UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2006
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _________
AMERICAN RADIO EMPIRE, INC.
(formerly Stone Field Management Company, Inc.)
(Exact name of small business issuer as specified in its charter)
Wyoming ; 86-0970014
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
13210 Kerrville Folkway, Building G, Austin, Texas 78729
(Address of principal executive offices) (Zip Code)
Tel: 512-249-9600
(Issuer's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES X NO
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES NO X
The number of shares outstanding of the Company's no par common stock as of March 31, 2006 was 82,305,215.
Traditional Small Business Disclosure Format:
YES NO X
Page 1
CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits
Page 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
AMERICAN RADIO EMPIRE, INC.
FINANCIAL STATEMENTS
(Unaudited)
For the Periods Ended June 30, 2006 and 2005
TABLE OF CONTENTS
PA GE
Balance Sheets | F-1 |
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Statements of Operations | F-2 |
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Statements of Cash Flows | F-3 |
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Notes to Financial Statements | F-4 |
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Page 3
AMERICAN RADIO EMPIRE, INC.
(A Development Stage Company)
BALANCE SHEETS
As of June 30, 2006 and December 31, 2005
June 30, 2006 |
| December 31, 2005 | |
ASSETS | |||
Current Assets | |||
Cash | $ 2 | $ 6,873 | |
Prepaid expenses | 9,191 | 7,990 | |
TOTAL ASSETS | $ 9,193 | $ 14,863 | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | |||
Liabilities | |||
Current Liabilities | |||
Accounts payable | $ 76,435 | $ 57,246 | |
Accrued interest payable | 169,151 | 132,420 | |
Notes Payable | 8,500 | - | |
Convertible notes payable (net of discounts of $19,141 and $21,373 for the periods ending June 30, 2006 and December 31, 2005, respectively) | 564,859 | 476,627 | |
Derivative liabilities, embedded derivatives and beneficial conversion feature | 197,159 | 172,813 | |
Other liabilities | 5,000 | 5,000 | |
Total liabilities | 1,021,104 | $ 844,106 | |
Stockholders' deficit | |||
Common stock, $0.001 par value, 100 million shares | |||
authorized, 5,200,000 issued and outstanding at | |||
June 30, 2006 and December 31, 2005, respectively | 5,200 | 5,200 | |
Additional paid-in capital | (7,483) | (7,483) | |
Deficit accumulated during the development stage | (1,009,628) | (826,960) | |
Total stockholders' deficit | (1,011,911) | (829,243) | |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ 9,193 | $ 14,863 | |
F-1
AMERICAN RADIO EMPIRE, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2006 and 2005, and
from December 9, 1998 (Inception) through June 30, 2006
Three months ended | Six months ended | From December 9, 1998 (Inception) Through June 30, 2006 | |||||||
June 30, 2006 | June 30, 2005 | June 30, 2006 | June 30, 2005 | ||||||
REVENUES | $ - | $ - | $ - | $ - | $ - | ||||
OPERATING EXPENSES | |||||||||
Bank fees | 128 | 239 | 212 | 370 | 1,444 | ||||
Communications | 4,456 | - | 5,727 | - | 11,059 | ||||
Professional fees | 48,854 | 35,850 | 99,639 | 70,645 | 648,338 | ||||
Travel, meals and entertainment | 4,146 | 191 | 4,773 | 1,023 | 19,463 | ||||
Vehicle costs | 2,205 | - | 4,764 | - | 13,649 | ||||
Office supplies | 723 | - | 902 | 8 | 2,191 | ||||
Registration and licensing | 700 | - | 1,300 | - | 1,300 | ||||
Other expenses | 843 | 278 | 1,043 | 278 | 18,024 | ||||
Total operating expenses | 62,055 | 36,558 | 118,360 | 72,324 | 715,468 | ||||
OTHER (INCOME) EXPENSES | |||||||||
Interest expense | 33,972 | 21,443 | 64,309 | 41,316 | 314,160 | ||||
(Gain)/Loss on fair value of derivatives | - | - | - | - | (20,000) | ||||
LOSS BEFORE INCOME TAXES | (96,027) | (58,001) | (182,669) | (113,640) | (1,009,628) | ||||
Income tax expense | - | - | - | - | - | ||||
NET LOSS | $ (96,027) | $ (58,001) | $(182,669) | $(113,640) | $ (1,009,628) | ||||
Basic and diluted loss per share: | $ (0.02) | $ (0.01) | $ (0.04) | $ (0.03) | $ (0.26) | ||||
Weighted average common shares outstanding: | |||||||||
Basic and fully diluted | 5,200,000 | 3,900,000 | 5,200,000 | 3,483,333 | 3,867,033 | ||||
See accompanying notes and independent auditors' report.
