U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[ X ] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended June 30, 1998
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ___________ to _____________
Commission file number 0-20843
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.)
2839 PACES FERRY ROAD, SUITE 500, ATLANTA, GEORGIA 30339
(Address of Principal Executive Offices)
(770) 432-6800
(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:.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 44,484,776.
------------
Traditional Small Business Disclosure Format:
Yes X No
----- -----
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CHARTER COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
<S> <C> <C>
June 30, December 31,
1998 1997
------------- --------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 456,944 $ 155,503
Restricted cash 135,000 135,000
Accounts receivable, net of allowance for
doubtful accounts of $798,478 and $650,000 3,211,192 2,606,104
Accounts receivable-- affilliate 82,408 -
Inventory 649,818 252,120
Prepaid expenses and other 318,590 224,595
------------- --------------
Total current assets 4,853,952 3,373,322
------------- --------------
PROPERTY AND EQUIPMENT, at cost:
Equipment and machinery 6,906,544 6,058,943
Earth station facility 665,507 618,497
Software 1,364,077 1,121,248
Furniture and fixtures 468,761 360,694
Other 844,233 583,861
------------- --------------
10,249,122 8,743,243
Accumulated depreciation and amortization (2,890,258) (2,113,198)
------------- --------------
Property and equipment, net 7,358,864 6,630,045
------------- --------------
OTHER ASSETS:
Goodwill, net of accumulated amortization
of $1,188,158 and $865,087 17,204,629 17,391,398
Acquired customer bases, net of accumulated
amortization of $748,650 and $579,369 1,012,367 1,181,651
Other intangibles, net of accumulated
amortization of $866,605 and $590,884 1,715,757 1,938,582
Other 638,173 551,087
------------- --------------
Total other assets 20,570,926 21,062,718
------------- --------------
TOTAL ASSETS $ 32,783,742 $ 31,066,085
============= ==============
The accompanying Condensed Notes to Financial Statements
are an integral part of these balance sheets.
<PAGE>
CURRENT LIABILITIES:
Current portion of notes payable $ 849,982 $ 175,001
Current portion of lease obligation 422,070 342,249
Lines of credit 470,000 485,000
Receivable purchase facility 600,000 -
Loans from shareholders 695,000 520,000
Accounts payable 4,896,551 4,889,518
Accounts payable-- affiliate - 249,655
Accrued liabilities 1,471,540 1,676,547
Unearned revenues 1,552,751 1,645,722
------------- --------------
Total current liabilities 10,957,894 9,983,692
------------- --------------
LONG TERM LIABILITIES:
Financing lease obligation 1,544,565 1,397,473
Convertible debenture 1,180,000 1,180,000
Senior subordinated notes 675,278 660,278
Notes payable 933,365 711,110
------------- --------------
Total long term liabilities 4,333,208 3,948,861
------------- --------------
Deferred settlement gain - 2,757,132
------------- --------------
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value; 100,000 shares
authorized, 0 shares issued and outstanding at
June 30, 1998 and December 31, 1997 - -
Common stock, $0.00001 par value; 45,000,000
shares authorized; 43,997,276 and 34,134,776
shares outstanding at June 30, 1998 and
December 31, 1997, respectively 440 341
Additional paid-in-capital 41,412,306 35,981,440
Accumulated deficit (23,920,106) (21,605,381)
------------- --------------
Total stockholders' equity 17,492,640 14,376,400
------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 32,783,742 $ 31,066,085
============= ==============
The accompanying Condensed Notes to Financial Statements
are an integral part of these balance sheets.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CHARTER COMMUNICATIONS INTERNATIONAL, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
June 30, 1998 June 30, 1998 June 30, 1997 June 30, 1997
------------- ------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Communications services $ 4,451,449 $ 7,784,085 $ 2,326,398 $ 4,062,036
Hardware and software 102,178 114,247 162,061 331,540
Internet connection services 721,677 1,475,838 694,624 1,362,219
