UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2006.

o	REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

		For the transition period from to
		Commission file number 001-15383

	CARDINAL COMMUNICATIONS, INC.
	(Exact name of small business issuer as specified in its charter)

NEVADA		91-2117796
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

	11101 WEST 120th AVENUE, SUITE 220, BROOMFIELD, COLORADO 80021
	(Address of principal executive offices)

	(303) 285-5379
	(Issuer’s telephone number)


	(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (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 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 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

Check whether the registrant filed all documents and reports required to be filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes o No o

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

As of November 17, 2006, there were 534,566,549 shares of the issuer’s outstanding common stock.

Transitional Small Business Disclosure Format (Check one): Yes o No x

Special Note Regarding Forward-Looking Statements

This Form 10-QSB and other reports filed by Cardinal Communications, Inc. (the "Registrant" or the “Company”) from time to time with the Securities and Exchange Commission (collectively the "Filings") contain forward looking statements and information that are based upon beliefs of, and information currently available to, the Registrant's management as well as estimates and assumptions made by the Registrant's management. When used in the Filings the words "anticipate", "believe", "estimate", "expect", "future", "intend", "plan" or the negative if these terms and similar expressions as they relate to the Registrant or the Registrant's management identify forward looking statements. Such statements reflect the current view of the Registrant with respect to future events and are subject to risks, uncertainties, assumptions and other factors relating to the Registrant's industry, operations and results of operations and any businesses that may be acquired by the Registrant. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.

PART I - Financial Information

Item 1. Financial Statements

CARDINAL COMMUNICATIONS, INC. AND SUBSIDIARIES

FINANCIAL STATEMENTS

TABLE OF CONTENTS

	PAGE
Consolidated Balance Sheet as of September 30, 2006 (Unaudited)	4

Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2006 and 2005 (Restated) (Unaudited)	6

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2006 and 2005 (Restated) (Unaudited)	7

Notes to Consolidated Financial Statements (Unaudited)	9

CARDINAL COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
September 30, 2006 (UNAUDITED)

ASSETS
(Substantially pledged)



Cash and cash equivalents	$	434,594
Marketable securities		700
Accounts receivable, net		276,217
Notes receivable - net of $1,168,606 discount		950,778
Other receivables, net		487,371
Deposits and prepaid expenses		577,946
Property and equipment, net		1,290,666
Real estate and land inventory		47,471,995
Deferred costs of goods sold		1,927,325
Intangibles, net		6,714,704
Other assets		428,977
Assets held for sale		404,401

Total Assets	$	60,965,674

The accompanying notes are an integral part of these statements.

CARDINAL COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (Continued)
September 30, 2006 (UNAUDITED)

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)



Accounts payable	$	4,406,270
Accrued expenses and other liabilities		4,201,231
Deferred revenue		1,971,674
Land and construction loans		35,225,611
Related party debt		4,526,915
Notes payable, net of $30,487 debt discount		10,505,229
Liabilities of assets held for sale		1,254,747

Total Liabilities		62,091,677

Commitments and Contingencies

Stock Committed		1,211,982

Minority Interest		1,539,178

Stockholders' equity (deficit):
Preferred stock; par value $0.0001; issuable in series; authorized 100,000,000
Series A Convertible Preferred stock; issued and outstanding 6,200		1
Series B Convertible Preferred stock; issued and outstanding 350,000		35
Common stock; par value $0.0001; authorized 800,000,000; issued and outstanding
522,166,549		52,216
Additional paid-in capital		74,096,488
Deferred consulting		(66,667	)
Other comprehensive (loss)		(12,100	)
Accumulated (deficit)		(77,947,136	)

Total Stockholders' Equity (Deficit)		(3,877,163	)

Total Liabilities and Stockholders' Equity (Deficit)	$	60,965,674

The accompanying notes are an integral part of these statements.

CARDINAL COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)

	Three Months Ended September 30						Nine Months Ended September 30
	2006			2005 (Restated)			2006			2005 (Restated)
REVENUES
Revenues	$	9,923,880		$	5,061,099		$	18,724,218		$	12,274,618
Gain on disposition of real estate		—			—			1,761,146			—
Cost of sales		(9,151,925	)		(3,678,104	)		(17,036,665	)		(8,194,461	)
Gross profit		771,955			1,382,995			3,448,699			4,080,157

OPERATING EXPENSES
Depreciation and amortization		118,204			427,569			581,773			1,116,136
Asset impairment		39,071			93,097			293,012			93,097
Accounts Payable Settlements		—			8,801			13,652			8,801
Professional fees		301,382			497,929			1,368,897			2,415,794
Rent		119,709			177,798			424,460			345,924
Salaries and commissions		503,203			1,567,186			1,980,969			3,554,767
Selling, general and administrative		380,269			459,789			1,083,820			1,329,199
Total operating expenses		1,461,838			3,232,169			5,746,583			8,863,718

INCOME (LOSS) FROM OPERATIONS		(689,883	)		(1,849,174	)		(2,297,884	)		(4,783,561	)

OTHER INCOME (EXPENSE)
Other income (expense)		(34,816	)		(92,521	)		163,253			(122,121	)
Accretion of interest (expense) on convertible debt		(18,832	)		(207,670	)		(250,916	)		(580,431	)
Gain (loss) on disposition of assets		700			—			13,670			(25,764	)
Interest (expense)		(465,820	)		(264,951	)		(1,417,629	)		(694,397	)
Total other (expense)		(518,768	)		(565,142	)		(1,491,622	)		(1,422,713	)

(LOSS) FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST		(1,208,651	)		(2,414,316	)		(3,789,506	)		(6,206,274	)

(Income)/loss attributable to minority interest		314,363			65,829			633,110			(346,207	)

(LOSS) FROM CONTINUING OPERATIONS	$	(894,288	)	$	(2,348,487	)	$	(3,156,396	)	$	(6,552,481	)

Income (loss) from discontinued operations	$	(5,220	)	$	(1,040,134	)	$	(2,225,969	)	$	(880,434	)

NET (LOSS) BEFORE COMPREHENSIVE (LOSS)	$	(899,508	)	$	(3,388,621	)	$	(5,382,365	)	$	(7,432,915	)

OTHER COMPREHENSIVE (LOSS)
Unrealized holding (loss)		(100	)		(10,800	)		(12,100	)		(562,000	)

COMPREHENSIVE (LOSS)	$	(899,608	)	$	(3,399,421	)	$	(5,394,465	)	$	(7,994,915	)

Income/(loss) per common share, basic and diluted:

(Loss) from continuing operations	$	(0.002	)	$	(0.009	)	$	(0.007	)	$	(0.027	)

Income/(loss) from discontinued operations	$	—		$	(0.004	)	$	(0.005	)	$	(0.004	)

Net (loss)	$	(0.002	)	$	(0.013	)	$	(0.012	)	$	(0.031	)


Weighted average number of shares outstanding		525,881,742			260,556,939			462,291,807			243,349,435


The accompanying notes are an integral part of these statements.

CARDINAL COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
	Nine Months Ended September 30
	2006			2005 (Restated)
CASH FLOWS FROM (TO) OPERATING ACTIVITIES
Net (loss) before comprehensive (loss)	$	(5,382,365	)	$	(7,432,915	)
Adjustments to reconcile net (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization		581,773			1,116,136
Stock issued for consulting, fees and compensation		1,412,186			3,412,444
Stock options issued for consulting services		—			18,375
Stock committed for expenses		105,930			—
Accretion of interest expense on convertible debt		252,749			580,431
Minority interest loss of subsidiaries attributable to parent		(239,964	)		—
Income (loss) attributable to minority interest		(633,110	)		(389,947	)
(Gain) Loss on sale of assets		(13,670	)		25,764
Asset impairment		128,464			93,097
(Gain) loss from discontinued projects		10,553			—

Changes in Operating Assets and Liabilities:
Accounts receivable		178,454			(73,364	)
Financing costs		—			292,741
Accounts payable		2,103,043			1,073,061
Accrued expenses and other liabilities		484,207			1,887,097
Deferred revenue		(653,311	)		1,471,480
Other assets and liabilities		400,024			(199,313	)
Real estate and land inventory		(1,727,743	)		(5,732,526	)
Deferred Costs of Goods Sold		(66,665	)		(1,165,459	)
Net cash provided by (used in) continuing operations		(3,059,445	)		(5,022,898	)

Net cash provided by (used in) discontinued operations		2,214,842			(325,011	)
Net cash from operations		(844,603	)		(5,347,909	)

CASH FLOWS FROM (TO) INVESTING ACTIVITIES
Purchases of property and equipment		(29,050	)		(194,711	)
Cash paid for acquisition		—			(294,765	)
Issuance of note receivable		(1,052,560	)		—
Purchases of intangibles & other assets		(6,000	)		—
Cash acquired through acquisition		—			1,352,147
Proceeds from sale of assets		17,924			9,284
Net cash provided by (used in) investing activities		(1,069,686	)		871,955

CASH FLOWS FROM (TO) FINANCING ACTIVITIES
Proceeds from issuances of common stock		550,000			—
Proceeds from notes payable		15,634,762			20,730,438
Proceeds from related party notes payable		1,117,500			732,215
Payments on notes payable		(15,968,220	)		(16,872,384	)
Payments on related party notes payable		(52,789	)		44,585
Investment by minority interest members		83,021			—
Net cash provided by (used in) financing activities		1,364,274			4,634,854

Net increase (decrease) in cash		(550,015	)		158,900
Cash and cash equivalents, beginning of period		984,609			480,122
Cash and cash equivalents, end of period	$	434,594		$	639,022

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest	$	1,077,641		$	360,821
Stock issued for acquisition of assets	$	—		$	5,705,000
Stock issued for satisfaction of debt	$	1,489,978		$	471,538

The accompanying notes are an integral part of these statements.

SUPPLEMENTAL DISCLOSURE

OF NON-CASH INVESTING AND

OTHER CASH FLOW INFORMATION

Nine Months Ended September 30, 2006

In the first quarter of 2006, the Company issued 12,552,131 shares under various consulting agreements, which shares were valued at $236,939; however $9,500 of this expense was recorded as deferred consulting. Additionally, $22,340 of amortized deferred consulting was recognized during this period. In the second quarter of 2006, the Company issued 10,001,790 shares under various consulting agreements, which shares were valued at $160,992. Additionally, $14,003 of amortized deferred consulting was recognized during this period as consulting expense. In the third quarter of 2006 the Company issued 2,210,723 shares under a consulting agreement, which shares were valued at $14,922.

In the first quarter of 2006, the Company issued 841,750 shares to an outside director for committee services performed, which shares were valued at $15,000. In the second quarter of 2006, the Company issued 1,751,000 shares to an outside director for committee services performed, which shares were valued at $30,000.

