<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
/x/ Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 1997
/ / Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ___________ to _____________
Commission file number 33-25129-LA
CHARTER COMMUNICATIONS INTERNATIONAL, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
NEVADA 84-1097751
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
17100 EL CAMINO REAL, HOUSTON, TEXAS 77058
(Address of Principal Executive Offices)
(713) 486-8337
(Issuer's Telephone Number, Including Area Code)
-----------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
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
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 31,111,776
Traditional Small Business Disclosure Format
(check one)
Yes X No
--- ---
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<PAGE>
CHARTER COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1997 AND DECEMBER 31, 1996
June 30, December 31,
1997 1996
----------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 627,392 $ 320,252
Accounts receivable, net of allowance for
doubtful accounts of $531,054 and $435,000 2,389,993 1,675,939
Accounts receivable-- affiliate 369,517 385,951
Inventory 435,912 307,940
Prepaid expenses and other 503,664 331,538
----------- -----------
Total current assets 4,326,478 3,021,620
----------- -----------
PROPERTY AND EQUIPMENT, at cost:
Equipment and machinery 4,608,019 4,345,137
Earth station facility 618,497 618,497
Software 707,333 664,486
Furniture and fixtures 425,849 297,329
Other 803,866 240,714
----------- -----------
7,163,564 6,166,163
Accumulated depreciation and amortization (1,514,407) (791,892)
----------- -----------
Property and equipment, net 5,649,157 5,374,271
----------- -----------
OTHER ASSETS:
Goodwill, net of accumulated amortization
of $756,869 and $378,895 18,823,495 22,077,423
Acquired customer bases, net of accumulated
amortization of $434,382 and $261,151 1,520,914 1,867,117
Other intangibles, net of accumulated
amortization of $387,302 and $186,888 2,223,034 2,369,390
Other 316,363 81,783
----------- -----------
Total other assets 22,883,806 26,395,713
----------- -----------
TOTAL ASSETS $32,859,441 $34,791,604
----------- -----------
----------- -----------
The accompanying Condensed Notes to Financial Statements
are an integral part of these balance sheets.
<PAGE>
CHARTER COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1997 AND DECEMBER 31, 1996
June 30, December 31,
1997 1996
------------ ------------
CURRENT LIABILITIES:
Current portion of notes payable $ 48,426 $ 50,264
Lines of credit 1,450,000 1,646,092
Loans from shareholders 460,645 1,520,548
Accounts payable 5,929,347 7,234,129
Accounts payable-- affiliate 121,148 222,999
Accrued liabilities 949,525 870,804
Unearned revenues 1,563,151 1,830,731
------------ ------------
Total current liabilities 10,522,242 13,375,567
------------ ------------
LONG TERM LIABILITIES:
Convertible debentures 1,000,000 -
Senior subordinated notes 645,278 2,513,492
Notes payable 413,611 229,801
------------ ------------
Total long term liabilities 2,058,889 2,743,293
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock, $0.00001 par value; 45,000,000
shares authorized; 31,111,776 and 24,202,779
shares outstanding at June 30, 1997 and
December 31, 1996, respectively 311 242
Additional paid-in-capital 35,305,694 28,302,025
Accumulated deficit during developmental stage (2,579,324) (2,579,324)
Accumulated deficit subsequent to developmental
stage (11,448,371) (7,050,199)
------------ ------------
Total stockholders equity 20,278,310 18,672,744
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 32,859,441 $ 34,791,604
------------ ------------
------------ ------------
The accompanying Condensed Notes to Financial Statements
are an integral part of these balance sheets.
