<PAGE>
U.S. SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
----------- -----------
Commission File No. 0-22174
American Entertainment Group. Inc
----------------------------------
(Exact name of small business issuer as specified in its charter)
Colorado 83-0277375
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization identification No.)
160 Bedford Road, Suite 306, Toronto, Ontario, Canada M5R 2K9
- ----------------------------------------------------- ----------------
(Address of principal executive offices) Zip Code
Issuer's telephone number, including area code (416) 920-1919, or
toll free 1-800-358-1919
Indicate by check mark whether the Issuer (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 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
----- -----
The number of shares outstanding of Registrant's common stock, as of the latest
practicable date, July 31, 1996, was 1,891,677 (after the reverse split of July
26, 1996).
NOTE: All numbers of shares, warrants and options provided herein reflect post
reverse split numbers.
Total number of sequentially numbered pages in this document: 14
<PAGE>
AMERICAN ENTERTAINMENT GROUP, INC.
INDEX
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements Page No.
Condensed Consolidated Balance Sheets-
June 30, 1996 and December 31, 1995 1-2
Condensed Consolidated Statements of
Operations Six Month periods Ended
June 30, 1996 and June 30, 1995 3
Condensed Consolidated Statement of Changes
in Stockholders' Equity- Six Months Ended
June 30, 1996 4 & 4B
Condensed Consolidated Statement of Cash Flows-
Six Months Ended June 30, 1996 and June 30, 1995 5
Notes to Condensed Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 9-10
PART II. OTHER INFORMATION 10-13
Signatures 14
<PAGE>
AMERICAN ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES
A DEVELOPMENT STAGE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
JUNE 30, 1996 DECEMBER 31, 1995
(UNAUDITED) (AUDITED)
Current Assets:
Cash $ -- $ 315
Inventory 7,728 7,801
Prepaid expenses and deposits 6,692 6,711
--------------- ---------------
Total current assets 14,420 14,827
--------------- ---------------
Property and equipment at cost
Office furniture and equipment 16,976 16,976
Computer equipment 9,782 9,854
--------------- ---------------
26,758 26,830
Less Accumulated Depreciation 13,963 11,315
--------------- ---------------
Net property and equipment 12,795 15,515
--------------- ---------------
Other assets:
Film library ownership 1,847,478 1,847,478
Other assets 5,608 6,324
--------------- ---------------
Total other assets 1,853,086 1,853,802
--------------- ---------------
$ 1,880,301 $ 1,884,144
--------------- ---------------
--------------- ---------------
See Notes to Financial Statements
-1-
<PAGE>
AMERICAN ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES
A Development Stage Company
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
LIABILITIES and STOCKHOLDERS' EQUITY
June 30,1996 December 31, 1995
(Unaudited) (Audited)
Current Liabilities:
Bank Indebtedness $ 34,105 $ --
Current portion of long-term debt 632,736 612,982
Short term note payable 41,666 --
Accounts payable 494,257 535,611
Accrued expenses 721,215 585,336
--------------- ---------------
Total current liabilities 1,923,979 1,733,929
--------------- ---------------
Long Term Debt:
Note payable 155,303 155,303
--------------- ---------------
Stockholders' Equity:
Common stock no per value:
authorized 700,000,000 shares;
issued 1,883,678 and 1,462,985 shares 5,226,897 4,903,289
Unearned compensation -- (13,900)
Foreign currency translation adjustment (11,991) (12,369)
Deficit accumulated during the development
stage (5,413,887) (4,882,108)
--------------- ---------------
Total stockholders' equity (deficit) (198,981) (5,088)
--------------- ---------------
$ 1,880,301 $ 1,884,144
--------------- ---------------
--------------- ---------------
SEE NOTES TO FINANCIAL STATEMENTS
-2-
<PAGE>
AMERICAN ENTERTAINMENT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Six and Three Month Periods Ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
Cumulative Since June 30, 1996 June 30, 1995 June 30, 1996 June 30,1995
Inception
<S> <C> <C> <C> <C> <C>
Sales $ 156,056 $ 116,124 $ 20,000 $ 116,124 $ 20,000
Cost of Sales 22,015 7,698 614 7,698 614
-------------- -------------- -------------- -------------- --------------
Gross Profit 134,041 108,426 19,386 108,426 19,386
-------------- -------------- -------------- -------------- --------------
Operating Expenses:
Selling, general and administrative
expenses 5,373,251 615,696 1,099,838 299,798 565,625
