SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999
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, 1999................................$5,812,080.00

Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of December 31, 1999................................193,736,923

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."
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. In addition, the Company has agreed to pay, from its
share of profits, five percent (5%) of film profits to Steve Zahn, one of the
stars of the film. 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 1999 the
film had debuted as a Cinemax Friday Night Premiere in December 1999 and January
2000. At year-end the Producers were negotiating for the grant of U.S. video and
television rights to the film and for a sales agent to sell foreign rights to
the film. The Joint Venture Agreement has been previously filed as an Exhibit in
an earlier Form 10Q for the Company and the Company's 1997 Form 10-K. 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. "FREAK TALKS ABOUT SEX" is a comedy starring Steve Zahn,
who has recently appeared in "OUT OF SIGHT" and "YOU'VE GOT MAIL" and stars in
the current Miramax film "HAPPY TEXAS" and Josh Hamilton, who has recently
appeared in the NBC mini-series "THE 60'S."

During the first quarter, the Company acquired a forty percent (40%) interest in
the business called The Movie Place, which owns and operates the Internet site
"http://www.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 site has
retained an advertising broker to procure additional advertising. 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

Page 2

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. Mr.
Reynolds and Charles M. LaLoggia, a former President of the Company, have lent
an additional $75,000.00 to Movieplace.com, Inc. for working capital for a
twenty-seven percent (27%) equity interest in Movieplace.com, Inc. from the
owners of Movieplace stock, not including the Company. The Company continues to
own forty percent (40%) of Movieplace.com, Inc. common stock. Mr. Reynolds has
also been elected Chairman of the Board of Directors of Movieplace.com, Inc.

Movieplace.com intends to be the premiere Internet site for movie fans, motion
picture industry professionals, stock market investors with a particular
interest in entertainment, media, communications and internet stocks and
investors who are interested in participating in the financing of independent
motion pictures.

The Movieplace.com business plan has three essential elements:

FIRST, it will provide timely, interesting, informative and proprietary content
which draws viewers to the Movieplace.com web site. This content includes
reviews of current movies and news from the world of entertainment; exclusive
"One On One" interviews with major motion picture stars conducted by
Movieplace.com Chief Executive Officer and Managing Editor Mike Cidoni in full
streaming video; a regular internet "television" program, "The Critics", a full
streaming video production featuring reviews of current movie releases and
commentary on classic films and video releases; "The Movieplace Radio Hour", a
weekly one-hour audio streaming program that discusses films and videos,
featuring guests commentators and journalists from around the country and which
also includes interactivity with the listening audience; "Everybody's A Critic",
an audio interactive message board feature which allows Movieplace.com visitors
to express their views on movies and other topics in a voice/audio format; and
"Spotlight On Wall Street", which features proprietary columns and other
information dealing mainly (but not exclusively) with media, entertainment and
communications stocks which would be of interest to stock market investors,
provided partially as free, advertiser-supported content and also offering
"premium" content on a subscription basis. Other content includes movie and
entertainment industry news, links to movie showing times at theaters around the
country, full video streaming movie music videos, message boards for interactive
comment, e-commerce trade in movie-related items and 24-hour video and audio
streaming television and radio programming.

SECOND, Movieplace.com intends to provide a mechanism through which selected
independent film makers can secure full or partial financing for their projects
over the

Page 3

Movieplace.com web site. It is anticipated that Movieplace.com will receive
equity interests in films financed in this manner in return for presenting the
projects on the site. The size of the interest will vary from project to
project, and Movieplace.com may, in certain instances, provide partial funding
and additional services for certain projects.

THIRD, Movieplace.com will acquire internet rights to selected independent
films, videos and television programming for presentation on the Movieplace.com
web site either as advertiser-supported free programming or for presentation on
a pay-per-view basis.

