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J:\CLIENTS\ACE\S.E.C\ACE Sept 30 1999 10Q.rtf
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, 1999.
( ) 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)
7103 Pine Bluffs Trail, Austin, TX 78729
(Address of Principal Executive Offices)
(512) 249-2344
(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 October 30, 1999.
21,600,000 Common Shares
Transitional Small Business Disclosure Format:
YES ( ) NO (X)
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AMERICAN COMMUNICATIONS ENTERPRISES, INC.
INDEX TO FORM 10-QSB
PART I. FINANCIAL INFORMATION
<TABLE>
<S> <C> <C>
Item 1. Financial Statements (unaudited)
Balance Sheets as of September 30, 1999 and December 31, 1998............................... 3
Statements of Operations for the three and nine months ended September 30, 1999.............. 4
Statement of Stockholders' Equity (Deficit) for the nine months ended September 30, 1999... 5
Statements of Cash Flows for the three and nine months ended September 30, 1999.............. 6
Notes to Financial Statements ............................................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings......................................................................... 13
Item 2. Changes in Securities..................................................................... 13
Item 3. Defaults Upon Senior Securities........................................................... 13
Item 4. Submission of Matters to a Vote of Securities Holders..................................... 13
Item 5. Other Information......................................................................... 13
Item 6. Exhibits and Reports on Form 8-K.......................................................... 13
</TABLE>
Signatures
2
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American Communications Enterprises, Inc.
(A Development Stage Enterprise)
BALANCE SHEETS AS OF
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
September 30, December 31,
1999 1998
ASSETS (Unaudited) (Audited)
----------------- ------------------
<S> <C> <C>
Cash $ 9,216 $ 0
Licenses 480,000 0
----------------- ------------------
TOTAL ASSETS $ 489,216 $ 0
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accrued payroll $ 213,173 $ 64,590
Accrued expenses 41,090 0
Advances from shareholder 6,140 6,140
----------------- ------------------
Total liabilities 260,403 70,730
----------------- ------------------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock - no par value: 30,000,000 shares authorized;
21,600,000 and10,500,000 shares issued and outstanding 555,100 100
Deficit accumulated during the development stage (326,287) (70,830)
----------------- ------------------
Total stockholders' equity (deficit) 228,813 (70,830)
----------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
$ 489,216 $ 0
================= ==================
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
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American Communications Enterprises, Inc.
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Three-Months Nine-Months
Ended Ended
Sept. 30, 1999 Sept. 30, 1999
----------------- ------------------
<S> <C> <C>
REVENUES $ 154,498 $ 203,715
EXPENSES:
Broadcast operations 146,660 190,140
Payroll & related taxes 64,590 193,770
Professional fees 5,000 48,212
Other Expenses 16,943 27,050
----------------- ------------------
NET LOSS $ 78,695 $ 255,457
================= ==================
NET LOSS PER SHARE $ 0.00 $ 0.02
================= ==================
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
4
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American Communications Enterprises, Inc.
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Nine Months Ended September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Deficit
Accumulated
During the
Common Stock Development
Shares Value Stage Total
--------------- ------------ ---------------- ---------------
<S> <C> <C> <C> <C>
Balances, December 31, 1998 10,500,000 $ 100 $ (70,830) $ (70,730)
Proceeds from the issuance
of common stock 1,500,000 75,000 75,000
Shares issued for license fees 9,600,000 480,000 480,000
Net loss for the nine months
Ended September 30, 1999 (255,457) (255,457)
--------------- -------------- -------------------- -------------------
Balances September 30, 1999 21,600,000 $ 555,100 $ (326,287) $ 228,813
=============== ============== ==================== ===================
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
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American Communications Enterprises, Inc.
