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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
AMENDMENT #1
TO
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
October 31, 1999
Commission File Number 0-27395
CHARTWELL INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
Nevada 95-3979080
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State (or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5275 DTC PARKWAY, SUITE 110, ENGLEWOOD, CO 80111
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(Address of principal executive offices including zip code)
(303) 804-0100
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(Registrant's telephone number including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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
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Number of shares outstanding of Common Stock, $0.001 par value outstanding at
December 17, 1999: 60,272,512
(This Form 10-QSB includes 9 pages)
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CHARTWELL INTERNATIONAL, INC.
FORM 10-QSB
For the Quarterly Period Ended
October 31, 1999
INDEX
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Page
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PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheet at October 31, 1999 3
Consolidated Statements of Operations for the Three-Month Periods Ended
October 31, 1999 and 1998 4
Consolidated Statements of Cash Flows for the Three-Month Periods Ended
October 31, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 7
PART II. OTHER INFORMATION 8
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PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
CHARTWELL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
As of October 31, 1999
(In thousands, except share and per share amounts )
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<CAPTION>
October 31, 1999
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ASSETS
Current assets:
Cash $ 6,758
Trade credits 17,405
Receivables from related parties 134,826
Prepaids and other 79,397
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Total current assets 238,386
Investment in real estate 1,195,655
Mineral properties 2,014,800
Recruiting systems and publishing rights, net 1,482,837
Other assets, net 122,843
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Total assets $ 5,054,521
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 296,326
Notes payable, current 58,569
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Total current liabilities 354,895
Long-term debt:
Due to related parties 1,597,096
Other notes payable 637,782
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Total liabilities 2,589,773
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Stockholders' Equity:
Preferred Series B Stock (preferable to common
Stock and equal to Preferred Series A stock
In liquidation) 300,000
Preferred Series A Stock (preferable to common
Stock and equal to Preferred Series C stock
In liquidation) 600
Preferred Series C Stock (preferable to all other
classes of stock in liquidation) 1,106,120
Common stock; $.001 par value; 90,000,000
shares authorized; 60,272,512 shares issued 60,272
Additional paid-in capital 10,097,901
Accumulated deficit (9,093,260)
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2,471,633
Less, Treasury stock (68,850 shares) at cost (6,885)
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Total stockholders' equity 2,464,748
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Total liabilities and stockholders' equity $ 5,054,521
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3
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CHARTWELL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE-MONTH PERIODS ENDED
OCTOBER 31, 1999 AND 1998
(in thousands except share and per share amounts)
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<CAPTION>
Three-Month Periods Ended
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October 31, October 31,
1999 1998
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Management and license fee revenue $ 31,486 $ 22,747
Operating expenses:
General and administrative 70,797 77,802
Depreciation and amortization 26,174 26,982
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Total operating expenses 96,971 104,784
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Operating loss (65,485) (82,037)
Other income (expense):
Gain on sales of stock 5,047
Share of CBSA loss (51,847)
Interest (expense), net (58,957) (23,871)
Miscellaneous (expense), net (359) (6,425)
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Total other income (expense), net (59,316) (77,096)
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Income (loss) before cumulative effect
of change in accounting principle (124,801) (159,333)
Cumulative effect of change in
accounting principle --- (13,959)
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Net loss $ (124,801) $ (173,292)
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Income (loss) per share:
Before cumulative effect of change
In accounting principle $ (0.00) $ (0.00)
Cumulative effect of change in
Accounting principle --- (0.00)
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Loss per common share $ (0.00) $ (0.00)
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Weighted average number of common shares 60,272,512 61,772,512
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The accompanying notes are an integral part of the consolidated financial
statements.