Network services - - 137,972 314,615
------------- ------------- ------------- -------------
Total Revenues 5,275,304 9,374,170 3,321,055 6,070,410
------------- ------------- ------------- -------------
COSTS AND EXPENSES:
Cost of services 3,663,865 7,068,802 2,317,192 4,471,315
Cost of hardware and software 75,973 81,428 123,730 264,724
Selling, general, and administrative 2,141,776 4,139,899 1,853,007 3,783,985
Depreciation and amortization 754,582 1,506,566 805,162 1,485,269
------------- ------------- ------------- -------------
Total costs and expenses 6,636,196 12,796,695 5,099,091 10,005,293
------------- ------------- ------------- -------------
OPERATING LOSS (1,360,892) (3,422,525) (1,778,036) (3,934,883)
------------- ------------- ------------- -------------
INTEREST EXPENSE, NET (276,902) (537,969) (79,519) (221,508)
LOSS ON EXTINGUISHMENT OF DEBT - - - (241,785)
OTHER INCOME, NET 1,645,769 1,645,769
-
NET LOSS BEFORE INCOME TAXES 7,975 (2,314,725) (1,857,555) (4,398,176)
INCOME TAX BENEFIT - - - -
------------- ------------- ------------- -------------
NET LOSS $ 7,975 $ (2,314,725) $ (1,857,555) $ (4,398,176)
============= ============= ============= =============
BASIC AND DILUTED
NET LOSS PER SHARE $ 0.00 $ (0.06) $ (0.06) $ (0.15)
============= ============= ============= =============
SHARES USED IN COMPUTING
NET LOSS PER SHARE 43,468,109 39,698,107 30,100,109 28,692,777
============= ============= ============= =============
The accompanying Condensed Notes to Financial Statements
are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CHARTER COMMUNICATIONS INTERNATIONAL, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Six Months Six Months
Ended Ended
June 30, 1998 June 30, 1997
--------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,314,725) $ (4,398,176)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization 1,506,566 1,485,269
Bad debt expense 148,478 107,521
Amortization of discounts on senior
subordinated notes and financing lease obligation 95,467 14,950
Loss on extinguishment of debt - 241,785
Deferred settlement gain (2,757,132) -
Changes in operating assets and liabilities:
Accounts receivable, net (627,066) (714,054)
Accounts receivable-- affiliate (82,408) 16,434
Inventory (150,774) (127,972)
Prepaid expenses (93,995) (172,126)
Other assets (230,781) (288,449)
Accounts payable and accrued liabilities (275,106) (1,226,058)
Accounts payable-- affiliate (249,655) (101,851)
Unearned revenue (92,971) (267,580)
--------------- ---------------
Total Adjustments (2,809,377) (1,032,131)
--------------- ---------------
Net cash used in operating activities (5,124,102) (5,430,307)
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,276,579) (997,401)
Acquisition of subsidiary (112,500) -
--------------- ---------------
Net cash used in investing activities (1,389,079) (997,401)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 5,250,000 5,877,518
Proceeds from issuance of convertible debenture - 1,000,000
Repayment on line of credit, net (30,000) (196,092)
Proceeds from/Repayment of loans from shareholders 150,000 (125,401)
Proceeds from/repayment of notes payable 682,184 178,823
Proceeds from receivable facility, net 574,500 -
Proceeds from sale and leaseback transactions, net 187,938 -
--------------- ---------------
Net cash provided by financing activities 6,814,622 6,734,848
--------------- ---------------
INCREASE IN CASH AND CASH EQUIVALENTS 301,441 307,140
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 155,503 320,252
--------------- ---------------
END OF PERIOD $ 456,944 $ 627,392
=============== ===============
Supplemental Non-Cash Disclosures:
- ----------------------------------------------------------
Interest Paid $ 542,715 $ 99,529
Income Taxes Paid - -
Assets acquired in excess of liabilities assumed 136,302 -
Value of warrants issued 68,465 -
Valued of stock issued for acquisition 112,500 -
The accompanying Condensed Notes to Financial Statements
are an integral part of these statements.
</TABLE>
<PAGE>
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, 1997.
2. Certain amounts in the prior year financial statements have been
reclassified to conform to the current year presentation.
