10QSB 1 csi10qsb073101.txt QUARTERLY REPORT FOR CHAMPIONS SPORTS, INC. 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, 2001 -------------------------------------------------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF [ ] THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------- ------------ Commission file number 0-17263 ------------------------------------- CHAMPIONS SPORTS, INC. ---------------------- (Exact name of registrant as specified in its charter) Delaware 52-1401755 --------------------------------------- (State or other jurisdiction of (I.R.S. Employer organization) Identification No.) Suite 214, 2420 Wilson Blvd., 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 September 13, 2001 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 July 31, 2001(unaudited) and April 30, 2001 3 Consolidated Statements of Operations: Three months ended July 31, 2001, and July 31, 2000, (unaudited) 4 Consolidated Statements of Cash Flows: Three months ended July 31, 2001, and July 31,2000 (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 July 31, April 30, 2001 2001 ---- ---- Current assets Cash and cash equivalents $437,670 451,650 Accounts receivable - trade - 1,326 Inventories 15,177 25,056 Prepaid expenses 22,416 17,411 ------ ------ Total current assets 475,263 495,443 Property and equipment Furniture and equipment 562,981 562,981 Leasehold improvements 584,772 584,772 ------- ------- 1,147,753 1,147,753 Accumulated depreciation and amortization (840,118) (828,013) -------- -------- 307,635 319,740 Other assets Available for sale investments, at cost 50,000 50,000 Deposits 11,052 11,052 ------ ------ Total assets $843,950 $876,235 ======== ======== Liabilities and Stockholders' Equity Current liabilities Accounts payable $121,756 $126,240 Dividend payable on preferred stock 447,692 447,692 Other accrued expenses 67,299 58,479 Deferred revenue 64,625 64,625 Current portion of deferred lease concession 4,363 4,363 Current portion of capital lease obligation 9,839 10,283 ----- ------ Total current liabilities 715,574 711,682 Capital lease obligation, net of current portion - 1,940 Deferred lease concession, net of current portion 11,193 11,556 ------ ------ Total liabilities 726,767 725,178 ------- ------- 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, 2001 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 July 31 and April 30, 2001 8,514 8,514 Additional paid-in capital 5,337,599 5,337,599 Accumulated deficit (5,760,182) (5,726,308) ---------- ---------- Total stockholders' equity 117,183 151,057 ------- ------- Total liabilities and stockholders' equity $843,950 $876,235 ======== ======== See notes to consolidated financial statements CHAMPIONS SPORTS, INC. AND SUBSIDIARIES Consolidated Statements of Operations For the three months ended July 31 2001 2000 ---- ---- Revenue Food and beverage $530,409 $503,391 Merchandise, memorabilia, and consulting fees 18,108 101,211 Interest income 3,429 6,822 Other income 2,994 1,942 ----- ----- 554,940 613,365 Costs and expenses Cost of food and beverage sales 137,926 126,588 Cost of merchandise and memorabilia 34,793 33,143 Restaurant payroll and related costs 185,819 173,988 Restaurant occupancy costs 64,464 52,318 Other restaurant costs 86,797 86,345 General and administrative 66,335 87,018 Depreciation and amortization 12,105 12,105 Interest 578 674 --- --- 588,817 572,179 Operating income (loss) before income tax expense (33,877) 41,186 Loss on restricted security held for sale - (50,000) Income tax expense - - Net loss (33,877) (8,814) Less preferred stock dividends (15,938) (15,938) ------- ------- Net income (loss) available to common stockholders $(49,815) $(24,752) ======== ======== Basic earnings (loss) per share $(0.00) $(0.00) ====== ====== Earnings (loss) per common share - assuming dilution $(0.00) $(0.00) ====== ====== See notes to consolidated financial statements CHAMPIONS SPORTS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Increase (Decrease) in Cash and Cash Equivalents For the three months ended July 31 2001 2000 ---- ---- Cash flows from operating activities: Net loss $(33,877) $(8,814) Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 12,104 12,104 Loss on restricted securities held for sale - 50,000 Changes in assets and liabilities: Accounts receivable 1,326 (71,583) Inventories 9,879 (3,201) Prepaid expenses (5,005) 12,620 Accounts payable (4,480) 22,255 Other accrued expenses 8,820 8,163 Deferred lease concessions (363) (1,454) Net cash provided (used) by operating activities (11,596) 20,090 Cash flows from investing activities: Purchases of property and equipment - (15,187) Net cash (used) by investing activities - (15,187) Cash flows from financing activities: Principal payments on capital lease (2,384) (1,948) Net increase (decrease) in cash and cash equivalents (13,980) 2,955 Cash and cash equivalents at beginning of year 451,650 591,208 Cash and cash equivalents at July 31 $437,670 $594,163 Supplemental disclosures of cash flow information: Cash paid during the year for interest $578 $674 See notes to consolidated financial statements CHAMPIONS SPORTS, INC. Notes to Consolidated Financial Statements July 31, 2001 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, 2001, the consolidated statements of operations and the consolidated statements of cash flows for the three months ended July 31, 2001 and July 31, 2000 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, 2001 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, 2001. The results of operations for the period ended July 31, 2001 are not necessarily indicative of the operating results for the full year. Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations Results of Operation For the three months ended July 3, 2001, the Company's net loss was $33,877 and the net loss available for common shareholders was $49,815, ($0.01) per common share. The Company's total assets decreased by $32,285 to $843,950 at July 31, 2001 from $876,235 at April 30, 2001. For the three months ended July 31, 2000, the Company's net loss was $8,814 and the net loss available for common shareholders was $24,752, ($0.00) per common share. The Company's assets increased to $1,434,672 as of July 31, 2000 from $1,416,470 at April 30, 2000. Revenues The Company's total revenues were $554,940 for the three months ended July 31, 2001 versus $613,365 for the three-month period ended July 31, 2000, a decrease of $58,425 or 9.5%. By component, food and beverage sales increased 5.4% from the previous year. This improvement in food and beverage sales is attributed to an increase in customer volume compared to the three months ended July 31, 2000. Merchandise, memorabilia and consulting revenues were $18,108 for the three months ended July 31, 2001 compared to $101,211 for the comparable period in 2000. Interest income was 0.6% of the Company's total revenue for the three months ended July 31, 2001 contrasted to 1.1% for the comparable period in 2000. Other income represented less than 1.0% of total revenues for the three months ended July 31, 2001 and 2000. Expenses Cost of food and beverage was 26.0% and 25.1 % of related sales for the three months ended July 31, 2001 and 2000. Cost of merchandise and memorabilia sales for the three months ended July 31, 2001 was $34,793 compared to $33,143 in the preceding year. Restaurant payroll and related costs were 35.0% of related food and beverage sales for the three months ended July 31, 2001 and 34.6% for the three months ended July 31, 2000. The increase in restaurant payroll is attributed a scarce labor market and the necessity to increase hourly wages to retain experienced workers. Restaurant occupancy costs were $64,464 or 12.2% of food and beverage sales compared to $52,318 or 10.4% of related sales during the three months ended July 31, 2000. This increase in occupancy costs is attributed to higher sales which in turn raises the percentage paid to the landlord in common area charges and base rent. Other restaurant costs decreased to 16.4% of related food and beverage sales for the three months ended July 31, 2001 compared to 17.2% of related sales during the three months ended July 31, 2000. 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, 2001 compared to 14.2 % of total revenues for the three months ended July 31,2000. Depreciation and amortization expense were constant at approximately 2% of the Company's total revenues during each comparable period. Liquidity and Capital Resources The Company's cash position on July 31, 2001 was $437,670 compared to $451,650 on April 30, 200, a decrease of $13,980. For the three months ended July 31, 2001, the Company's operations used $11,596 in cash. The Company used it cash to repay a capital lease for $2,384. The Company met its liquidity needs during the period from its revenues, cash reserves and cash flow provided from its San Antonio location. For the three months ended July 31, 2000, the Company's operating activities provided cash of $20,090. The Company purchased restaurant equipment for $15,187 and repaid capital leases for $1,948. The Company realized a loss of $ 50,000 on a restricted security held for sale. The Company met its liquidity needs during the period from its revenues and cash flow from its San Antonio location. The Company anticipates that it will be able to meet its cash requirements for the next twelve months from its cash reserves and from its operating activities. The Company's working capital was a negative $240,311 on July 31 2001 and negative $216,239 on April 30, 2001. Stockholder's equity was $117,183 as of July 31, 2001 compared to $876,235 as of April 30, 2001. The Company continues to review and evaluate its operations and priorities. The Company is actively pursuing merger or acquisition candidates to meet its longer-term growth and liquidity needs. There is no assurance that the Company will be able to structure a merger or acquisition on terms satisfactory to the Company. Other This document contains "forward-looking statements" (within the meaning of the Private Securities Litigation Act of 1995) that inherently involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of unforeseen external factors. These factors may include, but are not limited to, changes in general economic conditions, customer acceptance of products and services offered and other general competitive factors. 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 ----------------- James Martell Chairman, President and Chief Executive Officer /s/ James E. McCollam --------------------- James E. McCollam Corporate Secretary, Chief Accounting Officer and Controller September 14, 2001