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, 2002
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 11, 2002.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
VarTech Systems Inc.
Balance Sheets
April 30, July 31,
2002 2001
(Unaudited) (Audited)
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents $ 89,197 $ 78,806
Accounts receivable - trade 537,398 569,063
Accounts receivable - other 0 2,755
Loan Receivable 97,321 0
Inventory 736,630 395,464
------------ ------------
Total current assets 1,460,546 1,046,088
------------ ------------
Furniture and equipment 527,445 524,935
Leasehold improvements 12,145 12,145
Less: Accumulated depreciation (373,361) (311,611)
------------ ------------
166,229 225,469
------------ ------------
Deposits 9,870 14,370
------------ ------------
Total assets $ 1,636,645 $ 1,285,927
============ ============
VarTech Systems Inc.
Balance Sheets
April 30, July 31,
2002 2001
(Unaudited) (Audited)
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable - credit lines $ 334,198 $ 289,154
Accounts payable 330,307 159,053
Income tax payable 63,727 29,012
Other accrued expenses 106,933 122,637
------------ ------------
Total current liabilities 835,165 599,856
Deferred income taxes 23,212 34,038
------------ ------------
Total liabilities 858,377 633,894
------------ ------------
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 221,407 95,172
------------ ------------
Total stockholders' equity 778,268 652,033
------------ ------------
Total liabilities and stockholders' equity $ 1,636,645 $ 1,285,927
============ ============
VarTech Systems Inc.
Statements of Income
(Unaudited)
Quarter Ended Nine Months Ended
April 30, April 30,
2002 2001 2002 2001
---------- ---------- ---------- ----------
Sales $1,684,030 $1,831,948 $4,752,951 $5,076,992
Cost of sales 933,869 1,114,651 2,446,334 2,829,726
---------- ---------- ---------- ----------
Gross profit 750,161 717,297 2,306,617 2,247,266
Operating expenses 730,165 720,469 2,097,081 2,045,256
---------- ---------- ---------- ----------
Net income (loss) before
income taxes 19,996 (3,172) 209,536 202,010
Income taxes 5,533 3,256 83,301 74,509
---------- ---------- ---------- ----------
Net income (loss) $ 14,463 $ (6,428) $ 126,235 $ 127,501
Basic and diluted net
Income (loss) per
common share .01 - .07 .07
Weighted average number
of common shares
outstanding:
1,950,000 1,950,000 1,950,000 1,950,000
VarTech Systems Inc.
Statements of Cash Flows
(Unaudited)
Quarter Ended Nine Months Ended
April 30, April 30,
2002 2001 2002 2001
--------- --------- --------- ---------
Cash flows from operating activities
Net Income $ 14,463 $ (6,428) $ 126,235 $ 127,501
Adjustments to net cash provided
by (used in) operating activities:
Depreciation 21,975 20,566 61,750 64,466
Deferred income taxes (3,609) 4,901 (10,827) 14,707
Changes in operating assets
and liabilities:
Decrease (increase) in assets
Accounts receivable 27,608 (106,158) 34,420 (356,816)
Inventory (217,016) 17,457 (341,165) (143,226)
Other assets 4,500 101,610 4,500 99,014
Increase (decrease) in
liabilities
Accounts payable 76,675 55,497 160,292 155,269
Accrued expenses 8,077 (1,908) 29,974 57,058
--------- --------- --------- ---------
Net cash provided by (used in)
operating activities (67,327) 85,537 65,179 17,973
--------- --------- --------- ---------
Cash flows from investing activities
Purchase of property and
equipment (100) 0 (2,510) (21,760)
Net increase in account
receivable - shareholder 0 0 0 (30,790)
Net increase in loan receivable (97,320) 0 (97,320) 0
Proceed from sale of furniture
And equipment 0 0 0 20,270
--------- --------- --------- ---------
Net cash used in
investing activities (97,420) 0 (99,830) (32,280)
--------- --------- --------- ---------
Cash flows from financing activities
Net (payments on) proceeds from
lines of credit 148,184 (52,622) 45,042 45,736
--------- --------- --------- ---------
Net cash (used in) provided by
financing activities 148,184 (52,622) 45,042 45,736
---------- --------- --------- -------
Net increase (decrease) in cash
and cash equivalents (16,563) 32,915 10,391 31,429
Cash and cash equivalents,
beginning of period 105,760 13,652 78,806 15,138
--------- --------- --------- ---------
Cash and cash equivalents,
end of period $ 89,197 $46,567 $ 89,197 $ 46,567
========= ========= ========= =========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 2002
COMPARED TO APRIL 30, 2001
The Company's revenues decreased to $1,684,030 in the third quarter of fiscal
2002 as compared to $1,831,948 in the third quarter of fiscal 2001. This
revenue decrease is due to the continued decreased sales in the 21st Network
division.
Gross profit of $750,161 for the third quarter ended April 30, 2002 represented
44.5% of sales as compared to $717,297 which represented 39.2% of sales in the
same period ended April 30, 2001. The increase in profit margin is due to a
increase in display sales and repairs which has a higher margin than the 21st
Network division.
The Company's pretax operating income in the third quarter of fiscal 2002 was
$19,996 as compared to an operating loss of $3,172 in the same period of
fiscal 2001.
NINE MONTHS ENDED APRIL 30, 2002
COMPARED TO APRIL 30, 2001
The Company's revenues were $4,752,951 for the nine months ended
April 30, 2002 as compared to $5,076,992 for the nine months ended
April 30, 2001.
Gross profit of $2,306,617 for the nine months ended April 30, 2002 represented
48.5% of sales as compared to $2,247,266 which represented 44.2% of sales in
the same period ended April 30, 2001.
The Company's net income before income taxes for the nine months ended
April 30, 2002 was $209,536 as compared to income of $202,010 for the same
period of the previous year.
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 April 30, 2002, the outstanding balance on these lines was $334,198. The
lines of credit and its current assets of $1,460,546 are deemed sufficient to
fund operations for the next twelve months. As of April 30, 2002, the Company
had $415,802 available under the lines of credit.
VARTECH SYSTEMS INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
APRIL 30, 2002
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 11, 2002
C. Wayne Prater
President and Chief Executive Officer
signed/s/ C. Wayne Prater