FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
the fiscal year ended December 31, 1996
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED
For the transition period from _____________ to ___________
Commission File Number: 0-13347
_______
ARINCO COMPUTER SYSTEMS INC.
______________________________________
(Exact of small business issuer in its charter)
New Mexico 085-0272154
_____________ ____________
(State or otherjurisdiction of (I.R.S. Employer
incorporation or organization) identification no.)
1650 University Blvd., N, S.E., Suite 100,
Albuquerque, New Mexico 897102
______________________________________________ ______
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 505-243-4949
____________
Securities registered pursuant to Section 12(b)
of the Act: None
Securities registered pursuant to Section 12(g)
of the Act:
$0.001 Par Value Common Stock
_________________________________
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed
by section 13 or 15(d) of the 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.
__________ ___________
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. X
______
State issuer's revenues for its most recent fiscal year. ($16,000)
_________
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock
was sold, or the average bid and asked prices of such stock, as of a
specified date within the past 60 days. (See definition of affiliate in
Rule 12b-2 of the Exchange Act). $117,795
________
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: $0.001
par value common stock, its only class of equity securities, as of
March 15, 1996, was: 4,396,000.
__________
PART I
Item 1. Business.
Arinco Computer Systems, Inc. (Arinco, Company or Registrant)
was incorporated under the laws of the State of New Mexico on March
31, 1978. Arinco is a publicly held, over-the-counter traded company
organized principally to serve its subsidiary operations.
On March 1, 1983, acquired a telephone inter-connect company which
had engaged inselling and installing telecommunications equipment in
commercial and governmental facilities. In July of 1987, operations
ceased when two creditors of the telephone inter-connect subsidiary
received the assets of the company. A negotiated settlement was
agreed upon because of continued default by the company in payment of
its secured obligations.
In July of 1985, the Registrant sold its interest in a
computer retail chain to a public company involved in a similar
business. Upon the default of the purchaser to meet its cash and
securities payment obligations to the Registrant, the Registrant
instituted suit and secured a judgment against the purchaser and
guarantor for the balance owing on notes, interest thereon, and
attorneys fees. In 1986, the purchaser filed bankruptcy and in 1987,
the guarantor filed bankruptcy. In 1995, the Registrant received an
interim distribution of $284,000 from the bankrupt estate of the
guarantor. During 1996, a creditor whose claim had been disallowed was
successful in having the order disallowing its claim set aside. If the
claim is subsequently allowed, the creditor could petition the court
to have the bankruptcy trustee recall the distribution; however, to
date, no action has been taken. Management believes court action
requiring recall of the distribution is unlikely; nevertheless, it
is reasonably possible that such an event will occur, although the
amount of the recall cannot currently be estimated.
At the end of the fiscal year ended December 31, 1995 the
Registrant was without any business, had assets consisting of $39,000
in cash and a receivable from a related party of $215,000 and had
liabilities of $572,000. At the end of the Fiscal Year ending December
31, 1996 it had assets consisting of $265,000 in cash and liabilities
of $610,000. The increase of liabilities and increase in assets from
the last fiscal period were due to the following actions and events The
increase in cash assets was due to the Registrant's accumulation of
interest income earned from time deposits, while the increase of
liabilities resulted from accrued interest expense associated with
"Other Debt" (see Item 7. Financial Statements, Note D- Debt to
Nonrelated Parties).
Employees.
The Registrant currently has no employees who are compensated
for their efforts on behalf of the Registrant. The sole officer of the
Registrant is employed without compensation, but is to be reimbursed
all out of pocket expenses incurred by him on the Registrants business.
The Registrants' sole director is not paid for being a director
or for attending directors meetings, but is to be reimbursed all out of
pocket expenses incurred in attending such meetings. The time incurred
by Mr. Arias is minimal.
Item 2. Description of Properties.
The Registrant utilizes office space of a company managed by its
President and sole director, Mr. James A. Arias, at 1650 University
Blvd., N.E., Suite 5-100, Albuquerque, New Mexico 87102. The Registrant
is not presently paying rent for the use of this office space, however,
the space used is negligible.
Item 3. Legal Proceedings.
1. The Registrant has been subjected to the following judgments:
a) On July 21, 1988, a Judgment was entered in the First
Judicial District, County of Santa Fe, New Mexico for legal fees in
the amount of $5,869.97.
b) During fiscal 1987 pursuant to a Stipulation in the US
District Court or the Eastern District of New York, a prior supplier
of material to a formally owned subsidiary, obtained Judgment against
the Registrant in the amount of $245,738, plus interest.
