<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                       ----------------------------------

                                    FORM 10-Q
(Mark One)

[X]     QUARTERLY report pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934

        For the quarterly period ended September 30, 2000

                                       OR

[ ]     TRANSITION report pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934

        For the transition period from        to
                                      --------   --------
                         Commission file number 0-26420

                         AMBASSADORS INTERNATIONAL, INC.
                         -------------------------------
             (Exact name of registrant as specified in its charter)

<TABLE>
<CAPTION>
            Delaware                             91-1688605
-------------------------------              ------------------
<S>                                          <C>
(State or other jurisdiction of               (I.R.S. Employer
incorporation of organization)               Identification No.)
</TABLE>

<TABLE>
<CAPTION>
 Dwight D. Eisenhower Building
   110 South Ferrall Street
      Spokane, Washington                          99202
-------------------------------              -----------------
<S>                                          <C>
     (Address of principal                       (Zip code)
       executive offices)
</TABLE>

Registrant's telephone number, including area code: (509) 534-6200

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [ ]

Indicate number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practical date:

           Common shares outstanding as of October 31, 2000: 9,648,875



<PAGE>   2

AMBASSADORS INTERNATIONAL, INC.
FORM 10-Q QUARTERLY REPORT

Table of Contents



PART I FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (unaudited)

        Consolidated Balance Sheets
        Consolidated Statements of Income
        Consolidated Statements of Comprehensive Income
        Consolidated Statements of Cash Flows
        Notes to Consolidated Financial Statements

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations


PART II OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K


SIGNATURES



<PAGE>   3

AMBASSADORS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 30, 2000 and December 31, 1999
(dollars in thousands)

<TABLE>
<CAPTION>
                                                        September 30,       December 31,
                                                           2000                1999
                                                         --------            --------
<S>                                                     <C>                 <C>
ASSETS

Current assets:
   Cash and cash equivalents                             $ 43,282            $ 18,461
   Restricted cash equivalents                                112                 112
   Available-for-sale securities                           73,209              81,743
   Accounts receivable                                      3,737               4,897
   Prepaid program costs and expenses                       6,921               5,868
                                                         --------            --------
         Total current assets                             127,261             111,081

Property and equipment, net                                 4,433               4,613
Other investments                                           2,954               2,936
Goodwill and covenant not-to-compete,
    net of $2,782 and $1,947 of
      accumulated amortization                             22,854              22,875
Deferred income taxes                                       1,120               1,120
Other assets                                                  138                 138
                                                         --------            --------
         Total assets                                    $158,760            $142,763
                                                         ========            ========
</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements.



<PAGE>   4

AMBASSADORS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED), CONTINUED
September 30, 2000 and December 31, 1999
(dollars in thousands)


<TABLE>
<CAPTION>
                                                        September 30,       December 31,
                                                            2000                1999
                                                          --------            --------
<S>                                                     <C>                 <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                       $  4,670            $  3,941
   Accrued expenses                                          3,744               3,215
   Participants' deposits                                   22,703              22,748
   Note payable, current portion                                --                 346
   Foreign currency exchange contracts                       2,176                 369
   Deferred income taxes                                     2,967               3,475
                                                          --------            --------
          Total current liabilities                         36,260              34,094

Note payable due after one year                                400                 400
                                                          --------            --------
         Total liabilities                                  36,660              34,494
                                                          --------            --------
Total stockholders' equity                                 122,100             108,269
                                                          --------            --------
         Total liabilities and stock-
            holders' equity                               $158,760            $142,763
                                                          ========            ========
</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements.



