10QSB/A 1 v078650_10qsba.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
Amendment No. 2
to
FORM 10-QSB
__________________________
 
(Mark One)
ý
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2005

¨
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to ___________

Commission file number: 333-100046

CINTEL CORP.
(Exact name of Registrant as specified in its charter)
____________________

Nevada
(State or other Jurisdiction of Incorporation or organization)
52-2360156
(IRS Employer I.D. No.)
___________________________
 
9900 Corporate Campus Drive
Suite 3000, Louisville, KY 40223
Tel : (502) 657-6077
Fax : (502) 657-6078
(Address, including zip code, and telephone and facsimile numbers, including area code, of
registrant’s executive offices)
___________________________


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


Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes   o No

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of June 30, 2005 40,629,877 shares of common stock, $.001 par value per share.


EXPLANATORY NOTE
 
This quarterly report on Form 10-QSB/A ("Form 10-QSB/A") is being filed to amend our quarterly report on Form 10-QSB for the fiscal quarter ended June 30, 2005 (the "Original Form 10-QSB"), which was originally filed with the Securities and Exchange Commission ("SEC") on August 22, 2005 and amended on February 9, 2007. Accordingly, pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, the Form 10-QSB/A contains current dated certifications from the Principal Executive Officer and the Principal Financial Officer.
 
The Original Form 10-QSB is being amended to amend the financial statements contained therein to write-off certain tax benefits recognized in the year ended December 31, 2004.
 
We have not updated the information contained herein for events occurring subsequent to August 22, 2005, the filing date of the Original Form 10-QSB.
 

CINTEL CORP.

 
FORM 10-QSB

 
 
 
Page
PART I - FINANCIAL INFORMATION
   
Item 1. Financial Statements
2
Item 2. Management’s Discussion and Analysis or Plan of Operation
22
Item 3. Controls and Procedures
23
   
PART II - OTHER INFORMATION
   
Item 1. Legal Proceedings
23
Item 2. Changes in Securities and Use of Proceeds
24
Item 3. Defaults Upon Senior Securities
24
Item 4. Submission of Matters to a Vote of Security Holders
24
Item 5. Other Information
24
Item 6. Exhibits
24
   
SIGNATURES
25
 
 
To the Board of Directors and Stockholders of
Cintel Corp. and Subsidiary
 
We have reviewed the accompanying consolidated balance sheets of Cintel Corp. and Subsidiary (the "Company") as at June 30, 2005 and 2004, and the related consolidated statements of operations and comprehensive loss, stockholders' deficit, and cash flows for the six-month periods then ended. These interim consolidated financial statements are the responsibility of the Company's management.
 
We conducted our reviews in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
 
Based on our reviews, we are not aware of any material modifications that should be made to such consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
 
Toronto, Canada CHARTERED ACCOUNTANTS
August 17, 2005 except as to note 15(a)
which is as of February 2, 2007 and note 15(b)
which is as of June 7, 2007

- 1 -

 
CINTEL CORP. AND SUBSIDIARY
Consolidated Balance Sheets
June 30, 2005 and 2004
(Unaudited)

   
Restated
(note 15)
      
   
2005
  
2004
  
ASSETS
          
           
Current
              
Cash and cash equivalents (note 3)
  
$
373,982
  
$
242,450
  
Accounts receivable (net of allowance for doubtful accounts of $965,246; 2004 - $426,626)
    
290,083
    
1,301,587
  
Inventories (note 4)
    
267,433
    
217,259
  
Prepaid and other assets
    
225,429
    
89,411
  
Deferred taxes (notes 11 and 15)
    
-
    
121,288
  
               
     
1,156,927
    
1,971,995
  
Deferred Financing Fees 
    
30,000
    
-
  
Deferred Taxes (notes 11 and 15)
    
-
    
527,419
  
Equipment (note 6)
    
466,422
    
595,901
  
Investments in Available for Sale Securities (note 5)
    
48,752
    
43,654
  
               
$
1,702,101
  
$
3,138,969
  
               
LIABILITIES
              
Current
              
Accounts payable
  
$
781,088
  
$
958,258
  
Shareholder loan (note 7)
    
161,779
    
-
  
Deferred revenue (note 15)
    
57,639
    
-
  
Loans payable - current (note 8)
    
1,493,511
    
1,367,178
  
Promissory note (note 9)
    
180,000
    
-
  
               
     
2,674,017
    
2,325,436
  
Accrued Severance 
    
104,469
    
-
  
Loans Payable (note 8)
    
515,274
    
51,492
  
Convertible Debenture (note 10)
    
30,000
    
-
  
               
     
3,323,760
    
2,376,928
  
Contingent Liabilities and Commitments (note 13)
              
STOCKHOLDERS' DEFICIT
              
Capital Stock (note 11)
              
Authorized 300,000,000 common shares, par value $0.001 per share
              
Issued 40,629,877 common shares (20,314,300 in 2004)
    
40,629
    
20,314
  
Additional Paid-in Capital
    
5,243,316
    
4,427,330
  
Treasury Stock
    
(105,185
)
  
-
  
Cumulative Other Comprehensive (Loss) Income
    
(47,154
)
  
8,438
  
Accumulated Deficit
   
(6,753,265
)
  
(3,694,041
)
               
     
(1,621,659
)
  
762,041
  
               
   
$
1,702,101
  
$
3,138,969
  

(The accompanied notes are an integral part of these consolidated financial statements.)

