FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_________________ to _________________
Commission File Number: 0-13347
ARINCO COMPUTER SYSTEMS INC.
(Exact name of small business issuer in its charter)
New Mexico 85-0272154
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1650 UNIVERSITY BLVD., N.E. SUITE 100
ALBUQUERQUE, NEW MEXICO 87102
(Address of principal executive offices) (Zip Code)
505-242-4561
Issuer's telephone number, including area code
Not Applicable
(Former names, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
issuer was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes[X] No[ ]
The number of shares outstanding of the Issuer's common stock, par value
$ 0.001 par value common stock, its only class of equity securities, as of
July 25, 1998 was 4,035,000 shares.
Transitional Small Business Disclosure Format (Check one): Yes[ ] No[X]
PART I
Item 1. FINANCIAL STATEMENTS
ARINCO COMPUTER SYSTEMS INC.
BALANCE SHEET
<TABLE>
UNAUDITED
JUNE 30,
1998
ASSETS
<S> <C>
CURRENT ASSETS
Cash and Interest Bearing Deposits .................... $271,000
-----------
Total Assets ......................................... $271,000
===========
SHAREHOLDERS EQUITY
SHAREHOLDERS' DEFICIT:
Preferred stock, .06 cumulative,
convertible share for share into
common stock, $.10 par value,
$896,000 liquidation preference,
5,000,000 shares authorized,
396,000 shares (NOTE F) ................................ 40,000
Common stock, $.01 par value,
4,500,000 shares authorized 4,396,000
shares (NOTE F) ...................... ................. 44,000
Additional paid-in-capital
Preferred stock ...................................... 1,250,000
Common stock ......................................... 1,273,000
Accumulated deficit .................................... (2,336,000)
-----------
Total shareholders' deficit ...................... 271,000
-----------
Total liabilities and
shareholders' deficit ........................... $271,000
===========
</TABLE>
See accompanying notes to consolidated financial statements
ARINCO COMPUTER SYSTEMS, INC.
CONDENSED STATEMENT OF OPERATIONS
UNAUDITED
<TABLE>
Six Months Six Months
Ended Ended
JUNE 30, 1998 JUNE 30, 1997
<S> <C> <C>
OPERATING EXPENSES
General and administrative ................. 2,000 2,000
----------- -----------
Total operating expenses .......... 2,000 2,000
----------- -----------
OPERATING LOSS ............................... (2,000) (2,000)
INTEREST EXPENSE ............................. (19,000) (19,000)
----------- -----------
OTHER INCOME ................................. 669,000 4,000
----------- -----------
INCOME FROM OPERATIONS ....................... 648,000 (17,000)
=========== ===========
NET INCOME PER COMMON SHARE .................. $ (.000) $ (.000)
=========== ===========
WEIGHTED AVERAGE OF SHARES OUTSTANDING ....... 4,396,000 4,396,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statement
ARINCO COMPUTER SYSTEMS, INC.
CONDENSED STATEMENT OF OPERATIONS
UNAUDITED
Three Months Three Months
Ended Ended
JUNE 30, 1998 JUNE 30, 1997
<TABLE>
<S> <C> <C>
OPERATING EXPENSES
General and administrative ................. 2,000 2,000
----------- -----------
Total operating expenses .......... 2,000 2,000
----------- -----------
OPERATING LOSS ............................... (2,000) (2,000)
INTEREST EXPENSE ............................. (10,000) (10,000)
----------- -----------
OTHER INCOME ................................. 667,000 2,000
----------- -----------
INCOME FROM OPERATIONS ....................... 655,000 (10,000)
=========== ===========
NET INCOME (LOSS) PER COMMON SHARE .......... $ (.000) $ (.000)
=========== ===========
WEIGHTED AVERAGE OF SHARES OUTSTANDING ....... 4,396,000 4,035,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statement
ARINCO COMPUTER SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 1998 & 1997
1998 1997
<TABLE>
<S> <C> <C>
Operating Activities:
Net loss/income ................................... $655,000 $(17,000)
Adjustments to reconcile net
loss to cash provided (used)
by operating activities:
Changes in operating assets and liabilities: ......... (655,00) 17,000
-------- --------
Net cash provided used/by operating activities: ...... 1000 0
Cash and cash equivalents at beginning of period ..... 272,000 267,000
-------- --------
Cash and cash equivalents at end of period ........... $271,000 $267,000
======== ========
</TABLE>
See accompanying notes to consolidated financial statement
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ------------------------------------------
The consolidated balance sheet as of June 30, 1998 and the consolidated
statements of operations for the three and six months period and cash flows
for the six month periods ended June 30, 1998 and 1997 have been prepared by
the Company without audit.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the consolidated financial
position at June 30, 1998 and 1997 and the consolidated results of operations
and consolidated cash flows for the six month periods ended June 30, 1998 and
1997 have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. Its suggested that these
consolidated financial statements be read in conjunction with the
consolidated financial filing of the Company's Securities & Exchange
Commission Form 10-KSB. The results of operations for the periods ended
June 30, 1998 and 1997 are not necessarily indicative of the operating results
for the full year.
