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, 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 ________
Commission file number 0-17263
CHAMPIONS SPORTS, INC.
(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.)
2420 Wilson Blvd., Suite 214, Arlington, VA 22201
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(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
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(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, 2003, the revenues of the registrant were
$2,006,406.
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 10, 2003, was approximately $120,000.
As of July 10, 2003, the Registrant had a total of 8,514,459 shares of
common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
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, 2003, 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
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 that opened in the Georgetown section of Washington, D.C. in
1983. 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 the 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 95% of the
Company's revenues for FY 2003, as reflected in the consolidated financial
statements included herein.
(ii) Supplier of Sports Memorabilia and Consulting Services to Marriott
In 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. 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 2003, the Company provided sports
memorabilia and consulting services to Champions Sports Bar Restaurant that
opened in Marriott hotel in Dead Sea, Jordan.
Marriott hotel locations accounted for about 5% of the Company's revenues
for FY 2003, 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 provide
a person injured by an intoxicated person the right to recover damages from an
establishment that 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, 2003, the Company had 2 full-time employees in its
corporate office in Arlington, Virginia and 46 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 $500 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 June 2005. The lease provides monthly rental payments of
$23,536 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
PART II
Item 5. Markets for Common Equity & Related Stockholder Matters.
(a) Principal Market or Markets.
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
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Fiscal 2003
$ $
First Quarter 0.06 0.01
Second Quarter 0.04 0.02
Third Quarter 0.04 0.01
Fourth Quarter 0.03 0.01
Fiscal 2002
$ $
First Quarter 0.14 0.07
Second Quarter 0.09 0.06
Third Quarter 0.10 0.05
Fourth Quarter 0.09 0.05
(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
10, 2003 was 2,140 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 10, 2003.
(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 2003 and 2002.
1. Revenues
For the fiscal year ended April 30, 2003, the Company's revenues decreased
6.6% to $2,006,406 from $2,147,995 in FY 2002.
By component, food and beverage sales decreased 5.7% to $1,882,118 for FY
2003 compared to $1,995,226 in FY 2002. The Company's management attributes the
decrease in food and beverage sales to an decrease in customer volume, due to
the economic slowdown and the residual effects of September 11, 2001,which has
curtailed convention and tourist travel in the San Antonio area. The food to
beverage ratio for the San Antonio location was approximately 60% to 40% for
both comparable years. Food and beverage sales accounted for 93.8% and 92.9% of
the Company's total revenue in the comparable periods.
Revenues from merchandise and memorabilia sales and consulting fees
accounted for 5.7% of the Company's total revenue in FY 2003 compared to 6.29%
in FY 2002. Sales of memorabilia are directly tied to the number of new
Champions locations that open during the fiscal year. In FY 2003 and FY 2002,
the Company provided sports memorabilia to one Champions location. During FY
2003 and FY 2002, the Company other revenues accounted for less than 1% of its
total revenues.
2. Expenses
The Company's cost of food and beverage was 24.6% for FY 2003 and 26.0% for
FY 2002.
Restaurant payroll and related costs were 35.3% of food and beverage sales
in FY 2003 and 34.2% of related sales in FY 2002. Restaurant occupancy costs for
FY 2003 were 13.4% of food and beverage sales compared to 12.3% in FY 2002.
Other restaurant costs increased as a percentage of food and beverage sales
at 21.5% for FY 2003 compared to 18.2% for FY 2002 General and administrative
costs incurred in FY 2003 were $280,847 and $309,892 in FY 2002.The primary
components of G&A expenses are operating the Company's corporate office,
including salaries. Interest expense in both FY 2003 and 2002 was immaterial.
3. Profits / Losses
For FY 2003, the Company's loss was $145,994 from its operations before
dividends accrued on the outstanding preferred stock of $63,750, producing a net
loss for common shareholders of $209,744, or $0.02 per common share. The San
Antonio Champions location produced a net profit of $97,519.
For FY 2002, the Company's loss was $147,312 from its operations before
dividends accrued on the outstanding preferred stock of $63,750, producing a net
loss for common shareholders of $211,062. During FY 2002, the Company wrote off
an equity investment in a non-publicly traded company of $50,000.
