<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C INFORMATION
Proxy Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x]Preliminary Proxy Statement
[ ]Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ]Definitive Proxy Statement
[ ]Definitive Additional Materials
[ ]Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
SBI COMMUNICATIONS, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-------------------------------------------------------------------------------
(Name of Person Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box)
[X]No fee required.
[ ]Fee computed on table below per Exchange Act Rules 14c-5(g)
and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ]Fee Paid previously with preliminary materials.
[ ]Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
SBI COMMUNICATIONS, INC.
1239 South Glendale Avenue
Glendale, CA 91205
--------------------------
Information Statement
---------------------
October 16, 2000
----------------
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
GENERAL
This Information Statement is first being furnished on or about
October 16, 2000 to shareholders of record as of the close of business on
August 31, 2000 (the "Record Date") of the common stock of SBI
Communications, Inc. ("SBI" or the "Company") in connection with the
following (collectively, the "Actions"):
1. To elect four directors to serve on the Company's Board of Directors for
the ensuing year and until their successors are elected; and
2. To amend the Certificate of Incorporation to reflect a change in the
Company's name to ValCom, Inc.; and
3. To amend the Certificate of Incorporation to reflect a change in the par
value of the Preferred Stock to $.001; and
4. To approve the increase in authorize shares of Common stock available
for issuance under the Company's Certificate of Incorporation;
The Board of Directors has approved, and a total of four (4)
stockholders (the "Consenting Stockholders") representing 6,954,178
shares of the 12,324,878 shares outstanding of the Common Stock as of
August 31, 2000 have consented in writing, to the Actions. Such approval
and consent constitute the approval and consent of a majority of the total
number of shares of outstanding of Common Stock and are sufficient under
the Delaware General Corporation Law and SBI's By-Laws to approve the
Actions. Accordingly, the Actions will not be submitted to the other
stockholders of SBI for a vote and this Information Statement is being
furnished to stockholders to provide them with certain information
concerning the Actions in accordance with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and
the regulations promulgated thereunder, including Regulation 14C.
This Information Statement contains forward-looking statements
which involve risks and uncertainties. SBI's actual results may differ
significantly from the results discussed in the forward-looking statements.
SBI will pay all costs associated with the distribution of the
Information Statement, including the costs of printing and mailing. SBI
will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending this
Information Statement to the beneficial owners of SBI's Common Stock.
FOR ADDITIONAL INFORMATION ABOUT THE COMPANY,
REFERENCE IS MADE TO SBI'S ANNUAL REPORT ON FORM 10-KSB.
<PAGE>
The principal executive office of SBI is located at 1239 South Glendale
Avenue, Glendale, CA 91205.
ELECTION OF DIRECTORS
The Board of Directors unanimously nominated and the
Consenting Stockholders have approved and elected four (4) individuals
as directors to hold office until the next Annual Meeting of Shareholders
and until their successors are elected and qualified. Each of the following
individuals have consented to serve as a Director of the Company.
Director and/or Executive
Name and Position in the Company Age Officer Since
Ronald Foster 59 1986
Chairman of the Board
Vince Vellardita 42 2000
President / CEO
David Weiner 41 --
Nominee
Stephen A. Webber 52 --
Nominee
Ronald Foster, Ron Foster has served as the Company's Chief Executive
Officer, President and Chairman of the Board from 1986 to October 2000.
Mr. Foster, 59, is presently Chairman of the Board for SBI. 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 the
owner and operator of Artist Management & Promotions where he was
responsible for coordinating television entertainers, sports figures and
other celebrities for department store promotions. Previously, Mr. Foster
has served as president and director of Ed-Phills, Inc., a Nevada
corporation, and executive vice president and member of the Board of
Directors of Golden American Network, a California corporation. From
1984 to 1994, he has also been the president and chief executive officer of
ROPA Communications, Inc., which owned and operated 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
Director/Producer/Writer of the Company Interactive Broadcast Programs.
Other than the Company, Mr. Foster does not currently serve as a director
of any other reporting company.
Vince Vellardita, Vince Vellardita is currently President and CEO
of SBI and is the CEO of Valencia Entertainment International, LLC. As
discussed in this Informational Statement, SBI and Valenci have agreed in
principal to enter into a merger agreement whereby Valencia will become
a wholly owned subsidiary of SBI. Mr. Vellardita was instrumental in
having Valencia Entertainment acquire a 170,000 square foot production
facility in Valencia, California that houses 8 sound stages that have been
occupied for the past four years by the hit CBS series' JAG and Fox's Power
<PAGE>
Rangers. Mr. Vellardita began his career in 1977 as a music producer and
promoter of live shows and is credited with bringing Duran Duran and U2
to North America for their first tours. He also produced a benefit tour for
the 1980 Presidential campaign of John Anderson. Mr. Vellardita does not
currently serve as a director of any other reporting company.
