CHUN CAN CAPITAL GROUP - Quarter Report: 2009 September (Form 10-Q)

form10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

T QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009

¨ TRANSITION REPORT UNDER SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM __________ TO __________

COMMISSION FILE NUMBER: 333-100046

CINTEL CORP.

(Name of registrant in its charter)

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

433 N. Camden Drive, Suite 400, Beverly Hills, CA 90210

(Address of principal executive offices) (Zip Code)

Issuer’s telephone Number: (310)-887-1407

WITH COPIES TO:

Gregory Sichenzia, Esq.

Marcelle S. Balcombe, Esq.

Sichenzia Ross Friedman Ference LLP

61 Broadway, 32 nd Flr.

New York, New York 10006

(212) 930-9700

Indicate by check mark whether the registrant (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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o 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 November 22, 2009 was 95,300,196.

CINTEL CORP.

INDEX

PART I: FINANCIAL INFORMATION
ITEM 1:	FINANCIAL STATEMENTS (Unaudited)	3
	Consolidated Interim Balance Sheets	4
	Consolidated Interim Statements of Operations and Comprehensive Loss	5
	Consolidated Interim Statement of Stockholders' Equity	6
	Consolidated Interim Statements of Cash Flows	7
	Notes to the Consolidated Interim Financial Statements	9
ITEM 2:	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	31
ITEM 3 :	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	40
ITEM 4:	CONTROLS AND PROCEDURES	40
PART II: OTHER INFORMATION
Item 1	LEGAL PROCEEDINGS	40
ITEM 1A :	RISK FACTORS	40
ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	40
ITEM 3	DEFAULTS UPON SENIOR SECURITIES	40
ITEM 4	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	40
ITEM 5	OTHER INFORMATION	41
ITEM 6:	EXHIBITS	41
SIGNATURES		45

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CINTEL CORP. AND SUBSIDIARIES

CONSOLIDATED INTERIM BALANCE SHEETS

(In thousands, except per share and par value)

ASSETS

	September 30, 2009 (Unaudited)		December 31, 2008 (Audited)
Current assets:
Cash and cash equivalents	$	3,349	$	23,502
Short-term investments		23,149		17,116
Accounts receivable, net		15,674		19,554
Inventories		16,517		12,968
Notes receivable - affiliates		10,469		15,957
Prepaid and other current assets		6,308		12,382

Total current assets		75,466		101,479

Property, plant and equipment, net		99,937		98,415

Other assets:
Restricted cash		9,062		649
Notes receivable - affiliates, net of current		39		81
Investments		53,696		34,802
Goodwill		16,434		18,449
Other intangible assets, net		1,214		1,365
Security deposits		4,504		6,569

Total other assets		84,949		61,915

Total assets	$	260,352	$	261,809

See accompanying notes to consolidated financial statements.

CINTEL CORP. AND SUBSIDIARIES

CONSOLIDATED INTERIM BALANCE SHEETS

(In thousands, except per share and par value)

LIABILITIES AND STOCKHOLDERS’ DEFICIT

	September 30, 2009			December 31, 2008
Current liabilities:
Accounts payable	$	20,328		$	20,998
Accrued liabilities		5,020			4,610
Deferred revenue		4,606			13,394
Notes payable, current		100,322			82,761
Other current liabilities		38			244

Total current liabilities		130,314			122,007

Long-term liabilities:
Accrued severance benefits		1,234			1,065
Notes payable, net of current portion		17,246			25,485
Convertible debentures		117,293			111,809

Long-term liabilities		135,773			138,359

Total liabilities		266,087			260,366

Commitments and contingencies (Note 18)

Stockholders' deficit:
Noncontrolling interest		27,829			27,673

Common stocks: par value $0.001 per share, 300,000,000 shares authorized, 97,824,896 shares issued; 95,300,196 and 97,824,896 shares outstanding at September 30, 2009 and December 31, 2008, respectively		98			98
Additional paid-in capital		6,993			20,470
Treasury stock		(3,254	)		(3,264	)
Accumulated other comprehensive loss		(7,678	)		(8,295	)
Accumulated deficit		(29,723	)		(35,239	)

Total stockholders’ deficit		(33,564	)		(26,230	)

Total liabilities and stockholders' deficit	$	260,352		$	261,809

See accompanying notes to consolidated financial statements.

CINTEL CORP. AND SUBSIDIARIES

CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended September 30, 2009			(Adjusted) Three Months Ended September 30, 2008			Nine Months Ended September 30, 2009			(Adjusted) Nine Months Ended September 30, 2008
Revenues:
Finished goods	$	38,281		$	51,730		$	105,234		$	125,926
Merchandise		194			6,175			1,088			8,112
Services		331			960			678			4,678
		38,806			58,865			107,000			138,716
Cost of revenue:
Finished goods		37,567			50,970			102,472			120,520
Merchandise		308			6,022			1,053			7,760
Services		113			913			300			3,032
		37,988			57,905			103,825			131,312

Gross profits		818			960			3,175			7,404

Operating expenses:
General and administrative expenses		2,182			3,051			7,973			11,316
Depreciation and amortization		244			94			650			562
		2,426			3,145			8,623			11,878

Loss from operations		(1,608	)		(2,185	)		(5,448	)		(4,474	)

Other income (expenses):
Interest income		656			944			2,579			2,802
Other income (expenses)		1,784			1,107			1,741			724
Net gain (loss) from sale of assets		21			1			(97	)		16
Interest expenses		(2,412	)		(1,790	)		(7,175	)		(5,935	)
Share of income (loss) from equity investment		(2,837	)		252			(3,996	)		(268	)
Net gain from sale of investment		-			20			-			85
Unrealized holding gain on marketable securities		24			-			838			-
Foreign currency transaction, net		2,439			512			74			487
		(325	)		1,046			(6,036	)		(2,089	)

Loss before income taxes and non-controlling interest		(1,933	)		(1,139	)		(11,484	)		(6,563	)

Income tax expense (benefit)		665			419			500			531
Noncontrolling interest in loss of consolidated subsidiaries		(1,935	)		(846	)		(3,632	)		(1,966	)
		(1,270	)		(427	)		(3,132	)		(1,435	)

Net loss		(663	)		(712	)		(8,352	)		(5,128	)

(Continued)

See accompanying notes to consolidated financial statements.

CINTEL CORP. AND SUBSIDIARIES

CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except per share amounts)

(Continued)

	Three Months Ended September 30, 2009			(Adjusted) Three Months Ended September 30, 2008			Nine Months Ended September 30, 2009			(Adjusted) Nine Months Ended September 30, 2008
Other comprehensive income (loss):
Unrealized gain (loss) on investment		90			(70	)		(435	)		(100	)
Foreign currency translation adjustments		792			(9,424	)		1,127			(16,536	)
		882			(9,494	)		692			(16,636	)

Other comprehensive income (loss) before noncontrolling interest		219			(10,206	)		(7,660	)		(21,764	)

Unrealized loss on investment – noncontrolling interest		338			-			954			-

Foreign currency translation adjustments – noncontrolling interest		(1,789	)		176			(1,029	)		2,651

Total comprehensive loss	$	(1,232	)	$	(10,030	)	$	(7,735	)	$	(19,113	)

Loss per share – basic and diluted	$	(0.01	)	$	(0.01	)	$	(0.09	)	$	(0.05	)

Weighted average number of common shares outstanding - basic and diluted		95,300			97,399			95,309			97,399

See accompanying notes to consolidated financial statements.

CINTEL CORP. AND SUBSIDIARIES

CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except per share amounts)

	Nine Months Ended September 30,
	2009			Adjusted (Note 20) 2008

Cash flows from operating activities:
Net loss	$	(8,352	)	$	(5,128	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation		6,902			562
Amortization of intangible assets		307			-
Non-controlling interest’s share of loss		(5,896	)		(1,966	)
Common stock provided for professional services		11			-
Bad debt expense		701			211
Severance benefit		1,032			-
Share of loss from equity investment		15			369
Unrealized loss on investment		1,587			-
Net loss (gain) on sale of property		97			(16	)
Net gain on sale of investment		568			-
Foreign currency transaction		2,514			-
Other miscellaneous loss		599			-
(Increase) decrease in assets:
Accounts receivable		3,821			(7,158	)
Inventory		(3,011	)		(567	)
Prepaid expenses and other assets		6,070			(18,177	)
Security deposits		1,868			(43	)
Increase (decrease) in liabilities:
Accounts payable		(3,084	)		(3,126	)
Deferred revenue		(13,172	)		2,183
Accrued liabilities		1,112			843
Accrued severance benefits		(170	)		17
Other current liabilities		4,229			-

Cash used in operating activities		(2,252	)		(31,996	)

(Continued)

See accompanying notes to consolidated financial statements.

