-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Iqi6mR5aOnFKRuoApS3kEtC0xbY2TYXae+rEIhh+Pm9+47GpdyDwJlokbEJhORU+ EQ6IMgMYgRTeKxqTR8oNKQ== 0001010549-06-000569.txt : 20060815 0001010549-06-000569.hdr.sgml : 20060815 20060814175317 ACCESSION NUMBER: 0001010549-06-000569 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060630 FILED AS OF DATE: 20060815 DATE AS OF CHANGE: 20060814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CabelTel International Corp CENTRAL INDEX KEY: 0000105744 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 752399477 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08187 FILM NUMBER: 061032480 BUSINESS ADDRESS: STREET 1: 1755 WITTINGTON PLACE STREET 2: SUITE 340 CITY: DALLAS STATE: TX ZIP: 75234 BUSINESS PHONE: 9724078400 MAIL ADDRESS: STREET 1: 1755 WITTINGTON PLACE STREET 2: SUITE 340 CITY: DALLAS STATE: TX ZIP: 75234 FORMER COMPANY: FORMER CONFORMED NAME: GREENBRIAR CORP DATE OF NAME CHANGE: 19960514 FORMER COMPANY: FORMER CONFORMED NAME: MEDICAL RESOURCE COMPANIES OF AMERICA DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: WESPAC INVESTORS TRUST DATE OF NAME CHANGE: 19900605 10-Q 1 cabel10q063006.txt ================================================================================ FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 2006 or |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 000-08187 CABELTEL INTERNATIONAL CORPORATION (Exact Name of Registrant as Specified in Its Charter) Nevada 75-2399477 - ------------------------------- ------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1755 Wittington Place, Suite 340 Dallas, Texas ---------------------------------------------- (Address of principal executive offices) 75234 ---------------------------------------------- (Zip Code) (972) 407-8400 (Registrant's telephone number, including area code) ---------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X|. No |_|. Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes |_|. No |X|. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of accelerated filer in Rule 12b-2 of the Exchange Act (Check one): Large accelerated filer |_| Accelerated filer |_| Non-accelerated filer |X| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes |_|. No |X|. APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes |_|. No |_|. APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. Common Stock, $.01 par value 976,955 (Class) (Outstanding at June 30, 2006) ================================================================================ CABELTEL INTERNATIONAL CORPORATION Index to Quarterly Report on Form 10-Q Period ended June 30, 2006 PART I: FINANCIAL INFORMATION..................................................3 Item 1: Financial Statements...............................................3 Consolidated Balance Sheets..............................................3 Consolidated Statements of Operations....................................5 Consolidated Statements of Cash Flow.....................................6 Notes To Consolidated Financial Statements...............................7 Item 2: Management's Discussion And Analysis Of Financial Condition And Results Of Operations.........................................14 Item 3. Quantitative and Qualitative Disclosures About Market Risk........16 Item 4. Controls and Procedures...........................................16 PART II: OTHER INFORMATION....................................................17 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds........17 Item 6. Exhibits...........................................................17 Signatures.................................................................19 2
Part I: Financial Information ITEM 1: FINANCIAL STATEMENTS - ------------------------------ The accompanying Consolidated Financial Statements as of and for the six months ended June 30, 2006 have not been audited by independent certified public accountants but, in the opinion of the management of CableTel International Corporation ("CabelTel" or the "Company" or "CIC" or "we" or "us"), all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of CIC's consolidated financial position, consolidated results of operations and consolidated cash flows at the dates and for the periods indicated, have been included. CabelTel International Corporation Consolidated Balance Sheets (Amounts in thousands) June 30, December 31, Assets 2006 2005 (Unaudited) ------------ ------------ Current assets Cash and cash equivalents $ 332 $ 650 Accounts receivable-trade 240 339 Note receivable 6 306 Other current assets 1,838 179 ------------ ------------ Total current assets 2,416 1,474 Notes receivable net of deferred income 1,809 309 Property and equipment, at cost Land and improvements 2,232 2,232 Buildings and improvements 5,304 5,298 Equipment and furnishings 302 292 Proven oil and gas properties (full cost method) -- 1,401 ------------ ------------ 7,838 9,223 Less accumulated depreciation and depletion 835 963 ------------ ------------ 7,003 8,260 Deferred tax asset 831 1,161 Due from CableTEL AD - related party -- 8,004 Other assets 854 872 ------------ ------------ $ 12,913 $20,080 ============ ============
