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 SEPTEMBER 30, 2001
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_________________ to ________________________
Commission file number 0-14621
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NEW SKY COMMUNICATIONS, INC.
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(Exact name of registrant as specified in its charter)
NEW YORK 16-1229730
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
731 POWERS BUILDING, 16 WEST MAIN STREET, ROCHESTER, NEW YORK 14614
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(Address of principal executive offices)
(716) 454-5490
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(Registrant's telephone number, including area code)
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(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.
968,700 as of November 1, 2001
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
Nine months ending 9/30/01, 9/30/00, 9/30/99, 9/30/98 3
Consolidated Balance Sheet
As of 9/30/01 & 12/31/00 4 & 5
Statement of Cash Flows
Nine months ended 9/30/01 & 9/30/00 6
Management's Discussion of Statement of
Income and Financial Condition 7 - 11
PART II - OTHER INFORMATION & SIGNATURES 12
Page 2
NEW SKY COMMUNICATIONS, INC.
STATEMENT OF INCOME (LOSS)
(UNREVIEWED)
FOR THREE MONTHS ENDED FOR NINE MONTHS ENDED
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September September September September
30, 2001 30, 2000 30, 2001 30, 2000
Gross Film Receipts $ 0 $ 0 $ 0 $ 0
Less: Amortized Film Costs $ 0 $ 0 $ 0 $ 0
-------- -------- -------- --------
Net Film Receipts $ 0 $ 0 $ 0 $ 0
-------- -------- -------- --------
General and Administrative Expenses $ 20,365 $ 7,735 $ 37,177 $ 26,648
-------- -------- -------- --------
Income (Loss) Before Other Income
and Related Expenses $(20,365) $ (7,735) $(37,177) $(26,648)
-------- -------- -------- --------
Other Income (Loss) $ 0 $ 0 $ 0 $ 0
-------- -------- -------- --------
Income (Loss) $(20,365) $ (7,735) $(37,177) $(26,648)
======== ======== ======== ========
Net Per Common Share NIL NIL NIL NIL
======== ======== ======== ========
FOR THREE MONTHS ENDED FOR NINE MONTHS ENDED
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September September September September
30, 2001 30, 2000 30, 2001 30, 2000
Gross Film Receipts $ 0 $ 0 $ 0 $ 0
Less: Amortized Film Costs $ 0 $ 0 $ 0 $ 0
-------- -------- -------- --------
Net Film Receipts $ 0 $ 0 $ 0 $ 0
-------- -------- -------- --------
General and Administrative Expenses $ 8,240 $ 7,758 $ 27,085 $ 60,637
-------- -------- -------- --------
Income (Loss) Before Other Income
and Related Expenses $ (8,240) $ (7,758) $(27,085) $(60,637)
-------- -------- -------- --------
Other Income (Loss) $ 0 $ 0 $ 0 $ 0
-------- -------- -------- --------
Income (Loss) $ (8,240) $ (7,758) $(27,085) $(60,637)
======== ======== ======== ========
Net Per Common Share NIL NIL NIL NIL
======== ======== ======== ========
Page 3
NEW SKY COMMUNICATIONS, INC.
BALANCE SHEET
(As of September 30, 2001 and December 31, 2000)
ASSETS
September December
30, 2001 31, 2000
(Unreviewed) (Audited)
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Current Assets:
Cash and Cash Items $ 0 $ 0
Accounts Receivable:
Trade Accounts 0 0
Current Amortizable Portion
of Film Inventory 0 0
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Total Current Assets $ 0 $ 0
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Fixed Assets:
Property and Equipment:
Property and Equipment 0 0
Film Inventory 258,257 200,535
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Total Property and Equipment 258,257 200,535
Less: Accumulated Depreciation 0 0
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Net Property and Equipment 258,257 200,535
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Other Assets 25,400 25,400
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TOTAL ASSETS $283,657 $225,935
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NEW SKY COMMUNICATIONS, INC.