(b) Liquidity and Capital Resources for Fiscal Years 2003 and 2002
The Company's cash position on April 30, 2003 was $195,101 compared to
$449,282 on April 30, 2002, a decrease of $254,181.
During FY 2003, The Company's operating activities used cash of $248,117.
The Company purchased equipment for its San Antonio Champions location for
$9,135 and repaid a capital lease for $1,929. The Company's operating activities
and cash reserves were sufficient to meet its cash requirement during FY 2003.
During FY 2002, The Company's operating activities used cash of $32,684.
The Company used cash of $14,390 to purchase replacement equipment for its San
Antonio Champions location and repaid a capital lease of $10,294. In January
2002, the Company entered into an agreement with a private investor, to purchase
from the Company 4,000,000 shares of the Company's common restricted stock at a
purchase price of $0.125 per share in the aggregate amount of $500,000 payable
in monthly installments to be used by the Company to provide general working
capital. The purchaser has paid a total of $55,000 at April 30, 2002 and an
additional $5,000 during FY 2003.Subsequently they have not met the payment
terms of the agreement. The Company believes that the agreement may not be
fulfilled. The Company's operating activities coupled with its cash reserves
provided sufficient cash flow for the Company to meet its cash needs in FY 2002.
The Company's working capital as of April 30, 2003 was a negative $463,353
contrasted to $294,573 on April 30, 2002.
The Company is facing liquidity problems and is uncertain that it will be
able to continue operations without an infusion of cash. The Company continues
to review and evaluate its operations and priorities. The Company is actively
pursuing merger or acquisition candidates and other financing possibilities to
meet its liquidity needs. There is no assurance that the Company will be able to
structure a merger or acquisition, or raise additional financing to continue
operations on terms satisfactory to the Company.
Furthermore, The Company's independent auditor has expressed substantial
doubt that the Company can continue as a going concern.
(c) Miscellaneous
Stockholders' equity on April 30, 2003 was a negative $209,749 compared to
a negative $5,005 on April 30, 2002. In FY 2003 and 2002, 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 2003 and 2002, 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 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 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-14 hereof.
Item 8. Changes In and Disagreements with Accountants on Accounting
& Financial Disclosure.
For FY 2003, the Company changed independent auditors from Pannell Kerr
Forster PC to Michael F. Moore, CPA (sole practitioner). There have been no
disagreements between the Company and its independent accountants on any matter
of accounting principles or practices or financial statement disclosure during
the last two fiscal years.
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 and Director
James E. McCollam Controller, Chief Accounting Officer, Corporate Secretary
Durwood C. Settles Director
Michael M. Tomic Director
James M. Martell, age 56, has served as President from May 1990 to June
1992 and from January 1993 to September 1993 and from March 1994 to the present
and as Chief Executive Officer from May 1990 to June 1992 and from January 1993
to September 1993 and from March 1994 to August 2000 and from June 2001 to the
present and as Chairman from November 1991 to August, 2000 and from June 2001 to
the present. Mr. Martell served as 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 56, 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 that 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.
Durwood C. Settles, age 60, has served as Director of the Company since
March 2001. Mr. Settles is a Certified Public Accountant in individual practice
since 1983. From 1973 to 1982, Mr. Settles was with Coopers & Lybrand in
Washington, D.C. as a member of the audit staff and as Manager-Special Projects.
During the period 1974 to 1986, Mr. Settles served as Controller or Treasurer of
the various political campaign organizations of Congressman Richard A. Gephardt
of Missouri, Governor Charles S. Robb of Virginia, and Congressman Joseph L.
Fisher of Virginia. From 1970 to 1973, Mr. Settles was an owner and executive of
a company that manufactured and sold Plexiglas furniture located in Kensington,
Maryland. From 1966 to 1969, Mr. Settles was a promoter of popular music
concerts in various cities in the Eastern and Southern United States. From 1964
to 1966, Mr. Settles was a Group Pension Management Assistant and Computer Files
Service Supervisor with the Mutual of New York Life Insurance Company (MONY) in
New York, New York. Mr. Settles received a Bachelor of Arts degree in Economics
in 1964 from Davidson College, Davidson, North Carolina and completed accounting
studies in 1973 at George Washington University, Washington, D.C.
