SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported):
November 10, 1997
SIEMANN EDUCATIONAL SYSTEMS, INC
(Exact name of registrant as specified in its charter)
COLORADO 33-18174 84-1067172
(State or other (Commission File Number) (IRS Employer I.D. Number)
jurisdiction of
incorporation)
405 SOUTH PLATTE RIVER DRIVE SUITE 3A
DENVER, COLORADO 80203
(Address of principal executive offices)
Registrant's telephone number, including area code: (303) 733-9673
Chartwell Cable Fund, Inc.
20 Chase Street
Lakewood, Colorado 80226
-------------------------------------------------------------
(Former name and former address, if changed since last report)
<PAGE>
ITEM 4. CHANGES IN ACCOUNTANTS
Holben, Boak, Cooper & Co., formerly CPA's for the Company,
resigned as auditor on November 10, 1997 due to the pending dissolution of
that firm. Gordon, Hughes & Banks, LLP, CPA's were engaged on November 10,
1997 as auditors for the Company.
In connection with audits of two most recent fiscal years and any
interim period preceding resignation, no disagreements exist with any
former accountant on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope of procedure, which
disagreements if not resolved to the satisfaction of the former accountant
would have caused him to make reference in connection with his report to
the subject matter of the disagreement(s) in connection with its reports.
The audit report by Holben, Boak, Cooper & Co., ("HBC") for the
year ended December 31, 1996. contained no adverse opinion, disclaimer or
qualification except a paragraph discussing uncertainties related to
continuation of the Registrant as a going concern. No adverse opinion,
disclaimer or qualification was included in the opinion by HBC for the year
ending December 31, 1995.
The decision to change accountants was approved by the Board of
Directors.
ITEM 5. OTHER EVENTS
N/A
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
INDEPENDENT AUDITORS' REPORT
The Board of Directors
and Stockholders
Siemann Educational Systems, Inc.
Denver, Colorado
We have audited the accompanying balance sheets of Siemann Educational
Systems, Inc. as of December 31, 1996 and 1995 and the related statements
of operations, stockholders' equity, and cash flows for the years ended
December 31, 1996 and 1995. These financial statements statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly,
in all material respects, the financial position of Siemann Educational
Systems, Inc. as of December 31, 1996 and 1995, and the results of operations
and cash flows for the years ended December 31, 1996 and 1995 in conformity
with generally accepted accounting principles.
/s/ GORDON, HUGHES & BANKS, LLP
GORDON, HUGHES & BANKS, LLP
Lakewood, Colorado
November 19, 1997
Page 1
<PAGE>
SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF AUGUST 31, 1997 AND DECEMBER 31, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
AUGUST 31
(Unaudited) DECEMBER 31
---------------------------------------
1997 1996 1995
<S> <C> <C> <C>
CURRENT ASSETS:
Cash 167,376 311,986 6,423
Accounts receivable, less allowance
for doubtful accounts of $137,278,
$66,760 and $82,676 1,272,590 798,058 1,006,871
Note receivable 200,000 0 0
Note receivable - stockholder 148,302 60,000 30,000
Inventory 23,239 23,321 35,264
Prepaid and Other 7,980 0 13,174
---------- ---------- ----------
Total current assets 1,819,487 1,193,365 1,091,732
STUDENT ACCOUNTS AND NOTES RECEIVABLE,
long-term portion, less allowance for
doubtful accounts of $66,098;
$63,591; $31,133 571,753 411,164 176,944
PROPERTY AND EQUIPMENT, net of
accumulated depreciation 335,629 449,499 509,029
PERKINS MATCHING FUNDS 70,000 70,000 70,000
OTHER 6,874 8,883 20,923
---------- ---------- ----------
Total assets $2,803,743 $2,132,911 $1,868,628
---------- ---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 123,395 117,463 119,895
Note payable to bank 135,669
Students refunds payable and
credit balances 12,137 143,324 57,198
Accrued liabilities 110,573 108,935 101,521
Deferred tuition income 1,106,084 717,999 983,700
Current maturities of long-term debt 87,012 43,162 9,573
Current portion of capital lease
obligations - - 59,984
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 1,574,870 1,130,883 1,331,871
RENT PAYABLE 128,866 - -
LONG-TERM DEBT, net of
current maturities 266,503 184,210 34,543
NOTE PAYABLE TO STOCKHOLDER 410,307 391,712 -
CAPITAL LEASE OBLIGATIONS, NET
OF CURRENT PORTION - - 142,964
---------- ---------- ----------
TOTAL LIABILITIES 2,380,546 1,706,805 1,509,378
STOCKHOLDER'S EQUITY:
Preferred stock, $.10 par value,
10,000,000 shares authorized,
none outstanding - - -
Common stock, $.10 par value,
100,000,000 shares authorized,
3,700,000 (1997) and 400,000
(1996 and 1995) shares
issued and outstanding 370,000 40,000 40,000
Additional paid-in capital 53,197 618,646 630,972
Accumulated (deficit) - (232,540) (311,722)
---------- ---------- ----------
TOTAL STOCKHOLDER'S EQUITY 423,197 426,106 359,250
---------- ---------- ----------
Total Liabilities and stockholders'
equity $2,803,743 $2,132,911 $1,868,628
---------- ---------- ----------
</TABLE>
See notes to financial statements.
