10QSB: Optional form for quarterly and transition reports of small business issuers
Published on November 14, 2000
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
FORM 10-QSB
( X ) Quarterly report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934.
For the quarterly period ended September 30, 2000.
( ) Transition report pursuant to Section 13 or 15(d) of the Exchange Act for
the transition period from _________________ to ____________ .
Commission File Number: 333-72097
AMERICAN COMMUNICATIONS ENTERPRISES, INC.
-----------------------------------------
(Exact name of registrant as specified in charter)
Nevada 74-2897368
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(State of Incorporation) (I.R.S. Employer I.D. No)
355 Interstate Blvd., Sarasota FL 34240
(Address of Principal Executive Offices)
(941) 923-1949
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(Registrant's Telephone Number, Including Area Code)
Check whether the registrant: (1) has filed all reports required to be filed by
Section by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES ( X ) NO ( )
Indicate the number of shares outstanding of each of the issuer's classes of
stock as of November 5, 2000.
24,487,532 Common Shares
Transitional Small Business Disclosure Format:
YES ( ) NO (X)
1
AMERICAN COMMUNICATIONS ENTERPRISES, INC.
INDEX TO FORM 10-QSB
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Balance Sheets as of September 30, 2000 and December 31,
1999................................................................3
Statements of Operations for the three and nine months ended
September 30, 2000 and 1999.........................................4
Statement of Stockholders' Equity (Deficit) for the nine months
ended September 30, 2000............................................5
Statements of Cash Flows for the three and nine months ended
September 30, 2000 and 1999.........................................6
Notes to Financial Statements.......................................7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..............................................10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................14
Item 2. Changes in Securities..............................................14
Item 3. Defaults Upon Senior Securities....................................14
Item 4. Submission of Matters to a Vote of Securities Holders..............14
Item 5. Other Information..................................................14
Item 6. Exhibits and Reports on Form 8-K...................................14
Signatures
2
AMERICAN COMMUNICATIONS ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
September
30, 2000 December 31,
(Unaudited) 1999
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ASSETS
CURRENT ASSETS
Cash $ 3,808 $ 43,613
Accounts receivable, net of allowance for
doubtful accounts of $40,285 and
$25,500, respectively - 70,226
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Total Current Assets 3,808 113,839
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Fixed assets, at cost, net of accumulated
depreciation of $5,150 and $150, respectively - 3,986
Licenses, at cost, net of accumulated
amortization of $39,400
and $18,000, respectively - 197,000
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$ 3,808 $ 314,825
============== =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 71,720 $ 24,147
Capital Lease Payable - Current 11,460 -
Accrued Expenses 379,007 247,769
Shareholder Advances 73,000 -
-------------- -------------
Total Current Liabilities 535,187 271,916
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Capital Lease Payable - Long Term 17,054 -
-------------- -------------
Total Liabilities 552,241 271,916
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Common stock; authorized 30,000,000 no par
common shares; 18,487,532 and 17,917,420
shares issued and outstanding, respectively 661,983 519,455
Deficit accumulated during the development stage (1,210,416) (476,546)
-------------- -------------
Total Stockholders' Deficit (548,433) 42,909
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$ 3,808 $ 314,825
============== =============
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS
3
AMERICAN COMMUNICATIONS ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(Unaudited)
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS
4
AMERICAN COMMUNICATION ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 2000
(Unaudited)
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS
5
AMERICAN COMMUNICATIONS ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(Unaudited)
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS
6
AMERICAN COMMUNICATIONS ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
AS OF AND FOR NINE MONTHS ENDED SEPTEMBER 30, 2000
(Unaudited)
NOTE 1: BUSINESS ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American Communications Enterprises, Inc. (the "Company") was
incorporated under the laws of the state of Nevada on October 29,
1998. The Company is considered to be in the development stage, as
defined in Financial Accounting Standards Board Statement No. 7. The
Company is currently in the process of creating strategic
relationships and acquiring complementary operating companies within
the global communications industry that have proven management and
state-of-the-art technologies. Through October 12, 2000 the Company
sought to purchase and operate radio stations throughout the United
States. The planned principal operations of the Company have not
commenced, therefore accounting policies and procedures have not yet
been established.
