-----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, WP2G260WF5RfUYBQzX4CuaOTUZufv1fkEd7mZp7ECtKZ6q1b85GEJtoDlxealfBL 3k9PTux/xgWvogG3VFhwng== 0001013453-97-000004.txt : 19970818 0001013453-97-000004.hdr.sgml : 19970818 ACCESSION NUMBER: 0001013453-97-000004 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970815 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SBI COMMUNICATIONS INC CENTRAL INDEX KEY: 0001013453 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATION SERVICES, NEC [4899] IRS NUMBER: 581700840 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-28416 FILM NUMBER: 97664195 BUSINESS ADDRESS: STREET 1: 458 HIGHWAY 278 BY PASS STREET 2: PO BOX 597 CITY: PIEDMONT STATE: AL ZIP: 36272 BUSINESS PHONE: 2054478797 10QSB 1 SBI COMMUNICATIONS, INC. - 10-QSB Securities and Exchange Commission Washington, D.C., 20549 FORM 10-QSB (Mark one) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal quarter ended June 30, 1997 Commission file Number 0-28416 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 SBI Communications, Inc. ------------------------ (Name of small business issuer specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 58-1700840 ---------- (I.R.S. Employer Identification Number) Post Office Box 597 - 458 Highway 278 By Pass - Piedmont, Alabama 36272 ----------------------------------------------------------------------- (Address of Principal executive offices) (Zip code) (205) 447-8797 Issuer's telephone number Securities registered pursuant to 12(b) of the Act: None Securities to be registered pursuant to Section 12(g) of the Act: Common Stock and Preferred Stock Common Stock $0.001 Par Value - Preferred Stock $5.00 Par Value --------------------------------------------------------------- (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [ X ] NO [ ] As of August 11, 1997 the Registrant had 5,345,430 shares of its $0.001 par value Common Stock Outstanding. Table Of Contents SBI COMMUNICATIONS, INC. FORM 10-QSB INDEX Page PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements 3 Consolidated Balance Sheets as of December 31, 1996 and and June 30, 1997 Consolidated Statements of Operations 4 for the six months ended June 30, 1996 and 1997 Consolidated Statement of Changes 4 in Shareholders' Equity for the six months ended June 30, 1997 Consolidated Statements of Cash Flows 5 for the six months ended June 30, 1996 and 1997 Notes to Consolidated Financial State- 6 ments Item 2. Management's Discussion and Analysis 7 of Financial Condition and Results of Operations Condition Part II. OTHER INFORMATION Item 1. Legal Proceedings 10 Item 2. Changes in Securities 10 Item 3. Defaults Upon Senior Securities 10 Item 4. Submission of Matters to a Vote 10 of Security Holders Item 5. Other Information 10 Item 6. Exhibits and Reports on Form 8-K 10 Signatures 11 PART I. FINANCIAL INFORMATION Financial Statements SBI COMMUNICATIONS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
June 31, Dec. 31, 1997 1996 ASSETS Current assets: Cash $ 16,827 $ 42,327 Accounts receivable, net of allowance for doubtful accounts of $-0- 30,445 120,306 Notes receivable from affiliates 3,600 3,600 Inventories 94,213 24,391 Prepaid expenses 12,172 - 157,257 190,624 Property and equipment, net of accumulated depreciation 6,921,856 7,026,112 Other assets: Accounts receivable - long-term, net of allowance for doubtful accounts of $550,000 at December 31, 1996 - 100,000 Deferred loan costs 39,891 56,200 Deposits 68,088 68,088 $7,187,092 $7,441,024 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Note payable to trust managed by a shareholder $ 200,000 $ 200,000 Mortgage note payable-current portion 6,350 5,873 Accrued wages due to principal shareholder (Note 2) 240,000 180,000 Advances due to principal shareholder 48,955 14,901 Account payable and accrued expenses 150,099 83,873 645,404 484,647 Mortgage payable, long-term portion 236,425 240,229 Total liabilities 881,829 724,876 Stockholders' equity: Preferred stock, par value $5.00; 10,000,000 shares authorized; 1,673,000 and 1,693,000 shares issued and outstanding at June 30, 1997 and December 31, 1996, respectively 8,365,000 8,465,000 Common stock, par value $.001; 40,000,000 shares authorized; 5,345,439 shares issued and outstanding at June 30, 1997 and December 31, 1996 5,345 5,345 Paid in capital 3,567,343 3,467,343 Accumulated deficit ( 5,632,425) (5,221,540) 6,305,263 6,716,148 $7,187,092 $7,441,024
See accountants' compilation report and accompanying notes to consolidated financial statement SBI COMMUNICATIONS, INC. AND SUBSIDIARY STATEMENTS OF LOSS
Three Months Ended June 30, Six Months Ended June 30, 1997 1996 1997 1996 Revenues: Bingo hall rent $ 121,171 $ 75,000 $ 196,171 $ 200,000 Kitchen and gift shop revenues 43,704 - 75,892 - Other income 7 249 360 274 164,882 75,249 272,423 200,274 Expenses: Cost of sales - kitchen and gift shop 67,550 - 99,417 - Administrative salaries and related expenses 46,299 46,860 79,864 76,860 Facility costs 15,088 5,413 29,415 18,990 Other general and administrative 200,169 94,145 282,151 161,574 Production costs 478 8,198 2,483 8,198 Depreciation and amortization 72,833 135,210 143,874 273,974 Interest and finance expenses 23,278 20,036 46,104 26,911 425,695 309,862 683,308 566,507 Net loss ($ 260,813) ($ 234,613) ($ 410,885) ($ 366,233) Net loss per share ($ 0.05) ($ 0.04) ($ 0.08) ($ 0.07)
See accountants' compilation report and accompanying notes to consolidated financial statement SBI COMMUNICATIONS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30,
1997 1996 Cash flows from operating activities: Net (loss) ($ 410,885) ($ 366,233) Adjustments to reconcile net loss to cash provided (used) by operating activities: Depreciation and amortization 143,874 273,974 Amortization of deferred loan costs 16,309 4,426 Charge offs of long-term receivables 8,178 - Change in accounts receivable, trade 89,861 ( 86,421) Change in inventories - 30,000 Change in prepaid expenses ( 12,172) - Change in accounts payable and accrued expenses 126,226 34,598 Cash (used) by operating activities ( 38,609) ( 109,656) Cash flows from investing activities: Cash held in escrow - ( 120,000) Purchase of property and equipment ( 17,618) ( 31,052) Cash (used) by investing activities ( 17,618) ( 151,052) Cash flows from financing activities: Proceeds from notes payable - 250,000 Loans from shareholders/affiliates 34,054 20,321 Repayments of affiliated loans - - Mortgage loan and other note repayments ( 3,327) ( 1,255) Cash flows provided by financing activities 30,727 269,066 Net increase (decrease) in cash ( 25,500) 8,358 Cash at beginning of period 42,327 11,589 Cash at end of period $ 16,827 $ 19,947 Supplemental information: Income taxes paid $ - $ - Interest paid $ 32,102 $ 23,264 Significant non-cash transactions: In June, 1997, $69,822 of inventory and $22,000 of furniture were acquired through offsets against long-term accounts receivable. During 1996, loan costs of $20,000 were paid through issuance of preferred stock.