Page 2
<PAGE>
SIEMANN EDUCATIONAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE EIGHT MONTHS ENDED AUGUST 31, 1997 AND 1996
AND YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
EIGHT MONTHS ENDED YEAR ENDED
AUGUST 31, DECEMBER 31,
(Unaudited)
--------------------- --------------------
1997 1996 1996 1995
-------- --------- --------- --------
<S> <C> <C> <C> <C>
REVENUES:
Earned tuition revenue $1,863,938 $1,863,306 $2,796,440 $2,306,534
College supply sales, net 11,200 18,797 63,034 73,781
Contributed materials - 42,863 77,153 -
Interest and other 83,909 68,927 53,471 40,077
---------- ---------- ---------- ----------
TOTAL REVENUES 1,959,047 1,993,893 2,990,098 2,420,392
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Course materials, supplies and
instructional costs 608,615 610,335 883,514 752,056
Selling and promotion 347,478 383,484 595,393 551,264
General and administrative 403,922 482,516 824,938 580,835
Occupancy expense 201,855 224,489 317,859 248,054
Depreciation and amortization 121,379 89,748 182,890 161,919
Interest expense 45,275 10,799 25,302 34,482
Bad debt expense 119,662 80,459 81,020 54,718
---------- ---------- ---------- ----------
TOTAL COSTS AND EXPENSES 1,848,186 1,881,830 2,910,916 2,383,328
---------- ---------- ---------- ----------
NET INCOME $ 110,861 $ 112,063 $ 79,182 $ 37,064
---------- ---------- ---------- ----------
Net income per common
share (Note 1) $ 0.08 $ 0.28 $ 0.20 $ 0.09
---------- ---------- ---------- ----------
Weighted number of common
shares outstanding (Note 1) 1,398,354 400,000 400,000 400,000
---------- ---------- ---------- ----------
</TABLE>
See notes to financial statements
Page 3
<PAGE>
SIEMANN EDUCATIONAL SYSTEMS INC.
STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
AND THE EIGHT MONTHS ENDED AUGUST 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Additional Total
------------ Paid-in Accumulated Stockholders'
Shares Amount Capital (Deficit) Equity
------ ------ ------- -------- ------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 400,000 $ 40,000 $ 842,225 $ (348,786) $ 533,439
Net Income - - - 37,064 37,064
Distributions - - (211,253) - (211,253)
---------- ---------- ---------- ---------- ----------
Balances, December 31, 1995 400,000 40,000 630,972 (311,722) $ 359,250
Net Income - - - 79,182 79,182
Distributions - - (12,326) - (12,326)
---------- ---------- ---------- ---------- ----------
Balances, December 31, 1996 400,000 40,000 618,646 (232,540) $ 426,106
Net Income - - - 110,861 110,861
Distributions - - (216,520) - (216,520)
Recapitalization of the Company
and recognition of outstanding
shares issued by Chartwell
prior to merger 500,000 50,000 (171,679) 121,679 -
Sale of common stock to
stockholder of SES ($.001 per
share) 2,250,000 225,000 (222,750) - 2,250
Sale of common stock ($.001
per share) 500,000 50,000 (49,500) - 500
Sale of common stock ($2.00
per share) 50,000 5,000 95,000 - 100,000
---------- ---------- ---------- ---------- ----------
Balance, August 31, 1997
(unaudited) 3,700,000 $ 370,000 $ 53,197 $ - $ 423,197
---------- ---------- ---------- ---------- ----------
</TABLE>
See notes to financial statements
Page 4
<PAGE>
SIEMANN EDUCATIONAL SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE EIGHT MONTHS ENDED AUGUST 31, 1997 AND 1996
AND THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
EIGHT MONTHS ENDED YEAR ENDED
--------------------- --------------------
AUGUST 31, DECEMBER 31,
(Unaudited)
1997 1996 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income $ 110,861 $ 112,063 $ 79,182 $ 37,064
Cash provided (used) by
operating activities:
Depreciation &
Amortization 121,379 89,748 182,890 161,919
Contributed materials - (42,863) (77,153) -
Change in operating assets and
liabilties:
Accounts receivable and
notes receivable (923,424) (315,934) 178,813 (823,345)
Inventory 82 - 11,943 (13,523)
Prepaid expenses & other
assets (7,970) 6,714 (219,556) (3,850)
Accounts payable 5,935 45,836 (2,432) 60,121
Student refunds payable and
credit balances (131,188) (45,201) 86,126 57,198
Accrued liabilities 1,638 (25,940) 7,414 31,109
Rent payable 128,865 - - -
Deferred tuition income 388,084 262,040 (265,701) 481,555
---------- ---------- ---------- ----------
Net cash provided (used) by
operating activities (305,738) 86,463 (18,474) (11,752)
---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property and
equipment (5,510) (6,362) (35,657) (172,862)
---------- ---------- ---------- ----------
Net cash (used) by investing
activities (5,510) (6,362) (35,657) (172,862)
---------- ---------- ---------- ----------
</TABLE>
(Continued on next page)
See notes to financial statements
Page 5
<PAGE>
SIEMANN EDUCATION SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE EIGHT MONTHS ENDED AUGUST 31, 1997 AND 1996
AND THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(CONTINUED)
<TABLE>
<CAPTION>
Eight Months Ended Year Ended
August 31, December 31,
(Unaudited)
1997 1996 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Increase in debt $ 261,813 $ 31,808 $ - $ 89,679
Net decrease in debt - - (19,692) -
Increase in note payable to
related party 18,595 - 391,712 -
Cash received in merger 102,750 - - -
Distributions to stockholder (216,520) (4,047) (12,326) (211,253)
---------- ---------- ---------- ----------
Net cash provied (used) by
financing activities 166,638 27,761 359,694 (121,574)
---------- ---------- ---------- ----------
Net increase (decrease)
in cash (144,610) 107,862 305,563 (306,188)
CASH, beginning of period 311,986 6,423 6,423 312,611
---------- ---------- ---------- ----------
CASH, end of period $ 167,376 $ 114,285 $ 311,986 $ 6,423
---------- ---------- ---------- ----------
Supplemental disclosure of
cash flow information:
Cash payments for interest $ - $ - $ - $ 71,406
---------- ---------- ---------- ----------
</TABLE>
See notes to financial statements
Page 6
<PAGE>
SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENT
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND NATURE OF BUSINESS
-----------------------------------
Siemann Educational Systems, Inc. (the "Company") was
incorporated in the State of Colorado on September 17, 1987. The
Company, through its wholly-owned subsidiary, Denver Automotive
and Diesel College, Inc., (the "School")(formerly Siemann
Educational Systems, Inc.) is engaged in the business of
operating a private vocational college located in Denver,
Colorado. The majority of students are drawn from the Denver
metropolitan area, with the remainder drawn from various other
surrounding states.
A significant portion of the Company's revenues are provided
by students who participate in government financial aid programs.
