<PAGE>
Securities and Exchange Commission
Washington, D.C., 20549
FORM 10-KSB
Annual Report Pursuant To Sections 13 Or 15 (D) Of The Securities Exchange
Act Of 1934
For the Fiscal Year Ended December 31, 1998
Filed Pursuant To Sections 13 Or 15(D) Of The Securities Exchange Act of
1934
Securities and Exchange Commission File Number O-28416
===============================================================================
SBI Communications, Inc.
(Name of small business issuer specified in its charter)
===============================================================================
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 58-1700840
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
1239 South Glendale Avenue - Glendale, California 91205
(Address of Principal Executive Offices) ( Zip Code)
(818) 550-6181
(Issuer's telephone number)
</TABLE>
===============================================================================
Securities registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, Par value $0.001 - Preferred Stock, Par Value $5.00
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirement for the past 90 days.
YES X NO __
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definite proxy or
information statements incorporation by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. YES X NO __
Registrant's revenues for its most current fiscal year: $ 0.00
----------
Aggregate market value of the voting stock held by
non-affiliates as of March 30, 1999: $1,336,360.00
------------
Number of common shares outstanding as of latest
practical date at $.001 par value: 5,570,439
---------
Documents Incorporated By Reference: None
Location of Exhibit Index: The index of exhibits is contained in
part IV herein on page number 49.
Transitional Small Business Disclosure Format: Yes ____ No _X__
==============================================================================
Dated March 30, 1999
______________________________________________________________________________
<PAGE>
Table of Contents
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Item Page
Number Number Item Caption
----- ------ ------------
Part I
------
Item 1. 3 Description of Business
Item 2. 15 Description of Properties
Item 3. 16 Legal Proceedings.
Item 4. 16 Submission of Matters to a Vote of Security Holders
Part II
-------
Item 5. 16 Market Price of and Dividends on the Registrant's
Common Equity and other Shareholder Matters
Item 6. 22 Management's Discussion and Analysis or Plan of
Operation Executive Compensation
Item 7. 25 Financial Statements and Summary Financial Data
Item 8 33 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
Part III
--------
Item 9 34 Directors, Executive Officers, Promoters and Control Persons
Item 10. 42 Executive Compensation
Item 11. 44 Security Ownership of Certain Beneficial Owners and
Management
Item 12. 45 Certain Relationships and Related Transactions
Part IV
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Item 13. 45 Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
Signatures 49
----------
<PAGE>
Part I
------
Item I. Description of Business
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General
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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 the U. S. commercial bingo industry will remain
attractive due to: i) increased customer recognition and participation;
<PAGE>
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 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
<PAGE>
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.
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. The company dose not lease this facility for bingo and the
facility for sell.
The company is also considering renovation to turn the Piedmont facility
into a retail Mall. This is needed in Piedmont and would be well received
by the City and local community.
Florida
-------
The Company will be opening a new facility in Fort Lauderdale, Florida.
This facility will open in the third quarter of 1999.
California
----------
The Company website is located in Glendale, California at the company
production facility.
The Company has a bingo program operating over the PandaAmerica Shopping
Network.
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
<PAGE>
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
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.
<PAGE>
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.
The use of telephones for game card distribution makes it possible for
home viewers to also participate in the Company's broadcast programs.
The Globalot Bingo program was designed to provide larger jackpots than
participating operations could individually pay, permitting participating
cable and broadcast stations to attract larger viewing audiences,
increase profits and attract commercial sponsors. The company's plans to
enter into a license agreement with a major Spanish Network to broadcast
its interactive programming.
Operation
---------
In order to play the game each player must be playing a different card
or cards. Globalot Bingo has developed a "Super Jackpot Bingo" computer
program that can generate a series of one billion individual cards
without duplication. Each card is unique and all cards are serially
numbered to preclude anyone from submitting a fraudulent cards and/or
counterfeiting.
Globalot Bingo cards may be obtained by telephone until a specified time.
At that point the Company provides the serial number of cards obtained
for that night's game to its central processing office.
In order to encourage participation and to develop a broad playing
audience, Globalot Bingo developed a special Million Dollar Globalot
game, designed to air each Saturday evening at 11:00 p.m. (eastern
time). When broadcasts resume, the game will pay the first person who
attains Bingo each broadcast night an advertised cash prize. The prizes
will involve a chance to win $1,000,000 by being the first participant
to cover the correct 8 numbers in 16 calls (the term call referring to
the first 16 numbers selected in the game) or less (the "Quick Pick 8"
game) or, guaranteed second prizes of $25,000. If there is no winner in
the $1,000,000 game, the Company will pay the first person to cover the
shaded area or complete the Quick Pick 8 game $5,000. In 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.
<PAGE>
As additional players participate, the Company plans to increase the
grand prize to $50,000.
When the televised game begins, each number being called on the
televised show is also recorded by the master computer. The computer
system, by monitoring all of the cards in play, is able to determine
when a Bingo has occurred and provide the location of the winning card
holder. The viewing audience is immediately shown the image of the
winning card.
All games are called at the rate of approximately one Bingo number every
12-15 seconds in order to allow players to play multiple cards. If it
is determined that, based on the cards in play, the call is too fast or
too slow, an adjustment is made.
The national winner will be called during the broadcast by the program's
host, or, may call the Globalot Bingo 800 number shown on the program.
Upon contact, the winner will provide the Company's staff with his or her
serial number and other necessary identification, including name and
address. The winner is then instructed on how to claim the prize.
If for reasons beyond the control of Globalot Bingo the regular telecast
and game cannot be broadcast, all prize moneys announced for that week
will be added to the jackpot for the next succeeding game. All elements
of the broadcast game are being conducted on the Company 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 permit
ting).
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
<PAGE>
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 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 administra
tive costs.
Internet
--------
The Company websites are located at http://www.sbicommunications.com,
http://www.globalot.com http://www.sbid.net, http://www.sbicom.com and
http://www.abingo.com. Shopping, travel, bingo games and other items will
be available for the consumer first quarter-1999. A club membership will
be required, and membership fee will be $19.95 per month. To gain access
<PAGE>
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.
IMPACT OF THE YEAR 2000
The year 2000 risk is the result of computers being written using two
digits rather than four digits to define the applicable year. Computer
programs that have sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. As a result, computer systems
and/or software used by many companies and government agencies may need
to be upgraded to comply with year 2000 requirements or risk systems or
miscalculations causing disruptions of normal business activities.
STATE OF READINESS
Based on as internal assessment, SBI believes that its software programs,
both those development internally and purchased from material outside
vendors, are year 2000 compliant or will be by December 31st 1999.
SBI began assessing its state of year 2000 readiness during September
1998. This included reviewing the year 2000 compliance of the following:
SBI internally developed proprietary software incorporated
in the SBI broadcast bingo and Internet programs;
Third-party software vendors;
SBI will continue to require its vendors of material hardware and
software to provide assurances of their year 2000 compliance.
