-----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, TiZf8035Rn6bZ4kgRkkalbzYLi+swvRpdStd9iUAM2xu2w3tzkxw9ltxFa2Gja3B D76lipVvwYs+qWD3wSzQ9g== 0000950144-98-009107.txt : 19980806 0000950144-98-009107.hdr.sgml : 19980806 ACCESSION NUMBER: 0000950144-98-009107 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 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: 10QSB SEC ACT: SEC FILE NUMBER: 000-28416 FILM NUMBER: 98677351 BUSINESS ADDRESS: STREET 1: 458 HIGHWAY 278 BY PASS STREET 2: PO BOX 597 CITY: PIEDMONT STATE: AL ZIP: 36272 BUSINESS PHONE: 2054478797 10QSB 1 SBI COMMUNICATIONS, INC 10-QSB FOR 3/31/98 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C., 20549 FORM 10-QSB (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL QUARTER ENDED MARCH 31, 1998 COMMISSION FILE NUMBER 0-28416 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 SBI COMMUNICATIONS, INC. (Name of small business issuer specified in its charter) DELAWARE 58-1700840 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) POST OFFICE BOX 729 103 FIRETOWER ROAD LEESBURG, GA 31763 (Address of Principal executive offices) (Zip code) (912) 759-0701 Issuer's telephone number
SECURITIES REGISTERED PURSUANT TO 12(b) OF THE ACT: NONE SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK AND PREFERRED STOCK
COMMON STOCK $0.001 PAR VALUE - PREFERRED STOCK $5.00 PAR VALUE (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 requirements for the past 90 days. YES [ X ] NO [ ] As of May 5, 1998 the Registrant had 5,570,439 shares of its $0.001 par value Common Stock Outstanding. 2 TABLE OF CONTENTS SBI COMMUNICATIONS, INC. FORM 10-QSB INDEX Page PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements 3 Consolidated Balance Sheets as of December 31, 1997 and and March 31, 1998 Consolidated Statements of Operations for the three months ended March 31, 1997 and 1998 4 Consolidated Statement of Changes in Shareholders' Equity for the three months ended March 31, 1998 4 Consolidated Statements of Cash Flows for the three months ended March 31, 1997 and 1998 5 Notes to Consolidated Financial State- ments 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Condition 7 PART II. OTHER INFORMATION Item 1. Legal Proceedings 11 Item 2. Changes in Securities 11 Item 3. Defaults Upon Senior Securities 11 Item 4. Submission of Matters to a Vote of Security Holders 11 Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12 Page 2 3 PART I. FINANCIAL INFORMATION - ----------------------------- FINANCIAL STATEMENTS SBI COMMUNICATIONS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, Dec. 31, 1998 1997 ---- ---- ASSETS ------ Current assets: Cash $ -- $ 22,228 Accounts receivable, net of allowance for doubtful accounts of $-0- 250 250 Notes receivable from affiliates 4,118 9,617 Inventories 79,444 86,065 ----------- ----------- 83,812 118,160 Property and equipment, net of accumulated depreciation 6,709,723 6,782,223 Other assets: Deferred loan costs 13,090 21,109 Deposits 63,065 63,065 ----------- ----------- $ 6,869,690 $ 6,984,557 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Note payable to trust managed by a shareholder $ 150,000 $ 150,000 Mortgage note payable-current portion 239,171 239,701 Capitalized leases-current portion 17,284 17,491 Accrued wages due to principal shareholder (Note 2) 320,000 290,000 Advances due to principal shareholder 12,698 -- Account payable and accrued expenses 163,778 150,442 ----------- ----------- 902,931 847,634 Capitalized leases, long-term portion 61,459 62,216 Other notes payable 52,438 52,438 ----------- ----------- Total liabilities 1,016,828 962,288 ----------- ----------- Stockholders' equity: Preferred stock, par value $5.00; 10,000,000 shares authorized; 1,673,000 and 1,693,000 shares issued and outstanding at March 31, 1998 and December 31, 1997, respectively 8,265,000 8,465,000 Common stock, par value $.001; 40,000,000 shares authorized; 5,570,439 shares issued and outstanding at March 31, 1998 and 5,345,439 as of December 31, 1997 5,570 5,345 Paid in capital 3,667,118 3,467,343 Accumulated deficit (6,084,826) (5,915,419) ----------- ----------- 5,852,862 6,022,269 ----------- ----------- $ 6,869,690 $ 6,984,557 =========== ===========
See accompanying notes to consolidated financial statements. Page 3 4 SBI COMMUNICATIONS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, (UNAUDITED) 1998 1997 ---- ---- Revenues: Bingo hall rent $ -- $ 75,000 Kitchen and gift shop revenues -- 32,188 Other income 172 353 --------- --------- 172 107,541 --------- --------- Expenses: Cost of sales - kitchen and gift shop -- 31,867 Administrative salaries and related expenses 38,570 33,565 Facility costs 10,864 14,327 Other general and administrative 32,876 81,982 Production costs -- 2,005 Depreciation and amortization 72,500 71,041 Interest and finance expenses 14,769 22,826 --------- --------- 169,579 257,613 --------- --------- Net loss $(169,407) $(150,072) ========= ========= Net loss per share $ (0.03) $ (0.03) ========= ========= See accompanying notes to consolidated financial statements. Page 4 5 SBI COMMUNICATIONS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, (UNAUDITED)
