As filed with the Securities and Exchange Commission on August 7, 1998
Registration No. 0-20843
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
Charter Communications International, Inc.
(Exact name of registrant as specified in its charter)
Nevada 84-1097751
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2839 Paces Ferry Road
Atlanta, Georgia 30339
(770) 432-6800
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
--------------------
STEPHEN E. RAVILLE with copy to:
CHIEF EXECUTIVE OFFICER DALLAS PARKER, ESQ.
CHARTER COMMUNICATIONS BROWN, PARKER & LEAHY, L.L.P.
INTERNATIONAL, INC. 1200 SMITH STREET
2839 PACES FERRY ROAD SUITE 3600
ATLANTA, GEORGIA 30339 HOUSTON, TEXAS 77002
(Name and address of agent for service)
(770) 432-6800
(Telephone Number, Including Area Code, of Agent for Service)
--------------------
Approximate date of commencement of proposed sale to the public:
From time to time after this registration statement becomes
effective as determined by market conditions.
--------------------
<PAGE>
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [
]
If any of the securities being registered on this Form are to be offered on a
delayed or continued basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Securities Amount to Proposed Proposed Amount of
to be Registered be Maximum Maximum Registration
Registered Offering Price Aggregate Fee
Per Share (1) Offering Price (1)
==================== ========== =============== ================== ============
<S> <C> <C> <C> <C>
Common Stock, 450,000 1.6875 759,375 224.02
.00001 par value
==================== ========== =============== ================== ============
<FN>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based on the average of the closing bid and asked prices of
the Company's Common Stock, as reported by National Quotation Bureau, Inc., for
August 5, 1998.
</TABLE>
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 7, 1998
PROSPECTUS
450,000 SHARES
CHARTER COMMUNICATIONS INTERNATIONAL, INC.
COMMON STOCK
All the 450,000 share (the "Shares") of Common Stock, $.00001 par value per
share ("Common Stock"), of Charter Communications International, Inc., a Nevada
corporation (together with its subsidiaries, "Charter" or the "Company"),
offered hereby are being offered for the account of stockholders of the Company
(the "Selling Shareholders"). The Company will receive none of the proceeds
from sales of the Shares.
The Common Stock is quoted on the NASDAQ Bulletin Board (the "NASDAQ")
under the symbol "CHTD". On August 6, 1998, the closing price of the Common
Stock on the NASDAQ was $1.6875 per share.
The Shares may be sold from time to time by the Selling Shareholders. Such
sales may be made on the NASDAQ or otherwise at prices and on terms related to
the then current market price of the Common Stock or in negotiated transactions.
The Shares may be sold by any one or more of the following methods: (a) a block
trade in which the broker or dealer so engaged will attempt to sell the Shares
as agent, but may position and resell a portion of a block as principal to
facilitate the transaction; (b) purchases by a broker or dealer as principal,
and resale by such broker or dealer, for its account pursuant to this
Prospectus; (c) ordinary brokerage transactions and transactions in which the
broker solicits purchasers; and (d) privately negotiated transactions. See
"Plan of Distribution".
The Company has agreed with the Selling Shareholders to register Shares
offered hereby. The Selling Shareholders shall pay all fees and expenses
incident to such registration, inclusive of any underwriting discounts, any
selling commissions payable in respect of sales of the Shares or any expenses
incurred by the Selling Shareholders to retain any counsel, accountant or other
advisor. It is estimated that the fees and expenses payable by the Company in
connection with the registration of the Shares will be approximately $15,000.
The Company has agreed with the Selling Shareholders to keep the Registration
Statement (as hereinafter defined), of which this Prospectus is a part,
effective for a period of 6 months from the effective date of this Prospectus.
-----------------
THE SHARES HAVE NOT BEEN REGISTERED FOR SALE UNDER THE SECURITIES LAWS OF
ANY STATE OR JURISDICTION AS OF THE DATE OF THIS PROSPECTUS. BROKERS OR DEALERS
EFFECTING TRANSACTIONS IN THE SHARES SHOULD CONFIRM THE REGISTRATION OF THE
SHARES UNDER THE SECURITIES LAWS OF THE STATES IN WHICH SUCH TRANSACTIONS OCCUR,
OR THE EXISTENCE OF ANY EXEMPTIONS FROM SUCH REGISTRATION.
-----------------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS".
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is August __, 1998
<PAGE>
No person is authorized in connection with the offering made hereby to give
any information or to make any representation not contained or incorporated by
reference in this Prospectus, and any information or representation not
contained or incorporated by reference herein must not be relied upon as having
been authorized by the Company or the Selling Shareholders. This Prospectus
does not constitute an offer to sell or a solicitation of an offer to buy any of
the securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information herein is correct as of any time subsequent
to the date hereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at 7 World Trade Center, Suite 1300, New York, New
York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can also be obtained from the Commission at prescribed
rates through its Public Reference Section at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding issuers, including the Company, that file
electronically with the Commission.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended, with respect to the Common
Stock offered hereby (including all amendments or supplements thereto, the
"Registration Statement"). This Prospectus, which forms a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. Statements contained herein
concerning the provisions of certain documents are not necessarily complete and,
in each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
0-20843) pursuant to the Exchange Act are incorporated herein by reference:
(1) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed June 11, 1996, pursuant to
Section 12(g) of the Securities Exchange Act of 1934, as amended, and declared
effective on August 10, 1996, including any amendment or report filed for the
purpose of updating such information;
(2) The Company's Annual Report on Form 10-KSB and its amendments for
the fiscal year ended December 31, 1997;
(3) The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1998;
(4) The Company's Current Report on Form 8-K dated May 13, 1997 and
amended March 8, 1997 and March 5, 1998;
(5) The Company's Proxy Statement for the 1998 Annual Meeting of
Stockholders to be held August 31, 1998 filed August 7, 1998;
(6) All other documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of the offering of the Shares.
Any statement contained herein or in documents or information incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or suspended for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is, or is
deemed to be, incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of any such person, a
copy of any and all of the foregoing documents or information that has been
incorporated by reference in this Prospectus, other than exhibits to such
documents (unless such exhibits are specifically incorporated by reference into
such documents). All requests should be directed to Patrick Delaney, Chief
Financial Officer, Charter Communications International, Inc., 2839 Paces Ferry
Road, #500 Atlanta, GA 30339, Telephone (770) 432-6800.
