UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended August 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from June 1, 2000 to August 31, 2000
Commission File Number 033-67536
AMERICAN DREAM ENTERTAINMENT, INC.
---------------------------------
(Exact Name of Registrant as Specified in Charter)
Minnesota 59-3169033
--------- ----------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
1800 East Sahara Avenue, Suite 107, Las Vegas, Nevada 89104
-----------------------------------------------------------
(Address of Principal Executive Offices)
1-800-658-5105
--------------
(Registrant's Telephone Number, Including Area Code)
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
--- ---
There were 17,920,000 shares of the Registrant's $.0001 par value common stock
outstanding as of August 31, 2000.
Transitional Small Business Format (check one) Yes NO X
--- ---
<PAGE>
American Dream Entertainment, Inc. and Subsidiary
Contents
Part I - Financial Information
------------------------------
Item 1. Financial Statements
Item 2. Management's Discussion & Analysis of Financial
Condition and Results of Operations
Signatures
----------
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
American Dream Entertainment, Inc. and Subsidiary
Consolidated Financial Statements
For the Three Months Ended August 31, 2000 and 1999 (Unaudited)
Contents
Consolidated Financial Statements:
Consolidated Balance Sheet................................................2
Consolidated Statements of Operations.....................................3
Consolidated Statements of Changes in Stockholders' Deficit...............4
Consolidated Statements of Cash Flows.....................................5
Notes to Consolidated Financial Statements..............................6-7
<PAGE>
<TABLE>
<CAPTION>
American Dream Entertainment, Inc. and Subsidiary
Consolidated Balance Sheet
August 31, 2000
(Unaudited)
<S> <C>
Assets
Current assets:
Cash $ 2,556
Other receivables 27,758
Prepaid expenses 13,361
---------------
Total current assets 43,675
---------------
Property and equipment, net of accumulated depreciation 44,653
---------------
Other assets:
Trademark and license 5,501,600
Due from related party 29,147
Website development 150,360
Deposits 4,187
---------------
Total other assets 5,685,294
---------------
$ 5,773,622
===============
Liabilities and Stockholders' Deficit Current liabilities:
Convertible debentures $ 461,273
Due to related party 6,609,028
Accounts payable and accrued expenses 416,834
Common stock payable 50,000
---------------
Total current liabilities 7,537,135
---------------
Stockholders' deficit:
Common stock; $.0001 par value; 50,000,000 shares
authorized; 17,920,000 shares issued and outstanding 1,792
Capital in excess of par value 1,370,321
Accumulated deficit (3,180,442)
Accumulated other comprehensive income 44,816
---------------
Total stockholders' deficit (1,763,513)
---------------
$ 5,773,622
===============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE>
<TABLE>
<CAPTION>
American Dream Entertainment, Inc. and Subsidiary
Consolidated Statements of Operations
Three Months Ended
August 31,
----------------------------------
2000 1999
----------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues $ 0 $ 0
----------------------------------
Operating expenses:
General and administrative expenses (379,535) (130,539)
Interest expense (707,199)
Other income 11,949
----------------------------------
Net loss $ (1,074,785) $ (130,539)
==================================
Loss per share $ (.06) $ (.01)
==================================
Weighted average shares outstanding 17,920,000 17,980,000
==================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
<TABLE>
<CAPTION>
American Dream Entertainment, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders' Deficit
For the Year Ended May 31, 2000 and the
Three Months Ended August 31, 2000
(Unaudited)
Accumulated
Capital In Other
Common Stock Excess Of Accumulated Comprehensive
Shares Amount Par Value Deficit Income
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, May 31, 1999 18,580,000 $ 1,858 $ 158,513 $ (526,815)
Shares returned and retired due
to termination of an
agreement (660,000) (66) 66
Imputed interest on stockholder
advances 511,745
Foreign currency translation
adjustment $ 43,994
Net loss for year (1,578,842)
---------------------------------------------------------------------------
Balance, May 31, 2000 17,920,000 1,792 670,324 (2,105,657) 43,994
Imputed interest on stockholder
advances (unaudited) 137,124
Foreign currency translation
adjustment (unaudited) 822
Intrinsic value of beneficial
conversion feature of
convertible debentures
(unaudited) 562,873
Net loss for period (unaudited) (1,074,785)
-------------------------------------------------------------------------
Balance, August 31, 2000
(unaudited) 17,920,000 $ 1,792 $ 1,370,321 $ (3,180,442) $ 44,816
=========================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