These two judgments remain unpaid at the date of this Report.
2. In 1995, the Registrant received an interim distribution of
approximately $284,000 in connection with a bankruptcy case in which
the Registrant is a creditor. The bankruptcy case has not yet been
closed, however, no additional distributions are contemplated because
the remaining amounts are committed for administrative expenses and
recent settlement entered into by the Trustee.
A large creditor filed a motion to set aside a previous order
disallowing itsclaim based upon a lack of notice. The court set aside
the default order disallowing its claim, but parties in interest may
still object to the claim. The creditor threatened to take action in
early February, but no action has been taken to date. Management
believes court action requiring recall of the distribution is unlikely;
nevertheless, it is reasonably possible that such an event will occur,
although the amount of the recall cannot currently be estimated.
Insofar as is known to the Company's management, there are no
other proceedings now pending, threatened, or contemplated, or
unsatisfied judgments outstanding which have no t been provided for
in any court or agency to which the Company or any of its officers or
directors, in such capacity, are or may be a party, except as discussed
above.
Item 4. Submission of Matters to a Vote of Securities Holders.
No matters were submitted to a vote of shareholders during the
fourth quarter of the company's fiscal year.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
The Registrant's common stock has been listed in by the National
Daily Quotation Bureau, Inc. in its Pink Sheets and the OTC Bulletin
Board under the symbol "ARCS". The high and low bid prices during each
quarter of 1995 and 1996 are as follows
<TABLE>
Bid Prices Bid Prices
High Low High Low
____ ___ ____ ___
<S> <C> <C> <S> <C> <C>
March 31, 1996 $0.02 $0.01 March 31, 1995 $0.02 $0.01
June 30, 1996 $0.02 $0.01 June 30, 1995 $0.02 $0.01
September 30,1996 $0.02 $0.01 September 30,1995 $0.02 $0.01
December 31, 1996 $0.02 $0.01 December 31, 1995 $0.02 $0.01
</TABLE>
There were approximately 350 holders of the Registrant's common
stock on March 25, 1997.
The Registrant has never paid dividends on its common stock.
Item 6. Management's' Discussion and Analysis or Plan of Operations
Liquidity and Capital Resources.
________________________________
The Registrant's cash position improved during the past fiscal
year as a result of its earnings of interest on its time deposits. The
Registrant currently has approximately $265,000.
The Registrant's sole officer and director is currently
devoting his services, as needed, to the Registrant without
compensation. Other costs and expenses, including legal and accounting
costs are being paid from the cash held by the Registrant. The
Registrant may continue to operate in a limited manner utilizing the
funds it currently has. It is believed that the Registrant has
sufficient funds to maintain its current activities, for the year
ending December 31, 1997, while it seeks to acquire or establish a new
business.
Financial Condition and Changes in Financial Condition
_______________________________________________________
As stated above, the Registrant's cash position improved as a
result of interest income and liabilities increased as a result of
accrued interest expense during the fiscal year ended December 31,
1996. At December 31, 1995, the Registrant had assets of $254,000
consisting of $39,000 in cash and $215,000 in notes and had
liabilities of $572,000. Assets increased by $254,000 as a result of
the recovery of cash on a judgment entered for the Registrant in 1986.
Also, during fiscal 1995, certain debts and judgments became barred
from collection through application of the statute of limitation, which
was the primary reason for reducing the liabilities by approximately
$666,000 to $572,000. Management believes that additional debts and
expenses may also be time barred and has retained the services to an
attorney to review the status of those debts and expenses and furnish
the Registrant an opinion relating to that matter.
Item 7. Financial Statements. (Item 7 begins on the nest page.)
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
__________________________________________________
The Shareholders and Board of Directors
Arinco Computer Systems, Inc.
We have audited the consolidated balance sheet of Arinco Computer
Systems, Inc. and Subsidiary, as of December 31, 1996, and the related
consolidated statements of operations, shareholders' deficit, and cash
flows for each of the two years in the period ended December 31, 1996.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free 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. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Arinco Computer Systems, Inc. and Subsidiary, as of December 31,
1996, and the consolidated results of their operations and their
consolidated cash flows for each of the two years in the period ended
December 31, 1996 in conformity with generally accepted accounting
principles.
