SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 10-KSB
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 033-67536
AMERICAN DREAM ENTERTAINMENT, INC.
---------------------------------
(Exact name of registrant as specified in charter)
Minnesota 59-3169033
--------- ----------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1800 East Sahara Avenue, Suite 107, Las Vegas, Nevada 89104
- ----------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone Number, including area code: (702) 734-7557
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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.
[ X ] Yes [ ] No
Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy of information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [ X ]
State issuer's revenues for its most recent reporting period May 31,
1999........$-0-.
Aggregate market value of the voting stock held by non-affiliates of the
registrant at May 31, 1999 was $-0-. There was no bid price of the common stock
at that date.
FEDERAL AFFORDABLE HOUSING CORPORATION
--------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
AMERICAN DREAM ENTERTAINMENT, INC.
(f/k/a Federal Affordable Housing Corporation)
FORM 10-KSB - Index
PART I
Page
Item 1. Description of Business......................................... 2
Item 2. Description of Property......................................... 8
Item 3. Legal Proceedings............................................... 8
Item 4. Submission of Matters to a Vote of Security Holders............. 8
PART II
Item 5. Market of the Registrant's Securities and
Related Stockholder Matters..................................... 9
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of Operations................... 10
Item 7. Financial Statements and Supplementary Data..................... 12
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures....................................... 12
PART III
Item 9. Directors and Executive Officers of the Registrant.............. 12
Item 10. Executive Compensation.......................................... 13
Item 11. Security Ownership of Certain Beneficial Owners and Management.. 14
Item 12. Certain Relationships and Related Transactions......... 15
Item 13. Exhibits, Consolidated Financial Statements,
Schedules and Reports on Form 8-K...................... 16
Signatures............................................. 17
1
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Annual Report on Form 10-KSB and the documents incorporated herein by
reference contain forward-looking statements that have been made pursuant to the
provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based on current expectations, estimates and
projections about American Dream Entertainment's industry, management's beliefs,
and assumptions made by management. Words such as "anticipates," "expects,"
"intends," "plans," "believes," "seeks," "estimates," variations of such words
and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and are
subject to certain risks, uncertainties and assumptions that are difficult to
predict; therefore, actual results and outcomes may differ materially from what
is expressed or forecasted in any such forward-looking statements.
PART I
------
ITEM 1. BUSINESS
GENERAL
American Dream Entertainment, Inc., formerly Federal Affordable Housing
Corporation, has obtained certain rights under a License and Royalty Agreement
from Dreamweavers, N.V. to market and distribute, the "Robin and The
Dreamweavers" medial concept in the United States. American Dream's objective is
to create, develop, and produce animated properties that are typically marketed
to television, home-video and theatrical exhibition companies.
Federal Affordable Housing Corporation was originally organized on March 5, 1993
to develop residential subdivisions, and construct, market and sell affordable
homes in the Tampa, Florida market. Federal Affordable Housing Corporation was
restructured December 31, 1998, reflecting a new line of business for the
exploitation of media products known as "Robin and The Dreamweavers" within the
United States. All assets and liabilities were transferred to a newly formed
subsidiary, AAA Homes, Inc at December 31, 1998. The stock of AAA Homes, Inc.
was distributed to our shareholders of record as of February 1, 1999.
We have not generated any media revenues to-date. We plan to generate revenues,
in the future, from the creation, development, production, licensing and
distribution of animated properties relating to "Robin and The Dreamweavers" for
exhibition in all domestic media, which include home video, pay television and
cable television markets. We have also developed plans to produce music
properties based on the characters from the animated series.
The Company's principal office is located at 1800 East Sahara Avenue, Suite 107,
Las Vegas, Nevada 89104.
RECENT DEVELOPMENTS
On March 5, 1999, Dreamweavers N.V., Curacao, Netherlands Antilles corporation
entered into a Royalty and License Agreement granting American Dream
Entertainment an exclusive license in the United States to exploit a medial
concept known as "Robin and The Dreamweavers". The holding Company of this
medial concept, Dreamweavers NV, owns 100% of the rights for the "Robin and The
Dreamweavers" animated properties. In consideration of the License Agreement
American Dream Entertainment issued 16,000,000 shares of restricted common stock
to Dreamweavers N.V. and agreed to pay Dreamweavers, N.V. a royalty equal to 3%
of gross revenues.
The 16,000,000 shares represents approximately 88% of the total outstanding
stock of American Dream Entertainment formerly Federal Affordable Housing
Corporation. In addition, this License Agreement provides for a cash payment of
$5,500,000, from a private placement of our securities, to Dreamweavers, N.V.
for the right to the medial products consisting of a feature film together with
the license for TV production of "Robin and The Dreamweavers", license for
merchandising "Robin and The Dreamweavers", license for the music of "Robin and
The Dreamweavers", license for designer fashion wear of "Robin and The
Dreamweavers", license of the video of "Robin and The Dreamweavers", and license
for private label merchandising of "Robin and The Dreamweavers" ancillary
products.
2
<PAGE>
Upon execution of the License Agreement, the President, Secretary and Director,
Mr. Dick Metz, resigned and Mr. Dirk W. Peschar, a resident and citizen of The
Netherlands was appointed President, Secretary and Director of the Company. Mr.
Peschar also serves as Chief Executive Officer of Dreamweavers N.V.
In connection with the License Agreement and in order to restructure American
Dream Entertainment to reflect the new line of business for the exploitation of
media products known as "Robin and The Dreamweavers" within the United States,
we divested all assets and liabilities by transferring such assets and
liabilities to a newly formed subsidiary, AAA Homes, Inc. We agreed to have no
more than 1,000,000 shares of common stock outstanding prior to the issuance of
16,000,000 shares of restricted common stock to Dreamweavers N.V. Mr. Dick Metz
is the sole director and officer of AAA Homes, Inc. The shares of AAA Homes,
Inc. were distributed to our shareholders of record as of February 1, 1999.
In May 1999, we amended our Certificate of Incorporation through actions by our
majority stockholder, Dreamweavers N.V. to change our name to American Dream
Entertainment, Inc. and to increase the authorized common stock from 20,000,000
to 50,000,000 shares.
BUSINESS MODEL AND PRODUCTS
In February 1999, American Dream Entertainment acquired the exclusive rights in
the United States to exploit the Media Property known as "Robin and The
Dreamweavers" under a License and Royalty Agreement granted by Dreamweavers N.V.
a Curacao Company that has developed the "Robin and The Dreamweavers" concept.
This concept consists of several media products, an animated feature length show
for television, animated television series, a soundtrack, an Internet Site and
games, a Robin private label (a fashion label with designs based upon the
character of "Robin"), ancillary merchandising products related to the video
games, toys, apparel, school supplies and cosmetic products.
We plan to develop and exploit our products in several media and entertainment
franchises, based upon our animation property known as "Robin and The
Dreamweavers". This project combines the portrayal of a beautiful woman in the
eye-catching style of Vargas with contemporary humor and comedic turns to
develop "Robin" our heroine. Robin is contemporary, hip, sexy, and wise,
characteristic of today's young woman. Robin appeals to all ages and
demographics, especially those that enjoy house, dance music, RIB and HIP HOP
music.
We plan on launching our marketing campaign by establishing broadcasting
contracts with "Cable" television network companies. In addition, in conjunction
with these broadcasting contracts, we plan on establishing marketing agreements
for the merchandising of the music, fashion wear and related products under the
"Robin and The Dreamweavers" trade mark.
American Dream Entertainment plans on marketing the following products:
- Animated Feature Film for Television.
We are in the process of developing a feature length animation
movie (72 minutes in length utilizing traditional cell
animation techniques for exhibition in the United States.
Exhibition will include home video, pay television and free
television markets.
- Animated Television Series.
We are developing 26 half-hour episodes for exhibition in all
domestic and international media channels. Each episode will
be a complete story featuring the characters from the feature
film and will address contemporary social issues relevant to
young adults. Additionally, the characters of "Robin and The
Dreamweavers" may further be applied to an interactive
television game show.
- Music CD's.
3
<PAGE>
American Dream plans on incorporating songs written by
successful songwriters into a double CD album, with an
underscore house CD and dance music CD. These CD's will be
launched simultaneously with the feature film. We plan to
ensure a contemporary music focus and will utilize, "up and
coming" dance producers to provide new songs by various
performers.
- Internet Web Site and Interactive Games.
We will utilize broad-based proprietary digital development
techniques to create leading edge entertainment content.
CD-Roms and a multi-lingual Internet Site will feature a
multi-player game experience, sponsorship and marketing
opportunities, as well as, gaming applets and shopping
components. These will be corporate sponsored or charged to
viewer participants. The Internet Site will be used to create
awareness of the characters, assist in cross promotional
efforts, and generate product sales, advertising revenues and
subscription fees.
We will be poised to take advantage of new technologies with
cable access to on-line services, "cyber cable" the hot new
interactive technology that's right around the corner. These
new technologies promise to bind fast access speeds to
everything that cyberspace has to offer. Existing cable and
telephone operators are going to bundle Internet and on-line
service access together, just like cable television packages.
