-----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, Dtdq7UaFJH+9OUvVRkze4gdiJw8Xe0ZUjFGpEFNZ8B0t4lkleGTDRurI9DTSDC3M EQDe0QMVwsYl1UnXInIl5Q== 0001013453-00-000007.txt : 20000406 0001013453-00-000007.hdr.sgml : 20000406 ACCESSION NUMBER: 0001013453-00-000007 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000405 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 SEC ACT: SEC FILE NUMBER: 000-28416 FILM NUMBER: 593739 BUSINESS ADDRESS: STREET 1: 1239 S GLENDALE AVE STREET 2: SUITE 104 CITY: GLENDALE STATE: CA ZIP: 91205 BUSINESS PHONE: 8185506148 MAIL ADDRESS: STREET 1: 103 FIRETOWER RD STREET 2: SUITE 104 CITY: LEESBURG STATE: GA ZIP: 31763 10KSB 1 SBI COMMUNICATIONS, INC. - 10-KSB Securities and Exchange Commission Washington, D.C., 20549 FORM 10-KSB Annual Report Pursuant To Sections 13 Or 15 (D) Of The Securities Exchange Act Of 1934 For the Fiscal Year Ended December 31, 1999 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 incorporation or organization) Identification Number) 1239 South Glendale Avenue [818] 550-6181 Glendale, California 91205 ISSUER'S telephone number (Address of Principal Executive Offices) (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: $ 0.00 Aggregate market value of the voting stock held by non-affiliates as of March 30, 2000: $1,893,949.20 Number of common shares outstanding as of latest practical date at $.001 par value: 5,570,439
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 March 30, 2000 ___________________________________________________________________________
Table of Contents Item Page Number Number Item Caption - ------ ------ ------------ Part I - ------ Item 1. 3 Description of Business Item 2. 15 Description of Properties Item 3. 16 Legal Proceedings. Item 4. 16 Submission of Matters to a Vote of Security Holders Part II - ------- Item 5. 16 Market Price of and Dividends on the Registrant's Common Equity and other Shareholder Matters Item 6. 22 Management's Discussion and Analysis or Plan of Operation Item 7. 25 Financial Statements and Summary Financial Data Item 8 33 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Part III - -------- Item 9 34 Directors, Executive Officers, Promoters and Control Persons Item 10. 42 Executive Compensation Item 11. 44 Security Ownership of Certain Beneficial Owners and Management Item 12. 45 Certain Relationships and Related Transactions Part IV - ------- Item 13. 45 Exhibits, Financial Statement Schedules, and Reports on Form 8-K Signatures 49 - ----------
Part I ------ Statements contained in this Annual Report on Form 10-KSB that are not historical facts are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act Of 1995. Such forward-looking statements are subject to risk and uncertainties, which could cause actual results to differ materially from estimated results. Certain of such risks and uncertainties are detailed in filings with the Securities and Exchange Commission and the Company's in Item 1 "BUSINESS" and Item 6 MANAGEMENT'S DISCUSSION AND DESCRIPTION OR PLAN OF OPERATION" below. 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 four subsidiaries, Frontier Palace.Com, 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. Business Overview SBI Communications, Inc. (The "Company" or SBI), owned a bingo facility and leased this facility and equipment to charities, for fund raising projects, under a licences to operate and conduct bingo. Due to the fact that the charity was not able to pay the agreed rental payment. This operation ceased in January of 1998 and the company did not renew the charity lease. The Company has since place the facility for sale and has a purchase agreement in place to close on April 30, 2000. The Company moved its corporate offices to Glendale, California and change its direction and focus to the broadcasting of interactive game shows and creation of Internet entertainment and related services. The intent of the company is to identify and commercialize leading edge Internet entertainment technologies and make available to it's Frontier Palace.Com membership base throughout the world. The Company's wholly owned subsidiary Frontier Palace.Com, is a high tech Internet website that will provide an interactive communicative infrastructure of international chat, e-commerce, entertainment, 24/7 Satellite Bingo with cash prizes for your chance to win up to $1,000,000.00 with guarantee prize winners, trade & barter, shopping cart, web-casting of special events, classified ads, newsletters, players club and other service available for its members. Current Operations - ------------------ Alabama Facility - ---------------- The Company owns a facility in Piedmont, Alabama which is leased to businesses for their operations in Piedmont, Alabama. The company has in place a purchase agreement for this facility from The Brindlee Mountain Castle Corporation for $6,000,000. The company had considered renovation to turn the Piedmont facility into a E-Mall for store front, hosting of web sites and fulfillment for home base Internet business that have need for this service and facility as their business grows. Also, considering a retail or entertainment facility. This is needed in Piedmont and would be well received by the City and local community. California - ---------- The Company web site is located in Glendale, California at the company's production facility. The company has moved it's offices to Glendale, California October of 1999. Expansion Plans - --------------- The Company continuously reviews industry developments and regulations for potential expansion opportunities. 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) favorable demographics; 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 development of telecommunications, the emergence of new technology and the international nature of the Internet has created opportunities to develop new, efficient and secure ways to deliver entertainment to customers. As one of the companies that plans to employ these new technologies on the Internet, SBI intends to capitalize on its expertise in the analyzing of consumer data and information to become a world leader of online entertainment. 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 & Satellite 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. 