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, 2000
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.
1,950,000 shares of common stock, $.001 par value, (the issuer's only class of
common stock), were outstanding as of June 9, 2000.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
VarTech Systems Inc. and Subsidiaries
Balance Sheet
April 30, July 31,
2000 1999
Unaudited Audited
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ASSETS
Current Assets
Cash and cash equivalents $ 3,852 $ 29,460
Accounts receivable 537,083 561,909
Inventory 221,736 220,235
Prepaid expenses - 5,560
Note receivable-officer 95,602 -
Deferred income taxes 44,096 44,096
------------ ------------
Total current assets 902,369 861,260
Furniture and equipment 495,423 477,754
Leasehold improvements 12,145 10,306
Less: Accumulated depreciation (174,053) (136,853)
Deposits 114,988 114,988
------------ ------------
Total assets $1,350,872 $1,327,455
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VarTech Systems Inc. and Subsidiaries
Balance Sheet
April 30, July 31,
2000 1999
Unaudited Audited
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable 296,866 215,015
Other accrued expenses 99,654 100,138
Notes payable 345,372 344,418
Current maturities - Long-term debt - 57,269
------------ ------------
Total current liabilities 741,892 716,840
Deferred income taxes 19,161 19,161
Deferred lease expense 20,149 20,632
Long-term debt, less current maturities - 47,998
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Total liabilities 781,202 804,631
Common stock - $.001 par value
100,000,000 shares authorized
1,950,000 and 2,100,000 shares
issued and outstanding at April 30, 2000
and July 31, 1999 1,950 2,100
Capital in excess of par value 554,911 704,761
Retained earnings 12,809 (184,037)
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Total stockholders' equity 569,670 522,824
Total liabilities and stockholders' equity $1,350,872 $1,327,455
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VarTech Systems Inc. and Subsidiaries
Statement of Operations
(Unaudited)
Quarter Ended Nine Months Ended
April 30, April 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
Sales $1,695,038 $1,011,375 $5,111,637 $4,435,182
Cost of sales 955,646 516,032 2,858,794 2,548,164
---------- ---------- ---------- ----------
Gross profit 739,392 495,343 2,252,843 1,887,018
Expenses 686,794 431,047 2,161,264 1,784,169
---------- ---------- ---------- ----------
Operating income (loss) 52,598 64,296 91,579 102,849
Loss from discontinued
operations - (99,839) - (99,839)
Other income:
Gain on settlement
of debt - - 105,267 -
---------- ---------- ---------- ----------
Net income (loss) $ 52,598 $ (35,543) $ 196,846 $ 3,010
Per common share .03 (.02) .10 .00
Weighted number shares
outstanding 1,950,000 2,200,000 1,950,000 2,200,000
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VarTech Systems Inc. and Subsidiaries
Statement of Cash Flows
(Unaudited)
Quarter Ended Nine Months Ended
April 30, April 30,
2000 1999 2000 1999
--------- --------- --------- ---------
Cash flows from operating activities
Adjustments to reconcile net
income to net cash (used in)
provided by operating activities
Net income (loss) $ 52,598 $(35,543) $196,846 $ 3,010
Depreciation and amortization 6,750 6,825 37,200 118,877
Loss from discontinued
operations - 99,839 - 99,839
Gain on settlement of debt - - (105,267) -
Net changes in:
Accounts receivable and
other assets 185,964 98,364 30,386 119,493
Inventory (53,162) 38,927 (1,501) 230,148
Accounts payable and
accrued expenses 82,897 (285,417) 81,367 (583,235)
Deferred lease expense (161) - (483) -
--------- --------- --------- ---------
Net cash (used in) provided by
operating activities 274,886 (77,005) 238,548 (11,868)
--------- --------- --------- ---------
Cash flows from investing activities
Purchase of property and
equipment - (15,841) (19,508) (107,138)
Cash flows from financing activities
Changes in notes payable (538) (122,159) 954 (121,913)
Changes in notes receivable (95,602) - (95,602) -
Changes in stockholder loan (61,883) - - -
Proceeds from sale of stock - 250,000 - 250,000
Retirement of stock (150,000) - (150,000) -
--------- --------- --------- ---------
Net cash (used in) provided by
financing activities (308,023) 127,841 (244,648) 128,087
--------- --------- --------- ---------
Net increase (decrease) in cash (33,137) 34,995 (25,608) 9,081
Cash and equivalents,
beginning of period 36,989 25,645 29,460 51,559
--------- --------- --------- ---------
Cash and equivalents,
end of period $ 3,852 $ 60,640 $ 3,852 $ 60,640
--------- --------- --------- ---------
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 2000
COMPARED TO APRIL 30, 1999
The Company's revenues increased to $1,695,038 in the third quarter of fiscal
2000 as compared to $1,011,375 in the third quarter of fiscal 1999. This
revenue increase is due to additions to the Company's sales team and effective
marketing of its new product lines.
The Company's costs and expenses in the period totaled $1,642,440 or 97% of
revenues as compared to $947,079 or 94% in the same period of 1999. Profit
margins were lower in fiscal 2000 due to increased marketing costs.
The Company's operating income in the third quarter of 2000 was $52,598 as
compared to operating income of $64,296 in the same period of fiscal 1999.
The decrease in operating income was a result of the Company's increase in
marketing and sales expenses.
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NINE MONTHS ENDED APRIL 30, 2000
COMPARED TO APRIL 30, 1999
The Company's revenues increased by 15% to $5,111,637 for the nine months
ended April 30, 2000 as compared to $4,435,182 for the nine months ended
April 30, 1999. The increase in revenue is attributed to additions to the
Company's sales team and effective marketing of its new product lines.
The Company's costs and expenses increased during the period. Costs and
expenses were $5,020,058 or 98% of revenue for the nine months ended
April 30, 2000 as compared to $4,332,333 or 98% for the nine months ended
April 30, 1999.
The Company's income for the nine months ended April 30, 2000 was $196,846 as
compared to income of $3,010 for the same period of the previous year. The
major difference in the two periods is attributed to a $99,839 loss from
discontinued operations in 1999 and a gain of $105,267 from a settlement of
debt in fiscal 2000.
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 April 30, 2000, the outstanding balance on these lines was $345,372. The
lines of credit and its current assets of $902,369 are deemed sufficient to
fund operations for the next twelve months. As of April 30, 2000, the Company
had $104,628 available under the lines of credit.
<PAGE>
VARTECH SYSTEMS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS
APRIL 30, 2000
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.
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: June 9, 2000
C. Wayne Prater
President
signed/s/ C. Wayne Prater
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EXHIBIT INDEX
EXHIBIT METHOD OF FILING
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27. Financial Data Schedule Filed herewith electronically
