**UNITED
STATES**
 **SECURITIES
AND EXCHANGE COMMISSION**
 **Washington,
DC 20549**
 
 **FORM
10KSB/A**
 
 [x]  **Annual
Report under Section 13 or 15 (d) of the Securities Exchange Act
1934:**
 For the
year ended December 31, 2004
 
 **TRANSITION
REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF
1934**
 For the
transition period from _____ to _____
 
 **Commission
file number 0-23873**
 
 **CIPHER
HOLDING CORPORATION**
 (FORMERLY
KNOWN AS MOMENTUM HOLDING CORPORATION
 (Exact
Name of Registrant in its Charter)
 
 Delaware
    
    13-4099008(State
      or other jurisdiction
    
    (IRS
      Employer Identification No.)of
      incorporation or organization)
 
 **3801
N. Washington St. Oak Brook, IL 60523**
 (Address
of principal executive offices  (Zip
Code)
 
 **(630)
371-5583**
 (Registrant's
telephone number, including area code)
 
 **Securities
registered under Section 12(b) of the Exchange Act: None**
 
 **Securities
registered under Section 12(g) of the Exchange Act:**
 
 **Common
Stock, $.001 par value per share**
 
 Check
whether Registrant (1) filed all reports required to be filed by Section 13 or
15 (d) of the Securities Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days: Yes [ X ] No
[ ]
 
 Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment thereto. [ X ]
 
 Registrant's
revenues for its most recent fiscal year: $2,668
 
 Market
value of Common stock held by non-affiliates at April 14, 2005:
$4,011,004
 
 Shares of
Common Stock outstanding at December 31, 2004: 19,205,311 shares
 
 Documents
incorporated by reference: None
 
 Transitional
Small Business Disclosure Format (check one): Yes [ X ] No [ ]
 
 
  
  
 TABLE
      OF CONTENTSPART
      IItem
      1.
    Description
      of BusinessItem
      2.
    Description
      of PropertyItem
      3.
    Legal
      ProceedingsItem
      4.
    Submissions
      of Matters to a Vote of Security Holders**PART
      II**Item
      5.
    Market
      for Common Equity and Related Stockholder MattersItem
      6.
    Management's
      Discussion and Analysis or Plan of OperationItem
      7.
    Financial
      StatementsItem
      8.
    Changes
      in and Disagreements with Accountants on Accounting and Financial
      DisclosuresItem
      8A.
    Controls
      and ProceduresItem
      8B.
    Other
      Information**PART
      III**Item
      9.
    Directors,
      Executive Officers, Promoters and Control Persons; Compliance with Section
      16(a) of the Exchange ActItem
      10.
    Executive
      CompensationItem
      11.
    Security
      Ownership of Certain Beneficial Owners and ManagementItem
      12.
    Certain
      Relationships and Related TransactionsItem
      13.
    ExhibitsItem
      14.
    Principal
      Accounts Fees and ServicesSIGNATURESCERTIFICATIONS
 
  
  
 **PART
I**
 
 **ITEM
1. DESCRIPTION OF BUSINESS**
 
 **Business
Development**
 
 Cipher
Multimedia, Inc. ("Cipher") was incorporated under the laws of the State of
Illinois on September 13, 2002. The Company commenced its operations upon
incorporation and has been in the development stage since then.
 
 Cipher is
a digital distribution solution and marketing company which secures and allows
access to digital content through proprietary encoding, encryption and
authorization technology. Cipher's technology and services allow publishers and
distributors to distribute digital content in a secure format to mass markets.
Secured video and software content is distributed through new and existing
commercial product offerings and distribution channels.
 
 During
the second half of 2004, Cipher orchestrated several multimedia disk
distribution companies which served as trials for later potential distributions
with suppliers.
 
 Cipher's
Digital Rights Management ("DRM") technology protects or controls access to
digital content. Cipher's technology allows publishers and distributors to
distribute full-feature video and/or software in a secure format. Secured
digital content is delivered in the form of CD/DVDs, diskettes and Internet
download format. The consumer has the ability to view a sample of the video or
demonstration of the software before purchasing of the product by unlocking the
full product for immediate use on their personal computer. The purchase and
delivery transactions are immediate and are facilitated though Cipher's
transaction processing service. Cipher's technology protects publisher's content
from copyright infringement by restricting access only to authorized
purchasers.
 
 On August
19, 2003, Cipher, then a privately owned corporation, entered a stock purchase
agreement with Momentum Holdings Corporation, a publicly owned Delaware
corporation (“Momentum” or the “Registrant”), Midwest Merger Management, LLC, a
Kentucky limited liability company and Brentwood Capital Corp., a New York
Corporation (collectively, the "Selling Shareholders"). Pursuant to the terms of
the Agreement, Cipher purchased an aggregate of 1,900,000 shares of the
2,100,011 issued and outstanding shares of the Momentum Holding Corporation's
common stock, par value $.001 per share, from the Selling Shareholders for the
purchase price of $275,000 of cash and debt. Cipher delivered the sum of
$150,000 by wire transfer and executed promissory notes in the amount of $60,000
due on September 6, 2003 and a second promissory note in the amount of $65,000
due on December 5, 2003. Both notes have been fully satisfied.
 
 On
September 15, 2003, Cipher and Momentum executed a Share Exchange Agreement
whereby Momentum exchanged 14,052,800 newly issued shares of common stock for
all of the issued and outstanding shares of capital stock of Cipher. As a result
of the purchase and exchange of shares, Cipher acquired voting control of
Momentum on August 19, 2003 and became Momentum's majority shareholder. The
total number of issued and outstanding shares of Momentum after the Exchange
increased to 16,452,811.
 
 On
November 24, 2003, the Company amended its Articles of Incorporation to change
the name of the Company to Cipher Holding Corporation and to increase its
authorized capital stock to 100,000,000 shares, of which 95,000,000 are common
and 5,000,000 are preferred. The Company also created a new class of "blank
check" preferred stock authorizing the Company's Board of Directors to set the
rights and preferences of the preferred stock without further stockholder
action.
  -1-
  
 **Recent
Developments**
 
 Commencing
in September, 2004, the Registrant commenced negotiations with Imagin Diagnostic
Centres, Inc., a Canadian corporation (“Imagin”), to acquire convertible
promissory notes in favor of Imagin and made by Positron Corporation, a publicly
owned Texan corporation (“Positron”) which are convertible into 64,000,000
shares of Positron common stock (the “Positron Notes”). In addition, the
Registrant began exploring the possibility of refocusing its principal business
operations from digital encryption to medical imaging and diagnosis.
 
 On April
11, 2005, the Registrant executed a Securities Exchange Agreement with Imagin
whereby Imagin would transfer the Positron Notes to the Registrant in exchange
for 30,000,000 newly issued shares of the Registrant’s common stock (the
“Exchange”). Upon consummation of the Exchange, Imagin will become the
controlling shareholder of the Registrant and the Registrant, upon conversion of
the Positron Notes would hold a majority position of Positron. Further, after
closing of the Exchange, the Registrant intends to amend its articles of
incorporation to change its name to Imagin Molecular Corp.
 
 **History
of Momentum**
 
 Momentum
Holdings Corporation ("Momentum") was incorporated in Delaware on January 13,
2000 under the name Momentum Holding Corp. Upon its formation, the Registrant
was a wholly owned subsidiary of Momentum Productions, Inc., a New York
corporation formed on February 23, 1999 ("Productions") which was engaged in the
business of developing and producing live theatrical properties. On March 22,
2000, Buffalo Capital VIII, Ltd., a Colorado corporation formed on September 19,
1997 ("Buffalo") acquired all of the issued and outstanding capital stock of
Productions.
 
 On June
21, 2000, the shareholders of Buffalo approved the merger of Buffalo with and
into the Registrant. The merger was effected on July 14, 2000. As a result, the
corporate domicile and name of Buffalo were changed to Delaware and Momentum
Holdings Corporation, respectively, and Productions became a wholly owned
subsidiary of Momentum.
 
 Since its
acquisition, Productions and its live theatrical business sustained increasing
losses, which led Momentum to dispose of 100% of its interest in Productions on
December 31, 2001. In December 2001, the Registrant's management determined it
was in its best interest to dispose of Productions and its live entertainment
business. Accordingly, on December 31, 2001, the Registrant entered into an
Asset Disposition Agreement with Momentum Resolution Trust, an affiliated New
York trust formed by the Registrant's management to resolve Productions' affairs
(the "Trust"). The Trust purchased 100% of the outstanding shares of Productions
in exchange for the Trust's assumption of specified liabilities of the
Registrant aggregating $300,000.
 
