UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB


|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the quarterly period ended March 31, 2004

                                       OR

|_|  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15 (d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from                to
                               --------------        -----------------

Commission file number:      000-28515
                             ---------

                              AFG ENTERPRISES, INC.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

          Nevada                                         84-1249735
--------------------------------------------------------------------------------
(State or other jurisdiction of                  (IRS Employer Identification
 incorporation or organization)                   Number)

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

                                 (760) 674-1063
--------------------------------------------------------------------------------
                         (Registrant's telephone number)

                                       N/A
         --------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

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 |_| No |X|

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

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: Yes |_|  No |X|

<PAGE>

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Transitional  Small  Business  Disclosure  Format  (check  one):  Yes|_|  No|X|

The number of shares  outstanding of the issuer's  classes of common stock,  par
value $.001 per share, as of March 31, 2005 is 78,751,406 shares.


                                       2
<PAGE>

                              AFG ENTERPRISES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                                      INDEX
                                      -----


                                                                        Page No.
                                                                        --------

PART I.  FINANCIAL INFORMATION
-------  ---------------------

ITEM 1.  FINANCIAL STATEMENTS

Balance Sheet - December 31, 2003 and March 31, 2004 (unaudited)..............2

Statement  of  Operations  - For the Three  Months Ended March 31, 2003
and 2004 and for the Period from December 30, 1992 (inception) through
March 31, 2004 (unaudited)....................................................4

Statement of Changes In Stockholders' Equity (Deficit) - For the Three
Months Ended March 31, 2004 (unaudited).......................................5

Statement  of Cash Flows - For the Three  Months  Ended  March 31, 2003
and 2004 and for the Period from December 30, 1992 (inception) through
March 31, 2004 (unaudited)....................................................6

Notes to Unaudited Financial Statements.......................................7

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION...........11

ITEM 3.  CONTROLS AND PROCEDURES.............................................14

PART II.     OTHER INFORMATION...............................................15
--------     -----------------

ITEM 1.     LEGAL PROCEEDINGS................................................15

ITEM 2.     CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER
            PURCHASES OF EQUITY SECURITIES...................................15

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES..................................15

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............15

ITEM 5.     OTHER INFORMATION................................................16

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K.................................16

                                       1
<PAGE>

                              AFG ENTERPRISES, INC.
                     (FORMERLY IN STORE MEDIA SYSTEMS, INC.)
                          (A DEVELOPMENT STAGE COMPANY)
                                 BALANCE SHEET
                      DECEMBER 31, 2003 AND MARCH 31, 2004
                                  (UNAUDITED)

                                                               2003        2004
                                                             -------     -------
                                 ASSETS

Current assets:
   Cash and cash equivalents                                 $ 6,109     $ 1,433
   Other current assets                                          580          85
                                                             -------     -------

      Total current assets                                     6,689       1,518

Other assets:
   Patent costs, net of accumulated amortization of
    $48,360 (2003)                                            88,191          --
                                                             -------     -------

      Net other assets                                        88,191          --
                                                             -------     -------

                                                             $94,880     $ 1,518
                                                             =======     =======

   The accompanying notes are an integral part of these financial statements


                                       2
<PAGE>

                              AFG ENTERPRISES, INC.
                     (FORMERLY IN STORE MEDIA SYSTEMS, INC.)
                          (A DEVELOPMENT STAGE COMPANY)
                                 BALANCE SHEET
                      DECEMBER 31, 2003 AND MARCH 31, 2004
                                  (UNAUDITED)

<TABLE>
<CAPTION>


                                                                2003           2004
                                                            ------------    ------------
<S>                                                         <C>             <C>
            LIABILITIES AND STOCKHOLDERS' (DEFICIT)

Liabilities Not Subject to Compromise
Current liabilities:
   Accounts payable                                         $     49,572    $     51,940
   Accrued expenses                                              284,134         285,032
   Interest payable                                               28,496          35,107
   Notes payable-related party                                    67,100          67,100
   Short-term notes payable                                      106,000         106,000
                                                            ------------    ------------

      Total current liabilities                                  535,302         545,179

Liabilities Subject to Compromise
   Pre-Petition Liabilities net of debt issuance costs of
    $86,667 (2003) and $54,167 (2004)                          1,451,264       1,503,765

