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, 2001
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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
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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 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 September 13, 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
July 31, 2001(unaudited) and
April 30, 2001 3
Consolidated Statements of Operations:
Three months ended
July 31, 2001, and July 31, 2000,
(unaudited) 4
Consolidated Statements of Cash Flows:
Three months ended July 31, 2001, and
July 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
July 31, April 30,
2001 2001
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Current assets
Cash and cash equivalents $437,670 451,650
Accounts receivable - trade - 1,326
Inventories 15,177 25,056
Prepaid expenses 22,416 17,411
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Total current assets 475,263 495,443
Property and equipment
Furniture and equipment 562,981 562,981
Leasehold improvements 584,772 584,772
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1,147,753 1,147,753
Accumulated depreciation and amortization (840,118) (828,013)
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307,635 319,740
Other assets
Available for sale investments, at cost 50,000 50,000
Deposits 11,052 11,052
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Total assets $843,950 $876,235
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Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $121,756 $126,240
Dividend payable on preferred stock 447,692 447,692
Other accrued expenses 67,299 58,479
Deferred revenue 64,625 64,625
Current portion of deferred lease concession 4,363 4,363
Current portion of capital lease obligation 9,839 10,283
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Total current liabilities 715,574 711,682
Capital lease obligation, net of current portion - 1,940
Deferred lease concession, net of current portion 11,193 11,556
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Total liabilities 726,767 725,178
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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
July 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 July 31
and April 30, 2001 8,514 8,514
Additional paid-in capital 5,337,599 5,337,599
Accumulated deficit (5,760,182) (5,726,308)
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Total stockholders' equity 117,183 151,057
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Total liabilities and stockholders' equity $843,950 $876,235
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See notes to consolidated financial statements
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the three months ended July 31
2001 2000
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Revenue
Food and beverage $530,409 $503,391
Merchandise, memorabilia,
and consulting fees 18,108 101,211
Interest income 3,429 6,822
Other income 2,994 1,942
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554,940 613,365
Costs and expenses
Cost of food and beverage sales 137,926 126,588
Cost of merchandise and memorabilia 34,793 33,143
Restaurant payroll and related costs 185,819 173,988
Restaurant occupancy costs 64,464 52,318
Other restaurant costs 86,797 86,345
General and administrative 66,335 87,018
Depreciation and amortization 12,105 12,105
Interest 578 674
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588,817 572,179
Operating income (loss)
before income tax expense (33,877) 41,186
Loss on restricted security held for sale - (50,000)
Income tax expense - -
Net loss (33,877) (8,814)
Less preferred stock dividends (15,938) (15,938)
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Net income (loss) available to common
stockholders $(49,815) $(24,752)
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Basic earnings (loss) per share $(0.00) $(0.00)
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Earnings (loss) per common share - assuming
dilution $(0.00) $(0.00)
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See notes to consolidated financial statements
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash
Equivalents
For the three months ended July 31
2001 2000
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Cash flows from operating activities:
Net loss $(33,877) $(8,814)
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 12,104 12,104
Loss on restricted securities held for sale - 50,000
Changes in assets and liabilities:
Accounts receivable 1,326 (71,583)
Inventories 9,879 (3,201)
Prepaid expenses (5,005) 12,620
Accounts payable (4,480) 22,255
Other accrued expenses 8,820 8,163
Deferred lease concessions (363) (1,454)
Net cash provided (used) by
operating activities (11,596) 20,090
Cash flows from investing activities:
Purchases of property and equipment - (15,187)
Net cash (used) by investing activities - (15,187)
Cash flows from financing activities:
Principal payments on capital lease (2,384) (1,948)
Net increase (decrease) in cash and
cash equivalents (13,980) 2,955
Cash and cash equivalents at beginning of year 451,650 591,208
Cash and cash equivalents at July 31 $437,670 $594,163
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $578 $674
See notes to consolidated financial statements
CHAMPIONS SPORTS, INC.
Notes to Consolidated Financial Statements
July 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 July 31, 2001, the consolidated
statements of operations and the consolidated statements of cash flows for the
three months ended July 31, 2001 and July 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 July 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 July 31, 2001 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 3, 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.
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.
Revenues
The Company's total revenues were $554,940 for the three months ended July
31, 2001 versus $613,365 for the three-month period ended July 31, 2000, a
decrease of $58,425 or 9.5%. By component, food and beverage sales increased
5.4% from the previous year. This improvement in food and beverage sales is
attributed to an increase in customer volume compared to the three months ended
July 31, 2000. Merchandise, memorabilia and consulting revenues were $18,108 for
the three months ended July 31, 2001 compared to $101,211 for the comparable
period in 2000. Interest income was 0.6% of the Company's total revenue for the
three months ended July 31, 2001 contrasted to 1.1% for the comparable period in
2000. Other income represented less than 1.0% of total revenues for the three
months ended July 31, 2001 and 2000.
Expenses
Cost of food and beverage was 26.0% and 25.1 % of related sales for the
three months ended July 31, 2001 and 2000. Cost of merchandise and memorabilia
sales for the three months ended July 31, 2001 was $34,793 compared to $33,143
in the preceding year. Restaurant payroll and related costs were 35.0% of
related food and beverage sales for the three months ended July 31, 2001 and
34.6% for the three months ended July 31, 2000. The increase in restaurant
payroll is attributed a scarce labor market and the necessity to increase hourly
wages to retain experienced workers. Restaurant occupancy costs were $64,464 or
12.2% of food and beverage sales compared to $52,318 or 10.4% of related sales
during the three months ended July 31, 2000. This increase in occupancy costs is
attributed to higher sales which in turn raises the percentage paid to the
landlord in common area charges and base rent. Other restaurant costs decreased
to 16.4% of related food and beverage sales for the three months ended July 31,
2001 compared to 17.2% of related sales during the three months ended July 31,
2000. General and administrative expense for the Company's corporate office was
12.0% of the Company's total revenues for the three months ended July 31, 2001
compared to 14.2 % of total revenues for the three months
ended July 31,2000. 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 on July 31, 2001 was $437,670 compared to
$451,650 on April 30, 200, 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
it 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.
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 restricted security held for sale. The Company met its liquidity
needs during the period from its revenues and cash flow from its San Antonio
location.
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 a negative $240,311 on July 31 2001 and
negative $216,239 on April 30, 2001.
Stockholder's equity was $117,183 as of July 31, 2001 compared to $876,235
as of April 30, 2001.
The Company continues to review and evaluate its operations and priorities.
The Company is actively pursuing merger or acquisition candidates to meet its
longer-term growth and 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
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.
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
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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
September 14, 2001