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, 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 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 Blvd., 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 March 17, 1997, the Registrant had a total of 8,500,638 shares of
common stock outstanding.
<PAGE>
CHAMPIONS SPORTS, Inc.
FORM 10-QSB
INDEX
Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
January 31, 1997 (unaudited) and
April 30, 1996 3
Consolidated Statements of Operations:
Three months and nine months ended
January 31, 1997, and January 31, 1996,
(unaudited) 4
Consolidated Statements of Cash Flows:
Nine months ended January 31, 1997, and
January 31,1996 (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>
JANUARY 31 APRIL 30
1997 1996
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $85,598 $141,930
Certificate of deposit 25,080 25,080
Accounts receivable - trade 100,017 4,545
Inventories 76,780 53,160
Prepaid expenses 35,240 20,516
Total current assets 322,714 245,231
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 (637,023) (596,322)
446,672 487,373
Other assets
Deposits 11,052 11,052
Total assets $780,438 $743,656
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $44,110 $53,338
Dividend payable on preferred stock 201,870 134,580
Notes payable 23,824 31,010
Deferred revenue 0 0
Other accrued expenses 52,939 39,303
Current portion of deferred lease concession 4,363 4,363
Total current liabilities 327,106 262,594
Deferred lease concession (excluding current portion) 30,098 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
January 31, 1997 and April 30, 1996 8,501 8,501
Additional paid-in capital 5,308,112 5,308,112
Accumulated deficit (5,454,131) (5,441,684)
Total stockholders' equity 423,234 435,681
Total liabilities and stockholders' equity $780,438 $743,656
See notes to consolidated financial statements
3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CHAMPIONS SPORTS, INC.
Consolidated Statement of Operations
(Unaudited)
Three months ended Three months ended Nine months ended Nine months ended
January 31, 1997 Janaury 31, 1996 January 31, 1997 Janaury 31, 1996
<S> <C> <C> <C> <C>
Revenue
Food and beverage sales $440,949 $424,223 $1,286,367 $1,280,836
Merchandise 3,778 4,220 11,401 11,812
Licensing fees, royalties and memorabilia 81,000 81,000 276,687 305,328
Interest income 315 681 1,108 2,613
Other income 5,180 7,042 15,747 24,020
$531,221 $517,166 $1,591,311 $1,624,609
Expense
Cost of food and beverage sales 119,141 120,586 343,645 364,072
Licensing fees, royalties and memorabilia 81,000 81,000 276,687 305,328
Cost of merchandise and memorabilia sales 10,071 4,670 32,194 25,285
Restaurant payroll and related costs 152,907 157,454 437,487 469,933
Restaurant occupancy costs 51,483 52,495 156,203 145,512
Other restaurant costs 83,118 94,838 266,147 307,940
General and administrative 95,200 64,715 258,145 210,097
Depreciation and amortization 13,567 16,818 40,702 50,452
Interest expense 717 1,302 1,946 3,722
526,203 512,878 1,536,468 1,577,013
Net Income $5,018 $4,288 $54,842 $47,596
Net income per common share $0.00 $0.00 $0.01 $0.01
Net income per common share - assuming $0.00 $0.00 $0.00 $0.00
full dilution
Weighted average number of common
shares outstanding during the
period 8,500,638 7,778,613 8,500,638 7,513,607
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
For the nine months ended January 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $54,842 $47,597
Adjustments to reconcile net income
to cash provided by (used ) by operating activities:
Depreciation and amortization 40,702 50,508
Changes in asset and liabilities
Accounts receivable (95,472) 36,280
Inventories (23,620) (16,118)
Prepaid expenses (14,724) (33,362)
Accounts payable (9,228) (34,190)
Deferred revenue - (75,000)
Other accrued expenses 13,636 2,436
Deferred lease concessions (3,273) (3,272)
Net cash provided (used) by operating activities (37,137) (25,121)
Cash flows from investing activities:
Purchase of certificate of deposit 0 0
Sale of property and equipment 0 0
Net cash provided by investing activities 0 0
Cash flows from financing activities:
Repayment of borrowings (19,196) (14,277)
Common Stock issued upon the exercise of options - 60,000
Net cash provided (used) by financing activities (19,196) 45,723
Net increase (decrease) in cash and cash equivalents (56,332) 20,602
Cash and cash equivalents at beginning of year 141,930 131,102
Cash and cash equivalents at January 31, 85,598 151,704
Supplemental disclosure of cash flow information:
Cash paid during the period for interest 1,946 3,722
See notes to consolidated financial statements
5
</TABLE>
<PAGE>
CHAMPIONS SPORTS, INC.
Notes to Consolidated Financial Statements
January 31, 1997
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, 1997, the consolidated
statements of operations and the consolidated statements of cash flows for the
three months and nine months ended January 31, 1997 and January 31,1996 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, 1997 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 January 31, 1997 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, 1997, the Company realized
a net profit of $54,842 or $0.01 per common share as compared to a net profit of
$47,596 or $0.01 per common share for the nine month period ended January 31,
1996. The Company's assets increased to $780,438 at January 31, 1997 from
$743,656 at April 30, 1996. The Company's net profit from its ongoing operations
was $54,842 for the nine months and $5,018 for the three months ended January
31, 1997.
