10QSB 1 q605.txt QUARTERLY REPORT ON FORM 10QSB FOR THE QUARTER ENDED JUNE 30, 2005 U. S. Securities and Exchange Commission Washington, D. C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2005 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from to Commission File No. 000-26913 CYBERTEL CAPTIAL CORP. (Exact name of Small Business Issuer as specified in its Charter) NEVADA 86-0862532 ------ ---------- (State or Other Jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 9444 Waples St., Ste 290 San Diego, California 92121 ----------------------- (Address of Principal Executive Offices) Issuer's Telephone Number: (858) 646-7410 Check whether the Registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter Period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Not applicable. Check whether the Registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes No The Registrant has not been involved in any bankruptcy proceedings; however, see Item 3, Part I, for information regarding a pending legal proceeding pursuant to which additional documentation may be required to be filed by the Registrant in connection with the distribution of securities of the Registrant. APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: 2,782,592,110 June 30, 2005 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 for the periods then ended. CYBERTEL CAPITAL CORPORATION BALANCE SHEET June 30, 2005 (Unaudited) ASSETS Current Assets Cash $ 7,194 Accounts receivable, net of allowance for doubtful accounts of $8,889 3,915 Prepaid expenses 14,985 Notes receivable 2,537 ----------- Total Current Assets 28,631 Fixed assets, net of $58,631 accumulated depreciation 92 Deposit 5,087 ----------- Total Assets $ 33,810 =========== LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities Accounts payable $ 390,605 Other current liabilities 501,649 Note payable 50,000 ----------- Total Current Liabilities 942,254 ----------- Commitments and contingencies - Stockholders' Deficit: Series A convertible preferred stock, $.001 par; - 5,000 shares authorized; 460 shares issued and outstanding Series B voting preferred stock, $.001 par; 50,000,000 shares authorized; 50,000,000 shares issued and outstanding 50,000 Common stock, $.001 par value, 10,000,000,000 shares authorized, 2,782,792,110 shares issued and outstanding 2,782,591 Additional paid-in capital 18,076,442 Accumulated deficit (21,817,477) ----------- Total Stockholders' Deficit (908,444) ----------- Total Liabilities and Stockholders' Deficit $ 33,810 =========== CYBERTEL CAPITAL CORPORATION STATEMENTS OF OPERATIONS Three and Six Months Ended June 30, 2005 and 2004 (Unaudited) Three Months Six Months 2005 2004 2005 2004 ----------- ----------- ----------- ----------- REVENUES: $ 17,528 $ 49,277 $ 35,748 $ 181,593 COST OF GOODS SOLD 250 4,825 27,876 94,382 ---------- ----------- ----------- ----------- Gross Profit 17,278 44,452 7,872 87,211 EXPENSES: General, administrative and selling 542,015 795,623 1,083,829 1,568,038 Bad debt expense - 199,250 10,000 377,250 Bad debt recovery - - - (50,000) ----------- ----------- ----------- ----------- Total expenses 542,015 994,873 1,093,829 1,895,288 ----------- ----------- ----------- ----------- Operating loss (524,737) (950,421) (1,085,957) (1,808,077) OTHER INCOME (EXPENSE): Other income 2,460 - 8,452 - Interest expense (10,580) (2,001) (22,598) (2,509) Forgiveness of debt 330,686 - 330,686 - ----------- ----------- ----------- ---------- Total other income(expense) 322,566 (2,001) 316,540 (2,509) ----------- ----------- ----------- ---------- Net loss from continuing operations (202,171) (952,422) (769,417) (1,810,586) Discontinued operations: Loss from discontinued operations - (159,865) (112,617) (196,465) Loss on disposal of discontinued operations - - (16,494) - ----------- ----------- ----------- ---------- NET LOSS (202,171) (1,112,287) (898,528) (2,007,051) Preferred stock dividends (6,881) (13,654) (15,290) (30,519) ----------- ----------- ----------- ---------- Net loss attributable to common shareholders $ (209,052) $(1,125,941)$ (913,818) $(2,037,570) =========== =========== =========== =========== Basic and diluted net loss per share from continuing operations $ (0.00) $ (0.00)$ (0.00) $ (0.00) Basic and diluted net loss per share from discontinued operations (0.00) (0.00) (0.00) (0.00) Basic and diluted net loss per share (0.00) (0.00) (0.00) (0.00) Weighted average shares outstanding 2,554,570,132 2,042,132,670 1,947,254,541 1,796,287,015 CYBERTEL CAPITAL CORPORATION STATEMENTS OF CASH