THE COMPANY
Charter Communications International, Inc. (the "Company"), was
incorporated in Nevada on April 10, 1996, as a wholly owned subsidiary of Maui
Capital Corporation, a Colorado corporation ("Maui Capital"), which incorporated
on August 8, 1988. On April 21, 1996, Maui Capital and the Company merged with
the Company being the surviving corporation and succeeding to all the business,
properties, assets and liabilities of Maui Capital. The purpose of the merger
of Maui Capital and the Company was to change the name and state of
incorporation of Maui Capital. Maui Capital had no significant business or
assets prior to September 21, 1995, when it acquired TOPS Corporation, a Nevada
corporation ("TOPS") (TOPS was named Charter Communications International, Inc.,
until April 10, 1996, when its names was changed so that the Company could be
formed in Nevada with the same name).
TOPS was acquired by Maui Capital in exchange for the issuance of 5,798,391
shares of common stock, $.00001 par value per share ("Common Stock"), 550 shares
of Series A Preferred Stock, $.01 par value per share ("Series A Stock") and
warrants to purchase 854,231 shares of Common Stock. Each share of Series A
Stock was converted into 5,177 shares of Common Stock effective March 8, 1996.
At the time of the acquisition, TOPS was the sole stockholder of Charter
Communicaciones Internacionales Grupo, S.A., a Panama corporation ("Charter
Panama"), which was engaged in developing a private line telecommunications
system in Panama and pursuing licenses to provide such services in various other
Latin American countries. Since the acquisition of TOPS, the Company (and Maui
Capital, its predecessor) has endeavored to grow both through the development of
its existing businesses and through the acquisition of complementary businesses.
Accordingly, on January 8, 1996, Maui Capital acquired 90% of the
outstanding shares of Phoenix DataNet, Inc., a Texas corporation ("PDN"), from
Phoenix Data Systems, Inc., a Texas corporation ("PDS"), in exchange for
$525,000 cash. PDN is in the business of providing Internet access and a full
range of Internet services to individual and commercial subscribers,
predominately in the Houston, Texas area. On March 21, 1996, the Company
acquired the remaining 10% of the outstanding shares of PDN from Billie C.
Holbert, Jr., in exchange for the issuance of 150,000 shares of Common Stock.
On March 21, 1996, Maui Capital acquired PDS and issued 1,000,000 shares of
Common Stock to the former stockholders of PDS. The Company also granted
piggyback registration rights covering the shares of Common Stock issued in the
transaction to the former shareholders of PDS, including the 150,000 shares
issued to Billie C. Holbert, Jr., for the remaining 10% of PDN's stock. PDS is
in the business of designing, installing, modifying and managing computer
networks.
On September 21, 1996, the Company acquired Overlook Communications
International Corporation, a North Carolina corporation ("OCI"), and issued
8,999,960 shares of Common Stock to the former stockholders of OCI. The Company
also granted demand registration rights to certain stockholders in connection
with the acquisition of OCI (See "Certain Relationships and Related
Transactions" for a description of such agreement). OCI is in the business of
reselling long-distance services, providing interactive voice response services
and selling prepaid and post-paid calling cards.
On October 5, 1996, the Company acquired WorldLink Communications, Inc., a
Georgia corporation ("WorldLink"), and issued 1,850,000 shares of Common Stock
to the former stockholders of WorldLink. WorldLink is in the business of
reselling long-distance services and selling prepaid and post-paid calling
cards.
The Company and its subsidiaries provide enhanced telecommunications
products and services, including international private line telecommunications
services, switched voice and data products, Internet access, interactive voice
response, conference calling, enhanced calling cards and call center services,
both domestically and internationally, as well as computer network design,
installation, modification and management. The Company's primary international
focus is in North, Central and South America. Additional information on the
products and services offered by the Company and its subsidiaries is set forth
below.
The Company's principal office is located at 2839 Paces Ferry Road, #500
Atlanta, GA 30339, and its telephone number at such address is (770) 432-6800.
The Company also maintains an additional principal office located at 17100 El
Camino Real, Houston, Texas 77058, and its telephone number at such address is
(281) 486-8337.
RECENT DEVELOPMENTS
On May 28, 1998, David G. Olson resigned from as a Board member, President
and Chief Operating Officer of the Company. Mr. Olson had recently experienced
health problems and expressed his desire to leave the active management of the
Company. On July 31, 1998, the Company hired Gary D. Morgan, the founder and
CEO of Pointe Communications Corporation, to assume the position of President
and Chief Operating Officer of the Company. Mr. Morgan has 22 years of
experience in the telecommunications industry, and for the last 19 years has
held various senior level positions with Lucent Technologies, Siemens, and
Nortel. In conjunction with hiring Mr. Morgan, the Company acquired Pointe
Communications Corporation, which was a private company entering the
telecommunications market as a competitive local exchange carrier (CLEC).
Since March 31, 1998, the Company has completed construction of three new
teleports in Panama, Costa Rica and Nicaragua. In addition, during April and
June 1998, the Company signed two new agreements with Satmex to provide
satellite services within Mexico and for complete use of the Mexican Solidaridad
satellite systems for five and ten years, respectively. Also since March 31,
1998, the Company was granted the following licenses to provide
telecommunications services in South and Central America: i) El Salvador - on
May 5, 1998, a license to terminate international switched voice traffic and
provide a full range of telecommunications services within the nation was
granted by SIGET; ii) Nicaragua - on July 8, 1998, a license to terminate
international switched voice and provide International Private Line ("IPL"),
Internet and value added services was granted by ENITEL; and iii) Panama -
during July 1998, eight new licenses to provide IPL, internet and various other
telecommunications services were granted by Panama Ente Regulador de los
Servicios.
On June 5, 1998, the Company engaged Credit Suisse First Boston Corporation
to assist in its capital raising efforts.
FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus and the documents incorporated
herein, constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statement involve known and unknown risks, uncertainties and other important
factors that could cause the actual results, performance or achievement of the
Company, or industry results, to differ materially from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such risks, uncertainties and other important factors include,
among others: general economic and business conditions; industry trends;
competition; equipment costs and availability; the loss of any significant
customers; changes in business strategy or development plans; availability,
terms and deployment of capital; availability of qualified personnel; changes
in, or the failure or inability to comply with, governmental regulation; and
other factors referenced in this Prospectus. See "Risk Factors."
