Chun Can Capital (CNCN) 10QSB/A 2007 Q1 Quarterly report (small business) (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-QSB/A

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2007

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

FOR THE TRANSITION PERIOD FROM __________ TO __________

COMMISSION FILE NUMBER ________________________________

CINTEL CORP.

(Exact name of small business issuer in its charter)

NEVADA (State or other jurisdiction of incorporation or organization) 52-2360156 (I.R.S. Employer Identification No.)

9900 Corporate Campus Drive, Suite 3000, Louisville, KY 40223

(Address of principal executive offices)

Issuer’s telephone number: (502) 657-6077

WITH COPIES TO:

Gregory Sichenzia, Esq.

Sichenzia Ross Friedman Ference LLP

1065 Avenue of the Americas

New York, New York 10018

(212) 930-9700

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of May 21, 2007, the issuer had 88,625,196 outstanding shares of Common Stock, $.001 par value.

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

EXPLANATORY NOTE

This quarterly report on Form 10-QSB/A ("Form 10-QSB/A") is being filed to amend our quarterly report on Form 10-QSB for the fiscal quarter ended March 31, 2007 (the "Original Form 10-QSB"), which was originally filed with the Securities and Exchange Commission ("SEC") on May 22, 2007. Accordingly, pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, the Form 10-QSB/A contains current dated certifications from the Principal Executive Officer and the Principal Financial Officer. The Form 10-QSB/A is being amended to reflect certain changes in opening retained earnings and comparative figures.

We have not updated the information contained herein for events occurring subsequent to May 22, 2007, the filing date of the Original Form 10-QSB.

TABLE OF CONTENTS

	Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements	2
Item 2. Management’s Discussion and Analysis or Plan of Operation	21
Item 3. Controls and Procedures	25
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	25
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3. Defaults Upon Senior Securities	25
Item 4. Submission of Matters to a Vote of Security Holders	25
Item 5. Other Information	25
Item 6. Exhibits	25
SIGNATURES	28

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Cintel Corp. and Subsidiaries

We have reviewed the accompanying consolidated balance sheets of Cintel Corp. and Subsidiaries (the "Company") as of March 31, 2007 and 2006 and the related consolidated statements of operations and comprehensive loss, stockholders' equity and cash flows for the three month periods ended March 31, 2007 and 2006. These interim consolidated financial statements are the responsibility of the Company's management.

We conducted our review in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to such interim financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred losses since inception which raises substantial doubt about the Company's ability to continue as a going concern. Management's plan regarding this matter is also described in Note 1 to the financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Toronto, Canada  May 11, 2007 except as to note 14 which is as of June 7, 2007  CHARTERED ACCOUNTANTS

-1-

CINTEL CORP. AND SUBSIDIARIES

Consolidated Balance Sheets

March 31, 2007 and 2006

(Unaudited)

		Restated			Restated
		(note 19)			(Note 18)
		2007			2006
ASSETS
Current Assets
Cash and cash equivalents (note 3)	$	4,958,888		$	1,793,396
Short tern investment		-			291,427
Accounts receivable - Trade (less - Allowance for doubtful accounts of $1,130,408; 2006 - $1,087,980)		5,829,031			3,340,302
Inventory (note 4)		6,959,950			489,017
Prepaid and other current assets		1,048,214			728,995
Current portion - Loans receivable (note 5)		212,600			154,358
Total Current Assets		19,008,683			6,797,495
Loan receivable (note 5)		151,508			-
Investments (note 7)		2,435,886			2,572,624
Investments in Available for Sale Securities (note 8)		4,916			51,726
Property, Plant and Equipment, Net (note 9)		30,116,133			552,312
Land Right (note 10)		356,775			-
Goodwill		7,740,271			-
Total Assets	$	59,814,172		$	9,974,157
LIABILITIES
Current Liabilities
Accounts payable - Trade	$	16,044,058		$	2,532,854
Advances from Shareholder		282,758			-
Deferred revenue (note 19)		-			169,081
Current portion - Loans payable (note 12)		10,746,058			666,789
Total Current Liabilities		27,072,874			3,368,724
Accrued Severance		88,449			74,788
Loans Payable, less current portion (note 12)		4,206,219			39,121
Convertible Debentures (note 13)		15,284,295			8,853,191
Non-Controlling Interest		8,655,613			-
Total Liabilities		55,307,450			12,335,824
Commitments and Contingencies (note 16)
STOCKHOLDERS' EQUITY (DEFICIT)
Capital Stock (note 14)		88,299			42,379
Authorized 300,000,000 common shares, par value $0.001 per share Issued
88,299,896 common shares (42,379,354 in 2006)
Additional Paid-in Capital		14,437,328			5,351,058
Less - Treasury Stock		(5,630	)		(5,630	)
Accumulated Other Comprehensive (Loss) Income		(214,496	)		250,118
Accumulated (Deficit)		(9,798,779	)		(7,999,592	)
Total Stockholders' Equity (Deficit)		4,506,722			(2,361,667	)
Total Liabilities and Stockholders' Equity (Deficit)	$	59,814,172		$	9,974,157

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

-2-

CINTEL CORP. AND SUBSIDIARIES

Consolidated Statements of Operations and Comprehensive Loss

Three Months Ended March 31, 2007 and 2006

(Unaudited)

	Restated			Restated
	(Note 19)			(Note 18)
	2007			2006
Revenue
Finished goods	$	16,484,917		$	30,389
Merchandise		211,446			2,349,431
Services		978			28,032
Total Revenues		16,697,341			2,407,852
Cost of Revenues:
Finished goods		16,160,910			37,493
Merchandise		207,639			2,264,430
Total Cost of Revenues		16,368,549			2,301,923
Gross Profit		328,792			105,929
Expenses
General and administrative		416,108			407,694
Research and development		10,630			18,641
Depreciation and amortization		100,397			51,414
Total Expenses		527,135			477,749
(Loss) from Operations		(198,343	)		(371,820	)
Other Income (Expense)
Interest and other income		133,349			109,416
Interest expense and amortization of deferred financing fees		(343,152	)		(12,073	)
Loss on disposal of equipment		-			(30,000	)
Total Other Income (Expense)		(209,803	)		(67,343	)
(Loss) Before Income Taxes and Non-Controlling Interest		(408,146	)		(304,477	)
Income taxes - current (note 6)		-			23,432
Non-Controlling Interest		(66,909	)		-
		(66,909	)		(23,432	)
Net (Loss)		(341,237	)		(327,909	)
Comprehensive Income (Loss)
Foreign currency translation		(47,658	)		241,166
Total Comprehensive Loss before Non-controlling Interest		(388,895	)		(86,743	)
Foreign Currency Translation Adjustment - Non-controlling Interest		3,968			-
Total Comprehensive Loss	$	(384,927	)	$	(86,743	)
Basic and Fully Diluted Loss per Share (note 14)	$	0.00		$	0.00
Basic and Diluted Weighted Average Number of Shares Outstanding During the Period		87,846,563			42,379,354

