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 JUNE 30, 2001 ------------- 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 incorporation or organization) Identification 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 August 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 Six months ending 6/30/01 & 6/30/00 3 Consolidated Balance Sheet As of 6/30/01 & 12/31/00 4 & 5 Statement of Cash Flows Six months ended 6/30/01 & 6/30/00 6 Management's Discussion of Statement of Income and Financial Condition 7 - 11 PART II - OTHER INFORMATION & SIGNATURES 12 Financial Data Summary 13 Page 2
<TABLE> <CAPTION> NEW SKY COMMUNICATIONS, INC. STATEMENT OF INCOME (LOSS) (UNREVIEWED) FOR THREE MONTHS ENDED FOR SIX MONTHS ENDED ---------------------- -------------------- June 30, June 30, June 30, June 30, 2001 2000 2001 2000 <S> <C> <C> <C> <C> 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 $ 7,962 $ 8,308 $ 16,812 $ 18,913 -------- -------- -------- -------- Income (Loss) Before Other Income and Related Expenses $ (7,962) $ (8,308) $(16,812) $(18,913) -------- -------- -------- -------- Other Income (Loss) $ 0 $ 0 $ 0 $ 0 -------- -------- -------- -------- Income (Loss) $ (7,962) $ (8,308) $(16,812) $(18,913) ======== ======== ======== ======== Net Per Common Share NIL NIL NIL NIL ======== ======== ======== ======== </TABLE> Page 3
<TABLE> <CAPTION> NEW SKY COMMUNICATIONS, INC. BALANCE SHEET (As of June 30, 2001 and December 31, 2000) ASSETS June 30, 2001 December 31, 2000 (UNREVIEWED) (AUDITED) ------------ ----------------- Current Assets: <S> <C> <C> 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 200,535 200,535 -------- -------- Total Property and Equipment 200,535 200,535 Less: Accumulated Depreciation 0 0 -------- -------- Net Property and Equipment 200,535 200,535 -------- -------- Other Assets 25,400 25,400 -------- -------- TOTAL ASSETS $225,935 $225,935 ======== ======== </TABLE> Page 4
<TABLE> <CAPTION> NEW SKY COMMUNICATIONS, INC. BALANCE SHEET (As of June 30, 2001 and December 31, 2000) LIABILITIES AND STOCKHOLDERS' EQUITY June 30, 2001 December 31, 2000 (UNREVIEWED) (AUDITED) ------------- ----------------- Current Liabilities: <S> <C> <C> Accounts Payable $ 25,665 $ 22,565 Due to Related Party 240,086 226,374 Leases 2,068 2,068 Accrued Expenses 41,516 41,516 ----------- ----------- Total Current Liabilities $ 309,335 $ 292,523 ----------- ----------- Stockholders' Equity: Common Stock $.0001 Par Value 200,000,000 Shares Authorized 193,736,923 Shares Issued and Outstanding (193,736,923 Shares on June 30, 2001) $ 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 (6,064,802) (6,047,990) ----------- ----------- Total Stockholders' Equity (83,400) (66,588) ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 225,935 $ 225,935 =========== =========== </TABLE> Page 5
<TABLE> <CAPTION> NEW SKY COMMUNICATIONS, INC. Statement Of Cash Flows Six Months Ended June 30, 2001 and June 30, 2000 Unreviewed Six Months Ended Six Months Ended JUNE 30, 2001 JUNE 30, 2000 ------------- ------------- Operating Activities: <S> <C> <C> Net Income (Loss) $(16,812) $(18,913) 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 16,812 18,913 Amortization of Film Costs 0 0 -------- -------- Net Cash Provided (Used) $ 0 $ 0 -------- -------- Investing Activities: Additional Film Inventory $ 0 $ 0 Investment in Web site 0 0 -------- -------- Net Cash Provided (Used) $ 0 $ 0 -------- -------- Financing Activities: Net Cash Provided (Used) $ 0 $ 0 -------- -------- Increase (Decrease) In Cash and Cash Equivalents $ 0 $ 0 Cash and Cash Equivalents at Beginning of Period $ 0 $ 0 -------- -------- Cash and Cash Equivalents at End of Period $ 0 $ 0 ======== ======== </TABLE> Page 6
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 June 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 "OUT OF SIGHT" and "YOU'VE GOT MAIL" and stars in the Miramax film "HAPPY TEXAS" 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 Page 7
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. 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 Page 8
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 $26,772. 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 has proposed, at its annual shareholders' meeting to be held August 22, 2001, a reverse 1:200 stock split of the common stock of the Company in preparation for 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 2001, Bellacasa re-filed registration documents for a public offering to finance the production of the film. In 2000 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." 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 Page 9
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 $240,086.00 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 is scheduled for August 22, 2001. 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: August 8, 2001. /S/ CARL R. REYNOLDS -------------------- Carl R. Reynolds President/ Treasurer/Chief Financial & Accounting Officer /S/ CARL R. REYNOLDS - -------------------- DIRECTOR - -------- AUGUST 8, 2001 - -------------- Date Page 12