As filed with the Securities and Exchange Commission on February 9, 2000
Registration No. ________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
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NEW SYSTEMS, INC.
----------------------------------------------
(Name of Small Business Issuer in its charter)
Nevada 87-0454377
- ------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
5 Clancy Lane South
Rancho Mirage, California 92770
------------------------------------------------------------
(Address of principal executive offices, including zip code)
(760) 346-5961
---------------------------
(Issuer's Telephone Number)
Securities to be Registered Pursuant to 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
- ------------------- ------------------------------
N/A N/A
Securities to be Registered Pursuant to Section 12(g) of the Act:
Common Stock; $.001 per share
-----------------------------
(Title of Class)
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<PAGE>
TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS............................................ 1
ITEM 2. PLAN OF OPERATION.................................................. 2
ITEM 3. DESCRIPTION OF PROPERTY............................................ 4
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT......................................................... 5
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS................................... 6
ITEM 6. EXECUTIVE COMPENSATION............................................. 6
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................... 6
ITEM 8. DESCRIPTION OF SECURITIES.......................................... 7
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...................... 7
ITEM 2. LEGAL PROCEEDINGS.................................................. 7
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS...................... 7
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES............................ 8
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.......................... 8
PART F/S
INDEX TO FINANCIAL STATEMENTS
PART III
ITEM 1. INDEX TO EXHIBITS.
i
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
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 ("CSH"), from its stockholder. The Company
was initially capitalized with $50,000 from its organizers. Subsequently, a
public offering (the "Offering"), which yielded $300,000 in proceeds before
deducting commissions and other costs of the 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. Upon completion of the
Offering the Company completed its acquisition of all issued and outstanding
stock of CSH. After the acquisition of the CSH stock, CSH was operated as a
wholly owned subsidiary but was never profitable and 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 CSH through late 1991 at which time the elected directors of the
Company resigned from their positions as directors. After the resignation of the
directors, Mr. Denny W. Nestripke, who originally organized the Company and was
its president during the period of its initial public offering and was later
retained as a consultant, was appointed its sole director and president. Rather
than receiving cash consideration for his past consulting services Mr. Nestripke
was issued shares of the Company's common stock. The Company also authorized the
issuance of 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, Mr. Nestripke brought another individual, Mr. Lloyd T.
Rochford, into the leadership of the Company. On January 22, 1999, Mr. Nestripke
resigned from the Company for health reasons. Mr. 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.
On March 2, 1999, the Company's stockholders approved the following
actions: a) a change in the Company's name to New Systems, Inc. ("New Systems")
and b) a 1:250 reverse split of the Company's outstanding common stock.
CURRENT BUSINESS
The Company is currently not engaged in any business operations other than
seeking to locate an existing business or business assets ("Target Corp.") with
which the Company could enter into a merger, acquisition or other corporate
reorganization. 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
<PAGE>
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.
ITEM 2. PLAN OF OPERATION
The Company did not have any operations during either of the fiscal years
ended December 31, 1998 and 1999. The Company's only operations during such
years involved the preliminary investigation of one or more potential business
opportunities, none of which have come to fruition.
The Company will continue to seek a Target Corp. with which the Company can
enter into a merger, acquisition or other corporate reorganization. The Company
has no set guidelines on the type of business which the Target Corp. conducts.
Management will have broad discretion in seeking a Target Corp. and structuring
a reorganization. As a result of this business strategy the Company continually
evaluates potential Target Corp's. Although the Company is not currently a party
to any agreement, understanding or arrangement regarding any possible
reorganization, the Company is always evaluating potential candidate Target
Corps.
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.
Since its inception, the Company has not been profitable and has used all
of the monies raised in the Offering, and it is unlikely that any revenue will
be generated until the Company locates a business opportunity to acquire or
merge. The Company has retained the services of KM Financial, Inc. ("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 and in any event, for
at least the next twelve (12) months. In addition, KM shall attempt to make
appropriate introductions to management of the Company in its efforts to seek an
appropriate Target Corp. 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. 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 in order to effectuate the Company's reorganization plans. Mr.
