Business Context and Reporting Period
Company: New Sky Communications, Inc. (Note: Input metadata referenced "DSS, INC." but the filing text identifies the registrant as New Sky Communications, Inc.)
Reporting Period: Fiscal year ended December 31, 1999.
Business Overview: An independent motion picture production company developing theatrical films and home video. The company operates with minimal overhead, renting no office space and employing only its President. Key assets include film inventory and a 40% interest in "The Movie Place" (movieplace.com), an internet entertainment site.
Key Financial Metrics
| Metric | 1999 | 1998 |
|---|---|---|
| Net Sales | $0 | $0 |
| Net Loss | $(36,870) | $(71,337) |
| Operating Expenses | $34,870 | $39,337 |
| Cash and Cash Equivalents | $0 | $0 |
| Total Assets | $1,284,566 | $1,259,566 |
| Film Inventory | $1,284,166 | $1,259,166 |
| Total Current Liabilities | $259,295 | $197,425 |
| Long-term Debt | $0 | $0 |
| Net Working Capital | $(259,295) | $(197,425) |
| Accumulated Deficit | $(4,956,131) | $(4,919,261) |
Liquidity: The company reported zero cash and cash equivalents at year-end. It has no long-term debt but carries significant current liabilities, primarily accounts payable and accrued expenses.
Material Changes vs. Prior Period
- Revenue: The company generated no revenue in 1999 or 1998. This contrasts with 1997, which had $25,946 in net sales.
- Loss Reduction: The net loss decreased from $(71,337) in 1998 to $(36,870) in 1999, primarily due to lower operating expenses and the absence of film inventory amortization charges in 1999.
- Liabilities: Current liabilities increased by approximately $62,000 year-over-year, driven by an increase in accounts payable and other current liabilities.
- Asset Composition: Total assets increased slightly, almost entirely due to capitalized development costs for new film projects ("The Giant" and "The Godmother") and the acquisition of the 40% interest in The Movie Place.
Outlook, Risks, and Management Commentary
- Liquidity Crisis: Management explicitly states the company has "no liquidity or capital resources" and is dependent on future film revenues or secondary securities offerings to survive.
- Strategic Focus: The company is pursuing an Initial Public Offering (IPO) for its subsidiary, Movieplace.com, to maximize value and secure capital. There is no assurance this will occur.
- Project Status:
- Freak Talks About Sex: Debuted on Cinemax in late 1999; no profit participation received in 1999.
- The Giant: Development costs of $750,000 capitalized; financing sought.
- The Godmother: Pre-production commenced May 1, 2000, following financing commitments.
- Legal and Tax Risks:
- A landlord obtained a judgment against the company in 1993 for unpaid rent ($16,383).
- The company has not filed federal or state tax returns for 1992, 1993, and 1994 and has not paid associated New York State tax liabilities due to lack of funds.
- Corporate Governance: The company lacked sufficient funds to hold a shareholders' meeting in 1999. No dividends have ever been paid.
Investor Verification Checklist
- Cash Position: Verify the company's ability to fund operations given $0 cash on hand and negative working capital.
- Related Party Transactions: Review the $25,000 loan from President Carl R. Reynolds used to fund the Movieplace.com investment and the issuance of 10 million shares to him for unpaid compensation.
- Film Inventory Valuation: Assess the recoverability of the $1.28 million in film inventory, noting that no amortization was taken in 1999 despite no revenue generation.
- Tax Compliance: Confirm the status of unpaid New York State taxes for 1992-1994 and the risk of penalties or liens.
- Movieplace.com Viability: Evaluate the likelihood of the proposed IPO for the subsidiary and the competitive landscape of the entertainment web sector.