Commitments and contingencies

Stockholders' (deficit):
   Preferred stock, no par value; 50,000,000 shares
    authorized, 2 shares issued and outstanding
    liquidation preference $520,000                              500,000         500,000
   Common stock, $.001 par value; 150,000,000 shares
    authorized, 87,552,814 (2002) and 88,126,148
    (2003) shares issued                                          88,126          88,126
   Additional paid-in capital                                 21,567,220      21,567,220
   Stock subscriptions received                                  150,000         150,000
   Treasury stock, at cost; 9,374,742 shares                    (563,750)       (563,750)
   Deficit accumulated during the development stage          (23,633,282)    (23,789,022)
                                                            ------------    ------------

      Total stockholders' (deficit)                           (1,891,686)     (2,047,426)
                                                            ------------    ------------

                                                            $     94,880    $      1,518
                                                            ============    ============
</TABLE>

   The accompanying notes are an integral part of these financial statements


                                       3
<PAGE>

                              AFG ENTERPRISES, INC.
                     (FORMERLY IN STORE MEDIA SYSTEMS, INC.)
                          (A DEVELOPMENT STAGE COMPANY)
                            STATEMENT OF OPERATIONS
               FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2004
  AND FOR THE PERIOD FROM DECEMBER 30, 1992 (INCEPTION) THROUGH MARCH 31, 2004
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                         Cumulative
                                                                        amounts from
                                            2003           2004          inception
                                        ------------    ------------    ------------
<S>                                     <C>             <C>             <C>
Revenues:
    Coupon handling fees and other      $         --    $         --      $   19,664

Costs and expenses:
    Research and development                      --              --       3,320,137
    General and administrative                81,290         113,164      11,926,311
    Depreciation and amortization             11,100              --         413,765
                                        ------------    ------------    ------------

      Total costs and expenses                92,390         113,164      15,660,213
                                        ------------    ------------    ------------

      Operating loss                         (92,390)       (113,164)    (15,640,549)

Other income (expense):
    Interest income                               --              --         105,872
    Litigation settlement                         --              --        (156,250)
    Restructuring costs                           --              --        (222,632)
    Debt conversion costs                         --              --      (1,437,198)
    Debt forgiveness                              --              --         562,321
    Gain/(loss) on sale of assets                 --              --        (122,146)
    Interest expense                         (55,913)        (39,111)     (5,840,256)
                                        ------------    ------------    ------------

      Total other income (expense)           (55,913)        (39,111)     (7,110,289)
                                        ------------    ------------    ------------

    Loss before reorganization items        (148,303)       (152,275)    (22,750,838)

Reorganization expense                       (13,348)         (3,465)       (197,526)
                                        ------------    ------------    ------------

Net loss                                    (161,651)       (155,740)    (22,948,364)

Preferred stock dividends                         --              --          90,658
                                        ------------    ------------    ------------

Net loss applicable to common
    stockholders                        $   (161,651)   $   (155,740)   $(23,039,022)
                                        ============    ============    ============

Basic and diluted net loss per common
    share                                          *               *    $       (.43)
                                        ============    ============    ============

Weighted average common shares
    outstanding                           78,700,000      78,800,000      54,100,000
                                        ============    ============    ============
</TABLE>

    * less than ($.01) per share

   The accompanying notes are an integral part of these financial statements


                                       4
<PAGE>

                              AFG ENTERPRISES, INC.
                     (FORMERLY IN STORE MEDIA SYSTEMS, INC.)
                          (A DEVELOPMENT STAGE COMPANY)
                            STATEMENT OF OPERATIONS
                    FOR THE THREE MONTHS ENDED MARCH 31, 2004
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                               Preferred stock                Common stock            Additional
                                         ---------------------------   ---------------------------      paid-in
                                             Shares        Amount          Shares         Amount        capital
                                         ------------   ------------   ------------   ------------   ------------
<S>                                      <C>            <C>            <C>            <C>            <C>
Balance, December 31, 2003                          2   $    500,000     88,126,148   $     88,126   $ 21,567,220

   Net loss for the three months ended
    March 31, 2004                                 --             --             --             --             --
                                         ------------   ------------   ------------   ------------   ------------