Rochford 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 costs.
2
<PAGE>
CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS
EXTREMELY LIMITED CAPITALIZATION. Although the Company has enterned into an
agreement with KM for the provision of the funds necessary to carry out the
Company's plan of operation, such amounts may be insufficient to allow
management to complete a proper analysis of any particular business opportunity.
Assuming suitable prospects are identified, if ever, the Company may be unable
to complete an acquisition or merger due to a lack of operating funds.
SCARCITY OF AND COMPETITION FOR BUSINESS OPPORTUNITIES. The Company is and
will continue to be an insignificant participant in the business of seeking
business opportunities. A large number of established and well financed
entities, including venture capital firms, have recently increased their merger
and acquisition activities, especially among companies in high technology
fields. Nearly all of such entities have significantly greater resources,
technical expertise and managerial capabilities than the Company and.
consequently, the Company will be at a competitive disadvantage in identifying
suitable merger and acquisition candidates and successfully concluding a
proposed merger or acquisition. Further, there is no assurance that the Company
will be able to acquire a business opportunity on terms favorable to the
Company.
POTENTIAL DISADVANTAGES OF THE COMPANY'S PLAN OF OPERATION. The Company's
plan of operation may involve the acquisition of or merger with a company which
does not need substantial additional capital but which desires to establish a
public trading market for its shares. A Company which seeks the Company's
participation in attempting to consolidate its operations through a merger,
reorganization, asset acquisition, or some other form of combination may desire
to do so to avoid what they deem to be adverse consequences of themselves
undertaking a public offering. Factors considered may include time delays,
significant expense, loss of voting control and the inability or unwillingness
to comply with various federal or state laws enacted for the protection of
investors. Persons who wish to invest in the shares of the Company's Common
Stock may be deprived of the protection of such laws. In making an investment in
the Company, investor's should recognize that they may be doing so under terms
which may ultimately be less favorable than making an investment directly in a
company with a specific business.
LACK OF DIVERSIFICATION. In the event the Company is successful in
identifying and evaluating a suitable business opportunity, the Company will, in
all likelihood be required to issue its Common Stock in an acquisition or merger
transaction. Inasmuch as the Company's capitalization is limited and the
issuance of additional Common Stock will result in dilution of interest for
present and prospective stockholders, it is unlikely that the Company will be
capable of negotiating more than one or two acquisitions or mergers.
Consequently, the Company's lack of diversification may subject the Company to
economic fluctuation within the particular industry in which a target company
conducts business.
POSSIBLE DILUTION. The Company's Articles of Incorporation authorizes the
issuance of 250,000,000 shares of Common Stock, $.001 par value. Any acquisition
effected by the Company may result in the issuance of additional Common Stock
without shareholder approval and may result in substantial dilution in the
percentage of ownership of the Company's shareholders. Moreover, the Common
Stock issued in any such acquisition or merger transaction may be valued in a
manner other than the then trading value of the Company's Common Stock, thus
resulting in additional reduction in the ownership percentage of the Company's
shareholders.
POSSIBLE CHANGE IN CONTROL AND MANAGEMENT. The successful completion of a
merger or acquisition may result in a change of control of the Company. This
could result from the issuance of a large percentage of the Company's authorized
3
<PAGE>
Common Stock or the sale by one or more present shareholders of all or a portion
of their stock or a combination of both. Any such change in control may also
result in the resignation or removal of Mr. Rochford. If there is a change in
management, no assurance can be given as to the experience or qualification of
such persons either in the operation of the Company's current activities or in
the operation of the business, assets or property being acquired.
POSSIBLE FAILURE TO RECOVER COSTS OF FAILED ACQUISITION OR MERGER. It is
anticipated that 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 substantial costs for accountants, attorneys, and others. If a
decision is made not to participate in a specific business opportunity, the
costs incurred in the related investigation would not be recoverable.
