Edgar Filing: SATELLITE NEWSPAPERS CORP

	UNITED STATES
	SECURITIES AND EXCHANGE COMMISSION
	Washington, D.C. 20549

	FORM 10-QSB

	QUARTERLY REPORT
	UNDER SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934

	FOR QUARTER ENDED SEPTEMBER 30, 2006

	SATELLITE NEWSPAPERS CORP.
	(Exact name of small business registrant as specified in its charter)


Nevada	000-26607	88-0390828
(State or other jurisdiction of incorporation or organiztion)	(Commission File Number)	(IRS Employer Indentification Number)



	Bank of America Building
	980 Post Road East
	Westport, Connecticut 06880
	(Address of principal executive offices) (Zip Code)

	203 401 8089
	(Registrant’s telephone no., including area code)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 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 o

Number of shares of the registrant’s common stock outstanding as of November 20, 2006 was: 8,456,374

Traditional Small Business Disclosure Format: Yes o No x

SATELLITE ENTERPRISES CORP. AND SUBSIDIARY

FORM 10-QSB

FOR QUARTER ENDED SEPTEMBER 30, 2006

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)	03
Consolidated Balance Sheet as of September 30, 2006 (Unaudited) and December 31, 2005	05
Consolidated Statements of Operations – For the Three Months Ended September 30, 2006 (Unaudited) and September 30, 2005 and for the Nine Months Ended September 30, 2006 and September 30, 2005	06
Consolidated Statements of Cash Flows – For the Nine Months Ended September 30, 2006 (Unaudited)	07
Notes to Unaudited Condensed Consolidated Financial Statements	09
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION	10

PART II. OTHER INFORMATION
ITEM 1. - LEGAL PROCEEDINGS	12
ITEM 2. - CHANGES IN SECURITIES AND USE OF PROCEEDS	12
ITEM 3. - DEFAULTS UPON SENIOR SECURITIES	12
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	12
ITEM 5. - OTHER INFORMATION	12
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K	12

SIGNATURES	13

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

SATELLITE ENTERPRISES CORP. AND SUBSIDIARY

FINANCIAL STATEMENTS

SEPTEMBER 30, 2006 AND 2005

SATELLITE ENTERPRISES CORP. AND SUBSIDIARY

INDEX TO FINANCIAL STATEMENTS

JUNE 31, 2006 AND 2005

FINANCIAL STATEMENTS (UNAUDITED)

Consolidated Balance Sheet as of September 30, 2006 (Unaudited) and December 31, 2005

Consolidated Statements of Operations (Unaudited)

– For the Three Months Ended September 30, 2006 and 2005 and Nine Months Ended September 30, 2006 and 2005

Consolidated Statements of Cash Flows (Unaudited)

– For the Nine Months Ended September 30, 2006 and 2005

Notes to Unaudited Condensed Financial Statements

SATELLITE ENTERPRISES CORP. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	2006			2005
CURRENT ASSETS		(Unaudited)
Cash	$	21,077		$	37,509
Accounts receivable		150,696			241,002
Inventory					119,658
Total Current Assets		171,773			398,169

EQUIPMENT, net of accumulated depreciation of $300,765 at December 31, 2005					1,183,472

OTHER ASSETS
Deposits		8,826			8,826
Technology rights					840,466

Total Assets	$	180,599		$	2,430,933

LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)

CURRENT LIABILITIES
Accounts payable		1,355,020			1,321,768
Accrued expenses		129,060			99,523
Accrued settlement fees relating to employee costs		1,140,000
Accrued salaries and related expenses		163,204			371,107
Total Current Liabilities		2,787,284			1,792,398

LONG-TERM LIABILITIES
Notes payable to related parties		429,847			165,848
Loans payable		3,291,294			3,060,280
Total Long-Term Liabilities		3,721,141			3,226,128

