UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(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, 2006
[_] 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 52-2360156
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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 [_]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |_| 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 19, 2006, the issuer had
42,879,654 outstanding shares of Common Stock, $.001 par value.
Transitional Small Business Disclosure Format (check one): Yes [_] No [X]
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.............................................. 1
Item 2. Management's Discussion and Analysis or Plan of Operation......... 19
Item 3. Controls and Procedures........................................... 22
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................. 22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds....... 23
Item 3. Defaults Upon Senior Securities................................... 23
Item 4. Submission of Matters to a Vote of Security Holders............... 23
Item 5. Other Information................................................. 23
Item 6. Exhibits.......................................................... 23
SIGNATURES................................................................. 26
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
CINTEL CORP.
Consolidated Balance Sheets
March 31, 2006 and 2005
2006 2005
ASSETS ---- ----
Current
Cash and cash equivalents (note 3) $ 1,793,396 $ 141,789
Short term investment 291,427 -
Accounts receivable (net of allowance for doubtful
accounts of $1,087,980; 2003 - $972,014) 3,340,302 326,192
Inventory (note 4) 489,017 290,032
Prepaid and sundry assets 728,995 257,842
Loans receivable (note 5) 154,358 -
Deferred taxes (note 6) 10,851 213,470
----------- -----------
6,808,346 1,229,325
Deferred Financing Fees - 60,000
Deferred Taxes (note 6) 1,336,599 799,875
Investments (note 7) 2,624,350 49,094
Equipment (note 8) 552,312 513,218
----------- -----------
$11,321,607 $ 2,651,512
=========== ===========
LIABILITIES
Current
Accounts payable $ 2,532,860 $ 873,359
Convertible Debenture - 320,000
Loans payable - current (note 9) 666,789 1,630,679
Shareholder loan - 114,079
------------ -----------
3,199,649 2,938,117
Accrued Severance 74,788 125,315
Loans Payable (note 9) 39,121 30,538
Convertible Debenture (note 10) 8,853,191 -
----------- ------------
12,166,749 3,093,970
----------- -----------
STOCKHOLDERS' DEFICIENCY
Capital Stock (note 11) 42,379 30,324
Paid in Capital 5,351,058 4,941,120
Treasury Stock (5,630) (105,185)
Accumulated Other Comprehensive Income 415,011 26,830
Accumulated Deficit (6,647,960) (5,335,547)
----------- -----------
(845,142) (442,458)
----------- -----------
$11,321,607 $ 2,651,512
=========== ===========
(The accompanying notes to the financial statements are an integral part of these statements)
1
CINTEL CORP.
Consolidated Statement of Operations
Three Months Ended March 31, 2006 and 2005
2006 2005
---- ----
Revenue
Merchandise $ 2,218,198 $ 112,004
Finished goods 75,469 -
Services 28,032 14,514
-------------------------
2,321,699 126,518
-------------------------
Cost of Sales
Merchandise 2,137,305 111,678
Finished goods 50,724 -
-------------------------
2,188,029 111,678
-------------------------
Gross Profit 133,670 14,840
-------------------------
Expenses
Salaries and employee benefits 182,911 148,252
Professional fees 100,667 124,351
Office and general 95,914 98,650
Depreciation 51,414 55,750
Travel 31,425 45,394
Research and development 18,641 -
Taxes and dues 121 32,782
-------------------------
481,093 505,179
-------------------------
Operating Loss (347,423) (490,339)
-------------------------
Other Expense (Income)
Interest and other income (109,416) (1,459)
Foreign exchange (3,344) -
Interest expense 12,073 74,849
Amortization of deferred financing fees 30,000 60,000
-------------------------
(70,687) 133,390
-------------------------
Loss Before Income Taxes (276,736) (623,729)
-------------------------
Current 23,432 -
Deferred income taxes recoverable (78,473) (77,314)
-------------------------
(55,041) (77,314)
-------------------------
Net Loss $ (221,695) $ (546,415)
=========================
Basic Loss per Share $ (0.01) $ (0.02)
=========================
Fully Diluted Loss per Share $ (0.01) $ (0.02)
=========================
Weighted Average Number of Shares (note 11) 42,379,354 27,692,499
=========================
Fully Diluted Weighted Average Number of Shares (note 11) 42,379,354 27,692,499
=========================
(The accompanying notes to the financial statements are an integral part of these statements)
2
CINTEL CORP.
