-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HATNTb6x1AgP8khfigofW7QrlM07zs6snJv9nBtCoVw7eXoYc1kv+FrqpZOJpQWG manz05l/qnoRcmXcEWNOzw== 0000950144-98-009106.txt : 19980806 0000950144-98-009106.hdr.sgml : 19980806 ACCESSION NUMBER: 0000950144-98-009106 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980805 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SBI COMMUNICATIONS INC CENTRAL INDEX KEY: 0001013453 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATION SERVICES, NEC [4899] IRS NUMBER: 581700840 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: SEC FILE NUMBER: 000-28416 FILM NUMBER: 98677342 BUSINESS ADDRESS: STREET 1: 458 HIGHWAY 278 BY PASS STREET 2: PO BOX 597 CITY: PIEDMONT STATE: AL ZIP: 36272 BUSINESS PHONE: 2054478797 10KSB/A 1 SBI COMMUNICATIONS 10KSB/A 12/31/97 1 Securities and Exchange Commission Washington, D.C., 20549 FORM 10-KSB/A Annual Report Pursuant To Sections 13 Or 15 (d) Of The Securities Exchange Act Of 1934 For the Fiscal Year Ended December 31, 1997 Filed Pursuant To Sections 13 Or 15(D) Of The Securities Exchange Act of 1934 Securities and Exchange Commission File Number O-28416 =============================================================================== SBI Communications, Inc. (Name of small business issuer specified in its charter) =============================================================================== Delaware 58-1700840 (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) Number) Post Office Box 729 103 Firetower Road Leesburg, GA 31763 (912) 759-0701 (Address of Principal executive offices) Issuer's telephone number (Zip code) =============================================================================== Securities registered pursuant to Section 12(b) of the Act: None Securities to be registered pursuant to Section 12(g) of the Act: Common Stock, Par value $0.001 - Preferred Stock, Par Value $5.00 (Title of Class) 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 requirement for the past 90 days. YES X NO __ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definite proxy or information statements incorporation by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. YES X NO __ Registrant's revenues for its most current fiscal year: $544,662.00 Aggregate market value of the voting stock held by non-affiliates as of April 30, 1998: $1,336,360.00 Number of common shares outstanding as of latest practical date at $.001 par value: 5,345,430 Documents Incorporated By Reference: None Location of Exhibit Index: The index of exhibits is contained in part IV herein on page number 49. Transitional Small Business Disclosure Format: Yes ____ No _X__ =============================================================================== Dated April 30, 1998 2 Table of Contents Item Page Number Number Item Caption - ------ ------ ------------ Part I - ------ Item 1. 3 Description of Business Item 2. 16 Description of Properties Item 3. 17 Legal Proceedings. Item 4. 18 Submission of Matters to a Vote of Security Holders Part II - ------- Item 5. 18 Market Price of and Dividends on the Registrant's Common Equity and other Shareholder Matters Item 6. 24 Management's Discussion and Analysis or Plan of Operation Executive Compensation Item 7. 29 Financial Statements and Summary Financial Data Item 8. 43 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Part III - -------- Item 9. 44 Directors, Executive Officers, Promoters and Control Persons Item 10. 46 Executive Compensation Item 11. 47 Security Ownership of Certain Beneficial Owners and Management Item 12. 49 Certain Relationships and Related Transactions Part IV - ------- Item 13. 49 Exhibits, Financial Statement Schedules, and Reports on Form 8-K Signatures 53 - ---------- Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 2 3 PART I ITEM I. DESCRIPTION OF BUSINESS GENERAL SBI Communications, Inc., a publicly held Delaware corporation (the "Company"), was originally organized in the State of Utah on September 23, 1983, under the corporate name Alpine Survival Products, Inc. Its name was changed to Justin Land and Development, Inc., during October of 1984, and to Supermin, Inc., on November 20, 1985. The Company was originally formed to engage in the acquisition of any speculative investment or business opportunity without restriction as to type or classification. On September 29, 1986, Supermin, Inc., concluded a reorganization under Section 368(a)(1)(B) of the Internal Revenue Code of 1954, as amended, pursuant to which it exchanged 200,000 shares of its common stock, $.001 par value (all shares numbers, unless otherwise stated, adjusted to reflect a one for 20 reverse stock split) for all of the capital stock of Satellite Bingo, Inc., a Georgia corporation organized on January 10, 1986, and the originator of the Company's current business (the "SBI Subsidiary"). In conjunction with such reorganization, the former stockholders of the SBI Subsidiary, acquired control of the Company and the Company changed its name to Satellite Bingo, Inc. On March 10, 1988, the Company changed its name to SBI Communications, Inc., its current name, and on January 28, 1993, the Company reincorporated into Delaware through a statutory merger with a wholly owned Delaware subsidiary in reliance on the exemption from registration requirements of Section 5 of the Securities Act of 1933, as amended, provided by Rule 145(a)(2) promulgated thereunder. The Company has three subsidiaries, SBI Communications, Inc., an Nevada corporation; Satellite Bingo, Inc., a Georgia corporation and SBI Communications, Inc., a Alabama corporation. Unless the context requires otherwise, the term "Company" includes SBI Communications, Inc., a publicly held Delaware corporation, and, its subsidiaries, predecessors and affiliates whose operations or assets have been taken over by SBI Communications, Inc., a publicly held Delaware corporation. A report by the National Association of Fund-raising Ticket Manufacturers estimated that in 1992 annual gross receipts to charities in the U. S. from charity bingo games were approximately $2.6 billion. Industry groups estimate the growth rate of the industry at more than 10% annually. Management therefore estimates the U. S. charitable bingo market currently totals approximately $5 billion in annual receipts. Thus, while the charity bingo market is only a small percentage of the total U. S. gaming market, the Company believes that charity bingo is, and will continue to be, an attractive, growing market segment, despite the proliferation of alternative gaming options available to the public. Management believes that Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 3 4 the U. S. commercial bingo industry will remain attractive due to: i) increased customer recognition and participation; ii) favorable demographic trends, including an aging population with increasing disposable income; iii) reduced governmental funding of charities due to budgeting pressures; iv) the trend towards legalization of gaming activities; and v) the requirement in most jurisdictions that charity lessors operate commercial bingo centers and retain responsibility for all staffing and marketing costs. Management is also confident that the Company will prosper in the bingo industry based on: i) management's industry and operational experience; ii) the Company's early entry into the nationally fragmented bingo market, with no competition on a similar scale; and iii) the Company's positioning of its bingo centers in demographically and economically desirable markets, primarily in the southern part of the U. S. BUSINESS OVERVIEW Although state regulations vary, the Company's basic operation is as follows. The Company identifies and analyzes desirable bingo markets that offer favorable population and income demographics. After the Company selects an attractive market for expansion, the Company determines whether it would be more desirable to build a new bingo center or acquire an existing center, if one exists. Building and finishing out a new commercial center, which typically costs $100,000 - $250,000, is often less expensive than acquiring an existing center and allows the Company to potentially earn a higher rate of return and accelerated payback on its investment. Conversely, acquisitions typically cost more than building a comparable new center, but offer certain advantages over building, including: i) greater predictability of investment return since the center's past performance is known, ii) no dilution of the existing bingo market through the addition of another bingo center, and iii) preservation of the Company's cash resources (if the acquisition is funded in whole or in part with seller-financed notes and/or Company stock. The Company will continue to expand through both developments and acquisitions. The Company will only pursue acquisitions of desirable halls that offer proven cash flows and opportunities for enhanced financial performance. Concurrent with new bingo center development or acquisitions, the Company will acquire all necessary operating permits and licenses from the appropriate state or local municipality. After the company selects a site for development or acquisition and initiates legal fulfillment activities, the Company then contacts local charities to promote the Fund-raising possibilities which charity bingo provides. When selecting charities, the Company considers such factors as; i) the charitable cause and presence in the local community; ii) the background of charity officers or trustees; and iii) a charity's financial stability. Once charity selection is complete, the Company assists the charities in the development of an operating plan consistent with current regulations, which may include the creation of a bingo management team comprise of representatives from the participating charities. The management team hires and oversees center employees and volunteers, sets up an accounting system and bank accounts, and hires a center manager/head cashier who manages the center. Lease agreements between the Company and the charities are typically structured on an annual basis, with cancellation options for both parties. The Company believes that short term leases allow it to limit commitments to under-performing charities. After the bingo center is opened, the Company continues to act as a consultant/service provider to the Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 4 5 participating charities, as well as property manager for the building in which the bingo games are held. The Company's role is to ensure profitable operation of the center and help resolve any conflicts that may arise. The Company's primary income is derived from rental payments from the charities for the lease of the building and equipment for bingo sessions at the center. These rental payments are generally controlled by state or local regulations and typically place a cap or ceiling on the amount to be realized by the Company per session (See Item 1 - Government Regulation). The participating charities keep the net proceeds after payment of rent to the Company and payroll costs to the bingo center employees. Additional income may also be earned by the Company through vending and concessions operations, the sale of bingo paper and supplies at certain of the centers and revenues from video gaming, where legal. The thrust of most applicable state or local regulations is to make participating charities responsible for the direct operation of the bingo center and employment and payment of personnel. These regulations generally prohibit management control by the Company, which reduces the Company's staffing obligations and expenses. In addition, most states require that participating charities be responsible for all marketing and advertising activities and expenses. The Company's role as consultant/service provider does permit it to advise in the selection of key employees and the formulation and execution of a center's business plan. The Company normally bears responsibility for all non-personnel and non-advertising costs of a bingo center, including property rental, finish-out of the property for bingo operations, bingo supplies, janitorial services, utilities, maintenance and repairs, security, property taxes, permits and insurance. The Company must be able to cover these expenses, plus corporate overhead, from its charity rental payments in order to earn a profit. However, as a center becomes better established and more profitable, the Company transfers a portion of these expenses to the participating charities. The Company's objective is to allow the operation to run on a "turnkey" basis by the charities to the extent possible. However, because of the Company's substantial investment in opening a bingo center and significant continued commitment in funding operating and overhead costs, the Company must maintain an advisory role with respect to its bingo center operations. The Company and participating charities each has a vested stake in making sure that operations are conducted in a mutually profitable way. The Company's objective is to ensure maximum proceeds from center operations, which allows charities to generate substantial funds, and, in turn, allows the Company to earn the maximum legal rent from leasing its properties to charities. CURRENT OPERATIONS The Company's bingo center strive to offer first class facilities and amenities, are committed to customer satisfaction and offer generous charity support. The Company believes that these principles, together with the Company's management experience, site selection methodology and ability to raise capital, distinguish the Company from direct competition and allow the Company and its charities to mutually prosper. The Company's participating charities raised approximately $300,000 proceeds in 1996 and 1997. The Company's current operations and potential expansions will likely remain focused on the southern part of the U.S. which offers favorable demographics and logistical advantages to the Company. A brief description of the Company's current operations is as follows. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 5 6 ALABAMA (ONE) BINGO CENTER) The Company owns and leases a facility to local charities for bingo operations in Piedmont, Alabama that have been in existence since 1994, respectively. Bingo in Alabama is regulated at the local level with varying laws between counties and cities. Most local laws provide limits on jackpots and the number of weekly charity sessions that can be conducted except in Piedmont with no limits and ten hour sessions, five days a week. FLORIDA The Company will be opening a new facility in Fort Lauderdale, Florida. This facility will open in the third quarter of 1998. The Company website is located in Coral Gables, Florida. CALIFORNIA The Company has a bingo program operating over the PandaAmerica Shopping Network. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 6 7 EXPANSION PLANS The Company continuously reviews industry developments and regulations for potential expansion opportunities. It plans to acquire or develop bingo centers in markets that meet the Company's financial, legal, operational and demographic selection criteria. The Company will continue to target those states that have enacted legislation enabling charities to raise money through bingo and gaming events. Such states recognize that most charities lack the investment capital and/or business acumen to independently establish such centers. These states have provided a regulatory structure that allows commercial lessors such as the Company to act as landlord and source provider to the charities. The Company operates within this regulatory structure and essentially provides the charities with the expertise needed to open and operate a profitable bingo entertainment center. As a public company, the Company benefits from operating in highly regulated markets which levels the competitive playing field. It is imperative that the Company continue to grow its operational revenues. The Company has made a significant investment in assembling its management team and operational infrastructure. This investment cost is now relatively fixed, however, and the Company has the potential to significantly leverage its profitability through incremental revenue increases. The Company will therefore continue to employ an aggressive yet methodical growth strategy. It intends to make strategic expansions in markets with: i) accommodating regulations; ii) amenable charities; iii) favorable demographics (areas with concentrations of middle-lower income earners and/or elderly population); and iv) significant driving distance to competing gaming establishments. Once the Company has made an expansion decision, the success of the venture is determined by: i) site selection; ii) a continued favorable legal environment; iii) successful operations management; and iv) customer acceptance and patronization. The Company intends to grow through both acquisitions and developments. it uses extensive review procedures to evaluate expansion opportunities, including market studies, legal evaluations, financial analyzes and operational reviews. The Company determines development budgets and acquisition prices based on the proposed investment's expected financial performance, competitive market position, risk profile and overall strategic fit within the Company's operational plans. Acquisition terms typically include cash payments, issuance of Company securities and seller-financed notes. Consulting and non-competition agreements may also be included. The Company expects to continue its expansion activities in those markets that allow charity gaming activities. Some states currently allow video gaming in charity centers, while other states are considering the legalization of charity video gaming. Assuming continued government and charity funding shortages and demonstrated customer interest, the Company believes that the number and types of games that charities can offer in conjunction with bingo will continue to increase. Management believes that video gaming such as bingo, blackjack, keno and poker, as well as video pull-tab machines, has tremendous appeal to both existing bingo clientele and potential new customers, and would substantially increase Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 7 8 charity fund-raising and expand the overall market for charity gaming. The Company will remain actively involved in the legislative process of bringing charity gaming to states where the Company operates. OTHER PRODUCTS OR SERVICES AND THEIR MARKETS 1. BROADCAST AND INTERNET The Company has experience in the interactive communications and entertainment fields which brings together elements of the "information superhighway." It has created and broadcast interactive national television programs using state-of-the-art computer technology, proprietary software programs, satellite communications, and advanced telecommunications systems. The Company's management believes that its experience in developing and delivering interactive television programs, as well as its ownership of proprietary systems and software, provide an advantage in its ability to launch new entertainment and information programs based on comparable resources. A. GLOBALOT BINGO INTRODUCTION Globalot Bingo and Satellite Bingo are proprietary interactive Bingo games which were broadcast by the Company in the past via satellite to participating cable and television stations. The Company plans to resume expanded broadcasts in the near future, when it repairs required telephone switching equipment. The use of telephones for game card distribution makes it possible for home viewers to also participate in the Company's broadcast programs. The Globalot Bingo program was designed to provide larger jackpots than participating operations could individually pay, permitting participating cable and broadcast stations to attract larger viewing audiences, increase profits and attract commercial sponsors. A broadcast took place on June 15, 1996; however, subsequent broadcasts have been delayed by a problem with the Company's telephone switching equipment, which should be resolved in the near future. Future plans include expanding the game to other week nights. The game was broadcast over PandaAmerica Network in the past and daily broadcasts resumed during the forth quarter of 1997. The Company intends to broadcast a Million Dollar Globalot game each Saturday evening at 11:00 p.m. (eastern time). Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 8 9 OPERATION In order to play the game each player must be playing a different card or cards. Globalot Bingo has developed a "Super Jackpot Bingo" computer program that can generate a series of one billion individual cards without duplication. Each card is unique and all cards are serially numbered to preclude anyone from submitting a fraudulent cards and/or counterfeiting. Globalot Bingo cards may be obtained by telephone until a specified time. At that point the Company provides the serial number of cards obtained for that night's game to its central processing office. In order to encourage participation and to develop a broad playing audience, Globalot Bingo developed a special Million Dollar Globalot game, designed to air each Saturday evening at 11:00 p.m. (eastern time). A broadcast took place on June 15, 1996; however, subsequent broadcasts have been delayed by a problem with the Company's telephone switching equipment, which should be resolved in the near future. When broadcasts resume, the game will pay the first person who attains Bingo each broadcast night an advertised cash prize. The prizes will involve a chance to win $1,000,000 by being the first participant to cover the correct 8 numbers in 16 calls (the term call referring to the first 16 numbers selected in the game) or less (the "Quick Pick 8" game) or, guaranteed second prizes of $25,000. If there is no winner in the $1,000,000 game, the Company will pay the first person to cover the shaded area or complete the Quick Pick 8 game $5,000. In addition to the Quick Pick 8 game, the Company will award a $20,000.00 dollar grand prize to the first person covering an entire card. Cards obtained to play the Company's 24 hour program will be good for the entire week, including the Saturday Million Dollar Globalot game. As additional players participate, the Company plans to increase the grand prize to $50,000. When the televised game begins, each number being called on the televised show is also recorded by the master computer. The computer system, by monitoring all of the cards in play, is able to determine when a Bingo has occurred and provide the location of the winning card holder. The viewing audience is immediately shown the image of the winning card. All games are called at the rate of approximately one Bingo number every 12-15 seconds in order to allow players to play multiple cards. If it is determined that, based on the cards in play, the call is too fast or too slow, an adjustment is made. The national winner will be called during the broadcast by the program's host, or, may call the Globalot Bingo 800 number shown on the program. Upon contact, the winner will provide the Company's staff Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 9 10 with his or her serial number and other necessary identification, including name and address. The winner is then instructed on how to claim the prize. If for reasons beyond the control of Globalot Bingo the regular telecast and game cannot be broadcast, all prize moneys announced for that week will be added to the jackpot for the next succeeding game. All elements of the broadcast game are being conducted on the Company website. TECHNOLOGY The Company will use proprietary technologies that enable viewers at home to participate in Bingo games televised live in specific English speaking Hispanic markets in the US and Worldwide (local laws permitting). Globalot Bingo has a special telephone number, 800-729-BINGO (2464), which is an access code to gain entry into long distance network. Upon dialing the number a caller hears a 45 second message disclosing who the caller has reached, providing information about Globalot Bingo, the caller's options and how to receive Globalot Bingo playing cards by telephone (including the cost and method of billing). A caller must have a prepaid calling card in order to obtain free Globalot Bingo playing cards via the phone, which must be purchased from the Company. The prepaid calling card also permits the purchaser to make long distance telephone calls at savings of up to 70% from regular long distance rates and will provide access to other services which the Company plans to make available in the future. In the event the caller, (who must be 18 or over), wishes to proceed after the 45 second announcement he or she must activate the system. Upon activation by the caller, the call is automatically switched to the Globalot Bingo card distribution center, and charges for the call begin. The time necessary to receive three Globalot Bingo playing cards by telephone is eight minutes and the caller is charged $9.00 or $1.00 per minute. The charge for the call is deducted from the caller's prepaid calling card. The prepaid calling card may be obtained from the Tele-communications switch via credit cards or by sending in payment to the Company. Interactive players will also be able to obtain a strip of three cards free of any charge by sending a stamped, self addressed envelope to the Company. The Company has established a winners hot-line that will allow card holders to obtain information concerning winning cards. This will allow players to play and win even if they didn't have an opportunity to see the show. This number is 800-684-8493. The Company also has the ability to receive long distance calls from 65 countries for Globalot Bingo playing cards, provided in the same manner as domestic callers except that service is provided in the predominant language used in the originating country. The cost for such calls will differ depending on Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 10 11 the country of origin. The Company receives a portion of each call paid, payment being different in each originating country. International callers can obtain play information over the Internet. The Company's software and communications technology eliminates the need and minimizes the expense related to the printing and distribution of Bingo cards by permitting viewers to receive up to four "cards" (numbers) by phone; and, allows its telephone switching network to handle thousands of calls simultaneously, permitting optimum viewer participation in each game. The use of these technologies also eliminates the need for live operators. The Company's production offices and computer center are located at 1239 South Glendale Avenue, Glendale, California 91205. Its phone number is 1-800-460-2170. Each strip of three cards gives the holder nine chances to win the Super Jackpot Prize. COMPANY'S INCOME The Company's income will be based on the difference between the telephone charges paid by players and the negotiated cost charged to by the participating long distance company. The long distance charges will appear on each caller's prepaid calling card, eliminating collection functions. Since no live operators are employed in recording and processing the calls and awards, the only expenses are related to the prizes offered, production and telecast of the Bingo game and administrative costs. INTERNET The Company websites are located at http://www.sbicommunications.com, http://www.globalot.com and http://www.abingo.com. Shopping, travel, bingo games and other items will be available for the consumer mid-1998. A-bingo club membership will be required, and membership fee will be $19.95 per month. To gain access to the site and take advantage of services and games available you must be a member. All bingo game are free and anyone may acquire free game cards by sending the Company a request and a SASE. Bingo games will be player 24 hours 7 days a week. Members may play all games available. Upon winning, the player will be sent an e-mail disclosing the game number, amount of winnings and be featured in the winners circle. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 11 12 COMPETITION There are currently numerous entities engaged in the operation of commercial bingo entertainment centers in the U. S. Commercial bingo center start-up expenses are generally comprised of site selection and preparation, finish-out, equipment and licensing fees, and typically cost from $100,000 to $250,000 per center. Thus, there are no significant financial barriers to entry. However, rigorous regulatory requirements and legal complexities of the involvement of non-profit organizations serve to reduce the entry of new competitors. Since bingo prize payout are often legally limited, competition, where it exists, is normally focused on a center's amenities. Bingo centers with convenient locations, attractive facilities, maximum bingo prize payout, ample parking, attentive security, comfortable environment, friendly personnel and value-priced concessions usually succeed in their market. The Company seeks to provide the most desirable bingo center(s) in its respective markets in order to generate long-term player loyalty. The Company is committed to ensuring that its bingo centers remain appealing and that its customers are provided maximum comfort and enjoyment. Additional competition within the bingo market comes from charitable bingo operations owned and run by charities. In general, however, such operations have not been able to compete with commercial operations due to, according to most bingo players, smaller and less desirable facilities and amenities, lower bingo prize payout and fewer bingo sessions. Additional competition comes from other sectors of the gaming industry such as lotteries, horse and dog racing and casino operations. While the Company is cognizant of these competing operations, and does try to locate its facilities in areas insulated from such competition, the Company believes that its patrons represent unique, value-oriented customers for whom a day or night of bingo represents a small investment of $10 - $100 that provides several hours of entertainment with payout that rival the average slot machine. Lottery players seek much larger payout with less time commitment, despite the infinitesimal odds. Horse and dog racing bettors and casino patrons do enjoy comparable entertainment value that bingo provides, but generally require longer commutes to the gaming establishment as well as higher investments for the same period of playing time. In addition, these other gaming venues do not provide the socializing value that bingo provides. The Company also recognizes competition from American Indian gaming establishments, which enjoy certain legal, operational and tax advantages. The Company currently has no plans to compete in American Indian gaming markets. 