ITEM 2.01   COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS

O n October 12, 2007, we entered into a Stock Exchange Agreement with Joytoto Co., Ltd., a Korean company, and Joyon Entertainment Co., Ltd, a Korean company, to purchase 100% of the issued and outstanding capital stock of Joyon Entertainment, Inc., a Delaware corporation (“JEI”), in exchange for 115,000,000 shares of our common stock (after giving effect to a one-for-forty reverse split of our common stock) as well as the divestment of our two subsidiaries, BH Holding Company, Inc. and ABS Holding Company, Inc. As a result of this acquisition we acquired certain operations and assets as described herein.

FORM 10 DISCLOSURE

As disclosed elsewhere in this Current Report, effective on October 31, 2007, we acquired Joyon Entertainment, Inc. Although we were not a shell company prior to the transaction, we had significantly different operations before the transaction and have therefore included the below Form 10 disclosure information as would have been required under Item 2.01(f) of Form 8-K if we were a shell company immediately before the transaction. We have included this disclosure in order to disclose the details of this transaction and our resulting new operations and management.

Accordingly, we are providing below the information that would be included in a Form 10 if we were to file a Form 10. Please note that the information provided below relates to the combined company after the acquisition of JEI, except that information relating to periods prior to the date of the merger only relate to the Company unless otherwise specifically indicated.

DESCRIPTION OF BUSINESS

History and Development of the Company

Joytoto USA, Inc., formerly BioStem, Inc. (the “Company,” “we,” and “us”) was incorporated on November 2, 2001, in the State of Nevada, as Web Views Corporation. In June 2003, we acquired 100% of the issued and outstanding shares of Cascade Mountain Mining Corp., pursuant to an exchange agreement. As a result of the acquisition and the change in focus of our business, on June 17, 2003, we changed our name from Web Views Corporation to Cascade Mountain Mining Company, Inc.

On January 7, 2005, we changed our name from Cascade Mountain Mining Company, Inc. to National Parking Systems, Inc., in anticipation of an exchange agreement entered into on January 13, 2005, whereby we acquired 100% of the issued and outstanding shares of ABS Holding Company, Inc., a Nevada corporation and BH Holding Company, Inc., a Nevada corporation.

On November 18, 2005, we changed our name from National Parking Systems, Inc. to BioStem, Inc. in contemplation of the closing of an Agreement and Plan of Merger we had entered into with Cryobanks International, Inc., a stem cell company. Due to the failure of Cryobanks to satisfy certain conditions of the closing of such Agreement, we terminated the Agreement in September 2007, and sought a new acquisition.

 

 

O n October 12, 2007, we entered into a Stock Exchange Agreement with Joytoto Co., Ltd., a Korean company (“Joytoto Korea”) , and Joyon Entertainment Co., Ltd, a Korean company, to purchase 100% of the issued and outstanding capital stock of Joyon Entertainment, Inc., a Delaware corporation (“JEI”), in exchange for 115,000,000 shares of our common stock (after giving effect to a one-for-forty reverse split of our common stock) as well as the divestment of our two subsidiaries, BH Holding Company, Inc. and ABS Holding Company, Inc. Effective on October 31, 2007, our name was changed to Joytoto USA, Inc. and our common stock commenced trading under the new symbol “JYTO”.

We are a majority owned subsidiary of Joytoto Korea, a Korean public company traded on the KOSDAQ. We have one wholly-owned subsidiary, JEI, and two sub-subsidiaries, Joytoto Technologies, Inc., a Nevada corporation (“JTI”) and Joytoto America, Inc., a California corporation (“JAI”), both of which are wholly-owned subsidiaries of JEI.

Products and Services

Our operations are organized into two business segments: Consumer Electronics and Video Games. Neither of our business segments has generated any revenues.

Consumer Electronics

Through our sub-subsidiary, JTI, we are a virtual, original equipment manufacturer (“OEM”) of consumer electronics for retailers located throughout the world. Effective on June 11, 2007, JTI entered into an Exclusive Distributorship Agreement with Joytoto Korea, whereby JTI was appointed as the exclusive worldwide distributor of Joytoto Korea’s MP3 products and other consumer electronic devices. Joytoto Korea will complete all purchase orders existing or pending as of the date of the Exclusive Distributorship Agreement. In addition, Joytoto Korea will complete any additional purchase orders until such time as JTI is able to fulfill such orders, which is expected to be in the first quarter of 2008. It is anticipated that Joytoto Korea will transfer to JTI all of its MP3 products business as described in the Exclusive Distributorship Agreement at such time as we are able to fulfill all new purchase orders for such products. We hope to enter into direct contractual relationships with Joytoto Korea’s primary customers at that time.