The accompanying notes are an integral part of these statements. 3
CabelTel International Corporation Consolidated Balance Sheets (Amounts in thousands) June 30, December 31, Liabilities and Stockholders' equity 2006 2005 (Unaudited) ------------ ------------ Current liabilities Current maturities of long-term debt $ 2,486 $ 2,383 Accounts payable - trade 547 842 Accrued expenses 1,154 1,236 Other current liabilities 414 371 ------------ ------------ Total current liabilities 4,601 4,832 Long-term debt 6,147 13,560 Other long term liabilities 193 936 ------------ ------------ Total liabilities 10,941 19,328 Stockholders' equity Preferred stock, Series B 1 1 Preferred stock, Series J 2% -- 3,150 Preferred stock, Series J 2% contra equity -- (3,150) Common stock $.01 par value; authorized, 4,000,000 shares; 976,955 shares issued and outstanding 10 10 Additional paid-in capital 55,966 55,966 Accumulated deficit (54,005) (55,225) ------------ ------------ 1,972 752 ------------ ------------ $ 12,913 $ 20,080 ============ ============
The accompanying notes are an integral part of these statements. 4
CabelTel International Corporation Consolidated Statements of Operations (Amounts in thousands, except per share data) For The Three Month For The Six Month Period Ended Period Ended June 30, June 30, 2006 2005 2006 2005 ------- ------- ------- ------- (Unaudited) (Unaudited) Revenue Real estate operations $ 1,072 $ 1,136 $ 2,222 $ 2,236 Oil and gas operations 541 396 995 810 ------- ------- ------- ------- 1,613 1,532 3,217 3,046 ------- ------- ------- ------- Operating expenses Real estate operations 704 770 1,561 1,457 Oil and gas operations 374 319 726 612 Lease expense 238 231 474 462 Corporate general and administrative 249 268 563 532 ------- ------- ------- ------- 1,565 1,588 3,324 3,063 ------- ------- ------- ------- Operating earnings (loss) 48 (56) (107) (17) Other income (expense) Interest income 5 28 322 68 Interest expense (155) (133) (615) (268) Net gain (loss) on sale of assets 418 -- 418 (118) Other 1,531 18 1,532 50 ------- ------- ------- ------- 1,799 (87) 1,657 (268) ------- ------- ------- ------- Income (loss) from continuing operations 1,847 (143) 1,550 (285) (Loss) from discontinued operations -- (17) -- (12) Provision for income taxes 330 -- 330 -- Net income (loss) applicable to common shares $ 1,517 $ (160) $ 1,220 $ (297) Earnings (loss) per share - basic Continuing operations 1.55 $ (0.15) $ 1.25 $ (0.29) Discontinued operations -- (0.01) -- (0.01) ------- ------- ------- ------- Net loss per share $ 1.55 $ (0.16) $ 1.25 $ (0.30) ------- ------- ------- ------- Basic weighted average common shares 977 977 977 977
The accompanying notes are an integral part of these statements. 5
CabelTel International Corporation Consolidated Statements of Cash Flow (Amounts in thousands) For the six month Period Ended June 30, 2006 2005 ----------- ----------- (Unaudited) (Unaudited) Cash flows from operating activities Net income (loss) $ 1,220 $ (297) Adjustments to reconcile net income (loss) to net cash used in operating activities Depreciation, depletion and amortization 262 247 (Gain) loss on sale of asset (418) 118 (Gain) from affiliate (1,500) -- Changes in operating assets and liabilities Accounts receivable 99 (137) Interest receivable (232) -- Other current and non current assets 341 (1,043) Accounts payable and other liabilities (311) 790 ----------- ----------- Net cash used in operating activities (539) (322) Cash flows provided by (used in) investing activities Repayment of notes receivable 300 3,307 Purchase of property and equipment, net (16) (33) ----------- ----------- Net cash provided by investing activities 284 3,274 Cash flows from financing activities Net advances from affiliates -- 453 Payments on debt (63) (3,775) ----------- ----------- Net cash used in financing activities (63) (3,322) Net decrease in cash and cash (318) (370) equivalents Cash and cash equivalents at beginning of period 650 767 ----------- ----------- Cash and cash equivalents at end of period $ 332 $ 397 Non-cash: Sale of Gaywood receivable $ 1,737 Notes payable dissolved under rescission $ 7,245 Interest payable dissolved under rescission $ 900 Funds due from affiliate dissolved under rescission $ 8,236 Note receivable funded under rescission $ 1,500
