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Securities and Exchange Commission
Washington, D.C., 20549
FORM 10-KSB/A
Annual Report Pursuant To Sections 13 Or 15 (d) Of The
Securities Exchange Act Of 1934 For the Fiscal Year Ended December 31, 1997
Filed Pursuant To Sections 13 Or 15(D) Of The Securities Exchange Act of 1934
Securities and Exchange Commission File Number O-28416
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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 Identification
incorporation or organization) Number)
Post Office Box 729
103 Firetower Road
Leesburg, GA 31763 (912) 759-0701
(Address of Principal executive offices) Issuer's telephone number
(Zip code)
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Securities registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, Par value $0.001 - Preferred Stock, Par Value $5.00
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days.
YES X NO __
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definite proxy or information statements
incorporation by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. YES X NO __
Registrant's revenues for its most current fiscal year: $544,662.00
Aggregate market value of the voting stock held by non-affiliates as of
April 30, 1998: $1,336,360.00
Number of common shares outstanding as of latest practical date at
$.001 par value: 5,345,430
Documents Incorporated By Reference: None
Location of Exhibit Index: The index of exhibits is contained in part IV herein
on page number 49.
Transitional Small Business Disclosure Format: Yes ____ No _X__
===============================================================================
Dated April 30, 1998
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Table of Contents
Item Page
Number Number Item Caption
- ------ ------ ------------
Part I
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Item 1. 3 Description of Business
Item 2. 16 Description of Properties
Item 3. 17 Legal Proceedings.
Item 4. 18 Submission of Matters to a Vote of Security Holders
Part II
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Item 5. 18 Market Price of and Dividends on the Registrant's Common
Equity and other Shareholder Matters
Item 6. 24 Management's Discussion and Analysis or Plan of Operation
Executive Compensation
Item 7. 29 Financial Statements and Summary Financial Data
Item 8. 43 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
Part III
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Item 9. 44 Directors, Executive Officers, Promoters and Control
Persons
Item 10. 46 Executive Compensation
Item 11. 47 Security Ownership of Certain Beneficial Owners and
Management
Item 12. 49 Certain Relationships and Related Transactions
Part IV
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Item 13. 49 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
Signatures 53
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Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 2
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PART I
ITEM I. DESCRIPTION OF BUSINESS
GENERAL
SBI Communications, Inc., a publicly held Delaware corporation (the "Company"),
was originally organized in the State of Utah on September 23, 1983, under the
corporate name Alpine Survival Products, Inc. Its name was changed to Justin
Land and Development, Inc., during October of 1984, and to Supermin, Inc., on
November 20, 1985.
The Company was originally formed to engage in the acquisition of any
speculative investment or business opportunity without restriction as to type or
classification. On September 29, 1986, Supermin, Inc., concluded a
reorganization under Section 368(a)(1)(B) of the Internal Revenue Code of 1954,
as amended, pursuant to which it exchanged 200,000 shares of its common stock,
$.001 par value (all shares numbers, unless otherwise stated, adjusted to
reflect a one for 20 reverse stock split) for all of the capital stock of
Satellite Bingo, Inc., a Georgia corporation organized on January 10, 1986, and
the originator of the Company's current business (the "SBI Subsidiary"). In
conjunction with such reorganization, the former stockholders of the SBI
Subsidiary, acquired control of the Company and the Company changed its name to
Satellite Bingo, Inc.
On March 10, 1988, the Company changed its name to SBI Communications, Inc., its
current name, and on January 28, 1993, the Company reincorporated into Delaware
through a statutory merger with a wholly owned Delaware subsidiary in reliance
on the exemption from registration requirements of Section 5 of the Securities
Act of 1933, as amended, provided by Rule 145(a)(2) promulgated thereunder.
The Company has three subsidiaries, SBI Communications, Inc., an Nevada
corporation; Satellite Bingo, Inc., a Georgia corporation and SBI
Communications, Inc., a Alabama corporation. Unless the context requires
otherwise, the term "Company" includes SBI Communications, Inc., a publicly held
Delaware corporation, and, its subsidiaries, predecessors and affiliates whose
operations or assets have been taken over by SBI Communications, Inc., a
publicly held Delaware corporation.
A report by the National Association of Fund-raising Ticket Manufacturers
estimated that in 1992 annual gross receipts to charities in the U. S. from
charity bingo games were approximately $2.6 billion. Industry groups estimate
the growth rate of the industry at more than 10% annually. Management therefore
estimates the U. S. charitable bingo market currently totals approximately $5
billion in annual receipts. Thus, while the charity bingo market is only a small
percentage of the total U. S. gaming market, the Company believes that charity
bingo is, and will continue to be, an attractive, growing market segment,
despite the proliferation of alternative gaming options available to the public.
Management believes that
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the U. S. commercial bingo industry will remain attractive due to: i) increased
customer recognition and participation; ii) favorable demographic trends,
including an aging population with increasing disposable income; iii) reduced
governmental funding of charities due to budgeting pressures; iv) the trend
towards legalization of gaming activities; and v) the requirement in most
jurisdictions that charity lessors operate commercial bingo centers and retain
responsibility for all staffing and marketing costs. Management is also
confident that the Company will prosper in the bingo industry based on: i)
management's industry and operational experience; ii) the Company's early entry
into the nationally fragmented bingo market, with no competition on a similar
scale; and iii) the Company's positioning of its bingo centers in
demographically and economically desirable markets, primarily in the southern
part of the U. S.
BUSINESS OVERVIEW
Although state regulations vary, the Company's basic operation is as follows.
The Company identifies and analyzes desirable bingo markets that offer favorable
population and income demographics. After the Company selects an attractive
market for expansion, the Company determines whether it would be more desirable
to build a new bingo center or acquire an existing center, if one exists.
Building and finishing out a new commercial center, which typically costs
$100,000 - $250,000, is often less expensive than acquiring an existing center
and allows the Company to potentially earn a higher rate of return and
accelerated payback on its investment. Conversely, acquisitions typically cost
more than building a comparable new center, but offer certain advantages over
building, including: i) greater predictability of investment return since the
center's past performance is known, ii) no dilution of the existing bingo market
through the addition of another bingo center, and iii) preservation of the
Company's cash resources (if the acquisition is funded in whole or in part with
seller-financed notes and/or Company stock. The Company will continue to expand
through both developments and acquisitions. The Company will only pursue
acquisitions of desirable halls that offer proven cash flows and opportunities
for enhanced financial performance. Concurrent with new bingo center development
or acquisitions, the Company will acquire all necessary operating permits and
licenses from the appropriate state or local municipality.
After the company selects a site for development or acquisition and initiates
legal fulfillment activities, the Company then contacts local charities to
promote the Fund-raising possibilities which charity bingo provides. When
selecting charities, the Company considers such factors as; i) the charitable
cause and presence in the local community; ii) the background of charity
officers or trustees; and iii) a charity's financial stability. Once charity
selection is complete, the Company assists the charities in the development of
an operating plan consistent with current regulations, which may include the
creation of a bingo management team comprise of representatives from the
participating charities. The management team hires and oversees center employees
and volunteers, sets up an accounting system and bank accounts, and hires a
center manager/head cashier who manages the center. Lease agreements between the
Company and the charities are typically structured on an annual basis, with
cancellation options for both parties. The Company believes that short term
leases allow it to limit commitments to under-performing charities.
After the bingo center is opened, the Company continues to act as a
consultant/service provider to the
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participating charities, as well as property manager for the building in which
the bingo games are held. The Company's role is to ensure profitable operation
of the center and help resolve any conflicts that may arise. The Company's
primary income is derived from rental payments from the charities for the lease
of the building and equipment for bingo sessions at the center. These rental
payments are generally controlled by state or local regulations and typically
place a cap or ceiling on the amount to be realized by the Company per session
(See Item 1 - Government Regulation). The participating charities keep the net
proceeds after payment of rent to the Company and payroll costs to the bingo
center employees. Additional income may also be earned by the Company through
vending and concessions operations, the sale of bingo paper and supplies at
certain of the centers and revenues from video gaming, where legal.
The thrust of most applicable state or local regulations is to make
participating charities responsible for the direct operation of the bingo center
and employment and payment of personnel. These regulations generally prohibit
management control by the Company, which reduces the Company's staffing
obligations and expenses. In addition, most states require that participating
charities be responsible for all marketing and advertising activities and
expenses. The Company's role as consultant/service provider does permit it to
advise in the selection of key employees and the formulation and execution of a
center's business plan.
The Company normally bears responsibility for all non-personnel and
non-advertising costs of a bingo center, including property rental, finish-out
of the property for bingo operations, bingo supplies, janitorial services,
utilities, maintenance and repairs, security, property taxes, permits and
insurance. The Company must be able to cover these expenses, plus corporate
overhead, from its charity rental payments in order to earn a profit. However,
as a center becomes better established and more profitable, the Company
transfers a portion of these expenses to the participating charities. The
Company's objective is to allow the operation to run on a "turnkey" basis by the
charities to the extent possible. However, because of the Company's substantial
investment in opening a bingo center and significant continued commitment in
funding operating and overhead costs, the Company must maintain an advisory role
with respect to its bingo center operations. The Company and participating
charities each has a vested stake in making sure that operations are conducted
in a mutually profitable way. The Company's objective is to ensure maximum
proceeds from center operations, which allows charities to generate substantial
funds, and, in turn, allows the Company to earn the maximum legal rent from
leasing its properties to charities.
CURRENT OPERATIONS
The Company's bingo center strive to offer first class facilities and amenities,
are committed to customer satisfaction and offer generous charity support. The
Company believes that these principles, together with the Company's management
experience, site selection methodology and ability to raise capital, distinguish
the Company from direct competition and allow the Company and its charities to
mutually prosper. The Company's participating charities raised approximately
$300,000 proceeds in 1996 and 1997. The Company's current operations and
potential expansions will likely remain focused on the southern part of the
U.S. which offers favorable demographics and logistical advantages to the
Company. A brief description of the Company's current operations is as follows.
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ALABAMA (ONE) BINGO CENTER)
The Company owns and leases a facility to local charities for bingo operations
in Piedmont, Alabama that have been in existence since 1994, respectively. Bingo
in Alabama is regulated at the local level with varying laws between counties
and cities. Most local laws provide limits on jackpots and the number of weekly
charity sessions that can be conducted except in Piedmont with no limits and ten
hour sessions, five days a week.
FLORIDA
The Company will be opening a new facility in Fort Lauderdale, Florida. This
facility will open in the third quarter of 1998.
The Company website is located in Coral Gables, Florida.
CALIFORNIA
The Company has a bingo program operating over the PandaAmerica Shopping
Network.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 6
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EXPANSION PLANS
The Company continuously reviews industry developments and regulations for
potential expansion opportunities. It plans to acquire or develop bingo centers
in markets that meet the Company's financial, legal, operational and demographic
selection criteria. The Company will continue to target those states that have
enacted legislation enabling charities to raise money through bingo and gaming
events. Such states recognize that most charities lack the investment capital
and/or business acumen to independently establish such centers. These states
have provided a regulatory structure that allows commercial lessors such as the
Company to act as landlord and source provider to the charities. The Company
operates within this regulatory structure and essentially provides the charities
with the expertise needed to open and operate a profitable bingo entertainment
center. As a public company, the Company benefits from operating in highly
regulated markets which levels the competitive playing field.