In September 2006, Joytoto Korea entered into an agreement with Best Buy Co., Inc. (“Best Buy”) to develop and manufacture an MP3 player to be sold under Best Buy’s in-house brand, Insignia. To date, Joytoto Korea has developed three models of the Insignia MP3 player for Best Buy. Product features of the top of the line Insignia Pilot include:

·

8GB internal flash storage;

·

Built-in Bluetooth wireless audio that enables users to listen to music with compatible Bluetooth headphones;

·

2.4" high-resolution LCD color display with wide viewing angles;

·

Built-in digital FM tuner;

·

Secure digital card expansion slot for additional memory capacity;

·

High-speed USB 2.0 interface; and

·

PC and Mac compatible.

 

 

Retail prices for the Insignia Pilot line range from $179 for the 8 GB model to $139 for the 4 GB model. Prices for the Insignia Sport line range from $119 for the 4 GB model to $89 for the 2 GB model.

In February 2007, Joytoto Korea also entered into an OEM agreement to develop and manufacture 200,000 units of the IRiver X20 multi-media device for South Korean consumer electronics firm Reigncom. Product features of the X-20 include:

·

8GB internal flash storage holds MP3 files, photos and videos;

·

QVGA Color LCD with dynamic GUI (2.2 inch TFT-LCD);

·

Music: 22 hours/Video: 6 hours;

·

Built-in SD-Card Slot;

·

Firmware upgradeable; and

·

USB 2.0 interface, Ultra Fast Data Transfer.

In addition to the relationships with Best Buy and Reigncom, we are actively seeking partnerships with other leading retailers and consumer electronics brands globally. We intend to expand our product offerings to include GPS devices, LCD displays, Bluetooth devices, digital picture frames, and other digital multimedia peripherals.

As a virtual OEM, we believe we benefit from a cost structure that does not include the overhead costs of manufacturing facilities and related personnel. Furthermore, we carry little inventory and are not responsible for returned goods. Joytoto Korea’s main contract manufacturing partner has built devices for Sandisk, Samsung, and Napster. The manufacturer currently delivers between 30,000 and 50,000 MP3 players to Joytoto Korea per month, with the ability to scale production on short notice.

Unlike retailers, whose core competency revolves around purchasing and reselling finished goods, Joytoto Korea’s value-added services include product development and supply chain management. Serving their customers as a supply channel partner, Joytoto Korea offers a wide spectrum of products and a broad range of services and solutions, including materials planning, design services, programming and assembly services. We intend to take over Joytoto Korea’s MP3 manufacturing and distribution business, and in support of these services, we currently maintain a staff of five employees and make use of Joytoto Korea’s staff of over 100 hardware, mechanical, and software engineers in Korea as well as quality control and quality assurance manufacturing support in China.

 

Video Games

Through our sub-subsidiary, JAI, we plan to operate an online game service in North America.

On April 18, 2007, JAI entered into a Master License Agreement with Joytoto Korea, and Joyon Entertainment Co., Ltd., a Korean company (collectively, the “Licensors”), whereby JAI acquired an exclusive license to operate an online game service, using four online video games developed by the Licensors, in the United States, for a period of ten years . In addition, JAI has the option to enter into an exclusive license to provide an additional twenty online video games through its online game service . A national appraisal firm, valued the online game license at more than $36,000,000.

 

 

Customers and Suppliers

Our target customers are value-added resellers (“VARs”) that sell consumer electronics worldwide. Best Buy and Reigncom, with which our controlling parent company, Joytoto Korea, has current agreements, are examples of VAR’s. In addition to our intent to take over Joytoto Korea’s relationships with Best Buy and Reigncom, we are actively seeking to develop partnerships with other leading retailers and consumer electronics brands globally.

 

The contract manufacturer currently delivers between 30,000 and 50,000 MP3 players to Joytoto Korea per month, with the ability to scale production on short notice. We regard Joytoto Korea’s relationship with its manufacturer, and the transfer of that relationship to our subsidiary, JTI, to be essential to our consolidated results of operations and do not currently have arrangements with other manufacturers to build and deliver our products.