COSTS
To date, SBI has incurred approximately $30,000.00 of costs in identify
ing and evaluating year 2000 compliance issues. Most of SBI expenses have
related to. And expected to continue ro relate to the operating costs
associated with time spent by employees in the evaluation year 2000
compliance matters. At this time, SBI does not possess the information
necessary to estimate the potential costs of future revision to software
relating to the SBI programs should revision by required of the
replacement of third-party software, hardware of services, if any, that
are determined to not be year 2000 compliant. Although SBI believes that
its software programs, both development internally and purchased from
outside vendors are either already year 2000 compliant or will be by
December 31st, 1999,. Failure to identify non year 2000 compliant software
could have a material and adverse effect on SBI's business, results of
operations and financial condition.
RISKS
SBI is not currently aware of any significant year 2000 compliance
problems relating to the broadcast or Internet or other software systems
that would have a material and adverse effect on business, results of
operations and financial condition.
<PAGE>
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 entertain
ment 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 "Informa
tion Superhighway" continues to shape the way people communicate with one
another, receive information and facilitate transactions, a number of
events are beginning to occur.
<PAGE>
Numerous books and recent articles indicate that people are becoming more
comfortable with services and entertainment offered in the privacy of
their own home through their telephones or personal computers. The data
highway also known as the National Information Infrastructure (NII), is
helping facilitate this trend by linking homes, offices and entertainment
sources into one big network.
The data highway and its ability to reach millions of consumers is
providing unprecedented opportunities for manufacturers and marketers of
products and services. These companies are being challenged to find ways
to use advanced technology, like interactive technology, to make it easy
for consumers to find out about and purchase their products and services.
Popular examples of interactive technology in the consumer market include
on-line computer services (like
AOL, AT&T, Prodigy and CompuServe), voice automated telephone services
(like consumer banking and financial services), and at-home television
shopping services (like the Home Shopping Network). The success of these
have convinced management that interactive television programming like
that being offered will be well received by a public that continues to
accept more and more interactive technology into their daily lives.
The Bingo 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 approxi
mately 60 millions people who visit a bingo facility each month and spend
an average of $22.00 per visit. Bingo is expected to maintain or possibly
increase its market share of total gaming industry receipts consistent
with an aging U.S. population, which has more disposable income and time
and enjoys playing bingo more than other age groups.
Management believes that the past success of the Company's interactive
bingo programs are evidence that the game is as popular as ever among
people around the world. Recent statistics generated by the United
States government seem to strongly support this belief. According to a
recent survey of American Gambling Attitudes and Behavior conducted by
the United States Commission on the Review of a National Policy Toward
Gambling, bingo is the fourth leading "entertainment sport" in the United
States, generating some 60,000,000 spectators and/or participants each
month. This figure represents 7,300,000 more participants/spectators
than Major League Baseball attracts and almost 40,000,000 more partici
pants/spectators than NFL Football and NBA Basketball attracts.
<PAGE>
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.
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
---------
<PAGE>
None of the Company's proposed activities are reliant on raw materials.
Rather, they depend on the ability to exploit emerging technologies that
are expected to be readily available.
3. Dependence on One or a Few Major Customers
---------------------------------------------
The Company's previous operations were highly reliant on local
charities. Its former broadcast operations and contemplated future
Internet Web Site operations are not expected to be reliant on any single
or small group of customers.
Employees
---------
As of December 31, 1998, the Company had 6 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
376 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 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 relation
ships. 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.
<PAGE>
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 until terminated January 1, 1998.
The rental for the building and equipment located therein is $75,000 per
month or $7,000 per day, whichever is greater, plus all other defined
expenses, excluding insurance, ad valorem taxes, assessments, repairs,
upkeep, maintenance and similar expenses. However, the Piedmont Jaycees
were not able to pay $75,000.00 per month and the rent was reduce to a
minium payment of $25,000.00 through the startup period. 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 approxi
mately 3,000 square feet for which the Company pays $1,000 per 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:
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.
<PAGE>
Rico Bingo: International Class 41 (production and
distribution of television game shows)
applied for on September 24, 1993, by SBI
Communications, Inc.
C-Note: International Class 41 (production and distribution of
television game shows) applied for on September 24,
1993, by SBI Communications, Inc.
The Company obtained an assignment to a copyrights for "the Works,"
copyright registrations for Globalot Bingo and derivatives: Number PAU
855-931 (June 10, 1986); Number Pau 847-876 (March 11, 1986); Number
PAU 788-031 (September 19, 1985); Number PAU 927-410 (November 4, 1986);
Number PA 370-721 (February 9, 1988); Number PA 516-494 (January 17,
1991); Number PA 533-697 (January 17, 1991); from Satellite Bingo,
Inc., to SBI Communications, Inc., dated September 14, 1993.
Item 3 - Legal Proceedings
--------------------------
Involvement in Certain Legal Proceedings
On April the 28th 1995 the State of Alabama place a tax lien on the
previous owner, Cranberry-Magnetite for admission taxes, in the amount
of $750,000.00. The company received a warranty deed from Cranberry
Magnetite. After a legal action by Cranberry Magnetite failed in 1998
the company paid this tax liability on behalf of Cranberry Magnetite. The
company will take legal action to recover these funds.
In April of 1995 two of the employees of the company's subsidiaries (SBI
Communications, Inc. of Alabama) was named as a defendant in a legal
action in Alabama. This action alleges that the defendant's
bingo game which was operate by the charity; 1) comprise a illegal
lottery, which violates the state constitution; 2) further comprise that
the equipment (a computer) was an illegal gaming device. After appeals
to Superior and State Supreme court failed, the defendant was incarcer
ated and later place on 24 months probation which will end November 14th
1999. This was a misdemeanor and a first offence. The court gave the
maximum, due the fact the court did not look at the legalities, but
the way the previous owner conducted their business.
The Company believes that this action was completely without merit and
did defend vigorously.
Item 4 - Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
There were no matters submitted to a vote of security holders during the
fourth quarter of fiscal 1998. The Company's annual shareholder meeting
with voting on proxy issues is on April 28, 2000.
<PAGE>
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 5,570,439 shares of stock outstanding,
with 1,450,000 in the public float. There are approximately 3,240
shareholders of record. For the fiscal year ended December 31st, 1998
the Company reported revenues of $0.00 and a net loss of $3,836,348.
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 128,000 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 after paying
the State of Alabama $750,000.00 in tax liens that were in place
against the previous owner pertaining to the property in Piedmont,
AL.
No common stock is currently being offered or proposed to be
offered which offering could be reasonably expected to have a
materially adverse effect on the market price of the Company's
common equity; and There are approximately 5,570,439 shares of
common stock which will become eligible for sale by December 31,
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.
<PAGE>
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.
<TABLE>
<CAPTION>
Common Stock
------------
<S> <C> <C>
Date Low High
Fiscal 1997 $ 0.25 $0.375
-----------
Fiscal 1998
-----------
First Quarter $0.25 $0.50
Second Quarter $0.1875 $0.375
Third Quarter $0.125 $0.25
Fourth Quarter $0.1875 $0.375
</TABLE>
______
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.