As disclosed in Note J to the consolidated financial statements, the
Company ceased operations upon the disposal of its subsidiary on
October 7, 1987. Although no formal plan of liquidation has been
adopted, no material business activity has occurred since October 7,
1987. As a result, the Company uses the liquidation basis of accounting.
GRANT THORNTON LLP
Oklahoma City, Oklahoma
February 7, 1997
Arinco Computer Systems, Inc.
CONSOLIDATED BALANCE SHEET
December 31, 1996
ASSETS (note J)
CURRENT ASSETS
Cash $ 265,000
============
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES (note C)
Other debt - nonrelated parties $ 252,000
Accrued expenses 358,000
___________
Total current liabilities 610,000
COMMITMENTS AND CONTINGENCIES (notes F and G) -
SHAREHOLDERS' DEFICIT
Preferred stock, $.06 per share cumulative,
convertible share- for-share into common
stock - $.10 par value, $396,000 liquidation
preference; authorized, 5,000,000 shares;
issued and outstanding, 396,000 shares (note F) 40,000
Common stock - $.01 par value; authorized,
4,500,000 shares; issued and outstanding,
4,396,000 shares (note F) 44,000
Additional paid-in capital
Preferred stock 1,250,000
Common stock 1,273,000
Accumulated deficit (2,952,000)
___________
(345,000)
___________
$ 265,000
===========
The accompanying notes are an integral part of this statement.
Arinco Computer Systems, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
1996 1995
________ _______
Revenue - settlement of litigation $ - $ 284,000
Operating expenses - general and administrative 5,000 4,000
________ _______
Operating profit (loss) (5,000) 280,000
Other (income) expense
Interest income (16,000) (8,000)
Interest expense 38,000 72,000
________ ______
22,000 64,000
________ ______
Earnings (loss) before extraordinary item (27,000) 216,000
Extraordinary item - extinguishment of
liabilities (note C) - 704,000
________ _______
NET EARNINGS (LOSS) (27,000) 920,000
Preferred stock dividend requirement 24,000 45,000
________ _______
NET EARNINGS (LOSS) APPLICABLE
TO COMMON SHARES $ (51,000) $ 875,000
=========== =========
Earnings (loss) per common share (note B1)
Primary
Earnings (loss) before extraordinary item $ (.01) $ .05
Extraordinary item - .17
__________ ________
NET EARNINGS (LOSS) $ (.01) $ .22
__________ ________
Fully diluted
Earnings (loss) before extraordinary item $ (.01) $ .04
Extraordinary item - .15
__________ ________
NET EARNINGS (LOSS) $ (.01) $ .19
========== ========
Weighted average of common shares outstanding
Primary 4,097,672 4,035,000
========== =========
Fully diluted 4,097,672 4,791,700
========== =========
The accompanying notes are an integral part of these statements.
Arinco Computer Systems, Inc.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
Additional
paid-in capital
__________________
Preferred stock Common stock Preferred Common Accumulated Treasury stock
________________ _________________ ______________
Shares Amount Shares Amount stock stock deficit Share Amount Total
_____ ______ ______ ______ _____ _____ _________ _____ ______ _____
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances
at 1\1\95 807,000 $ 81,000 4,085,000 $ 41,000 $1,282,000 $1,278,000 (3,845,000) 100,000 $(75,000) $(1,238,000)
Net
earnings - - - - - - 920,000 - - 920,000
_______ ______ _______ ________ _________ ________ _________ _______ ________ _________ __________
Balances
at 1\1\95 807,000 81,000 4,085,000 41,000 1,282,000 1,278,000 (2,925,000) 100,000 (75,000) (318,000)
Net loss - - - - - - (27,000) - - (27,000)
Preferred
stock
exchanged
for common
stock (361,000) (36,000) 361,000 3,000 - 33,000 - - - -
Retirement
of treasury
stock (50,000) (5,000) (50,000) - (32,000) (38,000) - (100,000) 75,000 -
_______ _______ ______ _______ __________ ________ _______ _________ ______ ________
Balances
at 12\31\96 396,000 $40,000 4,396,000 $44,000 $1,250,000 $1,273,000 $(2,952,000) - $ - $(345,000)
======= ======= ========= ======= ========== ========== ============ ======= ====== ============
</TABLE>
The accompanying notes are an integral part of these statements.