1998 1997 ---- ---- Cash flows from operating activities: Net (loss) $(169,407) $(150,072) Adjustments to reconcile net loss to cash provided (used) by operating activities: Depreciation and amortization 72,500 71,041 Amortization of deferred loan costs 8,019 8,175 Change in accounts receivable, trade -- 31,657 Change in inventories 6,621 -- Change in accounts payable and accrued expenses 43,336 47,150 --------- --------- Cash (used) by operating activities (38,931) 7,951 --------- --------- Cash flows from investing activities: Proceeds from repayment of notes receivable from affiliate 5,499 -- Purchase of property and equipment -- (7,134) --------- --------- Cash (used) by investing activities 5,499 (7,134) --------- --------- Cash flows from financing activities: Loans from shareholders/affiliates 12,698 -- Repayments of affiliated loans -- (499) Mortgage loan repayments (530) (1,393) Capital lease repayments (964) -- --------- --------- Cash flows provided by financing activities 11,204 (1,892) --------- --------- Net increase (decrease) in cash (22,228) (1,075) Cash at beginning of period 22,228 42,327 --------- --------- Cash at end of period $ -- $ 41,252 ========= ========= Supplemental information: Income taxes paid $ -- $ -- ========= ========= Interest paid $ 4,000 $ 14,097 ========= ========= Item not requiring use of cash: Preferred stock converted $(200,000) $ 0.00 Issuance of common stock 200,000 0.00 --------- --------- Paid in capital -- -- --------- ---------
See accompanying notes to consolidated financial statements. Page 5 6 SBI COMMUNICATIONS, INC. AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998 AND DECEMBER 31, 1997 NOTE 1 - SELECTED DISCLOSURES The accompanying unaudited consolidated financial statements, which are for interim periods, do not included all disclosures provided in the annual consolidated financial statements. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and the footnotes thereto contained in the Form 10-KSB for the year ended December 31, 1997 of SBI Communications, Inc. (the "Company"), as filed with the Securities and Exchange Commission. The December 31, 1997 balance sheet was derived from the unaudited consolidated financial statements, but does not include all disclosures required by generally accepted accounting principles. In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (which are of a normal recurring nature) necessary for a fair presentation of the financial statements. The results of operations and cash flow for the three months ended March 31, 1998 and 1997 are not necessarily indicative of the results to be expected for the full year. 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. NOTE 2 - RELATED PARTY TRANSACTIONS The Company accrued salaries payable to the Company's principal shareholder totaling $30,000 for each of the quarters ended March 31, 1998 and 1997, respectively. All amounts owed to the shareholder are payable on demand. Page 6 7 NOTE 3 - NET LOSS PER SHARE The Company's net loss per share was calculated using 5,570,439 and 5,345,439 weighted average shares outstanding for each of the quarters ended March 31, 1998 and December 31, 1997, 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. NOTE 4 - PREFERRED STOCK ACTIVITY In July, 1996, 5,000 shares of preferred stock with a par value of $25,000 were to be issued to cover $20,000 in closing costs relating to the mortgage note receivable. The Company inadvertently issued 25,000 shares rather than 5,000 shares, and both parties agreed that the related certificate would be returned and reissued. In that the certificate had not been returned as of December 31, 1996, the full 25,000 shares were treated as outstanding at that time, with a related reduction in paid in capital. In the first quarter of 1997, the certificate was returned, and a new certificate for 5,000 shares was issued. The stockholders' equity section of the balance sheet as of March 31, 1997, has been adjusted to reflect the reduced number of preferred shares outstanding, with a corresponding adjustment to paid in capital. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 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 delivered bingo games, game shows and other similar telecommunication gaming products or services to television viewers throughout the United States. The Company has also developed a system that can be integrated into all standard communications channels including the World Wide Web for interactive play throughout the World. Our Web site address which will be available 24 hours a day is http://www.sbicommunications.com, http://www.globalot.com or http://www.abingo.com. Currently, the Company's only operations are the leasing of a 80,000 square foot facility located in Piedmont, Alabama. Under local ordinances, the hall must be leased to a charity to operate Page 7 8 bingo, which was the local Jaycees. 