 On
February 5, 2002, Midwest Merger Management (MMM), LLC, a Kentucky limited
liability company engaged in the business of identifying, acquiring and
financing business operations acquired 12,001,465 (66.67%) of pre-reverse split
shares of the Registrant's Common Stock from the Registrant's former officers,
directors, and the Trust. Effective April 5, 2002, the Registrant's Common Stock
was reverse split on a one for 100 basis. As a result of this reverse split, the
number of shares of the Registrant's Common Stock then outstanding was reduced
from 18,000,000 to 180,000 shares.
 
  -2-
  
 Distribution
 
 We
distributed locked video in 2 ways. On the unused portion of DVD’s and in a
number of separate CD campaigns.
 
 Competition
 
 We do not
believe there are any direct competitors. There are digital right management
technology companies, but they sell their technology. We partner with publishers
to deliver their digital product as a multimedia piece that introduces the
product in the form of a trailer THEN if the customer would like to purchase the
video or software they can unlock via credit card and immediately view the
product that they just purchased.
 
 Materials
 
 Source of
materials that go into the product. Our locking software (encryption),
compression (make the content smaller to fit more on a disk), interface design
and graphic arts.
 
 Customers
 
 The few
customers we are dealing with are adult video companies, Playboy, a few
independent filmmakers, a couple of sports video publishers. We work with them
to create campaigns more so that they will be significant customers in the
future.
 
 Patents
 
 We do not
have any patents or patents pending.
 
 Research
and Development
 
 Research
and development is ongoing and is being performed by the three unpaid
programmers developing the product line.
 
 Employees
 
 We have
six unpaid employees (two officers, one manager and three
programmers)
 
 Dependence
on Executive Officers and Directors
 
 The
Company’s success is dependent on the efforts and abilities of its officers and
directors. The Company currently does not have employment agreements with its
executive officers. The loss of the services of any of these individuals could
materially and adversely affect the development of the Company’s business
plan.
 
 The
Company’s ability to attract and retain qualified marketing and management
personnel is critical to its operations. While management believes it will be
able to attract and retain sufficient professional employees to meet its needs,
there can be no assurance that management is correct. If the Company were unable
to employ the qualified employees needed, then its business would be materially
and adversely affected.
 
  -3-
  
 Competition
 
 The
Company expects to compete with other companies engaged in the Internet and
technology industries. Competitors in this industry could have more personnel
and greater financial and other resources than the Company. The Company may also
compete directly with firms that have much longer operating histories, greater
size, more substantial marketing organizations and established distribution
channels that are better situated in the market. The Company does not yet have
an established customer base and will likely encounter a high degree of
competition in developing one. One or more competitors could use their resources
to improve their current services or to develop new services that may compete
more effectively. New competitors may arise and may develop services, which
compete with the Company. In addition, new technologies may arise which could
lower or eliminate the demand for the Company’s services. Recognizing these
factors, the Company intends to attempt to form marketing and distribution
alliances with established marketing and distribution firms for its services. No
assurance can be given that such relationships can be established or maintained.
 
 Control
by Board of Directors and Management
 
 The
subscribers hereto will not have substantial participation in the Company’s
management or the investment of the proceeds of this Offering. Rather, they must
rely on the Company’s management and the expertise provided by the Company’s
Board of Directors. Thus, no person should purchase any of the Units offered
hereby unless he or she is willing to entrust all aspects of the Company’s
business to its management.
 
 Dependence
on Emerging Markets
 
 All of
Cipher’s revenue will be directly connected to the exploitation of Cipher’s
business plan. Cipher’s success will depend, in large part, upon the development
and expansion of this business plan, the growth and development of which cannot
be predicted with any certainty and which is subject to, among other things,
ongoing technological developments and regulatory and access issues. The Company
cannot predict the size of the market or the rate at which the market will
grow.
 
 Dependence
Upon Third Party Relationships
 
 Cipher
will be dependent on various third parties for software, manufacturing equipment
and related services. As a result, Cipher’s ability to deliver various services
to its potential users may be adversely affected by the failure of these third
parties to provide reliable software, equipment and related services to Cipher.
In addition, there can be no assurance that Cipher will be successful in
establishing and maintaining such relationships with those entities on terms
favorable to Cipher.
 
 Risks
Associated with Technological Change
 
 The
market in which Cipher will compete is characterized by rapidly changing
technology; evolving industry standards, frequent new product and service
announcements, introductions and enhancements, and changing customer demands.
These market characteristics are heightened by the emerging nature of the
Internet and e-commerce. Accordingly, Cipher’s future success will depend on its
ability to adapt to rapidly changing technologies, its ability to adapt its
services to meet evolving industry standards and its ability to continually
improve the performance, features and reliability of Cipher’s Web site in
response to both changing customer demands and competitive product and service
offerings. Cipher’s failure to successfully adapt to such changes in a timely
manner could have a material adverse effect on Cipher’s business, results of
operations and financial condition.
 
  -4-
  Government
Regulation
 
 Laws and
regulations directly applicable to communications or commerce over the Internet
are becoming more prevalent. The law of the Internet remains largely unsettled,
even in areas where there has been some legislative action. It may take years to
determine whether and how existing laws such as those governing privacy; libel
and taxation apply to our services. The rapid growth and development of the
market for online commerce may prompt calls for more stringent consumer
protection laws that may impose additional burdens on companies conducting
business online. The adoption or modification of laws or regulations relating to
the Internet business could result in a decrease in demand for our
services.
 
 **ITEM
2. DESCRIPTION OF PROPERTY**
 
 The
Registrant leases office space from Cipher’s founder and principal shareholder,
Patrick Rooney, on a month-to-month basis. Mr. Rooney does not assess the
Registrant a rental fee.
 
 **ITEM
3. LEGAL PROCEEDINGS**
 
 As of the
date of this Report, no legal proceedings have been threatened against or
settled by the Registrant.
 
 **ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
 
 There
were no submissions of matters to security holders in the fourth quarter
2004.
 
 **PART
II**
 
 **ITEM
5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS**
 
 (a)
Market Information.
 
 Since
approximately November 1996, the Registrant's common stock, its only class of
trading equity securities, has been traded on the NASD OTC Bulletin Board
(“OTCBB”) under the symbol "CSRV". The following table sets forth the range of
high and low bid price information for the common stock for each fiscal quarter
for the past three fiscal years as reported by the OTCBB. High and low bid
quotations represent prices between dealers without adjustment for retail
mark-ups, markdowns or commissions and may not necessarily represent actual
transactions.
 Year
      Ended December 31, 2004
    
    High
      Bid
    Low
      BidFourth
      Quarter
    
    .53
    .28Third
      Quarter
    
    .80
    .44Second
      Quarter
    
    1.23
    .60First
      Quarter
    
    2.00
    .31Year
      Ended December 31, 2003Fourth
      Quarter
    
    1.70
    1.01Third
      Quarter
    
    1.01
    .10Second
      Quarter
    
    1.01
    .10First
      Quarter
    
    .20
    .16
 
 (b)
Holders
  -5-
  
 As of
December 31, 2004, the approximate number of holders of record of shares of the
Registrant's Common Stock, $.001 par value per share was 400. The Registrant's
only class of trading securities, was believed by management to be as
follows:
 
 Title
      of Class
    Number
      of Record HoldersCommon
      Stock, $.001 par value
    400
 
 Management
believes there are many shareholders whose securities are held in street name
with various brokerage houses. The exact number of shareholders is unknown to
the Registrant.
 
 (c)
Dividends.
 
 The
Registrant has paid no dividends during the fiscal years ended December 31, 2003
and 2004. Other than the requirements of the General Corporation Law of the
State of Delaware that dividends be paid out of capital surplus only and that
the declaration and payment of a dividend not render the Registrant insolvent,
there are no restrictions on the Registrant's present or future ability to pay
dividends.
 
 The
payment by the Registrant of dividends, if any, in the future rests within the
discretion of its Board of Directors and will depend, among other things, upon
the Registrant's earnings, its capital requirements, and its financial
conditions, as well as other relevant factors.
 
 **ITEM
6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION**
 
 Results
of Operations
 
 We have
been at a development stage since the inception of our operations on September
13, 2002. We had no revenues in 2003 and $2,688 in 2004. Our total operating
expenses were $295,795 in 2004 as compared to $376,041 in 2003, a decrease of
$80,246 or 21%. Professional fees were $237,569 and accounted for 80% of the
total operating expenses, in 2004, as compared to $323,504 or 86% of the
operating expenses in 2003. A substantial portion of professional fees were for
consulting regarding the company services and finances.
 