3. Basic net loss per share is computed using the weighted average number
of shares outstanding. Diluted net loss per share is computed using the weighted
average number of shares outstanding, adjusted for common stock equivalents,
when dilutive. For the periods presented, the effect of common stock
equivalents was either antidilutive or had a diminimus effect on net loss per
share. As a result, basic and diluted net loss per share are the same.
4. There was no provision for or cash payment of income taxes for the
three months ended March 31, 1998 and 1997, respectively, as the Company had an
immaterial net gain and net taxable loss for 1998 and 1997, respectively, and
anticipates a net taxable loss for the year ended December 31, 1998.
5. During the second quarter of 1998, the Company completed a private
placement of 500,000 shares of common stock with warrants to purchase 500,000
shares at a price of $1.25 per share. The gross proceeds from the private
placement were $500,000. Also during the quarter, the Company entered into a
Zero Coupon Promissory Note for $750,000 with a one year maturity and an
effective interest rate of 10%. In conjunction with the sale of the Promissory
Note, the Company issued 545,455 warrants to purchase common stock at an
exercise price of $1.375 per share.
6. During the second quarter of 1998, the Company reported other income of
$1.6 million, which is comprised of a gain recognized on the settlement of an
account payable to Sprint, offset by a loss incurred on a guarantee of the
Company's stock price issued to Connecticut Bank of Commerce. As discussed in
the Company's December 31, 1997 10-KSB, an agreement in principal was reached
during 1997 to restructure the Company's payable to Sprint. The agreement was
memorialized on July 20, 1998, and requires the Company to pay $100,000
immediately and $50,000 per month over the succeeding 18 months. This
obligation is accrued in the Company's current and long term liabilities. The
price guarantee was given by the Company to the Connecticut Bank of Commerce and
its agent with respect to 450,000 shares issued in conjunction with a financing
lease. The guarantee required the Company's stock price to trade at an average
price of $2.33 per share for 20 trading days prior to June 30, 1998. The
failure of the Company's Stock to trade above the required average price
resulted in a $397,000 additional obligation to Connecticut Bank of Commerce.
<PAGE>
7. During the second quarter of 1998, the Company settled a claim of
trademark infringement with Charter Communications, Inc., a St. Louis, Missouri,
based cable television company. In the settlement, the Company agreed to change
its corporate name by September 15, 1998 and to cease all use of the words
"Charter" and "Charter Communications" in the conduct of its business. As part
of the agreement, Charter Communications, Inc. purchased 250,000 shares of the
Company's common stock for $1 per share on May 19, 1998.
8. During the second quarter of 1998, the Company granted 104,000 options
to purchase common stock, under its Incentive Stock Option Plan, at a weighted
average exercise price of $1.14. Additionally, 98,250 options with a weighted
average exercise price of $1.00 were forfeited during the quarter.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Over the next twelve months, the Company plans to pursue the expansion of
its International Private Line, 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.
Subject to the capital limitations discussed below, the Company intends to
continue to build a network that will provide voice, data, facsimile, Internet,
intranet, telecommuting, and video conferencing services to government and
commercial organizations operating throughout the United States and Latin
America. The Company currently holds licenses to provide international private
line and/or Internet services in the US, Panama, Costa Rica, Venezuela, El
Salvador, Nicaragua, Honduras, Guatemala and Peru and is currently providing
service in all of the countries except for Guatemala and Peru. During the
second quarter of 1998, the Company completed construction of three new
teleports in Costa Rica, Panama and Nicaragua. Also during 1998, the Company
signed two new agreements with Satmex to provide satellite services within
Mexico and for complete use of the Mexican Solidaridad satellite system for five
and ten years, respectively; was granted eight new licenses to provide a range
of telecommunications services within Panama, renewing its internet and private
line and granting the ability to provide various value added telecommunication
services; and was granted licenses in El Salvador and Nicaragua to provide IPL,
internet and international long distance service throughout both countries. The
license to provide international long distance service is the first of its kind
for the Company in Latin America and allows the Company to more vigorously
pursue expansion of its carrier services business.