Forward-looking statements speak only as of the date of this Prospectus. The
Company expressly disclaims any obligation or undertaking to disseminate any
updates or revisions to any forward-looking statement contained herein to
reflect any change in the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any such statement is
based.
RISK FACTORS
Any investment in the Common Stock involves a high degree of risk.
Prospective purchasers of the Common Stock should carefully consider the risk
factors set forth below, as well as the other information contained in this
Prospectus.
This Report on Form S-3 contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such forward-looking statements include, among
other things, the Company's plans to implement its growth strategy, improve its
financial performance, expand its infrastructure, develop new products and
services, expand its sales force, expand its customer base and enter
international markets. Such forward-looking statements also include the
Company's expectations concerning factors affecting the markets for its
products, such as demand for long-distance telecommunications and Internet
access. Actual results could differ from those projected in any forward-looking
statements for the reasons detailed in the "Risk Factors" below. The
forward-looking statements are made as of the date of this filing, and the
Company assumes no obligation to update the forward-looking statements, or to
update the reasons why actual results could differ from those projected in the
forward-looking statements.
LIMITED OPERATING HISTORY; OPERATING LOSSES
The Company has only a limited history upon which an evaluation of it and
its prospects can be based. Although the Company has experienced substantial
revenue growth since the inception of its business in April 1995, it has
incurred losses of totaling approximately $23,928,081 as of March 31, 1998. As
of March 31, 1998, the Company had stockholder's equity of $16,553,700. The
Company's current focus is on increasing its customer and subscriber bases, and
the Company continues to hire additional personnel and to increase its expenses
related to product development, marketing, network infrastructure, technical
resources and customer support. As a result, the Company expects that revenue
growth will continue or that the Company will in the future achieve or sustain
profitability on either a quarterly or annual basis.
The Company may implement its strategy to grow its customer and subscriber
bases through methods that may result in increases in costs as a percentage of
revenues, such as expansions of its promotional programs and implementation of
new pricing programs. In addition, an acceleration in the growth of the
Company's subscriber and customer bases or changes in usage patterns among
subscribers that the Company's operating margins will not be adversely affected
in the future by these strategies or events.
NEED FOR ADDITIONAL CAPITAL TO FINANCE GROWTH
AND CAPITAL REQUIREMENTS
The Company must continue to enhance and expand its network in order to
maintain its competitive position and continue to meed the increasing demands
for service quality, availability and competitive pricing. The Company's
ability to grow depends, in part, on its ability to expand its operations
through the establishment of new points of presence ("POPs") and earth stations,
each of which requires significant advance capital equipment expenditures as
well as advance expenditures and commitments for leased telephone company
facilities and circuits and advertising. The Company will need to raise
additional capital from equity or debt sources to fund its anticipated
development. There can be no assurance that the Company will be able to raise
such capital on favorable terms or at all. If the Company is unable to obtain
such additional capital, the Company may be required to reduce the scope of its
anticipated expansion, which could have a material adverse effect on the
Company's business, financial condition or results of operations and its ability
to compete.
RISKS OF GROWTH AND EXPANSION
The number of the Company's employees has grown rapidly and several members
of the Company's current management team have joined the Company recently. The
Company's growth has placed, and is expected to continue to place, a significant
strain on the Company's management, administrative, operational, financial and
technical resources and increased demands on its systems and controls. The
Company believes that it will need, both in the short term and the long term, to
hire additional qualified administrative management personnel in the accounting
and finance areas to manage its financial control systems. In addition, there
can be no assurance that the Company's operating and financial control systems,
infrastructure and existing facilities will be adequate to support the Company's
future operations or maintain and effectively monitor future growth. Failure to
manage the Company's growth properly could have a material adverse effect on the
Company's business, financial condition or results of operations.
The Company plans to build additional POPs. There can be no assurance that
the Company will be able to add service in new cities at the rate presently
planned by it. In addition, increases in the Internet subscriber base will
result in additional demands on its customer support, sales, marketing,
administrative and technical resources and network infrastructure. Increases in
the Company's telecommunications customer base will also produce increased
demands on its sales, marketing and administrative resources, as well as on its
engineering resources and on its switching and routing capabilities. The
Company anticipates that is continued growth will require it to recruit and hire
a substantial number of new managerial, technical and sales marketing personnel.
The inability to continue to upgrade the networking systems of the operation and
financial control systems, the inability to recruit and hire necessary personnel
or the emergence of unexpected expansion difficulties could have a material
adverse effect on the Company's business, financial condition or results of
operations.
Demands on the Company's network infrastructure and technical staff and
resources have grown rapidly with the Company's expanding customer base, and the
Company has in the past experienced difficulties satisfying the requests for its
Internet access and telecommunications services. The Company expects to
experience even greater strain on its billing and operational systems as it
develops, operates and maintains its network. There can be no assurance that
the Company's finance and technical staff will be adequate to facilitate the
Company's growth. The Company believes that its ability to provide timely
access for subscribers and adequate customer support services will largely
depend upon the Company's ability to attract, identify, train, integrate and
retain qualified personnel. There can be no assurance that the Company will be
able to do this. A failure to effectively manage its customer base and reduce
its subscriber cancellation rate and could therefore have a material adverse
effect on the Company's business, financial condition or results of operations.
DEPENDENCE ON KEY PERSONNEL; NEED TO HIRE
ADDITIONAL QUALIFIED PERSONNEL
The Company is highly dependent on the technical and management skills of
its key employees, including technical, sales, marketing, financial and
executive personnel, and on its ability to identify, hire and retain additional
personnel. Competition for such personnel is intense and there can be no
assurance that the Company will be able to retain existing personnel or identify
or hire additional personnel. In addition, the Company is highly dependent on
the services of each of its executive officers. The loss of the services of any
of them could have a material adverse effect on the Company's business,
financial condition or results of operations.
SHARES AVAILABLE FOR FUTURE SALE
The Company has financed its operations and acquisitions principally
through the issuance of securities in the "private placements" exempt from
registration under federal and applicable state securities laws. As a
consequence, approximately thirty two percent (32%) of the Company's issued and
outstanding common stock has been issued as "restricted securities" which cannot
be resold except in compliance with similar exemptions from federal and
applicable state securities laws. Under Rule 144 as currently in effect,
restricted securities are generally available for public resale after such
securities have been held by the purchasers thereof for a period of two years;
however the Securities and Exchange Commission has amended Rule 144 effective
April 29, 1997, to provide for the resale of such securities after one year.
