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, 2000

( ) 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)

355 Interstate Blvd., Sarasota, FL 34240
----------------------------------------
Address of Principal Executive Offices:

(941) 923-1949
--------------
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 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 (2) 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. X

The issuer's revenues for the most recent fiscal year were $252,403.

The aggregate market value of the voting stock held by non-affiliates of the
registrant at March 31, 2000 was $2,738,404. Shares of common stock held by each
officer and director and by each person who owns more that 10% 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.

1

Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of March 31, 2001.

97,950,128 Common Shares

Documents Incorporated By Reference - NONE

Transitional small business disclosure format. _ Yes X No






2



PART I

Forward-Looking Statements.

Any matters discussed or incorporated by reference in this Form 10-K that are
not historical facts are forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. Any expressions
that indicate future events and trends are forward-looking statements and are
subject to risks and uncertainties that could cause actual results to differ
materially from historical results, results American Communications Enterprises
anticipates or results expressed or implied by such forward-looking statements.
Our future performance and financial results could differ materially from those
reflected in this report due to general financial, economic, regulatory and
political conditions or additional factors unknown to us at this time, as well
as specific risks and uncertainties such as those set forth in documents filed
by us with the SEC.

ITEM 1. BUSINESS

General

American Communications Enterprises, Inc. ("ACEN"), was incorporated in Nevada
in 1998 and is based in Sarasota, Florida. 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 sold the shares ourselves and have not
used an underwriter or paid any commissions. We sold the shares using our best
efforts, and there was no minimum amount of shares we were required to sell. We
ended our offering June 30, 2000, having sold 1,566,667 shares (6,266,668 after
giving effect to a four for one split effected by a dividend in January 2001).

Our original purpose was to acquire, consolidate and operate non-rated market
radio stations in Texas and other geographic regions of the United States. We
intended to develop related "state-of-the-industry" Internet services to network
our planned regional clusters of radio stations in such markets. We believed
that this cross-marketing strategy would 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 managed the
operations of these stations for a period of thirteen months. Under this
cancelable agreement, we collected all revenues from operations and were
responsible for the payment of all expenses including certain monthly debt
obligations. However, we were unable to raise the capital necessary to acquire
these stations and began to pursue different opportunities.

In November 2000, after a change in control of the Company, the new management
team reevaluated the Company's strategic plan. Management concluded that
shareholder value could be augmented by broadening the Company's focus from the

3

radio industry to the broader telecommunications industry. In the course of its
review of available telecommunications activities, management has concluded that
it should focus on opportunities relating to the utilization of voice over
Internet protocol technology in the international long distance telephone
market. Since November 2000, therefore, our principal business has become
International Long Distance communication services. We intend to use
leading-edge technology known as Voice Over Internet Protocol ("VOIP") that
permits high speed, large volume, transmission services.

The "ACE Network," which we are designing, will consist of a U.S. presence of
international gateways located in Tampa, Florida. The gateways will be leased
from IP Access under a lease agreement, but we have not entered into a final
lease configuration.

Industry Background.
- -------------------

During the past decade, the international telecommunications industry has
undergone drastic change. Legislation, both domestically and internationally,
has combined with international agreements to enhance competition and to open
international markets to competition and foreign ownership. During the same time
frame, technology has revolutionized the choices available for transmission of
voice and data from point to point. These technological changes have contributed
to a downward trend in pricing to the end-user of the service, regardless of the
technological means used to transmit the call or data. Despite this downward
pressure on prices, however, increased availability has resulted in growth in
the overall telecommunications market.

The Company believes that a market opportunity exists in the use of VOIP in the
international long distance market. This opportunity stems from the availability
of the technology to transmit voice and data over a network, including the
world's largest network - the Internet.

Traditional telephony relied upon a continuous cable connection from the caller
to the recipient. It required mechanical or electronic switches to create the
dedicated line between caller and recipient. The advent of the Internet and the
technology to translate human speech into digital form permits the transmission
of voice information over the Internet, rather than over a dedicated line. The
speaker's words are digitized, broken into small "packets," and transmitted by
the fastest available path over the Internet to the destination. At that point,
the "packets" are reassembled and translated into sound, heard by the recipient.

