10KSB: Optional form for annual and transition reports of small business issuers [Section 13 or 15(d), not S-B Item 405]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20459

FORM 10-KSB

( X ) Annual Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934.

For the Year Ended December 31, 1999

( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.

For the transition period from __________ to __________.

Commission File Number: 333-72097

AMERICAN COMMUNICATIONS ENTERPRISES, INC.
-----------------------------------------
(Exact name of Registrant as specified in its Charter)

NEVADA 74-2897368
------ ----------
(State of or other jurisdiction of (IRS Employer I.D. No.)
incorporation or organization)

7103 Pine Bluffs Trail, Austin, TX 78729

Address of Principle Executive Offices:

(512) 249-2344
--------------
Registrant's telephone number, including area code:

Securities registered pursuant to Section 12(b) of the Act:

NONE

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

NONE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by 7 Section 13 or 15(d) of the Securities Exchange act of 1934
during the preceding 12 months (or for such other shorter period that the
registrant was required to file such reports), and (20 has been subject to such
filing requirements for the past 90 days. _X Yes _ _No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by referencing Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. _____

The issuer's revenues for the most recent fiscal year were $390,399.

The aggregate market value of the voting stock held by non-affiliates of the
registrant at March 31, 2000 was $14,120,415. Shares of common stock
held by each officer and director and by each person who owns more that 5% of
the outstanding common stock have been excluded in that such persons may be
deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.

Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of March 31, 2000.

18,030,888 Common Shares

Documents Incorporated By Reference - NONE

Transitional small business disclosure format. ___ Yes _X_No



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ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

ITEM PAGE
NUMBER DESCRIPTION NUMBER
------ ----------- ------


PART I

1. Business.................................................... 3
2. Properties.................................................. 14
3. Legal Proceedings........................................... 15
4. Submission of Matters to a Vote of Security Holders......... 15

PART II
5. Market for the Company's Common Equity and Related
Stockholder Matters....................................... 16
6. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 16
6A. Quantitative and Qualitative Disclosure about Market Risk... 18
7. Financial Statements and Supplementary Data................. 19
8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 33

PART III
9. Directors and Executive Officers of the Company.............. 33
10. Executive Compensation...................................... 34
11. Security Ownership of Certain Beneficial Owners............. 34
12. Certain Relationships and Related Transactions.............. 35

PART IV
13. Exhibits, Financial Statement Schedules, and Reports on Form
8-K....................................................... 36
Signatures...................................................... 36







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PART I

ITEM 1. BUSINESS

General

American Communications Enterprises, Inc. (ACE), was incorporated in
Nevada in 1998 and is based in Austin, Texas. We commenced our initial public
offering effective August 24, 1999 and our common stock is listed on the NASDAQ
Bulletin Board (OTCBB) under the symbol "ACEN".

In connection with our initial public offering we registered 11,000,000
shares of common stock at $0.05 per share. We are selling the shares ourselves
and have not used an underwriter or paid any commissions. We are selling our
shares using our best efforts and there is no minimum amount of shares we must
sell, accordingly, none of the funds raised from the sale of our stock will go
into escrow, trust or other similar arrangement. We expect to end our offering
no later than June 30, 2000.

ACE acquires, consolidates and operates non-rated market radio stations
in Texas. In the near future, we intend to enter other geographic regions of the
United States. We hope to develop related "state-of-the-industry" Internet
services to network our planned regional clusters of radio stations in such
markets. We believe that this cross-marketing strategy will allow us to offer
greater advertising capabilities to potential advertisers, and therefore avail
itself of possibly greater revenue opportunities than available to radio
stations on a "stand alone" basis or other consolidators who do not follow such
strategy.

