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 December 31, 2005
                                       or

[ ]      Transition Report Pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934

Commission file number 000-28515

                            AFG ENTERPRISES USA, INC.
                     (formerly In Store Media Systems, Inc.)
                     ---------------------------------------
        (Exact name of small business issuer as specified in its Charter)

              NEVADA                                   84-1249735
              ------                                   ----------
(State or other jurisdiction of                     (I.R.S. Employer
 incorporation or organization)                    Identification No.)

      73-595 El Paseo, Suite 2204, Palm Desert, California          92260
      ----------------------------------------------------          -----
           (Address of principal executive offices)               (Zip Code)

                  (760) 674-9696
                  --------------
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(g) of the Act:  Common Stock, par
value $.001 per share

Check 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 an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). | | Yes   |X| No

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).   |X| Yes   | | No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEEDING FIVE YEARS
<PAGE>

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) after distribution of securities under a plan
confirmed by a court:    |X| Yes   | | No

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference of Part III of this Form 10-KSB, or any amendment to
this Form 10-KSB. [ ]

Registrant had no revenue for the fiscal year ended December 31, 2005.

On March 10, 2006, the Registrant had 36,958 shares of common voting stock held
by non-affiliates. The aggregate market value of shares of Common Stock held by
non-affiliates was approximately $0 as of March 10, 2006 as the Common Stock
was not trading.

On March 10, 2006, the issuer had 100,440 shares of its Common Stock, par value
$.001 per share outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: NONE.

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT:  Yes |_|  No |X|

<PAGE>

                                     PART I

ITEM 1 - DESCRIPTION OF BUSINESS

Forward Looking Statements

     This Annual Report on Form 10-KSB for the Company for the fiscal year ended
December 31, 2005 (the "Annual Report") includes forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"1995 Act"). The 1995 Act provides a "safe harbor" for forward-looking
statements to encourage companies to provide prospective information about them
so long as they identify these statements as forward looking and provide
meaningful cautionary statements identifying important factors that could cause
actual results to differ from the projected results. All statements other than
statements of historical fact, including statements regarding industry prospects
and future results of operations or financial position, made in this Annual
Report are forward looking. The Company uses words such as "anticipates,"
"believes," "expects," "future" and "intends" and similar expressions to
identify forward-looking statements. Forward-looking statements reflect
management's current expectations and are inherently uncertain. The Company's
actual results may differ significantly from management's expectations.

Subsequent Events

         Change of Officers. On March 1, 2006, Erich Spangenberg resigned as a
Director and as the Chief Executive Officer, Treasurer and Secretary and David
Pridham resigned as a Director of the Company. Douglas B. Croxall, a Director of
the Company was appointed as the Chief Executive Officer, Treasurer and
Secretary.

      Reverse Stock Split. On January 20, 2006, the Company filed with the
Securities and Exchange Commission and mailed to shareholders an Information
Statement on Form 14C disclosing that a majority of the shareholders, by written
consent had approved Amended and Restated Articles of Incorporation. Such
written consent became effective on February 9, 2006. On March 10, 2006 the
Amended and Restated Articles of Incorporation will become effective. Such
Amended and Restated Articles of Incorporation implement a one for fifty (1:50)
reverse stock split pursuant to which each 50 shares of Common Stock will be
combined and converted into one share, with fractional shares being rounded up
to the next whole number of shares. All share numbers in this Annual Report on
Form 10-KSB reflect such reverse split (unless otherwise specified).

General

         AFG Enterprises USA, Inc. (formerly In Store Media Systems, Inc.), a
Nevada corporation (the "Company") was originally organized to develop a
computerized, point-of-sale marketing platform, the Coupon Exchange Center,
which incorporates proprietary components. Until November 2002, the Company was
primarily engaged in developing its technology, securing patent protection,
formulating its business strategy, raising capital and developing necessary
relationships with third parties, such as supermarkets, packaged goods
manufacturers and others in connection with the manufacture and marketing of the
systems incorporated into the Company's product line. Since the Company declared
bankruptcy in November 2002 and the confirmation of the Plan of Reorganization
January 2005, the primary activities have been to identify potential merger and
acquisition candidates and to identify ways to monetize the intellectual
property previously developed by the Company.

                                       1
<PAGE>

         For the twelve months ended December 31, 2005, the Company generated no
operating revenue. Since inception of the Company through December 31, 2005, the
Company has incurred accumulated losses of $304,024 after adoption of fresh
start accounting as of February 1, 2005.

Dispute with Let's Go Shopping, Inc.

            Effective as of November 29, 2001, the Company signed a Patent and
Software License agreement with Let's Go Shopping, Inc. ("LGS"), a private
company located in Cos Cob, Connecticut. Under the terms of the agreement, LGS
grants the Company an exclusive license to market its patented LGS Retail Coupon
Merchandising Program to 27 retail grocery chains in the United States. In
October 2002, certain disputes arose between the parties, and LGS filed a civil
complaint in the United States District Court for the Southern District of
Georgia alleging that the Company breached certain provision of the agreement
(the "Georgia Lawsuit"). On March 29, 2004, the Company and LGS (and certain
affiliated parties) (the "LGS Parties") entered into a settlement agreement (the
"LGS Settlement Agreement"), which was approved by the Court on April 29, 2004.
Under the terms of the LGS Settlement Agreement, LGS paid to the Company a total
of $60,000 in cash, all adversary proceedings (including the LGS Adversary
Proceeding and the Georgia Lawsuit) were dismissed, all claims held by the LGS
Parties were assigned to the Company and the Company and the LGS Parties entered
in mutual releases. The LGS Settlement Agreement also provided that the Company
retained access to and ownership of the "back end financial system."

Bankruptcy Proceedings

         Filing. On November 12, 2002, the Company filed a voluntary petition
for reorganization, case no. 02-28289 (the "Restructuring Proceedings") under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court for the District of Colorado.

         DIP Credit Facility. On July 15, 2003, in connection with the
Restructuring Proceedings, the Court approved the Company entering into a
debtor-in-possession credit facility (the "DIP Facility") with Acclaim Financial
Group Ventures II, LLC ("AFGVII") to supplement liquidity and fund operations
during the Restructuring Proceedings, and potentially beyond such period. Under
the DIP Facility, an affiliate of AFGVII was required to subordinate its claims
to any claims of AFGVII arising under the DIP Facility. Among other terms, the
DIP Facility contemplated: (i) AFGVII receiving a priority security interest in
all the assets of the Company (subject to minimal exceptions for professional
and trustee fees incurred by the Company and approved by the Court); (ii)
initial borrowings of up to $200,000, with a maximum borrowing of up to $3.0
million upon Court approval of a plan of reorganization acceptable to AFGVII;
(iii) an interest rate of 2% per month on all obligations deemed outstanding
under the DIP Facility; (iv) AFGVII being reimbursed (or such amounts being
added to amounts deemed outstanding) for all expenses incurred in connection
with the DIP Facility; (v) maturity of the DIP Facility on the earlier to occur
of certain specified events or December 31, 2003; (vi) AFGVII being granted an
option to acquire 20% of the fully diluted equity of the Company at various
prices; and (vii) the Company's compliance with various affirmative and negative
covenants that restrict the operations and ability of the Company to engage in
various transactions.

                                       2
<PAGE>

         On December 31, 2003, AFGVII agreed to waive an event of default under
the DIP Facility (related to the Debtor's failure to pay amounts due under the
DIP Facility by such date and the Debtor's failure to have an acceptable plan of
reorganization approved by the Court), for a period of time to be solely
determined by AFGVII, with AFGVII reserving the right to declare an event of
default upon one business day notice to the Debtor. Upon the effective date of a
final and non-appealable plan of reorganization acceptable to AFGVII (an
"Approved Plan"), the Company and AFGVII have agreed to amend the DIP Facility
such that, among other things, (i) AFGVII will have a continuing first priority
security interest in all of the assets of the Company and (ii) the interest rate
on all new borrowings will be 7% per annum.

         Plan of Reorganization. On November 12, 2004, a Plan of Reorganization
(the "Plan") for the Company was filed with the Bankruptcy Court. The Plan was
jointly proposed by the Company and AFGVII (collectively referred to as the
"Plan Proponents"). Also on November 16, 2004, a Disclosure Statement to be used
in soliciting votes to accept or reject the Plan (the "Disclosure Statement")
was approved by the Bankruptcy Court.

         Under the Plan, various claim holders and interest holders were
entitled to receive various considerations in respect of their claims and
interests. The Plan classified the claim and interest holders into various
groups that were approved by the Court as follows:

         Unclassified --Administrative Claims: These claims in an amount of
         approximately $292,000 constituted claims allowed under ss.11 U.S.C.
         ss.503(b) of the Code and constitute primarily claims of counsel to the
         Company for fees and expenses incurred post-petition on behalf of the
         Company. Such claims were paid in full in cash or pursuant to other
         arrangement acceptable to such claim holders (such amounts provided by
         AFGVII under the DIP Facility).

         Class 1--Secured Claim of NMPP: This claim of $100,000 plus accrued
         interest constituted the sole claim held by NMPP, Inc. (an affiliate of
         AFGVII) representing secured indebtedness incurred by the Company prior
         to the Petition Date. This claim was converted with the Class 2 claim
         into a pro rata share of 60,000 shares of the Common Stock in the
         reorganized Company to be issued under the Plan (the "Replacement
         Common Stock").

                                       3
<PAGE>

         Class 2--Secured Claim of AFGVII: This claim of $250,000 plus accrued
         interest constituted the sole claim held by AFGVII representing secured
         indebtedness incurred by the Company under the DIP Facility prior to
         the effective date of the Plan. Such claim was converted with the Class
         1 claim into a pro rata share of 60,000 shares of the Replacement
         Common Stock.

         Class 3--Allowed Unsecured Claims in Excess of $1,000: These claims
         constitute allowed unsecured claims held by various claimants incurred
         by the Company under the DIP Facility prior to the effective date of
         the Plan. These claims equaled approximately $1,900,000. Such claims
         were converted into their pro rata share of 30,000 shares of the
         Replacement Common Stock.

