SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 33-83418-LA
CYBERIA HOLDINGS, INC.
(Name of Small Business Issuer in Its Charter)
Delaware 93-1138967
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification
organization) Number)
1547 14th Street
Santa Monica, California 90404
(Address of principal (Zip Code)
executive offices)
Issuer's telephone number, including area code: (310) 260-3163
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ] N/A
State Issuer's revenues for its most recent fiscal year: $1,811,409.
As of March 15, 1998, the aggregate market value of the Common Stock held
by non-affiliates of the Issuer (450,000 shares) was approximately $75,938
(based upon the average bid and asked prices of such stock on the most
recently available date prior to March 15, 1998). The number of shares
outstanding of the Common Stock ($.0001 par value) of the Issuer as of the
close of business on March 15, 1998 was 30,000,000.
Documents Incorporated by Reference: None
<PAGE>
PART I
Item 1. Description of Business.
Introduction
Cyberia Holdings, Inc. (the "Company") was organized under the laws of the
State of Delaware on February 24, 1994 under the name NW Venture Corp. In
October 1995, the Company completed an initial public offering (the
"Offering") of 500,000 shares of its Common Stock at a price of $.10 per
share pursuant to a Registration Statement declared effective by the
Securities and Exchange Commission on June 30, 1995 as a "blank check"
offering subject to Rule 419 of Regulation C under the Securities Act of
1933. The Company had been organized for the purpose of creating a
corporate vehicle to seek, investigate and, if such investigation warrants,
acquire an interest in business opportunities presented to it by persons or
firms who or which desire to employ the Company's funding in their business
or to seek the perceived advantages of a publicly-held corporation.
In May 1996, the Company executed an agreement with Cyberia, Inc., a
California corporation ("Cyberia"), and its shareholders to acquire all of
the issued and outstanding shares of capital stock of Cyberia in exchange
for 25,500,000 shares of Common Stock of the Company (the "Cyberia
Acquisition"). Cyberia is primarily involved in the business of creating
original music for television and radio commercials. As of December 26,
1996, and following successful completion of a reconfirmation offering
required pursuant to Rule 419 (the "Reconfirmation Offering"), the Company
consummated the Cyberia Acquisition whereby Cyberia became a wholly-owned
subsidiary of the Company.
On January 13, 1997, the Company changed its corporate name to Cyberia
Holdings, Inc. to reflect the change of direction and new business of the
Company which resulted from the aforesaid transaction with Cyberia.
Unless the context otherwise requires, all references herein to the
"Company" refer to Cyberia Holdings, Inc. and its consolidated
subsidiaries.
This report contains certain forward-looking statements and information
relating to the Company that are based on the beliefs and assumptions made
by the Company's management as well as information currently available to
the management. When used in this document, the words "anticipate",
"believe", "estimate", and "expect" and similar expressions, are intended
to identify forward-looking statements. Such statements reflect the
current views of the Company with respect to future events and are subject
to certain risks, uncertainties and assumptions. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those described
herein as anticipated, believed, estimated or expected. The Company does
not intend to update these forward-looking statements.
Background and History of Cyberia
Cyberia was incorporated in the State of California in February 1994 by
Grammy Award winning producer Jay Rifkin and Academy Award winning composer
Hans Zimmer to create original music for television and radio commercials.
Cyberia has retained the services of various composers to create original
music for use by the advertising industry to promote products and
services. Such original music is produced, recorded and mixed at the
recording studio of Media Ventures, which is operated by Jay Rifkin and
Hans Zimmer located in Santa Monica, California. To date, the music
created and produced by Cyberia has played a role in the production in
television advertising for various products and services.
During 1996, Cyberia entered into an agreement to form Media Revolution,
LLC ("Media Revolution"), which is a company created to design Internet web
sites, computer games and software. Cyberia owns 80% of this entity and
has control of the day to day operations. The remaining 20% is owned by a
non-related party.
Overview of Business and Production Process
Cyberia
The services of Cyberia are retained by either a commercial production
company or advertising agency. In connection therewith, Cyberia has
retained the services of sales representatives who offer Cyberia's services
to potential clients in various territories. Such territories to date
include the United States, Japan, Germany, Netherlands and France. The
sales representative will explain the services of Cyberia by showing the
potential client a demonstration video reel, featuring commercials that
Cyberia has scored, that are representative of the quality of music
composed and the production standards employed by Cyberia. If the agency
is interested in the work of Cyberia the sales representative will arrange
a meeting with the Executive Music Producer and the Agency Producer to
discuss generally the musical style required. The Executive Producer will
negotiate the production budget and check schedules of the desired
composer.