The goals of Movieplace.com are as follows:

(1) To turn "Movieplace" into a brand name which is readily recognizable to
anyone with an interest in movies, the business of movies or the entertainment
industry in general, including moviegoers who will ultimately be attending films
produced by "Movieplace", television viewers who will be watching programming
produced by "Movieplace", newspaper readers who are reading columns written by
Movieplace writers, radio listeners who are listening to movie reviews from
Movieplace critics and stock market investors who are watching interviews or
reading about recommendations from analysts who write for Movieplace's
"Spotlight On Wall Street" section;

(2) To attract as many visitors as possible to the Web site by using a variety
of unique and proprietary content targeted to different elements and interests
relating not only to movies but to the business of movies and other forms of
media and communications;

(3) To use the proprietary content of the Web site to allow the "Movieplace"
brand name to migrate to other forms of media, including television and radio
syndication, newspaper columns, newsletters, books and motion picture production
so that the "Movieplace" brand name becomes familiar to users of "traditional"
media, allowing both the Web site and its "traditional" media offshoots to
cross-promote each other without necessitating the exorbitant advertising
expenditures other "dot.com" businesses are burdened with; and

(4) To make the assets of Movieplace.com increasingly valuable over time to a
potential partner or purchaser seeking to expand its presence on the Web. There
is no guarantee that Movieplace.com will be able to accomplish all of the goals
of its business plan. There is significant competition among movie-content Web
sites, many of which, have a been in existence longer and have significantly
more financial resources than Movieplace.com to provide features and advertising
and promotion for a Web site.

The Company has explored various options with a view toward both maximizing the
value of its holdings in Movieplace.com and also toward providing Movieplace.com

Page 4

sufficient capital to achieve its goal of becoming the leading "brand name"
among movie/entertainment web sites. The Company has concluded that the optimal
alternative is an Initial Public Offering of Movieplace.com as a stand-alone
public company. Under this scenario The Company would continue to own a stake in
Movieplace.com. in the form a shares of a publicly-trading company. As a result,
The Company has entered into discussions with investment bankers who have
expressed interest in a possible Initial Public Offering of Movieplace.com.
There can be no assurance that any Initial Public Offering will take place, or
that if it takes place, would be successful.

In fiscal 1998, the Company's first feature film "LADY IN WHITE" continued its
release on video cassette and in foreign markets. A new release of a so-called
"Director's Cut" of the film was released on laser disc in 1998. The Company
received no funds on account of distribution royalties from the film in 1999.
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 1999 the Company amortized none of the film's costs, leaving $200,000
in Film Inventory for the film. All rights to the film revert to the Company in
2003 and the Company believes there will be an ongoing market for the film,
especially in the new, emerging media formats.

The Company continued to develop and seek financing for another film project, a
comedy, tentatively entitled "THE GODMOTHER." At year-end the accumulated
development cost of the film was capitalized at $26,772. After the year-end, the
Company obtained commitments for financing the film and announced commencement
of pre-production activities for the film on May 1, 2000.

The Company continued to develop and seek financing, along with Bellacasa
Productions, Inc., for a feature film, entitled "THE GIANT", in 1999. The film
is a historical drama examining artistic inspiration and the political turmoil
surrounding Michaelangelo's carving of the David. At year-end the accumulated
development cost was $750,000. The Company is entitled to a Producer's fee and
fifteen percent (15%) of Producer's profits, if the film is produced.

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. The Company receives a priority repayment of its
investment and has the personal guarantee of the producer of the film. During
1999, the Company received no proceeds from the film's producer, keeping the
Company's investment to $108,610 at year-end.

Page 5

The Company also issued 10,000,000 common shares of the Company in 1997, 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 in
1997 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. in 1997
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 filed corporate income tax returns, federal and New York State,
for the years ended December 31, 1999, 1998, 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 experienced no material Year 2000 event or cost, before or after
year-end as the Company's records are not computerized. The Company also
experienced no Y2K problem by third party vendors and licensees of its films
already in release.

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 funds 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 (US 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" (all rights),
or the markets and

Page 6

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 profitability 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 talent.

This report contains forward-looking statements regarding expectations for
future financial performance which involve uncertainty and risk. It is possible
the Company's future financial performance may differ from expectations due to a
variety of factors including, but not limited to, changes in economic and
business conditions in the world, increased competitive activity, achieving
sales levels to fulfill revenue expectations, consolidation among its
competitors and customers, technology advancements, unexpected costs and
charges, fluctuations in supply costs, adequate funding for plans, changes in
interest and foreign exchange rates, regulatory and other approvals and failure
to implement all plans, for whatever reason. It is not possible to foresee or
identify all such factors. Any forward-looking statements in this report are
based on current conditions, expected future developments and other factors it
believes are appropriate in the circumstances. Prospective investors are
cautioned that such statements are not a guarantee of future performance and
actual results or developments may differ materially from those projected. The
Company makes no commitment to update any forward-looking statement included
herein, or disclose any facts, events or circumstances that may affect the
accuracy of any forward-looking statement.