<PAGE>   5

Ambassadors International, Inc.
Consolidated Statements of Income (Unaudited)
for the three and nine months ended September 30, 2000 and 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
                                              Nine Months Ended             Three Months Ended
                                                September 30,                  September 30,
                                          ------------------------       ------------------------
                                            2000            1999           2000            1999
                                          --------        --------       --------        --------
<S>                                       <C>             <C>            <C>             <C>
Revenues                                  $ 48,150        $ 38,457       $ 23,219        $ 16,440
                                          --------        --------       --------        --------
Operating expenses:
     Selling and tour promotion             15,687          13,579          6,940           5,789
     General and administrative             13,966          13,393          4,723           4,516
                                          --------        --------       --------        --------
                                            29,653          26,972         11,663          10,305
                                          --------        --------       --------        --------
Operating income                            18,497          11,485         11,556           6,135
                                          --------        --------       --------        --------
Other income (expense):
     Interest and dividend income            4,183           2,941          1,421             863
     Other, net                             (1,225)            848           (724)            158
                                          --------        --------       --------        --------
                                             2,958           3,789            697           1,021
                                          --------        --------       --------        --------
Income before income taxes                  21,455          15,274         12,253           7,156
Provision for income taxes                   7,509           5,041          4,380           2,283
                                          --------        --------       --------        --------
Net income                                $ 13,946        $ 10,233       $  7,873        $  4,873
                                          ========        ========       ========        ========
Net income per share - basic              $   1.46        $   1.05       $   0.82        $   0.50
                                          ========        ========       ========        ========
Weighted-average common shares
     basic                                   9,535           9,751          9,556           9,733
                                          ========        ========       ========        ========
Net income per share - diluted            $   1.45        $   1.04       $   0.81        $   0.50
                                          ========        ========       ========        ========
Weighted-average common shares
     diluted                                 9,634           9,809          9,771           9,780
                                          ========        ========       ========        ========
</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements.



<PAGE>   6

Ambassadors International, Inc.
Consolidated Statements of Comprehensive Income
for the three and nine months ended September 30, 2000 and 1999
(dollars in thousands)


<TABLE>
<CAPTION>
                                                            Nine Months Ended                  Three Months Ended
                                                              September 30,                       September 30,
                                                       ---------------------------          ---------------------------
                                                         2000               1999              2000              1999
                                                       --------           --------          --------           --------
<S>                                                    <C>                <C>               <C>                <C>
Net income                                             $ 13,946           $ 10,233          $  7,873           $  4,873

Change in unrealized gain (loss) on marketable
 equity security, net of
 income tax benefit (provision)
 of $418 and $(1,314)                                      (709)                --             2,238                 --

Change in unrealized gains (losses)
   on foreign currency
   exchange contracts, net
   of income tax benefit
   (provision)of $90, $(145),
   $85 and $(165)                                          (152)               258              (144)               324
                                                       --------           --------          --------           --------
Comprehensive income                                   $ 13,085           $ 10,491          $  9,967           $  5,197
                                                       ========           ========          ========           ========
</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements.



<PAGE>   7

AMBASSADORS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
for the nine months ended September 30, 2000 and 1999
(in thousands)

<TABLE>
<CAPTION>
                                                           2000              1999
                                                        --------           --------
<S>                                                     <C>                <C>
Cash flows from operating activities:
   Net income                                           $ 13,946           $ 10,233
   Adjustments to reconcile net income
      to net cash provided by operating
      activities:
         Depreciation and amortization                     1,783              1,838
         Loss on disposal of property and
            equipment                                         11                 20
         Compensation expense on stock
            grants                                           136                 98
         Other, net                                        1,547                (53)
         Change in assets and liabilities:
            Accounts receivable                            1,160             (4,569)
            Prepaid program costs and expenses            (1,053)               255
            Other assets                                      --                130
            Accounts payable and accrued
               expenses                                    1,870              5,060
            Participants' deposits                           (45)            (5,349)
                                                        --------           --------
                  Net cash provided by
                    operating activities                  19,355              7,663
                                                        --------           --------
Cash flows from investing activities:
   Purchase of property and equipment                       (785)            (1,266)
   Proceeds from the sale of equipment                         6                 --
   Purchase of available-for-sale
      securities                                         (55,843)           (77,068)
   Proceeds from sale or maturities of
      available-for-sale securities                       63,250             49,531
   Purchase of other investments                              --             (2,655)
   Net cash paid for acquisition of
      subsidiaries and covenant-not-to-
      compete agreements                                    (708)            (5,288)
   Change in other assets                                     --                 29
                                                        --------           --------
                  Net cash provided by (used
                   in) investing activities                5,920            (36,717)
                                                        --------           --------
</TABLE>



<PAGE>   8

AMBASSADORS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED), CONTINUED
for the nine months ended September 30, 2000 and 1999 (in thousands)