Consumers will surf the Internet at greater speeds, download
video clips in the blink of an eye, and generally continue to
blur the lines between broadcasters cable and on-line
services.
- A "Robin" Private Label.
Capitalizing on unique designs based upon the character of
Robin and her friends, we will develop a fashion label and
utilize our characters, especially "Robin" in international
campaigns.
- Ancillary Merchandising Products.
Gaming applets will be marketed to video game companies for
licensing. We will oversee all licensing and merchandising of
consumer products (i.e. toys, apparel, school supplies).
American Dream is currently developing electronic gadgets for
young adults such as; a pager memo watch, pocket E-mail
device, and other devices utilizing its characters. Also, we
are in the process of developing products such as stationery,
personal care, cosmetic products and other exciting young
adult oriented merchandise.
MATERIAL CONTRACTS
American Dream Entertainment is the beneficiary to License and Royalty
Agreements. We have an exclusive license for a period of fifteen (15) years,
with an option to extend the license for an additional five (5) years for the
United States rights to "Robin and The Dreamweavers". This License grants us a
full range of media products which include the following:
- Animated Feature Length Movie for Television
- Animated Television Series
- Music CD's
- Internet Web Site and Games
- A "Robin" Private Label
- Ancillary Merchandising Products.
INDUSTRY
General
Animation has been a major entertainment medium for decades. Since cartoon
characters appear the same dubbed in any language, animation easily crosses
national and language barriers. In addition, animation generally does not become
"dated" as does live-action programming, allowing an animated series to be
enjoyed by each new generation of children.
4
<PAGE>
Children are the primary target market for animated television programming.
Nielsen data indicate that children aged two to eleven are the nation's heaviest
consumers of television, watching an average of almost 22 hours each week.
Growth In advertising spending targeted at children and the expansion in the
number of television channels dedicated to children's programming around the
world have caused an increase in the demand for animated television programming.
Animated programming has expanded beyond the traditional Saturday morning
line-up. Monday through Friday mornings and afternoons now attract an even
greater number of young viewers than Saturday morning. There are many
programming blocks targeted toward children, including "The Disney Afternoon,"
Fox Children's Network and WB Kids. In addition, many first-run syndicates
provide programming blocks of animation Monday through Friday and on Sunday
mornings. Furthermore, programming successes such as "The Simpson's" and "Beavis
& Butthead", and more recently "King of the Hill", demonstrate that animation
also appeals to adults.
Increases in cable and satellite channels world wide and the privatization, new
entry and expansion in the international broadcast, satellite and cable industry
are providing additional opportunities for growth for animation companies,
especially those companies which own and distribute their own programs.
An increase in the number of channels and broadcasters world-wide, especially in
the United States, has caused an increase in competition among broadcasters.
This competition has had a negative impact on certain broadcasters that have had
difficulty competing. However, the more successful and committed programmers
have grown significantly. In this environment, access to distribution has
emerged as a more limiting factor and a key element of success.
Animation Production
The first step of a typical animation production is the creation of the script.
A story editor supervises the preparation of each episode's script by various
freelance script writers. Next, artists depict the story and action In
storyboards which provide a blueprint for the animation process. Voices and
songs are recorded and the recordings are analyzed and timed so that the
animation can be synchronized to the voice track. Based on the script and
storyboard, artists create character designs, as well as key background drawings
and paintings. These essential elements are assembled into a pre-production
package for each episode which is then shipped to an overseas subcontractor.
Subcontractors use the pre-production materials to perform most of the
labor-intensive aspects of production. Most of these subcontractors are located
In low-cost labor countries in the Far East, including South Korea, Taiwan,
China and the Philippines. When completed, the subcontractor ships the negative
and work-print for each episode to the producer. The film is then taken through
a post-production process which involves editing the picture and dialogue,
transferring the filmed Images to video tape, creating sound effects, composing
and producing the musical score and mixing and synchronizing the sound to the
picture. After the post-production process, an episode is ready for delivery.
COMPETITION
American Dream Entertainment will experience intense competition with respect to
its animated feature film and its animation products.
Our animated feature film will compete with feature films and other family
oriented entertainment products produced by major movie studios, including
Disney, DreamWorks SKG ("DreamWorks"), Pixar, Warner Bros., Inc., Twentieth
Century Fox Film Corporation ("Twentieth Century Fox"), Paramount Pictures
("Paramount"), Columbia Tri-Star Pictures Inc., Lucas film Ltd. ("Lucas film"),
Universal City Studios, Inc. and MGMUA, as well as numerous other independent
motion picture production companies.
In 1998, competition significantly intensified in the animated feature film
market from these and other movie studios. American Dream's film will compete
with the feature films of other movie studios for optimal release dates,
audience acceptance and exhibition outlets. The majority of movie studios with
which we compete have significantly greater name recognition and significantly
greater financial, technical, creative, marketing and other resources than does
American Dream Entertainment.
We believe that the primary competitive factors in the market for animated
feature films include creative content and talent, product quality, technology,
access to distribution channels and marketing resources. Because American Dream
is a new company with limited financial resources, there is no assurance that we
will be able to compete with these factors. However, we intend, wherever
possible to enter into contractual relationships with companies which have been
engaged in the communications, marketing and Internet business for a significant
period of time to allow the Company to utilize its assets and management team
productively.
5
<PAGE>
We expect competition to intensify and increase in this market in the future.
Currently, the majority of our potential competitors have longer operating
histories, greater name recognition, and significantly greater financial,
technical, marketing and other resources than American Dream Entertainment.
There can be no assurance that we will be able to compete successfully against
these competitors. Such competition could materially adversely affect our
business, operating results or financial condition.
MARKETING AND DISTRIBUTION
American Dream Entertainment has identified a niche in the market for television
animation. The majority of today's animation programming is directed toward
children in the age brackets of two to five or six to ten years old. However, a
third age bracket is evolving of sixteen years old and older. This third
category views programs such as: "The Simpson's" and "King of the Hill". We
believe that "Robin and The Dreamweavers" will be successful in attracting this
age bracket.
This group has shown a preference for animation content such as: "He-Man and the
Master of the Universe", "She-Ra Princess of Power", "Teen Age Mutant Turtles",
and "Sailor Moon". Currently, there is very limited product directed at this
audience with the exception of "Beavis and Butthead", "Spawn", "South park" and
Daria".
We have recognized the value of these viewers. This target group gains increased
financial independence beginning at age 13, at which time they typically go
unsupervised to the movies or malls, shop on their own, and make their own
purchasing decisions. Young adults have an average of $500 per month in
disposable income. They typically influence 20% of family spending which
represents more than 20% of the total dollar amount spent on CD's, Electronics,
and Video games.
"Robin and The Dreamweavers" was created and designed to attract the appetite of
this market and stimulate purchases of ancillary products that include lines of
merchandise that are designed for the young adult market. Examples of these
products are clothing, accessories, compact discs, stationery items, fitness
Items, cosmetics, jewelry, watches, cell-phones, home furnishing, bank accounts,
limited access credit cards, video games, and computers.
Media Exploitation
American Dream plans on utilizing the following media outlets for the
exploitation of its products:
- U.S. TELEVISION
Networks. The United States network television market is the most
valuable market to producers of animated programming. In the past,
networks have generally reached the largest audiences and paid the
highest license fees, enabling a producer to finance a more significant
portion of its production costs through network license fees than
licensing the same program to cable networks or first-run syndicates.
Weekend morning children's programming currently broadcasts on ABC,
CBS, FOX, UPN and WB (the "Networks"). In addition, FOX and WB
broadcast animated programming for young audiences during weekday
mornings and afternoons. NBC has not broadcasted children's
programming, including animation, since 1992.
Syndication. Syndication provides an important first-run, as well as
repeat, broadcast market for animated programs. Traditionally,
syndication has been populated by programs that support merchandise and
whose characters are featured in toy lines, apparel and other consumer
products. During the 1996-97 season, syndicators such as Buena Vista
Television Distribution, Saban Entertainment, Bohbot Entertainment and
Claster Television were distributing top rated children's programs,
both Monday through Friday and on Saturdays and Sundays.
6
<PAGE>
Cable and Direct Broadcast Satellite ("DBS"). Cable and DBS are
becoming more popular with children. The growth in the number of cable
channels and the development of DBS provides additional outlets for
animated programming. The cable channels which currently broadcast
animated programs include Nickelodeon, USA Network, The Disney Channel,
The Cartoon Network, The Comedy Channel, The Family Channel, HBO,
Showtime and MTV. Both Disney and Fox Kids Network recently announced
that they will be launching all-kids programming cable channels. Recent
increases in the penetration and viewership for Turner-Warners Cartoon
Network may indicate that this avenue of distribution/exhibition will
continue to grow as an important outlet for animated programming.
Notwithstanding potential growth in the animated programming industry,
other factors exert contrary pressures on the number of slots available
for animated programming and we believe that there will be fewer slots
available for such programming in the 1998-99 season than existed in
the past.