In connection with this participation, the Company is subject to
rules and regulations promulgated by the U.S. Department of
Education. Failure to comply with the terms and provisions of
this participation could lead to suspension or termination of the
Company's ability to participate in government financial aid
programs and, consequently, could adversely affect the Company's
operations.
On September 12, 1996, the U.S. Department of Education notified the
school that it had lost its eligibility to continue its participation
in the Federal Family Education Loan ("FFEL") Programs authorized
by Title IV of the Higher Education Act of 1965, as amended. This
was a result of the school's cohort default rates from each of the
fiscal years, 1991 to 1993, exceeding the eligibility threshold of
25%. The school made application with the U.S. Department of
Education to regain eligibility to participate in the FFEL Programs
and has received notification from the U.S. Department of Education
that, effective October 1, 1997, the school is eligible to
participate in the FFEL programs.
On August 31, 1997, the School entered into an Agreement and Plan
of Reorganization with Chartwell Cable Fund, Inc., ("Chartwell"),
a public company. The reorganization was completed on August 31,
1997. At a special meeting of the shareholders of Chartwell on
September 18, 1997, Chartwell's name was changed to Siemann
Educational Systems, Inc.
1
<PAGE>
SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONSOLIDATION
-------------
The accompanying consolidated balance sheet at August 31, 1997
includes the accounts of the Company and its wholly-owned
subsidiary, Denver Automotive and Diesel College, Inc. All
significant intercompany transactions have been eliminated in
consolidation.
ACCOUNTS RECEIVABLE AND DEFERRED TUITION
----------------------------------------
Accounts receivable represent outstanding tuition and fee
balances due from students. Allowances for doubtful accounts
have been established to record amounts deemed to be uncollectible
by management. Deferred tuition income on the accompanying balance
sheets represents the portion of tuition billed to the students for
the current semester that will be recognized over the remainder of
that semester.
CONCENTRATION OF CREDIT RISK AND FINANCIAL INSTRUMENTS
------------------------------------------------------
Statement of Financial Accounting Standards No. 105, "Disclosure
of Information About Financial Instruments with Off-Balance Sheet
Risk and Financial Instruments with Concentrations of Credit Risk",
requires disclosure of significant concentrations of credit risk
regardless of the degree of such risk. Financial instruments with
significant credit risk include cash, accounts and notes receivable.
The carrying amount of financial instruments approximates their
fair value, as determined by the amount of cash or the collectability
of receivables. As of August 31, 1997 and December 31, 1996, the
Company maintained cash balances in excess of $100,000 at one bank.
The Company's accounts at this bank are insured by the Federal
Deposit Insurance Corporation up to $100,000. Accounts and notes
receivable from students are unsecured and subject to significant
credit risk. The note receivable from stockholder is secured by the
stockholder's home.
ACCOUNTING ESTIMATES
--------------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ
from those estimates. Significant estimates have been made to
determine bad
2
<PAGE>
SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
debt expense and the related allowance for uncollectible accounts
and notes receivable.
INVENTORY
---------
Inventories consist of books and automotive and diesel repair
parts and supplies which are consumed in the educational activities
of the Company. Inventories are stated at the lower of cost or
market, cost being determined by the first-in, first-out method.
PROPERTY AND EQUIPMENT
----------------------
Property and equipment are stated at cost. Depreciation is
provided using the straight-line method over the estimated useful
lives of the classes of property and equipment. Lives range from
three to five years. Depreciation was $119,380, $83,781, $172,341
and $151,575 for the eight months ended August 31, 1997 and 1996
and for the years ended December 31, 1996 and 1995, respectively.
PERKINS MATCHING FUNDS
----------------------
The Company and the Federal Government together deposit money in
the U.S. Department of Education Title IV Perkins Loan Program in a
ratio of 1 to 9, respectively. As loans are repaid, the amounts
collected are re-loaned to new students. Should the loan program
in which the School has invested be terminated, the Company will
receive its respective share of the resulting cash. The Company's
approximate share as of each period end is presented in the
accompanying balance sheets.
INTANGIBLE ASSETS
-----------------
Intangible assets consist of the Company's organization costs,
which are being amortized over five years. Amortization expense
was $1,999, $5,967, $10,549 and $10,344 for the eight months ended
August 31, 1997 and 1996 and for the years ended December 31, 1996
and 1995, respectively.