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

-3-

CINTEL CORP. AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity

Periods Ended March 31, 2007 and 2006

(Unaudited)

	Number of Shares		Capital Stock		Additional Paid in Capital		Treasury Stock			Cumulative Other Comprehensive Loss			Accumulated Deficit			Total Stockholders' Equity
Balance, January 1, 2006		42,379,354	$	42,378	$	5,351,058	$	(5,630	)	$	121,739		$	(7,269,855	)	$	(1,760,310	)
Adjustment due to restatement (note 18)		-		-		-		-			(110,755	)		(267,801	)		(378,556	)
Adjustment due to restatement (note 18)		-		-		-		-			(2,032	)		(134,026	)		(136,058	)
		42,379,354		42,378		5,351,058		(5,630	)		8,952			(7,671,682	)		(2,274,924	)
Foreign currency translation adjustment		-		-		-		-			241,166			-			241,166
Net loss for the period		-		-		-		-			-			(221,695	)		(221,695	)
Adjustment due to restatement (note 18)		-		-		-		-			-			(78,472	)		(78,472	)
Adjustment due to restatement (note 18)		-		-		-		-			-			(27,743	)		(27,743	)
Balance, March 31, 2006		42,379,354	$	42,378	$	5,351,058	$	(5,630	)	$	250,118		$	(7,999,592	)	$	(2,361,668	)
Balance, January 1, 2007		87,619,896	$	87,619	$	14,319,408	$	(5,630	)	$	(170,806	)	$	(9,343,747	)		$4,886,842
Adjustment due to restatement (note 18)		-		-		-		-			-			(113,795	)		(113,795	)
		87,619,896		87,619		14,319,408		(5,630	)		(170,806	)		(9,457,542	)		4,773,047
Common shares issued for consulting services (note 14)		580,000		580		98,020		-			-			-			98,600
Common shares issued for employee remuneration (note 14)		100,000		100		19,900		-			-			-			20,000
Foreign currency translation adjustment		-		-		-		-			(43,690	)		-			(43,690	)
Net loss for the period		-		-		-		-			-			(455,032	)		(455,032	)
Adjustment due to restatement (note 19)		-		-		-		-			-			113,795			113,795
Balance, March 31, 2007		88,299,896	$	88,299	$	14,437,328	$	(5,630	)	$	(214,496	)	$	(9,798,779)		$	4,506,720

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

-4-

CINTEL CORP. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Three Months Ended March 31, 2007 and 2006

(Unaudited)

	Restated (Note 19) 2007			Restated (Note 18) 2006
Cash Flows from Operating Activities
Net (loss)	$	(341,237	)	$	(327,909	)
Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		972,173			51,414
Non-controlling interest		(66,909	)		-
Amortization of financing fees		90,000			30,000
Common stock issued for consulting services		118,600			-
		772,627			(246,495	)
Net changes in assets and liabilities
Accounts receivable - Trade		(208,339	)		(2,269,479	)
Inventory		(1,305,360	)		(23,273	)
Prepaid and other current assets		20,410			(353,849	)
Accounts payable - Trade		7,879,704			1,682,146
Deferred revenue		(113,793	)		33,024
Accrued severance		(8,955	)		2,781
Net Cash Flows Provided by (Used in) Operating Activities		7,036,294			(1,175,145	)
Cash Flows from Investing Activities
Acquisition of investments, net		(498,547	)		(290,354	)
Loans receivable		(65,892	)		(153,789	)
Acquisition of plant and equipment		(5,047,672	)		(1,244	)
Change in non-controlling interest		(3,968	)		-
Net Cash Flows Used in Investing Activities		(5,616,079	)		(445,387	)
Cash Flows from Financing Activities
Loans payable		(1,037,481	)		(9,517	)
Advances from shareholder		282,758			-
Net Cash Flows Used in Financing Activities		(754,723	)		(9,517	)
Foreign Exchange on Cash and Cash Equivalents		(43,692	)		(66,004	)
Net Increase (Decrease) in Cash and Cash Equivalents		621,800			(1,696,053	)
Cash and Cash Equivalents - Beginning of Period		4,337,088			3,489,449
Cash and Cash Equivalents - End of Period	$	4,958,888		$	1,793,396
Supplemental Disclosures of Cash Flow Information:
Interest and Income Taxes Paid-
Interest	$	253,152		$	12,073
Income taxes	$	-		$	23,432

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

-5-

CINTEL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2007 and 2006

(Unaudited)

1. Operations and Business

Cintel Corp. and Subsidiaries, formerly Link2 Technologies, Inc. ("the Company"), was incorporated in the State of Nevada on August 16, 1996 and on April 24, 2001 changed its name from "Great Energy Corporation International" to Link2 Technologies, Inc. On September 30, 2003 the Company changed its name to Cintel Corp.

On September 30, 2003, the Company entered into a definitive Share Exchange Agreement (the "Agreement") with Cintel Co., Ltd., ("Cintel Korea") a Korean corporation and its shareholders. The Agreement provided for the acquisition by the Company from the shareholders of 100% of the issued and outstanding capital stock of Cintel Korea. In exchange, the shareholders of Cintel Korea received 16,683,300 shares of the Company. As a result, the shareholders of Cintel Korea controlled 82% of the Company. While the Company is the legal parent, as a result of the reverse-takeover, Cintel Korea became the parent company for accounting purposes.

Upon completion of the share exchange, the business operations of Cintel Korea constituted virtually all of the business operations of the Company. Cintel Korea develops network solutions to address technical limitations to the Internet. Cintel Korea has developed what it believes is the first Korean server load balancing technology. Cintel Korea is now focused on the development of advanced solutions for Internet traffic management. The business operations of Cintel Korea are located in Seoul, Korea.

On October 30, 2006, the Company entered into an Equity Purchase Agreement with STS Semiconductor & Telecommunications Co., Ltd. ("STS"), a Korean corporation for the acquisition of 51% of the total equity of Phoenix Semiconductor Telecommunication (Suzhou) Co., Ltd. ("PSTS") for an aggregate purchase price of $16,500,000. The purchase price was paid from the proceeds of Cintel's convertible bonds financing pursuant to which the Company sold an aggregate of $15,284,295 principle amount in convertible bonds.

PSTS conducts its operations in the Wujiang Economic Development Zone, Jinagsu, People's Republic of China ("PRC"). The Company was incorporated on March 2, 2004, without share capital, pursuant to the commercial law of the PRC to engage in the business of manufacturing semiconductor and other electrical components for sale to the Korean market.

