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, 2003

                                       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) 674-9696
--------------------------------------------------------------------------------
                         (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___ -

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

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

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

<PAGE>



                              AFG ENTERPRISES, INC.
                     (FORMERLY IN STORE MEDIA SYSTEMS, INC.)

                                      INDEX
                                      -----


                                                                        Page No.
                                                                        --------

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

Balance Sheet - December 31, 2002
and March 31, 2003 (unaudited)                                           2 and 3

Statement of Operations - For the Three Months
Ended March 31, 2002 and 2003 and for the Period from
December 30, 1992 (inception) through March 31, 2003 (unaudited)               4

Statement of Changes In Stockholders' Equity
(Deficit) - For the Three Months Ended March 31, 2003 (unaudited)              5

Statement of Cash Flows - For the Three Months
Ended March 31, 2002 and 2003 and for the Period
from December 30, 1992 (inception) through March 31, 2003 (unaudited)          6

Notes to Unaudited Financial Statements                                        7

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION                                                          13

ITEM 3.  CONTROLS AND PROCEDURES                                              18

PART II.     OTHER INFORMATION                                                18

ITEM 1.     LEGAL PROCEEDINGS                                                 18

ITEM 2.   CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER
             PURCHASES OF EQUITY SECURITIES                                   19

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES                                   20

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS               20

ITEM 5.     OTHER INFORMATION                                                 21

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K                                  21


                                       1
<PAGE>

                             AFG ENTERPRISES, INC.
          (FORMERLY IN STORE MEDIA SYSTEMS, INC.-DEBTOR-IN-POSSESSION)
                         (A DEVELOPMENT STAGE COMPANY)
                                 BALANCE SHEET

                      December 31, 2002 and March 31, 2003
                                   (Unaudited)

                                 ASSETS

                                                            2002         2003
                                                         ---------    ---------
Current assets:
   Cash and cash equivalents                             $   4,688    $   2,719
   Inventory                                                 5,454           --
   Other current assets                                     73,533          532
                                                         ---------    ---------

    Total current assets                                    83,675        3,251

Property and equipment, at cost:
   Office furniture and equipment                          256,972      256,972
   Leasehold improvements                                   55,228       55,228
                                                         ---------    ---------

                                                           312,200      312,200

   Less accumulated depreciation and amortization         (168,370)    (177,370)
                                                         ---------    ---------

    Net property and equipment                             143,830      134,830

Other assets:
   Patent costs, net of accumulated amortization of
    $39,862 (2002) and $41,962 (2003)                       96,689       94,588
                                                         ---------    ---------

    Net other assets                                        96,689       94,588
                                                         ---------    ---------

                                                         $ 324,194    $ 232,669
                                                         =========    =========

                            See accompanying notes.


                                       2
<PAGE>

                              AFG ENTERPRISES, INC.
          (FORMERLY IN STORE MEDIA SYSTEMS, INC.-DEBTOR-IN-POSSESSION)
                         (A DEVELOPMENT STAGE COMPANY)
                                 BALANCE SHEET

                      December 31, 2002 and March 31, 2003
                                  (Unaudited)

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                                                       2002            2003
                                                                   ------------    ------------
<S>                                                                <C>             <C>
Liabilities Not Subject to Compromise:
Current liabilities:
   Accounts payable                                                $        532    $      5,118
   Accrued expenses                                                      44,055          94,054
   Interest payable                                                       2,498           7,157
   Notes payable-related party                                               --          12,800
   Short-term notes payable                                             154,400         103,000
                                                                   ------------    ------------

    Total current liabilities                                           201,485         222,129

Liabilities Subject to Compromise:
   Pre-Petition Liabilities net of debt issuance costs of
    $239,166 (2002) and $195,417 (2003)                               1,861,086       1,904,835

Commitments and contingencies

   Stockholders' equity (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                                                 87,553          88,126
   Additional paid-in capital                                        21,349,560      21,354,720
   Stock subscriptions received                                         325,000         325,000
   Treasury stock, at cost; 9,374,742 shares                           (563,750)       (563,750)
   Deficit accumulated during the development stage                 (23,436,740)    (23,598,391)
                                                                   ------------    ------------

    Total stockholders' equity (deficit)                             (1,738,377)     (1,894,295)
                                                                   ------------    ------------

                                                                   $    324,194    $    232,669
                                                                   ============    ============
</TABLE>

                            See accompanying notes.


