-----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, Kr9u+mE+k/HjaTq5Gkn67ITr6v70zsmRiQvJfEYUHkbrogsClqfLGs23mOqVfcfZ u2Su5GlVDdDSiri8HHn0PA== 0000950144-96-008565.txt : 19961121 0000950144-96-008565.hdr.sgml : 19961121 ACCESSION NUMBER: 0000950144-96-008565 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961120 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: 1934 Act SEC FILE NUMBER: 000-28416 FILM NUMBER: 96669823 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 10QSB 9/30/96 1 UNITED STATES 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 QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996; OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. COMMISSION FILE NUMBER O-28416 SBI COMMUNICATIONS, INC. (Name of Small Business Registrant in its charter) DELAWARE -------- (State or other jurisdiction of incorporation or organization) 58-1700840 ---------- (I.R.S. Employer Identification Number) 458 HIGHWAY 278 BY PASS; P.O. BOX 597; PIEDMONT, ALABAMA 36272 -------------------------------------------------------------- (Address of principal executive offices including Zip Code) (205) 447-8797 -------------- (Registrant's telephone number) Check whether the Registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, during the past twelve 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 [_] State the number of shares outstanding of each of the Registrant's classes of equity, as of the latest practicable date: 5,345,439 SHARES OF COMMON STOCK AND 1,688,000 SHARES OF PREFERRED STOCK, AS OF SEPTEMBER 30, 1996. 2 TABLE OF CONTENTS
ITEM PAGE NUMBER NUMBER ITEM CAPTION - ------ ------ ------------ PART I 3 FINANCIAL INFORMATION ITEM 1 3 FINANCIAL STATEMENTS 4 Cover Page 5 Consolidated Balance Sheets 6 Consolidated Statements of Income 7 Consolidated Statements of Shareholders' Equity 13 Consolidated Statements of Cash Flows 14 Notes to Consolidated Financial Statements ITEM 2 15 MANAGEMENT'S DISCUSSION AND ANALYSIS PART II 22 OTHER INFORMATION ITEM 1. 22 LEGAL PROCEEDINGS ITEM 2 22 CHANGES IN SECURITIES * Modification of Instruments Defining Rights * Limitation or Qualification of Class Rights * Recent Sales of Unregistered Securities ITEM 3. * DEFAULT UPON SENIOR SECURITIES ITEM 4. * SUBMISSION OF MATTERS TO SECURITIES HOLDERS ITEM 5. 22 OTHER INFORMATION ITEM 6. 23 EXHIBITS & REPORTS ON FORM 8-K 23 SIGNATURES 24 ADDITIONAL INFORMATION - ------- * Not Applicable.
SBI Communications, Inc., Form 10-QSB, Page 2 3 PART I FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS See pages 4 through 16 following SBI Communications, Inc., Form 10-QSB, Page 3 4 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS INTRODUCTION The Registrant is currently in the development stage of its business cycle. Since its inception, the Registrant 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 Registrant 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 Registrant. The majority of its current operating income is provided by managing bingo games for certain non-profit charities in a facility owned by the Registrant. The majority of future revenues, however, are not anticipated to occur in either of these areas. The Registrant 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 currently anticipates arranging contracts to purchase blocks of long distance telephone time at rates of less than ten cents per minute. Television audience users will call SBI telephone numbers to receive computer generated bingo playing cards. There will be no charge for the card, but a charge for the telephone time it takes to generate the card and communicate the information to the user. Management anticipates an average telephone time usage of ten minutes per card generated, and anticipates charging approximately one dollar per minute for such time. Accordingly, management anticipates generating in excess of ninety cents per minute profit on each telephone request for a bingo playing card, or approximately nine dollars for each card requested. Management of the Registrant 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 do some research into bingo on the Internet. Management estimates that all significant costs to begin telecommunications operations have already been incurred, but the Registrant must first locate a third party that will contract with the Registrant to broadcast the bingo shows. Management is not able to estimate the cost of expanding the telecommunications business segment into foreign markets or onto the Internet at this time. Overall, management hopes to be able to generate significant net revenues annually from this area of business. However, there can be no assurance that management will succeed in finding an acceptable broadcasting vendor, or that audience participation will be sufficient enough to provide adequate profit margins to continue the venture. Assuming success with the above concept, the Registrant also hopes to expand operations through the acquisition of television production facilities and rights to a television buying show. This would allow the Registrant to produce their bingo show in their own studio and broadcast it SBI Communications, Inc., Form 10-QSB, Page 17 5 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. Diligently being examined are the legal opinions submitted for imminent contractual arrangements between two companies with the Registrant, a major international shop at home entity and a telecommunications Registrant. Both of these entities are NASDAQ listed. Management feels confident that a deal will be consummated by year end 1996 allowing the Registrant to commence operations on a full