After the expiration of the one year holding period, such securities may be sold
in "broker's transactions" provided that certain requirements are met and that
the sales by a holder of such securities during any three month period do not
exceed the greater of one percent (1%) of the then issued and outstanding shares
of the issuer or the average weekly trading volume of such shares in the
over-the-counter market during the four calendar weeks preceding the date on
which a notice of such sale is sent to the Securities and Exchange Commission.
Under the new rules, at the end of two years, persons not "affiliated" with the
issuer may sell restricted securities without regard to the volume limitations
imposed by Rule 144. Persons "affiliated" with the issuer are persons deemed to
be in control of the issuer, including executive officers, directors and ten
percent or greater shareholders; such persons may sell shares only in compliance
with the requirements of Rule 144, including the volume limitations imposed
thereby, regardless of the length of time such securities have been held. Most
of the Common Stock of the Company will be available for public sale within the
next twelve months. The large number of the Company's shares which will become
available for public sale in the near future, along with the demand and
piggyback registration rights granted by the Company (described elsewhere
herein) created the possibility of volatility in the market for the Company's
stock and the possibility of adverse effects on the prevailing market price of
the Company's stock.
DEPENDENCE ON TECHNOLOGICAL DEVELOPMENT
The markets the Company serves are characterized by rapidly changing
technology, evolving industry standards, emerging competition and frequent new
service and product introductions. There can be no assurance that the Company
can successfully identify new service opportunities and develop and bring new
products and services to market in a timely and cost-effective manner, or that
products, services or technologies developed by others will not render the
Company's products, services or technologies noncompetitive or obsolete. In
addition, there can be no assurance that product or service developments or
enhancements introduced by the Company will achieve or sustain market acceptance
or be able to effectively address the compatibility and inoperability issues
raised by technological changes or new industry standards.
The Company is also at risk to fundamental changes in the way Internet
access services are delivered. Currently, Internet services are accessed
primarily by computers through telephone lines. However, several companies have
recently introduced, on an experimental basis, delivery of Internet access
services through cable television lines. If the Internet becomes accessible by
cable modem, screen-based telephones, television or other consumer electronic
devices, or customer requirements change the way the Internet access is
provided, the Company will need to develop new technology or modify its existing
technology to accommodate these developments. Required technological advances
by the Company as the industry evolves could include compression, full motion
video, and integration of video, voice, data and graphics. The Company's
pursuit of these technological advances may require substantial time and
expense, and there can be no assurance that the Company will succeed in adapting
its Internet service business to alternate access devices and conduits.
The Company's success is dependent in part upon its ability to enhance
existing products and services and to develop new products and services that
meet changing customer requirements on a timely and cost-effective basis. There
can be no assurance that the Company's competitors will not independently
develop technologies that are substantially equivalent or superior to the
Company's technology. In addition, there can be no assurance that licenses for
any intellectual property that might be required for the Company's services or
products would be available on reasonable terms if at all.
DEPENDENCE ON SUPPLIERS
The Company is dependent on third party suppliers of hardware and network
connectivity for many of its products and services and generally does not have
long-term contracts with suppliers. Certain of these suppliers are or may
become competitors of the Company, and such suppliers are not subject to
restrictions upon their ability to compete with the Company. To the extent that
any of these suppliers change their pricing structure or terminate service, as
did Sprint in December 1996, the Company may be adversely affected. The Company
is dependent upon third party providers which are the primary providers to the
Company of data communications facilities and capacity and lease to the Company
physical space for switches, modems and other equipment. If these suppliers are
unable to expand their networks or unwilling to provide or expand their current
level of service to the Company in the future, the Company's operations could be
adversely affected.
The Company has from time to time experienced delays in the receipt of
network access and telecommunications services. In addition, the Company has
also from time to time experienced delays in the receipt of certain hardware
components. A failure by a supplier to deliver quality services or products on
a timely basis, or the inability to develop alternate sources if and as
required, could result in delays which could have a material adverse effect on
the Company. In addition, the Company maintains relationships with certain
equipment suppliers in the design of products which they sell to the Company.
The Company's remedies against suppliers who fail to deliver products on a
timely basis are limited, in many cases, by practical considerations relating to
the Company's desire to maintain relationships with the suppliers. As the
Company's suppliers revise and upgrade the technology of their equipment, the
Company may encounter difficulties in integrating the new technology into its
network.
INTERNATIONAL EXPANSION
The Company's strategy includes expansion of its business into
international markets. There can be no assurance that the Company will be able
to obtain the permits and operating license, if any are required, necessary for
it to operate, to hire and train employees or to market, sell and deliver high
quality services in these markets. In many countries, the Company many need to
enter into a joint venture or other strategic relationship with one or more
third parties in order to successfully conduct its operations. There can be no
assurance that such factors will not have a material adverse effect on the
Company's future international operations and, consequently, on the Company's
business, financial condition or results of operations.
NEW AND UNCERTAIN MARKET
The market for Internet connectivity services and related software products
is in an early stage of growth. Since this market is relatively new and because
current and future competitors are likely to introduce Internet connectivity
and/or online services and products, it is difficult to predict the rate at
which the market will grow or at which new or increased connection will result
in market saturation. The novelty of the market for Internet access services
may also adversely affect the Company's ability to retain new customers, as
customers unfamiliar with the Internet may be more likely to discontinue the
Company's services after an initial trial period than other subscribers. If
demand for Internet services fails to grow, grows more slowly than anticipated,
or becomes saturated with competitors, the Company's business, operating results
and financial condition will be adversely affected.
To continue to realize customer growth in all its markets, the Company must
continue to replace terminating customers and attract additional customers.
However, the sales and marketing expenses and acquisition costs associated with
attracting new customers are substantial. Accordingly, the Company's ability to
improve operating margins will depend in part on the Company's ability to retain
its customers. The Company continues to invest significant resources in its
telecommunications infrastructure and customer support resources in connection
with all its businesses. There can be no assurance that the Company's
investments in telecommunications infrastructure and customer support
capabilities will improve customer retention. Since the Company's markets are
new and the utility of available service is not well understood by new and
potential customers, the Company is unable to predict future customer retention
rates.
