<PAGE>
Securities and Exchange Commission
Washington, D.C., 20549
FORM 10-QSB
(Mark one)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal quarter ended March 31, 2000
Commission file Number 0-28416
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
==============================================================================
SBI Communications, Inc.
(Name of small business issuer specified in its charter)
==============================================================================
<TABLE>
<S> <C>
Delaware 58-1700840
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification 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 12(b) of the Act: None
Securities to be registered pursuant to Section
12(g) of the Act: Common Stock and Preferred Stock
Common Stock $0.001 Par Value - Preferred Stock $5.00 Par Value
---------------------------------------------------------------
(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 requirements for the past 90 days.
YES [ X ] NO [ ]
As of March 31, 2000 the Registrant had 5,870,439 shares of its $0.001 par
value Common Stock Outstanding.
===============================================================================
May 3, 2000
===============================================================================
<PAGE>
<TABLE>
<CAPTION>
Table Of Contents
SBI COMMUNICATIONS, INC.
FORM 10-QSB
INDEX
<S> <C> <C> <C>
Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements 3
Consolidated Balance Sheets as of
December 31, 1999 and
and March 31, 2000
Consolidated Statements of Operations 4
for the three months ended
March 31, 1999 and 2000
Consolidated Statement of Changes 4
in Shareholders' Equity for the three
months ended March 31, 2000
Consolidated Statements of Cash Flows 5
for the three months ended March 31,
1999 and 2000
Notes to Consolidated Financial State- 6
ments
Item 2. Management's Discussion and Analysis 7
of Financial Condition and Results
of Operations Condition
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote 10
of Security Holders
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
</TABLE>
<PAGE> 2
PART I. FINANCIAL INFORMATION
Financial Statements
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited) (Audited)
March 31, Dec. 31,
2000 1999
ASSETS
Current assets:
<S> <C> <C>
Cash $ 71,580 $ -0-
Accounts receivable, -0- -0-
Note receivable from affiliates -0- -0-
Inventories -0- -0-
-------- --------
71,580 -0-
Property and equipment, at real
sale value: $ 3,940,000 $ 3,940,000
Other assets:
Fixed Assets: 7,500 -0-
------------ ------------
$ 4,019,080 $ 3,940,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable $ 150,000 -0-
Note payable to trust managed by a
shareholder $ 150,000 $ 150,000
Mortgage note payable-current
portion (Note 4) 1,050,000 1,050,000
Equipment note payable current portion 131,181 131,181
Accrued wages due to principal
shareholder (Note 2) 550,000 550,000
Advances due to principal shareholder 12,698 12,698
Accrued interest payable 229,000 199,000
---------- ----------
2,272,879 2,092,879
Accounts Payable 50,000 58,000
---------- ----------
Total liabilities $2,322,879 $2,150,879
----------- -----------
Stockholders' equity:
Preferred stock, par value $5.00; 10,000,000
shares authorized;
153,000 and 153,000 shares issued and
outstanding at March 31, 2000 and
December 31, 1999, respectively $765,000 $765,000
Common stock, par value $.001; 40,000,000
shares authorized; 5,870,439 shares issued and
outstanding at March 31, 2000 and 5,570,439
as of December 31, 1999 5,870 5,570
Paid in capital 3,611,518 3,559,318
Accumulated deficit ( 2,686,187) ( 2,540,767)
------------- ------------
1,696,201 1,789,121
------------- ------------
$ 4,019,080 $ 3,940,000
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
Revenues:
<S> <C> <C>
Facility rental $ -0- $ -0-
Other income - -0-
-0- -0-
Expenses:
Facility costs -0- -0-
Other general and administrative 115,420 32,500
Production costs -0- -0-
Interest and finance expenses 30,000 30,000
----------- ---------
145,420 62,500
----------- ---------
Net loss ($ 145,420) ($ 62,500)
=========== =========
Net loss per share $ (0.02) $ (0.01)
=========== =========
</TABLE>
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Balance December 31, 1999 Additional
<S> <C> <C> <C> <C>
Common Preferred Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
<C>
5,570,439 $5,570 153,000 $765,000 $3,559,318 ($2,540,767)
Net loss for 3 months ended March 31, 2000: (92,920)
Shares Issued for services:
300,000 $ 300 $ 52,200 $(52,500)
----------
$ (145,420)
- --------- -------- -------- --------- ----------- -------------
5,870,439 $ 5,870 153,000 $765,000 $3,611,518 ($2,686,187)
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
------ ------
Cash flows from operating activities:
<S> <C> <C>
Net (loss) ($ 145,420) ($62,500)
Adjustments to reconcile net loss to cash
provided (used) by operating activities:
Stock issued for services: $ 52,500 -0-
Change in accounts payable and
accrued expenses: 22,000 30,000
--------- -----------
Cash (used) by operating activities: ($ 74,500) ($ 30,000)
Cash flows from investing activities:
Proceeds from repayment of notes
receivable from affiliate: -0- -0-
Purchase of fixed assets: (7,500) -0-
Cash (used) by investing activities: -0- -0-
--------- ---------
(7,500) -0-
Cash flows from financing activities:
Loans from shareholders/affiliates: 150,000 -0-
---------- ---------
Cash flows provided by financing activities: $ 150,000 -0-
Net increase (decrease) in cash $ 71,580 -0-
Cash at beginning of period: -0- -0-
----------- ---------
Cash at end of period: $ 71,580 $ -0-
============ ===========
Supplemental information:
Income taxes paid: $ - $ -
Interest paid $ -0- $ 24,311
============ ===========
Items not requiring use of cash:
Preferred stock converted: $ -0- $ -0-
Issuance of common stock: 300,000 -0-
Paid in capital: $ -0- -0-
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND DECEMBER 31, 1999
Note 1 - Selected disclosures
The accompanying unaudited consolidated financial statements, which are
for interim periods, do not included all disclosures provided in the annual
consolidated audited financial statements. These unaudited consolidated
financial statements should be read in conjunction with the consolidated
audited financial statements and the footnotes thereto contained in the
Form 10-KSB for the year ended December 31, 1999 of SBI Communications, Inc.
(the "Company"), as filed with the Securities and Exchange Commission. The
March 31, 2000 balance sheet was derived from the unaudited consolidated
financial statements, but does not include all disclosures required by
generally accepted accounting principles.
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (which are of a normal recurring
nature) necessary for a fair presentation of the financial statements. The
results of operations and cash flow for the Three months ended March 31,
2000 and 1999 are not necessarily indicative of the results to be
expected for the full year. There were no activity in the first quarter.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reporting amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Note 2 - Related party transactions
The Company accrued salaries payable to the Company's principal shareholder
totaling $32,500 for the quarter ended March 31, 1999 and no accrued salaries
for 2000, respectively. All amounts owed to the shareholder are payable on
demand.
Note 3 - Net loss per share
The Company's net loss per share was calculated using 5,870,439 and
5,570,439 weighted average shares outstanding for each of the quarter ended
March 31, 2000 and December 31, 1999, respectively. Although convertible
preferred stock is a common stock equivalent, with a conversion rate of
each specific series of preferred share to common, preferred stock
conversion has not been included in the calculation of earnings per share
in that to do so would be antidilutive.
<PAGE> 6
Note 4 - Mortgage
The company secured a mortgage of $1,050,000.00 to pay the previous
owner's tax liability to the State of Alabama. The Company currently has under
contract the sale of the Piedmont real estate for $6,000,000. The Company
expects to pay this obligation from the proceeds of this sale which is due to
close within the next 30 days.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SBI Communications, Inc. (the "Company"), was originally organized in
the State of Utah on September 23, 1983, under the corporate name of Alpine
Survival Products, Inc. Its name was subsequently changed to Justin Land
and Development, Inc. during October, 1984, and then to Supermin, Inc. on
November 20, 1985. On September 29, 1986, Satellite Bingo, Inc.
was the surviving corporate entity in a statutory merger with Supermin, Inc.,
a Utah corporation. In connection with the above merger, the former
shareholders of Satellite Bingo, Inc. acquired control of the merged
entity and changed the corporate name to Satellite Bingo, Inc.
Through shareholder approval dated March 10, 1988, the name was changed to
its current name of SBI Communications, Inc. On January 1, 1993, the
Company executed a plan of merger that effectively changed the Company's
state of domicile from Utah to Delaware. Although the Company is currently
a Delaware corporation, on January 31, 1998, the stockholders and Board
of Directors approved a plan to change the Company's corporate domicile to
the State of Nevada. Management anticipates executing the plan during 2000.
The Company plans to provide interactive satellite delivered
bingo games, game shows and other similar telecommunication gaming
products or services to television viewers throughout the United States.
The Company has also developed a system that can be integrated into all
standard communications channels including the World Wide Web for
interactive play throughout the World. Our Web site or the
company's URLs are http://www.sBid.net, http://www.sbicom.com,
http://www.bingo2k.com, http://www.sbicommunications.com,
http://www.globalot.com, http://www.wnet1.com, and
http://www.frontierpalace.com. Currently, the Company's is developing its
web site.
Management of it's wholly owned subsidiary (SBI Communications, Inc. of
Alabama) has a signed purchase agreement with The Brindlee Mountain
Castle Corporation of Arab, Alabama to purchase the Piedmont property for
$6,000,000.00. If the sale of the property closes in the next thiry days
as anticipated, net proceeds will be $3,940,000.
Management is also working in the panhandle of North West Florida area and
believes that the local charity Bingo market is more hospitable in this area
of Florida, rather than northeast Alabama. The company plans to open a
facilities in the SoutheastFlorida and Maryland area to lease to local
charities to conduct bingo games.
<PAGE> 7
Intenet Web Site
- ----------------
The company is establishing a secure web site allowing individuals to
become members in "A Shopping Club" with membership fees of $19.95 per
month. The shopping club will provide a variety of products, services, bingo
game sweepstakes related events and items, travels and consumer goods; the
opportunity is primarily a shopping club. No charge is made to participate
in the bingo games. Games will be available for play 24 hours a day seven
days a week and new games played every 12 minute. Winners will collect their
winning of the on-going Globalot Bingo Sweepstake games either by crediting
their account or being delivered to the member at their option. Payments for
membership will be made by credit card, bank check, debit/ATM cards and by
lec billing or "900" telephone number. The company's URLs are
http://www.bingo2k.com - http://www.sBid.com - http:/www.sbicom.com -
http://www.globalot.com - http://www.sbicommunications.com -
http://www.forntierpalace.com. The web site is hosted by the company. The
company will also provide its services to other companies desiring access
to the Internet. The company will generate additional revenues by offering web
page/site design/development, advertising, fulfilment and its web services
to others. This would include equipment and tee access to the Internet. The
Company anticipate its web site to fully operation by June 30, 2000.
The Company believes that the $7 billion dollar North America charitable
bingo industry is fragmented and inefficient, yet potentially profitable. The
Company's strategy, therefore, is to consolidate a portion of the industry
to build a World Wide Web Site that includes a 24/7 Bingo gaame and othe other
membership services. The Company believes that its industry experience,
economies of scale and financial resources will provide a competitive
advantage over competing bingo web sites operations, which should enable
the Company to effectively execute its long-term growth plan. The Company
currently has only one bingo center located in Piedmont, Alabama. The
Company intends to continue its expansion through acquisitions and
developments in other selected markets throughout the United States.
Management's goal is to open one or two other bingo centers by end of 2000.
RESULTS OF OPERATION
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS
ENDED MARCH 31, 1999.
The Company generated revenues of $-0- during its first fiscal quarter
ended March 31, 2000, as compared to $-0- in the comparable period of the prior
fiscal year. The no revenue for this period due to renovation of facility in
Piedmont and building the company's Web Site. The Company expects quarterly
revenues to increase when the new leases are in place. Also, upon the
successful operation of the Company's Web site and broadcasting of it's
interactive programming.
Direct operating costs of the Company's totaled $145,420 during the first
quarter of 2000 versus $62,500 in the comparable 1999 quarter, which
represents a 230% increase. Approximately 60% of the current period's direct
operating costs were comprised of the development of the company's web site,
which are not fixed expenses. The company's web site is located at
www.frontierpalace.com. The balance is primarily comprised of legal,
wages and management fee costs. The end of the first Quarter of 1999 was
the last bingo operation of the Piedmont facility for the company.
<PAGE> 8
General & Administrative (G&A) expenses totaled $115,420 during the
first quarter of 2000 as compared to $62,500 in the year ago period, an
increase of 85%. This expense increase of$82,920 was mainly due to the
development of the company's web site first quarter of 2000.
The Company did not record any tax expense during the current quarter or
comparable year-ago period due to tax loss carry forwards. The Company's tax
loss carryforward balance at the end of fiscal 1999 was in excess of $9 million
and, as such, the Company does not expect to incur any federal income tax
liability until this carryforward is depleted by operational profits.
Net loss for the first fiscal quarter of 1999 was $145,420 which equated
to loss per share of ($.02) Net loss for the comparable quarter of 1999 was
$62,500 which equated to loss per share of ($0.01). Virtually all losses
was due to the development of the Company's web site.
Management believes that the Company's direct operating costs and G&A expenses
are relatively fixed. As such, management will continue to seek expansion
opportunities that offer incremental operating revenues which, in turn,
favorably leverage the Company's net income performance.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company had cash and cash equivalents of $ $71,580
a increase of $71,580 from the end of fiscal 1999. The increase was due to
The Company acquiring a loan for $150,000 with terms of 10% interest for
one year. Company does not expect to make further investments in its' Piedmont,
Alabama facility and has sold to The Brindlee Mountain Castle Corporation
for $6,000,000 of cash and stock.
The Company expects its cash position to begin to increase assuming
leases are place and the Company's Internet website is operational. There can
be no assurance of the foregoing.
Accounts receivables totaled $ -0- at March 31, 2000. The Company had no
revenues as of March 31, 2000. Current liabilities totaled $2,322,878 at the end
of the quarter, but less than .05% of this total represented trade payables.
Approximately 60% of total liabilities are comprised of a note payable which
currently is due and payable. The Company has no other long-term debt.
The Company had total assets of over $4.1 million and total liabilities of
$1,500,000.00 at the end of the first quarter, with shareholder equity of
$3.6 million. The Company believes that its current capital resources,
together with expected positive operational cash flows and note collections,
will support operational requirements for the next year.
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
<PAGE> 9
ITEM 2. CHANGES IN SECURITIES
In February the Company issued 200,000 shares of common stock for
consideration of $40,000.00 for a loan to the Company. In January the
Company issued 100,000 shares of common stock to a individual for cash of
$5,000 and services of $7,500.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
CHANGE IN MANAGEMENT.
NONE
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 did not incur any problem with its
software programs, both those development internally and purchased from material
outside vendors.
SBI will continue to require its vendors of material hardware and software to
provide assurances of their year 2000 compliance.
RISKS
SBI is not currently aware of any significant year 2000 compliance problems
relating to the broadcast, Internet or other software systems that would
have a material and adverse effect on business, results of operations and
financial condition.
EXHIBITS AND REPORTS ON FORM 8-K
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
EXHIBITS DESCRIPTION
11 Statement re: computation of per share
earnings
27 Financial data schedule
(B) REPORTS ON FORM 8-K: March 29, 2000
<PAGE> 10
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SBI Communications, Inc.
Date: May 3, 2000 By: /s/Ronald Foster
-------------------------------------
Ronald Foster Chairman of the
Board and Chief Executive Officer
(principal executive officer)
<PAGE> 11
EXHIBIT 11
SBI COMMUNICATIONS, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND 1999
Three Months Three Months
Ended Ended
March 31, 2000 March 31, 1999
-------------- --------------
Shares outstanding: 5,870,439 5,570,439
Weighted average shares outstanding 5,870,439 5,570,439
Net loss $ (145,420) $ (62,500)
Preferred Dividend -- --
-------------- --------------
Total ( 145,420) (62,500)
Net loss per share $ (0.02) $ (0.01)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF SBI COMMUNICATIONS,
INC. FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 71,580
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,140,080
<PP&E> 3,940,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,140,716
<CURRENT-LIABILITIES> 2,322,879
<BONDS> 1,200,000
0
765,000
<COMMON> 5,870
<OTHER-SE> 1,696,201
<TOTAL-LIABILITY-AND-EQUITY> 4,019,080
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 115,420
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 229,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (145,920)
<EPS-BASIC> (0.02)
<EPS-DILUTED> 0
</TABLE>
