SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
AMENDED ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
Commission File Number 0-14621
NEW SKY COMMUNICATIONS, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter
NEW YORK 16-1229730
- --------------------- ---------------------
State of Incorporation I.R.S. Employer
Identification Number
731 POWERS BUILDING
16 WEST MAIN STREET
ROCHESTER, NEW YORK 14614
------------------------------------------
Address of principal and executive offices
(716) 454-5490
-----------------------------
Registrant's telephone number
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act: None
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS REGISTERED ON
- ------------------- ------------------------
Common Stock National Daily Quotation
Listing Service
Indicate by check mark whether 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 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
----
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of December 31, 1997 ...............................$1,427,000.00
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of December 31, 1997.................................190,736,923
<PAGE>
PART 1
ITEM 1 - BUSINESS
New Sky Communications, Incorporated (the "Company") develops and produces
theatrical motion pictures and home video cassettes.
In 1997, the Company entered into a joint venture agreement with Syracuse
Productions, LLC to Co-Produce a feature film entitled "FREAK TALKS ABOUT SEX"
(originally "SYRACUSE MUSE"). The Company is a special limited partner in the
financing limited partnership for the film and is entitled to one-third of the
profits from the sale of the film after the investors receive their investment
plus a twenty percent (20%) return on their investment. The Company may not
disclose the budget or cost of the film for proprietary reasons, but the film
qualifies as a "low-budget" film. Principal photography of the film was
completed in 1997 and at year-end the film was being edited and mixed. The Joint
Venture Agreement has been previously filed as an Exhibit in an earlier 10Q for
the Company. To procure the Company's position as Co-Producer of the film, it
issued 20,000,000 common shares of stock in the Company, with restrictive
legend, to Charles M. LaLoggia in 1997. Mr. LaLoggia is the former President and
Chairman of the Company. Mr. LaLoggia was the original Executive Producer of the
film and is a significant investor in the financing limited partnership. The
Company has capitalized the market value cost of the issuance of the stock,
$100,000, under "Film Inventory" on the Balance Sheet. The Company received a
Producer's fee of $20,000 from the budget of the film in 1997.
The Company is also participating in the development of other film properties
with the principals of Syracuse Productions, LLC.
In fiscal 1997, the Company's first feature film "LADY IN WHITE" continued its
release on video cassette and in foreign markets. All of the funds received by
the Company in 1997 from the film, approximately $5,946, were recognized as
income in 1997. The Company carries its direct film costs as an asset on the
Balance Sheet under "Film Inventory". (See Note 2 to financial statements). In
1991, the Company accelerated its amortization of the costs of the film to the
rate of $600,000 per year to arrive at a target of $500,000 in Film Inventory
for the film by 1993. In 1997 the Company amortized another $100,000 of the
film's costs, leaving $200,000 in Film Inventory for the film.
The Company continued to develop and seek financing for another film project, a
comedy, tentatively entitled "RESPECT YOUR GODFATHER". At year-end the
accumulated development cost of the film was capitalized at $26,772.
Page 1
<PAGE>
The Company continued to develop and seek financing for its feature film,
tentatively entitled "THE GIANT", in 1997. At year-end the accumulated
development cost was written down to $750,000.
In 1989 the Company invested $250,000 in a film entitled "GRAVE SECRETS",
production of which was completed in 1989. Foreign and video sales of the film
commenced in late 1989 and continued throughout 1997. The Company receives a
priority repayment of its investment and has the personal guarantee of the
producer of the film. The Company anticipates receiving the return of its
investment, but does not anticipate realizing any profit on the film. During
1997, the Company received no proceeds from the film's producer, keeping the
Company's investment to $108,610 at year-end.
The Company also issued 10,000,000 common shares of the Company, with
restrictive legend, to Carl R. Reynolds, the President and Chairman to
compensate him for failing to receive regular compensation for over three years.
The Company also issued 3,000,000 shares of common stock to Colleen Tiffany for
financial public relations services to be rendered to the Company. Ms. Tiffany
is associated with the President, Carl R. Reynolds, in a financial public
relations company, Logan Consulting Group, Inc. However, the shares were issued
to Ms. Tiffany personally and Mr. Reynolds will receive no benefit or share in
the proceeds of the sale of any stock by Ms. Tiffany. The Company also issued
4,000,000 common shares of the Company to Starr Securities, Inc. for investment
banking services to be rendered to the Company. Both issuances of shares were
registered under an S-8 registration with the S.E.C. and are, therefore,
immediately free trading. The agreements with Ms. Tiffany and Starr Securities
were attached as Exhibits in 10Q's filed by the Company during 1997.
