**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 fromtoCommission 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.





2




**PART
      I - Financial Information**




**Item
      1.**  **Financial
      Statements**





**CARDINAL
      COMMUNICATIONS, INC. AND SUBSIDIARIES**





**FINANCIAL
      STATEMENTS**


**TABLE
      OF CONTENTS**





PAGEConsolidated
                Balance Sheet as of September 30, 2006 (Unaudited)
            4Consolidated
                Statements of Operations and Comprehensive Loss for the Three and
                Nine
                Months Ended September 30, 2006 and 2005 (Restated)
                (Unaudited)
            6Consolidated
                Statements of Cash Flows for the Nine Months Ended September 30,
                2006 and
                2005 (Restated) (Unaudited)
            7Notes
                to Consolidated Financial Statements (Unaudited)
            9






3





CARDINAL
                  COMMUNICATIONS, INC. AND SUBSIDIARIESCONSOLIDATED
                  BALANCE SHEETSeptember
                  30, 2006 (UNAUDITED)ASSETS(Substantially
                  pledged)Cash
                  and cash equivalents
              
              $
              434,594Marketable
                  securities
              
              
              700Accounts
                  receivable, net
              
              
              276,217Notes
                  receivable - net of $1,168,606 discount
              
              
              950,778Other
                  receivables, net
              
              
              487,371Deposits
                  and prepaid expenses
              
              
              577,946Property
                  and equipment, net
              
              
              1,290,666Real
                  estate and land inventory
              
              
              47,471,995Deferred
                  costs of goods sold
              
              
              1,927,325Intangibles,
                  net
              
              
              6,714,704Other
                  assets
              
              
              428,977Assets
                  held for sale
              
              
              404,401Total
                  Assets
              
              $
              60,965,674The
                  accompanying notes are an integral part of these
                  statements.
 
 4


CARDINAL
                COMMUNICATIONS, INC. AND SUBSIDIARIESCONSOLIDATED
                BALANCE SHEET (Continued)September
                30, 2006 (UNAUDITED)LIABILITIES
                AND STOCKHOLDERS' EQUITY (DEFICIT)Accounts
                payable
            
            $
            4,406,270Accrued
                expenses and other liabilities
            
            
            4,201,231Deferred
                revenue
            
            
            1,971,674Land
                and construction loans
            
            
            35,225,611Related
                party debt
            
            
            4,526,915Notes
                payable, net of $30,487 debt discount
            
            
            10,505,229Liabilities
                of assets held for sale
            
            
            1,254,747Total
                Liabilities
            
            
            62,091,677Commitments
                and ContingenciesStock
                Committed
            
            
            1,211,982Minority
                Interest
            
            
            1,539,178Stockholders'
                equity (deficit):Preferred
                stock; par value $0.0001; issuable in series; authorized
                100,000,000Series
                A Convertible Preferred stock; issued and outstanding
                6,200
            
            
            1Series
                B Convertible Preferred stock; issued and outstanding
                350,000
            
            
            35Common
                stock; par value $0.0001; authorized 800,000,000; issued and
                outstanding522,166,549
            
            
            52,216Additional
                paid-in capital
            
            
            74,096,488Deferred
                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)
            
            $
            60,965,674The
                accompanying notes are an integral part of these
                statements.






5


CARDINAL
                COMMUNICATIONS, INC. AND SUBSIDIARIESCONSOLIDATED
                STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(UNAUDITED)Three
                Months Ended September 30
            
            Nine
                Months Ended September 302006
            
            2005
                (Restated)
            
            2006
            
            2005
                (Restated)REVENUESRevenues
            
            $
            9,923,880
            
            $
            5,061,099
            
            $
            18,724,218
            
            $
            12,274,618Gain
                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
            
            
            4,080,157OPERATING
                EXPENSESDepreciation
                and amortization
            
            
            118,204
            
            
            427,569
            
            
            581,773
            
            
            1,116,136Asset
                impairment
            
            
            39,071
            
            
            93,097
            
            
            293,012
            
            
            93,097Accounts
                Payable Settlements
            
            
            —
            
            
            8,801
            
            
            13,652
            
            
            8,801Professional
                fees
            
            
            301,382
            
            
            497,929
            
            
            1,368,897
            
            
            2,415,794Rent
            
            
            119,709
            
            
            177,798
            
            
            424,460
            
            
            345,924Salaries
                and commissions
            
            
            503,203
            
            
            1,567,186
            
            
            1,980,969
            
            
            3,554,767Selling,
                general and administrative
            
            
            380,269
            
            
            459,789
            
            
            1,083,820
            
            
            1,329,199Total
                operating expenses
            
            
            1,461,838
            
            
            3,232,169
            
            
            5,746,583
            
            
            8,863,718INCOME
                (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
            
            
            243,349,435The
                accompanying notes are an integral part of these
                statements.






6


CARDINAL
                COMMUNICATIONS, INC. AND SUBSIDIARIESCONSOLIDATED
                STATEMENTS OF CASH FLOWS(UNAUDITED)Nine
                Months Ended September 302006
            
            2005
                (Restated)CASH
                FLOWS FROM (TO) OPERATING ACTIVITIESNet
                (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
            
            
            1,116,136Stock
                issued for consulting, fees and compensation
            
            
            1,412,186
            
            
            3,412,444Stock
                options issued for consulting services
            
            
            —
            
            
            18,375Stock
                committed for expenses
            
            
            105,930
            
            
            —Accretion
                of interest expense on convertible debt
            
            
            252,749
            
            
            580,431Minority
                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
            )
            
            25,764Asset
                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
            
            
            —
            
            
            292,741Accounts
                payable
            
            
            2,103,043
            
            
            1,073,061Accrued
                expenses and other liabilities
            
            
            484,207
            
            
            1,887,097Deferred
                revenue
            
            
            (653,311
            )
            
            1,471,480Other
                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 ACTIVITIESPurchases
                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
            
            
            —
            
            
            1,352,147Proceeds
                from sale of assets
            
            
            17,924
            
            
            9,284Net
                cash provided by (used in) investing activities
            
            
            (1,069,686
            )
            