In the first quarter of 2006, the Company issued 17,414,989 shares to employees as part of an employee stock purchase and compensation program, which shares were valued at $328,549. In the second quarter of 2006, the Company issued 19,764,010 shares to employees as part of an employee stock purchase and compensation program, which shares were valued at $308,205. In the third quarter of 2006, the Company issued 2,109,490 shares to employees as part of an employee stock purchase and compensation program, which shares were valued at $14,239.

In the first quarter of 2006, the Company issued 4,090,920 shares under two consulting agreements for legal services, which shares were valued at $70,000. In the second quarter of 2006, the Company issued 10,876,980 shares under two consulting agreements for legal services, which shares were valued at $205,000; however $160,000 of this expense was recorded as deferred consulting. Additionally, $40,000 of amortized deferred consulting was recognized as legal fees during the second quarter. In the third quarter of 2006, the Company issued 2,027,027 shares under a consulting agreement for legal services, which shares were valued at $13,683. Additionally, $40,000 of amortized deferred consulting was recognized as legal fees during the third quarter.

Nine Months Ended September 30, 2005 (Restated)

In the first quarter of 2005 (restated), the Company issued 13,656,959 shares under various consulting agreements, which shares were valued at $1,160,713. Additionally, $8,750 of amortized deferred consulting was recognized during this period. In the second quarter of 2005 (restated) the Company issued 20,815,500 shares under various consulting agreements, which shares were valued at $1,182,901; however $65,190 of this expense was recorded as deferred consulting. Additionally, $8,750 of amortized deferred consulting was recognized during this period. In the third quarter of 2005 (restated) the Company issued 1,767,424 shares under various consulting agreements, which shares were valued at $86,777. Additionally, $23,589 of amortized deferred consulting was recognized during this period.

In the second quarter of 2005 (restated), the Company issued 1,142,625 shares to employees as part of an employee stock purchase and compensation program, which shares were valued at $67,126. In the third quarter of 2005 (restated), the Company issued 1,584,778 shares to employees as part of an employee stock purchase and compensation program, which shares were valued at $69,545.

In the second quarter of 2005 (restated) the Company issued 4,166,667 shares pursuant to a debt settlement agreement; the shares issued were valued at $245,833: $119,708 was recorded as consulting fees and $126,125 was recorded as debt settlement. In the third quarter of 2005 (restated) the Company issued 9,383,430 shares pursuant to various debt settlement agreements; the shares issued were valued at $393,631: $91,983 was recorded as consulting fees and $301,648 was recorded as debt settlement.

CARDINAL COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (Restated)

(UNAUDITED)

Note 1. Interim Consolidated Financial Statements

In the opinion of management, the accompanying consolidated financial statements as of September 30, 2006 and for the nine months ended September 30, 2006 and 2005 (restated), reflect all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial condition, results of operations and cash flows of Cardinal Communications, Inc. and subsidiaries (“Company”), and include the accounts of the Company and all of its subsidiaries.

The financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to such rules and regulations. These unaudited financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2005 filed with the SEC on April 17, 2006.

Certain reclassifications and adjustments may have been made to the categories presented in the financial statements for the comparative period of the prior fiscal year to conform to the 2006 presentation. The results of operations for the interim periods are not necessarily indicative of the results to be obtained for the entire year.

Correction of an Error in Previously Issued Financial Statements

The Company determined it had an accounting error recording sales when the Company still had obligations. The Company error recognized $2,041,670 in sales for December 31, 2005 and $1,484,350 in sales for September 30, 2005. Please see Correction of an Error in Previously Issued Financial Statements under Note 3 for more details.

Going Concern

As of December 31, 2005 and September 30, 2006 the Company has experienced recurring losses and, as a result, there exists substantial doubt about its ability to continue as a going concern. For the Nine Months Ended September 30, 2006, the Company incurred a net loss of $5,382,365. As of September 30, 2006, Cardinal had an accumulated deficit of $77,947,136. The Company is actively seeking customers for its services. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event it cannot continue in existence. These factors raise substantial doubt about its ability to continue as a going concern.

Nature of Business

The Company offers integrated construction and construction management services, as well as broadband communications design, implementation, and operations services to other large developers and municipalities seeking to deploy broadband services. The Company also continues to implement and expand its business plan as a provider of enhanced telephone (voice) services, cable television (video) and Internet (data) services to business and residential customers.

Note 2. Critical Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include all of the accounts of the Company and all majority owned and/or controlled subsidiaries. At September 30, 2006, the Company has recorded minority interest of $1,539,178 representing third party ownership of the entities not wholly owned by the Company. Sovereign Partners, LLC, a wholly owned subsidiary of the Company, consolidates all operations of its subsidiaries due to a controlling financial interest or a controlling management interest in these subsidiaries. As the Company finalizes construction projects, certain entities may be dissolved in 2006. The Company is actively trying to sell its subsidiary Connect Paging, Inc. d/b/a Get A Phone and subsequently has recorded the associated assets and liabilities as held for sale and the operating results are included in discontinued operations. Please see Note 4. Assets held for sale below for more details.

In accordance with the Emerging Issues Task Force Issue No. 03-16, Accounting for Investments in Limited Liability Companies, the equity method of accounting is used for affiliated LLC entities over which the Company has significant influence; generally this represents partnership equity or common stock ownership interests of at least 3% to 5% and not more than 50%. Under the equity method of accounting, the Company recognizes its pro rata share of the profits and losses of these entities and have been included in other assets.

Inter-company transactions and balances have been eliminated in the consolidation.

Stock-Based Compensation

Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123R, under which compensation expense is recognized in the Consolidated Statement of Operations for the fair value of employee stock-based compensation. The Company has elected the modified-prospective transition method as permitted by SFAS No. 123R and accordingly, prior periods have not been restated to reflect the effect of SFAS No. 123R. The modified-prospective transition method requires that stock-based compensation expense recognized in the first quarter of fiscal 2006 include (1) quarterly amortization of all stock-based payments granted prior to, but not vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123 and (2) quarterly amortization of all stock-based payments granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123R. In addition, pursuant to SFAS No. 123R, the Company is required to estimate the amount of expected forfeitures when calculating stock-based compensation expense, rather than accounting for forfeitures as incurred, which was the Company’s previous method. Compensation expense will be recognized over the requisite service (vesting) period using the straight-line attribution method. The Company has evaluated the impact of the adoption of SFAS 123(R), and believes that it could have an impact to the Company's overall results of operations depending on the number of stock options granted in a given year. All employee options issued before January 1, 2006 were fully vested and no employee options have been granted nor vested in the fiscal year of 2006.

Stock for Services

The Company has issued stock pursuant to various consulting agreements. Deferred consulting costs which are valued at the stock price on the date of a particular agreement or the value of services, are recorded as a reduction of stockholders’ equity and are amortized over the useful lives of the respective agreements.

Revenue Recognition

The Company recognizes revenue from the sale of real estate when cash is received, title possession and other attributes of ownership have been transferred to the buyer and the Company is not obligated to perform significant additional services after sale and delivery. During construction, all direct material and labor costs and those indirect costs related to acquisition and construction are capitalized, and all customer deposits are treated as liabilities. Capitalized costs are charged to earnings upon revenue recognition. Costs incurred in connection with completed homes and selling, general and administrative costs are charged to expense as incurred.

For the mortgage brokerage operations, the Company only acts as an agent to place mortgages with third parties. The Company recognizes revenue on fees received from the mortgage lenders on the day the loan is closed, which is also the day the Company receives payment. The Company receives a percentage of the loan closing by the third party sponsor based on the interest rate charged to the consumer. The Company also recognizes loan origination fees from borrowers at closing.

The Company recognizes revenue from non-development construction consulting service activities when performed and there are no remaining service obligations.

The Company charges telephony, video and data customers monthly service fees and recognizes the revenue in the month the services are provided or equipment is sold. The Company bills monthly for voice (telephone), video and data services in advance and generally receives payments during the month in which the services are provided.

Deferred Revenue

The Company recognizes revenues in the period in which the earnings process is complete with no future obligations to be performed by the Company. Revenues collected in advance of the earnings process must be recorded as deferred revenues, a liability account, for financial statement purposes. Deferred revenue at September 30, 2006 and 2005 (restated) were $1,971,674 and $1,516,705 respectively.

Components of Deferred Revenue at September 30, 2006

Deferred Revenue from Real Estate Sales	$	1,927,325
Deferred Revenue from Communications Sales		44,349
Total Deferred Revenue	$	1,971,674

Deferred Costs of Goods Sold

The Company sells real estate inventory for which sales can not be recognized until all foreseeable obligations are satisfied. Inventory that is sold, but has not completed the earnings process is recorded as deferred costs of goods sold. If future expenses are anticipated at the time the inventory is sold, these costs are accrued at the time of the sale. Deferred costs of goods sold at September 30, 2006 and 2005 (restated) were $1,927,325 and $1,165,459 respectively.

Leasing Previously Sold Units

The Company has entered into a series of agreements to sell residential units and lease them back. These units are used for marketing purposes as model units. The revenue for these units is recognized at the time of sale of these units and the monthly rent expense is recognized in the period incurred. Generally, the Company enters into one year lease agreements for these units, and the buyers have the right to sell the units during the lease period.

The Company has also entered into a series of agreements to sell residential units and lease them back; the Company then holds these units for sale. The Company does not retain any ownership interest in these units. The sale of these units reduce commitments on construction lines of credit. Generally, the Company enters into one year lease agreements for these units, but the buyers have the right to sell the units during the lease period. The Company records the costs of these sales as deferred costs of goods sold until the unit is sold to another party. The revenue for these units is recognized as deferred revenue at the time of the sale. The Company then recognizes the revenue and corresponding costs of goods sold once the obligations of the Company are fully satisfied.

Property and Equipment

Property and equipment are stated at cost and are depreciated over the estimated useful lives of the assets.

Class of Asset	Useful life in Years
Airplane and vehicles	5
Furniture	5
Data Hardware	3
Equipment	5
Leasehold improvements	Lesser of life of lease or useful life
Rental real estate	20

Maintenance and repairs are charged to expense as incurred and expenditures for major improvements are capitalized. When assets are retired or otherwise disposed of, the property accounts are relieved of costs and accumulated depreciation and any resulting gain or loss is credited or charged to operations.

Classifications of property and equipment and accumulated depreciation were as follows at September 30, 2006:


Airplane and vehicles	$	605,012
Furniture		293,107
Data Hardware		108,831
Equipment		1,356,007
Leasehold improvements		46,565
Rental real estate		423,278
		2,832,800

Less accumulated depreciation		(1,542,134	)
Net property and equipment	$	1,290,666

For the nine months ending September 30, 2006 and 2005 (restated), the Company recognized $457,824 and $502,340 of depreciation expense, respectively.

