SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549
                                 ---------------
                                    FORM 10-Q


               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 1999
                         Commission file number 0-21907


                               Racom Systems, Inc.
                            ------------------------
             (Exact Name of Registrant as Specified in Its Charter)

        Delaware                                         84-1182875
---------------------------------          -------------------------------------
(State or Other Jurisdiction of            (I.R.S. Employer Identification No.)
 Incorporation or Organization)


16 W. 32nd Street, Suite 801, New York, NY                  100017
--------------------------------------------            ------------
(Address of Principal Executive Offices)                  (Zip Code)

                                 (212) 643-2080
                                 --------------
                         (Registrant's Telephone Number
                              Including Area Code)


       Indicate by check mark whether the Registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

    Yes:  X                                                       No: ___

       Indicate  the number of shares  outstanding  of each of the  Registrant's
classes of common stock, as of June 30, 1999:

Class                                          Number of Shares Outstanding
-----                                          ----------------------------

Common Stock, .01 par value                                19,987,230


<PAGE>

<TABLE>
<CAPTION>


                                     INDEX
<S>               <C>                                                                        <C>
Part I            Financial Information                                                      Page
                                                                                             ----

                    Item 1.         Condensed Balance Sheets as of                              2
                                    December 31, 1998 and June 30, 1999

                                    Condensed Statements of Operations                          3
                                    for the three and six months ended
                                    June 30, 1998 and 1999

                                    Condensed Statements of Cash Flows                          4
                                    for the six months ended June 30,
                                    1997 and 1998

                                    Notes to Condensed Financial Statements                     5

                    Item 2.         Management's Discussion and Analysis of                     6
                                    Financial Condition and Results of Operations

Part II           Other Information and Signatures                                              9

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                                 RACOM SYSTEM, INC.
                                                   BALANCE SHEETS
                                                    (Unaudited)

       ASSETS                                                                    June 30,           December 31,
                                                                                   1999                 1998
                                                                                 -------------         -------------
<S>                                                                                <C>                  <C>
CURRENT ASSETS:
      Cash and cash equivalents                                                      $  80,303             $ 383,866
      Accounts receivable-trade                                                        100,000                34,947
      Accounts receivable-related parties                                                    -                 1,027
      Inventory, net of reserve of $199,615 in 1998                                          -                 4,176
      Prepaid expense & other                                                                -                40,675
                                                                                 -------------         -------------
                     Total Current Assets                                              180,303               464,691

PROPERTY AND EQUIPMENT
      Machinery and equipment                                                                -               467,448
      Furniture and fixtures                                                                 -                58,227
      Leasehold improvements                                                                 -                 3,328
                                                                                 -------------         -------------
                                                                                             -               529,003
      Less-accumulated depreciation                                                          -             (488,470)
                                                                                 -------------         -------------
                                                                                             -                40,533

                     TOTAL ASSSETS                                                     180,303               505,224
                                                                                 =============         =============

                   LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
      Accounts Payable and accrued liabilities                                         337,111               247,532
      Accounts payable - related parties                                                     -                72,800
      Capital leaase obligation                                                         12,734                13,341
                                                                                 -------------         -------------
                     Total current liabilities                                         349,845               333,673
                                                                                 -------------         -------------
STOCKHOLDERS' EQUITY
      Common stock, $.01 par value, 40,000,000 shares                                   13,325                 1,991
       authorized, 1,332,482 shares issued and outstanding
      Preferred stock, no par value, 10,000,000 shares                                       -                     -
       authorized in 1999, no shares issued and outstanding
      Additional paid-in capital                                                    17,396,843            17,238,177
      Accumulated deficit                                                          (17,579,710)          (17,068,617)
                                                                                 -------------         -------------
                     Total shareholders' equity                                      (169,542)               171,551
                                                                                 -------------         -------------

                     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY              $     180,303                 $ 505,224
                                                                                 =============         =============
</TABLE>

                   The  accompanying   notes  are  an  integral  part  of  these
condensed financial statements.

