UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2004
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 0-28363
SBS Interactive, Co.
(Exact name of registrant as specified in its charter)
Florida 65-0705830
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
4211 Yonge Street, Suite 235
Toronto, Ontario M2P 2A9
Canada
(Address of principal executive offices)
(Zip Code)
(416) 223-9293
(Registrant's telephone number including area code)
N/A
(Former name, former address and former fiscal year, if
changed since last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURNG THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. YES |_| NO |_|
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: The registrant had 20,279,557 shares
of common stock, $0.001 par value, issued and outstanding as of August 12, 2004.
Transitional Small Business Disclosure Format (Check one): Yes |X| No |_|
SBS Interactive, Co.
INDEX
PAGE
PART I
NUMBER
Item 1 - Financial Information
Consolidated Balance Sheet for the period ended June 30, 2004 1
Consolidated Statements of Operations for the Three Months
and Six Months Ended June 30, 2004 and 2003 and from inception 2
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2004 and 2003 and from inception 3
Consolidated Statements of Stockholders' Deficit from inception
to June 30, 2004 4-5
Notes to Financial Statements 6-15
Item 2 - Management's Discussion and Analysis of Financial Condition and 16
Results of Operations
Item 3. - Disclosure Controls and Procedures 21
PART II
Item 1 - Legal Proceedings 21
Item 2 - Changes in Securities 21
Item 3 - Defaults Upon Senior Securities 21
Item 4 - Submission of Matters to a Vote of Security Holders 21
Item 5 - Other Information 22
Item 6 - Exhibits and Reports on Form 8-K 22
Signature Page
SBS Interactive, Co.
(A Development Stage Enterprise)
Consolidated Balance Sheet - Unaudited
- --------------------------------------------------------------------------------------
June 30 2004
- --------------------------------------------------------------------------------------
Assets
Current Asset:
Cash and cash equivalents $ 2,116
Property and equipment, net 9,153
Prepaid expenses 10,000
Deposits 1,620
- --------------------------------------------------------------------------------------
$ 22,889
- --------------------------------------------------------------------------------------
Liabilities, and Stockholders' Deficit
Current Liabilities:
Accounts payable $ 215,657
Accrued interest 14,733
Accrued compensation 4,500,000
Notes payable, related party 200,000
- --------------------------------------------------------------------------------------
Total current liabilities 4,930,390
Commitments and Contingencies --
Stockholders' Deficit:
Common stock, $0.001 par value; 50,000,000 shares authorized;
20,109,004 shares issued and outstanding 20,110
Additional paid-in capital 13,679,179
Deferred compensation (34,000)
Other comprehensive loss - foreign currency translation (35,591)
Deficit accumulated during the development stage (18,537,199
- --------------------------------------------------------------------------------------
Total stockholders' deficit (4,907,501)
- --------------------------------------------------------------------------------------
$ 22,889
- --------------------------------------------------------------------------------------
1
SBS Interactive, Co.
(A Development Stage Enterprise)
Consolidated Statements of Operations - Unaudited
For the
three months For the
ended six months
June 30, ended
2004 June 30, 2004
- ----------------------------------------------------------------------------------------------------------
Operating expenses:
Selling, general and administrative $ 245,812 $ 589,815
Non-cash compensation 466,288 935,288
Debt extinguishment costs to related parties 4,388,000 10,574,373
- ----------------------------------------------------------------------------------------------------------
Total operating expenses 5,100,100 12,099,476
- ----------------------------------------------------------------------------------------------------------
Loss from operations (5,100,100) (12,099,476)
Interest income -- 1
Interest expense (1,880) (11,141)
Non-cash interest expense from amortization of debt discount (24,000) (563,621)
- ----------------------------------------------------------------------------------------------------------
Net loss $(5,125,980 ) $(12,674,237)
- ----------------------------------------------------------------------------------------------------------
Net loss per common share (basic and diluted) $ (.26 ) $ (0.74)
- ----------------------------------------------------------------------------------------------------------
Weighted average number of common shares outstanding 20,109,004 17,114,241
- ----------------------------------------------------------------------------------------------------------
For the
For the six months From
three months ended Sep. 20, 1996
ended June 30, (inception)
June 30, 2003 2003 to June 30,
(restated ) (restated) 2004
- -------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Selling, general and administrative $ 21,991 $ 46,380 $ 1,272,327
Non-cash compensation 346,500 346,500 5,720,288
Debt extinguishment costs to related parties -- -- 10,574,373
- -------------------------------------------------------------------------------------------------------------------------
Total operating expenses 368,491 392,880 17,566,988
- -------------------------------------------------------------------------------------------------------------------------
Loss from operations
(368,491 (392,880 (17,566,988
Interest income -- -- 2,239
Interest expense (11,633) (13,675) (39,700)
Non-cash interest expense from amortization of debt discount (20,631) (41,492) (932,750)
- -------------------------------------------------------------------------------------------------------------------------
Net loss $ (400,755) $ (448,047) $(18,537,199)
- -------------------------------------------------------------------------------------------------------------------------
Net loss per common share (basic and diluted) $ (.04 ) $ (.04 )
- -------------------------------------------------------------------------------------------------------------------------
Weighted average number of common shares outstanding 10,198,184 10,198,184
- -------------------------------------------------------------------------------------------------------------------------
2
SBS Interactive, Co.