The accompanying notes are an integral part of these statements. 6 Notes To Consolidated Financial Statements For the Unaudited Six Months Ended June 30, 2006 and 2005 Note A: Basis of Presentation The accompanying unaudited, consolidated financial statements include the accounts of CabelTel International Corporation and its majority-owned subsidiaries (collectively, "CIC" or the "Company"). All significant intercompany transactions and accounts have been eliminated. The financial statements reflect all adjustments that are, in the opinion of management, necessary to fairly present such information. All such adjustments are of a normal recurring nature. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures, including a description of significant accounting policies normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2005. Operating results for the three and six month periods ended June 30, 2006 are not necessarily indicative of the results that may be expected for any subsequent quarter or the year ending December 31, 2006. Note B: Rescission of CabelTEL AD, Bulgaria Acquisition On October 12, 2004, the Company acquired, for 31,500 shares of newly-designated 2% Series J Preferred Stock, 74.8% of CableTEL AD ("CableTEL"), a Bulgarian telecommunications company. The terms of the acquisition agreement require the Company to present a proposal to its stockholders to approve the mandatory exchange of all shares of Series J Preferred Stock into 8,788,500 shares of common stock which, if approved by stockholders, would represent 90% of the resulting total issued and outstanding shares of common stock in the Company. The acquisition agreement, as amended, provided that the stockholders of the Company had until June 30, 2006 to approve the exchange of Series J Preferred Stock into the Company common stock. If the exchange was not approved by June 30, 2006, the holders of the Series J Preferred Stock had the option to rescind the entire transaction. Until the acquisition was completed, the financial statements of CableTEL AD were not included in the Company's consolidated financial statements. The financial statements of the Company did reflect the Series J Preferred Stock as well as a contra equity account reflecting that the transaction had not yet occurred. Effective June 1, 2006 the Company and the owners of CableTEL AD entered into a Rescission Agreement whereby the original Acquisition Agreement dated October 12, 2004, plus all amendments, was rescinded in its entirety. 7 Pursuant to the Rescission Agreement: (a) The Company cancelled the 31,500 shares of Series J 2% Cumulative Preferred Stock it issued. (b) The Company returned all entities it had acquired on October 12, 2004 to the original owners. (c) A corporation affiliated with one of the original sellers assumed from the Company all indebtedness incurred by the Company since October 1, 2004 in connection with or related to advances by the Company to CableTEL AD or its affiliates to fund the operation of CableTEL AD. In exchange the Company surrendered all claims it had against CableTel AD or its affiliates for reimbursement for such advances. (d) Ronald C. Finley, Chief Executive Officer of CableTEL AD and one of the original sellers resigned his positions in the Company as a director, as Chairman of the Board and as Chief Executive Officer. His resignation was effective June 1, 2006. (e) The Company agreed that, subject to its compliance with all applicable American Stock Exchange, Inc. rules and federal securities laws, it would in the future change its name to a name that does not include the word "cable" or "cabel". (f) An affiliate of one of the original sellers assumed control and responsibility of any and all litigation involving the Company or in which the Company is named as a party involving the Company's relationship with the parties to the Rescission Agreement and/or CableTEL AD. (g) All of the parties agreed to pay their own expenses with respect to any costs associated with the Rescission Agreement. (h) The Company, as a "break up fee", received, from one of the original sellers, a $1,500,000 participation in a 9 1/2% tax free bond. The bond, with a total face value of $2,406,850, is from an unrelated third party. The Company recorded, as other income, in June 2006 the $1,500,000, net of expenses. Note C: Sale of Gaywood Oil & Gas Effective June 30, 2006, the Company sold all of its membership interests in the two limited liability companies Gaywood Oil & Gas, LLC and Gaywood Oil & Gas II, LLC which own oil and gas leases in Gregg and Rusk Counties, Texas and on which