8-K/A 1 jre8ka.txt AMENDMENT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): July 10, 2003 JRE, INC. ----------------------------------------------- (EXACT NAME OF REGISTRANT SPECIFIED IN CHARTER) NEW YORK 000-33517 11-3579470 -------------------------------------------------------------------------------- (STATE OF (COMMISSION FILE (IRS EMPLOYER INCORPORATION) NUMBER) IDENTIFICATION NO.) 5650 Yonge Street, 15th Floor Xerox Tower Building Toronto, Ontario Canada M2M 4G3 -------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (416) 226-3375 -------------------------------------------------- (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) ITEM 1. Changes in control of Registrant. a) On July 10, 2003, 10,000,000 shares of restricted common stock of the Registrant were issued to the shareholders of Cyper Entertainment, Inc. ("Cyper") in exchange for all of the issued and outstanding shares of Cyper, pursuant to the provisions of the Acquisition Agreement dated May 23, 2003 by and between JRE, Inc., Cyper and shareholders of Cyper, which Agreement was filed as an exhibit to the Registrant's 8-K filing in June, 2003 . As a result of closing pursuant to the Acquisition Agreement, and the issuance of such shares, Cyper has become a wholly owned subsidiary of the Registrant and former Cyper shareholders now own approximately 67% of Registrant's issued and outstanding shares. Pursuant to the provisions of the acquisition agreement, Jeffrey R. Esposito, Kenneth C. Dollmann and Joel Esposito resigned as officers and directors of Registrant, and Duk Jin Jang was elected as President, CEO and a Director; Michael Chang was elected as Secretary, Treasurer and a Director; and Jong Won Yoon was elected as Vice President and a Director of Registrant. b) There are no arrangements known to the Registrant, including any pledge by any person, of securities of the Registrant, the operation of which may, at a subsequent date, result in a change in control of Registrant. ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits a) Financial Statements of Business Acquired b) Pro Forma Financial Information c) Exhibits Acquisition Agreement dated May 23, 2003 incorporated herein by reference to Form 8-K filed May 30, 2003 CYPER ENTERTAINMENT CO., LTD. FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2002 AND 2001 CONTENTS Independent Auditors' Report 1 Balance Sheets 2 Statements of Shareholders' Deficiency 3 Statements of Operations 4 Statements of Cash Flows 5 Notes to Financial Statements 6 - 11 SF Partnership, LLP Chartered Accountants INDEPENDENT AUDITORS' REPORT To the Stockholders of Cyper Entertainment Co., Ltd. We have audited the accompanying balance sheets of Cyper Entertainment Co., Ltd. (the "Company") as of December 31, 2002 and 2001, and the related statements of shareholders' deficiency, operations, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2002 and 2001, and the results of its operation, 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 financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1(b) to the 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 plan in regard to these matters are also described in Note 1(b). The financial statements do not include any adjustments that might result from the outcome of this uncertainty. SF Partnership, LLP Toronto, Canada CHARTERED ACCOUNTANTS September 21, 2003 The Madison Centre, 4950 Yonge Street, Suite 400, Toronto, Ontario Canada M2M 6K1 Telephone 416 250 1212 Fax 416 250 1225 - 1 - CYPER ENTERTAINMENT CO., LTD. Balance Sheets December 31, 2002 and 2001 2002 2001 ASSETS Current Cash $ 9,244 $ 39,128 Term deposit (note 3) 13,650 7,600 Prepaid and sundry assets 44 24,614 Accounts receivable -- 9,067 -------------------------- 22,938 80,409 Long-term Prepaid Assets 34,893 27,010 Rent Deposits 420 48,640 Equipment (note 4) 706,644 736,755 Organization Cost -- 251 -------------------------- $ 764,895 $ 893,065 ========================== LIABILITIES Current Bank loans (note 5) $ 323,400 $ 292,600 Accounts payable and accrued charges 907,649 630,965 Convertible