In June the company sold the developed real estate in its wholly owned subsidiary, Colorado River KOA, LLC. The company had developed these assets for sale; however the company has been leasing and receiving rental income from these facilities while holding the property for sale. Historically these developed assets were held as buildings and developments properties. The Company received $3,000,000 for the sale of these assets and recorded a gain on disposition of real estate for the assets of $1,761,146.

Real Estate and Land Inventory

Inventories, consisting of single and multi family residential units and commercial projects under construction, are stated at the lower of accumulated cost or net realizable value. Inventories under development or held for development are stated at accumulated cost, unless certain facts indicate such cost would not be recovered from the cash flows generated by future disposition. In this instance, such inventories are measured at fair value.

Sold units are expensed on a specific identification basis. Under the specific identification basis, cost of sales includes the construction cost of the unit, an average lot cost by project based on land acquisition and development costs, and closing costs and commissions. Construction related overhead and salaries are also capitalized and allocated proportionately to projects being developed. Construction cost of the unit includes amounts paid through the closing date of the unit. The Company also leases back units it has sold for use as model units (marketing tools). The monthly rental expense is recorded in the period incurred.

Major components of real estate and land inventory at September 30, 2006 were:


Residential/Commercial units under construction	$	25,972,884
Land under development		21,499,111

Total real estate and land inventory	$	47,471,995

Bad Debt

The Company estimates the amount of uncollectible accounts receivable and records an allowance for bad debt. Uncollectible accounts receivable are then charged against this allowance. At September 30, 2006 the Company does not have a bad debt allowance.

Goodwill

Goodwill was recorded at its purchase price and is not being amortized. Pursuant to SFAS 142 Goodwill and Other Intangible Assets and SFAS 144 Accounting for the Impairment or Disposal of Long-Lived Assets, the Company at December 31, 2005 evaluated its goodwill for impairment and determined the fair value of its goodwill exceeded the book cost. However, due to an unexpected downturn in the Texas communications market, the Company decided to retest the goodwill associated with Connect Paging, Inc. The Company determined through this process that all of the goodwill associated with Connect Paging, Inc. d/b/a Get A Phone should be impaired as of June 30, 2006. The Company has recorded an impairment charge in the income (loss) of discontinued operations of $1,820,824 - extinguishing the Get A Phone goodwill asset. Please see Assets Held for Sale and Discontinued Operations below for more details.

Intangibles

Classification of intangible assets and accumulated amortization at September 30, 2006 were as follows:

Description
Customer base	$	133,313
Goodwill		6,688,207
Totals		6,821,520
Accumulated amortization		(106,816	)
Intangibles, net	$	6,714,704

For the Nine Months Ended September 30, 2006 and 2005 (restated), the Company recognized $123,949 and $613,796 of amortization expense, respectively.

Loss Per Common Share

The loss per common share is presented in accordance with the provisions of SFAS No. 128 Earnings Per Share. Basic loss per common share has been computed by dividing the net loss available to the common stockholder by the weighted average number of shares of common stock outstanding for the period. The effect of considering all potential dilutive securities is not presented as the effects would be anti-dilutive.

Investment in EMT

In February, 2006, the Company received 46,000,000 shares of Entertainment Media and Telecoms Corporation, Australian Stock Exchange code “ETC”. Basis in these shares was valued at $87,924 since $339,618 was recorded as a reduction to the Note Receivable from GalaVu while $251,694 was recorded as a reduction to the GalaVu Receivable Discount. In April, 2006, the Company received 7,250,000 shares of Entertainment Media and Telecoms Corporation, Australian Stock Exchange code “ETC”. Basis in these shares was valued at $13,858 since $53,527 was recorded as a reduction to the Note Receivable from GalaVu while $39,669 was recorded as a reduction to the GalaVu Receivable Discount. Previously, In December 2005, the Company paid the debt holders of Gala Vu $60,608 as a deposit on this transaction; in July 2006 this deferred acquisition cost was reclassed as investment in EMT and will increase the Company’s basis in shares of Entertainment Media and Telecoms Corporation. The GalaVu transaction is described in further detail under Note 6. Acquisitions.

Marketable Securities and Comprehensive Income

At September 30, 2006, the Company was holding 1,000 shares of EATware Corporation stock (OTCBB: EATW) and the market value of the shares was $700, while the book value of the shares was $12,800 as of December 31, 2005 (restated). At December 31, 2005 the stock held was 4,000,000 shares of ZKID Network Company (OTCBB: ZKID), subsequently in 2006 ZKID Network Company renamed itself to EATware Corporation (OTCBB: EATW) and executed a 4,000:1 reverse stock split.

Note 3. Correction of an Error in Previously Issued Financial Statements

The Company determined it had an accounting error recording sales when the Company still had obligations. In this error, the company had recognized $2,041,670 in sales for December 31, 2005 and $1,484,350 in sales for September 30, 2005. Accordingly, certain historical transactions have been reclassified on the financial statements as of September 30, 2006 and 2005. To correct this error, the Company will restate its previously filed quarterly financial statements for the first three quarters of 2005, the previously filed financial statements of and for the year ended December 31, 2005, and its previously filed quarterly financial statements for the first and second quarter of 2006.

The accompanying tables reconcile the Company's results of operations for the year ended December 31, 2005 and the Company's financial position as of December 31, 2005, both previously reported in the Company's 2005 Annual Report on Form 10-KSB, to the restated financial statements.

For the Year Ended December 31, 2005	As Reported in 2005 10-KSB			(Unaudited) Adjustments			Restated Amounts for 2005

Revenues	$	19,301,897		$	(2,041,670	)	$	17,260,227
Cost of Sales		(16,208,757	)		1,854,910			(14,353,847	)
Gross Profit		3,093,140			(186,760	)		2,906,380

Total operating (expenses)		(12,305,839	)		(201,211	)		(12,507,050	)

Total other (expense)		(2,067,209	)		—			(2,067,209	)

(LOSS) FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST		(11,279,908	)		(387,971	)		(11,667,879	)

(Income)/loss attributable to minority interest		565,792			122,956			688,748

(LOSS) FROM CONTINUING OPERATIONS		(10,714,116	)		(265,015	)		(10,979,131	)

Income (loss) from discontinued operations	$	(511,162	)	$	—		$	(511,162	)

NET (LOSS)	$	(11,225,278	)	$	(265,015	)	$	(11,490,293	)

Income/(loss) per common share, basic and diluted:

(Loss) from continuing operations	$	(0.04	)	$	(0.00	)	$	(0.04	)

Income/(loss) from discontinued operations	$	(0.00	)	$	(0.00	)	$	(0.00	)

Net (loss)	$	(0.04	)	$	(0.00	)	$	(0.04	)

Weighted average number of shares outstanding		258,985,141			258,985,141			258,985,141

December 31, 2005	As Reported in 2005 10-KSB			(Unaudited) Adjustments			Restated Amounts for 2005

ASSETS
Unchanged Assets	$	15,168,502		$	—		$	15,168,502
Real estate and land inventory	$	44,707,494			(70,966	)		44,636,528
Deferred Costs of Goods Sold		—			1,860,660			1,860,660

Total Assets	$	59,875,996		$	1,789,694		$	61,665,690


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Unchanged Liabilities	$	53,320,106		$	—		$	53,320,106
Accrued expenses and other liabilities		3,681,711			135,996			3,817,707
Deferred revenue		583,315			2,041,670			2,624,985

Total Liabilities		57,585,132			2,177,666			59,762,798

Commitments and Contingencies
Stock Committed		2,804,837			—			2,804,837
Minority Interest		2,542,406			(122,957	)		2,419,449

Stockholders' equity (deficit):
Unchanged Equity		69,333,594			—			69,333,594
Accumulated (deficit)		(72,389,973	)		(265,015	)		(72,654,988	)

Total Stockholders' Equity (Deficit)		(3,056,379	)		(265,015	)		(3,321,394	)

Total Liabilities and Stockholders' Equity (Deficit)	$	59,875,996		$	1,789,694		$	61,665,690

The accompanying tables reconcile the Company's results of operations for the Nine Months Ended September 30, 2005 and the Company's financial position as of September 30, 2005, both previously reported in the Company's 2005 Quarterly Report on Form 10-QSB, to the restated financial statements.

For the Nine Months Ended September 30, 2005	As Reported in 2005 10-QSB			(Unaudited) Adjustments			Restated Amounts for 2005

Revenues	$	13,758,968		$	(1,484,350	)	$	12,274,618
Cost of Sales		(9,403,202	)		1,208,741			(8,194,461	)
Gross Profit		4,355,766			(275,609	)		4,080,157

Total operating (expenses)		(8,727,338	)		(136,379	)		(8,863,717	)

Total other (expense)		(1,422,713	)		—			(1,422,713	)

(LOSS) FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST		(5,794,285	)		(411,988	)		(6,206,274	)

(Income)/loss attributable to minority interest		(180,065	)		(166,142	)		(346,207	)

(LOSS) FROM CONTINUING OPERATIONS		(5,974,350	)		(578,130	)		(6,552,481	)

Income (loss) from discontinued operations	$	(880,434	)	$	—		$	(880,434	)

NET (LOSS)	$	(6,854,784	)	$	(578,130	)	$	(7,432,915	)

Income/(loss) per common share, basic and diluted:

(Loss) from continuing operations	$	(0.02	)	$	(0.00	)	$	(0.03	)

Income/(loss) from discontinued operations	$	(0.00	)	$	0.00		$	(0.00	)

Net (loss)	$	(0.03	)	$	(0.00	)	$	(0.03	)

Weighted average number of shares outstanding		243,349,435			243,349,435			243,349,435

September 30, 2005	As Reported in 2005 10-QSB			(Unaudited) Adjustments			Restated Amounts for 2005

ASSETS
Unchanged Assets	$	17,339,715		$	—		$	17,339,715
Real estate and land inventory		44,925,223			(27,020	)		44,898,203
Deferred Costs of Goods Sold		—			1,165,459			1,165,459

Total Assets	$	62,264,938		$	1,138,439		$	63,403,377


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Unchanged Liabilities	$	52,364,883		$	—		$	52,364,883
Accrued expenses and other liabilities		3,029,218			66,077			3,095,295
Deferred revenue		32,355			1,484,350			1,516,705

Total Liabilities		55,426,456			1,550,427			56,976,883

Commitments and Contingencies
Stock Committed		2,037,750			—			2,037,750
Minority Interest		4,194,583			166,142			4,360,725

Stockholders' equity (deficit):
Unchanged Equity		68,625,627			—			68,625,627
Accumulated (deficit)		(68,019,478	)		(578,130	)		(68,597,608	)

Total Stockholders' Equity (Deficit)		606,149			(578,130	)		28,019

Total Liabilities and Stockholders' Equity (Deficit)	$	62,264,938		$	1,138,439		$	63,403,377

Note 4. Assets held for sale

Assets Held for Sale and Discontinued Operations

In June, 2006, the Company’s Board of Directors decided to seek a buyer of the Company’s wholly owned subsidiary Connect Paging, Inc. d/b/a Get A Phone. Pursuant to SFAS 144 Accounting for the Impairment or Disposal of Long-Lived Assets, the Company has reclassified the balance sheet amounts and the income statement results from the historical presentation to assets held for sale and liabilities of assets held for sale and loss from discontinued operations. The cash flows have also been reclassified for all periods presented. The Company expects to sell Get A Phone within the next 12 months. After the completion of the sale, the Company will not have any significant continuing involvement in Get A Phone’s operations.