We identified KXYL AM and FM, Brownwood, Texas and KSTA AM and FM,
Coleman, Texas as ideal acquisitions within our desired market size. As a part
of our due diligence examination, as to whether or not we should pursue the
acquisition of these stations, we entered into a Time Brokerage Agreement with
the aforementioned radio stations, commencing June 1, 1999, whereby we manage
the operations of these stations for a period of up to twelve months. Under this
cancelable agreement, we collect all revenues from operations and are
responsible for the payment of all expenses including certain monthly debt
obligations, which approximate $10,000 per month.

Management

Dain Schult - President and Chief Executive Officer: Mr. Schult serves as
Chairman, President and Chief Executive Officer of ACE. Mr. Schult is a
broadcast veteran of over 32 years in the radio industry. Prior to the formation
of ACE, Mr. Schult was President of Radioactivity, Inc., a full-service radio
broadcast consulting firm serving over 150 radio stations in various parts of
the country. Mr. Schult participated in the turnaround of several stations,
created a unique turn-key management service for new station owners, conducted
station appraisals and market analysis projects for sellers and buyers, and
developed specific music formats for on-air use by client stations.
Concurrently, Mr. Schult was Chief Operating Officer for Sunbelt Radio Group,
Inc., a radio station group created to acquire and operate radio stations in
Texas. Previously, Mr. Schult had held various program manager, operating
manager, and on-air personality positions at several radio stations in the
Southeast and Southwest, including serving as President and Chief Executive
Officer for Equicom, Inc.

Robert E. Ringle - Executive VP/Internet Operations and Director of Sales: Mr.
Ringle has extensive experience in Internet operations and has held the position
of Director of Sales for a regional radio broadcasting network of over 30
stations which included creation of sales training programs, image enhancement
and the centralized billing system. He has owned and operated a Detroit-based
full-service advertising agency.

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Hap Hedges - Executive VP/Chief Operating Officer: As Executive Vice President
and Chief Operating Officer for the Company, Mr. Hedges brings with him over 30
years of experience in the radio broadcasting industry. Prior to the formation
of the Company, Mr. Hedges was Senior Vice-President/Regional Manager for
Equicom, Inc., garnering some of the highest sales goal achievements in the
entire group. Additionally he served as an associate consultant with
Radioactivity, Inc., and founded Hedges and Associates, a sales and marketing
company formed to represent Western and Southwestern clothing and accessories
manufacturers to various department stores and western-wear boutiques throughout
East and Central Texas. Previously, Mr. Hedges held various general manager,
sales and promotion manager, account executive, and news reporter/copy writer
positions at several stations in Texas.

Acquisition

On November 19, 1999, ACE entered into an agreement with Watts
Communications, Inc. to acquire all of the assets of the KXYL AM and FM,
Brownwood, Texas and KSTA AM and FM, Coleman, Texas for $1,625,000 subject to
the terms and conditions set forth in the Asset Purchase Agreement and subject
to prior approval of the FCC. The application to the FCC for license transfer
approval was accepted on December 2, 1999. We have final FCC approval and
anticipate closing on this acquisition by April 21, 2000.

The following table summarizes certain information relating to all radio
stations operated by ACE:

Market and Station Target Demographic
Call Letters Format Group Frequency

Brownwood, TX
KXYL-AM Country/Tejano 25-54 1240
KXYL-FM Country 18-64 104.1

Coleman, TX

KSTA -AM Classic Country 35-64 1000
KSTA-FM Oldies/AC 25-54 107.1


Acquisition Strategy

We will pursue a regionally focused acquisition strategy. We propose to
initially purchase small-sized radio stations in non-rated, non-major
metropolitan areas in Texas and then expand to surrounding states.

Our management believes that many of the non-major metropolitan areas
currently offer many attractively priced acquisition candidates compared to the
larger cities.

Besides our regional focus, our growth strategy is planned to be founded
upon the achievement of synergies and economies of scale, including but not
limited to, the generation of incremental sales through network marketing for
greater national and regional advertising, the reduction of overhead expenses
and the realization of operational cost savings.