It is imperative that the Company continue to grow its operational revenues. The
Company has made a significant investment in assembling its management team and
operational infrastructure. This investment cost is now relatively fixed,
however, and the Company has the potential to significantly leverage its
profitability through incremental revenue increases. The Company will therefore
continue to employ an aggressive yet methodical growth strategy. It intends to
make strategic expansions in markets with: i) accommodating regulations; ii)
amenable charities; iii) favorable demographics (areas with concentrations of
middle-lower income earners and/or elderly population); and iv) significant
driving distance to competing gaming establishments. Once the Company has made
an expansion decision, the success of the venture is determined by: i) site
selection; ii) a continued favorable legal environment; iii) successful
operations management; and iv) customer acceptance and patronization.
The Company intends to grow through both acquisitions and developments. it uses
extensive review procedures to evaluate expansion opportunities, including
market studies, legal evaluations, financial analyzes and operational reviews.
The Company determines development budgets and acquisition prices based on the
proposed investment's expected financial performance, competitive market
position, risk profile and overall strategic fit within the Company's
operational plans. Acquisition terms typically include cash payments, issuance
of Company securities and seller-financed notes. Consulting and non-competition
agreements may also be included.
The Company expects to continue its expansion activities in those markets that
allow charity gaming activities. Some states currently allow video gaming in
charity centers, while other states are considering the legalization of charity
video gaming. Assuming continued government and charity funding shortages and
demonstrated customer interest, the Company believes that the number and types
of games that charities can offer in conjunction with bingo will continue to
increase. Management believes that video gaming such as bingo, blackjack, keno
and poker, as well as video pull-tab machines, has tremendous appeal to both
existing bingo clientele and potential new customers, and would substantially
increase
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charity fund-raising and expand the overall market for charity gaming. The
Company will remain actively involved in the legislative process of bringing
charity gaming to states where the Company operates.
OTHER PRODUCTS OR SERVICES AND THEIR MARKETS
1. BROADCAST AND INTERNET
The Company has experience in the interactive communications and entertainment
fields which brings together elements of the "information superhighway." It has
created and broadcast interactive national television programs using
state-of-the-art computer technology, proprietary software programs, satellite
communications, and advanced telecommunications systems.
The Company's management believes that its experience in developing and
delivering interactive television programs, as well as its ownership of
proprietary systems and software, provide an advantage in its ability to launch
new entertainment and information programs based on comparable resources.
A. GLOBALOT BINGO
INTRODUCTION
Globalot Bingo and Satellite Bingo are proprietary interactive Bingo games which
were broadcast by the Company in the past via satellite to participating cable
and television stations. The Company plans to resume expanded broadcasts in the
near future, when it repairs required telephone switching equipment.
The use of telephones for game card distribution makes it possible for home
viewers to also participate in the Company's broadcast programs. The Globalot
Bingo program was designed to provide larger jackpots than participating
operations could individually pay, permitting participating cable and broadcast
stations to attract larger viewing audiences, increase profits and attract
commercial sponsors.
A broadcast took place on June 15, 1996; however, subsequent broadcasts have
been delayed by a problem with the Company's telephone switching equipment,
which should be resolved in the near future. Future plans include expanding the
game to other week nights. The game was broadcast over PandaAmerica Network in
the past and daily broadcasts resumed during the forth quarter of 1997. The
Company intends to broadcast a Million Dollar Globalot game each Saturday
evening at 11:00 p.m. (eastern time).
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OPERATION
In order to play the game each player must be playing a different card or cards.
Globalot Bingo has developed a "Super Jackpot Bingo" computer program that can
generate a series of one billion individual cards without duplication. Each card
is unique and all cards are serially numbered to preclude anyone from submitting
a fraudulent cards and/or counterfeiting.
Globalot Bingo cards may be obtained by telephone until a specified time. At
that point the Company provides the serial number of cards obtained for that
night's game to its central processing office.
In order to encourage participation and to develop a broad playing audience,
Globalot Bingo developed a special Million Dollar Globalot game, designed to air
each Saturday evening at 11:00 p.m. (eastern time). A broadcast took place on
June 15, 1996; however, subsequent broadcasts have been delayed by a problem
with the Company's telephone switching equipment, which should be resolved in
the near future.
When broadcasts resume, the game will pay the first person who attains Bingo
each broadcast night an advertised cash prize. The prizes will involve a chance
to win $1,000,000 by being the first participant to cover the correct 8 numbers
in 16 calls (the term call referring to the first 16 numbers selected in the
game) or less (the "Quick Pick 8" game) or, guaranteed second prizes of $25,000.
If there is no winner in the $1,000,000 game, the Company will pay the first
person to cover the shaded area or complete the Quick Pick 8 game $5,000. In
addition to the Quick Pick 8 game, the Company will award a $20,000.00 dollar
grand prize to the first person covering an entire card. Cards obtained to play
the Company's 24 hour program will be good for the entire week, including the
Saturday Million Dollar Globalot game.
As additional players participate, the Company plans to increase the grand prize
to $50,000.
When the televised game begins, each number being called on the televised show
is also recorded by the master computer. The computer system, by monitoring all
of the cards in play, is able to determine when a Bingo has occurred and provide
the location of the winning card holder. The viewing audience is immediately
shown the image of the winning card.
All games are called at the rate of approximately one Bingo number every 12-15
seconds in order to allow players to play multiple cards. If it is determined
that, based on the cards in play, the call is too fast or too slow, an
adjustment is made.
The national winner will be called during the broadcast by the program's host,
or, may call the Globalot Bingo 800 number shown on the program. Upon contact,
the winner will provide the Company's staff
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with his or her serial number and other necessary identification, including name
and address. The winner is then instructed on how to claim the prize.
If for reasons beyond the control of Globalot Bingo the regular telecast and
game cannot be broadcast, all prize moneys announced for that week will be added
to the jackpot for the next succeeding game. All elements of the broadcast game
are being conducted on the Company website.
TECHNOLOGY
The Company will use proprietary technologies that enable viewers at home to
participate in Bingo games televised live in specific English speaking Hispanic
markets in the US and Worldwide (local laws permitting).
Globalot Bingo has a special telephone number, 800-729-BINGO (2464), which is an
access code to gain entry into long distance network. Upon dialing the number a
caller hears a 45 second message disclosing who the caller has reached,
providing information about Globalot Bingo, the caller's options and how to
receive Globalot Bingo playing cards by telephone (including the cost and method
of billing). A caller must have a prepaid calling card in order to obtain free
Globalot Bingo playing cards via the phone, which must be purchased from the
Company. The prepaid calling card also permits the purchaser to make long
distance telephone calls at savings of up to 70% from regular long distance
rates and will provide access to other services which the Company plans to make
available in the future.
In the event the caller, (who must be 18 or over), wishes to proceed after the
45 second announcement he or she must activate the system. Upon activation by
the caller, the call is automatically switched to the Globalot Bingo card
distribution center, and charges for the call begin. The time necessary to
receive three Globalot Bingo playing cards by telephone is eight minutes and the
caller is charged $9.00 or $1.00 per minute. The charge for the call is deducted
from the caller's prepaid calling card. The prepaid calling card may be obtained
from the Tele-communications switch via credit cards or by sending in payment to
the Company.
Interactive players will also be able to obtain a strip of three cards free of
any charge by sending a stamped, self addressed envelope to the Company.
The Company has established a winners hot-line that will allow card holders to
obtain information concerning winning cards. This will allow players to play and
win even if they didn't have an opportunity to see the show. This number is
800-684-8493.
The Company also has the ability to receive long distance calls from 65
countries for Globalot Bingo playing cards, provided in the same manner as
domestic callers except that service is provided in the predominant language
used in the originating country. The cost for such calls will differ depending
on
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the country of origin. The Company receives a portion of each call paid, payment
being different in each originating country. International callers can obtain
play information over the Internet.
The Company's software and communications technology eliminates the need and
minimizes the expense related to the printing and distribution of Bingo cards by
permitting viewers to receive up to four "cards" (numbers) by phone; and, allows
its telephone switching network to handle thousands of calls simultaneously,
permitting optimum viewer participation in each game. The use of these
technologies also eliminates the need for live operators.
The Company's production offices and computer center are located at 1239 South
Glendale Avenue, Glendale, California 91205. Its phone number is 1-800-460-2170.
Each strip of three cards gives the holder nine chances to win the Super Jackpot
Prize.
COMPANY'S INCOME
The Company's income will be based on the difference between the telephone
charges paid by players and the negotiated cost charged to by the participating
long distance company. The long distance charges will appear on each caller's
prepaid calling card, eliminating collection functions. Since no live operators
are employed in recording and processing the calls and awards, the only expenses
are related to the prizes offered, production and telecast of the Bingo game and
administrative costs.
INTERNET
The Company websites are located at http://www.sbicommunications.com,
http://www.globalot.com and http://www.abingo.com. Shopping, travel, bingo games
and other items will be available for the consumer mid-1998. A-bingo club
membership will be required, and membership fee will be $19.95 per month. To
gain access to the site and take advantage of services and games available you
must be a member. All bingo game are free and anyone may acquire free game cards
by sending the Company a request and a SASE. Bingo games will be player 24 hours
7 days a week. Members may play all games available. Upon winning, the player
will be sent an e-mail disclosing the game number, amount of winnings and be
featured in the winners circle.
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COMPETITION
There are currently numerous entities engaged in the operation of commercial
bingo entertainment centers in the U. S. Commercial bingo center start-up
expenses are generally comprised of site selection and preparation, finish-out,
equipment and licensing fees, and typically cost from $100,000 to $250,000 per
center. Thus, there are no significant financial barriers to entry. However,
rigorous regulatory requirements and legal complexities of the involvement of
non-profit organizations serve to reduce the entry of new competitors. Since
bingo prize payout are often legally limited, competition, where it exists, is
normally focused on a center's amenities. Bingo centers with convenient
locations, attractive facilities, maximum bingo prize payout, ample parking,
attentive security, comfortable environment, friendly personnel and value-priced
concessions usually succeed in their market. The Company seeks to provide the
most desirable bingo center(s) in its respective markets in order to generate
long-term player loyalty. The Company is committed to ensuring that its bingo
centers remain appealing and that its customers are provided maximum comfort and
enjoyment. Additional competition within the bingo market comes from charitable
bingo operations owned and run by charities. In general, however, such
operations have not been able to compete with commercial operations due to,
according to most bingo players, smaller and less desirable facilities and
amenities, lower bingo prize payout and fewer bingo sessions.