Consolidated Statement of Stockholders' Equity
Three Months Ended March 31, 2006 and 2005
Paid in Accumulated
Capital in Other Total
Number of Capital Excess of Treasury Comprehensive Accumulated Stockholders'
Shares Stock Par value Stock Loss Deficit Equity
---------------------------------------------------------------------------------------
Balance, January 1, 2005 23,409,800 $23,409 $4,573,535 $ - $ 23,826 $(4,789,132) $ (168,362)
Common shares issued for consulting
services 640,000 640 63,860 - - - 64,500
Conversion of convertible debentures
into common stock 4,369,744 4,370 165,630 - - - 170,000
Conversion of convertible debentures
into common stock 1,905,136 1,905 138,095 - - - 140,000
Repurchase of employees' stock - - - (105,185) - - (105,185)
Foreign exchange on translation - - - - 3,004 - 3,004
Net loss - - - - - (546,415) (546,415)
---------------------------------------------------------------------------------------
Balance, March 31, 2005 30,324,680 $30,324 $4,941,120 $(105,185) $ 26,830 $(5,335,547) $ (442,458)
=======================================================================================
Balance, January 1, 2006 42,379,354 $42,379 $5,351,058 $ (5,630) $ 121,739 $(6,426,265) $ (916,719)
Foreign exchange on translation - - - - 293,272 - 293,272
Net loss - - - - - (221,695) (221,695)
---------------------------------------------------------------------------------------
Balance, March 31, 2006 42,379,354 $42,379 $5,351,058 $ (5,630) $ 415,011 $(6,647,960) $ (845,142)
(The accompanying notes to the financial statements are an integral part of these statements)
3
CINTEL CORP.
Consolidated Statement of Cash Flows
Three Months Ended March 31, 2006 and 2005
2006 2005
---- ----
Cash Flows from Operating Activities
Net loss $ (221,695) $(546,415)
Adjustments for working capital and non-cash items:
Depreciation 51,414 55,750
Amortization of financing fees 30,000 75,380
Common stock issued for consulting services - 64,500
Net Changes in Assets & Liabilities
Accounts receivable (2,269,479) 272,019
Inventory (23,273) 7,337
Prepaid and sundry assets (353,849) 12,605
Deferred taxes (78,473) (77,314)
Accounts payable 1,682,146 45,000
Accrued severance 2,781 2,345
-----------------------
(1,180,428) (88,793)
-----------------------
Cash Flows from Investing Activities
Short term investments (290,354) -
Loans receivable (153,789) -
Acquisition of equipment, net (1,244) (356)
-----------------------
(445,387) (356)
-----------------------
Cash Flows from Financing Activities
Payments of deferred financing fees - (240,000)
Proceeds from loans payable - (77,342)
Proceeds from convertible debenture - net - (20,000)
Advances from shareholder loan - 81,144
Proceeds from common shares issued for repayment of convertible debenture - 310,000
Repurchase of employees' stocks - (105,185)
Loans payable (9,517) -
-----------------------
(9,517) (51,383)
-----------------------
Foreign Exchange on Cash and Cash Equivalents (60,721) 934
-----------------------
Net Decrease in Cash and Cash Equivalents (1,696,053) (139,598)
Cash and Cash Equivalents - beginning of year 3,489,449 281,387
-----------------------
Cash and Cash Equivalents - end of year $ 1,793,396 $ 141,789
=======================
During the year, the company had cash flows arising
from interest and income taxes paid as follows:
Interest paid $ 12,073 $ 51,469
=======================
Income taxes paid $ 23,432 $ -
(The accompanying notes to the financial statements are an integral part of these statements)
4
CINTEL CORP.
