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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
Securities and Exchange Commission File Number O-28426
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
PURSUANT TO SECTIONS 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
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SBI COMMUNICATIONS, INC.
(Name of small business issuer specified in its charter)
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DELAWARE 58-1700840
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
POST OFFICE BOX 597 (205) 447-8797
458 HIGHWAY 278 BY PASS Issuer's telephone number
PIEDMONT, ALABAMA 36272
(Address of Principal executive offices) (Zip code)
================================================================================
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
Title of each class Name of each exchange on which
to be registered. each class is to be registered.
NONE NONE
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT
COMMON STOCK
PREFERRED STOCK
(Title of Class)
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DRAFT DATED AUGUST 31, 1996
================================================================================
This First Amendment to Registration Statement Number O-28426, dated August 31,
1996, including exhibits, consists of 176 sequentially numbered pages. The
exhibit index is located on sequentially numbered page 96.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
NUMBER NUMBER ITEM CAPTION
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<S> <C> <C>
Part I
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Item 1. 3 Description of Business
Item 2. 38 Management's Discussion and Analysis or Plan of Operation
Item 3. 42 Description of Property
Item 4. 42 Security Ownership of Certain Beneficial Owners and Management
Item 5. 43 Directors, Executive Officers, Promoters and Control Persons
Item 6. 46 Executive Compensation
Item 7. 49 Certain Relationships and Related Transactions
Item 8 54 Description of Securities
Part II
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Item 1 55 Market Price of and Dividends on the Registrant's Common
Equity and Other Shareholder Matters
Item 2. 57 Legal Proceedings.
Item 3. 58 Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure.
Item 4. 58 Recent Sales of Unregistered Securities
Item 5. 58 Indemnification of Officers & Directors
Part FS 59 Financial Statements
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95 Summary Financial Data
Part III
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Item 1. 96 Index to Exhibits
Item 2. 96 Description of Exhibits
98 Signatures
</TABLE>
Form 10-SB Dated August 31, 1996, Page 2
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ITEM I. DESCRIPTION OF BUSINESS
GENERAL
SBI Communications, Inc., a publicly held Delaware corporation (the
"Registrant"), 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 Registrant 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 used in this registration statement are,
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 Registrant's current
business (the "SBI Subsidiary"). In conjunction with such reorganization, the
former stockholders of the SBI Subsidiary, acquired control of the Registrant
and the Registrant changed its name to Satellite Bingo, Inc.
On March 10, 1988, the Registrant changed its name to SBI
Communications, Inc., its current name, and on January 28, 1993, the Registrant
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 Registrant has two subsidiaries, SBI Communications, Inc., an
Alabama corporation; and, Satellite Bingo, Inc., a Georgia corporation. As
used in this registration statement, unless the context requires otherwise, the
term "Registrant" 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.
CURRENT & PROPOSED OPERATIONS
The Registrant is engaged in the interactive communications and
entertainment fields. It brings together elements of the "information
superhighway" to create interactive national television programs, including
state-of-the-art computer technology, proprietary software programs, satellite
communications, and advanced telecommunications systems.
The Registrant'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.
Form 10-SB Dated August 31, 1996, Page 3
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As a result of its experience in production and broadcasting gaming
programs, the Registrant has developed a substantial amount of technical, legal
and operational information. Currently, the Registrant is planning a
partnership with the Louisiana Charitable Organization alliance (LACOA), and
the development of a senior citizens television network. Such ventures will
involve development of television programs featuring interactive Bingo shows,
auctions and factor direct sales. The LACOA project is currently awaiting
passage of legislation presented by the Honorable Clenix Esensauter of
Louisiana. Additional areas in the planning stage include the establishment of
a Casino and Bingo Hall on real estate provided by Chereokee Indians of
Georgia, Inc., (which is also now subject to State approval).
Additional areas being explored include the establishment of a casino
and Bingo hall on real estate provided by Cherokee Indians of Georgia, Inc.
(now subject to state approval); and, acquisition of Zacker's (Horizon) Gas of
Tampa, Florida, a retail propane gas company with $3,000,000 in annual sales.
In light of the preliminary and conditional nature of negotiations, no
assurances of any kind can be provided as to the likelihood that such proposed
projects will come to fruition. The Registrant has been active in the
interactive television programming business for over ten years. Its core
business has been a live Bingo game produced and broadcast via satellite to
Bingo halls and homes across the United States. The program generates revenues
from phone service fees, card sales to local Bingo halls and from paid
advertising.
The Registrant manages an 80,000 square foot, hi-tech Bingo facility
in Piedmont, Alabama for various charities. Such facility provides the
Registrant with the ability to transmit its games and other entertainment
programs to broadcast, on cable and satellite stations. Through its
relationships with the PandaAmerica Shopping Network, the Registrant's programs
can be broadcast on a 24 hours a day basis. Currently, rents and
administrative fees charged to charities are unsecured and generally are paid
only as revenues from the Bingo games produce sufficient profit to allow the
charities to make payments. Rents receivable at June 30, 1996, $586,285, are
concentated in that they are payable by only two charities. Management has
estimated the amount of such receivables that are collectible based upon its
knowledge of the financial condition of the charities and the history of the
profitability of the Bingo games; however, it is possible that management's
estimate of the amount of such receivables collectible could change in the near
future based on actual payment history.
The Registrant has entered into various licensing agreements to
provide proprietary software and know how involving Bingo game production and
operation covering territories in California, Brazil, Greece, Hong Kong, and
Indian reservations, military bases and charity Bingo parlors in the United
States. No licensee currently has Bingo operations generating significant fees
or royalties for the Registrant.
Should local, state, federal or foreign laws regulating Bingo change,
such changes could have a material impact on the ability of the Registrant to
generate future revenues. One recent change involved a decision by the United
States Supreme Court declaring a federal statute that limited state control
over operations located on Native American reservations unconstitutional. Such
decision is not expected to impact any of the Registrant's current operations.
Form 10-SB Dated August 31, 1996, Page 4
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The Registrant is headquartered in Piedmont, Alabama at 458 Highway 278 Bypass,
Piedmont, Alabama 36272. The Registrant's phone number is (205) 447-8797. The
Registrant employs approximately 12 persons.
GLOBALOT BINGO
Introduction
Globalot Bingo and Satellite Bingo are proprietary interactive Bingo
games broadcast by the Registrant via satellite to participating cable and
television stations. The use of telephones for game card distribution makes it
possible for home viewers to also participate in the Registrant'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 game is currently broadcast daily over PandaAmerica Network. The
Registrant intends to broadcast a Million Dollar Globalot game each Saturday
evening at 11:00 p.m. (eastern time) starting on June 15, 1996. Future plans
include expanding the game to other week nights.
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 Registrant suspends sales and 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 has developed a special Million Dollar Globalot game,
to air each Saturday evening at 11:00 p.m. (eastern time) starting on June 15,
1996. 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 Registrant will pay the first
person to cover the shaded area or complete the Quick Pick 8 game $5,000. In
addition to the Quick Pick 8 game, the Registrant will award a $20,000.00
dollar grand prize to the first person covering an entire card. This will
provide players with nine opportunities to win a prize. Cards obtained to play
the Registrant's current 24 hour program will be good for the entire week,
including the Saturday Million Dollar Globalot game.
As additional players participate, the Registrant plans to increase
the grand prize to $50,000.
Form 10-SB Dated August 31, 1996, Page 5
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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 to 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 Registrant'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.
Technology
The Registrant uses proprietary technologies that enable viewers at
home to participate in Bingo games televised live in specific English speaking
Hispanic markets in the US and Latin America (local laws permitting).
Globalot Bingo has a special telephone number, 800-729-BINGO (2464),
which is an access code to gain entry into long distance network. Upon dialing
the number a caller hears a 45 second message disclosing who the caller has
reached, providing information about Globalot Bingo, the caller's options and
how to receive Globalot Bingo playing cards by telephone (including the cost
and method of billing). A caller must have a prepaid calling card in order to
obtain free Globalot Bingo playing cards via the phone, which must be purchased
from the Registrant. 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 Registrant
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 to begin. The time
necessary to receive three Globalot Bingo playing cards by telephone is eight
minutes and the caller is charged $9.60 or $1.20 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 Registrant.
Interactive players may also obtain a strip of three cards free of any
charge by sending a stamped, self addressed envelope to the Registrant.
Form 10-SB Dated August 31, 1996, Page 6
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Globalot Bingo has set up a winners hot-line for card holders to use
in order to obtain information concerning winning cards. This allows players
to play to win even if they didn't have an opportunity to see the show. This
number is 800-684-8493.
The Registrant 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 Registrant receives a portion of each call paid,
payment being different in each originating country. International callers can
obtain play information over the internet.
The Registrant'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 Registrant's production offices and computer center are located at
1332 South Glendale Avenue, Glendale, California 91205. Its phone number is
1-800-460-2170. Each strip of three cards gives the holder nine chances to win
the Super Jackpot Prize.
Registrant's Income
The Registrant's income is 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 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.
PROJECTS UNDER DEVELOPMENT
The Registrant is currently negotiating with Telemundo for production
of Spanish language Bingo games to be telecast to Hispanic markets in the
United States and in Latin American markets. It is also investigating the
feasibility of pay-per-view broadcast of Bingo games to the cable television
market and of a regular Bingo game broadcast to the United States.
BACKGROUND
Satellite Bingo
The Registrant's initial satellite Bingo concept was to broadcast
Bingo games periodically from a satellite re-transmission facility, thereby
making the game available to viewers through the United States. The targeted
viewing audience was comprised of homes with satellite dish receivers or access
to cable facilities, and, direct broadcast recipients (i.e., Bingo halls).
Each program was to be broadcast live and viewers were to be provided the
opportunity to win valuable prizes by playing the game.
Form 10-SB Dated August 31, 1996, Page 7
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Pioneer Games of America
The Registrant's first satellite Bingo broadcast, ("Pioneer Games of
America") took place in 1985, from facilities in Tallahassee, Florida. The
program was broadcast live once a week from WCTV Channel 6, Tallahassee's CBS
affiliate station. At the time, the Registrant had agreements with 20 cable
networks which allowed the program to be delivered via cable to homes across
the United States. The program was also directly broadcast from WCTV to homes
in the Tallahassee area. In addition, homes with satellite dish receivers were
capable of picking up the program.
Bingo game cards were distributed to the public free of charge through
Piggly Wiggly grocery stores approximately 2 to 3 weeks prior to the game. The
Registrant would print the cards, color code them each week to mark the start
of a new game series, and distribute them to stores throughout the Southeast.
The cards featured a Bingo scorecard on one side and a discount coupon for
select store merchandise was featured on the other side.
Distributing Bingo game cards to grocery stores provided the
Registrant with a low-cost way to reach a mass market and gave Piggly Wiggly
stores an attractive promotion from which to build foot traffic in its stores.
Shoppers could pick up the free Bingo cards in the stores or write to an
address provided during games to receive free Bingo cards by mail.
The Registrant generated revenues by selling advertising to sponsors
such as Proctor & Gamble, who would advertise their products during the
broadcast and subsidize the product discount coupons which appeared on the
backs of the Bingo cards. The Registrant also received revenues through
syndication fees from independent television stations and cable systems, as
well as through the sale of Bingo cards to sponsors like Piggly Wiggly, who
distributed the cards in their grocery stores. Prizes consisted of cash awards
of up to $40,000.
The broadcast was held once a week for approximately 13 weeks. Each
broadcast featured a live game program host who drew numbers and announced the
winners. The popularity of the game was enormous. At one point, the
Registrant was printing and distributing 7,500,000 cards per week. Eventually,
the cost of producing and distributing the cards at the negotiated prices
exceeded the Registrant's ability to make a profit, and the broadcasts ended in
1987.
2. Satellite Bingo Productions
In September of 1987, the Registrant formed a joint venture called
"Satellite Bingo Productions" for the purpose of producing and distributing a
live satellite Bingo program once a week from a television studio in Glendale,
California. Agreements with cable systems and television stations enabled the
Registrant to broadcast the "Bingo Game Show" to larger metropolitan markets,
such as Las Vegas and Detroit. To attract attention and generate excitement
for the games, the Registrant secured national entertainers and celebrities
such as Marty Allen, Jo Ann Worley and Don Sutton to appear on the broadcasts.
As it had done in Tallahassee, the Registrant delivered Bingo cards to
grocery stores in 32 cities throughout the United States. Again, due to the
popularity of the game, the Registrant eventually became overwhelmed with
requests for Bingo game cards. Cards were distributed below
Form 10-SB Dated August 31, 1996, Page 8
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cost which eventually eroded the Registrant's profit. Consequently, the
Registrant discontinued the broadcast in 1988.
3. Spanish Satellite Bingo
In 1988 the Registrant began spanish language broadcasts from Los
Angeles, California, through KMEX Channel 34 to the Los Angeles Hispanic
market. The broadcasts were produced at Glendale, California.
Sponsors of the broadcast included the Coca-Cola Company and
individual Seven-Eleven stores. In addition to Los Angeles, the program was
broadcast to markets in Central and South America. As with the Registrant's
previous satellite Bingo games, cash prizes of up to $25,000 were awarded and
participants could pick up Bingo cards at participating Seven-Eleven stores.
The game ran for approximately 13 weeks and, as with the other Bingo
broadcasts, was terminated due to increased production costs.
4. Technical Improvements
In the years following its last Satellite Bingo broadcast, the
Registrant continued to develop and produce on-going Bingo programs held at
Bingo parlors located on Native American reservations. The Registrant also
continued to make substantial investments in the development of proprietary
software. This software was responsible for generating combinations of Bingo
card numbers which ensured that no two Bingo cards were alike.
When the Registrant began broadcasting Satellite Bingo in 1985, it was
capable of producing only 27,000 different combinations of Bingo cards. Over
the years, enhancements to the program enabled the Registrant to increase its
Bingo card combinations to more than 100 million.
In 1990, the Registrant developed a highly-sophisticated copyrighted
software program called the "One Billion Series for Bingo Lottery." This
software enabled a computer to generate up to one billion uniquely different
cards which were coded for play in a specific game through a series of assigned
serial numbers. These serial numbers permitted the Registrant to easily track
Bingo cards that it had printed and sold or otherwise distributed.
The software placed in play only those cards which had been sold or
distributed for a specific game, guaranteeing that each game would produce an
identifiable group of winners, something the previous software was incapable of
doing.
Another major advantage of the software was that it was possible to
tie it into an automated telecommunications system, which allowed the
Registrant for the first time to distribute Bingo cards "over the telephone."
Participants could call in and follow a series of automated voice commands to
obtain the numbers for their free Bingo cards by telephone. The caller would
simply write down the Bingo card numbers given by telephone on a blank sheet of
paper, creating his own personalized Bingo card.
Form 10-SB Dated August 31, 1996, Page 9
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Because his information was captured on a computerized database, the
Registrant could charge the participant for the call by arranging for the calls
to appear on the participant's regular telephone bill.
5. Test Marketing
The Registrant began implementing its new software system in 1991. To
eliminate some of the obvious drawbacks of distributing Bingo cards on a weekly
basis to a wide geographic area, the Registrant limited its distribution of
Bingo cards to select military bases, charity Bingo halls and Indian
reservations, which were already conducting their own weekly Bingo games and
could distribute the satellite Bingo cards to their local participants. During
the test marketing period, the Registrant provided Bingo cards to the
participating game operators free of charge. The Registrant began charging for
the cards once the test period was over.
Satellite receivers were placed at participating Bingo halls. The
receiver enabled operators to down-link the satellite Bingo broadcast to their
Bingo audiences, who could play along on the satellite Bingo cards previously
obtained from the hall. The Registrant's satellite Bingo games offered local
Bingo players the chance to win larger cash prizes (during the test years 1991
and 1992, the Registrant gave away more than $120,000 in cash and prizes).
The Registrant designed its satellite Bingo game with a view towards
offering participating game operators with considerably larger jackpots than
they could individually afford or legally pay in many jurisdictions. The
Registrant's management believed that, because of the larger potential prizes,
participating Bingo parlors and charity game operators would be able to attract
larger numbers of players, resulting in increased income.
In addition to the local play, the Registrant also began testing its
"interactive" concept, whereby viewers at home (who were able to receive the
satellite Bingo broadcast over their own satellite receiver dishes) could call
a televised toll-free number, receive a set of Bingo card numbers over the
telephone or by mail, and then, during a subsequent broadcast, play the game
along at home.
Satellite Bingo's popularity among local Bingo players, home viewers
and game hall operators during the test stage led the Registrant to officially
air the first "Globalot Bingo" program in November, 1993.
6. Globalot Bingo
The Registrant produced and broadcast its first satellite Bingo
program under the trade name "Globalot Bingo" on November 13, 1993, live from a
charity Bingo hall located in Piedmont, Alabama. Globalot Bingo was broadcast
each Saturday evening from 9:30 p.m. to 10:30 (Eastern Standard Time).
Under the Globalot Bingo program, the Registrant paid an advertised
cash prize to the first person who successfully completed one of its
specially-generated, copyrighted Bingo game cards. The prizes were awarded
following each weekly broadcast and started at $20,000 for the grand prize
winner and $5,000 for the second prize winners.
Form 10-SB Dated August 31, 1996, Page 10
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Over time, the Registrant developed a larger prize potential for a
grand prize winner. A special "Quick Pick 8" Bingo played during the broadcast
involved a potential $1,000,000 cash prize. Prize payments were bonded through
major insurance carriers licensed in states where the prizes were paid.
In addition to home viewers and local players at the Piedmont Bingo
hall, other Bingo halls located at military bases and Indian reservations
offered Globalot Bingo to their local players by agreeing to sell Bingo game
cards and paying the Registrant for their participation.
The Registrant initially broadcast Globalot Bingo in the United
States. Over time, the Registrant entered into agreements with groups in Hong
Kong, Philippines, Venezuela, Greece and Brazil to develop and broadcast Bingo
game programs.
How Globalot Bingo Worked
Like the Registrant's previous Bingo broadcasts, Globalot Bingo was
based on the popular game where contestants filled in a Bingo card by playing
"Quick Pick 8" or a "coverall" games. All games were called at a rate of
approximately one Bingo number every 12 to 15 seconds in order to allow
participants to play multiple cards. Most could comfortably play up to five
cards at a time. The Registrant initially sold Globalot Bingo cards to
licensees for $5.00 for a strip of three Bingo cards. The Registrant also
offered game cards at $10.00 for a strip of three to home viewers.
Home viewers who watched the program and wanted to play could call a
special toll-free number in Toronto, Canada (now Denver, Colorado), and
register the cards with a designated licensed Bingo hall (like the Piedmont,
Alabama hall). They would receive their Bingo card numbers by telephone for
the next Globalot Bingo program. Although there was no charge for the cards,
the caller was billed approximately $10 for the long distance telephone call
through the local telephone service provider. The length of the call
determined the number of cards the caller could obtain.
As with the sale of printed Globalot cards, the Registrant established
a sales termination deadline prior to the start of the game to allow its
computer sufficient time to process caller information. When the televised
Globalot Bingo game began, each number called on the television program was
recorded by the master computer. The computer system monitored all the cards
in play and was able to determine when a win occurred. It then identified the
licensee that sold the winning card.
The viewing audience was informed which card won the Globalot game and
actually saw an image of the card on the television screen. The grand prize
winner would then call the Globalot 800 number and provide the Registrant with
the serial number and other necessary identification. The winner was then
provided with instructions on how to claim the prize. Prizes were paid through
the designated licensed local Bingo hall at which the cards were registered;
however, the local Bingo hall had no responsibility for the national prizes or
their payment. After verification of the grand prize winner, additional
numbers were called for second prize (or prizes), which were awarded by the
Registrant.
Form 10-SB Dated August 31, 1996, Page 11
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The Registrant's sophisticated computer system acted as both a
security system and a generator of Bingo card members. The computer could
verify the winning card through the serial number and, as part of its memory,
the computer knew when there was a winner as soon as the number was called.
The Registrant successfully broadcasted its Globalot Bingo program
from Piedmont, Alabama from November 13, 1993 until March 27, 1994, when a
tornado damaged the Piedmont Bingo hall (now repaired and purchased by the
Registrant).
PRINCIPAL PRODUCTS OR SERVICES AND THEIR MARKETS
Globalot Bingo
1. Introduction
Globalot Bingo is a proprietary Bingo program developed and marketed
by the Registrant and for broadcast via satellite to participating licensees.
The licensees must be legally able to participate in the program based on the
federal, state and local laws that specifically apply to them. Licensees
include individuals who own satellite dishes but the bulk of its licensees have
been Bingo parlor operators on Native American properties and Bingo games
operated by non-profit organizations (e.g., churches).
The Globalot Program was broadcast each Saturday from November 13,
1993, until March 27, 1994, at 9:30 p.m. (Eastern Standard Time), over
transponder 8 of the Galaxy 3 communications satellite. Programming was
interrupted when a tornado damaged the facilities used by the Registrant;
however, the facilities have been repaired and purchased by the Registrant.
During the interim, the Registrant re-evaluated its marketing plan and
restructured its broadcasts to target the home viewer rather than bingo halls.
The Registrant also decided that it would be more cost effective to work with
an existing network (the PandaAmerica Shopping Network) rather than to purchase
its own transponder time. The Registrant currently has an agreement with the
PandaAmerica Shopping Network to produce a 24 hour animated bingo show and a
weekly 30 minute live interactive game shows with cash and prizes given away.
The 24 hour animated game show has been broadcast since November, 1995. The
first half hour game show was broadcast on June 15, 1996 over PandaAmerica
Network and its affiliates.
The Globalot Program was frequently followed by continuing optional
local games, usually starting after 10:00 p.m. (Eastern Standard Time). The
Registrant plans to expand the Globalot Program to other week nights during the
next twelve months.
Under the Globalot Program, the Registrant pays the first person who
successfully completes one of the Registrant's specially generated, copyrighted
Bingo game cards (generally referred to as a "coverall") a pre-advertised cash
prize. The prizes are awarded following each broadcast and started at a chance
for $1,000,000, with a guarantee of $25,000 for the grand prize winner and
$5,000 for the second prize winners.
Form 10-SB Dated August 31, 1996, Page 12
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The Registrant expects to increase the prize money paid to game
winners in the future, based on anticipated increases in the number of players
and Bingo parlors participating. The next level of prizes is expected to be a
grand prize of $50,000 and second prizes of $10,000.
The Globalot Program provides participating game operators with
considerably larger jackpots than they could individually afford or legally pay
in many jurisdictions. The Registrant expects that because of the larger
potential prizes, participating Bingo parlors and charity game operators will
attract larger numbers of players, resulting in increased income.
The Registrant's administrative offices are currently located at 458
Highway 278 By Pass; Piedmont, Alabama 36272. Its toll free Globalot telephone
number is 1-800-460-2170. Production offices with studio facilities are
located at 1239 South Glendale Avenue, Glendale, California 91205.
2. Operation
The Globalot Program can generate a series of up to one billion
individual cards, without duplication. Each card is unique and all cards are
serially numbered in order to preclude cheating and counterfeiting.
Participation in the Globalot Program by licensees requires them to have access
to a satellite dish and receiver to down-link the program; television monitors
for viewing the program; and, a turn-key installation package provided by the
Registrant. Under certain license arrangements, the Registrant provides the
licensee with the required equipment, at the Registrant's expense.
Globalot cards are sold by licensees of the Registrant for
specifically dated games, with sales halted prior to commencement of the
designated games at times specified in the licensing agreements. It is
expected that most licensees will initially be operators of Bingo parlors or of
games sponsored by authorized charities or churches.
Immediately following the sales termination deadline, licensees
provide the Registrant's central processing office with the serial number of
cards sold for that night's game, via an 800 telephone number. Master
computers in the Registrant's main offices then record all cards sold by
licensees.
When the televised game begins, each number called on the televised
show is recorded by the master computer. The computer system monitors the
cards in play and is able to determine when a win occurs. It then identifies
the licensee which sold the winning card. The viewing audience is informed of
which card won the Globalot game and actually see the image of the card on the
viewing screens. The grand prize winner calls the Globalot 800 number listed
on each card, and provides the Registrant with the serial number and other
necessary identification of the winning card, together with the winner's name
and address. The winner is then provided with instructions on how to claim the
prize. Local Bingo parlors have no responsibility for the national prizes or
their payment. After verification of the grand prize winner, additional
numbers are called for a second prize (or prizes) to be paid by the Registrant.
If, for reasons beyond the control of the Registrant, a regularly scheduled
telecast cannot be broadcast, all prize funds announced for that week are added
to the jackpot for the next telecast.
All games are called at a rate of approximately one Bingo number every
15 seconds in order to allow players to play multiple cards. Based on the
Registrant's experience, such time permits
Form 10-SB Dated August 31, 1996, Page 13
<PAGE> 14
experienced players to comfortably play up to five cards at a time. If it is
determined by participating Bingo parlor operators that the calls are too fast
or too slow, they notify the Registrant and adjustments can be made.
Local operators have the option of continuing play, after award of
Globalot prizes, for local prizes, subject to applicable local gaming laws and
regulations.
3. The Copyrighted Bingo Cards
The Registrant sells Globalot cards to licensees for $2.50 per strip
of three different cards. Each strip gives the player three chances to win the
grand prize. The licensee determines the resale price of the strips of cards
to individual players.
The Registrant currently provides its licensees two card payment
plans, the EFT Plan and the Prepay Plan:
1. Licensees may execute an electronic funds transfer (EFT)
authorization permitting the Registrant to debit the licensee's
checking account for cards actually sold, in which case cards are
shipped on consignment and the licensee is debited for cards sold
immediately after it reports sales to the Registrant on the toll-free
number. Because of the Registrant's card inventory tracking system,
the Registrant can monitor the licensees card inventory and ships
additional cards as required, assuring that the licensee always has an
adequate reserve of cards on hand.
2. Licensees wishing to participate in Globalot but not wanting
to enroll in the EFT program must pre-pay the price of their cards by
submitting card orders accompanied by full payment therefor.
In either case cards are shipped, freight pre-paid, by UPS surface mode.
Expedited delivery is available at the expense of the licensee.
4. Local Play
Licensees who operate Bingo parlors on Native American properties or
who operate qualifying charity or church games can continue play after
conclusion of the Globalot Program, subject to applicable local laws.
When the Globalot transmission begins, the number caller for the local
game operator places 75 balls in a slot designed to light up an electronic
display. Each Globalot number called is also displayed on television monitors
at local parlors. When a televised Globalot game ends and the grand prize
winner has been recognized, local number caller merely rakes all remaining
balls not called during the Globalot broadcast into a hopper and activates a
local blower mechanism to complete local play. Local games are played until a
local win for a locally determined and paid prize occurs.
5. Personal Play
Form 10-SB Dated August 31, 1996, Page 14
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Individuals who are unable to attend Globalot transmissions at
licensed local parlors can still play by obtaining copyrighted cards for the
next scheduled game directly from the Registrant and registering them with
designated licensed local parlors (e.g., Frontier Palace in Piedmont, Alabama).
The cards are obtained by calling the Registrant's special number in Denver,
Colorado. Although there is no charge for the cards, the caller is billed
$1.20 per minute for the call through his prepaid telephone calling card.
Prizes are paid through the designated licensed local parlor with which the
cards were registered.
6. Systems
The Globalot System includes the following sub-systems:
A. Customer Information System.
All customer information including names, addresses, telephone
numbers, hall sizes, security account codes, and comments are accessible
through a data input/inquiry screen, with reports generated upon request. The
sub-system permits card sales to be monitored and system security to be
maintained.
B. Card Sales Inventory System.
This sub-system allows the user to track card sales by account
identification number and date sold via a data input/inquiry screen. This
system permits cards placed in play to be validated for ownership (security)
and verifies the winner's location. It also allows a re-order system to track
and report upon those accounts that need to buy more cards.
C. Cards Into Play System.
This sub-system requires the Bingo hall owner to telephone the user
and provide the last serial number of cards sold for a game prior to game time.
It allows the user to place card numbers into play via a data entry/inquiry
screen and also performs security and responsibility checks insuring that the
card numbers are owned by the account and that the number of cards to be played
is a reasonable number for the hall size.
D. Card Generation System.
This sub-system generates up to 1 billion unique Bingo cards each with
a serial number beginning with 0 and ending with 999,999,999, in order. There
are 114 quadrillion potentially unique Bingo cards and the Company could allow
for the total set. However, in order to limit the length of the serial number
the Company has set the limit to 1 billion by using a 10 digit serial number
(which the Company feels is a reasonable size).
The Company decided that the best method for card generation would be
to develop an algorithm whereby a serial number would represent a Bingo card
and no database lookup would be necessary. This approach avoids the necessity
for a large database of cards and provides a number
Form 10-SB Dated August 31, 1996, Page 15
<PAGE> 16
of advantages. First, system security is greatly increased because no one can
tap into or get a copy of the card database. The source code for the algorithm
is owned by the Company and the only copy is kept in secure storage. Second,
hardware costs are greatly reduced because the Company does not have to rely on
a hard disk or a modem hookup to verify a card (the program is resident in the
local computer). Third, chances of system failure are greatly reduced since
less hardware connections are required.
E. Card Printing Services.
The Company has contracted with a printing company for competitive
printing services. The system automatically creates a magnetic tape for card
printing that can be transferred to most printers. The printing company works
directly with the Company to insure that all requirements for the printing and
packaging are met. Alternatively users can print their own cards.
F. The "Play Bingo" System.
This system provides the actual game playing function. It takes all
cards that are placed into play and picks Bingo numbers assuring that one and
only one winner is randomly selected; and, also provides the option of
continuing the game in order to provide for multiple winners. It runs after a
selected cutoff time (thirty minutes before game time) and is ready for
televised play at game time. Using the "plunger" and the electronic Bingo
board, the Bingo numbers are determined and displayed until one card has won,
at which time the computer notifies the user that there is a winner. The
winner's location and card face are also displayed. The game plays quickly and
accurately and the Company has calculated the statistical probabilities for the
number of Bingo cards that can be called before a win occurs. The Company
expects to have between forty and fifty Bingo numbers called before a card
wins. The system assures that no other card will win.
G. Card Validation and Winner Verification.
A data entry/inquiry screen allows the user or the customer to type in
a serial number and the face of the card is then displayed. The verify winner
sub-system automatically provides this information about the winning card and
gives the location of the winner on a winner report.
H. The Re-order System.
This system reports, upon request of the user, all customers who may
need to re-order cards. Using the card sales and card play inventory systems
any user that has ever played a game is listed on the report along with
statistical data such as number of games remaining, average cards played per
game, etc.
I. The Security System.
Security has been a major factor in the design of each part of the
system. The card generation algorithm prevents copying or stealing of viable
cards. The card sales, card play, and customer information systems provide
controls to check validity of serial numbers, validity of ANI (automated
Form 10-SB Dated August 31, 1996, Page 16
<PAGE> 17
number identification), and validity of account number. In addition, only the
Company owns and retains a copy of the software which is copyrighted. All
cards are printed in a distinctive and unusual style on special paper so that
copying of cards is very difficult. Card Sales are controlled by the user
directly with a specific Bingo hall being responsible for the sale of each
card. All card sales information is carefully tracked in inventory as is all
card play information. A password is required to perform data entry or inquiry
into the system. No new game can be played or setup for play unless this
password is utilized.
J. Post-play Inventory System.
This system wraps up, cleans up, and resets the systems after a game
has been played. The card sales and play inventory systems are updated with
play information and with winner information. The automated call-in program and
the game set-up master programs are placed into a wait state so that the user
can schedule the next game to be played.
K. User Training and Documentation.
The system comes with complete user and system documentation. The
Company supplies user training as part of the package.
L. Card Generation
This sub-system generates a file containing Bingo numbers and serial
numbers to be printed on Bingo cards. Up to one billion unique Bingo cards can
be generated. A print tape is generated to create Bingo cards, each unique and
with a unique serial number. The Bingo numbers on the cards are randomly
generated and the serial numbers are sequentially generated. A screen is
available permitting card generation in the quantities desired. The user also
determines whether cards will contain a "free space".
Bingo numbers are randomly generated and stored with the corresponding
serial number in a database. The number of cards generated is specified by the
user with a breakpoint of 2,000 cards. Cards can be printed with a "free"
space which must be selected at card generation time and all cards then
generated will contain the "free space". The cards are recorded on magnetic
tape which is shipped to a card printing shop. The user is responsible for all
tape creation and shipping.
The data entry screen permits the user to specify the number of cards
to be generated and to enter the free space option. The user enters the number
of cards to be generated. A sanity check is performed and all history is
logged. The last sequence number is generated and the total number of cards
already generated is displayed. The user is asked to approve continuance of
card generation. The file is generated using random Bingo numbers for each
card in the format required by the print company. The file is transferred to
magnetic tape. The file is added to the "all cards" database for play.
Form 10-SB Dated August 31, 1996, Page 17
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M. Card Sale Inventory
This sub-system provides the user with a computerized means of keeping
track of all Bingo hall customers and all cards sold to such customers. Data
entry screens allow the user to enter information about the Bingo halls
including their names, locations, and telephone numbers. The user can also
track how many and which Bingo cards are sold to each hall. With this
sub-system the Bingo call-in system has the ability to provide security and to
perform reasonability checks on the cards in play. Also, a re-order system can
be created using the card sale inventory database. The user can then be
pro-active about the sale of Bingo cards.
This system provides the data necessary for security and for
reasonability checks in the call-in system. The data stored also provides
information about customers and helps track card usage for each customer. Many
sales, usage, and statistical reports can be generated through this system.
Data entry screens with at least the following information are
created: Bingo hall name, address and phone number(s); contact person's name;
account identification; serial numbers of cards sold identifying source and
purchaser; and, the date of sale. A screen also displays the history of cards
sold, including last serial number, dates sold, and dates played.
All of the foregoing information is kept in a database which is
accessed at the time of call-in for reasonability checks and security. The
database is also accessed by the play programs to record cards played and
winners for each location.
N. Play Inventory (Pre-game Call-in)
This set of programs allows the Bingo halls to call in and record the
cards that are to be played in the upcoming game. A dialogic board is used to
perform the communications and voice response to the customer. The customer
enters information using the phone keypad. A data entry program allows an
operator to place cards into play manually with override capabilities.
There are several parts to this sub-system. First is the call-in
program which allows the customer to place cards into play using an automated
voice response system on an 800 number. Second is a watchdog program that
checks to see that all Bingo halls have called in a specified time before play.
Third is an override program that allows the user to put cards in play even if
reasonability check on card numbers or the account identification numbers cause
the automated call-in program to fail.
The call-in program allows any customer to dial an 800 number and
enter the last serial number on those cards that he has sold for play in the
next game. This program performs checks on the customer's account
identification number and on his ownership of cards and then either allows the
cards into play or gives an error message to the customer. An account status
field is also checked before cards are allowed into play.
At a specified time prior to game beginning another program checks to
see that all Bingo halls have called in to designate the cards in play. For
those halls that have not called in an automatic call
Form 10-SB Dated August 31, 1996, Page 18
<PAGE> 19
is generated to remind the hall to call in. At a pre-specified later time a
printout is generated so that a live operator can call the hall.
The operator has a data entry screen that performs the same functions
as the automated call-in program but can also override the security check and
account status check. Specifically, the operator can place any generated cards
into play.
The following gives a basic outline for the pre-game call-in system.
1. Gives greeting message, gives date and time of upcoming game.
2. Gets account identification number.
3. Gets last serial number sold for play.
4. Checks card sale inventory file to check that range of serial
numbers is valid for security identification number.
5. If the range of serial numbers is not valid, gives message to
re-enter or call a live operator for help. Prints error
report for live operator.
6. Gives closing message to Bingo hall, repeats game time.
7. Sends data to file for "play" program.
8. At designated time places reminder call to all halls that have
not called in.
9. At designated time generates a final report of all halls that
did not call in or that called in with errors.
10. Once the call-in time is over the call-in line so informs the
caller.
11. Interfaces with security sub-system to track all attempts to
enter system with invalid security codes.
12. Creates a data entry screen for the user to take call-ins by
telephone manually and to override any measure utilized in
call-in.
O. Play Bingo
This sub-system is the main brain of the system (the one that actually
"plays" Bingo). Using a full card blackout with the possibility that some
cards may have a free space, this sub-system generates from 40 to 47 Bingo
numbers causing one card to win. The press of a button causes the numbers to
display on a Bingo board. Once a winner is found the game is stopped and the
next phase ("verify winner") begins. However, the user has the option to
continue the game even though a winner has been found. In this event there
will be multiple winners.
Form 10-SB Dated August 31, 1996, Page 19
<PAGE> 20
During call-in Bingo card numbers are retrieved from the "all cards"
database and bitmapped into memory for the play program. There is a cut-off
time when no more call-ins are allowed. At this time the play program finishes
the bitmapping and then randomly chooses a card to win. This part of the
program is actually "pre-play" as all numbers to be generated in the real-time
play program are actually chosen here. Using an algorithm from 40 to 47 Bingo
numbers are generated and ordered for play so that when the last number is
called one and only one card will have won. The user has the option to
continue the game, picking more numbers and getting more winners.
The system creates a program to accept serial numbers from call-in and
look up the cards in the database. Then the card numbers are bitmapped into
memory. It creates the bitmapping program and the program that will randomly
choose a winning card and then chooses the other Bingo numbers to call. It
organizes these Bingo numbers into the order for the real-time play program,
examines the card sale inventory file to find the winning Bingo hall and
organizes this information into the order required by the real-time play
program. Through a keystroke the system displays the Bingo numbers to the
electronic board one at a time. Once a winner is found it is displays on the
computer screen along with its location.
P. Verify Winner
This sub-system displays the face of the winning card, its serial
number and the location of the winner on the screen. After the Bingo game is
played and a winner has been found, the master of ceremonies announces that
there is a winner. At this time the winner calls and gives his serial number.
When the number is input the card's likeness is displayed to the computer
screen.
Once a game play is completed the winning card location and serial
number is displayed. A program allows the user to enter the serial number and
then the card face is displayed. If the wrong serial number is called an
alternate screen is displayed. In the event of multiple winners all winning
serial numbers are displayed.
Q. Validation
At any time during or after play this sub-system allows a card serial
number to be typed into a data entry screen and to have the card displayed. In
order to verify the numbers on any Bingo card a sub-system is available to
display a replica of the card after its serial number is entered. The system
creates a data entry screen that accepts a serial number. It displays the
corresponding Bingo card numbers in a Bingo card format and displays error
messages if the card is not found.
R. Post Play Inventory
This sub-system updates all necessary databases with information from
the game. After a game is played the "all cards" database is updated so that
cards already played will not be played again. The card sale inventory
database is also updated so that all information desired by the user, including
potential re-order reporting, winner statistics, and sales statistics can be
generated.
The system marks all cards in "all cards" database that have been
played as "played". The database is subdivided with one sub-data base
containing played cards and one containing unused cards and generates a backup
copy of all databases. It updates card sale inventory database so that
Form 10-SB Dated August 31, 1996, Page 20
<PAGE> 21
the next pre-play call-in can do reasonability checks. Also, any other desired
information can be stored here (such as winner information, sales statistics).
Dates of play for serial numbers will be kept here.
S. Card Re-order
This sub-system tracks the card sale inventory database and generates
reports to alert the user that a re-order by the customer is needed. After
game play and post play inventory updates this sub-system checks each customer
for number of outstanding cards and generates a report of those customers who
should be interested in purchasing more cards.
Programs analyze the card sale inventory file after each game played
and create statistics for each customer. Using the statistics and user defined
stock needs a probable re-order date is determined. A report is generated
giving probable re-order dates for those customers with an upcoming date.
T. Security
This sub-system provides security features so that only those Bingo
halls approved for play will have access to the call-in system. A security
file associated with the card inventory system assigns a security code to each
Bingo hall. The security code must be entered in the call-in system by the
hall in order to put Bingo cards into play.
The sub-system provides the user of the card inventory system with a
security identification number for each Bingo hall which is given through an
appropriate means to the responsible person at the Bingo hall. Then this code
is utilized to verify authorization of Bingo card call-in. Any attempts to
call-in Bingo cards with an invalid security code generate an error listing.
If the "ANI" of the incoming call is known other information will be available
for the user (such as number of bad attempts from a specific Bingo hall or
number of attempts from bad ANI).
After the initial Bingo hall information is entered in the inventory
system this sub-system creates an account security number for the Bingo hall.
The user gives the Bingo hall his security number either by telephone or by
mail. The security number is checked at each call-in and any violations are
reported.
7. Conclusions
The system results in high difficulty of duplication as a barrier to
competition. The complex card generation and play algorithms are the biggest
detriment to duplication. The system's developer has been employed on numerous
complex projects including development of the expanded memory manager for
Compaq and creation of the operator workstation in use by Northern Telecom.
The encoding of the serial number, the large size of the card database with no
duplication and the fact that there is only one winner are all difficult to
copy. As with most products there is the possibility that a competitor will
develop such a system; however, such system would normally take at least one
year to develop and would probably not run correctly unless the complex
algorithms were developed.
Form 10-SB Dated August 31, 1996, Page 21
<PAGE> 22
The local computer hardware can be sold to the Bingo halls. This does
not affect the ownership of the software which is proprietary. The only
purpose for a local computer is to allow the Bingo hall to continue play at the
local level after the national winner has been found and then to verify the
local winning card. If the Bingo hall chooses not to continue the game there
is no need for a local computer. A Bingo hall can purchase its own computer as
long as is meets the required specifications. To date, however, no Bingo hall
has purchased such computer hardware from the Registrant.
The Company's software package provides critical features such as
inventory control, a card re-order system, strict security, faster play,
automated pre-play calling, a large unique database of cards, the ability to
continue play beyond one winner, simple card generation (without database
storage), inexpensive card printing, an optional local computer, user training
and documentation, and an overall and complete system for Bingo games.
Subscription Satellite Television
1. How Subscription Satellite Television Works
Broadcasters can transmit up-link signals in an "unscrambled" or
"scrambled" state. An unscrambled signal may be received by any satellite dish
and viewed with an ordinary satellite receiver. Broadcasters may also alter
their up-link signals to prevent unauthorized reception of the down-link
programming. Such a scrambled signal may be viewed only if the signal has
passed through an activated decoder; otherwise, it will appear on the
television screen with an unstable image and unintelligible sound. (See
"Decoder" and "VideoCipher Plus II", respectively below). The scrambled
up-link signal contains addressable information so that only an activated
VideoCipher II can descramble it. However, the decoder can only be activated
via satellite, as follows: When a customer orders subscription programming, he
provides his decoder's unique serial or identification number, which is put
into a computerized digital code and added to the universe of similar codes
from all purchases of the subscription programming. These codes are then
continuously up-linked to the satellite for broadcast along with the
subscription programming. If the decoder has been authorized for a specific
program, it will be activated by its own broadcast "address" code (no other
broadcast "address" code will affect that particular decoder). In the event a
subscriber becomes delinquent in paying for the programming, or elects not to
renew, the broadcaster will issue a de-authorization code which alters the
decoder's "address" code within the up-linked signal, and the subscriber will
no longer be able to decode the scrambled signal.
2. Components of a Home Satellite Television System or Earth Station
A home satellite system consists of an outdoor "dish" (which
essentially functions like the familiar roof top antenna, i.e., it receives and
collects television signals), an indoor electronic receiver and a television
set or monitor. In order to receive a particular signal, the owner of the
earth station or dish must aim the dish at the broadcasting satellite, either
electronically or manually, and tune the receiver to the desired transponder or
channel. Mounted in the front of the dish is an electronic device called a
"feedhorn". A broadcast from a satellite bounces off the dish and into the
feedhorn, where it is translated into an electronic signal. This signal is
then fed by wires to the tuned receiver, which converts it into a television
image and sound. However, as described above, a scrambled
Form 10-SB Dated August 31, 1996, Page 22
<PAGE> 23
television signal will not generate visible images or sound unless the receiver
is combined with a decoder which has been activated.
Decoders are available separately or as built-in components of the
receiver. Currently the most popular decoder is VideoCipher Plus II. (See
"Decoder" and "VideoCipher Plus II" below). A Decoder is an electronic device
which, when activated, converts an intentionally altered or scrambled satellite
television signal back to the standard format or pattern for normal perception.
VideoCipher Plus II is a brand of decoding system which currently is
the standard which satellite home dish and unauthorized viewing of their
respective services. It currently has the capacity to decode 56 different
channels, and its compatible with virtually all satellite television receivers.
However, a significant number of VideoCipher Plus II machines have been
activated by unauthorized third parties, allowing people to view decoded
signals without paying the programmer's fees. Such "piracy" has become
widespread and is believed to have deprived programmers, including the
Registrant, of substantial revenues. Although General Instrument Corp., the
manufacturer, and the industry in general are attempting to reduce the number
of unauthorized VideoCipher Plus II users, there can be no assurance that such
efforts will be successful.
There are over 4,700,000 satellite dish owners in the United States
and PandaAmerica , over which the Registrant's programming is currently
carried, currently reaches approximately 20,000,000 households through
satellite, cable and direct broadcast. The Registrant also plans to buy time
on Paxson Communications which reaches an additional 12.5 million cable
households in major markets throughout the country. In addition, the
Registrant is looking for other networks to carry their programming which will
increase the number of households reached. A schedule of affiliate network
data for PandaAmerica is filed as an exhibit to this registration statement.
3. Programming Distribution
The Registrant distributes its programming to satellite dish owners
and a limited number of hotels and small cable television systems via domestic
communications satellites and a third party satellite service provider. Its
programs are potentially available to anyone having proper satellite receiving
facilities. Participating cable operators re-scramble the signal and offer it
to their customers as part of their premium service.
Satellite services are available from approximately 25 domestic
communications satellites which are regularly used for broadcast transmissions,
on a "protected" or "unprotected" basis, replacement transponders are reserved
for use in the event that either the transponders used by the customer fail or
the satellite containing such transponders fail. Replacement transponders are
not reserved for service provided on an "unprotected" basis. Consequently, one
customer's "unprotected" service can be interrupted for indefinite periods in
order to restore service to a customer whose service is "protected" or in the
event the satellite owner requires transponder space in emergency.
The Registrant has had an oral agreement with Keystone Corporation
giving it the "unprotected" right to use one transponder on its domestic
communications satellite until December 31, 1996. Pursuant to the agreement, a
satellite up-link facility in Hollywood, California, converted
Form 10-SB Dated August 31, 1996, Page 23
<PAGE> 24
the Registrant's programming from a live broadcast into scrambled audio and
video signals, which were transmited (or "up-linked") to the transponder on the
satellites, which in turn relayed (or "down-linked") the signals to satellite
dishes located within the satellite's footprint for viewing. As a result of
the Registrant's current arrangements with the PandAmerica (which now provides
all such services) and the ready availability of satellite transponders for
lease, the Registrant does not expect to continue such arrangements.
Each transponder lease is subject to a tariff filed with the Federal
Communication Commission (the "tariff") which generally sets forth the terms
and nature of the service provided by the satellite owner to its lessees. In
particular, under the terms of each tariff, the Registrant is provided with
transponder time twenty-four hours a day, seven days a week through the lease
expiration date on an unprotected, preemptible basis as defined in the tariff.
There can be no assurance that these satellites will continue to be the
satellite from which transmits its signals.
4. Satellite Service Requirements
In order to operate and broadcast its interactive Bingo games, the
Registrant must have access to satellite transmission facilities. Satellite
services are available from approximately 25 domestic communication satellites
which are regularly used for broadcast transmissions on both a "protected,"
i.e. reserved, and "unprotected" basis; replacement transponders are reserved
for use in the event that either the transponders in use by a customer fail or
the satellite containing such transponders fails. Replacement transponders are
not reserved for service provided on an "unprotected basis." Consequently,
"unprotected" service to a customer can be interrupted for indefinite periods
in order to restore service to a customer whose service is "protected," or in
the event the satellite owner requires transponder space in an emergency. The
Registrant has a written agreement with 5 DTV Corporation giving it the
"unprotected" right to use one transponder on its domestic communications
satellite until the end of 1996, at a cost of $120 per hour. During 1995, the
Registrant paid approximately $2,400 for use of such transponder. A copy of the
current agreement is included as an exhibit to this registration statement.
Pursuant to a series of agreements in force until the end of 1996, a
satellite uplink facility in Hollywood, California, converts the Registrant's
programming into audio and video signals for transmission to a transponder on a
satellite, which in turn relays the signals to satellite dishes located within
the satellite's footprint for viewing. Copies of the current agreements are
included as exhibits to this registration statement. The cost of such services
have averaged $175 per hour during the past 12 months, and are expected to
average $175 per hour during the next twelve months, based on the Registrant's
currently anticipated operations. During 1995, the Registrant paid $3,500
under such agreement.
Each transponder lease is subject to a tariff filed with the Federal
Communications Commission which generally sets forth the terms and nature of
the service provided by the satellite owner to its lessees. In particular,
under the terms of each tariff held by the Registrant, the Registrant is
provided with transponder time twenty-four hours a day, seven days a week
through the lease expiration date, on an unprotected basis, subject to
pre-emption, as defined in the tariff. Notwithstanding the Registrant's
tariff, however, there are no assurances that any of these satellites will
continue to be operational.
Form 10-SB Dated August 31, 1996, Page 24
<PAGE> 25
In order to protect the privacy of the programming the Registrant
scrambles its signals which are decoded by authorized licensees using activated
VideoCipher II decoders. Unfortunately, a substantial number of VideoCipher II
machines have been activated by unauthorized third parties, allowing such
persons to view decode signals without paying the programmers' fees. Such
"piracy" constitutes a criminal offense and deprives programmers, including the
Registrant, of revenues otherwise charged for the right to view programming.
Subsidiaries' Operations
The Registrant currently has two operating subsidiaries and one
project in development that will deliver a variety of interactive television
programs and entertainment to home viewers in the United States and in
international markets. They include:
A. Public Domain Programming
The Registrant has developed plans to offer public domain programming;
however, such plans are currently on hold as a result of the greater emphasis
currently placed by management on development and marketing of the Registrant's
interactive Bingo programs.
Public domain telephone services offered by the Registrant will use
the computer technology, long distance services and phone bureau services
provided by the Registrant's business partners, permitting users to call
specific televised numbers in order to obtain information on social security
payments, birth certificates and other "public domain" information.
United States citizens can currently call Federal government agencies
to receive this type of information free; however, management believes that the
Registrant can develop a system providing such information in a more timely and
efficient manner. The Registrant's phone system will be capable of receiving
and processing more than 4,000 calls simultaneously. The Registrant's
management believes that the convenience of this service will lead to
potentially extensive use by the growing segment of the public that is becoming
literate in the computer and telecommunications fields. The Registrant will
derive revenues from the phone service fees generated.
The Registrant's management believes that this service will pave the
way for its proposed Life and Leisure Network.
B. Life and Leisure Network
This project is targeted to reach the expanding "over 50" market. The
Registrant plans to produce and broadcast entertainment and information
programs that will be of value to this segment of the population, including
at-home games (like interactive Bingo), finance and investment programs, health
care information programs and other entertainment programs that will focus on
life enhancement. Like other proposed projects, this one is currently on hold
while management concentrates on its interactive Bingo programming.
Form 10-SB Dated August 31, 1996, Page 25
<PAGE> 26
C. Interactive Satellite Bingo
The initial program offering will be interactive Bingo games. The
Bingo broadcasts will be similar in style and format to those produced by the
Registrant. The subsidiary, however, intends to deliver its Bingo program on a
daily basis from production facilities in Glendale, California (to be provided
by Glendale Studios).
Because the program will be broadcast daily, the Bingo games have the
potential of generating a higher volume of revenues. Using the Registrant's
computer systems, proprietary software and electronic phone switches, the
subsidiary will be capable of handling up to 4,000 calls simultaneously.
Revenues will be derived through service charges generated from the telephone
line time used by participants who call the show to receive Bingo card numbers
by telephone.
The Bingo games will be initially broadcast in the United States. The
subsidiary plans to expand the broadcasts to international markets like the
Russian Federation via the Ostakino network at a future date. Other areas
being currently considered include Brazil, Canada and Venezuela (see Part I,
Item II - "Management Discussion & Analysis"). The contemplated international
operations are currently on hold, all of management's efforts being currently
concentrated on its domestic, interactive broadcasts and marketing.
Contract With the Louisiana Charitable Organization Alliance, Inc.
In additional to the two new subsidiaries, the Registrant also has an
agreement with the Louisiana Charitable Organization Alliance, Inc. (LACOA) to
operate a high-stakes weekly Bingo game in the state of Louisiana.
LACOA's members, which include more than 1,600 charities in Louisiana,
would have the right to sell Bingo cards for the broadcast. A percentage of
the proceeds from card sales would go to each member charity and to LACOA. The
Registrant believes that a high-stakes Bingo game will provide Louisiana
charities with an effective competitive tool against state lotteries and other
prize-offering events that attract the public's spending dollars.
The game would be broadcast every Saturday night for 30 minutes on
cable television stations throughout the state. Players could watch the Bingo
game from their homes and call if they have a winning Bingo card.
LACOA has advised management that a number of members of the Louisiana
State Senate have opined to it that the Louisiana State Legislature will
approve legislation permitting LACOA's member charities to participate in a
high-stakes Bingo game as a means of raising funds. Both LACOA officials and
the Registrant's management believe that chance are excellent that favorable
clarifying legislation will be passed during the State's next legislative
session, which is scheduled to reconvene in March, 1996; however, no assurances
can be provided that such opinions will prove accurate.
The Registrant estimates that, during its first full year of
operation, the LACOA project could generate material revenues for the
Registrant. The Registrant is also confident that this program
Form 10-SB Dated August 31, 1996, Page 26
<PAGE> 27
could be marketed to other states whose charitable organizations require a
vehicle to increase the fund raising potential of their bingo operations.
Affiliations With Key Contractors and Suppliers
Development and implementation of the Registrant's proposed slate of
programs, has been facilitated through a series of informal relationships
(which the Registrant refers to as alliances) developed by the Registrant's
management with several major contractors and suppliers. Such alliances are
expected to provide the Registrant with the facilities and services it needs to
successfully execute its programming and to develop and implement other lines
of related business in the future.
They include:
Glendale/Oakridge studios, a major Hollywood-based video production
company, that will provide the production studio for the game and
auction shows.
Integrated Telephony, Inc., a national phone service bureau with
regional offices in Denver that will provide primary or back-up
telecommunications support;
PandaAmerica, a major television service group, that will be
responsible for bringing in television station commitments. The
Registrant is also pursuing contracts with cable networks.
The Registrant is also holding discussions with several other
companies. All of these companies have a proven track record of success in
their respective industries. By leveraging the assets and capabilities
provided by these companies, The Registrant's managements believes that it will
create an efficient vehicle for producing and delivering a wide range of
interactive television programs.
Possible Agreements With TV Networks
The Registrant has been approached by a number of television service
companies and networks about the possibility of carrying its subsidiaries'
proposed programming. These networks include TeleMundo and PandaAmerica.
TeleMundo is a network that broadcasts programs to more than 100
Spanish-speaking stations. The Registrant has made a proposal,
currently under consideration, to broadcast Interactive TV Services,
Inc.'s programming to Telemundo's 35 South American country
affiliates, as well as to 100 United States stations.
The Registrant is also pursuing relationships with networks willing to
aggressively advertise the Registrant's programs on the air in
exchange for a percentage of the gross revenue the programs generate
in their marketplaces. An agreement along such lines is currently in
effect with PandaAmerica, Inc.
Form 10-SB Dated August 31, 1996, Page 27
<PAGE> 28
DISTRIBUTION METHODS OF THE PRODUCTS OR SERVICES
The Registrant currently offers game cards electronically, over the
phone, at $1.20 per minute for a strip of three cards and free by requesting in
writing and sending a self addressed envelope to Globalot Bingo at 1239 South
Glendale Avenue, Glendale, California, 91205.
The Registrant markets and promotes its programming throughout each
day on its channels via traditional videotaped commercials. In addition, it
uses direct mail advertisements and places printed ads in television guides
oriented toward the home viewing audience. The Registrant also has a sales
incentive program which it offers to home satellite equipment dealers who can
sell the Registrant's programming alone or in conjunction with their sale of
home satellite receiving equipment. Home satellite dish owners who wish to
participate in the Bingo programs may obtain cards by mail or by calling the
Registrant's special 800 number at 1-800-729-2464, where, the Registrant
accepts PandaAmerica pre-paid calling cards.
When the viewer/contestant obtains the game cards they are
automatically entered onto the Registrant's computer for play until after the
super show on the following Saturday.
STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCT OR SERVICE
Except as described above, the Registrant has no publicly announced
new products or services.
COMPETITIVE BUSINESS CONDITIONS AND THE SMALL BUSINESS ISSUER'S COMPETITIVE
POSITION IN THE INDUSTRY AND METHODS OF COMPETITION
The Industry
1. The Growth of Interactive Technology
A number of important trends support management's belief that the
Registrant 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
Form 10-SB Dated August 31, 1996, Page 28
<PAGE> 29
challenged to find ways to use advanced technology, like interactive
technology, to make it easy for consumers to find out about and purchase their
products and services.
Popular examples of interactive technology in the consumer market
include on-line computer services (like Prodigy and CompuServe), voice
automated telephone services (like consumer banking and financial services),
and at-home television shopping services (like the Home Shopping Network). The
success of these have convinced management that interactive television
programming like that being offered by its new subsidiaries and through the
LACOA project will be well received by a public that continues to accept more
and more interactive technology into their daily lives.
2. The Bingo and Gaming Industry
Management believes that the past success of the Registrant'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.
Approximately 30% of bingo players have an income of $25,000 and over, and
bingo players are more likely to use their leisure time by doing indoor
activities such as reading books, newspapers and magazines.
As Americans become older as a population and choose to spend more
time at home, management believes that interactive television programs like
those it plans to offer will increase in popularity. Current statistics
indicate that persons 65 and older that play Bingo play the game at least once
a week.
These research findings and past experience support management's
belief that bingo is as popular as ever and that there is a viable market
opportunity for the Registrant's nationally and internationally interactive
broadcast programs
The Registrant's Competitive Position
Broadcast Bingo
The Registrant 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
Registrant has established a reputation of equitable and complete service to
the broadcast and gaming industry.
Form 10-SB Dated August 31, 1996, Page 29
<PAGE> 30
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 Registrant to successfully compete with other game shows.
2. Other Activities
The Registrant 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.
SOURCES AND AVAILABILITY OF RAW MATERIALS AND THE NAMES OF PRINCIPAL SUPPLIERS
None of the Registrant'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.
DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS
The Registrant's proposed client base is expected to be extremely
diversified, and its is not currently anticipated that any single customer will
account for more that 5% of the Registrant's aggregate business.
PATENTS, TRADEMARKS, LICENSES, FRANCHISES, CONCESSIONS, ROYALTY AGREEMENTS OR
LABOR CONTRACTS, INCLUDING DURATION
The Registrant 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 Registrant 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
Form 10-SB Dated August 31, 1996, Page 30
<PAGE> 31
(January 17, 1991); Number PA 533-697 (January 17, 1991); from Satellite Bingo,
Inc., to SBI Communications, Inc., dated September 14, 1993.
NEED FOR ANY GOVERNMENT APPROVAL OF PRINCIPAL PRODUCTS OR SERVICES. IF
GOVERNMENT APPROVAL IS NECESSARY AND THE SMALL BUSINESS ISSUER HAS NOT YET
RECEIVED THAT APPROVAL, DISCUSS THE STATUS OF THE APPROVAL WITHIN THE
GOVERNMENT APPROVAL PROCESS
General
The Registrant will be subject to applicable provisions of federal and
state securities laws, especially with reference to periodic reporting
requirements and, the operations of the Registrant are subject to regulation
normally incident to business operations (e.g., occupational safety & health
acts, workmen's compensation statutes, unemployment insurance legislation and
income tax and social security related regulations).
Because the Registrant is subject to regulation in every state and
country in which it transacts business and because government regulation tends
to be extremely dynamic, the Registrant will have to carefully monitor current
and proposed legislation in order to continuously comply therewith. There can
be no assurance that the Registrant's operations will always be in compliance
with applicable governmental regulation and in the event that it fails to
comply with applicable regulatory requirements, its activities may be curtailed
and it may be exposed to fines and adverse publicity. In any such event, the
Registrant's business could be detrimentally affected.
Required Government Approvals for Products or Services
The Registrant has requested several law firms to investigate the
legal parameters for its operations, and has also reviewed several legal
opinions provided to other companies offering gaming related programming. In
conjunction with such research, the Registrant has compiled the following
information. Copies of the opinions summarized below are filed as exhibits to
this registration statement. The following summaries thereof are qualified in
their entirety by reference to such exhibits.
Fletcher, Heald & Hidreth advised the Registrant's president by
letters dated March 19 and April 10, 1992 (referencing communications with
Cynthia Young, Assistant Chief, Support of Litigation, Organized Crime and
Racketeering Section of the Criminal Division, UNITED STATES DEPARTMENT OF
JUSTICE) concerning the applicability of 18 USC Sections 1084, 1301, 1302,
1304, 1952, 1953, 1955 and 1962 to the Company's proposed programs. They noted
that 18 USC 1307 and 25 USC 2720 provide exemptions from the restrictions
reflected in Sections 1301, 1302, 1303 and 1304; however, the firm opined that
such exemptions would not apply to the proposed programming. The letters
discussed certain observations of Edythe Wise, Chief of the Complaints and
Investigations Branch of the Enforcement Division of the Mass Media Bureau,
FEDERAL COMMUNICATIONS COMMISSION, in which, based on stated assumptions
concerning the proposed operations (including the encrypted nature of
distribution) the staff opined that the program as described did not involve a
broadcast to the public, and thus would not invoke the prohibitions of 18 USC
1304. Noting that consideration could not flow from the player to the
promoter, the author
Form 10-SB Dated August 31, 1996, Page 31
<PAGE> 32
indicated that the proposed programs did not appear to violate federal law
unless they violated a state law as well. No opinions were provided as to
state law implications.
In correspondence between the Federal Communications Commission and
Putbrese, Hunsaker & Ruddy, dated September 14, 1990 through February 11, 1991,
the Federal Communications Commission issued a declaratory ruling on the
legality of advertising interactive bingo games on cable systems. It found
that if such games provide persons interested in participating with an option
to play for $2.00 per call over a 900 line, or for free, after obtaining a
personal identification number, over 800 lines, the program would not appear to
violate applicable Federal Communications Commission regulations.
Based on correspondence between Sutherland, Asbill & Brennan and the
Federal Communications Commission, from July 28, 1986, until some undetermined
time in 1987, Edythe Wise, Chief, Complaints and Investigations Branch,
Enforcement Division, Mass Media Bureau, FEDERAL COMMUNICATIONS COMMISSION,
opined that the proposed activities would conform the Federal Communications
Commission decision dated November 25, 1986 and reported at 2 Federal
Communications Commission Rcd 1001 (1987). The program described involved free
participation by players, who were eligible to receive cash and other prizes,
through cable companies as a basic (no charge) service, including paid
commercials; and, a pay per view cable program. Ms. Wyse opined that both
methods appeared legal in that the first involved no consideration, and the
second involved non-public broadcast.
An opinion letter dated December 15, 1987, from Chamberlain, Hrdlicka,
White, Johnson & Williams, to Travis Enterprises, Inc., regarding a "Million
Dollar Bingo Game" originating on sovereign indian reservations and transmitted
by encrypted closed circuit television and telephone lines to bingo halls, also
on sovereign indian reservations, reflects that applicable legal issues involve
jurisdiction over Indian affairs, federal and state anti-gaming laws, and,
statutes and regulations governing mail, wire, television and radio
communication. The opinion noted that a number of federal criminal statutes
outlaw gaming activities prohibited under state laws and could technically
impact the proposed game; however, it notes that a defacto exception appears to
have been carved out for high stakes bingo games, making the issue unclear. It
notes that licenses from the Federal Communications Commission and Department
of the Interior (Indian Affairs) will probably be required and that safe harbor
negotiations in such licensing proceedings would be prudent. The opinion
concludes that federal pre-emption of regulation over Indian affairs, as well
as over wire, radio and television communications will, in most cases, preclude
application of state regulatory legislation. However, it notes that the effect
of certain federal statutes and regulations require careful consideration in
structuring and implementing the proposed operations to maintain special bingo
related exceptions.
An opinion letter dated July 28, 1987, from Ginsburg, Feldman and
Bress to the Bingo Network, Inc., involving planned satellite transmission of
Bingo games between Indian reservations addressed applicable federal law and
concluded that such game is legally permissible.
Opinion letters to Ron Foster, the Registrant's president, from
Sutherland, Asbill & Brennan dated July 11 and 15, 1986, dealt with the
legality of a program involving free participation by players, who were
eligible to receive cash and other prizes, through cable companies as a basic
(no
Form 10-SB Dated August 31, 1996, Page 32
<PAGE> 33
charge) service, including paid commercials; and, a pay per view cable program.
The opinion concluded that the free cable access program would be permissible
but further questions about pay per view aspect.
In a letter involving the Registrant's C-Note game, dated June 18,
1993, the State of Nebraska discussed a prohibition under Nebraska Statute
Section 9-701(1(a) to the offer of games of Bingo and keno in Nebraska, but
noted that such statute would not appear to prohibit the broadcast of the games
into Nebraska, or, the location in Nebraska of telephone banks involving offers
of the games outside of Nebraska.
An opinion letter issued by Wiley, Rein & Fielding (Washington, D.C.)
on November 16, 1995, addressed the probable legality of the Registrant's
pay-per-view Bingo projects. The opinion was limited to certain federal
statutes (18 U.S.C. Sections 1084, 1301, 1302, 1304, 1307; 1951-1968; and, 25
U.S.C. Section 2720) and to Federal Communications Commission regulations. The
opinion concluded that, under the specific circumstances described, the
proposed activities did not appear to violate the prohibition against gaming
activities contained in the cited federal statutes or the regulations
promulgated thereunder.
None of the authors of the foregoing opinions or the government
personnel with whom they dealt have consented to the use thereof in this
registration statement, therefore, such persons should not be deemed experts on
which investors may rely. Rather, such opinions merely form the basis for the
decision by the Registrant's management that the Registrant can legally conduct
its current activities. Because neither the foregoing opinions or observations
by government personnel are binding, no assurances can be provided that, at
some future time, government personnel will not reach different conclusions, to
the Registrant's detriment.
EFFECT OF EXISTING OR PROBABLE GOVERNMENTAL REGULATIONS ON THE BUSINESS
The Registrant is subject to regulation by the United States Federal
Trade Commission, the Federal Communications Commission, the Justice
Department, the Department of the Interior and the Securities and Exchange
Commission, as well as by comparable state agencies.
The costs of monitoring and complying with existing regulations is
expensive and time consuming. The Registrant's management is required to
expend significant resources to obtain required regulatory clearance and the
delays incident thereto have and are expected to continue to deprive the
Registrant of significant opportunities. However, because such regulations
also apply to the Registrant's competitors, they merely tend to make all
participants in the industry less effective, rather than to affect the
Registrant's competitive business posture. During 1995, the Registrant
incurred approximately $54,131 in legal fees related directly to compliance
with governmental regulations promulgated by the Federal Communications
Commission, the State of Alabama and Piedmont County.
Form 10-SB Dated August 31, 1996, Page 33
<PAGE> 34
ESTIMATE OF THE AMOUNT SPENT DURING EACH OF THE LAST TWO FISCAL YEARS ON
RESEARCH AND DEVELOPMENT ACTIVITIES, AND IF APPLICABLE THE EXTENT TO WHICH THE
COST OF SUCH ACTIVITIES ARE BORNE DIRECTLY BY CUSTOMERS
During the last two years, the Registrant has expended no funds in
research and development activities. Such expenses, if incurred in the future,
will be passed along to the public indirectly in the form of components of the
Registrant's pricing decisions.
COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS (FEDERAL, STATE AND
LOCAL)
To the best of management's knowledge, the Registrant will not be
required to directly incur material expenses in conjunction with federal, state
or local environmental regulations, however, like all other companies, there
are many but incalculable indirect expenses associated with compliance by other
entities that affect the prices paid by the Registrant for goods and services.
NUMBER OF TOTAL EMPLOYEES AND NUMBER OF FULL TIME EMPLOYEES
The Registrant currently has 12 full time employees and employs part
time employees and independent contractors from time to time, as required.
Management is of the opinion that required employees and contractors are
readily available at competitive prices. The Registrant has no labor
contracts.
SUMMARIES OF MATERIAL AGREEMENTS
All of the foregoing agreements and instruments have been filed as
exhibits to this registration statement. The following brief summaries thereof
are qualified in their entirety by reference to such agreements.
1. Joint Venture Agreements
A. Agreement with PandaAmerica and Glendale\Oakridge Studios.
On November 2, 1995, the Registrant, PandaAmerica and
Glendale\Oakridge Studios entered into an agreement to develop, finance,
produce and distribute the original concept and all elements created by the
Registrant entitled "Globalot Bingo." Each party receives 1/3 of "profits" on
all exploitation of Globalot Bingo on the PandaAmerica Network and shares in
the related costs.
The parties intend to jointly produce market and promote a
bingo-formatted show to be aired over Tel Star 402R ("T402R) receive Channel
24, which broadcasts PandaAmerica throughout the area covered by Tel Star 402R
Footprint. The joint venture anticipates that payment for all expenses
incurred and revenues generated will be shared equally by the parties.
The agreement provides that "[u]pon approval of such expenses incurred
or to be incurred. Equipment and services to be billed to the parties at cost
(or fair market value). Operating board to be formed and consist of the
following members: Marty Weiss (Pandaamerica); Al Makhanian, (Glendale Studios)
and Ron Foster (the Registrant). .... All new ventures, expenses and all
aspects
Form 10-SB Dated August 31, 1996, Page 34
<PAGE> 35
of operation shall be approved by all members of the operating board and/or
parties. Such approval will not unreasonably be withheld .... All start-up
expenses to be shared on an equal basis by the parties. These items to be
approved by the parties. All expenses to be paid out of revenues, unless there
are losses which will be paid equally by all of the parties. Profits after
expenses to be shared equally by each party. Accounting shall be provided by
CPA firm mutually agreed by the parties which include sales, expenses and all
other related items to be provided to the parties on a monthly basis."
Anticipated expenses include accounting; productions; credit cards;
trademark and opyrights; Legal; telecommunications switcher; 800 numbers;
printing and direct mail; travel; phone service (local - long distance);
software; and, technology.
The project is intended to be a pilot on Pandaamerica Television
Network tentatively entitled Globalot Bingo. The Registrant, Pandaamerica, and
Glendale/Oakridge Studios are expected to act act as show producers, and expect
to work jointly creatively on the show, but, in case of any dispute, Ron Foster
will have the final say in all creative decisions pertaining to the game
Globalot Bingo. Pandaamerica and Glendale/Oakridge Studios shall be
responsible for all production decisions and will share in costs.
The Registrant, Pandaamerica, and Glendale/Oakridge Studios intend to
work jointly to obtain funding commitments from other networks, cable or single
station to produce viewers. They will each receive 1/3 of the profits on all
exploitation from the project Globalot Bingo done on Pandaamerica Network; and,
will share in expenses of producing Globalot Bingo on Pandaamerica's network.
These costs will include prizes for winners of bingo, production costs,
satellite time, and any studio production costs including labor.
The Parties intend to mutually agree in good faith on any agreement
and the terms thereof made to third parties, financiers or networks relating to
this project, Bingo.
The Registrant shall receive credit as Executive Producer, with the
other parties being designated as Co-Executive Producers.
B. Joint Venture Agreement with VPACS Limited (a New York corporation)
Dated June 18, 1993, for international resale of telecommunications
services, marketing services and provision of re-origination equipment to SBI
Communications, Inc. Joint venture to operate as "SBI Communication World
Link." VPACS to provide equipment and SBI Communications, Inc., to market
worldwide. Equal share interests. Term, 10 years subject to 90 day notice
termination options. (An alternative international long distance service).
C. Cahill Agreement
Dated August 16, 1993, and also involving Ron Foster and R.F.
Associates Cayman Islands as co-parties with the Company (collectively referred
to as the "Foster Interests"). Applies to everything owned or developed by the
Foster Interests, but initially involved only Indian reservations (subject to
future exercise of the Cahill Option). Calls for formation of a Nevada
corporation to be
Form 10-SB Dated August 31, 1996, Page 35
<PAGE> 36
owned 49% by Cahill and 51% by the Foster Interests. Cahill to contribute
$2,000,000 in capital, in $500,000 increments. Cahill to provide an additional
$3,000,000 in debt financing when and if required to supplement working capital
requirements. The Nevada corporation is to own the Company's rights recovered
upon termination of the joint venture with Entertainment Television Network
Corp. Foster Interests waive all remedies for Cahill default, except specific
performance.
2. Bingo Parlor Agreements
A. Chief Strikeaxe Trading Post (Oklahoma)
Agreement with Satellite Bingo, Inc., dated November 12, 1993, calling
for direct debit card purchases at $2.50 per strip.
B. DCA Services Division, Fort Benning, Georgia
Ticket consignment agreement dated December 10, 1993, for Globalot
cards with the MWR Fund Community Operations Division. Term expires on
December 31, 1994. Price, $2.50 per strip.
C. Piedmont Jaycees
The Registrant is a party to a month to month lease agreement with the
Piedmont Jaycees described in Part I, Item 3. In addition, the Registrant and
the Piedmont Jaycees are parties to four separate service provider agreements
pertaining to operation of the Registrant's facilities leased to the Piedmont
Jaycees. These involve access to a security system, transportation services,
maintenance and repair services and bookkeeping services. All the agreements
were executed on August 17, 1995, and have no set term.
3. Telephone Services Agreement
Agreement dated January 17, 1996, between the Registrant and
Integrated Telephony, Inc., pursuant to which the Registrant, on a month to
month basis, obtains DAL 800, 900, Outbound, Debit Card, International Callback
and Voice Processing services. Estimated cost is $3,200 per month.
4. Program & Production
(omitted Las Vegas Television Network, Inc.)
Glendale Studios Production Agreements
Correspondence dated May 18, 1992, with Al Makhanian, pursuant to
which Glendale Studios acknowledged that SBI Communications had a credit of
$468,000 based on the issuance of 100,000 shares of stock during November of
1990. It detailed how the credit would be drawn on in conjunction with show
productions, exclusive of actual labor charges, which SBI Communications would
pay for. As of the date of this registration statement, approximately $300,000
of such credit remains available.
5. Service Agreements
Form 10-SB Dated August 31, 1996, Page 36
<PAGE> 37
Tate Memorandum of Service Agreement between SBI
Communications, Inc., or its subsidiaries) and Bradley M. (Brad) Tate, dated
November 1, 1993. Tate to provide required hardware and software knowledge for
Globalot game, in consideration for a royalty of $.10 per premium toll calls
for card purchases, and, $.05 per premium toll call for winners information
inquiries. The agreement is to remain in effect until either the parties elect
to terminate it, interruption of production for six months, or cancellation of
Globalot Bingo games on radio or television.
Tate Consulting Agreement between SBI Communications,
Inc., and Bradley M. (Brad) Tate, dated July 19, 1993. Tate to provide
computer, programmer and telecommunications consulting services in
consideration for 100,000 shares of restricted common stock and a $250
engagement fee. The agreement has a term of 60 months.
Alamo Standard form of car leasing program for SBI
Communications, Inc.'s members, dated March 18, 1993. Apparently a benefit for
Bingo club members and other groups sponsored by or through SBI Communications,
Inc.
6. Letters of Intent
A. Glendale Studios, Inc.
Letter of intent dated November 8, 1995, contemplating a merger
between SBI Communications, Inc., and Glendale Studios, Inc. Reference is made
to a $7,500,000 purchase price for Glendale Studios.
B. Cherokee Indians of Georgia, Inc.
Letter of intent dated October 2, 1992, contemplating construction of
a Bingo Hall funded and managed by SBI Communications, Inc., on real estate
provided by Cherokee Indians of Georgia, Inc.. SBI Communications, Inc., to
recover investment plus 10% annual interest and profits, if any, to be divided
40% to SBI Communications, Inc., and 60% to Cherokee Indians of Georgia, Inc.
C. Promotions International Corporation
Letter of intent dated March 28, 1996, between the Registrant and
Promotions International Corporation of Beverly Hills, California,
contemplating the granting of rights of first refusal, to Promotions
International Corporation to use the Registrant's services, equipment and
proprietary technology, in order to produce interactive television Bingo
programming for any venue, world wide, in exchange for license and rental fees,
percentage of income and payments for required operational personnel.
Form 10-SB Dated August 31, 1996, Page 37
<PAGE> 38
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS AND PLAN OF OPERATION.
INTRODUCTION
The Registrant is currently in the development stage of its business
cycle. Since its inception, the Registrant has actively pursued licensing
agreements designed to generate royalty income in exchange for providing
software and methods involving bingo game production. In the past, the
registrant 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 Registrant. The
majority of its current operating income is provided by managing bingo games
for certain non-profit charities in a facility owned by the Registrant. The
majority of future revenues, however, are not anticipated to occur in either of
these areas. The Registrant hopes to generate significant future revenues from
telecommunications services involved in interactive bingo and television buying
shows by purchasing large blocks of long distance telephone time and reselling
such time to television audience users at a profit. Management of the
Registrant has made this area of business their first priority, and most of the
other plans for the future are based on the success of the telecommunications
area. Management would like to broadcast the bingo show to as many viewers as
possible, and although there are no current foreign agreements, management's
plans are not limited to the U.S. Management intends to pursue contracts with
foreign countries and do some research into bingo on the internet. Overall,
management hopes to be able to generate net revenues over $10 million annually
from this area of business. The registrant also has plans to expand operations
through the acquisition of television production facilities and rights to a
television buying show. This would allow the Registrant to produce their bingo
show in their own studio and broadcast it 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
Registrant, a major international shop at home entity and a telecommunications
company. Both of these entities are NASDAQ listed. Management feels confident
that a deal will be consummated by year end 1996 allowing the Registrant to
commence operations on a full scale in the telecommunications business segment.
The Registrant is continuing to search for avenues to develop future
revenue. In light of the preliminary and conditional nature of negotiations,
no assurance can be provided as to the likelihood that such proposed projects
will come to fruition. A summary of projects currently being pursued is as
follows:
A) The registrant is exploring the negotiation for the management
contract for THE MILL Resort & Casino (Bingo Operation). At the request of
Full House Resort, Inc., a public entity in joint partnership with the Coquille
Indian Tribe, THE MILL is negotiating with the registrant to utilize the
experience of SBI through a management contract. Management anticipates that
such a contract could produce net revenues of $4 million annually.
Negotiations are only in the preliminary stage at this time.
Form 10-SB Dated August 31, 1996, Page 38
<PAGE> 39
B) The registrant is under agreement to acquire Deadwood Gulch Resort
& Casino in South Dakota. This is a twelve million dollar facility that is
presently wholly-owned and operated by the Full House Company. The status at
present is management is awaiting a decision by a participating equitable
entity. This project will not be able to be consummated without such a
participating entity. The acquisition of the resort & casino, if successfully
consummated, is projected to generate net revenue of approximately $2 million
annually.
C) The Registrant is planning a partnership with the Louisiana
Charitable Organization Alliance (LACOA), and the development of a senior
citizens television network. Such ventures will involve development of
television programs featuring interactive Bingo shows, auctions, and factory
direct sales. The LACOA project is currently awaiting passage of legislation
presented by Clenix Esensauter of Louisiana.
D) The Registrant is in the planning stage of the establishment of a
casino and bingo hall on real estate provided by the Cherokee Indians of
Georgia, Inc., which is also now subject to Bureau of Indian Affairs (BIA)
approval.
E) To add diversification, the Registrant is also exploring the
possible acquisition of Zacker's (Horizon) Gas of Tampa, Florida, a retail
propane gas company with $3,000,000 in annual sales.
Liquidity
The following table summarizes working capital and total assets:
<TABLE>
<CAPTION>
Fiscal Year Ended December 31,
1995 1994
---- ----
<S> <C> <C>
Working Capital $ 102,830 $(451,163)
Total Assets 8,179,490 8,150,090
</TABLE>
At December 31, 1995, the Registrant's current assets exceeded its
current liabilities, creating a working capital surplus. The surplus is
primarily the result of the issuance of preferred convertible stock to
liquidate liabilities owed to shareholders, and in income provided by the
Registrant's operating activities relating to approximately $100,000 in fees
collected from charities that sponsor bingo games at the Registrant's bingo
hall.
At December 31, 1994, the Registrant had current liabilities in excess
of current assets, principally due to administrative expenses incurred during
the development stage that have been funded by the majority stockholder in the
form of advances due on demand. The Registrant 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 Registrant'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, 1995. In the years prior to
Form 10-SB Dated August 31, 1996, Page 39
<PAGE> 40
1995, the Registrant was primarily involved in securing licensing agreements
for rights to software and methods of operating bingo games it had developed.
(omitted)
As the Registrant continues to operate in the development stage, no
significant cash flow is being generated from operating activities. 1994 was a
relatively dormant year. The registrant was able to generate $5,043 in cash
flow from operations principally from management of the bingo hall in the last
month of the year. Shareholders also advanced net funds of $51,564, allowing
the registrant to generate positive total cash flow of $56,607 for the year.
In 1995, the Registrant became more active in pursuing ventures, as well as
managing the bingo hall for the entire year. For 1995, the charities operating
the bingo hall struggled, and the Registrant collected less funds than were
needed to operate the games, as well as to cover administrative costs and costs
of the facility. As a result, the Registrant used $350,199 in net cash flow
for operations. The registrant also acquired various operating equipment at a
cost of $105,363. To fund these cash flow needs, the Registrant was able to
obtain $250,000 in proceeds from a loan to an affiliate, and $165,000 in
proceeds from the sale of common stock. Combined, this resulted in a net
decrease in cash for the year of $47,339.
Capital Resources
Since its inception, the Registrant'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
Registrant. The Registrant has also acquired significant assets through the
sale of convertible preferred stock. The Registrant anticipates continued
expansion of its business through acquisitions using Company stock.
Furthermore, with the bingo hall acquired in 1994 now in operation, the
Registrant anticipates generation of revenues from the lease of this facility
sufficient to cover administrative costs still being incurred as the Registrant
moves forward in its development stage.
Results of Operations
The following table sets forth the relative relationship to total
revenue of the revenue categories in the Registrant's statement of income and
percentage changes (rounded to the nearest whole dollar).
Amount of Total Revenue
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, 1995 1994
---- ----
<S> <C> <C>
Revenues:
Licenses & Royalties -0- -0-
Bingo Hall Operations $602,738 $ 24,905
Interest Income 34 171
Other Income 2,101 -0-
Total Revenue $604,873 $ 25,076
</TABLE>
Form 10-SB Dated August 31, 1996, Page 40
<PAGE> 41
In general, the Registrant experienced insignificant revenues in 1994
as it attempted to expand and develop its operations. Total revenues were
$25,076 for 1994. At the end of 1994, the Registrant acquired a bingo hall,
which it now leases to charities who sponsor bingo games. The Registrant also
provides management services to assist the charities in the operations of the
bingo games, for which the Registrant charges a fee. Net revenues related to
the bingo hall operations were only $24,905 in 1994, but have grown to $602,738
for the calendar year ended December 31, 1995. Total revenues for calendar
year ended December 31, 1995 were $604,873. Accordingly, except for the
operation of the bingo hall, there are no other significant revenue sources of
the Registrant at this time. For 1994 and 1995, the Registrant did not
generate 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 Registrant's expenses can be summarized as follows:
Amount of Total Expenses
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, 1995 1994
---- ----
<S> <C> <C>
Salaries and related expenses $132,086 $ 14,200
Other general and administrative expenses 497,685 54,990
Depreciation and amortization 538,605 275,461
Interest expenses and finance charges 205,729 Nil
</TABLE>
The most significant expense relates to the amortization of trademark,
game show and computer program assets the Registrant has developed. The
expense is running $265,960 per year. Such assets will be fully amortized at
the end of 1996. For 1995, the Registrant also had depreciation on the bingo
hall and related equipment, which will approximate $275,000 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 Registrant 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 1995, such expenses have increased in 1995. As the
Registrant 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 1995 due to $200,000 in finance charges incurred to obtain
short-term financing. These finance charges were paid for through the issuance
of preferred stock.
Should the Registrant successfully acquire production
facilities and broadcast companies under consideration, or expand operations in
areas previously discussed as currently under consideration, revenues and
expenses of the Registrant would change significantly. Management is not able
to predict the impact of such changes on revenues or expenses at this time.
Statement Re Computation of Earnings Per Share
See Notes To Consolidated Financial Statements included
elsewhere in this filing for a description of the Registrant's calculation of
earnings per share.
Form 10-SB Dated August 31, 1996, Page 41
<PAGE> 42
ITEM 3. DESCRIPTION OF PROPERTIES.
The Registrant's principal offices are located in Piedmont, Alabama,
in facilities purchased by the Registrant on December 16, 1994, for $6,500,000
(paid in shares of the Registrant's preferred stock, valued at $5.00 per
share). The facility is comprised of 80,000 square feet of usable space under
roof, and includes a Bingo hall. The Bingo hall, including the personal
property owned by the Registrant and maintained therein, has been leased on a
month to month basis by the Registrant to Piedmont Jaycees, Inc. since August
10, 1995. The rental for the building and equipment located therein is $75,000
per month or $7,000 per day, whichever is greater, plus all other defined
expenses, excluding insurance, ad valorem taxes, assessments, repairs, upkeep,
maintenance and similar expenses.
The Registrant also has a branch office at 1332 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 Registrant pays $1,000 per
month. The lease is scheduled to expire on December 31, 1996; however, the
Registrant is confident that it can be renewed on favorable terms.
ITEM 4. 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 Registrant's outstanding common stock (the Registrant's only class
of voting securities).
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT OF NATURE OF PERCENT OF
BENEFICIAL OWNER * SHARES OWNERSHIP CLASS
- ---------------- ------ --------- -----
<S> <C> <C> <C>
Ronald Foster 1,632,089 Record & 32%
144-A North Court House Avenue Beneficial
Leesburg, Georgia, 31763
Larry Cahill 1,000,000 Record & 19%
3330 Southgate Court Beneficial
Cedar Rapids, Iowa 52404
Michael Graham 500,000 Record & 10%
1804 Cherry Lane Beneficial
Bluefield, West Virginia 24701
</TABLE>
- -----
* Includes all stock held either personally or by affiliates.
Form 10-SB Dated August 31, 1996, Page 42
<PAGE> 43
(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
Registrant, 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.
<TABLE>
<CAPTION>
TITLE OF NAME OF AMOUNT NATURE OF PERCENT OF
CLASS BENEFICIAL OWNER SHARES OWNERSHIP CLASS
- ----- ---------------- ------ --------- -----
<S> <C> <C> <C> <C>
Common Ronald Foster 1,632,089 ** 32.00%
Common Kathy Hunt 0 *** 00.00%
Common Thomas Barrett 0 *** 00.00%
Common Claude Pichard 10,000 ** 00.07%
Common Betty Rodgers 5,000 *** 00.035%
Common Mel Ray 0 *** 00.00%
Common Michael McGlothin 0 *** 00.00%
Common All officers and directors
as a group (5 people) 1,647,089 ** 33.05%
</TABLE>
- -----
* Includes all stock held either personally or by affiliates.
** Record & Beneficial.
*** Not Applicable.
To the best knowledge and belief of the Registrant, there are no
arrangements, understandings, or agreements relative to the disposition of the
Registrant's securities, the operation of which would at a subsequent date
result in a change in control of the Registrant.
ITEM 5. 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 Registrant's board of directors and its executive officers, the positions
with the Registrant held by each, and the period during which each such person
has held such position.
<TABLE>
<CAPTION>
NAME AGE POSITION SINCE
- ---- --- -------- -----
<S> <C> <C> <C>
Ronald Foster 54 President/Chairman of the Board 1986
Betty Rodgers 52 Secretary/Treasurer/Director 1986 *
Kathy Hunt 46 Secretary/Treasurer/Director 1994
Thomas Barrett 26 Vice President 1995
Claude Pichard 41 Vice President/Director 1986
Mel Ray 55 Director 1994
Michael McGlothlin 44 Director 1994
</TABLE>
- ------
* Mrs. Rodgers served in such positions until 1994.
Form 10-SB Dated August 31, 1996, Page 43
<PAGE> 44
Messrs. Fosters, Barrett, and Pichard and Ms. Hunt are all engaged
with the Registrant's business on a full time basis.
All directors hold office until the next annual meeting of
stockholders of the Registrant (currently expected to be held during March of
1997) 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 REGISTRANT'S EXECUTIVE OFFICERS AND DIRECTORS
Ronald Foster
Mr. Foster, 54, is presently Chairman, President, Chief Executive
Officer, and Executive Producer for SBI Communications, Inc. He has been
working with the Registrant since its inception in 1984. His primary
responsibilities include operations, finance, marketing and technical review.
In addition to his responsibilities with the Registrant, 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-Philis, 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.
Betty Rodgers
Ms. Rodgers, 52, was the Secretary, Treasurer and a Director of the
Registrant fom 1986 until 1994. Her primary responsibilities included general
business, legal and administrative matters. Ms. Rodgers has extensive
experience in the entertainment field. From 1967-83, she was the secretary and
treasurer of the Rodgers Agency, Inc., a company that booked and managed
entertainment artists for companies around the world. Since 1983, she has been
president of Rodgers of Atlanta, Inc., an agency for the Arabian-American Oil
Company (Aramco) that provides entertainment and recreational instructors for
American employees in Aramco communities.
Kathy Hunt
Ms. Hunt is 46 years old and resides in Cedartown, Georgia. Ms. Hunt
graduated from Berry College with a bachelor of science degree in Secretarial
Science. Ms. Hunt has extensive experience in executive secretarial business,
including the governmental (State of Georgia) and private sectors. She has
extensive background in the field of bookkeeping, accounting, procurement,
contract
Form 10-SB Dated August 31, 1996, Page 44
<PAGE> 45
management, statistical data compilation, personnel management and laws
governing confidentiality. She is currently employed as bookkeeper and
accountant for SBI Communications, Inc.
Claude Pichard
Mr. Pichard, 41, has been a Vice President and a director for the
Registrant 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 Registrant, Mr.
Pichard also serves as a research and training specialist with the Florida
Department of Law Enforcement where he supervises the production of training
tapes, public service announcements and media related courses. Mr. Pichard
holds a bachelor of science degree in mass communications from Florida State
University.
Mel Ray
Mr. Ray is 55 years old and resides in Tampa, Florida. Mr. Ray has
been an executive in the bottled and natural gas industries for more than 30
years, and currently manages six gas companies in the state of Florida, ranging
from the west coast Tampa area all the way to the east coast of Florida. Mr.
Ray's extensive experience in utility companies gives him a great understanding
of local and federal government regulations. Due to the nature of his
business, Mr. Ray also possesses knowledge concerning hazardous materials
transportation, bulk purchasing, retail sales, management, marketing,
acquisition, and personnel. Mr. Ray has 20 years of experience operating some
of the most profitable divisions of Tropi-Gas, Petrolane, and Star Gas as an
executive both in its international and domestic markets. Mr. Ray is an
officer and director of the company.
Michael McGlothlin
Mr. McGlothlin is 44 years old and resides in Pounding Mill, Virginia.
He is a graduate in Business and Physics from Hampden-Sydney College in
Virginia, and has extensive experience in the mining, processing and trucking
industry. Mr. McGlothlin currently owns and operates a mineral grinding
facility, a land fill facility, and a fleet of 70 diesel trucks. Mr.
McGlothlin's experience in mining and landfills gives him extensive knowledge
in federal regulations. Mr. McGlothlin demonstrates the ability to use
computers to their fullest potential and has the ability to notice potential
problems at an early stage and correct them before they grow. Mr. McGlothlin
has extensive experience in management, personnel, cost control, marketing,
federal, state and local regulations. Mr. McGlothlin is an officer and
director of the company.
Thomas Barrett
Mr. Barrett, age 26, serves as a vice president of the Registrant. He
received his Bachelor of Science Degree in Finance from the University of
Georgia in 1993. From 1988 until 1991, he was employed in Chicago as a broker
assistant to a local currency futures trader, Mark Dehetogh, at the
Form 10-SB Dated August 31, 1996, Page 45
<PAGE> 46
Chicago Mercantile Exchange, and in 1991 worked for Refco Corp. as an assistant
bond trader at the Chicago Board of Trade. From 1994 until 1995 he was
employed as head of charity by the Steelworker's Assistance Fund at its
Flamingo Bingo operation in Piedmont Alabama. From 1994 until joining the
Registrant in 1995, Mr. Barrett was employed as assistant manager for Bingo
matters by Elkhorn Valley Development Corp., at it's Frontier Palace operation
in Piedmont, Alabama.
FAMILY RELATIONSHIPS
There are no family relationships among directors, executive officers
or persons chosen by the Registrant to be nominated as a director or appointed
as an executive officer of the Registrant of any of its affiliated
subsidiaries. Mrs. Betty Rodgers, a former director was the sister of the
Registrant's Chairman, Ronald Foster.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
To the best knowledge and belief of the Registrant, during the past
five years, no present or former director, executive officer or person
nominated as a director or appointed as an executive officer of the Registrant
or any of its affiliated subsidiaries, has been involved in:
(1) Any bankruptcy petition by or against any business of which
such person was a general partner or executive either at the
time of the bankruptcy or within two years prior to that time;
(2) Any conviction in criminal proceeding or subject to a pending
criminal proceeding (excluding traffic violations and other
minor offenses);
(3) Being subject to any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily, barring,
suspending, or otherwise limiting his involvement in any type
of business, securities or banking activities; and
(4) Being found by any court of competent jurisdiction (in a civil
action), the Commission or the Commodities Futures Trading
Commission to have violated a federal or state securities or
commodities law, and the judgment has not been reversed,
suspended or vacated.
ITEM 6. EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth all compensation paid
to the Officers and Directors of the Registrant during the Registrant's year
ended December 31, 1994, and 1995. Prior to June of 1992, the date on which a
change in control of the Registrant was effected and current management took
over their respective positions, previous management conducted no business, the
Registrant was inactive and no compensation was paid or deferred to any of the
Registrant's officers or directors.
Form 10-SB Dated August 31, 1996, Page 46
<PAGE> 47
1994 SUMMARY COMPENSATION TABLE
<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
- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald Foster ** * * * * * * *
Betty Rodgers *** * * * * * * *
Claude Pichard +* * * * * * *
Kathy Hunt (1) * * * * * * *
Mel Ray (2) * * * * * * *
Michael McGlothlin (3) * * * * * * *
</TABLE>
1995 SUMMARY COMPENSATION TABLE
<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
- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald Foster ** (5) * * * * * *
Betty Rodgers *** * * * * * * *
Claude Pichard +* * * * * * *
Kathy Hunt (1) (6) * * * * * *
Mel Ray (2) * * * * * * *
Michael McGlothlin (3) * * * * * *
Thomas Barrett (4) (7) * * * * * *
</TABLE>
- ----
* 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) $120,000.
(6) $10,690.
(7) $1,500.
(8) 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.
EMPLOYMENT AGREEMENTS
The Registrant 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 Registrant, 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 Registrant for cause, or
the Registrant'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.
Form 10-SB Dated August 31, 1996, Page 47
<PAGE> 48
The Agreement provides the Registrant with an obligation to defend and
indemnify Mr. Foster to the fullest extent legally permitted, and calls for the
following compensation:
(a) Mr. Foster is entitled to an annual bonus payable in shares of the
Registrant's common stock, determined by dividing 10% of the
Registrant's pre-tax profits (excluding depreciation) for the subject
calendar year by the average bid price for the Registrant'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 Registrant's gross annual income or 10% of the Registrant's net
pre-tax profit (excluding depreciation), whichever is less.
(c) Mr. Foster is entitled to a salary starting at $10,000 per month, but
subject to review on a quarterly basis, with the expectation that it
will be substantially increased as increased profits and cash flow
from operations permit.
(d) In addition to the foregoing, Mr. Foster is entitled to a benefit
package equal to the most favorable benefit package provided by the
Registrant or its subsidiaries to any of their employees, officers,
directors, consultants or agents.
All required payments are accruing until such time as the Registrant
has adequate funds to meet its operating expenses and commitments.
COMPENSATION UNDER PLANS
None of the Registrant's executive officers have received or become
entitled to any cash or non-cash compensation under any Registrant plans (as
the term "plan" is defined in Instruction 6(ii) to Item 402(a)(2) of Regulation
S-B, promulgated by the Securities and Exchange Commission) during the last
calendar year, nor have they been awarded any stock options or other forms of
indirect compensation by the Registrant.
MANNER OF DETERMINING EXECUTIVE COMPENSATION
Executive compensation is determined by the Registrant's Board of
Directors, without pre-established policies, based on negotiations with the
executive officer involved. The executive officer involved is not precluded
from voting in favor of his or her compensation, if he or she is also a member
of the Registrant's Board of Directors. Decisions are based on the respective
bargaining strength of the parties.
Form 10-SB Dated August 31, 1996, Page 48
<PAGE> 49
ARRANGEMENTS WITH DIRECTORS
Other than as indicated below there are no arrangements or
understandings regarding compensation for services provided as a director,
including any additional amounts payable for committee participation or special
assignments.
COMPENSATION OF DIRECTORS
All officers and directors will be reimbursed for any expenses
incurred on behalf of the Registrant. Directors will be reimbursed for
expenses pertaining to attendance at meetings of the Registrant's board of
directors , including travel, lodging and meals. They will also, at such time
as the Registrant has sufficient revenues from operations, receive a fee of
$250 per day for all Board meetings attended, including meetings of committees
of the Board. Non-salaried officers and directors may be retained by the
Registrant as consultants paid consulting fees deemed appropriate by the board
of directors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
HISTORICAL BACKGROUND
SBI Communications, Inc., a publicly held Delaware corporation (the
"Registrant"), 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.
On September 29, 1986, Supermin, Inc., concluded a reorganization
pursuant to 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 for all of the capital stock of Satellite Bingo, Inc., a
Georgia corporation organized on January 10, 1986, and the originator of the
Registrant's current business. In conjunction with such reorganization, the
former stockholders of the SBI Subsidiary, acquired control of the Registrant
and the Registrant changed its name to Satellite Bingo, Inc.
On March 10, 1988, the Registrant changed its name to SBI
Communications, Inc., its current name, and on January 28, 1993, the Registrant
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.
INITIAL PUBLIC OFFERING
During 1983, the Registrant completed a public offering of its 125,000
shares of its authorized but previously unissued securities in reliance on
Securities and Exchange Commission Rule 504 of Regulation D. The offering was
registered by qualification with the State of Utah.
Form 10-SB Dated August 31, 1996, Page 49
<PAGE> 50
The offering price was arbitrarily determined at $.20 per share, and
the Registrant received gross proceeds of $25,000. Offering expenses were
$2,681. The placement agent was Bryan K. Johnson, then the Registrant's
president, and the initial transfer agent was Fidelity Transfer Company with
offices at 321 Boston Building; Salt Lake City, Utah 84111.
TRANSACTIONS WITH PROMOTERS
Bryan K. Johnson and Frank C. Trinniman were described as the original
founders, parents and promoters of the Registrant (as those terms are defined
in Regulation C promulgated under authority of the Securities Act of 1933, as
amended) in the Registrant's original public offering prospectus. However, as
a result of the reorganization described above, it would be more accurate to
consider Mr. Ron Foster as the founder, parent and promoter of the Registrant,
as presently constituted.
In conjunction with the reorganization of the Registrant (described
below), Mr. Foster received 200,000 shares of the Registrant's Common Stock in
exchange for all of his capital stock in the SBI Subsidiary.
REORGANIZATION
On or about September 23, 1986, the Registrant (then operating as
Supermin, Inc.) entered into a reorganization agreement with the stockholders
of Satellite Bingo, Inc., a Georgia corporation, pursuant to which the
Registrant exchanged 200,000 shares of its authorized but theretofore unissued
common stock, $.001 per share par value, for all of the capital stock of the
SBI Subsidiary. As a result of such transaction, the former stockholders of
the SBI Subsidiary, became the Registrant's controlling stockholders (holding
200,000 of the 360,000 shares outstanding upon completion of the reorganization.
Immediately following the reorganization, the officers and directors
(Ron Foster, Frank C. Cooper, Michael C. Hall, Kenneth P. McDougal, and Betty
Rodgers) of the SBI Subsidiary, were elected as the Registrant's officers and
directors, and the Registrant's name was changed to Satellite Bingo, Inc.
The transaction was structured in a manner designed to meet the tax
free reorganization provisions of Section 368(a)(1)(B) of the Internal Revenue
Code of 1986, as amended, and securities were issued in conjunction therewith
without registration under the provisions of Section 5 of the Act pursuant to
exemptions provided by Sections 3(b), 4(1), 4(2) or 4(6) thereof.
RELATED PARTY TRANSACTIONS
Ronald Foster
On January 15, 1991, the Registrant issued 250,000 shares of its
Common Stock to Ron Foster in consideration for cancellation of $250,000 in
debt. The transaction was effected in reliance on the exemption from
registration under Section 5 of the Securities Act of 1933, as amended,
provided by Section 4 (2).
Form 10-SB Dated August 31, 1996, Page 50
<PAGE> 51
On October 3, 1991, the Registrant issued 250,000 shares of its Common
Stock to Ronald Foster as an inducement to make the Registrant a loan in the
amount of $250,000, in reliance on the exemption from registration under
Section 5 of the Securities Act of 1933, as amended, provided by Section 4 (2).
During October of 1991, the Registrant issued 500,000 shares of its Common
Stock to Ronald Foster as full payment for a $500,000 indebtedness to him for a
series of loans made by him to the Registrant. The stock was valued at $1.00
per share despite the fact that, between July 1, 1991 and September 30, 1991,
the stock was trading at prices ranging from $1.60 and $3.00 per share, because
such shares were unregistered. The transaction was unanimously approved by the
Registrant's Board of Directors, including the unanimous vote of all
disinterested directors. The decision was ratified by the Registrant's
stockholders at a meeting on June 3, 1992.
On November 16, 1991, the Registrant issued 468,000 shares of its
Common Stock to Ronald Foster in exchange for (i) copyrights, (ii) 25,000,000
Bingo cards, (iii) cups and T-shirts for the Bingo Club, (iv) prizes for set,
(v) computer software, (vi) electronic boards, (vii) 2 Rebus puzzle boards,
(viii) 40 ft. trailer, (ix) federal trademark number 1473709, (x) video
library, including copyrights issued in relationship thereto, and (xi)
brochures, which, in the aggregate were valued at $2,810,400. The transaction
was effected in reliance on the exemption from registration under Section 5 of
the Securities Act of 1933, as amended, provided by Section 4 (2). The stock
was valued at $6.00 per share (during the period from October 1, 1991 to
December 31, 1991, the Registrant's Common Stock traded at prices ranging
between $2.00 and $7.00 per share). The exchange valuation was based on a
third party appraisal of the subject assets, approved by the Registrant's Board
of Directors (including the affirmative vote of all disinterested directors),
and ratified by the Registrant's stockholders at a stockholders' meeting held
on June 3, 1992.
On November 16, 1991, the Registrant issued 500,000 shares of its
Common Stock to Ronald Foster in consideration for cancellation of outstanding
indebtedness of the Registrant in the amount of $500,000.
During 1994 and for several other prior years, Mr. Ron Foster, the
Registrant's principal shareholder, who also serves as Chief Executive Officer,
personally funded the majority of the Registrant's operations. All amounts
owed to Mr. Foster, including amounts originally evidenced by interest bearing
notes, were converted to non-interest bearing advances effective January 1,
1993. The majority of these advances were repaid in 1995 through the issuance
of 90,000 shares of preferred stock. During 1995, the Registrant accrued
salary payable to the Registrant's principal shareholder totaling $120,000.
All amounts owed to Mr. Foster are payable on demand. During 1994,
the Registrant received advances from Mr. Foster of $56,564, and made
repayments to Mr. Foster of $5,000. As of December 31, 1994, the Registrant
owed $460,933 to Mr. Foster. During 1995, the Registrant made repayments (on a
net basis) to Mr. Foster (exclusive of the preferred stock transaction
described above) of $6,777 (in addition to the preferred stock transaction
described above).
Peter Papas
Form 10-SB Dated August 31, 1996, Page 51
<PAGE> 52
In October, 1995 the Registrant borrowed $250,000 from a trust managed
by a shareholder, in the form of a mortgage note. The note is payable in full
on October 15, 1996, with interest payable quarterly at prime plus 3%, secured
by all corporate property up to $1,000,000 in value. The holder has the right
to convert the mortgage note to common stock at a price of three dollars per
share. This conversion privilege expires on July 15, 1996. Interest expense
related to this note totaled $5,729 for the year ended December 31, 1995. As
an inducement to consummate this transactions, the Registrant issued 40,000
shares of preferred stock to the individual. This stock has been valued at
$200,000 in the Registrant's financial statements, with the Registrant
recording a corresponding amount as a finance charges expense for the year
ended December 31, 1995.
All of the foregoing transactions involving issuance of securities
were effected in reliance on the exemption from registration under Section 5 of
the Securities Act of 1933, as amended, provided by Section 4(2) thereof.
Other Officers or Directors
On January 9, 1992, the Board voted to issue 5,000 shares of the
Registrant's Common Stock to Claude Pichard and to Betty Rodgers as
compensation for services to the Registrant in their capacities as officers and
directors of the Registrant, on the basis of the Registrant's inability to pay
them cash compensation. While Mr. Pichard and Ms. Rodgers, as directors of
the Registrant, voted in favor of the authorizing resolution, Ronald Foster,
the disinterested member of the Board of Directors who reviewed this
transaction, also voted in favor of the resolution. However, Mr. Foster is
the brother of Betty Rodgers. In order to avoid the appearance of conflicting
interest, the action was ratified by the Registrant's stockholders vote at a
meeting held on June 3, 1992.
Glendale Studios
On November 19, 1990, the Registrant issued 100,000 shares common
stock (adjusted for one for 20 reverse stock split) to Glendale Studios in
consideration for $468,000, in reliance on the exemption from registration
under Section 5 of the Securities Act of 1933, as amended, provided by Section
4(2) thereof.
Loans to Affiliates
No (i) director or executive officer of Registrant, (ii) nominee for
election as a director, (iii) member of the immediate family of persons
described in (i) or (ii), (iv) corporation or organization (other than
Registrant or majority owned subsidiary of Registrant) of which any of the
persons specified in (i) or (ii) is an executive officer or partner is directly
or indirectly, the beneficial owner of 10% or more of any class of equity
securities, nor (v) any trust or other estate in which any of the persons
specified in (i) or (ii) has a substantial beneficial interest or as to
Form 10-SB Dated August 31, 1996, Page 52
<PAGE> 53
which such person serves as a trustee or in a similar capacity, has been
indebted to the Registrant or its subsidiaries at any time since January 1,
1991 in an amount in excess of $60,000.
LIMITATIONS ON LIABILITY
On March 10, 1988, the Registrant's stockholders voted to adopt
provisions authorized by Section 16-10-49.1 of the Utah Business Corporation
Act, eliminating the liability of the Registrant's officers and directors for
monetary damages arising as a result of a breach of fiduciary duties. Such
limitation on liability does not not include a breach of the duty of loyalty to
the Registrant or its stockholders; acts or omissions not in good faith or
which involve intentional misconduct or knowing violations of law; actions
specified in Section 16-10-44 of the Utah Business Corporation Act; or, any
transactions from which a director derived an improper personal benefit.
Such provision was adopted in order to permit the Registrant to
recruit qualified personnel who were otherwise not inclined to subject
themselves to potential frivolous litigation by disgruntled stockholders, short
sellers and others.
REVERSE STOCK SPLIT & RE-INCORPORATION
On February 1, 1993, the Registrant merged with a wholly owned
Delaware subsidiary in order to change its corporate domicile to the State of
Delaware. Such re-incorporation was deemed in the best interests of the
Registrant by management for two reasons. First, the State of Utah has been
perceived by the investment community as a haven for "penny stock" companies
frequently associated with violations of applicable securities laws, while the
State of Delaware serves as the state of domicile for many of the countries
most respected corporations. Secondly, the corporate law of the State of
Delaware has been subject to detailed analysis and interpretation by the
Delaware courts in a manner making operation under Delaware law significantly
more predictable than under the laws of most other states. Such predictability
significantly simplifies long range corporate planning.
In conjunction with such re-incorporation, the Registrant effected a
one share for twenty reverse stock split and increased its authorized
capitalization. As a result, the Registrant is now authorized to issue
40,000,000 shares of common stock, $0.001 par value, and 10,000,000 shares of
preferred stock, $5.00 par value. Immediately prior to the reverse stock
split, the Registrant had 49,015,117 shares outstanding. As a result of the
reverse stock split, as of February 1, 1993, the Registrant's outstanding
common stock was reduced to 2,450,856 shares (after rounding up all fractional
shares).
COMPARABILITY OF TERMS
It is the opinion of the Registrant's current management that in each
transaction described above since current management assumed control of the
Registrant, the terms of transactions involving the Registrant's officers and
directors were materially more favorable to the Registrant than it could have
obtained from unrelated sources.
Form 10-SB Dated August 31, 1996, Page 53
<PAGE> 54
ITEM 8. DESCRIPTION OF SECURITIES
GENERAL
The Registrant 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.
Immediately prior to this registration 5,345,439 shares of Common
Stock were outstanding (excluding the 2,500,000 shares held but not yet
allocated by the Registrant's Employees' Trust) and held of record by
approximately 3,244 persons. In addition, 1,668,000 shares of preferred stock
were outstanding, and held by approximately five persons.
Corporate Stock Transfer, 370 17th Street, Suite 2350; Denver,
Colorado 80202, acts as transfer agent and registrar for the Registrant's
common and preferred stock.
COMMON STOCK
The following statement is a summary of the rights and privileges of
the holders of the Registrant's Stock. It does not purport to be complete and
is subject to the provisions of the Delaware General Corporation Act, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules, regulations and bylaws of the National Association of
Securities Dealers, Inc. The following statements are qualified in their
entirety by such references.
Dividend Rights
Holders of shares of the Registrant's common voting stock are entitled
to receive, out of funds legally available, such dividends as may be declared
by the Registrant's Board of Directors. The Registrant, as of the date of this
registration statement, cannot forecast with any certainty, when and if any
dividends will be paid, although the Registrant does not anticipate paying any
dividends prior to its year ended December 31, 1996.
Voting Rights
Holders of shares of the common voting stock are entitled to one vote
per outstanding share held on a designated record date, on each matter
submitted to a vote at a meeting of shareholders. Each holder may exercise
such vote either in person or by proxy. A majority of the outstanding shares
of common stock present at a duly convened meeting, appearing in person or by
proxy, constitutes a quorum for shareholders meetings. Except with respect to
amending the Articles of Incorporation, which requires an affirmative vote of a
majority of the Registrant's shares issued and withstanding, other matters to
be acted upon by shareholders at any meeting of the shareholders require the
affirmative vote of a majority of the shareholders voting in person or by
proxy, provided a quorum, as defined above, is established. The holders of the
common stock of the Registrant are not entitled to cumulative voting in
election of Directors, and shareholders are denied any pre-emptive rights.
Form 10-SB Dated August 31, 1996, Page 54
<PAGE> 55
Liquidation Rights
Upon liquidation, dissolution or winding up of the Registrant, the
shareholders would be entitled to share on a pro-rata basis in assets available
for distribution to shareholders.
Purchase and Redemption
Subject to special rights and restrictions appurtenant to any class of
the Registrant's securities, the Registrant may, in compliance with the
Deleware General Corporation Laws, repurchase shares of its common stock or
redeem any class of its shares which are redeemable, unless a proposed purchase
or redemption would render the Registrant unable to meet its liabilities as
they mature. The Registrant is not aware of any restriction in purchasing
shares of its common stock on the open market, other than those imposed by
rules promulgated by the Securities and Exchange Commission pursuant to
authority of Section 10(b) of the Securities Exchange Act of 1934, as amended
(e.g., Rules 10b-6 and 10b-18).
Miscellaneous
The common stock of the Registrant has no conversion, subscription, or
sinking fund rights. All shares when issued, are fully paid, non-assessable
and not liable to further calls or assessments.
PREFERRED STOCK
All attributes of the currently unissued preferred stock will be
determined by the Registrant'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.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET FOR COMMON EQUITY
The Registrant's stock is traded on the NASDAQ OTC Electronic Bulletin
Board. The Registrant currently has 5,345,439 shares of stock outstanding,
with 750,000 in the public float. There are approximately 3,244 shareholders
of record. For the fiscal year ended December 31, 1995, the Registrant
reported revenues of $604,873 and a net loss of $(769,232).
Form 10-SB Dated August 31, 1996, Page 55
<PAGE> 56
The Common Stock of Registrant has been traded over-the-counter since
1983. Its trading symbol is "SBID." No established public trading market
exists for the Common Stock of Registrant at this time. As of the date of this
registration statement:
No common equity is subject to options or warrants to purchase or
securities convertible into common stock, except for the currently
issued 1,668,000 shares of preferred stock which are convertible into
common stock, as described below (see Part II, Item 8 "Description of
Securities");
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 Registrant's common equity;
and
There are approximately 5,135,439 shares of common stock which will
become eligible for sale by December 31, 1996, pursuant to the
provisions of Securities and Exchange Commission Rule 144.
The Registrant has not agreed to register securities for resale under
the Securities Act of 1933, as amended, for anyone.
The following table sets forth in United States dollars the high and
low bid quotations for such shares. Such bid quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commissions, and do not
necessarily represent actual transactions. The source of the following
information is the National Daily Quotation System, Inc.'s "Pink Sheets" and
the National Association of Securities Dealers, Inc.'s Nasdaq Bulletin Board.
<TABLE>
<CAPTION>
Date Low High
Bid Bid
--- ---
<S> <C> <C>
April 1, 1996 - June 30, 1996 $ 0.1875 $ 0.375
January 1, 1996 - March 31, 1996 $ 0.25 $ 0.50
October 1, 1995 - December 31, 1995 $ 0.62 $ 1.37
July 1, 1995 - September 30, 1995 $ 0.50 $ 1.56
April 1, 1995 - June 30, 1995 $ 0.12 $ 1.75
January 1, 1995 - March 31, 1995 $ 0.12 $ 0.375
October 1, 1994 - December 31, 1994 $ 0.03 $ 0.06
July 1, 1994 - September 31, 1994 $ 0.06 $ 0.15
April 1, 1994 - June 30, 1994 $ 0.06 $ 0.15
January 1, 1994 - March 31, 1994 $ 0.06 $ 0.62
October 1, 1993 - December 31, 1993 $ 0.25 $ 1.50
July 1, 1993 - September 31, 1993 $ 0.50 $ 5.00
April 1, 1993 - June 30, 1993 $ 2.25 $ 5.375
January 1, 1993 - March 31, 1993 $ 0.02 $ 0.12
</TABLE>
- ------
* Prices quoted reflect a one share for twenty reverse split effective
on February 1, 1993.
Form 10-SB Dated August 31, 1996, Page 56
<PAGE> 57
DIVIDEND POLICY
The Registrant has never paid any dividends. It is the present
intention of the Registrant 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 Registrant's board of directors then
serving will resolve to declare them.
MARKET
The Registrant's securities are currently quoted on the National
Association of Securities Dealers, Inc.'s NASDAQ Bulletin Board and on the
National Daily Quotation System, Inc.'s "Pink Sheets." The Registrant 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".
SECURITY HOLDERS
As of March 31, 1996, the latest practicable date for which
information is available, the Registrant's management was of the opinion that
the Registrant had approximately 3,244 common stock holders.
DIVIDENDS
There have been no cash dividends declared or paid since the inception
the Registrant and no dividends are contemplated to be paid in the foreseeable
future.
ITEM 2. LEGAL PROCEEDINGS
The Registrant is not a party to any pending legal proceedings other
than those non material proceedings that arise in the ordinary course of
business.
As reflected in the statement of changes in stockholders' equity (see
Part FS - "Financial Statements"), the Registrant has a history of issuing
common stock for services difficult to value, or yet to be provided.
Approximately 4,600,000 (or 86%) of the common stock outstanding at December
31, 1995, is restricted in some fashion as a result of the above transactions.
Furthermore, the Registrant has in prior years canceled common stock
certificates due to non-performance by the third parties involved in certain
transactions. Although no party to such transactions has yet instigated
litigation involving the Registrant for cancellation or restrictions of the
related shares, due to the volume of such transactions, litigation remains a
possibility. Management feels all actions it has taken to cancel or restrict
common stock are legally justified and does not anticipate any material loss
being incurred by the Registrant due to future resolution of these matters.
Form 10-SB Dated August 31, 1996, Page 57
<PAGE> 58
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
The Registrant's audited statements for the calendar years ended
December 31, 1995, 1994 and 1993, have been prepared by the Daniel Professional
Group, of Charlotte, North Carolina. The Registrant has had no disputes with
nor does it have any current plans to replace its auditors.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The Registrant has not previously registered any securities with the
Securities and Exchange Commission, all sales having heretofore been effected
in reliance on exemptions from applicable federal registration requirements,
pursuant to Sections 4(2), 4(6) or 3(b) of the Securities Act of 1933, as
amended, and Rules 144, 147, 257, 504 or 701 promulgated thereunder.
During the past 36 months, no shares of the Registrant's securities
have been issued except as disclosed in the consolidated statement of changes
in shareholders' equity (deficit) included as a component of the audited
financial statements for the years ended December 31, 1994 and 1995, filed
herewith in response to Part FS of this registration statement. Such schedules
are hereby incorporated herein by reference, as permitted by Rule 12b-23 of the
Securities Exchange Act of 1934, as amended.
The Registrant has never offered its securities through an
underwriter, nor has it paid any commissions or granted any discounts in
conjunction with such transactions.
The Registrant relied on the exemptions from registration provided by
Section 4(2) of the Securities Act of 1933 with respect to all issuances of
securities listed above. In order to rely upon Section 4(2), the Registrant
noted that no other offerings of the Registrant's common stock were made or
contemplated to any other persons during the period of time in which the
issuances disclosed above occurred, and that all stock certificates issued
before legends indicating that the stock was not registered and that such stock
was subject to restrictions on transfer.
ITEM 5. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Registrant's certificate of incorporation authorizes the board of
directors to indemnify officers, directors, employees and agents to the fullest
extent permitted by law. They also significantly limit the personal liability
of the Registrant's officers and directors to the Registrant's stockholders.
The Registrant's bylaws authorize the board of directors to indemnify officers,
directors, employees and agents in the same circumstances set forth in the
certificate of incorporation. The bylaws also authorize the Registrant to
purchase liability insurance for the benefit of officers, directors, employees
and agents and to enter into indemnity agreements with officers, directors,
employees and agents.
Form 10-SB Dated August 31, 1996, Page 58
<PAGE> 59
Section 145 of the General Corporation law of the State of Delaware,
under which the Registrant is organized, empowers a corporation, subject to
certain limitations, to indemnify its officers, directors, employees and
agents, or others acting in similar capacities for other entities at the
request of the Registrant, against certain expenses, including attorneys fees,
judgments, fines and other amounts which may be paid or incurred by them in
their capacities as such officers, directors, employees and agents.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers or
persons controlling the Registrant pursuant to the foregoing provisions, the
Registrant has been informed that in the opinion of the United States
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is therefore unenforceable.
PART FS FINANCIAL STATEMENTS
The audited consolidated balance sheet of the Registrant for its years
ended December 31, 1995 and 1994 and the related consolidated statements of
operations, stockholder's equity and cash flows are submitted herewith.
INDEX TO FINANCIAL STATEMENTS
The audited consolidated balance sheet of the Registrant for its years
ended December 31, 1995 and 1994 and related consolidated statements of
income (loss), stockholder's equity and cash flows therefor, follow. The page
numbers for the financial statement categories are as follows:
<TABLE>
<CAPTION>
Page Description
- ---- -----------
<S> <C>
61 Cover Page (Audited Statements for 1994 and 1995)
62 Report of the Daniel Professional Group, Inc., Certified Public
Accountants, as to the calendar years ended December 31, 1995 and 1994.
63 Consolidated Balance Sheets - December 31, 1995 and December 31, 1994.
64 Consolidated Statement of Income (Loss) for the calendar years ended
December 31, 1995 and December 31, 1994 and from inception until
December 31, 1995.
</TABLE>
Form 10-SB Dated August 31, 1996, Page 59
<PAGE> 60
<TABLE>
<S> <C>
65 Consolidated Statement of Changes in Stockholder's Equity from
Inception (January 10, 1986) through December 31, 1995.
71 Consolidated Cash Flows for the calendar years ended December 31, 1995
and December 31, 1994 and from inception until December 31, 1995.
72 Notes to Consolidated Financial Statement Statements for the calendar
years ended December 31, 1995 and December 31, 1994.
78 Cover Page (Unaudited Statements for Six Months Ended June 30, 1996.
79 Compilation report of the Daniel Professional Group, Inc., Certified
Public Accountants, as to the six months ended June 30, 1996.
80 Consolidated Balance Sheets - June 30, 1996.
81 Consolidated Statement of Income (Loss) for the six months ended June
30, 1996.
82 Consolidated Statement of Changes in Stockholder's Equity from
Inception (January 10, 1986) through June 30, 1996.
87 Consolidated Cash Flows for the six months ended June 30, 1996.
88 Notes to Consolidated Financial Statement. Statements for the six
months ended June 30, 1996.
</TABLE>
Form 10-SB Dated August 31, 1996, Page 60
<PAGE> 61
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
AND ACCOUNTANTS' REPORT
DECEMBER 31, 1995 AND 1994
Page 61
<PAGE> 62
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
SBI Communications, Inc.
Piedmont, Alabama
We have audited the accompanying consolidated balance sheets of SBI
Communications, Inc., a development stage company, as of December 31, 1995 and
1994, and the related consolidated statements of income (loss), changes in
shareholders' equity, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 of
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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of SBI
Communications, Inc., a development stage company, as of December 31, 1995 and
1994, and the consolidated results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.
March 28, 1996
Charlotte, North Carolina
Page 62
<PAGE> 63
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
<TABLE>
<CAPTION>
1995 1994
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash $ 11,589 $ 58,928
Accounts receivable, net of allowance
for doubtful accounts of $462,500
and $0 for 1995 and 1994, respectively 499,864 -
Note receivable from
shareholder (Note 2) 25,000 -
---------- ----------
536,453 58,928
Property and equipment, less
accumulated depreciation
(Note 3) 7,316,219 7,483,501
Other assets (Note 4):
Trademarks, net 100,000 200,000
Shows and computer programs, net 165,960 331,920
Game inventory 60,688 75,400
Organization costs 170 341
---------- ----------
$8,179,490 $8,150,090
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable to a trust managed by
a shareholder (Note 2) $ 250,000 $ -
Accounts payable 53,738 49,158
Accrued wages due to principal
shareholder (Note 2) 120,000 -
Advances due to principal
shareholder (Note 2) 4,156 460,933
Accrued interest 5,729 -
---------- ----------
433,623 510,091
---------- ----------
Shareholders' equity (Note 5):
Preferred stock, par value $5.00;
10,000,000 shares authorized;
1,668,000 and 1,505,000 shares
issued and outstanding at
December 31, 1995 and 1994,
respectively 8,340,000 7,525,000
Common stock, par value $.001;
40,000,000 shares authorized;
5,345,439 and 5,135,439 shares
issued and outstanding at
December 31, 1995 and 1994,
respectively 5,345 5,135
Paid-in capital 3,572,343 3,512,453
Deficit accumulated during
the development stage (4,171,821) (3,402,589)
---------- ----------
Total shareholders' equity 7,745,867 7,639,999
---------- ----------
$8,179,490 $8,150,090
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 63
<PAGE> 64
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
Inception
through
December 31,
1995 1994 1995
---- ---- ------------
<S> <C> <C> <C>
Revenues:
Licenses and royalties $ - $ - $ 641,642
Bingo hall rent 534,593 - 534,593
Bingo hall operating
administrative fees 68,145 24,905 93,050
Interest income 34 171 1,101
Other income 2,101 - 235,754
---------- ---------- ----------
Gross revenues 604,873 25,076 1,506,140
---------- ---------- ----------
Expenses:
Production costs - - 306,685
General and
administrative 497,685 54,990 1,907,834
Salaries and related
expenses 132,086 14,200 863,660
Depreciation and
amortization 538,605 275,461 1,424,325
Interest expense
and finance charges 205,729 - 294,630
Losses from equity
interest in joint
venture - - 880,827
---------- ---------- ----------
Total expenses 1,374,105 344,651 5,677,961
---------- ---------- ----------
Income (loss) from
operations ($ 769,232) ($ 319,575) ($4,171,821)
========== ========== ==========
Income (loss) per
share (Note 5) ($ 0.14) ($ 0.07) ($ 2.39)
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 64
<PAGE> 65
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION, JANUARY 10, 1986, THROUGH DECEMBER 31, 1995
<TABLE>
<CAPTION>
Deficit
Common Stock Preferred Stock Accumulated
-------------------- ---------------------- Additional During Total
Number Number Paid-in Development Shareholders'
of shares Amount of shares Amount Capital Stage Equity (Deficit)
---------- ------- ---------- ------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Initial common stock sold
in January, 1986 for
cash of $500 4,000,000 $ 4,000 - $ - ($ 3,500) $ - $ 500
Recapitalization as a
business combination 3,300,000 3,300 - - (13,153) - (9,853)
Forgiveness of debt - - - - 246,370 - 246,370
Retroactive adjustment for
1 for 20 reverse stock
split occurring in 1993 (6,935,000) (6,935) - - 6,935 - -
Net loss, 1986 - - - - - (204,663) (204,663)
--------- -------- --------- ---------- ---------- ---------- ----------
Balance, December 31, 1986 365,000 365 - - 236,652 (204,663) 32,354
Common stock sold for cash
of $25,809 in August, 1987
($12.90 per share) 2,000 2 - - 25,807 - 25,809
Common stock sold for cash
of $71,691 in August, 1987
($14.06 per share) 5,100 5 - - 71,686 - 71,691
Common stock issued in August,
1987 for rent concessions
and other assets valued
at $71,750 ($7.18 per share) 10,000 10 - - 71,740 - 71,750
Common stock sold for cash
of $41,000 in October, 1987
($10.00 per share) 4,100 4 - - 40,996 - 41,000
Common stock sold for cash
of $5,000 in November, 1987
($10.00 per share) 500 1 - - 4,999 - 5,000
Net loss, 1987 - - - - - (544,026) (544,026)
--------- -------- --------- ---------- ---------- ---------- ----------
Balance December 31, 1987 386,700 387 - - 451,880 (748,689) (296,422)
Common stock sold for cash
of $100,000 in January, 1988
($2.00 per share) 50,000 50 - - 99,950 - 100,000
Common stock issued in April,
1988 for services rendered
valued at $34,716 ($5.00 per
share) 6,943 7 - - 34,709 - 34,716
Common stock issued in June,
1988 for cash of $86,546
($4.69 per share) 18,463 18 - - 86,528 - 86,546
Common stock issued in November,
1988 for services rendered
from September through
November, 1988, valued
at $46,877 ($4.69 per share) 10,000 10 - - 46,867 - 46,877
Net loss, 1988 - - - - - (1,206,824) (1,206,824)
--------- -------- --------- ---------- ---------- ---------- ----------
Balance December 31, 1988 472,106 472 - - 719,934 (1,955,513) (1,235,107)
Common stock issued in January,
1989 for cash of $23,438
($4.69 per share) 5,000 5 - - 23,433 - 23,438
Common stock issued in January,
1989 as inducement to lenders
valued at $21,095 ($4.69
per share) 4,500 5 - - 21,090 - 21,095
Common stock issued in June,
1989 as repayment of debt
valued at $70,000 ($4.67
per share) 15,000 15 - - 69,985 - 70,000
</TABLE>
(Continued)
Page 65
<PAGE> 66
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION, JANUARY 10, 1986, THROUGH DECEMBER 31, 1995
(Continued)
<TABLE>
<CAPTION>
Deficit
Common Stock Preferred Stock Accumulated
-------------------- ---------------------- Additional During Total
Number Number Paid-in Development Shareholders'
of shares Amount of shares Amount Capital Stage Equity (Deficit)
---------- ------- ---------- ------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Common stock issued in June,
1989 for legal services
from February through June,
1989, valued at $140,630
($4.69 per share) 30,000 $ 30 - $ - $ 140,600 $ - $ 140,630
Net loss, 1989 - - - - - (491,957) (491,957)
--------- -------- --------- ---------- ---------- ---------- ----------
Balance December 31, 1989 526,606 527 - - 975,042 (2,447,470) (1,471,901)
Common stock issued in January,
1990 for production and
uplinking services valued
at $10,000 ($2.00 per share) 5,000 5 - - 9,995 - 10,000
Common stock issued in January,
1990 for design and
software programs valued at
$30,000 ($4.00 per share) 7,500 7 - - 29,993 - 30,000
Common stock issued in January,
1990 for telecommunication and
layout services rendered valued
at $50,000 ($2.00 per share) 25,000 25 - - 49,975 - 50,000
Common stock issued in June,
1990 for production services
valued at $50,000 ($5.00 per
share) 10,000 10 - - 49,990 - 50,000
Common stock sold in June,
1990 for cash of $3,750
($5.00 per share) 750 1 - - 3,749 - 3,750
Common stock issued in November,
1990 as repayment of debt
owed to CEO valued at $300,000
($0.60 per share) 500,000 500 - - 299,500 - 300,000
Common stock issued in November,
1990 for receivables of
$468,000, later deemed to
have no value ($4.68 per
share reduced to -0-) 100,000 100 - - (100) - -
Common stock issued in December,
1990 to a board member for
services rendered valued at
$25,000 ($5.00 per share) 5,000 5 - - 24,995 - 25,000
Common stock issued in December,
1990 to a board member for
services rendered valued at
$25,000 ($5.00 per share) 5,000 5 - - 24,995 - 25,000
Net income, 1990 - - - - - 2,511,101 2,511,101
--------- -------- --------- ---------- ---------- ---------- ----------
Balance December 31, 1990 1,184,856 1,185 - - 1,468,134 63,631 1,532,950
Common stock issued in October,
1991 as repayment of debt
owed to CEO valued at
$500,000 ($1.00 per share) 500,000 500 - - 499,500 - 500,000
Common stock issued in November,
1991 to CEO for various
trademarks, shows, computer
programs and bingo game
inventory, valued at
$1,405,200 ($3.00 per share) 468,400 468 - - 1,404,732 - 1,405,200
Net loss, 1991 - - - - - (2,315,058) (2,315,058)
--------- -------- --------- ---------- ---------- ---------- ---------
Balance December 31, 1991 2,153,256 2,153 - - 3,372,366 (2,251,427) 1,123,092
Common stock issued in January,
1992 for marketing services
valued at $9,000 ($0.60 per
share) 15,000 15 - - 8,985 - 9,000
</TABLE>
Page 66
<PAGE> 67
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Common stock issued in November,
1990 as repayment of debt
owed to CEO valued at $300,000
($0.60 per share) 500,000 500 - - 299,500 - 300,000
Common stock issued in November,
1990 for receivables of
$468,000, later deemed to
have no value ($4.68 per
share reduced to -0-) 100,000 100 - - ( 100) - -
Common stock issued in December,
1990 to a board member for
services rendered valued at
$25,000 ($5.00 per share) 5,000 5 - - 24,995 - 25,000
Common stock issued in December,
1990 to a board member for
services rendered valued at
$25,000 ($5.00 per share) 5,000 5 - - 24,995 - 25,000
Net income, 1990 - - - - - 2,511,101 2,511,101
--------- -------- --------- ---------- ---------- ---------- ----------
Balance December 31, 1990 1,184,856 1,185 - - 1,468,134 63,631 1,532,950
Common stock issued in October,
1991 as repayment of debt
owed to CEO valued at
$500,000 ($1.00 per share) 500,000 500 - - 499,500 - 500,000
Common stock issued in November,
1991 to CEO for various
trademarks, shows, computer
programs and bingo game
inventory, valued at
$1,405,200 ($3.00 per share) 468,400 468 - - 1,404,732 - 1,405,200
Net loss, 1991 - - - - - ( 2,315,058) (2,315,058)
--------- -------- --------- ---------- ---------- ---------- ---------
Balance December 31, 1991 2,153,256 2,153 - - 3,372,366 ( 2,251,427) 1,123,092
Common stock issued in January,
1992 for marketing services
valued at $9,000 ($0.60 per
share) 15,000 15 - - 8,985 - 9,000
</TABLE>
Page 67
<PAGE> 68
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION, JANUARY 10, 1986, THROUGH DECEMBER 31, 1995
(Continued)
<TABLE>
<CAPTION>
Deficit
Common Stock Preferred Stock Accumulated
-------------------- ---------------------- Additional During Total
Number Number Paid-in Development Shareholders'
of shares Amount of shares Amount Capital Stage Equity (Deficit)
---------- ------- ---------- ------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Common stock issued in January,
1992 for clerical services
valued at $10,000 ($2.00
per share) 5,000 $ 5 - $ - $ 9,995 $ - $ 10,000
Common stock issued in January,
1992 for services provided
by board member valued at
$10,000 ($2.00 per share) 5,000 5 - - 9,995 - 10,000
Common stock issued in January,
1992 for services provided
by board member valued at
$10,000 ($2.00 per share) 5,000 5 - - 9,995 - 10,000
Common stock issued in January,
1992 for payment of interest
due on notes to three
individuals, valued at
$9,900 ($0.57 per share) 17,500 18 - - 9,882 - 9,900
Common stock sold in August,
1992 for cash of $25,000
($0.75 per share) 33,333 33 - - 24,967 - 25,000
Net loss, 1992 - - - - - (493,057) (493,057)
--------- -------- --------- ---------- ---------- ---------- ---------
Balance December 31, 1992 2,234,089 2,234 - - 3,446,185 (2,744,484) 703,935
Fractional shares issued in
connection with reverse
stock split 100 - - - - - -
Common stock issued in March,
1993 for bonds - bonds were
unable to be issued, stock
was canceled in 1994 - no
valued has been assigned 650,000 650 - - (650) - -
Common stock issued in March,
1993 for consulting agreement;
350,000 shares originally
issued, 200,000 shares
canceled; no value assigned 150,000 150 - - (150) - -
Common stock issued in April,
1993 for consulting agreement
and $40,000 in cash; no value
assigned to the consulting
agreement ($0.40 per share) 100,000 100 - - 39,900 - 40,000
Common stock issued in July,
1993 for consulting agreement,
no value assigned 650,000 650 - - (650) - -
Common stock issued in August,
1993 for consulting agreement,
no value assigned 100,000 100 - - (100) - -
Common stock issued in August,
1993 to CEO for repayment
of various debts valued at
$37,500 ($0.19 per share) 200,000 200 - - 37,300 - 37,500
Common stock issued in October,
1993 for consulting services,
no value assigned 1,250 1 - - (1) - -
Common stock issued in November,
1993 for commitments to raise
$400,000 but such funds were
never received; Company has not
yet canceled certificates, but
restricted such certificates
until the matter is resolved;
no value has been assigned in
that management anticipates
ultimate cancellation of the
certificates 200,000 200 - - (200) - -
</TABLE>
(Continued)
Page 68
<PAGE> 69
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION, JANUARY 10, 1986, THROUGH DECEMBER 31, 1995
(Continued)
<TABLE>
<CAPTION>
Deficit
Common Stock Preferred Stock Accumulated
-------------------- ---------------------- Additional During Total
Number Number Paid-in Development Shareholders'
of shares Amount of shares Amount Capital Stage Equity (Deficit)
---------- ------- ---------- ------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Common stock issued in December,
1993 for consulting agreement;
stock canceled in 1994 due
to nonperformance; no value
assigned 1,000,000 $ 1,000 - $ - ($1,000) $ - $ -
Net loss, 1993 - - - - - (338,530) (338,530)
--------- -------- --------- ---------- ---------- ---------- ---------
Balance December 31, 1993 5,285,439 5,285 - - 3,520,634 (3,083,014) 442,905
Common stock issued in March,
1993 for bonds - bonds were
unable to be issued, stock
was canceled in 1994 (650,000) ($650) - - 650 - -
Common stock issued in January,
1994 for consulting agreement
and computer equipment with
a book value of $91,669; no
value has been assigned to
the consulting agreement;
total value of $91,669
($0.09 per share) 1,000,000 1,000 - - 90,669 - 91,669
Common stock issued in December,
1993 for consulting agreement;
stock canceled in July 1994
due to nonperformance; no
value assigned in 1993 (1,000,000) (1,000) - - 1,000 - -
Common stock issued in
November, 1994 for
consulting agreement,
no value assigned 500,000 500 - - (500) - -
Preferred stock issued in
December, 1994 for land
valued at $250,000;
building valued at
$6,250,000; and equipment
valued at $900,000; total
value of $7,400,000
($4.93 per share) - - 1,500,000 7,500,000 (100,000) - 7,400,000
Preferred stock issued in
December 1994 to individual
to settle debts of
approximately $25,000
($5.00 per share) - - 5,000 25,000 - - 25,000
Net loss, 1994 - - - - - (319,575) (319,575)
--------- ------- --------- ---------- ---------- ---------- ----------
Balance December 31, 1994 5,135,439 $ 5,135 1,505,000 $7,525,000 $3,512,453 ($3,402,589) $7,639,999
Common stock issued in January,
1995 for accounting services
valued at $100
($0.001 per share) 100,000 100 - - - - 100
Preferred stock issued in
March, 1995, for cash - - 33,000 165,000 - - 165,000
Common stock issued in May,
1995 for legal services
valued at $50,000
($0.50 per share) 100,000 100 - - 49,900 - 50,000
Preferred stock issued in
June, 1995, to principal
shareholder as settlement
for $450,000 owed to said
shareholder, valued at
$450,000 ($5.00 per share) - - 90,000 450,000 - - 450,000
Common stock issued in
August, 1995 for
legal services valued
at $10,000 ($1.00 per share) 10,000 10 - - 9,990 - 10,000
</TABLE>
(Continued)
Page 69
<PAGE> 70
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION, JANUARY 10, 1986, THROUGH DECEMBER 31, 1995
(Continued)
<TABLE>
<CAPTION>
Deficit
Common Stock Preferred Stock Accumulated
-------------------- ---------------------- Additional During Total
Number Number Paid-in Development Shareholders'
of shares Amount of shares Amount Capital Stage Equity (Deficit)
---------- ------- ---------- ------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Preferred stock issued in
October, 1995 as an inducement
to an individual to arrange for
$250,000 to be loaned to the
Company by a trust controlled
by the individual, value of
$200,000 ($5.00 per share) - - 40,000 200,000 - - 200,000
Net loss, 1995 - - - - - (769,232) (769,232)
--------- ------- --------- ---------- ---------- ---------- ----------
Balance December 31, 1995 5,345,439 $ 5,345 1,668,000 $8,340,000 $3,572,343 ($4,171,821) $7,745,867
========= ======= ========= ========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 70
<PAGE> 71
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
Jan. 10, 1986
Through
December 31,
1995 1994 1995
---- ---- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) ($769,232) ($319,575) ($4,171,821)
Adjustments to reconcile net loss
to cash provided from operations:
Depreciation and amortization 538,776 275,460 1,424,495
Stock issued for services 180,100 - 1,850,438
Stock issued for financing costs 200,000 - 200,000
Increase in debt for
services performed (120,000) - -
Change in accounts receivable (524,864) - (524,864)
Change in game inventories 14,712 - 14,712
Change in accounts payable 4,580 49,158 53,738
Change in accrued expenses 125,729 - 125,729
Loss on write-off of marketable
securities - - 2,000
Loss on disposal of assets - - 2,440
Write-off of production costs - - 236,138
Loss on equity interest in
joint venture - - 880,827
-------- -------- ----------
Cash provided (used) by
operating activities (350,199) 5,043 93,832
-------- -------- ----------
Cash flows from investing activities:
Organization costs incurred - - (758)
Investment in marketable securities - - (2,000)
Payment for production costs - - (236,567)
Investment in joint venture - - (880,827)
Effect of business capitalization - - (9,853)
Purchase of property and equipment (105,363) - (186,628)
-------- -------- ----------
Cash provided (used) by
investing activities (105,363) - (1,316,633)
-------- -------- ----------
Cash flows from financing activities:
Loans from shareholders/affiliates 250,000 56,564 724,803
Repayments on loans from
shareholders (6,777) (5,000) (78,147)
Proceeds from issuance of
common stock 165,000 - 587,734
-------- -------- ----------
Cash provided by
financing activities 408,223 51,564 1,234,390
-------- -------- ----------
Net increase (decrease) in cash (47,339) 56,607 11,589
Cash at beginning of period 58,928 2,321 -
-------- -------- ----------
Cash at end of period $ 11,589 $ 58,928 $ 11,589
======== ======== ==========
Supplemental information:
Income taxes paid $ - $ - $ -
======== ======== ==========
Interest paid $ - $ - $ 66,400
======== ======== ==========
</TABLE>
Non-cash transactions for 1995 and 1994 included the following:
During 1995, legal and accounting fees valued at $60,100 were paid for by the
issuance of 210,000 shares of common stock; $450,000 of loans payable to
shareholders were repaid through the issuance of 90,000 shares of preferred
stock; and $200,000 of finance charges relating to loan inducement fees were
paid for by the issuance of 40,000 shares of preferred stock.
During 1994, property and equipment valued at $7,491,669 was acquired through
the issuance of 1,500,000 shares of preferred stock; and $25,000 of loans
payable to shareholders were repaid through the issuance of 5,000 shares of
preferred stock.
See accompanying notes to consolidated financial statements.
Page 71
<PAGE> 72
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
Note 1 - Summary of significant accounting policies
The major accounting policies of SBI Communications, Inc. are summarized
below to assist the reader in reviewing the Company's financial statements.
Organization
SBI Communications, Inc. (the "Company"), was originally organized in the
State of Utah on September 23, 1983, under the corporate name of Alpine
Survival Products, Inc. Its name was subsequently changed to Justin Land
and Development, Inc. during October, 1984, and then to Supermin, Inc. on
November 20, 1985. On September 29, 1986, Satellite Bingo, Inc. was the
surviving corporate entity in a statutory merger with Supermin, Inc., a
Utah corporation. In connection with the above merger, the former
shareholders of Satellite Bingo, Inc. acquired control of the merged
entity and changed the corporate name to Satellite Bingo, Inc. Through
shareholder approval dated March 10, 1988, the name was changed to its
current name of SBI Communications, Inc.
Development stage company
The Company plans to provide an interactive, satellite cable bingo game
show and other similar telecommunication products or services to
television viewers. Since principal operations have not commenced, and
since only insignificant revenues have been generated, the Company is
considered to be a development stage company. Statement of Financial
Accounting Standards Number 7 establishes the accounting principles
governing development stage companies.
Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Satellite Bingo, Inc., a Georgia
corporation, which currently is inactive with no assets or liabilities.
Intercompany transactions and balances have been eliminated in
consolidation.
Estimates and assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reporting amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Page 72
<PAGE> 73
Property and equipment
Property and equipment are stated at cost. Expenditures for maintenance
and repairs which do not improve or extend the life of an asset are
charged to expense as incurred. Major renewals and betterments are
charged to the property accounts. Upon retirement or sale of an asset,
its cost and related accumulated depreciation or amortization are removed
from the property accounts, and any gain or loss is recorded as income or
expense. Depreciation is provided using straight-line methods for
financial reporting.
Trademarks, shows and computer programs
Trademarks, shows and computer programs are intangible assets acquired
through the issuance of stock. Such assets are being amortized on a
straight-line basis over sixty (60) months. The five-year life is a
subjective estimate that was derived after considering such factors as
consumer demand, competition, expected actions of competitors, effect of
obsolescence, etc. The estimated useful life of any unamortized cost will
be re-evaluated upon completion of the Company's development stage..
Income taxes
The Company provides for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, which requires the use of the
asset and liability method and recognizes deferred income taxes for the
consequences of "temporary differences" by applying enacted statutory tax
rates applicable to future years to differences between the financial
statement carrying amounts and the tax bases of existing assets and
liabilities. The Company has no significant "temporary differences".
Deferred tax assets also may be recorded for the future benefits of
operating loss carryforwards if such benefits are not deemed "more likely
than not" to be realized. The effect on deferred taxes for a change in
tax rates is recognized in income or expense in the period that includes
the enactment date.
Statements of cash flows
For the purposes of the statements of cash flows, the Company considers
cash and highly liquid investments purchased with a maturity of three
months or less to be cash equivalents.
Note 2 - Related party transactions
During 1994 and for several other prior years, the Company's principal
shareholder, who also serves as Chief Executive Officer (CEO), personally
funded the majority of the Company's operations. All amounts owed to the
shareholder, including amounts originally evidenced by interest bearing notes,
were converted to non-interest bearing advances effective January 1, 1993. The
majority of these advances were repaid in 1995 through the issuance of 90,000
shares of preferred stock. During 1995, the Company accrued salaries payable
to the Company's principal shareholder totalling $120,000.
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<PAGE> 74
All amounts owed to the shareholder are payable on demand. During 1994, the
Company received advances from this shareholder of $56,564, and made repayments
to the shareholder of $5,000. As of December 31, 1994, the Company owed
$460,933 to this shareholder. During 1995, the Company made repayments (on a
net basis) to the shareholder (exclusive of the preferred stock transaction
described above) of $6,777. As of December 31, 1995, the Company owed $4,156
to this shareholder.
In addition to the above, the Company previously owed $25,000 in the form of an
interest bearing note payable to another shareholder. This note, along with
related accrued interest, was settled through the issuance of 5,000 shares of
preferred stock valued at $25,000 to the shareholder during 1994. In October,
1995, the Company advanced $25,000 to a shareholder to be repaid upon demand
with interest at prevailing market rates.
In October, 1995, the Company borrowed $250,000 from a trust managed by a
shareholder, in the form of a mortgage note. The note is payable in full on
October 15, 1996, with interest payable quarterly at prime plus 3%, secured by
all corporate property up to $1,000,000 in value. The holder has the right to
convert the mortgage note to common stock at a price of $3 per share. This
coversion privilege expires on July 15, 1996. Interest expense related to this
note totalled $5,729 for the year ended December 31, 1995. As an inducement to
consummate this transaction, the Company issued 40,000 shares of preferred
stock to the individual. This stock has been valued at $200,000 in these
financial statements, with the Company recording a corresponding amount as
finance charges expense for the year ended December 31, 1995.
Note 3 - Property and equipment
Property and equipment are summarized as follows at December 31:
<TABLE>
<CAPTION>
Estimated
Useful Life 1995 1994
----------- ---- ----
<S> <C> <C> <C>
Land $ 250,000 $ 250,000
Building 40 years 6,250,000 6,250,000
Vehicles 5 years 10,920 -
Furniture and
equipment 5 to 7 years 1,087,384 992,941
---------- ----------
7,598,304 7,492,941
Less accumulated
depreciation 282,085 9,440
---------- ----------
$7,316,219 $7,483,501
========== ==========
</TABLE>
Depreciation expense totalled approximatley $273,000 and $9,000 for the years
ended December 31, 1995 and 1994, respectively.
Page 74
<PAGE> 75
Note 4 - Other assets
Other assets are summarized as follows at December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Trademarks:
Original cost $ 500,000 $ 500,000
Less accumulated amortization 400,000 300,000
---------- ----------
$ 100,000 $ 200,000
========== ==========
Shows and computer programs:
Original cost $ 829,800 $ 829,800
Less accumulated amortization 663,840 497,880
---------- ----------
$ 165,960 $ 331,920
========== ==========
Game inventory:
Original cost $ 75,400 $ 75,400
Less amounts used in operations 14 712 -
---------- ----------
$ 60,688 $ 75,400
========== ==========
Organization costs:
Original cost $ 758 $ 758
Less accumulated amortization 588 417
---------- ----------
$ 170 $ 341
========== ==========
</TABLE>
Game inventory is expensed as used. All other assets listed above are being
amortized over sixty (60) months. Amortization expense totalled approximately
$266,000 for each of the years ended December 31, 1995 and 1994.
Note 5 - Common and preferred stock activity
On January 1, 1993, the Company executed a plan of merger that effectively
changed the Company from a Utah corporation to a Delaware corporation. This
merger also resulted in a reverse stock split of one (1) share of the Delaware
corporation for each twenty (20) shares of the Utah corporation. The common
stock of the Company has been retroactively restated from its initial year to
account for this reverse stock split.
The Delaware corporation is authorized to issue up to 40,000,000 shares of
common stock with a par value of $.001 per share, and 10,000,000 shares of
preferred stock with a par value of $5.00 per share. The preferred stock may
be issued from time to time in one or more series, the shares of each series to
have such voting powers, dividend rates, designations, preferences, and other
characteristics as adopted by the Board of Directors. Preferred stock issued
during 1994 and 1995 consisted of one series (series A), having a liquidation
preference of $5.00 per share, paying no dividend, and convertible into common
stock upon demand, at a conversion rate that would transfer shares of common
stock worth an amount equal to the par value of the preferred stock based upon
the market value of the common stock at the date of conversion.
The Company's income (loss) per share was calculated using 5,306,754,
4,743,658, and 1,745,221 weighted average shares outstanding for the year ended
December 31, 1995, the year ended December 31, 1994, and for the period from
inception to December
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<PAGE> 76
31, 1995, respectively. These amounts were determined based upon retroactive
restatement for the 1 for 20 reverse stock split occuring in 1993, Although the
preferred stock issued in 1995 and 1994 is a common stock equivalent, with a
coversion rate of approximately 10 shares of common stock (based upon an
approximate market price for common stock of $0.50 at December 31, 1995) for
each share of preferred stock as of the date the preferred stock was issued,
preferred stock conversion has not been included in the calculation of earnings
per share in that to do so would be anti-dilutive.
Note 6 - Income taxes
Deferred income tax assets and liabilities are summarized as follows at
December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C>
Deferred tax assets
attributable to operating
loss carryforwards $1,540,000 $1,300,000
Valuation allowance due to
uncertainty surrounding
realization of operating
loss carryforwards ( 1,540,000) ( 1,300,000)
Deferred tax liabilities - -
---------- ----------
Total deferred taxes $ - $ -
========== ==========
</TABLE>
The Company has available at December 31, 1995, unused operating loss
carryforwards, which may be applied against future taxable income, that expire
as follows:
<TABLE>
<CAPTION>
Amount of Unused Operating Expiration During
Loss Carryforwards Year Ended December 31,
-------------------------- -----------------------
<S> <C>
$ 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
----------
$4,050,000
==========
</TABLE>
Note 7 - Commitments, risks and contingencies
The Company manages for various charities a bingo hall in Piedmont, Alabama.
Rents and administrative fees charged to charities are unsecured, and generally
are paid only as revenues from the bingo games produce sufficient profit to
allow the charities to make payments. Rents receivable at December 31, 1995,
are concentrated with only two charities. Management has estimated the amount
of such receivables that are collectible based upon their knowledge of the
financial condition of the charities and the history of the profitability of
bingo games. It is reasonably possible that management's estimate of the
amount of such receivables that are collectible could change in the near
future.
Page 76
<PAGE> 77
The Company is also in the process of developing bingo productions to be
broadcast by satellite into homes of viewers throughout the United States, and
has entered into various licensing agreements to provide, for fees and
royalties, certain software and methods involving bingo game production and
operation. These agreements cover territories in California, Brazil, Greece,
Hong Kong, and United States Indian Reservations/Military Bases/Charity Bingo
Parlors. None of the above territories have significant bingo operations that
are generating fees or royalties for the Company at this time. Should local,
state, federal or foreign country laws change regarding bingo in these areas,
such changes could have a material impact on the ability of the Company to
generate future revenues.
As reflected in the statement of changes in stockholders' equity, the Company
has a history of issuing common stock for services difficult to value, or yet
to be provided. Approximately 4,600,000 (or 86%) of the common stock
outstanding at December 31, 1995, is restricted in some fashion as a result of
the above transactions. Furthermore, the Company has in prior years canceled
common stock certificates due to non-performance of the third parties involved
in certain of the above transactions. Although no party to such transactions
has yet instigated litigation involving the Company for cancellation or
restriction of related shares, due to the volume of such transactions,
litigation relating to such activity remains a possibility. Management feels
all actions it has taken to cancel or restrict common stock are with merit, and
does not anticipate any material loss being incurred by the Company relating to
future resolution of these matters.
The Company has an employment agreement with Mr. Ron Foster, shareholder and
president, which expires on December 31, 2001. Under the agreement, Mr. Foster
is entitled to $120,000 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 - Fair market value of financial instruments
The Company's accounts receivable are principally with two charities for unpaid
rents. The collectibility of these receivables is contingent on the ability of
the charities to generate sufficient profits from future bingo games, and/or
other sources. Due to the nature of these receivables, their fair market value
is not subject to reasonable estimation. Management feels that their fair
market value approximates their recorded book value. The fair market value of
all other financial instruments is estimated to approximate their carrying
value in that their nature and terms are consistent with similar instruments in
the market place at this time.
The Company sold stock to a production company in California several years ago.
As a result of the sale, the production company was to provide approximately
$400,000 of production facility time and services at no additional charge. No
value has been recorded for such services provided and to be provided in that
their market value is not subject to reasonable estimation and that realization
of future services is not assured.
Page 77
<PAGE> 78
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
AND ACCOUNTANTS' REPORT
JUNE 30, 1996 AND 1995
Page 78
<PAGE> 79
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
SBI Communications, Inc.
Piedmont, Alabama
We have compiled the accompanying consolidated balance sheets of SBI
Communications, Inc., a development stage company, as of June 30, 1996 and
1995, and the related consolidated statements of income (loss), changes in
shareholders' equity, and cash flows for the years then ended, in accordance
with Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying consolidated financial statements and, accordingly,
do not express an opinion or any other form of assurance on them.
August 16, 1996
Charlotte, North Carolina
Page 79
<PAGE> 80
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
ASSETS
------
Current assets:
Cash $ 19,947 $ 61
Cash held in escrow (Note 5) 95,000 -
Accounts receivable, net of allowance
for doubtful accounts of $462,500
and $300,000 for 1996 and 1995, respectively 586,285 268,015
Note receivable from shareholder (Note 2) 25,000 -
---------- ----------
726,232 268,076
Property and equipment, less accumulated
depreciation (Note 3) 7,206,362 7,397,087
Other assets (Note 4):
Deferred loan costs 40,574 -
Trademarks, net 50,000 150,000
Shows and computer programs, net 82,980 248,940
Game inventory 30,688 75,400
Organization costs 85 256
---------- ----------
$8,136,921 $8,139,759
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Mortgage note payable - current portion (Note 5) $ 4,992 $ -
Note payable to a trust managed by a shareholder (Note 2) 250,000 -
Accounts payable 29,115 28,825
Accrued wages due to principal shareholder (Note 2) 180,000 60,000
Advances due to principal shareholder (Note 2) 24,477 50,962
Accrued interest 4,950 -
---------- ----------
493,534 139,787
---------- ----------
Mortgage note payable (Note 5) 243,753 -
---------- ----------
Shareholders' equity (Note 6):
Preferred stock, par value $5.00; 10,000,000
shares authorized; 1,668,000 and 1,628,000
shares issued and outstanding at March 31,
1996 and 1995, respectively 8,340,000 8,140,000
Preferred stock subscribed 25,000 -
Common stock, par value $.001; 40,000,000
shares authorized; 5,345,439 and 5,235,439
shares issued and outstanding at March 31,
1996 and 1995, respectively 5,345 5,335
Paid-in capital 3,567,343 3,562,353
Deficit accumulated during the development stage (4,538,054) (3,707,716)
---------- ----------
Total shareholders' equity 7,399,634 7,999,972
---------- ----------
$8,136,921 $8,139,759
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
and accountants compilation report.
Page 80
<PAGE> 81
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE SIX MONTHS ENDED JUNE 30,
<TABLE>
<CAPTION>
Inception
through
June 30,
1996 1995 1996
---- ---- -----------
<S> <C> <C> <C>
Revenues:
Licenses and royalties $ - $ - $ 641,642
Bingo hall rent 200,000 150,000 734,593
Bingo hall operating administrative fees - - 93,050
Interest income 274 32 1,375
Other income - - 235,754
--------- --------- -----------
Gross revenues 200,274 150,032 1,706,414
--------- --------- -----------
Expenses:
Production costs 8,198 - 314,883
General and administrative 180,564 142,468 2,088,398
Salaries and related expenses 76,860 66,000 940,520
Depreciation and amortization 273,974 246,498 1,698,299
Interest expense and finance charges 26,911 193 321,541
Losses from equity interest in joint venture - - 880,827
--------- --------- -----------
Total expenses 566,507 455,159 6,244,468
--------- --------- -----------
Income (loss) from operations $(366,233) $(305,127) $(4,538,054)
========= ========= ===========
Income (loss) per share (Note 6) $ (0.07) $ (0.06) $ (2.20)
========= ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements
and accountants compilation report.
Page 81
<PAGE> 82
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION, JANUARY 10, 1986, THROUGH JUNE 30, 1996
<TABLE>
<CAPTION>
Deficit
Common Stock Preferred Stock Accumulated
--------------------- --------------------- Additional During Total
Number Number Paid-in Development Shareholders'
of shares Amount of shares Amount Capital Stage Equity (Deficit)
---------- ------- --------- ---------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Initial common stock sold
in January, 1986 for
cash of $500 4,000,000 $ 4,000 - $ - $ (3,500) $ - $ 500
Recapitalization as a
business combination 3,300,000 3,300 - - (13,153) - (9,853)
Forgiveness of debt - - - - 246,370 - 246,370
Retroactive adjustment for
1 for 20 reverse stock
split occurring in 1993 (6,935,000) (6,935) - - 6,935 - -
Net loss, 1986 - - - - - (204,663) (204,663)
---------- ------- --------- ---------- ----------- ---------- ----------
Balance, December 31, 1986 365,000 365 - - 236,652 (204,663) 32,354
Common stock sold for cash
of $25,809 in August, 1987
$(12.90 per share) 2,000 2 - - 25,807 - 25,809
Common stock sold for cash
of $71,691 in August, 1987
$(14.06 per share) 5,100 5 - - 71,686 - 71,691
Common stock issued in August,
1987 for rent concessions
and other assets valued
at $71,750 $(7.18 per share) 10,000 10 - - 71,740 - 71,750
Common stock sold for cash
of $41,000 in October, 1987
$(10.00 per share) 4,100 4 - - 40,996 - 41,000
Common stock sold for cash
of $5,000 in November, 1987
$(10.00 per share) 500 1 - - 4,999 - 5,000
Net loss, 1987 - - - - - (544,026) (544,026)
---------- ------- --------- ---------- ----------- ---------- ----------
Balance December 31, 1987 386,700 387 - - 451,880 (748,689) (296,422)
Common stock sold for cash
of $100,000 in January, 1988
$(2.00 per share) 50,000 50 - - 99,950 - 100,000
Common stock issued in April,
1988 for services rendered
valued at $34,716 $(5.00 per
share) 6,943 7 - - 34,709 - 34,716
Common stock issued in June,
1988 for cash of $86,546
$(4.69 per share) 18,463 18 - - 86,528 - 86,546
Common stock issued in November,
1988 for services rendered
from September through
November, 1988, valued
at $46,877 $(4.69 per share) 10,000 10 - - 46,867 - 46,877
Net loss, 1988 - - - - - (1,206,824) (1,206,824)
---------- ------- --------- ---------- ----------- ---------- ----------
Balance December 31, 1988 472,106 472 - - 719,934 (1,955,513) (1,235,107)
Common stock issued in January,
1989 for cash of $23,438
$(4.69 per share) 5,000 5 - - 23,433 - 23,438
Common stock issued in January,
1989 as inducement to lenders
valued at $21,095 $(4.69
per share) 4,500 5 - - 21,090 - 21,095
Common stock issued in June,
1989 as repayment of debt
valued at $70,000 $(4.67
per share) 15,000 15 - - 69,985 - 70,000
</TABLE>
(Continued)
Page 82
<PAGE> 83
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION, JANUARY 10, 1986, THROUGH JUNE 30, 1996
(Continued)
<TABLE>
<CAPTION>
Deficit
Common Stock Preferred Stock Accumulated
--------------------- --------------------- Additional During Total
Number Number Paid-in Development Shareholders'
of shares Amount of shares Amount Capital Stage Equity (Deficit)
---------- ------- --------- ---------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Common stock issued in June,
1989 for legal services
from February through June,
1989, valued at $140,630
$(4.69 per share) 30,000 $ 30 - $ - $ 140,600 $ - $ 140,630
Net loss, 1989 - - - - - (491,957) (491,957)
---------- ------- --------- ---------- ----------- ---------- ----------
Balance December 31, 1989 526,606 527 - - 975,042 (2,447,470) (1,471,901)
Common stock issued in January,
1990 for production and
uplinking services valued
at $10,000 $(2.00 per share) 5,000 5 - - 9,995 - 10,000
Common stock issued in January,
1990 for design and
software programs valued at
$30,000 $(4.00 per share) 7,500 7 - - 29,993 - 30,000
Common stock issued in January,
1990 for telecommunication and
layout services rendered valued
at $50,000 $(2.00 per share) 25,000 25 - - 49,975 - 50,000
Common stock issued in June,
1990 for production services
valued at $50,000 $(5.00 per
share) 10,000 10 - - 49,990 - 50,000
Common stock sold in June,
1990 for cash of $3,750
$(5.00 per share) 750 1 - - 3,749 - 3,750
Common stock issued in November,
1990 as repayment of debt
owed to CEO valued at $300,000
$(0.60 per share) 500,000 500 - - 299,500 - 300,000
Common stock issued in November,
1990 for receivables of
$468,000, later deemed to
have no value $(4.68 per
share reduced to -0-) 100,000 100 - - (100) - -
Common stock issued in December,
1990 to a board member for
services rendered valued at
$25,000 $(5.00 per share) 5,000 5 - - 24,995 - 25,000
Common stock issued in December,
1990 to a board member for
services rendered valued at
$25,000 $(5.00 per share) 5,000 5 - - 24,995 - 25,000
Net income, 1990 - - - - - 2,511,101 2,511,101
---------- ------- --------- ---------- ----------- ---------- ----------
Balance December 31, 1990 1,184,856 1,185 - - 1,468,134 63,631 1,532,950
Common stock issued in October,
1991 as repayment of debt
owed to CEO valued at
$500,000 $(1.00 per share) 500,000 500 - - 499,500 - 500,000
Common stock issued in November,
1991 to CEO for various
trademarks, shows, computer
programs and bingo game
inventory, valued at
$1,405,200 $(3.00 per share) 468,400 468 - - 1,404,732 - 1,405,200
Net loss, 1991 - - - - - (2,315,058) (2,315,058)
---------- ------- --------- ---------- ----------- ---------- ----------
Balance December 31, 1991 2,153,256 2,153 - - 3,372,366 (2,251,427) 1,123,092
Common stock issued in January,
1992 for marketing services
valued at $9,000 $(0.60 per
share) 15,000 15 - - 8,985 - 9,000
</TABLE>
(Continued)
Page 83
<PAGE> 84
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION, JANUARY 10, 1986, THROUGH JUNE 30, 1996
(Continued)
<TABLE>
<CAPTION>
Deficit
Common Stock Preferred Stock Accumulated
--------------------- --------------------- Additional During Total
Number Number Paid-in Development Shareholders'
of shares Amount of shares Amount Capital Stage Equity (Deficit)
---------- ------- --------- ---------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Common stock issued in January,
1992 for clerical services
valued at $10,000 $(2.00
per share) 5,000 $ 5 - $ - $ 9,995 $ - $ 10,000
Common stock issued in January,
1992 for services provided
by board member valued at
$10,000 $(2.00 per share) 5,000 5 - - 9,995 - 10,000
Common stock issued in January,
1992 for services provided
by board member valued at
$10,000 $(2.00 per share) 5,000 5 - - 9,995 - 10,000
Common stock issued in January,
1992 for payment of interest
due on notes to three
individuals, valued at
$9,900 $(0.57 per share) 17,500 18 - - 9,882 - 9,900
Common stock sold in August,
1992 for cash of $25,000
$(0.75 per share) 33,333 33 - - 24,967 - 25,000
Net loss, 1992 - - - - - (493,057) (493,057)
---------- ------- --------- ---------- ----------- ---------- ----------
Balance December 31, 1992 2,234,089 2,234 - - 3,446,185 (2,744,484) 703,935
Fractional shares issued in
connection with reverse
stock split 100 - - - - - -
Common stock issued in March,
1993 for bonds - bonds were
unable to be issued, stock
was canceled in 1994 - no
valued has been assigned 650,000 650 - - (650) - -
Common stock issued in March,
1993 for consulting agreement;
350,000 shares originally
issued, 200,000 shares
canceled; no value assigned 150,000 150 - - (150) - -
Common stock issued in April,
1993 for consulting agreement
and $40,000 in cash; no value
assigned to the consulting
agreement $(0.40 per share) 100,000 100 - - 39,900 - 40,000
Common stock issued in July,
1993 for consulting agreement,
no value assigned 650,000 650 - - (650) - -
Common stock issued in August,
1993 for consulting agreement,
no value assigned 100,000 100 - - (100) - -
Common stock issued in August,
1993 to CEO for repayment
of various debts valued at
$37,500 $(0.19 per share) 200,000 200 - - 37,300 - 37,500
Common stock issued in October,
1993 for consulting services,
no value assigned 1,250 1 - - (1) - -
Common stock issued in November,
1993 for commitments to raise
$400,000 but such funds were
never received; Company has not
yet canceled certificates, but
restricted such certificates
until the matter is resolved;
no value has been assigned in
that management anticipates
ultimate cancellation of the
certificates 200,000 200 - - (200) - -
</TABLE>
(Continued)
Page 84
<PAGE> 85
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION, JANUARY 10, 1986, THROUGH JUNE 30, 1996
(Continued)
<TABLE>
<CAPTION>
Deficit
Common Stock Preferred Stock Accumulated
--------------------- --------------------- Additional During Total
Number Number Paid-in Development Shareholders'
of shares Amount of shares Amount Capital Stage Equity (Deficit)
---------- ------- --------- ---------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
---------- ------- --------- ---------- ----------- ---------- ----------
Common stock issued in December,
1993 for consulting agreement;
stock canceled in 1994 due
to nonperformance; no value
assigned 1,000,000 $ 1,000 - $ - $ (1,000) $ - $ -
Net loss, 1993 - - - - - (338,530) (338,530)
---------- ------- --------- ---------- ----------- ---------- ----------
Balance December 31, 1993 5,285,439 5,285 - - 3,520,634 (3,083,014) 442,905
Common stock issued in March,
1993 for bonds - bonds were
unable to be issued, stock
was canceled in 1994 (650,000) $ (650) - - 650 - -
Common stock issued in January,
1994 for consulting agreement
and computer equipment with
a book value of $91,669; no
value has been assigned to
the consulting agreement;
total value of $91,669
$(0.09 per share) 1,000,000 1,000 - - 90,669 - 91,669
Common stock issued in December,
1993 for consulting agreement;
stock canceled in July 1994
due to nonperformance; no
value assigned in 1993 (1,000,000) (1,000) - - 1,000 - -
Common stock issued in
November, 1994 for
consulting agreement,
no value assigned 500,000 500 - - (500) - -
Preferred stock issued in
December, 1994 for land
valued at $250,000;
building valued at
$6,250,000; and equipment
valued at $900,000; total
value of $7,400,000
$(4.93 per share) - - 1,500,000 7,500,000 (100,000) - 7,400,000
Preferred stock issued in
December 1994 to individual
to settle debts of
approximately $25,000
$(5.00 per share) - - 5,000 25,000 - - 25,000
Net loss, 1994 - - - - - (319,575) (319,575)
---------- ------- --------- ---------- ----------- ---------- ----------
Balance December 31, 1994 5,135,439 5,135 1,505,000 7,525,000 3,512,453 (3,402,589) 7,639,999
Common stock issued in January,
1995 for accounting services
valued at $100
$(0.001 per share) 100,000 100 - - - - 100
Preferred stock issued in
March, 1995, for cash - - 33,000 165,000 - - 165,000
Net loss, January 1, 1995,
to March 31, 1995 - - - - - (180,176) (180,176)
---------- ------- --------- ---------- ----------- ---------- ----------
Balance March 31, 1995 5,235,439 5,235 1,538,000 7,690,000 3,512,453 (3,582,765) 7,624,923
Common stock issued in May,
1995 for legal services
valued at $50,000
$(0.50 per share) 100,000 100 - - 49,900 - 50,000
Preferred stock issued in
June, 1995, to principal
shareholder as settlement
for $450,000 owed to said
shareholder, valued at
$450,000 $(5.00 per share) - - 90,000 450,000 - - 450,000
Common stock issued in
August, 1995 for
legal services valued
at $10,000 $(1.00 per share) 10,000 10 - - 9,990 - 10,000
</TABLE>
(Continued)
Page 85
<PAGE> 86
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION, JANUARY 10, 1986, THROUGH JUNE 30, 1996
(Continued)
<TABLE>
<CAPTION>
Preferred Deficit
Common Stock Preferred Stock Stock Subscribed Accumulated
--------------------- --------------------- ---------------- Additional During Total
Number Number Number Paid-in Development Shareholders'
of shares Amount of shares Amount of Shares Amount Capital Stage Equity (Deficit)
---------- ------- --------- ---------- ---------------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Preferred stock issued
in October, 1995 as
an inducement to an
individual to arrange
for $250,000 to be
loaned to the Company
by a trust controlled
by the individual,
value of $200,000
$(5.00 per share) - - 40,000 200,000 - - - - 200,000
Net loss, April 1, 1995
to December 31, 1995 - - - - - - - (589,056) (589,056)
--------- ------- --------- ---------- ----- ------- ---------- ---------- ----------
Balance December 31,
1995 5,345,439 5,345 1,668,000 8,340,000 - - 3,572,343 (4,171,821) 7,745,867
Preferred stock sub-
scribed in April,
1996, issued in July,
1996, as an inducement - - - - 5,000 25,000 (5,000) - 20,000
Net loss, January 1,
1996 to June 30, 1996 - - - - - - - (366,233) (366,233)
--------- ------- --------- ---------- ----- ------- ---------- ---------- ----------
Balance June 30, 1996 5,345,439 $ 5,345 1,668,000 $8,340,000 5,000 $25,000 $3,567,343 (4,538,054) $7,399,634
========= ======= ========= ========== ===== ======= ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
and accountants compilation report.
Page 86
<PAGE> 87
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
Jan. 10, 1986
<TABLE>
<CAPTION>
Through
June 30,
1996 1995 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) $(366,233) $(305,127) $(4,538,054)
Adjustments to reconcile net loss to cash
provided from operations:
Depreciation and amortization 273,974 246,498 1,698,469
Stock issued for services - 50,100 1,850,438
Stock issued for financing costs - - 200,000
Change in accounts receivable (86,421) (268,015) (611,285)
Change in game inventories 30,000 - 44,712
Amortization of deferred loan costs 4,426 - 4,426
Change in accounts payable (24,623) (20,333) 29,115
Change in accrued expenses 59,221 60,000 184,950
Loss on write-off of marketable securities - - 2,000
Loss on disposal of assets - - 2,440
Write-off of production costs - - 236,138
Loss on equity interest in joint venture - - 880,827
--------- --------- -----------
Cash provided (used) by operating activities (109,656) (236,877) (15,824)
--------- --------- -----------
Cash flows from investing activities:
Cash held in escrow (120,000) - (120,000)
Organization costs incurred - - (758)
Investment in marketable securities - - (2,000)
Payment for production costs - - (236,567)
Investment in joint venture - - (880,827)
Effect of business capitalization - - (9,853)
Purchase of property and equipment (31,052) (27,019) (217,680)
--------- --------- -----------
Cash provided (used) by investing activities (151,052) (27,019) (1,467,685)
--------- --------- -----------
Cash flows from financing activities:
Proceeds from notes payable 250,000 - 250,000
Repayment of notes payable (1,255) - (1,255)
Loans from shareholders/affiliates 20,321 40,029 745,124
Repayments on loans from shareholders (-) (-) (78,147)
Proceeds from issuance of common stock - 165,000 587,734
--------- --------- -----------
Cash provided by financing activities 269,066 205,029 1,503,456
--------- --------- -----------
Net increase (decrease) in cash 8,358 (58,867) 19,947
Cash at beginning of period 11,589 58,928 -
--------- --------- -----------
Cash at end of period $ 19,947 $ 61 $ 19,947
========= ========= ===========
Supplemental information:
Income taxes paid $ - $ - $ -
========= ========= ===========
Interest paid $ 23,264 $ - $ 89,664
========= ========= ===========
</TABLE>
Significant non-cash transactions included the following:
During 1995, legal and accounting fees valued at $60,100 were paid for by
the issuance of 210,000 shares of common stock; $450,000 of loans payable to
shareholders were repaid through the issuance of 90,000 shares of preferred
stock; and $200,000 of finance charges relating to loan inducement fees were
paid for by the issuance of 40,000 shares of preferred stock.
During 1996, loan costs of $20,000 were paid for through the issuance of
5,000 shares of preferred stock.
See accompanying notes to consolidated financial statements
and accountants compilation report.
Page 87
<PAGE> 88
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
Note 1 - Summary of significant accounting policies
The major accounting policies of SBI Communications, Inc. are summarized
below to assist the reader in reviewing the Company's financial statements.
Organization
SBI Communications, Inc. (the "Company"), was originally organized in the
State of Utah on September 23, 1983, under the corporate name of Alpine
Survival Products, Inc. Its name was subsequently changed to Justin Land
and Development, Inc. during October, 1984, and then to Supermin, Inc. on
November 20, 1985. On September 29, 1986, Satellite Bingo, Inc. was the
surviving corporate entity in a statutory merger with Supermin, Inc., a Utah
corporation. In connection with the above merger, the former shareholders
of Satellite Bingo, Inc. acquired control of the merged entity and changed
the corporate name to Satellite Bingo, Inc. Through shareholder approval
dated March 10, 1988, the name was changed to its current name of SBI
Communications, Inc.
Development stage company
The Company plans to provide an interactive, satellite cable bingo game show
and other similar telecommunication products or services to television
viewers. Since principal operations have not commenced, and since only
insignificant revenues have been generated, the Company is considered to be
a development stage company. Statement of Financial Accounting Standards
Number 7 establishes the accounting principles governing development stage
companies.
Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Satellite Bingo, Inc., a Georgia
corporation, which currently is inactive with no assets or liabilities.
Intercompany transactions and balances have been eliminated in consolidation.
Estimates and assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reporting amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Page 88
<PAGE> 89
Property and equipment
Property and equipment are stated at cost. Expenditures for maintenance and
repairs which do not improve or extend the life of an asset are charged to
expense as incurred. Major renewals and betterments are charged to the
property accounts. Upon retirement or sale of an asset, its cost and
related accumulated depreciation or amortization are removed from the
property accounts, and any gain or loss is recorded as income or expense.
Depreciation is provided using straight-line methods for financial reporting.
Trademarks, shows and computer programs
Trademarks, shows and computer programs are intangible assets acquired
through the issuance of stock. Such assets are being amortized on a
straight-line basis over sixty (60) months. The five-year life is a
subjective estimate that was derived after considering such factors as
consumer demand, competition, expected actions of competitors, effect of
obsolescence, etc. The estimated useful life of any unamortized cost will
be re-evaluated upon completion of the Company's development stage.
Deferred loan costs
Deferred loan costs are amortized using the effective interest method over
the life of the related loan.
Income taxes
The Company provides for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, which requires the use of the asset
and liability method and recognizes deferred income taxes for the
consequences of "temporary differences" by applying enacted statutory tax
rates applicable to future years to differences between the financial
statement carrying amounts and the tax bases of existing assets and
liabilities. The Company has no significant "temporary differences".
Deferred tax assets also may be recorded for the future benefits of
operating loss carryforwards if such benefits are not deemed "more likely
than not" to be realized. The effect on deferred taxes for a change in tax
rates is recognized in income or expense in the period that includes the
enactment date.
Statements of cash flows
For the purposes of the statements of cash flows, the Company considers cash
and highly liquid investments purchased with a maturity of three months or
less to be cash equivalents. Cash held in escrow is not considered a cash
equivalent.
Note 2 - Related party transactions
During 1994 and for several other prior years, the Company's principal
shareholder, who also serves as Chief Executive Officer (CEO), personally
funded the majority of the Company's operations. All amounts owed to the
shareholder, including amounts originally evidenced by interest bearing notes,
were converted to non-interest bearing advances effective January 1, 1993. The
majority of these advances were repaid in 1995 through the issuance of 90,000
shares of preferred stock. During 1995 and 1996, the Company accrued salaries
payable to the Company's principal shareholder of $10,000 per month.
Page 89
<PAGE> 90
All amounts owed to the shareholder are payable on demand. During the six
months ended June 30, 1995, the Company received net advances from this
shareholder of $40,029. As of June 30, 1995, the Company owed $50,962 to this
shareholder. During the six months ended June 30, 1996, the Company received
net advances from this shareholder of $24,477. As of March 31, 1996, the
Company owed $24,477 to this shareholder.
In October, 1995, the Company advanced $25,000 to a shareholder to be repaid
upon demand with interest at prevailing market rates. This balance was still
outstanding at June 30, 1996.
In October, 1995, the Company borrowed $250,000 from a trust managed by a
shareholder, in the form of a mortgage note. The note is payable in full on
October 15, 1996, with interest payable quarterly at prime plus 3%, secured by
all corporate property up to $1,000,000 in value. The holder has the right to
convert the mortgage note to common stock at a price of $3 per share. This
conversion privilege expires on July 15, 1996. Interest expense related to
this note totalled $13,750 for the six months ended June 30, 1996.
Note 3 - Property and equipment
Property and equipment are summarized as follows at June 30:
<TABLE>
<CAPTION>
Estimated
Useful Life 1996 1995
----------- ---- ----
<S> <C> <C>
Land $ 250,000 $ 250,000
Building 40 years 6,250,000 6,250,000
Vehicles 5 years 10,920 10,920
Furniture and
equipment 5 to 7 years 1,118,436 1,017,570
---------- ----------
7,629,356 7,528,490
Less accumulated
depreciation 422,994 131,403
---------- ----------
$7,206,362 $7,397,087
========== ==========
</TABLE>
Depreciation expense totalled approximately $140,000 and $122,000 for the six
months ended June 30, 1996 and 1995, respectively.
Note 4 - Other assets
Other assets are summarized as follows at June 30:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Trademarks:
Original cost $ 500,000 $ 500,000
Less accumulated amortization 450,000 350,000
---------- ----------
$ 50,000 $ 150,000
========== ==========
Shows and computer programs:
Original cost $ 829,800 $ 829,800
Less accumulated amortization 746,820 580,860
---------- ----------
$ 82,980 $ 248,940
========== ==========
</TABLE>
Page 90
<PAGE> 91
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Game inventory:
Original cost $ 75,400 $ 75,400
Less amounts used in operations 44,712 -
---------- ----------
$ 30,688 $ 75,400
========== ==========
Organization costs:
Original cost $ 758 $ 758
Less accumulated amortization 673 503
---------- ----------
$ 85 $ 255
========== ==========
Deferred loan costs:
Original cost $ 20,000 -
Less accumulated amortization 2,052 -
---------- ----------
$ 17,948 $ -
========== ==========
</TABLE>
Game inventory is expensed as used. Deferred loan costs are being amortized
over the life of the related loan (30 months) using the effective interest
method. All other assets listed above are being amortized on a straight-line
basis over sixty (60) months. Amortization expense including approximately
$4,000 classified as interest expense in 1996, totalled approximately $136,000
and $134,000 for the six months ended June 30, 1996 and 1995, respectively.
Note 5 - Mortgage note payable
Mortgage note payable is summarized as follows as of June 30:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Mortgage note payable in 30
installments of $3,330 including
interest at 14% per annum, with a
final balloon payment of $235,255
due october 1,1998, secured by
a deed of trust on all of the
Company's real estate $ 248,745 $ -
Less current portion 4,992 -
--------- --------
Long-term portion $ 243,753 $ -
========= ========
</TABLE>
$95,000 of the proceeds from the above note are currently held in escrow
pending resolution of various conditions of the loan. Management anticipates
collecting these funds during the third quarter of 1996.
Note 6 - Common and preferred stock activity
On January 1, 1993, the Company executed a plan of merger that effectively
changed the Company from a Utah corporation to a Delaware corporation. This
merger also resulted in a reverse stock split of one (1) share of the Delaware
corporation for each twenty (20) shares of the Utah corporation. The common
stock of the Company has been retroactively restated from its initial year to
account for this reverse stock split.
The Delaware corporation is authorized to issue up to 40,000,000 shares of
common stock with a par value of $.001 per share, and 10,000,000 shares of
preferred stock with a par value of $5.00 per share. The
Page 91
<PAGE> 92
preferred stock may be issued from time to time in one or more series, the
shares of each series to have such voting powers, dividend rates, designations,
preferences, and other characteristics as adopted by the Board of Directors.
Preferred stock issued during 1994 and 1995 consisted of one series (series A),
having a liquidation preference of $5.00 per share, paying no dividend, and
convertible into common stock upon demand, at a conversion rate that would
transfer shares of common stock worth an amount equal to the par value of the
preferred stock based upon the market value of the common stock at the date of
conversion. Preferred stock subscribed (see below) in 1996 has a liquidation
preference of $5.00 per share, paying no dividend, and convertible into common
stock after July 1, 1997, at a conversion rate of 5 shares of common stock for
1 share of preferred stock.
As an inducement to obtain the mortgage note payable described in Note 5, the
Company has granted an option to the mortgagor to acquire 50,000 shares of
common stock at a price of fifty cents $(0.50) per share. Such option is
exercisable upon thirty days notice, and expires upon repayment of the mortgage
loan. The Company also has subscribed 5,000 shares of convertible preferred
stock to the mortgagor as payment for $20,000 in loan closing costs. These
shares were formally issued in the third quarter of 1996.
The Company's income (loss) per share was calculated using 5,345,439,
5,269,141, and 2,059,838 weighted average shares outstanding for the six months
ended June 30, 1996, the six months ended June 30, 1995, and for the period
from inception to June 30, 1996, respectively. These amounts were determined
based upon retroactive restatement for the 1 for 20 reverse stock split
occurring in 1993. Although the preferred stock is a common stock equivalent,
with a conversion rate of approximately 10 shares of common stock (based upon
an approximate market price for common stock of $0.50 at December 31, 1995) for
each share of preferred stock as of the date the preferred stock was issued,
preferred stock conversion has not been included in the calculation of earnings
per share in that to do so would be anti-dilutive.
Note 7 - Income taxes
Deferred income tax assets and liabilities are summarized as follows at June 30:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets
attributable to operating
loss carryforwards $1,690,000 $1,370,000
Valuation allowance due to
uncertainty surrounding
realization of operating
loss carryforwards (1,690,000) (1,370,000)
Deferred tax liabilities - -
---------- ----------
Total deferred taxes $ - $ -
========== ==========
</TABLE>
The Company has available at June 30, 1996, unused operating loss
carryforwards, which may be applied against future taxable income, that expire
as follows:
Page 92
<PAGE> 93
<TABLE>
<CAPTION>
Amount of Unused Operating Expiration During
Loss Carryforwards Year Ended December 31,
-------------------------- -----------------------
<S> <C>
$ 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
360,000 2011
----------
$4,410,000
==========
</TABLE>
Note 8 - Commitments, risks and contingencies
The Company manages for various charities a bingo hall in Piedmont, Alabama.
Rents and administrative fees charged to charities are unsecured, and generally
are paid only as revenues from the bingo games produce sufficient profit to
allow the charities to make payments. Accounts receivable at June 30, 1996,
are concentrated principally with two charities. Management has estimated the
amount of such receivables that are collectible based upon their knowledge of
the financial condition of the charities and the history of the profitability
of bingo games. It is reasonably possible that management's estimate of the
amount of such receivables that are collectible could change in the near future.
The Company is also in the process of developing bingo productions to be
broadcast by satellite into homes of viewers throughout the United States, and
has entered into various licensing agreements to provide, for fees and
royalties, certain software and methods involving bingo game production and
operation. These agreements cover territories in California, Brazil, Greece,
Hong Kong, and United States Indian Reservations/Military Bases/Charity Bingo
Parlors. None of the above territories have significant bingo operations that
are generating fees or royalties for the Company at this time. Should local,
state, federal or foreign country laws change regarding bingo in these areas,
such changes could have a material impact on the ability of the Company to
generate future revenues.
As reflected in the statement of changes in stockholders' equity, the Company
has a history of issuing common stock for services difficult to value, or yet
to be provided. Approximately 4,600,000 (or 86%) of the common stock
outstanding at June 30, 1996, is restricted in some fashion as a result of the
above transactions. Furthermore, the Company has in prior years canceled
common stock certificates due to non-performance of the third parties involved
in certain of the above transactions. Although no party to such transactions
has yet instigated litigation involving the Company for cancellation or
restriction of related shares, due to the volume of such transactions,
litigation relating to such activity remains a possibility. Management feels
all actions it has taken to cancel or restrict common stock are with merit, and
does not anticipate any material loss being incurred by the Company relating to
future resolution of these matters.
Page 93
<PAGE> 94
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 $120,000 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 9 - Financial instruments
The Company's accounts receivable are principally with two charities for unpaid
rents. The collectibility of these receivables is contingent on the ability of
the charities to generate sufficient profits from future bingo games, and/or
other sources. Due to the nature of these receivables, their fair market value
is not subject to reasonable estimation. Management feels that their fair
market value approximates their recorded book value. The fair market value of
all other financial instruments is estimated to approximate their carrying
value in that their nature and terms are consistent with similar instruments in
the market place at this time.
The Company sold stock to a production company in California several years ago.
As a result of the sale, the production company was to provide approximately
$400,000 of production facility time and services at no additional charge. No
value has been recorded for such services provided and to be provided in that
their market value is not subject to reasonable estimation and that realization
of future services is not assured.
Page 94
<PAGE> 95
SUMMARY FINANCIAL DATA
Set forth below is selected financial information of the Registrant
and its consolidated subsidiaries as derived from the audited statements of
income (loss) for the last three fiscal 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.
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA
- ----------------------------
Gross Revenues 604,873 25,076
Income from Operations(Loss) (769,232) (319,575)
Net Income (Loss) per share * (.14) (.07)
BALANCE SHEET DATA
- ------------------
ASSETS
- ------
Current Assets 536,453 58,928
Property & equipment, less
accumulated depreciation 7,316,219 7,483,501
Other Assets 326,818 607,661
--------- ---------
TOTAL ASSETS 8,179,490 8,150,090
LIABILITIES
- -----------
Current Liabilities 433,623 510,091
Long Term Liabilities Nil Nil
--------- ---------
TOTAL LIABILITIES 433,623 510,091
TOTAL STOCKHOLDERS' EQUITY 7,745,867 7,639,999
--------- ---------
Total Liabilities and Equity 8,179,490 8,150,090
- ---------------------------- ========= =========
</TABLE>
- ------
* See above. Per share data is computed based on the weighted average
of common stock outstanding as of the report date.
PART III
ITEM 1. INDEX TO EXHIBITS
Incorporated by reference from Item 2 below.
Form 10-SB Dated August 31, 1996, Page 95
<PAGE> 96
ITEM 2. DESCRIPTION OF EXHIBITS
<TABLE>
<CAPTION>
PAGE OR
EXHIBIT SOURCE OF
NUMBER INCORPORATION DESCRIPTION
- ------- ------------- -----------
<S> <C> <C>
2. .1 *** Plan of Reorganization: Agreement and Plan of Merger [sic] by and among Satellite Bingo, Inc.,
a Georgia corporation, and Supermin, Inc. dated September 2, 1986.
.2 *** Re-incorporation in Delaware Instruments.
3. Constituent Documents:
----------------------
.1 *** Articles of Incorporation, as amended
.2 *** Bylaws, as amended
10. Material Contracts:
-------------------
.1 *** Agreements for Purchase of Piedmont Bingo Hall (Frontier Palace).
.2 *** Employment Agreement between Registrant and Ronald Foster.
.3 Joint Venture Agreements:
-------------------------
*** .1 Joint Venture Agreement with VPACS Limited (a New York corporation)
*** .2 Cahill Agreement
99 .3 La Yate Company Limited (Hong Kong)
108 .4 PandaAmerica/Glendale Studios
.4 Bingo Hall Agreements:
----------------------
*** .1 Chief Strikeaxe Trading Post (Oklahoma)
*** .2 DCA Services Division, Fort Benning, Georgia
.5 *** Lease and Service Provider Agreements with Piedmont Jaycees.
.6 Program & Production Agreements:
--------------------------------
*** .1 Glendale Studios Production Agreements
*** .2 Las Vegas Television Network, Inc.
.7 *** Lease Agreement dated January 17, 1996, with Integrated Telephony Products, Inc.
.8 Agreements with Bradley M. (Brad) Tate:
---------------------------------------
*** .1 Memorandum of Service Agreement
*** .2 Consulting Agreement
.9 *** Alamo Leasing Agreement
</TABLE>
Form 10-SB Dated August 31, 1996, Page 96
<PAGE> 97
<TABLE>
<CAPTION>
PAGE OR
EXHIBIT SOURCE OF
NUMBER INCORPORATION DESCRIPTION
- ------- ------------- -----------
<S> <C> <C>
.10 Letters of Intent:
------------------
*** .1 Glendale Studios, Inc.
*** .2 Cherokee Indians of Georgia, Inc.
*** .3 Promotions International Corporation.
.11 Licensing Agreements:
---------------------
111 .1 Fertina-C, LTD, March 25, 1992 (Greece)
118 .2 Satellite Bingo, Inc. and Luis Manuel Da Costa Matias, January 18, 1991(Brazil)
123 .3 I.O. Report, C.A., March 23, 1993, (Venezuela)
.12 LACOA Agreements:
-----------------
126 .1 Lobbyist Engagement Agreement
130 .2 Management Agreement
11. * Statement re computation of per share earnings.
21. ** Subsidiaries of the Registrant.
27. Financial Data Schedule (for SEC use only)
99. Additional Exhibits:
*** .1 Letter from Fletcher, Heald & Hidreth to Ron Foster, dated April 10, 1992,
referencing communications with Cynthia Young, Assistant Chief, Support of
Litigation, Organized Crime and Racketeering Section of the Criminal Division,
UNITED STATES DEPARTMENT OF JUSTICE.
*** .2 Letter from Fletcher, Heald & Hidreth to Ron Foster, dated March 19, 1992,
referencing the legality under federal law of SBI Communications, Inc.'s
programs and planned subscription network.
*** .3 Correspondence between the Federal Communications Commission and Putbrese,
Hunsaker & Ruddy, dated September 14, 1990 through February 11, 1991, requesting
a request for declaratory ruling the legality of advertising interactive Bingo
games on cable systems.
*** .4 Correspondence between Sutherland, Asbill & Brennan and the Federal Communications
Commission, from July 28, 1986, until some undetermined time in 1987.
*** .5 Opinion letters to Ron Foster from Sutherland, Asbill & Brennan dated July 11 and 15, 1986.
*** .6 Letter involving the game C-Note, dated June 18, 1993, referencing a prohibition under
Section 9-701(1(a) to the offer of games of Bingo and keno
</TABLE>
Form 10-SB Dated August 31, 1996, Page 97
<PAGE> 98
<TABLE>
<S> <C> <C>
in Nebraska, but noting that such statute would not appear to prohibit the broadcast of
the games into Nebraska, or, the location in Nebraska of telephone banks involving offers
of the games outside of Nebraska.
*** .7 Opinion Letter dated November 16, 1995, from Wiley, Rein & Fielding (Washington, D.C.), re
Pay-per-view Bingo.
137 .8 Ordinance Number 429 (Bingo) dated June 13, 1994, City Clerk of Piedmont, Alabama.
144 .9 Alabama Constitution, Amendment Number 508, Bingo Games in Calhoun County.
145 .10 Limited Appraisal of Frontier Palace, dated May 1, 1995, prepared by Phillip C. Ledbetter.
</TABLE>
- ---------
* Incorporated by reference from the financial statements filed
herewith.
** Incorporated by reference from the disclosure thereof at Part I, Item
I (Description of Business), located at page 3 of this registration
statement.
*** Provided in original filing.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this First Amended
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized.
SBI COMMUNICATIONS, INC.
Dated: August 31, 1996
/s/Ronald Foster/s/
-------------------
Ronald Foster
Chairman, Chief Executive Officer & President
Form 10-SB Dated August 31, 1996, Page 98
<PAGE> 1
Exhibit 10.3.3
THIS MEMORANDUM OF JOINT VENTURE AGREEMENT (the "Agreement") is entered
into this 15th day of April, 1989, by and between LA YATE COMPANY LIMITED a
Hong Kong Corporation (LYL) and SBI Communications, Inc., a Utah Corporation
(SBI).
In consideration of the mutual promises of the parties and for other good
and valuable consideration, the parties do hereby agree as follows: -
1. FORMATION OF JOINT VENTURE
(a) The parties hereto agree to form a joint venture for the
purpose of financing, developing and producing a
television game show currently entitled "Satellite Bingo"
(the "Project") for commercial television broadcast, and
such other rights of exploitation as the parties deem
commercially viable in Hong Kong. LYL shall be given a
right to first refusal to form joint venture or other
legal relationship with SBI in connection with the
Project in other Asian countries. SBI agrees to make the
same proposals to LYL that it makes to other entities
relative to the Project in other Asian countries. LYL
shall have 21 days from receipt of the proposal to accept
or reject the proposal. Nothing in this paragraph shall
restrict SBI's rights to negotiate with others regarding
the Project. In the event that no response is submitted
by LYL within the above stated period, SBI may
immediately execute contracts with other entities,
without notice to LYL.
(b) This joint venture shall be deemed formed pursuant to and
subject to the provisions of the California Corporations
Code, Title 2, Chapter 1, known as Uniform Partnership
Act; provided that if any provisions of this Agreement is
inconsistent
Form 10-SB Dated August 31, 1996, Page 99
<PAGE> 2
with any provision of said Uniform Partnership Act, then
the provisions of this Agreement shall prevail to the
extent permitted by law.
(c) The name of this joint
venture shall be "Satellite Bingo, Ltd.".
2. Principal Place of Business
The principal place of business of the joint venture shall be 509 Tak
Shing House, 20 Des Voeux Road Central, Hong Kong, or such other place as may be
mutually agreed by the parties hereto.
3. Term The term
of the joint venture shall commence upon the approval of
the Television and Entertainment Licensing Authority
and/or any relevant authority of the Hong Kong Government
in the manner stipulated in Clause 4 hereof and shall
continue thereafter unless and until:
(i) The election by all parties to terminate;
(ii) If lack of financing for subsequent productions of the Project
results in any interruption of production for a period in excess
of six (6) months, then on the election of any party to terminate;
(iii) The distribution to the parties of all the joint venture's assets;
or
(iv) The sale of all or substantially all of the assets of the Joint
Venture and distribution of the proceeds to the parties.
4. Capital Contributions
LYL has or will contribute to the capital of the joint
venture the financing for the production of the show, SBI hereby contributes to
the joint venture all the rights to exploit all of SBI's rights in and to the
game show in the stated market. Each party shall have a capital account
Form 10-SB Dated August 31, 1996, Page 100
<PAGE> 3
equal to that party's capital contributions plus that party's allocations of net
profit and minus that party's allocations of net loss and share of distribution.
LYL may make additional capital contribution to the joint venture to cover the
expenses of soliciting financing in accordance with Section 7 hereof including
promotional costs as the parties shall mutually agree. Any other additional
capital contributions shall be made by the unanimous approval of the parties
hereto. The term "Adjusted Invested Capital" shall refer to all capital
contributions by a party, less cash distributed to the party, provided that
Adjusted Invested Capital shall not be reduced below zero.
It is understood and agreed that SBI has expended One Hundred Thousand
U.S. Dollars ($100,000) thus far on computers, software, sets, and promotional
video tapes. Upon the approval of the Television and Entertainment Licensing
Authority of the Hong Kong Government of the Project and upon LYL signing the
contract with the T.V. Station, LYL will pay to SBI the sum of Fifty Thousand
U.S. Dollars ($50,000) whereupon each party shall receive a contribution of
Fifty Thousand U.S. Dollars (US $50,000).
5. Interest in Joint Venture
The parties shall have "Percentage Interests" in the Joint Venture as
follows:-
LYL 50%
SBI 50%
6. Financing the Project
For six (6) months from the date of this Agreement LYL shall actively
solicit financing from television stations, networks, cable services and
various sponsors for the development, production and exploitation of the
Project in the event the parties are unable to secure sufficient financing for
such purpose within such six month period, either party may terminate the joint
venture.
Form 10-SB Dated August 31, 1996, Page 101
<PAGE> 4
7. Production
The budgets for Satellite Bingo shows, shall be subject to the mutual
approval of the parties, but in event of dispute SBI shall have final budgeting
approval.
8. Credit
If the Project is produced, then the parties shall receive credit as
follows:
"Produced by SBI Communications, Inc. in association with LA YATE CO. LTD."
together with such other credits , if any, as the parties mutually agree.
9. Control and Management
Except as specifically provided herein, LYL shall be responsible for the
management of the operations of the joint venture including the disbursement of
joint venture's capital and other funds in accordance with a budget authorized
in accordance with the terms of this Agreement. Notwithstanding Jon Benn of
LYL shall on an ongoing basis, inform and consult with an officer of SBI.
10. Accounting
LYL shall keep adequate books and records to reflect the affairs and
transactions of the joint venture which shall be available for inspection by
the parties during normal business hours. The parties shall insure that each
party receives within ninety (90) days after the end of each taxable year the
information necessary for the party to complete his federal and state income
tax returns.
11. Banking
Form 10-SB Dated August 31, 1996, Page 102
<PAGE> 5
Joint Venture funds shall be deposited in a bank account in the name of
the joint venture. Such funds shall be subject to withdrawal on the signature
of an authorized signatory of LYL or of both LYL and SBI.
12. Cash Available for Distribution
All revenues generated by the joint venture after paying all proper
expenses and providing for reasonable reserves for the conduct of the joint
venture business ("cash available for distribution") shall be distributed at
such times as determined by LYL and SBI in the following order of priority:
(i) First, to the parties in an amount which when added to all prior
distributions under this subsection 12(a)(i) equal total capital
contributions of the parties.
(ii) Thereafter, cash available for distribution shall be distributed
to the parties pro rata in accordance with their percentage
interests.
13. Profits and Losses
Net profits and net losses as determined by the joint venture's
accountants shall be allocated as follows: -
(i) Net loss shall first be allocated to the parties until net loss
has been allocated in an amount equal to the capital
contributions;
(ii) Thereafter, net loss shall be allocated to the parties in
accordance with their Percentage Interests.
(iii) Net profit shall first be allocated to the parties until such
time as there shall have been allocated to the parties under
this subsection (13)(iii) net profit equal to such prior net
loss allocations;
Form 10-SB Dated August 31, 1996, Page 103
<PAGE> 6
(iv) Thereafter, net profit shall be allocated to the parties in
accordance with their percentage interests.
Form 10-SB Dated August 31, 1996, Page 104
<PAGE> 7
14. Compensation
One or more of the parties may be entitled to compensation for services
performed as a producer subject to the unanimous approval of the parties.
Except as specifically set forth herein and except for distributions of cash
made in accordance with Section 12, no party shall be entitled to compensation
for services relating to the joint venture.
15. Reimbursement of Expenses
The joint venture shall indemnify a party for payment made and personal
liabilities reasonably incurred by it in the ordinary and proper conduct of the
joint venture business or for the preservation of the joint venture property.
16. Assignment of interests
No party shall sell, assign, mortgage, hypothecate or encumber its
interest in the joint venture without the prior written consent of the
non-assigning parties.
17. Dissolution
Upon dissolution, the business of the joint venture shall be wound up, the
assets shall be liquidated, and the proceeds applied to (i) payment of the
joint venture debts (other than to the parties) including the expenses of
liquidation; (ii) deposit in a trust account of a reasonable reserve for
payment of contingent liabilities and expenses; and (iii) repayment for loans
from the parties. The remaining proceeds shall be distributed in the manner
provided for distribution of cash generally. After passage of a reasonable
time and payment of the contingencies arising in that time, the balance
remaining in the trust account shall be distributed to the parties in the same
manner. It is specifically understood and agreed that upon termination and/or
dissolution, the rights granted hereunder by SBI shall terminate and/or revert
back to SBI.
Form 10-SB Dated August 31, 1996, Page 105
<PAGE> 8
18. Construction
This Memorandum of Joint Venture Agreement shall be governed by and
construed in accordance with the laws of the California Corporation Code
applicable to contracts entered into and to be fully performed therein.
19. Entire Understanding
The foregoing constitutes the entire understanding of the parties hereto,
and supersedes any prior or collateral understandings and negotiations or
agreements.
20. Notices
All notice or demands shall be in writing and shall be delivered
personally, electronically, telegraphically, or by express or certified mail.
Delivery shall be deemed conclusively made (i) at the time of delivery if
personally delivered, (ii) immediately in the event notice is delivered by
transmittal over electronic or telephonic transmitting devices, such as telex
or telecopy, provided the party to whom the notice is delivered has compatible
device and electronically or by other written document confirms receipt
thereof, or the party otherwise confirms actual receipt thereof; (iii) at the
time that the telegraphic agency confirms to the sender delivery thereof to the
addressee of the Parties or if they cannot agree then in accordance with the
rules governing the Arbitrators shall have at least ten (10) years experience
in the television and motion picture industry.
Judgment on the arbitration award may be entered in any state or federal
court of competent jurisdiction. Nothing contained herein shall, however, (i)
prevent any party from seeking and obtaining extraordinary or provisional
relief, including but not limited to, prohibitory or mandatory injunctions or
extraordinary writs in any court of law or equity having jurisdiction; (ii)
prevent any party from joining any other Defendant in any action brought by or
against a third
Form 10-SB Dated August 31, 1996, Page 106
<PAGE> 9
party; or (iii) prevent any party from filing a legal action hereunder to
effectuate any attachment or garnishment, provided that such party stipulates in
such action, at any other party's request, to arbitration of the merits of said
case in accordance with this provision.
22. Attorney's Fees
In the event of any litigation or arbitration respecting or arising out of
this Agreement, the prevailing party shall be entitled to recover its
Attorneys' fees and costs.
<TABLE>
<S> <C>
LA YATE CO. LTD SBI COMMUNICATIONS, INC.
A Hong Kong Corporation A Utah Corporation
/s/ Jon Benn /s/ /s/ Ron Foster /s/
- ----------------------- ------------------------
JON BENN, Director RON FOSTER, President
</TABLE>
Form 10-SB Dated August 31, 1996, Page 107
<PAGE> 1
Exhibit 10.3.4
AGREEMENT
1) PANDAAMERICA
3160 Torrance Blvd., Ste 100
Torrance, CA 90503
2) GLENDALE STUDIOS, INC., a California Corporation
1239 S. Glendale Avenue
Glendale, CA 91205
3) SBI Communications, Inc., a Delaware Corporation
1330 South Glendale Avenue
Glendale, CA 91205
Will jointly produce market and promote a bingo-formatted show to be aired over
Tel Star 303 (T303) receive Channel 17, which broadcasts PandaAmerica
throughout area covered by Tel Star 303 Footprint.
This joint venture will provide payment for all expenses incurred and revenues
equally by and to the parties. Upon approval of such expenses incurred or to
be incurred. Equipment and services to be billed to the parties at cost (or
fair market value). Operating board to be formed and consist of the following
members:
Marty Weiss (PandaAmerica)
Al Makhanian (Glendale Studios)
Ron Foster (SBI Communications)
All new ventures, expenses and all aspects of operation shall be approved by
all members of the operating board and/or parties. Such approval will not
unreasonably be withheld.
All start-up expenses to be shared on an equal basis by the parties. These
items to be approved by the parties. All expenses to be paid out of revenues,
unless there are losses which will be paid equally by all of the parties.
Profits after expenses to be shared equally by each party. Accounting shall be
provided by CPA firm mutually agreed by the parties which include sales,
expenses and all other related items to be provided to the parties on a monthly
basis.
Accounting, Productions, Credit Cards, Trademark and Copyrights, Legal,
Telecommunications Switcher, "800" numbers, Printing and Direct Mail , Travel,
Phone Service (Local - Long Distance), Software, Technology
Form 10-SB Dated August 31, 1996, Page 108
<PAGE> 2
TO: RON FOSTER
AL MAKHANIAN
MARTY WEISS
RE: GLOBALOT BINGO
DATE: NOVEMBER 2, 1995
This shall set forth the basic terms of the agreement between SBI
Communications, Inc., PandaAmerica, Inc., and Glendale/Oakridge Studios, Inc.
The option for development, financing, production and distribution of the
original concept and all elements thereof (concept) created by SBI
Communications Inc. entitled Globalot Bingo as the project.
I. PROJECT
A) The project shall be a pilot on PandaAmerica Television Network
tentatively entitled Globalot Bingo.
B) SBI, PandaAmerica, and Glendale/Oakridge Studios shall act as show
producers, and shall work jointly creatively on the show, but, in case of
any dispute, Ron Foster will have the final say in all creative decisions
pertaining to the game Globalot Bingo. PandaAmerica and Glendale/Oakridge
Studios shall be responsible for all production decisions and will share
in costs.
II. FINANCING
A) SBI, PandaAmerica, and Glendale/Oakridge Studios shall work jointly to
obtain commitments from other networks, cable or single station to produce
viewers.
B) SBI, PandaAmerica, and Glendale/Oakridge Studios shall receive 33 1/3%
profits on all exploitation from the project Globalot Bingo done on
PandaAmerica Network.
C) SBI, PandaAmerica, and Glendale/Oakridge Studios will share in expenses on
producing Globalot Bingo on PandaAmerica's network. These costs will include
prizes for winners of bingo, production costs, satellite time, and any studio
production costs including labor.
III. RIGHTS
SBI, PandaAmerica, and Glendale/Oakridge Studios will mutually agree in
good faith on any agreement and the terms thereof made to third parties,
financiers or networks relating to this project, Bingo.
Form 10-SB Dated August 31, 1996, Page 109
<PAGE> 3
IV. CREDITS
SBI shall receive Executive Producer, Al and Marty will share Co.
Executive Producer.
V. EXECUTION
The foregoing, when signed by all parties will serve as a binding interim
agreement in order, among other things, to begin development and licensing of
the concept and until a more formal agreement, if any, on terms not inconsistent
with those stated above, can be prepared and signed.
SBI Communications Glendale/Oakridge Studios
/s/ Ron Foster /s/ Al Makhanian /s/
- ------------------ --------------------
By: Ron Foster By: Al Makhanian
PandaAmerica
/s/ Marty Weiss /s/
- --------------------
By: Marty Weiss
Form 10-SB Dated August 31, 1996, Page 110
<PAGE> 1
Exhibit 10.11.1
LICENSING AGREEMENT
THIS AGREEMENT (the "Agreement") is made this March 25, 1992 by and between SBI
COMMUNICATIONS, INC., a Utah Corporation, and its wholly owned subsidiary
Satellite Bingo, Inc., a Georgia Corporation (together called "SBI") and
Fertina-C, LTD., a Greece Corporation.
WHEREAS, SBI has developed a concept for beaming live interactive promotional
bingo games, and other concepts to the cable and direct broadcast television
markets. SBI has acquired certain equipment that would be useful in
implementing said concept, has developed and copy-righted computer software
necessary to implement said concept, has produced considerable video footage
that could be useful in developing video tapes promoting said concept, and has
trademarked the name and logo Satellite Bingo; and
WHEREAS, Fertina-C, LTD. has the expertise on the European and Middle East
market with business relations and the network to provide distribution and
promotional services. Furthermore, Fertina-C, Ltd., has a desire of utilizing
SBI concepts on satellite, cable television, on direct broadcast television and
the Bingo Club nationally in Greece;
WHEREAS, under a separate agreement, Fertina-C, Ltd. will enter into a
consultant agreement with Ronald Foster to produce Satellite Bingo and its
concepts.
NOW THEREFORE, in consideration of $550,000 to be paid no later than April 30,
1997 annually in equal payments of $100,000 by Fertina-C, Ltd. to SBI, and in
consideration of a continuing royalty payment described more fully below, the
parties hereto agree as follows:
1. SBI hereby grants to Fertina-C, Ltd. an exclusive license to use its
concepts, whether presently developed or developed in the future, its
computer software footage to produce promotional video tapes (the
"rights") on satellite, cable television, on direct broadcast television
and in its Bingo Club. SBI will engage in no business operations on
satellite, cable television, on direct broadcast television, or Bingo
Club, and Fertina-C, Ltd. will not use the rights anywhere except on
satellite, cable television, on direct broadcast television, or Bingo Club
in Greece. SBI also herewith sells to Fertina-C, Ltd. certain "set
pieces" including a computerized bingo board, a computerized random
selector board, and spare parts.
Form 10-SB Dated August 31, 1996, Page 111
<PAGE> 2
2. The $550,000 paid herewith by Fertina-C, Ltd. to SBI will be allocated as
follows:
<TABLE>
<S> <C>
Purchase of production set pieces * $ 50,000
Rights to Satellite Bingo trademarks 40,000
Rights to footage to produce
promotional video tapes 60,000
Rights to use computer software program 150,000
Exclusive rights to SBI concept for cable
television, satellite, and direct broadcast television 200,000
Concept of the Bingo Club 50,000
--------
550,000
</TABLE>
3. Fertina-C, Ltd. hereby agrees to pay SBI or its assigns a 2% royalty on
satellite bingo card sales, net of the money escrowed for prizes, made by
Satellite Bingo for cable, on direct broadcast, and for the Bingo Club.
Also a 2% fee will be paid to SBI on any additional revenues through
advertising, sell of products or the Bingo Club.
NOTE: By mutual approval between SBI and Fertina-C, Ltd., candidates will
be selected for a scholarship, from this 2% royalty fund for agriculture
education in Greece or from Greece into Georgia, or elsewhere. This fund
will be held in escrow and will require both the Licensor and the Licensee
for the use of these funds.
4. SBI hereby represents and warrants to Fertina-C, Ltd. that it is a
corporation duly incorporated, validly existing and in good standing under
the laws of Utah, that its wholly owned subsidiary is a corporation duly
incorporated, validly existing and in good standing under the laws of
Georgia; that it is the owner of all rights and equipment conveyed herein;
that no litigation is pending or threatened that challenges SBI's
ownership of these rights and equipment; that it will at closing deliver
all rights and equipment free of any liens and encumbrances; that it has
entered into no contracts that would prevent it from entering into this
Agreement; and that it has obtained the necessary approval from its board
of directors to enter into this Agreement. Fertina-C, Ltd. hereby
represents and warrants to SBI that it is a corporation duly incorporated,
validly existing and in good standing under the laws of Greece and that
its President has authority under the corporation to enter into this
Agreement.
5. This Agreement is binding upon inures to the benefit of SBI, its
successors and assigns, and to Fertina-C, Ltd., its successors and
assigns.
Form 10-SB Dated August 31, 1996, Page 112
<PAGE> 3
6. No modification or waiver of this Agreement shall be valid unless it is
in writing and signed by the party against whom it is sought to be
enforced. No waiver at any time of any provision of this Agreement shall
be deemed a waiver of any other provision of this Agreement at that time
of a waiver of that or any other provision at any other time.
7. This Agreement contains the entire understanding between the parties with
reference to the matters contained herein, there being no terms,
conditions, warranties or representations other than those contained
herein.
ADDITIONAL PARAGRAPHS
1. Licensee agrees that all broadcast will be via a live feed. Licensee
agrees to provide copyright notice and credits in a manner to be supplied
by Licensor. Under no circumstances shall Licensor delete such copyright
notices or credits. Licensee agrees that all videos, brochures or any
written, taped, or printed materials that result from the exploitation of
this license shall bear the copyrights as provided by Licensor. Licensee
further agrees that the use at any time of any of the above stated
materials outside of the market territory provided under this agreement,
or for purposes other than exploitation of this agreement shall constitute
not only a material breach of this agreement, but shall also constitute
copyright and trademark infringement.
2. Licensee agrees that no cards for participation in the game will be made
available or distributed to areas not covered specifically by this
agreement and that no winning cards will be honored if such cards are
played via satellite or other instrumentality which is not in association
with licensed broadcasts within the territory as provided by this
agreement.
3. Licensor agrees that Licensee may develop variations from the original
"Game" including but not limited to changing the name or format of the
show, however, all variations shall contain trademark and copyrights as
supplied by Licensor. Any deviation shall constitute a material breach
and copyright and trademark infringement.
4. Licensee agrees to allow Licensor to review its overall plan of
exploitation under this License Agreement, in advance of finalization, so
as to allow Licensor an opportunity to object to any conduct, materials,
etc. that may affect Licensor reputation.
5. Licensor reserves all rights not expressly granted herein, and the
parties agree that Licensor may exercise all or any of its reserved
rights, without limitation, unless expressly provided otherwise herein,
and regardless of the extent to which such exercise is competitive with
Licensee or the license granted hereunder.
6. Any controversy or claim arising out of, or relating to, this agreement,
the breach thereof, or the coverage of this arbitration provision shall be
settled by arbitration; provided, that any arbitrators selected shall have
experience in or knowledge of the television broadcasting
Form 10-SB Dated August 31, 1996, Page 113
<PAGE> 4
industry. Any such arbitration shall be conducted in the U.S. The
arbitration of such issues, including the determination of the amount of
any damages suffered by any party hereof by reason of the acts or omissions
of another shall be to the exclusion of any court of law, except as set
forth below. The decision of the arbitrators or a majority of them shall
be final and binding on all parties and their respective heirs, executors,
administrators, successors and assigns. If the parties or the arbitrators
appointed by them are unable to agree upon the selection of a neutral
arbitrator, then either party may, at it election, require that the
arbitration shall be conducted under the auspices and rules of the American
Arbitration Association ('AAA') and that the neutral arbitrator shall be
selected by the AAA. Notwithstanding the foregoing, Licensor may, at its
election, by written notice to such effect, waive the provisions
of this arbitration clause and proceed directly against Licensee by court
action. Arbitration hereunder shall not, in any event (i) prevent any
party from seeking and obtaining equitable relief, including, but not
limited to, prohibitory or mandatory injunctions, specific performance or
extraordinary writs, in any court of law or equity having jurisdiction,
nor (ii) prevent any party from joining any other party as a defendant in
any action brought by or against a third party, or (iii) prevent any party
from filing legal action hereunder to effectuate any attachment or
garnishment, provided that such party stipulates in such action, at any
other party's request, to arbitrate on the merits of said case, or (iv)
prevent a party from filing legal action to compel arbitration under the
arbitration provisions hereof. Any action taken by Licensor as provided
in sub-clauses (i) through (iv) above shall not constitute a waiver of
Licensor's right to require arbitration hereunder unless such rights shall
have been otherwise waived by Licensor as foresaid. The Arbitrator will
be selected from a list of proposed names by AAA to the mutual agreement
of Licensor and Licensee.
7. This Agreement shall be governed by and construed in accordance with the
laws of the State of Georgia. The parties consent to the jurisdiction of
the courts of the State of Georgia (and/or that Federal courts within
Georgia), and each party agrees that service of process may be effected by
mail (certified or registered mail, return receipt requested), or to or by
personal service upon such party (or any officer of a corporate party) at
such party's address as set forth in this agreement or such other address
as such party may specify in writing.
8. All notices hereunder must be in writing and must either be personally
delivered or be sent by certified mail, postage prepaid, unless otherwise
specified. The address for all notices and all payments required to be
sent or delivered to Licensor and Licensee shall be the respective address
stated below hereof, or such other address as the parties may designate in
writing.
SBI Communications, Inc. Fertina-C, Ltd./Greek Desk
144-A North Courthouse Ave. P. O. Box 14108
P. O. Box 729 11501 Athens
Leesburg, GA 31763 Greece
9. Licensee shall not assign this agreement, in whole or in part, or
sub-license or authorize or permit the sub-license of any programs
hereunder, to any third party without the prior written
Form 10-SB Dated August 31, 1996, Page 114
<PAGE> 5
consent of Licensor. Licensor may assign its rights hereunder in whole or
part to any person, firm or corporation. Licensor acknowledges that a
joint venture may be formed.
10. Nothing in this agreement shall be construed so as to require the
commission of any act contrary to law, and wherever there is any conflict
between any provision of this agreement and any material statute, law,
ordinance or regulation, the latter shall prevail, but in such event any
provisions of this agreement so affected shall be curtailed and limited
only to the extent necessary to bring them within the applicable
requirements, and the remainder of this agreement represents the entire
agreement between the parties and no modification or waiver of any term
thereof shall be effective unless in writing and signed by both parties.
The waiver by either party of any breach or default by the other party
shall not be construed as a waiver of any other breach of default by such
other party.
11. Licensee agrees to protect, indemnify defend and hold Licensor, and its
employees and agents, harmless against all costs, claims, losses or
damages, attorney's fees and other expenses arising out of or caused by
Licensee's exploitation of the "Game"; and (ii) any breach by Licensee of
any of Licensee's Warranties, representations or agreements hereunder.
12. Licensor agrees to refer all inquiries of any nature (with respect to
this game in these markets) to Licensee.
13. The term of this license agreement shall be for an initial period of five
years (5 years), subject to renewal of another five years (5 years) during
the twelfth month of this agreement. Renewal will be extended in good
faith and the fee will not exceed more than 25% over original fee stated
herein by Licensor provided that Licensee has made substantial and
significant progress in the exploitation of the game. Substantial and
significant progress will be measured by the following parameters:
a) Contracts for marketing, sponsors, and television stations shall be
fully executed and delivered.
b) Documented revenues or accounts receivables.
In the event that Licensee has not made substantial progress under this
contract and Licensor has an opportunity to exploit the game in Greece,
Licensee agrees to negotiate with Licensor in good faith, a buy-out of
Licensee under this contract, such negotiations to be based upon the
progress of Licensee under this agreement.
In the event of a breach of this contract by Licensee, all rights granted
herein shall immediately terminate and revert to Licensor.
Form 10-SB Dated August 31, 1996, Page 115
<PAGE> 6
IN WITNESS WHEREOF, Licensee has this day and year executed this contract of
license which upon execution by the Licensor shall constitute a license for
broadcast of Satellite Bingo in accordance with the terms and conditions
hereby;
Form 10-SB Dated August 31, 1996, Page 116
<PAGE> 7
Licensor: /s/ Ronald Foster /s/
Ronald Foster, President
SBI Communications, Inc.
Licensee: /s/ Fertina-C /s/
Fertina-C, Ltd.
Form 10-SB Dated August 31, 1996, Page 117
<PAGE> 1
Exhibit 10.11.2
CONTRACT OF LICENSE
Licensor: SATELLITE BINGO, INC. Date: January 18, 1991
144-A NORTH COURTHOUSE AVE.
LEESBURG, GA 31763 U.S.A.
(Hereinafter Licensor)
Licensee: LUIS MANUEL DA COSTA MATIAS
RUA VIOLETAS #140
CASAIS PORTUGAL
(Hereinafter Licensee)
Licensor hereby grants to Licensee the right to promote, market, advertise,
produce and broadcast a game show, "Satellite Bingo" (hereinafter the "game")
in the following broadcast markets (see paragraph A3) for a period of Ten years
(10 years) (with an option for Ten more years (10) for a payment of $1.00 and
each year thereafter for a payment of $1.00) subject to the terms and
conditions set forth in the following paragraphs set forth herein.
A. Luis Manuel Da Costa Matias shall provide the following:
1. Luis Manuel Da Costa Matias will develop and implement a marketing plan
which will be designed to secure advertising/sponsors and television
stations in Brazil, South America. Such marketing plan shall be subject
to the approval of Licensor, however, approval will not be unreasonably
withheld.
2. Luis Manuel Da Costa Matias shall be responsible for all aspects of the
exploitation of this license including but not limited to the following:
a) Production
b) Distribution of cards
c) Prizes
d) Contracts with sponsors, advertisers, television stations, actors,
producers, etc.
e) All Governmental permits
3. Luis Manuel Da Costa Matias shall have the exclusive rights to exploit
this license in the following markets:
a) Brazil, South America
Form 10-SB Dated August 31, 1996, Page 118
<PAGE> 2
4. Licensee will provide and Licensor shall receive creator screen credits
on each production.
5. Licensee shall exploit this license in such a manner as to protect all
trademarks and copyrights of Licensor.
6. As compensation for the rights granted hereunder, Licensee shall pay to
Licensor Two Million Dollars ($2,000,000 USD) for 80%.
a) With a 12 month option for the remaining 20% for Seven Million Dollars
($7,000,000 USD).
b) Payment will be as follows upon execution of this contract a payment
fee of Five Hundred Thousand Dollars ($500,000 USD) due by March 31,
1991 and the balance of One Million, Five Hundred Thousand Dollars
($1,500,000 USD) to be paid prior to August 31, 1991.
Licensor shall incur no liabilities or responsibilities other than those
specifically set forth herein with respect to Licensee's exploitation of
this license.
B. Licensor shall provide the following:
1. Computer programs, bingo cards, and technical assistance. All computer
programs and bingo cards shall be paid for directly by Licensee and
Licensor will incur no liabilities for payment of same. Technical
assistance will be provided via a separate consulting agreement
2. Proof of ownership of requisite copyrights, trademarks and rights granted
herein.
3. 1" videos of actual programs for use as sale materials only. Such videos
will be provided at Licensor's cost for reproduction. Where feasible,
Licensor will provide its current sales materials for use by Licensee.
C. ADDITIONAL PARAGRAPHS
1. Licensee agrees that all broadcast will be via a live feed. Licensee
agrees to provide copyright notice and credits in a manner to be supplied
by Licensor. Under no circumstance shall Licensor delete such copyright
notices or credits. Licensee agrees that all videos, brochures or any
written, taped, or printed materials that result from the exploitation of
this license shall bear the copyrights as provided by Licensor. Licensee
further agrees that the use at any time of any of the above stated
materials is outside of the market territory provided under this
agreement, or for purposes other than exploitation of this agreement
shall constitute not only a material breach of this agreement, but shall
also constitute copyright and trademark infringement.
Form 10-SB Dated August 31, 1996, Page 119
<PAGE> 3
2. Licensee agrees that no cards for participation in the game will be made
available or distributed to areas not covered specifically by this
agreement and that no winning cards will be honored if such cards are
played via satellite or other instrumentality which is not in association
with licensed broadcasts within the territory as provided by this
agreement.
3. Licensor agrees that Licensee may develop variations form the original
"game" including, but not limited to, changing the name or format of the
show, however, all variations shall contain trademark and copyrights as
supplied by Licensor. Any deviation shall constitute a material breach
and copyright and trademark infringement.
4. Licensee agrees to allow Licensor to review its overall plan of
exploitation under this License Agreement, in advance of finalization, so
as to allow Licensor an opportunity to object to any conduct, materials,
etc. that may affect Licensor reputation.
5. Licensor reserves all rights not expressly granted herein, and the
parties agree that Licensor may exercise all or any of its reserved
rights, without limitation, unless expressly provided otherwise herein,
and regardless of the extent to which such exercise is competitive with
Licensee or the license granted hereunder.
6. Any controversy or claim arising out of, or relating to, this agreement,
the breach thereof, or the coverage of this arbitration provision shall
be settled by arbitration; provided, that any arbitrators selected shall
have experience in or knowledge of the television broadcasting industry.
Any such arbitration shall be conducted in the U.S. The arbitration of
such issues, including the determination of the amount of any damages
suffered by any party hereof by reason of the acts or omissions of
another shall be to the exclusion of any court of law, except as set
forth below. The decision of the arbitrators or a majority of them shall
be final and binding on all parties and their respective heirs,
executors, administrators, successors and assigns. If the parties or the
arbitrators appointed by them are unable to agree upon the selection of a
neutral arbitrator, then either party may, at its election, require that
the arbitration shall be conducted under the auspices and rules of the
American Arbitration Association ('AAA') and that the neutral arbitrator
shall be selected by the AAA. Notwithstanding the foregoing, Licensor
may, at its election, by written notice to such effect, waive the
provisions of this arbitration clause and proceed directly against
Licensee by court action. Arbitration hereunder shall not, in any event
(I) prevent any party from seeking and obtaining equitable relief,
including, but not limited to, prohibitory or mandatory injunctions,
specific performance or extraordinary writs, in any court of law or
equity having jurisdiction, nor (II) prevent any party from joining any
other party as a defendant in any action brought by or against a third
party or (III) prevent any party from filing legal action hereunder to
effectuate any attachment or garnishment, provided that such party
stipulates in such action, at any other party's request to arbitrate on
the merits of said case, or (IV) prevent a party from filing legal action
to compel arbitration under the arbitration provisions hereof. Any
action taken by Licensor as provided in sub-clauses (I) through (IV)
above shall not constitute a waiver of
Form 10-SB Dated August 31, 1996, Page 120
<PAGE> 4
Licensor's right to require arbitration hereunder unless such rights
shall have been otherwise waived by Licensor as foresaid.
7. This Agreement shall be governed by and construed in accordance with the
laws of the State of California. The parties consent to the jurisdiction
of the courts of the State of California (and/or the Federal courts
within California), and each party agrees that service of process may be
effected by mail (certified or registered mail, return receipt
requested), or to or by personal service upon such party's address as set
forth in this agreement or such other address as such party may specify
in writing.
8. All notices hereunder must be in writing and must either be personally
delivered or be sent by certified mail, postage prepaid, unless otherwise
specified. The address for all notices and all payments required to be
sent or delivered to Licensor and Licensee shall be the respective
addresses stated on page 1 hereof, or such other address as the parties
may designate in writing.
9. Licensee shall not assign this agreement, in whole or in part, or
sub-license or authorize or permit the sub-license of any programs
hereunder, to any third party without the prior written consent of
Licensor. Licensor may assign its rights hereunder in whole or part to
any person, firm or corporation. Licensor acknowledges that a joint
venture may be formed.
10. Nothing in this agreement shall be construed so as to require the
commission of any act contrary to law, and wherever there is any conflict
between any provision of this agreement and any material statute, law,
ordinance, or regulation, the latter shall prevail, but in such event any
provisions of this agreement so affected shall be curtailed and limited
only to the extent necessary to bring them within the applicable
requirements, and the remainder of this agreement represents the entire
agreement between the parties and no modification or waiver of any term
thereof shall be effective unless in writing and signed by both parties.
The waiver by either party of any breach or default by the other party
shall not be construed as a waiver of any other breach of default by such
other party.
11. Licensee agrees to protect, indemnify, defend and hold Licensee, and its
employees and agents, harmless against all costs, claims, losses or
damages, attorney's fees and other expenses arising out of or caused by
Licensees exploitation of the Game; and (II) any breach by Licensee of
any of Licensee's Warranties, representations or agreements hereunder.
12. Licensor and Licensee acknowledge that Craig Aronld has been instrumental
in creating this association and as such is entitled to compensation to
be negotiated by all parties in good faith.
Form 10-SB Dated August 31, 1996, Page 121
<PAGE> 5
13. Licensor agrees to refer all inquiries of any nature (with respect to
this game in these markets) to Licensee.
14. The term of this license agreement shall be for an initial period of ten
years (10 years), subject to renewal of another ten years (10 years)
during the twelfth month of this agreement. Renewal will be extended in
good faith by Licensor provided that Licensee has made substantial and
significant progress in the exploitation of the game. Substantial and
significant progress will be measured by the following parameters:
a) Contracts for marketing, sponsors, and television stations shall be
fully executed and delivered.
b) Documented revenues or accounts receivables.
If the show is set for production by the twelfth month (12), then
Licensor will extend for the period of contracts involved for production.
If the show completes its scheduled showing and, at the end of that
period, there are no renewals of the production contract, then this
license will terminate.
In the event that Licensee has not made substantial progress under this
contract and Licensor has an opportunity to exploit the game in South
America, Licensee agrees to negotiate with Licensor in good faith, a
buy-out of Licensee under this contract, such negotiations to be based
upon the progress of Licensee under this agreement
15. Licensor reserves the right to terminate all rights granted hereunder,
after 120 days from the date of execution of this agreement, in the
event that Licensee has not entered into any contractual relations with
sponsors, television stations or card distributors within the above
stated 120 days.
Licensee may preserve his rights hereunder provided that Licensee pays
to Licensor a fee of Five Hundred Thousand US Dollars ($500,000 USD).
In the event of a breach of this contract by Licensee, all rights granted
herein shall immediately terminate and revert to Licensor.
IN WITNESS WHEREOF, Licensee has this day and year executed this contract of
license which upon execution by the Licensor shall constitute a license for
broadcast of Satellite Bingo in accordance with the terms and conditions
hereby:
Licensor: /s/ Ron Foster /s/ Licensee: /s/ Luis Manuel Da Costa Matias
------------------------ --------------------------------
Ron Foster, Satellite Bingo, Inc. Luis Manuel Da Costa Matias
Form 10-SB Dated August 31, 1996, Page 122
<PAGE> 1
Exhibit 10.11.3
AGREEMENT
This agreement (the "Agreement") is made this 23rd day of March, 1993 by and
between SBI COMMUNICATIONS, INC., a Delaware Corporation, and it's wholly owned
subsidiary SATELLITE BINGO, INC., a Georgia Corporation and SBI COMMUNICATIONS,
C.A. (to be formed in the Republic of Venezuela), together called "SBI", and
I.O. REPORT, C.A., a Company duly registered in the Republic of Venezuela and
hereinafter called "IOR".
Whereas SBI has developed concepts for interactive bingo games, bingo lotteries
and other concepts for the cable and direct broadcast television markets
internationally; SBI has acquired certain equipment that would be useful in
implementing said concepts; has developed copyrighted computer software
necessary to implement said concepts; has produced considerable video footage
that could be useful in developin video tapes promoting said concepts; and has
trademarks, logos and patents;
Whereas IOR has a desire to enter into a license to utilize SBI's concepts
nationally in the Republic of Venezuela;
Now, in consideration of US $500,000.00 to be paid by a five year promissory
note from IOR to SBI, and expenses of US $50,000.00 to be paid as follows: US
$15,000.00 upon signing of the agreement and US $35,000.00 to be paid over a 30
and 60 ($17,500 each) day period as SBI concepts are being implimented and any
unforeseen expenses incurred must be approved and paid by IOR;
1. An exclusive licensing agreement from SBI to IOR will be presented in the
next five (5) days;
2. A Computer Bingo Board is to be shipped to IOR in the next ten (10) days by
airfreight and returned to SBI in the next ninety (90) days at IOR expense, and
IOR will provide sufficient insurance to cover damages and/or loss of the board
for an amount no less than US $80,000.00 (eighty thousand US dollars);
3. A computer tape which generates bingo cards will be shipped to IOR in the
next five (5) days via DHL;
4. SBI Communicaciones de Venezuela, C.A. to be formed and Federico L. Wust
will be installed as President in order to assist IOR in implementing said
concepts;
5. IOR will provide office space, telephone and fax suitable for SBI operations
in Carcaras;
6. IOR will pay SBI a continuing royalty of 2.5% (two and one half percent) of
all gross monies produced by the selling of bingo cards sold in Venezuela under
this license agreement;
Form 10-SB Dated August 31, 1996, Page 123
<PAGE> 2
7. SBI will grant IOR under this license agreement a first right of refusal to
implement it's concepts in other South American Countries and others around the
World as mutually agreed upon;
8. All other terms and conditions will be covered in the licensing agreement;
9. SBI will provide support for implementing the software program;
10. SBI will work with IOR in order to have a broadcast of the "LOTERIA DE
CARACAS BINGO" by April 25th, 1993, 9:00 am Venezuelan time;
11. 1. SBI will provide computer programs (and IOR will protect this program)
and technical assistance;
2. SBI will provide proof of ownership of requisite copyrights, trademarks
and rights granted to IOR;
3. SBI will provide one inch (1") videos of actual programs for use as sale
material only. Such videos will be provided at IOR cost of
reproduction.
12. IOR will provide SBI with translated copies of documented agreements
entered with other parties in order for SBI to have knowledge of all terms and
conditions entered by IOR with third parties.
IN WITNESS THEREOF, SBI has executed this agreement and will provide a formal
agreement within the next five (5) days. By executing this agreement SBI has
granted IOR an exclusive license for all it's concepts now and future concepts
which may be developed.
Terms and conditions of the formal agreement will reflect all of the above
terms.
SBI COMUNICACIONES DE SBI COMMUNICATIONS, INC.
VENEZUELA, C.A.
(to be formed)
/s/ Federica L. Wust /s/ /s/ Ronald Foster /s/
- ------------------------ ---------------------
Federico L. Wust Ronald Foster, President and CEO
I. O. REPORT, C.A.
/s/ Luis Jose Rodrigues /a/
----------------------------------
Luis Jose' Rodrigues, President
Vicente Gonzalez', Vice President
Form 10-SB Dated August 31, 1996, Page 124
<PAGE> 3
IN WITNESS THEREOF, SBI AND IOR have executed this agreement in Caracas,
Republic of Venezuela, this 23rd day of March, 1993.
SBI COMUNICACIONES DE SBI COMMUNICATIONS, INC.
VENEZUELA, C.A.
(to be formed)
/s/ Federica L. Wust /s/ /s/ Ronald Foster /s/
- ------------------------ ---------------------
Federico L. Wust Ronald Foster, President and CEO
I. O. REPORT, C.A.
/s/ Luis Jose Rodrigues /a/
---------------------------------
Luis Jose' Rodrigues, President
Vicente Gonzalez', Vice President
Form 10-SB Dated August 31, 1996, Page 125
<PAGE> 1
Exhibit 10.12.1
LOBBYIST ENGAGEMENT AGREEMENT
THIS AGREEMENT (the "Agreement") made as of the 29th day of July, 1994 by
and between SPRADLEY & SPRADLEY ("Spradley"), a Louisiana Corporation and SBI
COMMUNICATIONS, INC., a Delaware Corporation (the "Company");
W I T N E S S E T H:
WHEREAS, the parties hereto desire to enter into an agreement for the
Company's contracting with Spradley to provide certain lobbying services to the
Company on the terms and conditions hereinafter stated;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereby agree as follows:
1. Relationship Established. The Company hereby contracts with Spradley
to serve as a lobbyist for the Company and to perform such other services as
may be mutually agreed upon by the Company and Spradley. Spradley shall use
its best efforts to obtain an Executive Order from the Governor of Louisiana
allowing the Louisiana Charitable Organization Alliance, Inc. to operate high
stakes Bingo games in the state of Louisiana. In the alternative, if obtaining
such Executive Order is not feasible, Spradley shall endeavor to aid in the
initiation and passage of legislation in the Louisiana State Legislature
allowing the Louisiana Charitable Organization Alliance, Inc. to operate high
stakes Bingo games in the state of Louisiana. The aforementioned activities
are referred to herein as the "Services". Spradley acknowledges that it has
been informed of and discussed with the Company the specific activities which
it will perform and understands the scope of the activities that will
constitute the Services which it will provide to the Company.
2. Term of Employment. The term of Spradleys' contract as a Lobbyist
under this Agreement shall commence on the date hereof (the "Effective Date")
and shall continue for a maximum term of six (6) months from the Effective
Date, unless sooner terminated by the first to occur of the following:
(i) The completion of the Services to the satisfaction of the Company.
(ii) The cancellation of this Agreement by the Company due to (i) the
failure by Spradley to perform the Services diligently and
competently on behalf of the Company in any material respect on a
recurring basis, or (ii) the reasonable determination by Company
that the performance of services by Spradley will not accomplish
the goals stated in Paragraph 1 of this Agreement.
Form 10-SB Dated August 31, 1996, Page 126
<PAGE> 2
3. Compensation. The Company shall pay Spradley Two Thousand Dollars
($2,000.00) per month (or a pro rated portion thereof for each fraction of a
month in which the Services were performed) during the term of this Agreement
for the performance of the Services.
4. Confidentiality.
(a) Proprietary Information. Spradley acknowledges that it may from time
to time have access to and be provided with confidential, secret and
proprietary information of the Company. Spradley agrees that it will not,
without the prior written consent of the Company, for any reason or at any
time, use or disclose to any individual, person, firm or entity ("Person") any
fact or information not generally available to the public concerning any aspect
of the products and business of the Company or its affiliates, including,
without limitation, technical or nontechnical data, formulae, compilations,
programs, methods, data, financial plans, product plans, marketing or sales
strategies, lists of actual or potential customers or suppliers, or other
information relating to the Company's business which derives economic value,
actual or potential from not being generally known to other persons. Such
information is hereinafter referred to as the "Proprietary Information".
(b) Exceptions. Notwithstanding the provisions of Section 4(a) above, the
following shall not be considered to be Proprietary Information: (i) any
information that was in the public domain through no fault or act of Spradley
prior to the disclosure thereof by the Company to Spradley; (ii) any
information that comes into the public domain through no fault or act of
Spradley; (iii) any information that is disclosed to Spradley by a third party
(which terms shall not include the counsel, accountants and other non-employee
representatives of the Company) having the legal right to make such disclosure;
and (iv) any confidential business information that is not a trade secret under
applicable law two (2) years after Spradley ceases to provide Services to the
Company (provided, however, that the limited duration of the confidentiality
obligation with regard to confidential business information not constituting a
trade secret shall not operate or be construed as affording Spradley any right
or license thereafter to use such confidential business information, or as a
waiver by the Company of the rights and benefits otherwise available to the
Company under the laws governing the protection and enforceability of patents,
trade secrets and other intellectual property).
(c) Exceptions Procedure. If Spradley considers any portion of the
Proprietary Information to be within the exceptions set forth in Section 4(b)
above, at least thirty (30) days before using or disclosing such Proprietary
Information, Spradley shall so advise the Company in a writing, stating in
detail its reasons therefor, citing and specifically referring to the documents
or circumstances on which it is relying, and accompanied by copies of all cited
documents. A failure of the Company to respond to any such notice shall in no
event be deemed an acceptance of the assertions contained in such notice.
5. Representations of Spradley. Spradley represents that it, and each of
its employees performing the Services hereunder, possesses all necessary
licenses, registrations, permits and
Form 10-SB Dated August 31, 1996, Page 127
<PAGE> 3
other evidences of authority to perform the Services. Spradley agrees to make
such filings, if any, with the State of Louisiana or other government, as may be
required to properly effectuate this Agreement. Spradley understands that the
Company is relying on the representations of Spradley concerning the applicable
laws of the State of Louisiana in retaining Spradley hereunder. Spradley agrees
to indemnify the Company and hold the Company harmless from any civil or
criminal liability arising from the performance of the Services by Spradley
hereunder.
6. Interpretation: Severability. All rights and restrictions contained
in this Agreement may be exercised and shall be applicable and binding only to
the extent that they do not violate any applicable laws and are intended to be
limited to the extent necessary so that they will not render this Agreement
illegal, invalid or unenforceable.
7. Nonwaiver. Failure of either party to insist, in one or more
instances, on performance by the other in strict accordance with the terms and
conditions of this Agreement shall not be deemed a waiver or relinquishment of
any right granted hereunder or of the future performance of any such term or
condition or of any other term or condition of this Agreement, unless such
waiver is contained in a writing signed by or on behalf of both parties.
8. Notices. Any notice or other communication required or permitted
hereunder shall be deemed sufficiently given if sent by registered or certified
mail, return receipt requested, postage and fees prepaid, addressed to the
party to be notified as follows:
(a) If to the Company: SBI Communications, Inc.
P.O. Box 71236
Albany, Ga. 31708
2415-H Dawson Road
Albany, Ga. 31707
(b) If to Spradley: Spradley and Spradley
7612 Picardi Avenue
Baton Rouge, Louisiana 70808
or in each case to such other address as either party may from time to time
designate in writing to the other. Such notice or communication shall be
deemed to have been given as of the date so mailed.
9. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Georgia.
10. Entire Agreement: Amendment. This Agreement contains the sole and
entire agreement between the parties hereto with respect to the Company's
employment of Spradley and supersedes all prior discussions and agreements
between the parties and any such prior agreements shall, from
Form 10-SB Dated August 31, 1996, Page 128
<PAGE> 4
and after the date hereof, be null and void. This Agreement shall not be
modified or amended except by an instrument in writing signed by or on behalf of
the parties hereto.
11. Parties Benefitted. This Agreement shall inure to the benefit of, and
be binding upon the Company and Spradley and their partners, subsidiaries, and
affiliates, and upon each party's respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
COMPANY:
SBI COMMUNICATIONS, INC.
By: /s/ Ronald Foster /s/
---------------------
Name: Ronald Foster
-------------------
Title: President
-----------------
SPRADLEY:
SPRADLEY & SPRADLEY
By: /s/ T. J. Spradley /s/
----------------------
Name: T. J. Spradley
--------------------
Title: Partner
-------------------
Form 10-SB Dated August 31, 1996, Page 129
<PAGE> 1
Exhibit 10.12.2
MANAGEMENT AGREEMENT
THIS AGREEMENT (the "Agreement") made as of the 28th day of July, 1994 by
and between LOUISIANA CHARITABLE ORGANIZATION ALLIANCE, INC., a Louisiana
corporation ("LACOA") and SBI COMMUNICATIONS, INC., a Delaware corporation
("SBI") and/or SBI GAMING, INC., a Nevada Corporation ("SBI Gaming")
(hereinafter collectively "SBI" and "SBI Gaming" shall be called "Company");
WITNESSETH:
WHEREAS, the parties hereto desire to enter into an agreement for LACOA's
contracting with the Company to have the Company provide management and
operational services for LACOA's high stakes Bingo games in the event that
LACOA obtains authorization from the state government of Louisiana to operate
high stakes Bingo games, on the terms and conditions hereinafter stated;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, and for other good and valuable consideration
the receipt and sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:
1. Management. LACOA hereby agrees to contract with the Company to
exclusively manage and operate LACOA's high stakes Bingo game throughout the
state of Louisiana (the "Services"). The initial term of such contract shall
be five (5) years, with the Company holding successive one (1) year renewal
options with each option period carrying the same terms and conditions as the
original five (5) year contract, and such original five (5) year contract shall
include substantially the same terms as set forth on Exhibit A attached hereto.
LACOA agrees that it will in no event contract with any other entity to
provide the Services, unless LACOA receives the prior express written consent
of the Company.
2. Condition. This Agreement is expressly conditioned on LACOA obtaining
proper authorization from the state government of Louisiana to operate high
stakes Bingo games.
3. Interpretation; Severability. All rights and restrictions contained in
this Agreement may be exercised and shall be applicable and binding only to the
extent that they do not violate any applicable laws and are intended to be
limited to the extent necessary so that they will not render this Agreement
illegal, invalid or unenforceable.
4. Notices. Any notice or other communication required or permitted
hereunder shall be deemed sufficiently given if sent by registered or certified
mail, return receipt requested, postage and fees prepaid, addressed to the
party to be notified as follows:
(a) If to the Company: SBI Communications, Inc.
2415 Dawson Road, Ste. H
Form 10-SB Dated August 31, 1996, Page 130
<PAGE> 2
Albany, Ga. 31707
(b) If to LACOA: Louisiana Charitable Organization Alliance, Inc.
P.O. Box 806
Kenner La. 70063
(c) Copy to Larry Cahill: Larry Cahill
3330 Southgate Ct.
Cedar Rapids, IA 52406
or in case to such other address as either party may from time to time
designate in writing to the other. Such notice or communication shall be
deemed to have been given as of the date so mailed.
5. Governing Law. This Agreement shall be governed by and enforced in
accordance with the laws of the State of Georgia.
6. Parties Benefitted. This Agreement shall inure to the benefit of, and
binding upon the Company and LACOA and their partners, subsidiaries and
affiliates, and upon each party's respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as to
the date first above written.
COMPANY:
SBI COMMUNICATIONS, INC.
By: /s/ Ron Foster /s/
-------------------
Name: Ron Foster
Title: President
SBI GAMING, INC.
By: /s/ Ron Foster /s/
-------------------
Name: Ron Foster
Title: President
LACOA:
LOUISIANA CHARITABLE ORGANIZATION ALLIANCE, INC.
By: /s/ Billy D. Butchfield /s/
-------------------------------------
Name:
Title: President
Form 10-SB Dated August 31, 1996, Page 131
<PAGE> 3
Exhibit A
SBI
Communications, Inc.
Louisiana Bingo
Proposal for Louisiana Bingo
Proposal Made by SBI Communication
and their Gaming Company SBI Gaming, Inc.
Proposal Made To: (LACOA) Louisiana Charitable
Organization Alliance, Inc.
* SBI, Inc. will contract with LACOA to participate in operating the Louisiana
State Bingo operation as a Licensed Subcontractor. LACOA will be the
authorized operator of the Bingo Games and SBI will be the operation
subcontractor.
SBI Gaming will be responsible for the following program operations.
1. Provide assistance to the LACOA in the organization of the state
program.
2. Produce the Game Show weekly.
3. Prepare and produce game cards for the Bingo Game.
4. Set up the T.V. Contract & Programming.
5. Develop Advertising for the Bingo Program.
6. Fulfill prize payment.
7. Handle general administration of the operation.
8. Provide the feed on satellite for the Halls as needed.
P.O. Box 71336/2415 Dawson Road/ Suite H/ Albany, GA 31708-1236
(912) 432-5103
Form 10-SB Dated August 31, 1996, Page 132
<PAGE> 4
EXHIBIT A
Game Time:
* Saturday Night (Weekly)
* 8:00 p.m. - 10:00 p.m. Time Frame
* Show 20-25 Minutes
* Broadcast in state wide cable and broadcast T.V. stations in Louisiana
Game:
* Bingo
* Played for 1 winner in the state weekly for each game.
A. Guaranteed prize winner for a coverall game $5,000-$20,000/ prize
* Can be set at game time based on participation with not lower than
(_____) prize weekly
B. Quick Pick eight (8) out of Sixteen (16) numbers for a $1,000,000 prize
1. Played weekly
2. Not a guaranteed winner
3. Prize would be a 20 year pay out.
4. As soon as Escrow Funds are available for the $400,000 annuity, then
the prize could be forced by going to 18 or 20 numbers to get a
winner and keep players' interest at a high level.
C. An In-Hall game for "Hall" stakes can be provided for any organizations
that want to participate.
(ie) Four (4) corner games.
Form 10-SB Dated August 31, 1996, Page 133
<PAGE> 5
EXHIBIT A
---------
Game Operations:
All Halls or Charitable games will sell cards all week in their games at
the Halls and in any other outlet or capacity that is available.
Each charity will be provided a standard quantity of cards. These will be
provided through the format of distribution channels if the system can be
worked out feasibly.
Cards will be sold for $5.00 a strip of 3 cards.
Closing of card sales shall occur 2 hours prior to game time (except
Saturday night game/ charities which will be 1 hour prior to game time). At
closing, all sale locations will report activated cards (first card in series
serial # and last card in series serial #) by phone to the SBI clearing house
to activate the cards for play in that weeks game.
Those Halls will then be responsible for paying SBI on behalf of LACOA for
the cards at the prescribed rate as set out in this policy.
Prizes will be announced on the T.V. show and awarded to the prize
winners:
A. at an appointed state location.
B. or by mail
(After surrendering the winning prize card.)
LACOA will give full legal authorization along with state approval to SBI
Gaming to operate the game in their behalf in Louisiana.
Agreements with each participating charity will be secured by LACOA and
provided to SBI for records and operational support.
Production:
Will take place in SBI studios and be uplinked to Satellite Feed into the
state stations.
Production format and game process will be with a live pop-up Ball System
or Computer Generated random number system that will include:
* Game ball verifications
* Winner Audits
* Payment Audits
* Winner on T.V. interview if possible
Form 10-SB Dated August 31, 1996, Page 134
<PAGE> 6
The program & advertising spots will explain:
* How to play the game
* Prize winner interviews
* Some Entertainment production
* How to claim prizes, etc.
Numbers will be called in 12-15 second intervals
T.V. Broadcast time contracts with stations will include advertising spots
that will be produced for LACOA by SBI.
Cash Flow & Payments
Charities/Agencies will sell tickets all week and at game time in
participating Halls.
Payment for advertised tickets will be made weekly or subsequent weekly
entries will not get activated.
Payment will be made to:
A. LACOA Director
B. SBI on behalf of LACOA
C. To distributor who then pays SBI Director.
Participation charities will be allowed to take their earnings before
payment is made.
Form 10-SB Dated August 31, 1996, Page 135
<PAGE> 7
Costs:
Ticket strips (3 Cards) = $ 5.00/ sale
Charity keeps = 1.50
State Association = 1.00 (operations cost)
SBI operation = 2.50
* Charities pay their own tax.
* LACOA pays its own tax.
* SBI cost break down.
1. Ticket Production
2. Ticket Distributions
3. Game Show Production
4. T.V. Station Payment/Promotion
5. Prize Payment
Note: After final T.V. costs and state tax is determined the above may need to
be adjusted.
<TABLE>
Projected Financials
- -----------------------
@ $5.00/strip of tickets x number of Halls x $5.00 =
Strips Sold Weekly 1,000 1,600 2,400
Per Hall Halls Halls Halls
-------- ----- ----- -----
<S> <C> <C> <C>
200 $1,000,000 $1,600,000 $2,400,000
250 $1,250,000 $2,000,000 $3,000,000
500 $2,500,000 $4,000,000 $6,000,000
(Per Week Revenue)
</TABLE>
at 250 tickets/Hall x 1600 Halls/week
=$2,000,000 weekly revenue
or $104,000,000 annual sale volume.
A very achievable number.
Form 10-SB Dated August 31, 1996, Page 136
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 114,947
<SECURITIES> 0
<RECEIVABLES> 1,073,785
<ALLOWANCES> 462,500
<INVENTORY> 0
<CURRENT-ASSETS> 726,232
<PP&E> 7,629,356
<DEPRECIATION> 422,994
<TOTAL-ASSETS> 8,136,921
<CURRENT-LIABILITIES> 493,534
<BONDS> 243,753
0
8,340,000
<COMMON> 5,345
<OTHER-SE> (945,711)
<TOTAL-LIABILITY-AND-EQUITY> 8,136,921
<SALES> 0
<TOTAL-REVENUES> 200,274
<CGS> 0
<TOTAL-COSTS> 359,032
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,911
<INCOME-PRETAX> (366,233)
<INCOME-TAX> 0
<INCOME-CONTINUING> (366,233)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (366,233)
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
Exhibit 99.8
ORDINANCE NO. 429
SECTION I: Definitions.
As used in this article, the following terms shall have the respective
meaning ascribed to them:
Bingo: That specific kind of game, or enterprise, commonly known as
"bingo", in which prizes are awarded on the basis of designated numbers, or
symbols, which are drawn, at random, by the operator of said game, on cards, or
sheets of paper, which contain, or set out numbered spaces, upon which said
designated numbers, or symbols, may be placed by the persons playing or
participating in said game.
Equipment: The receptacle and numbered objects, or symbols, drawn from
it; the master "bingo" board displaying numbers upon which such numbered
objects, or symbol, are placed by the operator thereof; the cards, or sheets of
paper, bearing numbers, or other designations, participating in said game, and
the board, or signs, however operated, used to announce or display said
numbers, or designations, as they are drawn by the operator of said game, all
tables and chairs used by participants as well as any other items used in the
playing of bingo. All such equipment shall be stamped or marked with the name
of the organization and used on the premises of the organization operating and
conducting the "bingo" game in which said equipment is being used unless
specifically exempted by the City Clerk.
Educational Organization: An organization within the state, not organized
for pecuniary profit, the primary purpose of which is educational in nature and
designed to develop the capabilities of individuals by instruction in any
public or private kindergarten, elementary or secondary school, or any public
or private college, not organized for pecuniary profit, and approved by the
State Department of Education.
Fraternal Organization: An organization within this state, except student
fraternities or sororities, not organized for pecuniary profit, which is a
branch, lodge, or chapter of a national or state organization and exists for
the authorized purposes or other interests of its members.
Member: An individual who has qualified for membership in a qualified
organization pursuant to its by-laws, articles of incorporation, or charter.
Permit Holder: A qualified organization issued a permit pursuant to this
article.
Qualified Organization: A bona fide religious, educational, charitable,
service, senior citizens, fraternal, or veterans organization which has not
been organized for pecuniary profit and which operates without profit to its
members and which has been in existence continuously in the State of Alabama as
such an organization for a period of not less than two (2) years. Criteria for
recognizing organizations within the scope of this section shall be determined
by the City Council of the City of Piedmont, Alabama.
Religious Organization: an organization, church body of communicants,
association, or group, not organized for pecuniary profit, meeting regularly
within the state in common membership for mutual support, instruction and
edification in worship and religious observances; or any society or
association, not organized for pecuniary profit, or individuals united for
religious purposes at a definite place; or a church related private school, not
organized for pecuniary profit.
Form 10-SB Dated August 31, 1996, Page 137
<PAGE> 2
Senior Citizens Organization: An organization within this state, not
organized for pecuniary profit, which consists of at least ten (10) members who
are sixty (60) years of age, or older, and which exists for their mutual
support and for the entertainment or advancing the causes of elderly or retired
persons.
Service Organization: A branch, lodge, or chapter of a national or state
organization not organized for pecuniary profit, which is authorized by its
written constitution charter, articles of incorporation, or by-laws to engage in
a fraternal, civic, or service purpose within the state; and a local civic or
service organization, not organized for pecuniary profit and not affiliated with
a state or national organization, the constitutional charter, articles of
incorporation, or by-laws of which contain a provision for the perpetuation of
the organization as a non-profit organization the entire assets of which are
pledged to charitable purposes or by the organization itself toward its
perpetuation.
Veterans Organization: An organization within this state, or a branch, or
lodge, or chapter within this state of a state organization or of a national
organization chartered by the Congress of the United States, not organized for
pecuniary profit, the membership of which consists of individuals who have
been, or are, members of the armed services of the United States.
Location: A single building, hall, enclosure, or outdoor area used for
the purpose of playing "bingo" pursuant to a permit issued under this article.
"Bingo" games shall be held only on the premises wholly owned or leased by the
organization operating or conducting said "bingo" games. If the premises or
equipment are leased, the rental shall not be based on percentage of receipts
or profits from the operation of said "bingo" games. A copy of any and all
Lease Agreements must be filed with the City Clerk of the City of Piedmont,
Alabama prior to issuance of permit to issuance of permit to operate bingo.
SECTION II: Authority to Operate Games:
(a) Any qualified non-profit organization, as herein defined, may operate
and conduct "bingo" games, as herein defined, within this city, and its police
jurisdiction for prizes or money, for charitable or educational purposes, to
the extent and in the manner authorized by the provisions hereof and in
accordance with Amendment 508 , of the Constitution of Alabama, 1901.
(b) The game of bingo, shall be conducted in the City of Piedmont,
Alabama only on the following days of the week: Monday, Tuesday, Thursday,
Friday and Saturday. Any Bona Fide bingo permit holder may operate bingo games
within their approved location on any combination of days herein outlined.
SECTION III: General Permit-Required; determination of necessity;
transferability.
(a) No qualified organization shall be permitted to operate a "bingo"
game within the city, or its police jurisdiction, until the City Clerk or his
duly authorized representative has issued a permit to said organization for
said purpose.
(b) In the event that any controversy concerning whether or not certain
activity, or type of activity, constitutes the game of "bingo", as herein
defined, and for which a permit may be issued, the decision of the governing
body determining said controversy shall control, and shall be final.
(c) A permit issued pursuant hereto shall not be assignable or
transferable.
SECTION IV: Same - Application; investigation; annual fee; duration; renewal.
Form 10-SB Dated August 31, 1996, Page 138
<PAGE> 3
(a) All qualified organizations desiring to obtain or to review a permit
to operate "bingo" games shall make application to the City Clerk on forms
prescribed by the governing body. The City Attorney shall investigate the
status of the applicant as a qualified organization as defined herein. The
suitability of the proposed location where "bingo" will be conducted and the
character and fitness of the members who will conduct and manage "bingo" games
will be investigated by the Police Chief. Within fifteen (15) days from the
date of application the Police Chief shall direct the results of the
investigation and the application to the attention of the City Clerk along with
his recommendation as to the fitness and character of these individuals. Based
on this investigation the Police Chief shall submit in writing to the City
Clerk the results of same along with his recommendation as to their fitness to
operate said bingo games. The City Council reserves the right to review any
bingo permit when it appears the operation would inure to the benefit of
individual members, officers, agents, or employees of the permit holder rather
than the qualified organization itself. All annual permits must be approved
by the City Clerk.
(b) All qualified organizations except qualified senior citizens
organizations, as defined herein, shall pay an annual fee of $50.00 for a
"bingo" permit. "Bingo" permits shall be issued at no cost to qualified senior
citizen organizations which have otherwise complied with this article. No
permit shall be issued to any qualified organization unless such organization
has been in existence for twenty-four (24) months immediately prior to the
issuance of the permit.
(c) Such permit shall be valid for one (1) year from the date of issuance.
(d) a permit may be renewed annually by filing a renewal application with
the City Clerk within thirty (30) days, before the date of expiration on a form
prescribed by the governing body. The City Clerk shall direct the renewal
application to the attention of the Police Chief for necessary investigation.
(e) Each application for a permit or for renewal of a permit shall contain
the following information:
(1) The name and address of the qualified organization.
The name and home address of directors, or other persons
similarly situated, of the organization. Also, the following
information shall be required: (1) date of birth; (2) drivers
license number (3) social security number and (4) home and
business phone numbers.
(2) The names and addresses of each of the persons who
will be operating the "bingo" games along with all information
required in (1) of this section.
(3) The name and addresses of any persons organizations
who will act as surety for the applicant, or to whom the
applicant is financially indebted.
(4) The location at which the applicant will conduct the "bingo"
games.
(5) A statement showing the convictions, if any, for
criminal offenses, other than minor traffic offenses, of each
of the persons listed in 1, 2, and 3 above.
(6) Any other necessary and reasonable information which
the City Clerk may require.
(f) No "bingo" permit shall be granted to any applicant who fails to fully
provide the information required by this section.
Form 10-SB Dated August 31, 1996, Page 139
<PAGE> 4
(g) No permit shall be issued initially unless applicant has in place cash
bond or irrevocable letter of credit from bank approved by the City Clerk in
the amount of $25,000.00. Permittee shall timely pay all debts, taxes or
indebtedness due the City of Piedmont, Alabama, a Municipal Corporation.
SECTION V: Same - Contents and Display.
(a) Each "bingo" permit shall contain the name and address of the permit
holder, location at which the permit holder is permitted to conduct "bingo" and
the days of the week on which the permit holder will be permitted to conduct
"bingo".
(b) The "bingo" permit holder shall display the permit conspicuously at
the location where "bingo" is being conducted at all times during the conduct
of the games.
SECTION VI: Special permit; application, fee issuance, contents, term, number,
transfer.
A qualified organization licensed pursuant to Section 4 may obtain a
special permit to play "bingo" games at locations and on days other than those
set forth in its annual permit upon submission of a special application to the
City Clerk at least fifteen (15) days prior to the dates that such "bingo" games
are to be played. The City Clerk shall direct the application to the attention
of the Police Chief within fifteen (15) days of its receipt. All special
permits must be approved by the city clerk as provided in Section 4. The
privilege to a special permit is subject to the limitations of Subsection A of
Section 4. The fee for a permit issued under this Section shall be Fifty
Dollars ($50.00) unless the applicant is exempted from payment of same as
provided in Section 4.
SECTION VII: Suspension or revocation of permits; appeal.
The City Clerk may suspend or revoke any permit issued pursuant to this
article if the permit holder, or any officer, director, agent, member or
employee of the permit holder violates this ordinance or rules promulgated
hereunder.
SECTION VIII: Issuance or reissuance of permit after revocation, forfeiture,
or suspension, ground for forfeiture, return of permit upon suspension,
revocation or forfeiture, effect suspension, revocation or forfeiture.
(a) A permit holder whose permit is revoked in consequence of a violation
of this article or a rule promulgated under this article shall be ineligible to
apply for a permit for a period of one (1) year after the revocation.
(b) A person convicted of an offense under this section or any other
gambling offense shall be ineligible to participate in conducting "bingo" for a
period of one (1) year after the conviction becomes final.
(c) If the permit is suspended, in addition to other penalties, which may
be imposed, the governing body may declare the violator ineligible to conduct a
"bingo" game or apply for a permit under this article for a period not
exceeding one (1) year.
(d) The permit holder shall return its permit to the City Clerk on or
before the effective date of a suspension, revocation, or forfeiture. Whether
returned or not, the permit shall not be valid beyond the effective date of the
suspension, revocation, or forfeiture.
(e) It shall be unlawful for any person to conduct or aid in conducting a
"bingo" game under an expired, suspended or revoked permit.
SECTION IX: Records of permit holders; financial statements; inspection and
location of "bingo" games.
Form 10-SB Dated August 31, 1996, Page 140
<PAGE> 5
(a) Each permit holder shall maintain the following records for at least
three (3) years from the date on which the last "bingo" game is conducted:
(1) An itemized list of the gross receipts for each session;
(2) An itemized list of all expenses, including money and prizes
paid during a "bingo" session, including the name and address
of each person to whom the expenses are paid and a receipt for
all of said expenses. An itemized listing of all cash winners
of $1,200.00 or more shall be submitted for each session to the
City Clerk. This list must include the name and address of
each winner. Copies of IRS form W-2G or other required forms
must be kept on file and available for inspection by the city
upon prior notification by the City Clerk. The City Clerk, or
such Clerk's authorized deputy auditor or representative shall
examine and conduct all inspections regarding operation of
"bingo".
(b) On or before the fifteenth day of the month following the end of each
calendar quarter each permit holder shall file with the City Clerk a financial
statement of receipts and expenses relating to the operation of "bingo" games
in the previous calendar quarter (April 15, July 15, October 15, and January
15). Said report shall be in addition to any and all other reports required by
law.
(c) The location at which "bingo" is being conducted or at which an
applicant or permit holder intends to conduct "bingo" shall be open to
inspection at all times by duly authorized representatives of the Police Chief.
(d) A qualified organization shall be taxed at a rate of four dollars
($4.00) per person participating in the bingo games per session. Such tax must
be paid by the close of the next business day (5:00 pm) following each bingo
session. Such tax shall be submitted with the financial information required in
part (a) of this section. Failure to pay tax on time may result in the
automatic and immediate suspension of the bingo permit, as determined by the
City Clerk and City Attorney. Such taxes shall be distributed by the City Clerk
as follows:
$2.00 to the City of Piedmont General Fund
$2.00 to the Piedmont Board of Education
SECTION X. Fee proceeds, disposition, expenses.
All fees collected under this article shall be paid into the city's general
fund and all necessary expenses incurred by the Police Chief in the
administration and enforcement of this article shall be financed from the
city's general fund.
SECTION XI. Proceeds of "bingo" games, disposition.
(a) A qualified organization operating "bingo" games pursuant to a permit
issued by the City Clerk shall devote the entire net proceeds of such games to
the charitable, civic, community, educational, benevolent, religious or
scholastic activities stated in its charter, by-laws, or similar legal
instrument or other activities approved by the City of Piedmont, Alabama.
(b) An item of expense shall not be incurred or pain in connection with
the holding, operating, or conducting of "bingo" except the following bona fide
expenses may be incurred or paid in amount bearing a reasonable relationship to
that proportion of the total expense attributable to the conduct of "bingo"
games.
(1) The purchase or rental of equipment necessary for conducting
"bingo" and payment of services reasonably necessary for the repair
of equipment;
Form 10-SB Dated August 31, 1996, Page 141
<PAGE> 6
(2) Cash prizes or the purchase of prizes or merchandise;
(3) Rental of the location at which "bingo" is conducted, subject,
however, to the definition of "location" in Section 1. If the
premises or equipment are leased, the rate of rental shall not be
based on a percentage of receipts or profits resulting from the
operation of "bingo" games and must be reasonable and customary for
such, subject to approval by the City Council;
(4) Utilities;
(5) Janitorial services;
(6) The fee required for issuance or re-issuance of a permit to conduct
"bingo";
(7) Other reasonable expenses incurred by the permit holder, not
inconsistent with this article, as permitted by rules established
by the governing body;
(8) Reasonable wages necessary for the normal operation of bingo games
conducted in accordance with the provisions of this ordinance. All
wages are subject to approval by the Mayor and City Council of the
City of Piedmont, Alabama.
SECTION XII: Management and operation of "bingo"; persons eligible,
compensation, equipment, prizes advertisement.
(a) No person other than a bona fide member of the permit holder who has
submitted provisions of Section IV may participate in the management of "bingo"
under an approved permit.
(b) "Bingo" may not be conducted with any equipment which is not owned,
purchased, or being rented at a reasonable rate by the permit holder.
(c) Advertising or promotion of "bingo" games may be directed toward bona
fide members of the permit holder in accordance with the reasonable rules
thereof to be established by the governing body. The permit holder shall
indicate in all advertisements and promotions the purposes for which the net
proceeds will be used by the permit holder.
(d) A permit holder shall display its "bingo" license conspicuously at the
location where the "bingo" game is conducted.
(e) A permit holder shall conduct "bingo" games only at the single location
specified in the permit holder's application.
SECTION XIII: Age restriction to play or conduct "bingo" games.
No person under the age of nineteen (19) years shall be permitted to play
any game or games of "bingo" conducted pursuant to any permit issued under this
article. No person under the age of nineteen (19) years shall be permitted to
conduct or assist in the conducting of any game of "bingo" conducted pursuant to
any permit issued under this article.
SECTION XIV: Certain contract activities prohibited; special requirements
(a) Only qualified organizations which are properly issued permits pursuant
to this article shall be allowed to operate "bingo" games.
(b) A qualified organization shall not lend its name or allow its identity
to be used by any person in the operating, promotion or advertising of a "bingo"
game in which said qualified organization is not directly and solely operating
said "bingo" game.
(c) It shall be unlawful to use equipment marked with the name of another
organization.
(d) No qualified organization shall pay consulting fees to any individual
or entity for any services performed in relation to the operation of a "bingo"
game. Any consultant used in the
Form 10-SB Dated August 31, 1996, Page 142
<PAGE> 7
operation of bingo must submit to provisions on Section IV of this ordinance,
and must be approved in advance by the City Clerk following recommendation of
the Police Chief.
SECTION XV: Enforcement and supervision of administration of act, personnel,
rules.
(a) The governing body may promulgate reasonable rules and regulations
deemed necessary for the proper administration and enforcement of the
provisions of this article. The Police Chief shall employ personnel as
necessary to implement this article.
(b) The governing body by reasonable rules shall regulate the holding,
operation, or conducting of "bingo" including but not limited to the following:
(1) The method of play and selection of winners.
(2) The type of equipment to be used.
(3) Advertising and promotion among members of the permit holder.
SECTION XVI: Offense; forfeiture of license; ineligibility to apply for
license.
Any person, association or corporation who or which shall:
(1) Make any false statement in any application for any license authorized
to be issued under this ordinance.
(2) Fail to keep such books and records as shall fully and truly record a
transaction connected with the conducting of "bingo".
(3) Falsify or make any false entry in any books or records so far as they
relate any manner to the conduct of "bingo", to the disposition of the proceeds
thereof.
(4) Divert or pay any portion of the net proceeds of any game of "bingo"
to any person, association, or corporation, except in furtherance of one or
more of the lawful purposes defined herein; or
(5) Violate any of the provisions of this article or of the Constitution
of the State of Alabama relating to the conduct of "bingo" in Calhoun County or
any term of any license issued under this ordinance; shall be guilty of a Class
"B" misdemeanor and shall be subject to incarceration for a period up to six
(6) months and fined up to $500.00 plus court cost. In addition thereto, a
qualified organization shall forfeit any license issued under this ordinance
and be ineligible to apply for license under this ordinance for one (1) year
thereafter.
SECTION XVII: The sections and subsection of this ordinance shall be deemed
severable. If any section, subsection, sentence or phrase of this ordinance is
declared invalid or unconstitutional, such declaration shall not affect the
remaining parts unaffected by such declaration. PASSED AND ADOPTED THIS THE 13TH
DAY OF JUNE 1994.
Form 10-SB Dated August 31, 1996, Page 143
<PAGE> 1
Exhibit 99.9
AMENDMENT NO. 508
Bingo Games in Calhoun County
The operation of bingo games for prizes or money by certain nonprofit
organizations for charitable, educational, or other lawful purposes shall be
legal in Calhoun County, subject to the provisions of any resolution or
ordinance by the county governing body or the governing bodies of the
respective cities and towns, within their respective jurisdictions as provided
by law regulating such operation. The said governing bodies shall have the
authority to promulgate rules and regulations for the issuance of permits or
licenses and for operation of bingo games, within their respective
jurisdictions; provided, however, that said governing bodies must ensure
compliance pursuant to said law and the following provisions:
(a) No person under the age of 19 shall be permitted to play any
game or games of bingo, unless accompanied by a parent or guardian;
nor shall any person under the age of 19 be permitted to conduct or
assist in the conduct of any game of bingo;
(b) No bingo permit or license shall be issued to any non-profit
organization, unless such organization shall have been in existence
for at least 12 months immediately prior to the issuance of the
permit or license;
(c) Bingo games shall be operated only on the premisses owned or
leased by the nonprofit organization operating the bingo game. If
the premises is leased, the rate or rental shall not be based on a
percentage of receipts or profits resulting from the operation of
bingo games;
(d) No nonprofit organization shall enter into any contract with any
individual, firm, association or corporation to have said individual
or entity operate bingo games or concessions on behalf of the
nonprofit organization, nor shall said nonprofit organization pay
consulting fees to any individual or entity for any service
performed in relation to the operation or conduct of a bingo game;
(e) A nonprofit organization shall not lend its name or allow its
identity to be used by any other person or entity in the operating
or advertising of a bingo game in which said nonprofit organization
is not directly and solely operating said bingo game;
(f) Prizes given by any qualified nonprofit organization for the
playing of bingo games shall not exceed the cash amount of gifts of
equivalent value, set by the legislature, during any bingo session.
The legislature shall set a maximum amount for any calendar week;
(g) No person or organization, by whatever name or composition
thereof, shall take any expenses for the operation of a bingo game
except as permitted by law.
The provisions of this constitutional amendment shall be self-executing, but to
adopt laws supplemental to this amendment or in furtherance of the general
purposes and objectives herein set forth.
Form 10-SB Dated August 31, 1996, Page 144
<PAGE> 1
Exhibit 99.10
LIMITED APPRAISAL
OF
FRONTIER PALACE
SBI COMMUNICATIONS, INC.
376 US HIGHWAY #278 BYPASS
PIEDMONT, ALABAMA
FOR
Mr. Ron Foster
SBI Communications, Inc.
P. O. Box 597
Piedmont, AL 36272
PREPARED BY
PHILIP C. LEDBETTER
ACA #CG00236
May 1, 1995
Form 10-SB Dated August 31, 1996, Page 145
<PAGE> 2
May 1, 1995
Mr Ron Foster
SBI Communications, Inc.
P. O. Box 597
Piedmont, AL 36272
Re: Frontier Palace
376 U. S. Hwy 278 Bypass
Piedmont, Alabama
Dear Mr. Foster:
Pursuant to your request, please find enclosed the analysis regarding the above
captioned business.
A thorough inspection was made of the subject property, and the current bingo
operation. Based on the thorough analysis of applicable financial data and the
overall property attributes, it is estimated that the "going concern" value of
the subject property, assuming the continuance of the current business, as of
April 28, 1995 was:
SEVEN MILLION DOLLARS
($7,000,000.00)
Per your request, I have summarized the results of our analysis, opinions, and
conclusions in the original report.
I appreciated your choice of our firm for this matter. If I can provide you
with more information, please contact me.
Respectfully submitted,
G. B. DANIELL REALTY COMPANY
/s/ Phillip C. Ledbetter /s/
PHILLIP C. LEDBETTER
CERTIFIED GENERAL APPRAISER
CG 002336
Form 10-SB Dated August 31, 1996, Page 146
<PAGE> 3
SUMMARY OF IMPORTANT FACTORS & CONCLUSIONS
<TABLE>
<S> <C>
VALUATION DATE: May 1, 1995
PROPERTY LOCATION: Frontier Palace
376 U.S. Highway 278 Bypass
Piedmont, Alabama
PROPERTY RIGHTS APPRAISED: Fee simple
LICENSES: Yes; Current
LAND SIZE: 15 Acres
HIGHEST AND BEST USE: Current Operation
LEASES: See Income Approach
ESTIMATED MARKET VALUE: $7,000,000.00
ESTIMATED MARKETING PERIOD: 24 Months
</TABLE>
Form 10-SB Dated August 31, 1996, Page 147
<PAGE> 4
IDENTIFICATION OF THE PROPERTY
The subject property is being appraised as a 80,000 square foot facility doing
business at the "Frontier Palace" which owns, leases, operates and manages a
bingo gaming operation for a non-profit charity organization. The said charity
is assumed to be in existence for the purpose of this report. The park is
situated on 15+/- acres and is located in the northern section of Calhoun
County, Alabama. The reader may find plats, data, photos and general
information herein regarding the subject property. The writer has interviewed
the management and ownership of the existing operation. All of which helped
the writer better visualize the condition of the subject operation.
Form 10-SB Dated August 31, 1996, Page 148
<PAGE> 5
PURPOSE OF APPRAISAL
Mr. Ron Foster of SBI Communications, Inc. in Piedmont, Alabama, has requested
that this appraiser furnish to him a written report estimating the
going-concern value of the commercial property located on Hwy 278 Bypass known
as "Frontier Palace".
DATE OF APPRAISAL
The date of value is May 1, 1995.
FUNCTION OF APPRAISAL
It is my understanding that the appraisal report will be used by the client for
negotiating and securing debt financing on the subject property.
PROPERTY RIGHTS APPRAISED
It is imperative that the Appraiser ascertain at the beginning of the
assignment specific rights to be appraised. In this instance, the property is
appraised in fee simple ownership, assuming good and marketable title.
Form 10-SB Dated August 31, 1996, Page 149
<PAGE> 6
PROPERTY ADDRESS
376 U.S. Highway #278 Bypass, Piedmont, Alabama.
LEGAL DESCRIPTION
The legal description was furnished to the appraiser as per that certain deed,
map and legal description as attached herein. The reader may find a reduced
copy of said deeds under OWNERSHIP HISTORY.
SIZE OF PARCEL
According to the survey plat of the subject parcel, available to the appraiser,
the size of the subject parcel is as follows:
15 ACRES
PURPOSE OF APPRAISAL
This appraisal is made for the purpose of estimating the going concern of the
subject property (see attached definition of going concern).
Form 10-SB Dated August 31, 1996, Page 150
<PAGE> 7
HISTORY OF OWNERSHIP
The writer has not completed a detailed title search. However, it is the
understanding of the appraiser that SBI Communications, Inc. purchased the
property and all rights of the business in December, 1994. Please find
enclosed a reduced copy of the prior deed for the legal description purposes
only.
Form 10-SB Dated August 31, 1996, Page 151
<PAGE> 8
DEED
AND
LEGAL DESCRIPTION
Form 10-SB Dated August 31, 1996, Page 152
<PAGE> 9
Book 1871 Page 606
Know All Men By These Presents, That WILLIAM FAMBRO (a/k/a W. PAUL FAMBRO)
and MARY CAROL TWETTEN FAMBRO, his wife, both residents of and domiciled in
Floyd County, Georgia, for and in consideration of the sum of ONE HUNDRED
THIRTY FIVE THOUSAND AND NO/100 DOLLARS ($135,000.00) to us in hand paid by
CRANBERRY MAGNETITE CORPORATION, the receipt whereof we hereby acknowledge, do
grant, bargain, sell and convey unto the said CRANBERRY MAGNETITE CORPORATION,
the following described real estate, all situated in Calhoun County, State of
Alabama, to-wit:
1515 George Wallace Dr.
Gadsden, Al 35903
Begin at the Southeast corner of Spartan Foods, Inc. property as recorded
in Deed Book 1666, Page 1029, Calhoun County Probate Office, said point
being on the North right-of-way line of U. S. Highway No. 278 at Alabama
State Highway Department Station 107+78.73 and run Easterly along the
North right-of-way line of U. S. Highway No. 278 a distance of 418.45
feet; thence deflect 62 degrees 14 minutes 55 seconds left and run a
distance of 910.78 feet; thence deflect 81 degrees 56 minutes 44 seconds
left and run a distance of 560.53 feet; thence deflect 83 degrees 33
minutes 51 seconds left and run a distance of 220.80 feet; thence deflect
5 degrees 20 minutes 00 seconds left and run a distance of 90.90 feet,
thence deflect 14 degrees 00 minutes 00 seconds right and run a distance
of 61.10 feet; thence deflect 11 degrees 29 minutes 00 seconds left and
run a distance of 272.20 feet; thence deflect 0 degrees 10 minutes 00
seconds left and run a distance of 200.00 feet; thence deflect 28 degrees
46 minutes 23 seconds left and run a distance of 68.79 feet; thence
deflect 100 degrees 27 minutes 54 seconds left and run Easterly along the
North line of Spartan Foods, Inc. property a distance of 176.00 feet to
the Northeast corner thereof; thence deflect 90 degrees 00 minutes 17
seconds right and run Southerly along the East line of said property a
distance of 425.00 feet to the point of beginning.
Said parcel of land being a portion of Fraction 24 of Fractional Section
32 and Fraction 21 of Fractional Section 33, all being in T-12-S, R-10-E,
being subject to easement rights for the existing sanitary sewer gravity
line and forcemain and service lines across the property, lying and being
in Piedmont, Calhoun County, Alabama, and containing 15.00 acres, more or
less.
To have and to hold the aforegranted premesis to the said CRANBERRY
MAGNETITE CORPORATION, its successors and assigns, forever.
And we, for ourselves and our heirs and assigns, do hereby covenant with
the said CRANBERRY MAGNETITE CORPORATION, its successors and assigns, that we
are lawfully seized in fee of the aforegranted premises; that such premises are
free from all
Form 10-SB Dated August 31, 1996, Page 153
<PAGE> 10
encumbrances; that we have good right to sell and convey the same, and that we
will warrant and defend the said premises to the said CRANBERRY MAGNETITE
CORPORATION, its successors and assigns, forever against the lawful claims and
demands of all persons.
In Witness Whereof, we, WILLIAM FAMBRO (a/k/a W. PAUL FAMBRO) and MARY
CAROL TWETTEN FAMBRO, his wife, have hereunto set our hands and seals this 4th
day of March, 1993.
____________________________________ /s/ William Fambro /s/
Witness --------------------------
WILLIAM FAMBRO
(a/k/a W. PAUL FAMBRO)
/s/Glenda H. West/s/ /s/Mary Carrol Twetten Fambro/s/
- -------------------- ---------------------------------
Witness MARY CAROL TWETTEN FAMBRO
STATE OF GEORGIA
FLOYD COUNTY,
I, the undersigned, hereby certify that WILLIAM FAMBRO (a/k/a W. PAUL
FAMBRO) and MARY CAROL TWETTEN FAMBRO, whose names are signed to the foregoing
conveyance, and who are known to me, acknowledged before me on this day that,
being informed of the contents of the conveyance, they executed the same
voluntarily on the day the same bears date.
Given under my hand this 4th day of March, 1993.
/s/ Carol W. Williams/s/
NOTARY PUBLIC, STATE OF GEORGIA
Commission Expires:
This deed was prepared by John M. Graham, III, Esq., of Shaw, Maddox, Graham,
Monk & Boling, P.O. Box 29, Rome, Georgia 30162-0029
Form 10-SB Dated August 31, 1996, Page 154
<PAGE> 11
LOCATION MAPS
Form 10-SB Dated August 31, 1996, Page 155
<PAGE> 12
Map showing all counties in Alabama. From top left: Lauderdale, Limestone,
Madison, Jackson, Colbert, Franklin, Lawrence, Morgan, Marshall, Dekalb,
Marion, Winston, Cullman, Blount, Etowah, Cherokee, Lamar, Fayette, Walker,
Jefferson, St. Clair, Calhoun, Pickens, Tuscaloosa, Shelby, Talladega, Clay,
Randolph, Cleburne, Greene, Hale, Bibb, Perry, Chilton, Autauga, Coosa, Elmore,
Tallapoosa, Chambers, Sumter, Marengo, Dallas, Lowndes, Montgomery, Macon, Lee,
Russell, Bullock, Choctaw, Clarke, Washington, Monroe, Concuh Butler, Crenshaw,
Coffee, Pike, Escambia, Covington, Coffee, Dale, Henry, Houston, Geneva.
Following Page: Map of Piedmont showing parcel. Not a survey, just an
approximate layout.
Form 10-SB Dated August 31, 1996, Page 156
<PAGE> 13
NEIGHBORHOOD AND SITE DATA
<TABLE>
<S> <C>
Employment Stability Good
Convenience to Employment Good
Convenience to Shopping Good
Convenience to Schools Good
Adequacy of Public Transportation Good
Recreational Facilities Good
Adequacy of Utilities Good
Property Compatibility Good
Protection from Detrimental Conditions Good
Police and Fire Protection Good
General Appearances of Properties Good
Appeal to the Market Good
</TABLE>
ALL OF THE ABOVE FACTORS AND ASSUMPTIONS ARE CONSIDERED TO BE AVERAGE AND
POSITIVE FACTORS.
Form 10-SB Dated August 31, 1996, Page 157
<PAGE> 14
LOCATION MAPS
Form 10-SB Dated August 31, 1996, Page 158
<PAGE> 15
IMPROVEMENTS ON THE SITE
BASIC BUILDING STRUCTURE
Below is a brief description of the quality of construction and material used
in the subject country club building:
<TABLE>
<S> <C>
FOUNDATION: Concrete block with slab
FRAMING: Block and masonry with metal frames
EXT. WALLS: Brick veneer with some metal panels
ROOF: Metal Standing Seam
FLOORS: Good quality of commercial carpeting with some vinyl tile and
ceramic tile.
INT. WALLS: Taped and painted sheetrock, excellent quality wall coverings -
some wood paneling with chair rail and crown molding in offices.
CEILINGS: 2' x 4' acoustic tile suspended on T-bar grid with recessed
florescence lighting - some older areas are sheetrock with recessed
lighting.
HVAC: Central heat and air conditioning, zone controls assumed adequate
capacity and service.
ELECTRICAL: 110 amp service .3 phase, assumed adequate outlets.
PLUMBING: Copper supply lines with some pvc waste lines - Men and Women
restrooms, all fixtures are modern with some ceramic tile and
fixtures
PARKING: Asphalt
</TABLE>
The building also features a vault, kitchen areas, storage areas, several
offices, and a modern electrical entrance system. The security system includes
28 cameras. See List.
Form 10-SB Dated August 31, 1996, Page 159
<PAGE> 16
BUILDING INSPECTION
<TABLE>
<S> <C>
PROPERTY: Frontier Palace (Inspection
Date: 4/29/95)
LOCATION: 376 US Highway #278 Bypass
Piedmont, Alabama
LAND AREA: 15 Acres rectangular site fronting Hwy 278
IMPROVEMENTS SIZE: 80,000 SF Gross
ERECTED: 1993 +/- (New Construction)
CONSTRUCTION: Retail: 3 Story metal with office and open area.
ROOF: Steel bar joist and pan with rigid board, metal; open steel
girders and purlins with sheet metal membrane.
WALLS: Brick and Prefabricated metal.
CEILINGS: 12 foot eave, open ceiling with wet sprinkler systems.
FLOOR: Concrete on grade with commercial grades of carpet and vinyl
in office; Sealed concrete on grade.
LIGHTING: Office: Recessed fluorescent fixtures; Service: Industrial
fluorescent strips plus skylite panels.
ELECTRICAL: Office: Typical; Service: Typical.
RESTROOMS: Open: Adequate; Office: Adequate.
HVAC: Adequate (over built)
LOADING FACILITIES: Garage Door - No dock - well
CONDITION: Open: Good; Office: Good.
</TABLE>
Form 10-SB Dated August 31, 1996, Page 160
<PAGE> 17
IMPROVEMENTS ON THE SITE (cont'd)
---------------------------------
Quality of Construction (Materials & Finish) Good
Condition of Improvements Good
Room Sizes and Layout Good
Covered Areas and Storage Good
Insulation - Adequacy Good
Plumbing - Adequacy & condition Good
Electrical - Adequacy & condition Good
HVAC - Adequacy & condition Good
Parking and Entrance Areas Good
Compatibility to Neighborhood Good
Access to Upper Levels Good
Office Interior Layouts Good
Quality of Construction Good
Overall Usability Good
Appeal and Marketability Good
ALL OF THE ABOVE FACTORS ARE CONSIDERED TO BE NEW AND ABOVE AVERAGE AND ASSUMED
TO BE IN GOOD CONDITION AND WORKING ORDER.
ALL STATEMENTS ARE ASSUMED TO BE COMPLETED AND NEW.
YEARS ESTIMATE REMAINING ECONOMIC LIFE: 25 TO 40.
Form 10-SB Dated August 31, 1996, Page 161
<PAGE> 18
HIGHEST AND BEST USE
SUMMARY
The subject property is well located which in return has allowed the good
market demand. It is the opinion of the appraiser that the site is developed
to its highest and best use as a gaming and educational complex specifically
for a special usage. The steady income stream of the going concern tends to
prove the good use of the property. Therefore, the subject property conforms
to the appraiser's opinion of highest and best use. This is assuming the
license of the current operation remains in place.
Form 10-SB Dated August 31, 1996, Page 162
<PAGE> 19
HIGHEST AND BEST USE
According to the test of Real Estate Appraisal Terminology, Revised Edition,
published jointly by the American Institute of Real Estate Appraisers and the
Society of Real Estate Appraisers, Highest and best use may be defined as:
That reasonable and probable use that supports the highest present value,
as defined, as of the effective date of the appraisal. Alternatively,
that use, from among reasonably probable and legal alternative uses, found
to be physically possible, appropriately supported, financially feasible
and which results in highest land value.
This definition implies that the highest and best use of the subject is
considered as if vacant. For improved properties, there is also a consideration
of the highest and best use of the property as improved. The existing
improvements are considered in relation to the highest and best as improved.
The subject property is situated north of the major thoroughfare, U. S. Highway
#278 Bypass (see attached maps). The development patterns in the area point to
further commercial and retail complexes in the general area with no other
gaming operation. Clearly, the subject property's highest and best use assumes
the continuance of the going concern complex, which clearly best allows for the
maximum benefit available.
Form 10-SB Dated August 31, 1996, Page 163
<PAGE> 20
INCOME APPROACH
CONCLUSIONS
In summary, the subject is a well located property for the present use. Demand
for playing appears to have been steady in recent years with an increase of
revenues and an overall increase of the net operating income. Note, that the
Lessee is a non-profit concern. If the property was placed on the open market
for sale at the present time, it is my opinion that the property would be sold
as a going concern facility, and past operating statements would have the most
(if not all) use to the new owners. However, based on the operating financial
data provided the subject business, operation and property would have an
estimate income value as follows. Please note some downward/upward adjustments
were required to the operating statements due to taxes, insurance, amounts of
maintenance, fees, rents, payouts, expenses and overall non-profit charges
which indicates a higher than average operating gross costs. A detailed view
of each income producer was analyzed and made by the appraiser. The property's
location, access, license, size, shape, layout, condition, equipment, zoning
classification, utilities, use and overall financial condition are all
considered and analyzed for this appraisal, and was very supported in the final
estimated value for the subject based on a reasonable rate of return for an
investor based on the current market condition, was:
ADJUSTED NET OPERATING INCOME: $700,000
10% NOI @ $700,000 = $7,000,000
Adjustments were required and made for the following:
1) Depreciation and Taxes
2) Non-Profit Expenses and Costs
Form 10-SB Dated August 31, 1996, Page 164
<PAGE> 21
INCOME/EXPENSE STATEMENT
NOTES
1) The capitalization rate was developed on the local mortgage rates,
interest rates, terms and demands on R.O.I. and R.O.E. from the local
investors.
2) All verbal contracts were assumed to be in very short supply with no
value estimated.
3) The stated average rental rate was derived from the current operation and
past performance.
4) The occupancy rate was projected at 100% with the leasing period being
more than 1 year.
5) The potential gross income from the lease was based on similar on-going
operations and past operating statements of alike businesses. Also, from
the actual tenant/business as stated by the parcel's owner.
6) All work is assumed to be completed, if any. This includes exterior and
interior of the proposed structure.
7) Market conditions are stable and constant for this business operation.
Form 10-SB Dated August 31, 1996, Page 165
<PAGE> 22
SUMMARY OF VALUE CONCLUSIONS
The estimated values of the equipment, furniture and other business related
assets have been based on income stream, past history of related items and from
conversations from the owners. The holding period for the assets is projected
to be approximately 24 years. This time period is typical for the items and
assets. The costs of ownership, holding and caring fees are estimated at 30%
of the total. The fees should include most moving, interest and shipping
expense, but not the owner's profit. A deep discount of 50% of the total has
been applied in this assignment. This discount also includes the assumptions
that the income stream should decline if the furniture and equipment are
removed. Furthermore, the assets are considered to be part of the "going
concern" business, and their values are included and shows up in the income
stream.
Form 10-SB Dated August 31, 1996, Page 166
<PAGE> 23
CERTIFICATION OF THE APPRAISER
I, the undersigned appraiser, hereby certify that:
1) I have no interest, present or contemplated, direct or otherwise in the
appraised properties.
2) My employment and compensation are not contingent upon the valuations found.
3) I have made a thorough, personal inspection of the subproperties and the
general area.
4) According to the best of my knowledge and belief, everything contained in
this report is true, subject to the limiting conditions herein, and that no
important facts have been intentionally overlooked or withheld.
5) This appraisal has been made in conformity with the rules and professional
ethics of the Alabama Real Estate Commission.
5/5/95 /s/Phillip C. Ledbetter/s/
- ------ ------------------------------------
Date Phillip C. Ledbetter
Appraiser & Broker
Form 10-SB Dated August 31, 1996, Page 167
<PAGE> 24
I certify that, to the best of my knowledge and belief:
- -- the statements of fact contained in this report are true and correct.
- -- the reported analyses, opinions and conclusions are limited only by the
reported assumptions and limiting conditions, and are my personal, unbiased
professional analyses, opinions, and conclusions.
- -- I have no present or prospective interest in the property that is the subject
of this report, and I have no personal interest or bias with respect to the
parties involved.
- -- my compensation is not contingent upon the reporting of a predetermined value
or direction in value that favors the cause of the client, the amount of the
value estimate, the attainment of a stipulated result, or the occurrence of a
subsequent event.
- -- my analyses, opinions and conclusions were developed, and this report has
been prepared in conformity with the Uniform Standards of Professional
Appraisal Practice.
- -- I have made a personal inspection of the property that is the subject of this
report.
- -- no one provided significant professional assistance to the person signing
this report except as stated herein, if any.
- -- the reported analyses, opinions and conclusions were developed and this
report has been prepared, in conformity with the requirements of the Code of
Professional Ethics and the Standards of Professional Appraisal Practice of
the Appraisal Institute.
- -- the use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representative.
- -- or an approval of a loan.
Form 10-SB Dated August 31, 1996, Page 168
<PAGE> 25
ASSUMPTIONS AND LIMITING CONDITIONS
-----------------------------------
1) The legal descriptions, survey plats and maps furnished to the appraiser are
assumed to be correct.
2) The appraiser assumes no responsibility for matters legal in nature, and
title is assumed to be correct.
3) All existing leins and encumbrances, if any, have been disregarded, and the
property has been appraised as though free and clear of those limitations.
4) Responsible ownership and competent management is assumed in the appraisal
of these properties.
5) Information identified in this report as having been furnished by others is
believed to be reliable but no responsibility is assumed for its accuracy.
6) The sketches included in this report are included merely to assist the
reader in visualizing the property and are not to be constructed as being
actual surveys.
7) Possession of this report, or any copy thereof, does not carry with it the
right of publication, in whole or in part without the express consent of the
appraiser.
8) Attendance or testimony in court by reason of this report is not required
unless separate arrangements have been made with the appraiser.
Form 10-SB Dated August 31, 1996, Page 169
<PAGE> 26
ASSUMPTIONS AND LIMITING CONDITIONS
The various indications of value developed in the appraisal are indications
only. They were developed through the various approaches to value primarily to
give weight to the various factors affecting value and to assist the appraiser
in reaching a value conclusion. These indications of value must not be used in
conjunction with any other appraisal and are invalid if so used.
The distribution of the total valuation as between land and improvements
applies only under the existing program of utilization. The separate value
estimates for land and improvements must not be used in conjunction with any
other appraisal and are invalid if so used.
The appraiser assumed that there are no hidden conditions of the property,
subsoil, or structures which would render it more or less valuable than
otherwise apparently comparable property. The appraiser assumes no
responsibility for such conditions or for engineering which might be required
to discover them.
Form 10-SB Dated August 31, 1996, Page 170
<PAGE> 27
CERTIFICATION OF THE APPRAISER
"This assignment was made subject to regulations of the state of Alabama Real
Estate Appraisers Board. The undersigned state certified appraiser has met the
requirements of the board that allow this report to be regarded as a 'Certified
Appraisal.'"
/s/Phillip C. Ledbetter/s/
--------------------------
Phillip C. Ledbetter, ACA
Certified General Real Estate Appraiser
Certificate Number: CG00236
Form 10-SB Dated August 31, 1996, Page 171
<PAGE> 28
DISCLOSURE OF COMPETENCY
I certify that I have the appropriate knowledge and experience that is required
to complete this appraisal assignment within the standards and requirements to
comply with the Competency Provision in the USPAP.
Form 10-SB Dated August 31, 1996, Page 172
<PAGE> 29
CERTIFICATION OF THE APPRAISER
I, the undersigned appraiser, hereby certify that:
1) I have no interest, present or contemplated, direct or otherwise in the
appraised properties.
2) My employment and compensation are not contingent upon the valuations found.
3) I have made a thorough, personal inspection of the subproperties and the
general area.
4) According to the best of my knowledge and belief, everything contained in
this report is true, subject to the limiting conditions herein, and that no
important facts have been intentionally overlooked or withheld.
5) This appraisal has been made in conformity with the rules and professional
ethics of the Alabama Real Estate Commission.
5/5/95 /s/Phillip C. Ledbetter/s/
- ------ --------------------------
Date Phillip C. Ledbetter
Appraiser & Broker
Form 10-SB Dated August 31, 1996, Page 173
<PAGE> 30
PHILLIP C. LEDBETTER
--------------------
EDUCATION
- ---------
1979 Diploma - Jacksonville High School
1982 B.S. - Political Science - JSU
1982 B.A. - Economics - JSU
LICENSES
- --------
1982 Alabama Real Estate License - Salesman
1984 Alabama Real Estate License - Broker
1990 State Certified General Appraiser
EXPERIENCE
- ----------
CLIENTS
- -------
AmSouth Bank
Colonial Bank
SBA
Courts
Numerous Attorneys
Independent Bank
Accountants/Trusts
Corporations
Form 10-SB Dated August 31, 1996, Page 174
<PAGE> 31
STATE OF ALABAMA
This is to certify that
PHILLIP C. LEDBETTER
having given satisfactory evidence of the necessary
qualifications required by the laws of the State of Alabama
is authorized to transact business in Alabama as a
CERTIFIED GENERAL REAL ESTATE APPRAISER
with all rights, privileges and obligations
apputenant thereto.
Certificate Number: CG00236 Expiration Date: Sept., 30, 1995
Seal
Signature
Signature
Signature
Signature
Signature
Signature
Signature
Signature
Signature
ALABAMA REAL ESTATE
APPRAISERS BOARD
Form 10-SB Dated August 31, 1996, Page 175
<PAGE> 32
STATE OF ALABAMA
THE ALABAMA REAL ESTATE COMMISSION
HEREBY GRANTS 1995-96
REAL ESTATE BROKERS LICENSE
NUMBER 014815
TO
PHILLIP C. LEDBETTER
G B DANIEL REALTY COMPANY
1330 NOBLE STREET SUITE 21
ANNISTON, AL 36201 COUNTY 11
I014726 PHILLIP C. LEDBETTER
COMPANY OFFICE REGISTRATION NUMBER COMPANY QUALIFYING BROKER
TYPE OF LICENSE Q
LICENSE NUMBER 014815
ISSUE DATE 10/1/94
EXPIRATION DATE 9/30/96
LICENSE FEES 90.00
RECOVERY FUND
PENALTY
REG. FEE
C.E. HOURS 12.00
Table>
THIS LICENSE SHALL TERMINATE WHENEVER ABOVE LICENSEE FAILS TO COMPLY WITH ANY
PORTION OF THE ALABAMA REAL ESTATE LICENSING LAW.
ALABAMA REAL ESTATE COMMISSION
Signature
Executive Director
205 350 990
127516R19940805
02561
Form 10-SB Dated August 31, 1996, Page 176
