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, 1999
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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 214, 2420 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 12,1999, 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, 1999 (unaudited) and
April 30, 1998 3
Consolidated Statements of Operations:
Three months and nine months ended
January 31, 1999, and January 31, 1998,
(unaudited) 4
Consolidated Statements of Cash Flows:
Nine months ended January 31, 1999, and
January 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
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<TABLE>
<CAPTION>
Champions Sports, Inc. and Subsidiaries
Consolidated Balance Sheets
ASSETS January 31 April 30
1999 1998
<S> <C> <C>
Current assets
Cash and cash equivalents $689,696 $631,230
Accounts receivable - trade 26,450 612
Inventories 60,527 69,594
Prepaid expenses 14,024 3,850
Deferred tax asset 207,952 207,952
Total current assets 998,649 913,238
Property and Equipment
Furniture and Equipment 534,546 530,531
Leasehold improvements 570,962 570,962
1,105,508 1,101,493
Accumulated depreciation and amortization (741,058) (700,356)
364,450 401,137
Other assets
Deposits 13,065 13,065
Total assets $1,376,164 $1,327,440
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $126,446 $42,672
Dividend payable on preferred stock 336,450 269,160
Other accrued expenses 36,011 48,038
Current portion of deferred lease concession 4,363 4,363
Total current liabilities 503,271 364,233
Deferred lease concession (excluding current portion) 21,372 24,644
Stockholders' equity
Preferred stock:
Series A, 12% convertible cumulative, par value $10 per share,
preferred as to dividends and liquidation: 56,075 shares
authorized, issued and outstanding. 560,752 560,752
Common stock, par value $.001 per share,
50,000,000 shares authorized, 8,500,638
shares issued and outstanding at
January 31, 1999 and April 30, 1998 8,501 8,501
Additional paid-in capital 5,308,112 5,308,112
Accumulated deficit (5,025,843) (4,938,802)
Total stockholders' equity 851,522 938,563
Total liabilities and stockholders' equity $1,376,164 $1,327,440
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,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenue
Food and beverage sales $409,758 $486,297 $1,276,838 $1,330,285
Merchandise, memorabilia and licensing fees 236,703 97,753 330,929 333,025
Interest income 5,571 4,686 17,789 5,936
Other income 3,493 7,083 13,747 18,582
Total Revenues $655,525 $595,818 $1,639,302 $1,687,829
Expense
Cost of food and beverage sales $112,295 $133,296 $346,282 $368,825
Cost of merchandise and memorabilia 74,828 35,888 105,832 65,163
Restaurant payroll and related costs 150,960 168,334 448,726 466,615
Restaurant occupancy costs 48,415 45,142 155,422 136,157
Other restaurant costs 93,900 101,144 283,254 268,858
General and administrative 114,536 72,884 278,837 293,448
Depreciation and amortization 13,567 13,567 40,702 40,702
Interest expense - - - 455
Total Expense $608,500 $570,255 $1,659,054 $1,640,223
Net Income (loss) from operations $47,025 $25,563 $(19,751) $47,605
Extraordinary gain - - - 290,641
Net income (loss) $47,025 $25,563 $(19,751) $338,246
Basic earnings per share $0.01 $0.00 $0.00 $0.04
Earnings per common share - fully diluted $0.00 $0.00 $0.00 $0.03
Weighted average number of common
shares outstanding during the period 8,500,638 8,500,638 8,500,638 8,500,638
See notes to consolidated financial statements
</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,
<S> <C> <C>
1999 1998
Cash flows from operating activities:
Net income (loss) $(19,751) $338,246
Adjustments to reconcile net income
to cash provided by (used ) by operating activities:
Depreciation and amortization 40,702 40,702
Extraordinary gain - (290,641)
Changes in asset and liabilities
Accounts receivable (25,838) 13,766
Inventories 9,067 (5,190)
Prepaid expenses (10,174) (305)
Accounts payable 83,774 (7,313)
Other accrued expenses (12,027) (14,941)
Deferred lease concessions (3,272) (3,273)
Net cash provided (used) by operating activities 62,481 71,051
Cash flows from investing activities:
Purchase of certificate of deposit
Purchase of property and equipment
(4,015) (10,749)
Net cash provided by investing activities (4,015) (10,749)
Cash flows from financing activities:
Repayment of borrowings - (17,201)
Net cash provided (used) by financing activities - (17,201)
Net increase (decrease) in cash and cash equivalents 58,466 43,101
Cash and cash equivalents at beginning of year 631,230 219,881
Cash and cash equivalents at January 31 $689,696 $553,621
Supplemental disclosure of cash flow information:
Cash paid during the period for interest - -
See notes to consolidated financial statements
</TABLE>
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CHAMPIONS SPORTS, INC.
Notes to Consolidated Financial Statements
January 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 January 31, 1999, the consolidated
statements of operations and the consolidated statements of cash flows for the
three months and nine months ended January 31, 1999 and January 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 January 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, 1998. The results of operations for the
period ended January 31, 1999 are not necessarily indicative of the operating
results for the full year.
