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, 2003
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 Boulevard, 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 December 15, 2003 the Registrant had a total of 8,771,859 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, 2003 (unaudited) and
April 30, 2003 3
Consolidated Statements of Operations:
Three months and six months ended
October 31, 2003, and October 31, 2002,
(unaudited) 4
Consolidated Statements of Cash Flows:
Six months ended October 31, 2003, and
October 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
Item 4. Controls and Procedures 9
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
2003 2003
---- ----
Current assets
Cash and cash equivalents ................................................... $121,377 $195,101
Inventories ................................................................. 27,598 23,750
Prepaid expenses ............................................................ 15,285 10,836
------ ------
Total current assets ....................................................... 164,260 229,687
Property and equipment
Furniture and equipment .................................................... 589,437 586,506
Leasehold improvements ...................................................... 584,772 584,772
------- -------
1,174,209 1,171,278
Accumulated depreciation and amortization ................................... (949,060) (924,851)
-------- --------
225,149 246,427
Deposits ..................................................................... 11,052 11,052
------ ------
Total assets ............................................................ 400,461 487,166
Liabilities and Stockholders' (Deficiency of Net Assets)
Current liabilities
Accounts payable ............................................................ $73,679 $65,246
Dividend payable on preferred stock ......................................... 389,864 575,192
Other accrued expenses ...................................................... 36,954 49,280
Current portion of deferred lease concession ............................... 3,322 3,322
----- -----
Total current liabilities ................................................. 503,819 693,040
Deferred lease concession, net of current portion ............................. 968 3,875
--- -----
Total liabilities ....................................................... 504,787 696,915
Commitments and contingencies
Stockholders' (deficiency of net assets)
Preferred stock
Series A, 12% Convertible Cumulative; $10 par value;
preferred as to dividends and liquidation;
56,075 shares authorized and 35,965 and 53,125
shares issued and outstanding
at October 31 and April 30, 2003 ......................................... 359,650 531,250
Common stock, par value $.001 per share, 50,000,000 shares
authorized and 8,771,859 and 8,514,459 shares issued
and outstanding at October 31, and April 30, 2003 ........................ 8,772 8,514
Additional paid-in capital ................................................ 5,568,940 5,397,598
Accumulated deficit ........................................................ (6,041,688) (6,147,111)
---------- ----------
Total stockholders' (deficiency of net assets) .......................... (104,326) (209,749)
-------- --------
Total liabilities and stockholders' (deficiency of net
assets) ....................................................................... 400,461 487,166
======= =======
See notes to consolidated financial statements
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Unaudited
Three months Six months
ended October 31, ended October 31,
2003 2002 2003 2002
Unaudited Unaudited
--------- ---------
Revenue
Food and beverage ............................. $453,690 $453,810 $986,337 $960,925
Merchandise, memorabilia, and consulting fees . 5,755 96,543 12,918 104,676
Interest income ............................... 21 858 125 2,038
Other income .................................. 1,414 2,249 4,695 3,903
----- ----- ----- -----
460,880 553,460 1,004,075 1,071,542
Costs and expenses
Cost of food and beverage sales ............... 115,901 107,817 274,953 228,330
Cost of merchandise and memorabilia ........... 4,852 6,728 12,414 28,625
Restaurant payroll and related costs .......... 153,575 164,858 332,977 346,205
Restaurant occupancy costs .................... 62,156 61,981 129,522 134,383
Other restaurant costs ........................ 84,450 92,228 184,577 179,294
General and administrative .................... 60,399 70,850 125,328 169,033
Depreciation and amortization ................. 12,104 12,104 24,209 24,209
Interest ...................................... -- -- -- 50
-- -- -- --
493,437 516,566 1,083,980 1,110,129
Operating income (loss) before income tax expense (32,557) 36,894 (79,905) (38,587)
Income tax expense ............................ -- -- -- --
Net income (loss) .......................... (32,557) 36,894 (79,905) (38,587)
------- ------ ------- -------
Less: preferred stock dividends ................. (10,790) (10,790) (21,580) (21,580)
Net income (loss) available to common ....... (43,347) 26,104 (101,485) (60,167)
======= ====== ======== =======
stockholders
Basic earnings (loss) per share ................. (0.00) 0.00 (0.01) (0.01)
===== ==== ===== =====
Earnings (loss) per common share - assuming
dilution ...................................... (0.00) 0.00 (0.01) (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
October 31,
2003 2002
---- ----
Cash flows from operating activities:
Net profit (loss) .............................. (79,905) (38,587)
Adjustments to reconcile net income
to net cash provided (used) by operating
activities:
Depreciation and amortization ................. 24,209 24,209
Changes in assets and liabilities:
Accounts receivable ......................... -- (5,192)
Inventories ................................. (3,848) 848
Prepaid expenses ............................ (4,449) (2,766)
Accounts payable ............................ 8,433 506
Other accrued expenses ...................... (12,326) 645
Deferred revenues ........................... -- (124,871)
Deferred lease concessions .................. (2,907) (2,180)
--------
Net cash provided (used) by
operating activities ........................... (70,793) (147,388)
Cash flows from investing activities:
Stock subscriptions .......................... -- 5,000
Purchases of property and equipment .......... (2,931) (9,385)
--------
Net cash (used) by investing activities .......... (2,931) (4,385)
Cash flows from financing activities:
Principal payments on capital lease ........... -- (1,929)
--------
Net increase (decrease) in cash and
cash equivalents ............................... (73,724) (153,702)
Cash and cash equivalents at beginning of year ... 195,101 449,282
--------
Cash and cash equivalents at October 31 .......... 121,377 295,580
========
Supplemental disclosures of cash flow information:
Cash paid during the year for interest ........ -- 50
See notes to consolidated financial statements
CHAMPIONS SPORTS, INC.