A meeting will then be arranged with the Executive Music Producer, the
composer and the advertising agency creative team. A discussion will
usually entail the commercial's visual style, meaning and target
demographies so that Cyberia has a clear understanding of the musical
direction. After the commercial is shot and edited, the composer will
receive a copy of the commercial on video tape. The composer will have a
room setup with his composing equipment, keyboards, guitars, samplers and
effects gear. The composer will then write a piece of music based upon the
input of the client and a meeting will be held to play the new music for
the client. After the music is finally approved by the agency, it may also
need the approval of the agency's client. Upon receipt of the final
approval, the music is recorded to digital audio tape, musicians are hired
to play and the music is mixed by an audio engineer. The final music is
delivered by the agency producer on DAT (high quality digital audio tape).
Media Revolution
Media Revolution plans, creates maintains and hosts web sites for major
entertainment clients and others. Media Revolution has a sales and
marketing manager as a member of the full-time staff who is responsible for
finding new business through public relations and promotion of the company.
Once there is an expressed interest in Media Revolution's services, a
meeting is set up to delineate the scope of the project and formulate
creative ideas. A proposal is then submitted by the sales and marketing
manager to the interested party and if approved, production begins. A
production team is assembled to provide technical and creative services
throughout the production period. Delivery is assumed to take place once
the site has been posted online.
Media Revolution has recently initiated efforts to generate recurring
revenues from Web site maintenance and Web site hosting fees. The amount
of revenue generated to date from such activities has been 22% of total
gross revenues of Media Revolution.
Revenues and Clients
The Company's clients are primarily domestic and foreign advertising
agencies and commercial production companies. The Company's services are
marketed primarily through its sales representatives who offer the
Company's services to such advertising agencies and commercial production
companies.
For the years ended December 31, 1997 and 1996, the Company had net sales
of approximately $1,820,000 and $1,030,000, respectively. During 1997 and
1996, the Company provided its services for approximately 76 and 36
projects, respectively. During the year ended December 31, 1997, the
Company did business with two customers Leo Burnett Agency (an advertising
agency) and Twentieth Century Fox (a production company) whose sales
comprised approximately 29% and 17% respectively, in net sales.
Competition
The markets for the Company's services are intensively competitive and
characterized by significant price competition. The Company has a large
number of competitors which range from large national and international
concerns to small owner/operator shops. In addition, there are numerous
other entities which compete in the low end and mid-price range in the
market. Many of the competitors have the advantage of larger installed
customer bases then the Company. Many potential customers in the Company's
target markets are often reluctant to commit significant resources to
replace their current suppliers. In addition, Cyberia competes with
licensors of pre-recorded music who are able to license their products at a
lower price than creating original music. As a result of the above
factors, there can be no assurance that the Company will compete
successfully in the future.
The Company believes that its ability to compete depends on elements both
within and outside its control including the quality of the creative team,
success and timing of marketing and advertising efforts, the performance of
competitors and price and availability. There can be no assurance that the
Company will be able to compete successfully with respect to these factors.
In addition, there can be no assurance that the Company will successfully
differentiate its services from the services of its competitors or that the
marketplace will consider the Company's services to be superior to the
competing services. Moreover, the Company's competitors may introduce
additional services that are competitive with those of the Company, and
there can be no assurance that the Company's services can compete
effectively with such new services.
Employees
Cyberia currently employs six persons, four of whom are the officers of the
Company, one who is an executive producer, and one who is an administrative
assistant. In addition, the Company has obtained the services of outside
sales representatives to market the Company's services, and composers to
create original music for the Company's projects.
Media Revolution employs ten persons, two of whom are the members of the
company and active managers in the company. There is a full time in house
sales and marketing manager, a creative director, a senior programmer, an
art director and assistant art director, director of production,
production coordinator and three staff designers. In 1998, it is expected
that more employees will be needed in order to accommodate the anticipated
new project work load.
Item 2. Description of Property.
The Company maintains its executive offices pursuant to a written
agreement, in office space provided by a limited liability company, which
is owned by Jay Rifkin and Hans Zimmer. Such offices are located at 1542
15{th} Street, Santa Monica, California 90404, and are leased from a third
party. Rent expense paid by Cyberia was $30,700 for 1997 and $38,948 for
1996. Media Revolution has entered into a lease agreement also with a
related party for office space at 1749 14th Street, Santa Monica,
California 90404. Rent expense was $37,859 and $9,440 for the years 1997
and 1996 respectively.
Item 3. Legal Proceedings.
There are no material pending legal proceedings to which the Company is a
party or to which any of its property is subject.
Item 4.Submission of Matters to a Vote of Security-Holders.
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders.
PART II
Item 5. Market for Common Equity
and Related Stockholder Matters.
(a) Market Information.