The sales price the Company’s Board of Directors is seeking is in excess of the carrying value of these assets and liabilities and therefore no adjustment to the carrying value has been made. However, due to the downturn in the Company’s Texas communications market, the Company retested the goodwill associated with Get A Phone. The Company determined through this process that goodwill associated with Get A Phone should be impaired as of June 30, 2006. Pursuant to SFAS 142 Goodwill and Other Intangible Assets, the Company has included an impairment charge of $1,820,824 in the loss from discontinued operations.

The major classes of Assets Held for Sale and Liabilities of assets held for sale are as follows:

Assets:


Cash	$	138,187
Trade accounts receivable		25,872
Prepaid expenses and deposits		161,976
Net Property, Plant and Equipment		78,366
	$	404,401

Liabilities:


Trade Payables	$	1,129,140
Accrued Liabilities		43,000
Total Salaries and Wages Payable		31,607
Related Party Debt		51,000
	$	1,254,747

The following table details financial information included in the loss from discontinued operations:

CARDINAL COMMUNICATIONS, INC. AND SUBSIDIARIES
Discontinued Operations of Connect Paging, Inc. d/b/a Get A Phone
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)

	Three Months Ended September 30						Nine Months Ended September 30
	2006			2005			2006			2005

REVENUES
Revenues	$	1,022,456		$	1,541,991		$	4,479,216		$	6,129,769
Cost of sales		(546,140	)		(1,224,196	)		(2,600,575	)		(3,535,177	)
Gross profit		476,316			317,795			1,878,641			2,594,592

OPERATING EXPENSES
Depreciation and amortization		-			15,582			15,276			46,361
Asset impairment		-			-			1,820,824			-
Professional fees		75,853			30,875			161,024			276,570
Rent		11,675			14,582			39,007			41,769
Salaries and commissions		189,789			353,931			719,342			1,000,123
Selling, general and administrative		275,605			599,926			1,356,939			1,767,340
Total operating expenses		552,922			1,014,896			4,112,412			3,132,163

(LOSS) FROM OPERATIONS		(76,606	)		(697,101	)		(2,233,771	)		(537,571	)

OTHER INCOME (EXPENSE)
Other income (expense)		71,638			-			8,383			170
Accounts Payable Settlement		-			(343,000	)		-			(343,000	)
Interest (expense)		(252	)		(33	)		(581	)		(33	)
Total other (expense)		71,386			(343,033	)		7,802			(342,863	)

NET INCOME (LOSS)	$	(5,220	)	$	(1,040,134	)	$	(2,225,969	)	$	(880,434	)

The accompanying notes are an integral part of these statements.

Note 5. Financing Transactions

Private Placements

In the second quarter of 2006, the Company sold common stock totaling $550,000. Under the terms of the private placement, accredited investors were offered restricted, common stock at a rate of $0.015 per share for a minimum investment of $50,000.

Convertible Loan Agreements

In the first quarter of 2006, the Company entered into a series of Convertible Loan Agreements with ISP V, LLC totaling $1,500,000, to be due in January 2008 with interest at a rate of 12% per year; the Company issued five year warrants to purchase 2,400,000 shares of common stock at an exercise price of $0.05. A debt discount value was calculated based upon the Black-Scholes Pricing Model applied to the warrants; and over the life of the initial note $16,825 of additional interest will be recorded relating to the accretion of the note to its face value. For the Black-Scholes Pricing Model the average risk free interest rate used was 5%, volatility was estimated at 69% and the expected life was five years. The holder of the notes have the right to convert $1,500,000 of the principal to shares of Common Stock per the following: $800,000 at $.025 per share, $400,000 at $0.05 per share and $300,000 at $0.075 per share.

Senior Secured Debt and Notes Payable

In the second quarter of 2006 the Company converted $70,000 of Senior Secured Debentures into shares of the Company’s common stock at a rate of $0.025 pursuant to the Convertible Loan Agreements associated with those debentures. In the third quarter of 2006 the Company converted $50,000 of Senior Secured Debentures into shares of the Company’s common stock at a rate of $0.025 pursuant to the Convertible Loan Agreements associated with those debentures.

At September 30, 2006, the Company has secured notes totaling $10,535,716 with debt discount of $30,487 netted against the balance resulting in the secured notes payable balance of $10,505,229. All of these notes are secured by assets of the Company. Interest rates range from 6% to 12% and have Maturity Dates from July 2006 through January 2008 with one exception with a maturity in February 2020. As of September 30, 2006 the senior secured debt and notes payable outstanding amounts range from $47,627 to $2,025,000 utilizing twelve different lenders. Currently the Company is in default on five senior secured notes totaling $5,050,000 in arrearage. These notes are held by two different lenders and the Company is actively working to renegotiate the terms of these notes. More details may be found in this report Part II Item 3. Defaults upon senior securities.

Debt Collateralized by Real Estate and Construction Lines-of-Credit

Through the Company’s subsidiary Sovereign Partners, LLC, the Company maintains secured revolving construction lines-of-credit with several lending institutions for its construction projects. At September 30, 2006 the aggregate borrowings under the lines-of-credit totaled $20,639,207. Borrowings on the lines are repaid in connection with the sale of completed units. The lines-of-credit are secured by the project being constructed. Each construction line is personally guaranteed by the individual members of each development entity or an officer of the Company. Interest rates range from 8.82% to 10.25%, and have maturity dates ranging from June 2006 through May 2007, with two exceptions with maturities in May 2011 and July 2034, unless extended. As of September 30, 2006, the construction lines-of-credit outstanding amounts range from $220,000 to $3,069,563, utilizing eight different lenders

Through the Company’s subsidiary Sovereign Partners, LLC the Company has debt collateralized by real estate. These notes payable totaled $14,586,404 at September 30, 2006. Interest rates range from 7.5% to 9.75%, and have maturity dates ranging from June 2006 through August 2011. As of September 30, 2006, the notes payable outstanding amounts range from $569,364 to $4,139,063, utilizing six different lenders.

Currently the Company is in default with two creditors on two debts collateralized by construction and real estate totaling $4,352,850. These notes are both specifically related to the SR Condominium project located in Parker, Colorado. The Company is actively working to renegotiate the terms of these notes. More details may be found in Part II Item 3. Defaults upon senior securities.

Related Party Debt

Thunderbird Management Limited Partnership

In March 2006, the Board of Directors for Cardinal Communications, Inc. (the “Company”) approved on its behalf and the behalf of its wholly owned subsidiary, Sovereign Companies, LLC (“Sovereign”), the execution of a Convertible Loan Agreement, Promissory Note (the “Note”), and Pledge and Security Agreement with Thunderbird Management Limited Partnership (“Thunderbird”). A member of the Company’s Board of Directors and the Company’s Chief Executive Officer, Edouard A. Garneau, is related (as son-in-law) to the General Partner of Thunderbird Management. Mr. Garneau did not participate in the vote by Cardinal’s Board of Directors approving the Promissory Note, Pledge and Security Agreement, or Convertible Loan Agreement (collectively, the “Agreements”). The remaining members of Cardinal’s Board of Directors voted unanimously to approve the Agreements.

The Company is indebted to Thunderbird pursuant to two existing promissory notes. The first, dated September 12, 2000, is in the original principal amount of $702,000, with interest on the principal balance at the rate of 12% per annum; the second, dated August 24, 2004, is in the original principal amount of $800,000 with interest on the principal balance from time to time remaining at the rate of 10% per annum, collectively, the “Prior Notes”.

The Convertible Loan Agreement consolidates for certain purposes the Prior Notes and a third, new note (described in the next section, below) in the original principal amount of $998,000 (collectively, the “Thunderbird Notes”). The total principal amount owed under the Thunderbird Notes is $2,500,000, the “Principal Amount”.

The Thunderbird Notes are consolidated for the purposes of setting a single interest rate and certain conversion rights for the Principal Amount. Interest on the Principal Amount outstanding shall accrue at the rate of 12% per annum, which interest shall be paid monthly, with the first installment payable on April 17, 2006, and subsequent payments at the seventeenth day of the month beginning each month thereafter. Overdue principal and interest on the Thunderbird Notes shall bear interest, to the extent permitted by applicable law, at a rate of 18% per annum. If not sooner redeemed or converted, the Thunderbird Notes shall mature on the fifth anniversary of the execution of the Convertible Loan Agreement, at which time all the remaining unpaid principal, interest and any other charges then due under the agreement shall be due and payable in full.

The Thunderbird Notes shall be convertible, at either party’s option, into shares of the Company’s common stock at four separate conversion prices: up to 25% of the Principal Amount may be converted at $0.025 per share; up to twenty five percent (25%) of the Principal Amount may be converted at $0.075 per share; up to 25% of the Principal Amount may be converted at $0.125 per share; and the final 25% of the Principal Amount may be converted at $0.175 per share (collectively, such converted stock is referred to as the “Registerable Securities”).

In the Convertible Loan Agreement, the Company has agreed to register all or any portion of the Registerable Securities any time it receives a written request from Thunderbird that the Company file a registration statement under the 1933 Act covering the registration of at least a majority of the Registerable Securities then outstanding. The Company has agreed, subject to the limitations in the Convertible Loan Agreement, to use its best lawful efforts to effect as soon as reasonably possible, and in any event (if legally possible, and as allowed by the SEC, and if no factor outside the Company’s reasonable control prevents it) within 150 days of the receipt of the initial written registration request, to effect the registration under the 1933 Act of all Registerable Securities which the Thunderbird has requested.

Notwithstanding the foregoing, in lieu of registration, the Company may provide Thunderbird with a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors, it would be materially detrimental to the Company and its shareholders for such registration statement to be filed at that time, and it is therefore essential to defer the filing of such registration statement. Thereafter, the Company shall have the right to defer the commencement of such a filing for a period of not more than 180 days after receipt of the request; provided, however, that at least 12 months must elapse between any two such deferrals.

