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 September 30, 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)
==============================================================================
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
==============================================================================
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 September 30, 2000 the Registrant had 13,770,878 shares of its $0.001
par value Common Stock Outstanding.
===============================================================================
October 23, 2000
===============================================================================
Table Of Contents
SBI COMMUNICATIONS, INC.
------------------------
FORM 10-QSB
-----------
INDEX
-----
Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements 3
Consolidated Balance Sheets as of
December 31, 1999 and
and September 30, 2000
Consolidated Statements of Operations 4
for the three and Nine months ended
September 30, 1999 and 2000
Consolidated Statement of Changes 4
in Shareholders' Equity for the nine
months ended September 30, 2000
Consolidated Statements of Cash Flows 5
for the nine months ended September 30,
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
2
PART I. FINANCIAL INFORMATION
- -----------------------------
INDEPENDENT ACCOUNTANTS' REPORT
-------------------------------
We have reviewed the accompanying consolidated balance sheet, statement of
operations, and cash flows of SBI Communications, Inc., and subsidiaries as of
September 30, 2000, and for the three-months and nine-months period then ended.
These financial statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by the
American Institure of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally acce[ted auditing standards, the
objective of which is the expression of an opinion reguarding the financial
statements taken as a whole. Accordingly, we do not express such as opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be
conformity with generally accepted accounting principles.
/s/ Jay J. Shapiro, CPA P.C.
- ----------------------------
JAY J. SHAPIRO, C.P.A.
A professional corporation
October 20, 2000
Encino, California
Financial Statements
- --------------------
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
---------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(Unaudited) (Audited)
Sept. 30, Dec. 31,
2000 1999
---- ----
ASSETS
------
Current assets:
Cash $ 22,542 $ -0-
Inventory 20,500
-------- --------
44,541 -0-
Property and equipment, at real
sale value: $ 4,015,000 $ 3,940,000
Other assets:
Fixed Assets: 20,500 -0-
------------ ------------
$ 4,080,041 $ 3,940,000
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Note payable to trust managed by a
shareholder $ 150,000 $ 150,000
Mortgage note payable 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 295,000 12,698
Accrued interest payable 299,000 199,000
Accounts Payable 76,000 58,000
---------- ----------
Total liabilities $2,551,181 $2,150,879
----------- -----------
Stockholders' equity:
Preferred stock, par value $5.00; 10,000,000
shares authorized;
43,000 and 153,000 shares issued and
outstanding at Sepetember 30, 2000 and
December 31, 1999, respectively; $215,000 $765,000
Common stock, par value $.001; 40,000,000
shares authorized; 13,770,878 shares
issued and outstanding at September 30,
2000 and 5,570,439 as of December 31, 1999 6,885 5,570
Paid in capital 4,294,568 3,559,318
Accumulated deficit ( 2,987,593) ( 2,540,767)
------------- ------------
1,528,860 1,789,121
------------- ------------
$ 4,080,041 $ 3,940,000
See accompanying notes to consolidated financial statements.
3
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
---------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------
(UNAUDITED)
-----------
Nine Months Ended Sept. 30, Three Months Ended Sept. 30,
--------------------------- --------------------------
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
Revenues $ -0- $ -0- $ -0- $ -0-
Expenses:
General
and administrative 289,335 98,000 112,188 33,500
Website Development 102,491 -0- 38,000 -0-
Interest and
finance expenses 100,000 120,000 35,000 40,000
---------- -------- --------- --------
491,826 218,000 185,188 73,000
---------- -------- --------- --------
Net loss ($ 491,826) ($ 218,000) (185,188) ($ 73,000)
=========== ========== ========= ==========
Net loss per share $ (0.04) $ (0.02) $ (0.01) $ (0.00)
=========== ========== ========= =========
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
---------------------------------------
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
----------------------------------------------
Balance December 31, 1999 Additional
Common Preferred Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
------ ------ ------ ------ ------- -------
11,140,878 $5,570 153,000 $765,000 $3,559,318 ($2,540,767)
Net loss for 9 months ended Sept. 30, 2000: (350,261)
Shares Issued for services:
1,130,000 $ 565 $ 141,000 $(141,565)
Shares Issued for Cash:
400,000 200 44,800 45,000
- --------- -------- -------- --------- ----------- -------------
conversion
of prefered
stock
1,100,000 560 (110,000) (550,000) 549,450 5
- --------- -------- -------- --------- ---------- -------------
13,770,87 $ 6,885 43,000 $215,000 $4,294,568 ($2,987,593)
See accompanying notes to consolidated financial statements.
4
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
---------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------
(UNAUDITED)
-----------
2000 1999
------ ------
Cash flows from operating activities:
Net (loss) ($ 491,826) ($218,000)
Adjustments to reconcile net loss to cash
provided (used) by operating activities:
Stock issued for services: $141,565 -0-
Increase in accounts payable: 120,000 218,000
Inventory 20,500
--------- -----------
Cash (used) by operating activities: ($209,761) $ -0-
Cash flows from investing activities:
Renovation Costs ( 75,000) -0-
Purchase of fixed assets: ( 20,000) -0-
---------- ---------
Cash flow (used) by finanicing activities ( 95,000) -0-
Loans from shareholders/affiliates: 282,302 -0-
Sale of common stock 45,000 -0-
---------- ---------
Cash flows provided by financing activities: $ 327,302 -0-
Net increase in cash $ 22,541 -0-
Cash at beginning of period: -0- -0-
----------- ---------
Cash at end of period: $ 22,541 $ -0-
============ ===========
Supplemental information:
Income taxes paid: $ -0- $ -
Interest paid $ -0- $ 24,311
============ ===========
Items not requiring use of cash:
Conersion of preferred stock 550,000 -0-
============= ===========
See accompanying notes to consolidated financial statements.