Michael M. Tomic, age 57, 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 2003, and 2002 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 $100,000:
Name and FY Annual Other
Principal Position Year Salary ($) Compensation ($)
--------------------------------------------------------------------------------
James M. Martell, President 2003 123,333 0
2002 148,022 0
In FY 2003, all officers of the Company as a group (2 in number) received
cash compensation of $184,166. 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 an employment agreement with Mr. Martell in
September 1993, under which Mr. Martell received 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.
.. This agreement was extended for two years in FY 2000 at an annual salary of
$148,000 and further extended for another three years in FY 2002. In FY 2003,
Mr. Martell's salary was reduced in the interim to $74,000 to preserve the
Company's cash position. In FY 2001, the Board of Directors reissued the options
to purchase the 200,000 shares of Company's Common stock at $0.11 per share
instead of $1.00 per share as previously granted and extended the expiration of
those options to August 22, 2003.
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. Mr. Martell in FY 1996 exercised this option for 1,200,000 restricted
shares for $60,000.
In FY 2001, the Board of Directors, as part of its efforts to diversify
into high technology, granted the following options to the Company's Officers,
Directors and Advisory Board Members: a three year option to purchase 575,000
restricted shares of the Company's Common Stock at $0.11 per share to James J.
Heigl, then Chairman and CEO in FY 2001; a three year option to purchase 550,000
restricted shares of the Company's Common Stock at $0.11 per share to Harry
Alton Lee, then COO and Director in FY 2001; a three year option to purchase
900,000 restricted shares of the Company's Common Stock at $0.11 per share to
Michael Tomic, Director; a three year option to purchase 100,000 restricted
shares of the Company's Common Stock at $0.11 per share to Durwood Settles,
Director; a three year option to purchase 50,000 restricted shares of the
Company's Common Stock at $0.11 per share to James McCollam, Chief Accounting
Officer and Controller; and three year options to purchase 5,000 restricted
shares of the Company's Common Stock at $0.28 per share to each of its Advisory
Board Members.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
As of July 10, 2003, 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 (1) Percentage
--------------------------------------------------------------------------
James M. Martell 1,548,000 18.2
2420 Wilson, Blvd., Suite 214
Arlington, VA 22201
(1) Beneficial Ownership includes shares for which an individual, directly
or indirectly, has or shares, or has the right within 60 days to have or share,
voting or investment power or both. Beneficial ownership as reported in the
above table has been determined in accordance with Rule 13d-3 of the Exchange
Act.
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 as of July 10, 2003(1) Percentage
--------------------------------------------------------------------------------
James M. Martell President & Director 1,548,000 18.2
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 1,765,000 20.8
*Less than 1.0%
(1) Beneficial Ownership includes shares for which an individual, directly
or indirectly, has or shares, or has the right within 60 days to have or share,
voting or investment power or both. Beneficial ownership as reported in the
above table has been determined in accordance with Rule 13d-3 of the Exchange
Act.
Item 12. Certain Relationships and Related Transactions.
During FY 2003 and FY 2002, there were no related party transactions.
Item 13. Exhibits and Reports on Form 8-K.
(a) Index to Financial Statements PAGE
Independent Auditors' Reports F-1
Consolidated Balance Sheets as of April 30, 2003 and 2002 F-2
Consolidated Statements of Operations for the Years Ended
April 30, 2003 and 2002 F-3
Consolidated Statements of Stockholder's Equity for the Years
ended April 30, 2003 and 2002 F-4
Consolidated Statements of Cash Flows for the Years ended
April 30, 2003 and 2002 F-5
Notes to the Consolidated Financial Statements F-6/F-14
(b) There were no Form 8-K's filed during the last quarter of the period
covered by this report.
ITEM 14. CONTROLS AND PROCEDURES
Disclosure controls are procedures that are designed with the objective of
ensuring that information required to be disclosed in the Company's reports
under the Securities Exchange Act of 1934, such as this Form 10-K 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 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 10-K.