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 7

ITEM 4 - SUBMISSION OF MATTERS
TO A VOTE OF SECURITY HOLDERS

The Company lacked sufficient funds to hold a shareholders' meeting in 1999.
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 "bulletin board".

HIGH BID LOW BID
-------- -------
First Quarter 1999 $ .05 $ .017
Second Quarter 1999 $ .09 $ .019
Third Quarter 1999 $ .05 $ .025
Fourth Quarter 1999 $ .06 $ .022

The approximate number of shareholders of common stock is 4,500 as of December
31, 1999.

During the first quarter, the Company acquired a forty percent (40%) interest in
the business called The Movie Place, which owns and operates the Internet site
"http://www.movieplace.com." 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. Mr.
Reynolds and Charles M. LaLoggia, a former President of the Company, have lent
an additional $75,000.00 to Movieplace.com, Inc. for working capital for a
twenty-seven percent (27%) equity interest in Movieplace.com, Inc. from the
owners of Movieplace stock, not including the Company. The Company continues to
own forty percent (40%) of Movieplace.com, Inc. common stock. Mr. Reynolds has
also been elected Chairman of the Board of Movieplace.com, Inc.

Page 8

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. In addition, the Company
has agreed to pay, from its share of profits, five percent (5%) of film profits
to Steve Zahn, one of the stars of the film. The Joint Venture Agreement has
been previously filed as an Exhibit in the 1997 Form 10K 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.

The Company also issued 3,000,000 shares of common stock in 1997 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. in 1997
for investment banking services to be rendered to the Company. Both of the
issuances of these 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.

Page 9

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, 1999, 1998,
1997, 1996 and 1995. 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.

YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------------------------------------

1999 1998 1997 1996 1995
----------- --------- -------- -------- ---------

Net Sales $ 0 $ 0 $ 25,946 $ 13,729 $ 16,860
Income (loss) from
continuing operations (34,870) (71,337) (454,562) (157,416) (138,734)

Income (loss) from
continuing operations
per share (A) NIL NIL NIL NIL NIL

Cash Dividends NONE NONE NONE NONE NONE

Net working capital (259,295) (197,425) (147,582) (142,225) (125,265)

Total assets 1,284,566 1,259,566 1,251,116 1,508,415 1,647,821

Long-term debt 0 0 0 0 0

Note A: Amounts are not presented as such amounts were less than $ .01 per
share.

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

During the year, the Company received no distribution royalties for "LADY IN
WHITE".

During 1999, the Company received no funds from Planet Productions, Inc. from
receipts on the film "GRAVE SECRETS".

Page 10

The Company received no funds from its profit participation in the feature film
"FREAK TALKS ABOUT SEX" during 1999.

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, and possible secondary
offerings of its securities 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 1999, 1998 and
1997 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, 1996, December 31, 1997,
December 31, 1998 and December 31, 1999.

Statement of Stockholders Equity - December 31, 1996, December 31, 1997,
December 31, 1998 and December 31, 1999.

Statement of Cash Flows - Years ended December 31, 1996, December 31,
1997, December 31, 1998 and December 31, 1999.

Notes to Financial Statements

Balance Sheet - December 31, 1996, December 31, 1997, December 31, 1998
and December 31, 1999.

Page 11

MICHAEL F. CRONIN
CERTIFIED PUBLIC ACCOUNTANT
1574 EAGLE NEST CIRCLE
WINTER SPRINGS, FL 32708
407-977-9057

Shareholders
New Sky Communications, Inc.
Rochester, New York

I have audited the accompanying balance sheet of New Sky Communications, Inc. as
of December 31, 1999, 1998, 1997 and 1996 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, 1999, 1998, 1997 and 1996 and the results of its operations and
cash flows for the fiscal years then ended in conformity with generally accepted
accounting principles.

March 23, 2000

Michael F. Cronin
Certified Public Accountant

Page 12

NEW SKY COMMUNICATIONS, INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DECEMBER 31, 1999

USE OF ESTIMATES
- ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statement and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from the
estimates.

CASH & CASH EQUIVALENTS
- -----------------------
For financial statement presentation purposes, the Company considers those
short-term, highly liquid investments with original maturities of three
months or less to be cash or cash equivalents.

