United States
Securities And Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Pursuant To Section 13 Or 15 (d) Of The Securities
Exchange Act Of 1934
For the quarterly period ended: September 30, 2003
Or
[ ] Transition Report Pursuant To Section 13 Or 15 (d) Of The Securities
Exchange Act Of 1934
For the transition period from ______________ to _______________
Commission File Number: 000-28153
The Cyber Group Network Corporation
(Exact name of registrant as specified in its charter)
Nevada 33-0901534
(State or other jurisdiction of (I.R.S. Employer
incorporation of origination) Identification Number)
Post Office Box 11403 San Bernardino, CA 92423
(Address of principal executive offices) (Zip code)
(310) 854-4190
(Registrant's telephone number, including area code)
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 { }
APPLICABLE ONLY TO ISSUERS INVLOVED IN BANKRUPTCY PROCEEDINGS
DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to filed by Sections 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes { } No { }
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each issuer's classes of common
stock, as of the latest practicable date: 145,646,665
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Item 2 - Management's Discussion and Analysis or Plan of Operation
Item 3 - Controls and Procedures
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THE CYBER GROUP NETWORK CORPORATION
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2003
THE CYBER GROUP NETWORK CORPORATION
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
--------
PAGE 1 CONDENSED CONSOLIDATED BALANCE SHEETS AS OF
SEPTEMBER 30, 2003 (UNAUDITED) AND DECEMBER 31, 2002
PAGE 2 CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2003 AND 2002 AND FOR THE PERIOD FROM
MARCH 21, 2000 (INCEPTION) TO SEPTEMBER 30, 2003
(UNAUDITED)
PAGES 3 - 4 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' DEFICIENCY FOR THE PERIOD FROM
MARCH 21, 2000 (INCEPTION) TO SEPTEMBER 30, 2003
(UNAUDITED)
PAGE 5 CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
AND 2002 AND FOR THE PERIOD FROM MARCH 21, 2000
(INCEPTION) TO SEPTEMBER 30, 2003 (UNAUDITED)
PAGES 6 - 9 NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS AS OF SEPTEMBER 30, 2003 (UNAUDITED)
THE CYBER GROUP NETWORK CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
----------------------------------------------
ASSETS
------
September 30,
2003 December 31,
(Unaudited) 2002
------------- -------------
CURRENT ASSETS
Cash $ 2,422 $ 800
------------- -------------
TOTAL ASSETS $ 2,422 $ 800
------------ ============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
CURRENT LIABILITIES
Accounts payable $ 230,285 $ 230,285
Accrued expenses 98,691 69,511
Loans payable 251,317 251,317
Payable to related party 52,210 52,210
Due to officers 489,755 249,714
------------- -------------
Total Current Liabilities 1,122,258 853,037
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Preferred stock, $0.001 par value, 50,000,000 shares authorized, 2,000,000
shares issued and outstanding 2,000 2,000
Common stock, $0.001 par value, 500,000,000 shares authorized,
145,646,665 and 142,646,665 shares issued and outstanding, respectively 145,646 142,646
Additional paid-in capital 10,343,235 10,340,535
Deficit accumulated during development stage (11,610,717) (11,337,418)
------------- -------------
TOTAL STOCKHOLDERS' DEFICIENCY (1,119,836) (852,237)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 2,422 $ 800
---------------------------------------------- ============= =============
See accompanying notes to condensed consolidated financial statements.
