<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 September 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:
Common Stock 33,861,776 shares as of November 13, 1997.
Transitional Small Business Disclosure Format (check one):
Yes No X
----- -----
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHARTER COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
September 30, December 31,
1997 1996
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 155,967 $ 320,252
Accounts receivable, net of allowance for
doubtful accounts of $686,487 and $435,000 2,573,991 1,675,939
Accounts receivable-- affiliate, net 179,552 385,951
Inventory, net 517,247 307,940
Prepaid expenses and other 525,764 331,538
------------ ------------
Total current assets 3,952,521 3,021,620
------------ ------------
PROPERTY AND EQUIPMENT, at cost:
Equipment and machinery 4,817,397 4,345,137
Earth station facility 656,177 618,497
Software 1,220,766 664,486
Furniture and fixtures 452,991 297,329
Other 740,291 240,714
------------ ------------
7,887,622 6,166,163
Accumulated depreciation and amortization (1,894,964) (791,892)
------------ ------------
Property and equipment, net 5,992,658 5,374,271
------------ ------------
OTHER ASSETS:
Goodwill, net of accumulated amortization
of $951,345 and $378,895 18,989,032 22,077,423
Acquired customer bases, net of accumulated
amortization of $526,047 and $261,151 1,449,249 1,867,117
Other intangibles, net of accumulated
amortization of $507,707 and $186,888 2,142,629 2,369,390
Other 296,173 81,783
------------ ------------
Total other assets 22,877,083 26,395,713
------------ ------------
TOTAL ASSETS $ 32,822,262 $ 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 SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
September 30, December 31,
1997 1996
------------ ------------
CURRENT LIABILITIES:
Current portion of notes payable $ 104,204 $ 50,264
Lines of credit 1,425,000 1,646,092
Loans from shareholders 556,828 1,520,548
Accounts payable 3,927,786 7,234,129
Accounts payable-- affiliate 181,999 222,999
Accrued liabilities 986,332 870,804
Unearned revenues 1,576,070 1,830,731
------------ ------------
Total current liabilities 8,758,219 13,375,567
------------ ------------
LONG TERM LIABILITIES:
Convertible debentures 1,150,000 -
Senior subordinated notes 652,778 2,513,492
Notes payable 615,950 229,801
------------ ------------
Total long term liabilities 2,418,728 2,743,293
------------ ------------
DEFERRED CREDITS:
Deferred settlement gain 1,771,954 -
------------ ------------
Deferred credits 1,771,954 -
STOCKHOLDERS' EQUITY:
Common stock, $0.00001 par value; 45,000,000
shares authorized; 33,111,776 and 24,202,779
shares outstanding at September 30, 1997 and
December 31, 1996, respectively 331 242
Additional paid-in-capital 35,305,738 28,302,025
Accumulated deficit during developmental stage (2,579,324) (2,579,324)
Accumulated deficit subsequent to developmental
stage (12,853,384) (7,050,199)
------------ ------------
Total stockholders equity 19,873,361 18,672,744
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 32,822,262 $ 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 NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
Sept. 30, 1997 Sept. 30, 1997 Sept. 30, 1996 Sept. 30, 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES:
Communications services $ 2,282,078 $ 6,344,114 $ 1,236,706 $ 1,536,189
Hardware and software 65,509 397,049 746,933 1,998,694
Internet connection services 695,940 2,058,159 479,880 1,228,523
Network services 153,645 468,260 126,286 540,826
-------------- -------------- -------------- --------------
Total Revenues 3,197,172 9,267,582 2,589,805 5,304,232
-------------- -------------- -------------- --------------
COSTS AND EXPENSES:
Cost of services $ 1,866,176 $ 6,337,491 $ 1,596,926 $ 2,614,573
Cost of hardware and software 47,960 312,684 597,283 1,584,694
Selling, general, and administrative 2,012,040 5,796,025 1,766,837 3,820,511
Depreciation and amortization 787,167 2,272,436 371,388 698,698
-------------- -------------- -------------- --------------
Total costs and expenses 4,713,343 14,718,636 4,332,434 8,718,476
-------------- -------------- -------------- --------------
OPERATING LOSS (1,516,171) (5,451,054) (1,742,629) (3,414,244)
-------------- -------------- -------------- --------------
MINORITY INTEREST - - - 12,783
INTEREST EXPENSE, NET (88,838) (310,346) (132,121) (284,516)
GAIN ON SETTLEMENT 200,000 200,000 - -
LOSS ON EXTINGUISHMENT OF DEBT - (241,785) - -
-------------- -------------- -------------- --------------
NET LOSS BEFORE INCOME TAXES (1,405,009) (5,803,185) (1,874,750) (3,685,977)
INCOME TAX BENEFIT - - - -
-------------- -------------- -------------- --------------
NET LOSS $ (1,405,009) $ (5,803,185) $ (1,874,750) $ (3,685,977)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
NET LOSS PER SHARE $ (0.04) $ (0.20) $ (0.12) $ (0.31)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
SHARES USED IN COMPUTING
NET LOSS PER SHARE 31,778,443 29,721,332 15,270,046 11,888,440
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</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 NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