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We hope to eventually acquire up to approximately 400 non-rated radio
stations nationwide. We intend operate additional radio stations beginning by
July, 2000. We plan to pursue a regionally focused acquisition strategy
beginning in a geographic area ranging from Wyoming to the west, Texas,
Mississippi and Georgia to the east. We then intend to add clusters of stations
across the country when and wherever possible. The total number of stations
acquired will be a function of availability, our financing capability and
marketing feasibility.

To this end, we have tendered Letters of Intent for 25 stations
located in Texas, Wyoming, Arizona, New Mexico, Oklahoma, Mississippi and
Georgia and currently have executed Letters of Intent for 4 stations located in
Texas, Wyoming and South Dakota.

Operating Strategy

With the successful integration of the operations of the Brownwood and
Coleman stations, we are able to offer regional advertisers the ability to
access a population base of approximately 300,000 people in Central/West Texas.
As we acquire more stations, advertisers will be able to purchase the entire ACE
group as a network with one media buy which will also include advertising
capabilities on the Internet. Under current market conditions, an advertiser
would not be able to roll out a campaign targeting non-major Texas areas without
entering into a number of separate media purchases which is both time consuming
and non-cost effective due to having to contact each station separately instead
of as a group .

Based on our management's prior experience in operating radio stations in
consolidated groups, we believe that these stations can be linked together for
efficient operation in a reasonable time frame. We intend to centralize
functions such as programming, accounting and national and regional sales to
significantly reduce operating expenses and enhance profits.

Our Internet component is planned to include a variety of entertainment,
gaming, and e-commerce sites along with local and national weather and news in a
unique configuration that we believe will successfully compete in this growing
segment of the Internet. By combining the small to medium market broadcast radio
stations with the Internet, we believe we can eventually create a network
presence across the country and internationally. The strategy is a hybrid of a
small-to-medium-market radio station consolidation and an Internet approach that
is cross-market oriented.

As an augmentation to this Internet strategy, on July 31, 1999, we entered
into a license agreement with Tamark Communications to obtain (4) four exclusive
IP Gateways. The Gateways are essentially switching devices that are a
combination of the Internet and global telephone networks to provide high speed
telecommunications routing. In return for the issuance of 4,300,000 shares of
our common stock and a 1% royalty on gross sales generated from the Gateways, we
have obtained the marketing and distribution rights for the Gateways for
specific territories. We believe that we may be able to use the Gateways in our
Internet activities and we also hope to be able to generate licensing revenue
for us through the licensing of the Gateways. However, because we have only
recently entered into this licensing agreement and have generated no revenues as
a result thereof, we are not able to predict whether we will have any decreased
costs or increased revenues through this arrangement.

On January 17, 2000, ACE executed an agreement with Sino Marketing to
develop opportunities for programming and entertainment content in both
broadcast and Internet formats for sale and distribution in Mainland China. Sino
Marketing's partner, CITIC Beijing Guoan Advertising, provides unique media

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venues in Internet and broadcast. We are planning to reach both English and
non-English speaking residents of China who are interested in American music
formats, entertainment and products. Sino Marketing and their partner are ready
to launch a portal to China for e-commerce. The web site will provide a broad
spectrum of product services including entertainment. This capability will be
extremely valuable in facilitating the sale and distribution of our programming
and products. Since our business plan includes the ability to provide our
services and products via satellite and the Internet, we are perfectly
positioned to do business in countries around the world.

Based upon the prior personal, professional experiences of our management
as well as the success of other regional consolidators, we believe our ability
to market our entire network will result in a consolidated advertising approach
with a distinctly higher component of national and regional advertising versus
local direct retail advertising. This is favorable because national and regional
advertising often command premiums over local ad rates by as much as 50%, and
100% in smaller cities.

