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 June 30, 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)

                73595 El Paseo Suite 2204, Palm Desert, CA 92261
------------------------------------------------------------------------------
              (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)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days: Yes 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:

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.


<PAGE>

                              AFG ENTERPRISES, INC.
                     (FORMERLY IN STORE MEDIA SYSTEMS, INC.)
                          (A DEVELOPMENT STAGE COMPANY)

                                      INDEX
                                      -----

                                                                        Page No.
                                                                        --------

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

Balance Sheet - December 31, 2003 and June 30, 2004 (unaudited)               2

Statement of Operations - For the Three Months Ended June 30, 2003
and 2004 (unaudited)                                                          4

Statement of Operations - For the Six Months Ended June 30, 2003
and 2004 and for the Period from December 30, 1992 (inception) through
June 30, 2004 (unaudited)                                                     5

Statement  of  Changes  In  Stockholders'  Equity  (Deficit) - For the Six
Months Ended June 30, 2004 (unaudited)                                        6

Statement of Cash Flows - For the Six Months Ended June 30, 2003
and 2004 and for the Period from December 30, 1992 (inception) through
June 30, 2004 (unaudited)                                                     7

Notes to Unaudited Financial Statements                                       8

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION           12

ITEM 3.  CONTROLS AND PROCEDURES                                             16

PART II. OTHER INFORMATION                                                   16
-------- -----------------

ITEM 1.     LEGAL PROCEEDINGS                                                16

ITEM 2.     CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER
                  PURCHASES OF EQUITY SECURITIES                             17

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES                                  17

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS              17

ITEM 5.     OTHER INFORMATION                                                17

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K                                 17

                                       1
<PAGE>

                              AFG ENTERPRISES, INC.
                     (FORMERLY IN STORE MEDIA SYSTEMS, INC.)
                          (A DEVELOPMENT STAGE COMPANY)
                                 BALANCE SHEET
                      DECEMBER 31, 2003 AND JUNE 30, 2004
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 2003             2004
                                                             ------------     ------------
<S>                                                          <C>              <C>
                          ASSETS

Current assets:
   Cash and cash equivalents                                 $      6,109     $      5,044
   Other current assets                                               580            4,173
                                                             ------------     ------------

      Total current assets                                          6,689            9,217

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

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

                                                             $     94,880     $      9,217
                                                             ============     ============
</TABLE>

   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 JUNE 30, 2004
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 2003             2004
                                                             ------------     ------------
<S>                                                          <C>              <C>

          LIABILITIES AND STOCKHOLDERS' (DEFICIT)

Liabilities Not Subject to Compromise
Current liabilities:
   Accounts payable                                          $     49,572     $     47,807
   Accrued expenses                                               284,134          287,256
   Interest payable                                                28,496           42,133
   Notes payable-related party                                     67,100           77,100
   Short-term notes payable                                       106,000          106,000
                                                             ------------     ------------

      Total current liabilities                                   535,302          560,296

Liabilities Subject to Compromise
   Pre-Petition Liabilities net of debt issuance costs of
      $86,667 (2003) and $21,667 (2004)                         1,451,264        1,536,264

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)     (23,828,939)
                                                             ------------     ------------

      Total stockholders' (deficit)                            (1,891,686)      (2,087,343)
                                                             ------------     ------------

                                                             $     94,880     $      9,217
                                                             ============     ============
</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 JUNE 30, 2003 AND 2004
                                   (UNAUDITED)

                                                    2003             2004
                                                ------------     ------------
Revenues:
   Coupon handling fees and other               $         --     $         --

Costs and expenses:
   Research and development                               --               --
   General and administrative                         54,766            4,817
   Depreciation and amortization                      11,100               --
                                                ------------     ------------

      Total costs and expenses                        65,866            4,817
                                                ------------     ------------

      Operating loss                                 (65,866)          (4,817)