This 10K filing was not timely made as the Company's accountant was unable to
complete an audit of its books and records on time.
The Company has filed corporate income tax returns, federal and New York State,
for the years ended December 31, 1997, 1996 and 1995, but has not filed for
years ending December 31, 1992, 1993 and 1994. It has not paid any tax due for
any of these years. Although the Company believes there is no federal tax
liability for those years, due to its continuing losses, there is tax liability
to the State of New York. The Company has not paid those taxes for lack of
funds. The Company reports the expected tax liability as an "Accrued Expense".
The Company also wrote down development costs in other film projects it has been
attempting to develop for a number of years, including "SOMEWHERE IS CALLING"
($15,000), "ARREVIDERCI VENICE" ($30,771) and "CHEAP TRICKS" ($1,000.00).
Page 2
<PAGE>
The Company believes it has no material Year 2000 risk or costs as the Company's
records are not computerized. The Company cannot assess the potential risk of
the Y2K problem on its third party vendors and licensees of its films already in
release but the Y2K problem may affect the accounting of such parties to the
Company for royalties. The Company does intend to inquire of any potential
future licensses of their Y2K compliance as part of any negotiations for a grant
of rights. As the Company has no Y2K risk, it has developed no contingency
plans.
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.
ITEM 2 - PROPERTIES
The Company currently rents no office space, but is provided office space by
it's President in his law office at no charge to the Company at the current
time.
ITEM 3 - LEGAL PROCEEDINGS
The Company was unable to pay the final several months of rent on the premises
it leased at One West Main Street and the landlord has taken a judgment against
the Company in the Supreme Court of the State of New York on February 24, 1993
in the amount of $16,383.
Page 3
<PAGE>
ITEM 4 - SUBMISSION OF MATTERS
TO A VOTE OF SECURITY HOLDERS
The Company lacked sufficient funds to hold a shareholders' meeting in 1997.
Therefore, no matters were submitted to the shareholders for a vote.
PART II
ITEM 5 - MARKET FOR THE COMPANY'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS
Effective October 25, 1989, the Company's stock was deleted from NASDAQ listing.
Since that date, the Company's stock trading has been reported on the National
Daily Quotation Listing Service, or "pink sheets" or "bulletin board".
HIGH BID LOW BID
-------- -------
First Quarter 1997 $ .007 $ .003
Second Quarter 1997 $ .006 $ .004
Third Quarter 1997 $ .11 $ .005
Fourth Quarter 1997 $ .02 $ .01
The approximate number of shareholders of common stock is 4,500 as of December
31, 1997.
In 1997, the Company entered into a joint venture agreement with Syracuse
Productions, LLC to Co-Produce a feature film entitled "FREAK TALKS ABOUT SEX"
(originally "SYRACUSE MUSE"). The Company is a special limited partner in the
financing limited partnership for the film and is entitled to one-third of the
profits from the sale of the film after the investors receive their investment
plus a twenty percent (20%) return on their investment. The Joint Venture
Agreement has been previously filed as an Exhibit in an earlier 10Q for the
Company. To procure the Company's position as Co-Producer of the film, it issued
20,000,000 unregistered common shares of stock in the Company, to Charles M.
LaLoggia on April 13, 1997 in exchange for his rights as Executive Producer in
the film.
The Company also issued 10,000,000 unregistered common shares of the Company on
March 13, 1997 to Carl R. Reynolds, the President and Chairman, to compensate
him for failing to receive regular compensation for over three years.
Page 4
<PAGE>
The Company also issued 3,000,000 shares of common stock to Colleen Tiffany for
financial public relations services to be rendered to the Company. Ms. Tiffany
is associated with the President, Carl R. Reynolds, in a financial public
relations company, Logan Consulting Group, Inc. However, the shares were issued
to Ms. Tiffany personally and Mr. Reynolds will receive no benefit or share in
the proceeds of the sale of any stock by Ms. Tiffany. The Company also issued
4,000,000 common shares of the Company to Starr Securities, Inc. for investment
banking services to be rendered to the Company.
Both issuances of shares were registered under an S-8 registration with the
S.E.C. and are, therefore, immediately free trading. The agreements with Ms.
Tiffany and Starr Securities were attached as Exhibits in 10Q's filed by the
Company during 1997.
