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, 1997 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: (504) 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 9, 1997.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Vartech Systems Inc. and Subsidiary
Balance Sheet
October 31, July 31,
1997 1997
Unaudited Audited
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ASSETS
Current Assets
Cash $ 8,159 $ 100,796
Investments 6,500 6,500
Accounts receivable 907,847 921,338
Inventory 204,755 291,350
Prepaid expenses 16,667 16,667
Deferred income taxes 19,422 19,422
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Current assets 1,163,350 1,356,073
Property and equipment (net of depreciation) 357 065 401,232
Leasehold improvements (net of depreciation) 7,896 31,994
Note receivable - officer - 14,202
Deposits 105,706 105,706
Goodwill 10,391 10,853
Other assets 4,700 4,660
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Total assets $1,649,108 $1,924,720
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Vartech Systems Inc. and Subsidiary
Balance Sheet
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
Accounts payable 712,089 985,216
Accrued payables 100,030 83,575
Notes payable 284,186 136,222
Current maturities - Long-Term debt 37,509 84,313
Income taxes payable - 41,842
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Total current liabilities 1,133,814 1,331,168
Deferred Income Taxes 5,760 5,760
Long term debt 233,135 162,381
Stockholder loan - 52,774
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Total liabilities 1,372,709 1,552,083
Common stock - $.001 par value
100,000,000 shares authorized
1,950,000 and 1,937,300 shares
issued and outstanding at October 31, 1997
and July 31, 1997 1,950 1,937
Capital in excess of par value 412,472 412,485
Retained earnings (138,023) ( 41,785)
---------- ----------
Total shareholders' equity 276,399 372,637
Total liabilities and shareholders' equity $1,649,108 $1,924,720
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Vartech Systems Inc. and Subsidiary
Statement of Operations
(Unaudited)
Quarter Ended
October 31,
1997 1996
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Revenues
Sales $1,611,555 $402,570
Cost of sales 1,185,082 201,320
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Gross profit 426,473 201,250
Expenses 522,712 136,762
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Income $ ( 96,239) $ 64,488
Per common share (0.05) .04
Weighted number shares
outstanding 1,950,000 1,787,300
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Vartech Systems Inc and Subsidiary
Statement of Cash Flows
(Unaudited)
Three Months Ended
Quarter Ended
October 31,
1997 1996
--------- --------
Cash flow from operating activates
Net income (loss) $(96,239) $ 64,488
Noncash items included in net
income
Depreciation and amortization 26,255 5,000
Net changes in:
Accounts receivable and other assets 13,451 (116,554)
Inventory 86,595 (5,000)
Accounts payable and
accrued expenses (298,514) 48,394
--------- --------
Net cash provided(used)by operating activities (268,452) (3,672)
--------- --------
Cash flows from investing activities
Sale of property and equipment 42,473 -
Cash flow from financing activities
Changes in notes payable 119,140 8,068
Changes in notes receivable 14,202 -
--------- --------
Net increase (decrease) in cash (92,637) (11,740)
Cash and equivalents,
beginning of period 100,796 18,683
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Cash and equivalents,
end of period $ 8,159 $ 6,943
--------- --------
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 1997
COMPARED TO OCTOBER 31, 1996
The Company's revenues increased by 408% to $1,611,555 in the first quarter
of fiscal 1998 as compared to $402,570 in the first quarter of fiscal 1997.
The increase was due to the acquisition of 21st Century Professionals, Inc.
as of June 30, 1997.
The Company's costs and expenses increased in the period to $1,707,794 or
106% of revenues as compared to $338,082 or 85% in the same period of 1997.
The primary difference in the two periods was due to the acquisition of 21st
Century Professionals, Inc. and the elimination of certain product lines.
Start up costs in new areas and additional staffing were also factors.
The Company's net loss in the first quarter of 1997 was $96,239 as compared
to net income of $64,488 in the same period in fiscal 1996. The decrease in
net income was a result of the factors mentioned above.
LIQUIDITY AND CAPITAL RESOURCES
The Company has three lines of credit totaling $400,000 which it uses for
short-term borrowing to acquire inventory and finance the increase in
accounts receivable. On October 31,1997, the outstanding balance on these
lines was $284,186. The lines of credit and its current assets of $1,127,261
are deemed sufficient to fund operations for the next twelve months. As of
October 31, 1997, the Company had $115,814 available under the lines of
credit.
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VARTECH SYSTEMS, INC AND SUBSIDIARY
NOTES TO UNAUDITED FINANCIAL STATEMENTS
October 31, 1997
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 include 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 9, 1997
J. Keith Henderson
President
signed/s/ J. Keith Henderson
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
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27. Financial Data Schedule Filed herewith electronically