<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 September 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 2K
- ----------------------------------------------------- ------
(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, October 31, 1996, was 2,391,296 (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: 15
<PAGE>
AMERICAN ENTERTAINMENT GROUP, INC.
INDEX
-----
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements Page No.
Condensed Consolidated Balance Sheets-
September 30, 1996 and December 31, 1995 1-2
Condensed Consolidated Statements of
Operations Nine Month periods Ended
September 30, 1996 and September 30, 1995 3
Condensed Consolidated Statement of Changes
in Stockholders' Equity- Nine Months Ended
September 30, 1996 4 & 4B
Condensed Consolidated Statement of Cash Flows-
Nine Months Ended September 30, 1996 and
September 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 10
PART II. OTHER INFORMATION 11-14
Signatures 15
<PAGE>
AMERICAN ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES
A DEVELOPMENT STAGE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
SEPTEMBER 30, 1996 DECEMBER 31, 1995
(UNAUDITED) (AUDITED)
Current Assets:
Cash $ 7,297 $ 315
Inventory 7,728 7,801
Prepaid Expenses and deposits 8,232 6,711
---------- ----------
Total current assets 23,257 14,827
---------- ----------
Property and equipment, at cost
Office furniture and equipment 16,976 16,976
Computer equipment 9,914 9,854
---------- ----------
26,890 26,830
Less Accumulated Depreciation 15,376 11,315
---------- ----------
Net property and equipment 11,514 15,515
---------- ----------
Other assets:
Film library ownership 1,847,478 1,847,478
Other assets 4,783 6,324
---------- ----------
Total other assets 1,852,261 1,853,802
---------- ----------
$1,887,032 $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
SEPTEMBER 30, 1996 DECEMBER 31, 1995
(UNAUDITED) (AUDITED)
Current Liabilities:
Current portion of long-term debt $ 642,413 $ 612,982
Short term note payable 41,667 --
Accounts payable 351,874 535,611
Accrued expenses 324,124 585,336
----------- -----------
Total current liabilities 1,360,078 1,733,929
----------- -----------
Long Term Debt:
Note payable 155,503 155,303
----------- -----------
Stockholders' Equity:
Common stock, no par value;
authorized 700,000,000 shares;
issued 2,381,296 and 1,462,985 shares 5,648,685 4,903,289
Common stock to be issued 188,431 --
Unearned compensation -- (13,900)
Foreign currency translation adjustment (13,825) (12,369)
Deficit accumulated during the
development stage (5,451,840) (4,882,108)
----------- -----------
Total stockholders' equity (deficit) 371,451 (5,088)
----------- -----------
$ 1,887,032 $ 1,884,144
----------- -----------
----------- -----------
See Notes to Financial Statements
-2-
<PAGE>
AMERICAN ENTERTAINMENT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
CUMULATIVE SINCE NINE MONTHS ENDED THREE MONTHS ENDED
INCEPTION SEPT. 30, 1996 SEPT. 30, 1995 SEPT. 30, 1996 SEPT. 30, 1995
<S> <C> <C> <C> <C> <C>
Sales $ 241,735 $ 201,803 $ 20,000 $ 85,679 $ 20,000
Cost of Sales 22,015 7,698 614 614
------------ ---------- ----------- ---------- ----------
Gross Profit 219,720 194,105 19,386 85,679 19,386
------------ ---------- ----------- ---------- ----------
Operating Expenses:
Selling, general and adminstrative
expenses 5,486,807 729,252 1,323,687 113,556 237,465
Interest 184,753 34,585 36,546 10,076 14,943
------------ ---------- ----------- ---------- ----------
Total operating expenses 5,671,560 763,837 1,360,233 123,632 252,408
------------ ---------- ----------- ---------- ----------
Loss from continuing operations (5,418,856) (569,732) (1,340,847) (37,953) (233,022)
Discontinued Operations
Loss from discontinued operations (32,984) -- -- -- --
------------ ---------- ----------- ---------- ----------
NET LOSS $ (5,451,840) $ (569,732) $(1,340,847) $ (37,953) $ (233,022)
------------ ---------- ----------- ---------- ----------
------------ ---------- ----------- ---------- ----------
LOSS PER SHARE:
Loss from continuing operations $ (5.83) $ (0.32) $ (1.12) $ (0.019) $ (0.195)
Loss from discontinued operations (0.03) -- -- -- --
------------ ---------- ----------- ---------- ----------
NET LOSS $ (5.86) $ (0.32) $ (1.12) $ (0.019) $ (0.195)
------------ ---------- -----------
Weighted average shares
outstanding - (see Note 3) 929,839 1,759,234 1,189,807 2,035,022 1,194,782
------------ ---------- ----------- ---------- ----------
------------ ---------- ----------- ---------- ----------
</TABLE>
See Notes to Financial Statements
-3-
<PAGE>
AMERICAN ENTERTAINMENT GROUP, INC.