PROPERTY & EQUIPMENT
- --------------------
Property and equipment are recorded at cost. Depreciation is computed
using the straight line method over the estimated useful lives of the
assets, generally 10 years. Expenditures for renewals and betterments are
capitalized. Expenditures for minor items, 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.

REVENUE RECOGNITION
- -------------------

Sales are recognized when a product is delivered or shipped to the
customer and all material conditions relating to the sale have been
substantially performed.

STOCK BASED COMPENSATION
- ------------------------
Stock based compensation is accounted for by using the intrinsic value
based method in accordance with Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25"). The Company has
adopted Statements of Financial Accounting Standards No. 123, "Accounting
for Stock Based Compensation, ("SFAS 123") which allows companies to
either continue to account for stock based compensation to employees under
APB 25, or adopt a fair value based method of accounting. The Company has
elected to continue to account for stock based compensation to employees
under APB 25 but has made the required SFAS 123 pro forma disclosures in
accordance with SFAS 123.

FAIR VALUE OF FINANCIAL INSTRUMENTS
- -----------------------------------
Statements of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires disclosure of fair value
information about financial instruments. Fair value estimates discussed
herein are based upon certain market assumptions and pertinent information
available to management as of December 31, 1999. The respective carrying
value of certain on-balance sheet financial instruments approximated their
fair values. These financial instruments include cash and cash
equivalents, marketable securities, trade receivables, accounts payable
and accrued expenses. Fair values were assumed to approximate carrying
values for these financial instruments since they are short term in nature
and their carrying amounts approximate fair values or they are receivable
or payable on demand. The fair value of the Company's notes payable is
estimated based upon the quoted market prices for the same or similar
issues or on the current rates offered to the Company for debt of the same
remaining maturities. The carrying value approximates the fair value of
the notes payable.

Page 13

NEW SKY COMMUNICATIONS, INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DECEMBER 31, 1999

EARNINGS PER COMMON SHARE
-------------------------
The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 128 "Earnings Per Share" ("SFAS 128"). SFAS 128
replaces the previous "primary" and "fully diluted" earnings per share
with "basic" and "diluted" earnings per share. Unlike "primary" earnings
per share that included the dilutive effects of options, warrants and
convertible securities, "basic" earnings per share reflects the actual
weighted average of shares issued and outstanding during the period.
"Diluted" earnings per share are computed similarly to "fully diluted"
earnings per share. In a loss year, the calculation for "basic" and
"diluted" earnings per share is considered to be the same as the impact of
potential common shares is antidilutive.

INCOME TAXES
- ------------
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes,"
("SFAS 109") which requires recognition of estimated income taxes payable
or refundable on income tax returns for the current year and for the
estimated future tax effect attributable to temporary differences and
carry forwards. Measurement of deferred income tax is based on enacted tax
laws including tax rates, with the measurement of deferred income tax
assets being reduced by available tax benefits not expected to be
realized.

IMPAIRMENT OF LONG LIVED ASSETS
- -------------------------------
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long Lived Assets and for Long Lived
Assets to be Disposed of," ("SFAS 121"). SFAS 121 requires impairment
losses to be recorded on long lived assets used in operations and goodwill
when indications of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the carrying
amount of the asset.

RECENT ACCOUNTING PRONOUNCEMENTS
- --------------------------------
Effective for periods beginning after December 15, 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," ("SFAS 130") and
Statement of Financial Accounting Standards No. 131, "Disclosure about
segment of an Enterprise and Related Information," ("SFAS 131"). SFAS 130
establishes standards for reporting and displaying comprehensive income ,
its components and accumulated balances. SFAS 131 establishes standards
for the way that public companies report information about operating
segments in annual financial statements and requires reporting of selected
information about operating statements in interim financial statements
issued to the public. The Company has not determined the impact adoption
of these new accounting standards will have on its future financial
statements and disclosures.

Page 14

NEW SKY COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS

DESCRIPTION OF BUSINESS:
- ------------------------
New Sky Communications, Inc. writes and produces motion pictures for domestic
and foreign theater and video distribution. It currently has five motion
pictures at various stages of the production and distribution process.