<TABLE>
<CAPTION>
                                                              2000               1999
                                                            --------           --------
<S>                                                         <C>                <C>
Cash flows from financing activities:
   Payments on long-term debt                               $   (346)          $   (135)
   Proceeds from exercise of stock
      options                                                    127                225
   Purchase and retirement of common
      stock                                                     (235)            (3,918)
                                                            --------           --------
               Net cash used in financing
                 activities                                     (454)            (3,828)
                                                            --------           --------
Net increase (decrease) in cash and
   cash equivalents                                           24,821            (32,882)
Cash and cash equivalents, beginning
   of period                                                  18,461             55,290
                                                            --------           --------
Cash and cash equivalents, end of
   period                                                   $ 43,282           $ 22,408
                                                            ========           ========
</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements.



<PAGE>   9

AMBASSADORS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.      BASIS OF PRESENTATION

        The consolidated financial statements included herein have been prepared
        by Ambassadors International, Inc. (the Company), without audit,
        pursuant to the rules and regulations of the Securities and Exchange
        Commission. Certain information and footnote disclosures, normally
        included in financial statements prepared in accordance with generally
        accepted accounting principles, have been condensed or omitted as
        permitted by such rules and regulations. The Company believes the
        disclosures included herein are adequate; however, these consolidated
        statements should be read in conjunction with the financial statements
        and the notes thereto for the year ended December 31, 1999 previously
        filed with the Securities and Exchange Commission on Form 10-K.

        In the opinion of management, these unaudited, consolidated financial
        statements contain all of the adjustments (normal and recurring in
        nature) necessary to present fairly the consolidated financial position
        of the Company at September 30, 2000, the consolidated results of
        operations and comprehensive income for three and nine months ended
        September 30, 2000 and 1999, and cash flows for the nine-months ended
        September 30, 2000 and 1999. The results of operations for the periods
        presented may not be indicative of those which may be expected for the
        full year.


2.      PRINCIPLES OF CONSOLIDATION

        Ambassadors International, Inc. (the Company) is an educational travel,
        travel services and performance improvement company. The Company's
        operations are classified in the following segments:

        -       Ambassadors Education Group - Promotes and organizes
                international educational travel and sports programs for
                students, athletes and professionals.

        -       Ambassadors Performance Group - Develops, markets and manages
                meetings and incentive programs for a nationwide roster of
                corporate clients utilizing incentive travel, merchandise award
                programs, and corporate meeting management services.

        -       Ambassadors Services Group - Provides comprehensive hotel
                reservation, registration and travel services for meetings,
                conventions, expositions and trade shows.

        The Company was founded in 1967 and was reincorporated in Delaware in
        1995. The Education Group represented the entire operations of the
        Company until 1996 when the Performance Group commenced operations. The
        Services Group commenced operations in 1998.

        The consolidated financial statements include the accounts of
        Ambassadors International, Inc. (the Company) and its subsidiaries. All
        significant intercompany accounts and transactions are eliminated in
        consolidation.



<PAGE>   10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

3.      INCOME PER SHARE:

        Net income per share - basic is computed by dividing net income by the
        weighted-average number of common shares outstanding during the period.
        Net income per share - diluted is computed by increasing the
        weighted-average number of common shares outstanding by the additional
        common shares that would have been outstanding if the dilutive potential
        common shares had been issued.

        The following table presents a reconciliation of basic and diluted
        earnings per share (EPS) computation (in thousands, except per share
        data):

<TABLE>
<CAPTION>
                                                        Nine Months Ended                 Three Months Ended
                                                           September 30,                     September 30,
                                                     ------------------------          ------------------------
                                                      2000             1999             2000             1999
                                                     -------          -------          -------          -------
<S>                                                  <C>              <C>              <C>              <C>
          Numerator:
             Net income for basic and
                diluted earnings per share           $13,946          $10,233          $ 7,873          $ 4,873
                                                     =======          =======          =======          =======
          Denominator:
             Weighted-average shares
                - basic                                9,535            9,751            9,556            9,733
             Effect of dilutive common
                stock options and grants(A)               99               58              215               47
                                                     -------          -------          -------          -------
             Weighted-average shares
                - diluted                              9,634            9,809            9,771            9,780
                                                     =======          =======          =======          =======
          Earnings Per Share:
             Net income per share - basic            $  1.46          $  1.05          $  0.82          $   .50
                                                     =======          =======          =======          =======
             Net income per share -
                diluted                              $  1.45          $  1.04          $  0.81          $   .50
                                                     =======          =======          =======          =======
</TABLE>