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows - Unaudited
For the From
For the six months Sep. 20,
six months ended 1996
ended June 30, (inception)
June 30, 2003 to June 30,
2004 restated 2004
- ----------------------------------------------------------------------------------------------------------------------------
Operating activities:
Net loss $(12,674,237) $ (448,047 ) $ (18,537,199 )
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 3,464 4,761 13,318
Translation adjustments (26,254) (12,460) (16,915)
Non-cash interest, beneficial conversion feature 563,621 50,492 932,750
Issuance of equity instruments for extinguishment of debt 6,186,373 -- 6,186,373
Issuance of equity instruments for services 1,173,288 346,500 5,858,288
Change in assets and liabilities:
Deposits (208) (81) (530)
Prepaid expenses (10,000) -- (10,000)
Accrued compensation 4,150,000 4,150,000
Accrued interest 27,128 4,753 55,363
Accounts payable 82,252 (30,565) 79,577
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (524,573) (84,647) (1,288,975)
- ----------------------------------------------------------------------------------------------------------------------------
Investing activities:
Cash from acquired subsidiaries -- 1,980
Purchase of property and equipment (11,253) (1,183) (11,639)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities (11,253) (1,183) (9,659)
- ----------------------------------------------------------------------------------------------------------------------------
Financing activities:
Proceeds from issuance of common stock -- -- 315,160
Proceeds from issuance of debt to related parties -- -- 39,840
Proceeds from issuance of debt, shareholders 510,000 78,786 945,750
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 510,000 78,786 1,300,750
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (25,826) (7,044) 2,116
Cash and equivalents, beginning of period 27,942 7,419 0
- ----------------------------------------------------------------------------------------------------------------------------
Cash and equivalents, end of period $ 2,116 $ 375 $ 2,116
- ----------------------------------------------------------------------------------------------------------------------------
3
SBS Interactive, Co.
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows - Unaudited
June 30, 2004 2003
- --------------------------------------------------------------------------------
Cash paid for interest $ 322 $ 2,041
- --------------------------------------------------------------------------------
Cash paid for taxes -- --
Non-cash investing and financing activities:
Issuance of stock for services 823,288 --
Issuance of stock for accrued compensation 350,000 --
Conversion of debt to warrants 6,186,373 --
Conversion of debt to equity 1,033,475 --
Non-cash interest, beneficial conversion feature 434,000 48,000
4
SBS Interactive, Co.
(A Development Stage Enterprise)
Consolidated Statements of Stockholders' Deficit - Unaudited
Other
Comprehensive
Common Stock Deferred Loss - foreign
Shares Amount Compensation Currency
- ----------------------------------------------------------------------------------------------------------------------------
Common stock issued for cash (09/20/1996) 500,000 $ 500 $ -- $ --
Common stock issued for cash (10/01/1996 to 17,200 17 5,143
12/31/1996)
Net loss during 1996
- ----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 517,200 517 -- --
Net loss during 1997
- ----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 517,200 517 -- --
Net loss during 1998
- ----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 517,200 517 -- --
Common stock issued for cash 6,000,000 6,000
Net loss during 1999
- ----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 6,517,200 6,517 -- --
Net loss during 2000
- ----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000 6,517,200 6,517 -- --
Common stock issued for services (11/30/2001) 500,000 500
Net loss during 2001
- ----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2001 7,017,200 7,017 -- --
Common stock issued for business acquisition 3,180,984 3,181
(10/29/2002)
Debt discount arising from beneficial
conversion feature
Net loss during 2002
- ----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2002, restated 10,198,184 10,198 -- --
Common stock issued for services (07/01/2003) 100,000 101
Debt discount arising from beneficial
conversion feature
Common stock issued for services (11/20/2003) 1,000,000 1,000
Stock discount expense
Deferred compensation (100,000)
Foreign currency translation (9,339)
Net loss during 2003
- ----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2003 11,298,184 $ 11,299 (100,000) $ (9,339)
Common stock issued for services (02/09/2004) 3,500,000 3,500
Warrants issued for services (02/09/2004)
Warrants issued to retire outstanding debt
(03/17/2004)
Common stock issued to retire debt (03/17/2004) 3,741,111 3,741
Common stock issued to retire debt (03/19/2004) 589,709 590
Shares issued for services (02/04/04 and 500,000 500
02/19/04)
Shares issued for services (03/29/04) 250,000 250
Shares issued for services (03/29/04) 230,000 230
Warrants issued for services (04/01/04)
Warrants issued for services (04/01/04)
Warrants issued for services (05/01/04)
Warrants issued for services (06/01/04)
Warrants issued for services (06/29/04)
Debt discount arising from beneficial
conversion feature
Deferred compensation 66,000
Foreign currency translation (26,252)
Net loss period ended June 30, 2004
- ----------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2004 20,109,004 $ 20,110 (34,000) $ (35,591)
- ----------------------------------------------------------------------------------------------------------------------------
Deficit
Accumulated
Additional During the
Paid in Development Total Equity
Capital Stage Deficit)
- -------------------------------------------------------------------------------------------------------
Common stock issued for cash (09/20/1996) $ 9,500 $ -- $ 10,000
Common stock issued for cash (10/01/1996 to 5,160
12/31/1996)
Net loss during 1996 (15,160) (15,160)
- -------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 14,643 15,160
Net loss during 1997 (15,160) (15,160)
- -------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 14,643 (15,160) 0
Net loss during 1998 (17,087) (17,087)
- -------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 14,643 (32,247) (17,087)
Common stock issued for cash 294,000 300,000
Net loss during 1999 (54,829) (54,829)
- -------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 308,643 (87,076) 228,084
Net loss during 2000 (55,545) (55,545)
- -------------------------------------------------------------------------------------------------------
Balance at December 31, 2000 308,643 (142,621) 172,539
Common stock issued for services (11/30/2001) 3,874,500 3,875,000
Net loss during 2001 (3,941,567) (3,941,567)
- -------------------------------------------------------------------------------------------------------
Balance at December 31, 2001 4,183,143 (4,084,188) 105,972
Common stock issued for business acquisition (313,938) (310,757)
(10/29/2002)
Debt discount arising from beneficial 33,000 33,000
conversion feature
Net loss during 2002 (226,317) (226,317)
- -------------------------------------------------------------------------------------------------------
Balance at December 31, 2002, restated 3,902,205 (4,310,505) (398,102)
Common stock issued for services (07/01/2003) 346,399 346,500
Debt discount arising from beneficial 465,750 465,750
conversion feature
Common stock issued for services (11/20/2003) 109,000 110,000
Stock discount expense 103,500 103,500
Deferred compensation (100,000)
Foreign currency translation (9,339)
Net loss during 2003 (1,552,457) (1,552,457)
- -------------------------------------------------------------------------------------------------------
Balance at December 31, 2003 4,926,854 $ (5,862,962) $ (1,034,148)
Common stock issued for services (02/09/2004) 346,500 350,000
Warrants issued for services (02/09/2004) 48,000 48,000
Warrants issued to retire outstanding debt 6,186,373 6,186,373
(03/17/2004)
Common stock issued to retire debt (03/17/2004) 904,331 908,072
Common stock issued to retire debt (03/19/2004) 124,813 125,403
Shares issued for services (02/04/04 and 109,500 110,000
02/19/04)
Shares issued for services (03/29/04) 24,750 25,000
Shares issued for services (03/29/04) 252,770 253,000
Warrants issued for services (04/01/04) 225,854 225,854
Warrants issued for services (04/01/04) 22,355 22,355
Warrants issued for services (05/01/04) 17,293 17,293
Warrants issued for services (06/01/04) 12,067 12,067
Warrants issued for services (06/29/04) 43,719 43,719
Debt discount arising from beneficial 434,000 434,000
conversion feature
Deferred compensation 66,000
Foreign currency translation (26,252)
Net loss period ended June 30, 2004 (12,674,237) (12,674,237)
- -------------------------------------------------------------------------------------------------------
Balance at June 30, 2004 13,679,179 $(18,537,199) $ (4,907,501 )
- -------------------------------------------------------------------------------------------------------
5
SBS Interactive, Co.