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Financial Statements
For The Year Ended April 30, 2003
Table of Contents
Page
Independent Auditor's Report 1
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Changes in Stockholders'
(Deficiency of Net Assets) 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
PFK PANNELL
worldwide KERR
FORSTER PC
[GRAPHIC OMITTED][GRAPHIC OMITTED] 10304 Eaton Place
Suite 440
Fairfax, VA 22030
(703) 385-8809
Independent Auditors' Report
To the Stockholders and Board of Directors
Champions Sports, Inc.
Arlington, Virginia
We have audited the accompanying consolidated balance sheet of Champions Sports,
Inc. and its subsidiaries as of April 30, 2002, and the related consolidated
statement of operations, changes in stockholders' (deficiency) equity, and cash
flows for the year 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit 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 audit provides 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, 2002, and the results of
their operations and their cash flows for the year then ended, in conformity
with accounting principles generally accepted in the United States of America.
[GRAPHIC OMITTED][GRAPHIC OMITTED]
/s/ Pannell Kerr Forster PC
June 21, 2002
Michael F. Moore, CPA
Sole Practitioner
1412 Kingsvale Circle
Herndon, VA 20170
Independent Auditor's Report
To the Stockholders and Board of Directors
Champions Sports, Inc.
Arlington, Virginia
I have audited the accompanying consolidated balance sheet of Champions Sports,
Inc. and its subsidiaries as of April 30, 2003, and the related consolidated
statements of operations, changes in stockholders' (deficiency of net assets),
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with auditing standards generally accepted in
the United States of America. Those standards require that I plan and perform
the audit 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. I believe that my audit provides a reasonable basis for
my opinion.
In my 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, 2003, and the results of
their operations and their cash flows for the year then ended, in conformity
with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 9. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Michael F. Moore, CPA
Sole Practitioner
July 1, 2003
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
Assets
April 30
--------
2003 2002
----------- -----------
Current assets
Cash and cash equivalents ............................................. $ 195,101 $ 449,282
Inventories ........................................................... 23,750 25,555
Prepaid expenses ...................................................... 10,836 14,089
----------- -----------
Total current assets ......................................... 229,687 488,926
----------- -----------
Property and equipment
Furniture and equipment ............................................... 586,506 577,371
Leasehold improvements ................................................ 584,772 584,772
----------- -----------
1,171,278 1,162,143
Accumulated depreciation and amortization ............................. (924,851) (876,432)
----------- -----------
246,427 285,711
----------- -----------
Deposits ................................................................. 11,052 11,052
----------- -----------
Total assets ................................................. $ 487,166 $ 785,689
=========== ===========
Liabilities and Stockholders' (Deficiency of Net Assets)
Current liabilities
Accounts payable ...................................................... $ 65,246 $ 88,104
Dividend payable on preferred stock (note 6) .......................... 575,192 511,442
Other accrued expenses ................................................ 49,280 52,790
Deferred revenue ...................................................... -- 124,871
Current portion of deferred lease concession .......................... 3,322 4,363
Current portion of capital lease obligation (note 4) .................. -- 1,929
----------- -----------
Total current liabilities .................................... 693,040 783,499
Deferred lease concession, net of current portion ........................ 3,875 7,195
----------- -----------
Total liabilities ............................................ 696,915 790,694
----------- -----------
Commitments and contingencies (notes 3, 5, and 8)
Stockholders' (deficiency of net assets) (notes 6, 7, and 8)
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 2003 and 2002, respectively ......................... 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 2003 and 2002, respectively .............. 8,514 8,514
Additional paid-in capital ............................................ 5,397,598 5,392,598
Accumulated deficit ................................................... (6,147,111) (5,937,367)
----------- -----------
Total stockholders' (deficiency of net assets) ............... (209,749) (5,005)
----------- -----------
Total liabilities and stockholders' (deficiency of net assets) $ 487,166 $ 785,689
=========== ===========
See notes to consolidated financial statements
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Years Ended April 30
--------------------
2003 2002
----------- -----------
Revenue
Food and beverage ........................................................... $ 1,882,118 $ 1,995,226
Merchandise, memorabilia, and consulting fees ............................... 113,641 132,995
Other income ................................................................ 10,647 19,774
----------- -----------
2,006,406 2,147,995
----------- -----------
Costs and expenses
Cost of food and beverage sales ............................................. 463,074 518,367
Cost of merchandise and memorabilia ......................................... 38,799 76,919
Restaurant payroll and related costs ........................................ 663,947 681,806
Restaurant occupancy costs .................................................. 251,899 245,038
Other restaurant costs ...................................................... 405,365 363,264
