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, 2003
--------------------------------------------------------
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.)
2420 Wilson Blvd., Suite 214, 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 March 14, 2003 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
January 31, 2003 (unaudited) and
April 30, 2002 3
Consolidated Statements of Operations:
Three months and nine months ended
January 31, 2003, and January 31, 2002,
(unaudited) 4
Consolidated Statements of Cash Flows:
Nine months ended January 31, 2003, and
January 31,2002 (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
January 31, 2003 April 30, 2002
---------------------------------
Current assets
Cash and cash equivalents 196,296 449,282
Accounts receivable - trade 25 54
Inventories 24,137 25,555
Prepaid expenses 16,123 14,035
------ ------
Total current assets 236,581 488,926
Property and equipment
Furniture and equipment 588,272 577,371
Leasehold improvements 584,772 584,772
------- -------
1,173,044 1,162,143
Accumulated depreciation and amortization (912,746) (876,432)
-------- --------
260,298 285,711
Deposits 11,052 11,052
Total assets 507,931 785,689
======= =======
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable 34,971 88,104
Dividend payable on preferred stock 575,193 511,442
Other accrued expenses 34,481 52,790
Deferred revenue - 124,871
Current portion of deferred lease concession 4,363 4,363
Current portion of capital lease obligation - 1,929
---- -----
Total current liabilities 649,008 783,499
Capital lease obligation, net of current portion - -
Deferred lease concession, net of current portion 3,925 7,195
----- -----
Total liabilities 652,933 790,694
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 January 31, 2003
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 January 31, 2003
and April 30, 2002 8,514 8,514
Additional paid-in capital 5,397,598 5,392,599
Accumulated deficit (6,082,366) (5,937,370)
---------- ----------
Total stockholders' equity (145,002) (5,005)
Total liabilities and stockholders' equity 507,931 876,235
======= =======
See notes to consolidated financial statements
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Unaudited
Three months Nine months
January 31 ended January 31,
2003 2002 2003 2002
Unaudited Unaudited
-------------------------------------------------------
Revenue
Food and beverage 443,847 506,775 1,404,772 1,460,392
Merchandise, memorabilia, and consulting fees 6,713 9,040 111,389 124,687
Interest income 571 1,035 2,609 6,915
Other income 2,052 2,094 5,955 9,976
----- ----- ----- -----
453,183 518,944 1,524,725 1,601,970
Costs and expenses
Cost of food and beverage sales 108,810 129,464 337,140 376,913
Cost of merchandise and memorabilia 6,365 6,517 34,990 70,467
Restaurant payroll and related costs 172,974 172,720 519,179 510,132
Restaurant occupancy costs 47,657 62,690 182,040 185,828
Other restaurant costs 86,635 85,744 265,929 257,795
General and administrative 61,765 86,469 230,798 231,169
Depreciation and amortization 12,105 12,105 36,314 36,314
Interest - 313 50 1,348
--- --- -- -----
496,311 556,022 1,606,440 1,669,966
------- ------- --------- ---------
Operating income (loss) before
income tax expense (43,128) (37,078) (81,715) (67,996)
Income tax expense - - - -
Net income (loss) (43,128) (37,078) (81,715) (67,996)
Less: preferred stock dividends (15,938) (15,938) (47,814) (47,814)
Net income (loss) available to
common stockholders (59,066) (53,016) (129,529) (115,810)
==============================================================
Basic earnings (loss) per share (0.01) (0.00) (0.02) (0.01)
==============================================================
Earnings (loss) per common share - assuming
full dulution (0.01) (0.01) (0.02) (0.01)
==============================================================
See notes to consolidated financial statements
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
UNAUDITED
Januay 31
2003 2002
Cash flows from operating activities:
Net profit (loss) (81,715) (67,996)
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Depreciation and amortization
36,314 36,314
Changes in assets and liabilities:
Accounts receivable 29 1,026
Inventories 1,418 2,051
Prepaid expenses (2,088) 2,647
Accounts payable (52,664) (65,880)
Other accrued expenses (18,309) (14,249)
Deferred revenues (124,871) (64,625)
Deferred lease concessions (3,270) (3,270)
------ ------
Net cash provided (used) by
operating activities (245,156) (173,982)
Cash flows from investing activities:
Stock subscriptions 5,000 20,000
Purchases of property and equipment (10,901) (7,280)
------- ------
Net cash (used) by investing activities (5,901) 12,720
Cash flows from financing activities:
Principal payments on capital lease (1,929) (7,540)
------ ------
Net increase (decrease) in cash and
cash equivalents (252,986) (168,802)
Cash and cash equivalents at beginning of year 449,282 451,650
------- -------
Cash and cash equivalents at January 31 196,296 282,849
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for interest 50 1,035
See notes to consolidated financial statements
CHAMPIONS SPORTS, INC.
