-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UeSZMna4baTyR2TPnk1+LmLvpxzguxYJp0cYnIvqfq8UXQIG65OyjRxRTn7UXmI3 B/Sp8fxFHjhwS/aWLvmFuQ== /in/edgar/work/20000728/0000771856-00-000005/0000771856-00-000005.txt : 20000921 0000771856-00-000005.hdr.sgml : 20000921 ACCESSION NUMBER: 0000771856-00-000005 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000430 FILED AS OF DATE: 20000728 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHAMPIONS SPORTS INC CENTRAL INDEX KEY: 0000771856 STANDARD INDUSTRIAL CLASSIFICATION: [5810 ] IRS NUMBER: 521401755 STATE OF INCORPORATION: DE FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-17263 FILM NUMBER: 681118 BUSINESS ADDRESS: STREET 1: 2500 WILSON BLVD STREET 2: SUITE 305 CITY: ARLINGTON STATE: VA ZIP: 22201 BUSINESS PHONE: 703-526-04 MAIL ADDRESS: STREET 1: 1749 OLD MEADOW RD STREET 2: STE 610 CITY: MCLEAN STATE: VA ZIP: 22102 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL GROUP INC DATE OF NAME CHANGE: 19860319 10KSB 1 0001.txt ANNUAL REPORT FOR CHAMPIONS SPORTS, INC. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB Mark One [X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended April 30, 2000 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.) 2420 Wilson Blvd., Suite 214, Arlington, VA 22201 ------------------------------------------------- (Address of principal executive offices) (Zip code) (703) 526-0400 -------------- (Registrant's telephone number, including area code) Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $.001 per share --------------------------------------- (Title of Class) Preferred Stock, par value $10.00 per share ------------------------------------------- (Title of Class) Indicate by check mark whether the Registrant (1) has filed all report required to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the past 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 __ Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of the registrant's knowledge, in a definitive proxy or information statements incorporated by reference in Part III of this Form10-KSB. [X] For the year ended April 30, 2000, the revenues of the registrant were $2,217,328. The aggregate market value of the Common Stock of the Registrant held by non-affiliates of the Registrant, based on the average bid and asked price on July 17, 2000, was approximately $673,950. As of July 17, 2000, the Registrant had a total of 8,514,459 shares of common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE None 2 PART I Item 1. Business (a) Development of Business. CHAMPIONS Sports, Inc. (the "Company" or "CSI") was incorporated under the laws of the State of Delaware on June 4, 1985 under the name "International Group, Inc." In September 1985, the Company completed a public offering of 40,000,000 Units, each Unit consisting of one share of Common Stock and warrants to purchase three shares of Common Stock, at a price of $0.01 per Unit. The net proceeds of the offering to the Company were approximately $357,000. On January 16, 1986, the Company acquired 100% of the outstanding shares of CHAMPIONS Sports International, Inc. ("CSII"), in exchange for 195,555,555 shares of the Company's Common Stock. In February, 1986, International Group, Inc. changed its name to CHAMPIONS Sports, Inc. Between 1987 and 1988, most of the original warrants issued in September 1985 were exercised by stockholders and consequently the Company received additional capital of $2,356,268. On September 12, 1989, CSII was merged with and into the Company, with the Company as the surviving corporation. In November 1991, the Company effected a reverse split of its outstanding shares on a 1 for 100 basis. In November 1992, the Company completed a public offering of 350,000 Shares of Series A 12% Cumulative Convertible Preferred Stock. In March 1993, the Company completed an exchange offer converting all, except 64,575 preferred shares, into 2,171,657 shares of common stock. Subsequently. an additional 11,450 preferred shares have been converted into 53,930 shares of common stock. The Company is a licensee of one CHAMPIONS Sports Bar Restaurant and the exclusive supplier of sports memorabilia and consultant to Marriott International, Inc. (Marriott). Effective November, 1997, the Company sold the rights to the CHAMPIONS brand to Marriott and became a licensee of CHAMPIONS Sports Bar Restaurants and an exclusive supplier of sports memorabilia and a consultant to all new managed Marriott and Renaissance Hotel sports bar restaurants worldwide. At April 30, 2000, the Company owns the one CHAMPIONS Sports Bar Restaurant in San Antonio, Texas. (b) Description of Business. 1. Concept The Company operates a restaurant in San Antonio, Texas by the name of CHAMPIONS which has a sports theme concept that combines casual dining, sports viewing with strategic marketing and promotions. The CHAMPIONS popularity is 3 defined in the CHAMPIONS motto: "Good Food, Good Times, Good Sports." This concept is based, in large measure, on the format implemented in the first CHAMPIONS location which opened in the Georgetown section of Washington, D.C. in 1983. The Company does not own, operate or manage this property. A strong food component was added to the original concept so that the CHAMPIONS in San Antonio, Texas is a full-fledged restaurant as well as bar. The sports theme of CHAMPIONS is based upon management's belief that sports appeals to most socio-economic, age and gender groups worldwide. The sports atmosphere at CHAMPIONS is created by the presence of hundreds of items of original sports memorabilia such as uniforms, sports equipment, posters, advertising, signs, magazine covers, official programs, film posters, and photographs from local, national and international celebrities and sporting events, past and present. The sports decor seeks to establish a feeling a comfort and belonging for all customers. In addition, CHAMPIONS atmosphere is enhanced by sports programming and viewing which is accomplished through a network of strategically placed TV monitors designed to continuously show local, national and international sporting events without taking away from the casual dining experience. Although sports is a theme in CHAMPIONS restaurants it is not the dominant factor. At the heart of the CHAMPIONS concept is the food. The menu, which attracts guests for lunch and dinner, appeals to those interested in dining at a moderate price. It incorporates traditional American cuisine as well as popular regional items. CHAMPIONS average check is about $14.25 per person, placing it within the "casual dining" segment of the restaurant industry. This segment seeks to attract customers who want a higher quality of food and service than that commonly provided at "fast food" or "family style" restaurants. Although no element of he CHAMPIONS concept is unique, the combination of food, atmosphere, sports memorabilia, sports viewing, marketing and promotions defines the concept. 