Arinco Computer systems, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
1996 1995
______ ______
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
Net earnings (loss) $ (27,000)$ 920,000
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities
Gain on extinguishment of liabilities - (704,000)
Changes in operating assets and liabilities
Accounts payable - (34,000)
Accrued expenses 38,000 72,000
Net cash provided by operating activities 11,000 254,000
_______ _______
Cash flows from investing activities
Repayments (borrowings) by related party 215,000 (215,000)
_______ _______
NET INCREASE IN CASH AND
CASH EQUIVALENTS 226,000 39,000
Cash and cash equivalents at beginning of year 39,000 -
________ ________
Cash and cash equivalents at end of year $265,000 $ 39,000
======== ========
The accompanying notes are an integral part of this statement.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE A - ORGANIZATION
Arinco Computer Systems, Inc. (the "Company") was incorporated under
the laws of the State of New Mexico on March 31, 1978. The Company is
a publicly-held, over-the-counter traded company. The Company has
had no significant business operations since the disposal of its
operating subsidiary in 1987. The Company's subsidiary, New Start, Inc.,
has no business operations and intercompany transaction and balances
are eliminated in consolidation.
NOTE B - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied
in the accompanying consolidated financial statements follows.
1. Earnings (Loss) Per Common Share
________________________________
Earnings (loss) per common share is determined by dividing the
earnings (loss) by the weighted average number of common shares
outstanding during the periods. Warrants are not included in
the computation of earnings (loss) per share because the effect
of inclusion would be antidilutive. Fully diluted earnings
(loss) per share is based on the weighted average number of
common shares outstanding during the periods as if the
preferred shares were converted into common shares at the
beginning of the periods.
2. Cash Accounts
_____________
The Company maintains its cash in bank deposit accounts which
may exceed federally insured limits.
3. Use of Estimates
________________
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes; accordingly, actual results could
differ from those estimates.
NOTE C - EXTINGUISHMENT OF LIABILITIES
The Company incurred certain liabilities which could not be
paid as a result of unprofitable operations before 1988.
During 1995, the Company reviewed these old liabilities and, as
a result of that review and upon advice from legal counsel,
determined that approximately $704,000 of these liabilities
were no longer enforceable as claims against the Company. As a
resul o the extinguishment of these obligations, an extraordinary
income item of $704,000 has been reflected in the consolidated
statement of operations and recognized in the fourth quarter.
NOTE D - DEBT TO NONRELATED PARTIES
The debt to nonrelated parties which was previously
collateralized by substantially all of the assets of the
Company's former subsidiary bears interest at 15%. The Company
has defaulted on payment; accordingly, the amount is currently
due and payable.
NOTE E - INCOME TAXES
The following is a reconciliation between the Company's tax provision
to the tax computed at the statutory federal rate:
<TABLE>
Year ended December 31,
_______________________
1996 1995
________ __________
<S> <C> <C>
Tax expense (benefit) at statutory rate $ (9,000) $ 313,000
State income taxes (1,000) 37,000
Change in valuation allowance 10,000 (350,000)
_________ _________
$ - $ -
========= ==========
</TABLE>
As of December 31, 1996, the Company has net operating loss
carryforwards for financial reporting and income tax purposes as
follows:
<TABLE>
<S> <C>
Expiration date
2008 $ 65,000
2009 73,000
2011 27,000
________
$ 165,000
========
</TABLE>
The Company's deferred tax assets and liabilities consist of the
following at December 31, 1996:
<TABLE>
<S> <C>
Net operating loss carryforward $ 63,000
Valuation allowance (63,000)
__________
Deferred tax liability $ -
==========
</TABLE>
The valuation allowance for deferred tax assets decreased
$105,000 and $350,000, respectively, for the years ended December 31,
1996 and 1995.
NOTE F - CAPITAL STOCK
1. Warrants
________
In connection with a public offering of the Company's stock, warrants
to purchase 503,000 shares of its common stock at $1 per share remain
outstanding at December 31, 1996.
2. Preferred Stock
_______________
The Company's preferred stock has full voting rights, accumulates $.06
per share cumulative dividends annually, and is convertible on a share-
for-share basis to the Company's common stock. Dividends on outstanding
preferred stock are payable annualy each May 31 beginning May 31, 1985.
Dividends in arrears amount to $285,000 at December 31, 1996. Preferred
stockholders are not entitled to payment of any accrued but unpaid
dividends existing at the time of a voluntary conversion of such stock
to common stock.
3. Exchange and Retirement of Stock
________________________________
In July, 1996, 361,082 shares of outstanding preferred stock were
exchanged for 361,082 shares of the Company's $.01 par
value common stock under the share-for-share conversion rights
of the preferred stock. During 1996, the Company retired 50,000
shares of preferred stock and 50,000 shares of common
stock which was previously held as treasury stock.