The Company has never paid a dividend on its common stock.
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes selected financial information of New Sky
Communications, Inc. for each of the five years ended December 31, 1997, 1996,
1995, 1994 and 1993. This table should be read in conjunction with other
financial information of New Sky Communications, Inc., including "Management's
Discussion and Analysis" and financial statements included elsewhere herein.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
- -----------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Net Sales $ 25,946 $ 13,729 $ 16,860 $ 334 $ 19,275
Income (loss) from
continuing operations (454,562) (157,416) (138,734) (47,367) (846,795)
Income (loss) from
continuing operations
per share (A) NIL NIL NIL NIL NIL
Cash Dividends NONE NONE NONE NONE NONE
Net working capital (147,582) (142,225) (125,265) (106,631) (94,264)
Total assets 1,251,116 1,508,415 1,647,821 1,767,821 1,802,821
Long-term debt 0 0 0 0 0
<FN>
Note A: Amounts are not presented as such amounts were less than $.01 per share.
</FN>
</TABLE>
Page 5
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
During the year, the Company received continuing foreign distribution royalties
from The Samuel Goldwyn Company for "LADY IN WHITE" in the amount of $5,946.
During 1997, the Company received no funds from Planet Productions, Inc. from
receipts on the film "GRAVE SECRETS".
The Company received a Producer's fee of $20,000 from the budget of the film
"FREAK TALKS ABOUT SEX" during 1997.
The Company has no liquidity or capital resources and is dependent on revenue
streams from previously released films, the recently completed co-production of
"FREAK TALKS ABOUT SEX" and future productions, if any to provide liquidity and
capital.
The variability in Costs and Expenses Applicable to Sales & Revenue and
resultant variability in Net Loss on the Income Statements in 1997, 1996 and
1995 is due to variations in writedowns of Film Inventory. See Item 1. Business.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) The following documents are filed as part of this report:
1. Financial Statements:
Statements of Income - Year ended December 31, 1994, December 31, 1995,
December 31, 1996 and December 31, 1997.
Statement of Stockholders Equity - December 31, 1994, December 31, 1995,
December 31, 1996 and December 31, 1997.
Statement of Cash Flows - Years ended December 31, 1994, December 31,
1995, December 31, 1996 and December 31, 1997.
Notes to Financial Statements
Balance Sheet - December 31, 1994, December 31, 1995, December 31, 1996
and December 31, 1997.
Page 6
<PAGE>
MICHAEL F. CRONIN
CERTIFIED PUBLIC ACCOUNTANT
12 BLANDFORD LANE
FAIRPORT, NEW YORK 14450
Shareholders
New Sky Communications, Inc.
Rochester, New York
I have audited the accompanying balance sheet of New Sky Communications, Inc. as
of December 31, 1997, 1996, 1995 and 1994 and the related statements of income,
stockholders' equity and cash flows for the years and then ended. The financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are of material misstatement.
An audit includes examining on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. I believe that my
audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of New Sky Communications, Inc. as of
December 31, 1997, 1996, 1995 and 1994 and the results of its operations and
cash flows for the fiscal years then ended in conformity with generally accepted
accounting principles.