<PAGE>
CHARTER COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
<TABLE>
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
June 30, 1997 June 30, 1997 June 30, 1996 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Communications services $ 2,326,398 $ 4,062,036 $ 241,640 $ 299,483
Hardware and software 162,061 331,540 1,201,731 1,251,761
Internet connection services 694,624 1,362,219 424,794 748,643
Network services 137,972 314,615 414,540 414,540
----------- ----------- ----------- -----------
Total Revenues 3,321,055 6,070,410 2,282,705 2,714,427
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of services 2,317,192 4,471,315 797,962 1,017,647
Cost of hardware and software 123,730 264,724 950,206 987,411
Selling, general, and administrative 1,853,007 3,783,985 1,295,939 2,053,674
Depreciation and amortization 805,162 1,485,269 233,358 327,310
----------- ----------- ----------- -----------
Total costs and expenses 5,099,091 10,005,293 3,277,465 4,386,042
----------- ----------- ----------- -----------
OPERATING LOSS (1,778,036) (3,934,883) (994,760) (1,671,615)
----------- ----------- ----------- -----------
MINORITY INTEREST - - 12,783
INTEREST EXPENSE, NET (79,519) (221,508) (108,815) (152,395)
LOSS ON EXTINGUISHMENT OF DEBT - (241,785)
NET LOSS BEFORE INCOME TAXES (1,857,555) (4,398,176) (1,103,575) (1,811,227)
INCOME TAX BENEFIT - - - -
----------- ----------- ----------- -----------
NET LOSS $(1,857,555) $(4,398,176) $(1,103,575) $(1,811,227)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
NET LOSS PER SHARE $ (0.06) $ (0.15) $ (0.09) $ (0.18)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
SHARES USED IN COMPUTING
NET LOSS PER SHARE 30,100,109 28,692,777 11,625,231 9,954,306
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The accompanying Condensed Notes to Financial Statements
are an integral part of these statements.
<PAGE>
CHARTER COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
<TABLE>
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
June 30, 1997 June 30, 1997 June 30, 1996 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,857,555) $ (4,398,176) $ (1,103,575) $ (1,811,227)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization 805,162 1,485,269 233,358 327,310
Noncash consulting and service expenses - - 51,130 71,727
Bad debt expense 54,633 107,521 1,164 1,164
Amortization of discounts on senior
subordinated notes 7,492 14,950 16,825 17,739
Loss on extinguishment of debt - 241,785 - -
Changes in current assets and current liabilities:
Accounts receivable, net (251,915) (714,054) (427,197) (482,222)
Accounts receivable--affiliate 27,397 16,434 23,688 41,924
Inventory (86,749) (127,972) 87,837 45,438
Prepaid expenses (140,446) (172,126) 134,074 (72,079)
Other assets 5,479 (234,580) 13,598 (33,146)
Accounts payable and accrued liabilities 253,362 (1,226,058) 83,065 372,078
Accounts payable--affiliate (4) (101,851) - (129,167)
Unearned revenue (212,727) (267,580) 87,794 126,093
Other (53,869) (53,869) (28,722) (28,722)
------------ ------------ ------------ ------------
Total Adjustments 407,815 (1,032,131) 276,614 258,137
------------ ------------ ------------ ------------
Net cash used in operating activities (1,449,740) (5,430,307) (826,961) (1,553,090)
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (490,815) (997,401) (869,953) (1,717,907)
Acquisition of subsidiary - - (381,000)
Proceeds from sale leasebacks - - 66,165 274,165
Investment in joint venture - - (77,289) (154,191)
------------ ------------ ------------ ------------
Net cash used in investing activities (409,815) (997,401) (881,077) (1,978,933)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 1,035,000 5,877,518 365 423,684
Proceeds from issuance of convertible debentures 1,000,000 1,000,000 - -
Proceeds from issuance of stock warrants - - 67,686 332,992
Proceeds from senior subordinated notes - - 417,314 2,172,008
Proceeds/(Repayment) of line of credit, net (96,092) (196,092) 991,889 983,778
Repayment of loans from shareholders (401) (125,401) - -
Proceeds/(Repayment) of notes payable 187,442 178,823 (165,809) (165,809)
------------ ------------ ------------ ------------
Net cash provided by financing activities 2,125,949 6,734,848 1,311,445 3,746,653
------------ ------------ ------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS 185,394 307,140 (396,593) 214,630
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 441,998 320,252 665,064 43,841
------------ ------------ ------------ ------------
CASH AT END OF PERIOD $ 627,392 $ 627,392 $ 258,471 $ 258,471
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
SUPPLEMENTAL NON-CASH DISCLOSURES:
Interest Paid $ 51,138 $ 99,529 $ 67,010 $ 72,397
Taxes Paid - - - -
</TABLE>
The accompanying Condensed Notes to Financial Statements
are an integral part of these statements.