1
THE CYBER GROUP NETWORK CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
---------------------------------------------------------------
AND FOR THE PERIOD FROM MARCH 21, 2000 (INCEPTION) TO SEPTEMBER 30, 2003
------------------------------------------------------------------------
(UNAUDITED)
Cumulative From
For the Three For the Three For the Nine For the Nine March 21, 2000
Months Ended Months Ended Months Ended Months Ended (Inception) To
September 30, September 30, September 30, September 30, September 30,
2003 2002 2003 2002 2003
------------- ------------- ------------- ------------- -------------
REVENUE $ - $ 8,905 $ - $ 63,498 $ 237,304
COST OF GOODS SOLD - - - 17,980 45,718
------------- ------------- ------------- ------------- -------------
GROSS PROFIT - 8,905 - 45,518 191,586
------------- ------------- ------------- ------------- -------------
OPERATING EXPENSES
Selling, general and administrative 67,518 439,732 263,869 1,911,833 9,951,472
Impairment of property, plant and equipment - - - - 44,113
Impairment of goodwill - - - - 295,000
------------- ------------- ------------- ------------- -------------
Total Operating Expenses 67,518 439,732 263,869 1,911,833 10,290,585
------------- ------------- ------------- ------------- -------------
LOSS FROM OPERATIONS (67,518) (430,827) (263,869) (1,866,315) (10,098,999)
------------- ------------- ------------- ------------- -------------
OTHER EXPENSE (INCOME)
Other income (3,422) - (6,404) - (6,404)
Interest expense 5,278 10,992 15,834 29,703 1,518,122
------------- ------------- ------------- ------------- -------------
Total Other Expense 1,856 10,992 9,430 29,703 1,511,718
------------- ------------- ------------- ------------- -------------
NET LOSS $ (69,374) $ (441,819) $ (273,299) $ (1,896,018) $(11,610,717)
-------------------------------------------- ============= ============= ============= ============= =============
Net loss per share - basic and diluted $ (.000) $ (.003) $ (.002) $ (.015)
============= ============= ============= =============
Weighted average number of common shares
outstanding - basic and diluted 145,646,665 164,646,418 145,635,676 122,618,785
============= ============= ============= =============
See accompanying notes to condensed consolidated financial statements.
2
THE CYBER GROUP NETWORK CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM MARCH 21, 2000 (INCEPTION) TO SEPTEMBER 30, 2003
--------------------------------------------------------------------
(UNAUDITED)
Deficit
Accumulated
Additional During
Preferred Stock Common Stock Paid-In Development
Shares Amount Shares Amount Capital Stage Total
--------- ------- ---------- ------- ------------ ------------- ------------
Issuance of common stock and recapitalization
due to acquisition on March 21, 2000 - $ - 740,400 $ 740 $ (740) $ - $ -
Issuance of stock for services rendered - - 608,519 609 1,277,591 - 1,278,200
Issuance of stock for compensation - - 83,487 83 243,372 - 243,455
Issuance of stock for donations - - 18,333 18 29,932 - 29,950
Conversion of convertible redeemable
debentures - - 794,058 794 999,206 - 1,000,000
Conversion of convertible redeemable
debentures - - 260,519 261 271,239 - 271,500
Stock options issued for compensation - - - - 237,750 - 237,750
Stock options issued for services rendered - - - - 220,000 - 220,000
Interest from beneficial conversion features - - - - 932,291 - 932,291
Issuance of stock for interest expense - - 88,889 89 99,911 - 100,000
Net loss, 2000 - - - - - (4,509,712) (4,509,712)
--------- ------- ---------- ------- ------------ ------------- ------------
Balance, December 31, 2000 - - 2,594,205 2,594 4,310,552 (4,509,712) (196,566)
Issuance of common stock for services rendered - - 13,350,675 13,350 2,752,503 - 2,765,853
Issuance of stock for compensation - - 1,998,841 1,999 592,296 - 594,295
See accompanying notes to condensed consolidated financial statements.
3
THE CYBER GROUP NETWORK CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM MARCH 21, 2000 (INCEPTION) TO SEPTEMBER 30, 2003
--------------------------------------------------------------------
(UNAUDITED)
Deficit
Accumulated
Additional During
Preferred Stock Common Stock Paid-In Development
Shares Amount Shares Amount Capital Stage Total
--------- ------- ------------ --------- ------------ ------------- ------------
Conversion of convertible redeemable
debentures - - 657,385 657 603,188 - 603,845
Interest from beneficial conversion
features - - - - 218,922 - 218,922
Issuance of other stock - litigation - - 600,000 600 148,400 - 149,000
Issuance of restricted shares - - 5,555,555 5,556 (5,556) - -
Preferred stock issued 2,000,000 2,000 - - 211,250 - 213,250
Net loss, 2001 - - - - - (4,902,903) (4,902,903)
--------- ------- ------------ --------- ------------ ------------- ------------
Balance, December 31, 2001 2,000,000 2,000 24,756,661 24,756 8,831,555 (9,412,615) (554,304)
Issuance of stock to pay loans - - 30,253,157 30,253 346,023 - 376,276
Issuance of stock for compensation - - 20,010,289 20,010 479,275 - 499,285
Issuance of stock for services - - 73,214,520 73,215 678,094 - 751,309
Stock rescinded - - (5,587,962) (5,588) 5,588 - -
Net loss, 2002 - - - - - (1,924,803) (1,924,803)
--------- ------- ------------ --------- ------------ ------------- ------------
Balance, December 31, 2002 2,000,000 2,000 142,646,665 142,646 10,340,535 (11,337,418) (852,237)
Issuance of stock for services - - 3,000,000 3,000 2,700 - 5,700
Net loss, 2003 - - - - - (273,299) (273,299)
--------- ------- ------------ --------- ------------ ------------- ------------
BALANCE, SEPTEMBER 30, 2003 2,000,000 $ 2,000 145,646,665 $145,646 $10,343,235 $(11,610,717) $(1,119,836)
------------------------------------ ========= ======= ============ ========= ============ ============= ============
See accompanying notes to condensed consolidated financial statements.
