x |
ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
¨ |
TRANSITION
REPORT UNDER SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Nevada
(State
or other jurisdiction of incorporation or organization)
|
52-2360156
(I.R.S.
Employer Identification No.)
|
Page
|
||||
PART
I
|
||||
Item
1. Description of Business
|
1 | |||
Item
1A. Risk Factors
|
11 | |||
Item
2. Properties
|
10 | |||
Item
3. Legal Proceedings
|
10 | |||
Item
4. Submission of Matters to a Vote of Security Holders
|
10 | |||
PART
II
|
||||
Item
5. Market for Common Equity and Related Stockholder
Matters
|
15 | |||
Item
6. Selected Financial Data
|
16 | |||
Item
7. Management’s Discussion and Analysis or Plan of
Operation
|
17 | |||
Item
7A. Quantitative and Qualitative Disclosures about Market
Risks
|
||||
Item
8. Financial Statements and Supplementary Data
|
20 | |||
Item
9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
|
20 | |||
Item
9A. Controls and Procedures
|
20 | |||
Item
9B. Other Information
|
21 | |||
PART
III
|
||||
Item
10. Directors, Executive Officers, Promoters and Control Persons;
Compliance
With Section 16(a) of the Exchange Act
|
21 | |||
Item
11. Executive Compensation
|
23 | |||
Item
12. Security Ownership of Certain Beneficial Owners and Management
and
Related Stockholder Matters
|
25 | |||
Item
13. Certain Relationship and Related Transactions
|
27 | |||
Item
14. Principal Accountant Fees and Services
|
27 | |||
Item
15. Exhibits
|
27 | |||
SIGNATURES
|
32 |
·
|
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.
|
·
|
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.
|
·
|
CinTel
Korea located in Seoul, Korea produces and distributes our traditional
base products in the Internet Traffic Management (ITM)
sector.
|
Name
of Distributor
|
|
URL
|
|
Area
of Distribution
|
Singapore
& Suntze Communications Engineering Pte., Ltd.
|
|
www.suntze.com.sg
|
|
The
Peoples Republic of China
|
Canon
System Solutions Co., Ltd
|
|
www.canon-sol.co.jp
|
|
Japan
|
Rikei
Corporation
|
|
www.rikei.co.jp
|
|
Japan
|
NetSys
Pte., Ltd
|
|
www.netsys.com.sg
|
|
Singapore
|
InterSpace
Computers
|
www.interspaceisclou.com
|
USA
|
Company
|
R&D
Product Description
|
|
|
|
|
|
|
Bluecomm
|
|
-
Call center system
-
DBM related development and maintenance
|
|
|
|
|
|
PSTS
|
|
None
at this time
|
|
|
|
|
|
PDT
|
|
-
Develops new product lines with customers
-
Semiconductor packaging
-
Automated Optical Inspection
|
|
CinTel
Korea
|
-
Develops Internet Traffic Management Solutions
-
Logging applications
|
Fiscal
2007
|
Fiscal
2006
|
Fiscal
2005
|
|||||||||||||||||
Quarter
Ended
|
High
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
Low
|
||||||||
March
31
|
$
|
0.46
|
$
|
0.38
|
$
|
0.29
|
$
|
0.14
|
$
|
0.17
|
$
|
0.02
|
|||||||
June
30
|
$
|
0.53
|
$
|
0.35
|
$
|
0.18
|
$
|
0.17
|
$
|
0.08
|
$
|
0.02
|
|||||||
September
30
|
$
|
0.49
|
$
|
0.24
|
$
|
0.12
|
$
|
0.10
|
$
|
0.05
|
$
|
0.02
|
|||||||
December
31
|
$
|
0.40
|
$
|
0.20
|
$
|
0.18
|
$
|
0.16
|
$
|
0.37
|
$
|
0.03
|
Plan
category
|
Number
of securities
to
be issued upon
exercise
of
outstanding
options,
warrants
and rights
|
Weighted
average
exercise
price of
outstanding
options,
warrants
and rights
|
Number
of securities
remaining
available for future issuance under equity compensation plans (excluding
securities reflected in column (a)
|
|||||||
|
(a)
|
(b)
|
(c)
|
|||||||
Equity
compensation plans approved by security holders
|
0
|
0
|
0
|
|||||||
|
||||||||||
Equity
compensation plans not approved by security
holders
|
0
|
0
|
0
|
|||||||
|
||||||||||
Total
|
0
|
0
|
0
|
|
12/31/2007
|
|
12/31/2006
|
||||
Revenue
|
218,234,855
|
21,134,797
|
|||||
Cost
of sales
|
198,779,459
|
20,263,862
|
|||||
Gross
Profit
|
19,455,396
|
870,935
|
|||||
Expenses
|
24,745,257
|
2,859,145
|
|||||
Operating
(Loss)
|
(5,289,861
|
)
|
(1,988,210
|
)
|
|||
Net
(Loss)
|
(8,436,224
|
)
|
(1,785,861
|
)
|
Name
|
Age
|
Position
|
Date
of Election
Or
Appointment
As
Director
|
|||
Sang
Don Kim
|
40
|
President,
Chief Executive Officer and Director
|
7/1997
|
|||
JD
Sparks
|
40
|
Executive
Vice President
|
n/a
|
|||
Kyo
Jin Kang
|
41
|
Chief
Financial Officer and Principal Accounting Officer
|
n/a
|
|||
Sang
Yong Oh
|
45
|
Director
|
7/2006
|
|||
Kang
Hee Lee
|
42
|
Director
|
7/2006
|
|||
Jung
Ho Kim
|
38
|
Director
|
12/2007
|
Name
and
Principal
Position
|
Year
|
Compensation
($)
|
Bonus
($)
|
Stock
Awards ($)
|
Option
Awards ($)
|
Non-Equity
Incentive Plan Compensation ($)
|
Change
in Pension Value and Non-Qualified Deferred Compensation Earnings
($)
|
All
Other Compensation ($)
|
Total
($)
|
|||||||||||||||||||