Notes to Consolidated Financial Statements
January 31, 2003
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, 2003, the consolidated
statements of operations and the consolidated statements of cash flows for the
three months and nine months ended January 31, 2003 and January 31, 2002 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, 2002. The results of operations for the
period ended January 31, 2003 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 nine month period ended January 31, 2003, the Company's net loss
was $81,715 or ($0.02) per common share as compared to a net loss of $67,996 or
($0.01) per common share for the nine month period ended January 31, 2002. For
the nine months ended January 31, 2003 and January 31, 2002, the net loss was
from the Company's ongoing operations.
Dividends accrued for the Company's Preferred Stock (net of conversions)
totaled $47,814. The Company's assets decreased to $507,931 at January 31, 2003
from $785,689 at April 30, 2002. For the three months ended January 31, 2003 the
Company's net loss from its ongoing operations was $43,128 compared to a net
operating loss of $37,078 during the three months ended January 31, 2002.
Revenues
The Company's total revenues decreased 4.8% to $1,524,725 for the nine
months ended January 31, 2003 versus $1,601,970 for the nine month period ended
January 31, 2002. By component, food and beverage sales decreased 3.8% from the
previous year for the nine months and 12.4% for the three months period from the
previous year. The decrease in food and beverage sales is attributed to a
decrease in customer volume, and the current economic slowdown. Merchandise and
memorabilia sales for the nine months ended January 31, 2003 decreased to
$111,389 compared to $124,687. The Company provided memorabilia and consulting
services to one Marriott CHAMPIONS during each comparable period. For the three
months ended January 31, 2003 and 2002, merchandise and memorabilia sales were
less than 2% of the Company's total revenues. For the nine months ended January
31, 2003 and 2002, 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 deceased to 24.0% of related sales compared for
the nine months ended January 31, 2003 compared to 25.8% related sales for the
comparable period. This is attributed to stable prices at the wholesale level.
Cost of merchandise and memorabilia sales for the nine months ended January 31,
2003 was $34,990 compared to $70,467 in the preceding year. Restaurant payroll
and related costs were 37.0% of related food and beverage sales contrasted to
34.9% for the nine months ended January 31, 2002. The increase is attributed to
increases in health insurance benefits. Restaurant occupancy costs were $182,040
for the nine months and $47,657 for the three months ended January 31, 2003
compared to $185,828 for the nine months and $62,690 for the three month
comparable period in 2002. Other restaurant costs were 18.9% of food and
beverage sales for the nine months and 19.5% of food and beverage sales for the
three months ended January 31, 2003 compared to 17.7% of food and beverage sales
for the comparable nine month and 16.9% for the three months in 2002. General
and administrative expense was $230,798 for the nine months ended January 31,
2003 compared to $231,169 for the nine months ended January 31, 2002.
Depreciation and amortization expense accounted for approximately 2.5 % of the
Company's total revenues during the nine months ended January 31, 2003 and 2002.
Liquidity and Capital Resources
The Company's cash position on January 31, 2003 decreased by $252,986 to
$196,296 from $449,282 on April 30, 2002. For the nine months ended January 31,
2003, the Company's ongoing operations used cash totaling $245,156. For the
comparable period ending January 31, 2002, the Company's ongoing operations used
cash of $173,982. For the nine months ended January 31, 2003, the Company
purchased equipment for its San Antonio location for $10,901. During the nine
months ended January 31, 2002, the Company purchased equipment for its San
Antonio CHAMPIONS for $7,280.
The Company met its cash needs during the nine months ended January 31,
2003 and 2002 from its revenues and from cash flow from its San Antonio, Texas
operation. The Company is facing liquidity problems and is uncertain that it
will be able to continue operations with out an infusion of cash. The Company
continues to review and evaluate its operations and priorities. The Company is
actively pursuing merger or acquisition candidates and other financing
possibilities to meet its liquidity needs. There is no assurance that the
Company will be able to structure a merger or acquisition, or raise additional
financing on terms satisfactory to the Company.
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 as of January
31, 2003 and has not met the payment terms of the agreement. The Company
believes that the agreement may not be fulfilled
The Company's working capital was a negative $412,427 on January 31, 2003
and negative $294,573 on April 30, 2002.
Stockholder's equity was a negative $145,002 as of January 31, 2003
compared to a negative $5,005 as of April 30, 2002.
Other
In November 2002, 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
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
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 17, 2003