Cyper Media, Inc. ("Cyper/the Company") was formed as a New York Corporation on
November 30, 2000 as JRE, Inc. The Company changed its name to Cyper Media Inc.
on October 2, 2003. JRE operated an internet web site which generated commission
revenues on the sale of products that were supplied by third party suppliers
which JRE sold at retail and wholesale.
JRE Inc. and its predecessors have not had filings of any bankruptcies,
receiverships or similar proceedings.
On July 10, 2003, 10,000,000 shares of restricted common stock of the Company
was issued to the shareholders of Cyper Entertainment, Inc. ("Entertainment") in
exchange for all of the issued and outstanding shares of Entertainment pursuant
to the provisions of the Acquisition Agreement dated May 23, 2003 by and between
JRE, Inc., Entertainment and shareholders of Entertainment. As a result of
closing pursuant to the Acquisition Agreement, and the issuance of such shares,
Entertainment has become a wholly owned subsidiary of the Company and the former
Entertainment shareholders now own approximately 67% of the Company's issued and
outstanding shares.
There are no arrangements known to the Company, including any pledge by any
person, of securities of the Company, the operation of which may, at a
subsequent date, result in a change in control of the Company.
As a result of the acquisition of Entertainment, a 3D Digital Animation
Production company located in Seoul, Korea, which provides services to the
television, commercial and film industries, the business of Entertainment is now
the Company's main line of business.
Cyper Entertainment, Inc.
Entertainment develops and produces 3D digital animation for television, short
films, feature films, home video, music video and multi-media applications such
as video games and operates in three revenue segments:
Independent Contractor for Services: Entertainment produces digital animation
projects for unrelated third-parties on a fee basis. Typically, the projects are
prepared to the specifications of the party hiring Entertainment.
Proprietary Development: Entertainment develops original animation projects
based on characters and storylines conceived by Entertainment, in which event
Entertainment owns all proprietary rights in the project. To date,
Entertainment's principal efforts in proprietary development have been:
"Biggie and Danmu" - Entertainment has created a ten minute pilot episode of
this children's educational animation short. The show is designed to fill ten
minutes of airtime in a children's program and has no dialogue so that it can be
marketed worldwide. The pilot episode is currently being marketed to
distributors.
"The 5th Global Epoch" - Entertainment has prepared a demo reel with the
concepts and characters for this project, which is being marketed to
distributors.
Co-Production Development: Entertainment produces animation projects based on
characters conceived and owned by other parties. With co-production
developments, Entertainment enters into agreements with the owners of rights to
the characters regarding responsibility for production costs, marketing costs,
the allocation of gross or net revenues from the production, and the rights to
derivative works, such as sequels, spin-offs, toys and games.
JoongAng Movie Entertainment Co., Ltd.
On October 23, 2003, 4,000,000 shares of restricted common stock of the Company
were issued to the shareholders of JoongAng Movie Entertainment Co., Ltd.
("JoongAng") in exchange for all of the issued and outstanding shares of
JoongAng. JoongAng develops and produces 2D traditional/digital animation for
television, feature films and home video/DVD. JoongAng operates in two revenue
segments:
Independent Contractor for Services: JoongAng produces 2D animation for
unrelated third parties on a fee basis. The projects are prepared to the
specifications of the party hiring JoongAng.
Proprietary Development: JoongAng develops original animation, Costume Play
Events, Live Action Feature Film projects based on characters and storylines
conceived by JoongAng and also other parties in which JoongAng and their
respective partners hold certain rights in the project:
Administrative Offices - The Company's executive offices are maintained at 5650
Yonge Street, Suite 1508, Toronto, Canada.
Employees - Cyper Media has 8 full-time employees and 87 part-time and/or per
project basis employees.
Item 2. Description of Property
Cyper Media, Inc. leases 100 square feet of office space at 5650 Yonge Street,
Toronto, Ontario, Canada where it maintains its executive offices, and
Entertainment and JoonAng share 3050 square feet of leased office space at
Ganghee Building, 4th Floor, 529-12, Shillim-Dong, Gwanak-Gu Seoul, South Korea.
Item 3. Legal Proceedings
The Company is not currently involved in any legal proceedings.
Item 4. Submission of Matter to a Vote of Security Holders
No matters were submitted to a vote of Security Holders during the 4th quarter
of the fiscal year.
Part II
Item 5. Market for Common Equity, Related Stockholder Matters and Company
Purchase of Equity Securities
(a) The company underwent a 2 for 1 stock split of its stock on August 25, 2003.
The quotations shown below are on a post-split basis. The following table sets
forth the high and low bid prices as reported by Yahoo Finance for the periods
ending December 31, 2003. All quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commissions, and may not reflect actual
transactions. There was no trading in the Company's stock in 2002.
(b) The Company has approximately 83 shareholders of its outstanding common
stock.
(c) No cash dividends have been declared on the Company's common stock within
the last two years. There are no restrictions that limit the Company's ability
to pay cash dividends nor are there likely to be any in the near future.
Recent Sales of Unregistered Securities.
On October 23, 2003, the Company issued 4,000,000 restricted shares of common
stock to the shareholders of Joonang Movie Entertainment Co., Ltd in exchange
for all of the issued and outstanding shares of JoonAng. Such issuance was
exempt from registration under Section 4(2) of the under the Securities Act as
it did not involve a public offering of securities as that term is defined in
the Securities Act.