<PAGE>
Penny stocks are low-priced, over-the-counter securities that are prone
to manipulation because of their price and a lack of reliable market
information regarding them. Under Section 3(a)(51)(A) of the Exchange
Act, any equity security is considered to be a "penny stock," unless that
security is: i) registered and traded on a national securities exchange
meeting specified Securities and Exchange Commission criteria; ii)
authorized for quotation on the National Association of Securities
Dealers, Inc.'s (NASD") automated inter-dealer quotation system
("NASDAQ"); iii) issued by a registered investment company; iv) excluded,
on the basis of price or the issuer's net tangible assets, from the
definition of the term by Securities and exchange Commission rule; or v)
excluded from the definition by the Securities and Exchange Commission.
Pursuant to Section 3(a)(51)(B), securities that normally would be
considered penny stocks because they are registered on an exchange or
authorized for quotation on NASDAQ may be designated as penny stocks by
the Securities and Exchange Commission if the securities are traded off
the exchange or if transactions in the securities are effected by market
makers that are not entering quotations in NASDAQ.
Rule 3a51-1 was adopted by the Securities and Exchange Commission for the
purpose of implementing the provisions of Section 3(a)(51). Like Section
3(a)(51), it defines penny stocks by what they are not. Thus, the rule
excludes from the definition of penny stock any equity security that is:
(1) a "reported" security; (2) issued by an investment company registered
under the 1940 Act; (3) a put or call option issued by the Options
Clearing Corporation; (4) priced at five dollars or more; (5) subject to
last sale reporting; or (6) whose issuer has assets above a specified
amount. (Release No. 30608, Part III.A).
Rule 3a51-1(a) excludes from the definition of penny stock any equity
security that is a "reported security" as defined in Rule 11Aa3-1(a).
A reported security is any exchange-listed or NASDAQ security for which
transaction reports are required to be made on a real-time basis pursuant
to an effective transaction reporting plan. Securities listed on the New
York Stock Exchange (the "NYSE"), certain regional exchange-listed
securities that meet NYSE or Amex criteria, and NASDAQ National Market
System ("NMS") securities are not considered penny stocks. (Release No.
30608, Part III.A.1). Generally, securities listed on the American Stock
Exchange (the "Amex") pursuant to the Amex's original and junior tier or
its "Emerging Company Marketplace" listing criteria, are not considered
penny stocks. Securities listed on the Amex pursuant to its Emerging
Companies Market ("ECM") criteria, however, are considered to be "penny
stock" solely for purposes of Exchange Act 15(b)(6). (Release No. 30608,
Part III.A.1).
Rule 3a51-1(d) excludes securities that are priced at five dollars or
more. Price, in most cases, will be the price at which a security is
purchased or sold in a particular transaction, excluding any broker
commission, commission equivalent, mark-up, or mark-down. In the absence
of a particular transaction, the five dollar price may be based on the
inside bid quotation for the security as displayed on a Qualifying
Electronic Quotation System (i.e., an automated inter-dealer quotation
system as set forth in Exchange Act Section 17B(b)(2)). "Inside bid
quotation" is the highest bid quotation for the security displayed by a
market maker in the security on such a system. If there is no inside bid
quotation, the average of at least three inter-dealer bid quotations
displayed by three or more market makers in the security must meet the
<PAGE>
five dollar requirement. Broker-dealers may not rely on quotations if
they know that the quotations have been entered for the purpose of
circumventing the rule. (Release No. 30608, Part III.A.3.b). An inter-
dealer quotation system is defined in Rule 15c2-7(c)(1) as any system of
general circulation to brokers and dealers that regularly disseminates
quotations of identified brokers or dealers. In the case of a unit
composed of one or more securities, the price divided by the number of
shares of the unit that are not warrants, options, or rights must be five
dollars or more. Furthermore, the exercise price of any warrant, option,
or right, or of the conversion price of any convertible security,
included in the unit must meet the five dollar requirement. For example:
a unit composed of five shares of common stock and five warrants would
satisfy the requirements of the rule only if the unit price was twenty-
five dollars or more, and the warrant exercise price was five dollars or
more. Once the components of the unit begin trading separately on the
secondary market, they must each be separately priced at five dollars or
more. (Release No. 30608, footnote 66).
Securities that are registered, or approved for registration upon notice
of issuance, on a national securities exchange are also excluded from the
definition of penny stock (Rule 3a51-1(e)). The exchange must make
transaction reports available pursuant to Rule 11Aa3-1 for the exclusion
to work. The exclusion is further conditioned on the current price and
volume information with respect to transactions in that security being
reported on a current and continuing basis and made available to vendors
of market information. In addition, the exclusion is limited to
exchange-listed securities that actually are purchased or sold through
the facilities of the exchange, or as part of a distribution. Exchange-
listed securities satisfying Rule 3a51-1(e), but which are not otherwise
excluded under Rule 3a51-1(a)-(d), continue to be deemed penny stocks for
purposes of Exchange Action Section 15(b)(6).
Exchanges that qualified for this exclusion as of April, 1992 were the
NYSE, Amex, Boston Stock Exchange, Cincinnati Stock Exchange, Midwest
Stock Exchange, Pacific Stock exchange, Philadelphia Stock Exchange, and
the Chicago Board of Options. (Release No. 30608, footnote 37).
Securities that are registered, or approved for registration upon notice
of issuance, on NASDAQ are excluded from the definition of penny stock
(Rule 3a51-1(f)). Similar to the exchange-registered exclusion of Rule
3a51-1(e), the NASDAQ exclusion is conditioned on the current price and
volume information with respect to transactions in that security being
reported on a current and continuing basis and made available to vendors
of market information pursuant to the rules of NASD. NASDAQ securities
satisfying Rule 3a51-1(e), but which are not otherwise excluded under
Rule 3a51-1(a)-(d), continue to be deemed penny stocks for purposes of
Exchange Act Section 15(b)(6).
An exclusion is available for the securities of issuers that meet certain
financial standards. This exclusion pertains to: (1) issuers that have
been in continuous operation for at least three years having net tangible
assets in excess of $2 million (Rule 3a51-1(g)(1); ii) issuers that have
been in continuous operation for less than three years having net
tangible assets in excess of $5 million (Rule3a51-1(g)(1); iii) issuers
that have an average revenue of at least $6 million for the last three
years (Rule 3a51-1(g)(2)). To satisfy this requirement, an issuer must
<PAGE>
have had total revenues of $18 million by the end of a three-year period.
(Release No. 30608, Part III.A.4). The Company believes that its
securities qualify under this exemption.
For domestic issuers, net tangible assets or revenues must be
demonstrated by financial statements that are dated no less than fifteen
months prior to the date of the related transaction. The statements must
have been audited and reported on by an independent accountant in
accordance with Regulation S-X. For foreign private issuers, net
tangible assets or revenues must be demonstrated by financial statements
that are dated no less than fifteen months prior to the date of the
related transaction. The statements must be filed with the Securities
and Exchange Commission pursuant to Rule 12g3-2(b). If the issuer has
not been required to furnish financial statements during the previous
fifteen months, the statements may be prepared and audited in compliance
with generally accepted accounting principles of the country of
incorporation.
