8-K/A 1 eightkaone.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 September 30, 2003 --------------------- Date of Report (Date of earliest event reported) CINTEL CORP. ------------ (Exact name of registrant as specified in its charter) Nevada ------ (State or other jurisdiction of incorporation) 333-100046 52-2360156 ---------- ---------- (Commission File Number) (IRS Employer Identification No.) 7F, MSA B/D, 891-43, Daechi-dong, Kangnam-gu, Seoul, KOREA (Zip: 135-280) -------------------------------------------------------------------------- (address of principal executive offices) (Zip Code) 011-822-508-2033 ---------------- (Registrant's telephone number, including area code) -1- The undersigned Registrant hereby amends its current report on Form 8-K dated September 30, 2003 to file the following information: ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. See the Registrant's periodic report on Form 10QSB filed November 17, 2003, for further information regarding the acquisition by the Registrant of CINTEL CO., LTD., a Korean corporation. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial statements of business acquired. The audited financial statements of CINTEL CO., LTD., a Korean corporation, for the years ended December 31, 2002 and 2001 immediately follow the signature page below. (b) Pro forma financial information. Pro forma financial information with respect to the Registrant and CINTEL CO., LTD., a Korean corporation, follow the audited financial statements described above. (c) Exhibits Exhibit No. Description ----------- ----------- 2.1(1) Share Exchange Agreement, dated September 30, 2003, by and between the Company, CINTEL CO., LTD. and the Shareholders of CINTEL CO., LTD. (1) Previously filed as an exhibit to the Registrant's current report on Form 8-K on September 30, 2003. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Cintel Corp. By: /s/ Sang Don Kim -------------------------- Sang Don Kim Date: December 1, 2003 Chief Executive Officer -2- CINTEL CO., LTD. FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2002 AND 2001 CONTENTS
Independent Auditors' Report . . . . . . . . F-1 Balance Sheets . . . . . . . . . . . . . . . F-2 Statement of Operations. . . . . . . . . . . F-3 Statement of Changes in Stockholders' Equity F-4 Schedule of Expenses . . . . . . . . . . . . F-5 Statement of Cash Flows. . . . . . . . . . . F-6 Notes to Financial Statements. . . . . . . . F-7 ? F-13
INDEPENDENT AUDITORS' REPORT To the Stockholders of CINTEL CO., LTD. We have audited the balance sheets of CINTEL CO., LTD. (the "Company") as at December 31, 2002 and 2001 and the statements of operations, changes in stockholders' equity and cash flows for the years then ended. The financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2002 and 2001, and the results of its operation, changes in its accumulated deficit and its cash flows for the years ended, in conformity with accounting principles generally accepted in the United States of America. /s/ SF Partnership, LLP TORONTO, CANADA CHARTERED ACCOUNTANTS November 6, 2003 F-1 CINTEL CO., LTD. Balance Sheets December 31, 2002 and 2001
2002 2001 ASSETS CURRENT Cash and cash equivalents . . . . . . . . . . $ 778,891 $ 759,281 Accounts receivable . . . . . . . . . . . . . 3,418,909 4,386,753 Inventory . . . . . . . . . . . . . . . . . . 219,100 137,343 Prepaid and sundry assets . . . . . . . . . . 405,654 182,227 Loans receivable (note 3) . . . . . . . . . . 285,740 119,186 Deferred taxes. . . . . . . . . . . . . . . . 61,769 40,797 ------------------------- 5,170,063 5,625,587 INVESTMENTS . . . . . . . . . . . . . . . . . 42,037 38,194 EQUIPMENT (note 4). . . . . . . . . . . . . . 319,598 282,747 DEFERRED TAXES. . . . . . . . . . . . . . . . 185,306 122,391 ------------------------- $ 5,717,004 $ 6,068,919 ========================= LIABILITIES CURRENT Accounts payable. . . . . . . . . . . . . . . $ 1,532,597 $ 2,822,676 Income taxes. . . . . . . . . . . . . . . . . 5,129 - Deferred government grant (note 5). . . . . . 