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U. S. Securities and Exchange Commission
Washington, D. C. 20549
Form 10-KSB
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 33-21085
NEW SYSTEMS, INC.
-----------------------
(Name of small business issuer in its charter)
NEVADA
------
(State or other jurisdiction of incorporation or organization)
87-0454377
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(I.R.S. Employer Identification No.)
5 Clancy Lane South
Rancho Mirage, California 92270
-------------------------------
(Address of principal executive offices)
(760) 346-5961
--------------
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: None
Name of each exchange on which registered: None
Securities registered under Section 12(g) of the Exchange Act: None
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: [1] No [2]
No
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not 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 the Form 10-
KSB or any amendment to this Form 10-KSB. [ X ]
State issuer's revenues for its most recent fiscal year: $ 0.00
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as
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of a specified date within the past 60 days: $ 0.00
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: March 10, 1999 -
1,000,002 shares of common stock
Transitional Small Business Disclosure Format: No
PART I
Item 1. Description of Business
A] BUSINESS DEVELOPMENT
Initial Business Operations
New Systems, Inc. (the "Company") was incorporated under the laws of the State
of Nevada on December 10, 1987, under the name of Municipal Systems, Inc., for
the purpose of acquiring all of the issued and outstanding common stock of CSH
Corporation, a Utah corporation (formerly, Computer Systems House Corporation
and hereinafter referred to as "CSH"), from its stockholder. The Company was
initially capitalized with $50,000 from its organizers. Subsequently, a public
offering was undertaken by the Company for the purpose of raising sufficient
capital to acquire the common stock of CSH and to raise operating capital for
CSH. The Company filed a registration statement on Form S-18 with the
Securities and Exchange Commission ("SEC") which became effective in
September, 1988 (the "IPO" or "Offering"). The Company sold a total of 40,000
units, at a price of $7.50 per unit, each unit consisting of 300 shares of
$0.001 par value, common stock; 900 Class A Warrants and 600 Class B Warrants.
Each warrant of either class was exercisable for one share of common stock at
a predetermined price; however, no warrants of either class were exercised
prior to their expiration date and currently there are no Warrants issued and
outstanding. Before deducting any underwriting commissions or other costs of
the public offering, gross proceeds from the public offering amounted to
$300,000.
Upon completion of the Offering, in 1988, the Company completed its
acquisition of all issued and outstanding stock of CSH for total consideration
of $100,000. After the acquisition of the CSH stock, CSH was operated as a
wholly owned subsidiary. CSH was primarily engaged in the developing,
manufacturing and marketing of four specialized accounting software programs
(the "CSH Software") principally for school district funding and secondary
school activity funding. At the time of the Company's initial investment in
CSH, the CSH Software was being sold in limited quantities while further
development and program refinements were being undertaken. CSH's principal
executive offices were located in Wilmington, Delaware, from where its
marketing and sales efforts originated, with satellite offices in Provo, Utah,
from where research, development and technical support activities were
conducted. Several months after the Company's initial investment in CSH, the
Delaware offices were closed and all of CSH's activities were conducted from
the Provo, Utah, offices. Eventually, when projected revenue from the sale of
the CSH Software failed to materialize, the principal business and technical
support offices of CSH were relocated to the Company's offices in Salt Lake
City, Utah.
Subsidiary's Business Operations
The CSH Software was targeted for sales to "secondary schools" within the
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numerous school districts across the United States. The Company had utilized
$100,000 of the public offering proceeds to acquire CSH and an additional
amount of approximately $150,000 had been expended through April, 1989, for
marketing and further development of the CSH Software. By April of 1989 it
became apparent that the CSH Software sales had not been profitable and the
reality of obtaining additional funding was not likely unless the
organizational structure of CSH was changed.
In order to provide the possibility of such a change, the Company's
stockholders voted on April 28, 1989, to adopt resolutions which had the
following effect on the Company and its stockholders: 1] Certain stockholders
of the Company contributed a total of 7,800,000 shares of the Company's common
stock previously purchased by them, back to the Company for cancellation. In
exchange, these stockholders received shares of CSH's common stock, which
effectively reduced the Company's 100% ownership interest in CSH; 2] The
Company's shares of common stock, representing its remaining ownership
interest in shares of common stock was placed into escrow with the intent to
distribute the CSH common stock to the Company's stockholders upon a
registration statement relative to those shares of common stock being declared
effective by the SEC; 3] The Company's Articles of Incorporation were
amended to increase the authorized number of shares of common stock to
250,000,000; and 4] The Company's former president during the Company's IPO,
Denny Nestripke, was retained as a consultant to the Company for the purpose
of providing an office location for the Company and to assist the Company with
respect to matters relating to its publicly held ownership. Before the actual
reorganization of CSH could be accomplished, the Chief Executive Officer of
CSH abruptly, and without prior notice, returned to Wilmington, Delaware,
unwilling to continue any association with CSH. Additionally, the stockholder
from whom the Company purchased CSH, and who subsequently provided the
leadership and direction to further develop the CSH Software, resigned from
CSH and relocated to the eastern part of the United States. The departure of
these two individuals resulted in CSH remaining operational for only a short
period of time before its business operations were discontinued and
settlements with CSH's creditors were negotiated. By November of 1991, the
distribution of the shares of CSH's common stock held in escrow for the
Company's stockholders had not occurred and CSH had ceased operations. Even
though CSH had not entered into any form of bankruptcy proceedings, on
November 1, 1991, the Utah State Department of Commerce issued a Certificate
of Involuntary Dissolution to CSH.
Activities Subsequent to CSH
The Company did not engage in any business activities other than the operation
of its subsidiary, CSH, from the time it acquired CSH through the end of 1991.
Subsequent thereto several proposed reorganizations involving the Company were
review by then existing management; however, it was determined that none of
the proposals presented would provide a realistic opportunity for the Company
to become a viable operating entity. By the end of 1991, the Company's common
stock had ceased to actively trade on the over-the-counter market and the
Company's board of directors, elected at the aforementioned April, 1989
meeting, didn't have any clear direction as to what business activities the
Company should pursue. During this two year period, active participation from
the elected directors diminished and they resigned from their positions as
directors.
By the end of 1991, Mr. Denny W. Nestripke, who originally organized the
Company and was its president during the period of its IPO, was appointed its
new director and president. As the sole officer and director of the Company,
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Mr. Nestripke acted for and on behalf of the Company in effecting the
following: 1) shareholders who had contributed shares of common stock to the
Company for shares of CSH had their shares returned to them to the extent that
they acted in good faith; 2) any shares of CSH common stock issued for
services, or for cash, were allowed to be exchanged for shares of the
Company's common stock; 3) rather than receiving cash consideration for
consulting services, as provided in the April 1989 meeting, Mr. Nestripke was
issued shares of the Company's common stock; and 4) authorization was given to
issue shares of the Company's common stock for the purpose of: a) paying any
cost and expenses which the Company may incur in order to maintain its
corporate existence; b) having sufficient capital for the Company to
investigate possible reorganization; and c) to pay such fees and costs as Mr.
Nestripke deemed appropriate.
In December of 1997, due to health reasons, Mr. Nestripke brought another
individual, Mr. Lloyd T. Rochford, into the leadership of the Company,
effective upon Mr. Nestripke's resignation. Mr. Lloyd T. Rochford has now
assumed the position of director of the Company and is the Company's chief
executive and financial officer. In addition, the financial consulting firm of
KM Financial, Inc. was retained, effective concurrent with Mr. Rochford's
appointment.
By consent resolution of a majority of the Company's stockholders, approval
for the following action became effective March 2, 1999: a) Mr. Lloyd T.
Rochford was elected as a director of the Company; b) the Company's name was
changed to New Systems, Inc. ("New Systems"); c) a reverse split of the
Company's outstanding common stock on the basis of one share of the Company to
be issued for each 250 shares of the Company's common stock outstanding prior
thereto.
