UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
T QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2009
¨ TRANSITION REPORT UNDER SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER: 333-100046
CINTEL CORP.
(Name of registrant in its charter)
Nevada (State or other jurisdiction of incorporation or organization) | 52-2360156 (I.R.S. Employer Identification No.) |
433 N. Camden Drive, Suite 400, Beverly Hills, CA 90210
(Address of principal executive offices) (Zip Code)
Issuer’s telephone Number: (310)-887-1407
WITH COPIES TO:
Gregory Sichenzia, Esq.
Marcelle S. Balcombe, Esq.
Sichenzia Ross Friedman Ference LLP
61 Broadway, 32 nd Flr.
New York, New York 10006
(212) 930-9700
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer o | Accelerated filer o | |
| Non-accelerated filer o | Smaller reporting company x | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of shares of registrant’s common stock outstanding, as of May 19, 2009 was 95,300,196.
This amended quarterly report on Form 10-Q/A ("Form 10-Q/A ") is being filed to amend our quarterly report on Form 10-Q for the quarter ended March 31, 2009 (the "Original Form 10-Q"), which was originally filed with the Securities and Exchange Commission ("SEC") on May 22, 2009. Accordingly, pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, this Form 10-Q/A contains current dated certifications from the Principal Executive Officer and the Principal Financial Officer.
This Form 10-Q/A is being filed to address comments of the Reviewing Staff of the Securities and Exchange Commission to the financial statements of the Company for the quarter ended March 31, 2009.
We have not updated the information contained herein for events occurring subsequent to May 22, 2009, the filing date of the Original Form 10-Q.
CINTEL CORP.
INDEX
| |
ITEM 1: | FINANCIAL STATEMENTS (Unaudited) | 3 |
| Consolidated Interim Balance Sheets | 4 |
| Consolidated Interim Statements of Operations and Comprehensive Loss | 5 |
| Consolidated Interim Statement of Stockholders' Equity | |
| Consolidated Interim Statements of Cash Flows | 6 |
| Notes to the Consolidated Interim Financial Statements | 7 |
ITEM 2: | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 25 |
ITEM 3 : | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 25 |
ITEM 4: | CONTROLS AND PROCEDURES | 25 |
PART II: OTHER INFORMATION | |
Item 1 | LEGAL PROCEEDINGS | 26 |
ITEM 1A : | RISK FACTORS | 26 |
ITEM 2 | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 26 |
ITEM 3 | DEFAULTS UPON SENIOR SECURITIES | 26 |
ITEM 4 | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS | 26 |
ITEM 5 | OTHER INFORMATION | 26 |
| EXHIBITS | 26 |
| | 31 |
PART I: FINANCIAL INFORMATION | | | |
ITEM 1: | | FINANCIAL STATEMENTS (Unaudited) | | | |
| | Condensed Consolidated Balance Sheets | | | 3 |
| | Condensed Consolidated Statements of Operations | | | 4 |
| | Condensed Consolidated Statements of Cash Flows | | | 5 |
| | Notes to the Condensed Consolidated Financial Statements | | | 7 |
ITEM 1. FINANCIAL STATEMENTS
CINTEL CORP. AND SUBSIDIARIES
______________________________________________________
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2009
(UNAUDITED)
CINTEL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS | | March 31, 2009 (Unaudited) | | | December 31, 2008 (1) | |
Current assets: | | | | | | |
Cash and cash equivalents | | $ | 6,853 | | | $ | 23,502 | |
Short-term investments | | | 22,492 | | | | 17,116 | |
Accounts receivable, net | | | 18,420 | | | | 19,554 | |
Inventories | | | 13,989 | | | | 12,968 | |
Loans receivable - affiliates, current | | | 17,744 | | | | 15,957 | |
Prepaid and other current assets | | | 10,167 | | | | 12,382 | |
Total current assets | | | 89,665 | | | | 101,479 | |
Property, plant and equipment, net | | | 93,366 | | | | 98,415 | |
Restricted cash | | | 351 | | | | 649 | |
Loans receivable - affiliates, net of current | | | 57 | | | | 81 | |
Derivative instrument | | | 5,250 | | | | 5,508 | |
Equity method investments | | | 12,419 | | | | 12,998 | |
Long-term investments | | | 19,578 | | | | 16,296 | |
Goodwill | | | 17,459 | | | | 18,449 | |
Other intangible assets, net | | | 1,215 | | | | 1,365 | |
Security deposits | | | 4,044 | | | | 6,569 | |
Total assets | | $ | 243,404 | | | $ | 261,809 | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable | | $ | 19,533 | | | $ | 20,998 | |
Accrued liabilities | | | 3,028 | | | | 4,610 | |
Deferred revenue | | | 10,129 | | | | 13,394 | |
Notes payable, current | | | 73,133 | | | | 82,761 | |
Other current liabilities | | | 187 | | | | 244 | |
Total current liabilities | | | 106,010 | | | | 122,007 | |
Accrued severance benefits | | | 907 | | | | 1,065 | |
Notes payable, net of current portion | | | 30,275 | | | | 25,485 | |
Convertible debts | | | 110,359 | | | | 111,809 | |
Total liabilities | | | 247,551 | | | | 260,366 | |
Commitments and contingencies (Note 18) | | | | | | | | |
Stockholders' equity (deficit): | | | | | | | | |
Cintel Corp stockholders’ deficit: | | | | | | | | |
Common stock | | | 98 | | | | 98 | |
Additional paid-in capital | | | 6,611 | | | | 20,470 | |
Treasury stock | | | (3,254 | ) | | | (3,264 | ) |
Accumulated other comprehensive loss | | | (10,187 | ) | | | (8,295 | ) |
Accumulated deficit | | | (23,293 | ) | | | (35,239 | ) |
Total Cintel Corp. stockholders’ deficit | | | (30,025 | ) | | | (26,230 | ) |
Non-controlling interest | | | 25,878 | | | | 27,673 | |
Total stockholders’ equity (deficit) | | | (4,147 | ) | | | 1,443 | |
Total liabilities and stockholders' equity | | $ | 243,404 | | | $ | 261,809 | |
| (1) Derived from audited financial statements included in the Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission. |
See accompanying notes to unaudited condensed consolidated financial statements.
CINTEL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)
| | Three Months Ended | |
| | March 31, 2009 | | | Adjusted March 31, 2008 | |
| | | | | | |
Net revenues | | $ | 26,817 | | | $ | 42,448 | |
Cost of revenues | | | 25,425 | | | | 40,307 | |
Gross profits | | | 1,392 | | | | 2,141 | |
| | | | | | | | |
General and administrative expenses | | | 3,086 | | | | 4,149 | |
Depreciation and amortization | | | 174 | | | | 286 | |
Net (gain) loss from sale of assets | | | 101 | | | | (37 | ) |
| | | 3,361 | | | | 4,398 | |
Loss from operations | | | (1,969 | ) | | | (2,257 | ) |
| | | | | | | | |
Other income (expenses): | | | | | | | | |
Interest income | | | 720 | | | | 760 | |
Other income (expenses) | | | (107 | ) | | | 139 | |
Interest expenses | | | (2,007 | ) | | | (1,872 | ) |
Share of loss from equity investment | | | (161 | ) | | | (430 | ) |
Net gain from sale of marketable securities | | | 832 | | | | - | |
Foreign currency transaction, net | | | 452 | | | | (137 | ) |
| | | (271 | ) | | | (1,540 | ) |
Loss before income taxes | | | (2,240 | ) | | | (3,797 | ) |
Income tax expense | | | 9 | | | | 1 | |
| | | | | | | | |
Net loss | | | (2,249 | ) | | | (3,798 | ) |
Less: net loss attributable to the noncontrolling interest | | | (327 | ) | | | (1,202 | ) |
Net loss attributable to Cintel Corp. | | $ | (1,922 | ) | | $ | (2,596 | ) |
| | | | | | | | |
Loss per share – basic and diluted: | | | | | | | | |
Net loss attributable to Cintel Corp. common stockholders | | $ | (0.02 | ) | | $ | (0.03 | ) |
| | | | | | | | |
Weighted average shares outstanding - basic and diluted | | | 83,424 | | | | 97,825 | |
See accompanying notes to unaudited condensed consolidated financial statements.