 The total
operating, professional, and general and administrative expenses were $295,795,
$376,041, and $784,463, from inception to December 31, 2004.
 
 Based on
the limited operating background of the company and uncertainty of future cash
flows from operations, we determined that the goodwill resulting from the
acquisition of Momentum Holding Corp. was impaired and we wrote it off. In 2004,
the total net loss was $329,871. Our loss for 2003 was $468,090. The total loss
from inception to December 31, 2004 was $910,588.
 
 We
restated our financial statements and reclassified the amount of $275,000,
previously recorded and written off as goodwill from the acquisition of the
shares of Momentum, as a reduction in the additional paid in
capital.
 
 During
2004, the Company had issued 1,552,500 restricted shares of common stock for
consulting services. The shares were valued at $78,726. As explained in the note
5, the Company used the Black Scholes model and recomputed and restated the fair
value of the restricted shares at $218,850. As a result of the adjustment, the
company’s professional fees, net loss, and additional paid in capital increased
by $140,324.
  -6-
  
 The
Registrant did not conduct any research and development activities in the fiscal
year ended December 31, 2004.
 
 FINANCIAL
CONDITION
 
 The
Company had revenues of $2,688 for 2004. The net cash used in operations were
$54,535 and $134,585 for 2004 and 2003, respectively. The Company also expended
$150,000 for the acquisition of Momentum Holding Corp in 2003.
 
 The
principal source of cash inflows were issuance of notes payable in the amount of
$130,000 in 2004. In 2003, we raised the funds necessary to pay the operating
expenses through issuance of shares of common stock for $110,000. The loans
payable to the shareholders of $50,930 and $24,642 and common stock issued for
services of $218,850 and $240,000 in 2004 and 2003, respectively were used to
pay operating expenses.
 
 On
December 31, 2004, we had a net working capital deficiency and total
stockholders' deficit of $408,824.
 
 PLAN OF
OPERATION
 
 The
Registrant’s plan, upon consummation of the Exchange with Imagin, is to commence
a new line of operations as a medical imaging and diagnosis operation. When the
Exchange is finalized, the Registrant may pursue a spin-off of Cipher into its
own publicly owned company. Until such time, the Registrant intends to continue
offering technology and services to publishers and distributors to mass-market
digital content in a secure format. Management does not expect substantial
revenues from its operations and plans to raise equity capital to finance the
operating and capital requirements of the Company, over the next year. Also, the
principal shareholder of the Company has agreed to make working capital loans.
While the Company is expending its best efforts to achieve the above plans,
there is no assurance that such activity will generate sufficient funds to
accomplish its business purpose, or that the Company's business plans will be
successful.
 
 
 **ITEM
7. FINANCIAL STATEMENTS**
 
 The
Penny Stock Rules May Have an Adverse Effect Upon Liquidity of the Company’s
Shares
 
 If the
shares of the Registrant's common stock are listed on The Nasdaq Stock Market or
certain other national securities exchanges and the price thereof is below
$5.00, then subsequent purchases of such securities will be subject to the
requirements of the penny stock rules absent the availability of another
exemption. The SEC has adopted rules that regulate broker-dealer practices in
connection with transactions in "penny stocks." Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on The Nasdaq
Stock Market). The penny stock rules require a broker-dealer to deliver a
standardized risk disclosure document required by the SEC, to provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction,
monthly account statements showing the market value of each penny stock held in
the customer's account, to make a special written determination that the penny
stock is a suitable investment for the purchaser and receive the purchaser's
written agreement to the transaction. These disclosure requirements may have the
effect of reducing the level of trading activity in the secondary market for a
stock that becomes subject to the penny stock rules.
  -7-
  
 The
Liability of Cipher’s Directors' May be Limited under Illinois Law
 
 Pursuant
to Article XII of Cipher's By-Laws and under Illinois law, directors of Cipher
are not liable to Cipher or its stockholders for monetary damages for breach of
fiduciary duty, except for liability in connection with a breach of the duty of
loyalty, for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, for dividend payments or stock
repurchases illegal under Illinois law or any transaction in which a director
has derived an improper personal benefit.
 
 Cipher
Does Not Carry Any Key Man Insurance
 
 Cipher
presently has no key man life insurance policies. As soon as practicable
following the commencement of profitable operations (of which there can be no
assurance), Cipher intends to purchase key man life insurance on the lives of
its two principal executive officers, Patrick Rooney and Corey Conn. Upon
purchase of such insurance, Cipher intends to pay the premiums and be the sole
beneficiary. The lack of such insurance may have a material adverse effect upon
Cipher's business.
 
 Lack
of Profitability
 
 The
Company currently operates at a loss. No assurance can be given that the Company
will achieve sufficient revenues for profitability. We believe that we will
continue to incur operating and net losses for at least the foreseeable future.
The rate at which we will incur losses is expected to increase from current
levels for a period when we intend to increase our costs and expenses. Even if
the Company attains profitability, there is no assurance that it can sustain or
increase profitability on a quarterly or annual basis in the future. If revenues
grow slower than anticipated, or if operating expenses exceed expectations or
cannot be adjusted accordingly, the Company’s business, results of operations
and financial condition will be materially and adversely affected.
 
 Additional
Capital Requirements
 
 The
Company’s need for capital during the twelve months or more subsequent to the
offering will vary based upon a number of factors, including the rate at which
demand for its service expands, the level of sales and marketing activities for
its service, and the level of effort needed to develop and commercialize
additional applications. In addition, the Company’s business plans may change or
unforeseen events may occur which require the Company to raise additional
funds.
 
 Additional
funds may not be available on terms acceptable to the Company when it needs such
funds. The unavailability of additional funds when needed could have a material
adverse effect on the Company. If adequate funds are not available to satisfy
short-term or long-term requirements, management will be required to consider a
variety of other options including seeking joint venture partners, selling or
licensing all or a portion of the Company’s proprietary technology, curtailing
the development and growth of the services the Company offers, as well as other
cost cutting actions, including suspending all or a portion of the Company’s
activities.
 
 **PART
III**
 
 **ITEM
8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE**
 
 None
 
 
  -8-
  
 **ITEM
9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT**
 
 (a)
Identify Directors and Executive Officers.
 
 The
following table sets forth: (1) names and ages of all persons who presently are
and who have been selected as directors of the Registrant; (2) all positions and
offices with the Registrant held by each such person; (3) the term or office of
each person named as a director; and 4) any period during which he or she has
served a such:
 
 Duration
      and DateOf
      Expiration of
    Position
      and Office
    Age
      andName
    Present
      Term
    With
      Registrant
    Director
      SincePatrick
      Rooney
    One
      year
    Chief
      Executive
    42December
      31, 2005
    Officer
      and Director
    August
      19, 2003Corey
      Conn
    One
      year
    Chief
      Financial
    42December
      31, 2005
    Officer,
      Director
    August
      19, 2003
 
 There is
no understanding or arrangement between any directors or any other person or
persons pursuant to which such individual, was or is to be, selected as a
director or nominee of the Registrant.
 
 Business
Experience
 
 Patrick
Rooney- Age 42, President, Director: Mr. Rooney is the founder of the Company.
Since March, 2003, he also serves as Partner of Solaris Opportunity Fund, L.P.
From June, 1998 to April 2002, Mr. Rooney served as President of Digital Age
Ventures Ltd., a venture investment company and concurrently acts as the
President of UBInet, Inc, an internet service provider. From 1998 to 2000, Mr.
Rooney was a member of the Chicago Board Options Exchange from 1985 through 2000
and was founder and operator of Rooney Trading, Inc., an option and futures
trading company based in Chicago. Mr. Rooney has been actively involved in the
management and business development of early stage companies since
1986.
 
 Corey
Conn- Age 42, Chief Financial, Director: Mr. Conn is a co-founder of the
Company. Since September, 1999. Mr. Conn serves as Managing Director of Virtual
Partnerships, LLC, a business development and business strategy consulting firm.
Previously, Mr. Conn was Vice President of Business Development at iLX, an
e-business and e-transformation services provider from June 1996 to September
1999. Mr. Conn served as a member of the Board of Directors of Uniloc, Inc.,
from April 2000 to July 2002. Mr. Conn also acted as interim President of Uniloc
from May 2002 to July 2002.
 Directorship
 
 Except as
disclosed in this Item, each director of the Registrant has indicated to the
Registrant that he is not presently a director in any other Registrant with a
class of securities registered pursuant to Section 12 of the 34 Act or subject
to the requirements of Section 15(d) of such act or any investment company
registered under the Investment Company Act of 1940.
  -9-
  (b)
Identification of Certain Significant Employees
 
 The
Registrant does not presently employ any person as a significant employee who is
not an executive officer but who makes or is expected to make a significant
contribution to the business of the Registrant.
 