Interest 174,677 24,509 27,373 14,160 10,121
-------------- -------------- -------------- ------------- --------------
Total operating expenses 5,547,928 640,205 1,127,211 313,958 575,746
-------------- -------------- -------------- -------------- --------------
Loss from continuing operations (5,380,903) (531,779) (1,107,825) (205,532) (556,360)
Discontinued Operations
Loss from discontinued operations (32,984) - - - -
-------------- -------------- -------------- -------------- --------------
NET LOSS $ (5,413,887) $ (531,779) $ (1,107,825) $ (205,532) $ (556,360)
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
LOSS PER SHARE:
Loss from continuing operations (6.00) (3.30) (0.90) (1.20) (0.50)
Loss from discontinued operations (0.10) - - - -
-------------- -------------- -------------- -------------- --------------
NET LOSS (6.10) (3.30) (0.90) (1.20) (0.50)
-------------- -------------- -------------- -------------- --------------
Weighted average shares
outstanding - (see Note 3) 897,980 1,619,820 1,151,891 1,765,375 1,149,264
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
</TABLE>
See Notes to Financial Statements
-3-
<PAGE>
AMERICAN ENTERTAINMENT GROUP, INC.
A Development Stage Company
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
June 30, 1996
<TABLE>
<CAPTION>
Foreign
Common Stock Outstanding Common Currency
Stock to Be Unearned Translation
Shares Amounts Issued Compensation Adjustment
--------------------------------------------------------------------------
Balance at April 23, 1992 (inception)
Issuance of common stock 428,000 $ 150 -- -- --
NET LOSS
--------------------------------------------------------------------------
Balance at December 31, 1992 428,000 150 -- -- --
Issuance of common stock 406,914 2,719,197 -- -- --
Common stock issued in reverse
acquisition (Note B) 70,000 -- -- -- --
Common stock subscribed -- -- 62,066 -- --
NET LOSS -- -- -- -- --
--------------------------------------------------------------------------
Balance at December 31, 1993 904,914 2,719,347 62,066 -- (40)
Issuance of common stock 145,118 696,094 (8,449) -- --
Common stock subscribed -- -- 70,000 -- --
Unearned compensation related to
issuance of stock for services -- -- -- (75.000) --
Amortization of unearned compensation -- -- -- 33,333 --
Foreign currency translation adjustment -- -- -- -- (1,876)
NET LOSS -- -- -- -- --
--------------------------------------------------------------------------
Balance at December 31, 1994 1,050,032 3,415,441 123,637 (41,667) (1,916)
Issuance of common stock 412,959 1,487,848 -- -- --
Common stock subscribed -- -- (123,637) -- --
Unearned compensation related to
issuance of stock for services -- -- -- (13,900) --
Amortization of unearned compensation -- -- -- 41,667 --
Foreign currency translation adjustment -- -- -- (10,453)
NET LOSS -- -- -- -- --
--------------------------------------------------------------------------
Balance at December 31, 1995 1,462,985 4,903,269 -- (13,900) (12,369)
Issuance of common stock 39,732 84,330 -- -- --
Unearned compensation related to
issuance of stock for services-- -- -- 13,900 --
Common stock subscribed -- -- -- -- --
Foreign currency translation adjustment -- -- -- (1,012)
NET LOSS -- -- -- -- --
--------------------------------------------------------------------------
Balance at March 31, 1996 1,502,717 $4,987,619 $ -- $ -- $ (13,381)
<CAPTION>
Deficit
Accumulated Notes/
During The Subscriptions
Development Stage Receivable Total
----------------------------------------------------
<S> <C> <C> <C>
Balance at April 23, 1992 (inception)
Issuance of common stock -- $ (150) --
NET LOSS (89,500) (89,500)
----------------------------------------------------
Balance at December 31, 1992 (89,500) (150) (89,500)
Issuance of common stock -- (12,745) 2,706,452
Common stock issued in reverse
acquisition (Note B) -- -- --
Common stock subscribed -- (61,586) 500
NET LOSS (1,608,553) -- (1,608,553)
----------------------------------------------------
Balance at December 31, 1993 (1,698,053) (74,461) 1,006,059
Issuance of common stock -- (56) 697,589
Common stock subscribed -- (70,000) --
Unearned compensation related to
issuance of stock for services -- -- (75,000)
Amortization of unearned compensation -- -- 33,333
Foreign currency translation adjustment -- -- (1,876)
NET LOSS (1,342,562) -- (1,342,562)
----------------------------------------------------
Balance at December 31, 1994 (3,040,635) (144,537) 310,323
Issuance of common stock -- -- 1,487,848
Common stock subscribed -- (144,537) 20,900
Unearned compensation related to