CINTEL CORP. AND SUBSIDIARIES

CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

	Nine Months Ended September 30,
	2009			Adjusted (Note 20) 2008

Cash flows from investing activities:
Acquisition of investments in securities		(64,220	)		-
Proceeds from sale of investment in securities		26,187			1,093
Acquisition of property and equipment		(4,749	)		(355	)
Proceeds from disposal of property and equipment		780			-
Payments on loan receivable		(12,966	)		890
Proceeds from loan receivable		21,415			-
Acquisition of intangible assets		(21	)		-
Changes in non-controlling interest		-			2,651

Cash provided by (used in) investing activities		(33,574	)		4,279

Cash flows from financing activities:
Proceeds from convertible debenture		16,275			13,328
Principal payments of debentures		(17,167	)		-
Proceeds from stock warrants		-			217
Common stocks issued		1,529			-
Proceeds from short and long-term notes		14,538			46,950
Principal payments of notes payable		(8,302	)		(38,351	)

Cash provided by financing activities		6,873			22,144

Net decrease in cash and cash equivalent		(28,953	)		(5,573	)

Effect of foreign currency translation		(262	)		(3,899	)

Cash and cash equivalent - beginning of period		23,502			29,947

Restricted cash		9,062			3,560

Cash and cash equivalent - end of period	$	3,349		$	24,035

Supplemental Disclosure of Cash Flows Information:
Cash paid for interest	$	6,777		$	3,359
Cash paid for income taxes	$	636		$	531

See accompanying notes to consolidated financial statements.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Organization and Nature of the Business

Cintel Corp., formerly Link2 Technologies, Inc. (“Cintel” or the "Company") incorporated in Nevada in August 1996, primarily owns and manages its subsidiaries which have been engaged in the business of developing network solutions to improve internet traffic, manufacturing semiconductor and electrical components, and designing, manufacturing and installing automated assembly machinery and testing equipments based on customers’ specification. The subsidiaries' businesses also include Customer Relationship Management (CRM) solution, call center operation and database marketing.

On September 30, 2003, the Company acquired 100% of the outstanding voting stocks of Cintel Co. Ltd. (“Cintel Korea”) and in return, the shareholders of Cintel Korea received 16,683,300 shares (approximately 82%) of the Company’s common stock. This transaction was a reverse-takeover by Cintel Korea whereby Cintel Korea’s shareholders acquired the control of the Company. Cintel Korea, located in Seoul, Korea, was in the 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 acquired 51% of the outstanding voting stocks of Phoenix Semiconductor Telecommunication (Suzhou) Co., Ltd. ("PSTS") in China for $16.5 million. In March 2008, the Company contributed $4.9 million of additional capital to PSTS to proportionately match the additional investments made by the minority shareholders of PSTS. PSTS was incorporated on March 2, 2004 without share capital pursuant to the commercial law of the PRC to manufacture semiconductor and electrical components.

On May 18, 2007, the Company acquired 100% of the outstanding voting stocks of Bluecomm Korea, Co. Ltd. (“Bluecomm”) in Korea for $6.5 million. Bluecomm is 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 entered into an agreement with Pizza Hut Korea to provide HSC and data base management operations services in June 2006. The service agreement with Pizza Hut Korea ended as of September 30, 2008, and as a result, the CRM business has substantially declined.

On August 27, 2007, the Company acquired 50.1% of the outstanding voting stocks of Phoenix Digital Tech Co. Ltd. (“PDT”) in Korea for $34.7 million. 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.

Acquisitions of these foreign subsidiaries were financed through the Company's convertible debentures as described in Note 12.

Pursuant to mandated restructuring rules of the local government, PDT has been under a debt restructuring workout with its major creditors since April 2009. As of the current period ending, several creditors have agreed and lowered interest rate on notes and the workout is expected to finalize before end of 2009.

The Company has sustained recurring losses and reported net loss of $8.4 million for the period ended September 30, 2009, and working capital deficiency of $55 million as of September 30, 2009. The company’s accumulated deficits aggregated $29 million as of September 30, 2009.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(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.

In management’s opinion, the accompanying unaudited consolidated financial statements contain all adjustments necessary to state fairly the financial information included herein. While the Company believes that the disclosures are adequate to make the information not misleading, these financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

The Company has evaluated subsequent events through November 16,2009, the date the financial statements were issued.

Basis of Presentation

The consolidated financial statements include the accounts of Cintel Corp. and its wholly-owned or majority-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.

Non-controlling interest in subsidiaries represents the minority stockholders' proportionate share of the net assets and the results of operations of subsidiaries in Korea and China.

Where the functional currency of the Company's foreign subsidiaries is the local currency, all assets and liabilities are translated into U.S. dollars, using the exchange rate on the consolidated balance sheet date, and revenues and expenses are translated at average rates prevailing during the period. Accounts and transactions denominated in foreign currencies have been re-measured into functional currencies before translated into U.S. dollars. Foreign currency transaction gains and losses are included as a component of other income and expense. Gains and losses from foreign currency translation are included as a separate component of comprehensive income.

Use of Estimates

The preparation of 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. These estimates are often based on complex judgments and assumptions that management believes to be reasonable but are inherently uncertain and unpredictable. Actual results may differ materially from these estimates. In addition, any changes in these estimates or their related assumptions could have a materially adverse effect on the Company's operating results.

Revenue Recognition

Revenues from sales of products are recognized upon shipment or delivery and acceptance of products by customers, when pervasive evidence of a sales arrangement exists, the price is fixed or determinable, the title has transferred and collection of resulting receivables is reasonably assured.

Manufactured products (machinery and equipments) based on customers' specifications are subject to specific rights of returns, and revenue recognition is deferred until the products are installed, tested and approved by the customers. All amounts billed to a customer related to shipping and handling are classified as revenue, while all costs incurred by the Company for shipping and handling are classified as cost of revenues. Revenues generated by Customer Relationship Management consulting and database marketing services are recognized as the services are performed, while the call center operation revenues are recognized at the end of each month when the relating time costs can be reasonably determined.

Advertising Costs

The Company's policy is to expense advertising costs as they are incurred. Advertising expenses were $20,582 and $226,268 for the periods ended September 30, 2009 and 2008, respectively, and are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Sales and Value-Added Taxes

Taxes collected from customers and remitted to governmental authorities are presented on a net basis in the Company's statement of operations.

Cash and Cash Equivalents

Cash includes currency, checks issued by others, other currency equivalents, current deposits and passbook deposits held by financial institutions. For financial statement purposes, we consider all highly liquid debt instruments with insignificant interest rate risk and maturity of three months or less when purchased to be cash equivalent. Cash equivalents consist primarily of cash deposits in money market funds that are available for withdrawal without restriction. The investments that mature within three months from the investment date are also included as cash equivalents.

Cash deposits that are restricted as to usage, 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 September 30, 2009 and December 31, 2008, such restricted cash aggregated $9.1 million and $0.6 million, respectively.

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.

The allowances for doubtful accounts were $3.7 million and $2.3 million as of September 30, 2009 and December 31, 2008, respectively.

The Company’s trade receivables are pledged as collateral on bank debts.

Investments

The Company determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date. For all investment securities, unrealized losses that are considered to be other than temporary are considered impairment losses and included in the statements of operations.

Available-for-sale investments include marketable short-term investments and long-term investments in marketable securities. Short-term investments in marketable debt securities are reported at fair value and include all debt securities regardless of their maturity dates. Long-term investments in marketable equity securities are reported at fair value. Unrealized gains and losses on marketable debt and equity securities, net of related tax, are recorded as a separate component of comprehensive income in stockholders' equity until realized.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Investments in long-term non-marketable equity securities are recorded at cost and consist primarily of non-marketable common and preferred stock of private companies with less than 20% of the voting rights. Gains and losses on securities sold are included in the statement of operations. In the event that the carrying value of the investments exceeds its fair value and the decline in value is determined to be other than temporary, the unrealized losses are considered impairment losses and recognized as a component of net income. Investments classified as held-to-maturity are carried at amortized cost in the absence of any other than temporary decline in value.

The equity method of accounting is used to account for investments for which we have the ability to exercise significant influence, but not control, over an investee. Significant influence is generally deemed to exist if we have an ownership interest in the voting stock of an investee of between 20% and 50%.