In February 2004, the Company issued 50,000,000 restricted shares of common
stock to a creditor in connection with the conversion of outstanding convertible
debt obligations, and in February 2004 the Company also issued 350,000
restricted shares of common stock valued at $17,500 for consulting services
related to the proposed debt financing arrangement. All of such shares were
issued without registration pursuant to an exemption from registration under
Section 4(2) of the Securities Act.
Item 6. Managements Discussions & Analysis or Plan of Operation
The following discussion relates to the results of our operations to date, and
our financial condition: This report contains forward looking statements
relating to our Company's future economic performance, plans and objectives of
management for future operations, projections of revenue mix and other financial
items that are based on the beliefs of, as well as assumptions made by and
information currently known to, our management. The words "expects, intends,
believes, anticipates, may, cold should" and similar expressions and variations
thereof are intended to identify forward-looking statements. The cautionary
statements set forth in this section are intended to emphasize that actual
results may differ materially from those contained in any forward looking
statement.
Critical Accounting Policies and Estimates
Our discussion and analysis of financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure or contingent liabilities. We base there
estimates on our historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, and these estimates from the
basis for our judgments concerning the carrying values of assets and liabilities
that are not readily apparent from other sources. We periodically evaluate these
estimates and judgments based on available information and experience. Actual
results will differ from our estimates under different assumptions and
conditions. If actual results significantly differ from our estimates, our
financial condition and results of operations could be materially impacted.
We believe that the accounting policies described below are critical to
understanding our business, results of operations and financial condition
because they involve more significant judgments and estimates used in the
preparation of our consolidated financial statements. An accounting policy is
deemed to be critical if it requires an accounting estimate to be made based on
assumptions about matters that are highly uncertain the time the estimate is
made, and if different estimates that could have been used, or changes in the
accounting estimates that are reasonably likely to occur periodically, could
materially impact our consolidated financial statement. We have discussed the
development, selection and application of our critical accounting policies with
the audit committee of our board of directors, and our audit committee has
reviewed our disclosure relating to our critical accounting policies in this
"Management's Discussion and Analysis or Plan of Operations."
Revenue Recognition
The Company follows the guidance of the Securities and Exchange Commission's
Staff Accounting Bulletin 101 for revenue recognition. In general, the Company
records revenue when persuasive evidence of an arrangement exists, services have
been rendered or product delivery has occurred, the sales price to the customer
is fixed or determinable, and collectability is reasonably assured.
Foreign Currency Translation
Transactions and balances originally denominated in U.S. dollars are presented
at their original amounts. Transactions and balances in other currencies are
converted into U.S. dollars in accordance with Statement of Financial Accounting
Standards (SFAS) No. 52, "Foreign Currency Translation," and are included in
determining net income or loss.
For foreign operations with the local currency as the functional currency,
assets and liabilities are translated from the local currencies into U.S.
dollars at the exchange rate prevailing at the balance sheet date. Revenues and
expenses are translated at weighted average exchange rates for the period to
approximate translation at the exchange rates prevailing at the dates those
elements are recognized in the financial statements. Translation adjustments
resulting from the process of translating the local currency financial
statements into U.S. dollars are included in determining comprehensive loss.
The functional currency of the Company's Korean subsidiaries is the local
currency (Korean Won). The financial statements of the subsidiaries are
translated to United States dollars using year-end rates of exchange for assets
and liabilities, and average rates of exchange for the period for revenues,
costs, and expenses. Net gains and losses resulting from foreign exchange
transactions are included in the consolidated statements of operations and were
not material during the periods presented. The cumulative translation adjustment
and effect of exchange rate changes on case at December 31, 2003 was not
material.
Results of Operation
The Company's revenue for the years ended December 31, 2003 and 2002 were
$56,076 and $193,919. The Company's revenues decreased in 2003 in comparison to
2002 primarily as a result of the increase in the Company's selling, general and
administrative expenses. The Company's selling, general and administrative
expenses for the year ended December 31, 2003 was $658,842 and the year ended
December 31, 2002 was $335,190.
The Company does not believe that revenues for the year ended December 31, 2003
are indicative of revenues that the Company will incur in future periods. The
Company's management believes that revenues will increase in the next several
years.
Liquidity and Sources of Capital
As of December 31, 2003, the Company had current assets of $80,152, current
liabilities of $3,348,488 and a working capital deficit of ($3,995,202) and
shareholders' equity of ($2,822,987).
The Company's working capital is currently not sufficient for the Company to
implement its business plan. The Company's ability to continue as a going
concern is contingent upon its ability to secure additional financing and
increase sale of its products. The Company is pursuing various sources of equity
financing and is also attempting to increase its sales. Although the Company
plans to pursue additional financing, there can be no assurance that the Company
will be able to secure such financing when needed or on terms satisfactory to
the Company.
Recent Accounting Pronouncements
In December 2002, the FASB issued Statement of Financial Accounting Standards
No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure.
