SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
September 30, 2003
---------------------
Date of Report (Date of earliest event reported)
CINTEL CORP.
------------
(Exact name of registrant as specified in its charter)
Nevada
------
(State or other jurisdiction of incorporation)
333-100046 52-2360156
---------- ----------
(Commission File Number) (IRS Employer
Identification No.)
7F, MSA B/D, 891-43, Daechi-dong, Kangnam-gu, Seoul, KOREA (Zip: 135-280)
--------------------------------------------------------------------------
(address of principal executive offices) (Zip Code)
011-822-508-2033
----------------
(Registrant's telephone number, including area code)
-1-
The undersigned Registrant hereby amends its current report on Form 8-K dated
September 30, 2003 to file the following information:
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
See the Registrant's periodic report on Form 10QSB filed November 17, 2003, for
further information regarding the acquisition by the Registrant of CINTEL CO.,
LTD., a Korean corporation.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial statements of business acquired.
The audited financial statements of CINTEL CO., LTD., a Korean corporation,
for the years ended December 31, 2002 and 2001 immediately follow the signature
page below.
(b) Pro forma financial information.
Pro forma financial information with respect to the Registrant and CINTEL
CO., LTD., a Korean corporation, follow the audited financial statements
described above.
(c) Exhibits
Exhibit No. Description
----------- -----------
2.1(1) Share Exchange Agreement, dated September 30, 2003,
by and between the Company, CINTEL CO., LTD. and the
Shareholders of CINTEL CO., LTD.
(1) Previously filed as an exhibit to the Registrant's current report on
Form 8-K on September 30, 2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Cintel Corp.
By: /s/ Sang Don Kim
--------------------------
Sang Don Kim
Date: December 1, 2003 Chief Executive Officer
-2-
CINTEL CO., LTD.
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2002 AND 2001
CONTENTS
Independent Auditors' Report . . . . . . . . F-1
Balance Sheets . . . . . . . . . . . . . . . F-2
Statement of Operations. . . . . . . . . . . F-3
Statement of Changes in Stockholders' Equity F-4
Schedule of Expenses . . . . . . . . . . . . F-5
Statement of Cash Flows. . . . . . . . . . . F-6
Notes to Financial Statements. . . . . . . . F-7 ? F-13
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
CINTEL CO., LTD.
We have audited the balance sheets of CINTEL CO., LTD. (the "Company") as
at December 31, 2002 and 2001 and the statements of operations, changes in
stockholders' equity and cash flows for the years then ended. The financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
2002 and 2001, and the results of its operation, changes in its accumulated
deficit and its cash flows for the years ended, in conformity with accounting
principles generally accepted in the United States of America.
/s/ SF Partnership, LLP
TORONTO, CANADA CHARTERED ACCOUNTANTS
November 6, 2003
F-1
CINTEL CO., LTD.
Balance Sheets
December 31, 2002 and 2001
2002 2001
ASSETS
CURRENT
Cash and cash equivalents . . . . . . . . . . $ 778,891 $ 759,281
Accounts receivable . . . . . . . . . . . . . 3,418,909 4,386,753
Inventory . . . . . . . . . . . . . . . . . . 219,100 137,343
Prepaid and sundry assets . . . . . . . . . . 405,654 182,227
Loans receivable (note 3) . . . . . . . . . . 285,740 119,186
Deferred taxes. . . . . . . . . . . . . . . . 61,769 40,797
-------------------------
5,170,063 5,625,587
INVESTMENTS . . . . . . . . . . . . . . . . . 42,037 38,194
EQUIPMENT (note 4). . . . . . . . . . . . . . 319,598 282,747
DEFERRED TAXES. . . . . . . . . . . . . . . . 185,306 122,391
-------------------------
$ 5,717,004 $ 6,068,919
=========================
LIABILITIES
CURRENT
Accounts payable. . . . . . . . . . . . . . . $ 1,532,597 $ 2,822,676
Income taxes. . . . . . . . . . . . . . . . . 5,129 -
Deferred government grant (note 5). . . . . . 37,288 33,971
Loans payable - current (note 6). . . . . . . 1,177,222 552,656
-------------------------
2,752,236 3,409,303
LOANS PAYABLE (note 6). . . . . . . . . . . . 19,958 111,312
-------------------------
2,772,194 3,520,615
-------------------------
STOCKHOLDERS' EQUITY
CAPITAL STOCK (note 7). . . . . . . . . . . . 2,150,968 2,010,250
PAID IN CAPITAL . . . . . . . . . . . . . . . 2,461,453 2,237,448
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (47,263) (283,586)
ACCUMULATED DEFICIT . . . . . . . . . . . . . (1,620,348) (1,415,808)
-------------------------
2,944,810 2,548,304
-------------------------
$ 5,717,004 $ 6,068,919
=========================
APPROVED ON BEHALF OF THE BOARD
/s/ Sang Don Kim
- ------------------------------------
Director
F-2
CINTEL CO., LTD.
