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 January 31, 1996
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 March 9, 1996, the Registrant had a total of 8,500,638 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
January 31, 1996 (unaudited) and
April 30, 1995 3
Consolidated Statements of Operations:
Three months and nine months ended
January 31, 1996, and January 31, 1995,
(unaudited) 4
Consolidated Statements of Cash Flows:
Nine months ended January 31, 1996, and
January 31,1995 (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
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Champions Sports, Inc.
Consolidated Balance Sheet
<TABLE>
<CAPTION>
JANUARY 31 APRIL 30,
1996 1995
UNAUDITED
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $151,704 $131,102
Certificate of deposit 25,080 25,080
Accounts receivable - trade 6,472 42,752
Inventories 57,353 41,235
Prepaid expenses 34,372 1,010
Total current assets 274,980 241,179
Property and Equipment
Furniture and Equipment 516,382 516,383
Leasehold improvements 567,312 567,312
1,083,695 1,083,695
Accumulated depreciation and amortization (579,505) (529,053)
504,190 554,642
Other assets
Deposits 11,052 11,052
Total assets $790,222 $806,873
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $89,296 $123,486
Dividend payable on preferred stock 134,580 67,290
Deferred revenues - 75,000
Notes payable 29,425 18,671
Other accrued expenses 46,156 43,720
Current portion of deferred lease concession 4,363 4,363
Total current liabilities 303,820 332,530
Deferred lease concession 34,462 37,734
Note payable, excluding current portion 17,988 43,019
Total Liabilities 356,270 413,283
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, 8,500,638 and 7,300,638
shares issued and outstanding at
January 31, 1996 and April 30, 1995, respectively. 8,502 7,301
Additional paid-in capital 5,307,975 5,249,312
Accumulated deficit (5,443,276) (5,423,775)
Total stockholders' equity 433,953 393,590
Total liabilities and stockholders' equity $790,222 $806,873
</TABLE>
3
<PAGE>
CHAMPIONS SPORTS, INC.
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months Three months Nine months Nine months
ended ended ended ended
January 31, January 31, January 31, January 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue
Food and Beverage sales $424,223 $472,985 $1,280,836 $1,431,918
Merchandise and memorabilia 4,220 4,387 64,036 17,256
Initial franchise and license fees 81,000 - 156,000 -
Other franchise fees and royalties - 14,079 97,104 97,382
Interest income 681 77 2,613 956
Other income 7,042 3,460 24,020 12,365
$517,166 $494,987 $1,624,609 1,559,878
Expense
Cost of food and beverage sales 120,586 128,400 364,072 386,394
Cost of merchandise and 4,670 3,592 25,285 11,074
memorabilia
Restaurant payroll and related costs 157,454 160,187 469,933 494,181
Restaurant occupancy costs 52,495 45,535 145,512 139,660
Other restaurant costs 79,794 74,007 269,601 215,065
General and administrative 64,715 66,649 210,097 273,171
Restaurant promotion 15,044 17,232 38,339 42,322
Depreciation and amortization 16,818 23,851 50,452 72,986
Interest expense 1,302 - 3,722 919
512,877 519,453 1,577,012 1,635,774
Net Income (loss) from operations $4,289 ($24,466) $47,597 ($75,896)
Gain / (Loss) from discontinued - - - 81,183
operations
Gain on disposal of fixed assets - - - 5,500
Non recurring gain for lease - 99,245 - 99,245
termination
Net Income (loss) $4,289 $74,779 $47,597 $110,031
Net income (loss) per common share* $0.00 $0.01 $0.01 $0.02
Weighted average number of common
shares outstanding during the
period 7,778,613 7,300,564 7,513,607 7,283,268
<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>
JANUARY 31, JANUARY 31
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $47,597 $185,031
Adjustments to reconcile net income
(loss) to cash provided by (used in)
operating activities
Depreciation and amortization 50,508 72,986
Loss from discontinued operations - (81,183)
Disposal of furniture and equipment - 77,961
(Increase) decrease in accounts receivable 36,280 (14,066)
(Increase) Decrease in prepaid expenses (33,362) (331)
(Increase) Decrease in inventories (16,118) (3,653)
(Increase) Decrease in notes receivable - 14,585
Decrease in other assets - 9,573
(Increase) Decrease in deferred revenues (75,000) 78,935
(Decrease) Increase in accounts payable (34,190) (199,626)
(Decrease) Increase in other current liabilities 2,436 (31,930)
(Decrease) Increase in accrued rent - (20,605)
(Decrease) Increase in deferred lease concession (3,272) (68,221)
Total adjustments (72,718) (165,575)
Net cash provided by (used in)
operating activities (25,121) 19,456
Cash flows from investing activities:
Sale of equipment - 5,500
Redemption of certificate of deposit - 25,000
Sale of liquor license - 35,205
Net cash (used in) investing activities 0 65,705
Cash flows from financing activities:
Common Stock issued upon exercise of options 60,000 -
Repayment of borrowings and capital leases (14,277) (11,706)
Net cash provided by financing
activities 45,723 (11,706)
Net increase (decrease) in cash and
cash equivalents 20,602 73,455
Cash and cash equivalents at April 30. 131,102 75,466
Cash and cash equivalents at January 31 $151,704 $148,921
</TABLE>
5
<PAGE>
CHAMPIONS SPORTS, INC.