(A Development Stage Enterprise)
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with Article 310 of Regulation S-B. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. All adjustments which,
in the opinion of management, are considered necessary for a fair presentation
of the results of operations for the periods shown are of a normal recurring
nature and have been reflected in the unaudited condensed financial statements.
The results of operations for the periods presented are not necessarily
indicative of the results expected for the full fiscal year or for any future
period. The information included in these unaudited condensed financial
statements should be read in conjunction with the financial statements and
accompanying notes included in the SBS Interactive, Co. and subsidiaries (the
"Company") Annual Report on Form 10-KSB for the fiscal year ended December 31,
2003.
Nature of Operations
SBS Interactive, Co. (the "Company") was incorporated on September 20, 1996
under the laws of the State of Florida as Cosmetics Consultants Corp. for the
purpose of marketing sales and support services to retailers of cosmetic
companies. In November of 1999, the Company changed its activities to acting as
a consultant to internet related enterprises that were seeking capital. In July,
2002 the Company changed its activities to operate as a consumer electronics
company focused on developing, marketing and licensing products that enabled the
consumers to use their televisions as an interactive medium. The Company has
been operating as a development stage enterprise since its inception and is
devoting substantially all its efforts to the ongoing development of its
business, which is operated by its wholly-owned subsidiary, SBS Interactive,
Inc.
On November 25, 1996, Cosmetics Consultants Corp. changed its name to Lomillo
Consultants Corp. On July 17, 1997, the Company amended and restated its
articles of incorporation and changed its name to Inet Commerce Conduit Corp. On
July 30, 2002, the Company amended and restated its articles of incorporation
and changed its name to SBS Interactive, Co.
6
SBS Interactive, Co.
(A Development Stage Enterprise)
Summary of Significant Accounting Policies
SBS Interactive, Inc. ("SBS, Inc."), the Company's wholly owned subsidiary, was
incorporated on August 3, 2000 under the laws of the State of Nevada. SBS,
Inc.'s line of business is to design, develop and manufacture technology which
captures a user's image and local background environment and composites that
image side-by-side with a pre-recorded image. SBS, Inc. has been operating as a
development stage enterprise since its inception and is devoting substantially
all its efforts to the ongoing development of its business.
In May, 2002, SBS Inc. acquired High Plateau Holdings, Inc. ("High Plateau"), as
a wholly owned subsidiary. High Plateau was incorporated on April 3, 1974 under
the laws of Canada and had been operating as a development stage enterprise
since its inception devoting substantially all its efforts to its ongoing
development. High Plateau has had no significant transactions since inception
other than the acquisition and development of its technology (United States
Patent Number 6,072,933).
Principles of Consolidation
The unaudited consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, SBS Interactive, Inc. and High
Plateau Holdings, Inc. All material intercompany accounts and transactions have
been eliminated.
Reclassifications
Certain prior year amounts have been reclassified to conform to the 2004
presentation.
Loss per Share
Basic loss per share is computed on the basis of the weighted average number of
common shares outstanding during each year. Diluted loss per share is computed
on the basis of the weighted average number of common shares and dilutive
securities outstanding. Dilutive securities having an antidilutive effect on
diluted loss per share are excluded from the calculation.
Stock based Compensation
The Company accounts for its stock option plans using the fair value based
method of accounting, under which compensation expense has been recognized for
stock option awards granted. For purposes of pro forma disclosures under FAS
123, Accounting for Stock-Based Compensation, as amended by FAS 148, Accounting
for Stock-Based Compensation--Transition and Disclosure, the estimated fair
value of the stock options is amortized to compensation expense over the
options' vesting period. No pro forma disclosures have been made since the fair
value based method has been applied to all outstanding and unvested awards in
each period.
7
SBS Interactive, Co.
(A Development Stage Enterprise)
Summary of Significant Accounting Policies
The Company estimates the fair value of each stock option at the grant date by
using the Black-Scholes option pricing model based on the following assumptions:
June 30, 2004 2003
----
Risk free interest rate 4 % - %
Expected life 3 years --
Expected volatility 208-216 % - %
Dividend yield 0.0 --
The Black-Scholes option-pricing model was developed for use in estimating the
fair value of traded options, which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's stock options and warrants have characteristics different from
those of traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of such stock options.
8
SBS Interactive, Co.