David Weiner, Mr. Weiner received his MBA degree from
U.C.L.A. and gained a wide variety of business experiences early in his
career working in the investment banking and pension fund management
arena. He joined the consulting group of Deloitte and Touche in 1988,
where he provided general and corporate finance consulting services to a
wide variety of entertainment, telecommunications, and direct response
clients including K-tel, International, Inc. Mr. Weiner joined K-tel in
1993, as Vice President of Corporate Development and was appointed
President in September of 1996. His responsibilities included directing all
United States operations of the company as well as its wholly owned
subsidiaries in the Untied Kingdom, Germany and Finland. Mr. Weiner
resigned as President of K-tel in 1998 to form W-Net, Inc., an Internet and
software development and consulting firm. Mr. Weiner does not currently
serve as a director of any other reporting company.
Stephen A Webber, Mr. Webber is the President and C.F.O. of
Valencia Entertainment LLC. Mr Weber has over 20 years of background
in Finance and Management and is a certified public accountant. Prior to
joining Valencia Entertainment, Mr. Webber was the managing partner for
a regional audit firm. Currently, in addition to his duties at Valencia
Entertainment International, Mr. Webber also consults for a publicly traded
internet company, Genesis Entermedia.com, Inc. where he sits on the
Board of Director and is Chairman of the Audit Committee.
Meeting and Committee of the Board of Directors
-------------------------------------------------
Each director is elected to serve for a term of one (1) year until the
next annual meeting of shareholders or until a successor is duly elected and
qualified. There are no family relationships among directors or persons
nominated or chosen by the Company to become a director. The present
term of office of each director will expire at the next annual meeting of
shareholders.
During the fiscal year ended December 31, 1999, the Board of
Directors held __ meetings of which no director attended fewer than 75%
of the total number of meetings. Outside directors received no cash
compensation for their services, however they were reimbursed for their
expenses associated with attendance at meetings or otherwise incurred in
connection with the discharge of their duties as directors of the Company.
No officer of the Company receives any additional compensation for his
services as a director, and the Company does not contribute to any
retirement, pension, or profit sharing plans covering its directors.
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY
The Board of Directors unanimously adopted and the Consent of
Stockholders have approved an amendment to the Company's Certificate
of Incorporation to change the name to ValCom, Inc (the "Name
Amendment"). This name change will be implemented by amending the
Company's Certificate of Incorporation with the Delaware Secretary of
State. The text of the Name Amendment is attached as Appendix A and
is incorporated herein by reference. In the judgment of the Board of
Directors, the change of the Company's corporate name is desirable in view
of the significant change in the character and strategic focus of the
company.
The Name Amendment will become effective upon the filing of a certificate
of amendment relating thereto with the Secretary of State of Delaware.
Under federal securities laws, the Company cannot file the certificate of
amendment until at least 20 days after the mailing of this Information
Statement.
<PAGE>
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO CHANGE THE PAR VALUE OF PREFERRED STOCK
The Board of Directors unanimously adopted and the Consent of
Stockholders have approved an amendment to the Company's Certificate
of Incorporation to change the part value of its preferred stock (the "Par
Value Amendment"). The Company's current capital structure provides
that for the authorization of 10,000,000 million shares of Preferred Stock
at a par value of $5.00. Delaware Law computes the annual franchise tax
based either upon the authorized share method or the assumed par value
capital method, but in no event greater than $150,000. In order to reduce
and minimize the annual franchise tax, the Board of Directors unanimously
adopted and the Consent of Stockholders have approved an amendment to
the Company's Certificate of Incorporation to change the Preferred Stock
par value from $5.00 per share to $.001.
On or about January 31, 1998, the Shareholders approved a plan
to change the Company's corporate domicile to the State of Nevada in order
to reduce the annual franchise tax. This proposal, if adopted, would reduce
the annual franchise tax and the Company would not incur the additional
cost of changing its domicile to Nevada. The text of the Par Value
Amendment is attached as Appendix B and is incorporated herein by
reference.