Internet Telephony began with the introduction of software that allowed a PC
user to send a voice communication over the Internet using a microphone
connected to his or her computer. Initial sound quality was poor, and the
service required that both parties to the conversation use computers, not
telephones. In the mid 1990s, the introduction of the gateway gave anyone with a
telephone the capacity to complete calls on the Internet. A gateway is a piece
of equipment that receives the call, usually through a local carrier. The
gateway converts the voice input to a digital format, then routes it to its
destination over the Internet. A gateway in the receiving location performs the
reverse process, converting the digital data from the Internet to a voice
format. This in turn is transmitted through local telephone providers to the
ultimate destination.

The volume of calls made through VOIP has been limited to date, largely because
of poor sound quality of the calls. Technological developments, however, have
improved, and are expected to continue to improve, the quality of Internet
telephony. The Company believes that increased use of this technology will
further enhance competition in the telephone industry, resulting in price
reductions to consumers. It is the Company's desire to be in the forefront of
the promotion of this technology to the international long distance market.

4

Principal Products and Services.

ACEN currently is in the process of designing and constructing international
telecommunications operations with an initial focus in Taiwan and in Mexico. We
believe that as technology advances, a comprehensive range of both consumer and
business communications and information services will be provided over networks
utilizing VOIP technology. VOIP carries voice and data over the internet. With a
large enough traffic base, the cost of acquiring VOIP equipment should become
more cost effective. These services will include traditional VOIP, video, data
and facsimile transmission, as well as virtual private networks. We believe this
shift to VOIP has begun, and over time should accelerate, for the following
reasons:

o Cost. VOIP technology generally results in lower average costs for
telephone calls than traditional switch-based networks. (Source:
Economist, March 27, 2001).

o Flexibility. VOIP technology is based on an open protocol (a
nonproprietary, published standard) that allows for market driven
development of new uses and applications for VOIP networks. In
international markets, this is based upon proprietary protocols for
a "Public Switched Telephone Network" ("PSTN"), which are governed
and maintained by international standards bodies that are generally
controlled by government affiliated entities.

o Improving Technologies. ACEN believes that VOIP's open protocol will
allow technological advances that will lead to achieving seamless
interconnection in International Markets. A seamless interconnection
will allow customers to use ACEN's VOIP-based services, including
VOIP and facsimile, without modifying existing telephone and
facsimile equipment or existing dialing procedures; there will be no
need to dial access codes or follow other present procedures.

o Standardized Interface. Web browsers (developed for the Internet and
usable with many VOIP networks) can provide a standardized interface
to data and applications on a VOIP network and thus make it easier
for end users to access and use these resources.

While VOIP technology does not offer the same quality as traditional networks,
especially for voice transmissions, we believe the market is more accepting of
VOIP today. We are developing the technology to allow seamless interconnection
of the network we are presently building, to be known as the "ACE Network." We
intend to provide a comprehensive range of telecommunication services over the
ACE Network, including private line, virtual private networks, video, data, VOIP
and facsimile transmission services.

Distribution Methods.
- --------------------

In January 2001, we signed a Letter Of Intent to acquire a start-up marketer of
VOIP technology. While we are still in the due diligence stage of evaluating
this acquisition, we are pursuing business arrangements using VOIP technology
with other potential customers.

In December 2000, we entered into a Letter Of Intent to acquire Swift Telecom,
Inc., an operator of a significant data network with network facilities

5

throughout the world, which we intended to convert to VOIP and offer services
worldwide. On January 31, 2001, Swift terminated that letter of intent, because
of disagreements regarding the use of the collateral needed to finance the
acquisition.

Suppliers.
- ---------

The most crucial resource we will need is VOIP equipment manufactured by IP
Access of Tampa, Florida. Our relationship with IP Access is new, but we believe
satisfactory. In the event the relationship develops difficulties, we would have
to find a new supplier. Although other suppliers exist, we believe it may be
several months before those suppliers will have equipment meeting our
specifications at IP Access's prices.