Notes to Consolidated Financial Statements
October 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 October 31, 2003, the consolidated
statements of operations for the three months and six months ended October 31,
2003 and October 31, 2002 and the consolidated statements of cash flows for the
six months ended October 31, 2003 and October 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 October
31, 2003 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, 2003. The results of operations for the
period ended October 31, 2003 are not necessarily indicative of the operating
results for the full year.
The Company's independent auditor has expressed substantial doubt the
Company can continue as a going concern, as of April 30, 2003. The Company is
facing grave liquidity problem and has reduced it general and administrative
expense to conserve cash. 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
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, 2003, the Company's net loss from
operations was $79,905 before preferred stock dividends of $21,580, resulting in
a net loss available to common shareholders of $101,485. For the three months
ended October 31, 2003, the Company's net loss from operations was $32,557
before preferred stock dividends of $10,790, resulting in a net loss available
for common shareholders of $43,347.
For the six months ended October 31, 2002, the Company's net loss from
operations was $38,587 before preferred stock dividends of $21,580 resulting in
a net loss available to common shareholders of $60,167, ($0.01) per common
share. For the three months ended October 31, 2002, the Company's net profit for
operations was $36,894 before preferred stock dividends of $10,790 resulting in
a net income available for common shareholders of $26,104.
The Company's assets decreased to $400,461 at October 31, 2003 from
$487,166 at April 30, 2003, as a result of the net loss for the six-month
period.
Revenues
The Company's total revenues decreased by 6.3% for the six-month period and
decreased 16.7% for the three month period ended October 31, 2003. The Company's
total revenues were $1,004,075 and $1,071,542 for the six months ended October
31, 2003 and 2002. By component, food and beverage sales increased 2.6% for the
comparable six-month periods. For the three-month period, food and beverage
sales were essentially the same for the comparable period. Merchandise and
memorabilia sales for the six months ended October 31, 2003 were $12,918
compared to $104,676 in the comparable period. The Company did not provide any
sports memorabilia to Marriott International during the six months ended October
31, 2003. The Company provided sports memorabilia to one Marriott Champions
location during the six months ended October 31, 2002. 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, 2003 and 2002.
Expenses
Cost of food and beverage were 27.9% and 23.8% of food and beverage sales
of for the six months ended October 31, 2003 and 2002. The increase in the cost
of food and beverage is attributed to increase in wholesale prices.
Subsequently, the Company has increased menu prices to reflect the increased
costs. Restaurant payroll and related costs decreased to 33.6% from 36.0% of
related sales for the six months ended October 31, 2003 and 2002. Restaurant
occupancy costs decreased slightly to 13.1% from 14.0% of restaurant sales for
the six-month comparable periods. Other restaurant costs were 18.7% of sales for
both the comparable periods. General and administrative expenses for the
Company's corporate office were $125,328 or 12.5% of the Company's total
revenues for the six months ended October 31, 2003 compared to $169,033 or 15.8%
for the six months ended October 31, 2002. Depreciation and amortization expense
represented 2.5% of the Company's total revenues during each six-month period.
Liquidity and Capital Resources
The Company's cash position on October 31, 2003 was $121,377 compared to
$195,101 on April 30, 2003, as decrease of $73,724. For the six months ended
October 31, 2003 the Company's operating activities used $70,793 in cash. The
Company replaced aging equipment for it San Antonio Champions restaurant for
$2,931.
The Company's cash position on October 31, 2002 was $295,580 compared to
$449,282 on April 30, 2002, a decrease of $153,702. For the six months ended
October 31, 2002 the Company's operating activities used $147,388 in cash. The
Company used its cash to repay equipment leases for $1,929. The Company
purchased equipment for its San Antonio Champions restaurant amounting to
$9,385.
