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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended
April 30, 2000
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, Colorado 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)
Indicate by check whether the Registrant: (1) filed all reports required to be
filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 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 of Common Stock, $0.001 Par Value Outstanding at May 31, 2000:
60,272,512
(This Form 10-QSB includes 11 pages)
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CHARTWELL INTERNATIONAL, INC.
FORM 10-QSB
For the Quarterly Period Ended
April 30, 2000
INDEX
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Page
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheet at April 30, 2000 3
Consolidated Statements of Operations for the Three and
Nine Month Periods Ended April 30, 2000 and 1999 4
Consolidated Statements of Cash Flows for the Three
and Nine Month Periods Ended April 30, 2000 and 1999 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 10
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PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
CHARTWELL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
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<CAPTION>
April 30, 2000
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ASSETS
Current assets:
Cash ................................................................. $ 22,538
Trade dollars ........................................................ 15,889
Receivables from related parties ..................................... 103,150
Prepaids and other.................................................... 29,112
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Total current assets ........................................ 170,689
Investment in real estate ............................................ 1,195,655
Mineral Properties ................................................... 2,014,800
Recruiting systems and publishing rights, net ........................ 1,454,224
Other assets, net .................................................... 104,045
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$ 4,939,413
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ................................ $ 181.292
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Total current liabilities ................................... 181,292
Long-term debt:
Due to related parties ............................................... 1,282,807
Mortgage payable ..................................................... 600,000
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Total liabilities ........................................... 2,064,099
Stockholders' Equity:
Preferred Series C Stock (preferable in liquidation to all
other classes of stock ) .......................................... 300,000
Preferred Series A Stock (preferable to common stock and
equal to Preferred Series A Stock in liquidation) ................. 600
Preferred Series B Stock (preferable to common stock
and equal to Preferred Series B Stock in liquidation).............. 1,106,120
Common stock; $.001 par value; 90,000,000 shares
authorized; 60,272,512 shares issued ............................. 60,272
Additional paid-in capital ........................................... 10,097,901
Treasury stock at cost (68,850 shares) ............................... (6,885)
Accumulated deficit .................................................. (8,682,694)
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Total stockholders' equity .................................. 2,875,314
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$ 4,939,413
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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 OPERATIONS
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<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
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2000 1999 2000 1999
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Management and license fee revenue ...... $ 114,609 $ 19,330 $ 177,080 $ 71,658
Operating expenses:
General and administrative .............. 161,476 66,882 336,490 211,566
Depreciation and amortization ........... 22,077 30,308 79,146 88,272
------------ ------------ ------------ ------------
Total operating expenses ............ 183,553 97,190 415,636 299,838
------------ ------------ ------------ ------------
Operating loss .......................... (68,944) (77,860) (238,556) (228,180)
Other income (expense):
Gains on sales of stock ................. 669,515 9,149 819,166 99,348
Share of CBSA loss ...................... (70,000) (46,662) (70,000) (207,386)
Interest (expense), net ................. (67,111) (23,871) (185,574) (71,613)
Miscellaneous (expense), net ............ (27,324) (6,425) (44,466) (19,275)
------------ ------------ ------------ ------------
Total other income, net ............. 505,080 (67,809) 519,126 (198,926)
------------ ------------ ------------ ------------
Income (loss) before cumulative effect of
change in accounting principle ....... 436,136 (145,669) 280,570 (427,106)
Cumulative effect of change in accounting
principle ............................ -- -- -- (13,959)
------------ ------------ ------------ ------------
Net income (loss) ....................... $ 436,136 $ (145,669) $ 280,570 $ (441,065)
============ ============ ============ ============
Income (loss) per common share:
Before cumulative effect of change in
accounting principle ................. $ 0.01 $ 0.00 $ 0.00 $ (0.01)
Cumulative effect of change in accounting
principle ............................ -- -- -- 0.00
------------ ------------ ------------ ------------
Net income (loss) per common share ...... $ 0.01 $ 0.00 $ 0.00 $ (0.01)
============ ============ ============ ============
Average common shares outstanding ....... 60,203,512 61,703,662 60,203,512 61,703,662
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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CHARTWELL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
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<CAPTION>
Nine Months Ended April 30,
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2000 1999
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Cash Flows from Operating Activities
Net income (loss) ....................................... $ 285,765 $(441,065)
Adjustments:
Depreciation and amortization ........................ 79,146 88,272
Gain on sales of stock ............................... (819,166) (149,651)
Minority interest share .............................. -- (4,622)
Share of loss from investee accounted for by the
equity method .................................... 70,000 207,836
Changes in operating assets and liabilities:
(Increase) decrease in trade credits ................. 8,717 58,674
(Increase) decrease in due from related parties ...... 5,887 (27,518)
(Increase) decrease in prepaids and other assets ..... 40,300 52,776
Increase (decrease) in accounts payable and
Accrued expenses ................................. (54,381) (209,129)
Increase (decrease) in interest due to related parties 96,491 24,500
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Net cash (used in) operating activities ............ (287,241) (399,927)
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Cash Flows From Investing Activities
Proceeds from sales of stock ............................ 819,166 149,651
Advances to CBSA ....................................... (70,000) --
Cash balance of CBSA on date of changing from
consolidation to the equity method ................... -- (173,832)
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Net cash (used in) investing activities ........... 749,166 (24,181)
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Cash Flows From Financing Activities
Proceeds from borrowings from related parties ........... 49,708 252,028
Repayments of borrowings from related parties ........... (381,237) --
Repayments of other notes payable ....................... (123,432) --
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Net cash provided by (used in) financing activities .. (454,961) 252,028
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Net increase (decrease) in cash ............................. 6,964 (172,080)
Cash at beginning of period ................................. 15,574 178,515
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Cash at end of Period ....................................... $ 22,538 $ 6,435
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SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest ...................................... $ 62,379 $ 54,000
</TABLE>
NON-CASH INVESTING AND FINANCING ACTIVITIES
No significant noncash investing or financing activities occurred during the
nine month periods ended April 30, 2000 and 1999.