General and administrative .................................................. 280,847 309,892
Depreciation and amortization ............................................... 48,419 48,419
Interest .................................................................... 50 1,602
Impairment of investments (note 1) ........................................... -- 50,000
----------- -----------
2,152,400 2,295,307
----------- -----------
Net (loss) before income tax expense ........................................... (145,994) (147,312)
Income tax expense (note 2) .................................................... -- --
----------- -----------
Net (loss) ............................................................... (145,994) $ (147,312)
Preferred stock dividends ...................................................... (63,750) (63,750)
----------- -----------
Net (loss) applicable to common stockholders ............................. $ (209,744) $ (211,062)
=========== ===========
Basic (loss) per common share (note 1) ......................................... $ (0.02) $ (0.02)
========= ===========
(Loss) per common share - assuming dilution (note 1) ........................... $ (0.02) $ (0.02)
=========== ===========
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' (Deficiency of Net Assets)
For The Years Ended April 30, 2003 and 2002
Series A, 12%
Convertible Cumulative
Common Stock Preferred Stock
------------------------------------------------- ----------------------
Additional
Amount Amount Paid-in Accumulated
Shares at Par Shares at Par Capital Deficit Total
----------------------------------------------------------------------------
Balances, April 30, 2001 ........................ 8,514,459 8,514 53,125 $531,250 $ 5,337,598 $(5,726,305) $ 151,057
For the year ended April 30, 2002
Dividend on preferred stock
accrued and unpaid ............................ -- -- -- -- (63,750) (63,750)
Subscriptions received, stock unissued (note 8) -- -- -- 55,000 -- 55,000
Net (loss) .................................... -- -- -- -- (147,312) (147,312)
------------------------------------------------- ----------- ------ --------------- ----------- ----------- -----------
Balances, April 30, 2002 ........................ 8,514,459 8,514 53,125 531,250 5,392,598 (5,937,367) (5,005)
For the year ended April 30, 2003
Dividend on preferred stock
accrued and unpaid ............................ -- -- -- -- (63,750) (63,750)
Subscriptions received, stock unissued (note 8) -- -- -- 5,000 -- 5,000
Net (loss) .................................... -- -- -- -- (145,994) (145,994)
----------- ------ --------------- ----------- ----------- -----------
Balances, April 30, 2003 ........................ 8,514,459 8,514 53,125 $531,250 $ 5,397,598 $(6,147,111) $ (209,749)
=========== ====== =============== =========== =========== ===========
See notes to consolidated financial statements
5
----
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
Years Ended April 30
--------------------
2003 2002
--------- ---------
Cash flows from operating activities:
Net (loss) ......................................................................................... $(145,994) $(147,312)
Adjustments to reconcile net (loss) to net
cash (used) by operating activities:
Depreciation and amortization ................................................................... 48,419 48,419
Impairment of investments ....................................................................... 50,000
Changes in assets and liabilities:
Inventories .................................................................................. 1,805 (499)
Prepaid expenses ............................................................................. 3,253 4,648
Accounts payable ............................................................................. (22,858) (38,136)
Other accrued expenses ....................................................................... (3,510) (5,689)
Deferred revenue ............................................................................. (124,871) 60,246
Deferred lease concession .................................................................... (4,361) (4,361)
--------- ---------
Net cash provided (used) by
operating activities .................................................................... (248,117) (32,684)
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment ................................................................ (9,135) (14,390)
--------- ---------
Cash flows from financing activities:
Subscriptions received, stock unissued (note 9) ................................................... 5,000 55,000
Principal payments on capital lease ................................................................ (1,929) (10,294)
--------- ---------
Net cash provided by financing activities ................................................. 3,071 44,706
--------- ---------
Net (decrease) in cash and cash equivalents ........................................................... (254,181) (2,368)
Cash and cash equivalents at beginning of year ........................................................ 449,282 451,650
--------- ---------
Cash and cash equivalents at end of year .............................................................. $ 195,101 $ 449,282
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the year for interest ............................................................. $ 50 $ 1,602
========= =========
Supplemental disclosure of non-cash investing and financing activities:
Accrued dividend on preferred stock ................................................................ $ 63,750 $ 63,750
========= =========
See notes to consolidated financial statements
6
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
April 30, 2003
Note 1 - Organization, operations and summary of significant accounting policies
--------------------------------------------------------------------------------
Organization and operations
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, 2003 and 2002,
respectively, the Company, through its subsidiaries, owns and licenses, without
any royalty fee, one Champions Sports Bar Restaurant in San Antonio, Texas.