                                       3
<PAGE>

                             AFG ENTERPRISES, INC.
          (FORMERLY IN STORE MEDIA SYSTEMS, INC.-DEBTOR-IN-POSSESSION)
                         (A DEVELOPMENT STAGE COMPANY)
                            STATEMENT OF OPERATIONS

               For the three Months Ended March 31, 2002 and 2003
  and for the Period from December 30, 1992 (inception) through March 31, 2003
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                         Cumulative
                                                                        amounts from
                                            2002            2003         inception
                                        ------------    ------------    ------------
<S>                                     <C>             <C>               <C>
Revenues:
   Coupon handling fees and other       $      1,158    $         --      $ 19,664 -

Costs and expenses:
   Research and development                       --              --       3,320,137
   General and administrative                662,480          81,290      11,689,400
   Depreciation and amortization              11,064          11,100         392,367
                                        ------------    ------------    ------------

     Total costs and expenses                673,544          92,390      15,401,904
                                        ------------    ------------    ------------

     Operating loss                         (672,386)        (92,390)    (15,382,240)

Other income (expense):
   Interest income                                20              --         105,872
   Litigation settlement                          --              --        (156,250)
   Restructuring costs                            --              --        (222,632)
   Debt conversion costs                     (16,195)             --      (1,437,198)
   Gain/(loss) on sale of assets                  --              --          (2,316)
   Interest expense                           36,103         (55,913)     (5,633,543)
                                        ------------    ------------    ------------

     Total other income (expense)             19,928         (55,913)     (7,346,067)
                                        ------------    ------------    ------------

   Loss before reorganization items         (652,458)       (148,303)    (22,728,307)

Reorganization expense                            --         (13,348)        (29,426)
                                        ------------    ------------    ------------

Net loss (Note 3)                           (652,458)       (161,651)    (22,757,733)

Preferred stock dividends                     20,000              --          90,658
                                        ------------    ------------    ------------

Net loss applicable to common
   stockholders                         $   (672,458)   $   (161,651)   $(22,848,391)
                                        ============    ============    ============

Basic and diluted net loss per common
   share                                $       (.01)              *    $       (.44)
                                        ============    ============    ============

Weighted average common shares
   outstanding                            73,900,000      78,700,000      51,700,000
                                        ============    ============    ============
</TABLE>

   * less than ($.01) per share

                            See accompanying notes.


                                       4
<PAGE>

                             AFG ENTERPRISES, INC.
          (FORMERLY IN STORE MEDIA SYSTEMS, INC.-DEBTOR-IN-POSSESSION)
                         (A DEVELOPMENT STAGE COMPANY)
             STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

                    For the Three Months Ended March 31, 2003
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                 Preferred stock            Common stock                 Additional
                                                            ---------------------------   --------------------------      paid-in
                                                               Shares         Amount         Shares         Amount        capital
                                                            ------------   ------------   ------------   ------------   ------------
<S>                                                         <C>            <C>              <C>          <C>            <C>
Balance, December 31, 2002                                             2   $    500,000     87,552,814   $     87,553   $ 21,349,560

   Common stock issued-in exchange for services (Note 5)              --             --        573,334            573          5,160

   Net loss for the three months ended
    March 31, 2003                                                    --             --             --             --             --
                                                            ------------   ------------   ------------   ------------   ------------

Balance, March 31, 2003                                                2   $    500,000     88,126,148   $     88,126   $ 21,354,720
                                                            ============   ============   ============   ============   ============
<CAPTION>
                                                                                               Deficit
                                                                                             accumulated
                                                                                             during the
                                                               Stock          Treasury       development
                                                            subscriptions       stock            stage          Total
                                                             ------------    ------------    ------------    -----------
<S>                                                          <C>            <C>             <C>             <C>
Balance, December 31, 2002                                   $    325,000   $   (563,750)   $(23,436,740)   $ (1,738,377)

   Common stock issued-in exchange for services (Note 5)               --             --              --           5,733

   Net loss for the three months ended
    March 31, 2003                                                     --             --        (161,651)       (161,651)
                                                             ------------    ------------    ------------    -----------

Balance, March 31, 2003                                      $    325,000   $   (563,750)   $(23,598,391)   $ (1,894,295)
                                                             ============   ============    ============    ============
</TABLE>

                            See accompanying notes.


                                       5
<PAGE>

                             AFG ENTERPRISES, INC.
          (FORMERLY IN STORE MEDIA SYSTEMS, INC.-DEBTOR-IN-POSSESSION)
                         (A DEVELOPMENT STAGE COMPANY)
                            STATEMENT OF CASH FLOWS

               For the Three Months Ended March 31, 2002 and 2003
  and for the Period from December 30, 1992 (inception) through March 31, 2003
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                       Cumulative
                                                                                         amounts
                                                                                          from
                                                           2002           2003          inception
                                                      ------------    ------------    ------------
<S>                                                   <C>             <C>             <C>
Cash flows from operating activities:
   Net loss                                           $   (652,458)   $   (161,651)   $(22,757,733)
   Adjustments to reconcile net loss to net
    cash used in operating activities:
      Depreciation and amortization                         11,064          11,101         392,368
      Loss on disposal of fixed assets                          --              --           2,316
      Restructuring charges                                     --              --         222,632
      Common stock issued for services, patents and
       payables                                            (38,744)          5,733       4,429,766
      Amortization of debt issuance costs                   32,500          43,749       1,921,153
      Reduction in note receivable - related party
       charged to research and development                      --              --         244,311
      Changes in assets and liabilities:
       Accounts receivable and notes receivable              1,067              --         (63,860)
       Inventory                                                --           5,454        (104,380)
       Other assets                                         20,940          18,601         (54,932)
       Accounts payable                                     61,254           4,586       1,168,877
       Interest payable                                     16,364           4,658         956,298
       Other liabilities                                     5,796          50,000         395,964
                                                      ------------    ------------    ------------

      Total adjustments                                    110,241         143,882       9,510,513
                                                      ------------    ------------    ------------

      Net cash used in operations                         (542,217)        (17,769)    (13,247,220)

Cash flows from investing activities:
   Purchase of property and equipment                       (1,342)             --        (382,780)
   Proceeds from sale of property and equipment                 --              --         125,000
   Advances - related party                                     --              --        (244,311)
   Patent costs                                             (1,245)             --        (136,549)
   Lease deposits                                               --              --         (27,880)
   Debt issuance costs                                          --              --         (10,000)
                                                      ------------    ------------    ------------

      Net cash used in investing activities                 (2,587)             --        (676,520)

Cash flows from financing activities:
   Proceeds from sale of common stock                      516,200              --       9,204,534
   Purchase of treasury stock                                   --              --        (520,000)
   Proceeds from sale of preferred stock                        --              --         750,000
   Preferred stock dividends                               (20,000)             --         (80,658)
   Proceeds from stockholder loans                          70,000           3,000           3,000
   Repayments of capital leases                                 --              --         (14,087)
   Proceeds from notes payable                                  --          12,800       5,553,618
   Repayments of notes payable                             (16,797)             --        (969,948)
                                                      ------------    ------------    ------------

      Net cash provided by financing activities            549,403          15,800      13,926,459
                                                      ------------    ------------    ------------

Net increase (decrease) in cash                              4,599          (1,969)          2,719

Cash and cash equivalents at beginning of period            21,457           4,688              --
                                                      ------------    ------------    ------------

Cash and cash equivalents at end of period            $     26,056    $      2,719    $      2,719
                                                      ============    ============    ============
</TABLE>

                            See accompanying notes.


                                       6
<PAGE>

                              AFG ENTERPRISES, INC.
         (FORMERLY IN STORE MEDIA SYSTEMS, INC. - DEBTOR-IN-POSSESSION)
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

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,  2003,  and the results of  operations  and cash
      flows for the periods ended March 31, 2002 and 2003.

      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, 2003 of $1,894,295.  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  7-"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
      7-"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 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


                                       7
<PAGE>

                             AFG ENTERPRISES, INC.
         (FORMERLY IN STORE MEDIA SYSTEMS, INC. - DEBTOR-IN-POSSESSION)
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

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

      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 7 - "Subsequent Events")

2.    New Chairman, President and Chief Executive Officer:

      During  February 2003,  Michael T. Mozer resigned as Chairman,  President,
      and Chief Executive  Officer of the Company.  Donald P. Uhl, the Company's
      previous  Chairman,  President and Chief Executive  Officer  succeeded Mr.
      Mozer.

3.    Notes payable

      Between   February  and  March  2003,  the  Company  received  $12,800  in
      unsecured, non-interest bearing loans from an officer and directors of the
      Company which funds were used to support Company activity.

4.    Income taxes

      No provision for income taxes is required at March 31, 2003,  because,  in
      management's  estimation the Company will not recognize any taxable income
      through December 31, 2003.

5.    Common stock

      During the quarter ended March 31, 2003, the Company issued 573,334 shares
      of restricted  common stock for services  rendered by a consultant and two
      former employees of the Company and recorded an expense of $5,733.

6.    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, 2003, 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.  As of March 31, 2003,  options to
      purchase  1,191,875  shares of the Company's  common stock had expired and
      none of these stock options had been exercised.

7.    Subsequent events

      Between  May and June  2003,  the  Company  received  a net of  $4,300  in
      unsecured, non-interest bearing loans from an officer and directors of the
      Company which funds were used to support


                                       8
<PAGE>

                             AFG ENTERPRISES, INC.
         (FORMERLY IN STORE MEDIA SYSTEMS, INC. - DEBTOR-IN-POSSESSION)
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

7.    Subsequent Events (continued):

      Company activity.

      During May and June 2003,  the  Company  entered  into  negotiations  with
      Acclaim  Financial  Group Venture II, LLC  ("AFGVII")  wherein  subject to
      Bankruptcy Court approval, AFGVII would provide financing to the Company.

      In June 2003,  the Company  discharged  the  liability  it had recorded to
      Unisys   Corporation  for  $498,407  as  a  result  of  the  Restructuring
      Proceedings.

      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 AFGVII to supplement liquidity and fund
      operations during the Restructuring  Proceedings,  and potentially  beyond
      such period.  Under the DIP Facility,  a creditor,  Melissa  McBride,  was
      required to  subordinate  her claims to any claims of AFGVII arising under
      the DIP  Facility.  NMPP,  an affiliate of AFGVII,  subsequently  acquired
      Melissa McBride's claim. 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.

      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  five  members)  and  an  individual
      designated  by AFGVII  assumed the role of Chairman,  CEO,  Secretary  and
      Treasurer of the Company.

      In August 2003 as part of the  Company's  strategy to devote its financial
      resources  primarily to pursuing its  litigation  strategy in an effort to
      maximize recovery,  the Company closed its Aurora,  Colorado location. The
      Company  continues  to be supported  by contract  staff and by  management
      personnel located out of state.

      As part of management's  decision to close the office,  certain accounting
      adjustments were recorded in August 2003 to reflect the disposition of the
      Company's furniture and fixtures along with certain obsolete demonstration
      equipment and other  inventory to the  Company's  landlord in exchange for
      the


                                       9
<PAGE>

                             AFG ENTERPRISES, INC.
         (FORMERLY IN STORE MEDIA SYSTEMS, INC. - DEBTOR-IN-POSSESSION)
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

7.    Subsequent events (continued):

      extinguishment of certain rent obligations which had accrued.

      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.

      The LGS Litigation  was initiated in the Bankruptcy  Court after LGS filed
      suit in the United  States  District  Court for the  Southern  District of
      Georgia (the "Georgia  Action") alleging the Company had breached a patent
      software  license  agreement.  As  a  result  of  the  initiation  of  the
      Restructuring   Proceedings,   the  Georgia   Action  was  stayed.   After
      negotiations  among  representatives  of the Debtor and LGS,  on March 29,
      2004,  the  Debtor  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 Debtor a total of
      $60,000 in cash, all adversary  proceedings  (including the Georgia Action
      and the LGS Litigation) were dismissed, all claims held by the LGS Parties
      were assigned to the Debtor and the Debtor and the LGS Parties  entered in
      mutual releases.