<PAGE>
CHARTER COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
1. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to Section
310 of Regulation S-B of the Securities and Exchange Commission. The
accompanying unaudited condensed consolidated financial statements
reflect, in the opinion of management, all adjustments necessary to
achieve a fair statement of financial position and results for the
interim periods presented. All such adjustments are of a normal
recurring nature. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1996.
2. Certain amounts in the prior year financial statements have been
reclassified to conform to the current year presentation.
3. Net loss per share is computed using the weighted average number of shares
outstanding, adjusted for common stock equivalents, when dilutive.
4. There was no provision for or cash payment of income taxes for the
three months ended March 31, 1997 and 1996, respectively, as the Company
had net taxable loss for these periods and anticipates a net taxable loss
for the year ended December 31, 1997.
5. During the second quarter of 1997, the Company completed a private
placement offering of $0.00001 par value common stock. The Company
issued 1,000,000 shares at $1 per share. Additionally, during the second
quarter, the Company completed a private placement of a $1,000,000 par
value subordinated debenture which is convertible into shares of $0.00001
par value common stock at a price of $0.50 per share. Each share issued
upon conversion will have one warrant giving the holder the right to
purchase one additional share of $0.00001 par value common stock at $1.50
per share. The Company retains the right to require exercise of these
warrants if the closing price of the Company's common stock trades at or
above $1.75 for a period of 20 in any 30 trading day period.
6. During the second quarter of 1997, the Company granted 746,297 options
with a weighted average exercise price of $1.92 per share, which vest
ratably over 2-4 years. In addition, during the second quarter of 1997,
893,834 options with a weighed average strike price of $1.44 per share
were forfeited by terminated employees.
Also during the second quarter of 1997, warrants that gave holders the
right to purchase 160,000 and 20,000 shares of common stock at $1.00 and
$4.00, respectively, were forfeited.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(a) PLAN OF OPERATION. Over the next twelve months, the Company intends, to
the extent permitted by its capital limitations discussed herein, to pursue
the expansion of its International Private Lines, Telecommute Solutions, Long
Distance Telephone, Calling Card, Phone Centers, and Internet Access
services. The Company intends to capitalize on the growing demand for these
services and gain market share by building its subscriber base both
domestically and internationally. Management believes the expansion will be
accomplished through the acquisition of additional licenses and concessions
allowing the Company to provide these services both in the United States and
in targeted Latin American countries. The Company intends to pursue new
customers by combining the highest possible level of service with an expanded
sales force and intensive marketing efforts. After thoroughly investigating
market demand, the Company intends to expand in major cities in Latin
America. The Company intends to seek out and enter into strategic alliances
with local business groups and individuals to create successful operations
within the respective target Latin Countries.
The Company intends, to the extent permitted by its capital limitations
discussed below, to build an International Private Line communication network
that will provide voice, data, facsimile, Internet, intranet, telecommuting,
and video services to government and commercial organizations operating
throughout the United States and Latin America.
The Company is currently licensed to provide various telecommunication
services in the United States, Peru, Honduras, Venezuela, Mexico, El
Salvador, Guatemala, Costa Rica, and Panama. As of June 30, 1997, the
Company is providing service in the United States, Panama, Venezuela, El
Salvador, and Honduras and will shortly begin providing service in Mexico and
Costa Rica. Over the next twelve months, the Company intends to seek,
through public and private markets, an additional $20 - $25 million in debt or
equity financing to build-out and operate facilities in these and other
countries. The Company will, however, only be able to begin expansion if it
is able to obtain appropriate financing.