Statement of Operations
Years Ended December 31, 2002 and 2001
2002 2001
REVENUE . . . . . . . . . . . . . . . . . . . . $5,476,702 $5,750,176
COST OF SALES . . . . . . . . . . . . . . . . . 3,901,035 4,124,610
-----------------------
GROSS PROFIT. . . . . . . . . . . . . . . . . . 1,575,667 1,625,566
EXPENSES (page 5) . . . . . . . . . . . . . . . 1,833,431 1,465,404
-----------------------
OPERATING (LOSS) INCOME . . . . . . . . . . . . (257,764) 160,162
-----------------------
OTHER
Interest and other income . . . . . . . . . . . (38,028) (65,465)
Foreign exchange. . . . . . . . . . . . . . . . (12,798) 2,675
Interest expense. . . . . . . . . . . . . . . . 55,518 25,765
-----------------------
4,692 (37,025)
-----------------------
(LOSS) EARNINGS BEFORE DISCONTINUED OPERATIONS
AND INCOME TAXES. . . . . . . . . . . . . . (262,456) 197,187
Loss from discontinued operations (note 10) . . - 118,743
-----------------------
(LOSS) EARNINGS BEFORE INCOME TAXES . . . . . . (262,456) 78,444
-----------------------
Current . . . . . . . . . . . . . . . . . . . . 7,898 9,493
Deferred. . . . . . . . . . . . . . . . . . . . (65,814) (54,499)
-----------------------
(57,916) (45,006)
-----------------------
NET (LOSS) EARNINGS . . . . . . . . . . . . . . $ (204,540) $ 123,450
=======================
BASIC (LOSS) EARNINGS PER SHARE BEFORE
DISCONTINUED OPERATIONS . . . . . . . . . . $ (0.042) $ 0.051
=======================
BASIC (LOSS) EARNINGS PER SHARE . . . . . . . . $ (0.042) $ 0.026
=======================
FULLY DILUTED (LOSS) EARNINGS PER SHARE BEFORE
DISCONTINUED OPERATIONS . . . . . . . . . . $ (0.042) $ 0.049
=======================
FULLY DILUTED (LOSS) EARNINGS PER SHARE . . . . $ (0.042) $ 0.025
=======================
BASIC WEIGHTED AVERAGE NUMBER OF SHARES . . . . 4,895,550 4,730,000
=======================
FULLY DILUTED WEIGHTED AVERAGE NUMBER OF SHARES (note 7) . . . . . . . . . .
.. . . . 4,895,550 4,893,000
=======================
F-3
CINTEL CO., LTD.
