Business Context and Reporting Period
This is a Quarterly Report (Form 10-Q) for New Sky Communications, Inc. (also referenced as DSS, Inc. in metadata) for the period ended September 30, 1999. The company is an independent motion picture production company with minimal operations, employing only its President. As of November 1, 1999, there were 193,736,923 shares of common stock outstanding.
Key Financial Metrics
| Metric | Three Months Ended 9/30/99 | Nine Months Ended 9/30/99 | Nine Months Ended 9/30/98 |
|---|---|---|---|
| Gross Film Receipts | $0 | $0 | $0 |
| General & Administrative Expenses | $8,240 | $27,085 | $60,637 |
| Net Income (Loss) | $(8,240) | $(27,085) | $(60,637) |
| Cash and Cash Equivalents | $0 | $0 | $0 |
| Total Assets | $1,284,566 (as of 9/30/99) | ||
| Total Liabilities | $249,510 (as of 9/30/99) | ||
| Stockholders' Equity | $1,035,056 (as of 9/30/99) | ||
| Notes Payable | $25,000 (Loan from Chairman) |
Liquidity: The company reports a current ratio of nil due to zero cash and zero current assets against $249,510 in current liabilities. Working capital is described as inadequate.
Material Changes vs. Prior Period
- Expense Reduction: General and Administrative expenses for the nine months ended September 30, 1999, decreased to $27,085 from $60,637 in the same period in 1998, resulting in a reduced net loss.
- Asset Composition: Total assets increased slightly to $1,284,566 from $1,259,566 at year-end 1998, driven primarily by a $25,000 investment in a website ("movieplace.com") and an increase in "Other Assets."
- Liabilities: Current liabilities increased to $249,510 from $197,425, primarily due to a new $25,000 note payable to the Chairman and President and an increase in accounts payable.
- Cash Flow: Net cash provided by operating activities was $25,000 for the nine months ended 9/30/99, compared to $5,449 in the prior year. This was offset by a $25,000 cash outflow for investing activities (website investment).
Outlook, Risks, and Management Commentary
- Revenue Outlook: The company generated no revenue in the quarter. Future revenue depends on profit participation from the film "FREAK TALKS ABOUT SEX," which secured a Cinemax premiere deal in December 1999. The company is also seeking financing for a new film, "THE GODMOTHER."
- Strategic Investments: The company acquired a 40% interest in "The Movie Place" (movieplace.com) for $25,000, funded by a loan from the Chairman. Plans include a weekly movie critics program starting in early 2000.
- Financial Risks: Management explicitly states that working capital is inadequate and the company is dependent on future film revenues or producer fees. The company has no cash on hand.
- Tax Contingencies: The company has not filed Federal or New York State tax returns for years 1992 through 1998 due to lack of funds. While no Federal tax is expected due to losses, the company believes it owes New York State capital taxes and has been accruing estimates since 1992.
- Year 2000 Compliance: Management believes there is no material risk as records are not computerized, though third-party licensee compliance remains an unassessed risk.
Investor Verification Checklist
- Verify the status of the $25,000 promissory note owed to Chairman Carl R. Reynolds and its repayment terms.
- Confirm the actual receipt of funds from the HBO/Cinemax deal for "FREAK TALKS ABOUT SEX" and the specific profit participation terms.
- Investigate the potential liability regarding unfiled tax returns and accrued New York State taxes from 1992-1998.
- Assess the viability of the "movieplace.com" investment given the company's zero cash balance and reliance on external financing.
- Review the progress of financing for the film "THE GODMOTHER" to determine if the company can sustain operations without further dilution or debt.