STOCKHOLDERS’ DEFICIT
Preferred stock, par value $0.001; authorized 500,000,000 Shares, 257,533,000 Class A convertible preferred shares issued and outstanding		258			258
Common stock, $0.001 par value; 500,000,000 shares authorized; 8,469,550 and 8,409,550 issued and outstanding at March 31, 2006 and December 31, 2005.		8,470			8,410
Additional paid in capital.		9,644,329			9,344,388
Stock subscription receivable.
Accumulated deficit.		(16,054,341	)		(12,087,594	)
Accumulated other comprehensive loss.		73,458			146,945

Total Stockholders’ Deficit		(6,327,826	)		(2,587,593	)
Total Liabilities and Stockholders’ Deficit	$	180,599		$	2,430,933

See accompanying notes to consolidated financial statements.

SATELLITE ENTERPRISES CORP. AND SUBSIDIARY

CONDENSES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

		Three Months Ended September 30					Nine Months Ended JSeptember 30
		2006		2005			2006			2005

NET SALES	$	150,333		$	341,689		$	484,982		$	1,784,466

COSTS AND EXPENSES:
Cost of services		48,156			395,250			207,855			666,285
Selling, general and administrative		1,348,066			529,490			1,784,466			2,317,005
Interest expense		35,199			74,884			101,811			155,439
Research and development		25,306						99,448
Depreciation and amortization		105,811			71,563			302,510			207,717
Total Costs and Expenses		1,562,538			1,071,187			2,496,090			3,346,446

NET OPERATING LOSS		(1,412,205	)		(729,498	)		(2,011,108	)		(1,561,980	)

OTHER INCOME:
Currency gain (loss)		7,212						(29,267	)
Total Other Income (Expense)		7,212						(29,267	)

NET LOSS FROM CONTINUING OPERATIONS		(1,404,993	)		(729,498	)		(2,040,375	)		(1,561,980	)

DISCONTINUED OPERATIONS
Loss from discontinued operations (less applicable income tax expense of $0)		(2,397,694	)					(2,529,987	)
Gain from discontinued operations (less Applicable income tax expense of $0)								603,625
Total Discontinued Operations		(2,397,694	)					(1,926,372	)

NET INCOME (LOSS)	$	(3,802,687	)	$	(729,498	)	$	(3,966,747	)	$	(1,561,980	)

NET LOSS PER COMMON SHARE
(Basic and diluted)	$	(0.45	)	$	(0.16	)	$	(0.47	)	$	(0.35	)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING								8,465,374			4,504,015

See accompanying notes to consolidated financial statements.

SATELLITE ENTERPRISES CORP. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)


	Nine Months Ended September 30,
	2006			2005

CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss)	$	(3,966,747	)	$	(1,561,980	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		302,510			207,717
Loss from Discontinued Operations		2,397,694
Changes in operating assets and liabilities:
Increase in accounts receivable		(109,694	)		(929,237	)
Increase in inventory					(68,180	)
(Decrease) increase in accounts payable		33,252			456,828
(Decrease) increase in accrued expenses		29,536			582,811
(Decrease) increase in accrued settlement fee relating to employee costs		1,140,000
(Decrease) increase in accrued salaries and related expenses		(207,903	)		(253,444	)

Net Cash Used in Operating Activities		(381,352	)		(1,565,485	)

CASH FLOWS FROM INVESTING ACTIVITIES
Payments for equipment		(56,606	)		1,330,739
Deposits					(16,785	)

Net Cash Flows (Used in) /Provided by Investing Activities		(56,606	)		1,313,954

CASH FLOWS FROM FINANCING ACTIVITIES
Changes in notes payable to related party					(119,998	)
Net change in notes psayable to related parties		495,013			(626,877	)
Change in notes payable to financial institutions					156,553
Proceeds from issuance of common stock					247,570

Net Cash (Used in) Provided by Financing Activities		495,013			(342,752	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH		(73.487	)		599,580

NET (DECREASE) INCREASE IN CASH		(16,432	)		5,297

CASH AND CASH EQUIVALENTS BEGINNING OF YEAR		37,509			46,897

CASH AND CASH EQUIVALENTS END OF PERIOD	$	21,077		$	52,194

See accompanying notes to consolidated financial statements.

