10QSB 1 cyper9302003.txt FORM 10-QSB (9-30-2003) SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter ended September 30, 2003 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to ________________ Commission File No 000-33517 CYPER MEDIA INC. --------------------------------------------------- (Exact name of registrant as specified in its charter) New York 11-3579470 -------- ---------- (State or other jurisdiction (IRS Employer ID Number) of incorporation or organization) 5650 Yonge Street, 15th floor, Toronto, Ontario, Canada M2M 4G3 -------------------------------------- (Address of principal executive offices) (416) 226-3375 ------------------------- (Issuer's Telephone Number) -------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. Yes X No ------ ------ As of September 30, 2003, the Issuer had 29,920,250 shares of Common Stock, per value $.001 per share, issued and outstanding. PART I Item 1. Financial Statements and Exhibits (a) The unaudited financial statements of Registrant for the three months ended September 30, 2003, follow. The financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented. CONTENTS Consolidated Balance Sheet F-1 Consolidated Statement of Shareholders' Deficiency F-2 Consolidated Statement of Operations F-3 - F-4 Consolidated Statement of Cash Flows F-5 Notes to Consolidated Financial Statements F-6 - F-9 CYPER MEDIA INC. Consolidated Balance Sheet September 30, 2003 and 2002 2003 2002 ---- ---- ASSETS Current Cash $ 137 $ 4,359 Term deposit -- 13,163 Accounts receivable -- 3,519 Prepaid and sundry assets -- 20,049 ----------- ----------- 137 41,090 Long-term Prepaid Assets 36,148 33,651 Rent Deposits 17,835 40,906 Equipment 632,600 770,110 Organization Cost -- 267 ----------- ----------- $ 686,720 $ 886,024 ----------- ----------- LIABILITIES Current Bank loans $ 275,170 $ 314,350 Accounts payable and accrued charges 1,219,089 763,099 Convertible bond (note 3) 852,600 -- Interest payable 183,409 60,428 Loan payable 42,000 38,000 Loans from shareholders and directors 661,925 859,660 ----------- ----------- 3,234,193 2,035,537 Convertible Bond -- 793,800 ----------- ----------- 3,234,193 2,829,337 ----------- ----------- SHAREHOLDERS' DEFICIENCY Capital Stock (note 4) 14,960 14,960 Paid in Capital 888,085 888,085 Accumulated Other Comprehensive Loss (167,386) (74,323) Accumulated Deficit (3,283,132) (2,772,035) ----------- ----------- (2,547,473) (1,943,313) ----------- ----------- $ 686,720 $ 886,024 ----------- ----------- F-1
CYPER MEDIA INC. Consolidated Statement of Shareholders' Deficiency Nine Months Ended September 30, 2003 and 2002 Accumulated Additional Other Number of Common Paid in Comprehensive Accumulated Shares Stock Capital Income (Loss) Deficit ------------------------------------------------------------------------------------------------------------------------- Balance, January 1, 2002 14,960,250 $ 14,960 $ 888,085 $ 81,898 $(2,343,529) Net loss -- -- -- -- (428,506) Shares issued for cash -- -- -- -- -- Share issuance costs -- -- -- -- -- Financial statement translation -- -- -- (156,221) -- ------------------------------------------------------------------------------- Balance, September 30, 2002 14,960,250 $ 14,960 $ 888,085 $ (74,323) $(2,772,035) =============================================================================== Balance, January 1, 2003 14,960,250 $ 14,960 $ 888,085 $ (83,092) $(2,782,960) Net loss -- -- -- -- (500,172) Two for one stock split 14,960,250 -- -- -- -- Financial statement translation -- -- -- (84,294) -- ------------------------------------------------------------------------------- Balance, September 30, 2003 29,920,500 $ 14,960 $ 888,085 $ (167,386) $(3,283,132) =============================================================================== F-2
CYPER MEDIA INC. Consolidated Statement of Operations Nine Months Ended September 30, 2003 and 2002 2003 2002 ---- ---- Sales $ 2,141 $ 89,919 Cost of Sales 101,943 207,177 ---------------------------- Gross Loss (99,802) (117,258) ---------------------------- Expenses Selling, general and administrative expenses 225,107 180,565 Interest 78,796 40,813 Depreciation 96,467 89,870 ---------------------------- 400,370 311,248 ---------------------------- Net Loss $ (500,172) $ (428,506) ============================ Basic Loss Per Share $ (0.017) $ (0.014) ============================ Fully Diluted Loss Per Share (Note 4) $ (0.017) $ (0.014) ============================ Basic Weighted Average Number of Shares 29,920,500 29,920,500 ============================ F-3 CYPER ENTERTAINMENT CO., LTD. Consolidated Statement of Operations Three Months Ended September 30, 2003 and 2002 2003 2002 ---- ---- Sales $ -- $ 6,544 Cost of Sales 5,039 15,146 ---------------------------- Gross Loss (5,039) (8,602) ---------------------------- Expenses Selling, general and administrative expenses 143,129 52,180 Interest 15,500 15,518 Depreciation 33,667 30,624 ---------------------------- 192,296 98,322 ---------------------------- Net Loss $ (197,335) $ (106,924) ============================ Basic Loss Per Share $ (0.007) $ (0.004) ============================ Fully Diluted Loss Per Share (note 4) $ (0.007) $ (0.004) ============================ Basic Weighted Average Number of Shares 29,920,500 29,920,500 ============================ F-4 CYPER MEDIA INC. Consolidated Statement of Cash Flows Nine Months Ended September 30, 2003 and 2002 2003 2002 ---- ---- Cash Flows from Operating Activities Net loss $(500,172) $(428,506) Depreciation 96,467 89,870 Accrued interest payable 52,824 