         Class 4--Allowed Unsecured Claims of $1,000 or less: These claims in an
         amount of approximately $10,000 were paid in full in cash or pursuant
         to other arrangement acceptable to such claim holders (such amounts
         provided by AFGVII under the DIP Facility).

         Class 5--Allowed Administrative Convenience Claims: These claims
         constitute claims allowed under ss.11 U.S.C. ss.503(b) of the Code, the
         holders of which elect to receive an amount not in excess of $1,000 in
         cash in respect of their claims. No creditors elected to be treated as
         a Class 5 claim.

         Class 6--Interests: These constitute any equity interest in the Company
         including Common Stock, preferred stock, options, warrants, convertible
         instruments and other equity equivalents but excluding the options
         granted to AFGVII in connection with the DIP Facility. There were
         78,751,406 shares (net of 9,374,742 treasury shares) of Common Stock
         outstanding, 2 shares of Preferred Stock outstanding (convertible into
         1,890,598 shares of Common Stock) and 19,282,809 options and other
         equity equivalents outstanding (prior to the stock splits, effective
         May 5, 2005 and March 10, 2006). All shares of Common Stock and
         preferred stock were reverse split into 10,000 shares of the
         Replacement Common Stock. The number of shares subject to AFGVII's
         option to purchase Common Stock was adjusted to reflect the stock
         split. The exercise price per share is not subject to adjustment and
         will remain at various prices ranging from $0.05 to $1.50.

         Confirmation of Plan. On January 20, 2005, the Bankruptcy Court
confirmed and approved the Plan. On January 31, 2005 all appeal periods expired
with respect to the Bankruptcy Court confirmation and approval of the Plan. On
July 26, 2005 the Bankruptcy Court for the District of Colorado issued a final
decree closing the bankruptcy case.

         Effects of Plan. As a result of the confirmation and implementation of
the Plan, the following have occurred:

                  Transfer of Assets. All assets of the Company owned
         pre-petition or acquired during the Restructuring Proceedings were
         transferred to the reorganized Company free and clear of all liens,
         claims and interests of all creditors and interested parties. The
         reorganized Company is not liable for repayment of any claims except as
         set forth in the Plan. All other debts and liabilities were discharged.

                                       4
<PAGE>

                  Name Change. The reorganized Company has changed its name from
         "In Store Media Systems, Inc." to "AFG Enterprises USA, Inc."

                  Change in Capital Structure. All of the outstanding shares of
         capital stock were reverse split into an aggregate of 10,000 shares of
         Common Stock of the reorganized Company. Upon implementation of the
         Plan, the Company had 100,440 shares of Common Stock, and no shares of
         preferred stock issued and outstanding. No options, warrants or other
         rights to acquire capital stock remain outstanding, other than the
         options to purchase 21,572 shares (after giving effect to the 50 to 1
         reverse split effectve March 10, 2006) of Common Stock held by AFGVII
         at various prices, ranging from $0.05 to $1.50.

                  As a result of direct ownership or indirectly through
         affiliated companies, AFGVII controls approximately 63.1% of the stock
         in the reorganized Company.

                  Executory Contracts Rejected. All executory contracts,
         including all pre-petition royalty agreements, have been rejected. The
         Company has assumed and continued certain agreements with vendors or
         suppliers.

                  Changes in Management. Upon confirmation of the Plan, the
         Board of Directors of the Company comprised five persons: John B. Burns
         III, Douglas B. Croxall, Erich Spangenberg, David Pridham and Stephen
         Peary. Messrs. Burns and Peary resigned their positions during the year
         ended December 31, 2005.

Plan of Operation

         General. After the confirmation of the Plan, the Company's anticipated
business strategy includes (i) an effort to pursue opportunities to monetize the
ISM Intellectual Property (as defined below), including the licensing and joint
venturing of such rights and the possible acquisition or licensing of other
intellectual property rights that the Company believes complement the ISM
Intellectual Property or complement the overall business strategy pursued by the
Company and (ii) an effort to pursue, evaluate and joint venture or acquire
businesses that the Company believes compliment its business strategy, including
businesses operating in the marketing services sector (collectively, and as
modified from time to time by the Company, the "Business Plan").

         The Company intends to seek to license the ISM Intellectual Property to
enable all types of retailers and goods manufacturers to realize benefits
provided by the ISM Intellectual Property. Specifically, the Company believes
that the ISM Intellectual Property has the potential to benefit the
manufacturers that utilize coupons to promote their products, the retail
industry and entities involved in coupon issuance and redemption. The Company
will seek to negotiate for license fees, as well as ongoing royalties based on
worldwide sales by licensees of products incorporating the ISM Intellectual
Property.

                                       5
<PAGE>

         The financial statements of the Company reflect that the ISM
Intellectual Property does not have any book value under generally accepted
accounting principles. Book value may not reflect actual market value.

         The Company also intends to seek to pursue joint ventures with entities
that may seek to further develop and implement the benefits provided by the ISM
Intellectual Property. The Company intends to pursue such joint ventures as a
way to reduce the capital and other resources required to effectively exploit
the potential benefits of the ISM Intellectual Property. In addition, the
Company also intends to seek to acquire or license other intellectual property
rights that the Company believes will complement the ISM Intellectual Property
or complement the overall business strategy pursued by the Company.

         In addition to seeking to monetize the ISM Intellectual Property, the
the Company intends to pursue, evaluate and joint venture or acquire businesses
that the Company believes complement its business strategy, including business
that operate in the marketing services sector. Any such joint venture or
acquisition could substantially change the Business Plan and prospects of the
Company. While the Company has not identified any specific acquisitions or joint
ventures and no negotiations are occurring, it is anticipated that after the
Confirmation Date, the Company will devote a substantial amount of its
management and other resources to this aspect of its Business Plan. While the
initial focus is intended to be on companies that operate in the marketing
services sector, this is not the only sector that the Company will evaluate in
seeking acquisitions or joint ventures. Accordingly, the Company's future
operations, financial condition and prospects will be significantly impacted if
the Company is successful in consummating any such joint ventures or
acquisitions.

         As of the date hereof, no specific opportunities to monetize the ISM
Intellectual Property have been identified and no negotiations are occurring
with respect thereto and the Company has not executed any definitive agreements
to acquire any business. There can be no assurance that the Company will be
successful in implementing the Business Plan or that the Business Plan will not
change significantly from that which the Company presently intends to pursue.
(See "Business Risks" below.)

            Summary of Current ISM Intellectual Property. As of the date hereof,
the ISM Intellectual Property consists of the following patents and pending
patents:

            Issued Patents. The Company holds title to the following issued
patents:

                  Patent No. 6,233,564 "Merchandising Using Consumer Information
                  from Surveys", (The InStaData(TM) System) issued May 15, 2001
                  with 12 allowed claims. This patent covers a methods and
                  system of conducting consumer surveys, using an identification
                  card in an interactive apparatus to provide targeted consumer
                  incentives.

                                       6
<PAGE>

                  Patent No. 5,483,049 "The Coupon Exchange and Check Writing
                  System", (The Coupon Exchange Center(TM)) issued January 9,
                  1996 with 37 allowed claims. This patent covers a method of
                  issuing proprietary coupons in exchange for unwanted coupons,
                  redeeming the newly issued coupons, and paying the redeeming
                  consumer an immediate cash rebate paid in the form of a check
                  at store checkout.

                  Patent No. 5,111,927 "Automated Recycling Machine", (The
                  CanPactor(TM)) issued May 12, 1992 with nine allowed claims.
                  This patent covers an apparatus located outside supermarkets
                  which accepts, crushes and stores aluminum cans, then prints
                  coupons for supermarket products and dispenses a penny for
                  each can recycled as a reward to the recycling consumer.

                  Patent No. 6,497,360 "Prompt Coupon Reimbursement After Coupon
                  Redemption", (The Coupon Bank(TM) System) issued December 24,
                  2002 with 32 allowed claims. The Coupon Bank(TM) System, is a
                  specific method of validating redeemed coupons with products
                  purchased, provides for the almost immediate reimbursement of
                  the retailer and rapid transmission of redemption data to
                  coupon issuing manufacturers.

         The Company is not aware of any relevant facts that would negatively
affect the validity of these patents or their claims.

         Patent Pending. The Company has filed an application with the United
States Patent Office and is pursuing issuance of the following patent
application:

                  "Coupon Redemption System". The In$taClearing(TM) System,
                  which covers a specific method of electronically validating
                  coupons with purchased products at checkout wherein coupons
                  that are validated are electronically processed, recorded and
                  destroyed right at checkout.

There can be no assurance that the pending patent application will be issued.

 Business Risks

     The Company's future results may be affected by certain risks and
uncertainties including, but not limited to, the following:

         Need For Additional Capital. The Company has no income or operations
and therefore has no established means of generating revenue to sustain
operations. The Company has relied upon credit arrangements to pay costs of
operations. The Company will require additional funds to implement its plan of
operation for the next 12 months. The Company may be required to attempt to
raise additional capital through the sale of equity and/or debt securities in
private transactions. The Company also may seek bridge financing and other forms
of financing through venture capital firms in the future. If the Company's
operating costs and expenses are more than currently expected, the need for
additional working capital may arise earlier than expected. There can be no
assurance that any such financing will be available when needed to execute the
plan or, if available, that such financing will be on terms that are acceptable
to the Company. The inability to obtain additional capital would restrict the
Company's ability to grow and could reduce the Company's ability to continue as
a going concern.

                                       7
<PAGE>

Cost of Compliance with Environmental Laws

     The Company is unaware of any pending or proposed environmental laws, rules
or regulations, the effect of which would be adverse to its contemplated
operations.

Employees

         As of December 31, 2005, the Company had no full time employees. All
activities of the Company related to the Bankruptcy Proceedings and were
conducted by independent advisors. As of February 28, 2006, the Company has an
employment agreement with one officer, Erich Spangenberg, Chief Executive
Officer. See Part III, Item 10 "EXECUTIVE COMPENSATION - Employment Agreement."

