<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, 1999
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: 5,186,979 shares
outstanding as of March 15, 1999.
-1-
<PAGE>
VERTEX INDUSTRIES, INC.
FORM 10-Q
January 31, 1999
I N D E X
PAGE
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets-
January 31, 1999 and July 31, 1998. . . . . . . 3
Statements of Operations
three and six months ended January 31, 1999
and 1998 . . . . . . . . . . . . . . . . . . . . 5
Statements of Changes in
Stockholders' Equity - for the year ended
July 31, 1998 and six months ended
January 31, 1999. . . . . . . . . . . . . . . . .6
Statements of Cash Flows - six months
ended January 31, 1999 and 1998 . . . . . . . . .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 6. Exhibits and Reports on form 8 - K . . 16
Signatures . . . . . . . . . . . . . . . . . . 17
2
<PAGE>
<TABLE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VERTEX INDUSTRIES, INC.
BALANCE SHEETS
ASSETS
<CAPTION>
January 31, 1999 July 31, 1998
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $1,008,191 $631,362
Accounts Receivable, Less Allowance
for Doubtful Accounts of $70,785 and
$75,985 at January 31, 1999 and
July 31, 1998 1,866,547 837,399
Notes and other receivables, net 63,405 67,344
Inventories 405,287 464,389
Investment Securities 169,688 452,502
Prepaid Expenses and
other current assets 38,369 21,348
----------- -----------
Total Current Assets 3,551,487 2,474,344
----------- -----------
PROPERTY, EQUIPMENT,
AND CAPITAL LEASES:
Property and Equipment 1,877,175 1,799,526
Capital Leases 141,757 141,757
----------- -----------
Total Property, Equipment and
Capital Leases 2,018,932 1,941,283
Less: Accumulated Depreciation and
Amortization (1,701,104) (1,653,962)
----------- ------------
Net Property, Equipment
and Capital Leases 317,828 287,321
----------- ------------
OTHER ASSETS:
Deferred tax asset 119,000 400,000
Other Assets 81,432 66,401
----------- ------------
Total Other Assets 200,432 466,401
----------- ------------
Total Assets $4,069,747 $3,228,066
============ ============
<FN>
See notes to financial statements.
</TABLE>
3
<PAGE>
<TABLE>
VERTEX INDUSTRIES, INC.
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
January 31, 1999 July 31, 1998
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of obligations
under capital leases $5,947 5,641
Accounts payable 891,966 273,726
Accrued Expenses and Other Liabilities 267,246 257,094
Deferred Revenue 391,707 343,612
---------- ----------
Total Current Liabilities 1,556,866 880,073
---------- ----------
LONG-TERM LIABILITIES:
Obligations Under Capital Leases,
Net of Current Portion 8,372 11,424
---------- -----------
Total Long-Term Liabilities 8,372 11,424
---------- -----------
Total Liabilities 1,565,238 891,497
---------- -----------
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 5,196,979 and
5,156,979 shares at January 31, 1999
and July 31,1998 respectively 25,985 25,785
Additional paid-in capital 5,253,393 5,223,293
Accumulated Deficit (2,875,948) (3,296,401)
Accumulated other comprehensive income 146,248 429,061
---------- -----------
2,549,678 2,381,738
Less: Treasury stock, 10,000
shares at cost (45,169) (45,169)
---------- -----------
Total Stockholders' Equity 2,504,509 2,336,569
---------- -----------
Total Liabilities and
Stockholders' Equity $4,069,747 $3,228,066
=========== ===========
<FN>
See notes to financial statements.
</TABLE>
4
<PAGE>
<TABLE>
VERTEX INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Jan. 31 Six Months Ended Jan. 31
1999 1998 1999 1998
<S> <C> <C> <C> <C>
OPERATING REVENUES $2,311,510 $885,212 $5,004,480 $1,538,205
COST OF SALES 1,414,115 449,540 3,164,983 843,434
---------- --------- ---------- ----------
GROSS PROFIT 897,395 435,672 1,839,497 694,771
---------- --------- ---------- ----------
OPERATING EXPENSES:
Selling and Administrative 438,741 365,042 832,135 775,074
Research and Development 166,034 100,564 325,578 222,927
---------- --------- ----------- ----------
Total Operating Expenses 604,775 465,606 1,157,713 998,001
---------- --------- ----------- -----------
OPERATING INCOME (LOSS) 292,620 (29,934) 681,784 (303,230)
---------- --------- ----------- -----------
OTHER INCOME AND (EXPENSES):
Interest Income 19,156 6,883 24,793 13,545
Interest Expense (3,109) (673) (4,599) (1,702)
----------- ---------- ----------- -----------
Net Other Income 16,047 6,210 20,194 11,843
----------- ---------- ----------- -----------
Income (Loss) Before Income Taxes 308,667 (23,724) 701,978 (291,387)
----------- ---------- ----------- -----------
Income Tax Provision 124,200 -- 281,525 --
----------- ---------- ----------- -----------
Net Income (loss) $184,467 ($23,724) $420,453 ($291,387)
=========== ========== =========== ===========
Net Income (loss) per share of
Common Stock
Basic $.04 $.00 $.08 ($.06)
Diluted $.03 $.00 $.07 ($.06)
Weighted Average Number of
Shares Outstanding
Basic 5,170,838 5,134,618 5,163,908 5,131,384
Diluted 5,779,211 5,134,618 5,778,762 5,131,384
<FN>
See notes to financial statements.