2. Operations As of the end of the fiscal year, the Company was engaged in the following types of operations: (i) Company-Owned Operation The Company currently operates one Company-owned restaurant. This location is licensed from Marriott, royalty free, to use the name CHAMPIONS pursuant to a licensing agreement signed in FY 1998. This CHAMPIONS sports bar restaurant has been in operation since 1989 and is located in the River Center Mall in San Antonio, Texas. The San Antonio restaurant provided approximately 83.3% of the Company's revenues for FY 2000, as reflected in the consolidated financial statements included herein. (ii) Supplier of Sports Memorabilia and Consulting Services to Marriott Effective November 1997, the Company sold the rights to the CHAMPIONS brand to Marriott and became a licensee of CHAMPIONS Sports Bar Restaurants and an exclusive supplier of sports memorabilia and a consultant to all new managed Marriott and Renaissance Hotel sports bar 4 restaurants worldwide. Under the terms of this agreement, Marriott is required to purchase sports memorabilia and for the Company to serve as a consultant for each new CHAMPIONS or like sports bar restaurant that opens in a new Marriott or Renaissance Hotel worldwide at the same prescribed prices (with increases pegged to the Consumer Price Index) as paid to the Company by Marriott in its previous agreement, except that Marriott does not pay any annual fees as before. In FY 2000, the Company signed agreements to provide sports memorabilia to Champions locations in Aruba, Tampa, Florida and Tunisa. Marriott hotel locations accounted for about 12.4% of the Company's revenues for FY 2000, as reflected in the consolidated financial statements included herein. 3. Competition The food and beverage industry is highly competitive. Food and beverage businesses are affected by changing customer tastes, local and national economic conditions that affect spending habits, population shifts and traffic patterns. Quality of service, attractiveness of facilities and price are also important factors. The popularity of the concept of sports bar restaurants has spawned a number of companies seeking to capitalize on that market. While the Company believes that the Champions concept is superior, there are other "sports" bar restaurants in operation. The sports memorabilia business is also highly competitive. 4. Service Mark The Company sold the federally registered service mark "Champions" to Marriott pursuant to the November, 1997 agreement and transferred to Marriott all of its international service marks that the Company had registered. . 5. Government Regulation The Company's CHAMPIONS sports bar restaurant is subject to federal, state and local governmental regulations, including regulations relating to alcoholic beverage control, public health and safety, zoning and fire codes. The failure to retain food, liquor or other licenses would adversely affect the operations of the Company's restaurant. While the Company has not experienced and does not anticipate any problems in retaining required licenses, permits or approvals, any difficulties, delays or failures in retaining such licenses, permits or approvals could adversely affect the restaurant. The license to sell alcoholic beverages must be renewed annually and may be suspended or revoked at any time for cause, including violation by the Company or its employees of any law or regulation pertaining to alcoholic beverage control, such as those regulating the minimum age of patrons or employees, advertising, wholesale purchasing, and inventory control, handling and storage. However, the restaurant is operated in accordance with standardized procedures designed to assure compliance with all applicable codes and regulations. The Company may be subject to "dram-shop" statutes, which generally 5 provide a person injured by an intoxicated person the right to recover damages from an establishment which wrongfully served alcoholic beverages to such person. While the Company carries liquor liability coverage, a judgment against the Company under a dram-shop statute in excess of the Company's liability coverage, or inability to continue to obtain such insurance coverage at reasonable costs, could have a material adverse effect on the Company. The Company is also subject to the Fair Labor Standards Act, the Immigration Reform and Control Act of 1986 and various state laws governing such matters as minimum wages, overtime, tip credits and other working conditions. A significant number of the Company's hourly personnel are paid at rates related to the federal minimum wage and, accordingly, increases in the minimum wage or decreases in the allowable tip credit will increase the Company's labor cost. 6. Employees As of April 30, 2000, the Company had 2 full-time employees in its corporate office in Arlington, Virginia and 56 employees (both management and hourly) at its San Antonio restaurant. Item 2. Properties. The Company is leasing, on a month to month basis, its corporate office space located at 2420 Wilson Blvd., Suite 214, Arlington, VA 22201. The Company's rental payments are $350 per month. The Company is leasing 5,289 square feet of space for its restaurant in San