CINTEL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
| | Three Months Ended | |
| | March 31, 2009 | | | Adjusted March 31, 2008 | |
| | | | | | |
Cash flows from operating activities: | | | | | | |
Net loss | | $ | (1,922 | ) | | $ | (2,596 | ) |
Adjustments to reconcile net loss to net cash | | | | | | | | |
used in operating activities: | | | | | | | | |
Depreciation | | | 1,134 | | | | 1,307 | |
Amortization of intangible assets | | | 77 | | | | 56 | |
Non-controlling interest’s share of loss | | | (327 | ) | | | (1,202 | ) |
Common stock provided for professional services | | | 10 | | | | - | |
Bad debt expense | | | 1,089 | | | | - | |
Severance benefit | | | 259 | | | | - | |
Impairment of long-lived assets | | | 260 | | | | - | |
Share of loss from equity investment | | | 161 | | | | 430 | |
Unrealized loss on investment | | | 4 | | | | - | |
Net loss (gain) on sale of property | | | 101 | | | | (37 | ) |
Net gain on sale of investment | | | (191 | ) | | | - | |
Interest expense | | | 673 | | | | - | |
Other miscellaneous loss | | | 656 | | | | - | |
(Increase) decrease in assets: | | | | | | | | |
Accounts receivable | | | (1,452 | ) | | | (20,290 | ) |
Inventory | | | (1,913 | ) | | | (4,751 | ) |
Prepaid expenses and other assets | | | (1,861 | ) | | | (7,786 | ) |
Security deposits | | | - | | | | 156 | |
Increase (decrease) in liabilities: | | | | | | | | |
Accounts payable | | | 2,979 | | | | 3,173 | |
Deferred revenue | | | (2,082 | ) | | | 5,192 | |
Accrued liabilities | | | (3,682 | ) | | | 5,676 | |
Accrued severance benefits | | | (320 | ) | | | 772 | |
Other current liabilities | | | (418 | ) | | | 2 | |
Cash used in operating activities | | | (6,765 | ) | | | (19,898 | ) |
| | | | | | | | |
| | | | | | | | |
(Continued)
See accompanying notes to unaudited condensed consolidated financial statements.
CINTEL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
| | Three Months Ended | |
| | March 31, 2009 | | | Adjusted March 31, 2008 | |
| | | | | | |
Cash flows from investing activities: | | | | | | |
Acquisition of investments in securities | | | (11,071 | ) | | | - | |
Proceeds from sale of investment in securities | | | 5,321 | | | | 9,555 | |
Acquisition of property and equipment | | | (2,720 | ) | | | (14,308 | ) |
Proceeds from disposal of property and equipment | | | 440 | | | | - | |
Payments on loan receivable | | | (5,063 | ) | | | (13,212 | ) |
Proceeds from loan receivable | | | 1,824 | | | | - | |
Acquisition of intangible assets | | | (5 | ) | | | 72 | |
Changes in non-controlling interest | | | - | | | | 2,857 | |
Cash used in investing activities | | | (11,274 | ) | | | (15,036 | ) |
| | | | | | | | |
Cash flows from financing activities: | | | | | | | | |
Proceeds from convertible debts | | | - | | | | 8,437 | |
Principal payments of convertible debts | | | (4,237 | ) | | | - | |
Acquisition of treasury stocks | | | (2 | ) | | | - | |
Proceeds from short and long-term notes | | | 13,767 | | | | 26,059 | |
Principal payments of notes payable | | | (6,173 | ) | | | (879 | ) |
Cash provided by financing activities | | | 3,355 | | | | 33,617 | |
| | | | | | | | |
Net decrease in cash and cash equivalent | | | (14,684 | ) | | | (1,317 | ) |
Effect of foreign currency translation | | | (1,614 | ) | | | (600 | ) |
Cash and cash equivalent - beginning of period | | | 23,502 | | | | 29,946 | |
Restricted cash | | | 351 | | | | (4,811 | ) |
| | | | | | | | |
Cash and cash equivalent - end of period | | $ | 6,853 | | | $ | 32,840 | |
| | | | | | | | |
Supplemental Disclosure of Cash Flows Information: | | | | | | | | |
Cash paid for interest | | $ | 2,107 | | | $ | 1,466 | |
Cash paid for income taxes | | $ | 140 | | | $ | 330 | |
CINTEL CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of CinTel Corp. (“Cintel” or the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make judgments, estimates and assumptions that affect the reported in the financial statements and accompanying notes. These estimates are often based on complex judgments and assumptions that management believes to be reasonable but are inherently uncertain and unpredictable. Actual results may differ materially from these estimates. In addition, any changes in these estimates or their related assumptions could have a materially adverse effect on the Company's operating results.
In management’s opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments), necessary to state fairly the financial information included herein. While the Company believes that the disclosures are adequate to make the information not misleading, these financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
These unaudited condensed consolidated financial statements include the accounts of Cintel Corp. and its wholly-owned or majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Noncontrolling interest represents the minority stockholders' proportionate share of the net assets and the results of operations of subsidiaries in Korea and China.
Where the functional currency of the Company's foreign subsidiaries is the local currency, all assets and liabilities are translated into U.S. dollars, using the exchange rate on the consolidated balance sheet date, and revenues and expenses are translated at average rates prevailing during the period. Accounts and transactions denominated in foreign currencies have been re-measured into functional currencies before translated into U.S. dollars. Foreign currency transaction gains and losses are included as a component of other income and expense. Gains and losses from foreign currency translation are included as a separate component
Reclassifications
Certain reclassifications have been made to the prior year consolidated financial statement presentation to correspond to the current period’s format. Total equity and net income are unchanged due to these reclassifications.
Recent Accounting pronouncements
In December 2007, the Financial Accounting Standard Board issued SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statements" (“SFAS 160”). SFAS 160 requires all entities to report noncontrolling (i.e. minority) interests in subsidiaries as equity in the Consolidated Financial Statements and to account for transactions between an entity and noncontrolling owners as equity transactions if the parent retains its controlling financial interest in the subsidiary. SFAS 160 also requires expanded disclosure that distinguishes between the interests of the controlling owners and the interests of the noncontrolling owners of a subsidiary. SFAS 160 is effective for the Company’s financial statements for the year beginning on January 1, 2009, and earlier adoption is not permitted. The adoption o f SFAS 160 had no material impact on the Company’s financial condition and results of operations.
CINTEL CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Restructuring
In January 2009, the Company’s majority owned subsidiary, PDT's board of directors approved a corporate readjustment of its equity accounts in the form of Quasi-Reorganization in which the Company's accumulated deficits of $13.9 million was charged to paid-in capital. PDT accounted this quasi-reorganization by establishing new retained earnings account subsequent to the readjustment in January 2009.
Pursuant to mandated restructuring rules of the local government, PDT has been under a debt restructuring workout with its major creditors since April 2009. As of the current period ending, several creditors have agreed and lowered interest rate on notes and the workout is expected to finalize before end of 2009.
Note 3 – Balance Sheet Details
Inventories
Inventories consist of the following as of March 31, 2009 and December 31, 2008:
| | March 31, 2009 | | | December 31, 2008 | |
| | (in thousands) | |
| | | | | | |
Raw materials and supplies | | $ | 3,209 | | | $ | 4,015 | |
Work-in-process | | | 6,830 | | | | 5,813 | |
Finished goods | | | 3,950 | | | | 3,140 | |
Total | | $ | 13,989 | | | $ | 12,968 | |
Loans Receivable - Affiliates
Loans receivable from affiliates consist of the following as of March 31, 2009 and December 31, 2008:
| | March 31, 2009 | | | December 31, 2008 | |
| | (in thousands) | |
Loan receivable at 7% interest, matured in January 2009. | | $ | - | | | $ | 172 | |
Loan receivable at 8% interest, matures in September 2009. | | | 10,122 | | | | 11,093 | |
Loan receivable at 8% interest, matured in June 2009. | | | 3,254 | | | | 3,566 | |
Loans receivable at 8.5% to 12% interest, matures in 2009 and 2010. | | | 4,338 | | | | 1,109 | |
Other loans receivable | | | 87 | | | | 98 | |
| | | 17,801 | | | | 16,038 | |
Less: current portion | | | 17,744 | | | | 15,957 | |
Loan receivable, net of current | | $ | 57 | | | $ | 81 | |
In the ordinary course of business, the Company had and expects to continue to have transactions, including borrowings, with unrelated and affiliated companies. In the opinion of management, such transactions were on similar terms, including interest rates and collateral, as those prevailing at the time of comparable transactions with other persons and did not involve more than a normal risk of collectability or present any other unfavorable features to the Company.
CINTEL CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Prepaid Expenses and Other Assets
Prepaid expenses and other current assets consist of the following as of March 31, 2009 and December 31, 2008:
| | March 31, 2009 | | | December 31, 2008 | |
| | (in thousands) | |
| | | | | | |
Prepaid expenses | | $ | 368 | | | $ | 255 | |
Advance payments to vendors | | | 6,884 | | | | 5,534 | |
Deposits made for investments | | | - | | | | 3,803 | |
Other current assets | | | 2,915 | | | | 2,790 | |
Total | | $ | 10,167 | | | $ | 12,382 | |
Property, Plant and Equipment
Property, plant and equipment consist of the following at March 31, 2009 and December 31, 2008:
| | March 31, 2009 | | | December 31, 2008 | |
| | (in thousands) | |
| | | | | | |
Land | | $ | 17,619 | | | $ | 19,749 | |
Buildings and improvements | | | 40,537 | | | | 43,663 | |
Machinery and equipment | | | 30,603 | | | | 30,981 | |
Furniture and fixtures | | | 7,975 | | | | 8,531 | |
Vehicles | | | 410 | | | | 481 | |
Software | | | 40 | | | | 40 | |
Small tools | | | 502 | | | | 518 | |
| | | 97,686 | | | | 103,963 | |
Less: accumulated depreciation | | | (20,286 | ) | | | (20,022 | ) |
| | | 77,400 | | | | 83,941 | |
Assets held for sale | | | 4,767 | | | | 5,224 | |
Construction-in-progress | | | 11,199 | | | | 9,250 | |
Property and equipment, net | | $ | 93,366 | | | $ | 98,415 | |
Depreciation expenses for the three months ended March 31, 2009 and 2008 were $1.13 million and 1.31 million, respectively.