Statement 148 provides alternative methods of transition to Statement 123's fair
value method of accounting for stock-based employee compensation. It also amends
the disclosure provisions of Statement 123 and APB Opinion No. 28, Interim
Financial Reporting, to requires disclosure in the summary of significant
accounting policies of the effects of an entity's accounting with respect to
stock-based employee compensation on reported net income and earnings per share
in annual and interim financial statements. Statement 148"s amendment of the
transition and annual disclosure requirements of Statement's 123 are effective
for fiscal years ending after December 15, 2002. Statement 148's amendment of
the disclosure requirements of Opinion 28 is effective for interim periods
beginning after December 15, 2002. The adoption of the disclosure provisions of
Statement 148 as of December 31, 2002 did not have a material impact on the
Company's financial condition or results of operations.
In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"consolidation of Variable Interest Entities," FIN 46 requires that if an entity
has a controlling financial interest in a variable interest entity, the assets,
liabilities and results of activities of the variable interest entity should be
included in the consolidated financial statements of the entity. FIN 46 requires
that its provisions are effective immediately for all arrangements entered into
after January 31, 2003. The Company does not have any variable interest entities
created after January 31, 2003. For those arrangements entered into prior to
January 31, 2003, the FIN 46 provisions are required to be adopted at the
beginning of the first interim or annual period beginning after June 13, 2003.
The Company has not identified any variable interest entities to date and will
continue to evaluate whether it has variable interest entities that will have a
significant impact on its consolidated balance sheet and results of operations.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity." This statement
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. This
statement is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective for the first interim period beginning
after June 15, 2003, with certain exceptions. The adoption of SFAS No. 150 did
not have a significant impact on our consolidated financial position or results
of operations.
Item 7. Financial Statements - See Financial Statements Attached.
Item 8. Changes in or Disagreement With Accountants On Accounting and Financial
Disclosure
The Company had no disagreements with Accountants on accounting and financial
disclosure.
On July 10, 2003 the Company engaged the accounting firm of SF Partnership LLP
as its independent accountants to audit the Company's financial statements
beginning with the fiscal year ended December 31, 2003. The Company amicably
concluded its relationship with its former accountant Stewart H. Benjamin with
the appointment of SF Partnership LLP.
Item 8(A) Controls and Procedures
We carried out an evaluation under the supervision and with the participation of
our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Securities Exchange Act Rules 13a-15(e) and
15d-15(e). Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures as of
December 31, 2003 are effective in timely alerting them to material information
relating to the company required to be included in our periodic SEC Filings. The
design of any system of controls is based in part upon certain assumptions about
the likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future
conditions, regardless of how remote. There were no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation.
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
The directors and executive officers currently serving the Company are as
follows:
Name Age Title
------------ --- -----
Duk Jin Jang 34 CEO, President & Director
Michael Chung 31 Secretary, Treasurer & Director
Jong Won Yoon 31 Vice-President, Director
Duk Jin Jang:
Mr. Jang, the Company's President and CEO; has been President, Chairman and
Chief Executive Officer of Cyper Entertainment since June 1, 2002. Mr. Jang
worked as a department manager of POST Intermedia, Inc. from 1992 to 1993, and
as a manager of Nowcom, Inc. From 1996 to 1996. Mr. Jang worked as a manager of
GEN Multimedia studio} from 1997 to 1998. Mr. Jang worked as a Professor at
Kaywon School of Art and Design from 1997 until 2000. Mr. Jang has been Director
of Digital Contents Associates in Korea since 2001, and an advisory committee
member of Gyeonggi Digital Arts Hive at Gyeonggi-Do, Korea since 2001. Mr. Jang
started Cyper Entertainment, Inc. In January 2000. Mr. Jang attended Kook Min
University in Seoul Korea, graduating with a degree in visual Communication
Design in 1995.
Michael Chung
Mr. Chung is Secretary and Treasurer of the Company and has been with the
Company since March 14, 2001. Mr. Chung has worked as a digital colorist for
Cream Entertainment from October 2000 to February 2001. Mr. Chung worked as a
digital artist for Matrixcube from October 2000 to February 2001. Mr. Chung
worked as an animator on a short animated film for the 407 ETR in 1996 to 1997.
Mr. Chung worked as an animator on the Multimedia CD-Rom Lambchop Loves Music in
1995. Mr. Chung attended Digital Media Studios and studied 3D modeling and
animation using Alias Wavefront Maya. Mr. Chung attended Sheridan College from
1992-1996 studying fundamental arts and Classical Animation.
Jong Won Yoon
Mr. Yoon, Vice President of the Company attended Dankook University in Chun Ahn,
Korea, graduating with a degree in Management in 1999 and thereafter attended
Dankook University in Seoul, Korea, graduating with a master's degree in
Management in 2001. He worked as a manager of FMG of Consulting Company until
December, 2001 and worked TFT Team of Korea Game Development & Promotion
Institute with planning to Game Education Institute in 2001.
Duk Jin Jang and Jong Won Yoon officers and directors of the Company did not
file their Initial Statement of Beneficial Ownership of Securities on Form 3 at
the time they acquired their shares in the Company. They have advised the
Company that they will file same by May 30, 2004.
Item 10. Executive Compensation
None of the executive officers of the Company receive compensation in excess of
$60,000 and all of the Company's executive officers in the aggregate receive
compensation of less than $60,000 per annum.
