Chun Can Capital (CNCN) 10QSB 2005 Q2 Quarterly report (small business)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________

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 endedJune 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[ ] 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.

CINTEL CORP.

FORM 10-QSB

INDEX

PART IFINANCIAL INFORMATION

Item 1.Consolidated Financial Statements Periods Ended June 30, 2005 and 2004 (audited)

Consolidated Balance Sheets 4

Consolidated Statements of Operations 5-6

Consolidated Statements of Stockholders’ Deficit 7

Consolidated Statements of Cash Flows 8

Notes to Consolidated Financial Statements  9-23

Item 2.Management’s Discussion and Analysis or Plan of Operation 23

Item 3.Controls and Procedures  25

PART IIOTHER INFORMATION

Item 1.Legal Proceedings 25

Item 2.Changes in Securities and Use of Proceeds 25

Item 3.Defaults Upon Senior Securities 25

Item 4.Submission of Matters to a Vote of Security Holders 25

Item 5.Other Information 25

Item 6.Exhibits and Reports on Form 8-K26

SIGNATURE PAGE27

CINTEL CORP.

CONSOLIDATED FINANCIAL STATEMENTS

PERIODS ENDED JUNE 30, 2005 AND 2004

CINTEL CORP.

Consolidated Balance Sheets

June 30, 2005 and 2004

		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
Inventory (note 4)		267,433			217,259
Prepaid and sundry assets		225,429			89,411
Deferred taxes		208,146			121,288
		1,365,073			1,971,995
Deferred financing fees		30,000			-
Deferred taxes		888,050			527,419
Equipment (note 5)		466,422			595,901
Investments		48,752			43,654
	$	2,798,297			3,138,969
LIABILITIES
Current
Accounts payable	$	781,087		$	958,258
Shareholder loan (note 6)		161,779			-
Loans payable - current (note 7)		1,493,511			1,367,178
Promissory note (note 8)		180,000			-
		2,616,377			2,325,436
Accrued Severance		104,469			-
Loans Payable (note 7)		515,274			51,492
Convertible Debenture (note 9)		30,000			-
		3,266,120			2,376,928
STOCKHOLDERS' DEFICIT
Capital Stock(note 10)
Authorized 300,000,000 common shares, par value $0.001 per share
Issued40,629,877 common shares (20,314,300 in 2004)		40,630			20,314
Paid-in Capital		5,243,316			4,427,330
Treasury Stock		(105,185	)		-
Accumulated Other Comprehensive Loss		34,383			8,438
Accumulated Deficit		(5,680,967	)		(3,694,041	)
		(467,823	)		762,041
	$	2,798,297		$	3,138,969

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

APPROVED ON BEHALF OF THE BOARD

"SANG DON KIM""KYO JIN KANG"

DirectorDirector

CINTEL CORP.

Consolidated Statements of Operations

Six Months Ended June 30, 2005 and 2004

	2005			2004
Revenue
Merchandise	$	326,626		$	638,634
Finished goods		197,703			147,571
Services		21,644			23,291
	$	545,973		$	809,496
Cost of Sales
Merchandise	$	277,399		$	635,996
Finished goods		76,369			149,184
		353,768			785,180
Gross Profit		192,205			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
Operating Loss		(901,183	)		(751,319	)
Other
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		(1,061,708	)		(792,165	)
Deferred income taxes recoverable		169,873			116,000
Net Loss	$	(891,835	)	$	(676,165	)
Basic Loss per Share	$	(0.03	)	$	(0.03	)
Fully Diluted Loss per Share	$	(0.03	)		(0.03	)
Weighted Average Number of Shares(note 10)		32,364,447			20,314,300

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

--

CINTEL CORP.

Consolidated Statements of Operations

Three Months Ended June 30, 2005 and 2004

	2005			2004
Revenue
Merchandise	$	214,622		$	422,517
Finished goods		197,703			64,534
Services		7,130			15,649
	$	419,455		$	502,700
Cost of Sales
Merchandise	$	165,721		$	427,955
Finished goods		76,369			58,267
		242,090			486,222
Gross Profit		177,365			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
Operating Loss		(350,844	)		(342,715	)
Other
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		(437,979	)		(365,860	)
Deferred income taxes recoverable		92,559			48,000
Net Loss		(345,420	)	$	(317,860	)
Basic Loss per Share	$	(0.01	)	$	(0.02	)
Fully Diluted Loss per Share		(0.01	)	$	(0.02	)
Weighted Average Number of Shares(note 10)		37,036,394			20,314,300

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

--

CINTEL CORP.

Consolidated Statements of Stockholders' Deficit

Six Months Ended June 30, 2005 and 2004

					Paid in					Accumulated
					Capital in					Other						Total
	Number		Capital		Excess of		Treasury			Comprehensive			Accumulated			Stockholders'
	of Shares		Stock		Par value		Stock			Loss			Deficit			Equity
Balance, January 1, 2004		20,314,300	$	20,314	$	4,427,330	$	-			(38,627	)	$	(3,017,876	)	$	1,391,141
Foreign exchange on translation		-		-		-		-			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	$	23,410	$	4,573,535	$	-			23,826		$	(4,789,132	)	$	(168,361	)
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 8)		11,283,095		11,283		348,717		-			-			-			360,000
Conversion of convertible debenture into common stock (note 9)		3,946,982		3,947		206,053		-			-			-			210,000
Repurchase of employees' stocks		-		-		-		(105,185	)		-			-			(105,185	)
Foreign exchange on translation		-		-		-		-			10,557			-			10,557
Net loss		-		-		-		-			-			(891,835	)		(891,835	)
Balance, June 30, 2005		40,629,877	$	40,630	$	5,243,316	$	(105,185	)		34,383		$	(5,680,967	)	$	(467,823	)

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

--

CINTEL CORP.