Notes to Consolidated Financial Statements
January 31, 1996
Summarized Financial Information
Company or group of companies for which report is filed:
CHAMPIONS Sports, Inc. and Subsidiaries
The consolidated balance sheet as of January 31, 1996, the consolidated
statements of operations and the consolidated statements of cash flows for the
three months and nine months ended January 31, 1996 and January 31,1995 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 January 31, 1996 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 January 31, 1996 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 nine month period ended January 31, 1996, the Company realized
a net profit of $47,597 or $0.01 per common share as compared to a net profit of
$110,031 or $0.02 per common share for the nine month period ended January 31,
1995. The Company's assets decreased to $790,222 at January 31, 1996 from
$806,873 at April 30, 1995. For this current period, the Company's net profit
from its ongoing operations was $47,597 for the nine months and $4,289 for the
three months ended January 31, 1996. In the previous year, the Company lost
$75,896 from its ongoing operations, realized a non recurring gain of $81,183
from settlement of a restaurant lease from an abandoned location, realized a non
recurring gain of $5,500 upon the sale of equipment which had been previously
written off, and a non recurring gain of $99,245 from settlement of a lease
previously used for office space for the Company's corporate headquarters.
During the three month period in the previous year, the Company lost $24,466
from its ongoing operations and realized a gain of $99,245 for the settlement of
a lease.
Revenues
The Company's total revenues were $1,624,609 for the nine months ended
January 31, 1996 versus $1,559,878 for the nine month period ended January 31,
1995, a increase of $64,731 or 4.1%. By component, food and beverage sales
decreased by 10.6% from the previous year for the nine months and decreased
10.3% for the three months period from the previous year. This decrease in food
and beverage sales is attributed to a decrease in customer volume as there were
no price increases for menu items. Merchandise and memorabilia sales for the
nine months ended January 31, 1996 increased to $64,036 or 271.1% compared to
the comparable period in 1995. The increase is a result of the Company providing
memorabilia to a new Champions licensed location in Jakarta, Indonesia. The
Company realized an initial franchise fee of $156,000 during the nine months
ended January 31, 1996, for the rights to use the Champions trademark in Jakarta
Indonesia and Amman, Jordan. For the nine months ended January 31, 1995, the
Company did not record any initial licensing fees. Other franchise and royalties
realized by the Company during the nine months ended January 31, 1995 were
$97,104 which was comparable to the same period in 1995. Other income was
$24,020 contrasted to $12,365 for the nine months ended January 31, 1995.
