<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
1996; OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
COMMISSION FILE NUMBER O-28416
SBI COMMUNICATIONS, INC.
(Name of Small Business Registrant in its charter)
DELAWARE
--------
(State or other jurisdiction of incorporation or organization)
58-1700840
----------
(I.R.S. Employer Identification Number)
458 HIGHWAY 278 BY PASS; P.O. BOX 597; PIEDMONT, ALABAMA 36272
--------------------------------------------------------------
(Address of principal executive offices including Zip Code)
(205) 447-8797
--------------
(Registrant's telephone number)
Check whether the Registrant (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, during the past twelve months (or for such shorter period that the
Registrant was required to file such reports, and (2) has been subject to such
filing requirements for the past 90 days:
YES [X] NO [_]
State the number of shares outstanding of each of the Registrant's
classes of equity, as of the latest practicable date: 5,345,439 SHARES OF
COMMON STOCK AND 1,688,000 SHARES OF PREFERRED STOCK, AS OF SEPTEMBER 30, 1996.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
NUMBER NUMBER ITEM CAPTION
- ------ ------ ------------
<S> <C> <C>
PART I 3 FINANCIAL INFORMATION
ITEM 1 3 FINANCIAL STATEMENTS
4 Cover Page
5 Consolidated Balance Sheets
6 Consolidated Statements of Income
7 Consolidated Statements of Shareholders' Equity
13 Consolidated Statements of Cash Flows
14 Notes to Consolidated Financial Statements
ITEM 2 15 MANAGEMENT'S DISCUSSION AND ANALYSIS
PART II 22 OTHER INFORMATION
ITEM 1. 22 LEGAL PROCEEDINGS
ITEM 2 22 CHANGES IN SECURITIES
* Modification of Instruments Defining Rights
* Limitation or Qualification of Class Rights
* Recent Sales of Unregistered Securities
ITEM 3. * DEFAULT UPON SENIOR SECURITIES
ITEM 4. * SUBMISSION OF MATTERS TO SECURITIES HOLDERS
ITEM 5. 22 OTHER INFORMATION
ITEM 6. 23 EXHIBITS & REPORTS ON FORM 8-K
23 SIGNATURES
24 ADDITIONAL INFORMATION
- -------
* Not Applicable.
</TABLE>
SBI Communications, Inc., Form 10-QSB, Page 2
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
See pages 4 through 16 following
SBI Communications, Inc., Form 10-QSB, Page 3
<PAGE> 4
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
INTRODUCTION
The Registrant is currently in the development stage of its business
cycle. Since its inception, the Registrant has actively pursued licensing
agreements designed to generate royalty income in exchange for providing
software and methods involving bingo game production. In the past, the
Registrant entered into various agreements covering territories in Brazil,
Greece, Hong King, and Indian reservations, military bases, and charity bingo
parlors in the United States. Prior emphasis on these type of licensing
agreements has proven to be ineffective. No licensee currently has bingo
operations generating significant fees or royalties for the Registrant. The
majority of its current operating income is provided by managing bingo games
for certain non-profit charities in a facility owned by the Registrant. The
majority of future revenues, however, are not anticipated to occur in either of
these areas.
The Registrant hopes to generate significant future revenues from
telecommunications services involved in interactive bingo and television buying
shows by purchasing large blocks of long distance telephone time and reselling
such time to television audience users at a profit. Management currently
anticipates arranging contracts to purchase blocks of long distance telephone
time at rates of less than ten cents per minute. Television audience users
will call SBI telephone numbers to receive computer generated bingo playing
cards. There will be no charge for the card, but a charge for the telephone
time it takes to generate the card and communicate the information to the user.
Management anticipates an average telephone time usage of ten minutes per card
generated, and anticipates charging approximately one dollar per minute for
such time. Accordingly, management anticipates generating in excess of
ninety cents per minute profit on each telephone request for a bingo playing
card, or approximately nine dollars for each card requested. Management of
the Registrant has made this area of business their first priority, and most of
the other plans for the future are based on the success of the
telecommunications area.
Management would like to broadcast the bingo show to as many viewers
as possible, and although there are no current foreign agreements, management's
plans are not limited to the U.S. Management intends to pursue contracts with
foreign countries and do some research into bingo on the Internet. Management
estimates that all significant costs to begin telecommunications operations
have already been incurred, but the Registrant must first locate a third party
that will contract with the Registrant to broadcast the bingo shows.
Management is not able to estimate the cost of expanding the telecommunications
business segment into foreign markets or onto the Internet at this time.
Overall, management hopes to be able to generate significant net revenues
annually from this area of business. However, there can be no assurance that
management will succeed in finding an acceptable broadcasting vendor, or that
audience participation will be sufficient enough to provide adequate profit
margins to continue the venture.