Note 4 – Investments Securities
The carrying amount, gross unrealized holding gains, gross unrealized holding losses, and fair value of investment securities by major security type and class of security at March 31, 2009 and December 31, 2008 were as follows:
| | Aggregate cost basis | | | Gross unrealized holding gains | | | Gross unrealized holding (losses) | | | Estimated fair values | |
| | (In thousands) | |
March 31, 2009 | | | | | | | | | | | | |
Available-for-sale: | | | | | | | | | | | | |
Time deposits and commercial papers | | $ | 8,003 | | | $ | - | | | $ | - | | | $ | 8,003 | |
Equity securities - marketable | | | 3,954 | | | | 231 | | | | (165 | ) | | | 4,020 | |
Equity securities - nonmarketable | | | 19,578 | | | | - | | | | - | | | | 19,578 | |
| | | 31,535 | | | | 231 | | | | (165 | ) | | | 31,601 | |
Held-to-maturity: Corporate debt securities | | | 10,469 | | | | | | | | | | | | 10,469 | |
| | $ | 42,004 | | | $ | 231 | | | $ | (165 | ) | | $ | 42,070 | |
| | | | | | | | | | | | | | | | |
Included in short-term investments | | | | | | | | | | | | | | $ | 22,492 | |
Included in long-term investments | | | | | | | | | | | | | | | 19,578 | |
| | | | | | | | | | | | | | $ | 42,070 | |
| | | | | | | | | | | | | | | | |
December 31, 2008 | | | | | | | | | | | | | | | | |
Available-for-sale: | | | | | | | | | | | | | | | | |
Time deposits and commercial papers | | $ | 1,419 | | | $ | - | | | $ | - | | | $ | 1,419 | |
Equity securities - marketable | | | 4,333 | | | | 97 | | | | (207 | ) | | | 4,223 | |
Equity securities - nonmarketable | | | 16,296 | | | | - | | | | - | | | | 16,296 | |
| | | 22,048 | | | | 97 | | | | (207 | ) | | | 21,938 | |
Held-to-maturity: Corporate debt securities | | | 11,474 | | | | | | | | | | | | 11,474 | |
| | $ | 33,522 | | | $ | 97 | | | $ | (207 | ) | | $ | 33,412 | |
| | | | | | | | | | | | | | | | |
Included in short-term investments | | | | | | | | | | | | | | $ | 17,116 | |
Included in long-term investments | | | | | | | | | | | | | | | 16,296 | |
| | | | | | | | | | | | | | $ | 33,412 | |
CINTEL CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Corporate debt securities: The investments in corporate debt securities consisted of corporate bonds with maturities of less than one year and are recorded at net of amortized cost.
Equity securities: The investments in equity securities with unrealized gain or loss are consisted of marketable and non-marketable equity securities. The Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the impairment. For nonmarketable equity securities, the Company does not estimate the fair values unless there are identified events or changes in circumstances that may have a significant adverse effect on the investment. If management determines that these nonmarketable equity investments are impaired, losses are generally measured by using pricing reflected in current rounds of financing.
Note 5 - Equity Method Investments
The Company accounts investment under equity method when the it has the ability to exercise significant influence, but not control, over an investee. Significant influence is generally deemed to exist if the investing company has an ownership interest in the voting stock of an investee of between 20% and 50%.
Investments accounted for under the equity method consist of as follows at March 31, 2009 and December 31, 2008:
March 31, 2009 | | Ownership | | | Carrying Value | |
| | | | | (in thousands) | |
| | | | | | |
D-Network | | | 31.3 | % | | $ | 1,715 | |
Phoenix Holding | | | 25.5 | % | | | 3,535 | |
Phoenix Asset Investment | | | 27.4 | % | | | 7,169 | |
| | | | | | $ | 12,419 | |
December 31, 2008 | | Ownership | | | Carrying Value | |
| | | | | (in thousands) | |
| | | | | | |
D-Network | | | 31.3 | % | | $ | 1,884 | |
Phoenix Holding | | | 25.5 | % | | | 3,086 | |
Phoenix Asset Investment | | | 27.4 | % | | | 8,028 | |
| | | | | | $ | 12,998 | |
The Company’s share of losses from the equity method investment for the three months ended March 31, 2009 and 2008 were $161,000 and $430,000, respectively.
CINTEL CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 5 – Derivative Instruments
The Company has foreign subsidiaries that operate and sell the Company’s products primarily in Chinese and Korean markets. As a result, the Company is exposed to changes in foreign currency exchange rates. The Company utilizes forward contracts to manage its exposure associated with net asset and liability positions denominated in non-functional currencies and to reduce the volatility of earnings and cash flows related to forecasted foreign currency transactions. The Company does not speculate using derivative instruments.
The Company enters into forward contracts that are designated as foreign currency cash flows hedges of selected forecasted payments denominated in currencies other than the local currency. These forward contracts have maturities of less than 12 months. Changes in the fair value of the forward contracts attributable to changes in time value are excluded from the assessment of effectiveness and are recognized in gain or loss from foreign currency transactions. The effective portion of the forward contracts’ gain or loss is initially reported as a component of accumulated other comprehensive income and subsequently reclassified into earnings when the hedged exposure affects earnings. The ineffective portion, if any, of the gain or loss is reported in earnings immediately.
The balance sheet classification and the fair value of foreign currency swap is as follows:
| | March 31, 2009 | | | December 31, 2008 | |
| | (In thousands) | |
Derivative asset designated as cash flow hedges: | | | | | | |
Foreign currency swap | | $ | 5,250 | | | $ | 5,508 | |
Note 7 – Fair Value Measurements
Effective January 1, 2008, the Company adopted FASB Statement No. 157, Fair Value Measurements ("SFAS No. 157"). SFAS No. 157 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Under SFAS No. 157, fair value measurements are not adjusted for transaction costs. SFAS No. 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements).
The three levels of the fair value hierarchy under SFAS No. 157 are described below:
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets.
Level 2 - Significant other observable inputs other than Level 1 prices such as quoted prices in markets that are not active, quoted prices for similar assets, or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset.
Level 3 - Significant unobservable inputs that reflect a reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability.
The fair values of securities available for sale are generally determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted securities (Level 2 inputs).
CINTEL CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the placement in the fair value hierarchy of assets and liabilities that are measured at fair value on a recurring basis at March 31, 2009 and December 31, 2008:
| | | | | Fair value measurements at reporting date using | |
| | March 31, 2009 | | | Quoted prices in active markets for identical assets (Level 1) | | | Significant other observable inputs (Level 2) | | | Significant unobservable inputs (Level 3) | |
| | (In thousands) | |
Available-for-sale securities | | | | | | | | | | | | |
Time deposit and commercial paper | | $ | 8,003 | | | $ | 8,003 | | | $ | - | | | $ | - | |
Marketable equity securities | | | 3,954 | | | | - | | | | 3,954 | | | | - | |
Nonmarketable equity securities | | | 19,578 | | | | - | | | | - | | | | 19,578 | |
Derivative assets, net | | | 5,250 | | | | - | | | | 5,250 | | | | - | |
Total financial assets | | $ | 36,785 | | | $ | 8,003 | | | $ | 9,204 | | | $ | 19,578 | |
| | | | | | | | | | | | | | | | |
Convertible debts | | $ | 110,359 | | | $ | - | | | $ | 110,359 | | | $ | - | |
| | | | | Fair value measurements at reporting date using | |
| | December 31, 2008 | | | Quoted prices in active markets for identical assets (Level 1) | | | Significant other observable inputs (Level 2) | | | Significant unobservable inputs (Level 3) | |
| | (In thousands) | |
Available-for-sale securities | | | | | | | | | | | | |
Time deposit and commercial paper | | $ | 1,419 | | | $ | 1,419 | | | $ | - | | | $ | - | |
Marketable equity securities | | | 4,223 | | | | - | | | | 4,223 | | | | - | |
Nonmarketable equity securities | | | 16,296 | | | | - | | | | - | | | | 16,296 | |
Derivative assets, net | | | 5,508 | | | | - | | | | 5,508 | | | | - | |
Total financial assets | | $ | 27,446 | | | $ | 1,419 | | | $ | 9,731 | | | $ | 16,296 | |
| | | | | | | | | | | | | | | | |
Convertible debts | | $ | 111,809 | | | $ | - | | | $ | 111,809 | | | $ | - | |
The fair values of the financial instruments shown in the above table as of March 31, 2009 and December 31, 2008 represent the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants at that date. Those fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects the Company’s own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by the Company based on the best information available in the circumstances, including expected cash flows and appropriately risk-adjusted discount rates , available observable and unobservable inputs.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments:
Time deposit and commercial paper: The carrying amounts, at face value or cost plus accrued interest, approximate fair value because of the short maturity of these instruments.