Balance, March 31, 2004                             2   $    500,000     88,126,148   $     88,126   $ 21,567,220
                                         ============   ============   ============   ============   ============

<CAPTION>
                                                                         Deficit
                                                                       accumulated
                                                                       during the
                                            Stock        Treasury      development
                                        subscriptions      stock           stage           Total
                                        ------------   ------------    ------------    ------------
<S>                                     <C>            <C>             <C>             <C>
Balance, December 31, 2003              $    150,000   $   (563,750)   $(23,633,282)   $ (1,891,686)

   Net loss for the three months ended
    March 31, 2004                                --             --        (155,740)       (155,740)
                                        ------------   ------------    ------------    ------------

Balance, March 31, 2004                 $    150,000   $   (563,750)   $(23,789,022)   $ (2,047,426)
                                        ============   ============    ============    ============
</TABLE>

   The accompanying notes are an integral part of these financial statements


                                       5
<PAGE>

                              AFG ENTERPRISES, INC.
                     (FORMERLY IN STORE MEDIA SYSTEMS, INC.)
                          (A DEVELOPMENT STAGE COMPANY)
                            STATEMENT OF CASH FLOWS
  AND FOR THE PERIOD FROM DECEMBER 30, 1992 (INCEPTION) THROUGH MARCH 31, 2004
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                       Cumulative
                                                                                         amounts
                                                                                          from
                                                          2003            2004          inception
                                                      ------------    ------------    ------------
<S>                                                   <C>             <C>             <C>
Cash flows from operating activities:
   Net loss                                           $   (161,651)   $   (155,740)   $(22,948,364)
   Adjustments to reconcile net loss to net
    cash used in operating activities:
      Depreciation, amortization and impairment             11,101          88,191         501,956
      Loss on disposal of fixed assets                          --              --         122,146
      Restructuring charges                                     --              --         222,632
      Common stock issued for services, patents and
       payables                                              5,733              --       4,429,766
      Amortization of debt issuance costs                   43,749          32,500       2,062,403
      Reduction in note receivable - related party
       charged to research and development                      --              --         244,311
      Changes in assets and liabilities:
       Accounts receivable and notes receivable                 --              --         (63,860)
       Inventory                                             5,454              --        (104,380)
       Other assets                                         18,601             495             (85)
       Accounts payable                                      4,586           2,368         683,959
       Interest payable                                      4,658           6,611         984,248
       Other                                                50,000          20,899         521,962
                                                      ------------    ------------    ------------

      Total adjustments                                    143,882         151,064       9,605,058
                                                      ------------    ------------    ------------

      Net cash used in operations                          (17,769)         (4,676)    (13,343,306)

Cash flows from investing activities:
   Purchase of property and equipment                           --              --        (382,780)
   Proceeds from sale of property and equipment                 --              --         125,000
   Advances - related party                                     --              --        (244,311)
   Patent costs                                                 --              --        (136,549)
   Lease deposits                                               --              --         (27,880)
   Debt issuance costs                                          --              --         (10,000)
                                                      ------------    ------------    ------------

      Net cash used in investing activities                     --              --        (676,520)

Cash flows from financing activities:
   Proceeds from sale of common stock                           --              --       9,242,034
   Purchase of treasury stock                                   --              --        (520,000)
   Proceeds from sale of preferred stock                        --              --         750,000
   Preferred stock dividends                                    --              --         (80,658)
   Proceeds from (repayments of) stockholder loans           3,000              --           6,000
   Repayments of capital leases                                 --              --         (14,087)
   Proceeds from notes payable                              12,800              --       5,607,918
   Repayments of notes payable                                  --              --        (969,948)
                                                      ------------    ------------    ------------

      Net cash provided by financing activities             15,800              --      14,021,259
                                                      ------------    ------------    ------------

Net increase (decrease) in cash                             (1,969)         (4,676)          1,433

Cash and cash equivalents at beginning of period             4,688           6,109              --
                                                      ------------    ------------    ------------

Cash and cash equivalents at end of period            $      2,719    $      1,433    $      1,433
                                                      ============    ============    ============
</TABLE>

   The accompanying notes are an integral part of these financial statements


                                       6
<PAGE>

                              AFG ENTERPRISES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                                 March 31, 2004

1.    Basis of presentation and management's plans:

      The accompanying  unaudited financial statements have been prepared by the
      Company.  In  the  opinion  of  management,   the  accompanying  unaudited
      financial  statements  contain all adjustments  (consisting of only normal
      recurring  accruals)  necessary for a fair  presentation  of the financial
      position  as of March 31,  2004,  and the results of  operations  and cash
      flows for the periods ended March 31, 2003 and 2004.

