SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Mark One
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
[X ] THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1995
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 0-17263
CHAMPIONS SPORTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1401755
(State or other jurisdiction of(I.R.S. Employer
organization) Identification No.)
Suite 610, 1749 Old Meadow Road, McLean, VA 22102
(Address of principal executive offices)
(Zip code)
(703) 556-3332
(Registrant's telephone number, including area code)
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 December 4, 1995 the Registrant had a total of 7,300,638 shares
of common stock outstanding.
1
<PAGE>
CHAMPIONS SPORTS, Inc.
FORM 10-QSB
INDEX
Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
October 31, 1995 (unaudited) and
April 30, 1995 3
Consolidated Statements of Operations:
Three months and six months ended
October 31, 1995, and October 31, 1994,
(unaudited) 4
Consolidated Statements of Cash Flows:
Six months ended October 31, 1995, and
October 31, 1994 (unaudited) 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussions and
Analysis of Financial Condition
and Results of Operations 7
Part II. Other Information and Signatures
Item 4. Submission of Matters to a Vote
of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
2
<PAGE>
Champions Sports, Inc.
Consolidated Balance Sheet
<TABLE>
<CAPTION>
OCTOBER 31, APRIL 30,
1995 1995
UNAUDITED
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $89,153 $131,102
Certificate of deposit 25,080 25,080
Accounts receivable - trade 7,917 42,752
Inventories 50,653 41,235
Prepaid expenses 1,836 1,010
Total current assets 174,639 241,179
Property and Equipment
Furniture and Equipment 516,382 516,383
Leasehold improvements 567,312 567,312
Total 1,083,695 1,083,695
Accumulated depreciation and amortization (562,687) (529,053)
521,007 554,642
Other assets
Deposits 11,052 11,052
Total assets $706,699 $806,873
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $72,136 $123,486
Dividend payable on preferred stock 67,290 67,290
Deferred revenues 0 75,000
Notes payable 18,671 18,671
Other accrued expenses 38,350 43,720
Current portion of deferred lease concession 4,363 4,363
Total current liabilities 200,810 332,530
Deferred lease concession 35,553 37,734
Note payable, excluding current portion 33,440 43,019
Total Liabilities 269,802 413,283
Stockholders' equity
Preferred stock:
Series A, 12% convertible cumulative, par value $10 per share,
preferred as to dividends and liquidation: 650,000 shares
authorized, 56,075 issued and outstanding. 560,752 560,752
Undesignated, par value $10 per share, 150,000 authorized,
none issued and outstanding. - -
Common stock, par value $.001 per share,
50,000,000 shares authorized, 7,300,564 and 7,300,564
shares issued and outstanding at
October 31, 1995 and April 30, 1995, respectively. 7,301 7,301
Additional paid-in capital 5,249,312 5,249,312
Accumulated deficit (5,380,468) (5,423,775)
Total stockholders' equity 436,897 393,590
Total liabilities and stockholders' equity $706,699 $806,873
</TABLE>
3
<PAGE>
CHAMPIONS SPORTS, INC.
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months Three months Six months Six months
ended ended ended ended
October 31, October 31, October 31, October 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenue
Food and Beverage sales $399,410 $468,030 $856,613 $958,933
Merchandise and memorabilia 55,727 5,638 59,816 12,869
Initial franchise and license fees 75,000 - 75,000 -
Other franchise fees and royalties - 21,782 97,104 83,304
Interest income 1,097 344 1,932 879
Other income 13,698 4,218 16,978 8,905
$544,931 $500,011 $1,107,442 $1,064,890
Expense
Cost of food and beverage sales 113,422 127,836 243,486 257,994
Cost of merchandise and 13,823 5,821 20,615 7,482
memorabilia sales
Restaurant payroll and related 150,086 164,677 312,479 333,994
costs
Restaurant occupancy costs 50,222 50,670 93,017 94,126
Other restaurant costs 79,428 68,903 189,807 141,058
General and administrative 83,747 97,227 145,382 206,523
Promotion 23,295 13,141 23,295 25,091
Depreciation and amortization 17,873 23,851 33,634 49,135
Interest expense 1,404 663 2,420 919
Total expenses 533,300 552,788 1,064,135 $1,116,321
Net Income (loss) from operations $11,631 ($52,777) $43,307 ($51,431)
Gain on discontinued operations - $77,006 - $81,183
Gain on disposal of fixed assets - $5,500 - $5,500
Net profit / (loss) $11,631 $29,729 $43,307 $35,252
Net income (loss) per common $0.00 $0.00 $0.01 $0.00
share*
Weighted average number of common
shares outstanding during the
period 7,300,638 7,277,564 7,300,638 7,275,837
<FN>
*The income (loss) per common share has been computed on the weighted average
number of shares outstanding during the period. Warrants are not included as
common stock equilivants in the computation of income (loss) per share since
the effect would not be material.