Arbitron, the national radio ratings service provides every-other-year
ratings for markets such as Brownwood and Coleman. While ACE awaits the next
ratings results from Arbitron, using internal research systems provided by
Radioactivity, Inc., indications are that KXYL FM's listenership has grown 25%
since June, 1999 and KSTA FM's listenership has grown at least 35% since June,
1999. We are optimistic that the next Arbitron ratings will reflect the
improvements we have made in programming at all of the stations ACE owns in
Brownwood and Coleman, Texas. Additionally, ACE has consistently billed more
advertising revenue per month than the corresponding month a year ago before the
Time Brokerage Agreement took effect.

We plan to utilize a blend of WAN (Wide Area Network) music programming
coupled with centralized satellite voice programming from a centrally located
control location. Additionally, all of our stations are planned to operate with
centralized accounting, billing, marketing and promotions systems, an in-house
sales group that will be utilized for group advertising for the radio stations
as well as for Internet advertising, and specialized in-house sales training
programs for all of our salespeople. Due to such planned centralization of
services, we believe that each station's general manager will have more time to
focus on sales instead of administration responsibilities. We expect that we
will also eventually utilize "super regional managers" each of who will serve
on-site as general manager in one market but also oversee the operation of other
stations within their designated region.

Overview of the Radio Business

Radio station revenues are primarily derived from the sale of advertising
spots or programs to national, regional, and local advertisers. Advertising
rates charged by a station are predicated on its performance in the ratings
based on estimates of the number of persons listening to a station as well as
the number of homes in a station's service area.

The only national radio audience measuring service, Arbitron, serves the
entire country and provides even the smallest markets with annual ratings
service. Ultimately, the success of a radio station (or group of stations)
depends on its ability to develop popular programming and promotions, thus
generating higher rates and allowing the station to charge more for airing
commercials.

Industry Consolidation

The radio broadcast industry is currently subject to consolidation
activity which is having a major impact on the competitive landscape. In
general, and as further discussed below, such consolidation activity has been
triggered by the Telecommunications Act of 1996. Up until the mid-1980s, there

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was no public market for radio stocks. Local ownership limits by the FCC of one
AM and one FM station per market and a total limit of 14 total stations
prevented radio groups from amassing greater size to attract outside capital.
Because of these strict limits, radio station ownership was highly fragmented
and characterized by "mom and pop" operations in even the largest markets. By
1984, however, FCC ownership rules had begun to be relaxed, with major
relaxation of such rules occurring in 1992 and 1994.

The passage of the 1996 Telecommunications Act (the "Telecom Act")
eliminated the national limits on the number of radio stations that one entity
could own and eased local ownership rules so as to allow 1 operating entity to
control up to 8 stations in most medium and major markets. Much of the
consolidation activity to date has been centered on major markets, resulting in
increased competition and higher valuations in such markets.

Mid-sized markets (generally defined to mean US markets ranked #50 to #265
based on population) have recently begun to see upward price pressure, with
15.0x to 20.0x EBITDA (Earnings before Income Taxes, Depreciation and
Amortization) multiples not uncommon (vs. 8.0x to 10.0x EBITDA multiples as
recently as 1997). The consolidation activity of large market operators such as
Chancellor/Capstar Communications (Hicks, Muse), Sunburst (Bain Capital), and
Cumulus (Wisconsin State Teachers Retirement/ Quaestus Capital) all of whom have
consolidated stations across the US, have begun the process in some of the same
markets that we are exploring for acquisitions thus tending to indicate that
consolidation has begun in the smaller markets. We believe that we will only
encounter these larger mid-market consolidators at the upper end of our target
markets in rated medium sized markets but not in the smaller, non-regularly
rated markets. Few groups have ventured beyond focusing on the top 250 markets,
which has kept acquisition multiples in our targeted markets low, but that could
change should other consolidators follow our small market strategy.

