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, 1998
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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 101, 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 17,1998, 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
January 31, 1998 (unaudited) and
April 30, 1997 3
Consolidated Statements of Operations:
Three months and nine months ended
January 31, 1998, and January 31, 1997,
(unaudited) 4
Consolidated Statements of Cash Flows:
Nine months ended January 31, 1998, and
January 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
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<TABLE>
<CAPTION>
Champions Sports, Inc. and Subsidiaries
Consolidated Balance Sheets
JAN 31 APRIL 30
1998 1997
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $553,621 $219,881
Certificate of deposit 25,080 25,080
Accounts receivable - trade 1,833 15,599
Inventories 63,109 57,919
Prepaid expenses 19,479 19,174
Deferred tax asset 215,892 215,892
Total current assets 879,015 553,545
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 (685,063) (644,362)
409,954 439,906
Other assets
Deposits 11,052 11,052
Total assets $1,300,021 $1,004,503
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $42,345 $49,658
Dividend payable on preferred stock 269,160 201,870
Notes payable 17,201
Deferred revenue 0 0
Other accrued expenses 35,792 50,733
Current portion of deferred lease concession 4,363 4,363
Total current liabilities 351,659 323,825
Deferred lease concession
(excluding current portion) 25,735 29,007
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
January 31, 1998 and April 30, 1997 8,501 8,501
Additional paid-in capital 5,308,112 5,308,112
Accumulated deficit (4,954,738) (5,225,694)
Total stockholders' equity 922,627 651,671
Total liabilities and stockholders' equity $1,300,021 $1,004,503
See notes to consolidated financial statements
</TABLE>
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<TABLE>
<CAPTION>
CHAMPIONS SPORTS, INC.
Consolidated Statement of Operations
(Unaudited)
Three months ended Nine months ended
January 31, January 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenue
Food and beverage sales $486,297 $440,949 $1,330,285 $1,286,367
Merchandise 8,219 3,778 17,087 11,401
Consulting,licensing, royalties
and memorabilia fees 89,534 81,000 315,938 276,687
Interest income 4,686 315 5,936 1,108
Other income 7,083 5,180 18,582 15,747
$595,818 $531,222 $1,687,829 $1,591,310
Cost of food and beverage sales 133,296 119,141 368,825 343,645
Cost of merchandise and memorabilia sales 35,888 10,071 65,163 32,194
Restaurant payroll and related costs 168,334 152,907 466,615 437,487
Restaurant occupancy costs 45,142 51,483 136,157 156,203
Other restaurant costs 101,144 83,118 268,859 266,147
General and administrative 72,884 95,200 293,448 258,145
Depreciation and amortization 13,567 13,567 40,702 40,702
Interest expense 0 717 455 1,946
570,255 526,204 1,640,224 1,536,469
Net Income from continuing operations 25,563 5,018 47,605 54,841
Extraordinary gain - - 290,641 -
Net income 25,563 5,018 338,246 54,841
Earnings per share - Primary $0.00 $0.00 $0.04 $0.01
Earnings per share - Diluted $0.00 $0.00 $0.04 $0.01
Weighted average number of common
shares outstanding during the period
Primay 8,500,638 8,500,638 8,500,638 8,500,638
Diluted 9,308,676 9,308,676 9,308,676 9,308,676
</TABLE>
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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,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $338,246 $54,842
Adjustments to reconcile net income
to cash provided by (used ) by operating activities:
Depreciation and amortization 40,702 40,702
Extraordingay gain (290,641) -
Changes in asset and liabilities
Accounts receivable 13,766 (95,472)
Inventories (5,190) (23,620)
Prepaid expenses (305) (14,724)
Accounts payable (7,313) (9,228)
Other accrued expenses (14,941) 13,636
Deferred lease concessions (3,273) (3,273)
Net cash provided (used) by operating activities 71,051 (37,137)
Cash flows from investing activities:
Purchase of property and equipment (10,749) -
Net cash provided by investing activities (10,749) -
Cash flows from financing activities:
Repayment of borrowings (17,201) (19,196)
Net cash provided (used) by financing activities (17,201) (19,196)
Net increase (decrease) in cash and cash equivalents 43,101 (56,332)
Cash and cash equivalents at beginning of year 219,881 141,930
Cash and cash equivalents at January 31, 553,621 85,598
Supplemental disclosure of cash flow information:
Cash paid during the period for interest - 1,946
See notes to consolidated financial statements
</TABLE>
5
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CHAMPIONS SPORTS, INC.
Notes to Consolidated Financial Statements
January 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 January 31, 1998, the consolidated
statements of operations and the consolidated statements of cash flows for the
three months and nine months ended January 31, 1998 and January 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 January 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, 1997. The results of operations for the
period ended January 31, 1998 are not necessarily indicative of the operating
results for the full year.
