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, 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.
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(Exact name of registrant as specified in its charter)
Delaware 52-1401755
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(State or other jurisdiction of (I.R.S. Employer
organization) Identification No.)
Suite 305, 2500 Wilson Boulevard, Arlington, VA 22201
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(Address of principal executive offices)
(Zip code)
(703) 526-0400
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(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 13, 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
October 31, 1996 (unaudited) and
April 30, 1996 3
Consolidated Statements of Operations:
Three months and six months ended
October 31, 1996, and October 31, 1995,
(unaudited) 4
Consolidated Statements of Cash Flows:
Six months ended October 31, 1996, and
October 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
<PAGE>
Champions Sports, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
OCTOBER 31 APRIL 30
1996 1996
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $170,635 $141,930
Certificate of deposit 25,080 25,080
Accounts receivable - trade 17,503 4,545
Inventories 72,567 53,160
Prepaid expenses 11,344 20,516
Total current assets 297,128 245,231
Property and Equipment
Furniture and Equipment 516,383 516,383
Leasehold improvements 567,312 567,312
1,083,695 1,083,695
Accumulated depreciation and amortization (623,456) (596,322)
460,239 487,373
Other assets
Deposits 11,052 11,052
Total assets $768,419 $743,656
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $46,044 $53,338
Dividend payable on preferred stock 134,580 134,580
Notes payable 30,607 31,010
Deferred revenue 0 0
Other accrued expenses 36,130 39,303
Current portion of deferred lease concession 4,363 4,363
Total current liabilities 251,724 262,594
Deferred lease concession (excluding current portion) 31,190 33,371
Note payable, excluding current portion 0 12,010
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
and unissued. 0 0
Common stock, par value $.001 per share,
50,000,000 shares authorized, 8,500,638
shares issued and outstanding at
October 31 and April 30, 1996 8,501 8,501
Additional paid-in capital 5,308,112 5,308,112
Accumulated deficit (5,391,860) (5,441,684)
Total stockholders' equity 485,505 435,681
Total liabilities and stockholders' equity $768,419 $743,656
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CHAMPIONS SPORTS, INC.
Consolidated Statement of Operations
(Unaudited)
Three months ended Six months ended
October 31 October 31
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue
Food and beverage sales $413,673 $399,410 $845,418 $856,613
Merchandise 4,468 3,503 7,623 7,592
Licensing fees, royalties and memorabilia 95,985 127,224 195,687 224,328
Interest income 514 1,097 794 1,932
Other income 5,698 13,698 10,568 16,978
$520,338 $544,932 $1,060,090 $1,107,443
Expense
Cost of food and beverage sales 111,911 113,422 224,504 243,486
Cost of merchandise and memorabilia sales 19,125 13,823 22,124 20,615
Restaurant payroll and related costs 136,531 150,086 284,580 312,479
Restaurant occupancy costs 54,623 50,222 104,720 93,017
Other restaurant costs 89,461 102,723 183,029 213,102
General and administrative 74,196 83,747 162,945 145,382
Depreciation and amortization 13,567 17,873 27,134 33,634
Interest expense 884 1,404 1,229 2,420
500,298 533,300 1,010,266 1,064,135
Net Income $20,040 $11,632 $49,824 $43,308
Net income per common share $0.00 $0.00 $0.01 $0.01
Net income per common share - assuming
full dilution $0.00 $0.00 $0.00 $0.00
Weighted average number of common
shares outstanding during the
period 8,500,638 7,300,638 8,500,638 7,300,638
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
For the six months ended October 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................... $ 49,824 $ 43,307
Adjustments to reconcile net income
to cash provided by (used ) by operating activities:
Depreciation and amortization ....................... 27,134 33,634
Changes in asset and liabilities
Accounts receivable ............................... (12,958) 34,835
Inventories ....................................... (19,407) (9,418)
Prepaid expenses .................................. 9,172 (826)
Accounts payable .................................. (7,294) (51,350)
Deferred revenue .................................. 0 (75,000)
Other accrued expenses ............................ (3,173) (5,370)
Deferred lease concessions ........................ (2,181) (2,181)
Net cash provided (used) by operating activities 41,117 (32,369)
Cash flows from financing activities:
Repayment of borrowings .............................. (12,413) (9,579)
Net cash provided (used) by financing activities (12,413) (9,579)
Net increase (decrease) in cash and cash equivalents ... 28,705 (41,949)
Cash and cash equivalents at beginning of year .......... 141,930 131,102
Cash and cash equivalents at October 31, ................ 170,635 89,153
Supplemental disclosure of cash flow information:
Cash paid during the period for interest ............. 1,229 2,420
See notes to consolidated financial statements
</TABLE>
<PAGE>
CHAMPIONS SPORTS, INC.
Notes to Consolidated Financial Statements
October 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 October 31, 1996, the consolidated
statements of operations and the consolidated statements of cash flows for the
three months and six months ended October 31, 1996 and October 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 October 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, 1996. The results of operations for the
period ended October 31, 1996 are not necessarily indicative of the operating
results for the full year.
<PAGE>
Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operation
For the six month period ended October 31,1996, the Company realized a
net profit of $49,824 or $0.00 per common share as compared to a profit of $
43,308 or $ .01 per common share for the six month period ended October 31,
1995. The Company's assets increased to $768,419 at October 31, 1996 from
$743,656 at April 30, 1996. For both comparable periods, the Company's profit
was derived from its operations.