See accountants' compilation report and accompanying notes to consolidated financial statement SBI COMMUNICATIONS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 AND DECEMBER 31, 1996 Note 1 - Selected disclosures The accompanying unaudited consolidated financial statements, which are for interim periods, do not included all disclosures provided in the annual consolidated financial statements. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and the footnotes thereto contained in the Form 10-KSB for the year ended December 31, 1996 of SBI Communications, Inc. (the "Company"), as filed with the Securities and Exchange Commission. The December 31, 1996 balance sheet was derived from the audited consolidated financial statements, but does not include all disclosures required by generally accepted accounting principles. In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (which are of a normal recurring nature) necessary for a fair presentation of the financial statements. The results of operations for the three and six months ended June 30, 1997 are not necessarily indicative of the results to be expected for the full year. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reporting amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company manages for a charity a bingo hall in Piedmont, Alabama. Rents charged to charity are unsecured, and generally are paid only as revenues from the bingo games produce sufficient profit to allow the charity to make payments. Effective February 1, 1996, the current lease requires minimum rent of $25,000 per month, with additional contingent rent of $50,000 per month depending upon the success of the bingo games. Management records contingent rent revenue only as it is collected. Certain amounts in the 1996 interim financial statements have been reclassified to conform with the classifications used in the 1997 interim financial statements. Note 2 - Related party transactions The Company accrued salaries payable to the Company's principal shareholder totaling $60,000 for each of the six month periods ended June 30, 1997 and 1996, respectively. This shareholder has also advanced funds to the Company as needed for working capital purposes. All amounts owed to the shareholder are payable on demand. Note 3 - Net loss per share The Company's net loss per share was calculated using 5,345,439 weighted average shares outstanding for each of the quarters ended and six month periods ended June 30, 1997 and 1996, respectively. Although convertible preferred stock is a common stock equivalent, with a conversion rate of approximately 10 shares of common stock (based upon an approximate market price for common stock of $0.50) for each share of preferred stock, preferred stock conversion has not been included in the calculation of earnings per share in that to do so would be antidilutive. Note 4 - Preferred stock activity In 1996, 5,000 shares of preferred stock with a par value of $25,000 were to be issued to cover $20,000 in closing costs relating to the mortgage note receivable. The Company inadvertently issued 25,000 shares rather than 5,000 shares, and both parties agreed that the related certificate would be returned and reissued. In that the certificate had not been returned as of December 31, 1996, the full 25,000 shares were treated as outstanding at that time, with a related reduction in paid in capital. In the first quarter of 1997, the certificate was returned, and a new certificate for 5,000 shares was issued. The stockholders' equity section of the balance sheet as of June 30, 1997, has been adjusted to reflect the reduced number of preferred shares outstanding, with a corresponding adjustment to paid in capital. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SBI Communications, Inc. (the "Company"), was originally organized in the State of Utah on September 23, 1983, under the corporate name of Alpine Survival Products, Inc. Its name was subsequently changed to Justin Land and Development, Inc. during October, 1984, and then to Supermin, Inc. on November 20, 1985. On September 29, 1986, Satellite Bingo, Inc. was the surviving corporate entity in a statutory merger with Supermin, Inc., a Utah corporation. In connection with the above merger, the former shareholders of Satellite Bingo, Inc. acquired control of the merged entity and changed the corporate name to Satellite Bingo, Inc. Through shareholder approval dated March 10, 1988, the name was changed to its current name of SBI Communications, Inc. On January 1, 1993, the Company executed a plan of merger that effectively changed the Company's state of domicile from Utah to Delaware. Although the Company is currently a Delaware corporation, on January 31, 1997, the stockholders and Board of Directors approved a plan to change the Company's corporate domicile to the State of Nevada. Management anticipates executing the plan during 1997. In the past several years, while the company was in its development stage, a great deal of time and resources were spent getting the company prepared to grow exponentially. In the past year the Company has achieved a registering its securities pursuant to Section 12(g) of the act; and has aspirations of becoming NASDAQ listed. The Company currently meets all requirements to become NASDAQ listed except for the fact that the it's stock is currently trading below the required price. With this in mind, the company has entered into negotiations with a public relations firm based in Florida to expose the company and its shares to the financial community. The Company intends to inform the public of the plans to develop, with the assistance of MCI, the Globalot Bingo website. The company currently has two website addresses, http://www.sbicommunications.com and http://www.bingobingo.com, and they are currently under development to allow bingo players from around the world to participate in bingo games 24 