The Company's calling card business has grown significantly, as monthly
sales have increased trifold from January to June of 1998. During the first
quarter of 1998, the Company added an enhanced self-contained calling card
platform to its network in order to provide additional capacity, speed and
reliability. A second such platform will be obtained and installed the third
quarter. Also, the Company has formed strategic alliances with certain
facilities based carriers in Colorado, Florida and California in order to expand
its network and product offerings. In late 1997, the Company introduced its
"Super Card", which provides for local access origination. The card has been
introduced into the Georgia market with success. Throughout the remainder of
the year, the "Super Card" will be rolled out into Texas, Colorado, Florida and
California. In its target market of Latin Americans resident in the US, the
Company's calling card services have had significant success. The Company has
added a number of distributors and will continue to vigorously pursue
distribution within this market segment.
The Company intends to vigorously pursue expansion of its telecommuting
services. The Company believes demand for telecommuting services in the US will
grow significantly as a result of corporate pressure to reduce operating costs,
comply with government regulation, and attract and retain employees. The
Company has developed a complete turnkey telecommuting solution which is
scalable and can be deployed nationally. In November 1997, the Company signed a
master agreement with a Fortune 100 financial services corporation to provide
telecommuting outsourcing services. The first telecommuters were brought
online under this agreement in February, 1998. The Company intends to expand
this line of business through its direct sales force, located in major
metropolitan areas (Atlanta, Houston, New York, Chicago, Los Angeles, Dallas and
Washington, D.C.), where telecommuting is in greatest demand, and through
strategic alliances with equipment vendors, consultants and Regional Bell
Operating Companies. The initial product development has been focused on
program design, implementation and support. As a second phase of its product
development, the Company intends to build a private internet protocol (IP)
network, specifically designed for telecommuting. The Company will begin
expansion only upon securing appropriate financing.
<PAGE>
See "Liquidity and Capital Resources" for a discussion of the Company's
ability to meet the capital requirements associated with its expansion plans.
RESULTS OF OPERATIONS
The following table sets forth certain financial data for the quarters
ended June 30, 1998 and 1997. 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.
<TABLE>
<CAPTION>
June 30, June 30,
1998 1997
% of Revenues % of Revenues
<S> <C> <C> <C> <C>
Revenues
Communications services $ 4,451 84.4 $ 2,326 70.0
Hardware and software
Sales 102 1.9 162 4.9
Network services - - 138 4.2
Internet connection 722 13.7 695 20.9
--------------- --------------- -------- -------------
Total revenues 5,275 100.0 3,321 100.0
Cost and expenses:
Cost of services 3,664 69.5 2,317 69.8
Cost of hardware
and software 76 1.4 124 3.7
Selling, general,
And administrative 2,142 40.6 1,853 55.8
Depreciation and
Amortization
Amortization 754 14.3 805 24.2
--------------- --------------- -------- -------------
Total costs
and expenses 6,636 125.8 5,099 153.5
--------------- --------------- -------- -------------
Operating loss (1,361) (25.8) (1,778) (53.5)
--------------- --------------- -------- -------------
Interest expense, net (277) (5.2) (80) (2.4)
Other income 1,646 31.2
--------------- --------------- -------- -------------
Net Income (Loss) $ 8 0.2 $(1,858) (55.9)
--------------- --------------- -------- -------------
Net loss per share $ 0.00 $ (0.06)
Shares used in computing:
net loss per share 43,468,109 30,100,109
</TABLE>
<PAGE>
Consolidated results for the three months ended June 30, 1998 reflect
significant improvement in most respects when compared to the same period of
1997. Consolidated revenues for the combined lines of business for the quarter
increased to $5.3 million from $3.3 million. The 59% increase in revenues was
principally the result of increased prepaid calling card sales. Cost of
services and hardware and software costs were $3.7 million for the quarter and
$2.4 million for the comparable period in 1997, yielding a gross profit margin
of 29.1% for 1998 and 26.5% for the same period in 1997. The increased margins
are primarily the result of reduced networking costs which resulted from
terminating an increased percentage of traffic over the Company's own network
and the addition of lower cost carriers. The Company anticipates that margins
will continue to increase throughout the remainder of the year as it continues
to expand its network and improve its least cost routing. Additionally, the
Company anticipates an increase in sales in its higher margin International
Private Line services as a result of completion of three teleports in Panama,
Costa Rica and Nicaragua.