                                      -2-

<PAGE>

<TABLE>
<CAPTION>

                               RACOM SYSTEMS, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                                    Three months ended June 30,            Six months ended June 30,
                                                      1998              1999                1998                1999
                                                    -------------      -------------       -------------      -------------
<S>                                                  <C>                <C>                <C>                 <C>
REVENUES
        Product Sales                               $      65,969      $          -        $      93,147       $     23,086
        Product Sales - related party                       6,814                 -               44,141                  -
        License revenues                                  500,000                 -            1,500,000                  -
                                                    -------------      -------------       -------------      -------------
                                                          572,783                 -            1,637,288             23,086
COST OF REVENUES                                           39,846            31,711               76,044             38,510
                                                    -------------      -------------       -------------      -------------

GROSS MARGIN                                              532,937           (31,711)           1,561,244            (15,424)

OPERATING EXPENSES
        Research and development                          217,319                 -              484,067            128,117
        General and administrative                        302,896            19,933              618,502            410,403
        Sales and marketing                               220,611                 -              466,584                  -
        Amortization expense                               39,411                 -               78,822                  -
                                                    -------------      -------------       -------------      -------------
                                                          780,237            19,933            1,647,975            538,520

LOSS FROM OPERATIONS                                     (247,300)          (51,644)             (86,731)          (553,944)

OTHER INCOME (EXPENSE)
        Interest expense                                     (482)                -               (1,195)              (215)
        Interest income                                    16,807                 -               34,529              1,044
        Other                                                 (82)                -                  898             42,022
                                                    -------------      -------------       -------------      -------------
                                                           16,243                 -               34,232             42,851

NET LOSS                                              $  (231,057)        $ (51,644)           $ (52,499)        $ (511,093)
                                                    =============      =============       =============      =============

NET LOSS PER SHARE - BASIC AND DILUTED                $     (1.18)        $   (0.09)            $  (0.27)        $    (1.32)
                                                    =============      =============       =============      =============

WEIGHTED AVERAGE SHARES OUTSTANDING                       196,192           576,926              196,192            388,038
                                                    -------------      -------------       -------------      -------------

</TABLE>

                   The  accompanying   notes  are  an  integral  part  of  these
condensed financial statements.

                                      -3-

<PAGE>

<TABLE>
<CAPTION>

                               RACOM SYSTEMS, INC.
                        CONDENSED STATEMENT OF CASH FLOWS
                                   (Unaudited)

                                                                          ix months ended June 30,
                                                                          998                  1999
                                                                           ----------           ----------
<S>                                                                         <C>                <C>
CASH FLOWS USED IN OPERATING ACTIVITIES:
     Net Loss                                                               $ (52,499)          $ (511,093)
     Adjustments to reconcile net loss to net cash used in
     operating activities:
         Depreciation and amortization                                        117,703               12,533
         Reserve for uncollectible accounts                                                          8,810
         Decrease (increase) in:
             Prepaid expenses and other                                         (327)               40,675
             Accounts receivables-trade                                        14,743               27,164
             Accounts receivables-related parties                              19,136                    -
             Inventory                                                        (21,911)               4,176
         Increase (decrease) in:
             Accounts payable and accrued liabilities                         (56,896)              16,779
             Accounts payable-related party                                   (20,780)                   -
                                                                           ----------           ----------
         NET CASH USED IN OPERATING ACTIVITIES                                   (831)            (400,956)

     CASH FLOWS USED IN INVESTING ACTIVITIES:
             Purchase of fixed assets                                         (52,171)                    -
             Proceeds from sale of fixed assets                                     -               28,000
                                                                           ----------           ----------
         NET CASH FLOWS USED IN INVESTING ACTIVITIES                          (52,171)              28,000

     CASH FLOWS FROM FINANCING ACTIVITIES:
             Proceeds from issuance of common stock                           220,000              170,000
             Payments on capital lease obligation                              (1,792)                (607)
                                                                           ----------           ----------
         NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES                      218,208              169,393

     NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                     165,206             (203,563)

     CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                         1,198,567              383,866
                                                                           ----------           ----------

     CASH AND CASH EQUIVALENTS, END OF PERIOD                              $1,363,773             $180,303
                                                                           ==========           ==========


