<SEC-DOCUMENT>0000771856-01-500004.txt : 20011018
<SEC-HEADER>0000771856-01-500004.hdr.sgml : 20011018
ACCESSION NUMBER:		0000771856-01-500004
CONFORMED SUBMISSION TYPE:	10KSB
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20010430
FILED AS OF DATE:		20010730

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CHAMPIONS SPORTS INC
		CENTRAL INDEX KEY:			0000771856
		STANDARD INDUSTRIAL CLASSIFICATION:	RETAIL-EATING & DRINKING PLACES [5810]
		IRS NUMBER:				521401755
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0430

	FILING VALUES:
		FORM TYPE:		10KSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-17263
		FILM NUMBER:		1692816

	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
</SEC-HEADER>
<DOCUMENT>
<TYPE>10KSB
<SEQUENCE>1
<FILENAME>csi10k2001.txt
<DESCRIPTION>ANNUAL REPORT FOR CHAMPIONS SPORTS, INC.
<TEXT>

                       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, 2001
                    ----------------------------------------

                                       OR

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                     THE SECURITIES EXCHANGE ACT OF 1934

                        For the transition period from ______  to ________

                         Commission file number 0-17263


                             CHAMPIONS SPORTS, INC.
             (Exact name of registrant as specified in its charter)

                               Delaware 52-1401755
                               -------------------
                (State or other jurisdiction of (I.R.S. Employer
                        organization) Identification No.)

                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)




<PAGE>



     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,  2001,  the  revenues of the  registrant  were
$2,210,348.

     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, 2001, was approximately $530,000.

     As of July 17, 2001,  the  Registrant  had a total of  8,514,459  shares of
common stock outstanding.


                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None




<PAGE>




                                     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, 2001, 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. 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

                                       2
<PAGE>

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
91.5% of the Company's revenues for FY 2001, 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 2001, the Company provided sports
memorabilia and consulting services to Champions Sports Bar Restaurants that
opened in Marriott hotels in Vienna, Austria and Indianapolis, Indiana.
     Marriott hotel locations accounted for about 8.4% of the Company's revenues
for FY 2001, as reflected in the consolidated financial statements included
herein.

                                       3
<PAGE>

               (iii). High Technology Diversification

         In August, 2000, after reviewing and evaluating the Company's
operations and priorities, the Board of Directors decided that in an effort to
increase shareholder value and to meet its longer term liquidity needs,
Champions Sports, Inc. should diversify into the high-technology by expanding
the management team to focus on business opportunities in that sector. The
Company believed that the best opportunities to maximize the shareholder value
existed at that time in high technology. To accomplish this diversification,
Champions signed agreements with James J. Heigl Jr. and Harry A. Lee to take
lead management roles in the Company. Heigl joined Champions as its Chairman and
CEO, and Lee joined as COO and Director. Champions Tech Ventures was formed to
provide Management Capital to help early-stage technology companies by assisting
them in solidifying their business strategy and business plans; by keeping them
focused on their implementation; and by holding them accountable for taking
actions to fully execute those plans. Champions Tech Ventures provided advice
and guidance for clients in their capital formation, marketing and partnership
efforts, and in the development of their management team. The Company expended
$242,000 in its attempt to start the technology venture. This venture generated
no revenues. Adverse capital markets conditions precluded the Company from
raising $2 million, in a private placement, required to fund Champions Tech
Ventures. Subsequent to April 30, 2001, Champions Sports, Inc. divested itself
of Champions Tech Ventures. On June 21, 2001 James J. Heigl, Jr. resigned as
Chairman, Director and Chief Executive Officer of Champions Sports, Inc. and
Harry Alton Lee resigned as the Company's Chief Operating Officer.

                  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. .


                                       4
<PAGE>


                  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, 2001, 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.

                                       5
<PAGE>

               7.     Advisory Board

       In FY 2001 the Company formed a Champions Advisory Board to provide
guidance and counsel on business development to the management team. The members
of the Advisory Board received options for restricted common stock for their
continuous service to the Company. The Champions Advisory Board includes the
following members:

     James V. Kimsey,  Special advisor to the Chairman of Champions Sports, Inc.
is the  founding  Chief  Executive  Officer of America  Online and is  currently
Chairman Emeritus of America Online.