4
THE CYBER GROUP NETWORK CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 AND FOR
-------------------------------------------------------------
THE PERIOD FROM MARCH 21, 2000 (INCEPTION) TO SEPTEMBER 30, 2003
----------------------------------------------------------------
(UNAUDITED)
For the Period
from
March 21,
For the Nine For the Nine 2000
Months Ended Months Ended (Inception) to
September 30, September 30, September 30,
2003 2002 2003
-------------- --------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES $ 1,622 $ (237,697) $ (1,922,486)
-------------- --------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment - (2,064) (125,506)
Purchase of license rights - - (79,000)
Proceeds used in business acquisition - - (295,000)
-------------- --------------- ----------------
Net Cash Used In Investing Activities - (2,064) (490,506)
-------------- --------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of loan payable - (16,500) (16,500)
Proceeds from loan payable - 248,208 644,104
Proceeds from issuance of convertible debt - - 1,787,810
-------------- --------------- ----------------
Net Cash Provided By Financing Activities - 231,708 2,415,414
-------------- --------------- ----------------
NET INCREASE (DECREASE) IN CASH 1,622 (8,053) 2,422
CASH - BEGINNING OF PERIOD 800 8,053 -
-------------- --------------- ----------------
CASH - END OF PERIOD $ 2,422 $ - $ 2,422
-------------------- ============== =============== ================
SUPPLEMENTAL DISCLOSURE CASH FLOW INFORMATION
---------------------------------------------
Cash paid for income taxes $ - $ - $ 1,922
============== =============== ================
Cash paid for interest $ - $ - $ -
============== =============== ================
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
-----------------------------------------------------------------------
During the nine months ended September 30, 2003, the Company issued 3,000,000 shares of
common stock with a fair value of $5,700 for services rendered.
See accompanying notes to condensed consolidated financial statements.
5
NOTE 1 BUSINESS ACTIVITY
------ -----------------
On March 21, 2000, The Cyber Group Network Corporation and Subsidiary (the
"Company", "CGPN", "Cyber Group") was incorporated in the State of
California and subsequently purchased Hollywood Entertainment Network, Inc.
The Company is a technology driven, internet based, computer security
company with one main area of focus: Computer Security. The primary purpose
is to continue to transition the Company into a self-sufficient,
revenue-generating company, capable of increasing shareholder value. The
Company is also very focused on exceeding customer expectations and
industry demand.
The Company's mission is to develop and create innovative security products
and services that will protect the B2B, corporate and everyday user.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------ ------------------------------------------
(A) BASIS OF PRESENTATION
----------------------------
The accompanying condensed consolidated financial statements include the
accounts of The Cyber Group Network Corporation and its subsidiary (the
"Company"). These statements have been prepared in accordance with
accounting principles generally accepted in the United States of America
for interim financial information and the instructions to Form 10-QSB and
do not include all the information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation of the results for the interim periods have been included.
Operating results for the nine months ended September 30, 2003 are not
necessarily indicative of the results that may be expected for the year
ended December 31, 2003. The accompanying condensed consolidated financial
statements and the information included under the heading "Management's
Discussion and Analysis" should be read in conjunction with the Company's
consolidated financial statements and related notes included in the
Company's Form 10-KSB for the year ended December 31, 2002.
(B) USE OF ESTIMATES
-----------------------
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America requires the
Company 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, as well as the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(C) EARNINGS PER SHARE
-------------------------
In accordance with SFAS No. 128, "Earnings Per Share", basic net loss per
share has been computed based on the weighted-average of common shares
outstanding during the period. Diluted earnings per share include the
effects of any outstanding financial instruments that may be converted into
common stock, and therefore classified as common stock equivalents. SFAS
No. 128 provides guidance to calculate the equivalent number of common
shares that would be likely issued in the event the holder would elect to
convert the financial instrument into common shares. As per SFAS No. 128,
common stock equivalents are not considered in the diluted earnings per
share calculations because the effect would have been anti-dilutive.