April 17, 1998
/s/ MICHAEL F. CRONIN
- ---------------------
Michael F. Cronin
Certified Public Accountant
Page 7
<PAGE>
NEW SKY COMMUNICATIONS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
------
DECEMBER DECEMBER DECEMBER DECEMBER
31, 1997 31, 1996 31, 1995 31, 1994
-------- -------- -------- --------
CURRENT ASSETS:
<S> <C> <C> <C> <C>
Cash and Cash Equivalents $ 56 $ 1,150 $ 0 $ 0
Accounts Receivable
Trade 0 0 0 0
Prepaid Expenses 0 0 0 0
----------- ----------- ----------- -----------
Total Current Assets 56 1,150 0 0
Property & Equipment, Net of Accumulated
Depreciation and Amortization (Note A) 1,250,660 1,506,865 1,591,865 1,711,865
Other Assets (Note B) 400 400 55,956 55,956
Total Assets $ 1,251,116 $ 1,508,415 $ 1,647,821 $ 1,767,821
----------- ----------- ----------- -----------
LIABILITIES & STOCKHOLDERS' EQUITY
----------------------------------
CURRENT LIABILITIES:
Accounts Payable $ 106,554 $ 94,291 $ 88,781 $ 75,047
Other Current Liabilities 41,084 49,084 36,584 31,584
----------- ----------- ----------- -----------
Total Current Liabilities 147,638 143,375 125,365 106,631
Stockholders' Equity
Common Stock 5,951,402 5,756,402 5,756,402 5,756,402
Accumulated Deficit (4,847,924) (4,391,362) (4,233,946) (4,095,212)
----------- ----------- ----------- -----------
Total Stockholders' Equity 1,103,478 1,365,040 1,522,456 1,661,190
Total Liabilities & Stockholers' Equity $ 1,251,116 $ 1,508,415 $ 1,647,821 $ 1,767,821
----------- ----------- ----------- -----------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
NEW SKY COMMUNICATIONS, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
------------------------------------------------
DECEMBER DECEMBER DECEMBER DECEMBER
31, 1997 31, 1996 31, 1995 31, 1994
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $ 25,946 $ 13,729 $ 16,860 $ 334
Costs and Expenses Applicable
to Sales & Revenue (Note A) 426,482 85,000 120,000 0
--------- -------- -------- --------
Gross Profit (Loss) (400,536) (71,271) (103,140) 334
Selling, General &
Administrative Expenses 54,026 28,089 30,594 47,701
--------- -------- -------- --------
Income From Operations (454,562) (99,360) (133,734) (47,367)
Other Expense-Write Down
Carrying Value of
Investments 0 55,556 0 0
--------- -------- -------- --------
Income (Loss) Before
Income Taxes (454,562) (154,916) (133,734) (47,367)
Income Taxes (Note A) 2,000 2,500 5,000 0
--------- -------- -------- --------
Net Income (Loss) $(456,562) $(157,416) $(138,734) $ (47,367)
========= ========= ========= =========
Per Share Amounts NIL NIL NIL NIL
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
NEW SKY COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
------------------------------------------------
DECEMBER DECEMBER DECEMBER DECEMBER
31, 1997 31, 1996 31, 1995 31, 1994
-------- -------- -------- --------
OPERATING ACTIVITIES:
- ---------------------
<S> <C> <C> <C> <C>
Net Income (Loss) $(456,562) $(157,416) $(138,734) $ (47,367)
Adjustments to Reconcile Net Income
(Loss) to Cash Provided
(Consumed) by Operating Activities:
Non-Cash Valuation Adjustment 0 55,556 0 0
Non-Cash Operating Expenses 25,000 0 0 0
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts &
Notes Receivable 0 0 0 0
Amortization of Film Inventory Costs 426,205 85,000 120,000 0
Increase (Decrease) in Accounts
Payable & Accrued Expenses 4,263 8,010 18,734 (12,367)
--------- --------- --------- ---------
Net Cash Provided (Consumed) by Operating
Activites (1,094) (8,850) 0 (35,000)
INVESTING ACTIVITIES:
- ---------------------
Reimbursement Received on Investment
in Film Inventory 0 5,000 0 35,000
--------- --------- --------- ---------
Net Cash Used in Investing Activities 0 5,000 0 35,000
FINANCING ACTIVITIES:
- ---------------------
Proceeds of Loan 0 10,000 0 0
--------- --------- --------- ---------
Net Cash Provided (Used) by Financing Activities 0 10,000 0 0
Net Change in Cash (1,094) 1,150 0 0
Cash & Cash Equivalents at the
Beginning of Period 1,150 0 0 0
--------- --------- --------- ---------
Cash & Cash Equivalents at the
End of Period $ 56 $ 1,150 $ 0 $ 0
========= ========= ========= =========
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
NEW SKY COMMUNICATIONS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK DEFICIT
------------------------------------------ -----------
CAPITAL IN EXCESS
NUMBER OF SHARES PAR VALUE OF PAR VALUE
---------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1992 142,736,923 $ 14,274 $ 5,742,128 $(3,201,050)
Net Loss December 31, 1993 -- -- -- (846,795)
----------- ----------- ----------- -----------
December 31, 1993 142,736,923 14,274 5,742,128 (4,047,845)
Net Loss December 31, 1994 -- -- -- (47,367)
----------- ----------- ----------- -----------
December 31, 1994 142,736,923 14,274 5,742,128 (4,095,212)
Net Loss December 31, 1995 -- -- -- (138,734)
----------- ----------- ----------- -----------
December 31, 1995 142,736,923 14,274 5,742,128 (4,233,946)
Net Loss December 31, 1996 -- -- -- (157,416)
----------- ----------- ----------- -----------
December 31, 1996 142,736,923 14,274 5,742,128 (4,391,362)
Shares Issued For Services 48,000,000 4,800 190,200 --
Net Loss December 31, 1997 -- -- -- (456,562)
----------- ----------- ----------- -----------
Balance December 31, 1997 190,736,923 $ 19,074 $ 5,932,328 $(4,847,924)
----------- ----------- ----------- -----------
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
NEW SKY COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
A. Summary of Significant Accounting Policies:
1. REVENUE AND EXPENSE RECOGNITION: Revenue is recognized when earned rather
than when received. Expenses are charged to operations as incurred.