Marketing.
- ---------

Since 1998, the global trend towards more liberalized telecommunications markets
has accelerated in an unprecedented fashion. In addition ACEN will focus its
strategies on:

North America. Long the leader, it is the world's international
telecommunications hub. Twenty-five (25) billion outbound minutes, one-third of
all global international public switched traffic, originate from this region.
Assuming we raise the capital, ACEN is positioned to compete in this region's
market. While the World Trade Organization (WTO) Agreement will result in the
further opening of the global telecommunications market in the new millennium,
ACEN intends to maintain its focus on the Far East, Latin America and the
Caribbean. This focus is due to the experience of management in these regions.
ACEN's management will focus on originating U.S. telecommunications traffic to
Latin America, while also bringing this traffic from these countries into the
U.S.

Latin America and the Caribbean. This region's economic promise, combined with
recent efforts by several nations to allow competition into their
telecommunications industries, makes it a significant target market. The
examples of Chile and Mexico, the region's deregulation leaders, are stimulating
others to accelerate their efforts to open their telecommunications industries.
Colombia, El Salvador and Guatemala are the most recent countries to allow
competition in international VOIP services. Argentina, Bolivia, Brazil, Peru and
Venezuela have committed to allow competition for their international services
over the next few years, with others likely to follow their lead. This region
now generates some five (5) billion minutes of outbound traffic annually. ACEN
intends to have contractual relationships allowing extensive origination and
termination of traffic into Mexico.

ACEN's sales plan is to utilize alternative distribution channels and thus focus
on other carriers, larger customers or larger groups of customers. Through
alternative distribution channels, ACEN believes that it will be able to more
rapidly access markets and increase revenue producing traffic with which it can
then begin to build a network. ACEN intends to hire a direct sales force to
market its products and services directly to large communications-intensive
national and international business accounts. These accounts would typically be
connected directly to the ACE Network using unswitched, dedicated facilities.

As part of its distribution strategy, ACEN has identified several additional
potential distribution channels. These include agents and resellers, also known
as wholesalers or aggregators. Agents are independent organizations that would
sell ACEN products and services to end-users in exchange for revenue based
commissions. ACEN intends to identify agents that generally would be focused on
specific market segments, such as Fortune 1000 corporations with operations in

6

different countries. Sales through this alternative distribution channel would
require ACEN to provide order fulfillment, billing and collections, customer
care and direct sales management, which we intend to partially outsource.

Wholesalers are independent companies that would purchase network and service
capabilities from ACEN in large quantities in order to market their own products
and services under a brand name other than ACEN's. ACEN believes that
wholesalers would have minimal dependence on ACEN's business support systems in
connection with the sale of services to their customers. ACEN anticipates that
participants in its distribution channels will sell services directly to
multi-national businesses.

Distribution.
- ------------

We have selected carrier to carrier services as our main focus; hence ACEN will
offer its network capacities to the 1st, 2nd and 3rd tier carriers with volumes
of traffic to host countries. For example, if we were to install our equipment
with a capacity of up to ten (10) million minutes per month, we would then
contract with other like carriers, brokers and agents that have proven to be
reliable in the past, and negotiate the best rate per minute based upon the cost
factors utilized for termination of calls it so required. Our desire is to
provide the best quality available and act as a pipeline of connectivity for the
telecommunication services to the host country. In some instances, we would be
able to sell the total minutes capacity of the installed equipment per host
country to a single customer.

If we build, operate and maintain a quality network and price it competitively,
filling the pipeline should not be difficult. Today, AT&T and MCI/WorldCom
control major portions of the data traffic. Management believes this dominance
will change in the coming decade, and it will provide additional niche
opportunities for ACEN's network.

Competitive Business Conditions.
- -------------------------------

The communications and information services industries are highly competitive.
Many of ACEN's existing and potential competitors have financial, personnel,
marketing and other resources significantly greater than those of ACEN, as well
as other competitive advantages including customer bases.

ACEN is subject to significant competition from other entities that engage in
the telecommunications industry. Many of the world's most widely recognized
telecommunications companies have begun to develop and sell overseas
telecommunications. In addition, other publicly-traded companies focused on the
overseas telecommunications industry currently compete, or may in the future
compete, with ACEN. Many of these entities possess significantly greater
financial, sales and marketing personnel and other resources than those of ACEN
and may be able to grow at a more rapid rate or more profitably as a result.
Management of ACEN believes that industry competition will be increased by
recent and possibly future consolidation in the telecommunications industry.

