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, 1997
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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 10, 1997 the Registrant had a total of 8,500,638 shares of common
stock outstanding.
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CHAMPIONS SPORTS, Inc.
FORM 10-QSB
INDEX
Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
October 31, 1997 (unaudited) and
April 30, 1997 3
Consolidated Statements of Operations:
Three months and six months ended
October 31, 1997, and October 31, 1996,
(unaudited) 4
Consolidated Statements of Cash Flows:
Six months ended October 31, 1997, and
October 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
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<TABLE>
Champions Sports, Inc. and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
OCT 31 APRIL 30
1997 1997
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $179,689 $219,881
Certificate of deposit 25,080 25,080
Accounts receivable - trade 447,600 15,599
Inventories 53,030 57,919
Prepaid expenses 14,664 19,174
Deferred tax asset 215,892 215,892
Total current assets 935,955 553,545
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 (671,496) (644,362)
423,521 439,906
Other assets
Deposits 11,052 11,052
Total assets $1,370,528 $1,004,503
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $121,035 $49,658
Dividend payable on preferred stock 201,870 201,870
Notes payable 7,745 17,201
Deferred revenue 0 0
Other accrued expenses 44,142 50,733
Current portion of deferred lease concession 4,363 4,363
Total current liabilities 379,155 323,825
Deferred lease concession (excluding current portion) 26,826 29,007
Accounts receivable - trade 447,600 15,599
Note payable, 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 (4,912,818) (5,225,694)
Total stockholders' equity 964,547 651,671
Total liabilities and stockholders' equity $1,370,528 $1,004,503
See notes to consolidated financial statements
</TABLE>
3
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<TABLE>
<CAPTION>
CHAMPIONS SPORTS, INC.
Consolidated Statement of Operations
(Unaudited)
Three months Six months
ended October 31 ended October 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenue
Food and beverage sales $406,559 $413,673 $843,989 $845,418
Merchandise 3,790 4,468 8,868 7,623
Licensing fees, royalties and memorabilia 95,700 95,985 226,404 195,687
Interest income 199 515 1,250 794
Other income 4,626 5,699 11,499 10,568
$510,873 $520,339 $1,092,010 $1,060,090
Expense
Cost of food and beverage sales 114,540 111,911 235,529 224,504
Cost of merchandise and memorabilia sales 25,165 19,125 29,274 22,124
Restaurant payroll and related costs 147,366 136,531 298,282 284,580
Restaurant occupancy costs 40,358 54,623 91,015 104,720
Other restaurant costs 82,136 89,461 167,714 183,029
General and administrative 106,517 74,195 220,565 162,945
Depreciation and amortization 13,567 13,567 27,134 27,134
Interest expense 84 884 455 1,229
529,733 500,297 1,069,969 1,010,265
Net Income from continuing operations ($18,860) $20,041 $22,042 $49,825
Extraordinary gain $290,641 - $290,641 -
Net income $271,781 $20,041 $312,683 $49,825
Net income per common share* $0.03 $0.00 $0.04 $0.01
Weighted average number of common
shares outstanding during the
period 8,500,638 8,500,638 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 (loss) per share since
the effect would not be material.
</TABLE>
4
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<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
Deferred revenue ....................................... -- (75,000)
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
</TABLE>
5
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CHAMPIONS SPORTS, INC.
Notes to Consolidated Financial Statements
October 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 October 31, 1997, the consolidated
statements of operations and the consolidated statements of cash flows for the
three months and six months ended October 31, 1997 and October 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 October 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 October 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 six month period ended October 31,1997, the Company realized a net
profit of $312,683 or $0.04 per common share as compared to a profit of $ 49,825
or $0.01 per common share for the six month period ended October 31, 1996. The
increase in net profit is attributed to the Company selling the Champions brand
name and trademark to Marriott International during the second quarter of the
current fiscal year. Company's assets increased to $1,370,528 at October 31,
1997 from $1,004,503 at April 30, 1997. The Company realized a one time
extraordinary gain from the sale of the Champions brand of $290,641 and a profit
from its operations of $22,042 during the six months ended October 31, 1997 For
the six months ended October 31, 1996, the Company's net profit was $49,825
which was derived from its operations.
