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, 2000
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
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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
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As of September 13, 2000, the Registrant had a total of 8,514,459
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
July 31, 2000 (unaudited) and
April 30, 2000 3
Consolidated Statements of Operations:
Three months ended
July 31, 2000, and July 31, 1999,
(unaudited) 4
Consolidated Statements of Cash Flows:
Three months ended July 31, 2000, and
July 31,1999 (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
Assets
July 31 April 30
2000 2000
---- ----
Current assets
Cash and cash equivalents $594,164 $591,208
Accounts receivable - trade 185,646 114,063
Inventories 27,382 24,181
Prepaid expenses 13,012 25,632
Deferred tax asset 207,952 207,952
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Total current assets 1,028,155 963,036
Property and equipment
Furniture and equipment 567,821 552,634
Leasehold improvements 570,962 570,962
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1,138,783 1,123,596
Accumulated depreciation and amortization (793,318) (781,214)
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345,465 342,382
Other assets
Available for sale investments, at cost 50,000 100,000
Deposits 11,052 11,052
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Total assets $1,434,672 $1,416,470
========== ==========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable 70,428 48,173
Dividend payable on preferred stock 383,940 383,940
Other accrued expenses 59,549 51,386
Current portion of deferred lease concession 4,363 4,363
Current portion of capital lease obligation 8,412 8,412
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Total current liabilities 526,692 496,274
Capital lease obligation, net of current portion 10,275 12,223
Deferred lease concession, net of current portion 14,827 16,281
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Total liabilities 551,795 524,778
Commitments and contingencies
Stockholders' equity
Preferred stock
Series A, 12% Convertible Cumulative;
$10 par value; preferred as to
dividends and liquidation;
56,075 shares authorized;
53,125 shares issued and outstanding
for July 31 and April 30, 2000 respectively 531,252 531,252
Common stock, par value $.001 per share,
50,000,000 shares authorized; 8,514,459
shares issued and outstanding at July 31
and April 30, 2000, respectively 8,514 8,514
Additional paid-in capital 5,337,599 5,337,599
Accumulated deficit (4,994,488) (4,985,673)
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Total stockholders' equity 882,877 891,692
Total liabilities and stockholders' equity $1,434,672 $1,416,470
========== ==========
See notes to consolidated financial statements
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CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three months ended July 31
2000 1999
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Revenue
Food and beverage $503,391 $523,212
Merchandise, memorabilia,
and consulting fees 101,211 104,726
Interest income 6,822 6,800
Other income 1,942 4,536
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613,365 639,274
Costs and expenses
Cost of food and beverage sales 126,588 132,964
Cost of merchandise and memorabilia 33,143 38,403
Restaurant payroll and related costs 173,988 172,046
Restaurant occupancy costs 52,318 52,695
Other restaurant costs 86,345 95,846
General and administrative 87,018 116,598
Depreciation and amortization 12,105 12,220
Interest 674 920
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572,179 621,692
Operating income before income tax expense 41,186 17,582
Loss on security held for sale (50,000) -
Income tax expense - -
Net income (loss) (8,814) 17,582
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Less preferred stock dividends (net of conversions) (15,938) (15,938)
Net income (loss) available to common
stockholders $(24,752) $1,644
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Basic earnings (loss) per common share $.00 $ .00
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Earnings (loss) per common share - assuming
dilution $.00 $.00
==== ====
See notes to consolidated financial statements
4
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CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
For the three months ended July 31
2000 1999
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Cash flows from operating activities:
Net income $(8,814) $17,581
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 12,104 12,201
Loss on sale of marketable securities 50,000 -
Changes in assets and liabilities:
Accounts receivable (71,583) 97
Inventories (3,201) (2,406)
Prepaid expenses 12,620 (7,314)
Accounts payable 22,255 62,932
Other accrued expenses 8,163 (2,106)
Deferred lease concessions (1,454) (727)
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Net cash provided (used) by
operating activities 20,090 80,258
Cash flows from investing activities:
Purchases of property and equipment (15,187)
Available for sale investments (100,000)
Purchase of marketable securities (67,030)
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Net cash (used) by investing activities (15,187) (167,030)
Cash flows from financing activities:
Principal payments on capital lease (1,948) (1,053)
Net increase (decrease) in cash and
cash equivalents 2,955 (87,825)
Cash and cash equivalents at beginning of year 591,208 726,241
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Cash and cash equivalents at end of year $594,163 $638,416
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for interest 674 919
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See notes to consolidated financial statements
5
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CHAMPIONS SPORTS, INC.