For virtual private network services and VOIP services, ACEN will compete
primarily with international and regional network providers. There are currently
three principal facilities based long distance fiber optic networks (AT&T,
Sprint and MCI/WorldCom), as well as numerous ILEC and CLEC networks. ACEN is
aware that others, including QWEST, IXC Communications, Inc. and The Williams
Companies, Inc., are building additional networks that, when constructed, could
employ advanced technology similar to that of our ACE Network and will offer
more capacity than is currently available in the marketplace. The additional

7

capacity that is expected to become available in the next several years may
cause significant decreases in the prices for services.

ACEN's ability to compete effectively in this market will depend upon its
ability to maintain high quality services at prices equal to or below those
charged by its competitors.

In the U.S. long distance market, in which we will pursue niche opportunities,
ACEN's primary competitors will include AT&T, Sprint and MCI/WorldCom, all of
whom have extensive experience in the long distance market. In addition, the
Telecommunications Act of 1996 will allow the regional Bell operating companies
("RBOCs") and others to enter the long distance market. ACEN will not compete
with ILECs and CLECs, many of whom have extensive experience in the local
market. ACEN believes that VOIP technology will prove to be a viable technology
for the transmission of VOIP, video, data and facsimile services. The technology
is in place that will enable ACEN to provide VOIP services at an acceptable
level of quality at this time.

The communications and information services industries are subject to rapid and
significant changes in technology. For instance, recent technological advances
permit substantial increases in transmission capacity of both new and existing
fiber, and the introduction of new products or emergence of new technologies may
reduce the cost or increase the supply of certain services similar to those,
which ACEN plans on providing. Accordingly, in the future ACEN's most
significant competitors may be new entrants to the communications and
information services industries, which are not burdened by an installed base of
outmoded equipment. ACEN expects competition to persist, intensify and increase
in the telecommunications industry in the future. Present competition includes
every telecommunications company and Internet Service Provider ("ISP"),
including AT&T, GTE, MCI/WorldCom, Sprint, QWEST, and all of the Bell companies,
and AOL and other Internet Service Providers. Almost all of ACEN's current and
potential competitors have longer operating histories, larger installed customer
bases, longer relationships with clients and significantly greater financial,
technical, marketing and public relations resources than ACEN and could decide
at any time to increase their resource commitments to ACEN's target market. As a
strategic response to changes in the competitive environment, ACEN may from time
to time make certain pricing, service, technology or marketing decisions or
business or technology acquisitions that could have a material adverse effect on
its business, financial condition, results of operations and prospects, and
similar actions by competitors could materially adversely affect ACEN's present
and proposed business operations, results of operations, financial condition and
prospects.

In addition, ACEN's ability to generate clients will depend to a significant
degree on the uniqueness and quality of its products and services and its
reputation among its clients and potential clients, compared with the quality of
similar services provided by, and the reputations of, ACEN's competitors. To the
extent ACEN loses clients to its competitors because of dissatisfaction with its
services, or its reputation is adversely affected for any other reason, ACEN's
business, results of operations, financial condition and prospects could be
materially adversely affected.

There are relatively low barriers to entry into ACEN's targeted business. Anyone
can attempt to purchase and sell the telecommunication services which ACEN
purchases and markets. Accordingly, ACEN is likely to face additional
competition from new entrants into the market in the future. There can be no
assurance that existing or future competitors will not develop or offer services
that provide significant performance, price, creative or other advantages over
those offered by ACEN, which could have a material adverse effect on its

8


business, financial condition, results of operations and prospects. There is
intense price competition among the major competitors in the telecommunications
industry. This continued decrease in the price of these services may make it
economically unfeasible for ACEN to continue its present and proposed
telecommunications purchases and sales.

Intellectual Property.
- ---------------------

The Company will negotiate and enter into Long-term Termination Agreements with
international host countries to the extent that management determines they are
beneficial to the Company's business.

Our proposed international telecommunications activities do not require, and we
do not intend to rely on, patents or trademarks.

Although our trade secrets are not subject to patent protection, we treat these
as proprietary and intend to use confidentiality agreements as appropriate in an
attempt to protect such trade names.

Effect of Governmental Regulations on Business.