scale in the telecommunications business segment. The Registrant 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, nor can management at this time make a reasonable estimation of the cost to start such projects, or the future revenues or profits that might be generated therefrom. A summary of projects currently being pursued is as follows: A) The Registrant is exploring the negotiation for the management contract for THE MILL Resort & Casino (Bingo Operation). At the request of Full House Resort, Inc., a public entity in joint partnership with the Coquille Indian Tribe, THE MILL is negotiating with the Registrant to utilize the experience of SBI through a management contract. Negotiations are only in the preliminary stage at this time. B) The Registrant is under agreement to acquire Deadwood Gulch Resort & Casino in South Dakota. This is a twelve million dollar facility that is presently wholly-owned and operated by the Full House Registrant. The status at present is management is awaiting a decision by a participating equitable entity. This project will not be able to be consummated without such a participating entity. C) The Registrant is planning a partnership with the Louisiana Charitable Organization Alliance (LACOA), and the development of a senior citizens television network. Such ventures will involve development of television programs featuring interactive Bingo shows, auctions, and factory direct sales. The LACOA project is currently awaiting passage of legislation presented by Clenix Esensauter of Louisiana. D) The Registrant is in the planning stage of the establishment of a casino and bingo hall on real estate provided by the Cherokee Indians of Georgia, Inc., which is also now subject to Bureau of Indian Affairs (BIA) approval. E) To add diversification, the Registrant is also exploring the possible acquisition of Zacker's (Horizon) Gas of Tampa, Florida, a retail propane gas Registrant with $3,000,000 in annual sales. LIQUIDITY The following table summarizes working capital and total assets: SBI Communications, Inc., Form 10-QSB, Page 18 6
SEPTEMBER 30, DECEMBER 31, 1996 1995 ---- ---- Working Capital ($ 7,831) $ 102,830 Total Assets 7,783,047 8,179,490
At December 31, 1995, the Registrant'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 Registrant's operating activities relating to approximately $100,000 in fees collected from charities that sponsor bingo games at the Registrant's bingo hall. At September 30, 1996, the Registrant 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 accrued salaries. $90,000 in salaries to management were accrued during the nine months ended September 30, 1996. At September 30, 1996, a total of $210,000 in salaries to management has been accrued. Management does not intend to pay such accrued salaries until the Registrant has sufficient working capital to do so while meeting operating needs. The Registrant has had some success in issuing stock for services, and accordingly has kept the working capital deficit to a minimum during the nine month period. The change in total assets is principally attributable to the Registrant's depreciation of the bingo hall and related equipment, as well as the amortization of intangible assets. Depreciation and amortization totaled $411,081 for the nine months ended September 30, 1996. In addition, during the third quarter of 1996, management increased reserves for uncollectible receivables by $87,500; and donated to the charity currently operating the bingo hall $60,688 relating to game inventories (either previously used and billed to the charity, but not yet paid for, or unused and still on site). These two transactions resulted in a decrease in assets of $148, 688. As the Registrant continues to operate in the development stage, no significant cash flow is being generated from operating activities. In early 1996, the charity operating the bingo hall struggled, and the Registrant collected less funds than were needed to operate the games, as well as to cover administrative costs and costs of the facility. The Registrant lowered rents charged to the charity to $25,000 per month, significantly below the $75,000 per month charged in 1995. As a result, the Registrant used $147,516 in net cash flow for operations. The Registrant also acquired various operating equipment at a cost of $38,064. To fund these cash flow needs, the Registrant was able to obtain $250,000 in proceeds from a mortgage loan, but $61,000 of such proceeds were needed to pay various loan inducement and closing costs, resulting in net cash inflow from the loan of only $189,000. Overall, the Registrant experienced a net increase in cash for the nine months of $1,464. Management anticipates the charity operating the bingo hall to do sufficiently well in the future to allow consistent payment of the $25,000 rent, as well as additional payments on older receivable balances, which should strengthen the Registrant's cash flow from operations. SBI Communications, Inc., Form 10-QSB, Page 19 7 CAPITAL RESOURCES Since its inception, the Registrant's only significant sources of capital have been from the sale of common stock and loans from shareholders. The Registrant has also acquired significant assets through the sale of convertible preferred stock. The Registrant anticipates continued expansion of its business through acquisitions using Registrant stock. Furthermore, with the bingo hall acquired in 1994 now operating more profitably, the Registrant anticipates generation of revenues from the lease of this facility sufficient to cover administrative costs still being incurred as the Registrant moves forward in its development stage. RESULTS OF OPERATIONS The following table sets forth the relative relationship to total revenue of the revenue categories in the Registrant's statement of income (rounded to the nearest whole dollar). AMOUNT OF TOTAL REVENUE
