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, 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 Boulevard, Arlington, VA 22201
-----------------------------------------------------
(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, 1999 the Registrant had a total of 8,513,591 cares
of common stock outstanding.
1
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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, 1999(unaudited) and
April 30, 1999 3
Consolidated Statements of Operations:
Three months and six months ended
October 31, 1999, and October 31, 1998,
(unaudited) 4
Consolidated Statements of Cash Flows:
Six months ended October 31, 1999, and
October 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
OCT 31, APRIL 30
1999 1999
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents $524,470 $726,241
Marketable securities 111,059 -
Accounts receivable - trade 75,831 800
Inventories 25,042 20,176
Prepaid expenses 8,725 3,232
Deferred tax asset 207,952 207,952
------- -------
Total current assets 953,079 958,401
Property and Equipment
Furniture and Equipment 540,287 539,139
Leasehold improvements 570,962 570,962
------- -------
1,111,249 1,110,101
Accumulated depreciation
and amortization (755,014) (729,420)
-------- --------
356,235 380,681
Other assets
Deposits 11,052 11,052
Investments 100,000 -
------- ------
Total assets $1,420,366 $1,350,134
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $79,278 $36,817
Dividend payable on preferred stock 336,450 336,450
Notes payable 6,885 6,885
Other accrued expenses 32,947 38,023
Current portion of
deferred lease concession 4,363 4,363
----- -----
Total current liabilities 459,923 422,538
Deferred lease concession
(excluding current portion) 18,463 20,281
Note payable, excluding current portion 17,465 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
October 31 and April 30, 1999 533,250 557,752
Common stock, par value $.001 per share,
50,000,000 shares authorized: 8,513,59
and 8,500,638 shares issued and
outstanding at October 31 and April 30, 1999 8,504 8,502
Additional paid-in capital 5,334,322 5,311,111
Accumulated deficit (4,951,561) (4,989,695)
---------- ----------
Total stockholders' equity 924,515 887,670
Total liabilities and stockholders' equity $1,420,366 $1,350,134
========== ==========
See notes to consolidated financial statements
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
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue
Food and beverage sales $393,356 $409,568 $916,568 $867,080
Merchandise, memorabilia
and consulting fees 85,818 10,641 190,544 94,225
Interest income 5,390 6,107 12,190 12,218
Other income 3,547 2,019 8,083 10,254
----- ----- ----- ------
$488,112 $428,335 1,127,385 $983,777
Expense
Cost of food and beverage sales 103,194 110,475 236,158 233,988
Cost of merchandise and memorabilia 22,367 6,318 60,770 31,004
Restaurant payroll and related costs 142,454 147,022 314,500 297,766
Restaurant occupancy costs 51,158 54,513 103,853 107,007
Other restaurant costs 77,477 98,367 173,323 189,354
General and administrative 57,959 87,615 174,557 164,301
Depreciation and amortization 12,105 13,567 24,325 27,134
Interest expense 846 - 1766 -
------ ------ ------ ------
467,560 517,878 1,089,252 1,050,554
Net Income (loss) from operations $20,552 ($89,543) $38,133 ($66,776)
Less preferred stock dividends $15,998 $16,800 $31,996 $33,600
------- ------- ------- -------
Net income (loss) $4,554 ($106,343) $6,137 ($100,376)
Basic earnings (loss) per share $0.00 ($0.01) $0.00 ($0.01)
Earnings per common share -
fully diluted $0.00 ($0.01) $0.00 ($0.01)
===== ====== ===== ======
See notes to consolidated financial
statements
</TABLE>
4
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CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
For the six months ended October 31,
1999 1998
---- ----
Cash flows from operating activities:
Net income $38,133 ($66,776)
Adjustments to reconcile net income
to cash provided by (used )
by operating activities:
Depreciation and amortization 24,325 27,135
Changes in asset and liabilities
Accounts receivable (75,031) (38)
Inventories (4,866) 5,712
Prepaid expenses (5,493) (9,103)
Accounts payable 42,461 9,047
Other accrued expenses (5,076) (25,718)
Deferred lease concessions (1,837) (723)
------ ----
Net cash provided (used)
by operating activities 12,616 (60,464)
Cash flows from investing activities:
Purchase of restricted securities (100,000) -
Purchase of marketable investment securities (111,059) -
Purchase of property and equipment (1,148) (2,884)
------ ------
Net cash provided by investing activities (212,207) (2,884)
Cash flows from financing activities:
Repayment of borrowings (2,180) -
------
Net cash provided(used)byfinancing activities (2,180) -
Net increase(decrease)in cash and cash equivalents (201,771) (63,348)
Cash and cash equivalents at beginning of year 726,241 631,230
------- -------
Cash and cash equivalents at October 31, 524,470 567,882
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for interest 1,766 -
See notes to consolidated financial statements
5
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CHAMPIONS SPORTS, INC.
Notes to Consolidated Financial Statements
October 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 October 31, 1999, the consolidated
statements of operations for the three months and six months ended October 31,
1999 and October 31, 1998 and the consolidated statements of cash flows for the
six months ended October 31, 1999 and October 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 October
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 October 31, 1999 are not necessarily indicative of the operating
results for the full year.
