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 January 31, 2002
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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.)
2420 Wilson Blvd., Suite 214, 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 March 15, 2002 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
January 31, 2002 (unaudited) and
April 30, 2001 3
Consolidated Statements of Operations:
Three months and nine months ended
January 31, 2002, and January 31, 2001,
(unaudited) 4
Consolidated Statements of Cash Flows:
Nine months ended January 31, 2002, and
January 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
2
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
Assets
January 31 April 30,
2002 2001
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UNAUDITED
Current assets
Cash and cash equivalents ................................ $ 282,849 $ 451,650
Accounts receivable - trade .............................. 300 1,326
Inventories .............................................. 23,005 25,056
Prepaid expenses ......................................... 14,764 17,411
Deferred tax asset ....................................... -- --
Total current assets ..................................... 320,918 495,443
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Property and equipment
Furniture and equipment .................................. 570,261 562,981
Leasehold improvements ................................... 584,772 584,772
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1,155,033 1,147,753
Accumulated depreciation and amortization ................ (864,327) (828,013)
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290,706 319,740
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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 ............................................. $ 672,676 $ 876,235
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Liabilities and Stockholders' Equity
Current liabilities
Accounts payable ......................................... $ 60,360 $ 126,240
Dividend payable on preferred stock ...................... 511,442 447,692
Other accrued expenses ................................... 44,230 58,479
Deferred Revenues ........................................ -- 64,625
Current portion of deferred lease concession ............. 4,363 4,363
Current portion of capital lease obligation .............. 4,683 10,283
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Total current liabilities ................................ 625,078 711,682
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Capital lease obligation, net of current portion ......... -- 1,940
Deferred lease concession, net of current portion ........ 8,286 11,556
Total liabilities ........................................ 633,364 725,178
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Stockholders' equity
Series A, 12% Convertible Cumulative; $10 par value;
preferred as to dividendsand liquidation;
56,075 shares authorized; 53,125 shares issued and
outstanding for January 31, 2002 and April 30, 2001
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 January 31,2002 and April 30, 2001,
respectively ............................................ 8,514 8,514
Additional paid-in capital ............................... 5,357,598 5,337,599
Accumulated deficit ...................................... (5,858,052) (5,726,308)
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Total stockholders' equity ............................... 39,312 151,057
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Total liabilities and stockholders' equity ............... $ 672,676 $ 876,235
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See notes to consolidated financial statements
3
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Unaudited
Three months Nine Months
ended January 31, ended January 31,
2002 2001 2002 2001
Unaudited Unaudited
Revenue
Food and beverage ............................... $ 506,775 $ 460,900 $ 1,460,392 $ 1,414,600
Merchandise, memorabilia, and consulting fees ... 9,040 9,389 124,687 121,129
Interest income ................................. 1,035 7,171 6,915 21,369
Other income .................................... 2,094 38 9,976 3,947
$ 518,944 $ 477,498 $ 1,601,970 $ 1,561,045
Costs and expenses
Cost of food and beverage sales ................. $ 129,464 $ 115,847 $ 376,913 $ 359,345
Cost of merchandise and memorabilia ............. 6,517 32,333 70,467 97,464
Restaurant payroll and related costs ............ 172,720 159,468 510,132 495,394
Restaurant occupancy costs ...................... 62,690 107,354 185,828 213,473
Other restaurant costs .......................... 85,744 95,029 257,795 276,889
