U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-SB/A

Amendment No. 6

GENERAL FORM FOR REGISTRATION OF SECURITIES

OF SMALL BUSINESS ISSUER

Under Section 12(b) or (g) of the Securities Exchange Act of 1934

American Entertainment and Animation Corporation

(Name of Small Business Issuer in Its Charter)

(Issuer's Telephone Number, Including Area Code): (905) 947-9925

Securities to be registered under Section 12(b) of the Act: None

Securities to be registered under Section 12(g) of the Act:

Common Stock, par value of $0.0001 per share

(Title of Class)

PART I

ITEM 1. DESCRIPTION OF BUSINESS

American Entertainment and Animation Corporation (the "Company") was incorporated in the State of Delaware on May 9, 1996 as American Electric Automobile Company, Inc. The Company is headquartered in Markham, Ontario, Canada.

On June 15, 1996, the Company entered the business of converting gasoline-powered vehicles to electric and hybrid power uses by acquiring California Electric Automobile Co., Inc. ("CEAC"), which had been incorporated in California on November 14, 1995. The Company purchased all of the outstanding shares of stock of CEAC in a transaction that was accounted for as a tax-free exchange. The exchange was on the basis of one share of CEAC for ten shares of the Company. As a result, a total of 1,050,000 shares of the Company's common stock were issued in exchange for the 105,000 shares of stock of CEAC. Of those 1,050,000 shares, 900,000 were held in escrow pending the exercise of an option held by CEAC to purchase the assets and business of a San Diego, California-based sole proprietorship that was doing business as San Diego Electric Automobile Company ("SDEAC"). On October 17, 1996 the Company exercised the option that it had acquired from CEAC to purchase the assets of SDEAC. The purchase price for the SDEAC assets was 900,000 shares of the Company's common stock. In January 2002, the Company discontinued its electric car business as it had not generated sufficient revenues to meet its obligations.

On April 22, 2002, the Company entered the business of digital animation business by purchasing all of the issued and outstanding shares of common stock of Cyper Entertainment Co., Ltd. ("Cyper") in exchange for 20,000,000 restricted common shares of the Company pursuant to a Share Exchange Agreement dated February 28, 2002. The shares of Cyper were purchased from numerous shareholders including Duk Jin Jang, the majority shareholder who is now the Company's chairman.

Cyper located in Seoul, Korea, is a 3D Digital Animation Production company providing services to the television, commercial and film industries. Cyper was established on January 27, 2000 and currently has approximately 24 full-time employees and 26 part-time employees.

On May 31, 2002, the Company accepted the resignations of Pierre Quilliam, Stephen Cohen and Denise Quilliam as Directors and Officers of the Company. Simultaneously, the Company appointed Duk Jin Jang, Marc Hazout, Jason Chung and John Chung to the Board of Directors. Mr. Jang was named Chairman, Mr. Hazout was named President and CEO, and Jason Chung was named Chief Financial Officer and Treasurer.

On July 16, 2002, the Company amended its Certificate of Incorporation to increase the number of shares of common stock that it is authorized to issue to 150,000,000, and to change its name to American Entertainment and Animation Corporation.

The Company develops and produces 3D digital animation for television, short films, feature films, home video, music video and multi-media applications such as video games. The Company produces 3D digital animation by applying advanced hardware and software technology using computer systems throughout the production process. The Company operates in three revenue segments:

Independent Contractor: The Company produces digital animation projects for unrelated third-parties on a fee basis. Typically, the projects are prepared to the specifications of the party hiring the Company. Principle independent contractor projects produced by the Company to date have been:

• KARI Project - The Company produced a ten minute public relations film for the Korea Aerospace Research Institute for $40,000. The Company has also been engaged to produce the next public relations film for KARI.
• Pottery War Project - The Company produced an animated short film entitled "Pottery War" for the World Ceramic Expo 2001 for $80,000.
• Samsung Lions Visual Project - The Company produced a series of 78 ten second animation segments prepared for the Samsung Lions baseball team for showing on a large screen during games. The Company received $80,000 in revenues from the project.

Proprietary Development: The Company develops original animation projects based on characters and storylines conceived by the Company, in which event the Company owns all proprietary rights in the project. The Company's principle efforts to date in proprietary development have been:

• "Biggie and Danmu" - The Company has created a ten minute pilot episode of this children's educational animation short. The show is designed to fill ten minutes of airtime in a children's program and has no dialogue so that it can be marketed worldwide. The pilot episode is currently being marketed to distributors.
• "Q-Pet" - The Company has created a demo reel for this proposed 26 episode, one-half hour cartoon. The demo reel is currently being marketed to distributors.
• "The 5^th Global Epoch" - The Company has prepared a demo reel with the concepts and characters for this project, which is being marketed to distributors as a half hour children's television show.
• "Kollang" - The Company has produced 10 episodes of a short film about a small humanoid alien with one eye known as "Kollang." The series was prepared to showcase the Company's skills and is being marketed as a one or two minute filler to programmers.

Co-Production Development: The Company produces animation projects based on characters conceived and owned by other parties. With co-production developments, the Company enters into agreements with the owners of rights to the characters regarding responsibility for production costs, marketing costs, the allocation of gross or net revenues from the production, and the rights to derivative works, such as sequels, spinoffs, toys and games. The Company's principle effort to date in co-production development has been the negotiation of a development agreement to produce a Christmas special for "Uncle Mugsy," which to date has primarily been the basis for a series of children's books.

In addition, the Company produces animated short films. The first such film is a seven minute 3D animated film known as "Angel" that was released in July 2001. "Angel" has won several awards including: Best Director at Korea Animation Festival, first prize at Japan Digital Contents Grand Prix 2001. It was also nominated at several film festivals, including LEAF 2001, Belgium Folioscope/Festival du Dessin Anime, Santa Barbara International Film Festival, Angsi 2002 Festival in France, Zagreb 2002 Festival in Croatia. In addition, Angel has been invited to the Siggraph 2002 Festival in Texas. "Angel" has received $5,000 in prize revenues. Currently, it is not possible to generate sufficient revenues from a short film to cover the costs of production and generate a profit. However, animation companies, like the Company, produce short films as a means to showcase their talents and generate publicity in order to attract other revenue-producing projects.

The Company is not dependent upon any one customer or distributor.

Following the Company's acquisition of Cyper on April 22, 2002, the Company opened a Canadian office in Markham, Ontario. The Canadian office is focused on marketing the Company's projects and services in North America, under which production would continue to be performed from the Company's studios in Seoul, Korea. The Company decided to expand to the North American market because there is a far greater market for animation projects and fee-based work in North America than in Korea. In addition, the Company believed that the significantly lower wage rates for animation talent in Korea would give it a competitive advantage over North American production firms.

The Company has entered into non-exclusive agency agreements with Netrix Inc. to source new business for the Company throughout North America. The Company's contract with Netrix, Inc. provides that it will receive an agency fee of 12.5% of any gross revenues produced through its efforts. In addition, the Company is obligated to reimburse Netrix's out-of-pocket expenses, subject to prior approval by the Company. In addition, the Company markets its services through attendance at international trade shows, film festivals, as well as direct marketing materials/sales and through its website, www.cyper.com. In addition, the Company is actively looking for additional, non-exclusive agency relationships to market its projects that it can retain on a contingency basis, like Netrix, Inc.