Nine Months Nine Months
Ended Ended
Sept. 30, 1997 Sept. 30, 1996
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(5,803,185) $(3,685,977)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization 2,272,436 704,410
Noncash consulting and service expenses - 223,575
Bad debt expense 162,154 188,184
Amortization of discounts on senior
subordinated notes 22,450 31,092
Loss on extinguishment of debt 241,785 -
Changes in current assets, current
liabilities and deferred credits:
Accounts receivable, net (898,052) (290,222)
Accounts receivable--affiliate, net 206,399 131,665
Inventory (209,307) (92,730)
Prepaid expenses (194,226) (212,827)
Other assets (214,390) (106,973)
Accounts payable and accrued liabilities (3,190,812) 1,071,728
Accounts payable--affiliate (41,000) (75,000)
Unearned revenue (254,661) 164,238
Deferred settlement gain 1,771,954 -
Other (128,519) (31,820)
----------- -----------
Total Adjustments (453,789) 1,705,320
----------- -----------
Net cash used in operating
activities (6,256,974) (1,980,657)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,721,459) (2,561,852)
Purchased allocation adjustment (400,000) -
Acquisition of subsidiary - (381,000)
Proceeds from sale leaseback - 274,165
Investment in joint venture - (185,848)
----------- -----------
Net cash used in investing activities (2,121,459) (2,854,535)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 6,877,518 1,525,422
Proceeds from issuance of convertible debentures 1,150,000 -
Proceeds from issuance of stock warrants - 332,992
Proceeds from senior subordinated notes - 2,172,008
(Repayment)/Proceeds of line of credit, net (221,092) 949,760
(Repayment)/Proceeds of loans from shareholders (29,218) 475,000
Proceeds/(Repayment) of notes payable 436,940 (174,233)
----------- -----------
Net cash provided by financing
activities 8,214,148 5,280,949
----------- -----------
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (164,285) $ 445,757
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 320,252 43,841
----------- -----------
CASH AT END OF PERIOD $ 155,967 $ 489,598
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURES:
Interest Paid $ 41,532 $ 165,428
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
SEPTEMBER 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 September 30, 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 third quarter of 1997, the Company privately placed
$1,150,000 face value subordinated debentures which are convertible at
any time into shares of $0.00001 par value common stock at a price of
$1.20 per share. The debentures are non-callable for a period of one
year and mature in five years. The debentures earn interest at a rate
of 18% per annum payable quarterly. Also during the quarter, the
$1,000,000 face value convertible debentures issued during the second
quarter of 1997 were converted into 2,000,000 shares of $0.00001 par
value common stock. The second quarter debentures were issued with
warrants to purchase $0.00001 common stock at $1.50 per share. The
Company may at any time require the exercise of the warrants because
the Company's common stock has traded above $1.75 for 20 in 30 trading
days, as required to force exercise.
6. During the third quarter of 1997, the Company reached a settlement with
Sprint Communications L.P. ("Sprint") regarding claims against Overlook
Communications International (OCI), a wholly owned subsidiary.
According to this agreement, the Company will pay $100,000 down and
$900,000 ratably over an 18 month period, in settlement of all claims.
A deferred settlement gain, which will be amortized over the settlement
period, has been established representing the difference between the
amount previously accrued and the settlement amount, net of certain
previously disputed charges. See Item 1 of Part II for further discussion.
7. During the third quarter of 1997, the Company granted 182,000 options
with a weighted average exercise price of $2.00 per share, which vest
ratably over 2-4 years. In addition, during the third quarter of 1997,
622,168 options with a weighted average strike price of $1.29 per share
were forfeited by terminated employees.
8. Subsequent to quarter end, the Company entered into a sale leaseback
transaction with regard to certain designated assets located in the US,
Panama and Venezuela. Proceeds from the transaction totaled
approximately $2.2 million. The lease requires full payout over a five
year term with an annual obligation of approximately $600,000.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Over the next twelve months, the Company will continue to vigorously 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 aggressively
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
the US and Latin America. Strategic alliances are expected to be formed with
local business groups and individuals to create successful operations within
the respective target Latin Countries.
The Company intends to continue 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
building of this private line network is complementary to the Company
objective of providing Internet access services.