FLOWS Six Months Ended June 30, 2005 and 2004 (Unaudited) 2005 2004 CASH FLOWS FROM OPERATING ACTIVITIES ---------- ----------- Net loss $ (898,528)$(2,007,051) Less: Net loss from discontinued operations (129,111) (196,465) ---------- ----------- (769,417) (1,810,586) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 2,215 5,388 Stock issued for services 3,000 53,041 Stock option expense 287,356 256,873 Bad debt expense 10,000 377,250 Amortization of discount on note 15,411 - Forgiveness of debt (330,686) - Changes in assets and liabilities: Accounts receivable (10,074) 79,949 Prepaid expenses (12,214) - Other assets - 3,385 Accounts payable and accrued expenses 44,505 (146,781) ----------- ----------- Net cash used in continuing operations (759,904) (1,181,481) Net cash used in discontinued operations (35,000) (311,739) ----------- ----------- Net cash used in operating activities (794,904) (1,493,220) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Loan to third party (75,000) - ----------- ----------- Net cash used in continuing operations (75,000) - ----------- ----------- Net cash used in investing activities (75,000) - ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from note payable due to related party 25,000 - Proceeds from exercise of common stock options 676,794 993,232 ----------- ----------- Net cash provided by continuing operations 701,794 993,232 Net cash provided by discontinued operations 35,000 (92,000) ----------- ----------- Net cash provided by financing activities 736,794 901,232 ----------- ----------- NET CHANGE IN CASH (133,110) (591,988) Cash, beginning of period 140,304 751,518 ----------- ----------- Cash, end of period $ 7,194 $ 159,530 =========== =========== Supplemental disclosure of cash flow information: Cash paid for interest and taxes $ 22,598 $ - Non-cash financing activities: Conversion of accrued dividends to common stock 9,600 72,620 Issuance of common stock; acquisition of Core Energy, LLC - 27,000 CYBERTEL CAPITAL CORPORATION NOTES TO FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited interim financial statements of Cybertel Capital Corporation ("Cybertel") have been prepared in accordance with accounting principles generally accepted in the United States of America 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 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 2004 as reported in the 10-KSB have been omitted. STOCK BASED COMPENSATION The Company accounts for its employee stock-based compensation plans under Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees. Cybertel granted 1,987,388,816 options to purchase common stock and 7,500,000 options to purchase preferred stock to employees in the six months ending June 30, 2005. All options vest immediately and expire 10 years from the date of grant. Cybertel recorded compensation expense of $287,356 under the intrinsic value method during the six months ended June 30, 2005. The following table illustrates the effect on net loss and net loss per share if Cybertel had applied the fair value provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation. Three Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 Net loss available to common stockholders, as reported $(209,052) $(1,125,941) $ (913,818) $(2,037,570) Add: stock based compensation determined under intrinsic value based method 178,231 98,473 287,356 256,873 Less: stock based compensation determined under fair value based method (142,319) (655,902) (907,315) (1,711,856) --------- ----------- ----------- ----------- Pro forma net loss available to common shareholders $(173,140) $(1,683,370)$(1,533,777) $(3,492,553) ========= =========== =========== =========== Basic and diluted net loss per share As reported $ (0.00) $ (0.00)$ (0.00) $ (0.00) Pro forma $ (0.00) $ (0.00)$ (0.00) $ (0.00) NOTE 2 NOTE PAYABLE One June 24, 2004, Cybertel borrowed $25,000 from a third party. The note carries interest of 12%. The note was due within 180 days or around December 21, 2004. As of June 30, 2005, the note is in default and is carrying interest at 18%. Late payment penalties equal 10% of the total payment due. On August 13, 2004, Cybertel issued a convertible debenture for $100,000 to a third party. The debenture carries interest of 8% due on or before August 31, 2005. In the event of conversion the number of shares of common stock to be issued shall be determined by dividing (i) the unpaid principal balance, plus any accrued interest by (ii) eight percent (80%) of the average of the lowest three closing bid prices