NOTE 3 COMMITMENTS AND CONTINGENCIES
------ -----------------------------
The Company is involved in certain legal proceeding and claims that arise
in the normal course of business. The Company does not believe that the
outcome of these matters will have a material adverse effect on its
financial position or results of operations.
See accompanying notes to condensed consolidated financial statements.
6
NOTE 4 STOCKHOLDERS' DEFICIENCY
------ ------------------------
On November 23, 2001, the Board of Directors approved a fifteen to one
reverse stock split on all of the outstanding common shares of the Company.
All references to common shares and loss per common share amounts have been
adjusted to reflect the 15-to-1 reverse common stock split. The common
shares commenced trading on a post reverse split basis on November 26,
2001.
(A) COMMON STOCK
------------------
During the nine months ended September 30, 2003, the Company issued
3,000,000 shares of common stock with a fair value of $5,700 for services
rendered.
During the year ended December 31, 2002, the Company issued 30,253,157
shares of common stock with a fair value of $376,276 to settle certain
loans payable.
During the years ended December 31, 2002 and 2001 and for the period from
March 21, 2000 (inception) to December 31, 2000, the Company issued
73,214,520, 13,350,675 and 608,519 shares of common stock (reflective of
reverse split) for services rendered valued at $751,309, $2,765,853 and
$1,278,200, respectively. The services were valued at the fair market value
of the stock on the date of issuance.
During the years ended December 31, 2002 and 2001 and for the period from
March 21, 2000 (inception) to December 31, 2000, the Company issued
20,010,289, 1,998,841 and 83,487 shares of common stock (reflective of
reverse split) as compensation totaling $499,285, $594,295 and $243,455,
respectively. These transactions were valued at the fair market value of
the stock on the date of issuance.
During the year ended December 31, 2001 and for the period from March 21,
2000 (inception) to December 31, 2000, the Company converted $603,845 and
$1,271,500 of its Series A and Series SPA Subordinated Convertible
Redeemable Debentures into 657,385 and 1,050,760 shares of common stock
(reflective of reverse split), respectively. In relation to these
transactions, the holder of the debentures converted accrued interest
totaling $0 and $4,293 in 2001 and 2000, respectively. This accrued
interest resulted in the issuance of 0 and 3,817 shares (reflective of
reverse split) in 2001 and 2001, respectively.
During the year ended December 31, 2001 and for the period from March 21,
2000 (inception) to December 31, 2000, the Company issued 0 and 18,333
shares of common stock (reflective of reverse split) as donations to
nonprofit organizations valued at $0 and $29,950, respectively. These
transactions were valued at the fair market value of the stock on the date
of issuance. During the year ended December 31, 2001 and for the period
from March 21, 2000 (inception) to December 31, 2000, the Company issued 0
and 88,889 shares of common stock (reflective of reverse split) as interest
expense totaling $0 and $100,000, respectively.
During the year ended December 31, 2001 and for the period from March 21,
2000 (inception) to December 31, 2000, the Company issued options (net of
those terminated) to employees and Board of Directors to purchase 6,255,972
and 4,250,000 shares of common stock, respectively, and recorded
compensation expense of $226,349, which is included in the issuance of
stock for compensation in the statements of changes in stockholders'
deficiency, and $237,750, respectively.
See accompanying notes to condensed consolidated financial statements.
7
During the year ended December 31, 2001, the Company issued 5,555,555
shares of common stock to the former CEO for inventions per his employment
agreement. In early 2002, the Company rescinded 5,587,962 shares from the
former CEO due to complications incurred with the former CEO. No expense
was recorded in relation to these transactions.
During the year ended December 31, 2001, the Company issued 600,000 shares
of common stock with a fair value of $149,000 in relation to the litigation
discussed in Note 6 (D) of the December 31, 2002 financial statements.
NOTE 5 RELATED PARTY TRANSACTIONS
------ --------------------------
During the nine months ended September 30, 2003 and 2002, the Company made
certain advances to and had loans from its former Chief Executive Officer
and other related individuals. As of September 30, 2003 and December 31,
2002, the due to officers account on the balance sheet includes these loans
and accrued compensation to officers and directors of the Company.
As of September 30, 2003 and December 31, 2002, the Company had a loan
payable to a related party totaling $52,210.