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 the Champions Sports Bar Restaurant in San Antonio.
A significant portion of the Company's revenues come from the San Antonio
restaurant where the Company is subject to the alcoholic beverage laws of the
State of Texas and the health regulations of the City of San Antonio. Further
this represents a geographic concentration of risk.
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 and amortization 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
Depreciation expense was $11,150 for each of the years ended April 30, 2003
and 2002. Amortization expense was $37,269 for each years ended April 30, 2003
and 2002. Fully depreciated assets in the approximate amount of $110,000 are
included in property and equipment at April 30, 2003.
7
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
April 30, 2003
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,
2003 and 2002, were as follows:
2003 2002
---------- -----------
Restaurant food and beverage $17,336 $ 17,535
Promotional merchandise for sale to
restaurant customers 6,414 8,020
---------- ----------
$23,750 $ 25,555
======= ========
Net (loss) per share
Basic earnings per common share is computed by dividing the net (loss),
adjusted for 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, 2003
(Loss) Available To Common Per
Common Stockholders Shares Share
Basic (loss) per
Common Share $(209,744 8,514,459 $ (.02)
========= =========
At April 30, 2002
(Loss) Available To Common Per
Common Stockholders Shares Share
Basic (loss) per
Common Share $(211,062) 8,514,459 $ (.02)
========= =========
The effect of including the options in diluted (loss) per share would be
antidilutive, and, therefore, are not included in the calculation of diluted
(loss) per share.
Cash and cash equivalents
The statements of cash flows are prepared on the basis of cash and
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 various times
throughout the year the Company had amounts on deposit at financial institutions
in excess of federally insured limits.
8
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
April 30, 2003
Note 1 - Organization and summary of significant accounting policies (continued)
--------------------------------------------------------------------------------
Income taxes
To the extent that taxable income differs from financial reporting net
income due to temporary differences, deferred taxes are recognized. The Company
accounts for general business tax credits, if any, by the flow-through method.
Deferred revenue
Deferred revenue consisted of payments received in advance of revenue being
earned under memorabilia sales agreements.
Financial statement estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 payable, and accrued expenses, approximate fair
values because of the short maturities of these instruments.
During 2002, $50,000 was expensed representing the Company's investment in two
unrelated companies.
Options for Common Stock
The Company uses the intrinsic value method to account for options granted
to executive officers, directors and other key employees for the purchase of
common stock. No compensation expense is recognized on the grant date, since at
that date, the option price equals or is higher than the market price of the
underlying common stock. The Company discloses the pro forma effect of
accounting for stock options under the fair value method (note 7). The Company
uses the fair value method to account for options granted to advisors for the
purchase of common stock.