General and administrative ...................... 86,469 90,331 231,169 255,630
Depreciation and amortization ................... 12,105 12,105 36,314 36,314
Interest ........................................ 313 830 1,348 2,453
$ 556,022 $ 613,298 $ 1,669,966 $ 1,736,961
Operating income (loss) before income tax expense ($ 37,078) ($ 135,800) ($ 67,996) ($ 175,915)
Loss from discontinued operations ............... -- (141,825) -- (220,234)
Gain/(Loss) on security held for sale ........... -- -- -- (50,000)
Income tax expense .............................. -- -- -- --
Net income (loss) .............................. ($ 37,078) ($ 277,625) ($ 67,996) ($ 446,149)
Less: preferred stock dividends ................. (15,938) (15,938) (47,814) (47,814)
Net income (loss) available to common ........... ($ 53,016) ($ 293,563) ($ 115,810) ($ 493,963)
stockholders
Basic earnings (loss) per share ................. ($ 0.01) ($ 0.03) ($ 0.01) ($ 0.06)
Earnings (loss) per common share - assuming
dilution ...................................... ($ 0.01) ($ 0.03) ($ 0.01) ($ 0.06)
See notes to consolidated financial statements
4
CHAMPIONS SPORTS, INC. AND SUBSIDARIES
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
For the nine months ended January 31,
Unaudited
2002 2001
Cash flows from operating activities:
Net income (loss) ................................ ($ 67,996) ($446,149)
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization .................... 36,314 36,314
Loss from discontinued operations ................ -- 220,234
Loss on securities held for sale ................. -- 50,000
Changes in assets and liabilities:
Accounts receivable .............................. 1,026 110,608
Inventories ...................................... 2,051 (27,717)
Prepaid expenses ................................. 2,647 9,104
Deferred revenues ................................ (64,625) 100,000
Accounts payable ................................. (65,880) 70,214
Other accrued expenses ........................... (14,249) (16,575)
Deferred lease concessions ....................... (3,270) (3,638)
Net cash provided (used) by
operating activities ........................... (173,982) 102,395
Cash flows from investing activities:
Purchases of property and equipment .............. (7,280) (19,913)
Leasehold improvements ........................... -- (13,810)
Investment in discontinued operation ............. (220,234)
Stock subscription receivable .................... 20,000 --
Net cash (used) by investing activities .......... 12,720 (253,957)
Cash flows from financing activities:
Principal payments on capital lease .............. (7,540) (6,150)
Net increase (decrease) in cash and
cash equivalents ............................... (168,802) (157,712)
Cash and cash equivalents at April 30, ........... 451,650 591,208
Cash and cash equivalents at January 31, ......... 282,849 433,496
Supplemental disclosures of cash flow information:
Cash paid during the year for interest ........... 1,348 2,453
See notes to consolidated financial statements
5
CHAMPIONS SPORTS, INC.
Notes to Consolidated Financial Statements
January 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 January 31, 2002, the consolidated
statements of operations and the consolidated statements of cash flows for the
three months and nine months ended January 31, 2002 and January 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 January 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, 2001. The results of operations for the period
ended January 31, 2002 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.
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Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operation
For the nine month period ended January 31, 2002, the Company's net loss
was $67,996 or ($0.01) per common share as compared to a net loss of $446,149 or
($0.06) per common share for the nine month period ended January 31, 2001. For
the nine months ended January 31, 2002, the net loss was from the Company's
ongoing operations. For the nine months ended January 31, 2001, the Company's
ongoing operations generated a loss of $175,915, the Company's loss from its
discontinued operation was $220,234 and a loss of $50,000 from a security held
for trade.
Dividends accrued for the Company's Preferred Stock (net of conversions)
totaled $47,814. The Company's assets decreased to $672,676 at January 31, 2002
from $876,235 at April 30, 2001. For the three months ended January 31, 2002 the
Company's net loss from its ongoing operations was $37,078 compared to a net
operating loss of $135,800 during the three months ended January 31, 2001.
