FORM 10-Q/A

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, 2005
or
o 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

Nevada		75-2399477
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

Dallas, Texas

1755 Wittington Place, Suite 340

75234

(972) 407-8400

     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 o.

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes o. No x.

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o. 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 o. No o.

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		977,000
(Class)		(Outstanding at November 11, 2005)

 

 

AMENDMENT NO. 1 TO
FORM 10-Q QUARTERLY REPORT FOR
CABELTEL INTERNATIONAL CORPORATION
FOR THE FISCAL QUARTER ENDED JUNE 30, 2005

The undersigned Registrant hereby amends the following items, exhibits, or other portions of its Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2005, as set forth below and as reflected in the substituted pages attached hereto which replace the same numbered pages in the original filing.

As a preface to the identification below, the entirety of the Report has been amended to reflect an acquisition of two U.S. entities which are not consolidated into the Company but are maintained in a separate basis. This change was necessitated by certain comments by the Staff of the Securities and Exchange Commission (the ASEC@), which resulted in an appeal to the Office of the Chief Accountant of the SEC. On October 25, 2005, the Office of the Chief Accountant of the SEC provided its determination of the appeal with respect to certain accounting treatment. The appeal was the result of an initial determination and comment by the Staff of the SEC during May 2005, that, in this very unique set of circumstances and in the opinion of the Staff, reverse acquisition accounting treatment may not have been the proper treatment. Management has determined based upon discussions with the Office of the Chief Accountant during such appeal that while the overall acquisition and other contingent aspects of the transaction are a single transaction, the appropriate accounting treatment at this time is recordation of the issuance of the Preferred Stock together with a recordation of a Acontra asset@ in the same amount for the value of the two U.S. corporations and CableTEL AD. The result is that Management of the Company filed a Form 8-K Current Report for event noted October 25, 2005, under Item 4.02, which of necessity requires certain changes in the Annual Report on Form 10-K and the Quarterly Report on Form 10-Q to cover such treatment. This document includes items which are changed are as follows:

•

Page 4, Item 1 — Financial Statements

•

Page 11, Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

•

Page 14, Item 3 — Quantitative and Qualitative Disclosures About Market Risk

The balance of the items have not been changed from the original filing and have, accordingly, not been updated to a more current date.

CABELTEL INTERNATIONAL CORPORATION
Index to Quarterly Report on Form 10-Q
Period ended June 30, 2005

PART I: FINANCIAL INFORMATION			4
Item 1: Financial Statements			4
Consolidated Balance Sheets			4
Consolidated Statements of Operations			6
Consolidated Statements of Cash Flow			7
Notes To Consolidated Financial Statements			8
Item 2: Management’s Discussion And Analysis Of Financial Condition And Results Of Operations			11
Item 3. Quantitative and Qualitative Disclosures About Market Risk			14
Item 4. Controls and Procedures			14
PART II: OTHER INFORMATION			14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			14
Item 6. Exhibits			15
Signatures			16

Item 1: Financial Statements

CabelTel International Corporation
Consolidated Balance Sheets
(Amounts in thousands)

		June 30,				December 31,
Assets		2005				2004
		(Unaudited)
Current assets
Cash and cash equivalents		$	397			$	762
Accounts receivable-trade			359				222
Notes receivable			606				856
Assets held for sale			—				2,925
Other current assets, net			254				103
Total current assets			1,616				4,868
Notes receivable net of deferred income			309				309
Property and equipment, at cost
Land and improvements			2,232				2,232
Buildings and improvements			5,298				5,349
Equipment and furnishings			278				273
Proven oil and gas properties (full cost method)			1,401				1,479
			9,209				9,333
Less accumulated depreciation, depletion and amortization			(786	)			(617	)
			8,423				8,716
Deferred tax asset			1,161				1,161
Due from CableTEL AD —related party			3,058				951
Deposits			179				36
Other assets			1,455				725
Total assets		$	16,201			$	16,766

The accompanying notes are an integral part of this statement.

CabelTel International Corporation
Consolidated Balance Sheets — Continued
(Amounts in thousands)

		June 30,				December 31,
Liabilities and Stockholders’ equity		2005				2004
		(Unaudited)
Current liabilities
Current maturities of long-term debt		$	2,375			$	5,945
Current notes payable			41				240
Accounts payable — trade			581				687
Accrued expenses			1,298				828
Other current liabilities			410				—
Total current liabilities			4,705				7,700
Long-term debt			9,884				7,173
Other non-current liabilities			171				155
Total liabilities			14,760				15,028
Stockholders’ equity
Preferred stock Series B			1				1
Preferred stock Series J			3,150				3,150
Preferred stock Series J contra reserve			(3,150	)			(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
Retained earnings			(54,536	)			(54,239	)
			1,441				1,738
Total Liabilities & Stockholders’ Equity		$	16,201			$	16,766

The accompanying notes are an integral part of this statement.

