<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended January 31, 1998
Commission file Number 0-15066
Vertex Industries, Inc.
(Exact name of registrant as specified in its charter)
New Jersey 22-2050350
(State of Incorporation) (I.R.S. Employer Identification No.)
23 Carol Street Clifton, New Jersey 07014
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: (973) 777-3500
Indicated by check mark whether the registrant (1) has filed all reports
required to be filed 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) has been
subject to such filing requirements for the past 90 days.
Yes X No ______
Common stock, par value $.005 per share: 5,135,107 shares outstanding as
of March 16, 1998.
1
<PAGE>
VERTEX INDUSTRIES, INC. AND SUBSIDIARY
FORM 10-Q
January 31, 1998
I N D E X
PAGE
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets-
January 31, 1998 and July 31, 1997 . . . . . . . . .3
Consolidated Statements of Operations
three and six months ended January 31, 1998
and 1997 . . . . . . . . . . . . . . . . . . . . . .5
Consolidated Statements of Changes in
Stockholders' Equity - for the year ended
July 31, 1997 and six months ended
January 31, 1998. . . . . . . . . . . . . . . . . . 6
Consolidated Statements of
Cash Flows - six months
ended January 31, 1998 and 1997 . . . . . . . . . . 7
Notes to Consolidated Financial Statements. . . . . 8
Item 2. Management's Discussion and Analysis
of Consolidated Financial Condition and
Results of Operations . . . . . . . . . . . . . . .10
Part II - Other Information
Item 4. Submission of Matters to Vote
of Security Holders . . . . . . . . . . . . . . 14
Item 5. Other Information. . . . . . . . . . . . 15
Item 6. Exhibits and Reports on form 8 - K. . . . 16
Signatures. . . . . . . . . . . . . . . . . . . . 17
2
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<TABLE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VERTEX INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
January 31, 1998 July 31, 1997
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $488,597 $608,553
Accounts Receivable, Less Allowance
for Doubtful Accounts of
$75,985 at January 31, 1998 and
July 31, 1997 623,416 450,266
Notes and other receivables 79,901 95,451
Inventories 474,987 582,609
Prepaid Expenses and
other current assets 20,535 32,861
---------- ---------
Total Current Assets 1,687,436 1,769,740
---------- ---------
PROPERTY, EQUIPMENT,
AND CAPITAL LEASES:
Property and Equipment 1,773,904 1,753,395
Capital Leases 141,757 141,757
--------- ---------
Total Property, Equipment and
Capital Leases 1,915,661 1,895,152
Less: Accumulated Depreciation and
Amortization (1,605,730) (1,545,071)
----------- -----------
Net Property, Equipment
and Capital Leases 309,931 350,081
----------- -----------
OTHER ASSETS:
Cost in Excess of Net Assets
of Companies Acquired, Net of
accumulated amortization of
375,085 at January 31, 1998 and
$350,395 at July 31, 1997 38,802 63,492
Deferred tax asset 195,000 195,000
Other Assets 55,380 55,142
---------- ----------
Total Other Assets 289,182 313,634
---------- ----------
Total Assets $2,286,549 $2,433,455
========== ==========
<FN>
The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
</TABLE>
3
<PAGE>
<TABLE>
VERTEX INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
January 31, 1998 July 31, 1997
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Long-Term debt, current portion $1,167 $2,567
Current portion of obligations
under capital leases 6,905 14,516
Accounts payable 177,689 129,622
Accrued Expenses and Other Liabilities 204,306 170,643
Deferred Revenue 333,403 267,630
----------- -----------
Total Current Liabilities 723,470 584,978
----------- -----------
LONG-TERM LIABILITIES:
Obligations Under Capital Leases,
Net of Current Portion 14,304 17,065
----------- -----------
Total Long-Term Liabilities 14,304 17,065
----------- -----------
Total Liabilities 737,774 602,043
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, par value $.01
per share 2,000,000 shares
authorized; none issued
and outstanding -- --
Common Stock, par value $.005
per share, authorized 20,000,000
shares; issued 5,147,979 shares at
January 31, 1998 and 5,137,979
shares at July 31, 1997,
respectively 25,740 25,690
Additional paid-in capital 5,209,838 5,201,138
Accumulated Deficit (3,636,234) (3,344,847)
----------- -----------
1,599,344 1,881,981
Less: Treasury stock, 12,872
shares at cost (50,569) (50,569)
----------- -----------
Total Stockholders' Equity 1,548,775 1,831,412
----------- -----------
Total Liabilities and
Stockholders' Equity $2,286,549 $2,433,455
=========== ============
<FN>
The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
</TABLE>
4
<PAGE>
<TABLE>
VERTEX INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Jan. 31 Six Months Ended Jan. 31
1998 1997 1998 1997
<S> <C> <C> <C> <C>
OPERATING REVENUES $885,212 $937,029 $1,538,205 $1,942,043
COST OF SALES 449,540 403,705 843,434 902,453
--------- --------- --------- ---------
GROSS PROFIT 435,672 533,324 694,771 1,039,590
--------- --------- --------- ---------
OPERATING EXPENSES:
Selling and Administrative 365,042 349,414 775,074 650,035
Research and Development 100,564 107,430 222,927 219,284
---------- --------- ---------- -------
Total Operating Expenses 465,606 456,844 998,001 869,319
---------- --------- ---------- -------
OPERATING INCOME (LOSS) (29,934) 76,480 (303,230) 170,271
---------- --------- ---------- -------
OTHER INCOME AND (EXPENSES):
Interest Income 6,883 (392) 13,545 14,689
Interest Expense (673) (2,002) (1,702) (3,709)
Other -- -- -- 3,068
---------- --------- ---------- ------
Net Other Income 6,210 (2,394) 11,843 14,048
---------- --------- ---------- ------
Income (Loss) Before Income Taxes (23,724) 74,086 (291,387) 184,319
---------- --------- ---------- --------
Income Tax Provision -- 29,600 -- 73,700
---------- --------- ---------- --------
Net Income (loss) ($23,724) $44,486 ($291,387) $110,619
========== ========== ========== ========
Net Income (loss) per share of
Common Stock $.00 $.01 ($.06) $.02
========== ========== ========== ========
Weighted Average Number of
Shares Outstanding 5,134,618 5,349,500 5,131,384 5,402,086
========== ========== ========= =========
<FN>
The accompanying notes to consolidated financial statements are an integral part of these financial statements.
</TABLE>
5
<PAGE>
<TABLE>
VERTEX INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
Common Stock Additional
$.005 Par Value Paid-In Accumulated Treasury
Year ended July 31, 1997 Shares Amount Capital Deficit Stock Total
<S> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1996 5,108,979 $25,545 $5,182,188 ($2,871,787) ($50,659) $2,285,377
Exercise of Stock Options 24,000 120 14,600 -- -- 14,720
Issuance of stock in
consideration of services 5,000 25 4,350 -- -- 4,375
Net loss for the year
ended July 31, 1997 -- -- -- (473,060) -- (473,060)
---------- --------- ----------- ------------ --------- -----------
Balance at July 31, 1997 5,137,979 $25,690 $5,201,138 ($3,344,847) ($50,569) $1,831,412
---------- --------- ----------- ------------ --------- -----------
Six months ended January
31, 1998 (Unaudited)
Issuance of stock in
considerration of services 10,000 50 8,700 -- -- 8,750
Net loss for the six
months ended January 31, 1998 -- -- -- (291,387) -- (291,387)
--------- -------- ----------- ------------ --------- -----------
Balance at January 31, 1998 5,147,979 $25,740 $5,209,838 ($3,636,234) ($50,569) $1,548,775
========= ======== =========== ============ ========= ===========
<FN>
The accompanying notes to consolidated financial statements are an integral part of these financial statements.
