losses in excess of
gains on sales of $210,000 on repeaters removed from service after being
identified as assets not economically advantageous to utilize, as compared with
the loss of $80,000 for the sale of the service division for the same nine month
period in 1996.
The net income for the nine months ended September 30, 1997 was
$2,220,000 compared with the net loss of $1,250,000 for the nine months ended
September 30, 1996, up $3,470,000 principally due to the sale of spectrum and
improved costs and expenses.
Financial Condition and Liquidity
The Company had $130,000 in cash and cash equivalents at September 30,
1997 as compared with $1,090,000 at December 31, 1996. The working capital of
the Company at September 30, 1997 was a negative $900,000 as compared with a
negative $1,570,000 at December 31, 1996. The increase in working capital is
attributed to the first quarter spectrum sale proceeds, the repayment of the
note payable to Champion Communications Company, and a temporary cash advance
from Albert F. Richmond, Chief Executive Officer, and David A. Terman,
President.
Cash flows from operating activities were a negative $400,000 and a
negative $910,000 for the quarters ended September 30, 1997 and 1996,
respectively. Cash flows from operating activities were $2,310,000 and a
negative $1,690,000 for the nine months ended September 30, 1997 and 1996,
respectively.
The Company anticipates that the remaining sales agreements for
non-core 800 MHz band systems will provide additional funds required. Although
the Company has executed new contracts
-13-
<PAGE> 16
for the sale of non-core 800 MHz band systems and non-strategic communication
installations, there is no assurance that the Company will be able to continue
to sell non-core systems. Failure to do so could have a material adverse effect
on the Company's cash flow and expansion abilities. The Company anticipates
procuring additional funding for expansion through long-term senior debt and
equity or mezzanine financing in the last quarter of 1997.
As of September 30, 1997, the Company owed $307,000 to three
commercial lenders with varying repayment terms.
PART II
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults on Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Shareholders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
Not applicable
-14-
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
CHAMPION COMMUNICATION SERVICES, INC.
By:
----------------------------------
Pamela R. Cooper
Chief Financial Officer, Treasurer and Controller
Date: November 13, 1997
-15-
<PAGE> 18
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 129,508
<SECURITIES> 0
<RECEIVABLES> 634,737
<ALLOWANCES> 84,335
<INVENTORY> 226,333
<CURRENT-ASSETS> 1,002,275
<PP&E> 6,714,399
<DEPRECIATION> 1,945,705
<TOTAL-ASSETS> 6,965,897
<CURRENT-LIABILITIES> 1,896,147
<BONDS> 0
0
0
<COMMON> 61,034
<OTHER-SE> 4,921,772
<TOTAL-LIABILITY-AND-EQUITY> 6,965,897
<SALES> 0
<TOTAL-REVENUES> 8,646,423
<CGS> 0
<TOTAL-COSTS> 3,816,423
<OTHER-EXPENSES> 2,193,477
<LOSS-PROVISION> 95,500
<INTEREST-EXPENSE> 75,985
<INCOME-PRETAX> 2,541,023
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,484,444
<DISCONTINUED> 0
<EXTRAORDINARY> (210,181)
<CHANGES> 0
<NET-INCOME> 2,274,263
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
</TABLE>
