1
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended: March 31, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Exchange Act
of 1934
For the transition period from to .
Commission File Number: 33-21085
NEW SYSTEMS, INC.
----------------
(Exact name of small business issuer as specified in its charter)
Nevada
--------
(State or other jurisdiction of incorporation or organization)
87-0454377
----------
(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)
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] Yes.
APPLICABLE ONLY TO CORPORATIONS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of April 25, 1999 the
Issuer held 1,000,002 shares of its $.001 par value common stock outstanding.
Transitional Small Business Disclosure Format (check one) Yes [ ] No [ X ]
2
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
The unaudited interim financial statements as of March 31, 1999 and for the
first quarter period ending March 31, 1999 and 1998, follow the signature page
and exhibits hereto. These interim financial statements include an unaudited
balance sheet as of March 31, 1999 and unaudited statements of operations and
cash flows for the first quarter period ending March 31, 1999 and for the
comparable period of the preceding fiscal year ended March 31, 1998.
The unaudited interim financial statements include all adjustments which in
the opinion of management are necessary in order to make these financial
statements not misleading. The interim financial statements have been prepared
in a condensed format in accordance with the rules and regulations of the
Securities and Exchange Commission and include such footnotes and other
disclosures as needed for fair presentation and to ensure that the financial
statements are not misleading. The interim financial statements provide
financial information cumulative from inception inasmuch as the Issuer is in
the development stage.
ITEM 2. Management's Discussion and Analysis or Plan of Operation.
The Issuer is not engaged in any business operations and is seeking to find a
suitable business to acquire or an entity with which it can enter into a
reorganization or merger. The Issuer has very limited resources and management
is relying on its association with KM Financial, Inc. to provide the Issuer
with sufficient financial resources to continue its search for an entity or
business which the Issuer can acquire or enter into a reorganization.
Management is also relying on KM Financial, Inc. to provide introductions to
individuals who may be influential in locating a business or entity interested
in being acquired or reorganizing with the Issuer. The Issuer intends to take
advantage of any reasonable business proposal presented which management
believes will provide the Issuer and its stockholders with a viable business
opportunity. The board of directors will make the final decision in
determining whether to complete any acquisition or reorganization unless
otherwise required by applicable law, the articles of incorporation, its
bylaws or by contract. Consequently, stockholders' approval of any acquisition
or reorganization will not be sought unless required as heretofore stated.
The investigation of specific business opportunities and the negotiation,
drafting, and execution of relevant agreements, disclosure documents, and
other instruments will require substantial time and attention from management.
Such an investigation will also result in the Issuer incurring expenses for
the payment of accountants, attorneys, and possibly others involved in such an
inquiry. Any costs incurred by investigating a specific business opportunity
and if a decision is made not to consummate, participate or complete the
acquisition of such a business opportunity, will most likely result in such
expenditures not being recoverable. Furthermore, the Issuer's participation
in any business opportunity does not assure that the results therefrom will
ultimately be successful and could have the potential of the Issuer sustaining
a loss of the costs incurred.
Management is not able to determine the amount of time or the resources that
will be necessary to locate, investigate and possibly acquire or merge with a
business prospect. If and when the Issuer locates a business opportunity and
if such opportunity results in the completion of the intended transaction,
there still is no assurance that after the transaction is completed the Issuer
3
will have profitable operations. The possibility also exists that the Issuer
will never be able to acquire, regardless of the form or manner of such
intended acquisition, an interest in any business prospects, products or
opportunities.
Management will give consideration and assess the potential profitability and
the adequacy of the working capital of any business operations which the
Issuer may investigate and possibly acquire. The foregoing considerations are
only some of factors which management will utilize in determining the terms
and conditions under which the Issuer would consummate any acquisition or
reorganization. Potential business opportunities, no matter which form they
may take, will almost assuredly result in substantial dilution for the
Issuer's shareholders due to the need for the issuance of additional shares of
the Issuer's common stock to acquire a business opportunity.