Other income (expense):
   Interest income                                        --               --
   Litigation settlement                                  --           10,000
   Restructuring costs                                    --               --
   Debt conversion costs                                  --               --
   Debt forgiveness                                  498,407               --
   Gain/(loss) on sale of assets                          --               --
   Interest expense                                  (48,980)         (39,526)
                                                ------------     ------------

      Total other income (expense)                   449,427          (29,526)
                                                ------------     ------------

   Income (loss) before reorganization items         383,561          (34,343)

Reorganization expense                               (15,030)          (5,574)
                                                ------------     ------------

Net income (loss)                                    368,531          (39,917)
                                                ------------     ------------

Net income (loss) applicable to common
   stockholders                                 $    368,531     $    (39,917)
                                                ============     ============

Basic and diluted net loss per common
   share                                                   *                *
                                                ============     ============

Weighted average common shares
   outstanding                                    78,700,000       78,800,000
                                                ============     ============

   * 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 SIX MONTHS ENDED JUNE 30, 2003 AND 2004
   AND FOR THE PERIOD FROM DECEMBER 30, 1992 (INCEPTION) THROUGH JUNE 30, 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                           136,056          117,981       11,931,128
   Depreciation and amortization                         22,200               --          413,765
                                                   ------------     ------------     ------------

      Total costs and expenses                          158,256          117,981       15,665,030
                                                   ------------     ------------     ------------

      Operating loss                                   (158,256)        (117,981)     (15,645,366)

Other income (expense):
   Interest income                                           --               --          105,872
   Litigation settlement                                     --           10,000         (146,250)
   Restructuring costs                                       --               --         (222,632)
   Debt conversion costs                                     --               --       (1,437,198)
   Debt forgiveness                                     498,407               --          562,321
   Gain/(loss) on sale of assets                             --               --         (122,146)
   Interest expense                                    (104,893)         (78,637)      (5,879,782)
                                                   ------------     ------------     ------------

      Total other income (expense)                      393,514          (68,637)      (7,139,815)
                                                   ------------     ------------     ------------

      Income (loss) before reorganization items         235,258         (186,618)     (22,785,181)

   Reorganization expense                               (28,378)          (9,039)        (203,100)
                                                   ------------     ------------     ------------

Net income (loss)                                       206,880         (195,657)     (22,988,281)

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

Net income (loss) applicable to common
   stockholders                                    $    206,880     $   (195,657)    $(23,078,939)
                                                   ============     ============     ============

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

Weighted average common shares
   outstanding                                       78,700,000       78,700,000       52,400,000
                                                   ============     ============     ============
</TABLE>

   * less than $.01 per share
   ** less than ($.01) per share

   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 CHANGES IN STOCKHOLDERS' (DEFICIT)
                     FOR THE SIX MONTHS ENDED JUNE 30, 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 six months ended
    June 30, 2004                                 --              --              --              --              --
                                        ------------    ------------    ------------    ------------    ------------

Balance, June 30, 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 six months ended
    June 30, 2004                                 --              --         (195,657)        (195,657)
                                        ------------    ------------     ------------     ------------

Balance, June 30, 2004                  $    150,000    $   (563,750)    $(23,828,939)    $ (2,087,343)
                                        ============    ============     ============     ============
</TABLE>

   The accompanying notes are an integral part of these financial statements


                                       6
<PAGE>

                              AFG ENTERPRISES, INC.
                     (FORMERLY IN STORE MEDIA SYSTEMS, INC.)
                          (A DEVELOPMENT STAGE COMPANY)
                              STATEMENT CASH FLOWS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2004
   AND FOR THE PERIOD FROM DECEMBER 30, 1992 (INCEPTION) THROUGH JUNE 30, 2004
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                          Cumulative
                                                                                            amounts
                                                                                             from
                                                            2003             2004          inception
                                                        ------------     ------------     ------------
<S>                                                     <C>              <C>              <C>
Cash flows from operating activities:
   Net loss                                             $    206,880     $   (195,657)    $(22,988,281)
   Adjustments to reconcile net loss to net
     cash used in operating activities:
       Depreciation, amortization and impairment              22,200           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                    87,499           65,000        2,094,903
       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           (3,593)          (4,173)
        Accounts payable                                    (469,540)          (1,765)         679,826
        Interest payable                                       9,881           13,637          991,274
        Other                                                 85,872           23,122          524,185
                                                        ------------     ------------     ------------