            871,955CASH
                FLOWS FROM (TO) FINANCING ACTIVITIESProceeds
                from issuances of common stock
            
            
            550,000
            
            
            —Proceeds
                from notes payable
            
            
            15,634,762
            
            
            20,730,438Proceeds
                from related party notes payable
            
            
            1,117,500
            
            
            732,215Payments
                on notes payable
            
            
            (15,968,220
            )
            
            (16,872,384
            )Payments
                on related party notes payable
            
            
            (52,789
            )
            
            44,585Investment
                by minority interest members
            
            
            83,021
            
            
            —Net
                cash provided by (used in) financing activities
            
            
            1,364,274
            
            
            4,634,854Net
                increase (decrease) in cash
            
            
            (550,015
            )
            
            158,900Cash
                and cash equivalents, beginning of period
            
            
            984,609
            
            
            480,122Cash
                and cash equivalents, end of period
            
            $
            434,594
            
            $
            639,022SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATIONCash
                paid for interest
            
            $
            1,077,641
            
            $
            360,821Stock
                issued for acquisition of assets
            
            $
            —
            
            $
            5,705,000Stock
                issued for satisfaction of debt
            
            $
            1,489,978
            
            $
            471,538The
                accompanying notes are an integral part of these
                statements.






7


**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.




8




**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.





9


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.





10


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, 2006Deferred
                  Revenue from Real Estate Sales
              
              $
              1,927,325Deferred
                  Revenue from Communications Sales
              
              
              44,349Total
                  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.





11


**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 YearsAirplane
                and vehicles
            5Furniture
            5Data
                Hardware
            3Equipment
            5Leasehold
                improvements
            Lesser
                of life of lease or useful lifeRental
                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
            
            $
            605,012Furniture
            
            
            293,107Data
                Hardware
            
            
            108,831Equipment
            
            
            1,356,007Leasehold
                improvements
            
            
            46,565Rental
                real estate
            
            
            423,2782,832,800Less
                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.





12





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





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





DescriptionCustomer
                base
            
            $
            133,313Goodwill
            
            
            6,688,207Totals
            
            
            6,821,520Accumulated
                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.





13


**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 2005Revenues
              
              $
              19,301,897
              
              $
              (2,041,670
              )
              $
              17,260,227Cost
                  of Sales
              
              
              (16,208,757
              )
              
              1,854,910
              
              
              (14,353,847
              )Gross
                  Profit
              
              
              3,093,140
              
              
              (186,760
              )
              
              2,906,380Total
                  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
   14
  December
                    31, 2005
                
                As
                    Reported in
                  2005
                    10-KSB
                
                (Unaudited)
                  Adjustments
                
                Restated
                    Amounts
                  for
                    2005ASSETSUnchanged
                    Assets
                
                $
                15,168,502
                
                $
                —
                
                $
                15,168,502Real
                    estate and land inventory
                
                $
                44,707,494
                
                
                (70,966
                )
                
                44,636,528Deferred
                    Costs of Goods Sold
                
                
                —
                
                
                1,860,660
                
                
                1,860,660Total
                    Assets
                
                $
                59,875,996
                
                $
                1,789,694
                
                $
                61,665,690LIABILITIES
                    AND STOCKHOLDERS' EQUITY (DEFICIT)Unchanged
                    Liabilities
                
                $
                53,320,106
                
                $
                —
                
                $
                53,320,106Accrued
                    expenses and other liabilities
                
                
                3,681,711
                
                
                135,996
                
                
                3,817,707Deferred
                    revenue
                
                
                583,315
                
                
                2,041,670
                
                
                2,624,985Total
                    Liabilities
                
                
                57,585,132
                
                
                2,177,666
                
                
                59,762,798Commitments
                    and ContingenciesStock
                    Committed
                
                
                2,804,837
                
                
                —
                
                
                2,804,837Minority
                    Interest
                
                
                2,542,406
                
                
                (122,957
                )
                
                2,419,449Stockholders'
                    equity (deficit):Unchanged
                    Equity
                
                
                69,333,594
                
                
                —
                
                
                69,333,594Accumulated
                    (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.




15


For
                    the Nine Months Ended September 30, 2005
                
                As
                    Reported in
                  2005
                    10-QSB
                
                (Unaudited)
                  Adjustments
                
                Restated
                  Amounts
                    for 2005Revenues
                
                $
                13,758,968
                
                $
                (1,484,350
                )
                $
                12,274,618Cost
                    of Sales
                
                
                (9,403,202
                )
                
                1,208,741
                
                
                (8,194,461
                )Gross
                    Profit
                
                
                4,355,766
                
                
                (275,609
                )
                
                4,080,157Total
                    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 2005ASSETSUnchanged
                  Assets
              
              $
              17,339,715
              
              $
              —
              
              $
              17,339,715Real
                  estate and land inventory
              
              
              44,925,223
              
              
              (27,020
              )
              
              44,898,203Deferred
                  Costs of Goods Sold
              
              
              —
              
              
              1,165,459
              
              
              1,165,459Total
                  Assets
              
              $
              62,264,938
              
              $
              1,138,439
              
              $
              63,403,377LIABILITIES
                  AND STOCKHOLDERS' EQUITY (DEFICIT)Unchanged
                  Liabilities
              
              $
              52,364,883
              
              $
              —
              
              $
              52,364,883Accrued
                  expenses and other liabilities
              
              
              3,029,218
              
              
              66,077
              
              
              3,095,295Deferred
                  revenue
              
              
              32,355
              
              
              1,484,350
              
              
              1,516,705Total
                  Liabilities
              
              
              55,426,456
              
              
              1,550,427
              
              
              56,976,883Commitments
                  and ContingenciesStock
                  Committed
              
              
              2,037,750
              
              
              —
              
              
              2,037,750Minority
                  Interest
              
              
              4,194,583
              
              
              166,142
              
              
              4,360,725Stockholders'
                  equity (deficit):Unchanged
                  Equity
              
              
              68,625,627
              
              
              —
              
              
              68,625,627Accumulated
                  (deficit)
              