Furthermore, even if an agreement is reached for the participation in a specific
business opportunity, the failure to consummate that transaction may result in
the loss to the Company of the related costs incurred.
TAXATION. In the course of any acquisition or merger the Company may
undertake, a substantial amount of attention will be focused upon federal and
state tax consequences to both the Company and the "target" company. Presently,
under the provisions of federal and various state tax laws, a qualified
reorganization between business entities will generally result in tax-free
treatment to the parties to the reorganization. While the Company expects to
undertake any merger or acquisition so as to minimize federal and state tax
consequences to both the Company and the target company, there is no assurance
that such business combination will meet the statutory requirements of a
reorganization or that the parties will obtain the intended tax-free treatment
upon a transfer of stock or assets. A nonqualifying reorganization could result
in the imposition of both federal and state taxes which may have substantial
adverse effect on the Company.
NO ASSURANCE OF PUBLIC MARKET. There is not currently an active trading
market for the Company's securities and there is no assurance that one will
develop or, if developed, that it will continue. Any investor in the Company's
securities may, therefore, have difficulty in selling such securities should
they desire to do so.
DIVIDENDS. No dividend has been paid on the Common Stock since inception
and none is contemplated in the foreseeable future.
ITEM 3. DESCRIPTION OF PROPERTY
The Company does not own any property. The Company maintains a mailing
address and telephone at the office of Mr. Rochford, the Company's sole director
and officer. The Company is not charged any fee or other cost by Mr. Rochford
for such office space.
4
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information relative to the Company's common
stock held by management and 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 December 31, 1999. This table takes into account
a 1: 250 reverse split of the Company's common stock which took effect on March
2, 1999.
NAME OF BENEFICIAL PERCENT OF
OWNER AND ADDRESS NUMBER OF SHARES COMMON STOCK OWNED
- -------------------------- ---------------- ------------------
Lloyd T. Rochford 295,392 24.6%
5 Clancy Lane South
Rancho Mirage, CA 92270
Stanley McCabe 60,296 (1) 5.0%
5922 S. Atlantic Pl.
Tulsa, OK 74105
William Parsons 279,008 (2) 23.3%
6350 E. Thomas Road, #240
Scottsdale, AZ 85251
KM Financial, Inc. 279,008 (3)
6350 E. Thomas Road, #240
Scottsdale, AZ 85251
All directors and officers
as a group (one person) 295,392 24.6%
- ----------
(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 KM Financial, Inc., Mr. Parsons'
wife and shares held by Mr. Parsons as a custodian.
(3) Includes shares registered in the name of William Parsons, Mr. Parsons'
wife and shares held by Mr. Parsons as custodian.
5
<PAGE>
ITEM 5. 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.
Lloyd T. Rochford Director, President, Secretary, Treasurer. For the period
(age 53) of one year or until a successor is duly qualified and
elected. Acknowledged willingness to serve such positions
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.
ITEM 6. EXECUTIVE COMPENSATION
The Company has not paid any cash compensation to any employee during the
three year period ending December 31, 1999. When Mr. Rochford acknowledged his
willingness to serve the Company as its director and sole officer, he received
295,392 shares of the Company's common stock valued at $73,848 for accepting
such positions. 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.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 5, 1997, Mr. Rochford and KM 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
carry out its plan of operation. 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 were fully paid as of
December 5, 1997.
6
<PAGE>
ITEM 8. DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 250,000,000 shares of Common Stock,
$.001 par value per share, of which 1,200,002 are outstanding as of the date of
this Registration Statement.
Holders of the Common Stock are entitled to one vote for each share owned
for all matters to be voted on by the shareholders. Holders of the Common Stock
are entitled to receive dividends as may be declared from time to time by the
Board of Directors, and in the event of any liquidation dissolution or winding
up of the affairs of the Corporation are entitled to receive a pro rata share of
any assets of the corporation legally available for distribution. There are no
redemption or sinking fund provisions applicable to the Common Stock. The rights
of the holders of the Common Stock are subject to any rights that may be fixed
for the holders of preferred stock, if and when any preferred stock is issued.