Competition

Our business is extremely competitive, particularly with respect to prices, and, in certain instances, product availability. In addition, the market for the products we develop is subject to rapid technological change. We intend to compete with numerous OEM’s, many of which have significantly greater financial, technical, and marketing resources than we do.

Employees

We have five employees, all of which are full time.

RISK FACTORS

We have a limited operating history and limited historical financial information upon which you may evaluate our performance.

We are in our early stages of development and face risks associated with a new company in a growth industry. We may not successfully address these risks and uncertainties or successfully implement our operating strategies. If we fail to do so, it could materially harm our business to the point of having to cease operations and could impair the value of our common stock to the point investors may lose their entire investment. Even if we accomplish these objectives, we may not generate positive cash flows or the profits we anticipate in the future.

If we are unable to maintain relationships with our suppliers, our business could be materially adversely affected.  

Substantially all of our products are going to be manufactured by Joytoto Korea’s contract manufacturing partner. To the extent that manufacturer is unwilling to do business with us, or to continue to do business with us once we enter into formal agreements with it, our business could be materially adversely affected. In addition, to the extent that the manufacturer modifies the terms of any contract it may enter into with us (including, without limitation, the terms regarding price, rights of return, or other terms that are favorable to us), or extend lead times, limit supplies due to capacity constraints, or other factors, there could be a material adverse effect on our business.

Our controlling parent company, Joytoto Korea, has contractual arrangements with only two customers at this time, and we intend to take over these contractual arrangements. If we are unable to take over these contractual arrangements, either due to inability to perform or unwillingness of the customers to accept us as the successor to Joytoto Korea, or if we lose these customer accounts before they generate any revenue, our business would substantially suffer.

Our controlling parent company, Joytoto Korea, currently has contractual relationships with Best Buy and Reigncom, neither of which has generated any revenue for us. The loss of business from Best Buy and Reigncom, or the failure to establish direct contractual relationships between Best Buy and/or Reigncom and our JTI subsidiary before we generate revenues would substantially harm our business.

We operate in a competitive industry and continue to be under the pressure of eroding gross profit margins, which could have a material adverse effect on our business.  

The market for the products we intend to develop is very competitive and subject to rapid technological change. The prices for our intended products tend to decrease over their life cycle, which can result in decreased gross profit margins for us. There is also substantial and continuing pressure from customers to reduce their total cost for products. We expend substantial amounts on the value creation services required to remain competitive, retain existing business, and gain new customers, and we must evaluate the expense of those efforts against the impact of price and margin reductions. Further, our margins will be lower in certain geographic markets and certain parts of our business than in others. For example, the products we intend to sell in the Asian markets tend to have lower profit margins than in the United States. If we are unable to effectively compete in our industry or are unable to maintain acceptable gross profit margins, our business could be materially adversely affected.

 

 

Products developed by us may be found to be defective and, as a result, warranty and/or product liability claims may be asserted against us, which may have a material adverse effect on the company.  

We may face claims for damages as a result of defects or failures in the products we intend to develop, or which Joytoto Korea has developed for value-added resellers. Our ability to avoid liabilities, including consequential damages, may be limited as a result of differing factors, such as the inability to exclude such damages due to the laws of some of the countries where we do business. Our business could be materially adversely affected as a result of a significant quality or performance issue in the products developed by us, if we are required to pay for the damages that result.

Our share ownership is concentrated.  

Joytoto Co. Ltd., a Korean company, beneficially owns approximately 74.9% of our voting shares (including shares owned by its wholly-owned subsidiary, Joyon Entertainment Co., Ltd.). As a result, this stockholder can exert significant influence over all matters requiring stockholder approval, including the election and removal of directors, any merger, consolidation or sale of all or substantially all of assets, as well as any charter amendment and other matters requiring stockholder approval. In addition, this stockholder may dictate the day to day management of the business. This concentration of ownership may delay or prevent a change in control and may have a negative impact on the market price of our common stock by discouraging third party investors. In addition, the interests of this stockholder may not always coincide with the interests of our other stockholders.

Our non-U.S. locations may represent a significant portion of our sales, and consequently, we may be exposed to risks associated with operating internationally.  