              
              (68,019,478
              )
              
              (578,130
              )
              
              (68,597,608
              )Total
                  Stockholders' Equity (Deficit)
              
              
              606,149
              
              
              (578,130
              )
              
              28,019Total
                  Liabilities and Stockholders' Equity (Deficit)
              
              $
              62,264,938
              
              $
              1,138,439
              
              $
              63,403,377




16


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





Liabilities:




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





17


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


CARDINAL
                  COMMUNICATIONS, INC. AND SUBSIDIARIESDiscontinued
                  Operations of Connect Paging, Inc. d/b/a Get A PhoneCONSOLIDATED
                  STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(UNAUDITED)Three
                  Months Ended September 30
              
              Nine
                  Months Ended September 302006
              
              2005
              
              2006
              
              2005REVENUESRevenues
              
              $
              1,022,456
              
              $
              1,541,991
              
              $
              4,479,216
              
              $
              6,129,769Cost
                  of sales
              
              
              (546,140
              )
              
              (1,224,196
              )
              
              (2,600,575
              )
              
              (3,535,177
              )Gross
                  profit
              
              
              476,316
              
              
              317,795
              
              
              1,878,641
              
              
              2,594,592OPERATING
                  EXPENSESDepreciation
                  and amortization
              
              
              -
              
              
              15,582
              
              
              15,276
              
              
              46,361Asset
                  impairment
              
              
              -
              
              
              -
              
              
              1,820,824
              
              
              -Professional
                  fees
              
              
              75,853
              
              
              30,875
              
              
              161,024
              
              
              276,570Rent
              
              
              11,675
              
              
              14,582
              
              
              39,007
              
              
              41,769Salaries
                  and commissions
              
              
              189,789
              
              
              353,931
              
              
              719,342
              
              
              1,000,123Selling,
                  general and administrative
              
              
              275,605
              
              
              599,926
              
              
              1,356,939
              
              
              1,767,340Total
                  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
              
              
              170Accounts
                  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.




18


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”.





19


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.





20


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.





21


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.




22


**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.





23


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.





24


**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**





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 2005Revenues
              
              $
              19,301,897
              
              $
              (2,041,670
              )
              $
              17,260,227Cost
                  of Sales
              
              
              (16,208,757
              )
              
              1,854,910
              
              
              (14,353,847
              )Gross
                  Profit
              
              
              3,093,140
              
              
              (186,760
              )
              
              2,906,380Total
                  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




25


December
                  31, 2005
              
              As
                  Reported in
                2005
                  10-KSB
              
              (Unaudited)
                Adjustments
              
              Restated
                Amounts
                  for 2005ASSETSUnchanged
                  Assets
              
              $
              15,168,502
              
              $
              —
              
              $
              15,168,502Real
                  estate and land inventory
              
              
              44,707,494
              
              
              (70,966
              )
              
              44,636,528Deferred
                  Costs of Goods Sold
              
              
              —
              
              
              1,860,660
              
              
              1,860,660Total
                  Assets
              
              $
              59,875,996
              
              $
              1,789,694
              
              $
              61,665,690LIABILITIES
                  AND STOCKHOLDERS' EQUITY (DEFICIT)Unchanged
                  Liabilities
              
              $
              53,320,106
              
              $
              —
              
              $
              53,320,106Accrued
                  expenses and other liabilities
              
              
              3,681,711
              
              
              135,996
              
              
              3,817,707Deferred
                  revenue
              
              
              583,315
              
              
              2,041,670
              
              
              2,624,985Total
                  Liabilities
              
              
              57,585,132
              
              
              2,177,666
              
              
              59,762,798Commitments
                  and ContingenciesStock
                  Committed
              
              
              2,804,837
              
              
              —
              
              
              2,804,837Minority
                  Interest
              
              
              2,542,406
              
              
              (122,957
              )
              
              2,419,449Stockholders'
                  equity (deficit):Unchanged
                  Equity
              
              
              69,333,594
              
              
              —
              
              
              69,333,594Accumulated
                  (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.




26


For
                  the Nine Months Ended September 30, 2005
              
              As
                  Reported in
                2005
                  10-QSB
              
              (Unaudited)
                Adjustments
              
              Restated
                Amounts
                  for 2005Revenues
              
              $
              13,758,968
              
              $
              (1,484,350
              )
              $
              12,274,618Cost
                  of Sales
              
              
              (9,403,202
              )
              
              1,208,741
              
              
              (8,194,461
              )Gross
                  Profit
              
              
              4,355,766
              
              
              (275,609
              )
              
              4,080,157Total
                  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 2005ASSETSUnchanged
                  Assets
              
              $
              17,339,715
              
              $
              —
              
              $
              17,339,715Real
                  estate and land inventory
              
              
              44,925,223
              
              
              (27,020
              )
              
              44,898,203Deferred
                  Costs of Goods Sold
              
              
              —
              
              
              1,165,459
              
              
              1,165,459Total
                  Assets
              
              $
              62,264,938
              
              $
              1,138,439
              
              $
              63,403,377LIABILITIES
                  AND STOCKHOLDERS' EQUITY (DEFICIT)Unchanged
                  Liabilities
              
              $
              52,364,883
              
              $
              —
              
              $
              52,364,883Accrued
                  expenses and other liabilities
              
              
              3,029,218
              
              
              66,077
              
              
              3,095,295Deferred
                  revenue
              
              
              32,355
              
              
              1,484,350
              
              
              1,516,705Total
                  Liabilities
              
              
              55,426,456
              
              
              1,550,427
              
              
              56,976,883Commitments
                  and ContingenciesStock
                  Committed
              
              
              2,037,750
              
              
              —
              
              
              2,037,750Minority
                  Interest
              
              
              4,194,583
              
              
              166,142
              
              
              4,360,725Stockholders'
                  equity (deficit):Unchanged
                  Equity
              
              
              68,625,627
              
              
              —
              
              
              68,625,627Accumulated
                  (deficit)
              
              
              (68,019,478
              )
              
              (578,130
              )
              