- 2 -

CINTEL CORP. AND SUBSIDIARY
Consolidated Statements of Operations and Comprehensive Loss
Six Months Ended June 30, 2005 and 2004
(Unaudited)
 
   
Restated
(note 15)
      
   
2005
 
2004
  
Revenue
          
Merchandise
 
$
326,626
  
$
638,634
  
Finished goods (note 15)
    
101,701
    
147,571
  
Services
    
21,644
    
23,291
  
               
   
$
449,971
  
$
809,496
  
               
Cost of Sales
              
Merchandise
 
$
277,399
  
$
635,996
  
Finished goods (note 15)
    
39,200
    
149,184
  
               
     
316,599
    
785,180
  
               
Gross Profit
    
133,372
    
24,316
  
               
Expenses
             
Salaries and employee benefits
    
285,360
    
225,616
  
Office and general
    
208,150
    
121,480
  
Professional fees
    
195,376
    
89,309
  
Travel
   
152,270
    
35,140
  
Depreciation
   
112,637
    
102,604
  
Amortization of deferred financing fees
    
90,000
    
-
  
Taxes and dues
    
49,595
    
8,337
  
Research and development
    
-
    
193,149
  
               
   
$
1,093,388
  
$
775,635
  
               
Loss from Operations
    
(960,016
)
  
(751,319
)
               
Other Income (Expense)
              
Interest and other income
    
6,258
    
10,265
  
Foreign exchange
    
-
    
(1,094
)
Interest expense
    
(166,783
)
  
(50,017
)
               
     
(160,525
)
  
(40,846
)
               
Loss Before Income Taxes
    
(1,120,541
)
  
(792,165
)
Deferred income taxes recoverable
    
-
    
116,000
  
               
Net Loss
   
(1,120,541
)
  
(676,165
)
Foreign Currency Translation Adjustment
    
20,186
    
47,065
  
               
Total Comprehensive Loss
    
(1,100,355
)
  
(629,100
)
               
Basic Loss per Share
 
$
(0.03
)
$
(0.03
)
               
Diluted Loss per Share
  
$
(0.03
)
$
(0.03
)
               
Weighted Average Number of Shares (note 11)
    
32,364,447
    
20,314,300
  

(The accompanied notes are an integral part of these consolidated financial statements.)
 
- 3 -

CINTEL CORP. AND SUBSIDIARY
Consolidated Statements of Operations and Comprehensive Loss
Three Months Ended June 30, 2005 and 2004
(Unaudited)
 
   
Restated
(note 15)
      
   
2005
  
2004
  
Revenue
          
Merchandise
 
$
214,622
  
$
422,517
  
Finished goods (note 15)
   
101,701
    
64,534
  
Services
    
7,130
    
15,649
  
               
   
$
323,453
  
$
502,700
  
               
Cost of Sales
              
Merchandise
 
$
165,721
  
$
427,955
  
Finished goods (note 15)
    
39,200
    
58,267
  
               
     
204,921
    
486,222
  
               
Gross Profit
    
118,532
    
16,478
  
               
Expenses
             
Salaries and employee benefits
    
137,108
    
104,953
  
Office and general
    
109,500
    
80,984
  
Travel
   
106,876
    
20,615
  
Professional fees
    
71,025
    
38,090
  
Depreciation
   
56,887
    
51,696
  
Amortization of deferred financing fees
    
30,000
    
-
  
Taxes and dues
    
16,813
    
3,101
  
Research and development
    
-
    
59,754
  
               
     
528,209
    
359,193
  
               
Loss from Operations
    
(409,677
)
  
(342,715
)
               
Other Income (Expense)
              
Interest and other income
    
4,799
    
3,263
  
Foreign exchange
    
-
    
(281
)
Interest expense
    
(91,934
)
  
(26,127
)
               
     
(87,135
)
  
(23,145
)
               
Loss Before Income Taxes
    
(496,812
)
  
(365,860
)
Deferred income taxes recoverable
    
-
    
48,000
  
               
Net Loss
 
$
(496,812
)
$
(317,860
)
Foreign Currency Translation Adjustment
    
18,679
    
(1,511
)
               
Total Comprehensive Loss
    
(478,133
)
  
(319,371
)
               
Basic Loss per Share
 
$
(0.01
)
$
(0.02
)
               
Diluted Loss per Share
  
$
(0.01
)
$
(0.02
)
               
Weighted Average Number of Shares (note 11)
    
37,036,394
    
20,314,300
  

(The accompanied notes are an integral part of these consolidated financial statements.)
 
- 4 -

CINTEL CORP. AND SUBSIDIARY
Consolidated Statements of Stockholders' Deficit
Six Months Ended June 30, 2005 and 2004
(Unaudited)

                   
Cumulative
          
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
Additional
 
Other
 
Comprehensive
 
 
 
Stockholders'
 
 
 
Number of
 
Capital
 
Paid - in
 
Treasury
 
(Loss)
 
Accumulated
 
(Deficit)
 
 
 
Shares
 
Stock
 
Capital
 
Stock
 
Income
 
Deficit
 
Equity
 
                               
Balance, January 1, 2004
    
20,314,300
  
$
20,314
  
$
4,427,330
  
$
-
    
(38,627
 )  
($3,017,876
)
$
1,391,141
  
Foreign currency translation adjustment
    
-
    
-
    
-
    
-
    
47,065
    
-
    
47,065
  
Net loss
    
-
    
-
    
-
    
-
    
-
    
(676,165
 )  
(676,165
 )
                                             
Balance, June 30, 2004
    
20,314,300
  
$
20,314
  
$
4,427,330
  
$
-
    
8,438
    
($3,694,041
)
$
762,041
  
                                             
Balance, January 1, 2005
    
23,409,800
  
$
23,409
  
$
4,573,535
  
$
-
    
23,826
    
($4,789,132
)
  
($168,362
)
Adjustment due to restatement (note 15a)
    
-
    
-
    
-
    
-
    
(91,166
) 
  
(843,591
)
  
(934,757
)
                                             
     
23,409,800
    
23,409
    
4,573,535
    
-
    
(67,340
)
  
(5,632,723
)
  
(1,103,119
)
Common shares issued for consulting services ‑ March 31, 2005
    
640,000
    
640
    
63,860
    
-
    
-
    
-
    
64,500
  
Common shares issued for consulting services ‑ June 30, 2005
    
1,350,000
    
1,350
    
51,151
    
-
    
-
    
-
    
52,501
  
Common shares issued as repayment of promissory note (note 9)
    
11,283,095
    
11,283
    
348,717
    
-
    
-
    
-
    
360,000
  
Conversion of convertible debenture into common stock (note 10)
    