      The accompanying financial statements have been prepared assuming that the
      Company  will  continue  as  a  going  concern.  The  Company  is  in  the
      development  stage  and  has  been  primarily  involved  in  research  and
      development   activities,   resulting   in   significant   losses   and  a
      stockholders'  deficit at March 31, 2004 of $2,047,426.  These  conditions
      raise  substantial doubt about its ability to continue as a going concern.
      The financial  statements do not include any adjustments that might result
      from the outcome of this uncertainty.

      On November 12, 2002 (the "Petition Date"),  the Company filed a voluntary
      petition  for  reorganization  under  Chapter  11  of  the  United  States
      Bankruptcy  Code (the  "Restructuring  Proceedings")  in the United States
      Bankruptcy  Court for the District of Colorado (the  "Bankruptcy  Court"),
      seeking   to   restructure   its   operations   and    obligations    (the
      "Restructuring")  in response to a lawsuit  (the "LGS  Lawsuit")  filed by
      LGS,  whom the  Company  believed  was  obligated  to provide  technology,
      intellectual  property  and  services to the Company  under the terms of a
      license  agreement  entered into by the Company and the third party.  As a
      result of the filing of the  Restructuring  Proceedings,  the  Company was
      entitled  to  protection  from  its  creditors.  (See  Note  4-"Subsequent
      Events") As part of the Restructuring Proceedings, the Company changed its
      name to AFG Enterprises, Inc.

      The Company is 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
      4-"Subsequent Events")

      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

                                       7
<PAGE>

1.    Basis of presentation and management's plans (continued):

      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 4 -
      "Subsequent Events")

2.    Income taxes

      No provision for income taxes is required at March 31, 2004,  because,  in
      management's  estimation the Company will not recognize any taxable income
      through December 31, 2004.

3.    Registration of company equity incentive plan

      In February 2002, the Company  completed a Registration  Statement on Form
      S-8 with the Securities  and Exchange  Commission  registering  options to
      purchase  8,866,875  shares  of  the  Company's  common  stock  that  were
      authorized to be issued under the Company's 2000 Omnibus Equity  Incentive
      Plan. As of March 31, 2004, the Company had granted  options to purchase a
      total of  3,066,875  shares  of the  Company's  common  stock  to  various
      employees  and  directors  of the Company and none of these stock  options
      were exercised. As of March 31, 2004, options to purchase 1,766,875 shares
      of the Company's common stock had expired

4.    Subsequent events

      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  and a  hearing  to
      determine whether the Bankruptcy Court should approve the Plan was set for
      January 20, 2005.

      On  December  8,  2004,  solicitation  packages  containing  the  Plan and
      Disclosure  Statement,  various  supporting  documents  and a  ballot,  if
      appropriate, were mailed to known creditors of

                                       8
<PAGE>

4.    Subsequent events (continued):

      the Company and holders of common and  preferred  stock  interests  in the
      Company.  Unless extended by the Plan Proponents or the Bankruptcy  Court,
      all votes to accept or reject the Plan were to be returned by the close of
      business on January 20, 2005.

      Under the  Plan,  various  claim  holders  and  interest  holders  will be
      entitled to receive various  consideration  in respect of their claims and
      interests. The Plan classifies the claim and interest holders into various
      groups that have been 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 constituted  primarily  claims of counsel to the
      Debtor  for fees and  expenses  incurred  post-petition  on  behalf of the
      Company.  Such  claims  will be paid in full in cash or  pursuant to other
      arrangements acceptable to such claim holders (such amounts to be 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 will be  converted  with the Class 2 claim
      into a pro rata  share of  3,000,000  shares  of the  Common  Stock in the
      reorganized  Company to be issued under the Plan (the "Replacement  Common
      Stock").