- NATIONAL TELEVISION
The growth in the number national television outlets has created
additional demand for animated programming. The commercialisation of
the television industry has encouraged a ratings/revenue-oriented focus
among broadcasters, thereby increasing the demand for higher quality
television entertainment. Animated programs produced in the United
States have enjoyed wide acceptance nationally. In addition, the
national market has experienced an increase in the number of cable and
satellite programming services. These added programming services have
created an opportunity for distributors, including American Dream, to
license simultaneously both traditional broadcast and satellite
programming rights within the same territory. Television, cable,
satellite and home video sales of animated programs produced in the
United States can account for the majority of the revenue for a given
program. Because the global demand has grown, it has created a need for
and an opportunity to produce internationally created animated
programs. U.S. producers work collaboratively with their international
peers to develop and produce programs for initial releases
simultaneously throughout the world. American Dream Entertainment is
concentrating its efforts on the U.S. market, which is the largest and
most lucrative market and the market for which we have obtained
exclusive rights under our Licensing and Royalty Agreement.
- HOME VIDEO
The home video distribution business involves the promotion and sale of
videocassettes and videodisks to local, regional and national video
retailers (i.e. video specially stores, convenience stores, record
stores and other outlets), which then rent or sell such video cassettes
and video disks to consumers primarily for private viewing. When video
cassettes are sold directly to the public they are priced significantly
lower than the prices charged to wholesalers who will rent the video.
This direct sale to consumers is commonly referred to as
the"sell-through market." In a typical home video deal, the wholesale
distributor will receive a non-refundable advance to be applied against
royalties which may range from 8% to 25% of the wholesale selling price
of a video cassette or disk.
- LICENSING AND MERCHANDISING
Due to the significant revenue that can be generated from licensing and
merchandising television characters, producers and owners of animated
characters seek to drive sales of toys and other licensed products
through the production and distribution of programs featuring their
characters. According to "The Licensing Letter" (a licensing and
merchandising trade periodical that is published monthly), U.S. and
Canadian retail sales of products derived from licensed
entertainment/character properties were approximately $16.7 billion in
1996. Numerous programs (such as The Teenage Mutant Ninja Turtles, G.I.
Joe, Power Rangers, Sonic the Hedgehog and Transformers) were initially
produced in large part to support the sales of merchandise associated
with these programs.
In addition to utilizing television to advertise products to children,
children's programming itself provides broad licensing and
merchandising opportunities. Characters developed in a popular series,
and often the series themselves, achieve a high level of recognition
and popularity among children, making them valuable assets for the
licensing and merchandising market, where they can provide attractive
"branding" opportunities. The children's market Is one of the fastest
growing segments in licensed merchandising sales, relating to
children-oriented products. Among the most popular licensed items are
toys, T-shirts, food, watches and soft vinyl goods such as boots,
backpacks and raincoats.
7
<PAGE>
In addition to the distribution venues described above, a number of
other sources of revenue exist for the exploitation of ancillary
rights. For Instance, interactive technology is rapidly evolving to
integrate full motion video with the personal computer, creating an
increasing array of opportunities for distribution rights in a market
commonly referred to as "multimedia".
- THE INTERNET
The interactive entertainment software industry generated an estimated
$4.4 billion in retail sales in 1996, according to IDC/Link research,
and $3.3 billion in indirect sales, for a total of $7.7 billion in
direct and indirect sales.
The video game market has grown exponentially since it was first
introduced in the late 1970s. Today, almost two-thirds of U.S.
households have a cartridge game system or a personal computer on which
games can be played. In addition, today's gamers are able to use
advanced gaming systems, including networked PCs, to challenge other
players which is infinitely more interesting than playing against the
computer.
The Internet has the potential of making multi-player gaming explode.
Currently, more than 5 million users are spending more than 5 hours a
week on-line. However, gaming on the Internet has not yet taken off
because of several complex technological challenges, one of which is
the problem of "latency" or lag time.
In 1999, American Dream Entertainment will lauch real-time multi-player
gaming over the Internet. This multiplayer game "Robin and The
Dreamweavers", will focus on environmental issues and will capitalize
on the natural desire to explore the world and participate in great
adventures. Participants will be able to check-out the latest
multi-player episodic game story and test their skills against millions
of potential opponents. They will also be able to participate in
contests, tournaments, and special events that are targeted to their
individual game and leisure interests. This service will be
speech-enabled, so players will be able to taunt their opponents, or
cheer their teams on, as they play. In addition, text and voice based
chat areas will provide a place to hang out with friends, meet other
players and even plot winning strategies with their teams. Industry
insiders believe that one of the next big waves will be PC-based,
real-time multi-player internet games, especially because PCs have much
more built-in connectivity than traditional video-game platforms.
We maintain an Internet Site that displays information regarding the
"Robin and The Dreamweavers" media products, and general information
about us and our progress in marketing products, news relating to
product improvements and new products, distribution agreements, release
dates of feature films, video series Internet games, and future
developments. In addition, we utilize the Internet to display and
market the products that we intend to provide which will include
merchandising various products for direct sale over the Internet.
EMPLOYEES
As of May 31, 1999, American Dream had (4) four employees. We consider our
relations with our employees to be excellent.
ITEM 2. PROPERTIES
We currently lease and occupy an office located at 20501 Ventura Boulevard,
Woodland Hills, California 91364-2313. Our monthly lease payment is $540. This
lease expires in February 2000.
ITEM 3. LEGAL PROCEEDINGS.
American Dream Entertainment is not party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURTIY HOLDERS.
On May 28, 1999, pursuant to an action by Dreamweavers, N.V., as the holder of a
majority of our outstanding shares of Common Stock, an Amendment to our Articles
of Incorporation was filed with the State of Minnesota, which (i) changed our
corporate name from Federal Affordable Housing Corporation to American Dream
Entertainment, Inc. and (ii) increased our authorized Common Stock to 50,000,000
shares, par value $.0001. Dreamweavers, N.V., as the holder of a majority of the
outstanding shares of Common Stock, also appointed Mr. Dirk W. Peschar, Arjen de
Groot and Mr. Jules H. van Marken as our officers and directors and the former
officers and directors of Federal Affordable Housing Corporation resigned.
8
<PAGE>
PART II
-------
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
Set forth below is information concerning the trading history of Federal
Affordable Housing Corporation's Common Stock. As noted below, our Common Stock
ceased trading in the fourth quarter of 1997. The transfer agent and registrar
for the Common Stock is American Securities Transfer and Trust, Inc. 12039 West
Alameda Parkway, Lakewood, Colorado 80226. The following table sets forth, to
the best of our knowledge, for the periods indicated the high and low sale
prices for shares of our Common Stock as reported to us by representatives of
our prior underwriter, Bernard, Lee & Edwards Securities, Inc.
Sales Price
High Low
Fiscal Year Ended 1995
Fourth Quarter 8-1/2 7
Third Quarter 8-1/2 7
Fiscal Year Ended 1996
Fourth Quarter 8 6-3/4
Third Quarter 8 6-3/4
Second Quarter 8 7
First Quarter 8 7
Fiscal Year Ended 1997
Fourth Quarter -- --
Third Quarter 7-3/4 6-1/2
Second Quarter 7-3/4 6-1/2
First Quarter 8 6-1/2
The Company's common stock is not listed on NASDAQ, or is not currently traded
in the over-the-counter market in the so called "pink sheets," or on the
"Electronic Bulletin Board" of the National Association of Securities Dealers,
Inc. (the "NASD"). Accordingly, an investor may find it difficult to dispose of,
or obtain accurate quotations as to the market value of the common stock.
Further, in the absence of a security being quoted on NASDAQ, a market price of
at least $5.00 per share or the Company having in excess of $2,000,000 in net
tangible assets, trading in the Company's securities may be covered by a
Securities and Exchange Commission ("SEC") rule that imposes additional sales
practice requirements on broker-dealers who sell such securities to persons
other than established customers and accredited investors (generally
institutions with net worth in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 jointly with their spouse). For transactions covered by the
rule, the broker-dealer must make a special suitability determination for the
purchaser and receive the purchasers' written agreement to the transaction prior
to the sale. Consequently, the rule affects the ability of broker-dealers to
sell the Company's securities and also may affect the ability of purchasers in
his offering to sell their securities in the secondary market.
Previously, the SEC adopted seven rules ("Rules") under the Securities Exchange
Act of 1934 requiring broker/dealers engaging in certain recommended
transactions with their customers in specified equity securities falling within
the definition of "penny stock" (generally non-NASDAQ securities priced below
$5.00 per share) to provide to those customers certain specified information.
Unless the transaction is exempt under the Rules, broker/dealers effecting
customer transactions in such defined penny stocks are required to provide their
customers with: (1) a risk disclosure document; (2) disclosure of current bid
and ask quotations, if any; (3) disclosure of the compensation of the
broker/dealers and its sales person in the transaction; and (4) monthly account
statements showing the market value of each penny stock held in the customer's
account.
9
<PAGE>
As a result of the aforesaid rules regulating penny stocks, the market liquidity
for the Company's securities could be severely adversely affected by limiting
the ability of broker-dealers to sell the Company's securities and the ability
of shareholders sell their securities in the secondary market.