Antonio, TX pursuant to a lease which expires in November 2004. The lease provides monthly rental payments of $18,650 including CAM charges and real estate taxes. In addition, the lease requires a percentage of the unit's revenues at the location in excess of $1,745,000 per year. Item 3. Legal Proceedings. The Company knows of no material pending legal proceedings as to which the Company is a party or of which its properties are the subject, and no such proceedings are known to the Company to be contemplated by governmental authorities. Item 4. Submission of Matters to a Vote of Security Holders. None 6 PART II Item 5. Markets for Common Equity & Related Stockholder Matters. (a) Principal Market or Markets. In FY 1995, the Common Stock was traded on the NASDAQ SmallCap Market until June 24, 1994. At that time, the Common Stock was delisted from the NASDAQ SmallCap Market for falling below the minimum financial requirements. The Common Stock is presently trading on the OTC Bulletin Board under the symbol CSBR. In October 1993, the series A 12% Cumulative Convertible Preferred Stock was delisted from NASDAQ due to lack of the required two market makers necessary for continued listing and has not been trading since. Common Stock High Low $ $ Fiscal 2000 First Quarter 0.125 0.07 Second Quarter 0.15 0.07 Third Quarter 0.125 0.07 Fourth Quarter 0.38 0.10 Fiscal 1999 First Quarter 0.50 0.19 Second Quarter 0.27 0.07 Third Quarter 0.14 0.06 Fourth Quarter 0.09 0.06 7 (b) Approximate Number of Holders of Common Stock and the Preferred Stock. The number of holders of record of the Company's common stock as of July 17 2000, was 2,150 and the Company estimates that there are approximately 3,000 additional beneficial shareholders. There are about 30 beneficial holders of the Company's preferred stock as of July 17, 2000. (c) Dividends. Holders of common stock are entitled to receive such dividends as may be declared by the Company's Board of Directors. No dividends have been paid with respect to the Company's common stock and no dividends are anticipated to be paid in the foreseeable future. Since November, 1994, the Company's Board of Directors voted each year to defer payment of the annual dividend on the Series A, 12%, Cumulative Preferred Stock, in order to preserve the Company's cash reserves. Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations. (a) Results of Operations for Fiscal Years 2000 and 1999. Revenues For the fiscal year ended April 30, 2000, the Company's revenues increased by less than 1% to $2,217,328 versus $2,197,677 in FY 1999. By component, food and beverage sales increased 7.7% to $1,846,255 for FY2000 compared to $1,714,237 in FY 1999. The Company's management attributes the increase in food and beverage sales to an increase in customer volume during the NBA championship payoff games held in San Antonio and to increase in menu prices. During FY1999, a delay in the NBA season had a negative impact on food and beverage sales. The food to beverage ratio for the San Antonio location was approximately 60/40 for both comparable years. Food and beverage sales account for 83.3 % of the Company's total revenue. Revenues from merchandise and memorabilia sales and consulting fees accounted for 14.9% 8 of the Company's total revenue in FY 2000 compared to 19.8% in FY 1999. Sales of memorabilia are directly tied to the number of new Champions locations which open during the fiscal year. In both FY2000 and FY1999, the Company signed agreements to provide sports memorabilia to three Champions locations. During FY 2000, the Company received other revenues of $18,465 from vendor promotional rebates and commissions compared to $22,986 in FY 1999. Interest income represented approximately 1% of the Company's total revenues in both FY 2000 and FY1999. 2. Expenses The Company's cost of food and beverage during the year ended April 30, 2000 was 25.6% of related sales, compared to 26.7% in the preceding year. The decrease in product costs in FY 2000 is attributed to stable wholesale prices, an increase in customer volume and a increase in menu prices. Restaurant payroll and related costs remained constant during both comparable years at 34.1% of food and beverage sales in FY 2000 and 35.0% of related sales in FY1999. Restaurant occupancy costs for FY 2000 were 11.3% of food and beverage sales compared to 12.1% in FY1999. Other restaurant costs decreased as a percentage of food and beverage sales to 19.4% compared to 21.3 % in the prior year. General and administrative costs incurred in FY 2000 were $322,475 and $346,176 in FY 1999. The primary components of G&A expenses are operating the Company's corporate office, including salaries. Interest expense in both FY 2000 and 1999 was less than 0.2% of the Company's expenses. 3. Profits / Losses For FY 2000, the Company's net income was $51,512 from its operations before dividends accrued on the outstanding preferred stock, net of conversions, of $47,490, producing a net income available to common shareholders of $4,022. For FY 1999, the Company's net income was $16,397 from its operations, before dividends accrued on the outstanding preferred stock of $67,290, creating a net loss available to common shareholders of $50,893. (b) Liquidity and Capital Resources for Fiscal Years 2000 and 1999 The Company's cash position on April 30, 2000 was $591,208 compared to $726,241 on April 30, 1999, an decrease of $135,033. During the past fiscal year, the Company's operating activities used cash in excess of expenses of $18,350. The Company increased its accounts receivable and other current assets by 9 $139,668, and increased its current liabilities by $20,719. The Company used cash to purchase equipment for $13,495 and $5,895 to repay an equipment lease. Furthermore, the Company purchased equity positions in two non publically traded companies for $100,000, and realized a gain of $2,636 from the purchase and sale of marketable securities. Cash used for interest payment in FY 2000 were $4,264. The Company's operating activities coupled with its cash reserves provided sufficient cash