<PAGE>
U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB/A-1
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 0-26913
CYBERTEL COMMUNICATIONS CORP.
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(Name of Small Business Issuer in its Charter)
NEVADA 86-0862532
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(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
4275 Executive Square, Suite 510
La Jolla, California 92037
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(Address of Principal Executive Offices)
Issuer's Telephone Number: (858) 646-7410
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 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.
(1) Yes X No (2) Yes X No
--- --- --- ---
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Not applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date:
5,775,000
June 30, 2000
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The Financial Statements of the Registrant required to be filed with
this 10-QSB Quarterly Report were prepared by management, and commence on the
following page, together with Related Notes. In the opinion of management,
the Financial Statements fairly present the financial condition of the
Registrant.
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<TABLE>
CYBERTEL COMMUNICATIONS CORP.
CONSOLIDATED BALANCE SHEET
June 30, 2000
<CAPTION>
2000
ASSETS
<S> <C>
Current Assets
Cash $ 1,831,763
Marketable securities 4,736,250
Accounts receivable 256,761
Note receivable 154,688
Other current assets 7,872
Total Current Assets 6,987,334
Equipment, net of $237,977
accumulated depreciation 254,344
Construction in progress 434,807
Deposits 60,939
TOTAL ASSETS $ 7,737,424
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 30,560
Accounts payable 150,493
Accrued salary 125,142
Accrued expenses 76,643
Total Current Liabilities 382,838
Long-term Debt 52,677
Total Liabilities 435,515
STOCKHOLDERS' EQUITY
Convertable referred stock, $.001 par value, 5,000,000
shares authorized, 3,000 shares issued and outstanding 3
Common stock, $.001 par value, 20,000,000
shares authorized, 5,775,000
shares issued and outstanding 5,775
Paid in capital 9,901,871
Stock subscription receivable ( 119,500)
Unrealized gain on marketable securities, net 4,046,250
Retained (deficit) (6,532,490)
TOTAL STOCKHOLDERS' EQUITY 7,301,909
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,737,424
</TABLE>
<TABLE>
CYBERTEL COMMUNICATIONS CORP.
CONSOLIDATED INCOME STATEMENTS
For the Three Months and Six Months Ended
June 30, 2000 and 1999
<CAPTION>
Three Months Ended Six Months Ended
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues $ 409,587 $1,783,168 $ 496,191 $2,335,117
Cost of sales 215,785 1,528,414 253,907 1,805,417
193,802 254,754 242,284 529,700
Operating Expenses
Selling 75,488 153,703 185,301 184,039
General and administrative 1,299,630 381,666 2,090,498 727,593
Depreciation 23,048 14,485 42,046 14,485
Interest (income) ( 32,469) ( 6,514) ( 46,040) ( 6,717)
Interest expense 2,390 9,500 609,193 9,500
Total Operating Expenses 1,368,087 552,840 2,880,999 928,900
NET INCOME (LOSS) (1,174,285) ( 298,086) (2,638,714) ( 399,200)
Other comprehensive income
Unrealized gain on
marketable securities 4,046,250 4,046,250
NET COMPREHENSIVE
INCOME (LOSS) $2,871,965 $(298,086) $1,407,536 $( 399,200)
Net (loss) per common share $(0.23) $(0.10) $(0.50) $( 0.11)
Weighted average common shares
outstanding 5,342,262 3,112,784 5,377,743 3,720,284
</TABLE>
<TABLE>
CYBERTEL COMMUNICATIONS CORP.