3
<PAGE>
SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
STUDENT REFUNDS PAYABLE AND CREDIT BALANCES
-------------------------------------------
Student refunds payable in the accompanying balance sheets
represent refunds due and payable on behalf of students who
withdrew in prior periods. Student credit balances represent
the excess of payments received over current tuition billings
for active students. Student refunds and credit balances are
combined in the accompanying balance sheet where the credit
balances comprise the majority of the amounts displayed. Credit
balances were $8,846, $138,983 and $47,649 at August 31, 1997
and December 31, 1996 and 1995, respectively.
CONTRIBUTED MATERIALS
---------------------
Periodically, automobile manufacturers and local dealers contribute
tools and vehicles to the School that are restricted solely for
use in educational activities. These materials are consumed in the
educational process and ultimately scrapped. Once the materials
are contributed, the School has no obligation to return them to
the manufacturers or dealers.
ADVERTISING COSTS
-----------------
Advertising costs are charged to operations when incurred and
included in selling and promotion expenses. Advertising amounted
to $90,668, $82,564, $133,112 and $755,702 for the eight months
ended August 31, 1997 and 1996 and for the years ended December
31, 1996 and 1995, respectively.
NET INCOME PER COMMON SHARE
---------------------------
Net income per common share at August 31, 1997 is computed based on
the weighted average number of common shares outstanding during the
period then ended. Common shares owned by the former sole
shareholder of Siemann Educational Systems, ("Siemann", also the
"Company") prior to the completion of the merger with Chartwell are
considered outstanding for all periods presented. Shares
outstanding for Chartwell prior to merger with Siemann are considered
outstanding on August 31, 1997.
STATEMENT OF CASH FLOWS
-----------------------
For the purposes of the statement of cash flows, the Company
considers investments and savings instruments with maturities of
three months or less to be cash equivalents.
4
<PAGE>
SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - RECAPITALIZATION AS A RESULT OF REORGANIZATION
Pursuant to the Agreement and Plan of Reorganization effective
August 31, 1997, Chartwell issued 400,000 shares of common
stock to the sole shareholder of Siemann in exchange for all of the
issued and outstanding common shares of Siemann. In addition,
on June 4, 1997, the former sole shareholder of Siemann
purchased 2,250,000 common shares of Chartwel, resulting in a
majority ownership of the consolidated Company. In addition,
other individuals purchased 500,000 shares at June 4, 1997 and
50,000 shares at August 29, 1997 for $500 and $100,000,
respectively, prior to the merger.
For legal purposes, Chartwell has acquired Siemann and is the
parent company of Siemann following the merger. However, for
accounting purposes, Siemann is the acquiring company in a
reverse acquisition of Chartwell. As a result, the financial
statements presented herein prior to August 31, 1997 are those
of Siemann except the equity section of the balance sheets, which
utilizes the pre-merger capital structure of Chartwell.
NOTE 3 - NOTE RECEIVABLE
The note receivable of $200,000 at August 31, 1997 bears interest
at 6% per annum, payable monthly. Principal is due in full on
August 28, 1998. The note represents compensation for the sale of
certain student loans and is secured by those loans.
5
<PAGE>
SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - NOTES RECEIVABLE - STOCKHOLDER
Notes receivable - stockholder consisted of the following:
<TABLE>
<CAPTION>
AUGUST 31
1997 DECEMBER 31
(Unaudited) 1996 1995
<S> <C> <C> <C>
Note receivable from majority
stockholder, interest at 7% per
annum payable quarterly; principal
and accrued interest due in full on
December 31, 1997; secured by
Deed of Trust on real property
and assets of the stockholder $ 60,000 $ 60,000 $ 30,000
Note receivable from majority
stockholder, interest of 7% per
annum payable quarterly; principal
and accrued interest due in full on
August 31, 1998; secured by
Deed of Trust on real property
and assets of the stockholder 88,302 - -
---------- ---------- ----------
$ 148,302 $ 60,000 $ 30,000
========== ========== ==========
</TABLE>
NOTE 5 - PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows:
<TABLE>
<CAPTION>
AUGUST 31 DECEMBER 31
1997 1996 1995
(UNAUDITED)
<S> <C> <C> <C>
Furniture, equipment
and vehicles $ 892,527 $ 887,018 $ 413,860
Equipment under capital
leases 15,031 15,031 375,379
---------- ---------- ----------
907,558 902,049 789,239
Less accumulated depreciation
and amortization (571,929) (452,550) (280,210)
---------- ---------- ----------
$ 335,629 $ 449,499 $ 509,029
========== ========== ==========
</TABLE>
6
<PAGE>
SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - PROPERTY AND EQUIPMENT (CONTINUED)
All furniture, equipment and vehicles are pledged as collateral
for the bank loan, with specific vehicles pledged as collateral to
finance companies.
