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 quarter April 30, 1997 Commission file number 33-26798-D
VARTECH SYSTEMS INC.
(formerly RICHMOND CAPITAL CORPORATION)
(exact name of registrant as specified in its' charter)
Colorado
(State or other jurisdiction of incorporation or organization)
84-1104385
(I.R.S. Employer Identification No.)
12139 Airline Highway
Baton Rouge, Louisiana 70817-4410
(Address of principal executive offices)
Registrant's telephone number, including area code: (504) 756-8989
Indicate by check mark whether the registrant (1) has filed all reports 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) had been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the insurer's classes of
common stock , as of the latest practicable date.
1,787,300 shares of common stock, $.001 par value, (the issuer's only class of
common stock), were outstanding as of June 6, 1997.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
VarTech Systems Inc.
(Formerly Richmond Capital Corporation)
Balance Sheets
April 30, July 31,
1997 1996
Unaudited Audited
--------- -------
ASSETS
Current Assets
Cash $ 14,192 $ 18,682
Investments 6,500 6,500
Accounts receivable 430,359 103,616
Inventory 84,888 49,888
-------- --------
Current assets 535,939 178,686
Property and equipment (net of depreciation) 47,774 65,375
Leasehold improvements (net of depreciation) 5,496 7,896
Note receivable - officer 19,602 13,402
Other assets 124,000 4,000
-------- --------
Total assets $732,811 $269,359
-------- --------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
Accounts payable 94,186 77,027
Accrued expenses 9,492 2,146
Income taxes 134,586 -
Notes payable 123,996 72,278
-------- --------
Current liabilities 362,260 151,451
Common stock - $.001 par value
100,000,000 shares authorized
1,787,300 shares issued and
outstanding 1,788 1,788
Capital in excess of par value 262,634 262,634
Retained earnings (deficit) 106,129 (146,514)
-------- --------
Total shareholders' equity 370,551 117,908
-------- --------
Total liabilities and shareholders' equity $732,811 $269,359
-------- --------
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<PAGE>
VarTech Systems Inc.
(formerly Richmond Capital Corporation)
Statement of Operations
(Unaudited)
Quarter Ended Nine months ended
April 30, April 30,
1997 1996 1997 1996
-------- -------- -------- --------
Sales $722,859 $226,604 $1,950,820$1,100,473
Cost of sales 462,205 161,692 1,108,343 749,463
-------- -------- ---------- --------
Gross profit 260,654 64,912 842,477 351,010
Expenses 186,208 128,113 434,835 364,642
-------- -------- ---------- --------
Income before taxes 74,446 (63,201) 407,642 (13,632)
Income taxes 21,000 - 155,000 -
-------- -------- ---------- -------
Net income $53,446 $(63,201) 252,642 (13,632)
Per common share .03 (.04) .14 (.01)
Weighted number shares
outstanding 1,787,300 1,787,300 1,787,300 1,787,300
-3-
<PAGE>
VarTech Systems Inc.
(formerly Richmond Capital Corporation)
Statement of Cash Flows
(Unaudited)
Three Months Ended
Quarter Ended Nine Months Ended
April 30, April 30,
1997 1996 1997 1996
--------- -------- --------- ---------
Cash flow from operating
activities:
Net income $ 53,446 $(63,201) $252,642 $(13,632)
Noncash items included in
net income
Depreciation 10,000 5,000 20,000 15,000
Net changes in:
Accounts receivable (54,880) 5,033 (353,357) 160,615
Inventory (10,000) 8,500 (35,000) (7,442)
Deposits - (120,000) -
Accounts payable and
accrued expenses 25,259 (18,386) 216,661 (156,255)
--------- -------- -------- --------
Net cash provided
by operating activities 23,825 (63,054) (19,054) (1,714)
--------- -------- -------- --------
Cash flows from investing
activities:
Purchase of property
and equipment - (7,859) - (74,636)
Cash flows from financing
activities:
Changes in notes payable (25,774) 67,145 14,563 80,577
--------- -------- -------- --------
Net increase(decrease) in cash (1,949) (3,768) (4,491) 4,227
Cash and equivalents,
beginning of period 16,141 14,682 18,683 6,687
--------- -------- -------- --------
Cash and equivalents,
end of period $ 14,192 $ 10,914 $ 14,192 $ 10,914
--------- -------- -------- --------
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 1997
COMPARED TO APRIL 30, 1996
The Company's revenues increased to $722,859 in the third quarter of fiscal
1997 as compared to $226,604 in the third quarter of fiscal 1996. This
revenue increase is primarily due to increased sales activity in new markets
and increased production of the sales staff.