Inventories

Inventories are stated at lower of cost or market. Cost is computed on a first in, first out basis for raw materials and supplies. Work-in-process, manufactured finished goods and merchandise goods are stated at the lower of cost or net realizable value, where cost is computed using weighted average method and net realizable value is determined by deducting applicable selling expenses from selling price.

The Company determines that a certain level of inventory must be carried to maintain an adequate supply of product for customers. This inventory level may vary based upon orders received from customers or internal forecasts of demand for these products. Other consideration in determining inventory levels include the stage of products in the product life cycle, design win activity, manufacturing lead times, customer demand, and competitive situations in the marketplace. Should any of these factors develop other than anticipated, inventory level may be materially affected.

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

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

Buildings located in China	20 - 30 years
Buildings located in Korea	30 - 40 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

Construction-in-progress 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.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

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.

Long-Lived Assets Impairment

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.

The determination of recoverability is based on an estimate of undiscounted cash flows expected to result from the use and eventual disposition of the asset. In the event such cash flows are not expected to be sufficient to recover the recorded value of the assets, the assets are written down to their estimated fair values. When assets are removed from operations and held for sale, the impairment loss is estimated as the excess of the carrying value of the assets over their fair value.

Goodwill and Other Intangible Assets

Goodwill is tested for impairment annually or more frequently if certain events or changes in circumstances indicate that the carrying amount of goodwill exceeds its implied fair value.

The two-step impairment test identifies potential goodwill impairment and measures the amount of impairment loss to be recognized. The first step of the impairment test, used to indentify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. The Company uses management estimates of future cash flows to perform the first step of the impairment test. Management's estimates include assumptions about future conditions such as future revenues, gross margins, operating expenses and industry trends. The second step is performed only if impairment is indicated from the first step test and measures the impairment by comparing the carrying value of the goodwill with its fair value.

The Company reviews intangible assets with definitive lives for impairment whenever events or changes in circumstances indicate an asset's carrying value may not be recoverable. Currently, the Company amortizes acquired intangible assets with definite lives over periods ranging primarily from five to ten years.

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 Company determines the estimated fair value of financial instruments using available market information and valuation methodologies considered to be appropriate. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts. The fair value of investments, derivative instruments and convertible debt are based on market data. Carrying amounts of cash equivalents, accounts receivable and accounts payable approximate fair value due to the short maturity of these financial instruments.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Derivative Instruments

All of the Company's derivative instruments are recognized as assets and liabilities in the statement of financial position and measured at fair value. On the date a derivative contract is entered into, the Company designates the derivative as either a hedge of the fair value of a recognized assets or liability ("fair-value" hedge), as a hedge of the variability of cash flows to be received or paid ("cash-flow" hedge) or as a foreign currency hedge. Changes in the fair value of a derivative that is highly effective and is designated and qualifies as a fair-value hedge, along with the loss or gain on the hedged asset or liability that is attributable to the hedge risk, are recorded in current period earnings. Effective changes in the fair value of a derivative that is highly effective and is designated and qualifies as a cash-flow hedge are recorded in other comprehensive income until earnings are affected by the variability of the cash flows. Changes in the fair value of derivatives that are highly effective and are designated and qualify as a foreign-currency hedge are recorded in either current period earnings or other comprehensive income, depending on whether the hedge transaction is a fair-value hedge (e.g., a hedge of a firm commitment that is to be settled in a foreign currency) or a cash-flow hedge (e.g., a foreign-currency-denominated forecasted transaction).

The Company also assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of the hedged items. If it were to be determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company would discontinuing hedge accounting prospectively.

The Company would discontinue hedge accounting prospectively when (1) it is determined that the derivative is no longer highly effective in offsetting changes in the fair value or cash flows of a hedged item (including firm commitments or forecasted transactions); (2) the derivative expires or is sold, terminated or exercised; (3) the derivative is no longer designated as a hedge instrument, because it is unlikely that a forecasted transaction will occur; (4) the hedged firm commitment no longer meets the definition of a firm commitment; or (5) management determines that designation of the derivative as a hedge instrument is no longer appropriate.

When hedge accounting is discontinued because it is determined that the derivative no longer qualifies as a highly effective fair-value hedge, the derivative will continue to be carried on the balance sheet at its fair value, and the hedged asset or liability will no longer be adjusted for changes in fair value. When a fair value hedge on an interest-bearing financial instrument (such as an interest swap) is cancelled and hedge accounting is discontinued, the hedge item is no longer adjusted for changes in its fair value, and the remaining asset or liability will be amortized to earnings over the remaining life of the hedged item. When hedge accounting is discontinued because it is probable that a forecasted transaction will not occur, the derivative will continue to be carried on the balance sheet at its fair value, and gains and losses that were accumulated in other comprehensive income will be recognized immediately in earnings. When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the derivative will continue to be carried on the balance sheet at its fair value, and any asset or liability that was previously recorded pursuant to recognition of the firm commitment will be removed from the balance sheet and recognized as a gain or loss in current period earnings.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to credit risk consist of cash equivalents, short-term investments, accounts receivable and loan receivables. Cash equivalents and short-term investments are maintained with high quality institutions, the composition and maturities of which are regularly monitored by management. The Company diversifies its investments to reduce the exposure to loss from any single issuer, sector or bank.

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 loan 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 customers having similar characteristics such that their ability to meet their obligations is expected to be affected similarly by changes in economic conditions.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

As of September 30, 2009, the Company had three major customers which accounted for about $2.9 million (equivalent to about 19%) of the total accounts receivable of $15.2 million. For the period ended September 30, 2009, the Company had four major customers which accounted for about $52.7 million (equivalent to about 49%) of the total revenue of $107 million.

Litigation and Settlement Costs

The Company may be involved in legal actions arising in the ordinary course of business. The Company records an estimated loss for a loss contingency when both of the following conditions are met: (1) information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements, and (2) the amount of loss can be reasonably estimated.

Income Taxes

The calculation of the Company's tax provision involves the application of complex tax rules and regulations within multiple jurisdictions throughout the world. The Company's tax liabilities include estimates for all income-related taxes that the Company believes are probable and that can be reasonably estimated. To the extent that the Company’s estimates are understated, additional charges to the provision for income taxes would be recorded in the period in which the Company determines such understatement. If the Company's income tax estimates are overstated, income tax benefits will be recognized when realized.

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

Comprehensive income or loss is defined as a change in equity of a company during a period from transactions and other events and circumstances, excluding transactions resulting from investments by owners and distributions to owners. The components of total comprehensive income or loss for the periods were consist of unrealized gain or loss on available-for-sale marketable securities and foreign currency translation adjustments.

Earnings (Loss) 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.

Reclassifications

Certain reclassifications have been made to the prior year consolidated financial statement presentation to correspond to the current period’s format. Total equity and net income are unchanged due to these reclassifications.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Recent Accounting pronouncements

In June 2009, the FASB issued the FASC Accounting Standards Codification (“Codification”) as the single source of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by FASB to be applied by non-governmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of the federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company adopted the Codification in the third quarter of 2009, and the adoption did not have any impact on its results of operations or financial position.

Note 3 - Inventories

Inventories consist of the following as of September 30, 2009 and December 31, 2008:

	September 30, 2009		December 31, 2008
	(in thousands)

Raw materials and supplies	$	3,512	$	4,015
Work-in-process		6,294		5,813
Finished goods		6,711		3,140

Total	$	16,517	$	12,968

Note 4 – Notes Receivable from Affiliates

Notes receivable from affiliates by common ownership consist of the following as of September 30, 2009 and December 31, 2008:

	September 30, 2009		December 31, 2008
	(in thousands)
Loan receivable from Vision Tech, a private company in China. 7% interest, payable interest only in quarterly installments. Guaranteed by the shareholders of the debtor. Matures in January 2009.	$	-	$	172
Loan receivable from Phoenix Holdings, a private company in Korea. 8% interest, payable interest only in quarterly installments. Matures in September 2009.		3,695		11,093
Loan receivable from Lion Property Holdings, a private company in Korea. 8% interest, payable interest and principal at maturity. Guaranteed by the BKLCD stocks (75,000 shares). Matures in June 2009.		-		3,566
Various loan receivables from Dream energy (FKA Phoenix Patro), a private company in Korea. 8.5% to 12% interest, payable interest only in quarterly installments. Matures in 2009 and 2010.		2,098		1,109
Loan receivable from F&F Investment, a private company in Korea. 8% interest. Matures in 2010.		4,329		-
Other notes		386		98
		10,508		16,038