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1996 1995 1996 1995 ---- ---- ---- ---- Revenues: Licenses & Royalties $ -0- $ -0- $ -0- $ -0- Bingo Hall Operations 89,754 162,678 289,745 312,678 Interest Income 343 -0- 617 32 Total Revenue $90,097 $ 162,678 $ 290,371 $ 12,710
In general, the Registrant experienced insignificant revenues in 1996 and 1995 as it attempted to expand and develop its operations. In 1995, the Registrant was able to get a more stable charity to lease the bingo hall, resulting in greater revenues in the three months ended September 30, 1995, as opposed to any other prior 1995 quarter. However, due to a transition period in early 1996 of charity management, bingo games were not as profitable as anticipated, and rents were lowered from $75,000 per month in 1995 to $25,000 per month in 1996. This has resulted in a decline in operating revenues in 1996 compared to 1995 for both the quarter and year-to-date periods. The Registrant has no other significant source of revenue at this time. As the existing charity gains in experience, participation at the bingo games has increased, allowing the charity to generate greater profits. This will allow timely payment of current rent charges, as well as potential ability to pay rents in the future closer to the $75,000 per month level originally agreed to. The Registrant's expenses can be summarized as follows: 8
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1996 1995 1996 1995 ---- ---- ---- ---- Salaries and related expenses $ 38,152 $ 38,263 $ 115,012 $104,263 Other general and administrative expenses 249,687 83,497 430,251 225,965 Depreciation and amortization 137,107 156,951 411,081 403,449 Interest and finance charges 27,717 -0- 54,628 193 Other 12,918 -0- 21,116 -0- Amount of Total Expenses $465,581 $ 278,711 $1,032,088 $733,870
One of the most significant expenses relates to the amortization of trademark, game show and computer program assets the Registrant has developed. The expense is running $265,960 per year, or approximately $66,000 per quarter. Such assets will be fully amortized at the end of 1996. The Registrant also has depreciation on the bingo hall and related equipment, which approximates $275,000 per year, or $69,000 per quarter. These expenses do not require the use of cash. As explained previously, the Registrant made adjustments to receivable and inventory balances in the third quarter of 1996, resulting in one time charges to general and administrative expenses of approximately $148,000. The Registrant also obtained debt financing in late 1995, and again in the spring of 1996, resulting in interest expense in 1996 with no corresponding expense in 1995. Interest expense includes about $17,000 in amortization of deferred loan costs for the nine months ended September 30, 1996. Should the Registrant 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 Registrant would change significantly. Management is not able to predict the impact of such changes on revenues or expenses at this time. IMPAIRMENT OF LONG LIVED ASSETS Although the Registrant has generated significant losses over the years, charity operations of the bingo hall are beginning to stabilize, and appear to be at a level to insure a minimum of $300,000 of annual rental income, with potential of $900,000 of annual rental income, as well as additional income relating to management services provided. This revenue should be sufficient to enable the Registrant to generate profits in the future. This, coupled with the potential proceeds from the sale of the bingo hall itself at some future date, has convinced management that the Registrant will ultimately collect net revenues from ownership of the bingo hall in excess of the recorded cost of the related fixed assets. Accordingly, management does not believe any adjustment in the recorded amounts of such assets is warranted under the new accounting rules relating to the impairment of long lived assets. SBI Communications, Inc., Form 10-QSB, Page 21 9 STATEMENT RE COMPUTATION OF EARNINGS PER SHARE See Notes To Consolidated Financial Statements included elsewhere in this filing for a description of the Registrant's calculation of earnings per share. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Incorporated by reference to the Registrant's registration statement on Form 10-SB, as filed with the Securities and Exchange Commission on November __, 1996. ITEM 2 CHANGES IN SECURITIES RECENT SALES OF UNREGISTERED SECURITIES Incorporated by reference to the Registrant's registration statement on Form 10-SB, as filed with the Securities and Exchange Commission on November __, 1996. ITEM 3. DEFAULT UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO SECURITIES HOLDERS Incorporated by reference to the Registrant's registration statement on Form 10-SB, as filed with the Securities and Exchange Commission on November __, 1996. ITEM 5. OTHER INFORMATION Incorporated by reference to the Registrant's registration statement on Form 10-SB, as filed with the Securities and Exchange Commission on November __, 1996. SBI Communications, Inc., Form 10-QSB, Page 22 10 ITEM 6. EXHIBITS & REPORTS ON FORM 8-K Incorporated by reference to the Registrant's registration statement on Form 10-SB, as filed with the Securities and Exchange Commission on November __, 1996. SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto authorized. SBI COMMUNICATIONS, INC. Dated: November 15, 1996 By: /s/Ronald Foster/s/ Ronald Foster Chairman, President & Chief Executive Officer SBI Communications, Inc., Form 10-QSB, Page 23 11 Additional Information HEADQUARTERS ------------ SBI Communications 458 Highway 278 Bypass; Post Office Box 597 Piedmont, Alabama 36272 SUBSIDIARIES ------------ SBI COMMUNICATIONS, INC, an Alabama corporation 458 Highway 278 Bypass; Post Office 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 458 Highway 278 Bypass; Post Office Box 597; Piedmont, Alabama 36272 OFFICERS & DIRECTORS -------------------- Ronald Foster: President, Chairman of the Board, Chief Executive Officer Kathy Hunt: Secretary/Treasurer/Director Thomas Barrett: Vice President Claude Pichard: Vice President/Director Mel Ray: Director Michael McGlothlin: Director AUDITORS -------- John Ratliff DANIELS AND RATLIFF PROFESSIONAL GROUP, INC. 1100 South Tryon Street; Suite 230; Charlotte, North Carolina 28203 TRANSFER AGENT -------------- CORPORATE STOCK TRANSFER 370 17th Street; Suite 2550; Denver, Colorado 80202 Exhibits to this Form 10-QSB will be provided, subject to payment of actual copy costs, to shareholders of the Registrant upon written request addressed to Kathy Hunt, Secretary, SBI Communications, Inc., at the Registrant's headquarters listed above. SBI Communications, Inc., Form 10-QSB, Page 24 12 SBI COMMUNICATIONS, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED FINANCIAL STATEMENTS AND ACCOUNTANTS' REPORT SEPTEMBER 30, 1996 AND 1995 13 SBI COMMUNICATIONS, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED BALANCE SHEETS
September 30, December 31, 1995 1995 ---- ---- (Unaudited) ----------- ASSETS ------ Current assets: Cash $ 13,053 $ 11,589 Accounts receivable, net of allowance for doubtful accounts of $500,000 at September 30, 1996 and $462,500 at December 31, 1995 463,038 499,864 Notes receivable from shareholders 33,200 25,000 ---------- ---------- 509,291 536,453 Property and equipment, less accumulated depreciation 7,142,799 7,316,219 Other assets: Deferred loan costs 64,424 - Trademarks, net 25,000 100,000 Shows and computer programs, net 41,490 165,960 Game inventory - 60,688 Organization costs 43 170 ---------- ---------- $7,783,047 $8,179,490 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current liabilities: Mortgage note payable - current portion $ 5,672 $ - Note payable to a trust managed by a shareholder 250,000 250,000 Accounts payable 41,747 53,738 Accrued wages due to principal shareholder 210,000 120,000 Advances due to principal shareholder 4,753 4,156 Accrued interest 4,950 5,729 ---------- ---------- 517,122 433,623 ---------- ---------- Mortgage note payable 241,775 - ---------- ---------- Shareholders' equity: Preferred stock, par value $5.00; 10,000,000 shares authorized; 1,668,000 shares issued and outstanding at September 30, 1996 and December 31, 1995, respectively 8,340,000 8,340,000 Preferred stock subscribed 25,000 - Common stock, par value $.001; 40,000,000 shares authorized; 5,345,439 shares issued and outstanding at September 30, 1996 and December 31, 1995, respectively 5,345 5,345 Paid-in capital 3,567,343 3,572,343 Deficit accumulated during the development stage (4,913,538) (4,171,821) ---------- ---------- Total shareholders' equity 7,024,150 7,745,867 ---------- ---------- $7,783,047 $8,179,490 ========== ==========
See accompanying notes to consolidated financial statements. 14 SBI COMMUNICATIONS, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Three Months Ended Nine Months Ended Through September 30, September 30, September 30, (Unaudited) (Unaudited) 1996 ----------------------- ------------------- (Unaudited) 1996 1995 1996 1995 ------------- ---- ---- ---- ---- Revenues: Licenses and royalties $ - $ - $ - - $ 641,642 Bingo hall rent 77,000 148,790 277,000 298,790 811,593 Bingo hall operations 12,754 13,888 12,754 13,888 105,804 Interest income 343 - 617 32 1,718 Other income - - - - 235,754 ---------- --------- ----------- ------- ---------- Gross revenues 90,097 162,678 290,371 312,710 1,796,511 ---------- --------- ----------- ======== ----------- Expenses: Production costs 1,813 - 10,011 - 316,696 Bingo hall operations 11,105 - 11,105 - 11,105 General and administrative 249,687 83,497 430,251 225,965 2,338,085 Salaries and related expenses 38,152 38,263 115,012 104,263 978,672 Depreciation and amortization 137,107 156,951 411,081 403,449 1,835,406 Interest expense and finance charges 27,717 - 54,628 193 349,258 Losses from equity interest in joint venture - - - - 880,827 ---------- --------- ----------- -------- ----------- Total expenses 465,581 278,711 1,032,088 733,870 6,710,049 ---------- --------- ----------- -------- ----------- Income (loss) from operations $ (375,484) $(116,033) $ (741,717) (421,160) $(4,913,538) ========== ========= =========== ======== =========== Income (loss) per share $ (0.07 ) $ (.02) $ (0.14) $ (.08) $ (2.30) ========== ========= =========== ======== ===========
See accompanying notes to consolidated financial statements. 15 SBI COMMUNICATIONS, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) FROM INCEPTION, JANUARY 10, 1986, THROUGH SEPTEMBER 30, 1996