NOTE G - COMMITMENTS AND CONTINGENCIES
Management believes that certain liabilities formerly reported by the
Company are now time barred from collection and are no longer reported
as liabilities of the Company.
NOTE H - SETTLEMENT OF LITIGATION
On March 31, 1986, the Company filed a lawsuit against Pathfinder
Computer Centers Corporation ("Pathfinder") and its organizers seeking
the balance due of $450,000 on a note plus accrued interest (guarantied
by Aaron D. and Jerilyn H. Silver). On February 14, 1990, the Company
settled the litigation and received settlement proceeds in 1995 of
approximately $284,000. Subsequent to distribution, a creditor
whose claim had been disallowed was successful in having the order
disallowing its claim set aside. If the claim is subsequently allowed,
the creditor could petition the court to have the bankruptcy trustee
recall the distribution; however, to date, no action has been taken.
Management believes court action requiring recall of the distribution
is unlikely; nevertheless, it is reasonably possible that such an
event will occur, although the amount of the recall cannot currently
be estimated.
NOTE I - FINANCIAL INSTRUMENTS
The following table includes various estimated fair value information
as of December 31, 1996 as required by Statement of Financial
Accounting Standards ("SFAS") No. 107, "Disclosures About Fair Value
of Financial Instruments". Such information, which pertains
to the Company's financial instruments, is based on the requirements
set forth in SFAS No. 107 and does not purport to represent the
aggregate net fair value of the Company. The carrying amounts in the
table below are the amounts at which the financial instruments are
reported in the consolidated financial statements.
All of the Company's financial instruments are held for purposes other
than trading.
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it is
practicable to estimate that value:
1. Cash
____
The carrying amount approximates fair value because of the short
maturity and highly liquid nature of those instruments.
2. Debt to Unrelated Parties
_________________________
These amounts, which accrue interest at 15%, are past due the
maturity date and it is not practicable to estimate fair value.
The carrying amounts and estimated fair values of the Company's
financial instruments are as follows:
<TABLE>
Carrying Estimated
amount fair value
________ __________
<S> <C> <C>
Financial assets
Cash $ 265,000 $265,000
Financial liabilities
Notes payable for which it
is not practicable to
estimate fair value (252,000) -
</TABLE>
NOTE J - CESSATION OF OPERATIONS
Since inception, the Company has operated on minimal amounts of
invested capital. Continuing losses have severely impaired the
Company's cash flow. The Company relinquished the assets of
its subsidiary on October 7, 1987 in settlement of two notes payable.
The Company has essentially ceased its operations and reduced its
existence to a shell corporation. Management will continue its
efforts to improve the Company's capital but does not anticipate
developing a formal plan of liquidation.
Item 8. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure.
No principal independent accountant resigned (or declined to stand
for re-election) or was dismissed during the Registrant's two most
recent fiscal years or any later interim period.
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act.
The following individuals are the Company's directors and executive
officers:
Name age Positions held with Company
______________ ______ _________________________________________
James A. Arias 59 Acting President, Chief Financial Officer
and Director
Background information about the sole director and sole
executive officer is as follows:
JAMES A. ARIAS has served as the President, Chief Executive
Officer and a Director of Realco, Inc., a publicly traded
corporation, since its formation in September 1983. From 1975 to
September of 1983, he was a partner of James Bentley &
Associates, a financial consulting and real estate syndication
firm in Albuquerque, New Mexico, which was merged into and became
a division of Financial Services Group, Inc., a New Mexico
corporation, of which Mr. Arias is President and a controlling
shareholder. Since 1984, he has served as Manager of S&H
Brokerage Inc., N.M., an insurance broker in Albuquerque, New Mexico.
From 1987 to July 1993, he served as President and a Director
of Valiant International, Inc., an aircraft acquisition and servicing
company. Since June 1995, he has served as interim sole Director and
as acting Director of the Registrant. Mr. Arias devotes substantially
all of his time to the business of Realco, Inc.
No director, officer or beneficial owner of more than 10% of
the Company's common stock, its only equity securities, or any other
person subject to Section 16 of the Exchange Act failed to file
reports required by Section 16(a) of the Exchange Act during
the most recent fiscal year or prior fiscal years.
Item 10. Executive Compensation.
No officer or director received compensation during the last
fiscal year. The following table sets forth certain information
concerning the remuneration paid by the Company for the fiscal
year ended December 31, 1995.