1. BROADCAST INTERACTIVE TECHNOLOGY A number of important trends support management's belief that the Company is re-entering the interactive television programming market at the right time with the right products. As the phenomenon known as the "Information Superhighway" continues to shape the way people Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 12 13 communicate with one another, receive information and facilitate transactions, a number of events are beginning to occur. Numerous books and recent articles indicate that people are becoming more comfortable with services and entertainment offered in the privacy of their own home through their telephones or personal computers. The data highway also known as the National Information Infrastructure (NII), is helping facilitate this trend by linking homes, offices and entertainment sources into one big network. The data highway and its ability to reach millions of consumers is providing unprecedented opportunities for manufacturers and marketers of products and services. These companies are being challenged to find ways to use advanced technology, like interactive technology, to make it easy for consumers to find out about and purchase their products and services. Popular examples of interactive technology in the consumer market include on-line computer services (like Prodigy and CompuServe), voice automated telephone services (like consumer banking and financial services), and at-home television shopping services (like the Home Shopping Network). The success of these have convinced management that interactive television programming like that being offered will be well received by a public that continues to accept more and more interactive technology into their daily lives. THE BINGO AND GAMING INDUSTRY Bingo is derived from as Italian lottery game initiated in 1530, and still held every Saturday in Italy. It grew throughout Europe over the next two centuries. In 1929, a game called "Beano" was played at a carnival near Atlanta, Georgia. The game was played with dried beans, a rubber number stamp and some cardboard. Players won when they filled a line of numbers on their card. The game of "Bingo" moved to New York, and quickly spread up and down the East Coast. By 1934, an estimated 10,000 bingo games were played every week. In 1996, approximately $6 Billion was spent on active bingo in North America alone. There are 64,000 charitable bingo centers in North America with over 60,000 organizations licensed to operate bingo. Bingo is the most accepted form of gaming by the public. There are approximately 60 millions people who visit a bingo facility each month and spend an average of $18.00 per visit. Bingo is expected to maintain or possibly increase its market share of total gaming industry receipts consistent with an aging U.S. population, which has more disposable income and time and enjoys playing bingo more than other age groups. Management believes that the past success of the Company's interactive bingo programs are evidence that the game is as popular as ever among people around the world. Recent statistics generated by the United States government seem to strongly support this belief. According to a recent survey of American Gambling Attitudes and Behavior conducted by the United States Commission on the Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 13 14 Review of a National Policy Toward Gambling, bingo is the fourth leading "entertainment sport" in the United States, generating some 60,000,000 spectators and/or participants each month. This figure represents 7,300,000 more participants/spectators than Major League Baseball attracts and almost 40,000,000 more participants/spectators than NFL Football and NBA Basketball attracts. The survey also shows that the game has equal appeal among genders. Approximately 30% of bingo players have an income of $25,000 and over, and bingo players are more likely to use their leisure time by doing indoor activities such as reading books, newspapers and magazines. As Americans become older as a population and choose to spend more time at home, management believes that interactive television programs like those it plans to offer will increase in popularity. Current statistics indicate that persons 65 and older that play Bingo play the game at least once a week. These research findings and past experience support management's belief that bingo is as popular as ever and that there is a viable market opportunity for the Company's nationally and internationally interactive broadcast programs THE COMPANY'S COMPETITIVE POSITION The Company has no direct local competition for its current operations (the operation of its facility in Piedmont, Alabama). However, its operations are in competition with all aspects of the entertainment industry, both locally and nationally. BROADCAST BINGO The Company competes with all broadcast game shows and, more generally, all types of broadcast promotions designed to increase audience share and advertising revenues. Management is not aware of any nationally broadcasted bingo shows. Some locally-originated shows exist in various locations. Management believes, without assurance, that it has a competitive edge over other broadcast bingo promotions since Ron Foster originated the concept and has been promoting it since 1984. Management believes that the Company has established a reputation of equitable and complete service to the broadcast and gaming industry. With respect to game shows and other types of broadcast promotion, management believes that the simplicity of the bingo game and its mass audience appeal enables the Company to successfully compete with other game shows. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 14 15 OTHER ACTIVITIES The Company is not an established participant in the other areas in which it expects to operate; however, management believes that the fields involve rapidly developing markets which no single entity currently dominates, with great opportunities for entry level participants possessing an understanding of developing technologies. Consequently, although the interactive television fields are highly competitive and include major cable television and telephone companies, management is confident that its endeavors constitute a niche in which it can successfully compete. 2. SOURCES AND AVAILABILITY OF RAW MATERIALS AND THE NAMES OF PRINCIPAL SUPPLIERS None of the Company's proposed activities are reliant on raw materials. Rather, they depend on the ability to exploit emerging technologies that are expected to be readily available. 3. DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS The Company's current operations are highly reliant on local charities. Its former broadcast operations and contemplated future operations are not expected to be reliant on any single or small group of customers. EMPLOYEES As of December 31, 1997, the Company had 12 permanent employees, including four officers, three professional staff, three maintance and five kitchen staff. The Company also retains the services of property managers who oversee the hall maintance & grounds in Alabama. No employee of the Company is represented by a labor union or is subject to a collective bargaining agreement. PREMISES Frontier Palace 458 Highway 278 Bypass - Piedmont, Alabama 36272 Company-owned GOVERNMENT REGULATION Approximately 45 states and the District of Columbia have enacted laws permitting and controlling the operation of bingo centers. A small but growing number of these states also allow video gaming in charity sponsored centers. The Company complies within this regulated structure as both landlord and consultant/service provider to the charities. In most states the Company is required to obtain and maintain permits and/or licenses from state and local regulatory agencies. State regulations often limit Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 15 16 the dollar amount that the Company can charge a charity for rent per bingo session. Some states also limit the number of weekly sessions that may be conducted in a given bingo center, as well as the prize money that a charity may pay out per session. The Company views this situation as a "double-edged sword," however, because the regulatory limitations and complexities discourage new competitors that lack the Company's experience and charity relationships. However, there can be no assurance that current laws and regulations will not be changed or interpreted in such a way as to require the Company to further restrict its activities or rentals. It is also possible that liberalization of such regulations in certain areas would diminish the Company's competitive advantage. In states that limit the number of charity sessions, the Company recruits a sufficient number of local charities to ensure that the maximum number of sessions are conducted. All states providing for the operation of charity bingo centers have unique regulations. While the vast majority of these states assign the regulation of charity bingo to a state agency, in some states, regulation is under the control of localities. The requirements typically imposed on a commercial bingo lessor include the acquisition of necessary licenses and permits, a limit on the rental payments to be made by a charity to the commercial lessor, and a prohibition against the lessor directly operating a center. The Company is thus typically prohibited from paying the wages of those employees operating the center as well as any marketing or advertising expenses for the center. The regulations against the direct operation and marketing of a bingo center by the Company reduce the Company's payroll and advertising costs for the center. Since the Company is allowed to act as a service provider, the Company can advise in the selection of key employees and the creation and execution of a bingo center's operating plan. ITEM 2 - PROPERTIES The Company's principal offices were located in Piedmont, Alabama in facilities purchased by the Company on December 16, 1994, for $6,500,000 (paid in shares of the Company's preferred stock, valued at $5.00 per share). The facility is comprised of 80,000 square feet of usable space under roof, and includes a Bingo hall. The Bingo hall, including the personal property owned by the Company and maintained properties therein, has been leased on a month to month basis by the Company to Piedmont Jaycees, Inc. since August 10, 1995. The rental for the building and equipment located therein is $75,000 per month or $7,000 per day, whichever is greater, plus all other defined expenses, excluding insurance, ad valorem taxes, assessments, repairs, upkeep, maintenance and similar expenses. However, the Piedmont Jaycees were not able to pay $75,000.00 per month and the rent was reduce to a minium payment of $25,000.00 through the startup period. The Company also has a branch office at 1239 South Glendale Avenue, Glendale, California, and Production Studio and transmission facilities are obtained from third parties at competitive rates. The premises are comprised of approximately 3,000 square feet for which the Company pays $1,000 per Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 16 17 month. The lease is scheduled to expire on December 31, 1998; however the Company is confidant that the lease would be renewed on favorable terms. PATENTS, TRADEMARKS, LICENSES, FRANCHISES, CONCESSIONS, ROYALTY AGREEMENTS OR LABOR CONTRACTS, INCLUDING DURATION The Company has no patent rights. It has the following service marks:
Satellite Bingo: International Class 41 (production and distribution of television game shows) granted Registration Number 1,473,709 on January 19, 1988 to Satellite Bingo, Inc. 20 years. Globalot Bingo: International Class 41 (production and distribution of television game shows) applied for on September 24, 1993, by SBI Communications, Inc. Rico Bingo: International Class 41 (production and distribution of television game shows) applied for on September 24, 1993, by SBI Communications, Inc. C-Note: International Class 41 (production and distribution of television game shows) applied for on September 24, 1993, by SBI Communications, Inc.