The Company's principal competition for independent contractor projects in Korea is Digital Dream Studio, which has substantially more years of experience and exposure than the Company. In North America, the Company's principal competition is Pixar, PDI Dreamworks Studio and Rhythm and Hues Studio. The Company intends to compete with U.S. based companies by offering state of the art production work at competitive prices. The competitive pricing can be achieved by carrying out production services in Seoul, Korea at a considerably lower cost than in the U.S. due to materially lower wage rates for animation talent in Korea. In addition, the Company's plan is to open production facilities in Canada to take advantage of lower wage rates in Canada than the U.S. and a favorable Canadian exchange rate.

Competition in the markets for proprietary and co-production projects is intense. The Company's animated projects must compete with animated projects produced by competing studios as well as non-animated children and family-oriented programming. Most of the competing production houses with which the Company competes have significantly greater financial, marketing and other resources than does the Company.

The Company is not dependent upon any patent, trademark, license, franchise, concession, royalty agreement or labor contract. The Company produces its animation projects using off-the-shelf software tools, including 3D Max Software, Motion Capture System, 3D Max Plug-In and On-Line Production Management System, Auto Rendering Plug-In of 3D Max, Auto Save Data Plug-In of 3D Max.

The Company owns the rights to a number of URL's for its business and relating to its proprietary development projects, including www.cyper.com; www.q-pet.co.kr; www.q-pet.net; www.5thiceage.com; and www.kollang.co.kr.

To aid in the production of animation projects, the Company is also developing its On-Line Production System (OAPS), which allows for real-time, on-line file sharing. The Company intends to patent the OAPS technology when it is completed. The Company will evaluate the feasibility of generating additional revenues from licensing its OAPS technology when it is complete.

The Company's wholly-owned subsidiary, Cyper Entertainment Inc. currently has 24 full time employees and 26 part time employees. The number of part-time employees will increase or decrease depending on the scope and number of the development projects being worked on at any particular time. The Company's Canadian subsidiary employs two persons.

The Company currently has no labour contracts and has never experienced a work stoppage. None of its employees are currently represented by a union or any other form of collective bargaining unit. The Company believes its relations with its employees are excellent.

The Company's digital animation operations only commenced operations in January 2000. The Company has not generated significant operating revenues to date to become profitable, and must be considered promotional and in its early stages of development. The Company's operations will be subject to all of the risks inherent in the establishment of a new enterprise and such uncertainties normally associated with an absence of any operating history.

As a result of the Company's limited operating history and the competitive nature of the markets in which it competes, the Company is unable to accurately forecast its revenues. The Company's current and future expense levels are based largely on its investment plans and estimates of future revenues. The Company may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in revenues in relation to the Company's planned expenditures could have an immediate adverse effect on the Company's business, prospects, financial condition and results of operations. Further, as a strategic response to changes in the competitive environment, the Company may from time to time make certain pricing, service or marketing decisions that could have a material adverse effect on its business, prospects, financial condition and results of operations.

The Company may experience significant fluctuations in its future quarterly operating results due to a variety of factors, many of which are outside the Company's control. Factors that may adversely affect the Company's quarterly operating results include: (i) the Company's ability to obtain distribution contracts for its productions, (ii) the Company's ability to maintain consumer satisfaction with the Company's productions, (iii) price competition, (iv) the Company's ability to upgrade and develop its systems and infrastructure and attract new personnel in a timely and effective manner, (v) the Company's ability to complete productions on time and on budget, (vi) technical difficulties, (vii) the amount and timing of operating costs and capital expenditures relating to expansion of the Company's business, operations and infrastructure, (viii) delays in revenue recognition at the end of a fiscal period as a result of logistical problems, (ix) governmental regulations, and (x) general economic conditions.

Due to the foregoing factors, in one or more future quarters, the Company's operating results may fall below the expectations of investors.

The success of our productions will depend in large part on our creative team's ability to predict the type of content that will appeal to a broad audience and to develop stories and characters that will achieve broad market acceptance. Traditionally, that has been difficult for companies in the entertainment industry to achieve.

The Company plans to expand its operations primarily by marketing its productions and services to the North American market. This expansion is expected to place a strain on the Company's management, operations and financial resources. To manage the expected growth of its operations and personnel, the Company will be required to improve existing, and implement new, operational and financial systems, procedures and controls, and to expand, train and manage a growing employee base. The Company may also be required to expand its finance, administrative and operations staff.

There can be no assurance that the Company's current and planned personnel, systems, procedures and controls will be adequate to support the Company's future operations, that management will be able to hire, train, retrain, motivate and manage required personnel or that the Company's management will be able to successfully identify, manage and exploit existing and potential market opportunities. If the Company were unable to manage growth effectively, its business, prospects, financial condition and results and operations would be materially adversely affected.

The Company's performance is substantially dependent on the continued services and on the performance of its senior management and other key personnel. The Company's performance also depends on the Company's ability to retain and motivate its other officers and key employees. The loss of the services of any of its executive officers or other key employees could have a material adverse effect on the Company's business, prospects, financial condition and results of operations. The Company's future success depends on its ability to identify, attract, hire, train, retrain and motivate other highly skilled technical, managerial, editorial, merchandising, marketing and customer service personnel. Competition for such personnel is intense and there can be no assurance that the Company will be able to successfully attract, assimilate and retain sufficiently qualified personnel. The failure to retain and attract the necessary technical, managerial, merchandising, marketing and customer service personnel could have a material adverse effect on the Company's business, prospects, financial condition and results of operations.

The Company's success is dependent on the services of Duk jin Jang, its chairman and founder, and on Marc Hazout, its chief executive officer. The loss of any officer or director could have a material adverse effect on the Company's business or results of operations. The Company does not maintain "key-man" life insurance policies on the lives of any of its officers. The Company has no employment or non-compete agreements with any personnel. In addition, Mr. Hazout does not devote his full time and resources to the Company.

The Company's future capital requirements will depend on many factors including the cost of producing its projects, the cost of marketing its productions and services, and the market acceptance of the Company's productions. The Company currently needs capital in order to effectively market its productions and services. To date, the Company has met its capital needs through loans from its founder and the deferral of salaries for key personnel. However, the Company cannot continue meeting its capital needs in that fashion, and is actively seeking outside capital.

There can be no assurance that financing will be available on acceptable terms, or at all. If the Company is required to sell equity to raise additional funds, there is no assurance that additional equity can be obtained on terms favorable to existing shareholders, with the result that existing shareholders may incur substantial dilution. Insufficient capital may require the Company to delay, scale back or eliminate some or all of its activities or to obtain additional funding.

The process of developing productions, such as those offered by the Company, is extremely complex, and it is highly likely that the Company will experience delays in developing and introducing new productions in the future. If the Company was unable to develop and introduce new productions in a timely manner, in response to changing market conditions or customer requirements, the Company's business, operating results and financial conditions could be materially adversely affected.

The Company currently plans to rely upon a combination of trade secret protection, invention assignments, non-disclosure agreements and licensing arrangements to establish and protect its proprietary rights. Despite the Company's efforts to safeguard and maintain its proprietary rights, there can be no assurance that the Company will be successful in doing so.