 (c)
Family Relationships
 
 No family
relationship exists between any director or executive officer of the
Registrant.
 
 (d)
Involvement in Certain Legal Proceedings
 
 No event
listed in Sub-paragraphs (1) through (4) of Subparagraph (d) of Item 401 of
Regulation S-B, has occurred with respect to any present executive officer or
director of the Registrant or any nominee for director during the past five
years which is material to an evaluation of the ability or integrity of such
director or officer.
 
 Compliance
with Section 16(a) of the Exchange Act
 
 Section
16(a) of the Exchange Act, as amended, requires the Registrant's executive
officers and directors and persons who own more than 10% of a registered class
of the Registrant's equity securities, to file with the SEC initial statements
of beneficial ownership, reports of changes in ownership and annual reports
concerning their ownership, of Common Stock and other equity securities of the
Registrant on Forms 3, 4, and 5, respectively. Executive officers, directors and
greater than 10% shareholders are required by SEC regulations to furnish the
Registrant with copies of all Section 16(a) reports they file. To the
Registrant's knowledge, all beneficial owners of greater than 10% of
Registrant's Common Stock, have complied with all Section 16(a) filing
requirements applicable to them during the Registrant's most recent fiscal year.
Mr. Rooney and Mr. Conn have not filed their Section 16(a) reports as executive
officers and directors.
 
 **ITEM
10. EXECUTIVE COMPENSATION.**
 
 (a)
General
 
 (1)
through (7) All Compensation Covered. During the three fiscal years ended
December 31, 2004, the aggregate compensation paid to, accrued or set aside for
any executive officer or director of the Registrant was $0.
 
 (b)
Summary Compensation Table.
 
 **SUMMARY
COMPENSATION TABLE**
 Annual
      CompensationName
      and Position
    Year
    Salary
      (1)Patrick
      Rooney
    2004
    --CEO
    2003
    --2002
    --Corey
      Conn
    2004
    --Chief
      Financial Officer
    2003
    --2002
    --
 (1) No
officer received any bonus or other compensation.
  -10-
  
 During
the fiscal years ended December 31, 2004 and 2003, the Registrant made no grants
of stock options or freestanding SAR's to any executive officer or director of
the Registrant.
 
 **ITEM
11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT**
 
 (a)
Security Ownership of Certain Beneficial Owner. The information is furnished as
of December 31, 2004, as to the number of shares of the Registrant's Common
Stock, $.001 par value per share, owned beneficially, or known by the Registrant
to own beneficially, more than 5% of any class of such security:
 
 
 Name
      and Address
    Percentage
      of Class
    Amount
      and Natureof
      Beneficial Owner
    
    of
      Beneficial OwnershipPatrick
      Rooney
    8,352,800
    47.1
 
 (b)
Security Ownership of Management. The following information is furnished as of
December 31, 2004, as to the number of shares of the Registrant's Common Stock,
$.001 par value per share owned beneficially by each executive officer and
director of the Registrant and by all executive officers and directors as a
group:
 
 Name
      and Address
    Percentage
      of Class
    Amount
      and Natureof
      Beneficial Owner
    
    of
      Beneficial OwnershipPatrick
      Rooney
    8,352,800
    47.1%3801
      N. Washington St.Oak
      Brook, IL 60523Corey
      Conn
    825,000
    4.3%3801
      N. Washington St.Oak
      Brook, IL 60523All
      Officers and Directors
    9,177,800
    51.4%As
      a Group of two persons
 
 
 **ITEM
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**
 
 On
December 28, 2004, the Registrant modified and amended a promissory note made by
Cipher in favor of John Rooney, brother of the Registrant’s President and
Chairman, in the principal amount of $130,000. Pursuant to the terms of the
amended note, the Registrant accepted the obligation for the payment of the note
for the release of the obligation of Cipher to repay principal and interest. The
due date of the note was extended to December 31, 2006, with interest at the
rate of 10%. The note was amended to be convertible into 138,867 shares of the
Registrant’s common stock.
  -11-
  On
December 29, 2004, John Rooney transferred the right to convert 800,000 shares
underlying the amended note to Solaris Opportunity Fund, L.P. (“Solaris”) in
satisfaction of unpaid obligations to Solaris in the aggregate amount of
$30,000. The Registrant’s President and Chairman, Patrick Rooney, is the
President of the general partner of Solaris.
 
 **ITEM
13. EXHIBITS AND REPORTS ON FORM 8-K**
 
 (a)
Exhibits:
 
 None
 
 **ITEM
14. CONTROLS AND PROCEDURES**
 
 (a)
Evaluation of disclosure controls and procedures
 
 For
purposes of rule 13a-14 and 15d-14 of the Securities Exchange Act of 1934
("Exchange Act") the term "disclosure controls and procedures" refers to the
controls and other procedures of a company that are designed to ensure that
information required to be disclosed by a company in the reports that it files
under the Exchange Act is recorded, processed, summarized and reported within
required time periods. Within 90 days prior to the date of this report
("Evaluation Date"), Cipher carried out an evaluation under the supervision and
with the participation of Cipher's Chief Executive Officer and its Chief
Financial Officer of the effectiveness of the design and operation of its
disclosure controls and procedures. Based on that evaluation, Chief Executive
Officer and Chief Financial Officer have concluded that, as of the Evaluation
Date, such controls and procedures were effective at ensuring that required
information will be disclosed on a timely basis in our periodic reports filed
under and pursuant to the Exchange Act.
 
 (b)
Changes in internal controls
 
 There
were no significant changes to our internal controls or in other factors that
could significantly affect our internal controls subsequent to the Evaluation
Date.
 
 **ITEM
15. PRINCIPAL ACCOUNTING FEES AND SERVICES**
 
 The
following table sets forth the aggregate fees billed to us for fiscal years
ended December 31, 2004 and 2003 by Bloom & Co., LLP, and our
auditors:
 
 
 2004
    2003Audit
      Fees (1)
    $
      14,171
    $
      13,000Non-Audit
      Fees:
    --
    --Audit
      Related Fees (2)
    --
    --Tax
      Fees (3)
    500
    500Total
      Fees paid to auditor
    $
      14,671
    $
      13,500
 
 (1) Audit
fees consist of fees billed for professional services rendered for the audit of
the Registrant's annual financial statements and review of the interim
consolidated financial statements included in quarterly reports and services
that are normally provided by Bloom & Co., LLP in connection with statutory
and regulatory filings or engagements.
  -12-
  
 (2)
Audit-Related fees consist of fees billed for assurance and related services
that are reasonably related to the performance of the audit or review of
Cipher's consolidated financial statements and are not reported under "Audit
Fees".
 
 (3) Tax
fees consist of fees billed for professional services rendered for tax
compliance, tax advice and tax planning (domestic and international). These
services include assistance regarding federal, state and international tax
compliance, acquisitions and international tax planning.
 
 (4) All
other fees consist of fees for products and services other than the services
reported above.
 
 The Board
of Directors has considered the role of Bloom & Co., LLP in providing
certain tax services to Cipher and has concluded that such services are
compatible with Bloom & Co., LLP's independence as our auditors. In
addition, the Board of Directors has approved providing certain tax services
since the effective date of the SEC rules. The rule states that an auditor is
not independent of an audit client if the services it provides to the client are
not appropriately approved. The Board of Directors will continue to pre-approve
all audit and permissible non-audit services provided by the independent
auditors until an audit committee is formed which will then he responsible for
approving audit fees. We are looking for new board members that would be
qualified to serve on an audit committee. When the audit committee is formed one
of their first assignments will be to propose to the board a code of
ethics.
 
 The Board
of Directors has adopted a policy for the pre-approval of services provided by
the independent auditors, pursuant to which it may pre-approve any service
consistent with applicable law, rules and regulations. Under the policy, the
Board of Directors may also delegate authority to pre-approve certain specified
audit or permissible non-audit services to one or more of its members, including
the Chairman. A member to whom pre-approval authority has been delegated must
report its pre-approval decisions, if any, to the Board of Directors at its next
meeting, and any such pre-approvals must specify clearly in writing the services
and fees approved. Unless the Board of Directors determines otherwise, the term
for any service pre-approved by a member to whom pre-approval authority has been
delegated is twelve months.
  -13-
  
 **SIGNATURES**
 
 Pursuant
to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned persons, and in the capacities so indicated on October 17,
2005.
 