Expenses
Cost of food and beverage was 28.4% of related sales for both the nine
months and three months ended January 31, 1996 compared to 26.9% for the nine
months and 27.2% for the three months ended January 31, 1995. This increase is
attributed higher product costs at the wholesale level. Cost of merchandise and
memorabilia sales for the nine months ended January 31, 1996 was $25,285 on
related sales of $64,036 contrasted to $11,074 on related sales of $17,256 for
the comparable period ended January 31, 1995. Restaurant payroll and related
costs were 36.7% of related food and beverage sales for the nine months and
37.1% for the three months ended January 31, 1996, versus 34.5%
7
<PAGE>
for the nine months and 33.9% for the three months ended January 31, 1995. This
increase is attributed to the decline in food and beverage sales from the
comparable period. Restaurant occupancy costs were $145,512 for the nine months
and $52,495 for the three months ended January 31, 1996 compared to $139,660 for
the nine month and $45,535 for the three month comparable period in 1995. This
increase is attributed to escalation provisions in the lease agreement. Other
restaurant costs were 21.1% of food and beverage sales for the nine months and
18.8% of food and beverage sales for the three months ended January 31, 1995
compared to 15.0% of food and beverage sales for the comparable nine month and
15.6% for the three months in 1995. This increase is ascribed to the decrease in
food and beverage sales from the comparable period and to the increase in repair
and maintenance expense to existing restaurant equipment. General and
administrative expense for the Company's corporate office was $210,097 for the
nine months ended January 31, 1996 compared to $273,171 for the nine months
ended January 31, 1995. The decrease of $63,075 or 23.1% is attributed primarily
the termination of the lease for office space and reduction in legal fees and
other professional fees from the previous period. Restaurant promotion expense
remains constant at approximately 3% of food and beverage sales for each
comparable nine month period. Depreciation and amortization expense decreased to
$50,452 during the nine months ended January 31, 1996 from $72,986 for the nine
months ended January 31, 1995.
Liquidity and Capital Resources
The Company's cash position on January 31, 1996 was $151,704 compared
to $131,102 on April 30, 1995, an increase of $20,602. On both January 31, 1996
and April 30, 1995, the Company maintained a certificate of deposit of $25,080.
For the nine months ended January 31, 1996 the Company expended $25,121 in cash
for its operating activities and repaid borrowings of $14,277. An officer of the
Company exercised an option to purchase 1,200,000 shares of the Company's common
stock for $60,000 The Company met its cash needs during the nine months ended
January 31, 1996 by using its cash reserves and by reducing its accounts
receivable by $36,280. For the nine months ended January 31, 1995, the Company
generated $19,456 in cash from its operating activities. During the nine months
ended January 31, 1995, the Company met its cash needs from franchise and
license fees and cash flow from its San Antonio operation.
Stockholder's equity was $433,953 as of January 31, 1996 compared to
$393,590 as of April 30, 1995. On November 6, 1995, the Company's Board of
Directors voted to defer payment of the annual dividend on the Series A, 12%
Preferred Stock, in order to preserve the Company's cash reserves. This unpaid
amount, $67,290, has been placed on the Company's balance sheet as a current
liability. The Board of Directors also voted to defer the Annual Meeting of
Security Holders until the Company's cash position improves.
The Company is continuing to seek additional financing and also
possible mergers or acquisitions to meet its longer term liquidity need and to
finance its future expansion. There is no assurance that the Company will be
able to obtain such financing or acquisitions on term satisfactory to the
Company.
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 January 31, 1996
Item 6. Exhibits and Reports on Form 8-K
The Company filed Form 8-K on December 28, 1995 pertaining to the
exercise of an option by an officer of the Company to purchase 1,200,000 shares
of the Company's common stock for $60,000.
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/JamesMartell
James Martell
Chairman, President
and Chief Executive Officer
/s/ James E. McCollam
James E. McCollam
Corporate Secretary, Chief
Accounting
Officer and Controller
March 15, 1996
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
NINE MONTHS ENDED JANUARY 31, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> JAN-31-1996
<CASH> 176,784
<SECURITIES> 0
<RECEIVABLES> 6,472
<ALLOWANCES> 0
<INVENTORY> 57,353
<CURRENT-ASSETS> 274,980
<PP&E> 1,083,695
<DEPRECIATION> (579,505)
<TOTAL-ASSETS> 790,222
<CURRENT-LIABILITIES> 303,820
<BONDS> 0
<COMMON> 8,502
560,752
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 790,222
<SALES> 1,597,976
<TOTAL-REVENUES> 1,624,609
<CGS> 389,357
<TOTAL-COSTS> 885,046
<OTHER-EXPENSES> 298,888
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,722
<INCOME-PRETAX> 47,597
<INCOME-TAX> 0
<INCOME-CONTINUING> 47,597
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,597
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
