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, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
[ ] THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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 Boulevard, 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 December 10, 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
October 31, 2000 (unaudited) and
April 30, 2000 3
Consolidated Statements of Operations:
Three months and six months ended
October 31, 2000, and October 31, 1999,
(unaudited) 4
Consolidated Statements of Cash Flows:
Six months ended October 31, 2000, and
October 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
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<TABLE>
<CAPTION>
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
Assets
October 31, April 30,
2000 2000
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UNAUDITED
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<S> <C> <C>
Current assets
Cash and cash equivalents ................................... $541,706 $591,208
Accounts receivable - trade ............................... 5,952 114,063
Inventories ............................................... 26,447 24,181
Prepaid expenses .......................................... 22,249 25,632
Deferred tax asset ........................................ 207,952 207,952
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Total current assets ............................... 804,305 963,036
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Property and equipment
Furniture and equipment ................................... 572,547 552,634
Leasehold improvements .................................... 577,884 570,962
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1,150,432 1,123,596
Accumulated depreciation and amortization ................. (805,423) (781,214)
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345,009 342,382
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Other assets
Available for sale investments, at cost ................... 50,000 100,000
Deposits .................................................. 11,052 11,052
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Total assets ....................................... $1,210,366 $1,416,470
========== ==========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable .......................................... $22,946 $48,173
Dividend payable on preferred stock ....................... 383,940 383,940
Other accrued expenses .................................... 45,574 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 .......................... 465,236 496,274
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Capital lease obligation, net of current portion ............. 8,227 12,223
Deferred lease concession, net of current portion ............ 13,737 16,281
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Total liabilities .................................. 487,199 524,778
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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
October 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 October, 31 and April 30, 2000,
respectively ............................................ 8,514 8,514
Additional paid-in capital ................................ 5,337,599 5,337,599
Accumulated deficit ....................................... (5,154,198) (4,985,673)
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Total stockholders' equity ......................... 723,167 891,692
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Total liabilities and stockholders' equity ......... $1,210,366 $1,416,470
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See notes to consolidated financial statements
</TABLE>
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<TABLE>
<CAPTION>
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Unaudited
Three months Six months
ended October 31, ended October 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenue
Food and beverage ........................... $450,308 $393,356 $953,699 $916,568
Merchandise, memorabilia, and consulting fees 10,529 85,818 111,740 190,544
Interest income ............................. 7,377 5,390 14,199 12,190
Other income ................................ 1,967 3,547 3,909 8,083
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470,181 488,111 1,083,547 1,127,385
Costs and expenses
Cost of food and beverage sales ............. 116,910 103,194 243,498 236,158
Cost of merchandise and memorabilia ......... 31,987 22,367 65,130 60,770
Restaurant payroll and related costs ........ 161,938 142,454 335,926 314,500
Restaurant occupancy costs .................. 53,801 51,158 106,119 103,853
Other restaurant costs ...................... 95,515 77,477 181,860 173,323
General and administrative .................. 156,689 57,959 243,707 174,557
Depreciation and amortization ............... 12,104 12,105 24,209 24,325
Interest .................................... 948 846 1,622 1,766
--- --- ----- -----
629,893 467,560 1,202,072 1,089,252
Operating income(loss) before income tax expense (159,712) 20,551 (118,525) 38,133
Loss on security held for sale .................. -- -- (50,000) --
Income tax expense .............................. -- -- -- --
Net income (loss)......................... (159,712) 20,551 (168,525) 38,133
Less preferred stock dividends (net of .......... (15,938) (15,938) (31,876) (31,876)
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conversions)
Net income (loss) available to common .... $(175,650) $4,613 $(200,401) $6,257
========= ====== ========= ======
stockholders
Basic earnings (loss) per share ................. $0.02) $0.00 $(0.02) $0.00
Earnings (loss) per common share - assuming
dilution ...................................... $(0.02) $0.00 $(0.02) $0.00
See notes to consolidated financial statements
</TABLE>
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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,
Unaudited
2000 1999
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Cash flows from operating activities:
Net inccome (loss) ............................. (168,525) 38,133
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization ................ 24,209 24,325
Loss on securities held for sale ............. 50,000 --
Changes in assets and liabilities:
Accounts receivable ....................... 108,111 (75,031)
Inventories ............................... (2,266) (4,866)
Prepaid expenses .......................... 3,383 (5,493)
Accounts payable .......................... (25,227) 42,461
Other accrued expenses .................... (5,812) (5,076)
Deferred lease concessions ................ (2,544) (1,837)
Net cash provided (used) by
operating activities ................ (18,671) 12,616
Cash flows from investing activities:
Purchases of property and equipment ............ (19,913) (1,148)
Leasehold improvements ......................... (6,922)
Available for sale investments ................. -- (100,000)
Purchase of marketable securities .............. -- (111,059)
Net cash (used) by investing activities (26,835) (212,207)
Cash flows from financing activities:
Principal payments on capital lease ............ (3,996) (2,180)
Net increase (decrease) in cash and
cash equivalents ................................. (49,502) (201,771)
Cash and cash equivalents at beginning of year ..... 591,208 726,241
Cash and cash equivalents at end of year ........... 541,706 524,470
Supplemental disclosures of cash flow information:
Cash paid during the year for interest ......... 1,622 1,766
See notes to consolidated financial statements
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CHAMPIONS SPORTS, INC.
Notes to Consolidated Financial Statements
October 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 October 31, 2000, the consolidated
statements of operations for the three months and six months ended October 31,
2000 and October 31, 1999 and the consolidated statements of cash flows for the
six months ended October 31, 2000 and October 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 October
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 October 31, 2000 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 involve risk and
uncertainties. The Company's actual results could differ materially from those
anticipated in the 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, and the ability to have access to financing sources on
reasonable terms in order to pursue the Company's diversification efforts.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's analysis, judgment, belief or expectation
only as of the date hereof.