 Cipher
Holding Corporation
 
 By: /s/
Patrick Rooney
 Patrick
Rooney
 Chairman
of the Board, President
 
 
  -14-
  
 BLOOM
      & CO., LLP. 50 CLINTON STREET, SUITE 502. HEMPSTEAD. NEW YORK 11550
    TEL:
      516 - 486-5900CERTIFIED
      PUBLIC ACCOUNTANTS
    FAX:
      516 - 486-5476STEVEN
      BLOOM, CPA
      FREDERICK
      PAUKER, CPA
      SIROUSSE
      TABRIZTCHI, Ph.D. CPA
    MEMBER
      OF AMERICAN INSTITUTE OF
      CERTIFIED
      PUBLIC ACCOUNTANTS
 
 Board of
Directors Cipher Holding Corporation
 (previously
known as Momentum Holding Corporation)
 3801 N
Washington St. Oak Brook, IL 60523
 
 We have
audited the Consolidated balance sheet of Cipher Holding Corporation (previously
known as Momentum Holdings Corporation), a development stage company, as of
December 31, 2004 and 2003 and the related consolidated statements of income,
accumulated deficit, and cash flows for the years ended December 31, 2004 and
2003 and the period from inception on September 13, 2002 to December 31, 2004.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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 also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, 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.
 
 As more
fully described in Notes 1 and 5 to the financial statements of the Company,
Momentum Holdings Corporation entered a reverse merger with Cipher Multimedia,
Inc. on August 19, 2003. The financial statements represent the financial
conditions and results of operations of the successor company. The financial
statements for the year ended December 31, 2004, were restated to reflect the
additional cost of shares issued for services.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Cipher Holding Corporation
(previously known as Momentum Holdings Corporation) as of December 31, 2004 and
2003 and the results of its operations and its cash flows for the years then
ended in conformity with accounting principles generally accepted in the United
States of America.
 
 The
accompanying consolidated financial statements have been prepared assuming
Cipher Holding Corporation will continue as a going concern. As discussed in
Note 3, the Company has sustained accumulated losses of $770,263, from inception
to December 31, 2004 and has a net working capital deficiency of $408,824 as of
December 31, 2004 that raise substantial doubt about the Company's ability to
continue as a going concern. The Company's ability to continue as a going
concern is dependent upon the successful completion of management plans to raise
equity capital to finance the operating and capital requirements of Cipher
Holding Corporation. Management's plans in regard to these matters are also
described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
 
 /s/Bloom
& Co., LLP
 Hempstead,
New York
 
 April 15,
2005, Except for Note 2, as to which the date is October 12,
2005.
  
  CIPHER
HOLDING CORPORATION
 (A
DEVELOPMENT STAGE COMPANY)
 CONSOLIDATED
BALANCE SHEETS
 DECEMBER
31, 2004 AND 2003
 
 2004
    
    2003ASSETSCash
    
    $
    1,625
    
    $
    230Total
      Current Assets
    
    
    1,625
    
    
    230Total
      Assets$
    1,625
    
    $
    230LIABILITIES
      AND STOCKHOLDERS' (DEFICIT)Accounts
      payable
    
    $
    21,196
    
    $
    1,455Notes
      payable to shareholders'
    
    
    225,974
    
    
    177,825Notes
      payable - Other
    
    
    130,000
    
    
    125,000Interest
      Payable
    
    
    33,279
    
    
    4,500Total
      Current Liabilities
    
    
    410,449
    
    
    308,780Commitments
      and contingenciesStockholders'
      (Deficit)(Restated- Note 2):Preferred
      Stock, 5,000,000 shareAuthorized,
      no shares issued andOutstandingCommon
      stock, $0.001 par value;95,000,000
      shares authorized and 19,205,311and
      17,652,811 shares sued and outstanding, onDecember
      31, 2004 and 2003, respectively.
    
    
    19,206
    
    
    17,653Additional
      paid-in capital
    
    
    482,558
    
    
    254,514(Deficit)
      accumulated duringThe
      development stage (2003 Restated, Note 2)
    
    
    (910,588
    )
    
    (580,717
    )Total
      Stockholders' (Deficit)
    
    
    (408,824
    )
    
    (308,550
    )Total
      Liabilities and Stockholders' (Deficit)
    
    $
    1,625
    
    $
    230
 
 The
accompanying notes are an integral part of the financial
statements.
 
  F-1
  
 CIPHER
HOLDING CORPORATION
 (A
DEVELOPMENT STAGE COMPANY)
 CONSOLIDATED
STATEMENT OF OPERATIONS
 FOR THE
YEARS ENDED DECEMBER 31, 2004 AND 2003 AND
 THE
PERIOD FROM SEPTEMBER 13, 2003 (INCEPTION) TO DECEMBER 31, 2004
 
 InceptionYear
      ended
    
    Year
      ended
    
    September
      13,December
    
    December
    
    2002
      to31,
    
    31,
    
    December
      31,2004
    
    2003
    
    2004Revenues:
    
    $
    2,668
    
    $
    --
    
    $
    2,668Operating
      expenses:Professional
      fees
    
    
    237,569
    
    
    323,504
    
    
    642,064Research
      and Development
    
    
    34,200
    
    
    --
    
    
    34,200Selling,
      general and administrative
    
    
    24,026
    
    
    52,537
    
    
    108,199Total
      operating expenses
    
    
    295,795
    
    
    376,041
    
    
    784,463Operating
      loss
    
    
    (293,127
    )
    
    (376,041
    )
    
    (781,795
    )Other
      expenses:Interest
      expense
    
    
    (
      36,744
    )
    
    (
      92,049
    )
    
    (
      128,793
    )Total
      other expenses
    
    
    (
      36,744
    )
    
    (
      92,049
    )
    
    (
      128,793
    )Net
      income(Loss) (2003 Restated, Note 2)
    
    
    (329,871
    )
    
    (
      468,090
    )
    
    (910,588
    )Provision
      for income taxes:Tax
      benefit of loss carryforward
    
    
    --
    
    
    --
    
    
    --Net
      income(Loss) (2003 Restated, Note 2)
    
    $
    (329,871
    )
    $
    (468,090
    )
    $
    (
      910,588
    )Per
      share amounts:Loss
      per share
    
    
    (.02
    )
    
    (
      .03
    )
    
    --Weighted
      average common Shares
    
    
    18,720,975
    
    
    15,271,949
    
    
    15,859,690
 
 The
accompanying notes are an integral part of the financial
statements.
 
  F-2
  CIPHER
HOLDING CORPORATION
 (A
DEVELOPMENT STAGE COMPANY)
 CONSOLIDATED
STATEMENT OF CASH FLOWS
 FOR THE
YEARS ENDED DECEMBER 31, 2004 AND 2003 AND
 THE
PERIOD FROM SEPTEMBER 13, 2003 (INCEPTION) TO DECEMBER 31, 2004
 
 InceptionSeptember
      13,Year
      ended
    
    Year
      ended
    
    2002
      toDecember
      31,
    
    December
      31,
    
    December
      31,2004
    
    2003
    
    2004Cash
      Flows From Operating Activities:Net
      (loss) (2003 Restated, Note 2)
    
    $
    (329,871
    )
    $
    (468,090
    )
    $
    (910,588
    )Adjustments
      to Reconcile Net (Loss)to
      Net Cash provided (Used) by OperatingActivities:Shares
      issued for services
    
    
    218,850
    
    
    240,000
    
    
    458,850Interest
      expense -Beneficial
      conversion
    
    
    10,746
    
    
    84,767
    
    
    95,513Changes
      in operating current assets andLiabilitiesAccounts
      payable
    
    
    19,742
    
    
    1,455
    
    
    21,197Interest
      payable
    
    
    --
    
    
    4,500Interest
      payable - loan to shareholder
    
    
    25,998
    
    
    2,783
    
    
    33,281Net
      Cash Provided (Used) by OperatingActivities
    
    
    (54,535
    )
    
    (134,585
    )
    
    (301,747
    )Cash
      Flows From Financing Activities:ActivitiesAdditional
      paid in capital
    
    
    
    
    
    110,000
    
    
    110,000Issuance
      of shares
    
    
    
    
    
    
    
    
    112,400Payment
      of notes payable
    
    
    (125,000
    )
    
    
    
    
    (125,000
    )Issuance
      of notes payable
    
    
    130,000
    
    
    