     Supplemental Disclosure of Cash Flow Information:

         Cash paid during the period for:
             Interest                                                           1,195                    -
             Income taxes                                                           -                    -

</TABLE>

                                      -4-

<PAGE>

                               RACOM SYSTEMS, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                  JUNE 30, 1999

Note 1 - Basis of Presentation

The accompanying  unaudited  condensed  financial  statements have been prepared
without  audit  pursuant  to the rules and  regulations  of the  Securities  and
Exchange Commission.  The condensed financial statements reflect all adjustments
(consisting  of  only  normal  recurring  accruals)  which,  in the  opinion  of
management,  are necessary to present fairly the financial position,  results of
operations and cash flows or Racom  Systems,  Inc. as of June 30, 1999 and 1998
and for the periods  then ended.  Operating  results for the three and six month
periods ended June 30, 1999 are not  necessarily  indicative of the results that
may be expected for the year ended December 31, 1999.

The unaudited  condensed  financial  statements should be read with the complete
financial statements and footnotes thereto included in the Company's Form 10-KSB
for the year ended  December 31, 1998  previously  filed with the Securities and
Exchange Commission.

Note 2 - Nasdaq Listing

In October 1998, the Company  received  notification  from Nasdaq  regarding the
continuing  listing of its stock  because the  Company's  common stock failed to
maintain a closing bid price  greater than or equal to $1.00.  On March 8, 1999,
the Company  received another  notification  from Nasdaq regarding its continued
listing because the Company failed to maintain the minimum required market value
of the public float of $1,000,000. On April 16, 1999, the Company's common stock
was delisted from The Nasdaq  SmallCap  Market and since that date was traded on
the OTC Bulletin Board.

Note 3 - Stock Split

On March 1, 1999,  the Company  effected a reverse  stock split of the Company's
common  stock on the basis of one share for each four and one-half  shares.  The
outstanding and weighted  average number of shares of common stock and per share
data in the financial statements have been adjusted to reflect the impact of the
stock split for all periods  presented.  The authorized number of shares was not
split.

Note 4- Preferred Stock

On January 29, 1999, the  stockholders  of the Company  approved an amendment to
the Company's Certificate of Incorporation authorizing the Board of Directors to
issue up to 10,000,000 shares of preferred stock, $0.01 par value per share. The
Board of  Directors  is  authorized  to issue  the  preferred  stock in  series,
establish  the number of shares in each series and fix the  designation,  voting
power, other powers,  preference,  rights,  limitations and restrictions of each
series.

Note 5- Subsequent Events

On July 12, 1999 the  Company  effected a reverse  stock split of the  Company's
common stock on the basis of one share for each fifteen shares.  The outstanding
and  weighted  average  number of shares of common  stock and per share  data in
these financial statements have been adjusted to reflect the impact of the stock
split for all period presented. The authorized number of shares was not split.

After the July 12, 1999 reverse split, two investment entities each beneficially
owned  566,666  shares  of  the  Company's  common  stock,  representing  in the
aggregate,  approximately  85% of the  Company's  total  issued and  outstanding
common stock. No other shareholder owned greater than 10% of the Company's total
issued and outstanding shares of common stock.

On July 20, 1999, the Company acquired approximately 99.6% (4,958,000 shares) of
the issued and outstanding capital stock of NewState Capital Co., Ltd., a Korean
corporation  ("NewState  Capital")  which was formerly a subsidiary  of NewState
Capital  Corp.,  a New York  corporation  ("NewState"),  in exchange for issuing
8,000,000 shares of the Company's common stock,  representing  approximately 80%
of the  Company's  total  issued  and  outstanding  shares of common  stock,  to
NewState. The Company also assumed a $5,000,000 liability of NewState to a bank.
The terms and  conditions  of the  acquisition  are more  fully set forth in the
Agreement  and  Plan  of  Reorganization,   dated  as  of  July  14,  1999  (the
"Acquisition Agreement"),  by and among the Company, NewState,  NewState Capital