A DEVELOPMENT STAGE COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
SEPTEMBER 30, 1996
<TABLE>
DEFICIT
FOREIGN ACCUMULATED
COMMON STOCK OUTSTANDING COMMON CURRENCY DURING THE NOTES/
STOCK TO BE UNEARNED TRANSLATION DEVELOPMENT SUBSCRIPTIONS
SHARES AMOUNTS ISSUED COMPENSATION ADJUSTMENT STAGE RECEIVABLE TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at April 23,
1992 (Inception)
Issuance of common
stock 428,000 $ 150 -- -- -- $ -- $ (150) --
NET LOSS (89,500) (89,500)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31,
1992 428,000 $ 150 $ -- -- -- $ (89,500) $ (150) $ (89,500)
Issuance of common
stock 406,914 2,719,197 -- -- -- -- (12,745) 2,706,452
Common Stock issued
in reverse
acquisition (Note B) 70,000 -- -- -- -- -- -- --
Common stock
subscribed -- -- 62,066 -- -- -- (61,586) 500
NET LOSS -- -- -- -- -- (1,608,553) -- (1,608,553)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31,
1993 904,914 $2,719,347 $ 62,066 -- $ (40) $(1,698,053) $ (74,461) $ 1,006,859
Issuance of common
stock 145,118 696,094 (8,449) -- -- -- (56) 697,589
Common stock
subscribed -- -- 70,000 -- -- -- (70,000) --
Unearned compensation
related to issuance
of stock for services -- -- -- (75,000) -- -- -- (75,000)
Amortization of unearned
compensation -- -- 33,333 -- -- -- 33,333
Foreign currency
translation adjustment -- -- -- -- (1,876) -- -- (1,876)
NET LOSS -- -- -- -- -- (1,342,562) -- (1,342,562)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31,
1994 1,050,032 $3,415,441 $ 123,637 $(41,667) $ (1,916) $(3,040,635) $ (144,537) $ 310,323
Issuance of common
stock 412,953 1,487,848 -- -- -- -- -- 1,487,848
Common stock
subscribed -- -- (123,637) -- -- -- (144,537) 20,900
Unearned compensation
related to issuance of
stock for services -- -- -- (13,900) -- (13,900) -- (13,900)
Amortization of unearned
compensation -- -- 41,667 -- -- -- 41,667
Foreign currency
translation adjustment -- -- -- (10,453) -- -- (10,453)
NET LOSS -- -- -- -- -- (1,841,473) -- (1,841,473)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31,
1995 1,462,985 $4,903,289 -- $(13,900) $(12,369) $(4,882,108) $ -- $ (5,088)
Issuance of common
stock 39,732 84,330 -- -- -- -- -- 84,330
Unearned compensation
related to issuance
of stock for services -- -- -- 13,900 -- -- -- 13,900
Common stock subscribed -- -- -- -- -- -- -- --
Foreign currency
translation adjustment -- -- -- (1,012) -- -- (1,012)
NET LOSS -- -- -- -- -- (326,247) -- (326,247)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at March 31,
1996 1,502,717 $4,987,619 $ -- $ -- $(13,381) $(5,208,355) $ -- $ (234,117)
</TABLE>
-4-
<PAGE>
AMERICAN ENTERTAINMENT GROUP, INC.