     Richard A. Kay, Founder, Chairman, President and CEO of Bethesda, Md. based
OTG Software Inc.

     Roger Mody, Founder,  President and CEO of Fairfax, Va. based Signal Corp.

     Sanju K. Bansal,  Vice Chairman and Chief Operating Officer of Vienna,  Va.
based MicroStrategy Inc.

     Lloyd J.  Griffiths,  Dean of the  School  of  Information  Technology  and
Engineering at George Mason University

     Edward A. Davis,  Former President of PSINetworks and senior vice president
PSINet

     Mario W. Cardullo,  Senior research associate and adjunct professor College
of Engineering and Pamplin College of Business  Virginia  Polytechnic  Institute
and State University

     Debra Diamond, President Debra Diamond Associates

     Babi Das, President and COO of Vienna based Etensity

     Daryl B. Davis, Managing Director, Global Star Partners, L.L.C.

     Carleton S. Jones, business consultant,  attorney, and president and COO of
PurelyWeb

     Stephen Rossetti, Executive director, Defense Integrated Travel

     James N. Schwarz,  partner in the Business Law practice  group Patton Boggs
LLP

     John L.  Sullivan  III,  partner at the  Washington,  DC office of LeBoeuf,
Lamb, Greene & MacRae LLP

     Gerald Turner,  entrepreneur,  angel investor and cofounder and chairman of
Potomac Capital Group

     Mark Wishner,  managing  partner of the Reston,  Va., office of Mintz Levin
Cohn Ferris Glovsky and Popeo

     Christopher  D. Young,  cofounder and former  president of Arlington  based
Cyveillance

     Champ Bailey, All-Star member of the Washington Redskin football team.



                                       6
<PAGE>



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 November 2004 with an option for an additional five years.  The
lease provides monthly rental payments of $18,939 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



                                       7
<PAGE>

                                     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 2001

         First Quarter                       0.16                      0.10
         Second Quarter                      0.53                      0.11
         Third Quarter                       0.29                      0.17
         Fourth Quarter                      0.20                      0.125

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



                  (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, 2001 was 2,131 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, 2001.

                  (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.


                                       8
<PAGE>

Item 6.            Management's Discussion and Analysis of Financial Condition
                           and Results of Operations.

                  (a) Results of Operations for Fiscal Years 2001 and 2000.

                           1.      Revenues

     For the fiscal year ended April 30, 2001, the Company's  revenues were flat
at $2,210,348 versus $2,217,328 in FY 2000.

     By component,  food and beverage sales  increased 5.1% to $1,939,841 for FY
2001 compared to $1,846,255 in FY 2000. The Company's management  attributes the
increase in food and beverage sales to an increase in customer volume,  as there
were no significant price increases in the last year. The food to beverage ratio
for the San Antonio location was approximately  60/40 for both comparable years.
Food and beverage  sales  accounted for 87.8% and 83.3 % of the Company's  total
revenue in the comparable periods.

     Revenues  from  merchandise  and  memorabilia  sales  and  consulting  fees
accounted for 10.7% of the Company's  total revenue in FY 2001 compared to 14.9%
in FY  2000.  Sales  of  memorabilia  are  directly  tied to the  number  of new
Champions  locations  that open during the fiscal year. In FY 2001,  the Company
provided  sports  memorabilia  to two  Champions  locations  compared  to  three
locations in FY 2000.  During FY 2001 and FY 2000, the Company's  other revenues
accounted for less than 1% of its total revenues.  Interest  income  represented
approximately 1.2% of the Company's total revenues in FY 2001 and 1% in FY 2000.

                           2.       Expenses

     The  Company's  cost of food and  beverage  remained  constant  at 25.6% of
related sales for both years ended April 30, 2001 and 2000.

     Restaurant  payroll and related  costs also remained  constant  during both
comparable  years at 34.7% of food and  beverage  sales in FY 2001 and  34.1% of
related sales in FY 2000.  Restaurant  occupancy costs for FY 2001 were 14.7% of
food and beverage  sales  compared to 11.3% in FY 2000,  as the increase in food
and  beverage  sales  triggered  payment of  percentage  rent and an increase in
common area charges passed on by the landlord increased occupancy cost.