On October 12, 2000, Tampa Bay Financial, Inc., a Florida
corporation ("TBF"), entered into an agreement (the "Agreement")
with the Company and certain of its shareholders. The Agreement
obliges TBF or persons affiliated with TBF to acquire 17,450,000
shares (71.3%) of the Company's outstanding common stock, thereby
acquiring control of the Company. Pursuant to the Agreement, TBF
agreed to acquire such stock over a period of three weeks. The
selling stockholders in the transaction were the Company's
directors, Dain L. Schult and Robert E. Ringle, as well as
John W. Saunders, a consultant to the Registrant.
Under the Agreement, TBF's designees paid aggregate consideration of
$500,000.
In connection with the transaction, Messrs. Schult and Ringle
resigned from any and all positions with the Company, including
their positions as officers and directors. Two designees of TBF,
Carl Smith and Matthew Veal, were appointed to the board. In
addition, Mr. Smith was elected to serve as Chairman and Chief
Executive Officer, and Mr. Veal was elected to serve as Chief
Financial Officer.
On October 12, 2000, the Board of Directors of the Company and a
majority of its shareholders agreed to amend its Articles of
Incorporation to increase its authorized capital stock to 500
million shares of common stock. At that time, the Board of Directors
also approved a stock dividend of three shares for each share of
common stock outstanding as of the record date of October 30, 2000.
Subsequently, on October 20, 2000, the Board of Directors modified
the record date for payment of the stock dividend to November 6,
2000. The Company anticipates payment of the dividend on
approximately November 16, 2000.
7
Basis of Presentation
The accompanying unaudited financial statements of the Company have
been prepared in accordance with generally accepted accounting
principles for interim financial information and the instructions to
Form 10-QSB and Rule 10-1 of Regulation S-X of the Securities and
Exchange Commission (the "SEC"). Accordingly, these financial
statements do not include all of the footnotes required by generally
accepted accounting principles. In the opinion of management, all
adjustments (consisting of normal and recurring adjustments)
considered necessary for a fair presentation have been included.
Operating results for the nine and three months ended September 30,
2000 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2000. The accompanying
financial statements and the notes should be read in conjunction
with the Company's audited financial statements as of December 31,
1999 contained in its Form 10-KSB.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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 periods presented. Actual
results could differ from those estimates.
NOTE 2: RELATED PARTY TRANSACTIONS
Included in accrued expenses is approximately $379,000 in accrued
wages and related payroll taxes due to the President and
Vice-President of the Company under employment agreements.
During the nine months ended September 30, 2000 the Company borrowed
$73,000 from its former President, which is non-interest bearing,
unsecured, and due on demand.
NOTE 3: GOING CONCERN
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The
Company has a working capital deficiency of $531,379 an accumulated
deficit of $1,210,416 as of September 30, 2000, and a net loss for
the nine months then ended of $733,870. Accordingly its ability to
continue as a going concern is dependent on obtaining capital and
financing for its planned principal operations. The Company plans to
secure financing for its acquisition strategy through the sale of
its common stock and issuance of debt. However, there is no
assurance that they will be successful in their efforts to raise
capital or secure other financing. These factors among others may
indicate that the Company will be unable to continue as a going
concern for a reasonable period of time.
8
NOTE 4: TIME BROKERAGE AGREEMENT
The Company entered into a Time Brokerage Agreement (the
"Agreement") with Watts Communications Inc. on June 1, 1999. The
Agreement was initially for 12 months, but was extended through June
30, 2000. At which time the Company was unsuccessful in its attempt
to exercise its irrevocable option to purchase substantially all of
the assets of Watts Communications Inc. (the "Seller"), subject to
Federal Communications Commission approval, which also granted the
Company the radio air time for four radio stations for the period of
the Agreement.
On July 3, 2000, the Company was named as a defendant in a lawsuit
brought by the Seller, seeking unspecified damages and attorney's
fees.
The Company filed a counterclaim on July 7, 2000, alleging that the
Seller breached its agreement to sell the radio stations to the
Company. The Company is seeking to require the Seller to perform its
obligations to sell the radio stations. The Company is also seeking
to be reimbursed for its damages arising from the Sellers breach of
contract.
Management believes that the allegations on which the Seller relies
in its claim for damages are false. Management also believes that
the Company's claims for breach of contract have merit. Therefore,
the Company intends to defend vigorously against the Seller's claim
and to pursue its counterclaim vigorously.