              (68,597,608
              )Total
                  Stockholders' Equity (Deficit)
              
              
              606,149
              
              
              (578,130
              )
              
              28,019Total
                  Liabilities and Stockholders' Equity (Deficit)
              
              $
              62,264,938
              
              $
              1,138,439
              
              $
              63,403,377




27


**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
                  ‘06Thunderbird
                  Management Limited Partnership,(1)
              
              
              2,500,682
              
              
              12
              %
              
              Mar
                  ‘11Bob
                  Searls, Director and Shareholder(2)
              
              
              802,053
              
              
              6
              %
              
              May
                  ‘33Kerry
                  Briggs, Director and Shareholder
              
              
              275,000
              
              
              10
              %
              
              Oct
                  ‘06Investors
                  and/or Partners in Sovereign Partners as a group
              
              
              819,260
              
              
              4-12
              %
              
              Oct
                  ‘06 -June
                  ‘28Total
              
              $
              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
              
              $
              -
              
              $
              18,724,218Comprehensive
                  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.





28


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.





29


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.





30


**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.




31


**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
              
              $
              3,762,680Related
                  party debt
              
              
              4,526,915
              
              
              1,224,180
              
              
              2,500,682
              
              
              802,053Notes
                  payable, net of $30,487 debt discount
              
              
              10,505,229
              
              
              9,971,700
              
              
              -
              
              
              533,529Total
              
              $
              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.




32


**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.




33


**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.





In
      a
      related action, Sovereign and Mr. Garneau, in his capacity as Manager of
      Sovereign and Mountain View, were named in a lawsuit brought by several
      individual members of Mountain View, claiming unspecified damages for breach
      of
      contract by Sovereign and Mr. Garneau, and for other causes of action against
      Mr. Garneau individually. That case is styled Yale King et al. v. Sovereign
      Companies, LLC et al., Case No. 2005-CV-1008 and was filed in June 2005 in
      Weld
      County District Court in Colorado. This action was subsequently dismissed for
      improper venue and transferred to Denver County District Court. Both related
      cases have been stayed pending a determination as to where the two cases should
      proceed; on June 16, 2006, the Court determined that the matters should be
      consolidated and transferred to the District Court of the City and County of
      Denver. Sovereign disputes the allegations of the other Mountain View members
      and intends to vigorously defend the action. However, the Company cannot control
      the outcome and extent of the losses, if any, that may be incurred. 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.





34


Sovereign
      Companies, LLC and Sovereign Developments, LLC, (collectively
“Sovereign”), wholly
      owned subsidiaries of the Company, were sued by Jech Excavating, Inc. in a
      case
      styled Jech
      Excavating, Inc. v. Riverplace


Condominiums,
      LLC et al., Case No. 55-CV-06-2028, in Olmstead
      County District Court, Minnesota. The lawsuit was filed on February 22, 2006
      and alleged
      breach of contract under a promissory note relating to the performance of
      excavating work
      at
      the Riverplace development. The action also asserted a claim against Mr. Garneau
      and others
      individually. The Plaintiff sought damages of $664,000 together with interest
      and attorney’s fees.
      The
      parties subsequently reached a full and final settlement whereby Sovereign
      paid Jech
      Excavating $638,000 in settlement of all claims with funds that were derived
      from the sale of the
      Riverplace property. Jech has dismissed the action and an Order for Dismissal
      was entered on August
      10, 2006. No further action is pending.





The
      Company was named as a defendant in a proceeding styled AMCO Insurance Company,
      as Subrogee of Poor Boy Bagels v. Sovereign Homes of Colorado, a division of
      Sovereign Companies LLC, Case No. 06C18852, filed in the County Court for Denver
      County, Colorado, on July 10, 2006. The complaint alleged that the defendant
      negligently severed a power line while performing construction operations,
      and
      sought $2,134 in damages, which includes interest. The Company demonstrated
      during discovery that the plaintiff's claims were factually baseless and the
      plaintiff voluntarily dismissed the complaint against the Company with prejudice
      on October 15, 2006.





On
      August
      11, 2006, a Chapter 11 bankruptcy petition was filed for Connect Paging, Inc,
      d/b/a Get A Phone in the Western District of Texas Federal Bankruptcy Court
      styled In Re: Connect Paging, Inc., Case No. 06-51519. Connect Paging, Inc.
      d/b/a Get A Phone is a wholly owned subsidiary of the Company currently held
      for
      sale. Connect Paging, Inc. requests temporary relief from its creditors while
      it
      restructures its debt. On October 25, 2006, the Company filed a Complaint for
      Injunctive Relief and sought a Temporary Restraining Order arising from the
      unauthorized exercise of dominion and control over the assets of the debtors
      by
      Byron Young, Brandon Young, and Brian Young. On October 30, 2006, Connect Paging
      filed a Complaint against Cardinal Communications, Inc., and its Chief Executive
      Officer, Edouard Garneau, seeking return $534,102.70, which was allegedly
      transferred to Cardinal within two years before Connect Paging filed its
      Bankruptcy petition, and seeking other monetary damages. The parties have
      reached a settlement pursuant to which the claims of the parties will be
      dismissed with prejudice and all parties shall release claims. 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.





The
      Company is a defendant in a proceeding styled Jantaq, Inc. v. Cardinal
      Communications, Inc., Case No. BC350688, filed in the Los Angeles County
      Superior Court on April 13, 2006. The complaint alleges breach of contract
      and
      fraud claims against the Company and seeks $300,000 in damages together with
      interest and attorney’s fees. On June 7, 2006, the Company filed Counterclaims
      against Jantaq seeking damages and alleging that it is excused from any contract
      obligations owed to Jantaq due to Jantaq's conduct, including but not limited
      to
      insider trading, fraud, and unfair business practices. The Company intends
      to
      vigorously defend and prosecute the action. However, the Company cannot control
      the outcome and extent of the losses, if any, that may be incurred.





