Securities and Exchange Commission
Washington, D.C., 20549
FORM 10-QSB/A
(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
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SBI Communications, Inc.
(Name of small business issuer specified in its charter)
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Delaware 58-1700840
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
1239 South Glendale Avenue, Glendale California 91205
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(Address of Principal executive offices) (Zip code)
(818) 550-6181
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Issuer's telephone number
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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
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(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 12,323,878 shares of its $0.001
par value Common Stock Outstanding.
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October 23, 2000
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Table Of Contents
SBI COMMUNICATIONS, INC.
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FORM 10-QSB
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INDEX
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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 8
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote 9
of Security Holders
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
2
PART I. FINANCIAL INFORMATION
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INDEPENDENT ACCOUNTANTS' REPORT
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We have reviewed the accompanying consolidated balance sheet, statement of
operations, stockholders'equity 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.
As indicated in Note 7, the stockholders' equity has been restated.
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.
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JAY J. SHAPIRO, C.P.A.
A professional corporation
December 21, 2000, except for Note 7 as to which the date is February 9, 2001.
Encino, California
Financial Statements
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SBI COMMUNICATIONS, INC. AND SUBSIDIARY
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CONSOLIDATED BALANCE SHEETS
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(Unaudited) (Audited)
Sept. 30, Dec. 31,
2000 1999
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ASSETS
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Current assets:
Cash $ 22,542 $ -0-
Inventory 20,500
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44,541 -0-
Property and equipment, at real
sale value: $ 4,015,000 $ 3,940,000
Other assets:
Fixed Assets: 20,500 -0-
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$ 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 460,253 95,136
Accrued interest payable 299,000 199,000
Accounts Payable 76,000 58,000
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Total liabilities $2,716,434 $2,233,317
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Stockholders' equity:
Preferred stock, par value $5.00; 10,000,000
shares authorized;
1,543,000 and 1,653,000 shares issued and
outstanding at Sepetember 30, 2000 and
December 31, 1999, respectively; $7,715,000 $8,265,000
Common stock, par value $.001; 40,000,000
shares authorized; 12,323,878 shares
issued and outstanding at September 30,
2000 and 9,693,878 as of December 31, 1999 6,161 4,846
Paid in capital 4,175,039 3,477,609
Accumulated deficit ( 10,532,593) (10,040,767)
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1,363,607 1,706,121
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$ 4,080,041 $ 3,940,000
See accompanying notes to consolidated financial statements.
3
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
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CONSOLIDATED STATEMENTS OF OPERATIONS
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FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,
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(UNAUDITED)
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Nine Months Ended Sept. 30, Three Months Ended Sept. 30,
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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
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491,826 218,000 185,188 73,000
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Net loss ($ 491,826) ($ 218,000) (185,188) ($ 73,000)
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Net loss per share $ (0.04) $ (0.02) $ (0.01) $ (0.00)
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SBI COMMUNICATIONS, INC. AND SUBSIDIARY
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CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY RESTATED
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Balance December 31, 1999 Additional
Common Preferred Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
------ ------ ------ ------ ------- -------
9,693,878 $4,846 1,653,000 8,265,000 $3,477,604 ($10,040,767)
Net loss for 9 months ended Sept. 30, 2000: (405,576)
Shares Issued for services:
950,000 $ 475 $ 85,775 $ (86,250)
Shares Issued for Cash:
400,000 200 44,800 45,000
180,000 475 17,410 17,410
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conversion
of prefered
stock
1,100,000 560 (110,000) (550,000) 549,450
- --------- -------- -------- --------- ---------- -------------
12,323,878 $ 6,161 1,543,000 $7,715,000 $4,175,039 ($10,532,593)
See accompanying notes to consolidated financial statements.
4
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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FOR THE NINE MONTHS ENDED SEPTEMBER 30,
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(UNAUDITED)
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2000 1999
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Cash flows from operating activities:
Net (loss) ($ 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
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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-
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Cash flow (used) by finanicing activities ( 95,000) -0-
Loans from shareholders/affiliates: 282,302 -0-
Sale of common stock 45,000 -0-
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Cash flows provided by financing activities: $ 327,302 -0-
Net increase in cash $ 22,541 -0-
Cash at beginning of period: -0- -0-
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Cash at end of period: $ 22,541 $ -0-
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Supplemental information:
Income taxes paid: $ -0- $ -
Interest paid $ -0- $ 24,311
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Items not requiring use of cash:
Conersion of preferred stock 550,000 -0-
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See accompanying notes to consolidated financial statements.