F-2
AMERICAN RADIO EMPIRE, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2006 and 2005, and
from December 9, 1998 (Inception) through June 30, 2006
Six months ended | From December 9, 1998 (Inception) Through June 30, 2006 | ||||
June 30, 2006 | June 30, 2005 | ||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||
Net loss | $ (182,669) | $ (113,640) | $ (1,009,628) | ||
Adjustments to reconcile net income to net cash provided by operating | |||||
activities: | |||||
Consulting fees paid through issuance of note | - | - | 35,000 | ||
Consulting fees paid through issuance of common stock | - | - | 8,750 | ||
Loss (gain) on fair value of derivative liability | - | - | (20,000) | ||
Non-cash interest expense added to derivative liability | 7,346 | 4,753 | 33,359 | ||
Amortization of note discount | 20,233 | 11,970 | 109,659 | ||
(Increase) Decrease in prepaid expenses | (1,201) | (294) | (9,191) | ||
(Decrease) increase in accounts payable | 19,189 | (4,273) | 64,567 | ||
Increase in accrued interest payable | 36,731 | 24,592 | 169,151 | ||
Increase in other liabilities | - | - | 5,000 | ||
NET CASH USED BY OPERATING ACTIVITIES | (100,371) | (76,892) | (613,333) | ||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||
Issuance of convertible notes and derivative liabilities | 85,000 | 71,500 | 604,000 | ||
Issuance of promissory notes | 8,500 | - | 8,500 | ||
Contributions of capital | - | - | 835 | ||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 93,500 | 71,500 | 613,335 | ||
NET INCREASE IN CASH | (6,871) | (5,392) | 2 | ||
CASH AT BEGINNING OF PERIOD | 6,873 | 5,592 | - | ||
CASH AT END OF PERIOD | $ 2 | $ 200 | $ 2 | ||
SUPPLEMENTAL DISCLOSURE | |||||
Income taxes paid | $ - | $ - | $ - | ||
Interest paid | $ - | $ - | $ - | ||
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES | |||||
Accounts payable assumed in exchange for common stock | $ - | $ - | $ 11,868 | ||
Discount on notes payable | $ 17,000 | $ 6,700 | $ 183,800 | ||
Cancellation of common stock to paid in capital | $ - | $ - | $ 500 | ||
See accompanying notes and independent auditors' report.
F-3
American Radio Empire, Inc.
Notes to Financial Statements
Note 1 - Nature of Business
American Radio Empire, Inc. (the “Company”), a Wyoming corporation formerly know as Stone Field Management Company, Inc., has a business plan to acquire, consolidate and operate small market radio stations in specific geographic regions of the United States of America. To date, the Company has not begun operations or acquired radio stations. When operations begin, the Company will be regulated by the Federal Communications Commission.
Effective December 31, 2005, pursuant to an Agreement and Plan of Merger dated as of December 15, 2005, American Radio Empire, Inc., a Nevada corporation (“ARE”), completed a merger with the Company pursuant to which ARE merged with and into the Company.
Development Stage Company
The Company is a development stage company, as defined in the Financial Accounting Standards Board Statement of Financial Accounting Standards (SFAS) No. 7. The Company is devoting substantially all of its present efforts in securing and establishing a new business, and although planned operations have commenced, no revenue has been realized.