B] BUSINESS OF ISSUER
The Company is currently not engaged in any business operation other than
seeking to locate an existing business or business assets ("Target Corp.")
with which the Company could enter into a merger or acquisition. There are no
set guidelines on the type of Target Corp. Management will have broad
discretion in seeking a Target Corp. and structuring a reorganization. At the
present time the Company has not entered into any formal discussions with any
corporation or individuals representing a corporation or other entity or
assets.
The utilization of an existing public corporation in a reorganization with an
existing business operation or in conjunction with a business plan, is highly
speculative. Furthermore, no assurance can be given that after a
reorganization has taken place that the acquired entity will be able to
maintain or achieve any earnings. There is also no assurance that the
Company's securities will achieve acceptance by the investing public or
supported in the marketplace by broker/dealers, investment advisors or others
who can or could influence the price of the Company's securities in the
marketplace.
The Company intends to comply with the reporting requirements of the SEC and
state securities regulators. Such compliance requires that its financial
statements be audited by an independent certified public accounting firm and
will also require that legal counsel review and assist in the compliance
process of a public entity. This will require that the Company seek adequate
financing for such purposes.
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The Company has no full time employees. Mr. Lloyd T. Rochford, chief
executive officer, chief financial officer and director of the Company will
devote such time to the Company as he deems necessary. Mr. Rochford received
shares of the Company's common stock from the Company upon accepting an
appointment to serve the Company in the positions mentioned. Subsequent to
such appointment Mr. Rochford has not received any compensation and it is not
intended that any compensation will be paid to Mr. Rochford at any future
time.
Item 2. Description of Property
The Company does not own any business property. The Company maintains a
mailing address and telephone at the office of Mr. Lloyd T. Rochford, the
Company's sole director and officer. The Company is not charged any fee or
other cost by Mr. Rochford for the office space.
Item 3. Legal Proceedings
The Company is not subject to any actual or pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
The Company did not submit any matter to a vote of security holders during the
fourth quarter of the fiscal year covered by this report. However, during the
first quarter of 1999, the Company did submit certain matters to a vote of
specific stockholders who represented a majority of the Company's issued and
outstanding common stock. These specific stockholders voted their shares
pursuant to an Action by Written Consent of Stockholders, which represented
55% of the shares eligible to vote.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Market Information, Holders and Dividends
The following information is current as of March 10, 1999. There is not a
public trading market for the Company's common stock, nor has there been a
public trading market during the past two fiscal years ending December 31,
1998. The Company has 1,000,002 shares of common stock issued and outstanding.
There are no outstanding options or warrants to purchase, or securities
convertible into, the Company's common stock. Of the 1,000,002 shares of
common stock issued and outstanding, 414,000 shares are restricted securities
which are available for resale pursuant to Rule 144 of the Securities Act of
1933, on or after December 5, 1998. As of March 10, 1999, the Company has 106
shareholders of record. Since its inception, the Company has not paid any
dividends and it is not anticipated that the Company will pay any dividends in
the foreseeable future.
Recent Sales of Unregistered Securities
The following information is being provided with respect to all securities
that the Company sold within the past three years without registering such
securities under the Securities Act. Any references made herein to the number
of shares of the Company's common stock have taken into account a reverse
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split of the Company's common stock which took effect on March 2, 1999. This
reverse split resulted in one share of the Company's Common Stock being
exchanged for every 250 shares of currently outstanding shares.
As discussed in Item 1. of this report, the Company issued shares of common
stock to Mr. Denny W. Nestripke rather than make payment to him in the amount
of $1,000 per month. The shares then issued were valued at one mill per share
and additional shares of common stock in an amount of $200 per month were
subscribed for by Mr. Nestripke. During 1995, a total of 55,200 shares were
issued to Mr. Nestripke and during 1996, a total of 48,000 shares were issued.
The Company relied on an exemption from registration pursuant to Section 4(2)
of the Securities Act of 1933.
Pursuant to a board of directors meeting held on December 5, 1997, Mr. Lloyd
T. Rochford and K M Financial, Inc. ("KM") were issued 295,392 and 79,008
shares of common stock, respectively. These shares were valued at one mill per
share and were issued as compensation to Mr. Rochford for his willingness to
accept the position as director and chief executive and financial officer of
the Company. Additionally, KM was issued its shares, which were also valued
at one mill per share, for providing services on an ongoing basis relative to
seeking a Target Corp. and in arranging for such financing as the Company may
need to continue conducting its operations as stated. In both of these
issuances, the Company relied on an exemption from registration pursuant to
Section 4(2) of the Securities Act of 1933.
Item 6. Management's Discussion and Analysis or Plan of Operation
The Company presently does not have any business operation and is looking for
a business to acquire or merge with. As the Company has limited resources, it
may be difficult to locate a business interested in being acquired or merging
with the Company. The Company intends to take advantage of any reasonable
business proposal presented which management believes will provide the Company
and its stockholders with a viable business opportunity. The board of
directors will make the final approval in determining whether to complete any
acquisition, and unless required by applicable law, the articles of
incorporation or bylaws or by contract, stockholders' approval will not be
sought.
The investigation of specific business opportunities and the negotiation,
drafting, and execution of relevant agreements, disclosure documents, and
other instruments will require substantial management time and attention and
will require the Company to incur costs for payment of accountants, attorneys,
and others. If a decision is made not to participate in or complete the
acquisition of a specific business opportunity, the costs incurred in a
related investigation will not be recoverable. Further, even if an agreement
is reach for the participation in a specific business opportunity by way of
investment or otherwise, the failure to consummate the particular transaction
may result in the loss to the Company of all related costs incurred.
Currently, management is not able to determine the time or resources that will
be necessary to locate and acquire or merge with a business prospect. There
is no assurance that the Company will be able to acquire an interest in any
such prospects, products or opportunities that may exist or that any activity
of the Company, regardless of the completion of any transaction, will be
profitable. If and when the Company locates a business opportunity, management
of the Company will give consideration to the dollar amount of that entity's
profitable operations and the adequacy of its working capital in determining
the terms and conditions under which the Company would consummate such an
<PAGE> 7
acquisition. Potential business opportunities, no matter which form they may
take, will most likely result in substantial dilution for the Company's
shareholders due to the issuance of stock to acquire such an opportunity.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, the Company had less than $2,500 in assets and
liabilities amounting to less than $500. The Company has only incidental
ongoing expenses primarily associated with maintaining its corporate status
and maintaining the Company's reporting obligations to the Securities and
Exchange Commission. For the twelve months ended December 31, 1998, the
Company's principal expenses were related to such general and administrative
expenses and amounted to $8,360. The Company received no revenue during each
of its fiscal years ended December 31, 1997 and 1998.
Since its inception, the Company has not been profitable and has used all of
the monies raised in its IPO, and it is unlikely that any revenue will be
generated until the Company locates a business opportunity to acquire or
merge. Management of the Company will be investigating various business
opportunities which may cost the Company not only out of pocket expenses for
its management but also expenses associated with legal and accounting cost.
There can be no guarantee that the Company will receive any benefits from the
efforts of management to locate business opportunities.
The Company has had no employees since its inception and does not intend to
employ anyone in the future, unless its present business operations were to
change. The president of the Company is providing the Company with a location
for its offices on a "rent free basis." The Company is not paying salaries or
other form of compensation to any officers or directors of the Company for
their time and effort. The Company does intend to reimburse its officers and
directors for out of pocket cost.
RESULTS OF OPERATIONS
The Company has not had any operations during the fiscal years ended December
31, 1997, and 1998. The Company's only operations since the closing of CSH
have involved the preliminary investigation of one or more potential business
opportunities, none of which have come to fruition.
The Company has retained the services of KM in order to provide adequate
financing for its continuing operations, as discussed herein. In so doing the
Company believes that it has minimized the risk associated with being
underfinanced or not being able to meet the financial obligations associated
with being a corporation reporting to the SEC. The Company believes that such
financing will be adequate to allow its officer to travel and incur other
expenses in seeking a Target Corp. In addition, KM shall attempt to make
appropriate introductions to management of the Company in its efforts to seek
an appropriate Target Corp.