     Other restaurant  costs also remained  constant as a percentage of food and
beverage sales at 19.4% for both fiscal years.  General and administrative costs
incurred in FY 2001 were $353,882 and $322,475 in FY 2000.The primary components
of  G&A  expenses  are  operating  the  Company's  corporate  office,  including
salaries.  Interest  expense in both FY 2001 and 2000 was 0.2% of the  Company's
expenses.

                            3.     Profits / Losses

     For FY 2001,  the Company's net loss was $468,931 from it operatons  before
dividends  accrued on the outstanding  preferred stock of $63,752 and a non-cash
charge of $207,952 for a change in valuation for a deferred tax asset, producing
a net loss  available to common  shareholders  of  $740,635,  ($0.09) per common
share. The San Antonio Champions  location  produced a profit of $74,623.  In FY
2001 the loss from operations of $468,931  included a loss of $242,101  incurred
in operations of the Company's high technology venture, Champions Tech Ventures,
Inc. and a write-off of $50,000 in an equity investment in a non-publicly traded
company.


     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,  creating a net income  available to common  shareholders of $4,022,
$0.00 per common share.

                                       9
<PAGE>

         (b) Liquidity and Capital Resources for Fiscal Years 2001 and 2000

     The  Company's  cash  position on April 30, 2001 was  $451,650  compared to
$591,208 on April 30, 2000, a decrease of $139,558.

     In FY 2001, The Company's  operating  activities provided cash of $144,678.
The Company  decreased  its  accounts  receivable  and other  current  assets by
$120,083 and increased its accounts  payable and other  current  liabilities  by
$145,060.  The Company wrote down its deferred tax asset totaling $207,952.  The
Company used $33,723 in cash to purchase  equipment  for its  restaurant  in San
Antonio and invested  $242,101 in Champions  Tech  Ventures,  Inc. Cash paid for
interest  expense in FY 2001 was  $3,518.  The  Company's  operating  activities
coupled with its cash reserves provided  sufficient cash flow for the Company to
meet its cash needs in FY 2001.

     During FY 2000, 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 $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-publicly  traded companies for $100,000,  and realized a gain of $2,707 from
the purchase and sale of marketable  securities.  Cash used for interest payment
in FY 2000 was $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.

     The Company's  working capital as of April 30, 2001 was a negative $216,239
contrasted to $466,400 on April 30, 2000.

     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, 2001 was $151,057 compared to $891,692 on
April 30, 2000. In FY 2001 and 2000, 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 2001 and 2000, 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  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 offered and other
general competitive factors.




                                       10
<PAGE>

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-13 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 J. Heigl, Jr.        Chairman and Chief Executive Officer  (1)
James M. Martell           President and Director (2)
Harry Alton Lee            Chief Operating Officer and Director (3)
James E. McCollam          Controller, Chief Accounting Officer,
                           Corporate Secretary
Durwood C. Settles         Director
Michael M. Tomic           Director

     (1) Subsequent to April 30, 2001, Mr. Heigl resigned,  on June 21, 2001, as
the Chairman and Chief Executive Officer of the Company.

     (2)  Subsequent  to April 30, 2001,  Mr.  Martell was appointed on June 22,
2001 to serve as Chairman and Chief Executive Officer.

     (3)  Subsequent to April 30, 2001,  Mr. Lee, on June 21, 2001,  resigned as
the Chief  Operating  Officer of the  Company and  effective  July 31, 2001 as a
Director of the Company.


                                       11
<PAGE>

     James J. Heigl Jr.,  age 63, has served as  Chairman  and CEO since  August
2000 and Chairman of Champions  Tech Ventures  since October 2000. Mr. Heigl has
over 33 years of experience  in  information  technology  and has been an active
entrepreneur  involved as an investor with many emerging  technology  companies.
Prior to joining  Champions,  Mr.  Heigl was the owner and CEO of ADVANCE  Inc.,
government  systems  integrator  company.  Mr. Heigl has been a senior executive
with Novadyne  Computer Systems and Litton  Industries.  Mr. Heigl has served on
the Board of ITAA, was President of the Processing and Network  Services  Group,
has co-chaired the annual US and Japan Information  Technology CEO Forum and was
the Co-Chair of the World Computing Congress in Yokahama,  Japan. Mr. Heigl is a
graduate of the U.S.  Military Academy at West Point and Auburn  University.  He
attended Law School at the  University of Maryland and did post graduate work at
Columbia University.


