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
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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 Identification
incorporation or organization) 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. 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
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MARCH 31, MARCH 31,
1999 1998
Gross Film Receipts $ 0 $ 0
Less: Amortized Film Costs $ 0 $ 0
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Net Film Receipts $ 0 $ 0
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General and Administrative Expenses $ 7,500 $ 44,239
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Income (Loss) Before Other Income
and Related Expenses $ (7,500) $(44,239)
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Other Income (Loss) $ 0 $ 0
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Income (Loss) $ (7,500) $(44,239)
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Net Per Common Share NIL NIL
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NEW SKY COMMUNICATIONS, INC.
BALANCE SHEET
(As of March 31, 1999 and December 31, 1998)
ASSETS
MARCH 31, 1999 DECEMBER 31, 1998
(UNAUDITED) (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 1,259,166 1,259,166
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Total Property and Equipment 1,259,166 1,259,166
Less: Accumulated Depreciation 0 0
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Net Property and Equipment 1,259,166 1,259,166
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Other Assets 25,400 400
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TOTAL ASSETS $1,284,566 $1,259,566
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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)
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Current Liabilities:
Accounts Payable $ 161,840 $ 154,340
Notes Payable 25,000 0
Leases 2,068 2,068
Accrued Expenses 41,017 41,017
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Total Current Liabilities $ 229,925 $ 197,425
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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
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Total Paid-In Capital 5,981,402 5,981,402
Accumulated Deficit (4,926,761) (4,919,261)
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Total Stockholders' Equity 1,054,641 1,062,141
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,284,566 $ 1,259,566
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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
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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
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Net Cash Provided (Used) $ 25,000 $ 2,449
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Investing Activities:
Additional Film Inventory $ 0 $ (2,505)
Investment in Web site 25,000 0
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Net Cash Provided (Used) $(25,000) $ (2,505)
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Financing Activities:
Net Cash Provided (Used) $ 0 $ 0
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Increase (Decrease) In Cash
and Cash Equivalents $ 0 $ (56)
Cash and Cash Equivalents at
Beginning of Period $ 0 $ 56
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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 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
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Carl R. Reynolds President/
Treasurer/
Chief Financial Officer
/S/ CARL R. REYNOLDS
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DIRECTOR
May 6, 1999
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Date
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