During the six months ended October 31, 2003 and 2002, the Company met its
cash needs from its revenues and cash reserves and from cash flow from its San
Antonio operation.
On October 31, 2003 the Company's working capital was a negative $339,559
versus a negative $463,353 on April 30, 2003. 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.
Stockholder's equity increased to $(104,326) as of October 31, 2003
compared to $(209,749) as of April 30, 2003, as a result of the net loss for the
six-month period, and the conversion of 17,160 preferred shared to 257,400
common shares.
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.
Other
The Company, during the quarter ended October 31, in order possibly
facilitate any merger or acquisition or infusion of cash that may help the
Company to survive its grave financial situation without which the Company might
be forced to discontinue its operations, decided to call and convert its
outstanding preferred shares and dividends to common shares and cash at the
following exchange: one (1) share of preferred stock converted to 15 shares of
Champions Sports, Inc.'s common stock and also $0.01 in cash."
The Company's independent auditor has expressed substantial doubt the
Company can continue as a going concern. The Company is facing a severe and
grave liquidity problem and has reduced it general and administrative expense to
conserve cash. 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.
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 4. CONTROLS AND PROCEDURES
Disclosure controls are procedures that are designed with the objective of
ensuring that information required to be disclosed in Company's reports under
the Securities Exchange Act of 1934, such as this Form 10Q-SB, is reported in
accordance with the Securities and Exchange Commission's rules. Disclosure
controls are also designed with the objective of ensuring that such information
is accumulated and communicated to management, including the Chief Executive
Officer and Chief Financial Officer as appropriate to allow timely decisions
regarding required disclosure.
Within the 90 days prior to the date of this report, the Company carried
out an evaluation under the supervision and with the participation of the
Company's management, including the Company's Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to the Securities Exchange
Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiaries) required to be
in the Company's periodic SEC filings. There were no significant changes in the
Company's internal controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation.
Certifications of the Chief Executive Officer and Chief Financial Officer
regarding, among other items, disclosure controls and procedures are included
immediately after the signature section of this Form 10Q-SB.
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, 2003.
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
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James M. Martell
President
__/s/ James E. McCollam
---------------------
James E. McCollam
Controller and Chief
Accounting Officer
December 13, 2003
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Section 302 Certification
I, JAMES MARTELL, certify that:
(1) I have reviewed this quarterly report on Form 10Q-SB of CHAMPIONS
SPORTS, INC., a Delaware corporation (the "registrant");
(2) Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
(4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) Presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
(5) The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
(6) The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: December 13, 2003
By: /s/ JAMES MARTELL
-----------------------
JAMES MARTELL
Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Section 302 Certification
I, JAMES E. MCCOLLAM, certify that:
(1) I have reviewed this quarterly report on Form 10Q-SB of CHAMPIONS
SPORTS, INC., a Delaware corporation (the "registrant");
(2) Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report.
(3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
(4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
(c) Presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
(5) The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
(6) The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: December 13, 2003
By: /s/ JAMES E. McCOLLAM
-------------------------
JAMES E. McCOLLAM
Chief Financial Officer
The following certification will not be deemed "filed" for purposes of
Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the
liability of that section, nor will the certification be deemed incorporated by
reference into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the registrant specifically
incorporates it by reference.
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, James Martell, President and Chief Executive Officer of Champions
Sports, Inc. (the "Company"), certify, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that, to my knowledge:
1. The accompanying Quarterly Report on Form 10-Q of the Company for the
fiscal quarter ended October 31, 2003 (the "Report") fully complies with the
requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
December 13, 2003 /s/ James Martell
James Martell
President and Chief Executive Officer
A signed original of the above certification has been provided to Champions
Sports. Inc. and will be retained by Champions Sports, Inc. and furnished to the
Securities and Exchange Commission or its staff upon request.
The following certification will not be deemed "filed" for purposes of
Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the
liability of that section, nor will the certification be deemed incorporated by
reference into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the registrant specifically
incorporates it by reference.
CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, James E. McCollam, Treasurer, Secretary and Principal Accounting Officer
of Champions Sorts, Inc. (the "Company"), certify, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that, to my knowledge:
1. The accompanying Quarterly Report on Form 10-Q of the Company for the
fiscal quarter ended October 31, 2003 (the "Report") fully complies with the
requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
December 13, 2003
/s/ James E. McCollam
James E. McCollam
Treasurer, Secretary and
Principal Accounting Officer
A signed original of the above certification has been provided to Champions
Sports, Inc. Inc. and will be retained by Champions Sports, Inc. and furnished
to the Securities and Exchange Commission or its staff upon request.