3,946,982
    
3,947
    
206,053
    
-
    
-
    
-
    
210,000
  
Repurchase of employees' stocks
    
-
    
-
    
-
    
(105,185
)
  
-
    
-
    
(105,185
)
Foreign currency translation adjustment
    
-
    
-
    
-
    
-
    
20,186
    
-
    
20,186
  
Net loss - Original
    
-
    
-
    
-
    
-
    
-
    
(891,835
) 
  
(891,835
) 
Adjustment due to restatement
   
-
    
-
    
-
    
-
    
-
    
(169,873
) 
  
(58,834
) 
(note 15a)
                                            
Adjustment due to restatement (note 15b)
    
-
    
-
    
-
    
-
    
-
    
(8,834
)
  
(58,834
) 
                                             
Balance, June 30, 2005
                                            
-restated (note 15)
    
40,629,877
  
$
40,629
  
$
5,243,316
    
($105,185
)
  
-47,154
    
($6,753,265
)
  
($1,621,659
)
 
- 5 -

CINTEL CORP. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2005 and 2004
(Unaudited)
 
           
   
Restated
(note 15)
      
   
2005
  
2004
  
Cash Flows from Operating Activities
              
Net loss
    
($1,120,541
)
  
($676,165
)
Adjustments required to reconcile net loss to net cash used in operating activities:
              
Depreciation
    
112,637
    
102,604
  
Amortization of financing fees
    
90,000
    
-
  
Common shares issued for consulting services
    
117,001
    
-
  
Changes in non - cash working capital:
              
Accounts receivable
   
311,060
    
1,077,141
  
Inventories
    
28,418
    
(69,382
) 
Prepaid and other assets
    
60,092
    
70,039
  
Deferred revenue
    
57,639
    
-
  
Deferred taxes
    
-
    
(135,198
) 
Accounts payable
    
(43,259
)
  
(692,619
) 
Accrued severance
    
(18,019
)
  
-
  
               
Net Cash Provided by (Used in) Operating Activities
    
(404,972
) 
  
(323,580
) 
               
Cash Flows from Investing Activities
              
Acquisition of equipment
    
(356
)
  
(28,974
) 
Loans receivable
    
-
    
(8,251
)
               
Net Cash Used in Investing Activities
    
(356
)
  
(37,225
)
               
Cash Flows from Financing Activities
              
Payments of deferred financing fees
   
(240,000
)
  
-
  
Proceeds from loans payable
    
273,270
    
60,313
  
Proceeds from convertible debenture
    
240,000
    
-
  
Repayment of convertible debenture by issuance of capital stock
    
(210,000
)
  
-
  
Proceeds from promissory note
    
200,000
    
-
  
Repayment of promissory note by issuance of capital stock
    
(360,000
)
  
-
  
Advances from shareholder loan
    
131,472
    
-
  
Proceeds from common shares issued for repayment of convertible debenture
    
210,000
    
-
  
Proceeds from common shares issued for repayment of promissory note
    
360,000
    
-
  
Repurchase of employees' stocks
    
(105,185
)
  
-
  
               
Net Cash (Used in) Provided by Financing Activities
    
499,557
    
60,313
  
               
Foreign Exchange on Cash and Cash Equivalents
    
(1,634
)
  
8,375
  
               
Net Increase (Decrease) in Cash and Cash Equivalents
    
92,595
    
(292,117
) 
Cash and Cash Equivalents - Beginning of Period
    
281,387
    
534,567
  
               
Cash and Cash Equivalents - End of Period
  
$
373,982
  
$
242,450
  
               
Supplemental Information
              
During the period, the company had cash flows arising
              
from interest and income taxes paid as follows:
              
Interest
  
$
107,084
  
$
50,017
  
 
              
Income taxes
  
$
-
  
$
-
  

(The accompanied notes are an integral part of these consolidated financial statements.)
 
- 6 -

CINTEL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(Unaudited)
 
1.
Operations and Business
 
Cintel Corp. and Subsidiary, formerly Link2 Technologies, Inc. ("the Company"), was incorporated in the State of Nevada on August 16, 1996 and on April 24, 2001 changed its name from "Great Energy Corporation International" to Link2 Technologies, Inc. On September 30, 2003 the Company changed its name to Cintel Corp.
 
On September 30, 2003, the Company entered into a definitive Share Exchange Agreement (the "Agreement") with Cintel Co., Ltd., ("Cintel Korea") a Korean corporation and its shareholders. The Agreement provided for the acquisition by the Company from the shareholders of 100% of the issued and outstanding capital stock of Cintel Korea. In exchange, the shareholders of Cintel Korea received 16,683,300 shares of the Company. As a result, the shareholders of Cintel Korea controlled 82% of the Company. While the Company is the legal parent, as a result of the reverse-takeover, Cintel Korea became the parent company for accounting purposes.
 
Upon completion of the share exchange, the business operations of Cintel Korea constituted virtually all of the business operations of the Company. Cintel Korea develops network solutions to address technical limitations to the Internet. Cintel Korea has developed what it believes is the first Korean server load balancing technology. Cintel Korea is now focused on the development of advanced solutions for Internet traffic management. The business operations of Cintel Korea are located in Seoul, Korea.
 
2.
Summary of Significant Accounting Policies
 
The accounting policies of the Company are in accordance with generally accepted accounting principles of the United States of America, and their basis of application is consistent. Outlined below are those policies considered particularly significant:
 
 
a)
Basis of Financial Statement Presentation
 
These financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business.
 
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the requirement of item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of the results that may be expected for a full year. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005, as filed with the Securities and Exchange Commission ("SEC").
 