Statement of Stockholders' Equity
Years Ended December 31, 2002 and 2001
PAID IN
ACCUMULATED
CAPITAL IN
OTHER
NUMBER OF CAPITAL EXCESS OF PAR
COMPREHENSIVE ACCUMULATED
SHARES STOCK VALUE
INCOME DEFICIT
---------------------------------------------------
- --------------------
Balance, January 1, 2001. . 473,000 $ 2,010,250 $ 2,211,948 $
(183,703) $ (1,539,258)
Retroactive adjustment for
May 7, 2002 10 to 1
stock split (note 7). . 4,257,000 - -
- - -
Employee stock options
granted . . . . . . . . - - 25,500
- - -
Foreign exchange on
translation . . . . . . - - -
(99,883) -
Net Loss. . . . . . . . . . - - -
- - 123,450
---------------------------------------------------
- --------------------
Balance, December 31, 2001. 4,730,000 $ 2,010,250 $ 2,237,448 $
(283,586) $ (1,415,808)
=======================================================================
Balance, January 1, 2002. . 4,730,000 $ 2,010,250 $ 2,237,448 $
(283,586) $ (1,415,808)
Common shares issued. . . . 331,100 140,718 224,005
- - -
Foreign exchange on
translation . . . . . . - - -
236,323 -
Net Loss. . . . . . . . . . - - -
- - (204,540)
---------------------------------------------------
- --------------------
Balance, December 31, 2002. 5,061,100 $ 2,150,968 $ 2,461,453 $
(47,263) $ (1,620,348)
=======================================================================
F-4
CINTEL CO., LTD.
Schedule of Expenses
Years Ended December 31, 2002 and 2001
2002 2001
EXPENSES
Salaries . . . . . . . . $ 483,109 $ 368,899
Employee benefits. . . . 65,608 40,832
Travel . . . . . . . . . 40,313 22,785
Entertainment. . . . . . 53,249 42,008
Communications . . . . . 12,758 10,720
Taxes and dues . . . . . 16,748 15,558
Depreciation . . . . . . 52,508 40,328
Rent . . . . . . . . . . 46,832 34,112
Repairs and maintenance. - 1,108
Insurance. . . . . . . . 20,303 1,670
Vehicle. . . . . . . . . 3,463 26,875
Office and general . . . 63,080 39,664
Professional fees. . . . 161,755 136,130
Research and development 554,183 558,080
Advertising. . . . . . . 71,945 52,248
Bad debts. . . . . . . . 130,877 16,667
Royalties. . . . . . . . 56,700 57,720
----------------------
$1,833,431 $1,465,404
======================
F-5
CINTEL CO., LTD.
Statement of Cash Flows
Years Ended December 31, 2002 and 2001
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) earnings . . . . . . . . . . . . . . . . $ (204,540) $ 123,450
Adjustments for working capital and non-cash items:
Depreciation. . . . . . . . . . . . . . . . . . . . 52,508 40,328
Accounts receivable . . . . . . . . . . . . . . . . 967,844 (3,607,778)
Inventory . . . . . . . . . . . . . . . . . . . . . (81,757) 86,146
Prepaid and sundry assets . . . . . . . . . . . . . (223,427) 99,467
Loans receivable. . . . . . . . . . . . . . . . . . (166,554) (7,676)
Deferred taxes. . . . . . . . . . . . . . . . . . . (83,886) (48,920)
Accounts payable. . . . . . . . . . . . . . . . . . (1,290,080) 2,366,655
Income taxes. . . . . . . . . . . . . . . . . . . . 5,129 -
Deferred government grant . . . . . . . . . . . . . 3,317 33,971
Foreign currency translation. . . . . . . . . . . . 236,323 (99,883)
-------------------------
(785,123) (1,014,240)
-------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of investments. . . . . . . . . . . . . (3,843) (33,786)
Acquisition of equipment. . . . . . . . . . . . . . (89,359) (87,133)
-------------------------
(93,202) (120,919)
-------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock. . . . . . . . . . . . . . 364,722 25,500
Loans payable . . . . . . . . . . . . . . . . . . . 533,213 266,191
-------------------------
897,935 291,691
-------------------------
NET INCREASE (DECREASE) IN CASH . . . . . . . . . . 19,610 (843,468)
CASH - BEGINNING OF YEAR . . . . . . . . . . . . . 759,281 1,602,749
-------------------------
CASH - END OF YEAR. . . . . . . . . . . . . . . . . $ 778,891 $ 759,281
=========================
F-6
CINTEL CO., LTD.