The Par Value Amendment will become effective upon the filing
of a certificate of amendment relating thereto with the Secretary of State
of Delaware. Under federal securities laws, the Company cannot file the
certificate of amendment until at least 20 days after the mailing of this
Information Statement
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED COMMON STOCK
The Board has unanimously adopted and the Consenting Stockholders
have approved the amendment to the Company's Certificate of
Incorporation to increase the Company's authorized Common Stock from
40,000,000 to 100,000,000 shares (the "Authorized Shares Amendment").
Recently, the Company reached an agreement in principal to acquire
Valencia Entertainment International, LLC ("Valencia"). Valencia is a
vertically integrated entertainment conglomerate that includes television
production, for both network and syndicate, motion pictures, sports,
internet and real estate holdings. The terms of the merger acquisition will
make Valencia a wholly owned subsidiary of the Company and the
principals of Valencia will receive shares of the Company's common stock
based upon an agreed upon fair market valuation of the net assets of
Valencia. According to the audited financial statements for Valencia for
the year ended December 31, 1999, Valencia recorded $8,749,487 in net
assets, which represents approximately 83% of the total net assets of the
two companies combined. A copy of Valencia's audited financial statement
is attached as Appendix C, and is hereby incorporated by reference. In
order to consummate the merger, the Company will be required to issue
75,709,965 shares of its common stock to the principals of Valencia. The
shares of common stock do not have any preemption rights. The text of the
Authorized Share Amendment is attached as Appendix B and is
incorporated herein by reference.
Currently, the Company has 40,000,000 shares authorized of
which 12,324,878 shares are issued and outstanding. As a result, the
Company would not be able to consummate the merger without first
increasing its total authorized shares of common stock. Shareholder
approval is not required for the merger itself under Delaware law.
Once the Company files the Authorized Share Amendment with
the Secretary of State of Delaware, the Company will have 87,1675,122
shares of unissued shares of Common Stock available for issuance. The
Company will immediately issue 75,709,965 shares to the principals of
<PAGE>
Valencia and will cause the merger to be consummated. If the Authorized
Shares Amendment was not approved by the majority shareholder, the
Company could not have issued the required number of Shares to the
principals of Valencia and the Company would be required to terminate the
merger.
The remaining unissued shares will be available for issuance from
time to time as may be required for various purposes, including the
issuance of shares in connection with financing or acquisition transactions
and the issuance or reservation of Common Stock for employee stock
options. The Board would be able to authorize the issuance of shares for
these transactions without the necessity, and related costs and delays, of
either calling a special shareholders' meeting or of waiting for the regularly
scheduled annual meeting of shareholders in order to increase the
authorized capital. If in a particular instance shareholder approval were
required by law or any stock exchanges or markets or otherwise deemed
advisable by the Board, then the matter would be referred to the
Shareholders for their approval regardless of whether a sufficient number
of shares previously had been authorized
The issuance of the Shares to consummate the merger will cause
a dilution to the existing Shareholders. The 12,324,878 shares currently
issued and outstanding will represent approximately fourteen percent
(14%) of the outstanding shares after the consummation of the merger.
The proposed change in capital is not intended to have any anti-takeover
effect and is not part of any series of anti-takeover measures contained in
any debt instruments or the Certificate of Incorporation or the Bylaws of
the Company in effect on the date of this Information Statement. However,
Shareholders should note that the availability of additional authorized and
unissued shares of Common Stock could make any attempt to gain control
of the Company or the Board more difficult or time consuming and that the
availability of additional authorized and unissued shares might make it
more difficult to remove management. Although the Board currently has
no intention of doing so, shares of Common Stock could be issued by the
Board to dilute the percentage of Common Stock owned by a significant
shareholder and increase the cost of, or the number of, voting shares
necessary to acquire control of the Board or to meet the voting
requirements imposed by Delaware law with respect to a merger or other
business combination involving the Company. The Company is not aware
of any proposed attempt to take over the Company or of any attempt to
acquire a large block of the Company's Common Stock. The Company has
no present intention to use the increased authorized Common Stock for
anti-takeover purposes.