The Company leased instructional equipment under capital leases in
1995 and part of 1996, at which time the Company purchased
substantially all of the leased equipment.
NOTE 6 - NOTE PAYABLE TO BANK
The note payable to bank represents the outstanding principal at
August 31, 1997 on a $350,000 revolving line of credit agreement.
The note bears interest at 9.5% per annum payable monthly.
The note, which matures April 11, 1998, is secured by
equipment, accounts and notes receivable. As of August 31, 1997,
$135,669 of principal is outstanding on this revolving line of
credit agreement.
NOTE 7 - LONG-TERM DEBT
<TABLE>
<CAPTION>
AUGUST 31
(UNAUDITED) DECEMBER 31
------------- -------------------------
1997 1996 1995
<S> <C> <C> <C>
Note payable to bank, monthly
principal and interest payments
of $5,856, interest at 9.5% per
annum, due April, 2002, cross-
collateralized by accounts
receivable, notes receivable
and equipment $ 262,728 $ 183,406 $ -
Note payable to finance company,
monthly principal and interest
payments of $1,358, interest at
8.458% per annum, due in full
in February, 2000, secured by
purchased equipment 51,010 - -
</TABLE>
7
<PAGE>
SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
AUGUST 31
(UNAUDITED) DECEMBER 31
1997 1996 1995
---------- ----------------------
<S> <C> <C> <C>
Note payable to finance company,
monthly principal and interest
payments of $465, interest at
7.99%, due February, 1999,
collateralized by security
interest in Company vehicle 7,895 11,301 15,687
Note payable to finance company,
monthly principal and interest
payments of $261, interest
at 6.0%, due March, 1999,
collateralized by security
interest in Company vehicle 4,709 6,584 9,231
Note payable to individual,
monthly principal and interest
payments of $266, interest at 7.5%,
due May, 1999, unsecured 5,099 7,026 9,198
Note payable to individual, interest
at 10.5%, due in full July, 1998,
unsecured 13,492 10,000 10,000
Other - capital leases 8,582 9,055 -
---------- ---------- ----------
353,515 227,372 44,116
Less current portion (87,012) (43,162) (9,573)
---------- ---------- ----------
$ 266,503 $ 184,210 $ 34,543
========== ========== ==========
</TABLE>
Aggregate maturities of long-term debt at August 31, 1997, are as
follows:
YEAR ENDING AUGUST 31,
----------------------
1998 $ 87,012
1999 78,050
2000 71,888
2001 73,085
2002 and thereafter 43,480
----------
$ 353,515
==========
8
<PAGE>
SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDARY
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - NOTE PAYABLE TO STOCKHOLDER
The Company owes its majority stockholder and president $410,307
and $391,712 as of August 31, 1997 and December 31, 1996,
respectively. The note payable to stockholder bears interest at
7% per annum. The balance of principal and interest is due on
December 31, 1999. The note is unsecured.
NOTE 9 - STOCKHOLDERS' EQUITY
The Company's Articles of Incorporation authorize the issuance
of 10,000,000 shares of preferred stock with $.10 par value.
The preferred stock may be issued from time to time with such
designation, rights, preferences and limitations as the Board of
Diretors may determine by resolution. As of August 31, 1997, no
shares of preferred stock have been issued.