(A Development Stage Enterprise)
Notes to the Unaudited Consolidated Financial Statements
1. Going Concern
The accompanying unaudited financial statements were prepared assuming that the
Company will continue as a going concern. This basis of accounting contemplates
the realization of assets and the satisfaction of liabilities in the normal
course of operations. Since inception, the Company has incurred losses of
approximately $18.5 million and, at June 30, 2004, has a working capital deficit
of approximately $4,928,274. The Company presently has no established source of
revenue. All of these factors raise substantial doubt about the Company's
ability to continue as a going concern.
The Company's continued existence is dependent upon its ability to resolve its
liquidity problems, principally by obtaining additional debt financing and
equity capital. Management plans to raise additional capital through private
equity financing by selling shares of the Company's common stock or through debt
financing. Management believes that the Company will need approximately $1
million to provide it with the ability to continue in existence for the next
twelve months. Accordingly, there are no assurances that the Company will be
successful in achieving the above plans, or that such plans, if consummated,
will enable the Company to obtain profitable operations or continue as a going
concern. The unaudited consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the possible inability of the Company to continue as a going
concern.
9
SBS Interactive, Co.
(A Development Stage Enterprise)
Notes to the Unaudited Consolidated Financial Statements
2. Note Payable, Notes payable consist of the following:
Shareholders
June 30, 2004
- --------------------------------------------------------------------------------
Note payable to related party, due on $100,000
demand, bearing interest at 5% per annum,
unsecured
Note payable to related party, due on $100,000
--------
demand, bearing interest at 6% per annum,
unsecured
200,000
Less current portion 200,000
Long-term $ --
- --------------------------------------------------------------------------------
In January, 2004 the note payable to Arthur Cohn was extended with a stated
interest rate of 6% per annum and a due date of April 30, 2004. This note
allowed the Company to borrow up to $841,750 in the aggregate, was secured by
all of the Company's assets and was convertible immediately at the holder's
discretion into shares of the Company's common stock equal to the lesser of $.04
per share or 60% of the average closing prices for the 5 trading days
immediately prior to the applicable conversion date. In accordance with EITF
98-5 and 00-27, the note (after consolidating several notes into the January
2004 note)contained a beneficial conversion feature, which was calculated at an
estimated fair value of $410,000 (limited to the face amount of the new debt
acquired) and was being amortized over the life of the note. The Company issued
3,741,111 shares of the Company's common stock upon conversion of this debt at
$0.22 per share on March 17, 2004.
In connection with these financings, the Company recorded an aggregate charge to
non-cash interest, including amortization of debt discount, in the amount of
$563,621 and $41,492 (restated) for the six months ended June 30, 2004 and 2003,
respectively.
In May and June, 2004 the Company received loans from Arthur Cohn with a stated
interest rate of 6% per annum. The loans are due upon demand.
The Company renegotiated the note payable with Maple Leaf Holdings in the amount
of $100,000 extending the due date from August 31, 2003 to payment due on
demand. It continues to accrue interest at a rate of 5% per annum.
10
SBS Interactive, Co.
(A Development Stage Enterprise)
Notes to the Unaudited Consolidated Financial Statements
3. Common Stock Shares Issued for Debt
On March 17, 2004, Arthur Cohn exercised his conversion rights under the
promissory note, for which the Company provided an inducement of a warrant to
purchase 4,741,111 shares of the Company's common stock, as payment for
principal of $841,750 previously loaned to the Company plus accrued interest.
The Company issued 3,741,111 shares of the Company's common stock and the
warrant to acquire up to 4,741,111 shares of common stock at the following
exercise prices: the first 3,741,111 shares at $1.00 per share and an additional
1,000,000 shares at $0.85 per share. The warrants expire March 18, 2007 and are
fully vested at grant. The Company recorded the issuance of these warrants
valued at $5,396,202 using the Black-Scholes Option pricing model with the
following assumptions: life of 3 years, volatility of 216% and a risk free
interest rate of 4.0%. During the three months ended March 31, 2004, $5,396,202
was charged to expense as a debt restructuring charge. On July 11, 2004 the
Company issued another 7,313, 333 shares to settle claims made by Mr. Cohn in
June 2004 regarding a renegotiated settlement agreement which had raised the
conversion rate from $.04 to $.225 immediately prior to the conversion of the
debt. The issuance of these shares gave the shareholder a controlling interest
(49.8%) of the common shares of the Company. An expense of $4,388,000 was
recognized during the six months ended June 30, 2004 on the statement of
operations.
On March 19, 2004 the Company issued shares and warrants to Todd Gotlieb (a
shareholder) as payment for principal and accrued interest totaling $57,711
previously loaned to the Company. The Company issued 264,923 shares of the
Company's common stock and warrants to acquire up to 318,034 shares of common
stock at the following exercise prices: the first 264,923 shares at $1.00 per
share and an additional 53,111 shares at $0.85 per share. The warrants expire
March 18, 2007 and are fully vested at grant. The Company recorded the issuance
of these warrants valued at $346,407 using the Black-Scholes Option pricing
model with the following assumptions: life of 3 years, volatility of 216% and a
risk free interest rate of 4.0%. During the three months ended March 31, 2004,
$346,407 was charged to expense as a debt restructuring charge.
11
SBS Interactive, Co.
(A Development Stage Enterprise)
Notes to the Unaudited Consolidated Financial Statements
On March 17, 2004 the Company issued shares and warrants to Challure Holdings (a
shareholder) as payment for principal and accrued interest totaling $67,692
previously loaned to the Company. The Company issued 324,786 shares of the
Company's common stock and warrants to acquire up to 389,898 shares of common
stock at the following exercise prices: the first 324,786 shares at $1.00 per
share and an additional 65,112 shares at $0.85 per share. The warrants expire
March 18, 2007 and are fully vested at grant. During the three months ended
March 31, 2004, $346,407 was charged to expense as a debt restructuring charge.