Investment securities: Marketable securities classified as available for sale are measured using quoted market prices at the reporting date multiplied by the quantity held. The fair values of equity securities accounted for under the cost method (non-marketable equity securities) are determined using market multiples derived from comparable companies. Under that approach, the identification of comparable companies requires significant judgment. Additionally, multiples might lie in ranges with a different multiple for each comparable company. The selection of where the appropriate multiple falls within that range also requires significant judgment, considering both qualitative and quantitative factors. Debt securities classified as available for sale are measured using quoted market prices multiplied by the quantity held whe n quoted market prices are available. If quoted market prices for those debt securities are not available, the fair value is determined using an income approach valuation technique (present value using the discount rate adjustment technique) that considers, among other things, rates currently observed in publicly traded debt markets for debt of similar terms to companies with comparable credit risk, the issuer’s credit spread, and illiquidity by sector and maturity.
CINTEL CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Convertible debt: The fair value of the Company’s convertible debt is measured using quoted offer-side prices when quoted market prices are available. If quoted market prices are not available, the fair value is determined by discounting the future cash flows of each instrument at rates that reflect rates currently observed in publicly traded debt markets for debt of similar terms to companies with comparable credit risk. In determining an appropriate spread to reflect its credit standing, the Company considers credit default swap spreads, bond yields of other convertible debt offered by the Company, and interest rates currently offered to the Company for similar debt instruments of comparable maturities by the Company’s bankers as well as other banks that regularly compete to provide financing to the Company.
Note 8 – Goodwill and Other Intangible Assets
The following table sets forth changes in the carrying of goodwill at March 31, 2009 and December 31, 2008:
Balance as of December 31, 2008 | | $ | 18,449 | |
Fair value adjustments | | | (990 | ) |
Balance as of March 31, 2009 | | $ | 17,459 | |
Other intangible assets consist of the following at March 31, 2009 and December 31, 2008:
| | March 31, 2009 | | | December 31, 2008 | |
| | (in thousands) | |
| | | | | | |
Land rights | | $ | 436 | | | $ | 437 | |
Accumulated amortization | | | (49 | ) | | | (47 | ) |
| | | 387 | | | | 390 | |
Other intangible assets, net | | | 828 | | | | 975 | |
Net carrying amount | | $ | 1,215 | | | $ | 1,365 | |
The Company has an agreement with the government of China for the use of land until February 14, 2054. According to the agreement, the Company is obligated to pay an annual management fee of approximately $2,400, and the land has to be used for manufacturing purposes.
Other intangible assets include patents, technology rights and in-process research and development costs and are amortized over its estimated useful life of three to seven years. Amortization expenses on these intangible assets for the three months ended March 31, 2009 was $34,991.
CINTEL CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 9 – Notes Payable
Notes payable consist of the following at March 31, 2009 and December 31, 2008:
| | March 31, 2009 | | | December 31, 2008 | |
| | (in thousands) | |
| | | | | | |
Note payable at 4.66% interest, matured in January 2009. | | $ | - | | | $ | 910 | |
Note payable at 7.3% interest, matures in July 2009. | | | 5,122 | | | | 5,130 | |
Note payable with LIBOR plus 3.5% interest, matured in January 2009. | | | - | | | | 691 | |
Note payable at LIBOR plus 2%, matured in February 2009. | | | - | | | | 984 | |
Note payable at LIBOR plus 2.2%, matures in June 2009. | | | 350 | | | | - | |
Notes payable at 7.5% to 8.98% interest, mature in 2009. | | | 1,763 | | | | 1,932 | |
Notes payable at 6.23% to 7.53% interest, mature in November 2009 and June 2010 | | | 4,338 | | | | 4,754 | |
Notes payable at 7.5% to 8.98% interest, mature in 2009. | | | 9,011 | | | | 9,876 | |
Notes payable at 6.23% to 7.53% interest, mature in November 2009 and June 2010 | | | 3,615 | | | | 4,754 | |
Note payable at 6.44% interest, matures in July 2009. | | | 7,546 | | | | 8,271 | |
Note payable at 5.45% to 5.56% interest, mature in January and July 2010. | | | 15,779 | | | | 17,293 | |
Note payable bearing no interest, matures in December 2011. | | | 461 | | | | 506 | |
Note payable at 6.89% to 7.90% interest, mature in March 2010. | | | 8,991 | | | | 9,846 | |
Notes payable at 7.93% interest, matures in October 2009. | | | 6,348 | | | | 6,968 | |
Notes payable at 6.64% to 7.11% interest, matures in February and March 2010. | | | 3,977 | | | | 4,358 | |
Notes payable at 5.5% to 5.79% interest, matures in July and September 2009. | | | 2,531 | | | | 2,773 | |
Notes payable at 4.83% to 6.33% interest, mature in October 2009. | | | 7,230 | | | | 7,924 | |
Notes payable at 6.45% interest, mature in July 2009. | | | 2,169 | | | | 2,377 | |
Note payable at 5.52% interest, matures in August 2009. | | | 2,169 | | | | 2,377 | |
Notes payable at 5.00% to 5.91% interest, matured in April and May 2009. | | | 2,403 | | | | 2,594 | |
Note payable at 5.38% interest, matured in January 2009. | | | - | | | | 13 | |
Notes payable at 4.04% interest, matures in March 2015. | | | 1,085 | | | | 1,189 | |
Notes payable at 4.7% interest, matures in December 2009 and May 2010 | | | 2,892 | | | | 3,170 | |
Notes payable at 4.54 % interest, matures in June 2011. | | | 1,885 | | | | 2,295 | |
Notes payable at 3 month CD plus 2.15% interest, matured in April 2009 | | | - | | | | 4,754 | |
Various notes payable to local government, bearing no interest. The loan is unsecured. | | | 7 | | | | 7 | |
Note payable with no interest bearing, matured in January 2009. | | | - | | | | 2,500 | |
Notes payable at 5.33% interest, matures in March 2010. | | | 4,337 | | | | - | |
Notes payable to Industrial Bank of Korea, and matures in March 2010 | | | 2,169 | | | | | |
Notes payable to Industrial Bank of Korea, and matures in February 2017 | | | 7,230 | | | | - | |
| | | 103,408 | | | | 108,246 | |
Less: current portion | | | 73,133 | | | | 82,761 | |
Long-term debt | | $ | 30,275 | | | $ | 25,485 | |
Following is a summary of principal maturities of notes payable over the next five years:
Years ending December 31, | | Amount (in thousands) | |
| | | |
2009 | | $ | 53,658 | |
2010 | | | 39,926 | |
2011 | | | 1,508 | |
2012 | | | 273 | |
2013 and thereafter | | | 8,043 | |
Total | | $ | 103,408 | |
CINTEL CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 10 – Convertible Debts
Pursuant to SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity," the Company accounts for the convertible debentures as liability instrument at carrying value which approximate the fair value.
The carrying value of convertible debts outstanding at March 31, 2009 and December 31, 2008, are summarized as follows:
| | Maturity | | | Interest Rate | | | Conversion Price | | | March 31, 2009 | | | December 31, 2008 | |
| | | | | | | | | | | (in thousands) | |
| | | | | | | | | | | | | | | |
Convertible debenture - A | | 2011 | | | | 8.00 | % | | $ | 0.50 | | | $ | 15,284 | | | $ | 15,284 | |
Convertible debenture - B | | 2012 | | | | 2.30 | % | | $ | 0.70 | | | | 64,920 | | | | 64,920 | |
Convertible debenture - C | | 2012 | | | | 2.30 | % | | $ | 0.70 | | | | 10,820 | | | | 10,820 | |
Convertible debenture - D (Issued by subsidiary, PDT) | | | 2010-2012 | | | | 0%-2.4 | % | | $80.15 - $96.17 of PDT | | | | 12,129 | | | | 13,024 | |
Bond with warrants (Issued by a subsidiary of PDT) | | | 2011 | | | | 0 | % | | $2.85 of UBP | | | | 7,206 | | | | 7,761 | |
Total | | | | | | | | | | | | | | $ | 110,359 | | | $ | 111,809 | |
The convertible debentures have not been included in the calculation of the diluted (loss) per share as their inclusion would be anti-dilutive.
Note 11 – Employee Severance Benefits
Employees and directors with one year or more of service are entitled to receive a lump-sum payment upon termination of their employment based on their length of service and rate of pay at the time of termination. Accrued severance benefits represent the amount which would be payable assuming all eligible employees and directors are to terminate their employment as of the balance sheet date. The severance benefits for the period ended March 31, 2009 and 2008, were $102,216 and $169,542, respectively.
Note 13 - Income Taxes
The Company adopted the provisions of FIN No. 48 on January 1, 2008, and there was no material effect on the financial statements at the date of adoption. There was no cumulative effect related to adopting FIN No. 48.