The Company also relies on trade secrets and proprietary know-how, which it seeks to protect by confidentiality and non-disclosure agreements with its employees, consultants, and third parties. There can be no assurance that these agreements will not be breached, that the Company will have adequate remedies for any breach, or that the Company's trade secrets and proprietary know-how will not otherwise become known or be discovered by competitors.

Litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity. Any such litigation could result in substantial costs and diversion of resources and could have a material adverse effect on our business, operating results or financial condition.

One of the risks of the film production business is the possibility of claims that our productions infringe the intellectual property rights of third parties with respect to previously developed films, stories, characters or other entertainment. In addition, our technology and software may be subject to patent, copyright or other intellectual property claims of third parties. The Company may receive, in the future, notice of claims of infringement of other parties' proprietary rights. There can be no assurance that infringement or invalidity claims (or claims for indemnification resulting from infringement claims) will not be asserted or prosecuted against the Company, or that any assertions or prosecutions will not materially adversely affect our business, financial condition or results of operations. Irrespective of the validity or the successful assertion of such claims, the Company would incur significant costs and diversion of resources with respect to the defense thereof which could have a material adverse effect on our business, financial condition or results of operations. If any claims or actions are asserted against us, we may seek to obtain a license under a third party's intellectual property rights. The Company cannot provide any assurances, however, that under such circumstances a license would be available on reasonable terms or at all.

The Company relies on certain technology that it licenses from third parties. The Company cannot provide any assurances that these third party technology licenses will continue to be available to us on commercially reasonable terms. The loss of or inability to maintain any of these technology licenses could result in delays in feature film releases or product releases until equivalent technology could be identified, licensed and integrated. Any such delays in feature film releases or product releases could materially adversely affect our business, operating results and financial condition.

The Company may, without further action or vote by shareholders of the Company, designate and issue additional shares of preferred stock. The terms of any series of preferred stock, which may include priority claims to assets and dividends and special voting rights, could adversely affect the rights of holders of the common stock and thereby reduce the value of the common stock. The designation and issuance of preferred stock favorable to current management or shareholders could make the possible takeover of the Company or the removal of management of the Company more difficult and discourage hostile bids for control of the Company which bids might have provided shareholders with premiums for their shares.

The Company's common stock has been approved for trading on the Pink Sheets under the symbol AEAC. To date, trading in the Common Stock has been minimal. No assurance can be given that an active trading market in the Company's securities will develop or, if developed, that it will be sustained. Various factors, such as the Company's operating results, changes in laws, rules or regulations, general market fluctuations, changes in financial estimates by securities analysts and other factors may have a significant impact on the market price of the Company's securities. The market price for the securities of public companies often experience wide fluctuations, which are not necessarily related to the operating performance of such public companies such as high interest rates or impact of overseas markets.

After all comments are resolved to the Company's Form 10-SB registration statement, the Company plans to initiate steps to commence trading in its Common Stock on the OTC Bulletin Board or the BBX. However, once trading is approved on the OTC Bulletin Board or the BBX, there can be no assurance that an active market will develop for the Common Stock. Without sponsorship by a broker/dealer, it is unlikely that a regular trading market will develop in the near term or that, if developed, it will be sustained. In the event a regular public trading market does not develop, any investment in the Company's Common Stock would be highly illiquid. Accordingly, an investor in the Common Stock may not be able to sell the Common Stock readily.

Furthermore, the trading price of the Common Stock is likely to be highly volatile and could be subject to wide fluctuations in response to factors, such as, actual or anticipated variations in the Company's quarterly operating results, announcements of technological innovations, or new services by the Company or its competitors, changes in financial estimates by securities analysts, conditions or trends, changes in the market valuations, announcements by the Company or its competitors of significant acquisitions, strategic relationships, joint ventures or capital commitments, additions or departures of key personnel, sales of Common Stock or other securities of the Company in the open market and other events or factors, many of which are beyond the Company's control. Further, the stock markets in general, and stocks traded on the Pink Sheets and the OTC Bulletin Board in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such companies. These broad market and industry factors may materially and adversely affect the market price of the Common Stock, regardless of the Company's operating performance. Market fluctuations, as well as general political and economic conditions, such as, recession or interest rate or currency rate fluctuations may also adversely affect the market price of the Common Stock. In the past, following periods of volatility in the market price of a company's securities, securities class-action litigation has often been instituted against such a company. Such litigation, if instituted, could result in substantial costs and a diversion of Management's attention and resources, which would have a material adverse effect on the Company's business, results of operations and financial condition.

The Company has not paid any dividends or made distributions to its investors and is not likely to do so in the foreseeable future. The Company presently intends to retain earnings for use in its business. Additionally, the Company may fund a portion of its future expansion through debt financing, and a condition of such financing may prohibit the payment of dividends while the debt is outstanding. Therefore, shareholders should understand that the Company's intention is to build value by increasing the size of the business and not by paying dividends.

The Company's common stock may be deemed to be a penny stock. Penny stocks generally are equity securities with a price of less than $5.00 per share other than securities registered on certain national securities exchanges or quoted on the Nasdaq Stock Market, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The Company's securities may be subject to "penny stock rules" that impose additional sales practice requirements on broker/dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse). For transactions covered by these rules, the broker/dealer must make a special suitability determination for the purchase of such securities and have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the "penny stock rules" require the delivery, prior to the transaction, of a disclosure schedule prescribed by the Commission relating to the penny stock market. The broker/dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information on the limited market in penny stocks. Consequently, the "penny stock rules" may restrict the ability of broker/dealers to sell the Company's securities, which could adversely effect the development of an active market for the Company's common stock.

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Certain statements in this General Form For Registration Of Securities Of Small Business Issuer on Form 10-SB, particularly under this Item 2, may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements, expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed herein. The words "believe", "expect", "anticipate", "seek" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date the statement was made.

Until the Company is subject to the reporting requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, the Company cannot avail itself of the safe harbor protections of Section 27A of the Securities Act of 1933 or Section 21E of the Securities Exchange Act of 1934 with respect to any forward-looking statements contained herein.

Revenues

For the fiscal year ended December 31, 2001, Cyper had net sales of W 224,209 ($170,696), as compared to net sales of W 601,315 ($532,165) in the fiscal year ended December 31, 2000. The significant decrease in sales fiscal 2000 was the result of a strategic decision by Cyper to invest its resources in the development of its own characters - Q-Pet, Angel and Kollang - rather than procuring and performing service contracts for third parties. Cyper believes that the development of proprietary characters will result in reduced revenues in the short-term, but will result in larger, high-margin revenues in the long-term.

Cost of Sales and Gross Profit (Loss)

For the fiscal year ended December 31, 2001, cost of sales was W 252,853 ($192,506), as compared to cost of sales in the fiscal year ended December 31, 2000 of W 779,207 ($689,600), resulting in a gross loss of W 28,644 ($21,807) in fiscal 2001 as compared to a gross loss of W 177,892 ($157,435) in fiscal 2000. Cost of sales decreased in fiscal 2001 as a result of the reduction in service contracts for third parties. In addition, many costs associated with the development of Cyper's in-house projects have been capitalized.

