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, 2001
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 12, 2001.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
VarTech Systems Inc.
Balance Sheets
October 31, July 31,
2001 2001
Unaudited Audited
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents $ 170,103 $ 78,806
Accounts receivable - trade 563,290 569,063
Accounts receivable - other 1,539 2,755
Accounts receivable - shareholder - -
Inventory 359,180 395,464
------------ ------------
Total current assets 1,094,112 1,046,088
Furniture and equipment 527,345 524,935
Leasehold improvements 12,145 12,145
Less: Accumulated depreciation (329,411) (311,611)
------------ ------------
210,079 225,469
Deposits 14,370 14,370
------------ ------------
Total assets $ 1,318,561 $ 1,285,927
============ ============
VarTech Systems Inc.
Balance Sheets
October 31, July 31,
2001 2001
Unaudited Audited
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable - credit lines $ 237,960 $ 289,154
Accounts payable 195,293 159,053
Income tax payable 39,974 29,012
Other accrued expenses 109,870 122,637
------------ ------------
Total current liabilities 583,097 599,856
Deferred income taxes 30,429 34,038
------------ ------------
Total liabilities 613,526 633,894
Preferred stock, 1,000,000 shares,
$.01 par authorized, no shares issued - -
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 shares at cost (150,000) (150,000)
Retained earnings 148,174 95,172
------------ ------------
Total stockholders' equity 705,035 652,033
Total liabilities and stockholders' equity $ 1,318,561 $ 1,285,927
============ ============
VarTech Systems Inc.
Statements of Income
(Unaudited)
Quarter Ended
October 31,
2001 2000
---------- ----------
Sales $1,563,981 $1,667,223
Cost of sales 874,966 872,646
---------- ----------
Gross profit 689,015 794,577
Expenses 599,648 694,062
---------- ----------
Net income before income taxes 89,367 100,515
Income taxes 36,365 36,033
---------- ----------
Net income $ 53,002 $ 64,482
Basic and diluted net income
per common share $ .03 $ .03
Weighted average number of
common shares outstanding:
Basic 1,950,000 1,950,000
Diluted 1,950,000 1,990,833
VarTech Systems Inc.
Statements of Cash Flows
(Unaudited)
Quarter Ended
October 31,
2001 2000
--------- ---------
Cash flows from operating activities
Net income $ 53,002 $ 64,482
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation 17,800 21,950
Deferred income taxes (3,609) 4,902
Changes in operating assets
and liabilities:
Increase (decrease) in assets
Accounts receivable 6,990 (161,905)
Inventory 36,284 (155,600)
Other assets -
Increase (decrease) in liabilities
Accounts payable 36,239 90,772
Accrued expenses (1,805) 27,727
----------- --------
Net cash provided by (used in)
operating activities 144,901 (107,672)
----------- ---------
Cash flows from investing activities
Purchase of property and
equipment (2,410) (21,760)
Net increase in account
receivable - shareholder - (28,500)
--------- ---------
Net cash used in
investing activities (2,410) (50,260)
--------- ---------
Cash flows from financing activities
Net (payments on) proceeds from
lines of credit (51,194) 150,745
--------- ---------
Net increase (decrease) in cash and
cash equivalents 91,297 (7,187)
Cash and cash equivalents,
beginning of period 78,806 15,138
--------- ---------
Cash and cash equivalents,
end of period $ 170,103 $ 7,951
============ =========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 2001
COMPARED TO OCTOBER 31, 2000
The Company's revenues decreased by 6% to $1,563,981 in the first quarter ended
October 31, 2001 as compared to $1,667,223 in the first quarter of the prior
year.
Gross profit of $689,015 for the first quarter ended October 31, 2001
represented 44% of sales as compared to $794,577 which represented 47% of sales
in the same period ended October 31, 2000.
The Company's net income before income taxes in the first quarter was $89,367
as compared to before tax net income of $100,515 in the same period last year.
The decrease in net income was a result of the Company's decrease of 3% in
gross profit margin.
LIQUIDITY AND CAPITAL RESOURCES
The Company has lines of credit totaling $750,000 which it uses for
short-term borrowing to acquire inventory and finance accounts receivable.
On October 31, 2001, the outstanding balance on these lines was $237,960.
The lines of credit and its current assets of $1,094,112 are deemed sufficient
to fund operations for the next twelve months. As of October 31, 2001, the
Company had $512,040 available under the lines of credit.
VARTECH SYSTEMS INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
OCTOBER 31, 2001
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: December 14, 2001
C. Wayne Prater
President and Chief Executive Officer
signed/s/ C. Wayne Prater