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 betterment's 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:

DEC. 31,1999 DEC. 31,1998 DEC. 31, 1997 DEC. 31,1996
------------ ------------ ------------- ------------

Films Released $ 308,631 $ 308,631 $ 308,611 $ 408,611
Films in Process 917,763 917,763 915,277 1,029,712
Story Rights & Scenarios 57,772 32,772 26,772 68,542
----------- ----------- ----------- -----------

Total Film Inventory $ 1,284,166 $ 1,259,166 $ 1,250,660 $ 1,506,865
=========== =========== =========== ===========

B. Income Taxes.

The Corporation has $ 4,843,000 in net operating loss carryovers available to
reduce future income taxes. These carryovers may be utilized through the year
2014. 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.

Page 15

NEW SKY COMMUNICATIONS, INC.
BALANCE SHEETS

ASSETS
------

DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996
------------- ------------ ------------- -----------
CURRENT ASSETS:

Cash and Cash Equivalents $ 0 $ 0 $ 56 $ 1,150
Accounts Receivable
Trade 0 0 0 0
Prepaid Expenses 0 0 0 0
----------- ----------- ----------- -----------
Total Current Assets 0 0 56 1,150

FILM INVENTORY (NOTE 1) 1,284,166 1,259,166 1,250,660 1,506,865

OTHER ASSETS 400 400 400 400

Total Assets $ 1,284,566 $ 1,259,566 $ 1,251,116 $ 1,508,415
=========== =========== =========== ===========

LIABILITIES & STOCKHOLDERS' EQUITY
----------------------------------

CURRENT LIABILITIES:
Accounts Payable $ 189,210 $ 154,340 $ 106,554 $ 94,291
Other Current Liabilities 70,085 43,085 41,084 49,084
----------- ----------- ----------- -----------
Total Current Liabilities 259,295 197,425 147,638 143,375

STOCKHOLDERS' EQUITY
Common Stock 5,981,402 5,981,402 5,951,402 5,756,402
Accumulated Deficit (4,956,131) (4,919,261) (4,847,924) (4,391,362)
----------- ----------- ----------- -----------
Total Stockholder's Equity 1,025,271 1,062,141 1,103,478 1,365,040

Total Liabilities & Stockholders' Equity $ 1,284,566 $ 1,259,566 $ 1,251,116 $ 1,508,415
=========== =========== =========== ===========

See Notes to Financial Statements.

Page 16

NEW SKY COMMUNICATIONS, INC.
STATEMENT OF OPERATIONS

FISCAL YEARS ENDED

DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996
------------ ----------- ----------- -----------

Net Sales $ 0 $ 0 $ 25,946 $ 13,729
Costs and Expenses Applicable to Sales & Revenue (Note 1) 0 30,000 426,482 85,000
-------- --------- -------- ---------
Gross Profit (Loss) 0 (30,000) (400,536) (71,271)

Selling, General & Administrative Expenses 34,870 39,337 54,026 28,089
-------- --------- --------- ---------

Income From Operations (34,870) (69,337) (454,562) (99,360)

Other Expense-Write Down Carrying Value of Investments 0 0 0 55,556
-------- --------- --------- ---------

Income (Loss) Before Income Taxes (34,870) (69,337) (454,456) (154,916)

Income Taxes (Note A) 2,000 2,000 2,000 2,500
-------- --------- --------- ---------

Net Income (Loss) $ (36,870) $ (71,337) $(456,562) $(157,416)
======== ========= ========= =========

Per Share Amounts NIL NIL NIL NIL

See Notes to Financial Statements.

Page 17

NEW SKY COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS

FISCAL YEARS ENDED

DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996
------------ ------------ ------------- ------------

OPERATING ACTIVITIES:

Net Income (Loss) $(36,870) $(71,337) $(456,562) $(157,416)
Adjustments to Reconcile Net Income (Loss) to Cash Provided
(Consumed) by Operating Activities:
Non-Cash Valuation Adjustment 0 0 0 55,556
Non-Cash Operating Expenses 0 0 25,000 0
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts & Notes Receivable 0 0 0 0
Amortization of Film Inventory Costs 0 30,000 426,205 85,000
Increase (Decrease) in Accounts Payable & Accrued Expenses 36,870 41,281 4,263 8,010
-------- -------- --------- ---------

Net Cash Provided (Consumed) by Operating Activities 0 (56) (1,094) (8,850)