approximately 50 oil-producing wells are operating. These are low production wells averaging two to three barrels of oil per day. The sale price of $1,737,000 was received in cash on July 5, 2006. The Company recorded a gain on the sale of $418,000. Note D: Notes Receivable As a result of the sale of two properties in 2001, the Company holds tax-exempt notes in the amount of $4,030,000, bearing interest at 9.5%. The notes mature on April 1, 2032, and August 1, 2031, respectively. The repayment of the notes and interest thereon is limited to the cash flow of the respective properties either from operations, refinancing or sale. The Company has deferred gains in the amount of $3,721,000 as well as unpaid interest which will be recognized as cash is received. As a result of the CableTEL AD rescission, the Company holds a $1,500,000 participation in a tax-exempt note with a face amount of $2,406,000, bearing interest at 9.5%. The note matures on August 20, 2037. The repayment of the 8
notes and interest thereon is limited to the cash flow of the property either from operations, refinancing or sale. Note E: Long-Term Obligations Long-term debt is comprised of the following (in thousands): June 30, December 31, 2006 2005 ------------ ------------ Note payable to a financial institution maturing in August 2009, with a fixed interest rate of 5.75% collateralized by property, fixtures, equipment and an assignment of rents $ 6,278 $ 6,341 Note payable to an individual with a fixed interest rate of 10% 2,255 2,255 Notes payable to related parties, bearing interest at rates from 15% to 18% 100 7,347 ------------ ------------ 8,633 15,943 Less: current maturities 2,486 2,383 ------------ ------------ $ 6,147 $ 13,560
Note F: Discontinued Operations The Company owned an assisted living property in Greenville, South Carolina. In August 2002, the Company leased the property to an unrelated third party who then operated the property. The monthly lease payments received by the Company approximated the Company's cost for interest and real estate taxes. In May 2005, the Company sold the property to the lessee for the amount of the existing mortgage on the property, which approximated the Company's carrying value for the property. On January 31, 2004, the Company terminated a lease for an assisted living community in Georgia. The operations of that property have been reflected as a discontinued operation in 2005. In March 2005, the Company sold an assisted living facility in North Carolina and recorded a loss of $42,000. The operations of that property have been reflected as a discontinued operation in 2005. In May 2005, the Company sold an assisted living facility in South Carolina. The operations of that property have been reflected as a discontinued operation in 2005. 9 Note G: Segment Reporting Business Operations On June 30, 2006 the Company operated two separate distinct businesses o The operation of real estate through one retirement community in King City, Oregon, with a capacity of 114 residents, and the ownership and operation of an outlet mall in Gainesville, Texas, with approximately 315,000 square feet of retail space available for lease. o The ownership of oil and gas leases in Gregg and Rusk Counties, Texas, on which approximately 50 producing wells were operating as of June 30, 2006. This oil and gas operation was sold effective June 30, 2006. 10
Certain 2005 and 2006 amounts have been reclassified to conform to the current presentation . The segment information and reconciliation to income (loss) from operations are as follows: Three months ended June 30, 2006 (amounts in thousands) Real Oil Consolidated Corporate Estate Operation CIC ------------ ------------ ------------ ------------ Revenue $ -- $ 1,072 $ 541 $ 1,613 Operating expenses Operations -- 704 374 1,078 Lease expense 29 209 -- 238 Corporate general and administrative 249 -- -- 249 ------------ ------------ ------------ ------------ 278 913 374 1,565 ------------ ------------ ------------ ------------ Operating earnings (loss) (278) 159 167 48 Interest income 5 -- -- 5 Interest (expense) (56) (93) (6) (155) Other 1,531 -- -- 1,531 Net earnings (loss) from continuing operations 1,676 11 160 1,847 Total assets $ 4,760 $ 8,153 $ -- $ 12,913 Six months ended June 30, 2006 (amounts in thousands): Real Oil Consolidated Corporate Estate Operation CIC ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Revenue $ -- $ 2,222 $ 995 $ 3,217 ------------ ------------ ------------ ------------ Operating expenses Operations -- 1,561 726 2,287 Lease expense 51 423 -- 474 Corporate general and administrative 563 -- -- 563 ------------ ------------ ------------ ------------ 614 1,984 726 3,324 ------------ ------------ ------------ ------------ Operating earnings (loss) (614) 238 269 (107) Interest income 322 -- -- 322 Interest (expense) (419) (186) (10) (615) Other 1,531 -- -- 1,531 Net earnings (loss) from continuing operations 1,377 (85) 257 1,549 Total assets $ 4,760 $ 8,153 $ -- $ 12,913