3,730 Foreign exchange on translation (84,294) (156,221) Accounts receivable -- (5,548) Prepaid and sundry assets -- (4,560) Accounts payable and accrued charges 311,440 132,134 Rent deposits (17,415) 7,735 ---------------------- (141,150) (361,366) ---------------------- Cash Flows from Investing Activities Increase (decrease) in term deposit 13,650 (5,563) Increase in long-term prepaid assets (1,211) (6,637) Net acquisition of equipment (22,423) (103,025) ---------------------- (9,984) (115,225) ---------------------- Cash Flows from Financing Activities Increase (Decrease) in bank loans (48,230) 21,750 Increase in convertible bond 29,400 49,000 Increase in loans from shareholders and directors 160,857 371,072 ---------------------- 142,027 441,822 ---------------------- Net Decrease in Cash (9,107) (34,769) Cash - beginning of period 9,244 39,128 ---------------------- Cash - end of period $ 137 $ 4,359 ====================== F-5 CYPER MEDIA INC. Notes to Financial Statements September 30, 2003 and 2001 1. Description of Business and Going Concern a) Description of Business Cyper Media Inc.. ("the Company"), a company operating in Seoul, Korea, was established in 2000. The Company's head office is located in Seoul, Korea. The Company is a digital animation and 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 feature films, home video, music video and multimedia applications such as video games. The Company has produced TV programming and feature films for the North American Market. 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 and has negative cash flows from operations that raise substantial doubt as to its ability to continue as a going concern. For the periods ended September 30, 2003 and 2002, the Company experienced net losses of $500,172 and $428,506 respectively. 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. Subsequent to the year end, it entered into a reverse-takeover agreement with a public shell corporation. 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. F-6 CYPER MEDIA INC. Notes to Financial Statements September 30, 2003 and 2001 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: Interim Financial Information The accompanying unaudited consolidated interim financial statements have been prepared by the Company, in accordance with generally accepted accounting principles pursuant to Regulation S-B of the Securities and Exchanges Commission. Certain information and footnote disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. In the opinion of management, the consolidated interim financial statements reflect all adjustments, including normal recurring adjustments, necessary for fair presentation of the interim periods presented. The results of operations for the nine months ended September 30, 2003 are not necessarily indicative of results of operations to be expected for the full year. Basis of Consolidation These consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Cyper Entertainment Co. Ltd., after elimination of all intercompany transactions and balances. 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. 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 F-7 CYPER MEDIA INC. Notes to Financial Statements September 30, 2003 and 2001 2. Summary of Significant Accounting Policies (cont'd) Revenue Recognition The Company recognizes revenues when services are performed on a percentage of completion method when collection is reasonably ascertained. 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. 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. 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. 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. F-8 CYPER MEDIA INC. Notes to Financial Statements September 30, 2003 and 2001 3. Convertible Bond The Company recorded the convertible bond in accordance with APB-14, "Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants". The bond issue is treated entirely as debt and no formal accounting recognition is assigned to the value inherent in the conversion feature. The convertible bond bears interest at 9.5% per annum and matures on December 26, 2003. Each $2.76 (3,500 Won) is convertible to 1 common share of the Company. The Company makes quarterly interest payments on the bond equivalent to 2% per annum on the face value. The difference between the rate of accrual and the rate of payment is included in interest payable and is repayable on maturity of the convertible bond. 4. Capital Stock Authorized 100,000,000 common shares, par value $0.001 2003 2002 Issued 29,920,500 common shares (2002 - 14,960,250) $ 14,960 $ 14,960 ========== ========== The convertible bond as described in note 3 has not been included in the calculation of the diluted earnings per share as the inclusion would be anti-dilutive. 5. Related Party Transactions Included in accounts payable is an amount owing of $103,800 (2001 - $Nil) to a director and a company controlled by parties related to the diretcor, for expenses paid on the Company's behalf. 6. Subsequent Events On October 22, 2003 the Company acquired Joongang Movie Entertainment Co. Ltd., ("Joongang") , a South Korean Corporation. Cyper Media Inc. issued 4,000,000 restricted shares in exchange for 100% of the shares of Joongang. As a result of the transaction, shareholders of Joongang will own 12% of the outstanding shares of the Company. F-9 Item 2. Management's Discussion and Analysis or Plan of Operation Results of Operation On July 10, 2003, in accordance with a Share Exchange Agreement dated May 23, 2003, the REgistrant entered into a reverse-takeover transactionwith Cyper Entertainment Co. Ltd (Cyper), whereby all the issued and outstanding shares of Cyper were exchanged for 10,000,000 shares of restricted stock of the Registrant. As result of the transaction, the shareholders of Cyper own 67% of the issued and outstanding stock of the Registrant. Accordingly, while the Registrant is the legal parent, Cyper became the parent company for accounting purposes and the results of operation below are those of Cyper. For the nine months ended Septmeber 30, 2003, the Company had revenues of $2,141, which was a 98% decrease over the nine months ended Septmeber 30, 2003 when the Company reported revenues of $89,919. For the nine months ended September 30, 2003, the Company had reported selling and administrative expenses of $225,107 or 105 times of revenues, versus selling and administrative expenses for the nine months ended September 30, 2002 of $180,565 or 201% of revenues. The Company reorted interest expense of $78,796 for the nine months ended September 30, 2003 verses interest expense fo $40,813 for the nine months ended September 30, 2002. The Company reported a net loss of $500,172 for the quarter ended September 30, 2003, versus a loss of $428,506 for the same period in 2002. Management contributes the decrease in revenue and income to the process of changing the Company's main line of business during 2003. Future Business As a result of the acquisition of Cyper, a 3D Digital Animation Production company located in Seoul, Korea, which provides services to the television, commercial and film industries, the business of Cyper is now the Registrant's main line of business. Cyper continues to develop and produce 3D digital animation for television, short films, feature films, home video, music video and multi-media applications such as video games. Cyper operates in three revenue segments: Independent Contractor for Services: Cyper produces digital animation projects for unrelated third-parties on a fee basis. Typically, the projects are prepared to the specifications of the party hiring Cyper. 2 Proprietary Development: Cyper develops original animation projects based on characters and storylines conceived by Cyper, in which event Cyper owns all proprietary rights in the project. Cyper principal efforts to date in proprietary development have been: o "Biggie and Danmu" - Cyper 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. o "The 5th Global Epoch" - Cyper has prepared a demo reel with the concepts and characters for this project, which is being marketed to distributors. Co-Production Development: Cyper 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, spinoffs, toys and games. Liquidity and Capital Resources The Registrant will need additional capital in order to continue its operations through Cyper in 3D digital animation production as well as to finance the administrative costs including but not limited to legal and accounting fees. Management is seeking additional capital. However, there is no assurance that this needed capital can be raised, or raised on terms acceptable to the Registrant. Forward-Looking Statements This Form 10-QSB includes "forward-looking statements" within th meaning of Section 27A of the Securities Acot of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historicl facts, included or incorporated by reference in this Form 10QSB which address activities, events or develoments which the Company expects or anticipates, will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof), finding suitable merger or acquisition cnadidates, expansion and growth of the Company's business and operations, and other such matters are forward-looking statements. These statements are based on certain assumptions and analysis made by the Company in light of its experience and its perception of historical trends, current conditions and expected future develoments as well as other factors it believes are appropriate inthe circumstances. However, whether actual results or deveopments will conform with the Company's expectations and predictions is subject to a number of risks and uncertainties, general economic market and business conditions; the business opportunities (or lack thereof) that may be presented to and pursued by the Company; changes in laws or regulation; and other facotrs, most of which are beyond the control of the Company. Consequently, all of the forward-looking statements made inthis Form 10-QSB are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The Company assumes no obligations to update any such forward-looking statements. 3 PART II Item 6. Exhibits and reports on Form 8-K (a) The exhibits required to be filed herewith by Item 601 of regulation S-B, as described in the following index of exhibits, are incorporated herein by reference, as follows: Exhibit No. Description ----------- ----------- 3.1 Articles of Incorporation of JRE Inc. (1) 3.2 By-Laws of JRE Inc. (1) 31 Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 --------------------------- (1) Incorporated by reference from the Form 10-SB filed by the Company on January 18, 2003 (b) Reports on Form 8-K The Company filed a report on Form 8-K on September 25, 2003 reporting a change in control of the Company. The Company also filed a report on Form 8-K on October 9, 2003 reporting a change in The Company' certifying accountant and in the Company's fiscal year. SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: November 18, 2003 Cyper Media INC. /S/ DUK JIN JANG ----------------------------- Duk Jin Jang, President 4