General and Administrative Expenses

For the fiscal year ended December 31, 2001, general and administrative expenses were W 559,613 ($426,047), as compared to W 399,925 ($353,935) in the fiscal year ended December 31, 2000. As a percentage of net sales, general and administrative expenses increased from 66.4% of revenues to 250% of revenues 2000 to 2001. The substantial increase in general and administrative expenses was primarily the result of Cyper maintaining the same staffing levels in 2001 as compared to 2000 while Cyper shifted its focus from service contracts for third parties to the development of in-house projects.

Other Income (Expense)

For the fiscal year ended December 31, 2001, Cyper recorded an unusual gain from the extinquishment of debt in the amount of W 490,681 ($373,568) resulting from the foregiveness of a loan from Cyper's chief executive officer. Offsetting the unusual gain was a loss on the disposal of tangible assets in the amount of W 290,681 ($221,303) incurred in fiscal 2001. During fiscal 2001 interest expense increased significantly to W135,864 ($103,437) from W 19,876 ($17,590) in fiscal 2000 as the result of increased levels of debt incurred to fund Cyper's operations.

Income Taxes

In the fiscal years ended December 31, 2001 and 2000, Cyper did not incur any income tax expense as the result of operating losses in both years. However, Cyper recorded a benefit resulting from the accrual of deferred tax assets of W 185,158 ($140,965) in fiscal 2001 as compared to W 169,352 ($149,882) in fiscal 2000.

Net Income (Loss)

In the fiscal year ended December 31, 2001, Cyper had a net loss of W (339,794) ($258,694), compared to a net loss of W(423,350) ($374,679) in the fiscal year ended December 31, 2000. The decreased net loss was primarily the result of an unusual gain on extinquishment of debt, reduced gross loss resulting from the capitalization of cost associated with inhouse development projects, and higher benefit realized from the accrual of deferred income tax assets, offset by higher general and administrative expenses.

As of December 31, 2001, Cyper had a net working capital deficit of W 1,159,415 ($882,691), as compared to a net working capital deficit of W 86,515 ($76,569) at December 31, 2000. The substantial increase in the working capital deficit from December 31, 2000 to December 31, 2001 was primarily attributable to operating losses incurred in fiscal 2001 and the investment in intangible assets, consisting of in-house development projects. Cyper's investment in 3D Animation intangible assets increased from W 360,000 ($318,612) at December 31, 2000 to W 1,787,505 ($1,360,872) at December 31, 2001.

Cyper has satisfied its liquidity needs by the deferral of salaries of key personnel, resulting in an increase in accrued expenses from W 181,592 ($160,715) at December 31, 2000 to W 609,990 ($464,400) at December 31, 2001, as well as loans from Cyper's president, which totaled W 617,434 ($470,068) at December 31, 2001.

Cyper's operations to date have been concentrated on the development of its digital animation business, as well as costs associated with the refinement of its business plan. Through 2000, the Company funded its short-term working capital needs primarily through the deferral of salaries and loans from its founder. However, as a part of its growth strategy, Cyper requires greater working capital to fund development costs and marketing expenses. Cyper is currently exploring avenues for additional financing in order to enable it to expedite the implementation of its business plan and achieve profitability.

The Company's independent auditors have included an explanatory paragraph in their report on the December 31, 2001 financial statements discussing issues which raise substantial doubt about the Company's ability to continue as a "going concern." The going concern qualification is attributable to the Company's historical operating losses, the Company's lack of cash reserves and capital, and the amount of capital which the Company projects it needs to achieve profitable operations. For the year ended December 31, 2001 and during the first quarter of fiscal 2002, the Company continued to experience a negative cash flow from operations, and projects that it will need additional capital to enable it to continue operations at its current level. The Company is looking at various options to raise additional capital from large private investors or strategic investors.

ITEM 3: NATURE AND EXTENT OF ISSUER'S FACILITIES

The Company's production facilities are located in approximately 10,000 square feet of leased space in Seoul, Korea. The lease provides for rental payments of W10,000,000 ($8,000) per month plus utilities, and runs from December 2001 to December 2003.

The Company's Canadian offices are located at 7270 Woodbine Avenue, Suite 200 Markham, Ontario L3R 4B9. The Company pays CAD$474.60 per month plus applicable Federal Taxes. The Company has a sub-lease agreement with Wepawaug, Inc., the head tenant, which gives the Company the right to occupy the space at the above rental rate on a month-to-month basis.

ITEM 4: SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information, as of June 24, 2002, as to the Company's common stock beneficially owned by (i) each executive officer and director of the Company, (ii) all directors and executive officers of the Company as a group, and (iii) any person who is known by the Company to be the beneficial owner of more than 5% of the outstanding shares of the Company's common stock.

(1) Based upon 34,198,649 common shares issued and outstanding as of June 12, 2002.

(2) Mr. Jang's shares do not include 431,417 shares owned by Sejin Chang, his brother.

(3) Mr. Quilliam's shares include 1,728,850 shares that he owns outright, 3,184,740 shares held by Bisell Investments, Inc., a company he owns, 3,000,000 shares that he has the right to acquire pursuant to an option to purchase such shares at $0.08 per share until September 13, 2002, and 97,916 shares owned by his wife.

(4) Mr. Hazout's shares are held by Travellers International, Inc., a company owned by him.

(5) Neither Jason or John Chungs' shares include 600,000 shares held by Michael Chung, the brother of Jason Chung and the son of John Chung.

ITEM 5: DIRECTORS, EXECUTIVE OFFICER, PROMOTERS AND CONTROL PERSONS:

Listed below are the directors and executive officers of the Company.

The term of office of each director of the Company ends at the next annual meeting of the Company's stockholders or when such director's successor is elected and qualifies. No date for the next annual meeting of stockholders is specified in the Company's bylaws or has been fixed by the Board of Directors. The term of office of each officer of the Company ends at the next annual meeting of the Company's Board of Directors, expected to take place immediately after the next annual meeting of stockholders, or when such officer's successor is elected and qualifies. Except as otherwise indicated below, no organization by which any officer or director previously has been employed is an affiliate, parent, or subsidiary of the Company.

Directors are entitled to reimbursement for expenses in attending meetings but receive no other compensation for services as directors. Directors who are employees may receive compensation for services other than as director. Prior to the Company's acquisition of Cyper on April 22, 2002, the Company's policy was to pay directors $500 for each board meeting attended. The Company anticipates that its policy on compensation of directors will change following its acquisition of Cyper, but as of June 24, 2002 an alternative policy has not been formulated.

The following information sets forth the backgrounds and business experience of the directors and executive officers.

Duk Jin Jang has been Chairman and Chief Executive Officer of the Company since June 1, 2002. Mr. Jang worked as a department manager of POST Intermedia, Inc from 1992 to 1993, and as a manager of Nowcom, Inc from 1995 to 1996. Mr. Jang worked as a manager of GEN(Multimedia studio) from 1997 until 1998. Mr. Jang worked as a professor at Kaywon School of Art and Design from 1997 until 2000. Mr. Jang has been Director of Digital Contents Association in Korea since 2001, and an advisory committee member of Gyeonggi Digital Art Hive in Gyeonggi-Do, Korea since 2001. Mr. Jang started Cyper Entertainment, Inc. in January 2000. Mr. Jang attended KookMin University in Seoul, Korea, graduating with a degree in Visual Communication Design in 1995.