RISK OF SYSTEM FAILURE
The success of the Company is largely dependent upon its ability to deliver
high quality, uninterrupted access to the Internet and other telecommunication
services. Any system failure that causes interruptions in the Company's
operations could have a material adverse effect on the Company. The Company has
experienced failure relating to individual POP's and the Company's customers
have experienced difficulties in accessing, and maintaining connection to the
Internet. The backbone of the Company's network, in addition to the Company's
overall telecommunications and Internet network, is currently leased from
certain suppliers, such as MCI, Sprint and Metropolitan Fiber Systems. If these
suppliers are unable to expand their networks or are unwilling to provide or
expand their current level of service to the Company in the future, the
Company's operations could be adversely affected. As the Company attempts to
expand its network and data traffic grows, there will be increased stress on
network hardware and traffic management systems. However, there can be no
assurance that the Company will not experience failures relating to individual
POP's or even failure of the entire network. The Company's operations also are
dependent on its ability to successfully expand its network and integrate new
and emerging technologies and equipment into its network, which are likely to
increase the risk of system failure and cause unforeseen strains upon the
network. The Company attempts to minimize customer inconvenience in the event
of a system disruption by high quality services and redundancy. However,
significant or prolonged system failures, or difficulties for subscribers in
accessing, and maintaining connection with the Internet could damage the
reputation of the Company and result in the loss of subscribers. Such damage or
losses could have a material adverse effect on the Company's ability to obtain
new subscribers and on the Company's business, financial condition or results of
operations.
The Company's operations are dependent on its ability to protect its
software and hardware against damage from fire, earthquake, power loss,
telecommunications failure, natural disaster and similar events. A significant
portion of the Company's computer equipment is located at its facilities in
Houston, Texas. The Company's switches and other telephone equipment are
located in Houston, Panama City, Panama, Caracas, Venezuela and Atlanta,
Georgia. Any damage or failure that causes interruptions in the Company's
operations could have a material adverse effect on the Company's business and
results of operations. While the Company and its subsidiaries carry some
property and business interruption insurance, such coverage may not be adequate
to compensate the Company for all losses that may occur.
SECURITY RISKS
Despite the implementation of network security measures by the Company,
such as limiting physical and network access to its routers, its
telecommunications infrastructure is vulnerable to computer viruses, break-ins
and similar disruptive problems caused by its customers or other Internet users.
Computer viruses, break-ins or other problems caused by third parties could lead
to interruption, delays or cessation in service to not only the Company's
Internet customers, but also the Company's telecommunication users.
Furthermore, such inappropriate use of the voice and data systems by third
parties could also potentially jeopardize the security or confidential
information stored in the computer systems of the Company's customers and other
parties which may deter potential subscribers. Persistent security problems
continue to plague public and private data networks. Recent break-ins reported
in the press and otherwise have reached computers connected to the Internet at
major corporations and Internet access providers and have included incidents
involving hackers by-passing fire-walls by posing as trusted computers and
involving the theft of information. Alleviating problems caused by computer
viruses, break-ins or other problems caused by third parties may require
significant expenditures of capital and resources by the Company, which could
have a material adverse effect on the Company. Moreover, until more
comprehensive security technologies are developed, the security and privacy
concerns of existing and potential customers may inhibit the growth of the
Internet service industry in general and the Company's customer base and
revenues in particular.
POTENTIAL LIABILITY FOR
INFORMATION DISSEMINATED THROUGH NETWORK
Internet service providers face potential liability for uncertain scope for
the actions of subscribers and others using their systems, including liability
for infringement of intellectual property rights, rights of publicity,
defamation, libel and criminal activity under the laws of the U.S. and foreign
jurisdictions. For example, an action against Prodigy alleging libel and
negligence in connection with an electronic message posted by a Prodigy
subscriber through Prodigy's Internet access system presents the potential for
increased focus and attempts to impose liability upon Internet service providers
for information, messages and other materials disseminated across and through
their systems. The Company carries errors and omissions insurance; however,
such insurance may not be adequate to compensate the Company for all liability
that may be imposed. Any imposition of liability in excess of the Company's
coverage could have a material adverse effect on the Company. In addition,
recent legislative enactments and pending legislative proposals aimed at
limiting the use of the Internet to transmit indecent or pornographic materials
could, depending upon their interpretation and application, result in
significant potential liability to internet access and service providers
including the Company, as well as additional costs and technological challenges
in complying with any statutory or regulatory requirements imposed by such
legislation.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's quarterly operating results have fluctuated in the past and
may fluctuate significantly in the future as a result of a variety of factors,
some of which are outside the Company's control. These factors include general
economic conditions, acceptance and use of the Internet, user demand for
long-distance telecommunication service, capital expenditures and other costs
relating to the expansion of operations, the timing of new product announcements
by the Company or its competitors, changes in pricing strategies by the Company
or its competitors, market availability and acceptance of new and enhanced
versions of the Company's or its competitors' products and services and the
rates of new subscriber and customer acquisition and retention. These factors
could also have a material adverse effect on the Company's annual results of
operation and financial condition.
VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock may be highly volatile. The
"public float" of the Company's Common Stock as a percentage of the total issued
and outstanding shares of Common Stock increased during 1997 due primarily to
the substantial numbers of shares that had been subject to restrictions on
transfer which terminated during 1997. Factors such as variations in the
Company's revenue, earnings and cash flow and announcements of new service
offerings, technological innovations or price reductions by the Company, its
competitors or providers or alternative services could cause the market price of
the Common Stock to fluctuate substantially. In the event that The Company's
operating results are below the expectations of public market analysts and
investors in one or more future quarters, it is likely that the price of the
Common Stock will be materially adversely affected. In addition, the stock
market has experienced significant price and volume fluctuations that have
particularly affected the market prices of equity securities of many
communications, media and technology companies and that often have been
unrelated to the operating performance of such companies. In addition, the
stock markets recently have experienced significant price and volume
fluctuations that particularly have affected companies in the technology sector
and resulted in changes in the market price of the stocks of many companies that
have not been directly related to the operating performance of those companies.
ABILITY OF MANAGEMENT TO DICTATE
CORPORATE POLICY AND THE
COMPOSITION OF THE BOARD OF DIRECTORS
Management and certain members of the Board of Directors of the Company own
or control, directly or indirectly, approximately one-third of the issued and
outstanding shares of the Common Stock of the Company. The Articles of
Incorporation and Bylaws of the Company provide that: (1) the presence of a
majority of the shareholders eligible to vote is required to constitute a quorum
at shareholders' meetings; (2) the vote of the holders of a majority of the
shares present at a meeting where a quorum is constituted is required to adopt
any resolution, unless a greater percentage is required by statute, in which
case a majority of the outstanding shares will be required; (3) shareholder
action may be taken by written consent, without prior notice, signed by the
holder(s) of the number of shares necessary to approve such action; and (4)
voting is noncumulative. As a consequence of the concentrations of stock
ownership in the hands of such persons, they have the ability to influence
corporate policy, the persons elected to the Board of Directors of the Company
and may be able to block certain corporate actions.