The Company has not stock option, retirement, pension or profit-sharing programs
for the benefit of directors, officers or other employees, but the Board of
Directors may recommend adoption of one or more such programs in the future.
Item ll. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of the end of the Company's most recent
fiscal year, the number of shares of Common Stock owned of record and
beneficially by executive officers, directors and persons who hold 5.0% or more
of the outstanding Common Stock of the Company. Also included are the shares
held by all executive officers and directors as a group.
Name and Address Number of Shares % of
Owned Beneficially Class Owned
============== ================== ===========
Hem Mutual Assurance LLC 49,030,000 55.4
c/o Gottbetter & Partners LLP
488 Madison Avenue
New York, NY 10022
Duk Jin Jang 6,815,966 7.7
Hosubmaeul Yuwon Apt 317 Dong 801 Ho
Janghang-Dong, LIsan-Gu
Goyang-Si, Kyungki-Do
Korea
Jong Won Yoon 791,498 .9
Hallamaeui 130-Dong 1003-Ho
Ung 4(SA)-Dong
Wonmi-Gu, Bucheon-Si
Kyungki-Do, Korea
All directors and Executive 7,607,464 8.6
Officers (2) persons
Item 12. Certain Relationships and Related Transactions
There were no transactions within the last two fiscal years to which the Company
was a party, in which any director, executive officer, nominee for election as a
director, beneficial owner of more than 5% of the shares, or any member of the
immediate family of any of those persons, had a direct or indirect material
interest.
Item 13. Exhibits List and Reports on Form 8-K
(a) The Exhibits listed below are filed as part of this Annual Report.
3.1 Articles of Incorporation (incorporated by reference from Registration
Statement on Form 10-SB filed with the Securities and Exchange Commission on
January 18, 2003.
3.2 Bylaws (incorporated by reference from Registration Statement on Form 10-SB
filed with the Securities and Exchange Commission on January 18, 2003.
14.1 Company Code of Ethics Statement.
31.1 Certification under Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification under Section 906 of the Sarbanes-Oxley Act of 2002.
(b) There were no reports filed on Form 8-K during the last quarter of fiscal
year ended December 31, 2003.
Item 14. Principal Accountants Fees and Services
Audit Fees
SF Partnership LLP provided audit services to us for our annual report for the
fiscal years ended December 31, 2003 and 2002. The aggregate fees billed by SF
Partnership LLP. for the audit of our annual financial statements and review of
financial statements included in our Form 10-QSBs was $26,000 and $17,000 for
2003 and 2002, respectively.
Audit Related Fees
There were no fees billed in each of 2003 and 2002 for professional services
that are reasonably related to the audit or review of our financial statements
that are not covered in the "Audit Fees" disclosure above.
Tax Fees
There were no fees billed for the years 2003 and 2002 for professional services
rendered by SF Partnership LLP for tax advice and planning.
All Other Fees
There were no fees billed in each of 2003 and 2002 for professional services
rendered by SF Partnership LLP. for all other services not disclosed above.
SIGNATURES
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Dated: April 23, 2004
CYPER MEDIA INC.
By: /s/ Duk Jin Jang
--------------------------------
Duk Jin Jang
President
By: /s/ Michael Chung
--------------------------------
Michael Chung
Secretary
CYPER MEDIA, INC.
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 AND 2002
CONTENTS
Independent Auditors' Report 1
Consolidated Balance Sheets 2
Consolidated Statement of Stockholders' Equity 3
Consolidated Statement of Operations 4
Consolidated Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6 - 13
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Cyper Media, Inc.
We have audited the accompanying consolidated balance sheets of Cyper
Media, Inc. and subsidiaries (the "Company") as of December 31, 2003 and 2002,
and the related consolidated statements of stockholders' equity, operations, and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated 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
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 2003 and 2002, and the results of its operation, accumulated
deficit and its cash flows for the years ended, in conformity with accounting
principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
1(b) to the consolidated financial statements, the Company has suffered
recurring losses and negative working capital from operations, which raises
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1(b). The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
"SF PARTNERSHIP, LLP"
Toronto, Canada CHARTERED ACCOUNTANTS
March 25, 2004
- 1 -
CYPER MEDIA, INC.
Consolidated Balance Sheets
December 31, 2003 and 2002
2003 2002
ASSETS
Current
Cash $ 553 $ 9,244
Term deposit -- 13,650
Prepaid and sundry assets 12 44
Accounts receivable 23,015 --
Loan to a director (note 3) 56,572 --
----------- -----------
80,152 22,938
Long-term Prepaid Assets -- 34,893
Rent Deposits 419 420
Equipment (note 4) 327,930 706,644
Goodwill 117,000 --
----------- -----------
$ 525,501 $ 64,895
=========== ===========
LIABILITIES
Current
Bank loans (note 5) $ 374,373 $ 323,400
Accounts payable and accrued charges 1,488,465 1,038,234
Loan payable -- 42,000
Loans from shareholders and directors (note 6) 1,485,650 501,068
Convertible bond (note 7) -- 823,200
----------- -----------
3,348,488 2,727,902
----------- -----------
STOCKHOLDERS' EQUITY
Capital Stock (note 8) 38,120 9,920
Paid in Capital 1,208,248 893,125
Accumulated Other Comprehensive Loss (74,153) (83,092)
Accumulated Deficit (3,995,202) (2,782,960)
----------- -----------
(2,822,987) (1,963,007)
----------- -----------
$ 525,501 $ 764,895
=========== ===========
APPROVED ON BEHALF OF THE BOARD
"DUK JIN JANG" "MICHAEL CHUNG"
---------------------- ----------------------
Director Director
- 2 -
CYPER MEDIA, INC.