bond (note 8) 823,200 -- Interest payable (note 8) 130,585 -- Loan payable (note 6) 42,000 38,000 Loans from shareholders and directors (note 7) 501,068 488,588 -------------------------- 2,727,902 1,450,153 Convertible Bond (note 8) -- 744,800 Interest Payable (note 8) -- 56,698 -------------------------- 2,727,902 2,251,651 -------------------------- SHAREHOLDERS' DEFICIENCY Capital Stock (note 9) 546,574 546,574 Paid in Capital 356,471 356,471 Accumulated Other Comprehensive Income (83,092) 81,898 Accumulated Deficit (2,782,960) (2,343,529) -------------------------- (1,963,007) (1,358,586) -------------------------- $ 764,895 $ 893,065 ========================== APPROVED ON BEHALF OF THE BOARD -2- CYPER ENTERTAINMENT CO., LTD. Statements of Shareholders' Deficiency Years Ended December 31, 2002 and 2001

CYPER ENTERTAINMENT CO., LTD. Statements of Operations Years Ended December 31, 2002 and 2001 2002 2001 Sales $ 193,919 $ 174,883 Cost of Sales 313,991 1,199,343 -------------------------- Gross Loss (120,072) (1,024,460) -------------------------- Expenses Selling, general and administrative expenses 355,190 311,114 Interest 124,863 105,825 Miscellaneous 813 797 Loss on disposition of tangible assets -- 258,706 Depreciation 118,493 177,453 -------------------------- 599,359 853,895 -------------------------- Net Loss Before the Undernoted (719,431) (1,878,355) Forgiveness of Related Party's Loan 280,000 382,731 -------------------------- Net Loss $ (439,431) $(1,495,624) ========================== Basic Loss Per Share $ (0.36) $ (1.24) ========================== Fully Diluted Loss Per Share (note 9) $ (0.36) $ (1.24) ========================== Basic Weighted Average Number of Shares 1,235,000 1,209,110 ========================== -4- CYPER ENTERTAINMENT CO., LTD. Statements of Cash Flows Years Ended December 31, 2002 and 2001 2002 2001 Cash Flows from Operating Activities Net loss $ (439,431) $(1,495,624) Depreciation 118,493 177,453 Loss from disposal of equipment -- 258,706 Accrued interest payable 73,887 (87,556) Foreign exchange on translation (164,990) 70,831 Accounts receivable 9,067 (9,067) Prepaid and sundry assets 24,570 71,703 Accounts payable and accrued charges 276,677 408,518 Rent deposits 48,220 173,828 --------------------------- (53,507) (431,208 --------------------------- Cash Flows from Investing Activities Increase in term deposit (6,050) (7,600) Increase in long-term prepaid assets (7,883) (20,737) Net acquisition of equipment (88,124) (50,229) --------------------------- (102,057) (78,566) --------------------------- Cash Flows from Financing Activities Increase in bank loans 30,800 (35,250) Increase in convertible bond 78,400 (29,400) Increase in loan payable 4,000 38,000 Increase in loans from shareholders and directors 12,480 129,824 Issuance of common stock -- 153,639 --------------------------- 125,680 256,813 --------------------------- Net Decrease in Cash (29,884) (252,961) Cash - beginning of year 39,128 292,089 --------------------------- Cash - end of year $ 9,244 $ 39,128 =========================== Interest Paid During the year, the company had cash flows arising from interest paid as follows: Interest paid $ 60,458 $ 46,706 =========================== -5- CYPER ENTERTAINMENT CO., LTD. Notes to Financial Statements December 31, 2002 and 2001 1. Description of Business and Going Concern a) Description of Business Cyper Entertainment Co., Ltd. ("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 years ended December 31, 2002 and 2001, the Company experienced net losses of $439,431 and $1,495,624 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 (see note 11). 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. -6- CYPER ENTERTAINMENT CO., LTD. Notes to Financial Statements December 31, 2002 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: 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 c) Revenue Recognition The Company recognizes revenues when services are performed on a percentage of completion method when collection is reasonably ascertained. d) 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. e) 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. -7- CYPER ENTERTAINMENT CO., LTD. Notes to Financial Statements December 31, 2002 and 2001 2. Summary of Significant Accounting Policies (cont'd) f) 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. g) 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. Term Deposit Term Deposit has been provided as collateral in connection with short term borrowing from Hanna Bank as described in note 5. 4. Equipment Equipment is comprised as follows:

-8- CYPER ENTERTAINMENT CO., LTD. Notes to Financial Statements December 31, 2002 and 2001 5. Bank Loans 2002 2001 Industrial Bank $ 29,400 $ 26,600 Hanna Bank # 1 42,000 38,000 Hanna Bank # 2 252,000 228,000 ---------------------------- $323,400 $292,600 ======== ======== Industrial Bank The loan bears interest at 9.55% per annum, repayable monthly interest only, and matures on February 25, 2003. The loan is secured by a second charge on the Company's assets as described in note 4. The loan is guaranteed by a personal guarantee by the Company's CEO. Hanna Bank #1 The loan bears interest at 8.50% per annum, repayable monthly interest only, and matures on March 8, 2003. The loan is secured by a first charge on the Company's assets as described in note 4. The loan is guaranteed by a personal guarantee by the Company's CEO. Hanna Bank #2 The loan bears interest of 7.85% per annum, repayable monthly interest only, and matures on August 1, 2003. The loan is secured by a first charge on the Company's assets as described in note 4. The loan is guaranteed by a personal guarantee by the Company's CEO. Bank loans from Industrial Bank and Hanna Bank #2 are further guaranteed by the Korean Technology Credit Guarantee Fund up to a total of $240,000 (300,000,000 Won). 6. Loan Payable 2002 2001 Night Storm Media $ 42,000 $ 38,000 =========================== Loan payable from Night Storm Media, an arm's length party, is non-interest bearing and due on demand. The Company declared bankruptcy in 2001 and it is uncertain as to whether the loan has to be repaid. -9- CYPER ENTERTAINMENT CO., LTD. Notes to Financial Statements December 31, 2002 and 2001 7. Loans from Shareholders and Directors The loans from the shareholders and directors are non-interest bearing and due on demand. 8. 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. 9. Capital Stock Authorized 50,000,000 common shares, par value $0.45 (500 Won) 2002 2001 Issued 1,235,000 common shares $ 546,574 $ 546,574 =========================== The convertible bond as described in note 8, has not been included in the calculation of the diluted earnings per share as the inclusion will be anti-dilutive. 10. Lease Commitments The Company is committed to lease obligations on its offices space to 2004. Future minimum annual payments exclusive of taxes, insurance and maintenance costs under these leases are as follows: 2003 $ 56,056 2004 5,096 -------- $ 61,152 -------- 11. 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. -10- The Company's income tax rates in 2002 are 16.5% for the first $80,000 (100,000,000 Won) taxable income and 29.7% of the excess. The Company has no future income tax liabilities. The Company's only future 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. Future Income Tax Assets 2002 2001 Non-capital losses carried forward $ 336,000 $ 272,000 Valuation allowance (336,000) (272,000) -------------------------- Net future tax assets $ -- $ -- ========================== The Company has non-capital tax losses of approximately $1,165,000 available to offset future taxable income. The tax losses expire as follows: 2003 $ 525,000 2004 425,000 2005 215,000 ------------ $ 1,165,000 ------------ 12. Subsequent Events On July 10, 2003, in accordance with a Share Exchange Agreement dated May 23, 2003, the Company entered into a reverse-takeover transaction with JRE Inc. ("JRE"), a public New York shell corporation, whereby all the issued and outstanding shares of the Company were exchanged for 10,000,000 shares of restricted stock of JRE. As a result of the transaction, the shareholders of Cyper Entertainment Co., Ltd. will control 67% of JRE. While JRE is the legal parent, the Company, as a result of the reverse-takeover, became the parent company for accounting purposes. -11- CYPER ENTERTAINMENT CO., LTD. PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 2003 UNAUDITED CONTENTS Pro-Forma Consolidated Balance Sheet 12 Pro-Forma Consolidated Statement of Deficit 13 Pro-Forma Consolidated Statement of Operations 14 Notes to Pro-Forma Consolidated Financial Statements 15 - 16

CYPER ENTERTAINMENT CO., LTD. Notes to Pro-Forma Consolidated Financial Statements June 30, 2003 1. Basis of Presentation These unaudited pro-forma consolidated financial statements have been prepared to give effect to the following: a) On July 10, 2003, in accordance with a Share Exchange Agreement dated May 23, 2003, the Company entered into a reverse-takeover transaction with JRE Inc., a public New York shell corporation, whereby all the issued and outstanding shares of the Company were exchanged for 10,000,000 shares of restricted stock of JRE Inc.. As a result of the transaction, the shareholders of Cyper Entertainment Co., Ltd. will control 67% of JRE Inc.. While JRE Inc. is the legal parent, the Company, as a result of the reverse-takeover, became the parent company for accounting purposes. b) Cyper Entertainment Co., Ltd. maintains its books and records in Korean won. Asset and liability accounts are translated using closing exchange rates in effect at the balance sheet date and equity accounts are translated at their historical value. Income and expense accounts are translated using an average exchange rate prevailing during each reporting period. No representation is made that the Korean won could have been, or could be, converted into United States dollars at the rates on the respective dates and or at any other certain rates. Adjustments resulting from the translation are included in the accumulated other comprehensive income (loss) in stockholders' equity. c) JRE Inc. is in the process of changing its name to Cyper Media Inc., and its year end to December 31. The pro-forma consolidated financial statements are based on the balance sheets of the following: a) JRE Inc. as at July 10, 2003 (unaudited) and October 31, 2002 (audited). b) Cyper Entertainment Co., Ltd. as at June 30, 2003 (unaudited) and December 31, 2002 (audited). The pro-forma consolidated financial statements include the statement of earnings for the following: a) JRE Inc. for the eight months ended July 10, 2003 (unaudited) and the year ended October 31, 2002 (audited). b) Cyper Entertainment Co., Ltd. for the six months ended June 30, 2003 (unaudited) and for the year ended December 31, 2002 (audited). -15- CYPER ENTERTAINMENT CO., LTD. Notes to Pro-Forma Consolidated Financial Statements June 30, 2003 1. Basis of Presentation (cont'd) The pro-forma consolidated balance sheet as at June 30, 2003 and December 31, 2002 gives effect to the transactions as at July 10, 2003 and the pro-forma statement of earnings for the six months ended June 30, 2003 and year ended December 31, 2002 gives effect to the transactions as if they had taken place at the beginning of each period. The pro-forma consolidated financial statements are not necessarily indicative of the actual results that would have occurred had the proposed transactions occurred on the dates indicated and not necessarily indicative of future earnings or financial position. 2. Pro-Forma Adjustments To record the consolidation of JRE Inc. with Cyper Entertainment Co., Ltd. including: a) The merger of JRE Inc. and Cyper Entertainment Co, Ltd. was accounted for as the recapitalization of Cyper Entertainment Co, Ltd., with the net assets of Cyper Entertainment Co, Ltd. brought forward at their historical basis. b) To eliminate the pre-acquisition shareholders' equity of JRE Inc. at July 10, 2003. -16- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. JRE, Inc. By: /s/ Duk Jin Jang ------------------------------------ Duk Jin Jang, President Dated: September 26, 2003

JRE INC 8-K/A