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. The company's plans to enter into a license agreement with a major Spanish Network to broadcast its interactive programming. 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). 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 the event of a Quick Pick 8 winner, each winner will be transported to the studios where a monthly web cast of a wheel game which will provide each winner the opportunity to spin for a cash prize up to one million dollars. All prizes over $100,000. will be paid by a twenty year annuity. 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 Bingo 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 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 web site at frontierpalace.com/Satellite Bingo.. Technology - ---------- The Company will use proprietary technologies that enable viewers at home to participate in Bingo games televised live in specific English speaking and 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 Satellite 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 $8.00 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. 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 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 1-818-550- 6181. 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. Additional revenues are from advertising, marketing for third parties, Internet and memberships. We intend to seek to generate revenues by selling advertising on our web site and entering into arrangements with sponsor to post links to their web sites. In order to accomplish this goal our games must attract a sufficient number of visitors and participants to our web site. Internet - ------- The Company URL's are located at http://www.sbicommunications.com, http://www.globalot.com, http://www.sbid.net, http://www.bingonut.com, http://www.wnet1.com, http://www.sbicom.com, http://www.bingo2k.com, and the company web site is at http://www.frontierpalace.com. Shopping, travel, bingo games and other items will be available for the consumer second quarter-2000. A 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 games are free with no purchase necessary and anyone may acquire free game cards by sending the Company a request and a self addressed, stamped, envelope (SASE). Satellite Bingo games will be played 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. IMPACT OF THE YEAR 2000 The year 2000 risk is the result of computers being written using two digits rather than four digits to define the applicable year. Computer programs that have sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. As a result, computer systems and/or software used by many companies and government agencies may need to be upgraded to comply with year 2000 requirements or risk systems or miscalculations causing disruptions of normal business activities. STATE OF READINESS Based on as internal assessment, SBI believes that its software programs, both those development internally and purchased from material outside vendors, are year 2000 compliant or will be by December 31st 1999. SBI began assessing its state of year 2000 readiness during September 1998. This included reviewing the year 2000 compliance of the following: SBI internally developed proprietary software incorporated in the SBI broadcast bingo and Internet programs; Third-party software vendors; SBI will continue to require its vendors of material hardware and software to provide assurances of their year 2000 compliance. COSTS To date, SBI has incurred approximately $30,000.00 of costs in identifying and evaluating year 2000 compliance issues. Most of SBI expenses have related to. And expected to continue ro relate to the operating costs associated with time spent by employees in the evaluation year 2000 compliance matters. At this time, SBI does not possess the information necessary to estimate the potential costs of future revision to software relating to the SBI programs should revision by required of the replacement of third-party software, hardware of services, if any, that are determined to not be year 2000 compliant. Although SBI believes that its software programs, both development internally and purchased from outside vendors are either already year 2000 compliant or will be by December 31st, 1999,. Failure to identify non year 2000 compliant software could have a material and adverse effect on SBI's business, results of operations and financial condition. RISKS SBI is not currently aware of any significant year 2000 compliance problems relating to the broadcast or Internet or other software systems that would have a material and adverse effect on business, results of operations and financial condition. Competition 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 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 AOL, AT&T, 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 Industry - ----------------------------- The interjection is so familiar one would think it originated with the eponymous game of chance. Yet bingo is derived from an Italian lottery game, Lo Giuoco del Lotto d'Italia, one initiated in 1530 and still held every Saturday in Italy. "Le Lotto" migrated to France in the late 1700s in a form similar to the bingo we know today, with a playing card, tokens and numbers read aloud. Lotto became educational in the 1800s - in Germany, lottery games were designed to teach children multiplication tables. It grew throughout Europe over the next two centuries. In 1929, a game called "Beano" was played at a carnival near Atlanta, Georgia. The primitive bingo game's tools consisted of dried beans, a rubber number stamp and some cardboard. Edwin Lowe, a New York toy salesman, observed the game where players exclaimed "beano" if they filled a line of numbers on their card. Lowe introduced the game to his friends in New York, where one of his players mistakenly yelled "Bingo!" in her excitement "Lowe's Bingo" began as a game and Lowe asked competitors to pay him $1 per year to allow them to call their games bingo as well. He later sought the services of an elderly math professor at Columbia University, Carl Leffler, to expand the amount of number combinations. In 1930 , Professor Leffler devised 6,000 bingo cards with non- repeating number groups. He completed the task successfully, and then went insane. 