Corporate income tax rates applicable to the Korean subsidiaries in 2009 and 2008 were 16.5% of the first 100 million Korean Won ($105,700) of taxable income and 29.7% on the excess. For the United States operations, the corporate tax rates range from 10% to 34%. 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 likely that they will be realized. Tax losses from the Korean subsidiaries can be carried forward for five years to offset future taxable income. The U.S. tax losses can be carried forward for 15 to 20 years to offset future taxable income. The Company has accumulated about $13,222,000 and $8,711,000 of taxable losses in its Korea and US operations, respectively. The utilization of the Korean losses expires in years 2008 to 2012 and the US losses in years 2019 to 2027. PSTS is exempt from income taxes under the Chinese tax law for the first two profitable tax years. Taxable income in the third to fifth profitable tax years will be taxed at 5% and subsequently the applicable tax rate will be 10%.
CINTEL CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The provision for income taxes for the period ended March 31, 2009 and 2008 are summarized as follows:
| | Three Months Ended March 31, | |
| | 2009 | | | 2008 | |
| | (in thousands) | |
Current income tax provision: | | | | | | |
U.S. | | $ | - | | | $ | - | |
Foreign taxes of subsidiaries | | | 9 | | | | 1 | |
| | | 9 | | | | 1 | |
Deferred income tax benefit: | | | - | | | | - | |
Income tax expense | | $ | 9 | | | $ | 1 | |
The Company has deferred tax assets (liabilities) at March 31, 2009 and December 31, 2008 as follows:
| | March 31, 2009 | | | December 31, 2008 | |
| | (in thousands) | |
Net operating loss carryforwards | | $ | 7,798 | | | $ | 5,877 | |
Valuation allowance | | | (7,798 | ) | | | (5,877 | ) |
| | $ | - | | | $ | - | |
Note 13 – Comprehensive Income (Loss)
Comprehensive income or loss is defined as a changes in equity of a company during a period from transactions and other events and circumstances, excluding transactions resulting from investments by owners and distributions to owners. Comprehensive loss, net of taxes, for the three months ended March 31, 2009 and 2008 is as follows:
| | Three Months Ended March 31, | |
| | 2009 | | | 2008 | |
| | (in thousands) | |
| | | | | | |
Net loss | | $ | (2,249 | ) | | $ | (3,798 | ) |
Comprehensive income (loss), net of tax: | | | | | | | | |
Unrealized gain on investment securities | | | 175 | | | | 32 | |
Foreign currency translation adjustments | | | (3,533 | ) | | | (600 | ) |
| | | (3,358 | ) | | | (568 | ) |
Total comprehensive loss | | | (5,607 | ) | | | (4,366 | ) |
Comprehensive income (loss) attributable to the noncontrolling interest | | | (1,466 | ) | | | (452 | ) |
Comprehensive loss attributable to Cintel Corp. | | $ | (4,141 | ) | | $ | (3,914 | ) |
Note 17 - Loss per Share
The following reconciles the numerators and denominators of the basic and diluted per share computation for the period ended March 31, 2009 and 2008:
| | Three Months Ended March 31, | |
| | 2009 | | | 2008 | |
| | (in thousands, except per share amounts) | |
Numerator for basic and diluted earnings per share: | | | | | | |
Net loss | | $ | (1,922 | ) | | $ | (2,596 | ) |
Denominator: | | | | | | | | |
Basic and diluted weighted average shares outstanding | | | 83,424 | | | | 97,825 | |
Basic and diluted loss per share | | $ | (0.02 | ) | | $ | (0.03 | ) |
CINTEL CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 15 - Capital
The Company's capital transactions for the periods ended March 31, 2009 are as follows:
In March 2009, 68,857 common shares held by a subsidiary were provided for consulting services at the value of $10,734.
As of March 31, 2009, 11,872,967 common shares held by a subsidiary of a majority-owned subsidiary were eliminated and presented as treasury stock.
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:
| | March 31, 2009 | | | December 31, 2008 | |
Interest rate | | | 6.5 | % | | | 6.5 | % |
Expected volatility | | | 70 | % | | | 70 | % |
Expected life in years | | | 5 | | | | 6 | |
Expected dividends | | | - | | | | - | |
In 1999, the Board of Directors of Cintel Korea adopted a stock option plan to allow employees to purchase ordinary shares of the Cintel Korea.
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 during the period ended March 31, 2009 and no option is outstanding at March 31, 2009.
The stock options have not been included in the calculation of the diluted earnings per share as their inclusion would be anti-dilutive.
Note 16 – Segment Information
The Company operates in two major reportable segments – the semiconductor segment and the automated assembly line segment – in which the Company offers products and services for a variety of electronic device applications and automated assembly machinery. The Company’s products and services are marketed primarily to makers of electronic devices and LCD televisions who sells finished products to consumer markets.
Summary of Operations by Segment
The following is a summary of operations by segment for the three months ended March 31, 2009 and 2008:
| | March 31, 2009 | | | March 31, 2008 | |
| | (In thousands) | |
Revenue: | | | | | | |
Semiconductor | | $ | 11,638 | | | $ | 20,065 | |
LCD assembly line | | | 15,166 | | | | 20,692 | |
Other | | | 13 | | | | 1,691 | |
Total | | $ | 26,817 | | | $ | 42,448 | |
| | | | | | | | |
Loss from operations: | | | | | | | | |
Semiconductor | | $ | (616 | ) | | $ | (239 | ) |
LCD assembly line | | | (549 | ) | | | (1,055 | ) |
Other | | | (804 | ) | | | (963 | ) |
Total | | $ | (1,969 | ) | | $ | (2,257 | ) |
For the period ended March 31, 2009 and 2008, call service operations and other general and administrative expenses that are not directly related to the major two segment operations are included in Other.
Significant Customers
The following table provides information about the Company’s significant customers, each of whom accounted for 10% or more of consolidated revenue for the periods indicated:
| | Three Months Ended | |
| | March 31, 2009 | | | March 31, 2008 | |
Consolidated: | | | | | | |
Number of significant customers | | | 1 | | | | 1 | |
Revenue amount (in thousands) | | $ | 10,122 | | | $ | 10,346 | |
Percentage of consolidated revenues | | | 38 | % | | | 24 | % |
Note 17 – Related Party Transactions
The following summarizes significant transactions with affiliates for:
As of: | | March 31, 2009 | | | December 31, 2008 | |
| | (in thousands) | |
| | | | | | |
Accounts receivable from STS | | $ | 966 | | | $ | 704 | |
Accounts receivable from BKLCD (fka We-Tech) | | | - | | | | 125 | |
| | | | | | | | |
Three months ended | | March 31, 2009 | | | March 31, 2008 | |
| | (in thousands) | |
| | | | | | | | |
Sales to STS | | $ | 10,126 | | | $ | 18,566 | |
Sales to BKLCD (fka We-Tech) | | | 4 | | | | 324 | |
Purchase from STS | | | 8,368 | | | | 16,892 | |
STS is a 49% owning non-controlling shareholder of PSTS and sells semiconductor wafers and other parts to PSTS. STS also purchases finished semiconductor products from PSTS. BKLCD is a subsidiary of STS and purchases semiconductor products from PSTS.
These transactions were in the normal course of business and recorded at an exchange value established and agreed upon by the above mentioned parties on an arm’s-length basis. The sale and purchase transactions among the listed companies are consummated on terms equivalent to those of unrelated parties. There were no minimum purchase or sales commitments with these affiliated companies.
CINTEL CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 18 - Commitments and Contingencies
(a) | The Company leases its premises under a non-cancellable lease agreement which will expire in August 2009. Future minimum annual payments (exclusive of taxes and insurance) under the lease are $9,189 for the period ended August 31, 2009. Rent expenses paid during the period ended March 31, 2009 and 2008 were $11,439 and $23,699, respectively. |
(b) | The Company is committed to vehicle lease obligations which expire in June, 2010. Future minimum annual payments (exclusive of tax and insurance) under the lease are as follows: |
Years | | Amount | |
2009 | | $ | 42,199 | |
2010 | | | 34,580 | |
2011 | | | 2,149 | |
| | $ | 78,928 | |
(c) | The Company’s Korean subsidiary, PDT, has outstanding guaranty agreements on behalf of affiliated companies. PDT is obligated to perform under these agreements if guarantees of the affiliated companies failed to pay principal and interest payments to the lender when due. Including accrued interest, the maximum potential amount of future (undiscounted) payments under these guaranty agreements is $12 million. |
PDT’s outstanding guaranty agreements were as follows at March 31, 2009:
Guarantee | | Maturity | | Guaranteed For | | Amount |
BKLCD | | January 20, 2012 | | Loan | | $ 3,600,000 |
BKLCD | | September 7, 2009 | | Loan | | $ 2,400,000 |
BKLCD | | June 25, 2009 | | Loan | | $ 515,055 |
Info Space | | February 6, 2009 | | Stand-by L/C | | $ 2,700,000 |
Info Space | | May 5, 2009 | | Stand-by L/C | | $ 2,000,000 |
Note 19 - Cumulative Effect of Changes in Accounting Policy
During 2008, the Company's majority-owned subsidiary, PDT, changed its accounting policy for revenue recognition on the sales of certain manufactured products (machinery and equipment). This policy change was necessary as it related to an amendment of terms in sales with the major customers. In the new policy, the point in revenue recognition time has been moved to a later point in time. Previously, revenue was recognized upon shipment of products; the new policy does not recognize revenue until the products are installed and tested and an acceptance is released by the customer. The Company considers that the new policy better conforms to the terms of sales. Prior year financial statements have been adjusted to reflect the change in revenue recognition timing retroactively to faci litate the comparability with the financial statements as of March 31, 2009 and for the period then ended.