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-QSB for the interim periods ended April 30, 2000 and
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 and nine months ended
April 30, 2000 and 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 (as amended) 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 35% (as of April 30, 2000)
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
nine months ended April 30, 1999. The effects of the change on operating
results 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 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. The
6
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amounts charged to amortization expense were $21,173 and $46,949 for the three
and nine months ended January 31, 2000, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATIONS AND LIQUIDITY
In the quarter ended April 30, 2000, the Company realized cash of $669,515
from sales of a portion of its holdings of CBSA. In the first quarter of
fiscal 2000, the Company realized cash of $149,651 from sales of a portion of
its holdings of CBSA stock, resulting in a year-to-date nine month total of
cash realized of $819,166.
In addition, the Company received payments of $188,348 from CBSA for accrued
management fees and license fees due to the Company. This included $75,000 that
was paid in the quarter ended April 30, 2000, which was part of a $100,000
license fee that was due to the Company from CBSA upon the completion of a
financing by CBSA. CBSA has signed promissory notes dated March 1, 2000 for the
remaining $25,000 and for remaining unpaid prior management fees totaling
$19,010. Each note is being paid at a rate of $1,000 per month without interest.
The funds realized from sale of the CBSA shares and from payments of fees
from CBSA significantly improved the Company's financial position. This
enabled the Company to make substantial reductions in accounts payable,
third-party notes payable, and debts owed to related parties. In October
1999, the Company had obtained extensions of due dates of all loans from
related parties until at least August 1, 2002. However, upon realization of
the funds from the sales of CBSA shares and the payment of accrued fees by
CBSA, the Company decided to reduce its liabilities. As a result, the
Company's debt-to-equity ratio improved to 0.71 to 1, as compared to 0.98 to
1 at July 31, 1999 and 1.08 to 1 at January 31, 2000.
At April 30, 2000, the Company's working capital ratio improved to 0.94 to 1,
based on current assets of $170,689 and current liabilities of $181,292 as
compared to 0.51 to 1 at July 31, 1999.
In the statement of cash flows, net cash (used) in operations was $(287,241) in
2000 and $(399,927) in 1999.
In 1999, the Company had net cash (used) for investing activities as a result of
$(173,832) from the conversion of CBSA from a consolidated subsidiary to an
entity accounted for by the equity method, which was partially offset by cash
received of $149,651 from sales of shares of CBSA owned by the Company. In 2000,
the Company realized cash of $819,166 from sales of shares of CBSA owned by the
Company. Early in the quarter ended April 30, 2000, the Company advanced $70,000
to CBSA for use in its operations.
In 2000 and 1999, the Company received cash loans from related parties of
$49,708 and $252,028, respectively. In 2000 the Company repaid third party loans
of $123,432 and repaid loans from related parties of $381,237, using a portion
of the proceeds received from the sale of the CBSA shares and payments of
accrued fees by CBSA.
7
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During the three and nine months ended January 31, 2000, CBSA continued to incur
losses and negative cash flow from operations as a result of continued start-up
activities. However, CBSA's revenue has continued to increase, reaching
approximately $1,500,000 for the nine months ended April 30, 2000, as compared
to approximately $300,000 for the nine months ended April 30, 1999. Revenue for
the current year-to-date period includes a corporate sponsorship of $500,000,
which was received in cash. In February 2000, CBSA successfully completed a
financing from which it realized proceeds of $1,000,000.
