10QSB 1 chartwelfinancial10q103101.txt FORM 10-QSB (10-31-2001) 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 October 31, 2001 Commission File Number 0-27395 CHARTWELL INTERNATIONAL, INC. ---------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Nevada 95-3979080 ----------------------------- ----------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 333 South Allison Parkway, Suite 100, Lakewood, CO 80226 --------------------------------------------------------- (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 December 11, 2001: 60,389,179 (This Form 10-QSB includes 9 pages) CHARTWELL INTERNATIONAL, INC. FORM 10-QSB For the Quarterly Period Ended October 31, 2001 INDEX Page ---------- Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheet at October 31, 2001 3 Consolidated Statements of Operations for the Three Months Ended October 31, 2001 and 2000 4 Consolidated Statements of Cash Flows for the Three Months Ended October 31, 2001 and 2000 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 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CHARTWELL INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEET AS OF OCTOBER 31, 2001 (In thousands, except share and per share amounts) ASSETS Current assets: Cash $ 21,491 Trade credits 2,835 Accounts Receivable 54,737 Prepaids and other 345 ------------ Total current assets 79,408 Investment in real estate 1,195,655 Mineral properties 2,014,800 Recruiting systems and publishing rights, net 1,278,915 Receivables from related parties 42,404 Other assets, net 79,013 ------------ Total assets $ 4,690,195 ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank Loan $ 8,000 Accounts payable and accrued liabilities 232,132 ------------ Total current liabilities 240,132 Long-term debt: Due to related parties 1,554,281 Other notes payable 600,000 Other long-term liabilities 30,000 ------------ Total liabilities 2,424,413 ------------ Stockholders' Equity: Preferred Series B Stock (preferable to all other classes of stock in liquidation) 300,000 Preferred Series C Stock (preferable to common Stock and equal to Preferred Series A stock In liquidation) 600 Preferred Series A Stock (preferable to common Stock and equal to Preferred Series B stock In liquidation) 506,120 Common stock; $.001 par value; 90,000,000 shares authorized; 60,389,179 shares issued 60,389 Additional paid-in capital 10,675,867 Accumulated deficit (9,270,309) ------------ 2,272,667 Less, Treasury stock (68,850 shares) at cost (6,685) ------------ Total stockholders' equity 2,265,782 ------------ Total liabilities and stockholders' equity $ 4,690,195 ============ The accompanying notes are an integral part of the consolidated financial statements. 3 CHARTWELL INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED OCTOBER 31, 2001 AND 2000 (in thousands except per share amounts) Three Months Ended October 31, ---------------------------- 2001 2000 ------------ ------------ Management and license fee revenue $ 37,500 $ 37,500 ------------ ------------ Operating expenses: General and administrative 75,913 67,919 Depreciation and amortization 30,858 32,455 ------------ ------------ Total operating expenses 106,771 100,374 ------------ ------------ Operating loss (69,271) (62,874) Other income (expense): Gain on sale of stock 4,000 0 Interest (expense), net (53,740) (50,956) Miscellaneous income (expense), net -- 1,578 ------------ ------------ Total other income (expense), net (49,740) (49,378) ------------ ------------ Net Income (loss) (119,011) (112,252) ============ ============ Basic and diluted income (loss) loss per share $ (0.00) $ (0.00) ============ ============ Weighted average common shares 60,389,179 60,272,512 ============ ============ The accompanying notes are an integral part of the consolidated financial statements. 4 CHARTWELL INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED OCTOBER 31, 2001 AND 2000 (In thousands) Three Months Ended ----------------------- October 31, October 31, 2001 2000 ----------------------- Cash Flows From Operating Activities: Net loss $(119,011) $(112,252) Adjustments to reconcile net income (loss) to net cash (used for) operating activities Depreciation and amortization 30,858 32,455 Services paid for by issuance of stock 4,000 -- Changes in assets and liabilities: Trade credits 6,567 16,182 Due from related parties 59,701 (5,797) Prepaid and other assets (29,020) 49,040 Accounts payable and accruals 3,478 (36,797) Interest due to related parties 35,802 33,607) --------- --------- Net cash (used for) operating activities (14,581) (23,562) --------- --------- Cash Flows From Investing Activities: Net cash provided by investing activities 0 0 --------- --------- Cash Flows From Financing Activities: Proceeds from borrowings from related parties 18,000 -- --------- --------- Net cash provided by financing activities 18,000 0 --------- --------- Net increase (decrease) in cash 3,419 (23,562) Cash, beginning of period 18,072 47,016 --------- --------- Cash, end of period $ 21,491 23,454 ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ 18,000 $ 18,000 SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: -------------------------------------------------------- No significant noncash investing or financing activities occurred during the three months ended October 31, 2001 and 2000 The accompanying notes are an integral part of the consolidated financial statements. 5 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, 2001 and 2000, 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 months ended October 31, 2001 and 2000 are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 2002. The Notes to Consolidated Financial Statements included in the Company's July 31, 2001 Form 10-KSB 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 26% (as of October 31, 2001) 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 - MODIFICATIONS TO ARRANGEMENTS WITH CBSA Effective August 1, 2000, the Company entered into a modification of its arrangements with CBSA. Under the modified arrangement, CBSA pays to the Company a minimum monthly license fee of $12,500 or, if greater, 1.5% of CBSA's revenues up to $10,000,000 and 1% of annual revenues of CBSA in excess of $10,000,000. The Company had agreed to defer payment by CBSA of $6,250 per month through July 31, 2001, of the minimum license fee depending on the cash flow circumstances of CBSA. The modified arrangements will exist of 12 years from August 1, 2000 or, if earlier, until total payments to the Company have equaled $2,120,000 plus an interest factor, at which point CBSA will not be required to make any more license payments to the Company. As a result, the Company had reduced the remaining useful lives of its recruiting systems and publishing rights to 12 years from August 1, 2000, and is amortizing the remaining net book values of these assets over 12 years from that date. 6 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATIONS AND LIQUIDITY At October 31, 2001, the Company's working capital ratio was 0.3 to 1.0, based on current assets of $79,408 and current liabilities of $240,132. In the statement of cash flows, net cash provided by (used) in operations was ($14,581) in 2001 and ($23,562) in 2000. We believe we have sufficient cash flows and sources of funding to meet our obligations over the foreseeable future. ANALYSIS OF STATEMENT OF OPERATIONS Comparison of Three Months Ended October 31, 2001 and 2000 ---------------------------------------------------------- Management and license fee revenue was the same with $37,500 in 2000 to $37,500 in 2001 primarily because of the minimum license fee of $12,500 per month payable in both years. General and administrative expenses increased from $67,919 in 2000 to $75,913 in 2001. Depreciation and amortization expense decreased from $32,455 in 2000 to $30,858 in 2001. Interest expense was at approximately the same level at $50,956 in 2000 and $53,740 in 2001. 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. 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. 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 7 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. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 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. December 17, 2001 By: /s/ Janice A. Jones ----------------- ------------------------------- Date Janice A. Jones, Chief Executive Officer EXHIBIT INDEX