Consolidated Statements of Cash Flows

Six Months Ended June 30, 2005 and 2004

	2005			2004
Cash Flows from Operating Activities
Net loss	$	(891,835	)	$	(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			-
Net Changes in Assets & Liabilities
Accounts receivable		311,060			1,077,141
Inventory		28,418			(69,382	)
Prepaid and sundry assets		60,092			70,039
Loans receivable		-			(8,251	)
Deferred taxes		(169,873	)		(135,198	)
Accounts payable		(43,259	)		(692,619	)
Accrued severance		(18,019	)		-
		(403,778	)		(331,831	)
Cash Flows from Investing Activities
Acquisition of equipment		(356	)		(28,974	)
Cash Flows from Financing Activities
Payments of deferred financing fees		(240,000	)		-
Proceeds from loans payable		273,270			60,313
Proceeds from convertible debenture - net		30,000			-
Repayment of promissory note - net		(160,000	)		-
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	)		-
		499,557			60,313
Foreign Exchange on Cash and Cash Equivalents		(2,828	)		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
Interest and Income Taxes Paid:
Interest paid	$	107,084		$	50,017
Income taxes paid	$	-		$	-

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

--

1. Operations and Business

Cintel Corp., 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.

b) Basis of Consolidation

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.

CINTEL CORP.Notes to Consolidated Financial StatementsJune 30, 2005 and 2004

2.Summary of Significant Accounting Policies(cont'd)

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

The Company recognizes revenues upon delivery of merchandise sold, and when services are rendered for maintenance contracts.

f) Cash and Cash Equivalents

Cash and highly liquid investment with an initial maturity period of 90 days or less are considered cash equivalents and recorded at cost.

g) Investments

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.

h) Inventories

Inventories are stated at the lower of cost or net realizable value. Net realizable value is determined by deducting selling expenses from selling price.

The cost of inventories is determined on the first-in first-out method, except for materials-in-transit for which the specific identification method is used.

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.

CINTEL CORP.Notes to Consolidated Financial StatementsJune 30, 2005 and 2004

2. Summary of Significant Accounting Policies(cont'd)

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) 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.

CINTEL CORP.Notes to Consolidated Financial StatementsJune 30, 2005 and 2004

2. Summary of Significant Accounting Policies(cont'd)

n) 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.

o) 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.

p) 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.

CINTEL CORP.Notes to Consolidated Financial StatementsJune 30, 2005 and 2004

2. Summary of Significant Accounting Policies(cont'd)

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 7. The loan will mature on August 12, 2005. As at June 30, 2005, the amount outstanding was $543,144 (2004 - $602,000).

CINTEL CORP.Notes to Consolidated Financial StatementsJune 30, 2005 and 2004

4.Inventory

Inventory includes $10,419 (2004 - $14,656) of merchandise and $257,014 (2004 - $202,603) of raw materials.

5. 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

6.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.

7.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

7.Loans Payable(cont'd)

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.

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.

CINTEL CORP.Notes to Consolidated Financial StatementsJune 30, 2005 and 2004

8.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.

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	)
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

CINTEL CORP.Notes to Consolidated Financial StatementsJune 30, 2005 and 2004

9.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 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

10.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)	$	40,630	$	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.

10.Capital Stock(cont'd)

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 8. 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.

In November 2004, the Company issued 412,286 common shares upon the repayment of $20,000 of the promissory note as described in note 8.

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 8.

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 8.

In February 2005, the Company issued 622,200 common shares upon the repayment of $50,000 of the promissory note as described in note 8.

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 8.

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 9.

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 8.

In April 2005, 1,200,000 common shares were issued for consulting services at the value of $48,000.

10.Capital Stock(cont'd)

In April 2005, 712,500 common shares were issued upon the conversion of $20,000 of convertible debenture as described in note 9.

In May 2005, 1,329,346 common shares were issued upon the conversion of $50,000 of convertible debenture as described in note 9.

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 8.

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 8.

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	6.5%	6.5%
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.

CINTEL CORP.Notes to Consolidated Financial StatementsJune 30, 2005 and 2004

10.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:

20052004

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

CINTEL CORP.Notes to Consolidated Financial StatementsJune 30, 2005 and 2004

11.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.

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:

20052004

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

12.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 8.

13. Comparative Information

Certain figures for the period ended June 30, 2004 have been reclassified to conform with the current year's financial statement presentation.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operation.

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		545,973			809,496
Cost of sales		353,768			785,180
Gross Profit		192,205			24,319
Expenses		1,093,388			775,635
Operating (Loss)		(901,183	)		(751,319	)
Loss Before Income Taxes		(1,061,708	)		(792,165	)

The main reason why this decrease of 32.5 % 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 54.9% decrease in revenues and the profitable finished goods revenue increase. The significant point was that the finished goods revenue have dramatically increasing about 36.2% of the total sales revenue compared to the previously year, about 18.2%. Additionally, it is attributed to the saving in the price of finished goods which consists of manufacturing expenses, and employees’ expenses etc. and the saving in the merchandise cost as well.

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.

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.

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.*

_______

(b) Reports on Form 8-K.

None.

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.

Date:August 22, 2005

CINTEL CORP.

By:/s/ Sang Don Kim

Name: Sang Don Kim

Title: Chief Executive Officer

By:/s/ Kyo Jin Kang

Name: Kyo Jin Kang

Title: Principal Financial Officer

Principal Accounting Officer