Upon the occurrence of any event of default, the Payee may declare the remainder of the debt immediately due and payable. The Note is secured by the pledge of certain assets by Borrower to the Payee pursuant to the Pledge and Security Agreement.

Pledge and Security Agreement

The Pledge and Security Agreement (“PSA”) secures payment of (i) all amounts now or hereafter payable by the Company and Sovereign (jointly “Pledgors”) to Thunderbird Management Limited Partnership, the “Secured Party”, on the Thunderbird Notes, and (ii) all obligations and liabilities now or hereafter payable by the Pledgors under, arising out of or in connection with the PSA (all such indebtedness, obligations and liabilities being herein called the “Obligations”).

Pursuant to the PSA, the Pledgors pledge and grant to the Secured Party a security interest in the shares of stock and partnership interests comprising Pledgors’ interests in Sovereign Pumpkin Ridge, LLC, and, Sovereign El Rio, LLC (collectively, the “Pledged Interests”). The Pledged Interests also include without limitation all of Pledgors’ right, title and interest in and to (i) all dividends or distributions arising from the Pledged Interests, payable thereon or distributable in respect thereof, whether in cash, property, stock or otherwise, and whether now or hereafter declared, paid or made, and the right to receive and receipt therefore; (ii) all Pledged Interests into which any of the Pledged Interests are split or combined; and (iii) all other rights with respect to the Pledged Interests; provided, however, that Secured Party hereby agrees that, if and so long as Pledgors shall not be in default under this Agreement, Pledgors shall have the right to vote, or to give any approval or consent in respect of, the Pledged Interests for all purposes not inconsistent with the provisions of this Agreement.

Upon the full and final payment of the Thunderbird Notes, the security interests in the Pledged Interests shall terminate and all rights to the Pledged Interests shall revert to the Pledgors. In addition, at any time and from time to time prior to such termination of the security interests, the Secured Party may release any of the Pledged Interests. Upon any such termination of the security interests or any release of the Pledged Interests, the Secured Party will, at the Pledgors’ expense, execute and deliver to the Pledgors such documents as the Pledgors shall reasonably request to evidence the termination of the security interests or the release of the Pledged Interests.

AEJM Enterprises Limited Partnership

During 2006 the Company converted $700,000 of related party debt to AEJM Enterprises Limited Partnership into restricted shares of the Company’s common stock at a rate of $0.0147. A member of the Company’s Board of Directors and the Company’s Chief Executive Officer, Edouard A. Garneau, is related (as son-in-law) to the General Partner of AEJM Enterprises Limited Partnership. Mr. Garneau did not participate in the vote by Cardinal’s Board of Directors approving the note conversion. The remaining members of Cardinal’s Board of Directors voted unanimously to approve the debt conversion.

Related Party Debt Summary

The Company has related party debt of $4,526,915 at September 30, 2006, utilizing ten different related parties. Interest rates range from 4.25% to 16.00%, and have maturity dates ranging from October 2006 through March 2011, with three exceptions. Two notes amortize over thirty years maturing April 2033 and February 2034, and one note is interest only, with no stated maturity date. As of September 30, 2006, the related party debts outstanding amounts range from $25,000 to $998,000.

Note 6. Acquisitions

Sovereign Partners, LLC, Restructure and Amendment Agreement

On February 18, 2005, the Company closed on the acquisition with Sovereign Partners, LLC (“Sovereign”) to acquire 100% of the membership interests of Sovereign from the Members in exchange for the issuance of 35,000,000 shares of the Company’s common stock and 100,000 shares of the Company’s newly created Series B Convertible Preferred Stock. Under the terms of the Acquisition Agreement the members are to be issued an additional 125,000 shares of Series B Preferred Stock on January 1, 2006 and July 1, 2006. As a result of the acquisition, Sovereign is now owned and operated as a wholly owned subsidiary of the Company. Sovereign operations include real estate development and the related communications infrastructure for residential, multiple dwelling unit (apartment) and planned community developments. See “Sovereign Acquisition” under Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations below.

In February, 2006, the Company entered into a Restructure and Amendment Agreement with the original members of Sovereign Partners, LLC. This agreement was created to resolve operating conflicts between the Company and Sovereign Partners, LLC. Under the terms of the agreement the original Stock Purchase Agreement was modified to eliminate the EBITDA and NOI provisions. All subsequent-to-purchase-date issuances of the Company’s stock in consideration of the original Stock Purchase Agreement were amended to the following. The guaranteed shares were modified to equal 500,000 shares of the Company’s Convertible Series B Preferred Stock issued as 250,000 shares with the execution of the agreement and the balance of 250,000 shares to be issued on July 1, 2006. Incentive shares shall equal 1,000,000 shares of the Company’s Convertible Series B Preferred Stock and will be issued as 500,000 shares on January 1, 2007 and 500,000 shares on July 1, 2007. Bonus shares shall equal 1,000,000 shares of the Company’s Convertible Series B Preferred stock and will be issued as 500,000 shares on January 1, 2008 and 500,000 shares on July 1, 2008. In addition, the Company shall distribute Balance Shares in two equal installments on January 1, 2009 and July 1, 2009. The Balance Shares shall be shares of the Company’s Convertible Series B Preferred Stock which shall equal such number of such preferred stock as shall provide the Members with ownership of at least, but not more than 49.99% of the issued and outstanding shares of the Common Stock of the Company on an as converted and fully diluted capitalization basis as measured on the Measurement Date. The Measurement Date shall be the last day of the first consecutive 10 day period, wherein the shares of the Company’s common stock have had a closing bid price of at least $0.10 per share on each day in that period, as adjusted for any stock splits, dividends, or similar adjustments. The Balance Shares calculation shall not include, and shall be adjusted for any shares or securities issued with respect to any mergers, acquisitions, conversion of Sovereign debt existing as of February 18, 2005 or any options or warrants that expire, unexercised prior to January 1, 2009 which may have been outstanding on the Measurement Date.

As of the date of this report, the Company has not issued the July 1, 2006 Incentive shares per the restructure and amendment agreement.

Technology and Trademark License Agreement

On February 17, 2006, the Company (or “Cardinal”) signed a Technology and Trademark License Agreement (the “License”) with GalaVu Entertainment Networks, Inc., of Toronto, Ontario, Canada (“GalaVu”). The term of the License is ten (10) years. Among other things, the License grants Cardinal a non-exclusive, royalty-free, fully paid up, worldwide license to make, use, sell, offer to sell, manufacture, market, and distribute the finished products and technology incorporated into GalaVu’s video on demand system (the “GalaVu Technology”). Under the License, Cardinal has the right to bundle products incorporating the GalaVu Technology with other products distributed by Cardinal. Cardinal also has the right to sublicense the rights granted under the License to third parties, provided that Cardinal enters into sublicense agreements with each such sublicensee consistent with the terms set forth in the License. The rights provided to Cardinal under the License shall apply equally to existing and future products of similar or like functionality as those currently offered by GalaVu.

In addition, provisions in the License grant Cardinal the right, but not the obligation, to purchase products incorporating or comprising the GalaVu Technology from GalaVu (the “Purchased Products”). Cardinal pays only the actual costs of manufacturing and shipping the Purchased Products to Cardinal (or as directed by Cardinal); GalaVu shall not be entitled to any mark-up or profit on such products for the first 5,000 units of such products (the “Initial Units”). Orders for any products in excess of the Initial Units shall be marked-up by the lowest amount charged by GalaVu to any of its customers or partners.

The License also grants to Cardinal a non-exclusive, royalty-free, fully paid up, worldwide license to use GalaVu’s trademarks, service marks, and logos (the “Marks”) for (i) the sale of GalaVu branded products (the “Branded Products”), (ii) the use and display for marketing, advertising and promotion according to certain usage standards, and (iii) incorporating the Marks into the Branded Products. Any uses of the Marks shall be submitted in writing for review by GalaVu in advance and shall not be distributed or used in any manner without prior written approval of the Licensor or its authorized representative, which approval shall not be unreasonably withheld or delayed. No license is granted for the use, display, or incorporation of the Marks on products other than the Branded Products. Cardinal has the right to bundle the Branded Products with other products or services distributed by Cardinal (such Branded Products when bundled with such other products, the “Bundled Products”), provided that Cardinal uses the Marks solely on and in conjunction with that portion of Bundled Products that constitute the Branded Products. Cardinal has the right to sublicense these rights to its partners, resellers, OEMs, distributors and sales representatives that market and distribute Branded Products (each, a “Sublicensee”) solely for the purpose of advertising, marketing, selling and distributing the Branded Products in accordance with the terms of the License; provided that Cardinal enters into agreements with each such Sublicensee consistent with the terms set forth in the License.

The parties to the License acknowledge and agree that the License does not create a fiduciary relationship among or between them; that each shall remain an independent business; and that nothing in the License is intended to constitute either party as an agent, legal representative, subsidiary, joint venture, partner, employee or servant of the other for any purpose whatsoever.

Purchase and Exchange Agreement

On February 17, 2006, the Company, Livonia Pty Limited (an Australian corporation) and Entertainment Media & Telecoms Corporation Limited (“EMT”), executed an agreement regarding the purchase and the exchange of certain debt owed by EMT and/or its subsidiaries (collectively, “EMT”) for equity in EMT, and including provisions for a loan for working capital from Cardinal to GalaVu (the “EMT Agreement”).

Pursuant to the EMT Agreement, Cardinal agreed to purchase the balance of the debt owed by EMT to Alleasing Finance Australia Limited (“Alleasing”), in the principal amount of $1,491,366 (the “Debt”) in exchange for an assignment of the Debt and all security interests securing repayment of the Debt. The purchase price paid by the Company for the Debt is $510,638.

In addition, the Company has provided a bridge loan for working capital of $602,530 to GalaVu (the “Loan”). The definitive terms, conditions, and interest rate in respect of such Loan shall be agreed between Cardinal and Livonia. Notwithstanding the generality of the foregoing, Cardinal’s representative shall have sole discretion as to the use of proceeds from the Loan, including how, to whom, and when the Loan proceeds are dispersed.

The Debt and the Loan are to be secured by the assets of EMT’s subsidiaries. The Debt purchased from Alleasing shall remain secured by the assets of EMT’s subsidiaries, including GalaVu. Also, Livonia shall assign to Cardinal $478,603 of the secured debt that Livonia previously purchased from Alleasing in a separate transaction, such that the total secured debt held by Cardinal shall total $2,573,137 (the “Cardinal Secured Debt”). All such Cardinal Secured Debt is and will remain secured by all the EMT’s subsidiaries’ assets. Initially a notes receivable discount was recorded in the amount of $1,459,969 to recognize the fair value of the Secured Debt. This discount will be reduced as the debt is satisfied.