                                      -5-

<PAGE>

and a newly formed wholly-owned subsidiary of the Company, NSK Holdings, Inc., a
Delaware corporation  ("NSK"),  which is incorporated herein by reference to the
Company's  Form 8-K filed with the  Commission  on July 21, 1999. As a result of
the Acquisition Agreement,  (i) NewState Capital has become a subsidiary of NSK,
(ii) several new  investors  acquired  667,000  shares of Racom for  $1,000,000
($1.50 per  share)  pursuant  to the terms and  conditions  of the Common  Stock
Purchase Agreement dated July 14, 1999 by and among the Company, Ocean Strategic
Holdings  Limited and Zebra  Strategic  Holdings  Limited which is  incorporated
herein by reference to the Company's  Form 8-K filed with the Commission on July
21,  1999,  and (iii)  NewState  owns 80% of the  common  stock in the  Company.
Accordingly,  following the consummation of the Acquisition,  NewState  controls
the Company.


           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

Statements  contained  in this  Report  which are not  historical  in nature are
forward-looking   statements  within  the  meaning  of  the  Private  Securities
Litigation  Reform  Act  of  1995.  These  forward-looking   statements  can  be
identified  by the  use  of  forward-looking  terminology  such  as  "believes,"
"expects,"  "may,"  "should",  or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy.

Such  forward-looking  statements  involve certain risks and uncertainties  that
could cause actual results to differ materially from anticipated results.  These
risks and  uncertainties  include  regulatory  constraints,  changes  in laws or
regulations  governing  the  Company's  products and  international  trade,  the
ability of the Company to market  successfully  its products in an  increasingly
competitive  worldwide  market,  changes in the  Company's  operating  strategy,
failure to consummate  or  successfully  integrate  products  developments,  the
general  economy of the United States and the specific  global  markets in which
the Company  competes,  the availability of financing from internal and external
sources  and  other  factors  as may be  identified  from  time  to  time in the
Company's  filings  with  the  Securities  and  Exchange  Commission  or in  the
Company's  press  releases.  No assurance  can be given that the future  results
covered by the forward-looking  statements will be achieved. Other factors could
also cause actual results to vary  materially from the future results covered in
such forward-looking statements.

RESULTS OF  OPERATIONS  FOR THE THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THE
THREE MONTHS ENDED JUNE 30, 1998

REVENUES.  Revenues  decreased from $572,783 for the three months ended June 30,
1998 to zero for the three  months  ended  June 30,  1999.  In March  1999,  the
Company  furloughed most of its employees for an indefinite  period of time. The
Company  received no royalty or license  revenues  during the second  quarter of
1999.

COST OF REVENUES AND GROSS MARGIN. The Company's cost of revenues was $31,711 in
second  quarter of 1999,  down 20% from $39,846 in second  quarter of 1998. As a
percentage  of  revenues,  gross  margin was  negative in second  quarter  1999,
compared to 93.0% in second quarter 1998.

RESEARCH  AND  DEVELOPMENT  EXPENSE  ("R&D").  As  a  result  of  the  Company's
furloughing all of the development personnel in March 1999, the Company incurred
no R&D in second quarter 1999, compared to $217,319 in second quarter 1998.

GENERAL AND  ADMINISTRATIVE  EXPENSES ("G&A").  G&A expenses  decreased $282,963
from $302,896 in the second  quarter 1998 to $19,933 in the second quarter 1999.
The decrease is primarily due to the Company's furloughing most of its employees
in March 1999.

SALES AND  MARKETING  EXPENSES.  Sales and  marketing  expenses  decreased  from
$220,611  to zero in the  second  quarter of 1999 due to the layoff of all sales
and marketing personnel during the fourth quarter of 1998.

AMORTIZATION  EXPENSE.  The  Company's  primary  asset is a  technology  license
related to the design and manufacture of its Smart card products.  In the fourth
quarter of 1998,  the Company  determined  that its investment in the technology
licensed was impaired due to the Company's  current  financial  position and its
inability to fund  operations.  Therefore,  the Company  wrote off the remaining
book value of the  technology  license in  December  1998 and,  accordingly,  no
amortization expense was recorded in the second quarter of 1999.

