CHUN CAN CAPITAL GROUP - Quarter Report: 2008 March (Form 10-Q)

Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(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, 2008

¨ TRANSITION REPORT UNDER SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________

COMMISSION FILE NUMBER: 333-100046

CINTEL CORP.

(Name of registrant in its charter)

Nevada

(State or other jurisdiction of incorporation or organization)

52-2360156

(I.R.S. Employer Identification No.)

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

(Address of principal executive offices) (Zip Code)

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

Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares of registrant’s common stock outstanding, as of May 14, 2008 was 97,825,196.

CINTEL CORP.

INDEX

PART I: FINANCIAL INFORMATION
ITEM 1:	FINANCIAL STATEMENTS (Unaudited)	1
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations	7
	Condensed Consolidated Statements of Cash Flows	10
	Notes to the Condensed Consolidated Financial Statements	12
ITEM 2:	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	34
ITEM 3:	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	38
ITEM 4:	CONTROLS AND PROCEDURES	38
PART II: OTHER INFORMATION
Item 1	LEGAL PROCEEDINGS	38
ITEM 1A:	RISK FACTORS	38
ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	38
ITEM 3	DEFAULTS UPON SENIOR SECURITIES	38
ITEM 4	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	39
ITEM 5	OTHER INFORMATION
ITEM 6:	EXHIBITS	39
SIGNATURES		43

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CINTEL CORP. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

CINTEL CORP. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

CONTENTS	PAGE

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	3

FINANCIAL STATEMENTS:

Consolidated Interim Balance Sheets	5

Consolidated Interim Statements of Operations and Comprehensive Loss	7

Consolidated Statements of Stockholders’ Equity	9

Consolidated Interim Statements of Cash Flows	10

Notes to Consolidated Financial Statements	12 - 33

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Cintel Corp. and the Subsidiaries

We have reviewed the accompanying consolidated interim balance sheets of Cintel Corp. and Subsidiaries (the "Company") as of March 31, 2008 and the related consolidated interim statements of operations and comprehensive loss, stockholders' equity, and cash flows for the three month ended March 31, 2008. These consolidated interim financial statements are the responsibility of the Company's management.

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

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

The financial statements as of March 31, 2007, were reviewed by other accountants, whose report dated June 7, 2007, that they were not aware of any material modifications that should be made to those statements in order for them to be in conformity with generally accepted accounting principles.

Kim & Lee Corporation

Los Angeles, California

May 9, 2008

CINTEL CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

MARCH 31, 2008 AND 2007

(UNAUDITED)

ASSETS
			Restated (Note 20)
	2008		2007
Current assets:
Cash and cash equivalents (Note 2)	$	32,839,823	$	4,958,888
Investments - short-term (Note 6)		12,160,529		-
Accounts receivable, net (Note 2)		31,150,805		5,829,031
Inventories (Note 3)		19,459,524		6,959,950
Loans receivable - current (Note 4)		17,816,216		212,600
Prepaid and other current assets (Note 5)		30,560,720		1,048,214

Total current assets		143,987,617		19,008,683

Property, plant and equipment, net (Note 7)		113,307,269		30,116,133

Other assets:
Loans receivable, net of current portion (Note 4)		5,673,776		151,508
Investments in securities (Note 6)		36,421,841		2,440,802
Land rights (Note 8)		331,552		356,775
Intangible assets (Note 9)		28,064,927		7,740,271
Security deposits		6,870,649		-

Total other assets		77,362,745		10,689,356

Total assets	$	334,657,631	$	59,814,172

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

CINTEL CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

MARCH 31, 2008 AND 2007

(UNAUDITED)

LIABILITIES AND STOCKHOLDERS’ EQUITY
				Restated (Note 20)
	2008			2007
Current liabilities:
Accounts payable	$	32,470,682		$	16,044,058
Accrued expenses		9,359,565			-
Deferred revenue		9,008,160			-
Notes payable, current (Note 10)		84,408,671			10,746,058
Advance from shareholder (Note 15)		-			282,758
Other current liabilities		2,607,083			-

Total current liabilities		137,854,161			27,072,874

Long-term liabilities:
Accrued severance benefits (Note 11)		4,114,597			88,449
Notes payable, net of current portion (Note 10)		33,542,736			4,206,219
Convertible debentures (Note 12)		112,536,245			15,284,295

Long-term liabilities		150,193,578			19,578,963

Total liabilities		288,047,739			46,651,837

Non-controlling interest		44,158,345			8,655,613

Commitments and contingencies (Note 19):

Stockholders' equity: (Note 14)
Common stocks: 300,000,000 shares authorized, par value $0.001 per share, 97,824,896 shares and 88,299,896 shares issued and outstanding, respectively		97,824			88,299
Additional paid-in capital		20,293,203			14,437,328
Treasury stock		-			(5,630	)
Accumulated other comprehensive income (loss)		2,436,213			(214,496	)
Accumulated deficit		(20,375,693	)		(9,798,779	)

Total stockholders' equity		2,451,547			4,506,722

Total liabilities and stockholders' equity	$	334,657,631		$	59,814,172

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

CINTEL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATION AND COMPREHENSIVE LOSS

THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(UNAUDITED)

	2008			Restated (Note 20) 2007
Revenues:
Finished goods	$	50,260,975		$	16,484,917
Merchandise		350,814			211,446
Services		2,035,130			978
		52,646,919			16,697,341
Cost of revenue:
Finished goods		49,096,772			16,160,910
Merchandise		303,682			207,639
Services		1,105,663			-
		50,506,117			16,368,549

Gross profits		2,140,802			328,792

Operating expenses:
General and administrative expenses		4,149,116			416,108
Research and development		-			10,630
Depreciation and amortization		286,286			100,397
		4,435,402			527,135

Loss from operations		(2,294,600	)		(198,343	)

Other income (expenses):
Interest income		760,145			133,349
Rental and other income		139,461			-
Net income from sale of assets		37,044			-
Interest expenses		(1,871,682	)		(253,152	)
Share of loss from equity investment		(430,249	)		-
Amortization of deferred financing fees		-			(90,000	)
Foreign currency transaction loss		(137,735	)		-
		(1,503,016	)		(209,803	)
Loss before income taxes and non-controlling interest		(3,797,616	)		(408,146	)

Income tax expense (Note 13)		(330	)		-
Non-controlling interest		1,202,225			66,909
		1,201,895			66,909

Net loss		(2,595,721	)		(341,237	)

Other comprehensive income (loss):
Foreign currency translation adjustments		(600,098	)		(47,658	)
Unrealized gain on investment		32,170			-
		(567,928	)		(47,658	)

Other comprehensive loss before non-controlling interest		(3,163,649	)		(388,895	)

(Continued)

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

CINTEL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATION AND COMPREHENSIVE LOSS

THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(UNAUDITED)

	2008			Restated (Note 20) 2007

Foreign currency translation adjustments - Non-controlling interest		(452,634	)		3,968

Total comprehensive loss	$	(3,616,283	)	$	(384,927	)

Loss per share - basic and diluted (Note 18)	$	(0.03	)	$	0.00

Weighted average number of common shares outstanding - basic and diluted		97,824,896			87,846,563

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

CINTEL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(UNAUDITED)