Notes to Consolidated Financial Statements
March 31, 2006 and 2005
1. Operations and Business
Cintel Corp., formerly Link2 Technologies, Inc. ("the Company"), was
incorporated in the State of Nevada on August 16, 1996 and on April 24,
2001 changed its name from "Great Energy Corporation International" to
Link2 Technologies, Inc. On September 30, 2003 the Company changed its
name to Cintel Corp.
On September 30, 2003, the Company entered into a definitive Share
Exchange Agreement (the "Agreement") with Cintel Co., Ltd., ("Cintel
Korea") a Korean corporation and its shareholders. The Agreement provided
for the acquisition by the Company from the shareholders of 100% of the
issued and outstanding capital stock of Cintel Korea. In exchange, the
shareholders of Cintel Korea received 16,683,300 shares of the Company. As
a result, the shareholders of Cintel Korea controlled 82% of the Company.
While the Company is the legal parent, as a result of the
reverse-takeover, Cintel Korea became the parent company for accounting
purposes.
Upon completion of the share exchange, the business operations of Cintel
Korea constituted virtually all of the business operations of the Company.
Cintel Korea develops network solutions to address technical limitations
to the Internet. Cintel Korea has developed what it believes is the first
Korean server load balancing technology. Cintel Korea is now focused on
the development of advanced solutions for Internet traffic management. The
business operations of Cintel Korea are located in Seoul, Korea.
2. Summary of Significant Accounting Policies
The accounting policies of the Company are in accordance with generally
accepted accounting principles of the United States of America, and their
basis of application is consistent. Outlined below are those policies
considered particularly significant:
a) Basis of Financial Statement Presentation
These financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of
America with the assumption that the Company will be able to realize
its assets and discharge its liabilities in the normal course of
business.
b) Basis of Consolidation
The merger of the Company and Cintel Korea has been recorded as the
recapitalization of the Company, with the net assets of the Company
brought forward at their historical basis. The intention of the
management of Cintel Korea was to acquire the Company as a shell
company listed on NASDAQ. Management does not intend to pursue the
business of the Company. As such, accounting for the merger as the
recapitalization of the Company is deemed appropriate.
c) Unit of Measurement
The US Dollar has been used as the unit of measurement in these
financial statements.
5
CINTEL CORP.
Notes to Consolidated Financial Statements
March 31, 2006 and 2005
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) Revenue Recognition
The Company recognizes revenues upon delivery of merchandise sold,
and when services are rendered for maintenance contracts.
f) Cash and Cash Equivalents
Cash includes currency, cheques issued by others, other currency
equivalents, current deposits and passbook deposits. Cash
equivalents include securities and short-term money market
instruments that can be easily converted into cash. The investments
that mature within three months from the investment date are also
included as cash equivalents.
g) Investments
Investments in available-for-sale securities are recorded in
accordance with FAS-115 "Accounting for Certain Investments in Debt
and Equity Securities". Equity securities that are not held
principally for the purpose of selling in the near term are reported
at fair market value when it is readily determinable, with
unrealized holding gains and losses excluded from earnings and
reported as a separate component of stockholders' equity.
Investments subject to significant influence have been recorded
using the equity method.
h) Inventories
Inventories are stated at the lower of cost or net realizable value.
Net realizable value is determined by deducting selling expenses
from selling price.
The cost of inventories is determined on the first-in first-out
method, except for materials-in-transit for which the specific
identification method is used.
i) Equipment
Equipment is stated at cost. Major renewals and betterments are
capitalized and expenditures for repairs and maintenance are charged
to expense as incurred. Depreciation is computed using the
straight-line method over a period of 5 years.
6
CINTEL CORP.
Notes to Consolidated Financial Statements
March 31, 2006 and 2005
2. Summary of Significant Accounting Policies (cont'd)
j) Government Grants
Government grants are recognized as income over the periods
necessary to match them with the related costs that they are
intended to compensate.
k) Currency Translation
The Company's functional currency is Korean won. Adjustments to
translate those statements into U.S. dollars at the balance sheet
date are recorded in other comprehensive income.
