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 February 28, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from November 30, 2000 to February
28, 2001
Commission File Number 033-67536
AMERICAN DREAM ENTERTAINMENT, INC.
---------------------------------
(Exact Name of Registrant as Specified in Charter)
Minnesota 59-3169033
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(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
1800 East Sahara Avenue, Suite 107, Las Vegas, Nevada 89104
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(Address of Principal Executive Offices)
1-516-481-4370
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(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
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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
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There were 18,520,000 shares of the Registrant's $.0001 par value common stock
outstanding as of February 28, 2001.
Transitional Small Business Format (check one) Yes NO X
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American Dream Entertainment, Inc. and Subsidiary
Contents
Part I - Financial Information
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Item 1. Financial Statements
Item 2. Management's Discussion & Analysis of Financial
Condition and Results of Operations
Signatures
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
American Dream Entertainment, Inc. and Subsidiary
Consolidated Financial Statements
For the Nine Months Ended February 28, 2001 and 2000 (Unaudited)
Contents
Consolidated Financial Statements:
Consolidated Balance Sheet.............................................1
Consolidated Statements of Operations..................................2
Consolidated Statements of Changes in Stockholders' Deficit............3
Consolidated Statements of Cash Flows..................................4
Notes to Consolidated Financial Statements.............................5-6
American Dream Entertainment, Inc. and Subsidiary
Consolidated Balance Sheet
February 28, 2001
(Unaudited)
Assets
Current assets:
Cash $ 1,401
Other receivables 60,244
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Total current assets 61,645
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Property and equipment, net of accumulated depreciation 45,177
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Other assets:
Trademark and license 5,501,600
Due from related party 80,976
Website development 97,983
PC Game development 300,000
Deposits 4,187
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Total other assets 5,984,746
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$ 6,091,568
===============
Liabilities and Stockholders' Deficit
Current liabilities:
Bank overdrafts $ 6,767
Convertible debentures 494,398
Due to related party 6,980,694
Accounts payable and accrued expenses 1,213,656
Common stock payable 50,000
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Total current liabilities 8,745,515
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Stockholders' deficit:
Common stock; $.0001 par value; 50,000,000 shares
authorized; 18,520,000 shares issued and outstanding 1,852
Capital in excess of par value 5,275,480
Accumulated deficit (4,392,368)
Accumulated other comprehensive income 61,089
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946,053
Stock subscription receivable (3,600,000)
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Total stockholders' deficit (2,653,947)
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$ 6,091,568
===============
The accompanying notes are an integral part of the consolidated financial
statements.
1
American Dream Entertainment, Inc. and Subsidiary
Consolidated Statements of Operations
Three Months Ended Nine Months Ended
February 28, 2001 February 28, 2001
---------------------------------- -----------------------------------
2001 2000 2001 2000
--------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues $ 0 $ 0 $ 0 $ 0
--------------------------------------------------------------------------
Operating (expenses) income:
General and administrative
expenses (371,173) (230,169) (1,245,164) (494,102)
Interest expense (179,382) (1,037,022)
Other (expense) income (14,582) (4,525)
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$ (565,137) $ (230,169) $ (2,286,711) $ (494,102)
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Net loss $ (565,137) $ (230,169) $ (2,286,711) $ (494,102)
============================================================================
Accumulated deficit - beginning
of period $ (3,827,231) $ (668,385) $ (2,105,657) $ (404,452)
----------------------------------------------------------------------------
Accumulated deficit - end
of period $ (4,392,368) $ (898,554) $ (4,392,368) $ (898,554)
----------------------------------------------------------------------------
Loss per share $ (.03) $ (.01) $ (.09) $ (.03)
============================================================================
Weighted average shares
outstanding 18,520,000 17,320,000 18,120,000 17,762,418
============================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
2
American Dream Entertainment, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders' Deficit
Nine Months Ended February 28, 2001 (Unaudited)
Accumulated
Common Stock Capital In Other
----------------------- Excess Of Accumulated Comprehensive
Shares Amount Par Value Deficit Income
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Balance, May 31, 2000 (unaudited) 17,920,000 1,792 670,324 (2,105,657) 43,994
Common stock issued for stock
subscription receivable
(unaudited) 600,000 60 3,599,940
Imputed interest on stockholder
advances (unaudited) 432,343
Foreign currency translation
adjustment (unaudited) 14,581
Intrinsic value of beneficial
conversion feature of
convertible debentures
(unaudited) 572,873
Net loss for period (unaudited) (2,286,711)
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Balance, February 28, 2001
(unaudited) 18,520,000 $1,852 $5,275,480 $(4,392,368) $58,575
===========================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
3
American Dream Entertainment, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Nine Months Ended
February 28,
----------------------------
2001 2000
----------------------------
(Unaudited) (Unaudited)
Operating activities
Net loss $(2,286,711) $(494,102)
----------------------------
Adjustments to reconcile net loss to net cash used by operating activities:
Imputed interest on stockholder advances 28,115
Interest expense attributable to beneficial
conversion feature of convertible debentures 1,005,216
Loan cost to be settled with stock issuance 50,000
Depreciation expense 39,711
Increase in:
Other receivables (41,565)
Other assets (282,863) (31,961)
Accounts payable and accrued expenses 1,322,403 192,620
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Total adjustments 2,121,017 160,659
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Net cash used by operating activities (165,694) (333,443)
Investment activities
Acquisition of property and equipment (52,227)
Financing activities
Offering costs 104,098
Net advances from stockholders 216,988 233,247
Effect of exchange rate changes on cash and
cash equivalents 914
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Net (decrease) increase in cash (19) 3,902
Cash, beginning of period 1,420
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Cash, end of period $1,401 $3,902
===========================
The accompanying notes are an integral part of the consolidated financial
statements.
4
American Dream Entertainment, Inc. and Subsidiary
Notes to Consolidated Financial Statements
For the Nine Months Ended February 28, 2001 and 2000 (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 the opinion of management, 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 nine-month period ended February 28, 2001 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 February 28, 2001, current liabilities exceed
current assets by approximately $8,750,000 and total liabilities exceed total
assets by approximately $2,650,000. 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- and nine-month periods ended February
28, 2001 and 2000. The weighted average shares outstanding for the three- and
nine-month periods ended February 28, 2001 were 18,520,000 and 18,120,000,
respectively, as compared to 17,320,000 and 17,762,418 respectively for the
three- and nine-month periods ended February 29, 2000. 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.
5
American Dream Entertainment, Inc. and Subsidiary
Notes to Consolidated Financial Statements
For the Nine Months Ended February 28, 2001 and 2000 (Unaudited)
3. Convertible Debentures
The Company issued $423,377 in convertible debentures in June 2000. These
debentures pay interest at six percent per annum. 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 is extended in December 2000 and matures in February
2001. This loan can be repaid by paying the principal plus interest of $10,000,
or the principal plus 1,000 shares of the Company's stock, or the loan can be
converted into 120,000 shares of stock at a conversion rate of $0.50 per share.
The stock was trading at $0.50 per share at the date of this extension; hence,
the Company has added interest of approximately $10,000 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.
4. Stock Warrants
The Company has outstanding warrants to purchase 600,000 shares of the Company's
common stock at a price of $6 per share at November 30, 2000. The holders of the
warrants must wait 18 months after issuance before the warrants are eligible to
be converted into common shares. After the initial 18-month period, the warrants
may be converted into shares within the next six months. The warrants are
exercisable any time from February 28, 2002 through August 31, 2002, at which
time the warrants expire. At November 30, 2000 600,000 shares of the Company's
common stock have been reserved for issuance under these warrants.
6
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 during 2001. Final exhibition of the feature film 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
7
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,
including PC and Video games, 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.
PC GAME
- -------
During January 2001 the company and its subsidiary Robinsdream Interactive NV
entered into a production agreement with the Belgium Imagination In Motion NV
(IIM), an animation studio specialized in state-of-the art 3D technologies, for
the purposes of the production of an PC Game based upon "Robin and the
Dreamweavers".
This PC Game will show a combination of the latest state-of-the art 3D
technologies and the adventures of the ongoing battle between Robin and her
nemesis Triple X. The company and IIM will use for the development of the PC
Game the game engine of Widescreen, best known for its award winning hit
Outcast. Widescreen is an action orientated engine conceived for PC, PS2 and
X-box development. Widescreen manages the characters in the 3rd Person
perspective, allowing the "gamer" to actually see the hero, as opposed to just
an arm with a gun.
It is expected that the production of the PC-Game will be ready for distribution
early 2002.
In addition the company and IIM agreed that IIM will represent the company as
its commercial agent for the purposes of the distribution of the PC Game. IIM
has a high level of experience and knowledge in the PC branch.
8
About Imagination In Motion NV
- ------------------------------
Launched in 1995 by co-founder and CEO Rudy Verbeeck, Imagination In Motion is
an integrated computer graphics 3D animation studio with over 30 animators and
developers in its Brussels headquarters. After specializing in CG 3-D animation
applied to advertising and entertainment, IIM is now focusing on offering
integrated digital character concepts for cross-media use to both
consumer-oriented corporations and the entertainment industry. The company is
also renowned for its state-of-the art 3D technologies, such as the RealActor
internet technology and Virtual Actor technology. The company's extensive roster
of clients includes media giants DreamWorks SKG, Twentieth Century Fox, and
Disney as well as Coca-Cola, Procter and Gamble and Bertelsmann. The Belgian
public integrated media company De Beukelaar has a 34% stake in Imagination In
Motion.
RESULTS OF OPERATIONS
There were no revenues for the quarters ended February 28, 2001 and 2000.
For the quarter ended February 28, 2001, total general and administrative
expenses were $371,173 as compared to $230,169 for the same period in 2000, an
increase of $141,004. 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. Further increase of
the total general and administrative expenses is due to management consulting
fees, costs involved with the quarterly review of the financial statements by
the CPA and office rent.
Interest expense increased to $179,382 for the quarter ended February 28, 2001
from $0 in the same period in 2000. An amount of $166,141 relates to interest
(imputed) on loans taken and advances from stockholders and related parties.
Other income increased to ($14,582) for the quarter ended February 28, 2001 from
$0 for the same period in 2000.
Net loss amounted to $565,137 for the quarter ended February 28, 2001 as
compared to net loss of $230,169 for the same period in 2000. This increase in
net loss is associated with promotional efforts associated with our animated
feature film and series. In addition, there were no revenues or interest income
in the three-month period ended February 28, 2001 to absorb general and
administrative expenses incurred during the period.
There were no revenues for the nine month period ended February 28, 2001 and the
nine month period ended February 29, 2000.
For the nine month period ended February 28, 2001, total general and
administrative expenses were $1,245,164 as compared to $494,102 for the same
period in 2000, an increase of $751,062. This increase in general and
administrative expenses is the result of promotional efforts (including the MIP
conferences in Cannes, France during April and October 2000) associated with our
animated feature film and series, as well as efforts associated with raising
capital. Further increase is the result of higher professional fees which were
not pertinent in the prior period.
Interest expense increased to $1,037,022 for the nine month period ended
February 28, 2001 from $0 in the same period in 2000. An amount of $432,344
relates to interest (imputed) on loans taken and advances from stockholders and
related parties. In addition, the Company recorded $572,873 of interest, which
was associated with the intrinsic value of the beneficial conversion feature of
convertible debentures.
9
Other income increased to $(4,525) for the nine month period ended February 28,
2001 from $0 for the same period in 2000.
Net loss amounted to $2,286,711 for the nine month period ended February 28,
2001 as compared to net loss of $494,102 for the same period in 2000. 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 nine month period ended February 28, 2001 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 February 28, 2001,
Dreamweavers, N.V. and other stockholders have advanced approximately $7,000,000
on our behalf. This amount includes primarily relates to a payable amount of
$5,500,000 for the US license of the "Robin and the Dreamweavers" project. The
company owes this $5,500,000 to Dreamweavers NV, its major shareholder. The
remaining of approximately $1,500,000 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.
NO REVIEW
The financial statements for the three-month period ended February 28, 2001 are
not reviewed by an independent auditor. The company is in disagreement with its
CPA concerning the billing for the audit and review.
10
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: April 20, 2001 By: /s/ Dirk W. Peschar
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Dirk W. Peschar
Principal Executive Officer and
President