10QSB 1 0001.txt QUARTERLY REPORT FOR CHAMPIONS SPROTS, 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, 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.) 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, 2000, the Registrant had a total of 8,514,459 shares of common stock outstanding. 1 CHAMPIONS SPORTS, Inc. FORM 10-QSB INDEX Page Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets as of July 31, 2000 (unaudited) and April 30, 2000 3 Consolidated Statements of Operations: Three months ended July 31, 2000, and July 31, 1999, (unaudited) 4 Consolidated Statements of Cash Flows: Three months ended July 31, 2000, and July 31,1999 (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 2 CHAMPIONS SPORTS, INC. AND SUBSIDIARIES Consolidated Balance Sheets Assets July 31 April 30 2000 2000 ---- ---- Current assets Cash and cash equivalents $594,164 $591,208 Accounts receivable - trade 185,646 114,063 Inventories 27,382 24,181 Prepaid expenses 13,012 25,632 Deferred tax asset 207,952 207,952 ------- ------- Total current assets 1,028,155 963,036 Property and equipment Furniture and equipment 567,821 552,634 Leasehold improvements 570,962 570,962 ------- ------- 1,138,783 1,123,596 Accumulated depreciation and amortization (793,318) (781,214) -------- -------- 345,465 342,382 Other assets Available for sale investments, at cost 50,000 100,000 Deposits 11,052 11,052 ------ ------ Total assets $1,434,672 $1,416,470 ========== ========== Liabilities and Stockholders' Equity Current liabilities Accounts payable 70,428 48,173 Dividend payable on preferred stock 383,940 383,940 Other accrued expenses 59,549 51,386 Current portion of deferred lease concession 4,363 4,363 Current portion of capital lease obligation 8,412 8,412 ----- ----- Total current liabilities 526,692 496,274 Capital lease obligation, net of current portion 10,275 12,223 Deferred lease concession, net of current portion 14,827 16,281 ------ ------ Total liabilities 551,795 524,778 Commitments and contingencies Stockholders' equity Preferred stock Series A, 12% Convertible Cumulative; $10 par value; preferred as to dividends and liquidation; 56,075 shares authorized; 53,125 shares issued and outstanding for July 31 and April 30, 2000 respectively 531,252 531,252 Common stock, par value $.001 per share, 50,000,000 shares authorized; 8,514,459 shares issued and outstanding at July 31 and April 30, 2000, respectively 8,514 8,514 Additional paid-in capital 5,337,599 5,337,599 Accumulated deficit (4,994,488) (4,985,673) ---------- ---------- Total stockholders' equity 882,877 891,692 Total liabilities and stockholders' equity $1,434,672 $1,416,470 ========== ========== See notes to consolidated financial statements 3 CHAMPIONS SPORTS, INC. AND SUBSIDIARIES Consolidated Statements of Operations Three months ended July 31 2000 1999 ---- ---- Revenue Food and beverage $503,391 $523,212 Merchandise, memorabilia, and consulting fees 101,211 104,726 Interest income 6,822 6,800 Other income 1,942 4,536 ----- ----- 613,365 639,274 Costs and expenses Cost of food and beverage sales 126,588 132,964 Cost of merchandise and memorabilia 33,143 38,403 Restaurant payroll and related costs 173,988 172,046 Restaurant occupancy costs 52,318 52,695 Other restaurant costs 86,345 95,846 General and administrative 87,018 116,598 Depreciation and amortization 12,105 12,220 Interest 674 920 --- --- 572,179 621,692 Operating income before income tax expense 41,186 17,582 Loss on security held for sale (50,000) - Income tax expense - - Net income (loss) (8,814) 17,582 ------ ------ Less preferred stock dividends (net of conversions) (15,938) (15,938) Net income (loss) available to common stockholders $(24,752) $1,644 ======== ====== Basic earnings (loss) per common share $.00 $ .00 ---- ----- Earnings (loss) per common share - assuming dilution $.00 $.00 ==== ==== See notes to consolidated financial statements 4 CHAMPIONS SPORTS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Increase (Decrease) in Cash and Cash Equivalents For the three months ended July 31 2000 1999 ---- ---- Cash flows from operating activities: Net income $(8,814) $17,581 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 12,104 12,201 Loss on sale of marketable securities 50,000 - Changes in assets and liabilities: Accounts receivable (71,583) 97 Inventories (3,201) (2,406) Prepaid expenses 12,620 (7,314) Accounts payable 22,255 62,932 Other accrued expenses 8,163 (2,106) Deferred lease concessions (1,454) (727) ------ ---- Net cash provided (used) by operating activities 20,090 80,258 Cash flows from investing activities: Purchases of property and equipment (15,187) Available for sale investments (100,000) Purchase of marketable securities (67,030) ------- -------- Net cash (used) by investing activities (15,187) (167,030) Cash flows from financing activities: Principal payments on capital lease (1,948) (1,053) Net increase (decrease) in cash and cash equivalents 2,955 (87,825) Cash and cash equivalents at beginning of year 591,208 726,241 ------- ------- Cash and cash equivalents at end of year $594,163 $638,416 ======== ======== Supplemental disclosures of cash flow information: Cash paid during the year for interest 674 919 --- --- See notes to consolidated financial statements 5 CHAMPIONS SPORTS, INC. Notes