Pursuant to Rule 419, the securities issued to subscribers in the Offering
remained in escrow and were not released until the completion of the
Reconfirmation Offering and Cyberia Acquisition which was consummated as of
December 26, 1996. Accordingly, until such time, there could be no
trading in the Common Stock of the Company. As of August 1997, the
Company's Common Stock is traded in the over-the-counter market and is
listed on the OTC Bulletin Board under the symbol "CBHD". To date, there
has been only sporadic trading of the Company's Common Stock. The high
and low bid quotations for the Company's Common Stock tabulated below
represent prices between dealers and do not include retail markups,
markdowns, commissions or other adjustments and may not represent actual
transactions.
Bid Prices
Period High Low
Year Ended December 31, 1997:
Third Quarter $.18 $.125
Fourth Quarter $.18 $.125
(b) Holders.
As of March 15, 1998 there were 56 record holders of the Company's Common
Stock.
(c) Dividends.
The Company has never declared any cash dividends on its Common Stock and
does not anticipate declaring cash dividends in the foreseeable future.
Item 6. Management's Discussion and Analysis
or Plan of Operation.
The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto and is qualified in its
entirety by the foregoing.
Background
The Company was organized under the laws of the State of Delaware on
February 24, 1994 under the name NW Venture Corp. In October 1995, the
Company completed an initial public offering (the "Offering") of 500,000
shares of its Common Stock at a price of $.10 per share pursuant to a
Registration Statement declared effective by the Securities and Exchange
Commission on June 30, 1995 as a "blank check" offering subject to Rule
419 of Regulation C under the Securities Act of 1933. The Company had been
organized for the purpose of creating a corporate vehicle to seek,
investigate and, if such investigation warrants, acquire an interest in
business opportunities presented to it by persons or firms who or which
desire to employ the Company's funding in their business or to seek the
perceived advantages of a publicly-held corporation.
In May 1996, the Company executed an agreement with Cyberia, Inc., a
California corporation ("Cyberia"), and its shareholders to acquire all of
the issued and outstanding shares of capital stock of Cyberia in exchange
for 25,500,000 shares of Common Stock of the Company (the "Cyberia
Acquisition"). Cyberia is primarily involved in the business of creating
original music for television and radio commercials. As of December 26,
1996, and following successful completion of a reconfirmation offering
required pursuant to Rule 419 (the "Reconfirmation Offering"), the Company
consummated the Cyberia Acquisition whereby Cyberia became a wholly-owned
subsidiary of the Company.
On January 13, 1997, the Company changed its corporate name to Cyberia
Holdings, Inc. to reflect the change of direction and new business of the
Company which resulted from the aforesaid transaction with Cyberia.
Results of Operations
Net sales for the year ended December 31, 1997 increased to $1,811,409 as
compared to net sales for the year ended December 31, 1996 of $1,029,866,
an increase of $781,543. This increase is primarily due to the Company's
increased visibility and recognition in the commercial music production
industry. The Company experienced a strong 4th Quarter accounting for 45%
of the net sales for the year ended December 31, 1997. This increase in
net sales is in part due to the implementation of a marketing campaign and
hiring of new sales representatives, coupled with the increased sales of
its subsidiary.
The Company reported operating income of $238,765 for the year ended
December 31, 1997 as compared to a net operating income of $84,564 for the
year ended December 31, 1996, an increase of $154,201. This increase
resulted primarily from a reduction in production costs as a percentage of
sales in 1997 to 29% compared to 39% in 1996. This decrease is due to both
Cyberia and Media Revolution being able to command higher fees for its
services and at the same time keep the production costs primarily
consistent with the previous fiscal year.
General and administrative expenses increased to $1,041,195 for the year
ended December 31, 1997 compared to $543,951 for the year ended December
31,1996, an increase of $497,244. The increase is due to additional
facilities and employees, and the implementation of a marketing campaign to
achieve a greater public presence for the Company.
Cyberia's effective tax rate was 35% and 1.0% for the years ended December
31,1997 and 1996, respectively. On January 1,1996, Cyberia revoked its S
Corporation status and elected to be taxed as a C corporation. On that
date Cyberia recorded a tax benefit from the establishment of a net
deferred tax asset resulting from its change in tax status.
Liquidity and Capital Resources
At December 31, 1997, the Company had working capital of $199,759. The
ratio of current assets to current liabilities was approximately 1.62 to 1
at December 31, 1997. At December 31, 1997, the Company had stockholders'
equity of $227,347.
To date, the Company has funded its activities principally from cash flows
generated from operations. It is anticipated that the Company's continuing
cash flows from operations will be sufficient to meet its cash and working
capital requirements at least through 1998.
Item 7. Financial Statements.
See the Consolidated Financial Statements annexed to this report.
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act.