Telecommunications is a heavily regulated industry featuring regulations in the
various countries with which we do business or intend to business in the future,
tariff regulations which govern telecommunications activities between nations,
and various federal and state regulations in the United States. The following
discussion is intended to review the status of regulation relative to ACEN.

International Telecommunications. The World Trade Organization ("WTO") Agreement
took effect in February 1998. Sixty-nine (69) countries, representing 95% of the
world's U.S. $600 billion domestic and international telecommunications
revenues, signed the Agreement, with most committing to improved access by
foreign companies to these international telecommunications markets.

The liberalization movement also enjoyed significant advances in the
Asia-Pacific and Latin America areas, expanding the mosaic of foreign competitor
opportunities in these regions. While many nations have yet to open their
international telecommunications markets to competition, 1998 was a banner year.
ACEN's management believes that these developments make it likely that ACEN's
addressable global markets will continue to expand rapidly.

Federal Regulation. The Federal Communications Commission (the "FCC") regulates
interstate and international telecommunications services. The FCC imposes
extensive regulations on common carriers such as ILECs that have some degree of
market power. The FCC imposes less regulation on common carriers without market
power, such as ACEN. The FCC permits these non-dominant carriers to provide
domestic interstate services (including long distance and access services)
without prior authorization, but it requires carriers to receive an
authorization to construct and operate telecommunications facilities, and to
provide or resell telecommunications services between the United States and
international points. ACEN will obtain FCC authorization to provide
international services on a facilities and resale basis. ACEN will be required
to file tariffs for its interstate and international long distance services with
the FCC before commencing operations.

9

Under the Telecommunications Act of 1996, any entity, including cable television
companies, and electric and gas utilities, may enter any telecommunications
market, subject to reasonable state regulation of safety, quality and consumer
protection. Because implementation of the Telecommunications Act is subject to
numerous federal and state rulemaking proceedings and judicial review, there is
still uncertainty as to what impact it will have on ACEN. The Telecommunications
Act is intended to increase competition.

ACEN cannot predict whether state, federal or foreign governments will impose
additional regulation on ACEN's business, nor can it predict the impact that
future regulation will have on ACEN's operations.

State Regulation. The Telecommunications Act of 1996 is intended to increase
competition in the telecommunications industry. State regulatory agencies will
have jurisdiction when Company facilities and services are used to provide
intrastate services. A portion of ACEN's traffic may be classified as intrastate
and therefore subject to state regulation. ACEN expects that it will offer more
intrastate services as its business and product lines expand, and as state
regulations are modified to allow increased local services competition. To
provide intrastate services, ACEN generally must obtain a certificate of public
convenience and necessity from the state regulatory agency and comply with state
requirements for telecommunications utilities, including state tariff
requirements.

Research and Development.
- ------------------------

As part of ACEN's entrance to the international telecommunications market, it
intends to enhance existing products and develop new products on a limited
basis. ACEN had no costs associated with research and development activities,
including customer sponsored research and development activities during the
years ended December 31, 2000 or 1999.

Employment.
- ----------

Assembling talented and aggressive operating management is critical to success
in our industry. We endeavor to create positive work environments in order to
attract and retain talented personnel. In addition we will provide incentives to
key employees by creating financial rewards, including making equity available
to certain key employees based on performance.

We do not currently have any full time employees but have engaged several
part-time consultants and believe that our relations with our consultants are
good.

ITEM 2. PROPERTIES

We currently share a 3,000 square foot facility without payment of rent with
Tampa Bay Financial, Inc. at 355 Interstate Boulevard, Sarasota, Florida, 34240,
on an at will basis.

ITEM 3. LEGAL PROCEEDINGS

NONE

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

NONE



10



PART II


ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

The Company's common stock is quoted on the OTC Bulletin Board. Set forth below
is a table summarizing the high and low bid quotations for the Company's common
stock during its last two fiscal years. Trading commenced November 11, 1999

- ---------------------------------------------------------------------------
QUARTER HIGH BID LOW BID
- ---------------------------------------------------------------------------
4th Quarter 1999 $9.00 $.31
- ---------------------------------------------------------------------------
1st Quarter 2000 $1.00 $.034
- ---------------------------------------------------------------------------
2nd Quarter 2000 $.484 $.07
- ---------------------------------------------------------------------------
3rd Quarter 2000 $.109 $.025
- ---------------------------------------------------------------------------
4th Quarter 2000 $.23 $.04
- ---------------------------------------------------------------------------


The above table is based on Over-The-Counter quotations. These quotations
reflect inter-dealer prices, without retail mark-up, markdown or commissions,
and may not represent actual transaction. All historical data was obtained from
the CNBC.com web site.