The Authorized Share Amendment will become effective upon the
filing of a certificate of amendment relating thereto with the Secretary of
State of Delaware. Under federal securities laws, the Company cannot file
the certificate of amendment until at least 20 days after the mailing of this
Information Statement
2001 Annual Meeting
No definitive date for the Annual Meeting of Shareholders in
2001 has been established. Qualifying Shareholders may submit proposals
that are consistent with the Company's Bylaws and federal securities laws
to the Company for inclusion in the Company's proxy material relating to
the 2001 Annual Meeting. The Company must receive such proposals at
its business address (set forth at the beginning of this Proxy Statement) no
later than January 31, 2001.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires any person who owns more than ten percent of any class of any
equity security which is registered pursuant to Section 12 of the Exchange
<PAGE>
Act, or who is a director or an officer of the issuer of such security, to file
reports of ownership and changes in ownership with the Securities and
Exchange Commission (the "SEC"). Directors, officers, and greater than
ten-percent shareholders are also required by SEC regulation to furnish the
issuer of such securities with copies of all Section 16(a) reports filed.
Specific due dates for these reports have been established and the Company
is required to report in this Information Statement any failure to file by
these dates during 1999.
The Company believes that its officers, Directors, and stockholders owning
greater than 10% of the Common Stock of the Company have not complied
with the applicable Section 16(a) filing requirements during the fiscal year
ending 1999 as it relates to the filing of Form 5.
Incorporation of Certain Documents by Reference
The Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1999 was filed with the Securities and Exchange
Commission on April 5, 2000 which is hereby incorporated by reference.
A copy of SBI's Form 10-KSB will be furnished without charge to
Shareholders as of the record date upon written request to Ronald Foster,
Chairman, SBI Communications, Inc. 1239 South Glendale Avenue,
Glendale, California 91205.
SBI COMMUNICATIONS, INC.
By:/s/ Ronald Foster
------------------------
Ronald Foster, Chairman
<PAGE>
APPENDIX A
RESOLVED, that the First Article of the Certificate of
Incorporation of the Corporation be amended to read in its entirety as
follows:
FIRST:The name of the Corporation (hereinafter called the
"Corporation") is:
ValCom, Inc.
APPENDIX B
RESOLVED FURTHER, that the fourth Article of the Certificate
of Incorporation of the Corporation be amended to read in its entirety as
follows:
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 110,000,000 shares, of which
10,000,000 shares shall be Preferred Stock of the par value of $.001 each
(hereinafter called "Preferred Stock") and 100,000,000 shares shall be
Common stock of the par value of $.001 each (hereinafter called the
"Common Stock").
<PAGE>
APPENDIX C
Financial Statements for
Valencia Entertainment International, LLC
DECEMBER 31, 1999 and 1998
--------------------------
Contents of Report
-------------------------------------------------------------------------------
Page 1 Accountants' report
Page 2 Balance sheet
Page 3 Statements of operations
Page 4 Statements of cash flows
Page 5-9 Notes to financial statements
<PAGE>
INDEPENDENT AUDITORS REPORT
To the Board of Directors
Valencia Entertainment International, LLC:
We have audited the accompanying balance sheet of Valencia Entertainment
International, LLC as of December 31, 1999, and December 31, 1998, and
the related statements of operations and cash flows for each
of the years then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
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 financial position of the Company as of December
31, 1999 and December 31, 1998, and the results of its operations and its
cash flows for each of the years then ended, in conformity with generally
accepted accounting principles.
/s/Jay J. Shapiro
-----------------------
Jay J. Shapiro, C.P.A.