2. PROPERTY & EQUIPMENT are recorded on the basis of cost. Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets.Expenditures for renewals and betterments are capitalized. Expenditures
for repairs and maintenance are charged to operations as incurred. Gain or loss
upon sale or retirement due to obsolescence is reflected in the operating
results in the period the event takes place. Film production costs are
capitalized as film cost inventory and have been amortized using the
individual-film-forecast-computation method over the licensing period. Film
inventory consists of the following:
<TABLE>
<CAPTION>
DEC. 31, 1997 DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Films Released $ 308,611 $ 408,611 $ 524,214 $ 644,214
Films in Process 915,277 1,029,712 1,029,712 1,029,712
Story rights & Scenarios 26,772 68,542 37,939 37,939
---------- ---------- ---------- ----------
Total Film Inventory $1,250,660 $1,506,865 $1,591,865 $1,711,865
========== ========== ========== ==========
</TABLE>
B. Other Assets.
Other Assets consist of real estate mortgages held for investment and
unamortized organization costs. In 1996 management revised its estimate of the
recoverability of its investments resulting in a one time charge to earnings of
$55,556.
C. Income Taxes.
The Corporation has $4,735,663 in net operating loss carryovers available to
reduce future income taxes. These carryovers may be utilized through the year
2012. Generally Accepted Accounting Principles require the recognition of
deferred tax assets resulting from the future reduction in taxes as this net
operating loss is applied against future taxable income. Management has elected
not to recognize this asset due to its estimate of the uncertainty of the
realization of its future financial benefit.
12
<PAGE>
ITEM 9 - DISAGREEMENTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The names of the Directors and Executive Officers of the Company are as follows:
NAME AGE POSITION
---- --- --------
Carl R. Reynolds 50 Chairman of the Board
100 Caversham Woods President
Pittsford, NY 14534 Chief Financial Officer
History of Officers and Directors:
Carl R. Reynolds: Chairman of the Board, President and Director of the Company.
Mr. Reynolds is an attorney and an accountant. He is a Director of FNB Rochester
Corp. and First National Bank of Rochester, Inc. He has been a Director and
officer of the Company since inception.
All Directors of the Company will hold office until the next annual meeting of
shareholders and until their successors have been duly elected and qualified.
The executive officers of the Company are elected by the Board of Directors and
hold office at the will of the Board. The Company has not held an annual meeting
since 1989 due to lack of funds to hold such a meeting.
The Company presently has no Executive Committee or Audit Committee.
Page 13
<PAGE>
ITEM 11 - EXECUTIVE COMPENSATION
The executives of the Company received compensation in the following amounts:
<TABLE>
<CAPTION>
ANNUAL NON-CASH
NAME YEAR CASH COMPENSATION COMPENSATION LONG TERM
---- ---- ----------------- ------------ ---------
<S> <C> <C> <C> <C>
Carl R. Reynolds
President, Director 1997 $18,900.00 $50,000.00 None
1996 $13,000.00 $0 None
1995 $10,000.00 $0 None
</TABLE>
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of shares of Common
Stock beneficially owned by the directors and principal shareholders (those
owning more than 5% of the Company's outstanding Common Stock) of the Company
and any by all officers and directors as a group as of December 31, 1997.
<TABLE>
<CAPTION>
COMMON % COMMON
SHARES SHARES
NAME OWNED OWNED
---- ----- -----
<S> <C> <C>
Carl R. Reynolds 11,000,000 5.7%
100 Caversham Woods
Pittsford, New York 14534
Charles M. LaLoggia 22,050,000 11.5%
142 Beckwith Terrace
Rochester, New York 14610
All Officers & Directors
& Principal Shareholders
as a Group 33,050,000 17.2%
</TABLE>
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See ITEM 1 - BUSINESS.