The Company recorded the issuance of these warrants valued at $443,684 using the
Black-Scholes Option pricing model with the following assumptions: life of 3
years, volatility of 216% and a risk free interest rate of 4.0%.
Stock issued for services
On February 9, 2004 the Company issued 3,500,000 shares having a fair market
value of $.10 per share to two shareholders for past services performed. An
expense of $350,000 was reflected in non-cash compensation on the December 31,
2003 statement of operations. During the three months ended March 31, 2004,
these shares were issued to settle the unpaid accrued compensation.
On February 4, 2004 the Company approved the issuance of 450,000 common shares
having a fair market value of $0.08 per share to its legal counsel for services
performed. An expense of $36,000 was recognized during the three months ended
March 31, 2004 on the statement of operations.
On February 9, 2004 the Company approved the issuance of 250,000 common shares
having a fair market value of $0.09 per share to an employee for services
performed. An expense of $25,000 was recognized during the three months ended
March 31, 2004 on the statement of operations.
On February 19, 2004 the Company approved the issuance of 50,000 common shares
having a fair market value of $1.50 per share to its legal counsel for services
performed. An expense of $74,000 was recognized during the three months ended
March 31, 2004 on the statement of operations.
12
SBS Interactive, Co.
(A Development Stage Enterprise)
Notes to the Unaudited Consolidated Financial Statements
On March 29, 2004 the Company approved the issuance of 230,000 common shares
having a fair market value of $1.10 per share to a consultant for services
performed. An expense of $253,000 was recognized during the three months ended
March 31, 2004 on the statement of operations.
On June 25, 2004 the Company approved the issuance of 200,000 common shares
having a fair market value of $0.56 per share to a consultant for services
performed. An expense of $112,000 was recognized during the six months ended
June 30, 2004 on the statement of operations.
Warrants and Options
On June 25, 2004 the Company issued warrants to acquire up to 100,000 shares of
common stock at the exercise price of $0.75 per share for consulting fees. The
warrants expire June 24, 2007 and are vest(ed) as follows: 20,000 shares vested
on April 1, 2004, 20,000 shares vested on May 1, 2004, 20,000 shares vested on
June 1, 2004, 20,000 shares will vest on July 1, 2004, and 20,000 shares will
vest on August 1, 2004. During the three months ended June 30, 2004, $51,715 was
charged to expense as non-cash compensation.
The Company recorded the issuance of these warrants valued at $51,715 using the
Black-Scholes Option pricing model with the following assumptions: life of 3
years, volatility of 208% and a risk free interest rate of 4.0%.
On June 29, 2004 the Company issued warrants to acquire up to 75,000 shares of
common stock at the exercise price of $0.50 per share for consulting services
performed. The warrants expire June 28, 2007 and are fully vested at grant.
During the three months ended June 30, 2004, $43,719 was charged to expense as
non-cash compensation.
The Company recorded the issuance of these warrants valued at $43,719 using the
Black-Scholes Option pricing model with the following assumptions: life of 3
years, volatility of 208% and a risk free interest rate of 4.0%.
13
SBS Interactive, Co.
(A Development Stage Enterprise)
Notes to the Unaudited Consolidated Financial Statements
On July 22, 2004 the Company issued shares and warrants to Arthur Cohn (a
shareholder) in order to secure amounts loaned to the Company on May 30, 2004
and June 11, 2004. The Company issued warrants to acquire up to 400,000 shares
of common stock at the following exercise prices: the first 200,000 shares at
$1.00 per share and an additional 200,000 shares at $1.25 per share. The
warrants expire July 21, 2007 and are fully vested at grant. During the three
months ended June 30, 2004, $225,854 was charged to expense as non-cash
compensation.
The Company recorded the issuance of these warrants valued at $225,854 using the
Black-Scholes Option pricing model with the following assumptions: life of 3
years, volatility of 208% and a risk free interest rate of 4.0%.
The following table summarizes information about fixed stock options outstanding
at June 30, 2004:
Options Outstanding Options Exercisable
-------------------------------------- --------------------
Weighted Number
Number Average Weighted Exercise-abWeighted
Outstanding Remaining Average at June Average
Range of at June 30, Contractual Exercise 30, 2004 Exercise
Exercise Prices 2004 Life Price Price
- ---------------------------------------------------------- --------------------
$ 1.25 200,000 2.9 1.00 200,000 1.25
1.00 4,551,332 2.8 1.00 4,511,332 1.00
0.85 1,477,611 2.7 0.85 1,477,611 0.85
0.75 100,000 2.9 0.75 100,000 0.75
0.50 825,000 4.0 .50 825,000 0.50
- --------------------------------------------------------------------------------
4. Related Party Transactions Consulting Services
Fees totaling $82,511 and $5,601 have been paid to officers and companies owned
by shareholders during the periods ended June 30, 2004 and 2003 for
administrative fees, consulting services rendered and, expenses paid on behalf
of the Company. The officers and directors of the Company are involved in other
business activities and may, in the future, become involved in other business
opportunities.
Lease Commitments
Lease rent expense for the periods ended June 30, 2004 and 2003 amounted to
$11,450 and $6,348. At December 31, 2003, the Company was subleasing the office
space under a month-to-month lease from a related company for monthly payments
of $1,715 Canadian.
14
SBS Interactive, Co.
(A Development Stage Enterprise)
Notes to the Unaudited Consolidated Financial Statements
5. Subsequent Events
On August 6, 2004 the Company completed a private placement of units to
qualified investors. The units consisted of one share of common stock and a
warrant to purchase two shares of common stock at a price of $0.50 per unit. The
warrant grants the holder the right to purchase two shares of the Company's
common stock for every one unit purchased at exercise prices of $1.00 per share
for the first share and $1.25 per share for the second share. The offering
contained provisions for a "reset price" which was to be the lowest average
closing price for the five consecutive trading days prior to the closing,
however the reset price was not to be less than $0.35 per share. The Company
sold 1,250,000 shares and warrants at the reset price of $.40 per share for an
aggregate of $500,000.