Less: current portion		10,469		15,957

Notes receivable, net of current	$	39	$	81

In the ordinary course of business, the Company had and expects to continue to have transactions, including borrowings, with affiliated companies. In the opinion of management, such transactions were on similar terms, including interest rates and collateral, as those prevailing at the time of comparable transactions with other persons and did not involve more than a normal risk of collectability or present any other unfavorable features to the Company.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Note 5 – Prepaid Expenses and Other Assets

Prepaid expenses and other current assets consist of the following as of September 30, 2009 and December 31, 2008:

	September 30, 2009		December 31, 2008
	(in thousands)

Prepaid expenses	$	1,899	$	255
Advance payments to vendors		13		5,534
Deposits made for investments		1,791		3,803
Other current assets		2,605		2,790

Total	$	6,308	$	12,382

Note 6 – Investments

Short-term Investments:	September 30, 2009		December 31, 2008
	(in thousands)

Time deposits and commercial papers	$	11,581	$	1,419
Available-for-sale securities		5,452		4,223
Held-to-maturity securities		6,116		11,474

Total	$	23,149	$	17,116

Available-for-sale securities

The following is a summary of available-for-sale securities as of September 30, 2009 and December 31, 2008:

September 30, 2009	Cost		Gross Unrealized gain		Gross Unrealized (loss)			Estimated Fair value
	(in thousands)

Available-for-sale securities	$	4,983	$	565	$	(96	)	$	5,452

December 31, 2008	Cost		Gross Unrealized gain		Gross Unrealized (loss)			Estimated Fair value
	(in thousands)

Available-for-sale securities	$	4,333	$	97	$	(207	)	$	4,223

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Held-to-maturity securities

Investments in held-to-maturity securities consisted of corporate and municipal bonds with maturities of less than one year and are recorded at net of amortized cost. Total investments in held-to-maturity securities aggregated to $6.1 million and $11.5 million as of September 30, 2009 and December 31, 2008, which approximate their fair value.


Long-Term Investments	September 30, 2009		December 31, 2008
	(in thousands)

Non-marketable securities	$	20,135	$	16,296
Equity method investments		27,437		12,998
Derivative and other investments		6,124		5,508

Total	$	53,696	$	34,802

Equity method investments

The Company held the following equity method investments at September 30, 2009 and December 31, 2008:

September 30, 2009	Ownership			Carrying Value
				(in thousands)

Phoenix Holding		24.8	%	$	15,887
Phoenix Asset Investment		27.4	%		7,996
UB Holdings		24.8	%		2,533
Dream Energy and others	Various				1,021

				$	27,437

December 31, 2008	Ownership			Carrying Value
				(in thousands)

Radion Tech		31.3	%	$	1,884
Phoenix Holding		25.5	%		3,086
Phoenix Asset Investment		27.4	%		8,028

				$	12,998

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Note 7 – Property, Plant and Equipment

Property, plant and equipment consist of the following at September 30, 2009 and December 31, 2008:

	September 30, 2009			December 31, 2008
	(in thousands)

Land	$	20,698		$	19,749
Buildings and improvements		55,188			43,663
Machinery and equipment		31,353			30,981
Furniture and fixtures		10,628			8,531
Vehicles		450			481
Software		40			40
Small tools		463			518
		118,820			103,963

Accumulated depreciation		(26,300	)		(20,022	)
		92,519			83,941

Assets held for sale*		5,600			5,224
Construction-in-progress		1,817			9,250

Property and equipment, net	$	99,937		$	98,415

Depreciation expenses for the periods ended September 30, 2009 and 2008 were $6.90 million and $4.93 million, respectively.

* During 2008, the Company relocated its manufacturing facilities and administrative office in Pyung-Taek, Korea to larger facilities in a nearby city. The vacant property in Pyung-Taek has been placed on sale. The management has assessed the recoverability based on undiscounted cash flows expected to result from the sale of the property and determined that no significant impairment occurred as of September 30, 2009.

Note 8 – Goodwill

The following table sets forth changes in the carrying of goodwill at September 30, 2009 and December 31, 2008:

	(in thousands)

Balance as of January 1, 2008	$	26,593
Reduction in goodwill associated with deconsolidation of a subsidiary due to ownership dilution		(3,525	)
Goodwill impairment*		(4,179	)
Fair value adjustments		(440	)

Balance as of December 31, 2008	$	18,449
Reduction in goodwill associated with deconsolidation of a subsidiary and changes in foreign currency rate **		(1,929	)
Fair value adjustments		(86	)

Balance as of September 30, 2009	$	16,434

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

The Company recorded $4.2 million of goodwill which represents the excess of the purchase price over the fair value of the total outstanding shares of Bluecomm acquired. During 2008, Bluecomm's business has substantially wound down due to lost of its major customer and inability to retain new customers. The Company determined that the goodwill assigned to Bluecomm has fully impaired as of December 31, 2008 and recorded impairment loss for the full amount..

**	During the third quarter of 2009, a majority subsidiary, PDT, sold the entire ownership interest in one of its subsidiaries and reversed out the associated goodwill which was recorded upon acquisition of the subsidiary.

Note 9 – Other Intangible Assets

Intangible assets consist of the following at September 30, 2009 and December 31, 2008:

	September 30, 2009			December 31, 2008
	(in thousands)

Land rights	$	437		$	437
Accumulated amortization		(54	)		(47	)
		383			390
Other intangible assets, net		831			975

Net carrying amount	$	1,214		$	1,365

The Company has an agreement with the government of China for the use of land until February 14, 2054. According to the agreement, the Company is obligated to pay an annual management fee of approximately $2,400, and the land has to be used for manufacturing purposes.

Other intangible assets include patents, technology rights and in-process research and development costs and are amortized over its estimated useful life of three to seven years. Amortization expenses on these intangible assets for the periods ended September 30, 2009 and 2008 were $125,879 and $109,955, respectively.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Note 10 – Notes Payable

Notes payable consist of the following at September 30, 2009 and December 31, 2008:

	September 30, 2009		December 31, 2008
	(in thousands)

Note payable to Kong-Sang Bank of China, payable monthly interest only at 4.66%. The note matures in January 2009.	$	-	$	910
Note payable to Kong-Sang Bank of China, payable monthly interest only at 7.3%. The note matures in July 2009.		-		5,130
Note payable to Kong-Sang Bank of China, payable monthly interest only at LIBOR plus 3.5%. The note matures in January 2009.		-		691
Note payable to Kong-Sang Bank of China, payable monthly interest only at LIBOR plus 2%. The note matures in February 2009.		-		984
Note payable to Kong-Sang Bank of China, payable monthly interest only at 5.58%. The note matures in June 2010.		1,831
Note payable to Kong-Sang Bank of China, payable monthly interest only at 5.58%. The note matures in July 2010.		2,095
Note payable to Kong-Sang Bank of China, payable monthly interest only at 5.59%. The note matures in January 2010.		1,201
Note payable to Kong-Sang Bank of China, payable monthly interest only. The note matures in September 2009.		680
Notes payable to Hana Bank of Korea, payable monthly interest only, at 8.11% to 12.05%. The notes are secured by real property in Korea and mature in 2009.		2,072		1,932
Notes payable to Shin-Han Bank of Korea, payable monthly interest-only at 4%. The notes are secured by real estate and mature in November 2009 and June 2010		5,096		4,754
Notes payable to City Bank of Korea, payable monthly interest only at 4%. The notes are secured by real estate and mature in October 2009 and.		14,811		9,876
Notes payable to Korea Exchange Bank, payable monthly interest only, at 7.24% to 8.41%. The notes are guaranteed by sister company, and mature in April and May 2010.		-		4,754
Notes payable to Bokwang, affiliated company. Maturity of the note is 2010.		4,247		-
Note payable to City Bank of Korea, payable monthly interest only, at 4%. The note is secured by a deed of trust covering the Company’s real property and matures in July 2010.		6,116		8,271
Note payable to Citi Bank Korea, payable monthly interest-only, at 4%. The notes mature in 2010.		17,061		17,293
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.		542		506
Note payable to Kiup Bank, payable monthly interest only, at 4%. The notes are secured by a deed of trust covering the Company’s real property and mature in March 2010.		10,537		9,846
Notes payable to Woori Bank, payable monthly interest only at 3%. The note is unsecured and matures in December 2009.		6,585		6,968
Notes payable to Industrial Bank of Korea, payable monthly interest only at 6.64% to 7.11%. The note matures in February and March 2010.		4,672		4,358
Notes payable to Hana Bank Korea, payable monthly interest only at 5.5% to 5.79%. The note matures in October 2009 and March 2010.		2,973		2,773
Notes payable to Woori Bank, payable monthly interest only at 4.81% to 6.54%. The notes are secured by real property, and mature in October 2009 and April 2010.		6,243		7,924
Notes payable to Korea Exchange Bank, payable monthly interest only at 6.82%. The notes are secured by the Company’s real property and mature in October 2009.		2,378		2,377
Note payable to Kook Min Bank of Korea, payable monthly interest only at 5.93%. The note is unsecured and matures in August 2010.		2,548		2,377
Notes payable to Citi Bank Korea, payable monthly interest only at 5.00% to 5.91%. The note matures in April and May 2009.		-		2,594
Loan payable to local government with annual interest rate at 5.38%. The loan matures in January 2009.		-		13
Notes payable to Hana Bank Korea, payable monthly interest only at 4.04%. The note matures in March 2015.		1,274		1,189
Notes payable to Industrial Bank of Korea, payable monthly interest-only at 4.7%, and matures in December 2009 and May 2010		3,398		3,170
Notes payable to Shin-Han Bank of Korea is secured by real property with interest at 4.54 %. The notes mature in June 2011.		1,581		2,295
Notes payable issued in 2008. This note matures in April 2009 at 3 month CD plus 2.15%.		-		4,754
Various loan payables to local government, bearing no interest. The loan is unsecured.		9		7
Notes payable to Merrill Lynch. The note matured in January 2009.		-		2,500
Notes payable to Hana Bank Korea, payable monthly interest only at 6.76%. The note was secured by real property and matures in March 2010.		5,096		-
Notes payable to Industrial Bank of Korea, payable monthly interest only at 5.76%. The note was secured by real property and matures in March 2010		2,548
Notes payable to Industrial Bank of Korea, and matures in February 2017		8,494
Notes payable to City Bank of Korea, payable monthly interest only at 6.55%. The note was secured by real property and matures in December 2009		2,631		-
Notes payable to C-motech, and matures in 2009		849		-
		117,568		108,246
Less: current portion		100,322		82,761
Long-term debt	$	17,246	$	25,485

