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 October 31, 1999
Commission file number 33-26798-D
VARTECH SYSTEMS INC.
(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.)
11301 Industriplex Boulevard, Suite 4
Baton Rouge, Louisiana 70809-4115
(Address of principal executive offices)
Registrant's telephone number, including area code: (225) 298-0300
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.
2,100,000 shares of common stock, $.001 par value, (the issuer's only class of
common stock), were outstanding as of December 10, 1999.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
VarTech Systems Inc. and Subsidiaries
Balance Sheet
October 31, July 31,
1999 1999
Unaudited Audited
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents $ 14,456 $ 29,460
Accounts receivable 690,983 561,909
Inventory 171,437 220,235
Prepaid expenses 1,650 5,560
Deferred income taxes 44,096 44,096
------------ ------------
Total current assets 922,622 861,260
Furniture and equipment 494,473 477,754
Leasehold improvements 12,145 10,306
Less: Accumulated depreciation (151,853) (136,853)
Deposits 114,988 114,988
------------ ------------
Total assets $1,392,375 $1,327,455
<PAGE>
VarTech Systems Inc. and Subsidiaries
Balance Sheet
October 31, July 31,
1999 1999
Unaudited Audited
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable 185,081 215,015
Other accrued expenses 109,284 100,138
Notes payable 339,860 344,418
Current maturities - Long-term debt 57,269 57,269
------------ ------------
Total current liabilities 691,494 716,840
Deferred income taxes 19,161 19,161
Deferred revenue 25,000 -
Deferred lease expense 20,632 20,632
Long-term debt, less current maturities 47,998 47,998
------------ ------------
Total liabilities 804,285 804,631
Common stock - $.001 par value
100,000,000 shares authorized
2,100,000 shares issued and outstanding
at October 31, 1999 and July 31, 1999 2,100 2,100
Capital in excess of par value 704,761 704,761
Retained earnings (118,771) (184,037)
------------ ------------
Total stockholders' equity 588,090 522,824
Total liabilities and stockholders' equity $1,392,375 $1,327,455
------------ ------------
<PAGE>
VarTech Systems Inc. and Subsidiaries
Statement of Operations
(Unaudited)
Quarter Ended
October 31,
1999 1998
---------- ----------
Sales $1,654,290 $1,707,621
Cost of sales 911,312 1,219,391
---------- ----------
Gross profit 742,978 488,230
Expenses 677,712 470,826
---------- ----------
Net income $ 65,266 $ 17,404
Per common share .03 .01
Weighted number shares
outstanding 2,100,000 1,950,000
<PAGE>
VarTech Systems Inc. and Subsidiaries
Statement of Cash Flows
(Unaudited)
Quarter Ended
October 31,
1999 1998
--------- ---------
Cash flows from operating activities
Adjustments to reconcile net
income to net cash (used in)
provided by operating activities
Net income (loss) $ 65,266 $ 17,404
Depreciation and amortization 15,000 56,439
Net changes in:
Accounts receivable and
other assets (125,164) (53,959)
Inventory 48,798 179,908
Accounts payable and
accrued expenses (20,787) (231,305)
Non-compete obligation - (33,750)
Deferred revenue 25,000 -
--------- ---------
Net cash (used in) provided by
operating activities 8,113 (65,263)
--------- ---------
Cash flows from investing activities
Purchase of property and
equipment (18,558) (14,627)
--------- ---------
Cash flows from financing activities
Changes in notes payable (4,559) 44,625
--------- ---------
Net increase (decrease) in cash (15,004) (35,265)
Cash and equivalents,
beginning of period 29,460 51,559
--------- ---------
Cash and equivalents,
end of period $ 14,456 $ 16,294
--------- ---------
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 1999
COMPARED TO OCTOBER 31, 1998
The Company's revenues decreased by 3% to $1,654,290 in the first quarter ended
October 31, 1999 as compared to $1,707,621 in the first quarter of the prior
year, due to the Company's continued effort to reduce sales of personal computer
hardware and related products.
The Company's costs and expenses were $1,589,024 or 96% of revenues as compared
to $1,690,217 or 99% in the same period ended October 31, 1998.
The Company's net income in the first quarter was $65,266 as compared to net
income of $17,404 in the same period last year. The increase in net income was
a result of the Company refocusing its business into higher margin services
away from low margin personal computer products.
LIQUIDITY AND CAPITAL RESOURCES
The Company has lines of credit totaling $450,000 which it uses for
short-term borrowing to acquire inventory and finance accounts receivable.
On October 31, 1999, the outstanding balance on these lines was $339,860.
The lines of credit and its current assets of $922,622 are deemed sufficient
to fund operations for the next twelve months. As of October 31, 1999, the
Company had $110,140 available under the lines of credit.
<PAGE>
VARTECH SYSTEMS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS
OCTOBER 31, 1999
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.
<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
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) NONE
(b) NONE
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.
VARTECH SYSTEMS INC.
(Registrant)
DATE: December 10, 1999
C. Wayne Prater
President
signed/s/ C. Wayne Prater
<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.
<PERIOD-TYPE> 3-MOS
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<PERIOD-END> OCT-31-1999
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<COMMON> 2100
0
0
<OTHER-SE> 585990
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<INCOME-PRETAX> 65266
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