On
      August
      15, 2006, C Group Holdings, LP and Gale D. Pipkin filed a complaint against
      Cardinal Communications, Inc.; Sovereign Companies, LLC; Sovereign Partners,
      LLC; Sovereign Developments, LLC; Sovereign Group Holdings, Inc.; Sovereign
      GP,
      LLC; and SovCo Holdings, LLLP. The plaintiffs claim breach of a stock purchase
      and sale agreement regarding partnership interests in SovCo Holdings, LLLP
      and
      Sovereign Group Holdings, Inc. The plaintiffs also claim breach of fiduciary
      duty, conversion, unjust enrichment and breach of duty of good faith and fair
      dealing. The defendants generally deny all of the claims, and the Company has
      moved to dismiss for failure to state a claim upon which relief can be granted
      based on the fact that the Company was not a party to the subject agreement.
      The
      remaining defendants have asserted claims against the plaintiffs and against
      Randal Craven, the owner of C Group Holdings and a former employee of Sovereign
      Companies, LLC, for fraudulent inducement to enter into the subject agreement,
      negligent misrepresentation, breach of fiduciary duty, breach of contract and
      a
      claim for set-off. The Court has not yet ruled on the motion to dismiss, and
      as
      such, the case is not yet at issue. The Company intends to vigorously defend
      and
      prosecute the action. However, the Company cannot control the outcome and extent
      of the losses, if any, that may be incurred.





R
&
K
      Glass, Inc., filed a complaint against Colony Ridge Development, LLC,
      a majority owned subsidiary of the Company, on May 22, 2006, alleging that
      Colony Ridge Development owed approximately $8,000 to R & K Glass for
      materials supplied to that development project. The parties have entered into
      a
      settlement agreement resolving the dispute and dismissing the action.





35


On
      September 19, 2006, Pro Fab Framing, Inc., filed a claim against Foxhill
      Development, LLC, a majority owned subsidiary of the Company, regarding
      dispute over non-payment in the amount of $277,000.00. The Company generally
      denies all of the claims and intends to vigorously defend the action. However,
      the Company cannot control the outcome and extent of the losses, if any, that
      may be incurred.





Pro
      Fab
      Framing, Inc., filed a claim on July 14, 2006, against Mountain View at T-Bone,
      LLC, a majority owned subsidiary of the Company, regarding a dispute over
      non-payment in the amount of approximately $74,195.96. The Company generally
      denies all of the claims and intends to vigorously defend the action. However,
      the Company cannot control the outcome and extent of the losses, if any, that
      may be incurred.




**Item
      1A.** **Risk Factors**





Except
      as
      updated below, there has been no material changes with respect to the risk
      factors disclosed in our Annual Report on Form 10-K for the fiscal year ended
      December 31, 2005 filed with the SEC on April 17, 2006.





WE
      HAVE A
      HISTORY OF SIGNIFICANT LOSSES AND WE MAY NEVER ACHIEVE OR SUSTAIN PROFITABILITY.
      IF WE ARE UNABLE TO BECOME PROFITABLE, OUR OPERATIONS WILL BE ADVERSELY
      EFFECTED.





We
      have
      incurred annual operating losses since our inception. As a result, at September
      30, 2006, we had an accumulated deficit of $77,947,136  .
      Our
      gross revenues for the Nine Months Ended September 30, 2006 and 2005, were
      $18,724,218 and $12,274,618 with losses from operations of $2,297,884 and
      $4,783,561 and net losses of $5,382,365 and $7,432,915 respectively.





As
      we
      pursue our business plan, we expect our operating expenses to increase
      significantly. We will need to generate increased revenues to become profitable.
      Accordingly, we cannot assure you that we will ever become or remain profitable.
      If our revenues fail to grow at anticipated rates or our operating expenses
      increase without a commensurate increase in our revenues, our financial
      condition will be adversely affected. Our inability to become profitable on
      a
      quarterly or annual basis would have a materially adverse effect on our business
      and financial condition. Also, the market price for our stock could fall.





WE
      HAVE
      SENIOR SECURED UNCONVERTED DEBENTURES TOTALING $5,550,000 DUE IN 2006,
      COLLATERALIZED BY ALL OUR ASSETS. WE DO NOT HAVE THE FUNDS AVAILABLE TO PAY
      THESE DEBENTURES IF NOT CONVERTED INTO COMMON STOCK. IF THE DEBENTURES ARE
      NOT
      PAID OR CONVERTED, THE DEBENTURE HOLDERS COULD FORECLOSE ON OUR ASSETS.





We
      have
      entered into a series of private placements totaling $5,550,000 in senior
      secured debentures, convertible into common stock. Senior Secured debentures
      totaling $4,300,000 were due in July 2006 and are currently in default. We
      do
      not currently have the funds to pay these debentures and we cannot assure you
      that we will have the funds to pay them. If the debentures are not paid or
      converted, the debenture holders could foreclose on all of our assets. The
      debentures are collateralized by all of our assets.





WE
      HAVE A
      NOTE PAYABLE TO EVERGREEN VENTURE PARTNERS, LLC DUE IN 2006. WE CURRENTLY DO
      NOT
      HAVE THE FUNDS AVAILABLE TO PAY THIS NOTE WHEN DUE.





In
      2005
      we entered into an agreement with Evergreen Venture Partners, LLC to purchase
      17,000,000 unregistered shares of our common stock for a $750,000 note payable.
      The terms of the agreement call for payment of the note in July 2006. This
      note
      is currently in default. We do not have the funds to pay this debenture and
      we
      cannot assure you that we will have the funds to pay it.





WE
      REQUIRE ADDITIONAL FUNDING





We
      do not
      have sufficient cash on hand or cash generated from operations to continue
      operations into the foreseeable future. To continue funding operations the
      Company must raise additional cash, either through debt or equity financing.
      No
      assurance can be given that the Company will be successful in obtaining any
      such
      financing with acceptable terms, or that such financing will provide for
      payments to the Company sufficient to continue to sustain operations.  In
      the absence of such financing the Company may be required to reduce operations.
      Even assuming the Company is successful in securing additional sources of
      financing to fund the continued operations, there can be no assurance that
      the
      Company will become profitable or self sustaining in the future.