A professional corporation
Encino, California
October 17, 2000
<PAGE>
VALENCIA ENTERTAINMENT INTERNATIONAL, LLC
BALANCE SHEET
December 31,
<TABLE>
<CAPTION>
1999 1998
---- ----
ASSETS
--------
<S> <C> <C>
Cash (Note 6) $ 2,278,694 $ 8,835
Accounts receivable 106,812 48,144
Mortgage escrow holdback 327,900 0
----------- ----------
Total Current Assets 2,713,406 56,979
Fixed assets - net (Notes 2 and 3) 11,760,154 11,855,999
Production costs 28,000 6,170
Prepaid loan fees 111,668 0
------------ ----------
Total assets 14,613,228 11,919,148
============ ===========
LIBILITIES AND EQUITY
---------------------
Accounts payable 114,181 51,929
Loans payable 75,000 55,000
Morthgage payable - current portion (Note 3) 83,536 126,928
----------- -----------
Total Current Liabilities 272,717 233,857
Morgage Payable (Note 3) 5,916,464 3,181,670
----------- -----------
Total Liabilities 6,189,181 3,415,527
Commitments (Note 5)
Lquity:
Capital (Note 2, 4 and 6) 7,704,406 8,184,846
Accumulated income 719,641 318,775
----------- -----------
8,424,047 8,503,621
----------- -----------
Total Liabilities and Equity $ 14,613,228 $ 11,919,148
</TABLE>
See accompanying notes to financial statements
<PAGE>
VALENCIA ENTERTAINMENT INTERNATIONAL,LLC
STATEMENTS OF OPERATIONS
Year ended December 31
----------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Revenue:
Rental 1,214,171 1,166,983
Production 260,000 105,135
---------- ---------
1,474,171 1,272,118
---------- ---------
Costs and Expenses:
Production 83,049 63,195
Selling and promotion 89,017 74,562
Depreciation 135,376 133,620
Administrative and general 473,275 490,363
---------- ---------
Total 780,717 761,740
---------- ---------
Operating income 693,454 510,378
Interest expense (292,588) (298,292)
---------- ---------
Net income $ 400,866 $ 212,086
========== =========
</TABLE>
See accompanying Notes to financial statements
<PAGE>
VALENCIA ENTERTAINMENT INTERNATINAL,LLC
STATEMENT OF CASH FLOWS
Year end December 31
---------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Operating Activities:
Net income $ 400,866 $ 212,086
Items Not Requiring Cash Outlays:
Depreciation and amortzation 135,376 133,620
----------- -----------
536,242 345,706
Changes in:
Receivabes (58,686) 6,259
Other assets (21,830) (6,170)
Accounts payable and other accrued expenses 62,272 14,000
Loans payable 20,000 (55,000)
---------- ----------
1,756 (40,911)
---------- ----------
Cash Provided by Operations 537,998 304,795
---------- ----------
Investing Activities:
Acquisition of fixed assets (39,531) (110,051)
---------- ----------
Cash Used by Finaancing Activities (39,531) (110,051)
---------- ----------
Financing Activities:
Principal payments on former mortgage (152,000) (149,786)
Repayment of former mortgage (3,261,165) 0
Proceeds from mortgage refinancing 5,664,997 0
Withdrawal of capital contribution (480,440) (55,000)
---------- ---------
Cash Provided (Used) by Financing Activities 1,771,392 (204,786)
---------- ---------
Increase (Decrease) in Cash
and Cash Equivalents 2,269,859 (10,042)
Cash and cash equivalents, beginning of year 8,835 18,877
---------- ---------
Cash and cash equivalents, end of year $ 2,278,694 $ (8,835)
=========== ==========
Supplemental disclosure of cash flow
information:
Interest paid $ 299,000 $ 291,000
=========== ==========
Income taxes 0 0
=========== ==========
Capital contribution-land and buildings $ 0 8,114,000
=========== ==========
</TABLE>
See accompaning notes to financial statements
<PAGE>
VALENCIA ENTERTAINMENT INTERNATIONAL,LLC
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
--------------------------
Note 1: Summary of Significant Accounting Policies
---------------------------------------------------
Following is a summary of the significant accountng policies followed
in the preparation of these financial statements, which policies are
in accordance with generally accepted accounting principles:
Nature of Business
------------------
Valencia Entertainment International, LLc (the "Company") is a
limited liability corporation organized in November 1996 under the
laws of the State of California for the purpose of operating a studio
facility in Valencia, California and the development, financing and
production for entertainment content. The Company is managed
pursuant to the Amended Operating Agreement dated January 1, 1998
(the "Agreement").
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimaes
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of financial statements and the reported amounts of revenue
and expenses during the reporing period. Acual results could
materially differ from those estimates.
Concentration of Credit Risk
----------------------------
Financial instruments that potentially subject the Company to
concentrations of risk consist of trade receivables principally
arising from monthly leases. Management believes all receivables to
be fully collectible.
Cash Equivalents
----------------
The Company maintains cash and cash equivalents (short-term highly
liquid investments with original maturity less than three months)
with various financial institutoins. From time to time, cash
balances may exceed Federal Deposit Insurance corporation insurance
limits.
<PAGE>
VALENCIA ENTETAINMENT INTERNATIONAL. LLC
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
--------------------------
Note 1: Summary of Significant Accounting Policies (Continued)
---------------------------------------------------------------
Fair Value of Financial Instruments
-----------------------------------
The carring value of cash, receivables and accounts payable
approximates fair value due to the short maturity of these
instruments. The carrying value of and long-term debt approximates
fair value based on discounting the projected cash flows using market
rates available for similar instruments. None of the financial
instruments are held for trading purposes.