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

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

Years ending December 31,	Amount (in thousands)

2009	$	45,751
2010		54,729
2011		1,280
2012		1,864
2013 and thereafter		13,944

Total	$	117,568

Note 11 – Employee Severance Benefits

Employees and directors with one year or more of service are entitled to receive a lump-sum payment upon termination of their employment based on their length of service and rate of pay at the time of termination. Accrued severance benefits represent the amount which would be payable assuming all eligible employees and directors are to terminate their employment as of the balance sheet date. The severance benefits for the period ended September 30, 2009 and 2008, were $320,329 and $987,775, respectively.

Note 12 – Convertible Debentures

The Company accounts for the convertible debentures as liability at fair values and no formal accounting recognition is assigned to the values inherent in the conversion features.

Convertible debentures outstanding at September 30, 2009 and December 31, 2008, are summarized as follows:

	September 30, 2009		December 31, 2008
	(in thousands)

Convertible debenture - A	$	15,284	$	15,284
Convertible debenture - B		64,920		64,920
Convertible debenture - C		10,820		10,820
Convertible debenture - D		14,857		13,024
Bond with warrants		7,668		7,761
Convertible debenture - E		3,744		-

	$	117,293	$	111,809

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Convertible Debenture -A

The Convertible Debenture - A, issued on October 30, 2006, is non-interest bearing, unsecured, and matures on October 30, 2011. The bonds are convertible into 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 is made using the formula of 100% x ($0.50 - previous 3 months average share price)/$0.50, and is 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 September 30, 2009, 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 revenues of $65.8 million or more and an operating profit of $6.8 million or more in 2007, and revenue of $95.4 million and an operating profit of $10.6 million 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 - B, issued on April 12, 2007 matures on April 12, 2012 and is convertible into shares of common stock of the Company at the option of the holder at the 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 to use its best efforts to obtain such listing by October 31, 2009. If 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. If the Company defaults, 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.

As amended in November 2008, if such listing by October 31, 2009 for any reason not solely attributable to the holder of the debenture, the holder is entitled to exercise its put option to redeem the partial amount of the principal amount of $21.6 million and is also entitled to receive interest on the outstanding principal balance of the debenture calculated at the compounded rate of 14% per annum. In addition, if such listing by October 31, 2010, the holder is entitled to exercise its put option to redeem the outstanding balance of the debenture and is also entitled to receive interest at the compounded rate of 14% per annum.

The Company agreed to pledge as security all convertible bonds subscribed by the Company using the proceeds from the debenture. As of September 30, 2009, proceeds from the bonds aggregating $11.2 million were invested in a convertible debenture issued by STS, and these debentures have been pledged as security for this Convertible Debenture-B.

Convertible Debenture - C

The Convertible Debenture - C was issued on April 12, 2007, with a maturity date of April 12, 2012. The debenture is convertible into shares of common stock of the Company at the option of the holder at the 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

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. If the Company defaults, 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.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Convertible Debenture - D

The Convertible Debenture - D was issued by PDT, a majority-owned subsidiary of the Company, in August, November, and December 2007, respectively, with maturity dates in December 2010 through September 2012. These debentures are convertible into shares of common stock of PDT at the option of the holders at the range of $80.15 to $96.17 per share. The coupon rate of the bonds ranges from 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 their put option to redeem the debentures at the face value thereof, in which case the holder is entitled to interest at 8% per annum. If the Company defaults, the holders are entitled to exercise their 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.

Bond with warrants

The bond with warrant was issued by UB Precision ("UBP"), a subsidiary of majority-owned subsidiary of the Company, in April 2008, with maturity date in April 2011. Face amount of the bond is $7.92 million (KRW 10,000,000,000) with zero stated interest rate. These debentures are convertible into shares of UBP at the option of the holders at $2.85 (KRW 3,600) per share any time between April 30, 2008 and March 31, 2011. If the bond is not converted during the period, interest accrues at the rate of 5% per annum.

The warrants is detachable warrants and has call options to purchase common stocks of UBP up to 100% face value of the bond with initial purchase price at KRW 3,600 per share and the price can be adjusted every 3 months not below 70% of the initial purchase price. The warrants was accounted as a separate equity instrument and a portion of proceeds allocated to the warrants is accounted for as paid in capital. Based on the conversion features and terms of the warrants, fair value allocated to the warrants is immaterial.

Convertible Debenture - E

The Convertible Debenture - E was issued by UBP on May 15, 2009, with a maturity date of May 15, 2012. The debenture is convertible into shares of common stock of UBP at the option of the holder at the rate of $2.12 per share(KRW 2,700). The coupon rate of the bond is at the rate of 2.0% 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 4.5% per annum. During the period from May 15, 2010 to April 15, 2012, the holder is entitled to exercise its put option to redeem the debentures.

In July 2009, UBP issued another convertible bond with face amount of $2.16 million (KRW 3,000,000,000) which will mature in July 2012. The debentures are convertible into shares of UBP at the option of the holder at $2.12 (KRW 2,000) per share any time between July 16, 2010 and June 16, 2012.

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

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Note 13 - Income Taxes

Corporate income tax rates applicable to the Korean subsidiaries in 2009 and 2008 were 16.5% of the first 100 million Korean Won ($105,700) of taxable income and 29.7% on the excess. For the United States operations, the corporate tax rates range from 10% to 34%. The Company provided a valuation allowance equal to the deferred tax amounts resulting from the tax losses in the United States, as it is not likely that they will be realized. Tax losses from the Korean subsidiaries can be carried forward for five years to offset future taxable income. The U.S. tax losses can be carried forward for 15 to 20 years to offset future taxable income. The Company has accumulated about $12.1 taxable loss in US and $16.9 million of taxable loss in Korea and China operations. The utilization of the Korean losses expires in years 2008 to 2012 and the US losses in years 2019 to 2027. PSTS is exempt from income taxes under the Chinese tax law for the first two profitable tax years. Taxable income in the third to fifth profitable tax years will be taxed at 5% and subsequently the applicable tax rate will be 10%.

The provision for income taxes for the periods ended September 30, 2009 and 2008 are summarized as follows:

	Nine Months Ended September 30,
	2009		2008
	(in thousands)
Current income tax provision:
U.S.	$	-	$	-
Foreign taxes of subsidiaries		500		531
		500		531
Deferred income tax benefit: Foreign taxes of subsidiaries		-		-

Income tax expense (benefits)	$	500	$	531

The Company has deferred tax assets (liabilities) at September 30, 2009 and December 31, 2008 as follows:

	September 30, 2009			December 31, 2008
	(in thousands)
Net operating loss carryforwards		7,989			5,877
Valuation allowance		(7,989	)		(5,877	)

	$	-		$	-

Note 14 - Capital

The Company's capital transactions for the periods ended September 30, 2009 and 2008 are as follows:

In March 2009, 68,857 common shares held by a subsidiary were provided for consulting services at the value of $10,734.