Consolidated Statement of Stockholders' Equity
Years Ended December 31, 2003 and 2002
Paid in Accumulated
Capital in Other Total
Number of Capital excess of Comprehensive Accumulated Stockholders'
Shares Stock Par Value Loss Deficit Equity
----------- ----------- ----------- ----------- ----------- -----------
Balance, January 1, 2002 9,920,500 $ 9,920 $ 893,125 $ 81,898 $(2,343,529) $(1,358,586)
Foreign exchange on
translation -- -- -- (164,990) -- (164,990)
Net Loss -- -- -- -- (439,431) (439,431)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 2002 9,920,500 $ 9,920 $ 893,125 $ (83,092) $(2,782,960) $(1,963,007)
=========== =========== =========== =========== =========== ===========
Balance, January 1, 2003 9,920,500 $ 9,920 $ 893,125 $ (83,092) $(2,782,960) $(1,963,007)
Common shares issued on
acquisition of Cyper
Entertainment Co., Ltd. 20,000,000 20,000 (19,369) -- -- 631
Common shares issued on
acquisition of Joongang
Movie Entertainment
Co., Ltd. 4,000,000 4,000 128,692 -- -- 132,692
Common shares issued for
services 4,200,000 4,200 205,800 -- -- 210,000
Foreign exchange on
translation -- -- -- 8,939 -- 8,939
Net Loss -- -- -- -- (1,212,242) (1,212,242)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 2003 38,120,500 $ 38,120 $ 1,208,248 $ (74,153) $(3,995,202) $(2,822,987)
=========== =========== =========== =========== =========== ===========
- 3 -
CYPER MEDIA, INC.
Consolidated Statement of Operations
Years Ended December 31, 2003 and 2002
2003 2002
Sales $ 56,076 $ 193,919
Cost of Sales 152,484 313,991
------------ ------------
Gross Loss (96,408) (120,072)
------------ ------------
Expenses
Selling, general and administrative expenses 658,842 355,190
Interest 121,143 124,863
Miscellaneous 230 813
Depreciation 92,019 118,493
------------ ------------
872,234 599,359
------------ ------------
Net Loss Before the Undernoted (968,642) (719,431)
Loss on disposition of equipment (243,600) --
Forgiveness of related party loan -- 280,000
------------ ------------
Net Loss $ (1,212,242) $ (439,431)
============ ============
Fully Diluted Loss Per Share (note 8) $ (0.05) $ (0.02)
============ ============
Basic Weighted Average Number of Shares 26,310,250 20,000,000
============ ============
- 4 -
CYPER MEDIA, INC.
Consolidated Statement of Cash Flows
Years Ended December 31, 2003 and 2002
2003 2002
Cash Flows from Operating Activities
Net loss $(1,212,242) $ (439,431)
Adjustments for:
Depreciation 92,019 118,493
Common shares issued for services 210,000 --
Loss from disposition of equipment 243,600 --
Accounts receivable (2,287) 9,663
Prepaid and sundry assets 31,874 26,191
Accounts payable and accrued charges 433,685 262,749
----------- -----------
(203,351) (22,335)
----------- -----------
Cash Flows from Investing Activities
Decrease in rent deposits -- 51,435
Decrease (increase) in term deposits 13,650 (5,063)
Decrease (increase) in long-term prepaid assets 34,893 (4,860)
Net proceeds (acquisition) of equipment 42,630 (14,406)
----------- -----------
91,173 27,106
----------- -----------
Cash Flows from Financing Activities
Increase in bank loans 52,225 --
Repayment of convertible bond (823,200) --
Repayment of loan payable (42,000) --
Receipt of loans from shareholders and directors 973,226 --
Loan to a director (56,761) (37,560)
----------- -----------
103,490 (37,560)
----------- -----------
Foreign Exchange on Cash (3) 2,905
----------- -----------
Net Decrease in Cash (8,691) (29,884)
Cash - beginning of year 9,244 39,128
----------- -----------
Cash - end of year $ 553 $ 9,244
=========== ===========
- 5 -
CYPER MEDIA, INC.
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
1. Description of Business and Going Concern
a) Description of Business
Cyper Media, Inc., formerly JRE, Inc. ("the Company"), was
incorporated in the State of New York on November 30, 2000. On July
10, 2003 the Company changed its name to Cyper Media, Inc.
On July 10, 2003, the Company entered into a definitive Share Exchange
Agreement (the "Agreement") with Cyper Entertainment, Inc., ("Cyper
Korea") a Korean corporation and its shareholders. The Agreement
provided for the acquisition by the Company of 100% of the issued and
outstanding capital stock of Cyper Korea. In exchange, the
shareholders of Cyper Korea received 10,000,000 shares of the Company,
equivalent to 20,000,000 after the 1 to 2 forward stock split as
described in note 8. As a result, the shareholders of Cyper Korea
controlled 67% of the Company. While the Company is the legal parent,
as a result of the reverse-takeover, Cyper Korea became the parent
company for accounting purposes.