- 7 -

CINTEL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(Unaudited)
 
2.
Summary of Significant Accounting Policies (cont'd)
 
 
b)
Basis of Consolidation
 
The consolidated financial statements of the Company include the financial results of Cintel Corp. and Cintel Korea. The merger of the Company and Cintel Korea has been recorded as the recapitalization of the Company, with the net assets of the Company brought forward at their historical basis. The intention of the management of Cintel Korea was to acquire the Company as a shell company listed on NASDAQ. Management does not intend to pursue the business of the Company. As such, accounting for the merger as the recapitalization of the Company is deemed appropriate.
 
 
c)
Unit of Measurement
 
The US Dollar has been used as the unit of measurement in these financial statements.
 
 
d)
Use of Estimates
 
Preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and related notes to financial statements. These estimates are based on management's best knowledge of current events and actions the Company may undertake in the future. Actual results may ultimately differ from estimates, although management does not believe such changes will materially affect the financial statements in any individual year.
 
 
e)
Revenue Recognition
 
   
For sale of finished goods, the Company recognizes revenue when there is a definitive sales agreement, and upon shipment of products when title is passed and the amount collectible can reasonably be determined.
 
   
For merchandise sales, the Company recognizes revenue upon shipment of products when title is passed and the amount collectible can reasonably be determined.
 
   
For the service sales, the Company recognizes revenue when services are rendered.
 
 
f)
Cash and Cash Equivalents
 
Cash includes currency, cheques issued by others, other currency equivalents, current deposits and passbook deposits. Cash equivalents include securities and short-term money market instruments that can be easily converted into cash. The investments that mature within three months from the investment date, are also included as cash equivalents.
 
 
g)
Investments in Available for Sale Securities
 
Investments in available for sale securities are being recorded in accordance with FAS-115 "Accounting for Certain Investments in Debt and Equity Securities". Equity securities that are not held principally for the purpose of selling in the near term are reported at fair market value with unrealized holding gains and losses excluded from earnings and reported as a separate component of stockholders' equity.
 
- 8 -

CINTEL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(Unaudited)
 
2.
Summary of Significant Accounting Policies (cont'd)
 
 
h)
Inventories
 
Raw material is stated at the lower of cost or market value, using the first in first out weighted average cost method.
 
Merchandise inventory is stated at the lower of cost or net realizable value. Net realizable value is determined by deducting selling expenses from selling price.
 
 
i)
Equipment
 
Equipment is stated at cost. Major renewals and betterments are capitalized and expenditures for repairs and maintenance are charged to expense as incurred. Depreciation is computed using the straight-line method over a period of 5 years.
 
 
j)
Government Grants
 
Government grants are recognized as income over the periods necessary to match them with the related costs that they are intended to compensate.
 
 
k)
Currency Translation
 
   
The Company's functional currency is Korean won. Adjustments to translate those statements into U.S. dollars at the balance sheet date are recorded in other comprehensive income.
 
   
Foreign currency transactions of the Korean operation have been translated to Korean won at the rate prevailing at the time of the transaction. Realized foreign exchange gains and losses have been charged to income in the year.
 
 
l)
Financial Instruments
 
Fair values of cash equivalents, short-term and long-term investments and short-term debt approximate cost. The estimated fair values of other financial instruments, including debt, equity and risk management instruments, have been determined using market information and valuation methodologies, primarily discounted cash flow analysis. These estimates require considerable judgment in interpreting market data, and changes in assumptions or estimation methods could significantly affect the fair value estimates.
 
 
m)
Comprehensive Income (Loss)
 
The Company adopted SFAS No. 130, “Reporting Comprehensive Income (“SFAS No. 130”).” SFAS No. 130 establishes standards for reporting and presentation of comprehensive income (loss) and its components in a full set of financial statements. Comprehensive income (loss) is presented in the statements of stockholders' (deficit) equity, and consists of net earnings (loss) and foreign currency translation adjustments. SFAS No. 130 requires only additional disclosures in the financial statements and does not affect the Company's financial position or results of operations.

- 9 -

CINTEL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(Unaudited)
 
2.
Summary of Significant Accounting Policies (cont'd)
 
 
n)
Income Tax
 
The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting for Income Taxes". Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
 
 
o)
Earnings or Loss per Share
 
The Company adopted FAS No.128, "Earnings per Share" which requires disclosure on the financial statements of "basic" and "diluted" earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the year. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to stock options and warrants for each year.
 
 
p)
Concentration of Credit Risk
 
SFAS No. 105, "Disclosure of Information About Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentration of Credit Risk", requires disclosure of any significant off-balance sheet risk and credit risk concentration. The Company does not have significant off-balance sheet risk or credit concentration. The Company maintains cash and cash equivalents with major Korean financial institutions.
 
The Company's provides credit to its clients in the normal course of its operations. It carries out, on a continuing basis, credit checks on its clients and maintains provisions for contingent credit losses which, once they materialize, are consistent with management's forecasts.
 
For other debts, the Company determines, on a continuing basis, the probable losses and sets up a provision for losses based on the estimated realizable value.
 
Concentration of credit risk arises when a group of clients having a similar characteristic such that their ability to meet their obligations is expected to be affected similarly by changes in economic conditions. The Company does not have any significant risk with respect to a single client.

- 10 -

CINTEL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(Unaudited)
 
2.
Summary of Significant Accounting Policies (cont'd)
 
 
q)
Long-lived Asset Impairment
 
   
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability is assessed based on the carrying amount of a long-lived asset compared to the sum of the future undiscounted cash flows expected to result from the use and the eventual disposal of the asset. An impairment loss is recognized when the carrying amount is not recoverable and exceeds the total undiscounted cash flows expected from its use and disposition.
 
 
r)
Recent Accounting Pronouncements
 
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs - an amendment of ARB No. 43, Chapter 4" (Statement 151). This statement amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). As currently worded in ARB 43, Chapter 4, the term "so abnormal" was not defined and its application could lead to unnecessary noncomparability of financial reporting. This Statement eliminates that term and requires that those items be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal." In addition, this Statement requires that allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. The adoption of Statement 151 will not have a material impact on the Company's consolidated financial statements.
 
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Non-monetary Assets - an amendment of APB Opinion No. 29" (Statement 153). This Statement amends Opinion 29 to eliminate the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. A non-monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The adoption of FAS 153 will not have a material impact on the Company's consolidated financial statements.
 