										Cumulative			Retained
					Additional					other			earnings
	Common stock				paid-in		Treasury			comprehensive			(Accumulated
	Shares		Amount		capital		stock			income (loss)			deficit)			Total
Balance, January 1, 2007		87,619,896	$	87,619	$	14,319,408	$	(5,630	)	$	(170,806	)	$	(9,343,747	)	$	4,886,844
Restatement adjustments (Note 20)		-		-		-		-			-			(113,796	)		(113,796	)
Restated Balance, January 1, 2007		87,619,896		87,619		14,319,408		(5,630	)		(170,806	)		(9,457,543	)		4,773,048
Issuance of shares for consulting services (Note 14)		580,000		580		98,020		-			-			-			98,600
Issuance of shares for employee remuneration (Note 14)		100,000		100		19,900		-			-			-			20,000
Restatement adjustment (Note 20)		-		-		-		-			-			113,796			113,796
Foreign currency translation adjustment		-		-		-		-			(43,690	)		-			(43,690	)
Net loss for the period		-		-		-		-			-			(455,032	)		(455,032	)
Balance, March 31, 2007		88,299,896	$	88,299	$	14,437,328	$	(5,630	)	$	(214,496	)	$	(9,798,779	)	$	4,506,722
Balance, January 1, 2008		97,824,896	$	97,824	$	20,293,203	$	-		$	3,004,141		$	(17,779,972	)	$	5,615,196
Unrealized gain on investment		-		-		-		-			32,170			-			32,170
Foreign currency translation adjustment		-		-		-		-			(600,098	)		-			(600,098	)
Net loss for the period		-		-		-		-			-			(2,595,721	)		(2,595,721	)

Balance, March 31, 2008		97,824,896	$	97,824	$	20,293,203	$	-		$	2,436,213		$	(20,375,693	)	$	2,451,547

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

CINTEL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(UNAUDITED)

	2008			Restated (Note 20) 2007
Cash flows from operating activities:
Net loss	$	(2,595,721	)	$	(341,237	)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation		286,286			972,173
Amortization of financing fees		-			90,000
Non-controlling interest’s share of loss		(1,202,225	)		(66,909	)
Common stocks issued for consulting services		-			118,600
Share of loss from investment		462,419			-
Net gain on sale of property		(37,044	)		-
(Increase) decrease in assets:
Accounts receivable		(12,752,246	)		(208,339	)
Other receivable		(7,538,010	)		-
Inventory		(4,751,388	)		(1,305,360	)
Prepaid expenses and other assets		(7,786,425	)		20,410
Security deposits		155,611			-
Increase (decrease) in liabilities:
Accounts payable		3,173,406			7,879,704
Deferred revenue		5,192,082			(113,793	)
Accrued expense		5,676,785			-
Accrued severance benefits		771,881			(8,955	)

Cash provided by (used in) operating activities		(20,944,589	)		7,036,294

Cash flows from investing activities:
Acquisition of investments in securities		-			(498,547	)
Proceeds from disposal of securities held for investment		9,554,845			-
Acquisition of property and equipment		(13,262,725	)		(5,047,672	)
Loan receivable		(13,212,533	)		(65,892	)
Acquisition of intangible assets		72,687			-
Changes in non-controlling interest		2,857,084			(3,968	)

Cash used in investing activities		(13,990,642	)		(5,616,079	)

Cash flows from financing activities:
Proceeds from convertible debenture		8,437,325			-
Proceeds from short and long-term notes		26,059,224
Advance from shareholder		-			282,758
Principal payments of notes payable		(879,244	)		(1,037,481	)

Cash provided by (used in) financing activities		33,617,305			(754,723	)

Net increase (decrease) in cash		(1,317,926	)		665,492

(Continued)

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

CINTEL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(UNAUDITED)

	2008			Restated (Note 20) 2007

Effect of foreign currency translation		(600,098	)		(43,692	)

Cash and cash equivalent - beginning of period		29,946,476			4,337,088

Restricted cash		4,811,371			-

Cash and cash equivalent - end of period	$	32,839,823		$	4,958,888

Supplemental Disclosure of Cash Flows Information:
Cash paid during the period for:

Interest	$	1,466,571		$	253,152

Income taxes	$	330		$	-

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

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

Note 1 - Nature of Business

Description of Business

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

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. By the agreement, the Company acquired 100% of the issued and outstanding capital stock of Cintel Korea and in return, the shareholders of Cintel Korea received 16,683,300 shares (equivalent to 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.

Cintel Korea, located in Seoul Korea, was in business of developing network solutions to improve technical limitations to the internet traffic. During 2007, Cintel Korea ceased the network solution operation due to lack of profitability.

On October 30, 2006, the Company entered into an Equity Purchase Agreement with STS Semiconductor & Telecommunications Co., Ltd. ("STS"), a Korean corporation, to acquire 51% of the total equity of Phoenix Semiconductor Telecommunication (Suzhou) Co., Ltd. ("PSTS") for $16,500,000. The purchase was financed through the proceeds raised from the sale of Cintel's convertible bonds in an aggregate of $15,284,295. Shareholders of PSTS made additional equity investments during the 1^st quarter of 2008. Accordingly, the Company contributed $4,896,000, which is proportionate to its current ownership, to PSTS and no change in ownership resulted from this additional investment.

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

On May 18, 2007, the Company entered into a Share Sale and Purchase Agreement to acquire 100% of the outstanding common stocks of Bluecomm Korea, Co. Ltd. (“Bluecomm”). Pursuant to the purchase agreement, the Company acquired 220,000 shares of Bluecomm for Korean Won 6,027,600,000 (approximately $6,483,100).

Bluecomm is a Korean based company engaged in the business of Customer Relationship Management (CRM) solution and consulting, call center operation, and database marketing. It also provides total solutions for call center outsourcing and Home Service Center (HSC) hosting. Bluecomm commenced its CRM related business in October 2005 and in June 2006 entered into an agreement with PizzaHut Korea to provide HSC and data base management operations services.

On August 27, 2007, the Company entered into a Share Purchase Agreement to acquire 50% of the total equity of Phoenix Digital Tech Co. Ltd. (“PDT”) for Korean Won 32,500,000,000 (approximately $34,700,000). The purchase was financed through the proceeds raised from the sale of Cintel's convertible bonds. PDT was incorporated in May 1992 and conducts its operations in Pyung Taek, Korea. PDT is in the business of designing, manufacturing and installing automated assembly line for Flat Panel Displays, and manufacturing and testing of PCB related equipment based on customers’ specification.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

Note 2 - Summary of Significant Accounting Policies:

The following summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, who is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

Basis of Financial Statement Presentation

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

Basis of Consolidation

The consolidated financial statements of the Company include the accounts of Cintel Corp., Cintel Korea, PSTS, Bluecomm, and PDT. The merger of the Company with Cintel Korea has been recorded as recapitalization of the Company, with the net assets of the Company brought forward at their historical basis. The purpose of Cintel Korea’s merger with the Company was to acquire a shell company listed on NASDAQ. Management does not intend to pursue the business of the Company. As such, accounting for the merger as recapitalization of the Company is deemed appropriate.

The acquisitions of PSTS, Bluecomm, and PDT have been accounted for by the purchase method, with the net assets of these companies brought forward at their fair market values.

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions include the carrying amount of property, plant and equipment, goodwill and intangible assets; valuation allowances for doubtful receivables and deferred tax assets; depreciation and amortizable lives; recoverability of inventories; and amounts recorded for contingencies. These estimates are often based on complex judgments and assumptions that management believes to be reasonable but are inherently uncertain and unpredictable. Actual results may differ from those estimates.

Foreign Currency Transactions and Translation

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statement of operations and comprehensive income.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

The functional currencies of the Company are the Korean Won (“KRW”) and Chinese RMB (“RMB”). Assets and liabilities of the Company are translated into U.S. dollars, in accordance with Statement of Financial Accounting Standards (“SFAS”) No 52, Foreign Currency Translation, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements are recorded as a separate component of accumulated other comprehensive income within stockholders’ equity.

Revenue Recognition

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

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

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

For the call centers revenue, the Company recognizes revenue at the end of the month for services rendered when the relating time costs can be reasonably determined.

Cash and Cash Equivalents

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

Cash deposits that are restricted as to withdrawal or pledged as security are disclosed separately and not included in the cash total for the purpose of the statements of cash flow. At March 31, 2008 and 2007, cash and cash equivalents include restricted cash of $4,133,274 and $80,046, respectively, pledged as security for a bank loan.