in the past 20 trading days immediately preceding any such conversion. Under generally accepted accounting principles, Cybertel is required to record the value of the beneficial conversion feature of these convertible debentures as a debt discount. The total debt discount recorded on the sale of these convertible debentures during the year 2004 was $25,000. This debt discount is being amortized over the life of the note. During the six months ended June 30, 2005, $15,411 was charged to interest expense. In the event the investors convert the debentures prior to maturity of the agreements, generally accepted accounting principles require Cybertel to expense the unamortized balance of the debt discount in full. The note was forgiven during the quarter. See note 5 for further details. During the quarter, Cybertel borrowed $25,000 from one of its directors under a verbal agreement. The note is due on demand and carries an interest rate of 10%. NOTE 3 COMMON STOCK During the six months ended June 30, 2005, employees exercised options to acquire 1,570,000 of common stock on a cashless basis through an outside broker. The broker sold the shares on the open market and Cybertel received proceeds totaling $676,794. During the six months ended June 30, 2005, holders of Series A preferred stock converted $9,600 of dividends into 100,000,000 shares of common stock, using the market price on the date of conversion. During the six months ended June 30, 2005, holders of Series A preferred stock converted 220 shares of Series A Convertible Preferred Stock into 480,000,000 shares of common stock, using the market price on the date of conversion. During the six months ended June 30, 2005, Cybertel issued 2,000,000 shares of common stock for consulting services. The shares were valued at $3,000. NOTE 4 ACQUISITION AND DISPOSITION OF CORE Acquisition On March 5, 2004 Cybertel acquired a 51% ownership interest in Core Energy, LLC, a privately held oil & gas company for 10,000 shares of Cybertel's common stock valued at the then trading price of $27,000. Cybertel agreed to fund up to $300,000 and paid $100,000 of that at closing. Disposition On April 12, 2005 Cybertel agreed to settle a dispute with Core that was effective as of March 31, 2005. Under the agreement, Cybertel agreed to release any membership interest and/or other interest in Core in exchange for the return of the 10,000 shares of common stock given to Core and Core's agreement to repay $190,000 of the loans Cybertel had made to Core. The note receivable was impaired as of March 31, 2005. Revenues less direct costs for Core were $112,617 for the quarter. This information has been classified as discontinued operations in the consolidated statements of operations. The results of operations for Core from March 5, 2004 through March 31, 2005 are included in the Statement of Operations and the Statement of Cash Flows as a discontinued operation. NOTE 5 FORGIVENESS OF DEBT During the quarter, Cybertel reached an agreement with two vendors to forgive overdue accounts and a note payable. The total amount forgiven is $330,686, which is reflected in the statement of operations. The amount of accounts payable forgiven was $225,000, notes payable forgiven was $100,000, and accrued interest of $5,686. NOTE 6 SUBSEQUENT EVENTS In July, 2005, holders of Series A preferred stock converted 480 shares of Series A Preferred stock into 50,000,000 shares of common stock . Item 2. Item 2. Management's Discussion and Analysis or Plan of Operation. Results of Operations Three months ended June 30, 2005, compared to three months ended June 30, 2004. Revenues for the three-month period ended June 30, 2005 decreased to $17,528, from $49,277 for the three months ended June 30, 2004. General, administrative and selling costs were $542,015 during the three months ended June 30, 2005, as compared to $795,623 for the three-month period ended June 30, 2004. During the three months ended June 30, 2005 we had a net loss of $202,171, as compared to $1,112,287 in the three months ending June 30, 2004. After taking into account preferred stock dividends of $6,881 and $13,654 in the quarters ended June 30, 2005 and 2004, repectively, net loss available to common stockholders was $209,052 or $(0.00) per share, during the three months ended June 30, 2005, and $1,125,941 or $(0.00) per share, during the three months ended June 30, 2004. Six months ended June 30, 2005, compared to six months ended June 30, 2004. During the six months ended June 30, 2005 revenues decreased to $35,748 