BALANCE SHEET
(As of September 30, 2001 and December 31, 2000)
LIABILITIES AND STOCKHOLDERS' EQUITY
September December
30, 2001 31, 2000
(UNREVIEWED) (AUDITED)
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Current Liabilities:
Accounts Payable $ 96,047 $ 22,565
Due to Related Party 247,791 226,374
Leases 2,068 2,068
Accrued Expenses 41,516 41,516
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Total Current Liabilities $ 387,422 $ 292,523
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Stockholders' Equity:
Common Stock $.02 Par Value
200,000,000 Shares Authorized
968,700 Shares Issued and
Outstanding (193,736,923 Shares
on September 30, 2001) $ 19,374 $ 19,374
Additional Paid-In Capital 5,962,028 5,962,028
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Total Paid-In Capital 5,981,402 5,981,402
Accumulated Deficit (6,085,167) (6,047,990)
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Total Stockholders' Equity (103,765) (66,588)
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 283,657 $ 225,935
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NEW SKY COMMUNICATIONS, INC.
Statement Of Cash Flows
Nine Months Ended September 30, 2001 and September 30, 2000
Unreviewed
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER SEPTEMBER
30, 2001 30, 2000
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Operating Activities:
Net Income (Loss) $(37,177) $(26,648)
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 94,899 26,648
Amortization of Film Costs 0 0
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Net Cash Provided (Used) $ 57,722 $ 0
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Investing Activities:
Additional Film Inventory $ 57,722 $ 0
Investment in Web site 0 0
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Net Cash Provided (Used) $(57,722) $ 0
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Financing Activities:
Net Cash Provided (Used) $ 0 $ 0
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Increase (Decrease) In Cash
and Cash Equivalents $ 0 $ 0
Cash and Cash Equivalents at
Beginning of Period $ 0 $ 0
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Cash and Cash Equivalents
at End of Period $ 0 $ 0
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STATEMENT OF MANAGEMENT
In the opinion of management, the accompanying unreviewed financial statements
contain all adjustments necessary to present fairly the financial position of
the Company as of September 30, 2001 and the results of operations and cash
flows for the six months then ended.
1(A) New Sky Communications, Incorporated (the "Company") develops and produces
theatrical motion pictures and home video cassettes. The Company was organized
1983 in New York under the original name Thoroughbreds U.S.A., Incorporated.
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, because it did not provide any of the film's financing
and is not the owner of the film rights, but the film qualifies as "low-budget."
The film debuted as a Cinemax Friday Night Premiere in December 1999 and January
2000. During the year, the Producers entered into an agreement for the grant of
U.S. video rights to the film to Lions Gate Films. The film debuted on video in
December 2000, under the title "BLOWING SMOKE." The sales agent retained to sell
foreign rights to the film continues to take the film to festivals and closing
sales of rights to individual foreign territories. To date, the investors in the
film have recouped approximately one-quarter of their original investment. The
Joint Venture Agreement has been previously filed as an Exhibit in 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,
$100,000.00, under "Film Inventory" on the Balance Sheet. "FREAK TALKS ABOUT
SEX" is a comedy starring Steve Zahn, who has recently appeared in "HAPPY TEXAS"
and "SAVING SILVERMAN" and stars in the current film "JOY RIDE" and Josh
Hamilton, who has recently appeared in the NBC mini-series "THE 60'S."
During the first quarter of 1999, 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
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movie trailers and movie showing times around the country. The interest was
purchased for $25,000.00, which The Movie Place expended 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. Mr.
Reynolds and Charles M. LaLoggia, a former President of the Company, and an
outside investor 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. During 2000, Mr. Reynolds loaned an additional $25,000.00 to
Movieplace.com for working capital. 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. 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 continues to explore various options with a view toward both
maximizing the value of its holdings in Movieplace.com and also toward providing
Movieplace.com sufficient capital to achieve its goal of becoming the leading
"brand name" among movie/entertainment web sites. The Company had considered
that the optimal alternative was 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. The deterioration of the market for tech stocks, and Internet stocks in
particular, has made the placing of an IPO for Movieplace untenable at this
time. There can be no assurance that any Initial Public Offering will take
place, or that if it takes place, it would be successful. The Company is also
considering acquiring the sixty percent (60%) of Movieplace.com, Inc. that it
does not already own, making it wholly owned by the Company.