ITEM 2 - DESCRIPTION OF PROPERTIES

         The Company has its corporate headquarters at the offices of AFGVII at
73-595 El Paseo, Suite 2204, Palm Desert, California 92260. The Company does not
pay any rent for the use of such premises.

ITEM 3 - LEGAL PROCEEDINGS

         During the fiscal year ended December 31, 2005, the Company faced no
legal proceedings.


ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         The Company did not hold any shareholder meetings in fiscal year 2005.
In November 2004, the Company submitted to each shareholder the Joint Disclosure
Statement and Plan of Reorganization approved by the Bankruptcy Court. The votes
in favor of the Plan were 38,154,683 representing a majority of the outstanding
shares. The approval of the Plan of Reorganization had the effect of appointing
five directors, effectuating a reverse split of the outstanding shares and
changing the name of the Company. See Part I, Item 1. Business - Bankruptcy
Proceedings above.

                                     PART II

ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

                                      8
<PAGE>

         Since May 2003, the Common Stock of the Company has traded only
sporadically in The Pink Sheets.

         The following table shows the range of high and low bid quotations for
the Company's Common Stock for the period from January 1, 2004 until December
31, 2005, 2003, as reported by The Pink Sheets, LLC. Prices reflect inter-dealer
prices, and do not necessarily reflect actual transactions, retail mark-up,
mark-down, or commission. The prices reflected below are prior to the 50 to 1
reverse split effective on March 10, 2006.

                                STOCK QUOTATIONS

                       Period Ended                   Closing Sales
                       ------------                   -------------
                                               High                   Low
                                               ----                   ---
               2005
               ----
               December 31, 2005               0.000                  0.000
               September 30, 2005              0.000                  0.000
               June 30, 2005                   0.000                  0.000
               March 31, 2005                  0.000                  0.000

               2004
               ----
               December 31, 2004               0.0001                0.0001
               September 30, 2004              0.015                 0.0001
               June 30, 2004                   0.02                  0.0001
               March 31, 2004                  0.005                 0.0001

     At December 31, 2005, the number of record holders of the Company's Common
Stock was approximately 450 beneficial owners of its Common Stock.

Dividends

         The Company has not paid any dividends with respect to its Common
Stock, and it is not anticipated that the Company will pay dividends in the
foreseeable future.

Recent Sales of Unregistered Securities

         2005. The Company issued 90,000 shares of Common Stock to approximately
67 claimants in connection with the Plan of Reorganization. Such shares were
issued without registration pursuant to the exemption from registration provided
by Section 1145(a) of the United States Bankruptcy Code.

         The company issued 96 shares of Common Stock to six shareholders upon
exercise of previously issued options. Such issuance was exempt from
registration pursuant to the one or more exemptions provided by Section 4(2) and
3(b) and the rules and regulations promulgated thereunder, including Regulation
D.

                                       9
<PAGE>

         2004. None.

ITEM 6 -  MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         The following should be read in conjunction with the attached audited
consolidated financial statements and the notes attached thereto as of December
31, 2005 and 2004, and for each of the two years then ended.

         Overview

         References in these financial statements to "Predecessor Company" refer
to the Company prior to and including January 31, 2005. References to "Successor
Company" refer to the Company on and after February 1, 2005, after giving effect
to cancellation of all outstanding securities of the Predecessor Company and the
issuance of new securities of the Successor Company in accordance with the Plan
and implementation of "fresh start" accounting.

         Upon emergence from bankruptcy, the Company implemented fresh-start
accounting under the provisions of SOP 90-7. Under SOP 90-7, the reorganization
fair value of the Company was allocated to its assets and liabilities, its
accumulated deficit was eliminated, and its new equity was issued according to
the Plan as if it were a new reporting entity. The Company adopted the
provisions of fresh-start accounting as of February 1, 2005. In accordance with
fresh-start accounting, all assets and liabilities were recorded at their
respective fair market values upon emergence from Chapter 11 Reorganization. The
Company reports the fair market value of its primary assets, the patents and
intellectual property, at $0. All pre-petition liabilities discharged by the
Plan are eliminated as of February 1, 2005. The Successor Company is deemed to
have an inception date of February 1, 2005.

         The Company has identified the accounting policies described below as
critical to its business operations and the understanding of the Company's
results of operations. The impact and any associated risks related to these
policies on the Company's business operations is discussed throughout this
section where such policies affect the Company's reported and expected financial
results. For a detailed discussion on the application of these and other
accounting policies, see Note 1 to the Notes to the Financial Statements in Item
7 of this Annual Report, beginning on page F-9.

         The preparation of this Annual Report requires the Company to make
estimates and assumptions that affect the reported amount of assets and
liabilities of the Company, revenues and expenses of the Company during the
reporting period and contingent assets and liabilities as of the date of the
Company's financial statements. There can be no assurance that the actual
results will not differ from those estimates.

                                       10
<PAGE>

         The Company is a development stage company engaged in the marketing of
its system for distributing and electronically clearing coupons, certain
components of which are patented. Since the Company declared bankruptcy in
November 2002 and the confirmation of the Plan of Reorganization January 2005,
the primary activities have been to identify potential merger and acquisition
candidates and to identify ways to monetize the intellectual property previously
developed by the Company.

         The Company has generated revenues from operations of $0 and has
incurred losses of $304,024 since inception (February 1, 2005 as a result of
adoption of fresh start accounting upon emergence from bankruptcy) through
December 31, 2005.

         At December 31, 2005, the Company had a stockholders' deficit of
$299,019 which reflects $5,005 of common stock and additional paid in capital
less accumulated deficit of $304,024. The accumulated deficit amount is the
result of general and administrative expenses incurred since inception. At
December 31, 2005, the Company had a working capital deficit of $299,019.

         Financial Condition

         At December 31, 2005 the Company had $3,771 in total assets and
$302,790 in total current liabilities compared to $58,764 in total assets and
$616,324 in total current liabilities (net of $1,557,931 of pre-petition
liabilities subject to compromise) at December 31, 2004. Accounts payable and
accrued expenses at the end of fiscal year 2005 were $21,793 (net of
pre-petition liabilities subject to compromise) compared to $423,224 (net of
pre-petition liabilities subject to compromise) at December 31, 2004. The
Company had a working capital deficit of $299,019 at December 31, 2005 compared
to a working capital deficit of $557,560 at December 31, 2004. The difference
from 2005 to 2004 is primarily changes in accrued expenses and accounts payable
attributable to the costs of the Bankruptcy Proceedings and prosecuting the LGS
Adversary Proceeding (see Part I, Item 3, "LEGAL PROCEEDINGS").

         Results of Operations

         The Company has incurred operating expenses of $276,271 from inception
through December 31, 2005. These expenses include $276,271 in general and
administrative expenses. As a result of the closure of the bankruptcy
proceedings and a cessation of all operations except the corporate maintenance
activities, the general and administrative expenses of the Company were
substantially reduced.

         Period from Inception to December 31, 2005 Compared to Predecessor
Company Year Ended December 31, 2004

         For the period from inception to December 31, 2005, the Company
sustained net operating losses of $276,271 as compared to net operating losses
of $125,420 for the year ended December 31, 2004. The increase in net operating
losses primarily was due to an increase in general and administrative expenses.

                                       11
<PAGE>

         The Company's operating expenses for the period from inception to
December 31, 2005, increased by $155,250 or approximately 124% to $280,670 as
compared to operating expenses of $125,420, for the year ended December 31,
2004. The increase in operating expenses in 2004 was due to an increase in
general and administrative expenses. The increase in general and administrative
expenses primarily was due to the staffing of a full time financial and
accounting position for the year which was previously handled through consulting
support.

         The Company had a net loss of $304,024 for the period from inception to
December 31, 2005, compared to a net loss of $223,805 for the prior year. The
increase in net loss was attributable to various factors including adoption of
fresh start accounting as of February 1, 2005, income from the litigation
settlement with LGS in 2004 and a reduction in reorganization expense. As a
result, for the fiscal year ended 2005, the Company had total other expenses of
$15,335 compared to total other expense of $55,762 for the fiscal year ended
December 31, 2004. Reorganization expenses for 2005 declined by $34,604 or
approximately 74% to $12,418.

         Liquidity and Capital Resources

         From November 2002 until December 31, 2004, the primary capital
requirements of the Company have been to finance the costs of the Bankruptcy
Proceedings and the lawsuits with LGS. The Company has historically financed its
operations through loans and investments by directors and officers, and the sale
of equity and debt securities in private transactions in reliance upon
exemptions from the registration and qualification requirements under federal
and state securities laws. In July 2003, the Company entered into a Debtor in
Possession Credit Agreement (the "DIP Facility") with Acclaim Financial Group
Ventures II, LLC ("AFGVII"). Since such date the Company has relied primarily on
the DIP Facility to provide all required capital.

         At December 31, 2005, the Company had $302,790 in current liabilities,
of which $281,000 was from borrowings under its DIP loan facility.

         The remaining portion of the Company's current liabilities is primarily
comprised of accounts payable and accrued interest. The Company relied on the
DIP Facility to finance operations during the period from inception to December
31, 2005. At December 31, 2005, the Company had available cash of $300 as
compared to available cash of $6,809 at December 31, 2004. Other current assets
decreased to $3,471 primarily as a result of the reduction in the settlement
proceeds receivable from LGS.


ITEM 7 - FINANCIAL STATEMENTS

         The financial statements listed in the accompanying index to financial
statements required to be filed are attached to this Annual Report. Reference is
made to page F-1 of this Annual Report.

                                       12
<PAGE>

ITEM 8 -  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

         On April 21, 2005, Causey Demgen & Moore Inc. ("CDM") declined to stand
for re-appointment as AFG Enterprises, Inc. (the "Company") independent
accountants due to the restrictions imposed by Section 208(a) of the
Sarbanes-Oxley Act of 2002 and the rules and regulations of the Securities
Exchange Commission that prohibit partners on the audit engagement team from
providing audit services to the issuer for more than five consecutive years and
from returning to audit services with the same issuer within five years. The
Company appointed the firm of Singer Lewak Greenbaum & Goldstein LLP ("SLGG") to
serve as independent public accountants of the Company for the fiscal year
ending December 31, 2004.