</FN>
</TABLE>
4
<PAGE>
CHAMPIONS SPORTS, INC.
Consolidated Statement of Cash Flows
Increase (Decrease) in Cash and Cash
Equivalents
(UNAUDITED)
<TABLE>
<CAPTION>
OCTOBER 31, OCTOBER 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $43,307 $35,252
Adjustments to reconcile net income
(loss) to cash provided by (used in)
operating activities
Depreciation and amortization 33,634 49,135
(Increase) decrease in accounts receivable 34,835 (9,617)
(Increase) Decrease in prepaid expenses (826) 1,900
(Increase) Decrease in inventories (9,418) (615)
(Increase) Decrease in notes receivable 12,498
Decrease in other assets 2,269
(Increase) Decrease in deferred revenues (75,000) 30,000
(Decrease) Increase in accounts payable (51,350) (17,998)
(Decrease) Increase in other current liabilities (5,370) (22,931)
(Decrease) Increase in accrued rent (20,605)
(Decrease) Increase in deferred lease (2,181) (67,131)
concession
Total adjustments (75,677) (43,095)
Net cash provided by (used in)
operating activities (32,370) (7,843)
Cash flows from investing activities:
Sale of equipment 4,410
Redemption of certificate of deposit 25,000
Sale of liquor license 35,205
Net cash (used in) investing activities 0 64,615
Cash flows from financing activities:
Repayment of borrowings and capital leases (9,579) (8,839)
Net cash provided by financing
activities (9,579) (8,839)
- ----------
Net increase (decrease) in cash and
cash equivalents (41,949) 47,933
Cash and cash equivalents at April 30. 131,102 75,466
Cash and cash equivalents at October 31 $89,153 $123,399
</TABLE>
5
<PAGE>
CHAMPIONS SPORTS, INC.
Notes to Consolidated Financial Statements
October 31, 1995
Summarized Financial Information
Company or group of companies for which report is filed:
CHAMPIONS Sports, Inc. and Subsidiaries
The consolidated balance sheet as of October 31, 1995, the consolidated
statements of operations and the consolidated statements of cash flows for the
three months and six months ended October 31, 1995 and October 31, 1994 have
been prepared by the company, without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and changes in cash
flow at October 31, 1995 and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these consolidated financial statements
be read in conjunction with the financial statements and notes thereto included
in the Company's 10-KSB as of April 30, 1995. The results of operations for the
period ended October 31, 1995 are not necessarily indicative of the operating
results for the full year.
6
<PAGE>
Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operation
For the six month period ended October 31,1995, the Company realized a net
profit of $43,307 or $0.01 per common share as compared to a profit of $35,252
or $ .00 per common share for the six month period ended October 31, 1994. The
Company's assets decreased to $706,699 at October 31, 1995 from $806,873 at
April 30, 1995. For this current period, the Company's profit was derived from
its operations. For the six months ended October 31, 1994, the Company lost
$51,431 from its ongoing operations and realized a non recurring gain of $81,183
from settlement of a restaurant lease from an abandoned locationand realized a
non recurring gain of $5,500 upon the sale of equipment which had been
previously written off.
Revenues
The Company's total revenues were $1,107,442 for the six months ended
October 31, 1995 versus $1,064,890 for the six month period ended October 31,
1994, a increase of $42,552 or 4.0%. By component, food and beverage sales
decreased 10.7% from $958,933 to $856,613 for the six months ended October 31,
1995. This decrease in food and beverage sales for the same comparable unit is
attributed to a decrease in customer volume as there were no price adjustments
for menu items. Merchandise and memorabilia sales for the six months ended
October 31, 1995 were $59,816 compared to $12,869 for the comparable period in
1994. The increase of $46,947 is a result of the Company providing memorabilia
to one new Champions licensed location during the six months ended October 31,
1995. The memorabilia sales is dependant on the number of new Champions
locations which open during the period. No new Champions locations opened during
the period ended October 31, 1994. The Company realized no new initial license
fees during the six months ended October 31, 1994, as no new Champions locations
opened during this period. For the six months ended October 31, 1995, the
Company realized initial licensing fees of $75,000, which reflect the one
Champions licensed location which opened during the six months ended October
1995. Other franchise and royalties realized by the Company during the six
months ended October 31, 1995 were $97,104 compared to $83,304 for the same
period in 1994. This increase of $13,800 or 16.6% is a result of the increased
number of Marriott licensed locations. Interest income for the six month period
ended October 31, 1995 was $1,932 versus $879 for the comparable period in the
previous year. Other income was $16,978 contrasted to $8,905 for the six months
ended October 31, 1994.