Upon completion of the share exchange, the business operations of
Cyper Korea constituted virtually all of the business operations of
the Company. Cyper Korea is a Digital Animation Production company
providing services to the television, commercial and film industries
globally. The Company develops and produces 3D digital animation for
television, short films, computer generated image ("CGI") feature
films, home video, music video and multi-media applications such as
video games. Cyper Korea has produced CGI animations with the
objective of providing high-quality animation TV programming and
feature film for the North American market. The business operations of
Cyper Korea are located in Seoul, Korea.
In October 2003, in accordance with a Share Exchange Agreement, the
Company acquired Joongang Movie Entertainment Co., Ltd. ("Joongang"),
a Korean corporation. The agreement provided for the acquisition by
the Company of 100% of the issued and outstanding capital stock of
Joongang in exchange for 4,000,000 shares of the Company. As a result
of the transaction, the shareholders of Joongang controlled 12% of the
Company. Joongang produces animated content television and various
other media. Joongang is a 13-year-old animation company with over 60
different clients in the Far East and Europe.
b) 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 since inception, has not made payments on
its bank loans subsequent to July 2003 and has negative cash flows
from operations that raise substantial doubt as to its ability to
continue as a going concern. For the years ended December 31, 2003 and
2002, the Company experienced net losses of $1,212,242 and $439,431
respectively.
- 6 -
CYPER MEDIA, INC.
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
1. Description of Business and Going Concern (cont'd)
The Company's ability to continue as a going concern is contingent
upon its ability to secure additional financing, initiating sale of
its product and attaining profitable operations.
Management is pursuing various sources of equity financing in addition
to increasing its sales base. The Company has entered into
negotiations for a new issuance of convertible debt (see note 11).
During the year, the Company acquired Joongang Movie Entertainment
Co., Ltd. which management believes will greatly increase the
Company's our brand and image with North American product launches.
Although the Company has plans to pursue additional 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 financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may
result from the possible inability of the Company to continue as a
going concern.
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) Reporting Currency
The Company's functional currency is Korean won. Financial statements
have been translated into US dollars in accordance with SFAS No. 52,
"Foreign Currency Translation". All translation gains and losses are
directly reflected separately in stockholders equity as Accumulated
Other Comprehensive Income (loss).
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.
b) Equipment
Equipment is stated at cost.
Depreciation is computed by the straight line method using rates based
on estimated useful lives of the respective assets.
Useful lives (years)
--------------------
Machinery and equipment 10
Furniture and office equipment 5
Vehicles 5
- 7 -
CYPER MEDIA, INC.
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
2. Summary of Significant Accounting Policies (cont'd)
c) Goodwill
In July 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141, "Business Combinations" and No. 142, "Goodwill and Other
Intangible Assets". SFAS 141 requires all business combinations
initiated after June 30, 2001 to be accounted for using the purchase
method. Under SFAS 142, goodwill and intangible assets with indefinite
lives are no longer amortized but are reviewed annually (or more
frequently if impairment indicators arise) for impairment. Separable
intangible assets that are not deemed to have indefinite lives will
continue to be amortized over their useful lives (but with no maximum
life). Prior to the adoption of SFAS 142, the excess of cost over the
net assets of acquired businesses was amortized on a straight-line
basis over periods of up to forty years.
Goodwill relates to the acquisition of Joongang Movie Entertainment
Co., Ltd. (as described in note 8). The Company adopted SFAS 142
effective January 1, 2003 and, as a result, has not recorded an
amortization charge for goodwill since that time. Goodwill is derived
by using the discounted cash flows based on signed contracts at the
time of acquisition.
d) Revenue Recognition
The Company recognizes revenues when services are performed on a
percentage of completion method when collection is reasonably
ascertained.
e) Use of Estimates
The preparation of financial statements in conformity with U.S.
generally accepted accounting principles, requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
f) 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 risk and credit risk concentration. The Company does not
have significant off-balance sheet risk or credit concentration.
- 8 -
CYPER MEDIA, INC.
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
2. Summary of Significant Accounting Policies (cont'd)
g) 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.
h) Impact of Recently Issued Accounting Standards
The FASB recently issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets," that is applicable to financial
statements issued for fiscal years beginning after December 15, 2001.
SFAS No. 144 addresses the financial accounting and reporting for the
impairment or disposal of long-lived assets. The Company adopted SFAS
No. 144 and the statement is not expected to have a material effect on
the Company's financial position or operating results.
3. Loan to a Director
The loan to a director who owns approximately 10% of the Company is
non-interest bearing, unsecured and due on demand.
4. Equipment
Equipment is comprised as follows:
2003 2002
Accumulated Accumulated
Cost Depreciation Cost Depreciation
---------- ---------- ---------- ----------
Machinery and equipment $ 452,578 $ 197,985 $ 790,091 $ 203,639
Vehicles 28,482 19,938 28,578 14,289
Furniture and fixtures 203,793 139,000 204,474 98,571
---------- ---------- ---------- ----------
$ 684,853 $ 356,923 $1,023,143 $ 316,499
---------- ---------- ---------- ----------
Net carrying amount -- $ 327,930 -- $ 706,644
---------- ---------- ---------- ----------
- 9 -
CYPER MEDIA, INC.