Liquidity, Capital Resources and Results of Operations
As of March 31, 1999, the Issuer had expended all of its financial resources
and is seriously considering the issuance of additional shares of its common
stock in order to obtain operating capital. The issuance of additional shares
of its common stock will result in an immediate dilution in the percentage
ownership that existing shareholders have in the Issuer. As a result of the
Issuer's association with KM Financial, Inc., management believes that
additional financing will be obtained in amounts sufficient to meet the
Issuer's incidental ongoing expenses which are primarily associated with
maintaining its corporate status and maintaining its reporting obligations to
the Securities and Exchange Commission. Such expenses have been and will in
the future be categorized as general and administrative expenses.
During the quarter ended March 31, 1999, the Issuer incurred costs associated
with filling of its Form 10-KSB Report with the Securities and Exchange
Commission. Such report was not completed until the first part of the Issuer's
second quarter and the costs associated with the preparation and filing of
such report have not yet been determined. Any operating capital which the
Issuer intends to obtain, as stated in the prior paragraph, will include
sufficient capital to pay the costs incurred relative to the preparation and
filing of such report. In addition, the working capital intended to be
obtained will be sufficient for the Issuer to prepare and file all future
reports, as required by the Securities and Exchange Commission, for at least a
one year period of time. During the corresponding period of the prior year,
ending March 31, 1998, the Issuer was not engaged in the preparation of any of
the reports mentioned herein nor in any other activities. Consequently, no
meaningful comparison between the two quarterly periods ending March 31, 1999
and 1998 and the subsequent quarterly period would be meaningful.
Since its inception, the Issuer has not conducted any profitable operations
and has utilized all funds received from its initial public offering in
attempting to conduct profitable operations. It is not anticipated that the
Issuer will generate any revenue in the future unless a profitable business
opportunity is located and a merger or a form of reorganization is
consummated. The Issuer intends to investigate various business opportunities
which will likely result in management incurring "out of pocket" expenses and
could also include expenses associated with legal and accounting services.
Such costs and expenses will increase the financial burden on the Issuer with
no guarantee that any benefits will result from such expenditures or from the
efforts of management.
The Issuer currently has no employees and does not intend to employ anyone in
the future, unless its present business operations were to change. The sole
4
officer and director of the Issuer is providing a location for the Issuer's
offices on a "rent free basis" and is not being paid a salary or any other
form of compensation for any services which are or may be provided, other than
reimbursement of "out of pocket" costs and expenses.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
None
ITEM 2. Changes in Securities and Use of Proceeds
None
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
Reference is made to the Information Statement which is made a part of this
Report as Exhibit 22.
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on From 8-K
(a) Index of Exhibits
Exhibit 3 - Articles of Incorporation, Amendments to the Articles of
Incorporation, Bylaws and Amendments to the Bylaws
1. Incorporated by reference to a registration statement on
Form S-18, File No. 33-21085
2. Incorporated in Form 10-KSB for the fiscal year ended
December 31, 1998
3. Included with this Report - Amended Articles of
Incorporation, filed March 5, 1999
Exhibit 11 - Computation of per share earnings
1. Included as a part of the financial statements described
in Part I of this Report
Exhibit 22 - Published report regarding matters submitted to vote of
securities holders
1. Included in this Report - Information Statement, dated
April 9, 1999
Exhibit 27 - Financial Data Schedule
1. Included in EDGAR submission
(b) Report on Form 8-K
None
5
SIGNATURES
In accordance with the requirements of the Exchange Act, the Issuer caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NEW SYSTEMS, INC.
/s/ Lloyd T. Rochford
Chief Executive Officer
Chief Financial Officer
Date: April 20, 1999
6
PART I. FINANCIAL STATEMENTS
New Systems, Inc.
(A development stage company)
Balance Sheet
March 31, 1999
(unaudited)
ASSETS
Current Assets:
Cash in bank $ -0-
----------
Total Current Assets $ -0-
----------
Total Assets $ -0-
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Current liabilities $ -0-
----------
Total Liabilities $ -0-
----------
Stockholders' Equity:
Common stock $ 1,000
Additional paid-in capital 403,146
Deficit accumulated during the development stage (404,146)
----------
Total Stockholders' Equity $ -0-
----------
Total Liabilities and Stockholders' Equity $ -0-
==========
The accompanying notes are an integral part of these unaudited financial
statements.
7
New Systems, Inc.