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 1998, approximately $7 Billion was spent on active bingo in North America alone. There are 64,000 charitable bingo centers in North America with over 70,000 organizations licensed to operate bingo. Bingo is the most accepted form of gaming by the public. Approximately 45 states and the District of Columbia have legalized charitable bingo. There are approximately 65 millions people who visit a bingo facility each month and spend an average of $22.00 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 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. Approxi mately 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 operations are in competition with all aspects of the entertainment industry, both locally, nationally and worldwide. SBI experiences competition from five market segments: 1) Traditional game shows; 2) Internet bingo companies; 3) Electronic bingo companies; 4) Web services providers; and 5) Other entertainment/media companies 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. 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 previous operations were highly reliant on local charities. Its former broadcast operations and contemplated future Internet Web Site operations are not expected to be reliant on any single or small group of customers. Employees - --------- As of December 31, 1999, the Company had 6 permanent employees, including two officers, four professional staff. The Company also retains the services of property managers who oversee the facility maintenance & 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 376 Highway 278 Bypass - Piedmont, Alabama 36272 Company-owned Government Regulation Due to the game show broadcast and Internet bingo games are free. These game do not have the elements that comprise a lottery. This being prize, chance and consideration. The consideration is remove by offering the games free. However, the games are considered a sweepstakes and do fall under the government and state regulation for sweepstakes. Item 2 - Properties - ------------------- The Company owns a facility in Piedmont, Alabama and was purchased by the Company on December 16, 1994, for $6,500,000 and $1,000,000.00 for equipment (paid in 1,500,000 shares of the Company's preferred stock, valued at $5.00 per share) for a total of $7,500,00.00. 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 until terminated January 1, 1998. 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. However the company was never able to collect the total amount of agreed rent. This lease was cancel and was not renewed in January of 1998. Furthermore, on April the 28th 1995, before the deed was recorded, the State of Alabama placed a $550,000.00 tax lien on Cranberry-Magnetite for admission taxes, thereby placing a lien on the property. The Company received a warranty deed which reflected no liens. After a legal action by Cranberry-Magentite with the State of Alabama failed in 1998 the Company was force to pay these taxes which total $750,000.00 on behalf of Cranberry-Magnetite. In order to pay this liability the Company borrowed $1,050,000.00 from Haulmark, Inc. Haulmark, Inc. also wanted to have a first mortgage and by paying the first mortgage holder, which was a $250,000.00 loan from National Mortgage Company of Fort Lauderdale, Florida, Haulmark received a first mortgage on the Piedmont property. This pay-off to National Mortgage cost the company an additional $25,000.00 for early payoff of this loan. Haulmark, Inc. is owned by the principals that previously owned the Frontier Palace facility. In order to recover this payment to the State of Alabama, on behalf of Cranberry-Magnetite, The Company has received payment by Canceling the 1,500,000 shares of preferred stock previously issued for the payment of the facility. The Company had several Companies that had interest in purchasing the facility but was not able to complete the process for what ever reason. The facility has remained closed until January of 2000. The First Call System has leased part of the facility and will remain when new owner take over the facility in May. The property is being sold to the Brindlee Mountain Castle Corporation for $6,000,000.00. The Company's corporate offices are located 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 month. The lease is scheduled to expire on December 31, 2000; however the Company is confidant that the lease would be renewed on favorable terms. Patents, Trademarks, Copyrights, 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 - ---------------------------------------- On April the 28th 1995 the State of Alabama place a tax lien on the previous owner, Cranberry-Magnetite for admission taxes, in the amount of $750,000.00 plus 12% interest. The company received a warranty deed from Cranberry Magnetite. After a legal action by Cranberry Magnetite with the State of Alabama failed in 1998 the company paid this tax liability on behalf of Cranberry Magnetite/Broadway Bottle Gas Corporation. The company has recovered these funds by canceling the previously issued preferred stock. In April of 1995 two of the employees of the company's subsidiaries (SBI Communications, Inc. of Alabama) was named as defendants in a legal action in Alabama. This action alleges that the defendant's bingo game which was operate by the charity; 1) comprise a illegal lottery, which violates the state constitution; 2) further comprise that the equipment (a computer) was an illegal gaming device. After appeals to Circuit and State Supreme court failed, the defendants was incarcerated and later place on 24 months probation which ended November 14th 1999. This was a misdemeanor and a first offence for both defendants. The Company believes that this action was completely without merit and did defend vigorously. 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 1999. The Company's annual shareholder meeting with voting on proxy issues is on May 30, 2000. 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 under the symbol of SBID. The Company currently has 5,570,439 shares of stock outstanding, with 1,500,000 in the public float. There are approximately 3,240 shareholders of record. For the fiscal year ended December 31st, 1999 the Company reported revenues of $0.00 and a net loss of $259,000. 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 153,000 shares of preferred stock which are convertible into common stock. The Company has re- purchasing 1,500,000 of its preferred shares from the previous owner after paying the State of Alabama $750,000.00 in tax liens that were in place against the previous owner pertaining to the property in Piedmont, Al. These shares were canceled March 31, 2000 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 5,570,439 shares of common stock which will become eligible for sale by December 31, 1999, 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 re- present actual transactions. The source of the following information is the National Daily Quotation System, Inc.'s "Pink Sheets" and the National Ass- ociation of Securities Dealers, Inc.'s NASDAQ Electronic Bulletin Board. Common Stock