     James M.  Martell,  age 54, 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 as  Chairman  from
November 1991 to August,  2000.  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.

     Harry Alton Lee, age 48, has served as COO and  Director  since August 2000
and CEO and Director of Champions  Tech Ventures since October 2000. Mr. Lee has
over 20 years of experience in information technology and technology management.
He was the Founder,  President and CEO of, Gestalt Systems,  Inc., a pioneer and
leader in technology training, certification and courseware development. Mr. Lee
is an active venture capital investor and started,  before he joined  Champions,
the CEO  Advisory  Group,  a company  he founded  to share his  experiences  and
lessons  learned as an  entrepreneur  and CEO.  Mr. Lee received his Bachelor of
Science  degree in Operations  Analysis,  in 1975 from the U.S. Naval Academy in
Annapolis  and a Masters of Science  Degree in  Technology  of  Management  from
American University in 1980.

     James E. McCollam,  age 54, 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.

                                       12
<PAGE>

     Durwood C.  Settles,  age 58, 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 55, 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 2001,  and 2000  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         2001     148,022                 0
                                    2000     148,208                 0


     In FY 2001,  all officers of the Company as a group (4 in number)  received
cash  compensation  of $288,138.  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.

                                       13
<PAGE>

     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.  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.  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.

     In FY 2001,  the Board of Directors  granted the  following  options to the
Company's Officers, Directors and Advisory Board Members: a three year option to
purchase  200,000  restricted  shares of the Company's Common Stock at $0.11 per
share to James J.  Heigl,  Chairman  and CEO;  a three year  option to  purchase
200,000  restricted  shares of the Company's  Common Stock at $0.11 per share to
Harry Alton Lee,  COO and  Director;  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.

     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, 2001,  all 840,000
shares are reserved and available for issuance.


                                       14
<PAGE>

Item 11.    Security Ownership of Certain Beneficial Owners and Management.


     As of July 17, 2001, 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 17, 2001(1)  Percentage
-------------------------------------------------------------------------------

James J. Heigl, Jr.    Chairman & CEO (2)            120,000            1.4
James M. Martell       President & Director        1,548,000           18.2
Harry Alton Lee        COO & Director (3)            150,000            1.7
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                2,045,000           24.0

*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.

     (2) Subsequent to April 30, 2001, Mr. Heigl resigned,  on June 21, 2001, as
the Chairman and Chief Executive Officer of the Company.

     (3)  Subsequent to April 30, 2001,  Mr. Lee, on June 21, 2001,  resigned as
the Chief  Operating  Officer of the  Company and  effective  July 31, 2001 as a
Director of the Company.


                                       15
<PAGE>

Item 12.          Certain Relationships and Related Transactions.

                  During FY 2001 and FY 2000, there were no related party
transactions.





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, 2001 and 2000       F-2

         Consolidated Statements of Operations for the Years Ended
                  April 30, 2001 and 2000                                F-3

         Consolidated Statements of Stockholder's Equity for the Years
                  ended  April 30, 2001 and 2000                         F-4

         Consolidated Statements of Cash Flows for the Years ended
                  April 30, 2001 and 2000                                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.






<PAGE>








                     CHAMPIONS SPORTS, INC. AND SUBSIDIARIES

                        Consolidated Financial Statements
                        For The Year Ended April 30, 2001



<PAGE>













                                Table of Contents


                                                                      Page

Independent Auditors' Report                                           1

Consolidated Balance Sheets                                            2

Consolidated Statements of Operations                                  3

Consolidated Statements of Changes in Stockholders' Equity             4

Consolidated Statements of Cash Flows                                  5

Notes to Consolidated Financial Statements                             6
















<PAGE>


PKF                                                          PANNELL
worldwide                                                    KERR
[graphic omitted]                                            FORESTER PC

                                                  Certified Public Accountants
                                                             10304 Eatin Place
                                                             Suite 400
                                                             Fairfax, VA 22030
                                                        Telephone (703) 385-8809
                                                           Telefax (703-685-8890
                                                             pkfcpa@pkfwash.com


                          Independent Auditors' Report



To the Stockholders and Board of Directors
Champions Sports, Inc.
Arlington, Virginia


We have  audited  the  accompanying  consolidated  balance  sheets of  Champions
Sports, Inc. and its subsidiaries as of April 30, 2001 and 2000, and the related
consolidated statements of operations, changes in 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 auditing standards generally accepted
in the  United  States of  America.  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, 2001 and 2000,  and the
results of their  operations  and their cash flows for the years then ended,  in
conformity with accounting principles generally accepted in the United States of
America.



/s/ Pannell, Kerr, Forster PC
-----------------------------
Pannell, Kerr, Forster PC



June 15, 2001


<PAGE>








                                                                             F-2

<TABLE>
<CAPTION>


                     CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets

                                     Assets

                                                                      April 30
                                                                      --------

                                                                  2001          2000
                                                                  ----          ----
<S>                                                         <C>             <C>

Current assets
   Cash and cash equivalents .............................   $   451,650    $   591,208
   Accounts receivable - trade ...........................         1,326        114,063
   Inventories (note 1) ..................................        25,056         24,181
   Prepaid expenses ......................................        17,411         25,632
   Deferred tax asset (note 2) ...........................          --          207,952
                                                                  ------       -------

           Total current assets                                   495,443       963,036
                                                                  -------       -------


Property and equipment
   Furniture and equipment ...............................       562,981        552,634
   Leasehold improvements ................................       584,772        570,962
                                                                 -------        -------
                                                                1,147,753     1,123,596
   Accumulated depreciation
         and amortization ................................      (828,013)      (781,214)
                                                                --------       --------

                                                                 319,740        342,382
                                                                 -------        -------

Other assets
   Available for sale investments,
        at cost (notes 1 and 8)                                   50,000       100,000
   Deposits ..............................................        11,052         11,052
                                                                  ------         ------

           Total assets ..................................   $   876,235    $ 1,416,470
                                                             ===========    ===========


                      Liabilities and Stockholders' Equity

Current liabilities
   Accounts payable ......................................       126,240         48,173
   Dividend payable on
        preferred stock (note 6) .........................       447,692        383,940

   Other accrued expenses ................................        58,479         51,386

   Deferred revenue ......................................        64,625           --

   Current portion of deferred
       lease concession ..................................         4,363          4,725
   Current portion of capital
       lease obligation (note 4) .........................        10,283          8,412
                              -                                   ------          -----

      Total current liabilities ..........................       711,682        496,636
                                                                 -------        -------


Capital lease obligation,
       net of current portion (note 4) ...................         1,940         12,223
Deferred lease concession,
       net of current portion ............................        11,556         15,919
                                                                  ------         ------

      Total liabilities ..................................       725,178        524,778
                                                                 -------        -------


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 and
     53,125 shares issued and
     Outstanding for 2001 and 2000,
     respectively ........................................       531,252        531,252

   Common stock, par value $.001 per share,
     50,000,000 shares authorized and
     8,514,459 shares issued and
     outstanding for 2001 and 2000, respectively .........         8,514          8,514
   Additional paid-in capital ............................     5,337,599      5,337,599
   Accumulated deficit ...................................    (5,726,308)    (4,985,673)
                                                              ----------     ----------

      Total stockholders' equity .........................       151,057        891,692
                                                                 -------        -------

       Total liabilities
       and stockholders' equity ..........................   $   876,235    $ 1,416,470
                                                             ===========    ===========



See notes to consolidated financial statements
</TABLE>


<PAGE>



                                                                             F-3
<TABLE>
<CAPTION>


                     CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
                      Consolidated Statements of Operations

                                                            Years Ended April 30
                                                            --------------------
                                                               2001         2000
                                                               ----         ----
<S>                                                       <C>            <C>

Revenue
    Food and beverage ...................................  $ 1,939,841   $ 1,846,255
    Merchandise, memorabilia, and consulting fees .......      236,516       330,319
    Interest income .....................................       26,190        22,289
    Other income ........................................        7,801        18,465
                                                                 -----        ------
                                                             2,210,348     2,217,328
                                                             ---------     ---------