SATELLITE ENTERPRISES CORP. AND SUBSIDIARY

SUPPLEMENTAL CASH FLOW INFORMATION (UNAUDITED)


	Nine Months Ended September 30,
	2006		2005

Non-Cash Activities
Accounts receivable	$	200,000
Prepaid production costs		300,000
Inventory		119,658
Equipment - net		1,101,476
Technology rights		676,560

See accompanying notes to consolidated financial statements.

SATELLITE ENTERPRISE CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

NOTE 1 BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary in order to make the financial statements not misleading have been included. Results for the nine months ended September 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006. For further information, refer to the financial statements and footnotes thereto included in the Satellite Enterprise Corp. and Subsidiaries annual report on Form 10-KSB for the year ended December 31, 2005.

NOTE 2 GOING CONCERN

As shown in the accompanying financial statements, the Company has incurred cumulative net operating losses of $16,054,341 and, has a negative working capital, and a stockholders’ deficit. Management has ceased operations as of September 30, 2006 of the operations of Satellite Newspapers Suisse GMBH, its operating subsidiary. The ceasing of the operation does not allow the Company to generate revenues. As a result, it is questionable whether the Company can continue as a going concern.

NOTE 3 SALE OF SATELLITE NEWSPAPER CONTENT B.V. AND SATELLITE NEWSPAPER TRADING

B.V.

On May 2, 2006, Satellite Newspapers Suisse GMBH, a wholly owned subsidiary of Satellite Enterprise Corp., sold its interest in Satellite Newspaper Content B.V. and Satellite Newspaper Trading B.V. Accordingly, a gain from discontinued operations has been recognized in the statement of operations.

NOTE 4 STOCKHOLDERS DEFICIT

On July 1, 2006, the Company’s Board of Directors and shareholders approved a 50 to 1 reverse split. Accordingly, all shares and per share numbers have been restated to reflect the reverse split.

NOTE 5 DEFAULT JUDGEMENT

In May 2004, Fred DeVries and Renato Mariani filed suit in the Fifteenth Judicial Circuit Court located in Palm Beach County, Florida, claiming breach of employment contracts against the Company and against the Company’s CEO, claiming Fraud. The parties were seeking monies and benefits. The parties were recently awarded and filed a default judgment against the Company in the amount of $1,440,000 of which $300,000 has previously been reserved.

NOTE 6 CLOSING OF SATELLITE NEWSPAPERS SUISSE GMBH

As of September 30, 2006, the Company has determined to cease the operation of Satellite Newspapers Suisse GMBH. Accordingly, the Company has made a provision for the assets related to Satellite Newspapers Suisse GMBH.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OERATION.

Management has ceased operations as of September 30, 2006 of the operations of Satellite Newspapers Suisse GMBH, its operating subsidiary. The ceasing of the operation does not allow the Company to generate revenues. As a result, it is questionable whether the Company can continue as a going concern.

PRIOR HISTORY OF SATELLITE

The Company was formed as a Nevada corporation on April 14, 1998, to operate as a specialty retailer of fine jewelry. In its fiscal year ending June 30, 2000, the Company sold a limited quantity of jewelry through direct mail and word of mouth advertising.

On July 29, 2000, subsequent to the close of its June 30, 2000 fiscal year, the Company acquired 100% of the outstanding shares of GreenVolt Corp., an Ontario Corporation (“GreenVolt”) in a stock for stock exchange. GreenVolt was in the process of developing fuel cell technologies for commercial and industrial use. In connection with this transaction, management of the Company changed, and the Company disposed of its retail jewelry business in September 2000, by transfer of all jewelry assets and liabilities to Larry Beck, a former director of the company. In connection with such transaction, the Company changed its name from Beck & Co., Inc. to GreenVolt Power Corp.