36


WE
      CAN
      ISSUE COMMON STOCK WITHOUT SHAREHOLDER APPROVAL THAT MAY CAUSE DILUTION TO
      EXISTING SHAREHOLDERS.





We
      have
      800,000,000 authorized shares of common stock that can be issued by the Board
      of
      Directors. At September 30, 2006, we had 20,896,523 shares of common stock
      available for issue. Under most circumstances the Board of Directors has the
      right to issue these shares.





OUR
      COMMON STOCK HAS EXPERIENCED SIGNIFICANT PRICE VOLATILITY IN THE PAST AND WE
      EXPECT IT TO EXPERIENCE HIGH VOLATILITY IN THE FUTURE. THIS HIGH VOLATILITY
      SUBSTANTIALLY INCREASES THE RISK OF LOSS TO PERSONS OWNING OUR COMMON STOCK.





The
      trading price for our common stock has been, and we expect it to continue to
      be,
      highly volatile. For example, the closing bid price of our stock has fluctuated
      between $0.005 and $0.35 per share since January 1, 2003. The price at which
      our
      common stock trades depends upon a number of factors, including our historical
      and anticipated operating results and general market and economic conditions,
      which are beyond our control. In addition, the stock market has, from time
      to
      time, experienced extreme price and volume fluctuations. These broad market
      fluctuations may lower the market price of our common stock. Moreover, during
      periods of stock market price volatility, share prices of many
      telecommunications companies have often fluctuated in a manner not necessarily
      related to their operating performance. Accordingly, our common stock may be
      subject to greater price volatility than the stock market as a whole.





AN
      ADVERSE CHANGE IN ECONOMIC CONDITIONS COULD REDUCE THE DEMAND FOR HOMES AND,
      AS
      A RESULT, COULD REDUCE OUR EARNINGS.





Changes
      in national and regional economic conditions, as well as local economic
      conditions where our subsidiaries conduct operations and where prospective
      purchasers of our homebuilding subsidiaries’ homes live, can have a negative
      impact on our business. Adverse changes in employment levels, job growth,
      consumer confidence, housing demand, interest rates and population growth may
      reduce demand and depress prices for our homebuilding subsidiaries’ homes. This,
      in turn, can reduce our earnings. A material decline in the value of new
      residential housing could also result in a decreased value for the land, housing
      inventory and housing work-in-progress that we own. Any pronounced down cycle
      in
      the homebuilding industry in Colorado, Arizona and Wisconsin, could cause demand
      for our homes and land that we own to weaken significantly.







**item
      2.**  **Unregistered
      Sales of Equity Securities and Use of Proceeds**




1. (a)
      Securities Issued. In January 2006; 1,000,000 shares of the Company's common
      stock were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to
      Equitrend Advisors, LLC.





(c)
      Consideration. Such shares were issued pursuant to a services purchase
      agreement.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





2. (a)
      Securities Issued. In January 2006; 2,370,360 shares of the Company's common
      stock were issued.





37


(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Kenneth
      Miller.





(c)
      Consideration. Such shares were issued pursuant to consideration for loan
      guarantees.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





3. (a)
      Securities Issued. In January 2006; 193,180 shares of the Company's common
      stock
      were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Edwin
      Buckmaster.





(c)
      Consideration. Such shares were issued pursuant to consideration for loan
      guarantees.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





4. (a)
      Securities Issued. In January 2006; 8,980,360 shares of the Company's common
      stock were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Edouard
      Garneau.





(c)
      Consideration. Such shares were issued pursuant to consideration for loan
      guarantees.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





5. (a)
      Securities Issued. In January 2006; 170,450 shares of the Company's common
      stock
      were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Paul
      Garneau.





(c)
      Consideration. Such shares were issued pursuant to consideration for loan
      guarantees.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





6. (a)
      Securities Issued. In January 2006; 125,000 shares of the Company's common
      stock
      were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Jeffrey
      Fiebig.





(c)
      Consideration. Such shares were issued pursuant to consideration for loan
      guarantees.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





38


7. (a)
      Securities Issued. In January 2006; 6,810 shares of the Company's common stock
      were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Craig
      Cook.





(c)
      Consideration. Such shares were issued pursuant to consideration for loan
      guarantees.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





8 . (a)
      Securities Issued. In February 2006; 9,974,288 shares of the Company's common
      stock were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Michael
      Blank.





(c)
      Consideration. Such shares were issued pursuant to satisfy a Settlement
      Consultant Program.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.








9 . (a)
      Securities Issued. In February 2006; 15,372,015 shares of the Company's common
      stock were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Edwin
      Buckmaster.





(c)
      Consideration. Such shares were issued pursuant to satisfy a Settlement
      Consultant Program.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.








10 . (a)
      Securities Issued. In February 2006; 47,743,590 shares of the Company's common
      stock were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to AEJM
      Enterprises Limited Partnership .





(c)
      Consideration. Such shares were issued to satisfy a Note Payable in the amount
      of $700,000.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





11 . (a)
      Securities Issued. In March 2006; 357,143 shares of the Company's common stock
      were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Steven
      Basmajian.





(c)
      Consideration. Such shares were issued pursuant to a consulting agreement.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





39


12. (a)
          Securities Issued. In April 2006, 69,443 shares of the Company's series
          B
          convertible preferred stock were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to DD
      Family Properties, LLC.





(c)
      Consideration. Such shares were issued pursuant to a stock purchase agreement.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





13.(a) Securities
          Issued. In April 2006, 23,805 shares of the Company's series B convertible
          preferred stock were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to
      Thunderbird Management Limited Partnership.





(c)
      Consideration. Such shares were issued pursuant to a stock purchase agreement.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





14. (a)
          Securities Issued. In April 2006, 26,770 shares of the Company's series
          B
          convertible preferred stock were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Searls
      Family, LLLP.





(c)
      Consideration. Such shares were issued pursuant to a stock purchase agreement.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





15. (a)
          Securities Issued. In April 2006, 22,310 shares of the Company's series
          B
          convertible preferred stock were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Krantz
      Family, LLLP.





