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, 1998
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 101, 2500 Wilson Boulevard, Arlington, VA 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 December 10, 1998 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
October 31, 1998 (unaudited) and
April 30, 1998 3
Consolidated Statements of Operations:
Three months and six months ended
October 31, 1998, and October 31, 1997,
(unaudited) 4
Consolidated Statements of Cash Flows:
Six months ended October 31, 1998, and
October 31, 1997 (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
ASSETS OCTOBER 31 APRIL 30
1998 1998
Current assets
Cash and cash equivalents $567,882 $631,230
Accounts receivable - trade 650 612
Inventories 63,881 69,594
Prepaid expenses 12,953 3,850
Deferred tax asset 207,952 207,952
------- -------
Total current assets 853,319 913,238
Property and Equipment
Furniture and Equipment 533,415 530,531
Leasehold improvements 570,962 570,962
1,104,377 1,101,493
Accumulated depreciation and amortization (727,491) (700,356)
-------- --------
376,886 401,137
Other assets
Deposits 13,065 13,065
------ ------
Total assets $1,243,270 $1,327,440
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $51,719 $42,672
Dividend payable on preferred stock 269,160 269,160
Other accrued expenses 22,320 48,038
Current portion of deferred lease concession 4,363 4,363
----- -----
Total current liabilities 347,562 364,233
Deferred lease concession (excluding current portion) 23,921 24,644
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 (5,005,578) (4,938,802)
---------- ----------
Total stockholders' equity 871,787 938,563
Total liabilities and stockholders'equity $1,243,270 $1,327,440
========== ==========
See notes to consolidated financial statements
3
<PAGE>
CHAMPIONS SPORTS, INC.
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months Six months
ended October 31 ended October 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenue
Food and beverage sales $409,568 $406,559 $867,080 $843,989
Merchandise and memorabilia 10,641 3,790 94,225 8,868
Licensing fees 0 95,700 - 226,404
Interest income 6,107 199 12,218 1,250
Other income 2,019 4,626 10,254 11,499
----- ----- ------ ------
$428,335 $510,873 $983,777 $1,092,010
Expense
Cost of food and beverage sales 110,475 114,540 233,988 235,529
Cost of merchandise and memorabili 6,318 25,165 31,004 29,274
Restaurant payroll and related costs 147,022 147,366 297,766 298,282
Restaurant occupancy costs 54,513 40,358 107,007 91,015
Other restaurant costs 98,367 82,136 189,354 167,714
General and administrative 87,615 106,517 164,301 220,565
Depreciation and amortization 13,567 13,567 27,134 27,134
Interest expense 0 84 0 455
- -- - ---
517,878 529,733 1,050,554 1,069,969
Net Income (loss) from operations $(89,543) $(18,860) $(66,776) $22,042
Extraordinary gain $0 $290,641 0 $290,641
-- -------- - --------
Net income (loss) $(89,543) $271,781 $(66,776) $312,683
Basic earnings(loss)per share $(0.01) $0.03 $(0.01) $0.04
Earnings per common share -
fully diluted $(0.01) $0.03 $(0.01) $0.03
</TABLE>
4
<PAGE>
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
For the six months ended October 31,
1998 1997
---- ----
Cash flows from operating activities:
Net income (loss) $(66,776) $312,683
Adjustments to reconcile net income
to cash provided by (used )
by operating activities:
Depreciation and amortization 27,135 27,134
Changes in asset and liabilities
Accounts receivable (38) (432,001)
Inventories 5,712 4,889
Prepaid expenses (9,103) 4,510
Accounts payable 9,047 71,377
Other accrued expenses (25,718) (6,398)
Deferred lease concessions (723) (2,181)
---- ------
Net cash provided (used)
by operating activities (60,464) (19,987)
Cash flows from investing activities:
Purchase of certifcate of deposit
Purchase of property and equipment (2,884) (10,749)
------ -------
Net cash provided by investing
activities (2,884) (10,749)
Cash flows from financing activities:
Repayment of borrowings 0 (9,456)
- ------
Net cash provided (used)
by financing activities 0 (9,456)
Net increase (decrease) in cash
and cash equivalents (63,348) (40,192)
Cash and cash equivalents at beginning of year 631,230 219,881
------- -------
Cash and cash equivalents at October 31. 567,882 179,689
Supplemental disclosure of cash flow information:
Cash paid during the period for interest - 455
See notes to consolidated financial statements
5
<PAGE>
CHAMPIONS SPORTS, INC.
Notes to Consolidated Financial Statements
October 31, 1998
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, 1998, the consolidated
statements of operations and the consolidated statements of cash flows for the
three months and six months ended October 31, 1998 and October 31, 1997 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, 1998 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, 1998. The results of operations for the
period ended October 31, 1998 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 months ended October 31, 1998, the Company sustained a loss
of $66,776, or $0.01 per common share from its operations. For the six month
period ended October 31,1997, the Company realized a net profit of $312,683 or
$0.03 per common share. The net profit was attributed to the Company selling the
Champions brand name and trademark to Marriott International during the second
quarter of the fiscal year.