On October 6, 2000, the Company and the Seller entered into a
settlement agreement, pursuant to which each party agreed to dismiss
all of its claims in the litigation, and the parties executed mutual
general releases. Therefore, the litigation has been concluded, and
each party has released the other from any existing claims.
In exchange for the purchase option and the airtime, the Company
paid the Seller various monthly fees of approximately $10,000 per
month.
Under the Agreement, the Company operated the four radio stations
and received the right to receive payment for any commercial or
program time sold during the term of the Agreement.
The sale of commercial and program time are included in revenues and
the monthly fees payable under the Agreement are included in Cost of
Revenues in these financial statements.
As a result of the unsuccessful attempt to exercise the purchase
option, the Company has recorded $14,785 as a provision for bad
debts, in the accompanying statement of operations, for the
estimated amount of receivables which the Seller has collected and
not remitted to the Company.
9
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
OVERVIEW
The following discussion and analysis should be read in conjunction with the
balance sheet as of December 31, 1999 and the financial statements as of and for
the three and nine months ended September 30, 2000 and 1999 included with this
Form 10-QSB.
We are considered to be in the development stage as defined in Financial
Accounting Standards Board Statement No. 7, and we are currently in the process
of creating strategic relationships and acquiring complementary operating
companies within the global communications industry that have proven management
and state-of-the-art technologies. Through October 12, 2000 we sought to
purchase and operate radio stations throughout the United States.
Readers are referred to the cautionary statement, which addresses
forward-looking statements made by the Company.
Recent Developments
On October 12, 2000, Tampa Bay Financial, Inc., a Florida corporation ("TBF"),
entered into an agreement (the "Agreement") with the Company and certain of its
shareholders. The Agreement obliges TBF or persons affiliated with TBF to
acquire 17,450,000 shares (71.3%) of the Company's outstanding common stock,
thereby acquiring control of the Registrant. Pursuant to the Agreement, TBF
agreed to acquire such stock over a period of three weeks. The selling
stockholders in the transaction were the Company's directors, Dain L. Schult and
Robert E. Ringle, as well as John W. Saunders, a consultant to the Company.
Under the Agreement, TBF's designees paid aggregate consideration of $500,000
over the course of the three-week purchase period.
In connection with the transaction, Messrs. Schult and Ringle resigned from any
and all positions with the Company, including their positions as officers and
directors. Two designees of TBF, Carl Smith and Matthew Veal, were appointed to
the board. In addition, Mr. Smith was elected to serve as Chairman and Chief
Executive Officer, and Mr. Veal was elected to serve as Chief Financial Officer.
On October 12, 2000, the Board of Directors of the Company and a majority of its
shareholders agreed to amend its Articles of Incorporation to increase its
authorized capital stock to 500 million shares of common stock. At that time,
the Board of Directors also approved a stock dividend of three shares for each
share of common stock outstanding as of the record date of October 30, 2000.
Subsequently, on October 20, 2000, the Board of Directors modified the record
date for payment of the stock dividend to November 6, 2000. The Company
anticipates payment of the dividend on approximately November 16, 2000.
10
Prior Activities
We entered into a Time Brokerage Agreement (the "Agreement") with Watts
Communications Inc. on June 1, 1999. The Agreement was initially for 12 months,
but was extended through June 30, 2000. At which time we were unsuccessful in
our attempt to exercise the irrevocable option to purchase substantially all of
the assets of Watts Communications Inc. (the "Seller"), subject to Federal
Communications Commission approval, which also granted us the radio air time for
four radio stations for the period of the Agreement.
On July 3, 2000, we were named as a defendant in a lawsuit brought by the
Seller, seeking unspecified damages and attorney's fees.
We filed a counterclaim on July 7, 2000, alleging that the Seller breached its
agreement to sell the radio stations to us. We are seeking to require the Seller
to perform its obligations to sell the radio stations. We are also seeking to be
reimbursed for damages arising from the Sellers breach of contract.
We believe that the allegations on which the Seller relies in its claim for
damages are false. We also believe that the our claims for breach of contract
have merit. Therefore, we intend to defend vigorously against the Seller's claim
and to pursue our counterclaim vigorously.