Whether the issuer is domestic or foreign, in all cases a broker or
dealer must review the financial statements and have a reasonable basis
for believing that they were accurate as of the date they were made (Rule
3a51-1(g)(3). In most cases a broker-dealer need not inquire about or
independently verify information contained in the statements. (Release
No. 30608, Part III.A.4). Brokers and dealers must keep copies of the
domestic or foreign issuer's financial statements for at least three
years following the date of the related transaction (Rule 3a51-1(g)(4).
Security Holders
----------------
As of December 31, 1998, the latest practicable date for which
information is available, the Company's management was of the opinion
that the Company had approximately 3,240 common stock holders.
Dividends
---------
There have been no cash dividends declared or paid since the inception
of the Company and no dividends are contemplated to be paid in the
foreseeable future.
Description of Securities
-------------------------
General
-------
The Company is authorized to issue 50,000,000 shares of capital stock,
40,000,000 shares of which are designated as common stock, $.001 par
value per share, and the balance as preferred stock, $5.00 par value per
share.
As of December 31, 1998, 5,570,439 shares of Common Stock were
outstanding (excluding the 2,500,000 shares held but not yet allocated
by the Company's Employees' Trust) and held of record by approximately
3,240 persons. In addition, 1,628,000 shares of preferred stock were
<PAGE>
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.
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. Webinfotv.net, Inc. a wholly owned subsidiary
of the Company was formed in June 1999 in order to become a dedicated
Internet Service Provider for 24 hour on line service. That is, it will
<PAGE>
provide the computer and communication equipment for consumers and
businesses to connect their personal computers to the Internet 24 hours
a day seven days a week. It will also provide design and programming
services to build Internet Web Sites and the personnel and equipment to
maintain these sites. The company will also provide a television network
with programs design to promote, tour, advertised and provide Information
for each website desiring its services. Simulcasting of live or tape
programs via the Internet and satellite broadcast. The company will have
its own website featuring a 24 hour bingo program, classified ad, trade
and barter, auctions, special events and other service available for its
members.
Overall, the company can be characterized as a Broadcast Internet
Service company.
Webinfotv.net, Inc. is a newly formed Nevada Corporation and a Wholly
Owned Subsidiary of SBI Communications, Inc. We chose this form of
organization because we anticipate aggressive growth and will
require additional capital in the future to support this growth,
probably in the form of a secondary public offering. Webinfotv.net, Inc.
is currently in its start up phase. The management team has been formed,
new space has been leased, equipment and telecommunications have been
ordered for delivery within 45-60 days and certain business alliances
have been formed.
With the anticipated external financing, we expect to turn a profit
within one year and expect to offer shares of the parent Company to
raise additional capitol by the end of the first year operation.
To accomplish this goal we have developed a comprehensive plan
to intensify our marketing and sales activities, product development,
services expansion and customer support.
The Internet
The Internet is one of the fastest growing phenomenons. The current
facts are; More than 50 million American households are connected to the
Internet with Southeast Florida as one of the fasted growing regions.
Currently there are 150 million users worldwide. Every two seconds, a new
user signs up for Internet access. It is estimated that by the year 2002,
550 million people will be on-line. The Internet has gained the support
of everyone from the White House to the Department of Revenue to United
Parcel Service. Companies are scampering to become a part
of the madness and make a fortune. While making a fortune is possible,
it requires the help of an expert in the field with specific working
knowledge and training in the necessary technologies.
Management feels confident that all will be consummated by year end 1999
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
<PAGE>
proposed projects will come to fruition. A summary of projects currently
being pursued is as follows:
Frontier Palace
---------------
Piedmont Jaycees did not perform as represented, and management
did not develop business. Gross revenues were 50% of their projections
which did not fulfill 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 first of 1998.
At the same time, local political influences developed negative
local law changes as a reaction to the Piedmont Jaycees operation and a
Bingo Commission being implemented to oversee all bingo operation in
Calhoun County. Local ordinances are being adopted to limit all charity
bingo operations to the amount of employees and establish a requirement
of net proceeds being donated for charitable purposes, with no revenues
to the employees of the charity .
In reaction to the above political/legal trends, management of
it's wholly owned subsidiary (SBI Communications, Inc. of Alabama) has
a signed purchase agreement with Regency Communications, Inc. of Dallas,
Texas to purchase the Piedmont property for $7,100,000.00. The sale of
this property should be closed with-in the next thirty days. Regency plans
are to have an inbound telemarketing, fulfilment center and backbone to
the Internet at the Piedmont location. Regency plans to contract with SBI
to set all phases of operation in place. Plans are to employ approximately
250 to 300 employees.
Management is working with technical computer advisors and systems
designers in the Boca Raton/Fort Lauderdale, Florida area and believes
that the local charity Bingo market is more hospitable in Southeast
Florida, rather than northeast Alabama. The company plans to open a
facility in the Southeast Florida area to lease to local charities to
conduct bingo games.
Intenet Web Site
----------------
The company is establishing a secure web site allowing individuals
to join "A Shopping Club for a fee of $19.95 per month which is a shopping
club for a variety of products, services, Bingo game related events and
items, travel and consumer goods; the opportunity is primarily a shopping
club. No charge is made for Bingo cards, and for allowing members to play
an on-going 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 company will host the Internet Web
Site and provide fulfillment. The company will at some point be an
Internet Service Provider with server and tee access to the Internet.
The company will generate additional revenues by offering advertising and
its web services to others.
<PAGE>
Satellite Bingo.
----------------
The company has developed a pay-per-view television game show to
be operate by SBI, at a production studio in Glendale, California. 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,
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Working Capital $ -0- $ 118,160
Total Assets $3,940,000 $ 6,984,557
</TABLE>
December 31, 1995, the Company's current assets exceeded its current
liabilities, creating a working capital surplus. The surplus is primarily
the result of the issuance of preferred convertible stock to liquidate
liabilities owed to shareholders, and in income provided by the Company's
operating activities relating to approximately $100,000 in rental fees
collected from charities that sponsor bingo games at the Company's bingo
hall.
At December 31, 1994, the Company had current liabilities in excess of
current assets, principally due to administrative expenses incurred during
the development stage that have been funded by the majority stockholder
in the form of advances due on demand. The Company has had some success
in issuing stock for services, and accordingly has kept the working
capital deficit to a minimum during these years.
The changes in total assets are attributable to the Company's purchase of
a building (bingo hall) in 1994 through the issuance of preferred stock.
As a result, income from bingo hall operations has boosted working capital
in the calendar year ended December 31, 1997. In the years prior to 1996,
the Company was primarily involved in securing licensing agreements for
rights to software and methods of operating bingo games it had developed.