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CHARTWELL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
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<CAPTION>
Three-Month Periods Ended
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October 31, October 31,
1999 1998
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Cash Flows From Operating Activities:
Net loss $ (124,801) $ (173,292)
Adjustments to reconcile net loss to net cash
(used for) operating activities
Depreciation and amortization 26,174 26,982
Services paid for in stock 32,500
Gain on sale of securities (5,047)
Share of loss from investee accounted for
By the equity method 51,847
Changes in assets and liabilities:
Decrease in trade credits 7,201 72,871
(Increase) decrease in due from related parties (25,789) (3,755)
(Increase) decrease in prepaid and other assets (4,224) 53,059
(Decrease) in accounts payable and accruals 60,453 (85,874)
Increase in interest due to related parties 37,850 7,207
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Net cash (used for) operating activities (23,136) (23,502)
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Cash Flows From Investing Activities:
Proceeds from sale of securities ---- 5,047
Cash balance of subsidiary at date of commencement
of accounting by the equity method ---- (173,832)
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Net cash provided by investing activities ---- (168,785)
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Cash Flows From Financing Activities:
Proceeds from borrowings from related parties 41,401 23,991
Repayments on borrowings from third parties (27,081)
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Net cash provided by financing activities 14,320 23,991
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Net increase (decrease) in cash (8,816) (168,296)
Cash, beginning of period 15,574 178,515
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Cash, end of period $ 6,758 $ (10,219)
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SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
No significant noncash investing or financing activities occurred during the
three-month periods ended October 31, 1999 and 1998,
The accompanying notes are an integral part of the consolidated financial
statements.
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CHARTWELL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - UNAUDITED INTERIM INFORMATION
Chartwell International, Inc. (the "Company") and its wholly-owned subsidiaries
prepare and report financial results using a fiscal year ending July 31. This
Form 10-QSB includes the consolidated financial statements of the Company and
its wholly-owned subsidiaries. The Company's consolidated financial statements
included in this Form 10-Q for the interim periods ended October 31, 1999,
include all normal recurring adjustments which, in the opinion of the Company,
are necessary for a fair statement of the results of operations, financial
position, and cash flows as of the dates and for the periods presented. The
Company's operating results for the three-month period ended October 31, 1999
are not necessarily indicative of the results that may be expected for the
fiscal year ending July 31, 2000.
The Notes to Consolidated Financial Statements included in the Company's July
31, 1999 Form 10-SB should be read in conjunction with these consolidated
financial statements.
NOTE 2 - PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Chartwell International, Inc., its wholly owned subsidiary, National College
Recruiting Association, Inc. (NCRA), and Chartwell's 47% owned entity College
Bound Student Alliance, Inc. (CBSA) (f/k/a SportsStar Marketing, Inc.), which is
accounted for by the equity method commencing August 1, 1998. Previously, CBSA
was a consolidated subsidiary. Intercompany accounts and transactions have been
eliminated.
NOTE 3 - STARTUP COSTS
Effective August 1, 1998, the Company has adopted AICPA Statement of Position
("SOP") 98-5, which requires nongovernmental entities to expense startup costs
as incurred. The adoption of SOP 98-5 is not expected to have a material impact
on the Company's financial statements. The Company has included the cumulative
effect of the change in accounting of $13,959 in net loss for the quarter ended
October 31, 1998. The effects of the change on results for the quarters ended
October 31, 1999 and 1998 were not significant except for the cumulative effect
of the accounting change.
NOTE 4 - PREPAID EXPENSES
In October 1999, the Company entered into a one-year agreement with a third
party firm to provide public relations services for the Company. The third
party firm was compensated by the transfer of warrants and options to
purchase 1,903,000 shares of common stock previously held by the Company's
chief executive officer. At the time of transfer, the Company reduced the
exercise price from $0.10 to $0.05 per share. The Company has recorded this
as a contribution to capital of $84,000, which is the fair market value of
the services as indicated by the third-party firm. This amount is being
amortized to expense over the one-year period over which the services will be
performed.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATIONS AND LIQUIDITY
At October 31, 1999, the Company's working capital ratio was 0.7 to 1 based on
current assets of $238,386 and current liabilities of $354,895.
In the statement of cash flows, net cash (used) in operations was $(23,136) in
1999 and $(23,502) in 1998.
