<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
January 31, 2000
Commission File Number 0-27395
CHARTWELL INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
Nevada 95-3979080
------------------------------- -------------------
State (or other jurisdiction (IRS Employer
of incorporation or Identification
organization) No.)
5275 DTC PARKWAY, SUITE 110
----------------------------------------------------------------
(Address of principal executive offices including zip code)
(303) 804-0100
-----------------------
(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
----- -----
Number of shares outstanding of Common Stock, $0.001 par value outstanding at
March 14, 2000: 60,272,512
(This Form 10-QSB includes 9 pages)
<PAGE>
CHARTWELL INTERNATIONAL, INC.
FORM 10-QSB
For the Quarterly Period Ended
January 31, 2000
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheet at January 31, 2000 3
Consolidated Statements of Operations for the Three and Six Months
Ended January 31, 2000 and 1999 4
Consolidated Statements of Cash Flows for the Three and Six Months
Ended January 31, 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 9
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
CHARTWELL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
AS OF JANUARY 31, 2000
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
January 31, 2000
----------------
<S> <C>
ASSETS
Current assets:
Cash $ 55,395
Trade credits 13,035
Receivables from related parties 171,280
Prepaids and other 58,224
------------
Total current assets 297,934
Investment in real estate 1,195,655
Mineral properties 2,014,800
Recruiting systems and publishing rights, net 1,462,770
Other assets, net 102,295
------------
Total assets $ 5,073,454
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 326,381
Notes payable, current 38,917
------------
Total current liabilities 365,298
Long-term debt:
Due to related parties 1,644,173
Other notes payable 630,000
------------
Total liabilities 2,639,471
------------
Stockholders' Equity:
Preferred Series C Stock (preferable to all
other classes of stock in liquidation) 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
Accumulated deficit (9,124,025)
------------
2,440,868
Less, Treasury stock (68,850 shares) at cost (6,885)
------------
Total stockholders' equity 2,433,983
------------
Total liabilities and
stockholders' equity $ 5,073,454
============
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
3
<PAGE>
CHARTWELL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED
JANUARY 31, 2000 AND 1999
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
January 31, January 31,
---------------------- ----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Management and license fee revenue $ 30,985 $ 29,581 $ 62,471 $ 52,328
Operating expenses:
General and administrative 104,217 66,882 175,014 144,684
Depreciation and amortization 30,895 30,982 57,069 57,964
--------- --------- --------- ---------
Total operating expenses 135,112 97,864 232,083 202,648
--------- --------- --------- ---------
Operating loss (104,127) (68,283) (169,612) (150,320)
Other income (expense):
Gain on sales of stock 149,651 85,152 149,651 90,199
Share of CBSA loss -- (108,877) -- (160,724)
Interest (expense), net (59,506) (23,871) (118,463) (47,742)
Miscellaneous (expense), net (16,783) (6,425) (17,142) (12,850)
--------- --------- --------- ---------
Total other income (expense), net 73,362 (54,021) 14,046 (131,117)
--------- --------- --------- ---------
Income (loss) before cumulative effect
of change in accounting principle (30,765) (122,304) (155,566) (281,437)
Cumulative effect of change in
Accounting principle -- -- -- (13,959)
--------- --------- --------- ---------
Net loss $ (30,765) $(122,304) $(155,566) $(295,396)
========= ========= ========= =========
Income (loss) per share:
Before cumulative effect of change
In accounting principle $ (0.00) $ (0.00) $ (0.00) $ (0.00)
Cumulative effect of change in
accounting principle -- (0.00) -- (0.00)
--------- --------- --------- ---------
Loss per common share $ (0.00) $ (0.00) $ (0.00) $ (0.00)
========= ========= ========= =========
Weighted average common shares 60,272 61,773 60,272 61,773
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
4
<PAGE>
CHARTWELL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JANUARY 31, 2000 AND 1999
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
------------------------
January 31, January 31,
2000 1999
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $(155,566) $(295,396)
Adjustments to reconcile net loss to net cash
(used for) operating activities
Depreciation and amortization 57,069 57,964
Gain on sale of securities (149,651) (90,199)
Share of loss from investee accounted for
by the equity method -- 160,724
Changes in assets and liabilities:
Decrease in trade credits 11,571 68,674
(Increase) decrease in due from related parties (62,243) (7,518)
(Increase) decrease in prepaid and other assets 34,469 50,717
Increase (decrease) in accounts payable
and accruals 82,708 (107,039)
Increase in interest due to related parties 76,620 12,500
--------- ---------
Net cash (used for) operating activities (105,023) (149,573)
--------- ---------
Cash Flows From Investing Activities:
Proceeds from sale of securities 149,651 90,199
Cash balance of subsidiary at date of
commencement of accounting by the equity method -- (173,832)
--------- ---------
Net cash provided by (used in) investing
activities 149,651 (83,633)
--------- ---------
Cash Flows From Financing Activities:
Proceeds from borrowings from related parties 49,708 49,895
Borrowings (repayments) on other notes payable (54,515) 14,925
--------- ---------
Net cash provided by (used in) financing
activities (4,807) 64,820
--------- ---------
Net increase (decrease) in cash 39,821 (168,386)
Cash, beginning of period 15,574 178,515
--------- ---------
Cash, end of period $ 55,395 $ 10,129
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 18,900 12,000
</TABLE>
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
No significant noncash investing or financing activities occurred during the six
months ended January 31, 2000 and 1999
The accompanying notes are an integral part of
the consolidated financial statements.