NOTE 10 - OPERATING LEASE AND OTHER RELATED PARTY TRANSACTIONS
The Company leases its school facility under a lease from
the major stockholder of the Company. The net lease expense
was $125,533, $110,933, $174,802 and $105,366 for the eight
months ended August 31, 1997 and 1996 and for the years
ended December 31, 1996 and 1995, respectively. The following
is a schedule by years of future minimum rental payments required
under the operating lease which expires August 31, 2000:
YEAR ENDING AUGUST 31,
----------------------
1998 $ 176,400
1999 165,150
2000 178,900
----------
$ 520,450
==========
On December 31, 1996, the School entered into an ageement with its
stockholder providing for the deferment of rent payments. Rent
deferrals commenced in
9
<PAGE>
SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
January, 1997, and bear interest at 7% per annum payable quarterly,
due in full on August 31, 2000.
As discussed in Note 4, the Company holds notes receivable due from
its president and majority stockholder.
Also, as discussed in Note 8, the Company owes its majority
stockholder $410,307 and $391,712 at August 31, 1997 and December
31, 1996, respectively.
NOTE 11 - INCOME TAXES
Chartwell has incurred cumulative net operating losses since
inception and, as a result, no provision for income taxes is
necessary for the year ended August 31, 1997 and no deferred
taxes have been recorded because realization of the benefit
of the net operating losses incurred is not assured.
The net deferred tax asset at August 31, 1997 is as follows:
1997
----
Net operating loss benefit carry-forward $ 65,700
Valuation allowance for deferred
tax assets (65,700)
----------
Net deferred tax asset $ -
==========
Deferred income taxes are recorded to reflect the tax consequences
on future years of differences between the tax basis of assets and
liabilities and their financial reporting amounts at each year end.
Deferred income tax assets are recorded to reflect the tax
consequences on future years of income tax carry-forward benefits,
reduced by benefit amounts not expected to be realized by Chartwell.
At August 31, 1997, Chartwell has approximately $219,000 of net
operating loss carry-forwards for tax purposes available to offset
future taxable income which, if not utilized to reduce taxable
income in future periods, expire in the years 2007 to 2011.
Prior to August 31, 1997, Siemann Educational Systems, Inc. elected,
with the consent of its then sole stockholder, to be taxed as a
subchapter S corporation. The income or loss of an S corporation is
included in the income tax returns of
10
<PAGE>
SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
the stockholder. Accordingly, the Company made no provision for
income taxes for the eight months ended August 31, 1997 and 1996
and for the years ended December 31, 1996 and 1995. For periods
subsequent to August 31, 1997, the Company and its subsidiary intend
to file consolidated federal and state income tax returns.
NOTE 12 - EMPLOYEE BENEFIT PLAN
The Company sponsors a defined contribution retirement (401K) plan
for its employees. All employees with twelve consecutive months
of service and 1,000 hours of service may participate. Eligible
employees may voluntarily contribute from 1% to 15%, but not more
than the maximum allowed by law (currently $9,500), of their
compensation annually to the plan. The Company may, at its
election, make contributions to the plan, which are equitably
distributed to participant accounts. Participants are fully
vested for amounts thay they contributed and vest over six
years in amounts contributed by the Company. The Company has
not made any contributions to the plan during any of the periods
presented in accompanying statement of operations.
11
<PAGE>
PRO FORMA FINANCIAL DATA
(UNAUDITED)
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The following unaudited pro forma statements of operations have been
derived from the statements of operations of Siemann Educational Systems
("SES" or the "Company") and Chartwell Cable Fund, Inc. ("Chartwell") for
the twelve months ended December 31, 1996 and for the eight months ended
August 31, 1997. The pro forma statements are presented to give effect to
the acquisition of SES by Chartwell on August 31, 1997, accounted for as
reverse acquisition and recapitalization of SES, as if the acquisition had
occurred on January 1, 1996. The pro forma statements of operations are
presented for informational purposes only and do not purport to be
indicative of the results of operations that actually would have resulted
had the acquisition and recapitalization been consummated on January 1,
1996 nor which may result from future operations.
The pro forma consolidated statements of operations should be read in
conjunction with the notes thereto and the Company's consolidated financial
statements and related notes contained elsewhere in this Form 8-K.