In December 2004, the FASB issued a revision to SFAS No. 123, "Share-Based Payment" (Statement 123R). This Statement requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which the employee is required to provide service in exchange for the award requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. Employee share purchase plans will not result in recognition of compensation cost if certain conditions are met; those conditions are much the same as the related conditions in Statement 123. This Statement is effective for public entities that do not file as a small business issuers as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. This Statement applies to all awards granted after the required effective date and to awards modified, repurchased, or cancelled after that date. The cumulative effect of initially applying this Statement, if any, is recognized as of the required effective date and is not expected to have a material impact on the Company's consolidated financial statements.
 
3.
Cash and Cash Equivalents
 
Included in cash and cash equivalents is cash restricted for use by the Company of $135,786 (2004 - $121,590). The fund is being held as security for one of the bank loans as described in note 8. The loan will mature on August 12, 2005. As at June 30, 2005, the amount outstanding was $543,144 (2004 - $602,000).
 
- 11 -
CINTEL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(Unaudited)
 
4.
Inventories
 
Inventory includes $10,419 (2004 - $14,656) of merchandise and $257,014 (2004 - $202,603) of raw materials.
 
5.
Investments in Available for Sale Securities

   
2005
  
2004
  
Stock #1
  
$
48,501
  
$
43,395
  
Other miscellaneous
    
251
    
259
  
               
   
$
48,752
  
$
43,654
  
 
Stock #1 represents a minority interest in a private Korean company which is carried at cost.
 
6.
Equipment
 
Equipment is comprised as follows:

 
 
 
 
2005
 
 
 
2004
 
 
 
 
 
Accumulated
 
 
 
Accumulated
 
 
 
Cost
 
Depreciation
 
Cost
 
Depreciation
  
                   
Furniture and fixtures
  
$
44,768
  
$
26,538
  
$
23,799
  
$
18,414
  
Equipment
    
637,418
    
538,891
    
558,931
    
400,601
  
Vehicles
    
15,012
    
15,010
    
13,443
    
12,098
  
Software
    
710,830
    
361,167
    
622,735
    
191,894
  
                           
   
$
1,408,028
  
$
941,606
  
$
1,218,908
  
$
623,007
  
                           
Net carrying amount
  
 
 
  
$
466,422
         $
595,901
  
 
7.
Shareholder Loan
 
The loan from the chief executive officer, who is also a 11% shareholder of the Company, is non-interest bearing, unsecured, and due on demand.
 
- 12 -

CINTEL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(Unaudited)
 
8.
Loans Payable
 
   
 
 
 
 
2005
 
2004
 
 
 
Current
 
Long‑term
 
Total
 
Total
  
                   
Bank loans
  
$
1,125,084
  
$
-
  
$
1,125,084
  
$
1,302,750
  
Promissory note
    
39,000
    
-
    
39,000
    
39,000
  
Government loans (#1, 2, & 3)
    
61,932
    
38,256
    
100,188
    
89,713
  
Discount of interest‑free government loans
    
-1,342
    
-7,932
    
-9,274
    
-12,793
  
Note payable #1
    
-
    
484,950
    
484,950
    
-
  
Notes payable (#2 & 3)
    
268,837
    
-
    
268,837
    
-
  
                           
   
$
1,493,511
  
$
515,274
  
$
2,008,785
  
$
1,418,670
  
 
Bank Loans
 
The bank loans bear interest at 7.5% to 11.15% and mature between August and December 2005. The loans are repayable upon maturity.
 
Promissory Note
 
The promissory note is non-interest bearing, unsecured, and due on demand.
 
Government Loan #1
 
The loan is non-interest bearing, unsecured, repayable in annual payments of $17,992 and matures July 2005. The Company is in arrears on the 2004 annual payment. Total amount outstanding at June 30, 2005 was $35,984.
 
Government Loan #2
 
The loan is non-interest bearing, unsecured, repayable in annual payments of $12,974 and matures July 2005. The Company is in arrears on the 2004 annual payment. Total amount outstanding at June 30, 2005 was $25,948.
 
Government Loan #3
 
The loan is non-interest bearing, unsecured, repayable in annual payments of $9,564 starting 2006 and matures October 2009. The total amount outstanding at June 30, 2005 was $38,256.
 
Note Payable #1
 
The note payable is a non-interest bearing bridge loan to the Company during the negotiation period between the lender and the Company for a convertible debenture agreement of $1.5 million. Should an agreement not be reached by August 29, 2005, the note will be repayable in August 2015. Otherwise, it would be repaid by funds from the new convertible debenture.
 
- 13 -

CINTEL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(Unaudited)
 
8.
Loans Payable (cont'd)
 
Note Payable #2
 
The note payable of $213,378 bears interest at 4% per month, is personally guaranteed by the chief executive officer of the Company, and is due on demand.
 
Notes Payable #3
 
The notes payable of $55,459 is non-interest bearing and due on demand.
 
Principal payments consist of the followings:

2006
  
$
1,493,511
  
2007
    
7,581
  
2008
    
7,581
  
2009
    
7,581
  
2010 and Thereafter
    
492,531
  
   
$
2,008,785
  
 
9.
Promissory Note
 
The promissory note has an annual coupon rate of 12%. Commencing November 15, 2004, the promissory note and interest are repayable in one installment of $29,266 followed by 39 installments of $10,000 every seven calendar days. An additional $150,000 has been advanced under an agreement in April 2005 at the same interest rate. The new advance is repayable in installments of $10,000 every seven calendar days.
 
As security, 25,000,000 shares have been held in escrow by the lawyer who shall provide the shares for repayment of the debt. The conversion price of said shares issued will be equal to 98% of the lowest closing bid price of the common stock on the listed market for the five days immediately following the notice date for the advance.
 
Under the agreement, the debenture holder has committed to provide financing of up to $5,000,000 over a two year period. The maximum amount of financing per month is $400,000.
 