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Three-Months Nine-Months
Ended Ended
Sept. 30, 1999 Sept. 30, 1999
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (78,695) $ (255,457)
Adjustments to reconcile net loss to net cash
used in operating activities
Increase in accrued payroll 64,590 148,583
Increase in accrued expenses 205 41,090
------------------ ------------------
NET CASH USED IN OPERATING ACTIVITIES (13,900) (65,784)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short term borrowings 0 50,000
Proceeds from the issuance of common stock 12,500 25,000
------------------ ------------------
CASH PROVIDED BY FINANCING ACTIVITIES 12,500 75,000
------------------ ------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,400) 9,216
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 10,616 0
------------------ ------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 9,216 $ 9,216
================== ==================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 0 $ 0
================== ===================
Taxes paid $ 0 $ 0
================== ===================
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
American Communications Enterprises, Inc.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE A - FORMATION AND OPERATIONS OF THE COMPANY
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 intends 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.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
The accompanying unaudited financial statements of the Company have been
prepared in accordance with generally accepted accounting principals 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 principals. 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 three and nine months and ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1999. The accompanying financial statements and the notes should be
read in conjunction with the Company's audited financial statements as of
December 31, 1998 contained in its Amendment No. 2 Registration Statement on
Form SB-2.
NOTE B - 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 an accumulated
deficit and a negative working capital position of approximately $250,000 as of
September 30, 1999, and 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 (see Note D) and issuance of debt. However,
there is no assurance that they will be successful in their efforts to raise
capital. These factors among others may indicate that the Company will be unable
to continue as a going concern for a reasonable period of time.
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The financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern.
NOTE C - RELATED PARTY TRANSACTION
The Company's president, who is also a shareholder, has advanced $6,140 to the
Company. As of September 30, 1999 the Company had not repaid any of the
advances, which are unsecured, non-interest bearing and due on demand.
NOTE D - COMMON STOCK OFFERING
During April 1999, the Company began offering subscriptions for the sale of up
11,000,000 shares of the Company's common stock at $0.05 per share. The existing
shareholders do not intend to offer any shares for sale. The offering is on a
best efforts, no minimum basis, and any proceeds will be used to finance the
Company's acquisition strategy as well as provide working capital. As of
September 30, 1999, $75,000 was generated through the sale of 1,500,000 shares.
NOTE E - COMMITTMENTS
The Company has identified KXYL AM and FM, Brownwood, Texas, and KSTA AM and FM,
Coleman, Texas, as ideal acquisitions within its desired market size. As a part
of its due diligence, the Company has entered into a Time Brokerage Agreement
with the aforementioned radio stations, commencing June 1, 1999, whereby the
Company will manage the operations for a period of up to twelve months. Under
this cancelable agreement, the Company will collect all revenues and is
responsible for the payment of all expenses including certain monthly debt
obligations, which are approximately $40,000 per month.
NOTE F - LICENSE AGREEMENT
On July 31, 1999, the Company entered into a license agreement with Tamark
Communications to obtain (4) four exclusive IP Gateways. The Gateways are a
combination of the internet and the global telephone networks to provide high
speed telecommunications routing. In consideration of 9,600,000 shares of its
common stock (with a fair market value of $480,000) and a 1% royalty on gross
sales generated from the Gateways, the Company has obtained the marketing and
distribution rights for the Gateways for specific territories.
------------------------------------------------------------------------------
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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, 1998 and the financial statements as of and for
the three and nine months ended September 30, 1999 included with this Form
10-QSB. We incorporated October 29, 1998 and this analysis does not include any
discussion as of and for the comparative period in 1998.
We are considered to be in the development stage as defined in Financial
Accounting Standards Board Statement No. 7, and we intend to provide branded,
interactive information and programming as well as merchandise to music
enthusiasts worldwide.
Readers are referred to the cautionary statement, which addresses
forward-looking statements made by the Company.
RESULTS OF OPERATIONS
For the three and nine months ended September 30, 1999 we generated
revenues of $154,498 and $203,715 through a Time Brokerage Agreement that allows
us to manage the operations of two existing radio stations (the "Stations"). We
have identified these Stations as ideal acquisitions and this agreement allows
us to perform due diligence on the Stations prior to such acquisitions. However,
we incurred a cumulative net loss of $78,695 and $255,457, respectively. Our
operating expenses consist primarily of broadcast operations, payroll and
professional fees.
o Broadcast operating expenses of $146,660 and $190,140 consisted principally
of expenses incurred in connection with the management of the
aforementioned Stations.
o Payroll expenses of $64,590 and $193,770 consisted principally of related
taxes and salaries paid to employees.
o Professional fees of approximately $5,000 and $48,212 consisted principally
of general business consulting, business development, legal and accounting
fees.
o Other expenses of $16,943 and $27,050 consisted principally of office
supplies, travel, and organization costs.
