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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 SEPTEMBER 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
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(Address of principal executive offices)
75234
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(Zip Code)
(972) 407-8400 (Registrant's
telephone number, including
area code)
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(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 Exchange 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 976,954
(Class) (Outstanding at October 19, 2006)
CABELTEL INTERNATIONAL CORPORATION
Index to Quarterly Report on Form 10-Q
Period ended September 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...............................8
Item 2: Management's Discussion And Analysis Of Financial Condition And
Results Of Operations......................................................12
Forward Looking Statements..............................................13
Item 3. Quantitative and Qualitative Disclosures About Market Risk........14
Item 4. Controls and Procedures...........................................15
PART II: OTHER INFORMATION....................................................15
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds........15
Item 6. Exhibits..........................................................16
Signatures.................................................................18
2
Part I: Financial Information
ITEM 1: FINANCIAL STATEMENTS
-----------------------------
CabelTel International Corporation
Consolidated Balance Sheets
(Amounts in thousands)
September 30, December 31,
Assets 2006 2005
(Unaudited)
------------- -------------
Current assets
Cash and cash equivalents $ 186 $ 650
Accounts receivable - trade 107 339
Notes receivable - related party 1,377 --
Note receivable -- 306
Other current assets 247 179
------------- -------------
Total current assets 1,917 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 5,298 5,298
Equipment and furnishings 310 292
Proven oil and gas properties (full cost method) -- 1,401
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7,840 9,223
Less accumulated depreciation and
depletion 897 963
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6,943 8,260
Deferred tax asset 831 1,161
Due from CableTEL AD - related party -- 8,004
Deposits 229 129
Other assets 747 743
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$ 12,476 $ 20,080
============= =============
The accompanying notes are an integral part of this statement.
3
CabelTel International Corporation
Consolidated Balance Sheets - Continued
(Amounts in thousands, except share amounts)
September 30, December 31,
Liabilities and Stockholders' equity 2006 2005
(Unaudited)
------------- -------------
Current liabilities
Current maturities of long-term debt $ 2,389 $ 2,383
Accounts payable - trade 477 842
Accrued expenses 1,218 1,236
Other current liabilities 237 371
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Total current liabilities 4,321 4,832
Long-term debt 6,112 13,560
Other long-term liabilities 199 936
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Total liabilities 10,632 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 $.01 par value; authorized,
4,000,000 shares; 977,000 shares
issued and outstanding 10 10
Additional paid-in capital 55,966 55,966
Accumulated deficit (54,133) (55,225)
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1,844 752
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$ 12,476 $ 20,080
============= =============
The accompanying notes are an integral part of this statement.
4
CabelTel International Corporation
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
For The Three Month For The Nine Month
Period Ended Period Ended
September 30, September 30,
2006 2005 2006 2005
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
Revenue
Real estate operations 1,091 $ 969 $ 3,313 $ 3,205
---------- ---------- ---------- ----------
Operating expenses
Real estate operations 794 800 2,355 2,257
Lease expense 233 230 707 692
Corporate general and
administrative 202 256 765 787
---------- ---------- ---------- ----------
1,229 1,286 3,827 3,736
---------- ---------- ---------- ----------
Operating earnings (loss) (138) (317) (514) (531)
Other income (expense)
Interest income 95 22 417 90
Interest expense (200) (151) (815) (419)
Net loss on sale of assets
-- -- -- (36)
Other 115 27 1,648 77
---------- ---------- ---------- ----------
10 (102) 1,250 (288)
---------- ---------- ---------- ----------
Earnings from continuing
operations (128) (419) 736 (819)
Provision for income taxes -- -- 330 --
---------- ---------- ---------- ----------
Net income (loss) from
continuing operations (128) (419) 406 (819)
Discontinued operations
Gain from operations -- 125 268 310
Gain from sale of assets -- -- 418 (82)
---------- ---------- ---------- ----------
Net gain on discontinued
operations -- 125 686 228
---------- ---------- ---------- ----------
Net income (loss) applicable to
common shares (128) (294) 1,092 (591)
========== ========== ========== ==========
Net earnings (loss) per common share -
basic and diluted
Continuing operations $ (0.13) $ (0.43) $ 0.40 $ (0.84)
Discontinued operations -- 0.13 0.71 0.24
---------- ---------- ---------- ----------
Net income (loss) per share $ (0.13) $ (0.30) $ 1.11 $ (0.60)
---------- ---------- ---------- ----------
Weighted average of common and
equivalent shares outstanding -
basic and diluted 977 977 977 977
The accompanying notes are an integral part of this statement.