-6-

CINTEL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2007 and 2006

(Unaudited)

2. Summary of Significant Accounting Policies

The accounting policies of the Company are in accordance with generally accepted accounting principles of the United States of America, and their basis of application is consistent. Outlined below are those policies considered particularly significant:

a) Basis of Financial Statement Presentation

These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the requirement of item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of the results that may be expected for a full year. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006, as filed with the Securities and Exchange Commission ("SEC").

b) Basis of Consolidation

The consolidated financial statements of the Company included the financial results of Cintel Corp., Cintel Korea and PSTS. 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.

The acquisition of PSTS has been accounted for by the purchase method, with the net assets of PSTS brought forward at their fair market value basis.

c) Unit of Measurement

The US dollar has been used as the unit of measurement in these financial statements.

-7-

CINTEL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2007 and 2006

(Unaudited)

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

d) Use of Estimates

Preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and related notes to financial statements. These estimates are based on management's best knowledge of current events and actions the Company may undertake in the future. Actual results may ultimately differ from estimates, although management does not believe such changes will materially affect the financial statements in any individual year.

e) Research and Development

Research and development costs are expensed as incurred. Research and development expenses consist primarily of salaries and subcontracting cost.

f) Revenue Recognition

For finished goods, the Company recognizes revenue when there is a definitive sales agreement, and upon shipment of products when title is passed and the amount collectible can reasonably be determined.

For merchandise sales, the Company recognizes revenue upon shipment of products when title is passed and the amount collectible can reasonably be determined.

For the service revenues, the Company recognizes revenue when services are rendered.

g) Cash and Cash Equivalents

Cash includes currency, cheques issued by others, other currency equivalents, current deposits and passbook deposits held by financial institutions. Cash equivalents include securities and short-term money market instruments that can be easily converted into cash. The investments that mature within three months from the investment date are also included as cash equivalents.

h) Investments

Investments in securities are recorded in accordance with Statement of Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities". Investments in available for sale 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. Investments in trading securities are recorded at fair value. Unrealized holding gains and losses from investments are excluded from earnings and reported as a separate component of stockholders' equity.

Investments subject to significant influence have been recorded using the equity method.

-8-

CINTEL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2007 and 2006

(Unaudited)

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

i) Inventories

Raw material and supplies are stated at the lower of cost or market value, using the first in first out weighted average cost method.

Work-in-progress is stated at the lower of cost or market value, using the first in first out weighted average cost method. Net realizable value is determined by deducting applicable selling expenses from the product selling price.

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

j) Property, Plant and Equipment

Property, plant and equipment are stated at cost. Major renewals and betterments are capitalized and expenditures for repairs and maintenance are charged to expense as incurred. Upon disposition of an asset, its cost and related accumulated depreciation or amortization are removed from the accounts, and any resulting gain or loss is recognized. Depreciation, based on the estimated useful lives of the assets, is provided as follows:

Buildings	20 years	straight line
Equipment	5 - 10 years	straight line
Measuring equipment	5 years	straight line
Furniture and fixtures	5 years	straight line
Vehicles	5 years	straight line
Software	5 years	straight line
Landscaping	5 years	straight line

k) Land Right

Land right is stated at cost. Amortization, based on the estimated useful life of the asset, is provided on a straight line basis over 50 years.

l) Government Grants

Government grants are recognized as income over the periods necessary to match them with the related costs that they are intended to compensate.

-9-

CINTEL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2007 and 2006

(Unaudited)

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

m) Currency Translation

The Company's functional currencies are the Korean won and the Chinese RMB. Adjustments to translate those statements into United States dollars at the balance sheet date are recorded in other comprehensive income (loss).

Foreign currency transactions of the Korean and Chinese operations have been translated to Korean Won and Chinese RMB at the rate prevailing at the time of the transaction. Realized foreign exchange gains and losses have been charged to income in the period.

n) Financial Instruments

Fair values of cash equivalents, short-term and long-term investments and short-term debt approximate cost. The estimated fair values of other financial instruments, including debt, equity and risk management instruments, have been determined using market information and valuation methodologies, primarily discounted cash flow analysis. These estimates require considerable judgment in interpreting market data, and changes in assumptions or estimation methods could significantly affect the fair value estimates.

o) Income Tax

The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

p) Earnings or Loss per Share

The Company adopted FAS No.128, "Earnings per Share" which requires disclosure on the financial statements of "basic" and "diluted" earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to stock options, warrants, and convertible debentures for each period.

-10-

CINTEL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2007 and 2006

(Unaudited)

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

q) 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 receivables, the Company determines, on a continuing basis, the probable losses and sets up a provision for losses based on the estimated realizable value.

Concentration of credit risk arises when a group of clients having a similar characteristic such that their ability to meet their obligations is expected to be affected similarly by changes in economic conditions.

For the period ended March 31, 2007 PSTS had two major customers as follows:

	% of Total Revenue
STS		64	%
WE-Tech Corporation ("We-Tech")		15	%

r)Impairment of Long-lived Assets

The Company evaluates the recoverability of long-lived assets and the related estimated remaining lives when events or circumstances lead management to believe that the carrying value of an asset may not be recoverable. For the periods ended March 31, 2007 and 2006, no events or circumstances occurred for which an evaluation of the recoverability of long-lived assets was required.

-11-

CINTEL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2007 and 2006

(Unaudited)

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

s) Recently Issued Accounting Standards

In February 2007, the Financial Accounting Standards Board ("FASB" issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS No. 159"), which permits entities to measure many 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 irrevocable; 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 measurement at the time of implementation. The Company is currently evaluating the impact, if any, adoption of SFAS No. 159 will have on its financial statements.

3. Cash and Cash Equivalents

Cash and cash equivalent includes restricted cash in the amount of $80,046 (2006 - nil), which has been pledged as collateral on performance bonds as required by the Chinese Customs Department. A deposit of $2,836,087 (2006 - nil) has been pledged as security for a bank loan, as described in note 12.

-12-

CINTEL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2007 and 2006

(Unaudited)

4. Inventory

	2007			2006
Raw materials	$	5,319,234		$	154,312
Work-in-progress		518,734			-
Supplies		911,486			-
Merchandise		210,496			334,705
	$	6,959,950		$	489,017
5. Loans Receivable
Loans receivable to unrelated Korean companies include the following;
		2007			2006
Loan receivable #1	$	212,600		$	-
Loan receivable #2		-			51,450
Loan receivable #3		-			102,908
Loan receivable #4		151,508			-
		364,108			154,358
Less: current portion		(212,600	)		(154,358	)
	$	151,508		$	-

Loan receivable #1 to a private Korean company bears interest at 17% per annum and is guaranteed by the major shareholder of the debtor. Principal and interest are repayable upon maturity on June 30, 2007. The loan was repaid on April 25, 2007 subsequent to the period end.