The results of operations for the periods ended September 30, 1999
are not necessarily indicative of the results for any future interim period or
for the year ending December 31, 1999. We expect to expand upon obtaining
capital and financing for our planned principle operations.
9
<PAGE>
Liquidity and Capital Resources
Our operating requirements have exceeded our cash flow from
operations as we have been building our business. Operating activities during
the nine months ended September 30, 1999 created a net use of cash of $65,784,
which was funded through sales of common stock of $75,000. At September 30, 1999
we had cash and cash equivalents of $9,216, however we had a working capital
deficit of approximately $250,000.
During April 1999, we began offering subscription for the sale of up to
11,000,000 shares of our common stock at $0.05 per share. We need the proceeds
of this offering 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 As of September 30, 1999, $75,000 was
generated through the sale of 1,500,000 shares.
OTHER EVENTS
We have identified KXYL AM and FM, Brownwood, Texas, and KSTA AM and FM,
Coleman, Texas, as ideal acquisitions within its desired market size. As a part
of its due diligence, we have entered into a Time Brokerage Agreement with the
aforementioned radio stations, commencing June 1, 1999, whereby we will manage
the operations for a period of up to twelve months. Under this cancelable
agreement, we will collect all revenues and is responsible for the payment of
all expenses including certain monthly debt obligations, which are approximately
$40,000 per month.
On July 31, 1999, the Company entered into a license agreement with Tamark
Communications to obtain (4) four exclusive IP Gateways. The Gateways are a
combination of the internet and the global telephone networks to provide high
speed telecommunications routing. In consideration of 9,600,000 shares of its
common stock (with a fair market value of $480,000) and a 1% royalty on gross
sales generated from the Gateways, the Company has obtained the marketing and
distribution rights for the Gateways for specific territories.
YEAR 2000 ISSUE
Many software applications and operational programs written in the past were not
designed to recognize calendar dates beginning in the Year 2000. The failure of
such applications or systems to properly recognize the dates beginning in the
Year 2000 could result in miscalculations or system failures which could result
in an adverse effect on the our operations.
We do not currently utilize any critical date sensitive systems.
We have not incurred any costs to date related to Year 2000 compliance. As a
part of our acquisition strategy we will evaluate the costs to transition
systems to Year 2000 compliance and do not expect those costs will not have a
material effect on our financial position or results of operations.
We have not deferred any information technology projects to address the Year
2000 issue. In addition to internal Year 2000 activities, we will communicate
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with others with which our systems interface or on which they rely to determine
the extent to which those companies are addressing their Year 2000 compliance.
There can be no assurance that there will not be an adverse effect on us, if
third parties, such as utility companies do not convert their systems in a
timely manner and in a way that is compatible with the our systems. However, we
believe that ongoing communication with, and assessment of, these third parties
will minimize these risks.
Although we anticipate minimal business disruption will occur as a result of
Year 2000 issues, possible consequences include, but are not limited to, loss of
electric power, inability to process transactions or engage in similar normal
business activities.
To date, we have not established a contingency plan for possible Year 2000
issues. Where needed, we will establish contingency plans based on actual
testing experience with our supplier base and assessment of outside risks. We do
not anticipate that a contingency plan will need to be developed as manual
processes mitigate our outside risks.
The cost of the conversion and the completion dates are based on our best
estimates and may be updated, as additional information becomes available.
11
<PAGE>
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.
- ------------------------------------------------------------------------------
12
<PAGE>
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
Form 8-K, dated September 7, 1999, Item 5, Acquisition of Licenses
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.
11/22/1999 /s/ Robert E. Ringle
Date Robert E. Ringle, Vice-President, Treasurer
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<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 9,216
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 489,216
<CURRENT-LIABILITIES> 260,403
<BONDS> 0
0
0
<COMMON> 555,100
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 489,216
<SALES> 0
<TOTAL-REVENUES> 203,715
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 459,172
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (255,457)
<INCOME-TAX> 0
<INCOME-CONTINUING> (255,457)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (255,457)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