While the Company's telecommunication business is currently focused on
the provision of international private lines and prepaid calling cards, the
Company is actively pursuing other opportunities to provide long distance
services in Mexico and other Latin American countries. While the Company
presently has no contractual commitments regarding these services, the
Company anticipates that approximately $3 to 4 million dollars in capital
expenditure over the next several quarters will be required to expand its
long distance service to meet the demand of existing opportunities.
The Company's Internet business is expanding. In March of 1996, the
Company formed Phoenix DataNet de Panama and commenced the offering of
Internet services to business and residential customers in Panama City,
Panama. In the first year of operation, the Company acquired over 1,200 new
customers. On July 19, 1996, the Company obtained an additional concession
to provide Internet services to both residences and businesses operating in
Venezuela. In December of 1996, the Company began offering Internet Service
in Caracas, Venezuela. The Company anticipates approximately $130,000 per
site will be the required expenditure to provide Internet services at each of
the seven areas targeted for private line services in Venezuela.
See "Liquidity and Capital Resources" for a discussion of the Company's
ability to meet these capital costs.
<PAGE>
(b) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
RESULTS OF OPERATIONS
The following table sets forth certain unaudited financial data for the
quarters ended June 30, 1997 and 1996. Operating results for any period are
not necessarily indicative of results for any future period. Dollar amounts
(except per share data) are shown in thousands.
JUNE 30, 1997 JUNE 30, 1996
% OF % OF
REVENUES REVENUES
Revenues
Communications services $ 2,326 70.0 $ 242 10.6
Hardware and software 162 4.9 1,202 52.6
Internet Connection 695 20.9 425 18.6
Services
Network Services 138 4.2 414 18.2
----------- ----- ----------- -----
Total revenues 3,321 100.0 2,283 100.0
Cost and expenses:
Cost of services 2,317 69.8 798 35.0
Cost of hardware
and software 124 3.7 950 41.6
Selling, general, and
administrative 1,853 55.8 1,296 56.8
Depreciation and
Amortization 805 24.2 234 10.2
----------- ----- ----------- -----
Total costs and
Expenses 5,099 153.5 3,276 143.6
----------- ----- ----------- -----
Operating loss (1,778) (53.5) (995) (43.6)
----------- ----- ----------- -----
Interest expense, net (80) (2.4) (109) (4.8)
----------- ----- ----------- -----
Net Loss (1,858) (55.9) (1,104) (48.3)
----------- ----- ----------- -----
PER SHARE DATA:
Net loss per share $ (.06) $ (.09)
Shares used in computing:
Net loss per share 30,100,109 11,625,231
<PAGE>
In the first quarter of 1996, the Company's first international private
line customers went on-line, the acquisitions of Phoenix DataNet, Inc.
("PDN") and Phoenix Data Systems, Inc. ("PDS") were completed, and the
Company purchased the military phone centers in Panama. During the third
quarter of 1996, the Company completed the acquisition of Overlook
Communications International Corporation ("Overlook") and Worldlink
Communications, Inc. ("Worldlink"). The acquisitions are more fully described
in Footnotes to the Financial Statements in the Company's Annual Report on
Form 10-KSB and Forms 8-K previously filed by the Company.
Consolidated revenues for the combined lines of business increased to
$3,321,000 from $2,283,000 for the three months ended June 30, 1997 and 1996,
respectively. Total costs and expenses were $5,099,000 for the three months
ended June 30, 1997 and $3,277,000 for the same period in 1996. Depreciation
and amortization for the quarter was $805,000 and $233,000 in 1997 and 1996,
respectively. Interest expense decreased to $80,000 for the three months
ended June 30, 1997 from $109,000 for the same period in 1996. Net loss was
$1,858,000 for the three months ended June 30, 1997 and $1,104,000 for the
same period in 1996. Net loss per share for the quarter was ($.06) in 1997
and ($.09) in 1996.