Accounts Receivable

Trade accounts receivable are presented at face value less allowance for doubtful accounts. The allowance for doubtful accounts is the Company’s best estimate of probable credit losses in the existing accounts receivable. The Company determines the allowance based on Company’s historical experience and review of specifically identified accounts and ageing data. The Company reviews its allowance for doubtful accounts periodically. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Accounts receivables are shown net of allowance of $1,432,024 and $1,130,408 as of March 31, 2008 and 2007, respectively.

Inventories

Raw materials and supplies are stated at the lower of cost or market where the cost is determined by using the first in first out weighted-average method on perpetual basis.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

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

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

Investments

Investments with original maturities of less than 90 days are considered cash equivalents, and all other investments are classified as short-term or long-term investments. Management determines the appropriate classification of investments at the time of purchase and reevaluates such designation as of each balance sheet date.

Investments in securities are recorded in accordance with Statement of Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities." Marketable securities that are bought and held principally for the purpose of selling them in near term are classified as trading securities and are reported at fair value with net unrealized gain or loss recognized in earnings available-for-sale investments are stated at fair value with net unrealized gain or loss reported in stockholders’ equity. Investments classified as held-to-maturity are carried at amortized cost in the absence of any other than temporary decline in value. Realized gains and losses, and declines in value determined from other than temporary are included in the statement of operations.

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

Property and Equipment

Property and equipment, including renewals and betterments, are stated at cost. Cost of renewals and betterment that extend the economic useful lives of the related assets are capitalized. Expenditures for ordinary repairs and maintenance are charged to expense as incurred.

Depreciation is provided using the straight-line method over the following estimated useful lives of the assets.

Buildings located in China	20 years
Buildings located in Korea	30 years
Machinery and equipment	5 - 10 years
Measuring equipment	5 years
Furniture and fixtures	5 years
Vehicles	5 years
Software	5 years
Landscaping	5 years
Structure	5 years

Gain or loss on sale or disposition of assets is included in the statement of operations.

Construction in progress (CIP) is stated at cost, which includes the cost of construction and other direct costs attributable to the construction. No provision for depreciation is made on construction in progress until such time as the relevant assets are completed and put into use. CIP at March 31, 2008 represents capitalized interest expense and other accumulated costs for the new manufacturing facilities under construction.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

Land Rights

Land right is stated at cost. Amortization is provided on a straight line basis over 50 years.

Government Grants

Government grants without obligation to repay are recognized as reduction of the depreciable basis of the assets that are associated with the grants.

Impairment of Long-Lived Assets

In accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets, long-lived assets, such as property and equipment, and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held for sale are presented separately in the appropriate asset and liability sections of the balance sheet.

Goodwill represents the excess of costs over fair value of assets of businesses acquired. Goodwill is not amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS No. 142, Goodwill and Other Intangible Assets. Goodwill is tested for impairment more frequently if events and circumstances indicate that the asset might be impaired.

For the periods ended March 31, 2008 and 2007, no events or circumstances occurred for which an evaluation of the recoverability of long-lived assets was required. There can be no assurance however, that market conditions will not change or demand for the Company’s products and services will continue, which could result in impairment of long-lived assets in the future.

Research and Development Costs

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

Fair Value of Financial Instruments

The carrying values of cash equivalents, accounts receivable, short-term and long-term investments, and short-term debt approximate fair value due to the short maturities of these instruments. 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.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

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, cash equivalents and short-term investments with major Korean financial institutions.

The Company provides credit to its customers in the normal course of operations. It carries out, on a continuing basis, credit checks of its customers, and maintains allowance for credit losses contingent upon management’s forecasts. For other receivables, the Company determines, on a continuing basis, the probable losses and sets up a provision for losses based on the estimated realizable value.

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

Income Taxes

The Company accounts for income taxes pursuant to SFAS No. 109, Accounting for Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. 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.

Comprehensive Income

The Company records its other comprehensive income under SFAS No. 130, Reporting of Comprehensive Income. SFAS 130 which establishes standards for reporting and presentation of comprehensive income and its components. The Company’s other comprehensive income represents unrealized gain or loss on available-for-sale marketable securities and foreign currency translation adjustment.

Earnings per Share

SFAS No. 128, “Earnings per Share” requires disclosure on the financial statements of basic and diluted earnings per share. Basic earning (loss) per share is computed by dividing the net earning (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted earning (loss) per share is determined using the weighted average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of common stock options and warrants.

Commitments and Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonable estimated.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

Recent Accounting pronouncements

In June 2006, the Financial Accounting Standard Board (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in the Company’s financial statements in accordance with SFAS No. 109. FIN 48 prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The provisions of FIN 48 are effective for the fiscal years beginning after December 15, 2006. The adoption of FIN 48 did not have a significant effect on its financial statements.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB No 108”). SAB No. 108 provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. Under SAB No. 108, the Company should quantify errors using both a balance sheet and income statement approach (“dual approach”) and evaluate whether either approach results in a misstatement that is material when all relevant quantitative and qualitative factors are considered. The adoption of SAB 108 did not have any impact on the Company’s financial statements.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS No. 159"), which permits entities to measure financial instruments and certain other items at fair value that are not currently required to be measured at fair value. An entity would report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The decision about whether to elect the fair value option is applied instrument by instrument, with a few exceptions; the decision is irrevocable; and it is applied only to entire instruments and not to portions of instruments. SFAS No. 159 requires disclosures that facilitate comparisons (a) between entities that choose different measurement attributes for similar assets and liabilities and (b) between assets and liabilities in the financial statements of an entity that selects different measurement attributes for similar assets and liabilities. SFAS No. 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year provided the entity also elects to apply the provisions of SFAS No. 157 "Fair Value Measurements.” Upon implementation, an entity shall report the effect of the first remeasurement to fair value as a cumulative-effect adjustment to the opening balance of retained earnings. Since the provisions of SFAS No. 159 are applied prospectively, any potential impact will depend on the instruments selected for fair value measurement at the time of implementation. The Company is currently evaluating the impact, if any, of the adoption of SFAS No. 159 on its financial statements.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

Note 3 - Inventories

Inventories consist of the following as of March 31:

	2008		2007

Raw materials	$	3,236,262	$	5,319,234
Work-in-process		11,842,720		518,734
Finished goods		3,229,647		-
Merchandise and supplies		1,150,895		1,121,982

Total	$	19,459,524	$	6,959,950

Note 4 - Loans Receivable

Loans receivable from unrelated companies were as follows as of March 31:

	2008		2007

Loan receivable from CNY, a private company in China. 7% interest, payable interest only in quarterly installments. Guaranteed by the shareholders of the debtor. Matures in January 2009.	$	156,471	$	151,508

Loans receivable from NIG, a private company in Korea. 9% interest, payable interest only in quarterly installments. Guaranteed by the shareholders of the debtor. Mature in April and August 2008.		3,641,508		-

Note receivable from Phoenix Holdings, a private company in Korea. 8% interest, payable interest only in quarterly installments. Matures in September 2008.		14,161,420		-

Loan receivable from unrelated private companies in Korea, unsecured, bears interest at 17% payable with principal upon maturity. The loan matured in June 2007.		-		212,600

Notes receivable from F&F Investment, a private company in Korea, 10.5%-12% interests, payable interest only in monthly and quarterly installments. Matures in December 2008 and September 2009.		5,057,650		-

Other short-term loans receivable		472,943		-

		23,489,992		364,108
Less: current portion		17,816,216		212,600

Loan receivable, net of current	$	5,673,776	$	151,508

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

Note 5 - Prepaid Expenses and Other Assets

Prepaid expenses and other current assets consist of the following as of March 31:

	2008		2007

Prepaid expenses	$	5,683,820	$	1,048,214
Receivables from sale of assets		3,625,693		-
Advance payments to vendors		14,454,712		-
Other current assets		6,796,495		-

Total	$	30,560,720	$	1,048,214

Note 6 - Investments

Short-Term Investments

The Company holds various time deposits and financial instruments with maturity of less than one year, and recorded them as short-term investments. The Company’s investment in the short-term instruments at March 31, 2008 was $12,160,529.