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 Company believes that the $5 billion dollar North America charitable bingo industry is fragmented and inefficient, yet potentially profitable. The Company's strategy, therefore, is to consolidate a portion of the industry to build a national chain of bingo centers in lucrative markets. The Company believes that its industry experience, economies of scale and financial resources will provide a competitive advantage over competing bingo operations, which should enable the Company to effectively execute its long-term growth plan. The Company currently has only one bingo center located in Piedmont, Alabama. The Company intends to continue its expansion through acquisitions and developments in other selected markets throughout the United States. Management's goal is to open 10 bingo center by end of 1998. RESULTS OF OPERATION THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997. The Company generated revenues of $-0- during its first fiscal quarter of 1998 ended March 31, 1998, as compared to $107,541 in the comparable period of the prior fiscal year, which represents a decrease. The revenue decrease was due to renovation of facility in Piedmont. The Company expects quarterly revenues to increase when the new leases are in place. Also, upon the successful operation of the Company's Web site and broadcasting of it's interactive programming. Page 8 9 Direct operating costs of the Company's bingo center totaled $169,579 during the first quarter of 1998 versus $257,613 in the comparable 1997 quarter, which represents a 34% decrease. Approximately 43% of the current period's direct operating costs were comprised of depreciation and amortization, which are relatively fixed expenses. The balance is primarily comprised of legal, wages and management fee costs. General & Administrative (G&A) expenses totaled $32,876 during the first quarter of 1998 as compared to $81,982 in the year ago period, an decrease of 42%. This expense decrease of $49,106 was mainly due to the delectation of certain key management personnel since the first quarter of 1998. The Company did not record any tax expense during the current quarter or comparable year-ago period due to tax loss carryforwards. The Company's tax loss carryforward balance at the end of fiscal 1997 was in excess of $5 million and, as such, the Company does not expect to incur any federal income tax liability until this carryforward is depleted by operational profits. Net loss for the first fiscal quarter of 1998 was $169,407, which equated to loss per share of ($.03) Net loss for the comparable quarter of 1997 was $150,072 which equated to loss per share of ($0.03). Virtually all losses was due to termation of the Jaycess lease and revation of property in Piedmont, Alabama which was not open in the first quarter of 1998. Management believes that the Company's direct operating costs and G&A expenses are relatively fixed. As such, management will continue to seek expansion opportunities that offer incremental operating revenues which, in turn, favorably leverage the Company's net income performance. All of the Company's revenue comes from operation of the bingo hall or interest income on cash therefrom. The following table summarizes revenue categories in the Company's statement of income (rounded to the nearest whole dollar). Amount of Total Revenue Three Months Ended March 31, 1998 1997 ------------- ------------ Revenues: Bingo hall rent/administrative fees -0- $75,000 Kitchen and gift shop revenues -0- 32,000 Other Income 352 -------- Total Revenue $ -0- $107,541 ======== ======== In general, the Company experienced insignificant revenues in 1994 as it attempted to expand and develop its operations. At the end of 1994 the Registrant acquired a bingo hall, which it now leases to charities who sponsor bingo games. The Company also provides management services to assist the charities in the operations, for which the Company charges a fee. In late 1996, the Company was also requested to take over operations of the kitchen and gift shop portions of the facility. Except for the operation of the bingo hall, there are no other significant revenue sources of the Company at this time. In 1995, the Company charged a flat $75,000 per month in rent, plus management fees as deemed appropriate. In February, 1996, the lease with the current charity was amended to reflect a minimum payment of $25,000 per month, with adjustments up Page 9 10 to $75,000 per month if the charity generates sufficient annual cash flow to afford to pay the increased rent. Although the charity generated cash flow that would allow greater rent, management allow such excess to be applied toward unpaid rents and did not increase the rent charge for 1996. However, the company did received $61,033 additional rents in 1997. Management collected