from $181,593 for the six months ended June 30, 2004. General, administrative and selling costs were $1,083,829 during the six months ended June 30, 2005, as compared to $1,568,038 for the year ago period. During the six months ended June 30, 2005, we had a net loss of $898,528, as compared to $2,007,051 in the six months ended June 30, 2004. After taking into account preferred stock dividends of $15,290 and $30,519 in the six month periods ended June 30, 2005 and 2004, respectively, net loss available to common stockholders was $913,818, or $(0.00) per share, during the June 30, 2005, period and $2,037,570, or $(0.00) per share, during the June 30, 2004, period. Liquidity and Capital Resources. At June 30, 2005, we had total current assets of $28,631, including cash of $7,194. Management believes that our current cash on hand will be insufficient to meet our expenses during the next 12 months. We will need to raise more cash by selling debt or equity securities to continue our operations. There can be no guarantee that the required funds will be raised. Item 3. Controls and Procedures. As of the end of the period covered by this Quarterly Report, we carried out an evaluation, under the supervision and with the participation of our President and Treasurer, of the effectiveness of our disclosure controls and procedures. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effectively designed to ensure that information required to be disclosed or filed by us is recorded, processed or summarized, within the time periods specified in the rules and regulations of the Securities and Exchange Commission. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic Securities and Exchange Commission reports. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. In addition, we reviewed our internal controls over financial reporting, and there have been no changes in our internal controls or in other factors in the last fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting. PART II - OTHER INFORMATION Item 1. Legal Proceedings. Except as indicated below, we are not a party to any pending legal proceeding. To the knowledge of management, no federal, state or local governmental agency is presently contemplating any proceeding against us. No director, executive officer or other person who may be deemed to be an "affiliate" of Cybertel or owner of record or beneficially of more than five percent of its common stock is a party adverse to Cybertel or has a material interest adverse to us in any proceeding. (1) On or about January 25, 2002, Prudential Home Building Investors, Inc., a New Jersey corporation ("Prudential"), filed a complaint against the Company in the Superior Court of California, County of San Diego, Central Division. The case was designated Case No. GIC 782069, and sought damages in the amount of $32,000 for unpaid rent on our former La Jolla facility from September, 2001, through December, 2001, when the lease terminated. The Company has accrued this expense. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. None; not applicable. Item 3. Defaults Upon Senior Securities. None; not applicable. Item 4. Submission of Matters to a Vote of Security Holders. No matter was submitted to a vote of our Company's security holders during this quarter. Item 5. Other Information. On March 5, 2004, the Company acquired a 51% ownership interest in Core Energy, LLC, a privately held oil & gas company, in exchange for 10,000,000 "unregistered" and "restricted" shares of the Company's common stock. The Company further agreed to fund Core up to $300,000, and paid $100,000 of that at closing. For more information on this acquisition and its termination, see the Current Report on Form 8-K dated March 5, 2004 and the Current Report on Form 8-KA dated March 5, 2004, respectively filed with the Securities and Exchange Commission on March 19, 2004, and May 10, 2005. See Part II, Item 6 of this Report. Item 6. Exhibits. Exhibits. 31.1 Certification of Richard D. Mangiarelli 31.2 Certification of Richard Schmidt 32 302 Certification SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. CYBERTEL CAPITAL CORPORATION Date: 8-11-05 /s/ Richard D. Mangiarelli -------------- ------------------------------------- Richard D. Mangiarelli Chief Executive Officer, President and Director Date: 8-11-05 /s/ Richard Schmidt -------------- ------------------------------------- Richard Schmidt Chief Financial Officer Date: 8-11-05 /s/ John E. Jordan -------------- ------------------------------------- John E. Jordan Director