</TABLE>
6
<PAGE>
<TABLE>
VERTEX INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended
January 31, 1998 January 31, 1997
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (loss) ($291,387) $110,619
Adjustments to reconcile net income (loss) to net
cash (used for) provided by operating activities:
Depreciation and amortization 85,349 89,151
Common stock issued for services 8,750 --
Deferred taxes -- 73,700
(Increase) or decrease in operating assets:
Accounts receivable, net (173,150) 73,025
Inventories 107,622 68,219
Notes and other receivables 15,550 (57,925)
Prepaid expenses and other
current assets 12,326 (57,512)
Increase or (decrease) in operating
liabilities:
Accounts payable 48,067 (21,626)
Deferred revenue 65,773 (8,377)
Accrued expenses and other
liabilities 33,663 42,036
-------- ---------
Net adjustments to reconcile net income (loss) to
net cash (used for) provided by operating activities 203,950 200,691
-------- ---------
Net cash (used for) provided by operating activities (87,437) 311,310
-------- ---------
Cash Flows from Investing Activities:
Additions to property and
equipment (20,509) (6,949)
(Increase) decrease in other assets (238) (210)
--------- ----------
Net cash used for investing activities (20,747) (7,159)
--------- ----------
Cash Flows from Financing Activities:
Payment of long term debt (1,400) (1,400)
Payment of capitalized lease obligations (10,372) (16,241)
Proceeds from issuance of common stock - 1,920
--------- ----------
Net cash used for financing activities (11,772) (15,721)
--------- ----------
Net (Decrease) Increase in Cash (119,956) 288,430
Cash and Cash Equivalents at Beginning of Year 608,553 394,344
---------- -----------
Cash and Cash Equivalents at End of Period $488,597 $682,774
========== ===========
<FN>
The accompanying notes to the consolidated financial statements are an integral part of these financial statements.
</TABLE>
7
<PAGE>
VERTEX INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions for Form 10-Q, and
therefore, do not include all information and footnotes necessary for a
fair presentation of financial position, results of operations and cash
flows in conformity with generally accepted accounting principles.
Reference should be made to the annual financial statements including the
footnotes thereto, included in the Vertex Industries, Inc. and Subsidiary
(the "Company") Annual Report on Form 10-K for the year ended July 31,
1997. In the opinion of management, the accompanying unaudited interim
financial statements contain all material adjustments, consisting of
normal recurring accruals, necessary to present fairly the financial
condition, the results of operations and cash flows of the Company and
its consolidated subsidiary for the interim periods. Operating results
for interim periods are not necessarily indicative of the results that
may be expected for the entire year.
2. Income Taxes
At July 31, 1997 the Company had net operating loss ("NOLs")
carryforwards available to offset future taxable income of approximately
$4.5 million and $3.6 million for Federal and state tax purposes,
respectively. Realization of the future tax benefits associated with the
NOLs is dependent on the Company's ability to generate taxable income
within the carryforward period and the periods in which net temporary
differences reverse. Future levels of operating income and taxable
income are dependent upon general economic conditions, competitive
pressures on sales and margins and other factors beyond the Company's
control. Accordingly, no assurance can be given that sufficient taxable
income will be generated for utilization of all of the NOLs and reversals
of temporary differences. As of January 31, 1998, the Company had a
deferred tax asset valuation allowance of approximately $1.9 million with
a net deferred tax asset of approximately $195,000.
In assessing the realizability of the $195,000 net deferred tax
asset, the Company has considered numerous factors, including its future
operating plans and its recent history of operating losses. Management
believes that the $195,000 net deferred tax asset represents a reasonable
estimate of the future utilization of the NOLs and the Company will
continue to evaluate the likelihood of future profits and the necessity
of future adjustments to the deferred tax asset valuation allowance.
8
<PAGE>
3. Net Income (Loss) Per Share of Common Stock
Net income (loss) per share is computed based on the weighted
average number of common stock and common stock equivalents, if dilutive,
outstanding during each period.
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
which makes certain changes to the manner in which earnings per share is
reported. The Company is required to adopt this standard for the year
ending July 31, 1998. The adoption of this standard will require
restatement of prior years' earnings per share. For the three and six
months ended January 31, 1998 SFAS No. 128 had no material impact on
earnings per share.
