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, 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 December 8, 2000.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
VarTech Systems Inc. and Subsidiaries
Balance Sheets
October 31, July 31,
2000 2000
Unaudited Audited
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ASSETS
Current Assets
Cash and cash equivalents $ 7,951 $ 15,138
Accounts receivable - trade 660,313 500,918
Accounts receivable - other 4,869 2,359
Accounts receivable - shareholder 51,000 22,500
Inventory 357,286 201,685
Deferred income taxes 7,048 8,502
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Total current assets 1,088,467 751,102
Furniture and equipment 545,205 523,445
Leasehold improvements 12,145 12,145
Less: Accumulated depreciation (245,357) (223,407)
Deposits 114,988 114,988
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Total assets $ 1,515,448 $ 1,178,273
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VarTech Systems Inc. and Subsidiaries
Balance Sheets
October 31, July 31,
2000 2000
Unaudited Audited
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable - credit lines $ 494,819 $ 344,074
Accounts payable 290,389 199,616
Other accrued expenses 118,027 90,300
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Total current liabilities 903,235 633,990
Deferred income taxes 34,455 31,007
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Total liabilities 937,690 664,997
Common stock, 100,000,000 shares,
$.001 par authorized; 2,100,000
shares issued; 1,950,000 shares
outstanding 2,100 2,100
Capital in excess of par value 704,761 704,761
Treasury stock; 150,000 common stock shares (150,000) (150,000)
Retained earnings (deficit) 20,897 (43,585)
------------ ------------
Total stockholders' equity 577,758 513,276
Total liabilities and stockholders' equity $ 1,515,448 $ 1,178,273
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VarTech Systems Inc. and Subsidiaries
Statements of Income
(Unaudited)
Quarter Ended
October 31,
2000 1999
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Sales $1,667,223 $1,654,290
Cost of sales 872,646 911,312
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Gross profit 794,577 742,978
Expenses 694,062 677,712
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Net income before income taxes 100,515 65,266
Income taxes 36,033
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Net income $ 64,482 $ 65,266
Basic and diluted net income
per common share $ .03 $ .03
Weighted average number of
common shares outstanding:
Basic 1,950,000 2,100,000
Diluted 1,990,833 2,100,000
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VarTech Systems Inc. and Subsidiaries
Statements of Cash Flows
(Unaudited)
Quarter Ended
October 31,
2000 1999
--------- ---------
Cash flows from operating activities
Net income $ 64,482 $ 65,266
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation 21,950 15,000
Deferred income taxes 4,902
Changes in operating assets
and liabilities:
Decrease (increase) in assets
Accounts receivable (161,905) (129,074)
Inventory (155,600) 48,798
Other assets 3,910
Increase (decrease) in liabilities
Accounts payable 90,772 (29,934)
Accrued expenses 27,727 9,147
Deferred revenue 25,000
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Net cash provided by (used in)
operating activities (107,672) 8,113
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Cash flows from investing activities
Purchase of property and
equipment (21,760) (18,558)
Net increase in account
receivable - shareholder (28,500)
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Net cash (used in) provided by
investing activities (50,260) (18,558)
--------- ---------
Cash flows from financing activities
Net proceeds from (payments on)
lines of credit 150,745 (4,559)
--------- ---------
Net decrease in cash and cash
equivalents (7,187) (15,004)
Cash and cash equivalents,
beginning of period 15,138 29,460
--------- ---------
Cash and cash equivalents,
end of period $ 7,951 $ 14,456
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 2000
COMPARED TO OCTOBER 31, 1999
The Company's revenues increased by 1% to $1,667,223 in the first quarter ended
October 31, 2000 as compared to $1,654,290 in the first quarter of the prior
year.
Gross profit of $794,577 for the first quarter ended October 31, 2000
represented 47% of sales as compared to $742,978 which represented 45% of sales
in the same period ended October 31, 1999.
The Company's net income before income taxes in the first quarter was $100,515
as compared to before tax net income of $65,266 in the same period last year.
The increase in net income was a result of the Company refocusing its business
into higher margin display systems and online training away from low margin
personal computer products.
LIQUIDITY AND CAPITAL RESOURCES
The Company has lines of credit totaling $600,000 which it uses for
short-term borrowing to acquire inventory and finance accounts receivable.
On October 31, 2000, the outstanding balance on these lines was $494,819.
The lines of credit and its current assets of $1,088,467 are deemed sufficient
to fund operations for the next twelve months. As of October 31, 2000, the
Company had $105,181 available under the lines of credit.
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VARTECH SYSTEMS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS
OCTOBER 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.
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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 8, 2000
C. Wayne Prater
President and Chief Executive Officer
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