6. Restatement
The Company has restated its 2003 financial statements to change the account for
the acquisition of SBS, Inc. on October 29, 2002, which was accounted for under
FASB 141. The Company has accounted for the acquisition in accordance with SEC
Topic 5-G; therefore, a change to the valuation of the 3,180,984 shares, issued
for the acquisition of SBS, Inc., from the value of the shares issued to the
historical cost basis of SBS, Inc.'s assets and liabilities under GAAP. A change
to the recognition of a beneficial conversion feature was also recorded in
accordance with EITF 86-5 and 00-27, and is being amortized over the live of the
notes rather than being recognized in full at inception
15
SBS Interactive, Co.
(A Development Stage Enterprise)
Notes to the Unaudited Consolidated Financial Statements
The effects of the restatements are as follows:
As previously filed As restated
Total Assets $2,580,671 $ 6,963
Stockholders Equity/(Deficit) $2,094,599 $ (479,109)
Net Loss $ 171,641 $ 448,047
15
PART 1 - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-QSB contains "forward-looking
statements". These forward-looking statements are based on our current
expectations, assumptions, estimates and projections about our business and our
industry. Words such as "believe," "anticipate," "expect," "intend," "plan,"
"will," "may," and other similar expressions identify forward-looking
statements. In addition, any statements that refer to expectations, projections
or other characterizations of future events or circumstances are forward-looking
statements. These forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
reflected in the forward-looking statements. Factors that might cause such a
difference include, but are not limited to, those discussed in the financial
statements included in this report, as well as the following:
o our lack of capital and whether or not we will be able to raise
capital when we need it,
o whether or not we are able to successfully develop our product,
o whether or not we are able to successfully market our product;
o our overall ability to successfully compete in our market and our
industry,
o whether or not we will continue to receive the services of our
executive officer and director, Mr. Todd Gotlieb,
and other factors, some of which will be outside our control. You are cautioned
not to place undue reliance on these forward-looking statements, which relate
only to events as of the date on which the statements are made. We undertake no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that arise after the date hereof. You should refer to and
carefully review the information in documents we file with the Securities and
Exchange Commission, including the risk factors discussed in our Annual Report
on Form 10-KSB.
Management's discussion and analysis of results of operations and
financial condition are based upon the Company's financial statements. These
statements have been prepared in accordance with accounting principles generally
accepted in the United States of America. These principles require management to
make certain estimates, judgments and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, we evaluate our
estimates based on historical experience and various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
16
These interim financial statements are condensed and do not include some
of the information necessary to obtain a complete understanding of the financial
data. Management believes that all adjustments necessary for a fair presentation
of results have been included in the unaudited consolidated financial statements
for the interim periods presented. Operating results for the six months ended
June 30, 2004 are not necessarily indicative of the results that may be expected
for the year ended December 31, 2004. Accordingly, your attention is directed to
footnote disclosures found in the December 31, 2003 Annual Report on Form 10-KSB
and particularly to the summary of significant accounting policies.
Overview
We are a development stage company located in Toronto, Ontario, Canada. We
have developed a unique interactive video technology product that uses "reverse
blue screen" technology. Used primarily in the making of movies and television
programming, blue screen technology allows actors to perform in front of a blue
background screen, upon which background images are superimposed at a later time
by a chromakey processor. Our product uses patented reverse blue screen
technology to playback, on the user's television screen, pre-recorded
programming into which the user's environment, as photographed by the digital
camera in the set-top box, is combined. In other words, the user and his
surroundings will appear with the pre-recorded programming along with the
actors. The set-top box is easily connected between the user's DVD player and
the TV monitor.
We believe that our technology can be used not only for entertainment
purposes, but also as a teaching and training tool. For exercising or athletics
for example, the user can watch himself or herself stand next to the instructor
and follow the instructor's lead. This allows the user to compare his or her
activity to the instructor's and to immediately correct or modify the activity,
if necessary. Other potential uses by consumers for our interactive video
technology includes children's programs, video karaoke, performance training and
enhancement (including musical instrument training, acting workshops, singing
and dancing training), theme parties and adult entertainment. In the business
and institutional markets the potential uses for the product include product and
procedural training and testing, military and security training, language
education, training and educating the learning disabled, and public speaking
training.
The pre-recorded programming content is inexpensive to develop because
there is no need for costly sets or location shoots. For example, if a business
wants to create a program to instruct employees on how to correctly lift heavy
objects without sustaining injuries, we film an instructor doing the
demonstration in front of a blue screen. When the programming is played back at
the business location, the camera in the set-top box will capture the employee
and his surroundings, which will be projected onto the television screen along
with the instructor.
17
Plan of Operation
As a development stage company our capital requirements, particularly as
they relate to product development, have been and will continue to be
significant. Our future cash requirements and the adequacy of available funds
will depend on many factors, including the pace at which we are able to launch
our product, whether or not a market develops for our product and, if a market
develops, the pace at which it develops, and the pace at which the technology
involved in making our product changes.
Since our inception we have relied on loans and sales of our securities to
sustain our operations. We will continue to do this until we are able to support
our operations through sales of our product however, we cannot assure you that
this will ever occur. We cannot guarantee that financing will be available to
us, on acceptable terms or at all. If we do not earn revenues sufficient to
support our business and we fail to obtain other financing, either through an
offering of our securities or by obtaining additional loans, we may be unable to
continue our operations.
In February 2004 we reached an agreement with three of our creditors,
including Mr. Todd Gotlieb, our President, Challure Holdings, an entity
controlled by Mr. Barry Alter, a former director, and Mr. Arthur Cohn, our
largest security holder, to pay approximately $974,435 of debt with our common
stock. In conjunction with these agreements, we also agreed to issue to each
creditor a warrant to purchase our common stock at exercise prices of $0.85 and
$1.00 per share. These agreements were subsequently prepared and executed in
March 2004. When we are able to do so, we also pay consultants with our common
stock, to conserve our cash.