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Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operation
For the six months ended October 31, 2000, the Company's net loss from
operations was $168,525 before preferred stock dividends of $31,876 resulting in
a net loss of $200,401 or ($0.02) per common share
For the six months ended October 31, 1999, the Company's net income
from operations was $38,133 before preferred stock dividends of $31,876
resulting in a net income of $6,257 or $0.00 per common share.
The Company's assets decreased to $1,210,366 at October 31, 2000 from
$1,416,470 at April 30, 2000 as a result of the net loss for the six month
period.
Revenues
The Company's total revenues decreased 3.9% for the six month period
and 3.7% for the three month period ended October 31, 2000. The Company's total
revenues were $1,083,547 and $1,127,385 for the six months ended October 31,
2000 and 1999. By component, food and beverage sales increased 4.1% to $953,699
for the six months ended October 31, 2000 from $916,568 for the six months ended
October 31, 1999. The increase in food and beverage sales is attributed to an
increase in customer volume and an increase in the average customer check, as
there were no increases in retail pricing. For the three month period, food and
beverage sales increased 14.5% for the comparable period. The increase in food
and beverage sales is a result of an increase in customer volume during the
quarter ended October 31, 2000. Merchandise and memorabilia sales for the six
months ended October 31, 2000 were $111,740 compared to $190,544 in the
comparable period. The Company provided sports memorabilia to one Marriott
Champions locations during the six months ended October 31, 2000 and two
Marriott Champions location during the six months ended October 31, 1999.
Interest income and other income represent 2% or less of the Company's total
revenues for the three months and six months ended October 31, 2000 and 1999.
Expenses
Cost of food and beverage remained relatively constant at 25.5% versus
25.8% of food and beverage sales of for the six months ended October 31, 2000
and 1999. Cost of merchandise and memorabilia sales was 58.3% and 31.9% of
related sales for the six months ended October 31, 2000 and 1999. During the six
months ended October 31, 2000, the Company wrote down memorabilia inventory of
approximately $23,000. Restaurant payroll and related
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costs increased to 35.2% of related sales for the six months ended October 31,
2000 compared to 34.3% of food and beverage sales during 1999. Restaurant
occupancy costs remained constant at 11.1% and 11.3% of restaurant sales for the
six month comparable periods. Other restaurant costs also remained relatively
constant for the comparable periods at approximately 19.0% of restaurant sales.
General and administrative expense for the Company's corporate office was
$243,707 or 22.5% of the Company's total revenues for the six months ended
October 31, 2000 compared to $174,557 or 15.5% for the six months ended October
31, 1999. This increase is attributed to the Company's effort to diversify into
high-technology by expanding the management team to focus on business
opportunities in that sector as announced on August 23, 2000 and the formation
of a wholly owned subsidiary, Champions Tech Ventures. For the three and six
months ended October 31, 2000, the Company has expended approximately $85,000
for this diversification. To date, the Company's diversification efforts in
high-technology have not yet produced revenue.Depreciation and amortization
expense represented 2.2% of the Company's total revenues during each six-month
period.
Liquidity and Capital Resources
The Company's cash position on October 31, 2000 was $541,706 compared
to $591,208 on April 30, 2000, a decrease of $49,502. For the six months ended
October 31, 2000, the Company's operating activities used $18,671 in cash. The
Company used its cash to repay equipment leases for $3,996. The Company
purchased equipment for $19,913 and made leasehold improvements of $6,932.
For the six months ended October 31, 1999, the Company's operating
activities provided $12,616 in cash. The Company purchased $1,148 in property
and equipment. The Company, for the six months ended October 31, 1999, purchased
marketable investment securities for $111,059 and restricted investment
securities for $100,000. During the six months ended October 31, 2000 and 1999,
the Company met its cash needs from its revenues and cash reserves and from cash
flow from its San Antonio operation.
On October 31, 2000 the Company's working capital was $339,069 versus
$466,762 on April 30, 2000. To continue its diversification efforts, the Company
will need to raise additional capital through a Private Placement. The Company
anticipates that the revenues generated from its operations, its cash reserves
and its funding efforts, if successful, will be sufficient to meet its operating
obligations for the next twelve months. Should the Company be unable to raise
sufficient capital, its diversification efforts may be halted.
Stockholder's equity decreased to $723,167 as of October 31, 2000
compared to $891,692 as of April 30, 2000, as a result of the net loss for the
six month period.
<PAGE>
Subsequent Events
In November, 2000, the Board of Directors, in order to preserve the
Company's cash reserves, voted to defer payment of $63,750, the annual dividend
on the Series A, 12% convertible, cumulative Preferred Stock, par value $10, of
which there were 53,125 shares outstanding at October 31, 2000. The Board of
Directors also voted to defer the annual meeting of security holders in order to
preserve the Company's cash reserves.
Other Matters
The Company continues to review and evaluate its operations and
priorities, and is actively pursuing its diversification opportunities to meet
its longer-term growth and liquidity needs. The Company is considering a Private
Placement to fund its diversification efforts into high-technology, however,
there is no assurance that the Company will be able to raise sufficient capital,
if any, to continue it's diversification efforts. Should the Company be unable
to raise sufficient capital, its diversification efforts may be halted.
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, 2000.
Item 6. Exhibits and Reports on Form 8-K
None.
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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 M. Martell
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James M. Martell
President
/s/ James E. McCollam
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James E. McCollam
Controller and Chief Accounting
Officer
December 14, 2000
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