ANALYSIS OF STATEMENT OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED APRIL 30, 2000 AND 1999
Management and license fee revenue increased from $19,330 in 1999 to $114,609 in
2000 primarily because of a one-time license fee of $100,000 from CBSA that was
payable upon the completion of CBSA's financing. Also, increased royalties were
earned by the Company from CBSA based on a percentage of CBSA's revenue, which
revenue has increased. The Company expects CBSA's revenue to continue to
increase in future periods. These increases were partially offset by a reduction
in management fees of $15,000 as a result of the Company's agreement to
terminate, effective March 1, 2000, the arrangement pursuant to which CBSA paid
a $7,500 per month management fee to the Company. In the future, CBSA will
reimburse the Company for the cost of expenses paid by the Company for CBSA,
including services provided.
General and administrative expenses increased from $66,882 in 1999 to $161,476
in 2000, primarily because of $76,000 paid to a mining engineering consulting
firm to review and evaluate the available information on the Company's
high-grade (non-common variety) gypsum mining claims near St. George, Utah. Also
contributing to the increase in 2000 were various costs, including professional
fees, connected with initial SEC filings required to enable the Company to
achieve SEC "reporting company" status.
In 1999 the Company recognized its proportionate share of the loss of CBSA on
the equity method, which was $(46,662). The Company ceased recognizing losses
in the third quarter of fiscal 1999 because the Company's equity investment
and advances in CBSA had been reduced to zero. In 2000, the Company made an
advance of $70,000 to CBSA for use in CBSA's operations, which was recognized
as a loss under the equity method because its unrecognized share of CBSA's
losses since the third quarter of 1999 exceeded this amount. The recognition
of this loss resulted in zero carrying value of the Company's investment in
and advances to CBSA at April 30, 2000.
Interest expense increased from $23,871 in 1999 to $67,111 in 2000 primarily as
a result of lower interest in 1999 due to the waiver of interest by a related
party.
The Company had gains on sales of stock of $669,515 and $9,149 in 2000 and 1999,
respectively, from the sale of portions of its holdings in CBSA.
COMPARISON OF NINE MONTHS ENDED APRIL 30, 2000 AND 1999
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Management and license fee revenue increased from $71,658 in 1999 to $177,080 in
2000 primarily because of a one-time license fee of $100,000 from CBSA that was
payable upon the completion of CBSA's financing. Also, increased royalties were
earned by the Company from CBSA based on a percentage of CBSA's revenue, which
revenue has increased. The Company expects CBSA's revenue to continue to
increase in future periods. These increases were partially offset by a reduction
in management fees of $15,000 as a result of the Company's agreement to
terminate, effective March 1, 2000, the arrangement pursuant to which CBSA paid
a $7,500 per month management fee to the Company. In the future, CBSA will
reimburse the Company for the cost of expenses paid by the Company for CBSA,
including services provided.
General and administrative expenses increased from $211,566 in 1999 to $336,490
in 2000, primarily because of $76,000 paid to a mining engineering consulting
firm to review and evaluate the available information on the Company's
high-grade (non-common variety) gypsum mining claims near St. George, Utah. Also
contributing to the increase in 2000 were various costs, including professional
fees, connected with initial SEC filings required to enable the Company to
achieve SEC "reporting company" status.
In 1999 the Company recognized its proportionate share of the loss of CBSA on
the equity method, which was $(207,386). The Company ceased recognizing
losses in the third quarter of fiscal 1999 because the Company's equity
investment and advances in CBSA had been reduced to zero. In 2000, the
Company made an advance of $70,000 to CBSA for use in CBSA's operations,
which was recognized as a loss under the equity method because its
unrecognized share of CBSA's losses since the third quarter of 1999 exceeded
this amount. The recognition of this loss resulted in zero carrying value of
the Company's investment in and advances to CBSA at April 30, 2000.
Interest expense increased from $71,613 in 1999 to $185,574 in 2000 primarily as
a result of lower interest in 1999 due to the waiver of interest by a related
party.
The Company had gains on sales of stock of $819,166 and $99,348 in 2000 and
1999, respectively, from the sale of portions of its holdings in CBSA.
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
discussion of certain important factors that could cause actual results to
differ materially from such forward-looking statements.
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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 include: (i) possible inability of the Company
to attract investors for its equity securities or otherwise raise adequate funds
from any source, (ii) possible inability to establish businesses with
profitability and positive cash flow, (iii) possible unfavorable outcomes to
litigation that could arise in the future, and (iv) possible failure of the
Company to attract qualified management personnel. 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.
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 12, 2000 By: /s/ Janice A. Jones
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Date Janice A. Jones, Chief Executive Officer
10
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EXHIBIT INDEX
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EXHIBIT DESCRIPTION
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27 Financial Data Schedule for the Nine Months
Ended April 30, 2000
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