CHUN CAN CAPITAL GROUP - Quarter Report: 2010 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, 2010

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

FOR THE TRANSITION PERIOD FROM __________ TO __________

COMMISSION FILE NUMBER: 333-100046

CINTEL CORP.

(Name of registrant in its charter)

Nevada

(State or other jurisdiction of incorporation or organization)

52-2360156

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

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

(Address of principal executive offices) (Zip Code)

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

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 during the preceding 12 months (or 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 19, 2010 was 95,300,196.

CINTEL CORP.

INDEX

PART I: FINANCIAL INFORMATION
ITEM 1:	FINANCIAL STATEMENTS (Unaudited)	3
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
ITEM 2:	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	15
ITEM 3 :	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	20
ITEM 4:	CONTROLS AND PROCEDURES	20
PART II: OTHER INFORMATION
Item 1	LEGAL PROCEEDINGS	21
ITEM 1A :	RISK FACTORS	21
ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	21
ITEM 3	DEFAULTS UPON SENIOR SECURITIES	21
ITEM 4	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	21
ITEM 5	OTHER INFORMATION	21
ITEM 6:	EXHIBITS	21
SIGNATURES		22

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CINTEL CORP. AND SUBSIDIARIES

______________________________________________________

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2010

(UNAUDITED)

CINTEL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

ASSETS	September 30, 2010 (Unaudited)			December 31, 2009 (1)
Current assets:
Cash and cash equivalents	$	125		$	320
Loans receivable – affiliates		234			158
Prepaid and other current assets		183			361
Total current assets		542			839
Property, plant and equipment, net		43			3
Restricted cash		-			35
Equity method investments		7,060			7,912
Long-term investments		7,196			7,188
Goodwill		2,559			2,559
Security deposits		19			48
Total assets	$	17,419		$	18,584
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	12,390		$	12,032
Accrued liabilities		322			138
Total current liabilities		12,712			12,170
Convertible debts		26,104			26,104
Total liabilities		38,816			38,274


Stockholders’ equity (deficit):
Common stocks		98			98
Additional paid-in capital		20,293			20,293
Accumulated other comprehensive loss		(3,966	)		(3,668	)
Accumulated deficit		(37,822	)		(36,413	)
Total stockholders’ deficit		(21,397	)		(19,690	)
Total liabilities and stockholders' equity	$	17,419		$	18,584

(1)	Derived from audited financial statements included in the Form 10-K for the year ended December 31, 2009 filed with the Securities and Exchange Commission.

See accompanying notes to unaudited condensed consolidated financial statements.

CINTEL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)

	Three Months Ended September 30, 2010			(Restated-Note 2) Three Months Ended September 30, 2009			Nine Months Ended September 30, 2010			(Restated-Note 2) Nine Months Ended September 30, 2009

Net revenues	$	-		$	1		$	-		$	1
Cost of revenue		-			-			-			-
Gross profits		-			1			-			1

General and administrative expenses		93			112			497			512
Depreciation and amortization		1			-			3			1
		94			112			500			513
Loss from operations		(94	)		(111	)		(500	)		(512	)

Other income (expenses):
Interest income		-			1			-			551
Interest expenses		(51	)		(365	)		(149	)		(1,057	)
Impairment loss on investment		(183	)		(175	)		(558	)		(497	)
Share of income (loss) from equity method investment		(35	)		31			(415	)		(52	)
Gain (loss) from foreign currency transaction, net		807			2,618			212			(354	)
		538			2,110			(910	)		(1,409	)
Income (loss) before income taxes		444			1,999			(1,410	)		(1,921	)
Income tax provision		-			-			-			-
Income (loss) from continuing operations		444			1,999			(1,410	)		(1,921	)

Loss from discontinued operations, net of tax		-			(2,662	)		-			(6,431	)
Net Income (loss)	$	444		$	(663	)	$	(1,410	)	$	(8,352	)

Loss per share – basic and diluted:
Income (loss) from continuing operations	$	-		$	0.02		$	(0.01	)	$	(0.02	)
Loss form discontinued operations		-			(0.03	)		-			(0.07	)
Net loss	$	-		$	(0.01	)	$	(0.01	)	$	(0.09	)

Weighted average shares outstanding - basic and diluted		95,300			95,300			95,300			95,309

See accompanying notes to unaudited condensed consolidated financial statements.

CINTEL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

	Nine Months Ended
	September 30, 2010			(Restated-Note 2) September 30, 2009

Cash flows from operating activities:
Net loss	$	(1,410	)	$	(8,352	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation		3			1
Loss from discontinued operations		-			6,431
Severance benefit		-			32
Investment impairment		559			497
Share of loss from equity investment		416			53
Foreign currency transaction, net		(213	)		1,029
(Increase) decrease in assets:
Prepaid expenses and other assets		45			(11,071	)
Security deposits		30			-
Increase (decrease) in liabilities:
Accounts payable		132			460
Accrued liabilities		184			391
Cash used in operating activities		(254	)		(10,529	)

Cash flows from investing activities:
Acquisition of investments in securities		-			(923	)
Acquisition of property and equipment		(42	)		-
Proceeds from sale of investment		-			7,529
Payments on loan receivable		(106	)		(1	)
Proceeds from loan receivable		204			6
Cash provided by investing activities		56			6,611

Cash flows from financing activities:
Proceeds from short-term notes		-			765
Principal payments of notes payable		-			(2,500	)
Cash used in financing activities		-			(1,735	)

Net decrease in cash and cash equivalent		(198	)		(5,653	)
Effect of foreign currency translation		3			76
Cash and cash equivalent - beginning of period		320			5,648

Cash and cash equivalent - end of period	$	125		$	71

Supplemental disclosure of cash flows information:
Cash paid for interest	$	-		$	697

Non-cash activity
Common stocks provided for professional service	$	-		$	11

See accompanying notes to unaudited condensed consolidated financial statements.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of CinTel Corp. (“Cintel” or the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In management’s opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments), necessary to state fairly the financial information included herein.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make judgments, estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. 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.

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.

These unaudited condensed consolidated financial statements include the accounts of Cintel Corp. and its wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. While the Company believes that the disclosures are adequate to make the information not misleading, these condensed consolidated 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, 2009.

Going Concern

The Company’s financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has experienced recurring losses over the past years which have resulted in an accumulated deficit of approximately $37.8 million and a working capital deficit of approximately $12.2 million at September 30, 2010.

The Company’s ability to continue as a going concern is contingent upon its ability to secure additional financing, increase sales of its product and attain profitable operations. It is the intent of management to continue to raise additional funds to sustain operations and to pursue acquisitions of operating companies in order to generate future profits for the Company. Although the Company plans to pursue additional equity financing, there can be no assurance that the Company will be able to secure financing when needed or obtain such on terms satisfactory to the Company, if at all.

The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.

Reclassifications

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

CINTEL CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Recent Accounting pronouncements

In January 2010, the FASB issued guidance that expands the interim and annual disclosure requirements of fair value measurements, including the information about movement of assets between level 1 and 2 of the three-tier fair value hierarchy established under its fair value measurement guidance. This guidance also requires separate disclosure for each of purchases, sales, issuance, and settlements in the reconciliation for fair value measurements using significant unobservable inputs, level 3. Except for the detailed disclosure in the level 3 reconciliation, which is effective for the fiscal years beginning after December 15, 2010, all the other disclosures under this guidance are effective for the fiscal years beginning after December 15, 2009. The adoption of this guidance is not expected to a significant impact on the Company’s results of operations of financial position.

In February 2010, the FASB issued ASU No. 2010-09, “Amendments to Certain Recognition and Disclosure Requirements,” which addresses both the interaction of the requirements of Topic 855, Subsequent Events, with the SEC’s reporting requirements and the intended breadth of the reissuance disclosures provision related to subsequent events. Specifically, the amendments state that SEC filers are no longer required to disclose the date through which subsequent events have been evaluated in originally issued and revised financial statements. The standard was effective immediately upon issuance. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. Removal of the disclosure requirement did not affect the nature or timing of the Company’s subsequent event evaluations.

In April 2010, FASB issued ASU 2010-13 “Compensation-Stock Compensation (Topic 718) Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades” (ASU 2010-13). Topic 718 is amended to clarify that a share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades shall not be considered to contain a market, performance, or service condition. Therefore, such an award is not to be classified as a liability if it otherwise qualifies as equity classification. The amendments in this standard are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The guidance should be applied by recording a cumulative-effect adjustment to the opening balance of retained earnings for all outstanding awards as of the beginning of the fiscal year in which the amendments are initially applied. Adoption of the standard is not expected to have a material impact on the Company’s consolidated results of operations and financial condition.

Note 2 – Discontinued Operations from Disposal of Subsidiaries

In October 2009, the convertible bonds issued to Woori PEF were called, and in December 2009, to satisfy the debts, the Company transferred to the creditor; (1) its 100% ownership interest in Bluecomm, (2) its 48% ownership interest in PDT and (3) its 32% ownership interest in PSTS. As a result, the Company now has one remaining wholly owned subsidiary, Cintel Korea. For comparative presentation purposes, the consolidated statements of operations and cash flows for the three and nine months ended September 30, 2009 have been restated to reflect the result of discontinued operations of the subsidiaries which were transferred to Woori PEF.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 3 – Balance Sheet Details

Loans Receivable – Affiliates

Loans receivable from affiliates consist of the following as of September 30, 2010 and December 31, 2009:

	September 30, 2010		December 31, 2009
	(in thousands)
Due from officers	$	106	$	117
Other loan receivable		128		41
	$	234	$	158

In the ordinary course of business, the Company is expected to continue its operation, including borrowings, with companies that are affiliated by direct interest or through common ownership. 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.

Prepaid Expenses and Other Assets

Prepaid expenses and other current assets consist of the following as of September 30, 2010 and December 31, 2009:

	September 30, 2010		December 31, 2009
	(in thousands)

Prepaid expenses	$	1	$	180
Advance payments to vendors		176		173
Other current assets		6		8
Total	$	183	$	361

Property, Plant and Equipment

Property, plant and equipment consist of the following at September 30, 2010 and December 31, 2009:

	September 30, 2010			December 31, 2009
	(in thousands)

Furniture and fixtures	$	9		$	9
Vehicles		43			-
		52			9
Accumulated depreciation		(9	)		(6	)
Property and equipment, net	$	43		$	3

Depreciation expenses for the nine months ended September 30, 2010 and 2009 were $3,343 and $737, respectively.

Note 4 – Investments Securities

The carrying amount, gross unrealized holding gains, gross unrealized holding losses, and fair value of investment securities by major security type and class of security at September 30, 2010 and December 31, 2009 were as follows:

	Aggregate cost basis		Gross unrealized holding gains		Gross unrealized holding (losses)			Estimated fair values
	(In thousands)
September 30, 2010
Available-for-sale:
Equity securities - nonmarketable	$	6,068	$	2,119	$	(991	)	$	7,196

Included in long-term investments								$	7,196

December 31, 2009
Available-for-sale:
Equity securities - nonmarketable	$	6,068	$	2,111	$	(991	)	$	7,188

Included in long-term investments								$	7,188

CINTEL CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Equity securities: The investments in equity securities with unrealized gain or loss consisted of marketable and non-marketable equity securities. The Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the impairment. For nonmarketable equity securities, the Company does not estimate the fair values unless there are identified events or changes in circumstances that may have a significant adverse effect on the investment. If management determines that these nonmarketable equity investments are impaired, losses are generally measured by using pricing reflected in current rounds of financing.

Note 5 – Equity Method Investments

The Company accounts investment under equity method when the it has the ability to exercise significant influence, but not control, over an investee. Significant influence is generally deemed to exist if the investing company has an ownership interest in the voting stock of an investee of between 20% and 50%.

Investments accounted for under the equity method consist of as follows at September 30, 2010 and December 31, 2009:

September 30, 2010	Ownership			Carrying Value
				(in thousands)

Phoenix Asset Investment		27.4	%	$	7,060

December 31, 2009	Ownership			Carrying Value
				(in thousands)

Phoenix Asset Investment		27.4	%	$	7,912

The Company’s share of losses from the equity method investment for the nine months ended September 30, 2010 and 2009 were approximately $415,000 and $83,000, respectively.

Note 6 – Fair Value Measurements

Effective January 1, 2008, the Company adopted ASC 820, Fair Value Measurements and Disclosures, for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. ASC 820 also 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 under ASC 820 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.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 table presents the placement in the fair value hierarchy of assets and liabilities that are measured at fair value on a recurring basis at September 30, 2010 and December 31, 2009:

			Fair value measurements at reporting date using
	September 30, 2010		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	(In thousands)
Available-for-sale securities
Nonmarketable equity securities	$	7,196	$	-	$	7,196	$	-

			Fair value measurements at reporting date using
	December 31, 2009		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	(In thousands)
Available-for-sale securities
Nonmarketable equity securities	$	7,188	$	-	$	7,188	$	-

The fair values of the financial instruments shown in the above table as of September 30, 2010 and December 31, 2009 represent the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants at that date. Those fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects the Company’s own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by the Company based on the best information available in the circumstances, including expected cash flows and appropriately risk-adjusted discount rates, available observable and unobservable inputs.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Investment securities: Marketable securities classified as available for sale are measured using quoted market prices at the reporting date multiplied by the quantity held. The fair values of equity securities accounted for under the cost method (non-marketable equity securities) are determined using market multiples derived from comparable companies. Under that approach, the identification of comparable companies requires significant judgment. Additionally, multiples might lie in ranges with a different multiple for each comparable company. The selection of where the appropriate multiple falls within that range also requires significant judgment, considering both qualitative and quantitative factors. Debt securities classified as available for sale are measured using quoted market prices multiplied by the quantity held when quoted market prices are available. If quoted market prices for those debt securities are not available, the fair value is determined using an income approach valuation technique (present value using the discount rate adjustment technique) that considers, among other things, rates currently observed in publicly traded debt markets for debt of similar terms to companies with comparable credit risk, the issuer’s credit spread, and illiquidity by sector and maturity.

CINTEL CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 7 – Goodwill

The following table sets forth changes in the carrying of goodwill at September 30, 2010 and December 31, 2009:

Balance as of December 31, 2009 (in thousands)	$	2,559
Fair value adjustments		-
Balance as of September 30, 2010	$	2,559

Note 8 – Convertible Debts

The carrying value of convertible debts outstanding at September 30, 2010 and December 31, 2009, are summarized as follows:

	Maturity	Interest Rate			Conversion Price		September 30, 2010		December 31, 2009
							(in thousands)

Convertible debenture - A	2011		8.00	%	$	0.50	$	15,284	$	15,284
Convertible debenture - C	2012		2.30	%	$	0.70		10,820		10,820
Total							$	26,104	$	26,104

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

Note 9 – Income Taxes

The Company adopted the provisions of FASB ASC 740-10 on January 1, 2008, and there was no material effect on the financial statements at the date of adoption. There was no cumulative effect related to adopting FASB ASC 740-10.

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, 2010 and 2009 are summarized as follows:

	Nine Months Ended
	September 30, 2010		September 30, 2009
	(in thousands)

Current income tax - US and foreign	$	-	$	-
Deferred income tax - US and foreign		-		-
Income tax expense	$	-	$	-

CINTEL CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company has deferred tax assets (liabilities) at September 30, 2010 and December 31, 2009 as follows:

	September 30, 2010			December 31, 2009
	(in thousands)
Net operating loss carryforwards	$	5,439		$	5,353
Valuation allowance		(5,439	)		(5,353	)
	$	-		$	-

Note 10 – Comprehensive Income (Loss)

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. Comprehensive loss, net of taxes, for the periods ended September 30, 2010 and 2009 is as follows:

	Three Months Ended						Nine Months Ended
	September 30, 2010			September 30, 2009			September 30, 2010			September 30, 2009
	(in thousands)

Net Income (loss)	$	444		$	(663	)	$	(1,410	)	$	(8,352	)

Comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(1,101	)		(1,100	)		(297	)		(1,229	)
Total comprehensive loss	$	(657	)	$	(1,763	)	$	(1,707	)	$	(9,581	)

Note 11 – Loss per Share

The following reconciles the numerators and denominators of the basic and diluted per share computation for the periods ended September 30, 2010 and 2009:

	Three Months Ended					Nine Months Ended
	September 30, 2010		September 30, 2009			September 30, 2010			September 30, 2009
	(in thousand except for loss per share)

Numerator for basic and diluted earnings per share:
Net loss from continuing operations	$	444	$	1,999		$	(1,410	)	$	(1,921	)
Net loss from discontinued operations		-		(2,662	)		-			(6,431	)

Denominator:
Basic and diluted weighted average shares outstanding		95,300		95,300			95,300			95,309

Basic and diluted loss per share – continuing operations	$	-	$	0.02		$	(0.01	)	$	(0.02	)
Basic and diluted loss per share – discontinued operations	$	-	$	(0.03	)	$	-		$	(0.07	)

CINTEL CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 12 – Capital

The Company had no significant capital transactions for the three and nine months ended September 30, 2010.

Stock Warrants and Options

The Company has accounted for its stock options and warrants in accordance with ASC 718 "Stock Based Compensation". 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, 2010			December 31, 2009
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, 2010 and 2009 and no option is outstanding at September 30, 2010.

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

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 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 quarterly 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.

Recent Development

On December 31, 2009, CinTel Corp entered into an agreement (the “Agreement”) with Woori Private Equity Fund (“Woori”), and Cintel Co. Ltd., (“Cintel Korea”), a wholly owned subsidiary of the Company. The Agreement provides for the transfer by the Company of certain collateral to Woori in accordance with the Convertible Bonds Subscription Agreement dated as March 15, 2007 (the “Woori Subscription Agreement”). At the closing of the Woori Subscription Agreement, the Company issued a convertible bond (the “Convertible Bond”) in the amount of Korean Won 60,000,000,000 (USD$63,000,000). The Convertible Bond is secured by the all shares subscribed for by the Company using the proceeds from the Convertible Bond.

Pursuant to the terms of the Agreement, the Company acknowledged that it is in default of the terms of the Woori Subscription Agreement and agreed to the following in full satisfaction of all amounts owed under the Convertible Bond:

(A) The pledged deposit established pursuant to the Woori Subscription Agreement in the amount of Korean Won 10,718,080,000 (USD$9,292,602) shall be transferred to Woori; and

(B) The Company shall sell and transfer to Woori all of its interest in 501,000 shares of Phoenix Digital Tech (“PDT”), 10,200,000 shares of Phoenix Semiconductor Telecommunication Suzhou, 1,202,520 shares of Bluecomm (the “Pledged Shares”).

In addition, Cintel Korea shall transfer to Woori 2,644,426 shares of BKLCD (together with the Pledged Shares, collectively the “Pledged Securities”). The purchase price of the Pledged Securities shall be paid by offset against the amounts owed under the Convertible Bond.

The closing of the transactions contemplated by the Agreement occurred on December 31, 2009. Upon the closing of the transaction, the Company had no remaining active operations.

The Company’s principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through a combination with a business. The Company will not restrict its potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.

The analysis of new business opportunities will be undertaken by or under the supervision of the officers and directors of the Company. The Company has unrestricted flexibility in seeking, analyzing and participating in potential business opportunities. In its efforts to analyze potential acquisition targets, the Company will consider the following kinds of factors:

(a) Potential for growth, indicated by new technology, anticipated market expansion or new products;

(b) Competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole;

(d) Capital requirements and anticipated availability of required funds, to be provided by the Company or from operations, through the sale of additional securities, through joint ventures or similar arrangements or from other sources;

(e) The cost of participation by the Company as compared to the perceived tangible and intangible values and potentials;

(f) The extent to which the business opportunity can be advanced;

(g) The accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items; and

(h) Other relevant factors.

In applying the foregoing criteria, no one of which will be controlling, management will attempt to analyze all factors and circumstances and make a determination based upon reasonable investigative measures and available data. Potentially available business opportunities may occur in many different industries, and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. Due to the Company's limited capital available for investigation, the Company may not discover or adequately evaluate potential acquisition targets.

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 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. Until December 31, 2009, the Company had holdings that directly manufactured semiconductor packaging, NAND flash memory packaging, LCD assembly, and testing specialists, as well as provided a solution for memory applications for home appliances, semiconductor, TFT-LCD application products and Factory Automation Design. The Company’s operations were conducted through its subsidiaries, Phoenix Digital Tech, Phoenix Semiconductor Telecommunication Suzhou, and Bluecomm and its indirect subsidiary BKLCD. Upon transfer of the shares of its operating subsidiaries pursuant to the Agreement with its largest creditor, Woori, in December 2009, the company has no current operations. The Company maintains a 19% interest in PSTS and 2.1% interest in PDT.

Results of Operations

Three months period ended September 30, 2010 compared to the three months ended September 30, 2009.

(in thousands, USD)

	9/30/2010		(Restated) 9/30/2009
Revenue	$	-	$	1
Cost of sales		-		-
Gross profit		-		-
Operating expenses		94		112
Income (loss) from continuing operations		444		1,999
Loss from discontinued operations		-		(2,662	)
Net Income (loss)		444		(663	)

The company generated no revenues for the three months ended September 30, 2010 and approximately $1,000 for the corresponding period ended in 2009, as the result of disposal of its operating subsidiaries during the fourth quarter of 2009.

Total operating expenses for the three months ended September 30, 2010 and 2009 totaled approximately $94,000 and $112,000, respectively, resulting in a decrease of $18,000 or 16.1%.

For the three months ended September 30, 2010 and 2009, the Company had income from continuing operations of $444,000 and $2.0 million, respectively. Loss from discontinued operations totaled approximately $2.66 million for the three months ended September 30, 2009. The Company had net income of $444,000 for the three months ended September 30, 2010 and net loss of $663,000 for the corresponding period ended in 2009. The net income recognized was mainly from gain on foreign currency transactions.

Nine months period ended September 30, 2010 compared to the Nine months ended September 30, 2009.

(in thousands, USD)

	9/30/2010			(Restated) 9/30/2009
Revenue	$	-		$	1
Cost of sales		-			-
Gross profit		-			-
Operating expenses		500			513
Loss from continuing operations		(1,410	)		(1,921	)
Loss from discontinued operations		-			(6,431	)
Net loss		(1,410	)		(8,352	)

The company generated no revenues for the nine months ended September 30, 2010 and approximately $1,000 for the corresponding period in 2009, as the result of disposal of operating subsidiaries during the fourth quarter of 2009.

Total operating expenses for the nine months ended September 30, 2010 and 2009 totaled approximately $500,000 and $513,000, respectively, resulting in a decrease of $13,000 or 2.5%.

For the nine months ended September 30, 2010 and 2009, the company had loss from continuing operations of $1.41 million and $1.92 million, respectively. Loss from discontinued operations totaled approximately $6.43 million for the nine months ended September 30, 2009. The net loss for the nine months ended September 30, 2010 and 2009 totaled $1.41 million and $8.35 million, respectively. The decline in net loss from 2009 to 2010 mainly resulted from reduction of discontinued operating losses of transferred subsidiaries.

In summary, although the company incurred net income for the quarter ending September 30, 2010 mainly from gain on foreign currency transactions, management anticipates that the Company’s operating results will remain in the similar sluggish trend until the company engages in more viable business.

Liquidity and Capital Resources

As of September 30, 2010 our cash balance without restriction was about $125,000 compared to $320,000 at December 31, 2009. Total current assets at September 30, 2010 was $542,000 compared to $839,000 at December 31, 2009. The decline in the current assets mainly resulted from reduction in cash balance and prepaid expenses. Cash has been depleted on operating activities. We currently plan to use the cash balance for ordinary business operations.

For the nine months ended September 30, 2010, net cash used in operating activities was $254,000, compared to $10.5 million for the nine months ended September 30, 2009. The decrease in the net cash used in operating activities was mainly attributed to discontinued operating loss and changes in other assets during 2009.

For the nine months ended September 30, 2010, net cash provided by investing activities was $56,000, compared to $6.61 million for the nine months ended September 30, 2009. The decrease in cash provided by investing activities can be largely attributed to no additional investments or sales occurred in 2010.

For the nine months ended September 30, 2010, no cash transactions occurred in financing activities, compared to net cash used of $1.74 million for the nine months ended September 30, 2009. The decrease in cash used in financing activities can be largely attributed to no additional borrowings or debt payments occurred in 2010.

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

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, 2010, the Company has no cash under such restriction in use while, at December 31, 2009, such restricted cash aggregated $35,000$1,242,582.

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

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.

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.

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.

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.

Recent Accounting pronouncements

In January 2010, the FASB issued guidance that expands the interim and annual disclosure requirements of fair value measurements, including the information about movement of assets between level 1 and 2 of the three-tier fair value hierarchy established under its fair value measurement guidance. This guidance also requires separate disclosure for each of purchases, sales, issuance, and settlements in the reconciliation for fair value measurements using significant unobservable inputs, level 3. Except for the detailed disclosure in the level 3 reconciliation, which is effective for the fiscal years beginning after December 15, 2010, all the other disclosures under this guidance are effective for the fiscal years beginning after December 15, 2009. The adoption of this guidance will not have material impact to the net result of operations of 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, 2010.

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

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. Removed and Reserved

None

ITEM 6. EXHIBITS

Exhibit Number		Description

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 22, 2010	By:	/s/ Dave Kyung Han
		Dave Kyung Han
		President, Chief Executive Officer
		and Director (Principal Executive Officer)


Date: November 22, 2010	By:	/s/ Joo Chan Lee
		Joo Chan Lee
		Chief Financial Officer (Principal Financial and Accounting Officer)