Item 7. Financial Statements
The financial statements as of December 31, 1998 and for each of the two years
then ended, including the report of the Company's independent certified public
accountant, follow the signature page hereto.
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosures None.
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PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act
All information given below is current as of March 10, 1999, unless otherwise
stated. The Company is not subject to compliance with Section 16(a) of the
Exchange Act and information relating thereto is not provided herein.
Directors and Executive Officers
Listed below is the name of the Company's sole officer and director who was
elected by a consent of the majority of the Company's stockholders effective
as of March 2, 1999.
Name Age Positions, Offices, Term of Office
---- -- ----------------------------------
Lloyd T. Rochford 52 Director, President, Secretary,
Treasurer
For the period of one year or until
a successor is duly qualified and
elected. Accepted such position on
December 5, 1997 and has served in
such capacities since January 22,
1999.
Mr. Rochford currently serves as a director of Elligent Consulting Group,
Inc., a position which he has held since 1997. In addition to the foregoing,
from its inception to June, 1997, Mr. Rochford also served as a director of
Magnum Hunter Resources, Inc., a natural resource corporation listed on the
American Stock Exchange. In addition to serving in the capacities mentioned,
Mr. Rochford is an independent financial consultant and administers his own
investment portfolio, comprised of investments in securities, real estate and
natural resource properties.
Significant Employees or Consultants
Concurrent with Mr. Rochford's acceptance to the positions stated above, KM
agreed to provide services to the Company on an ongoing basis relative to
seeking a Target Corp. and in arranging for such financing as the Company may
need to continue conducting its operations as heretofore stated. KM is an
Arizona corporation founded in 1992 for the purpose of providing investment
banking services to established and emerging growth entities. The principal of
KM is William Parsons, who, along with associates, have a combined experience
in mergers and acquisitions, private placements, reverse mergers, syndication,
marketing and general securities industry business consulting which totals
over 40 years. Though not confined to any specific industry, KM has been
engaged in offering its services in the area of natural resources, legalized
gaming, health care, electronics, hospitality, fiber optics, environmental
services, childcare, timeshare, banking, information technology and
manufacturing.
Involvement in Certain Legal Proceedings
With respect to Mr. Rochford and KM, including its principals, during the past
five years, no: a) bankruptcy petition has been filed by or against any
business in which they were a general partner or executive officer or within
the two years prior to that time; b) conviction which involved a criminal
proceeding or a pending criminal proceeding; c) order, judgment, or decree
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having been entered by any court having competent jurisdiction which involved
any type of business, securities or banking activities; and d) judgement in a
civil action has been entered for violation of a federal or state securities
or commodities law.
Item 10. Executive Compensation
The Company has not paid any cash compensation during the two year period
ending December 31, 1998. When Mr. Rochford acknowledged his willingness to
serve the Company as its director and sole officer, he received shares of the
Company's common stock for accepting such positions. No formal agreement or
contract was entered into and even though Mr. Rochford has indicated to serve
the Company on an indefinite basis, Mr. Rochford is under no obligation to do
so. Inasmuch as the Company's common stock was not listed on an exchange or
quoted by a broker/dealer in the over-the-counter market, no value for the
Company's common stock could readily be determined. Consequently, the par
value of the Company's common stock was used to determine the fair market
value. The following Summary Compensation Table reflects the foregoing items.
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
Non-Cash Restricted Options/ LTIP
Name & Position Year Salary Bonus Other Stock SARs Payouts All Other
- --------------- ---- ------ ----- ----- ----- ----- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lloyd T. Rochford 1998 $ -0- $ -0- $ -0- $ -0- None $ -0- $ -0-
C E O (present) 1997 $ -0- $ -0- $ 73,848 $ -0- None $ -0- $ -0-
Denny W. Nestripke 1998 $ -0- $ -0- $ -0- $ -0- None $ -0- $ -0-
C E O (past) 1997 $ -0- $ -0- $ -0- $ -0- None $ -0- $ -0-
</TABLE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners
The following table provides information relative to the Company's common
stock held by any person or any group known to the Company to be the
beneficial owner of more than five percent of the Company's issued and
outstanding common stock as of March 10, 1999. This table has taken into
account a reverse split of the Company's common stock which took effect on
March 2, 1999. This reverse split resulted in one share of the Company being
issued for every 250 outstanding shares of the Company.
Title of Name and Address Shares Beneficially Percent of
Class of Beneficial Owner Owned Class
- -------- ------------------- ------------------- -----------
common Lloyd T. Rochford 295,392 29.5 %
5 Clancy Lane South
Rancho Mirage, CA 92270
common Stanley McCabe 60,296 (1) 6.0 %
<PAGE> 10
common William Parsons 189,296 (2) 18.9 %
------- ------
TOTAL 544,984 54.5 %
======= ======
(1) Includes shares owned by Stanton Oil & Gas Ltd. of which Mr. McCabe's
wife is the sole stockholder.
(2) Includes shares registered in the name of K M Financial, Inc.; Mr.
Parsons's wife; and shares held by Mr. Parsons as a custodian.
Security Ownership of Management
Title of Name and Address Shares Beneficially Percent of
Class of Beneficial Owner Owned Class
- -------- ------------------- -------------------- ----------
common Lloyd T. Rochford 295,392 29.5 %
5 Clancy Lane South
Rancho Mirage, CA 92270
------- ------
Total as a Group 295,392 29.5 %
======= ======
Changes in Control
No arrangements currently exist which may result in a change of control of the
Company. Furthermore, none of the individuals listed under either of the above
two tables has any arrangement known to the Company which would allow them the
right to acquire any additional shares of common stock within sixty days of
March 10, 1999.
Item 12. Certain Relationships and Related Transactions
On December 5, 1997, Lloyd T. Rochford and K M Financial, Inc. were issued
295,392 and 79,008 shares of common stock, respectively. The monetary value
placed on these shares of common stock at that time was $73,848 and $19,752,
respectively. The 295,392 shares of common stock were issued to Mr. Rochford
as compensation for his willingness to accept the position as director and
chief executive and financial officer of the Company. Subsequent to the
issuance of these shares, Mr. Rochford has received no additional
compensation. The 79,008 shares of common stock were issued to KM for
providing services on an ongoing basis relative to seeking a Target Corp. and
in arranging for such financing as the Company may need to continue conducting
its operations as herein stated. The Company did not enter into any agreement
or have any type of other arrangement with Mr. Rochford or KM which would
cause the issuance of these shares to be contingent on the happening of any
event or the passage of a certain time period. Thus, these shares are fully
paid as of December 5, 1997.
<PAGE>
<PAGE> 11
Item 13. Exhibits and Reports on Form 8-K
(a)(1)FINANCIAL STATEMENTS. The following financial statements are included
in this report:
Title of Document Page
- ----------------- ----
Report of Hansen Barnett and Maxwell, Certified
Public Accountants 13
Balance Sheets as of December 31, 1998 14
Statements of Operations for the fiscal years ended December
31, 1998, and 1997 15
Statements of Stockholders' Equity for the years ended
December 31, 1998, and 1997, and from inception 16
Statements of Cash Flows for the fiscal years ended
December 31, 1998, and 1997 18
Notes to Financial Statements 20
(a)(2)FINANCIAL STATEMENT SCHEDULES. The following financial statement
schedules are included as part of this report:
None.
(a)(3)EXHIBITS. The following exhibits are included as part of this report:
Number 3: Initial Articles of Incorporation and Bylaws
Incorporated by reference to the Registrant's registration statement on Form
S-18, SEC File No. 33-21085
Number 3: Amended Articles of Incorporation
Amended Articles of Incorporation are Attached as exhibit to this Form 10-KSB.
Number 3: Amended Bylaws
Amended Bylaws are attached as exhibit to this Form 10-KSB
Number 11: Computation of Income per Share
Refer to the financial statement contained in this Form 10-KSB.
