SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549
                             -----------------------
                                   FORM 10-QSB
                                   (Mark One)

                [ X ] Quarterly Report pursuant to Section 13 or
                  15(d) of the Securities Exchange Act of 1934
                For the Quarterly period ended December 31, 2000

                                       or

          [ ] Transition Report pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

                  For the transition period from _____ to _____

                         Commission file number 0-21907

                             NEWSTATE HOLDINGS, INC.
        (Exact name of small business issuer as specified in its charter)


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

156 W. 56th Street, Suite 2005, New York, NY           10019
---------------------------------------------         -------
(Address of Principal Executive Offices)

                                 (212) 245-5801
                              --------------------
                         (Registrant's Telephone Number
                              Including Area Code)

                               RACOM SYSTEMS, INC.
                   P.O. Box 3224, Boulder, Colorado 80307-3224
                        Former Fiscal Year - December 31
                              ---------------------
              (Former Name, Former Address and Former Fiscal Year,
                          if Changed Since Last Report)

Check  whether  the issuer  (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: ___
                 ---
                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares  outstanding  of each, of the issuer's  classes of
common stock,  as of the last  practicable  date: 11,508,684  shares,  $0.01 par
value, outstanding as of January 31, 2001.


<PAGE>

<TABLE>
<CAPTION>
                             NEWSTATE HOLDINGS, INC.

                                      INDEX

Part I            Financial Information                                                      Page
------            ---------------------                                                      ----
                    <S>             <C>                                                        <C>
                    Item 1.         Condensed Consolidated Balance Sheet as of                  5
                                    December 31, 2000

                                    Condensed Consolidated Statements of                        6
                                    Operations for the three month periods ended
                                    December 31, 2000 and December 31, 1999,
                                    and the nine month periods ended
                                    December 31, 2000 and December 31, 1999

                                    Condensed Consolidated Statements of Cash                   7
                                    Flows for the nine months ended December 31,
                                    2000 and December 31, 1999

                                    Notes to Condensed Consolidated Financial                   8
                                    Statements

                    Item 2.         Management's Discussion and Analysis of                    12
                                    Financial Condition and Results of Operations

Part II           Other Information and Signatures                                             17
-------           --------------------------------

</TABLE>

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 known and unknown risks,  uncertainties
and  other  factors  that  could  cause  the  actual  results,  performance,  or
achievements  of the  Company to differ  materially  from  anticipated  results,
performance  or  achievements  expressed  or  implied  by such  forward  looking
statements.  These  risks and  uncertainties  include,  but are not  limited to,
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 product developments,  the general economy of the United
States, Korea and the specific global markets in which the Company competes, the
availability  of  financing  from  internal  and  external  sources  to fund the
Company's  growth strategy,  the effect of adverse changes in loan demand,  real
estate values,  borrowing costs and current  interest rates in Korea,  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 not identified above could also cause
actual  results  to vary  materially  from the  future  results  covered in such
forward-looking  statements.  The  Company  assumes no  obligation  to  publicly
correct or update these forward  looking  statements to reflect actual  results,
changes in  assumptions  or  changes in other  factors  affecting  such  forward
looking  statements  or if the  Company  later  becomes  aware that they are not
likely to be achieved.



<PAGE>



PART I            Financial Information
------            ---------------------

Item 1.   Financial Statements

<TABLE>
<CAPTION>

                             NEWSTATE HOLDINGS, INC.
                         (FORMERLY RACOM SYSTEMS, INC.)
                           CONSOLIDATED BALANCE SHEET
                                   (UNAUDITED)

                                                                 December 31, 2000
ASSETS                                                        -----------------------
<S>                                                                   <C>
Cash and cash equivalents                                             $    160,886
Interest-bearing deposits with banks                                     3,684,940
Securities available for sale                                            1,048,160
Securities held to maturity                                                 21,230
Loans held for investment                                                4,047,859
Loans held for sale                                                     17,909,662
Subordinated certificates                                                6,864,868
Premises and equipment, net                                                772,448
Building and land                                                        2,846,606
Accrued interest receivable                                              1,079,169
Other assets                                                             5,126,658
                                                                      -------------
       Total assets                                                   $ 43,562,486
                                                                      =============
LIABILITIES AND SHAREHOLDERS' EQUITY

