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 July 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.
----------------------
(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
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22201 (Address of principal executive
offices)
(Zip code)
(703) 526-0400
--------------
(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 September 8, 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
July 31, 1997 (unaudited) and
April 30, 1997 3
Consolidated Statements of Operations:
Three months ended
July 31, 1997, and July 31, 1996,
(unaudited) 4
Consolidated Statements of Cash Flows:
Three months ended July 31, 1997, and
July 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 6. Exhibits and Reports on Form 8-K 8
Signatures 9
2
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Champions Sports, Inc. and Subsidiaries
Consolidated Balance Sheets
JULY 31 APRIL 30
1997 1997
ASSETS
Current assets
Cash and cash equivalents $122,552 $219,881
Certificate of deposit 25,080 25,080
Accounts receivable - trade 139,001 15,599
Inventories 68,390 57,919
Prepaid expenses 18,663 19,174
Deferred tax asset 215,892 215,892
Total current assets 589,578 553,545
Property and Equipment
Furniture and Equipment 524,055 516,956
Leasehold improvements 570,962 567,312
------- -------
1,095,017 1,084,268
Accumulated depreciation and amortization (657,929) (644,362)
-------- --------
437,089 439,906
Other assets
Deposits 11,052 11,052
Total assets $1,037,718 $1,004,503
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $51,811 $49,658
Dividend payable on preferred stock 201,870 201,870
Notes payable 10,072 17,201
Deferred revenue 0 0
Other accrued expenses 49,112 50,733
Current portion of deferred lease concession 4,363 4,363
----- -----
Total current liabilities 317,228 323,825
Deferred lease concession 27,917 29,007
(excluding current portion)
Commitments and contingencies
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
July 31 and April 30, 1996 8,501 8,501
Additional paid-in capital 5,308,112 5,308,112
Accumulated deficit (5,184,792) (5,225,694)
---------- ----------
Total stockholders' equity 692,573 651,671
Total liabilities and stockholders' equity 1,037,718 $1,004,503
========= ==========
See notes to consolidated financial statements
3
<PAGE>
CHAMPIONS SPORTS, INC.
Consolidated Statement of Operations
(Unaudited)
Three months
ended July 31,
1997 1996
Revenue
Food and beverage sales $437,430 $431,745
Merchandise and memorabilia 5,079 3,155
Initial license fees 0 0
Continuing licensing fees and royalties 130,740 99,702
Interest income 1,016 279
Other income 6,873 4,869
$539,751 $581,138
Expense
Cost of food and beverage sales 120,989 112,593
Cost of merchandise and memorabilia sales 4,109 2,999
Restaurant payroll and related costs 150,916 148,049
Restaurant occupancy costs 50,657 50,097
Other restaurant costs 85,578 93,568
General and administrative 114,048 88,750
Depreciation and amortization 13,567 13,567
Interest expense 371 345
540,236 509,968
Net Income $40,902 $29,784
Net income per common share* $0.00 $0.00
Weighted average number of common
shares outstanding during the
period 8,500,638 8,500,638
*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 equilvants in the computation of income
4
<PAGE>
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
For the three months ended July 31,
1997 1996
==== ====
Cash flows from operating activities:
Net income $40,902 $29,784
Adjustments to reconcile net income
to cash provided by (used ) by operating activities:
Depreciation and amortization 13,567 13,567
Changes in asset and liabilities
Accounts receivable (123,402) (99,869)
Inventories (10,471) (6,509)
Prepaid expenses 511 (2,732)
Accounts payable 2,153 (5,882)
Deferred revenue 0
Other accrued expenses (1,621) 3,974
Deferred lease concessions (1,090) (1,091)
Net cash provided (used) by operating activities (79,451) (68,758)
Cash flows from investing activities:
Purchase of certificate of deposit (1,000)
Purchase of property and equipment (10,749) 0
Net cash provided by investing activities (10,749) (1,000)
Cash flows from financing activities:
Repayment of borrowings (7,129) (5,797)
Net cash provided (used) by financing activities (7,129) (5,797)
Net increase (decrease) in cash and cash equivalents (97,329) (75,555)
Cash and cash equivalents at beginning of year 244,961 141,930
Cash and cash equivalents at July 31 147,632 66,375
Supplemental disclosure of cash flow information:
Cash paid during the period for interest 371 345
See notes to consolidated financial statements
5
<PAGE>
CHAMPIONS SPORTS, INC.
Notes to Consolidated Financial Statements
July 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 July 31, 1997, the consolidated statements
of operations and the consolidated statements of cash flows for the three months
ended July 31, 1997 and July 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 July 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, 1997. The results of operations for the
period ended July 31, 1997 are not necessarily indicative of the operating
results for the full year.