Investments in Debt and Equity Securities

Investment in non-marketable equity securities in which the Company has less than 20% interest and does not have the ability to exercise significant influence over the investee are initially recorded at cost. These investments are periodically reviewed for other than temporary impairment.

The Company’s investment in debt and equity securities at March 31, 2008 and 2007 were as follows:

	2008		2007

Investment in Cintel Systems Corp.	$	474,408	$	498,547
Convertible Debenture A (STS)		11,173,519		-
Pheonix Asset Management (fka Global Assets Inc.)		10,427,028		1,937,339
Investment in PluM Tech		202,306		-
We-Tech		1,340,909		-
East Gate		1,101,272		-
Phoenix Springs		3,034,590		-
Debt securities - bonds		219,907		-
Investment in equity securities held by subsidiaries		8,141,512		-
Other miscellaneous		306,390		4,916

Total	$	36,421,841	$	2,440,802

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

Convertible Debenture A

The debenture, issued in April 2007 and maturing on April 20, 2012, is non-interest bearing until the date of conversion. If the conversion right is not exercised within the conversion period, April 2008 until March 2012, interest will accrue at 8% annually. At any time within the conversion period, the bond may, at the option of the holder, be converted into common shares in the Company at the price of $8.60 (8,010 won). The conversion price will be adjusted based on the fair market value of the debtor's share. The adjustment shall be limited to a maximum of 30% of the conversion price. The debenture has been pledged as security for the Company’s own Convertible Debenture-B as stated in Note 12.

Note 7 - Property, Plant and Equipment

Property, plant and equipment consist of the following at March 31:

	2008		2007

Land	$	28,306,520	$	-
Buildings and improvements		34,812,621		11,148,501
Machinery and equipment		22,155,249		24,216,829
Furniture and fixtures		9,321,558		873,945
Vehicles		685,325		165,097
Software		230,771		754,682
Small tools		657,893		-
		96,169,937		37,159,054

Less: Accumulated depreciation		20,787,226		7,042,921
		75,382,711		30,116,133

Construction in progress		37,924,558		-

Property and equipment, net	$	113,307,269	$	30,116,133

Depreciation expenses for the periods ended March 31, 2008 and 2007 were $230,228 and $94,343, respectively.

Note 8 - Land Rights

The Company has an agreement with the government of the PRC for the use of land until February 14, 2054. According to the agreement, the Company is obligated to pay an annual management fee of approximately $2,400, and the land has to be used for manufacturing purposes. The Company has the right to apply for renewal by notifying the government no later than six months prior to the expiry of the agreement. The government has no obligation to approve the renewal application.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

The cost of the land right is capitalized and amortized over the life of the land right (50 years) on the straight-line method. The carrying value of land rights at March 31, 2008 and 2007 are summarized as follows:

	2008		2007

Land rights at cost	$	369,224	$	369,224
Less: Accumulated depreciation		37,672		12,449

Net carrying amount	$	331,552	$	356,775

Note 9 - Intangible Assets

Intangible assets consist of the following at March 31:

	2008		2007

Goodwill	$	26,592,993	$	7,740,271
Other intangible assets		1,471,934		-

Net carrying amount	$	28,064,927	$	7,740,271

Goodwill was recorded in connection with the Company’s acquisitions of foreign subsidiaries (PSTS, Bluecomm, and PDT, as described in Note 1) and represents the intangible benefits that the acquired businesses are expected to bring to the Company in the future by providing the Company the access to potential strategic customers and broadening the Company’s product/service offerings to its customers. Goodwill is not amortized for financial reporting purposes.

Other intangible assets include patents, technology rights and in-process research and development costs and are amortized over its estimated useful life of five years. Amortization expense on these intangible assets for the period ended March 31, 2008 was $56,058.

Note 10 - Notes Payable

Notes payable consist of the following at March 31:

	2008		2007

Note payable to Kong-Sang Bank of China, payable monthly interest only with interest at LIBOR plus 0.85%. The note is unsecured and matures in April 2008.	$	3,000,000	$	-

Note payable to Kong-Sang Bank of China, payable monthly interest only with interest at LIBOR plus 0.75%. The note is secured by real estate and equipment and matures in September 2008.		3,400,000		-

(Continued)

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

	2008		2007

Note payable to Kong-Sang Bank of China, payable monthly interest only with interest at LIBOR plus 0.75%. The note is unsecured and matures in October 2008.		3,903,367		-

Note payable to Min-Seng Bank of China, payable monthly interest only with interest at LIBOR plus 1.80%. The note is unsecured and matures in April 2009.		1,500,000

Note payable to Kong-Sang Bank of China, payable monthly interest only with interest at 6.14%. The note is unsecured and matured in April 2007.		-		3,234,893

Note payable to Kong-Sang Bank of China, payable monthly interest only with interest at 6.44%. The note is unsecured and matured in June 2007.		-		1,940,250

Note payable to Kong-Sang Bank of China, payable monthly interest only with interest at 5.68%. The note is secured by cash deposit of $2,836,087 and matured in April 2007.		-		2,730,811

Construction loan payable to China Construction Bank, payable quarterly installment of $447,551 with interest at bank prime. The note is secured by real estate and matures in July 2009.		-		4,479,144

Construction loan payable to China Construction Bank, payable quarterly installment of $250,000 with interest at LIBOR plus 1.18%. The note is secured by real estate and matures in July 2009.		-		2,500,000

Notes payable to Hana Bank of Korea, payable monthly interest only, with interest at 6.93% to 7.81%. The notes are secured by real property in Korea and mature on March 2008.		2,066,473		-

Notes payable to Shin-Han Bank of Korea, payable monthly interest-only, with interest at 5.95% to 6.43%. The notes are secured by real estate and mature in June and October 2008.		6,411,600		-

Notes payable to Nong Hyup Bank of Korea, payable monthly interest only, with interest at 4.1%. The notes are unsecured and mature in November 2008.		534,300		-

Notes payable to Citi Bank of Korea, payable monthly interest only with interest at 4.98% to 6.04%. The notes are secured by real estate and mature in July 2008.		9,445,554		-

Notes payable to Korea Exchange Bank, payable monthly interest only, with interest at 5.00% to 6.55%. The notes are unsecured and mature in October, November, and December 2008.		6,297,460		-

Note payable to Kook Min Bank of Korea, payable monthly interest only, with interest at 4.97%. The note is secured by a deed of trust covering the Company’s real property and matures in July 2008.		8,548,800		-

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

	2008		2007

Note payable to Citi Bank Korea, payable monthly interest-only, with interest at 5.56%. The note is secured by a deed of trust covering the Company’s real property and matures in October and November 2009.		14,732,120		-

Note payable to Citi Bank Korea, payable monthly interest-only. The note is classified as a long term debt due to its maturity.		6,069,180

Note payable to Sam Sung Electronics, bearing no interest. The note is secured by a deed of trust covering the Company’s real property and matures in December 2011.		681,767		-

Note payable to Industrial Bank of Korea, payable monthly interest only, with interest at 8%. The note is unsecured and matures in 2008.		11,265,508		-

Notes payable to Woori Bank, payable monthly interest only. The note is unsecured and matures in January 2009.		4,982,994		-

Notes payable to Industrial Bank of Korea, payable monthly interest only, with interest at 5.84%. The note is matures in 2008.		1,068,600		-

Notes payable to Industrial Bank of Korea, payable monthly interest only, with interest at 8.403%. The note is matures in February 2009.		4,551,885		-

Notes payable to Worri Bank of Korea, payable monthly interest only, with interest at 7.12%. The note is matures in April 2009.		5,057,650