Short-term borrowings                                                 $ 14,960,317
Accrued expenses and other liabilities                                     843,804
Long-term debt                                                          30,465,878
Severance and retirement benefits                                           82,213
Negative goodwill                                                        7,655,344
                                                                      -------------
      Total liabilities                                                 54,007,556

Minority interest                                                          (37,912)

Shareholders' equity:
     Common stock: $.01 par value
                   40,000,000 shares authorized;
                   11,508,684 shares issued and outstanding              5,682,430

Accumulated deficit                                                    (14,512,514)
Accumulated other comprehensive loss                                    (1,329,347)
Foreign currency translation adjustments                                  (247,777)
                                                                      -------------
      Total shareholders' equity                                       (10,407,158)
                                                                      -------------
      Total liabilities and shareholders' equity                      $ 43,562,486
                                                                      =============
</TABLE>
                 See accompanying notes to financial statements.

<PAGE>

<TABLE>
<CAPTION>
                             NEWSTATE HOLDINGS, INC.
                         (FORMERLY RACOM SYSTEMS, INC.)
                      CONSOLIDATED STATEMENT OF OPERATIONS
                                   (UNAUDITED)

                                         Three Months ended                  Nine Months ended
                                         ------------------                  -----------------
                                    December 31,    December 31,         December 31,  December 31,
                                       2000            1999                2000            1999
                                       ----            ----                ----            ----
<S>                                 <C>             <C>                 <C>            <C>
Interest income:
  Loans                             $ 1,009,534     $ 2,795,778         $ 3,322,525    $  9,508,600
  Deposits with banks                   311,627         546,771           1,132,447       1,981,733
                                    -----------     -----------         -----------    ------------
      Total interest income           1,321,161       3,342,549           4,454,972      11,490,333
                                    -----------     -----------         -----------    ------------
Interest expense:
  Short-term borrowings                 515,138       1,564,334           2,184,422       4,497,351
  Long-term debt                      1,036,015         986,689           2,163,979       4,429,537
                                    -----------     -----------         -----------    ------------
      Total interest expense          1,551,153       2,551,023           4,348,401       8,926,888
                                    -----------     -----------         -----------    ------------
Net interest income (expense)          (229,992)        791,526             106,571       2,563,445
Reversal of (addition to)
  provision for loan losses            (113,660)        981,322             236,167       1,660,373
                                    -----------     -----------         -----------    ------------
Net interest income (expense)
  after reversal of provision
  for loan losses                      (343,652)      1,772,848             342,738       4,223,818

Other income and expenses:
  Salaries                             (464,590)       (742,441)         (1,443,489)     (2,354,173)
  General and administrative           (695,371)       (540,842)         (2,122,974)     (2,018,602)
  Employee benefits                     (17,874)       (150,902)           (156,342)       (826,083)
  Amortization of negative goodwill     726,466         643,067           2,119,044       1,976,036
  Other income (expense), net          (392,654)     (1,346,218)            (28,370)       (921,291)
                                    -----------     -----------         -----------    ------------
                                       (844,023)     (2,137,336)         (1,632,131)     (4,144,113)

Income (loss) before provision
  for income taxes                   (1,187,675)       (364,488)         (1,289,393)         79,705
Provision for income taxes                    0         426,312                   0         212,273
Minority interest                         5,518           2,069              13,255          10,151
                                    -----------     -----------         -----------    ------------
Net income (loss)                    (1,182,157)         63,893          (1,276,138)        302,129
                                    ===========     ===========         ===========    ============

Net income (loss)
      per share of common stock      $    (0.10)       $   0.01          $    (0.11)        $  0.03
                                    ===========     ===========         ===========    ============
Average shares outstanding           11,508,642      11,443,684          11,508,642      10,670,557
                                    ===========     ===========         ===========    ============

</TABLE>

                 See accompanying notes to financial statements.