issuance of stock for services (13,900) -- (13,900)
Amortization of unearned compensation -- -- 41,667
Foreign currency translation adjustment -- -- (10,453)
NET LOSS (1,841,473) -- (1,841,473)
----------------------------------------------------
Balance at December 31, 1995 (4,882,108) -- (5,088)
Issuance of common stock -- -- 84,330
Unearned compensation related to
issuance of stock for services -- -- 13,900
Common stock subscribed -- -- --
Foreign currency translation adjustment -- -- (1,012)
NET LOSS (326,247) -- (326,247)
----------------------------------------------------
Balance at March 31, 1996 $ (5,208,355) $ -- $ (234,117)
</TABLE>
- 4 -
<PAGE>
AMERICAN ENTERTAINMENT GROUP, INC
A Development Stage Company
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
June 30, 1996
<TABLE>
<CAPTION>
Common Stock Outstanding Common
Stock to Be Unearned
Shares Amounts Issued Compensation
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance of March 31, 1996 1,502,717 $ 4,987,619 $ - $ -
Issuance of common stock 380,961 1,439,278
Unearned compensation related to
issuance of stock for services
Foreign currency translation adjustment
NET LOSS
-----------------------------------------------------------------------------------
Balance at June 30, 1996 1,883,678 $ 6,426,897 - -
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
<CAPTION>
Deficit
Foreign Accumulated
Currency During The Notes/
Translation Development Subscriptions
Adjustment Stage Receivable Total
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance of March 31, 1996 $ (13,381) $ (5,208,355) $ (234,117)
Issuance of common stock (1,200,000) 239,278
Unearned compensation related to
issuance of stock for services
Foreign currency translation adjustment 1,390 1,390
NET LOSS (205,532) (205,532)
--------------------------------------------------------------------------
Balance at June 30, 1996 $ (11,991) $ (5,413,887) $ (1,200,000) $ (196,981)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
</TABLE>
-4B-
<PAGE>
AMERICAN ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES
A DEVELOPMENT STAGE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative Since June 30,1996 June 30,1995
Inception
<S> <C> <C> <C>
Cash flows from operating activities:
Net Loss $ (5,413,887) $ (531,779) $ (1,107,825)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 25,046 4,354 4,098
Amortization of unearned compensation 13,900 13,900 41,667
Interest portion of amount due for
film library 66,855 19,754 9,877
Common stock issued for services 1,904,300 109,056 574,250
Foreign currency translation (11,991) 378 (695)
Changes in: Accounts Receivable -- -- (24,102)
Other current assets (14,531) (19) (1,479)
Accounts payable and other 1,413,087 93,720 262,629
------------- ------------- ------------
Net cash used by operating activities (2,017,221) (289,836) (241,580)
------------- ------------- ------------
Cash flows from investing activities:
Purchase of infomercial rights (120,000) -- (3,750)
Decrease (increase) Other Assets 110,549 -- (750)
Purchase of property and equipment (26,830) -- (967)
------------- ------------- ------------
Net cash used by investing activities (36,281) -- (5,467)
------------- ------------- ------------
Cash flows from financing activities
Proceeds from issuance of common
stock (net of stock issue costs of $4,000) 1,989,025 213,750 271,500
Increase in short-term notes payable 156,666 41,666 --
Repayment of long-term debt (126,294) -- (40,137)
------------- ------------- ------------
Net cash provided by financing activities 2,019,397 255,416 231,363
------------- ------------- ------------
NET INCREASE (DECREASE) IN CASH (34,105) (34,420) (15,684)
Cash, at the beginning of the period -- 315 32,590
------------- ------------- ------------
Cash (Deficiency) at the end of the period $ (34,105) $ (34,105) $ 16,906
------------- ------------- ------------
------------- ------------- ------------
</TABLE>
See notes to Financial Statements
-5-
<PAGE>
AMERICAN ENTERTAINMENT GROUP, INC
A Development Stage Company
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
1. FINANCIAL STATEMENTS
In the opinion of the Company's management, the accompanying unaudited
consolidated financial statements contain all adjustments, which include
only normal recurring accruals, necessary to present fairly the Company's
financial position as at June 30, 1996, the results of operations, changes
in stockholders' equity and cash flows for the six month periods ended
June 30, 1996 and 1995. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange
Commission. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1995.