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
5. Bank Loans
2003 2002
Industrial Bank $189,569 $ 29,400
KOTEC 184,804 --
Hanna Bank # 1 -- 42,000
Hanna Bank # 2 -- 252,000
-------- --------
$374,373 $323,400
======== ========
Industrial Bank
The loan bears interest at 10.2% per annum, repayable monthly interest
only, and is due on demand. The loan is secured by a personal guarantee of
the controlling shareholder. The Company has not made any payments on the
loan subsequent to July 2003.
KOTEC (Korea Technology Credit Guarantee Fund)
The loan bears interest at 9.55% per annum, repayable monthly interest
only, and is due on demand. The loan is secured by a personal guarantee of
the controlling shareholder. The Company has not made any payments on the
loan subsequent to July 2003.
Hanna Bank #1 and #2
During the year, the Company defaulted on the debt covenants of the loan.
As a result, the controlling shareholder paid the remaining balances of
these loans.
- 10 -
CYPER MEDIA, INC.
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
6. Loans from Shareholders and Directors
The loans from the shareholders and directors are non-interest bearing and
due on demand.
7. Convertible Bond
During the year, the Company defaulted on the debt covenants of the bond.
As a result, the controlling shareholder paid approximately $660,000 in
lieu of their personal guarantees and the remaining balance of
approximately $163,000 was refinanced by a bank loan and is included in the
balance owing to the Industrial Bank as disclosed in note 5.
8. Capital Stock
Authorized
100,000,000 common shares, par value $0.001
In July 2003, the Company issued 10,000,000 common shares, equivalent to
20,000,000 after the 1 to 2 forward stock split, in exchange for all the
outstanding common shares of Cyper Korea as described in note 1.
In July 2003, the Company authorized a 1 for 2 forward stock split of its
common shares. This split has retroactively been taken into consideration
in the consolidated financial statements and the calculation of earnings
per share.
In October 2003, the Company issued 4,000,000 common shares in exchange for
all the outstanding common shares of Joongang Movie Entertainment Co., Ltd.
The company was valued at $132,000.
In December 2003, the Company issued 4,200,000 common shares for $210,000
of consulting services with regard to the reverse takeover transaction as
described in note 1.
9. Lease Commitments
The Company is committed to lease obligations on its office spaces until
February 21, 2005. Future minimum annual payments exclusive of taxes and
insurance under the leases are as follows:
2004 $ 26,000
2005 5,000
---------
$ 31,000
- 11 -
CYPER MEDIA, INC.
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
10. Income Taxes
The Company accounts for income taxes in accordance with 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 the financial reporting and tax
basis of assets and liabilities, and are measured using the enacted tax law
when the effects of future changes in tax laws or rates are not
anticipated.
The Company's income tax rates in 2002 and 2003 are 16.5% for the first
$84,000 (100,000,000 Won) taxable income and 29.7% of the excess.
The Company has no deferred income tax liabilities.
The Company's only deferred income tax asset is from tax losses carried
forward, for which a valuation allowance has been provided because it is
not presently more likely than not that they will be realized.
CYPER MEDIA, INC.
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
11. Subsequent Events
a) In February 2004, the Company issued 50,000,000 common shares held in
escrow as security for a proposed convertible debt financing
arrangement of $1,000,000. The common shares will be issued to the
debt holder from escrow as it exercises its conversion rights.
b) In February 2004, the Company issued 350,000 common shares valued at
$17,500 for consulting services relating to the proposed financing
arrangement.
c) Effective December 17, 2003, the Company entered into a contract to
produce 36 episodes of animated video series for approximately
$1,500,000 over three years. The production began in February 2004.
- 13 -
Exhibit 14.1
CYPER MEDIA INC.
CODE OF ETHICS
FOR
PRINCIPAL EXECUTIVE OFFICER AND
SENIOR FINANCIAL OFFICERS
RECEIPT AND AGREEMENT OF COMPLIANCE NOTICE
OFFICER'S NAME: Duk Jin Jang
I have read and understand that Code of Ethics for Principal Executive Officer
and Senior Financial Officers of Cyper Media Inc. and hereby acknowledge receipt
thereof. I agree to comply with the requirements of such code.
/s/ Duk Jin Jang
-----------------------------------
Duk Jin Jang
Signature
April 19, 2004
-----------------------------------
Date
Code of Ethics
for Principal Executive Officer
and Senior Financial Officers
I. INTRODUCTION
A. Purpose of Code.
Cyper Media Inc. (the "Corporation") is committed to the highest
standards of legal and ethical conduct, including providing full and
accurate financial disclosure in compliance with applicable laws, rules and
regulations and maintaining its books and records in accordance with
applicable accounting policies, laws, rules and regulations.
This Code of Ethics for Principal Executive Officer and Senior
Financial Officers (this "Code") is designed to set forth particular
standards of conduct that the Corporation requires its principal executive
officer and its senior financial officers to follow. Any activity by a
principal executive officer or senior financial officer of the Corporation
contrary to this Code is prohibited ad is not within the scope of
employment or authority of such persons.