6
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of Operation and
Financial Condition
RESULTS OF OPERATION
The results of the quarter ended July 31, 1997 produced a net profit of
$40,902 ($0.00 per common share) compared to a net profit of $ 29,784 ($0.00 per
common share) for the same quarter in the preceding year.
REVENUES
The Company's total revenues were $581,138 for the three months ended
July 31, 1997 compared to $539,751 for the three months ended July 31, 1996, a
increase of 7.7%. By component, food and beverage sales were $437,430 compared
to $431,745 for the same period in the prior fiscal year, a increase of 1.3%.
This increase is attributed to a nominal increase in average customer check.
Merchandise and memorabilia sales accounted for less than 1% of the Company's
consolidated revenues for both comparable quarters. During the quarters ended
July 31, 1997 and July 31, 1996, the Company recognized no initial license fees.
Continuing licensing fees and royalties revenue was $130,740 for the current
quarter corresponding to $99,702 in the previous year. This increase is ascribed
to the additional number of licensed locations. Interest income in both
comparable quarters amounted to less than 1% of the Company's total consolidated
revenues.
EXPENSES
Cost of food and beverage was 27.7% of related sales for the quarter
ended July 31, 1997 compared to 26.1% of related sales during the quarter end
July 31, 1996. Restaurant payroll and related costs were $150,916, 34.5% of
related sales, compared to $148,049, 34.3% of related sales for the comparable
period. Other restaurant costs were $85,578 versus $93,568 for the three months
ended July 31, 1997 and 1996, a decrease of 8.5%. Occupancy costs for the same
unit in San Antonio remained constant for the comparable periods, $50,657 for
the quarter ended July 31, 1997 and $50,097 for the quarter end July 31, 1996.
General and administrative costs for the Company's corporate offices were
$114,048 for the three months July 31, 1997 and $88,750 for the three months
ended July 31, 1996 an increase of 28.5% which is a result of increased
professional fees. Depreciation and amortization expense was $13,567 for the
three months ended July 31, 1997 and 1996. Interest expense for each of the
comparable periods was negligible.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position at July 31, 1997 was $147,632 compared to
$244,961 at April 30, 1997, a decrease of $97,329. For the quarter ended July
31, 1997, the Company's operations used $79,451 in cash in excess of cash
provided from its operating activities. The Company increased its accounts
receivable by $123,402 and inventories by $10,471, while the Company's current
liabilities remained virtually unchanged from the comparable quarter. The
Company purchased equipment and other property for $10,749 and repaid borrowing
of $7,129.
During the quarter ended July 31, 1996, the Company met its cash need
from its cash reserves and from cash provided from its operations. During this
period, the Company increased its accounts receivable by $99,869 and increased
other current assets by approximately $10,000 while reducing current liabilities
by
7
<PAGE>
approximately $3,000 and repaying borrowings of $5,797.
The Company's working capital at July 31, 1997 was $272,351 compared to
$229,720 on April 30, 1997.
The Company is actively pursuing financing and merger candidates to
meet it liquidity needs. There is no assurance that the Company will be able to
obtain such financing or structure a merger on terms satisfactory to the
Company.
MISCELLANEOUS
Stockholder's equity on July 31, 1997 was $692,573, an increase of
$40,902 from April 30, 1997 which is a result of the net profit for the period.
On July 31, 1996, stockholder's equity was $465,465.
Item 6. Exhibits and Reports on Form 8-K
None.
8
<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 M. Martell
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James M. Martell
Chairman and President
/s/ James E. McCollam
---------------------
James E. McCollam
Controller and Chief Accounting
Officer
September 8, 1997
9
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
For the three months ended July 31, 1997
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> JUL-31-1997
<CASH> 147,632
<SECURITIES> 0
<RECEIVABLES> 139,001
<ALLOWANCES> 0
<INVENTORY> 68,390
<CURRENT-ASSETS> 589,578
<PP&E> 1,095,017
<DEPRECIATION> (657,929)
<TOTAL-ASSETS> 1,037,718
<CURRENT-LIABILITIES> 317,228
<BONDS> 0
560,752
0
<COMMON> 8,501
<OTHER-SE> 123,320
<TOTAL-LIABILITY-AND-EQUITY> 1,037,718
<SALES> 573,249
<TOTAL-REVENUES> 581,138
<CGS> 125,098
<TOTAL-COSTS> 287,061
<OTHER-EXPENSES> 127,615
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 371
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 40,902
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,902
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