Date Low High ---- --- ---- Fiscal 1998 $ 0.1875 $0.375 - ----------- Fiscal 1999 - ----------- First Quarter $0.25 $0.50 Second Quarter $0.1875 $0.375 Third Quarter $0.02 $0.04 Fourth Quarter $0.02 $0.50
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 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 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 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, 1999, the latest practicable date for which information is available, the Company's management was of the opinion that the Company had approximately 3,240 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, 1999, 5,570,439 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 3,240 persons. In addition, 153,000 shares of preferred stock were outstanding, and held by approximately five persons. The Company has canceled 1,500,000 preferred shares as of March 31st, 2000. Corporate Stock Transfer, 3200 Cherry Creek Drive, South; Suite 430, Denver Colorado 80209, acts as transfer agent and registrar for the Company's common and referred stock. 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 facility to retail businesses 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 game shows with a bingo format and television buying shows by purchasing large blocks of long distance telephone time and reselling such time to television audience users at a profit. Also, It's Internet business. 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 $25 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. FrontierPalace.Com, Inc. a wholly owned subsidiary of the Company was formed in June 1999 in order to become a dedicated Internet Entertainment website. That is, it will provide communication equipment for consumers to connect the company website via the Internet 24 hours a day seven days a week. It will also provide design and programming services to build Internet Web Sites and the personnel and equipment to maintain these sites. The company will also provide a television network with programs design to promote, tour, advertised and provide Information for each website desiring its services. Simulcasting of live or tape programs via the Internet and satellite broadcast. The company will have its own website featuring a 24 hour bingo program, classified ad, trade and barter, auctions, special events and other service available for its members. Overall, the company can be characterized as a Broadcast Internet Service company. Frontier Palace.Com, Inc. is a newly formed Nevada Corporation and a Wholly Owned Subsidiary of SBI Communications, Inc. We chose this form of organization because we anticipate aggressive growth and will require additional capital in the future to support this growth, probably in the form of a secondary public offering. FrontierPalace.Com, Inc. is currently in its start up phase. The management team has been formed, new space has been leased, equipment and telecommunications have been ordered for delivery within 30 days and certain business alliances have been formed. The Company expects to turn a profit within one year of going on line and expect to offer shares of the parent Company to raise additional capitol by the end of the first year operation. To accomplish this goal we have developed a comprehensive plan to intensify our marketing and sales activities, product development, services expansion and customer support. Internet -------- The Internet is one of the fastest growing phenomenons. The current facts are; More than 50 million American households are connected to the Internet with Southeast Florida as one of the fasted growing regions. Currently there are 150 million users worldwide. Every two seconds, a new user signs up for Internet access. It is estimated that by the year 2002, 550 million people will be on-line. The Internet has gained the support of everyone from the White House to the Department of Revenue to United Parcel Service. Companies are scampering to become a part of the madness and make a fortune. While making a fortune is possible, it requires the help of an expert in the field with specific working knowledge and training in the necessary technologies. Management feels confident that all will be consummated by year end 2000 allowing the Company to commence operations on a full scale in the Internet and 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: Frontier Palace - --------------- Management of it's wholly owned subsidiary (SBI Communications, Inc. of Alabama) has a signed purchase agreement with The Brindlee Mountain Castle Corporation, Inc. of Arab, Alabama to purchase the Piedmont property for $6,000,000.00. The sale of this property should be closed by April 30, 2000. Brindlee plans are to have an entertainment center with motel, bowling lanes, food court, daycare center, laser tag, arcade and small car racing tract. Brindlee plans to contract with SBI to set all phases of operation in place. Internet Web Site - ---------------- The company has established a secure web site allowing individuals to join "A 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 Satellite 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, and debit cards. The company will host the Internet Web Site and provide fulfillment. The company will at some point be a major entertainment Internet web site with server and tee access to the Internet. The website will be on line by the end of May. The company will generate additional revenues by offering advertising and its web services to others. Bingo Broadcast. - ---------------- The company has developed a pay-per-view television game show to be operate by SBI, at a production studio in Glendale, California. The company is in negotiations with the Dish Network to provide an interactive programming for a weekly two hour broadcast at $9.95 per subscriber per broadcast; SBI receives a license fee equal to approximately $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,