Page 14
<PAGE>
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
Page(s)
1. Financial Statement Schedules: For the years
ended December 31, 1994, December 31, 1995,
December 31, 1996 and December 31, 1997 in
accordance with Rule 5.04 of regulation S-X. 7 - 12
All other schedules are omitted because they are not
applicable or required information is shown in financial
statements or notes thereto.
2. Exhibits
1. Agreement dated July 31, 1997 with Starr Securities, Inc.
(incorporated by reference from Company's Form 10Q for
September 30, 1997).
2. Agreement dated November 7, 1996 with Charles M. LaLoggia
(incorporated by reference from Company's Form 10Q for
March 31, 1997).
3. Agreement dated July 2, 1996 with Frank LaLoggia (incorporated
by reference from Company's Form 10Q for June 30, 1996).
4. Agreement dated May 12, 1997, between New Sky 18-28
Communications, Inc. and Syracuse Film Productions, LLC
3. Financial Statement Schedules - The required schedules are filed herewith
and incorporated by reference.
4. Form 8-K - Form 8-K with Agreements dated April 18, 1997 with Charles M.
LaLoggia, dated May 12, 1997 with Syracuse Productions, LLC, and dated
June 16, 1997 with Colleen Tiffany was filed on June 16, 1997 with the
S.E.C. and is incorporated herein by reference.
Page 15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
(Registrant)
By:/S/ CARL R. REYNOLDS
-----------------------------------------------
APRIL 7, 1999 President, Chief Financial & Accounting Officer
- ---------------
(Date) (Signature and Title)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
/s/ Carl R. Reynolds
- --------------------
Director
(Signature and Title)
APRIL 7, 1999
- -------------
(Date)
Page 16
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JOINT VENTURE AGREEMENT
-----------------------
This Agreement is made this 12th day of May, 1997 by and between
SYRACUSE PRODUCTIONS, L.L.C., a New York limited liability company with offices
at 58 Copley Street, Auburn, New York 13021 (hereinafter referred to as
"Syracuse") and NEW SKY COMMUNICATIONS, INC., a New York corporation with
offices at 700 Reynolds Arcade, Rochester, New York 14614 (hereinafter referred
to as "New Sky") (Syracuse and New Sky are hereinafter sometimes referred
individually and collectively as "Venturer" or "Venturers").
R E C I T A L S
WHEREAS, Syracuse and New Sky are the General Partner and Special
Limited partner, respectfully, in Syracuse Film Partners, L.P., a New York
limited partnership ("Limited Partnership") which was formed to produce and
exploit an original screenplay currently entitled "FREAK TALKS ABOUT SEX" based
on an original idea created by Michael M.B. Galvin, and adapted for the screen
by Galvin, Peter M. Speakman and Paul N. Todisco (the "Screenplay") as a
theatrical motion picture (the "Picture") (the idea, Screenplay and/or Picture
and all ancillary rights thereto and therein are hereinafter collectively
referred to as the "Property"); and
WHEREAS, in addition to their relative rights and obligations as set
forth in the separate Agreement of Limited Partnership for Syracuse Film
Partners, L.P., Syracuse and New Sky wish to formalize their understanding with
respect to ancillary dealings and agreements in connection with the production
and distribution of the Picture and future movie production activity;
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<PAGE>
NOW THEREFORE, in consideration for the mutual covenant set forth
herein, the parties hereto agree as follows:
1. CONTRACTS AND AGREEMENTS.
-------------------------
(a) All contracts or agreements to be entered into by or on behalf
of or for the benefit of the Venture must be signed by all parties hereto, it
being understood that no party shall have the right to bind the Venture without
the express written consent of the other party. It is understood that if any
contract or agreement is entered into by either party without the written
consent of the other party, the party purporting to enter into such unauthorized
contract or agreement on behalf of the Venture will indemnify and hold harmless
the non-contracting party from all claims, liabilities, damages and costs
(including attorneys' fees and court costs) arising out of or pertaining to such
unauthorized contract or agreement. It being further understood that this
paragraph shall not apply to contracts and agreement. It being further
understood that this paragraph shall not apply to contracts and agreements
reasonable and necessary to further the production of the Picture, so long as
they do not materially differ from the final budget of the Picture as set forth
in the Confidential Offering Memorandum for the Limited Partnership dated April
2, 1997 ("Offering Memorandum").