NO DIVIDENDS
The Company does not anticipate that it will pay any dividends in the
foreseeable future but plans to reinvest in the Company's business any funds
which might otherwise be available for the payment of dividends. The payment of
dividends out of legally available funds thereafter, if such funds are
available, will be at the discretion of the Company's Board of Directors.
GOVERNMENT REGULATION
The telecommunications and are subject to extensive regulation by federal,
state and local governmental agencies. Existing regulations were substantially
affected by the passage of the Telecommunications Act of 1996 ("1996 Telecom
Act") in February 1996, which allowed cable television companies and telephone
companies both to enter and participate in new lines of business. This
introduced the possibility of new, non-traditional competition for both cable
television and telephone companies and resulted in greater potential competition
for The Company. The outcome of federal and state administrative proceedings
may also affect the nature and extent of competition that will be encountered by
The Company. In addition, future regulations may prevent The Company from
generating revenues from sales of database information about consumers obtained
by The Company from its television and telephone business. BellSouth is also
allowed to terminate its agreement with the Company if it determines that
regulatory changes would impact the Company's ability to perform under such
agreement. These competitive developments, as well as other regulatory
requirements relating to privacy issues, may have a material adverse effect on
The Company's business.
POTENTIAL ADVERSE IMPACT OF ANTI-TAKEOVER PROVISIONS
The Company's certificate of incorporation and by-laws and the provisions
of the Nevada General Corporation Law may have the effect of delaying, deterring
or preventing a change in control or an acquisition of The Company. The
Company's certificate of incorporation authorizes the issuance of "blank check"
preferred stock, which, in the event of issuance, could be utilized by the board
of directors of The Company as a method of discouraging, delaying or preventing
a change in control or an acquisition of The Company, even though such an
attempt might be economically beneficial to the holders of Common Stock. Such
provisions may have an adverse impact from time to time on the price of the
Common Stock.
SELLING SHAREHOLDERS
The following table sets forth, as of the date of this Prospectus, (i) the
name of each Selling Shareholder, (ii) the number of shares of Common Stock
beneficially owned by each Selling Shareholder prior to the offering, (iii) the
number of shares of Common Stock to be sold by each Selling Shareholder pursuant
to this Propsectus and (iv) the number of shares beneficially owned by each
Selling Shareholder after the offering. Except as otherwise indicated, the
Selling Shareholders have sole voting and investment power with respect to all
shares indicated as being beneficially owned by such person.
<TABLE>
<CAPTION>
Ownership of
Ownership of Number of Common Stock
Common Stock Before Shares Being After the
the Offering Offered Offering(1)
------------------------ -------- ------------------
Number of
Name Number of Shares Percent Shares Percent
- -------------------------------------- ---------------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
Equity Merchant Banking Corporation(2) 375,000 * 375,000 0 0
Connecticut Bank of Commerce(3) 75,000 * 75,000 0 0
====================================== ================ ======= ======= ========= =======
<FN>
* Represents less than 1% of outstanding Common Stock.
(1) Assumes that all Shares being offered are sold.
(2) The shares being offered were subscribed to by EMBC from the Company as part of a
financing. In connection with the financing, the Company also entered into an agreement with
EMBC pursuant to which EMBC was accorded certain registration rights with respect to such
shares. The Company has registered such shares for sale pursuant to this Prospectus as
required by the Agreement.
(3) The shares being offered were subscribed to by CBC from the Company as part of a
financing. In connection with the financing, the Company also entered into an agreement with
CBC pursuant to which was CBC was accorded certain registration rights with respect to such
shares. The Company has registered such shares for sale pursuant to this Prospectus as
required by the Agreement.
</TABLE>
PLAN OF DISTRIBUTION
The Shares may be sold from time to time by the Selling Shareholders
(including the Selling Shareholder's pledgees, donees or other successors in
interest). All sales may be made by the Selling Shareholders on the NASDAQ or
otherwise as prices and on terms related to the then current market price of the
Common Stock or in negotiated transactions. The Shares may be sold by any one
or more of the following methods:
(a) a block trade in which the broker or dealer so engaged will attempt to
sell the Shares as agent but may position and resell a portion of a block as
principal to facilitate the transaction;
(b) purchases by a broker or dealer as principal, and resale by such
broker or dealer, for its account pursuant to this Prospectus;
(c) ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
(d) privately negotiated transactions.
The Selling Shareholders may effect such transactions by selling the Shares
to or through brokers or dealers. Such brokers or dealers will receive
compensation in the form of discounts or commissions from the Selling
Shareholders, and they may also receive commissions from the purchasers of the
Shares for whom they may act as agents. Such discounts or commissions from the
Selling Shareholders or such purchasers are not expected to exceed those
customary in the types of transactions involved.
The Selling Shareholders will pay all fees and expenses incident to the
registration of the Shares, inclusive of any underwriting discounts, any selling
commissions payable in respect of sales of the Shares or any expenses incurred
by the Selling Shareholders to retain any counsel, accountant or other advisor.
It is estimated that the fees and expenses payable by the Selling Shareholders
in connection with the registration of the Shares will be approximately $15,000.
The Company will receive none of the proceeds from sales of the Shares.
In the event the Shares are offered to the public by the Selling
Shareholders, they may be deemed "underwriters" within the meaning of the
Securities Act of 1933. Any broker-dealer selling the Shares as agent for a
Selling Shareholders and any broker-dealer purchasing and reselling the Shares
for its own account may also be deemed an "underwriter".
INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 78.037 of the Nevada Revised Statutes ("NRS"), the
Company's Articles of Incorporation and Bylaws are intended to take full
advantage of the provisions of the NRS with respect to limiting the personal
liability of its officers, directors, employees and agents. The Articles
provide that a director of the Company shall not, to the fullest extent
permitted by the NRS, as the same exist or may hereafter be amended (but in the
case of any such amendment, only to the extent that such amendment permits
broader limitations than permitted prior to such amendment), be liable to the
Company or its shareholders for monetary damages for an act or omission in the
director's capacity as a director. The Articles and Bylaws provide that the
Company shall indemnify current and former directors, officers, employees and
agents, and persons serving in similar capacities in the Company's subsidiaries
or other entities in which the Company has an interest against expenses,
judgments, fines and amounts paid in settlement incurred if such director,
officer, employee or agent acted in good faith and in a manner such person
reasonably believed to be in, or not opposed to, the best interests of the
Company and, with respect to a criminal proceeding, had no reasonable cause to
believe such conduct was unlawful. Such determination shall be made (i) if
there is a quorum of disinterested members of the Board of Directors, by a
majority of such disinterested members of the Board of Directors, (ii) if a
majority of the disinterested members of the Board of Directors so determine or
if a quorum of disinterested members of the Board of Directors cannot be
obtained, by independent legal counsel in a written opinion, or (iii) by the
stockholders of the Company. The Company's Articles and Bylaws further provide
that directors, officers, employees and agents shall receive indemnification
payments in advance of the final disposition of an action upon the receipt by
the Company of a written undertaking by or on behalf of such director, officer,
employee or agent to repay the amounts advanced if it is ultimately determined
by a court of competent jurisdiction that such director, officer, employee or
agent was not entitled to indemnification by the Company. Thus, the Company may
be prevented from recovering damages for certain alleged errors or omissions by
directors, officers, employees and agents of the Company.
The Company maintains Directors' and Officers' Liability Insurance which
insures the Company's current and former directors and officers (and their
estates, heirs, legal representatives or assigns) and the Company and its
majority owned subsidiaries from damages, settlements and the cost of defense
associated with any alleged or actual error, misstatement, misleading statement,
act or omission, neglect or breach of duty by the directors and officers of the
Company in the discharge of their duties as directors or officers of the
Company; provided, that certain standard exclusions apply which limit the
liability of the insurer, including the limitation that no payment shall be made
in connection with a claim that is incident to or contributed to by the
fraudulent, dishonest, or criminal acts of the directors or officers of the
Company.
The Company also has contractual commitments to indemnify certain directors
and officers of the Company the basic terms of which mirror the provisions set
forth in the Articles of Incorporation and Bylaws of the Company.
Insofar as indemnification for liabilities arising under the Securities Act
of 1993 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
LEGAL MATTERS
The legality of the Shares offered hereby will be passed upon for the
Company by Brown, Parker & Leahy, L.L.P., Houston, TX.
EXPERTS
The consolidated financial statements of the Company appearing in its
quarterly report on form 10-QSB for the period ending March 31, 1998, and in its
Annual Report on Form 10-KSB for the year ended December 31, 1997, have been
audited by Arthur Andersen LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
Any audited financial statements incorporated by reference in the
Registration Statement of which this Prospectus is a part will be so
incorporated by reference herein in reliance upon the reports of independent
auditors pertaining to such financial statements (to the extent covered by
consents filed with the Securities and Exchange Commission) given upon the
authority of such firm as experts in auditing and accounting.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses, other than brokerage discounts
and commissions, expected to be incurred in connection with the offering of the
Shares registered hereby. All amounts, except the Securities and Exchange
Commission registration fee, are estimated.
Securities and Exchange Commission Registration Fee $ 224.02
Accounting Fees and Expenses $ *
Legal Fees and Expenses $ *
Miscellaneous Expenses $ *
Total $ *
* To be completed by amendment.
The Selling Shareholders shall pay all fees and expenses incident to such
registration, inclusive of any underwriting discounts, any selling commissions
payable in respect of sales of the Shares or any expenses incurred by the
Selling Shareholders to retain any counsel, accountant or other advisor.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
See "Indemnification of Directors and Officers."
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ------------------------------------------------------------------------
4.1 Agreement with Connecticut Bank of Commerce.
4.2 Agreement with Equity Merchant Banking Corporation, L.L.C.
5.1 Opinion of Brown, Parker & Leahy L.L.P., with respect to the validity of
the Company's Common Shares.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Brown, Parker & Leahy, L.L.P. (included in Exhibit 5.1).
24.1 Powers of Attorney (included in the signature page of this Amendment
No. 1)
ITEM 17. UNDERTAKINGS.
(a) Rule 415 Offering
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to the Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
(ii) to reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement; provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to e a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered, which remain, unsold at the termination of
the offering.
(b) Filings Incorporating Subsequent Exchange Act Documents by Reference.
The undersigned Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the Registrant's
Annual Report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new Registration Statement relating to the
securities offered therewith, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Acceleration of Effectiveness.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this to Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta, State of Georgia, on the 7th day of August,
1998.
CHARTER COMMUNICATIONS INTERNATIONAL, INC.
By: /s/ STEPHEN E. RAVILLE
-----------------------------------------
STEPHEN E. RAVILLE
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned directors and officers
of Charter Communications International, Inc., a Nevada corporation, which has
filed a Registration Statement on Form S-3 with the Securities and Exchange
Commission, Washington, D.C. 20549 under the provisions of the Securities Act of
1933, as amended (the "Securities Act") hereby constitute and appoint Stephen E.
Raville and Patrick E. Delaney, and each of them, the individual's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the person and in his or her name, place and stead, in any
and all capacities, to sign such Registration Statement and any or all
amendments, including post-effective amendments, to the Registration Statement,
including a Prospectus or an amended Prospectus therein and any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act, and all other documents in connection
therewith to be filed with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact as agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------------- --------------------------- --------------
<S> <C> <C>
/S/ Stephen E. Raville Chief Executive Officer and August 7, 1998
- ---------------------------- Chairman of the Board of
Stephen E. Raville Directors
/S/ Patrick E. Delaney Chief Financial Officer August 7, 1998
- ---------------------------- and Director
Patrick E. Delaney
/S/ Richard P. Halevy Treasurer August 7, 1998
- ----------------------------
Richard P. Halevy
/S/ Robert E. Conn Director August 7, 1998
- ----------------------------
Robert E. Conn
/S/ William P. O'Reilly Director August 7, 1998
- ----------------------------
William P. O'Reilly
/S/ F. Scott Yeager Director August 7, 1998
- ----------------------------
F. Scott Yeager
/S/ James H. Dorsey, III Director August 7, 1998
- ----------------------------
James H. Dorsey, III
/S/ Gerald F. Schmidt Director August 7, 1998
- ----------------------------
Gerald F. Schmidt
</TABLE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- -----------------------------------------------------------------------------
<C> <S>
4.1 Agreement with Connecticut Bank of Commerce.
4.2 Agreement with Equity Merchant Banking Corporation, L.L.C.
5.1 Opinion of Brown, Parker & Leahy L.L.P., with respect to the validity of the
Company's Common Shares.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Brown, Parker & Leahy, L.L.P. (included in Exhibit 5.1).
