UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1999
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_________________ to _____________________________
Commission file number 0-14621
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NEW SKY COMMUNICATIONS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 16-1229730
- -------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
731 POWERS BUILDING, 16 WEST MAIN STREET, ROCHESTER, NEW YORK 14614
-------------------------------------------------------------------
(Address of principal executive offices)
(716) 454-5490
----------------------------------------------------
(Registrant's telephone number, including area code)
---------------------------------------------
(Former name, former address and fiscal year, if changed since last report)
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and 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_____________
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities and
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes______________ No_______________
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. 193,736,923 as of
April 1, 1999
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements. Item 2. Management's Discussion and
Provide the information required Analysis of Financial Condition
by Rule 10-01 of Regulation S-X and Results of Operations.
(17CFR Part 210). Item 303 of Regulation S-K
(Sec. 229.303 of this chapter).
<PAGE>
INDEX
PART I - FINANCIAL INFORMATION PAGE(S)
Statement of Operations
Three months ending 3/31/99 & 3/31/98 3
Consolidated Balance Sheet
As of 3/31/99 & 12/31/98 4 & 5
Statement of Cash Flows
Three months ended 3/31/99 & 3/31/98 6
Management's Discussion of Statement of
Income and Financial Condition 7 - 9
PART II - OTHER INFORMATION & SIGNATURES 10
Exhibits 11 - 14
Financial Data Summary 15
Page 2
<PAGE>
NEW SKY COMMUNICATIONS, INC.
STATEMENT OF INCOME (LOSS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED
----------------------
MARCH 31, MARCH 31,
1999 1998
<S> <C> <C>
Gross Film Receipts $ 0 $ 0
Less: Amortized Film Costs $ 0 $ 0
-------- --------
Net Film Receipts $ 0 $ 0
-------- --------
General and Administrative Expenses $ 7,500 $ 44,239
-------- --------
Income (Loss) Before Other Income
and Related Expenses $ (7,500) $(44,239)
-------- --------
Other Income (Loss) $ 0 $ 0
-------- --------
Income (Loss) $ (7,500) $(44,239)
======== ========
Net Per Common Share NIL NIL
======== ========
</TABLE>
Page 3
<PAGE>
NEW SKY COMMUNICATIONS, INC.
BALANCE SHEET
(As of March 31, 1999 and December 31, 1998)
<TABLE>
<CAPTION>
ASSETS
MARCH 31, 1999 DECEMBER 31, 1998
(UNAUDITED) (AUDITED)
-------------- ------------------
Current Assets:
<S> <C> <C>
Cash and Cash Items $ 0 $ 0 Accounts
Receivable:
Trade Accounts 0 0
Current Amortizable Portion
of Film Inventory 0 0
---------- ----------
Total Current Assets $ 0 $ 0
---------- ----------
Fixed Assets:
Property and Equipment:
Property and Equipment 0 0
Film Inventory 1,259,166 1,259,166
---------- ----------
Total Property and Equipment 1,259,166 1,259,166
Less: Accumulated Depreciation 0 0
---------- ----------
Net Property and Equipment 1,259,166 1,259,166
---------- ----------
Other Assets 25,400 400
---------- ----------
TOTAL ASSETS $1,284,566 $1,259,566
========== ==========
</TABLE>
Page 4
<PAGE>
NEW SKY COMMUNICATIONS, INC.
BALANCE SHEET
(As of March 31, 1999 and December 31, 1998)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
MARCH 31, 1999 DECEMBER 31, 1998
(UNAUDITED) (AUDITED)
----------- ---------
Current Liabilities:
<S> <C> <C>
Accounts Payable $ 161,840 $ 154,340
Notes Payable 25,000 0
Leases 2,068 2,068
Accrued Expenses 41,017 41,017
----------- -----------
Total Current Liabilities $ 229,925 $ 197,425
----------- -----------
Stockholders' Equity:
Common Stock $.0001 Par Value
200,000,000 Shares Authorized
193,736,923 Shares Issued and
Outstanding (193,736,923 Shares
on March 31, 1999) $ 19,374 $ 19,374
Additional Paid-In Capital 5,962,028 5,962,028
----------- -----------
Total Paid-In Capital 5,981,402 5,981,402
Accumulated Deficit (4,926,761) (4,919,261)
----------- -----------
Total Stockholders' Equity 1,054,641 1,062,141
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,284,566 $ 1,259,566
=========== ===========
</TABLE>
Page 5
<PAGE>
NEW SKY COMMUNICATIONS, INC.
