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, 2001
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 Boulevard, Arlington, VA
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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 14, 2001 the Registrant had a total of 8,514,459 shares of
common stock outstanding.
CHAMPIONS SPORTS, Inc.
FORM 10-QSB
INDEX
Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
October 31, 2001 (unaudited) and
April 30, 2001 3
Consolidated Statements of Operations:
Three months and six months ended
October 31, 2001, and October 31, 2000,
(unaudited) 4
Consolidated Statements of Cash Flows:
Six months ended October 31, 2001, and October 31, 2000
(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
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
Assets
October 31, April 30,
2001 2001
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UNAUDITED
Current assets
Cash and cash equivalents $358,471 $451,650
Accounts receivable - trade 300 1,326
Inventories 19,552 25,056
Prepaid expenses 14,539 17,411
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Total current assets 392,862 495,443
Property and equipment
Furniture and equipment 563,560 562,981
Leasehold improvements 584,772 584,772
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1,148,332 1,147,753
Accumulated depreciation and amortization (852,223) (828,013)
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296,109 319,740
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Other assets
Available for sale investments, at cost 50,000 50,000
Deposits 11,052 11,052
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Total assets $750,023 $876,235
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Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $101,798 $126,240
Dividend payable on preferred stock 447,692 447,692
Other accrued expenses 57,502 58,479
Deferred revenue 0 64,625
Current portion of deferred lease concession 4,363 4,363
Current portion of capital lease obligation 7,333 10,283
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Total current liabilities 618,688 711,682
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Capital lease obligation, net of current portion 0 1,940
Deferred lease concession, net of current portion 11,193 11,556
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Total liabilities 629,881 725,178
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Stockholders' equity
Preferred stock
Series A, 12% Convertible Cumulative;
$10 par value; preferred as to
dividends and liquidation;
56,075 shares authorized and 53,125 shares
issued and
outstanding for October 31 and April 30, 2001 531,252 531,252
Common stock, par value $.001 per share,
50,000,000
shares authorized and 8,514,459 shares
issued and outstanding for October 31
and April 30, 2001 8,514 8,514
Additional paid-in capital 5,337,599 5,337,599
Accumulated deficit (5,757,223) (5,726,308)
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Total stockholders' equity 120,142 151,057
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Total liabilities and stockholders' equity $750,023 $876,235
============================
See notes to consolidated financial statements
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three months Six months
ended October 31, ended October 31,
2001 2000 2001 2000
Unaudited Unaudited
Revenue
Food and beverage $423,208 $450,308 $953,617 $953,699
Merchandise, memorabilia, and consulting fees 97,539 10,529 115,647 111,740
Interest income 2,451 7,377 5,880 14,199
Other income 4,888 1,967 7,882 3,909
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528,086 470,181 1,083,026 1,083,547
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Costs and expenses
Cost of food and beverage sales 109,523 116,910 247,449 243,498
Cost of merchandise and memorabilia 29,157 31,987 63,950 65,130
Restaurant payroll and related costs 151,593 161,938 337,412 335,926
Restaurant occupancy costs 58,674 53,801 123,138 106,119
Other restaurant costs 85,254 95,515 172,051 181,860
General and administrative 78,365 165,298
Depreciation and amortization 12,104 12,104 24,209 24,209
Interest 457 948 1,035 1,622
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525,127 551,484 1,113,944 1,123,663
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Operating income (loss) before income tax expense 2,959 (81,303) (30,918) (40,116)
Loss from discontinued operations 0 (78,409) 0 (78,409)
Loss on security held for sale 0 0 0 (50,000)
Income tax expense 0 0 0 0
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Net income (loss) 2,959 (159,712) (30,918) (168,525)
====================== ==============================
Less preferred stock dividends (net of conversions) (15,938) (15,938) (31,876) (31,876)
Net income (loss) available to common $(12,979) $(175,650) $(62,794) $(200,401)
====================== ==============================
stockholders
Basic earnings (loss) per share $(0.00) $(0.02) $(0.01) $(0.02)
====================== ==============================
Earnings (loss) per common share - assuming
dilution $(0.00) $(0.02) $(0.01) $(0.02)
====================== ==============================
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
For the six months ended October 31
2001 2000
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Unaudited
Cash flows from operating activities:
Net loss $(30,918) $(168,525)
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 24,210 24,209
Loss on restricted securities held for sale 0 50,000
Changes in assets and liabilities:
Accounts receivable 1,026 108,111
Inventories 5,504 (2,266)
Prepaid expenses 2,872 3,383
Deferred revenues (64,625) 0
Accounts payable (24,442) (25,227)
Other accrued expenses (977) (5,812)
Deferred lease concessions (363) (2,544)
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Net cash provided (used) by
operating activities (87,713) (18,671)
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Cash flows from investing activities:
Purchases of property and equipment (576) (19,913)
Leasehold Improvements 0 (6,922)
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Net cash (used) by investing activities (576) (26,835)
Cash flows from financing activities:
Principal payments on capital lease (4,890) (3,996)
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Net increase (decrease) in cash and
cash equivalents (93,179) (49,502)
Cash and cash equivalents at beginning of year 451,650 591,208
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Cash and cash equivalents at October 31 $358,471 $541,706
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Supplemental disclosures of cash flow information:
Cash paid during the year for interest $1,035 $1,622
========================
See notes to consolidated financial statements
CHAMPIONS SPORTS, INC.