INVESTING ACTIVITIES:
Reimbursement Received on Investment in Film Inventory 0 0 0 5,000
-------- -------- --------- ----------

Net Cash Used in Investing Activities 0 0 0 5,000

FINANCING ACTIVITIES:
Proceeds of Loan 0 0 0 10,000
-------- -------- --------- ----------

Net Cash Provided (Used) by Financing Activities 0 0 0 10,000

Net Change in Cash 0 (56) (1,094) 1,150
Cash & Cash Equivalents at the Beginning of Period 0 56 1,150 0
--------- -------- --------- ---------

CASH & CASH EQUIVALENTS AT THE END OF PERIOD $ 0 $ 0 $ 56 $ 1,150
========= ========= ========= =========

Other Non Cash Transactions:
Issuance of Common Stock for Services $ 30,000 $ 195,000

See Notes to Financial Statements.

Page 18

NEW SKY COMMUNICATIONS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

ACCUMULATED
COMMON STOCK DEFICIT
------------ -------

CAPITAL IN EXCESS
NUMBER OF SHARES PAR VALUE OF PAR VALUE
---------------- --------- ------------

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 14,274 5,742,128 (4,233,946 )
Net Loss December 31, 1996 142,736,923 (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 )
Shares Issued For Services 3,000,000 30 29,970
(71,337 )
----------- -------- ----------- ------------

Balance December 31, 1998 193,736,923 19,104 5,962,298 (4,919,261 )
Net Loss December 31, 1999 (36,870 )
----------- -------- ----------- ------------

Balance December 31, 1999 193,736,923 $ 19,104 $ 5,962,298 $(4,956,131 )
=========== ======== =========== ===========

See Notes To Financial Statements.

Page 19

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 52 Chairman of the Board
100 Caversham Woods President
Pittsford, NY 14534

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 member of the Rochester
Advisory Board of M&T Bank Corp. and is Chairman of the Board of Directors of
Movieplace.com, Inc., which is 40 percent owned by the Company. 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 20

ITEM 11 - EXECUTIVE COMPENSATION

The executives of the Company received compensation in the following amounts:

ANNUAL LONG TERM
NAME YEAR CASH COMPENSATION NON-CASH
COMPENSATION
---- ---- ----------------- --------

Carl R. Reynolds
President, Director 1999 $ 0 $ 0 None
1998 $ 0 $ 0 None
1997 $ 18,900.00 $50,000.00 None

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, 1999.

COMMON % COMMON
SHARES SHARES
NAME OWNED OWNED
---- ----- -----

Carl R. Reynolds 10,000,000 5.2%
100 Caversham Woods
Pittsford, New York 14534

Charles M. LaLoggia 17,950,000 9.3%
457 Park Avenue
Rochester, New York 14607

All Officers & Directors
& Principal Shareholders
as a Group 27,950,000 14.5%

Page 21

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During the first quarter, the Company acquired a forty percent (40%) interest in
the business called The Movie Place, which owns and operates the Internet site
"http://www.movieplace.com." 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. Mr.
Reynolds and Charles M. LaLoggia, a former President of the Company, have lent
an additional $75,000.00 to Movieplace.com, Inc. for working capital for a
twenty-seven percent (27%) equity interest in Movieplace.com, Inc. from the
owners of Movieplace stock, not including the Company. The Company continues to
own forty percent (40%) of Movieplace.com, Inc. common stock. Mr. Reynolds has
also been elected Chairman of the Board of Movieplace.com, Inc.

Page 22

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.

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 12 - 19
ended December 31, 1996, December 31, 1997,
December 31, 1998 and December 31, 1999 in
accordance with Rule 5.04 of regulation S-X.
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
Communications, Inc. and Syracuse Film Productions,
LLC (incorporated by reference from the Company's
Form 10-K for December 31, 1997).

5. Promissory Note dated March 24, 1999 from New Sky
Communications, Inc. to Carl R. Reynolds 27

Page 23

6. Agreement dated March 22, 1999 between New Sky
Communications, Inc. and Movieplace.com 28 - 31

3. Financial Statement Schedules - The required schedules are filed
herewith and incorporated by reference.

4. Form 8-K - No Form 8-K were filed during 1999.

Page 24

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
----------------------------
MARCH 24, 2000 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)

March 24, 2000
- --------------
(Date)

Page 25