B. Persons Subject to this Code.
This Code is applicable to the following Corporation personnel:
1. Principal executive officer
2. Principal executive officer
3. Principal executive officer
4. Controller; and
5. Other persons performing similar functions as persons in the
enumerated positions (individually, a "Covered Person" and
collectively, the "Covered Persons").
C. Distribution and Commitment
All Covered Persons will be given a copy of this Code. Each
Covered Person will be required to certify that each (i) has read and
understands the guidelines contained in this Code and (ii) will comply with the
terms of this Code.
II. COMPLIANCE WITH RULES AND REGULATIONS
The Corporation is committed to conducting its business in
accordance with all applicable laws, rules and regulations and in accordance
with the highest standards of business ethics. As a Covered Person, you must not
only comply with applicable laws, however. You also have leadership
responsibilities that include creating a culture of high ethical standards and
commitment to compliance; maintaining a work environment that encourages
employees to raise concerns; and promptly addressing employee compliance
concerns.
III. CONFLICTS OF INTEREST
A. General Statement.
All Covered Persons are expected to use good ethical judgment, and to
avoid situation that create an actual or potential conflict between the
Covered Person's personal interests and the interest of the Corporation. A
conflict of interest also exists where the Covered Person's loyalties or
actions are divided between the Corporation's interests and those of
another, such as a competitor, supplier or customer. Both the fact and the
appearance of a conflict should be avoided.
Before making any investment, accepting any position or benefits or
participating in any transaction or business arrangement that creates or
appears to create a conflict of interest, Covered Persons must obtain the
written approval of the Audit Committee of the Board of Directors.
While it is not feasible to describe all possible conflicts of
interest that could develop, the following are some of the more common
examples.
B. Examples of Conflicts.
1. Financial Interest in Another Business. Covered Persons should
not have a direct or indirect financial interest in a customer, supplier,
competitor or others with whom the Corporation does business. The ownership of
less than one percent (1%) of the publicly traded stock of a corporation will
not be considered a conflict.
2. Other Employment and Outside Activities. Covered Persons
should not work for, become directly or indirectly involved with, or receive
compensation of any sort from a customer, supplier or competitor of the
Corporation or others with whom the Corporation does business. Covered Persons
should not engage in any activity which may be competitive with or contrary to
the interests of the Corporation.
3. Corporate Opportunities. Business opportunities of which
Covered Persons learn as a result of employment with the Corporation belong to
the Corporation, if within the scope of the Corporation's existing or
contemplated business, and should not be taken advantage of for personal gain.
IV. DISCLOSURE IN REPORTS
The Corporation is committed to providing full, fair, accurate, timely and
understandable disclosure in reports and documents filed with, or submitted to,
the Securities and Exchange Commission and in other public communications made
by the Corporation.
V. COMPLIANCE WITH THIS CODE
If Covered Persons have questions about this Code, advice should be sought
from the Audit Committee of the Board of Directors. If a Covered Person knows of
or suspects a conflict of interest or a violation of applicable laws or
regulations or this Code, the Covered Person must immediately report that
information to the Chief Executive Officer or, if the suspected violation
concerns the Chief Executive Officer, to the Chairman of the Board.
VI. ACCOUNTABILITY; WAIVER OF THIS CODE
The Board shall determine, or designate appropriate persons to determine,
appropriate actions to be taken in the event of violations of this Code. Such
actions shall be reasonably designed to deter wrongdoing and to promote
accountability for adherence to this Code, and may include written notices to
the individual involved that the Board had determined that there has been a
violation, censure by the Board, demotion or re-assignment of the individual
involved, suspension with or without pay benefits and termination of the
individual's employment.
The Corporation will waive application of the policies set forth in this
Code only when circumstances warrant granting a waiver, and then only in
conjunction with any appropriate monitoring of the particular situation. Changes
in and waivers of this Code may be made by the Board of Directors or the Audit
Committee of the Board and will be disclosed as required under applicable law
and regulations.
/s/ Duk Jin Jang
-----------------------------------
Duk Jin Jang
Signature
April 19, 2004
-----------------------------------
Date
Exhibit 31.1
CERTIFICATE UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Duk Jin Jang, being the President of Cyper Media Inc., certify that:
1. I have reviewed this annual report on Form 10-KSB for the period ended
December 31, 2003.
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made and is not misleading with respect to the period
covered by this quarterly report; and
3. Based on my knowledge, the financial statements and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for the periods presented in this annual report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
oft his annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant' s internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: April 23, 2004
/s/ Duk Jin Jang
-------------------------
Duk Jin Jang
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-KSB/A (the "Report") of
Cyper Media Inc. (the "Company") for the year ended December 31, 2003, each of
the undersigned Duk Jin Jang, the President of the Company, and Michael Chung,
the Secretary of the Company, hereby certifies pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of the undersigneds' knowledge and belief:
(1) the Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Dated: April 23, 2004 /s/ Duk Jin Jang
-----------------------------------
Duk Jin Jang
President, Director
Dated: April 23, 2004 /s/ Michael Chung
-----------------------------------
Michael Chung
Secretary, Director
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