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Six Months Ended June 30, 2000 and 1999
<CAPTION>
2000 1999
<S> <C> <C>
CASH FLOWS USED BY OPERATING ACTIVITIES
Net comprehensive income (loss) $ 1,407,536 $(399,199)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 42,046 35,561
Unrealized gain on marketable securities (4,046,250)
Stock issued for services 230,104 244,500
Stock issued for interest 508,005
Changes in:
Accounts receivable ( 215,219) ( 81,939)
Other current assets 25,000
Accounts payable ( 105,868) 48,730
Accrued interest ( 31,786)
Accrued expenses ( 33,217) ( 27,824)
Deferred revenue (144,500)
NET CASH USED BY OPERATING ACTIVITIES (2,219,649) (324,671)
CASH FLOWS USED BY INVESTING ACTIVITIES
Purchase of equipment ( 158,353) ( 75,905)
Note receivable ( 150,000)
Purchase of marketable securities ( 690,000)
Deposits ( 56,439)
Construction in progress ( 434,807)
NET CASH USED BY INVESTING ACTIVITIES (1,489,599) ( 75,905)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of short-term private debt placement ( 390,238)
Payments on installment debt ( 30,470)
Proceeds from installment debt 86,572 9,487
Net change in credit lines ( 90,945)
Net change in accrued officer salary ( 5,804)
Changes in amounts payable from shareholder ( 38,245)
Stock subscription receivable 385,000 34,500
Sales of preferred stock, net of
costs of fundraising 2,830,125
Sales of common stock, net of
costs of fundraising 2,101,427 817,125
NET CASH FLOWS FROM FINANCING ACTIVITIES 4,885,667 822,867
NET INCREASE IN CASH 1,176,419 422,291
CASH BALANCES
- Beginning of period 655,344 146,209
- End of period $ 1,831,763 $ 568,500
SUPPLEMENTAL DISCLOSURES
Interest paid $ 0 $ 604,091
</TABLE>
CYBERTEL COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINACIAL STATEMENTS
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Cybertel
Communications Corporation have been prepared in accordance with generally
accepted accounting principles and the rules of the Securities and Exchange
Commission ("SEC"), and should be read in conjunction with the audited
financial statements and notes thereto contained in the Company's latest
Annual Report filed with the SEC on Form 10-KSB. In the opinion of
management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of financial position and the results of
operations for the interim periods presented have been reflected herein. The
results of operations for interim are not necessarily indicative of the
results to be expected for the full year. Notes to the financial statements
which would substantially duplicate the disclosure contained in the audited
financial statements for the most recent fiscal year, 1999, as reported in the
10-KSB, have been omitted.
NOTE 2 - STOCK ISSUANCES
In February 2000, the Company received net proceeds of $2,830,125, in
connection with a private placement of 3,000 shares of $.001 par value 6%
Convertible Preferred Stock. This preferred stock is convertible to Company
common stock at any time at a formula approximating market value. 225,000
warrants were issued to investors in connection with this funding, and these
have an exercise price of $17.40 per share.
On February 14, 2000, the Company began another private placement to sell up
to 1 million common shares at $8 per share. By amendment dated June 12, 2000,
the offering price was amended to $6 per share. As of June 30, 2000, 411,014
shares had been sold in this offering for $2,466,091 gross proceeds. As of
July 28, 2000, an additional 44,625 warrants with an exercise price of $.01
per share had been issued to a promoter in connection with this offering.
Additionally, during the six months ended June 30, 2000, 9,000 shares were
sold at $2 per share and 106,250 shares were sold for $.25 per share,
resulting in cash proceeds of $44,563; and 32,934 shares were issued for
services rendered valued at $6 per share.
On June 13, 2000, issued 700,000 shares and 51,783 warrants with an exercise
price of $8 per share in connection with the acquisition of LDVL, Inc.
("LDVL").
NOTE 3 - CONSTRUCTION IN PROGRESS
In March 2000, the Company signed a joint venture agreement with Transmission
Systems, Inc., a British West Indies company, to install and operate certain
telephone equipment in various foreign countries as might be identified and
agreed upon. As of June 30, 2000, the Company has invested $165,299, which
has been used to purchase certain equipment for installation in Senegal. The
Company expects the equipment to be functioning during the third quarter of
2000. The agreement calls for the Company to fund all start-up costs, with
profits to be split 50/50. Additionally, the company has invested $269,508 in
the construction of a switch located in San Diego which is expected to be
operational in August 2000. Substantially all costs associated with these two
projects were recorded as of June 30, 2000.
NOTE 4 - ACQUISITION OF LDVL, INC.
LDVL is a company that resells xDSL circuits, high speed internet connections,
through a network of Regional Bell Operating Company sales agents and other
top tier dealers within the United States who mainly service commercial
accounts in major metropolitan areas such as New York City, Philadelphia,
Chicago, and Los Angeles. LDVL targets the high-end market for internet
services and focuses on providing reliable, low cost, high quality service.
LDVL began operations during September 1999.
On June 15, 2000, the Company acquired LDVL by exchanging stock in a
transaction recorded using the pooling-of-interests method of accounting.
Accordingly, prior period financial statements of the Company are prepared on
a consolidated basis and have been restated to show the acquisition of LDVL as
if it had occurred on September 1, 1999, with consolidated operations since
that date.
There were no material transactions between the Company and LDVL prior to the
acquisition. All accounting policies used are consistent.