Basis of Accounting
The accompanying unaudited condensed consolidated financial statements of American Radio Empire, Inc. (the “Company”) have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-QSB. The results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the full fiscal year ending December 31, 2006. In the opinion of the Company’s management, the information contained herein reflects all adjustments necessary for a fair statement of the Company’s results of operations, financial position and cash flows. All such adjustments are of a normal recurring nature. The unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005.
Note 2 – Significant Accounting Policies
Loss per common share
Basic loss per share is based on the weighted effect of common shares issued and outstanding, and is calculated by dividing net loss by the weighted average shares outstanding during the period. Diluted loss per share is calculated by dividing net loss by the weighted average number of common shares used in the basic loss per share calculation plus the number of common shares that would be issued assuming exercise or conversion of all potentially dilutive common shares outstanding.
F-4
American Radio Empire, Inc.
Notes to Financial Statements
Incremental common shares attributable to the exercise of outstanding warrants of 552,990 and 730,259 shares as of June 30, 2005 and June 30, 2006, respectively were excluded from the computation of diluted loss per share because the effect would be anti-dilutive. As of June 30, 2005 and June 30, 2006, there were outstanding convertible notes to purchase approximately 630,672 and 1,016,439, respectively, shares of common stock that were not included in the computation of diluted loss per share because the effect would have been anti-dilutive. See Note 3 for further discussion.
Convertible Debt
The convertible debt and the related warrants have been accounted for in accordance with Emerging Issues Task Force (EITF) No. 98-5, "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios", EITF No. 00-19, "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock," EITF 00-27, “Application of issue 98-5 to Certain Convertible Instruments”, EITF 05-02 “Meaning of ‘Conventional Convertible Debt Instrument’ in Issue No. 00-19”, and EIFT 05-04 “The Effect of a Liquidated Damages Clause on a Freestanding Financial Instrument Subject to Issue No. 00-19”.
Derivative Financial Instruments
The Company accounts for all derivative financial instruments in accordance with SFAS No. 133. Derivative financial instruments are recorded as liabilities in the consolidated balance sheet, measured at fair value. When available, quoted market prices are used in determining fair value. However, if quoted market prices are not available, management estimates fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques.
The value of the derivative liabilities relating to the Convertible Note in the financial statements are subject to the changes in the trading value of common stock and other assumptions. As a result, our quarterly financial statements may fluctuate from quarter to quarter based on factors, such as the trading value of common stock, the amount of shares converted by Convertible Debt Holders in connection with the Convertible Notes and warrants. Consequently, financial position and results of operations may vary from quarter to quarter based on conditions other than operating revenues and expenses. See Note 3 regarding valuation methods used for derivative liabilities.
Derivative financial instruments that are not designated as hedges or that do not meet the criteria for hedge accounting under SFAS No. 133 are recorded at fair value, with gains or losses reported currently in earnings. All derivative financial instruments held by the Company as of June 30, 2006 were not designated as hedges.
Note 3 - Convertible Notes and Warrants
Manditorily Convertible Notes
The manditorily convertible notes are hybrid instruments which contains both a freestanding derivative financial instruments and more than one embedded derivative
F-5
American Radio Empire, Inc.
Notes to Financial Statements
feature which would individually warrant separate accounting as derivative instruments under SFAS 133. The freestanding derivative financial instruments include the warrants, which was valued individually, and was determined to have only a nominal value, as such no amount has been assigned to such warrants. The embedded derivative features have been bundled together as a single, compound embedded derivative instrument that has been bifurcated from the debt host contract, referred to as the "Single Compound Embedded Derivatives". The single compound embedded derivative features include the conversion feature within the Notes, and the right to convert each $100,000 of notes into 5% of the common stock outstanding on the date of conversion. The value of the single compound embedded derivative liability was bifurcated from the debt host contract and recorded as a derivative liability, which resulted in a reduction of the initial carrying amount (as unamortized discount) of the Notes of approximately $45,000 which has been fully amortized.