11
Note G: Segment Reporting - Continued Three months ended June 30, 2005 (amounts in thousands): Real Oil Consolidated Corporate Estate Operation CIC ------------ ------------ ------------ ------------ Revenue $ -- $ 1,136 $ 396 $ 1,532 Operating expenses Operations -- 770 319 1,089 Lease expense 19 212 -- 231 Corporate general and administrative 268 -- -- 268 ------------ ------------ ------------ ------------ 287 982 319 1,588 ------------ ------------ ------------ ------------ Operating earnings (loss) (287) 154 77 (56) Interest income 28 -- -- 28 Interest (expense) (59) (74) -- (133) Loss on sale of assets -- -- -- -- Other 18 -- -- 18 Net earnings (loss) from continuing operations (258) 38 77 (143) Total assets $ 5,680 $ 8,740 $ 1,781 $ 16,201 Six months ended June 30, 2005 (amounts in thousands): Real Oil Consolidated Corporate Estate Operation CIC ------------ ------------ ------------ ------------ Revenue $ -- $ 2,236 $ 810 $ 3,046 Operating expenses Operations -- 1,457 612 1,826 Lease expense 39 423 -- 462 Corporate general and administrative 532 -- -- 528 ------------ ------------ ------------ ------------ 571 1,880 612 3,063 ------------ ------------ ------------ ------------ Operating earnings (loss) (571) 356 198 (17) Interest income 68 -- -- 68 Interest (expense) (113) (155) -- (268) Loss on sale of assets -- (42) (76) (118) Other 50 -- -- 50 Net earnings (loss) from continuing operations (566) 159 122 (285) Total assets $ 5,680 $ 8,740 $ 1,781 $ 16,201
12 WARNING CONCERNING FORWARD-LOOKING STATEMENTS The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report. This Report on Form 10-Q may contain forward-looking statements within the meaning of the federal securities laws, principally, but not only, under the caption "Management's Discussion and Analysis of Financial Condition" and "Results of Operations." We caution investors that any forward-looking statements in this report, or which management may make orally or in writing from time to time, are based on management's beliefs and on assumptions made by, and information currently available to, management. When used, the words "anticipate," "believe," "expect," "intend," "may," "might," "plan," "estimate," "project," "should," "will," "result" and similar expressions which do not relate solely to historical matters are intended to identify forward-looking statements. These statements are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors, that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected. We caution you that, while forward-looking statements reflect our good faith beliefs when we make them, they are not guarantees of future performance and are impacted by actual events when they occur after we make such statements. We expressly disclaim any responsibility to update our forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends. Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the factors listed and described at Item 1A "Risk Factors" in the Company's Annual Report on Form 10-K, which investors should review. There have been no changes from the risk factors previously described in the Company's Form 10-K for the fiscal year ended December 31, 2005. Other sections of this report may also include suggested factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for management to predict all such matters; nor can we assess the impact of all such matters on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Investors should also refer to our quarterly reports on Form 10-Q for future periods and current reports on Form 8-K as we file them with the SEC, and to other materials we may furnish to the public from time to time through Forms 8-K or otherwise. 13 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND - -------------------------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- Overview Critical Accounting Policies and Estimates The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. Certain of the Company's accounting policies require the application of judgment in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments and estimates are based upon the Company's historical experience, current trends and information available from other sources that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company believes the following critical accounting policies are significant to the judgments and estimates used in the preparation of its consolidated financial statements. Revisions in such estimates are recorded in the period in which the facts that give rise to the revisions become known. The Company's allowance for doubtful accounts receivable and notes receivable is based on an analysis of the risk of loss on specific accounts. The analysis places particular emphasis on past due accounts. Management considers such information as the nature and age of the receivable, the payment history of the tenant, customer or other debtor and the financial condition of the tenant or other debtor. Management's estimate of the required allowance, which is reviewed on a quarterly basis, is subject to revision as these factors change. Deferred Tax Assets Significant management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against net deferred tax assets. The future recoverability of the Company's net deferred tax assets is dependent upon the generation of future taxable income prior to the expiration of the loss carry forwards. The company believes that it will generate future taxable income to fully utilize the net deferred tax assets. Liquidity and Capital Resources At June 30, 2006, the Company had current assets of $2.4 million and current liabilities of $4.6 million. Included in current liabilities is an obligation of principal and accrued interest of $3.0 million, the terms of which are similar to that of preferred stock whereby the Company can only pay this obligation out of available earned surplus. Cash and cash equivalents at June 30, 2006 were $332,000, as compared with $650,000 at December 31, 2005. Net cash used by operating activities was $539,000 for the six months ended June 30, 2006. During the six month period the Company had net income of $1.2 million. Net cash provided by investing activities was $284,000 for the six months ended June 30, 2006, due, primarily, to the collection of notes receivable. Net cash flow used in financing activities was $63,000 in the six months ended June 30, 2006. 14 Results of Operations The Company reported net income of $1,517,000 and $1,220,000 for the three and six months ended June 30, 2006, as compared to a net loss of $160,000 and $297,000 for the three and six months ended June 30, 2005. For the three and six months ended June 30, 2006, the Company recorded revenues of $1,072,000 and $2,222,000 for its real estate operations, as compared to $1,136,000 and $2,236,000 for the three and six months ended June 30, 2005. The Company's retirement property is fully occupied and it is anticipated that it will remain so during 2006. The Company's retail shopping mall was approximately 60% occupied at June 30, 2006. For the three and six months ended June 30, 2006, revenue for the oil and gas operation was $541,000 and $995,000, as compared to $396,000 and $810,000 for the three and six months ended June 30, 2005. The increase was due principally to the increase in the price of oil. For the three and six months ended June 30, 2006, real estate operating expenses were $704,000 and $1,561,000, as compared to $661,000 and $1,267,000 for the three and six months ended June 30, 2005. The increase was due principally to operating costs including promotional expenses for the Gainesville outlet mall. For the three and six months ended June 30, 2006, operating expenses for the oil and gas operation were $374,000 and $726,000, as compared to $292,000 and $559,000 for the three and six months ended June 30, 2005. The increase was due principally to well repairs incurred in 2006. For the three and six months ended June 30, 2006, interest income was $5,000 and $322,000, as compared to $28,000 and $68,000 for the three and six months ended June 30, 2005. During the first quarter of 2006 the Company incurred interest expense on borrowings for funds that were transferred to CableTEL AD for operating expenses. Interest expense was $155,000 and $615,000 for the three months and six months ended June 30, 2006, as compared to $133,000 and $268,000 for the three months and six months ended June 30, 2005. During the first quarter of 2006 the Company recorded interest income on loans to CableTEL AD for operating expenses. A mitigating factor that reduced interest expense was the refinancing of the Gainesville outlet mall August 2005 which reduced interest expense from 15% to 5.75%. Gain on the sale of assets was $418,000 for the three and six months ended June 30, 2006. On June 30, 2006 the Company sold Gaywood Oil and Gas. Other income was $1,531,000 for the three and six months ended June 30, 2006, as compared to $18,000 and $50,000 for the three months and six months ended June 30, 2005. The income in 2006 was due almost entirely to the company's rescinding it's acquisition