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 September 30, 1997, the
Company is providing service in the United States, Panama, Venezuela, El
Salvador, Honduras, Costa Rica and Mexico and will shortly begin providing
service in Nicaragua. Over the next twelve months, the Company intends to
seek, through public and private markets, an additional $20 - 25 million to
build - out and operate facilities in these and other countries. The Company
will, however, only begin expansion on a project by project basis upon
securing appropriate financing.
While the Company's telecommunication business is currently focused on
the provision of international private lines and prepaid calling cards, it is
actively pursuing other opportunities to provide long distance services in
Latin American countries. While there are presently no contractual
commitments regarding the purchase of facilities and equipment to provide
these services, the Company anticipates that approximately $3 to 4 million
dollars 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 continues to expand both domestically
and in Latin America. In March of 1996, the Company formed Phoenix DataNet de
Panama, S.A. and commenced the offering of Internet services to business and
residential customers in Panama City, Panama. In December of 1996, the
Company began offering Internet Service in Caracas, Venezuela. Charter
anticipates it will spend approximately $130,000 per site in order to provide
Internet services in other Latin American sites targeted for private line
services.
See "Liquidity and Capital Resources" for a discussion of the Company's
ability to meet these capital costs.
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain financial data for the quarters
ended September 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.
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
-------------------- -----------------------
% OF % OF
REVENUES REVENUES
-------- --------
Revenues
Communications $ 2,282 71.4 $ 1,237 47.8
Hardware and software 65 2.0 747 28.8
Internet Connection 21.8 480 18.5
Services 696
Network Services 154 4.8 126 4.9
----------- ----- ----------- -----
Total revenues 3,197 100.0 2,590 100.0
Cost and expenses:
Cost of services 1,866 58.4 1,597 61.6
Cost of hardware
and software 48 1.5 597 23.0
Selling, general, and
administrative 2,012 62.9 1,767 68.2
Depreciation and
Amortization 787 24.6 371 14.3
----------- ----- ----------- -----
Total costs and
expenses 4,713 147.4 4,332 167.3
----------- ----- ----------- -----
Operating loss (1,516) (47.4) (1,742) (67.3)
Interest expense, net (89) (2.8) (132) (4.8)
Gain on settlement 200 6.3 - -
----------- ----- ----------- -----
Net Loss (1,405) (43.9) (1,875) (72.4)
----------- ----- ----------- -----
PER SHARE DATA:
Net loss per share $ (.04) $ (.12)
Shares used in
Net loss per share 31,778,443 15,270,046
<PAGE>
In the first quarter of 1996, the Company's first international private
line customers went on - line, the acquisitions of Phoenix DataNet and
Phoenix Data Systems were completed, and the military phone centers in Panama
were purchased. During the third quarter of 1996, the Company completed the
acquisition of Overlook Communications International Corporation and
Worldlink Communications, Inc. 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 filed previously by the Company.
Consolidated revenues for the combined lines of business increased to
$3,197,000 from $2,590,000 for the three months ended September 30, 1997 and
1996, respectively. Total costs and expenses were $4,713,000 for the three
months ended September 30, 1997 and $4,332,000 for the same period in 1996.
Depreciation and amortization for the quarter was $787,000 and $371,000 in
1997 and 1996, respectively. Interest expense decreased to $89,000 for the
three months ended September 30, 1997 from $132,000 for the same period in
1996. Net loss was $1,405,000 for the three months ended September 30, 1997
and $1,875,000 for the same period in 1996. Net loss per share for the
quarter was ($.04) in 1997 and ($.12) in 1996.
Consolidated revenues for the combined lines of business for the quarter
ended September 30, 1997 and 1996 were $3,197,000 and $2,590,000,
respectively, while the cost of services and hardware and software costs were
$1,914,000 and $2,194,000 for the comparable period in 1996 yielding a gross
profit margin of 40.1% for 1997 and 15.3% for the same period in 1996. The
gross profit margin for the third quarter of 1997 improved by 13.6% from
26.5% in the second quarter of 1997. Improvement in gross profit margin was
achieved from the second quarter to the third quarter of 1997 as a result of
continued progress in implementing the Company's least cost routing plan and
an increase in higher margin international private line sales. The Company
expects gross profit margins to continue to improve during 1997 as the plan
is further implemented and private line sales continue to grow.
Selling, general, and administrative expenses for the September 1997
quarter were $2,012,000 or 62.9% of sales compared to $1,767,000 or 68.2% 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
increased from $1,853,000 or 55.8% of sales in the second quarter of 1997.
The increase is mainly the result of increased sales and operations
personnel. The Company does not anticipate continued increases, as costs
such as salaries and wages are not expected to increase in direct proportion
to increases in revenues and cost control efforts implemented by management
are expected to reduce increases in other expenses.
Depreciation and amortization expense was $787,000 for the third quarter
of 1997 compared to $371,000 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 Communications, and Worldlink acquisitions during 1996.