hours a day, with a chance to win $1,000,000. The company expects the websites to be fully operational by the end of 1997, at which point the company has laid out an intensive marketing plan to promote the website as well as the other aspects of the Company. The Company also announced on July 16 that it has joined with Carlsbad, CA based United Transactive Systems, Inc., in a newly formed enterprise, National Gaming Network, J.V. to develop interactive, multimedia sporting and gaming networks and services for the broadcast, cable, and on-line markets in all regions where legally permissible. The venture is currently working to link a satellite bingo game across Native American Indian reservations across the country. The company has also entered into negotiations with U.S. Win, Inc., the HBPA, and military bases to bring simulcast parimutuel racing to military bases in the U.S. and abroad. Management is very excited about the high potential of all these opportunities to produce significant revenues immediately. The Company plans to keep the public informed of each step of this expansion process, as well as the continued improvement of the current operations. This promotion as well as significantly increased revenues should result in the planned growth of the Company, however there can be no assurances of the foregoing. Currently, the Company's only operations are the leasing of a bingo hall located in Piedmont, Alabama. Under local ordinances, the hall must be leased to a charity in order to conduct and operate bingo games, which is currently the local Jaycees. The Company believes that the $3.5 billion U. S. bingo industry is fragmented and inefficient, yet potentially profitable. The Company's strategy, therefore, is to consolidate a portion of the industry to build a national chain of bingo centers in lucrative markets. The Company believes that its industry experience, economies of scale and financial resources will provide a competitive advantage over competing bingo operations, which should enable the Company to effectively execute its long- term growth plan. The Company currently has only one bingo center located in Piedmont, Alabama. The Company intends to continue its expansion through acquisitions and developments in other selected markets throughout the United States. RESULTS OF OPERATION SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996. The Company generated revenues of $164,882 during its second quarter of 1997 ended June 30, 1997, as compared to $75,249 in the comparable period of the prior fiscal year, which represents an increase of approximately 119% increase. This increase was due to the combination of the successful fourth quarter last year which significantly lowered the receivables due the company, and the addition of a second Super game in May that generated revenues to completely wipe off the receivables due the company by the Jaycees from last year as well as make a $46,171 payment toward the contingent rent for this year. The revenue stream also benefitted from the money generated by the kitchen and gift shop that was not open during the second quarter of last year. The Company expects quarterly revenues to continue to increase upon the successful operation of the Company's Web site and broadcasting of it's interactive programming. Direct operating costs of the Company's bingo center totaled $425,695 during the second quarter of 1997 versus $309,862 in the comparable 1996 quarter, which represents a 37.38% increase. The main reason for the increase is that the operation of the kitchen and gift shop, which was not in operation in the second quarter last year, has increased the general operating costs as well as the expenditures on cost of goods sold. The Company's general and administrative expenses also increased tremendously. This can be attributed to increased professional fees due to reporting requirements as well as increased travel in recent months working to get previously mentioned expansion opportunities in hand and underway. Further analysis of the direct operating costs showed that approximately 17% of the current period's costs were comprised of depreciation and amortization, which are relatively fixed expenses. The balance is primarily comprised of legal, wages and management fee costs. General & Administrative (G&A) expenses totaled $200,169 during the second quarter of 1997 as compared to $94,145 in the year ago period, an increase of approximately 112.6%. This expense increase of $106,023 was mainly due to many things as previously mentioned. The main new expense was the additional professional fees to assist in preparation of reports to be filed and in training of current employees of new requirements. The company's travel expense has also increased by about $15,000 - $20,000 due to increased travel to work on expansion process. The Company did not record any tax expense during the current quarter or comparable year-ago period due to losses incurred. The Company's tax loss carryforward balance at the end of fiscal 1996 was in excess of $5 million and, as such, the Company does not expect to incur any federal income tax liability until this carryforward is depleted by operational profits. Net loss for the second fiscal quarter of 1997 was $260,813, which equated to loss per share of ($.05). Net loss for the comparable quarter of 1996 was $234,613 which equated to loss per share of ($0.04). The increased loss of approximately 11% was due to the failure of an attempted restaurant which operated for approximately two months during the second quarter. The restaurant was to be open for breakfast and lunch during the week, when the bingo hall was not in operation. Management determined that the local economy couldn't support a restaurant and discontinued the weekday breakfasts and lunches. The Company still maintains the kitchen and gift shop during bingo games and continues to make a significant profit during those hours. The company also had significant increases in its general and administrative costs which outweighed the increases in revenues. All of the Company's revenue comes from operation of the bingo hall or interest income on cash therefrom. The following table summarizes revenue categories in the Company's statement of income (rounded to the nearest whole dollar). Amount of Total Revenue Six Months Ended June 30, 1997 1996 Revenues: Bingo hall rent/administrative fees 196,171 200,000 Kitchen and gift shop revenues 75,892 - Other Income 360 274 Total Revenue $272,423 $200,274 In 1995, the Company charged a flat $75,000 per month in rent, plus management fees as deemed appropriate. In February, 1996, the lease with the current charity was amended to reflect a minimum payment of $25,000 per month, with adjustments up to $75,000 per month if the charity generates sufficient annual cash flow to afford to pay the increased rent. Although the charity generated cash flow that would allow greater rent, management allow such excess to be applied toward unpaid rents and did not increase the rent charge for 1996. Management collected scheduled rent payments of $150,000 and contingent rent of 46,171 for a total of $196,171 from the Jaycees for six months ended June 30, 1997. Management is assisting the Jaycees in promoting one more super game in fiscal 1997 (November). Management anticipates that this second large game could produce $300,000 - $400,000 in rental income. If this proves true the Company will generate between $700,000 and $900,000 in annual rental income on this facility. Management believes that due to competition and geographic factors, two large games per year will likely be the limit for large games for this facility. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1997, the Company had cash and cash equivalents of $16,827, a decrease of $25,500 from the end of fiscal 1996. The decrease was mainly due to the Company investment in over $60,000 in its restaurant and doesn't foresee substantial further investments required there. The Company does expect to make further investments in its Piedmont, Alabama facility in order to meet strong customer demands. The Company expects its cash position to begin to increase assuming continued collection of its amounts due from its present charity. There can be no assurance of the foregoing. The Company intends to finance future acquisitions primarily through the use of stock and, to a lesser extent, cash and notes. Accounts receivables totaled $30,445 at June 30, 1997. This was down from $120,306 at year end 1996. The Company collects most of its receivables from its participating charities within one to four weeks from the time earned. The contingent rent will be collected, when earned, during two major months within the year. The Company also settled its $100,000 long term accounts receivable account by accepting tables, chairs and bingo paper in lieu of cash. Current liabilities totaled $645,404 at the end of the quarter, but less than 10% of this total represented trade payables. Approximately 27% of total liabilities are comprised of a long-term note payable on which the Company is currently making payments. The Company has no other long-term debt. The Company had total assets of over $7.2 million and total liabilities of $881 thousand at the end of the second quarter, with shareholder equity of $6.3 million. The Company believes that its current capital resources, together with expected positive operational cash flows, will support operational requirements for the next year. PART II--OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not involved in any legal proceedings. ITEM 2. CHANGES IN SECURITIES In July, 1996, 5,000 shares of preferred stock with a par value of $25,000 were to be issued to cover $20,000 in closing costs relating to the mortgage note receivable. The Company inadvertently issued 25,000 shares rather than 5,000 shares, and both parties agreed that the related certificate would be returned and reissued. In the first quarter of 1997, the certificate was returned, and a new certificate for 5,000 shares was issued in second quarter of 1997. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 5. OTHER INFORMATION CHANGE IN MANAGEMENT. In April 1997, Mr. Michael McGlothlin resigned as a officer and director. EXHIBITS AND REPORTS ON FORM 8-K ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS: EXHIBITS DESCRIPTION 11 Statement re: computation of per share earnings 27 Financial data schedule (B) REPORTS ON FORM 8-K: None SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SBI Communications, Inc. Date: August 11, 1997 By: /s/Ronald Foster ------------------------------------- Ronald Foster Chairman of the Board and Chief Executive Officer (principal executive officer) Date: August 11, 1997 By: /s/ Thomas Barrett ------------------------------------- Thomas Barrett, Controller (Principal Financial and Accounting Officer) EX-11 2 COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 SBI COMMUNICATIONS, INC. COMPUTATION OF EARNINGS PER COMMON SHARE FOR THE SIX MONTHS ENDED JUNE 30 , 1996 AND 1997 Six Months Six Months Ended Ended June 30, 1996 June 30, 1997 -------------- -------------- Shares outstanding: 5,345,439 5,345,439 Weighted average shares outstanding 5,345,439 5,345,439 Net loss $ (410,885) $ (366,233) Preferred Dividend -- -- -------------- -------------- Total (410,885) (366,233) Net loss per share $ (0.08) $ (0.07) EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF SBI COMMUNICATIONS, INC. FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1997 JUN-30-1997 16,827 0 34,045 0 94,213 157,257 7,626,436 704,580 7,187,092 645,404 236,425 0 8,365,000 5,345 (2,065,082) 7,187,092 75,892 272,423 99,417 355,053 0 0 46,104 (410,885) 0 (410,885) 0 0 0 (410,885) (0.08) (0.08)
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