Deficit Common Stock Preferred Stock Accumulated -------------------- ---------------------- Additional During Total Number Number Paid-in Development Shareholders' of shares Amount of shares Amount Capital Stage Equity (Deficit) ---------- ------- ---------- ------- ----------- ----------- ---------------- Initial common stock sold in January, 1986 for cash of $500 4,000,000 $ 4,000 - $ - $ (3,500) $ - $ 500 Recapitalization as a business combination 3,300,000 3,300 - - (13,153) - (9,853) Forgiveness of debt - - - - 246,370 - 246,370 Retroactive adjustment for 1 for 20 reverse stock split occurring in 1993 (6,935,000) (6,935) - - 6,935 - - Net loss, 1986 - - - - - (204,663) (204,663) ---------- -------- --------- ---------- ---------- ---------- ---------- Balance, December 31, 1986 365,000 365 - - 236,652 (204,663) 32,354 Common stock sold for cash of $25,809 in August, 1987 ($12.90 per share) 2,000 2 - - 25,807 - 25,809 Common stock sold for cash of $71,691 in August, 1987 ($14.06 per share) 5,100 5 - - 71,686 - 71,691 Common stock issued in August, 1987 for rent concessions and other assets valued at $71,750 ($7.18 per share) 10,000 10 - - 71,740 - 71,750 Common stock sold for cash of $41,000 in October, 1987 ($10.00 per share) 4,100 4 - - 40,996 - 41,000 Common stock sold for cash of $5,000 in November, 1987 ($10.00 per share) 500 1 - - 4,999 - 5,000 Net loss, 1987 - - - - - (544,026) (544,026) ---------- -------- --------- ---------- ---------- ---------- ---------- Balance December 31, 1987 386,700 387 - - 451,880 (748,689) (296,422) Common stock sold for cash of $100,000 in January, 1988 ($2.00 per share) 50,000 50 - - 99,950 - 100,000 Common stock issued in April, 1988 for services rendered valued at $34,716 ($5.00 per share) 6,943 7 - - 34,709 - 34,716 Common stock issued in June, 1988 for cash of $86,546 ($4.69 per share) 18,463 18 - - 86,528 - 86,546 Common stock issued in November, 1988 for services rendered from June through November, 1988, valued at $46,877 ($4.69 per share) 10,000 10 - - 46,867 - 46,877 Net loss, 1988 - - - - - (1,206,824) (1,206,824) ---------- -------- --------- ---------- ---------- ---------- ---------- Balance December 31, 1988 472,106 472 - - 719,934 (1,955,513) (1,235,107) Common stock issued in January, 1989 for cash of $23,438 ($4.69 per share) 5,000 5 - - 23,433 - 23,438
(Continued) 16 SBI COMMUNICATIONS, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) FROM INCEPTION, JANUARY 10, 1986, THROUGH SEPTEMBER 30, 1996 (Continued)
Deficit Common Stock Preferred Stock Accumulated -------------------- ---------------------- Additional During Total Number Number Paid-in Development Shareholders' of shares Amount of shares Amount Capital Stage Equity (Deficit) ---------- ------- ---------- ------- ----------- ----------- ---------------- Common stock issued in January, 1989 as inducement to lenders valued at $21,095 ($4.69 per share) 4,500 5 - - 21,090 - 21,095 Common stock issued in June, 1989 as repayment of debt valued at $70,000 ($4.67 per share) 15,000 15 - - 69,985 - 70,000 Common stock issued in June, 1989 for legal services from February through June, 1989, valued at $140,630 ($4.69 per share) 30,000 $ 30 - $ - $ 140,600 $ - $ 140,630 Net loss, 1989 - - - - - (491,957) (491,957) ------- -------- --------- ---------- ---------- ---------- ---------- Balance December 31, 1989 526,606 527 - - 975,042 (2,447,470) (1,471,901) Common stock issued in January, 1990 for production and uplinking services valued at $10,000 ($2.00 per share) 5,000 5 - - 9,995 - 10,000 Common stock issued in January, 1990 for design and software programs valued at $30,000 ($4.00 per share) 7,500 7 - - 29,993 - 30,000 Common stock issued in January, 1990 for telecommunication and layout services rendered valued at $50,000 ($2.00 per share) 25,000 25 - - 49,975 - 50,000 Common stock issued in June, 1990 for production services valued at $50,000 ($5.00 per share) 10,000 10 - - 49,990 - 50,000 Common stock sold in June, 1990 for cash of $3,750 ($5.00 per share) 750 1 - - 3,749 - 3,750 Common stock issued in November, 1990 as repayment of debt owed to CEO valued at $300,000 ($0.60 per share) 500,000 500 - - 299,500 - 300,000 Common stock issued in November, 1990 for receivables of $468,000, later deemed to have no value ($4.68 per share reduced to -0-) 100,000 100 - - (100) - - Common stock issued in December, 1990 to a board member for services rendered valued at $25,000 ($5.00 per share) 5,000 5 - - 24,995 - 25,000
(Continued) 17 SBI COMMUNICATIONS, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) FROM INCEPTION, JANUARY 10, 1986, THROUGH SEPTEMBER 30, 1996 (Continued)
Deficit Common Stock Preferred Stock Accumulated -------------------- ---------------------- Additional During Total Number Number Paid-in Development Shareholders' of shares Amount of shares Amount Capital Stage Equity (Deficit) ---------- ------- ---------- ------- ----------- ----------- ---------------- Common stock issued in December, 1990 to a board member for services rendered valued at $25,000 ($5.00 per share) 5,000 5 - - 24,995 - 25,000 Net income, 1990 - - - - - 2,511,101 2,511,101 --------- -------- --------- ---------- ---------- ---------- ---------- Balance December 31, 1990 1,184,856 1,185 - - 1,468,134 63,631 1,532,950 Common stock issued in October, 1991 as repayment of debt owed to CEO valued at $500,000 ($1.00 per share) 500,000 500 - - 499,500 - 500,000 Common stock issued in November, 1991 to CEO for various trademarks, shows, computer programs and bingo game inventory, valued at $1,405,200 ($3.00 per share) 468,400 468 - - 1,404,732 - 1,405,200 Net loss, 1991 - - - - - (2,315,058) (2,315,058) --------- -------- --------- ---------- ---------- ---------- ---------- Balance December 31, 1991 2,153,256 2,153 - - 3,372,366 (2,251,427) 1,123,092 Common stock issued in January, 1992 for marketing services valued at $9,000 ($0.60 per share) 15,000 15 - - 8,985 - 9,000 Common stock issued in January, 1992 for clerical services valued at $10,000 ($2.00 per share) 5,000 $ 5 - $ - $ 9,995 $ - $ 10,000 Common stock issued in January, 1992 for services provided by board member valued at $10,000 ($2.00 per share) 5,000 5 - - 9,995 - 10,000 Common stock issued in January, 1992 for services provided by board member valued at $10,000 ($2.00 per share) 5,000 5 - - 9,995 - 10,000 Common stock issued in January, 1992 for payment of interest due on notes to three individuals, valued at $9,900 ($0.57 per share) 17,500 18 - - 9,882 - 9,900 Common stock sold in August, 1992 for cash of $25,000 ($0.75 per share) 33,333 33 - - 24,967 - 25,000 Net loss, 1992 - - - - - (493,057) (493,057) --------- -------- --------- ---------- ---------- ---------- ---------- Balance December 31, 1992 2,234,089 2,234 - - 3,446,185 (2,744,484) 703,935 Fractional shares issued in connection with reverse stock split 100 - - - - - -