Loan receivable #2 to a private Korean company is unsecured, non-interest bearing and matures on May 12, 2006. The loan was repaid during 2006.

Loan receivable #3 to the chief executive officer of the indebted company per loan receivable #2 is unsecured, bears interest at 6% per annum, and is due on demand. The loan was repaid during 2006.

Loan receivable #4 to a private Chinese company is unsecured, bears interest at 7%, payable quarterly, interest only, and matures on January 3, 2009. The loan is guaranteed by the shareholders of the debtor.

-13-

CINTEL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2007 and 2006

(Unaudited)

6. Income Taxes

The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting for Income Taxes". This Standard prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates. The effects of future changes in tax laws or rates are not anticipated. Corporate income tax rates applicable to the Korean subsidiary in 2007 and 2006 are 16.5 percent of the first 100 million Korean Won ($105,700) of taxable income and 29.7 percent on the excess. For the United States operation, the corporate tax rate is approximately 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 subsidiary can be carried forward for five years to offset future taxable income. The U.S. tax losses can be carried forward for fifteen years to offset future taxable income. The company has accumulated approximately $7,235,000 and $1,400,000of taxable losses in its Korea and US operations, respectively, which can be used to offset future taxable income. The utilization of the Korean losses expires in years 2008 to 2011 and the US losses in years 2019 to 2021.

Under SFAS No. 109 income taxes are recognized for the following: a) amount of tax payable for the current year, and b) deferred tax liabilities and assets for future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. The Company has deferred income tax assets arising from research and development expenses. For accounting purposes, these amounts are expenses when incurred. Under Korean tax laws, these amounts are deferred and amortized on a straight-line basis over 5 years.

For the first two profitable taxation years, taxable income of the Company's, Chinese subsidiary PSTS is exempt from income taxes. Taxable income in the third to fifth profitable taxation years will be taxed at 5% and subsequently the applicable tax rate will be 10%.

The taxable income is determined by off-setting the income for tax purpose of the period with tax losses carried forward from prior years. Tax losses can be carried forward for five years. The Company provided a valuation allowance equal to the deferred tax amounts resulting from the tax losses as it is not more likely than not that they will be realized. The Company has accumulated approximately $2,446,000 of taxable losses, which can be used to offset future taxable income. The utilization of the losses expires in 2009 ($532,000), 2010 ($1,777,000) and 2012 ($137,000).

The Company has deferred income tax assets as follows:

Deferred income tax assets	2007			2006
Research and development expenses amortized over 5 years for tax purposes	$	267,000		$	258,646
Other timing differences		253,000			(53,810	)
Net operating loss carryforwards		2,287,000			1,799,654
		2,807,000			2,004,490
Valuation Allowance		(2,807,000	)		(2,004,490	)
	$	-		$	-

-14-

CINTEL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2007 and 2006

(Unaudited)

7. Investments

		2007		2006
Convertible Debenture	$	498,547	$	-
Equity Investment in Global Assets		1,937,339		2,572,624
	$	2,435,886	$	2,572,624

The convertible debenture issued by one of the Company's customer bears interest at 5.2% annum, and matures on January 30, 2010. The bond is convertible to 10,000 common shares at approximately $50 per share, representing 16% of the total outstanding common stock of the customer. The company can exercise the conversion right any time during the period from January 20, 2007 to 30 days prior to January 30, 2010.

Investment in Global Assets represents 500,000 shares, 20% ownership in a private Korean company, Global Assets Inc. The investment has been accounted for by the equity method. Carrying cost of the investment has been written off to the net equity balance of the investee.

Summarized financial information of Global assets Inc. based on the March 31, 2006 audited statements are as follows:

		100%		20%
Total Assets	$	9,849,750	$	1,969,950
Total Liabilities		53,706		10,741
Total Equities		9,796,044		1,959,209
Gross Revenue		2,036,556		407,311
Net Income		81,965		16,393

8. Investment in Available for Sale Securities

Investment in Available for Sale Securities represents minority interests in private Korean companies.

-15-

CINTEL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2007 and 2006

(Unaudited)

9. Property, Plant and Equipment, Net

Equipment is comprised as follows:

		Cost		2007 Accumulated Depreciation		Cost		2006 Accumulated Depreciation
Buildings		11,087,123		1,039,062		-		-
Furniture and fixtures		873,945		295,523		69,725		33,757
Equipment		22,392,529		4,591,665		882,442		642,223
Measuring equipment		1,824,300		425,572		-		-
Vehicles		165,097		54,034		17,281		864
Software		754,682		616,653		715,833		456,125
Landscaping		61,378		20,412		-		-
	$	37,159,054	$	7,042,921	$	1,685,281	$	1,132,969
Net carrying amount			$	30,116,133			$	552,312

10. Land Right

The Company has an agreement with the government of the PRC 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. The Company has the right to apply for renewal by notifying the government no later than six months prior to the expiry of the agreement. The government has no obligation to approve the renewal application.

			2007				2006
			Accumulated				Accumulated
	Cost		Depreciation		Cost		Depreciation
	$	369,224	$	12,449	$	-	$	-
Net carrying amount			$	356,775			$	-

11. Advances from Shareholder

The advances from the chief executive officer, who is also a 15% shareholder of the company, are non-interest bearing and unsecured. The advances were repaid on maturity on May 3, 2007.

-16-

CINTEL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2007 and 2006

(Unaudited)

12. Loans Payable

	Current		Long-term			2007 Total			2006 Total
Bank loan	$	-	$	-		$	-		$	617,430
Promissory note		39,000		-			39,000			39,000
Note payable		-		-			-			6,380
Government loans		10,481		20,966			31,447			40,589
Discount of interest-free government loans		-		(3,268	)		(3,268	)		(8,415	)
Vehicle Loan		-		-			-			10,926
Industrial and Commercial Bank of China (Loan #1)		3,234,893		-			3,234,893			-
Industrial and Commercial Bank of China (Loan #2)		1,940,250		-			1,940,250			-
Industrial and Commercial Bank of China (Loan #3)		2,730,811		-			2,730,811			-
China Construction Bank (Loan #1)		1,790,623		2,688,521			4,479,144			-
China Construction Bank (Loan #2)		1,000,000		1,500,000			2,500,000			-
	$	10,746,058	$	4,206,219		$	14,952,277		$	705,910

Promissory Note

The promissory note is non-interest bearing, unsecured, and due on demand.

Government Loans

The loan is non-interest bearing, unsecured, repayable in annual payments of $10,481 and matures in October 2009.

Industrial and Commercial Bank of China Loan #1

The loan is unsecured, payable monthly interest only at 6.14% per annum and matured April 18, 2007. This loan was repaid at maturity.

Industrial and Commercial Bank of China Loan #2

The loan is unsecured, payable monthly interest only at 6.44% per annum and matures June 20, 2007.