The Company's assets decreased to $1,243,270 at October 31, 1998 from
$1,327,440 at April 30, 1998. 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.
Revenues
- --------
The Company's total revenues were $983,777 for the six months ended
October 31, 1998 versus $1,092,010 for the six month period ended October 31,
1997, a decrease of 9.9%. By component, food and beverage sales increased 2.7%
to $867,080 from $843,989 for the six months ended October 31, 1997. This slight
increase in food and beverage sales is attributed to a constant customer volume
and sales price increase. Merchandise and memorabilia sales for the six months
ended October 31, 1998 were $94,225 compared to $8,868 in the comparable period.
The Company provided sports memorabilia to one Marriott Champions location
during the six months ended October 31, 1998. In the preceding year the Company
provided memorabilia to one Marriott Champions location, as the Company, at that
time, licensed the Champions brand and trademark to Marriott. During the six
months ended October 31, 1997, 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 remained relatively constant at 27% and 27.9%
of food and beverage sales of for the six months ended October 31, 1998 and
1997. Cost of merchandise and memorabilia sales for the six months ended October
31, 1998 was of $31,004 and $29,274 for the six months ended October 31, 1997.
Restaurant payroll and related costs decreased slightly to 34.3% or food and
beverage sales for the six months ended October 31, 1998 contrasted to 35.3% of
food and beverage sales during the six months ended October 31,1997. Restaurant
occupancy costs increased by 17.6% from the comparable period in 1997, due to a
increase in the common area charges and real estate taxes passed on by the
landlord. Other restaurant costs increased by12.9% to $189,354 from $167,714.
This increase is attributed to higher cost associated with repair and
maintenance. General and administrative expense for the Company's corporate
office was $164,301 for the six months ended October 31, 1998 compared to
$220,565 for the six months ended October 31, 1997. Depreciation and
amortization expense remained constant in each comparable period at $27,134.
7
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The Company's cash position on October 31, 1998 was $567,882 compared to
$631,230 on April 30, 1998, a decrease of $63,348. For the six months ended
October 31, 1998, the Company's operating activitiesconsumed $60,464 in cash.
The Company purchased equipment for $2,884 . For the six months ended October
31, 1998, the Company's operating activities used $19,987 in cash. The Company
purchased $10,749 in property and equipment and repaid borrowings of $9,456.
During the six months ended October 31, 1998 and 1997, the Company met its cash
needs from its revenues and cash reserves and from cash flow from its San
Antonio operation. On October 31, 1998, the Company's working capital was
$505,757 versus $549,005 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 sales of memorabilia will be sufficient to
meet its operating obligations for the next six months.
Stockholder's equity decreased to $871,787 as of October 31, 1998
compared to $938,563 as of April 30, 1998, as a result of the loss for the six
month period.
In October, 1998, 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, 1998. The Board of
Directors also voted to defer the annual meeting of security holders in order to
preserve the Company's cash reserves.
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.
The agreement between Business Expansion Capitol Corporation and
Champions Sports expired in October, 1998 and was not renewed. Subsequently, Mr.
George Naddaff, owner of Business Expansion Capitol Corporation, resigned from
the Board of Directors of Champions Sports, Inc.
This document contains "forward-looking statements" (within the meaning
of the Private Securities Litigation Act of 1995) that inherently involves risk
and uncertainties. The Company's actual result could differ materially for those
anticipated in there forward-looking statements as a result of unforseen
external factors. These factors may include, but are not limited to, changes in
general economic conditions, customer acceptance of products offered and other
general competitive factors.
Subsequent events
- -----------------
The Company has signed agreements to provide sports memorabilia to
Champions locations in Turkey and in the Peoples Republic of China in the third
quarter of Fiscal 1999.
8
<PAGE>
Part II. Other Information
Item 4. Submission of Matters to A Vote of Security Holders
There were no matters submitted to a vote of Security Holders during
the three month period ended October 31, 1998.
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 Martell______
James Martell
Chairman, Presiden
and Chief Executive Officer
__/s/ James E. McCollam__
James E. McCollam
Controller and Chief Accounting
Officer
December 14, 1998
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-END> OCT-31-1998
<CASH> 567,882
<SECURITIES> 0
<RECEIVABLES> 650
<ALLOWANCES> 0
<INVENTORY> 63,881
<CURRENT-ASSETS> 853,319
<PP&E> 1,104,377
<DEPRECIATION> 727,491
<TOTAL-ASSETS> 1,234,270
<CURRENT-LIABILITIES> 347,562
<BONDS> 0
0
560,752
<COMMON> 8,501
<OTHER-SE> 5,308,112
<TOTAL-LIABILITY-AND-EQUITY> (5,005,578)
<SALES> 961,305
<TOTAL-REVENUES> 983,777
<CGS> 264,992
<TOTAL-COSTS> 594,127
<OTHER-EXPENSES> 191,435
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (66,776)
<INCOME-TAX> 0
<INCOME-CONTINUING> (66,776)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (66,776)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