As a result of our intended foreign sales and locations, and our relationships with foreign suppliers and potential foreign customers, our operations may be subject to a variety of risks that are specific to international operations, including the following:

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import and export regulations that could erode profit margins or restrict exports;

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the burden and cost of compliance with foreign laws, treaties, and technical standards and changes in those regulations;

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potential restrictions on transfers of funds;

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foreign currency fluctuations;

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import and export duties and value-added taxes;

·

transportation delays and interruptions;

·

uncertainties arising from local business practices and cultural considerations; and

·

potential military conflicts and political risks.

While we intend to adopt measures to reduce the potential impact of losses resulting from the risks of doing business abroad, we cannot ensure that such measures will be adequate.

 

 

When we make acquisitions, we may not be able to successfully integrate them or attain the anticipated benefits.  

We intend to acquire other businesses that are synergistic with ours. If we are unsuccessful in integrating our acquisitions, or if integration is more difficult than anticipated, we may experience disruptions that could have a material adverse effect on our business. In addition, we may not realize all of the anticipated benefits from our acquisitions, which could result in an impairment of goodwill or other intangible assets.

 

If we fail to maintain an effective system of internal controls or discover material weaknesses in our internal controls over financial reporting, we may not be able to report our financial results accurately or timely or detect fraud, which could have a material adverse effect on our business.  

An effective internal control environment is necessary for us to produce reliable financial reports and is an important part of our effort to prevent financial fraud. We are required to periodically evaluate the effectiveness of the design and operation of our internal controls over financial reporting. Based on these evaluations, we may conclude that enhancements, modifications or changes to internal controls are necessary or desirable. While management evaluates the effectiveness of our internal controls on a regular basis, these controls may not always be effective. There are inherent limitations on the effectiveness of internal controls, including collusion, management override, and failure of human judgment. In addition, control procedures are designed to reduce rather than eliminate business risks. If we fail to maintain an effective system of internal controls, or if management or our independent registered public accounting firm discovers material weaknesses in our internal controls, we may be unable to produce reliable financial reports or prevent fraud, which could have a material adverse effect on our business. In addition, we may be subject to sanctions or investigation by regulatory authorities, such as the SEC. Any such actions could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements, which could cause the market price of our common stock to decline or limit our access to capital.  

We will rely on third-party suppliers and manufacturers to provide raw materials for and to produce our products, and we will have limited control over these suppliers and manufacturers and may not be able to obtain quality products on a timely basis or in sufficient quantity.

 

Substantially all of our products will be manufactured by unaffiliated manufacturers. We may not have any long-term contracts with our suppliers or manufacturing sources, and we expect to compete with other companies for raw materials, production and import quota capacity.

There can be no assurance that there will not be a significant disruption in the supply of raw materials from our intended sources or, in the event of a disruption, that we would be able to locate alternative suppliers of materials of comparable quality at an acceptable price, or at all. In addition, we cannot be certain that our unaffiliated manufacturers will be able to fill our orders in a timely manner. If we experience significant increased demand, or need to replace an existing manufacturer, there can be no assurance that additional supplies of raw materials or additional manufacturing capacity will be available when required on terms that are acceptable to us, or at all, or that any supplier or manufacturer would allocate sufficient capacity to us in order to meet our requirements. In addition, even if we are able to expand existing or find new manufacturing or raw material sources, we may encounter delays in production and added costs as a result of the time it takes to train our suppliers and manufacturers in our methods, products and quality control standards. Any delays, interruption or increased costs in the supply of raw materials or manufacture of our products could have an adverse effect on our ability to meet retail customer and consumer demand for our products and result in lower revenues and net income both in the short and long-term.

 

 

In addition, there can be no assurance that our suppliers and manufacturers will continue to provide raw materials and to manufacture products that are consistent with our standards. We may receive shipments of product that fail to conform to our quality control standards. In that event, unless we are able to obtain replacement products in a timely manner, we risk the loss of revenues resulting from the inability to sell those products and related increased administrative and shipping costs. In addition, because we do not control our manufacturers, products that fail to meet our standards or other unauthorized products could end up in the marketplace without our knowledge, which could harm our reputation in the marketplace.

The Chinese government could change its policies toward, or even nationalize, private enterprise, which could harm our operations.  