Notes payable to Hana Bank of Korea, payable monthly interest only, with interest at 6.65%. The note is matures in 2008.		2,528,825		-

Notes payable to Korea Exchange Bank of Korea, payable monthly interest only, with interest at 7.72%. The note is matures in May 2008.		5,057,650		-

Notes payable to City Bank of Korea, payable monthly interest only, with interest at 1.88 to 2.29%. The note is matures in 2008.		2,906,563		-

Loan payable to local government with annual interest rate at 4.75%. The Loan is unsecured and classified as long term debt		67,408		-

Notes payable to Hana Bank of Korea, payable monthly interest only, with interest at 5.18%. The loan is secured by real estate. The note is matures in 2015.		1,517,295		-

Notes payable to Industrial Bank of Korea, payable monthly interest only, with interest at 4.7%. The note is matures in 2009 and 2010.		4,046,120		-

Notes payable to Shin Han Bank of Korea, payable monthly interest only, with interest at 3.77%. The loan is secured by real estate. The note is matures in 2011.		3,516,078		-

Loan payable to local government with annual principal payment of $10,422, bearing no interest. The loan is unsecured and matures in October 2009		18,500

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

	2008		2007

Other Long term notes payable of subsidiaries		4,775,710

Note payable to an unrelated party, bearing no interest. The note is unsecured and due on demand.		-		39,000

Loan payable to local government with annual principal payment of $10,422, bearing no interest. The loan is unsecured and matures in October 2009				28,179
		117,951,407		14,952,277

Less: current portion		84,408,671		10,746,058

Long-term debt	$	33,542,736	$	4,206,219

Following is a summary of principal maturities of notes payable over the next five years:

Years ending December 31,	Amount

2008	$	84,465,660
2009		26,293,056
2010		2,306,723
2011		1,300,828
2012 and thereafter		3,585,140

Total	$	117,951,407

Note 11 - Employee Severance Benefits

Employees and directors with one year or more of service are entitled to receive a lump-sum payment upon termination of their employment based on their length of service and rate of pay at the time of termination. Accrued severance benefits represent the amount which would be payable assuming all eligible employees and directors are to terminate their employment as of the balance sheet date. The accrued severance benefits at March 31, 2008 and 2007, were $4,114,597 and $88,449, respectively.

Note 12 - 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 liability at face values and no formal accounting recognition is assigned to the values inherent in the conversion features.

	2008		2007

Convertible debenture - A (Cintel)	$	15,284,295	$	15,284,295
Convertible debenture - B (Cintel)		64,920,000		-
Convertible debenture - C (Cintel)		10,820,000		-
Convertible debenture - D (PDT)		21,511,950		-

	$	112,536,245	$	15,284,295

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

Convertible Debenture -A

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

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

Convertible Debenture - B

The convertible debenture issued on April 12, 2007 will mature on April 12, 2012 and are convertible into shares of common stock of the Company, at the option of the holder, at a rate of $0.70 per share. The coupon rate of the bond is at the compounded interest rate of 2.3% per annum. If the bond is not converted during the period commencing on the issuance date through one month prior to the maturity date, interest accrues at 8% per annum.

The debenture agreement requires the Company to pursue to list its common stock on either NASDAQ, London Stock Exchange, Hong Kong Stock Exchange or Singapore Exchange Securities Trading Limited and use its best efforts to obtain such listing by October 31, 2009.

In the event that the Company does not secure such listing by October 31, 2009 for any reason not solely attributable to the holder of the debenture is entitled to exercise its put option to redeem the debenture at the face values and is also be entitled to receive interest on the outstanding principal balance of the debenture calculated at the compounded rate of 10% per annum.

In the case of the Company completes the listing process prior to the end of October of 2009, the holder is entitled, on or after the fourth anniversary of the issuance of the debenture, to exercise its put option to redeem the debenture at the face value plus interest at 8% per annum.

In case of the occurrence of default by the Company and if such default is not cured within 60 days, the holder is entitled to exercise its put option to redeem the debenture at the face value plus interest at 19% per annum.

The Company agreed to pledge as security all convertible bonds subscribed by the Company using the proceeds from the debenture. As of March 31, 2008, proceeds from the bond $11,173,519 is invested in convertible debenture issued by STS and these debentures have been pledged as security for this Convertible Debenture-B as stated in Note 6.

Convertible Debenture - C

The debenture was issued on April 12, 2007, with maturity on April 12, 2012, is convertible into shares of common stock of the Company, at the option of the holder at a rate of $0.70 per share. The coupon rate of the bond is at the rate of 2.3% per annum. If the bond is not converted during the period commencing on the issuance date through one month prior to the maturity date, interest accrues at the rate of 8% per annum.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

At any time during the period from November 1, 2009 to March 12, 2012, the holder is entitled to exercise its put option to redeem the debentures at the face value thereof, in which case the holder is entitled to interest at 8% per annum. Upon the occurrence of any event of default by the Company, the holder is entitled to exercise its put option to redeem the debentures at the face value if the default is not cured within 60 days, in which case the holder is entitled to receive interest at 19 % per annum.

Convertible Debenture - D

The debentures were issued by PDT in August, November, and December 2007, respectively, with maturities in December 2010 thru September 2012. These debentures are convertible into shares of common stock of PDT, at the option of the holders at a range of $80.15 to $96.17 per share. The coupon rate of the bonds ranges 0.0% to 2.4% per annum. If the bond is not converted during the period commencing on the issuance date through one month prior to the maturity date, interest accrues at the rate of 8% per annum.

At any time during the period from September 2007 to August 2012, the holders are entitled to exercise its put option to redeem the debentures at the face value thereof, in which case the holder is entitled to interest at 8% per annum. Upon the occurrence of any event of default by the Company, the holders are entitled to exercise its put options to redeem the debentures at the face value if the default is not cured within 60 days, in which case the holders are entitled to receive interest at 19 % to 20% per annum.

The convertible debentures have not been included in the calculation of the diluted (loss) per share as their inclusion would be anti-dilutive.

Note 13 - 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 subsidiaries in 2008 and 2007 are 16.5% of the first 100 million Korean Won ($105,700) of taxable income and 29.7% on the excess. For the United States operation, the corporate tax rates range from 10% to 34%. The company provided a valuation allowance equal to the deferred tax amounts resulting from the tax losses in the United States, as it is not likely that they will be realized. Tax losses from the Korean subsidiaries can be carried forward for five years to offset future taxable income. The U.S. tax losses can be carried forward for 15 to 20 years to offset future taxable income. The company has accumulated about $11,770,000 and $8,617,000 of taxable losses in its Korea and US operations, respectively. The utilization of the Korean losses expires in years 2008 to 2012 and the US losses in years 2019 to 2027.

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 and taxable losses carried forward. 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.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

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

The provision for income taxes for the periods ended March 31, 2008 and 2007 are summarized as follows:

	2008		2007
Current income tax provision:
US	$	-	$	-
Foreign taxes of subsidiaries		330		-
		330		-
Deferred income tax benefit:
US		-		-
Foreign taxes of subsidiaries		-		-

Income tax expense	$	330	$	-

The Company has deferred tax assets (liabilities) at March 31, 2008 and 2007 as follows:

	2008			2007

Research and development expenses amortized over 5 years for tax purposes	$	-		$	267,000
Other timing differences		488,043			253,000
Net operating loss carryforwards		2,803,750			2,287,000
		3,291,793			2,807,000
Valuation allowance		(3,291,793	)		(2,807,000	)

	$	-		$	-

Note 14 - Capital

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

In January 2005, 2,262,424 common shares were issued upon the conversion of $40,000 of convertible debentures.

In February 2005, 622,200 common shares were issued upon the conversion of $50,000 of convertible debentures.

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

In March 2005, 1,485,120 common shares were issued upon the conversion of $80,000 of convertible debentures.