Expenses
Cost of food and beverage was $243,486 or 28.4% of related sales of $856,613 for
the six months ended October 31, 1995 compared to $257,994 or 26.9% of related
sales for the comparable six months ended October 31, 1994. Cost of merchandise
and memorabilia sales for the six months ended October 31, 1995 was 34.5% of
related sales of $59,816 contrasted to 58.2% of related sales of $12,869 for the
comparable period ended October 31, 1994. Restaurant payroll and related costs
were $312,479 or 36.5% of food and beverage sales of $856,613 during the six
month period ended October 31, 1995 compared to 34.8% of related food and
beverage sales during the comparable period in 1994. Restaurant occupancy costs,
which remained constant for the comparable periods, were $93,017 for the six
months ended October 31, 1995 compared to $94,126 for the same comparable period
in 1994. Other restaurant costs were $189,807 or 22.2% of food and beverage
sales compared to $141,058 or 14.7% of food and beverage sales for the
comparable six month period in 1994. This increase of $48,749 is attributed to
an increase in advertising expenditures and to repairs of aging equipment.
General and administrative expense for the Company's corporate office was
$145,382 for the six months ended October 31, 1995 compared to $206,523 for the
six months ended October 31, 1994. The decrease of $61,141 or 29.6% is
attributed primarily to the Company terminating its lease for office space for
the Corporate offices in November 1994. The Company currently is leasing its
office space on a month to month basis for $700 per month. Promotion expense
decreased from $25,091 for the six months ended
7
<PAGE>
October 31, 1994 to $23,295 for the six months ended October 31, 1995.
Depreciation and amortization expense dropped from $49,135 during the six months
ended October 31, 1994 to $33,634 for the six months ended October 31, 1995.
Liquidity and Capital Resources
The Company's cash position on October 31, 1995 was $89,153 compared to $131,102
on April 30, 1995, a decrease of $41,949. On October 31, 1995, the Company
maintained a certificate of deposit of $25,080, as well as on April 30, 1995.
For the six months ended October 31, 1995, the Company used $32,370 in cash for
its operating activities, repaid borrowings of $9,579 and decreased other
current liabilities of $56,720. For the six months ended October 31, 1994, the
Company expended $7,843 in cash for its operating activities, repaid borrowings
of $8,839 and reduced current liabilities of $40,929. During the six months
ended October 31, 1995, the Company met its cash needs from licensing fees and
from cash flow from its San Antonio operation. During the six months ended
October 31, 1994, the Company met its cash needs from its operating activities,
redeemed a certificate of deposit for $25,000, and sold other assets for
$39,615. On October 31, 1995, the Company's working capital was a negative
$26,171 versus a negative $91,351 on April 30, 1995.
Stockholder's equity increased to $436,897 on of October 31, 1995 compared to
$393,590 as of April 30, 1995, as a result of the net profit for the six month
period..
Subsequent Events
On November 6, 1995, the Company's Board of Directors voted to defer
payment of $67,290, the annual dividend on the Series A, 12% convertible,
cumulative Preferred Stock, par value $10, of which there were 56,075 shares
outstanding at October 31, 1995.
8
<PAGE>
Part II. Other Information
Item 4. Submission of Matters to A Vote of Security Holders
The were no matters submitted to a vote of Security Holders during the
three month period ended October 31, 1995
Item 6. Exhibits and Reports on Form 8-K
None
9
<PAGE>
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
CHAMPIONS Sports, Inc.
/s/ James Martell
-------------------------
James Martell
Chairman, President and
Chief Executive Officer
/s/ James E.McCollam
-------------------------
James E. McCollam
Controller and
Chief Accounting Officer
December 8, 1995
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
SIX MONTHS ENDED OCTOBER 31, 1995
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> OCT-31-1995
<CASH> 114,233
<SECURITIES> 0
<RECEIVABLES> 7,917
<ALLOWANCES> 0
<INVENTORY> 50,653
<CURRENT-ASSETS> 174,639
<PP&E> 1,083,695
<DEPRECIATION> (562,687)
<TOTAL-ASSETS> 706,699
<CURRENT-LIABILITIES> 200,810
<BONDS> 0
<COMMON> 7,301
560,752
0
<OTHER-SE> (131,156)
<TOTAL-LIABILITY-AND-EQUITY> 706,699
<SALES> 1,090,464
<TOTAL-REVENUES> 1,107,442
<CGS> 264,101
<TOTAL-COSTS> 595,303
<OTHER-EXPENSES> 466,412
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,420
<INCOME-PRETAX> 43,307
<INCOME-TAX> 0
<INCOME-CONTINUING> 43,307
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,307
<EPS-PRIMARY> .006
<EPS-DILUTED> .001
</TABLE>
