Business Context and Reporting Period
Company: New Sky Communications, Inc. (Note: Metadata referenced "DSS, INC." but the filing text identifies the registrant as New Sky Communications, Inc.)
Reporting Period: Quarterly report for the period ended September 30, 2000.
Business Overview: An independent motion picture production company. The company holds interests in film properties including "Freak Talks About Sex," "The Giant," and "The Godmother." It also holds a 40% interest in "The Movie Place," an internet site (movieplace.com) focused on movie reviews and independent film financing.
Key Financial Metrics
| Metric | Three Months Ended 9/30/00 | Nine Months Ended 9/30/00 | Nine Months Ended 9/30/99 |
|---|---|---|---|
| Revenue (Gross Film Receipts) | $0 | $0 | $0 |
| Net Loss | $(7,735) | $(26,648) | $(27,085) |
| General & Administrative Expenses | $7,735 | $26,648 | $27,085 |
| Cash and Cash Equivalents | $0 | $0 | $0 |
| Total Assets | $1,284,566 (as of 9/30/00) | ||
| Total Liabilities | $283,943 (as of 9/30/00) | ||
| Stockholders' Equity | $1,000,623 (as of 9/30/00) | ||
| Net Cash Flow from Operations | $0 (Nine months ended 9/30/00) |
Debt and Liquidity: The company has no cash on hand. Current liabilities include $215,859 in accounts payable, $25,000 in notes payable (a loan from the Chairman/President), and $41,016 in accrued expenses. The current ratio is nil due to zero current assets.
Material Changes vs. Prior Period
- Revenue: Remained at $0 for both the current and prior periods. No film revenues were recognized in the third quarter of 2000.
- Net Loss: The nine-month net loss decreased slightly from $(27,085) in 1999 to $(26,648) in 2000, driven by a marginal reduction in General and Administrative expenses.
- Cash Flow: Net cash provided by operating activities was $0 for the nine months ended September 30, 2000, compared to $25,000 in the prior year period. This is due to the increase in accounts payable and accrued expenses offsetting the net loss.
- Assets: Total assets remained flat at $1,284,566 compared to December 31, 1999, consisting primarily of capitalized film inventory ($1,259,166).
Outlook, Risks, and Management Commentary
- Operational Status: Pre-production on the feature film "The Godmother" has been temporarily suspended due to a lack of financing required to secure additional cast members.
- Strategic Initiatives: The company is exploring options to maximize the value of its 40% interest in movieplace.com. Management noted that an Initial Public Offering (IPO) for the website is not currently feasible due to market weakness in internet stocks.
- Financial Risks:
- Liquidity: Working capital is inadequate. The company has no cash and relies on accrued expenses to fund operations.
- Tax Compliance: The company has not filed Federal or New York State tax returns for years 1992 through 1999 due to lack of funds. While no Federal tax is believed to be owed due to losses, the company is accruing estimated New York State capital taxes.
- Related Party Transactions: The company holds a $25,000 promissory note payable on demand to its Chairman and President, Carl R. Reynolds.
- Unusual Items: The company issued 20,000,000 shares of stock in 1997 to a former executive in exchange for a co-production position in a film, which was capitalized as film inventory.
Investor Verification Checklist
- Cash Position: Verify the company's ability to continue operations with $0 cash on hand and significant accrued liabilities.
- Tax Liabilities: Confirm the status of unfiled tax returns (1992-1999) and the potential magnitude of accrued New York State capital taxes.
- Related Party Debt: Review the terms of the $25,000 demand note owed to the Chairman/President and the risk of immediate repayment.
- Asset Valuation: Assess the recoverability of the $1.26 million "Film Inventory" asset, given the suspension of new projects and lack of recent revenue.
- Movieplace.com Viability: Evaluate the prospects for the 40% stake in movieplace.com, particularly given the stated inability to pursue an IPO in the current market.