         CDM's report on the Company's financial statements for the fiscal years
ended December 31, 2003 and 2002 did not contain an adverse opinion or
disclaimer of opinion, or was modified as to uncertainty, audit scope or
accounting principles. However, they did include an explanatory paragraph
wherein they expressed substantial doubt about the Company's ability to continue
as a going concern.

         During the years ended December 31, 2003 and 2002 and through April 21,
2005, there were no disagreements with CDM on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure which, if not resolved to CDM's satisfaction, would have caused them
to make reference to the subject matter of such disagreements in connection with
their report on the Company's financial statements for such years.

ITEM 8A. CONTROLS AND PROCEDURES

         Evaluation of Disclosure Controls and Procedures. As of February 28,
2006, we evaluated the effectiveness of the design and operation of its
disclosure controls and procedures (as defined in the Securities Exchange Act of
1934 Rules 13a-15(e) and 15d-15(e)). That evaluation was performed under the
supervision and with the participation of its management, including its Chief
Executive Officer and its Chief Financial Officer. Based on that evaluation, our
Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting him to material information relating
to the Company required to be included in its periodic SEC filings.

         Changes in Internal Control over Financial Reporting. The Company has
made no significant change in its internal control over financial reporting as
of February 28, 2006 that has materially affected, or is reasonably likely to
materially affect, its internal control over financial reporting.


                                       13
<PAGE>

ITEM 8B. OTHER INFORMATION

         None.

                                    PART III

ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

         As of December 31, 2005, the Company's executive officers and directors
and their ages were as follows:

--------------------------------------------------------------------------------
        Name            Age                     Position
--------------------------------------------------------------------------------
Erich Spangenberg       45      Chief Executive Officer, Treasurer and Secretary
                                and Chairman of the Board
--------------------------------------------------------------------------------
Douglas B. Croxall      37      Director
--------------------------------------------------------------------------------
David Pridham           35      Director
--------------------------------------------------------------------------------

         The following discussion includes biographical information regarding
the Company's officer, directors and significant employees. All officers are
appointed by and serve at the discretion of the board of directors of the
Company. Directors serve for one-year terms or until their successor is duly
elected and qualified. There are no family relationships between any director,
executive officer or person nominated or chosen by the Company to become a
director or executive officer.

         ERICH SPANGENBERG, Chief Executive Officer, Treasurer, Secretary and
Chairman of the Board of Directors. Mr. Spangenberg is and has been since 1998
an officer of Acclaim Financial Group Venture II, LLC and several of its
affiliates, all of which are engaged in merchant banking, investment and
advisory services. From April 1996 through January 1998, Mr. Spangenberg held
various executive positions with Smartalk Teleservices, Inc., a
telecommunications company. From December 1994 through April 1996, Mr.
Spangenberg was a Senior Vice President with the investment banking group of
Donaldson, Lufkin & Jenerette. From 1985 until 1994, Mr. Spangenberg was an
associate and a partner with Jones, Day, Reavis & Pogue. Mr. Spangenberg holds a
BA from Skidmore College, a M.Sc. from The London School of Economics and a JD
from Case Western Reserve University.


                                       14
<PAGE>

         DOUGLAS B. CROXALL, Director, was elected to fill a vacancy on the
Board of July 14, 2003. Mr. Croxall is the Chief Executive Officer of Firepond,
Inc., a software company that provides configuration, pricing, and quotation
software, as well as interactive selling software solutions that help companies
more profitably acquire and retain customers. Mr. Croxall is the managing member
of Jaguar Technology Holdings, LLC. Since December 2001, Mr. Croxall has served
as the managing member of Riverland Enterprises LLC, a privately-held company
which holds investments and provides strategic advisory services. Since August
2001, Mr. Croxall has served as an officer of Acclaim Financial Group Venture
III, LLC, which provides strategic advisory services. From September 1999 until
August 2001, Mr. Croxall served as the Chief Financial Officer of Load Media
Network, Inc., an Internet and software company based in Hollywood, California.
From August 1995 until September 1999, Mr. Croxall served as a Senior Manager
for KPMG in the Strategic Transaction Services Group. Mr. Croxall has served as
a Director for Debtor since August 2003. Mr. Croxall received his Bachelor of
Arts degree in Political Science and Economics from Purdue University as well as
his Master Degree in Finance from Pepperdine University.

         Compensation Committee Interlocks and Insider Participation. As of
December 31, 2005, Erich Spangenberg, the Chairman of the Board of Directors,
also served as a Manager or Director of AFGVII and its affiliates. AFGVII is a
creditor of the Company pursuant to the DIP Facility.

         Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a)
Beneficial Ownership Reporting Compliance Section 16(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules of the
Commission thereunder require the Company's executive officers, directors and
greater than 10% stockholders to file reports of ownership and changes in
ownership of the Common Stock of the Company with the Commission. Based upon a
review of such reports, the Company has determined that during the fiscal year
ended December 31, 2005 the following persons failed to timely file reports:
Steve Peary (one report filed untimely), John Burns (one report filed untimely);
Douglas B.Croxall (one report filed), Erich Spangenberg (one report unfiled) and
David Pridham (one report unfiled).

ITEM 10 - EXECUTIVE COMPENSATION

Remuneration of Executive Officers

         The following table sets forth information concerning the compensation
received for the fiscal years ended December 31, 2005, 2004 and 2003 for
services rendered to the Company in all capacities by the individual who served
as the Company's Chief Executive Officer at the end of the 2005 fiscal year and
other highly compensated executives of the Company. The total amount of the
annual salary and bonus payable to each of the Company's other executive
officers for the last completed fiscal year was below $100,000. See Item 12 -
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

                                       15
<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
                                      Annual Compensation (1)                 Long Term Compensation
                                                                                                                  All other
                                 -------------------------------------------------------------------------------   Compen-
                                                                              Awards                Payouts       sation(2)
                                 ------------------------------------------------------------------------------------------
                                                                                    Securities
                                                                     Restricted     Underlying
   Name and Principal             Salary                               Stock       Options/SARs
        Position           Year    ($)(1)   Bonus ($)   Other ($)    Awards ($)         (#)         LTIP ($)
---------------------------------------------------------------------------------------------------------------------------
<S>                        <C>      <C>        <C>        <C>           <C>             <C>           <C>           <C>
Erich Spangenberg, CEO     2005     -0-        -0-        -0-           -0-             -0-           -0-           -0-
---------------------------------------------------------------------------------------------------------------------------
                           2004     -0-        -0-        -0-           -0-             -0-(2)        -0-           -0-
---------------------------------------------------------------------------------------------------------------------------
                           2003     -0-        -0-        -0-           -0-             -0-           -0-           -0-
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) All other compensation in the form of perquisites and other personal
benefits has been omitted because the aggregate amount of such perquisites and
other personal benefits constituted the lesser of $50,000 or 10% of the total
annual salary and bonus of the named executive for such year.

(2) Does not include indirect ownership of options to purchase 21,572 shares
of the Company Common Stock granted to AFGVII (of which Mr. Spangenberg is
principal) in connection with the DIP Facility.

Director Compensation

         Directors of the Company who are also employees do not receive cash
compensation for their services as directors or members of committees of the
board of directors of the Company, but are reimbursed for their reasonable
expenses incurred in connections with attending meetings of the board of
directors or management committees of the Company.

Employment Agreements

At December 31, 2005, the Company had an employment agreement with Erich
Spangenberg, Chief Executive Officer, Treasurer and Secretary which provides for
annual compensation of $1.00 per annum.

Individual Option Grants

         During the fiscal years ended December 31, 2005, no options to purchase
shares of Common Stock were granted.

Option Exercises

         During the fiscal year ended December 31, 2005 no employees exercised
any outstanding options and the Company had no options issued and outstanding
held by employees.


ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

                                       16
<PAGE>

         Except as otherwise indicated, the following table sets forth certain
information regarding the beneficial ownership of the Company's Common Stock at
December 31, 2005, by (i) each of the Company's directors and officers, (ii)
each person or entity who beneficially owned more than five percent of the
Company's Common Stock or Preferred Stock, and (iii) all directors and officers
of the Company as a group. Unless otherwise indicated, all addresses are care of
the Company at its executive offices.


          Name and Address of
           Beneficial Owner               Class of Security     Percent of Class
           ----------------               -----------------     ----------------
Acclaim Financial Group Ventures II,           56,951(2)             46.85%
LLC
NMPP, Inc.                                     25,482(3)             25.47%
Erich Spangenberg                              60,000(4)             60.00%

Douglas B. Croxall                             35,400(5)             35.40%

David Pridham                                   2,179(6)              2.17%

All Officer and Directors as a                 82,617                67.94%
group (six persons)


         (1) Beneficial ownership is determined in accordance with the
applicable rules under the Exchange Act. In computing the number of shares
beneficially owned by an executive officer or a director and the percentage
ownership of that person, shares of the Company's Common Stock subject to
options held by that person that are currently exercisable, or become
exercisable within 60 days from December 31, 2005, are deemed outstanding.
However, such shares are not deemed outstanding for purposes of computing the
percentage ownership of any other person. For purposes of determining the
individual beneficial ownership percentage, each percentage was calculated based
on the Company's Common Stock outstanding at December 31, 2005 (100,440 shares)
adjusted in the case of each executive officer and director by the of stock
options held by that individual and which are exercisable within 60 days of
December 31, 2005.

         (2) Includes options to purchase 21,572 shares of Common Stock
granted to AFGVII, of which Mr. Spangenberg and Mr. Croxall are principals and
owners. Mr. Spangenberg and Mr. Croxall each disclaim beneficial ownership of
such shares.

         (3) Includes 44 shares of Common Stock which NMPP has the right to
acquire upon request.