to Consolidated Financial Statements July 31, 2000 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, 2000, the consolidated statements of operations and the consolidated statements of cash flows for the three months ended July 31, 2000 and July 31,1999 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, 2000 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, 2000. The results of operations for the period ended July 31, 2000 are not necessarily indicative of the operating results for the full year. 6 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations Results of Operation 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. For the three month period ended July 31, 1999, the Company's net income was $17,582, and the net income available to common shareholders was $1,644 ($0.00 per common share). The Company's assets increased to $1,425,472 at July 31, 1999 from $1,350,134 at April 30, 1999. Revenues The Company's total revenues were $613,365 for the three months ended July 31, 2000 versus $639,274 for the three month period ended July 31, 1999, a decrease of $25,909 or 4.1%. By component, food and beverage sales decreased 3.8% from the previous year. This decrease in food and beverage sales is attributed to a decline in customer volume compared to the three months ended July 31, 1999 when the NBA championship playoff games were held in San Antonio. Merchandise, memorabilia and consulting revenues decreased 3.4% for the three months ended July 31, 2000 to $101,211 compared to $104,726 during the comparable period in the prior year. This decrease is attributed to slower merchandise sales at the San Antonio location. Interest income was 1.1% of the Company's total revenue for both comparable periods. Other income represented less than 1.0% of total revenues for the three months ended July 31, 2000 and 1999. Expenses Cost of food and beverage remained constant at 25.1% and 25.4 % of related sales for the three months ended July 31, 2000 and 1999. Cost of merchandise and memorabilia sales for the three months ended July 31, 2000 was $33,143 compared to $38,403 in the preceding year. Restaurant payroll and related costs were 34.6% of related food and beverage sales for the three months ended July 31, 2000 and 32.9% for the three months ended July 31, 1999. The increase in restaurant payroll is attributed the a scarce labor market and the necessity to increase hourly wages to retain experienced workers. Restaurant occupancy costs remained constant for both comparable periods. Other restaurant costs decreased to 17.2% of related food and beverage sales for the three months ended July 31, 2000 compared to 18.3% of related sales during the three months ended July 31, 1999. General and administrative expense for the Company's corporate office was 14.2% of the Company's total revenues for the three months ended July 31, 2000 compared to 18.2 % of total revenues for the three months ended July 31,1999. Depreciation and amortization expense were constant at approximately 2% of the Company's total revenues during each comparable period. 7 Liquidity and Capital Resources The Company's cash position on July 31, 2000 was $594,164 compared to $591,208 on April 30, 2000, a increase of $2,955. 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 security held for sale. The Company met its liquidity needs during the period from its revenues and cash flow from its San Antonio location. For the three month ended July 31, 1999, the Company's operating activities provided net cash of $80,258. The Company used its cash to repay equipment leases for $1,053. The Company purchased marketable investment securities for $67,030 and restricted securities for $100,000. The Company met its cash needs during the three months ended July 31, 1999 from its revenues and from cash flow from its San Antonio, Texas operation. 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 $501,463 on July 31 2000 and $466,762 on April 30, 2000. Stockholder's equity was $882,877 as of July 31, 2000 compared to $891,692 as of April 30, 2000. The Company continues to review and evaluate its operations and priorities. The Company is actively pursuing merger, acquisition candidates and alternative means of diversifying to meet its longer term liquidity needs. There is no assurance that the Company will be able to structure a merger, acquisition or diversification 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. 8 Subsequent Events On August 23, 2000, the Company announced its intention to diversify into high-technology area by expanding its management to focus on business opportunities in that sector. The Company signed agreements with James J. Heigl, Jr to be its Chief Executive Officer and Director, and Harry A. Lee to be its Chief Operating Officer and Director. Mr. Heigl was subsequently elected Chairman of the Board of Directors. The Company intends to change its name to Champions Ventures Group, Inc. 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. 9 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 J. Heigl, Jr. ----------------------- James J. Heigl, Jr Chairman and Chief Executive Officer /s/ James E. McCollam ----------------------- James E. McCollam Corporate Secretary, Chief Accounting Officer and Controller September 13, 2000 10