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, 2004
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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 16, 2004 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
January 31, 2004 (unaudited) and
April 30, 2003 3
Consolidated Statements of Operations:
Three months and nine months ended
January 31, 2004, and January 31, 2003,
(unaudited) 4
Consolidated Statements of Cash Flows:
Nine months ended January 31, 2004, and
January 31, 2003 (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 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
Assets
January 31 April 30
2004 2003
------------------------
Current assets
Cash and cash equivalents $84,703 $195,101
Inventories 31,201 23,750
Prepaid expenses 12,224 10,836
------ ------
Total current assets 128,128 229,687
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 (961,165) (924,851)
-------- --------
213,044 246,427
Deposits 11,052 11,052
------ ------
Total assets $352,224 $487,166
======= =======
Liabilities and Stockholders' (Deficiency of Net Assets)
Current liabilities
Accounts payable $61,422 $65,246
Dividend payable on preferred stock 389,864 575,192
Other accrued expenses 38,173 49,280
Current portion of deferred lease concession 2,232 3,322
----- -----
Total current liabilities 491,691 693,040
Deferred lease concession, net of current portion 968 3,875
--- -----
Total liabilities 492,659 696,915
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 January 31, 2004 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 January 31, 2004
and April 30, 2003 8,772 8,514
Additional paid-in capital 5,576,816 5,397,598
Accumulated deficit (6,085,673) (6,147,111)
---------- ----------
Total stockholders' (deficiency of net assets) (140,435) (209,749)
-------- --------
Total liabilities and stockholders'
(deficiency of net assets) $352,224 $487,166
======== ========
See notes to consolidated financial statements
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Unaudited
Three months Nine months
ended January 31, ended January 31,
2004 2003 2004 2003
Unaudited Unaudited
------------------------------ ---------------------------------
Revenue
Food and beverage $456,445 $443,847 $1,442,782 $1,404,772
Merchandise, memorabilia, and consulting fees 4,594 6,713 17,512 111,389
Interest income 8 571 133 2,609
Other income 1,029 2,052 5,724 5,955
----- ----- ----- -----
462,076 453,183 1,466,151 1,524,725
------- ------- --------- ---------
Costs and expenses
Cost of food and beverage sales $148,113 $108,810 $423,066 $337,140
Cost of merchandise and memorabilia 3,753 6,365 16,167 34,990
Restaurant payroll and related costs 154,008 172,974 486,985 519,179
Restaurant occupancy costs 55,245 47,657 184,767 182,040
Other restaurant costs 96,178 86,635 280,755 265,929
General and administrative 28,783 61,765 154,111 230,798
Depreciation and amortization 12,105 12,105 36,314 36,314
Interest - - - 50
------- ------- --------- ---------
498,185 496,311 1,582,165 1,606,440
------- ------- --------- ---------
Operating income (loss) before income tax expense (36,109) (43,128) (116,014) (81,715)
Income tax expense - - - -
------- ------- --------- ---------
Net income (loss) $(36,109) $(43,128) $(116,014) $(81,715)
Less: preferred stock dividends - (10,790) (21,580) (32,370)
------- ------- --------- ---------
Net income (loss) available to common
stockholders $(36,109) $(53,918) $(137,594) $(114,085)
======== ======== ========= =========
Basic earnings (loss) per share $(0.00) $(0.01) $(0.01) $(0.02)
====== ====== ====== ======
Earnings (loss) per common share - assuming
dilution $(0.00) $(0.01) $(0.02) $(0.02)
====== ====== ====== ======
See notes to consolidated financial statements
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
January 31
2004 2003
---- ----
Cash flows from operating activities:
Net profit (loss) $(116,014) $(81,715)
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
Inventories (7,451) 1,418
Prepaid expenses (1,388) (2,088)
Accounts payable (3,824) (52,664)
Other accrued expenses (11,107) (18,309)
Deferred revenues - (124,871)
Deferred lease concessions (3,997) (3,270)
------ ------
Net cash provided (used) by
operating activities (107,467) (245,156)
Cash flows from investing activities:
Stock subscriptions - 5,000
Purchases of property and equipment (2,931) (10,901)
------ -------
Net cash (used) by investing activities (2,931) (5,901)
Cash flows from financing activities:
Principal payments on capital lease - (1,929)
------ -------
Net increase (decrease) in cash and
cash equivalents (110,398) (252,986)
Cash and cash equivalents at beginning of year 195,101 449,282
------- -------
Cash and cash equivalents at January 31 $84,703 $196,296
======= ========
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
January 31, 2004
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, 2004 the consolidated
statements of operations and the consolidated statements of cash flows for the
three months and nine months ended January 31, 2004 and January 31, 2003 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, 2004 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 January 31, 2004 are not necessarily indicative of the operating
results for the full year.