The effect of the changes for the three months ended March 31, 2008, as it was retroactively applied, is as follows:
| | Under new Method | | | Under old Method | | | Effect of Change | |
| | (in thousands) | |
Statement of operation: | | | | | | | | | |
Sales | | $ | 42,448 | | | $ | 52,647 | | | $ | (10,199 | ) |
Cost of sales | | | 40,307 | | | | 50,506 | | | | (10,199 | ) |
Net loss | | | (3,798 | ) | | | (3,796 | ) | | | - | |
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Note on Forward-Looking Statements.
Certain statements in “Management’s Discussion and Analysis or Plan of Operation” below, and elsewhere in this annual report, are not related to historical results, and are forward-looking statements. Forward-looking statements present our expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements frequently are accompanied by such words such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” or the negative of such terms or other words and terms of similar meaning. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements, or timeliness of such results. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this quarterly report. Subsequent written and oral forward looking statements attributable to us or to persons acting in our behalf are expressly qualified in their entirety by the cautionary statements and risk factors set forth below and elsewher e in this annual report, and in other reports filed by us with the SEC.
You should read the following description of our financial condition and results of operations in conjunction with the financial statements and accompanying notes included in this report beginning on page F-1.
Overview
CinTel Corp and its subsidiaries (the “Company”, “we,” “us,” or “our”) are a global provider of semiconductor packaging, display/semiconductor/factory automation related manufacturing equipments and facilities, and CRM/DBM services. Founded in 1997, we evolved from being an internet traffic management (“ITM”) solution provider to a semiconductor-focused company in 2006. We manufacture and supply a broad range of semiconductor packaging products that address the needs of advanced electronic devices and products. We also produce standardized equipments that are utilized for display and semiconductor industries. Our factory automation related manufacturing facilities provide customized in-line distribution systems.
We have established relationships with our customers worldwide such as Samsung Electronics, Hynix Semiconductor, and Fairchild Semiconductor in the semiconductor industry. Our customers in factory automation and display industry include Samsung Electronics, S-LCDSamsung SDI, Samsung Techwin, and Samsung Corning Precision Glass.
We currently have major operations in China and Korea with a production capacity increase planned with several expansions of current operations. We intend to commence a major production expansion project in China in 2009 to become a more rounded total semiconductor solution provider through the transfer of new high-end products and product diversification. In addition, we have built a new manufacturing plant in Korea to increase our production in the semiconductor/display equipment and facility industry.
Background
CinTel Corp. (formerly Link2 Technologies) was incorporated in the State of Nevada on August 16, 1996. The initial business focus was to develop a 3D animation and digital effects studio that would provide high-end 3D animation and digital effects to the music video industry.
On September 30, 2003, Link2 Technologies entered into a definitive Share Exchange Agreement with CinTel Co., Ltd., a Korean corporation ("CinTel Korea") and the shareholders of CinTel Korea. Pursuant to the Share Exchange Agreement, we acquired 100% of the issued and outstanding capital stock of CinTel Korea in exchange for 16,683,300 shares of our common stock. CinTel Korea was founded in 1997 and has provided various Internet Traffic Management solutions to businesses and consumers. All of the business operations were comprised of developing, manufacturing and distributing Internet Traffic Management solutions to businesses and consumers in order to manage and control large traffic.
CinTel Korea introduced Korea's first dynamic server load balancer, and marketed Internet Traffic Management products since its inception, such as the PacketCruz (TM) family of products, iCache, i2one, and Proximator. The Internet Traffic Management solutions were marketed to customers around the world, helping them improve Internet traffic management, service levels (QOS: Quality of Service), and the user experience (QOC: Quality of Content).
In the last three years we have shifted our focus from Internet Traffic Management to becoming a semiconductor and LCD assembly holding company. The company’s focus has included investments in several high growth subsidiaries and divesting some non-performing subsidiaries. CinTel now has holdings that directly manufacture semiconductor packaging, NAND flash memory packaging, LCD assembly, and testing specialists, as well as provide a solution for memory applications for home appliances, semiconductor, TFT-LCD application products and Factory Automation Design.
Our subsidiaries include:
l | Phoenix Semiconductor Telecommunication (Suzhou) located in Suzhou, China, provides semiconductor package products in different groups of Dual, Quad and BGA. |
l | Phoenix Digital Tech located in Kyungki-Do, Korea, provides manufacturing facilities and equipments for LCD, PDP (Plasma Display Panel) and semiconductor production. UB Precision, a subsidiary of Phoenix Digital Tech provides testing products such as LCD/OLED probe stations for display and probe card for semiconductor. |
l | Bluecomm located in Daejeon, Korea, provides solutions for Customer Relationship Management (CRM) and related total solutions for call center outsourcing and Home Service Center hosting. |
l | CinTel Korea located in Seoul, Korea produces and distributes our traditional base products in the Internet Traffic Management (ITM) sector. |
Products
We produce multiple products lines throughout our separate subsidiaries. These product lines focus mainly on the semiconductor and LCD assembly core product lines. Our product line includes a number of related and unrelated products and services as follows:
Phoenix Semiconductor Telecommunication Suzhou (“PSTS”)
PSTS provides all aspects of semiconductor packaging (except foundry of chips) including packaging types of: DIP, SOP, TSSOP, QFP and ETQFP products. Printed Board Assembly (“PBA”) and Wafer. PSTS's main products also include NAND flash memory production.
Printer Board Assembly has been a mainstay of the product lines. During the year this product was phased out and will no longer be offered in this plant.
Phoenix Digital Tech (“PDT”)
Factory Automation Design (FAD) is a service that allows PDT to create cost effective production lines for their customer base. PDT designs and implements Automated Distribution Facilities (ADF) for our customers. These facilities allow reduced labor costs and quality production of high tech products. Computerized automation allows for the systems to be produced in a highly controlled and consistent manner.
PDT produces Scriber & Break in-line systems, Screen Printer and AOI scanning systems for enterprise level customers. In a never-ending effort to improve yield and optimize the wafer manufacturing process, automated optical inspection (AOI) has become an integral part of semiconductor fabrication. The ability to provide both high performance point-to-point motion and extremely smooth constant velocity scanning moves has enabled PDT to become a leading provider of critical motion systems for AOI applications.
PDT’s subsidiary, UB Precision provides testing products such as LCD/OLED probe stations for display and probe card for semiconductor.
Bluecomm
Bluecomm provides customer relationship management services. These services include running of call centers for full service customer support. Bluecomm also provides database management and marketing services for customers that allows customers to outsource all management of these systems. This allows them to provide detailed marketing and database services to their customers with little or no internal staffing.
RESULTS OF OPERATIONS
60;
| | (in thousands USD) | |
| | 03/31/09 | | | 03/31/08 | |
Revenue | | | 26,817 | | | | 62,891 | |
Cost of Sales | | | 25,425 | | | | 60,750 | |
Gross Profit | | | 1,392 | | | | 2,141 | |
Operating Expenses | | | 3,260 | | | | 4,435 | |
Operating Loss | | | 1,868 | | | | 2,294 | |
Net Loss | | | 1,922 | | | | 2,596 | |
The company generated revenues of approximately $26.8 million and approximately $62.9 million for the three months ended March 31, 2009 and 2008, respectively, which reflects a decrease of approximately $36 million. Revenues are comprised of the sale of products, and services.
The gross revenue of PSTS for the three months ended March 31, 2009 was $11.6 million, a 42.0% decrease from $20.1 million for the same period in 2008. The gross revenue of PDT for the three months ended March 31, 2009 including its two subsidiaries were $15.2 million, 50.6% decrease from $30.8 million in 2008. The decrease reflects the impact of the slowing economy and low demand in the semiconductor market.
Bluecomm’s gross revenue for the three months ended March 31, 2009 was $0.1 million, 94% decrease from $1.7 million in 2008. Bluecomm provided customer relationship management services for Pizza Hut Korea including call center operation for customer support, however, the contract with Pizza Hut Korea was terminated in 2008.
The cost of sales for the three months ended March 31, 2009 and 2008 was $25.4 million and $60.7 million, respectively, a decrease of 58.1%,. Our gross margins for the three months ended March 31, 2009 and 2008 was $1.4 million and $2.1 million respectively.
Total operating expenses for the three months ended March 31, 2009 and 2008 totaled approximately $3.3 million and $4.4 million, respectively, resulting in a decrease of $1.1 million or 25.0%.
The operating loss for the three months ended March 31, 2009 and 2008 totaled $1.8million and $2.3 million, respectively. Management anticipates that the company will see operating profit commencing from around late 2009. Management also anticipates that PDT’s operating profit will increase as the production of its factory automationFA division increase its manufacturing capability in its expanded plant.