Notes to Consolidated Financial Statements
October 31, 2001
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, 2001, the consolidated
statements of operations for the three months and six months ended October 31,
2001 and October 31, 2000 and the consolidated statements of cash flows for the
six months ended October 31, 2001 and October 31, 2000 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, 2001 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, 2001. The results of operations for the
period ended October 31, 2001 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, the ongoing threat of terrorism, customer acceptance of
products offered and other general competitive factors, and the ability to have
access to financing sources on reasonable terms. 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.
Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operation
For the six months ended October 31, 2001, the Company's net loss from
operations was $30,918 before preferred stock dividends of $31,876 resulting in
a net loss available to common shareholders of $62,794 or ($0.01) per common
share
For the six months ended October 31, 2000, the Company's net loss from
operations was $40,116 before preferred stock dividends of $31,876 resulting in
a net loss from continuing operations of $71,992. The Company also realized a
loss from discontinued operations of $78,409 and a loss on a security held for
sale of $50,000. The net loss available for common shareholders for the six
months ended October 31, 2000 was $200,401.
The Company's assets decreased to $750,023 at October 31, 2001 from
$876,235 at April 30, 2001 as a result of the net loss for the six month period.
Revenues
The Company's total revenues were essentially the same for the six month
period and increased 12.3% for the three month period ended October 31, 2001.
The Company's total revenues were $1,083,026 and $1,083,547 for the six months
ended October 31, 2001 and 2000. By component, food and beverage sales were
nearly exactly the same for the comparable six month periods. Although sales at
the San Antonio Champions dropped dramatically for a period of time after the
tragic events of September 11, 2001, sales at this location have rebounded to
levels comparable to the prior year. While the continued threat of terrorism
looms over the country, there can be no assurance that sales will remain
comparable to the prior year. For the three month period, food and beverage
sales decreased 6.2% for the comparable period. The decrease in food and
beverage sales for the three month period is a result of the events of September
11, 2001. Merchandise and memorabilia sales for the six months ended October 31,
2001 were $115,647 compared to $111,740 in the comparable period. The Company
provided sports memorabilia to one Marriott Champions location during the six
months ended October 31, 2001 and 2000. 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, 2001 and 2000.
Expenses
Cost of food and beverage remained relatively constant at 25.9% versus
25.5% of food and beverage sales of for the six months ended October 31, 2001
and 2000. Cost of merchandise and memorabilia sales was 55.3% and 58.3% of
related sales for the six months ended October 31, 2001 and 2000. During the six
months ended October 31, 2000, the Company wrote down memorabilia inventory of
approximately $23,000. Restaurant payroll and related costs also remained
relatively constant at 35.4% and 35.2% of related sales for the six months ended
October 31, 2001 and 2000. Restaurant occupancy costs increased to 12.9% of
restaurant sales compared to 11.1% of related sales for the six month comparable
periods. This is attributed to an increase in common area charges and real
estate taxes passed on by the landlord. Other restaurant costs were 18.0% of
sales compared to 19.1% for the comparable period. General and administrative
expense for the Company's corporate office was $144,700 or 13.4% of the
Company's total revenues for the six months ended October 31, 2001 compared to
$165,298 or 15.3% for the six months ended October 31, 2000. This decrease is
attributed to the Company's effort to contain its costs and expenses in the
uncertainty of the current economic climate. For the six months ended October
31, 2000, the Company expended $78,409 for its effort to diversify into
high-technology with the formation of a wholly owned subsidiary, Champions Tech
Ventures. These diversification efforts proved to be unsuccessful and the
Company ceased funding the operations of Champions Tech Ventures in March 2001
and divested its ownership in the subsidiary. 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, 2001 was $358,471 compared to
$451,650 on April 30, 2001, a decrease of $93,179. For the six months ended
October 31, 2001, the Company's operating activities used $87,713 in cash. The
Company used its cash to repay equipment leases for $4,890. The Company
purchased a nominal amount of equipment.
For the six months ended October 31, 2000, the Company's operating
activities used $18,671 in cash. The Company purchased $19,913 in property and
equipment and $6,922 in leasehold improvements. The Company repaid $3,996 in
capital leases. During the six months ended October 31, 2001 and 2000, the
Company met its cash needs from its revenues and cash reserves and from cash
flow from its San Antonio operation.
On October 31, 2001 the Company's working capital was a negative $225,826
versus a negative 216,239 on April 30, 2001. The Company anticipates that the
revenues generated from its operations and its cash reserves will be sufficient
to meet its operating obligations for the next twelve months.
Stockholder's equity decreased to $120,142 as of October 31, 2001 compared
to $151,057 as of April 30, 2001, as a result of the net loss for the six month
period.
Subsequent Events
In November, 2001, 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 as of October 31, 2001. The Board of
Directors also voted to defer the annual meeting of security holders in order to
preserve the Company's cash reserves.
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, 2001.
Item 6. Exhibits and Reports on Form 8-K
None.
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____
James M. Martell
President
__/s/ James E. McCollam__
James E. McCollam
Controller and Chief Accounting
Officer
December 14, 2001