Number 21: Subsidiaries of the Registrant
The Registrant has no subsidiaries.
<PAGE>
<PAGE> 12
Number 27: Financial Data Schedule
Included in the Report as Exhibit 27.
(b) Reports on Form 8-K.
The Company did not file any reports on From 8-K in its fourth quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated:
New Systems, Inc.
Date: April 7, 1999 By /s/ Lloyd T. Rochford, President and Director
-------------------------------
(Principal Executive Officer) <PAGE>
<PAGE> 13
HANSEN, BARNETT & MAXWELL
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS
(801) 532-2200
Member of AICPA Division of Firms Fax (801) 532-7944
Member of SECPS 345 East 300 South, Suite 200
Member of Summit International Associates Salt Lake City, Utah 84111-2693
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
New Systems, Inc.
We have audited the accompanying balance sheet of New Systems, Inc.(a
development stage enterprise) as of December 31, 1998 and the related
statements of operations, stockholders' equity, and cash flows for the
years ended December 31, 1998 and 1997, and for the cumulative period
from December 10, 1987 (date of inception) through December 31, 1998.
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 audits 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 financial position of New Systems, Inc. as
of December 31, 1998 and the results of its operations and its cash flows
for the years ended December 31, 1998 and 1997, and for the cumulative
period from December 10, 1987 (date of inception) through December 31,
1998 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. However, the Company's losses
since inception raise substantial doubt about its ability to continue as a
going concern. The financial statements do not include any adjustment that
might result from the outcome of this uncertainty.
/s/HANSEN, BARNETT & MAXWELL
Salt Lake City, Utah
March 4, 1999
<PAGE> 14
NEW SYSTEMS, INC.
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
Current Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,195
----------
Total Current Assets. . . . . . . . . . . . . . . . . . . 2,195
----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,195
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . $ 305
----------
Total Current Liabilities . . . . . . . . . . . . . . . . 305
----------
Stockholders' Equity
Common stock - $0.001 par value; 250,000,000
shares authorized; 1,000,000 shares issued and
outstanding. . . . . . . . . . . . . . . . . . . . . . . . 1,000
Additional paid-in capital . . . . . . . . . . . . . . . . . 403,146
Deficit accumulated during the development stage . . . . . . (402,256)
----------
Total Stockholders' Equity. . . . . . . . . . . . . . . . 1,890
----------
Total Liabilities and Stockholders' Equity . . . . . . . . . . $ 2,195
==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE> 15
NEW SYSTEMS, INC.
STATEMENTS OF OPERATIONS
Cumulative
From
December
10, 1987
(Date of
For the Years Ended Inception)
December 31, Through
---------------------- December 31,
1998 1997 1998
--------- ---------- -----------
General and Administrative Expense . . . .$ 8,360 $ 105,919 $ 236,696
--------- ---------- -----------
Loss from Continuing Operations. . . . . . (8,360) (105,919) (236,696)
Discontinued Operations
Loss from operation of discontinued
CSH software business . . . . . . . . - - (349,672)
Gain from disposal of CSH software
business. . . . . . . . . . . . . . . - - 173,766
--------- ---------- -----------
Loss before Extraordinary Gain . . . . . . (8,360) (105,919) (412,602)
Extraordinary Gain from Forgiveness
of Debt. . . . . . . . . . . . . . . . . - - 10,346
--------- ---------- -----------
Net Loss . . . . . . . . . . . . . . . . .$ (8,360) $ (105,919) $ (402,256)
========= ========== ===========
Basic and Diluted Loss Per Share
Continuing operations . . . . . . . . . $ (0.01) $ (0.18) $ (0.64)
Discontinued operations . . . . . . . . - - (0.47)
Extraordinary gain. . . . . . . . . . . - - 0.03
--------- --------- -----------
Net Loss . . . . . . . . . . . . . . . $ (0.01) $ (0.18) $ (1.08)
========= ========= ===========
Weighted Average Common Shares Used
in Per Per Share Calculations. . . . . . 1,000,000 577,600 371,881
========= ========= ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE> 16
NEW SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the Receivable Total
----------------------- Paid-In Development From Stockholders'
Shares Amount Capital Stage Shareholder Equity
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 10, 1987
(Date of Inception). . . . . . . . - $ - $ - $ - $ - $ -
Issuance for cash, December
1987, $3.61 per share . . . . . . 7,200 7 - - 25,993 26,000
Cash distribution to
shareholder, January 1988. . . . . . - - (21,000) - - (21,000)
Issuance upon exercise of stock option
for cash, October 1988, $3.13 per share 4,000 4 12,496 - - 12,500
Shares returned in sale of 13% of CSH,
April 1989, $3.75 per share . . . . (30,400) (30) (113,970) - - (114,000)
Issuance for cash:
December 1987 through February 1988,
$1.39 per share . . . . . . . . . . 28,800 29 39,971 - - 40,000
January 1988, $0.42 per share. . . . 12,000 12 4,988 - - 5,000
October 1988, net of $76,954 offering
costs, $4.65 per share . . . . . . 48,000 48 222,998 - - 223,046
July 31, 1989, $0.25 per share . . . 3,200 3 797 - - 800
July 31, 1990, $0.25 per share . . . 9,600 10 2,390 - - 2,400
November 1, 1990, $0.25 per share. . 24,000 24 5,976 - - 6,000
July 31, 1991, $0.25 . . . . . . . . 9,600 10 2,390 - - 2,400
July 31, 1992, $0.25 per share . . . 9,600 10 2,390 - - 2,400
December 31, 1992, $0.25 per share . 4,000 4 996 - - 1,000
December 31, 1993, $0.25 per share . 9,600 10 2,390 - - 2,400
December 31, 1994, $0.25 per share . 1,464 1 365 - - 366
Issuance for service:
July 31, 1989, $0.25 per share . . . 16,000 16 3,984 - - 4,000
July 31, 1990, $0.25 per share . . . 48,000 48 11,952 - - 12,000
November 1, 1990, $0.25 per share. . 40,000 40 9,960 - - 10,000
July 31, 1991, $0.25 per share . . . 48,000 48 11,952 - - 12,000
July 31, 1992, $0.25 per share . . . 48,000 48 11,952 - - 12,000
December 31, 1992, $0.25 per share . 20,000 20 4,980 - - 5,000
December 31, 1993, $0.25 per share . 48,000 48 11,952 - - 12,000
December 31, 1994, $0.25 per share . 48,000 48 11,952 - - 12,000
December 31, 1995, $0.25 per share . 48,000 48 11,952 - - 12,000
December 31, 1996, $0.25 per share . 48,000 48 11,952 - - 12,000
Issuance for receivable from shareholder:
December 31, 1994, $0.25 per share . 8,136 8 2,026 - (2,034) -
December 31, 1995, $0.25 per share . 9,600 9 2,391 - (2,400) -
December 31, 1996, $0.25 per share . 7,200 7 1,793 - (1,800)
Net loss for the period from December
10, 1987 through December 31, 1996 . - - - (287,977) - (287,977)
---------- ---------- ---------- --------- ---------- ----------
Balance, December 31, 1996 . . . . . . 577,600 $ 578 $ 297,968 $(287,977) $ (6,234) $ 4,335
========== ========== ========== ========= ========= ==========
(Continued)
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<PAGE> 17
NEW SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(CONTINUED)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the Receivable Total
----------------------- Paid-In Development From Stockholders'
Shares Amount Capital Stage Shareholder Equity
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 . . . . . 577,600 $ 578 $ 297,968 $ (287,977) $ (6,234) $ 4,335
Issuance for services, December 31,
1997, $0.25 per share. . . . . . . 422,400 422 105,178 - - 105,600
Net loss for the year ended
December 31, 1997 . . . . . . . . . - - - (105,919) - (105,919)
---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1997 . . . . . 1,000,000 1,000 403,146 (393,896) (6,234) 4,016
Net advances to shareholder. . . . . - - - - (152) (152)
Compensation for services
paid with receivable from
shareholder, December
31, 1998 . . . . . . . . . . . . . - - - - 6,386 6,386
Net loss for the year ended
December 31, 1998 . . . . . . . . . - - - (8,360) - (8,360)
---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1998 . . . . . 1,000,000 $ 1,000 $ 403,146 $(402,256) $ - $ 1,890
========== ========= ========== ========= ========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<PAGE> 18
NEW SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION> Cumulative From