The net loss for the three months ended March 31, 2009 and 2008 totaled $1.9 million and $2.6 million, respectively.
In summary, the company incurred the net loss mainly due to low operating results of its subsidiaries and their subsidiaries and other losses from non-operating items including interest expenses and foreign currency transaction loss. However, the company expects to see operating profit in the late 2009 based on the increased production driven by the plant expansion and the production line extension of our subsidiaries.
Liquidity and Capital Resources
As of March 31, 2009 our cash balance was $6.8 million compared to $23.5 million at December 31, 2008. Total current assets at Mach 31, 2009 were $89.6 million compared to $101.5 million at December 31, 2008. We currently plan to use the cash balance and cash generated from operations for our growth through operation and facility expansion by our subsidiaries.
For the three months ended March 31, 2009, net cash used in operating activities was $7.5 million as compared to $20.9 million for the three months ended March 31, 2008. The decrease in cash used in operating activities can be attributed to the increase in the account receivable and the decrease in the account payable.
For the three months ended March 31, 2009, net cash used in investing activities was $10.5 million, compared to net cash used in investing activities of $14.0 million for the three months ended March 31, 2008. The cash used in the period ended March 31, 2009, primarily represents acquisition of investments and payments on loan receivables.
Net cash provided by financing activities during the three months ended, March 31,2009 and 2008 was $3.3 million and $33.6 million, respectively, which consisted primarily of the proceeds from notes and principal payment of payables.
Off-Balance Sheet Arrangements
We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.
Significant Accounting Policies
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.
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.
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 when it is readily determinable, with unrealized holding gains and losses excluded from earnings and reported as a separate component of stockholders' equity.
Allowance for credit loss
The allowance for credit losses is management’s estimate of incurred losses in our customer and commercial accounts receivables. Management performs detailed review of individual portfolios to determine if impairment has occurred and to assess the adequacy of the allowance for credit losses, based on historical and current trends and other factors affecting credit losses. When receivables are past due for a period exceeding 2 years, a 100% allowance for credit losses is established without an individual analysis of the customer. A 100% allowance for credit losses is established, in an amount determined to be uncollectible, for the customer whom is not discontinuing operations or is facing financial issues that could result in discontinuance of business based on the assumptions management believes are reasonably likely to occur in fu ture.
On December 31, 2007, the allowance for credit losses was $2.2 million of $21.8 million in accounts receivables and on December 31, 2007, the allowance for credit losses was $1.9 million of $20.3 million of accounts receivables. The allowance for credit losses in 2008 saw an increase of $0.4 million (20.5%) compared to 2007. However, the allowance ratio for credit losses rose from 9.3% to 10.4%. The company expects that the allowance for credit losses will decrease over the long-term.
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 provis ion 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.
Recent Accounting pronouncements
In September 2006, the SEC issued Staff Accounting Bulletin No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements" (“SAB No 108”). SAB No. 108 provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. Under SAB No. 108, the Company should quantify errors using both a balance sheet and income statement approach (“dual approach”) and evaluate whether either approach results in a misstatement that is material when all relevant quantitative and qualitative factors are considered. The adoption of SAB 108 does not have material impact on the Company’s consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS No. 159"), which permits entities to measure financial instruments and certain other items at fair value that are not currently required to be measured at fair value. An entity would report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The decision about whether to elect the fair value option is applied instrument by instrument, with a few exceptions; the decision is irrev ocable; and it is applied only to entire instruments and not to portions of instruments. SFAS No. 159 requires disclosures that facilitate comparisons (a) between entities that choose different measurement attributes for similar assets and liabilities and (b) between assets and liabilities in the financial statements of an entity that selects different measurement attributes for similar assets and liabilities. SFAS No. 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year provided the entity also elects to apply the provisions of SFAS No. 157 "Fair Value Measurements.” Upon implementation, an entity shall report the effect of the first remeasurement to fair value as a cumulative-effect adjustment to the opening balance of retained earnings. Since the provisions of SFAS No. 159 are applied prospectively, any potential impact will depend on the instruments selected for fair value measureme nt at the time of implementation.
In October 2008, the FASB issued FSP 157-3, "Determining the Fair Value of a Financial Asset When the Market for that Asset Is Not Active," which amends SFAS 157 by incorporating "an example to illustrate key considerations in determining the fair value of a financial asset" in an inactive market. FSP 157-3 is effective upon issuance and should be applied to prior periods for which financial statements have not been issued. The adoption of FSP 157-3, effective October 2008 had no impact on the Company's results of operation or financial position.
In December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statements" (“SFAS 160”). SFAS 160 requires all entities to report noncontrolling (i.e. minority) interests in subsidiaries as equity in the Consolidated Financial Statements and to account for transactions between an entity and noncontrolling owners as equity transactions if the parent retains its controlling financial interest in the subsidiary. SFAS 160 also requires expanded disclosure that distinguishes between the interests of the controlling owners and the interests of the noncontrolling owners of a subsidiary. SFAS 160 is effective for the Company’s financial statements for the year beginning on January 1, 2009, and earlier adoption is not permitted. The adoption of SFAS 160 had no material impac t on the Company’s financial condition and results of operations.
In December 2007, the FASB issued Statement No. 141R, (revised 2007) "Business Combinations" ("SFAS 141R"). SFAS 141R replaces the current standard on business combinations and has significantly changed the accounting for and reporting of business combinations in consolidated financial statements. This statement requires an entity to measure the business acquired at fair value and to recognize goodwill attributable to any noncontrolling interests (previously referred to as minority interests) rather than just the portion attributable to the acquirer. The statement will also result in fewer exceptions to the principle of measuring assets acquired and liabilities assumed in a business combination at fair value. In addition, the statement requires payments to third parties for consulting, legal, audit, and similar services associated with an acquisition to be recognized as expenses when incurred rather than capitalized as part of the business combination. SFAS 141R is effective for fiscal years beginning on or after December 15, 2008.
In March 2008, the FASB issued Statement No. 161, "Disclosures about Derivative Instruments and Hedging Activities an Amendment of FASB Statement No. 133" ("SFAS 161"). SFAS 161 amends Statement 133 by requiring expanded disclosures about an entity's derivative instruments and hedging activities, but does not change Statement 133's scope or accounting. This statement requires increased qualitative, quantitative, and credit-risk disclosures. SFAS 161 also amends Statement No. 107 to clarify that derivative instruments are subject to Statement 107's concentration-of-credit-risk disclosures. SFAS 161 is effective for fiscal years beginning on or after November 15, 2008. The adoption of SFAS 161 will require the Company to provide additional disclosures about derivative instruments and hed ging activities beginning January 1, 2009.
In May 2008, the FASB issued SFAS No. 162 ("SFAS 162"), "The Hierarchy of Generally Accepted Accounting Principles." This statement identifies the sources of accoutning principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. This statement will be effective 60 days following the SEC's approval of the PCAOB amendments to AU Section 411, "The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles." The adoption of SFAS 162 had no significant impact on the Company's results of operations and financial position.