As of September 30, 2009, 11,872,967 common shares held by a subsidiary of a majority-owned subsidiary were eliminated and presented as treasury stock.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(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:

	September 30, 2009			December 31, 2008
Interest rate		6.5	%		6.5	%
Expected volatility		70	%		70	%
Expected life in years		5			6
Expected dividends		-			-

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

The 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. From this grant, 135,000 options were cancelled in 2002, and an additional 47,000 options were cancelled in 2003.

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 September 30, 2009 and 2008 and no option is outstanding at September 30, 2009.

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 INTERIM FINANCIAL STATEMENTS

(Unaudited)

Note 15 – Related Party Transactions

Significant transactions with companies affiliated by common control for the periods ended and at September 30, 2009 and December 31, 2008, are summarized as follows:

	September 30, 2009		December 31, 2008
	(in thousands)

Accounts receivable from STS	$	1,532	$	704
Accounts receivable from BKLCD (fka We-Tech)		-		125
Sales to STS		42,349		66,809
Sales to BKLCD (fka We-Tech)		49		2,282
Purchase from STS		32,947		49,311

The Company’s majority owned subsidiary, PSTS, purchases raw materials for packaging products from its noncontrolling shareholder, STS, and sells the finished goods back to STS and BKLCD, an affiliate of STS. These transactions were in the normal course of business and recorded at an exchange value established and agreed upon by the above mentioned parties.

Note 16 – Appropriated Retained Earnings

The Company's majority owned subsidiary, PDT, is required 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.

In January 2009, PDT's Board of Directors approved a corporate readjustment of its account in the form of a quasi reorganization in which the Company's accumulated deficits of $13.9 million was charged to paid-in capital.

Note 17 - Loss per Share

The following reconciles the numerators and denominators of the basic and diluted per share computation for the periods ended September 30, 2009 and 2008:

	September 30, 2009			September 30, 2008
	(in thousands, except per share amounts)
Numerator for basic and diluted earnings per share:
Net loss	$	(8,352	)	$	(5,128	)

Denominator:
Basic and diluted weighted average shares outstanding		95,309			97,399

Basic and diluted loss per share	$	(0.09	)	$	(0.05	)

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Note 18 – Commitments and Contingencies

(a)	Product Warranties:

The Company warrants finished goods against defects in material and workmanship under normal use and service for period of one year. A liability for estimated future costs under product warranties is recorded when products are shipped.

The following table sets forth a summary of changes in product warranties during the nine months ended September 30, 2009:

	Nine Months Ended September 30, 2009 (in thousands)
Balance as of December 31, 2008	$ 2,383
Accruals for warranties issued during the period		5,520
Settlement made during the period (in cash or in kind)		(6,163	)
Balance as of September 30, 2009	$	1,740

(b)	Operating Lease Obligations:

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

Years	Amount
2009	$	14,886
2010		36,596
2011		2,275
	$	53,757

(c)	Guaranty Agreements

The Company’s Korean subsidiary, PDT, has outstanding guaranty agreements on behalf of affiliated companies. PDT is obligated to perform under these agreements if guarantees of the affiliated companies failed to pay principal and interest payments to the lender when due. Including accrued interest, the maximum potential amount of future (undiscounted) payments under these guaranty agreements is $3.6 million.

Provisions related to recognizing a liability at inception for the fair value of the guarantor’s obligation do not apply since common control is considered to be existed with guarantees. Guaranty agreements were as follows as of September 30, 2009:

Guarantee	Maturity	Guaranteed For	Amount
BKLCD	January 20, 2012	Loan	$ 3,600,000

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

Note 19 – Fair Value of Financial Instruments

GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability an orderly transaction between market participants on the measurement date. Fair value measurements are not adjusted for transaction costs and establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements).

The three levels of the fair value hierarchy are described below:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets.

Level 2 - Significant other observable inputs other than Level 1 prices such as quoted prices in markets that are not active, quoted prices for similar assets, or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset.

Level 3 - Significant unobservable inputs that reflect a reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair values of securities available for sale are generally determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted securities (Level 2 inputs).

The following summarizes the financial instruments measured at fair value on a recurring basis as of September 30, 2009:

		Fair Value Measuring Using
	Total Fair Value	Quoted Prices in Active Markets for Identical (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
	(in thousands)

Available-for-sale securities	$ 5,452	$ - -	$ 5,452	$ - -

Note 20 - Cumulative Effect of Changes in Accounting Policy

During 2008, the Company's majority-owned subsidiary, PDT, changed its accounting policy for revenue recognition on the sales of certain manufactured products (machinery and equipment). This policy change was necessary as it related to an amendment of terms in sales with the major customers. In the new policy, the point in revenue recognition time has been moved to a later point in time. Previously, revenue was recognized upon shipment of products; the new policy does not recognize revenue until the products are installed and tested and an acceptance is released by the customer. The Company considers that the new policy better conforms to the terms of sales. Prior year financial statements have been adjusted to reflect the change in revenue recognition timing retroactively to facilitate the comparability with the financial statements as of September 30, 2009 and for the period then ended.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

The effect of the changes for the period ended September 30, 2008, as it was retroactively applied, is as follows:

For the period ended September 30, 2008	Under new Method			Under old Method			Effect of Change
	(in thousands)

Statement of operation:
Sales	$	138,716		$	161,587		$	22,871
Cost of sales		131,312			154,183			22,871
Net loss		(5,128	)		(5,128	)		-

Note 21 – Subsequent Events

In October 2009, the Company has entered into an agreement with Woori Private Equity Funds (Woori PEF, holder of the Convertible Debentures B and C in Note 12) to repay the bonds with cash and outstanding shares of the subsidiaries owned by the Company. The shares offered to Woori PEF represent, 100% interest in Bluecomm, 50.1% interest in PDT and 31.38% out of 51% interest in PSTS owned by the Company. The Company anticipates the actual exchanges of shares of the subsidiaries will be completed before December 31, 2009.

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

Special Note on Forward-Looking Statements.

Certain statements in “Management’s Discussion and Analysis or Plan of Operation” below, and elsewhere in this annual report, are not related to historical results, and are forward-looking statements. Forward-looking statements present our expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements frequently are accompanied by such words such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” or the negative of such terms or other words and terms of similar meaning. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements, or timeliness of such results. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this quarterly report. Subsequent written and oral forward looking statements attributable to us or to persons acting in our behalf are expressly qualified in their entirety by the cautionary statements and risk factors set forth below and elsewhere in this annual report, and in other reports filed by us with the SEC.

You should read the following description of our financial condition and results of operations in conjunction with the financial statements and accompanying notes included in this report beginning on page F-1.

Overview

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

We have established relationships with our customers worldwide such as Samsung Electronics, Hynix Semiconductor, and Fairchild Semiconductor in the semiconductor industry. Our customers in factory automation and display industry include Samsung Electronics, S-LCD Samsung SDI, Samsung Techwin, and Samsung Corning Precision Glass.

We currently have major operations in China and Korea with a production capacity increase planned with several expansions of current operations. We intend to commence a major production expansion project in China in 2009 to become a more rounded total semiconductor solution provider through the transfer of new high-end products and product diversification. In addition, we have built a new manufacturing plant in Korea to increase our production in the semiconductor/display equipment and facility industry.

Background

CinTel Corp. (formerly Link2 Technologies) was incorporated in the State of Nevada on August 16, 1996. The initial business focus was to develop a 3D animation and digital effects studio that would provide high-end 3D animation and digital effects to the music video industry.

On September 30, 2003, Link2 Technologies entered into a definitive Share Exchange Agreement with CinTel Co., Ltd., a Korean corporation ("CinTel Korea") and the shareholders of CinTel Korea. Pursuant to the Share Exchange Agreement, we acquired 100% of the issued and outstanding capital stock of CinTel Korea in exchange for 16,683,300 shares of our common stock. CinTel Korea was founded in 1997 and has provided various Internet Traffic Management solutions to businesses and consumers. All of the business operations were comprised of developing, manufacturing and distributing Internet Traffic Management solutions to businesses and consumers in order to manage and control large traffic.

CinTel Korea introduced Korea's first dynamic server load balancer, and marketed Internet Traffic Management products since its inception, such as the PacketCruz (TM) family of products, iCache, i2one, and Proximator. The Internet Traffic Management solutions were marketed to customers around the world, helping them improve Internet traffic management, service levels (QOS: Quality of Service), and the user experience (QOC: Quality of Content).