flow for the Company to meet its cash needs in FY 2000. During FY 1999, the Company's operating activities generated cash in excess of expenses of $105,486. The Company realized a gain on the disposal of a fixed assets of $4,000, reduced its inventories by $49,418 and current liabilities by $20,233. The Company purchased and leased equipment for $32,286 and repaid capitol lease for $5,756. Cash used to pay interest was $5,097. The Company's operating activities provided sufficient cash flow for the Company to meet its cash needs The Company's working capital as of April 30, 2000 was a $466,762 contrasted to a $535,863 on April 30, 1999. The Company continues to review and evaluate its operations and priorities. The Company is actively pursuing merger or acquisition candidates and other opportunities to meet its longer term liquidity needs. There is no assurance that the Company will be able to structure a merger or acquisition on terms satisfactory to the Company. (c) Miscellaneous Stockholders' equity on April 30, 2000 was $891,692 compared to $887,670 on April 30, 1999. In FY 2000 and 1999, the Company's Board of Directors voted to defer payment of the 12% annual dividend of the Company's preferred stock, in order to preserve the Company's cash reserves. This dividend is cumulative and has been recorded on the Company's balance sheet as a current liability. In addition, in FY 2000 and 1999, the Board of Directors voted to defer the annual meeting of security holders in order to preserve the Company's cash reserves. This document contains "forward-looking statements" (within the meaning of the Private Securities Litigation Act of 1995) that inherently involves risk and uncertainties. The Company's actual result could differ materially for those anticipated in there 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 offered and other general competitive factors. 10 Item 7. Financial Statements and Supplementary Data. The Report of Independent Accountants appears at page F-1 and the Consolidated Financial Statements and Notes to the Consolidated Financial Statements appear at pages F-2 through F-12 hereof. Item 8. Changes In and Disagreements with Accountants on Accounting & Financial Disclosure. During the two most recent fiscal years, there have been no changes in the Company's independent accountants and there have been no disagreements between the Company and its independent accountants on any matter of accounting principles or practices or financial statement disclosure. Item 9. Directors and Executive Officers. The Executive Officers and Directors of the Company are as follows: NAME POSITION(S) PRESENTLY HELD James M. Martell Chairman, President, Chief Executive Officer, Director James E. McCollam Controller, Chief Accounting Officer, Corporate Secretary Michael M. Tomic Director James M. Martell, age 53, has served as Chairman since November 1991and as President and Chief Executive Officer from May 1990 to June 1992 and from 11 January 1993 to September 1993 and from March 1994 to the present and Director of the Company since its inception on June 4, 1985. Additionally, he served the Company as Vice President from October 1988 to May 1990, as Treasurer from June 1985 to January 1989, and as Secretary from June 1985 to January 1986. Mr. Martell is a director and officer of all of the Company's wholly-owned subsidiaries, except for the Been Corporation. From 1983 to 1987, Mr. Martell was a partner along with Mr. Tomic in Tomar Associates, a consulting company specializing in European-American joint ventures, venture capital financing, technology transfer, and corporate finance. From 1981 to 1983, Mr. Martell was a partner in International Group, a partnership involved in promoting national and international business development. From 1973 to 1981, he served in various administrative positions at the U.S. Department of Energy. Mr. Martell received a Bachelor of Science degree in Chemistry in 1968, and a Master of Science degree in Geochemistry in 1973, from George Washington University. James E. McCollam, age 53, has served as Chief Accounting Officer of the Company since July 1992 and Controller since May 1988. From 1984 to 1987 he was Controller of the Winston Group, Inc., a five unit food service organization in the Washington D.C. metropolitan area. From 1977 to 1983, he was the Controller of Capitol Hill Cabaret, Inc., an organization which owned and operated two restaurants and nightclubs in the Washington D.C. area. From 1973 to 1977, he was employed by Marriott Corporation in various positions in the corporate accounting department. He earned a Bachelor of Science degree in Finance from the University of Maryland 1970. Michael M. Tomic, age 54, has served as a Director of the Company since its inception on June 4, 1985. From June 1985 to January 1986, he also served as Vice President of the Company. From 1983 to 1987, Mr. Tomic was a partner along with Mr. Martell in Tomar Associates, a consulting company specializing in European-American joint ventures, venture capital financing, technology transfer, and corporate finance. He received a Bachelor of Science degree in International Marketing and Economics in 1969 from the University of Maryland. The term of office of each Director is until the next annual election of Directors and until a successor is elected and qualified or until the Director's earlier death, resignation or removal. Item 10. Executive Compensation. The following table sets forth cash compensation for services rendered during FY 2000, and 1999 which was paid by the Company to, or accrued by the Company for, each of the Company's most highly compensated executive officers whose cash compensation in such year equaled or exceeded $100,000. 