The majority of our manufacturing will be conducted in China. Accordingly, our business, financial condition, results of operations and prospects are affected significantly by economic, political and legal developments in China. Over the past several years, the Chinese government has pursued economic reform policies, including the encouragement of private economic activities and decentralization of economic regulation. The Chinese government may not continue to pursue these policies or may significantly alter them to our detriment from time to time without notice. Changes in policies by the Chinese government resulting in changes in laws or regulations, our interpretation of laws or regulations, or the imposition of confiscatory taxation, restrictions on currency conversion or imports and sources of supply could materially and adversely affect our business and operating results.

Our common stock may be affected by limited trading volume and may fluctuate significantly.

There has been a limited public market for our common stock and there can be no assurance an active trading market for our common stock will develop. This could adversely affect our shareholders’ ability to sell our common stock in short time periods or possibly at all. Our common stock has experienced and is likely to experience significant price and volume fluctuations that could adversely affect the market price of our common stock without regard to our operating performance. Our stock price could fluctuate significantly in the future based upon any number of factors such as: general stock market trends; announcements of developments related to our business; fluctuations in our operating results; announcements of technological innovations, new products or enhancements by us or our competitors; general conditions in the markets we serve; general conditions in the U.S. economy; developments in patents or other intellectual property rights; the performance of our eligible portfolio companies; and developments in our relationships with our customers and suppliers. Substantial fluctuations in our stock price could significantly reduce the price of our stock.

Our common stock is traded on the "Over-the-Counter Bulletin Board," which may make it more difficult for investors to resell their shares due to suitability requirements.

Our common stock is currently traded on the Over the Counter Bulletin Board (OTCBB) where we expect it to remain in the foreseeable future. Broker-dealers often decline to trade in OTCBB stocks given the market for such securities are often limited, the stocks are more volatile, and the risk to investors is greater. These factors may reduce the potential market for our common stock by reducing the number of potential investors. This may make it more difficult for investors in our common stock to sell shares to third parties or to otherwise dispose of their shares. This could cause our stock price to decline.

 

 

(1)

The selected financial data included in this Section is the financial data for Joyon Entertainment, Inc. which contains all the operations of the parent company, Joytoto USA, Inc. (formerly known as BioStem, Inc.). This information assumes that our now discontinued (divested) parking operations were divested as of the inception of Joyon Entertainment, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.

Although the forward-looking statements in this Current Report on Form 8-K reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

Summary Overview

On October 31, 2007, we divested our two subsidiaries and acquired Joyon Entertainment, Inc., and its two wholly-owned subsidiaries, Joytoto America, Inc. and Joytoto Technologies, Inc. The discussion below concerns the business operations of our new subsidiaries, which are engaged in the business of providing online gaming services and MP3 and other technical products.

Results of Operations

Introduction

Our business is conducted through our two wholly-owned subsidiaries, Joytoto America and Joytoto Technologies. Both were acquired by Joyon Entertainment, Inc., in the second quarter of 2007, and both were formed in the third quarter of 2006, and thus we have no operations, other than some simple formation activities, for comparison purposes in prior periods. We have no revenues for any periods. We anticipate that we will have revenues beginning in 2008, but that we will continue to operate at a loss until at least the fourth quarter of 2008. There can be no assurance, however, that we will achieve all or any part of our anticipated revenue goals. All of our revenue goals are based on the assumption that Joytoto Korea will transfer its MP3 products business to our subsidiary, Joytoto Technologies, pursuant to our Exclusive Distributorship Agreement, however, this transfer cannot be assured, and if this transfer does take place, it cannot be assured that the transfer will be successful, or that the suppliers of our products will accept us as their customer, or the purchasers of our products will accept us as their supplier.

 

 

Six Months ended June 30, 2007 and the Period from December 6, 2007 (Inception) to December 31, 2006

For both the six months ended June 30, 2007, and the period from December 6, 2006 (Inception) to June 30, 2007, our selling, general and administrative expenses consisted primarily of $69,125 in professional fees, $10,000 of payroll expenses, and $7,373 of rent expense for the six months ended June 30, 2007 and $5,001 of professional fees for the period from December 6, 2006 (Inception) to December 31, 2006. Depreciation is of computers and other office furniture and equipment. Amortization is derived from the value assigned to the securities and other consideration issued for our license and distribution agreements, based on their estimated useful life (see Note F to the enclosed consolidated financial statements).

Net Loss

Because we have had no revenues for the periods discussed, our total costs and expenses for each period is equal to our net loss for the same period.