9
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
April 30, 2003
Note 2 - Income taxes
Income tax expense consists of the following for the years ended April 30,
2003 and 2002:
2003 2002
------------- ------------
Current $ - $ -
Deferred (81,085) (52,140)
Increase in valuation allowance 81,085 52,140
------------ ------------
Total income tax expense $ - $ -
=============== ==============
Temporary differences, which give rise to deferred tax assets are as follows:
2003 2002
------------- -------------
Deferred tax assets
Deferred rent concessions $ - $ 4,387
Net operating losses available
for carryforward 1,524,000 1,623,515
Depreciation 229,000 44,013
----------- ------------
Total deferred tax assets 1,753,000 1,671,915
Valuation allowance (1,753,000) (1,671,915)
---------- -----------
Net deferred tax assets $ - $ -
================ =================
A reconciliation of income taxes computed at Federal statutory rates to income
taxes recorded by the Company is as follows:
Years Ended April 30
-------------------------------
2003 2002
------------- -------------
Federal income taxes at statutory rate $ (70,480) $ (44,606)
State income taxes net of Federal income
tax benefit (8,050) (5,195)
Effect of non-deductible items (2,555) (2,339)
Change in valuation allowance 81,085 52,140
------------ ------------
Total income tax expense $ - $ -
============== ================
10
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
April 30, 2003
Note 2 - Income taxes (continued)
At April 30, 2003, the Company has net operating loss carryforwards of
approximately $3,910,000 for tax reporting purposes. The net operating loss
carryforwards for income tax purposes expire approximately as follows:
2006 $ 137,000
2007 9,000
2008 561,000
2009 1,004,000
2011 1,915,000
2012 11,000
2013 28,000
2020 33,000
2021 106,000
2022 106,000
2023 156,000
------------
$ 3,910,000
Note 3 - Commitments and contingencies
Operating leases
The Company leases, as tenant, restaurant space under an operating lease
which expires June 30,2005. 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.
Rental expense charged to expense during the years ended April 30, 2003 and
2002 was $199,834 and $214,096, respectively. Included in this expense are
contingent rentals of $7,241 and $11,949 in 2003 and 2002, respectively. Future
minimum payments under the noncancellable restaurant lease as of April 30, 2003
are as follows:
2004 $140,159
2005 140,159
2006 23,360
-------
Total $303,678
=======
Note 4 - Capital lease obligation
The Company leased equipment under a capital lease. The equipment cost of
$32,286 was amortized over its useful life, and such amortization was included
in the depreciation and amortization expense for 2003 and 2002, respectively.
During 2003, the lease expired and the Company purchased the equipment.
11
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
April 30, 2003
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
$89,531 and $89,523 for 2003 and 2002, 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 no conversions in 2003 and 2002.
For each of the eight fiscal years ended April 30, 2003, the Company
deferred payment of the annual dividend on the Series A preferred stock. The
deferral was $63,750, in both 2003 and 2002. Preferred stock dividends in
arrears at April 30, 2003 and 2002 aggregated $575,192 ($10.83 per preferred
share) and $511,442 ($9.63 per preferred share), respectively.
Note 7 - Common stock options
Options to purchase a total of 725,000 and 2,225,000 shares of common stock
in 2003 and 2002, respectively, at an exercise price of $0.11 and 460,000 shares
of common stock in 2001 at an exercise price of $0.28 were granted to two
executive officers, other key employees, directors and advisors of the Company.
All options were issued at market price or higher on the date of the grant.
These options expire if not exercised by August 2003 and September 2003. None of
these options have been exercised as of April 30, 2003.
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 that may be issued under the plan
is 840,000. The plan expired on August 2, 2002. No options were exercised under
the plan.
12
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
April 30, 2003
Note 7 - Common stock options (continued)
Stock option activity is summarized as follows:
Weighted Average
Number of Shares Exercise Price
Outstanding, April 30, 2001 3,265,000 $ 0.13
Granted 725,000 0.11
Expired (550,000) 0.11
Exercised -
---------------- --------
Outstanding, April 30, 2002 3,440,000 0.13
Granted - -
Expired - -
Exercised - -
---------------- ---------
Outstanding, April 30, 2003 3,440,000 $ 0.13
========= ======
The following table summarizes information about stock options outstanding and
exercisable at April 30, 2003.
Outstanding Exercisable
-------------------------------------------------------------
Weighted Weighted
Option Number Weighted Average Number Average
Price of Average Exercise of Exercise
Range Shares Life Price Shares Price
----- ------ ---- ----- ------ -----
$0.11- $0.28 3,440,000 4 months $0.13 3,440,000 $0.13
The following table summarizes information about stock options outstanding and
exercisable at April 30, 2002.