9
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ITEM 2. Management's Discussion and Analysis of Consolidated Financial
Conditions and Results of Operations
Results of Operations
Three months ended January 31, 1998 compared with three months ended
January 31, 1997.
Overview
The Company experienced a 6% decrease in operating revenues and
recorded a net loss of $23,724 or $0 per share for the quarter ended
January 31,1998, compared to net income of $44,486 or $.01 per share for
the same period in 1997. The decrease in operating revenues is
attributed to a decrease in demand for all of the Company's product lines
except the barcode and the NetWeave product lines. The decrease in net
income to a net loss is primarily due to an decrease in operating
revenues in addition to an increase in operating expenses.
Net Income
Net income decreased $68,210 to a net loss of $23,724 for the
quarter ended January 31, 1998 as compared to net income of $44,486 for
the same period in 1997. The decrease in net income is primarily due to
a decrease in operating revenues of approximately $51,817 or 6% in
1998 as compared to the same period in 1997. The decrease in net income
is also attributed to an increase in operating expenses of approximately
$8,762 or 2% in 1998 as compared to the same period in 1997.
Operating Revenues
Operating revenues decreased $51,817 or 6% to $885,212 for the
quarter ended January 31, 1998, compared to $937,029 for the same period
in 1997. The decrease in operating revenues is attributed to a decrease
in demand for all of the Company's product lines of approximately
$452,000 except for the barcode and NetWeave product lines. The NetWeave
and barcode product lines experienced an increase in demand of
approximately $400,000.
Cost of Sales
Cost of Sales increased to 50% of revenues for the three months
ended January 31, 1998 as compared to 43% for the same period last year.
The increase is primarily due to a change in the sales mix from higher
margin products to lower margin products in addition to approximately
$33,603 in royalties to NetWeave Corporation.
10
<PAGE>
Operating Expenses
Operating expenses increased $8,762 or 2% to $465,606 for the
quarter ended January 31, 1998, as compared to $456,844 for the same
period in 1997. The increase is comprised of an increase of $15,628 or
5% in selling and administrative expenses and a decrease of $6,866 or 6%
in research and development expenses.
The increase in selling and administrative expenses is primarily
due to operating costs associated with the NetWeave License Agreement.
In effort to reduce operating expenses the Company closed the NetWeave
office located in Philadelphia, Pennsylvania on December 31, 1997 and
consolidated the NetWeave Licensing Agreement operation into it's
Clifton, New Jersey office. The Company expects a cost savings of
approximately $30,000 per month with the above office consolidation.
Net Other Income (Expense)
Net other income (expense) increased to income of $6,210 for the
quarter ended January 31, 1998 compared to an expense of $2,394 for the
same period in 1997. The increase is primarily due to interest income
earned on the company's money market account for the quarter ended
January 31, 1998.
Six Month Ended January 31, 1998 compared with six months ended January
31, 1997.
Overview
The Company's operating revenues decreased $403,838 to $1,538,205
for the six months ended January 31, 1998 as compared to operating
revenues of $1,942,043 for the same period in 1997. The decrease in
operating revenues is due to a decrease in demand for all of the
Company's products. The NetWeave product line generated operating
revenues of approximately $516,000 for the six months January 31, 1998.
The Company recorded a net loss of $291,387 or $.06 per share for the six
months ended January 31, 1998 as compared to net income of $110,619 or
$.02 per share for the same period in 1997. The decrease in net income is
attributed to a decrease in operating revenues coupled with an increase
in operating expenses for the six months ended January 31, 1998 as
compared to the same period in 1997.
Net Income
The Company recorded a net loss of $291,387 or $.06 per share for
the six months ended January 31, 1998, compared to net income of $110,619
11
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or $.02 per share for the same period in 1997. The decrease in net
income to a net loss is primarily attributed to a decrease in operating
revenue of approximately $404,000 and an increase in operating expenses
of approximately $129,000 for the six months ended January 31, 1998 as
compared to the same period in 1997.