1999 1998 ---- ---- Working Capital ($2,142,879) ($ 1,853,879) Total Assets $3,940,000 $ 3,940,000
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 rental 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. 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. 1998 and 1999 was a dormant year. The Company was not able to generate any revenues from operations. 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. 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, 1999 1998 ---- ---- Revenues: Licenses & Royalties -0- -0- Bingo Hall Operations -0- -0- Kitchen and gift shop revenues -0- -0- Other Income -0- -0- --------- -------- Total Revenue -0- $ -0- ========= ========
In general, the Company experienced insignificant revenues in 1999 as it attempted to expand and develop its operations. Total revenues were $0.00 for 1999. The Company owns a facility , during 1997 was leases to charities who sponsor bingo games. Net revenues related to the facility operations were only $0.00 in 1998, and had no revenues for the calendar year ended December 31, 1999. 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, 1997 and 1998, 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, 1999 1998 ---- ----
Salaries and related expenses $130,000 $130,000 Other general and administrative expenses 0 $ 88,069 Interest expenses and finance charges $159,000 $ 40,000
The most significant expense relates to the amortization of trademark, game show and computer program assets the Company has developed. The expense is running $ 259,000 per year. Such assets will be fully amortized at the end of 1997. For 1997, the Company had depreciation on the bingo hall and related equipment, which will approximate $ 0.00 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 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 $199,000 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 audited consolidated balance sheet of the Company for its years ended December 31, 1999 and audited 1998 and the related consolidated statements of operations, stockholder's equity and cash flows are submitted herewith. To the Board of Directors SBI Communications. Inc.: We have audited the accompanying consolidated balance sheets of SBI Communications, Inc. and subsidiaries (the "Company") as of December 31, 1999 and 1998, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the two years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards.Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 1999 and 1998, and the consolidated results of its operations and its cash flows for each of the two years in the period ended January 31, 1999 in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has a $3.6 million provision for net realizable value regarding the cost basis of building and equipment as of January 1, 1998. As more specifically indicated in Note 1 to the financial statements, the Company's existence is dependent on the successful closing of this property held for sale and has no established commercial product or marketing channels at this time to generate future revenues. These factors raise a substantial doubt about the ability of the Company to continue as a going concern. Management's plans in regards to those matters are also described in Notes 1 and 8. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/JAY J. SHAPIRO, C.P.A. a professional corporation Encino, California March 27 2000 SBI COMMUNICATIONS. INC AND SUBSIDIARIES ---------------------------------------- CONSOLIDATED BALANCE SHEETS --------------------------- ASSETS ------
DECEMBER 31 ----------- 1999 1998 ---- ---- Cash $ 0 $ 0 Property - held for sale(Notes 2,7 and 8) $ 3,940,000 3,940,000 ------------ --------- $ 3,940,000 $ 3,940,000 ========================== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Mortgage note payable to trust managed by a shareholder (Notes 5 and 8) $ 150,000 150,000 Mortgage note payable (Notes 5 and 8) $ 1,050,000 $1,050,000 Equipment notes payable (Note 8) $ 131,181 131,181 Accrued wages due to principal shareholder $ 550,000 420,000 Advances due to principal shareholder $ 12,698 12,698 Accrued interest payable (Note 8) $ 199,000 40,000 Accounts payable (Note 8 ) $ 50,000 50,000 ----------- --------- 2,142,879 1,853,879 Commitments and contingencies (Note 7) Stockholders' equity: Preferred stock, par value $5.00; 10,000,000 shares authorized: 153,000 and 153,000 shares issued and outstanding at December 31, 1999 and December 31, 1998, respectively (Notes 3 and 8) 765,000 765,000 Common stock, par value $.001; 40,000,000 shares authorized; 5,570,439 shares issued and outstanding at December 31, 1999 and 1998(Note 8) 5,570 5,570 Paid in capital 3,567,318 3,567,318 Accumulated deficit (2,540,767) (2,251,767) ------------ ----------- $ 1,032,121 1,321,121 3,940,000 $3,940,000 ============ ==========
See accompanying notes to consolidated financial statements SBI COMMUNICATIONS. INC. AND SUBSIDIARIES ----------------------------------------- STATEMENTS OF LOSS ------------------ [CAPTION] December 31 ----------- 1999 1998 ---- ---- Revenue 0.00 0.00 Provision - net realizable value(Note 8 ) ($3,578,279) Expenses: Compensation 130,000 130,000 Other general and administrative 0 88,069 Interest 159,000 40,000 (259,000) (258,069) Net loss ($289,000) ($3,836,348) Basic net( loss)per share(Note 4) ( $.05 ) ($.69)
See accompanying notes to consolidated financial statements SBI COMMUNICATIONS. INC. AND SUBSIDIARIES ----------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS -------------------------------------