Foreign currency transactions of the Korean operation have been
translated to Korean Won at the rate prevailing at the time of the
transaction. Realized foreign exchange gains and losses have been
charged to income in the year.
l) Financial Instruments
Fair values of cash equivalents, short-term and long-term
investments and short-term debt approximate cost. The estimated fair
values of other financial instruments, including debt, equity and
risk management instruments, have been determined using market
information and valuation methodologies, primarily discounted cash
flow analysis. These estimates require considerable judgment in
interpreting market data, and changes in assumptions or estimation
methods could significantly affect the fair value estimates.
m) Income Tax
The Company accounts for income taxes pursuant to SFAS No. 109,
"Accounting for Income Taxes". Deferred taxes are provided on a
liability method whereby deferred tax assets are recognized for
deductible temporary differences, and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences
are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by
a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the
date of enactment.
n) Earnings or Loss per Share
The Company adopted FAS No.128, "Earnings per Share" which requires
disclosure on the financial statements of "basic" and "diluted"
earnings (loss) per share. Basic earnings (loss) per share is
computed by dividing net income (loss) by the weighted average
number of common shares outstanding for the year. Diluted earnings
(loss) per share is computed by dividing net income (loss) by the
weighted average number of common shares outstanding plus common
stock equivalents (if dilutive) related to stock options and
warrants for each year.
7
CINTEL CORP.
Notes to Consolidated Financial Statements
March 31, 2006 and 2005
2. Summary of Significant Accounting Policies (cont'd)
o) Concentration of Credit Risk
SFAS No. 105, "Disclosure of Information About Financial Instruments
with Off-Balance Sheet Risk and Financial Instruments with
Concentration of Credit Risk", requires disclosure of any
significant off-balance sheet risk and credit risk concentration.
The Company does not have significant off-balance sheet risk or
credit concentration. The Company maintains cash and cash
equivalents with major Korean financial institutions.
The Company's provides credit to its clients in the normal course of
its operations. It carries out, on a continuing basis, credit checks
on its clients and maintains provisions for contingent credit losses
which, once they materialize, are consistent with management's
forecasts.
For other debts, the Company determines, on a continuing basis, the
probable losses and sets up a provision for losses based on the
estimated realizable value.
Concentration of credit risk arises when a group of clients having a
similar characteristic such that their ability to meet their
obligations is expected to be affected similarly by changes in
economic conditions. The Company does not have any significant risk
with respect to a single client.
p) Recent Accounting Pronouncements
In 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.
8
CINTEL CORP.
Notes to Consolidated Financial Statements
March 31, 2006 and 2005
3. Cash and Cash Equivalents
In 2005, the company provided $136,738 as security for one of the bank
loans as described in note 9. As at March 31, 2005, the amount of loan
outstanding was $615,321. In 2006, the bank loan was repaid.
4. Inventory
Inventory includes $334,705 (2005 - $18,752) of merchandise and $154,312
(2005 - $271,280) of raw materials.
5. Loans Receivable
Loans receivable are comprised of the following;
2006 2005
---- ----
Loan receivable #1 $ 51,450 $ -
Loan receivable #2 102,908 -
-----------------------------
$ 154,358 $ -
=============================
Loan receivable #1 to a private Korean company is non-interest bearing and
matures on May 12, 2006. The loan is due on demand and secured by a
personal guarantee and the shares of the chief executive officer of the
indebted company.
Loan receivable #2 to the chief executive officer of the indebted company
per loan receivable #1 bears interest at 6% per annum, and is due on
demand. The loan is secured by 100% of the shares of a new private company
incorporated in March 2006.
9
CINTEL CORP.
Notes to Consolidated Financial Statements
March 31, 2006 and 2005
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 2006 and 2005 are 16.5 percent of the first 100 million
Korean Won ($84,000) 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 $7,054,794 of
taxable losses, which can be used to offset future taxable income. The
utilization of the losses expires in years 2008 to 2010.
Under SFAS No. 109 income taxes are recognized for the following: a)
amount of tax payable for the current year, and b) deferred tax
liabilities and assets for future tax consequences of events that have
been recognized differently in the financial statements than for tax
purposes. The Company has deferred income tax assets arising from research
and development expenses. For accounting purposes, these amounts are
expenses when incurred. Under Korean tax laws, these amounts are deferred
and amortized on a straight-line basis over 5 years.