2. COMMON STOCK
Common shares issued during the six month period ending June 30, 1996,
include 130,750 shares issued for cash or equivalent consideration and
49,943 shares issued in lieu of cash payment for various consulting
services provided and valued at $109,856.
At June 30, 1996, a total of approximately 917,000 options were outstanding
at option prices per share of $5.00CENTS to $20.00.
At June 30, 1996, a total of 415,954 warrants were outstanding at prices
per share of $10.00 to $30.00.
During the period no warrants expired.
3. SUBSEQUENT EVENTS
On July 18, 1996, the Company authorized a reverse split in the common
shares of the Company, issuing one new common share in exchange for ten
common shares previously held, effective July 29, 1996. The financial
statements have been prepared reflecting the above event.
On July 18, 1996, the Company entered into an agreement with First Bermuda
Securities relative to a Private Placement of the Company's shares
regarding the sum of $1,250,000.
-6-
<PAGE>
On July 23, 1996, the Company signed a Definitive Agreement to acquire all
of the assets of 3G VideoCassette Corporation. Pursuant to the Agreement
the Company is to pay a total of $US 1,500,000 being the sum of $800,000 in
cash and the remaining $700,000 by way of common stock in the Company.
4. OTHER MATTERS
The accompanying financial information contemplates continuation of the
Company as a going concern. However, the Company has sustained substantial
operating losses in recent years. In addition, the Company has used
substantial amounts of working capital in its operations. Further, at June
30, 1996, current liabilities exceed current assets by $1,909,559.
In view of these trends, the Company is in the process of seeking
additional working capital through various private placements. Although
there is no guarantee, management believes that actions presently being
taken to provide working capital can be effectively implemented and will
allow the Company to continue as a going concern.
On April 9, 1996 the Company authorized a loan to Joel Wagman, Samuel Paul,
and J.R.Y. Hugo, in the aggregate sum of $1,200,000 being $400,000 each
for the purpose of exercising their respective options at .50 CENTS per
share (post reverse split - $5.00 per share) in the aggregate amount of
2,400,000 (post reverse split - 240,000) restricted shares. Notice of same
was given in accord with the prevailing Colorado statute. In respect to the
said loan, Messrs. Wagman, Paul and Hugo entered into a security agreement
with the Company whereby the Company has a separate first charge and lien
upon the said shares until paid in full by each of Messrs. Wagman, Paul
and Hugo respectively.
5. COMMITMENTS AND CONTINGENCIES
Based upon the Company's film library, the Company has entered into several
agreements pertaining to its development and commercial exploitation. The
Company has commenced the marketing and sale of its film library product to
both mass market and general retailers. The Company also plans to sell
videos of motion pictures derived from its films by means of joint ventures
with broadcasters and by Video-on-Demand telephone-linked-transmission.
On February 4,1995, the Company entered into an Agreement with MediaLinx
Interactive Inc. of Toronto, Canada for the purpose of delivery for test
purposes of the product of its library by telephone communication to
television sets (Video-on-Demand). MediaLinx Interactive Inc. of
(MediaLinx) is a company established for the purpose of delivering to the
public goods and services by telephone transmission within Canada to
television sets (Video-on-Demand). The Company is a participant in such
test and will supply a limited amount of titles for such purpose.
