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, 1999
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 214, 2420 Wilson Blvd., 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 September 9,1999, the Registrant had a total of 8,513,591 shares
of common stock outstanding.
1
<PAGE>
CHAMPIONS SPORTS, Inc.
FORM 10-QSB
INDEX
Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
July 31, 1999 (unaudited) and
April 30, 1999 3
Consolidated Statements of Operations:
Three months ended
July 31, 1999, and July 31, 1998,
(unaudited) 4
Consolidated Statements of Cash Flows:
Three months ended July 31, 1999, and
July 31,1998 (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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Champions Sports, Inc. and Subsidiaries
Consolidated Balance Sheets
JULY 31 APRIL 30
1999 1999
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents $638,416 $726,241
Accounts receivable - trade 703 800
Inventories 22,582 20,176
Prepaid expenses 10,546 3,232
Deferred tax asset 207,952 207,952
------- -------
Total current assets 880,198 958,401
Property and Equipment
Furniture and Equipment 539,139 539,139
Leasehold improvements 570,962 570,962
------- -------
1,110,101 1,110,101
Accumulated depreciation and amortization (742,909) (729,420)
-------- --------
367,192 380,681
Other assets
Deposits 11,052 11,052
Investments 167,030 -
------- -------
Total assets $1,425,472 $1,350,134
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $99,749 $36,817
Dividend payable on preferred stock 336,450 336,450
Notes payable 6,885 6,885
Other accrued expenses 35,917 38,023
Current portion of deferred
lease concession 4,363 4,363
----- -----
Total current liabilities 483,364 422,538
Deferred lease concession
(excluding current portion) 19,553 20,281
Note payable, excluding current portion 18,592 19,645
Commitments and contingencies
Stockholders' equity
Preferred stock:
Series A, 12% convertible cumulative,
par value $10 per share, preferred as to
dividends and liquidation: 56,075 shares
authorized: 53,325 and 55,775 issued
and outstanding at
July 31 and April 30, 1999 533,250 557,752
Common stock, par value $.001 per share,
50,000,000 shares authorized: 8,513,591
and 8,500,638 shares issued and
outstanding at July 31 and April 30, 1999 8,504 8,502
Additional paid-in capital 5,335,419 5,311,111
Accumulated deficit (4,973,210) (4,989,695)
---------- ----------
Total stockholders' equity 903,962 887,670
Total liabilities and
stockholders' equity $1,425,472 $1,350,134
========== ==========
See notes to consolidated financial statements
3
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CHAMPIONS SPORTS, INC.
Consolidated Statement of Operations
(Unaudited)
Three months
ended July 31,
1999 1998
---- ----
Revenue
Food and beverage sales $523,212 $457,512
Merchandise, memorabilia
and consulting fee 104,726 83,584
Interest income 6,800 6,111
Other income 4,536 8,235
----- -----
$639,273 $555,443
Expense
Cost of food and beverage sales 132,964 123,513
Cost of merchandise and
memorabilia sales 38,403 24,686
Restaurant payroll and related costs 172,046 150,743
Restaurant occupancy costs 52,695 52,494
Other restaurant costs 95,846 90,987
General and administrative 116,598 76,686
Depreciation and amortization 12,220 13,567
Interest expense 920 -
---
621,692 532,676
Net Income $17,581 $22,767
Less preferred stock dividends $15,998 $16,800
------- -------
Net income (loss) available to
common share holders $1,584 $5,967
====== ======
Basic earnings per share $0.00 $0.00
===== =====
Earnings per common share
- assuming full dilution $0.00 $0.00
===== =====
See notes to consolidated financial statements
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,
1999 1998
---- ----
Cash flows from operating activities:
Net income $17,581 $22,767
Adjustments to reconcile net income
to cash provided by
(used ) by operating activities:
Depreciation and amortization 12,201 13,567
Changes in asset and liabilities
Accounts receivable 97 (38)
Inventories (2,406) 18,191
Prepaid expenses (7,314) (8,145)
Accounts payable 62,932 6,971
Other accrued expenses (2,106) (6,520)
Deferred lease concessions (727) (363)
---- ----
Net cash provided (used)
by operating activities 80,258 46,430
Cash flows from investing activities:
Purchase of restricted securitites (100,000) -
Purchase of marketable investment securitites (67,030) -
------- ---
Net cash provided by investing activities (167,030) -
Cash flows from financing activities:
Repayment of borrowings (1,053) -
------ ---
Net cash provided (used)
by financing activities (1,053) -
Net increase (decrease)
in cash and cash equivalents (87,825) 46,430
Cash and cash equivalents
at beginning of year 726,241 631,230
Cash and cash equivalents at July 31 638,416 677,660
== ======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for interest 919 -
See notes to consolidated financial statements
5
<PAGE>
CHAMPIONS SPORTS, INC.