The Company obtained an assignment to a copyrights for "the Works," copyright registrations for Globalot Bingo and derivatives: Number PAU 855-931 (June 10, 1986); Number Pau 847-876 (March 11, 1986); Number PAU 788-031 (September 19, 1985); Number PAU 927-410 (November 4, 1986); Number PA 370-721 (February 9, 1988); Number PA 516-494 (January 17, 1991); Number PA 533-697 (January 17, 1991); from Satellite Bingo, Inc., to SBI Communications, Inc., dated September 14, 1993. ITEM 3 - LEGAL PROCEEDINGS INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS To the best knowledge and belief of the Company, during the past five years, no present or former director, executive officer or person nominated as a director or appointed as an executive officer of the Company or any of its affiliated subsidiaries, has been involved in: (1) Any bankruptcy petition by or against any business of which such person was a general partner or executive either at the time of the bankruptcy or within two years prior to that time; Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 17 18 (2) Any conviction in criminal proceeding or subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) Being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily, barring, suspending, or otherwise limiting his involvement in any type of business, securities or banking activities; and (4) Being found by any court of competent jurisdiction (in a civil action), the Commission or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the fourth quarter of fiscal 1997. The Company's annual shareholder meeting with voting on proxy issues is on April 28, 1999. PART II ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS PREFERRED STOCK All attributes of the currently unissued preferred stock will be determined by the Company's board of directors prior to issuance, as permitted by and subject to the requirements of applicable Delaware law. The currently outstanding preferred stock has a $5.00 per share par value and a $5.00 per share liquidation preference; paying no dividend but convertible into common stock upon demand at a conversion rate equal to $5.00 per share divided by the market value of the common stock at the date of conversion. The preferred stock has no voting rights except as to matters specifically dealing with changes in the attributes of the preferred stock. MARKET FOR COMMON EQUITY The Company's stock is traded on the NASDAQ OTC Electronic Bulletin Board. The Company currently has 5,345,439 shares of stock outstanding, with 1,450,000 in the public float. There are Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 18 19 approximately 3,368 shareholders of record. For the fiscal year ended December 31st, 1997 the Company reported revenues of $544,662.00 and a net loss of $($693,879.00). The Common Stock of Company has been traded over-the-counter since 1983. Its trading symbol is "SBID." No established public trading market exists for the Common Stock of Company at this time. No common equity is subject to options or warrants to purchase or securities convertible into common stock, except for the currently issued 168,000 shares of preferred stock which are convertible into common stock. The Company is in the process of re-purchasing 1,500,000 of preferred shares from the previous owner of the property in Piedmont, AL. No common stock is currently being offered or proposed to be offered which offering could be reasonably expected to have a materially adverse effect on the market price of the Company's common equity; and There are approximately 5,345,439 shares of common stock which will become eligible for sale by December 31, 1998, pursuant to the provisions of Securities and Exchange Commission Rule 144. The Company has not agreed to register securities for resale under the Securities Act of 1934, as amended, for anyone. The following table sets forth in United States dollars the high and low bid quotations for such shares. Such bid quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and do not necessarily represent actual transactions. The source of the following information is the National Daily Quotation System, Inc.'s "Pink Sheets" and the National Association of Securities Dealers, Inc.'s NASDAQ Electronic Bulletin Board. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 19 20 Common Stock Date Low High ---- ------ ----- Fiscal 1996 $ 0.62 $1.37 Fiscal 1997 First Quarter $0.25 $0.50 Second Quarter $0.1875 $0.375 Third Quarter $0.125 $0.25 Fourth Quarter $0.1875 $0.375 ------ Prices quoted reflect a one share for twenty reverse split effective on February 1, 1993. DIVIDEND POLICY The Company has never paid any dividends. it is the present intention of the Company to pay dividends as soon as possible. There can, however, be no assurance that funds for payment of dividends will ever be available, or that even if available, the Company's board of directors then serving will resolve to declare them. MARKET The Company's securities are currently quoted on the Nation Association of Securities Dealers, Inc.'s NASDAQ Bulletin Board and on the National Daily Quotation System, Inc.'s "Pink Sheets." The Company expects that its securities will be listed on the National Association of Securities Dealers, Inc.'s automated quotation system ("NASDAQ") within the next 12 months and that they will be traded under its current symbol "SBID". Section 15(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires brokers and dealers to make risk disclosures to customers before effecting any transactions in "penny stocks". It also directs the Securities and Exchange Commission to adopt rules setting forth additional standards for disclosure of information concerning transactions in penny stocks. Penny stocks are low-priced, over-the-counter securities that are prone to manipulation because of their price and a lack of reliable market information regarding them. Under Section 3(a)(51)(A) of the Exchange Act, any equity security is considered to be a "penny stock," unless that security is: i) registered and traded on a national securities exchange meeting specified Securities and Exchange Commission criteria; ii) authorized for quotation on the National Association of Securities Dealers, Inc.'s (NASD") automated inter-dealer quotation system ("NASDAQ"); iii) issued by a registered investment company; iv) excluded, on the basis of price or the issuer's net tangible assets, from the definition of the term by Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 20 21 Securities and exchange Commission rule; or v) excluded from the definition by the Securities and Exchange Commission. Pursuant to Section 3(a)(51)(B), securities that normally would be considered penny stocks because they are registered on an exchange or authorized for quotation on NASDAQ may be designated as penny stocks by the Securities and Exchange Commission if the securities are traded off the exchange or if transactions in the securities are effected by market makers that are not entering quotations in NASDAQ. Rule 3a51-1 was adopted by the Securities and Exchange Commission for the purpose of implementing the provisions of Section 3(a)(51). Like Section 3(a)(51), it defines penny stocks by what they are not. Thus, the rule excludes from the definition of penny stock any equity security that is: (1) a "reported" security; (2) issued by an investment company registered under the 1940 Act; (3) a put or call option issued by the Options Clearing Corporation; (4) priced at five dollars or more; (5) subject to last sale reporting; or (6) whose issuer has assets above a specified amount. (Release No. 30608, Part III.A). Rule 3a51-1(a) excludes from the definition of penny stock any equity security that is a "reported security" as defined in Rule 11Aa3-1(a). A reported security is any exchange-listed or NASDAQ security for which transaction reports are required to be made on a real-time basis pursuant to an effective transaction reporting plan. Securities listed on the New York Stock Exchange (the "NYSE"), certain regional exchange-listed securities that meet NYSE or Amex criteria, and NASDAQ National Market System ("NMS") securities are not considered penny stocks. (Release No. 30608, Part III.A.1). Generally, securities listed on the American Stock Exchange (the "Amex") pursuant to the Amex's original and junior tier or its "Emerging Company Marketplace" listing criteria, are not considered penny stocks. Securities listed on the Amex pursuant to its Emerging Companies Market ("ECM") criteria, however, are considered to be "penny stock" solely for purposes of Exchange Act 15(b)(6). (Release No. 30608, Part III.A.1). Rule 3a51-1(d) excludes securities that are priced at five dollars or more. Price, in most cases, will be the price at which a security is purchased or sold in a particular transaction, excluding any broker commission, commission equivalent, mark-up, or mark-down. In the absence of a particular transaction, the five dollar price may be based on the inside bid quotation for the security as displayed on a Qualifying Electronic Quotation System (i.e., an automated inter-dealer quotation system as set forth in Exchange Act Section 17B(b)(2)). "Inside bid quotation" is the highest bid quotation for the security displayed by a market maker in the security on such a system. If there is no inside bid quotation, the average of at least three inter-dealer bid quotations displayed by three or more market makers in the security must meet the five dollar requirement. Broker-dealers may not rely on quotations if they know that the quotations have been entered for the purpose of circumventing the rule. (Release No. 30608, Part III.A.3.b). An inter-dealer quotation system is defined in Rule 15c2-7(c)(1) as any system of general circulation to brokers and dealers that regularly disseminates quotations of identified brokers or dealers. In the case of a unit composed of one or more securities, the price divided by the number of shares of the unit that are not Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 21 22 warrants, options, or rights must be five dollars or more. Furthermore, the exercise price of any warrant, option, or right, or of the conversion price of any convertible security, included in the unit must meet the five dollar requirement. For example: a unit composed of five shares of common stock and five warrants would satisfy the requirements of the rule only if the unit price was twenty-five dollars or more, and the warrant exercise price was five dollars or more. Once the components of the unit begin trading separately on the secondary market, they must each be separately priced at five dollars or more. (Release No. 30608, footnote 66). Securities that are registered, or approved for registration upon notice of issuance, on a national securities exchange are also excluded from the definition of penny stock (Rule 3a51-1(e)). The exchange must make transaction reports available pursuant to Rule 11Aa3-1 for the exclusion to work. The exclusion is further conditioned on the current price and volume information with respect to transactions in that security being reported on a current and continuing basis and made available to vendors of market information. In addition, the exclusion is limited to exchange-listed securities that actually are purchased or sold through the facilities of the exchange, or as part of a distribution. Exchange-listed securities satisfying Rule 3a51-1(e), but which are not otherwise excluded under Rule 3a51-1(a)-(d), continue to be deemed penny stocks for purposes of Exchange Action Section 15(b)(6). Exchanges that qualified for this exclusion as of April, 1992 were the NYSE, Amex, Boston Stock Exchange, Cincinnati Stock Exchange, Midwest Stock Exchange, Pacific Stock exchange, Philadelphia Stock Exchange, and the Chicago Board of Options. (Release No. 30608, footnote 37). Securities that are registered, or approved for registration upon notice of issuance, on NASDAQ are excluded from the definition of penny stock (Rule 3a51-1(f)). Similar to the exchange-registered exclusion of Rule 3a51-1(e), the NASDAQ exclusion is conditioned on the current price and volume information with respect to transactions in that security being reported on a current and continuing basis and made available to vendors of market information pursuant to the rules of NASD. NASDAQ securities satisfying Rule 3a51-1(e), but which are not otherwise excluded under Rule 3a51-1(a)-(d), continue to be deemed penny stocks for purposes of Exchange Act Section 15(b)(6). An exclusion is available for the securities of issuers that meet certain financial standards. This exclusion pertains to: (1) issuers that have been in continuous operation for at least three years having net tangible assets in excess of $2 million (Rule 3a51-1(g)(1); ii) issuers that have been in continuous operation for less than three years having net tangible assets in excess of $5 million (Rule3a51-1(g)(1); iii) issuers that have an average revenue of at least $6 million for the last three years (Rule 3a51-1(g)(2)). To satisfy this requirement, an issuer must have had total revenues of $18 million by the end of a three-year period. (Release No. 30608, Part III.A.4). The Company believes that its securities qualify under this exemption. For domestic issuers, net tangible assets or revenues must be demonstrated by financial statements that are dated no less than fifteen months prior to the date of the related transaction. The statements must have Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 22 23 been audited and reported on by an independent accountant in accordance with Regulation S-X. For foreign private issuers, net tangible assets or revenues must be demonstrated by financial statements that are dated no less than fifteen months prior to the date of the related transaction. The statements must be filed with the Securities and Exchange Commission pursuant to Rule 12g3-2(b). If the issuer has not been required to furnish financial statements during the previous fifteen months, the statements may be prepared and audited in compliance with generally accepted accounting principles of the country of incorporation. Whether the issuer is domestic or foreign, in all cases a broker or dealer must review the financial statements and have a reasonable basis for believing that they were accurate as of the date they were made (Rule 3a51-1(g)(3). In most cases a broker-dealer need not inquire about or independently verify information contained in the statements. (Release No. 30608, Part III.A.4). Brokers and dealers must keep copies of the domestic or foreign issuer's financial statements for at least three years following the date of the related transaction (Rule 3a51-1(g)(4). SECURITY HOLDERS As of December 31, 1997, the latest practicable date for which information is available, the Company's management was of the opinion that the Company had approximately 3,368 common stock holders. DIVIDENDS There have been no cash dividends declared or paid since the inception of the Company and no dividends are contemplated to be paid in the foreseeable future. DESCRIPTION OF SECURITIES GENERAL The Company is authorized to issue 50,000,000 shares of capital stock, 40,000,000 shares of which are designated as common stock, $.001 par value per share, and the balance as preferred stock, $5.00 par value per share. As of December 31, 1997, 5,345,439 shares of Common Stock were outstanding (excluding the 2,500,000 shares held but not yet allocated by the Company's Employees' Trust) and held of record by approximately 3,368 persons. In addition, 1,668,000 shares of preferred stock were outstanding, and held by approximately five persons. The Company plans to repurchase 1,500,000 preferred shares. CORPORATE STOCK TRANSFER, 370 17TH STREET, SUITE 2350; DENVER COLORADO 80202, ACTS AS TRANSFER AGENT AND REGISTRAR FOR THE COMPANY'S COMMON AND PREFERRED STOCK. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 23 24 Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations and Plan of Operation. INTRODUCTION The Company is currently in the development stage of its business cycle. Since its inception, the Company has actively pursued licensing agreements designed to generate royalty income in exchange for providing software and methods involving bingo game production. In the past, the Company has entered into various agreements covering territories in Brazil, Greece, Hong King, and Indian reservations, military bases, and charity bingo parlors in the United States. Prior emphasis on these type of licensing agreements has proven to be ineffective. No licensee currently has bingo operations generating significant fees or royalties for the Company. The majority of its current operating income is provided by rental income generated from the lease of its bingo facility to non-profit charities in a facility owned by the Company. The majority of future revenues, however, are not anticipated to occur in either of these areas. The Company hopes to generate significant future revenues from telecommunications services involved in interactive bingo and television buying shows by purchasing large blocks of long distance telephone time and reselling such time to television audience users at a profit. Management of the Company has made this area of business their first priority, and most of the other plans for the future are based on the success of the telecommunications area. Management would like to broadcast the bingo show to as many viewers as possible, and although there are no current foreign agreements, management's plans are not limited to the U.S. Management intends to pursue contracts with foreign countries and begin its bingo programs on the Internet. Overall, management hopes to be able to generate net revenues of $10 million annually from this area of business. The Company also has plans to expand operations through the acquisition of television production facilities and rights to a television buying show. This would allow the Company to produce their bingo show in their own studio and broadcast it over their own network. It will also give management freedom to use their experience in programming and production to produce other forms of interactive entertainment, such as the ideas of Public Domain Broadcasting and The Life and Leisure Network mentioned elsewhere in this offering document. Diligently being examined are the legal opinions submitted for imminent contractual arrangements between two companies with the Company, a major international shop at home entity and a telecommunications company. Both of these entities are NASDAQ listed. Management feels confident that a deal will be consummated by year end 1998 allowing the Company to commence operations on a full scale in the telecommunications business segment. The Company is continuing to search for avenues to develop future revenue. In light of the preliminary and conditional nature of negotiations, no assurance can be provided as to the likelihood that such proposed projects will come to fruition. A summary of projects currently being pursued is as follows: Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 24 25 FRONTIER PALACE Because the Piedmont Jaycees did not perform as represented, and their management did not develop business, gross revenues were 50% of their projections, and agreement in their premises lease: Jaycees salaries exceeded budgets; operations schedule was not full time. Therefore, their lease was allowed to not be renewed at the end of 1997. At the same time, local political influences developed negative local law changes as a reaction to the Piedmont Jaycees operation. Local ordinances are being adopted to limit all charity bingo operations and the amount of employees and establish a requirement of near gross proceeds being donated for charitable purposes regardless of reasonable and necessary operation expenses with no revenues to the employees of the charity . In reaction to the above political/legal trends, management has negotiated two business leases of the premises. Because management is working with technical computer advisors and systems designers in the Boca Raton/Fort Lauderdale, Florida area, management believes that their observations of the local charity Bingo market appears to be more hospitable in Southeast Florida, rather than northeast Alabama Two business enterprises have agreed to lease the premises at a gross rent of $70,000.00 per month, subject only to the company paying real estate taxes (approximately $35,000.00 per year, insurance $30,000.00 per year and the usual exterior, structural maintenance, estimated at no more that $20,000.00 per year). Gross rental income then is at $840,000.00 per year with estimated expenses and contingencies at $85,000.00 per year, indication gross income at $755,000.00. The two tenants are credible business operations with a history and financial capability, as follows: (1) Regency Communications, Inc. for operation of a telecommunication marketing center and advertising/video studio as part of their marketing efforts. Rent at $40,000.00 per month or $480,000 per year, plus agreement to jointly manage the property and develop complimentary products. (2) Dee Fords, Inc. is a country western dance hall, restaurant and bar operation with an operations history in Anniston, Alabama. Their management seeks a large location to accommodate up to near 2,500 attendees. Their operation involves what is known as a "show Palace" for well- known country and western musical shows, which includes dancing, dinning and bar service. Their agreed rental includes use of the kitchen and snack bar facilities, and is at a gross rent of $30,000.00 per month or $360,000.00 per year. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 25 26 INTENET WEB SITE The company established a secure web site allowing individuals to join "A Bingo Shopping Club for a fee of $19.95 per month which is a shopping club for a variety of products, services, Bingo game related events and items, travel and consumer goods; the opportunity is primarily a shopping club. No charge is made for Bingo cards, and for allowing members to play an on-going Globalot Bingo game, with winnings credited to the member's account or delivered to the member at their option. Payment for membership will be made by credit card, bank check, debit/ATM cards and by lec billing or "900" telephone number. The web site is hosted by a Coral Gables educational organizations. Fulfillment of the operation is by sites and organizations in Fort Lauderdale, Florida. The company will at some point host its own web site with server and tee access to the Internet. The company will generate additional revenues by offering advertising and its web services to others. SATELLITE BINGO. The company has developed a pay-per-view television game show to be operate by SBI, at a studio within the Piedmont, Alabama property, or within a production studio, as is most efficient. The charge for a weekly two hour broadcast is $9.95 per subscriber per broadcast; SBI receives $5.00 with the broadcaster/network company paid the balance. LIQUIDITY The following table summarizes working capital and total assets: Fiscal Year Ended December 31, 1997 1996 ---- ---- Working Capital $ 118,160 $ 290,023 Total Assets $6,984,557 $7,441,024 December 31, 1995, the Company's current assets exceeded its current liabilities, creating a working capital surplus. The surplus is primarily the result of the issuance of preferred convertible stock to liquidate liabilities owed to shareholders, and in income provided by the Company's operating activities relating to approximately $100,000 in fees collected from charities that sponsor bingo games at the Company's bingo hall. At December 31, 1994, the Company had current liabilities in excess of current assets, principally due to administrative expenses incurred during the development stage that have been funded by the majority stockholder in the form of advances due on demand. The Company has had some success in issuing stock for services, and accordingly has kept the working capital deficit to a minimum during these years. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 26 27 The changes in total assets are attributable to the Company's purchase of a building (bingo hall) in 1994 through the issuance of preferred stock. As a result, income from bingo hall operations has boosted working capital in the calendar year ended December 31, 1997. In the years prior to 1996, the Company was primarily involved in securing licensing agreements for rights to software and methods of operating bingo games it had developed. As the Company continues to operate in the development stage, no significant cash flow is being generated from operating activities. 1997 was a relatively dormant year. The Company was able to generate $12,000 in cash flow from operations principally from management/services of the bingo hall in the year ended 1997. Shareholders also advanced net funds of $51,564 in 1996 and was repaid in the year ended 1997, allowing the Company to generate positive total cash flow of $56,607 for the year. In 1996, the Company became more active in pursuing ventures, as well as managing the bingo hall for the entire year. For 1995, the charities operating the bingo hall struggled, and the Company collected less funds than were needed to operate the games, as well as to cover administrative costs and costs of the facility. As a result, the Company used $350,199 in net cash flow for operations. The Company also acquired various operating equipment at a cost of $105,363. To fund these cash flow needs, the Company was able to obtain $250,000 in proceeds from a loan to an affiliate, and $165,000 in proceeds from the sale of common stock. Combined, this resulted in a net decrease in cash for the year of $47,339. CAPITAL RESOURCES Since its inception, the Company's only significant sources of capital have been from the sale of common stock and loans from shareholders. See a discussion of these transactions under Item 7 - Certain Relationships and Related Party Transactions, and in the Consolidated Financial Statements of the Company. The Company has also acquired significant assets through the sale of convertible preferred stock. The Company anticipates continued expansion of its business through acquisitions using Company stock. Furthermore, with the bingo hall acquired in 1994 now in operation, the Company anticipates generation of revenues from the lease of this facility sufficient to cover administrative costs still being incurred as the Company moves forward in its development stage. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 27 28 RESULTS OF OPERATIONS The following table sets forth the relative relationship to total revenue of the revenue categories in the Company's statement of income and percentage changes (rounded to the nearest whole dollar). Amount of Total Revenue Fiscal Year Ended December 31, 1997 1996 ---- ---- Revenues: Licenses & Royalties -0- -0- Bingo Hall Operations $ 411,033 $352,000 Kitchen and gift shop revenues 131,703 67,019 Other Income 1,926 2,109 --------- -------- Total Revenue $ 544,662 $421,128 ========= ======== In general, the Company experienced insignificant revenues in 1997 as it attempted to expand and develop its operations. Total revenues were $544,662 for 1997. The Company owns a bingo hall, during 1997 was leases to charities who sponsor bingo games. The Company also provides management services to assist the charities in the operations of the bingo games, for which the Company charges a fee. Net revenues related to the bingo hall operations were only $352,000 in 1996, but have grown to $411,033 for the calendar year ended December 31, 1997. Total revenues for calendar year ended December 31, 1997 were $544,662. Accordingly, except for the operation of the bingo hall, there are no other significant revenue sources of the Company at this time. For 1996 and 1997, the Company did not generated revenue from the sale of copyrighted bingo cards, foreign licensing agreements, sale of computer hardware or security systems, or other various areas of business opportunity discussed in this offering document. The Company's expenses can be summarized as follows: Amount of Total Expenses Fiscal Year Ended December 31, 1997 1996 ---- ---- Salaries and related expenses $157,649 $170,822 Other general and administrative expenses $358,670 $488,545 Depreciation and amortization $346,742 $544,752 Interest expenses and finance charges $ 82,637 $ 76,202 The most significant expense relates to the amortization of trademark, game show and computer program assets the Company has developed. The expense is running $ 265,960 per year. Such assets will be fully amortized at the end of 1997. For 1997, the Company also had depreciation on the bingo hall and related equipment, which will approximate $367,202 per year. These expenses do not require the use of cash. The low level of other expenses in 1994 is due to a slow down in the general activity of the Company as it Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 28 29 explored alternative revenue generating ideas. With the addition of the bingo hall in late 1994, as well as the pursuit of television production and broadcast possibilities in 1996, such expenses have decreased in 1997. As the Company continues to pursue television production and broadcast possibilities, these expenses will continue to rise as a result of expanded facility space and travel costs. Interest and finance charge expenses increased in 1996 due to $200,000 in finance charges incurred to obtain short-term financing. These finance charges were paid for through the issuance of preferred stock. Should the Company successfully acquire production facilities and broadcast companies under consideration, or expand operations in areas previously discussed as currently under consideration, revenues and expenses of the Company would change significantly. Management is not able to predict the impact of such changes on revenues or expenses at this time. STATEMENT RE COMPUTATION OF EARNINGS PER SHARE See Notes To Consolidated Financial Statements included elsewhere in this filing for a description of the Company's calculation of earnings per share. ITEM 7. FINANCIAL STATEMENT AND SUMMARY FINANCIAL DATA FINANCIAL STATEMENTS The unaudited consolidated balance sheet of the Company for its years ended December 31, 1997 and 1996 and the related consolidated statements of operations, stockholder's equity and cash flows are submitted herewith. Index to Financial Statements The audited consolidated balance sheet of the Company for its years ended December 31, 1997 and 1996 and related consolidated statements of income (loss), stockholder's equity and cash flows therefor, follow. The page numbers for the financial statement categories are as follows: Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 29 30
Page Description - ---- ----------- __ Report of Certified Public Accountants, as to the calendar years ended December 31, 1997 and 1996. __ Consolidated Balance Sheets - December 31, 1997 and December 31, 1996. __ Consolidated Statement of Income (Loss) for the calendar years ended December 31, 1997 and December 31, 1996 and from inception until December 31, 1997. __ Consolidated Statement of Changes in Stockholder's Equity from Inception (January 10, 1986) through December 31, 1997. __ Consolidated Cash Flows for the calendar years ended December 31, 1995 and December 31, 1995 and from inception until December 31, 1997. __ Notes to Consolidated Financial Statement Statements for the calendar years ended December 31, 1997 and December 31, 1996.