The Company has a pending Form 211 Application with the National Association of
Securities Dealers ("NASD") to commence trading of the Company's common stock in
the counter market in either the so called "pink sheets" or on the "Electronic
Bulletin Board", of the NASD. On August 30, 1999, we received a comment letter
from the staff at the NASD requesting that a copy of this Form 10-KSB be
provided to the staff of the NASD upon filing with the SEC. The comment letter
indicated that the staff of the NASD will re-examine our Form 211 submission
following receipt of this Form 10-KSB. We are not aware of any other open issues
remaining with the NASD. If the NASD does not approve our Form 211 Application
or if the NASD continues to indicate that our Form 211 Application is deficient,
we will not be able to commence trading of our common stock. Although we believe
the filing of this Form 10-KSB will satisfy the staff of the NASD, there is no
assurance that the NASD will approve our Form 211 filing.
Recent SEC and NASD revisions and interpretations of Rule 15c2-11 require us to
maintain our status as a reporting company under Section 12(q) of the Securities
Exchange At of 1934. Our failure to timely file annual, quarterly or other
reports may affect our ability to maintain listing in the OTC "Electronic
Bulletin Board".
DILUTION AND ABSENCE OF DIVIDENDS
We have not paid any cash dividends on our common stock and do not anticipate
paying any such cash dividends in the foreseeable future. Earnings, if any, will
be retained to finance future growth. We plan to issue our shares in private or
public offerings to obtain financing, capital or to acquire other businesses
that can improve our performance and growth. Future issuance and or sales of
substantial amounts of common stock could adversely affect prevailing market
prices in our common stock.
TRANSFER AGENT AND WARRANT AGENT
American Securities Transfer & Trust, Inc. of Denver, Colorado acts as the
Company's Transfer Agent and Warrant Agent.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Federal Affordable Housing Corporation was restructured December 31, 1998,
reflecting a new line of business for the exploitation of media products known
as "Robin and The Dreamweavers" within the United States. All assets and
liabilities were transferred to a newly formed subsidiary, AAA Homes, Inc at
December 31, 1998. The stock of AAA Homes, Inc. was distributed to our
shareholders of record as of February 1, 1999. In May, 1999 we changed our name
to American Dream Entertainment, Inc. to reflect this new line of business.
There were no revenues from December 31, 1998 until May 31, 1999 in the animated
film business and we have incurred significant losses associated with the
promotion of our animated feature film. American Dream Entertainment does not
expect to generate revenues until its "Robin and The Dreamweavers" project is
completed and becomes contractually available for telecasting or exhibition. The
amount of distribution and licensing revenues earned by American Dream
Entertainment will be dependent on, among other things, the timeline for the
completion of the project and its distribution by others.
In the fiscal year ended May 31, 1998, Federal Affordable Housing Corporation's
principal lines of business were in developing land for the purpose of building
and selling residential housing. In this last year of operations in this
business we sold 32 lots and 3 houses. We have since transferred all operations
involving real estate and the development thereof, to AAA Homes, Inc. at
December 31, 1998.
10
<PAGE>
RESULTS OF OPERATIONS
FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998
There were no revenues for the year ended May 31, 1999. Revenues for the year
ended May 31, 1998 were $481,400 which consisted of the sales of real estate
involving 32 lots and 3 houses.
Cost of sales for the fiscal year ended May 31, 1998 were $457,275 which
represents a percentage of revenues of 95%. There were no cost of sales for the
fiscal year ended May 31, 1999.
For the year ended May 31, 1999, total selling, general and administrative
expenses were $261,069 as compared to $90,413 for the previous fiscal year, an
increase of $170,656 or 189%. Of this $170,656 increase in selling, general and
administrative, approximately $142,170 was due to promotional efforts associated
with our animated feature film which was not pertinent in the prior year.
The decrease in interest expense was primarily due to the sale of the 32 lots
and 3 houses and the complete payment of notes payable and long-term debt upon
sale of these properties. Interest expense for the fiscal year ended May 31,
1999 was $ -0- as compared to $20,555 in the previous year.
Net loss was $249,880 for the year ended May 31, 1999, as compared to a net loss
of $77,800 for the previous fiscal year ended May 31, 1998. This increase in net
loss is associated with promotional efforts related to our animated feature
film. In addition, there were no revenues in the fiscal year ended May 31, 1999
to absorb selling, general, and administrative expenses incurred during the
period.
FISCAL YEAR 1998 COMPARED TO FISCAL YEAR 1997
Sales in 1998 increased 3295% to $481,400 over the $14,178 recorded in 1997, as
a result of the sale of houses and land. The company sold 32 lots and 3 houses
in the fiscal year ended May 31, 1998.
Cost of goods sold for the fiscal year ended May 31, 1998, increased to $457,275
from zero in fiscal 1997. Cost of goods as a percentage of sales represents 95%
in fiscal 1998.
For the year ended May 31, 1998, total selling, general and administrative
expenses were $90,413, as compared to $49,936 for the previous fiscal year, an
increase of $40,477. This increase was due to a $40,000 disclosure requirement
in SAB 1:B regarding compensation expense for the fair value of services
provided by management.
Net loss was $77,800 for the year ended May 31, 1998, as compared to a net loss
of $35,758 for the previous fiscal year ended May 31, 1997. The increase in net
loss was primarily attributable to a $40,000 disclosure requirement in SAB 1:B
regarding compensation expense for the fair value of services provided by
management which increased general and administrative expense.
LIQUIDITY AND CAPITAL RESOURCES
Our operations are currently funded through advances made on our behalf by
Dreamweavers, N.V. Through May 31, 1999, Dreamweavers has advanced approximately
$193,201 on our behalf. These amounts primarily relate to promotional costs and
payments made to consultants, advisors, reimbursement of travel expenses and
lease expenses. We are not presently generating sufficient revenues from
operations to fund capital requirements. Our ability to alleviate our working
capital deficit and obtain capital adequate to fund future costs associated with
operations and expansion plans is dependent upon Dreamweavers, N.V. commitment
to continue funding our operations, the private placement of our securities and
the realization of projected sales for our products. There is no assurance that
such revenues will be generated or that other funding will be available.
INFLATION
Inflation has not proven to be a factor in the Company's business since its
inception and is not expected to have a material impact on the Company's
business in the foreseeable future.
11
<PAGE>
YEAR 2000
The Year 2000 problem is the result of computer programming using two digits
rather than four to define the applicable year. Computer programs that have
time-sensitive software may recognize a date using "00" as the Year 1900 rather
than the Year 2000.
This could result in a major system failure or miscalculations.
We use software, computer technology and other services developed and provided
by third-party vendors that may fail due to the year 2000 phenomenon. We are
currently reviewing our products, our internal computer systems and the systems
of third parties on which we rely for handling the Year 2000. We are also
seeking confirmation from third parties that their systems are Year 2000
compliant or plans are being developed to address the Year 2000 problem. Based
on information available to date, we believe that we will be able to complete
our Year 2000 compliance review and make any necessary modifications to our
internal systems prior to the end of 2000. We further believe that such review
and modification will not require us to incur any material charge to operating
expenses, although we cannot provide any assurance that such expenses will not
be material. In addition, even if the year 2000 issue does not internally
materially affect American Dream Entertainment, we could be affected through
disruption in the operation of the activities in which we interact.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is presented at page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
The information required by this item is incorporated by reference to the Form
8-Ks filed on July 13, July 26 and August 6, 1999 regarding Changes in
Registrant's Certifying Accountant.
PART III
--------
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS , PROMOTERS AND CONTROL PERSONS.
DIRECTORS
The members of American Dream Entertainment's Board of Directors as of May 31,
1999 are as follows:
NAME AGE POSITION
Dirk W. Peschar 41 Chairman of the Board of Directors
President, Chief Executive Officer
Arjen de Groot 36 Chief Financial Officer, Vice President
of Operations, Director
Jules H. van Marken 65 Director
Executive officers are elected by the Board of Directors and serve until their
successors are duly elected and qualify, subject to earlier removal by the Board
of Directors. Directors are elected at the annual meeting of shareholders to
serve for their term and until their respective successors are duly elected and
qualify, or until their earlier resignation, removal from office, or death. The
remaining directors may fill any vacancy in the Board of Directors for an
unexpired term. See "Board of Directors" for a discussion of the Directors'
terms.
12
<PAGE>
Dirk W. Peschar is our President, Chief Executive Officer and Chairman of the
Board. Mr. Peschar is also a shareholder of Dreamweavers, N.V. Mr. Peschar
conceived of the "Robin and The Dreamweavers" concept in 1997. In the 1980's Mr.
Peschar was a client services director at Saatchi & Saatchi. His clients there
included high profile companies such as Proctor and Gamble and Mercedes Benz. In
1992, Mr. Peschar founded Shore Communications Network, a Netherlands
corporation, which was an advertising agency, specializing in fast moving
consumer products. He developed his business to four offices in The Netherlands
before it was sold in 1996. In 1996, Mr. Peschar was client Services Director
for Pay-Per-View Netherlands, where he met Mr. de Groot.
Arjen de Groot is our Chief Financial Officer and a Director. From 1994 through
1997, Mr. de Groot was the financial director of Pay-Per-View, Netherlands. Mr.
de Groot is also a shareholder of Dreamweavers, N.V. In 1997, Mr. de Groot met
with Mr. Peschar and became involved in "Robin and The Dreamweavers" project.
Mr. de Groot has been an entrepreneur in The Netherlands since 1985, and has
been involved in numerous start-up business interests.
Jules H. van Marken is a Director of the Company. Mr. van Marken is a retired
television pioneer and continues to consult businesses in the television and
entertainment industry. He was recently senior consultant for Graf Pay Per View
TV (New York), and in Europe for Phillips and KPN.
BOARD OF DIRECTORS
The Company's Bylaws fix the size of the Board of Directors at no fewer than one
and no more than 10 members, to be elected annually by a plurality of the votes
cast by the holders of Common Stock, and to serve until the next annual meeting
of stockholders and until their successors have been elected or until their
earlier resignation or removal. Currently, there are three (3) directors.
ITEM 10. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table shows the compensation paid or accrued by the Company for
the fiscal year ended May 31, 1999, to or for the account of the Chief Executive
Officer. No other executive officer of the Company received an annual salary and
bonus in excess of $100,000 or more during the stated period. Accordingly, the
summary compensation table does not include compensation of other executive
officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation Awards
Restricted
Other Annual Stock Options/ LTIP All Other
Name & Principal Salary Bonus Compensation Award(s) SARs Payouts Compensation
Position Year ($) ($) ($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dirk W. Peschar
President, CEO 1999 18,000 --- --- --- --- --- ---
</TABLE>
(1) Represents amount of Mr. Peschar's salary and expense reimbursements
allocated to the Company from Dreamweavers, N.V.
During fiscal year ended May 31, 1999, the former executive officers of Federal
Affordable Housing Corporation did not receive any compensation. We do not have
employment agreements with any of our employees. We do not have any stock option
plans.
13
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES
The information provided in the table below provides information with
respect to each exercise of stock option during fiscal 1999 by each of the
executive officers named in the summary compensation table and the fiscal year
end value of unexercised options.
<TABLE>
<S> <C> <C> <C> <C>
- -------------------------- --------------------- ------------------- ------------------------ -----------------------
(a) (b) (c) (d) (e)
- -------------------------- --------------------- ------------------- ------------------------ -----------------------
- -------------------------- --------------------- ------------------- ------------------------ -----------------------
Value of Unexercised
Number of Unexercised In-the Money Options
Shares Acquired options at FY-End at FY-End($)
Name Exercise Value Realize($)(1) Exercisable/Unexercisable Exercisable/Unexercisable(1)
- -------------------------- --------------------- ------------------- ------------------------ -----------------------
Dirk W. Peschar -0- -0- -0- -0-
===================
</TABLE>
(1) The aggregate dollar values in column (c) and (e) are calculated by
determining the difference between the fair market value of the Common
Stock underlying the options and the exercise price of the options at
exercise or fiscal year end, respectively. In calculating the dollar
value realized upon exercise, the value of any payment of the exercise
price is not included.
DIRECTOR COMPENSATION
A director who is an employee of the Company receives no additional
compensation for services as director or for attendance at or participation in
meetings except reimbursement of out-of-pocket expenses and options. Outside
directors will be reimbursed for out-of-pocket expenditures incurred in
attending or otherwise participating in meetings and may be issued stock options
for serving as a director. The Company has no other arrangements regarding
compensation for services as a director.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership known to Company of shares of Company Common Stock owned as
of May 31, 1999 beneficially by (i) each person who beneficially owns more than
5% of the outstanding Company Common Stock, (ii) each director of the Company,
(iii) the Officers of the Company, and (iv) directors and executive officers of
the Company as a group:
Amount and Nature of
Name of Beneficial Owner(3) Beneficial Ownership(1) Percent of Class(2)
- --------------------------- ----------------------- -------------------
Dirk W. Peschar (4) (5) 6,160,000 33.4%
Arjen de Groot (6) 960,000 5.2%
Jules H. van Marken --- 0%
Dreamweavers, N.V. 16,000,000 89%
La Salle Group, Ltd. 980,000 5.5%
All directors and executive officers
as a group (3 persons) (5)(6) 7,120,000 38.6%
(1) Represents sole voting and investment power unless otherwise indicated.
14
<PAGE>
(2) Based on approximately 17,980,000 shares of Company Common Stock
outstanding as of May 31, 1999 plus, as to each person listed, that portion
of the unissued shares of Company Common Stock subject to outstanding
options which may be exercised by such person, and as to all directors and
executive officers as a group, unissued shares of Company Common Stock as
to which the members of such group have the right to acquire beneficial
ownership upon the exercise of stock options within the next 60 days.
(3) The address of each individual is in care of the Company.
(4) May be deemed to be a "founder" of the Company for the purpose of the
Securities Act.
(5) The number of shares shown in the above tables reflect indirect ownership
through Dreamweavers, N.V. Mr. Peschar owns 38.5% of Dreamweavers, NV. and
accordingly indirectly owns 33.4% of American Dream Entertainment, Inc.
(88% ownership of Dreamweavers, N.V. multiplied by 38.5%).
(6) The number of shares shown in the above tables reflect indirect ownership
through Dreamweavers, NV. Mr. de Groot owns, personally or through
affiliate entities, 6% of Dreamweavers, N.V. and accordingly indirectly
owns 5.2% of American Dream Entertainment, Inc. (8% ownership of
Dreamweavers, N.V. multiplied by 6%).
ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On March 5, 1999, Dreamweavers, N.V., Curacao, a Netherlands Antilles
corporation, entered into a Royalty and License Agreement granting American
Dream Entertainment, Inc. an exclusive license agreement to exploit a medial
concept known as "Robin and The Dreamweavers". The holding company of this media
concept, Dreamweavers NV, owns 100% of the rights of the animated properties. In
consideration of the License Agreement, we issued 16,000,000 shares of
restricted common stock to Dreamweavers, N.V. which includes a royalty payment
to Dreamweavers, N.V. equal to 3% of gross revenues.
The 16,000,000 shares represents approximately 88% of our total outstanding
stock. In addition, this License Agreement provides for a cash payment of
$5,500,000, from a private placement of our securities, to Dreamweavers, N.V.
for the rights to the medial products consisting of a feature film together with
the license for TV production of "Robin and The Dreamweavers", license for
merchandising "Robin and The Dreamweavers", license for the music of "Robin and
The Dreamweavers", license for designer fashion wear of "Robin and The
Dreamweavers", license of the video of "Robin and The Dreamweavers", and license
for private label merchandising of "Robin and The Dreamweavers" ancillary
products.
Upon execution of the License Agreement, the President, Secretary and Director,
Mr. Dick Metz, resigned and Mr. Dick W. Peschar, a resident and citizen of The
Netherlands, was appointed President, Secretary and Director of the Company. Mr.
Peschar also serves as CEO of Dreamweavers, N.V.
In connection with the License Agreement and in order to restructure American
Dream Entertainment to reflect the new line of business for the exploitation of
media products known as "Robin and The Dreamweavers" within the United States,
we divested all assets and liabilities by transferring such assets and
liabilities to a newly formed subsidiary, AAA Homes, Inc. We agreed to have no
more than 1,000,000 shares of common stock outstanding prior to the issuance of
16,000,000 shares of restricted common stock to Dreamweavers, N.V. Mr. Dick Metz
is the sole director and officer of AAA Homes, Inc. The shares of AAA Homes,
Inc. were distributed to the Company's shareholders of record as of February 1,
1999.
La Salle Group, Ltd. is an unaffiliated entity and has acted as Dreamweavers,
N.V.'s advisor and consultant. In connection with the License Agreement this
entity was issued 980,000 restricted shares of our Common Stock.
Through May 31, 1999, Dreamweavers, N.V. has advanced us approximately $193,201.
In the calendar year ended December 31, 1998, Dreamweavers, N.V. has invested
approximately $3,400,000 for development, set up, marketing and sales expenses.
To date, in fiscal 1999, Dreamweavers, N.V. has invested an additional $850,000
into the "Robin and The Dreamweavers" project. Dreamweavers, N.V. intends to pay
these advances from the $5,500,000 payment due Dreamweavers, N.V. under the
License Agreement.
15
<PAGE>
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
(1)(2) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.
Financial Statements filed as part of this Report are set forth in Item
7 and are presented at page F-1 of this Report; which list is
incorporated herein by reference. The Financial Statement Schedules and
the Report of Independent Auditors as to Schedules follow the Exhibits.
(a)(3) EXHIBITS.
(b) Reports on Form 8-K
(i) Form 8-K filed June 16, 1999 containing information regarding
the Change of Control and Acquisition of Royalty and License
Agreement.
(ii) Form 8-Ks filed on July 13, July 26, and August 6, 1999,
regarding the change in our Certified Public Accountant.
(c) Exhibits. See the Indexes to Exhibits below.
INDEX TO EXHBITS.
All of the items below are incorporated by reference to the Registrant's
Registration Statement on Form SB-2, File No. 33-67536-A, effective March 10,
1995, except for Exhibits 3.1 and 99.3, which are included with the filing and
Exhibits 99.4 and 99.5, which were filed with the Form 8-K dated March 5, 1999,
which is included with this filing.
Number Description
3.1 Amendment to Articles of Incorporation changing name and increasing
authorized common stock - May, 1999 (1)
4.1 Form of Common Stock Certificate (Exhibit 4.A of Form SB-2)
4.2 Form of Investor's Stock Purchase Warrant Certificate (Exhibit 4.B of Form
SB-2)
99.3 Office Real Estate Lease - 20300 Venture Boulevard, Woodland Hills,
California - dated February 12, 1999 (1)
99.4 Agreement between Dreamweavers, N.V., Federal Affordable Housing
Corporation and AAA Homes, Inc. relating to restructuring
and license agreement (2)
99.5 Heads of the License and Royalty Agreement will Dreamweavers, N.V. for
"Robin and The Dreamweavers" concepts in the United States (2)
(1) Filed herewith
(2) Filed as exhibits to Form 8-K filed on June 16, 1999.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: September 7, 1999 By: /s/Dirk W. Peschar
------------------
Dirk W. Peschar,
Principal Executive Officer
and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Dirk W. Peschar President and Chief Executive
- ---------------------- Officer (Principal Executive September 7, 1999
Dirk W. Peschar Officer) and Director
/s/ Jules H. van Marken Director September 7, 1999
- -----------------------
Jules H. van Marken
/s/ Arjen de Groot Chief Financial Officer (Principal September 7, 1999
- ------------------ Financial Officer) Principal
Arjen de Groot Accounting Officer, Director
17
<PAGE>
Financial Statements
American Dream Entertainment, Inc.
(f/k/a Federal Affordable Housing Corporation)
As of May 31, 1999 and
For the Years Ended May 31, 1999 and 1998
Independent Auditors' Report
<PAGE>
American Dream Entertainment, Inc.
(f/k/a Federal Affordable Housing Corporation)
Financial Statements
As of May 31, 1999 and
For the Years Ended May 31, 1999 and 1998
Contents
Independent Auditors' Report on Financial Statements.......................F-1
Financial Statements:
Balance Sheet..........................................................F-2
Statements of Operations...............................................F-3
Statements of Changes in Stockholders' Deficit.........................F-4
Statements of Cash Flows.........................................F-5 - F-6
Notes to Financial Statements...................................F-7 - F-11
<PAGE>
Independent Auditors' Report
Board of Directors
American Dream Entertainment, Inc.
(f/k/a Federal Affordable Housing Corporation)
Las Vegas, Nevada
We have audited the accompanying balance sheet of American Dream Entertainment,
Inc. (f/k/a Federal Affordable Housing Corporation) as of May 31, 1999 and the
related statements of operations, changes in stockholders' deficit, and cash
flows for the years ended May 31, 1999 and 1998. These financial statements are
the responsibility of the management of American Dream Entertainment, Inc.
(f/k/a Federal Affordable Housing Corporation). Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
These standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Dream Entertainment,
Inc. (f/k/a Federal Affordable Housing Corporation) as of May 31, 1999 and the
results of its operations and its cash flows for the years ended May 31, 1999
and 1998 in conformity with generally accepted accounting principles.
Certified Public Accountants
Tampa, Florida
August 31, 1999
F-1
<PAGE>
American Dream Entertainment, Inc.
(f/k/a Federal Affordable Housing Corporation)
Balance Sheet
May 31, 1999
Assets
Current assets:
Prepaid offering costs $ 104,098
----------------
Other assets:
Trademark and license 5,501,600
Deposits 550
----------------
Total other assets 5,502,150
----------------
$ 5,606,248
================
Liabilities and Stockholders' Deficit Current liabilities:
Due to stockholders $ 5,693,201
Accrued expenses 163,128
----------------
Total current liabilities 5,856,329
----------------
Stockholders' deficit:
Common stock; $.0001 par value; 50,000,000 shares
authorized; 17,980,000 shares issued and outstanding 1,798
Capital in excess of par value 152,573
Accumulated deficit (404,452)
----------------
Total stockholders' deficit (250,081)
----------------
$ 5,606,248
================
Read independent auditors' report. The accompanying
notes are an integral part of the financial statements.
F-2
<PAGE>
American Dream Entertainment, Inc.
(f/k/a Federal Affordable Housing Corporation)
Statements of Operations
Year Ended May 31,
--------------------------
1999 1998
--------------------------
Sales $ 481,400
Cost of sales 457,275
-------------------------
Gross profit 24,125
-------------------------
Operating expenses:
General and administrative expenses $ (261,069) (90,413)
Interest expense (20,555)
Other income 11,189 9,043
-------------------------
(249,880) (101,925)
-------------------------
Net loss $ (249,880) $ (77,800)
=========================
Loss per share $ (.05) $(.16)
=========================
Read independent auditors' report. The accompanying
notes are an integral part of the financial statements.
F-3
<PAGE>
American Dream Entertainment, Inc.
(f/k/a Federal Affordable Housing Corporation)
Statements of Changes in Stockholders' Equity
Years Ended May 31, 1999 and 1998
<TABLE>
<CAPTION>
Capital In
Common Stock Excess Of Accumulated
Shares Amount Par Value Deficit
<S> <C> <C> <C> <C>
Balance, May 31, 1997,
as previously stated 493,500 $ 49 $ 486,838 $ (84,303)
Error in recording proceeds
from stock offering (58,921) 7,531
----------------- --------------- ----------------- -----------
Balance, May 31, 1997,
as restated 493,500 49 427,917 (76,772)
Distributions to stockholders (148,501)
Contribution of services and rent 40,000
Net loss for year (77,800)
----------------- --------------- ----------------- -----------
Balance, May 31, 1998 493,500 49 319,416 (154,572)
Corporate restructuring 506,500 51 (51)
Distributions of assets to
stockholders (166,792)
Issuance of common stock for
trademark and license 16,980,000 1,698
Net loss for year (249,880)
----------------- --------------- ----------------- -----------
Balance, May 31, 1999 17,980,000 $ 1,798 $ 152,573 $ (404,452)
================= =============== ================= ===========
</TABLE>
Read independent auditors' report. The accompanying
notes are an integral part of the financial statements.
F-4
<PAGE>
American Dream Entertainment, Inc.
(f/k/a Federal Affordable Housing Corporation)
Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended May 31,
------------------------------
1999 1998
------------------------------
<S> <C> <C>
Operating activities
Net loss $ (249,880) $ (77,800)
---------------- ------------
Adjustments to reconcile net loss to net cash
(used) provided by operating activities:
Services contributed by stockholder 40,000
(Increase) decrease in:
Inventory of lots 377,295
Mortgage receivable (221,500)
Increase (decrease) in:
Security deposits (550)
Accrued expenses 123,128
--------------- -------------
Total adjustments 122,578 195,795
--------------- -------------
Net cash (used) provided by operating activities (127,302) 117,995
--------------- -------------
Investing activities
Proceeds from sale of investments 300,000
--------------- -------------
Financing activities
Advances from stockholders 189,103 22,848
Interest on mortgage (1,188)
Payments to stockholders (11,514)
Cash transfer to subsidiary (53,313)
Payments on notes payable and long-term debt (376,474)
Payments on prepaid offering costs (64,000)
--------------- -------------
Net cash provided (used) by financing activities 59,088 (353,626)
--------------- -------------
Net (decrease) increase in cash (68,214) 64,369
Cash, beginning of year 68,214 3,845
--------------- -------------
Cash, end of year $ 0 $ 68,214
=============== =============
</TABLE>
Read independent auditors' report. The accompanying
notes are an integral part of the financial statements.
F-5
<PAGE>
American Dream Entertainment, Inc.
(f/k/a Federal Affordable Housing Corporation)
Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended May 31,
------------------------------
1999 1998
------------------------------
<S> <C> <C>
Supplemental disclosures of cash flow information and
noncash investing and financing activities
Cash paid during the year for interest $ 0 $ 20,555
==============================
</TABLE>
During the year ended May 31, 1999, the Company transferred all of its
assets and liabilities that relate to the operations of Federal Affordable
Housing Corporation to AAA Homes, Inc., its wholly owned subsidiary. The net
value of those assets and liabilities was $166,792. Then all of the common
stock of AAA Homes, Inc. was distributed to stockholders of record as of
February 1, 1999. The assets and liabilities distributed to AAA Homes, Inc.
are as follows:
Cash $ 53,313
Construction in progress 7,273
Mortgage receivable 222,688
Deposits 424
Stockholder payable (35,676)
Dividend payable (81,230)
------------
$ 166,792
============
On March 15, 1999, the Company acquired the trademark and license for "Robin
and The Dreamweavers" (see Note 1). The Company agreed to pay $5,500,000 on
the completion of a private placement offering. Also, 16,000,000 shares of
stock were issued at $.0001 per share.
As part of the license and transfer, the Company issued 980,000 shares of
stock for services. These shares of stock were valued at $.0001 per share.
The recipient of these shares also received $100,000 in consulting fees,
which were capitalized as prepaid offering costs.
During the year ended May 31, 1998, the Company forgave a $67,271 related
party receivable in return for 74,500 shares of the related company's stock.
This stock was subsequently distributed to some of the Company's
stockholders. Two of the Company's stockholders did not receive stock as
part of this dividend. The Company has recorded a dividend payable totaling
$81,230 for their pro rata share of the dividend (see Note 4).
Read independent auditors' report. The accompanying
notes are an integral part of the financial statements.
F-6
<PAGE>
American Dream Entertainment, Inc.
(f/k/a Federal Affordable Housing Corporation)
Notes to Financial Statements
As of May 31, 1999 and
For the Years Ended May 31, 1999 and 1998
1. Background Information and Change In Control
American Dream Entertainment, Inc. (the "Company") is a Minnesota corporation
incorporated on March 5, 1993 as Federal Affordable Housing Corporation.
Originally, the Company's principal lines of business were developing land for
the purpose of building and selling residential housing. Operations were
concentrated in Florida.
On March 5, 1999, the Company entered into a license and royalty agreement with
Dreamweavers N.V., a company organized under the laws of Curacao. The Company
has purchased from Dreamweavers N.V. and its affiliated companies the trademark
and exclusive right to commercially exploit "Robin and the Dreamweavers,"
including media products, as well as a feature film together with licenses for
television production, music videos, and private label merchandising, in the
United States for $5,500,000, which shall be payable on the successful
completion of a private placement of the Company's securities. As further
consideration for the granting of the exclusive license and royalty agreement,
the Company issued to Dreamweavers N.V. 16,000,000 shares of its restricted
common stock. The 16,000,000 shares represent approximately 88 percent of the
total outstanding stock of the Company. Hence, the Company is a majority owned
subsidiary of Dreamweavers N.V. These shares were valued at par value $.0001
since the Company was inactive and had not been trading.
In accordance with this agreement, the Company has changed its name to American
Dream Entertainment, Inc. The Company also increased the number of shares
authorized to 50,000,000 and established a par value of $.0001 per share.
The Company assigned and transferred all of its assets (except for the above
license and royalty agreement) and liabilities to AAA Homes, Inc., a related
party. This transfer has been treated as a distribution to stockholders for the
net book value of those assets transferred, which amounted to $166,792.
The corporate headquarters of the Company is located in Las Vegas, Nevada.
Read independent auditors' report.
F-7
<PAGE>
American Dream Entertainment, Inc.
(f/k/a Federal Affordable Housing Corporation)
Notes to Financial Statements
As of May 31, 1999 and
For the Years Ended May 31, 1999 and 1998
2. Significant Accounting Policies
The significant accounting policies followed are:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
The Company's trademark and license will be amortized on the ratio of
current gross revenues to expected total gross revenues. Estimates of
total gross revenues can change significantly due to the level of market
acceptance of film and television products. Accordingly, revenue
estimates are reviewed periodically and amortization is adjusted. Such
adjustments could have a material effect on results of operations in
future periods. As of May 31, 1999, no amortization has been recorded
since the film is still in production.
The Company continually reviews the recoverability of the carrying value
of long-term assets using the methodology prescribed in SFAS 121. The
Company also reviews long-lived assets and the related intangible assets
for impairment whenever events or changes in circumstances indicate the
carrying amount of such assets may not be recoverable. Recoverability of
these assets is determined by comparing the forecasted undiscounted net
cash flows of the operation to which the assets relate, to the carrying
amount including associated intangible assets of such operation. If the
operation is determined to be unable to recover the carrying amount of
its assets, then intangible assets are written down first, followed by
the other long-lived assets of the operation, to fair value. Fair value
is determined based on discounted cash flows or appraised values,
depending upon the nature of the assets. As of May 31, 1999, the Company
has determined that no such impairment has occurred.
In connection with the Company's private placement, offering costs are
deferred and are offset against the proceeds of the offering or expensed
if the total offering is unsuccessful, both on a pro rata basis.
Read independent auditors' report.
F-8
<PAGE>
American Dream Entertainment, Inc.
(f/k/a Federal Affordable Housing Corporation)
Notes to Financial Statements
As of May 31, 1999 and
For the Years Ended May 31, 1999 and 1998
2. Significant Accounting Policies (continued)
Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the
financial statements carrying amounts of existing assets and liabilities
and their respective income tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Basic loss per share is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding
for the period.
The Company records shares of common stock as outstanding at the time
the Company becomes contractually obligated to issue shares.
3. Related Party Transactions
After the Company's change in control on March 5, 1999, the Company received
advances from the new majority stockholder. The advances totaled $193,201 as of
May 31, 1999 and are non-interest bearing, unsecured, and have no specific
repayment terms.
The Company entered into a license and royalty agreement with the new majority
stockholder. The Company has agreed to purchase from Dreamweavers N.V. and its
affiliated companies the trademark and exclusive right to commercially exploit
"Robin and the Dreamweavers," including media products, as well as consisting of
a feature film together with licenses for television production, music videos,
and private label merchandising, in the United States for $5,500,000, which
shall be payable on the successful completion of a private placement of the
Company's securities. As further consideration for the granting of the exclusive
license and royalty agreement, the Company issued to Dreamweavers N.V.
16,000,000 shares of its restricted common stock. The Company will pay a royalty
fee of three percent of the revenues generated from the exploitation of the
marketing and/or operation of "Robin and The Dreamweavers." The initial term of
the royalty agreement is for 15 years, which may be extended for an additional 5
years.
Read independent auditors' report.
F-9
<PAGE>
American Dream Entertainment, Inc.
(f/k/a Federal Affordable Housing Corporation)
Notes to Financial Statements
As of May 31, 1999 and
For the Years Ended May 31, 1999 and 1998
3. Related Party Transactions (continued)
The office spaced used by the Company has been provided free of charge for 1998
by a stockholder of the Company. In addition, this stockholder has provided
management services for 1998 to the Company free of charge. The fair value of
these services and the rent, which totals $40,000, has been recorded as a
contribution to capital in the accompanying financial statements.
The above transactions are not necessarily indicative of transactions that would
have been entered into by independent parties.
4. Distribution of Suncoast Food Services, Inc. Common Stock
In prior years, the Company loaned $67,271 to Suncoast Food Services, Inc., a
related company. In satisfaction of this debt, Suncoast Food Services, Inc.
transferred 74,500 shares of its stock to the Company. During the year ended May
31, 1998, the Company distributed all 74,500 shares to certain stockholders and
recorded a dividend payable totaling $81,230 to the stockholders that did not
receive the shares of Suncoast Food Services, Inc. The unpaid dividend payable
was distributed to AAA Homes, Inc. on March 5, 1999.
5. Income Taxes
Income tax consists of the following:
1999 1998
------------------------
Loss carryforward $ 140,000 $ 55,000
Less valuation allowance 140,000 55,000
------------------------
Net deferred tax asset $ 0 $ 0
========================
The amount of unused tax losses available to carry forward and apply against
future years' taxable income is approximately $412,000. Deduction of these
losses will be limited due to the change of control of the Company that took
place on March 5, 1999. The losses will expire between 2008 and 2013. Management
has established a valuation allowance equal to the amount of the deferred tax
assets due to the uncertainty of the Company's realization of this benefit.
Read independent auditors' report.
F-10
<PAGE>
American Dream Entertainment, Inc.
(f/k/a Federal Affordable Housing Corporation)
Notes to Financial Statements
As of May 31, 1999 and
For the Years Ended May 31, 1999 and 1998
6. Loss Per Share
The net loss per share amount is based on weighted average shares outstanding
for the years ended May 31, 1999 and 1998 of 4,815,614 and 493,500,
respectively.
Diluted net loss per share amounts are not presented because the Company has a
simple capital structure that consists of common stock and includes no potential
securities that would cause dilution of the number of shares.
7. Prior Period Adjustment
Retained earnings at the beginning of 1998 has been adjusted to correct an error
in recording the proceeds of a stock offering. The effect of this error in 1997
would have been to increase the net income in 1997 by $7,531.
Read independent auditors' report.
F-11
Exhibit 3.1
AMENDMENT OF
ARTICLES OF INCORPORATION OF
FEDERAL AFFORDABLE HOUSING CORPORATION
CORPORATE NAME: FEDERAL AFFORDABLE HOUSING CORPORATION
This amendment shall be effective on the day it is filed with the Minnesota
Secretary of State.
The following amendments to articles regulating the above corporation were
adopted:
Subsection 1.1 of ARTICLE 1 (NAME) is amended to read as follows:
1.1 The name of the corporation shall be AMERICAN DREAM
ENTERTAINMENT, INC.
Subsection 3.1 of ARTICLE 3 (CAPITAL STOCK) is amended to read in its
entirety as follows:
3.1 Authorized Shares. The aggregate number of shares that the
corporation has authority to issue, shall be Fifty Million
(50,000,000) shares of common stock with a par value of $.0001
per share.
This amendment has been approved pursuant to Minnesota Statues Chapter 302A. I
certify that I am authorized to execute this amendment and I further certify
that I understand that by signing this amendment, I am subject to the penalties
of perjury as set forth in Section 609.48 as if I signed this amendment under
oath.
------------------------------------
Dirk W. Peschar
President
Name and telephone number of contact person: Michael T. Cronin, Esq.
(727) 461-1818
Exhibit 99.3
OFFICE BUILDING LEASE
SUITE #290
1. PARTIES. This Lease dated for reference purposed only, February 12,
1999, by and between THE DEL MORENO ("Landlord") and AMERICAN DREAM
ENTERTAINMENT ("Tenant").
2. PREMISES. Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord that certain office space ("Premises") which is outlined on
Exhibit "A" attached hereto and incorporated herein by this reference, being
situated on the 2nd floor of that certain office building ("Building') known as
20300 Ventura Boulevard, Woodland Hills, CA 92364.
The square footage in Exhibit "A" also includes 44 square feet
as the Tenant's share of the common stairways, hallways, restrooms and other
useable square feet that are part of the Building and which are charged pro rata
to all other tenants of the Building. The inclusion of the Tenant's pro rata
share of the common areas as part of the rentable square footage is in lieu of
any common area expense charged to the Tenant for the base year.
By executing this Lease, Tenant acknowledges that the square
footage represented in Exhibit "A" is based on the Landlord's measurements and
Tenant has had the opportunity to make its own measurements with respect to the
square footage.
Nothing contained in Paragraph 2 of the Lease shall be deemed
to be a representation by Landlord as to the actual square footage of the
Premises leased hereby. It is understood that Tenant has relied on his own
measurements and investigations with regard thereto, and has not placed any
reliance on Landlord or any of his agents, employees, or independent contractors
with regard thereto.
The Premises exclude the common stairways, stairwells,
hallways, access ways and pipes, ducts, conduits, wires and appurtenant fixtures
serving exclusively or in common other parts of the Building. By taking
possession of the Premises, Tenant accepts the improvements as completed or as
substantially completed, and in the latter case, Landlord shall provide Tenant
with a list of incomplete and/or corrective items to be acknowledged by Tenant,
which Landlord shall complete and correct promptly thereafter.
Said Lease is subject to the terms, covenants, conditions and
agreements hereinafter set forth, to each and all of which Landlord and Tenant
hereby mutually agree.
3. TERM. The term of this Lease shall be for one (1) year,
commencing on March 1, 1999 and ending on February 29, 2000, unless
sooner terminated pursuant to this Lease.
<PAGE>
4. POSSESSION.
4.1 If Landlord for any reason whatsoever cannot initially
deliver possession of the Premises to Tenant at the commencement of the term
hereof, this Lease shall not be void or voidable nor shall Landlord be liable to
Tenant for any loss or damage resulting therefrom, nor shall the expiration date
of the above term be in any way extended, but except as otherwise specifically
provided herein, in that event, all rent shall be abated during the period
between the commencement of said term and the time when Landlord delivers
possession.
4.2 In the event the commencement date of the term of this
Lease is other than as provided in Section 3 above, then Landlord and Tenant
shall execute a written acknowledgment of the date of commencement and shall
attach it to this Lease as Exhibit "B."
4.3 In the event that Landlord shall permit Tenant to occupy
the Premises prior to the commencement date of the term, such occupancy shall be
subject to all of the provisions of this Lease and said early possession shall
not advance the termination date hereinabove provided. In the event Tenant
occupies the Premises prior to the commencement date of the term for the
installation of Tenant trade fixtures and equipment in the Premises, or
otherwise, such use or occupancy shall be pursuant to the express conditions
that (a) Tenant's early entry shall not interfere with Landlord's work or
construction or cause labor difficulty; (b) Tenant shall execute an indemnity
agreement in favor of Landlord in form and substance satisfactory to Landlord;
(c) Tenant shall pay for and provide evidence of insurance issued by an
insurance carrier (or evidence of self-insurance) approved in writing by
Landlord; and (d) Tenant shall pay utility charges reasonably allocated to
Tenant by Landlord. Tenant shall not commence the operation of business prior to
the commencement date of the term without the express prior written consent of
Landlord.
5. RENT. Tenant shall pay to Landlord as rent for the Premises, without
demand, deduction, abatement or set-off, the sum of Five Hundred Forty and
00/100 Dollars ($540.00) on or before the first day of each and every calendar
month of the term of this Lease, the first monthly payment to be made
concurrently with the execution hereof. If the commencement date is not the
first day of a month or if the Lease termination date is not the last day of a
month, the rent payable hereunder shall be prorated on a daily basis at the then
current rate for the fractional month during which this Lease commences and/or
terminates, and the rent payable for the partial month following the
commencement date shall be payable on the first day of the second full calendar
month of the term together with the regular monthly rent due. Said rent shall be
paid to Landlord in lawful money of the United States of America, which shall be
legal tender at the time of payment at the Office of the Building, or to such
other person or at such other place as Landlord may from time to time designate
in writing.
6. SECURITY DEPOSIT. Concurrently with the execution of this Lease,
Tenant has deposited with Landlord the sum of Five Hundred Fifty and 00/100
Dollars ($550.00), receipt of which is hereby acknowledged, to secure the
faithful performance by Tenant of all of the terms, covenants and conditions of
this Lease by Tenant to be kept and performed during the term hereof. Tenant
agrees that if it shall fail to pay when due any installment of rent or any
other sums provided in this Lease to be paid by Tenant to Landlord, or if Tenant
shall default in or breach any of the other terms, covenants and conditions of
this Lease and Landlord shall suffer any damage as a result of said default or
breach, then in any such event Landlord may, at its option (but Landlord shall
<PAGE>
not be required to) apply said deposit to any rent or other sum due and unpaid
by Tenant to Landlord hereunder, to any damage suffered by Landlord as a result
of such default or breach to the extent of the amount of damage suffered by
Landlord, or to any reasonable attorney's fees incurred by Landlord in
connection with such default or breach. Should the entire amount so deposited be
applied by Landlord as herein above provided, then Tenant, on the written demand
of Landlord, shall forthwith remit to Landlord a sufficient amount in cash to
restore said security deposit to its original amount, and Tenant's failure to do
so within ten (10) days after such demand shall constitute a breach of this
Lease. Should Tenant comply with all of the terms, covenants and conditions of
this Lease and promptly pay all rental herein provided for as it falls due and
all other sums payable by Tenant to Landlord hereunder, the unappropriated
balance of said security deposit shall be returned to Tenant at the expiration
of the term of this Lease or upon any earlier termination. Landlord shall have
the right to commingle said security deposit with other funds of Landlord.
Should Landlord sell its interest in the Premises during the term hereof and if
Landlord deposits with the purchaser thereof the then unappropriated funds
deposited by Tenant as aforesaid, thereupon Landlord shall be discharged from
any further liability with respect to such deposit.
7. MISCELLANEOUS.
7.1 Tenant agrees that it shall comply with all fire and
security regulations that may be issued from time to time by Landlord and Tenant
also shall provide Landlord with the name of a designated responsible employee
to represent Tenant in all matters pertaining to such fire or security
regulations.
7.2 Landlord reserves the right by written notice to Tenant to
rescind alter or waive any Rule or Regulation at any time prescribed for the
Building when, in Landlord's judgment, it is necessary, desirable or proper for
the best interest of the Building and its tenants.
7.3 Tenant shall not disturb, solicit, or canvass any
occupant of the Building and shall cooperate to prevent same.
7.4 Without the written consent of Landlord, Tenant shall not
use the name of the Building in connection with or in promoting or advertising
the business of Tenant except as Tenant's address.
7.5 Landlord shall furnish heating and air conditioning during
the hours of 7:00 a.m. and 7:00 p.m., Monday through Friday, and 7:00 a.m. to
12:00 p.m. on Saturday, except for holidays. In the event Tenant requires
heating and air conditioning during off hours, Sundays or holidays, Landlord
shall on notice provide such services at the then prevailing rate for such extra
service.
7.6 Pets which shall include but not be limited to dogs, cats,
birds and fish are prohibited from the Building, except for service animals.
7.7 Smoking anywhere on the Building Premises is prohibited,
except in any area which the Building Management may designate as a "Smoking
Area."
Landlord reserves the right to make such other and further
rules and Regulations as in its judgment may be for the safety, care and
cleanliness of the Premises and for the preservation of good order therein
Tenant agrees to abide by all such Rules and Regulations hereinabove stated and
any additional Rules and Regulations which are adopted.
<PAGE>
TENANT: LANDLORD:
AMERICAN DREAM ENTERTAINMENT BEVERLY DEVELOPMENT CO. VI
d/b/a THE DEL MORENO
By:_______________________________ By:_____________________________
ADOBE PROPERTIES,
Its:_______________________________ GENERAL PARTNER
By:_____________________________
General Partner
MTC/ej/195045
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> MAY-31-1998
<PERIOD-END> MAY-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 104,098
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,606,248
<CURRENT-LIABILITIES> 5,856,329
<BONDS> 0
0
0
<COMMON> 1,798
<OTHER-SE> (251,879)
<TOTAL-LIABILITY-AND-EQUITY> 5,606,248
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 261,069
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (249,880)
<INCOME-TAX> 0
<INCOME-CONTINUING> (249,880)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (249,880)
<EPS-BASIC> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