      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 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  classified  the claims  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 Company 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 arrangement  acceptable to such claim holders (such amounts to be
         provided by AFGVII under the DIP Facility).


                                       10
<PAGE>

                             AFG ENTERPRISES, INC.
         (FORMERLY IN STORE MEDIA SYSTEMS, INC. - DEBTOR-IN-POSSESSION)
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

7. Subsequent events (continued):

         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  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  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  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 equaled  approximately  $1,900,000.  Such claims
         were  converted  into their pro rata share of  1,500,000  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  will  be  paid  in  full in cash or
         pursuant to other  arrangement  acceptable  to such claim holders (such
         amounts to be 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
         holder of which  elect to  receive an amount not in excess of $1,000 in
         cash in respect of their claims.  No creditors  elected treatment under
         this Class.

         Class 6--Interests: These interests constitute interests represented by
         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.


                                       11
<PAGE>

                             AFG ENTERPRISES, INC.
         (FORMERLY IN STORE MEDIA SYSTEMS, INC. - DEBTOR-IN-POSSESSION)
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

7.    Subsequent events (continued):

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

      As  a  result  of  its  direct  stock  ownership  and  indirectly  through
      affiliated  companies,  AFGV II will  control  approximately  63.7% of the
      stock in the reorganized debtor.


                                       12
<PAGE>

                             AFG ENTERPRISES, INC.
         (FORMERLY IN STORE MEDIA SYSTEMS, INC. - DEBTOR-IN-POSSESSION)
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

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.

Warrants  issued to  warrant  holders  with  respect  to  convertible  notes and
warrants  issued in 1996,  1997 and 1998 were  initially  valued and recorded as
debt issuance costs which were  subsequently  amortized to interest expense over
the initial  term of the  convertible  notes.  When the  warrants  expired,  the
Company recorded the initial 120-day extension of the warrants at the fair value
of the warrants using the  Black-Scholes  option-pricing  model. As the warrants
were extended for additional 30-day periods, the Company treated the warrants as
stock appreciation rights and adjusted the value of the warrants quarterly based
on the increase or decrease in the market  price of the  Company's  stock.  Upon
conversion of these convertible notes into shares of the Company's common stock,
the Company valued any additional shares of its common stock issued and recorded
any decrease in the warrant  exercise  price,  compared to the original terms of
the conversion option, as debt conversion costs.

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 as compared to


                                       13
<PAGE>

                             AFG ENTERPRISES, INC.
         (FORMERLY IN STORE MEDIA SYSTEMS, INC. - DEBTOR-IN-POSSESSION)
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                                 MARCH 31, 2003


$1,158 for the three months ended March 31, 2002. Additionally,  the Company has
incurred losses of $22,757,733 since inception through March 31, 2003.

At March 31, 2003, the Company had a stockholders' deficit of $1,894,295,  which
reflects  $21,704,096 of paid in capital (net of amount attributable to treasury
stock) less accumulated  deficit of $23,598,391.  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, 2003, the Company
had a working capital deficit of $218,878.

In January  2002,  the Company  raised  $150,000 of equity from ISC enabling the
Company to continue the marketing of its electronic coupon distribution program.
In  February  2002,  the board of  directors  authorized  the  offering of up to
$700,000 of 2002 Units to accredited  investors to continue the marketing of the
electronic  coupon  distribution  program.  In June 2002, the board of directors
authorized an increase in this offering of an additional $122,850 of 2002 Units.
Through March 31, 2003, the Company sold 2,146,221 of its 2002 Units  generating
total net proceeds of $782,186.  During 2002, the Company sold 1,875,146  shares
of common stock generating total net proceeds of $269,105.  In 2002, the Company
received a  subscription  for the sale of 2,000,000  shares for $100,000 from an
officer of the Company.  The Company is unable to provide any assurance  that it
will be able to raise the  additional  funds  necessary  to finance  anticipated
costs  associated with the  commencement of the electronic  coupon  distribution
program and otherwise to implement its business plan and strategy,  as presently
contemplated.