Operating Revenues
Operating revenues decreased $403,838 to $1,538,205 for the six
months ended January 31, 1998 compared to $1,942,043 in the same period
last year. The decrease is due to a decrease in demand for all of the
Companies products except the NetWeave product line. The Company expects
to receive a large order from a major telecommunications provider within
the next three to four months.
Cost of Sales
Cost of Sales increased to 55% of revenues for the six months ended
January 31, 1998, compared to 46% for the same period in 1997. The
increase in cost of sales is attributed to a change in the sales mix from
higher margin products to lower margin products in addition to $43,603 in
royalties to NetWeave Corporation.
Operating Expenses
Operating expenses increased 15% or $128,682 to $998,001 for the
six months ended January 31, 1998 compared to $869,319 for the same
period in 1997. The increase is comprised of an increase of $125,039 or
19% in selling and administrative expenses. The increase in selling and
administrative expense is primarily due to operating costs associated
with the NetWeave license agreement and the hiring of a warehouse
management systems salesman.
Net Other Income (Expenses)
Net other income decreased $2,205 to $11,843 for the six months
ended January 31, 1998, compared to net other income of $14,048 for the
same period in 1997. The decrease is primarily due to an decrease in
other income from 1998 to 1997.
Liquidity and Capital Resources
At January 31, 1998 the Company had $448,597 in cash and cash
equivalents compared to $608,553 at July 31, 1997. Working Capital and
the current ratio were $963,966 and 2.33 to 1 at January 31, 1998 versus
12
<PAGE>
$1,184,762 and 3.03 to 1 at July 31, 1997. Net cash used for operating
activities was $87,437 for the first six months of fiscal 1998.
Capital expenditures were approximately $20,509 and $6,900 for the
six month periods ended January 31,1998 and 1997, respectively.
The Company believes that cash and working capital are at
sufficient levels to support the short term needs of the Company. The
Company is seeking additional financing to deal with the long term
financing needs of the Company.
13
<PAGE>
VERTEX INDUSTRIES, INC. AND SUBSIDIARY
Part II - Other Information
Item 1. Legal Proceedings
On or about January 5, 1998, the Company was named as a Respondent,
along with Sombers Associates, Inc., The Sombers Group, Inc., NetWeave
Corporation and Wilbur Highleyman, in a monetary claim brought by Channel
Group, Inc., a marketing and sales company, commenced before the American
Arbitration Association, for services Channel allegedly provided to the
Sombers Group, Inc.
Although the Company vehemently denies the allegations of the
claim, and intends to strongly oppose the claim, as well as seek punitive
damages for unwarranted and unfounded claims against the Company, there
can be no assurance that the Company will be successful in this regard.
Should Vertex be found liable for the claim, it could have a substantial
negative impact on the Company's operations.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held an Annual Meeting of Stockholders on January
21, 1998.
(b) The names of each Director elected at the Annual Meeting are
as follows:
James Q. Maloy
Ronald C. Byer
Irwin Dorros
Wilbur Highleyman
George Powch
The above directors were elected for a one year term.
FOR AGAINST ABSTAIN
James Q. Maloy 4,616,628 4,943 50,090
Ronald C. Byer 4,616,628 4,943 50,090
Wilbur Highleyman 4,616,628 4,943 50,090
George Powch 4,616,728 4,483 50,090
Irwin Dorros 4,616,728 4,843 50,090
14
<PAGE>
(c) A brief description of each other matter voted upon at the
Annual Meeting and the number of affirmative votes and the
number of negative votes cast with respect to each such matter
follows. Each such matter was approved.
(i) The ratification of Arthur Andersen LLP as the Company's
Independent Public Accountants for the fiscal year ending July
31, 1998:
For Against Abstain
4,632,585 24,070 15,006
(ii) To amend the Company's Incentive Stock Option Plan to
increase the number of shares of Common Stock available under
the plan from 1,500,000 shares to 2,000,000 shares
For Against Abstain
2,192,076 117,954 20,295
Item 5. Other Information
a) On October 30, 1997 the Company was notified by NASDAQ that the Company
was not in compliance with the current NASDAQ listing requirements. The
Company had until January 30, 1998 to cure the deficiency or to request a
hearing. Otherwise the Company would be de-listed effective with the
close of business on January 30, 1998, in which case it was probable that
the Company would trade in the Over-the-counter Bulletin Board Market.
