10QSB: Optional form for quarterly and transition reports of small business issuers
Published on August 20, 2001
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 June 30, 2001. ( ) 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 (State of Incorporation) (I.R.S. Employer I.D. No) 355 Interstate Blvd., Sarasota, FL 34240 (Address of Principal Executive Offices) (941) 923-1949 (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 August 10, 2001. 113,923,579 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 June 30, 2001 and December 31, 2000.......... 4 Statement of Operations for the six months and three months ended June 30, 2001 and 2000 and the period from October 29, 1998 (commencement of the development stage) to June 30, 2001..... 5 Statement of Stockholders' Equity (Deficit) for the six months ended June 30, 2001............................................... 6 Statements of Cash Flows for the six months and three months ended June 30, 2001 and 2000 and the period from October 29, 1998 (commencement of the development stage) to June 30, 2001..... 7 Notes to Financial Statements..................................... 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ........................................ 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings......................................................... 12 Item 2. Changes in Securities..................................................... 12 Item 3. Defaults Upon Senior Securities........................................... 12 Item 4. Submission of Matters to a Vote of Securities Holders..................... 12 Item 5. Other Information......................................................... 12 Item 6. Exhibits and Reports on Form 8-K.......................................... 12 Signatures ....................................................................... 12 2 FORWARD-LOOKING STATEMENTS Certain statements contained in this filing are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to financial results and plans for future business development activities, and are thus prospective. These statements appear in a number of places in this Form 10-QSB and include all statements that are not statements of historical fact regarding intent, belief or our current expectations, with respect to, among other things: (i) our financing plans; (ii) trends affecting our financial condition or results of operations; (iii) our growth strategy and operating strategy; and (iv) the declaration and payment of dividends. The words "may," "would," "could," "will," "expect," "estimate," "anticipate," "believe," "intent," "plans," and similar expressions and variations thereof are intended to identify forward-looking statements. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, many of which are beyond our ability to control. Actual results may differ materially from those projected in the forward-looking statements as a result of various factors. Among the key risks, assumptions and factors that may affect operating results, performance and financial condition are changes in technology, fluctuations in our quarterly results, ability to continue and manage our growth, liquidity and other capital resource issues, competition and the other factors discussed in detail in our filings with the Securities and Exchange Commission. 3 PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) AMERICAN COMMUNICATIONS ENTERPRISES, INC. (A Development Stage Company) Balance Sheet ASSETS CURRENT ASSETS June 30, 2001 December 31, 2000 (unaudited) Cash $ 80 $ 186 Total Current Assets $ 80 $ 186 ============= ============== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Accounts payable and accrued expense $ 173,802 $ 10,460 Advances payable to related party 149,539 114,569 Total Current Liabilities 323,341 125,029 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common stock, authorized 500,000,000 common shares; par value .001, 113,923,579 and 97,950,128 shares issued and outstanding, 1,682,983 1,321,983 Accumulated deficit during the development stage (2,006,244) (1,446,826) Total Stockholders' Equity (Deficit) (323,261) (124,843) TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 80 $ 186 ============= ============== See accompanying notes. 4 AMERICAN COMMUNICATIONS ENTERPRISES, INC. (A Development Stage Company) Statements of Operations (Unaudited) From Inception of the Development Stage on For the For the October 29, Six Months Ended Three Months Ended 1998 Through June 30, June 30, June 30, 2001 2000 2001 2000 2001 REVENUES Revenues $ - $ 252,403 $ - $ 126,238 $ 642,802 Cost of goods sold - 100,690 - 47,623 303,939 Gross Profit - 151,713 - 78,615 338,863 EXPENSES General and administrative 559,418 464,408 214,598 260,670 2,187,078 Sales and marketing - 70,557 - 34,924 160,338 Total Expenses (559,418) 534,965 214,598 295,594 2,347,416 Other Income (Expense) - 646 - - 2,309 Net loss before provision for income taxes (559,418) (382,606) (214,598) (216,979) (2,006,244) Provision for income taxes - - - - - NET LOSS $ (559,418) $ (382,606) $(214,598) $(216,979) $(2,006,244) =========== =========== ========== ========== ============ Weighted average loss per share Basic and Diluted (0.005) (0.005) (0.002) (0.0025) =========== =========== ========== ========== Weighted average shares outstanding Basic and Diluted 103,654,932 72,720,000 109,486,509 73,148,000 =========== =========== ========== ========== 5 AMERICAN COMMUNICATIONS ENTERPRISES, INC. (A Development Stage Company) STATEMENTS OF STOCKHOLDERS' DEFICIT FOR THE SIX-MONTHS ENDED JUNE 30, 2001 (Unaudited) Deficit Accumulated During the Common Stock Development Shares Amount Stage Balance, December 31, 2000 97,950,128 $ 1,321,983 $ (1,446,826) Issuance of common stock for services ($.0226 per share) 15,973,451 361,000 - Net loss for the six-months ended June 30, 2001 - - (559,418) Balance, June 30, 2001 113,923,579 $ 1,682,983 $ (2,006,244) 6 AMERICAN COMMUNICATIONS ENTERPRISES, INC. (A Development Stage Company) Statements of Cash Flows (Unaudited) From Inception of the Development Stage on For the For the October 29, Six Months Ended Three Months Ended 1998 Through June 30, June 30, June 30, 2001 2000 2001 2000 2001 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (559,418) $ (382,606) $ (214,598) $ (216,979) $ (2,006,244) ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES: Bad debt expense - 26,666 - 23,144 40,285 Depreciation and amortization - 26,400 - 12,450 44,550 Loss on abandoned assets - - - - 180,451 CHANGES IN OPERATING ASSETS AND LIABILITIES: (Increase) Decrease in receivables - 40,499 - 15,199 (40,285) Increase (Decrease) in payables and accrued expenses 163,342 96,654 (165,432) 88,243 167,662 