<PAGE>

<TABLE>
<CAPTION>

                             NEWSTATE HOLDINGS, INC.
                         (FORMERLY RACOM SYSTEMS, INC.)
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)

                                                                                     For the nine months ended
                                                                                December 31,          December 31,
                                                                                    2000                  1999
                                                                             ------------------------------------------
<S>                                                                          <C>                           <C>
Cash flows from operating activities:
    Net income (loss)                                                        $  (1,276,138)            $     302,129
    Adjustment to reconcile net loss to net cash
      used in operating activities:
      Minorities interest                                                          (13,256)                  (10,151)
      Provision (reversal of provision) for loan loss                             (236,167)               (1,660,373)
      Depreciation and amortization                                                234,904                   153,063
      Amortization of negative goodwill                                         (2,119,044)               (1,976,036)
      Loss on disposal of available-for-sale securities                            246,776                         -
      Increase in accrued employee benefits                                         71,473                   837,055
      Gain on valuation of subordinated certificates                              (624,606)                1,597,949
      Decrease in accrued expenses and other liabilities                          (255,157)               (1,865,568)
      Increase in accrued interest receivable and other assets                  (1,567,399)               (1,060,270)
                                                                             -------------             -------------
    Net cash used in operating activities                                       (5,538,614)               (3,681,662)
                                                                             -------------             -------------
    Cash flows from investing activities:
      Decrease in loans, net                                                     1,613,522                27,284,302
      Decrease in interest bearing deposits with banks                              15,860                 3,279,266
      Proceeds from available-for-sale securities                                  567,439                 6,665,539
      Investment in subsidiary                                                           -                (5,150,500)
      Purchase of available-for-sale securities                                   (841,096)                        -
      Acquisition of premises and equipment (included building and land)        (4,210,707)                        -
      Other                                                                         25,658                (2,024,431)
                                                                             -------------             -------------
    Net cash provided by (used in) investing activities                         (2,829,324)               30,054,176
                                                                             -------------             -------------
    Cash flows from financing activities:
        Decrease in short-term borrowings, net                                 (12,723,902)               (2,581,452)
        Proceeds from long-term debt                                            27,505,318                         -
        Payments on long-term debt                                              (6,761,185)              (52,269,033)
        Proceeds from issuance of common stock                                     170,000                 5,419,980
                                                                             -------------             -------------
    Net cash provided by (used in) financing activities                          8,190,231               (49,430,505)
    Effect of exchange rate changes on cash and cash equivalents                   (24,801)                1,146,471
                                                                             -------------             -------------
    Net decrease in cash and cash equivalents                                     (202,508)              (21,911,520)
    Cash and cash equivalents at beginning of period                               363,394                26,118,761
                                                                             -------------             -------------
    Cash and cash equivalents at end of period                               $     160,886             $   4,207,241
                                                                             =============             =============

</TABLE>
                 See accompanying notes to financial statements.

<PAGE>




                             NEWSTATE HOLDINGS, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                  December 2000

NOTE 1:  BASIS OF PRESENTATION

         The accompanying  financial statements report the consolidated accounts
of NewState  Holding,  Inc.,  a Delaware  corporation  (formerly  known as Racom
Systems, Inc.) and its wholly-owned subsidiaries, NSK Holdings, Inc., a Delaware
corporation ("NSK"),  Racom Systems, Inc., a Colorado corporation ("New Racom"),
and  its  99.6%  owned   subsidiary,   NewState  Capital  Co.,  Ltd.,  a  Korean
corporation.  Pursuant to the  acquisition  described in Note 3 below,  NewState
Holdings,  Inc.  (the  "Company")  has  treated  the  transaction  as a  reverse
acquisition  and,  accordingly,  has  reported  the pro forma effect in the 1998
financial  statements in order to achieve  comparability  in its  operations and
cash flows. The Company was incorporated on June 3, 1991 pursuant to the laws of
the State of Delaware  and  presently  has its  principal  executive  offices in
Seoul, Korea and New York, New York.

