SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1999 COMMISSION FILE NO 33-21085
NEW SYSTEMS, INC.
Incorporated in the State of Nevada IRS No. 87-0454377
5 Clancy Lane South
Rancho Mirage, California 92270
(760)346-5961
Indicate by check mark whether the registrant (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
registrant was required to file such report, and (2) has been subject to such
filing requirements for the past 90 days.
Yes (X) No ( )
Common Stock, $.001 par value 1,200,002 shares issued
and outstanding as of September 30, 1999
<PAGE>
PART I - FINANCIAL INFORMATION
INDEX
Page
----
Part I. Financial Information
Item 1. Financial Statements
a) Balance Sheets as of September 30, 1999 and
September 30, 1998............................................. 2
b) Income Statements for the three and six months
ended September 30, 1999....................................... 3
c) Statement of Cash Flows for the periods ended
September 30, 1999 and September 30, 1998...................... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Result of Operations............................. 5
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds...................... 7
Item 6. Exhibits and Reports on Form 8-K............................... 7
Signature................................................................... 7
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
NEW SYSTEMS, INC.
BALANCE SHEET
SEPTEMBER 30, 1999
(unaudited)
ASSETS
Current Assets:
Cash in bank $ 5,117
---------
Total Current Assets $ 5,117
---------
Total Assets $ 5,117
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Current liabilities 0
---------
Total Liabilities 0
---------
Stockholder's Equity:
Common Stock $ 1,200
Additional paid-in capital $ 412,527
Deficit accumulated during development stage $(408,610)
---------
Total Liability and Stockholders' equity $ 5,117
=========
The accompanying notes are an integral part of these
unaudited financial statements
2
<PAGE>
NEW SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Cumulative from
December 10, 1987
For the Quarter ended (Date of Inception)
September 30, 1999 through
------------------------- September 30,
1999 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
General and Administrative Expenses $ 4,464 $ 0 $ 253,469
Loss from continued operations (4,464) 0 (253,469)
Discontinued operations
Loss from prior business discontinued 0 0 (349,672)
Gain from disposal of prior business 0 0 173,766
----------- ----------- -----------
Loss before extraordinary gain (4,464) 0 (429,375)
Extraordinary gain from
forgiveness of debt 0 0 10,346
----------- ----------- -----------
Net Loss $ (4,464) $ 0 $ (419,029)
=========== =========== ===========
Basic and diluted loss per share
Continued operations $ 0 $ 0 $ (0.48)
Discontinued operations 0 0 (0.33)
Extraordinary gain 0 0 0.02
----------- ----------- -----------
Net loss per share $ 0 $ 0 $ (0.79)
=========== =========== ===========
Weighted average common shares
used in per share calculation 1,200,002 1,000,002 529,848
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
unaudited financial statements
3
<PAGE>
NEW SYSTEMS, INC.
STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Cumulative from
December 10, 1987
For the Quarter ended (Date of Inception)
September 30, 1999 through
---------------------- September 30,
1999 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Cash flow from operating activities:
Net loss $ (4,464) $ 0 $(419,029)
Adjustments for:
Changes in current assets and liabilities 0 0 $ 11,635
Other items 0 0 $ 153,414
--------- --------- ---------
Net cash flow used by operating activities (4,464) 0 (253,980)
--------- --------- ---------
Net cash flow from investing activities 0 0 (46,015)
--------- --------- ---------
Net cash flow from financing activities 0 0 305,112
--------- --------- ---------
Net decrease in cash (4,464) 0 4,464
Cash at beginning of period 9,581 0 9,581
--------- --------- ---------
Cash at end of period 5,117 0 5,117
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
unaudited financial statements
4
<PAGE>
NEW SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
NOTE 1. ACCOUNTING POLICIES AND OTHER DISCLOSURES
The condensed financial statements included in this Form 10-QSB Report are
unaudited and have been prepared to provide information with respect to the
interim three month periods ending September 30, 1999 and 1998, at a time when
the Issuer is in a development stage. These financial statements have also been
prepared assuming that the Issuer will obtain adequate financing to continue as
a going concern. Due to losses since its inception and inasmuch as the Issuer is
currently not engaged in any revenue producing activities, such financing will
most likely be obtained through the issuance of its equity securities. The
Issuer currently has 250,000,000 shares of common stock authorized for issuance
of which 1,200,002 shares are issued and outstanding. The issuance of any
additional shares of common stock will result in a decrease in the percentage
ownership which current shareholders have in the Issuer.
The Issuer is seeking to enter into a reorganization or merger with a business
venture or a business entity which is currently or has the potential to be
successful. The Issuer can give no assurance that such a business venture,
entity or opportunity can be located. If the Issuer should be successful in this
endeavor, the consummation of such transaction, either through a merger or other
type of reorganization would in all probability require that additional shares
of common stock be issued. Such a transaction would therefore further decrease
the present stockholder' percentage interest in the Issuer.
The Issuer's report on Form 10-KSB for the year ended December 31, 1998,
contains financial statements which have been audited by an independent
certified public accounting firm and their report on the Issuers financial
statements is contained therein. Additional information regarding the Issuer's
activities since inception, the accounting policies followed by the Issuer and
other pertinent financial disclosures are contained in the footnotes
accompanying the audited financial statements. The unaudited financial
statements of which these footnotes are an integral part, have been prepared in
conformity with generally accepted accounting principles for the interim periods
presented and in accordance with the rules and regulations of the Securities and
Exchange Commission.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The Issuer is not currently engaged in any business operations but is seeking to
find a suitable business to acquire or an entity with which it can enter into a
reorganization or merger. The form of reorganization will not be determined
until a suitable business opportunity is presented. The Issuer has very limited
financial resources and therefore, management is relying on its association with
KM Financial, Inc. to provide the Issuer with sufficient financial resources to
continue its search for an entity or business which the Issuer can acquire or
enter into a reorganization. Management is also relying on KM Financial, Inc. to
provide introductions to individuals who may be influential in locating a
business or entity interested in being acquired or reorganizing with the Issuer.
The Issuer intends to take advantage of any reasonable business proposal
presented which management believes will provide the Issuer and its stockholders
with a viable business opportunity. The board of directors will make the final
decision in determining whether to complete any acquisition or reorganization
unless otherwise required by applicable law, the articles of incorporation, its
bylaws or by contract. Consequently, stockholders' approval of any acquisition
or reorganization may not be sought unless required as heretofore stated.
5
<PAGE>
The investigation of specific business opportunities and the negotiation,
drafting, and execution of relevant agreements, disclosure documents, and other
instruments will require substantial time and attention from management. Such an
investigation will also result in the Issuer incurring expenses for the payment
of accountants, attorneys, and possibly others involved in such an inquiry. If a
decision is made not to consummate, participate or complete the acquisition of
such a business opportunity any expenses incurred will not be recoverable.
Furthermore, there can be no assurance that the Issuer's participation in any
business opportunity will ultimately be successful.
Management is not able to determine the amount of time or the resources that
will be necessary to locate, investigate and possibly acquire or merge with a
business prospect. If and when the Issuer locates a business opportunity and if
such opportunity results in the completion of the intended transaction, there
can be no assurance that after the transaction is completed the Issuer will have
profitable operations. The possibility also exists that the Issuer will never be
able to acquire, regardless of the form or manner of such intended acquisition,
an interest in any business prospects, products or opportunities.
Management will give consideration and assess the potential profitability and
the adequacy of the working capital of any business operations which the Issuer
may investigate and possibly acquire. The foregoing considerations are only some
of factors which management will utilize in determining the terms and conditions
under which the Issuer would consummate any acquisition or reorganization.
Potential business opportunities, no matter which form they may take, will, more
likely than not, result in substantial dilution for the Issuer's shareholders
due to the need for the issuance of additional shares of the Issuer's common
stock to acquire a business opportunity.
LIQUIDITY, CAPITAL RESOURCES AND RESULTS OF OPERATIONS
As of September 30, 1999, the Issuer had $5,117 in cash in the bank. Such amount
will provide working capital for only the next six months depending upon the
level of activity with regard to the investigation and consummation of a
business opportunity. Following this period, the Issuer is considering the
issuance of additional shares of its common stock in order to obtain operating
capital. The issuance of additional shares of its common stock will result in an
immediate dilution in the percentage ownership that existing shareholders have
in the Issuer. As a result of the Issuer's association with KM Financial, Inc.,
management believes that additional financing will be obtained in amounts
sufficient to meet the Issuer's incidental ongoing expenses which are primarily
associated with maintaining its corporate status and maintaining its reporting
obligations to the Securities and Exchange Commission. Such expenses have been
and will in the future be categorized as general and administrative expenses.
Any working capital obtained in the future will be used to prepare and file all
future reports, as required by the Securities and Exchange Commission, for at
least a one year period of time. During the corresponding period of the prior
year, ending September 30, 1998, the Issuer was not engaged in the preparation
of any of the reports mentioned herein nor in any other activities.
Consequently, no meaningful comparison between the two quarterly periods ending
September 30, 1999 and 1998 and the subsequent quarterly period would be
meaningful.
Since its inception, the Issuer has not conducted any profitable operations and
has utilized all funds received from its initial public offering in attempting
to conduct profitable operations. It is not anticipated that the Issuer will
6
<PAGE>
generate any revenue in the future unless a profitable business opportunity is
located and a merger or a form of reorganization is consummated. The Issuer
intends to investigate various business opportunities which will likely result
in management incurring "out of pocket" expenses and could also include expenses
associated with legal and accounting services. Such costs and expenses will
increase the financial burden on the Issuer with no guarantee that any benefits
will result from such expenditures or from the efforts of management.
The Issuer currently has no employees and does not intend to employ anyone in
the future, unless its present business operations were to change. The sole
officer and director of the Issuer is providing a location for the Issuer's
offices on a "rent free basis" and is not being paid a salary or any other form
of compensation for any services which are or may be provided, other than
reimbursement of "out of pocket" costs and expenses.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Index of Exhibits
Exhibit 11 - Computation of per share earnings
1. Included as a part of the financial statements described in Part
I of this Report
Exhibit 27 - Financial Data Schedule
1. Included in EDGAR submission
(b) Reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the Issuer caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NEW SYSTEMS, INC.
/s/ LLOYD T. ROCHFORD
- --------------------------
Chief Executive Officer
Chief Financial Officer
Date: November 15, 1999
7
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 831659
<NAME> NEW SYSTEMS, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 5,117
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,117
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,117
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 404,146
<OTHER-SE> (404,146)
<TOTAL-LIABILITY-AND-EQUITY> 5,117
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,464)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,464)
<EPS-BASIC> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