In November 2008, the FASB Emerging Issues Task Force ("EITF") issued EITF Issue No. 08-6 ("EITF 08-6"), "Equity Method Investment Accounting Considerations." EITF 08-6 address questions that have risen about the application of the equity method of accounting for investments after the effective date of both SFAS 141(R), "Business Combination", and SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statements". EITF is effective for fiscal years beginning on or after December 15, 2008. The adoption of EITF 08-6 had no significant impact on the Company's results of operations and financial position.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK n/a
ITEM 4T. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (1) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure; and (2) recorded, processed, summarized and reported, within the time periods s pecified in the Commission's rules and forms. There was no change to our internal controls or in other factors that could affect these controls during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
There are no material changes from the risk factors previously disclosed in the Registrant’s Form 10-K filed on April 15, 2009.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Exhibit Number | | Description |
2.1 | | Share Exchange Agreement, dated September 30, 2003, by and among the Company, CinTel Co., Ltd, and the shareholders of CinTel Co., Ltd. (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on September 30, 2003) |
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3.1 | | Articles of Incorporation (Incorporated by reference to the Company’s registration statement on Form SB-2 (File No. 333-100046), filed with the Securities and Exchange Commission on September 24, 2002) |
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3.2 | | Certificate of Amendment to Articles of Incorporation dated April 27, 2001 (Incorporated by reference to the Company’s registration statement on Form SB-2 (File No. 333-119002), filed with the Securities and Exchange Commission on September 15, 2004) |
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3.3 | | Certificate of Amendment to Articles of Incorporation dated October 21, 2003 (Incorporated by reference to the Company’s annual report on Form 10-KSB for the fiscal year ended December 31, 2003, filed with the Securities and Exchange Commission on April 14, 2004) |
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3.4 | | Certificate of Amendment to Articles of Incorporation dated September 13, 2004 (Incorporated by reference to the Company’s registration statement on Form SB-2 (File No. 333-119002), filed with the Securities and Exchange Commission on September 15, 2004) |
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3.5 | | Bylaws (Incorporated by reference to the Company’s registration statement on Form SB-2 (File No. 333-100046), filed with the Securities and Exchange Commission on September 24, 2002) |
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4.1 | | Standby Equity Distribution Agreement, dated August 4, 2004, between Cornell Capital Partners, L.P. and the Company (Incorporated by reference to the Company’s registration statement on Form SB-2 (File No. 333-119002), filed with the Securities and Exchange Commission on September 15, 2004) |
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4.2 | | $240,000 principal amount Compensation Debenture, due August 4, 2007, issued to Cornell Capital Partners, L.P., in connection with the Standby Equity Distribution Agreement (Incorporated by reference to the Company’s registration statement on Form SB-2 (File No. 333-119002), filed with the Securities and Exchange Commission on September 15, 2004) |
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4.3 | | Convertible Note in the principal amount of $40,000 issued to Sang Yong Oh (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 21, 2005) |
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4.4 | | Convertible Note in the principal amount of $400,000 issued to Tai Bok Kim (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 21, 2005) |
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4.5 | | Convertible Note in the principal amount of $9,640 issued to Meung Jun Lee (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005) |
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4.6 | | Convertible Note in the principal amount of $28,930 issued to Jin Yong Kim (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005) |
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4.7 | | Convertible Note in the principal amount of $48,300 issued to Su Jung Jun (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005) |
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4.8 | | Convertible Note in the principal amount of $48,300 issued to Se Jung Oh (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005) |
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4.9 | | Convertible Note in the principal amount of $48,300 issued to Sun Kug Hwang (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005) |
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4.10 | | Convertible Note in the principal amount of $192,864 issued to Woo Young Moon (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005) |
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4.11 | | Convertible Note in the principal amount of $336,000 issued to Joo Chan Lee (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005) |
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4.12 | | Convertible Note in the principal amount of $483,000 issued to Sang Ho Han (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005) |
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4.13 | | Convertible Note in the principal amount of $483,000 issued to Jun Ro Kim (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005) |
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4.14 | | Convertible Note in the principal amount of $483,000 issued to Tai Bok Kim (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005) |
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| | Convertible Note in the principal amount of $2,082,500 issued to Tai Bok Kim (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005) |
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4.16 | | Convertible Note in the principal amount of $280,000 issued to Joo Chan Lee (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005) |
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4.17 | | Convertible Note in the principal amount of $281,065 issued to Sang Yong Oh (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005) |
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4.18 | | Convertible Note in the principal amount of $246,400 issued to JungMi Lee (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005) |
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4.19 | | Convertible Note in the principal amount of $59,172 issued to Sung Min Chang (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005) |
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4.20 | | Convertible Note in the principal amount of $246,400 issued to Eun Suk Shin (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005) |
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4.21 | | Convertible Note in the principal amount of $492,800 issued to Overnet Co., Ltd. (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005) |
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4.22 | | Convertible Note in the principal amount of $98,620 issued to Yeun Jae Jo (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005) |
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4.23 | | Convertible Note in the principal amount of $985,950 issued to Equinox Partners Inc. (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005) |
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4.24 | | Convertible Note in the principal amount of $788,950 issued to Kei Wook Lee (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005) |
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4.25 | | Convertible Note in the principal amount of $492,800 issued to SeokKyu Hong (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 30, 2005) |
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4.26 | | Convertible Note in the principal amount of $197,200 issued to Moon Soo Park (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 30, 2005) |
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10.1 | | Securities Purchase Agreement dated October 17, 2005 by and among CinTel Corp. and Sang Yon Oh (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 21, 2005) |
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10.2 | | Securities Purchase Agreement dated October 17, 2005 by and among CinTel Corp. and Tai Bok Kim (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 21, 2005) |
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10.3 | | Securities Purchase Agreement dated November 17, 2005 by and among CinTel Corp. and Meung Jun Lee (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005) |
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10.4 | | Securities Purchase Agreement dated November 17, 2005 by and among CinTel Corp. and Jin Yong Kim (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005) |
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10.5 | | Securities Purchase Agreement dated November 17, 2005 by and among CinTel Corp. and Su Jung Jun (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005) |
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10.6 | | Securities Purchase Agreement dated November 17, 2005 by and among CinTel Corp. and Se Jung Oh (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005) |
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10.7 | | Securities Purchase Agreement dated November 17, 2005 by and among CinTel Corp. and Sun Kug Hwang (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005) |
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10.8 | | Securities Purchase Agreement dated November 17, 2005 by and among CinTel Corp. and Woo Young Moon (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005) |
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10.9 | | Securities Purchase Agreement dated November 17, 2005 by and among CinTel Corp. and Joo Chan Lee (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005) |
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10.10 | | Securities Purchase Agreement dated November 17, 2005 by and among CinTel Corp. and Sang Ho Han (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005) |
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10.11 | | Securities Purchase Agreement dated November 17, 2005 by and among CinTel Corp. and Jun Ro Kim (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005) |
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10.12 | | Securities Purchase Agreement dated November 17, 2005 by and among CinTel Corp. and Tai Bok Kim (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005) |
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10.13 | | Securities Purchase Agreement dated December 15, 2005 by and among CinTel Corp. and Tai Bok Kim (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005) |
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10.14 | | Securities Purchase Agreement dated December 15, 2005 by and among CinTel Corp. and Joo Chan Lee (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005) |
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10.15 | | Securities Purchase Agreement dated December 15, 2005 by and among CinTel Corp. and Sang Yong Oh (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005) |
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10.16 | | Securities Purchase Agreement dated December 15, 2005 by and among CinTel Corp. and JungMi Lee (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005) |
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10.17 | | Securities Purchase Agreement dated December 15, 2005 by and among CinTel Corp. and Sung Min Chang (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005) |
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10.18 | | Securities Purchase Agreement dated December 15, 2005 by and among CinTel Corp. and Eun Suk Shin (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005) |
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10.19 | | Securities Purchase Agreement dated December 15, 2005 by and among CinTel Corp. and Overnet Co., Ltd. (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005) |
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10.20 | | Securities Purchase Agreement dated December 15, 2005 by and among CinTel Corp. and Yeun Jae Jo (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005) |
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10.21 | | Securities Purchase Agreement dated December 15, 2005 by and among CinTel Corp. and Equinox Partners Inc. (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005) |
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10.22 | | Securities Purchase Agreement dated December 16, 2005 by and among CinTel Corp. and Kei Wook Lee (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005) |
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10.23 | | Securities Purchase Agreement dated December 26, 2005 by and among CinTel Corp. and SeokKyu Hong (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 30, 2005) |
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10.24 | | Securities Purchase Agreement dated December 26, 2005 by and among CinTel Corp. and Moon Soo Park (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 30, 2005) |
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10.25 | | Distribution Agreement dated March 15, 2006 among CinTel Corp. and InterSpace Computers, Inc. (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on May 3, 2006) |
10.26 | | Convertible Bonds Subscription Agreement between the Company and Axlon Corporation dated October 24, 2006 (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 31, 2006) |
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10.27 | | Convertible Bonds Subscription Agreement between the Company and Emerging Memory & Logic Solutions, Inc. dated October 24, 2006 (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 31, 2006) |
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10.28 | | Convertible Bonds Subscription Agreement between the Company and KTB China Optimum Fund dated October 24, 2006 (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 31, 2006) |
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10.29 | | Convertible Bonds Subscription Agreement between the Company and STS Semiconductor & Telecommunications Co. Ltd. dated October 24, 2006 (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 31, 2006)Stock Purchase Agreement by and between CinTel Corp and STS Semiconductor & Telecommunications Co., Ltd. (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 3, 2006) |
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10.30 | | Stock Purchase Agreement by and between CinTel Corp. and STS Semiconductor & Telecommunications Co. Ltd. (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 3, 2007) |
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10.31 | | Convertible Bonds Subscription Agreement entered into as of March 15, 2007 with Woori Private Equity Fund (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on March 15, 2007) |
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10.32 | | Share Subscription Agreement dated August 27, 2007 by and between Phoenix Digital Tech Co. Ltd. (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on August 31, 2007) |
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10.33 | | Share Subscription Agreement dated as of October 30, 2007 (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 5, 2007) |
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10.34 | | Amended CB Subscription Agreement dated November 18, 2008 (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2008) |
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14.1 | | Code of Ethics (Incorporated by reference to the Company’s Form 10-K filed with the Securities and Exchange Commission on April 17, 2006) |
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16.1 | | Letter on change in certifying accountant (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission October 11, 2007) |
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21.1 | | Subsidiaries (Incorporated by reference to the Company’s Form 10-K filed with the Securities and Exchange Commission on April 17, 2007) |
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31.1* | | Certification by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act |
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31.2* | | Certification by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act |
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32.1* | | Certification by Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code |
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32.2* | | Certification by Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code |
* Filed herewith.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CinTel Corp. |
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Date: June 17, 2010 | By: | /s/ Dave Kyung Han |
| | Dave Kyung Han |
| | President, Chief Executive Officer |
| | and Director (Principal Executive Officer) |
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Date: June 17, 2010 | By: | /s/ Joo Chan Lee |
| | Joo Chan Lee |
| | Chief Financial Officer (Principal Financial and Accounting Officer) |
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