Redeemable Convertible Notes
In 2004, 2005, and 2006 the Company executed a series of redeemable convertible notes (Redeemable Notes) totaling $379,000 with individuals. The terms of these Redeemable Notes included fixed interest of 12% per year, principal and interest due between April 2005 and June 2007. If unpaid at maturity, the holders my convert the balance of their Redeemable Notes and accrued interest into common stock. The conversion rate is the lesser of $0.80 per common share or 80% of the average trading value per common share during the first 30 trading days. Each Note holder also received a warrant to purchase one share of common stock for every dollar of promissory notes purchased, for a total of 379,000 additional shares, at $1 per share. The warrants expire four years after the initial registration statement.
The Redeemable Notes are hybrid instruments which contains both a freestanding derivative financial instrument and an embedded derivative feature which would individually warrant separate accounting as derivative instruments under SFAS 133. The freestanding derivative financial instruments include the warrants, which were valued individually, and were determined to have only a nominal value, as such no value has been assigned for the warrants. The single compound embedded derivative feature is the conversion feature within the Redeemable Notes. The value of the conversion feature was bifurcated from the debt host contract and recorded as a derivative liability, which resulted in a reduction of the initial carrying amount (as unamortized discount) of the Redeemable Notes of approximately $75,800. The unamortized discount will be amortized to interest expense using the effective interest method over the life of the Redeemable Notes, or tw elve months. During the three months ended June 30, 2006 and 2005 respectively, the Company amortized $10,778 and $6,103, respectively, of these discounts. During the six months ended June 30, 2006 and 2005, respectively, the Company amortized $20,232 and $11,790, respectively, of these amounts.
Warrants
The warrants issued along with the Notes and the Redeemable Notes were valued at zero using a Black-Scholes valuation model, risk free interest rate of 4%; dividend yield of 0%; an expected life of warrants of 4 years; and a 60% volatility factor. The volatility factor was determined as an average of comparable public companies.
F-6
American Radio Empire, Inc.
Notes to Financial Statements
Embedded Derivatives
Using the intrinsic value, a 20% discount from market price for the conversion feature, which was determined to be the maximum value, the fair value of the conversion feature embedded derivatives within the Notes was computed at $75,800 and within the Redeemable Notes was computed at $58,800 as of June 30, 2006 and December 31, 2005, respectively.
Convertible Notes Payable at June 30, 2006 and December 31, 2005
2006 | 2005 | ||
Other notes | $ 35,000 | $ 35,000 | |
Notional balances of Manditorily Convertible Notes Payable | 225,000 | 225,000 | |
Notional balances of Redeemable Notes Payable | 379,000 | 294,000 | |
Adjustments: | |||
Unamortized discount | (76,141) | (77,373) | |
Convertible Notes balance, net of unamoritized discount | 564,859 | 476,627 |
Convertible Note Payable
The Company executed a note in 1999 in exchange for services rendered by a consultant. This $35,000 note bears interest at 18% and is due on demand. The note has a conversion feature whereby the holder can choose to convert all of the outstanding principal and interest into common stock. The note holder agreed to accept 50,000 shares of common stock within 60 days of the Company becoming a recognized publicly traded company in full settlement for the principal amount. Additional shares of common stock will be issued for accrued interest by dividing the interest accrued by the stock price at the date of conversion.
Note 4 - Promissory Notes
The Company executed promissory notes of $8,500 in 2006 bearing an interest rate of 12%. These notes are due on December 31, 2006 or whenever corporate equity funding begins for ARE once it becomes a publicly traded company.
Note 5 - Commitments and Contingencies
The Company will be subjected to various claims and liabilities in the ordinary course of business. The Company intends to maintain various forms of insurance that the Company’s management believes are adequate to reduce the exposure to these risks to an acceptable level.
The Company executed an agreement in 2003 to purchase two radio stations, for $400,000 of common stock (number of shares to be determined on the day of Closing based on market value of common stock on that date) plus $375,000 cash. An additional $25,000 was to be paid to the sellers in exchange for a non-compete agreement. This agreement was contingent on the registration of common stock and the Company obtaining the additional cash resources (Note 8).
In May 2004, the Company filed a petition in a court of competent jurisdiction against the owners of those two radio stations. The litigation arose out of the Asset Purchase Agreement that the Company executed with the owners in October 2003, for the purchase of those stations. After the execution of the Asset Purchase Agreement, a dispute arose
F-7
American Radio Empire, Inc.
Notes to Financial Statements
between the Company and the owners. The Company believes that the owners violated the Asset Purchase Agreement by failing to provide necessary information on a timely basis and by failing to cooperate with the Company's efforts to complete the acquisition. The Company’s petition seeks specific performance of the agreement as well as damages for breach of contract and attorneys' fees.
The owners have filed a counterclaim that denies the enforceability of the Asset Purchase Agreement and requested that the court declare it unenforceable or, in the alternative, determine that the Company fraudulently induced them to sign it. The Company anticipates a mediation meeting with the owners before the end of 2006.
During 2004, the Company entered into two non-binding agreements for the purchase of a total of 5 radio stations. To date, no further agreements have been signed in connection with these acquisitions.
Note 6 – Other Liabilities
The Company received $5,000 from an individual in 1999 as part of an agreed upon investment. The individual has not fully invested the agreed amount and the Company intends to either repay the amount with interest or issue common stock in settlement of this liability in the future.
Note 7 – Related Party Transactions
An individual who is an officer and shareholder of the Company provides facilities and other operating costs for the Company without reimbursement. That individual has an employment agreement with the Company that requires payment of a salary with a set progression of annual raises, medical insurance and a vehicle for business use in exchange for management services. To date, the Company has not provided this compensation. This individual has forgone claims to this compensation and therefore it has not been accrued as a liability as of June 30, 2005 and 2006. In 2003, the Company executed a consulting agreement with this shareholder that provides for payment of consulting fees and reimbursement of expenses. Approximately $31,750 and $30,000 have been paid under this agreement during the three months ended June 30, 2005 and 2006, respectively. Approximately $65,100 and $62,550 have been paid under this agreement during the six months ended June 30, 2005 and 2006, respectively. As of June 30, 2006 and December 31, 2005, prepaid consulting fees of approximately $9,200 and $8,000 were paid to related parties, respectively.
During 2005 and 2006 the company entered into consulting agreement with investors to provide consulting services including software development, marketing, real estate development, and engineering in 2006. The investors agreed to receive compensation in the form of restricted common stock of 125,000 shares which will be issued in 2006 upon completion of the agreed upon services.
Subsequent to the quarter end, the Company amended a previous consulting agreement with a related party for ongoing business activities from 20,000 shares of stock to 120,000 shares of stock. This stock will be issued upon the completion of the agreed upon services.
F-8
American Radio Empire, Inc.
Notes to Financial Statements
Note 8 – Liquidity and Capital Resources
The Company has experienced operating losses since inception as a result of efforts to acquire capital and use that capital to acquire radio stations. The Company expects that it will achieve profitability and positive cash flows in the future if it can successfully raise capital and acquire an operating business. The Company’s plans in regard to this are to increase revenues by acquiring profitable radio stations and substantially reduce the cost of professional fees and obtain capital through the sale of stock. There can be no assurance that the Company will ever achieve or sustain profitability or positive cash flow from its operations, reduce expenses or sell common stock. To date, the Company has funded its activities primarily through private issuances of manditorily convertible and redeemable debt offerings (Note 3).
These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the ultimate outcome of these matters.
F-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The Three Month Periods Ended June 30, 2006 and June 30, 2005
The Company had no net revenue for the three month periods ended June 30, 2006 and 2005.
Operating expenses, consisting primarily of professional fees, increased from $36,558 for the three month period ended June 30, 2005 to $62,055 for the three month period ended June 30, 2006. The increase in professional fees is due to the increase in legal and accounting fees. Interest expense increased from $21,443 for the three month period ended June 30, 2005 to $33,972 for the same period ended June 30, 2006. The increase in interest expense is due to the increase in the notes payable balance and an increase in interest expense related to the amortization of the discount on the convertible notes.
Liquidity and Capital Resources
The Company remains in the development stage and, since inception, and has experienced no significant change in liquidity or capital resources or stockholder's equity. The Company's balance sheet as of June 30, 2006, reflects a current asset value of $9,193.
