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 July 31, 2003
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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.)
Suite 214, 2420 Wilson Blvd., 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 September 12, 2003 the Registrant had a total of 8,514,459 shares of
common stock outstanding.
2
CHAMPIONS SPORTS, Inc.
FORM 10-QSB
INDEX
Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
July 31, 2003(unaudited) and
April 30, 2003 3
Consolidated Statements of Operations:
Three months ended
July 31, 2003, and July 31, 2002,
(unaudited) 4
Consolidated Statements of Cash Flows:
Three months ended July 31, 2003, and
July 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 Prodedures 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
July 31, 2003 April 30, 2003
-----------------------------
Current assets
Cash and cash equivalents ............................. $ 167,359 $ 195,101
Accounts receivable - trade ........................... -- --
Inventories ........................................... 26,929 23,750
Prepaid expenses ...................................... 10,276 10,836
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Total current assets
204,564 229,687
Property and equipment
Furniture and equipment 589,437 586,506
Leasehold improvements
584,772 584,772
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1,174,209 1,171,278
Accumulated depreciation and amortization ................ (936,956) (924,851)
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237,253 246,427
Other assets
Deposits .............................................. 11,052 11,052
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Total assets ............................................. $ 452,869 $ 487,166
============ ============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable ...................................... $ 65,563 $ 65,246
Dividend payable on preferred stock ................... 575,192 575,192
Other accrued expenses ................................ 63,831 49,280
Deferred revenue ...................................... -- --
Current portion of deferred lease concession .......... 4,363 3,322
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Total current liabilities ............................. 708,949 693,040
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Capital lease obligation, net of current portion ......... -- --
Deferred lease concession, net of current portion ........ 1,017 3,875
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Total liabilities
709,966 696,915
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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 July 31 and April 30, 2002 .......... 531,250 531,250
Common stock, par value $.001 per share,50,000,000
shares authorized and 8,514,459 shares
issued and outstanding for July 31 and
April 30, 2002 ........................................... 8,514 8,514
Additional paid-in capital
5,397,598 5,397,598
Accumulated deficit ................................... (6,194,459) (6,147,111)
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Total stockholders' equity ............................ (257,097) (209,749)
------------ ------------
Total liabilities and stockholders' equity ............... $ 452,869 $ 487,166
============ ============
See notes to consolidated financial statements
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
July 31,
2003 2002
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Revenue
Food and beverage ............................. $ 532,647 $ 507,115
Merchandise, memorabilia, and consulting fees . 7,163 8,133
Interest income ............................... 104 1,180
Other income .................................. 3,281 1,654
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543,195 518,082
Costs and expenses
Cost of food and beverage sales\ .............. 159,052 120,513
Cost of merchandise and memorabilia ........... 7,562 21,897
Restaurant payroll and related costs .......... 179,402 181,347
Restaurant occupancy costs .................... 67,366 72,402
Other restaurant costs ........................ 100,127 87,066
General and administrative .................... 64,929 98,183
Depreciation and amortization ................. 12,105 12,105
Interest ...................................... -- 50
590,543 593,563
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Operating income (loss) before income tax expense (47,348) (75,481)
Income tax expense .............................. -- --
Net loss ........................................ (47,348) (75,481)
Less preferred stock dividends .................. (15,938) (15,938)
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Net income (loss) available to common
stockholders .................................. $ (63,286) $ (91,419)
========= =========
Basic earnings (loss) per share ................. $ (0.01) $ (0.01)
========= =========
Earnings (loss) per common share - assuming
dilution ...................................... $ (0.01) $ (0.01)
========= =========
See notes to consolidated financial statements
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Increase (Decrease) in Cash and Cash Equivalents
For the three months ended July 31
2003 2002
Cash flows from operating activities:
Net loss ........................................... $ (47,348) $ (75,481)
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization ..................... 12,104 12,104
Changes in assets and liabilities:
Accounts receivable ............................. -- 54
Inventories ..................................... (3,179) (3,300)
Prepaid expenses ................................ 560 1,297
Accounts payable ................................ 317 48,436
Other accrued expenses .......................... 14,551 6,531
Deferred revenues ............................... -- (35,340)
Deferred lease concessions ...................... (1,817) (1,090)
Net cash provided (used) by operating activities .... (24,812) (46,789)
Cash flows from investing activities:
Stock subscriptions .............................. 5,000
Purrchases of property and equipment ............. (2,930) (5,298)
Net cash (used) by investing activities .............. (2,930) (298)
Cash flows from financing activities:
Principal payments on capital lease ............... -- (1,929)
Net increase (decrease) in cash and
cash equivalents ................................... (27,742) (49,016)
Cash and cash equivalents at beginning of year ....... 195,101 449,282
Cash and cash equivalents at July 31 ................. $ 167,359 $ 400,266
Supplemental disclosures of cash flow information:
Cash paid during the year for interest ............ $ -- 50
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See notes to consolidated financial statements
CHAMPIONS SPORTS, INC.