Cardinal also agreed that, to the extent permissible under Australian law and subject to the approval of the shareholders of EMT, should the same be necessary, Cardinal shall: (a) convert $393,145 of the Cardinal Secured Debt into 53,250,000 shares of free-trading, common stock of EMT at a conversion rate of .7383 cent) per share; and (b) at a date to be agreed between the parties, convert $2,165,988 of the Cardinal Secured Debt into shares of free-trading EMT common stock at a conversion rate of $0.0036915 per share, equating to 586,250,000 shares in EMT. In addition, Livonia agreed that, to the extent permissible under Australian law and subject to approval of the shareholders of EMT, should same be necessary, Livonia shall: (a) convert $313,778 owing to it by EMT into 42,500,000 shares in EMT at a conversion rate of .7383 cent per share; and (b) at a date to be agreed between the parties, convert $571,260 owing to it by EMT into shares in EMT at a conversion rate of $0.0036915 per share, equating to 146,750,000 shares in EMT. The Parties agreed to take all acts necessary to ensure that, following both the Cardinal conversion and the Livonia conversion, Cardinal shall own 64% of the outstanding shares of EMT, accounted for on a fully diluted basis. EMT has historically traded on the Australian stock exchange under the symbol ETC.

Livonia and EMT agreed that should: (a) the shareholders of EMT not agree to the conversion by Cardinal of its Cardinal Secured Debt into equity in EMT, or (b) EMT does not regain trading status on the Australian Stock Exchange within one hundred and twenty (120) days of the date of the EMT Agreement, Livonia and EMT shall do all acts, matters or things to facilitate the transfer of the assets constituting the security (including but not limited to the assets of GalaVu) to Cardinal free and clear of all liens, claims, and encumbrances, in exchange for Cardinals’ agreement to extinguish the Cardinal Secured Debt. Cardinal agreed that, in the event that the GalaVu assets are transferred to Cardinal in exchange for the Cardinal Secured Debt, Livonia shall be entitled to acquire shares of Cardinal as follows: first, Livonia shall cause EMT to be sold; second, the purchase price obtained by Livonia from such sale (the “Purchase Price”) shall be paid directly to Cardinal in its entirety in exchange for shares of Cardinal common stock. The number of shares shall be determined by dividing the dollar amount of the Shell Purchase Price, converted to United States dollars, by the lower of 80% of the price per share for the five (5) trading days preceding the date of issuance, or $0.02. EMT did not regain trading status within the allotted time and on August 15, 2006 the Company and GalaVu executed an Assignment and Assumption Agreement to facilitate the transfer of GalaVu’s assets included in the security to the Company. Details of the Assignment and Assumption Agreement are described below.

Assignment Deed

Effective February 20, 2006, the Company signed an Assignment Deed with Alleasing Finance Australia Limited, an Australian company (formerly Rentworks Limited) (“Alleasing”) (the “Assignment”). Pursuant to the Assignment, Alleasing agreed to assign Cardinal all of its right, title, and interest in the debt owing by the Entertainment Media & Telecoms Corporation Limited (“EMT”) and/or EMT’s subsidiaries, including GalaVu Entertainment Networks, Inc. (“GalaVu”) to Cardinal in the amount of $1,491,366 (the “Debt”). The purchase price paid by Cardinal for the debt is $510,638.

The Debt is secured by the (a) Pledge Agreement between Entertainment Media & Telecoms Corporation (Canada), Inc., (registered in Canada) (“EMT (Canada)”), and Rentworks Limited dated March 31 2005; (b) Security Agreement between EMT (Canada) and Rentworks Limited dated March 31, 2005; (c) Security Agreement between GalaVu and Rentworks Limited dated March 31, 2005; (d) Guaranty between EMT (Canada), Inc., and Rentworks Limited dated March 31, 2005; and (e) Guaranty between GalaVu and Rentworks Limited dated March 31, 2005.

Interested Director

A member of the Company’s Board of Directors at the time of the transaction, David A. Weisman, and certain entities affiliated with Mr. Weisman are shareholders of GalaVu’s parent corporation, Entertainment Media & Telecoms Corporation Limited. Mr. Weisman did not participate in the vote by Cardinal’s Board of Directors approving the License, the Assignment Deed, or the Purchase and Exchange Agreement (collectively, the “Agreements”). As of June 9, 2006, Mr. Weisman is no longer a member of our board of directors. The remaining members of Cardinal’s Board of Directors voted unanimously to approve the Agreements.

Assignment and Assumption Agreement

In furtherance of the obligations set forth in the Purchase Agreement related to the assets of GalaVu Entertainment Networks, Inc. (GalaVu), on August 15, 2006, the Company and GalaVu executed an Assignment and Assumption Agreement. Pursuant to the Assignment, GalaVu has assigned, conveyed, transferred and sent over to the Company all of Gala Vu's rights related to or connected with the Pledged Assets. As Assignee, the Company retained the right to accept or reject the assignment as to each of the assets. The determination of which assets to accept or reject shall be exercised at the Company's sole and absolute discretion, which discretion may be exercised by the Company at any time and from time to time for one hundred and eighty (180) days following the execution of the Assignment. For any of GalaVu's contracts that are accepted by the Company, the Company has agreed to assume and to perform all of the GalaVu's obligations under such contracts.

Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

The following information should be read in conjunction with the consolidated financial statements, including the notes thereto, included elsewhere in this Form 10-QSB, and the Management's Discussion and Analysis of Financial Condition and Results of Operations included in our 2005 Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on April 17, 2006.

Forward-Looking Statements and Associated Risks

This report contains forward-looking statements, including statements regarding, among other things, (a) our growth strategies, (b) anticipated trends in our industry, (c) our future financing plans and (d) our ability to obtain financing and continue operations. In addition, when used in this filing, the words "believes," "anticipates," "intends," "in anticipation of," and similar words are intended to identify certain forward-looking statements. These forward-looking statements are based on our expectations and are subject to a number of risks and uncertainties, many of which are beyond our control. Actual results could differ materially from these forward-looking statements as a result of changes in trends in the economy and our industry, reductions in the availability of financing and other factors. In light of these risks and uncertainties, the forward-looking statements contained in this report may not occur. Except to fulfill our obligation under the United States securities laws, we do not undertake any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances.

Overview of Our Business

Cardinal Communications, Inc is a “Developer of Connected Communities,” as such; we design, construct, and operate diversified communication systems. The systems include voice, video, internet, wireless, and video-on-demand services to customers in multiple dwelling units (MDU), newly constructed housing developments, commercial properties, and the hospitality industry. One of our divisions builds residential and commercial properties, insuring a steady stream of telecommunication customers. Our growth strategy includes obtaining as many telecommunications customers as we can. We intend to grow our customer base through internal growth whenever possible, but we may acquire customers by acquiring related businesses or properties. If operational cash flow is insufficient to fund this growth, we will attempt to raise capital throughout the year.

Correction of an Error in Previously Issued Financial Statements

For the Year Ended December 31, 2005	As Reported in 2005 10-KSB			(Unaudited) Adjustments			Restated Amounts for 2005

Revenues	$	19,301,897		$	(2,041,670	)	$	17,260,227
Cost of Sales		(16,208,757	)		1,854,910			(14,353,847	)
Gross Profit		3,093,140			(186,760	)		2,906,380

Total operating (expenses)		(12,305,839	)		(201,211	)		(12,507,050	)

Total other (expense)		(2,067,209	)		—			(2,067,209	)

(LOSS) FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST		(11,279,908	)		(387,971	)		(11,667,879	)

(Income)/loss attributable to minority interest		565,792			122,956			688,748

(LOSS) FROM CONTINUING OPERATIONS		(10,714,116	)		(265,015	)		(10,979,131	)

Income (loss) from discontinued operations	$	(511,162	)	$	—		$	(511,162	)

NET (LOSS)	$	(11,225,278	)	$	(265,015	)	$	(11,490,293	)

Income/(loss) per common share, basic and diluted:

(Loss) from continuing operations	$	(0.04	)	$	(0.00	)	$	(0.04	)

Income/(loss) from discontinued operations	$	(0.00	)	$	(0.00	)	$	(0.00	)

Net (loss)	$	(0.04	)	$	(0.00	)	$	(0.04	)

Weighted average number of shares outstanding		258,985,141			258,985,141			258,985,141

December 31, 2005	As Reported in 2005 10-KSB			(Unaudited) Adjustments			Restated Amounts for 2005

ASSETS
Unchanged Assets	$	15,168,502		$	—		$	15,168,502
Real estate and land inventory		44,707,494			(70,966	)		44,636,528
Deferred Costs of Goods Sold		—			1,860,660			1,860,660

Total Assets	$	59,875,996		$	1,789,694		$	61,665,690


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Unchanged Liabilities	$	53,320,106		$	—		$	53,320,106
Accrued expenses and other liabilities		3,681,711			135,996			3,817,707
Deferred revenue		583,315			2,041,670			2,624,985

Total Liabilities		57,585,132			2,177,666			59,762,798

Commitments and Contingencies
Stock Committed		2,804,837			—			2,804,837
Minority Interest		2,542,406			(122,957	)		2,419,449

Stockholders' equity (deficit):
Unchanged Equity		69,333,594			—			69,333,594
Accumulated (deficit)		(72,389,973	)		(265,015	)		(72,654,988	)

Total Stockholders' Equity (Deficit)		(3,056,379	)		(265,015	)		(3,321,394	)

Total Liabilities and Stockholders' Equity (Deficit)	$	59,875,996		$	1,789,694		$	61,665,690

For the Nine Months Ended September 30, 2005	As Reported in 2005 10-QSB			(Unaudited) Adjustments			Restated Amounts for 2005

Revenues	$	13,758,968		$	(1,484,350	)	$	12,274,618
Cost of Sales		(9,403,202	)		1,208,741			(8,194,461	)
Gross Profit		4,355,766			(275,609	)		4,080,157

Total operating (expenses)		(8,727,338	)		(136,379	)		(8,863,717	)

Total other (expense)		(1,422,713	)		—			(1,422,713	)

(LOSS) FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST		(5,794,285	)		(411,988	)		(6,206,274	)

(Income)/loss attributable to minority interest		(180,065	)		(166,142	)		(346,207	)

(LOSS) FROM CONTINUING OPERATIONS		(5,974,350	)		(578,130	)		(6,552,481	)

Income (loss) from discontinued operations	$	(880,434	)	$	—		$	(880,434	)

NET (LOSS)	$	(6,854,784	)	$	(578,130	)	$	(7,432,915	)

Income/(loss) per common share, basic and diluted:

(Loss) from continuing operations	$	(0.02	)	$	(0.00	)	$	(0.03	)

Income/(loss) from discontinued operations	$	(0.00	)	$	0.00		$	(0.00	)

Net (loss)	$	(0.03	)	$	(0.00	)	$	(0.03	)

Weighted average number of shares outstanding		243,349,435			243,349,435			243,349,435

September 30, 2005	As Reported in 2005 10-QSB			(Unaudited) Adjustments			Restated Amounts for 2005

ASSETS
Unchanged Assets	$	17,339,715		$	—		$	17,339,715
Real estate and land inventory		44,925,223			(27,020	)		44,898,203
Deferred Costs of Goods Sold		—			1,165,459			1,165,459

Total Assets	$	62,264,938		$	1,138,439		$	63,403,377


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Unchanged Liabilities	$	52,364,883		$	—		$	52,364,883
Accrued expenses and other liabilities		3,029,218			66,077			3,095,295
Deferred revenue		32,355			1,484,350			1,516,705

Total Liabilities		55,426,456			1,550,427			56,976,883

Commitments and Contingencies
Stock Committed		2,037,750			—			2,037,750
Minority Interest		4,194,583			166,142			4,360,725

Stockholders' equity (deficit):
Unchanged Equity		68,625,627			—			68,625,627
Accumulated (deficit)		(68,019,478	)		(578,130	)		(68,597,608	)

Total Stockholders' Equity (Deficit)		606,149			(578,130	)		28,019

Total Liabilities and Stockholders' Equity (Deficit)	$	62,264,938		$	1,138,439		$	63,403,377

Certain Relationships and Related Transactions

We have certain debt owed to individuals and/or entities that are considered to be related parties for SEC reporting purposes.