Our largest stockholder, Mr. Arthur Cohn, has continued to loan us money
as we need it. In July 2004, we executed several agreements with Mr. Cohn to
document these loans and his rights in relation to the repayment of them. In
order to secure the loans he made to us, we executed a Pledge and Security
Agreement that grants to Mr. Cohn a security interest in all of our assets. We
have also executed a promissory note in the amount of $100,000 that allows Mr.
Cohn to convert the principal and interest we owe to him into 200,000 shares of
our common stock and we issued a warrant to Mr. Cohn to purchase an additional
400,000 shares of our common stock, 200,000 shares at $1.00 per share and
200,000 shares at $1.25 per share, in connection with these transactions.
We recently completed an offering of units to accredited investors. The
units were comprised of one share of our common stock and warrants to purchase
two shares of our common stock for each unit purchased. The unit price was $0.40
and the warrant exercise prices are $1.00 and $1.25, respectively. We raised
$500,000 in this offering. The proceeds of the offering will be used primarily
to pay for operating expenses and for expenses relating to the launch of our
product. Even with the proceeds from this offering, we will need to raise
additional funds soon to continue our operations. Pursuant to the terms of an
agreement we have with our largest security holder, Mr. Arthur Cohn, we may not
issue more than 350,000 shares of common stock without his consent. Mr. Cohn is
not required to give us his consent, nor is he required to loan us additional
funds. If we are unable to borrow money or to raise funds through the sale of
our securities, we will be required to severely curtail, or even cease, our
operations.
18
On July 16, 2002, we, SBS Interactive, Inc., a Nevada corporation
(referred to as "Interactive" in this discussion) and SBS Acquisition, Inc., our
wholly owned subsidiary, executed a Merger Agreement. On October 29, 2002 we
completed the merger by issuing 3,180,984 shares of our common stock to the
stockholders of Interactive in exchange for all of the Interactive issued and
outstanding stock.
On February 10, 2004, Barry I. Hechtman, P.A., our former auditor,
resigned and on April 6, 2004, we engaged the firm of Stonefield Josephson, Inc.
as our new auditors. In conducting its review of our financial statements,
Stonefield Josephson, Inc. determined that our acquisition of Interactive should
have been accounted for in accordance with SEC Topic 5-G rather than under FASB
141, since neither we nor Interactive constituted a business in accordance with
EITF 98-3. This resulted in a change to the valuation of the shares issued for
the acquisition of Interactive. The value of the shares was reduced to reflect
the value of Interactive's assets and liabilities on the date of the
transaction, which was a net liability assumed of $310,757.
We restated our 2003 financial statements to change the accounting for the
acquisition of Interactive, which required us to change the valuation of the
3,180,984 shares issued for the acquisition to the historical cost basis of
Interactive's assets and liabilities under GAAP. A change to the recognition of
a beneficial conversion feature was also recorded in accordance with EITF 98-5
and 00-27, and is being amortized over the lives of the notes rather than being
recognized in full at inception
The effects of the restatements for the six months ended June 30,
2003 are as follows:
As previously filed As restated
Total Assets $2,580,671 $ 6,963
Stockholders Equity/(Deficit) $2,094,599 $ (479,109)
Net Loss $ 171,641 $ 448,047
Our operating expenses for the three and six month periods ended June 30,
2004 were $5,100,100 and $12,099,476, respectively, as compared to $368,491 and
$392,880 in development stage expenses for the three month and six month periods
ended June 30, 2003. During the first quarter of the 2004 fiscal year, we issued
common stock and warrants in exchange for the payment of debt totaling $974,435.
During the three and six month periods ended June 30, 2004, we granted common
stock and warrants to induce conversion of debt and settle claims valued at
$4,388,000 and $10,574,370, respectively. We issued common stock and warrants to
employees and consultants in exchange for services rendered to us, which
accounted for $466,288 and $935,288 in expense during the three months and six
months ended June 30, 2004. Other operating expenses for the three and six month
periods ended June 30, 2004 included selling, general and administrative
expenses of $245,812 and $589,815, respectively. In comparison, for the three
month and six month period ended June 30, 2003, we had $21,991 and $46,380,
respectively, in selling, general and administrative expenses and $346,500 and
$346,500 in non-cash compensation. The increase in selling, general and
administrative expenses for the three and six month periods ended June 30, 2004
resulted from the ramp-up of our business while the increase in non-cash
compensation resulted not only from ramping-up our business, which meant
retaining the services of individuals who could assist us with the marketing of
our product, but also from an increase in professional fees that were incurred
as a result of the preparation of filings we are required to make with the
Securities and Exchange Commission and the preparation or review of general
business documents. We have adopted two employee benefit plans that will permit
us to pay employees, officers, directors, consultants and agents with our common
stock or options to purchase common stock, so long as the services these
individuals render to us do not relate to capital raising transactions. We
intend to continue to pay compensation and debt with our securities whenever
possible, in order to conserve our cash for operations.
19
Our loss from operations for the three and six month periods ended June
30, 2004 was $5,100,100 and $12,099,476, respectively, as compared to loss from
operations of $368,491 and $392,880 for the same periods in the prior fiscal
year. As a result of the payment of debt with securities, we incurred non-cash
interest expense for the three and six month periods ended June 30, 2004 of
$24,000 and $563,621, respectively, from the amortization of debt discount, as
compared to non-cash interest expense in the amount of $20,631 and $25,171,
respectively, for the same periods in the prior fiscal year. Interest expense
for the three and six month periods ended June 30, 2004 was $1,880 and $11,141,
respectively, as compared to interest expense of $11,633 and $13,675 for the
three and six month periods ended June 30, 2003. Our interest expense declined
because a significant portion of our debt was paid in full during the first
quarter of the 2004 fiscal year.