Sang
Don Kim,
President,
Chief Executive Officer and Director
|
2006
2007
|
120,000
170,000
|
0
0
|
0
0
|
0
0
|
0
0
|
0
0
|
0
0
|
120,000
170,000
|
Option
Awards
|
Stock
Awards
|
|||||||||||||||||||||||||||
Name
|
Number of
Securities
Underlying
Unexercised
Options
(#) Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#) Unexercisable
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number of Shares or Units of Stock That Have Not
Vested
(#)
|
Market Value of Shares or Units of Stock That Have Not
Vested
($)
|
Equity
Incentive
Plan
Awards: Number of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
(#)
|
Equity Incentive
Plan
Awards:
Market
or Payout
Value
of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
($)
|
|||||||||||||||||||
Sang
Don Kim,
President,
Chief Executive Officer and Director
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
Name
|
Fees
Earned or Paid in Cash ($) (b)
|
|
Stock
Awards ($)
(c)
|
|
Option
Awards
($) (d)
|
|
Non-Equity
Incentive Plan Compensation ($) (e)
|
|
Change
in Pension Value and Nonqualified Deferred Compensation Earnings
(f)
|
|
All
Other Compensation ($) (g)
|
|
Total
($) (h)
|
|||||||||
Sang
Don Kim
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|||||||||||||||
Sang
Yong Oh
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|||||||||||||||
Kang
Hee Lee
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|||||||||||||||
Jung
Ho Kim
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
Name
of Beneficial Owners
|
Common
Stock
Beneficially
Owned (1)
|
|
Percentage
of
Common
Stock (1)
|
|
|||
Sang
Don Kim
|
5,444,280
|
5.57
|
%
|
||||
3-105
Sampung Apt
|
|||||||
1685,
Seocho-dong,
Seocho-gu
|
|||||||
Seoul,
Korea
|
|||||||
Kyo
Jin Kang
|
-
|
0.00
|
%
|
||||
5-301
Daelim Apt
695
Sanggae-dong, Noweon-gu
|
|||||||
Seoul,
Korea
|
|||||||
Sang
Yong Oh
|
1,803,043
|
1.84
|
%
|
||||
8-906
Hannam Height Apt
|
|||||||
Oksu-dong
Sungdong-gu
|
|||||||
Seoul,
Korea
|
|||||||
Kang
Hee Lee
|
-
|
0.00
|
%
|
||||
113-102
Samsung Apt
843,
Shindang-dong, Jung-gu
Seoul,
Korea
|
|||||||
Jung
Ho Kim
|
-
|
0.00
|
%
|
||||
203-1702
Samsung Apt
Shinkongduk-dong
Mapo-gu
Seoul,
Korea
|
|||||||
Joung
Min Han.
|
6,900,000
|
7.05
|
%
|
||||
709-2,
Mokdong 2nd Sungwon Apt. 101-1604,
|
|||||||
Mok3-dong,
Yangchon-gu,
|
|||||||
Seoul,
Korea
|
|||||||
Tai
Bok Kim
|
19,400,000
|
19.83
|
%
|
||||
Lotte
Castle Forest 905 ho, #844-27
|
|||||||
Bangbae
4 dong, Seocho-Gu
|
|||||||
Seoul,
Korea
|
KTB
Network Co., Ltd.
|
4,305,570
(2
|
)
|
4.4
|
%
|
|||
KTB
Networks B/D
|
|||||||
826-14,
Yeoksam-dong
|
|||||||
Kangnam-gu,
Seoul, Korea
|
|||||||
KTB
China Optimum Fund
|
10,000,000
(3
|
)
|
9.27
|
%
|
|||
6th
Floor KTB B/D
|
|||||||
826-14
Yeoksam-dong, Kangnam-gu
|
|||||||
Seoul,
Korea
|
|||||||
STS
Semiconductor & Telecommunication Co.,Ltd
|
10,000,000
(4
|
)
|
9.27
|
%
|
|||
Baek-suk-dong,
Cheonan-City
|
|||||||
Chungnam-do,
Korea
|
|||||||
EMERGING
MEMORY & LOGIC Solution Inc.,
|
6,341,154
(5
|
)
|
6.09
|
%
|
|||
#844-274th
Floor, Jeju Construction and Financial Cooperative, 301-1
|
|||||||
Yeon-dong,
Jeju-si,
|
|||||||
Jeju-do,
Korea
|
|||||||
Woori
PEF
|
92,742,857
(6
|
)
|
48.67
|
%
|
|||
20Floor,
Youngpoong Bldg.
33
Seorin-dong, Chongno-gu
Seoul,
Korea
|
|||||||
Korea
Culture Promotion
|
7,728,571
(7
|
)
|
7.32
|
%
|
|||
2Floor,
Duwon Bldg.
503-5,
Sinsa-dong, Gangnam-gu
Seoul,
Korea
|
|||||||
Phoenix
M&M
|
7,728,571(8
|
)
|
7.32
|
%
|
|||
180
Unyong-ri, Dunpo-myun
Asan,
Chungchoengnam-do, Korea
|
|||||||
All
named executive officers and directors as a group (5
persons)
|
7,247,323
|
7.4
|
%
|
(1)
|
Applicable
percentage ownership is based on 97,824,896 shares of common stock
outstanding as of March 24, 2008, together with securities exercisable
or
convertible into shares of common stock within 60 days of March 24,
2008
for each stockholder. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and generally
includes voting or investment power with respect to securities. Shares
of
common stock that a person has the right to acquire beneficial ownership
of upon the exercise or conversion of options, convertible stock,
warrants
or other securities that are currently exercisable or convertible
or that
will become exercisable or convertible within 60 days of March 24,
2008
are deemed to be beneficially owned by the person holding such securities
for the purpose of computing the percentage of ownership of such
person,
but are not treated as outstanding for the purpose of computing the
percentage ownership of any other person.
|
(2)
|
KTB
Network Co., Ltd. is a publicly listed company on the KOSDAQ. Mr.
