<PAGE>
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, 1999
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 $ .01
par value common stock, its only class of equity securities, as of August 13,
1999 was 4,541,000 shares.
<PAGE>
PART I
Item 1. FINANCIAL STATEMENTS
ARINCO COMPUTER SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and Cash equivalents $ 222,000
Trading securities 48,000
----------
$ 270,000
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 1,000
SHAREHOLDERS' EQUITY
Preferred stock, $.06 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 40,000
Common stock - $.01 par value; authorized,
45,000,000 shares; issued and outstanding,
4,541,000 shares 45,000
Additional paid-in capital
Preferred stock 1,250,000
Common stock 1,272,000
Accumulated deficit (2,338,000)
----------
..................................................................... 269,000
----------
$ 270,000
==========
See accompanying notes.
<PAGE>
ARINCO COMPUTER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30,
(UNAUDITED)
1999 1998
--------- ---------
Operating expenses - general
and administrative $ 4,000 $ 2,000
--------- ---------
Operating loss 4,000 2,000
Other (income) expense
Interest income (1,000) (1,000)
Interest expense - 10,000
Realized gain on trading securities (1,000)
Unrealized loss on trading securities 9,000 -
--------- ---------
7,000 9,000
--------- ---------
Loss before extraordinary item (11,000) (11,000)
Extraordinary item - extinguishment of debt - 666,000
--------- ---------
NET EARNINGS (LOSS) (11,000) 655,000
Preferred stock dividend requirement 6,000 6,000
--------- ---------
NET EARNINGS (LOSS) APPLICABLE
TO COMMON SHARES $ (17,000) $ 649,000
========= =========
BASIC AND DILUTED EARNINGS (LOSS) PER
COMMON SHARE $ - $ .14
========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,541,000 4,541,000
========= =========
See accompanying notes.
<PAGE>
ARINCO COMPUTER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
1999 1998
--------- ---------
Operating expenses - general
and administrative $ 7,000 $ 2,000
--------- ---------
Operating loss 7,000 2,000
Other (income) expense
Interest income (3,000) (3,000)
Interest expense - 19,000
Realized gain on trading securities (1,000) -
Unrealized gain on trading securities (36,000) -
--------- ---------
(40,000) 16,000
--------- ---------
Earnings (loss) before extraordinary item 33,000 (18,000)
Extraordinary item - extinguishment of debt - 666,000
--------- ---------
NET EARNINGS 33,000 648,000
Preferred stock dividend requirement 12,000 12,000
--------- ---------
NET EARNINGS APPLICABLE
TO COMMON SHARES $ 21,000 $ 636,000
========= =========
BASIC AND DILUTED EARNINGS PER
COMMON SHARE $ - $ .14
========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,541,000 4,541,000
========= =========
See accompanying notes.
<PAGE>
ARINCO COMPUTER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
1999 1998
--------- ---------
Cash flows from operating activities
Net earnings $ 33,000 $ 655,000
Adjustments to reconcile net earnings to
net cash provided by operating activities
Gain on extinguishment of liabilities - (666,000)
Decrease in trading securities, including
unrealized appreciation of $36,000 and
$1,000 realized gains in 1999 1,000 -
Changes in operating assets and liabilities
Accounts payable 1,000 12,000
--------- ---------
Net cash provided by operating
activities 35,000 1,000
Cash flows from investing activities
Advances on related party note receivable (20,000) -
Receipts on related party note receivable 36,000 -
--------- ---------
Net cash provided by investing
activities 16,000 -
Cash flows from financing activities
Payment of bank overdraft (2,000) -
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 49,000 1,000
Cash and cash equivalents at beginning of period 173,000 270,000
--------- ---------
Cash and cash equivalents at end of period $ 222,000 $ 271,000
========= =========
See accompanying notes.
<PAGE>
ARINCO COMPUTER SYSTEMS, INC.