Selling, general, and administrative (SG&A) expenses declined as a
percentage of revenues from 55.8% in 1997 to 40.6% in 1998. Again, the
decrease is a result of the Company benefiting from economies of scale with
respect to costs such as salaries and wages which have not increased in direct
proportion to increases in revenues. Management anticipates additional cost
reductions over the next year as a result of certain cost control efforts such
as the implementation of even tighter purchasing controls and the redefining of
management's decision making authority.
Depreciation and amortization expense was $754,582 for the second quarter
of 1998 compared to $805,162 for the same period in the prior year. The decrease
is mainly attributable to a fourth quarter 1997 write off of intangibles related
to the Phoenix Data Systems acquisition partially offset by an increase in
depreciation resulting from an increase in assets. Interest expense was
$276,902 and $79,519 for the three months ended June 30, 1998 and 1997,
respectively. The increase in interest expense is primarily attributable to the
financing lease obligations originated in the last quarter of 1997 and the first
quarter of 1998 and the convertible debentures issued in the third quarter of
1997.
Other income for the second quarter of 1998 was $1.6 million resulting from
a gain recognized on the settlement of a payable dispute with Sprint
Communications. The gain was offset by a loss on a guarantee of the Company's
stock price on 450,000 shares issued in conjunction with a financing lease. The
guarantee required the Company's stock price to trade at an average price of
$2.33 per share for 20 trading days prior to June 30, 1998, resulting in the
obligation to pay an additional $397,000.
There was no income tax benefit recorded in either 1998 or 1997, as
management recorded a valuation reserve as a result of uncertainty in the timing
of future taxable income. The net income and loss for the quarter ended June
30, 1998 and 1997 were $7,975 and $1,857,555, respectively.
<PAGE>
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 affiliates and outside investors.
The Company intends to raise additional required funding through various sources
including, but not limited to, the exercise of outstanding warrants and options
and private placements of debt and/or equity securities. However, there can be
no assurance that the Company will be able to raise any capital on terms
acceptable to the Company or at all.
During the first quarter of 1998, the Company completed a private placement
of 9,000,000 shares of common stock at a price of $.50 per share for proceeds
totaling $4,500,000 (4,000,000 shares included in this offering were purchased
by directors), entered into an additional sale leaseback transaction of certain
assets for proceeds totaling approximately $400,000, and entered into a
Receivable Purchase Facility Agreement which enables it to sell its receivables
to the purchaser, up to the maximum facility amount of $600,000. During the
second quarter of 1998, the Company completed private placements of 750,000
shares of common stock for gross proceeds of $750,000 and entered into a Zero
Coupon Promissory Note for gross proceeds totaling $750,000 which includes the
issuance of a warrant to purchase 545,455 shares of Common Stock at an exercise
price of $1.375 per share. These funds were used to partially offset a net
operating cash flow deficiency of approximately $5,124,000 through June 30,
1998, as well as capital expenditures of $1.3 million, the acquisition of a
subsidiary of $112,500 and repayment of financing lease obligations, lines of
credit and notes payable of approximately $275,000.
The Company estimates that it will need approximately $5 million to fund
existing operations over the next twelve months including approximately $2.3
million to fund debt due in the next twelve months, $700,000 to fund the Sprint
settlement obligation over the next twelve months, and approximately $2 million
to fund currently planned capital projects. The Company currently has
approximately $450,000 on hand and intends to fund the balance through cash from
operations, additional debt and equity security offerings and the exercise of
outstanding options and warrants. The Company has engaged Credit Suisse First
Boston to assist in its capital raising efforts. Failure of the Company to
raise all or a significant portion of the funds needed could materially and
adversely affect the Company's continuing and its planned operations. At June
30, 1998, the Company had a significant working capital deficit and at times has
borrowed funds and sold equity to affiliates/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 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 any unanticipated expenses 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 debt or equity sources or scale back operations. The Company does not
currently have adequate resources available to achieve all of the potential
expansion plans noted above and will not engage in such expansion until adequate
capital sources have been arranged. Accordingly, the Company anticipates
additional future private placements and/or public offerings of debt or equity
securities will be necessary to fund such plans. If such sources of financing
are insufficient or unavailable, the Company will be required to significantly
change 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.