Industrial and Commercial Bank of China Loan #3

The loan is payable monthly interest only at 5.68% per annum, matured April 20, 2007 and is secured by a cash deposit of $2836,087, as described in note 3. This loan was repaid at maturity.

-17-

CINTEL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2007 and 2006

(Unaudited)

12. Loans Payable (cont'd)

China Construction Bank loans

China Construction Bank Loan # 1 bears interests at China Construction Bank's prime rate, matures in July 2009, and is repayable in quarterly installments of $447,551 commencing October 29, 2006.

China Construction Bank Loan # 2 bears interests at LIBOR plus 1.18%, matures in July 2009, and is repayable in quarterly installments of $250,000 commencing October 29, 2006.

The loans are guaranteed by property, plant and equipment of PSTS with a net book value of $25,172,616 as described in note 9.

Future principal repayments of the loans payable is comprised as follows:

2008	$	2,790,204
2009		1,405,534
2010		10,481
	$	4,206,219

13. Convertible Debentures

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 a liability at face value and no formal accounting recognition is assigned to the value inherent in the conversion feature.

The convertible bonds are non-interest bearing, unsecured, and mature on October 30, 2011. The bonds are convertible to common stock of the Company at $0.50 per share. The holders have a right to adjust the conversion price at any time between April 1, 2008 to September 30, 2011. The adjustment discount will be 100% X ($0.50 - Previous 3 months average share price)/$0.50, to a maximum of 30%. The holders can exercise their conversion rights any time from October 25, 2006 to September 30, 2011. As at December 31, 2006, no bonds have been converted.

For any unconverted amount on October 30, 2011, the Company shall pay interest at the rate of 8% per annum provided that PSTS generates total revenues of $65,800,000 and operating profit of $6,800,000 in 2007 and total revenue of $95,400,000, and operating profit of $10,600,000 in 2008. If the conditions are not achieved, interest shall be calculated at 10% per annum. Interest shall be due and payable in cash on the maturity date of October 30, 2011.

The convertible debenture outstanding at March 31, 2006 was converted to common shares in 2006, as described in note 14.

The convertible debenture have not been included in the calculation of the diluted (loss) per share as their inclusion would be antidilutive.

-18-

CINTEL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2007 and 2006

(Unaudited)

14. Capital Stock

Authorized 300,000,000 common shares, par value $0.001 per share
	2007		2006
Issued 88,299,396 common shares (2006 - 42,379,354)	$	88,299	$	42,379

In January 2005, the Company issued 240,000 common shares for consulting service at the value of $20,500.

In January 2005, the Company issued 2,262,424 common shares from escrow upon the repayment of $40,000 of the convertible debenture.

In February 2005, the Company issued 622,200 common shares from escrow upon the repayment of $50,000 of the convertible debentures.

In February 2005, 400,000 common shares were issued for consulting services at the value of $44,000.

In March 2005, the Company issued 1,485,120 common shares from escrow upon the repayment of $80,000 of the convertible debenture.

In March 2005, the Company repurchased 93,830 common shares for $105,259. The excess of repurchase price over fair market value was recorded as an employee benefit.

In March 2005, 1,905,136 common shares were issued upon the conversion of $140,000 of convertible debenture.

In April 2005, the Company issued 1,311,769 common shares from escrow upon the repayment of $40,000 of the convertible debenture.

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

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

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

In May 2005, the Company issued 2,333,551 common shares from escrow upon the repayment of $70,000 of the convertible debenture.

In June 2005, 150,000 common shares were issued for consulting services at the value of $4,500.

In June 2005, the Company issued 3,268,031 common shares from escrow upon the repayment of $80,000 of the convertible debenture.

-19-

CINTEL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2007 and 2006

(Unaudited)

14. Capital Stock (cont'd)

In July 2005, the Company issued 704,225 common shares from escrow upon the repayment of $20,000 of the convertible debenture.

In September 2005, 500,000 common shares were issued for consulting services at the value of $15,000.

In October 2005, 400,000 common shares were issued for consulting services at the value of $36,000.

In December 2005, the Company issued 145,252 common shares for the repayment of $38,492 of the convertible debenture including interest.

In April 2006, 500,000 common shares were issued for consulting services at the value of $90,000.

In May 2006, the Company issued 44,300,542 common shares for the repayment of $8,853,191 of the convertible debenture including interest.

In July 2006, 440,000 common shares were issued for consulting services at the value of $70,400.

In February 2007, 580,000 common shares were issued for consulting services at the value of $98,600.

In March 2007, 100,000 common shares were issued as employee remuneration at the value of $20,000.

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:

	2007		2006
Interest rate	6.5	%	6.5	%
Expected volatility	70	%	70	%
Expected life in years	6		6
Expected dividends	-		-

In 1999 the Board of Directors of Cintel Korea adopted an option plan to allow employees to purchase ordinary shares of the Cintel Korea.

In August 1999, the share option plan granted 96,000 stock options for the common stock of Cintel Korea having a $0.425 nominal par value each and an exercise price of $0.425. In 2002, 53,000 stock options were cancelled. In 2003, an additional 30,000 stock options were cancelled.

In March 2000, 225,000 stock options were granted having a $0.425 nominal par value each and an exercise price of $0.68. In 2002, 135,000 and in 2003, an additional 47,000 of these stock options were cancelled.

-20-

CINTEL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2007 and 2006

(Unaudited)

14. Capital Stock (cont'd)

In February 2001, 30,000 stock options were granted having a $0.425 nominal par value each and an exercise price of $0.72. In 2003, all of these stock options were cancelled.

In March 2003, 65,000 stock options were granted having a $0.425 nominal par value each and an exercise price of $0.71. In the same year, 15,000 of these stock options were cancelled.

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 years ended December 31, 2006 and 2005.

The stock options have not been included in the calculation of the diluted earnings per share as their inclusion would be antidilutive.

The following table summarizes the stock option activity during 2007 and 2006:

	2007			2006
Outstanding, beginning of period		106,000			106,000
Exercised		-			-
Cancelled		-			-
Expired		(106,000	)		-
Outstanding, end of period		-			106,000
Weighted average fair value of options granted during the period	$	-		$	-
Weighted average exercise price of common stock options, beginning of period	$	-		$	0.62
Weighted average exercise price of common stock options granted in the period	$	-		$	-
Weighted average exercise price of common stock options, end of period	$	-		$	0.67
Weighted average remaining contractual life of common stock options		-			1 year

-21-

CINTEL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2007 and 2006

(Unaudited)

15. Related Party Transactions

During the year, the Company's Chinese subsidiary PSTS entered into the following transactions with STS and We-Tech Corporation ("We-Tech"). STS and We-Tech are each 24.5% owners of PSTS respectively:

	2007
Accounts receivable - STS	$	2,210,384
Accounts receivable - We-Tech	$	1,266,875
Accounts payable - STS	$	9,669,402
Accounts payable - We-Tech	$	2,475,410
Sales - STS	$	9,918,606
Sales - We-Tech	$	2,298,188
Purchase - STS	$	13,338,851
Purchase - We-Tech	$	1,821,825

These transactions were in the normal course of business and recorded at an exchange value established and agreed upon by the above mentioned parties.