A DEVELOPMENT STAGE COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
SEPTEMBER 30, 1996
<TABLE>
DEFICIT
FOREIGN ACCUMULATED
COMMON STOCK OUTSTANDING COMMON CURRENCY DURING THE NOTES/
STOCK TO BE UNEARNED TRANSLATION DEVELOPMENT SUBSCRIPTIONS
SHARES AMOUNTS ISSUED COMPENSATION ADJUSTMENT STAGE RECEIVABLE TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31,
1996 1,502,717 $4,987,619 $ -- $ -- $(13,381) $(5,208,355) $ (234,117)
Issuance of common
stock 380,961 1,439,278 (1,200,000) 239,278
Foreign currency
translation adjustment 1,390 1,390
NET LOSS (205,532) (205,532)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at June 30,
1996 1,883,678 $6,426,897 $ -- $ -- $(11,991) $(5,413,887) $(1,200,000) $ (198,981)
Issuance of common
stock 497,618 $ 421,787 $ -- $ -- $ -- $ -- $ 421,787
Common stock to be
issued 188,432 188,432
Foreign currency
translation adjustment (1,834) (1,834)
NET LOSS (37,953) (37,953)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30,
1996 2,381,296 $6,848,684 $188,432 $ -- $(13,825) $(5,451,840) $(1,200,000) $ 371,451
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-4B-
<PAGE>
AMERICAN ENTERTAINMENT GROUP, INC.
AND SUBSIDIARIES
A DEVELOPMENT STAGE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
CUMULATIVE SINCE
INCEPTION SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
<S> <C> <C> <C>
Cash flows from operating activities:
Net Loss $(5,451,840) $(569,732) $(1,340,847)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 27,190 6,498 6,247
Amortization of unearned compensation 13,900 13,900 41,667
Interest portion of amount due for
film library 76,732 29,631 19,754
Common stock issued for services 2,514,519 720,075 636,500
Foreign currency translation (13,825) (1,456) (703)
Changes in: Accounts Receivable -- -- 1,587
Other current assets (15,960) (1,448) (2,282)
Accounts payable and other 873,465 (445,902) 316,917
----------- --------- -----------
Net cash used by operating activities (1,975,819) (248,434) (316,596)
----------- --------- -----------
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) (1,123)
----------- --------- -----------
Net cash used by investing activities (36,281) -- (5,623)
----------- --------- -----------
Cash flows from financing activities
Proceeds from issuance of common
stock (net of stock issue costs of $4,000) 1,989,025 213,750 356,500
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 2,019,397 255,416 316,363
----------- --------- -----------
NET INCREASE (DECREASE) IN CASH (34,105) 6,982 (5,856)
Cash, at the beginning of the period -- 315 32,590
----------- --------- -----------
Cash (Deficiency) at the end of the period $ (34,105) $ 7,297 $ 26,734
----------- --------- -----------
----------- --------- -----------
</TABLE>
See Notes to Financial Statements
- 5 -
<PAGE>
AMERICAN ENTERTAINMENT GROUP, INC
A Development Stage Company
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 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 September 30, 1996, the results of operations,
changes in stockholders' equity and cash flows for the nine month periods
ended September 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 nine month period ending September 30,
1996, include 571,863 shares issued for cash or equivalent consideration
in the amount of $579,055 and 106,443 shares issued in lieu of cash
payment for various consulting services provided and valued at $166,340.
At September 30, 1996, a total of approximately 917,000 options were
outstanding at option prices per share of $5.00 to $20.00.