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,  2003,  notes  totaling  $75,000 were
extended and notes totaling  $310,676,  including  accrued interest of $110,676,
have been  converted into 837,712  shares of the Company's  common stock.  As of
March 31, 2003, notes totaling $287,500 (including accrued interest of $176,182)
remain  outstanding and in default.  Through March 31, 2003 the Company remained
burdened with debt  obligations  and a continuing lack of working  capital.  The
raising of additional  equity in the first three  quarters of 2002 relieved some
of the burden  relating  to the debt  obligations  and  provided  the  necessary
funding  to  continue  the   marketing  of  the  Company's   electronic   coupon
distribution  program.  If  the  Company  is  unsuccessful  in  eliminating  all
remaining debt obligations  either through conversion or buyout, the Company may
require the securing of additional  working  capital to continue its program and
operations  as  planned.  Otherwise,  the  Company  may be forced to  curtail or
discontinue  its  operations.

FINANCIAL CONDITION

The Company had $232,669 in total  assets and  $2,126,964  in total  liabilities
(net of debt  issuance  costs of  $195,417)  at March 31,  2003,  as compared to
$324,194 and $2,062,571 (net of debt issuance costs of


                                       14
<PAGE>

                             AFG ENTERPRISES, INC.
         (FORMERLY IN STORE MEDIA SYSTEMS, INC. - DEBTOR-IN-POSSESSION)
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

$239,166) at December 31, 2002, respectively. Accounts payable, accrued expenses
and  liabilities  subject to compromise (net of debt issuance costs) at December
31, 2002 were  $1,905,673  as  compared to  $2,004,007  at March 31,  2003.  The
Company had a working capital deficit of $218,878 at March 31, 2003, as compared
to a working  capital  deficit of $117,810 at December 31, 2002. This difference
primarily is attributed to an increase in accounts  payable and accrued expenses
of $54,585 offset by a decrease in notes payable and accrued interest of $33,941
and a reduction in cash, inventory and prepaid expenses of $80,424.


                                       15
<PAGE>

                             AFG ENTERPRISES, INC.
         (FORMERLY IN STORE MEDIA SYSTEMS, INC. - DEBTOR-IN-POSSESSION)
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

RESULTS OF OPERATIONS

The  Company's  operational  costs  historically  have  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
$15,401,904  from  inception  through  March 31, 2003.  These  expenses  include
$3,320,137 in research and  development  expenses and $11,689,400 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 ceased its support of the
coupon  booklet   program   introduced  at  Piggly  Wiggly  Carolina  Co.,  Inc.
supermarkets.  In the interim, Let's Go Shopping,  Inc. took over responsibility
for the expenses of continuing the Piggly Wiggly operation. See Part II, Item I,
LEGAL PROCEEDINGS.

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

For the quarter  ended March 31, 2003,  the Company  sustained net losses before
reorganization items of $148,303,  as compared to net losses of $652,458 for the
quarter ended March 31, 2002. The decrease in net losses  primarily was due to a
reduction in general and administrative  expenses net of an increase 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.  The Company's  operating expenses for the
quarter  ended March 31, 2003  decreased  by  approximately  86% to $92,390,  as
compared to operating  expenses of $673,544  for the same period last year.  The
decrease  in  operating  expenses  in 2003 was due to  decreases  in general and
administrative  expenses.  General  and  administrative  expenses  decreased  by
$581,190 or 88% to $81,290  for the 2003  fiscal  quarter as compared to general
and  administrative  expenses  of $662,480  for the same  period last year.  The
decrease in general and  administrative  expenses primarily was due to decreases
of $56,859 in  management  consulting  fees  related  to the  Company's  project
management requirements, $72,336 in advertising/promotion,  $13,209 in insurance
expense,  $81,199 in legal and  professional  fees,  $118,642 in licensing fees,
$215,473 in wages and benefits.

The Company's  net  non-operating  expenses  (including  non-operating  interest
income and interest  expense)  increased to $55,913 for the quarter  ended March
31,  2003 as  compared  to net  non-operating  income of $19,928 for the quarter
ended March 31, 2002.  The increase was  primarily  due to increases in interest
expense.  Interest  expense for the quarter  ended March 31, 2003  increased  by
$92,016 as compared to the same period last year. This was


                                       16
<PAGE>

                             AFG ENTERPRISES, INC.
         (FORMERLY IN STORE MEDIA SYSTEMS, INC. - DEBTOR-IN-POSSESSION)
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

due  primarily  to a  decrease  in the  valuation  of  the  warrants  issued  in
connection  with the Company's  debt  offerings as a result of the expiration of
the A, B, and C warrants in June 2002.  Reorganization  expenses for the quarter
ended March 31, 2003 were $13,348.