16. Commitments and Contingencies

a) The Company has entered into a contract with iMimic Networking, Inc. for the use of the iMimic solution within Korea starting November 17, 2000. For the use of this solution, the Company paid $70,000 as an upfront payment and pays a $640 royalty for each product sold that uses the iMimic solution. The Company is also required to pay an annual royalty fee of $10,000. The contract has no fixed termination date.

b) The Company is committed to premise lease obligations which expires in December 2007 and February 2008. Future minimum annual payments (exclusive of taxes and insurance) under the leases are as follows:

2007	$	52,649
2008		1,950
	$	54,599

Rent expenses paid in 2007 and 2006 were $ 39,828 and $36,731 respectively.

-22-

CINTEL CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2007 and 2006

(Unaudited)

��

16. Commitments and Contingencies (cont'd)

c) The Company is committed to pay interest of 8% or 10% on its convertible bonds payable, should PSTS fail to achieve the predetermined earnings threshold as disclosed in note 13.

d) The Company's Chinese Subsidiary PSTS is committed to pay a management fee to the government of Republic of China of approximately $2,400 per annum for the use of land as disclosed in note 10.

e) The Company's Chinese Subsidiary PSTS, in accordance with its Articles of Incorporation, the Company has to maintain a minimum capital of $20,000,000

17. Subsequent Events

a) On March 15, 2007, the Company entered into a financing agreement with Woori Private Equity Fund (“Woori”) for the sale of convertible debentures in an aggregate principal amount of approximately $63,000,000 (the “Debenture”) which was funded on April 12, 2007. The Debenture will mature on April 12, 2012 and is convertible into shares of common stock of the Company, at the option of the holder, at a rate of $0.70 per share. The coupon rate of the bond shall be at the compounded interest rate of 2.3% per annum; provided however, if the bond is not converted during the period commencing on the issuance date through one month prior to the maturity date, the Company shall guarantee a compounded interest rate of 8% per annum.

Per the debenture agreement, the Company will undertake to apply for listing of its common stock on any of the NASDAQ, London Stock Exchange, Hong Kong Stock Exchange and Singapore Exchange Securities Trading Limited and use its best efforts to obtain such listing by October 31, 2009. In the event that the Company does not secure such listing by October 31, 2009 for any reason not solely attributable to Woori, Woori shall be entitled to exercise its put option to redeem the Debenture at the face value and shall also be entitled to receive from the Company the payment of interest on the outstanding principal balance of the Debenture calculated at the compounded rate of ten per cent per annum. In the case of the Company completing the listing process prior to the end of October of 2009, Woori shall be entitled, on or after the fourth anniversary of the issuance of the Debenture, to exercise its put option to redeem the Debenture at the face value thereof and shall also be entitled to receive from the Company the payment of interest on the outstanding principal amount of the Debenture calculated at the compounded rate of eight per cent per annum. In case of the occurrence of any event of default by the Company, Woori shall be entitled to exercise its put option to redeem the Debenture at the face value thereof if such event of default is not cured within sixty days of notice, in which case Woori shall also be entitled to receive from the Company the payment of default interest on the outstanding principal balance of the Debenture calculated at the compounded rate of nineteen per cent per annum.

The Company has agreed to pledge as security all convertible bonds to be issued by any entity and subscribed by the Company using the proceeds from the Debenture in favor of the Company and all the shares of any such entity to be acquired by the Company.

-23-

17. Subsequent Events (cont'd)

b) On April 12, 2007, the Company entered into a financing agreement with Korea Culture Promotion Inc. and Phoenix M&M Corporation for the sale of convertible debentures in an aggregate principal amount of approximately $10,500,000 (the “Debentures”) which was immediately funded. The Debentures will mature on April 12, 2012 and are convertible into shares of common stock of the Company, at the option of the holder at a rate of $0.70 per share. The coupon rate of the bond shall be at the compounded interest rate of 2.3% per annum. If the bond is not converted during the period commencing on the issuance date through one month prior to the maturity date, the Company shall guarantee a compounded interest rate of 8% per annum.

At any time during the period from November 1, 2009 to March 12, 2012, the holders are entitled to exercise their put option to redeem the Debentures at the face value thereof, in which case the holder shall also be entitled to receive from the Company the payment of interest on the outstanding principal balance of the Debentures calculated at the compounded rate of 8 % per annum. Upon the occurrence of any event of default by the Company, the holders will be entitled to exercise their put option to redeem the Debentures at the face value thereof if the event of default is not cured within sixty days of notice thereof, in which case the holders shall also be entitled to receive from the Company default interest on the outstanding principal balance of the Debentures calculated at the compounded rate of 19 % per annum.

c) On April 19, 2007, the Company entered into convertible bonds subscription agreements pursuant to which the Company purchased convertible debentures in an aggregate principal amount of approximately $38,000,000 (the “Debentures”) issued by STS. The Debentures were issued in the principal amount of approximately $28,000,000 and $10,000,000 and bear interest at the compounded rate of 0% and 4% per annum respectively. If the bonds are not converted during the period commencing on the issuance date through one month prior to the maturity date, STS shall guarantee a compounded interest rate of 4% and 8% per annum, respectively. The Debenture issued in the principal amount of $28,000,000 matures on April 20, 2009 and the Debenture in the principal amount of $10,000,000 matures on April 20, 2012. Upon the occurrence of an event of default under the terms of the Debentures, the interest rate shall be 19%. The Debentures are convertible into shares of common stock of STS, at the option of the holder at a rate of approximately $8.66 per share, representing 23% of the total outstanding common stock of STS. If converted, the Company will be the single major shareholder.

At any time after April 20 2008, if the closing price of STS remains higher than 135% of the conversion price then in effect for thirty consecutive trading dates of the Korean National Association of Securities Dealers' Automated Quotation System and the Company shall not have exercised its Conversion Rights during such thirty day period, on the trading date immediately following the end of such thirty day period, STS may send a notice requesting the Company to exercise its conversion right within five (5) trading dates from the date of receipt of such notice. If the Company fails to exercise its conversion right during such five (5) day period, STS may redeem all or some of the issued and outstanding Debentures at 100% of the principal amount of the Bonds without any interest or premium thereon.

-24-

18. Restatement of the 2006 Comparative Consolidated Financial Statements

a) Restatement dated November 13, 2006

On further consideration, the Company determined that it was not more likely than not that deferred tax losses would be realized. As such, the Company provided a 100% valuation allowance against the deferred tax losses at March 31, 2006.