(c)
      Consideration. Such shares were issued pursuant to a stock purchase agreement.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





16. (a)
          Securities Issued. In April 2006, 21,416 shares of the Company's series
          B
          convertible preferred stock were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Dolphin
      Bay, LLC.





(c)
      Consideration. Such shares were issued pursuant to a stock purchase agreement.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





40


17. (a)
          Securities Issued. In April 2006, 3,548 shares of the Company's series
          B
          convertible preferred stock were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Paul
      Garneau.





(c)
      Consideration. Such shares were issued pursuant to a stock purchase agreement.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





18. (a)
          Securities Issued. In April 2006, 3,547 shares of the Company's series
          B
          convertible preferred stock were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Laura
      Mia Garneau.





(c)
      Consideration. Such shares were issued pursuant to a stock purchase agreement.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





19. (a)
          Securities Issued. In April 2006, 56,598 shares of the Company's series
          B
          convertible preferred stock were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Kenneth
      Miller.





(c)
      Consideration. Such shares were issued pursuant to a stock purchase agreement.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





20. (a)
          Securities Issued. In April 2006, 3,363 shares of the Company's series B
          convertible preferred stock were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Jeffery
      Schetgen.





(c)
      Consideration. Such shares were issued pursuant to a stock purchase agreement.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





41


21. (a)
          Securities Issued. In April 2006, 6,250 shares of the Company's series
          B
          convertible preferred stock were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Thomas
      Beck.





(c)
      Consideration. Such shares were issued pursuant to a stock purchase agreement.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





21. (a)
          Securities Issued. In April 2006, 6,250 shares of the Company's series
          B
          convertible preferred stock were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Brent
      E. Couch.





(c)
      Consideration. Such shares were issued pursuant to a stock purchase agreement.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





22. (a)
          Securities Issued. In April 2006, 2,500 shares of the Company's series
          B
          convertible preferred stock were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Jeffrey
      W. Fiebig.





(c)
      Consideration. Such shares were issued pursuant to a stock purchase agreement.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





23. (a)
          Securities Issued. In April 2006, 2,500 shares of the Company's series
          B
          convertible preferred stock were issued.


(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Craig
      A. Cook.





(c)
      Consideration. Such shares were issued pursuant to a stock purchase agreement.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





26. (a)
          Securities Issued. In April 2006, 850 shares of the Company's series B
          convertible preferred stock were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Curt
      A.
      Bushman.





(c)
      Consideration. Such shares were issued pursuant to a stock purchase agreement.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





28. (a)
          Securities Issued. In April 2006, 850 shares of the Company's Series B
          convertible Preferred Stock were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Michael
      P. Petrusich.





(c)
      Consideration. Such shares were issued pursuant to a stock purchase agreement.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





42


29. (a)
      Securities Issued. In April 2006; 170,070 shares of the Company's common stock
      were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Steven
      Basmajian.





(c)
      Consideration. Such shares were issued pursuant to a consulting agreement.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





30 . (a)
      Securities Issued. In June 2006; 33,333,34 shares of the Company's common stock
      were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Edwin
      Buckmaster.





(c)
      Consideration. Such shares were issued pursuant to a stock subscription
      agreement valued at $500,000.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.








31. (a)
      Securities Issued. In April 2006; 6,650,000 shares of the Company's common
      stock
      were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Ed
      Buckmaster.





(c)
      Consideration. Such shares were issued to satisfy a Note Payable in the amount
      of $150,000.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.








32 . (a)
      Securities Issued. In April 2006; 1,678,250 shares of the Company's common
      stock
      were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Richard
      Koontz.





(c)
      Consideration. Such shares were issued pursuant to satisfy a Note Payable plus
      interest totaling $29,000.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





33. (a)
      Securities Issued. In May 2006; 607,900 shares of the Company's common stock
      were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Kenneth
      Miller.





(c)
      Consideration. Such shares were issued pursuant to consideration for loan
      guarantees.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





34. (a)
      Securities Issued. In May 2006; 50,000 shares of the Company's common stock
      were
      issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Edwin
      Buckmaster.





(c)
      Consideration. Such shares were issued pursuant to consideration for loan
      guarantees.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





43


35. (a)
      Securities Issued. In May 2006; 2,410,950 shares of the Company's common stock
      were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Edouard
      Garneau.





(c)
      Consideration. Such shares were issued pursuant to consideration for loan
      guarantees.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





36. (a)
      Securities Issued. In May 2006; 43,750 shares of the Company's common stock
      were
      issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Paul
      Garneau.





(c)
      Consideration. Such shares were issued pursuant to consideration for loan
      guarantees.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





37. (a)
      Securities Issued. In May 2006; 34,400 shares of the Company's common stock
      were
      issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Jeffrey
      Fiebig.





(c)
      Consideration. Such shares were issued pursuant to consideration for loan
      guarantees.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





38. (a)
      Securities Issued. In May 2006; 18,500 shares of the Company's common stock
      were
      issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Craig
      Cook.





(c)
      Consideration. Such shares were issued pursuant to consideration for loan
      guarantees.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.








39 . (a)
      Securities Issued. In June 2006; 1,989,703 shares of the Company's common stock
      were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Robert
      Schechter.





(c)
      Consideration. Such shares were issued pursuant to satisfy a Note Payable plus
      interest totaling $49,743.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.





44





40 . (a)
      Securities Issued. In June 2006; 1,595,764 shares of the Company's common stock
      were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Shimon
      Fishman.





(c)
      Consideration. Such shares were issued pursuant to satisfy a Note Payable plus
      interest totaling $39,894.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.








41 . (a)
      Securities Issued. In July 2006; 816,386 shares of the Company's common stock
      were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Robert
      Schechter.





(c)
      Consideration. Such shares were issued pursuant to satisfy a Note Payable plus
      interest totaling $20,410.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.








42 . (a)
      Securities Issued. In June 2006; 816,386 shares of the Company's common stock
      were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Shimon
      Fishman.





(c)
      Consideration. Such shares were issued pursuant to satisfy a Note Payable plus
      interest totaling $20,410.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.