In 1998, the Company had net cash (used) for investing activities of $(168,875)
as a result of the conversion of CBSA from a consolidated subsidiary to an
entity accounted for by the equity method.
In 1999 and 1998, the Company had net cash provided by financing activites of
$14,320 and $23,991, respectively. In each fiscal year, the net cash provided
was the result of cash advanced by related parties.
During the three months ended October 31, 1999, CBSA continued to incur
losses and negative cash flow from operations as a result of continuing
start-up activities. This was followed by a seasonal downturn in the volume
of business during December 1999 and the first half of January 2000. In
February 2000, the revenue level of CBSA began to again increase, reducing
the cash operating losses that were being incurred previously. In February
2000, CBSA successfully completed a public offering from which it realized
proceeds of $1,000,000 and, in March 2000, received a corporate sponsorship
of $500,000 cash.
As of October 1999, all related parties to whom the Company owed notes
payable and interest had extended all due dates to no earlier than August 1,
2001. Accordingly, all such amounts are classified as long-term liabilities
in the balance sheet at January 31, 2000.
ANALYSIS OF STATEMENT OF OPERATIONS
Management and license fee revenue increased from $22,747 in 1999 to $31,486 in
1998 primarily because of management fees earned by the Company from CBSA and
royalties earned based on a percentage of CBSA's revenue.
General and administrative expenses were at approximately the same level with
$70,797 in 1999 and $77,802 in 1998.
Depreciation and amortization expense was at approximately the same level in
fiscal 1999 with $26,174 and $26,982 in 1998.
In 1998 the Company recognized its proportionate share of the loss of CBSA on
the equity method, which was $51,847. No loss was recognized in 1999 because the
Company's equity in CBSA had been reduced to zero.
Interest expense increased from $23,871 in 1998 to $58,957 in 1999 primarily as
a result of the waiver of interest in 1998 by a related party.
FORWARD LOOKING INFORMATION
From time to time, the Company or its representatives have made or may make
forward-looking statements, orally or in writing. Such forward-looking
statements may be included in, but not limited to, press releases, oral
statements made with the approval of an authorized executive officer or in
various filings made by the Company with the Securities and Exchange Commission.
Words or phrases "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project or projected", or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "Reform Act"). The Company
wishes to ensure that such statements are accompanied by meaningful cautionary
statements, so as to maximize to the fullest extent possible the protections of
the safe harbor established in the Reform Act. Accordingly, such statements are
qualified in their entirety by reference to and are accompanied by the following
7
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discussion of certain important factors that could cause actual results to
differ materially from such forward-looking statements.
Management is currently unaware of any trends or conditions that could have a
material adverse effect on the Company's consolidated financial position, future
results of operations, or liquidity.
However, investors should also be aware of factors that could have a negative
impact on the Company's prospects and the consistency of progress in the
areas of revenue generation, liquidity, and generation of capital resources.
These include: (i) variations in the mix of corporate trading and trade
exchange revenue, (ii) possible inability of the Company to attract investors
for its equity securities or otherwise raise adequate funds from any source,
(iii) increased governmental regulation of the barter business, (iv) a
decrease in the cash fees and commissions realized by the Company based upon
a substantial decrease in corporate or retail trade exchange transactions,
and (v) unfavorable outcomes to litigation to which the Company may become a
party in the future.
The risks identified here are not all inclusive. Furthermore, reference is also
made to other sections of this report that include additional factors that could
adversely impact the Company's business and financial performance. Moreover, the
Company operates in a very competitive and rapidly changing environment. New
risk factors emerge from time to time and it is not possible for Management to
predict all of such risk factors, nor can it assess the impact of all such risk
factors on the Company's business or the extent to which any factor or
combination of factors may cause actual results to differ materially from those
contained in any forward-looking statements. Accordingly, forward-looking
statements should not be relied upon as a prediction of actual results.
PART II. OTHER INFORMATION
Not applicable.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
CHARTWELL INTERNATIONAL, INC.
June 15, 2000 By: /s/ Janice A. Jones
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Date Janice A. Jones, Chief Executive Officer