    
    
    130,000Notes
      payable shareholders'
    
    
    50,930
    
    
    24,642
    
    
    75,972Cash
      Flows (Used) Provided by Financing Activities
    
    
    55,930
    
    
    134,642
    
    
    303,372Net
      increase in cash
    
    
    1,395
    
    
    57Cash
      at beginning of period
    
    
    230
    
    
    173
    
    
    --Cash
      at end of period
    
    $
    1,625
    
    $
    230
    
    $
    1,625
 
 The
accompanying notes are an integral part of the financial
statements.
  F-3
  CIPHER
HOLDING CORPORATION
 (A
DEVELOPMENT STAGE COMPANY)
 CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ (DEFICIT)
 FOR THE
YEARS ENDED DECEMBER 31, 2004 AND 2003 AND
 THE
PERIOD FROM SEPTEMBER 13, 2003 (INCEPTION) TO DECEMBER 31, 2004
 
 Number
      of
    Common
    Additional
      paidShares
    Stock
    in
      Capital
    Deficit
    TotalShares
      issued for cash
    8,135,928
    $8,136
    $104,264
    --
    $112,400Net
      loss
    --
    --
    --
    (112,627)
    (112,627)December
      31, 2002
    8,135,928
    8,136
    104,264
    (112,627)
    (227)Shares
      issued for cash
    7,816,872
    7,817
    102,183
    --
    110,000Payment
      to MomentumShareholders
    
    
    (
      275,000)
    
    (275,000)Recapitalization
    500,011
    500
    (
      500)
    --
    --Shares
      issued for services
    1,200,000
    1,200
    238,800
    --
    240,000Beneficial
      effect
    --
    --
    84,767
    --
    84,767Net
      loss
    
    
    
    (468,090)
    (468,090)December
      31, 2003
    17,652,811
    17,653
    254,514
    (580,717)
    (308,550)Shares
      issued for services
    1,552,500
    1,553
    217,297
    --
    218,850Beneficial
      effect
    --
    --
    10,747
    --
    10,747Net
      loss
    --
    --
    --
    (
      329,871)
    (329,871)December
      31, 2004
    19,205,311
    $
      19,206
    $
      482,558
    $(
      910,588)
    $
      (408,824)
 
  F-4
  
 CIPHER
HOLDING CORPORATION
 (A
DEVELOPMENT STAGE COMPANY)
 CONSOLIDATED
STATEMENT OF CASH FLOWS
 FOR THE
YEARS ENDED DECEMBER 31, 2004 AND 2003 AND
 THE
PERIOD FROM SEPTEMBER 13, 2003 (INCEPTION) TO DECEMBER 31, 2004
 (CONTINUED)
 
 SUPPLEMENTARY
SCHEDULE OF NONCASH TRANSACTIONS
 
 2004
 
 During
the year ended December 31, 2004, 1,552,500 shares were issued in exchange for
consulting services, which amounted to $76,973.
 
 The
amount of $10,746, the proceeds from issuance of the convertible debt, equal to
the difference between the fair value of the common stock and the conversion
price, was allocated to additional paid-in-capital. Because the debt is
convertible at the date of issuance, the debt discount of $10,746 was charged to
interest expense at that date.
 
 2003
 
 In August
2003, Cipher entered a reverse merger agreement with majority shareholders of
Momentum. Under the agreement cipher purchased 1,900,000 shares of Momentum for
$150,000 cash and two notes payable in the amounts of $60,000, and $65,000 each.
Also, Momentum issued 14,052,800 new shares in exchange for all issued and
outstanding shares of common stock of Cipher. The majority shareholder of Cipher
loaned $150,000 to Cipher.
 
 At the
time of acquisition Momentum did not have any assets and the only liability of
Momentum was to Brentwood Capital Corp., a selling shareholder, who had waived
the liability prior to the exchange. Cipher wrote off the acquired goodwill of
$250,000 in Momentum because of uncertain future cash flow projections from the
acquisition.
 
 The
amount of $84,767, the proceeds from issuance of the convertible debt, equal to
the difference between the fair value of the common stock and the conversion
price, was allocated to additional paid-in-capital. Because the debt is
convertible at the date of issuance, the debt discount of $84,767 was charged to
interest expense at that date.
 
 The
accompanying notes are an integral part of the financial
statements.
 
 
  F-5
  CIPHER
HOLDING CORPORATION
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 
 **NOTE
1. BUSINESS ORGANIZATION**
 
 Cipher
Multimedia, Inc. ("Cipher", "the Company"), a development stage company, was
incorporated under the laws of the State of Illinois on September 13, 2002. The
Company commenced its operations upon incorporation and has been in the
development stage since then and has had no revenues.
 
 Cipher
Multimedia, Inc. is a digital distribution solution and marketing company which
secures and allows access to digital content through proprietary encoding,
encryption and authorization technology. Cipher's technology and services allow
publishers and distributors to distribute digital content in a secure format to
mass markets. Secured video and software content is distributed through new and
existing commercial product offerings and distribution channels.
 
 Cipher's
developmental stage activities involve introducing and marketing its technology
and services to publishers and distributors to help them mass market their
products digitally in a secure format. Also, the Company contemplates acquiring
other operating companies.
 
 Cipher's
Digital Rights Management ("DRM") technology protects or controls access to
digital content. Cipher's technology allows publishers and distributors to
distribute full-feature video and/or software in a secure format. Secured
digital content is delivered in the form of CD/DVDs, diskettes and Internet
download format. The consumer has the ability to view a sample of the video or
demonstration of the software before purchasing of the product by unlocking the
full product for immediate use on their personal computer. The purchase and
delivery transactions are immediate and are facilitated though Cipher's
transaction processing service. Cipher's technology protects publisher's content
from copyright infringement by restricting access only to authorized
purchasers.
 
 Reverse
Merger
 
 On August
19, 2003, Momentum Holdings Corporation (the "Company", Midwest Merger
Management, LLC, a Kentucky limited liability Company and Brentwood Capital
Corp., a New York Corporation (collectively, the "Selling Shareholders"),
consummated the terms of a Stock Purchase Agreement (the "Agreement") with
Cipher Multimedia, Inc., a privately-owned, Illinois corporation ("Cipher").
Pursuant to the terms of the Agreement, Cipher purchased an aggregate of
1,900,000 shares of the 2,100,011 issued and outstanding shares of the Company's
common Stock, par value $.001 per share, from the selling shareholders for the
purchase price of $275,000 of cash and debt. Cipher delivered the sum of
$150,000 by wire transfer and executed promissory notes in the amount of $60,000
due on September 6, 2003 and a second promissory note in the amount of $65,000
due on December 5, 2003. The notes were paid on April 28, 2004.
 
 Also,
under the terms of the exchange agreement, Momentum exchanged 14,052,800
newly-issued shares of common stock for all of the issued and outstanding shares
of common stock of Cipher, amounting to 100% of Cipher's outstanding capital
stock after the Exchange, leaving 16,152,811 shares of the Company's stock
issued and outstanding.
 
 As a
result of reverse merger agreement, Cipher acquired voting control of Momentum
on August 19, 2003 and became Momentum's majority shareholder.
 
 Also on
August 19, 2003, Anthony R. Russo and Danny L. Pixler resigned as the sole
officers and directors of the Company. Patrick Rooney was elected as the
Company's President and Chairman of the Board of Directors and Corey Conn was
elected as the Company's Chief Financial Officer, Secretary and
Director.
 
  F-6
  CIPHER
HOLDING CORPORATION
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 
 **NOTE
1. BUSINESS ORGANIZATION (Continued)**
 
 Going
Concern
 
 These
financial statements have been prepared in accordance with generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and the satisfaction of liabilities and commitments in the
normal course of business. The Company has sustained losses since inception and
has accumulated losses of $770,263 as of December 31, 2004. The Company's
ability to continue as a going concern is dependent upon the successful
completion of additional financing arrangements and its ability to develop and
sell its services.
 
 Cipher's
plans to continue offering technology and services to publishers and
distributors to distribute to mass market digital content in a secure format.
Management does not expect substantial revenues from its operations and plans to
raise equity capital to finance the operating and capital requirements of the
Company. While the Company is expending its best efforts to achieve the above
plans, there is no assurance that such activity will generate sufficient funds
to accomplish its business purpose, or that the Company's business plans will be
successful.
 