      Class  2--Secured  Claims 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 will be converted with the Class 1
      claim into a pro rata share of 3,000,000 shares of the Replacement  Common
      Stock.

      Class  3--Allowed  Unsecured  Claims  in Excess of  $1,000:  These  claims
      constituted  allowed unsecured claims held by various  claimants  incurred
      prior to the  Petition  Date who have not elected to be treated as Class 4
      Claims.  These claims are currently estimated at $ 1,900,000.  Such claims
      will be  converted  into their pro rata share of  1,500,000  shares of the
      Replacement Common Stock.

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

      Class  5--Allowed   Administrative   Convenience   Claims:   These  claims
      constituted  claims allowed under ss.11 U.S.C.  ss.503(b) of the Code, the
      holder of which  elected  to  receive an amount not in excess of $1,000 in
      cash in respect of their claims. No creditors elected treatment under this
      Class.

                                       9
<PAGE>

4.    Subsequent events (continued):

      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  are  currently
      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.  All shares of Common Stock and preferred  stock
      will be reverse split into 500,000 shares of the Replacement Common Stock.
      The number of shares subject to AFGVII's  option to purchase  Common Stock
      will be adjusted to reflect the stock split.  The exercise price per share
      is not subject to  adjustment  and will remain at various  prices  ranging
      from $0.001 to $0.03.

      The Bankruptcy Court may confirm a plan of reorganization only upon making
      certain  findings  required  by the  Bankruptcy  Code,  and a plan  may be
      confirmed over the dissent of non-accepting  creditors and equity security
      holders  if  certain  requirements  of the  Bankruptcy  Code are met.  The
      payment rights and other entitlements of pre-petition creditors and equity
      security   holders   may  be   substantially   altered   by  any  plan  of
      reorganization confirmed in the Chapter 11 Case.

      On January 20, 2005, the Bankruptcy Court confirmed and approved the Plan.

      On January  31, 2005 all appeal  periods  with  respect to the  Bankruptcy
      Court confirmation and approval of the Plan expired.

      As  a  result  of  direct  ownership  or  indirectly   through  affiliated
      companies,  AFGVII will  control  approximately  63.7% of the stock in the
      reorganized debtor.

                                       10
<PAGE>

ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

These  discussions may contain  forward-looking  statements.  A  forward-looking
statement may contain words or phrases such as "will continue to be," "will be,"
"continue  to,"  "expect  to,"  "anticipates  that,"  "to be," or "can  impact."
Management  cautions that  forward-looking  statements  are subject to risks and
uncertainties that could cause the Company's actual results to differ materially
from those projected in forward-looking statements.

OVERVIEW

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.  The
preparation of this Quarterly  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.

The Company has relied upon the issuance of shares of its common stock,  options
to purchase  its common  stock and warrants to purchase its common stock to fund
much of the Company's  operations.  The following  describes the methods used to
record various stock related transactions.

Stock issued for services is valued at the market price of the  Company's  stock
at the date of grant.

Compensation related to the issuance of stock options to employees and directors
is recorded at the intrinsic value of the options,  which is the market price of
the  Company's  common stock less the exercise  price of the option at the grant
date.  Compensation  related to the issuance of options to  consultants  for the
purchase of the  Company's  common  stock is recorded at the market price of the
Company's  common  stock  at the  measurement  date.  The  measurement  date  is
generally the date the options are fully vested.

The Company is a development  stage company  engaged in the  development  of its
system for distributing and electronically clearing coupons,  certain components
of which are patented.  The Company generated no revenues from operations during
the three  months ended March 31, 2003 and 2004.  Additionally,  the Company has
incurred losses of $22,948,364 since inception through March 31, 2004.

At March 31, 2004, the Company had a stockholders' deficit of $2,047,426,  which
reflects  $21,741,596 of common stock,  preferred stock and paid in capital (net
of amount  attributable  to  treasury  stock) and  subscriptions  received  less
accumulated deficit of $23,789,022.  The accumulated deficit amount is primarily
the  result of the  amount of  interest  expense  incurred  in  connection  with
short-term  convertible  notes and debentures by the Company and its predecessor
in private transactions in 1996 through 2001, research and development,  general
and  administrative  expenses and the  valuation  of stock  options and warrants
incurred since  inception.  At March 31, 2004, the Company had a working capital
deficit of $543,661.