Notes to Consolidated Financial Statements
July 31, 1999
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, 1999, the consolidated statements
of operations and the consolidated statements of cash flows for the three months
ended July 31, 1999 and July 31,1998 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, 1999 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, 1999. The results of operations for the
period ended July 31, 1999 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 three month period ended July 31, 1999, the Company's net
income was $17,581, and the net income available to common shareholders was
$1,584 ($0.00 per common share). For the three months ended July 31, 1998, the
net income was $22,767 and the net income available to common shareholders of
$5,967 ($0.00 per common share). The Company's assets increased to $1,425,472 at
July 31, 1999 from $1,350,134 at April 30, 1999.
Revenues
- --------
The Company's total revenues were $639,273 for the three months ended
July 31, 1999 versus $555,443 for the three month period ended July 31, 1998, an
increase of $83,830 or 15.1%. By component, food and beverage sales increased
14.3% from the previous year for the three months ended July 31, 1999. This
increase in food and beverage sales is attributed to a increase in customer
volume during the NBA championship playoff games held in San Antonio during June
1999, as there were no material price increases for menu items. Merchandise,
memorabilia and consulting revenues increased 25.3% for the three months ended
July 31, 1999 to $104,726 compared to $83,584 during the comparable period in
the prior year. This increase is attributed to the increase in merchandise sales
at the San Antonio location. Interest income was 1.1% of the Company's total
revenue for both comparable periods. Other income represented approximately 1.0%
of total revenues for the three months ended July 31, 1999 and 1998.
Expenses
- --------
Cost of food and beverage was 25.4% of related sales for the three
months ended July 31, 1999 compared to 27.0% for the three months ended July 31,
1998. Cost of merchandise and memorabilia sales for the three months ended July
31, 1998 was $38,403 compared to $24,686 in the preceding year. Restaurant
payroll and related costs were 32.9% of related food and beverage sales for the
three months ended July 31, 1999 and 1998. Restaurant occupancy costs remained
constant for both comparable periods. Other restaurant costs also remained
constant during both periods at approximately 19% of food and beverage sales.
General and administrative expense for the Company's corporate office was 18.2%
of the Company's total revenues for the three months ended July 31, 1999
compared to 13.8 % of total revenues for the three months ended July 31,
Depreciation and amortization expense decreased to $12,220 during the three
months ended July 31, 1999 from $13,567 during the three months ended July 31,
1998, as some of the Company's restaurant equipment has become fully
depreciated.
7
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The Company's cash position on July 31, 1999 was $638,416 compared to
$726,241 on April 30, 1999, a decrease of $87,825. For the three month ended
July 31, 1999, the Company's operating activities provided net cash of $80,258.
The Company used its cash to repay equipment leases for $1,053. The Company
purchased marketable investment securities for $67,030 and restricted securities
for $100,000. For the three months ended July 31, 1998, the Company operating
activities provided $46,430 in cash. During the three months ended July 31,
1998, the Company did not use any funds for investing. The Company met its cash
needs during the three months ended July 31, 1999 and 1998 from its revenues and
from cash flow from its San Antonio, Texas operation. The Company anticipates
that it will be able to meet its cash requirements for the next twelve months
from its cash reserves and from its operating activities.
The Company's working capital was $396,834 on July 31 1999 and $535,863 on
April 30, 1999.
Stockholder's equity was $903,962 as of July 31, 1999 compared to $887,670
as of April 30, 1999.
The Company continues to review and evaluate its operations and
priorities. The Company is actively pursuing merger or acquisition candidates
and other opportunities to met its longer term liquidity needs. 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.
YEAR 2000
- ---------
The Company has taken appropriate measures by purchasing software and
computer equipment that is compliant with identifying the year 2000. However,
the Company relies on outside vendors and financial institutions and there is no
assurance that these vendors and financial institutions will be able to meet the
year 2000 requirements.
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
<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
hereunto duly authorized.
CHAMPIONS Sports, Inc.
/s/ James Martell
-----------------
James Martell
Chairman, President and Chief Executive Officer
/s/ James E. McCollam
-----------------------
James E. McCollam
Corporate Secretary, Chief Accounting
Officer and Controller
September 14, 1999
10
<PAGE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-END> JUL-31-1999
<CASH> 638,416
<SECURITIES> 167,030
<RECEIVABLES> 703
<ALLOWANCES> 0
<INVENTORY> 22,582
<CURRENT-ASSETS> 880,198
<PP&E> 1,110,101
<DEPRECIATION> (742,909)
<TOTAL-ASSETS> 1,425,472
<CURRENT-LIABILITIES> 483,364
<BONDS> 0
0
533,250
<COMMON> 8,504
<OTHER-SE> 362,209
<TOTAL-LIABILITY-AND-EQUITY> 903,962
<SALES> 632,473
<TOTAL-REVENUES> 639,273
<CGS> 171,367
<TOTAL-COSTS> 224,741
<OTHER-EXPENSES> 128,818
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 920
<INCOME-PRETAX> 17,581
<INCOME-TAX> 0
<INCOME-CONTINUING> 17,581
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,581
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