Kwon,
Sung Moon, the President and Chief Executive Officer of KTB Network
Co.,
Ltd., has investment and voting control over the securities beneficially
owned by KTB Network Co., Ltd.
|
(3)
|
Represents
shares of common stock issuable upon conversion of $5,000,000 principal
amount of convertible notes with a conversion price of $0.50 per
share.
|
(4)
|
Represents
shares of common stock issuable upon conversion of $5,000,000 principal
amount of convertible notes with a conversion price of $0.50 per
share.
|
(5)
|
Represents
shares of common stock issuable upon conversion of $3,170,577 principal
amount of convertible notes with a conversion price of $0.50 per
share.
|
(6)
|
Represents
shares of common stock issuable upon conversion of $64,920,000 principal
amount of convertible notes with a conversion price of $0.70 per
share.
|
(7)
|
Represents
shares of common stock issuable upon conversion of $5,410,000 principal
amount of convertible notes with a conversion price of $0.70 per
share.
|
(8)
|
Represents
shares of common stock issuable upon conversion of $5,410,000 principal
amount of convertible notes with a conversion price of $0.70 per
share.
|
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)
|
|
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
|
|
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
|
|
|
|
CinTel
Corp.
|
||
|
|
|
|
||
|
|
|
|
||
|
By:
|
/s/
Sang Don Kim
|
|||
|
|
Sang
Don Kim
|
|||
|
|
President,
Chief Executive Officer
|
|||
|
|
and
Director (Principal Executive Officer)
|
|||
|
|
|
|||
|
By:
|
/s/
Kyo Jin Kang
|
|||
|
|
|
Kyo
Jin Kang
|
||
|
|
|
Chief
Financial Officer
(Principal
Financial and Accounting Officer)
|
Signature
|
Title
|
Date
|
||
/s/
Sang Don Kim
|
President,
Chief Executive Officer and Director
|
March
31, 2008
|
||
Sang
Don Kim
|
||||
/s/
Kyo Jin Kang
|
Chief
Financial Officer
|
March
31, 2008
|
||
Kyo
Jin Kang
|
||||
/s/
Sang Yong Oh
|
Director
|
March
31, 2008
|
||
Sang
Yong Oh
|
||||
/s/
Kang Hee Lee
|
Director
|
March
31, 2008
|
||
Kang
Hee Lee
|
CONTENTS
|
PAGE
|
|||
Report
of Independent Registered Public Accounting Firm - 2007
|
F-2
|
|||
Report
of Independent Registered Public Accounting Firm - 2006
|
F-3
|
|||
Financial
Statements:
|
||||
Consolidated
Balance Sheets
|
F-4
|
|||
Consolidated
Statements of Operations and Comprehensive Loss
|
F-6
|
|||
Consolidated
Statements of Stockholders’ Equity
|
F-8
|
|||
Consolidated
Statements of Cash Flows
|
F-9
|
|||
Notes
to Consolidated Financial Statements
|
F-11
- F-32
|
Restated
(Note
20)
|
|||||||
2007
|
2006
|
||||||
Current
assets:
|
|||||||
Cash
and cash equivalents (Note 2)
|
$
|
29,946,476
|
$
|
4,337,088
|
|||
Investments
- short-term (Note 6)
|
21,073,400
|
-
|
|||||
Accounts
receivable, net (Note 2)
|
18,398,559
|
5,620,693
|
|||||
Inventories
(Note 3)
|
14,708,136
|
5,654,590
|
|||||
Loans
receivable - current (Note 4)
|
9,247,168
|
430,000
|
|||||
Prepaid
and other current assets (Note 5)
|
15,236,285
|
1,068,624
|
|||||
|
|||||||
Total
current assets
|
108,610,024
|
17,110,995
|
|||||
|
|||||||
Property,
plant and equipment, net (Note 7)
|
100,233,981
|
25,977,243
|
|||||
Other
assets:
|
|||||||
Restricted
cash
|
4,802,288
|
-
|
|||||
Loans
receivable, net of current portion (Note 4)
|
1,030,291
|
-
|
|||||
Investments
in securities (Note 6)
|
37,503,147
|
1,964,466
|
|||||
Intangible
assets (Note 9)
|
28,193,672
|
7,740,271
|
|||||
Security
deposits
|
7,026,260
|
-
|
|||||
Land
rights (Note 8)
|
335,299
|
356,172
|
|||||
|
|||||||
Total
other assets
|
78,890,957
|
10,060,909
|
|||||
|
|||||||
Total
assets
|
$
|
287,734,962
|
$
|
53,149,147
|
Restated
(Note
20)
|
|||||||
2007
|
2006
|
||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
31,589,923
|
$
|
8,164,357
|
|||
Accrued
expenses
|
3,682,780
|
-
|
|||||
Deferred
revenue
|
3,816,078
|
113,793
|
|||||
Notes
payable, current (Note 10)
|
61,383,334
|
11,112,570
|
|||||
Other
current liabilities
|
314,436
|
-
|
|||||
|
|||||||
Total
current liabilities
|
100,786,551
|
19,390,720
|
|||||
|
|||||||
Long-term
liabilities:
|
|||||||
Accrued
severance benefits (Note 11)
|
5,380,222
|
97,404
|
|||||
Notes
payable, net of current portion (Note 10)
|
29,350,587
|
4,877,188
|
|||||
Convertible
debentures (Note 12)
|
104,098,920
|
15,284,295
|
|||||
|
|||||||
Long-term
liabilities
|
138,829,729
|
20,258,887
|
|||||
|
|||||||