(A development stage company)
Statements of Operations
(unaudited)
Cumulative from
For the December 10, 1987
Quarter Ended (Date of Inception)
March 31, 1999 Through
1999 1998 March 31, 1999
---------- ---------- -------------
General and administrative expenses $ 1,890 $ -0- $ 238,586
Loss from continued operations (1,890) -0- (238,586)
Discontinued operations:
Loss from prior business discontinued -0- -0- (349,672)
Gain from disposal of prior business -0- -0- 173,766
---------- ---------- -------------
Loss before extraordinary gain (1,890) -0- (414,492)
Extraordinary gain
from forgiveness of debt -0- -0- 10,346
---------- ---------- -------------
Net Loss $ (1,890) $ -0- $ (404,146)
========== ========== =============
Basic and diluted loss per share
Continued operations $ -0- $ -0- $ (0.62)
Discontinued operations -0- -0- (0.45)
Extraordinary gain -0- -0- 0.03
---------- ---------- -------------
Net Loss Per Share $ -0- $ -0- $ (1.04)
========== ========== =============
Weighted average common shares
used in per share computation 1,000,000 1,000,000 387,201
========== ========== =============
The accompanying notes are an integral part of these unaudited financial
statements.
8
New Systems, Inc.
(A development stage company)
Statements of Cash Flows
(unaudited)
Cumulative from
For the December 10, 1987
Quarter Ended (Date of Inception)
March 31, 1999 Through
1999 1998 March 31, 1999
---------- ---------- -------------
Cash flows from operating activities:
Net loss $ (1,890) $ -0- $ (404,146)
Adjustments for:
Changes in current assets
and liabilities (305) -0- 11,635
Other items -0- -0- 153,414
---------- ---------- -------------
Net cash flow used
by operating activities $ (2,195) $ -0- $ (239,097)
---------- ---------- -------------
Net cash flow from
investing activities $ -0- $ -0- $ (46,015)
---------- ---------- -------------
Net cash flow from
financing activities $ -0- $ -0- $ 285,112
---------- ---------- -------------
Net decrease in cash $ (2,195) $ -0- $ (2,195)
Cash at beginning of the period 2,195 -0- 2,195
---------- ---------- -------------
Cash at end of the period $ -0- $ -0- $ -0-
========== ========== ============
The accompanying notes are an integral part of these unaudited financial
statements.
9
New Systems, Inc.
(A development stage company)
Notes to Financial Statements
(unaudited)
NOTE 1. ACCOUNTING POLICIES AND OTHER DISCLOSURES
The condensed financial statements included in this Form 10-QSB Report are
unaudited have been prepared to provide information with respect to the
interim three month periods ending March 31, 1999 and 1998, at a time when
the Issuer is in a development stage. These financial statements have also
been prepared assuming that the Issuer will obtain adequate financing to
continue as a going concern. Due to losses since its inception and inasmuch as
the Issuer is currently not engaged in any revenue producing activities, such
financing will most likely be obtained through the issuance of its equity
securities. The Issuer currently has 250,000,000 million shares of common
stock authorized for issuance of which 1,000,002 shares are issued and
outstanding. The issuance of any additional shares of common stock will result
in a decrease in the percentage ownership which current shareholders have in
the Issuer.
The Issuer is seeking to enter into a reorganization or merger with a business
venture or a business entity which is currently successful or has the
potential to be successful. The Issuer can give no assurance that such a
business venture, entity or opportunity can be located. If the Issuer should
be successful in this endeavor, the consummation of such a transaction, either
though a merger or other type of reorganization would in all probability
require additional shares of common stock be issued. Such a transaction would
therefore further decreasing the present shareholders' percentage interest in
the Issuer.
The Issuer's report on Form 10-KSB for the year ended December 31, 1998,
contains financial statements which have been audited by an independent
certified public accounting firm and their report on the Issuer's financial
statements in contained therein. Additional information regarding the Issuer's
activities since its inception, the accounting policies followed by the Issuer
and other pertinent financial disclosures are contained in the footnotes
accompanying those audited financial statements. The unaudited financial
statements of which these footnotes are an integral part, have been prepared
in conformity with generally accepted accounting principles for the interim
periods presented and in accordance with rules and regulations of the
Securities and Exchange Commission.