NOTE 2:  UNAUDITED FINANCIAL STATEMENTS

         The consolidated  financial statements as of December 31, 2000, and for
the periods ended  December 31, 2000 and 1999,  and September 30, 2000 and 1999,
and June 30,  2000 and  1999,  included  herein  are  unaudited;  however,  such
information reflects all adjustments consisting of normal recurring adjustments,
which are, in the opinion of management,  necessary for a fair  presentation  of
the information for such periods.  The 1999 pro forma  presentation gives effect
to the reverse  acquisition in July 1999, in order to provide  comparability  in
the  presentation  of  operations  and cash flows.  In addition,  the results of
operations for the interim periods are not necessarily indicative of the results
for the  entire  fiscal  year.  The  accompanying  financial  statements  are in
condensed  form and  should be read in  conjunction  with the  Company's  annual
report filed on Form 10-KSB.

NOTE 3:  ACQUISITION

         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 NY"), 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  NY. The Company  also  assumed a  $5,000,000  liability  of
NewState NY 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 NY,
NewState Capital 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  Securities  and  Exchange
Commission  ("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 the  Company 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 NY owns 80% of the common stock in the Company.  Accordingly,
following the consummation of the Acquisition, NewState NY controls the Company.

         The Company accounted for the acquisition as a purchase under a reverse
acquisition   procedure  whereby  NewState  Capital's  operations  and  retained
earnings are reported as continuous.

         NewState  Capital  is  a  specialty  finance  company  incorporated  on
February 18, 1994 under the laws of the Republic of Korea to engage in factoring
commercial  notes  and  accounts  receivables,  and to  provide  short-term  and
long-term financing,  including home mortgage loans, to customers.  On March 12,
1999,  NewState Capital  acquired all the outstanding  stock of Youngnam Housing
Finance Co.,  Ltd., a Korean  company  providing  financings for the purchase of
homes to  middle-income  individuals.  The  acquisition  was recorded  under the
purchase method of accounting.

NOTE 4:  DISSOLUTION

         The boards of directors of both New Racom, a dormant subsidiary with no
assets, and the Company authorized  the  dissolution  of New Racom by  unanimous
consent on  November  21,  2000.  Articles  of  Dissolution  were filed with the
Secretary of State of the State of Colorado on December  19, 2000.  The State of
Colorado is currently in the process of issuing a tax clearance certificate. The
Company  originally created New Racom during the acquisition of NewState Capital
referred  to in Note 3 above in order  to  transfer  all  remaining  assets  and
liabilities  that  existed on the date of the  acquisition  to New  Racom.  This
transaction,  however, was never consummated and the Company decided to dissolve
New Racom.

         The boards of  directors  of both NSK and the  Company  authorized  the
dissolution  and  liquidation of NSK by unanimous  consent on November 29, 2000.
The Company  originally  created NSK during the acquisition of NewState  Capital
referred to in Note 3 above to ensure that there would be no liability issues in
connection  with the  acquisition.  The  Company  owned  100% of the  issued and
outstanding  common  stock  of  NSK  and  NSK  owned  99.6%  of the  issued  and
outstanding  common stock of NewState  Capital.  The boards of directors of both
NSK and the Company  dissolved and  liquidated  NSK effective as of December 31,
2000. A Certificate of Dissolution  was filed with the Secretary of State of the
State of Delaware on January 18, 2001.

NOTE 5:  LOANS

         Loans held for  investment  at  December  31,  2000 are as follows  (in
thousands of Won):

                                   Allowance for     Net Book      U.S. Dollars
                    Principal       loan losses       Value          (a)
                    ------------   -------------     -----------   ------------
Loans held           W13,288,972     W8,188,669       W5,100,303   $4,047,859
 for investment

         Loans  held  for  investment  consist  of  residential  mortgage  loans
(approximately  96.8%) and commercial and consumer loans (approximately 3.2%) at
December 31, 2000.