The Company's independent auditor, for the year ending April 30, 2003, has
expressed substantial doubt the Company can continue as a going concern. The
Company is still facing grave liquidity and cash problems as of January 31, 2004
and through the date of the filing of this 10-QSB The Company has reduced its
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 and any other financing possibilities
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 or to
improve its liquidity. If the situation does not improve, the Company might be
forced to discontinue its operations.
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, 2004, the Company's net loss
was $116,014 or ($0.01) per common share as compared to a net loss of $81,715 or
($0.01) per common share for the nine month period ended January 31, 2003. For
the nine months ended January 31, 2004 and January 31, 2003, the net loss was
from the Company's ongoing operations.
The Company's assets decreased to $352,224 at January 31, 2004 from
$487,166 at April 30, 2003. For the three months ended January 31, 2004 the
Company's net loss from its ongoing operations was $36,109 compared to a net
operating loss of $43,128 during the three months ended January 31, 2003.
Revenues
The Company's total revenues decreased 3.8% to $1,466,151 for the nine
months ended January 31, 2004 versus $1,524,725 for the nine month period ended
January 31, 2003. By component, food and beverage sales increased 2.7% from the
previous year for the nine months and 2.8% for the three months period from the
previous year. The increase in food and beverage sales is attributed to an
increase in menu prices. Merchandise and memorabilia sales for the nine months
ended January 31, 2004 decreased to $17,512 compared to $111,389. The Company
did not provide any memorabilia and consulting services to Marriott
International during the nine month period ended January 31, 2004. For the three
months ended January 31, 2004 and 2003, merchandise and memorabilia sales were
approximately 1% 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 increased to 29.3% of related sales compared for
the nine months ended January 31, 2004 compared to 24.0% related sales for the
comparable period. This is attributed to higher prices at the wholesale level.
Cost of merchandise and memorabilia sales for the nine months ended January 31,
2004 was $16,167 compared to $34,990 in the preceding year. Restaurant payroll
and related costs were 33.8% of related food and beverage sales contrasted to
37.0% for the nine months ended January 31, 2003. Restaurant occupancy costs
were $184,767 for the nine months and $55,245 for the three months ended January
31, 2004 compared to $182,040 for the nine months and $47,657 for the three
month comparable period in 2003. The increase in occupancy costs it attributed
to an increase in real estate taxes and common area charges passed on by the
landlord. Other restaurant costs were 19.5% of food and beverage sales for the
nine months and 21.1% of food and beverage sales for the three months ended
January 31, 2004 compared to 18.9 of food and beverage sales for the comparable
nine month and 19.5% for the three months in 2003. General and administrative
expense was $154,111 for the nine months ended January 31, 2004 compared to
$230,798 for the nine months ended January 31, 2003. Depreciation and
amortization expense accounted for approximately 2.5 % of the Company's total
revenues during the nine months ended January 31, 2004 and 2003 and during the
three months ended January 31, 2004 and 2003.
Liquidity and Capital Resources
The Company's cash position on January 31, 2004 decreased by $110,398 to
$84,703 from $195,101 on April 30, 2003. For the nine months ended January 31,
2004, the Company's ongoing operations used cash totaling $107,467. For the
comparable period ending January 31, 2003, the Company's ongoing operations used
cash of $245,156. For the nine months ended January 31, 2004, the Company
purchased equipment for its San Antonio location for $2,931. During the nine
months ended January 31, 2003, the Company purchased equipment for its San
Antonio CHAMPIONS for $10,901.
The Company met its cash needs during the nine months ended January 31,
2004 and 2003 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 to improve its liquidity.
The Company's working capital was a negative $373,078 on January 31, 2004
and negative $463,353 on April 30, 2003.
Stockholder's equity was a negative $149,950 as of January 31, 2004
compared to a negative $209,749 as of April 30, 2003.
Other
The Company's independent auditor, for the year ending April 30, 2003, has
expressed substantial doubt the Company can continue as a going concern. The
Company is still facing grave liquidity and cash problems as of January 31, 2004
and through the date of the filing of this 10-QSB The Company has reduced its
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 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 on terms satisfactory to the Company or to
improve its liquidity. If the situation does not improve, the Company might be
forced to discontinue its operations. The Company's Board of Directors voted to
defer the annual meeting of shareholders and to cancel the payment of the annual
dividend on the Company's 12% Preferred Stock to preserve the Company's cash
position. The Board of Directors granted to James Martell, Chairman, President,
and Chief Executive Officer of Champions Sports, Inc., an option to purchase
8,000,000 shares of the Company's restricted shares pursuant to Rule 144.
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
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 16, 2004
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: March 16, 2004
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: March 16, 2004
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 January 31, 2004 (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.
March 16, 2004 /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 January 31, 2004 (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.
March 16, 2004
/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.