12 Name and FY Annual Other Principal Position Year Salary ($) Compensation ($) - ------------------ ---- ---------- ---------------- James M. Martell, 2000 148,208 0 Chairman, President,& 1999 87,000 73,000 Chief Executive Officer In FY 2000, all officers of the Company as a group (2 in number) received cash compensation of $221,028. The Board of Directors has the right to change and increase the compensation of executive officers at any time. The Company has no arrangement by which any of its directors are compensated for services solely as directors, and these individuals will not receive any additional remuneration for their services as directors. The Company may from time to time pay consulting fees to its officers and directors. Except as described below, the Company has no compensatory plan or arrangement which would result in executive officers receiving compensation as a result of their resignation, retirement or any other termination of employment with the Company or its affiliates, or from a change in control of the Company or a change in responsibilities following a change in control of the Company. The Company entered into a five-year employment agreement with Mr. Martell in September 1993, under which Mr. Martell received a base annual salary of $128,000 and options to purchase 200,000 shares of the Company's Common Stock at $1.00 per share at any time prior to September 6, 2001, whether or not Mr.Martell is an employee at such time. If there is a change in the management of the Company and such management acts contrary to the policy of the current Board, or if Mr. Martell's position as an officer or director is terminated, Mr. Martell may resign and become entitled to liquidated damages determined pursuant to a formula prescribed in the contract. Since 1994, in order to preserve the Company's cash reserves, Mr. Martell had been receiving an annual base salary of $87,000 plus 20% of all fees received from international locations. This agreement was extended for two years in FY 2000 at an annual salary of $148,000. In FY 1996, the Board of Directors granted to Mr. Martell an option to purchase 1,200,000 restricted shares of the Company's Common Stock at $0.05 per share. This option for 1,200,000 restricted shares was exercised for $60,000 by Mr. Martell. The Board of Directors also granted an option to Mr. McCollam to purchase 100,000 restricted shares of the Company's Common Stock at $0.05 per share exercisable at any time prior to July 30, 2001. The Company has a Stock Option Plan intended to assist the Company in securing and retaining key employees and consultants by allowing them to participate in the ownership and growth of the Company through the grant of incentive and non qualified options. Incentive stock options granted under the Plan are intended to be "Incentive Stock Options" as defined by Section 422 of the Internal Revenue Code. An aggregate of 840,000 shares of Common Stock has been reserved for issuance under the Plan. As of April 30, 2000, all 840,000 shares are reserved and available for issuance. 13 Item 11. Security Ownership of Certain Beneficial Owners and Management. As of July 17, 2000, the following were persons known to the Company to own beneficially more than 5% of the Company's outstanding Common Stock, Name and Address of Common Stock Beneficial Owner Beneficially Owned Percentage James M. Martell 1,548,000 18.2% 2420 Wilson, Blvd. Suite 214 Arlington, VA 22201 The stock ownership by officers and directors of the Company and all officers and directors as a group are as follows: Common Stock Beneficially Owned Name Title July 17, 2000 Percent ---- ----- ------------- ------- James M. Martell Chairman, President, 1,548,000 18.2% CEO & Director Michael M. Tomic Director 225,000 2.6% James E. McCollam Controller, 2,000 * Chief Accounting Officer & Corporate Secretary All officers & directors as a group 1,775,000 20.8% *Less than 1.0% Item 12. Certain Relationships and Related Transactions. During FY 2000 and FY 1999, there were no related party transactions. 14 Item 13. Exhibits and Reports on Form 8-K. (a) Index to Financial Statements PAGE Independent Auditor's Report F-1 Consolidated Balance Sheets as of April 30, 2000 and 1999 F-2 Consolidated Statements of Operations for the Years Ended April 30, 2000 and 1999 F-3 Consolidated Statements of Stockholder's Equity for the Years ended April 30, 2000 and 1999 F-4 Consolidated Statements of Cash Flows for the Years ended April 30, 2000 and 1999 F-5 Notes to the Consolidated Financial Statements F-6/F-12 (b) There were no Form 8-K's filed during the last quarter of the period covered by this report. 15 CHAMPIONS SPORTS, INC. AND SUBSIDIARIES Consolidated Financial Statements For The Year Ended April 30, 2000 Table of Contents Page Independent Auditors' Report 1 Consolidated Balance Sheets 2 Consolidated Statements of Operations 3 Consolidated Statements of Stockholders' Equity 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6 PKF PAANNELL worldwide KERR [graphics omitted] FORESTER PC Certified Public Accountants 10304 Eaton Place Suite 440 Fairfax, VA 22030 Telephone (703) 385-8809 Telefax (703) 385-8890 pkfcpa@pkfwash.com Independent Auditors' Report To the Stockholders and Board of Directors Champions Sports, Inc. Arlington, Virginia We have audited the consolidated balance sheets of Champions Sports, Inc. and subsidiaries as of April 30, 2000 and 1999, and the related consolidated statements of operations, stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Champions Sports, Inc. and subsidiaries at April 30, 2000 and 1999, and the results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles. June 16, 2000 /s/ Pannell Kerr Forester PC F-2