The following is a condensed balance sheet of LDVL as of June 15, 2000, the
date of acquisition:
Current assets $ 80,816
Fixed assets, net of accumulated
depreciation of $4,566 95,529
Long-term assets 32,363
Total assets $208,708
Current liabilities $ 43,492
Long-term liabilities 51,056
Total liabilities 94,538
Capital stock 501,155
Retained (deficit) (386,985)
Total stockholders' equity 114,170
Total liabilities and stockholders' equity $208,708
There have been no revenues. Expenses from inception through June 15, 2000.
$159,302 selling, $219,687 general and administrative, $4,566 depreciation,
and $3,430 interest expense.
NOTE 5 - MARKETABLE SECURITIES
The Company owns 30,000 shares of Sonus Networks, Inc., which is publicly
traded on the NASDAQ system. The shares were purchased in May 2000 at $23 per
share with a resulting basis of $690,000. As of June 30, 2000, the securities
are valued at market price, then $157 per share. The securities are
classified as available for sale. Accordingly, an unrealized gain of
$4,046,250, net of tax of $0, due to the availability of income tax
carryforwards, is recognized as other comprehensive income in the quarter
ended June 30, 2000. As of July 26, 2000, the market price is $251 per share,
for and additional unrealized gain of $2,793,750, which will be recorded in
the next quarter.
NOTE 6 - STOCK OPTION PLAN
Effective April 1, 2000, the Company adopted a stock option plan to be
administered by the Board of Directors. Under the Plan, eligible employees of
the Company and its subsidiaries may be awarded incentive stock options and
eligible participants providing services to the Company may be awarded
non-qualified options. As of July 26, 2000, no options had been awarded under
the plan.
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Item 2. Management's Discussion and Analysis or Plan of Operation.
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Plan of Operation.
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It is anticipated that Cybertel Communications Corp. will produce
approximately $12,882,000 in revenue in the 2000 fiscal year and approximately
$35,000,000 in fiscal 2001. Gross profit would be approximately ($1,244,000),
and $6,766,000, respectively. In the next 12 months, the Company intends to
employ 50 IP Gateways throughout the United States in order to transport long-
haul Voice Over the Internet traffic ("VOIP," i.e., long distance voice
traffic transported as digital electronic data packets over the internet),
both domestically and internationally.
The Company's Strategic Partnership Agreements with Bell Atlantic
and Level 3 Communications allow it to collocate its Gateway equipment and
terminate traffic in areas that the Company has not or does not intend to
locate Gateways. The Company has very actively begun to employ its Affinity
Group Marketing strategy and has contracted with three of its seven targeted
groups; it is negotiating with the remaining four. The total membership
population of the Company's seven targeted groups is over 40 million.
The three groups with which the Company has contracted are: the
Tailhook Association; Miles Ahead Ministries; and the Marine Corps Reserve
Officers Association. Each agreement requires each group to forward a
marketing piece to its members; the marketing pieces will recommend a
telecommunications plan to the members, which will include long distance, toll
free service, paging, cellular service, internet access, pre-paid and regular
calling cards and other telecommunications services. The Company will provide
each group wiht a billing summary of all participants' accounts each month and
pay each group a percentage of each participant's net telephone bill. The
contracts will be in place for periods of time ranging from 12 months to 36
months, with each group having an option to renew for an additional term.
The Company also intends to build a captive agent network for direct
marketing purposes to supplement its Affinity Group Marketing programs. The
Company has retained the Southwestern Companies to conduct door-to-door
residential solicitation of new customers. These operations began on October
3, 1999. The Company has also begun its telemarketing efforts, which entail
contacting members of the Marine Corps Reserve Officers Association and the
Tailhook Association. The Southwestern Companies are entitled to a commission
of 20% of gross sales from its efforts. As of the date of this Report, the
Company and the Southwestern Companies do not have a written contract.
The Company's projections are based on the following assumptions and
limitations:
The Company's business plan details a stair step process whereby it
will lease telecommunications services that can be marketed directly to its
primary affinity groups. The Company currently has contracts with three of
the seven affinity organizations originally targeted. The combined membership
of the three contracted affinity groups is 25,000 members. The Company has
just begun contacting affinity group members and is realizing a 38% acceptance
rate. This acceptance rate substantially exceeds the 12.5% rate detailed in
the business plan. The Company is currently in contract discussions with
three more affinity groups. It is anticipated that all seven groups will be
contracted by year end, although the Company can make no assurances in this
regard. The total membership of the seven affinity groups is 40,000,000
members. The Company believes this population and its current acceptance rate
should provide the revenues detailed in the projections. Additionally, the
affinity group marketing plan is only one of several currently being test
marketed.