Costs and expenses
    Cost of food and beverage sales .....................      495,754       472,476
    Cost of merchandise and memorabilia .................      143,951       118,592
    Restaurant payroll and related costs ................      673,052       628,760
    Restaurant occupancy costs ..........................      284,660       208,546
    Other restaurant costs ..............................      375,996       358,909
    General and administrative ..........................      353,882       322,475
    Depreciation and amortization .......................       56,365        51,794
    Interest ............................................        3,518         4,264
    Impairment of investments (note 8) ..................      292,101          --
                                                               -------        ------
                                                             2,679,279     2,165,816
                                                            ----------    ----------

Operating income (loss) before income tax expense .......     (468,931)       51,512
Income tax expense (note 2) .............................      207,952             -
                         -                                     -------        ------


       Net income (loss) ................................     (676,883)       51,512

Preferred stock dividends (net of conversions in 2000) ..      (63,752)      (47,490)
                                                               -------       -------


       Net income (loss) available to common stockholders     (740,635)        4,022
                                                              ========         =====


Basic earnings (loss) per common share ..................         (.09)          .00
                                                                  ====           ===


Earnings (loss) per common share - assuming dilution ....         (.09)          .00
                                                                  ====           ===



</TABLE>






<PAGE>











                                                                             F-5
<TABLE>
<CAPTION>


                                   CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
                                    Consolidated Statements of Cash Flows
                               Increase (Decrease) in Cash and Cash Equivalents

                                                                          Years Ended April 30
                                                                   ------------------------------
                                                                           2001           2000
                                                                   ---------------------  ------
<S>                                                                       <C>         <C>
Cash flows from operating activities:
     Net income (loss) ................................................   $(676,883)   $  51,512
     Adjustments to reconcile net income (loss) to net
       cash provided (used) by operating activities:
             Depreciation and amortization ............................      56,365       51,794
             Gain on sale of marketable securities ....................        --         (2,707)
             Impairment of investments ................................     292,101         --
             Deferred income taxes ....................................     207,952         --
             Changes in assets and liabilities:
                     Accounts receivable ..............................     112,737     (113,263)
                     Inventories ......................................        (875)      (4,005)
                     Prepaid expenses .................................       8,221      (22,400)
                     Accounts payable .................................      78,067       11,356
                     Other accrued expenses ...........................       7,093       13,363
                     Deferred revenue .................................      64,625         --
                     Deferred lease concessions .......................      (4,725)      (4,000)
                                                                          ---------    ---------
                             Net cash provided (used) by
                               operating activities ...................     144,678      (18,350)
                                                                          ---------    ---------

Cash flows from investing activities:
     Purchases of property and equipment ..............................     (33,723)     (13,495)
     Available for sale investments ...................................        --       (100,000)
     Purchase of marketable securities ................................        --       (964,975)
     Sale of marketable securities ....................................        --        967,682
     Investment in Champions Tech Ventures, Inc. ......................    (242,101)        --
                                                                          ---------    ---------
                             Net cash (used) by investing .............    (275,824)    (110,788)
                             activities
                                                                          ---------    ---------

Cash flows from financing activities:
     Principal payments on capital lease ..............................      (8,412)      (5,895)
                                                                          ---------    ---------

Net (decrease) in cash and cash equivalents ...........................    (139,558)    (135,033)

Cash and cash equivalents at beginning of year ........................     591,208      726,241
                                                                          ---------    ---------
Cash and cash equivalents at end of year ..............................   $ 451,650    $ 591,208
                                                                          =========    =========

Supplemental disclosures of cash flow information:
     Cash paid during the year for interest ...........................   $   3,518    $   4,264
                                                                          =========    =========

Supplemental disclosure of non-cash investing and financing activities:
     Cumulative dividend on preferred stock,
       (net of conversions in 2000) ...................................   $  63,752    $  47,490
                                                                          =========    =========


See notes to consolidated financial statements

</TABLE>

<PAGE>






                     CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                 April 30, 2001


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, 2001 and 2000,
respectively, the Company, through its subsidiaries,  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  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 $19,096 and $14,525 for the years ended April 30, 2001
and 2000,  respectively.  Amortization  expense was $37,269 for both years ended
April 30, 2001 and 2000. Fully depreciated  assets in the amount of $109,186 and
$109,292  are  included in property  and  equipment  at April 30, 2001 and 2000,
respectively.