        (A)     For the three months ended September 30, 2000 and 1999,
                respectively, there were approximately 144,000 and 368,000
                additional stock options outstanding, respectively. For the
                nine-months ended September 30, 2000 and 1999, there were
                approximately 246,000 and 292,000 additional stock options
                outstanding, respectively. The effects of the shares, which
                would be issued upon the exercise of these options, have



<PAGE>   11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

3.      INCOME PER SHARE:

        been excluded from the calculation of diluted earnings per share
        because they are anti-dilutive.

4.      BUSINESS SEGMENTS:

        The Company operates the Education Group, Performance Group and Services
        Group segments. Corporate and other consists of general corporate assets
        (primarily cash and cash equivalents, investments and goodwill) and
        other activities which are not directly related to the Education,
        Performance and Services Groups. Selected financial information related
        to these segments is as follows (in thousands):


<TABLE>
<CAPTION>
                                                  Nine Months Ended                    Three Months Ended
                                                    September 30,                        September 30,
                                            ---------------------------           ---------------------------
                                              2000               1999               2000              1999
                                            --------           --------           --------           --------
          <S>                               <C>                <C>                <C>                <C>
          Revenues:
             Education Group                $ 34,765           $ 25,177           $ 19,114           $ 12,935
             Performance Group                 8,053              8,381              2,332              2,415
             Services Group                    5,104              4,763              1,749              1,070
             Corporate and Other                 228                136                 24                 20
                                            --------           --------           --------           --------
                Total                       $ 48,150           $ 38,457           $ 23,219           $ 16,440
                                            ========           ========           ========           ========

          Operating Income (Loss):
             Education Group                $ 19,037           $ 13,392           $ 12,182           $  7,533
             Performance Group                 1,565                248                112                 (2)
             Services Group                     (105)                (1)                (4)              (620)
             Corporate and Other              (2,000)            (2,154)              (734)              (776)
                                            --------           --------           --------           --------
                                            $ 18,497           $ 11,485           $ 11,556           $  6,135
                                            ========           ========           ========           ========
</TABLE>




<PAGE>   12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

5.      1999 RESTRUCTURING PLAN:

        During the fourth quarter of 1999, in connection with management's
        decision to improve operating efficiencies, outsource the merchandising
        business and reduce costs, the Company recorded a restructuring charge
        and write-down of intangible assets totaling $8.1 million. The
        restructuring plan is anticipated to be completed during the year ended
        December 31, 2000. The restructuring plan also involved the elimination
        of approximately 60 positions. The restructuring plan activity from
        December 31, 1999 through September 30, 2000 is as follows (in
        thousands):

<TABLE>
<CAPTION>
                                Restructuring                         Restructuring
                                allowance at                          allowance at
                                December 31, 1999       Activity      September 30, 2000
                                ------------------      --------      ------------------
<S>                             <C>                     <C>           <C>
Severance and related
   charges                              $ 566             $(566)             $  --
Consolidation of offices                  272              (207)                65
                                        -----             -----              -----
Total restructuring charges             $ 838             $(773)             $  65
                                        =====             =====              =====
</TABLE>



<PAGE>   13


Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

This Quarterly Report on Form 10-Q contains forward-looking statements. A
forward-looking statement may contain words such as "will continue to be," "will
be," "continue to," "expect to," "anticipates that," "to be" or "can impact."
Management cautions that forward-looking statements are subject to risks and
uncertainties that could cause the Company's actual results to differ materially
from those projected in forward-looking statements.

In June 1999, Ambassadors Education Group (AEG) acquired certain of the assets
of Travel Dynamics, Inc. ("TDI"). TDI primarily provided youth sports and
educational travel programs and has expanded the Education Group's sports travel
programs. In September 1999, Ambassadors Services Group acquired all of the
capital stock of Advanced Registration Systems, Inc. ("ARS"). ARS was primarily
involved in pre-registration and on-site registration services for trade shows.
Both acquisitions were included in the Company's results of operations as of
their respective dates of acquisition.


COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 2000 TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1999

GROSS PROGRAM RECEIPTS

Gross program receipts increased to $65.8 million in the third quarter of 2000
from $47.6 million in the third quarter of 1999. The $18.2 million increase is
the result of increased participant volume within the Education Group traveling
in the third quarter of 2000 in comparison to the third quarter of 1999.

NET REVENUE

Net revenue increased to $23.2 million in the third quarter of 2000 from $16.4
million in the third quarter of 1999. This $6.8 million increase is due to the
effect of increased participants within the Education Group and continued strong
overall gross program margins of 35% during the third quarters of 2000 and 1999.

SELLING AND TOUR PROMOTION EXPENSES

The Company's policy is to expense all selling and tour promotion costs as they
are incurred.

Selling and tour promotion expenses increased to $6.9 million in the quarter
ended September 30, 2000 from $5.8 million in the comparable quarter of 1999.
The increase is primarily the result of increased student, sports, and
professional marketing within the Education Group, combined with personnel costs
to support increased participant volume.




<PAGE>   14
GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses during the third quarter of 2000 of $4.7
million are comparable to the third quarter of 1999 of $4.5 million. The
Performance Group's general and administrative expenses decreased as a result of
the Company's 1999 restructuring. This decrease was offset by increases in the
Education Group due to the 1999 acquisition and the assumption of the related
general and administrative expenses associated with supporting an increased
number of participants.

OTHER INCOME/EXPENSE

Other income in 2000 consisted primarily of interest income generated by cash
and short-term investments. As of September 30, 2000, the Company had $116.5
million in cash, cash equivalents and short-term investments, an increase from
$100.2 million at December 31, 1999. As a result, the Company realized interest
income of $1.4 million in the third quarter of 2000, compared to $0.9 million in
the comparable quarter of 1999.

Other income also included $0.9 million of unrealized losses on certain foreign
currency contracts during the third quarter of 2000. The Company enters into
forward foreign exchange contracts and foreign currency option contracts to
offset certain operational exposures from changes in foreign currency exchange
rates. These foreign exchange contracts and options are entered into to support
normal recurring purchases, and accordingly are not entered into for speculative
purposes. Forward foreign exchange contracts are utilized to manage the risk
associated with currency fluctuations on certain purchase expectations. Certain
of these contracts do not qualify for hedge accounting and therefore unrealized
gains and losses are recorded in other income/expense.

INCOME TAXES

The Company has recorded an income tax provision of approximately $4.4 million
for the third quarter of 2000 in comparison to $2.3 million for the third
quarter of 1999. The income tax provision has been recorded based upon the
estimated annual effective income tax rate applied to the pre-tax income.



<PAGE>   15

COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2000 TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999

GROSS PROGRAM RECEIPTS

Gross program receipts increased to $142.8 million in the nine-month period
ended September 30, 2000 from $120.9 million in the same period of 1999. The
$21.9 million increase is the result of increased participant volume within the
Education Group traveling in the nine-month period ended September 30, 2000 in
comparison to the comparable period in 1999. This increase was partially offset
by a decrease within the Performance Group as unprofitable merchandising
business was outsourced.

NET REVENUE

Net revenue increased to $48.2 million in the nine-month period ended September
30, 2000 from $38.5 million in the same period of 1999. This $9.7 million
increase is due to increased participants within the Education Group and
strengthened overall gross program margins to 34% during the nine-month period
ended September 30, 2000 from 32% during the comparable period in 1999.

SELLING AND TOUR PROMOTION EXPENSES

The Company's policy is to expense all selling and tour promotion costs as they
are incurred.

Selling and tour promotion expenses increased to $15.7 million in the nine-month
period ended September 30, 2000 from $13.6 million in the comparable period in
1999. The increase is primarily the result of increased sales and marketing
within the Education Group's student program sales, combined with nine months of
sports marketing expenses in 2000 due to the June, 1999 Education Group's
acquisition of an international youth sports travel company. This increase was
offset by a decrease in the Performance Group due to realized efficiencies as a
result of the Company's 1999 restructuring.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses increased to $14.0 million in the nine-month
period ended September 30, 2000 from $13.4 million during the comparable period
in 1999. The Performance Group's general and administrative expenses decreased
as a result of the Company's 1999 restructuring. This decrease was offset by
increases in the Education and Services Groups due to 1999 acquisitions and the
assumption of the related general and administrative expenses associated with
supporting an increased number of programs.