5
SBI COMMUNICATIONS, INC. AND SUBSIDIARY
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
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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 12,323,878 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's tax liability.
NOTE 5 - Property and equipment
Property and equinment consists of the following at Setpember 30, 2000
Land $ 832,500
Building $3,182,500
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$4,015,000
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NOTE 6 - Subsequent Events
In Octoer 2000, the Company entered into an agreement to issue
75,710,000 shares of common stock to acquire 100% ownership Valencia
Entertainment International LLC ("VEI").
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 $10,221,168, the shares
outstanding 88,034,843 net income for nine months ended September 30, 2000 of
861,495 and net income per share of $0.00.
NOTE 7 - Restatement of Financial Statements
The balance sheet and statement of stockholders' equity as of September
30, 2000 and for the nine month then ended have been restated to reflect a
reversal of preferred stock cancellation. Originally in 1998, 1,500,000 shares
of preferred stock with a par value of $5.00 per share was issued in connection
with he purchase of the Company's building and land in Piedmont, Alabama. The
perferred shares were cancelled due to non-performance under the sales
contract. It now has been determinded that this cancellation should not be
recorded unless or until the preferred stock certificates are surrendered
to the Company. The reversal is necessary for the financial statement to be
in conformity with General Accepted Accounting principles.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Plan of Operation:
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During he next 12 months, SBI plans to continue to market and host its
auction for automobiles and antique and collectible merchandisc using its
80,000 square foot facility located in Piedmont, Alabama. For the next 12
months, the auction will require an additional $50,000 in capital inprovement
and approximately $150,000 for marketing and advertising. In addition, SBI
is deliquent in its mortgage note payable in the amount of $1,050,000. plus
accrued interest of $200,000, which the private party lender has agreed to
extend until december 31, 2001.
Since the inplementation of the auction business plan, SBI has not generated
significant revenues, thus in order for SBI to satisfy its cash requirment
for the nest 12 months, it will have to borrow or raise additional funds.
Currently, management is in the process of looking into refinancing the
existing mortgage loan and for operating cash flow for the next 12 months.
In the event SBI is unable to obtain favorable financing, VEI has agreed to
provide any necessary financing for the next 12 fmonths.
For the next 12 months, SBI does not plan to purchase or sell any significant
property or equipment and does not expect any significant changes in the number
of employees.
September 30, 2000 and 1999
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SBI generated revenues of $0.00 during its third quarter ended September 30,
2000, as compared to $0.00 in the comparable period of the prior year. SBI
wxpects to generat revenuye from its on-site auction in the Piedmont facility
and through the use of its website beginning in 2001.
General an administratives cost of SBI 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 cost were comprised of the
development of the SBI's website, which are not fixed expense. The balance is
primarily comparised of professional cost. The nine months ended september 30,
2000 reflects $294,000 increase ofer the 1999 period due to website development
cost and professional fees.
Interest and financing cost totaled $35,000 during the third quarter of 2000
as copared to $40,000 in the comparable 1999 period and for the nine months
ended Setpember seotember 30, 2000, such costs were $100,000 versus $120,000
for 1999.
SBI did not record any tax expense during the current quarter or comparable
year-ago period due to tax loss carry forwards. SBI's tax loss carry forward
balance at the end fo fiscal 1999 was in excess of $9 milion.
Net loss for the nine months of 2000 was $492,826. The loss was primarily due
to the development of SBI's website and the renvoation of the auction facilty
in Piedmont and professional fees.
The sale of the property located in Pidedmont, Alabama for net proceeds of
$3,040,000. pending as of June 30, 2000 was subsequently cancelled because
the purchaser was unable to obtain financeing under favorable terms. SBI
has decided to develop the property as a venue for auto and autique and
collectible merchandise auction. SBI spent $75,000. for renovation of this
property in Setember 2000.
7
PART II--OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
NONE
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.
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NONE
IMPACT OF THE YEAR 2000
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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
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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
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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
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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
8
SIGNATURES
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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
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Ron Foster, Chairman of the
Board and Chief Executive Officer
(principal executive officer)