EARNINGS (LOSS) PER SHARE
- -------------------------
Earnings (loss) per share are computed using the weighted number of
common shares outstanding of 4,035,000 for the three and six month periods
ended June 30, 1998 and 1997, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following is Management's discussions and analysis of the financial
condition and results of operations of the Company during the quarter ended
June 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's principal source of liquidity is derived from limited cash
reserves and interest income. These sources are adequate to meet the present
daily operating needs of the Company. At June 30, 1998 the Company had cash of
approximately $271,000. (See Legal Proceedings)
To acquire or develop any further new business interests, the Company may need
to obtain additional moneys, by borrowing or the sale of equities. There is no
assurance thta the Company, however, will be sucessful in raising new capital
or securing any new business.
RESULTS OF OPERATIONS
- --------------------
During the quarter ended June 30, 1998, the Company recognized a net
operating gain of $667.000 and for the six months ended June 30, 1998, the
Company recognized an operating gain of $648,000. The current quaraterly gain
was a result of elimination or prior liabilities consisting of principal and
accrued interest. (see Legal proceedings (b))
Going forward as presently consitituted, the Management anticipates that
interest income earned from cash reserves will be adequate to meet annual
operational needs.
As the Company has incurred operating losses, no provision for income taxes
was required for the period ended June 30, 1998, however, some Alterntive
Minimum Tax may apply by year end.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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) On April 8, 1987 pursuant to a stipulation the US District Court
for the Eastern District of New York, a prior supplier of materials 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 and have become time barred and unenforceable by
Statute of Limitations. As previously reported, the Company received
$288,969.39 in May, 1995, as part of an interim distribution form the
bankruptcy Estate, representing partial payment of an unsecured claim. The
receipt by the Company of that distribution had been challenged by another
claimant of the Estate. That claimant filed a Motion to disallow the prior
distributions by the Estate Trustee to previously noticed and allowed
claimants. On July 9, 1998, a Final Hearing was set to Amend Order for
Interim Distribution. The court orally denied the Motion. No written
order has been entered or filed to date. Apposing Counsel has requested
that the Court enter written Findings in support of its decision. The
Courts decision will not become final and not subject to appeal until ten
days after a written order is entered.
ITEM 2. CHANGES IN SECURITIES
NONE
ITEM 3. DEFAULTS IN SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
The company recently discovered that the financial statements of the
company has for some time erroneously classified Common shares
Aurhorized as 4,500,000 and should have been classified as 45,000,000.
This clerical error has had no adverse impact on the presentation or
representation of the of the financial condition of the company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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
Arinco Computer Systems Inc.
July 20, 1998
-------------------------------
James A. Arias
Interim Chief Executive Officer
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC
FORM (TYPE) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 271,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 271,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
40,000
<COMMON> 44,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 271,000
<SALES> 0
<TOTAL-REVENUES> 669,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,000
<INCOME-PRETAX> 655,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 655,000
<EPS-PRIMARY> (000)
<EPS-DILUTED> (000)
</TABLE>