In the last three years we have shifted our focus from Internet Traffic Management to becoming a semiconductor and LCD assembly holding company. The company’s focus has included investments in several high growth subsidiaries and divesting some non-performing subsidiaries. CinTel now has holdings that directly manufacture semiconductor packaging, NAND flash memory packaging, LCD assembly, and testing specialists, as well as provide a solution for memory applications for home appliances, semiconductor, TFT-LCD application products and Factory Automation Design.

Our subsidiaries include:

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

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

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

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

Products

We produce multiple products lines throughout our separate subsidiaries. These product lines focus mainly on the semiconductor and LCD assembly core product lines. Our product line includes a number of related and unrelated products and services as follows:

Phoenix Semiconductor Telecommunication Suzhou (“PSTS”)

PSTS provides all aspects of semiconductor packaging (except foundry of chips) including packaging types of: DIP, SOP, TSSOP, QFP and ETQFP products. Printed Board Assembly (“PBA”) and Wafer. PSTS's main products also include NAND flash memory production.

Printer Board Assembly has been a mainstay of the product lines. During the year this product was phased out and will no longer be offered in this plant.

Phoenix Digital Tech (“PDT”)

Factory Automation Design (FAD) is a service that allows PDT to create cost effective production lines for their customer base. PDT designs and implements Automated Distribution Facilities (ADF) for our customers. These facilities allow reduced labor costs and quality production of high tech products. Computerized automation allows for the systems to be produced in a highly controlled and consistent manner.

PDT produces Scriber & Break in-line systems, Screen Printer and AOI scanning systems for enterprise level customers. In a never-ending effort to improve yield and optimize the wafer manufacturing process, automated optical inspection (AOI) has become an integral part of semiconductor fabrication. The ability to provide both high performance point-to-point motion and extremely smooth constant velocity scanning moves has enabled PDT to become a leading provider of critical motion systems for AOI applications.

PDT’s subsidiary, UB Precision provides testing products such as LCD/OLED probe stations for display and probe card for semiconductor.

Bluecomm

Bluecomm provides customer relationship management services. These services include running of call centers for full service customer support. Bluecomm also provides database management and marketing services for customers that allows customers to outsource all management of these systems. This allows them to provide detailed marketing and database services to their customers with little or no internal staffing.

RESULTS OF OPERATIONS

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.

Nine months period ended September 30, 2009 compared to the nine months ended September 30, 2008.

(in thousands, USD)

	9/30/2009			Adjusted 9/30/2008
Revenue	$	107,000		$	138,716
Cost of sales		103,825			131,312
Gross profit		3,175			7,404
Operating expenses		8,623			11,879
Operating loss		(5,448	)		(4,475	)
Net loss		(8,352	)		(5,128	)

The company’s revenues are mainly comprised of the sale of equipment, semiconductor products and services. The company generated revenues of approximately $107 million and approximately $138.7 million for the nine months ended September 30, 2009 and 2008, respectively, which reflects a decrease of approximately $31.7 million or 22.8%. The decrease in the companywide revenue were mainly contributed by a decline in revenue of our two major subsidiaries, PDT and PSTS. Since early 2009, we have seen a definite slowdown in the business of PDT and PSTS due to lack of new orders from the customers. This decline in revenue has been directly impacted by a prolonged slowdown in the global economy and the consumer demands for electronic goods has been deteriorating.

The gross revenue of PSTS for the nine months ended September 30, 2009 was $51.9 million, a 13.8% decrease from $60.2 million for the same period in 2008. This decrease in sales resulted mainly from declining in sales orders from the major customers STS and BKLCD for semiconductor packaging products.

The gross revenue of PDT for the nine months ended September 30, 2009 including majority owned subsidiaries were $55.0 million, 25.6% decrease from $73.9 million in 2008. The decrease reflects the impact of the slowing economy and low demand for LCD module assembly line and automated distribution line facilities as the major electronic goods manufacturers have reduced purchase orders and cut back on building any new facilities until the economy turns around.

The gross revenue of Bluecomm for the nine months ended September 30, 2009 was less than $0.1 million compared to about $4.7 million in 2008. Bluecomm provided customer relationship management services for Pizza Hut Korea including call center operation for customer support, however, the contract with Pizza Hut Korea was terminated in 2008 and no revenue has been generated in 2009. Most of the 2009 revenue was generated from rental income from its office space.

The cost of sales for the nine months ended September 30, 2009 and 2008 were $103.8 million and $131.3 million, respectively, a decrease of $27.5 million or 20.9%. Our cost of sale to net sales percentage has increased by about 2.3%, from 94.7% in 2008 to 97% in 2009. This increase in cost of sale percentage has been mainly affected by PSTS operation. For the nine months ended September 30, 2009, PDT’s cost of sales was about $48.2 million (87.6% of PDT’s net sales), while PSTS’s cost of sales was about $55.6 million (107.1% of PSTS’s net sales), which resulted in combined cost of sales of 97%. PSTS’s high cost of sales has been mainly caused by a steady increase in the price of raw materials (such as gold and resins which make up large portion of semiconductor packaging products) and direct labor in the region (China), as well as high direct overhead costs associated with maintaining plant facilities and machinery. Our gross margins for the nine months ended September 30, 2009 and 2008 were $3.2 million (3% of net sales) and $7.4 million (5.3% of net sales), respectively.

Total operating expenses for the nine months ended September 30, 2009 and 2008 totaled approximately $8.6 million and $11.9 million, respectively, resulting in a decrease of $3.3 million or 27.7%. The company’s operating expenses for 2009 has declined significantly from 2008 as the company has focused on controlling the overhead costs and reducing non-essential expenses.

The operating loss for the nine months ended September 30, 2009 and 2008 totaled $5.4 million and $4.5 million, respectively. Although the recent economic statistics have shown a slow turnaround in global economy and consumer confidence has been improving, the management anticipates that the turnaround in electronic industries will be a very slow process. The company will continue to see negative operating results or low profits for the next few more quarters. Management anticipates that PDT’s operating will slowly improve as sales has been increasing and the production of its factory automation FA division increase its manufacturing capability in its expanded plant. Management also anticipates that the sales of PSTS would increase in the coming quarters and as soon as the sales exceeds the breakeven level, it would begin to generate operating profits.

The net loss for the nine months ended September 30, 2009 and 2008 totaled $8.3 million and $5.1 million, respectively, resulting in an increase loss of $3.2 million mainly from the increase in operating loss of $0.9 million as described above and an increase in total other expenses of $3.9 million (mainly comprised of an increase in net interest expenses of $1.5 million, increase in loss from equity method investment of 3.7 million and an increase in other income of $1 million) and exclusion of non-controlling portion of loss of $1.6 million.

In summary, the company incurred the net loss mainly due to low operating results of its subsidiaries and their subsidiaries and other losses from non-operating items including net interest expenses, share of loss from equity method investments and foreign currency transaction loss. Management anticipates that the company’s operating results will remain in the similar trend for the next few more quarters until the revenue of two major subsidiaries significantly increase at an improved gross margin.

Three months period ended September 30, 2009 compared to the three months ended September 30, 2008.

(in thousands, USD)

	9/30/2009			Adjusted 9/30/2008
Revenue	$	38,806		$	58,865
Cost of sales		37,988			57,905
Gross profit		818			960
Operating expenses		2,426			3,145
Operating income (loss)		(1,608	)		(2,185	)
Net loss		(663	)		(712	)

The company generated revenues of approximately $38.8 million and approximately $58.9 million for the three months ended September 30, 2009 and 2008, respectively, which reflects a decrease of approximately $20.1 million. Revenues are comprised of the sale of products, and services.

The gross revenue of PSTS for the three months ended September 30, 2009 was $20.5 million, a 3.8% decrease from $21.3 million for the same period in 2008. The gross revenue of PDT for the three months ended September 30, 2009 including its subsidiaries were $18.2 million, a 49.5% decrease from $36.1 million in 2008. The decrease reflects the impact of the slowing economy and low demand in the semiconductor market and decline in orders for automated facilities.

Bluecomm’s gross revenue for the three months ended September 30, 2009 was about $0.1 million, mostly from rental income, compared to about $1.5 million in 2008 from service revenue. Bluecomm provided customer relationship management services for Pizza Hut Korea including call center operation for customer support, however, the contract with Pizza Hut Korea was terminated in 2008 and no revenue has been generated in 2009.

The cost of sales for the three months ended September 30, 2009 and 2008 was $38 million and $57.9 million, respectively, a decrease of 34.4%. Our gross margins for the three months ended September 30, 2009 and 2008 was $818,000 and $960,000, respectively.