-7-
<PAGE>
On September 13, 1995, the Company entered into a Letter of Intent to
acquire all of the business interest, both personal and corporate, of Mr.
Peter A. Wray. These interests consist of computerized software for image
and animation (and integrated processes in connection therewith) relative
to the creation and manipulation of motion pictures and associates uses.
Pursuant to an Agreement entered into between the Company and Peter A. Wray
dated January 15, 1996, all of Mr. Wray's interest regarding the foregoing,
in a company known as Imaginetics Inc. has been purchased by the Company in
consideration of the sum of $US 500,000 which sum is evidenced by a
Promissory Note payable in common shares of the Company.
Pursuant to Agreements entered into between the Company and its wholly
owned subsidiary, AEG Entertainment Limited, (AEL) and The VIP Phone Club,
Inc. respectively dated November 28,1995, November 29,1995, January
30,1996, and February 27, 1996, the Company via its subsidiary AEL granted
a license to The VIP Phone Club, Inc. (VIP Phone), a Delaware corporation
of Baltimore, Maryland, to market, sell and distribute the company's film
library consisting of 5,000 vintage motion picture and television series
episodes. These Agreements were contingent upon the company and AEL
arranging financing with an international banking source regarding VIP
Phone's accounts receivable. A commitment regarding a revolving line of
credit in the sum of $US 5,000,000 was received by AEL from Banque
Nationale de Paris (Canada) (BNP) on February 21, 1996, and the
transactions respecting both the financing and the licensing were completed
on March 22,1996.
6. OPERATIONS
Based upon the Company's film library, the Company has entered into several
agreements pertaining to its development and commercial exploitation. The
Company has commenced the marketing and sale of its film library product to
both mass market and general retailers. The Company also plans to sell
videos of motion pictures derived from its films by means of joint ventures
with broadcasters and by Video-on-Demand telephone-linked-transmission.
On February 4, 1995, the Company entered into an Agreement with MediaLinx
Interactive Inc. of Toronto, Canada for the purpose of delivery for test
purposes of the product of its library by telephone communication to
television sets (Video-on-Demand). MediaLinx Interactive Inc. (MediaLinx)
is a company established for the purpose of delivering to the public goods
and services by telephone transmission within Canada to television sets
(Video-on-Demand). The Company is a participant in such test and will
supply a limited amount of titles for such purpose.
On September 13, 1995, the Company entered into a letter of intent to
acquire all of the business interest, both personal and corporate, of Mr.
Peter A. Wray. These interests consist of computerized software for image
and animation (and integrated processes in connection therewith) relative
to the creation and manipulation of motion pictures and associates uses.
Pursuant to an Agreement entered into between the Company and
-8-
<PAGE>
Peter A. Wray dated January 15, 1996, all of Mr. Wray's interest regarding
the foregoing, in a company known as Imaginetics Inc. has been purchased by
the Company in consideration of the sum of $US 500,000 which sum is
evidenced by a Promissory Note payable in common shares of the Company.
Pursuant to Agreements entered into between the Company and its wholly
owned subsidiary, AEG Entertainment Limited, (AEL) and The VIP Phone Club,
Inc. respectively dated November 28, 1995, November 29, 1995, January 30,
1996, and February 27, 1996, the Company via its subsidiary AEL granted a
license to The VIP Phone Club, Inc. (VIP Phone), a Delaware corporation of
Baltimore, Maryland, to market, sell and distribute the company's film
library consisting of 5,000 vintage motion picture and television series
episodes. These Agreements were contingent upon the company and AEL
arranging financing with an international banking source regarding VIP
Phone's accounts receivable. A commitment regarding a revolving line of
credit in the sum of $US 5,000,000 was received by AEL from Banque
Nationale de Paris (Canada) (BNP) on February 21, 1996, and the
transactions respecting both the financing and the licensing were completed
on March 22, 1996.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS QF
OPERATIONS
The Company is a development stage company and as such has not yet
commenced full operations. Consolidated revenue for the six months ended
June 30, 1996, was $116,124. In the six month period ended June 30 1995,
the company had revenue of $20,000.
The main thrust of the Company's activities for the balance of the year
will be in sales of products derived from its film libraries through
various means to both distributors and retailers. The Company also plans
to sell its product via joint ventures and licensing arrangements regarding
general broadcast, cable and satellite generated television stations.