Marc M. Hazout has been Chief Executive Officer and a director of the Company since June 1, 2002. From 1985 to 1987, Mr. Hazout was the Canadian licensee and franchisee for a multinational clothing manufacturer and retailer. From 1987 to 1991, Mr. Hazout established a private label apparel manufacturing and retailing company. From 1991 to 1998, Mr. Hazout developed, owned and operated entertainment complexes in Toronto. Mr. Hazout attended The Canadian Securities Institute from 1998-2000 and in 1999 worked as an equity trader for Swift Trade Securities Inc. in Toronto. Since 1998, Mr. Hazout has been President and C.E.O. of Travellers International Inc., an investment and merchant banking firm headquartered in Toronto. Mr. Hazout studied International Relations and Economics at York University in Toronto from 1983 to 1985. Mr. Hazout completed the Real Estate Licensing Course at Humber College in Toronto in 1984.

Jason Chung has been Chief Financial Officer and a director of the Company since June 1, 2002. From 1993 to 1995, Mr. Chung worked at KPMG Peat Marwick as a staff accountant. From 1995 to 1997, Mr. Chung worked as an Assistant Finance Manager at Samsung Electronics Canada Inc. From 1997 to 1998, Mr. Chung worked as a financial analyst at Kraft Canada Inc. In 1998, Mr. Chung joined the accounting firm Goldfarb, Shulman, Patel and Co. LLP and remained with the firm until 2000. Since 2000, Mr. Chung has been providing financial consulting and advisory services to various clients, including Daewoo Electronics Canada Inc. where Mr. Chung acted as the interim Accounting Manager. Mr. Chung attended the University of Toronto, graduating with a Bachelor of Commerce degree in 1993. Mr. Chung holds a Chartered Accountant designation from Canada and a Certified Public Accountant designation from the US.

John Chung has been a director of the Company since June 1, 2002. Mr. Chung graduated from Korea University in 1963 with a B.A. in Political Science. Following graduation from college, Mr. Chung operated a number of businesses in Korea. In 1977, Mr. Chung immigrated to Canada. In the 1980's and 1990's, Mr. Chung developed a chain of six dry cleaning stores in Canada. After selling the chain, Mr. Chung was self-employed as a consultant designing and setting up dry cleaning stores in the Toronto, Canada area. Mr. Chung is the father of Jason Chung.

ITEM 6: EXECUTIVE COMPENSATION

The following table sets forth the compensation earned by the Company's Chief Executive Officers during the last three fiscal years and other officers who received compensation in excess of $100,000 during any of the last three fiscal years. In accordance with Item 402(a)(5), the Company has omitted certain columns from the table required by Item 402(b).

(1) Mr. Quilliam's compensation was paid in restricted shares of common stock of the Company valued at the market price on the date of issuance. Mr. Quilliam's compensation does not include an additional $1,500 that he received for services as a director of the Company, which amount was paid in shares of common stock of the Company.

(2) Mr. Cohen's compensation was paid in restricted shares of common stock of the Company valued at the market price on the date of issuance. Mr. Cohen's compensation does not include an additional $1,500 that he received for services as a director of the Company, which amount was paid in shares of common stock of the Company.

(3) Mr. Roach's compensation was paid in 300,000 restricted shares of common stock of the Company.

The Company did not grant any options or stock appreciation rights or make an award under any long-term incentive plan to any of its named executive officers during the last fiscal year. The Company did not re-price any options or stock appreciation rights during the last fiscal year. The Company did not have outstanding any options or stock appreciation rights at the end of each of its last two fiscal years. During the last fiscal year, no options or stock appreciation rights were exercised by any of the named executive officers. The Company does not have any employment or deferred compensation agreements with management.

The Company historical policy has been to pay directors $500 per board meeting attended, which amount is payable in shares of common stock of the Company. However, the Company anticipates that its policy on compensation of directors will change following its acquisition of Cyper.

ITEM 7: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On March 29, 1998 the Company sold 60,000 shares of common stock at $0.25 per share to Mari Carmen Cedillo de Norby the wife of former Director, Scott Norby. On May 12, 1998 the company sold 28,000 shares of its common stock at $0.25 per share for cash and exchanged 32,000 shares for an automobile valued at $8000 to Mari Carmen Cedillo de Norby, wife of former Director Scott Norby. Mr. Norby was a Director of the Company from June 1, 1998, until December 6, 1999. On December 13, 1999 the Company issued 550,000 shares of the Company's common stock to EFM Venture Group, Inc. for consulting services to the Company between January 1, 1998 and December 13, 1999. EFM Venture Group, Inc. is controlled by the Company's former Chairman, Edward F. Myers. The Company's board valued these shares at $0.02 per share for a total value of $11,000. These services included work on helping to write the 15c2-11 for filing with the NASD, work of preparation of the 10-SB for filing, assistance with work with Accountants, auditors and Company attorneys. EFM also provided technical advice on the design on electric car conversions.

On December 13, 1999 the Company issued 250,000 shares of its common stock to Betty N. Myers for services to the Company between its organization in 1996 and December 13, 1999. Betty N. Myers is the wife of the Company's former chairman, Edward F. Myers. The board valued these shares at $0.02 per share for a total value of $5,000. These services included secretarial and bookkeeping. On December 13, 1999 the Company issued 36,000 shares of its common stock to Gary Jackson for services to the Company. Dr. Jackson is a past Director and Vice-President of the Company. The board valued these shares at $0.02 per share for a total value of $720. These services included technical advice on conversion of automobiles from gasoline to electric. On December 13, 1999 the Company issued 60,000 shares of its common stock to Gary G. DeGano, the Company's past president, in exchange for options that Mr. DeGano held on 250,000 shares of the Company's common stock at $0.25 per share. The Company valued these shares at $0.02. The Board of Directors decided to reduce the number of outstanding options to increase the company's ability to attract additional capital.

On October 1, 2000 the Company entered into a sublease at 7270 Woodbine Avenue, Suite 200, Markham, Ontario, Canada, for its corporate offices. The Company pays CAD$474.60 per month plus applicable federal taxes. The Company has a sublease agreement with Wepawaug Inc., the head tenant, which gives the Company the right to occupy the space at the above rental rate until August 31, 2001. Since August 31, 2001, the Company has continued to sublease the space on a month-to-month basis. Wepawaug Inc. is controlled by Pierre Quilliam, the Company's former President and CEO.

On October 31, 2000, the Company purchased a 50% interest in a 1999 Cadillac Seville for the price of $16,427.97. The Company purchased this interest from 87807 Canada Ltd., which is controlled by Denise Quilliam, a former director of the Company. On November 7, 2000, the Company sold its interest in the Cadillac to Bisell Investments Inc. for the price of $17,500.00, realizing a profit of $1,072.03. Bisell Investments Inc. owned 47% of the shares of the Company at the time and is controlled by Pierre Quilliam.