On October 6, 2000, the Company and the Seller entered into a settlement
agreement, pursuant to which each party agreed to dismiss all of its claims in
the litigation, and the parties executed mutual general releases. Therefore, the
litigation has been concluded, and each party has released the other from any
existing claims.
Under the Agreement, we operated the four radio stations and received the right
to receive payment for any commercial or program time sold during the term of
the Agreement.
RESULTS OF OPERATIONS
Quarter Ended September 30, 2000 and 1999
For the quarter ended September 30, 2000 we did not generate any revenues
compared to $154,498 for the quarter ended September 30, 1999 as we were
unsuccessful in our attempt to exercise the irrevocable option to purchase
substantially all of the assets of Watts Communications Inc.
We incurred a net loss of approximately $351,264 for the quarter ended September
30, 2000 as compared with a net loss of $78,695 for the quarter ended September
30, 1999. Our operating expenses consist primarily of general and administrative
expenses. General and administrative expenses increased to $154,180 for the
11
quarter ended September 30, 2000 from $86,533 for the quarter ended September
30, 1999, and principally includes payroll and related taxes; professional fees
for consulting, business development, legal and accounting; office supplies
expense; travel expense and organizational costs. Also as a result of an
unsuccessful attempt to exercise the purchase option related to the Time
Brokerage Agreement, we recorded an impairment loss of $175,600 related to a
license agreement we had purchased to develop our business plan. In addition, we
recorded a loss on abandoned assets of $33,365.
The results of operations for the quarter ended September 30, 2000 are not
necessarily indicative of the results for any future interim period or for the
year ending December 31, 2000. We expect to expand upon obtaining capital and
financing for our planned principle operations.
Nine Months Ended September 30, 2000 and 1999
For the nine-months ended September 30, 2000 we generated revenues of
approximately $252,403 through the Time Brokerage Agreement with the Stations.
Revenues primarily consisted of commercial or program time sold. We generated
$203,715 revenues for the nine-months ended September 30, 1999, as we had just
commenced operations.
We incurred a net loss of approximately $733,870 for the nine-months-ended
September 30, 2000 as compared with a net loss of $255,457 for the
nine-months-ended September 30, 1999. Our operating expenses consist primarily
of broadcast operations, sales and marketing and general and administrative
expenses. General and administrative expenses increased to $591,922 for the
nine-months ended September 30, 2000 from $269,032 for the nine-months ended
September 30, 1999, and principally includes payroll and related taxes;
professional fees for consulting, business development, legal and accounting;
office supplies expense; travel expense and organizational costs. Broadcast
operating expenses and sales and marketing expenses decreased to $171,247 for
the nine months ended September 30, 2000 from $190,140 for the nine months ended
September 30, 1999, and consisted primarily of those expenses incurred in
connection with the management and development of advertising revenues for the
Stations. Also as a result of an unsuccessful attempt to exercise the purchase
option related to the Time Brokerage Agreement, we recorded $14,785 as a
provision for bad debts for the estimated amount of receivables which the Seller
has collected and not remitted to us. Additionally, we recorded an impairment
loss of $175,600 related to a license agreement we had purchased to develop our
business plan. In addition, we recorded a loss on abandoned assets of $33,365.
The results of operations for the nine-months ended September 30, 2000 are not
necessarily indicative of the results for any future interim period or for the
year ending December 31, 2000. We expect to expand upon obtaining capital and
financing for our planned principal operations.
Liquidity and Capital Resources
Our operating requirements have exceeded our cash flow from operations as we
continue to build our business. Operating activities during the nine-months
12
ended September 30, 2000 used cash of $131,940. Operating activities were
primarily funded through proceeds from the sale of common stock of $25,000 and
proceeds from the issuance of debt of $73,000 and the use of approximately
$40,000 of cash on hand at December 31, 1999. At September 30, 2000 we had cash
and cash equivalents of approximately $3,808.
During April 1999, we began offering subscriptions for the sale of up to
11,000,000 shares of our common stock at $0.05 per share, which was increased to
$0.25 in the third quarter of 1999. As of September 30, 2000, cash proceeds of
approximately $200,000 were received through the sale of 1,566,667 shares in
connection with this offering. An additional 6,420,865 shares of common stock,
valued at approximately $462,000, were issued in exchange for services,
satisfaction of debt and a license agreement.