6
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Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operation
For the nine month period ended January 31, 1998, the Company realized
a net profit of $338,246 or $0.04 per common share as compared to a net profit
of $54,841 or $0.01 per common share for the nine month period ended January 31,
1997. Net income from continuing operations for the nine months ended January
31, 1998 was $47,605 compared to $54,841 in the comparable period ended January
31, 1997. The Company realized a extraordinary gain of $290,641 for the nine
months ended January 31, 1998 from the sale of the CHAMPIONS brand. The
Company's assets increased to $1,300,021 at January 31, 1998 from $1,004,503 at
April 30, 1997. The Company's net profit from its ongoing operations was $25,563
for the three months ended January 31, 1998 versus $5,018 for the three months
ended January 31, 1997.
Revenues
The Company's total revenues were $1,687,829 for the nine months ended
January 31, 1998 versus $1,591,310 for the nine month period ended January 31,
1997, a increase of $96,519 or 6.1%. By component, food and beverage sales
increased 3.4% from the previous year for the nine months and increased 10.3%
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
material price increases for menu items. Merchandise sales for the nine months
ended January 31, 1997 accounted for 1.0% of the Company's total revenues
compared to .7% in the prior comparable period. For the nine months ended
January 31, 1998, the Company realized $315,938 from consulting and memorabilia
fees. For the three months ended January 31, 1998, this amount was $89,534. For
the nine months ended January 31, 1997, the Company received licensing ,
royalties and memorabilia fees of $276,687. For the three months ended January
31, 1997, this amount was $81,000. For the nine months ended January 31, 1998,
other income was $18,582 contrasted to $15,747 for the nine months ended January
31, 1997. Interest income in both comparable periods was less than 1% of the
Company's total revenue.
Expenses
Cost of food and beverage was 27.7% of related sales for the nine
months and 27.4% for the three months ended January 31, 1998 compared to 26.7%
for the nine months and 27.0% for the three months ended January 31, 1997. This
increase is attributed to sightly higher costs at the wholesale level. Cost of
merchandise and memorabilia sales for the nine months ended January 31, 1998 was
$65,163 compared to $32,194 in the preceding year. Restaurant payroll and
related costs were 35.1% of related food and beverage sales for the nine months
and 34.6% for the three months ended January 31, 1998, versus 34.0% for the nine
months and 34.7% for the three months ended January 31, 1997. Restaurant
occupancy costs were $136,157 for the nine months and $45,142 for the three
months ended January 31, 1998 compared to $156,203 for the nine month and
$51,483 for the three month comparable period in 1997. This decrease is
attributed to reduction in common area charges passed on by the landlord. Other
restaurant costs were 20.2% of food and beverage sales for the nine months and
20.8% of food and beverage sales for the three months ended January 31, 1998
compared to 20.7% of food and beverage sales for the comparable nine month and
18.9% for the three months in 1997. General and administrative expense for the
Company's corporate office was $293,448 for the nine months ended January 31,
1998 compared to $258,145 for the nine months ended January 31, 1997.
Depreciation and amortization expense remained constant at $40,702 during the
nine months ended January 31, 1998 and 1997.
7
<PAGE>
Liquidity and Capital Resources
The Company's cash position on January 31, 1998 was $578,701 compared
to $244,961 on April 30, 1997, an increase of $333,740. For the nine months
ended January 31, 1998, the Company provided $71,051 in cash from its continuing
operating activities and repaid borrowings of $17,201. For the nine months ended
January 31, 1997, the Company expended $37,137 in cash for its operating
activities and repaid borrowings of $19,196. The Company met its cash needs
during the nine months ended January 31, 1998 and 1997 from its revenues and
from cash flow from its San Antonio, Texas operation.
The Company's working capital was $527,356 on January 31 1998 and
$229,720 on April 30, 1997.
Stockholder's equity was $922,627 as of January 31, 1998 compared to
$651,671 as of April 30, 1997. In November 1997, 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.
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.
Other
This document contains "forward-looking statements" (within the meaning
of the Private Securities Litigation Act of 1995) that inherently involve risks
and uncertainties. The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result of unforeseen
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.
8
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Part II. Other Information
Item 4. Submission of Matters to A Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
None.
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
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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, 1998
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> JAN-31-1997
<CASH> 578,701
<SECURITIES> 0
<RECEIVABLES> 1,833
<ALLOWANCES> 0
<INVENTORY> 63,109
<CURRENT-ASSETS> 879,015
<PP&E> 1,095,017
<DEPRECIATION> (685,063)
<TOTAL-ASSETS> 1,300,021
<CURRENT-LIABILITIES> 351,659
<BONDS> 0
560,752
0
<COMMON> 8,501
<OTHER-SE> 353,374
<TOTAL-LIABILITY-AND-EQUITY> 1,300,021
<SALES> 1,663,311
<TOTAL-REVENUES> 1,687,829
<CGS> 433,988
<TOTAL-COSTS> 871,631
<OTHER-EXPENSES> 293,448
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 455
<INCOME-PRETAX> 47,605
<INCOME-TAX> 0
<INCOME-CONTINUING> 47,605
<DISCONTINUED> 0
<EXTRAORDINARY> 290,641
<CHANGES> 0
<NET-INCOME> 338,246
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