37,288 33,971 Loans payable - current (note 6). . . . . . . 1,177,222 552,656 ------------------------- 2,752,236 3,409,303 LOANS PAYABLE (note 6). . . . . . . . . . . . 19,958 111,312 ------------------------- 2,772,194 3,520,615 ------------------------- STOCKHOLDERS' EQUITY CAPITAL STOCK (note 7). . . . . . . . . . . . 2,150,968 2,010,250 PAID IN CAPITAL . . . . . . . . . . . . . . . 2,461,453 2,237,448 ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (47,263) (283,586) ACCUMULATED DEFICIT . . . . . . . . . . . . . (1,620,348) (1,415,808) ------------------------- 2,944,810 2,548,304 ------------------------- $ 5,717,004 $ 6,068,919 =========================
APPROVED ON BEHALF OF THE BOARD /s/ Sang Don Kim ------------------------------------ Director F-2 CINTEL CO., LTD. Statement of Operations Years Ended December 31, 2002 and 2001
2002 2001 REVENUE . . . . . . . . . . . . . . . . . . . . $5,476,702 $5,750,176 COST OF SALES . . . . . . . . . . . . . . . . . 3,901,035 4,124,610 ----------------------- GROSS PROFIT. . . . . . . . . . . . . . . . . . 1,575,667 1,625,566 EXPENSES (page 5) . . . . . . . . . . . . . . . 1,833,431 1,465,404 ----------------------- OPERATING (LOSS) INCOME . . . . . . . . . . . . (257,764) 160,162 ----------------------- OTHER Interest and other income . . . . . . . . . . . (38,028) (65,465) Foreign exchange. . . . . . . . . . . . . . . . (12,798) 2,675 Interest expense. . . . . . . . . . . . . . . . 55,518 25,765 ----------------------- 4,692 (37,025) ----------------------- (LOSS) EARNINGS BEFORE DISCONTINUED OPERATIONS AND INCOME TAXES. . . . . . . . . . . . . . (262,456) 197,187 Loss from discontinued operations (note 10) . . - 118,743 ----------------------- (LOSS) EARNINGS BEFORE INCOME TAXES . . . . . . (262,456) 78,444 ----------------------- Current . . . . . . . . . . . . . . . . . . . . 7,898 9,493 Deferred. . . . . . . . . . . . . . . . . . . . (65,814) (54,499) ----------------------- (57,916) (45,006) ----------------------- NET (LOSS) EARNINGS . . . . . . . . . . . . . . $ (204,540) $ 123,450 ======================= BASIC (LOSS) EARNINGS PER SHARE BEFORE DISCONTINUED OPERATIONS . . . . . . . . . . $ (0.042) $ 0.051 ======================= BASIC (LOSS) EARNINGS PER SHARE . . . . . . . . $ (0.042) $ 0.026 ======================= FULLY DILUTED (LOSS) EARNINGS PER SHARE BEFORE DISCONTINUED OPERATIONS . . . . . . . . . . $ (0.042) $ 0.049 ======================= FULLY DILUTED (LOSS) EARNINGS PER SHARE . . . . $ (0.042) $ 0.025 ======================= BASIC WEIGHTED AVERAGE NUMBER OF SHARES . . . . 4,895,550 4,730,000 ======================= FULLY DILUTED WEIGHTED AVERAGE NUMBER OF SHARES (note 7) . . . . . . . . . . . . . . 4,895,550 4,893,000 ======================= F-3
CINTEL CO., LTD. Statement of Stockholders' Equity Years Ended December 31, 2002 and 2001
PAID IN ACCUMULATED CAPITAL IN OTHER NUMBER OF CAPITAL EXCESS OF PAR COMPREHENSIVE ACCUMULATED SHARES STOCK VALUE INCOME DEFICIT --------------------------------------------------- -------------------- Balance, January 1, 2001. . 473,000 $ 2,010,250 $ 2,211,948 $ (183,703) $ (1,539,258) Retroactive adjustment for May 7, 2002 10 to 1 stock split (note 7). . 4,257,000 - - - - Employee stock options granted . . . . . . . . - - 25,500 - - Foreign exchange on translation . . . . . . - - - (99,883) - Net Loss. . . . . . . . . . - - - - 123,450 --------------------------------------------------- -------------------- Balance, December 31, 2001. 4,730,000 $ 2,010,250 $ 2,237,448 $ (283,586) $ (1,415,808) ======================================================================= Balance, January 1, 2002. . 4,730,000 $ 2,010,250 $ 2,237,448 $ (283,586) $ (1,415,808) Common shares issued. . . . 331,100 140,718 224,005 - - Foreign exchange on translation . . . . . . - - - 236,323 - Net Loss. . . . . . . . . . - - - - (204,540) --------------------------------------------------- -------------------- Balance, December 31, 2002. 5,061,100 $ 2,150,968 $ 2,461,453 $ (47,263) $ (1,620,348) ======================================================================= F-4