As of December 31, 2001, the Company was invoiced for administration and bookkeeping services from 87807 Canada Ltd. and Bisell Investment Group Inc. in the amount of $27,994.62 not including G.S.T. 87807 Canada Ltd. is controlled by Denise Quilliam and Bisell Investment Group Inc. is controlled by Pierre Quilliam.

On January 31, 2001, the Company issued 77,000 restricted shares of its common stock to Pierre Quilliam, the Company's President and CEO for services to the Company from September 13, 2000 until December 31, 2000. The Board valued these shares at $0.10 per share for a total of $7,700. These services included overall management of the Company, assistance with the Company's auditors and attorneys and assisting in the preparation of SEC filings.

On January 31, 2001, the Company issued 77,000 restricted shares of its common stock to Stephen Cohen, the Company's Secretary and Treasurer for services to the Company from September 13, 2000 until December 31, 2000. The Board valued these shares at $0.10 per share for a total of $7,700. These services included management of the Company's administration, assistance with the Company's auditors and attorneys and preparation of SEC filings and compliance requirements.

On April 2, 2001, the Company issued 116,666 restricted shares of its common stock to Pierre Quilliam, the Company's President and CEO for services to the Company from January 1, 2001 until March 31, 2001. The Board valued these shares at $0.06 per share for a total of $7,000. These services included overall management of the Company, assistance with the Company's auditors and attorneys and assisting in the preparation of SEC filings.

On April 2, 2001, the Company issued 116,666 restricted shares of its common stock to Stephen Cohen, the Company's Secretary and Treasurer for services to the Company from January 1, 2001 until March 31, 2001. The Board valued these shares at $0.06 per share for a total of $7,000. These services included overall management of the Company, assistance with the Company's auditors and attorneys and assisting in the preparation of SEC filings.

On April 2, 2001, the Company issued 8,333 restricted shares of its common stock to Denise Quilliam as compensation for attending the directors' meeting held on that date. The Board valued these shares at $0.06 per share for a total of $500.00.

On July 2, 2001, the Company issued 93,750 restricted shares of its common stock to Pierre Quilliam, the Company's President and CEO for services to the Company from April 1, 2001 until June 30, 2001. The Board valued these shares at $0.08 per share for a total of $7,500. These services included overall management of the Company, assistance with the Company's auditors and attorneys and assisting in the preparation of SEC filings.

On July 2, 2001, the Company issued 93,750 restricted shares of its common stock to Stephen Cohen, the Company's Secretary and Treasurer for services to the Company from April 1, 2001 until June 30, 2001. The Board valued these shares at $0.08 per share for a total of $7,500. These services included overall management of the Company, assistance with the Company's auditors and attorneys and assisting in the preparation of SEC filings.

On July 2, 2001, the Company issued 6,250 restricted shares of its common stock to Denise Quilliam as compensation for attending the directors' meeting held on that date. The Board valued these shares at $0.08 per share for a total of $500.00.

On October 4, 2001, the Company issued 140,000 restricted shares of its common stock to Pierre Quilliam, the Company's President and CEO for services to the Company from July 1, 2001 until September 30, 2001. The Board valued these shares at $0.05 per share for a total of $7,000. These services included overall management of the Company, assistance with the Company's auditors and attorneys and assisting in the preparation of SEC filings.

On October 4, 2001, the Company issued 140,000 restricted shares of its common stock to Stephen Cohen, the Company's Secretary and Treasurer for services to the Company from July 1, 2001 until September 30, 2001. The Board valued these shares at $0.05 per share for a total of $7,000. These services included overall management of the Company, assistance with the Company's auditors and attorneys and assisting in the preparation of SEC filings.

On October 4, 2001, the Company issued 10,000 restricted shares of its common stock to Denise Quilliam as compensation for attending the directors' meeting held on that date. The Board valued these shares at $0.05 per share for a total of $500.00.

ITEM 8: DESCRIPTION OF SECURITIES

General

Under the Company's Certificate of Incorporation, the Company is authorized to issue 150,000,000 shares of common stock, par value $0.0001 per share, of which 34,198,649 shares were issued and outstanding at June 12, 2002, and 20,000,000 shares of preferred stock, par value $0.0001 per share, of which no shares are issued and outstanding.

Common Stock

The holders of shares of common stock are entitled to dividends when and as declared by the Board of Directors from funds legally available therefore and, upon liquidation, are entitled to share pro rata in any distribution to common shareholders. Holders of the common stock have one non-cumulative vote for each share held. There are no preemptive, conversion or redemption privileges, nor sinking fund provisions, with respect to the common stock. All of the Company's outstanding shares of common stock are validly issued, fully paid and non-assessable. Signature Stock Transfer, Inc. serves as transfer agent for the common stock.

Preferred Stock

The Company is authorized to issue up to 20,000,000 shares of preferred stock containing such rights, privileges and limitations that the Board of Directors may determine. The Board of Directors has not authorized the issuance of a series of preferred stock, and there are no shares of preferred stock outstanding.

PART II

The Company's common stock is registered with the United States Securities and Exchange Commission under Section 12(g) of the Securities Exchange Act of 1934. Since April 5, 2000, the Company's common stock has been traded on the Pink Sheets, operated by Pink Sheets, LLC, under the symbol "AEAC". The following table summarizes the low and high prices for the Company's common stock for for the last two fiscal years.

There were 128 holders of record of the common stock as of June 12, 2002. This number does not include an indeterminate number of shareholders whose shares are held by brokers in "street name." The above quotations reflect inter-dealer prices, without mark-up, mark-down or commission and may not represent actual transactions. The Company has not declared any cash dividends on its Common Stock during its fiscal years ended on December 31, 2001 or 2000. The Board of Directors of the Company has made no determination to date to declare cash dividends during the foreseeable future.

ITEM 2: LEGAL PROCEEDINGS

The Company is not a party to any pending litigation or government investigation, nor is there any threatened litigation, or investigation, involving the Company or its business or assets of which management is aware.

ITEM 3: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

In March 1999, Harlen and Boettger, LLP informed the Company that it no longer performed audits for public companies due to increased insurance costs. Harlan and Boettger, LLP's report contained no adverse opinion, no disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles. There were no disagreements with Harlen and Boettger, LLP on any matters of accounting principles or practices, financial statement disclosures, or auditing scope or procedures, which if not resolved to the satisfaction of Harlen and Boettger, LLP would have caused Harlen and Boettger, LLP to make reference to the subject matter of the disagreements in connection with its reports.

On March 8, 2000, the Company engaged the firm of Weinberg and Company P.A. as the Company's independent auditors to replace Harlen and Boettger, LLP. On July 31, 2001, the Company's Board of Directors elected not to renew Weinberg and Company, P.A. as the Company's auditors. Weinberg and Company P.A.'s report contained no adverse opinion, no disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles, except that the report dated April 6, 2001 of Weinbert and Company, P.A. for the fiscal year ended December 31, 2000 indicated conditions that raised substantial doubt about the Company's ability to continue as a going concern. There were no disagreements with Weinberg and Company P.A. on any matters of accounting principles or practices, financial statement disclosures, or auditing scope or procedures, which if not resolved to the satisfaction of Weinberg and Company P.A. would have caused Weinberg and Company P.A. to make reference to the subject matter of the disagreements in connection with its reports.