Gross profit for the six months ended June 30, 1996, and June 30, 1995 was
$108,426 and $19,386 respectively.
Selling, general and administrative expenses for six months ended June 30,
1996 were $615,696, a decrease of $484,142 or 44% from the three month
period ended June 30, 1995.
The decrease of $484,142 in selling, general and administrative expenses
for the period ended June 30, 1996, over the period ended June 30, 1995 is
attributed partly to the decreased issuance of shares in lieu of cash
payment for various consulting services provided, as well as substantial
decreases in expenses resulting from discontinuation of operations of its
main subsidiary.
-9-
<PAGE>
Interest expense for the six month periods ended June 30, 1996 and 1995,
was $24,509 and $27,373 respectively.
Since commencement, the Company has devoted the majority of its efforts to
researching and refining its marketing activities with a view to developing
comprehensive business and merchandising plans, that in management's
opinion, when fully implemented, will result in the successful sale and
distribution of the Company's goods and services to the general public.
The Company has successfully acquired a film library consisting of 5,000
motion pictures, television series episodes and motion picture serial
chapters. The Company's ability to acquire further film libraries will be
dependent upon the availability of its financial resources to do.
The major cost components associated with the Company's video sales revenue
(with the exception of its media cost), are variable in nature, and the
Company believes that sufficient revenues will be obtained in order to meet
both media costs and the Company's general overhead. The Company's fixed
costs for the coming year are estimated to be approximately $1,500,000.
The Company has no material commitments for capital expenditures in the
next twelve months. Such capital requirements that the Company does have
in the next twelve months, relate to its Business Plan.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, bank indebtedness was $34,105 compared to $16,906 cash
balance at June 30, 1995.
The Company expects to require additional capital of approximately
$1,500,000 during the remainder of this fiscal year and throughout the next
fiscal year, which it will use for all of its operating divisions. The
Company expects to generate such capital through a combination of public
offerings, private placements, bank operating lines of credit, and cash
flow, if any.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On September 26, 1995, the Company filed a lawsuit in the US District
Court, Northern District of Texas, Dallas Division, against Securities
Transfer Corporation (the Company's stock transfer agent), Harve Sherman,
Steve Waxman, Chaos Corporation, Max Sherman Trust, Richview Holdings
Limited, and Janice Fox. Messrs. Sherman and Waxman are former officers
and directors of the Company, the remaining parties, except for Securities
Transfer Corporation, are related persons and entities to Messrs. Sherman
and Waxman.
-10-
<PAGE>
The action requests the following relief:
a. That Defendant Securities Transfer Corporation be ordered to maintain
all restrictions and legends on the shares and share certificates of the
Company's shares controlled by the other Defendants, pending further
instructions from the Court;
b. That the Company's shares of Defendants Herve Sherman, Marcia Sherman,
Max Sherman Trust, Chaos Corporation, Richview Holdings, Ltd., Steven
Waxman and Janice Fox be ordered canceled and revoked;
c. In the alternative, that the transactions by which Defendants obtained
the Company's shares be rescinded, with any consideration paid by each
returned to each by the Company;
d. The Defendants Harve Sherman, Marcia Sherman and Steven Waxman
disgorge to the Company all profits earned by them on the short-swing
transactions alleged in this matter;
e. That Defendants Harve Sherman, Marcia Sherman and Steven Waxman pay
all costs of suit and a reasonable attorney fee to the Company; and
f. That the Company recover all other relieve to which it may be entitled
at law or in equity.
On June 27, 1996, the Company obtained a Default Judgment Order against all
Defendants except Securities Transfer Corporation. Subsequently, in July
1996, the defaulting Defendants moved to set aside the Default Judgment
Order. As of the date hereof, there has been no disposition as to the
defaulting Defendants pending motion.
This action is presently in the preliminary stages of litigation. No
substantial discovery has taken place to date.
Otherwise, no legal proceedings of a material nature to which the Company is
a party were pending during the reporting period, and the Company knows of
no other legal proceedings of a material nature pending or threatened or
judgments entered against any director or officer of the Company in his
capacity as such.