SBI COMMUNICATIONS, INC. AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 CONSOLIDATED BALANCE SHEETS DECEMBER 31,
1997 1996 ----- ----- ASSETS Current assets: Cash $ 22,228 $ 42,327 Accounts receivable, net of allowance for doubtful accounts of $-0- at December 31, 1997 and 1996 (Note 8) 250 120,306 Accounts and notes receivable from affiliates (Note 2) 9,617 3,600 Inventories 86,065 24,391 ---------- ---------- 118,160 190,624 Property and equipment, net of accumulated depreciation (Note 3) 6,782,223 7,026,112 Other assets: Accounts receivable - long-term, doubtful accounts of at December 31, 1996 - 100,000 Organization costs, trademarks, shows, computer programs and game inventory, net (Note 4) - - Deferred loan costs 21,109 56,200 Deposits 63,065 68,088 ---------- ---------- $6,984,557 $7,441,024 ========== ==========
See accompanying notes to consolidated financial statements. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 30 31
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Note payable to trust managed by a shareholder (Note 2) $ 150,000 $ 200,000 Mortgage note payable-current portion (Note 5) 239,701 5,873 Capitalized leases-current portion (Note 5) 17,491 - Accrued wages due to principal shareholder (Note 2) 290,000 180,000 Advances due to principal shareholder (Note 2) - 14,901 Account payable and accrued expenses 150,442 83,873 ---------- ---------- 847,634 484,647 Mortgage payable, long-term portion (Note 5) - 240,229 Capitalized leases, long-term portion (Note 5) 62,216 - Other notes payable (Note 5) 52,438 - ---------- ---------- Total liabilities 962,288 724,876 ---------- ---------- Stockholders' equity (Note 6): Preferred stock, par value $5.00; 10,000,000 shares authorized; 1,673,000 and 1,693,000 shares issued and outstanding at December 31, 1997 and 1996, respectively 8,365,000 8,465,000 Common stock, par value $.001; 40,000,000 shares authorized; 5,345,439 shares issued and outstanding at December 31, 1997 and 1996 5,345 5,345 Paid in capital 3,567,343 3,467,343 Accumulated deficit (5,915,419) (5,221,540) ----------- ----------- 6,022,269 6,716,148 ----------- ----------- $ 6,984,557 $ 7,441,024 =========== ===========
See accompanying notes to consolidated financial statements. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 31 32 SBI COMMUNICATIONS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF LOSS FOR THE YEARS ENDED DECEMBER 31,
1997 1996 ---- ---- Revenues (Note 8): Bingo hall rent $ 411,033 $ 352,000 Kitchen and gift shop revenues 131,703 67,019 Administrative fees - - Other income 1,926 2,109 ----------- ----------- 544,662 421,128 ----------- ----------- Expenses: Cost of sales - kitchen and gift shop 180,563 37,892 Salaries and related expenses 157,649 170,822 Facility costs 49,518 80,605 General and administrative 358,670 488,545 Travel and production costs 102,762 72,029 Depreciation and amortization 306,742 544,752 Interest and finance expenses 82,637 76,202 ------------ ----------- 1,238,541 1,470,847 ----------- ----------- Net loss from operations (693,879) (1,049,719) Net loss $ (693,879) $(1,049,719) ============ =========== Net loss per share (Note 7) $ (0.13) $ (0.20) =========== ===========
See accompanying notes to consolidated financial statements. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 32 33 SBI COMMUNICATIONS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDING DECEMBER 31, 1996 AND 1997
Common Stock Preferred Stock ------------------- ------------------- Additional Total Number Number Paid-in Accumulated Shareholders' of shares Amount of shares Amount Capital Deficit Equity --------- ------ --------- ------ ------- ----------- ------------- Balance December 31, 1995 5,345,439 5,345 1,668,000 8,340,000 3,572,343 (4,171,821) 7,745,867 Preferred stock issued in July, 1996 to cover $20,000 in loan closing costs, 20,000 shares to be returned in 1997 - - 25,000 125,000 (105,000) - 20,000 Net loss, January 1, 1996 to December 31, 1996 - - - - - (1,049,719) (1,049,719) --------- ------ --------- ---------- ---------- ----------- ----------- Balance December 31, 1996 5,345,439 5,345 1,693,000 8,465,000 3,467,343 (5,221,540) 6,716,148 Excess preferred stock issued in July, 1996 to cover $20,000 in loan closing costs, 20,000 shares were returned in 1997 - - (20,000) (100,000) 100,000 - - Net loss, January 1, 1997 to December 31, 1997 - - - - - (4,723,202) (4,723,202) --------- ------ --------- ---------- ---------- ----------- ----------- Balance December 31, 1997 5,345,439 $5,345 1,673,000 $8,365,000 $3,567,343 $(9,944,742) $ 1,992,946 ========= ====== ========= ========== ========== =========== ===========
See accompanying notes to consolidated financial statements. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 33 34 SBI COMMUNICATIONS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31,
1997 1996 ---- ---- Cash flows from operating activities: Net (loss) $ (693,487) $(1,049,719) Adjustments to reconcile net loss to cash provided (used) by operating activities: Depreciation and amortization 341,833 569,552 Services paid through reduction in amounts receivable from affiliates - 25,000 Change in accounts receivable, trade 128,234 279,558 Change in inventories 8,148 36,297 Change in accounts payable and accrued expenses 176,569 84,406 ----------- ---------- Cash (used) by operating activities (38,703) (54,906) ----------- ---------- Cash flows from investing activities: Purchase of property and equipment (40,853) (51,603) Decrease (increase) in deposits 5,023 (5,000) Loans to affiliates (6,017) (3,600) ------------ ---------- Cash (used) by investing activities (41,847) (60,203) ------------ ---------- Cash flows from financing activities: Loans received from (repaid to) affiliates - 10,745 Repayments of affiliated loans (14,901) (50,000) Borrowings on new loans and capital leases 145,000 250,000 Repayments on loans and capital leases (69,256) (3,898) Deferred loan costs paid - (61,000) Proceeds from issuance of common stock - - ------------ --------- Cash flows provided by financing activities 60,843 145,847 ------------ --------- Net increase (decrease) in cash (20,009) 30,738 Cash at beginning of year 42,327 11,589 ------------ --------- Cash at end of year $ 22,228 $ 42,327 ============ ========= Supplemental information: Income taxes paid $ - $ - ============ ========= Interest paid $ 41,144 $ 50,241 ============ =========
Non-cash activities: - -------------------- During 1996, $25,000 in services were paid for through the reduction of $25,000 in affiliated loans receivable, and $20,000 in loan closing costs were paid for through the issuance of 20,000 shares of preferred stock. During 1997, $100,000 in trade receivables were settled for receipt of inventory valued at $69,822 and furniture valued at $22,000. See accompanying notes to consolidated financial statements. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 34 35 SBI COMMUNICATIONS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The major accounting policies of SBI Communications, Inc. are summarized below to assist the reader in reviewing the Company's financial statements. Organization and Operations SBI Communications, Inc. (the "Company"), was originally organized in the State of Utah on September 23, 1983, under the corporate name of Alpine Survival Products, Inc. Its name was subsequently changed to Justin Land and Development, Inc. during October, 1984, and then to Supermin, Inc. on November 20, 1985. On September 29, 1986, Satellite Bingo, Inc. was the surviving corporate entity in a statutory merger with Supermin, Inc., a Utah corporation. In connection with the above merger, the former shareholders of Satellite Bingo, Inc. acquired control of the merged entity and changed the corporate name to Satellite Bingo, Inc. Through shareholder approval dated March 10, 1988, the name was changed to its current name of SBI Communications, Inc. On January 1, 1993, the Company executed a plan of merger that effectively changed the Company's state of domicile from Utah to Delaware. Although the Company is currently a Delaware corporation, on January 31, 1997, the stockholders and Board of Directors approved a plan to change the Company's corporate domicile to the State of Nevada. Management anticipates executing the plan during 1998. The Company plans to lease or operate bingo halls and to provide interactive satellite cable bingo game shows and other similar telecommunication gaming products or services to television viewers throughout the United States. During 1997, the Company's only operations were the leasing of a bingo hall located in Piedmont, Alabama, and the operation of the kitchen facilities therein. Under local ordinances, the hall must be leased to a charity, which was the local Jaycees. As described in Note 8, the Company is being forced to sell its facility a cease bingo operations in Piedmont, Alabama. The Company plans to continue to search for avenues to provide bingo over the Internet, as well as to explore other revenue producing ventures. Principles of consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, SBI Communications, Inc. (an Alabama corporation). Intercompany transactions and balances have been eliminated in consolidation. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 35 36 Estimates and assumptions The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reporting amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Property and equipment Property and equipment are stated at cost. Expenditures for maintenance and repairs which do not improve or extend the life of an asset are charged to expense as incurred. Major renewals and betterments are charged to the property accounts. Upon retirement or sale of an asset, its cost and related accumulated depreciation or amortization are removed from the property accounts, and any gain or loss is recorded as income or expense. Depreciation is provided using straight-line methods for financial reporting. Trademarks, shows and computer programs Trademarks, shows and computer programs are intangible assets acquired through the issuance of stock. Such assets are being amortized on a straight-line basis over sixty (60) months. The five-year life is a subjective estimate that was derived after considering such factors as consumer demand, competition, expected actions of competitors, effect of obsolescence, etc. Deferred loan costs Deferred loan costs represent costs incurred to obtain existing debt, and are being amortized over the life of the related loan using the interest method. Income taxes The Company provides for income taxes in accordance with Statement of Financial Accounting Standards No. 109, which requires the use of the asset and liability method and recognizes deferred income taxes for the consequences of "temporary differences" by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The Company's "temporary differences" relate to accrued compensation to shareholders which is a deduction in the year paid, and differences in book versus tax depreciation methods. Deferred tax assets also may be recorded for the future benefits of operating loss carry forwards if such benefits are not deemed "more likely than not" to be realized. The effect on deferred taxes for a change in tax rates is recognized in income or expense in the period that includes the enactment date. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 36 37 Rental and administrative fee income The Company managed for various charities a bingo hall in Piedmont, Alabama. Rents and administrative fees charged to charities are unsecured, and generally are paid only as revenues from the bingo games produce sufficient profit to allow the charities to make payments. The lease in effect during 1997 required minimum rent of $25,000 per month, with additional contingent rent of $50,000 per month depending upon the success of the bingo games. Management records contingent rent revenue and administrative fee income only as it is collected. Statements of cash flows For the purposes of the statements of cash flows, the Company considers cash and highly liquid investments purchased with a remaining maturity of three months or less at the date of purchase to be cash equivalents. NOTE 2 - RELATED PARTY TRANSACTIONS From time to time, the Company's principal shareholder advances money to the Company for operations. All amounts owed to the shareholder are non-interest bearing advances. As of December 31, 1995, the Company owed $4,156 to this shareholder. During 1996, the Company borrowed (on a net basis) an additional $10,745 from this shareholder. During 1997, the Company repaid all amounts advanced, plus further advanced to the shareholder $9,617. The Company owed this shareholder $14, 901 at December 31, 1996, and had $9,617 receivable from this shareholder at December 31, 1997. In addition to advances, the Company accrued salaries payable to the Company's principal shareholder totaling $110,000 and $120,000 for the years ended December 31, 1997 and 1996, respectively. All amounts owed to the shareholder are payable on demand. In October, 1995, the Company borrowed $250,000 from a trust managed by a shareholder, in the form of a mortgage note. The note was payable in full on October 15, 1996, with interest payable quarterly at prime plus 3%, secured by all corporate property up to $1,000,000 in value. $50,000 of this note was repaid in 1996 when due, and an additional $50,000 was repaid during 1997. The holder had the right to convert the mortgage note to common stock at a price of $3 per share. This conversion privilege expired on July 15, 1996. The note has been extended on a quarter to quarter basis, with $150,000 remaining outstanding at December 31, 1997. Interest expense related to this note totaled approximately $20,000 and $27,000 for the years ended December 31, 1997 and 1996, respectively. In October, 1995, the Company advanced $25,000 to a shareholder to be repaid upon demand with interest at prevailing market rates. This shareholder also provides services to the Company relating to acquisition candidates and capital sources. The above note was applied as payment for such services in 1996. An additional $11, 700 was paid to this shareholder during 1996 for the services described. In 1996, the Company loaned $3,600 to a relative of a shareholder. This loan is non-interest bearing and is due upon demand. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 37 38 NOTE 3 - PROPERTY AND EQUIPMENT Property and equipment are summarized as follows at December 31:
Estimated Useful Life 1997 1996 ----------- ---- ---- Land (see Note 8) $ 250,000 $ 250,000 Building (see Note 8) 6,250,000 6,250,000 Vehicles 5 years 10,920 10,920 Furniture and equipment 5 to 7 years 1,109,182 1,024,296 ---------- ---------- 7,620,102 7,535,216 Less accumulated depreciation 367,202 282,085 ---------- ---------- $7,252,900 $7,253,131 ========== ==========
Depreciation expense totaled approximately $306,000 and $279,000 for the years ended December 31, 1997 and 1996, respectively. NOTE 4 - ORGANIZATION COSTS, TRADEMARKS, AND SIMILAR ASSETS Organization costs, trademarks, shows, computer programs and game inventory represent assets acquired or developed in prior years as the Company went through its development stage, and are summarized as follows at December 31:
1997 1996 ---- ---- Trademarks: Original cost $ 500,000 $ 500,000 Less accumulated amortization 500,000 500,000 ---------- ---------- $ - $ - ========== ========== Shows and computer programs: Original cost $ 829,800 $ 829,800 Less accumulated amortization 829,800 829,800 ---------- ---------- $ - $ - ========== ========== Game inventory: Original cost $ 75,400 $ 75,400 Less amounts used in operations 75,400 75,400 ---------- ----------- $ - $ - ========== =========== Organization costs: Original cost $ 758 $ 758 Less accumulated amortization 758 758 ---------- ----------- $ - $ - ========== ===========