Liquidity and Capital Resources

Introduction

Our primary assets are the two online game license agreements and the Exclusive Distributorship Agreement. We have not begun to generate revenue from these agreements, and as a result we have very few current assets. Our cash requirements have been relatively small up to this point, but as a result of the acquisition of JEI and the fact that we are now a public, reporting company, we anticipate that our cash needs will increase dramatically. We anticipate satisfying these cash needs through the sale of our common stock until we not only begin to generate revenue, but until we can generate enough revenue to sustain our operations.

 

 

Cash Requirements

For the six months ended June 30, 2007, we had a net loss from operations of $289,093. This was offset by depreciation and amortization of $192,621, an increase in loan receivable of $11,500, a decrease in prepaid expenses of $1,369, an increase in accrued expenses of $48,565, and an increase in the amount due to an affiliate (Joytoto Korea) of $20,000, for total cash used in our operating activities of $38,038.

As stated above, we anticipate that our cash requirements will increase substantially as a result of the fact that we are now a public, reporting company and as we begin to increase operations to generate revenue from our license and distributorship agreements.

Sources and Uses of Cash

Operations

We had no revenues for the six months ended June 30, 2007, and thus generated no cash from operations.

Investments

We increased our cash by $48,210 as a result of the acquisition of Joytoto America and Joytoto Technologies.

Financing

We did not have any cash from financing activities.

Critical Accounting Policies

The discussion and analysis of the Company’s financial condition and results of operations are based upon its financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. In consultation with its Board of Directors, the Company has identified the following accounting policies that it believes are key to an understanding of its financial statements. These are important accounting policies that require management’s most difficult, subjective judgments.

Valuation of License Agreements

The company accounts for goodwill and license agreements in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and other Intangible Assets.” Under SFAS 142, goodwill and intangibles with indefinite lives are not amortized; rather they are tested for impairment at least annually.  Intangible assets and license agreements, other than goodwill, with definite lives will be amortized over their useful lives ranging from 3 to 10 years. The company periodically evaluates the reasonableness of the useful lives of these intangible assets.  The license agreements were valued on our balance sheet as follows:

A.   Upon execution of the Master License Agreement the Company issued Joyon Korea thirty million (30,000,000) common shares as consideration. Prior to the acquisition of the Master License Agreement the Company had an independent business valuation performed whereby the Company’s enterprise value was calculated to be $0.1799 per share. Accordingly, the shares issued for the license were valued at $0.1799 per share.

 

 

B.   Prior to the acquisition of the Exclusive Distributorship Agreement the Company had an independent business valuation performed whereby the Company’s enterprise value was calculated to be $0.3562 per share. Accordingly, the shares issued for the license agreement were valued at $0.3562 per share.

C.   License agreements are comprised of the following:

 

Off-balance Sheet Arrangements

We have no off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is deemed by our management to be material to investors.

DESCRIPTION OF PROPERTY

Joytoto America, Inc., a wholly-owned subsidiary of Joyon Entertainment, Inc., leases approximately 1,800 square feet of office space in Santa Clara, California, for $3,072 per month pursuant to the terms of a one (1) year lease agreement commencing March 1, 2007.

 

 

(1)

Unless otherwise indicated, based on 153,612,510 shares of common stock issued and outstanding following the acquisition of JEI. Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for the purposes of computing the percentage of any other person.

(2)

Indicates one of our officers or directors. Beneficial ownership by these officers does not include shares owned by Joytoto Co., Ltd. or Joyon Entertainment Co., Ltd.

(3)

Unless indicated otherwise, the address of the shareholder is c/o Joytoto USA, Inc., 3000 Scott Boulevard, Suite 206, Santa Clara, CA 95054.

(4)

Joyon Entertainment Co., Ltd. is a wholly-owned subsidiary of Joytoto Co. Ltd., and as such, the shares of common stock held by both are attributed to the other. Combined, they own 42.3% of our outstanding common stock.

(5)

On November 29, 2007, Joytoto Co., Ltd. and Joyon Entertainment Co., Ltd. transferred (i) 21,000,000 shares to Seong Yong Cho (our President and a member of our Board of Directors), (ii) 21,000,000 shares to Seong Sam Cho (our CFO and a member of our Board of Directors), and (iii) 8,000,000 shares to Doo Ho Choi (our COO and a member of our Board of Directors), bringing the share ownership to 35,000,000 shares owned by Joytoto Co., Ltd., and 30,000,000 shares owned by Joyon Entertainment Co., Ltd.