Revenues
The Company's total revenues increased 2.6% to $1,601,970 for the nine
months ended January 31, 2002 versus $1,561,045 for the nine month period ended
January 31, 2001. By component, food and beverage sales increased 3.2% from the
previous year for the nine months and 9.9% for the three months period from the
previous year. The increase in food and beverage sales is attributed to a
increase in customer volume. Merchandise and memorabilia sales for the nine
months ended January 31, 2002 increased slightly to $124,687 compared to
$121,129. The Company provided memorabilia and consulting services to one
Marriott CHAMPIONS during each comparable period. For the three months ended
January 31, 2002 and 2001,merchandise and memorabilia sales were less than 2% of
the Company's total revenues. For the nine months ended January 31, 2002 and
2001, other income was less than 1% of the Company's total revenues. Interest
income in all comparable periods was also less than 1% the Company's total
revenue.
Expenses
Cost of food and beverage remained constant at approximately 25.5% of
related sales for all comparable periods. This is attributed to stable prices at
the wholesale level. Cost of merchandise and memorabilia sales for the nine
months ended January 31, 2002 was $70,467 compared to $97,464 in the preceding
year. During the nine months ended January 31, 2001, the Company wrote down
memorabilia inventory of approximately $23,000. Restaurant payroll and related
costs were approximately 35.0% of related food and beverage sales for all
comparable periods. Restaurant occupancy costs were $185,828 for the nine months
and $62,690 for the three months ended January 31, 2002 compared to $213,473 for
the nine month and $107,354 for the three month comparable period in 2001. The
increase in 2001 was attributed to a retroactive increase in common area charges
and real estate taxes passed on by the landlord. Other restaurant costs were
17.7% of food and beverage sales for the nine months and 16.9% of food and
beverage sales for the three months ended Jannuary 31, 2002 compared to 19.6% of
food and beverage sales for the comparable nine month and 20.6% for the three
months in 2001. General and administrative expense was $231,169 for the nine
months ended January 31, 2002 compared to $255,630 for the nine months ended
January 31, 2001. Depreciation and amortization expense accounted for 2.3 % of
the Company's total revenues during the nine months ended January 31, 2002 and
2000.
7
Liquidity and Capital Resources
The Company's cash position on January 31, 2002 decreased by $168,802 to
$282,849 from $451,650 on April 30, 2002. For the nine months ended January 31,
2002, the Company's ongoing operations used cash totaling $173,982. For the
comparable period ending January 31, 2001, the Company's ongoing operations
provided cash of $102,395. At January 31, 2002 and 2001, the Company held
$50,000 of restricted securities of a privately held company. For the nine
months ended January 31, 2002, the Company purchased equipment for its San
Antonio location for $7,280. During the nine months ended January 31, 2001, the
Company purchased equipment for its San Antonio CHAMPIONS for $19,913 and made
leasehold improvements in that same location totaling $13,810.
The Company met its cash needs during the nine months ended January 31,
2002 and 2001 from its revenues and from cash flow from its San Antonio, Texas
operation. The Company anticipates that the revenues generated from its location
in San Antonio, Texas along with revenues generated from its consulting and
sales of memorabilia will be sufficient to meet its operating obligations for
the next twelve months. In January 2002, the Company entered into an agreement
with a private investor, JMS New York, Inc., 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 Company's working capital was a negative $304,160 on January 31, 2002
and negative $216,239 on April 30, 2001.
Stockholder's equity was $39,312. as of January 31, 2002 compared to
$151,057 as of April 30, 2001.
Other
In November 2001, the Company's Board of Directors voted to defer the
annual meeting of shareholders in order to preserve the Company's cash position.
The Board further voted to defer the payment of the annual dividend on the
Company's 12% Preferred Stock to preserve the Company's cash position. This
amount is accrued on the Company's books as a current liability.
Part II. Other Information
Item 4. Submission of Matters to A Vote of Security Holders
8
None
Item 6. Exhibits and Reports on Form 8-K
On January 15, 2002, Champions Sports, Inc. entered into an agreement with
a private investor, JMS New York, Inc. 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 24 equal monthly
installments to be used by the Company to provide general working capital.
9
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 Martell
James Martell
President
/s/ James E. McCollam
James E. McCollam
Corporate Secretary, Chief Accounting
Officer and Controller
March 15, 2001
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