5
<PAGE>
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 January 31, 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 six months ended
January 31, 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 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 45% (as of January 31,
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 six months
ended January 31, 1999. The effects of the change on results for the three and
six months ended January 31, 2000 and 1999 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 amounts charged to amortization
expense were $21,173 and $25,776 for the three and six months ended January 31,
2000, respectively.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATIONS AND LIQUIDITY
At January 31, 2000, the Company's working capital ratio was 0.8 to 1, based on
current assets of $297,934 and current liabilities of $365,298.
In the statement of cash flows, net cash (used) in operations was $(105,023) in
2000 and $(149,573) in 1999.
In 1999, the Company had net cash (used) for investing activities as a result of
the conversion of CBSA from a consolidated subsidiary to an entity accounted for
by the equity method, which was partially offset by cash received from sales of
shares of CBSA owned by the Company. In 2000, the Company realized cash of
$149,651 from sales of shares of CBSA owned by the Company.
In 2000 and 1999, the Company received cash loans from related parties of
$49,708 and $49,895, respectively. In 2000 the Company repaid third party loans
of $54,515 and in 1999, the Company received cash loans from third parties of
$14,925.
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.
During the three and six months ended January 31, 2000, CBSA continued to incur
losses and negative cash flow from operations as a result of continuing start-up
activities and also because of 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.
Beginning in January 2000 and continuing through February and the middle of
March 2000, the Company was able to liquidate a portion of its holdings in CBSA
and significantly improve the liquidity and financial position of the Company.
The Company has paid substantially all of its third-party indebtedness (other
than its land mortgage) and a portion of its related party indebtedness and
interest.
ANALYSIS OF STATEMENT OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED JANUARY 31, 2000 AND 1999
Management and license fee revenue increased slightly from $29,581 in 1999 to
$30,985 in 2000 primarily because of increased royalties payable to the Company
from CBSA based on a percentage of CBSA's revenue, which has increased. The
Company expects CBSA's revenue to continue to increase in future periods.
General and administrative expenses increased from $66,882 in 1999 to
$104,217 in 2000, primarily because of costs, including professional fees,
connected with initial SEC filings required to enable the Company to achieve
SEC "reporting company" status.
7
<PAGE>
Depreciation and amortization expense was at the same level with $30,982 in 1999
and $30,895 in 2000.
In 1999 the Company recognized its proportionate share of the loss of CBSA on
the equity method, which was $108,877. No loss was recognized in 2000 because
the Company's equity investment in CBSA had been reduced to zero.
Interest expense increased from $23,871 in 1999 to $59,506 in 2000 primarily as
a result of the waiver of interest in 1999 by a related party.
The Company had gains on sales of stock of $149,651 and $85,152 in 2000 and
1999, respectively, from the sale of a portion of its holdings in CBSA.
COMPARISON OF SIX MONTHS ENDED JANUARY 31, 2000 AND 1999
Management and license fee revenue increased from $52,328 in 1999 to $62,471 in
2000 primarily because of increased royalties payable to the Company from CBSA
based on a percentage of CBSA's revenue, which has increased. The Company
expects CBSA's revenue to continue to increase in future periods.
General and administrative expenses increased from $144,684 in 1999 to
$175,014 in 2000, primarily because of costs, including professional fees,
connected with initial SEC filings required to enable the Company to achieve
SEC "reporting company" status.
Depreciation and amortization expense was at the same level with $57,964 in 1999
and $57,069 in 2000.
In 1999 the Company recognized its proportionate share of the loss of CBSA on
the equity method, which was $160,724. No loss was recognized in 2000 because
the Company's equity investment in CBSA had been reduced to zero.
Interest expense increased from $47,742 in 1999 to $118,463 in 2000 primarily as
a result of the waiver of interest in 1999 by a related party.
The Company had gains on sales of stock of $149,651 and $90,199 in 2000 and
1999, respectively, from the sale of a portion 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
8
<PAGE>
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 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.
March 16, 2000 By: /s/ Janice A. Jones
---------------------- ------------------------------------------------
Date Janice A. Jones, Chief Executive Officer
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------------------ ---------------------------------------------
27 Financial Data Schedule for the Six Months
Ended January 31, 2000
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-2000
<PERIOD-START> NOV-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 55,395
<SECURITIES> 0
<RECEIVABLES> 171,280
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 297,934
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,073,454
<CURRENT-LIABILITIES> 365,298
<BONDS> 0
0
1,406,720
<COMMON> 60,272
<OTHER-SE> 966,991
<TOTAL-LIABILITY-AND-EQUITY> 5,073,454
<SALES> 0
<TOTAL-REVENUES> 62,471
<CGS> 0
<TOTAL-COSTS> 232,083
<OTHER-EXPENSES> 17,142
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 118,463
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (155,566)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (155,566)
<EPS-BASIC> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
