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 January 31, 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.
2,100,000 shares of common stock, $.001 par value, (the issuer's only class of
common stock), were outstanding as of March 10, 2000.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
VarTech Systems Inc. and Subsidiaries
Balance Sheet
January 31, July 31,
2000 1999
Unaudited Audited
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents $ 36,989 $ 29,460
Marketable equity securities 61,883 -
Accounts receivable 659,514 561,909
Inventory 168,574 220,235
Prepaid expenses 1,650 5,560
Deferred income taxes 44,096 44,096
----------- -----------
Total current assets 972,706 861,260
Furniture and equipment 495,423 477,754
Leasehold improvements 12,145 10,306
Less: Accumulated depreciation (167,303) (136,853)
Deposits 114,988 114,988
----------- -----------
Total assets $1,427,959 $1,327,455
<PAGE>
VarTech Systems Inc. and Subsidiaries
Balance Sheet
January 31, July 31,
2000 1999
Unaudited Audited
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable 216,372 215,015
Other accrued expenses 97,250 100,138
Notes payable 345,910 344,418
Current maturities - Long-term debt - 57,269
----------- -----------
Total current liabilities 659,532 716,840
Deferred income taxes 19,161 19,161
Deferred lease expense 20,310 20,632
Long-term debt, less current maturities - 47,998
Stockholder loan 61,883 -
----------- -----------
Total liabilities 760,886 804,631
Common stock - $.001 par value
100,000,000 shares authorized
2,100,000 shares issued and
outstanding at January 31, 2000
and July 31, 1999 2,100 2,100
Capital in excess of par value 704,761 704,761
Retained earnings (39,788) (184,037)
----------- -----------
Total stockholders' equity 667,073 522,824
Total liabilities and stockholders' equity $1,427,959 $1,327,455
----------- -----------
<PAGE>
VarTech Systems Inc. and Subsidiaries
Statement of Operations
(Unaudited)
Quarter Ended Six Months Ended
January 31, January 31,
2000 1999 2000 1999
---------- ---------- ---------- ----------
Sales $1,762,310 $1,716,186 $3,416,599 $3,423,807
Cost of sales 991,836 814,741 1,903,148 2,034,131
---------- ---------- ---------- ----------
Gross profit 770,474 901,445 1,513,451 1,389,676
Expenses 796,758 882,296 1,474,470 1,353,122
---------- ---------- ---------- ----------
Income (loss) from
operations (26,284) 19,149 38,981 36,554
Other income:
Gain on settlement
of debt 105,267 - 105,267 -
---------- ---------- ---------- ----------
Net income 78,983 19,149 144,248 36,554
Per common share .04 .01 .07 .02
Weighted number shares
outstanding 2,100,000 1,950,000 2,100,000 1,950,000
<PAGE>
VarTech Systems Inc. and Subsidiaries
Statement of Cash Flows
(Unaudited)
Quarter Ended Six Months Ended
January 31, January 31,
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) $ 78,983 $ 19,149 $144,248 $ 36,554
Depreciation and amortization 15,450 55,614 30,450 112,052
Gain on settlement of debt (105,267) - (105,267) -
Net changes in:
Accounts receivable and
other assets (30,414) (5,410) (155,578) (59,369)
Inventory 2,862 11,312 51,661 191,220
Accounts payable and
accrued expenses 19,257 33,485 (1,530) (197,820)
Non-compete obligation - (33,750) - (67,500)
Deferred revenue (25,000) - - -
Deferred lease expense (322) - (322) -
-------- -------- -------- --------
Net cash (used in) provided by
operating activities (44,451) 80,400 (36,338) 15,137
-------- -------- -------- --------
Cash flows from investing activities
Purchase of property and
equipment (950) (26,670) (19,508) (41,297)
Cash flows from financing activities
Changes in notes payable 6,051 (44,379) 1,492 246
Change in stockholder loan 61,883 - 61,883 -
-------- -------- -------- --------
Net increase (decrease) in cash 22,533 9,351 7,529 (25,914)
Cash and equivalents,
beginning of period 14,456 16,294 29,460 51,559
-------- -------- -------- --------
Cash and equivalents,
end of period $ 36,989 $ 25,645 $ 36,989 $ 25,645
-------- -------- -------- --------
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
THREE MONTHS ENDED JANUARY 31, 2000
COMPARED TO JANUARY 31, 1999
The Company's revenues increased by 3% to $1,762,310 in the second quarter
of fiscal 2000 as compared to $1,716,186 in the second quarter of fiscal 1999.
The Company's costs and expenses in the period before provision for income
taxes totaled $1,788,594 or 101% of revenues as compared to $1,697,037 or 99%
in the same period of 1999.
The Company's profit in the second quarter of 2000 was $78,983 as compared
to a profit of $19,149 in the same period in fiscal 1999. Income in the
second quarter of fiscal 2000 included a one-time gain of $105,267.
SIX MONTHS ENDED JANUARY 31, 2000
COMPARED TO JANUARY 31, 1999
The Company's revenues were $3,416,599 for the six months ended
January 31, 2000 as compared to $3,423,807 for the six months ended
January 31, 1999.
The Company's costs and expenses were $3,377,618 or 99% of revenue for the
six months ended January 31, 2000 as compared to $3,387,253 or 99% for the
six months ended January 31, 1999.
The Company's profit for the six months ended January 31, 2000 was $144,248
as compared to a profit of $36,554 for the same period of the previous year.
The primary difference in the two periods is the one-time gain of $105,267
realized in the second quarter of 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
January 31, 2000, the outstanding balance on these lines was $345,910. The
lines of credit and current assets of $972,706 are deemed sufficient to fund
operations for the next twelve months. As of January 31, 2000, the Company
had $104,090 available under the lines of credit.
<PAGE>
VARTECH SYSTEMS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JANUARY 31, 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: March 10, 2000
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> 6-MOS
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<PERIOD-END> JAN-31-2000
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0
0
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