 **NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
 
 Principles
of Consolidation and Nature of Operations
 
 For the
year ended December 31, 2004 and for the period from August 19, 2003, the time
of reverse merger, to the end of 2004, the consolidated financial statements
include the transactions of Cipher Multimedia, Inc. (subsidiary) and the
transactions of Momentum Holding Corp. (parent). For the period September 13,
2002 to August 19,2003, the financial statements include only the accounts of
Cipher Multimedia Inc. All Intercompany transactions have been
eliminated.
 
 Cash and
Cash Equivalents
 
 The
Company considers all highly liquid instruments with original maturities of
three months or less to be cash equivalents.
 
 Income
Taxes: The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Under Statement No.
109, the asset and liability method is used in accounting for income taxes.
Deferred taxes are recognized for temporary differences between the bases of
assets and liabilities for financial statement and income tax purposes. The
temporary differences relate primarily to net operating loss carryforwards. A
valuation allowance is recorded for deferred tax assets when it is more likely
than not that some or all of the deferred tax assets will not be realized
through future operations.
 
  F-7
  
 CIPHER
HOLDING CORPORATION
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 
 **NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**
 
 Loss Per
Share
 
 Loss per
share is computed based on the weighted average number of shares of common stock
outstanding. All per share data retroactively reflects the effect of the reverse
acquisition.
 
 Accounting
for Convertible Notes
 
 The
Company has issued convertible debt securities with non-detachable conversion
features. The note holder has the right to have the notes and all or a portion
of accrued and unpaid interest converted into a number of shares of the Common
Stock at a Conversion Price of $0.001 per share. The Company has recorded the
fair value of the beneficial conversion features as interest expense and an
increase to Additional Paid in Capital.
 
 Use of
Estimates
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
 
 New
Accounting Pronouncements
 
 In
November 2002, the EITF finalized its consensus on EITF Issue 00-21, "Revenue
Arrangements with Multiple Deliverables, " which provides guidance on the method
of revenue recognition for sales arrangements that include the delivery of more
than one product or service. EITF 00-21 is effective prospectively for
arrangements entered into in fiscal periods beginning after June 15, 2003. Under
EITF 00-21, revenue must be allocated to all deliverables regardless of whether
an individual element is incidental or perfunctory. The adoption of EITF 00-21
did not have a material impact on the Company's results of operations or
financial position. In January 2003, the FASB issued FASB Interpretation No. 46
("FIN 46"), "Consolidation of Variable Interest Entities." FIN 46 clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 applies immediately to
variable interest entities ("VIE's") created after January 31, 2003, and to
VIE's in which an enterprise obtains an interest after that date. On October 9,
2003 the FASB issued FASB Staff Position No. FIN 46-6 "Effective Date of FASB
Interpretation No.46 Consolidation of Variable Interest Entities," which defers
the implementation date for public entities that hold an interest in a variable
interest entity or potential variable interest entity from the first fiscal year
or interim period beginning after June 15, 2003 to the end of the first interim
or annual period ending after December 15, 2003.
 
 This
deferral applies only if 1) the variable interest entity was created before
February 1, 2003 and 2) the public entity has not issued financial statements
reporting that variable interest entity in accordance with FIN 46, other than
disclosures required by paragraph 26 of FIN 46. The adoption of FIN 46 did not
have a material impact on the Company's financial position, liquidity or results
of operations.
 
  F-8
  CIPHER
HOLDING CORPORATION
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 
 **NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**
 
 New
Accounting Pronouncements (Continued)
 
 In May
2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative
Instruments and Hedging Activities. "This Statement amends and clarifies
financial accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities under FASB Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 149 is
effective for contracts entered into or modified after June 30, 2003, and for
hedging relationships designated after June 30, 2003. The adoption of SFAS No.
149 did not materially impact the Company's financial position or results of
operations.
 
 In May
2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." The statement
requires that an issuer classify financial instruments that are within its scope
as a liability. Many of those instruments were classified as equity under
previous guidance. SFAS No. 150 is effective for all financial instruments
entered into or modified after May 31, 2003. Otherwise, it is effective on July
1, 2003 except for mandatory redeemable non controlling (minority) interest
which, on October 29, 2003, the FASB decided to defer indefinitely. The adoption
of SFAS No. 150 did not materially impact the Company's financial position or
results of operations.
 
 In
December 2003, the SEC issued Staff Accounting Bulletin ("SAB") No. 104,
"Revenue Recognition, "which supercedes SAB No. 101, "Revenue Recognition in
Financial Statements." SAB No. 104 rescinds accounting guidance in SAB No. 101
related to multiple element arrangements, which was previously superceded by
EITF 00-21 (see above). The adoption of SAB No. 104 did not have a material
impact on the Company's results of operations or financial
position.
 
 Restatement
of financial statements
 
 The
Company adopted recapitalization accounting for the reverse merger and restated
the financial statements and eliminated the recognition and immediate write off
of $275,000 of goodwill. The additional paid in capital decreased by $275,000
for the liabilities incurred to acquire Momentum Holding Corporation. The net
loss, accumulated deficit, and additional paid in capital were each reduced by
$275,000.
  During
2004, the Company had issued 1,552,500 restricted shares of common stock for
consulting services. The shares were valued at $78,726. As explained in the note
5, the Company used the Black Scholes model and recomputed the fair value of the
restricted shares at $218,850. As a result of the adjustment, the company’s
professional fees, net loss, and additional paid in capital increased by
$140,324.
  The
restatements did not change the total stockholders’ equity. The net loss per
share before and after restatements are as follows:
 
 Net
      loss per share
    Year
      ended
    Year
      endedDecember
      31
    December
      31,2004
    2003After
      Restatement
    $
      0.2
    $
      0.03Before
      Restatement
    $
      0.01
    0.03
  F-9
  CIPHER
HOLDING CORPORATION
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 
 **NOTE
3. COMMITMENT AND CONTINGENCIES**
 
 Formation
of Momentum Resolution Trust (the "Trust").
 
 During
August 2001, the Momentum Holding Corp accepted the resignation of the two
executives who operated Productions. In connection with their resignation, 100%
of the Registrant shares they owned were contributed to a Trust in contemplation
of their use in resolving the Registrant's business affairs. The Trust is a New
York irrevocable trust to which the Registrant's two remaining executives agreed
to contribute 100% of their ownership in the Registrant, to act as Trustees, and
to perform such services as necessary to resolve the Registrant's affairs
without compensation.
 
 The sole
beneficiaries of the Trust are in order of priority: the taxing authorities to
which Productions has payroll withholding tax liabilities, the Trustees for
indemnification of claims that may arise from their good faith guarantees of any
of the Registrant's business obligations, and any person the Trustees deem to
have made a valuable contribution to the accomplishment of the Trust's
purpose.
 
 On
February 5, 2002, the Trust delivered 12,001,465 pre reverse split shares or
66.7% of the Registrant's stock to Midwest Merger Management, LLC in exchange
for $250,000 in cash, notes and common stock.
 
 Disposition
of Productions
 
 During
2001, the Registrant's Board of Directors determined that it was in the
Registrant's best interest to dispose of Productions and its entertainment
projects. Accordingly, on December 31, 2001, pursuant to an Asset Disposition
Agreement, between the Company and MPI Resolution Trust, a New York irrevocable
trust was formed and managed by the Company officers for the purpose of
resolving Production's affairs (the "Trust"). The Registrant transferred 100% of
the outstanding shares of Productions to the Trust in exchange for the Trust's
assumption of specified liabilities of the Registrant aggregating $300,000. The
net liabilities transferred pursuant to this agreement include delinquent
obligations, fiduciary withholdings applicable to payroll taxes and related
taxes, as follows:
  F-10
  CIPHER
HOLDING CORPORATION
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 
 **NOTE
3. COMMITMENT AND CONTINGENCIES**
 
 2001
Liabilities of Productions to government and third parties:
 
 Accounts
      payable and accrued expenses
    
    $
    542,633Accrued
      payroll taxes and related expenses
    
    
    900,000Notes
      payable
    
    
    835,638$
    2,278,271
 Liabilities
of Productions to related parties and minority interest:
 
 Notes
      payable-- related parties
    
    $
    290,569Minority
      interest
    
    
    86,054376,623Total
      Productions liabilities
    
    
    2,654,894Assets
      of Productions-Cash
    
    
    17,163Loan
      receivable—related party
    
    
    23,000Total
      Productions assets
    
    
    40,163Productions
      liabilities in excess of assets
    
    
    2,614,731Liabilities
      of the Company assumed by the Trust
    
    
    300,000Total
      Liabilities Removed from the Company at December 31, 2001
    
    $
    2,914,731
 
 Momentum
had not guaranteed the liabilities of Production and has removed
the
 $2,914,731
in liabilities of Production from its financial statements.
 
