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, 2002
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
(State or other jurisdiction of (I.R.S. Employer
organization) Identification No.)
Suite 214, 2420 Wilson Blvd., Arlington VA 22201
(Address of principal executive offices)
(Zip code)
(703) 526-0400
(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 September 12, 2002 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
July 31, 2002(unaudited) and
April 30, 2002 3
Consolidated Statements of Operations:
Three months ended
July 31, 2002, and July 31, 2001,
(unaudited) 4
Consolidated Statements of Cash Flows:
Three months ended July 31, 2002, and
July 31,2001 (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
July 31, 2002 April 30, 2002
------------- --------------
Current assets
Cash and cash equivalents $ 400,266 $ 449,282
Accounts receivable - trade - 54
Inventories 28,855 25,555
Prepaid expenses 12,738 14,035
------ ------
Total current assets 441,859 488,926
Property and equipment
Furniture and equipment 582,669 577,371
Leasehold improvements 584,772 584,772
------- -------
1,167,441 1,162,143
Accumulated depreciation
and amortization (888,537) (876,432)
-------- --------
278,904 285,711
Other assets
Deposits 11,052 11,052
------ ------
Total assets $ 731,815 $ 785,689
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 136,540 $ 88,104
Dividend payable on preferred stock 511,442 511,442
Other accrued expenses 59,351 52,790
Deferred revenue 89,531 124,871
Current portion of deferred lease concession 4,363 4,363
Current portion of capital lease obligation - 1,929
Total current liabilities 801,227 783,499
---------------------------
Capital lease obligation,
net of current portion - -
Deferred lease concession,
net of current portion 6,105 7,195
----- -----
Total liabilities 807,332 7,195
------- -----
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 July 31
and April 30, 2002 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 July 31 and April 30, 2002 8,514 8,514
Additional paid-in capital 5,397,598 5,392,599
Accumulated deficit 6,012,881) (5,937,370)
--------- ----------
Total stockholders' equity (75,517) (5,005)
------- ------
Total liabilities and stockholders' equity $ 731,815 $ 876,235
=========== ===========
See notes to consolidated financial statements
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
July 31,
2002 2001
---- ----
Revenue
Food and beverage $507,115 $530,409
Merchandise, memorabilia,
andd consulting fees 8,133 18,108
Interest income 1,180 3,429
Other income 1,654 2,994
----- -----
518,082 554,940
Costs and expenses
Cost of food and beverage sales 120,513 137,926
Cost of merchandise and memorabilia 21,897 34,793
Restaurant payroll and related costs 181,347 185,819
Restaurant occupancy costs 72,402 64,464
Other restaurant costs 87,066 86,797
General and administrative 98,183 66,335
Depreciation and amortization 12,105 12,105
Interest 50 578
-- ---
593,563 588,817
Operating income (loss)
before income tax expense (75,481) (33,877)
Income tax expense - -
Net loss (75,481) (33,877)
Less preferred stock dividends (15,938) (15,938)
------- -------
Net income (loss) available to common
stockholders $(91,419) $(49,815)
======== ========
Basic earnings (loss) per share $(0.01) $(0.01)
------ ------
Earnings (loss) per common share - assuming
dilution $(0.01) $(0.01)
------ ------
See notes to consolidated financial statements
Increase (Decrease) in Cash and Cash Equivalents
For the three months ended July 31
2002 2001
---- ----
Cash flow from operating activities:
Net loss $(75,481) $(33,877)
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 12,104 12,104
Changes in assets and liabilities:
Accounts receivable 54 1,326
Inventories (3,300) 9,879
Prepaid expenses 1,297 (5,005)
Accounts payable 48,436 (4,480)
Other accrued expenses 6,531 8,820
Deferred revenues (35,340) -
Deferred lease concessions (1,090) (363)
------ ----
Net cash provided (used) by
operating activities (46,789) (11,596)
Cash flows from investing activities:
Stock subscriptions 5,000 -
Purchases of property and equipment (5,298) -
------ ------
Net cash (used) by investing activities (298) -
Cash flows from financing activities:
Principal payments on capital lease (1,929) (2,384)
------ ------
Net increase (decrease) in cash and
cash equivalents (49,016) (13,980)
Cash and cash equivalents at beginning of year 449,282 451,650
------- -------
Cash and cash equivalents at July 31 $400,266 $437,670
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $50 $578
See notes to consolidated financial statements
CHAMPIONS SPORTS, INC.