CINTEL CO., LTD. Schedule of Expenses Years Ended December 31, 2002 and 2001
2002 2001 EXPENSES Salaries . . . . . . . . $ 483,109 $ 368,899 Employee benefits. . . . 65,608 40,832 Travel . . . . . . . . . 40,313 22,785 Entertainment. . . . . . 53,249 42,008 Communications . . . . . 12,758 10,720 Taxes and dues . . . . . 16,748 15,558 Depreciation . . . . . . 52,508 40,328 Rent . . . . . . . . . . 46,832 34,112 Repairs and maintenance. - 1,108 Insurance. . . . . . . . 20,303 1,670 Vehicle. . . . . . . . . 3,463 26,875 Office and general . . . 63,080 39,664 Professional fees. . . . 161,755 136,130 Research and development 554,183 558,080 Advertising. . . . . . . 71,945 52,248 Bad debts. . . . . . . . 130,877 16,667 Royalties. . . . . . . . 56,700 57,720 ---------------------- $1,833,431 $1,465,404 ====================== F-5
CINTEL CO., LTD. Statement of Cash Flows Years Ended December 31, 2002 and 2001
2002 2001 CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) earnings . . . . . . . . . . . . . . . . $ (204,540) $ 123,450 Adjustments for working capital and non-cash items: Depreciation. . . . . . . . . . . . . . . . . . . . 52,508 40,328 Accounts receivable . . . . . . . . . . . . . . . . 967,844 (3,607,778) Inventory . . . . . . . . . . . . . . . . . . . . . (81,757) 86,146 Prepaid and sundry assets . . . . . . . . . . . . . (223,427) 99,467 Loans receivable. . . . . . . . . . . . . . . . . . (166,554) (7,676) Deferred taxes. . . . . . . . . . . . . . . . . . . (83,886) (48,920) Accounts payable. . . . . . . . . . . . . . . . . . (1,290,080) 2,366,655 Income taxes. . . . . . . . . . . . . . . . . . . . 5,129 - Deferred government grant . . . . . . . . . . . . . 3,317 33,971 Foreign currency translation. . . . . . . . . . . . 236,323 (99,883) ------------------------- (785,123) (1,014,240) ------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of investments. . . . . . . . . . . . . (3,843) (33,786) Acquisition of equipment. . . . . . . . . . . . . . (89,359) (87,133) ------------------------- (93,202) (120,919) ------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Issuance of common stock. . . . . . . . . . . . . . 364,722 25,500 Loans payable . . . . . . . . . . . . . . . . . . . 533,213 266,191 ------------------------- 897,935 291,691 ------------------------- NET INCREASE (DECREASE) IN CASH . . . . . . . . . . 19,610 (843,468) CASH - BEGINNING OF YEAR . . . . . . . . . . . . . 759,281 1,602,749 ------------------------- CASH - END OF YEAR. . . . . . . . . . . . . . . . . $ 778,891 $ 759,281 ========================= F-6 CINTEL CO., LTD. Notes to Financial Statements December 31, 2002 and 2001
1. OPERATIONS AND BUSINESS Cintel Co., Ltd. ("the Company"), a company operating in Seoul, Korea, was established on June 7, 1997 to develop and sell software relating to the maintenance of internet traffic load. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the Company are in accordance with generally accepted accounting principles of the United States of America, and their basis of application is consistent. Outlined below are those policies considered particularly significant: a) Basis of Financial Statement Presentation These financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. b) Unit of Measurement The US Dollar has been used as the unit of measurement in these financial statements. c) Use of Estimates Preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and related notes to financial statements. These estimates are based on management's best knowledge of current events and actions the Company may undertake in the future. Actual results may ultimately differ from estimates, although management does not believe such changes will materially affect the financial statements in any individual year. d) Revenue Recognition The Company recognizes revenues upon delivery of merchandise sold, and when services are rendered for maintenance contracts. e) Cash and Cash Equivalents Cash includes currency, cheques issued by others, other currency equivalents, current