The effects of this restatement were to increase the valuation allowance to $2,004,490 from $657,039 (note 6); to decrease the deferred tax assets on the consolidated balance sheets to nil from $1,347,451 (comprised of $10,851 current and $1,336,559 long term); and to decrease the deferred income taxes recoverable to nil from $78,473 on the consolidated statement of operations and comprehensive income.

b) Restatement dated June 7, 2007

On further consideration, the Company decided to defer recognition of revenue for all sale arrangements that include the credit terms "condition of clearing from original buyer", when distributors who used the Company's products in network installation projects were allowed to pay when their final end users paid them, until such time as the underlying payment condition has been met.

The affects of this restatement for March 31, 2006 are to increase the deferred revenue from the consolidated financial statements dated February 2, 2007 to $169,081 from nil on the consolidated balance sheet; and to increase revenue from merchandise from $2,218,198 to $2,349,431, decrease revenue from finished goods from $75,469 to $30,389, increase cost of sales for merchandise from $2,137,305 to $2,264,430 and to decrease cost of sales for finished goods from $50,724 to $37,493 on the consolidated statement of operations and comprehensive loss.

19. Restatement of the Previously Issued Consolidated Financial Statements

Restatement dated June 7, 2007

On further consideration, the Company decided to defer recognition of revenue for all sale arrangements that include the credit terms "condition of clearing from original buyer", when distributors who used the Company's products in network installation projects were allowed to pay when their final end-users paid them, until such time as the underlying payment condition has been met.

The affects of this restatement for March 31, 2007 are to increase revenue from the consolidated financial statements dated May 11, 2007 from merchandise from $207,801 to $211,446 and to increase revenue from finished goods from $16,298,317 to $16,484,917 and to increase cost of sales for merchandise from $204,100 to $207,639 and to increase cost of sales for finished goods from $16,087,999 to $16,160,910 on the consolidated statement of operations and comprehensive income.

-25-

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

FORWARD-LOOKING STATEMENTS

The information in this quarterly report on Form 10-QSB contains forward-looking statements. All statements other than statements of historical fact made in this report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. Forward-looking statements reflect management's current expectations and are inherently uncertain. Our actual results may differ significantly from management's expectations.

The following discussion and analysis should be read in conjunction with the consolidated financial statements of Cintel Corp. (referred to herein as the “Company,” “we,” “us,” and “our”) included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.

OVERVIEW

While the Company maintains its position as a leader in Internet Traffic Management (ITM) systems it has also begun expansion into creative new markets and worldwide distribution of Korean and Chinese based technologies. The Company provides an ever expanding range of enterprise technology solutions.

Founded in 1997, the Company introduced Korea's first dynamic server load balancer. CinTel's award winning ITM solutions are marketed to customers around the world, enabling them to improve delivery of internet traffic, manage service level standards, reduce server loads bandwidth demands and meet enterprise security mandates.

The Company’s strategy going forward is to leverage this track record in Asia and expand into the larger networking markets of North America and Europe.

The Company had also entered the semiconductor industry with the acquisition of Phoenix Semiconductor Telecommunication (Suzhou), Ltd. (PSTS) in 2006. PSTS was successfully spun off from Samsung Electronics and is now a dedicated provider of contracted products for Samsung and other vendors. As a result of this acquisition, the Company has shifted its core business from the ITM solutions into the production and packaging of technology components and which management believes will ensure CinTel's growth and profits in the near future.

PSTS's ever expanding solutions with key partners and internal development has created a conglomerate of technology products for CinTel to offer to include NAND flash memory, LCD assembly, semiconductor packaging and testing specialists, as well as, a total solution provider for memory applications for home appliances, semiconductor, TFT-LCD application products. The Company intends to expand into the global semiconductor market by consolidating various businesses involved in the semiconductor industry. The Company expects that the expansion of its semiconductor business will grow from the fast-developing and emerging Chinese market and gradually move into the US and EU markets. With long term secure contracts with customers such as Samsung Electronics, the Company’s management believes that the Company will be able to continue its rapid growth.

With additional acquisitions the Company intends to expand its business to include mobile communications, other cutting-edge technologies, and various services.

Management anticipates that it will use the balance of fiscal year 2007 to expand its products and markets. The Company is also taking steps to establish several business partnerships in the United States. Additionally, the Company plans to study other markets for entry where management believes the Company will be able to leverage its distribution channels and product strengths.

RESULTS OF OPERATIONS

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Three months period ended Mar 31, 2007 compared to the three months ended Mar 31, 2006

(Unit: USD)

	3/31/2007			3/31/2006
Revenue		16,697,341			2,407,852
Cost of sales		16,368,549			2,301,923
Gross Profit		328,792			105,929
Expenses		527,135			477,749
Operating (Loss)		(198,343	)		(371,820	)
Loss Before Income Taxes		(408,146	)		(304,477	)

 

In the first quarter of 2007 and 2006 revenues totaled approximately $16.7 million and approximately $2.4 million, respectively, which reflects an increase of approximately of $14.3 million. The main reason for the increase in revenue for the first quarter of 2007, as compared to the first quarter of 2006, is primarily attributed to the consolidating of the revenue of Phoenix Semiconductor Telecommunication (Suzhou) Co., Ltd (“PSTS”), our subsidiary. In October 2006, we acquired a majority interest in PSTS. PSTS’s main customer is Samsung Electronics Corporation, the largest semiconductor manufacturer in the world. PSTS's main products are semiconductor packaging, NAND flash memory and LCD assembly.

The revenue of PSTS for the first quarter of 2007 is $15.6 million (Print Board Assembly sales of $3.1 million, Packaging sales of $6.8 million, wafer sales and miscellaneous $5.7 million). The revenue of Cintel, excluding PSTS, for the first quarter of 2007 is approximately $1.1 million.

The cost of sales for the first quarter of 2007 and 2006 was $16.3 million and $2.3 million, respectively, an increase of 611.1%, which is primarily attributable to the increase in revenues. Our gross margins for the first quarter of 2007 and 2006 decreased from 4.4% to 1.9%, respectively. PSTS’s cost is relatively high, as a recently formed company, due to fixed assets, depreciation expenses and others, but it expects to expand gross margin through maximizing of revenue in the near future.

Total expenses for the first quarter of 2007 and 2006 totaled approximately $0.53 million and approximately $0.48 million, respectively, resulting in an increase of $0.05 million or 10.3 %.

The operating loss for the first quarter of 2007 and 2006 totaled $0.19 million and $0.37 million respectively. Total loss before income taxes for the first quarter of 2007 and 2006 totaled $0.41 million and $0.30 million respectively.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2007, CinTel and its subsidiaries had cash and cash-equivalents totaling $4.96 million. Management believes it has the resources necessary to maintain its current business operations for at least twelve months from the date of this report.