Revenues
The Company's total revenues were $1,060,090 for the six months ended
October 31, 1996 versus $1,107,443 for the six month period ended October 31,
1995, a decrease of $47,353 or 4.3%. By component, food and beverage sales
decreased 1.3% from $856,613 to $845,418 for the six months ended October 31,
1996. This decrease in food and beverage sales for the same comparable unit is
attributed to a decrease in customer volume as there were no material price
adjustments for menu items. Merchandise sales for the six months ended October
31, 1996 and 1996 were less than 1% if the Company's total revenues. Revenues
from licensing fees, royalties and memorabilia decreased by 12.8% to $195,687
for the six months ended October 31, 1996 from $224,328 in the proceeding
period. During each of the periods presented, one new Champions licensed
location opened. One in Jakarta, Indonesia (1995) and Beirut, Lebanon (1996).
Expenses
Cost of food and beverage was $224,504 or 26.6% of related sales of
$845,418 for the six months ended October 31, 1996 compared to $243,486 or 28.4%
of related sales for the comparable six months ended October 31, 1995. Cost of
merchandise and memorabilia sales for the six months ended October 31, 1996 was
of $22,124 and $20,615 for the six months ended October 31, 1995. Restaurant
payroll and related costs decreased to 33.7% or food and beverage sales for the
six months ended October 31, 1996 contrasted to 36.5% of food and beverage sales
during the six months ended October 31,1995. Restaurant occupancy costs
escalated by 12.6% from the comparable period in 1995, due to an increase in the
base rent as prescribed in the lease agreement and in increases in the common
area charges and real estate taxes passed on by the landlord. Other restaurant
costs decrease by 14.1% to $183,029 from $213,102. This decrease is attributed
to reduction in advertising costs which during the six months ended October 31,
1995 proved not to be effective. General and administrative expense for the
Company's corporate office was $162,945 for the six months ended October 31,
1996 compared to $145,382 for the six months ended October 31, 1995.
Depreciation and amortization expense dropped from $33,634 during the six months
ended October 31, 1996 to $27,134 for the six months ended October 31, 1996, as
some of the Company's equipment, still in use, becomes fully depreciated.
Liquidity and Capital Resources
The Company's cash position on October 31, 1996 was $170,635 compared
to $141,930 on April 30, 1996, a increase of $28,705. On October 31, 1996, the
Company maintained a certificate of deposit of $25,080, as well as on April 30,
1996. For the six months ended October 31, 1996, the Company's operations
provided cash of $41,117 and used $12,413 to repay borrowings. For the six
months ended October 31, 1995, the Company used $32,369 in cash for its
operating activities, repaid borrowings of $9,579 and decreased other current
liabilities of $56,720. During the six months ended October 31, 1996 and 1995,
the Company
<PAGE>
met its cash needs from licensing fees and from cash flow from its San Antonio
operation. On October 31, 1996, the Company's working capital was $45,404 versus
a negative $17,363 on April 30, 1996. The Company anticipates that the revenues
generated from its location in San Antonio, Texas along with licensing, royalty
and memorabilia revenues will be sufficient to met its operating obligations for
the next six months.
Stockholder's equity increased to $485,505 on of October 31, 1996
compared to $435,681 as of April 30, 1996, as a result of the net profit for the
six month period.
Other Events
On October 4, 1996, Champions Sports, Inc. signed a joint venture letter of
agreement with Business Expansion Capital Corporation, a privately held
corporation, to assist Champions Sports, Inc. in actively searching and
selection of merger or acquisitions candidate(s). Business Expansion Capital
Corporation is owned by George A. Naddaff. The term of the agreement is for two
years. Champions Sports, Inc issued 8,500,000 performance based warrants
exercisable at $0.11 per share, subject to Champions Sports, Inc. approval of a
successful acquisition or merger. Mr. George A. Naddaff has been appointed to
the Board of Directors of Champions Sports, Inc.
Subsequent Events
On November 6, 1996, 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, 1996.
<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, 1996
Item 6. Exhibits and Reports on Form 8-K
On October 4, 1996, the Company filed with the Commission Form 8-K, in
which the Company disclosed a joint venture letter of agreement between the
Company and Business Expansion Capital Corporation and the issuance of 8,500,000
performance based warrants.
<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 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule
Champions Sports, Inc.
For the six months ended October 31, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> OCT-31-1997
<CASH> 170,635
<SECURITIES> 25,080
<RECEIVABLES> 17,503
<ALLOWANCES> 0
<INVENTORY> 72,567
<CURRENT-ASSETS> 297,128
<PP&E> 1,083,695
<DEPRECIATION> (623,456)
<TOTAL-ASSETS> 768,419
<CURRENT-LIABILITIES> 251,724
<BONDS> 0
560,752
0
<COMMON> 8,501
<OTHER-SE> 5,308,112
<TOTAL-LIABILITY-AND-EQUITY> 768,419
<SALES> 1,048,728
<TOTAL-REVENUES> 1,060,090
<CGS> 246,628
<TOTAL-COSTS> 837,957
<OTHER-EXPENSES> 190,079
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,229
<INCOME-PRETAX> 49,824
<INCOME-TAX> 0
<INCOME-CONTINUING> 49,824
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49,824
<EPS-PRIMARY> .01
<EPS-DILUTED> .00
</TABLE>