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,  2003,  the  Company  had  $2,126,964  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, 2003, 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
Company's restricted common stock. Under the extension feature, each note holder
has the option of extending their note and accrued interest to October 31, 2002.
In  consideration  for  extending  their note,  each note holder  would  receive
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 would receive 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,  2003,  notes  totaling  $75,000 have been
extended and notes totaling  $310,676,  including  accrued  interest of $110,676
have been  converted  into 837,712  shares of the  Company's  common  stock.  At
December 31, 2002 and March 31, 2003, 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 $5,118,  accrued  expenses of $101,211,  and short-term note
obligations  totaling $115,800.  The Company's remaining  liabilities subject to
compromise  consisted of continuing payment obligations of $498,407 (at December
31,  2002 and  March  31,  2003) to  Unisys  Corporation,  accounts  payable  of
$665,352,  notes payable of $156,097,  accrued  expenses of $301,910 and accrued
interest  payable of  $190,986  the sum of which were  reduced by debt  issuance
costs of $195,417.  The Company relies on the availability of additional capital
to satisfy all such obligations.


                                       17
<PAGE>

                             AFG ENTERPRISES, INC.
         (FORMERLY IN STORE MEDIA SYSTEMS, INC. - DEBTOR-IN-POSSESSION)
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

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 2002 through  March 31, 2003,  the  Company's  cash
position has  decreased.  At March 31, 2003,  the Company had available  cash of
$2,719,  as  compared to  available  cash of $4,688 at December  31,  2002.  The
decrease  in cash  is a  result  of the  Company  obtaining  short  term  equity
financing  through the offering of the 2002 Units and the issuance of short term
notes payable less operating expenses paid.

In January 2002, the Company  raised an additional  $150,000 of equity from ISC,
enabling  the  Company  to  continue  the  marketing  of its  electronic  coupon
distribution  program.  In February 2002, the board of directors  authorized the
offering of up to $700,000 of 2002 Units to accredited investors.  In June 2002,
the board of directors  authorized an increase in this offering of an additional
$122,850 of these Units. As of March 31, 2003, the Company had sold 2,146,221 of
its 2002 Units  generating  total net  proceeds of $782,186.  In June 2002,  the
Company  finalized an agreement  with Piggly  Wiggly  Carolina to implement  the
Let's Go Shopping coupon booklet program in 115 of their retail  locations.  The
rollout  began with 38 stores on September 26, 2002 and the other 77 stores were
scheduled  to  implement  the  program in  November.  The Company  will  require
additional  capital to finance its operating and/or legal costs through the sale
of equity and/or debt  securities.  Prior to the dispute with Let's Go Shopping,
Inc.,  the Company had entered  into one funding  arrangement,  was  considering
another funding  proposal and had  established  contact with two venture capital
companies  that had an interest  in  providing  funding to the Company  after an
analysis of revenues from Piggly Wiggly operations.  These funding opportunities
were withdrawn following the Company's announcement of the LGS action.

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
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


                                       18
<PAGE>

                             AFG ENTERPRISES, INC.
         (FORMERLY IN STORE MEDIA SYSTEMS, INC. - DEBTOR-IN-POSSESSION)
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

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 lawsuit alleges the Company breached
the contract between LGS and the Company by not paying minimum license fees. The
Plaintiff  has asked the Court for  $435,000  of such fees,  interest  and legal
costs.  The LGS lawsuit  followed the LGS claim that it cancelled the Patent and
License  agreement by LGS,  which was  subsequently  announced by In Store Media
Systems on October 10, 2002.  The Company views the license as in full force and
effect and denies that LGS has the right to terminate  the contract and contends
that the LGS lawsuit is without merit. The Company has engaged counsel to assert
claims  against all parties who may have  misappropriated  the  Company's  trade
secrets or interfered in its business.  The LGS actions  resulted in the loss by
the Company of previously arranged financing  resulting in substantial  damages.
The Company,  which was  expecting  income to be generated by the Piggly  Wiggly
contract,  was not able to pay its creditors on a timely basis.  It has deferred
executive  salaries  totaling $383,232 as of March 31, 2003.  Consequently,  two
officers of the Company  resigned and a third was terminated.  Two of the former
officers,  James Babo and Michael  Eckerman have filed  lawsuits to collect back
pay. 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
obligation  are part of the  obligations  classified and to be discharged in the
Restructuring  Proceedings.