The second revenue source detailed is the wholesaling of
telecommunications services. The Company is buying international
telecommunication services from Bridgeport Energy Corporation and selling
these services to Justice Telecommunications, Inc. The Company also has
relationships with Flat Rate Communications, Inc., and LD Exchange, Inc., and
is pursuing other wholesale agreements as well. The profit margin is 3% to 4%
on the wholesaling of telecommunications services.
Management projects that 2000 revenues from its affinity group
program will total $2,640,000, with revenues from its wholesaling operations
totaling $8,087,000. For the 2001 fiscal year, management projects these
revenues to be $12,000,000 and $20,000,000, respectively. Cybertel's
subsidiaries, Telenomics, Inc. and Like Dat Music, Inc., project revenues of
$2,155,000 in fiscal 2000 and revenues of $4,200,000 in fiscal 2001.
In arriving at its revenue projections for its affinity groups
program, the Company assumes that on average each residential customer will
use approximately 200 minutes per month at a cost to the customer of
approximately $0.10 per minute, and that the number of residential customers
will increase from approximately 600 in September, 1999, to approximately
26,000 in December, 2000.
The cost of goods sold currently reflects the cost of a leased
network whereby the Company can transmit customer calls. The cost of goods
reflects the use of the telephone lines, billing and collections and customer
service. The rate used in the projections to reflect these costs is $0.07.
To control cost, the Company has entered into subcontract arrangements to
facilitate billing and collections and customer service. These costs are a
calculation of the services provided. As such they are a true marginal cost.
The Company's projections for its wholesaling operations assume
volume of 5,000,000 monthly minutes through December 2000, at an average rate
of $0.25 per minute. Projected cost of goods sold will be $0.25 per minute
through December 2000.
The Company has commenced the development of its own Internet
Protocol Network. It is anticipated that the planned network will be
operational by early 2001. With this network in place, the Company will have
control of its pricing for the transmission of telecommunications services.
The projection reflects a modest decrease in the cost of goods sold when the
network is operational. The Company believes the reduction of cost will be
more substantial but is reflecting a modest reduction to be conservative.
The Company's selling, general and administrative costs will be
reduced by management's intentions to subcontract significant services such as
billing and collections and customer service. The fundamental costs will be
1)the maintenance of the Company's own Internet Protocol Network and 2)the
marketing to and maintenance of affinity group relationships. The projections
reflect a management group that is primarily marketing driven and that will
target and service National Affinity Groups. The remainder of management will
monitor the subcontractor relationships to maintain the quality of service the
Company intends to provide.
The telecommunication industry holds a certain amount of risk due to
the highly competitive nature of the industry and capital required. The
reason the Company is building its own IP Network is to be in control of its
destiny with regard to price competition. To build this network the Company
has sought out the technology that is compatible with internet requirements.
The Company currently has agreements to provide sufficient funding in the
short term. See the heading "Liquidity and Capital Resources," of this
caption.
The foregoing contains "forward-looking" statements and information.
Actual results may differ materially from those projected in such forward-
looking statements and there is no assurance that the projected results will
be obtained.
Results of Operations.
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Six months ended June 30, 2000, compared to six months ended June 30,
2000.
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Revenues for the period ended June 30, 2000, decreased to $496,191 as
compared to $2,335,117 for the period ended June 30, 1999, as the result of
the development of a new wholesaling program for long distance
telecommunications services.
General and administrative costs have risen to $2,090,498 for the
period ended June 30, 2000, as compared to $727,593 for the period ended
June 30, 1999. Other general and administrative costs, such as payroll,
marketing and legal, have increased as the Company has begun to implement its
business plan.
Liquidity and Capital Resources.
--------------------------------
On about February 14, 2000, the Company commenced a private
placement of a minimum of 100,000 shares, and a maximum of 1,000,000
"unregistered" and "restricted" shares of its common stock at a price of $8
per share. Subject to the completion of the minimum offering, our placement
agent, Capital Growth Resources, of El Cajon, California, will receive a sales
commission of 10% of the gross proceeds of the offering, together with:
2% of the gross proceeds as a wholesaling fee;
2% of the gross proceeds as a "due diligence" fee;
2% of the gross proceeds as an unaccountable expense allowance;
and
12.5 warrants for every 100 shares sold (together with an
additional 20,000 warrants if the offering is completed within
90 days). Each warrant grants Capital Growth the right to
acquire one "unregistered" and "restricted" share of our common
stock for a period of one year, at a price of $0.01 per share.