Competition

Competition within the radio broadcasting industry has historically been
and will continue to be very intense. Overall, the principal factor affecting
competition in this industry is the number of audience members reached with one
advertising medium. With the advent of deregulation, competition has increased
since the key to success is no longer how many listeners can an independent firm
reach in one market, but rather, how many listeners can a consolidator reach in
multiple markets. Competition with newspapers and television for advertising
dollars is also high. However, radio's audience has held up well over time. In
the past five years listenership has actually increased as reported by the Radio
Advertising Bureau despite the onslaught of Internet use. Internet radio usage
continues to grow, too. In addition, with the bulk of radio listening taking
place outside of the home and on the road, where competition with other mediums
is limited, and the audience somewhat "captive" (unable to access television,
newspapers, or the Internet), radio appears to be well positioned for continued
growth.

Regulation

INTRODUCTION

The ownership, operation and sale of radio stations are subject to the
jurisdiction of the FCC, which acts under authority granted by the
Communications Act of 1934, as amended (the "Communications Act"). Among other
things, the FCC assigns frequency bands for broadcasting; determines the
particular frequencies, locations and power of stations; issues, renews, revokes
and modifies station licenses; determines whether to approve changes in
ownership or control of station licenses; regulates equipment used by stations;
imposes regulations and takes other action to prevent harmful interference
between stations; adopts and implements regulations and policies that directly
or indirectly affect the ownership, management, programming, operation and
employment practices of stations; and has the power to impose penalties for



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violations of its rules or the Communications Act. In February 1996, Congress
enacted the Telecommunications Act of 1996 (the "Telecom Act") to amend the
Communications Act. The Telecom Act, among other measures, directed the FCC,
which has since conformed its rules, to (a) eliminate the national radio
ownership limits; (b) liberalize the local radio ownership limits as specified
in the Telecom Act; (c) issue broadcast licenses for periods of up to eight
years; and (d) eliminate the opportunity for the filing of competing
applications against broadcast license renewal applications.

LICENSE GRANTS AND RENEWALS
The Communications Act provides that a broadcast license may be granted to an
applicant if the grant would serve the public interest, convenience and
necessity, subject to certain limitations referred to below. In making licensing
determinations, the FCC considers the legal, technical, financial and other
qualifications of the applicant, including compliance with the Communications
Act's limitations on alien ownership, compliance with various rules limiting
common ownership of broadcast, cable and newspaper properties, and the
"character" of the licensee and those persons holding "attributable" interests
in the licensee. Broadcast licenses are granted for specific periods of time
and, upon application, are renewable for additional terms. The Telecom Act
amended the Communications Act to provide that broadcast licenses be granted,
and thereafter renewed, for a term not to exceed eight years, if the FCC finds
that the public interest, convenience, and necessity would be served. Generally,
the FCC renews broadcast licenses without a hearing. The Telecom Act amended the
Communications Act to require the FCC to grant an application for renewal of a
broadcast license if: (1) the station has served the public interest,
convenience and necessity; (2) there have been no serious violations by the
licensee of the Communications Act or the rules and regulations of the FCC; and
(3) there have been no other violations by the licensee of the Communications
Act or the rules and regulations of the FCC which, taken together, would
constitute a pattern of abuse. Competing applications against broadcast license
renewal applications are therefore not entertained. The Telecom Act provided
that if the FCC, after notice and an opportunity for a hearing, decides that the
requirements for renewal have not been met and that no mitigating factors
warrant lesser sanctions, it may deny a renewal application. Only thereafter may
the FCC accept applications by third parties to operate on the frequency of the
former licensee. The Communications Act continues to authorize the filing of
petitions to deny against broadcast license renewal applications during
particular periods of time following the filing of renewal applications.
Petitions to deny can be used by interested parties, including members of the
public, to raise issues concerning the qualifications of the renewal applicant.

The Brownwood and Coleman Stations' broadcast licenses were renewed by Watts
Communications, Inc. on August 17, 1997 and will expire on August 17, 2004. We
do not anticipate any material difficulty in obtaining license renewals in the
future.

The following table sets forth selected license information concerning each of
the stations operated by ACE: