-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PlQzObk0DUIjJ+c/JFkMFj8gniTMV6jiWratE4E7DGpbZ8I5jBIDCAa4qLhELdkf rvxHUbFy5PFMfS++mtU8tw== 0000909012-00-000265.txt : 20000327 0000909012-00-000265.hdr.sgml : 20000327 ACCESSION NUMBER: 0000909012-00-000265 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000324 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW SKY COMMUNICATIONS INC CENTRAL INDEX KEY: 0000771999 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [7812] IRS NUMBER: 161229730 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-14621 FILM NUMBER: 578018 BUSINESS ADDRESS: STREET 1: 16 EAST MAIN ST STREET 2: 720 REYNOLDS ARCADE CITY: ROCHESTER STATE: NY ZIP: 14614 BUSINESS PHONE: 7164545490 MAIL ADDRESS: STREET 1: 720 REYNOLDS ARCADE STREET 2: 16 EAST MAIN STREET CITY: ROCHESTER STATE: NY ZIP: 14614 FORMER COMPANY: FORMER CONFORMED NAME: THOROUGHBREDS USA INC DATE OF NAME CHANGE: 19861118 10-K 1 ANNUAL REPORT 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. 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. The Joint Venture Agreement has been previously filed as an Exhibit in an earlier 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 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 EX-99.1 2 PROMISSORY NOTE PROMISSORY NOTE $25,000.00 March 24, 1999 Rochester, New York For value received, receipt of which is hereby acknowledged, the undersigned does hereby promise to pay to the order of Carl R. Reynolds the sum of Twenty-Five THousand and 00/100 Dollars ($25,000.00) upon demand wiht interest at the rate of ten percent (10%) per annum. The Maker(s) hereof agree to be jointly and severally liable hereon. If Maker shall default in any payments due on this Note, or any of the terms hereof, the Holder may give notice of the default and if not cured within fifteen (15) days, may declare all principal and accrued interest at once due and payable nad proceed to seek all remedies available at law. The Maker agrees to pay, as part of this Note, all costs incurred in collecting the amount due on this Note, including but not limited to reasonable attorneys' fees of 20 percent of the amount due. Presentment, protest and notice are hereby waived. WITNESS: NEW SKY COMMUNICATIONS, INC. /s/ Carl R. Reynolds - ----------------------- By: ---------------------------------- President - ----------------------- ---------------------------------- SEAL EX-99.2 3 INVESTMENT AGREEMENT Exhibit 6 - INVESTMENT AGREEMENT THIS AGREEMENT MADE THIS 22nd day of March, 1999 by and between NEW SKY COMMUNICATIONS, INC., a publicly-traded New York corporation with offices at 731 Powers Building, 16 West Main Street, Rochester, New York 14614 (hereinafter referred to as "New Sky") and MICHAEL CIDONI, STEPHEN MORSE and RICHARD HERRERA, d/b/a The Movie Place, with offices at 518 Benton Street, Rochester, New York (hereinafter referred to individually and collectively as "The Movie Place"). WHEREAS, The Movie Place owns, produces and operates the Internet site known as "movieplace.com" and the owners thereof are desirous of New Sky investing therein, and New Sky being desirous of making such investment; NOW THEREFORE the parties hereto covenant and agree as follows: 1) New Sky Communications, Inc. agrees to acquire a forty percent (40%) interest in the The Movie Place business and the Web site known as "movieplace.com" for a purchase price of $25,000.00. The Movie Place shall use the proceeds of the investment to promote the Web site, purchase equipment and for working capital. 2) The Movie Place warrants and represents that Mike Cidoni, Stephen Morse and Richard Herrera own the entire business known as The Movie Place which owns and operates the Web site known as "movieplace.com", and that there exist no other encumbrances, liens, or restrictions upon the business and the Web site that would affect or impair such investment by New Sky in the business or the Web site. The Movie Place further warrants and represents that the Web address "movieplace.com" is registered to The Movie Place and that the Web site and its content were created by and is operated solely by The Movie Place and that, to the best of their knowledge, there exist no other claims to the Web address or the creative content of the site. The Movie Place further warrants and represents that the Movie Place business and the "movieplace.com" Web site are currently compliant with the so-called Y2K problem and that such problem will not adversely affect the business or the Web site. 3) That the investment by New Sky is made in material reliance upon Page 28 documents and the representations made therein, presented to New Sky by The Movie Place, specifically the "Movie Place Business Plan" and an outline of a budget. New Sky, or its designated agents or representatives, shall have the right to examine all of the books and records of the business of Movie Place at reasonable times and places. The investment by New Sky is also made in material reliance on the representation that it is the intention of The Movie Place to incorporate as soon as is practicable after the execution of this Agreement. This Agreement shall survive and not be merged into such incorporation. 