         (a)  translated at the rate of  W1,260.0:$1.00,  the  prevailing Won to
U.S. Dollar exchange rate on December 31, 2000.

NOTE 6:  SHORT TERM BORROWINGS

         Short-term borrowings at December 31, 2000 comprise the following:

                       Annual Interest         Thousands          U.S. Dollars
                         Rate (%)                of Won               (a)
                    -------------------      ------------         ------------
Finance companies     9.29 ~ 12.00            W18,850,000         $14,960,317
                                              ===========         ===========

         (a)  translated at the rate of  W1,260.0:$1.00,  the  prevailing Won to
U.S. Dollar exchange rate on December 31, 2000.

NOTE 7:  LONG-TERM DEBT

         Long-term debt at December 31, 2000 comprise the following:

                                     Thousands
                        Reference     of  Won            U.S. Dollars  (a)
                        ---------    -------------      ------------------
 Debentures                (A)        W31,987,007           $25,386,513
 Won currency loans        (B)         W6,400,000            $5,079,365
                                     -------------      ------------------
                                      W38,387,007          $30,465,878
                                     =============      ==================

         (A) Debentures outstanding at December 31, 2000 comprise the following:


                                    Annual         Thousands
                                    Rates (%)       of Won      U.S. Dollars (a)
                                    ---------      ----------   ----------------

Debentures collateralized
  by bank letter of credit            9.7             W495,730        $393,436
Non-collateralized debentures     10.5 ~ 11.035    W31,491,277     $24,993,077
                                                   -----------     -----------
                                                   W31,987,006     $25,386,513
                                                   ===========     ===========

         (a)  translated at the rate of  W1,260.0:$1.00,  the  prevailing Won to
U.S. Dollar exchange rate on December 31, 2000.

<PAGE>

         (B) Won currency  loans  outstanding  at December 31, 2000 comprise the
following:

                          Annual             Thousands
                          Rates (%)            of Won           U.S. Dollars(a)
                        --------------      --------------      ---------------
Won currency loans       10.25 ~ 14.5         W6,400,000           $5,079,365
                        --------------      --------------      ---------------
                                              W6,400,000           $5,079,365
                                            ==============      ===============

         (a)  translated at the rate of  W1,260.0:$1.00,  the  prevailing Won to
U.S. Dollar exchange rate on December 31, 2000.



<PAGE>


Item 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS

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

THE FOLLOWING ANALYSIS OF THE OPERATIONS AND FINANCIAL  CONDITION OF THE COMPANY
SHOULD  BE  READ  IN  CONJUNCTION  WITH  THE  CONDENSED  CONSOLIDATED  FINANCIAL
STATEMENTS,  INCLUDING NOTES THERETO, OF THE COMPANY CONTAINED ELSEWHERE IN THIS
FORM 10-QSB.

OVERVIEW

On October 10, 2000,  NewState Capital Co. Ltd. ("NewState  Capital"),  a Korean
operating  subsidiary of NewState Holdings,  Inc. (the "Company") announced that
it will  issue  mortgage-backed  securities  ("MBS")  through a special  purpose
entity ("SPE") in the principal amount of $16.5 million. This will be the second
MBS  issuance by NewState  Capital  this year.  The cut-off day was November 14,
2000 and the total  number of loans was 511.  Underwriting  was  performed by LG
Investment  &  Securities  Co.,  Ltd. and the due  diligence  investigation  was
performed by Samil  Accounting  Corporation.  The MBS issuance closed on January
19, 2001.

On November 21, 2000,  the boards of  directors of both Racom  Systems,  Inc., a
Colorado  corporation  ("Racom"),  and the Company  approved the liquidation and
dissolution of Racom, a dormant subsidiary corporation.  Articles of Dissolution
were filed with the  Secretary of State of the State of Colorado on December 19,
2000.

On November 29, 2000,  the boards of  directors  of both NSK  Holdings,  Inc., a
Delaware  corporation  ("NSK"),  and the Company  approved the  liquidation  and
dissolution of NSK, a subsidiary corporation. The assets of NSK were transferred
to the Company  effective on December 31, 2000. A Certificate of Dissolution was
filed with the Secretary of State of the State of Delaware on January 18, 2001.