The Board of  Directors  decided 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 LGS Litigation was initiated in the Bankruptcy Court after LGS filed suit in
the United  States  District  Court for the  Southern  District of Georgia  (the
"Georgia  Action")  alleging the Company had breached a patent software  license
agreement. As a result of the initiation of the Restructuring  Proceedings,  the
Georgia  Action was stayed.  After  negotiations  among  representatives  of the
Debtor and LGS, on March 29, 2004,  the Debtor 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  Debtor a total of
$60,000 in cash, all adversary proceedings (including the Georgia Action and the
LGS Litigation) were dismissed, all claims held by the LGS Parties were assigned
to the Debtor and the Debtor and the LGS Parties entered in mutual releases.

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

In January 2002, the Company raised an additional $150,000 of equity from ISC in
exchange for the issuance of 347,222 shares of the Company's  restricted  common
stock,  enabling the Company to continue the marketing of its electronic  coupon
distribution  program.  This  sale  was  made  pursuant  to  an  exemption  from
registration  under  Section  4(2)  of  the  Securities  Act  and  Regulation  D
promulgated thereunder.

In  February  2002,  the board of  directors  authorized  the  offering of up to
$700,000  of 2002 Units to  accredited  investors.  In June  2002,  the board of
directors  authorized  an increase in this  offering of an  additional  $122,850


                                       19
<PAGE>

                             AFG ENTERPRISES, INC.
         (FORMERLY IN STORE MEDIA SYSTEMS, INC. - DEBTOR-IN-POSSESSION)
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

Units.  As of September 30, 2002, the Company had generated total gross proceeds
of $822,851 in exchange for the issuance of  2,146,221  shares of the  Company's
restricted  common  stock.  This sale was made  pursuant to an  exemption  under
Section 4(2) of the Securities Act and Regulation D promulgated thereunder.

During the quarter ended  September 30, 2002, the Company sold 1,451,146  shares
of common stock to three  individuals  generating total proceeds of $235,000 (of
which $120,000 was received in June, 2002). The Company also sold 424,000 shares
of common  stock to other  individuals  for proceeds of $34,105 (net of offering
costs of $3,789).  These sales were made pursuant to an exemption  under Section
4(2) of the Securities Act and Regulation D promulgated thereunder.

During the quarter ended March 31, 2003,  the Company  issued  573,334 shares of
restricted  common stock to a consultant  and two former  employees for services
rendered.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

As of March 31, 2003,  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.

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

None.


                                       20
<PAGE>

                             AFG ENTERPRISES, INC.
         (FORMERLY IN STORE MEDIA SYSTEMS, INC. - DEBTOR-IN-POSSESSION)
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

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,  2003,  options to purchase  3,066,875
shares of the Company's  common stock had been granted to various  employees and
directors  of the  Company.  Additionally,  as of March  31,  2003,  options  to
purchase  1,191,875  shares of the  Company's  common stock  expired and no such
options were exercised.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

      (a) Exhibits

            Exhibit  31.1  Certification  of  CEO  pursuant  to  Section  302 of
            Sarbanes-Oxley

            Exhibit  31.2  Certification  of  CFO  pursuant  to  Section  302 of
            Sarbanes-Oxley

            Exhibit 32 Certification pursuant to Section 906 of Sarbanes-Oxley

      (b) Reports on Form 8-K.

            None.


                                       21
<PAGE>

                              AFG ENTERPRISES, INC.
         (FORMERLY IN STORE MEDIA SYSTEMS, INC. - DEBTOR-IN-POSSESSION)
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

                                   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: April 15, 2005                    AFG ENTERPRISES, INC.
                                        (Registrant)

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



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

                                       22