5
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
---------------------------------------
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------------------
SEPTEMBER 30, 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
September 30, 2000 financial statememt 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 and nine months ended
September 30, 2000 and 1999 are not necessarily indicative of the results to be
expected for the full year.
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.
In August 2000 the Company split its common stock 2 for 1. All financial
data in these statements reflects the post-split basis.
Note 2 - Related party transactions
The Company accrued salaries payable to the Company's principal shareholder
totaling $97,500 for the nine months ended September 30, 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 13,770,878 weighted
average shares outstanding for ended September 30, 2000 and 11,140,878 for
September 30, 1999 on a post split basis. 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.
6
Note 4 - Mortgage
The company borrowed $1,050,000.00 to pay State of Alabama, on behalf of
Cranberry-Magnetite/Broadway Gas Company, the previous owner tax liability.
The Company is delinquient on the repayment of this obligation.
NOTE 5 - Subsequent Events
In Octoer 2000, the Company entered into an agreement to issue
75,709,965 shares of common stock to acquire 100% ownership Valencia
Entertainment International LLC ("Valencia").
This transaction will be treated as a reverse acquisition merger for accounting
purposes. If the transaction would have taken pace as of January 1, 2000, the
Company's proforma consolidated net assets would be $9,953,000, the shares
outstanding 88,040,843 net income for nine months ended September 30, 2000 of
$500,000, and net income per share of $0.00.
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.
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.
The sale of this property in Piedmont, Alabama for net proceeds of
$3,940,000, was pending as of June 30, 2000. Subsquent to June 30, 2000, the
Company decided to develop the property as an Auto Auction (the "Auction")
and cancelled the sale. The Company spent $75,000 for renovation of this
property for the Auto Auction in September 2000.
7
Intenet Web Site
- ----------------
The company established 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 Satellite 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 -
The web site is hosted by the Company and the Company will provide its own
fulfillment. 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 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.
As discussed in Item 4 and Note 5 to the financial statements, the
Company will issue 84.6 million shares of common stock to Valencia for 100%
ownership of this company. Valencia had revenues and earnings of $1,474,000
and $401,000 and $1,272,000 and $212,000 for years ended December 31, 1999
and 1998.
RESULTS OF OPERATION
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1999.
The Company generated revenues of $-0- during its first third fiscal
quarter ended September 30, 2000, as compared to $-0- in the comparable period
of the prior fiscal year. The Company expects to generate revenue upon the
successful operation of the Company's Web site the broadcasting of its
interactive programming, and the operations of Valencia.
General and administrative costs of the Company's totaled $150,000
during the third quarter of 2000 versus $33,000 in the comparable 1999
quarter, which represents a 433% increase. Most of the current period's
costs were comprised of the development of the company's web site,
which are not fixed expenses. The balance is primarily comprised of
professional and personal cost. The end of the first Quarter of 1999 was
the last bingo operation of the Piedmont facility for the company and the
Company was inactive after that date. The nine months ended September 30,
2000 reflects $294,000 increase over the 1999 period due to website
development cost and professional fees.
8
Interest and financing cost totaled $35,000 during the third quater of
2000 as compared to $40,000 in the comparable 1999 period,and for the nine
months ended September 30, 2000, such costs were $100,000 versus $120,000 for
1999.
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 nine months of 2000 was $492,000 which equated
to loss per share of ($.04) Net loss for the comparable quarter of 1999 was
$218,000 which equated to loss per share of ($0.02). Virtually all 2000
loss was due to the development of the Company's web site and the renovation
of the Auction Plaza in Pidemont and professional fees. Including the third
quarter loss of ($0.01) per share vs ($0.00) per share in the comparable 1999
quarter.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At September 30, 2000, the Company had cash and cash equivalents of
$22,541 a increase of $22,541 from the end of June 30, 2000. The increase
was due to sale of stock and loan from principal shareholder less fiscal 2000
operating expenses.
The Company expects its cash position to increase when the Company's
Internet website is operational and Valencial is in full operation. There can
be no assurance of the foregoing. The Company intends to finance future
acquisitions primarily through the use of stock and, to a lesser extent, cash
and notes.
The Company has working capital deficit of $2.5 million at September 30, 2000.
The Company believes that its current capital resources, together with
expected positive operational cash flows and additional advances by major
stockhokder, will support operational requirements for the next year.
PART II--OTHER INFORMATION
- --------------------------
ITEM 1. LEGAL PROCEEDINGS
NONE
9
ITEM 2. CHANGES IN SECURITIES
In February the Company issued 400,000 shares of common stock for
the repayment of $40,000.00 for a loan to the Company. In January the
Company issued 200,000 shares of common stock to a individual for cash of
$5,000 and services of $7,500. In June 2000, the Company issued for
400,000 shares consulting services rendered. In August 2000 the Company
issued 130,000 shares for goods and services rendered. All 1,130,000 shares
issued are valued at $0.25 per share. In addition, 400,000 shares were
issued for $45,000 in cash.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A preliminary proxy statement on schedule 14C proxy filing. Terms of
proxy is as follows which has been approved by a majority of the companys
shareholders. An informational statement will be provided to all current
shareholders of the company.
A. Acquisition of Valencia Intertainment International.
B. Company will change its name to Val Com, Inc.
C. Change the capital structure of the company from 40,000,000 common shares
to 100,000,000 shares. D. Elect four directors to the board of directors.
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: July 20, 24, & 28 2000
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: October 23, 2000 By: /s/Ron Foster
-------------------------------------
Ron Foster, Chairman of the
Board and Chief Executive Officer
(principal executive officer)