On August 27, 2002, Satellite Holdings, Ltd., a corporation organized under the laws of Turks & Caicos, acquired 13,783,740 shares of the Company’s common stock from Thomas L. Faul. Such shares represented approximately 53% of the issued and outstanding common stock of the Company. Mr. Faul resigned as the Company’s sole officer and director, after appointing Robert Hodge as the Company’s new President and CEO, and as Chairman of the Board of Directors. In addition, in exchange for the release by Faul of the Company for various claims, the Company transferred its wholly owned subsidiary, GreenVolt Corp., to Faul.

On August 28, 2002, the Board of Directors of the Company resolved to change the name of the Company to Satellite Enterprises Corp., and on September 15, 2002, the Company completed a one-for-one-hundred reverse stock split (the “Reverse Stock Split”) of its outstanding common stock.

During fiscal year 2003, the Company concentrated its efforts on maintaining its corporate status and seeking a merger candidate.

On June 20, 2003, in conjunction with a previously reported change of control of the Company, the Company entered into a Rights Agreement with Satellite Newspapers Worldwide NV, a corporation organized under the laws of the Netherlands (hereinafter “Satellite Newspapers”). Under said Rights Agreement, Satellite Newspapers appointed the Company as it’s irrevocable commercial exclusive distributor to promote the sale and/or lease of its newspaper Kiosks (hereinafter “KiOSK) and the associated Satellite newspaper content distribution technology for which Satellite Newspapers has developed the technology, owns the patents, engineering and technical design. These Rights include the exclusive rights to use the trade names, logos and other trade designations, including, but not limited to, all rights to the Satellite Newspapers derived content fed into the territory granted therein to the Company and the names “Satellite Newspapers” devices or variants thereof as a corporate or trade name of Satellite Newspapers. These Rights also include the exclusive rights to distribute all available contents of its KiOSKs in its territory which includes all of North, Central and South America including but not limited to Mexico, the United States and all its territories, and all the Caribbean Islands, including the existing inventory of prototype and placebo units of its KiOSKs in the Americas. The Rights further include all parts and supply inventory owned by Satellite Newspapers relating to its KiOSKs in said territory.

In October 2003, Satellite Newspapers took a different direction. Satellite Newspapers sold their patents, software and trademarks to Media Finance en Suisse Holding GmbH, a Swiss corporation (hereinafter “Media Finance”). Thereafter, Media Finance set up an operating subsidiary, Satellite Newspapers Suisse GmbH, a Swiss corporation (hereinafter “Satellite Swiss”). Media Finance granted Satellite Swiss a twenty-year exclusive license to distribute all satellite derived contents for the purpose of commercializing their product under a revenue sharing arrangement.

On November 26, 2003, the Company entered into a Stock Purchase Option Agreement dated November 26, 2003 with Media Finance for the purchase of 100% of Satellite Swiss. This option agreement allowed the Company to acquire the right to purchase 100% of the shares of common stock of Satellite Swiss. On February 15, 2004, the Company exercised the option and acquired 100% of Satellite Swiss in consideration for the issuance of 126,000,000 shares of common stock.

On December 19, 2003, as part of the Company’s desire to obtain Satellite Swiss, Roy Piceni, founder of Satellite Newspapers and whose family owns 100% of Media Finance was elected the Company’s chairman of the board and as its president.

Satellite Swiss consists of two subsidiaries, Satellite Newspapers Content BV a Dutch corporation that negotiates agreements with newspapers throughout the world for the rights to distribute their content and Satellite Newspapers Trading BV which has the production rights to produce and sell the KiOSKs.

On March 11, 2004 the Company amended its Articles of Incorporation whereby the authorized number of shares of common stock were increased from 200,000,000 to 500,000,000 and thereafter declared a 3-for-1 stock split effective in the form of a 200 per cent stock dividend payable on or about March 31, 2004 to shareholders of record as of March 22, 2004 thereby increasing its issued shares as of that date to 197,887,545.

On August 31, 2004, the Company entered into an agreement to acquire a 52% interest in SoliDAM, a software development company located in the Netherlands. The purchase price is to consist of the issuance of a $125,000 note payable to the stockholders of SoliDAM as well as 919,926 shares of the Company’s stock. On September 15, 2005, the Company and the shareholders of SoliDAM decided that the acquisition of SoliDAM was not in the best interests of either party. It was mutually agreed to unwind the transaction. Accordingly the shareholders of SoliDAM returned the 919,926 shares of the Company’s common stock and released the Company from its note obligation in the amount of $125,000.