 **NOTE
4. INCOME TAXES**
 
 The
details of deferred tax assets and liabilities are as follows:
 
 In 2004,
the Company used a statutory tax rate of 35% and estimated the tax asset to be
$269,000. The valuation allowance of $39,000, in 2002, was increased by
$164,000, in 2003, and $66,000 in 2004 to equal the amount of the Company's tax
assets that are estimated to expire without providing future tax benefits.
Estimated Tax Year Loss Expiration Operating Asset on Net Incurred Date Loss
Operating Loss
 
 2002
    
    
    2022
    
    $
    (112,627
    )
    $
    39,0002003
    
    
    2023
    
    
    (468,090
    )
    
    164,0002004
    
    
    2024
    
    
    (
      189,546
    )
    
    66,000$
    (770,263
    )
    $
    269,000Valuation
      allowance
    
    
    
    
    
    
    
    
    (269,000)Net
      tax assets
    
    
    
    
    
    
    
    
    $
      --
 
 Internal
Revenue Code Section 382 establishes a limit on the amount of NOLs of Momentum
Holding Corp. that may be used to offset income after the ownership change that
occurred in 2003 and 2004. The net operating loss carryforward of Momentum was
$770,263, as of December 31, 2004.
  F-11
  
 CIPHER
HOLDING CORPORATION
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 
 
 **NOTE
4. INCOME TAXES**
 
 Section
382 allows an owner shift any time there is a transfer of stock by a person who
directly, or indirectly, owns more than 5% of the corporation and the percentage
of stock of the corporation owned by one or more five percent shareholders has
increased, in the aggregate, by more than 50 percentage points over the lowest
percentage of stock owned by such shareholders at any time during the "testing
period." The "testing period" is generally a three-year period ending on the
date of any owner or equity structure shift.
 
 The
amount of post-change income that may be offset by pre-change losses is limited
each year by the "Section 382 Limitation." Generally, the Section 382 Limitation
is an amount equal to the value of the old loss corporation multiplied by a rate
established monthly by the Internal Revenue Service.
 
 **NOTE
5. STOCKHOLDERS' EQUITY**
 
 Reverse
Acquisition
 
 On August
19, 2003, the Company, Midwest Merger Management, LLC, a Kentucky limited
liability Company and Brentwood Capital Corp., a New York Corporation
consummated a Stock Purchase Agreement with Cipher Multimedia, Inc., a
privately-owned, Illinois corporation ("Cipher"). Pursuant to the terms of the
Agreement, Cipher purchased an aggregate of 1,900,000 shares of the 2,100,011
issued and outstanding shares of the Company's common Stock, par value $.001 per
share, from the Selling shareholders for the purchase price of $275,000 of cash
and debt. Cipher delivered the sum of $150,000 by wire transfer and executed a
promissory note in the amount of $60,000 due on September 6, 2003 and a second
promissory note in the amount of $65,000 due on December 5, 2003, which was paid
in 2004.
 
 Also,
under the terms of the exchange agreement, Momentum exchanged 14,052,800
newly-issued shares of common stock for all of the issued and outstanding shares
of common stock of Cipher, amounting to 100% of Cipher's outstanding capital
stock after the Exchange, leaving 16,452,811 shares of the Company's stock
issued and outstanding. Consequently, Cipher acquired voting control of Momentum
on August 19, 2003 and became Momentum's majority shareholder.
 
 The
transaction is accounted for as a reverse merger and the Company's name was
formally changed to Cipher Multimedia, Inc.
 
 Recapitalization
 
 In August
2003, Cipher was merged into its Delaware subsidiary and renamed the surviving
entity Cipher Holding Corporation. The principal effects of the merger were to
more closely align the Company's identity with its operating business. In
addition, the number of Common Shares authorized was increased to 100,000,000,
common and 5,000,000 preferred. Cipher's capital accounts have been restated to
give effect to this recapitalization.
 
 Issuance
of Common Stock
  During
2004, the Company issued 1,552,500 restricted shares of common stock for
consulting services. The shares were valued at $218,850. Restrictions regarding
the required holding period of the shares issued for services affect the fair
value. The discount from the market price of the common stock, at the time when
the shares are issued was determined using the Black Scholes model. The discount
was derived from the cost of hedging the value of the stock during its period of
restriction. The market price of the shares issued for services varied from $.85
to $1.06. The amount of discount, from the market prices were estimated as the
cost per share of buying a put option with a strike price equal to the market
price of the stock on the grant date, and a term equivalent to the restriction
period of two years and expected volatility of 300%, at the date of issue. The
discounted prices of shares ranged from $.10 to $.14.
  **NOTE
6. NOTES PAYABLE**
 
 Notes
Payable Other
 
 Cipher in
consideration for the purchase of the shares of Momentum paid the sellers
$150,000 and issued two promissory notes in the amounts of $60,000 and $65,000.
The $60,000 and $65,000 notes bore 9% interest and were payable within 30 and
120 days, respectively. The notes were secured by the personal guarantees of Mr.
Patrick Rooney a principal shareholder and officer of the Company and were paid
in 2004.
 
 Notes
Payable Shareholder
 
 1.
    The
      principal shareholder of the Company loaned $150,000 to Cipher to provide
      for a part of the acquisition cost of Momentum. The unsecured note is a
      demand note and is payable no later than December 31, 2004. The interest
      on the note is the prime rate. To date the note has not been
      paid.2.
    The
      principal shareholder has advanced funds to finance the working capital
      requirements of the Company. The advances are made against a demand note
      that is payable by December 31, 2004. Interest on the amounts advanced is
      computed at prime rate. The note may be converted to common stock at a
      rate of $0.01 per share. To date the note has not been
    paid.
 
  F-12
  
 CIPHER
HOLDING CORPORATION
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 
 
 **NOTE
7. RELATED PARTY TRANSACTION**
 
 On
December 28, 2004, the Registrant modified and amended a promissory note made by
Cipher in favor of John Rooney, brother of the Registrant’s President and
Chairman, in the principal amount of $130,000. Pursuant to the terms of the
amended note, the Registrant accepted the obligation for the payment of the note
for the release of the obligation of Cipher to repay principal and interest. The
due date of the note was extended to December 31, 2006, with interest at the
rate of 10%. The note was amended to be convertible into 138,867 shares of the
Registrant’s common stock.
  Restrictions
regarding the required holding period of the convertible shares affect the fair
value of the conversion feature. The discount from the $.28 market price of the
common stock, at the time when the conversion right was granted to the holder of
the $130,000 note was determined using the Black Scholes model. The discount was
derived from the cost of hedging the value of the stock during its period of
restriction. The amount of discount, approximately $.18, is the cost per share
of buying a put option with a strike price equal to the $.28 market price of the
stock on, the grant date, and a term equivalent to the restriction period of two
years and expected volatility of 150%. With the contracted conversion price of
$.093, the beneficial effect convertibility of the note to 1,386,667 shares of
common stock was estimated at $10,746, at the date of conversion right
contract.
  On
December 29, 2004, John Rooney transferred the right to convert 800,000 shares
underlying the amended note to Solaris Opportunity Fund, L.P. (“Solaris”) in
satisfaction of unpaid obligations to Solaris in the aggregate amount of
$30,000. The Registrant’s President and Chairman, Patrick Rooney, is the
President of the general partner of Solaris.
 
 **NOTE
8. CONVERTIBLE NOTE**
 
 On
December 28, 2004 we entered into an agreement with John Rooney, brother to the
CEO, majority shareholder and chairman of the board, to convert the note John
Rooney was holding for $130,000, 10% due December 31, 2005 into a 10 % note for
$130,000 due and payable on December 31, 2006 with the right to convert to
1,386,667, fully and non-assessable shares at any time prior to the repayment
thereof. Additional shares may be converted for unpaid interest at $.09375.
Because of the beneficial effect of the conversion right granted to the related
party we recognized an interest of 10,746 and equivalent paid in capital. We
used black Schoeles model to compute the interest expense.
 
 
 
 
  F-13
  
 **SIGNATURES**
 
 Pursuant
to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York, State of
New York on October 17, 2005.
 
 Cipher
Multimedia, Inc.
 
 By: /s/
Patrick Rooney
 Patrick
Rooney
 Chairman
of the Board /President
 
 By:/s/
Corey Conn
 Corey
Conn
 Chief
Financial Officer
 
 
 Board
 /s/Patrick
Rooney
 Patrick
Rooney