- 14 -

CINTEL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(Unaudited)

 
9.
Promissory Note (cont'd)
 
The promissory note has been repaid as follows:
 
Balance - June 30, 2004
    
-
  
Issued - November 2004
  
$
400,000
  
Payments by issuance of shares - quarter
       
ended December 2004
    
(60,000
)
         
   
$
340,000
  
Advances - quarter ended March 2005
    
50,000
  
Payments by issuance of shares - quarter
       
ended March 2005
    
(170,000
)
Advances - quarter ended June 2005
    
150,000
  
Payments by issuance of shares - quarter
       
ended June 2005
    
(190,000
)
         
         
Balance - June 30, 2005
  
$
180,000
  
 
10.
Convertible Debenture 
 
Pursuant to SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" the Company accounts for the convertible debenture as a liability at face value and no formal accounting recognition is assigned to the value inherent in the conversion feature. The debenture is convertible to common shares at a price per share of 100% of the lowest closing bid price on the trading day immediately preceding the conversion date.
 
The convertible debenture has a face value of $240,000 with an annual coupon rate of 5%, and both principal and interest are to be repaid either in cash or common shares by August 4, 2007.
 
The debenture has been repaid as follows:

Issued - February 2005
  
$
240,000
  
Converted - quarter ended March 2005
    
(140,000
)
Converted - quarter ended June 2005
    
(70,000
)
         
Balance - June 30, 2005
  
$
30,000
  
 
- 15 -

CINTEL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(Unaudited)
 
11.
Capital Stock
 
Authorized
300,000,000 common shares, par value $0.001 per share (2004 - 50,000,000)
 
   
2005
  
2004
  
Issued
          
40,629,877 common shares (2004 - 20,314,300)
  
$
40,629
  
$
20,314
  
 
   
On September 30, 2003, the Company cancelled 4,800,000 shares of common stock for no consideration. As well, the Company granted a 2 to 5 reverse stock split. The reverse split has retroactively been taken into consideration in the consolidated financial statements an the calculation of earnings per share. Subsequently, the Company issued 16,683,300 common shares in exchange for 100% of the outstanding shares of Cintel Co., Ltd.
 
   
In June 2004, 300,000 common shares were issued for consulting services at the value of $33,000.
 
   
In July 2004, 160,000 common shares were issued for consulting services at the value of $12,800.
 
   
In August 2004, 50,000 common shares were issued for consulting services at the value of $4,500.
 
   
In September 2004, 120,000 common shares were issued for consulting services at the value of $9,600.
 
   
In September 2004, the Company increased its authorized capital from 50,000,000 common shares to 300,000,000 common shares.
 
   
In October 2004, 120,000 common shares were issued for consulting services at the value of $14,400.
 
   
In November 2004, 170,000 common shares were issued for consulting services at the value of $15,000.
 
   
In November 2004, 25,000,000 common shares were held in escrow for future conversion to repay the promissory note as described in note 9. As at June 30, 2005, 13,458,595 common shares have been issued on repayment as described below. The balance of shares held in escrow at June 30, 2005 was 11,541,405.
 
- 16 -
 
CINTEL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(Unaudited)
 
11.
Capital Stock (cont'd)
 
   
In November 2004, the Company issued 412,286 common shares upon the repayment of $20,000 of the promissory note as described in note 9.
 
   
In December 2004, the Company issued 1,763,214 common shares upon the repayment of $40,000 of the promissory note as described in note 9.
 
   
In January 2005, the Company issued 240,000 common shares for consulting service at the value of $20,500.
 
   
In January 2005, the Company issued 2,262,424 common shares upon the repayment of $40,000 of the promissory note as described in note 9.
 
   
In February 2005, the Company issued 622,200 common shares upon the repayment of $50,000 of the promissory note as described in note 9.
 
   
In February 2005, 400,000 common shares were issued for consulting services at the value of $44,000.
 
   
In March 2005, the Company issued 1,485,120 common shares upon the repayment of $80,000 of the promissory note as described in note 9.
 
   
In March 2005, the Company repurchased 93,830 common shares for $105,185
 
   
In March 2005, 1,905,136 common shares were issued upon the conversion of $140,000 of convertible debenture as described in note 10.
 
   
In April 2005, the Company issued 1,311,769 common shares upon the repayment of $40,000 of the promissory note as described in note 9.
 
   
In April 2005, 1,200,000 common shares were issued for consulting services at the value of $48,000.
 
   
In April 2005, 712,500 common shares were issued upon the conversion of $20,000 of convertible debenture as described in note 10.
 
   
In May 2005, 1,329,346 common shares were issued upon the conversion of $50,000 of convertible debenture as described in note 10.
 
   
In May 2005, the Company issued 2,333,551 common shares upon the repayment of $70,000 of the promissory note as described in note 9.
 
- 17 -

CINTEL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(Unaudited)
 
11.
Capital Stock (cont'd)
 
   
In June 2005, 150,000 common shares were issued for consulting services at the value of $4,500.
 
   
In June 2005, the Company issued 3,268,031 common shares upon the repayment of $80,000 of the promissory note as described in note 9.
 
 
Stock Warrants and Options
 
The Company has accounted for its stock options and warrants in accordance with SFAS 123 "Accounting for Stock - Based Compensation" and SFAS 148 "Accounting for Stock - Based compensation - Transition and Disclosure." Value of options granted has been estimated by the Black Scholes option pricing model. The assumptions are evaluated annually and revised as necessary to reflect market conditions and additional experience. The following assumptions were used:
 
   
2005
  
2004
  
Interest rate
   
6.50
%
  
6.50
%
Expected volatility
    
70
%
  
70
%
Expected life in years
    
6
    
6
  
 
In 1999 the Board of Directors of Cintel Korea adopted an option plan to allow employees to purchase ordinary shares of the Cintel Korea.
 
In August 1999, the share option plan granted 96,000 stock options for the common stock of Cintel Korea having a $0.425 nominal par value each and an exercise price of $0.425. In 2002, 53,000 stock options were cancelled. In 2003, an additional 30,000 stock options were cancelled.
 
In March 2000, 225,000 stock options were granted having a $0.425 nominal par value each and an exercise price of $0.68. In 2002, 135,000 and in 2003, an additional 47,000 of these stock options were cancelled.
 
