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 September 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
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(Exact name of small business issuer in its charter)
New Mexico 85-0272154
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1650 UNIVERSITY BLVD., N.E., SUITE 5-100, ALBUQUERQUE, NEW MEXICO 87102
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(Address of principal executive offices) (Zip Code)
505-242-4561
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Issuer's telephone number, including area code
Not Applicable
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(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 November 15,
1999 was 4,541,000 shares.
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
ARINCO COMPUTER SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
(unaudited)
ASSETS
CURRENT ASSETS
Cash and Cash equivalents $ 175,000
Accounts receivable 24,000
Trading securities 54,000
----------
$ 253,000
==========
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 (2,355,000)
----------
252,000
----------
$ 253,000
==========
See accompanying notes.
ARINCO COMPUTER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30,
(unaudited)
1999 1998
--------- ---------
Operating expenses - general
and administrative $ 1,000 $ 7,000
--------- ---------
Operating loss 1,000 7,000
Other (income) expense
Interest income (1,000) (3,000)
Interest expense - -
Realized loss on trading securities 2,000 -
Unrealized loss on trading securities 15,000 -
--------- ---------
16,000 (3,000)
--------- ---------
NET LOSS (17,000) (4,000)
Preferred stock dividend requirement 6,000 6,000
--------- ---------
NET LOSS APPLICABLE TO COMMON SHARES $ (23,000) $ (10,000)
========= =========
BASIC AND DILUTED LOSS PER
COMMON SHARE $ (.01) $ -
========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,541,000 4,541,000
========= =========
See accompanying notes.
ARINCO COMPUTER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30,
(unaudited)
1999 1998
--------- ---------
Operating expenses - general
and administrative $ 8,000 $ 9,000
--------- ---------
Operating loss 8,000 9,000
Other (income) expense
Interest income (4,000) (6,000)
Interest expense - 19,000
Realized loss on trading securities 1,000 -
Unrealized gain on trading securities (21,000) -
--------- ---------
(24,000) 13,000
--------- ---------
Earnings (loss) before extraordinary item 16,000 (22,000)
Extraordinary item - extinguishment of debt - 666,000
--------- ---------
NET EARNINGS 16,000 644,000
Preferred stock dividend requirement 18,000 18,000
--------- ---------
NET EARNINGS (LOSS) APPLICABLE
TO COMMON SHARES $ (2,000) $ 626,000
========= =========
BASIC AND DILUTED EARNINGS (LOSS) PER
COMMON SHARE $ - $ .14
========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,541,000 4,541,000
========= =========
See accompanying notes.
ARINCO COMPUTER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30,
(unaudited)
1999 1998
--------- ---------
Cash flows from operating activities
Net earnings $ 16,000 $ 644,000
Adjustments to reconcile net earnings to
net cash used in operating activities
Gain on extinguishment of liabilities - (666,000)
Increase in trading securities, including
unrealized appreciation of $21,000 and
$1,000 realized losses in 1999 (5,000) (76,000)
Changes in operating assets and liabilities
Accounts receivable (24,000) -
Accounts payable 1,000 -
Accrued expenses - 19,000
--------- ---------
Net cash used in operating
activities (12,000) (79,000)
Cash flows from investing activities
Advances on related party note receivable (20,000) (16,000)
Receipts on related party note receivable 36,000 -
--------- ---------
Net cash provided by (used in)
investing activities 16,000 (16,000)
Cash flow from financing activities
Payment of bank overdraft (2,000) -
--------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2,000 (95,000)
Cash and cash equivalents at beginning of period 173,000 270,000
--------- ---------
Cash and cash equivalents at end of period $ 175,000 $ 175,000
========= =========
See accompanying notes.
ARINCO COMPUTER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated balance sheet as of September 30, 1999, and the consolidated
statements of operations and cash flows for the periods ended September 30, 1999
and 1998 have been prepared by the Company without audit. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
considered necessary for a fair presentation have been included. The results of
operations for the periods ended September 30, 1999 and 1998 are not necessarily
indicative of the operating results for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these consolidated
financial statements be read in conjunction with the Company's annual report on
Form 10-KSB for the year ended December 31, 1998.
EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is computed using the weighted average number of
common shares outstanding of 4,541,000 for the periods ended September 30, 1999
and 1998.
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
September 30, 1999 and 1998.
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 September 30, 1999 the Company had cash and trading securities totaling
$229,000 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 activities 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 September 30, 1999
The Company's net loss of $17,000 for the quarter ended September 30, 1999
consists primarily of a $15,000 unrealized loss on trading securities. The
Company recognized a net loss of $4,000 for the quarter ended September 30, 1998
as a result of operating expenses exceeding interest income.
For the Nine Months Ended September 30, 1999
The Company's net earnings of $16,000 for the nine months ended September 30,
1999 consists primarily of a $21,000 unrealized gain on trading securities and
$3,000 of other income, as offset by $8,000 in operating expenses. For the nine
months ended September 30, 1998, the Company recognized net earnings of
$644,000. Such earnings are primarily the result of a $666,000 extraordinary
gain recognized on extinguishment of certain debt, which was previously reported
in the Company's Form 10-KSB filing of December 31, 1998.
Income Taxes
As the Company has incurred operating losses, no provision for income taxes was
required for the periods ended September 30, 1999 and 1998.
YEAR 2000 ISSUE
Because of the 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. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has no material market risk associated with interest rates, foreign
currency exchange rates or commodity prices.
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 interest (which was 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 its claim set aside. If the claim is subsequently allowed, the
creditor could petition the court to have the bankruptcy trustee recall the
settlement proceeds. An Evidentiary Hearing was conducted in September 1999, at
which time briefs were filed. The Company is now awaiting the ruling on such
briefs.
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 Securities Exchange Act of 1934, 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
-------------------------------
James A. Arias
Interim Chief Executive Officer
DATE: November 15, 1999
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