Total operating expenses for the three months ended September 30, 2009 and 2008 totaled approximately $2.4 million and $3.1 million, respectively, resulting in a decrease of $0.7 million or 22.6%.

For the three months ended September 30, 2009 and 2008, the company had operating loss of $1.6 million and $2.2 million, respectively. The net loss for the three months ended September 30, 2009 and 2008 totaled $663,000 and $712,000, respectively.

In summary, the company incurred the net loss for the current quarter ending September 30, 2009 but at a declining rate compared to the first two quarters of the current year. Management anticipates that the company’s operating results will remain in the similar trend for the next few more quarters until the revenue of two major subsidiaries significantly increase at an improved gross margin.

Liquidity and Capital Resources

As of September 30, 2009 our cash balance was $3.3 million compared to $23.5 million at December 31, 2008. Total current assets at September 30, 2009 were $75.4 million compared to $101.5 million at December 31, 2008. We currently plan to use the cash balance for ordinary business operations and facility expansion by our subsidiaries.

For the nine months ended September 30, 2009, net cash used in operating activities was $2.3 million, compared to $32.0 million for the nine months ended September 30, 2008. The decrease in cash used in operating activities can be largely attributed to decrease in the prepaid payments to vendors, decrease in accounts receivable.

For the nine months ended September 30, 2009, net cash used in investing activities was $33.6 million, compared to net cash provided by $4.3 million for the nine months ended September 30, 2008. The increase in cash used in investing activities can be largely attributed to acquisition of investment in securities.

For the nine months ended September 30,2009, net cash provided by financing activities was $6.9 million, compared to $22.1 million for the nine months ended September 30, 2008. The decrease in cash provided by financing activities can be largely attributed to proceeds received from short and long-term notes during the nine months ended September 30, 2009.

Our management plans to conduct a detailed analysis of the business of our subsidiaries and if necessary, management will consider a restructuring of the Company’s business model. This may include a selloff of underperforming businesses and/or the acquisition of profitable companies, including companies which have operations in the nontechnology sector. The Company has not yet identified any companies for acquisition. Further, we currently have no agreements, plans or arrangements with any third parties for any one or more acquisitions. There can be no assurance that we will be able to consummate any strategic acquisitions, or even if we are able to do so, that any one or more of the acquisitions will prove to be profitable or otherwise beneficial to our company.

In addition, we may seek to raise additional funds through arrangements with corporate collaborators, through public or private sales of our securities, including equity securities, or through bank financing. There is no assurance that additional funds will be available on terms favorable to the Company and its stockholders, or at all.

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 Presentation

Non-controlling interest in subsidiaries represents the minority stockholders' proportionate share of the net assets and the results of operations of subsidiaries in Korea and China.

Revenue Recognition

Cash and Cash Equivalents

Inventories

Long-Lived Assets Impairment

Goodwill and Other Intangible Assets

Goodwill is tested for impairment annually or more frequently if certain events or changes in circumstances indicate that the carrying amount of goodwill exceeds its implied fair value.

Fair Value of Financial Instruments

Derivative Instruments

Concentration of Credit Risk

Comprehensive Income

Recent Accounting pronouncements

In October 2008, the FASB issued FSP 157-3, "Determining the Fair Value of a Financial Asset When the Market for that Asset Is Not Active," which amends SFAS 157 by incorporating "an example to illustrate key considerations in determining the fair value of a financial asset" in an inactive market. FSP 157-3 is effective upon issuance and should be applied to prior periods for which financial statements have not been issued. The adoption of FSP 157-3, effective October 2008 had no impact on the Company's results of operation or financial position.

In December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statements" (“SFAS 160”). SFAS 160 requires all entities to report noncontrolling (i.e. minority) interests in subsidiaries as equity in the Consolidated Financial Statements and to account for transactions between an entity and noncontrolling owners as equity transactions if the parent retains its controlling financial interest in the subsidiary. SFAS 160 also requires expanded disclosure that distinguishes between the interests of the controlling owners and the interests of the noncontrolling owners of a subsidiary. SFAS 160 is effective for the Company’s financial statements for the year beginning on January 1, 2009, and earlier adoption is not permitted. The adoption of SFAS 160 had no material impact on the Company’s financial condition and results of operations.

In December 2007, the FASB issued Statement No. 141R, (revised 2007) "Business Combinations" ("SFAS 141R"). SFAS 141R replaces the current standard on business combinations and has significantly changed the accounting for and reporting of business combinations in consolidated financial statements. This statement requires an entity to measure the business acquired at fair value and to recognize goodwill attributable to any noncontrolling interests (previously referred to as minority interests) rather than just the portion attributable to the acquirer. The statement will also result in fewer exceptions to the principle of measuring assets acquired and liabilities assumed in a business combination at fair value. In addition, the statement requires payments to third parties for consulting, legal, audit, and similar services associated with an acquisition to be recognized as expenses when incurred rather than capitalized as part of the business combination. SFAS 141R is effective for fiscal years beginning on or after December 15, 2008.

In March 2008, the FASB issued Statement No. 161, "Disclosures about Derivative Instruments and Hedging Activities an Amendment of FASB Statement No. 133" ("SFAS 161"). SFAS 161 amends Statement 133 by requiring expanded disclosures about an entity's derivative instruments and hedging activities, but does not change Statement 133's scope or accounting. This statement requires increased qualitative, quantitative, and credit-risk disclosures. SFAS 161 also amends Statement No. 107 to clarify that derivative instruments are subject to Statement 107's concentration-of-credit-risk disclosures. SFAS 161 is effective for fiscal years beginning on or after November 15, 2008. The adoption of SFAS 161 will require the Company to provide additional disclosures about derivative instruments and hedging activities beginning January 1, 2009.

In May 2008, the FASB issued SFAS No. 162 ("SFAS 162"), "The Hierarchy of Generally Accepted Accounting Principles." This statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. This statement will be effective 60 days following the SEC's approval of the PCAOB amendments to AU Section 411, "The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles." The adoption of SFAS 162 had no significant impact on the Company's results of operations and financial position.

In November 2008, the FASB Emerging Issues Task Force ("EITF") issued EITF Issue No. 08-6 ("EITF 08-6"), "Equity Method Investment Accounting Considerations." EITF 08-6 address questions that have risen about the application of the equity method of accounting for investments after the effective date of both SFAS 141(R), "Business Combination", and SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statements". EITF is effective for fiscal years beginning on or after December 15, 2008. The adoption of EITF 08-6 had no significant impact on the Company's results of operations and financial position.

In June 2009, the FASB issued the FASC Accounting Standards Codification ("Codification") as the single source of authoritative U.S. generally accepted accounting principles ("GAAP") recognized by FASB to be applied by non-governmental entities. Rules and interpretive releases of the Securities and Exchange Commission ("SEC") under authority of the federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company adopted the Codification in the third quarter of 2009, and the adoption did not have any impact on its results of operations or financial position.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

n/a

ITEM 4T. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (1) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure; and (2) recorded, processed, summarized and reported, within the time periods 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 April 15, 2009.

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 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)

10.25		Distribution Agreement dated March 15, 2006 among CinTel Corp. and InterSpace Computers, Inc. (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on May 3, 2006)

10.26		Convertible Bonds Subscription Agreement between the Company and Axlon Corporation dated October 24, 2006 (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 31, 2006)

10.27		Convertible Bonds Subscription Agreement between the Company and Emerging Memory & Logic Solutions, Inc. dated October 24, 2006 (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 31, 2006)

10.28		Convertible Bonds Subscription Agreement between the Company and KTB China Optimum Fund dated October 24, 2006 (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 31, 2006)

10.29		Convertible Bonds Subscription Agreement between the Company and STS Semiconductor & Telecommunications Co. Ltd. dated October 24, 2006 (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 31, 2006)Stock Purchase Agreement by and between CinTel Corp and STS Semiconductor & Telecommunications Co., Ltd. (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 3, 2006)

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)

10.34		Amended CB Subscription Agreement dated November 18, 2008 (Incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 21, 2008)

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 April 17, 2007)

31.1*		Certification by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act

31.2*		Certification by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act

32.1*		Certification by Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code

32.2*		Certification by Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code

* Filed herewith.

SIGNATURES

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

		CinTel Corp.


Date: November 23, 2009	By:	/s/ Dave Kyung Han
		Dave Kyung Han
		President, Chief Executive Officer
		and Director (Principal Executive Officer)


Date: November 23, 2009	By:	/s/ Joo Chan Lee
		Joo Chan Lee
		Chief Financial Officer (Principal Financial and Accounting Officer)