Additional competition comes from other sectors of the gaming industry such as
lotteries, horse and dog racing and casino operations. While the Company is
cognizant of these competing operations, and does try to locate its facilities
in areas insulated from such competition, the Company believes that its patrons
represent unique, value-oriented customers for whom a day or night of bingo
represents a small investment of $10 - $100 that provides several hours of
entertainment with payout that rival the average slot machine. Lottery players
seek much larger payout with less time commitment, despite the infinitesimal
odds. Horse and dog racing bettors and casino patrons do enjoy comparable
entertainment value that bingo provides, but generally require longer commutes
to the gaming establishment as well as higher investments for the same period of
playing time. In addition, these other gaming venues do not provide the
socializing value that bingo provides. The Company also recognizes competition
from American Indian gaming establishments, which enjoy certain legal,
operational and tax advantages. The Company currently has no plans to compete in
American Indian gaming markets.
1. BROADCAST
INTERACTIVE TECHNOLOGY
A number of important trends support management's belief that the Company is
re-entering the interactive television programming market at the right time with
the right products. As the phenomenon known as the "Information Superhighway"
continues to shape the way people
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communicate with one another, receive information and facilitate transactions, a
number of events are beginning to occur.
Numerous books and recent articles indicate that people are becoming more
comfortable with services and entertainment offered in the privacy of their own
home through their telephones or personal computers. The data highway also known
as the National Information Infrastructure (NII), is helping facilitate this
trend by linking homes, offices and entertainment sources into one big network.
The data highway and its ability to reach millions of consumers is providing
unprecedented opportunities for manufacturers and marketers of products and
services. These companies are being challenged to find ways to use advanced
technology, like interactive technology, to make it easy for consumers to find
out about and purchase their products and services.
Popular examples of interactive technology in the consumer market include
on-line computer services (like Prodigy and CompuServe), voice automated
telephone services (like consumer banking and financial services), and at-home
television shopping services (like the Home Shopping Network). The success of
these have convinced management that interactive television programming like
that being offered will be well received by a public that continues to accept
more and more interactive technology into their daily lives.
THE BINGO AND GAMING INDUSTRY
Bingo is derived from as Italian lottery game initiated in 1530, and still held
every Saturday in Italy. It grew throughout Europe over the next two centuries.
In 1929, a game called "Beano" was played at a carnival near Atlanta, Georgia.
The game was played with dried beans, a rubber number stamp and some cardboard.
Players won when they filled a line of numbers on their card.
The game of "Bingo" moved to New York, and quickly spread up and down the East
Coast. By 1934, an estimated 10,000 bingo games were played every week. In 1996,
approximately $6 Billion was spent on active bingo in North America alone. There
are 64,000 charitable bingo centers in North America with over 60,000
organizations licensed to operate bingo. Bingo is the most accepted form of
gaming by the public. There are approximately 60 millions people who visit a
bingo facility each month and spend an average of $18.00 per visit. Bingo is
expected to maintain or possibly increase its market share of total gaming
industry receipts consistent with an aging U.S. population, which has more
disposable income and time and enjoys playing bingo more than other age groups.
Management believes that the past success of the Company's interactive bingo
programs are evidence that the game is as popular as ever among people around
the world. Recent statistics generated by the United States government seem to
strongly support this belief. According to a recent survey of American Gambling
Attitudes and Behavior conducted by the United States Commission on the
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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 Company's nationally and internationally interactive broadcast programs
THE COMPANY'S COMPETITIVE POSITION
The Company has no direct local competition for its current operations (the
operation of its facility in Piedmont, Alabama). However, its operations are in
competition with all aspects of the entertainment industry, both locally and
nationally.
BROADCAST BINGO
The Company competes with all broadcast game shows and, more generally, all
types of broadcast promotions designed to increase audience share and
advertising revenues. Management is not aware of any nationally broadcasted
bingo shows. Some locally-originated shows exist in various locations.
Management believes, without assurance, that it has a competitive edge over
other broadcast bingo promotions since Ron Foster originated the concept and has
been promoting it since 1984. Management believes that the Company has
established a reputation of equitable and complete service to the broadcast and
gaming industry.
With respect to game shows and other types of broadcast promotion, management
believes that the simplicity of the bingo game and its mass audience appeal
enables the Company to successfully compete with other game shows.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 14
<PAGE> 15
OTHER ACTIVITIES
The Company is not an established participant in the other areas in which it
expects to operate; however, management believes that the fields involve rapidly
developing markets which no single entity currently dominates, with great
opportunities for entry level participants possessing an understanding of
developing technologies. Consequently, although the interactive television
fields are highly competitive and include major cable television and telephone
companies, management is confident that its endeavors constitute a niche in
which it can successfully compete.
2. SOURCES AND AVAILABILITY OF RAW MATERIALS AND THE NAMES OF PRINCIPAL
SUPPLIERS
None of the Company's proposed activities are reliant on raw materials. Rather,
they depend on the ability to exploit emerging technologies that are expected to
be readily available.
3. DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS
The Company's current operations are highly reliant on local charities. Its
former broadcast operations and contemplated future operations are not expected
to be reliant on any single or small group of customers.
EMPLOYEES
As of December 31, 1997, the Company had 12 permanent employees, including four
officers, three professional staff, three maintance and five kitchen staff. The
Company also retains the services of property managers who oversee the hall
maintance & grounds in Alabama. No employee of the Company is represented by a
labor union or is subject to a collective bargaining agreement.
PREMISES
Frontier Palace
458 Highway 278 Bypass - Piedmont, Alabama 36272 Company-owned
GOVERNMENT REGULATION
Approximately 45 states and the District of Columbia have enacted laws
permitting and controlling the operation of bingo centers. A small but growing
number of these states also allow video gaming in charity sponsored centers. The
Company complies within this regulated structure as both landlord and
consultant/service provider to the charities. In most states the Company is
required to obtain and maintain permits and/or licenses from state and local
regulatory agencies. State regulations often limit
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 15
<PAGE> 16
the dollar amount that the Company can charge a charity for rent per bingo
session. Some states also limit the number of weekly sessions that may be
conducted in a given bingo center, as well as the prize money that a charity may
pay out per session.
The Company views this situation as a "double-edged sword," however, because the
regulatory limitations and complexities discourage new competitors that lack the
Company's experience and charity relationships. However, there can be no
assurance that current laws and regulations will not be changed or interpreted
in such a way as to require the Company to further restrict its activities or
rentals. It is also possible that liberalization of such regulations in certain
areas would diminish the Company's competitive advantage. In states that limit
the number of charity sessions, the Company recruits a sufficient number of
local charities to ensure that the maximum number of sessions are conducted.
All states providing for the operation of charity bingo centers have unique
regulations. While the vast majority of these states assign the regulation of
charity bingo to a state agency, in some states, regulation is under the control
of localities. The requirements typically imposed on a commercial bingo lessor
include the acquisition of necessary licenses and permits, a limit on the rental
payments to be made by a charity to the commercial lessor, and a prohibition
against the lessor directly operating a center. The Company is thus typically
prohibited from paying the wages of those employees operating the center as well
as any marketing or advertising expenses for the center. The regulations against
the direct operation and marketing of a bingo center by the Company reduce the
Company's payroll and advertising costs for the center. Since the Company is
allowed to act as a service provider, the Company can advise in the selection of
key employees and the creation and execution of a bingo center's operating plan.
ITEM 2 - PROPERTIES
The Company's principal offices were located in Piedmont, Alabama in facilities
purchased by the Company on December 16, 1994, for $6,500,000 (paid in shares of
the Company'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 Company and
maintained properties therein, has been leased on a month to month basis by the
Company to Piedmont Jaycees, Inc. since August 10, 1995. The rental for the
building and equipment located therein is $75,000 per month or $7,000 per day,
whichever is greater, plus all other defined expenses, excluding insurance, ad
valorem taxes, assessments, repairs, upkeep, maintenance and similar expenses.
However, the Piedmont Jaycees were not able to pay $75,000.00 per month and the
rent was reduce to a minium payment of $25,000.00 through the startup period.
The Company also has a branch office at 1239 South Glendale Avenue, Glendale,
California, and Production Studio and transmission facilities are obtained from
third parties at competitive rates. The premises are comprised of approximately
3,000 square feet for which the Company pays $1,000 per
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 16
<PAGE> 17
month. The lease is scheduled to expire on December 31, 1998; however the
Company is confidant that the lease would be renewed on favorable terms.
PATENTS, TRADEMARKS, LICENSES, FRANCHISES, CONCESSIONS, ROYALTY AGREEMENTS OR
LABOR CONTRACTS, INCLUDING DURATION
The Company has no patent rights. It has the following service marks:
<TABLE>
<CAPTION>
<S> <C>
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.
</TABLE>
The Company obtained an assignment to a copyrights for "the Works," copyright
registrations for Globalot Bingo and derivatives: Number PAU 855-931 (June 10,
1986); Number Pau 847-876 (March 11, 1986); Number PAU 788-031 (September 19,
1985); Number PAU 927-410 (November 4, 1986); Number PA 370-721 (February 9,
1988); Number PA 516-494 (January 17, 1991); Number PA 533-697 (January 17,
1991); from Satellite Bingo, Inc., to SBI Communications, Inc., dated September
14, 1993.
ITEM 3 - LEGAL PROCEEDINGS
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
To the best knowledge and belief of the Company, 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 Company 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;
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 17
<PAGE> 18
(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 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the fourth
quarter of fiscal 1997. The Company's annual shareholder meeting with voting on
proxy issues is on April 28, 1999.
PART II
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
PREFERRED STOCK
All attributes of the currently unissued preferred stock will be determined by
the Company's board of directors prior to issuance, as permitted by and subject
to the requirements of applicable Delaware law. The currently outstanding
preferred stock has a $5.00 per share par value and a $5.00 per share
liquidation preference; paying no dividend but convertible into common stock
upon demand at a conversion rate equal to $5.00 per share divided by the market
value of the common stock at the date of conversion. The preferred stock has no
voting rights except as to matters specifically dealing with changes in the
attributes of the preferred stock.
MARKET FOR COMMON EQUITY
The Company's stock is traded on the NASDAQ OTC Electronic Bulletin Board. The
Company currently has 5,345,439 shares of stock outstanding, with 1,450,000 in
the public float. There are
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 18
<PAGE> 19
approximately 3,368 shareholders of record. For the fiscal year ended December
31st, 1997 the Company reported revenues of $544,662.00 and a net loss of
$($693,879.00).
The Common Stock of Company has been traded over-the-counter since 1983. Its
trading symbol is "SBID." No established public trading market exists for the
Common Stock of Company at this time.
No common equity is subject to options or warrants to purchase or
securities convertible into common stock, except for the currently
issued 168,000 shares of preferred stock which are convertible into
common stock. The Company is in the process of re-purchasing 1,500,000
of preferred shares from the previous owner of the property in
Piedmont, AL.
No common stock is currently being offered or proposed to be offered
which offering could be reasonably expected to have a materially
adverse effect on the market price of the Company's common equity; and
There are approximately 5,345,439 shares of common stock which will
become eligible for sale by December 31, 1998, pursuant to the
provisions of Securities and Exchange Commission Rule 144.