In February 2001, 30,000 stock options were granted having a $0.425 nominal par value each and an exercise price of $0.72. In 2003, all of these stock options were cancelled.
 
In March 2003, 65,000 stock options were granted having a $0.425 nominal par value each and an exercise price of $0.71. In the same year, 15,000 of these stock options were cancelled.
 
- 18 -

CINTEL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(Unaudited)
 
11.
Capital Stock (cont'd)
 
The options vest gradually over a period of 3 years from the date of grant. The term of each option shall not be more than 8 years from the date of grant. No options have vested in the six months ended June 30, 2005 and 2004.

The stock options have not been included in the calculation of the diluted earnings per share as their inclusion would be antidilutive.
 
The following table summarizes the stock option activity during 2005 and 2004:

 
  
2005
  
2004
  
Outstanding, beginning of period
   
106,000
    
163,000
  
Granted
    
-
    
65,000
  
Exercised
   
-
    
-
  
Cancelled
    
-
    
(122,000
 )
               
Outstanding, end of period
   
106,000
    
106,000
  
               
Weighted average fair value of options granted during the period
  
$
-
  
$
54,097
  
               
Weighted average exercise price of common stock options, beginning of period
  
$
0.62
  
$
0.62
  
               
Weighted average exercise price of common stock options granted in the period
  
$
-
  
$
0.72
  
               
Weighted average exercise price of common stock options, end of period
  
$
0.67
  
$
0.67
  
               
Weighted average remaining contractual life of common stock options
    
3 years
    
4 years
  
 
- 19 -

CINTEL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(Unaudited)
 
12.
Income Taxes
 
The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting for Income Taxes". This Standard prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates. The effects of future changes in tax laws or rates are not anticipated. Corporate income tax rates applicable to the Company in 2005 and 2004 are 16.5 percent of the first 100 million Korean Won ($84,000) of taxable income and 29.7 percent on the excess. The company provided a valuation allowance equal to the deferred tax amounts resulting from the tax losses in the United States, as it is not more likely than not that they will be realized.
 
Under SFAS No. 109 income taxes are recognized for the following: a) amount of tax payable for the current year, and b) deferred tax liabilities and assets for future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. The Company has deferred income tax assets arising from research and development expenses. For accounting purposes, these amounts are expenses when incurred. Under Korean tax laws, these amounts are deferred and amortized on a straight-line basis over 5 years.
 
The Company has deferred income tax assets as follows:

   
2005
  
2004
  
Deferred income tax assets
          
Research and development expenses amortized over 5 years for tax purposes
  
$
214,829
  
$
220,892
  
Other timing differences
    
154,439
    
62,707
  
Net operating loss carryforwards
    
726,928
    
365,108
  
               
     
1,096,196
    
648,707
  
Valuation Allowance (note 15)
    
-1,096,196
    
-
  
               
 
  
$
-
  
$
648,707
  
 
- 20 -

CINTEL CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2005 and 2004
(Unaudited)
 
13.
Contingent Liabilities and Commitments
 
 
a)
The Company is committed to an office space lease obligation which expires in March 2006. The minimum annual payments (exclusive of taxes and insurance) under the leases for 2006 is $23,800. Rent expenses paid in 2005 and 2004 were $47,560 and $39,382 respectively.
 
 
b)
The Company has entered into a contract with iMimic Networking, Inc. for the use of the iMimic solution within Korea starting November 17, 2000. For the use of this solution, the Company paid $70,000 as an upfront payment and pays a $640 royalty for each product sold that uses the iMimic solution. The Company is also required to pay an annual royalty fee of $10,000. The contract has no fixed termination date.
 
 
c)
On September 14, 2004, the Company entered into a Standby Equity Distribution Agreement with US-based investment fund Cornell Capital Partners LP. Under the terms of the agreement, Cornell has committed to provide up to $5 million of funding to the Company over a 24 month period, to be drawn down at the Company's discretion through the sale of the Company's common stock to Cornell. As at June 30, 2005, $550,000 has been advanced in the form of promissory note as described in note 9.
 
14.
Comparative Information
 
Certain figures for the period ended June 30, 2004 have been reclassified to conform with the current year's financial statement presentation.
 
15.
Restatement of the Previously Issued Consolidated Financial Statements
 
 
a)
Restatement dated February 2, 2007
 
   
On further consideration, the Company determined that it was not more likely than not that deferred tax benefits would be realized, therefore, the Company provided a 100% valuation allowance against the deferred tax assets.
 
   
The affects of this restatement are to increase the valuation allowance from the consolidated financial statements dated August 17, 2005 to $1,096,196 from nil (note 12); to decrease deferred tax assets on the consolidated balance sheets to nil from $1,096,196 (comprised of $208,146 current and $888,050 long term); and to decrease the deferred income taxes recoverable from $169,873 to an expense of nil on the consolidated statements of operations and comprehensive loss.
 
- 21 -

 
Results of Operations for the six months ended June 30, 2005 compared to the six months ended June 30, 2004
 
     
6/30/2005
    
6/30/.2004
  
               
Revenue
    
449,971
    
809,496
  
Cost of sales
    
316,599
    
785,180
  
Gross Profit
    
133,372
    
24,316
  
Expenses
    
1,093,388
    
775,635
  
Operating (Loss)
    
(960,016
)
  
(751,319
)
Loss Before Income Taxes
    
(1,120,541
)
  
(792,165
)
 
The main reason why this decrease of 44.4 % revenue for the first six months of 2005 as compared to the previous year was attributed to the cancellation and downsizing of some projects from large and major customers. The primary reason was to decreases in the Korean IT market demand due to the Korean economic situation on the peninsula. These cancellations were not due to any issue with Cintel products or our relationships with customers.

The decrease in cost of sales for the first six months of 2005 compared to the last year was primarily attributed to the decrease in revenues.

Despite our decrease in revenues, our gross profit increased due to the sales portion of finished goods revenues versus the merchandise revenues increased, additionally decreasing costs of finished goods have been a factor.
The lack of a relative decrease in expenses as compared to revenues was primarily attributable to developing the overseas market and to increased travel overseas, to the USA and Japan. Additionally, cost increases were due to the increasing costs of alliances with other big vendors or companies in order to create a better future relationship with large customers. The result of this contribution should be clear by the end of this year.