The following table sets forth the individual amounts totaling $4,526,915 due as of September 30, 2006 to related parties, and entities:


Name and Relationship	Amount		Interest			Due
			Rate			Date

Jeffrey Fiebig, Director and Shareholder	$	129,920		16	%		Dec ‘06
Thunderbird Management Limited Partnership, ⁽¹⁾		2,500,682		12	%		Mar ‘11
Bob Searls, Director and Shareholder ⁽²⁾		802,053		6	%		May ‘33
Kerry Briggs, Director and Shareholder		275,000		10	%		Oct ‘06
Investors and/or Partners in Sovereign Partners as a group		819,260		4-12	%		Oct ‘06 -
							June ‘28
Total	$	4,526,915

(1) The general partner of Thunderbird Management and Limited Partnership, Ed Buckmaster is a shareholder of the Company and Ed Garneau’s father-in-law.

(2) Mr. Searls is also the general partner of Searls Family LLLP which is a shareholder of the Company.

Segment Information

We have two reportable segments: communications services and real estate activities. Communications services include individual, voice, video and data services as well as various combinations of bundled packages of these communications services. Real estate activities include sales of residential single family units, rental from commercial properties and fees from mortgage operations.

The accounting policies of the segments are the same as those described in the summary of critical accounting policies. Our business is conducted through separate legal entities. Each entity is managed separately as each business has a distinct customer base and requires different strategic and marketing efforts. The following table reflects the income statement and balance sheet information for each of the reporting segments at September 30, 2006:

	Real Estate			Communications			Corporate			Total

Revenue	$	9,782,649		$	8,941,569		$	-		$	18,724,218
Comprehensive net income (loss)		36,015			(589,344	)		(4,841,136	)		(5,394,465	)
Interest (expense)		(202,971	)		(139	)		(1,214,519	)		(1,417,629	)
Depreciation and amortization		(55,258	)		(235,423	)		(291,092	)		(581,773	)
Assets		54,943,337			514,407			5,507,930			60,965,674

Current Sovereign Projects

Mountain View at West T-Bone Ranch, Greeley, Colorado

Mountain View at West T-Bone Ranch is a 21 acre multi-dwelling unit development located in southwest Greeley, Colorado with onsite amenities including a clubhouse with pool, hot tub, and fitness room. The completed project will have 215 units consisting of two-story flats with detached garages, along with 7-unit and 4-unit town homes with attached garages. To date, 94 units, three of the units are models, have been sold with an average sale price of $140,489. As of September 30, 2006, we had 7 units representing $1,178,800 of deferred revenue representing sales of units which we can not recognize the revenue pending the satisfaction of future obligations. These units had an average sales price of $168,400.

The Renaissance at Fox Hill, Greeley, Colorado

The Renaissance at Fox Hill is a 13 acre multi-dwelling unit development located in Greeley, Colorado. The completed project will contain 123 dwelling units consisting of two story stacked flats/carriage units with direct access garages and 4-unit town homes with attached garages. To date, 49 units have been sold with an average sale price of $173,512. As of September 30, 2006, we had 3 units representing $748,525 of deferred revenue representing sales of units which we can not recognize the revenue pending the satisfaction of future obligations. These units had an average sales price of $249,508.

Colony Ridge Condominiums, (Settler’s Chase) Thornton, Colorado

The Colony Ridge Condominiums are a mix of 4 three-story stacked flats over one level of underground parking with elevators, and 98 town home-style residences on an 11.65 acre parcel in Thornton, Colorado. Colony Ridge at Settler’s Chase is the final phase in the master planned community of Settler’s Chase, located in Thornton, Colorado. To date, 36 units, four of the units are models, have been sold with an average sale price of $183,918.

SR Condominiums, Parker, Colorado

The SR Condominiums are a mix of two and three story stacked flats with detached garages marketed as Hunter’s Chase Condominiums in Parker, Colorado. The completed project will include 188 dwelling units situated on a 13 acre parcel and includes a clubhouse featuring an outdoor swimming pool and spa. To date, 35 units, two of the units are models, have been sold with an average sale price of $156,928.

Millstone at Clear Creek, Golden, Colorado

The Millstone at Clear Creek consists of three four-story condominium buildings each with a ground level parking structure located on an approximately 1.7 acre parcel in Golden, Colorado. The completed project will have 78 dwelling units. To date, 21 units have been sold and 51 units are under contract. The sold units have an average sales price of $274,493, and the average contracted sales price is $349,904.

Sovereign Pumpkin Ridge, Greeley, Colorado

The Pumpkin Ridge development consists of 78 lots in the Pumpkin Ridge subdivision located in west Greeley, Colorado. The plan is to build single and two-story single family detached residences on each of the lots. To date, 24 units, three of the units are models, have been sold with an average sale price of $278,794.

Settler’s Commercial Development, Thornton, Colorado

Settler’s Commercial Development is the commercial/retail component of a master planned community. This 3.8 acre parcel is the final phase of the Settler’s Chase subdivision to be developed and is located in Thornton, Colorado. Building construction began in December 2005 and the estimated start of delivery of space to tenants is scheduled before year end 2006. 3 Margaritas Restaurants will anchor the site and negotiations with other tenants are ongoing.

Sovereign Parker Commercial, Parker, Colorado

Parker Commercial consists of 18.5 undeveloped commercial acres located within the downtown core of Parker, Colorado. This property is currently on the market for approximately $3.5 million.

Legacy of Shorewood, Shorewood (Milwaukee), Wisconsin

Legacy of Shorewood is a 40 unit condominium project in the Village of Shorewood, a suburb of Milwaukee. It is a single building, converted from its prior use as an assisted living facility, renovated and rebuilt into 40 individual condominiums. It is a 4-story structure with underground parking and elevator access. To date, 29 units have been sold with an average sales price of $230,693.

El Rio Country Club, Arizona

El Rio consists of approximately 640 acres of land dedicated to a gated community anchored by an 18-hole golf course. Sovereign Homes of Arizona has been named one of the Preferred Builders for the 1600-home, master planned community project in northwest Arizona's Mojave Valley. One model is currently under construction which is expected to be finished in January 2007.

Going Concern

Our auditor stated in its report on our financial statements for the period ended December 31, 2005 that we have experienced recurring losses and, as a result, there exists substantial doubt about our ability to continue as a going concern. For the Nine Months Ended September 30, 2006, we incurred a net loss of $5,382,365. As of September 30, 2006, Cardinal had an accumulated deficit of $77,947,136. We are actively seeking customers for our services. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event we cannot continue in existence. These factors raise substantial doubt about our ability to continue as a going concern.

Critical Accounting Policies

Management’s Discussion and Analysis discusses the results of operations and financial condition as reflected in our consolidated financial statements, which have been prepared in accordance with accounting principals generally accepted in the United States. The preparation of financial statements in conformity with accounting principals generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to accounts receivable, inventory valuation, amortization and recoverability of long-lived assets, including goodwill, litigation accruals and revenue recognition. These critical accounting policies are described in more detail under Item 6 in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-KSB for the year ended December 31, 2005 filed with the Securities and Exchange Commission on April 17, 2006. Management bases its estimates and judgments on its historical experience and other relevant factors, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

While we believe that the historical experience and other factors considered provide a meaningful basis for the accounting policies applied in the preparation of our consolidated financial statements, we cannot guarantee that our estimates and assumptions will be accurate. If such estimates and assumptions prove to be inaccurate, we may be required to make adjustments to these estimates in future periods.

Results of Operations

Nine Months Ended September 30, 2006 And 2005 (Restated)

Discontinued Operations

The Company reclassified the income statement results for its wholly owned subsidiary, Connect Paging, Inc. d/b/a Get A Phone from the historical presentation to discontinued operations for all periods presented.

Revenues

For the Nine Months Ended September 30, 2006 and 2005 (restated), Cardinal had revenue of $18,724,218 and $12,274,618 respectively, an increase of $6,449,600. This increase is primarily due to increased real estate sales. The Company’s 2006 revenues are derived primarily from the sale of residential units, rental from commercial properties, fees from mortgage operations, telecommunication services, internet access services, telecommunications-related hardware and services, satellite-based CATV access services and construction management services. These revenues are recognized and recorded as services are performed and properties are sold or rented.

Operating Expenses

For the Nine Months Ended September 30, 2006 and 2005 (restated), operating expenses were $5,746,583 and $8,863,718, respectively, a decrease of $3,117,135. The decrease was primarily due to reduced professional and consulting fees. During the Nine Months Ended September 30, 2006, operating expenses consisted primarily of professional and consulting fees of $1,368,897 , of which $657,879 were paid in stock, salaries and commissions of $1,980,969 of which $650,993 were paid in stock, other general and administrative expenses of $1,083,820.

Loss From Continuing Operations Net Loss

For the Nine Months Ended September 30, 2006, we had a loss from continuing operations of $3,156,396 or $0.007 per share. In the comparable period of the prior year, we had a loss from continuing operations of $6,552,481 or $0.027 per share. The decrease in loss from continuing operations period over period is primarily the result of lower operating expenses. Specifically, the Company lowered staffing related expenses by reducing staff and salaries, lowered professional fees and lower deprecation and amortization.