The Company has not agreed to register securities for resale under the
Securities Act of 1934, as amended, for anyone.
The following table sets forth in United States dollars the high and low bid
quotations for such shares. Such bid quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commissions, and do not necessarily
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 Electronic Bulletin Board.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 19
<PAGE> 20
Common Stock
Date Low High
---- ------ -----
Fiscal 1996 $ 0.62 $1.37
Fiscal 1997
First Quarter $0.25 $0.50
Second Quarter $0.1875 $0.375
Third Quarter $0.125 $0.25
Fourth Quarter $0.1875 $0.375
------
Prices quoted reflect a one share for twenty reverse split effective on February
1, 1993.
DIVIDEND POLICY
The Company has never paid any dividends. it is the present intention of the
Company to pay dividends as soon as possible. There can, however, be no
assurance that funds for payment of dividends will ever be available, or that
even if available, the Company's board of directors then serving will resolve to
declare them.
MARKET
The Company's securities are currently quoted on the Nation Association of
Securities Dealers, Inc.'s NASDAQ Bulletin Board and on the National Daily
Quotation System, Inc.'s "Pink Sheets." The Company expects that its securities
will be listed on the National Association of Securities Dealers, Inc.'s
automated quotation system ("NASDAQ") within the next 12 months and that they
will be traded under its current symbol "SBID".
Section 15(g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires brokers and dealers to make risk disclosures to customers before
effecting any transactions in "penny stocks". It also directs the Securities and
Exchange Commission to adopt rules setting forth additional standards for
disclosure of information concerning transactions in penny stocks.
Penny stocks are low-priced, over-the-counter securities that are prone to
manipulation because of their price and a lack of reliable market information
regarding them. Under Section 3(a)(51)(A) of the Exchange Act, any equity
security is considered to be a "penny stock," unless that security is: i)
registered and traded on a national securities exchange meeting specified
Securities and Exchange Commission criteria; ii) authorized for quotation on the
National Association of Securities Dealers, Inc.'s (NASD") automated
inter-dealer quotation system ("NASDAQ"); iii) issued by a registered investment
company; iv) excluded, on the basis of price or the issuer's net tangible
assets, from the definition of the term by
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 20
<PAGE> 21
Securities and exchange Commission rule; or v) excluded from the definition by
the Securities and Exchange Commission.
Pursuant to Section 3(a)(51)(B), securities that normally would be considered
penny stocks because they are registered on an exchange or authorized for
quotation on NASDAQ may be designated as penny stocks by the Securities and
Exchange Commission if the securities are traded off the exchange or if
transactions in the securities are effected by market makers that are not
entering quotations in NASDAQ.
Rule 3a51-1 was adopted by the Securities and Exchange Commission for the
purpose of implementing the provisions of Section 3(a)(51). Like Section
3(a)(51), it defines penny stocks by what they are not. Thus, the rule excludes
from the definition of penny stock any equity security that is: (1) a "reported"
security; (2) issued by an investment company registered under the 1940 Act; (3)
a put or call option issued by the Options Clearing Corporation; (4) priced at
five dollars or more; (5) subject to last sale reporting; or (6) whose issuer
has assets above a specified amount.
(Release No. 30608, Part III.A).
Rule 3a51-1(a) excludes from the definition of penny stock any equity security
that is a "reported security" as defined in Rule 11Aa3-1(a). A reported security
is any exchange-listed or NASDAQ security for which transaction reports are
required to be made on a real-time basis pursuant to an effective transaction
reporting plan. Securities listed on the New York Stock Exchange (the "NYSE"),
certain regional exchange-listed securities that meet NYSE or Amex criteria, and
NASDAQ National Market System ("NMS") securities are not considered penny
stocks. (Release No. 30608, Part III.A.1). Generally, securities listed on the
American Stock Exchange (the "Amex") pursuant to the Amex's original and junior
tier or its "Emerging Company Marketplace" listing criteria, are not considered
penny stocks. Securities listed on the Amex pursuant to its Emerging Companies
Market ("ECM") criteria, however, are considered to be "penny stock" solely for
purposes of Exchange Act 15(b)(6). (Release No. 30608, Part III.A.1).
Rule 3a51-1(d) excludes securities that are priced at five dollars or more.
Price, in most cases, will be the price at which a security is purchased or sold
in a particular transaction, excluding any broker commission, commission
equivalent, mark-up, or mark-down. In the absence of a particular transaction,
the five dollar price may be based on the inside bid quotation for the security
as displayed on a Qualifying Electronic Quotation System (i.e., an automated
inter-dealer quotation system as set forth in Exchange Act Section 17B(b)(2)).
"Inside bid quotation" is the highest bid quotation for the security displayed
by a market maker in the security on such a system. If there is no inside bid
quotation, the average of at least three inter-dealer bid quotations displayed
by three or more market makers in the security must meet the five dollar
requirement. Broker-dealers may not rely on quotations if they know that the
quotations have been entered for the purpose of circumventing the rule. (Release
No. 30608, Part III.A.3.b). An inter-dealer quotation system is defined in Rule
15c2-7(c)(1) as any system of general circulation to brokers and dealers that
regularly disseminates quotations of identified brokers or dealers. In the case
of a unit composed of one or more securities, the price divided by the number of
shares of the unit that are not
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 21
<PAGE> 22
warrants, options, or rights must be five dollars or more. Furthermore, the
exercise price of any warrant, option, or right, or of the conversion price of
any convertible security, included in the unit must meet the five dollar
requirement. For example: a unit composed of five shares of common stock and
five warrants would satisfy the requirements of the rule only if the unit price
was twenty-five dollars or more, and the warrant exercise price was five dollars
or more. Once the components of the unit begin trading separately on the
secondary market, they must each be separately priced at five dollars or more.
(Release No. 30608, footnote 66).
Securities that are registered, or approved for registration upon notice of
issuance, on a national securities exchange are also excluded from the
definition of penny stock (Rule 3a51-1(e)). The exchange must make transaction
reports available pursuant to Rule 11Aa3-1 for the exclusion to work. The
exclusion is further conditioned on the current price and volume information
with respect to transactions in that security being reported on a current and
continuing basis and made available to vendors of market information. In
addition, the exclusion is limited to exchange-listed securities that actually
are purchased or sold through the facilities of the exchange, or as part of a
distribution. Exchange-listed securities satisfying Rule 3a51-1(e), but which
are not otherwise excluded under Rule 3a51-1(a)-(d), continue to be deemed penny
stocks for purposes of Exchange Action Section 15(b)(6).
Exchanges that qualified for this exclusion as of April, 1992 were the NYSE,
Amex, Boston Stock Exchange, Cincinnati Stock Exchange, Midwest Stock Exchange,
Pacific Stock exchange, Philadelphia Stock Exchange, and the Chicago Board of
Options. (Release No. 30608, footnote 37).
Securities that are registered, or approved for registration upon notice of
issuance, on NASDAQ are excluded from the definition of penny stock (Rule
3a51-1(f)). Similar to the exchange-registered exclusion of Rule 3a51-1(e), the
NASDAQ exclusion is conditioned on the current price and volume information with
respect to transactions in that security being reported on a current and
continuing basis and made available to vendors of market information pursuant to
the rules of NASD. NASDAQ securities satisfying Rule 3a51-1(e), but which are
not otherwise excluded under Rule 3a51-1(a)-(d), continue to be deemed penny
stocks for purposes of Exchange Act Section 15(b)(6).
An exclusion is available for the securities of issuers that meet certain
financial standards. This exclusion pertains to: (1) issuers that have been in
continuous operation for at least three years having net tangible assets in
excess of $2 million (Rule 3a51-1(g)(1); ii) issuers that have been in
continuous operation for less than three years having net tangible assets in
excess of $5 million (Rule3a51-1(g)(1); iii) issuers that have an average
revenue of at least $6 million for the last three years (Rule 3a51-1(g)(2)). To
satisfy this requirement, an issuer must have had total revenues of $18 million
by the end of a three-year period. (Release No. 30608, Part III.A.4). The
Company believes that its securities qualify under this exemption.
For domestic issuers, net tangible assets or revenues must be demonstrated by
financial statements that are dated no less than fifteen months prior to the
date of the related transaction. The statements must have
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 22
<PAGE> 23
been audited and reported on by an independent accountant in accordance with
Regulation S-X. For foreign private issuers, net tangible assets or revenues
must be demonstrated by financial statements that are dated no less than fifteen
months prior to the date of the related transaction. The statements must be
filed with the Securities and Exchange Commission pursuant to Rule 12g3-2(b). If
the issuer has not been required to furnish financial statements during the
previous fifteen months, the statements may be prepared and audited in
compliance with generally accepted accounting principles of the country of
incorporation.
Whether the issuer is domestic or foreign, in all cases a broker or dealer must
review the financial statements and have a reasonable basis for believing that
they were accurate as of the date they were made (Rule 3a51-1(g)(3). In most
cases a broker-dealer need not inquire about or independently verify information
contained in the statements. (Release No. 30608, Part III.A.4). Brokers and
dealers must keep copies of the domestic or foreign issuer's financial
statements for at least three years following the date of the related
transaction (Rule 3a51-1(g)(4).
SECURITY HOLDERS
As of December 31, 1997, the latest practicable date for which information is
available, the Company's management was of the opinion that the Company had
approximately 3,368 common stock holders.
DIVIDENDS
There have been no cash dividends declared or paid since the inception of the
Company and no dividends are contemplated to be paid in the foreseeable future.
DESCRIPTION OF SECURITIES
GENERAL
The Company is authorized to issue 50,000,000 shares of capital stock,
40,000,000 shares of which are designated as common stock, $.001 par value per
share, and the balance as preferred stock, $5.00 par value per share.
As of December 31, 1997, 5,345,439 shares of Common Stock were outstanding
(excluding the 2,500,000 shares held but not yet allocated by the Company's
Employees' Trust) and held of record by approximately 3,368 persons. In
addition, 1,668,000 shares of preferred stock were outstanding, and held by
approximately five persons. The Company plans to repurchase 1,500,000 preferred
shares.
CORPORATE STOCK TRANSFER, 370 17TH STREET, SUITE 2350; DENVER COLORADO 80202,
ACTS AS TRANSFER AGENT AND REGISTRAR FOR THE COMPANY'S COMMON AND PREFERRED
STOCK.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 23
<PAGE> 24
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations and Plan of Operation.
INTRODUCTION
The Company is currently in the development stage of its business cycle. Since
its inception, the Company has actively pursued licensing agreements designed to
generate royalty income in exchange for providing software and methods involving
bingo game production. In the past, the Company has entered into various
agreements covering territories in Brazil, Greece, Hong King, and Indian
reservations, military bases, and charity bingo parlors in the United States.
Prior emphasis on these type of licensing agreements has proven to be
ineffective. No licensee currently has bingo operations generating significant
fees or royalties for the Company. The majority of its current operating income
is provided by rental income generated from the lease of its bingo facility to
non-profit charities in a facility owned by the Company. The majority of future
revenues, however, are not anticipated to occur in either of these areas. The
Company hopes to generate significant future revenues from telecommunications
services involved in interactive 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 Company has made this
area of business their first priority, and most of the other plans for the
future are based on the success of the telecommunications area. Management would
like to broadcast the bingo show to as many viewers as possible, and although
there are no current foreign agreements, management's plans are not limited to
the U.S. Management intends to pursue contracts with foreign countries and begin
its bingo programs on the Internet. Overall, management hopes to be able to
generate net revenues of $10 million annually from this area of business. The
Company also has plans to expand operations through the acquisition of
television production facilities and rights to a television buying show. This
would allow the Company to produce their bingo show in their own studio and
broadcast it over their own network. It will also give management freedom to use
their experience in programming and production to produce other forms of
interactive entertainment, such as the ideas of Public Domain Broadcasting and
The Life and Leisure Network mentioned elsewhere in this offering document.
Diligently being examined are the legal opinions submitted for imminent
contractual arrangements between two companies with the Company, a major
international shop at home entity and a telecommunications company. Both of
these entities are NASDAQ listed. Management feels confident that a deal will be
consummated by year end 1998 allowing the Company to commence operations on a
full scale in the telecommunications business segment.
The Company is continuing to search for avenues to develop future revenue. In
light of the preliminary and conditional nature of negotiations, no assurance
can be provided as to the likelihood that such proposed projects will come to
fruition. A summary of projects currently being pursued is as follows:
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 24
<PAGE> 25
FRONTIER PALACE
Because the Piedmont Jaycees did not perform as represented, and their
management did not develop business, gross revenues were 50% of their
projections, and agreement in their premises lease: Jaycees salaries exceeded
budgets; operations schedule was not full time. Therefore, their lease was
allowed to not be renewed at the end of 1997.
At the same time, local political influences developed negative local law
changes as a reaction to the Piedmont Jaycees operation. Local ordinances are
being adopted to limit all charity bingo operations and the amount of employees
and establish a requirement of near gross proceeds being donated for charitable
purposes regardless of reasonable and necessary operation expenses with no
revenues to the employees of the charity .
In reaction to the above political/legal trends, management has negotiated two
business leases of the premises. Because management is working with technical
computer advisors and systems designers in the Boca Raton/Fort Lauderdale,
Florida area, management believes that their observations of the local charity
Bingo market appears to be more hospitable in Southeast Florida, rather than
northeast Alabama
Two business enterprises have agreed to lease the premises at a gross rent of
$70,000.00 per month, subject only to the company paying real estate taxes
(approximately $35,000.00 per year, insurance $30,000.00 per year and the usual
exterior, structural maintenance, estimated at no more that $20,000.00 per
year). Gross rental income then is at $840,000.00 per year with estimated
expenses and contingencies at $85,000.00 per year, indication gross income at
$755,000.00.
The two tenants are credible business operations with a history and financial
capability, as follows:
(1) Regency Communications, Inc. for operation of a
telecommunication marketing center and advertising/video studio
as part of their marketing efforts. Rent at $40,000.00 per month
or $480,000 per year, plus agreement to jointly manage the
property and develop complimentary products.
(2) Dee Fords, Inc. is a country western dance hall, restaurant and
bar operation with an operations history in Anniston, Alabama.
Their management seeks a large location to accommodate up to
near 2,500 attendees. Their operation involves what is known as
a "show Palace" for well- known country and western musical
shows, which includes dancing, dinning and bar service. Their
agreed rental includes use of the kitchen and snack bar
facilities, and is at a gross rent of $30,000.00 per month or
$360,000.00 per year.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 25
<PAGE> 26
INTENET WEB SITE
The company established a secure web site allowing individuals to join "A Bingo
Shopping Club for a fee of $19.95 per month which is a shopping club for a
variety of products, services, Bingo game related events and items, travel and
consumer goods; the opportunity is primarily a shopping club. No charge is made
for Bingo cards, and for allowing members to play an on-going Globalot Bingo
game, with winnings credited to the member's account or delivered to the member
at their option. Payment for membership will be made by credit card, bank check,
debit/ATM cards and by lec billing or "900" telephone number. The web site is
hosted by a Coral Gables educational organizations. Fulfillment of the operation
is by sites and organizations in Fort Lauderdale, Florida. The company will at
some point host its own web site with server and tee access to the Internet. The
company will generate additional revenues by offering advertising and its web
services to others.
SATELLITE BINGO.
The company has developed a pay-per-view television game show to be operate by
SBI, at a studio within the Piedmont, Alabama property, or within a production
studio, as is most efficient. The charge for a weekly two hour broadcast is
$9.95 per subscriber per broadcast; SBI receives $5.00 with the
broadcaster/network company paid the balance.
LIQUIDITY
The following table summarizes working capital and total assets:
Fiscal Year Ended December 31,
1997 1996
---- ----
Working Capital $ 118,160 $ 290,023
Total Assets $6,984,557 $7,441,024
December 31, 1995, the Company's current assets exceeded its current
liabilities, creating a working capital surplus. The surplus is primarily the
result of the issuance of preferred convertible stock to liquidate liabilities
owed to shareholders, and in income provided by the Company's operating
activities relating to approximately $100,000 in fees collected from charities
that sponsor bingo games at the Company's bingo hall.
At December 31, 1994, the Company had current liabilities in excess of current
assets, principally due to administrative expenses incurred during the
development stage that have been funded by the majority stockholder in the form
of advances due on demand. The Company has had some success in issuing stock for
services, and accordingly has kept the working capital deficit to a minimum
during these years.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 26
<PAGE> 27
The changes in total assets are attributable to the Company's purchase of a
building (bingo hall) in 1994 through the issuance of preferred stock. As a
result, income from bingo hall operations has boosted working capital in the
calendar year ended December 31, 1997. In the years prior to 1996, the Company
was primarily involved in securing licensing agreements for rights to software
and methods of operating bingo games it had developed.
As the Company continues to operate in the development stage, no significant
cash flow is being generated from operating activities. 1997 was a relatively
dormant year. The Company was able to generate $12,000 in cash flow from
operations principally from management/services of the bingo hall in the year
ended 1997. Shareholders also advanced net funds of $51,564 in 1996 and was
repaid in the year ended 1997, allowing the Company to generate positive total
cash flow of $56,607 for the year. In 1996, the Company 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 Company
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 Company used
$350,199 in net cash flow for operations. The Company also acquired various
operating equipment at a cost of $105,363. To fund these cash flow needs, the
Company 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 Company's only significant sources of capital have been
from the sale of common stock and loans from shareholders. See a discussion of
these transactions under Item 7 - Certain Relationships and Related Party
Transactions, and in the Consolidated Financial Statements of the Company. The
Company has also acquired significant assets through the sale of convertible
preferred stock. The Company anticipates continued expansion of its business
through acquisitions using Company stock. Furthermore, with the bingo hall
acquired in 1994 now in operation, the Company anticipates generation of
revenues from the lease of this facility sufficient to cover administrative
costs still being incurred as the Company moves forward in its development
stage.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 27
<PAGE> 28
RESULTS OF OPERATIONS
The following table sets forth the relative relationship to total revenue of the
revenue categories in the Company's statement of income and percentage changes
(rounded to the nearest whole dollar).
Amount of Total Revenue
Fiscal Year Ended December 31, 1997 1996
---- ----
Revenues:
Licenses & Royalties -0- -0-
Bingo Hall Operations $ 411,033 $352,000
Kitchen and gift shop revenues 131,703 67,019
Other Income 1,926 2,109
--------- --------
Total Revenue $ 544,662 $421,128
========= ========
In general, the Company experienced insignificant revenues in 1997 as it
attempted to expand and develop its operations. Total revenues were $544,662 for
1997. The Company owns a bingo hall, during 1997 was leases to charities who
sponsor bingo games. The Company also provides management services to assist the
charities in the operations of the bingo games, for which the Company charges a
fee. Net revenues related to the bingo hall operations were only $352,000 in
1996, but have grown to $411,033 for the calendar year ended December 31, 1997.
Total revenues for calendar year ended December 31, 1997 were $544,662.
Accordingly, except for the operation of the bingo hall, there are no other
significant revenue sources of the Company at this time. For 1996 and 1997, the
Company did not generated revenue from the sale of copyrighted bingo cards,
foreign licensing agreements, sale of computer hardware or security systems, or
other various areas of business opportunity discussed in this offering document.
The Company's expenses can be summarized as follows:
Amount of Total Expenses
Fiscal Year Ended December 31, 1997 1996
---- ----
Salaries and related expenses $157,649 $170,822
Other general and administrative expenses $358,670 $488,545
Depreciation and amortization $346,742 $544,752
Interest expenses and finance charges $ 82,637 $ 76,202
The most significant expense relates to the amortization of trademark, game show
and computer program assets the Company has developed. The expense is running $
265,960 per year. Such assets will be fully amortized at the end of 1997. For
1997, the Company also had depreciation on the bingo hall and related equipment,
which will approximate $367,202 per year. These expenses do not require the use
of cash. The low level of other expenses in 1994 is due to a slow down in the
general activity of the Company as it
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 28
<PAGE> 29
explored alternative revenue generating ideas. With the addition of the bingo
hall in late 1994, as well as the pursuit of television production and broadcast
possibilities in 1996, such expenses have decreased in 1997. As the Company
continues to pursue television production and broadcast possibilities, these
expenses will continue to rise as a result of expanded facility space and travel
costs. Interest and finance charge expenses increased in 1996 due to $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 Company successfully acquire production facilities and broadcast
companies under consideration, or expand operations in areas previously
discussed as currently under consideration, revenues and expenses of the Company
would change significantly. Management is not able to predict the impact of such
changes on revenues or expenses at this time.
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
See Notes To Consolidated Financial Statements included elsewhere in this filing
for a description of the Company's calculation of earnings per share.
ITEM 7. FINANCIAL STATEMENT AND SUMMARY FINANCIAL DATA
FINANCIAL STATEMENTS
The unaudited consolidated balance sheet of the Company for its years ended
December 31, 1997 and 1996 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 Company for its years ended
December 31, 1997 and 1996 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:
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 29
<PAGE> 30
<TABLE>
<CAPTION>
Page Description
- ---- -----------
<S> <C>
__ Report of Certified Public Accountants, as to the calendar years ended December 31, 1997
and 1996.
__ Consolidated Balance Sheets - December 31, 1997 and December 31, 1996.
__ Consolidated Statement of Income (Loss) for the calendar years ended December 31, 1997 and
December 31, 1996 and from inception until December 31, 1997.
__ Consolidated Statement of Changes in Stockholder's Equity from Inception (January 10, 1986)
through December 31, 1997.
__ Consolidated Cash Flows for the calendar years ended December 31, 1995 and December 31, 1995
and from inception until December 31, 1997.
__ Notes to Consolidated Financial Statement Statements for the calendar years ended December 31,
1997 and December 31, 1996.
</TABLE>
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
<TABLE>
<CAPTION>
1997 1996
----- -----
ASSETS
<S> <C> <C>
Current assets:
Cash $ 22,228 $ 42,327
Accounts receivable, net of allowance for doubtful
accounts of $-0- at December 31, 1997 and 1996 (Note 8) 250 120,306
Accounts and notes receivable from affiliates (Note 2) 9,617 3,600
Inventories 86,065 24,391
---------- ----------
118,160 190,624
Property and equipment, net of accumulated
depreciation (Note 3) 6,782,223 7,026,112
Other assets:
Accounts receivable - long-term, doubtful accounts of at December 31, 1996 - 100,000
Organization costs, trademarks, shows, computer
programs and game inventory, net (Note 4) - -
Deferred loan costs 21,109 56,200
Deposits 63,065 68,088
---------- ----------
$6,984,557 $7,441,024
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 30
<PAGE> 31
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Note payable to trust managed by a shareholder (Note 2) $ 150,000 $ 200,000
Mortgage note payable-current portion (Note 5) 239,701 5,873
Capitalized leases-current portion (Note 5) 17,491 -
Accrued wages due to principal shareholder (Note 2) 290,000 180,000
Advances due to principal shareholder (Note 2) - 14,901
Account payable and accrued expenses 150,442 83,873
---------- ----------
847,634 484,647
Mortgage payable, long-term portion (Note 5) - 240,229
Capitalized leases, long-term portion (Note 5) 62,216 -
Other notes payable (Note 5) 52,438 -
---------- ----------
Total liabilities 962,288 724,876
---------- ----------
Stockholders' equity (Note 6):
Preferred stock, par value $5.00; 10,000,000 shares authorized;
1,673,000 and 1,693,000 shares issued and outstanding at
December 31, 1997 and 1996, respectively 8,365,000 8,465,000
Common stock, par value $.001; 40,000,000 shares authorized; 5,345,439
shares issued and outstanding at December 31,
1997 and 1996 5,345 5,345
Paid in capital 3,567,343 3,467,343
Accumulated deficit (5,915,419) (5,221,540)
----------- -----------
6,022,269 6,716,148
----------- -----------
$ 6,984,557 $ 7,441,024
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 31
<PAGE> 32
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF LOSS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Revenues (Note 8):
Bingo hall rent $ 411,033 $ 352,000
Kitchen and gift shop revenues 131,703 67,019
Administrative fees - -
Other income 1,926 2,109
----------- -----------
544,662 421,128
----------- -----------
Expenses:
Cost of sales - kitchen and gift shop 180,563 37,892
Salaries and related expenses 157,649 170,822
Facility costs 49,518 80,605
General and administrative 358,670 488,545
Travel and production costs 102,762 72,029
Depreciation and amortization 306,742 544,752
Interest and finance expenses 82,637 76,202
------------ -----------
1,238,541 1,470,847
----------- -----------
Net loss from operations (693,879) (1,049,719)
Net loss $ (693,879) $(1,049,719)
============ ===========
Net loss per share (Note 7) $ (0.13) $ (0.20)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 32
<PAGE> 33
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
FOR THE YEARS ENDING DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
Common Stock Preferred Stock
------------------- ------------------- Additional Total
Number Number Paid-in Accumulated Shareholders'
of shares Amount of shares Amount Capital Deficit Equity
--------- ------ --------- ------ ------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
issued in July, 1996
to cover $20,000 in
loan closing costs,
20,000 shares to be
returned in 1997 - - 25,000 125,000 (105,000) - 20,000
Net loss, January 1, 1996
to December 31, 1996 - - - - - (1,049,719) (1,049,719)
--------- ------ --------- ---------- ---------- ----------- -----------
Balance December 31, 1996 5,345,439 5,345 1,693,000 8,465,000 3,467,343 (5,221,540) 6,716,148
Excess preferred stock
issued in July, 1996
to cover $20,000 in
loan closing costs,
20,000 shares were
returned in 1997 - - (20,000) (100,000) 100,000 - -
Net loss, January 1, 1997
to December 31, 1997 - - - - - (4,723,202) (4,723,202)
--------- ------ --------- ---------- ---------- ----------- -----------
Balance December 31, 1997 5,345,439 $5,345 1,673,000 $8,365,000 $3,567,343 $(9,944,742) $ 1,992,946
========= ====== ========= ========== ========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 33
<PAGE> 34
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (693,487) $(1,049,719)
Adjustments to reconcile net loss to cash
provided (used) by operating activities:
Depreciation and amortization 341,833 569,552
Services paid through reduction in amounts
receivable from affiliates - 25,000
Change in accounts receivable, trade 128,234 279,558
Change in inventories 8,148 36,297
Change in accounts payable and accrued expenses 176,569 84,406
----------- ----------
Cash (used) by operating activities (38,703) (54,906)
----------- ----------
Cash flows from investing activities:
Purchase of property and equipment (40,853) (51,603)
Decrease (increase) in deposits 5,023 (5,000)
Loans to affiliates (6,017) (3,600)
------------ ----------
Cash (used) by investing activities (41,847) (60,203)
------------ ----------
Cash flows from financing activities:
Loans received from (repaid to) affiliates - 10,745
Repayments of affiliated loans (14,901) (50,000)
Borrowings on new loans and capital leases 145,000 250,000
Repayments on loans and capital leases (69,256) (3,898)
Deferred loan costs paid - (61,000)
Proceeds from issuance of common stock - -
------------ ---------
Cash flows provided by financing activities 60,843 145,847
------------ ---------
Net increase (decrease) in cash (20,009) 30,738
Cash at beginning of year 42,327 11,589
------------ ---------
Cash at end of year $ 22,228 $ 42,327
============ =========
Supplemental information:
Income taxes paid $ - $ -
============ =========
Interest paid $ 41,144 $ 50,241
============ =========
</TABLE>
Non-cash activities:
- --------------------
During 1996, $25,000 in services were paid for through the reduction of $25,000
in affiliated loans receivable, and $20,000 in loan closing costs were paid for
through the issuance of 20,000 shares of preferred stock. During 1997, $100,000
in trade receivables were settled for receipt of inventory valued at $69,822 and
furniture valued at $22,000.
See accompanying notes to consolidated financial statements.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 34
<PAGE> 35
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
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 and Operations
SBI Communications, Inc. (the "Company"), was originally organized in
the State of Utah on September 23, 1983, under the corporate name of
Alpine Survival Products, Inc. Its name was subsequently changed to
Justin Land and Development, Inc. during October, 1984, and then to
Supermin, Inc. on November 20, 1985. On September 29, 1986, Satellite
Bingo, Inc. was the surviving corporate entity in a statutory merger
with Supermin, Inc., a Utah corporation. In connection with the above
merger, the former shareholders of Satellite Bingo, Inc. acquired
control of the merged entity and changed the corporate name to
Satellite Bingo, Inc. Through shareholder approval dated March 10,
1988, the name was changed to its current name of SBI Communications,
Inc. On January 1, 1993, the Company executed a plan of merger that
effectively changed the Company's state of domicile from Utah to
Delaware. Although the Company is currently a Delaware corporation, on
January 31, 1997, the stockholders and Board of Directors approved a
plan to change the Company's corporate domicile to the State of Nevada.
Management anticipates executing the plan during 1998.
The Company plans to lease or operate bingo halls and to provide
interactive satellite cable bingo game shows and other similar
telecommunication gaming products or services to television viewers
throughout the United States. During 1997, the Company's only
operations were the leasing of a bingo hall located in Piedmont,
Alabama, and the operation of the kitchen facilities therein. Under
local ordinances, the hall must be leased to a charity, which was the
local Jaycees. As described in Note 8, the Company is being forced to
sell its facility a cease bingo operations in Piedmont, Alabama. The
Company plans to continue to search for avenues to provide bingo over
the Internet, as well as to explore other revenue producing ventures.
Principles of consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, SBI Communications, Inc. (an
Alabama corporation). Intercompany transactions and balances have been
eliminated in consolidation.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 35
<PAGE> 36
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.
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.
Deferred loan costs
Deferred loan costs represent costs incurred to obtain existing debt,
and are being amortized over the life of the related loan using the
interest method.
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's "temporary differences" relate to
accrued compensation to shareholders which is a deduction in the year
paid, and differences in book versus tax depreciation methods. Deferred
tax assets also may be recorded for the future benefits of operating
loss carry forwards 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.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 36
<PAGE> 37
Rental and administrative fee income
The Company managed 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. The
lease in effect during 1997 required minimum rent of $25,000 per month,
with additional contingent rent of $50,000 per month depending upon the
success of the bingo games. Management records contingent rent revenue
and administrative fee income only as it is collected.
Statements of cash flows
For the purposes of the statements of cash flows, the Company considers
cash and highly liquid investments purchased with a remaining maturity
of three months or less at the date of purchase to be cash equivalents.
NOTE 2 - RELATED PARTY TRANSACTIONS
From time to time, the Company's principal shareholder advances money to the
Company for operations. All amounts owed to the shareholder are non-interest
bearing advances. As of December 31, 1995, the Company owed $4,156 to this
shareholder. During 1996, the Company borrowed (on a net basis) an additional
$10,745 from this shareholder. During 1997, the Company repaid all amounts
advanced, plus further advanced to the shareholder $9,617. The Company owed this
shareholder $14, 901 at December 31, 1996, and had $9,617 receivable from this
shareholder at December 31, 1997. In addition to advances, the Company accrued
salaries payable to the Company's principal shareholder totaling $110,000 and
$120,000 for the years ended December 31, 1997 and 1996, respectively. All
amounts owed to the shareholder are payable on demand.
In October, 1995, the Company borrowed $250,000 from a trust managed by a
shareholder, in the form of a mortgage note. The note was payable in full on
October 15, 1996, with interest payable quarterly at prime plus 3%, secured by
all corporate property up to $1,000,000 in value. $50,000 of this note was
repaid in 1996 when due, and an additional $50,000 was repaid during 1997. The
holder had the right to convert the mortgage note to common stock at a price of
$3 per share. This conversion privilege expired on July 15, 1996. The note has
been extended on a quarter to quarter basis, with $150,000 remaining outstanding
at December 31, 1997. Interest expense related to this note totaled
approximately $20,000 and $27,000 for the years ended December 31, 1997 and
1996, respectively.
In October, 1995, the Company advanced $25,000 to a shareholder to be repaid
upon demand with interest at prevailing market rates. This shareholder also
provides services to the Company relating to acquisition candidates and capital
sources. The above note was applied as payment for such services in 1996. An
additional $11, 700 was paid to this shareholder during 1996 for the services
described. In 1996, the Company loaned $3,600 to a relative of a shareholder.
This loan is non-interest bearing and is due upon demand.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 37
<PAGE> 38
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows at December 31:
<TABLE>
<CAPTION>
Estimated
Useful Life 1997 1996
----------- ---- ----
<S> <C> <C> <C>
Land (see Note 8) $ 250,000 $ 250,000
Building (see Note 8) 6,250,000 6,250,000
Vehicles 5 years 10,920 10,920
Furniture and equipment 5 to 7 years 1,109,182 1,024,296
---------- ----------
7,620,102 7,535,216
Less accumulated
depreciation 367,202 282,085
---------- ----------
$7,252,900 $7,253,131
========== ==========
</TABLE>
Depreciation expense totaled approximately $306,000 and $279,000 for the years
ended December 31, 1997 and 1996, respectively.
NOTE 4 - ORGANIZATION COSTS, TRADEMARKS, AND SIMILAR ASSETS
Organization costs, trademarks, shows, computer programs and game inventory
represent assets acquired or developed in prior years as the Company went
through its development stage, and are summarized as follows at December 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Trademarks:
Original cost $ 500,000 $ 500,000
Less accumulated amortization 500,000 500,000
---------- ----------
$ - $ -
========== ==========
Shows and computer programs:
Original cost $ 829,800 $ 829,800
Less accumulated amortization 829,800 829,800
---------- ----------
$ - $ -
========== ==========
Game inventory:
Original cost $ 75,400 $ 75,400
Less amounts used in operations 75,400 75,400
---------- -----------
$ - $ -
========== ===========
Organization costs:
Original cost $ 758 $ 758
Less accumulated amortization 758 758
---------- -----------
$ - $ -
========== ===========
</TABLE>
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 38
<PAGE> 39
Game inventory was expended as used. All other assets listed above were
amortized over sixty (60) months. Amortization expense on the above intangible
assets totaled approximately $266,000 for the year ended December 31, 1996.
NOTE 5 - MORTGAGE NOTE PAYABLE
On April 1, 1996, the Company borrowed $250,000 from a mortgage company. The
note is payable in thirty (30) equal monthly installments of $3,330 including
interest at fourteen percent (14%) per annum, with a final balloon payment of
any remaining unpaid principal due October 1, 1998, secured by a deed of trust
on the Company's real estate. The balance on this note was $239,701 at December
31, 1997. Due to events as described at Note 8, the entire balance of the note
has been classified as current. The note includes pre-payment penalties ranging
from 4% to 6% depending upon the timing of the prepayment.
In connection with the above note, the lending company was granted options to
purchase 250,000 shares of common stock for $0.50 per share. These options
expire upon repayment of the loan. In addition, the Company agreed to issue
5,000 shares of preferred stock to the lender to cover $20,000 in loan closing
costs. Upon issuance, the Company inadvertently issued 25,000 shares instead of
$25,000 in value of preferred stock to the lender. Such shares were outstanding
at December 31, 1996. In March, 1997, the lender returned the certificate for
the 25,000 shares to the Company, and a new certificate for 5,000 shares will be
issued. The Company has recorded all 25,000 shares as outstanding at December
31, 1996, and reduced paid-in capital for the value of the extra 20,000 shares.
The adjustment to paid-in capital has been reversed in 1997 with the issuing of
the new certificate.
NOTE 6 - COMMON AND PREFERRED STOCK ACTIVITY
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 to
date consists 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.
Over the history of the Company, there have been a number of non-cash
transactions involving the issuance of common stock of the Company (with related
as well as unrelated parties) recorded based on the estimated fair value of the
consideration received (the asset received or debt retired) regardless of the
number of common shares issued in such transactions in that it is the opinion of
management that the Company's common stock did not have a readily determinable
market value at the time of the transactions.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 39
<PAGE> 40
The Board of Directors have approved fourteen (14) classes of preferred stock in
total. No shares have been issued relating to any Series other than Series A as
described above. Series A through G of preferred stock have a liquidation
preference of $5.00 per share, pay no dividends, and are convertible to common
stock upon demand at the following conversion rates:
Series A Sufficient number of 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.
Series B 5 shares common for 1 share preferred
Series C 1 share common for 1 share preferred
Series D 2 shares common for 1 share preferred
Series E 3 shares common for 1 share preferred
Series F 4 shares common for 1 share preferred
Series G 10 shares common for 1 share preferred
Series H through N of preferred stock have a liquidation preference of $5.00 per
share, pay dividends at a rate not to exceed twelve percent (12%) annually, and
are convertible to common stock upon demand at the following conversion rates:
Series H Sufficient number of 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.
Series I 5 shares common for 1 share preferred
Series J 1 share common for 1 share preferred
Series K 2 shares common for 1 share preferred
Series L 3 shares common for 1 share preferred
Series M 4 shares common for 1 share preferred
Series N 10 shares common for 1 share preferred
The Company's income (loss) per share was calculated using 5,345,439 weighted
average shares outstanding for each of the years ended December 31, 1997 and
1996, respectively. Although convertible preferred stock is a common stock
equivalent, with a conversion rate of approximately 10 shares of common stock
(based upon an approximate market price for common stock of $0.50) for each
share of preferred stock, preferred stock conversion has not been included in
the calculation of earnings per share in that to do so would be antidilutive.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 40
<PAGE> 41
NOTE 7 - INCOME TAXES
Deferred income tax assets and liabilities are summarized as follows at December
31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets
attributable to operating
loss carry forwards $ 1,500,000 $ 1,380,000
Valuation allowance due to
uncertainty surrounding
realization of operating
loss carry forwards (1,500,000) (1,380,000)
Deferred tax liabilities - -
----------- -----------
Total deferred taxes $ - $ -
=========== ===========
</TABLE>
The Company has available at December 31, 1997, unused operating loss carry
forwards, which may be applied against future taxable income, that expire as
follows:
Amount of Unused Operating Expiration During
Loss Carry forwards Year Ended December 31,
-------------------------- -----------------------
$ 200,000 2001
550,000 2002
1,200,000 2003
300,000 2004
490,000 2007
340,000 2008
320,000 2009
650,000 2010
1,050,000 2011
700,000 2012
----------
$5,800,000
==========
NOTE 8 - COMMITMENTS, RISKS AND CONTINGENCIES
The Company leased to various charities a bingo hall in Piedmont, Alabama. There
has been no revenues so for in 1998 due to the hall been renovated. However, the
Company has a lease commitment from Regency Communications, Inc. of Dallas,
Texas and Christian Life Ministries, Inc. This leases will be in place by
Mid-1998.
The Company is in the process of developing bingo productions to be broadcast by
satellite and via the Internet into homes of viewers throughout the United
States. Should local, state, or federal laws change regarding bingo, such
changes could have a material impact on the ability of the Company to generate
future revenues.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 41
<PAGE> 42
The Company has a history of issuing common stock for services difficult to
value or yet to be provided. Approximately 3,000,000 (or 57%) of the common
stock outstanding at December 31, 1997, 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 $130,000 in minimum annual salary, cash bonuses of the lesser of
10% of revenues or 5% of pre-tax profits, and stock bonuses equivalent to 10% of
pre-tax profits before depreciation. To date, Mr. Foster has accepted no more
than $120,000 per year as adequate compensation under the contract. There is no
guarantee that Mr. Foster will continue to accept an amount less than that
stipulated in the agreement.
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.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 42
<PAGE> 43
SUMMARY FINANCIAL DATA
Set forth below is selected financial information of the Company and its
consolidated subsidiaries as derived from the audited statements of income
(loss) for the last two calendar years, from the balance sheets for the periods
then ended. The selected financial information should be read in conjunction
with the financial statements (including the notes thereto) filed with this
Registration Statement and are qualified by reference to such financial
statements.
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
Statement of Operations Data
Gross Revenues 544,662 421,128
Income from Operations(Loss) (693,879) (1,049,719)
Net Income (Loss) per share * (.13) (.20)
Balance Sheet Data
Assets
Current Assets 118,160
190,624
Property & equipment, less
accumulated depreciation 6,782,223 7,026,112
Other Assets 84,174 224,288
---------- -----------
Total Assets 6,984,557 7,441,024
Liabilities
Current Liabilities 847,634
484,647
Long Term Liabilities Nil 240,229
Total Liabilities 962,288
724,876
Total Stockholders' Equity 6,022,269 6,716,148
---------- -----------
Total Liabilities and Equity $6.984,557 $ 7,441,024
========== ===========
</TABLE>
- ---------
* See above. Per share data is computed based on the weighted average of
common stock outstanding as of the report date.
ITEM 8. CHARGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and ages of the members of the
Company's board of directors and its executive officers, the positions with the
Company held by each, and the period during which each such person has held such
position.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 43
<PAGE> 44
Name Age Position Since
- ---- --- -------- -----
Ronald Foster 56 President/Chairman of the Board 1986
William Beggs 54 Director 1998
Karien Anderson 47 Secretary/Treasurer/Director 1997
Claude Pichard 43 Director 1986
Mel Ray 58 Director 1997
----------
Messrs. Fosters, Mr. William Beggs, Mr. Prichard and Ms. Anderson are all
engaged with the Company's business on a full time basis.
All directors hold office until the next annual meeting of stockholders of the
Company (currently expected to be held during April 1999) and until their
successors are elected and qualified. Officers hold office until the first
meeting of directors following the annual meeting of stockholders and until
their successors are elected and qualified, subject to earlier removal by the
board of directors. There are currently no committees of the board of directors.
BIOGRAPHIES OF THE COMPANY'S EXECUTIVE OFFICERS AND DIRECTORS
RONALD FOSTER
Mr. Foster, 56, is presently Chairman, President, Chief Executive Officer, and
Executive Producer for SBI Communications, Inc. He has been working with the
Company since its inception in 1984. His primary responsibilities include
finance, marketing and technical review. In addition to his responsibilities
with the Company, Mr. Foster has held a number of other management positions
over the years. From 1984 to 1986, he was executive vice president and producer
of Pioneer Games of American Satellite Bingo, in Albany, Georgia. Mr. Foster was
also owner and operator of Artist Management & Promotions where he was
responsible for coordinating television entertainers, sports figures and other
celebrities for department store promotions. Since 1987, Mr. Foster has served
as president and director of Ed-Phills, Inc., a Nevada corporation and is now an
executive vice president and member of the board of directors of Golden American
Network, a California corporation. Since 1984, he has also been the president
and chief executive officer of ROPA Communications, Inc., which owns and
operates WTAU-TV-19 in Albany, Georgia. He created and produced "Stock Outlook
87, 88, and 89," a video presentation of public companies through Financial News
Network (FNN), a national cable network. Mr. Foster also has experience as
technical director and associate producer for numerous national live sports
broadcasts produced by ABC, CBS and WTBS. Mr. Foster is Driector/Producer/Writer
of the Company Interactive Broadcast Programs.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 44
<PAGE> 45
KARIEN ANDERSON
Ms. Anderson is 47 years old and resides in Piedmont, Alabama. Ms. Anderson has
extensive experience in executive secretarial business, including government and
private sectors. She has extensive background in the field of advertising,
marketing, special event promotions, contract management, personnel management
and real estate. Ms. Anderson currently holds a real estate licence. Ms.
Anderson has been involve as coordinator for non-profit association for the last
eighteen years. She is currently employed as Secretary and property manager for
SBI Communications, Inc.
CLAUDE PICHARD
Mr. Pichard, 44, has been a Vice President and a director for the Company since
1986. His primary responsibilities include directing and developing the
interactive Bingo and auction programs. Mr. Pichard has over twenty years of
television experience as a producer, director and scriptwriter. He served as
creative services director at WCTV in Tallahassee, Florida, where he headed an
award-winning team of directors, writers and artists for the number one station
in its market. He has also worked with numerous Hollywood-based game shows and
was the director for the Bolivian National Lottery game. In addition to his
responsibilities with the Company, Mr. Pichard also serves as a research and
training specialist with the Florida Department of Law 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 58 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.
WILLIAM BEGGS
Mr. Beggs is 54 years old and resides in Fort Lauderdale, Florida. Mr. Beggs has
been a member, in good standing, of The Florida Bar since 1973. Mr. Beggs
practices real estate and corporate law in the Fort Lauderdale area.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 45
<PAGE> 46
ITEM 10 EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth all compensation paid to the
Officers and Directors of the Company during the Company's year ended December
31, 1996 and 1997. Prior to June of 1992, the date on which a change in control
of the Company was effected and current management took over their respective
positions, previous management conducted no business, the Company's was inactive
and no compensation was paid or deferred to and of the Company's officers or
directors.
1996 Summary Compensation Table
<TABLE>
<CAPTION>
Name Annual Compensation Awards Long Term Compensation Awards
and All
Principal Restricted Restricted LTIP Pay- Other
Position Salary Bonus Other Stock Options outs Compensation
- --------- ------ ----- ----- ----- ------- ---- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald Foster ** 5 * * * * * *
Claude Pichard + * * * * * * *
Mel Ray (2) * * * * * * *
Thomas Barrett(4) 7 * * * * * *
</TABLE>
1997 Summary Compensation Table
<TABLE>
<CAPTION>
Name Annual Compensation Awards Long Term Compensation Awards
and All
Principal Restricted Restricted LTIP Pay- Other
Position Salary Bonus Other Stock Options outs Compensation
- --------- ------ ----- ----- ----- ------- ---- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald Foster ** (5) * * * * * *
Claude Pichard + * * * * * * *
Mel Ray (2) * * * * * * *
Karien Anderson(1) (6) * * * * * *
Thomas Barrett (4) (8) * * * * * *
</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) $130,000.
(6) $ 30,000.
(7) $ 1,500.
(8) $ 30,000.
(9) No person listed has any options to acquire securities of the kind required
to be disclosed pursuant to instruction 1 of Item 403 of Regulation SB.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 46
<PAGE> 47
EMPLOYMENT AGREEMENTS
The Company is a party to an employment agreement with Ronald Foster, a copy of
which is filed as an exhibit to this registration statement. The following
summary thereof is qualified in its entirety by reference to such exhibit.
On January 1, 1992, Mr. Foster entered into a ten year employment agreement with
the Company, renewable thereafter for continuing one year terms unless one of
the parties provides the other with written intention not to renew, on or before
the 180th day prior to expiration of the then current term. Although the
agreement can be terminated by the Company for cause, or the Company's
stockholders can refuse to comply with its terms by not re-electing Mr. Foster
as a director, such events accelerate Mr. Foster's rights to compensation under
the Agreement.
The Agreement provides the Company with an obligation to defend and indemnify
Mr. Foster to the fullest extent legally permitted, and calls for the following
compensation:
(a) Mr. Foster is entitled to an annual bonus payable in shares of the
Company's common stock, determined by dividing 10% of the Company's
pre-tax profits (excluding depreciation) for the subject calendar year by
the average bid price for the Company's common stock during the last five
trading days prior to the end of the last day of each year and the first
five days of the new year, provided, however, that the agreement shall
have been in effect for at least one business day during the subject
year.
(b) Mr. Foster is entitled to an annual cash bonus in a sum equal to 5% of
the Company's gross annual income or 10% of the Company's net pre-tax
profit (excluding depreciation), whichever is less.
(c) Mr. Foster is entitled to a salary starting at $2,500.00 per Week, but
subject to review on a quarterly basis, with the expectation that it will
be substantially increased as increased profits and cash flow from
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 Company or
its subsidiaries to any of their employees, officers, directors,
consultants or agents.
All required payments are accruing until such time as the Company has adequate
funds to meet its operating expenses and commitments.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS & MANAGEMENT
The following table sets forth, as of the date of this Registration Statement,
the number and percentage of shares of common stock owned of record and
beneficially by any group (as that term is defined for purposes of Section
13(d)(3) of the Exchange Act), person or firm that owns more than
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 47
<PAGE> 48
five percent (5%) of the Company's outstanding common stock (the Company'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%
103 Firetower Road 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.
(b) Security Ownership of Management
The following table sets forth, as of the date of this Registration
Statement, the number and percentage of the equity securities of the Company,
its parent or subsidiaries, ,owned of record or beneficially by each officer,
director and person nominated to hold such office and by all officers and
directors as a group.
<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 Karien Anderson 0 *** 00.00%
Common Claude Pichard 10,000 ** 00.07%
Common Betty Rodgers 5,000 *** 00.035%
Common Williams Beggs 0 *** 00.00%
Common All officers and directors
as a group (5 people) 1,647,089 ** 33.05%
</TABLE>
- ------
* Includes all stock held either personally or by affiliates.
** Record & Beneficial.
*** Not Applicable.
To the best knowledge and belief of the Company, there are no arrangements,
understandings, or agreements relative to the disposition of the Company's
securities, the operation of which would at a subsequent date result in a change
in control of the Company.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 48
<PAGE> 49
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no family relationships among directors, executive officers or persons
chosen by the Company to be nominated as a director or appointed as an executive
officer of the Company of any of its affiliated subsidiaries.
PART IV
<TABLE>
<CAPTION>
ITEM 13. INDEX TO EXHIBITS
DESCRIPTION OF EXHIBITS
PAGE OR
EXHIBIT SOURCE OF
NUMBER INCORPORATION DESCRIPTION
- ------- ------------- -----------
<S> <C> <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 Company and Ronald Foster.
.3 Joint Venture Agreements:
-------------------------
*** .1 Joint Venture Agreement with VPACS Limited (a New York corporation)
*** .2 Cahill Agreement
*** .3 La Yate Company Limited (Hong Kong)
*** .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:
--------------------------------
</TABLE>
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 49
<PAGE> 50
<TABLE>
<CAPTION>
<S> <C> <C> <C>
*** .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
.10 Letters of Intent:
-----------------
*** .1 Glendale Studios, Inc.
*** .2 Cherokee Indians of Georgia, Inc.
*** .3 Promotions International Corporation.
.11 Licensing Agreements:
---------------------
*** .1 Fertina-C, LTD, March 25, 1992 (Greece)
*** .2 Satellite Bingo, Inc. and Luis Manuel Da Costa Matias, January 18,
1991(Brazil)
*** .3 I.O. Report, C.A., March 23, 1993, (Venezuela)
.12 LACOA Agreements:
-----------------
*** .1 Lobbyist Engagement Agreement
*** .2 Management Agreement
11. * Statement re computation of per share earnings.
21. ** Subsidiaries of the Company.
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.
</TABLE>
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 50
<PAGE> 51
<TABLE>
<CAPTION>
<S> <C> <C> <C>
*** .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 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.
*** .8 Ordinance Number 429 (Bingo) dated June 13, 1994,
City Clerk of Piedmont, Alabama.
*** .9 Alabama Constitution, Amendment Number 508, Bingo
Games in Calhoun County.
*** .10 Limited Appraisal of Frontier Palace, dated May 1,
1995, prepared by Phillip C. Ledbetter.
</TABLE>
---------
o Incorporated by reference from the disclosure thereof in
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 the original filing and/or first amendmentfo the 10-SB.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 51
<PAGE> 52
Additional Information
Headquarters
SBI Communications, Inc.
P.O. Box 729 - 103 Firetower Road - Leesburg, Georgia 31763.
Subsidiaries
SBI Communications, Inc., an Alabama Corporation
376 Hwy 278 Bypass - P.O. 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
103 Firetower Road - P. O. Box 729, Leesburg, Georgia 31763
Officers & Directors
Ronald Foster: President, Chairman of the Board, Chief Executive Officer
Karien Anderson: Secretary/Treasurer/Director
Claude Pichard: Vice President/Director
Mel Ray: Director
Williams Beggs: Director
Auditors
John Ratliff
Daniels and Ratliff Professional Group, Inc.
301 South McDowell Street; Suite 1014; Charlotte, North Carolina 28204
Transfer Agent
Corporate Stock Transfer
370 17th Street; Suite 2550; Denver, Colorado 80202
Exhibits to this Form 10-KSB will be provided, subject to payment of actual copy
costs, to shareholders of the Company upon written request addressed to Lisa
Evans acting, Secretary, SBI Communications, Inc., at the Company's headquarters
listed above.
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 52
<PAGE> 53
Signatures
PURSUANT TO THE REQUIREMENTS OF SECTION 12 OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED, THE COMPANY HAS DULY CAUSED THIS FIRST AMENDED
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, HEREUNTO
DULY AUTHORIZED.
SBI COMMUNICATIONS, INC.
DATED: APRIL 30, 1998
/s/ Ronald Foster
Ronald Foster
Chairman, President & Chief Executive
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf or the
Company and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Ronald Foster Chairman, President & Chief Financial Officer April 30, 1998
- ----------------------------
Ronald Foster
/s/ Karien Anderson Director, Secretary, Treasurer April 30, 1998
- ----------------------------
Karien Anderson
/s/ Claude Pichard Director, Vice President April 30, 1998
- ----------------------------
Claude Pichard
/s/ Mel Ray Director April 30, 1998
- ----------------------------
Mel Ray
/s/William Beggs Director April 30, 1998
- ----------------------------
William Beggs
</TABLE>
Form 10-KSB for the Calendar Year Ended December 31, 1997, Page 53
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF SBI COMMUNICATIONS, INC. FOR THE YEAR ENDED
DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 22,228
<SECURITIES> 0
<RECEIVABLES> 10,867
<ALLOWANCES> 0
<INVENTORY> 86,065
<CURRENT-ASSETS> 118,160
<PP&E> 6,984,557
<DEPRECIATION> (367,202)
<TOTAL-ASSETS> 6,617,335
<CURRENT-LIABILITIES> 962,288
<BONDS> 0
0
8,365,000
<COMMON> 5,345
<OTHER-SE> 6,377,399
<TOTAL-LIABILITY-AND-EQUITY> 6,984,557
<SALES> 411,033
<TOTAL-REVENUES> 544,662
<CGS> 180,563
<TOTAL-COSTS> 797,234
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 82,637
<INCOME-PRETAX> (693,879)
<INCOME-TAX> 0
<INCOME-CONTINUING> (693,879)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (693,879)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> 0
</TABLE>