As the Company continues to operate in the development stage, no
significant cash flow is being generated from operating activities. 1998
was a dormant year. The Company was not able to generate any revenues
from operations. Shareholders also advanced net funds of $100,000.00 in
1998.
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
<PAGE>
Statements of the Company. The Company has also acquired significant
assets through the sale of convertible preferred stock. The Company
anticipates continued expansion of its business through acquisitions using
Company stock. Furthermore, with the bingo hall acquired in 1994 now in
operation, the Company anticipates generation of revenues from the lease
of this facility sufficient to cover administrative costs still being
incurred as the Company moves forward in its development stage.
Results of Operations
---------------------
The following table sets forth the relative relationship to total revenue
of the revenue categories in the
Company's statement of income and percentage changes (rounded to the
nearest whole dollar).
Amount of Total Revenue
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, 1998 1997
---- ----
<S> <C> <C>
Revenues:
Licenses & Royalties -0- -0-
Bingo Hall Operations -0- $ 411,033
Kitchen and gift shop revenues -0- 131,703
Other Income -0- 1,926
----------------
Total Revenue -0- $ 544,662
================
</TABLE>
In general, the Company experienced insignificant revenues in 1998 as it
attempted to expand and develop its operations. Total revenues were $0.00
for 1998. 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 $411,033 in 1997, but have decreased to $0.00 for the
calendar year ended December 31, 1998. Total revenues for calendar year
ended December 31, 1997 were $544,662. Accordingly, except for the
operation of the bingo hall, there are no other significant revenue
sources of the Company at this time. For 1996, 1997 and 1998, the Company
did not generated revenue from the sale of copyrighted bingo cards,
foreign licensing agreements, sale of computer hardware or security
systems, or other various areas of business opportunity discussed in this
offering document.
The Company's expenses can be summarized as follows:
Amount of Total Expenses
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, 1998 1997
<PAGE>
---- ----
<S> <C> <C>
Salaries and related expenses 130,000 $157,649
Other general and administrative expenses 88,069 $358,670
Depreciation and amortization -0- $346,742
Interest expenses and finance charges 40,000 82,637
</TABLE>
The most significant expense relates to the amortization of trademark,
game show and computer program assets the Company has developed. The
expense were running $ 265,960 per year. Such assets were fully
amortized at the end of 1997. For 1998, the Company also had depreciation
on the bingo hall and related equipment, which will approximate $0.00
per year. These expenses do not require the use of cash. The low level
of other expenses in 1994 is due to a slow down in the general activity
of the Company as it explored alternative revenue generating ideas. With
the addition of the bingo hall in late 1994, as well as the pursuit of
television production and broadcast possibilities in 1996, such expenses
have decreased in 1997. As the Company continues to pursue television
production and broadcast possibilities, these expenses will continue to
rise as a result of expanded facility space and travel costs. Interest
and finance charge expenses decreased in 1998 due to $40,000 in finance
charges incurred to obtain short-term financing. These finance charges
were paid for through the issuance of preferred stock.
Should the Company successfully acquire production facilities and
broadcast companies under consideration, or expand operations in areas
previously discussed as currently under consideration, revenues and
expenses of the Company would change significantly. Management is not
able to predict the impact of such changes on revenues or expenses at this
time.
Statement Re Computation of Earnings Per Share
----------------------------------------------
See Notes To Consolidated Financial Statements included elsewhere in this
filing for a description of the Company's calculation of earnings per
share.
Item 7. Financial Statement and Summary Financial Data
----------------------------------------------------------
Financial Statements
--------------------
The audited consolidated balance sheet of the Company for its years ended
December 31, 1998 and 1997 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, 1998 and 1997 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:
Page Description
---------------
<PAGE>
__ Report of Certified Public Accountants, as to the calendar years
ended December 31, 1998 and 1997.
__ Consolidated Balance Sheets - December 31, 1998 and December 31,
1997.
__ Consolidated Statement of Income (Loss) for the calendar years ended
December 31, 1998 and December 31, 1997 and from inception until
December 31, 1998.
__ Consolidated Statement of Changes in Stockholder's Equity from
Inception (January 10, 1986) through December 31, 1998.
__ Consolidated Cash Flows for the calendar years ended December 31,
1998 and December 31, 1997 and from inception until December 31,
1998.
__ Notes to Consolidated Financial Statement Statements for the calendar
years ended December 31, 1998 and December 31, 1997.
To the Board of Directors
SBI Communictions, Inc.:
We have audited the accompaning consolidated balance sheets of SBI
Communications, Inc. and subsidiaries (the "Company") as of December
31, 1998, and the related consolidaated statements of opeerations,
stockholders' equity and cash flows for yeaar ended December 31, 1998.
These finanacial statements are the responsibility of the Company's
management. Our responsbility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generalklky accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about wheather the financial statements are
free from material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company
as of December 31, 1998, and the consolidated results of its operations and its
cash flows for the year ended December 31, 1998, in conformity with generally
accepted accounting principles.
The accompaning financial statements have been prepated assuming that the
Company will continue as a going concern. As shown in the accompaning
financial statements, the Company has a $3.6 millon provision for net
realizable value regaarding the cost basis of building and equipment as of
January 1, 1998. As more speccifically indicated in Note 1 to the financial
statements, the Company's existence is dependent on the successful colsing
of this property held for sale and has no established commercial product or
marketing channels at this time to generate future revenues. These factors
raise a substantial doubt about the ability of the Company to continue as a
going concern. Management's plans in regards to those matters aare also
described in Notes 1 and 8. The financial statements do not include any
adjustments that might result form the outcome of this uncertainty.
/s/Jay J Shapiro
JAY J. SHAPIRO, C.P.A.