The Company has deferred income tax assets as follows:
2006 2005
---- ----
Deferred income tax assets
Research and development expenses amortized
over 5 years for tax purposes $ 258,646 231,788
Other timing differences (53,810) 155,522
Net operating loss carryforwards 1,799,654 838,868
-----------------------
2,004,490 1,226,178
Valuation Allowance 657,039 212,833
-----------------------
$ 1,347,451 1,013,345
=======================
10
CINTEL CORP.
Notes to Consolidated Financial Statements
March 31, 2006 and 2005
7. Investments Available for Sale
2006 2005
Stock #1 $ 2,572,624 $ -
Stock #2 51,453 48,835
Other miscellaneous 273 259
-----------------------------
$ 2,624,350 $ 49,094
=============================
Stock #1 represents 500,000 shares, 20% ownership in a private Korean
company. As the financial statement of the investee are not readily
available, income from the investment has not been recorded.
Stock #2 represents a minority interest in a private Korean company which
is carried at cost.
8. Equipment
Equipment is comprised as follows:
2006 2005
---- ----
Accumulated Accumulated
Cost Depreciation Cost Depreciation
--------------------------------------------------
Furniture and fixtures 69,725 33,757 38,484 25,494
Equipment 882,442 642,223 640,866 522,833
Vehicles 17,281 864 15,117 15,115
Software 715,833 456,125 674,467 292,274
--------------------------------------------------
$1,685,281 $ 1,132,969 $1,368,934 $ 855,716
--------------------------------------------------
Net carrying amount $ 552,312 $ 513,218
----------- ------------
11
CINTEL CORP.
Notes to Consolidated Financial Statements
March 31, 2006 and 2005
9. Loans Payable
2006 2005
---- ----
Current Long-term Total Total
------------------------------------------
Bank loan $617,430 $ - $617,430 $1,220,875
Promissory Note 39,000 - 39,000 39,000
Note payable 6,380 - 6,380 309,790
Government loans - 40,589 40,589 100,891
Discount of interest-free
government loans - (8,415) (8,415) (9,339)
Vehicle Loan 3,979 6,947 10,926 -
------------------------------------------
$666,789 $ 39,121 $705,910 $1,661,217
==========================================
Bank Loan
The bank loan bears interest at 7.5% and matures in December 2006. The
loan is repayable upon maturity and guaranteed by the Korea Credit
Guaranteed Fund for $524,816.
Promissory Note
The promissory note is non-interest bearing, unsecured, and due on demand.
Note Payable
The note payable is non-interest bearing and due on August 24, 2006.
Government Loan
The loan is non-interest bearing, unsecured, repayable in annual payments
of $10,143 and matures in October 2009.
Vehicle Loan
The loan is interest bearing, secured by the vehicle as disclosed in note
8, and is repayable in 36 monthly installments of $331. The loan matures
in December 2008.
12
CINTEL CORP.
Notes to Consolidated Financial Statements
March 31, 2006 and 2005
10. 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 debentures outstanding as at March 31, 2006 are unsecured
and non-interest bearing. The debenture holders have sixteen months from
the date of their agreements (the conversion date) to convert their
debentures into common stock of the company. Balances outstanding after
the conversion date are repayable twenty months after the conversion date
(or thirty six months after the date of the agreements).
Conversion Conversion
Price Date Maturity date Amount
-------------------------------------------------
Convertible note #1 $ 0.35 6/15/2007 12/15/2008 $ 492,800
Convertible notes #2 0.04 4/17/2007 10/17/2008 440,000
Convertible notes #3 0.14 4/17/2007 10/17/2008 2,161,334
Convertible note #4 0.35 5/17/2007 11/17/2008 5,759,057
-------------------------------------------------
Total $8,853,191
==========
The two convertible debentures outstanding at March 31, 2005 had an annual
coupon rate of 12% and 5%. The convertible debentures were repaid in 2005.
13
CINTEL CORP.