Notes to Consolidated Financial Statements
July 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 July 31, 2003, the consolidated
statements of operations and the consolidated statements of cash flows for the
three months ended July 31, 2003 and July 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 July 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 July 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 a most severe 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
Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operation
For the three months ended July 31, 2003, the Company's net loss was
$47,348 and the net loss available to common shareholders was $63,286, ($0.01)
per common share. The Company's' total assets decreased by $34,297 to $452,869
from $487,166 at April 30, 2003.
For the three months ended July 31, 2002, the Company's net loss was
$75,481, and the net loss available for common shareholders was $91,419, ($0.01)
per common share. The Company's total assets decreased by $53,874 to $731,815
from $785,689 at April 30, 2002.
Revenues
The Company's total revenues were $543,195 for the three months ended July
31, 2003 versus $518,082 for the three-month period ended July 31, 2002, an
increase of $25,113 or 4.8%. By component, food and beverage sales increased
5.0% from the previous year. This increase in food and beverage sales is
attributed to an increase in customer volume. Merchandise, memorabilia and
consulting revenues were $7,163 for the three months ended July 31, 2003
compared to $8,133 for the three months ended July 31, 2002 Interest income was
less than 1.0% of the Company's total revenue for both comparable periods. Other
income also represented less than 1.0% of total revenues for the three months
ended July 31, 2003 and 2002.
Expenses
Cost of food and beverage was 29.9% and 23.8% of related sales for the
three months ended July 31, 2003 and 2002. This increase is attributed to higher
wholesasle prices, as there was no increases in selling prices during the three
month period. Cost of merchandise and memorabilia sales for the three months
ended July 31, 2003 was $7,562 compared to $21,897 in the preceding year.
Restaurant payroll and related costs were 33.7% of related food and beverage
sales for the three months ended July 31, 2003 and 35.8% for the three months
ended July 31, 2002. Restaurant occupancy costs were $67,366 or 12.6% of food
and beverage sales compared to $72,402 or 14.3% of related sales during the
three months ended July 31, 2002. This decrease in occupancy costs is attributed
to the percentage paid to the landlord in common area charges and base rent.
Other restaurant costs were 18.8% of related food and beverage sales for the
three months ended July 31, 2003 compared to 17.7% of related sales during the
three months ended July 31, 2002. General and administrative expense for the
Company's corporate office was 12.0% of the Company's total revenues for the
three months ended July 31, 2003 compared to 18.9 % of total revenues for the
three months ended July 31,2002. Depreciation and amortization expense were
constant at approximately 2.2% of the Company's total revenues during each
comparable period.
Liquidity and Capital Resources
The Company's cash position as of July 31, 2003 was $167,359 compared to
$195,101 on April 30, 2003, a decrease of $27,742. For the three month period,
the Company's operations used $24,812 in cash in excess of revenues. The Company
purchased equipment for it San Antonio location for $2,930. The Company met its
liquidity needs during the period from its cash reserves and cash flow provided
from its San Antonio location.
The Company's cash position as of July 31, 2002 was $400,266 compared to
$449,282 on April 30, 2002, a decrease of $49,016. For the three month period,
the Company's operations used $46,789 in cash in excess of revenues. The Company
received $5,000 from a common share subscription. The Company purchased
equipment for its restaurant in San Antonio totaling $5,298 and finished paying
for a capital lease of $1,929. The Company met its liquidity needs during the
period from its revenues, cash reserves and cash flow provided from its San
Antonio location.
The Company's working capital was a negative $504,385 on July 31 2003 and a
negative $463,353 on April 30, 2003.
Stockholder's equity was a negative $257,097 as of July 31, 2003 compared
to a negative $209,749 as of April 30, 2003.
Other
The Company's independent auditor has expressed substantial doubt the
Company can continue as a going concern. The Company is facing a severe
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
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 hereunto duly authorized.
CHAMPIONS Sports, Inc.
/s/ James Martell
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James Martell
Chairman, President and
Chief Executive Officer
/s/ James E. McCollam
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James E. McCollam
Corporate Secretary, Chief Accounting
Officer and Controller
September 12 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: September 12, 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: September 12, 2003
By: /s/ JAMES E. McCOLLAM
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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 July 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.
September 12, 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 August 11, 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.
September 12, 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.