a professional corporation
Encino, California
March 27, 2000
<PAGE>
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
-----------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
DECEMBER 31, 1998 AND 1997
--------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
DECEMBER 31,
------------
<TABLE>
<CAPTION>
1998 1997
---- ----
ASSETS
------
Current assets:
<S> <C> <C>
Cash $ -0- $ 22,228
Accounts receivable, net of allowance
for doubtful Accounts of $ -0- at
December 31, 1998 and 1997 - 250
Note receivable from affiliates (Note 2) -0- 9,617
Inventories -0- 86,065
-------- -------
-0- 118,160
Property and equipment,
Held for sale (Note 1, 2, 7 and 8) 3,940,000 6,782,223
Other assets:
Deferred loan costs -0- 21,109
Deposits -0- 63,065
--------- ---------
$3,940,000 $6,984,557
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Note payable to trust managed by
a shareholder (Note 5 & 8) $ 150,000 $ 150,000
Mortgage note payable-current
portion (Note 5 and 8) 1,050,000 239,701
Capitalized leases-current portion 131,181 17,491
Accrued wages due to principal
shareholder (Note 7) 420,000 290,000
Advances due to principal shareholder 12,698 -
Account payable and accrued expenses(Note 8) 90,000 150,442
---------- ---------
1,853,879 847,634
=========== =========
Capitalized leases, long-term portion -0- 62,216
Other notes payable -0- 52,438
----------- ---------
Total liabilities 1,853,879 962,288
=========== =========
Commitments and contingencies (Note 7)
Stockholders' equity:
Preferred stock, par value $5.00;
10,000,000 shares authorized;
153,000 and 153,000 shares
issued and outstanding at
December 31, 1998, respectively (Note 3 & 8) 765,000 8,465,000
Common stock, par value $.001;
40,000,000 shares authorized; 5,570,439
shares issued and outstanding at March
31, 1999 and 5,345,439 as of December
31, 1998 (Note 8) 5,570 5,345
Paid in capital 3,567,318 3,467,343
Accumulated deficit ( 2,251,767) ( 5,915,419)
-------------- ------------
1,321,121 6,022,269
-------------- ------------
$ 3,940,000 $ 6,984,557
============== ============
</TABLE>
<PAGE>
See accompanying notes to consolidated financial statements
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
---------------------------------------
CONSOLIDATED STATEMENTS OF LOSS
-------------------------------
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
<TABLE>
<CAPTION>
1998 1997
---- ----
Revenues:
<S> <C> <C>
Bingo hall rent (Note 8) $ - $196,171
Kitchen and gift shop revenues - 75,892
Other income -0- 360
------ --------
-0- 272,423
------- --------
Provision - net realizable value (Note 8) ($3,578,279)
Expenses:
Cost of sales - kitchen and gift shop - 99,417
Administrative salaries and related expenses 130,000 79,864
Facility costs -0- 29,415
Other general and administrative 88,069 282,151
Production costs - 2,483
Depreciation and amortization -0- 143,874
Interest and finance expenses 40,000 46,104
------- --------
(258,069) 683,308
-------- --------
Net loss ($3,836,348) ($ 410,885)
=========== ===========
Net loss per share (Note 4) ($ 0.69) ($ 0.08)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
---------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN
-------------------------------------
SHAREHOLDERS' EQUITY
--------------------
FOR THE YEARS ENDING DECEMBER 31, 1997 AND 1998
-----------------------------------------------
<TABLE>
<CAPTION>
Common Stock Preferred Stock Additional
Number Number Paid-in Accumulated
of shares Amount of shares Amount Capital Deficit
<S> <C> <C> <C> <C> <C> <C>
Balance
January
1998 5,345,439 5,345 1,693,000 8,465,000 3,567,343 (5,915,419)
Converion 200,000 200 (40,000) (200,000)
Acquisition
of Software 25,000 25 (25)
Cancellation
of Stock
Issued (1,500,000) (7,500,000) 7,500,000
(note 3)
Net loss,
for 1998 ( 3,836,348)
Balance
December 31,
1998 5,570,439 $5,570 153,000 $765,000 $3,567,318 ( $2,251,767)
</TABLE>
<PAGE>
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
---------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
<TABLE>
<CAPTION>
1998 1997
Cash flows from operating activities:
<S> <C> <C>
Net (loss) ( $3,836,348) ( $ 693,487)
Adjustments to reconcile net loss to cash
provided (used) by operating activities:
Depreciation and amortization 569,552
Services paid through reduction
in amounts receivable from affiliates - 25,000
Change in accounts receivable, trade 170,000 279,558
Change in inventorie -0- 36,297
Change in accounts payable
and accrued expenses -0- 84,406
Cash (used) by operating activities ( 88,069) ( 54,906)
Cash flows from investing activities:
Purchase of property and equipment ( 748,622) ( 51,603)
Decrease (increase) in deposits -0- ( 5,000)
Loans to affiliates ( 7,570) ( 3,600)
Cash (used) by investing activities ( 756,192) ( 60,203)
Cash flows from financing activities:
Loans received from (repaid to) affiliates 12,698 10,745
Repayments of affiliated loans ( 964) ( 50,000)
Borrowings on new loans and capital leases -0- 250,000
Repayments on loans and capital leases ( 239,701) ( 3,898)
Deferred loan costs paid - ( 61,000)
Proceeds from issuance of common stock - -
Cash flows provided by financing activities 822,033 145,847
Net increase (decrease) in cash ( 22,228) 30,738
Cash at beginning of year 22,228 11,589
Cash at end of year $ -0- $ 42,327
Supplemental information:
Income taxes paid $ - $ -
Interest paid $ 24,311 $ 50,241
========== ==========
Items not requiring use of cash:
Preferred stock converted ($200,000) -0-
============ =========
Issuance of Common stock $202,500 -0-
============ =========
Preferred stock cancelled $7,500,000 -0-
============ =========
</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
<PAGE>
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
Note 1 - Summary of significant accounting policies
Property and Equipment
----------------------
Property and equipment were stated at cost. In March 2000, the Company
sold all its property and equipment for net cash sales price of $3,940,000
due at closing. The gross sales price of $6,000,000 was reduced by
$860,000 in closing costs, $635,000 in fix-up expenses, and the assignment
of no value to $565,000 in down payment received in Buyer's non-trading
common stock. The Company also canceled the 1,500,000 shares of
preferred stock(valued at $7.5 million) issued to former owner of this property
due to non-performance relative to reimbursement of Company for payment
of $750,000 in delinquent Alabama property taxes.
Income Taxes
------------
The Company provides for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, which requires the use of the asset
and liability method and recognizes deferred income taxes for the
consequences of "temporary differences" by applying enacted statutory tax
rates applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities.
Statements of Cash Flows
------------------------
For the purposes of the statements of cash flows, the Company considers
cash and highly liquid investments purchased with a remaining maturity of
three months or less at the date of purchase to be cash equivalents.
Related Party Transactions
--------------------------
From time to time, the Company's principal shareholder advances money to
the Company for operations. All amounts owed to the shareholder ($12,968)
are non-interest bearing advances. In addition to advances, the Company
accrued salaries payable to the Company's principal shareholder totaling
$130,000 for the years ended December 1998, respectively. All
amounts owed to the shareholder are payable on demand.
In October, 1995, the Company borrowed $250,000 from a trust managed
by a shareholder, in the form of a mortgage note. The note was payable in
full on October 15, 1996, with interest payable quarterly at prime plus 3%,
secured by a second mortgage on The Piedmont Property. Fifty thousand
dollars of this note was repaid in 1996 when due, and an additional $50,000
was repaid during 1997. The note has been extended on a quarter to quarter
basis, with $150,000 remaining outstanding at December 31, 1998.
<PAGE>-
SBI COMMUNICATIONS. INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2
Piedmont Admission Taxes
-----------------------
On April 28, 1995 the State of Alabama placed a tax lien on the previous
owner of the Piedmont Property, Cranberry-Magnetite/Broadway Gas
Corporation(the "Seller") for admission taxes, in the amount of $750,000
plus 12% interest. The Company received a warranty deed from Cranberry
Magnetite. After a legal action by Cranberry Magnetite with the State of
Alabama failed in 1998 the Company paid this tax liability on behalf of
Cranberry Magnetite/Broadway Gas Corporation. The Company attempted
to recover these funds.