Notes to Consolidated Financial Statements
March 31, 2006 and 2005
11. Capital Stock
Authorized
300,000,000 common shares, par value $0.001 per share
2006 2005
---- ----
Issued
42,379,354 common shares (2005 - 30,324,680) $ 42,378 $ 30,324
==================
On September 30, 2003, the Company cancelled 4,800,000 shares of
common stock for no consideration. As well, the Company granted a 2
to 5 reverse stock split. The reverse split has retroactively been
taken into consideration in the consolidated financial statements an
the calculation of earnings per share. Subsequently, the Company
issued 16,683,300 common shares in exchange for 100% of the
outstanding shares of Cintel Co., Ltd.
In June 2004, 300,000 common shares were issued for consulting
services at the value of $33,000.
In June 2004, 300,000 common shares were issued for consulting
services at the value of $33,000.
In July 2004, 160,000 common shares were issued for consulting
services at the value of $12,800.
In August 2004, 50,000 common shares were issued for consulting
services at the value of $4,500.
In September 2004, 120,000 common shares were issued for consulting
services at the value of $9,600.
In September 2004, the Company increased its authorized capital from
50,000,000 common shares to 300,000,000 common shares.
In October 2004, 120,000 common shares were issued for consulting
services at the value of $14,400.
In November 2004, 170,000 common shares were issued for consulting
services at the value of $15,000.
In November 2004, 25,000,000 common shares were placed in escrow for
future conversion to repay the convertible debt.
14
CINTEL CORP.
Notes to Consolidated Financial Statements
March 31, 2006 and 2005
11. Capital Stock (cont'd)
In November 2004, the Company issued 412,286 common shares from
escrow upon the conversion of $20,000 of the convertible debentures.
In December 2004, the Company issued 1,763,214 common shares from
escrow upon the conversion of $40,000 of the convertible debentures.
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.
15
CINTEL CORP.
Notes to Consolidated Financial Statements
March 31, 2006 and 2005
11. Capital Stock (cont'd)
In June 2005, 150,000 common shares were issued for consulting
services at the value of $4,500.
In June 2005, the Company issued 3,268,031 common shares from escrow
upon the repayment of $80,000 of the convertible debenture.
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.
The balance of shares held in escrow in March 2006 of 10,837,180 was
returned to the company.
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:
2006 2005
---- ----
Interest rate 6.5% 6.5%
Expected volatility 70% 70%
Expected life in years 6 6
16
CINTEL CORP.
Notes to Consolidated Financial Statements
March 31, 2006 and 2005
11. 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 year ended December 31,
2005 and 2004.
The stock options have not been included in the calculation of the diluted
earnings per share as their inclusion would be antidilutive.
The following table summarizes the stock option activity during 2006 and
2005:
2006 2005
---- ----
Outstanding, beginning of year 106,000 106,000
Exercised - -
Cancelled - -
--------------------------
Outstanding, end of year 106,000 106,000
==========================
Weighted average fair value of options granted
during the year $ - $ -
==========================
Weighted average exercise price of common stock
options, beginning of year $ 0.62 $ 0.62
==========================
Weighted average exercise price of common stock
options granted in the year $ - $ -
==========================
Weighted average exercise price of common stock
options, end of year $ 0.67 $ 0.67
==========================
Weighted average remaining contractual life of
common stock options 1 years 2 years
==========================
17
CINTEL CORP.
Notes to Consolidated Financial Statements
March 31, 2006 and 2005
12. 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 office spaces' leases obligations which
expires in December 2006 and February 2007. Future minimum annual
payments (exclusive of taxes and insurance) under the leases are as
follows:
2006 $ 72,097
2007 2,000
----------
$ 74,097
==========
Rent expenses paid in 2006 and 2005 were $ 36,731 and $28,288
respectively.
c) On September 14, 2004, the Company entered into a Standby Equity
Distribution Agreement with US-based investment fund Cornell Capital
Partners LP. Under the terms of the agreement, Cornell has committed
to provide up to $5 million of funding to the Company over a 24
month period, to be drawn down at the Company's discretion through
the sale of the Company's common stock to Cornell. No amount was
outstanding as at March 31, 2006 ($240,000-2005).