The Company cannot predict to what extent its liquidity and capital resources will be diminished prior to the consummation of a business combination or whether its capital will be further depleted by the operating losses (if any) of the business entity which the Company may eventually acquire.
Need for Additional Financing
The Company has experienced operating losses since inception as a result of efforts to acquire capital and use that capital to acquire radio stations. The Company expects that it will achieve profitability and positive cash flows in the future if it can successfully raise capital and acquire an operating business. The Company's plans in regard to this are to increase revenues by acquiring profitable radio stations and substantially reduce the cost of professional fees and obtain capital through the sale of stock. There can be no assurance that the Company will ever achieve or sustain profitability or positive cash flow from its operations, reduce expenses or sell common stock. To date, the Company has funded its activities primarily through private issuances of mandatorily convertible and redeemable debt offerings.
Item 3. Controls and Procedures.
As required by SEC rules, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures at the end of the period covered by this report. This evaluation was carried out under the supervision and with the participation of our management, including our principal executive officer and principal financial officer. Based on this evaluation, these officers have concluded that the design and operation of our disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Disclosure controls and procedures are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Page 4
PART II - OTHER INFORMATION
Item 1. Legal proceedings
With the exception of what is listed below, there are no legal proceedings pending or threatened against the Company.
American Radio executed an agreement in 2003 to purchase two radio stations, for $400,000 of common stock (number of shares to be determined on the day of Closing based on market value of common stock on that date) plus $375,000 cash. An additional $25,000 was to be paid to the sellers in exchange for a non-compete agreement. This agreement was contingent upon the registration of common stock and American Radio obtaining the additional cash resources for financing purposes.
In May 2004, the Company filed a petition in a court of competent jurisdiction against the owners of those two radio stations. The litigation arose out of the Asset Purchase Agreement that American Radio executed with the owners in October 2003, for the purchase of those stations. After the execution of the Asset Purchase Agreement, a dispute arose between American Radio and the owners. American Radio believes that the owners violated the Asset Purchase Agreement by failing to provide necessary information on a timely basis and by failing to cooperate with American Radio's efforts to complete the acquisition. The Company's petition seeks specific performance of the agreement as well as damages for breach of contract and attorneys' fees.
The owners have filed a counterclaim that denies the enforceability of the Asset Purchase Agreement and requested that the court declare it unenforceable or, in the alternative, determine that American Radio fraudulently induced them to sign it. The Company anticipates a mediation meeting with the owners some time in Second Quarter 2006.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the quarter the Company did not issue any shares of common stock.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits
31.1 - Rule 13a-14a/15d-14(a) Certification by Chief Executive/Financial Officer
32.1 - Section 1350 Certification by Chief Executive/Financial Officer
SIGNATURES
In accordance with the requirements of the Exchange Act , the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AMERICAN RADIO EMPIRE, INC.
Dated: August 14, 2006
/s/ Dain Schult
Dain Schult, President, CEO, Treasurer and Director
Page 5
Exhibit 31.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 15 U.S.C. 78m(a) OR 78o(d)
(SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)
I, Dain Schult, certify that:
(1) I have reviewed this quarterly report on Form 10QSB of American Radio Empire, Inc.;
(2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
(4) I am responsible for establishing and maintaining disclosure controls and procedures as of the end of the period covered by the report for the small business issuer and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the small business issuer, including consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter that has materially affected, or is reasonable likely to materially affect, the small business issuer's internal control over financial reporting; and
(5) I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent function):
(a) any changes and material weaknesses in the design or operation of internal controls which are reasonable likely to adversely affect the small business issuer's ability to record, process, summarize and report financial data and have identified for the Company's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting
/s/ Dain Schult
President, CEO, Treasurer and Director
American Radio Empire, Inc.
August 14, 2006
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. Section 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of American Radio Empire, Inc. on Form 10-QSB for the quarter ending June 30, 2006, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Dain Schult, President, CEO, Treasurer and Director of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Date: August 14, 2006
/s/ Dain Schult
President, CEO, Treasurer and Director
American Radio Empire, Inc.