Set forth below are the present directors and executive officers of the
Company. Note that there are no other persons who have been nominated or
chosen to become directors nor are there any other persons who have been
chosen to become executive officers. There are no arrangements or
understandings between any of the directors, officers and other persons
pursuant to which such person was selected as a director or an officer.
Directors are elected to serve until the next annual meeting of
stockholders and until their successors have been elected and have
qualified. Officers serve at the discretion of the Board of Directors.
Present Position Has Served As
Name Age and Offices Director Since
Jay Rifkin 42 President, 1997
Chief Executive
Officer, Treasurer
and Director
Hans Zimmer 40 Vice President, 1977
Secretary 1997
and Director
Mark S. Levy 31 Executive Vice President -
and General Manager
Elisa M. Perlman 30 Chief Financial Officer -
Martin Rifkin 36 Director 1994
JAY RIFKIN has been President, Chief Executive Officer and a Director of
Cyberia since its inception in February 1994, and has been President, Chief
Executive Officer, Treasurer and a Director of the Company since January
1997 following the acquisition of Cyberia. Since 1989, Mr. Rifkin has been
President of Mojo Music, Inc. which is a general partner of Media Ventures,
which operates a recording studio in Santa Monica, California. Mr. Rifkin
is an award winning music producer and engineer having received a Grammy
Award as Producer for Best Children's Album and American Music Awards for
Producer of Best Album and Best Soundtrack. Jay Rifkin is the brother of
Martin Rifkin.
HANS ZIMMER has been Vice President, Secretary and a Director of Cyberia
since its inception in February 1994 and has been Vice President, Secretary
and a Director of the Company since January 1997 following the acquisition
of Cyberia. Mr. Zimmer has been President of Remote Control Productions,
Inc., which is a general partner of Media Ventures since 1989. Mr. Zimmer
is an award winning composer having received an Academy Award and Golden
Globe for Best Original Score for "The Lion King". He also received a
Grammy Award as Producer of Best Children's Album and Best Instrumental
Arrangement with Accompanying Vocalist for "The Lion King". Mr. Zimmer
also received Academy Award Nominations for Best Original Score for the
films "Rainman" and "As Good As it Gets". He has composed the scores for
numerous other major motion pictures including but not limited to "Black
Rain", "Driving Miss Daisy", "Bird on a Wire", "Days of Thunder", "Pacific
Heights", "Thelma & Louise", "Crimson Tide" and "Nine Months".
MARK S. LEVY has been Executive Vice President and General Manager of
Cyberia since its inception in February 1994 and has been Executive Vice
President and General Manager of the Company since January 1997 following
the acquisition of Cyberia. Mr. Levy has also served as General Manager of
Media Ventures since June 1993. Previously thereto, and from 1992 to 1993,
he served as Production Auditor for Propaganda Films in Los Angeles. Mr.
Levy also co-founded an independent record company and served as a
Financial Analyst at Geffen Records from 1991 to 1992.
ELISA M. PERLMAN has been Financial Manager of Cyberia since its inception
in February 1994 and has been Chief Financial Officer of the Company since
January 1997 following the acquisition of Cyberia. Ms. Perlman has also
served as Financial Manager of Media Ventures since June 1993. Previously,
from 1991 to 1993, she worked as the accountant for the business management
firm Savitsky, Satin and Geibelson, who at the time were the business
managers for Hans Zimmer, Jay Rifkin and Media Ventures. She received her
C.P.A. in 1991, while working as a senior in the tax and audit departments
at Kenneth Leventhal and Company.
MARTIN RIFKIN has been a Director of the Company since its inception in
February 1994 and was President, Secretary and Treasurer of the Company
from its inception through December 1996. Since December 1985, Mr. Rifkin
has been a Director of Nutrition Now, Inc., a company which manufactures
and markets nutritional supplements and, since November 1987, he has been
its Secretary and Treasurer and since February 1992, its President. Also,
from August 1988 to February 1992, he was its Vice President. In addition,
Mr. Rifkin has been, since April 1985, a Director of Nova International
Films, Inc., a company which principally has been engaged in the business
of financing and producing motion pictures, and from April 1985 to October
1994, he was its Vice President, and since October 1994, he has been its
President and Treasurer. Such company is at the present time relatively
inactive. In addition, Mr. Rifkin has been Treasurer and Director of Profit
Merchandising Corp. since September 1983 and Vice President since June
1985. Such company is engaged in the distribution of weatherstripping
products. Martin Rifkin is the brother of Jay Rifkin.
Item 10. EXECUTIVE COMPENSATION.