Assuming success with the above concept, the Registrant also hopes to
expand operations through the acquisition of television production facilities
and rights to a television buying show. This would allow the Registrant to
produce their bingo show in their own studio and broadcast it
SBI Communications, Inc., Form 10-QSB, Page 17
<PAGE> 5
over their own network. It will also give management freedom to use their
experience in programming and production to produce other forms of interactive
entertainment. Diligently being examined are the legal opinions submitted for
imminent contractual arrangements between two companies with the Registrant, a
major international shop at home entity and a telecommunications Registrant.
Both of these entities are NASDAQ listed. Management feels confident that a
deal will be consummated by year end 1996 allowing the Registrant to commence
operations on a full scale in the telecommunications business segment.
The Registrant is continuing to search for avenues to develop future
revenue. In light of the preliminary and conditional nature of negotiations,
no assurance can be provided as to the likelihood that such proposed projects
will come to fruition, nor can management at this time make a reasonable
estimation of the cost to start such projects, or the future revenues or
profits that might be generated therefrom. A summary of projects currently
being pursued is as follows:
A) The Registrant is exploring the negotiation for the management
contract for THE MILL Resort & Casino (Bingo Operation). At the
request of Full House Resort, Inc., a public entity in joint
partnership with the Coquille Indian Tribe, THE MILL is negotiating
with the Registrant to utilize the experience of SBI through a
management contract. Negotiations are only in the preliminary stage
at this time.
B) The Registrant is under agreement to acquire Deadwood Gulch Resort &
Casino in South Dakota. This is a twelve million dollar facility that
is presently wholly-owned and operated by the Full House Registrant.
The status at present is management is awaiting a decision by a
participating equitable entity. This project will not be able to be
consummated without such a participating entity.
C) The Registrant is planning a partnership with the Louisiana Charitable
Organization Alliance (LACOA), and the development of a senior
citizens television network. Such ventures will involve development
of television programs featuring interactive Bingo shows, auctions,
and factory direct sales. The LACOA project is currently awaiting
passage of legislation presented by Clenix Esensauter of Louisiana.
D) The Registrant is in the planning stage of the establishment of a
casino and bingo hall on real estate provided by the Cherokee Indians
of Georgia, Inc., which is also now subject to Bureau of Indian
Affairs (BIA) approval.
E) To add diversification, the Registrant is also exploring the possible
acquisition of Zacker's (Horizon) Gas of Tampa, Florida, a retail
propane gas Registrant with $3,000,000 in annual sales.
LIQUIDITY
The following table summarizes working capital and total assets:
SBI Communications, Inc., Form 10-QSB, Page 18
<PAGE> 6
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
---- ----
<S> <C> <C>
Working Capital ($ 7,831) $ 102,830
Total Assets 7,783,047 8,179,490
</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 September 30, 1996, the Registrant had current liabilities in
excess of current assets, principally due to administrative expenses incurred
during the development stage that have been funded by the majority stockholder
in the form of accrued salaries. $90,000 in salaries to management were accrued
during the nine months ended September 30, 1996. At September 30, 1996, a
total of $210,000 in salaries to management has been accrued. Management does
not intend to pay such accrued salaries until the Registrant has sufficient
working capital to do so while meeting operating needs. The Registrant has had
some success in issuing stock for services, and accordingly has kept the
working capital deficit to a minimum during the nine month period.
The change in total assets is principally attributable to the
Registrant's depreciation of the bingo hall and related equipment, as well as
the amortization of intangible assets. Depreciation and amortization totaled
$411,081 for the nine months ended September 30, 1996. In addition, during the
third quarter of 1996, management increased reserves for uncollectible
receivables by $87,500; and donated to the charity currently operating the
bingo hall $60,688 relating to game inventories (either previously used and
billed to the charity, but not yet paid for, or unused and still on site).
These two transactions resulted in a decrease in assets of $148, 688.
As the Registrant continues to operate in the development stage, no
significant cash flow is being generated from operating activities. In early
1996, the charity operating the bingo hall struggled, and the Registrant
collected less funds than were needed to operate the games, as well as to cover
administrative costs and costs of the facility. The Registrant lowered rents
charged to the charity to $25,000 per month, significantly below the $75,000
per month charged in 1995. As a result, the Registrant used $147,516 in net
cash flow for operations. The Registrant also acquired various operating
equipment at a cost of $38,064. To fund these cash flow needs, the Registrant
was able to obtain $250,000 in proceeds from a mortgage loan, but $61,000 of
such proceeds were needed to pay various loan inducement and closing costs,
resulting in net cash inflow from the loan of only $189,000. Overall, the
Registrant experienced a net increase in cash for the nine months of $1,464.
Management anticipates the charity operating the bingo hall to do sufficiently
well in the future to allow consistent payment of the $25,000 rent, as well as
additional payments on older receivable balances, which should strengthen the
Registrant's cash flow from operations.
SBI Communications, Inc., Form 10-QSB, Page 19
<PAGE> 7
CAPITAL RESOURCES
Since its inception, the Registrant's only significant sources of
capital have been from the sale of common stock and loans from shareholders.
The Registrant has also acquired significant assets through the sale of
convertible preferred stock. The Registrant anticipates continued expansion of
its business through acquisitions using Registrant stock. Furthermore, with
the bingo hall acquired in 1994 now operating more profitably, the Registrant
anticipates generation of revenues from the lease of this facility sufficient
to cover administrative costs still being incurred as the Registrant moves
forward in its development stage.
RESULTS OF OPERATIONS
The following table sets forth the relative relationship to total
revenue of the revenue categories in the Registrant's statement of income
(rounded to the nearest whole dollar).
AMOUNT OF TOTAL REVENUE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Licenses & Royalties $ -0- $ -0- $ -0- $ -0-
Bingo Hall Operations 89,754 162,678 289,745 312,678
Interest Income 343 -0- 617 32
Total Revenue $90,097 $ 162,678 $ 290,371 $ 12,710
</TABLE>
In general, the Registrant experienced insignificant revenues in 1996
and 1995 as it attempted to expand and develop its operations. In 1995, the
Registrant was able to get a more stable charity to lease the bingo hall,
resulting in greater revenues in the three months ended September 30, 1995, as
opposed to any other prior 1995 quarter. However, due to a transition period
in early 1996 of charity management, bingo games were not as profitable as
anticipated, and rents were lowered from $75,000 per month in 1995 to $25,000
per month in 1996. This has resulted in a decline in operating revenues in
1996 compared to 1995 for both the quarter and year-to-date periods. The
Registrant has no other significant source of revenue at this time.
As the existing charity gains in experience, participation at the
bingo games has increased, allowing the charity to generate greater profits.
This will allow timely payment of current rent charges, as well as potential
ability to pay rents in the future closer to the $75,000 per month level
originally agreed to.
The Registrant's expenses can be summarized as follows:
<PAGE> 8
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Salaries and related expenses $ 38,152 $ 38,263 $ 115,012 $104,263
Other general and administrative
expenses 249,687 83,497 430,251 225,965
Depreciation and amortization 137,107 156,951 411,081 403,449
Interest and finance charges 27,717 -0- 54,628 193
Other 12,918 -0- 21,116 -0-
Amount of Total Expenses $465,581 $ 278,711 $1,032,088 $733,870
</TABLE>
One of the most significant expenses relates to the amortization of
trademark, game show and computer program assets the Registrant has developed.
The expense is running $265,960 per year, or approximately $66,000 per quarter.
Such assets will be fully amortized at the end of 1996. The Registrant also
has depreciation on the bingo hall and related equipment, which approximates
$275,000 per year, or $69,000 per quarter. These expenses do not require the
use of cash. As explained previously, the Registrant made adjustments to
receivable and inventory balances in the third quarter of 1996, resulting in
one time charges to general and administrative expenses of approximately
$148,000. The Registrant also obtained debt financing in late 1995, and again
in the spring of 1996, resulting in interest expense in 1996 with no
corresponding expense in 1995. Interest expense includes about $17,000 in
amortization of deferred loan costs for the nine months ended September 30,
1996.
Should the Registrant successfully acquire production facilities and
broadcast companies under consideration, or expand operations in areas
previously discussed as currently under consideration, revenues and expenses of
the Registrant would change significantly. Management is not able to predict
the impact of such changes on revenues or expenses at this time.
IMPAIRMENT OF LONG LIVED ASSETS
Although the Registrant has generated significant losses over the
years, charity operations of the bingo hall are beginning to stabilize, and
appear to be at a level to insure a minimum of $300,000 of annual rental
income, with potential of $900,000 of annual rental income, as well as
additional income relating to management services provided. This revenue
should be sufficient to enable the Registrant to generate profits in the
future. This, coupled with the potential proceeds from the sale of the bingo
hall itself at some future date, has convinced management that the Registrant
will ultimately collect net revenues from ownership of the bingo hall in excess
of the recorded cost of the related fixed assets. Accordingly, management does
not believe any adjustment in the recorded amounts of such assets is warranted
under the new accounting rules relating to the impairment of long lived assets.
SBI Communications, Inc., Form 10-QSB, Page 21
<PAGE> 9
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
See Notes To Consolidated Financial Statements included elsewhere in
this filing for a description of the Registrant's calculation of earnings per
share.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Incorporated by reference to the Registrant's registration statement
on Form 10-SB, as filed with the Securities and Exchange Commission on November
__, 1996.
ITEM 2 CHANGES IN SECURITIES
RECENT SALES OF UNREGISTERED SECURITIES
Incorporated by reference to the Registrant's registration statement
on Form 10-SB, as filed with the Securities and Exchange Commission on November
__, 1996.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO SECURITIES HOLDERS
Incorporated by reference to the Registrant's registration statement
on Form 10-SB, as filed with the Securities and Exchange Commission on November
__, 1996.
ITEM 5. OTHER INFORMATION
Incorporated by reference to the Registrant's registration statement
on Form 10-SB, as filed with the Securities and Exchange Commission on November
__, 1996.
SBI Communications, Inc., Form 10-QSB, Page 22
<PAGE> 10
ITEM 6. EXHIBITS & REPORTS ON FORM 8-K
Incorporated by reference to the Registrant's registration statement
on Form 10-SB, as filed with the Securities and Exchange Commission on November
__, 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto authorized.
SBI COMMUNICATIONS, INC.
Dated: November 15, 1996
By: /s/Ronald Foster/s/
Ronald Foster
Chairman, President & Chief Executive Officer
SBI Communications, Inc., Form 10-QSB, Page 23
<PAGE> 11
Additional Information
HEADQUARTERS
------------
SBI Communications
458 Highway 278 Bypass; Post Office Box 597
Piedmont, Alabama 36272
SUBSIDIARIES
------------
SBI COMMUNICATIONS, INC, an Alabama corporation
458 Highway 278 Bypass; Post Office Box 597; Piedmont, Alabama 36272
SBI COMMUNICATIONS, INC, a Nevada corporation
955 South Virginia Street; Suite 116; Reno, Nevada 89502
SATELLITE BINGO, INC., a Georgia corporation
458 Highway 278 Bypass; Post Office Box 597; Piedmont, Alabama 36272
OFFICERS & DIRECTORS
--------------------
Ronald Foster: President, Chairman of the Board, Chief Executive Officer
Kathy Hunt: Secretary/Treasurer/Director
Thomas Barrett: Vice President
Claude Pichard: Vice President/Director
Mel Ray: Director
Michael McGlothlin: Director
AUDITORS
--------
John Ratliff
DANIELS AND RATLIFF PROFESSIONAL GROUP, INC.
1100 South Tryon Street; Suite 230; Charlotte, North Carolina 28203
TRANSFER AGENT
--------------
CORPORATE STOCK TRANSFER
370 17th Street; Suite 2550; Denver, Colorado 80202
Exhibits to this Form 10-QSB will be provided, subject to payment of
actual copy costs, to shareholders of the Registrant upon written request
addressed to Kathy Hunt, Secretary, SBI Communications, Inc., at the
Registrant's headquarters listed above.
SBI Communications, Inc., Form 10-QSB, Page 24
<PAGE> 12
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
AND ACCOUNTANTS' REPORT
SEPTEMBER 30, 1996 AND 1995
<PAGE> 13
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1995 1995
---- ----
(Unaudited)
-----------
<C> <C>
ASSETS
------
Current assets:
Cash $ 13,053 $ 11,589
Accounts receivable, net of allowance
for doubtful accounts of $500,000 at
September 30, 1996 and $462,500 at
December 31, 1995 463,038 499,864
Notes receivable from shareholders 33,200 25,000
---------- ----------
509,291 536,453
Property and equipment, less accumulated
depreciation 7,142,799 7,316,219
Other assets:
Deferred loan costs 64,424 -
Trademarks, net 25,000 100,000
Shows and computer programs, net 41,490 165,960
Game inventory - 60,688
Organization costs 43 170
---------- ----------
$7,783,047 $8,179,490
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Mortgage note payable - current portion $ 5,672 $ -
Note payable to a trust managed by
a shareholder 250,000 250,000
Accounts payable 41,747 53,738
Accrued wages due to principal
shareholder 210,000 120,000
Advances due to principal shareholder 4,753 4,156
Accrued interest 4,950 5,729
---------- ----------
517,122 433,623
---------- ----------
Mortgage note payable 241,775 -
---------- ----------
Shareholders' equity:
Preferred stock, par value $5.00; 10,000,000
shares authorized; 1,668,000 shares issued
and outstanding at September 30, 1996 and
December 31, 1995, respectively 8,340,000 8,340,000
Preferred stock subscribed 25,000 -
Common stock, par value $.001; 40,000,000
shares authorized; 5,345,439 shares issued
and outstanding at September 30, 1996 and
December 31, 1995, respectively 5,345 5,345
Paid-in capital 3,567,343 3,572,343
Deficit accumulated during the development
stage (4,913,538) (4,171,821)
---------- ----------
Total shareholders' equity 7,024,150 7,745,867
---------- ----------
$7,783,047 $8,179,490
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 14
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Through
September 30, September 30, September 30,
(Unaudited) (Unaudited) 1996
----------------------- ------------------- (Unaudited)
1996 1995 1996 1995 -------------
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues:
Licenses and royalties $ - $ - $ - - $ 641,642
Bingo hall rent 77,000 148,790 277,000 298,790 811,593
Bingo hall operations 12,754 13,888 12,754 13,888 105,804
Interest income 343 - 617 32 1,718
Other income - - - - 235,754
---------- --------- ----------- ------- ----------
Gross revenues 90,097 162,678 290,371 312,710 1,796,511
---------- --------- ----------- ======== -----------
Expenses:
Production costs 1,813 - 10,011 - 316,696
Bingo hall operations 11,105 - 11,105 - 11,105
General and administrative 249,687 83,497 430,251 225,965 2,338,085
Salaries and related expenses 38,152 38,263 115,012 104,263 978,672
Depreciation and amortization 137,107 156,951 411,081 403,449 1,835,406
Interest expense and finance
charges 27,717 - 54,628 193 349,258
Losses from equity interest
in joint venture - - - - 880,827
---------- --------- ----------- -------- -----------
Total expenses 465,581 278,711 1,032,088 733,870 6,710,049
---------- --------- ----------- -------- -----------
Income (loss) from operations $ (375,484) $(116,033) $ (741,717) (421,160) $(4,913,538)
========== ========= =========== ======== ===========
Income (loss) per share $ (0.07 ) $ (.02) $ (0.14) $ (.08) $ (2.30)
========== ========= =========== ======== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 15
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION, JANUARY 10, 1986, THROUGH SEPTEMBER 30, 1996
<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 June through
November, 1988, valued
at $46,877 ($4.69 per share) 10,000 10 - - 46,867 - 46,877
Net loss, 1988 - - - - - (1,206,824) (1,206,824)
---------- -------- --------- ---------- ---------- ---------- ----------
Balance December 31, 1988 472,106 472 - - 719,934 (1,955,513) (1,235,107)
Common stock issued in January,
1989 for cash of $23,438
($4.69 per share) 5,000 5 - - 23,433 - 23,438
</TABLE>
(Continued)
<PAGE> 16
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION, JANUARY 10, 1986, THROUGH SEPTEMBER 30, 1996
(Continued)
<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,
1989 as inducement to lenders
valued at $21,095 ($4.69
per share) 4,500 5 - - 21,090 - 21,095
Common stock issued in June,
1989 as repayment of debt
valued at $70,000 ($4.67
per share) 15,000 15 - - 69,985 - 70,000
Common stock issued in June,
1989 for legal services
from February through June,
1989, valued at $140,630
($4.69 per share) 30,000 $ 30 - $ - $ 140,600 $ - $ 140,630
Net loss, 1989 - - - - - (491,957) (491,957)
------- -------- --------- ---------- ---------- ---------- ----------
Balance December 31, 1989 526,606 527 - - 975,042 (2,447,470) (1,471,901)
Common stock issued in January,
1990 for production and
uplinking services valued
at $10,000 ($2.00 per share) 5,000 5 - - 9,995 - 10,000
Common stock issued in January,
1990 for design and
software programs valued at
$30,000 ($4.00 per share) 7,500 7 - - 29,993 - 30,000
Common stock issued in January,
1990 for telecommunication and
layout services rendered valued
at $50,000 ($2.00 per share) 25,000 25 - - 49,975 - 50,000
Common stock issued in June,
1990 for production services
valued at $50,000 ($5.00 per
share) 10,000 10 - - 49,990 - 50,000
Common stock sold in June,
1990 for cash of $3,750
($5.00 per share) 750 1 - - 3,749 - 3,750
Common stock issued in November,
1990 as repayment of debt
owed to CEO valued at $300,000
($0.60 per share) 500,000 500 - - 299,500 - 300,000
Common stock issued in November,
1990 for receivables of
$468,000, later deemed to
have no value ($4.68 per
share reduced to -0-) 100,000 100 - - (100) - -
Common stock issued in December,
1990 to a board member for
services rendered valued at
$25,000 ($5.00 per share) 5,000 5 - - 24,995 - 25,000
</TABLE>
(Continued)
<PAGE> 17
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION, JANUARY 10, 1986, THROUGH SEPTEMBER 30, 1996
(Continued)
<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,
1990 to a board member for
services rendered valued at
$25,000 ($5.00 per share) 5,000 5 - - 24,995 - 25,000
Net income, 1990 - - - - - 2,511,101 2,511,101
--------- -------- --------- ---------- ---------- ---------- ----------
Balance December 31, 1990 1,184,856 1,185 - - 1,468,134 63,631 1,532,950
Common stock issued in October,
1991 as repayment of debt
owed to CEO valued at
$500,000 ($1.00 per share) 500,000 500 - - 499,500 - 500,000
Common stock issued in November,
1991 to CEO for various
trademarks, shows, computer
programs and bingo game
inventory, valued at
$1,405,200 ($3.00 per share) 468,400 468 - - 1,404,732 - 1,405,200
Net loss, 1991 - - - - - (2,315,058) (2,315,058)
--------- -------- --------- ---------- ---------- ---------- ----------
Balance December 31, 1991 2,153,256 2,153 - - 3,372,366 (2,251,427) 1,123,092
Common stock issued in January,
1992 for marketing services
valued at $9,000 ($0.60 per
share) 15,000 15 - - 8,985 - 9,000
Common stock issued in January,
1992 for clerical services
valued at $10,000 ($2.00
per share) 5,000 $ 5 - $ - $ 9,995 $ - $ 10,000
Common stock issued in January,
1992 for services provided
by board member valued at
$10,000 ($2.00 per share) 5,000 5 - - 9,995 - 10,000
Common stock issued in January,
1992 for services provided
by board member valued at
$10,000 ($2.00 per share) 5,000 5 - - 9,995 - 10,000
Common stock issued in January,
1992 for payment of interest
due on notes to three
individuals, valued at
$9,900 ($0.57 per share) 17,500 18 - - 9,882 - 9,900
Common stock sold in August,
1992 for cash of $25,000
($0.75 per share) 33,333 33 - - 24,967 - 25,000
Net loss, 1992 - - - - - (493,057) (493,057)
--------- -------- --------- ---------- ---------- ---------- ----------
Balance December 31, 1992 2,234,089 2,234 - - 3,446,185 (2,744,484) 703,935
Fractional shares issued in
connection with reverse
stock split 100 - - - - - -
</TABLE>
(Continued)
<PAGE> 18
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION, JANUARY 10, 1986, THROUGH SEPTEMBER 30, 1996
(Continued)
<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 March,
1993 for bonds - bonds were
unable to be issued, stock
was canceled in 1994 - no
valued has been assigned 650,000 650 - - (650) - -
Common stock issued in March,
1993 for consulting agreement;
350,000 shares originally
issued, 200,000 shares
canceled; no value assigned 150,000 150 - - (150) - -
Common stock issued in April,
1993 for consulting agreement
and $40,000 in cash; no value
assigned to the consulting
agreement ($0.40 per share) 100,000 100 - - 39,900 - 40,000
Common stock issued in July,
1993 for consulting agreement,
no value assigned 650,000 650 - - (650) - -
Common stock issued in August,
1993 for consulting agreement,
no value assigned 100,000 100 - - (100) - -
Common stock issued in August,
1993 to CEO for repayment
of various debts valued at
$37,500 ($0.19 per share) 200,000 200 - - 37,300 - 37,500
Common stock issued in October,
1993 for consulting services,
no value assigned 1,250 1 - - (1) - -
Common stock issued in November,
1993 for commitments to raise
$400,000 but such funds were
never received; Company has not
yet canceled certificates, but
restricted such certificates
until the matter is resolved;
no value has been assigned in
that management anticipates
ultimate cancellation of the
certificates 200,000 200 - - (200) - -
Common stock issued in December,
1993 for consulting agreement;
stock canceled in 1994 due
to nonperformance; no value
assigned 1,000,000 $ 1,000 - $ - $ (1,000) $ - $ -
Net loss, 1993 - - - - - (338,530) (338,530)
--------- -------- --------- ---------- ---------- ---------- --------
Balance December 31, 1993 5,285,439 5,285 - - 3,520,634 (3,083,014) 442,905
Common stock issued in March,
1993 for bonds - bonds were
unable to be issued, stock
was canceled in 1994 (650,000) $ (650) - - 650 - -
</TABLE>
(Continued)
<PAGE> 19
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION, JANUARY 10, 1986, THROUGH September 30, 1996
(Continued)
<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,
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
</TABLE>
(Continued)
<PAGE> 20
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION, JANUARY 10, 1986, THROUGH September 30, 1996
(Continued)
<TABLE>
<CAPTION>
Preferred
Common Stock Preferred Stock Stock Subscribed
------------------- ---------------------- ------------------
Number Number Number
of shares Amount of shares Amount of shares Amount
---------- ------ ---------- ------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Common stock issued in
August, 1995 for
legal services valued
at $10,000
($1.00 per share) 10,000 10 - - - -
Preferred stock issued
in October, 1995 as
an inducement to an
individual to arrange
for $250,000 to be
loaned to the Company
by a trust controlled
by the individual,
value of $200,000
($5.00 per share) - - 40,000 200,000 - -
Net loss, April 1, 1995
to December 31, 1995 - - - - - -
--------- ------- --------- ---------- -------- ---------
Balance December 31,
1995 5,345,439 5,345 1,668,000 8,340,000 - -
Unaudited:
Preferred stock sub-
scribed in April,
1996, issued in July,
1996, as an inducement - - - - 5,000 25,000
Net loss, January 1,
1996 to September 30,
1996 - - - - - -
--------- ------- --------- ---------- -------- ---------
Balance September 30,
1996 5,345,439 $ 5,345 1,668,000 $8,340,000 5,000 $ 25,000
========= ======= ========= ========== ======== =========
<CAPTION>
Deficit
Accumulated
Additional During Total
Paid-in Development Shareholders'
Capital Stage Equity (Deficit)
----------- ----------- ----------------
<S> <C> <C> <C>
Common stock issued in
August, 1995 for
legal services valued
at $10,000
($1.00 per share) 9,990 - 10,000
Preferred stock issued
in October, 1995 as
an inducement to an
individual to arrange
for $250,000 to be
loaned to the Company
by a trust controlled
by the individual,
value of $200,000
($5.00 per share) - - 200,000
Net loss, April 1, 1995
to December 31, 1995 - (589,056) (589,056)
---------- ----------- ----------
Balance December 31,
1995 3,572,343 (4,171,821) 7,745,867
Unaudited:
Preferred stock sub-
scribed in April,
1996, issued in July,
1996, as an inducement (5,000) - 20,000
Net loss, January 1,
1996 to September 30,
1996 - (741,717) (741,717)
---------- ----------- ----------
Balance September 30,
1996 $3,567,343 $(4,913,538) $7,024,150
========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 21
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(Unaudited)
<TABLE>
<CAPTION>
Jan. 10, 1986
Through
Sept. 30,
1996 1995 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) $(741,717) $(421,160) $(4,913,538)
Adjustments to reconcile net loss to cash
provided from operations:
Depreciation and amortization 411,081 403,449 1,835,576
Stock issued for services - 60,100 1,850,438
Stock issued for financing costs - - 200,000
Change in accounts receivable 28,626 (312,678) (496,238)
Change in game inventories 60,688 - 75,400
Amortization of deferred loan costs 16,576 - 16,576
Change in accounts payable (11,991) (41,005) 41,747
Change in accrued expenses 89,221 90,000 214,950
Loss on write-off of marketable securities - - 2,000
Loss on disposal of assets - - 2,440
Write-off of production costs - - 236,138
Loss on equity interest in joint venture - - 880,827
--------- --------- -----------
Cash provided (used) by operating activities (147,516) (221,294) (53,684)
--------- --------- -----------
Cash flows from investing activities:
Organization costs incurred - - (758)
Investment in marketable securities - - (2,000)
Payment for production costs - - (236,567)
Investment in joint venture - - (880,827)
Effect of business capitalization - - (9,853)
Purchase of property and equipment (38,064) (26,834) (224,692)
--------- --------- -----------
Cash provided (used) by investing activities (38,064) (26,834) (1,354,697)
--------- --------- -----------
Cash flows from financing activities:
Proceeds from notes payable 250,000 - 250,000
Deferred loan cost paid (61,000) - (61,000)
Repayment of notes payable (2,553) - (2,553)
Loans from shareholders/affiliates 20,321 40,029 745,124
Repayments on loans from shareholders (19,724) (13,309) (97,871)
Proceeds from issuance of common stock - 165,000 587,734
--------- --------- -----------
Cash provided by financing activities 187,044 191,720 1,421,434
--------- --------- -----------
Net increase (decrease) in cash 1,464 (56,408) 13,053
Cash at beginning of period 11,589 58,928 -
--------- --------- -----------
Cash at end of period $ 13,053 $ 2,520 $ 13,053
========= ========= ===========
Supplemental information:
Income taxes paid $ - $ - $ -
========= ========= ===========
Interest paid $ 38,831 $ 193 $ 128,495
========= ========= ===========
</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.
<PAGE> 22
SBI COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
UNAUDITED
Note 1 - Organization and certain significant accounting policies
The organization and certain major accounting policies of SBI Communications,
Inc. are summarized below to assist the reader in reviewing the Company's
financial statements.
Organization
SBI Communications, Inc. (the "Company"), was originally organized in the
State of Utah on September 23, 1983, under the corporate name of Alpine
Survival Products, Inc. Its name was subsequently changed to Justin Land
and Development, Inc. during October, 1984, and then to Supermin, Inc. on
November 20, 1985. On September 29, 1986, Satellite Bingo, Inc. was the
surviving corporate entity in a statutory merger with Supermin, Inc., a Utah
corporation. In connection with the above merger, the former shareholders
of Satellite Bingo, Inc. acquired control of the merged entity and changed
the corporate name to Satellite Bingo, Inc. Through shareholder approval
dated March 10, 1988, the name was changed to its current name of SBI
Communications, Inc.
Development stage company
The Company plans to provide an interactive, satellite cable bingo game show
and other similar telecommunication products or services to television
viewers. Since principal operations have not commenced, and since only
insignificant revenues have been generated, the Company is considered to be
a development stage company. Statement of Financial Accounting Standards
Number 7 establishes the accounting principles governing development stage
companies.
Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Satellite Bingo, Inc., a Georgia
corporation, which currently is inactive with no assets or liabilities.
Intercompany transactions and balances have been eliminated in
consolidation.
Estimates and assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reporting amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Note 2 - Basis of Presentation
The accompanying unaudited consolidated financial statements, which are for
interim periods, have been prepared by the Company. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
<PAGE> 23
omitted. In the opinion of the Company's management, the disclosures made are
adequate to make the information presented not misleading, and the consolidated
financial statements contain all adjustments necessary to present fairly the
financial position as of September 30, 1996, results of operations for the
three months and nine months ended September 30, 1996 and 1995, and cash flows
for the nine months ended September 30, 1996 and 1995. The unaudited
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the footnotes thereto contained in Form
10-SB as filed with the Securities and Exchange Commission during 1996. The
December 31, 1995, balance sheet was derived from audited consolidated
financial statements, but does not include all disclosures required by
generally accepted accounting principles.
The results of operations for the nine months ended September 30, 1996, are not
necessarily indicative of the results to be expected for the full year.
Note 3 - Deferred loan costs
Deferred loan costs are summarized as follows at September 30, 1996:
<TABLE>
<S> <C>
Original cost $ 81,000
Less accumulated amortization 16,576
----------
$ 64,424
==========
</TABLE>
Note 4 - Accounts receivable and game inventory adjustments
During the third quarter of 1996, management determined that amounts due from a
particular charity for back rents totalling $187,500 would likely be collected
only through assumption of certain furniture and equipment owned by the
charity. Management estimates that the value of such furniture and equipment
is only $100,000, and accordingly has recorded an additional bad debt reserve
of $87,500.
Game inventory used by charities leasing the bingo hall is billed to the
related charity. During the third quarter of 1996, management made the
decision to not pursue collection of amounts billed for game inventory during
1996, and to donate the remaining game inventory to the charity. This resulted
in a charge to operations of $60,688 in the third quarter of 1996.
Note 5 - Mortgage note payable
Mortgage note payable is summarized as follows as of September 30, 1996:
<TABLE>
<S> <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 $ 247,447
Less current portion 5,672
---------
Long-term portion $ 241,775
=========
</TABLE>
<PAGE> 24
$61,000 of the proceeds from the above note were used to pay various costs
associated with the loan, and have been capitalized as deferred loan costs. In
addition, as a condition of the loan, the Company paid an additional $20,000 in
loan costs by issuing subscriptions for 5,000 shares of preferred stock to the
lender. As a further inducement to obtain the mortgage note, the Company has
granted an option to the mortgagor to acquire 50,000 shares of common stock at
a price of fifty cents ($0.50) per share. Such option is exercisable upon
thirty days notice, and expires upon repayment of the mortgage loan.
Note 6 - Earnings per share
The Company's income (loss) per share was calculated using weighted average
shares outstanding for the appropriate period. These amounts were determined
based upon retroactive restatement for the 1 for 20 reverse stock split
occurring in 1993. Although the preferred stock is a common stock equivalent,
with a conversion rate of approximately 10 shares of common stock for each
share of preferred stock as of the date the preferred stock was issued,
preferred stock conversion has not been included in the calculation of earnings
per share in that to do so would be anti-dilutive.
Note 7 - Commitments, risks and contingencies
The Company manages for various charities a bingo hall in Piedmont, Alabama.
Rents and administrative fees charged to charities are unsecured, and generally
are paid only as revenues from the bingo games produce sufficient profit to
allow the charities to make payments. Accounts receivable at September 30,
1996, are concentrated principally with two charities. Management has
estimated the amount of such receivables that are collectible based upon their
knowledge of the financial condition of the charities and the history of the
profitability of bingo games. It is reasonably possible that management's
estimate of the amount of such receivables that are collectible could change in
the near future.
As reflected in the statement of changes in stockholders' equity, the Company
has a history of issuing common stock for services difficult to value, or yet
to be provided. Approximately 4,600,000 (or 86%) of the common stock
outstanding at September 30, 1996, is restricted in some fashion as a result of
the above transactions. Furthermore, the Company has in prior years canceled
common stock certificates due to non-performance of the third parties involved
in certain of the above transactions. Although no party to such transactions
has yet instigated litigation involving the Company for cancellation or
restriction of related shares, due to the volume of such transactions,
litigation relating to such activity remains a possibility. Management feels
all actions it has taken to cancel or restrict common stock are with merit, and
does not anticipate any material loss being incurred by the Company relating to
future resolution of these matters.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER
30, 1996 COMPILED INTERIM FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<PERIOD-START> JAN-01-1996
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 13,053
<SECURITIES> 0
<RECEIVABLES> 996,238
<ALLOWANCES> 500,000
<INVENTORY> 0
<CURRENT-ASSETS> 509,291
<PP&E> 7,636,247
<DEPRECIATION> 493,448
<TOTAL-ASSETS> 7,783,047
<CURRENT-LIABILITIES> 517,122
<BONDS> 241,775
0
8,365,000
<COMMON> 5,345
<OTHER-SE> (1,346,195)
<TOTAL-LIABILITY-AND-EQUITY> 7,783,047
<SALES> 12,754
<TOTAL-REVENUES> 290,371
<CGS> 11,105
<TOTAL-COSTS> 536,104
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 87,500
<INTEREST-EXPENSE> 54,628
<INCOME-PRETAX> (741,717)
<INCOME-TAX> 0
<INCOME-CONTINUING> (741,717)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (741,717)
<EPS-PRIMARY> (0.14)
<EPS-DILUTED> 0
</TABLE>