                                       11
<PAGE>

The Company was seeking to eliminate all remaining debt obligations  through the
conversion or buyout of notes payable. In March 2002, the Company provided these
note holders with the option of extending  their notes through  October 31, 2002
or electing  to convert  their  notes and  accrued  interest  into shares of the
Company's  common stock. As of March 31, 2004,  notes totaling  $75,000 had been
extended and notes totaling  $310,676,  including  accrued interest of $110,676,
had been  converted  into 837,712  shares of the Company's  common stock.  As of
March 31, 2004, notes totaling $287,500 (including accrued interest of $176,182)
remain  outstanding and in default.  Through March 31, 2004 the Company remained
burdened with debt obligations and a continuing lack of working capital.

FINANCIAL CONDITION

The Company had $1,518 in total assets and $2,048,944 in total  liabilities (net
of debt issuance costs of $54,167) at March 31, 2004, as compared to $94,880 and
$1,986,566  (net of debt  issuance  costs of  $86,667)  at  December  31,  2003,
respectively.  Accounts  payable and accrued  expenses at December 31, 2003 were
$1,237,054  as  compared  to  $1,260,320  at March 31,  2004.  The Company had a
working  capital deficit of $543,661 at March 31, 2004, as compared to a working
capital deficit of $528,613 at December 31, 2003.  This difference  primarily is
attributed to an increase in accounts payable and accrued expenses of $3,266 and
an  increase in accrued  interest of $6,611 and a reduction  in cash and prepaid
expenses of $5,171.

RESULTS OF OPERATIONS

From  inception  through  November 12, 2002,  the  Company's  operational  costs
increased or decreased  primarily  due to the  expansion or  contraction  of the
Company's  ongoing  research and development  efforts.  The Company has incurred
operating  expenses of $15,660,213 from inception  through March 31, 2004. These
expenses include $3,320,137 in research and development expenses and $11,926,311
in general  and  administrative  expenses.  The  Company  introduced  its coupon
booklet program in 38 Piggly Wiggly Carolina Co., Inc. supermarkets on September
26, 2002. The costs of installation and promotion  increased  operating expenses
during the period. The remaining 77 Piggly Wiggly supermarkets were scheduled to
activate the coupon booklet program on or about November 1, 2002. However, on or
about  August 6, 2002 the  Company was  notified  by legal  counsel for Let's Go
Shopping,  Inc.  ("LGS")  that in the  opinion of LGS,  the  Patent and  License
Agreement  between the two companies signed November 29, 2001 (the  "Agreement")
required a minimum license fee payment of $435,000 be paid by October 6, 2002 or
the  Agreement  would be  terminated.  In Store Media  Systems  responded to and
disputed this demand.  On October 10, 2002 a  representative  of LGS advised the
Company that  notwithstanding  the  Company's  objections,  LGS  considered  the
Agreement  terminated.  In Store Media Systems disputed this  interpretation and
took vigorous action to enforce the Agreement.  The Company filed for bankruptcy
in November  2002 in order to more  expeditiously  resolve the dispute with LGS.
Thereafter,  the Company  ceased  operations  except  prosecution  of its claims
against LGS and the bankruptcy case. See Part II, Item I, LEGAL PROCEEDINGS.

                                       12
<PAGE>

QUARTER ENDED MARCH 31, 2003, COMPARED TO QUARTER ENDED MARCH 31, 2002

For the quarter  ended March 31, 2004,  the Company  sustained net losses before
reorganization items of $152,275,  as compared to net losses of $148,303 for the
quarter ended March 31, 2003. The increase in operating losses primarily was due
to  continuing  general and  administrative  expenses and a decrease in interest
expense.