The Company has no employment agreements with any of its executive
officers. The following summary compensation table sets forth information
concerning the annual and long-term compensation for services in all
capacities to the Company for the years ended December 31, 1997, 1996 and
1995, of those persons who were, at December 31, 1997 (i) the chief
executive officer and (ii) the other most highly compensated executive
officers of the Company, whose annual base salary and bonus compensation
was in excess of $100,000 (the named executive officers):
Summary Compensation Table
Annual Long-Term
Compensation Compensation
Restricted Shares
Name and Principal Fiscal Stock Underlying
Position Year Salary Bonus Awards Options
Jay Rifkin, 1997 $0 $0 0 0
President and 1996 $30,000 $0 0 0
Chief Executive 1995 $85,000 $0 0 0
Officer
Hans Zimmer, 1997 $0 $0 0 0
Vice President and 1996 $30,000 $0 0 0
Secretary 1995 $65,000 $0 0 0
Mark S. Levy, 1997 $34,167 $5,000 0 0
Executive Vice 1996 $61,061 $0 0 0
President 1995 $15,000 $0 0 0
Since inception, no director has received any cash compensation for his
services as such. In the past, directors have been and will continue to be
reimbursed for reasonable expenses incurred on behalf of the Company.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 15, 1998, by (i) each
person who is known by the Company to own beneficially more than 5% of the
Company's outstanding Common Stock; (ii) each of the Company's directors;
and (iii) directors and officers of the Company as a group:
Number Percent
of Shares of
Name and Address Owned Class
Jay Rifkin 12,000,000 40.0%
1547 14th Street
Santa Monica, CA 90404
Hans Zimmer 12,000,000 40.0%
1547 14th Street
Santa Monica, CA 90404
Mark S. Levy 1,500,000 5.0%
1547 14th Street
Santa Monica, CA 90404
Martin Rifkin 4,050,000 13.5%
6350 N.E. Campus Drive
Vancouver, WA 98661
All Officers and Directors 29,550,000 98.5%
as a Group (5 Persons)
Item 12. Certain Relationships and Related Transactions.
The Company was incorporated on February 24, 1994, under the laws of the
State of Delaware, with an authorized capitalization of 50,000,000 shares
of Common Stock, $.0001 par value each. In April 1994, the Company
issued 4,000,000 shares to Martin Rifkin for cash consideration of $1,000.
In April 1994, the Company borrowed $4,000 from Martin Rifkin in order to
pay certain operating expenses of the Company and expenses of the Offering.
Such loans were due on demand and bear interest at 7% per annum. Following
completion of the Reconfirmation Offering and Cyberia Acquisition, the
Company repaid these loans from the proceeds of the Offering.
In May 1996, the Company executed an Agreement and Plan of Tax Free
Reorganization with Cyberia and the shareholders of Cyberia pursuant to
which upon successful completion of the Reconfirmation Offering the Company
would acquire all of the issued and outstanding shares of capital stock of
Cyberia in exchange for 25,500,000 shares of Common Stock of the Company.
As of December 26, 1996, and following successful completion of the
Reconfirmation Offering, the Company consummated the Cyberia Acquisition
whereby Cyberia became a wholly-owned subsidiary of the Company.
The Company paid approximately $56,947 and $83,000 to Media Ventures, a
company operated by Jay Rifkin and Hans Zimmer, for sound mixing and
recording services for the years ended December 31, 1997 and 1996,
respectively. The Company also paid Media Ventures $74,290 and $39,000 for
related overhead costs for the period ending December 31, 1997 and 1996
respectively. As of December 31, 1997, $85,970 is due to Media Ventures
for these costs.
During the year ended December 31, 1997, the line of credit for the Company
and all the Company's affiliates was transferred to an affiliate, Media
Ventures. All affiliates can draw down on the line of credit, and the line
of credit is collateralized by all assets of the Company and its
affiliates. The line of credit bears interest at prime (8.5% at December
31, 1997). At December 31, 1997, $80,000 of the amount due to Media
Ventures was for advances on the line of credit.
See Part I, Item 2 elsewhere herein for information on the facilities
leased by the Company. Rent expense paid to related parties was $68,559
and $48,388 for the years ended December 31, 1997 and 1996, respectively.
Item 13. Exhibits, List and Reports on Form 8-K.
(a) Exhibits.
3.1 Registrant's certificate of incorporation(1)
3.2 Registrant's certificate of amendment to its certificate of
incorporation (filed January 13, 1997)(3)
3.3 Registrant's by-laws(1)
4.1 Specimen certificate for common stock(1)
10.1 Agreement and Plan of Tax Free Reorganization dated May 22,
1996 by and among NW Venture Corp., Cyberia, Inc. ("Cyberia")
and the shareholders of Cyberia(2)
22.0 Cyberia Holdings, Inc., parent and subsidiaries(3)
27.1 Financial Data Schedule
___________________
(1) Incorporated herein by reference from the Company's Registration
Statement on Form SB-2 declared effective as of June 30, 1995.