As of June 30, 2000, the Company had sold 411,014 shares, for gross
proceeds of $2,466,091. The offering is continuing. Unless the Company is
able to sell the maximum amount of its offering, for total gross proceeds of
$8,000,000, or to raise substantial additional funding, it will not be able to
proceed with its expansion plans. There can be no assurance that the Company
will be able to raise such funding.
Effective February 15, 2000, the Company entered into a Securities
Purchase Agreement with Adara Investors, LLC, a Delaware limited liability
company. Under the Securities Purchase Agreement, the Company sold to Adara:
3,000 Shares of its Series A Preferred Stock, at a price of
$3,000,000;
Warrants to purchase 225,000 shares of its common stock; and
For $100, a Supplemental Warrant to purchase an additional
2,000 shares of Series A Preferred Stock (the "Additional
Shares") for $2,000,000, and Stock Purchase Warrants to
purchase up to 150,000 additional shares of common stock.
Adara can exercise the Warrants until February 15, 2004, at a price
of $16.86 per share. It can exercise the Supplemental Warrant until November
15, 2000.
Also on February 15, 2000, Cybertel and Adara executed a
Registration Rights Agreement under which the Company agreed to file, within
45 days of the initial closing date of the Securities Purchase Agreement, a
Registration Statement on Form SB-2, covering the resale of two times:
the number of shares of common stock that Adara would be able
to receive from the conversion of the Shares and the Additional
Shares on the date of filing; and
the maximum number of shares of common stock that Adara would
be able to receive upon exercise of all Warrants that we issued
to Adara under the Securities Purchase Agreement.
The Company must keep the Registration Statement effective until the
earlier of:
the date on which Adara has sold all of the registered
securities;
the date on which Adara may sell the registered securities
immediately, without restriction; and
24 months after the date on which the Registration Statement is
declared effective.
The Company must pay 2% of Adara's $3,000,100 purchase price for
every 30 day period during which:
it has not filed the Registration Statement with the Securities
and Exchange Commission within 45 days of the closing date of
the Securities Purchase Agreement;
the Registration Statement is not effective within 90 days of
the closing of the Securities Purchase Agreement or, if the
Commission does not review it, within three days after the
Company or its counsel receive notice that there will be no
review;
for any period of five days after the effectiveness deadline,
the Company does not have enough shares listed for trading or
reserved for issuance upon the conversion of Adara's
convertible securities; or
for any period of five days after the effectiveness deadline,
the Company becomes aware of any event that makes any statement
in its Prospectus untrue or misleading, or that the Securities
and Exchange Commission has suspended the Registration
Statement.
For each 30 day default period during which the Company has cured
the default, the penalty will be prorated.
One June 30, 2000, the Securities and Exchange Commission ordered
effective the Company's Registration Statement on Form SB-2 with respect to
these shares.
The Registration Rights Agreement also gives Adara "piggyback"
registration rights with respect to these securities.
Additionally, during the six months ended June 30, 2000, 9,000
shares were sold at $2 per share and 106,250 shares were sold for $.25 per
share, resulting in cash proceeds of $44,563; and 32,934 shares were issued
for services rendered valued at $6 per share.
The Company had cash on hand of $1,831,763 at June 30, 2000. This
will not be sufficient to fund its proposed expansion of its IP network
without substantial additional funding.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
----------------------------
None; not applicable.
Item 2. Changes in Securities and Use of Proceeds.
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Recent Sales of Unregistered Securities.
----------------------------------------
See the heading "Liquidity and Capital Resources," for a discussion
of the "unregistered" and "restricted" securities issued by the Company during
the quarterly period ended June 30, 2000.
Item 3. Defaults Upon Senior Securities.
------------------------------------------
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
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None; not applicable.
Item 5. Other Information.
----------------------------
None; not applicable.
Item 6. Exhibits and Reports on Form 8-K.
-------------------------------------------
(a) Exhibits.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K.
Dated June 13, 2000, filed with the Securities and Exchange
Commission on June 28, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
CYBERTEL, COMMUNICATIONS CORP.
Date: 11/13/2000 By:/s/Richard D. Mangiarelli
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Richard D. Mangiarelli
CEO, President and Director
Date: 11/13/2000 By:/s/Richard Schmidt
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Richard Schmidt
Chief Financial Officer