Statement Of Cash Flows
Three Months Ended March 31, 1999 and March 31, 1998
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
------------------ ------------------
Operating Activities:
<S> <C> <C>
Net Income (Loss) $ (7,500) $(44,239)
Adjustments to reconcile
Net Income and Net Cash:
Depreciation and Amortization 0 0
(Increase)Decrease in Accounts
Receivable 0 0
(Increase)Decrease in Prepaid
Expenses 0 0
Increase(Decrease) in Accounts
Payable and Accrued Expenses 32,500 16,688
Amortization of Film Costs 0 30,000
-------- --------
Net Cash Provided (Used) $ 25,000 $ 2,449
-------- --------
Investing Activities:
Additional Film Inventory $ 0 $ (2,505)
Investment in Web site 25,000 0
-------- --------
Net Cash Provided (Used) $(25,000) $ (2,505)
-------- --------
Financing Activities:
Net Cash Provided (Used) $ 0 $ 0
-------- --------
Increase (Decrease) In Cash
and Cash Equivalents $ 0 $ (56)
Cash and Cash Equivalents at
Beginning of Period $ 0 $ 56
-------- --------
Cash and Cash Equivalents
at End of Period $ 0 $ 0
======== ========
</TABLE>
Page 6
<PAGE>
STATEMENT OF MANAGEMENT
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments necessary to present fairly the financial position of
the Company as of March 31, 1999 and the results of operations and cash flows
for the three months then ended.
1(A)
During the quarter, the Company and it's Co-Producing partner, Syracuse
Productions, LLC, entered their feature film, "FREAK TALKS ABOUT SEX"
(formerly "SYRACUSE MUSE"), into the Seattle International Film Festival.
The film has been selected for its World Premiere at the Festival.
Through its World Premiere, the film will be exposed to potential film
distributors at the Festival's public screenings. The Festival runs from
May 16 to June 6, 1999. "FREAK TALKS ABOUT SEX" is a comedy starring
Steve Zahn, who has recently appeared in "OUT OF SIGHT" and "YOU'VE GOT
MAIL" and Josh Hamilton, who has recently appeared in the NBC mini-series
"THE 60'S." The Company owns one-third of the profits of the film after
the investors recoup their investment plus twenty percent (20%). For
proprietary reasons, the Company may not disclose the budget of the film.
The Company is currently actively pursuing production of its film
property "THE GODMOTHER" (formerly "RESPECT YOUR GODFATHER"). The film is
a comedy co-written by, among others, Joel and Ethan Coen, who have
previously written "RAISING ARIZONA," "THE BIG LEBOWSKI" and "FARGO." The
Company is making final revisions to the screenplay, attempting to raise
financing and initiating negotiations with cast and production personnel.
During the quarter, the Company acquired a forty percent (40%) interest
in the business called The Movie Place, which owns and operates the
Internet site "movieplace.com." The Web site features movie reviews and
interviews with movie stars by nationally syndicated movie reviewer Mike
Cidoni, along with links to movie trailers and movie showing times around
the country. The interest was purchased for $25,000.00, which The Movie
Place will expend to enhance and market the Web site and for working
capital. The Company procured the funds for the investment by a loan on a
promissory note from its Chairman and President, Carl R. Reynolds. The
Promissory Note is in the amount of $25,000.00, payable on demand and
bears interest at the rate of ten percent (10%) per annum. A copy of the
Promissory Note and the Agreement with The Movie Place are annexed hereto
as exhibits. The Company hopes to help develop the site into a
significant Web site of interest for movie fans and as an agent for
raising production funds for independent films by the Company and others.