4) The Movie Place agrees to consult with New Sky, its officers, directors and agents regarding business, legal and creative matters pertaining to the business of The Movie Place and the "movieplace.com" Web site. All partners in the business shall undertake to assist to make the business of the Web site a success and shall in no event take any action which shall impair, hinder or delay full exploitation of the business and the Web site. The primary duty and responsibility of Mike Cidoni is and shall remain creation of film-related content of the Web site. Stephen Morse's primary duty and responsibility is the technical aspects of the Web site. New Sky shall provide business, legal, accounting and financial consulting services as requested. 5) Mike Cidoni hereby agrees to provide exclusive Internet film-related content services to the "movieplace.com" Web site for a minimum period of one year from the date of this Agreement. Such exclusivity shall not include Cidoni's other current Internet activities: www.rochestertoday.com, www.moviebuff.com, www.wegmans.com and other current radio- and TV-station Internet sites contributed to in connection with Cidoni's appearances on their airwaves. Any additional involvement of Cidoni in other Internet sites shall be undertaken only upon the consent of The Movie Place. At no time, without the prior approval of the remaining partners, shall any party hereto disclose the business methods, plans or any other informational reasonably deemed to be confidential regarding the business of The Movie Place to any third party, unless required by legal or regulatory mandate. 6) No party hereto, nor its officers, directors employees or agents, shall be liable for any act or omission performed or omitted in good faith. Nothing herein shall place any party in the relationship of principal, agent, master and servant, partners, joint venturers or employer and employee of any other party and no party shall have the authority, express or implied, or represent themselves as having the Page 29 authority to make binding contracts for the other or to bind or obligate the other in any way. No party hereto shall assume any liabilities of any other party and each party agrees to indemnify and hold the other parties, its officers, directors, employees and agents harmless from any manner of claim, action, or liability past, present or future not directly related to this Agreement. 7) This Agreement shall be construed under the laws of the State of New York. Should there be any dispute between the parties concerning the interpretation of this Agreement or concerning an alleged breach, which the parties are unable to resolve after consultation with each other, such dispute shall be decided by arbitration pursuant to the regulations and procedures of the American Arbitration Association at Syracuse, New York. The parties agree that any award rendered by the American Arbitration Association may be entered in the Supreme Court of New York. In no event, shall any party seek injunctive relief or take any action which may impair, hinder or delay the production and full exploitation of the "movieplace.com" Web site or any of its ancillary rights. 8) The Movie Place shall maintain books and records of account in accordance with generally accepted accounting principles and shall, within 120 days following the end of its fiscal year, render a statement of financial condition and profit and loss. New Sky shall have the right to audit the books and records of The Movie Place, upon reasonable notice, but not more often than once a year. 9) This Agreement may not be assigned without the written permission of the other party. 10) This Agreement may be amended in writing only and shall be binding upon and inure to the benefit of the successors and assigns of the parties. NEW SKY COMMUNICATIONS, INC. SEAL By: ----------------------------- President ----------------------------- Stephen Morse Page 30 ------------------------------ Michael Cidoni ------------------------------- Richard Herrera Page 31 EX-27 4 FINANCIAL DATA SCHEDULE
5 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 0 0 0 0 0 0 0 0 1,284,566 259,295 0 19,104 0 0 1,006,167 1,284,566 0 0 0 34,870 0 0 0 (34,870) 2,000 (36,870) 0 0 0 (36,870) 000 000
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