       Total adjustments                                    (234,300)         184,592        9,638,586
                                                        ------------     ------------     ------------

       Net cash used in operations                           (27,420)         (11,065)     (13,349,695)

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             6,000               --            6,000
   Repayments of capital leases                                   --               --          (14,087)
   Proceeds from notes payable                                17,100           10,000        5,617,918
   Repayments of notes payable                                    --               --         (969,948)
                                                        ------------     ------------     ------------

       Net cash provided by financing activities              23,100           10,000       14,031,259
                                                        ------------     ------------     ------------

Net increase (decrease) in cash                               (4,320)          (1,065)           5,044

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

Cash and cash equivalents at end of period              $        368     $      5,044     $      5,044
                                                        ============     ============     ============
</TABLE>

   The accompanying notes are an integral part of these financial statements


                                       7
<PAGE>

                              AFG ENTERPRISES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO UNAUDITED FINANCIAL STATEMENTS
                                  June 30, 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 June 30, 2004, and the results of operations and cash flows
      for the periods ended June 30, 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 June 30, 2004 of  $2,087,343.  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 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.

      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

                                       8
<PAGE>
                              AFG ENTERPRISES, INC.
                     (FORMERLY IN STORE MEDIA SYSTEMS, INC.)
                          (A DEVELOPMENT STAGE COMPANY)

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

      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 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 June 30, 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 June 30, 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 June 30, 2004, options to purchase 1,766,875 shares
      of the Company's common stock had expired.


                                       9
<PAGE>

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 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 must 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.

                                       10
<PAGE>
                              AFG ENTERPRISES, INC.
                     (FORMERLY IN STORE MEDIA SYSTEMS, INC.)
                          (A DEVELOPMENT STAGE COMPANY)

4.    Subsequent events (continued):

      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.

      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.

                                       11
<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 six months  ended June 30,  2003 and 2004.  Additionally,  the  Company  has
incurred losses of $22,988,281 since inception through June 30, 2004.

At June 30, 2004, the Company had a stockholders'  deficit of $2,087,343,  which
reflects  $21,741,596 of common stock,  preferred stock and paid in capital (net
of amount attributable to treasury stock) and stock subscriptions  received less
accumulated deficit of $23,828,939.  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 June 30, 2004, the Company had a working  capital
deficit of $551,079.

                                       12
<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
noteholders 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 June 30, 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 June
30, 2004,  notes  totaling  $287,500  (including  accrued  interest of $176,182)
remain  outstanding and in default.  Through June 30, 2004 the Company  remained
burdened with debt obligations and a continuing lack of working capital.

FINANCIAL CONDITION

The Company had $9,217 in total assets and  $2,096,560 in total  liabilities  at
June 30,  2004,  as compared to $94,880 and  $1,986,566  at December  31,  2003,
respectively.  Accounts  payable and accrued  expenses at December 31, 2003 were
$1,237,054 as compared to $1,258,411 at June 30, 2004. The Company had a working
capital  deficit of $551,079 at June 30, 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 $1,357, an
increase in notes  payable  and  accrued  interest of $23,637 and an increase in
other current assets of $3,593 and a reduction in cash of $1,065.

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
$15,665,030  from  inception  through  June 30,  2004.  These  expenses  include
$3,320,137 in research and  development  expenses and $11,931,128 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 has taken
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.