December 31 ---------- 1999 1998 ----- ----- Cash flows from operating activities: Net (loss) income ($289,000) ($3,836,348) Adjustments to reconcile net loss to cash provided (used) by operating activities: Provision - net realizable value $3,578,279 Change in accounts payable and accrued expenses 289,000 170,000 Cash (used) by operating activities 0 (88,069) Cash flows from investing activities: Affiliate receivables (7,570) Purchase of real estate (748,622) Cash (used) by investing activities (756,192) Cash flows from financing activities: Loans from shareholders/affiliates 12,698 Proceeds from new first mortgage $1,050,000 Mortgage loan repayment (239,701) Equipment note repayments ( 964) Cash flows provided by financing activities $ 822,033 Net increase (decrease) in cash 0 (22,228) Cash at beginning of period 0 22,228 Cash at end of period 0 $ 0 Supplemental information: Income taxes paid $ - $ - Interest paid $ - $ 24,311 Items not requiring use of cash: Preferred stock converted $ 0 ($200,000) Issuance of common stock $ 0 202,500 Preferred stock canceled $ 0 $7,500,000
See accompanying notes to consolidated financial statements SBI COMMUNICATIONS, INC. AND SUBSIDIARY --------------------------------------- CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY ----------------------------------------------
Additional Common Preferred Paid-in Accumulated ------- ---------- Capital Deficit Shares Amount Shares Amount ---------- ----------- ------- ------- ------ ------- Balance January 1 1998 5,345,439 $5,345 1,963,000 $8,465,000 $3,567,343 ($5,915,419) Converion 200,000 $ 200 (40,000) (200,000) Acquisiton of Software 25,000 $ 25 (25) --- Cancellation of Stock issued (Note 3) (1,500,000)(7,500,000) 7,500,000 Net loss for 1998 (3,836,348) ----------- Balance December -------- ---- ----------- ----------- ------- 31, 1998 5,570,439 5,570 153,000 765,000 3,567,318 (2,251,767) Net loss for 1999 (289,000) --------- ----- ----------- ----------- -------- ------------ Balance December 31, 1999 5,570,000 5,570 153,000 $665,000 $3,559,618 ($2,540,567) ========== ===== ========== ========= ========== ============
See accompanying notes to consolidated fincncial statements SBI COMMUNICATIONS. INC AND SUBSIDIARIES ---------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ NOTE 1 Organization and Signification Accounting Policies 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 Supermin, Inc. on November 20, 1985. On September 29, 1986, Satellite Bingo, Inc. became the surviving corporate entity in a statutory merger with Supermin, Inc. 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 aplan 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, 1998 the stockholders and Board of Directors approved a plan to change the Company's corporate domicile to the State of Nevada. The Company owns approximately $25,000 for Delaware franchise taxes as of December 31, 1997 and such amount is included in Accounts Payable. The Company has developed a system that can be integrated into all standard communications channels including the World Wide Web for interactive bingo play. Currently, the Company is developing its website. The Alabama bingo hall lease was allowed to not be renewed in early 1998. The Company is establishing a website allowing individuals to become members in a shopping club with membership fees of $19.95 per month. The shopping club will provide a variety of products, services, bingo game sweepstakes related events and items, travel and consumer goods; No charge is made to participate in the bingo games. The website will be hosted by the Company's subsidiary, FrontierPalace.Com. and fulfillment will be provided by unrelated company. The Company will generate additional revenues by offering web page/site design/development, advertising, fulfillment and its web services to others. Principles of Consolidation - --------------------------- The consolidated financial statements include the accounts of the Company and four wholly-owned subsidiaries of which only SBI Communications, Inc. - Alabama has activity during the two-year period ended 12/31/99. 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. The 1998 financial statements reflect $3.6 million change in the reporting amount of building and equipment. SBI COMMUNICATIONS. INC AND SUBSIDIARIES ---------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ NOTE 1 (Cont'd) Property and Equipment - ---------------------- Property and equipment were stated at cost. In March 2000, the Company sold all its property and equipment for net cash sales price of $3,940,000 due at closing. The gross sales price of $6,000,000 was reduced by $860,000 in closing costs, $635,000 in fix-up expenses, and the assignment of no value to $565,000 in downpayment received in Buyer's non-trading common stock. The Company also cancelled the 1,500,000 shares of preferred stock(valued at $7.5 million) issued to former owner of this property due to non-performance relative to reimbursement of Company for payment of $750,000 in delinquent Alabama property taxes. 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. 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. 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~ll 2,968) are non-interest bearing advances. In addition to advances, the Company accrued salaries payable to the Company's principal shareholder totaling $130,000 for the years ended December 1999 and 1998, 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 a second mortgage on The Piedmont Property. Fifty thousand dollars of this note was repaid in 1996 when due, and an additional $50,000 was repaid during 1997. The note has been extended on a quarter to quarter basis, with $150,000 remaining outstanding at December 31, 1998 and 1999. SBI COMMUNICATIONS. INC. AND SUBSIDIARY --------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------- NOTE 2 Piedmont Property Taxes - ----------------------- On April 28, 1995 the State of Alabama placed a tax lien on the previous owner of the Piedmont Property, Cranberry-Magnetite/Broadway Gas Corporation(the "Seller") for admission taxes, in the amount of $750,000 plus 12% interest. The Company received a warranty deed from Cranberry Magnetite. After a legal action by Cranberry Magnetite with the State of Alabama failed in 1998 the Company paid this tax liability on behalf of Cranberry Magnetite/Broadway Gas Corporation. The Company attempted to recover these funds. NOTE 3 Stockholders' Equity - -------------------- In January 1998 the Company issued 25,000 shares of its common stock to cover the cost of PandaAmerica software programming. Such cost was recognized at $.10 per share nominal value and expensed in 1998. The Company also converted 40,000 shares of preferred shares to 200,000 shares of the Company common stock. Such preferred stock pays no