<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the Quarter Ended March 31, 1998
[ ] Transition Report Under Section 13 or 15(d) of the Exchange Act for the
transition period from _______________ to __________________
Commission File Number 000-29032
CHAMPION COMMUNICATION SERVICES, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 76-0448005
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1610 WOODSTEAD COURT
SUITE 330
THE WOODLANDS, TEXAS 77380
(Address of Principal Executive Offices) (Zip Code)
(281) 362-0144
(Issuer's Telephone Number, including area code.)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ]
As of April 30, 1998, there were 6,119,712 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 -
March 31, 1998 and December 31, 1997.......................................... 1
Statements of Operations -
Three Months Ended March 31, 1998 and 1997 and
Year Ended December 31, 1997.................................................. 2
Statements of Cash Flows -
Three Months Ended March 31, 1998 and 1997 and
Year Ended December 31, 1997.................................................. 3
Statement of Stockholders' Equity -
Three Months Ended March 31, 1998 and
Years Ended December 31, 1997 and 1996........................................ 4
Notes to Interim Financials Statements........................................ 5
Earnings Per Share Computations -
Three Months Ended March 31, 1998 and
Year Ended December 31, 1997.................................................. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of operations................................. 7
SIGNATURE...................................................................................... 9
</TABLE>
<PAGE> 3
CHAMPION COMMUNICATION SERVICES, INC.
BALANCE SHEETS
March 31, 1998 and December 31, 1997
<TABLE>
<CAPTION>
ASSETS March 31, December 31,
1998 1997
----------- ------------
Unaudited
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 168,861 $ 618,335
Accounts and notes receivable, net of allowance of $60,190
at March 31, 1998 and $42,712 at December 31, 1997 1,005,600 1,016,612
Inventory 567,635 604,522
Prepaid expenses and other 202,577 180,744
---------- ----------
Total Current Assets 1,944,673 2,420,213
---------- ----------
Communications equipment and related assets, net 4,221,857 4,313,910
Notes receivable 48,989 54,340
Other assets, net of amortization 1,439,041 1,039,402
---------- ----------
$7,654,560 $7,827,865
========== ==========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
Current Liabilities
Accounts payable $ 591,340 $ 547,995
Accrued expenses 1,000,883 774,055
Deferred revenue 822,158 1,213,701
Current maturities of notes payable 257,238 203,599
---------- ----------
Total Current Liabilities 2,671,619 2,739,350
---------- ----------
Long Term Liabilities
Notes payable 103,224 68,353
Customer deposits 1,589 1,589
---------- ----------
Total Long Term Liabilities 104,813 69,942
---------- ----------
Stockholders' Equity
Common stock, $0.01 par value, 20,000,000 shares authorized,
6,119,712 shares issued and outstanding at March 31, 1998
and 6,103,412 shares issued and outstanding at December 31, 1997 61,197 61,034
Additional paid-in capital 5,179,265 5,166,184
Accumulated earnings (deficit) (362,334) (208,645)
---------- ----------
Total Stockholders' Equity 4,878,128 5,018,573
---------- ----------
$7,654,560 $7,827,865
========== ==========
</TABLE>
See accompanying notes to financial statements.
-1-
<PAGE> 4
CHAMPION COMMUNICATION SERVICES, INC.
STATEMENTS OF OPERATIONS
For the three months ended March 31, 1998 and 1997 and
the year ended December 31, 1997
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997 1997
----------------------------- -----------
Unaudited
<S> <C> <C> <C>
Revenues $1,833,575 $5,195,027 $10,521,740
-------------- ------------ ------------
Costs and expenses:
Cost of sales 1,143,362 1,578,279 4,848,029
Provision for doubtful accounts 18,000 33,000 116,500
Depreciation and amortization 207,778 219,822 898,570
General and administrative expenses 641,345 628,933 1,979,255
-------------- ------------ ------------
Total Operating Expenses 2,010,485 2,460,034 7,842,354
-------------- ------------ ------------
Operating Income (Loss) (176,910) 2,734,993 2,679,386
-------------- ------------ ------------
Other income (expenses):
Net gain (loss) on disposal of fixed assets 29,457 (189,730) (334,181)
Interest income 3,989 9,702 23,515
Interest expense ( 8,800) (61,671) (84,152)
-------------- ------------ ------------
Income (Loss) before income taxes (152,264) 2,493,294 2,284,568
Income taxes 1,425 - 3,900
-------------- ------------ ------------
Net income (loss) ($ 153,689) $2,493,294 $2,280,668
=============== ============ ============
Weighted average common shares and common stock
equivalents outstanding 6,104,318 6,103,412 6,103,412
=============== ============ ============
Net income (loss) per common share ($ 0.03) $ 0.41 $ 0.37
=============== ============ ============
</TABLE>
See accompanying notes to financial statements.
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<PAGE> 5
CHAMPION COMMUNICATION SERVICES, INC.
STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1998 and 1997
and the year ended December 31, 1997
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997 1997
-------------------------------- ----------------
Unaudited
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ($153,689) $2,493,294 $2,280,668
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 207,778 219,822 898,570
Bad debt expense 18,000 33,000 116,500
Loss (gain) on disposal/sale of fixed assets (29,457) 189,730 334,181
Change in assets and liabilities:
Accounts receivable (6,466) 362,924 (233,051)
Inventory 36,887 242,458 (147,113)
Prepaid expenses and other (21,833) (14,698) (110,429)
Notes receivable 5,351 - 30,660
Accounts payable 43,345 43,148 101,469
Accrued expenses 226,828 133,267 83,337
Deferred revenue (391,543) (559,095) (372,924)
------------ ---------- ------------
Net cash provided by (used in) operating activities (64,799) 3,143,850 2,981,868
------------ ---------- ------------
Cash flows from investing activities:
Additions to property and equipment (233,750) (255,238) (480,209)
Other assets, net of amortization (399,639) (42,928) (504,868)
Proceeds from sale of fixed assets 237,125 70,616 461,168
------------ ---------- ------------
Net cash provided by (used in) investing activities (396,264) (227,550) (523,909)
------------ ---------- ------------
Cash flows from financing activities:
Proceeds from other borrowings 133,944 - 590,399
Repayment of notes payable (122,355) (2,864,234) (3,517,463)
------------ ---------- ------------
Net cash provided by (used in) financing activities 11,589 (2,864,234) (2,927,064)
------------ ---------- ------------
Net increase (decrease) in cash and cash equivalents (449,474) 52,066 (469,105)
Cash and cash equivalents at beginning of period 618,335 1,087,440 1,087,440
------------ ---------- ------------
Cash and cash equivalents at end of period $ 168,861 $1,139,506 $ 618,335
============ ========== ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 8,800 $ 87,710 $ 87,997
============ ========== ============
</TABLE>
See accompanying notes to financial statements.
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<PAGE> 6
CHAMPION COMMUNICATION SERVICES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
For the three months ended March 31, 1998 and
For the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Common Common Additional Accumulated Total
stock Common stock paid-in earnings Stockholders'
shares stock subscribed capital (deficit) Equity
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
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 - - - - 2,280,668 2,280,668
----------- ----------- ----------- ---------- ----------- ----------
Balance at December 31, 1997 6,103,412 $ 61,034 $ - $5,166,184 ($ 208,645) $5,018,573
=========== =========== ========== ========== =========== ==========
Issuance of Common stock 16,300 163 - 13,081 - 13,244
Net loss for 1998 - - - - (153,689) (153,689)
----------- ----------- ----------- ---------- ----------- ----------
Balance at March 31, 1998 6,119,712 $ 61,197 $ - $5,179,265 ($ 362,334) $4,878,128
=========== =========== ========== ========== =========== ==========
</TABLE>
-4-
See accompanying notes to financial statements.
<PAGE> 7
CHAMPION COMMUNICATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The financial statements for the three months ended March 31,
1998 and 1997 are unaudited and, in the opinion of management, reflect all
adjustments which, are necessary for a fair statement of the financial
position, results of operations and cash flows as of and for the interim
periods. Such adjustments consist of only items of a normal recurring nature.
The results of operations for the interim periods are not necessarily indicative
of the financial position or results of operations expected for the full fiscal
year or for any other future periods. These financial statements should be read
in conjunction with the financial statements and the notes thereto included in
the Company's annual report and Form 10-KSB for the year ended
December 31, 1997.
The differences between accounting principles generally accepted in the
United States and Canada would not have a material impact on the accompanying
financial statements.
2. Acquisitions
The Company acquired twenty-two (22) exclusive UHF frequencies located in
Phoenix and Tucson, Arizona, in March 1998.
-5-
<PAGE> 8
CHAMPION COMMUNICATION SERVICES, INC.
EARNINGS PER SHARE COMPUTATIONS
For the three months ended March 31, 1998 and 1997 and
For the year ended December 31, 1997
<TABLE>
March 31, December 31,
1998 1997 1997
---------------------------- ------------------
Unaudited
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Net income (loss) applicable to common stock ($ 153,689) $2,493,294 $2,280,668
---------- ---------- ----------
Shares used in earnings per share computations 6,104,318 6,103,412 6,103,412
Net income (loss) per weighted average common share ($ 0.03) $ 0.41 $ 0.37
========== ========== ==========
DILUTED EARNINGS PER SHARE
Net income (loss) applicable to common stock ($ 153,689) $2,493,294 $2,280,668
----------- ---------- ----------
Shares used in earnings per share computation 6,104,318 6,103,412 6,103,412
Net income (loss) per weighted average common share ($ 0.03) $ 0.41 $ 0.37
=========== ========== ===========
</TABLE>
COMPUTATION OF SHARES USED IN EARNINGS PER SHARE
COMPUTATIONS - BASIC
<TABLE>
<S> <C> <C> <C>
Outstanding common shares at beginning of period 6,103,412 6,103,412 6,103,412
Weighted average common shares issued during period 906 - -
----------- ---------- ----------
Weighted average common shares used in earnings
per share computation 6,104,318 6,103,412 6,103,412
=========== ========== ==========
</TABLE>
COMPUTATION OF SHARES USED IN EARNINGS PER SHARE
COMPUTATIONS - DILUTED
<TABLE>
<S> <C> <C> <C>
Outstanding common shares at beginning of period 6,103,412 6,103,412 6,103,412
Weighted average common shares issued during period 906 - -
----------- ----------- -----------
Weighted average common shares used in earnings
per share computation 6,104,318 6,103,412 6,103,412
========= ========== ==========
</TABLE>
-6-
<PAGE> 9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations - Quarters ended March 31, 1998 and 1997
Revenues for the quarter ended March 31, 1998 were $1,834,000 compared
with $5,195,000 for the quarter ended March 31, 1997. The first quarter 1998
reflects spectrum sales of $200,000, or $3,360,000 less than the $3,560,000
recorded in the same quarter 1997. Dispatch revenues increased $10,000 to
$1,282,000 for the quarter ended March 31, 1998 from $1,272,000 in the same
quarter 1997. This increase reflects the successful implementation of trunking
offset by the reduction of revenues due to sales of non-strategic sites.