18
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
Management believes the Internet Traffic Management ("ITM") market
continues to expand globally in the near future due to an increase in Web-based
applications, server based applications and more process intensive applications
in Web-based interfaces in the market. The Company can expect to show additional
revenue in the coming quarters with the strong relationships it has established
with its enterprise level customers. In accordance with the directive of the
Company's Board of Directors, management will use the balance of fiscal year
2006 to expand its products and markets. In the Korean market, the Company plans
to leverage its alliance with Hyundai HDS and expand the solution portfolio from
the single ITM solutions to include more enterprise IT solutions, including
security products with Hyundai HDS. We believe this partnership with HDS will
continue to enable growth for the Company in the current IT environment. The
Company is also taking steps to establish several business partnerships in the
United States. Additionally, the Company plans to study other markets to enter
where management believes the Company will be able to leverage its distribution
channels and product strengths.
The Company has selected "digital content with ITM" as a new target
market and plans to launch an online game business in 2006 to help boost sales
and secure growth within the Company. In December 2005 we applied for a game
server patent that will be used to manage traffic of online game servers. Our
strategy for online gaming is not to develop online games but to enter the
online game market by a potential acquisition of an online Korean game company.
As CinTel positions itself as an online game publisher CinTel plans to expand
into China, Japan, other Asian countries, Europe and North America with
additional licensing of qualified Korean online games.
RESULTS OF OPERATIONS
(Unit: USD)
3/31/2006 3/31/2005
Revenue 2,321,699 126,518
Cost of sales 2,188,029 111,678
Gross Profit 133,670 14,840
Expenses 481,093 505,179
Operating (Loss) (347,423) (490,339)
Loss Before Income Taxes (276,736) (623,729)
In the first quarter of 2006 and 2005 revenues totaled approximately
$2.32 million and approximately $0.13 million, respectively, which reflects
an increase of approximately $2.19 million, or an increase of 1,735%. The
main reason for this increase of revenue is attributable to the work with
the Republic of Korea Air Force for the supply of network equipment. The
Company
19
generated revenue of approximately $1.95 million from such work with
the Republic of Korea Air Force during the first quarter of 2006. In
addition, approximately $0.25 million of the revenue generated during the
first quarter of 2006 is derived from the global system integration project
in Hyundai Heavy Industries plants located in Kuwait, in consortium with KT
Corp. In the future, the Company expects significant new revenues to be
generated by opening up a new market with the products distributed by
Hyundai HDS and KT Corp. Strong strategic alliances with groups such as
Hyundai HDS and KT Corp will allow us to diversify our product offerings
with a more well rounded total IT solutions.
Cost of sales also increased significantly from $111,678 in the first
quarter of 2005 to $2,188,029 in the first quarter of 2006, and gross profit
increased from $14,840 in the first quarter of 2005 to $133,670 in the first
quarter of 2006. The increase in cost of sales and gross margins for the first
quarter of 2006 compared to the previous year was primarily attributable to the
relative increase in revenue. While revenue increased 1,735% the actual gross
profit only increased by 801%. This was due to the fact that some items in the
transactions were third party equipment with less gross margin that our product
line and thus there was less profit on their sale.
Despite our increase in revenues, our operating expenses decreased.
Total expenses for the first quarter of 2006 and 2005 totaled approximately
$0.48 million and approximately $0.51 million, respectively, resulting in a
decrease of 5%. The decrease in total expenses was primarily due to a reduction
of fixed charges through restructuring that mainly applied to sales and services
related to human resources within the Company. These changes included reduction
in staff, reductions in entertainment fees, reductions in travel expenses and
reductions in office equipment purchases.
The operating loss for the first quarter of 2006 and 2005 totaled
$0.35 million and $0.49 million respectively due primarily to the increase of
gross profit and decrease of expenses discussed above. Total loss before income
taxes the first quarter of 2006 and 2005 totaled $0.28 million and $0.62 million
respectively due to the increase of interest and other income and decrease of
interest expense.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2006, CinTel had cash and cash equivalents totaling
$1.79 million. At March 31, 2006, the Company had a working capital surplus of
$3,608,697 and an accumulated deficit of $6,647,960. Management believes it has
the resources necessary to maintain its current business operations for at least
twelve months from the date this report was filed.