Page 7
<PAGE>
The Company and Owasco Entertainment, whose principals are the same as
Syracuse Productions, LLC, had an option to produce a feature film based
upon a screenplay entitled "FACE FACTS" from the author, Lynne Adams,
which has now expired. The two Companies are continuing to pursue a
satisfactory revision of the screenplay. The Companies had entered into
an option agreement with Winchester Entertainment, PLC to provide part,
or all, of the production financing for the film, which has also now
expired. Winchester, remains interested in raising some, or all of the
production financing, if a satisfactory sceenplay can be developed. The
Company and Owasco Entertainment had obtained an option on the novel THE
HELL CANDIDATE by Graham Masterton, a prolific British horror novelist,
which has also now expired. The Companies have been unable thus far to
develop a suitable screenplay. The Companies continue to pursue an
acceptable screenplay for the film.
The Company entered into a distribution agreement for a so-called
"Director's Cut" of its feature film "LADY IN WHITE" which was released
on DVD format during the first quarter of 1998. All remaining outstanding
distribution agreements on the film expire in 2002, at which time all
rights will revert to the Company.
The Company continues to carry its investments in feature films as an
asset of the Company under Film Inventory, amortizing these costs when
funds are received on the various film investments and at other times
management believes a write-down of the unamortized costs is appropriate.
The Company has title to and/or interests in the following feature film
properties, which are in development or completed: "FREAK TALKS ABOUT
SEX", "FACE FACTS", THE HELL CANDIDATE, "THE GIANT" and "THE GODMOTHER".
The Company has released two feature films: "FEAR NO EVIL" and "LADY IN
WHITE". The Company was also an investor, in 1989, in a feature film
entitled "GRAVE SECRETS", produced by Planet Productions, Inc.
The Company received no revenues in the first quarter.
Management believes that the Company has no material risk or costs
associated with the Year 2000 problem as its records are not
computerized. The Company cannot assess the risk of third-party vendors
or licensees of films already in release, but the Year 2000 problem could
affect the accounting of any licensees to the Company for royalties. The
Company does intend to inquire of any potential future licensees
regarding their Year 2000 compliance as part of the negotiations for any
licensing or royalty agreement.
The Company has not filed Federal or New York State tax returns for the
years 1992, 1993 and 1994 and has not paid any tax due for those years
nor for 1995, 1996, 1997 and 1998 because of lack of funds for the
preparation of the returns and
Page 8
<PAGE>
the payment of tax. The Company believes no Federal tax would be due due
to the Company's continuing losses. However, the Company believes it owes
New York State tax based upon capital and has been accruing estimated
amounts for such tax since 1992.
The Company is an independent motion picture production company.
Independent motion picture production involves a number of risks and
elements that must coalesce to produce a successful feature film. These
elements include: procuring rights to a screenplay, securing financing to
finance the budget of the film, procuring talent for production,
direction, acting and post-production, which includes editing, music and
mixing and obtaining distribution of the completed film. Inadequate
performance of any of these elements, or miscalculation of the tastes of
the movie-going public can cause the film to not obtain distribution
and/or be a box-office failure. The potential market for motion pictures
is divided into two components: foreign and domestic (U.S and Canada).
Within each of these markets there are several different potential
revenue streams: theatrical, pay television, free television, video
cassette and new emerging sources such as CD-ROM, laser disc and DVD.
Distribution of an independent film may be accomplished by a single
distributor acquiring "the world", or the markets and elements of each
can be sold off by the producer to separate distributors. The lead time
from original acquisition of a screenplay to final cut of the film and
ultimate exhibition, if any, and receipt of revenues can take several
years. Therefore, the revenue streams and profitabilty of an independent
production company can vary greatly year-to-year. There is significant
competition in the independent film business. Many more films are
produced each year than receive distribution or recover their investment.
In addition, independent films compete against major studios who have
significantly greater resources and can therefore employ the most
talented people to make films and better promote their films. The Company
employs only one person, the President, Carl R. Reynolds, but has working
relationships with other persons who provide access to different elements
needed to produce a film, including financing, production and securing
talent.