December 10, 1987
(Date of
For the Years Ended Inception)
December 31, Through
----------------------- December 31,
1998 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net loss . . . . . . . . . . . . . . . .$ (8,360) $ (105,919) $ (402,256)
Adjustments to reconcile net loss
to net cash used by operating activities:
Compensation paid with common stock. . . - 105,600 208,600
Compensation paid with furniture
and equipment. . . . . . . . . . . . . - - 6,471
Compensation paid with stock of
subsidiary . . . . . . . . . . . . . . - - 129,000
Compensation paid by reduction of
receivable . . . . . . . . . . . . . . . 6,240 - 6,240
Depreciation . . . . . . . . . . . . . . - - 15,778
Purchased research and development . . . - - 90,000
Amortization of goodwill . . . . . . . . - - 56,442
Amortization of debt discount. . . . . . - - 5,650
Changes in assets and liabilities, net
of effects from acquisition of
CSH Corporation:
Accounts receivable. . . . . . . . . . - - 4,941
Inventory. . . . . . . . . . . . . . . - - 2,941
Accounts payable and accrued liabilities 305 (6) 4,058
Minority interest in loss of subsidiary. - - (64,441)
Gain from sale of interest in subsidiary - - (116,214)
Gain from disposal of discontinued
operations. . . . . . . . . . . . . . . - - (173,766)
Extraordinary gain from forgiveness of debt - - (10,346)
---------- ---------- ----------
Net Cash Used by Operating Activities (1,815) (325) (236,902)
---------- ---------- ----------
Cash Flows from Investing Activities
Purchase of furniture and equipment. . . - - (20,015)
Purchase of CSH Corporation. . . . . . . - - (26,800)
---------- ---------- -----------
Net Cash Used by Investing Activities. - - (46,015)
---------- ---------- ----------
Cash Flows from Financing Activities
Proceeds from issuance of common stock . - - 383,411
Stock issuance costs paid. . . . . . . . - - (76,954)
Distribution to shareholder. . . . . . . - - (21,000)
Proceeds from subsidiary issuance of
common stock. . . . . . . . . . . . . . - - 54,800
Proceeds from borrowing. . . . . . . . . - - 15,560
Principal payments on notes payable
and obligations . . . . . . . . . . . . - - (76,060)
Proceeds from borrowing from related
parties . . . . . . . . . . . . . . . . - - 87,016
Principal payments on notes payable
to related parties. . . . . . . . . . . - - (81,661)
---------- ---------- ----------
Net Cash Provided by Financing
Activities. . . . . . . . . . . . . . - - 285,112
---------- ---------- ----------
Net Increase (Decrease) in Cash. . . . . . (1,815) (325) 2,195
Cash at Beginning of Period. . . . . . . . 4,010 4,335 -
---------- ---------- ----------
Cash at End of Period. . . . . . . . . . .$ 2,195 $ 4,010 $ 2,195
========== ========== ===========
Supplemental Schedule of Cash Flow Information
Cash paid for interest . . . . . . . . .$ - $ - $ 3,483
========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 19
NEW SYSTEMS, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
Supplemental Schedule of Noncash Investing and Financing Activities
On December 23, 1987, New Systems, Inc. ("Systems") acquired CSH
Corporation. The fair value of the assets acquired was $100,350. Cash in
the amount of $26,000 was paid in the acquisition and liabilities of $74,350
were assumed.
In October 1988, Systems paid the remaining $74,000 due on the purchase of
CSH Corporation and a former shareholder of CSH exercised his option to
acquire 4,000 shares of Systems for $12,500 resulting in the net payment of
$61,500 to the former CSH shareholder.
On April 28, 1989, certain officers and directors of Systems were issued
380,000 shares of CSH common stock in exchange for the return and
cancellation of 30,400 shares of Systems common stock. The exchange was
valued at $114,000 based upon the fair value of the Systems common stock
returned. On July 26, 1989, certain of the CSH shareholders returned 200,000
of the above described CSH common shares. The canceled shares were valued
at $60,000 using the same value per share as was used when the shares were
issued. The issuance, net of the cancellation, of the CSH common stock
resulted in recognition of $56,214 of goodwill and a $54,000 increase in
minority interest.
In 1998, a receivable from an officer/shareholder in the amount of $6,234
was settled as compensation for services from the officer/shareholder.
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE> 20
NEW SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
PRINCIPLES
Organization and Nature of Business - New Systems, Inc.
("Systems"), formerly Municipal Systems, Inc., was organized under
the laws of the State of Nevada on December 10, 1987 and changed
its name to New Systems, Inc. on March 4, 1999. Systems was formed
for the purpose of acquiring CSH Corporation ("CSH"). To
accomplish that purpose, on December 23, 1987, Mr. Denny W.
Nestripke, president of Systems, acquired a 25% interest in CSH
for $25,000 and purchased an option for $1,000 to acquire the
remaining 75% of CSH for $74,000. On December 30, 1987, Mr.
Nestripke transferred the interest in and option for CSH to
Systems in exchange for $21,000 and 7,200 shares of common stock.
On that same date, Systems granted an option to the holders of the
remaining 75% of CSH to acquire 4,000 shares of Systems for
$12,500. On October 31, 1988, Systems exercised its option and
acquired the remaining 75% interest in CSH for $74,000 and the
sellers exercised their stock purchase option at that same time.
The acquisition transactions were accounted for as a purchase
business combination with Systems considered the acquiring entity
since the CSH shareholders received cash and only a minority
interest in Systems from the exercise of the stock option. As
explained above, on October 31, 1988, CSH became a wholly-owned
subsidiary of Systems. From December 23, 1987 to October 31, 1988,
Systems owned 25% of the outstanding common stock of CSH. Since
control of the business was obtained on a step-by-step basis,
generally accepted accounting principles required the transaction
be accounted for retroactively as the acquisition of 100% of CSH
on December 23, 1987. To accomplish that requirement, the October
31, 1988 payment of $74,000 was discounted to $68,350 on December
23, 1987 using a 10% discount rate and resulted in a total
purchase price of $94,350. The purchase price was allocated to the
assets acquired and liabilities assumed based upon their fair
values. The main assets acquired were computer software, with a
nominal fair value, and in-process research and development with a
fair value of $90,000, which was charged to operations at the
acquisition date. The excess of the purchase price was $288 which
was allocated to goodwill and was expensed at the acquisition date
due to its immateriality.
CSH's operations consisted of developing, marketing and selling
computer software. Although financing was provided by Systems and
other minority interests, CSH was unable to obtain profitable
operations due to its software not being accepted in commercial
quantities. Pursuant to a vote by Systems' shareholders on April
28, 1989, CSH filed a registration statement with the Securities
and Exchange Commission to allow Systems to distribute its CSH
shares to the Systems shareholders. However, the distribution
never occurred because, prior to the registration statement
becoming effective, CSH was dissolved as a corporate entity on
November 1, 1990.
The accompanying financial statements include the accounts of
Systems and the operations of CSH during the period from its
<PAGE> 21
acquisition in 1987 until it was dissolved in 1990. The terminated
computer software operations have been presented as discontinued
operations in the accompanying statements of operations. The
computer software operations had sales of $139,133 from inception
through November 1, 1990.
Upon CSH being dissolved on November 1, 1990, Systems recognized a
gain in the amount of $173,766 due to previous recognition of
losses from the discontinued computer software operations in
excess of the investment in CSH. The gain was recognized as a
gain from disposal of discontinued operations. At that same time,
debt in the amount of $10,346 was assumed by Systems and was
forgiven. The forgiveness of debt has been accounted for as an
extraordinary gain.
Systems is considered a development stage enterprise. Since 1990,
Systems has been inactive except for its recent efforts to become
current in filing its reports with the Securities and Exchange
Commission and seeking to enter into a potential merger or
acquisition transaction.
NOTE 2 - MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY
On April 28, 1989, Systems entered into an escrow agreement to
distribute all of the common stock of CSH to the Systems
shareholders; however, that agreement was not fulfilled and the
distribution never occurred. In connection with this agreement,
however, certain officers and directors of Systems were issued
380,000 CSH common shares, representing 13% of CSH, in exchange
for the return and cancellation of 30,400 shares of Systems common
stock. The exchange was valued at $114,000 based upon the fair
value of the Systems common stock returned. Due to a negative
carrying value of the CSH interest sold, Systems recognized a
$116,214 gain from this sale. On July 26, 1989, certain of the
CSH shareholders returned 200,000 of the above described CSH
common shares. The canceled shares were valued at $60,000 using
the same value per share as was used when the shares were issued.
The net issuance and cancellation of the CSH common stock resulted
in recognition of $56,214 of goodwill which was amortized in full
by November 1, 1990 when CSH was liquidated.
During the years ended July 31, 1989 and 1990, CSH issued 40,000
and 430,000 shares of common stock for services valued at $12,000
and $129,000, respectively. In addition, CSH issued 1,000,000
shares of common stock in January 1990 for cash in the amount of
$42,800. These transactions were accounted for as increases to
minority interest in the accompanying financial statements.
NOTE 3 - STOCKHOLDERS' EQUITY
On March 2, 1999, the stockholders approved a 1-for-250 reverse
stock split of the outstanding common stock. The accompanying
financial statements have been restated for all periods presented
for the effects of the reverse stock split.
As shown in the accompanying statements of stockholders' equity,
Systems has issued common stock for services pursuant to an
<PAGE> 22
agreement approved by its stockholders with its founding president
in April 1989. Subsequently, 48,000 shares of common stock were
issued annually for his services through 1996, which were valued
at $12,000 per year, or $0.25 per share. During 1997, additional
shares of Systems' common stock were issued to its current
president and another entity. The value of the services rendered
and the fair value of the stock issued was determined to be equal
to the par value of the stock.
AMENDMENT
TO
THE BY-LAWS
OF
MUNICIPAL SYSTEMS, INC.
A new Article XII is hereby added to the By-Laws to read as follows:
ARTICLE XII.
EXEMPTION FROM INTERESTED STOCKHOLDER
COMBINATION PROVISIONS
The Corporation hereby elects on October 22, 1991 not to be subject to
the provisions of Sections 43 through 70 of Assembly Bill No. 655, passed by
the 1991 Nevada Legislature and signed into law, which deal with combinations
between resident domestic corporations and interested stockholders."
A true copy adopted by the Board of Directors the 22nd day of October,
1991.
ATTEST:
/s/ Denny W. Nestripke, Secretary
<PAGE>
NO: 9329-87
CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION
[ After Issuance of Stock ]
MUNICIPAL SYSTEMS, INC.
Filed by and return copy to:
Denny W. Nestripke
P. O. Box 4190
Palm Desert, CA 92261
The undersigned, as President, Secretary and Treasurer of Municipal
Systems, Inc. does hereby certify:
That the Board of Directors of Municipal Systems, Inc. at a meeting duly
convened and held on the 19th day of April, 1989, adopted resolutions to amend
the Original Articles of Incorporation of Municipal Systems, Inc. The Board of
Directors adopted such resolutions pursuant to Consent Resolutions of the
Stockholders Holding a Majority of the Voting Shares of Municipal Systems,
Inc. on April 5, 1989.
The number of shares of Municipal Systems, Inc. outstanding and entitled
to vote with respect to this Amendment to the Articles of Incorporation is
25,000,000; that the following changes and Amendment were consented to and
approved by a majority vote of stockholders holding a total of 19,137,300
shares or 77% of the shares entitled to vote.
The Resolutions adopted to modify the original Articles of Incorporation
are:
An additional paragraph (number 9) shall be added:
ARTICLE III
PURPOSES
9] That the intended business purpose of the Corporation shall include
the following:
a) to engage in the acquisition of any type of assets, properties, and
business without regard to any specific business or industry; b) to look for
acquisition possibilities across the United States; and c) to make such
acquisitions as its assets will allow.
Article IV shall be deleted in its entirety and replaced with the follow:
ARTICLE IV
CAPITALIZATION
The corporation shall have the authority to issue 250,000,000 million
shares of common stock, each share having a par value of $0.001 per share.
Each share shall have equal rights with respect to voting, dissolution and/or
liquidation.
/s/ Denny W. Nestripke, President, Sec./Treas.
State of Utah...........}
County of Salt Lake }
On May 6, 1998, personally appeared before me, a Notary Public, Denny W.
Nestripke, who acknowledged that executed the above instrument.
[SEAL] Signature of Notary: /s/ sic.
CERTIFICATE OF CORRECTION
OF ARTICLES OF INCORPORATION
[After Issuance of Stock]
[FILED NEW SYSTEMS, INC.
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE Filed by: Lloyd T. Rochford, President
STATE OF NEVADA Municipal Systems, Inc.
MAR 22 1999] 5 Clancy Lane South
Rancho Mirage, CA 92270
The undersigned, Lloyd T. Rochford, President and Secretary of the
Municipal Systems, Inc. does in accordance with Section 78 0295 of the Nevada
Revised Statutes, certify the following:
1) The name of the corporation is New Systems, Inc., formerly
Municipal Systems, Inc.
2) That a Certificate of Amendment of the Articles of Incorporation
of Municipal Systems, Inc. was filed by the Secretary of State of Nevada on
May 8, 1998.
3) That said Amendment replaced ARTICLE IV - CAPITALIZATION of the
Article of Incorporation. The Amendment stated that "the corporation shall
have the authority to issue 250,000,000 million shares of common stock". The
stockholders of the corporation had voted to approve an amendment to the
Articles of Incorporation to increase the authorized number of shares of
common stock to 250 million shares or 250,000,000 shares, not 250,000,000
million shares.
4) Article IV shall be corrected to read as follows:
ARTICLE IV
CAPITALIZATION
The corporation shall have the authority to issue 250,000,000 shares of
common stock, each share having a par value of $0.001 per share. Each share
shall have equal rights with respect to voting, dissolution and/or
liquidation.
/s/ Lloyd T. Rochford, President and Secretary
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE )
On March 19, 1999 before me Wayne A. Walter, Notary Public personally appeared
Lloyd T. Rochford personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the instrument the person or the entity
upon behalf of which the person acted, executed the instrument.
[SEAL - Wayne A. Walter WITNESS my hand and official seal
Commission #1151718 /s/ Wayne A. Walter, notary
Notary Public-California
Riverside County
My Comm Expires Sep 10, 2001]
BYLAWS
OF
Municipal Systems, Inc.
Article I - Bylaws
The Board of Directors (the "Directors") shall have the authority to
formulate the bylaws of Municipal Systems, Inc. (the "Company") and to
govern the affairs of the Company in accordance with those bylaws. Any
restrictions placed upon the Directors with respect to the contents of
the bylaws, shall only be to the extent that the bylaws are not
consistent with the constitution or laws of the United States, the
constitution or laws or of the state of Nevada and in particular, The
Nevada Business Corporation Act, in Chapter 78, Title 7 of the Nevada
Revised Statues, as amended.
Article II - Seal
The Directors have determined that the Company shall conduct its
business without making use of a "corporate seal", except to the
extent that such seal shall be required by any governmental agency or other
governing group, then the Directors may allow for the specific use of
a seal. For purposes of the Company's stock certificates, the Company
shall use a facsimile of a seal on which the words "SEAL" shall be
placed, in order to conform with the practices of most corporations
who have publicly traded securities.
Article III - Capitalization of the Company
1] The Company's Articles of Incorporation ("Articles") shall be
the governing instrument to determine the number of shares which the
company is authorized to issue and the class or series of any shares
authorized for issuance. To the extent that the Articles designate only
one class of security, such class shall represent the common stock of the
Company.
2] To the extent that the Articles designate that the Company may
issue more than one class or series of security and if the
shareholders do not designate as a part of the Articles, any rights, privileges,
voting powers, preferences, limitations, restrictions or any other
designations to differentiate this additional class from the common
shares, then the Directors, upon majority vote, may at their sole
desecration designate any special rights of such class or classes
(series or series' or other delineation). If any preferences are given
to any security other than the common stock, and such preferences are
not identified in the Articles, then the Directors shall file a
certificate of designation, describing the preferences being given to
such other security, with the Secretary of State of Nevada and such
same information shall be conspicuously printed on each certificate issued
which is representative of such security.
3] Unless otherwise specifically stated in the Articles, the shares
of the Company identified and designated as the "common stock" of the
Company, shall be the only security of the Company to have the right to
receive the net assets of the Company upon dissolution.
4] To the extent that the Articles do not specifically withhold such
right from the Directors or that the Articles do not specifically give
such rights to the shareholders, the Directors may increase or decrease
the number of authorized shares of a series or class of the Company's
securities. Such action must correspond to an increase or decrease in
the number of shares of that particular series or class of securities
which are issued and outstanding at the time the Directors cause such
increases or decrease to occur. Thus, the Directors, without a vote of
the Company's shareholders, may forward split or reverse split the
shares of any series or class of the Company's securities.
5] To the extent that the Articles do not specifically withhold such
right from the Directors or that the Articles do not specifically give
such rights to the shareholders, the Directors shall have the authority
to change the par value of any series or class of the Company's
securities.
6] If any action authorized by either the Directors or the
shareholders would result in fractional shares being issued, then the
Directors shall issue "Scrip" rather than fractional shares. Shareholder
holding Scrip shall pay to the Company such additional dollar amounts as
are required in order for a whole share to be issued. The Scrip shall
not have any rights attached thereto or any voting privileges associated
therewith until exchanged for shares of that particular security for
which the Scrip was issued. The shareholder receiving Scrip shall have a
period of thirty (30) days to exercise the Scrip for the issuance of
additional shares as set forth and contained on the Scrip; otherwise,
the Scrip shall expire and the shareholder holding such Scrip shall have
forfeited any rights relative thereto.
7] The Directors have the authority to determine the value of any
shares issued by the Company or to determine the consideration which the
Company shall receive for the issuance of its shares. The determination
of the adequacy of the consideration shall be the exclusive right of the
Directors and shall be conclusive, except if such determination was made
with fraudulent intent, and would include any tangible or intangible
property or benefit to the Company. Such property or benefit may be
defined as, but not limited to: a) a cash payment to the Company; b) a
promissory note, secured or unsecured, payable to the Company; c)
services performed for the benefit of the Company; d) a contract for
services to be performed; and e) the exchange of one class of the
Company's securities for another class of the Company's securities.
8] The consideration received by the Company for the shares being
issued need not be allocated equally to all parties giving consideration
for the shares being issued. Thus, the value of the consideration being
given for the shares being issued may vary based on the determination of
the Directors.
9] The Company may give a right, option or warrant (collectively
referred to herein as the "Right") to any individual or entity to
purchase its shares. This is limited to the extent that the Right, when
exercised, does not exceed the Company's total number of shares
authorized for issuance. The terms of purchase, the exercise price, the
time period during which the Right can be exercised and any other
pertinent information relative to such Right, must be conspicuously
displayed on the document evidencing such Right.
10] The shareholders of the Company do not have any preemptive
rights to purchase or otherwise receive shares of the Company's
securities, sole by the fact that such shareholders own shares of one or
more of the Company's securities.
11] The Company shall have the right to redeem one or more classes
of its outstanding securities in an amount determined by formula or
other extrinsic data or events, for such consideration as determined by
the Directors. The consideration which the Company would give in
exchange for its shares may be similar to that listed in paragraph 7 of
Article III of these bylaws, and under such terms and/or conditions or
events, as the Directors shall determine.
12] Inasmuch as the Nevada Business Corporation Act of the Nevada
Revised Statues, as amended, does not provide for any statutory
provisions related to reducing the Company's capital, the Company will
account for its "common stock" issued on its balance sheet by
multiplying the number of shares issued and outstanding by the par value
of each common share. Any dollar amounts received or the value of
services or other consideration, which exceeds the computation for
"common stock" as described in this paragraph, shall be account for in
an account entitled "paid-in capital" or "capital in excess of par" or
some similar designation.
Article IV - Board Of Directors
1] The number of individuals comprising the Directors shall be at
least one in number. At either a meeting of the Directors or at a
meeting of shareholders at which the Directors are elected, such number
may be increased by a majority vote of the Directors or shareholders,
respectively. The Directors shall not number more than thirteen (13) and
prior to any individual being qualified as a Director, such individual,
either elected or appointed, shall have attained the age of eighteen
(18) years.
2] With respect to the long range plan of the Company's business
affairs, the Directors shall have the authority and responsibility to
direct the Company and to assign such duties and responsibilities to the
Company's officers as the Directors deem appropriate.
3] The Directors have the authority to act, without the vote of the
Company's shareholders, in any manner which the Directors deem
appropriate, to the extent that such dealings are in the securities of
an entity other than the Company or in the securities of any
municipality.
4] The Directors have no obligation to hold regular meetings. Any
business requiring the affirmative vote of the majority of the Directors
will require that the Chairman of the Board of Directors or if any other
Director may so desire, give notice of a meeting to the Directors (see
following paragraph number 5) or by resolution(s) signed by all
Directors without a meeting (see following paragraph number 6).
5] In order for the Directors to convene a meeting to transact such
Company business that a vote of the Directors is required, a majority of
all of the Directors (a "Quorum of Directors") must be present. If a
Quorum of Directors is present, unless otherwise called for by these
bylaws, the Articles or the Nevada Business Corporation Act of the
Nevada Revised Statues, as amended, a majority vote of the Directors is
sufficient for the action requiring a vote, to be enacted.
6] A meeting of the Directors need not occur nor is notice required
to be given, if all Directors vote in favor of the proposition and do so
in writing and a record of the proposition and the vote is retained in
the Company's records.
7] The term of service of each Director shall be for at least one
year or until the Company's next annual meeting. The Directors shall set
the date, time and place for the annual meeting of shareholders. In the
event that an annual meeting of shareholders is not held on an annual
basis, then each Director shall continue to serve in their capacity and
discharge their duties until a successor has been elected. In the event
that one or more Directors resign, the remaining Directors, regardless
of the number, may appoint one or more individuals to serve as
Directors.
8] Directors shall be reimbursed for costs and expenses paid to
third parties and incurred during the performance of their duties,
unless otherwise adopted by resolution of a Quorum of Directors. The
amount of any compensation to be paid to Directors for their services,
shall be determined by resolution of the Directors at a fixed sum
amount. Nothing herein contained shall be construed to prelude any
Director from serving the Company in any other capacity and receiving
compensation therefor.
Article V - Shareholders
1] To the extent that the Company only has common stock outstanding,
each shareholder shall be entitled to one vote for each share held. To
determine if a shareholder is eligible to vote, such individual or
entity must be a shareholder on the "record date", which date shall be
set by the Directors. If an entity or individual is the owner of the
Company's shares; however, the shares are being held in the name of a
nominee, a brokerage firm, a clearing house or under any other such
arrangement, the purpose of which is for the convenience of the
shareholder and not as a deceptive device to avoid disclosure of the
number of shares owned by such shareholder, then upon receipt of an
omnibus proxy from the shareholder of record, the actual owner of the
Company's shares may vote such shares in the manner desired.
2] If notice of a meeting of the Company's shareholders is given, a
majority of the shareholders of the Company ("Quorum of Shareholders")
must be present to vote on any proposition. Matters requiring a vote of
shareholders can be enacted and declared effective if a majority of the
Quorum of Shareholders present vote in the affirmative for the
proposition.
3] Without a vote of the majority of the Company's shareholders at a
meeting where a Quorum of Shareholders are present, matters can not be
enacted and declared effective with respect to selling, assigning,
transferring or otherwise disposing of all of the Company's assets.
Nevertheless, the Directors have the authority to pledge, mortgage,
secure indebtedness or otherwise encumber all or substantially all of
the Company's assets for such purposes as the Directors deem appropriate
and are in the best interest of the Company's shareholders.
Additionally, the Directors are authorized to sell, purchase, hold or
transfer the Company's securities for the purpose of obtaining cash or
other assets or properties. All of these activities, except where a vote
of shareholders of the Company is specifically called for, can be
transacted by a majority vote of the Directors.
4] A meeting of shareholders need not occur nor is notice required
to be given, if a Quorum of Shareholders vote in the affirmative in
writing, and a record of the proceedings and the vote, is retained in
the Company's records. Such a vote requires that the entire Quorum of
Shareholders vote in the affirmative, unless if more than a majority of
all shareholders vote, only a majority of all of the Company's
shareholders is required.
5] If a vote of shareholders is required pursuant to a merger or
exchange of shares with another corporation, then the Company's
shareholders shall have the right to dissent and receive payment of the
fair value of such shareholder's shares in the Company. The Company's
shareholders shall not be entitled to a right to dissent if: a) the
Company's shares of stock entitled to vote are listed on a national
securities exchange, listed as a part of the national market system on
the NASDAQ system, or there are at least 2,000 shareholders of record of
the Company's shares entitled to vote.
Article VI - Officers
1] The Directors shall appoint such number of officers as the
Directors deem appropriate. Not withstanding the foregoing, the
following offices of the Company must be filled by individuals appointed
by the Directors: a) president; b) secretary; c) treasurer. To the
extent that the Directors deem it advisable, the Directors may delegate
to the aforementioned officers the right to appoint such other officers
as such officers deem advisable.
2] The officers of the Company shall be elected or appointed by the
Directors in the manner described in paragraph 1 of Article VI. Unless
otherwise agreed to by contract, the officers of the Company serve in
their respective positions at the discretion of the Directors or at the
discretion of such other officers as the Directors have delegated. The
Directors are responsible to assure that the offices of president,
secretary and treasurer are at all times occupied by an individual. One
individual may, at the discretion of the Directors, serve the Company in
the capacities of president, secretary and treasurer.
3] Unless determined otherwise by the Directors, the president of
the Company shall also be given the title of principal executive officer
or the chief executive officer of the Company. In such capacity, unless
another officer is specifically appointed for such purpose, and subject
to the ultimate direction of the Directors, shall supervise and control
all of the business and affairs of the Company. The president shall
preside, under the direction of the Directors, at all meetings of the
Company's shareholders, either annual meetings or special meetings. The
presidents signature, and if required by the document, the signature of
the secretary of the Company, shall validate and/or bind the Company
with respect to all matters, including, but not limited to, certificates
of the Company representing equity or debt instruments, any deeds,
mortgages, contracts or other documents.
4] In addition to any other duties or obligations assigned to the
office of vice president, in the absence of the president due to death,
disablement, or other inability to act, the vice president shall
exercise and perform the duties of the president.
5] The secretary shall keep the minutes of any meeting of the
Company's shareholders and if so requested, of any meeting of the
Directors. The secretary shall be responsible for giving or for
supervising the giving of all "notices" of meetings and shall perform
such other duties as from time to time may be assigned by the president
or by the Directors.
6] Unless otherwise designated by the by the Directors, the
treasurer of the Company shall also be given the title of principal
financial officer or the chief financial officer and the principal
accounting officer of the Company. If required by the Directors, the
treasurer shall be under a bond for the faithful discharge of the duties
and responsibilities of such office. These duties would include but not
be limited to: a) maintaining records and save keeping all of the
Company's funds and securities; b) establish such bank accounts as
instructed by the Directors; c) supervise the preparation of financial
statements and the filing of such financial statements with such
regulatory agencies as may be required.
7] Unless covered by contract, the compensation to be paid to each
officer shall be determined from time to time by the Directors and no
officer shall be prevented from receiving compensation as an officer if
such officer is also a director of the Company.
Article VII - Other Matters
1] The annual meeting of the shareholders or any special meeting of
the shareholders of the Company's shall be held on such date, at such
place and at such time as determined by the Directors. The failure of
the Directors to call for an annual meeting of shareholders shall in no
way effect the legality of the Company's existence and the continuation
of the Directors to conduct their duties and obligations.
2] The Directors may, at their discretion, declare dividends in cash
or in shares of the Company's securities, to the extent that in so
doing, the Company does not become insolvent or that the liabilities of
the Company would exceed the Company's total assets.
3] The Company shall indemnify its directors, officers, employees
and agents in any action which is brought against them by or in the
right of the Company or in any action which is brought against them
other than by or in the right of the Company. By acceptance of a
directorship, by taking any action which would be synonymous with that
of a duly appointed officer or any activities which an employee or agent
undertakes believing such to be authorized by any individual
representing the Company as an officer and/or director, the Company
represents to have entered into an agreement with such individual for
purposes of indemnification. Such agreement provides that the expenses,
including attorneys' fees and any "out of pocket costs" incurred or the
loss of income arising from time commitments necessary to defend a civil
or criminal action, suit or proceeding must be paid by the Company as
they are incurred and in advance of the final disposition of the of the
action, suit or proceeding. The termination of the suit by judgment,
settlement, conviction or upon a plea of nolo contendere shall not, of
itself, create a presumption that the person being indemnified did not
act in accordance to such person's belief that the best interests of the
Company and that of its shareholders were not the prevailing motive in
such persons conduct. Thus, unless evidence is presented against the
person being indemnified that such person acted willfully and in a
grossly negligent manner in direct violation of existing statues, the
Company shall indemnify such individual in possible respects.
4] The registered office of the Company in the state of Nevada is
The Corporation Trust Co. of Nev., One East 1st Street, Reno, Nevada
89501. The Company shall provide to its registered agent located at the
registered office such information as is required by Section 78.105(1),
as amended by Ch. 442, Laws 1991.
5] Certificates representing shares of the Company's equity and debt
securities (if any) shall be in such form as shall be determined by the
Directors. Such certificates shall be signed by the president and by the
secretary of the Company. The name and address of the shareholders, the
number of shares and date of issue, shall be entered on the stock
transfer books of the Company, which may be maintained by the Secretary,
the Treasurer or an agent for the Company as designated by the
Directors. All certificates surrendered to the Company or its agent for
transfer shall be canceled and no new certificate shall be issued until
the former certificate for a like number of shares shall have been
surrendered and canceled. In such case where a certificate is lost,
destroyed or mutilated, a replacement certificate may be issued upon
such terms and indemnity to the Company as the Directors may prescribe.
These bylaws replace any and all bylaws that were previously adopted by
the board of directors. These bylaws were reviewed, approved and adopted
by Municipal Systems, Inc.'s board of directors on Monday, December 23,
1996, and represent the governing document with respect to those matters
described herein, until such time as these bylaws shall be amended or
otherwise revised by the board of directors.
Dated: December 23, 1996
/s/ Denny W. Nestripke, Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet as of December 31, 1998, and statements of operations for the year ended
December 31, 1998, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000831659
<NAME> NEW SYSTEMS, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,195
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<CURRENT-ASSETS> 2,195
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0
0
<COMMON> 1,000
<OTHER-SE> 890
<TOTAL-LIABILITY-AND-EQUITY> 2,195
<SALES> 0
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<CGS> 0
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<OTHER-EXPENSES> 8,360
<LOSS-PROVISION> 0
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<INCOME-PRETAX> (8,360)
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<NET-INCOME> (8,360)
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</TABLE>