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,
		2005				2004				2005				2004
		(Unaudited)								(Unaudited)
Revenue
Real Estate operations		$	1,136			$	1,116			$	2,236			$	2,340
Oil and gas operations			396				323				810				638
			1,532				1,439				3,046				2,978
Operating expenses
Real estate operations			661				727				1,267				1,359
Oil and gas operations			292				245				559				491
Lease expense			231				231				462				455
Depletion, depreciation and amortization			138				100				247				187
Corporate general and administrative			266				260				528				537
			1,588				1,563				3,063				3,029
Operating earnings (loss)			(56	)			(124	)			(17	)			(51	)
Other income (expense)
Interest income			28				54				68				128
Interest expense			(133	)			(172	)			(268	)			(453	)
Net (loss) on sale of assets			—				—				(118	)			—
Equity in net income of affiliated partnership			—				16				—				31
Other			18				55				50				65
			(87	)			(47	)			(268	)			(229	)
(Loss) from continuing operations			(143	)			(171	)			(285	)			(280	)
(Loss) from discontinued operations			(17	)			(34	)			(12	)			(100	)
Net loss applicable to common shares		$	(160	)		$	(205	)		$	(297	)		$	(380	)
Earnings (loss) per share — basic
Continuing operations		$	(0.15	)		$	(0.18	)		$	(0.29	)		$	(0.29	)
Discontinued operations			(0.01	)			(0.03	)			(0.01	)			(0.10	)
Net loss per share		$	(0.16	)		$	(0.21	)		$	(0.30	)		$	(0.39	)
Basic weighted average common shares			977				977				977				977

The accompanying notes are an integral part of this statement.

CabelTel International Corporation
Consolidated Statements of Cash Flow
(Amounts in thousands)

		For the six month
		Period Ended June 30,
		2005				2004
		(Unaudited)				(Unaudited)
Cash flows from operating activities
Net loss		$	(297	)		$	(380	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation, depletion and amortization			247				187
(Gain) on partnership			—				(31	)
Loss on sale of assets			118				—
Depreciation from assets classified as discontinued operations			—				69
Changes in operating assets and liabilities
Accounts receivable			(137	)			(118	)
Other current and non current assets			(1,043	)			(195	)
Accounts payable and other liabilities			790				(648	)
Net cash used in operating activities			(322	)			(1,116	)
Cash flows provided by (used in) investing activities
Repayment of notes receivable			3,307				879
Purchase of property and equipment, net			(33	)			(52	)
Net cash provided by investing activities			3,274				827
Cash flows from financing activities
Net advances from affiliates			453				—
Payments on debt			(3,770	)			(89	)
Net cash used in financing activities			(3,317	)			(89	)
Net decrease in cash and cash equivalents			(365	)			(378	)
Cash and cash equivalents at beginning of period			767				688
Cash and cash equivalents at end of period		$	397			$	310

The accompanying notes are an integral part of this statement.

Notes To Consolidated Financial Statements
For the Unaudited Six Months Ended June 30, 2005 and 2004

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 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, 2004. Operating results for the three and six month period ended June 30, 2005 are not necessarily indicative of the results that may be expected for any subsequent quarter or the year ended December 31, 2005.

Note B: 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.

The Company also sold a property in March 2005 and received a $200,000 non-interest bearing note. The repayment of the notes and interest thereon is limited to the cash flow of the respective properties either from operations, refinancing or sale. Subsequent to the sale, the Company has received payments totaling $30,000 and has deferred gains in the amount of $170,000 which will be recognized as cash is received.

Note C: Long-Term Obligations

Long-term debt is comprised of the following (in thousands):

		June 30,				December 31,
		2005				2004
Notes payable to financial institutions maturing through 2018; fixed and variable interest rates ranging from 5.75% to 11% collateralized by property, fixtures, equipment and the assignment of rents.		$	6,402			$	7,627
Notes payable to individuals and companies maturing through 2023; fixed and variable interest rates ranging from 10% to 18% collateralized by real property, personal property, fixtures, equipment and the assignment of rents.			2,255				4,590
Notes payable to related parties, bearing interest at rates from 15% to 18%.			3,602				901
			12,259				13,118
Less: current maturities			2,375				5,945
		$	9,884			$	7,173

Note D: 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 has been operating 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 and 2004.

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 and 2004.

In May 2005, the Company sold an assisted living facility in South Carolina. The facility has been classified as an asset held for sale at March 31, 2005. The operations of that property have been reflected as a discontinued operation in 2005 and 2004.

Note E: Segment Reporting

Business Operations

The Company operates two separate distinct businesses

	•		The ownership and operation of real estate through one retirement community in King City, Oregon, with a capacity of 114 residents, and ownership and operation of an outlet mall in Gainesville, Texas, with approximately 315,000 square feet of retail space available for lease.
	•		The ownership of oil and gas leases in Gregg and Rusk Counties, Texas, on which 48 producing wells were operating as of June 30, 2005.