deposits and passbook deposits. Cash equivalents includes securities and short-term money market instruments that can be easily converted into cash. The investments that mature within three months from the investment date, are also included as cash equivalents. F-7 CINTEL CO., LTD. Notes to Financial Statements December 31, 2002 and 2001 - - 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) f) Inventories Inventories are stated at the lower of cost or net realizable value. Net realizable value is determined by deducting selling expenses from selling price. The cost of inventories is determined on the first-in first-out method, except for materials-in-transit for which the specific identification method is used. g) Equipment Equipment is stated at cost. Major renewals and betterments are capitalized and expenditures for repairs and maintenance are charged to expense as incurred. Depreciation is computed using the straight-line method over a period of 5 years. h) Currency Translation The Company's functional currency is Korean won. Adjustments to translate those statements into U.S. dollars at the balance sheet date are recorded in other comprehensive income. Foreign currency transactions of the Korean operation have been translated to Korean Won at the rate prevailing at the time of the transaction. Realized foreign exchange gains and losses have been charged to income in the year. i) Financial Instruments Fair values of cash equivalents, short-term and long-term investments and short-term debt approximate cost. The estimated fair values of other financial instruments, including debt, equity and risk management instruments, have been determined using market information and valuation methodologies, primarily discounted cash flow analysis. These estimates require considerable judgment in interpreting market data, and changes in assumptions or estimation methods could significantly affect the fair value estimates. j) Income Tax The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting for Income Taxes". Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. F-8 CINTEL CO., LTD. Notes to Financial Statements December 31, 2002 and 2001 - - 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) k) Earnings or Loss per Share The Company adopted FAS No.128, "Earnings per Share" which requires disclosure on the financial statements of "basic" and "diluted" earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the year. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to stock options and warrants for each year. l) Concentration of Credit Risk SFAS No. 105, "Disclosure of Information About Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentration of Credit Risk", requires disclosure of any significant off-balance sheet risk and credit risk concentration. The Company does not have significant off-balance sheet risk or credit concentration. The Company maintains cash and cash equivalents with major Korean financial institutions. The Company's provides credit to its clients in the normal course of its operations. It carries out, on a continuing basis, credit checks on its clients and maintains provisions for contingent credit losses which, once they materialize, are consistent with management's forecasts. For other debts, the Company determines, on a continuing basis, the probable losses and sets up a provision for losses based on the estimated realizable value. Concentration of credit risk arises when a group of clients having a similar characteristic such that their ability to meet their obligations is expected to be affected similarly by changes in economic of other conditions. The Company does not have any significant risk with respect to a single client. 3. LOANS RECEIVABLE
Loans receivable included: 2002 2001 Employee loans. $ 84,117 $119,186 WISEngine, Inc. 201,623 - ------------------ $285,740 $119,186 ==================
The employee loans bear interest at 5% per annum and are due on demand. The loan to WISEngine, Inc. is non-interest bearing and due on demand. The loans were repaid subsequent to the year end. F-9 CINTEL CO., LTD. Notes to Financial Statements December 31, 2002 and 2001 4. EQUIPMENT Equipment is comprised as follows:
2002 2001 ACCUMULATED Accumulated COST DEPRECIATION Cost Depreciation ------------------------------------------------ Furniture and fixtures $ 22,916 $ 11,436 $ 17,678 $ 6,404 Equipment. . . . . . . 523,080 271,445 365,313 163,204 Vehicles . . . . . . . 12,944 7,767 11,793 4,717 Software . . . . . . . 85,323 34,017 77,732 15,444 ------------------------------------------------ $644,263 $ 324,665 $472,516 $ 189,769 ------------------------------------------------ Net carrying amount. . $319,598 $ 282,747 -------- -------------
5. DEFERRED GOVERNMENT GRANT The Company received government grants to research and develop various products. The Company recognizes the grants upon completion of each subsidized project. 6. LOANS PAYABLE
2002 2001 CURRENT LONG-TERM TOTAL Total -------------------------------------------- Bank loan #1. . $1,087,190 $ - $1,087,190 $457,140 Bank loan #2. . 63,332 - 63,332 148,786 Government loan 26,700 19,958 46,658 58,042 -------------------------------------------- $1,177,222 $ 19,958 $1,197,180 $663,968 ============================================
Bank Loan #1 The loan is repayable, interest only, at 7.6% per annum calculated monthly. The loan matures December 2003. F-10 CINTEL CO., LTD. Notes to Financial Statements December 31, 2002 and 2001 6. LOANS PAYABLE (cont'd) Bank Loan #2 The loan bears interest at LIBOR+3.28% per annum calculated monthly, is repayable in semi-annual payments of $38,400 and matures November 2003. Government Loan The loan is non-interest bearing, repayable in annual payments of $26,700 and matures July 2005. 7. CAPITAL STOCK Authorized 50,000,000 common shares, par value $0.425 per share
2002 2001 Issued 5,061,100 common shares (4,730,000 in 2001) $2,150,968 $2,010,250 ======================
On May 7, 2002, the Company granted a 10 to 1 stock split. The 2001 comparative share amounts have been retroactively adjusted to give effect to the stock split. On June 18, 2002, the Company issued 331,100 shares for consideration of $364,723. Stock Warrants and Options The Company accounted for its stock options and warrants in accordance with SFAS 123 "Accounting for Stock - Based Compensation" and SFAS 148 "Accounting for Stock - Based compensation - Transition and Disclosure." Value of options granted has been estimated by the Black Scholes option pricing model. The assumptions are evaluated annually and revised as necessary to reflect market conditions and additional experience. The following assumptions were used:
2002 2001 Interest rate. . . . . 6.5% 6.5% Expected volatility. . 70% 70% Expected life in years 6 6
In 1999 the Board of Directors of the Company adopted an option plan to allow employees to purchase ordinary shares of the Company. F-11 CINTEL CO., LTD. Notes to Financial Statements December 31, 2002 and 2001 7. CAPITAL STOCK (cont'd) In August 1999, the share option plan granted 43,000 stock options for the common stock of the Company having a $0.425 nominal par value each and an exercise price of $0.425. In March 2000, an additional 90,000 stock options were granted having a $0.425 nominal par value each and an exercise price of $0.68. In February 2001, an additional 30,000 stock options were granted having a $0.425 nominal par value each and an exercise price of $0.72. The options vest gradually over a period of 3 years from the date of grant. The term of each option shall not be more than 8 years from the date of grant. For 2001, the stock options have not been included in the calculation of the diluted earnings per share as their inclusion would be antidilutive. The following table summarizes the stock option activity during 2002 and 2001:
2002 2001 Outstanding, beginning of year . . . . . . . . . . . . . . . . 163,000 133,000 Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . - 30,000 Exercised. . . . . . . . . . . . . . . . . . . . . . . . . . . - - Cancelled. . . . . . . . . . . . . . . . . . . . . . . . . . . - - ---------------- -- Outstanding, end of year . . . . . . . . . . . . . . . . . . . 163,000 163,000 ================== Weighted average fair value of options granted during the year $ - $ 25,500 ==================
8. INCOME TAXES The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting for Income Taxes". This Standard prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates. The effects of future changes in tax laws or rates are not anticipated. Corporate income tax rates applicable to the Company in 2002 and 2001 are 16.5 percent of the first 100 million Korean Won of taxable income and 29.7 percent of the excess. Under SFAS No. 109 income taxes are recognized for the following: a) amount of tax payable for the current year, and b) deferred tax liabilities and assets for future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. The Company has deferred income tax assets arising from research and development expenses. For accounting purposes, these amounts are expenses when incurred. Under Korean tax laws, these amounts are deferred and amortized on a straight-line basis over 5 years. F-12 CINTEL CO., LTD. Notes to Financial Statements December 31, 2002 and 2001 9. CONTINGENT LIABILITIES AND COMMITMENTS a) The Company has entered into a contract with iMimic Networking, Inc. for the use of the iMimic solution within Korea starting November 17, 2000. For the use of this solution, the Company paid $70,000 as an upfront payment and pays a $640 royalty for each product sold that uses the iMimic solution. The Company is also required to pay an annual royalty fee of $10,000. The contract has no fixed termination date. b) The Company is committed to lease obligations, with various expiry dates to May 2004. Future minimum annual payments (exclusive of taxes, insurance and maintenance costs) under these leases are as follows:
2003. . $60,070 2004. . 25,030 ------- $85,100 -------
10. DISCONTINUED OPERATIONS The Company closed down its subsidiary in the United States in 2001. The subsidiary did not carry on any business activity in 2001. The net tangible assets of $118,743 at December 31, 2001 were used to finance the costs associated with closing operations, and therefore were charged to the income statement in 2001. 11. SUBSEQUENT EVENT On September 30, 2003, in accordance with a Share Exchange Agreement dated May 8, 2003, the Company entered into a reverse-takeover transaction with Link2 Technologies, Inc. ("LINK"), a public Nevada shell corporation, whereby all the outstanding shares of the Company were exchanged for 16,683,300 shares of LINK. As a result of the transaction, the shareholders of Cintel Co., Ltd. will control 82% of LINK. While LINK is the legal parent, the Company, as a result of the reverse-takeover, became the parent company for accounting purposes. F-13 CINTEL CORP. PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 2003 UNAUDITED CONTENTS
Pro-Forma Consolidated Balance Sheet . . . . . . . . . . F-15 Pro-Forma Consolidated Statement of Stockholders' Equity F-16 Pro-Forma Consolidated Statement of Operations . . . . . F-17Notes to Pro- Forma Consolidated Financial Statements . . F-18 ? F-19
F-14 CINTEL CORP. Pro-Forma Consolidated Balance Sheet September 30, 2003 Unaudited
LINK2 TECHNOLOGIES, CINTEL CO., CINTEL CORP. INC. LTD. PRO- FORMA CINTEL CORP. SEPTEMBER 30, SEPTEMBER 30, PRO-FORMA SEPTEMBER 30, DEC. 31, 2003 2003 ADJUSTMENTS 2003 2002 ------------------------------------------------ ------------------ ASSETS CURRENT Cash and cash equivalents. . . $ - $ 345,997 $ - $ 345,997 $ 778,891 Accounts receivable. . . . . . - 3,285,886 - 3,285,886 3,418,909 Inventory. . . . . . . . . . . - 333,079 - 333,079 219,100 Prepaid and sundry assets. . . - 311,801 - 311,801 405,654 Loans receivable . . . . . . . - - - - 285,740 Deferred taxes . . . . . . . . - 65,739 - 65,739 61,769 ------------------------------------------------ ------------------ - 4,342,502 - 4,342,502 5,170,063 INVESTMENTS. . . . . . . . . . - 43,741 - 43,741 42,037 EQUIPMENT. . . . . . . . . . . - 734,474 - 734,474 319,598 DEFERRED TAXES . . . . . . . . - 197,215 - 197,215 185,306 ------------------------------------------------ ------------------ $ - $ 5,317,932 $ - $ 5,317,932 $ 5,717,004 ================================================================== LIABILITIES CURRENT Accounts payable . . . . . . . $ 32,903 $ 1,996,159 $ - $ 2,029,062 $ 1,563,041 Income taxes . . . . . . . . . - - - - 5,129 Deferred government grant. . . - 38,800 - 38,800 37,288 Loans payable - current. . . . - 1,160,354 - 1,160,354 1,177,222 ------------------------------------------------ ------------------ 32,903 3,195,313 - 3,228,216 2,782,680 LOANS PAYABLE. . . . . . . . . 39,000 20,767 - 59,767 34,958 ------------------------------------------------ ------------------ 71,903 3,216,080 - 3,287,983 2,817,638 ------------------------------------------------ ------------------ STOCKHOLDERS' DEFICIENCY CAPITAL STOCK. . . . . . . . . 10,539 2,150,968 (10,539) 2,150,968 2,150,968 PAID IN CAPITAL. . . . . . . . 66,161 2,461,453 (138,064) 2,389,550 2,416,009 ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - 38,711 - 38,711 (47,263) ACCUMULATED DEFICIT. . . . . . (148,603) (2,549,280) 148,603 (2,549,280) (1,620,348) ------------------------------------------------ ------------------ (71,903) 2,101,852 - 2,029,949 2,899,366 ------------------------------------------------ ------------------ $ - $ 5,317,932 $ - $ 5,317,932 $ 5,717,004 ================================================================== F-15
CINTEL CORP. Pro-Forma Consolidated Statement of Stockholders' Equity Nine Months Ended September 30, 2003 Unaudited
LINK2 TECHNOLOGIES, CINTEL CO., CINTEL CORP. INC. LTD. PRO-FORMA CINTEL CORP. SEPTEMBER 30, SEPTEMBER 30, PRO-FORMA SEPTEMBER 30, DEC. 31, 2003 2003 ADJUSTMENTS 2003 2002 --------------------------------------------------- -------------- ACCUMULATED DEFICIT - BEGINNING OF PERIOD $(122,144) $(1,620,348) $ 122,144 $(1,620,348) $(1,415,808) Net Loss. . . . . . . . (26,459) (928,932) 26,459 (928,932) (204,540) --------------------------------------------------- -------------- ACCUMULATED DEFICIT - END OF PERIOD. . . $(148,603) $(2,549,280) $ 148,603 $(2,549,280) $(1,620,348) ================================================================= F-16
CINTEL CORP. Pro-Forma Consolidated Statement of Operations Nine Months Ended September 30, 2003 Unaudited
LINK2 TECHNOLOGIES, CINTEL CO., CINTEL CORP. INC. LTD. PRO-FORMA CINTEL CORP. SEPTEMBER 30, SEPTEMBER 30, PRO-FORMA SEPTEMBER 30, DEC. 31, 2003 2003 ADJUSTMENTS 2003 2002 ------------------------------------------------- ------------- REVENUE . . . . . . . . . . . $ 1,000 $3,701,066 $ (1,000) $3,701,066 $5,476,702 COST OF SALES . . . . . . . . - 3,547,832 - 3,547,832 3,901,035 ------------------------------------------------- ------------- GROSS PROFIT. . . . . . . . . 1,000 153,234 (1,000) 153,234 1,575,667 ------------------------------------------------- ------------- EXPENSES Salaries. . . . . . . . . . . - 352,041 - 352,041 483,109 Research and development. . . - 151,389 - 151,389 554,183 Depreciation. . . . . . . . . - 87,743 - 87,743 52,508 Bad debts (recovery). . . . . - (24,570) - (24,570) 130,877 Travel. . . . . . . . . . . . - 20,734 - 20,734 40,313 Rent. . . . . . . . . . . . . - 42,869 - 42,869 46,832 Professional fees . . . . . . 9,279 71,862 (9,279) 71,862 161,755 Entertainment . . . . . . . . - 19,396 - 19,396 53,249 Employee benefits . . . . . . - 43,819 - 43,819 65,608 Office and general. . . . . . 17,622 39,992 (17,622) 39,992 63,080 Taxes and dues. . . . . . . . - 12,496 - 12,496 16,748 Communications. . . . . . . . 558 9,726 (558) 9,726 12,758 Vehicle . . . . . . . . . . . - 31 - 31 3,463 Repairs and maintenance . . . - 133,048 - 133,048 - Insurance . . . . . . . . . . - 14,214 - 14,214 20,303 Advertising . . . . . . . . . - 53,340 - 53,340 71,945 Royalties . . . . . . . . . . - - - - 56,700 ------------------------------------------------- ------------- 27,459 1,028,130 (27,459) 1,028,130 1,833,431 ------------------------------------------------- ------------- OPERATING LOSS. . . . . . . . (26,459) (874,896) 26,459 (874,896) (257,764) ------------------------------------------------- ------------- OTHER Interest and other income . . - (17,172) - (17,172) (38,028) Interest expense. . . . . . . - 76,693 - 76,693 55,518 Foreign exchange. . . . . . . - 176 - 176 (12,798) ------------------------------------------------- ------------- - 59,697 - 59,697 4,692 ------------------------------------------------- ------------- NET LOSS BEFORE INCOME TAXES. (26,459) (934,593) 26,459 (934,593) (262,456) ------------------------------------------------- ------------- Current . . . . . . . . . . . - - - - 7,898 Deferred. . . . . . . . . . . - (5,661) - (5,661) (65,814) ------------------------------------------------- ------------- - (5,661) - (5,661) (57,916) ------------------------------------------------- ------------- NET LOSS. . . . . . . . . . . $(26,459) $ (928,932) $ 26,459 $ (928,932) $ (204,540) ============================================================== F-17
CINTEL CORP. Notes to Pro-Forma Consolidated Financial StatementsSeptember 30, 2003 1. BASIS OF PRESENTATION These unaudited pro-forma consolidated financial statements have been prepared to give effect to the following: a) The reverse takeover at September 30, 2003 whereby Link2 Technologies, Inc. ("LINK"), (the legal parent), issued 16,683,300 common shares in return for all outstanding common shares of Cintel Co., Ltd. ("Cintel") a Korean company (the acquirer for accounting purposes). As a result of this transaction, the former shareholders of Cintel received approximately 82% ownership of LINK. After the transaction LINK has 20,383,300 common shares issued and outstanding. b) Cintel maintains its books and records in Korean won. Balance sheet accounts are translated using closing exchange rates in effect at the balance sheet date. Income and expense accounts are translated using an average exchange rate prevailing during each reporting period. No representation is made that the Korean won could have been, or could be, converted into United States dollars at the rates on the respective dates and or at any other certain rates. Adjustments resulting from the translation are included in the accumulated other comprehensive income (loss) in stockholders' equity. c) Subsequent to the reverse takeover LINK changed its name to Cintel Corp. The pro-forma consolidated financial statements are based on the balance sheets of the following: a) LINK as at September 30, 2003 (unaudited) and December 31, 2002 (audited). b) Cintel as at September 30, 2003 (unaudited) and December 31, 2002 (audited). The pro-forma consolidated financial statements include the statement of earnings for the following: a) LINK for the nine months ended September 30, 2003 (unaudited) and the year ended December 31, 2002 (audited). b) Cintel for the nine months ended June 30, 2003 (unaudited) and for the year ended December 31, 2002 (audited). The pro-forma consolidated balance sheet as at September 30, 2003 and December 31, 2002 gives effect to the transactions as at September 30, 2003 and the pro-forma statement of earnings for the nine months ended September 30, 2003 and year ended December 31, 2002 gives effect to the transactions as if they had taken place at the beginning of each period. F-18 CINTEL CORP. Notes to Pro-Forma Consolidated Financial Statements September 30, 2003 1. BASIS OF PRESENTATION (cont'd) The pro-forma consolidated financial statements are not necessarily indicative of the actual results that would have occurred had the proposed transactions occurred on the dates indicated and not necessarily indicative of future earnings or financial position. 2. PRO-FORMA ADJUSTMENTS To record the consolidation of LINK with Cintel including: a) Accounting for the merger of LINK and Cintel as the recapitalization of Cintel, with the net assets of Cintel brought forward at their historical basis. b) Eliminating the pre-acquisition shareholders' equity of the LINK at September 30, 2003 and December 31, 2002. F-19