dividends, has a liquidation value of $5.00 per share, and is convertible at 5 shares common stock for 1 share of preferred. The company also cancelled 1,500,000 shares of preferred stock due to failure of Seller to meet its obligation owed to the Company. NOTE 4 Net Loss Per Share - ------------------ The Company's net loss per share was calculated using 5,570,439 and 6,182,000 weighted average shares outstanding for 1999 and 1998, 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 5 Mortgage Note Payable - --------------------- The Company agreed to issue 5,000 shares of preferred stock to the lender to cover $20,000 in loan closing costs for a $250,000 mortgage loan due October 1, 1998. SBI COMMUNICATIONS. INC AND SUBSIDIARIES ---------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ NOTE 5 (Cont'd) Mortgage Note Payable (cont'd) - ------------------------------ The Company borrowed $1,050,000 to pay the State of Alabama, on behalf of Cranberry-Magnetite, the previous owner tax liability of $748,422 and to pay old mortgage loan with a balance of $239,701 plus accrued interest. NOTE 6 Income Taxes - ------------ Deferred income tax assets and liabilities are summarized as follows at December 31,1999:
Deferred tax assets attributable to operating loss carry forwards $3,500,000 Valuation allowance due to uncertainty surrounding realization of operating loss carry forwards ($ 3,500,000) ------------ Total deferred taxes $ 0 ============
The Company has available at December 31, 1999, unused operating loss carry forwards, which may be applied against future taxable income, that expire as follows:
Amount of Unused Expiration During Operating Loss Year Ended Carry Forwards 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 $ 3,836,000 2013 $ 289,000 2014 ------------- $ 9,925,000 -------------
SBI COMMUNICATIONS. INC AND SUBSIDIARIES ------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ NOTE 7 Commitments. Risks and Contingencies - ------------------------------------- The Company has developed bingo productions to be broadcast via satellite in English and Spanish to the television market and the Internet, into homes of viewers throughout the World. Should local, state, or federal laws change regarding bingo sweepstakes, such changes could have a material impact on the ability of the Company to generate future revenues. The Company is the owner of record on the Piedmont Property and is therefore, responsible for all amounts attributable or assessed by state tax authorities. Management believes that $100,000 paid at closing will satisfy all obligations. The Company has a history or issuing common stock tor services difficult to value or yet to be provided. Approximately 3,000,000 (or 57%) of the common stock outstanding at December 31, 1998, 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 believes 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. NOTE 8 Subsequent Events - ----------------- a) The Company sold its building in Alabama in March 2000. The net sales price is $6,000,000 with a 20% cash down payment and real estate contract for $4.8 million at 9.00% interest payable monthly with balloon payment of $4,695,000 in five years. The note will be acquired at closing for $4.1 million in cash. The financial statements reflect at $3.6 million provision for net realizable value of the Piedmont Property as of 12/31/99 and 12/31/98 and no depreciation has been recognized. SBI COMMUNICATIONS. INC. AND SUBSIDIARIES ----------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ NOTE 8 (Cont'd) Subsequent Events (cont'd) - -------------------------- b) The Company intends on using the proceeds of Piedmont property sales to settle the two outstanding mortgage obligations and the equipment notes payable. c) The Company cancelled 1,500,000 shares of preferred stock issued to the former owner of the Piedmont property in March 2000 and released such party from its obligation to repay the Company $750,000 paid for past property taxes (See Note 2). Accordingly, the basis of the property sold in March 2000 was $750,000 and related closing costs at acquisition and the Company will recognize a gain at closing in April 2000 of approximately $3.2 million. d) In January 2000, the Company received all 2,500 shares issued by a new company, FrontierPlace.Com, a Nevada corporation. This wholly-owned subsidiary will operate proprietary software and copyrighted bingo programs over the Internet. This company will also provide a television network with programs promoting the Internet bingo and shopping website and will be characterized as a broadcast Internet service company. e) In February 2000, they issued 200,000 shares of restricted stock (estimated value $40,000) for the origination of a $150,000 loan from two parties (the "Holder") which will bear interest at 10.00% per annum. Principal and interest payable on 2/7/01 or demand of the Holder and loan is secured by all Company assets. Note is repayable at the option of the Holder in cash or upon exercise of stock options granted in February 2000 for 300,000 shares at $.50 per share. f) On January 12, 2000, the Company issued 100,000 shares of restricted common stock to an individual in consideration of a $5,000 cash payment and financial marketing services valued at $7,500 ($.12 per share). g) On March 30, 2000, the Company canceled 723,500 shares of common stock held by various individuals for non-performance of services. 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. [CAPTION] December 31, 1999 December 31, 1998 ----------------- ----------------- Statement of Operations Data - ---------------------------- Gross Revenues $ -0- -0- Income from Operations(Loss) ($ 289,000) (3,836,348) Net Income(Loss) per share * ( .05) ( .69) Balance Sheet Data - ------------------ Assets ------ Current Assets $ -0- -0- Property & equipment $3,940,000 3,940,000 Total Assets $3,940,000 3,940,000 Liabilities - ----------- Current Liabilities $2,142,879 1,853,879 Total Liabilities $2,142,879 1,853,879 Total Stockholders' Equity $1,797,121 2,086,121 - -------------------------- ---------- --------- Total Liabilities and Equity $3,940,000 $ 3,940,000 =========== =============