Revenues
The Company's total revenues were $1,092,010 for the six months ended
October 31, 1997 versus $1,060,090 for the six month period ended October 31,
1996, an increase of $31,920 or 3.0%. By component, food and beverage sales
remained flat at $843,989 compared to $845,418 for the six months ended October
31, 1997 and 1996. Merchandise sales for the six months ended October 31, 1997
and 1996 were less than 1% if the Company's total revenues. Revenues from
licensing fees, royalties and memorabilia increased by 15.7% to $226,404 for the
six months ended October 31, 1997 from $195,687 in the proceeding period. The
Company recorded licensing fees of $226,404 prior to the sale of the Champions
brand and trademark to Marriott International.
Expenses
Cost of food and beverage was $235,529 or 27.9% of related sales of
$843,989 for the six months ended October 31, 1997 compared to $224,504 or 26.6%
of related sales for the comparable six months ended October 31, 1996. Cost of
merchandise and memorabilia sales for the six months ended October 31, 1997 was
of $29,274 and $22,124 for the six months ended October 31, 1996. Restaurant
payroll and related costs increased to 35.3% or food and beverage sales for the
six months ended October 31, 1997 contrasted to 33.7% of food and beverage sales
during the six months ended October 31,1996. Restaurant occupancy costs
decreased by 13.1% from the comparable period in 1996, due to a decrease in the
common area charges and real estate taxes passed on by the landlord. Other
restaurant costs decreased by 8.4% to $167,714 from $183,029. This decrease is
attributed to reduction in promotion costs. General and administrative expense
for the Company's corporate office was $220,565 for the six months ended October
31, 1997 compared to $162,945 for the six months ended October 31, 1996.
Depreciation and amortization expense remained constant in each comparable
period at $27,134.
Liquidity and Capital Resources
The Company's cash position on October 31, 1997 was $179,689 compared to
$219,881 on April 30, 1997, a decrease of $40,192. On October 31, 1997, as well
as on April 30, 1997, the Company maintained a certificate of deposit of
$25,080. For the six months ended October 31, 1997, the Company's operating
activities consumed $19,987 in cash. The Company purchased $10,749 in property
and equipment and repaid borrowings of $9,456. For the six months ended October
31, 1996, the Company's operations provided cash of $41,117 and used $12,413 to
repay borrowings. During the six months ended October 31, 1997 and 1996,
7
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<PAGE>
the Company met its cash needs from its revenues and from cash flow from its San
Antonio operation. On October 31, 1997, the Company's working capital was
$556,800 versus $229,720 on April 30, 1997. The Company anticipates that the
revenues generated from its location in San Antonio, Texas along with revenues
generated from its consulting and the sale of memorabilia will be sufficient to
met its operating obligations for the next six months. Stockholder's equity
increased to $964,547 on of October 31, 1997 compared to $651,671 as of April
30, 1997, as a result of the net profit for the six month period.
The Company is actively pursuing merger/acquisition candidates. There is no
assurance that the Company will be able to structure a merger or acquisition on
terms satisfactory to the Company.
Subsequent Events
On September 22, 1997, the Board of Directors, in order to preserve the
Company's cash reserves, 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, 1997.
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, 1997.
Item 6. Exhibits and Reports on Form 8-K
On November 10, 1997, the Company filed with the Commission Form 8-K, in
which the Company disclosed the sale of the Champions brand and trademark to
Marriott International.
9
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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 10, 1997
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> OCT-31-1997
<CASH> 204,769
<SECURITIES> 0
<RECEIVABLES> 447,600
<ALLOWANCES> 0
<INVENTORY> 53,030
<CURRENT-ASSETS> 935,955
<PP&E> 1,095,017
<DEPRECIATION> (671,496)
<TOTAL-ASSETS> 1,370,528
<CURRENT-LIABILITIES> 379,155
<BONDS> 0
560,752
0
<COMMON> 8,501
<OTHER-SE> 395,294
<TOTAL-LIABILITY-AND-EQUITY> 1,370,528
<SALES> 1,079,261
<TOTAL-REVENUES> 1,092,010
<CGS> 264,803
<TOTAL-COSTS> 821,815
<OTHER-EXPENSES> 248,154
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 455
<INCOME-PRETAX> 22,042
<INCOME-TAX> 0
<INCOME-CONTINUING> 22,042
<DISCONTINUED> 0
<EXTRAORDINARY> 290,641
<CHANGES> 0
<NET-INCOME> 312,683
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