Consolidated revenues for the combined lines of business for the quarter
ended June 30, 1997 and 1996 were $3,321,000 and $2,283,000, respectively,
while the cost of services and hardware and software costs were $2,440,000
and $1,748,000 for the comparable period in 1996 yielding a gross profit
margin of 26.5% for 1997 and 23.4% for the same period in 1996. The gross
profit margin for the second quarter of 1997 improved by 10% from 16.5% in
the first quarter of 1997. The first quarter of 1997 was adversely impacted
by a delay in the implementation of the Company's least cost routing plan to
improve network costs. As anticipated, improvement in gross profit margin
was achieved from the first quarter to the second quarter of 1997 as a result
of progress in implementing the plan. The Company expects gross profit
margins to continue to improve during 1997 as least cost routing is further
implemented.
Selling, general, and administrative expenses for the June 1997 quarter
were $1,853,000 or 55.8% of sales compared to $1,296,000 or 56.8% of sales
for the same period of the prior year. The overall increase in expenses was
primarily attributable to the expansion of the Company's operations and
acquisitions. Selling, general and administrative expenses decreased from
$1,930,000 or 70.2% of sales in the first quarter of 1997. The Company
anticipates to continue benefiting in 1997 from economies of scale with
respect to such costs as salaries and wages that are not expected to increase
in direct proportion to increases in revenue as well as cost control efforts
implemented by management.
Depreciation and amortization expense was $805,000 for the first quarter
of 1997 compared to $233,000 for the prior year. The increase is attributable
to the increase in property, plant and equipment related to the acquisitions
and expansion of operations and the amortization associated with the PDS,
PDN, Overlook, and Worldlink acquisitions during 1996.
Interest expense was $80,000 and $108,000 for the quarters ended June
30, 1997 and 1996. The interest expense for the second quarter of 1997 was
primarily from the 12% Senior Subordinated Notes totaling approximately $.7
million and three bank credit facilities totaling approximately $1.5 million.
Interest expense decreased from $142,000 in the first quarter of 1997, mainly
as a result of approximately $2.1 million of $2.8 million Senior Subordinated
Notes being converted to equity on January 29, 1997 as part of a private
placement of common stock by the Company. The Company is seeking additional
debt financing which may result in additional indebtedness, and as such, an
increase in interest expense. Such financing results traditionally contains
interest rates tied to the prime interest rate. Increases in the prime rate
could increase interest expense and negatively affect the Company's operating
results.
<PAGE>
There was no income tax benefit recorded in either 1997 or 1996, as
management recorded a valuation reserve due to the uncertainty of the timing
of future taxable income. The net losses for the quarter ended June 30, 1997
and 1996 were $1,857,000 and $1,104,000, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company has not generated net cash from operations for any period
presented. The Company has primarily financed its operations to date through
private sales of equity securities and debt to insiders and outside
investors. During 1996, funding was obtained from several sources: bank
lines of credit, sale lease back transactions, private placement of notes and
warrants, shareholder loans, and private placements of common stock. Such
activities, net of repayment of loans, provided the Company with $6,212,000
to fund operations.
The $6,212,000 raised by the Company was utilized to fund a net
operating cash flow deficiency of approximately $1,870,000 in 1996 as well
as capital expenditures of $3,528,000 for the purchase of equipment and
installation at domestic and international locations to expand business
capacity as well as the acquisition of 90% of PDN in January 1996 for
$483,000, net of cash received of $42,000. The remainder of the 1996
acquisitions were all completed as stock transactions.
During the first quarter of 1997, the Company had a private placement
offering of its common stock and received cash in the amount of approximately
$5.4 million and reduced its liabilities (through the conversion of debt to
Common Stock) by approximately $2.6 million. All conversions were effected
at the rate of one dollar of the liability for one share of stock. During
the second quarter of 1997, the Company raised $1 million through a private
placement of common stock and $1 million through the issuance in a foreign
market of convertible debentures. These funds were used to partially offset
a net operating cash flow deficiency of approximately $5,430,000 through
June 30, 1997, as well as capital expenditures of $997,000.
The Company estimates that it will need to raise approximately $5
million to fund existing operations including approximately $1.5 million
through the end of 1997 to fund operating cash deficiencies, $875,000 to fund
debt due in 1997 and $2.5 million to fund capital expenditures. The Company
will seek to raise the required funding through various sources including but
not limited to sale-leaseback transactions, conversion of warrants, and
private placements of debt and/or equity. However, there can be no assurance
that the Company will be able to raise any such capital on terms acceptable
to the Company, or at all. Failure of the Company to raise all or a
significant portion of the funds needed could materially and adversely affect
the Company's continuing and its planned operations. At June 30, 1997, the
Company had a significant working capital deficit and at times has borrowed
funds from and sold equity to insiders/shareholders to fund essential
obligations. While the Company has been able to fund such essential
obligations to date and while management believes that its current business
activity is such that operating funds will be available to it as needed to
continue operations and to fund planned growth, no assurance can be given
that the Company will be able to raise such funds on a timely basis or at
all. Failure to raise such funds could have material adverse consequences to
the Company and its continuing and planned operations.
Any increase in the Company's growth rate, shortfall in anticipated
revenues, increase in anticipated expenses, or significant acquisitions or
expansion could have a material adverse effect on the Company's liquidity and
capital resources and would require the Company either to raise additional
capital from public or private equity or debt sources or to scale back
operations. The Company does not presently have adequate resources available
to achieve all of the expansion plans noted in "Plan of Operation," and will
not engage in such expansion until adequate capital sources have been
arranged. Accordingly, the Company anticipates additional future private
placements and/or public offerings of debt or equity securities will be
necessary to fund such plans. If such sources of financing are insufficient
or unavailable, the Company will be required to significantly change and
scale back its operating plans to the extent of available funding.
The Company may need to raise additional funds in order to take
advantage of unanticipated opportunities, such as acquisitions of
complementary businesses or the development of new products, or to otherwise
respond to unanticipated competitive pressures. There can be no assurance
that the Company will be able to raise any such capital on terms acceptable
to the Company or at all.
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS
In February, 1997, the Financial Accounting Standards Board ("FASB")
issued Statement 128, "Earnings per share" ("SFAS 128") which redefines how
entities compute earnings per share. Primary earnings per share will be
replaced by basic earnings per share which will be computed exclusively based
on the weighted average number of common shares outstanding. This statement
is effective for periods ending after December 15, 1997 and will require
restatement of all prior period earnings per share data presented. The
adoption of SFAS 128 is not expected to have a material impact on the
Company's earnings per share data.
In July 1997, the FASB issued statement No. 130, Reporting Comprehensive
Income ("SFAS 130"), which establishes standards for reporting and display of
net income and all other non-owner changes in stockholders' equity and its
components. This statement is effective beginning in 1998.
<PAGE>
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
(1) On June 20, 1997, the Company issued shares of its $.00001 par value common
stock in a private placement to accredited investors. No underwriter was
used for this private placement. One million (1,000,000) shares were
privately placed in the offering at one dollar ($1.00) per share. This
private placement was offered under Regulation D promulgated pursuant to
the Securities Act of 1933, as amended (the "Act").
(2) On May 13, 1997, the Company issued a one million dollar ($1,000,000)
convertible debenture to offshore investors. No underwriter was used for
this Offering. Such debenture is convertible into shares of the Company's
$.00001 par value common stock at $.50 per share. Each converted share has
a warrant attached to it convertible to an additional share of the
Company's $.00001 par value common stock at a $1.50 exercise price. The
debenture offering was offered under Regulation S promulgated under the Act.
(3) During the second quarter of 1997, the Company granted its employees, in a
private placement under Section 4(2) of the Act, 746,297 options with a
weighted average exercise price of $1.92 per share, which vests ratably
over 2-4 years.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-B
Exhibit 27 -- Financial Data Schedule
(b) REPORTS ON FORM 8-K.
Reports on Form 8-K were filed during the quarter for which this report
is filed as follows:
<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 thereunto duly authorized.
CHARTER COMMUNICATIONS
INTERNATIONAL, INC.
Date: August 19, 1997 By: /s/ David G. Olson
Chief Executive Officer/President
Date: August 19, 1997 By: /s/ Patrick E. Delaney
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
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