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.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

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

In April 2005, 1,311,769 common shares were issued upon the conversion of $40,000 of convertible debentures.

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 debentures.

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

In May 2005, 2,333,551 common shares were issued upon the conversion of $70,000 of convertible debentures.

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

In June 2005, 3,268,031 common shares were issued upon the conversion of $80,000 of convertible debentures.

In July 2005, 704,225 common shares were issued upon the conversion of $20,000 of convertible debentures.

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, 145,252 common shares were issued upon the conversion of $38,492 of convertible debentures including interest.

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

In May 2006, 44,300,542 common shares were issued upon the conversion of $8,853,191 of convertible debentures including interest.

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

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

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

In June 2007, 825,000 common shares were issued for consulting services at the value of $319,400.

In July 2007, 1,200,000 common shares were issued for consulting services at the value of $486,000.

In October 2007, 7,000,000 shares of common stock to eight investors for a total of $4,900,000 at a price of $0.70 per share.

In December 2007, 500,000 common shares were issued for consulting services at the value of $160,000.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

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:

	2008			2007
Interest rate		6.5	%		6.5	%
Expected volatility		70	%		70	%
Expected life in years		5			6
Expected dividends		-			-

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

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

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

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

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

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 periods ended March 31, 2008 and 2007 and no option is outstanding at March 31, 2008.

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

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

The following table summarizes the stock option activity during the periods ended March 31,:

	2008		2007

Outstanding, beginning of period		-		106,000
Exercised		-		-
Cancelled		-		-
Expired		-		(106,000	)
Outstanding, end of period		-		-

Weighted average fair value of options granted during the period	$	-	$	-
Weighted average exercise price of options, beginning of period	$	-	$	-
Weighted average exercise price of options granted during the period	$	-	$	-
Weighted average exercise price of options, end of period	$	-	$	-
Weighted average remaining contractual life of common stock options		-		-

Note 15 - Related Party Transactions

Significant transactions with companies affiliated by common control for the period ended and as of March 31, 2008 and 2007 are summarized as follows:

	2008		2007

Accounts receivable from STS	$	7,080,366	$	2,210,384
Accounts receivable from BKLCD (fka We-Tech)	$	1,197,970	$	1,266,875
Accounts receivable from BKLS	$	-	$	-
Accounts payable to STS	$	-	$	9,669,402
Accounts payable to BKLCD (fka We-Tech)	$	-	$	2,475,410
Sales to STS	$	18,565,787	$	9,918.606
Sales to BKLCD (fka We-Tech)	$	323,579	$	2,298,188
Purchase from STS	$	1,689,186	$	13,338,851
Purchase from BKLCD (fka We-Tech)	$	-	$	1,821,825

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

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

Note 16 - Significant Concentration of Sales

For the period ended March 31, 2008, the Company’s subsidiary in China, PSTS, had a major customer which accounted for about 91% of the PSTS’s total revenue.

For the same period, PDT, a subsidiary in Korea, had three major customers which accounted for about 70% of the PDT’s total revenue.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

Note 17 - Appropriated Retained Earnings

The Company’s subsidiary in Korea, PDT, is required under the regulation of Restriction of Tax Reduction and Exemption Act in Korea, to appropriate a part of their net profits for statutory surplus reserve and reserve for technological development and business investment. For the statutory surplus reserve, an amount equivalent to 10% or more of the declared dividends is transferred to the reserve until the reserve reaches 50% of the registered capital of PDT. The reserve is not distributable as cash dividends but can be converted into capital upon approval of the Company.

Note 18 - Earnings per Share

The following reconciles the numerators and denominators of the basic and diluted per share computation for the periods ended March 31, 2008 and 2007:

	2008			2007
Numerator for basic and diluted earnings per share:
Net loss	$	(2,608,136	)	$	(341,237	)

Denominator:
Basic and diluted weighted average shares outstanding		97,824,896			87,846,563

Basic and diluted loss per share	$	(0.03	)	$	(0.00	)

Note 19- Commitments and Contingencies

(a)

The Company leases its premises under a non-cancellable lease agreement which will expire in December 2008. Future minimum annual payments (exclusive of taxes and insurance) under the lease are $29,647 in 2008. Rent expenses paid during the periods ended March 31, 2008 and 2007 were $23,699 and $39,828, respectively.

(b)

The Company is committed to pay interest of 8% or 10% on its convertible bonds payable, should PSTS, the Company’s subsidiary in China, fail to achieve the predetermined earnings threshold as disclosed in Note 12.

(c)

PSTS is committed to pay a management fee to the government of Republic of China of approximately $2,400 per annum for the use of land as disclosed in Note 8.

(d)

PSTS, in accordance with its Articles of Incorporation, has to maintain a minimum capital of $20,000,000.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2008 AND 2007

(UNAUDITED)

(e)

The Company's subsidiary in Korea, Bluecomm, is committed to vehicle lease obligations which expire in June, 2010. Future minimum annual payments (exclusive of tax and insurance) under the lease are as follows:

Years	Amount
2008	$	48,077
2009		64,103
2010		32,052
	$	144,232

(f)

The Company’s Korean subsidiary, PDT, has an outstanding commitment under standby letters-of-credit totaling approximately $5,000,000. This standby letter-of-credit was issued on behalf of affiliated companies.

Note 20 - Restatement of the 2007 Comparative Interim Financial Statements

Restatement dated June7, 2007

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

The effects of this restatement on the consolidated financial statements for the period ended March 31, 2007 with accountants’ review report dated May 11, 2007 were an increase in revenue from merchandise from $207,801 to $211,446, from finished goods from $16,298,317 to $16,484,917, an increase in cost of sales for merchandise from $204,100 to $207,639, and an increase in cost of sales for finished goods from $16,087,999 to $16,087,999 on the consolidated statements of operations and comprehensive loss.

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

CinTel Corp and its subsidiaries (“we,” “us,” or “our”) are a global provider of semiconductor packaging, display/semiconductor/factory automation related manufacturing equipments and facilities, and CRM/DBM services. Founded in 1997, we evolved from being an internet traffic management (“ITM”) solution provider to a semiconductor-focused company in 2006. We manufacture and supply a broad range of semiconductor packaging products that address the needs of advanced electronic devices and products. We also produce standardized equipments that are utilized for display and semiconductor industries. Our factory automation related manufacturing facilities provide customized in-line distribution systems. Our CRM/DBM operation services provide solutions and consulting service for customer relationship management.

We have established relationships with our customers worldwide such as Samsung Electronics, Hynix Semiconductor, and Fairchild Semiconductor in the semiconductor industry. Our customers in factory automation and display industry include Samsung Electronics, Samsung SDI, Samsung Techwin, and Samsung Corning Precision Glass. Our major customer in the CRM sector includes Pizza Hut Korea.

We currently have major operations in China and Korea with a production capacity increase planned with several expansions of current operations. In the first half of 2008, we will commence a major production expansion project in China to become a more rounded total semiconductor solution provider through the transfer of new high-end products and product diversification. In addition, we are currently building a new expanded manufacturing plant in Korea due to the current expansion of the semiconductor/display equipment and facility industry, especially in the automated in-line distribution facility sector.

Our subsidiaries include:

l	Phoenix Semiconductor Telecommunication (Suzhou) located in Suzhou, China , provides semiconductor package products in different groups of Dual, Quad and BGA.

Phoenix Digital Tech located in Kyungki-Do, Korea, provides manufacturing facilities and equipments for LCD, PDP (Plasma Display Panel) and semiconductor production. UB Precision, a subsidiary of Phoenix Digital Tech provides testing products such as LCD/OLED probe stations for display and probe card for semiconductor.

l	Bluecomm located in Daejeon, Korea, provides solutions for Customer Relationship Management (CRM) and related total solutions for call center outsourcing and Home Service Center hosting.

l	CinTel Korea located in Seoul, Korea produces and distributes our traditional base products in the Internet Traffic Management (ITM) sector.