NOTE 3
Stockholders' Equity
--------------------
In January 1998 the Company issued 25,000 shares of its common stock to
cover the cost of PandaAmerica software programming. Such cost was
recognized at $.10 per share nominal value and expensed in 1998. The
Company also converted 40,000 shares of preferred shares to 200,000
shares of the Company common stock. Such preferred stock pays no
dividends, has a liquidation value of $5.00 per share, and is convertible at 5
shares common stock for 1 share of preferred. The company also cancelled
1,500,000 shares of preferred stock due to failure of Seller to meet its
obligation owed to the Company.
NOTE 4
Net Loss Per Share
------------------
The Company's net loss per share was calculated using 5,570,439
weighted average shares outstanding for 1998, respectively.
Although convertible preferred stock is a common stock
equivalent, with a conversion rate of approximately 10 shares of common
stock (based upon an approximate market price for common stock of $0.50)
for each share of preferred stock, preferred stock conversion has not been
included in the calculation of earnings per share in that to do so would be
antidilutive.
NOTE 5
Mortgage Note Payable
---------------------
The Company agreed to issue 5,000 shares of preferred stock to the lender
to cover $20,000 in loan closing costs for a $250,000 mortgage loan due
October 1, 1998.
<PAGE>
SBI COMMUNICATIONS. INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 (Cont'd)
Mortgage Note Payable (cont'd)
------------------------------
The Company borrowed $1,050,000 to pay the State of Alabama, on
behalf of Cranberry-Magnetite, the previous owner tax liability of $748,422
and to pay old mortgage loan with a balance of $239,701 plus accrued
interest.
NOTE 6
Income Taxes
-----------
Deferred income tax assets and liabilities are summarized as follows at
December 31,1998:
<TABLE>
<S> <C>
Deferred tax assets attributable to
operating loss carry forwards $3,500,000
Valuation allowance due to uncertainty
surrounding realization of operating
loss carry forwards ($ 3,500,000)
--------------
Total deferred taxes $ 0
---------------
---------------
</TABLE>
The Company has available at December 31, 1998, unused operating loss
carry forwards, which may be applied against future taxable income, that
expire as follows:
<TABLE>
<CAPTION>
Amount of Unused Expiration During
Operating Loss Year Ended
Carry Forwards December 31
<S> <C> <C>
$ 200,000 2001
$ 550,000 2002
$ 1,200,000 2003
$ 300,000 2004
$ 490,000 2007
$ 340,000 2008
$ 320,000 2009
$ 650,000 2010
$ 1,050,000 2011
$ 700,000 2012
$ 3,836,000 2013
$ 289,000 2014
-------------
$ 9,925,000
</TABLE>
<PAGE>
SBI COMMUNICATIONS. INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7
Commitments. Risks and Contingencies
------------------------------------
The Company has developed bingo productions to be broadcast via
satellite in English and Spanish to the television market and the Internet, into
homes of viewers throughout the World. Should local, state, or federal laws
change regarding bingo sweepstakes, such changes could have a material
impact on the ability of the Company to generate future revenues.
The Company is the owner of record on the Piedmont Property and is
therefore, responsible for all amounts attributable or assessed by state tax
authorities. Management believes that $100,000 paid at closing will satisfy all
obligations.
The Company has a history or issuing common stock tor services difficult to
value or yet to be provided. Approximately 3,000,000 (or 57%) of the
common stock outstanding at December 31, 1998, is restricted in some
fashion as a result of the above transactions. Furthermore, the Company has
in prior years canceled common stock certificates due to non-performance of
the third parties involved in certain of the above transactions. Although no
party to such transactions has yet instigated litigation involving the Company
for cancellation or restriction of related shares, due to the volume of such
transactions, litigation relating to such activity remains a possibility.
Management believes all actions it has taken to cancel or restrict common
stock are with merit, and does not anticipate any material loss being incurred
by the Company relating to future resolution of these matters.
The Company has an employment agreement with Mr. Ron Foster,
shareholder and president, which expires on December 31, 2001. Under
the agreement, Mr. Foster is entitled to $130,000 in minimum annual salary,
cash bonuses of the lesser of 10% of revenues or 5% of pre-tax profits, and
stock bonuses equivalent to 10% of pre-tax profits before depreciation.
NOTE 8
Subsequent Events
a) The Company sold its building in Alabama in March 2000. The net
sales price is $6,000,000 with a 20% cash down payment and real
estate contract for $4.8 million at 9.00% interest payable monthly with
balloon payment of $4,695,000 in five years. The note will be
acquired at closing for $4.1 million in cash. The financial statements
reflect at $3.9 million provision for net realizable value of the Piedmont
Property as of 12/31/98 and no depreciation has been recognized.
<PAGE>
SBI COMMUNICATIONS. INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 (Cont'd)
Subsequent Events (cont'd)
--------------------------
b) The Company intends on using the proceeds of Piedmont property
sales to settle the two outstanding mortgage obligations and the
equipment notes payable.
c) The Company cancelled 1,500,000 shares of preferred stock issued
to the former owner of the Piedmont property in March 2000 and
released such party from its obligation to repay the Company
$750,000 paid for past property taxes (See Note 2). Accordingly,
the basis of the property sold in March 2000 was $750,000 and
related closing costs at acquisition and the Company will recognize a
gain at closing in April 2000 of approximately $3.2 million.
d) In January 2000, the Company received all 2,500 shares issued by a
new company, FrontierPlace.Com, a Nevada corporation. This
wholly-owned subsidiary will operate proprietary software and
copyrighted bingo programs over the Internet. This company will also
provide a television network with programs promoting the Internet
bingo and shopping website and will be characterized as a broadcast
Internet service company.
e) In February 2000, they issued 200,000 shares of restricted stock
(estimated value $40,000) for the origination of a $150,000 loan from
two parties (the "Holder") which will bear interest at 10.00% per
annum. Principal and interest payable on 2/7/01 or demand of the
Holder and loan is secured by all Company assets. Note is
repayable at the option of the Holder in cash or upon exercise of stock
options granted in February 2000 for 300,000 shares at $.50 per
share.
f) On January 12, 2000, the Company issued 100,000 shares of
restricted common stock to an individual in consideration of a $5,000
cash payment and financial marketing services valued at $7,500 ($.12
per share).
g) On March 30, 2000, the Company canceled 723,500 shares of
common stock held by various individuals for non-performance of
services.
<PAGE>
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, 1998, is
restricted in some fashion as a result of the above transactions.
Furthermore, the Company has in prior years canceled common stock
certificates due to non-performance of the third parties involved in
certain of the above transactions. Although no party to such
transactions has yet instigated litigation involving the Company for
cancellation or restriction of related shares, due to the volume of
such transactions, litigation relating to such activity remains a
possibility. Management 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.
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, 1998 December 31, 1997
Statement of Operations Data
<S> <C> <C>
Gross Revenues $ -0- 544,662
Income from Operations(Loss) ($ 3,836,348) ( 693,879)
Net Income (Loss) per share * ( .69) ( .13)
Balance Sheet Data
------------------
Assets
------
Current Assets $ -0- 118,160
Property & equipment, less
accumulated depreciation $ 3,940,000 6,782,223
Other Assets $ -0- 84,174
-------------- ------------
Total Assets $ 3,940,000 6,984,557
=============== ============
Liabilities
-----------
Current Liabilities $ 1,853,879 847,634
Long Term Liabilities $ -0- Nil
Total Liabilities $ 1,853,879 962,288
Total Stockholders' Equity $ 2,086,121 6,022,269
----------- -----------
Total Liabilities and Equity $3,940,000 $ 6,984,557
============ =============
</TABLE>
______
* See above. Per share data is computed based on the weighted average
of common stock outstanding as of the report date.
<PAGE>
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.
<TABLE>
<CAPTION>
Name Age Position Since
---- --- -------- -----
<S> <C> <C> <C>
Ronald Foster 57 President/Chairman of the Board 1986
William Beggs 55 Director 1998
Karien Anderson 48 Secretary/Treasurer/Director 1997
Claude Pichard 44 Director 1986
Mel Ray 59 Director 1997
</TABLE>
______
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, 57, 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.
<PAGE>
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.
Karien Anderson
---------------
Ms. Anderson is 48 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 59 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
<PAGE>
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 55 years old and resides in Fort Lauderdale, Florida. Mr.
Beggs has been a member, in good standing, of The Florida Bar since
1973. Mr. Beggs practices real estate and corporate law in the Fort
Lauderdale area.
Item 10 Executive Compensation
----------------------------------
The Summary Compensation Table below sets forth all compensation paid
to the Officers and Directors of the Company during the Company's
year ended December 31, 1997 and 1998.
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.
1997 Summary Compensation Table
-------------------------------
<TABLE>
<CAPTION>
Name Annual Compensation Long Term Compensation
and Awards Awards LTIP All
Principal Restricted Restricted Pay-Other
Position Salary Bonus Other Stock Options outs Compensation
-------- ------ ----- ----- ----- ------- ---- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald Foster ** (5) * * * * *
Claude Pichard + * * * * * *
Mel Ray (2) * * * * * * *
Karien Anderson (1) (6) * * * * *
Thomas Barrett (4) (8) * * * * *
_____________________________________________________________________________
</TABLE>
1998 Summary Compensation Table
-------------------------------
<TABLE>
<CAPTION>
Name Annual Compensation Long Term Compensation
and Awards Awards LTIP All
Principal Restricted Restricted Pay- Other
Position Salary Bonus Other Stock Options outs Compensation
-------- ------ ----- ----- ----- ------- ---- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald Foster ** 5 Y * Y * * *
Claude Pichard +(2) * * * * * *
Mel Ray (2) * * * * * * *
Karien Anderson(1) 6 * * * * * *
</TABLE>
_____________________________________________________________________________
* None.
<PAGE>
** President, Chairman and Chief Executive Officer.
*** Former Secretary, Treasurer and Chief Financial Officer.
+ Vice President.
(1) Secretary and Treasurer.
(2) Director.
(3) Director.
(4) Vice President.
(5) $130,000.
(6) $ 30,000.
(7) $ 35,500.
(8) $ 30,000.
(9) No person listed has any options to acquire securities of the
kind required to be disclosed pursuant to instruction 1 of Item
403 of Regulation SB.
(Y) Yes
Employment Agreements
---------------------
The Company is a party to an employment agreement with Ronald Foster,
a copy of which is filed as an exhibit to this registration statement.
The following summary thereof is qualified in its entirety by reference
to such exhibit.
On January 1, 1992, Mr. Foster entered into a ten year employment
agreement with the Company, renewable thereafter for continuing one
year terms unless one of the parties provides the other with written
intention not to renew, on or before the 180th day prior to expiration
of the then current term. Although the agreement can be terminated by
the Company for cause, or the Company's stockholders can refuse to
comply with its terms by not re-electing Mr. Foster as a director, such
events accelerate Mr. Foster's rights to compensation under the
Agreement.
The Agreement provides the Company with an obligation to defend and
indemnify Mr. Foster to the fullest extent legally permitted, and calls
for the 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.
<PAGE>
(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 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> <C>
Ronald Foster 1,632,089 Record & 32% Common
103 Firetower Road Beneficial Owner
Leesburg, Georgia, 31763
Larry Cahill 1,000,000 Record & 19% Common
3330 Southgate Court Beneficial Owner
Cedar Rapids, Iowa 52404
Michael Graham 500,000 Record & 10% Common
1804 Cherry Lane Beneficial Owner
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.
<PAGE>
<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 *** 0.00%
Common Claude Pichard 10,000 ** 00.07%
Common Betty Rodgers 5,000 *** 00.035%
Common Williams Beggs 0 *** 0.00%
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.
Changes In Control
------------------
SBI is unaware of any contract or other arrangement, the operation of
which may at a subsequent date result in a change in control of SBI.
Item 12. Certain Relationships and Related Transactions
---------------------------------------------------------
There are no family relationships among directors, executive officers
or persons chosen by the Company to be nominated as a director or
appointed as an executive officer of the Company of any of its
affiliated subsidiaries.
PART IV
-------
Item 13. Index to Exhibits
------------------------------
Description of Exhibits
-----------------------
Page or
Exhibit Source of
Number Incorporation Description
----------------------------------------
Ex-27
---
<PAGE>
Additional Information
----------------------
Headquarters
------------
SBI Communications, Inc.
1239 South Glendale Avenue, Glendale, California 91205
Subsidiaries
------------
SBI Communications, Inc., a Alabama Corporation
376 Hwy 278 Bypass - Piedmont, Alabama 36272
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
--------
Jay J. Shapiro
Jay J. Shapiro, CPA A Professional Corporation
16501 Ventura Boulevard - Suite 650 - Encino, California 91436
Transfer Agent
--------------
Corporate Stock Transfer
3200 Cherry Creek Drive-Suite 430; Denver, Colorado 80209
Exhibits to this Form 10-KSB will be provided, subject to payment of
actual copy costs, to shareholders of the Company upon written request
addressed to Karien Anderson, Secretary, SBI Communications, Inc.,
at the Company's headquarters listed above.
<PAGE>
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: July 10, 2000
/s/Ronald Foster/s/
Ronald Foster
Chairman, President & Chief Executive
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons
on behalf or the Company and in the capacities and on the dates
indicated.
[CAPTION]
<TABLE>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Ronald Foster Chairman, President
-----------------
Ronald Foster & Chief Financial Officer April 28, 2000
/s/ Karien Anderson Director, Secretary, Treasurer April 28, 2000
-------------------
Karien Anderson
/s/ Claude Pichard Director, Vice President April 28, 2000
------------------
Claude Pichard
/s/William Beggs Director April 28, 2000
----------------
William Beggs
</TABLE>