American Dream Entertainment, Inc. and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended
August 31,
--------------------------------
2000 1999
--------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Operating activities
Net loss $ (1,074,785) $ (130,539)
--------------------------------
Adjustments to reconcile net loss to net cash
used by operating activities:
Imputed interest on stockholder advances 137,124
Interest expense attributable to beneficial
conversion feature of convertible debentures 562,873
Gain on foreign currency transactions (11,949)
Loan cost to be settled with stock issuance 50,000
Depreciation expense 2,350
Increase in:
Other receivables (9,079)
Other assets (13,361)
Accounts payable and accrued expenses 96,187 75,154
--------------------------------
Total adjustments 814,145 75,154
--------------------------------
Net cash used by operating activities (260,640) (55,385)
--------------------------------
Investment activities
Acquisition of property and equipment (47,003)
--------------------------------
Financing activities
Net (payments) advances (to) from stockholders (164,598) 55,385
Proceeds from convertible debentures 473,377
--------------------------------
Net cash provided by financing activities 308,779 55,385
--------------------------------
Net increase in cash 1,136
Cash, beginning of year 1,420
--------------------------------
Cash, end of year $ 2,556 $ 0
================================
Supplemental disclosures of cash flow information
Cash paid for interest expense $ 0 $ 0
================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
American Dream Entertainment, Inc. and Subsidiary
Notes to Consolidated Financial Statements
For the Three Months Ended August 31, 2000 and 1999 (Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of American Dream
Entertainment, Inc. and Subsidiary (the "Company"), which are for interim
periods, do not include all disclosures provided in the annual consolidated
financial statements. These unaudited consolidated financial statements should
be read in conjunction with the consolidated financial statements and the notes
thereto contained in the audited consolidated financial statements of the
Company for the years ended May 31, 2000 and 1999.
In our opinion, the accompanying unaudited consolidated financial statements
contain all adjustments that are of a normal and recurring nature necessary for
a fair presentation of the consolidated financial statements. The results of
operations for the three-month period ended August 31, 2000 are not necessarily
indicative of the results to be expected for the full year.
The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America, which contemplate continuation of the Company as a going concern.
However, the Company has sustained substantial operating losses in recent years
and has no revenue. Further, at August 31, 2000, current liabilities exceed
current assets by approximately $7,500,000 and total liabilities exceed total
assets by approximately $1,764,000. These factors raise substantial doubt about
the Company's ability to continue as a going concern. These consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
2. Per Share Calculations
Per share data was computed by dividing net loss by the weighted average number
of shares outstanding during the three-month period ended August 31, 2000. The
weighted average shares outstanding for the three-month period ended August 31,
2000 was 17,920,000 as compared to 17,980,000 for the three-month period ended
August 31, 1999. Diluted earnings per share (EPS) reflects the potential
dilution from the exercise or conversion of securities into common stock.
Diluted EPS is not presented because there are no outstanding dilutive
securities.
6
<PAGE>
American Dream Entertainment, Inc. and Subsidiary
Notes to Consolidated Financial Statements
For the Three Months Ended August 31, 2000 and 1999 (Unaudited)
3. Convertible Debentures
The Company issued $423,377 in convertible debentures in June 2000. These
debentures pay interest at six percent per annum and mature on July 30, 2000.
The debentures may be converted at any time after their issuance into common
stock of the Company. During July 2000, the note holder agreed to extend the
maturity date of the agreement until the Company generates revenue or
successfully completes a private placement of its securities. The debentures are
convertible, at the option of the holder, into 70,000 shares of common stock and
70,000 warrants. The conversion price for the debentures is $5 per share and $1
per warrant. These warrants may be exercised in one year and entitle the holder
to purchase common stock of the Company at $6 per share. The stock was trading
at $10 per share at the date of this commitment; hence, the Company has recorded
interest of approximately $556,000 to reflect the intrinsic value of the
beneficial conversion features of these debentures in accordance with accounting
principles generally accepted in the United States of America.