The segment information and reconciliation to income (loss) from operations are as follows:

Three months ended June 30, 2005 (amounts in thousands):

		Corporate				Real Estate				Oil Operation				Consolidated CIC
Revenue
Real estate operations							1,136								1,136
Oil & gas operations											396				396
							1,136				396				1,532
Operating expenses
Operations							661				292				953
Lease expense			19				212								231
Depletion, depreciation and amortization			2				109				27				138
Corporate general and administrative			266												266
			287				982				319				1,588
Operating earnings (loss)			(287	)			154				77				(56	)
Interest Income			28												28
Interest (expense)			(55	)			(78	)							(133	)
Other			18												18
Net earnings (loss) from continuing operations			(296	)			76				77				(143	)
Total assets			5,680				8,740				1,781				16,201

Note E: Segment Reporting — Continued

Six months ended June 30, 2005 (amounts in thousands):

		Corporate				Real Estate				Oil Operation				Consolidated CIC
Revenue
Real estate operations							2,236								2,236
Oil & gas operations											810				810
							2,236				810				3,046
Operating expenses
Operations							1,267				559				1,826
Lease expense			39				423								462
Depletion, depreciation and amortization			4				190				53				247
Corporate general and administrative			528												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
Net earnings (loss) from continuing operations			(566	)			159				122				(285	)
Total assets			5,680				8,740				1,781				16,201

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 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
At June 30, 2005, the Company had current assets of $1,616,000 and current liabilities of $4,705,000. Included in current liabilities is an obligation of principal and accrued interest of $2,830,000, 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 June 30, 2005 were $397,000, as compared with $762,000 at December 31, 2004.

Net cash used by operating activities was $322,000 for the six months ended June 30, 2005. During the six month period the Company had a net loss of $297,000.

Net cash provided in investing activities was $3,274,000 for the six months ended June 30, 2005. In March and April of 2005, the Company sold two assisted living communities and received approximately $3,000,000 which approximated their book value. The proceeds were primarily used to pay off the existing mortgages.

Net cash flow used in financing activities was $3,317,000 in the six months ended June 30, 2005. The additional funds received for the sale of the two properties was used to pay off the existing mortgages on those properties.

Results of Operations
The Company reported a net loss of $160,000 and $297,000 for the three and six months ended June 30, 2005, as compared to a net loss of $205,000 and $380,000 for the three and six months ended June 30, 2004.

For the three and six months ended June 30, 2005, the Company recorded revenues of $1,136,000 and $2,236,000 for its real estate operations, as compared to $1,116,000 and $2,340,000 for the three and six months ended June 30, 2004. The Company’s retirement property is fully occupied and it is anticipated that it will remain so during 2005. The Company’s retail shopping mall was approximately 76% occupied at June 30, 2005.

For the three and six months ended June 30, 2005, revenue for the oil and gas operation was $396,000 and $810,000, as compared to $323,000 and $638,000 for the three and six months ended June 30, 2004. The increase was due principally to the increase in the price of oil.

For the three and six months ended June 30, 2005, real estate operating expenses were $661,000 and $1,267,000, as compared to $727,000 and $1,359,000 for the three and six months ended June 30, 2004. The decrease was due principally to a reduction in operating costs for the Gainesville outlet mall.
For the three and six months ended June 30, 2005, operating expenses for the oil and gas operation were $292,000 and $559,000, as compared to $245,000 and $559,000 for the three and six months ended June 30, 2004. The increase was due principally to well repairs incurred in 2005.

For the three and six months ended June 30, 2005, the depletion, depreciation and amortization expense was $138,000 and $247,000, as compared to $100,000 and $187,000 for the three and six months ended June 30, 2004. The increase was due to the additional depreciable asset — the Gainesville outlet mall.

For the three and six months ended June 30, 2005, interest income was $28,000 and $68,000, as compared to $54,000 and $128,000 for the three and six months ended June 30, 2004. The decrease was due principally to a reduction in notes receivable in 2005, as compared to 2004.

Interest expense was $133,000 and $268,000 for the three months and six months ended June 30, 2005, as compared to $172,000 and $453,000 for the three months and six months ended June 30, 2004. The decrease was due principally to the refinancing of the Gainesville outlet mall.

Loss on the sale of assets was $118,000 for the six months ended June 30, 2005. The Company sold certain of its non-producing oil wells when it was determined that we were unlikely to operate them in the future. The Company incurred a loss of $76,000 on the sale. The Company also incurred certain legal and closing costs in its sale of the assisted living property in North Carolina.

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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

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

Average Price

Part of Publicly

Purchased

of Shares

Paid per

Announced

Under the

Period

Purchased

Share

Program

Program(a)

Balance as of March 31, 2005

—

—

—

—

April 1-30, 2005

—

$

—

—

—

May 1-31, 2005

—

—

—

—

June 1-30, 2005

—

—

—

—

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, 2005.

Item 6. Exhibits

The following exhibits are filed herewith or incorporated by reference as indicated below.

Exhibit 31.1 — Certification of Chief Executive Officer Pursuant to Rule 13(a)-14(a) or Rule 15(d)-14(a)

Exhibit 31.2 — Certification of Chief Financial Officer Pursuant to Rule 13(a)-14(a) or Rule 15(d)-14(a)

Exhibit 32.1 — Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13(a)-14(b), 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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.