At September 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 23, 1996, the Company signed a Definitive Agreement to acquire
all of the assets of 3G VideoCassette Corporation (3G). 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. On October 18, 1996 3G and the Company agreed to proceed
no further and accordingly terminated the agreement of July 23, 1996.
- 6 -
<PAGE>
Effective October 1, 1996, the Company revised the contracts of employment
of its Officers, namely, Messrs. Wagman, Hugo, Paul, and Chapman. The
revised annual employment contract of Mr. Wagman will be $120,000, and of
Messrs. Hugo, Paul, and Chapman, will be $80,000 each. The revision to
these contracts will result in an annual reduction of $290,000 in
management salaries.
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 September 30, 1996, current liabilities exceed current
assets by $1,336,821.
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.
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. On September 4, 1996, the Company decided
not to proceed any further with this matter due to adverse market
conditions.
- 7 -
<PAGE>
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.
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.
- 8 -
<PAGE>
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 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.
- 9 -
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company is a development stage company and as such has not yet
commenced full operations. Consolidated revenue for the nine months
ended September 30, 1996, was $201,803. In the nine month period ended
September 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 nine months ended September 30, 1996, and September
30, 1995 was $194,105 and $19,386 respectively.
Selling, general and administrative expenses for nine months ended
September 30, 1996 were $729,252, a decrease of $594,435 or 45% from the
nine month period ended September 30, 1995.
The decrease of $594,435 in selling, general and administrative expenses
for the period ended September 30, 1996, over the period ended September
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.
Interest expense for the nine month periods ended September 30, 1996 and
1995, was $34,585 and $36,546 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.
- 10 -
<PAGE>
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 September 30, 1996, cash balance was $7,297 compared to $26,734 cash
balance at September 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.
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 Harve Sherman, Marcia Sherman,
Max Sherman Trust, Chaos Corporation, Richview Holdings, Ltd., Steven
Waxman and Janice Fox be ordered canceled and revoked.;
- 11 -
<PAGE>
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
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
- 12 -
<PAGE>
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.
(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).
- 13 -
<PAGE>
* 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.
(vii) That on July 22, 1996, the Company issued a Form 8K dated July 22,
1996 respecting a Private Placement with First Bermuda Securities
in the sum of $1,250,000.
(viii) That on July 22, 1996, the Company issued a Form 8K dated July 22,
1996 respecting a one-for-ten Reverse Split of the issued and
outstanding common shares of the Company.
(ix) That on July 25, 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.
(x) That on September 4, 1996, the Company issued a Form 8K
dated September 4, 1996, that John A. Velasco has been elected to
fill a vacancy on the Company's Board of Directors.
- 14 -
<PAGE>
(xi) That on September 4, 1996, the Company issued a Form 8K
dated September 4, 1996 that it had terminated the Private
Placement with First Bermuda Securities.
(xii) That on October 18, 1996, the Company issued a Form 8K, a
Report dated October 18, 1996, that the Company terminated its
efforts to acquire the assets and deferred liabilities of 3G
VideoCassette Corporation.
(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: November 14, 1996 /s/ JOEL WAGMAN
------------------------
Joel Wagman
Chairman of the Board and
Chief Executive Officer
Date: November 14, 1996 /s/ SAMUEL C. PAUL
------------------------
Samuel C. Paul
Treasurer and Chief Accounting Officer
- 15 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 7,297
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 7,728
<CURRENT-ASSETS> 23,257
<PP&E> 26,890
<DEPRECIATION> 15,376
<TOTAL-ASSETS> 1,887,032
<CURRENT-LIABILITIES> 1,360,078
<BONDS> 0
0
0
<COMMON> 5,648,685
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,887,032
<SALES> 0
<TOTAL-REVENUES> 201,803
<CGS> 0
<TOTAL-COSTS> 7,968
<OTHER-EXPENSES> 763,837
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,585
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (569,732)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (569,732)
<EPS-PRIMARY> (5.86)
<EPS-DILUTED> 0
</TABLE>