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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, 1999, the Company incurred a
loss of $19,751 or $0.00 per common share as compared to a net profit of
$338,246 or $0.04 per common share for the nine month period ended January 31,
1998. Net loss for the nine months ended January 31, 1999 was from the Company's
ongoing operations, compared to a profit of $47,605 from continuing operations
in the comparable period ended January 31, 1998. 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 $1,376,164 at
January 31, 1999 from $1,327,440 at April 30, 1998. The Company's net profit
from its ongoing operations was $47,025 for the three months ended January 31,
1999 versus $25,563 for the three months ended January 31, 1998.
Revenues
The Company's total revenues were $1,639,302 for the nine months ended
January 31, 1999 versus $1,687,829 for the nine month period ended January 31,
1998, a decrease of 2.9%. By component, food and beverage sales decreased 4.0%
from the previous year for the nine months and decreased 15.7% for the three
months period from the previous year. This decrease in food and beverage sales
is attributed to a decrease in customer volume, especially during the NBA player
lockout. Sales trends have improved and are comparable to the prior year, now
that the NBA has commenced its season. Merchandise and memorabilia sales for the
nine months ended January 31, 1999 and 1998 accounted for approximately 20% of
the Company's total revenues. This was primarily memorabilia for Marriott
CHAMPIONS locations. For the three months ended January 31, 1999, this amount
was $236,703, or 36.1% of the Company's total revenue versus $97,753 or 16.4% of
the Company's revenues for the three months ending January 31, 1998. For the
nine months ended January 31, 1999, other income was $13,747 contrasted to
$18,582 for the nine months ended January 31, 1998. Interest income in both
comparable periods was less than 1.1% of the Company's total revenue.
Expenses
Cost of food and beverage remained constant at 27.1% of related sales for
the nine months and 27.4% for the three months ended January 31, 1999 compared
to 27.7% for the nine months and 27.4% for the three months ended January 31,
1998. This is attributed to stable prices at the wholesale level. Cost of
merchandise and memorabilia sales for the nine months ended January 31, 1999 was
$105,832 compared to $65,163 in the preceding year. Restaurant payroll and
related costs were 35.1% of related food and beverage sales for the nine months
and 36.8% for the three months ended January 31, 1999, versus 35.1% for the nine
months and 34.6% for the three months ended January 31, 1998. Restaurant
occupancy costs were $155,422 for the nine months and $48,415 for the three
months ended January 31, 1999 compared to $136,157 for the nine month and
6
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$45,142 for the three month comparable period in 1998. This increase is
attributed to higher common area charges and real estate taxes passed on by the
landlord. Other restaurant costs were 22.2% of food and beverage sales for the
nine months and 22.9% of food and beverage sales for the three months ended
January 31, 1999 compared to 20.2% of food and beverage sales for the comparable
nine month and 20.8% for the three months in 1998. General and administrative
expense for the Company's corporate office was $278,837 for the nine months
ended January 31, 1999 compared to $293,448 for the nine months ended January
31, 1998. Depreciation and amortization expense remained constant at $40,702
during the nine months ended January 31, 1999 and 1998.
Liquidity and Capital Resources
The Company's cash position on January 31, 1998 increased by $58,466 to
$689,696 from $631,230 on April 30, 1998. For the nine months ended January 31,
1999, the Company's ongoing operations provided cash of $62,481. The Company
purchased equipment for $4,000. 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. The Company met its cash needs during the nine
months ended January 31, 1999 and 1998 from its revenues and from cash flow from
its San Antonio, Texas operation.
The Company's working capital was $495,378 on January 31, 1999 and $527,356
on January 31 1998.
Stockholder's equity was $851,522 as of January 31, 1999 compared to
$938,563 as of April 30, 1998. In November 1998, 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
The Company relocated its corporate offices in January 1999 to 2420 Wilson
Blvd, Suite 214, Arlington, VA 22201.
In November 1998, the Company's Board of Directors voted to defer the
annual meeting of shareholders in order to preserve the Company's cash position.
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.
7
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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.
8
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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 12, 1999
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<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-END> JAN-31-1999
<CASH> 689,696
<SECURITIES> 0
<RECEIVABLES> 26,450
<ALLOWANCES> 0
<INVENTORY> 60,527
<CURRENT-ASSETS> 998,649
<PP&E> 1,105,508
<DEPRECIATION> 741,058
<TOTAL-ASSETS> 1,376,164
<CURRENT-LIABILITIES> 503,271
<BONDS> 0
560,752
0
<COMMON> 8,501
<OTHER-SE> 282,269
<TOTAL-LIABILITY-AND-EQUITY> 851,522
<SALES> 1,607,766
<TOTAL-REVENUES> 1,639,302
<CGS> 256,865
<TOTAL-COSTS> 1,339,516
<OTHER-EXPENSES> 278,837
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (19,751)
<INCOME-TAX> 0
<INCOME-CONTINUING> (19,751)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,751)
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