Although management believes the ITM market continues to expand globally, the company's financial performance is down largely due to a lack of diversification in its products and markets, concentrating execution risk unnecessarily on only a handful of large customers. In accordance with the directive of the board of directors, management will use the balance of fiscal year 2005 to expand its products and markets that it participates in going forward. Additionally, we will have some new distribution and reseller partners in the USA soon. CinTel must better leverage its solid distribution channels and expand the solution portfolio from the single ITM solutions to include more enterprise IT solutions, such as Enterprise Content Management (ECM), Business Intelligence, security solution and broadband access solutions. We believe these areas will continue to experience growth in the current IT environment. Geographically CinTel will enter the US market with its iCache and PacketCruz product with other solution relatively security and distributed product. Additionally, CinTel will research other markets to enter where we can leverage our distribution channels and product strengths.
 
Operations for the next twelve months
 
Our financial plan for the next twelve months depends on important assumptions, most of which are shown in the following table. The key underlying assumptions are:
 
 
§
We assume a slow-growth economy without major recession.
 
§
We assume there are no unexpected discoveries in technology to make our products immediately obsolete.
 
§
We expect the global IT spending environment to remain flat to slightly above this year's levels.
 
§
Nature and Limitation of Projections -This financial projection is based on sales volume at the levels described in the revenue section and presents, to the best of management's knowledge and belief, the company's expected assets, liabilities, capital, revenues, and expenses. The projections reflect management's judgment of the expected conditions and its expected course of action, given these assumptions.
 
§
Revenues - The Company's revenues are derived primarily from the sale of IT solutions to enterprise customers. Revenue projections are based on the 2005 sales in the comparable market nationwide, based on industry average. The exact numbers can be found in the Sales Forecast table and chart section.
 
§
Expenses - The Company's expenses are primarily those of salaries, sales commissions, development costs, operating costs, and administrative costs. Other expenses are based on management's estimates and industry averages.

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Trends

The ITM market is currently in a rapid transformation from a pure caching appliance environment to a convergence of more enterprise network traffic and application management features such as SSL VPN, Application Acceleration (Web-enabled), WAN optimization, Firewall and Content Security. CinTel must incorporate these functionalities into its current product line to better compete in the marketplace.
 
Income/loss elements not a part of regular business operations

Although in the normal course of business there will always be a percentage of receivables that will go uncollected, a significant amount was written off the books this fiscal year. This was due to the downturn in Korea's IT climate that began a few years ago, and these companies were never able to recover from that, and management has conceded and recognized the fact. This is not a symptom of poor vendor qualification.

Liquidity

Although results of the six month period ended June 30, 2005, did not yield a profit, we believe this was due to our concentration of risk on a small number of customers for the majority of our revenues, and not due to any specific weakness in our business opportunity overall in a broader marketplace. Therefore we do not believe reducing expenses to achieve profitability in one single year will help to grow the business in the long run for our shareholders. We anticipate increasing our expenditure to capture market share in the areas we have outlined above will result in a solid base for future growth and profitability.

To execute our current plan for fiscal year 2005, we anticipate a cash shortfall of $1 million for the year. We may execute another draw down to meet this cash requirement on the SEDA with Cornell Capital, LLC. Otherwise, we will continue to seek favorable financing or equity placement as the need arises for mergers and acquisitions, buying some equipment for the sales revenue and/or ongoing operating costs. We may consider some CB or BW as well.

Forward-Looking Statements

Many statements made in this report are forward-looking statements that are not based on historical facts. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. The forward-looking statements made in this report relate only to events as of the date on which the statements are made.
 
ITEM 3 - CONTROLS AND PROCEDURES

The company’s management evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer, the effectiveness of the company’s disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the company’s disclosure controls and procedures were effective as of the end of the period covered by this report.  There has been no change in the company’s internal control over financial reporting that occurred during the quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.

PART II - OTHER INFORMATION
Item 1. Legal Proceedings.

The Company is not a party to any pending legal proceedings other than in the normal course of business nor is any of its property subject to pending legal proceedings material to the fiscal well-being of the Company.
 
Item 2. Changes in Securities and Use of Proceeds.
 
During the second quarter of 2005, Registrant has not sold securities without registration under the Securities Act of 1933, except as described below.

Securities issued in each of such transaction were offered and sold in reliance upon the exemption from registration under Section 4(2) of the Securities Act, relating to sales by an issuer not involving a public offering. The recipients of the securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and restrictive legends were affixed to the share certificates and other instruments issued in such transactions. All recipients either received adequate information about Registrant or had access, through relationships with Registrant, to information about Registrant.
 
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During the quarter ended June 30, 2005, the Company issued 3,946,982 common shares upon the conversion of $70,000 of convertible debentures.
 
During the quarter ended June 30, 2005, the Company issued 11,283,095 common shares as repayment in the amount of $190,000 of a promissory note.
 
During the quarter ended June 30, 2005, the Company issued 1,350,000 common shares in exchange for consulting services rendered in behalf of the Company valued at $52,501.
 
Item 3. Defaults Upon Senior Securities.

None.
 
Item 4. Submission of Matters to a Vote of Security Holders.

None.
 
Item 5. Other Information.

None.
 
Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits
 
EXHIBIT
NUMBER
 
 
DESCRIPTION
 
 
 
31.1
 
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended*
 
 
 
31.2
 
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended*
 
 
 
32.1
 
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.*
 
 
 
32.2
 
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.*
 
 
 
* Filed herewith
 
(b) Reports on Form 8-K.

None.
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SIGNATURES

In accordance with the requirements of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
     
  CINTEL CORP.
 
 		  
 		  
 
Date: June 18, 2007 By:    
 
Name: Sang Don Kim
Title: Chief Executive Officer
   
     
   
 
 		  
 		  
 
  By:    
 
Name: Kyo Jin Kang
  Title: Principal Financial Officer Principal Accounting Officer