5
CabelTel International Corporation
Consolidated Statements of Cash Flow
(Amounts in thousands)
For The Nine Month
Period Ended September 30,
2006 2005
----------- -----------
(Unaudited) (Unaudited)
Cash flows from operating activities
Net earnings (loss) from continuing operations $ 406 $ (819)
Adjustments to reconcile net earnings (loss) to net
cash used in operating activities
Depreciation and amortization 360 291
Gain (loss) on sale of assets (418) 118
Gain from CableTEL AD break up fee -
related party (1,500) --
Changes in operating assets and liabilities
Accounts receivable 232 (130)
Interest receivable (232) --
Other current and non current assets 262 (1,071)
Other assets 70 --
Accounts payable and other liabilities (454) 1,166
----------- -----------
Net cash used in operating activities (1,274) (445)
----------- -----------
Cash flows used in investing activities
Repayment of notes receivable 306 400
Funding of note receivable (1,377) --
Proceeds from the sale of property -- 3,057
Purchase of property and equipment (18) (41)
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Net cash provided by (used in) investing
activities (1,089) 3,416
Cash flows from financing activities
Net advances from affiliates -- 257
Payments on debt (106) (3,800)
----------- -----------
Net cash used in financing activities (106) (3,543)
Cash flows from discontinued operations
Cash provided by operating activities 268 228
Cash provided by investing activities -
proceeds from sale 1,737 --
----------- -----------
Net cash provided by discontinued operations 2,005 228
NET DECREASE IN CASH AND
CASH EQUIVALENTS (464) (344)
Cash and cash equivalents at beginning of period 650 762
----------- -----------
Cash and cash equivalents at end of period $ 186 $ 418
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The accompanying notes are an integral part of this statement.
6
CabelTel International Corporation
Consolidated Statements of Cash Flow - continued
(Amounts in thousands)
For The Nine Month
Period Ended September 30,
2006 2005
------------ ------------
(Unaudited) (Unaudited)
Non-cash
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 this statement.
7
CabelTel International Corporation
Notes To Consolidated Financial Statements
Note A: Basis of Presentation
The accompanying unaudited consolidated financial statements include the
accounts of CabelTel International Corporation and its majority-owned
subsidiaries (collectively, the "Company"). All significant intercompany
transactions and accounts have been eliminated.
The unaudited financial statements included herein have been prepared by the
Company without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. 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 notes thereto included in the Company's Annual Report
on Form 10-K, as amended, for the fiscal year ending December 31, 2005.
Operating results for the three and nine month period ended September 30, 2006
are not necessarily indicative of the results that may be expected for any
subsequent quarter or the year ended 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 required 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 have represented 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 at December 31, 2005 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.
8
Pursuant to the Rescission Agreement:
(a) The Company received back and cancelled cancelled the 31,500 shares of
Series J 2% Cumulative Preferred Stock it issued.
(b) The Company returned the equity securities of 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, 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 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: Short-Term Note Receivable - Related Party
In July 2006 the Company made an unsecured $1,377,000 loan to Eurenergy
Resources Corporation (a company that is 20% owned by an entity deemed to be
related to CabelTel). The loan has an annual interest rate of 8% with principal
and interest payable within 30 days after demand, and if not sooner demanded, on
July 17, 2007.
9
Note E: Long-Term Notes Receivable and Deferred Gain
As a result of the sale of two properties in 2001 the Company, as of January 1,
2006, held 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 when it is received. In the third quarter of 2006 the Company
determined that a $3,200,000 note due April 1, 2032 would be uncollectible and
therefore wrote off the note and the corresponding deferred gain. The write off
caused no gain or loss for the Company.
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
notes and interest thereon is limited to the cash flow of the property either
from operations, refinancing or sale.
As of September 30, 2006 the Company had two notes for $2,330,000 and a
corresponding deferred gain of $521,000.
Notes Deferred
Receivable Gain Net
-----------------------------------------
Balance 1/1/2006 $ 4,030,000 $ 3,721,000 $ 309,000
Write off of uncollectible note (3,200,000) (3,200,000) --
62% Participation in $2,406,000 Note 1,500,000 -- 1,500,000
-----------------------------------------
=========================================
Balance September 30, 2006 $ 2,330,000 $ 521,000 $ 1,809,000
=========================================
10
Note F: Long-Term Obligations
Long-term debt is comprised of the following (in thousands):
September 30, December 31,
2006 2005
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Notes payable to financial institutions maturing through $ 6,246 $ 6,341
2018 at variable and fixed interest rates ranging from
5.75% to 11% and collateralized by real property,
fixtures, equipment and the assignment of rents
Notes payable to individuals and companies maturing
through 2023 at variable and fixed interest rates ranging
from 10% to 18% and collateralized by real property,
personal property, fixtures, equipment and the
assignment of rents 2,255 2,255
Notes payable to related parties bearing interest at rates
ranging from 15% to 18% -- 7,347
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8,501 15,943
Less: current maturities 2,389 2,383
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$ 6,112 $ 13,560
NOTE G: Discontinued Operations
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.
Effective June 30, 2006, the Company sold all of its membership interests in two
limited liability companies, Gaywood Oil & Gas, LLC and Gaywood Oil & Gas II,
LLC ("Gaywood"), which own oil and gas leases in Gregg and Rusk Counties, Texas
and on which approximately 50 oil-producing wells are operating. These are 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. The operation of Gaywood and the gain on the sale have been reflected
as a discontinued operation in 2006 and 2005.
11
NOTE H: Segment Reporting
Business Operations
Currently, the Company operates one retirement community in King City, Oregon,
with a capacity of 114 residents and owns and operates an outlet mall with
approximately 315,000 square feet of retail space available for lease in
Gainesville, Texas.
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 September 30, 2006
(amounts in thousands) Corporate Real Estate Consolidated
CIC
----------------------------------------
Revenue $ 61 $ 1,030 $ 1,091
Operating expenses
Operations -- 794 794
Lease expense 28 205 233
Corporate general and administrative 202 -- 202
----------------------------------------
230 999 1,229
----------------------------------------
Operating earnings (loss) (169) 31 (138)
Interest income 95 -- 95
Interest (expense) (108) (92) (200)
Other 115 -- 115
Net earnings (loss) from continuing operations (201) 73 (128)
Total assets $ 4,533 $ 7,943 $ 12,476
Nine months ended September 30, 2006
(amounts in thousands) Corporate Real Estate Consolidated
CIC
----------------------------------------
Revenue $ 196 $ 3,117 $ 3,313
Operating expenses
Operations -- 2,355 2,355
Lease expense 73 634 707
Corporate general and administrative 765 -- 765
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838 2,989 3,827
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Operating earnings (loss) (642) 128 (514)
Interest income 417 -- 417
Interest (expense) (476) (339) (815)
Other 1,648 -- 1,648
Net earnings (loss) from continuing operations 803 (67) 736
Total assets $ 4,533 $ 7,943 $ 12,476
12
NOTE H: Segment Reporting - continued
Three months ended September 30, 2005
(amounts in thousands) Corporate Real Estate Consolidated
CIC
----------------------------------------
Revenue
Real estate operations -- 969 969
Operating expenses
Operations 5 795 800
Lease expense 19 211 230
Corporate general and administrative 256 -- 256
----------------------------------------
280 1,006 1,286
----------------------------------------
Operating earnings (loss) (280) (37) (317)
Interest Income 22 -- 22
Interest (expense) (73) (78) (151)
Other 27 -- 27
Net earnings (loss) from continuing operations (301) (118) (419)
Total assets
6,920 8,836 17,633
Nine months ended September 30, 2005
(amounts in thousands) Corporate Real Estate Consolidated
CIC
----------------------------------------
Revenue
Real estate operations -- 3,205 3,205
Operating expenses
Operations 12 2,245 2,257
Lease expense 58 634 692
Corporate general and administrative 787 787
----------------------------------------
857 2,879 3,736
----------------------------------------
Operating earnings (loss) (857) 326 (531)
Interest Income 90 90
Interest (expense) (170) (249) (419)
Loss on sale of assets (36) (36)
Other 77 77
Net earnings (loss) from continuing operations (958) 139 (819)
Total assets 6,920 8,836 17,633
13
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
--------------------------------------------------------------------------------
OF OPERATIONS
-------------
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 more
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
On September 30, 2006, the Company had current assets of $1.9 million and
current liabilities of $4.3 million. Included in current liabilities is an
obligation of principal and accrued interest of $3,112,000, 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 September 30, 2006 were $186,000.
Net cash used by operating activities was $1.3 million for the nine months ended
September 30, 2006. During the nine month period the Company had a net income of
$ 406,000 from continuing operations.
14
Net cash used in investing activities was $1.1 million for the nine months ended
September 30, 2006 which consists principally of $306,000 from the collection of
notes receivable and the funding of $1,377,000 for a loan made by the Company to
a related party.
Net cash flow used in financing activities was $106,000 in the nine months ended
September 30, 2006 which consist of principal payments made by the Company on
its existing debt.
Net cash flow from discontinued operations was $2,005,000 in 2006. In June of
2006 the Company sold Gaywood and received cash proceeds of $ 1.7 million. In
addition the Company received $268,000 in cash from the operations of Gaywood
during the period of time it was owned.
Results of Operations
The Company reported a net loss of $128,000 for the three months ended September
30, 2006 and net income of $1.1 million for the nine months ended September 30,
2006, as compared to a net loss of $294,000 and $591,000 for the three and nine
month periods ending September 30, 2005.
For the three and nine months ended September 30, 2006, the Company recorded
revenues of $1.1 million and $3.3 million for its real estate operations, as
compared to $969,000 and $3,205,000 for the three and nine months ended
September 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 is approximately 60% occupied at September 30, 2006. The increase in
revenue in 2006, as compared to 2005, is partially due to rent increases at the
retirement property. In addition the Company received fees of $37,500 of
$112,500 for the three and nine months ended September 30, 2006 from a related
party for providing accounting services.
For the three and nine months ended September 30, 2006, real estate operating
expenses were $794,000 and $2.4 million, as compared to $800,000 and $2.3
million for the three and nine months ended September 30, 2005. The increase for
the nine months ended September 30, 2006 was due to operating costs that include
promotional expenses for the Gainesville Outlet Mall.
For the three and nine months ended September 30, 2006, interest income was
$95,000 and $417,000, as compared to $22,000 and $90,000 for the three and nine
months ended September 30, 2005. During the first quarter of 2006 the Company
recorded $306,000 of interest income from loans made to CabelTEL AD in Bulgaria
(see discussion of interest expense).
Interest expense was $200,000 and $815,000 for the three months and nine months
ended September 30, 2006, as compared to $151,000 and $419,000 for the three
months and nine months ended September 30, 2005. During the first quarter of
2006 the Company recorded $306,000 of interest expense from loans made for the
purpose of advancing funds to CabelTEL AD in Bulgaria (see discussion of
interest income).
Gain on the sale of assets was $418,000 for the nine months ended September 30,
2006. On June 30, 2006 the Company sold Gaywood Oil and Gas.
15
Other income was $115,000 and $1.7 million for the three and nine months ended
September 30, 2006 as compared to $27,000 and $77,000 for the three months and
nine months ended September 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.
Forward Looking Statements
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: A number of the matters and subject areas discussed in this filing that
are not historical or current facts deal with potential future circumstances,
operations and prospects. The discussion of such matters and subject areas is
qualified by the inherent risks and uncertainties surrounding future
expectations generally, and also may materially differ from the Company's actual
future experience involving any one or more of such matters and subject areas
relating to interest rate fluctuations, ability to obtain adequate debt and
equity financing, demand, pricing, competition, construction, licensing,
permitting, construction delays on new developments, contractual and licensure,
and other delays on the disposition, transition, or restructuring of currently
or previously owned, leased or managed properties in the Company's portfolio,
and the ability of the Company to continue managing its costs and cash flow
while maintaining high occupancy rates and market rate charges in its retirement
community. The Company has attempted to identify, in context, certain of the
factors that it currently believes may cause actual future experience and
results to differ from the Company's current expectations regarding the relevant
matter of subject area. These and other risks and uncertainties are detailed in
the Company's reports filed with the Securities and Exchange Commission ("SEC"),
including the Company's Annual Reports on Form 10-K and Quarterly Reports on
Form 10-Q.
Inflation
The Company's principal sources of revenue are from rents in a retirement
community, an outlet shopping mall and 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. Worldwide consumption patterns seem to
preclude competition in the oil business in the foreseeable future. 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. The price of oil
is dictated by market conditions and the Company could not arbitrarily increase
the price of its oil.
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.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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Interest Rate Risk
Nearly 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 chief
executive officer and the 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.
PART II: OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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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
of Shares Shares that May
Average Purchased as Yet be
Total Number Price Part of Publicly Purchased
of Shares Paid per Announced Under the
Period Purchased Share Program Program(a)
---------------------------- ------------ -------- ---------------- ---------------
Balance as of March 31, 2006 2 $ 3.25 -- --
April 1-30, 2006 - -- -- --
May 1-31, 2006 - -- -- --
June 1-30, 2006 - -- -- --
------------ -------- ---------------- ---------------
September 30, 2006 1 2.18 -- --
Total 3 $ 5.43 -- --
============ ======== ================ ===============
(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
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the then most recent closing price of the Company's common stock on the
last trading day before the stock certificate(s) is (are) actually received
by the Company from the stockholder. The number of such shares purchased in
any period of time has been minimal. One share was purchased during the
quarter ended September 30, 2006.
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ITEM 6. EXHIBITS
----------------
The following exhibits are filed herewith or incorporated by reference as
indicated below.
Exhibit
Designation Exhibit 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)
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)
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Exhibit
Designation Exhibit Description
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* Certification pursuant to Rule 13a-14 and 15d-14 under the
Securities Exchange Act of 1934, as amended, of Principal
Executive Officer and Chief Financial Officer.
32.1* Certification of Principal Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. ss. 1350.
*Filed herewith.
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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 the
undersigned, thereunto duly authorized.
CabelTel International Corporation
Date: November 13, 2006 By: /s/ Gene S. Bertcher
-------------------------------
President and
Chief Financial Officer
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