CASH FLOWS FROM OPERATING ACTIVITIES
During the first quarter of 2006, cash flow from operating activities
had a net reduction of approximately $1.18 million. The main reason for this
reduction of cash is attributable to the increase of accounts receivable,
inventory, advance payments in spite of the decrease net loss. Almost all the
accounts receivable occured in the first quarter and collect to the next
quarter. So, the company expects that cash flow will get better to the next
quarter. Inventory and Advanced payments were increased by more "just in time"
ordering of technology parts for equipment.
CASH FLOWS FROM INVESTING ACTIVITIES
During the first quarter of 2006, cash flow from investing operating
activities had a net reduction approximately $0.45 million where we had no
numbers in 2005. The main reason for this reduction of cash is attributable to
the increase of the Short term investments and Loans receivable. The Short term
investments could be disposed at any time in marketing aspect and the Loans the
receivable collected sooner or later.
CASH FLOWS FROM FINANCING ACTIVITIES
During the first quarter of 2006, cash flow from financing activities
had a net reduction approximately $9,517. During the first quarter of 2006 we
had limited cash flows from financing activities.
20
BUSINESS TRENDS
The ITM market is currently undergoing rapid transformation from a pure
caching appliance environment to a convergence of more enterprise network
traffic and application management features such as SSL VPN, Application
Acceleration (Web-enabled), WAN optimization, Firewall and Content Security. The
Company must incorporate these functions into its current product line to better
compete in the marketplace.
Wireless ISP market access penetration is rapidly increasing in North
America as wireless and broadband technologies are being deployed. As the
standards are agreed upon, and as the new business models begin to surface
broadband access penetration will become ubiquitous and will open up new
business opportunities for companies like the Company and others in this space.
The Korean game industry is quit unique in the world market. According
to our research the market share of Korean video games, which are strong in the
USA and Japan, is just 3.8% and ranked as 8th in the world. But the global
market share of Korean online games is almost 70% (including exports to oversea
markets like Japan and China) and 100 million users in over 33 countries are
enjoying Korean online games. (Source: News clipping of Daily Sports ("Ilgan
Sports"), 10-25-2005)
Online gaming is strong in Asian countries like Korea, Taiwan and
China, but the online game market in the USA and Japan is expected to grow
gradually as broadband services are becoming affordable and available. Current
online game market in USA relies on business model of advertisement, sponsor and
e-commerce through casual gaming portal site. (Source: A Study On Global Digital
Contents - game by KIPA (Korea IT Industry Promotion Agency 2003). According to
our research it is expected that the USA online game market will grow to as much
as $2.6 billion by the year 2007. (Source: 10/2003: Datamonitor, `Global Online
games' 7/2002, IDC, Online game forecast 2002-2007). And the online game market
in Europe is also expected to grow gradually as broadband is becomes more
popular.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off balance sheet arrangements that are reasonably
likely to have a current or future effect on our financial condition, revenues,
results of operations, liquidity or capital expenditures.
SIGNIFICANT ACCOUNTING POLICIES
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.
21
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.
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.
As of the end of the period covered by this report, we conducted an
evaluation, under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange
Act). Based upon this evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures are
effective to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is: (1) accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required
disclosure; and (2) recorded, processed, summarized and reported, within the
time periods specified in the Commission's rules and forms. There was no change
to our internal controls or in other factors that could affect these controls
during our last fiscal quarter that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
PART II
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.
22
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)
23
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)
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)
31.1 Certification by Chief Executive Officer, required by Rule
13a-14(a) or Rule 15d-14(a) of the Exchange Act
24
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
25
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: May 22, 2006 By: /s/ Sang Don Kim
---------------------------------
Sang Don Kim
Chief Executive Officer
Dated: May 22, 2006 By: /s/ Kyo Jin Kang
---------------------------------
Kyo Jin Kang
Principal Financial Officer and
Principal Accounting Officer
26