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 38 39 Game inventory was expended as used. All other assets listed above were amortized over sixty (60) months. Amortization expense on the above intangible assets totaled approximately $266,000 for the year ended December 31, 1996. NOTE 5 - MORTGAGE NOTE PAYABLE On April 1, 1996, the Company borrowed $250,000 from a mortgage company. The note is payable in thirty (30) equal monthly installments of $3,330 including interest at fourteen percent (14%) per annum, with a final balloon payment of any remaining unpaid principal due October 1, 1998, secured by a deed of trust on the Company's real estate. The balance on this note was $239,701 at December 31, 1997. Due to events as described at Note 8, the entire balance of the note has been classified as current. The note includes pre-payment penalties ranging from 4% to 6% depending upon the timing of the prepayment. In connection with the above note, the lending company was granted options to purchase 250,000 shares of common stock for $0.50 per share. These options expire upon repayment of the loan. In addition, the Company agreed to issue 5,000 shares of preferred stock to the lender to cover $20,000 in loan closing costs. Upon issuance, the Company inadvertently issued 25,000 shares instead of $25,000 in value of preferred stock to the lender. Such shares were outstanding at December 31, 1996. In March, 1997, the lender returned the certificate for the 25,000 shares to the Company, and a new certificate for 5,000 shares will be issued. The Company has recorded all 25,000 shares as outstanding at December 31, 1996, and reduced paid-in capital for the value of the extra 20,000 shares. The adjustment to paid-in capital has been reversed in 1997 with the issuing of the new certificate. NOTE 6 - COMMON AND PREFERRED STOCK ACTIVITY The Delaware corporation is authorized to issue up to 40,000,000 shares of common stock with a par value of $.001 per share, and 10,000,000 shares of preferred stock with a par value of $5.00 per share. The preferred stock may be issued from time to time in one or more series, the shares of each series to have such voting powers, dividend rates, designations, preferences, and other characteristics as adopted by the Board of Directors. Preferred stock issued to date consists of one series (Series A), having a liquidation preference of $5.00 per share, paying no dividend, and convertible into common stock upon demand, at a conversion rate that would transfer shares of common stock worth an amount equal to the par value of the preferred stock based upon the market value of the common stock at the date of conversion. Over the history of the Company, there have been a number of non-cash transactions involving the issuance of common stock of the Company (with related as well as unrelated parties) recorded based on the estimated fair value of the consideration received (the asset received or debt retired) regardless of the number of common shares issued in such transactions in that it is the opinion of management that the Company's common stock did not have a readily determinable market value at the time of the transactions. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 39 40 The Board of Directors have approved fourteen (14) classes of preferred stock in total. No shares have been issued relating to any Series other than Series A as described above. Series A through G of preferred stock have a liquidation preference of $5.00 per share, pay no dividends, and are convertible to common stock upon demand at the following conversion rates: Series A Sufficient number of shares of common stock worth an amount equal to the par value of the preferred stock based upon the market value of the common stock at the date of conversion. Series B 5 shares common for 1 share preferred Series C 1 share common for 1 share preferred Series D 2 shares common for 1 share preferred Series E 3 shares common for 1 share preferred Series F 4 shares common for 1 share preferred Series G 10 shares common for 1 share preferred Series H through N of preferred stock have a liquidation preference of $5.00 per share, pay dividends at a rate not to exceed twelve percent (12%) annually, and are convertible to common stock upon demand at the following conversion rates: Series H Sufficient number of shares of common stock worth an amount equal to the par value of the preferred stock based upon the market value of the common stock at the date of conversion. Series I 5 shares common for 1 share preferred Series J 1 share common for 1 share preferred Series K 2 shares common for 1 share preferred Series L 3 shares common for 1 share preferred Series M 4 shares common for 1 share preferred Series N 10 shares common for 1 share preferred The Company's income (loss) per share was calculated using 5,345,439 weighted average shares outstanding for each of the years ended December 31, 1997 and 1996, respectively. Although convertible preferred stock is a common stock equivalent, with a conversion rate of approximately 10 shares of common stock (based upon an approximate market price for common stock of $0.50) for each share of preferred stock, preferred stock conversion has not been included in the calculation of earnings per share in that to do so would be antidilutive. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 40 41 NOTE 7 - INCOME TAXES Deferred income tax assets and liabilities are summarized as follows at December 31:
1997 1996 ---- ---- Deferred tax assets attributable to operating loss carry forwards $ 1,500,000 $ 1,380,000 Valuation allowance due to uncertainty surrounding realization of operating loss carry forwards (1,500,000) (1,380,000) Deferred tax liabilities - - ----------- ----------- Total deferred taxes $ - $ - =========== ===========
The Company has available at December 31, 1997, unused operating loss carry forwards, which may be applied against future taxable income, that expire as follows: Amount of Unused Operating Expiration During Loss Carry forwards Year Ended December 31, -------------------------- ----------------------- $ 200,000 2001 550,000 2002 1,200,000 2003 300,000 2004 490,000 2007 340,000 2008 320,000 2009 650,000 2010 1,050,000 2011 700,000 2012 ---------- $5,800,000 ========== NOTE 8 - COMMITMENTS, RISKS AND CONTINGENCIES The Company leased to various charities a bingo hall in Piedmont, Alabama. There has been no revenues so for in 1998 due to the hall been renovated. However, the Company has a lease commitment from Regency Communications, Inc. of Dallas, Texas and Christian Life Ministries, Inc. This leases will be in place by Mid-1998. The Company is in the process of developing bingo productions to be broadcast by satellite and via the Internet into homes of viewers throughout the United States. Should local, state, or federal laws change regarding bingo, such changes could have a material impact on the ability of the Company to generate future revenues. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 41 42 The Company has a history of issuing common stock for services difficult to value or yet to be provided. Approximately 3,000,000 (or 57%) of the common stock outstanding at December 31, 1997, is restricted in some fashion as a result of the above transactions. Furthermore, the Company has in prior years canceled common stock certificates due to non-performance of the third parties involved in certain of the above transactions. Although no party to such transactions has yet instigated litigation involving the Company for cancellation or restriction of related shares, due to the volume of such transactions, litigation relating to such activity remains a possibility. Management feels all actions it has taken to cancel or restrict common stock are with merit, and does not anticipate any material loss being incurred by the Company relating to future resolution of these matters. The Company has an employment agreement with Mr. Ron Foster, shareholder and president, which expires on December 31, 2001. Under the agreement, Mr. Foster is entitled to $130,000 in minimum annual salary, cash bonuses of the lesser of 10% of revenues or 5% of pre-tax profits, and stock bonuses equivalent to 10% of pre-tax profits before depreciation. To date, Mr. Foster has accepted no more than $120,000 per year as adequate compensation under the contract. There is no guarantee that Mr. Foster will continue to accept an amount less than that stipulated in the agreement. The Company sold stock to a production company in California several years ago. As a result of the sale, the production company was to provide approximately $400,000 of production facility time and services at no additional charge. No value has been recorded for such services provided and to be provided in that their market value is not subject to reasonable estimation and that realization of future services is not assured. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 42 43 SUMMARY FINANCIAL DATA Set forth below is selected financial information of the Company and its consolidated subsidiaries as derived from the audited statements of income (loss) for the last two calendar years, from the balance sheets for the periods then ended. The selected financial information should be read in conjunction with the financial statements (including the notes thereto) filed with this Registration Statement and are qualified by reference to such financial statements.
December 31, 1997 December 31, 1996 ----------------- ----------------- Statement of Operations Data Gross Revenues 544,662 421,128 Income from Operations(Loss) (693,879) (1,049,719) Net Income (Loss) per share * (.13) (.20) Balance Sheet Data Assets Current Assets 118,160 190,624 Property & equipment, less accumulated depreciation 6,782,223 7,026,112 Other Assets 84,174 224,288 ---------- ----------- Total Assets 6,984,557 7,441,024 Liabilities Current Liabilities 847,634 484,647 Long Term Liabilities Nil 240,229 Total Liabilities 962,288 724,876 Total Stockholders' Equity 6,022,269 6,716,148 ---------- ----------- Total Liabilities and Equity $6.984,557 $ 7,441,024 ========== ===========
- --------- * See above. Per share data is computed based on the weighted average of common stock outstanding as of the report date. ITEM 8. CHARGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth the names and ages of the members of the Company's board of directors and its executive officers, the positions with the Company held by each, and the period during which each such person has held such position. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 43 44 Name Age Position Since - ---- --- -------- ----- Ronald Foster 56 President/Chairman of the Board 1986 William Beggs 54 Director 1998 Karien Anderson 47 Secretary/Treasurer/Director 1997 Claude Pichard 43 Director 1986 Mel Ray 58 Director 1997 ---------- Messrs. Fosters, Mr. William Beggs, Mr. Prichard and Ms. Anderson are all engaged with the Company's business on a full time basis. All directors hold office until the next annual meeting of stockholders of the Company (currently expected to be held during April 1999) and until their successors are elected and qualified. Officers hold office until the first meeting of directors following the annual meeting of stockholders and until their successors are elected and qualified, subject to earlier removal by the board of directors. There are currently no committees of the board of directors. BIOGRAPHIES OF THE COMPANY'S EXECUTIVE OFFICERS AND DIRECTORS RONALD FOSTER Mr. Foster, 56, is presently Chairman, President, Chief Executive Officer, and Executive Producer for SBI Communications, Inc. He has been working with the Company since its inception in 1984. His primary responsibilities include finance, marketing and technical review. In addition to his responsibilities with the Company, Mr. Foster has held a number of other management positions over the years. From 1984 to 1986, he was executive vice president and producer of Pioneer Games of American Satellite Bingo, in Albany, Georgia. Mr. Foster was also owner and operator of Artist Management & Promotions where he was responsible for coordinating television entertainers, sports figures and other celebrities for department store promotions. Since 1987, Mr. Foster has served as president and director of Ed-Phills, Inc., a Nevada corporation and is now an executive vice president and member of the board of directors of Golden American Network, a California corporation. Since 1984, he has also been the president and chief executive officer of ROPA Communications, Inc., which owns and operates WTAU-TV-19 in Albany, Georgia. He created and produced "Stock Outlook 87, 88, and 89," a video presentation of public companies through Financial News Network (FNN), a national cable network. Mr. Foster also has experience as technical director and associate producer for numerous national live sports broadcasts produced by ABC, CBS and WTBS. Mr. Foster is Driector/Producer/Writer of the Company Interactive Broadcast Programs. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 44 45 KARIEN ANDERSON Ms. Anderson is 47 years old and resides in Piedmont, Alabama. Ms. Anderson has extensive experience in executive secretarial business, including government and private sectors. She has extensive background in the field of advertising, marketing, special event promotions, contract management, personnel management and real estate. Ms. Anderson currently holds a real estate licence. Ms. Anderson has been involve as coordinator for non-profit association for the last eighteen years. She is currently employed as Secretary and property manager for SBI Communications, Inc. CLAUDE PICHARD Mr. Pichard, 44, has been a Vice President and a director for the Company since 1986. His primary responsibilities include directing and developing the interactive Bingo and auction programs. Mr. Pichard has over twenty years of television experience as a producer, director and scriptwriter. He served as creative services director at WCTV in Tallahassee, Florida, where he headed an award-winning team of directors, writers and artists for the number one station in its market. He has also worked with numerous Hollywood-based game shows and was the director for the Bolivian National Lottery game. In addition to his responsibilities with the Company, Mr. Pichard also serves as a research and training specialist with the Florida Department of Law Enforcement where he supervises the production of training tapes, public service announcements and media related courses. Mr. Pichard holds a bachelor of science degree in mass communications from Florida State University. MEL RAY Mr. Ray is 58 years old and resides in Tampa, Florida. Mr. Ray has been an executive in the bottled and natural gas industries for more than 30 years, and currently manages six gas companies in the state of Florida, ranging from the west coast Tampa area all the way to the east coast of Florida. Mr. Ray's extensive experience in utility companies gives him a great understanding of local and federal government regulations. Due to the nature of his business, Mr. Ray also possesses knowledge concerning hazardous materials transportation, bulk purchasing, retail sales, management, marketing, acquisition, and personnel. Mr. Ray has 20 years of experience operating some of the most profitable divisions of Tropi-Gas, Petrolane, and Star Gas as an executive both in its international and domestic markets. Mr. Ray is an officer and director of the company. WILLIAM BEGGS Mr. Beggs is 54 years old and resides in Fort Lauderdale, Florida. Mr. Beggs has been a member, in good standing, of The Florida Bar since 1973. Mr. Beggs practices real estate and corporate law in the Fort Lauderdale area. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 45 46 ITEM 10 EXECUTIVE COMPENSATION The Summary Compensation Table below sets forth all compensation paid to the Officers and Directors of the Company during the Company's year ended December 31, 1996 and 1997. Prior to June of 1992, the date on which a change in control of the Company was effected and current management took over their respective positions, previous management conducted no business, the Company's was inactive and no compensation was paid or deferred to and of the Company's officers or directors. 1996 Summary Compensation Table
Name Annual Compensation Awards Long Term Compensation Awards and All Principal Restricted Restricted LTIP Pay- Other Position Salary Bonus Other Stock Options outs Compensation - --------- ------ ----- ----- ----- ------- ---- ------------ Ronald Foster ** 5 * * * * * * Claude Pichard + * * * * * * * Mel Ray (2) * * * * * * * Thomas Barrett(4) 7 * * * * * *
1997 Summary Compensation Table
Name Annual Compensation Awards Long Term Compensation Awards and All Principal Restricted Restricted LTIP Pay- Other Position Salary Bonus Other Stock Options outs Compensation - --------- ------ ----- ----- ----- ------- ---- ------------ Ronald Foster ** (5) * * * * * * Claude Pichard + * * * * * * * Mel Ray (2) * * * * * * * Karien Anderson(1) (6) * * * * * * Thomas Barrett (4) (8) * * * * * *
- -------------- * None. ** President, Chairman and Chief Executive Officer. *** Former Secretary, Treasurer and Chief Financial Officer. + Vice President. (1) Secretary and Treasurer. (2) Director. (3) Director. (4) Vice President. (5) $130,000. (6) $ 30,000. (7) $ 1,500. (8) $ 30,000. (9) No person listed has any options to acquire securities of the kind required to be disclosed pursuant to instruction 1 of Item 403 of Regulation SB. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 46 47 EMPLOYMENT AGREEMENTS The Company is a party to an employment agreement with Ronald Foster, a copy of which is filed as an exhibit to this registration statement. The following summary thereof is qualified in its entirety by reference to such exhibit. On January 1, 1992, Mr. Foster entered into a ten year employment agreement with the Company, renewable thereafter for continuing one year terms unless one of the parties provides the other with written intention not to renew, on or before the 180th day prior to expiration of the then current term. Although the agreement can be terminated by the Company for cause, or the Company's stockholders can refuse to comply with its terms by not re-electing Mr. Foster as a director, such events accelerate Mr. Foster's rights to compensation under the Agreement. The Agreement provides the Company with an obligation to defend and indemnify Mr. Foster to the fullest extent legally permitted, and calls for the following compensation: (a) Mr. Foster is entitled to an annual bonus payable in shares of the Company's common stock, determined by dividing 10% of the Company's pre-tax profits (excluding depreciation) for the subject calendar year by the average bid price for the Company's common stock during the last five trading days prior to the end of the last day of each year and the first five days of the new year, provided, however, that the agreement shall have been in effect for at least one business day during the subject year. (b) Mr. Foster is entitled to an annual cash bonus in a sum equal to 5% of the Company's gross annual income or 10% of the Company's net pre-tax profit (excluding depreciation), whichever is less. (c) Mr. Foster is entitled to a salary starting at $2,500.00 per Week, but subject to review on a quarterly basis, with the expectation that it will be substantially increased as increased profits and cash flow from operations permit. (d) In addition to the foregoing, Mr. Foster is entitled to a benefit package equal to the most favorable benefit package provided by the Company or its subsidiaries to any of their employees, officers, directors, consultants or agents. All required payments are accruing until such time as the Company has adequate funds to meet its operating expenses and commitments. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS & MANAGEMENT The following table sets forth, as of the date of this Registration Statement, the number and percentage of shares of common stock owned of record and beneficially by any group (as that term is defined for purposes of Section 13(d)(3) of the Exchange Act), person or firm that owns more than Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 47 48 five percent (5%) of the Company's outstanding common stock (the Company's only class of voting securities).