(b) The proceeds of any contracts entered into by any party hereto
for personal services of such party as a writer, producer, director,
actor/actress or otherwise with any third party motion picture company after
such motion picture company has acquired the Property hereunder shall belong
solely to such party;
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<PAGE>
provided, however, that it is specifically agreed that any such agreement with a
motion picture company must agree to employ both parties hereunder as producers
of any motion picture based upon the Property and all credits for such motion
picture are in accordance with the credit provisions of Paragraph 3 of this
Agreement.
2. ALLOCATION OF PROFITS FROM LIMITED PARTNERSHIP. Syracuse and New Sky
-----------------------------------------------
agree that any third party net or gross profit participations which are
negotiated in connection with the production and distribution of the Property
shall be paid from New Sky's or Syracuse's respective share of all distributions
from the Limited Partnership, except for any profit participation agreed to in
advance by both parties. In this regard, Syracuse and New Sky hereby agree that
any profit participation negotiated with Steve Zahn shall be shared equally by
New Sky and Syracuse from their Limited Partnership distributions.
3. CREDITS.
-------
(a) Charles M. LaLoggia and Carl R. Reynolds shall be accorded the
following credit on a single card, in the main credits, on screen and in paid
ads controlled by Syracuse and in which any other Producer (for purposes of the
Agreement "Producer" shall mean James D. Daddabbo and Angela J. Daddabbo
collectively) is accorded credit, and in size of type (as to height, width,
thickness and
20
<PAGE>
boldness) equal to the largest size type in which any other Producer is
accorded credit:
"Executive Producers
Charles M. LaLoggia
Carl R. Reynolds"
(b) New Sky and Roxbury Partners shall be accorded the following
credit on a single card, in the main credits, on screen and in paid ads
controlled by Syracuse and in which any other Producer (for purposes of this
Agreement "Producer" shall mean James D. Daddabbo and Angela J. Daddabbo
collectively) in accorded credit, and in size of type (as to height, width,
thickness and boldness) equal to the largest size type in which any other
Producer is accorded credit:
"New Sky Communications, Inc. and Roxbury Partners Present"
4. DEVELOPMENT FEES. A development fee of $20,000 shall be paid to
----------------
New Sky under the Offering Memorandum upon the closing of the Offering. A
development fee of $20,000 shall be payable to Syracuse under the Offering
Memorandum on the earlier of the return of any Screen Actor's Guild bond posted
for the Picture, or along with other deferred compensation negotiated in the
budget for the Picture.
21
<PAGE>
5. EXCLUSIVITY AND OPTION.
-----------------------
(a) None of the parties shall be exclusive to the Venture and each
party may develop other properties and engage in other activities in the motion
picture and television industry or any other business, which may be competitive
in nature with the Venture, separate and apart from the Venture and the other
party. However, it is agreed that each party will devote as much time to the
business of the Venture as is reasonably necessary to fulfill its duties and
obligations herein.
(b) Any and all rights, that Syracuse now or hereinafter acquires in
the Property which are not specifically assigned, or otherwise transferred to
the Partnership, including but not limited to, theatrical remakes or sequel
rights, shall be jointly owned by the parties hereto. Neither party may exercise
any joint right under this Agreement without the written consent of the other
party.
(c) If Syracuse intends to product another picture within seven (7)
years of the date of this Agreement or five (5) years of the date of the initial
theatrical release (if any) of the Picture, whichever is later, then Syracuse
hereby grants New Sky the exclusive right and option to raise the production
financing for said subsequent picture (and one picture only), with the
understanding that the ownership rights in any subsequent picture, and financial
terms and conditions for its production shall be no less favorable to Syracuse
than those set forth herein and in the Offering Memorandum. Syracuse shall give
written notice to New Sky of its intent to commence production of the any
subsequent picture prior to entering into
22
<PAGE>
any agreement with any third party whereby such third party would acquire the
right to finance all or part of the picture. After such written notice, the
parties shall negotiate in good faith to finalize an agreement (which
negotiations shall not exceed 90 days), and New Sky shall have a period of one
year after finalization of the agreement to provide such financing. If New Sky
is unable to provide financing as agreed within the one year period, Syracuse
may proceed with the production concerned without the involvement of New Sky and
the parties shall have no further obligation to each other with respect to such
production.
6. TERM. The term of this Joint Venture shall commence on the effective
----
date of this Agreement, and, unless sooner terminated in accordance with the
provisions hereof, shall continue for the aggregate term of any and all
agreements relating to the Picture and Screenplay. This Agreement shall commence
and take effect only upon the closing of the Offering Memorandum.