As of March 26, 2001 there were 212 stockholders of record of the common stock.

ACEN has never declared or paid cash dividends on its common stock. We intend to
retain all future earnings to finance future growth and therefore, do not
anticipate paying any cash dividends in the foreseeable future.

Sales Of Unregistered Securities.
- --------------------------------

In 1999, the Company issued 1,333,333 common shares (5,333,332 shares after
giving effect to a four for one stock split effected in the form of a dividend
in January 2001) in settlement of debts in the amount of $50,000. The
transaction was valued at $.0375 per share ($.009375 adjusted for the stock
split) based on the trading value of the Company's stock at the time of the
transaction. The transaction involved the issuance of unregistered stock to a
small group of sophisticated investors in a transaction that the Company
believes is exempt from registration under Section 4(2) of the Securities Act of
1933.

In 1999, the Company issued 4,300,000 common shares (17,200,000 shares after
giving effect to the stock split) in exchange for a license agreement valued at
$215,000. The transaction was recorded at $.05 per share per share ($.0125
adjusted for the stock split) based on the trading value of the Company's stock
at the time of the transaction. The transaction involved the issuance of
unregistered stock to a small group of sophisticated investors in a transaction
that the Company believes is exempt from registration under Section 4(2) of the
Securities Act of 1933.

11

In 1999, the Company issued 317,420 common shares (1,269,680 shares after giving
effect to the stock split) for services valued at $79,355. The transaction was
recorded at $.25 per share ($.0625 adjusted for the stock split) based on the
trading value of the company's stock at the time of the transaction. The
transaction involved the issuance of unregistered stock to a small group of
sophisticated investors in a transaction that the Company believes is exempt
from registration under Section 4(2) of the Securities Act of 1933.

In 2000, the Company issued 470,632 shares of common stock (1,880,448 shares
after giving effect to the stock split) for services valued at $117,528. The
transaction was valued at $.25 per share ($.0625 adjusted for the stock split)
based on the trading value of the Company's stock at the time of the
transaction. The transaction involved the issuance of unregistered stock to a
small group of sophisticated investors in a transaction that the Company
believes is exempt from registration under Section 4(2) of the Securities Act of
1933.

ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Overview.
- --------

The following discussion should be read in conjunction with other financial data
appearing elsewhere in this report. Certain information included herein contains
statements that constitute "forward-looking statements" containing certain risks
and uncertainties. Readers are referred to the cautionary statement at the
beginning of this report, which addresses forward-looking statements made by us.

We are considered to be in the development stage as defined in Financial
Accounting Standards Board Statement No. 7. Although the Company has been in
existence for a number of years, management's efforts to develop the Company's
business have not yet resulted in generation of significant revenues. To date,
management's efforts have focused on acquisitions within the communications
industry. The Company has recently changed the focus of its business, from radio
communications to telephone communications using the internet as its backbone.
Until acquisitions have been completed and potential customers are convinced of
the viability of the Company's voice over internet protocol business, it is
unlikely that the Company will generate significant revenue. The following
discussion of the Company's historical financial results should be read against
that background.

Results of Operations.
- ---------------------

For the year ended December 31, 2000 we generated revenues of approximately
$252,403 as compared to $390,399 for the year ended December 31, 1999 through
the Company's previous radio operations. Revenues primarily consisted of
commercial or program time sold. Revenues declined due to the termination of the
radio operations in mid-2000.

We incurred a net loss of approximately $970,280 for the year-ended December 31,
2000 as compared with a net loss of $405,716 for the year ended December 31,
1999. Our operating expenses consisted primarily of broadcast operations, sales
and marketing and general and administrative expenses. General and
administrative expenses of $1,052,082 for the year ended December 31, 2000
compared to $504,748 for the year ended December 31, 1999 and consisted
principally of payroll and related taxes; professional fees for consulting,
business development, legal and accounting; office supplies expense; travel
expense and organizational costs. The increased net loss and increases in

12

general and administrative expenses related to costs paid to officers for
services. Sales and marketing expenses were $70,557 for the year ended December
31, 2000 as compared to $89,781 for the year ended December 31, 1999 and were
incurred in connection with the development of advertising revenues.