Notes to Financial Statements
December 31, 2002 and 2001
1. OPERATIONS AND BUSINESS
Cintel Co., Ltd. ("the Company"), a company operating in Seoul, Korea, was
established on June 7, 1997 to develop and sell software relating to the
maintenance of internet traffic load.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of the Company are in accordance with generally accepted
accounting principles of the United States of America, and their basis of
application is consistent. Outlined below are those policies considered
particularly significant:
a) Basis of Financial Statement Presentation
These financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America with the
assumption that the Company will be able to realize its assets and discharge its
liabilities in the normal course of business.
b) Unit of Measurement
The US Dollar has been used as the unit of measurement in these financial
statements.
c) 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.
d) Revenue Recognition
The Company recognizes revenues upon delivery of merchandise sold, and when
services are rendered for maintenance contracts.
e) Cash and Cash Equivalents
Cash includes currency, cheques issued by others, other currency equivalents,
current deposits and passbook deposits. Cash equivalents includes 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.
F-7
CINTEL CO., LTD.
Notes to Financial Statements
December 31, 2002 and 2001
- -
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
f) Inventories
Inventories are stated at the lower of cost or net realizable value. Net
realizable value is determined by deducting selling expenses from selling price.
The cost of inventories is determined on the first-in first-out method, except
for materials-in-transit for which the specific identification method is used.
g) Equipment
Equipment is stated at cost. Major renewals and betterments are capitalized and
expenditures for repairs and maintenance are charged to expense as incurred.
Depreciation is computed using the straight-line method over a period of 5
years.
h) 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.
i) 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.
j) Income Tax
The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting for
Income Taxes". Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences, and
deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of assets
and liabilities and their tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the date of enactment.
F-8
CINTEL CO., LTD.
Notes to Financial Statements
December 31, 2002 and 2001
- -
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
k) Earnings or Loss per Share
The Company adopted FAS No.128, "Earnings per Share" which requires disclosure
on the financial statements of "basic" and "diluted" earnings (loss) per share.
Basic earnings (loss) per share is computed by dividing net income (loss) by the
weighted average number of common shares outstanding for the year. Diluted
earnings (loss) per share is computed by dividing net income (loss) by the
weighted average number of common shares outstanding plus common stock
equivalents (if dilutive) related to stock options and warrants for each year.
l) 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 of other conditions. The Company
does not have any significant risk with respect to a single client.
3. LOANS RECEIVABLE
Loans receivable included:
2002 2001
Employee loans. $ 84,117 $119,186
WISEngine, Inc. 201,623 -
------------------
$285,740 $119,186
==================
The employee loans bear interest at 5% per annum and are due on demand. The
loan to WISEngine, Inc. is non-interest bearing and due on demand. The loans
were repaid subsequent to the year end.
F-9
CINTEL CO., LTD.
Notes to Financial Statements
December 31, 2002 and 2001
4. EQUIPMENT
Equipment is comprised as follows:
2002 2001
ACCUMULATED Accumulated
COST DEPRECIATION Cost Depreciation
------------------------------------------------
Furniture and fixtures $ 22,916 $ 11,436 $ 17,678 $ 6,404
Equipment. . . . . . . 523,080 271,445 365,313 163,204
Vehicles . . . . . . . 12,944 7,767 11,793 4,717
Software . . . . . . . 85,323 34,017 77,732 15,444
------------------------------------------------
$644,263 $ 324,665 $472,516 $ 189,769
------------------------------------------------
Net carrying amount. . $319,598 $ 282,747
-------- -------------
5. DEFERRED GOVERNMENT GRANT
The Company received government grants to research and develop various products.
The Company recognizes the grants upon completion of each subsidized project.
6. LOANS PAYABLE
2002 2001
CURRENT LONG-TERM TOTAL Total
--------------------------------------------
Bank loan #1. . $1,087,190 $ - $1,087,190 $457,140
Bank loan #2. . 63,332 - 63,332 148,786
Government loan 26,700 19,958 46,658 58,042
--------------------------------------------
$1,177,222 $ 19,958 $1,197,180 $663,968
============================================
Bank Loan #1
The loan is repayable, interest only, at 7.6% per annum calculated monthly. The
loan matures December 2003.
F-10
CINTEL CO., LTD.
Notes to Financial Statements
December 31, 2002 and 2001
6. LOANS PAYABLE (cont'd)
Bank Loan #2
The loan bears interest at LIBOR+3.28% per annum calculated monthly, is
repayable in semi-annual payments of $38,400 and matures November 2003.
Government Loan
The loan is non-interest bearing, repayable in annual payments of $26,700 and
matures July 2005.
7. CAPITAL STOCK
Authorized
50,000,000 common shares, par value $0.425 per share
2002 2001
Issued
5,061,100 common shares (4,730,000 in 2001) $2,150,968 $2,010,250
======================
On May 7, 2002, the Company granted a 10 to 1 stock split. The 2001
comparative share amounts have been retroactively adjusted to give effect to the
stock split. On June 18, 2002, the Company issued 331,100 shares for
consideration of $364,723.
Stock Warrants and Options
The Company 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:
2002 2001
Interest rate. . . . . 6.5% 6.5%
Expected volatility. . 70% 70%
Expected life in years 6 6
In 1999 the Board of Directors of the Company adopted an option plan to allow
employees to purchase ordinary shares of the Company.
F-11
CINTEL CO., LTD.
Notes to Financial Statements
December 31, 2002 and 2001
7. CAPITAL STOCK (cont'd)
In August 1999, the share option plan granted 43,000 stock options for the
common stock of the Company having a $0.425 nominal par value each and an
exercise price of $0.425. In March 2000, an additional 90,000 stock options were
granted having a $0.425 nominal par value each and an exercise price of $0.68.
In February 2001, an additional 30,000 stock options were granted having a
$0.425 nominal par value each and an exercise price of $0.72.
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.
For 2001, 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 2002 and 2001:
2002 2001
Outstanding, beginning of year . . . . . . . . . . . . . . . . 163,000
133,000
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . -
30,000
Exercised. . . . . . . . . . . . . . . . . . . . . . . . . . . -
- -
Cancelled. . . . . . . . . . . . . . . . . . . . . . . . . . . -
- -
----------------
- --
Outstanding, end of year . . . . . . . . . . . . . . . . . . . 163,000
163,000
==================
Weighted average fair value of options granted during the year $ - $
25,500
==================
8. INCOME TAXES
The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting for
Income Taxes". This Standard prescribes the use of the liability method
whereby deferred tax asset and liability account balances are determined based
on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates. The effects of future
changes in tax laws or rates are not anticipated. Corporate income tax rates
applicable to the Company in 2002 and 2001 are 16.5 percent of the first 100
million Korean Won of taxable income and 29.7 percent of the excess.
Under SFAS No. 109 income taxes are recognized for the following: a) amount of
tax payable for the current year, and b) deferred tax liabilities and assets for
future tax consequences of events that have been recognized differently in the
financial statements than for tax purposes. The Company has deferred income tax
assets arising from research and development expenses. For accounting purposes,
these amounts are expenses when incurred. Under Korean tax laws, these amounts
are deferred and amortized on a straight-line basis over 5 years.
F-12
CINTEL CO., LTD.
Notes to Financial Statements
December 31, 2002 and 2001
9. CONTINGENT LIABILITIES AND COMMITMENTS
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 lease obligations, with various expiry dates
to May 2004. Future minimum annual payments (exclusive of taxes, insurance and
maintenance costs) under these leases are as follows:
2003. . $60,070
2004. . 25,030
-------
$85,100
-------
10. DISCONTINUED OPERATIONS
The Company closed down its subsidiary in the United States in 2001. The
subsidiary did not carry on any business activity in 2001. The net tangible
assets of $118,743 at December 31, 2001 were used to finance the costs
associated with closing operations, and therefore were charged to the income
statement in 2001.
11. SUBSEQUENT EVENT
On September 30, 2003, in accordance with a Share Exchange Agreement dated May
8, 2003, the Company entered into a reverse-takeover transaction with Link2
Technologies, Inc. ("LINK"), a public Nevada shell corporation, whereby all the
outstanding shares of the Company were exchanged for 16,683,300 shares of LINK.
As a result of the transaction, the shareholders of Cintel Co., Ltd. will
control 82% of LINK. While LINK is the legal parent, the Company, as a result
of the reverse-takeover, became the parent company for accounting purposes.
F-13
CINTEL CORP.
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2003
UNAUDITED
CONTENTS
Pro-Forma Consolidated Balance Sheet . . . . . . . . . . F-15
Pro-Forma Consolidated Statement of Stockholders' Equity F-16
Pro-Forma Consolidated Statement of Operations . . . . . F-17Notes to Pro-
Forma Consolidated Financial Statements . . F-18 ? F-19
F-14
CINTEL CORP.
Pro-Forma Consolidated Balance Sheet
September 30, 2003
Unaudited
LINK2
TECHNOLOGIES, CINTEL CO., CINTEL
CORP.
INC. LTD. PRO-
FORMA CINTEL CORP.
SEPTEMBER 30, SEPTEMBER 30, PRO-FORMA
SEPTEMBER 30, DEC. 31,
2003 2003 ADJUSTMENTS
2003 2002
------------------------------------------------
- ------------------
ASSETS
CURRENT
Cash and cash equivalents. . . $ - $ 345,997 $ - $
345,997 $ 778,891
Accounts receivable. . . . . . - 3,285,886 -
3,285,886 3,418,909
Inventory. . . . . . . . . . . - 333,079 -
333,079 219,100
Prepaid and sundry assets. . . - 311,801 -
311,801 405,654
Loans receivable . . . . . . . - - -
- - 285,740
Deferred taxes . . . . . . . . - 65,739 -
65,739 61,769
------------------------------------------------
- ------------------
- 4,342,502 -
4,342,502 5,170,063
INVESTMENTS. . . . . . . . . . - 43,741 -
43,741 42,037
EQUIPMENT. . . . . . . . . . . - 734,474 -
734,474 319,598
DEFERRED TAXES . . . . . . . . - 197,215 -
197,215 185,306
------------------------------------------------
- ------------------
$ - $ 5,317,932 $ - $
5,317,932 $ 5,717,004
==================================================================
LIABILITIES
CURRENT
Accounts payable . . . . . . . $ 32,903 $ 1,996,159 $ - $
2,029,062 $ 1,563,041
Income taxes . . . . . . . . . - - -
- - 5,129
Deferred government grant. . . - 38,800 -
38,800 37,288
Loans payable - current. . . . - 1,160,354 -
1,160,354 1,177,222
------------------------------------------------
- ------------------
32,903 3,195,313 -
3,228,216 2,782,680
LOANS PAYABLE. . . . . . . . . 39,000 20,767 -
59,767 34,958
------------------------------------------------
- ------------------
71,903 3,216,080 -
3,287,983 2,817,638
------------------------------------------------
- ------------------
STOCKHOLDERS'
DEFICIENCY
CAPITAL STOCK. . . . . . . . . 10,539 2,150,968 (10,539)
2,150,968 2,150,968
PAID IN CAPITAL. . . . . . . . 66,161 2,461,453 (138,064)
2,389,550 2,416,009
ACCUMULATED OTHER
COMPREHENSIVE INCOME (LOSS) - 38,711 -
38,711 (47,263)
ACCUMULATED DEFICIT. . . . . . (148,603) (2,549,280) 148,603
(2,549,280) (1,620,348)
------------------------------------------------
- ------------------
(71,903) 2,101,852 -
2,029,949 2,899,366
------------------------------------------------
- ------------------
$ - $ 5,317,932 $ - $
5,317,932 $ 5,717,004
==================================================================
F-15
CINTEL CORP.
Pro-Forma Consolidated Statement of Stockholders' Equity
Nine Months Ended September 30, 2003
Unaudited
LINK2
TECHNOLOGIES, CINTEL CO., CINTEL
CORP.
INC. LTD. PRO-FORMA
CINTEL CORP.
SEPTEMBER 30, SEPTEMBER 30, PRO-FORMA SEPTEMBER
30, DEC. 31,
2003 2003 ADJUSTMENTS 2003
2002
---------------------------------------------------
- --------------
ACCUMULATED DEFICIT
- BEGINNING OF PERIOD $(122,144) $(1,620,348) $ 122,144
$(1,620,348) $(1,415,808)
Net Loss. . . . . . . . (26,459) (928,932) 26,459
(928,932) (204,540)
---------------------------------------------------
- --------------
ACCUMULATED DEFICIT
- END OF PERIOD. . . $(148,603) $(2,549,280) $ 148,603
$(2,549,280) $(1,620,348)
=================================================================
F-16
CINTEL CORP.
Pro-Forma Consolidated Statement of Operations
Nine Months Ended September 30, 2003
Unaudited
LINK2
TECHNOLOGIES, CINTEL CO., CINTEL
CORP.
INC. LTD. PRO-FORMA
CINTEL CORP.
SEPTEMBER 30, SEPTEMBER 30, PRO-FORMA SEPTEMBER
30, DEC. 31,
2003 2003 ADJUSTMENTS 2003
2002
-------------------------------------------------
- -------------
REVENUE . . . . . . . . . . . $ 1,000 $3,701,066 $ (1,000) $3,701,066
$5,476,702 COST OF SALES . . . . . . . . - 3,547,832 -
3,547,832 3,901,035
-------------------------------------------------
- -------------
GROSS PROFIT. . . . . . . . . 1,000 153,234 (1,000) 153,234
1,575,667
-------------------------------------------------
- -------------
EXPENSES
Salaries. . . . . . . . . . . - 352,041 - 352,041
483,109
Research and development. . . - 151,389 - 151,389
554,183
Depreciation. . . . . . . . . - 87,743 - 87,743
52,508
Bad debts (recovery). . . . . - (24,570) -
(24,570) 130,877
Travel. . . . . . . . . . . . - 20,734 - 20,734
40,313
Rent. . . . . . . . . . . . . - 42,869 - 42,869
46,832
Professional fees . . . . . . 9,279 71,862 (9,279) 71,862
161,755
Entertainment . . . . . . . . - 19,396 - 19,396
53,249
Employee benefits . . . . . . - 43,819 - 43,819
65,608
Office and general. . . . . . 17,622 39,992 (17,622) 39,992
63,080
Taxes and dues. . . . . . . . - 12,496 - 12,496
16,748
Communications. . . . . . . . 558 9,726 (558) 9,726
12,758
Vehicle . . . . . . . . . . . - 31 - 31
3,463
Repairs and maintenance . . . - 133,048 - 133,048
- -
Insurance . . . . . . . . . . - 14,214 - 14,214
20,303
Advertising . . . . . . . . . - 53,340 - 53,340
71,945
Royalties . . . . . . . . . . - - - -
56,700
-------------------------------------------------
- -------------
27,459 1,028,130 (27,459) 1,028,130
1,833,431
-------------------------------------------------
- -------------
OPERATING LOSS. . . . . . . . (26,459) (874,896) 26,459
(874,896) (257,764)
-------------------------------------------------
- -------------
OTHER
Interest and other income . . - (17,172) -
(17,172) (38,028)
Interest expense. . . . . . . - 76,693 - 76,693
55,518
Foreign exchange. . . . . . . - 176 - 176
(12,798)
-------------------------------------------------
- -------------
- 59,697 - 59,697
4,692
-------------------------------------------------
- -------------
NET LOSS BEFORE INCOME TAXES. (26,459) (934,593) 26,459
(934,593) (262,456)
-------------------------------------------------
- -------------
Current . . . . . . . . . . . - - - -
7,898
Deferred. . . . . . . . . . . - (5,661) -
(5,661) (65,814)
-------------------------------------------------
- -------------
- (5,661) -
(5,661) (57,916)
-------------------------------------------------
- -------------
NET LOSS. . . . . . . . . . . $(26,459) $ (928,932) $ 26,459 $
(928,932) $ (204,540)
==============================================================
F-17
CINTEL CORP.