Equipment sales, service and rental revenues were down $10,000 for the first
quarter 1998 as compared with first quarter 1997.
Costs and expenses decreased $450,000 for the first quarter ended March
31, 1998 as compared with the first quarter ended March 31, 1997. The cost of
spectrum sales was $92,000 for the first quarter 1998 as compared with $425,000
for the same period in 1997, a reduction of $333,000. The cost of dispatch
revenue was down $75,000 for the quarter ended March 31, 1998 from the quarter
ended March 31, 1997, due in large part to the sales and removal of non-
strategic repeaters. The costs of equipment sales, service and rental were
reduced $28,000 or 12% from $242,000 for the first quarter 1997 to $214,000 for
the first quarter 1998.
Depreciation and amortization for the quarter ended March 31, 1998 was
$208,000, a decrease of $12,000 or 5% from $220,000 reported for the quarter
ended March 31, 1997, due to the disposition of various non strategic repeater
sites netted with new construction and acquisition of licenses.
General and administrative expenses were up $12,000 to $641,000 from
$629,000. This increase is primarily attributable to establishing a regional
office in the Dallas/Ft. Worth area.
Interest expense was $9,000 for the quarter ended March 31, 1998,
compared with $62,000 for the same quarter 1997 due to the repayment of debt at
the end of the first quarter 1997. The Company reported a gain on the sale and
disposal of assets in the amount of $29,000 for the first quarter 1998 as
compared with a loss of $190,000 for the first quarter 1997. The first quarter
loss in 1997 reflected the removal of uneconomical assets as compared with the
successful sales of various sites in 1998 to offset those removals.
The net loss for the quarter ended March 31, 1998 was $154,000 as
compared with net income of $2,493,000 for the first quarter ended March 31,
1997. Management anticipates that revenue derived from the sales spectrum will
increase during the third and fourth quarters of 1998. However, there can be no
assurance of this forward looking statement, and factors which could limit the
Company's ability to achieve such results include the Company's ability to
acquire spectrum on favorable terms, the demand for Spectrum, regulations and
competitive issues, and the Company's ability to negotiate sales of Spectrum on
favorable terms.
-7-
<PAGE> 10
Financial Condition and Liquidity
The Company had $169,000 in cash and cash equivalents at March 31, 1998
as compared with $618,000 at December 31, 1997. The working capital of the
Company at March 31, 1998 was a negative $727,000 as compared with a negative
$319,000 at December 31, 1997. The decrease is attributable to capital
expenditures to construct sites and the acquisition of twenty-two frequencies
in Arizona.
Cash flows from operating activities were a negative $65,000 and a
positive $3,144,000 for the quarters ended March 31, 1998 and 1997,
respectively due to the sale of Spectrum in the first quarter 1997.
The Company is seeking additional funding for expansion
through long-term senior debt and equity or mezzanine financing in the third
quarter 1998, however, there can be no assurance of the Company's ability to
obtain any such financing on acceptable terms.
-8-
<PAGE> 11
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: /s/ PAMELA R. COOPER
--------------------------------------
Pamela R. Cooper
Chief Financial Officer,
Treasurer and Controller
Date: 5-15-98
----------------------------------
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<PAGE> 12
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 168,861
<SECURITIES> 0
<RECEIVABLES> 1,065,790
<ALLOWANCES> 60,190
<INVENTORY> 567,635
<CURRENT-ASSETS> 1,944,673
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,654,560
<CURRENT-LIABILITIES> 2,671,619
<BONDS> 0
0
0
<COMMON> 61,197
<OTHER-SE> 4,816,931
<TOTAL-LIABILITY-AND-EQUITY> 7,654,560
<SALES> 0
<TOTAL-REVENUES> 1,833,575
<CGS> 0
<TOTAL-COSTS> 1,143,362
<OTHER-EXPENSES> 849,123
<LOSS-PROVISION> 18,000
<INTEREST-EXPENSE> 3,989
<INCOME-PRETAX> (176,910)
<INCOME-TAX> 1,425
<INCOME-CONTINUING> (172,099)
<DISCONTINUED> 0
<EXTRAORDINARY> 29,457
<CHANGES> 0
<NET-INCOME> (153,689)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