NOTE 6 GOING CONCERN
------ -------------
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles that contemplate
the Company's continuation as a going concern. For the nine months ended
September 30, 2003, CGPN incurred net losses of $273,299 and had a working
capital deficiency and a stockholders' deficiency of $1,119,836 as of
September 30, 2003. In addition, the Company was still in the development
stage as of September 30, 2003. These factors raise substantial doubt about
the Company's ability to continue as a going concern.
The attainment of profitable operations is dependent upon the Company
obtaining adequate debt and/or equity financing and developing an effective
marketing campaign to generate a consistent cash flow. The financial
statements do not include any adjustments relating to the recoverability
and classification of recorded asset amounts or amounts and classification
of liabilities that might be necessary should the Company be unable to
continue in existence.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with our
consolidated financial statements and related footnotes for the year ended
December 31, 2002 included in FORM 10KSB filed with the SEC on May 15, 2003.
The discussion of results, causes and trends should not be construed to imply
any conclusion that such results or trends will necessarily continue in the
future.
GENERAL
On March 21, 2000, The Cyber Group Network Corporation and Subsidiary (the
"Company", "CGPN", "Cyber Group") was incorporated in the State of California
and subsequently purchased Hollywood Entertainment Network, Inc. The Company is
a technology driven, computer security company with one main area of focus:
Computer Security. The primary purpose is to continue to transition the Company
into a self-sufficient, revenue-
See accompanying notes to condensed consolidated financial statements.
8
generating company, capable of increasing shareholder value.
THE COMPANY'S MISSION IS TO DEVELOP AND CREATE INNOVATIVE SECURITY PRODUCTS AND
SERVICES THAT WILL PROTECT THE B2B, CORPORATE AND EVERYDAY USER.
RESULTS OF OPERATIONS
SINCE INCEPTION IN MARCH 2000, THE COMPANY HAS BEEN IN THE DEVELOPMENT STAGE.
THE PRIMARY FOCUS HAS BEEN ON THE DEVELOPMENT AND MARKETING OF ITS HARDWARE
AND SOFTWARE DEVICES, E-SNITCH AND PPIRT, RESPECTIVELY. BECAUSE THE COMPANY
BEGAN SHIPMENT OF PPIRT IN THE LATE FOURTH QUARTER 2000 AND SHIPPED MINIMAL
PRODUCT, MINIMAL REVENUE HAS BEEN GENERATED TO DATE. BECAUSE SUBSTANTIALLY ALL
OF ITS EFFORTS HAVE BEEN CONCENTRATED IN RESEARCH AND DEVELOPMENT
ACTIVITIES, IT HAS OPERATED AT A NET LOSS SINCE INCEPTION. THE COMPANY
INCURRED A NET LOSS OF $74,782 AND $891,619 FOR THE QUARTERS ENDED JUNE 30,
2003 AND 2002, RESPECTIVELY. THE FIRST QUARTER 2003 LOSSES HAVE DECREASED
ABOUT 90% COMPARED TO THE SAME PERIOD IN 2002. THE DECREASE IN THE NET LOSS IS
PRIMARILY DUE TO THE MINIMAL OPERATIONS THAT THE COMPANY INCURRED DURING THE
QUARTER ENDED JUNE 30, 2003.
THE COMPANY HAS IMPROVED PPIRT AND EXPECTS TO RELEASE VERSION 3.0 DURING THE
FIRST QUARTER OF 2004. VERSION 3.0 WILL CONTAIN FEATURES AND ENHANCEMENTS THAT
WILL MAKE PPIRT ATTRACTIVE AND MARKETABLE TO THE B2B MARKET PLACE AS WELL AS THE
INDIVIDUAL CONSUMER.
THE COMPANY HAS RECEIVED REPORTS ON ITS FINANCIAL STATEMENTS FOR THE PERIODS
ENDING DECEMBER 31, 2002 AND 2001 FROM ITS CURRENT AND PREVIOUS INDEPENDENT
AUDITORS THAT INCLUDE EXPLANATORY PARAGRAPHS DESCRIBING THE COMPANY'S
UNCERTAINTY TO CONTINUE AS A GOING CONCERN. THESE FINANCIAL STATEMENTS
CONTEMPLATE THE ABILITY TO CONTINUE AS A GOING CONCERN AND AS SUCH DO NOT
INCLUDE ANY ADJUSTMENTS THAT MIGHT RESULT FROM THIS UNCERTAINTY.