OTHER INCOME/EXPENSE

Other income in 2000 consisted primarily of interest income generated by cash
and short-term investments. As a result of the Company's $116.5 million




<PAGE>   16


in cash, cash equivalents and short-term investments at September 30, 2000, the
Company realized interest income of $4.2 million in the nine-month period ended
September 30, 2000, compared to $2.9 million in the comparable period of 1999.

Other income also included $1.6 million of unrealized losses on certain foreign
currency contracts during 2000. The Company enters into forward foreign exchange
contracts and foreign currency option contracts to offset certain operational
exposures from changes in foreign currency exchange rates. These foreign
exchange contracts and options are entered into to support normal recurring
purchases, and accordingly are not entered into for speculative purposes.
Forward foreign exchange contracts are utilized to manage the risk associated
with currency fluctuations on certain purchase expectations. Certain of these
contracts do not qualify for hedge accounting and therefore unrealized gains and
losses are recorded in other income/expense.

In January of 1999, the Company purchased a minority interest in connection with
the acquisition by a group of investors of all of the capital stock of Scheduled
Airlines Traffic Offices, Inc. The Company received a non-recurring consulting
fee related to this transaction. The Company also entered into a management
agreement as part of this purchase, whereby the Company receives quarterly
management consulting fees. The consulting fee and quarterly management
consulting fee have been included in other income.

INCOME TAXES

The Company has recorded an income tax provision of approximately $7.5 million
for the nine-month period ended September 30, 2000 in comparison to $5.0 million
for the comparable period in 1999. The income tax provision has been recorded
based upon the estimated annual effective income tax rate applied to the pre-tax
income.

SEASONALITY

The Company's businesses are seasonal. The majority of the Company's travel
programs occur in May through July and October of each year. The Company
historically has earned more than three-quarters of its annual revenues in the
second and third quarters, which has more than offset operating losses incurred
during the rest of the year. The Company anticipates that this trend will
continue for the foreseeable future.

LIQUIDITY AND CAPITAL RESOURCES

The Company's business is not capital intensive. However, the Company does
retain funds for operating purposes in order to conduct sales and marketing
efforts for future programs and to facilitate acquisitions of other companies.

Net cash provided by operations for the nine-month period ended September 30,
2000 and 1999 was approximately $19.4 million and $7.7 million, respectively.
The increase in operating cash flows from 1999 to 2000 primarily




<PAGE>   17

relates to an increased volume of Education Group participants' deposits and
collection of accounts receivable.

Net cash provided by investing activities for the nine-month period ended
September 30, 2000 was $5.9 million compared to net cash used in investing
activities for the comparable period in 1999 of $36.7 million, an increase of
$42.6 million. The increase from 1999 to 2000 was primarily due to the proceeds
from the sale or maturity of available-for-sale securities. The Company does not
have any material capital expenditure commitments for 2000. However, the terms
of the Company's acquisitions of certain businesses include contingent
consideration. Additionally, the Company is continuing to pursue further
acquisitions of related travel and performance improvement businesses that may
require the use of cash and cash equivalents. No such acquisitions are currently
pending and no assurance can be given that definitive agreements for any such
acquisitions will be entered into, or, if they are entered into, that they will
be on terms favorable to the Company.

The Company has a credit facility available with Bank of America, with a current
limit of up to $50.0 million for foreign currency purchases and forward
contracts. This credit facility is renewable annually.

In November 1998, the Board of Directors of the Company authorized the
repurchase of the Company's common stock (up to an approved amount) in the open
market or through private transactions. This repurchase program is ongoing. The
Company does not believe that any such repurchases will have a significant
impact on the Company's liquidity.

At September 30, 2000, the Company had approximately $116.5 million of cash,
cash equivalents, and available-for-sale securities, including program
participant funds of $22.7 million. Under the Company's cancellation policy, a
program participant may be entitled to a refund of a portion of his or her
deposit, less certain charges, depending on the time of cancellation.