<TABLE>
<CAPTION>
Number
Capacities in of persons Salaries and Insurance Other forms of
Which Served in group Directors fees Benefits Remuneration
_____________ __________ ______________ __________ ______________
<S> <C> <C> <C> <C>
Directors 1 -0- -0- -0-
Executive Officers(2) 1 -0- -0- -0-
All Officers and
Directors as a group 1 -0- -0- -0-
</TABLE>
The Registrant has no long term compensation arrangements
and neither it nor its subsidiaries have adopted any plan
pursuant to which cash or non-cash compensation will be paid to
any officer or director of the Registrant or its subsidiaries.
The Registrant has not adopted any pension or other form of
defined benefit or actuarial plan.
Item 11. Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth, as of March 25, 1997, the
beneficial ownership of Common Stock by each person who is known
by the Company to own beneficially more than 5% of the issued and
outstanding Common Stock and the shares of Common Stock owned by
each nominee and all officers and Directors as a group. Each
person has sole voting and investment power as to all shares
unless otherwise indicated.
Directors.
__________
<TABLE>
(2) (3)
(1) Name and address Amount and nature (4)
Title of of of Percent
Class Beneficial owner Beneficial ownership of class
________ ________________ _____________________ ________
<S> <C> <C> <C>
$0.01 par James A. Arias 385,000 8.76
value common 1650 University Blvd., #100 Indirect*
stock Albuquerque, NM 87102 <F1>
$0.01 par Realco, Inc. 385,000 8.76
value common 1650 University Blvd., #100 Direct
stock Albuquerque, NM 87102
$0.01 par Financial Services Group, Inc. 385,000 8.76
value common 1650 University Blvd., #100 Direct
stock Albuquerque, NM 87102
$0.01 par James A. Arias 385,000 8.76
value common 1650 University Blvd., #100 Indirect*
stock Albuquerque, NM 87102 <F1>
$.001 par Steven P. Kadner 518,500 11.79
value common 8401 Washington Pl, N.E. Direct and
stock Albuquerque, NM 87113 Indirect**
<F2>
$0.001 par Jerome F. Beckes 545,000 12.40
value common 8401 Washington Pl, N.E. Direct and
stock Albuquerque, NM 87113 Indirect**
<F2>
$.001 par Richard Elkins 223,000 5.07
value common P.O.B. 25000 Direct
stock Albuquerque, NM 87125
convertible Storecos, a NV corp. 381,700 96.4
preferred 8106 Menual Blvd., N.E. Direct
Albuquerque, NM 87113
</TABLE>
[FN]
<F1> *These shares are owned by Realco, Inc. and Financial Services
Group, Inc., both of which are controlled by Mr. Arias.
<F2>** 266,000 of these shares are owned by Aquila Technologies
Group, Inc., a corporation which is controlled by Messrs. Kadner
and Beckes.
There are no arrangements known to the registrant, including any
pledge by any person of securities of the registrant or any of its
parents, the operation of which may at a subsequent date result
in a change in control of the registrant.
Item 12. Certain Relationships and Related Transactions.
None
Item 13. Exhibits and Reports on Form 8-K.
(a) Documents filed as a part of this report:
_________________________________________
None
(b) Reports on Form 8-K:
____________________
The Registrant filed no reports on Form 8-K during the last
quarter of the period covered by this Report:
(c) Exhibits:
_________
The following documents are incorporated by reference to the
Registrant's Form 10 Registration Statement under the Securities
Exchange Act of 1934: a. Articles of Incorporation; b. Bylaws;
c. Instruments defining rights of security holders, including
indentures; d. Material contracts; e. Subsidiaries of Registrant and
f. Additional Exhibits.
(11) Statement re: computation of per share earnings. See
Note B (1) to the financial statements.
There are no other exhibits specified in Item 601 of Regulation
S-B to be included with this filing.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act,
the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ARINCO COMPUTER SYSTEMS INC..
s/James A. Arias
__________________________________________ Date: April 12, 1996
James A. Arias*, President and Chief
<F3> Executive Officer and
Chief Financial Officer
In accordance with the Exchange Act,, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
s/James A. Arias
____________________________________ Date: April 12, 1996
James A. Arias*., Director
<F3> *Only Mr. Arias is an officer or a director of the Registrant.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 265,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 265,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 265,000
<CURRENT-LIABILITIES> 610,000
<BONDS> 0
0
40,000
<COMMON> 44,000
<OTHER-SE> (429,000)
<TOTAL-LIABILITY-AND-EQUITY> 265,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,000
<INCOME-PRETAX> (27,000)
<INCOME-TAX> 0
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (51,000)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