         (4) Includes 60,000 shares of Common Stock held indirectly through Mr.
Spangenberg's ownership interest in Acclaim Financial Group Ventures II, LLC and
NMPP, Inc. Mr. Spangenberg disclaims beneficial ownership of such shares.
Excludes the options to purchase 21,572 shares of Common Stock held by Acclaim
Financial Group ventures II, LLC.

         (5) Includes 60,000 shares of Common Stock held indirectly through Mr.
Croxall's ownership interest in Acclaim Financial Group Ventures II, LLC. Mr.
Croxall disclaims beneficial ownership of such shares. Excludes the options to
purchase 21,572 shares of Common Stock.

         (6) Shares held of record by PacStar, Inc. of which David Pridham is
the owner and principal.

ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Erich Spangenberg CEO, Treasurer and Secretary and Chairman of the
Board, and Douglas B. Croxall, Director, are principals of AFGVII. In July 2003,
the Company and AFGVII entered into the DIP Facility. See Item I, Part 1
"BUSINESS--Bankruptcy Proceedings" above. Eric Spangenberg is also a principal
of NMPP which was a secured creditor of the Company and which purchased from ISC
the right to acquire 44 shares (after giving effect to the reverse stock splits
effectuated May 2, 2005 and March 10, 2006) of Common Stock.

                                       17
<PAGE>

ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K

(a) The following exhibits are filed as part of this Annual Report.


Exhibit
Number        Description
-------       -----------
3.1           Amended and Restated Articles of Incorporation*

3.2           Bylaws of the Company (as amended) (1)

4.1           Specimen of Common Stock of the Company (1)

10.1          Credit Agreement between the Company and Acclaim Financial Group
              Ventures II, LLC dated July 15, 2003. (1)

10.2          Settlement Agreement dated March 25, 2004 between the Company and
              Let's Go Shopping, Inc., James McCreary and James B. Babo. (2)

10.3          Employment Agreement with Erich Spangenberg. (3)

10.4          Employment Agreement with William P. Stelt dated February 1,
              2005. (3)

21.1          List of Subsidiaries *

31.1          Certification of Principal Executive Officer Pursuant to Rule
              13a-14(a)/15d-14(a) *

31.2          Certification of Principal Accounting Officer Pursuant to Rule
              13a-14(a)/15d-14(a) *

32.1          Section 1350 Certification *
---------------------------
*        Filed herewith.

(1)     Previously filed with the Commission as an exhibit to the Annual Report
        on Form 10-K for the fiscal year ended December 31, 2001 filed on
        April 1, 2002.

(2)     Filed with the Commission and incorporate by reference from the
        Company's Annual Report on Form 10-KSB for the fiscal year ended
        December 31, 2002 and filed on April 15, 2005.

(3)     Filed with the Commission and incorporate by reference from the
        Company's Annual Report on Form 10-KSB for the fiscal year ended
        December 31, 2004 and filed on April 20, 2005.

                                       18
<PAGE>

(b)     REPORTS ON FORM 8-K.

         Current Report on Form 8-K filed on October 28, 2005.

Item 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

         Audit Fees

         The aggregate fees billed for professional services rendered by the
Company's principal accountant for the audit of its annual financial statements,
review of its financial statements included in its quarterly reports and other
fees that are normally provided by the Company's accountant in connection with
its audits during the fiscal years ended December 31, 2005 and 2004 were $58,555
and $33,000 respectively.

         Audit Related Fees

         The Company did not pay any fees for assurance and related services by
the Company's principal accountant, other than amounts previously reported in
this Item 14 for the fiscal years ended December 31, 2005 and 2004.

         Tax Fees

         The Company did not pay its principal accountant for any professional
services related to tax compliance, tax advices and tax planning for the fiscal
years ended December 31, 2005 and 2004.

         All Other Fees

         During the fiscal year ended December 31, 2005, and 2004, the Company's
principal accountant did not provide any other services and accordingly did not
bill the Company any other fees for the fiscal years ended December 31, 2005 and
2004, except as provided above.

         Audit Committee

         The Company's directors serve as its audit committee and, other than
the tax related fees, have approved all of the above amounts billed to the
Company prior to incurring the expenses associated therewith.

                                       19
<PAGE>

                            AFG ENTERPRISES USA, INC.

                     (Formerly In Store Media Systems, Inc.)

                          (A Development Stage Company)

                              FINANCIAL STATEMENTS

    FOR THE YEAR ENDED DECEMBER 31, 2005 AND THE PERIOD FROM INCEPTION (FEBRUARY
     1, 2005) TO DECEMBER 31, 2005 (SUCCESSOR COMPANY), THE PERIOD JANUARY 1 TO
   JANUARY 31, 2005 AND THE YEAR ENDED DECEMBER 31, 2004 (PREDECESSOR COMPANY)

                                      WITH

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



<PAGE>

                            AFG ENTERPRISES USA, INC.


                          INDEX TO FINANCIAL STATEMENTS



AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2004,
THE ONE MONTH ENDED JANUARY 31, 2005, THE ELEVEN MONTHS ENDED
DECEMBER 31, 2005 AND THE PERIOD FROM INCEPTION (FEBRUARY 1, 2005)
UNTIL DECEMBER 31, 2005.

Report of Independent Registered Public Accounting Firm                      F-3

Balance Sheet as of December 31, 2005                                        F-4

Statement of Operations for the Year Ended December 31, 2004, the
One Month Ended January 31, 2005, the Eleven Months Ended December
31, 2005 and for the Period from Inception (February 1, 2005)
Through December 31, 2005                                                    F-6

Statement of Changes in Stockholders' Deficit For the Period from
December 31, 2004 Through December 31, 2005                                  F-7

Statement of Cash Flows For the Year Ended December 31, 2004, the
One Month Ended January 31, 2005, the Eleven Months Ended December 31,
2005 and for the Period from Inception (February 1, 2005) Through
December 31, 2005                                                            F-8

Notes to Financial Statements                                                F-9



                                      F-2
<PAGE>

REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM

To the Board of Directors
AFG Enterprises USA, Inc.
Palm Desert, CA

We have audited the accompanying balance sheet of AFG Enterprises USA (a
Development Stage Company), Inc. as of December 31, 2005, and the related
statements of operations, changes in stockholders' deficit and cash flows for
the period from inception (February 1, 2005) to December 31, 2005 (Successor
Company), the period from January 1, 2005 through January 31, 2005 (Predecessor
Company), and the year ended December 31, 2004 (Predecessor Company). These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those 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 AFG Enterprises USA, Inc. as of
December 31, 2005 and the results of its operations and its cash flows for the
period from inception (February 1, 2005) to December 31, 2005, the period from
January 1 to January 31, 2005 and the year ended December 31, 2004 in conformity
with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
amounting to $304,024, $5,162 and $223,805 respectively for the periods from
inception (February 1, 2005) through December 31, 2005 (Successor Company),
January 1, 2005 through January 31, 2005 and the year ended December 31, 2004
(Predecessor Company) and stockholders' deficit of $299,019, $2,120,653 and
$2,115,491 as of December 31, 2005 (Successor Company), January 31, 2005
(Predecessor Company), and December 31, 2004 (Predecessor Company),
respectively. This raises substantial doubt about the Company's ability to
continue as a going concern. Management's plans regarding those matters are
described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

/s/ SINGER LEWAK GREENBAUM & GOLDSTEIN

Los Angeles, California
March 8, 2006 except for Note 9,
  for which the date is March 10, 2006


                                      F-3
<PAGE>

                            AFG ENTERPRISES USA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                                 BALANCE SHEET
                               December 31, 2005


                                 ASSETS
                                 ------
                                                            Successor
                                                             Company
                                                              2005
                                                              ----
Current assets:
   Cash and cash equivalents                                $     300
   Other current assets                                         3,471
                                                            ---------
    Total current assets                                        3,771
                                                            ---------
                                                            $   3,771
                                                            =========



   The accompanying notes are an integral part of these financial statements.
                                      F-4
<PAGE>

                            AFG ENTERPRISES USA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                                 BALANCE SHEET
                               December 31, 2005


                 LIABILITIES AND STOCKHOLDERS' DEFICIT
                 -------------------------------------
                                                                    Successor
                                                                     Company
                                                                       2005
                                                                       ----
Liabilities
-----------
Current liabilities:
   Accounts payable                                                $     6,346
   Interest payable                                                     13,074
   Unclaimed class 4 obligations                                         2,370
   Notes payable-related party                                         281,000
                                                                   -----------
    Total current liabilities                                          302,790

Commitments and contingencies

Stockholders' deficit:
   Common stock, $.001 par value; 300,000,000 shares
    authorized, 100,440 issued                                             100
   Additional paid in capital                                            4,904
   Deficit accumulated during the development stage                   (304,024)
                                                                   -----------
    Total stockholders' deficit                                       (299,019)
                                                                   -----------
                                                                   $     3,771
                                                                   ===========



   The accompanying notes are an integral part of these financial statements.
                                      F-5
<PAGE>

                            AFG ENTERPRISES USA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                             STATEMENT OF OPERATIONS

For the Year Ended December 31, 2004, the One Month Ended January 31, 2005, the
    Eleven Months Ended 12/31/2005 and for the Period from February 1, 2005
                      (inception) through December 31, 2005


<TABLE>
<CAPTION>
                                                     Predecessor     Predecessor        Successor         Cumulative
                                                       Company         Company           Company         amounts from
                                                                      One Month       Eleven Months       02/01/2005
                                                                                                          (inception)
                                                                                                            through
                                                         2004        Ended 1/31/05    Ended 12/31/05      12/31/2005
                                                         ----        -------------    --------------     ------------
<S>                                                   <C>              <C>              <C>                <C>
Revenues:
   Coupon handling fees and other                     $       --               --       $        --        $       --

Costs and expenses:
   General and administrative                            125,420            1,860           276,271           276,271
                                                      ----------       ----------       -----------        ----------

     Total costs and expenses                            125,420            1,860           276,271           276,271
                                                      ----------       ----------       -----------        ----------

     Operating loss                                     (125,420)          (1,860)         (276,271)         (276,271)