In the quarter, 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 the
quarter. The Company carries its direct film costs as an asset on the Balance
Sheet under "Film Inventory". In accordance with new accounting rules taking
effect in 2001, the unamortized cost of film inventories must be written down if
no revenues have been received, or production has not commenced, after a certain
number of years. The Company elected to adopt this rule for 2000 and wrote down
the remaining unamortized film inventory in "LADY IN WHITE." All rights to the
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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 the end of the quarter the
accumulated development cost of the film was capitalized at $90,494. The Company
was prepared to proceed with production of the film in 2000 but subsequently
determined that, due to difficult current independent film market conditions, a
higher amount of budget allocated to cast would be prudent and, therefore, the
proposed budget was inadequate to obtain a more recognizable cast deemed
necessary to enhance the film's potential success. The Company's proposal at its
annual shareholders' meeting held August 22, 2001 to reverse split the common
stock of the Company 1:200 was approved by shareholders and became effective
November 1, 2001. The Company's new NASDAQ trading symbol is NSCI. The reverse
split of common stock will allow the Company to consider a secondary offering of
stock or private placement of stock to raise the financing required to produce
"THE GODMOTHER" and develop Movieplace.
The Company continued to develop and seek financing, along with Bellacasa
Productions, Inc., for a feature film, entitled "THE GIANT". The film is a
historical drama examining artistic inspiration and the political turmoil
surrounding Michaelangelo's carving of the David. During the quarter, Bellacasa
re-filed registration documents for a public offering to finance the production
of the film. Upon regulatory approval, the Companies will use the Movieplace.com
Web site to assist in a public offering for the common stock of Bellacasa. The
accumulated development cost was $750,000. The Company is entitled to a
Producer's fee of $750,000 and fifteen percent (15%) of Producer's profits, if
the film is produced. In accordance with new accounting rules taking effect in
2001, the unamortized cost of film inventories must be written down if no
revenues have been received, or production has not commenced, after a certain
number of years. The Company elected to adopt this rule for 2000 and wrote down
the remaining unamortized film inventory in "THE GIANT."
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 is to receive a priority repayment of its
investment and has the personal guarantee of the producer of the film. During
the first quarter, the Company received no proceeds from the film's producer. In
accordance with new accounting rules taking effect in 2001, the unamortized cost
of film inventories must be written down if no revenues have been received, or
production has not commenced, after a certain number of years. Since further
revenues appear unlikely the Company elected to adopt this rule for 2000 and
wrote down its investment in "GRAVE SECRETS."
Page 9
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
in the amount of $72,000.00. The market value of the stock at the time of
issuance was $50,000.00.
The Company has filed corporate income tax returns, federal and New York State,
for the years ended December 31, 2000, 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 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 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.
Page 10
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.
1(B) Financial Condition -
1. Working capital is inadequate. (Current Ratio is nil). Without
additional capital the Company cannot pursue any of its business plans and
may have to cease operations.
2. The Company has an outstanding loans and debts to its Chairman and
President, Carl R. Reynolds in the amount of $247,791.00 and current
payables and accrued expenses.
Page 11
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 - Annual
meeting of shareholders was held on August 22, 2001 at which a 1:200
reverse split of the common stock was approved, increasing the par
value of the common stock to $.02 and reducing the outstanding common
stock to 968,700 shares effective November 1, 2001. The Company's new
trading symbol after the reverse split is NSCI.
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: November 7, 2001. /S/ CARL R. REYNOLDS
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Carl R. Reynolds
President/
Treasurer/Chief Financial &
Accounting Officer
/S/ CARL R. REYNOLDS
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DIRECTOR
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NOVEMBER 7, 2001
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Date
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