On August 3, 2001, the Company retained Moore Stephens, P.C. as its independent auditors to replace Weinberg and Company, P.A.

ITEM 4: RECENT SALES OF UNREGISTERED SECURITIES

In 1999, the Company sold 151,877 shares of common stock at $0.375 per share. The Company issued these shares in reliance on the exemption from registration contained in Section 4(2) of the Securities Act of 1933. The shares were issued with a restrictive legend, were sold largely to persons who were existing shareholders of the Company, and were sold to persons whom the Company believed to be accredited or sophisticated investors. The purchasers were:

The Company issued 16,000 shares of common stock White Horse Holding, S.A., a company controlled by Gary Degano, to settle a debt. The Company issued these shares in reliance on the exemption from registration contained in Section 4(2) of the Securities Act of 1933. The shares were issued with a restrictive legend, and to a person with knowledge of the Company's financial condition and operations.

The Company approved the issuance of 334,669 shares for services rendered, of which 36,001 were issued in 1999, and the remaining 298,668 shares were issued in 2000. Of the shares issued in 1999, 33,334 shares were issued to David Schuil and 2,667 shares were issued to Wing Fung. The Company issued these shares in reliance on the exemption from registration contained in Section 4(2) of the Securities Act of 1933. The shares were issued with a restrictive legend, and to a person with knowledge of the Company's financial condition and operations. The shares approved in 1999 and issued in 2000 were:

The Company effected a 1 for 3 reverse stock split on March 20, 2000. All share amounts have been adjusted to give effect to the subsequent reverse stock split, and the effect of rounding fractional shares up to the nearest whole share.

The Company issued 554,234 shares of common stock (net of shares cancelled for nonpayment of subscription amounts) in an offering conducted pursuant to Rule 504 at $0.375 per share. All of the investors were accredited investors.

In 2000, the Company sold 50,000 shares of common stock to China Electric Automobile Ltd. at $0.375 per share pursuant to the exemption from registration contained in Section 4(2) and/or Regulation S of the Securities Act of 1933. The shares were issued with a restrictive legend.

In 2000, the Company sold 3,250,000 shares of common stock Bisell Investments, Inc. for $275,000 pursuant to the exemption from registration contained in Section 4(2) and/or Regulation S of the Securities Act of 1933. The shares were issued with a restrictive legend.

The Company issued 355,000 shares of common stock for services rendered. The Company issued these shares in reliance on the exemption from registration contained in Section 4(2) of the 1933 Securities Act. The shares were issued with a restrictive legend, and to a person with knowledge of the Company's financial condition and operations. The shares were issued to:

In April 2002, the Company issued 20,000,000 shares of its common stock to purchase all of the issued and outstanding shares of Cyper. The shares bear a restricted legend and were issued in reliance on the exemption from registration provided by Regulation S.

In May 2002, the Company issued 400,000 shares to John Chung in consideration for $20,000 cash. The shares bear a restricted legend, and were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933 and/or Regulation S. Mr. Chung subsequently became a director of the Company.

ITEM 5: INDEMNIFICATION OF DIRECTORS AND OFFICERS

Neither the Company's Certificate of Incorporation nor its Bylaws contain any provision granting directors or officers a right of indemnification from the Company. However, the Company has entered into contractual indemnification agreements with certain of its former officers and directors.

The Company's Certificate of Incorporation provides that a director of the Company will not be personally liable to the Company or its shareholders for monetary damages for breach of the fiduciary duty of care as a director, including breaches that constitute gross negligence. However, this provision does not eliminate or limit the liability of a director of the Company (i) for breach of the director's duty of loyalty to the Company or its shareholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law (relating to unlawful payment of dividends or unlawful stock repurchases or redemptions), (iv) for gaining a financial profit of other personal advantage to which he or she was not entitled, or (v) for breaches of a director's responsibilities under the Federal securities laws.

Insofar as indemnification for liabilities under the 1933 Act may be permitted to directors, officers or persons controlling the Company, we has been informed that in the opinion of the Securities an Exchange Commission, such indemnification is against public policy as expressed in the 1933 Act and unenforceable.

At the present, there is no pending litigation or proceeding involving a director or officer of the Company as to which indemnification is being sought nor are aware of any threatened litigation that may result in claims for indemnification by any officer or director. The Company does not currently maintain directors and officers liability insurance.

PART F/S

PART III

ITEMS 1 AND 2. INDEX TO AND DESCRIPTION OF EXHIBITS

(1) Incorporated by reference from the Form 8-K filed on May 17, 2002.

(2) Incorporated by reference from the Form 10-SB filed on February 23, 2000.

(3) Filed July 16, 2002.

5. Cyper Entertainment Co., Ltd., a Korea corporation (100%).
6. Incorporated by reference from the Form 8-K/A filed on May 17, 2002.

In accordance with Section 12 of the Securities Exchange Act of 1934, the registrant caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC.

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001

REPORT OF INDEPENDENT AUDITOR

To the Board of Directors and Stockholders'

of American Electric Automobile Company, Inc.

We have audited the accompanying consolidated balance sheet of American Electric Automobile Company, Inc. and subsidiary [a development stage company] as of December 31, 2001, and the related consolidated statements of operations, stockholders' deficit, and cash flows for the year then ended and for the period from June 15, 1996 [inception] to December 31, 2001. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We did not audit the cumulative data from June 15, 1996 to December 31, 2000. That cumulative data were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts in the cumulative data through December 31, 2000, is based solely on the report of other auditors.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, based on our audit and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of American Electric Automobile Company, Inc. and subsidiary [a development stage company] as of December 31, 2001 and the results of their operations and their cash flows for the year then ended and for the period from June 15, 1996 (inception) to December 31, 2001 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has recurring losses from operations and has a net capital deficiency. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Moore Stephens, P.C.

Certified Public Accountants

New York, New York

April 23, 2002

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of:

American Electric Automobile Company, Inc. and Subsidiary

We have audited the accompanying consolidated statements of operations, changes in stockholders' equity (deficiency) and cash flows for American Electric Automobile Company, Inc. and Subsidiary for the year ended December 31, 2000. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly in all material respects, the results of operations and cash flows for American Electric Automobile Company, Inc. and Subsidiary for the year ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company is a development stage company with accumulated operating losses, a working capital deficiency, and a stockholders deficiency. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans concerning this matter are also described in Note 2. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

WEINBERG and COMPANY, P.A.

Boca Raton, Florida

April 6, 2001

1. THE COMPANY

American Electric Automobile Company, Inc. ("AEAC") (a development stage company), a Delaware corporation, was incorporated on May 9, 1996. The Company is headquartered in Ontario, Canada and operates primarily in the United States and Canada. On June 15, 1996, AEAC acquired all of the outstanding stock of California Electric Automobile Co., Inc. ("CEAC"), a California corporation incorporated on November 14, 1995 (together the "Company"). AEAC exchanged 1,050,000 shares of its common stock (prior to a 1 for 3 stock split), in a ratio of ten to one, for all of the outstanding shares of CEAC. The acquisition was accounted for using the purchase method of accounting. Under this method, the assets were recorded at their fair market value. The $95 excess value of the stock issued over the fair market value of the assets acquired was recorded as goodwill and subsequently written off in that year.