of CableTEL AD and recording a break up fee of $1,500,000 net of expenses. Inflation The Company's principal sources of revenue are from rents in a retirement community, an outlet shopping mall and, through June 30, 2006, its oil and gas operations. The operation of the real estate entities is affected by rental rates that are highly dependent upon market conditions and the competitive environment in the areas where the properties are located. Compensation to employees and maintenance are the principal cost elements relative to the operations of the entities. Although the Company has not historically experienced any adverse effects of inflation on salaries or other operating expenses, there can be no assurance that such trends will continue or that, should inflationary pressures arise, the Company will be able to offset such costs by increasing rental rates in its real estate properties. 15 Environmental Matters The Company has conducted environmental assessments on most of its existing owned or leased properties. These assessments have not revealed any environmental liability that the Company believes would have a material adverse effect on the Company's business, assets or results of operations. The Company is not aware of any such environmental liability. The Company believes that all of its properties are in compliance in all material respects with all federal, state and local laws, ordinances and regulations regarding hazardous or toxic substances or petroleum products. The Company has not been notified by any governmental authority and is not otherwise aware of any material non-compliance, liability or claim relating to hazardous or toxic substances or petroleum products in connection with any of its communities. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - -------------------------------------------------------------------- Interest Rate Risk All of the Company's debt is financed at fixed rates of interest. Therefore, we have minimal risk from exposure to changes in interest rates. ITEM 4. CONTROLS AND PROCEDURES - --------------------------------- As required by Rule 13(a)-15(b), the Company's management, including the principal executive officer, chief financial officer and principal accounting officer, conducted an evaluation as of the end of the period covered by this report, of the effectiveness of the Company's disclosure controls and procedures as defined in Exchange Act Rule 13(a)-15(e). Based on that evaluation, the president and chief financial officer concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report. As required by Rule 13(a)-15(d), the Company's management, including the chief executive officer, chief financial officer and principal accounting officer, also conducted an evaluation of the Company's internal controls over financial reporting to determine whether any changes occurred in the first fiscal quarter that materially affected, or are reasonably likely to materially effect, the Company's internal control over financial reporting. Based on that evaluation, there has been no such change during the first fiscal quarter. It should be noted that any system of controls, however well designed and operated, can only provide reasonable and not absolute assurance that the objectives of the system will be met. In addition, the design of any control system is based in part on certain assumptions about the likelihood of future events. 16
Part II: Other Information ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS - --------------------------------------------------------------------- During the period of time covered by this report, CabelTel International Corporation did not repurchase any of its equity securities. The following table sets forth a summary for the quarter, indicating no repurchases were made and that, at the end of the period covered by this report, no specified number of shares may be purchased under any program in place. Maximum Total Number of Number of Shares Shares that May Purchased as Yet be Total Number of Average Price Part of Publicly Purchased Shares Paid per Announced Under the Period Purchased Share Program Program(a) ------ ---------------- ---------------- ---------------- ---------------- Balance as of March 31, 2006...... -- -- -- -- April 1-30, 2006.................. -- $ -- -- -- May 1-31, 2006.................... -- -- -- -- June 1-30, 2006 .................. -- -- -- -- ---------------- ---------------- ---------------- ---------------- Total ............................ -- $ -- -- -- ================ ================ ================ ================
(a) As a courtesy to stockholders of less than 100 shares and to relieve such stockholders of having to pay a broker's commission, the Company, although not obligated to do so, has periodically repurchased its common stock at the then most recent closing price of the Company's common stock on the last trading day before the stock certificate(s) is actually received by the Company from the stockholder. The number of such shares purchased in any period of time has been minimal; no purchases were made during the quarter ended June 30, 2006. ITEM 6. EXHIBITS - ------------------ The following exhibits are filed herewith or incorporated by reference as indicated below. Exhibit Exhibit Designation Description 3.1 Articles of Incorporation of Medical Resource Companies of America (incorporated by reference to Exhibit 3.1 to Registrant's Form S-4 Registration Statement No. 333-55968 dated December 21, 1992) 3.2 Amendment to the Articles of Incorporation of Medical Resource Companies of America (incorporated by reference to Exhibit 3.5 to Registrant's Form 8-K dated April 1, 1993) 3.3 Restated Articles of Incorporation of Greenbriar Corporation (incorporated by reference to Exhibit 3.1.1 to Registrant's Form 10-K dated December 31, 1995) 3.4 Amendment to the Articles of Incorporation of Medical Resource Companies of America (incorporated by reference to Exhibit to Registrant's PRES 14-C dated February 27, 1996) 17 Exhibit Exhibit Designation Description 3.5 Bylaws of Registrant (incorporated by reference to Exhibit 3.2 to Registrant's Form S-4 Registration Statement No. 333-55968 dated December 21, 1992) 3.6 Amendment to Section 3.1 of Bylaws of Registrant adopted October 9, 2003 (incorporated by reference to Exhibit 3.2.1 to Registrant's Form S-4 Registration Statement No. 333-55968 dated December 21, 1992) 3.7 Certificate of Decrease in Authorized and Issued Shares effective November 30, 2001 (incorporated by reference to Exhibit 2.1.7 to Registrant's Form 10-K dated December 31, 2002) 3.8 Certificate of Designations, Preferences and Rights of Preferred Stock dated May 7, 1993 relating to Registrant's Series B Preferred Stock (incorporated by reference to Exhibit 4.1.2 to Registrant's Form S-3 Registration Statement No. 333-64840 dated June 22, 1993) 3.9 Certificate of Voting Powers, Designations, Preferences and Rights of Registrant's Series F Senior Convertible Preferred Stock dated December 31, 1997 (incorporated by reference to Exhibit 2.2.2 of Registrant's Form 10-KSB for the fiscal year ended December 31, 1997) 3.10 Certificate of Voting Powers, Designations, Preferences and Rights of Registrant's Series G Senior Non-Voting Convertible Preferred Stock dated December 31, 1997 (incorporated by reference to Exhibit 2.2.3 of Registrant's Form 10-KSB for the fiscal year ended December 31, 1997) 3.11 Certificate of Designations dated October 12, 2004 as filed with the Secretary of State of Nevada on October 13, 2004 (incorporated by reference to Exhibit 3.4 of Registrant's Current Report on Form 8-K for event occurring October 12, 2004) 3.12 Certificate of Amendment to Articles of Incorporation effective February 8, 2005 (incorporated by reference to Exhibit 3.5 of Registrant's Current Report on Form 8-K for event occurring February 8, 2005) 31.1* Rule 13a-14(a) Certification by Chief Financial Officer *Filed herewith. 18 SIGNATURES ---------- Pursuant to the requirements of the Securities and Exchange Act of 1934, registrant has duly caused this report to be signed on its behalf by undersigned, thereunto duly authorized. CabelTel International Corporation Date: August 14, 2006 By: /s/ Gene S. Bertcher ----------------------------------- President & Chief Financial Officer 19 EX-31.1 2 cabel10qex311063006.txt CERTIFICATION OF CFO UNDER SECTION 302 EXHIBIT 31.1 PRESIDENT AND CHIEF FINANCIAL OFFICER'S RULE 13(a)-14(a)/15(d)-14(a) CERTIFICATION I, Gene S. Bertcher, certify that: 1) I have reviewed this quarterly report on Form 10-Q of CabelTel International Corporation; 2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made in light of the circumstances under which such statements were made, and is not misleading with respect to the period covered by this report; 3) Based on my knowledge, the financial statements and other financial information included in this report fairly present, in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4) The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15(d)-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the controls and procedures as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5) The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. Dated: August 14, 2006. /s/ Gene S. Bertcher ----------------------------- Gene S. Bertcher, President & Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----