1(B) Financial Condition -
1. Working capital is inadequate. (Current Ratio is nil)
2. The Company has an outstanding loan to its Chairman and President,
Carl R. Reynolds in the amount of $25,000.00 and current payables and
accrued expenses.
Page 9
<PAGE>
PART II
Other Information and Signatures
NEW SKY COMMUNICATIONS, INC.
Item 1. Legal Proceedings - None.
Item 2. Change in Security - None.
Item 3. Defaults upon Senior Securities - None.
Item 4. Submission of matters to a vote of securities holders - None.
Item 5. Other information - None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEW SKY COMMUNICATIONS, INC.
Date: May 6, 1999. /S/ CARL R. REYNOLDS
--------------------
Carl R. Reynolds President/
Treasurer/
Chief Financial Officer
/S/ CARL R. REYNOLDS
- --------------------
DIRECTOR
May 6, 1999
- -----------
Date
Page 10
INVESTMENT AGREEMENT
THIS AGREEMENT MADE THIS 24th day of March, 1999 by and between NEW
SKY COMMUNICATIONS, INC., a publicly-traded New York corporation with
offices at 731 Powers Building, 16 West Main Street, Rochester, New York
14614 (hereinafter referred to as "New Sky") and MICHAEL CIDONI, STEPHEN
MORSE and RICHARD HERRERA, d/b/a The Movie Place, with offices at 518
Benton Street, Rochester, New York (hereinafter referred to individually
and collectively as "The Movie Place").
WHEREAS, The Movie Place owns, produces and operates the Internet
site known as "movieplace.com" and the owners thereof are desirous of New
Sky investing therein, and New Sky being desirous of making such
investment;
NOW THEREFORE the parties hereto covenant and agree as follows:
1) New Sky Communications, Inc. agrees to acquire a forty percent
(40%) interest in the The Movie Place business and the Web site known as
"movieplace.com" for a purchase price of $25,000.00. The Movie Place shall
use the proceeds of the investment to promote the Web site, purchase
equipment and for working capital.
2) The Movie Place warrants and represents that Mike Cidoni,
Stephen Morse and Richard Herrera own the entire business known as The
Movie Place which owns and operates the Web site known as
"movieplace.com", and that there exist no other encumbrances, liens, or
restrictions upon the business and the Web site that would affect or
impair such investment by New Sky in the business or the Web site. The
Movie Place further warrants and represents that the Web address
"movieplace.com" is registered to The Movie Place and that the Web site
and its content were created by and is operated solely by The Movie Place
and that, to the best of their knowledge, there exist no other claims to
the Web address or the creative content of the site. The Movie Place
further warrants and represents that the Movie Place business and the
"movieplace.com" Web site are currently compliant with the so-called Y2K
problem and that such problem will not adversely affect the business or
the Web site.
3) That the investment by New Sky is made in material reliance
upon documents and the representations made therein, presented to New Sky
by The Movie Place, specifically the "Movie Place Business Plan" and an
outline of a budget. New Sky, or its designated agents or representatives,
shall have the right to examine all of the books and records of the
business
Page 11
<PAGE>
of Movie Place at reasonable times and places. The investment by New Sky
is also made in material reliance on the representation that it is the
intention of The Movie Place to incorporate as soon as is practicable
after the execution of this Agreement. This Agreement shall survive and
not be merged into such incorporation.
4) The Movie Place agrees to consult with New Sky, its officers,
directors and agents regarding business, legal and creative matters
pertaining to the business of The Movie Place and the "movieplace.com" Web
site. All partners in the business shall undertake to assist to make the
business of the Web site a success and shall in no event take any action
which shall impair, hinder or delay full exploitation of the business and
the Web site. The primary duty and responsibility of Mike Cidoni is and
shall remain creation of film-related content of the Web site. Stephen
Morse's primary duty and responsibility is the technical aspects of the
Web site. New Sky shall provide business, legal, accounting and financial
consulting services as requested.