The results of operations for the period ended December 31, 2000 are not
necessarily indicative of the results for any future period. We expect to expand
operations upon obtaining capital and financing for our planned principle
operations and acquisitions.

Liquidity And Capital Resources.
- -------------------------------

Our operating requirements have exceeded our cash flow from operations as we
attempt to build our business. Operating activities during the year ended
December 31, 2000 used cash of $177,131. Operating activities were funded
through proceeds from the sale of common stock of $25,000 received through the
sale of 400,000 shares of common stock and advances from related party
shareholders of $114,569. At December 31, 2000 we had cash and cash equivalents
of $186.

As of December 31, 2000, an additional 25,880,448 shares of common stock, valued
at $777,528, were issued in exchange for services. We need to raise capital to
expand our operations and finance our future working capital requirements.

Based upon the Company's current plans, the Company anticipates that it will
need to seek additional funding. The Company is pursuing acquisitions. Pursuit
of acquisitions are in their early stages, however, and it is difficult to
predict what revenue stream, if any, they will generate.

The Company does not expect its revenue stream to be sufficient to cover costs
of operations in the immediate future. The Company expects that it will continue
to be required to raise capital to fund operations for the next year as targeted
acquisitions may need cash to fund their operations. The Company will attempt to
raise this capital by borrowing, but no lender has issued a binding commitment
to the Company. Therefore, the Company expects to engage in one or more private
placements of common stock to fund its operating needs. The Company has engaged
in discussions with several parties who have expressed interest in assisting the
Company in such a private offering, based on potential acquisitions. Management
is confident that private equity or debt financing will be available to fund it
until revenues from operations are sufficient to fund operations.

Capital Expenditures.
- --------------------

Management cannot forecast capital expenditures for the coming year. The
Company's needs are based on acquisitions, which it believes can be raised
through equity. If it is unable to raise the capital needed for acquisitions, it
will greatly curtail planned operations. No assurance can be given that we will
raise the needed capital.

ITEM 7. FINANCIAL STATEMENTS



13

AMERICAN COMMUNICATIONS ENTERPRISES, INC.

TABLE OF CONTENTS

PAGE

INDEPENDENT AUDITORS' REPORT 15

FINANCIAL STATEMENTS

Balance Sheet 16

Statements of Operations 17

Statements of Stockholders' Equity 18

Statements of Cash Flow 19

Notes to Financial Statements 20-25



14

INDEPENDENT AUDITORS' REPORT

Board of Directors

American Communications Enterprises, Inc.


We have audited the accompanying balance sheet of American Communications
Enterprises, Inc. (the Company), a development stage company, as of December 31,
2000, and the related statements of operations, stockholders' equity and cash
flows for the years ended December 31, 2000 and 1999 and from inception on
October 29, 1998 through December 31, 2000. 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 audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
2000, and the results of its operations and its cash flows for the years ended
December 31, 2000 and 1999, and from inception on October 29, 1998 through
December 31, 2000, in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 5 to the
financial statements, the Company has incurred significant operating losses and
has a working capital deficiency, which raise substantial doubt about its
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

SPROUSE & WINN, L.L.P.


March 27, 2001
Austin, Texas


15



FINANCIAL STATEMENTS


16

AMERICAN COMMUNICATIONS ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEET

DECEMBER 31, 2000

ASSETS

CURRENT ASSETS

Cash $ 186
-------
Total Assets $ 186
=======


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
Accounts payable $ 10,460
Advances payable to related party 114,569
-------
Total Current Liabilities 125,029
-------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY

Common stock; authorized 500,000,000 common shares; par
value .001, 97,950,128 shares issued and outstanding 1,321,983

Deficit accumulated during the development stage (1,446,826)
----------
Total Stockholders' Equity (Deficit) (124,843)
----------
Total Liabilities and Stockholders' Equity $ 186
==========




SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS


17

AMERICAN COMMUNICATIONS ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS