SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| For the Quarter Ended June 30, 2003 |
Commission File Number 1-13332 |
Cabletel Communications Corp.
(Exact name of registrant as specified in its charter)
| Ontario, Canada (State or other jurisdiction of incorporation or organization) |
8647 8526 (Canadian Federal Tax Account No.) |
230 Travail Rd.
Markham, Ontario, Canada L3S 3J1
(Address of principal executive offices)
Registrant’s telephone number, including area code: (905) 475-1030
Indicate by check mark whether 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 þ No o
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock as of the latest practicable date:
| Class | Outstanding as at August 13, 2003 | |
| Common Stock, no par value | 7,167,612 |
CABLETEL COMMUNICATIONS CORP.
FORM 10-Q
FOR THE QUARTER ENDED
JUNE 30, 2003
INDEX
| Page No. | ||||||
| Part I. | Financial Information | 3 | ||||
| Item 1. | Financial Statements | 3 | ||||
| Balance Sheet as at June 30, 2003 and December 31, 2002 | 3 | |||||
|
Statement of Operations and Deficit For the 3 and 6 month periods ended June 30, 2003 and 2002 |
4 | |||||
|
Statement of Cash Flows For the 3 and 6 month periods ended June 30, 2003 and 2002 |
5 | |||||
| Notes to Financial Statements | 6-25 | |||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 26-34 | ||||
| Item 3. | Quantitative and Qualitative Disclosures of Market Risk | 35 | ||||
| Item 4. | Controls and Procedures | 38 | ||||
| Part II. | Other Information | 39 | ||||
| Item 1. | Legal Proceedings | 39 | ||||
| Item 6. | Exhibits and Reports on Form 8-K | 39 | ||||
The Company is a “Foreign Private Issuer” as defined in Rule 3b-4 under the Securities Exchange Act of 1994, as amended. Although as a Foreign Private Issuer the Company is eligible to file reports on Form 6-K, the Company has voluntarily elected to file quarterly reports on Form 10-Q.
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CABLETEL COMMUNICATIONS CORP.
CONSOLIDATED BALANCE SHEETS
(Canadian Funds)
Unaudited
| Audited | ||||||||||
| June 30, | December 31, | |||||||||
| 2003 | 2002 | |||||||||
| (Unaudited) | ||||||||||
| ASSETS | ||||||||||
CURRENT |
||||||||||
Cash |
$ | 29,706 | $ | 63,169 | ||||||
Accounts receivable
(net of allowance of $143,852; 2002 – $109,914) |
9,666,095 | 14,291,574 | ||||||||
Inventory (Note 2) |
9,517,152 | 10,488,445 | ||||||||
Other receivables (Note 9i) |
242,500 | 235,000 | ||||||||
Income taxes recoverable |
— | 120,000 | ||||||||
Prepaid expenses and deposits |
249,112 | 1,407,169 | ||||||||
| 19,704,565 | 26,605,357 | |||||||||
PROPERTY, PLANT AND EQUIPMENT (Note 3) |
1,410,590 | 2,198,086 | ||||||||
DEFERRED REFINANCING FEES (Note 8) |
500,000 | 633,334 | ||||||||
GOODWILL |
— | 161,616 | ||||||||
PRODUCT DEVELOPMENT COSTS |
||||||||||
(net of amortization of $120,770; 2002 – $103,517) |
14,378 | 31,631 | ||||||||
| $ | 21,629,533 | $ | 29,630,024 | |||||||
| LIABILITIES | ||||||||||
CURRENT |
||||||||||
Bank indebtedness (Note 4) |
$ | 9,851,535 | $ | 12,461,424 | ||||||
Accounts payable |
4,898,367 | 6,736,089 | ||||||||
Accrued liabilities |
2,001,157 | 1,994,647 | ||||||||
Current portion of long-term debt (Note 5) |
1,956,588 | 2,067,558 | ||||||||
| 18,707,647 | 23,259,718 | |||||||||
LONG-TERM DEBT (Note 5) |
498,039 | 1,154,088 | ||||||||
| 19,205,686 | 24,413,806 | |||||||||
COMMITMENTS AND CONTINGENCIES (Note 10) |
||||||||||
| SHAREHOLDERS’ EQUITY | ||||||||||
CAPITAL STOCK (Note 6) |
||||||||||
AUTHORIZED |
||||||||||
Unlimited First preferred shares, issuable in
series |
||||||||||
Unlimited Common shares |
||||||||||
ISSUED |
||||||||||
7,167,612 Common shares (2002 – 7,167,612) |
16,136,761 | 16,136,761 | ||||||||
Paid in Capital – Warrant |
164,000 | 164,000 | ||||||||
DEFICIT |
(13,876,914 | ) | (11,084,543 | ) | ||||||
| 2,423,847 | 5,216,218 | |||||||||
| $ | 21,629,533 | $ | 29,630,024 | |||||||
See accompanying notes to financial statements.
3
CABLETEL COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(Canadian Funds)
(Unaudited)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30,
| For the Three Month | For the Six Month | ||||||||||||||||
| Period Ended June 30, | Period Ended June 30, | ||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
SALES |
$ | 8,776,970 | $ | 14,960,379 | $ | 19,895,317 | $ | 28,144,065 | |||||||||
COST OF SALES |
8,073,510 | 12,297,387 | 17,193,163 | 23,033,059 | |||||||||||||
GROSS PROFIT |
703,460 | 2,662,992 | 2,702,154 | 5,111,006 | |||||||||||||
EXPENSES |
|||||||||||||||||
Selling, general and administrative |
2,074,136 | 2,248,282 | 3,998,155 | 4,396,051 | |||||||||||||
Special charge (Note 11) |
280,000 | — | 280,000 | — | |||||||||||||
Amortization |
44,817 | 55,220 | 95,223 | 120,305 | |||||||||||||
Interest – bank indebtedness |
164,051 | 179,261 | 324,857 | 326,785 | |||||||||||||
Interest – long-term debt |
77,816 | 76,574 | 168,894 | 94,259 | |||||||||||||
| 2,640,820 | 2,559,337 | 4,867,129 | 4,937,400 | ||||||||||||||
INCOME (LOSS) BEFORE THE FOLLOWING |
(1,937,360 | ) | 103,655 | (2,164,975 | ) | 173,606 | |||||||||||
Loss on disposition of assets |
— | — | 31,269 | — | |||||||||||||
Write down of long-lived assets
(Note 3) |
400,000 | — | 400,000 | ||||||||||||||
Write off of goodwill (Note 12) |
198,606 | — | 198,606 | ||||||||||||||
Write off of other assets (Note 12) |
— | 604,809 | — | 604,809 | |||||||||||||
Loss on settlement of debt (Note 5ii) |
— | 164,000 | — | 164,000 | |||||||||||||
| 598,606 | 768,809 | 629,875 | 768,809 | ||||||||||||||
LOSS BEFORE INCOME TAXES |
(2,535,966 | ) | (665,154 | ) | (2,794,850 | ) | (595,203 | ) | |||||||||
Income taxes |
9,000 | 9,000 | (2,479 | ) | 18,000 | ||||||||||||
NET LOSS FOR THE PERIOD |
$ | (2,544,966 | ) | $ | (674,154 | ) | $ | (2,792,371 | ) | $ | (613,203 | ) | |||||
DEFICIT, beginning of period |
$ | (11,331,948 | ) | $ | (10,005,475 | ) | $ | (11,084,543 | ) | $ | (10,066,426 | ) | |||||
DEFICIT, end of period |
$ | (13,876,914 | ) | $ | (10,679,629 | ) | $ | (13,876,914 | ) | $ | (10,679,629 | ) | |||||
Earnings (loss) per share (Note 7) |
|||||||||||||||||
Basic |
($0.36 | ) | ($0.09 | ) | ($0.39 | ) | ($0.09 | ) | |||||||||
Fully diluted |
($0.36 | ) | ($0.09 | ) | ($0.39 | ) | ($0.09 | ) | |||||||||
See accompanying notes to financial statements.
4
CABLETEL COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Canadian Funds)
(Unaudited)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30,
| For the Three Month | For the Six Month | ||||||||||||||||
| Period Ended June 30, | Period Ended June 30, | ||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
OPERATING ACTIVITIES |
|||||||||||||||||
Loss for the period |
$ | (2,544,966 | ) | $ | (674,154 | ) | $ | (2,792,371 | ) | $ | (613,203 | ) | |||||
Amortization |
119,463 | 111,646 | 244,777 | 176,739 | |||||||||||||
Amortization of prepaid refinancing
fees |
66,666 | — | 133,333 | — | |||||||||||||
Write down of long-lived assets |
400,000 | — | 400,000 | — | |||||||||||||
Write off of goodwill |
198,606 | — | 198,606 | — | |||||||||||||
Write off of other assets |
— | 604,809 | — | 604,809 | |||||||||||||
Loss on settlement of debt |
— | 164,000 | — | 164,000 | |||||||||||||
Loss on disposition of assets |
— | — | 31,269 | — | |||||||||||||
Imputed interest |
(3,750 | ) | (4,000 | ) | (7,500 | ) | (8,000 | ) | |||||||||
Change in accounts receivable |
1,275,350 | (4,594,006 | ) | 4,625,479 | (3,368,845 | ) | |||||||||||
Change in inventory |
1,026,284 | 158,988 | 971,293 | 546,027 | |||||||||||||
Change in prepaid expenses,
deposits and other |
818,257 | (987,566 | ) | 1,158,057 | (995,191 | ) | |||||||||||
Change in accounts payable
and accrued liabilities |
(1,396,052 | ) | 2,697,207 | (1,831,212 | ) | 1,972,974 | |||||||||||
Change in income taxes recoverable |
— | (45,211 | ) | 120,000 | (80,192 | ) | |||||||||||
| (40,142 | ) | (2,568,287 | ) | 3,251,731 | (1,600,882 | ) | |||||||||||
FINANCING ACTIVITIES |
|||||||||||||||||
Bank indebtedness incurred (repayment) |
395,693 | 2,855,858 | (2,609,889 | ) | 1,914,551 | ||||||||||||
Repayment of long-term debt |
(337,685 | ) | (228,543 | ) | (767,019 | ) | (259,320 | ) | |||||||||
| 58,008 | 2,627,315 | (3,376,908 | ) | 1,655,231 | |||||||||||||
INVESTING ACTIVITIES |
|||||||||||||||||
Goodwill acquired |
(30,017 | ) | — | (36,990 | ) | — | |||||||||||
Disposition of (purchase of) equipment |
1,964 | (31,471 | ) | 128,704 | (25,560 | ) | |||||||||||
| (28,053 | ) | (31,471 | ) | 91,714 | (25,560 | ) | |||||||||||
CHANGE IN CASH |
(10,187 | ) | 27,557 | (33,463 | ) | 28,789 | |||||||||||
CASH, beginning of period |
39,893 | 13,524 | 63,169 | 12,292 | |||||||||||||
CASH, end of period |
$ | 29,706 | $ | 41,081 | $ | 29,706 | $ | 41,081 | |||||||||
SUPPLEMENTARY CASH FLOW INFORMATION |
|||||||||||||||||
Interest paid |
$ | 241,867 | $ | 259,835 | $ | 493,751 | $ | 429,044 | |||||||||
Income taxes paid |
$ | — | $ | — | $ | — | $ | — | |||||||||
See accompanying notes to financial statements.
5
CABLETEL COMMUNICATIONS CORP.<