5) Mike Cidoni hereby agrees to provide exclusive Internet
film-related content services to the "movieplace.com" Web site for a
minimum period of one year from the date of this Agreement. Such
exclusivity shall not include Cidoni's other current Internet activities:
www.rochestertoday.com, www.moviebuff.com, www.wegmans.com and other
current radio- and TV-station Internet sites contributed to in connection
with Cidoni's appearances on their airwaves. Any additional involvement of
Cidoni in other Internet sites shall be undertaken only upon the consent
of The Movie Place. At no time, without the prior approval of the
remaining partners, shall any party hereto disclose the business methods,
plans or any other information reasonably deemed to be confidential
regarding the business of The Movie Place to any third party, unless
required by legal or regulatory mandate.
6) No party hereto, nor its officers, directors employees or
agents, shall be liable for any act or omission performed or omitted in
good faith. Nothing herein shall place any party in the relationship of
principal, agent, master and servant, partners, joint venturers or
employer and employee of any other party and no party shall have the
authority, express or implied, or represent themselves as having the
authority to make binding contracts for the other or to bind or obligate
the other in any way. No party hereto shall assume any liabilities of any
other party and each party agrees to indemnify and hold the other parties,
its officers, directors, employees and agents harmless from any manner of
claim, action, or liability past, present or future not directly related
to this Agreement.
Page 12
<PAGE>
7) This Agreement shall be construed under the laws of the State of
New York. Should there be any dispute between the parties concerning the
interpretation of this Agreement or concerning an alleged breach, which
the parties are unable to resolve after consultation with each other, such
dispute shall be decided by arbitration pursuant to the regulations and
procedures of the American Arbitration Association at Syracuse, New York.
The parties agree that any award rendered by the American Arbitration
Association may be entered in the Supreme Court of New York. In no event,
shall any party seek injunctive relief or take any action which may
impair, hinder or delay the production and full exploitation of the
"movieplace.com" Web site or any of its ancillary rights.
8) The Movie Place shall maintain books and records of account in
accordance with generally accepted accounting principles and shall, within
120 days following the end of its fiscal year, render a statement of
financial condition and profit and loss. New Sky shall have the right to
audit the books and records of The Movie Place, upon reasonable notice,
but not more often than once a year.
9) This Agreement may not be assigned without the written
permission of the other party.
10) This Agreement may be amended in writing only and shall be
binding upon and inure to the benefit of the successors and assigns of the
parties.
NEW SKY COMMUNICATIONS, INC.
SEAL
By: /S/ CARL R. REYNOLDS
--------------------
President
/S/ STEPHEN MORSE
-----------------
Stephen Morse
/S/ MICHAEL CIDONI
------------------
Michael Cidoni
/S/ RICHARD HERRARA
--------------------
Richard Herrera
Page 13
PROMISSORY NOTE
$ 25,000.00
March 24, 1999
Rochester, New York
For value received, receipt of which is hereby acknowledged, the
undersigned does hereby promise to pay to the order of Carl R. Reynolds the sum
of Twenty-Five Thousand and 00/100 Dollars ($25,000.00) upon demand with
interest at the rate of ten percent (10%) per annum. The Maker(s) hereof agree
to be jointly and severally liable hereon.
If Maker shall default in any payments due on this Note, or any of the
terms hereof, the Holder may give notice of the default and if not cured within
fifteen (15) days, may declare all principal and accrued interest at once due
and payable and proceed to seek all remedies available at law. The Maker agrees
to pay, as part of this Note, all costs incurred in collecting the amount due on
this Note, including but not limited to reasonable attorneys' fees of 20 percent
of the amount due.
Presentment, protest and notice are hereby waived.
WITNESS: NEW SKY COMMUNICATIONS, INC.
_____________________ By:/S/ CARL R. REYNOLDS
--------------------
President
_____________________ /S/ CARL R. REYNOLDS
--------------------
SEAL
Page 14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> MAR-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,284,566
<CURRENT-LIABILITIES> 229,925
<BONDS> 0
<COMMON> 19,374
0
0
<OTHER-SE> 1,035,267
<TOTAL-LIABILITY-AND-EQUITY> 1,284,566
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 7,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,500)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,500)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,500)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