Outstanding Exercisable
-------------------------------------------------------------
Weighted Weighted
Option Number Weighted Average Number Average
Price of Average Exercise of Exercise
Range Shares Life Price Shares Price
----- ------ ---- ----- ------ -----
$0.11- $0.28 3,440,000 1.3 years $0.13 3,440,000 $0.13
13
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
April 30, 2003
Note 7 - Common stock options (continued)
The Company's net (loss) and net (loss) per common share for the year ended
April 30, 2003, would have been increased to the pro forma amounts indicated
below if compensation cost for the Company's stock option plans had been
determined based on the fair value at the grant date for awards in accordance
with the provisions of Statement of Financial Accounting Standards No. 123,
Accounting for Stock Based Compensation. 2002
Net (loss):
As reported $(147,312)
Pro forma $(232,121)
Basic (loss) per share:
As reported $(.02)
Pro forma $(.03)
Diluted (loss) per share:
As reported $(.02)
Pro forma $(.03)
The effect of including the options in diluted (loss) per share would be
antidilutive, and, therefore, are not included in the calculation of diluted
(loss) per share.
The fair value of the options granted during 2002 was estimated on the date
of grant using the Black-Scholes option pricing model. The weighted-average
assumptions used are as follows:
2002
Expected term 2 years
Expected stock volatility 172%
Risk-free interest rate 2.5%
Dividend $0.00
The fair value of the stock options granted to advisors of the Company is
immaterial, and has not been included in the financial statements.
Management believes that, due to the financial condition of the Company
(note 9), all of the options outstanding at April 30, 2003, have no value and
that they will expire unexercised.
14
CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
April 30, 2003
Note 8 - Stock agreement
In January 2002, the Company entered into a subscription agreement to sell
4,000,000 shares of common stock to an unrelated party at $0.125 per share for a
total of $500,000.
The purchaser paid $20,000 at the closing of the agreement and provided a
promissory note for $480,000. The note is non-interest bearing and requires
twenty-four monthly payments of $20,000 each. The note is secured by the stock
issued and the transfer of such stock is restricted until the note is paid off.
Certain other restrictions regarding the transfer of the stock also exist.
The purchaser paid a total of $55,000 during the year ended April 30, 2002,
and $5,000 during the year ended April 30, 2003, and has defaulted under the
payment terms of the note. The stock has not been issued, and management
believes the agreement may be cancelled and, therefore, has neither recorded the
note nor issued the stock.
Note 9 - Continued existence
The Company has experienced net losses for the past two years and, at April
30, 2002. Current liabilities exceed total assets, which raises substantial
doubt about the Company's ability to continue as a going concern. In response to
these conditions, management reduced payroll costs at the corporate headquarters
and is actively pursuing mergers and acquisitions.
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 29, 2003
In accordance with the Exchange Act, this report has been signed below by
the following 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 29, 2003
By: /s/ Michael M. Tomic
------------------------
Michael M. Tomic
Director
Date: July 29, 2003
By: /s/ Durwood C. Settles
--------------------------
Durwood C. Settles
Director
Date: July 29, 2003
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Section 302 Certification
I, JAMES M. MARTELL, certify that:
(1) I have reviewed this annual report on Form 10-KSB of CHAMPIONS SPORTS,
INC., a Delaware corporation (the "registrant");
(2) Based on my knowledge, this annual 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 annual
report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 annual 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 annual
report (the "Evaluation Date"); and
(c) Presented in this annual 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
annual 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: July 29, 2003
By: /s/ James M. Martell
------------------------
James M. Martell
Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Section 302 Certification
I, JAMES E. McCOLLAM, certify that:
(1) I have reviewed this annual report on Form 10-KSB of CHAMPIONS SPORTS,
INC., a Delaware corporation (the "registrant");
(2) Based on my knowledge, this annual 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 annual
report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 annual 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 annual
report (the "Evaluation Date"); and
(c) Presented in this annual 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 function):
(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
annual 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: July 29, 2003
By: /s/ James E. McCollam
-------------------------
James E. McCollam
Chief Financial Officer