<PAGE>


                                                                             F-7

                     CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements (continued)
                                 April 30, 2001


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, 2001 and
2000, were as follows:

                                            2001            2000
                                         -----------    -----------

  Restaurant food and beverage              $ 15,669       $ 15,127
  Promotional merchandise for sale to
    restaurant customers                       9,387          9,054
                                           ---------     ----------

                                            $ 25,056       $ 24,181
                                            ========       ========

Net income (loss) per share

Basic earnings per common share is computed by dividing the net income (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, 2001
                         (Loss) available to Common                      Per
                                Common Stockholders         Shares      Share

       Basic (loss) per
         Common Share           $(740,635)                8,514,459      $ (.09)
                                ---------                 ---------      ------


                               At April 30, 2000
                        Earnings available to Common                      Per
                                Common Stockholders         Shares       Share

       Basic earnings per
         Common Share           $   4,022                 8,511,344      $  .00
                                ---------                 ---------      ------


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 April 30, 2001 and 2000,
respectively,  and at various times throughout the year, the Company had amounts
on deposit at financial institutions in excess of federally insured limits.



<PAGE>

                                                                             F-8

                     CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements (continued)
                                 April 30, 2001


Note 1 - Organization and summary of significant accounting policies (continued)
--------------------------------------------------------------------------------

Investments
-----------

Investments  consist of equity  holdings  in  companies  which are not  publicly
traded.  There is no readily  determinable  fair market value for the securities
and,  as such,  they are stated at cost.  To the  extent  that the cost of these
investments  is greater than expected  future  earnings from these  investments,
they are considered to be impaired and are written off.

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.

Deterred revenue
----------------

Deterred revenue consists primarily of payments received in advance of revenue
being earned under memorabilia sales agreements.

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
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 consists of the following for the years ended April 30, 2001
and 2000:

                                                  2001                 2000
                                             ------------         ------------

   Current                                $             -       $            -
   Deferred                                      (179,690)             (20,487)
   Increase in valuation allowance                387,642               20,487
                                                ---------           ----------
            Total income tax expense            $ 207,952       $            -
                                                =========       ==============



<PAGE>

                                                                             F-9

                     CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements (continued)
                                 April 30, 2001


Note 2 - Income taxes (continued)

The increase in the  valuation  allowance is  recognized  in the fourth  quarter
ended April 30, 2001, and is the primary reason for the increase in the net loss
from the reported net loss of the third quarter, ended January 31, 2001.

Temporary differences, which give rise to deferred tax assets are as follows:

                                                2001                 2000
                                           --------------       -------------

  Deferred tax assets
    Deferred rent concessions               $      6,043        $       7,836
    Net operating losses available
         for carryforward                      1,575,201            1,407,647
    Depreciation                                  38,531               24,602
                                            ------------        -------------
           Total deferred tax assets           1,619,775            1,440,085
    Valuation allowance                       (1,619,775)          (1,232,133)
                                              ----------          -----------
           Net deferred tax assets          $          -        $     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
                                              ----------------------------------
                                                   2001                 2000
                                              -------------        -------------

    Federal income taxes at statutory rate       $  159,437         $    17,514
    State income taxes net of Federal income
      tax benefit                                    18,569               2,040
    Effect of non-deductible expenses                 1,684                 933
    Change in valuation allowance                  (387,642)            (20,487)
                                                -----------         ------------
             Total income tax (expense)          $ (207,952)    $             -
                                                 ===========    ================

At April 30, 2001, the Company has net operating loss carryforwards of
approximately $4,129,000 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
                                            2021           493,000
                                                      ------------
                                                        $4,129,000

During the year ended April 30, 2000,  the Company used net operating  losses of
approximately  $67,000 to offset taxable  income.  No such net operating  losses
were used during 2001.

<PAGE>


                                                                            F-10


                     CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements (continued)
                                 April 30, 2001


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.