Because of the increase in expenses related to implementation of our
business plan, including the expenses we incurred by paying compensation and
loans with our securities, our net loss for the three and six month periods
ended June 30, 2004 was $5,125,980 and $12,674,237, respectively, as compared to
a net loss of $400,755 and $448,047, respectively, for the three and six month
periods ended June 30, 2003.
In May 2004 we received the completed prototype of the Side-by-Side(TM)
set-top box and we began our marketing efforts. A dance and fitness instruction
facility, a global digital media company and a team of stunt professionals have
agreed to use our product and to act as value-added resellers of our
Side-by-Side hardware. However, we have not yet earned any revenues from the
sales of our product, and we do not anticipate earning significant revenues
soon. In order to maintain our operations, we will be required to either
continue borrowing money or to raise money through the sale of our securities.
Pursuant to the terms of an agreement we have with our largest security holder,
Mr. Arthur Cohn, we may not issue more than 350,000 shares of common stock
without his consent. Mr. Cohn is not required to give us his consent, nor is he
required to loan us additional funds. If we are unable to borrow money or to
raise funds through the sale of our securities, we will have to severely
curtail, or even cease, our operations.
Net cash used in operating activities for the six month period ended June
30, 2004 was $(524,573) as compared to $(84,647) in net cash used in operating
activities for the six month period ended June 30, 2003.
20
We used $11,253 to purchase property and equipment during the six month
period ended June 30, 2004, as compared to $1,183 used to purchase property and
equipment during the six month period ended June 30, 2003. This increase in
investment in property and equipment related to the ramp-up of our business.
During the six month period ended June 30, 2004, $510,000 was provided to
us from security holder loans, as compared to $78,786 provided to us by security
holder loans during the six month period ended June 30, 2003.
As of the six month period ended June 30, 2004 we had a net loss of
$12,674,237 and a working capital deficiency of approximately $4,928,274. Our
auditor, Stonefield Josephson, Inc., has issued a "going concern" report on our
consolidated financial statements for the year ended December 31 2003. In that
report and in the notes to the consolidated financial statements, the auditor
noted that we have generated no revenues and that our continued existence will
be dependent on our ability to resolve our lack of liquidity and obtain adequate
financing to fulfill our development activities. These factors raise substantial
doubt about our ability to continue as a going concern.
ITEM 3. DISCLOSURE CONTROLS AND PROCEDURES
Management, including the Company's President (who is also the Company's
Principal Accounting Officer), carried out an evaluation of the effectiveness of
the design and operation of our disclosure controls and procedures as of the end
of the period covered by this report. The evaluation was undertaken in
consultation with the Company's accounting personnel. Based on that evaluation,
the President/Principal Accounting Officer concluded that our disclosure
controls and procedures are effective to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms.
There were no significant changes in the Company's internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of their evaluation.
PART II - ITEM 1 LEGAL PROCEEDINGS
Not applicable.
PART II - ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
PART II - ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable
PART II - ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
21
PART II - ITEM 5 OTHER INFORMATION
On July 22, 2004 we entered into five agreements with Arthur Cohn, our
largest security holder. Pursuant to the First Amendment to Assignment and
Agreement to Convert Debt, we agreed to issue to Mr. Cohn an additional
7,313,333 shares of our common stock to settle alleged claims Mr. Cohn asserted
relating to his agreement, in March 2004, to convert loans made by him to our
securities. The Master Loan Agreement governs current and future loans made to
us by Mr. Cohn. The Pledge and Security Agreement secures the repayment of any
loans made by Mr. Cohn to us with our assets. The Secured Convertible Promissory
Note in the amount of $100,000 allows Mr. Cohn to convert the principal and
interest of the loan into shares of our common stock at the price of $0.50 per
share. The loan bears interest at 6% per annum and is payable on demand. The
Common Stock Purchase Warrant allows Mr. Cohn to purchase up to 400,000 shares
of our common stock, 200,000 shares at an exercise price of $1.00 and 200,000
shares at an exercise price of $1.25.
On July 26, 2004 we borrowed an additional $27,500 from Mr. Cohn. This
loan will be paid from the proceeds of our private offering.
PART II - ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
Exhibits:
2 Articles and Plan of Merger of SBS Acquisition,
Inc. with and into SBS Interactive, Inc. (1)
3.1 Certificate of Incorporation, as amended (2)
3.2 Bylaws (2)
10.1 First Amendment to Assignment and Agreement to
Convert Debt dated July 22, 2004 among SBS
Interactive, Co., SBS Interactive, Inc. and Arthur Cohn (3)
10.2 Master Loan Agreement dated July 22, 2004 among SBS
Interactive, Co., SBS Interactive, Inc. and Arthur Cohn (3)
10.3 Pledge and Security Agreement entered into among SBS
Interactive, Co., SBS Interactive, Inc. and Arthur Cohn dated
July 22, 2004 (3)
10.4 Secured Convertible Promissory Note in favor of Arthur Cohn
the amount of $100,000 dated July 22, 2004 (3)
10.5 Common Stock Purchase Warrant (3)
10.6 Promissory Note in favor of Arthur Cohn in the amount of $27,500(3)
31 Certification pursuant to Rule 13a-14(a) and 15d-14(a) (4)
32 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (4)
(1) Incorporated by reference from the Registrant's Form 10-QSB for the quarter
ended September 30, 2002, filed with the Securities and Exchange Commission on
November 12, 2002.
(2) Incorporated by reference from the Registrant's Form 10-SB filed with the
Securities and Exchange Commission on December 3, 1999, as amended.
(3) Filed herewith.
22
Reports on Form 8-K
On April 9, 2004, the registrant filed a current report disclosing the
engagement of Stonefield Josephson, Inc. as its new auditor.
On April 15, 2004, the registrant filed a current report disclosing a
press release that announced the payment of approximately $980,000 of debt with
its securities.
23
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
August 16, 2004
SBS Interactive, Co.
By: Todd Gotlieb
-------------------------------------------
President and Principal Accounting Officer
(Principal accounting and financial officer
for the quarter)