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, 2002
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
(State or other jurisdiction of (I.R.S. Employer
organization) Identification No.)
2420 Wilson Boulevard, 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 December 6, 2002 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
October 31, 2002 (unaudited) and
April 30, 2002 3
Consolidated Statements of Operations:
Three months and six months ended
October 31, 2002, and October 31, 2001,
(unaudited) 4
Consolidated Statements of Cash Flows:
Six months ended October 31, 2002, and
October 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
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
Assets
October 31, 2002 April 30, 2002
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Current assets
Cash and cash equivalents $295,580 $449,282
Accounts receivable - trade 5,246 54
Inventories 24,707 25,555
Prepaid expenses 16,801 14,035
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Total current assets 342,334 488,926
Property and equipment
Furniture and equipment 586,724 577,371
Leasehold improvements 584,772 584,772
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1,171,496 1,162,143
Accumulated depreciation and amortization (900,641) (876,432)
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270,855 285,711
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Other assets
Deposits 11,052 11,052
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Total assets $624,241 $785,689
======== ========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable 88,610 88,104
Dividend payable on preferred stock 511,442 511,442
Other accrued expenses 53,435 52,790
Deferred revenue - 124,871
Current portion of deferred lease
concession 4,363 4,363
Current portion of capital lease
obligation - 1,929
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Total current liabilities 657,850 783,499
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Deferred lease concession, net of current
portion 5,015 7,195
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Total liabilities 662,865 7,195
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 October 31
and April30, 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 October 31 and April 30, 2002 8,514 8,514
Additional paid-in capital 5,397,598 5,392,599
Accumulated deficit (5,975,988) (5,937,370)
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Total stockholders' equity (38,624) (5,005)
Total liabilities and stockholders' equity $624,241 $876,235
======== ========
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,
2002 2001 2002 2001
Unaudited Unaudited
Revenue
Food and beverage $453,810 $423,208 $960,925 $953,617
Merchandise, memorabilia,
and consulting fees 96,543 97,539 104,676 115,647
Interest income 858 2,451 2,038 5,880
Other income 2,249 4,888 3,903 7,882
----- ----- ----- -----
553,460 528,086 1,071,542 1,083,026
Costs and expenses
Cost of food and beverage sales $107,817 $109,523 $228,330 $247,449
Cost of merchandise and memorabilia 6,728 29,157 28,625 63,950
Restaurant payroll and related costs 164,858 151,593 346,205 337,412
Restaurant occupancy costs 61,981 58,674 134,383 123,138
Other restaurant costs 92,228 85,254 179,294 172,051
General and administrative 70,850 78,365 169,033 144,700
Depreciation and amortization 12,104 12,104 24,209 24,209
Interest - 457 50 1,035
----- --- -- -----
516,566 525,127 1,110,129 1,113,944
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Operating income (loss) before income tax expense 36,894 2,959 (38,587) (30,918)
Income tax expense - - - -
------ ----- ------- -------
Net income (loss) $36,894 $2,959 $(38,587) $(30,918)
====== ===== ======= =======
Less: preferred stock dividends (15,938) (15,938) (31,876) (31,876)
------- ------- ------- -------
Net income (loss) available to common
stockholders 20,956 (12,979) (70,463) (62,794)
====== ======= ======= =======
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,
2002 2001
Cash flows from operating activities:
Net profit (loss) $(38,587) $(30,918)
Adjustments to reconcile net income
to net cash provided (used) by operating
activities:
Depreciation and amortization 24,209 24,210
Changes in assets and liabilities:
Accounts receivable (5,192) 1,026
Inventories 848 5,504
Prepaid expenses (2,766) 2,872
Accounts payable 506 24,442)
Other accrued expenses 645 (977)
Deferred revenues (124,871) (64,625)
Deferred lease concessions (2,180) (363)
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Net cash provided (used) by
operating activities (147,388) (87,713)
Cash flows from investing activities:
Stock subscriptions 5,000 -
Purchases of property and equipment (9,385) (576)
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Net cash (used) by investing activities (4,385) (576)
Cash flows from financing activities:
Principal payments on capital lease (1,929) (4,890)
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Net increase (decrease) in cash and
cash equivalents (153,702) (93,179)
Cash and cash equivalents at beginning of year 449,282 451,650
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Cash and cash equivalents at October 31 $295,580 $358,471
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for interest 50 1,035
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See notes to consolidated financial statements
CHAMPIONS SPORTS, INC.