ITEM 2. CHANGE IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
- 11 -
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K
(i) On January 25,1996, the Company issued a Form 8-K, a Report dated January
25, 1996 relating the following:
* That the Company has entered into an Agreement to acquire 100% of
Imaginetics, Inc. (imaginetics), a Nevada corporation which is in the
business of developing proprietary digital products for the motion
picture industry. That the transaction is valued at $US 500,000
payable by way of a Promissory Note in the principal sum of
$US 500,000 which said Promissory Note is payable in preferred shares
of the Company.
* That the transaction has closed, subject to the delivery of certain
documents, and the receipt by the Company of a Fairness Opinion
regarding the evaluation of Imaginetics.
(ii) On February 22, 1996, the Company issued a form 8-K, a Report dated
February 22, 1996 relating the following:
* That the Banque Nationale de Paris (Canada) (BNP) has provided a
commitment to AEG Entertainment Limited (AEL) a wholly owned Canadian
subsidiary of the Company, to make available a $US 5,000,000 line of
credit to be used to finance the accounts receivable of The VIP Phone
Club, Inc. (VIP Phone) a Delaware corporation which in November, 1995
and January, 1996 assigned its accounts receivable to AEL contingent
upon the Company obtaining institutional bank financing for the
accounts receivable.
* That in consideration of obtaining the financing the Company shall
receive a monthly fee equal to 3% of the monthly accounts receivable
financed by BNP.
* That the Company and AEL have granted a license to VIP Phone to make
available to VIP Phone's subscribers the titles contained in the
Company's film library.
- 12 -
<PAGE>
(iii) That on March 22, 1996, the Company issued a Form 8-K, a Report dated
March 22, 1996 relating to the following.
* That on March 22,1996, the Banque Nationale de Paris (Canada) (BNP)
provided financing to AEG Entertainment Limited (AEL), a wholly owned
Canadian subsidiary of the Company regarding a $US 5,000,000 revolving
line of credit to be used to finance the accounts receivable of The
VIP Phone Club, Inc. (VIP Phone).
* VIP Phone, in November, 1995 and in January, 1996, assigned its
accounts receivable to AEL contingent upon the Company obtaining
institutional bank financing for VIP Phone's accounts receivable. The
extension of credit by BNP fulfills that financing contingency.
* In consideration of obtaining the financing the Company is to receive
a monthly fee equal to 3% of the monthly accounts receivable financing
advanced by BNP to VIP Phone.
* That the Company and AEL have granted a license to VIP Phone to make
available to VIP Phone's telephone subscribers the titles contained in
the Company's film library.
(iv) That on May 8, 1996, the Company issued a Form 8K, a Report dated May
8, 1996, whereby the Company has entered into a joint venture
with VIP Cellular, Inc., a private company affiliated with the VIP
Phone Club, Inc. respecting the development of debit cellular platform
for the Canadian cellular market.
(v) That on June 10, 1996, the Company issued a Form 8K, a Report dated
June 11, 1996, whereby the Company signed a Letter of Intent to
acquire all of the assets of 3G VideoCassette Corporation, a private
California company in the video reproduction and marketing business.
(vi) That on June 18, 1996, the Company issued a Form 8K, a Report
dated June 18, 1996, that as of June 17, 1996, the Company
canceled an Agreement with Future Arts Limited relating to Care
Bares animation cels due to the fact that the Company could not
verify ownership of the cels.
(vi) That on July 23, 1996, the Company issued a Form 8K, a Report
dated July 25, 1996, whereby the Company signed a Definitive
Agreement to acquire all of the assets of 3G VideoCassette
Corporation. The Company agreed to pay a total of $US 1,500,000,
being the sum of $800,000 in cash, and the remaining $700,000 in
the common stock of the Company.
- 13 -
<PAGE>
(b) EXHIBITS
No exhibits are filed as part of this report.
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.
American Entertainment Group, Inc.
----------------------------------
(Registrant)
Date: August 14,1996 /s/ Joel Wagman
---------------
Joel Wagman
Chairman of the Board and
Chief Executive Officer
Date: August 14, 1996 /s/ Samuel C. Paul
------------------
Samuel C. Paul
Treasurer and Chief Accounting Officer
- 14 -
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