UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] 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.
- -----------------------------------------------------------------------------
(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 5-100
Albuquerque, New Mexico 87102
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (505)242-4561
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
$0.01 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 [ ].
<PAGE>
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. [ ]
State issuer's revenues for its most recent fiscal year: $ -0-
The number of share of the Registrant's common stock outstanding at March 7,
2000 was 4,959,000. The aggregate market value of the Registrant's common stock
held by non-affiliates as of March 7, 2000 was $7,828,000.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART I
ITEM 1: DESCRIPTION OF BUSINESS.
Arinco Computer Systems, Inc., incorporated in 1978 under the laws of the State
of New Mexico, and subsidiary is hereinafter referred to as the "Registrant" or
the "Company". The Company is a NASDAQ Bulleting Board traded company.
The Company's principal offices are located at 1650 University Boulevard, N.E.,
Suite 5-100, Albuquerque, New Mexico 87102 and its telephone number at that
location is (505)243-4949.
Company's Historic Development.
The Company was organized principally to serve its subsidiary operations, which
have included activities in the telecommunications industry as well as the
retail sale of computer equipment. Since 1988, the Company has essentially been
without operations. A more detailed discussion of the Company's history follows.
In 1983, the Company acquired a telephone inter-connect company which engaged in
selling and installing telecommunications equipment in commercial and
governmental facilities. In 1987, operations ceased when two creditors of the
telephone inter-connect subsidiary received the assets of the Company under a
negotiated settlement due to default on the payment of secured obligations.
In 1985, the Company 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 Company, a suit was
instituted and judgement was secured 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 Company received an interim distribution of $284,000 from the bankrupt
estate of the guarantor. During 1996, a creditor petitioned the court to recall
the distribution. See Item 3: Legal Proceedings for further discussion of this
matter.
As a result of these events, the Company is currently without operations.
Management is actively soliciting and pursuing investment possibilities in the
form of acquisitions of privately held businesses. See Item 6 Management's
Discussion and Analysis or Plan of Operations for information relating to a
definitive agreement signed on March 9, 2000 which would provide the Company
with additional working capital and a new line of business.
Employees.
The Company currently has no employees who are compensated for their efforts.
The sole officer and director of the Company is employed without compensation,
but is reimbursed for all out of pocket expenses incurred in transacting
business on behalf of the Company. The time incurred by the Company's sole
officer and director is minimal based upon current activity.
<PAGE>
ITEM 2: DESCRIPTION OF PROPERTY.
The Company utilizes office space at 1650 University Blvd., N.E., Suite 5-100,
Albuquerque, New Mexico 87102. The space utilized is minimal and it pays no rent
for its use. The Company's sole officer and director manages this property.
ITEM 3: LEGAL PROCEEDINGS.
Management of the Company is not aware of any legal or administrative actions
now pending or contemplated against the Company, except as discussed below.
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 these settlement proceeds, a creditor whose claim had
been disallowed in the defendant's 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; however, to date, no action has been taken.
Management believes court action requiring recall of the settlement proceeds is
unlikely; nevertheless, it is reasonably possible that such an event will occur,
although the amount of the recall cannot currently be estimated.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted during the fourth quarter of the 1999 fiscal year to a
vote of security holders, through solicitation of proxies or otherwise.
PART II
ITEM 5: MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Registrant's common stock has been listed on the NASDAQ Bulletin Board under
the symbol ARCU. The following table sets forth for the periods indicated, the
high and low bid prices as reported, which represents inter dealer prices
without adjustment for retail markups, markdowns or commissions, and may not
reflect actual transactions.
<PAGE>
1999 1998
---------------- ----------------
High Low High Low
------- ------- ------- -------
First quarter $ .10 $ .01 $ .10 $ .01
Second quarter .05 .05 .10 .01
Third quarter .19 .06 .10 .01
Fourth quarter .25 .06 .10 .01
There were approximately 400 holders of the Registrant's common stock on March
7, 2000.
The Registrant has never paid dividends on its common stock.
ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
Plan of Operation:
As the Company has not had revenues from operations in each of the last two
fiscal years, the following represents management's plans of operations for the
next twelve months.
The Company is presently without revenues or cash flows from operations. Based
upon current activity levels, management believes that cash on hand and trading
securities are sufficient to meet the Company's cash requirements for the next
twelve months, which are expected to consist of general and administrative costs
incurred to maintain good standing as a publicly traded company, unless the
transaction with Pangea Internet Advisors LLC is consummated, which is discussed
in more detail below.
On March 9, 2000, the Company entered into a definitive agreement with Pangea
Internet Advisors LLC ("Pangea"), a private investment firm focused on the
acquisition and management of internet and related infrastructure and service
technology businesses. The agreement provides for a cash investment of up to $40
million in newly-issued Company preferred stock by Pangea and certain other
investors to be identified by Pangea at a purchase price on an as converted
basis of $.25 per share of Company common stock. As part of the proposed
transaction, certain investors will acquire five- year warrants to acquire
shares representing 20% of the Company's common stock on a fully-diluted basis
at varying exercise prices.
The proposed transaction is expected to close by the end of March; however, it
remains subject to certain closing conditions and no assurance can be given that
the proposed transaction will be consummated.
In the event this transaction does not close, management will resume its efforts
soliciting and pursuing other investment possibilities in the form of
acquisitions of privately held businesses. However, it should be noted,
management is engaged on a full time basis in other activities, endeavors and
professions. Considering the Company's limited resources, there can be no
assurance given that the Company will succeed in attracting another acquisition
or merger prospect.
<PAGE>
The Company currently has no employees.
Year 2000 Issues:
Because of the limited activities of the Company, year 2000 issues were minimal.
The Company has not incurred any year 2000 problems with its computer hardware
and software, financial institutions or professional service providers, nor does
management expect to incur any future problems.
<PAGE>
ITEM 7: FINANCIAL STATEMENTS.
Report of Independent Certified Public Accountants
Shareholders and Board of Directors
Arinco Computer Systems, Inc.
We have audited the accompanying consolidated balance sheet of Arinco Computer
Systems, Inc. and Subsidiary, as of December 31, 1999, and the related
consolidated statements of operations, shareholders' equity (deficit), and cash
flows for each of the two years in the period ended December 31, 1999. 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, 1999, and the consolidated
results of their operations and their consolidated cash flows for each of the
two years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles.
GRANT THORNTON LLP
Oklahoma City, Oklahoma
February 28, 2000 (except for
footnote I, as to which the
date is March 9, 2000)
<PAGE>
ARINCO COMPUTER SYSTEMS, INC, AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
December 31, 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 133,000
Trading securities 112,000
Account receivable 1,000
----------
$ 246,000
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,000
COMMITMENTS AND CONTINGENCIES (notes F and G) -
SHAREHOLDERS' EQUITY (note E)
Preferred stock, $.06 per share cumulative,
convertible share-for-share into common
stock - $.10 par value; authorized,
5,000,000 shares; issued and outstanding,
3,000 shares -
Common stock - $.01 par value; authorized,
45,000,000 shares; issued and outstanding,
4,959,000 shares 49,000
Additional paid-in capital
Preferred stock 10,000
Common stock 2,549,000
Accumulated deficit (2,363,000)
-----------
245,000
-----------
$ 246,000
===========
See accompanying notes.
<PAGE>
ARINCO COMPUTER SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
1999 1998
--------- ---------
Operating expenses - general
and administrative $ 12,000 $ 11,000
--------- ---------
Operating loss (12,000) (11,000)
Other (income) expense
Interest income (5,000) (7,000)
Interest expense - 19,000
Realized loss on trading securities 1,000 -
Unrealized (gain) loss on trading securities (16,000) 30,000
--------- ---------
(20,000) 42,000
--------- ---------
Earnings (loss) before extraordinary item 8,000 (53,000)
Extraordinary item - extinguishment of
liabilities (note C) - 666,000
--------- ---------
NET EARNINGS 8,000 613,000
Preferred stock dividend requirement 14,000 24,000
--------- ---------
NET EARNINGS (LOSS) APPLICABLE TO
COMMON SHARES $ (6,000) $ 589,000
========= =========
Earnings (loss) per common share
Loss before extraordinary item $ - $ (.02)
Extraordinary item - .15
--------- ---------
BASIC AND DILUTED NET EARNINGS (LOSS) $ - $ .13
========= =========
Weighted average of common shares
outstanding, basic and diluted 4,698,000 4,541,000
========== ==========
See accompanying notes.
<PAGE>
ARINCO COMPUTER SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
Years ended December 31, 1999 and 1998
Preferred stock Common stock
----------------- -------------------
Shares Amount Shares Amount
------- -------- --------- --------
Balance at Jan. 1, 1998 396,000 $ 40,000 4,541,000 $ 45,000
Net earnings - - - -
------- -------- --------- --------
Balance at Dec. 31, 1998 396,000 40,000 4,541,000 45,000
Issuance of common stock - - 25,000 -
Conversion of preferred
stock (393,000) (40,000) 393,000 4,000
Net earnings - - - -
------- -------- --------- --------
Balance at Dec. 31, 1999 3,000 $ - 4,959,000 $ 49,000
======= ======== ========= ========
Additional
paid-in capital
----------------------
Preferred Common Accumulated
stock stock deficit Total
---------- ---------- ----------- ---------
Balance at Jan. 1, 1998 $1,250,000 $1,272,000 $(2,984,000) $ (377,000)
Net earnings - - 613,000 613,000
---------- ---------- ----------- ----------
Balance at Dec. 31, 1998 1,250,000 1,272,000 (2,371,000) 236,000
Issuance of common stock - 1,000 - 1,000
Conversion of preferred
Stock (1,240,000) 1,276,000 - -
Net earnings - - 8,000 8,000
---------- ---------- ----------- ----------
Balance at Dec. 31, 1999 $ 10,000 $2,549,000 $(2,363,000) $ 245,000
========== ========== =========== ==========
See accompanying notes.
<PAGE>
ARINCO COMPUTER SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
1999 1998
--------- ---------
Cash flows from operating activities
Net earnings $ 8,000 $ 613,000
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 $16,000 in 1999 and unrealized
depreciation of $30,000 in 1998) (63,000) (49,000)
Changes in operating assets and
liabilities
Accounts payable 1,000 -
Accrued expenses - 19,000
--------- ---------
Net cash used in operating activities (54,000) (83,000)
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 flows from financing activities
Bank overdraft (2,000) 2,000
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (40,000) (97,000)
Cash and cash equivalents at beginning of year 173,000 270,000
--------- ---------
Cash and cash equivalents at end of year $ 133,000 $ 173,000
========= =========
Noncash financing activities:
- -----------------------------
In 1999, the Company issued 25,000 shares of common stock in exchange for an
account receivable.
See accompanying notes.
<PAGE>
ARINCO COMPUTER SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSILIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES
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 that has had no business operations since 1988.
The Company's activities consist primarily of paying general and administrative
costs.
Prior to the settlement of certain liabilities of the Company in 1998 (Note C),
the Company reported on the liquidation basis of accounting; however, this
change in reporting had no effect on the 1999 or 1998 financial statements or
their presentation.
At present, the Company has no employees and is wholly dependent on the personal
efforts of its officer and director, who is engaged full-time in other
activities, endeavors, and professions.
A summary of the significant accounting policies consistently applied in the
accompanying consolidated financial statements follows.
1. Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, New Start, Inc. All significant intercompany
transactions and balances have been eliminated.
2. Earnings (Loss) Per Common Share
Earnings (loss) per common share has been computed using the weighted average
number of common shares outstanding during each period after deduction of
preferred stock dividends, if applicable. Basic and diluted earnings (loss) per
share are the same because the effect of convertible preferred stock would be
antidilutive.
3. Cash and Cash Equivalents
The Company considers money market accounts to be cash equivalents. The Company
maintains its cash and cash equivalents in accounts, which may exceed federally
insured limits or may not be federally insured. The Company has not experienced
any losses on such accounts and believes it is not exposed to any significant
credit risk on cash and cash equivalents.
4. 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.
<PAGE>
5. Securities
Trading securities (cost of $127,000 and $79,000 at December 31, 1999 and 1998,
respectively) are bought with the intention of selling them in the near term and
are carried at fair value with any unrealized gains or losses included in
earnings. Cost is determined by the average cost method in computing realized
gains and losses. Unrealized gains (losses) of $16,000 and ($30,000) were
included in earnings for the years ended December 31, 1999 and 1998,
respectively.
NOTE B - RELATED PARTY TRANSACTIONS
The Company advanced $20,000 under a note receivable from a related party during
1999. This advance, as well as $16,000 advanced in 1998, was repaid in 1999
including interest at 8.5%.
The Company's investment in equity securities consists of common stock of a
publicly traded entity, which is under common control, as the Company's sole
officer and director is also President and Chief Executive Officer of this
entity. These securities are classified as trading.
NOTE C - EXTINGUISHMENT OF LIABILITIES
The Company incurred certain liabilities which could not be paid as a result of
unprofitable operations before 1988. During 1998, the Company reviewed these old
liabilities and, upon advice from legal counsel, determined that liabilities
totaling approximately $666,000 were no longer enforceable as claims against the
Company. As a result of extinguishment of these obligations, an extraordinary
income item of $666,000 was recognized in the fourth quarter of 1998.
NOTE D - INCOME TAXES
The following is a reconciliation between the Company's tax provision to the tax
computed at the statutory federal rate:
Year ended December 31,
------------------------
1999 1998
--------- ---------
Tax expense at statutory
rate $ 3,000 $ 209,000
State income taxes - 25,000
Change in valuation allowance 9,000 (246,000)
Revision of prior year estimate (12,000) -
Other - 12,000
--------- ---------
$ - $ -
========= =========
<PAGE>
As of December 31, 1999, the Company has net operating loss carryforwards for
income tax purposes as follows:
Expiration date
2001 $ 37,000
2003 3,000
2004 28,000
2005 15,000
2006 39,000
2007 75,000
2008 73,000
2009 73,000
2011 36,000
2012 23,000
2019 8,000
---------
$ 410,000
=========
The Company's deferred tax assets and liabilities consist of the following at
December 31, 1999:
Net operating loss carryforwards $ 164,000
Valuation allowance (164,000)
---------
$ -
=========
The valuation allowance for deferred tax assets decreased $9,000 and increased
$94,000, respectively, for the years ended December 31, 1999 and 1998. The
increase for 1998 was a result of an increase in prior years operating losses of
$340,000 and usage of prior year operating loss carryforwards of $246,000.
NOTE E - CAPITAL 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
annually each May 31 beginning May 31, 1985. 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.
NOTE F - 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.
<PAGE>
NOTE G - SETTLEMENT OF LITIGATION
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 these settlement proceeds, a creditor whose claim had
been disallowed in the defendant's 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; however, to date, no action has been taken.
Management believes court action requiring recall of the settlement proceeds is
unlikely; nevertheless, it is reasonably possible that such an event will occur,
although the amount of the recall cannot currently be estimated.
NOTE H - FINANCIAL INSTRUMENTS
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 and Cash Equivalents
The carrying amount approximates fair value because of the short maturity and
highly liquid nature of those instruments.
2. Trading Securities
The estimated fair values are based upon quoted market prices.
The carrying amounts and estimated fair values of the Company's financial
instruments are as follows:
Carrying Estimated
amount fair value
--------- ----------
Financial assets
Cash and cash equivalents $ 133,000 $ 133,000
Trading securities 112,000 112,000
<PAGE>
NOTE I - SUBSEQUENT EVENT
On March 9, 2000, the Company entered into a definitive agreement with Pangea
Internet Advisors LLC ("Pangea"), a private investment firm focused on the
acquisition and management of internet and related infrastructure and service
technology businesses. The agreement provides for a cash investment of up to $40
million in newly-issued Company preferred stock by Pangea and certain other
investors to be identified by Pangea at a purchase price on an as converted
basis of $.25 per share of Company common stock. As part of the proposed
transaction, certain investors will acquire five- year warrants to acquire
shares representing 20% of the Company's common stock on a fully-diluted basis
at varying exercise prices.
The proposed transaction is expected to close by the end of March; however, it
remains subject to certain closing conditions and no assurance can be given that
the proposed transaction will be consummated.
<PAGE>
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None
PART III
ITEM 9: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
JAMES A. ARIAS has served as the Company's Interim President, Chief Executive
Officer, Chief Financial Officer and sole Director since June 1995.
From 1975 to September of 1983, Mr. Arias 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.
Mr. Arias devotes substantially all of his time to serving as the President,
Chief Executive Officer and a Director of Realco, Inc., a NASDAQ listed company
based in New Mexico. Mr. Arias has served in this capacity since 1983.
Mr. Arias also serves as a Director and Audit Committee Member of Miller and
Schroeder Financial, Inc., a broker dealer headquartered in Minneapolis,
Minnesota, and a Director of Quatro, Inc., a New Mexico electronics company.
Both Miller and Schroeder and Quatro, Inc. are privately held corporations.
ITEM 10: EXECUTIVE COMPENSATION.
The Company's sole officer and director is not compensated for the minimal
services which are provided on behalf of the Company. However, this individual
is reimbursed for certain out of pocket costs incurred in providing such
services on behalf of the Company.
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information known by the Company with
respect to the security ownership of certain beneficial owners and management of
the Company's common stock as of March 7, 2000. Each person has sole voting and
investment power as to all shares unless otherwise stated.
<PAGE>
There were 4,959,000 shares of the Company's common stock issued and outstanding
at March 7, 2000.
Title of Name and Address Amount and Nature of Percent
Class of Beneficial Owner Beneficial Ownership of Class
------------ ------------------------------ -------------------- --------
$.01 par James A. Arias (1)(2) 100,000 - Direct 9.8%
common 1650 University Blvd., NE 385,000 - Indirect
Suite 5-100
Albuquerque, NM 87102
$.01 par Realco, Inc. (1) 285,000 - Direct 5.8%
common 1650 University Blvd., NE
Suite 5-100
Albuquerque, NM 87102
$.01 par Financial Services Group, 100,000 - Direct 2.0%
common Inc. (2)
1650 University Blvd., NE
Suite 5-100
Albuquerque, NM 87102
$.01 par James A. Arias 100,000 - Direct 2.0%
common 1650 University Blvd., NE
Suite 5-100
Albuquerque, NM 87102
$.01 par Steven P. Kadner 252,500 - Direct 5.1%
common 8401 Washington Pl, N.E
Albuquerque, NM 87113
$.01 par Jerone F. Beckes 279,000 - Direct 5.6%
common 8401 Washington Pl, N.E
Albuquerque, NM 87113
- ------------------------------------------
Note to Beneficial Ownership Table:
1. Mr. Arias is President of Realco, Inc. (a publicly traded company) and as
such, votes these shares.
2. Mr. Arias is President, Chief Executive Officer and Chairman of Board of
Financial Services Group, Inc. and as such, votes these shares.
Changes in Control:
There are no arrangements known to the Company, including any pledge of
securities of the Company, which may result in a change in control of the
Company at a subsequent date, except for the definitive agreement with Pangea
Internet Advisors LLC, as discussed in Item 6 Management's Discussion and
Analysis or Plan of Operations.
<PAGE>
ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In 1998, the Company loaned $16,000 to a person affiliated with a company
controlled by Mr. Arias. Additional advances of $20,000 were made in 1999. These
loans were evidenced by demand notes bearing interest at 8.5% per annum. At
December 31, 1999, all such amounts from this person had been repaid.
The purpose of these loans was to secure a higher rate of return on excess
working capital.
ITEM 13: EXHIBITS AND REPORTS ON FORM 8-K.
(a) Documents filed as a part of this report:
(1) The financial statements filed as part of this report are included in
Item 7.
(2) The following exhibits are filed as part of this report:
3.1 * Articles of Incorporation
3.2 * Bylaws
4 * Instruments defining rights of security holders, including
indentures.
10 * Material contracts
11 Subsidiary of registrant - New Start, Inc.
* Filed as an exhibit to the Registrant's Form 10 Registration Statement
under the Securities Exchange Act of 1934, and incorporated herein by
reference.
(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.
There are no other exhibits specified in Item 601 of Regulation S-B to be
included with this filing.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) 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.
Dated: March 21, 2000 By: /s/ JAMES A. ARIAS
-----------------------------
* James A. Arias, President
and Chief 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.
Dated: March 21, 2000 By: /s/ JAMES A. ARIAS
-----------------------------
* James A. Arias, Director
* Mr. Arias is the only officer or a director of the Registrant.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 133,000
<SECURITIES> 112,000
<RECEIVABLES> 1,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 246,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 246,000
<CURRENT-LIABILITIES> 1,000
<BONDS> 0
0
0
<COMMON> 85,000
<OTHER-SE> 160,000
<TOTAL-LIABILITY-AND-EQUITY> 246,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 12,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,000
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