24.1 Powers of Attorney (included in the signature page of this Amendment No.
1)
======= =============================================================================
</TABLE>
<PAGE>
EXHIBIT 4.1
CHARTER COMMUNICATIONS INTERNATIONAL, INC.
January 19, 1998
Via Federal Express
- ---------------------
Mr. Dennis Pollack
President and Chief Executive Officer
612 Bedford Street
Stanford, Connecticut 06901
Dear Mr. Pollack:
This letter shall set forth our mutual understanding and agreement with
regard to the 75,000 shares of Charter Communications International, Inc.
("Charter") common stock (the "Stock") received by Connecticut Bank of Commerce
(the "Bank") as additional compensation for the lease financing and receivable
purchase facility described below provided or to be provided by the Bank in the
future.
The Bank has agreed to provide (i) up to $3 million in full-payout lease
financing to Charter and (ii) a receivable purchase facility in an amount up to
$600,000. The Bank has agreed not to sell any of the Charter Stock for a period
of six months (i.e. June 30, 1998).
In consideration of the foregoing, Charter has agreed to guarantee the
market value (the "Market Value") of the Stock held by the Bank as of June 30,
1998 at $2.33 per share or an aggregate of $174,750.00 (the "Minimum Valuation
Threshold"). In addition, the Bank shall have demand registration rights
covering the Stock (as well as any additional shares of common stock to be
issued pursuant to this letter agreement). The Bank will pay all physical costs
of the registration of the Stock. Charter shall pay any unusual or out of the
ordinary auditing or legal costs or expenses associated with the registration of
the Stock, provided that the Bank exercises its demand registration rights
during such period as to be able to utilize Charter's 10-K and 10-Qs as of or
for the year ended December 31, 1997 in connection with the registration
statement. For purposes of this letter agreement, the Market Value of the Stock
shall be based on the average closing sales price of the Stock for the twenty
trading days immediately preceding June 30, 1998 (inclusive of June 30, 1998, if
a trading day). In the event the Market Value of the Stock does not equal or
exceed the Minimum Valuation Threshold, then Charter, at its option, shall pay
to the Bank cash, additional shares of Charter common stock, or a combination of
both equal to the difference between the Minimum Valuation Threshold and the
Market Value of the Stock. In the event that Charter issues additional shares
of Charter common stock to the Bank, the value of the stock so issued shall be
based on the closing sales price of Charter's common stock on the trading day
immediately preceding the date of issuance and delivery of the additional shares
to the Bank. In addition, the shares shall also be covered by an effective
registration statement.
If the foregoing accurately reflects our mutual agreement with regard to
the above matters, please execute one copy of this letter in the space provided
below and return it to me at the above address.
Very truly yours,
CHARTER COMMUNICATIONS
INTERNATIONAL, INC.
By:
---------------------------------
Its:
---------------------------------
AGREED TO AND ACCEPTED
this ____ day of _________, 1998:
CONNECTICUT BANK OF COMMERCE
By:
---------------------------
Its:
---------------------------
<PAGE>
EXHIBIT 4.2
CHARTER COMMUNICATIONS INTERNATIONAL, INC.
January 14, 1998
Via Federal Express
- ---------------------
Mr. Ross Walpole
Managing Director
Equity Merchant Banking Corporation, L.C.
2419 East Commercial Boulevard, Suite 304
Fort Lauderdale, Florida 33308
Dear Mr. Walpole:
This letter shall set forth our mutual understanding and agreement with
regard to the 375,000 shares of Charter Communications International, Inc.
("Charter") common stock (the "Stock") received by Equity Merchant Banking
Corporation, L.C. ("EMBC") as compensation for certain investment banking
services provided, or to be provided in the future, to Charter. EMBC has agreed
not to sell any of the Charter Stock for a period of six months (i.e., June 30,
1998).
In consideration of the foregoing, Charter has agreed to guarantee the
market value (the "Market Value") of the Stock held by EMBC as of June 30, 1998
at $2.33 per share or an aggregate of $873,750.00 (the "Minimum Valuation
Threshold"). In addition, the EMBC shall have demand registration rights
covering the Stock (as well as any additional shares of common stock to be
issued pursuant to this letter agreement). EMBC will pay all physical costs of
the registration of the Stock. Charter shall pay any unusual or out-of the
ordinary auditing or legal costs or expenses associated with the registration of
the Stock, provided that EMBC files the registration statement during such
period as to be able to utilize Charter's 10-K and 10-Qs as of or for the year
ended December 31, 1997. For purposes of this letter agreement, the Market
Value of the Stock shall be based on the average closing sales price of the
Stock for the twenty trading days immediately preceding June 30, 1998 (inclusive
of June 30, 1998, if a trading day). In the event the Market Value of the Stock
does not equal or exceed the Minimum Valuation Threshold, then Charter, at its
option, shall pay to EMBC cash, additional shares of Charter common stock, or a
combination of both equal to the difference between the Minimum Valuation
Threshold and the Market Value of the Stock. In the event that Charter issues
additional shares of Charter common stock to EMBC, the value of the stock so
issued shall be based on the closing sales price of Charter's common stock on
the trading day immediately preceding the date of issuance and delivery of the
additional shares to EMBC. In addition, the shares shall also be covered by an
effective registration statement.
If the foregoing accurately reflects our mutual agreement with regard to
the above matters, please execute one copy of this letter in the space provided
below and return it to me at the above address.
Very truly yours,
CHARTER COMMUNICATIONS
INTERNATIONAL, INC.
By:
---------------------------------
Its:
---------------------------------
AGREED TO AND ACCEPTED
this ____ day of _________, 1998:
EQUITY MERCHANT BANKING
CORPORATION, L.C.
By:
---------------------------
Its:
---------------------------
<PAGE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our reports dated March 31, 1998 included in Charter Communications
International, Inc.'s Annual Report on Form 10-K/SB for the year ending
December 31, 1997 into this Registration Statement.
Arthur Andersen LLP
Atlanta, Georgia
August 7, 1998