The Company's mission is to provide environmentally sensitive, quality and cost effective electric automotive transportation domestically with cooperative structuring of opportunities with global partners.

2. GOING CONCERN

The Company's financial statements for the year ended December 31, 2001 have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company incurred a net loss of approximately $339,500 for the year ended December 31, 2001 and has accumulated losses since inception of approximately $1,153,000. In addition, the Company's had a working capital deficiency of $155,800 at December 31, 2001. These factors create an uncertainty about the Company's ability to continue as a going concern.

Management's plans to alleviate these factors and allow the Company to continue as a going concern primarily consist of seeking additional equity investments. In February 2002 the Company entered into negotiations to acquire 100% of the stock of an operating company (see Note 11).

The ability of the Company to continue as a going concern is dependent on the success of its plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiary. All significant inter-company balances and transactions have been eliminated in consolidation.

2. Use of Estimates

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported periods. Actual results could differ from those estimates.

3. Cash and Cash Equivalents

For purposes of the cash flows statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. There were no cash equivalents at December 31, 2001.

4. Inventory

Inventories of automobiles and conversion parts of gas to electric are stated at cost on a specific identification basis.

5. Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, generally from three to five years.

6. Concentration of Credit Risk

The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk.

The Company does not believe it is exposed to any credit risk from advances receivable because these are all from related parties.

The Company does not require collateral or other securities to support financial instruments that are subject to credit risk.

7. Revenue Recognition

The Company recognizes revenue on each automobile conversion when the completed conversion is billed and delivered to the respective customer.

8. Income Taxes

The Company accounts for income taxes under Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes" . Under SFAS No.109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

9. Advertising Expense

Advertising costs are expensed as incurred.

10. Loss per share of Common Stock

Loss per share and common equivalent share are calculated on the basis of weighted average number of common shares outstanding. Due to the antidilutive effect of the assumed exercise of outstanding common stock equivalents at December 31, 2001 and 2000, loss per share does not give effect to the exercise of these common stock equivalents in either year, but they may dilute earnings per share in the future.

11. Impairment

The Company evaluates its long-lived assets to determine whether later events and circumstances warrant revised estimates of useful lives or a reduction in carrying value due to impairment.

In September 2001, the FASB issued SFAS No. 144 "Accounting for Impairment or Disposal of Long-Lived Assets". SFAS No. 144 supersedes SFAS No. 121 "Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of", but retains the basic requirements regarding when and how to measure an impairment loss. SFAS No. 144 applies to long-lived assets to be held or disposed of but specifically excludes certain classes of assets such as goodwill and intangibles not being amortized. The Company does not believe that the adoption of this standard will have a material impact on the Company's financial position or results of operations.

12. Stock-based Compensation

On July 1, 1996, the Company adopted the disclosure requirements of SFAS No. 123, "Accounting for Stock-Based Compensation" for stock options and similar equity instruments (collectively, "options") issued to employees; however, the Company will continue to apply the intrinsic value based method of accounting for options issued to employees prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issues to Employees" rather than the fair value based method of accounting prescribed by SFAS No. 123. SFAS No. 123 also applies to transactions in which an entity issues its equity instruments to acquire goods or services from non-employees. Those transactions must be accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.

13. Foreign Currency Transactions

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the US dollar are included in the results of operations as incurred. Foreign transaction gains and losses are immaterial.

For the years ended December 31, 2001 and 2000, the Company issued 1,179,415 and 355,000 common shares, respectively, for services rendered by officers and directors. The value of the services was $89,901 and $28,430, respectively. During 2000, the Company reclassified $23,000 of stock issued in 1999 pursuant to a settlement agreement from additional paid-in capital to forgiveness of debt.

For the year ended December 31, 2001 and 2000, there were no income taxes or interest expense paid by the Company.

CYPER ENTERTAINMENT CO., LTD.

FINANCIAL STATEMENTS

Years ended December 31, 2001 and 2000

with

INDEPENDENT AUDITOR'S REPORT

The Board of Directors and Stockholders

Cyper Entertainment Co., Ltd.

We have audited the accompanying balance sheet of Cyper Entertainment Co., Ltd. (the "Company") as of December 31, 2001 and 2000 and the related statement of income, disposition of deficit and cash flow for the years then ended, all expressed in Korean won, These financial statements are the responsibility of Cyper Entertainment co., Ltd.'s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our review in accordance with the auditing standards generally accepted in the Republic of Korea. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether 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, expressed in Korean won, present fairly, in all material respects, the financial position of Cyper Entertainment Co., Ltd. as of December 31, 2001 and 2000, and the results of its operations, disposition of undisposed accumulated deficit and cash flows for the years then ended in conformity with accounting principles generally accepted in the Republic of Korea.

We have also reviewed the translation of the 2001 financial statements referred to above into United States dollar amounts on the basis described in Note 1. Based on our review, such financial statements have been properly translated on such basis. The United States dollar amounts are presently translated on such basis. The United States dollar amounts are presently solely for the convenience of the reader.

Without qualifying our opinion, we draw attention to Note 14 to the financial statements. Which states that the operations of the Company have been affected, and may continue to be affected for the foreseeable future, by the general unstable economic conditions in the Republic of Korea and in the Asia Pacific region. The ultimate effect of these uncertainties on the financial position of the Company as of the balance sheet date cannot presently be determined.

The accompanying financial statements are not intended to present the financial position and results of operations in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than the Republic of Korea. The procedures and practices utilized in the Republic of Korea to audit such financial statements may differ from those generally accepted and applied in other countries and jurisdictions. Accordingly, this report and the accompanying financial statements are not intended for use by those who are not informed about Korean accounting principles or auditing standards and their application in practice.

March 9, 2002

CYPER ENTERTAINMENT CO., LTD.

BALANCE SHEET

Years ended December 31, 2001 and 2000

(Continued)

See accompanying notes and accountants' review report.

CYPER ENTERTAINMENT CO., LTD.

BALANCE SHEET (CONT'D)

Years ended December 31, 2001 and 2000

See accompanying notes and accountants' review report.

CYPER ENTERTAINMENT CO., LTD.

STATEMENTS OF INCOME

Years ended December 31, 2001 and 2000

See accompanying notes and accountants' review report.

CYPER ENTERTAINMENT CO., LTD.

STATEMENTS OF DISPOSITION OF DEFICIT

Years ended December 31, 2001 and 2000

CYPER ENTERTAINMENT CO., LTD.

NOTES TO FINANCIAL STATEMENTS

December 31, 2001 and 2000

CYPER ENTERTAINMENT CO., LTD.

NOTES TO FINANCIAL STATEMENTS

December 31, 2001 and 2000

NOTES TO FINANCIAL STATEMENTS

December 31, 2001 and 2000

CYPER ENTERTAINMENT CO., LTD.

NOTES TO FINANCIAL STATEMENTS

December 31, 2001 and 2000

3. Restricted deposits

CYPER ENTERTAINMENT CO., LTD.

NOTES TO FINANCIAL STATEMENTS

December 31, 2001 and 2000