Notes to Consolidated Financial Statements
October 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 October 31, 2002, the consolidated
statements of operations for the three months and six months ended October 31,
2002 and October 31, 2001 and the consolidated statements of cash flows for the
six months ended October 31, 2002 and October 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 October
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 October 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.
Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operation
For the six months ended October 31, 2002, the Company's net loss from
operations was $38,587 before preferred stock dividends of $31,876 resulting in
a net loss available to common shareholders of $70,463, ($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 $15,938 resulting in
a net income available for common shareholders of $20,956.
For the six months ended October 31, 2001, the Company's net loss from
operations was $30,918 before preferred stock dividends of $31,876 resulting in
a net loss available to common shareholders of $62,794, ($0.01) per common
share.
The Company's assets decreased to $624,241 at October 31, 2002 from
$785,689 at April 30, 2002, as a result of the net loss for the six-month
period.
Revenues
The Company's total revenues decreased by 1.1% for the six month period and
increased 4.8% for the three month period ended October 31, 2002. The Company's
total revenues were $1,071,542 and $1,083,026 for the six months ended October
31, 2002 and 2001. By component, food and beverage sales increased less than 1%
for the comparable six-month periods. For the three-month period, food and
beverage sales increased 7.2% for the comparable period. Merchandise and
memorabilia sales for the six months ended October 31, 2002 were $104,676
compared to $115,647 in the comparable period. The Company provided sports
memorabilia to one Marriott Champions location during each of the six months
ended October 31, 2002 and 2001. 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, 2002 and 2001.
Expenses
Cost of food and beverage were 23.8% and 25.9% of food and beverage sales
of for the six months ended October 31, 2002 and 2001. Cost of merchandise and
memorabilia sales was 27.3% and 55.3% of related sales for the six months ended
October 31, 2002 and 2001. Restaurant payroll and related costs also remained
relatively constant at 36.0% and 35.4% of related sales for the six months ended
October 31, 2002 and 2001. Restaurant occupancy costs increased to 14.0% of
restaurant sales compared to 12.9% of related sales for the six-month comparable
periods. This is attributed to an increase in common area charges and real
estate taxes passed on by the landlord. Other restaurant costs were 18.7% of
sales compared to 18.0% for the comparable period. General and administrative
expense for the Company's corporate office was $169,033 or 15.7% of the
Company's total revenues for the six months ended October 31, 2002 compared to
$144,700 or 13.4% for the six months ended October 31, 2001. Depreciation and
amortization expense represented 2.2% of the Company's total revenues during
each six-month period.
Liquidity and Capital Resources
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.
For the six months ended October 31, 2001, the Company's operating
activities used $87,713 in cash. The Company purchased a nominal amount of
equipment. The Company repaid $4,890 in capital leases.
During the six months ended October 31, 2002 and 2001, the Company met its
cash needs from its revenues and cash reserves and from cash flow from its San
Antonio operation.
On October 31, 2002 the Company's working capital was a negative $315,516
versus a negative $294,573 on April 30, 2002. 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 decreased to $(38,624) as of October 31, 2002 compared
to $(5,005) as of April 30, 2002, as a result of the net loss for the six-month
period.
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.
Subsequent Events
In November, 2002, the Board of Directors, in order to preserve the
Company's cash reserves, voted to defer payment of $63,750, the annual dividend
on the Series A, 12% convertible, cumulative Preferred Stock, par value $10, of
which there were 53,125 shares outstanding as of October 31, 2002. The Board of
Directors also voted to defer the annual meeting of security holders in order to
preserve the Company's cash reserves.
Other
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 October
31,2002 and has not met the payment terms of the agreement. The Company believes
that the agreement may not be fulfilled.
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, 2002.
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__
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James E. McCollam
Controller and Chief Accounting
Officer
December 6, 2002