Income and Loss From Discontinued Operations

For the Nine Months Ended September 30, 2006, we had a loss from discontinued operations of $2,225,969 or $0.005 per share. In the comparable period of the prior year, we had a loss from discontinued operations of $880,434 or $0.004 per share. The increased loss from discontinued operations period over period is directly attributable to the impairment of goodwill associated with Get A Phone of $1,820,824 and reduced revenues of $1,650,553.

Net Loss

For the Nine Months Ended September 30, 2006, we had a net loss of $5,382,365 or $0.012 per share. In the comparable period of 2005 (restated), we had a net loss of $7,432,915 or $0.031 per share. The decrease in net loss period over period is directly attributable to the reduction of operating expenses by $3,117,135 overcoming the additional expense of $1,820,824 goodwill impairment associated with discontinued operations.

Liquidity

We have a minimum cash on hand to meet the current operational needs of the business. We are actively seeking additional sources of cash through additional financing and equity transactions in order to meet the short term cash needs of the business. If we are unsuccessful in these efforts, we may not be able fund the operational needs of the business through the remaining months of fiscal year 2006. Historically, we have funded our construction and telecommunication activities with internally generated cash flows, existing credit agreements, and equity financing. For the Nine Months Ended September 30, 2006 our operations used $844,603 of cash and at September 30, 2006 we had cash on hand of $434,594. As we grow, we expect operations to continually use cash since our construction projects use a large portion of operational cash which is provided by construction lines of credit. Operating, investing and financing activities used a total of $550,015 net cash in the Nine Months Ended September 30, 2006 compared to generating $158,900 of cash in the same period in 2005 (restated).

Currently we are in default with four of our creditors representing 7 of our notes totaling $9,402,850 in arrearage. We are actively seeking to renegotiate the terms of these debts. More liquidity information is available in the future obligation note below and Part II Item 3. Defaults upon senior securities

Cash Used in Operating Activities

During the Nine Months Ended September 30, 2006, our operations used cash of $844,603 compared to using $5,347,909 during the same period in 2005 (restated). For the Nine Months Ended September 30, 2006 and 2005 the use of cash was a direct result of expanded construction projects. During the Nine Months Ended September 30, 2006, $250,916 of accreted interest expense was recorded in relation to our notes payable with beneficial conversion features; during the same period in 2005 (restated) we incurred accreted interest expense of $580,431.

Cash Provided by Investing Activities

During the Nine Months Ended September 30, 2006, we engaged in significant capital investment activity, primarily through the purchase of a notes receivable from GalaVu for $1,052,560. The total value of capital investments for the period used $1,069,686 compared to a net cash gain for the same period in 2005 (restated) of $871,955.

Cash Provided by Financing Activities

During the Nine Months Ended September 30, 2006, financing provided cash of $1,364,274 compared to providing $4,634,854 during the same period in 2005 (restated). The majority of our increased borrowings came from related party notes payable. The balance of our increased financing came from stock subscription agreements.

Future Obligations

The following table sets forth contractual obligations as of September 30, 2006:

			2 Years				More than
Contractual Obligations	Total		or less		3-5 years		5 years
Land and construction loans	$	35,225,611	$	30,893,567	$	569,364	$	3,762,680
Related party debt		4,526,915		1,224,180		2,500,682		802,053
Notes payable, net of $30,487 debt discount		10,505,229		9,971,700		-		533,529

Total	$	50,257,755	$	42,089,447	$	3,070,046	$	5,098,262

The majority of our obligations over the next 2 years consist of revolving land and construction loans which are paid off as real estate inventory is sold and extended as new construction is performed. We are working with both our notes payable and related party debt holders to extend their terms. However we are in default with four of our creditors representing 7 of our notes totaling $9,402,850 currently in arrearage. More details may be found in this report’s Part II Item 3 Defaults upon senior securities. If the debentures are not extended, paid or converted; the debenture holders could foreclose on our assets.

Future Cash Flow

Our telecommunications subsidiary, Cardinal Broadband, receives monthly recurring revenues provided by their subscriber base. The total costs associated with these subscribers has historically exceeded revenues, however we are striving to increase our subscriber base and lowering our costs in an attempt to generate excess cash flow. If we are unsuccessful at increasing our cash flow generated from this subsidiary our operations may be curtailed or ceased all together. When analyzing our operational cash flow one should bear in mind that as we develop real estate inventory, the expense is reflected in operations, however the construction loans directly related to this expense are reflected in our financing activities.

We do not expect to be profitable for the year ended December 31, 2006. Our auditors have issued a going concern opinion for our Company which means that given our current operations our auditors believe there is a possibility we will not continue in operation long enough to realize our investment in assets through operations (as opposed to sale). In order to mitigate this possibility, we constantly monitor current operational requirements and financial market conditions to evaluate the use of available financing sources, including debt and securities offerings.

Future acquisitions may require additional cash investment. When possible we will finance future acquisitions through operational cash flow, however if needed we will also utilize private placements of our securities and debt.

Off-Balance Sheet Financing Activities

None.

Factors Affecting our Business and Prospects

The most significant risks and uncertainties associated with our business are described in Part II Item 1.A; however, they are not the only risks we face. If any of the following risks actually occur, our business, financial condition, or results or operations could be materially adversely affected, the trading of our common stock could decline, and an investor may lose all or part of his or her investment.

Item 3. Controls and Procedures.

Material Weaknesses in Collecting And Processing Financial Information

Management has determined that certain material weaknesses in our internal controls over the financial reporting process existed at December 31, 2005 and through the quarter ended September 30, 2006. Specifically, management has determined that there is a material weakness in the controls over recording, processing, classes of transactions and disclosure and related assertions included in the financial statements from our subsidiaries and incorporating and consolidating that information into the holding company’s financial records.

Management did not identify the appropriate accounting treatment for certain transactions involving the sale and subsequent leaseback of residential units as it relates to the timing of revenue and expense recognition. Management was not aware of the material impact of the specific transactions on the consolidated financial statements and may have inadvertently not provided our auditors with the specific lease agreements for these transactions. We believe this weakness is attributable to the fact that we experienced a high degree of employee turnover at the time of acquisition of our Sovereign subsidiary. At the time of the acquisition, certain policies and procedures to assure that all transactions had proper documentation had not been implemented. Contributing factors include the fact that we inherited these accounting systems when we acquired these businesses, the information processing problems have been aggravated by the turnover of staff and we had a decentralized accounting department. Management believes that this situation reflects a material weakness in our internal controls and procedures insofar as there is a more than remote likelihood that our inability to identify the proper accounting treatment and assess the impact on the financial statements in conjunction with consolidating our financial statements could lead to a material misstatement of our financial statements. Management has identified a material misstatement in our financial statements through the quarter ended June 30, 2006 as a result of this weakness, and we have restated prior periods accordingly (See Note 3 of the financial statements). We advised our auditors when we became aware of the weakness in our accounting systems due to the nature of the documentation related to a specific set of transactions. We have taken specific steps to correct this weakness in regards to the documentation and we have restated the prior period financial statements accordingly. We have recently implemented a centralized accounting team, including a Controller and a Chief Financial Officer. We have also implemented additional procedures regarding the requirements of increased level of documentation related to all transactions. We believe that these actions will address our concerns.

The occurrence of material misstatements in our financial statements by reason of a material weakness in our internal controls and procedures or any other reason could harm our operating results, cause us to fail to meet our reporting obligations, subject us to increased risk of errors and fraud related to our financial statements or result in material misstatements in our financial statements. Any such failure also could adversely affect the results of the periodic management evaluations and annual independent certified public accountant attestation reports regarding the effectiveness of our “internal control over financial reporting” that will be required when the Securities and Exchange Commission’s rules under Section 404 of the Sarbanes-Oxley Act of 2002 become applicable to us. Inadequate internal controls could also expose the officers and directors of our company to securities laws violations and also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

PART II- OTHER INFORMATION

Item 1. Legal proceedings

Cardinal Communications, Inc. (the “Company”) was named as a defendant in a proceeding styled Exceleron Software, Inc. v. Cardinal Communications, Inc., Cause No. DV05-8334-J, filed in the Dallas County, Texas District Court on August 22, 2005. On May 5, 2006, the parties reached an agreement to settle the matter and dismiss the case, with prejudice. The Company has paid Exceleron a total of $47,500 in full satisfaction of all claims and has recorded expense of the same amount in connection with the settlement.

King Concrete, LLC (a dissolved wholly-owned subsidiary of Sovereign Partners, LLC, a wholly-owned subsidiary of the Company), was a defendant in a proceeding known as ABCO Development Corporation v. Systems Contractors, Inc., Case Nos. Case Nos. BC316119 and BC313338 pending in the Superior Court for the County of Los Angeles, California. The lawsuit alleged defective construction claims with respect to certain concrete components performed by King Concrete at a project site in Lakewood, Colorado. In February 2006, this suit was settled and the Company incurred no losses in relation to the suit.

The Company was a defendant in an arbitration proceeding styled Douglas O. McKinnon v. Cardinal Communications, Inc. pending before the American Arbitration Association in Denver, Colorado. The demand for arbitration was filed on July 29, 2005. Mr. McKinnon was seeking $360,000, representing two years salary pursuant to an employment agreement with the Company. The parties have settled the claim for a one year consulting services agreement valued at $242,000 payable in stock over the course of twelve months and the Company is recording the consulting expense in the period incurred. The Company failed to transfer stock under this settlement and have been informed by Mr. McKinnon that the Company is in default and that the full amount is now due.

Sovereign Companies, LLC (“Sovereign”), a wholly owned subsidiary of the Company, is involved in litigation surrounding a condominium development project in Greeley, Colorado known as Mountain View at T-Bone. In October 2005, Sovereign, Mountain View at T-Bone, LLC (“Mountain View”), and Mr. Edouard A. Garneau filed a declaratory relief action against certain members of Mountain View seeking a determination of the various rights and obligations of the members. The action is styled Sovereign Companies, LLC et al. v. Yale King et al., Case No. 05-CV-649 and is pending in Larimer County District Court in Colorado. The declaratory relief action seeks to clarify the roles and responsibilities of certain members and the operational authority of individual managers of Mountain View and asserts claims against certain of its members. Mr. Garneau is a member of the Company’s Board of Directors and indirectly owns and controls shares of the Company’s common and preferred stock.

Colorado River KOA, LLC (“CRKOA”), a wholly owned subsidiary of the Company, was sued by WHR Properties, Inc. in a case styled WHR Properties, Inc. v. Colorado River KOA, LLC and was pending in Gunnison County District Court in Colorado. The action was filed on March 17, 2006 and alleges breach of an agreement for the purchase of real property and seeks specific performance of the alleged contract and, alternatively, an unspecified claim for damages. On March 22, 2006, the Gunnison County District Court entered an order enjoining the sale of the property to any third party. The parties reached a settlement whereby CRKOA sold the property at issue to WHR. The action has been dismissed by WHR.