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES Consolidated Balance Sheets Assets April 30 ------------------------------------ 2000 1999 ---------------- ---------------- Current assets Cash and cash equivalents $591,208 $726,241 Accounts receivable - trade 114,063 800 Inventories (note 1) 24,181 20,176 Prepaid expenses 25,632 3,232 Deferred tax asset (note 2) 207,952 207,952 ---------------- ---------------- Total current assets 963,036 958,401 ---------------- ---------------- Property and equipment Furniture and equipment 552,634 539,139 Leasehold improvements 570,962 570,962 ---------------- ---------------- 1,123,596 1,110,101 Accumulated depreciation and amortization (781,214) (729,420) ---------------- ---------------- 342,382 380,681 ---------------- ---------------- Other assets Available for sale investments, at cost (note 1) 100,000 - Deposits 11,052 11,052 ---------------- ---------------- Total assets $1,416,470 $1,350,134 ================ ================ Liabilities and Stockholders' Equity Current liabilities Accounts payable $48,173 $36,817 Dividend payable on preferred stock (note 6) 383,940 336,450 Other accrued expenses 51,386 38,023 Current portion of deferred lease concession 4,363 4,363 Current portion of capital lease obligation (note 4) 8,412 6,885 ---------------- ---------------- Total current liabilities 496,274 422,538 ---------------- ---------------- Capital lease obligation, net of current portion (note 4) 12,223 19,645 Deferred lease concession, net of current portion 16,281 20,281 ---------------- ---------------- Total liabilities 524,778 462,464 ---------------- ---------------- Commitments and contingencies (notes 3, 4, and 5) Stockholders' equity (notes 6 and 7) Preferred stock Series A, 12% Convertible Cumulative; $10 par value; preferred as to dividends and liquidation; 56,075 shares authorized; 53,125 and 55,775 shares issued and outstanding for 2000 and 1999, respectively 531,252 557,752 Common stock, par value $.001 per share, 50,000,000 shares authorized; 8,514,459 and 8,501,977 shares issued and outstanding for 2000 and 1999, respectively 8,514 8,502 Additional paid-in capital 5,337,599 5,311,111 Accumulated deficit (4,985,673) (4,989,695) ---------------- ---------------- Total stockholders' equity 891,692 887,670 ---------------- ---------------- Total liabilities and stockholders' equity $1,416,470 $1,350,134 ================ ================
See notes to consolidated financial statements F-3 CHAMPIONS SPORTS, INC. AND SUBSIDIARIES Consolidated Statements of Operations Years Ended April 30 2000 1999 Revenue Food and beverage $ 1,846,255 $ 1,714,237 Merchandise, memorabilia, and consulting fees 330,319 435,843 Interest income 22,289 24,601 Other income 18,465 22,986 ---------- --------- 2,217,328 2,197,667 ---------- --------- Costs and expenses Cost of food and beverage sales 472,476 457,455 Cost of merchandise and memorabilia 118,592 136,753 Restaurant payroll and related costs 628,760 600,516 Restaurant occupancy costs 208,546 206,888 Other restaurant costs 358,909 364,911 General and administrative 322,475 346,176 Depreciation and amortization 51,794 63,474 Interest 4,264 5,097 ---------- --------- 2,165,816 2,181,270 ---------- --------- Operating income before income tax expense 51,512 16,397 Income tax expense (note 2) - - ---------- --------- Net income 51,512 16,397 Less preferred stock dividends (net of conversions) (47,490) (67,290) ---------- --------- Net income (loss) available to common stockholders $ 4,022 $ (50,893) ============ ========== Basic earnings (loss) per share $ 0.00 $ (.00) ============ ========== Earnings (loss) per common share - assuming dilution $ 0.00 $ (.00) ============ ========== See notes to consolidated financial statements F-4
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity For The Years Ended April 30, 2000 and 1999 Series A, 12% Convertible Cumulative Common Stock Preferred Stock Additional Amount Amount Paid-in Accumulated Shares at Par Shares at Par Capital Deficit Total ..................................... Balance, April 30, 1998 ................. 8,500,564 $8,501 56,075 $560,752$ 5,308,112 $(4,938,802) $938,563 For the year ended April 30, 1999 Dividend on preferred stock accrued and unpaid .................... -- -- -- -- -- (67,290) (67,290) Preferred stock converted to common (note 6) ................... 1,413 1 (300) (3,000) 2,999 -- -- Net income .............................. -- -- -- -- -- 16,397 16,397 Balance, April 30, 1999 ................. 8,501,977 8,502 55,775 557,752 5,311,111 (4,989,695) 887,670 For the year ended April 30, 2000 Dividend on preferred stock accrued and unpaid .................... -- -- -- -- -- (63,990) (63,990) Dividend on preferred stock adjusted for preferred stock converted to common stock .......................... -- -- -- -- -- 16,500 16,500 Preferred stock converted to common (note 6) .................... 12,482 12 (2,650) (26,500) 26,488 -- -- Net income .............................. -- -- -- -- -- 51,512 51,512 Balance, April 30, 2000 ................. 8,514,459 $8,514 53,125 $531,252$ 5,337,599 $4,985,673) $891,692 See notes to consolidated financial statements
F-5 CHAMPIONS SPORTS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Increase (Decrease) 4in Cash and Cash Equivalents Years Ended April 30 2000 1999 ---- ---- Cash flows from operating activities: Net income $51,512 $16,397 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 51,794 63,474 Gain on sale of marketable securities (2,707) - Gain on disposal of asset - (4,000) Changes in assets and liabilities: Accounts receivable (113,263) (188) Inventories (4,005) 49,418 Prepaid expenses (22,400) 618 Accounts payable 11,356 (5,855) Other accrued expenses 13,363 (10,015) Deferred lease concessions (4,000) (4,363) --------- -------- Net cash provided (used) by operating activities (18,350) 105,486 --------- -------- Cash flows from investing activities: Purchases of property and equipment (13,495) (4,719) Available for sale investments (100,000) - Purchase of marketable securities (964,975) - Sale of marketable securities 967,682 - --------- -------- Net cash (used) by investing activities (110,788) (4,719) --------- -------- Cash flows from financing activities: Principal payments on capital lease (5,895) (5,756) --------- -------- Net increase (decrease) in cash and cash equivalents (135,033) 95,011 Cash and cash equivalents at beginning of year 726,241 631,230 --------- -------- Cash and cash equivalents at end of year $591,208 $726,241 ========= ======== Supplemental disclosures of cash flow information: Cash paid during the year for interest $4,264 $5,097 ========= ======== Supplemental disclosure of non-cash investing and financing activities: Cumulative dividend on preferred stock, (net of conversions) $47,490 $67,290 ========= ======== Equipment acquired through capital lease - $32,286 ========= ======== See notes to consolidated financial statements F-6 CHAMPIONS SPORTS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements April 30, 2000 Note 1 - Organization and summary of significant accounting policies Organization Champions Sports, Inc., (Company) a Delaware corporation, promoted a sports theme restaurant bar concept through Company owned and licensed operations. The Company sold the rights to the Champions brand to Marriott International, Inc. (Marriott) and became a licensee of Champions Sports Bar Restaurants (note 5). Substantially all memorabilia sales are to Marriott. At April 30, 2000 and 1999, respectively, the Company owns and licenses, without any royalty fee, one Champions Sports Bar Restaurant. C.S.B.R., Inc., (CSBR) and The Been Corporation (Been) were organized on June 16, 1989 and October 11, 1989, respectively, for the purpose of owning and operating a Champions Sports Bar in San Antonio, Texas. Basis of consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All material inter-company transactions have been eliminated in consolidation. Property and equipment Property and equipment are stated at cost. Depreciation is computed from the date property is placed in service using the straight-line method over estimated useful lives as follows: Life Furniture and equipment 5-15 years Leasehold improvements Remaining term of the lease License fee revenue Initial license fees were recognized as revenue when all material services provided for in the license agreement had been substantially performed by the Company. Continuing license fees were recognized over the period of time to which they related. F-7 CHAMPIONS SPORTS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (continued) April 30, 2000 Note 1 - Organization and summary of significant accounting policies (continued) Inventories Inventories consist of goods and supplies held for sale in the ordinary course of business and are stated at the lower of cost, determined on the first-in first-out basis, or market. The components of inventories at April 30, 2000 and 1999, were as follows: 2000 1999 ---- ---- Restaurant food and beverage $ 15,127 $ 13,561 Promotional merchandise for sale to restaurant customers 9,054 6,615 $ 24,181 $ 20,176 Net income (loss) per share Basic earnings per common share is computed by dividing the net income, reduced by preferred stock dividends, by the weighted average number of common shares outstanding during the period. The weighted average number of common shares used to compute earnings per share is: At April 30, 2000 (Loss) available to Common Per Common Stockholders Shares Share ------------------- ------ ----- Basic earnings per Common Share $ 4,022 8,511,344 $ .00 At April 30, 1999 Earnings available to Common Per Common Stockholders Shares Share ------------------- ------ ----- Basic (loss) per Common Share $(50,893) 8,501,977 $ (.00) The stock options (note 7) and convertible preferred shares are antidilutive for 1999 and have no material effect for 2000 and, therefore, are excluded from the computation of basic earnings per share. F-8 CHAMPIONS SPORTS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (continued) April 30, 2000 Note 1 - Organization and summary of significant accounting policies (continued) Cash and cash equivalents The statements of cash flows are prepared on the basis of cash and cash equivalents. For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less, unless restricted as to use, to be cash equivalents. At April 30, 2000 and 1999, respectively, the Company had amounts on deposit at financial institutions in excess of federally insured limits. Investments The Company owns equity securities in two companies, neither of which are publicly traded. There is no readily determinable fair market value for the securities and, as such, they are stated at cost. Income taxes To the extent that taxable income differs from financial reporting net income due to temporary differences, deferred taxes are recognized. Financial statement estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair value of financial instruments The carrying amounts of the Company's financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses, approximate fair values because of the short maturities of these instruments. Note 2 - Income taxes Income tax expense (benefit) consists of the following for the years ended April 30, 2000 and 1999: 2000 1999 ---- ---- Current $ - $ - Deferred 20,487 2,669 (Increase) in valuation allowance (20,487) (2,669) ------- ------ Total income tax expense $ - $ - F-9 CHAMPIONS SPORTS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (continued) April 30, 2000 Note 2 - Income taxes (continued) Temporary differences which give rise to deferred tax assets and liabilities are as follows: 2000 1999 ---- ---- Deferred tax assets Deferred rent concessions $7,836 $10,071 Net operating losses available for carryforward 1,407,647 1,393,451 Depreciation 24,602 16,076 Total deferred tax assets 1,440,085 1,419,598 Valuation allowance 1,232,133) (1,211,646) Net deferred tax assets $207,952 $207,952 A reconciliation of income taxes computed at Federal statutory rates to income taxes recorded by the Company is as follows: Years Ended April 30 2000 1999 ---- ---- Federal income taxes at statutory rate $17,514 $1,810 State income taxes net of Federal income tax benefit 2,040 477 Effect of non-deductible expenses 933 382 Change in valuation allowance (20,487) (2,669) Total income tax expense $ - $ - At April 30, 2000, the Company has net operating loss carryforwards of approximately $3,636,000 for tax reporting purposes. The net operating loss carryforwards for income tax purposes expire approximately as follows: 2005 $75,000 2006 9,000 2007 561,000 2008 1,004,000 2009 1,915,000 2011 11,000 2012 28,000 2013 33,000 ------ $3,636,000 ========== During the years ended April 30, 2000 and 1999, the Company used net operating losses of approximately $67,000 and $46,000, respectively, to offset taxable