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS
In July 1997, the Financial Accounting Standards Board 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.
SFAS 130 did not have an impact on the Company, and the Company does not expect
SFAS 131 to have a material impact on the Company's financial statements.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 (SOP 98-5), "Reporting on the Costs of
Start-Up Activities," which is effective for fiscal years beginning after
December 15, 1998. SOP 98-5 requires entities to expense certain start-up costs
and organization costs as they are incurred. The Company does not expect SOP
98-5 to have a material impact on the Company's financial statements.
In June 1998, the Financial Accounting Standards Board issued Statement No.
133 "Accounting for Derivative Instruments and Hedging Activities," which is
effective for fiscal years beginning after June 15, 1999. FAS 133 establishes
accounting and reporting standards for derivative instruments and transactions
involving hedhe accounting. The Company does not anticipate that this statement
will have a material impact on its financial statements.
YEAR 2000
The Year 2000 Issue is a problem resulting from computer programs being
written using two digits rather than four digits to define the applicable year.
Date-sensitive software may recognize a date using 00 as the year 1900 rather
than 2000. This could result in system failures or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities. The Company has addressed and continues to assess the impact of the
Year 2000 Issue on its reporting and operating systems. Due to the proprietary
nature of many of the Company's operating platforms, including its billing and
accounts receivable systems, the Company has limited reliance on external
vendors and third party network providers with Year 2000 exposure. The Company
has addressed programming issues to ensure that its programs are capable of
handling the change that will result from the turn of the century. Any costs
incurred for Year 2000 compliance are being expensed as incurred and are not
expected to be material to the financial statements.
<PAGE>
FORWARD-LOOKING STATEMENTS
This report on Form 10-QSB contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Actual results could
differ from those projected in any forward-looking statements for the reasons
detailed in the "Risk Factors" as well as in other sections of the Company's
report filed on Form 10-KSB for the year ended December 31, 1997. The
forward-looking statements contained herein are made as of the date of this
report and the Company assumes no obligation to update such forward-looking
statements, or to update the reasons why actual results could differ from those
projected in such forward-looking statements. Investors should consult the Risk
Factors and the other information set forth from time to time in the Company's
reports on Forms 10-Q, 8-K, 10-KSB and Annual Report to Stockholders.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In this quarter on July 20, 1998, the Company finalized and entered into
settlement agreement with Sprint that requires the Company to pay $100,000
immediately and $50,000 per month of the next 18 months in settlement of the
disputes between the parties.
ITEM 2. CHANGES IN SECURITIES
<PAGE>
(1) During the first quarter of 1998, the Company issued 750,000 shares of
its $.00001 par value common stock in a private placements to accredited
investors at a price of $1.00 per share. No underwriter was used for these
private placements. 750,000 shares were privately placed in the offering at
$1.00 per share. These private placements were intended to be exempt from
registration under the Securities Act of 1933, as amended (the "Act") pursuant
to Regulation D promulgated under the Act and Section 4(2) of the Act. The
$750,000 raised in this private offering will be used to offset the Company's
operating deficit and to fund capital expenditures as described in the
"Liquidity and Capital Resources" section of this filing.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<PAGE>
(a) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-B
Exhibit 27 - Financial Data Schedule
(b) REPORTS ON FORM 8-K
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHARTER COMMUNICATIONS
INTERNATIONAL, INC.
Date: August 14, 1998 By: /s/ Stephen E. Raville
------------------------------
Stephen E. Raville
Chief Executive Officer
Date: August 14, 1998 By: /s/ Patrick E. Delaney
------------------------------
Patrick E. Delaney
Chief Financial Officer
<PAGE>
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