rent payments of $75,000 from the Jaycees for three ended March 31, 1997. Management has collect no revenues for first quarter 1998 from the Piedmont facility. Management believes that due to competition and geographic factors, change in the local regulations, which states that charity member and employees cannot be paid, the local charity will not be able to operate and pay its obligations under the lease agreement and therefore in January the lease with the Piedmont Jaycees was terminated. The company has a letters of intent to lease the Piedmont facility from Regency Communications, a telemarketing company and a sign lease from Consolidated Trust, S.A. which starts August 1, and September 1, 1998. Each company will lease half of the property for $40,000.00 and $25,000.00 per month each. Total revenue for the monthly leases will be $65,000.00. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1998, the Company had cash and cash equivalents of $83,812, a decrease of $34,348 from the end of fiscal 1997. The decrease was due to renovation of the facility and will not be able to rent the facility until August of 1998. The Company has also invested over $60,000 in its restaurant and doesn't foresee substantial further investments required there. The Company does expect to make further investments in its Piedmont, Alabama facility in order to meet strong customer demands and requirement of under the new leases. The Company expects its cash position to begin to increase assuming leases are place and the Company's Internet website is operational. There can be no assurance of the foregoing. The Company intends to finance future acquisitions primarily through the use of stock and, to a lesser extent, cash and notes. Accounts receivables totaled $ -0- at March 31, 1998. The Company collects most of its receivables from its participating charities within one to four weeks from the time earned. The accrued rent will be collected, when earned, during two major months within the year. Current liabilities totaled $1,016,828 at the end of the quarter, but less than 10% of this total represented trade payables. Approximately 38% of total liabilities are comprised of a long-term note payable on which the Company is currently making payments. The Company has no other long-term debt. The Company had total assets of over $7.3 million and total liabilities of $770 thousand at the end of the first quarter, with shareholder equity of $6.5 million. The Company believes that its current capital resources, together with expected positive operational cash flows and note collections, will support operational requirements for the next year. Page 10 11 PART II--OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not involved in any legal proceedings. ITEM 2. CHANGES IN SECURITIES In July, 1996, 5,000 shares of preferred stock with a par value of $25,000 were to be issued to cover $20,000 in closing costs relating to the mortgage note receivable. The Company inadvertently issued 25,000 shares rather than 5,000 shares, and both parties agreed that the related certificate would be returned and reissued. In the first quarter of 1997, the certificate was returned, and a new certificate for 5,000 shares was issued. In January 1998 the Company issued 25,000 shares of its common stock to cover the cost of software programing relating to PandaAmerica. The Company also converted 40,000 shares of preferred shares to 200,000 shares of the company common stock. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 5. OTHER INFORMATION CHANGE IN MANAGEMENT. EXHIBITS AND REPORTS ON FORM 8-K ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS: EXHIBITS DESCRIPTION 11 Statement re: computation of per share earnings 27 Financial data schedule (B) REPORTS ON FORM 8-K: None Page 11 12 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SBI Communications, Inc. Date: July 14, 1998 By: /s/Ronald Foster ------------------------------------- Ronald Foster Chairman of the Board and Chief Executive Officer (principal executive officer) Page 12 EX-11 2 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 SBI COMMUNICATIONS, INC. COMPUTATION OF EARNINGS PER COMMON SHARE FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 Three Months Three Months Ended Ended March 31, 1997 March 31, 1998 -------------- -------------- Shares outstanding: 5,345,439 5,570,439 Weighted average shares outstanding 5,345,439 5,570,439 Net loss $ (150,072) $ (169,407) Preferred Dividend -- -- -------------- -------------- Total (150,072) (169,407) Net loss per share $ (0.03) $ (0.03) Page 13 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF SBI COMMUNICATIONS, INC. FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1998 DEC-31-1998 MAR-31-1998 0 0 0 0 79,444 83,812 6,709,723 72,500 6,869,690 1,016,828 239,171 0 8,365,000 5,570 5,852,862 6,869,690 0 0 0 154,810 0 0 14,769 (169,407) 0 (169,407) 0 0 0 (169,407) (0.03) 0
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