 

 

The issuer is not aware of any person who owns of record, or is known to own beneficially, ten percent or more of the outstanding securities of any class of the issuer, other than as set forth above. There are no classes of stock other than common stock issued or outstanding.

There are currently warrants outstanding to acquire an aggregate of 21,000,000 shares of our common stock at an exercise price of $0.10 per share which were issued to the holders of our Junior Convertible Debentures as part of the acquisition of JEI. There are also currently warrants outstanding to acquire an aggregate of 7,400,000 shares of our common stock at an exercise price of $0.35 per share which were issued to three consultants as part of the acquisition of JEI. Other than as set forth above, none of these parties owns, in the aggregate and including shares of our common stock that may be acquired upon exercise of their warrants, more than five percent (5%) of our common stock.

There are no current arrangements which will result in a change in control.

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the names and ages of the current directors and executive officers of the Company, the principal offices and positions with the Company held by each person and the date such person became a director or executive officer of the Company. The executive officers of the Company are elected annually by the Board of Directors. The directors serve one-year terms until their successors are elected. The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors. Unless described below, there are no family relationships among any of the directors and officers.

Seong Yong Cho (Michael Cho) , 39, has been the Chief Executive Officer and a Director since the acquisition of JEI on October 31, 2007. He has served as the Chief Executive Officer of Joyon Entertainment Co., Ltd. since December 1999 and has been a director of Joytoto Co., Ltd. since December 2005. He served as the CEO of Joytoto Co., Ltd. from December 2005 to November 2006, and has been the COO of Joytoto Co., Ltd. since then.

Prior to joining Joyon, Mr. Cho was a director of Sam Electronics from 1988 to 1996 and the CEO of Korea Licensing from September 1996 to March 2002. He has provided consulting services related to game development for EA/Accolade/Inforgrams, Samsung, SSangyong, Diamond Ads and other companies since 1988. In recognition of his services, he received the prize of the Ministry of Information and Communications for the Software Industry Development on December 2000 and the prize of the Prime Minister for the Software Industry Development on December 2001.

 

Seong Yong Cho and Seong Sam Cho are brothers.

 

 

Seong Sam Cho (Sam Cho) , 42, has been the Chief Financial Officer, Secretary, and a Director since the acquisition of JEI on October 31, 2007. He has been the CEO of Joytoto Co., Ltd. since December 2006, and has been a director of Joytoto Co. Ltd. since December 2005. He served as the COO of Joytoto Co., Ltd. from December 2005 to November 2006. He has been the Chairman of the Board of Joyon Entertainment Co. Ltd., which is a subsidiary of Joytoto Co., since December 1999. Mr. Cho lectures on digital content and culture at the faculty of Sookmyung Women's University as a professor. He also participates actively as a member of the committee for Ministry of Information & Communication and Ministry of Culture & Tourism of the Korean government. Mr. Cho is a subcommittee member of the Federation of Korean Industries and Mirae Forum division of the game department. He has been engaged in the IT industry for approximately 20 years. He founded Sam Electronics Co., Ltd. in 1988. He received the prize of the Ministry of Information and Communication for the Software Industry Development on December 2001.

Doo Ho Choi (David Choi) , 42, has been the Chief Operating Officer and a Director since the acquisition of JEI on October 31, 2007. He has been the internal auditor of Joytoto Co., Ltd. since December 2005. Prior to joining Joytoto Co., Ltd., Mr. Choi was a director of Imine Co., Ltd. and was responsible for their global business division. He was involved with an electronic government business in Vietnam. He took office as the CEO and CTO until April 2002 after he established Webtrol Interactive Co., Ltd. in March 2000, and he developed a remote control system through the Internet for industrial boilers. He served as the CEO and CTO of Nextware Corporation until June 1999 after he established Nextware Corporation in August 1997, and he developed a three-dimensional graphic system and ran a distribution business for computer systems. Since June 1985, he served in the Korean army as an officer and an official in the field of communication and security until August 1994. He has worked in the information and communication field for 22 years.

Other Directorships

None of our officers and directors are directors of any company with a class of securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940.

Audit Committee

We do not currently have an audit committee financial expert.

Compliance with Section 16(a) of the Securities Exchange Act of 1934