Rental expense charged to expense during the years ended April 30, 2001 and 2000
was $252,738 and $174,999,  respectively.  There were no  contingent  rentals in
2001 or 2000. Future minimum payments under the noncancellable  restaurant lease
as of April 30, 2001 are as follows:

                        2002    $140,158
                        2003     140,158
                        2004     140,158
                                --------
                        Total   $420,474
                                ========

Note 4 - Capital lease obligation

The Company is the lessee of equipment under a capital lease. The equipment cost
of $32,286 is amortized over its useful life, and such  amortization is included
in the depreciation and amortization expense for 2001 and 2000, respectively.

Minimum  future lease  payments under the capital lease as of April 30, 2001 are
as follows:

      2002                                                 $11,838
      2003                                                   1,973
                                                         ---------
      Total future minimum lease payments                   13,811
      Less interest                                          1,588
                                                         ---------
      Principal payments due                                12,223
      Less current portion                                  10,283
                                                          --------
                                                          $  1,940

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
$187,770 and $278,284 for 2001 and 2000, respectively.

<PAGE>


                                                                            F-11

                     CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements (continued)
                                 April 30, 2001


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 shares of Series A preferred stock
during 2000, but no conversions in 2001.

For each of the seven fiscal years ended April 30, 2001, the Company's  Board of
Directors  voted  to  defer  payment  of the  annual  dividend  on the  Series A
preferred stock in the amount of $63,752 for 2001, $63,990 for 2000, and $67,290
for the previous five years.  Preferred  stock dividends in arrears at April 30,
2001 and 2000  aggregated  $447,692  ($8.42 per share) and  $383,940  ($7.22 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. In fiscal 2001, the exercise price of 200,000 of these shares
was reduced from $1.00 per share to $0.11 per share.  None of these options were
exercised as of April 30, 2001.

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.

Options to purchase a total of  2,255,000  shares of common stock at an exercise
price of $0.11 and 460,000  shares of common stock at an exercise price of $0.28
were granted to two  executive  officers,  other key  employees,  directors  and
advisors of the Company  during  fiscal 2001.  All options were issued at market
price on the date of the grant.  These options expire if not exercised by August
2003 and September 2003.

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, 2001 and 2000, respectively, is not material to the
Company's consolidated financial statements.

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, 2001.

<PAGE>


                                                                            F-12

                     CHAMPIONS SPORTS, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements (continued)
                                 April 30, 2001


Note 7 - Common stock

Stock option activity is summarized as follows:

                                                            Weighted average
                                      Number of shares         exercise price
                                      ----------------     -------------------


 Outstanding, April 30, 1999               550,000                $ 0.83
      Granted                                    -                     -
      Exercised                                  -                     -
                                  ----------------             ---------
 Outstanding, April 30, 2000               550,000                  0.83
      Granted                            2,715,000                  0.14
      Exercised                                  -                     -
                                  ----------------             ---------
 Outstanding, April 30, 2001             3,265,000                $ 0.20
                                         =========                ======

The following table summarizes  information about stock options  outstanding and
exercisable at April 30, 2001.

                              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   3,265,000   2.0 years     $0.20      3,265,000        $0.20



Note 8 - Impairment of investments

During the current  year,  the Company  established  a wholly owned  subsidiary,
Champions Tech Ventures, Inc. The Company incurred $242,101 of costs relating to
this subsidiary,  which  represented the cost to the Company of this investment.
Prior to the  year-end,  the  Company  reduced  its  holding in  Champions  Tech
Ventures,  Inc. and  subsequent to the year-end  completely  divested  itself of
ownership in Champions  Tech Ventures,  Inc. The  investment is  considered,  by
management, to be fully impaired.

During the current  year,  $50,000 was written off,  representing  the Company's
full interest in an unrelated company.




<PAGE>








                                   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 30, 2001


     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 30, 2001


                                   By: /s/ Michael M. Tomic
                                   ------------------------
                                           Michael M. Tomic
                                           Director
                                           Date: July 30, 2001

                                   By: /s/ Durwood C. Settles
                                   --------------------------
                                           Durwood C. Settles
                                           Director
                                           Date: July 30, 2001

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