Interest expense was $89,000 and $132,000 for the quarters ended
September 30, 1997 and 1996. The interest expense for the third quarter of
1997 was primarily from the 12% Senior Subordinated Notes totaling
approximately $0.7 million and three bank credit facilities totaling
approximately $1.4 million. Interest expense decreased from $132,000 in the
third quarter of 1996, 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 transaction. The Company is seeking
additional debt financing, which may result in additional indebtedness, and
<PAGE>
as such, an increase in interest expense. Such financing 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 earnings.
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 September 30,
1997 and 1996 were $1,405,000 and $1,875,000, 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 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 to one share of common stock.
During the second quarter of 1997, the Company raised $1 million through a
private placement of its common stock and $1 million through the issuance in
a foreign market of convertible debentures. During the third quarter of
1997, the Company raised $1,150,000 through a private placement of
convertible debentures. These funds were used to partially offset a net
operating cash flow deficiency of approximately $6,257,000 through
September 30, 1997, as well as capital expenditures of $1,721,000.
The Company estimates that it will need to raise approximately $3.75
million to fund existing operations including approximately $300,000 through
the end of 1997 to fund operating cash deficiencies, $950,000 to fund debt
due in 1997 and $2.5 million to fund capital expenditures. Subsequent to the
third quarter of 1997, the Company entered into a sale lease back transaction
in which it sold and leased back designated assets located in the US, Panama
and Venezuela. Proceeds from the sale totaled approximately $2.2 million.
The lease is a full payout lease payable over a five year term. The Company
intends to raise the balance of required funding through various sources
including but not limited to receivable financing 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
September 30, 1997, the Company had a significant working capital deficit and
at times has borrowed funds 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 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 increases in the Company's growth rate, shortfalls in anticipated
revenues, increases in anticipated expenses, or significant acquisition or
expansion opportunities could have a material adverse effect on the Company's
liquidity and capital resources and would either require the Company to raise
additional capital from public or private sources or scale back operations.
The Company does not have adequate resources available to achieve all of the
potential expansion plans noted above and will not engage in such expansion
until adequate capital
<PAGE>
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 or 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.
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"), and No. 131, "Disclosures About Segments
of an Enterprise and Related Information" ("SFAS 131"). Both statements are
effective for fiscal years beginning after December 15, 1997. The Company
does not anticipate that these statements will have a material impact on its
financial statements.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In September 1997, the Company agreed to a settlement with Sprint
Communications L.P. ("Sprint"), of a previously reported dispute between
Sprint and a subsidiary of the Company pursuant to which Sprint claimed it
was due $3.5 to $4 million. Pursuant to the settlement reached with Sprint,
the Company will pay Sprint $1 million in settlement of all claims. An
installment of $100,000 is due upon execution of settlement documents, with
payment of $50,000 due in 18 monthly installments thereafter.
ITEM 2. CHANGES IN SECURITIES.
(1) In August and September 1997, the Company issued $1,150,000 convertible
debentures to accredited investors. No underwriter was used for this
Offering. Such debentures are convertible into shares of the Company's
common stock at $1.20 per share. The debentures mature in five years,
pay interest quarterly at a rate of 18% per annum and are non-callable
for one year.
(2) During the third quarter of 1997, the Company granted its employees, in
a private placement under Section 4(2) of the Act, 182,000 options with
a weighted average exercise price of $2.00 per share, which vests
ratably over 2-4 years.
<PAGE>
(3) During the third quarter, $1,000,000 of the debentures previously issued
by the Company were converted into 2,000,000 shares of common stock.
The debentures, and the common stock issued upon conversion thereof, were
issued to foreign investors pursuant to Regulation S promulgated under
the Securities Act.
(4) In October 1997, the Company issued warrants to purchase 283,334 shares
of common stock at an exercise price of $3.00 per share. The warrants
were issued to "accredited investors" in a private offering exempt from
registration pursuant to Section 4(2) of the Securities Act.
(5) In October 1997, the Company issued 300,000 shares of common stock to
"accredited investors" at a price of $1.00 per share. The common stock
was issued in a private offering exempt from registration under Section
4(2) of the Securities Act.
(6) In October and November 1997, the Company issued 450,000 shares of
common stock to "accredited investors" at a price of $1.00 per share.
The common stock was issued in a private offering exempt from
registration under Section 4(2) of the Securities Act.
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:
August 15, 1997- reporting sales of equity security under Regulation S
on May 13, 1997, under item 9.
<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: November 14, 1997 By: /s/ Stephen E. Raville
----------------------------
Chief Executive Officer
Date: November 14, 1997 By /s/ Patrick E. Delaney
----------------------------
Chief Financial Officer
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 155,967
<SECURITIES> 0
<RECEIVABLES> 3,260,478
<ALLOWANCES> (686,487)
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0
0
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