Other income (expense):
   Litigation settlement                                  60,000               --                --                --
   Interest expense                                     (115,762)          (2,261)          (15,335)          (15,335)
                                                      ----------       ----------       -----------        ----------

     Total other income (expense)                        (55,762)          (2,261)          (15,335)          (15,335)
                                                      ----------       ----------       -----------        ----------

     Loss before reorganization items                   (181,182)          (4,121)         (291,606)         (291,606)

   Reorganization expense                                (42,623)          (1,041)          (12,418)          (12,418)
                                                      ----------       ----------       -----------        ----------

Net loss                                                (223,805)          (5,162)         (304,024)         (304,024)

Preferred stock dividends                                     --               --                --                 --
                                                      ----------       ----------       -----------        ----------

Net loss applicable to common
   stockholders                                       $ (223,805)        $ (5,162)      $  (304,024)       $ (304,024)
                                                      ==========       ==========       ===========        ==========

Basic and diluted net loss per common
   share                                                       *                *       $     (3.03)       $    (3.03)
                                                      ==========       ==========       ===========        ==========

Weighted average common shares
   outstanding                                        78,800,000       78,800,000           100,440           100,440
                                                      ==========       ==========       ===========        ==========
</TABLE>

* Less than ($0.01) per share


   The accompanying notes are an integral part of these financial statements.
                                       F-6
<PAGE>

                            AFG ENTERPRISES USA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                 STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT)


        For the Period from December 31, 2004 through December 31, 2005

<TABLE>
<CAPTION>
                               Preferred stock       Common stock                Additional
                              -----------------   --------------------             paid-in
                              Shares   Amount        Shares       Amount           capital
                              -----------------   -------------  ---------      -------------
<S>                             <C>    <C>          <C>          <C>            <C>
Balance, December 31, 2004         2   $ 500,000    88,126,148   $ 88,126       $ 21,567,220

  Predecessor Company net
    loss for the one month
    ended January 31, 2005

  Reorganization entries
    required under fresh
    start accounting              (2)  $(500,000)  (83,126,148)  $(83,126)      $(21,567,220)

Balance, January 31, 2005         --   $      --     5,000,000   $  5,000                 --
                              -------  ---------   ------------  --------       -------------

  Issuance of additional
    shares as part of
    reorganization                                       4,772   $      5
  Impact of 50 to 1 reverse
    stock split*                                    (4,904,332)    (4,904)             4,904
  Successor Company net
    loss for the eleven
    months February 1
    through 12/31/2005

Balance, December 31, 2005        --          --       100,440   $    100       $      4,904
                              =======  =========   ============  ========       =============

<CAPTION>
                                                                  Deficit
                                                                accumulated
                                                                during the
                                   Stock          Treasury      development
                                subscriptions       stock         stage            Total
                                -------------     --------     ------------     ------------
<S>                               <C>             <C>          <C>              <C>
Balance, December 31, 2004        $ 150,000      $(563,750)    $(23,857,087)    $ (2,115,491)

  Predecessor Company net
    loss for the one month
    ended January 31, 2005                                     $     (5,162)    $     (5,162)

  Reorganization entries
    required under fresh
    start accounting             $(150,000)      $ 563,750     $ 23,862,249     $  2,125,653

Balance, January 31, 2005               --              --               --            5,000
                                ----------       ---------     ------------     ------------

  Issuance of additional
    shares as part of
    reorganization                                                              $          5
  Impact of 50 to 1 reverse
    stock split*
  Successor Company net                                                  --               --
    loss for the eleven
    months February 1
    through 12/31/2005                                         $   (304,024)    $   (304,024)

Balance, December 31, 2005       $      --       $    --       $   (304,024)    $   (299,019)
                                ==========       =========     ============     ============
</TABLE>

* Reflects 50 to 1 reverse stock split which occurred on March 10, 2006.

   The accompanying notes are an integral part of these financial statements.

                                       F-7
<PAGE>

                            AFG ENTERPRISES USA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                             STATEMENT OF CASH FLOWS

            For the Year Ended December 31, 2004, the One Month Ended January
        31, 2005, the Eleven Months ended December 31, 2005 and for the Period
        from February 1, 2005 (inception) through December 31, 2005

<TABLE>
<CAPTION>
                                                        Predecessor     Predecessor       Successor       Successor
                                                          Company         Company          Compnay         Company
                                                                         One Month      Eleven Months     Cumulative
                                                                                                           amounts
                                                                                                             from
                                                           2004        Ended 1/31/05   Ended 12/31/05     inception
                                                           ----        -------------   --------------     ---------
<S>                                                     <C>             <C>              <C>             <C>
Cash flows from operating activities:
   Net loss                                             $ (223,805)     $   (5,162)      $  (304,024)    $ (304,024)
   Adjustments to reconcile net loss to net
    cash used in operating activities:
     Depreciation, amortization and impairment              88,191              --            40,572         40,572
     Amortization of debt issuance costs                    86,667              --                --             --
     Changes in assets and liabilities:
      Other assets                                         (51,375)         14,342            34,142         34,142
      Accounts payable                                       3,476         (26,219)            4,842          4,842
      Interest payable                                      29,095           2,261            13,074         13,074
      Other                                                 48,451        (125,161)          (74,424)       (74,424)
                                                        ----------      -----------      -----------     ----------

     Total adjustments                                     204,505        (134,777)           18,206         18,206
                                                        ----------      -----------      -----------     ----------

     Net cash used in operations                           (19,300)       (139,939)         (285,818)      (285,818)

Cash flows from financing activities:
   Proceeds from notes payable                              20,000         138,248           281,000        281,000
                                                        ----------      ----------       -----------     ----------

     Net cash provided by financing activities              20,000         138,248           281,000        281,000
                                                        ----------      ----------       -----------     ----------

Net increase (decrease) in cash                                700          (1,691)           (4,818)        (4,818)

Cash and cash equivalents at beginning of period             6,109           6,809             5,118          5,118
                                                        ----------      ----------       -----------     ----------

Cash and cash equivalents at end of period              $   6,809       $    5,118       $       300     $      300
                                                        ==========      ==========       ===========     ==========
</TABLE>

During the year ended December 31, 2005 the Company recorded the non cash
settlement of the accounts payable and accrued liabilitities in the amount
$1,557,931 as part of the plan or reorganization



   The accompanying notes are an integral part of these financial statements.
                                       F-8
<PAGE>

                            AFG ENTERPRISES USA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2004 and 2005


1.   Organization and summary of significant accounting policies:

     Organization:

     AFG Enterprises USA, Inc. (formerly In Store Media Systems, Inc.), a Nevada
     corporation, was organized to develop a system for distributing and
     electronically clearing coupons. The Company is considered to be a
     development stage enterprise as more fully defined in Statement No. 7 of
     the Financial Accounting Standards Board. Activities from inception include
     research and development activities, seeking patents, as well as fund
     raising.

     The accompanying consolidated financial statements have been prepared in
     accordance with AICPA Statement of Position 90-7 ("SOP 90-7"), "Financial
     Reporting by Entities in Reorganization under the Bankruptcy Code" and on a
     going concern basis, which contemplates continuity of operations and
     realization of assets and liquidation of liabilities in the ordinary course
     of business. However, as a result of the Restructuring Proceedings, such
     realization of assets and liquidation of liabilities, without substantial
     adjustments and/or changes of ownership, is highly uncertain. While
     operating as a debtor-in-possession ("DIP") under the protection of Chapter
     11 of the Bankruptcy Code, and subject to approval of the Bankruptcy Court,
     or otherwise as permitted in the ordinary course of business, the Debtor,
     may sell or otherwise dispose of assets and liquidate or settle liabilities
     for amounts other than those reflected in the financial statements.
     Further, a plan of reorganization could materially change the amounts and
     classifications in the historical financial statements. (See Note
     9-"Subsequent Events")

     Plan of Reorganization

              On November 12, 2004, a Plan of Reorganization (the "Plan") for
     the Company was filed with the Bankruptcy Court. The Plan was jointly
     proposed by the Company and AFGVII (collectively referred to as the "Plan
     Proponents"). Also on November 16, 2004, a Disclosure Statement to be used
     in soliciting votes to accept or reject the Plan (the "Disclosure
     Statement") was approved by the Bankruptcy Court.

              Confirmation of Plan. On January 20, 2005, the Bankruptcy Court
     confirmed and approved the Plan. On January 31, 2005 all appeal periods
     expired with respect to the Bankruptcy Court confirmation and approval of
     the Plan. On July 26, 2005 the Bankruptcy Court for the District of
     Colorado issued a final decree closing the bankruptcy case.

              Effects of Plan. As a result of the confirmation and
     implementation of the Plan, the following have occurred:

               Transfer of Assets. All assets of the Company owned pre-petition
     or acquired during the Restructuring Proceedings were transferred to the
     reorganized Company free and clear of all liens, claims and interests of
     all creditors and interested parties. The reorganized Company is not liable
     for repayment of any claims except as set forth in the Plan. All other
     debts and liabilities were discharged.

               Name Change. The reorganized Company has changed its name from
     "In Store Media Systems, Inc."

                                      F-9
<PAGE>

                            AFG ENTERPRISES USA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2004 and 2005

1.   Organization and summary of significant accounting policies (continued):

     to "AFG Enterprises USA, Inc."

     Change in Capital Structure. All of the outstanding shares of capital stock
     were reverse split into an aggregate of 10,000 shares of Common Stock of
     the reorganized Company. Upon implementation of the Plan, the Company had
     100,440 shares of Common Stock, and no shares of preferred stock issued
     and outstanding. No options, warrants or other rights to acquire capital
     stock remain outstanding, other than the options to purchase 21,572
     shares of Common Stock held by AFGVII at various prices, ranging from
     $0.05 to $1.50.

     As a result of direct ownership or indirectly through affiliated companies,
     AFGVII controls approximately 63.1% of the stock in the reorganized
     Company.

     Executory Contracts Rejected. All executory contracts, including all
     pre-petition royalty agreements, have been rejected. The Company has
     assumed and continued certain agreements with vendors or suppliers.