The Common Stock currently outstanding is validly issued, fully paid and
nonassessable.
PREFERRED STOCK
None authorized
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The following information is current as of December 31, 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 three fiscal years ending December 31,
1999. The Company has 1,200,002 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 1,200,002 shares of common
stock issued and outstanding, 614,000 shares are restricted securities all of
which are available for resale pursuant to Rule 144 of the Securities Act of
1933. As of December 31, 1999, the Company has 120 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.
ITEM 2. LEGAL PROCEEDINGS
The Company is not subject to any actual or pending legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
7
<PAGE>
ITEM 4. 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 1:250 reverse
split of the Company's common stock which took effect on March 2, 1999.
Pursuant to a board of directors meeting held on December 5, 1997, Mr.
Rochford and 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.
On May 26, 1999, the Issuer sold an additional 200,000 shares of its common
stock to KM for $20,000 or $.10 per share. In each of these issuances, the
Company relied on the exemption from registration provided by Section 4(2) of
the Securities Act of 1933.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
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 has 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 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 statutes, the Company shall indemnify such individual in all possible
respects.
8
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PART F/S
Reference is made to the Consolidated Financial Statements, together with
the notes thereto and the reports thereon of Hansen Barnett and Maxwell,
Certified Public Accountants appearing on pages F-1 through F-10 of this Form
10.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Certified Public
Accountants, Hansen Barnett and Maxwell F-1
Consolidated Financial Statements:
Balance Sheet as of December 31, 1999 F-2
Statements of Operations for the years
ended December 31, 1999 and 1998 and for the
cumulative period from December 10, 1987
(Date of Inception) through December 31, 1999 F-3
Statements of Stockholders' Equity (Deficit) for the
period from December 19, 1987 (Date of Inception)
through December 31, 1996 and for the years ended
December 31, 1997 through December 31, 1999 F-4
Statements of cash flows for the years ended
December 31, 1999 and 1998 and for the Cumulative
Period from December 10, 1987 (Date of Inception)
through December 31, 1999 F-6
Notes to financial statements F-8
9
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS.
EXHIBIT DOCUMENT NOTE
------- -------- ----
2.1 Initial Articles of Incorporation (1)
2.2 Articles of Incorporation as amended on April 5, 1989 (2)
2.3 Certificate of Correction of Articles of Incorporation
as filed on March 22, 1999 (2)
2.4 Bylaws (2)
2.5 Amendment to Bylaws (2)
- ----------
(1) Incorporated by reference from the Registrant's Registration Statement on
Form S-18, SE No. 33-21085.
(2) Incorporated by reference from the Registrant's Annual Report on Form
10-KSB for the year ended December 31, 1998.
10
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
NEW SYSTEMS, INC.,
a Nevada corporation
Date: February 9, 2000 By: /s/ Lloyd T. Rochford
-----------------------
Lloyd T. Rochford
Chief Executive Officer
11
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NEW SYSTEMS, INC.
(FORMERLY MUNICIPAL SYSTEMS, INC.)
FINANCIAL STATEMENTS
AND
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
DECEMBER 31, 1999 AND 1998
AND FOR THE CUMULATIVE PERIOD FROM DECEMBER 10, 1987
(DATE OF INCEPTION) THROUGH DECEMBER 31, 1999
<PAGE>
NEW SYSTEMS, INC.