7. PARTNERSHIP AGREEMENT. This Agreement shall be subject to the
---------------------
Agreement of Limited Partnership for the Limited Partnership, and to the extent
that that agreement is inconsistent with this Agreement, the terms and
provisions of the Agreement of Limited Partnership shall supersede any term or
provision of this Agreement.
8. REPRESENTATIONS AND WARRANTIES. Each party hereto represents and
------------------------------
warrants to the other as follows:
23
<PAGE>
(a) (i) that it possesses the legal authority and capacity and has
obtained the necessary Board of Director or Member approval to enter into this
Agreement:
(ii) that there are not outstanding liens, claims,
administrative orders, judgments, contracts or other circumstances which
adversely affect either the substance of this Agreement or the ability of either
party to enter into or perform this Agreement;
(iii) that it shall not encumber or sell any property, assets,
or intangible rights of the Venture without the written consent of the other
party;
(iv) that it shall not assign, mortgage, hypothecate or encumber
its interest in the Venture without the written consent of the other party;
(v) that it shall not loan any funds or extend any credit of the
Venture to any person or entity without the written consent of the other party;
(vi) that it shall not incur any expense, cost, liability or
obligation in the name of or on the credit of the Venture without the written
consent of the other party;
(b) Each party hereby indemnifies and holds harmless the other party
from and against any and all claims, liabilities, damages and costs
24
<PAGE>
(including but not limited to reasonable attorneys' fees and court costs)
arising from any breach by such party of any representation, warranty or
agreement made by such party herein.
(c) Any loss sustained by the Venture because of the breach by any
party of any representation or warranty shall be deducted from such party's
share of distributions from the Limited Partnership.
9. DISSOLUTION AND TERMINATION.
----------------------------
(a) The Venture shall be dissolved and terminated and its business
wound up upon the first of the following:
(i) The expiration of the term set forth herein;
(ii) Mutual agreement of the parties;
(iii) Operation of law;
(iv) Material breach of the Agreement by any party, which breach is
not cured in thirty (30) days after written notice thereof from the
non-defaulting party; provided, however, it is understood that only the
non-defaulting party; provided, however, it is understood that only the
non-defaulting party shall have the right to terminate the Venture pursuant
thereto. Such termination shall not release the defaulting party from any of the
obligations or liabilities to the other party whether pursuant to this Agreement
or at law or in equity.
10. ASSIGNABILITY. This Agreement shall not be assigned without the
-------------
written permission of the other party.
25
<PAGE>
11. AMENDMENT. 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.
12. ARBITRATION. The parties agree that should any dispute arise
-----------
hereunder such dispute shall be resolved by arbitration in accordance with the
rules and regulations of the American Arbitration Association, as those rules
may be amended. Such rules are incorporated herein and made a part of this
Agreement by reference. The parties agree to abide by and perform any award
rendered in such arbitration and that any court having jurisdiction may issue a
final judgment based upon such award.
13. CONSTRUCTION. This Agreement shall be construed under the laws of
------------
the State of New York applicable to agreements executed and to be wholly
performed within such state and the parties hereby designate New York as the
sole convenient forum for the resolution of disputes hereunder.
14. NO CONFLICT. Nothing herein contained shall be construed to require
-----------
any action or payment of any compensation contrary to law or in violation of any
guild or union agreement which, from time to time, may be in effect. If there is
any conflict between any provision of this Agreement and any such law, or guild
or union agreement, and the letter shall prevail, then the affected provisions
of this Agreement shall be modified only to the extent necessary to remove such
conflict.
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<PAGE>
15. OTHER DOCUMENTS. Each party agrees to execute all documents and
---------------
take all further actions reasonably necessary in connection with the performance
of the obligations hereunder.
16. WAIVER. No waiver by any party hereto of any failure by any other
------
party to keep or perform any convenant or condition hereof shall be deemed a
waiver of any preceding or succeeding breach of the same or any other covenant
or condition.
IN WITNESS WHEREOF, the parties have executed this Agreement the date
and date first above written.
SYRACUSE PRODUCTIONS, L.L.C.
By: /S/ JAMES D. DADDABBO
---------------------
James D. Daddabbo, Member
NEW SKY COMMUNICATIONS, INC.
By: /s/ CARL R. REYNOLDS
--------------------
Carl R. Reynolds, President
27