Management believes that existing cash and cash equivalents and cash flows from
operations will be sufficient to fund the Company's anticipated operating needs,
capital expenditures, stock repurchases and acquisitions at least for the
ensuing year.

FOREIGN CURRENCY; HEDGING POLICY

The substantial majority of the Education Group's travel programs take place
outside the United States, and most foreign suppliers require payment in
currency other than the U.S. dollar. Accordingly, the Company is exposed to
foreign currency risk relative to changes in foreign currency exchange rates
between those currencies and the U.S. dollar. The Company has a program to
provide a hedge against certain of these foreign currency risks. The Company
uses forward contracts, which allow the Company to acquire the foreign currency
at a fixed price for a specified period of time. Some of the Company's forward
contracts include a synthetic component if a pre-determined trigger occurs
during the term of the contract. Additionally, the Company uses foreign





<PAGE>   18


currency call options which provide the Company with the option to acquire
certain foreign currencies at a fixed exchange rate and time period. Concurrent
with the purchase of a foreign currency call option, the Company sells a foreign
currency put option to minimize the net premium paid for the call option. The
strike prices on these options generally straddle the exchange rate at the time
the options are purchased. The Company is exposed to credit risk under the
foreign currency contracts and options to the extent that the counterparty is
unable to perform under the agreement. The fair value of foreign currency
exchange contracts is based on quoted market prices and the forward rate of the
foreign currencies subject to contracts at period-end. The fair value of the
foreign currency options is based on the estimated amount to terminate the put
and call contracts with the counterparties at period end.

The Company accounts for these foreign exchange contracts and options under the
provisions of Statement of Financial Accounting Standards No. 133 (SFAS 133),
"Accounting for Derivative Instruments and Hedging Activities." Therefore, for
those derivatives that qualify for hedge accounting treatment, the effective
portion of any unrealized gains or losses on foreign exchange contracts are
recorded as other comprehensive income or loss and are accumulated as a
component of stockholders' equity. Realized gains and losses on these contracts
are recorded as a cost of the related travel program when the contracts mature
and are utilized. For derivatives that do not meet the criteria to be accounted
for as hedges, all unrealized gains and losses are recognized in other income
as the derivative instruments are valued at fair value.

IMPLEMENTATION OF 1999 RESTRUCTURING PLAN

During the fourth quarter of 1999, the Company initiated a significant
restructuring effort impacting both the Performance and Services Groups.
Management anticipates the restructuring plan to be completed during the year
2000. The restructuring plan activity from December 31, 1999 through September
30, 2000 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                            Restructuring
                                   Restructuring                            allowance at
                                   allowance at                             September 30,
                                   December 31, 1999      Activity          2000
                                   -----------------      --------          -------------
<S>                                <C>                    <C>               <C>
Severance and related
  charges                                $ 566              $(566)              $  --
Consolidation of offices                   272               (207)                 65
                                         -----              -----               -----
Total restructuring charges              $ 838              $(773)              $  65
                                         =====              =====               =====
</TABLE>

The Company also outsourced the incentive merchandise component of its
Performance Group and consolidated the operations of the Services Group. The
restructuring plan involved the closure of the Company's Boston, Massachusetts
and Minneapolis, Minnesota offices, eliminating approximately 60 positions. This
restructure has positioned the Company to eliminate duplicate administrative
costs and create efficiencies within the core business segments. However, the
Company estimates the net savings to be insignificant.

Cash spent on the restructuring has been funded from operations, and the Company
expects operations to continue to fund the remaining reserve within the year
2000.




<PAGE>   19

PART II - OTHER INFORMATION

Items 1, 2, 3, 4 and 5 are not presented as they are not applicable.

Item 6. Exhibits and Reports on Form 8-K.

        (a)     Exhibits: 27 - Financial Data Schedule

        (b)     Reports on Form 8-K:

                No reports on Form 8-K were filed for the three months ended
                September 30, 2000.



<PAGE>   20

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 thereunto duly authorized.


AMBASSADORS INTERNATIONAL, INC.


Date: November 14, 2000                   By: /s/Jeffrey D. Thomas
                                          --------------------------------------
                                          Jeffrey D. Thomas,
                                          Chief Financial Officer