______ * 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 -------------------- In March 20, 2000 Daniel, Ratliff, and Company, independent certified public accountants, previously engaged as the principal accountant to audit the prior financial statements of the Comapny, resigned. The resignation resulted from the Company moving its corporate offices to the west coast (Glendale, California) and the conclusion that the Company would be better served through the engagement of a local Certified Public Accounting firm. The Company elected to utilize the services of Jay J. Shapiro, CPA of Encino, California. The decision to change accountants was approved by the Board of Directors of the company. There have been no disagreements with the former accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of the former accountant, would have cause it to make reference to the subject matter of the disagreements in connection with its report for 1998 and 1999. The Company has filed with the Securities and Exchange Commission an 8-K dated march 29, 2000 disclosing this action. The Company has requested that the former accountants furnish them with letter stating whether they agree with the statements made by the registrant, and, if not, stating the respects in which they do not agree as indicating in Item 4. A copy of this letter , when received, will be filed by Exhibit with an 8-K. 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. [CAPTION] Name Age Position Since - ---- --- -------- ---- Ronald Foster 58 President/Chairman of the Board 1986 William Beggs 56 Director 1998 Karien Anderson 49 Secretary/Treasurer/Director 1997 Claude Pichard 45 Director 1986
Messrs. Fosters, Mr. Pichard 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 May 2000) 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, 58, 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 Director/Producer/Writer of the Company Interactive Broadcast Programs. Karien Anderson - --------------- Ms. Anderson is 49 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, 45, 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 Enforce ment 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. William Beggs - ------------- Mr. Beggs is 56 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. 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, 1998 and 1999.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. 1998 Summary Compensation Table ------------------------------- [CAPTION] Name Annual Compensation Long Term Compensation and Awards Awards LTIP All Principal Restricted Restricted Pay- Other Position Salary Bonus Other Stock Options outs Compensation - -------- ------------ ------------ ------- ---- ------------ Ronald Foster ** (5) * * * * * * * Claude Pichard + * * * * * * * Karien Anderson (1)(6) * * * * * * * _____________________________________________________________________________ _ 1999 Summary Compensation Table ------------------------------- Name Annual Compensation Long Term Compensation and Awards Awards LTIP All Principal Restricted Restricted Pay- Other Position Salary Bonus Other Stock Options outs Compensation Ronald Foster ** 5 Y * Y * * * Claude Pichard +(2) * * * * * * * Karien Anderson(1)(2)6 * * * * * *
_____________________________________________________________________________ _ * 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) $ 35,500. (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. (Y) Yes 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 follow ing 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 opera tions 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 five percent (5%) of the Company's outstanding common stock (the Company's only class of voting securities). [CAPTION] Name and Address of Amount of Nature of Percent of Beneficial Owner *Shares Ownership Class Ronald Foster 1,632,089 Record & 32% Common 103 Firetower Road Beneficial Leesburg, Georgia, 31763 Larry Cahill 1,000,000 Record & 19% Common 3330 Southgate Court Beneficial Cedar Rapids, Iowa 52404 Michael Graham 500,000 Record & 10% Common 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. [CAPTION] 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 arrange- ments, 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. Changes In Control - ------------------ SBI is unaware of any contract or other arrangement, the operation of which may at a subsequent date result in a change in control of SBI. 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 - ------ ----------------- --------------- 27 Summary Financial Information
Additional Information - ---------------------- Headquarters ------------ SBI Communications, Inc. 1239 South Glendale Avenue - Glendale, California 91205. Subsidiaries ------------ SBI Communications, Inc., a Alabama Corporation ------------------------- 376 Hwy 278 Bypass - Piedmont, Alabama 36272 FrontierPalace.Com, a Nevada Corporation 1239 South Glendale Avenue, Glendale, California 91205 SBI Communications, Inc., a Nevada Corporation 1063 Centerville Lane, Gardnerville, Nevada 89410 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 Al Makhanian: Vice President/Director Williams Beggs : Director Auditors -------- Mr. Jay J. Shapiro Jay J. Shapiro, CPA. A Professional Corporation 16501 Ventura Boulevard, Suite 650, Encino, California 91436 Transfer Agent -------------- Corporate Stock Transfer 3200 Cherry Creek Drive South; Suite 430; Denver, Colorado 80209 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. 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 4, 2000 /s/Ronald Foster/s/ 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. [CAPTION] Signature Title Date --------- ----- ---- /s/ Ronald Foster Chairman, President & May 30, 2000 - ----------------- Ronald Foster /s/ Karien Anderson Director, Secretary, Treasurer May 30, 2000 - ------------------- Karien Anderson /s/ Claude Pichard Director, Vice President May 30, 2000 - ------------------ Claude Pichard /s/William Beggs Director May 30, 2000 - ---------------- William Beggs
EX-27 2 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 Exhibit 27 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF SBI COMMUNICATIONS, INC. FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. (In thousands, except per share amounts) DEC-31-1999 JAN-01-1999 DEC-31-1999 0 0 0 0 0 3,940,000 0 3,940,000 2,142,000 10 0 0 765,000 5,570 3,567,343 3,940,000 0 0 0 0 0 199,000 0 0 0 0 0 0 (259,000) (0.05) (0)
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