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 an 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 future.

On March 31, 2007, the allowance for credit losses was $1,130,408 of $6,959,439 in accounts receivables and on March 31, 2006, the allowance for credit losses was $1,087,980 of $4,428,282 of accounts receivables. The allowance for credit losses in 2007 saw an increase of $42,428 (3.9%) compared to 2006. The increasing of allowances for credit losses as of March 31, 2007 was primarily due to receivables which occurred in 2005. We established a 100% allowance for credit losses for the receivables of more than 2 years and for customers who have an impairment of capital assets, are discontinuing business operations or are suffering from bad cash flow and liquidity issues.

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The accounts receivables older than 2 years were incurred because of national economic issues in the Korean market with changing many management situations, with bankrupt companies and bad cash flow of many companies in Korea beginning in 2000. Our credit losses ratio is moderately high but we expect a decrease of credit losses ratio in future as most Korean companies have restructured to establish more stable organizations.

BUSINESS TRENDS

Component material, semiconductors, semiconductor packaging and wireless processes are the planned new direction for CinTel Corp. Semiconductors are the basic blocks used to create an increasing variety of electronic products and system Improvements in semiconductor process and design technologies continue to result in ever smaller, more complex and more reliable devices at a lower cost per function. As performance has increased and size and costs have decreased, semiconductors have become common components in products used in everyday life, including personal computers, telecommunications systems, wireless handheld devices, automotive products, industrial automation and control systems and security applications. The fragile nature of semiconductors also requires considerable efforts in packaging and transport of the products and components.

According to IC Insights, the percentage of semiconductor content in electronic equipment increased from approximately 11 percent in 1989 to approximately 21 percent in 2004. Nevertheless, the market for semiconductors has historically been volatile. Supply and demand have fluctuated cyclically and have caused pronounced fluctuations in prices and margins. Following a severe downturn in 2001, the industry experienced a further period of low demand and ongoing worldwide overcapacity during 2002. In 2003 and in particular in 2004, the semiconductor market showed stronger performance. During our 2005 financial year, global semiconductor market growth slowed significantly. However market trends indicate improved forecast and contracts secured at this point indicate a strong demand in the near future.

The ITM market has stabilized but is still seeing some significant transformation from a pure caching appliance environment to a convergence of more enterprise network traffic and application management features such as SSL VPN, Application Acceleration (Web-enabled), WAN optimization, firewall and content security. CinTel must incorporate these functions into its current product line to better compete in the marketplace. With current and future partners CinTel may continue to expand its offerings and move from being a niche player to a total solution provider in the near future.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off balance sheet arrangements that are likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.

SIGNIFICANT ACCOUNTING POLICIES

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.

Concentration of Credit Risk - SFAS No. 105, "Disclosure of Information About Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentration of Credit Risk", requires disclosure of any significant off-balance sheet risk and credit risk concentration. The Company does not have significant off-balance sheet risk or credit concentration. The Company maintains cash and cash equivalents with major Korean financial institutions. The Company's provides credit to its clients in the normal course of its operations. It carries out, on a continuing basis, credit checks on its clients and maintains provisions for contingent credit losses which, once they materialize, are consistent with management's forecasts. For other debts, the Company determines, on a continuing basis, the probable losses and sets up a provision for losses based on the estimated realizable value. Concentration of credit risk arises when a group of clients having a similar characteristic such that their ability to meet their obligations is expected to be affected similarly by changes in economic conditions. The Company does not have any significant risk with respect to a single client.

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RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued a revision to SFAS No. 123, "Share-Based Payment" (Statement 123). This Statement requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which the employee is required to provide service in exchange for the award requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. Employee share purchase plans will not result in recognition of compensation cost if certain conditions are met; those conditions are much the same as the related conditions in Statement 123. This Statement is effective for public entities that do not file as a small business issuers as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. This Statement applies to all awards granted after the required effective date and to awards modified, repurchased, or cancelled after that date. The cumulative effect of initially applying this Statement, if any, is recognized as of the required effective date and is not expected to have a material impact on the Company's consolidated financial statements.

In May 2005, the FASB issued Statement No. 154, Accounting Changes and Error Corrections - A Replacement of APB Opinion No. 20 and FASB Statement No. 3 (Statement No. 154). Statement No. 154 changes the requirements for the accounting for and reporting of a change in accounting principle. Statement No. 154 requires retrospective application of any change in accounting principle to prior periods' financial statements. Statement No. 154 is effective for the first fiscal period beginning after December 15, 2005. We do not expect the implementation of Statement No. 154 to have a significant impact on our consolidated financial statements.

ITEM 3. CONTROLS AND PROCEDURES.

(a)   Evaluation of Disclosure 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 the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

(b)   Changes in internal controls.   There was no change in 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

Item 1. Legal Proceedings.

We are not a party to any pending legal proceeding, nor is our property the subject of a pending legal proceeding, that is not in the ordinary course of business or otherwise material to the financial condition of our business. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Not applicable

Item 3. Defaults Upon Senior Securities.

Not applicable.

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

Not applicable.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits.

Exhibit Number	Description
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)
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)
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)
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)
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)
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)
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)
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)
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)
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)
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)
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)
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)
4.15	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)
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)
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)
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)
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)
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)
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)
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)
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)
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)
4.25	Convertible Note in the principal amount of $492,800 issued to Seok Kyu Hong (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 30, 2005)
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)
10.1	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)
10.2	Convertible Bonds Subscription Agreement between the Company and Axlon Corporation dated October 24, 2006 (Incorporated by reference to the Company’s Form 8-K/A filed with the Securities and Exchange Commission on October 31, 2006)
10.3	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/A filed with the Securities and Exchange Commission on October 31, 2006)

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10.4	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/A filed with the Securities and Exchange Commission on October 31, 2006)
10.5	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/A filed with the Securities and Exchange Commission on October 31, 2006)
10.6	Stock Purchase Agreement by and between Cintel Corp. and STS Semiconductor & Telecommunications Co., Ltd. Dated October 30,2006 (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 3, 2006)
10.6	Convertible Bonds Subscription Agreement between the Company and Woori Private equity. dated March 15, 2007 (Incorporated by reference to the Company’s Form 8-K/A filed with the Securities and Exchange Commission on March 21, 2007)
31.1	Certification by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act
31.2	Certification by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act
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
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

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SIGNATURES

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

 

	CINTEL CORP.
Dated:June 18, 2007	By:	/s/ Sang Don Kim
		Sang Don Kim Chief Executive Officer

Dated:June 18, 2007	By:	/s/ Kyo Jin Kang
		Kyo Jin Kang Principal Financial Officer and Principal Accounting Officer

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