OTHER  INCOME  (EXPENSE).  The Company  received no other income and incurred no
other expense in the second  quarter of 1999. In the second quarter of 1998, the
Company received $16,242 in other income, comprising mostly of interest income.

                                      -6-

<PAGE>

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE SIX
MONTHS ENDED JUNE 30, 1998

REVENUES.  Revenues  decreased 99% to $23,086 for the six months ending June 30,
1999  ("Interim  1999") from  $1,637,288 for the six months ending June 30, 1998
("Interim  1998").  In March 1999, the Company  furloughed most of its employees
for an  indefinite  period of time.  During  Interim  1998 the Company  received
$1,500,000  in license  revenues.  The  Company  received  no royalty or license
revenues during Interim 1999.

COST OF REVENUES AND GROSS MARGIN. As a percentage of revenues,  gross margin is
negative in Interim 1999 compared to 95% in Interim 1998.  During  Interim 1998,
the license revenues of $1,500,000 have no associated direct costs.

RESEARCH  AND  DEVELOPMENT  EXPENSE  ("R&D").  As  a  result  of  the  Company's
furloughing all of the  development  personnel in March 1999, R&D decreased from
$484,067 in Interim 1998 to $128,117 in Interim 1999.

GENERAL AND  ADMINISTRATIVE  EXPENSES ("G&A").  G&A expenses  decreased $208,099
from  $618,502  in Interim  1998 to $410,403 in Interim  1999.  The  decrease is
primarily due to the Company's furloughing most of its employees in March 1999.

SALES AND  MARKETING  EXPENSES.  Sales and  marketing  expenses  decreased  from
$466,584  to zero in Interim  1999 due to the layoff of all sales and  marketing
personnel during the fourth quarter of 1998.

AMORTIZATION  EXPENSE.  The  Company's  primary  asset is a  technology  license
related to the design and manufacture of its Smart card products.  In the fourth
quarter of 1998,  the Company  determined  that its investment in the technology
licensed was impaired due to the Company's  current  financial  position and its
inability to fund  operations.  Therefore,  the Company  wrote off the remaining
book value of the  technology  license in  December  1998 and,  accordingly,  no
amortization expense was recorded in Interim 1999.

OTHER INCOME  (EXPENSE).  During  Interim  1999,  the Company  earned  $1,044 of
interest  income  compared to $34,529 of interest  income in Interim 1998.  This
reduction  is a direct  result of less funds  available  for  investment.  Other
income of $42,000 in Interim  1999  results  from the reversal of an accrual for
warranty work.

LIQUIDITY AND CAPITAL RESOURCES

In March 1999,  the  Company  announced  that it was unable to continue  funding
operations and that most of its employees had been  furloughed for an indefinite
period of time.  As of June 30,  1999,  the Company  has  entered  into a period
whereby its primary  function  will be to collect  future  royalties if and when
receivable  pursuant to the Company's existing RFID technology licenses to three
multinational  semiconductor companies and to complete existing contracts. There
can be no assurance that royalties will become due in the future.

On May 17, 1999,  the  Company's  Board of Directors  approved  entering  into a
letter  of intent  and a common  stock  purchase  agreement  (the  "Agreement"),
subject  to  certain  contingencies,  for the  sale of  Racom  common  stock  in
anticipation of the spin out of the net assets of Racom from the public company.
The  Agreement  provided for the sale of an aggregate  of  17,000,000  shares of
common stock to two investment  entities for a purchase  price of $170,000.  The
Agreement  further  provided  that (i) four of the six  members  of the Board of
Directors of the Company would  resign,  (ii) the size of the Board of Directors
would be reduced to five members,  and (ii) three nominees of the two investment
entities  would be  appointed to the Board of Directors in order to complete the
remaining terms of the resigning directors. The transactions contemplated by the
Agreement was closed on June 17, 1999.

CASH FLOW

The Company had cash and cash equivalents of $383,866 and $80,303 as of December
31, 1998 and June 30, 1999,  respectively.  During  Interim 1999,  the Company's
primary  source  of cash  was from the  sales  of fixed  assets  and the sale of
17,000,000 shares of restricted common stock at $0.01 per share.

CAPITALIZATION

The Company's  capitalization  of $171,551 as of December 31, 1998 was comprised
entirely  of  stockholders'  equity,  as  compared  to a deficit of  $169,542 of
stockholders'  equity as of June 30, 1999. The decrease is  attributable  to the
net loss of  $511,093  during  Interim  1999,  offset by the sale of  17,000,000
shares of restricted common stock at $0.01 per share.

                                      -7-
<PAGE>

YEAR 2000 DISCLOSURE.

The Year 2000 issue  exists  because  many  computer  systems  and  applications
currently use  two-digit  fields to designate a year. As the century date change
occurs,  date-sensitive  systems will recognize the year 2000 as 1900, or not at
all.  This  inability  to  recognize  or properly  treat the Year 2000 may cause
systems to process critical financial and operational  information  incorrectly.
The Company has  completed  an internal  study to  determine  the full scope and
related costs to insure that the Company's systems continue to meet its internal
needs and those of its  customers.  The results of the internal  study  indicate
that its products are not affected by the Year 2000 issue.  As of June 30, 1999,
the major  system  utilized by the Company is its personal  computer  accounting
system.  The  Company  does not  believe  that the Year 2000  issue  will have a
material effect on this system.

The Company  believes  that there is greater risk that its vendors and customers
will be  affected by the Year 2000 issue.  The  Company is  currently  unable to
assess,  and may be unable to  accurately  determine,  the magnitude of any Year
2000  problems  that may reside in the computer and  information  systems of its
vendors and  customers,  or the impact that any such problems  could have on the
products and services provided by the Company to such customers.

The Company  believes,  based upon the progress to date,  that its suppliers and
customers  are either Year 2000  compliant,  or are  themselves in an assessment
phase.  However,  there  can be no  assurance  that  all such  problems  will be
resolved.  The  occurrence  of Year 2000  related  failures in the  computer and
information  systems of any of the  Company's  significant  customers or vendors
could have a material adverse effect on the business,  results of operations and
financial position of the Company.

                                      -8-

<PAGE>

PART II.      Other Information

Item 1.       Legal Proceedings
              ----------------------
              None

Item 2.       Changes in Securities and Use of Proceeds
              ----------------------------------------------------

              On June 17,  1999,  the Company  issued  17,000,000  shares of its
common stock,  $0.01 par value per share,  at a price of $0.01 per share, to two
investment  entities,  pursuant  to an  exemption  from  registration  under the
Securities  Act provided by Section 4(2)  thereunder.  Proceeds of the offering,
aggregating $170,000,  were used for the payment of outstanding  liabilities and
for general overhead expenses.

Item 3.       Defaults Upon Senior Securities
              --------------------------------------
              None

Item 4.       Submission of Matters to a Vote of Security Holders
              ---------------------------------------------------------------

              A Special Meeting of Stockholders was held on July 12, 1999.  The
following proposal was approved by the stockholders.

              Proposal #1 - To amend the Company's Certificate of Incorporation
              to reverse split the Company's common stock on the basis of one
              share for each fifteen shares outstanding.

              FOR                AGAINST               ABSTAIN
              ---                -------               -------
              17,084,741         95,643                 2,347

Item 5.       Other Information
              ----------------------
              None

Item 6.       Exhibits and Reports on Form 8-K
              -----------------------------------------

(a)      Exhibits:

              27 Financial Data Schedule

(b)      Reports on Form 8-K

              *  Filed  July  21,  1999 - - The  Company  announced  that it had
                 acquired  approximately  99.6% of the  issued  and  outstanding
                 capital  stock  of  Newstate   Capital  Co.,   Ltd.,  a  Korean
                 corporation,  in exchange for issuing  8,000,000  shares of its
                 common  stock,  representing  approximately  80% of  its  total
                 issued and  outstanding  shares of common  stock,  to  Newstate
                 Capital Corp., a New York corporation.

                                   SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                   RACOM SYSTEMS, INC.


                                   By: ________________________________
                                       Alexander T. Shang, Treasurer and
                                       Chief Financial Officer

                                      -9-