LIQUIDITY AND CAPITAL RESOURCES
AS OF THE FISCAL QUARTER ENDED JUNE 30, 2003, THE COMPANY HAD CURRENT
ASSETS OF $0 AND TOTAL ASSETS OF $0 . THE COMPANY WAS IN A NEGATIVE
WORKING CAPITAL POSITION OF $1,012,673 AS OF JUNE 30, 2003.
CASH REQUIREMENTS AND ADDITIONAL FUNDING
THE COMPANY NEEDS TO IMMEDIATELY RAISE ADDITIONAL CAPITAL TO RUN THE DAILY
OPERATING ACTIVITIES OF THE BUSINESS. THE CURRENT CASH ON HAND IS INSUFFICIENT
TO MEET ITS ANTICIPATED NEEDS FOR WORKING CAPITAL, CAPITAL EXPENDITURES AND
BUSINESS DEVELOPMENT FOR THE NEXT TWELVE MONTHS. BECAUSE THE COMPANY HAS NOT
SUSTAINED A CONSISTENT REVENUE STREAM, IT WILL NEED TO RAISE ADDITIONAL CAPITAL
TO MEET ITS OPERATING NEEDS. THE COMPANY WILL CONTINUE TO RESEARCH VARIOUS
METHODS OF ACQUIRING CAPITAL, LIKE PRIVATE PLACEMENT, DEBT REFINANCING AND SB2
FILINGS. THE COMPANY RECOGNIZES THAT FILING AN SB2 CAN POTENTIALLY LEAD TO
STOCK DILUTION, HOWEVER, IT MAY BE THE MOST EFFECTIVE MEANS TO GENERATE CASH
FLOW. IRRESPECTIVE OF THE FUNDING METHOD, THIS FUNDING WILL COVER SUCH COSTS AS
MARKETING AND DISTRIBUTION, MAINTAINING AND UPGRADING TECHNOLOGY, RECURRING
See accompanying notes to condensed consolidated financial statements.
9
OVERHEAD EXPENSES FOR THE DAY-TO-DAY OPERATION OF THE BUSINESS AND OTHER
UNEXPECTED EXPENSES DUE TO ECONOMIC CHANGES. THE COMPANY CANNOT GUARANTEE THAT
THE FINANCING WILL BE AVAILABLE IN CERTAIN AMOUNTS OR ON ACCEPTABLE TERMS.
FORWARD-LOOKING STATEMENTS
Certain matters discussed in this report contain forward-looking statements that
are subject to risks and uncertainties that could cause actual results to differ
materially from those indicated by such forward-looking statements. These
forward-looking statements relate to, among other things, capital expenditures,
liquidity, capital resources and competition and may be indicated by words or
phrases such as "anticipate", "estimate", "plans", "projects", "continuing",
"ongoing", "expects", "management believes", "the Company believes", "the
Company intends" and similar words or phrases. The following factors and others
discussed in the Company's periodic reports and filings with the Securities and
Exchange Commission are among the principal factors that could cause actual
results to differ materially from the forward-looking statements: availability
and terms of financing; risk insurance markets; competition; general economic
conditions; interest rates; and inflation. However, this list is not a complete
statement of all potential risks or uncertainties.
These forward-looking statements are made as of the date hereof based on
management's current expectations, and the Company does not undertake an
obligation to update such statements, whether as a result of new information,
future events or otherwise. Additional information regarding these and other
risk factors may be found in the Company's other filings made from time to time
with the Securities and Exchange Commission.
PART II - OTHER INFORMATION
ITEM 3 - CONTROLS AND PROCEDURES
Disclosure controls and procedures are designed to ensure information required
to be disclosed in our periodic reports filed with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported, within the time periods specified in the rules and
forms of the Securities and Exchange Commission. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in the periodic reports filed
under the Securities Exchange Act of 1934 is accumulated and communicated to
management, including the Chief Executive Officer and Principal Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure.
Within the 90 days prior to filing data of this Report, we have not conducted an
evaluation of the effectiveness of the design and operation of our disclosures
controls and procedures pursuant to Securities and Exchange Act Rule 13a-14.
This evaluation will be conducted before the issuance of our end of year quarter
10QSB / 10KSB.
See accompanying notes to condensed consolidated financial statements.
10
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE EXCHANGE ACT OF 1934, THE REGISTRANT HAS
DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED.
THE CYBER GROUP NETWORK CORPORATION
-----------------------------------
(REGISTRANT)
Dated: December 18, 2003
BY: /S/ R. SCOTT CRAMER
CHIEF EXECUTIVE OFFICER
11