Stock issued for services 361,000 106,367 361,000 78,000 1,217,883 Net cash provided (used) by operating activities (35,076) (86,020) (19,030) 57 (395,698) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of fixed assets - - - - (4,136) CASH FLOWS FROM FINANCING ACTIVITIES: Advances from stockholder 34,970 25,000 18,610 - 155,679 Issuance of common stock - 25,000 - - 200,100 Issuance of debt - - - - 50,000 Payments of capital lease obligations - (5,865) - (3,000) (5,865) NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES: 34,970 44,135 18,610 (3,000) 399,914 Net (Decrease) Increase in cash (106) (41,885) (420) (2,943) 80 Cash at beginning of period 186 43,613 500 4,671 - Cash at end of period $ 80 $ 1,728 $ 80 $ 1,728 $ 80 ============== ============ ============= ============= ============= 7 AMERICAN COMMUNICATIONS ENTERPRISES, INC. (A Development Stage Company) Statements of Cash Flows (Unaudited) (continued) From Inception of the Development Stage on For the For the October 29, Six Months Ended Three Months Ended 1998 Through June 30, June 30, June 30, 2001 2000 2001 2000 2001 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for: Interest $ - $ - $ - $ - $ - =============== ================ ============== =============== ================ Income taxes $ - $ - $ - $ - $ - =============== ================ ============== =============== ================ SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Equipment purchased under capital lease $ - $ 34,379 $ - $ - $ 38,515 Stock issued for services $ 361,000 $ 106,367 $ 361,000 $ 78,000 $ 1,217,883 Stock issued for debt $ - $ - $ - $ - $ 50,000 Stock issued for license $ - $ - $ - $ - $ 215,000 Disposal of asset and Capital lease payable $ - $ - $ - $ - $ 32,650 8 AMERICAN COMMUNICATIONS ENTERPRISES, INC. (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS (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. Basis of Presentation: The accompanying unaudited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America 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 six months ended June 30, 2001 are not necessarily indicative of the results that may be expected for the year ended December 31, 2001. The accompanying financial statements and the notes should be read in conjunction with the Company's financial statements as of December 31, 2000 contained in its Form 10-KSB. NOTE 2: RELATED PARTY TRANSACTIONS During the quarter, the Company borrowed from Tampa Bay Financial, Inc. $18,610, which is non-interest bearing, unsecured, and due on demand. NOTE 3: GOING CONCERN The accompanying financial statements have been prepared on a 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 $323,261, an accumulated deficit of $(2,006,244) as of June 30, 2001, and a net loss for the quarter then ended of $244,147. 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 the Company 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. 9 NOTE 4: RECENT EVENTS The Company entered into a letter of intent in May, 2001, to acquire 100% ownership of Aero Group, Inc., through a reverse merger. As of the date of this filing this transaction has not been consummated; however, Tampa Bay Financial, Inc., a related party shareholder, has advanced $375,000 during July and August, 2001, to Aero Group, Inc. in connection with its obligations under the letter of intent. 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, 2000 and the financial statements as of and for the six months ended June 30, 2001 and 2000 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. 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. Readers are referred to the cautionary statement, which addresses forward-looking statements made by the Company. RESULTS OF OPERATIONS For the six months and quarter ended June 30, 2001, we did not generate any revenues. We generated $252,403 and $126,238 in revenues for the six months and quarter ended June 30, 2000, through the Time Brokerage Agreement with the Stations, that primarily consisted of commercial or program time sold. We incurred a net loss of approximately $559,418 and $214,598 for the six months and quarter ended June 30, 2001 as compared with a net loss of $382,606 and $216,979 for the six months and quarter ended June 30, 2000. For the quarter ended June 30, 2001, our operating expenses of $214,598 consist primarily of accrued fees which were paid in April, 2001 through the issuance of common shares, whereas in the quarter ended June 30, 2000 operating expenses of $295,594 consisted of broadcast operations, sales and marketing and general and administrative expenses. Such expenses decreased by $80,996 as a result of the cessation of our Time Brokerage Agreement. The results of operations for the period ended June 30, 2001 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. 10 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 quarter ended June 30, 2001, used cash of $19,030. Operating activities were primarily funded through advances from Tampa Bay Financial, Inc. of $18,610. At June 30, 2001, we had cash and cash equivalents of $80. Our accrued expenses were substantially converted to equity in April, 2001 through the issuance of common shares. Based upon our current plans, we anticipate that we will need to seek additional funding. The Company is pursuing acquisitions. Pursuit of acquisitions are in their early stages, however, it is difficult to predict what revenue stream, if any, they will generate. We do not expect our revenue stream to be sufficient to cover costs of operations in the immediate future. We expect that we 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. We will attempt to raise this capital by borrowing, but no lender has issued a binding commitment to the Company. Therefore, we expect to engage in one or more private placements of common stock to fund our operating needs. We have engaged in discussions with several parties who have expressed interest in assisting us 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. 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 difference include, among others, the following: (i) 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. 11 PART II OTHER INFORMATION Item 1. LEGAL PROCEEDINGS none Item 2. CHANGES IN SECURITIES none Item 3. DEFAULTS UPON SENIOR SECURITIES none Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS none Item 5. OTHER INFORMATION none Item 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: 10.1 Letter of Intent dated May 17, 2001, between the Registrant and Aero Group, Inc. 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. 5/15/2001 /s/ Matthew A. Veal Date Matthew A. Veal Director, Chief Financial Officer, and Accounting Officer 12