Total
liabilities
|
239,616,280
|
39,649,607
|
|||||
Non-controlling
interest
|
42,503,486
|
8,726,492
|
|||||
|
|||||||
Commitments
and contingencies (Note 19):
|
|||||||
|
|||||||
Stockholders'
equity: (Note 14)
|
|||||||
Common
stocks: 300,000,000 shares authorized, par value $0.001 per share,
97,824,896 shares and 87,619,896 shares issued and outstanding,
respectively
|
97,824
|
87,619
|
|||||
Additional
paid-in capital
|
20,293,203
|
14,319,408
|
|||||
Treasury
stock
|
-
|
(5,630
|
)
|
||||
Accumulated
other comprehensive income (loss)
|
3,004,141
|
(170,806
|
)
|
||||
Accumulated
deficit
|
(17,779,972
|
)
|
(9,457,543
|
)
|
|||
|
|||||||
Total
stockholders' equity
|
5,615,196
|
4,773,048
|
|||||
|
|||||||
Total
liabilities and stockholders' equity
|
$
|
287,734,962
|
$
|
53,149,147
|
|||
2007
|
Restated
(Note
20)
2006
|
||||||
Revenues:
|
|||||||
Finished
goods
|
$
|
208,142,199
|
$
|
16,210,675
|
|||
Merchandise
|
2,747,652
|
4,785,720
|
|||||
Services
|
7,345,004
|
138,402
|
|||||
218,234,855
|
21,134,797
|
||||||
Cost
of revenue:
|
|||||||
Finished
goods
|
191,819,888
|
15,936,096
|
|||||
Merchandise
|
2,641,869
|
4,327,766
|
|||||
Services
|
4,317,702
|
-
|
|||||
198,779,459
|
20,263,862
|
||||||
Gross
profits
|
19,455,396
|
870,935
|
|||||
|
|||||||
Operating
expenses:
|
|||||||
General
and administrative expenses
|
23,519,649
|
2,568,989
|
|||||
Research
and development
|
-
|
19,045
|
|||||
Depreciation
and amortization
|
1,225,608
|
271,111
|
|||||
|
24,745,257
|
2,859,145
|
|||||
Loss
from operations
|
(5,289,861
|
)
|
(1,988,210
|
)
|
|||
|
|||||||
Other
income (expenses):
|
|||||||
Interest
income
|
1,949,846
|
786,677
|
|||||
Rental
and other income
|
341,991
|
-
|
|||||
Net
loss from sale of assets
|
(531,003
|
)
|
(117,496
|
)
|
|||
Interest
expenses
|
(4,419,567
|
)
|
(372,177
|
)
|
|||
Impairment
loss on investment
|
(5,074,539
|
)
|
-
|
||||
Share
of income (loss) from equity investment
|
(2,695,028
|
)
|
16,393
|
||||
Amortization
of deferred financing fees
|
-
|
(90,000
|
)
|
||||
Foreign
currency transaction gain (loss)
|
(83,015
|
)
|
58,836
|
||||
|
(10,511,315
|
)
|
282,233
|
||||
Loss
before income taxes and
non-controlling
interest
|
(15,801,176
|
)
|
(1,705,977
|
)
|
|||
Income
tax benefit (expense) (Note 13)
|
1,382,769
|
(52,664
|
)
|
||||
Non-controlling
interest
|
5,982,183
|
(27,220
|
)
|
||||
7,364,952
|
(79,884
|
)
|
|||||
Net
loss
|
(8,436,224
|
)
|
(1,785,861
|
)
|
|||
Other
comprehensive income (loss):
|
|||||||
Foreign
currency translation adjustments
|
3,638,757
|
591,604
|
|||||
Unrealized
loss on investment
|
(61,667
|
)
|
(722,409
|
)
|
|||
3,577,090
|
(130,805
|
)
|
|||||
Other
comprehensive loss before non-controlling interest
|
(4,859,134
|
)
|
(1,916,666
|
)
|
|||
2007
|
Restated
(Note
20)
2006
|
||||||
Foreign
currency translation adjustments - Non-controlling
interest
|
(396,513
|
)
|
(48,958
|
)
|
|||
Total
comprehensive loss
|
$
|
(5,255,647
|
)
|
$
|
(1,965,624
|
)
|
|
Loss
per share - basic and diluted (Note 18)
|
$
|
(0.06
|
)
|
$
|
(0.03
|
)
|
|
|
|||||||
Weighted
average number of common
shares outstanding - basic and diluted
|
90,024,479
|
68,753,837
|
|||||
Common
stock
|
Additional
paid-in
|
Treasury
|
Cumulative
other
comprehensive
|
Retained
earnings
(Accumulated
|
|
|||||||||||||||||
|
Shares
|
Amount
|
capital
|
stock
|
income
(loss)
|
deficit)
|
Total
|
|||||||||||||||
Balance,
January 1, 2006
|
42,379,354
|
$
|
42,379
|
$
|
5,351,058
|
$
|
(5,630
|
)
|
$
|
121,739
|
$
|
(7,269,855
|
)
|
$
|
(1,760,309
|
)
|
||||||
Restatement
adjustments (Note
20)
|
-
|
-
|
-
|
-
|
(110,750
|
)
|
(267,801
|
)
|
(378,551
|
)
|
||||||||||||
Restatement
adjustments (Note
20)
|
-
|
-
|
-
|
-
|
(2,032
|
)
|
(134,026
|
)
|
(136,058
|
)
|
||||||||||||
Restated
Balance,January
1, 2006
|
42,379,354
|
42,379
|
5,351,058
|
(5,630
|
)
|
8,957
|
(7,671,682
|
)
|
(2,274,918
|
)
|
||||||||||||
Unrealized
loss on investment
|
-
|
-
|
-
|
-
|
(722,409
|
)
|
-
|
(722,409
|
)
|
|||||||||||||
Issuance
of shares for consulting services (Note 14)
|
500,000
|
500
|
89,500
|
-
|
-
|
-
|
90,000
|
|||||||||||||||
Conversion
of convertible debentures (Note 14)
|
44,300,542
|
44,300
|
8,808,890
|
-
|
-
|
-
|
8,853,190
|
|||||||||||||||
Issuance
of shares for consulting services (Note 14)
|
440,000
|
440
|
69,960
|
-
|
-
|
-
|
70,400
|
|||||||||||||||
Foreign
currency translation
adjustment
|
-
|
-
|
-
|
-
|
542,646
|
-
|
542,646
|
|||||||||||||||
Net
loss for the year
|
-
|
-
|
-
|
-
|
-
|
(1,806,092
|
)
|
(1,806,092
|
)
|
|||||||||||||
Restatement
adjustment (Note
20)
|
-
|
-
|
-
|
-
|
-
|
20,231
|
20,231
|
|||||||||||||||
Balance,
December 31, 2006
|
87,619,896
|
$
|
87,619
|
$
|
14,319,408
|
$
|
(5,630
|
)
|
$
|
(170,806
|
)
|
$
|
(9,457,543
|
)
|
$
|
4,773,048
|
||||||
Balance,
January 1, 2007
|
87,619,896
|
$
|
87,619
|
|
14,319,408
|
$
|
(5,630
|
)
|
$
|
(170,806
|
)
|
$
|
(9,343,747
|
)
|
$
|
4,886,844
|
||||||
Restatement
adjustments (Note
20)
|
-
|
-
|
-
|
-
|
-
|
(113,796
|
)
|
(113,796
|
)
|
|||||||||||||
Restated
Balance, January
1, 2007
|
87,619,896
|
87,619
|
14,319,408
|
(5,630
|
)
|
(170,806
|
)
|
(9,457,543
|
)
|
4,773,048
|
||||||||||||
Issuance
of shares for consulting services (Note 14)
|
580,000
|
580
|
98,020
|
-
|
-
|
-
|
98,600
|
|||||||||||||||
Issuance
of shares for employee remuneration (Note
14)
|
100,000
|
100
|
19,900
|
-
|
-
|
-
|
20,000
|
|||||||||||||||
Restatement
adjustment (Note
20)
|
-
|
-
|
-
|
5,630
|
(5,630
|
)
|
113,795
|
113,795
|
||||||||||||||
Issuance
of shares for consulting services (Note 14)
|
825,000
|
825
|
318,575
|
-
|
-
|
-
|
319,400
|
|||||||||||||||
Issuance
of shares for consulting services (Note 14)
|
1,200,000
|
1,200
|
484,800
|
-
|
-
|
-
|
486,000
|
|||||||||||||||
Issuance
of shares for consulting services (Note 14)
|
500,000
|
500
|
159,500
|
-
|
-
|
-
|
160,000
|
|||||||||||||||
Issuance
of shares (Note 14)
|
7,000,000
|
7,000
|
4,893,000
|
-
|
-
|
-
|
4,900,000
|
|||||||||||||||
Unrealized
loss on investment
|
-
|
-
|
-
|
-
|
(61,667
|
)
|
-
|
(61,667
|
)
|
|||||||||||||
Foreign
currency translation
adjustment
|
-
|
-
|
-
|
-
|
3,242,244
|
-
|
3,242,244
|
|||||||||||||||
Net
loss for the year
|
-
|
-
|
-
|
-
|
-
|
(8,436,224
|
)
|
(8,436,224
|
)
|
|||||||||||||
Balance,
December 31, 2007
|
97,824,896
|
$
|
97,824
|
$
|
20,293,203
|
$
|
-
|
$
|
3,004,141
|
$
|
(17,779,972
|
)
|
$
|
5,615,196
|
2007
|
Restated
(Note
20)
2006
|
||||||
Cash
flows from operating activities:
|
|||||||
Net
loss
|
$
|
(8,436,224
|
)
|
$
|
(1,785,861
|
)
|
|
Adjustments
to reconcile net loss to net cash
|
|||||||
provided
by operating activities:
|
|||||||
Depreciation
|
520,818
|
963,409
|
|||||
Amortization
of financing fees
|
-
|
90,000
|
|||||
Non-controlling
interest’s share of gain (loss)
|
(5,982,183
|
)
|
27,220
|
||||
Common
stocks issued for consulting services and
employee
remuneration
|
1,084,000
|
160,400
|
|||||
Bad
debt expense
|
74,657
|
-
|
|||||
Share
of (gain) loss from equity investment
|
(506,011
|
)
|
16,393
|
||||
Net
(gain) loss on sale of property
|
(657,239
|
)
|
117,496
|
||||
Increase
in assets:
|
|||||||
Accounts
receivable
|
(12,852,523
|
)
|
(4,597,233
|
)
|
|||
Other
receivable
|
(2,004,923
|
)
|
-
|
||||
Inventory
|
(9,053,546
|
)
|
(5,206,015
|
)
|
|||
Prepaid
expenses and other assets
|
(12,162,738
|
)
|
(704,511
|
)
|
|||
Security
deposits
|
(7,026,260
|
)
|
-
|
||||
Increase
(decrease) in liabilities:
|
|||||||
Accounts
payable and accrued expenses
|
23,740,002
|
7,204,452
|
|||||
Deferred
revenue
|
3,816,082
|
(
22,264
|
)
|
||||
Accrued
expense
|
3,682,780
|
-
|
|||||
Accrued
severance benefits
|
3,245,312
|
28,048
|
|||||
Cash
used in operating activities
|
(22,517,996
|
)
|
(3,708,466
|
)
|
|||
|
|||||||
Cash
flows from investing activities:
|
|||||||
Acquisition
of investments in securities
|
(56,096,987
|
)
|
-
|
||||
Proceeds
from disposal of securities held for investment
|
-
|
99,071
|
|||||
Acquisition
of property and equipment
|
(74,099,444
|
)
|
(26,869,066
|
)
|
|||
Loan
receivable
|
(9,847,459
|
)
|
(430,000
|
)
|
|||
Acquisition
of intangible assets
|
(20,453,401
|
)
|
(8,096,443
|
)
|
|||
Changes
in non-controlling interest
|
39,759,177
|
8,726,492
|
|||||
Cash
used in investing activities
|
(120,738,114
|
)
|
(26,569,946
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Proceeds
from convertible debenture
|
88,814,625
|
15,284,295
|
|||||
Common
stocks issued
|
4,900,000
|
-
|
|||||
Proceeds
from short and long-term notes
|
78,934,689
|
15,299,110
|
|||||
Principal
payments of notes payable
|
(2,153,020
|
)
|
-
|
||||
Cash
provided by financing activities
|
170,496,294
|
30,583,405
|
|||||
|
|||||||
Net
increase in cash
|
27,240,184
|
304,993
|
|||||
2007
|
Restated
(Note
20)
2006
|
||||||
Effect
of foreign currency translation
|
3,180,575
|
542,646
|
|||||
Cash
and cash equivalent - beginning of year
|
4,337,088
|
3,489,449
|
|||||
|
|||||||
Restricted
cash
|
(4,811,371
|
)
|
-
|
||||
Cash
and cash equivalent - end of year
|
$
|
29,946,476
|
$
|
4,337,088
|
|||
|
|||||||
Supplemental
Disclosure of Cash Flows Information:
|
|||||||
Cash
paid during the year for:
|
|||||||
Interest
|
$
|
1,026,665
|
$
|
357,798
|
|||
Income
taxes
|
$
|
61,374
|
$
|
52,664
|
|||
Buildings
located in China
|
20
years
|
|
Buildings
located in Korea
|
30
years
|
|
Machinery
and equipment
|
5
-
10 years
|
|
Measuring
equipment
|
5
years
|
|
Furniture
and fixtures
|
5
years
|
|
Vehicles
|
5
years
|
|
Software
|
5
years
|
|
Landscaping
|
5
years
|
|
Structure
|
5
years
|
2007
|
2006
|
||||||
Raw
materials
|
$
|
3,034,427
|
$
|
3,964,276
|
|||
Work-in-process
|
9,119,467
|
314,445
|
|||||
Finished
goods
|
1,433,773
|
428,727
|
|||||
Merchandise
and supplies
|
1,120,469
|
947,142
|
|||||
Total
|
$
|
14,708,136
|
$
|
5,654,590
|
2007
|
|
2006
|
|||||
Loan
receivable from CNY, a private company in China. 7% interest, payable
interest only in quarterly installments. Guaranteed by the shareholders
of
the debtor. Matures in January 2009.
|
$
|
150,000
|
$
|
-
|
|||
Loans
receivable from NIG, a private company in Korea. 9% interest, payable
interest only in quarterly installments. Guaranteed by the shareholders
of
the debtor. Mature in April and August 2008.
|
3,846,960
|
-
|
|||||
Loan
receivable from Phoenix M&M, a private company in Korea. 9% interest,
payable interest only in quarterly installments. Guaranteed by the
shareholders of the debtor. Matures in September 2008.
|
5,343,000
|
-
|
|||||
Loan
receivable from unrelated private companies in Korea, unsecured,
bears
interest at 17% payable with principal upon maturity. The loan matured
in
June 2007.
|
-
|
215,000
|
|||||
Loan
receivable from unrelated private companies in Korea, unsecured,
bears
interest at 8% payable with principal upon maturity. The loan matured
in
December 2007 and was collected in January 2007.
|
-
|
215,000
|
|||||
Other
short-term loans receivable
|
937,499
|
-
|
|||||
10,277,459
|
430,000
|
||||||
Less:
current portion
|
9,247,168
|
430,000
|
|||||
Loan
receivable, net of current
|
$
|
1,030,291
|
$
|
-
|
2007
|
2006
|
||||||
Prepaid
expenses
|
$
|
1,439,730
|
$
|
1,068,624
|
|||
Receivables
from sale of assets
|
5,289,724
|
-
|
|||||
Advance
payments to vendors
|
2,004,923
|
-
|
|||||
Other
current assets
|
6,501,908
|
-
|
|||||
Total
|
$
|
15,236,285
|
$
|
1,068,624
|
2007
|
2006
|
||||||
Investment
in Cintel Systems Corp.
|
$
|
501,173
|
$
|
-
|
|||
Convertible
Debenture A (STS)
|
11,173,519
|
-
|
|||||
Phoenix
Asset Management (fka Global Assets Inc.)
|
11,051,513
|
1,959,209
|
|||||
Investment
in PluM Tech
|
213,720
|
-
|
|||||
We-Tech
|
1,416,563
|
-
|
|||||
East
Gate
|
1,163,405
|
-
|
|||||
Phoenix
Springs
|
3,205,800
|
-
|
|||||
Debt
securities - bonds
|
260,291
|
-
|
|||||
Investment
in equity securities held by subsidiaries
|
8,383,744
|
-
|
|||||
Other
miscellaneous
|
133,419
|
5,257
|
|||||
Total
|
$
|
37,503,147
|
$
|
1,964,466
|
|
2007
|
2006
|
|||||
Land
|
$
|
29,508,360
|
$
|
-
|
|||
Buildings
and improvements
|
35,598,569
|
11,181,632
|
|||||
Machinery
and equipment
|
21,843,857
|
19,068,569
|
|||||
Furniture
and fixtures
|
8,736,692
|
816,058
|
|||||
Vehicles
|
740,673
|
183,546
|
|||||
Software
|
241,095
|
767,209
|
|||||
Small
tools
|
680,015
|
-
|
|||||
|
97,349,261
|
32,017,014
|
|||||
|
|||||||
Less:
Accumulated depreciation
|
19,832,760
|
6,039,771
|
|||||
|
77,516,501
|
25,977,243
|
|||||
|
|||||||
Construction
in progress
|
22,717,480
|
-
|
|||||
|
|||||||
Property
and equipment, net
|
$
|
100,233,981
|
$
|
25,977,243
|
|
2007
|
2006
|
|||||
Land
rights at cost
|
$
|
369,224
|
$
|
369,224
|
|||
Less:
Accumulated depreciation
|
33,925
|
13,052
|
|||||
Net
carrying amount
|
$
|
335,299
|
$
|
356,172
|
2007
|
2006
|
||||||
Goodwill
|
$
|
26,592,993
|
$
|
7,740,271
|
|||
Other
intangible assets
|
1,600,679
|
-
|
|||||
Net
carrying amount
|
$
|
28,193,672
|
$
|
7,740,271
|
|
2007
|
2006
|
|||||
Note
payable to Kong-Sang Bank of China, payable monthly interest only
with
interest at LIBOR plus 0.85%. The note is unsecured and matures
in April
2008.
|
$
|
3,000,000
|
$
|
-
|
|||
Note
payable to Kong-Sang Bank of China, payable monthly interest only
with
interest at LIBOR plus 0.75%. The note is secured by real estate
and
equipment and matures in September 2008.
|
3,400,000
|
-
|
|
2007
|
2006
|
|||||
Note
payable to Kong-Sang Bank of China, payable monthly interest only
with
interest at LIBOR plus 0.75%. The note is secured by real estate
and
equipments and matures in March 2008.
|
1,600,000
|
-
|
|||||
Note
payable to Kong-Sang Bank of China, payable monthly interest only
with
interest at 5.86%. The note is unsecured and matures in October
2008.
|
3,027,510
|
-
|
|||||
Note
payable to Kong-Sang Bank of China, payable monthly interest only
with
interest at LIBOR plus 0.75%. The note is secured by real estate
and
equipments and matures in January 2008.
|
1,000,000
|
-
|
|||||
Note
payable to Kong-Sang Bank of China, payable monthly interest only
with
interest at 6.14%. The note is unsecured and matured in April
2007.
|
-
|
3,202,500
|
|||||
Note
payable to Kong-Sang Bank of China, payable monthly interest only
with
interest at 6.44%. The note is unsecured and matured in June
2007.
|
-
|
1,922,305
|
|||||
Note
payable to Kong-Sang Bank of China, payable monthly interest only
with
interest at 5.68%. The note is secured by cash deposit of $2,840,249
and
matured in April 2007.
|
-
|
2,730,811
|
|||||
Construction
loan payable to China Construction Bank, payable quarterly installment
of
$443,226 with interest at bank prime. The note is secured by real
estate
and matures in July 2009.
|
-
|
4,878,048
|
|||||
Construction
loan payable to China Construction Bank, payable quarterly installment
of
$250,000 with interest at LIBOR plus 1.18%. The note is secured
by real
estate and matures in July 2009.
|
-
|
2,750,000
|
|||||
Notes
payable to Hana Bank of Korea, payable monthly interest only, with
interest at 6.93% to 7.81%. The notes are secured by real property
in
Korea and mature on March 2008.
|
2,544,691
|
-
|
|||||
Notes
payable to Shin-Han Bank of Korea, payable monthly interest-only,
with
interest at 5.95% to 6.43%. The notes are secured by real estate
and
mature in June and October 2008.
|
6,411,600
|
-
|
|||||
Notes
payable to Nong Hyup Bank of Korea, payable monthly interest only,
with
interest at 4.1%. The notes are unsecured and mature in November
2008.
|
534,300
|
-
|
|||||
Notes
payable to Citi Bank of Korea, payable monthly interest only with
interest
at 4.98% to 6.04%. The notes are secured by real estate and mature
in July
2008.
|
10,797,134
|
-
|
|||||
Notes
payable to Korea Exchange Bank, payable monthly interest only,
with
interest at 5.00% to 6.55%. The notes are unsecured and mature
in October,
November, and December 2008.
|
4,274,400
|
-
|
|
2007
|
2006
|
|||||
Note
payable to Kook Min Bank of Korea, payable monthly interest only,
with
interest at 4.97%. The note is secured by a deed of trust covering
the
Company’s real property and matures in July 2008.
|
8,548,800
|
-
|
|||||
Note
payable to Citi Bank Korea, payable monthly interest-only, with
interest
at 5.56%. The note is secured by a deed of trust covering the Company’s
real property and matures in October and November 2009.
|
10,686,000
|
-
|
|||||
Note
payable to Sam Sung Electronics, bearing no interest. The note
is secured
by a deed of trust covering the Company’s real property and matures in
December 2011.
|
681,767
|
-
|
|||||
Note
payable to Industrial Bank of Korea, payable monthly interest only,
with
interest at 8%. The note is unsecured and matures in 2008.
|
6,207,858
|
-
|
|||||
Notes
payable to Woori Bank, payable monthly interest only. The note
is
unsecured and matures in January 2009.
|
6,473,639
|
-
|
|||||
Notes
payable to Industrial Bank of Korea, payable monthly interest only,
with
interest at 5.84%. The note is matures in 2008.
|
1,068,600
|
-
|
|||||
Notes
payable to Citi Bank Korea, payable monthly interest only with
interest at
2.5% to 5.8%. The note matures in 2008.
|
5,229,769
|
-
|
|||||
Loan
payable to local government with annual interest rate at 4.75%.
The loan
is unsecured and classified as a long term debt.
|
89,014
|
-
|
|||||
Notes
payable to Shin-Han Bank of Korea, payable monthly interest only,
with
interest at 3.77 %.
|
3,714,454
|
-
|
|||||
Notes
payable to Hana Bank of Korea, payable monthly interest only, with
interest at 5.18%.
|
1,602,900
|
-
|
|||||
Notes
payable to Industrial Bank of Korea, payable monthly interest-only,
with
interest at 4.7%.
|
4,274,400
|
-
|
|||||
Other
short term notes payable of subsidiaries, unsecured, due on demand
|
2,423,389
|
430,000
|
|||||
Other
long term notes payable of subsidiaries
|
3,124,499
|
-
|
|||||
Auto
loan payable with monthly payment of $340, bearing no interest.
The loan
is secured by the vehicle and matures in December 2008.
|
-
|
10,165
|
|||||
Note
payable to an unrelated party, bearing no interest. The note is
unsecured
and due on demand.
|
-
|
39,000
|
|||||
Loan
payable to local government with annual principal payment of $10,422,
bearing no interest. The loan is unsecured and matures in October
2009
|
19,197
|
26,859
|
|||||
|
90,733,921
|
15,989,688
|
|||||
Less:
current portion
|
61,383,334
|
11,112,570
|
|||||
Long-term
debt
|
$
|
29,350,587
|
$
|
4,877,118
|
Years
ending December 31,
|
Amount
|
|||
2008
|
$
|
61,383,334
|
||
2009
|
20,950,204
|
|||
2010
|
2,306,723
|
|||
2011
|
1,300,828
|
|||
2012
and thereafter
|
4,792,832
|
|||
Total
|
$
|
90,733,921
|
2007
|
2006
|
||||||
Face
value
|
$
|
-
|
$
|
-
|
|||
Convertible
debenture - A (CinTel)
|
15,284,295
|
15,284,295
|
|||||
Convertible
debenture - B (CinTel)
|
64,920,000
|
-
|
|||||
Convertible
debenture - C (CinTel)
|
10,820,000
|
-
|
|||||
Convertible
debenture - D (PDT)
|
13,074,625
|
-
|
|||||
$
|
104,098,920
|
$
|
15,284,295
|
2007
|
2006
|
||||||
Current
income tax provision:
|
|||||||
US
|
$
|
-
|
$
|
-
|
|||
Foreign
taxes of subsidiaries
|
61,374
|
52,664
|
|||||
61,374
|
52,664
|
||||||
Deferred
income tax benefit:
|
|||||||
US
|
-
|
-
|
|||||
Foreign
taxes of subsidiaries
|
(1,444,143
|
)
|
-
|
||||
Income
tax benefit
|
$
|
(1,382,769
|
)
|
$
|
52,664
|
2007
|
2006
|
||||||
Research
and development expenses
amortized
over 5 years for tax purposes
|
$
|
165,207
|
$
|
270,195
|
|||
Other
timing differences
|
520,579
|
255,953
|
|||||
Net
operating loss carryforwards
|
2,540,300
|
2,155,532
|
|||||
|
3,226,086
|
2,681,680
|
|||||
Valuation
allowance
|
(3,226,086
|
)
|
(2,681,680
|
)
|
|||
|
$ | - |
$
|
-
|
2007
|
2006
|
||||||
Interest
rate
|
6.5
|
%
|
6.5
|
%
|
|||
Expected
volatility
|
70
|
%
|
70
|
%
|
|||
Expected
life in years
|
6
|
6
|
|||||
Expected
dividends
|
-
|
-
|
2007
|
2006
|
||||||
Outstanding,
beginning of year
|
-
|
106,000
|
|||||
Exercised
|
-
|
-
|
|||||
Cancelled
|
-
|
-
|
|||||
Expired
|
-
|
106,000
|
|||||
Outstanding,
end of year
|
-
|
-
|
|||||
Weighted
average fair value of options granted during the year
|
$
|
-
|
$
|
-
|
|||
Weighted
average exercise price of options, beginning of year
|
$
|
-
|
$
|
-
|
|||
Weighted
average exercise price of options granted during the year
|
$
|
-
|
$
|
-
|
|||
Weighted
average exercise price of options, end of year
|
$
|
-
|
$
|
-
|
|||
Weighted
average remaining contractual life of common stock options
|
-
|
-
|
2007
|
2006
|
||||||
Accounts
receivable from STS
|
$
|
2,060,745
|
$
|
1,749,945
|
|||
Accounts
receivable from BKLCD (fka We-Tech)
|
$
|
-
|
$
|
1,882,528
|
|||
Accounts
receivable from BKLS
|
$
|
5,966,257
|
$
|
-
|
|||
Accounts
payable to STS
|
$
|
1,776,307
|
$
|
1,428,234
|
|||
Accounts
payable to BKLCD (fka We-Tech)
|
$
|
1,029,509
|
$
|
2,631,573
|
|||
Sales
to STS
|
$
|
70,667,505
|
$
|
7,972.281
|
|||
Sales
to BKLCD (fka We-Tech)
|
$
|
4,868,916
|
$
|
5,113,353
|
|||
Purchase
from STS
|
$
|
10,363,356
|
$
|
4,780,074
|
|||
Purchase
from BKLCD (fka We-Tech)
|
$
|
5,266,035
|
$
|
3,299,765
|
2007
|
2006
|
||||||
Numerator
for basic and diluted earnings per share:
|
|||||||
Net
loss
|
$
|
(8,436,224
|
)
|
$
|
(1,965,624
|
)
|
|
Denominator:
|
|||||||
Basic
and diluted weighted average
shares
outstanding
|
90,765,938
|
68,753,837
|
|||||
Basic
and diluted loss per share
|
$
|
(0.09
|
)
|
$
|
(0.03
|
)
|
(a)
|
The
Company leases its premises under a non-cancellable lease agreement
which
will expire in December 2008. Future minimum annual payments (exclusive
of
taxes and insurance) under the lease are $40,640 in 2008. Rent expenses
paid during the years ended December 31, 2007 and 2006 were $77,867
and
$149,387, respectively.
|
(b)
|
The
Company is committed to pay interest of 8% or 10% on its convertible
bonds
payable, should PSTS, the Company’s subsidiary in China, fail to achieve
the predetermined earnings threshold as disclosed in Note
12.
|
(c)
|
PSTS
is committed to pay a management fee to the government of Republic
of
China of approximately $2,400 per annum for the use of land as disclosed
in Note 8.
|
(d)
|
PSTS,
in accordance with its Articles of Incorporation, has to maintain
a
minimum capital of $20,000,000.
|
(e)
|
The
Company's subsidiary in Korea, Bluecomm, is committed to vehicle
lease
obligations which expire in June, 2010. Future minimum annual payments
(exclusive of tax and insurance) under the lease are as
follows:
|
Years
|
Amount
|
|||
2008
|
$
|
64,103
|
||
2009
|
64,103
|
|||
2010
|
32,052
|
|||
$
|
160,258
|
(f)
|
The
Company’s Korean subsidiary, PDT, has an outstanding commitment under
standby letters-of-credit totaling approximately $5,000,000. This
standby
letter-of-credit was issued on behalf of affiliated companies.
|