(2) Incorporated herein by reference from the Company's Post-Effective
Amendment to the Registration Statement on Form SB-2 declared
effective as of December 24, 1996.
(3) Incorporated herein by reference from the Company's Annual Report
on Form 10-KSB for the fiscal year ended December 31, 1996.
(b) Reports on Form 8-K.
Listed below are reports on Form 8-K filed during the last quarter of the
period covered by this report:
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
CYBERIA HOLDINGS, INC.
(Registrant)
By:/s/Jay Rifkin
Jay Rifkin, President
Dated: April 14, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant, and in the capacities and on the dates indicated:
Signature Title Date
/s/Jay Rifkin President, Chief 4/14/98
Jay Rifkin Executive Officer,
Treasurer, Director
(Principal Executive
Officer)
/s/Hans Zimmer Vice President, 4/14/98
Hans Zimmer Secretary, Director
/s/Martin Rifkin Director 4/14/98
Martin Rifkin
/s/Elisa M. Perlman Chief Financial Officer 4/14/98
Elisa M. Perlman (Principal Financial
Officer and Principal
Accounting Officer)
<PAGE>
CYBERIA HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996
<PAGE>
CYBERIA HOLDINGS, INC. AND SUBSIDIARIES
CONTENTS
As of December 31, 1997
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS
Consolidated Balance Sheet 2
Consolidated Statements of Operations 3
Consolidated Statements of Stockholders' Equity 4
Consolidated Statements of Cash Flows 5 - 6
Notes to Consolidated Financial Statements 7 - 11
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Cyberia Holdings, Inc.
We have audited the accompanying consolidated balance sheet of Cyberia
Holdings, Inc. and subsidiaries as of December 31, 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for each of the two years in the period ended December 31, 1997. 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 generally accepted auditing
standards. 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 consolidated financial position of Cyberia
Holdings, Inc. and subsidiaries as of December 31, 1997, and the
consolidated results of their operations and their consolidated cash flows
for each of the two years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
February 24, 1998
<PAGE>
CYBERIA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
As of December 31, 1997
ASSETS
Current assets
Cash $ 211,394
Accounts receivable,
net of allowance for
doubtful accounts of $0 258,848
Work in process 25,050
Note receivable 18,829
Prepaid expenses and other assets 2,692
Advances to employees 7,796
Total current assets 524,609
Furniture and equipment, net (Note 2) 86,644
Other assets 13,144
Total assets $624,397
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 62,187
Income taxes payable 12,684
Due to affiliates (Note 4) 88,456
Accrued payroll and payroll taxes 65,487
Deferred income 80,000
Deferred income taxes 16,036
Total current liabilities 324,850
Deferred income taxes 15,358
Total liabilities 340,208
Commitments and contingencies (Note 3)
Minority interest 56,842
Stockholders' equity
Common stock, $.0001 par value
50,000,000 shares authorized
30,000,000 shares issued
and outstanding 3,000
Additional paid-in capital 9,269
Retained earnings 215,078
Total stockholders' equity 227,347
Total liabilities and
stockholders' equity $624,397
The accompanying notes are an integral part of these financial statements.
<PAGE>
CYBERIA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31,
1997 1996
Net sales (Note 5) $1,811,409 $1,029,866
Expenses
Cost of sales 531,449 401,351
General and administrative
expenses 1,041,195 543,951
Total expenses 1,572,644 945,302
Income from operations 238,765 84,564
Other income (expense)
Interest income 759 -
Other income 8,615 4,476
Interest expense (11,326) (1,216)
Minority interest (40,781) -
Total other income (expense) (42,733) 3,260
Income before taxes 196,032 87,824
Income taxes 67,978 800
Net income $128,054 $87,024
Basic income per common share $ 0.00 $ 0.00
Diluted income per common share $ 0.00 $ 0.00
Weighted-average common shares
outstanding 30,000,000 25,536,986
The accompanying notes are an integral part of these financial statements.
<PAGE>
CYBERIA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31,
Additional
Common Stock Paid-in Retained
Shares Amount Capital Earnings Total
Balance,
December 31, 1995 25,500,000 $1,000 $ - $(30,975) (29,975)
Effect of change
in tax filing
status (30,975) 30,975 -
Shares issued
for acquisition
of NW
Ventures Corp. 4,500,000 2,000 40,244 42,244
Net income 87,024 87,024
Balance,
December 31, 1996 30,000,000 3,000 9,269 87,024 99,293
Net income 128,054 128,054
Balance,
December 31, 1997 30,000,000 $3,000 $9,269 $215,078 $227,347
The accompanying notes are an integral part of these financial statements.