On December 1, 2000,  NewState Capital announced that it entered into a contract
to acquire  55.34 percent of the total shares of World Asset  Management  Ltd, a
Seoul based mutual fund management  company.  This acquisition becomes effective
immediately  upon an official  approval from the Financial  Supervisory  Service
("FSS") of Korea, the governmental committee that regulates the finance sector.

On December 15, 2000,  NewState  Capital decided to restructure its sales force.
NewState  Capital  seeks to  improve  the  quality  of its  sales  force and has
launched an  intensive  education  program.  NewState  Capital is  developing  a
performance  based sale  program to attract  new branch  managers,  after  which
branch managers will be appointed.

RESULTS OF OPERATIONS  FOR THE THREE MONTHS ENDED  DECEMBER 31, 2000 COMPARED TO
THE THREE MONTHS ENDED DECEMBER 31, 1999

INTEREST INCOME

Interest  income on loans  decreased  64.3% to $1.0 million for the three months
ended  December  31, 2000 ("3rd  Quarter  2000") from $2.8 million for the three
months ended  December 31, 1999 ("3rd Quarter  1999").  The decrease in interest
income  on  loans  was  due  to  the  net  decrease  in  outstanding   loans  by
approximately $56.8 million,  compared to the outstanding balance as of December
31, 1999.  The reason for the decrease in mortgage  loans was that  originations
were offset by loan sales  through a MBS issuance of $53.6  million on March 21,
2000, a $27.0 million issuance on July 31, 2000 and repayments.  Interest income
on bank deposits  decreased to $311,627 in the 3rd Quarter 2000 from $546,771 in
the 3rd Quarter 1999 due to a decrease in average cash and bank deposits.

INTEREST EXPENSE

Total  interest  expense  decreased to $1.6 million in the 3rd Quarter 2000 from
$2.6 million in the 3rd Quarter  1999 due to lower  outstanding  borrowings  and
interest rates. The outstanding  borrowings declined to $45.4 million at the end
of the 3rd Quarter 2000, compared to $77.1 million at the end of the 3rd Quarter
1999.

NET INTEREST INCOME (EXPENSE)

The Company  recorded net interest  expense of $229,992 for the 3rd Quarter 2000
compared  to net  interest  income of  $791,526  for the 3rd  Quarter  1999.  In
addition to the decrease in loans and borrowings,  the decrease was due to lower
interest rates on mortgage loans outstanding and higher borrowing costs.

PROVISION FOR LOAN LOSSES

The Company  recorded  provision for loan losses of $113,660 for the 3rd Quarter
2000 compared to a reversal of provision for loan losses of $981,322 for the 3rd
Quarter 1999. The reversal in 1999 was due to  collections  of accrued  interest
and mortgage loan principal on loans previously written off.

SALARIES

Salaries  decreased to $464,590 in the 3rd Quarter 2000  compared to $742,441 in
the 3rd Quarter  1999  primarily  due to  replacing  former  employees  with new
lower-paid employees.

GENERAL AND ADMINISTRATION ("G&A")

G&A  increased to $695,371 in the 3rd Quarter  2000  compared to $540,842 in the
3rd Quarter 1999. The Company had increased advertising expenses for newspapers,
consulting and professional service fees in the 3rd Quarter 2000.

EMPLOYEE BENEFITS

Employee benefits  decreased to $17,874 in the 3rd Quarter 2000 from $150,902 in
the 3rd Quarter 1999 due to an decrease in number of employees, especially those
employees who were qualified employees as described below. Employee benefits are
accrued for employees  and directors  with more than one year of service and are
based on their annual compensation and years of service.

AMORTIZATION OF NEGATIVE GOODWILL

Negative goodwill, which represents the excess of fair value over purchase price
of net assets  acquired,  is being amortized on the  straight-line  basis over 5
years. The net amount of negative goodwill amortization for the 3rd Quarter 2000
was $726,466.