The Company's costs and expenses in the period before provision for income
taxes totaled $648,413 or 90% of revenues as compared to $289,805 or 128% in
the same period of 1996. The primary difference in the two periods was the
substantial increase in sales volume.
The increase in other expenses was primarily additional compensation to the
sales staff and increased provision for income taxes.
The Company's net income after tax in the third quarter of 1997 was $53,446 as
compared to a loss of ($63,201) the same period in fiscal 1996. The increase
in net income was a result of the Company's increase in both sales volume and
profit margins on the products sold.
-5-
<PAGE>
NINE MONTHS ENDED APRIL 30, 1997
COMPARED TO APRIL 30, 1996
The Company's revenues increased by 77% to $1,950,820 for the nine months
ended April 30, 1997 as compared to $1,100,473 for the nine months ended April
30, 1996. The increase in revenue is attributed to an increase in marketing
and additional product lines.
The Company's cost and expenses increased during the period; however, the
increase represents a lower percentage of total revenue. Cost and expenses
were $1,543,178 or 79% of revenue for the nine months ended April 30, 1997 as
compared to $1,114,105 or 101% for the nine months ended April 30, 1996. The
difference in the two periods was a direct result of the increase in overall
sales.
The Company's after tax income for the nine months ended April 30, 1997 was
$252,642 as compared to a loss of ($13,632) for the same period of the
previous year.
LIQUIDITY AND CAPITAL RESOURCES
The Company has lines of credit totaling $125,000 which it uses for short-term
borrowing to finance receivable and acquire inventory. On April 30, 1997, the
outstanding balance on these lines was $107,686. The Company also has other
short term loans totaling $16,310. The lines of credit, other loans, and its
current assets of $535,939 are deemed sufficient to fund operations for the
next twelve months. As of April 30, 1997, the Company had $17,314 available
under the lines of credit.
The Company's accounts receivable balance increased $48,680 during the third
quarter of fiscal year 1997. This increase was a result of the 218% increase
in sales over the same period in fiscal 1996 in conjunction with the year to
date increase of $850,346 or 77% for fiscal 1997 over fiscal 1996.
-6-
<PAGE>
VARTECH SYSTEMS INC.
(formerly RICHMOND CAPITAL CORPORATION)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
April 31, 1997
General
The accompanying unaudited financial statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations. The Company believes that the disclosures made herein are
adequate to make the information presented not misleading. In the opinion of
management, all adjustments necessary to a fair statement of the results of
operations for the periods presented have been made.
-7-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1 THROUGH 3.
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY/HOLDERS
NONE
ITEM 5. OTHER INFORMATION
The Company filed Articles of Amendment to the Articles of Incorporation
pursuant to the provisions of the Colorado Business Corporation Act and
changed the company name from Richmond Capital Corporation to VarTech Systems
Inc.
The Company filed Form 8-K and Form 8-K/A dated February 1, 1997 detailing the
acquisition of Encore Investments, Inc. Cash payments required were to be
provided by loan proceeds from DBS Capital Corporation for payment on May 31,
1997. The DBS loans were not finalized and the acquisition has been delayed.
No results of the operations of Encore Investments, Inc. have been included in
the third quarter operations of VarTech Systems Inc. (formerly Richmond
Capital Corporation).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K FOR THE QUARTER ENDED JANUARY 31,
1997
(a) Exhibits - none
(b) Reports on Form 8-K. Form 8-K and Form 8-K/A amendment no. 1 dated
February 1, 1997 were filed during the current quarter for the registrant's
acquisition of Encore Investments, Inc. All financial statements required
under regulation 210-3.05(b) and pro forma financial information required
pursuant to Article 11 of Regulation S-X were detailed and filed with Form
8-K/A dated February 1, 1997.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RICHMOND CAPITAL CORPORATION
(Registrant)
DATE: June 12, 1997
J. Keith Henderson
President
signed/s/ J. Keith Henderson
<PAGE>
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
- ------- -----------------------------
27. Financial Data Schedule Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet and statement of operations of the Company's Form 10-Q for the
year to date, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK>0000846535
<NAME> VARTECH SYSTEMS INC.
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<PERIOD-END> APR-30-1997
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