<PAGE>
CYBERIA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
1997 1996
Cash flows from operating activities
Net income $128,054 $ 87,024
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities
Depreciation 16,566 5,016
Minority interest 40,781 -
Deferred income taxes 31,394 -
(Increase) decrease in
Accounts receivable (137,098) (57,228)
Work in progress (25,050) 19,007
Prepaid expenses and other assets 5,804 (8,163)
Other assets (3,149) (4,720)
Increase (decrease) in
Accounts payable and accrued expenses (28,026) 56,726
Income taxes payable 12,684 -
Due to affiliates (21,245) 11,326
Accrued payroll and payroll taxes 36,945 28,542
Deferred income 80,000 (148,157)
Net cash provided by (used in)
operating activities 137,660 (10,627)
Cash flows from investing activities
Note receivable (18,829) -
Acquisition of NW Ventures Corp. - 46,928
Advances to employees 11,518 (19,314)
Purchase of furniture and equipment (44,369) (45,177)
Net cash used in investing activities (51,680) (17,563)
Cash flows from financing activities
Net proceeds from (payments on)
from line of credit (70,000) 70,000
Loan from affiliate 80,000 -
Payments to minority interest (2,416) -
Payments on note to stockholder (4,000) -
Net cash provided by financing
activities 3,584 70,000
Net increase in cash 89,564 41,810
Cash, beginning of period 121,830 80,020
Cash, end of period $211,394 $121,830
The accompanying notes are an integral part of these financial statements.
<PAGE>
CYBERIA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
For the Years Ended December 31,
1997 1996
Supplemental disclosures
of cash flow information
Interest paid $11,326 $1,216
Taxes paid $23,900 $ 800
Supplemental schedule of non-cash investing and financing activities
The Company issued 4,500,000 shares of common stock for the acquisition of
NW Ventures Corp. during the year ended December 31, 1996.
The accompanying notes are an integral part of these financial statements.
<PAGE>
CYBERIA HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Line of Business
On December 28, 1996, NW Venture Corp. ("NW Venture") acquired all of the
outstanding stock of Cyberia, Inc. For accounting purposes, the
acquisition has been treated as a recapitalization of Cyberia, Inc. with
Cyberia, Inc. as the acquirer (reverse acquisition). NW Venture
subsequently changed its name to Cyberia Holdings, Inc. (the "Company").
The Company, through its wholly-owned subsidiary, Cyberia, Inc., composes
background music for television and radio commercials which are aired
throughout the world. The Company also designs Internet web sites,
computer games, and software. The Company sells its services to customers
in the United States.
In August 1996, Cyberia, Inc. entered into a joint venture to form Media
Revolution, LLC. Cyberia, Inc. owns 80% of this entity and has control of
the day-to-day operations. The remaining 20% is owned by an unrelated
stockholder. Media Revolution, LLC has been consolidated with the Company
in the accompanying consolidated financial statements with the minority
interest reflected as a separate component of the consolidated balance
sheet.
Principles of Consolidation
The consolidated financial statements include the accounts of Cyberia
Holdings, Inc. and its subsidiaries. All material inter-company
transactions and balances have been eliminated.
Cash Equivalents
For purposes of the statements of cash flows, the Company considers all
highly-liquid investments purchased with original maturities of three
months or less to be cash equivalents. At December 31, 1997, cash and cash
equivalents consisted of cash in banks and money market funds.
Furniture and Equipment
Furniture and equipment are stated at cost. The Company provides for
depreciation and amortization using accelerated and straight-line methods
over the estimated useful lives as follows:
Furniture and fixtures 7 years
Computer equipment 3 years
Office equipment 7 years
Leasehold improvements 5 years
Expenditures for maintenance and repairs are charged to operations as
incurred while renewals and betterments are capitalized. Gains or losses
on the sale of furniture and equipment are reflected in the statements of
operations.
Net Income Per Share
For the year ended December 31, 1997, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share."
Basic earnings per share is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding.
Diluted earnings per share is computed similar to basic earnings per share
except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were
dilutive. Earnings per share for 1996 has been restated to conform with
SFAS No. 128.
Fair Value of Financial Instruments
The Company measures its financial assets and liabilities in accordance
with generally accepted accounting principles. For certain of the
Company's financial instruments, including cash, accounts receivable, and
accounts payable and accrued expenses, the carrying amounts approximate
fair value due to their short maturities.
Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements,
as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Work-in-Process
Work-in-process consists of costs incurred on uncompleted contracts.
Deposits and progress billings are recorded as deferred revenue.
Revenue Recognition
Revenues from contracting services are recognized upon completion of the
contract.