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.
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, 1999, the Company's net income
from operations was $38,133 before preferred stock dividends of $31,996
resulting in a net income of $6,137 or $0.00 per common share. For the six
months ended October 31, 1998, the Company sustained a loss from operations of
$66,776 before preferred stock dividends of $33,600 which resulted in a net loss
of $100,376 or ($0.01) per common share.
The Company's assets increased to $1,420,366 at October 31, 1999 from
$1,350,134 at April 30, 1999 as a result of the net income for the six month
period.
Revenues
The Company's total revenues increased 14.6% for the six month period
and 14.0% for the three month period ended October 31, 1999. The Company's total
revenues were$1,127,385 and $983,777 for the six months ended October 31, 1999
and 1998. By component, food and beverage sales increased 5.7% to $916,568 for
the six months ended October 31, 1999 from $867,080 for the six months ended
October 31, 1998. The increase in food and beverage sales is attributed to an
increase in both customer volume and sales prices. For the three month period ,
food and beverage sales decreased 4.0% for the comparable period. The decrease
in food and beverage sales is a result of a decline in customer volume during
the quarter ended October 31, 1999. Merchandise and memorabilia sales for the
six months ended October 31, 1999 were $190,544 compared to $94,225 in the
comparable period. The Company provided sports memorabilia to two Marriott
Champions locations during the six months ended October 31, 1999 and one
Marriott Champions location during the six months ended October 31, 1998.
Interest income and other income represent 1% or less of the Company's total
revenues for the three months and six months ended October 31, 1999 and 1998.
Expenses
Cost of food and beverage decreased to 25.8% versus 27.0% of food and
beverage sales of for the six months ended October 31, 1999 and 1998. Cost of
merchandise and memorabilia sales was 31.9% and 32.9% of related sales for the
six months ended October 31, 1999 and 1998. Restaurant payroll and related costs
remained constant at 34.3% or food and beverage sales for the six months ended
October 31, 1999 and 1998. Restaurant occupancy costs represented 11.3% and
12.3% of restaurant sales for the six month periods. Other restaurant costs
decreased to 18.9% of food and beverage sales compared to 21.8% of related sales
in the six months ended October 31, 1998. General and administrative expense for
the Company's corporate office was 15.5% of the Company's total revenues for the
six months ended October 31, 1999 compared to 16.7% for the six months ended
October 31, 1998. Depreciation and amortization expense represented less than 3%
of the Company's total revenues during each six month period.
Liquidity and Capital Resources
The Company's cash position on October 31, 1999 was $524,470 compared
to $726,241 on April 30, 1999, a decrease of $201,771. For the six months ended
October 31, 1999, the Company's operating activities provided $12,616 in cash.
The Company used its cash to repay equipment leases for $2,180. The Company
purchased marketable investment securities for $111,059 and restricted
investment securities for $100,000. The Company purchased equipment for $1,148.
For the six months ended October 31, 1998, the Company's operating activities
used $60,464 in cash. The Company purchased $2,884 in property and equipment.
During the six months ended October 31, 1999
7
<PAGE>
and 1998, the Company met its cash needs from its revenues and cash reserves and
from cash flow from its San Antonio operation. On October 31, 1999, the
Company's working capital was $493,156 versus $535,863 on April 30, 1999. 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
twelve months.
Stockholder's equity increased to $924,515 as of October 31, 1999
compared to $887,670 as of April 30, 1999, as a result of the net income for the
six month period.
In October, 1999, the Board of Directors, in order to preserve the
Company's cash reserves, voted to defer payment of $63,990, the annual dividend
on the Series A, 12% convertible, cumulative Preferred Stock, par value $10, of
which there were 53,325 shares outstanding at October 31, 1999. 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 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.
YEAR 2000
The Company has taken appropriate measures by purchasing software and
computer equipment that is compliant with identifying the year 2000. The Company
relies on outside vendors and financial institutions and all of whom have
indicated to the Company that their computer systems are compliant for
identifying the year 2000.
.
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, 1999.
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______
James Martell
Chairman, President and
Chief Executive Officer
__/s/ James E. McCollam__
James E. McCollam
Controller and
Chief Accounting Officer
December 14, 1999
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-END> JUL-31-1999
<CASH> 524,470
<SECURITIES> 111,059
<RECEIVABLES> 75,831
<ALLOWANCES> 0
<INVENTORY> 25,042
<CURRENT-ASSETS> 953,079
<PP&E> 1,111,249
<DEPRECIATION> (755,014)
<TOTAL-ASSETS> 1,420,366
<CURRENT-LIABILITIES> 459,923
<BONDS> 0
0
533,250
<COMMON> 8,504
<OTHER-SE> 382,761
<TOTAL-LIABILITY-AND-EQUITY> 1,420,366
<SALES> 1,107,112
<TOTAL-REVENUES> 1,127,385
<CGS> 296,928
<TOTAL-COSTS> 591,676
<OTHER-EXPENSES> 198,882
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,776
<INCOME-PRETAX> 38,133
<INCOME-TAX> 0
<INCOME-CONTINUING> 38,133
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