Name and Address of Amount of Nature of Percent of Beneficial Owner* Shares Ownership Class - ------------------- --------- --------- ---------- Ronald Foster 1,632,089 Record & 32% 103 Firetower Road Beneficial Leesburg, Georgia, 31763 Larry Cahill 1,000,000 Record & 19% 3330 Southgate Court Beneficial Cedar Rapids, Iowa 52404 Michael Graham 500,000 Record & 10% 1804 Cherry Lane Beneficial Bluefield, West Virginia 24701
- ----- * Includes all stock held either personally or by affiliates. (b) Security Ownership of Management The following table sets forth, as of the date of this Registration Statement, the number and percentage of the equity securities of the Company, its parent or subsidiaries, ,owned of record or beneficially by each officer, director and person nominated to hold such office and by all officers and directors as a group.
Title of Name of Amount Nature of Percent of Class Beneficial Owner Shares Ownership Class - -------- --------------- ------ --------- ---------- Common Ronald Foster 1,632,089 ** 32.00% Common Karien Anderson 0 *** 00.00% Common Claude Pichard 10,000 ** 00.07% Common Betty Rodgers 5,000 *** 00.035% Common Williams Beggs 0 *** 00.00% Common All officers and directors as a group (5 people) 1,647,089 ** 33.05%
- ------ * Includes all stock held either personally or by affiliates. ** Record & Beneficial. *** Not Applicable. To the best knowledge and belief of the Company, there are no arrangements, understandings, or agreements relative to the disposition of the Company's securities, the operation of which would at a subsequent date result in a change in control of the Company. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 48 49 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS There are no family relationships among directors, executive officers or persons chosen by the Company to be nominated as a director or appointed as an executive officer of the Company of any of its affiliated subsidiaries. PART IV
ITEM 13. INDEX TO EXHIBITS DESCRIPTION OF EXHIBITS PAGE OR EXHIBIT SOURCE OF NUMBER INCORPORATION DESCRIPTION - ------- ------------- ----------- 2. .1 *** Plan of Reorganization: Agreement and Plan of Merger [sic] by and among Satellite Bingo, Inc., a Georgia corporation, and Supermin, Inc. dated September 2, 1986. .2 *** Re-incorporation in Delaware Instruments. 3. Constituent Documents: ---------------------- .1 *** Articles of Incorporation, as amended .2 *** Bylaws, as amended 10. Material Contracts: ------------------- .1 *** Agreements for Purchase of Piedmont Bingo Hall (Frontier Palace). .2 *** Employment Agreement between Company and Ronald Foster. .3 Joint Venture Agreements: ------------------------- *** .1 Joint Venture Agreement with VPACS Limited (a New York corporation) *** .2 Cahill Agreement *** .3 La Yate Company Limited (Hong Kong) *** .4 PandaAmerica/Glendale Studios .4 Bingo Hall Agreements: --------------------- *** .1 Chief Strikeaxe Trading Post (Oklahoma) *** .2 DCA Services Division, Fort Benning, Georgia .5 *** Lease and Service Provider Agreements with Piedmont Jaycees. .6 Program & Production Agreements: --------------------------------
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 49 50
*** .1 Glendale Studios Production Agreements *** .2 Las Vegas Television Network, Inc. .7 *** Lease Agreement dated January 17, 1996, with Integrated Telephony Products, Inc. .8 Agreements with Bradley M. (Brad) Tate: -------------------------------------- *** .1 Memorandum of Service Agreement *** .2 Consulting Agreement .9 *** Alamo Leasing Agreement .10 Letters of Intent: ----------------- *** .1 Glendale Studios, Inc. *** .2 Cherokee Indians of Georgia, Inc. *** .3 Promotions International Corporation. .11 Licensing Agreements: --------------------- *** .1 Fertina-C, LTD, March 25, 1992 (Greece) *** .2 Satellite Bingo, Inc. and Luis Manuel Da Costa Matias, January 18, 1991(Brazil) *** .3 I.O. Report, C.A., March 23, 1993, (Venezuela) .12 LACOA Agreements: ----------------- *** .1 Lobbyist Engagement Agreement *** .2 Management Agreement 11. * Statement re computation of per share earnings. 21. ** Subsidiaries of the Company. 99. Additional Exhibits: -------------------- *** .1 Letter from Fletcher, Heald & Hidreth to Ron Foster, dated April 10, 1992, referencing communications with Cynthia Young, Assistant Chief, Support of Litigation, Organized Crime and Racketeering Section of the Criminal Division, UNITED STATES DEPARTMENT OF JUSTICE.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 50 51
*** .2 Letter from Fletcher, Heald & Hidreth to Ron Foster, dated March 19, 1992, referencing the legality under federal law of SBI Communications, Inc.'s programs and planned subscription network. *** .3 Correspondence between the Federal Communications Commission and Putbrese, Hunsaker & Ruddy, dated September 14, 1990 through February 11, 1991, requesting a request for declaratory ruling the legality of advertising interactive Bingo games on cable systems. *** .4 Correspondence between Sutherland, Asbill & Brennan and the Federal Communications Commission, from July 28, 1986, until some undetermined time in 1987. *** .5 Opinion letters to Ron Foster from Sutherland, Asbill & Brennan dated July 11 and 15, 1986. *** .6 Letter involving the game C-Note, dated June 18, 1993, referencing a prohibition under Section 9-701(1(a) to the offer of games of Bingo and keno in Nebraska, but noting that such statute would not appear to prohibit the broadcast of the games into Nebraska, or, the location in Nebraska of telephone banks involving offers of the games outside of Nebraska. *** .7 Opinion Letter dated November 16, 1995, from Wiley, Rein & Fielding (Washington, D.C.), re Pay-per-view Bingo. *** .8 Ordinance Number 429 (Bingo) dated June 13, 1994, City Clerk of Piedmont, Alabama. *** .9 Alabama Constitution, Amendment Number 508, Bingo Games in Calhoun County. *** .10 Limited Appraisal of Frontier Palace, dated May 1, 1995, prepared by Phillip C. Ledbetter.
--------- o Incorporated by reference from the disclosure thereof in the financial statements filed herewith. ** Incorporated by reference from the disclosure thereof at Part I, Item I (Description of Business), located at page 3 of this registration statement. *** Provided in the original filing and/or first amendmentfo the 10-SB. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 51 52 Additional Information Headquarters SBI Communications, Inc. P.O. Box 729 - 103 Firetower Road - Leesburg, Georgia 31763. Subsidiaries SBI Communications, Inc., an Alabama Corporation 376 Hwy 278 Bypass - P.O. Box 597 - Piedmont, Alabama 36272 SBI Communications, Inc., a Nevada Corporation 955 South Virginia Street; Suite 116; Reno, Nevada 89502 Satellite Bingo, Inc., a Georgia Corporation 103 Firetower Road - P. O. Box 729, Leesburg, Georgia 31763 Officers & Directors Ronald Foster: President, Chairman of the Board, Chief Executive Officer Karien Anderson: Secretary/Treasurer/Director Claude Pichard: Vice President/Director Mel Ray: Director Williams Beggs: Director Auditors John Ratliff Daniels and Ratliff Professional Group, Inc. 301 South McDowell Street; Suite 1014; Charlotte, North Carolina 28204 Transfer Agent Corporate Stock Transfer 370 17th Street; Suite 2550; Denver, Colorado 80202 Exhibits to this Form 10-KSB will be provided, subject to payment of actual copy costs, to shareholders of the Company upon written request addressed to Lisa Evans acting, Secretary, SBI Communications, Inc., at the Company's headquarters listed above. Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 52 53 Signatures PURSUANT TO THE REQUIREMENTS OF SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, THE COMPANY HAS DULY CAUSED THIS FIRST AMENDED REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, HEREUNTO DULY AUTHORIZED. SBI COMMUNICATIONS, INC. DATED: APRIL 30, 1998 /s/ Ronald Foster Ronald Foster Chairman, President & Chief Executive Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf or the Company and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Ronald Foster Chairman, President & Chief Financial Officer April 30, 1998 - ---------------------------- Ronald Foster /s/ Karien Anderson Director, Secretary, Treasurer April 30, 1998 - ---------------------------- Karien Anderson /s/ Claude Pichard Director, Vice President April 30, 1998 - ---------------------------- Claude Pichard /s/ Mel Ray Director April 30, 1998 - ---------------------------- Mel Ray /s/William Beggs Director April 30, 1998 - ---------------------------- William Beggs
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 53 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF SBI COMMUNICATIONS, INC. FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 22,228 0 10,867 0 86,065 118,160 6,984,557 (367,202) 6,617,335 962,288 0 0 8,365,000 5,345 6,377,399 6,984,557 411,033 544,662 180,563 797,234 0 0 82,637 (693,879) 0 (693,879) 0 0 0 (693,879) (.13) 0
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