-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Szntyvho9EVhfOwPF9yGXXosg0JRiILKBpv1gpcHlOZm7xPMY5N3HSmFoXGEyW7L ZvL6/XCx0Tv1E+HGNH4jXg== 0000909012-99-000314.txt : 19990511 0000909012-99-000314.hdr.sgml : 19990511 ACCESSION NUMBER: 0000909012-99-000314 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW SKY COMMUNICATIONS INC CENTRAL INDEX KEY: 0000771999 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [7812] IRS NUMBER: 161229730 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14621 FILM NUMBER: 99615349 BUSINESS ADDRESS: STREET 1: 16 EAST MAIN ST STREET 2: 720 REYNOLDS ARCADE CITY: ROCHESTER STATE: NY ZIP: 14614 BUSINESS PHONE: 7164545490 MAIL ADDRESS: STREET 1: 720 REYNOLDS ARCADE STREET 2: 16 EAST MAIN STREET CITY: ROCHESTER STATE: NY ZIP: 14614 FORMER COMPANY: FORMER CONFORMED NAME: THOROUGHBREDS USA INC DATE OF NAME CHANGE: 19861118 10-Q 1 QUARTERLY REPORT 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 ------- 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). 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 NEW SKY COMMUNICATIONS, INC. STATEMENT OF INCOME (LOSS) (UNAUDITED)
FOR THREE MONTHS ENDED ---------------------- MARCH 31, MARCH 31, 1999 1998 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 ======== ========
Page 3 NEW SKY COMMUNICATIONS, INC. BALANCE SHEET (As of March 31, 1999 and December 31, 1998)
ASSETS MARCH 31, 1999 DECEMBER 31, 1998 (UNAUDITED) (AUDITED) -------------- ------------------ Current Assets: 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 ========== ==========
Page 4 NEW SKY COMMUNICATIONS, INC. BALANCE SHEET (As of March 31, 1999 and December 31, 1998) LIABILITIES AND STOCKHOLDERS' EQUITY
MARCH 31, 1999 DECEMBER 31, 1998 (UNAUDITED) (AUDITED) ----------- --------- Current Liabilities: 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 =========== ===========
Page 5 NEW SKY COMMUNICATIONS, INC. Statement Of Cash Flows Three Months Ended March 31, 1999 and March 31, 1998
THREE MONTHS ENDED THREE MONTHS ENDED MARCH 31, 1999 MARCH 31, 1998 ------------------ ------------------ Operating Activities: 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 ======== ========
Page 6 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 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 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 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 EX-10 2 INVESTMENT AGREEMENT 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 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 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 EX-27 3 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1999 JAN-1-1999 MAR-31-1999 0 0 0 0 0 0 0 0 1,284,566 229,925 0 19,374 0 0 1,035,267 1,284,566 0 0 0 7,500 0 0 0 (7,500) 0 (7,500) 0 0 0 (7,500) 0 0
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