As a result  of the LGS  action  and the  bankruptcy  filing,  the  Company  had
terminated  all but two key  employees as of December 31, 2002 and suspended all
development  and research  activities.  In August 2003,  the Company  closed its
office in Aurora,  Colorado as a cost saving  measure.  The Company's  operating
expenses for the quarter ended March 31, 2004  increased by 22% to $113,164,  as
compared to  operating  expenses  of $92,390 for the same period last year.  The
increase in operating  expenses in 2004 was due  primarily to the  impairment of
the Company's patents in the amount of $88,191 combined with a decrease in other
general  and  administrative  expenses.   General  and  administrative  expenses
increased  by $31,874  or  approximately  39% to  $113,164  for the 2004  fiscal
quarter as compared to general  and  administrative  expenses of $81,290 for the
same period last year.  The  increase  in general  and  administrative  expenses
primarily was due to the impairment  expense of $88,191  combined with decreases
of $11,290 in rent and utilities expense, $4,580 in insurance expense, $5,862 in
legal and professional fees, $31,040 in wages and benefits.

The Company's net non-operating  expense (consisting solely of interest expense)
increased  to $39,111  for the  quarter  ended March 31, 2004 as compared to net
non-operating expense (consisting solely of interest expense) of $55,913 for the
quarter  ended  March 31,  2003.  The  decrease  was due to a  reduction  in the
interest rate charged by AFGV II on its credit facility. Reorganization expenses
for the quarter ended March 31, 2004 were $3,465.

LIQUIDITY AND CAPITAL RESOURCES

Since inception,  the Company's principal  requirements for capital have been to
finance the cost of research and development of its coupon selection, dispensing
and  clearing  systems  and  related  technologies,  and  to  pay  for  expenses
associated with securing patent  protection,  formulating its business  strategy
and  developing  strategic  relationships  with  third  parties,  such as Unisys
Corporation,  retailers and product manufacturers.  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.

At March 31,  2004,  the  Company  had  $2,048,944  in current  liabilities  and
liabilities  subject to  compromise,  of which $287,500  (including  $176,182 of
interest accrued thereon) was in the form of convertible,  short-term debentures
issued by the Company and its  predecessor  in private  transactions  during the
1998,  1997 and 1996 fiscal years. At March 31, 2004, the Company was in default
of its  obligations  under the notes  issued to investors by the Company and its
predecessor  in the amount of $287,500  (plus accrued  interest of $176,182).  A
portion of the notes were  converted  into shares of the Company's  common stock
during the 1998,  1999,  2000, and 2001 fiscal years. In March 2002, the Company
offered its note holders the option of extending their notes through October 31,
2002 or electing to convert their notes and accrued interest into shares of the

                                       13
<PAGE>

Company's restricted common stock. Under the extension feature, each note holder
had the option of extending their note and accrued interest to October 31, 2002.
In consideration  for extending their note, each note holder received options to
purchase shares of the Company's  restricted  common stock  exercisable at $1.00
per share for each dollar owed the note holder as of March 1, 2002 including all
accrued interest.  Under the conversion feature, each note holder had the option
of  converting  their note and accrued  interest  into  shares of the  Company's
restricted common stock at $.45 per share. In consideration for converting their
note,  each note holder  received  options to purchase  shares of the  Company's
restricted  common  stock (one option for each share of common  stock) at prices
ranging from $.50 to $.75 per share.  All options  expired on December 31, 2002.
As of March  31,  2004,  notes  totaling  $75,000  had been  extended  and notes
totaling  $310,676,  including  accrued  interest of $110,676 had been converted
into 837,712  shares of the  Company's  common  stock.  At December 31, 2003 and
March 31, 2004,  notes in the aggregate  principal  amount of $287,500  remained
outstanding  classified  as  liabilities  subject to  compromise.  The remaining
portion of the Company's  current  liabilities are comprised of accounts payable
of $51,940,  accrued expenses of $285,032,  short-term note obligations totaling
$173,100 and interest payable of $35,107.  The Company's  remaining  liabilities
subject to compromise  consisted of accounts payable of $632,019,  notes payable
of  $156,097,  accrued  expenses of $291,329  and  accrued  interest  payable of
$190,986 the sum of which were reduced by debt  issuance  costs of $54,167.  The
Company  relies on the  availability  of additional  capital to satisfy all such
obligations.

The Company will require additional capital to continue and complete development
of its  systems,  to market its  products  and  services  and to  implement  its
business strategies.

The  Company  has  limited  access to  additional  sources  of  equity  and debt
financing  and it can  provide  no  assurance  that  additional  funds  will  be
available at all, or if  available,  on  commercially  acceptable  terms or in a
timely manner to enable the Company to continue its operations as expected.