Depreciation
------------
For financial and tax reporting purposes, the Company follows the
policy of providing depreciation and amortization on the straight-line
and accelerated declining balance methods over the estimated useful
lives of the assets, which are as follows:
Building 39 Years
Building Inprovements 39 Years
Ofice Furniture and Equipment 5 to 7 Years
Amortization of Prepaid Loan Costs
----------------------------------
For financial reporting purposes, cost are amortized on the straight
line method over 10 years, the life of the related loan.
Income Taxes
------------
The company files it's taxes as a Partnership under the laws of the
United States and as a Limited Liability Company under the laws of
the State of California. In both cases the Partners/Owners of the
company report as individuals their share of the income of the Company
and individually pay all related income taxes.
<PAGE>
VALENCIA ENERTAINMENT INTERNATIONAL, LLC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
--------------------------
Note 2: Property and Equipment
-------------------------------
Property and equipment at December 31, consists of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Land $ 7,392,292 $ 7,392,292
Building 4,028,785 4,028,785
Building Improvements 1,062,473 1,025,648
Office furniture and equipment 24,156 21,450
---------- -----------
Total 12,507,706 12,468,175
----------- -----------
Less: Accumulated Depreciation (747,552) (612,176)
----------- -----------
Net book value $11,760,154 $11,855,999
============ ===========
Note 3: Notes Payable
------------------------
Following is a summary of the Company's Notes Payable at year end
December 31,
------------------------
1999 1998
------------------------
Promissory note payable to Great-West
Life Insurance Company due in
monthly installments of principal
and interest of $33,944 at 8.625%
per annuam. The note is secured by
a Deed of Trust on the Valencia
Studio property. The Note was
refinanced in December 1999. $ 3,308,598
Promissory note payable to First Fidelity
Investment and Loan due in monthly
installments of rincipal and interest of
$4,648 at 10.03% per annum. The rate is
variable dependent on the 6 month US T-Bill
rate. The note is secued by a Deed of trust
on the Valencia Studio property. The Note
matures December 2009. $ 6,000,000
Various other loans, short-term, 8.00%-9.00%
interest 75,000 55,000
----------- ---------
Total 6,075,000 3,363,598
Less: Current maturities 158,536 181,928
----------- ---------
Notes Payable $ 5,916,464 $ 3,181,670
=========== =========
</TABLE>
<PAGE>
VALENCIA ENTERTAINMENT INTERNATIONAL, LLC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
--------------------------
Note 3: Notes Payable (Continued)
---------------------------------
<TABLE>
<CAPTION>
Maturities on the notes are as follows:
<S> <C> <C> <C>
2000 $ 158,536 $ 181,928
2001 92,283 3,181,670
2002 101,946
2003 112,622
2004 124,415
And thereafter 5,485,198
--------- ---------
$ 6,075,000 $ 3,363,598
========== ==========
</TABLE>
The Company's average short-term weighted interest rate is 9% and
8.5% respectively, for 1999 and 1998
Note 4: Partners' Capital
-------------------------
In January 1997 Magic Movie Studios of Valencia, LLC, a California
partnership, contributed property including land and buildings with
a net book value of $11,870,412 to the Company. The land and buildings
contributed were subject to a Deed of Trust with an unpaid balance of
$3,256,566. The capitol accounts of the individual partners were
credited for $8,114,000 and the Agreement recognizes their 50%
ownership of the Company.
Note 5: Commitments
-------------------
In May 2000 the Company leased additional facilities adjacent to
it's current location. The lease has a term of five years. Initial
monthly base rent is $29,000 with annual increases until 2004 when
base rent will be $34,585.
Note 6: Subsequent Events
-------------------------
a. The Company distributed $2,000,000 cash to an affiliate, Magic
Movie Studios of Valencia, LLC, On January 11, 2000. Such
distribution reduces the respective ownership interest in the
Company.
b. A lease was executed on May 11, 2000 for approximately 52,000
square feet of additional facility space.
c. In August 2000, the Company entered into a letter of intent with
SBI Communications, Inc. a publicly-traded Delewae corporaation
(SBI), to be acquired for 86% of all the outstanding stock of SBI.
This transaction will be treated for accounting purposes as a
reverse acquisition merger.
If this transaction took place on January 1, 1999 and a corporate
tax provision were appropriately recognized, the 1999 pro-forma
net income per share $261,000 and the pro-forma net income
per share would be $.02 per share.