We will require the proceeds of this and subsequent offerings to expand our
operations and finance our future working capital requirements. Based upon our
current plans and assumptions relating to our business plan, we anticipate that
we may need to seek additional financing to fund our proposed acquisition
strategy.
CAUTIONARY STATEMENT
This Form 10-QSB, press releases and certain information provided periodically
in writing or orally by the Company's officers or its agents contain statements
which constitute forward-looking statements within the meaning of Section 27A of
the Securities Act, as amended and Section 21E of the Securities Exchange Act of
1934. The words expect, anticipate, believe, goal, plan, intend, estimate and
similar expressions and variations thereof if used are intended to specifically
identify forward-looking statements. Those statements appear in a number of
places in this Form 10-QSB and in other places, particularly, Management's
Discussion and Analysis of Financial Condition and Results of Operations, and
include statements regarding the intent, belief or current expectations of the
Company, its directors or its officers with respect to, among other things: (i)
the Company's liquidity and capital resources; (ii) the Company's financing
opportunities and plans and (iii) the Company's future performance and operating
results. Investors and prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those projected in the forward-looking statements as a result of various
factors. The factors that might cause such differences include, among others,
the following: (i) any material inability of the Company to successfully
identify, consummate and integrate the acquisition of radio stations at
reasonable and anticipated costs to the Company; (ii) any material inability of
the Company to successfully internally develop its products; (iii) any adverse
effect or limitations caused by Governmental regulations; (iv) any adverse
effect on the Company's continued positive cash flow and abilities to obtain
acceptable financing in connection with its growth plans; (v) any increased
competition in business; (vi) any inability of the Company to successfully
conduct its business in new markets; and (vii) other risks including those
identified in the Company's filings with the Securities and Exchange Commission.
The Company undertakes no obligation to publicly update or revise the forward
looking statements made in this Form 10-QSB to reflect events or circumstances
after the date of this Form 10-QSB or to reflect the occurrence of unanticipated
events.
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13
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
On July 3, 2000, the Company was named as a defendant in a lawsuit titled
Cause No.00-07-370; Watts Communications, Inc. vs. American Communications
Enterprises, Inc., which is currently pending in the 35th Judicial District
Court in Brown County, Texas. The plaintiff in this action is Watts
Communications, Inc. The action arises out of a contract between the Company
and the plaintiff to purchase radio stations located in Brownwood and Coleman,
Texas. The plaintiff seeks unspecified damages and its attorney's fees.
The Company filed a counterclaim on July 7, 2000, alleging that the
plaintiff breached its agreement to sell the radio stations to the Company. The
Company is seeking to require the plaintiff to perform its obligations to sell
the radio stations. The Company is also seeking to be reimbursed for its damages
arising from the plaintiff's breach of contract.
Management believes that the allegations on which the plaintiff relies in
its claim for damages are false. Management also believes that the Company's
claims for breach of contract have merit. Therefore, the Company intends to
defend vigorously against the plaintiff's claim and to pursue its counterclaim
vigorously.
On October 6, 2000, the Company and the plaintiff entered into a settlement
agreement, pursuant to which each party agreed to dismiss all of its claims in
the litigation, and the parties executed mutual general releases. Therefore, the
litigation has been concluded, and each party has released the other from any
existing claims. ACE is involved in litigation from time to time in the ordinary
course of its business. In management's opinion, the outcome of all pending
legal proceedings, individually and in the aggregate, will not have a material
adverse effect on the Company.
Item 2. Changes in Securities
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Securities Holders
On October 12, 2000, shareholders holding 18,450,000 shares, which
constituted more than a majority of the Company's outstanding common stock, took
action by written consent without a meeting to approve an amendment to the
Company's Articles of Incorporation to increase its authorized capital stock to
500 million shares of common stock.
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3(i).1 Amendment to Articles of Incorporation filed October 24, 2000.
10.1 Amendment to Agreement between the Registrant and Dain
L.Schult.
10.2 Amendment to Agreement between the Registrant and Robert
E. Ringle.
(b) Form 8-K, dated October 12, 2000; Items 1 - change in control and Item
5 - amended capitalization and three for one stock dividend.
14
SIGNATURES
Pursuant to the requirements 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.
November 14, 2000 /s/ Carl Smith
- -------------------------------- --------------------
Date Carl Smith,
Chief Executive Officer
15