The Company issued an additional $50,000 of convertible debentures, which mature
in November 2000. This loan can be repaid by paying the principal plus interest
of $5,000, or the principal plus 1,000 shares of the Company's stock, or the
loan can be converted into 12,500 shares of stock at a conversion rate of $4 per
share. The stock was trading at $4.50 per share at the date of this commitment;
hence, the Company has recorded interest of approximately $6,000 to reflect the
intrinsic value of the beneficial conversion features of these debentures in
accordance with accounting principles generally accepted in the United States of
America.
7
<PAGE>
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion & Analysis of
Financial Condition and Results of Operation
THIS FILING CONTAINS FORWARD-LOOKING STATEMENTS. THE WORDS "ANTICIPATED,"
"BELIEVE," "EXPECT," "PLAN," "INTEND," "SEEK," "ESTIMATE," "PROJECT," "WILL,"
"COULD," "MAY," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. THESE STATEMENTS INCLUDE, AMONG OTHERS, INFORMATION REGARDING FUTURE
OPERATIONS, FUTURE CAPITAL EXPENDITURES, AND FUTURE NET CASH FLOW. SUCH
STATEMENTS REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND
FINANCIAL PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, INCLUDING, WITHOUT
LIMITATION, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN FOREIGN,
POLITICAL, SOCIAL, AND ECONOMIC CONDITIONS, REGULATORY INITIATIVES AND
COMPLIANCE WITH GOVERNMENTAL REGULATIONS, THE ABILITY TO ACHIEVE FURTHER MARKET
PENETRATION AND ADDITIONAL CUSTOMERS, AND VARIOUS OTHER MATTERS, MANY OF WHICH
ARE BEYOND THE COMPANY'S CONTROL, INCLUDING, WITHOUT LIMITATION, THE RISKS
DESCRIBED UNDER THE CAPTION "BUSINESS." SHOULD ONE OR MORE OF THESE RISKS OR
UNCERTAINTIES OCCUR, OR SHOULD UNDERLYING ASSUMPTIONS PROVE TO BE INCORRECT,
ACTUAL RESULTS MAY VARY MATERIALLY AND ADVERSELY FROM THOSE ANTICIPATED,
BELIEVED, ESTIMATED, OR OTHERWISE INDICATED. CONSEQUENTLY, ALL OF THE
FORWARD-LOOKING STATEMENTS MADE IN THIS FILING ARE QUALIFIED BY THESE CAUTIONARY
STATEMENTS AND THERE CAN BE NO ASSURANCE OF THE ACTUAL RESULTS OR DEVELOPMENTS.
American Dream Entertainment, Inc. (the "Company") is an entertainment company
that has obtained the exclusive license for the territory of the United States
of America for a creative animated cartoon property entitled "Robin and The
Dreamweavers," aimed at the young adult market. The license consists of a
feature length animation movie and 26 half-hour episodes for all domestic media,
including network and cable television and home video. Lou Scheimer Productions
in Los Angeles, California, well known for such animated productions as
Superman, Fat Albert & The Cosby Kids, Archie's, He-Man, and She-Ra, is in
charge of production, has delivered the feature film, and will deliver the first
13 episodes by Summer 2001. Final exhibition took place at the "MIPCOM"
conference in Cannes, France on October 2, 2000, the world-renowned market place
for television and movie productions. As a result, the Company will convert the
closed pre-sale agreement of the feature film and series into a definite sale
agreement.
The Company acquired the exclusive rights in the United States for marketing and
distributing the entire media properties known as "Robin and The Dreamweavers."
In March 1999, the Company entered into a License and Royalty Agreement with
Dreamweavers, N.V., a Curacao company that developed the "Robin and The
Dreamweavers" concept, which consists of a feature length animation movie and 26
half-hour episodes. This agreement granted the Company exclusive rights in the
North American market for the feature film, television series, Internet
8
<PAGE>
merchandising, music, video, and publishing. The term of the agreement is for a
period of 15 years, with an option to extend the license for an additional
five-year period. In consideration of this agreement, the Company issued
16,000,000 shares of its restricted common stock to Dreamweavers, N.V. and
agreed to pay Dreamweavers, N.V. an annual royalty equal to three percent of
gross revenues. In addition, the Company agreed to pay $5,500,000.
Further, the Company acquired the exclusive exploitation of the trademarks, the
characters, and the concept with regard to the Internet and interactive rights
on a world-wide basis through its subsidiary, Robinsdream Interactive, N.V.
The "Robin and The Dreamweavers" concept consists of several media products; an
animated feature length movie for television; an animated television series;
music CDs; an Internet website with e-commerce capabilities and interactive
games; private-label fashions based on the character of "Robin"; and ancillary
merchandising products such as video games, toys, apparel, school supplies, and
cosmetic products.
The Company also has the license and intends to market music properties based on
the characters from the animated feature film and series. The Company plans to
aggressively exploit its proprietary characters and programs through the
licensing of merchandising products targeted at the 12- to 28-year old
demographic.
There have been no revenues to date in the animated film business and we have
incurred significant losses associated with the promotion of our animated
feature film. American Dream Entertainment, Inc. does not expect to generate
revenues until the "Robin and The Dreamweavers" project is completed and becomes
contractually available for telecasting or exhibition. The amount of our
distribution and licensing revenues earned by American Dream Entertainment, Inc.
will be dependent upon, among other things, the timeline for the completion of
the project and its distribution by others.
The release of the film is expected in 2001. Following this feature film
release, we plan on releasing the first 13 episodes of the series in 2002. The
Company will convert the pre-sale agreement with Tempo Media of Copenhagen,
Denmark, for the distribution of the television production in the United States
into a definite sale agreement. This agreement could generate potential revenues
of approximately $7.5 million.
RESULTS OF OPERATIONS
There were no revenues for the quarters ended August 31, 2000 and 1999.
For the quarter ended August 31, 2000, total general and administrative expenses
were $379,535 as compared to $130,539 for the same period in 1999, an increase
of $198,996. This increase in general and administrative expenses is the result
of promotional efforts associated with our animated feature film and series, as
well as efforts associated with raising capital.
Interest expense increased to $707,199 for the quarter ended August 31, 2000
from $0 in the same period in 1999. The interest expenses were due to $144,326
interest (imputed) on loans taken and advances from stockholders and related
parties. In addition, the Company recorded $562,873 of interest, which was
associated with the intrinsic value of the beneficial conversion feature of
convertible debentures.
9
<PAGE>
Other income increased to $11,949 for the quarter ended August 31, 2000 from $0
for the same period in 1999.
Net loss amounted to $1,074,785 for the quarter ended August 31, 2000 as
compared to net loss of $130,539 for the same period in 1999. This increase in
net loss is associated with promotional efforts associated with our animated
feature film and series and the intrinsic value of the beneficial conversion
feature of our convertible debentures. In addition, there was no revenue or
interest income in the three-month period ended August 31, 2000 to absorb
general and administrative expenses incurred during the period.
LIQUIDITY AND CAPITAL RESOURCES
Our operations are currently funded through advances made on our behalf by
Dreamweavers, N.V. and other stockholders. Through August 31, 2000,
Dreamweavers, N.V. and other stockholders have advanced approximately $1,000,000
on our behalf. This amount includes interest (imputed) and primarily relates to
promotional costs and payments made to consultants, advisors, reimbursement of
travel expenses, and lease expenses. We are not presently generating any
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 the commitment
of Dreamweavers, N.V. to continue funding our operations and the realization of
projected sales for our products. There is no assurance that Dreamweavers, N.V.
will continue to fund us, that adequate revenues will be generated from our
products, or that other funding will be available.
10
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereto duly authorized:
AMERICAN DREAM ENTERTAINMENT, INC.
Dated: 10/20/00 By: /s/ Dirk W. Peschar
-------------------
Dirk W. Peschar
Principal Executive Officer and
President