Notes to Consolidated Financial Statements
July 31, 2002
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, 2002, the consolidated
statements of operations and the consolidated statements of cash flows for the
three months ended July 31, 2002 and July 31, 2001 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,
2002 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, 2002. The results of operations for the
period ended July 31, 2002 are not necessarily indicative of the operating
results for the full year.
Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operation
For the three months ended July 31, 2002, the Company's net loss was
$75,481, and the net loss available for common shareholders was $91,419, ($0.01)
per common share. The Company's total assets decreased by $53,874 to $731,815
from $785,689 at April 30, 2002.
For the three months ended July 31, 2001, the Company's net loss was
$33,877 and the net loss available for common shareholders was $49,815, ($0.01)
per common share. The Company's total assets decreased by $32,285 to $843,950 at
July 31, 2001 from $876,235 at April 30, 2001
Revenues
The Company's total revenues were $518,082 for the three months ended July
31, 2002 versus $554,940 for the three-month period ended July 31, 2001, a
decrease of $36,858 or 6.6%. By component, food and beverage sales decreased
4.4% from the previous year. This decline in food and beverage sales is
attributed to a decrease in customer volume due to the slowing economic climate.
Merchandise, memorabilia and consulting revenues were $8,133 for the three
months ended July 31, 2002 compared to $18,108 for the three months ended July
31, 2001. Interest income was less than 1.0% of the Company's total revenue for
both comparable periods. Other income also represented less than 1.0% of total
revenues for the three months ended July 31, 2002 and 2001.
Expenses
Cost of food and beverage was 23.8% and 26.0 % of related sales for the
three months ended July 31, 2002 and 2001. Cost of merchandise and memorabilia
sales for the three months ended July 31, 2001 was $21,897 compared to $34,793
in the preceding year. Restaurant payroll and related costs were 35.8% of
related food and beverage sales for the three months ended July 31, 2002 and
35.0% for the three months ended July 31, 2001. The increase in restaurant
payroll is attributed to the necessity to increase hourly wages to retain
experienced workers. Restaurant occupancy costs were $72,402 or 14.3% of food
and beverage sales compared to $64,464 or 12.2% of related sales during the
three months ended July 31, 2002. This increase in occupancy costs is attributed
to the percentage paid to the landlord in common area charges and base rent.
Other restaurant costs were 17.2% of related food and beverage sales for the
three months ended July 31, 2002 compared to 16.4% of related sales during the
three months ended July 31, 2001. General and administrative expense for the
Company's corporate office was 19.0% of the Company's total revenues for the
three months ended July 31, 2002 compared to 16.4 % of total revenues for the
three months ended July 31,2002. Depreciation and amortization expense were
constant at approximately 2% of the Company's total revenues during each
comparable period.
Liquidity and Capital Resources
The Company's cash position as of July 31, 2002 was 400,266 compared to
$449,282 on April 30, 2002, a decrease of $49,016. For the three month period,
the Company's operations used $46,789 in cash in excess of revenues. The Company
received $5,000 from a common share subscription. The Company purchased
equipment for its restaurant in San Antonio totaling $5,298 and finished paying
for a capital lease of $1,929. The Company met its liquidity needs during the
period from its revenues, cash reserves and cash flow provided from its San
Antonio location.
The Company's cash position on July 31, 2001 was $437,670 compared to
$451,650 on April 30, 2001 a decrease of $13,980. For the three months ended
July 31, 2001, the Company's operations used $11,596 in cash. The Company used
its cash to repay a capital lease for $2,384. The Company met its liquidity
needs during the period from its revenues, cash reserves and cash flow provided
from its San Antonio location. The Company is uncertain 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 a negative $359,368 on July 31 2002 and
$294,573 on April 30, 2002.
Stockholder's equity was a negative $75,517, as of July 31, 2002 compared
to a negative $60,005 as of April 30, 2002.
The Company continues to review and evaluate its operations and priorities.
The Company is actively pursuing merger or acquisition candidates to meet its
liquidity needs. There is no assurance that the Company will be able to
structure a merger or acquisition on terms satisfactory to the Company.
Other
In January 2002, the Company entered into an agreement with a private
investor, to purchase from the Company 4,000,000 shares of the Company's common
restricted stock at a purchase price of $0.125 per share in the aggregate amount
of $500,000 payable in monthly installments to be used by the Company to provide
general working capital. The purchaser has paid a total of $60,000 at July
31,2002 and has not met the payment terms of the agreement. The Company believes
that the agreement may not be fulfilled.
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.
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.
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 Martell
James Martell
Chairman, President
and Chief Executive Officer
/s/ James E. McCollam
James E. McCollam
Corporate Secretary, Chief Accounting
Officer and Controller
September 12 2002