(Continued) 18 SBI COMMUNICATIONS, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) FROM INCEPTION, JANUARY 10, 1986, THROUGH SEPTEMBER 30, 1996 (Continued)
Deficit Common Stock Preferred Stock Accumulated -------------------- ---------------------- Additional During Total Number Number Paid-in Development Shareholders' of shares Amount of shares Amount Capital Stage Equity (Deficit) ---------- ------- ---------- ------- ----------- ----------- ---------------- Common stock issued in March, 1993 for bonds - bonds were unable to be issued, stock was canceled in 1994 - no valued has been assigned 650,000 650 - - (650) - - Common stock issued in March, 1993 for consulting agreement; 350,000 shares originally issued, 200,000 shares canceled; no value assigned 150,000 150 - - (150) - - Common stock issued in April, 1993 for consulting agreement and $40,000 in cash; no value assigned to the consulting agreement ($0.40 per share) 100,000 100 - - 39,900 - 40,000 Common stock issued in July, 1993 for consulting agreement, no value assigned 650,000 650 - - (650) - - Common stock issued in August, 1993 for consulting agreement, no value assigned 100,000 100 - - (100) - - Common stock issued in August, 1993 to CEO for repayment of various debts valued at $37,500 ($0.19 per share) 200,000 200 - - 37,300 - 37,500 Common stock issued in October, 1993 for consulting services, no value assigned 1,250 1 - - (1) - - Common stock issued in November, 1993 for commitments to raise $400,000 but such funds were never received; Company has not yet canceled certificates, but restricted such certificates until the matter is resolved; no value has been assigned in that management anticipates ultimate cancellation of the certificates 200,000 200 - - (200) - - Common stock issued in December, 1993 for consulting agreement; stock canceled in 1994 due to nonperformance; no value assigned 1,000,000 $ 1,000 - $ - $ (1,000) $ - $ - Net loss, 1993 - - - - - (338,530) (338,530) --------- -------- --------- ---------- ---------- ---------- -------- Balance December 31, 1993 5,285,439 5,285 - - 3,520,634 (3,083,014) 442,905 Common stock issued in March, 1993 for bonds - bonds were unable to be issued, stock was canceled in 1994 (650,000) $ (650) - - 650 - -
(Continued) 19 SBI COMMUNICATIONS, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) FROM INCEPTION, JANUARY 10, 1986, THROUGH September 30, 1996 (Continued)
Deficit Common Stock Preferred Stock Accumulated -------------------- ---------------------- Additional During Total Number Number Paid-in Development Shareholders' of shares Amount of shares Amount Capital Stage Equity (Deficit) ---------- ------- ---------- ---------- ----------- ----------- ---------------- Common stock issued in January, 1994 for consulting agreement and computer equipment with a book value of $91,669; no value has been assigned to the consulting agreement; total value of $91,669 ($0.09 per share) 1,000,000 1,000 - - 90,669 - 91,669 Common stock issued in December, 1993 for consulting agreement; stock canceled in July 1994 due to nonperformance; no value assigned in 1993 (1,000,000) (1,000) - - 1,000 - - Common stock issued in November, 1994 for consulting agreement, no value assigned 500,000 500 - - (500) - - Preferred stock issued in December, 1994 for land valued at $250,000; building valued at $6,250,000; and equipment valued at $900,000; total value of $7,400,000 ($4.93 per share) - - 1,500,000 7,500,000 (100,000) - 7,400,000 Preferred stock issued in December 1994 to individual to settle debts of approximately $25,000 ($5.00 per share) - - 5,000 25,000 - - 25,000 Net loss, 1994 - - - - - (319,575) (319,575) --------- ------- --------- ---------- ---------- ---------- ---------- Balance December 31, 1994 5,135,439 5,135 1,505,000 7,525,000 3,512,453 (3,402,589) 7,639,999 Common stock issued in January, 1995 for accounting services valued at $100 ($0.001 per share) 100,000 100 - - - - 100 Preferred stock issued in March, 1995, for cash - - 33,000 165,000 - - 165,000 Net loss, January 1, 1995, to March 31, 1995 - - - - - (180,176) (180,176) --------- ------- --------- ---------- ---------- ---------- --------- Balance March 31, 1995 5,235,439 5,235 1,538,000 7,690,000 3,512,453 (3,582,765) 7,624,923 Common stock issued in May, 1995 for legal services valued at $50,000 ($0.50 per share) 100,000 100 - - 49,900 - 50,000 Preferred stock issued in June, 1995, to principal shareholder as settlement for $450,000 owed to said shareholder, valued at $450,000 ($5.00 per share) - - 90,000 450,000 - - 450,000
(Continued) 20 SBI COMMUNICATIONS, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) FROM INCEPTION, JANUARY 10, 1986, THROUGH September 30, 1996 (Continued)