13
<PAGE>
SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
HISTORICAL AND PRO FORMA STATEMENT OF OPERATIONS
FOR THE EIGHT MONTHS ENDED AUGUST 31, 1997
<TABLE>
<CAPTION>
Pro forma
Historical Adjustments Pro forma
---------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUE:
Education revenues $1,863,938 $1,863,938
Other income 96,773 96,773
---------- ----------
1,960,711 1,960,711
EXPENSES:
Cost of education revenues 608,615 608,615
Selling and promotion 347,478 347,478
General and administrative 733,928 733,928
Interest expense 45,275 45,275
Depreciation and amortization 121,379 121,379
---------- ----------
Operating expenses 1,856,675 1,856,675
---------- ----------
Operating income 104,036 104,306
Provision for income taxes 0 (2) 27,040 27,040
---------- ----------
Net income $ 104,036 $ 76,996
========== ==========
Net income per share $ 0.03 $ 0.02
========== ==========
Weighted number of shares outstanding 3,700,000 3,700,000
========== ==========
</TABLE>
See notes to pro forma financial statements.
14
<PAGE>
SIEMANN EDUCATIONAL SYSTEMS, INC. AND SUBSIDIARY
HISTORICAL AND PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Pro forma
Historical Adjustments Pro forma
---------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUE:
Education revenues $2,859,474 $2,859,474
Other income 140,613 140,613
---------- ----------
3,000,087 3,000,087
EXPENSES:
Cost of education revenues 883,514 883,514
Selling and promotion 595,393 595,393
General and administrative 1,237,926 1,237,926
Interest expense 25,302 25,302
Depreciation and amortization 183,324 183,324
---------- ----------
Operating expenses 2,925,459 2,925,459
---------- ----------
Operating income 74,628 74,628
Loss on disposal of subsidiaries 126,439 (1) 126,439 0
---------- ----------
Income (loss) before income taxes (51,811) 74,628
Provision for income taxes 0 (2) 20,370 20,370
---------- ----------
Net income (loss) $ (51,811) $ 54,258
========== ==========
Net income (loss) per share $ (0.01) $ 0.01
========== ==========
Weighted number of shares outstanding 3,700,000 3,700,000
========== ==========
</TABLE>
See notes to pro forma financial statements.
15
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(1) Adjustment to exclude the loss relating to disposal of subsidiaries by
Chartwell. There is no tax effect of such exclusion due to Chartwell's net
operating loss carryforward.
(2) Adjustment to record Federal and state income taxes based on an
estimated Federal and state statutory tax rate.
(3) The number of shares outstanding equal the number of shares outstanding
on the acquisition date, August 31, 1997.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Siemann Educational Systems, Inc.
(Registrant)
By /s/ Paul T. Siemann
----------------------------
Paul T. Siemann
Chief Executive Officer
Dated: November 10, 1997
EXHIBIT 23.1
HOLBEN, BOAK, COOPER & CO.
- -------------------------------------------------------------------------
Certified Public Accountants 1720 S. Bellaire Street, Suite 500
Professional Corporation Denver, Colorado 80222
(303) 759-2727 Fax (303) 759-2728
November 10, 1997
Mr. Paul Siemann
President
Siemann Educational Systems, Inc. (formerly Chartwell Cable Fund, Inc.)
405 South Platte River Dr.
Denver, CO 80203
Dear Mr. Siemann,
This is to confirm that the client-auditor relationship between Siemann
Educational Systems, Inc. (SES) (formerly Chartwell Cable Fund, Inc.)
(Commission File Number 33-18174-D) and Holben, Boak, Cooper & Co. has
ceased. We have reviewed and agree with the disclosure included in SES'
Form 8-K dated November 10, 1997 which describes the termination of our
relationship.
Sincerely,
/s/ HOLBEN, BOAK, COOPER & CO.
Holben, Boak, Cooper & Co.
cc: Office of the Chief Accountant
SECPS Letter File
Securities and Exchange Commission
Mail Stop 9-5
450 Fifth Street, N.W.
Washington, D.C. 20549