OTHER INCOME (EXPENSE), NET

The Company  recorded a net other  expense of  $392,654 in the 3rd Quarter  2000
compared to net other income of $1,346,218 in the 3rd Quarter 1999.  For the 3rd
Quarter  2000,  other  expense  included  losses for disposal of  securities  of
$595,076 compared to a loss of $1,597,949 in the 3rd Quarter 1999.

NET INCOME (LOSS)

The  Company  recorded a net loss of  $1,182,157  or $0.10 per share for the 3rd
Quarter 2000  compared to a net income of $63,893 or $0.01 per share for the 3rd
Quarter 1999.

RESULTS OF  OPERATIONS  FOR THE NINE MONTHS ENDED  DECEMBER 31, 2000 COMPARED TO
THE NINE MONTHS ENDED DECEMBER 31, 1999

INTEREST INCOME

Interest  income on loans  decreased  to $3.3  million for the nine months ended
December 31, 2000  ("Interim  2000") from $9.5 million for the nine months ended
December 1999 ("Interim 1999")  primarily due to loan sales.  Interest income on
bank  deposits  decreased  to $1.1  million in Interim 2000 from $2.0 million in
Interim 1999 due to a reduced  outstanding  average balance of  interest-bearing
deposits with banks during the Interim 2000.

INTEREST EXPENSE

Total  interest  expense  decreased  to $4.3  million in Interim  2000 from $8.9
million in Interim 1999  primarily  due to the Company's  lowered  borrowings as
described above.

NET INTEREST INCOME

Net interest income decreased to $106,571 for Interim 2000 from $2.6 million for
Interim 1999 due to decreased mortgage loans and borrowings  combined with lower
mortgage rates and higher borrowing costs.

REVERSAL OF (ADDITION TO) PROVISION FOR LOAN LOSSES

The Company was again able to record a reversal of provision  for loan losses of
$236,167  in Interim  2000  compared to a provision  reversal of  $1,660,373  in
Interim 1999 due to continued  collections of accrued interest and mortgage loan
principal on loans previously written off.

SALARIES

Salaries  decreased to $1.4 million in Interim 2000 from $2.4 million in Interim
1999 due to a decrease in employees.

GENERAL AND ADMINISTRATION ("G&A")

The amount of G&A increased to $2.1 million in Interim 2000 from $2.0 million in
Interim 1999 due primarily to advertising expenses,  consulting and professional
service fees.

EMPLOYEE BENEFITS

Employee benefits decreased to $156,342 in Interim 2000 from $826,083 in Interim
1999.  Employee  benefits are accrued for employees and directors with more than
one year of  service  and are based on their  annual  compensation  and years of
service.  The  decrease in employee  benefits was due to a decrease in number of
employees, especially those employees who were qualified employees.

AMORTIZATION OF NEGATIVE GOODWILL

Negative goodwill, which represents the excess of fair value over purchase price
of net assets  acquired,  is being amortized on the  straight-line  basis over 5
years.  The net amount of negative  goodwill  amortization  for Interim 2000 was
$2.1 million.

OTHER INCOME (EXPENSE), NET

Net other expense  increased to $28,370 in Interim 2000 from net other income of
$921,291 in Interim  1999. In Interim 2000,  Other expense  included  losses for
disposal of securities  of $803,544  compared to a loss of $1,597,949 in Interim
1999.

NET INCOME (LOSS)

The Company  recorded a net loss of $1.3  million or $0.11 per share for Interim
2000 as compared to net income of $302,129 or $0.03 per share for Interim  1999.
The  increase  in net  loss  was  primarily  due  to  decreased  mortgage  loans
originated and outstanding and interest margin pressure.

LIQUIDITY AND CAPITAL RESOURCES

At  December  31,  2000,  the  Company  had  cash  and  cash   equivalents   and
interest-bearing  deposits  totaling  $3.8  million  compared to $4.6 million at
March 31, 2000.