NOTES TO CONSOLIDTED FINANCIAL STATEMENTS
JUNE 30, 1999
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated balance sheet as of June 30, 1999, and the consolidated
statements of operations and cash flows for the three month periods ended March
31, 1999 and 1998 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 financial position, results of
operations and cash flows as of and for the three months ended March 31, 1999
and 1998.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It's suggested that these consolidated financial
statements be read in conjunction with the consolidated financial filing of
Securities & Exchange Commission Form 10-KSB. The results of operations for the
periods ended March 31, 1999 and 1998 are not necessarily indicative of the
operating results for the ful l year.
EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is computed using the weighted average number of
common shares outstanding for the periods ended June 30, 1999 and 1998.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS::
The following is Management's discussions and analysis of the financial
condition and results of operations of the Company for the periods ended June
30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity, as discussed herein, refers to the Company's ability to generate
adequate amounts of cash to meet its needs.
At June 30, 1999 the Company had cash and trading securities totaling $270,000
and total liabilities of $1,000.
The Company's sole officer and director is currently devoting his services, as
needed to the Company without compensation. No increase of employees is
anticipated during the foreseeable future of the Company. Other costs and
expenses, including legal and accounting costs are being paid from the cash held
by the Company. The Company may continue to operate in a limited manner
utilizing the funds it currently has. It is believed that the Company has
sufficient funds to maintain its current act ivities for the year ending
December 31, 1999, while it seeks to establish a new business. There is no
assurance that given the Company's limited financial resources, it will succeed
in attracting acquisitions or merger prospects.
RESULTS OF OPERATIONS
For the Quarter Ended June 30, 1999
The Company's net loss of $11,000 for the quarter ended June 30, 1999 consists
primarily of a $9,000 unrealized loss on trading securities and $4,000 of
operating expenses, as offset by other income items. The Company recognized net
earnings of $655,000 for the quarter ended June 30, 1998 as a result of a
$666,000 extraordinary gain recognized on extinguishment of certain debt, which
was previously reported in the Company's 10-KSB filing of December 31, 1998.
For the Six Months Ended June 30, 1999
The Company's net earnings of $33,000 for the six months ended June 30, 1999
consists primarily of a $36,000 unrealized gain on trading securities and $4,000
of other income, as offset by other $7,000 in operating expenses. For the six
months ended June 30, 1998, the Company recognized net earnings of $648,000.
This profit was the result of the aforementioned $666,000 extraordinary gain, as
offset by operating expenses and other income and expense items.
<PAGE>
Income Taxes
As the Company has incurred operating losses, no provision for income taxes was
required for the periods ended June 30, 1999 and 1998.
YEAR 2000 ISSUE
Because of limited operations of the Company, Year 2000 issues are minimal. The
Company's financial institutions and professional service providers have
provided notification that they are Year 2000 compliant. The personal computer
and software which the Registrant utilizes is deemed Year 2000 compliant.
ITEM 3. QUANTITIATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has no material market risk associated with interest rates, foreign
currency exchange rates or commodity prices.
<PAGE>
PART II. OTHER INFORMATION:
ITEM 1. LEGAL PROCEEDINGS:
On March 31, 1986, the Company filed a lawsuit against Pathfinder Computer
Centers Corporation and its organizers (defendants) seeking the balance due
of $450,000 on a note plus accrued interest (guaranteed 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 receipt of settlement proceeds, a creditor whose
claim had been disallowed in the defendants Bankruptcy proceedings was
successful in having the order disallowing it claim set aside. If the claim
is subsequently allowed, the creditor could petition the court to have the
bankruptcy trustee recall the settlement proceeds. A Notice of Evedentiary
Hearing set for September 1, 1999 was received by the Company at which time
the Bankruptcy Judege is expected to issue a Final Ruling on this matter.
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:
NONE
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.
s/James A. Arias
-------------------------------
James A. Arias
Interim Chief Executive Officer
DATE: August 13, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 222000
<SECURITIES> 48000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 270000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 270000
<CURRENT-LIABILITIES> 1000
<BONDS> 0
0
40000
<COMMON> 45000
<OTHER-SE> 184000
<TOTAL-LIABILITY-AND-EQUITY> 270000
<SALES> 0
<TOTAL-REVENUES> 40000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 33000
<INCOME-TAX> 0
<INCOME-CONTINUING> 33000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33000
<EPS-BASIC> .00
<EPS-DILUTED> .00
</TABLE>