In June 2005, Swiss Satellite incorporated two new Swiss subsidiary entities. Satellite Newspapers Content GmbH and Satellite Newspapers Trading GmbH. Except for the Development and Network Management, the Swiss Companies will take over all activities from the Dutch Companies.

On November 30, 2005, the Company changed its name from Satellite Newspapers Corp. to Satellite Newspapers Corp. In addition, effective November 30, 2005, the Company’s quotation symbol on the OTC Bulletin Board changed from SENR to SNWP.

On December 5, 2005, Mr. Roy Piceni resigned as Chief Executive Officer of the Company. On December 5, 2005, the Board of Directors appointed Ms. Jerri L. Palmer as the new Chief Executive Officer of the Company. Mr. Piceni will continue to serve as the Chairman of the Board of Directors.

On March 31, 2006, the Company’s subsidiary Swiss Satellite entered into a binding Secured Purchase Agreement which closed on the same date with Media Finance en Suisse Holding GmbH whereby the Company sold $2,700,000 original principal amount of Series A Premium Secured Convertible Debenture and its two Dutch subsidiaries Satellite Newspapers Content BV and Satellite Newspapers Trading BV.

Media Finance en Suisse Holding GmbH paid for the Debentures and the two subsidiaries when it was transferred to Swiss Satellite all its validity issued and subsisting Intellectual Properties, such as patents to the manufacture of the KiOSKS that was owned by Media Finance en Suisse Holding GmbH. With this transaction, the twenty-year exclusive license distribution agreement with Media Finance has ended and the Company is free from its monthly fee obligation, since the Company is now the holder of these rights.

PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

From time to time, the Company is a party to litigation or other legal proceedings that we consider to be part of the ordinary course of our business. Except for the following, we are not involved currently in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations:

On May 2004, Fred de Vries and Renato Mariani filed suit in the Fifteenth Judicial Circuit Court located in Palm Beach County, Florida, claiming breach of employment agreements against the Company and against the Company’s CEO claiming fraud. The parties were seeking monies and benefits owed in connection with their employment agreements as well as other damages. On June 27, 2005, the company had agreed upon a settlement which is now in default. As a result of the default, The company owes Fred de Vries and Renato Mariani an amount of $1,440,000.

Three Dutch companies in the Netherlands have commenced a legal procedure against Satellite Newspapers Content BV, claiming an amount due to them of approximately $156,000. They have agreed to suspend legal action until June 1, 2005 based upon a settlement reached in February 2004 whereby a shareholder of the Company will surrender a comparable number of Company shares to offset the obligation

To date The Company is still in negotiation with the three Dutch companies in order to find a solution. While negotiations are pending, legal actions against the company are suspended.

The Company may become involved in material legal proceedings in the future.

ITEM 2.

CHANGES IN SECURITIES AND USE OF PROCEEDS

None

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS AND REPORTS ON FORM 8-K

(a)

Exhibits:

Exhibit 31.1

Certification of Roy Piceni, Chairman & CEO

Exhibit 31.2

Certification of Randy Hibma, Director, President & CFO

Exhibit 32.1

Certification of Roy Piceni, Chairman & CEO

Exhibit 32.2

Certification of Randy Hibma, Director, President & CFO

(b)	Reports on Form 8-K:

Three months ended September 30, 2006

None.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		SATELLITE NEWSPAPERS CORP..
		(Registrant)


Date: November 20, 2006		By: /s/ ROY PICENI
		Roy Piceni
		Chief Executive Officer and
		Chairman of the Board
		(Duly Authorized Officer)


Date: November 20, 2006		By: /s/ RANDY HIBMA
		Randy Hibma
		President and Chief
		Financial Officer and Director
		(Principal Financial
		and Accounting Officer)