Revenues
The Company's total revenues were $1,591,311 for the nine months ended
January 31, 1997 versus $1,624,609 for the nine month period ended January 31,
1996, a decrease of $33,298 or 2.0%. By component, food and beverage sales
increased slightly from the previous year for the nine months and increased 3.9%
for the three months period from the previous year. This increase in food and
beverage sales is attributed to a increase in customer volume as there were no
price increases for menu items. Merchandise sales for the nine months ended
January 31, 1997 were comparable to merchandise sales for the same period in
1996. For the nine months ended January 31, 1997, the Company realized$276,687
from Licensing fees, royalties and memorabilia. For the three months ended
January 31, 1997, this was $81,000 for the license rights for Guatemala City,
Guatemala CA. The Company realized initial licensing fees 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, 1997, other income was $15,747 contrasted to $24,020 for the nine
months ended January 31, 1996.
Expenses
Cost of food and beverage was 26.7% of related sales for the nine
months and 27.0% for the three months ended January 31, 1997 compared to 28.4%
for both the nine month and three months ended January 31, 1996. This decrease
is attributed sightly lower costs at the wholesale level. Cost of merchandise
and memorabilia sales for the nine months ended January 31, 1997 was $32,194
compared to $25,285 in the preceding year. Restaurant payroll and related costs
were 34.1% of related food and beverage sales for the nine months and 34.7% for
the three months ended January 31, 1997, versus 36.7% for the nine months and
37.1% for the three months ended January 31, 1996. This decrease is attributed
to better labor cost controls implemented in the current fiscal year. Restaurant
occupancy costs were $156,203 for the nine months and $51,483 for the three
months ended January 31, 1997 compared to $145,512 for the nine month and
$52,495 for the three month comparable period in 1996. This increase is
attributed to escalation provisions in the lease agreement. Other restaurant
costs were 20.7% of food and beverage sales for the nine months and 18.9% of
food and beverage sales for the three months ended January 31, 1997 compared to
24.0% of food and beverage sales for the comparable nine month and 22.4% for the
three months in 1996. This decrease is ascribed to better cost controls
implemented during the current fiscal year. General and administrative expense
for the Company's corporate office was $258,145 for the nine months ended
January 31, 1997 compared to $210,097 for the nine months ended January 31,
1996. The increase of $48,048 is attributed primarily to the relocation of the
Company's corporate offices in November 1996 and cost associated with the Annual
Meeting of Shareholders in December, 1996. Depreciation and amortization expense
decreased to $40,702 during the nine months ended January 31, 1997 from $50,452
for the nine months ended January 31, 1996.
7
<PAGE>
Liquidity and Capital Resources
The Company's cash position on January 31, 1997 was $85,598 compared to
$141,930 on April 30, 1996, an decrease of $56,332. On both January 31, 1997 and
April 30, 1996, the Company maintained a certificate of deposit of $25,080. For
the nine months ended January 31, 1997, the Company used $37,137 for its
operating activities and repaid borrowings of $19,196. 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. Additionally during the nine months
ended January 31, 1996, 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.
Stockholder's equity was $423,234 as of January 31, 1997 compared to
$435,681 as of April 30, 1996. On November 6, 1996, 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 recorded on the Company's balance sheet as a current
liability.
8
<PAGE>
Part II. Other Information
Item 4. Submission of Matters to A Vote of Security Holders
(a) Annual Meeting of Shareholders held at the office of the
Corporation on Friday December 20, 1996.
(b) The Meeting involved the election of three directors:
Shares Voted FOR Shares Voted WITHHOLD
James Martell 6,196,048 129,194
George Naddaff 6,199,228 126,014
Michael Tomic 6,198,253 126,989
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 Matell
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James Martell
Chairman, President and
Chief Executive Officer
/s/ James E. McCollam
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James E. McCollam
Corporate Secretary, Chief Accounting
Officer and Controller
March 17, 1997
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule
Champions Sports, Inc.
For the nine months ended January 31, 1997
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> JAN-31-1997
<CASH> 85,598
<SECURITIES> 25,080
<RECEIVABLES> 100,017
<ALLOWANCES> 0
<INVENTORY> 76,780
<CURRENT-ASSETS> 322,714
<PP&E> 1,083,695
<DEPRECIATION> (637,023)
<TOTAL-ASSETS> 780,438
<CURRENT-LIABILITIES> 327,106
<BONDS> 0
560,752
0
<COMMON> 8,501
<OTHER-SE> 5,308,112
<TOTAL-LIABILITY-AND-EQUITY> 780,438
<SALES> 1,574,456
<TOTAL-REVENUES> 1,591,311
<CGS> 375,839
<TOTAL-COSTS> 1,235,676
<OTHER-EXPENSES> 298,847
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,946
<INCOME-PRETAX> 54,842
<INCOME-TAX> 0
<INCOME-CONTINUING> 54,842
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,842
<EPS-PRIMARY> .01
<EPS-DILUTED> .00
</TABLE>