For the nine months ended December 31, 2000,  cash used in operating  activities
of $5.5  million  was  primarily  due to (i) net  loss  of  $1.3  million,  (ii)
amortization  of negative  goodwill of $2.1 million,  (iii)  increase in accrued
interest receivable and other assets of $1.6 million, and (iv) gain on valuation
of subordinated certificates of 0.6 million.

For the nine months ended December 31, 2000,  cash used by investing  activities
was $2.8  million and was  primarily  due to (i)  acquisition  of  premises  and
equipment  (included building and land) of $4.2 million,  (ii) decrease in loans
of $1.6 million,  (iii)  acquisition  of  available-for-sale  securities of $0.8
million,  and (iv)  Proceeds from sale of  available-for-sale  securities of 0.6
million.

For the nine  months  ended  December  31,  2000,  cash  provided  by  financing
activities  of $8.2 million was  primarily  attributable  to the  proceeds  from
long-term debt of $27.5 million, offset by net payments on short-term borrowings
of $12.7 million and long-term debt of $6.8 million,  respectively.  The Company
will require capital to continue its operations.

The Company intends to secure  additional  capital by issuing  corporate  bonds,
pledging assets for bank  borrowings,  and issuing  Mortgage-Backed  Securities,
Collateralized  Loan  Obligations,  and  Collateralized  Bond  Obligations.  The
Company may also issue  additional  equity  securities,  if required,  which may
result in  additional  dilution to the holders of the  Company's  common  stock.
There can be no assurance that  additional  financing will be available on terms
and conditions acceptable to the Company, if available at all.


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.

<PAGE>

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

              The Annual Meeting of  Stockholders  was held on November 9, 2000.
The following is a brief description as well as the tabulation of votes for each
of the matters which were voted upon at the 2000 Annual Meeting.

         1.  Election of the  following  four  persons as  directors of NewState
Holdings, Inc.:

                 DIRECTOR                  FOR             AUTHORITY WITHHELD
              -------------              ---------         ------------------
              Ernest B. Kim              8,505,809                 698
              Jin K. Kim                 8,505,809                 698
              Sun W. Young               8,505,809                 698
              A. Sungil Noh              8,505,809                 698


Item 5.       Other Information

         On July 31, 2000,  NewState  Capital Co.,  Ltd.,  the Company's  Korean
operating subsidiary ("NewState  Capital"),  successfully issued corporate bonds
in the principal amount of 30 billion Won (US$27 million).  The bonds issued had
two different maturities, 1.5 years and 2 years, in the amount of 15 billion Won
(US$14  million)  each and have been  incorporated  into the  underlying  assets
backing  a  1.5  trillion  Won  (US$1.4  billion)  pooled   collateralized  bond
obligation  ("CBO") issue  underwritten  by LG Investment & Securities Co., Ltd.
("LG Investment").

         LG Investment & Securities  Co.,  Ltd., the lead manager in issuing the
CBO, is one of the largest  securities firms in Korea with over 7.3 trillion Won
in total assets and over 2,500 employees in 99 domestic  branches and 5 branches
overseas.

         On January 19, 2001, NewState Capital issued mortgage-backed securities
("MBS") in the  principal  amount of 18.2 billion Won ($16.5  million).  The MBS
were issued in five  tranches.  The two senior  tranches  are rated  triple-A by
Korean Rating Services and Korean Management  Consulting Credit Rating Corp. and
the three subordinate tranches are rated single-A,  triple-B and double-C. Legal
counsel for the issuer was Shin & Kim in Korea,  due  diligence was conducted by
PriceWaterhouseCoopers,  and the trustee was Housing & Commercial Bank of Korea.
The lead underwriter for the MBS was LG Investment.


Item 6.       Exhibits and Reports on Form 8-K


              (a)      Exhibits:

                       None.

              (b)      Reports on Form 8-K

                       None.



<PAGE>


                                   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.

                                    NEWSTATE HOLDINGS, INC.


                                        ERNEST B. KIM
                                    By: ________________________________
                                        Ernest B. Kim, Chairman, President
                                         and Chief Executive Officer