Preferred Common Stock Preferred Stock Stock Subscribed ------------------- ---------------------- ------------------ Number Number Number of shares Amount of shares Amount of shares Amount ---------- ------ ---------- ------- --------- ------ Common stock issued in August, 1995 for legal services valued at $10,000 ($1.00 per share) 10,000 10 - - - - Preferred stock issued in October, 1995 as an inducement to an individual to arrange for $250,000 to be loaned to the Company by a trust controlled by the individual, value of $200,000 ($5.00 per share) - - 40,000 200,000 - - Net loss, April 1, 1995 to December 31, 1995 - - - - - - --------- ------- --------- ---------- -------- --------- Balance December 31, 1995 5,345,439 5,345 1,668,000 8,340,000 - - Unaudited: Preferred stock sub- scribed in April, 1996, issued in July, 1996, as an inducement - - - - 5,000 25,000 Net loss, January 1, 1996 to September 30, 1996 - - - - - - --------- ------- --------- ---------- -------- --------- Balance September 30, 1996 5,345,439 $ 5,345 1,668,000 $8,340,000 5,000 $ 25,000 ========= ======= ========= ========== ======== ========= Deficit Accumulated Additional During Total Paid-in Development Shareholders' Capital Stage Equity (Deficit) ----------- ----------- ---------------- Common stock issued in August, 1995 for legal services valued at $10,000 ($1.00 per share) 9,990 - 10,000 Preferred stock issued in October, 1995 as an inducement to an individual to arrange for $250,000 to be loaned to the Company by a trust controlled by the individual, value of $200,000 ($5.00 per share) - - 200,000 Net loss, April 1, 1995 to December 31, 1995 - (589,056) (589,056) ---------- ----------- ---------- Balance December 31, 1995 3,572,343 (4,171,821) 7,745,867 Unaudited: Preferred stock sub- scribed in April, 1996, issued in July, 1996, as an inducement (5,000) - 20,000 Net loss, January 1, 1996 to September 30, 1996 - (741,717) (741,717) ---------- ----------- ---------- Balance September 30, 1996 $3,567,343 $(4,913,538) $7,024,150 ========== =========== ==========
See accompanying notes to consolidated financial statements. 21 SBI COMMUNICATIONS, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, (Unaudited)
Jan. 10, 1986 Through Sept. 30, 1996 1995 1996 ---- ---- ---- Cash flows from operating activities: Net (loss) $(741,717) $(421,160) $(4,913,538) Adjustments to reconcile net loss to cash provided from operations: Depreciation and amortization 411,081 403,449 1,835,576 Stock issued for services - 60,100 1,850,438 Stock issued for financing costs - - 200,000 Change in accounts receivable 28,626 (312,678) (496,238) Change in game inventories 60,688 - 75,400 Amortization of deferred loan costs 16,576 - 16,576 Change in accounts payable (11,991) (41,005) 41,747 Change in accrued expenses 89,221 90,000 214,950 Loss on write-off of marketable securities - - 2,000 Loss on disposal of assets - - 2,440 Write-off of production costs - - 236,138 Loss on equity interest in joint venture - - 880,827 --------- --------- ----------- Cash provided (used) by operating activities (147,516) (221,294) (53,684) --------- --------- ----------- Cash flows from investing activities: Organization costs incurred - - (758) Investment in marketable securities - - (2,000) Payment for production costs - - (236,567) Investment in joint venture - - (880,827) Effect of business capitalization - - (9,853) Purchase of property and equipment (38,064) (26,834) (224,692) --------- --------- ----------- Cash provided (used) by investing activities (38,064) (26,834) (1,354,697) --------- --------- ----------- Cash flows from financing activities: Proceeds from notes payable 250,000 - 250,000 Deferred loan cost paid (61,000) - (61,000) Repayment of notes payable (2,553) - (2,553) Loans from shareholders/affiliates 20,321 40,029 745,124 Repayments on loans from shareholders (19,724) (13,309) (97,871) Proceeds from issuance of common stock - 165,000 587,734 --------- --------- ----------- Cash provided by financing activities 187,044 191,720 1,421,434 --------- --------- ----------- Net increase (decrease) in cash 1,464 (56,408) 13,053 Cash at beginning of period 11,589 58,928 - --------- --------- ----------- Cash at end of period $ 13,053 $ 2,520 $ 13,053 ========= ========= =========== Supplemental information: Income taxes paid $ - $ - $ - ========= ========= =========== Interest paid $ 38,831 $ 193 $ 128,495 ========= ========= ===========
Significant non-cash transactions included the following: During 1995, legal and accounting fees valued at $60,100 were paid for by the issuance of 210,000 shares of common stock; $450,000 of loans payable to shareholders were repaid through the issuance of 90,000 shares of preferred stock; and $200,000 of finance charges relating to loan inducement fees were paid for by the issuance of 40,000 shares of preferred stock. During 1996, loan costs of $20,000 were paid for through the issuance of 5,000 shares of preferred stock. See accompanying notes to consolidated financial statements. 22 SBI COMMUNICATIONS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 UNAUDITED Note 1 - Organization and certain significant accounting policies The organization and certain major accounting policies of SBI Communications, Inc. are summarized below to assist the reader in reviewing the Company's financial statements. Organization 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. Development stage company The Company plans to provide an interactive, satellite cable bingo game show and other similar telecommunication products or services to television viewers. Since principal operations have not commenced, and since only insignificant revenues have been generated, the Company is considered to be a development stage company. Statement of Financial Accounting Standards Number 7 establishes the accounting principles governing development stage companies. Principles of consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Satellite Bingo, Inc., a Georgia corporation, which currently is inactive with no assets or liabilities. Intercompany transactions and balances have been eliminated in consolidation. 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. Note 2 - Basis of Presentation The accompanying unaudited consolidated financial statements, which are for interim periods, have been prepared by the Company. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or 23 omitted. In the opinion of the Company's management, the disclosures made are adequate to make the information presented not misleading, and the consolidated financial statements contain all adjustments necessary to present fairly the financial position as of September 30, 1996, results of operations for the three months and nine months ended September 30, 1996 and 1995, and cash flows for the nine months ended September 30, 1996 and 1995. The unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and the footnotes thereto contained in Form 10-SB as filed with the Securities and Exchange Commission during 1996. The December 31, 1995, balance sheet was derived from audited consolidated financial statements, but does not include all disclosures required by generally accepted accounting principles. The results of operations for the nine months ended September 30, 1996, are not necessarily indicative of the results to be expected for the full year. Note 3 - Deferred loan costs Deferred loan costs are summarized as follows at September 30, 1996: Original cost $ 81,000 Less accumulated amortization 16,576 ---------- $ 64,424 ==========
Note 4 - Accounts receivable and game inventory adjustments During the third quarter of 1996, management determined that amounts due from a particular charity for back rents totalling $187,500 would likely be collected only through assumption of certain furniture and equipment owned by the charity. Management estimates that the value of such furniture and equipment is only $100,000, and accordingly has recorded an additional bad debt reserve of $87,500. Game inventory used by charities leasing the bingo hall is billed to the related charity. During the third quarter of 1996, management made the decision to not pursue collection of amounts billed for game inventory during 1996, and to donate the remaining game inventory to the charity. This resulted in a charge to operations of $60,688 in the third quarter of 1996. Note 5 - Mortgage note payable Mortgage note payable is summarized as follows as of September 30, 1996: Mortgage note payable in 30 installments of $3,330 including interest at 14% per annum, with a final balloon payment of $235,255 due october 1,1998, secured by a deed of trust on all of the Company's real estate $ 247,447 Less current portion 5,672 --------- Long-term portion $ 241,775 =========
24 $61,000 of the proceeds from the above note were used to pay various costs associated with the loan, and have been capitalized as deferred loan costs. In addition, as a condition of the loan, the Company paid an additional $20,000 in loan costs by issuing subscriptions for 5,000 shares of preferred stock to the lender. As a further inducement to obtain the mortgage note, the Company has granted an option to the mortgagor to acquire 50,000 shares of common stock at a price of fifty cents ($0.50) per share. Such option is exercisable upon thirty days notice, and expires upon repayment of the mortgage loan. Note 6 - Earnings per share The Company's income (loss) per share was calculated using weighted average shares outstanding for the appropriate period. These amounts were determined based upon retroactive restatement for the 1 for 20 reverse stock split occurring in 1993. Although the preferred stock is a common stock equivalent, with a conversion rate of approximately 10 shares of common stock for each share of preferred stock as of the date the preferred stock was issued, preferred stock conversion has not been included in the calculation of earnings per share in that to do so would be anti-dilutive. Note 7 - Commitments, risks and contingencies The Company manages 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. Accounts receivable at September 30, 1996, are concentrated principally with two charities. Management has estimated the amount of such receivables that are collectible based upon their knowledge of the financial condition of the charities and the history of the profitability of bingo games. It is reasonably possible that management's estimate of the amount of such receivables that are collectible could change in the near future. As reflected in the statement of changes in stockholders' equity, the Company has a history of issuing common stock for services difficult to value, or yet to be provided. Approximately 4,600,000 (or 86%) of the common stock outstanding at September 30, 1996, 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. EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER 30, 1996 COMPILED INTERIM FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-QSB. 9-MOS JAN-01-1996 DEC-31-1996 SEP-30-1996 13,053 0 996,238 500,000 0 509,291 7,636,247 493,448 7,783,047 517,122 241,775 0 8,365,000 5,345 (1,346,195) 7,783,047 12,754 290,371 11,105 536,104 0 87,500 54,628 (741,717) 0 (741,717) 0 0 0 (741,717) (0.14) 0
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