Income Taxes
The Company accounts for income taxes under the liability method required
by SFAS No. 109, "Accounting for Income Taxes," which requires the
recognition of deferred tax liabilities and assets for the expected future
tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred income taxes are
recognized for the tax consequences in future years of differences between
the tax bases of assets and liabilities and their financial reporting
amounts at each period end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to be
realized. The provision for income taxes represents the tax payable for the
period and the change during the period in deferred tax assets and
liabilities. The Company has elected to use the cash method for reporting
income taxes.
NOTE 2 - FURNITURE AND EQUIPMENT
Furniture and equipment at December 31, 1997 consisted of the following:
Furniture and fixtures $ 14,802
Computer equipment 55,614
Office equipment 20,590
Leasehold improvements 21,218
112,224
Less accumulated depreciation
and amortization 25,580
Total $86,644
NOTE 3 - COMMITMENTS AND CONTINGENCIES
The Company subleases facilities for its corporate and operations offices
from a related party pursuant to a written agreement. The related party
leases the office building from a third party, and the leases expire in
February 2007.
The Company also has a long-term lease agreement for certain facilities for
its corporate and operations offices from a related party pursuant to a
written agreement. The related party leases the office building from a
third party, and the leases expire in May 2001.
Future minimum lease payments relating to these facilities are as follows:
Year Ending
December 31,
1998 $ 92,964
1999 92,964
2000 92,964
2001 63,235
2002 42,000
Thereafter 175,000
Total $559,127
Rent expense paid to related parties was $68,559 and $48,388 for the years
ended December 31, 1997 and 1996, respectively.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company paid approximately $56,947 and $83,000 to Media Ventures, which
has common ownership, for sound mixing and recording services for the years
ended December 31, 1997 and 1996, respectively. The Company also paid
Media Ventures $74,290 and $39,000 for related overhead cost for the years
ended December 31, 1997 and 1996, respectively. As of December 31, 1997,
$85,970 is due to Media Ventures.
During the year ended December 31, 1997, the line of credit for the Company
and all the Company's affiliates was transferred to an affiliate, Media
Ventures. All affiliates can draw on the line of credit, and the line of
credit is collateralized by all assets of the Company and its affiliates.
The line of credit bears interest at prime (8.5% at December 31, 1997). At
December 31, 1997, $80,000 of the amount due to Media Ventures was for
advances on the line of credit.
NOTE 5 - SALES
During the year ended December 31, 1997, the Company conducted business
with two customers whose sales comprised approximately 29% and 17%,
respectively, of net sales.
During the year ended December 31, 1996, the Company conducted business
with two customers whose sales comprised approximately 41% and 17%,
respectively, of net sales.
NOTE 6 - INCOME TAXES
A reconciliation of the expected income tax computed using the federal
statutory income rate to the Company's effective rate for the years ended
December 31, 1997 and 1996 is as follows:
1997 1996
Income tax computed at
federal statutory tax rate 34.0% 34.0%
Deferred tax benefit resulting
from conversion from
an "S" corporation to
a "C" corporation - (34.0)
Surtax exemptions (6.0) -
State taxes, net of federal benefit 6.0 1.0
Total 34.0% 1.0%
Significant components of the Company's deferred tax assets and liabilities
for income taxes consisted of the following at December 31, 1997:
Deferred tax assets
Accounts payable and accrued liabilities $23,294
Due to affiliates 7,176
Accrued payroll and payroll taxes 21,735
Deferred income 31,600
Total deferred assets 83,805
Deferred tax liabilities
Accounts receivable (89,821)
Work in process (10,020)
Depreciation of furniture and equipment (15,358)
Total deferred liabilities (115,199)
Net deferred tax liability (31,394)
Less current portion 16,036
Long-term deferred tax liability $(15,358)
NOTE 7 - SUBSEQUENT EVENT (UNAUDITED)
Subsequent to December 31, 1997, the Company repaid the $80,000 due to
Media Ventures for advances on the line of credit. (See further discussion
of the line of credit in Note 4.)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM CYBERIA HOLDINGS, INC. ANNUAL REPORT FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 211,394
<SECURITIES> 0
<RECEIVABLES> 18,829
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 524,609
<PP&E> 86,644
<DEPRECIATION> 0
<TOTAL-ASSETS> 624,397
<CURRENT-LIABILITIES> 324,850
<BONDS> 0
<COMMON> 3,000
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 624,397
<SALES> 1,811,409
<TOTAL-REVENUES> 1,811,409
<CGS> 531,449
<TOTAL-COSTS> 531,449
<OTHER-EXPENSES> 1,041,195
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,326
<INCOME-PRETAX> 196,032
<INCOME-TAX> 67,978
<INCOME-CONTINUING> 128,054
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 128,054
<EPS-PRIMARY> .000
<EPS-DILUTED> .000
</TABLE>