Results of Operations

(Unit: USD)

	3/31/2008	3/31/2007
Revenue	52,646,919	16,697,341
Cost of sales	50,506,117	16,368,549
Gross Profit	2,140,802	328,792
Expenses	4,435,402	527,135
Operating (Loss)	(2,294,600)	(198,343)
Net (Loss)	(2,595,721)	(341,237)

The company is in the early stage of operations with its subsidiaries, as a result, much of the cost of revenue and operating expenses reflected in its consolidated financial statements are costs based on the integration of the acquired companies and assets that comprise its operations. Accordingly, the Company believes that, at the Company’s current stage of operations, period-to-period comparisons of results of operations are not meaningful.

The company generated revenues of approximately $52.6 million and approximately $16.7 million for the first quarter of 2008 and 2007, respectively, which reflect an increase of approximately $35.9 million, an increase of 215.3%. The majority of this increase, as compared to the previous year, resulted from the consolidating of the revenue of Bluecomm Co., Ltd (“Bluecomm”), Phoenix Digital Tech Co., Ltd (“PDT”) our new subsidiaries acquired in May and August 2007, respectively.

The gross revenue of PSTS for the first quarter of 2008 is $20.1 million. PSTS’ revenue is comprised of its two business divisions: Semiconductor Packaging (“PKG”) $6.4 million and Wafer $13.7 million. PSTS's main products are semiconductor packaging, NAND flash memory and printed board assembly.

The gross revenue of PDT for the first quarter of 2008 including its two subsidiaries is $30.8 million. PDT’s revenue is $13.9 million, which is comprised of its four business divisions: Factory Automation (“FA”) $11.7 million, Scriber (“SR”) $0.2 million, Screen Printer (“SP”) $1.7 million and Automated Optical Inspection (“AOI”) $0.3 million. The revenue of PDT’s two subsidiaries is $16.9 million, which is comprised of UB Precision $11.0 million and D-Networks $5.9 million. PDT’s main customer is Samsung Electronics Corporation, one the largest display product manufacturers in the world. It specializes in manufacturing facilities, such as automated facilities for LCD module assembly line, scriber and break in-line system and automated distribution line facilities.

Bluecomm’s gross revenue for the first quarter of 2008 is $1.7 million. Bluecomm provides customer relationship management services for Pizza Hut Korea, which includes call center operation for customer support.

The cost of sales for the first quarter of 2008 and 2007 was $50.5 million and $16.4 million, respectively, an increase of 208.56%, which is primarily attributable to the increase in revenues. Our gross margins for the first quarter of 2008 and 2007 increased from 2.0% to 4.1%.

Total expenses for the first quarter of 2008 and 2007 totaled approximately $4.4 million and approximately $0.5 million, respectively, resulting in an increase of $3.9 million or 741.4 %. The increase in the total expenses was primarily attributable to the consolidating of each subsidiary’s expenses.

The operating loss for the first quarter of 2008 and 2007 totaled $2.3 million and $0.2 million, respectively. The operating loss for the first quarter of 2008 was due to the increase in sales of low margin products of PDT and PSTS, which contribute to the majority of sales and the delayed sales of high margin products, which are planned after the second quarter of 2008.

The net loss for the first quarter of 2008 and 2007 totaled $2.6 million and $0.3million, respectively. The main reason for the increase in the net loss for the first quarter of 2008 is due to the interest expense borne by CinTel for its convertible debenture issuance, the interest expense borne by PDT for its bank loan regarding its plant expansion and the impairment loss on investment.

In summary, the company incurred the net loss due to a low operating result from its subsidiaries. However, the company expects to see the operating profit in 2008 based on the increased production driven by the plant expansion and the production line extension of subsidiaries.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2008 our cash balance was $32.8 million compared to $4.9 million at March 31, 2007. Total current assets at March 31, 2008 were $143.9 million compared to $19.0 million at March 31, 2007. We currently plan to use the cash balance and cash generated from operations for our growth through the acquisitions of semiconductor manufacturing company and for the investment of our subsidiaries on their operation and facility expansion.

For the three months ended March 31, 2008, net cash used in operating activities was $(20.9 million) as compared to $7.0 million for the three months ended March 31, 2007. The decrease in cash used in operating activities can be attributed to the increase in the account receivable, inventories and other receivable.

For the three months ended March 31, 2008, net cash used in investing activities was $(13.9 million), compared to net cash used in investing activities of $(5.6 million) for the three months ended March 31, 2007. The main reason for the decrease in cash used in investing activities was primarily attributed to the company’s subsidiaries’ purchasing of property and equipment.

For the three months ended March 31, 2008, net cash provided by Financing Activities was $33.6 million compared to $(0.8 million) for the three months ended March 31, 2007. The main reason for the increase in cash used in financing activities was primarily attributed to the increase of the company’s subsidiaries’ bank loan. We are growing as a semiconductor group by investing the funds into the acquisition of semiconductor manufacturing companies. In addition, our subsidiaries are planning to expand their facilities and plants for their future growth.

Off-Balance Sheet Arrangements

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

Significant Accounting Policies

Basis of Consolidation - The merger of the Company and CinTel Korea has been recorded as the recapitalization of the Company, with the net assets of the Company brought forward at their historical basis. The intention of the management of CinTel Korea was to acquire the Company as a shell company listed on NASDAQ. Management does not intend to pursue the business of the Company. As such, accounting for the merger as the recapitalization of the Company is deemed appropriate.

Currency Translation - The Company's functional currency is Korean won. Adjustments to translate those statements into U.S. dollars at the balance sheet date are recorded in other comprehensive income. Foreign currency transactions of the Korean operation have been translated to Korean Won at the rate prevailing at the time of the transaction. Realized foreign exchange gains and losses have been charged to income in the year.

Investments - Investments in available-for-sale securities are being recorded in accordance with FAS-115 "Accounting for Certain Investments in Debt and Equity Securities". Equity securities that are not held principally for the purpose of selling in the near term are reported at fair market value when it is readily determinable, with unrealized holding gains and losses excluded from earnings and reported as a separate component of stockholders' equity.

Allowance for credit loss

The allowance for credit losses is management’s estimate of incurred losses in our customer and commercial accounts receivables. Management performs detailed review of individual portfolios to determine if impairment has occurred and to assess the adequacy of the allowance for credit losses, based on historical and current trends and other factors affecting credit losses. When receivables are past due for a period exceeding 2 years, a 100% allowance for credit losses is established without an individual analysis of the customer. A 100% allowance for credit losses is established, in an amount determined to be uncollectible, for the customer whom is not discontinuing operations or is facing financial issues that could result in discontinuance of business based on the assumptions management believes are reasonably likely to occur in future.

On December 31, 2007, the allowance for credit losses was $1.9 million of $20.3 million in accounts receivables and on December 31, 2005, the allowance for credit losses was $1.1 million of $6.8 million of accounts receivables. The allowance for credit losses in 2007 saw an increase of $0.7 million (66%) compared to 2006. However, the allowance ratio for credit losses dropped from 16.9% to 9.3% since PDT and PSTS supplied products for large-sized corporations such as Samsung Electronics and Hynix Semiconductor satisfying their accounts is fairly certain. The company expects that the allowance for credit losses will continually decrease.

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.