Notes to Pro-Forma Consolidated Financial StatementsSeptember 30, 2003
1. BASIS OF PRESENTATION
These unaudited pro-forma consolidated financial statements have been prepared
to give effect to the following:
a) The reverse takeover at September 30, 2003 whereby Link2 Technologies,
Inc. ("LINK"), (the legal parent), issued 16,683,300 common shares in return for
all outstanding common shares of Cintel Co., Ltd. ("Cintel") a Korean company
(the acquirer for accounting purposes). As a result of this transaction, the
former shareholders of Cintel received approximately 82% ownership of LINK.
After the transaction LINK has 20,383,300 common shares issued and outstanding.
b) Cintel maintains its books and records in Korean won. Balance sheet
accounts are translated using closing exchange rates in effect at the balance
sheet date. Income and expense accounts are translated using an average
exchange rate prevailing during each reporting period. No representation is made
that the Korean won could have been, or could be, converted into United States
dollars at the rates on the respective dates and or at any other certain rates.
Adjustments resulting from the translation are included in the accumulated other
comprehensive income (loss) in stockholders' equity.
c) Subsequent to the reverse takeover LINK changed its name to Cintel Corp.
The pro-forma consolidated financial statements are based on the balance sheets
of the following:
a) LINK as at September 30, 2003 (unaudited) and December 31, 2002
(audited).
b) Cintel as at September 30, 2003 (unaudited) and December 31, 2002
(audited).
The pro-forma consolidated financial statements include the statement of
earnings for the following:
a) LINK for the nine months ended September 30, 2003 (unaudited) and the
year ended December 31, 2002 (audited).
b) Cintel for the nine months ended June 30, 2003 (unaudited) and for the
year ended December 31, 2002 (audited).
The pro-forma consolidated balance sheet as at September 30, 2003 and December
31, 2002 gives effect to the transactions as at September 30, 2003 and the
pro-forma statement of earnings for the nine months ended September 30, 2003 and
year ended December 31, 2002 gives effect to the transactions as if they had
taken place at the beginning of each period.
F-18
CINTEL CORP.
Notes to Pro-Forma Consolidated Financial Statements
September 30, 2003
1. BASIS OF PRESENTATION (cont'd)
The pro-forma consolidated financial statements are not necessarily indicative
of the actual results that would have occurred had the proposed transactions
occurred on the dates indicated and not necessarily indicative of future
earnings or financial position.
2. PRO-FORMA ADJUSTMENTS
To record the consolidation of LINK with Cintel including:
a) Accounting for the merger of LINK and Cintel as the recapitalization of
Cintel, with the net assets of Cintel brought forward at their historical basis.
b) Eliminating the pre-acquisition shareholders' equity of the LINK at
September 30, 2003 and December 31, 2002.
F-19