43 . (a)
      Securities Issued. In June 2006; 2,499,088 shares of the Company's common stock
      were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Atlas
      Equity Group, Inc.





(c)
      Consideration. Such shares were issued pursuant to satisfy a Note Payable plus
      interest totaling $102,047.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.








44. (a)
      Securities Issued. In July 2006; 3,333,34 shares of the Company's common stock
      were issued.





(b)
      Underwriter, Purchaser or Recipient. Such shares of stock were issued to Jeffrey
      Schetgen.





(c)
      Consideration. Such shares were issued pursuant to a stock subscription
      agreement valued at $50,000.





(d)
      Exemption from Registration. These securities are exempt from registration
      under
      the Securities Act of 1933, as amended, pursuant to the provisions of Section
      4(2) thereof, as a transaction not involving a public offering. This purchaser
      is a sophisticated investor capable of evaluating an investment in the Company.




45


**Item
      3.**  **Defaults
      upon senior securities**







Washington
      Mutual Bank FA





As
      of the
      date of the filing of this report the Company is in default in payment of one
      note payable to Washington Mutual Bank FA (WAMU) totaling $1,908,075 due in
      principal. The financial institution has submitted a default letter to the
      Company as of July 2006 due to the fact the note payable matured in August
      2005
      and elected not to renew the note. The Company has been unsuccessful to date
      in
      obtaining additional financing to replace the note. The note is specifically
      related to the SR Condominium project located in Parker, Colorado. The Company
      is currently in negotiations with WAMU to resolve the outstanding
      balance.





MW
      Housing Partners III, LP





As
      of the
      date of the filing of this report the Company is in default on one note payable
      to MW Housing Partners III, LP (Weyerhaeuser) totaling $2,444,775 due in
      principal. The note is specifically related to the SR Condominium project
      located in Parker, Colorado. Weyerhaeuser submitted a default notice to the
      Company in July 2006 due to the fact the Company was in default on the note
      to
      WAMU associated with the same construction project, SR Condominium. A clause
      in
      the notes payable gives Weyerhaeuser the right to place the Company in default
      status if a different note from a different lender is in default status on
      the
      same project. Weyerhaeuser elected to exercise this right under the note. The
      Company is currently in negotiations with Weyerhaeuser to resolve the
      issue.





Crestview
      Capital Master, LLC





As
      of the
      date of the filing of this report the Company is in default in payment of four
      notes payable to Crestview Capital Master, LLC (Crestview) totaling $4,300,000
      due in principal and related accrued interest. The total principal and interest
      matured on July 1, 2006. The Company is currently in negotiations with Crestview
      to resolve the outstanding balance.





Evergreen
      Venture Partners, LLC





As
      of the
      date of the filing of this report the Company is in default in payment of one
      non-interest bearing, note payable to Evergreen Venture Partners, LLC
      (Evergreen) for $750,000. The total principal matured on July 1, 2006. The
      Company is currently in negotiations with Evergreen to resolve the outstanding
      balance.




**Item
      4.**  **Submission
      of matters to a vote of security holders**




None.




**Item
      5.**  **Other
      Information**




**Subsequent
      Events**





None.


46


**Item
      6.**  **Exhibits
      and Reports on Form 8-K**





EXHIBIT
        NO. DESCRIPTION
  (1)
              3.1 
                  Articles of Incorporation of
                  Registrant.
  (6)
              3.2  Bylaws
                  of Registrant, as amended April 20,
                  2005.
  (3)
              3.5  Articles
                  of
                  Amendment to Articles of Incorporation of
                  Registrant.
  (4)
              3.6  Articles
                  of
                  Amendment to Articles of Incorporation of
                  Registrant.
  (8)
              3.7  Certificate
                  of
                  Designation of Series A Convertible Preferred
                  Stock.
  (6)
              3.8  Certificate
                  of
                  Designation of Series B Convertible Preferred
                  Stock.
  (7)
              3.9  Articles
                  of
                  Amendment to Articles of Incorporation of
                  Registrant.
  (2)
              4.1 
                  Specimen Common Stock Certificate.
  (5)
              4.2  Specimen
                  Series
                  A Preferred Stock Certificate.
  (5)
              4.3  Specimen
                  Series
                  B Preferred Stock Certificate.
  (6)
              21.1Subsidiaries
                  of Registrant.


#
              31.1Certification
                  pursuant to rules 13A-14 and 15D-14 of the Securities Exchange
                  Act of 1934
                  of President and CEO.
 #
              31.2Certification
                  pursuant to rules 13A-14 and 15D-14 of the Securities Exchange
                  Act of 1934
                  of Chief Financial Officer.
  #
              32.1CERTIFICATION
                  PURSUANT TO18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION
                  906 OF
                  THE SARBANES-OXLEY ACT OF 2002 of CEO and Chief Financial
                Officer.


(1)
      Incorporated by reference from Registrant's Registration Statement on Form
      S-1,
      Commission File No. 333-26385.





(2)
      Incorporated by reference from Registrant's Registration Statement on Form
      S-1,
      Commission File No. 333-96027.





(3)
      Incorporated by reference from Registrant's Current Report on Form 8-K filed
      with the SEC on July 29, 1998.





(4)
      Incorporated by reference from Registrant's Current Report on Form 8-K filed
      with the SEC on July 13, 1999.





(5)
      Incorporated by reference from Registrant’s Annual Report on Form 10-KSB filed
      with the SEC on March 31, 2005 and amended on April 6, 2005.





(6)
      Incorporated by reference from Registrant’s Report on Form 10-KSB filed with the
      SEC on April 17, 2006.





(7)
      Incorporated by reference from Registrant’s Report on Form 10-QSB filed with the
      SEC on August 18, 2005.





**#
      Filed Herewith**





47


**SIGNATURES**




In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned thereunto duly
      authorized.




Date:November
                20, 2006**CARDINAL
                COMMUNICATIONS, INC.**By:
            /s/ *Edouard
              A. Garneau*Edouard
                A. GarneauChief
                Executive Officer


By:
            /s/ *D.
              Brian Karr***D.
                Brian KarrChief
                Financial Officer




48