                                       13
<PAGE>

QUARTER ENDED JUNE 30, 2004, COMPARED TO QUARTER ENDED JUNE 30, 2003

For the quarter  ended June 30,  2004,  the  Company  recorded a net loss before
reorganization   items  of  $34,343,   as  compared  to  a  net  income   before
reorganization items of $383,561 for the quarter ended June 30, 2003. The change
was primarily due to receipt of litigation  settlement proceeds less general and
administrative expenses and continuing interest expense in the current period as
compared to a  recognition  of debt  forgiveness  of $498,407  arising  from the
bankruptcy discharge of the obligation to Unisys Corporation in June of 2003.

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 June 30, 2004 decreased by approximately 93% to $4,817 as compared
to operating expenses of $65,866, for the same period last year. The decrease in
operating  expenses in 2004 was due to decreases  in general and  administrative
expenses primarily as a result of closing the Aurora, Colorado offices in August
2003. General and administrative  expenses decreased by $49,949 or 91% to $4,817
for the 2004 fiscal quarter as compared to general and  administrative  expenses
of  $54,766  for the  same  period  last  year.  The  decrease  in  general  and
administrative  expenses  primarily  was due to decreases of $13,124 in contract
labor to  support  the  office,  $1,245 in rent  expense,  $10,357  in legal and
professional   fees,   $19,998  in  wages  and   benefits.   The  Company's  net
non-operating income and expenses (including  non-operating  interest income and
interest  expense)  increased  to net  non-operating  expense of $29,526 for the
quarter ended June 30, 2004 as compared to net non-operating  income of $449,427
for the quarter  ended June 30, 2003.  The increase  was  primarily  due to debt
forgiveness  arising from the bankruptcy  discharge of the Unisys  obligation of
$498,407  recognized in June 2003 as contrasted to the litigation  settlement of
$10,000  recorded in June 2004.  Interest expense for the quarter ended June 30,
2004 decreased by $9,454 as compared to the same period last year.  This was due
primarily to the reduction in the interest rate charged by AFGV II on its credit
facility  with the Company.  Reorganization  expenses for the quarter ended June
30, 2004 were $5,574 as compared to $15,030 in the prior year.

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 June 30,  2004,  the  Company  had  $2,096,560  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 June 30, 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


                                       14
<PAGE>

during  the  1998,  1999,  2000,  and 2001  fiscal  years.  In March  2002,  the
Companyoffered  its  noteholders  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 noteholder had the option of extending  their note and accrued  interest to
October 31, 2002. In  consideration  for extending  their note,  each noteholder
received  options to purchase  shares of the Company's  restricted  common stock
exercisable  at $1.00 per share for each dollar owed the  noteholder as of March
1, 2002  including all accrued  interest.  Under the  conversion  feature,  each
noteholder  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 noteholder  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 June 30,  2004,  notes  totaling
$75,000 were extended and notes totaling $310,676, including accrued interest of
$110,676 were converted into 837,712  shares of the Company's  common stock.  At
December 31, 2003 and June 30, 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  primarily
comprised of accounts  payable of $47,807,  accrued  expenses of $287,256,  note
obligations and accrued  interest  totaling  $225,233.  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 is  reduced  by debt  issuance  costs of
$21,667. 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  June 30, 2004,  the  Company's  cash
position has  decreased.  At June 30, 2004,  the Company had  available  cash of
$5,044,  as  compared to  available  cash of $6,109 at December  31,  2003.  The
decrease in cash is a result of the Company paying operating expenses.

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 June 30, 2004, 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


                                       15
<PAGE>

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.  Whether or not the Company
prevails in its dispute with Let's Go Shopping, Inc., it 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. If the Company
were unable to secure needed additional  capital it would most likely impair the
ability of the Company to meet its obligations in the near or medium term and to
continue operations.

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

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.

                                       16
<PAGE>

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 August 15, 2002, 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 in the
Bankruptcy Proceedings.

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

None.

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 June 30, 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
June 30, 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.

                                       17
<PAGE>


      (b)   Reports on Form 8-K.

                  Current Report on Form 8-K filed on April 1, 2004

                  Current Report on Form 8-K filed on May 3, 2004.

                  Current Report on Form 8-K filed on June 3, 2004.

                                       18
<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

                                       19