Since the end of fiscal year 2003 through  March 31, 2004,  the  Company's  cash
position has  decreased.  At March 31, 2004,  the Company had available  cash of
$1,433,  as  compared to  available  cash of $6,109 at December  31,  2003.  The
decrease in cash is a result of operating expenses paid.

ITEM 3. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures.

The Company's Chief Executive Officer and Chief Financial Officer have conducted
an evaluation of the Company's  disclosure  controls and procedures as of a date
(the  "Evaluation  Date")  within 90 days  before the  filing of this  quarterly
report.  Based on their  evaluation,  the Company's Chief Executive  Officer and
Chief Financial  Officer have concluded that the Company's  disclosure  controls
and procedures are effective to ensure that information required to be disclosed

                                       14
<PAGE>

by the Company in reports that it files or submits under the Securities Exchange
Act of 1934 is recorded,  processed,  summarized  and  reported  within the time
periods specified in the applicable Securities and Exchange Commission rules and
forms.

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

On October 23, 2002 Let's Go Shopping,  Inc. ("LGS") filed a lawsuit against the
Company for breach of contract in the United  States  District  Court,  Southern
District of Georgia,  Savannah  Division.  The Company  sought to obtain a legal
decision in its dispute with LGS. In order to expedite the decision, the Company
filed a Chapter  11  proceeding  under  the  Bankruptcy  Code in  United  States
Bankruptcy  Court for the District of Colorado on November 12, 2002. The Company
settled all claims and disputes  pursuant to a Settlement  Agreement dated March
25, 2004.

As a result of the litigation with LGS and the bankruptcy,  the Company deferred
executive  salaries totaling $385,982 as of March 31, 2004. Two former officers,
James Babo and Michael  Eckerman  filed lawsuits to collect back pay. The claims
and disputes with James Babo were settled in the  Settlement  Agreement with LGS
and  the  claims  of  Michael  Eckerman  were  discharged  as a  result  of  the
confirmation of the Plan of Reorganization. See Note 4. Subsequent Events to the
Financial Statements.

In addition,  a consultant firm,  Computer Task Group, Inc., has also filed suit
to collect $19,800 plus interest and collection  costs, for consulting  services
rendered  to  the  Company.  The  deferred   compensation  and  consulting  firm
obligations were subsequently discharged in the Restructuring Proceedings.

ITEM 2. CHANGES IN  SECURITIES  AND SMALL  BUSINESS  ISSUER  PURCHASES OF EQUITY
SECURITIES

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

As of March 31, 2004,  the Company was in default on its notes payable issued to
investors  in  1996,  1997,  and  1998  in the  form of  convertible  short-term
debentures  totaling $287,500  (including  accrued interest of $176,182).  These
debentures,  which  originally  matured  between  1997 and 1999,  are in default
because of the Company's inability to repay these obligations as a result of the
Company's insufficient working capital. These obligations were discharged by the
Bankruptcy Proceedings.

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

None.

                                       15
<PAGE>

ITEM 5. OTHER INFORMATION

In February  2002, the Company  completed a  Registration  Statement on Form S-8
with the  Securities  and Exchange  Commission  registering  options to purchase
8,866,875 shares of the Company's common stock, par value $.001 per share,  that
were  authorized to be issued by the Company  under the  Company's  2000 Omnibus
Equity  Incentive  Plan.  As of March 31,  2004,  options to purchase  3,066,875
shares of the Company's  common stock had been granted to various  employees and
directors of the Company;  no such options were exercised.  Additionally,  as of
March 31, 2004,  options to purchase  1,766,875  shares of the Company's  common
stock expired unexercised.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

      (a) Exhibits


            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  Certification pursuant to Section 1350.



      (b) Reports on Form 8-K.

                  Current Report on Form 8-K filed on January 30, 2004.

                  Current Report on Form 8-K filed on March 15, 2004.


                                       16
<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: May 13, 2005                       AFG ENTERPRISES, INC.
                                         (Registrant)


                                         By:  /s/ Erich Spangenberg
                                              ----------------------
                                              Erich Spangenberg, CEO


                                          By: /s/ William P. Stelt
                                              -----------------------
                                              William P. Stelt, CFO


                                       17