The Company has requested a hearing which is scheduled for, on or about
March 19, 1998.
b) On March 3, 1998, the Company entered into a Merger and Reorganization
Agreement (the "Agreement)" with Mortgage Plus Equity and Loan Corp.
("Mortgage Plus"), a corporation organized and existing under the laws
of the State of New York, Computer Transceiver Systems, Inc. (OTCBB:
"CPTT"), the Company's inactive publicly traded subsidiary, organized and
existing under the laws of the State of New York and CTS-Subsidiary,
Inc., a corporation which is a wholly-owned subsidiary of CPTT, organized
and existing under the laws of the State of New York.
The Agreement provides pre-merger CPTT shareholders with 4% of post
merger CPTT, of which the Company shall own 2.7%. The Company anticipates
recording an unrealized gain on marketable securities in connection with
above transaction.
Pursuant to the Agreement, Mortgage Plus and CTS-Subsidiary, Inc.
executed, delivered and filed with the office of the New York Secretary
15
<PAGE>
of State, a certificate of merger, merging CTS-Subsidiary with and into
Mortgage Plus, with the latter being the surviving corporation, and CPTT
being it's parent corporation.
Prior to the transaction, the CPTT Board of Directors ( "Board") was
comprised of the following four members: Thomas J. Tully, James Q. Maloy,
Allen G. Jacobson and Ronald C. Byer. Simultaneously with the
transaction, the Board, through the Unanimous Written Consent of The
Board of Directors, immediately filled three vacancies then existing by
electing Steven M. Latessa, Carey Wolen and John T. Blasi, respectively,
to the Board. Immediately thereafter, the Board accepted the
resignations tendered by Thomas J. Tully, James Q. Maloy, Allen G.
Jacobson and Ronald C. Byer from their positions as directors and
officers of CPTT through the Unanimous Written Consent of the Board of
Directors. Each of the three newly named directors will remain as
director of CPTT until his successor is duly elected and qualified.
Mortgage Plus has its corporate offices in Syosset, New York and its Home
Equity Services Division in Fairfield, N.J., with retail branches in
sixteen states plus the Commonwealth of Puerto Rico. Mortgage Plus
provides conventional, government and non-conforming financing for
residential home mortgages.
Following the merger, CPTT intends to change its name to MPEL Holdings
Corp. , trade under the bulletin board symbol "MPLS" and continue to
operate as a full service retail mortgage banking company. CPTT `s new
address will be 6851 Jericho Turnpike, Syosset, New York 11791, and its
new telephone number will be (516) 365-2700.
Item 6. Exhibits and Reports on Form 8 - K
(a) None
(b) There have been no reports filed on form 8 - K for the quarter ended
January 31, 1998
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VERTEX INDUSTRIES, INC.
Registrant
By S/ Robert T. McLaughlin
Robert T. McLaughlin
Chief Financial Officer, Treasurer
March 16, 1998
17
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 488597
<SECURITIES> 0
<RECEIVABLES> 898427
<ALLOWANCES> 195110
<INVENTORY> 474987
<CURRENT-ASSETS> 1687436
<PP&E> 1915661
<DEPRECIATION> 1605730
<TOTAL-ASSETS> 2286549
<CURRENT-LIABILITIES> 723470
<BONDS> 0
0
0
<COMMON> 25740
<OTHER-SE> 1523035
<TOTAL-LIABILITY-AND-EQUITY> 2286549
<SALES> 1538205
<TOTAL-REVENUES> 1538205
<CGS> 843434
<TOTAL-COSTS> 998001
<OTHER-EXPENSES> 13545
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1702
<INCOME-PRETAX> (291387)
<INCOME-TAX> 0
<INCOME-CONTINUING> (291387)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (291387)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> 0
</TABLE>