     Basis of presentation and management's plans:

     Through January 31, 2005, the Company was operating its business as a DIP
     (the "Debtor") subject to the provisions of the Bankruptcy Code. The
     appropriateness of using the going concern basis for the Company's
     financial statements is dependent upon, among other things: (i) the
     Company's ability to comply with the terms of the DIP credit facility which
     was approved by the Court on July 15, 2003 (the "DIP Facility") and
     provided to the Company by Acclaim Financial Group Venture II, LLC
     ("AFGVII") and any cash management order entered by the Bankruptcy Court in
     connection with the Restructuring Proceedings; (ii) the ability of the
     Company to maintain adequate cash on hand to fund its operations; (iii) the
     ability of the Company to generate cash from operations or the sale of
     assets; (iv) confirmation of a plan of reorganization under the Bankruptcy
     Code; and (vi) the Company's ability to achieve profitability following
     such confirmation. (See Note 9-"Subsequent Events")

     The financial statements do not include any adjustment relating to the
     recoverability and classification of recorded asset amounts or the amount
     and classification of liabilities or other adjustments that might be
     necessary should the Company be unable to continue as a going concern in
     its present form.

     Use of estimates:

     The preparation of financial statements in conformity with accounting
     principles generally accepted in the United States of America 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.

                                      F-10
<PAGE>

                            AFG ENTERPRISES USA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2004 and 2005


1.   Organization and summary of significant accounting policies (continued):

     Income taxes:

     The Company provides for income taxes utilizing the liability approach
     under which deferred income taxes are provided based upon enacted tax laws
     and rates applicable to the periods in which the taxes become payable.
     Property and equipment:

     Property and equipment is recorded at cost. Depreciation commences as items
     are placed in service and is computed using straight-line and accelerated
     methods over their estimated useful lives of five to seven years or the
     term of the lease for leasehold improvements. Maintenance and repairs are
     expensed as incurred, and improvements and major renewals are capitalized.

     Patent costs:

     Patents are stated at cost less accumulated amortization which is
     calculated on a straight-line basis over the useful lives of the assets,
     estimated by management to average 16 years. Research and development costs
     and any costs associated with internally developed patents (with the
     exception of legal costs which are capitalized) and costs incurred to
     establish the technological feasibility of computer software are expensed
     in the year incurred. At 12/31/04 patent costs were impaired and written
     off as impairment expense.

     Impairment of long-lived assets:

     The Company evaluates the potential impairment of long-lived assets in
     accordance with Statement of Financial Accounting Standards No. 144,
     Accounting for the Impairment or Disposal of Long-Lived Assets. The Company
     annually reviews the amount of recorded long-lived assets for impairment.
     If the sum of the expected cash flows from these assets is less than the
     carrying amount, the Company will recognize an impairment loss in such
     period.

     Stock options:

     The Company has adopted the disclosure-only provisions of Statement of
     Financial Accounting Standards No. 123 Accounting for Stock-Based
     Compensation. Accordingly, compensation is recorded only when the quoted
     market price of the Company's stock at the date of grant exceeds the amount
     an employee must pay to acquire the stock.

     Cash equivalents:

     For the purposes of the statement of cash flows, the Company considers all
     highly liquid debt instruments purchased with a maturity of three months or
     less to be cash equivalents.


                                      F-11
<PAGE>

                            AFG ENTERPRISES USA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2004 and 2005


1.   Organization and summary of significant accounting policies (continued):

     Concentrations of credit risk:

     Financial instruments which potentially subject the Company to
     concentrations of credit risk consist principally of cash and cash
     equivalents. The Company's excess cash is deposited in liquid low-risk
     interest bearing accounts within high quality national financial
     institutions.

     Recent accounting pronouncements:

     SFAS No. 151

     In November 2004, the FASB issued SFAS No. 151,"Inventory Costs". SFAS No.
     151 amends the accounting for abnormal amounts of idle facility expense,
     freight, handling costs, and wasted material (spoilage) under the guidance
     in ARB No. 43, Chapter 4,"Inventory Pricing". Paragraph 5 of ARB No. 43,
     Chapter 4, previously stated that ". . . under some circumstances, items
     such as idle facility expense, excessive spoilage, double freight, and
     rehandling costs may be so abnormal as to require treatment as current
     period charges. . . ." This Statement requires that those items be
     recognized as current-period charges regardless of whether they meet the
     criterion of "so abnormal." In addition, this Statement requires that
     allocation of fixed production overheads to the costs of conversion be
     based on the normal capacity of the production facilities. This statement
     is effective for inventory costs incurred during fiscal years beginning
     after June 15, 2005. Management does not expect adoption of SFAS No. 151 to
     have a material impact on the Company's financial statements.

     SFAS No. 152

     In December 2004, the FASB issued SFAS No. 152,"Accounting for Real Estate
     Time-Sharing Transactions". The FASB issued this Statement as a result of
     the guidance provided in AICPA Statement of Position (SOP) 04-2,"Accounting
     for Real Estate Time-Sharing Transactions". SOP 04-2 applies to all real
     estate time-sharing transactions. Among other items, the SOP provides
     guidance on the recording of credit losses and the treatment of selling
     costs, but does not change the revenue recognition guidance in SFAS No.
     66,"Accounting for Sales of Real Estate", for real estate time-sharing
     transactions. SFAS No. 152 amends Statement No. 66 to reference the
     guidance provided in SOP 04-2. SFAS No. 152 also amends SFAS No. 67,
     "Accounting for Costs and Initial Rental Operations of Real Estate
     Projects", to state that SOP 04-2 provides the relevant guidance on
     accounting for incidental operations and costs related to the sale of real
     estate time-sharing transactions. SFAS No. 152 is effective for years
     beginning after June 15, 2005, with restatements of previously issued
     financial statements prohibited. This statement is not applicable to the
     Company.

                                      F-12
<PAGE>

                            AFG ENTERPRISES USA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2004 and 2005


1.   Organization and summary of significant accounting policies (continued):

     SFAS No. 153

     In December 2004, the FASB issued SFAS No. 153,"Exchanges of Nonmonetary
     Assets," an amendment to Opinion No. 29,"Accounting for Nonmonetary
     Transactions". Statement No. 153 eliminates certain differences in the
     guidance in Opinion No. 29 as compared to the guidance contained in
     standards issued by the International Accounting Standards Board. The
     amendment to Opinion No. 29 eliminates the fair value exception for
     nonmonetary exchanges of similar productive assets and replaces it with a
     general exception for exchanges of nonmonetary assets that do not have
     commercial substance. Such an exchange has commercial substance if the
     future cash flows of the entity are expected to change significantly as a
     result of the exchange. SFAS No. 153 is effective for nonmonetary asset
     exchanges occurring in periods beginning after June 15, 2005. Earlier
     application is permitted for nonmonetary asset exchanges occuring in
     periods beginning after December 16, 2004. Management does not expect
     adoption of SFAS No. 153 to have a material impact on the Company's
     financial statements.

     SFAS 154

     In May 2005, the FASB issued Statement of Financial Accounting Standards
     (SFAS) No. 154, "Accounting Changes and Error Corrections", an amendment to
     Accounting Principles Bulletin (APB) Opinion No. 20, "Accounting Changes",
     and SFAS No. 3, "Reporting Accounting Changes in Interim Financial
     Statements". Though SFAS No. 154 carries forward the guidance in APB No.20
     and SFAS No.3 with respect to accounting for changes in estimates, changes
     in reporting entity, and the correction of errors, SFAS No. 154 establishes
     new standards on accounting for changes in accounting principles, whereby
     all such changes must be accounted for by retrospective application to the
     financial statements of prior periods unless it is impracticable to do so.
     SFAS No. 154 is effective for accounting changes and error corrections made
     in fiscal years beginning after December 15, 2005, with early adoption
     permitted for changes and corrections made in years beginning after May
     2005. The Company will implement SFAS No. 154 in its fiscal year beginning
     November 1, 2006. We are currently evaluating the impact of this new
     standard, but believe that it will not have a material impact upon the
     Company's financial position, results of operations or cash flows.

     SFAS 155

     In February 2006, the FASB issued Statement of Financial Accounting
     Standards No. 155, "Accounting for Certain Hybrid Financial Instruments"
     ("SFAS 155"), which amends SFAS No. 133, "Accounting for Derivatives
     Instruments and Hedging Activities" ("SFAS 133") and SFAS No. 140,
     "Accounting for Transfers and Servicing of Financial Assets and
     Extinguishment of Liabilities" ("SFAS 140"). SFAS 155 amends SFAS 133 to
     narrow the scope exception for interest-only and principal-only strips on
     debt instruments to include only such strips representing rights to receive
     a specified portion of the contractual interest or principle cash flows.
     SFAS 155 also amends SFAS 140 to allow qualifying special-purpose entities
     to hold a passive derivative financial instrument pertaining to beneficial
     interests that itself is a derivative instruments. The Company is currently
     evaluating the impact this new Standard, but believes that it will not have
     a material impact on the Company's financial position,

                                      F-13
<PAGE>

                            AFG ENTERPRISES USA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2004 and 2005


1.   Organization and summary of significant accounting policies (continued):

     results of operations or cash flows.

     SFAS No. 123(R)

     In December 2004, the FASB issued SFAS No. 123(R),"Share-Based Payment".
     SFAS 123(R) amends SFAS No. 123,"Accountung for Stock-Based Compensation",
     and APB Opinion 25,"Accounting for Stock Issued to Employees." SFAS
     No.123(R) requires that the cost of share-based payment transactions
     (including those with employees and non-employees) be recognized in the
     financial statements.

     SFAS No. 123(R) applies to all share-based payment transactions in which an
     entity acquires goods or services by issuing (or offering to issue) its
     shares, share options, or other equity instruments (except for those held
     by an ESOP) or by incurring liabilities (1) in amounts based (even in part)
     on the price of the entity's shares or other equity instruments, or (2)
     that require (or may require) settlement by the issuance of an entity's
     shares or other equity instruments. This statement is effective (1) for
     public companies qualifying as SEC small business issuers, as of the first
     interim period or fiscal year beginning after December 15, 2005, or (2) for
     all other public companies, as of the first interim period or fiscal year
     beginning after June 15, 2005, or (3) for all nonpublic entities, as of the
     first fiscal year beginning after December 15, 2005. Management is
     currently assessing the effect of SFAS No. 123(R) on the Company's
     financial statements.

2.   Notes payable

     On July 15, 2003, in connection with the Restructuring Proceedings, the
     Court approved the Company entering into debtor-in-possession credit
     facility (the "DIP Facility") with AFGVII to supplement liquidity and fund
     operations during the Restructuring Proceedings, and potentially beyond
     such period. Under the DIP Facility, an affiliate of AFGVII was required to
     subordinate its claims to any claims of AFGVII arising under the DIP
     Facility. Among other terms, the DIP Facility contemplates: (i) AFGVII
     receiving a priority security interest in all the assets of the Debtor
     (subject to minimal exceptions for professional and trustee fees incurred
     by the Debtor and approved by the Court); (ii) initial borrowings of up to
     $200,000, with a maximum borrowing of up to $3.0 million upon Court
     approval of a plan of reorganization acceptable to AFGVII; (iii) an
     interest rate of 2% per month on all obligations deemed outstanding under
     the DIP Facility; (iv) AFGVII being reimbursed (or such amounts being added
     to amounts deemed outstanding) for all expenses incurred in connection with
     the DIP Facility; (v) maturity of the DIP Facility on the earlier to occur
     of certain specified events or December 31, 2003; (vi) AFGVII being granted
     an option to acquire 20% of the fully diluted equity of the Debtor at
     various prices; and (vii) the Debtor's compliance with various affirmative
     and negative covenants that restrict the operations and ability of the
     Debtor to engage in various transactions.

     The Company's available borrowings and use of borrowings under the DIP
     Facility are restricted in many ways, including the Debtor using any
     borrowings in a manner acceptable to AFGVII as set forth in a budget
     prepared by the Debtor and approved by AFGVII.

                                      F-14
<PAGE>

                            AFG ENTERPRISES USA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2004 and 2005


2. Notes payable (continued):

     On July 15, 2003, the Company took appropriate corporate action to cause
     two representatives of AFGVII to be appointed to the Company's Board of
     Directors (which now consists of three members) and an individual
     designated by AFGVII assumed the role of Chairman, CEO, Secretary and
     Treasurer of the Company.

     On December 31, 2003, AFGVII agreed to waive an event of default under the
     DIP Facility (related to the Debtor's failure to pay amounts due under the
     DIP Facility by such date and the Debtor's failure to have an acceptable
     plan of reorganization approved by the Court), for a period of time to be
     solely determined by AFGVII, with AFGVII reserving the right to declare an
     event of default upon one business day notice to the Debtor. Upon the
     effective date of a final and non-appealable plan of reorganization
     acceptable to AFGVII (an "Approved Plan"), the Company and AFGVII have
     agreed to amend the DIP Facility such that, among other things, (i) AFGVII
     will have a continuing first priority security interest in all of the
     assets of the Company and (ii) the interest rate on all new borrowings will
     be 7% per annum.

     Notes payable-related party at December 31, 2005 consisted of the
     following:

                                                                        2005
                                                                        ----
           7%, secured loan from Acclaim Financial Group Ventures II   281,000
                                                                      --------
                                                                      $281,000
                                                                      ========

3.   Income taxes

      At December 31, 2005, the Company has a net operating tax loss
      carryforward of approximately $17,237,400, and unused tax credits of
      $270,000. Differences between the book and tax net operating loss
      carryforward consists primarily of the treatment of start up costs. The
      loss carryforward has been reduced to the extent of debt discharged as a
      result of the approved plan of reorganization. The utilization of net
      operating loss carryforwards may be limited due to the ownership change
      under the provisions of Internal Revenue Code section 382 and similar
      state provisions. The net operating tax loss carryforward expires as
      follows:

                        2012                    1,945,700
                        2018                      520,000
                        2019                    1,624,300
                        2020                      484,200
                        2021                    4,926,400
                        2022                    3,379,100
                        2023                    1,428,100
                        2024                    1,422,100
                        2025                    1,507,500

                                             $ 17,237,400
                                             ============


                                      F-15
<PAGE>

                            AFG ENTERPRISES USA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2004 and 2005


3.   Income Taxes (cont.):

     At December 31, 2005, total deferred tax assets and valuation allowance are
as follows:

                                                                        2005
                                                                        ----

                Deferred tax assets resulting from:
                  Net operating loss carryforwards                  $ 6,429,550
                  Research and development tax credits                  270,000
                                                                    -----------

                  Total                                               6,699,550
                  Less valuation allowance                           (6,699,550)
                                                                    -----------

                                                                    $        --
                                                                    ===========


     A 100% valuation allowance has been established against the deferred tax
     assets, as utilization of the loss carryforwards and realization of other
     deferred tax assets cannot be reasonably assured.


4.   Stockholders' equity

     Stock warrants:

     The following is a summary of stock warrant activity:

                                                Exercise         Number of
                                                  price            shares
                                                  -----            ------

        Balance at December 31, 2004                             3,150,000
                                                                 =========

        Exercisable at December 31, 2004          $2.00          3,150,000
                                                                 =========

        Discharged in reorganization              $2.00         (3,150,000)
                                                                 =========

        Balance at December 31, 2005                                    --
                                                                 =========


                                      F-16
<PAGE>

                            AFG ENTERPRISES USA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2004 and 2005


     Stock options:

     The following is a summary of stock option activity:

<TABLE>
<CAPTION>
                                                                                 Weighted
                                                                                  average
                                                               Option price      exercise    Number of
                                                                 per share         price       shares
                                                              ---------------   ----------  -----------
<S>                                                           <C>                  <C>      <C>
      Balance December 31, 2004                               $0.001 to $1.50      $0.03     20,182,809

      Options exercisable at December 31, 2004                $0.001 to $0.36      $0.03     20,182,809
                                                              ===============                ==========

      Granted                                                 $            --      $  --             --
      Exercised                                               $            --      $  --             --
      Effect of reverse stock split during the period         $            --      $  --    (18,204,249)
      Effect of reverse Stock Split March 10, 2006                                           (1,056,988)
      Forfeited - Discharged in Bankruptcy                    $0.30 to $.357       $0.31       (900,000)
                                                                                             ----------

      Balance December 31, 2005                               $0.05 to $1.50       $0.76         21,572
                                                                                             ==========

      Options exercisable at December 31, 2005                $0.05 to $1.50       $0.76         21,572
                                                              ===============                ==========
</TABLE>



                                      F-17
<PAGE>

                            AFG ENTERPRISES USA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2004 and 2005


4.   Stockholders' equity (continued):

     The following is additional information with respect to those options and
     warrants outstanding at December 31, 2005:

<TABLE>
<CAPTION>
                                        Weighted
                                         average
                                        remaining        Weighted
                                       contractual        average             Number of
                  Price per share     life in years    exercise price           shares
                  ----------------    -------------    --------------        -----------
<S>                    <C>                 <C>              <C>              <C>
 Options               $0.05               2.58             $0.05                  5,005
                       $0.50               2.58             $0.50                  5,255
                       $1.00               2.58             $1.00                  5,518
                       $1.50               2.58             $1.50                  5,795
                                                                             -----------
                                                                                  21,572
                                                                             ===========

 Warrants              $0.00                0               $0.00                     --
                                                                             ===========
</TABLE>


     The fair value of each option grant is estimated on the date of grant using
     the Black-Scholes option-pricing model. There were no grants in 2005.

5.   Basic and diluted warrants net loss per share

     Basic net loss per share is based on the weighted average number of shares
     outstanding during the periods. Shares issued for nominal consideration are
     considered outstanding since inception. Diluted loss per share has not been
     presented as exercise of the outstanding stock options and warrants would
     have an anti-dilutive effect.

6.   Commitments and contingencies

     As a result of the Restructuring Proceedings, the Company has no lease
     commitments.

7.   Financial instruments

     The carrying values of cash, advances and note receivable-shareholder,
     accounts payable and notes payable (excluding the convertible notes payable
     and related accrued interest) approximated fair value due to the short-term
     maturities of these instruments.


                                      F-18
<PAGE>

                            AFG ENTERPRISES USA, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2004 and 2005


8.   Reorganization expense

     The Company has recorded certain legal expenses as reorganization expenses
     under its Chapter 11 bankruptcy filing. Such treatment is consistent with
     Statement of Position 90-7 as issued by the Accounting Standards Executive
     Committee in November 1990.

9.   Subsequent events

     Reverse Stock Split. On January 20, 2006, the Company filed with the
     Securities and Exchange Commission and mailed to shareholders an
     Information Statement on Form 14C disclosing that a majority of the
     shareholders, by written consent had approved Amended and Restated Articles
     of Incorporation. Such written consent became effective on February 9,
     2006. The Amended and Restated Articles of Incorporation implemented a one
     for fifty (1:50) reverse stock split pursuant to which each 50 shares of
     Common Stock were combined and converted into one share, with fractional
     shares being rounded up to the next whole number of shares. This reverse
     split has been reflected in the 2005 financial statements.

     On March 1, 2006, Messrs. Spangenberg and Pridham resigned as directors of
     the Company.



                                      F-19
<PAGE>

                                   Signatures

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
     Registrant has duly caused this report to be signed on its behalf by the
     undersigned thereunto duly authorized.

     Date: March 14, 2006                       AFG ENTERPRISES USA, INC.
                                                     (Registrant)


                                               By: /s/ Douglas B. Croxall
                                                   -----------------------------
                                                   Douglas B. Croxall, CEO and
                                                   Principal Accounting Officer


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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:

                            AFG ENTERPRISES USA, INC.




Date:    March 14, 2006                         /s/ Douglas B. Croxall
                                               ---------------------------------
                                               Douglas B. Croxall, Director