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. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

n/a

ITEM 4T. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (1) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure; and (2) recorded, processed, summarized and reported, within the time periods 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 - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

There are no material changes from the risk factors previously disclosed in the Registrant’s Form 10-K filed on March 31, 2008.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

Exhibit Number		Description
2.1		Share Exchange Agreement, dated September 30, 2003, by and among the Company, CinTel Co., Ltd, and the shareholders of CinTel Co., Ltd. (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on September 30, 2003)
3.1		Articles of Incorporation (Incorporated by reference to the Company’s registration statement on Form SB-2 (File No. 333-100046), filed with the Securities and Exchange Commission on September 24, 2002)
3.2		Certificate of Amendment to Articles of Incorporation dated April 27, 2001 (Incorporated by reference to the Company’s registration statement on Form SB-2 (File No. 333-119002), filed with the Securities and Exchange Commission on September 15, 2004)
3.3		Certificate of Amendment to Articles of Incorporation dated October 21, 2003 (Incorporated by reference to the Company’s annual report on Form 10-KSB for the fiscal year ended December 31, 2003, filed with the Securities and Exchange Commission on April 14, 2004)
3.4		Certificate of Amendment to Articles of Incorporation dated September 13, 2004 (Incorporated by reference to the Company’s registration statement on Form SB-2 (File No. 333-119002), filed with the Securities and Exchange Commission on September 15, 2004)
3.5		Bylaws (Incorporated by reference to the Company’s registration statement on Form SB-2 (File No. 333-100046), filed with the Securities and Exchange Commission on September 24, 2002)
4.1		Standby Equity Distribution Agreement, dated August 4, 2004, between Cornell Capital Partners, L.P. and the Company (Incorporated by reference to the Company’s registration statement on Form SB-2 (File No. 333-119002), filed with the Securities and Exchange Commission on September 15, 2004)
4.2		$240,000 principal amount Compensation Debenture, due August 4, 2007, issued to Cornell Capital Partners, L.P., in connection with the Standby Equity Distribution Agreement (Incorporated by reference to the Company’s registration statement on Form SB-2 (File No. 333-119002), filed with the Securities and Exchange Commission on September 15, 2004)
4.3		Convertible Note in the principal amount of $40,000 issued to Sang Yong Oh (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 21, 2005)
4.4		Convertible Note in the principal amount of $400,000 issued to Tai Bok Kim (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 21, 2005)
4.5		Convertible Note in the principal amount of $9,640 issued to Meung Jun Lee (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005)
4.6		Convertible Note in the principal amount of $28,930 issued to Jin Yong Kim (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005)
4.7		Convertible Note in the principal amount of $48,300 issued to Su Jung Jun (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005)
4.8		Convertible Note in the principal amount of $48,300 issued to Se Jung Oh (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005)
4.9		Convertible Note in the principal amount of $48,300 issued to Sun Kug Hwang (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005)
4.10		Convertible Note in the principal amount of $192,864 issued to Woo Young Moon (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005)

4.11		Convertible Note in the principal amount of $336,000 issued to Joo Chan Lee (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005)
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 SeokKyu 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		Securities Purchase Agreement dated October 17, 2005 by and among CinTel Corp. and Sang Yon Oh (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 21, 2005)
10.2		Securities Purchase Agreement dated October 17, 2005 by and among CinTel Corp. and Tai Bok Kim (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 21, 2005)

10.3		Securities Purchase Agreement dated November 17, 2005 by and among CinTel Corp. and Meung Jun Lee (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005)
10.4		Securities Purchase Agreement dated November 17, 2005 by and among CinTel Corp. and Jin Yong Kim (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005)
10.5		Securities Purchase Agreement dated November 17, 2005 by and among CinTel Corp. and Su Jung Jun (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005)
10.6		Securities Purchase Agreement dated November 17, 2005 by and among CinTel Corp. and Se Jung Oh (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005)
10.7		Securities Purchase Agreement dated November 17, 2005 by and among CinTel Corp. and Sun Kug Hwang (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005)
10.8		Securities Purchase Agreement dated November 17, 2005 by and among CinTel Corp. and Woo Young Moon (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005)
10.9		Securities Purchase Agreement dated November 17, 2005 by and among CinTel Corp. and Joo Chan Lee (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005)
10.10		Securities Purchase Agreement dated November 17, 2005 by and among CinTel Corp. and Sang Ho Han (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005)
10.11		Securities Purchase Agreement dated November 17, 2005 by and among CinTel Corp. and Jun Ro Kim (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005)
10.12		Securities Purchase Agreement dated November 17, 2005 by and among CinTel Corp. and Tai Bok Kim (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2005)
10.13		Securities Purchase Agreement dated December 15, 2005 by and among CinTel Corp. and Tai Bok Kim (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005)
10.14		Securities Purchase Agreement dated December 15, 2005 by and among CinTel Corp. and Joo Chan Lee (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005)
10.15		Securities Purchase Agreement dated December 15, 2005 by and among CinTel Corp. and Sang Yong Oh (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005)
10.16		Securities Purchase Agreement dated December 15, 2005 by and among CinTel Corp. and JungMi Lee (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005)
10.17		Securities Purchase Agreement dated December 15, 2005 by and among CinTel Corp. and Sung Min Chang (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005)
10.18		Securities Purchase Agreement dated December 15, 2005 by and among CinTel Corp. and Eun Suk Shin (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005)
10.19		Securities Purchase Agreement dated December 15, 2005 by and among CinTel Corp. and Overnet Co., Ltd. (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005)
10.20		Securities Purchase Agreement dated December 15, 2005 by and among CinTel Corp. and Yeun Jae Jo (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005)
10.21		Securities Purchase Agreement dated December 15, 2005 by and among CinTel Corp. and Equinox Partners Inc. (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005)

10.22		Securities Purchase Agreement dated December 16, 2005 by and among CinTel Corp. and Kei Wook Lee (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 20, 2005)
10.23		Securities Purchase Agreement dated December 26, 2005 by and among CinTel Corp. and SeokKyu Hong (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 30, 2005)
10.24		Securities Purchase Agreement dated December 26, 2005 by and among CinTel Corp. and Moon Soo Park (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 30, 2005) Distribution Agreement dated March 15, 2006 among CinTel Corp. and InterSpace Computers, Inc. (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on May 3, 2006)
10.25		Convertible Bonds Subscription Agreement between the Company and Axlon Corporation dated October 24, 2006 (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 31, 2006)
10.26		Convertible Bonds Subscription Agreement between the Company and Emerging Memory & Logic Solutions, Inc. dated October 24, 2006 (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 31, 2006)
10.27		Convertible Bonds Subscription Agreement between the Company and KTB China Optimum Fund dated October 24, 2006 (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 31, 2006)
10.28		Convertible Bonds Subscription Agreement between the Company and STS Semiconductor & Telecommunications Co. Ltd. dated October 24, 2006 (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 31, 2006)
10.29		Stock Purchase Agreement by and between CinTel Corp and STS Semiconductor & Telecommunications Co., Ltd. (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 3, 2006)
10.30		Stock Purchase Agreement by and between CinTel Corp. and STS Semiconductor & Telecommunications Co. Ltd. (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 3, 2007)
10.31		Convertible Bonds Subscription Agreement entered into as of March 15, 2007 with Woori Private Equity Fund (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on March 15, 2007)
10.32		Share Subscription Agreement dated August 27, 2007 by and between Phoenix Digital Tech Co. Ltd. (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on August 31, 2007)
10.33		Share Subscription Agreement dated as of October 30, 2007 (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 5, 2007)
14.1		Code of Ethics (Incorporated by reference to the Company’s Form 10-K filed with the Securities and Exchange Commission on April 17, 2006)
16.1		Letter on change in certifying accountant (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission October 11, 2007)
21.1		Subsidiaries (Incorporated by reference to the Company’s Form 10-K filed with the Securities and Exchange Commission on March 31, 2008)
31.1*		Certification by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act
31.2*		Certification by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act
32.1*		Certification by Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code
32.2*		Certification by Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code

* Filed herewith.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 15, 2008

				CINTEL CORP.


			By:	/s/ Sang Don Kim
				Name: Sang Don Kim
				Title: Chief Executive Officer
				(Principal Executive Officer)


			By:	/s/ Kyo Jin Kang
				Name: Kyo Jin Kang
				Title: Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)