TABLE OF CONTENTS
Page
----
Report of Independent Certified Public Accountants......................... F-1
Balance Sheet, December 31, 1999........................................... F-2
Statements of Operations for the Years Ended December 31, 1999 and
1998 and for the Cumulative Period From December 10, 1987
(Date of Inception) through December 31, 1999............................ F-3
Statements of Stockholders' Equity (Deficit) for the period from
December 10, 1987 (Date of Inception) through December 31, 1996
and for the Years Ended December 31, 1997 through December 31, 1999...... F-4
Statements of Cash Flows for the Years Ended December 31, 1999 and
1998 and for the Cumulative Period From December 10, 1987
(Date of Inception) through December 31, 1999............................ F-6
Notes to Financial Statements.............................................. F-8
<PAGE>
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, 1999 and the related statements
of operations, stockholders' deficit, and cash flows for the years ended
December 31, 1999 and 1998, and for the cumulative period from December 10, 1987
(date of inception) through December 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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, 1999 and the results of its operations and its cash flows for the
years ended December 31, 1999 and 1998, and for the cumulative period from
December 10, 1987 (date of inception) through December 31, 1999 in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's lack of operations and significant losses
raise substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
HANSEN, BARNETT & MAXWELL
Salt Lake City, Utah
January 13, 2000
F-1
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NEW SYSTEMS, INC.
BALANCE SHEET
AS OF DECEMBER 31, 1999
ASSETS
CURRENT ASSETS
Cash ............................................................ $ 1,047
TOTAL CURRENT ASSETS .......................................... 1,047
---------
TOTAL ASSETS ...................................................... $ 1,047
=========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accrued liabilities ............................................. $ 13,991
---------
TOTAL CURRENT LIABILITIES .................................... 13,991
---------
STOCKHOLDERS' DEFICIT
Common stock - $0.001 par value; 250,000,000 shares authorized;
1,200,002 shares issued and outstanding, respectively ......... 1,200
Additional paid-in capital ...................................... 422,946
Deficit accumulated during the development stage ................ (437,090)
---------
TOTAL STOCKHOLDERS' DEFICIT ................................. (12,944)
---------
Total Liabilities and Stockholders' Deficit ....................... $ 1,047
=========
The accompanying notes are an integral part of these financial statements.
F-2
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NEW SYSTEMS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
CUMULATIVE FROM
FOR THE YEARS ENDED DECEMBER 10, 1987
DECEMBER 31, (DATE OF INCEPTION)
-------------------------- THROUGH
1999 1998 DECEMBER 31, 1999
----------- ----------- -----------------
<S> <C> <C> <C>
GENERAL AND ADMINISTRATIVE EXPENSE .............. $ 34,834 $ 8,360 $ 271,530
----------- ----------- -----------
LOSS FROM CONTINUING OPERATIONS ................. (34,834) (8,360) (271,530)
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 .................. (34,834) (8,360) (447,436)
EXTRAORDINARY GAIN FROM FORGIVENESS
OF DEBT ........................................ -- -- 10,346
----------- ----------- -----------
NET LOSS ...................................... $ (34,834) $ (8,360) $ (437,090)
=========== =========== ===========
BASIC AND DILUTED LOSS PER SHARE
Continuing operations ......................... $ (0.03) $ (0.01) $ (0.63)
Discontinued operations ....................... -- -- (0.41)
Extraordinary gain ............................ -- -- 0.02
----------- ----------- -----------
NET LOSS ...................................... $ (0.03) $ (0.01) $ (1.01)
=========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES USED IN PER
SHARE CALCULATIONS ............................. 1,120,000 1,000,000 433,885
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
NEW SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<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
December 31, 1997, $0.25 per share...... 422,400 422 105,178 -- -- 105,600
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, 1997...... -- -- -- (393,896) -- (393,896)
--------- ------- --------- ---------- -------- ----------
BALANCE, DECEMBER 31, 1997................ 1,000,000 $ 1,000 $ 403,146 $ (393,896) $ (6,234) $ 4,016
========= ======= ========= ========== ======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
(Continued)
F-4
<PAGE>
NEW SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(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, 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
Issuance for cash, April 16, 1999,
$0.10 per share.......................... 200,002 200 19,800 -- -- 20,000
Net loss for the year ended
December 31, 1999....................... -- -- -- (34,834) -- (34,834)
--------- ------- --------- ---------- -------- ----------
BALANCE, DECEMBER 31, 1999............... 1,200,002 $ 1,200 $ 422,946 $ (437,090) $ -- $ (12,944)
========= ======= ========= ========== ======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
NEW SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
CUMULATIVE FROM
FOR THE YEARS ENDED DECEMBER 10, 1987
DECEMBER 31, (DATE OF INCEPTION)
--------------------- THROUGH
1999 1998 DECEMBER 31, 1999
-------- ------- ------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ............................................. $(34,834) $(8,360) $(437,090)
Adjustments to reconcile net loss to net
cash used by operating activities:
Compensation paid with common stock .................. -- -- 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 ......... 13,686 305 17,744
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 ............. (21,148) (1,815) (258,050)
-------- ------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and equipment .................. -- -- (20,015)
Purchase of CSH Corporation .......................... -- -- (26,000)
-------- ------- ---------
NET CASH USED BY INVESTING ACTIVITIES ............. -- -- (46,015)
-------- ------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock ............... 20,000 -- 403,411
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 ......... 20,000 -- 305,112
-------- ------- ---------
NET INCREASE (DECREASE) IN CASH ........................ (1,148) (1,815) 1,047
CASH AT BEGINNING OF PERIOD ............................ 2,195 4,010 --
-------- ------- ---------
CASH AT END OF PERIOD .................................. $ 1,047 $ 2,195 $ 1,047
======== ======= =========
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid for interest .............................. $ -- $ -- $ 3,483
======== ======= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
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.
F-7
<PAGE>
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 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.
F-8
<PAGE>
NEW SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
USE OF ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
BASIS OF PRESENTATION -- The Company has no operations and has accumulated
losses since inception of $437,090. This situation raises substantial doubt
about its ability to continue as a going concern. The accompanying financial
statements do not include any adjustments relative to the amount and
classification of liabilities that might result from the outcome of this
uncertainty. Management is currently seeking one or more potential business
ventures through acquiring or merging with a company with viable operations.
BASIC AND DILUTED LOSS PER COMMON SHARE -- In 1998, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 128, EARNINGS PER SHARE.
Under SFAS 128, loss per common share is computed by dividing net loss available
to common stockholders by the weighted-average number of common shares
outstanding during the period.
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 3, 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 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.
In April 1999, the Company issued 200,002 shares of stock for proceeds of
$20,000 or $0.10 per share.
F-9
<PAGE>
NEW SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - INCOME TAXES
The Company has paid no federal or state income taxes for any period. The tax
effect of the temporary difference that gave rise to the deferred tax asset at
December 31,1999, is as follows:
Operating loss carry forward.................... $ 437,090
Valuation allowance............................. (437,090)
---------
TOTAL DEFERRED TAX ASSETS....................... $ --
=========
In 1999 and 1998, the valuation allowance increased by $12,994 and $3,117,
respectively. As of December 31, 1999, the Company had net operating loss carry
forwards for federal income tax reporting purposes of $437,090 which, if unused,
will expire from 2002 through 2015.
The following is a reconciliation of the income tax computed using the federal
statutory rate to the provision for income taxes:
1999 1998
-------- -------
Tax at federal statutory rate (34%) ....... $(11,844) $(2,842)
State benefit, net of federal benefit ..... (1,150) (275)
Change in valuation allowance ............. 12,994 3,117
-------- -------
PROVISION FOR INCOME TAXES ................ $ -- $ --
======== =======
F-10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRITY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> U.S.DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 1,047
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,047
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,047
<CURRENT-LIABILITIES> 13,991
<BONDS> 0
0
0
<COMMON> 1,200
<OTHER-SE> (12,944)
<TOTAL-LIABILITY-AND-EQUITY> 1,047
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (34,834)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (34,834)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