Notes to Consolidated Financial Statements
July 31, 2000
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, 2000, the consolidated
statements of operations and the consolidated statements of cash flows for the
three months ended July 31, 2000 and July 31,1999 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,
2000 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, 2000. The results of operations for the
period ended July 31, 2000 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 three months ended July 31, 2000, the Company's net loss was $8,814
and the net loss available for common shareholders was $24,752 ($0.00 per common
share). The Company's assets increased to $1,434,672 as of July 31, 2000 from
$1,416,470 at April 30, 2000.
For the three month period ended July 31, 1999, the Company's net income
was $17,582, and the net income available to common shareholders was $1,644
($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 $613,365 for the three months ended July
31, 2000 versus $639,274 for the three month period ended July 31, 1999, a
decrease of $25,909 or 4.1%. By component, food and beverage sales decreased
3.8% from the previous year. This decrease in food and beverage sales is
attributed to a decline in customer volume compared to the three months ended
July 31, 1999 when the NBA championship playoff games were held in San Antonio.
Merchandise, memorabilia and consulting revenues decreased 3.4% for the three
months ended July 31, 2000 to $101,211 compared to $104,726 during the
comparable period in the prior year. This decrease is attributed to slower
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
less than 1.0% of total revenues for the three months ended July 31, 2000 and
1999.
Expenses
Cost of food and beverage remained constant at 25.1% and 25.4 % of related
sales for the three months ended July 31, 2000 and 1999. Cost of merchandise and
memorabilia sales for the three months ended July 31, 2000 was $33,143 compared
to $38,403 in the preceding year. Restaurant payroll and related costs were
34.6% of related food and beverage sales for the three months ended July 31,
2000 and 32.9% for the three months ended July 31, 1999. The increase in
restaurant payroll is attributed the a scarce labor market and the necessity to
increase hourly wages to retain experienced workers. Restaurant occupancy costs
remained constant for both comparable periods. Other restaurant costs decreased
to 17.2% of related food and beverage sales for the three months ended July 31,
2000 compared to 18.3% of related sales during the three months ended July 31,
1999. General and administrative expense for the Company's corporate office was
14.2% of the Company's total revenues for the three months ended July 31, 2000
compared to 18.2 % of total revenues for the three months ended July 31,1999.
Depreciation and amortization expense were constant at approximately 2% of the
Company's total revenues during each comparable period.
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Liquidity and Capital Resources
The Company's cash position on July 31, 2000 was $594,164 compared to
$591,208 on April 30, 2000, a increase of $2,955. For the three months ended
July 31, 2000, the Company's operating activities provided cash of $20,090. The
Company purchased restaurant equipment for $15,187 and repaid capital leases for
$1,948. The Company realized a loss of $ 50,000 on a security held for sale. The
Company met its liquidity needs during the period from its revenues and cash
flow from its San Antonio location.
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. The Company met its cash needs
during the three months ended July 31, 1999 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 $501,463 on July 31 2000 and $466,762 on
April 30, 2000.
Stockholder's equity was $882,877 as of July 31, 2000 compared to $891,692
as of April 30, 2000.
The Company continues to review and evaluate its operations and priorities.
The Company is actively pursuing merger, acquisition candidates and alternative
means of diversifying to meet its longer term liquidity needs. There is no
assurance that the Company will be able to structure a merger, acquisition or
diversification 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 and services
offered and other general competitive factors.
8
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Subsequent Events
On August 23, 2000, the Company announced its intention to diversify into
high-technology area by expanding its management to focus on business
opportunities in that sector. The Company signed agreements with James J. Heigl,
Jr to be its Chief Executive Officer and Director, and Harry A. Lee to be its
Chief Operating Officer and Director. Mr. Heigl was subsequently elected
Chairman of the Board of Directors.
The Company intends to change its name to Champions Ventures Group, Inc.
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
hereunto duly authorized.
CHAMPIONS Sports, Inc.
/s/ James J. Heigl, Jr.
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James J. Heigl, Jr
Chairman and Chief Executive Officer
/s/ James E. McCollam
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James E. McCollam
Corporate Secretary, Chief Accounting
Officer and Controller
September 13, 2000
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