income. F-10 CHAMPIONS SPORTS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (continued) April 30, 2000 Note 3 - Commitments and contingencies Operating leases The Company leases, as lessee, restaurant space under an operating lease which expires initially in 2004 and which has renewal options. The lease escalates for increases in the landlord's expenses or for increases in the Consumer Price Index, and requires additional rentals based on a percentage of restaurant sales over a defined amount. The lease grants the Company certain concessions which are amortized to lease expense over the term of the lease. The Company leases office space on a month- to-month basis. Rental expense charged to expense during the years ended April 30, 2000 and 1999 was $174,999 and $174,279, respectively. There were no contingent rentals in 2000 or 1999. Future minimum payments under the noncancellable restaurant lease as of April 30, 2000 are as follows: 2001 $140,158 2002 140,158 2003 140,158 2004 140,158 ---- ------- Total $560,632 ======== Note 4 - Capital lease obligation The Company is the lessee of equipment under a capital lease effective July 1998. The equipment cost of $32,286 is depreciated over its useful life, and such depreciation is included in the depreciation expense for 2000 and 1999, respectively. Minimum future lease payments under the capital lease as of April 30, 2000 are as follows: 2001 $11,838 2002 11,838 2003 1,973 Total future minimum lease payments 25,649 ------ Less interest 5,014 ----- Principal payments due 20,635 Less current portion 8,412 ----- $12,223 F-11 CHAMPIONS SPORTS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (continued) April 30, 2000 Note 5 - Marriott license The Company is an exclusive supplier of sports memorabilia and a consultant to all new Champions Sports Bars located in Marriott and Renaissance Hotels worldwide. Total annual license and memorabilia fees under this agreement were $278,284 and $403,244 for 2000 and 1999, respectively. Note 6 - Preferred stock The Series A preferred stock requires a dividend of 12 percent per annum, and the dividends are cumulative and are to be accrued on the Company's books if not paid. The dividend may be paid in common stock of the Company at the Company's discretion. The number of shares comprising the dividend paid in common stock shall be determined by dividing $1.20 by the closing bid price for the common stock on the payment date. The Series A preferred stock is preferred in liquidation or dissolution up to the amount of their par value ($10 per share). The Series A preferred stock is convertible into 4.71 shares of the Company's common stock. There were conversions of 2,650 and 300 shares of Series A preferred stock during 2000 and 1999, respectively. For each of the five fiscal years ended April 30, 2000, the Company's Board of Directors voted to defer payment of the annual dividend on the Series A preferred stock in the amount of $63,990 for 2000 and $67,290 for the previous four years. Preferred stock dividends in arrears at April 30, 2000 and 1999, respectively, aggregated $383,940 ($7.22 per share) and $336,450 ($6.03 per share), respectively. Note 7 - Common stock Options to purchase a total of 450,000 shares at $1.00 per share were granted to two executive officers during fiscal 1994. The options expire if not exercised by September 2001. No options were exercised as of April 30, 2000. Options to purchase a total of 1,300,000 shares of common stock at an exercise price of $.05 per share were granted to two executive officers in July 1995. An officer exercised an option to purchase 1,200,000 of these shares in December 1995 for $60,000 cash. The remaining options of 100,000 shares of common stock expire if not exercised by July 2001. The effect of valuing the stock options as required by the Statement of Financial Accounting Standards Number 123, "Accounting for Stock Based Compensation", at April 30, 2000 and 1999, respectively, is not material to the Company's consolidated financial statements. F-12 CHAMPIONS SPORTS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (continued) April 30, 2000 Note 7 - Common stock (continued) During fiscal 1993, the Company adopted a compensatory stock option plan for key employees or consultants of the Company and its subsidiaries. The total number of shares of the Company's common stock, which may be issued under the plan, is 840,000. The plan expires on August 2, 2002. No options have been granted under the plan as of April 30, 2000. Stock option activity is summarized as follows: Weighted average Number of shares exercise price Outstanding, April 30, 1998 550,000 $ 0.83 Granted - - Exercised - - Outstanding, April 30, 1999 550,000 0.83 Granted - - Exercised - - Outstanding, April 30, 2000 550,000 $ 0.83 The following table summarizes information about stock options outstanding and exercisable at April 30, 2000. Outstanding Exercisable Weighted Weighted Option Number Weighted Average Number Average Price of Average Exercise of Exercise Range Shares Life Price Shares Price ----- ------ ---- ----- ------ ----- $0.05 - $1.00 550,000 1.4 years $0.83 550,000 $0.83 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CHAMPIONS SPORTS, INC By: /s/ James E. McCollam ------------------------- James E. McCollam Chief Accounting Officer and Controller Date: July 28, 2000 In accordance with the Exchange Act, this report has been signed below by the following nd Controller persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ James M. Martell ------------------------ James M. Martell Chairman and President Date: July 28, 2000 By: /s/ Michael M. Tomic ------------------------ Michael M. Tomic Director Date: July 28, 2000 16 EX-27 2 0002.txt FDS 5
5 (Replace this text with the legend) 0000771856 CHAMPIONS SPORTS, INC. 1 YEAR APR-30-2000 APR-30-2000 591,208 0 114,063 0 24,181 963,036 1,123,596 (781,214) 1,416,470 496,274 0 531,252 0 8,501 351,926 1,416,470 2,176,574 2,217,328 591,068 1,787,283 322,475 0 4,264 51,794 0 51,512 0 0 0 4,022 0.00 0.00
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