</TABLE>
5
<PAGE>
<TABLE>
VERTEX INDUSTRIES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION> Accumulated
Additional Other
Common Stock Paid-In Accumulated Comprehensive Comprehensive Treasury
Shares Amount Capital Deficit Income Income Stock Total
------------------ ---------- ------------ ----------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE July 31, 1997 5,137,979 $25,690 $5,201,138 ($3,344,847) $0 $0 ($50,569) $1,831,412
Issuance of stock in
consideration of services 19,000 95 22,155 22,250
Other comprehensive income,
net of tax
Net income 48,446 48,466 48,446
Unrealized gain on
investment securities 429,061 429,061 429,061
----------
Comprehensive income 477,507
===========
Decrease in treasury stock 0 5,400 5,400
--------- ------- ---------- ----------- --------- --------- ----------
BALANCE July 31, 1998 5,156,979 $25,785 $5,223,293 ($3,296,401) $429,061 ($45,169) $2,336,569
Six months ended January 31,
1999 (Unaudited)
Exercise of stock options 40,000 200 30,000 30,300
Other comprehensive
income, net of tax
Net income for the six
months ended January
31, 1999 420,453 420,453 420,453
Unrealized loss on
investment securities (282,813) (282,813) (282,813)
---------
Comprehensive income 137,640
--------- ------- ---------- ------------ ========= -------- --------- ----------
BALANCE January 31, 1999 5,196,979 $25,985 $5,253,393 ($2,875,948) $146,248 ($45,169) $2,504,509
========= ======== ========== ============ ======== ======== ==========
<FN>
See notes to financial statements.
</TABLE>
6
<PAGE>
<TABLE>
VERTEX INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended
January 31, 1999 January 31, 1998
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $420,453 ($291,387)
Adjustments to reconcile net income to
net cash (used for) provided by
operating activities:
Depreciation and amortization 47,143 85,349
Deferred taxes 281,000 --
(Increase) or decrease in operating
assets:
Accounts receivable, net (1,029,148) (173,150)
Inventories 59,102 107,622
Notes and other receivables 3,939 15,550
Prepaid expenses and other
current assets (17,021) 12,326
Increase or (decrease) in operating
liabilities:
Accounts payable 618,240 48,067
Deferred revenue 48,095 65,773
Accrued expenses and other liabilities 10,152 33,663
---------- ---------
Net adjustments to reconcile net income to
net cash provided by (used for)
operating activities 21,502 203,950
---------- ---------
Net cash provided by (used for)
operating activities 441,955 (87,437)
---------- ----------
Cash Flows from Investing Activities:
(Increase) decrease)additions to property
and equipment (77,649) (20,509)
(Increase) decrease in other assets (15,031) (238)
----------- ----------
Net cash used for investing activities (92,680) (20,747)
----------- ----------
Cash Flows from Financing Activities:
Payment of long term debt or leave -- (1,400)
Payment of capitalized lease obligations (2,746) (10,372)
Proceeds from issuance of common stock 30,300 --
----------- ----------
Net cash provided by (used for)
financing activities 27,554 (11,772)
------------- ----------
Net Increase in Cash 376,829 (119,956)
Cash and Cash Equivalents at Beginning of Year 631,362 608,553
-------------- ----------
Cash and Cash Equivalents at End of Period 1,008,191 $488,597
=============== ==========
<FN>
See notes to the financial statements.
</TABLE>
7
<PAGE>
VERTEX INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited 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.
(the "Company") Annual Report on Form 10-K for the year
ended July 31, 1998. 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 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, 1998 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, 1999
the Company had a deferred tax asset valuation allowance of
approximately $1.5 million with a net deferred tax asset of
approximately $119,000.
In assessing the realizability of the $119,000 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 $119,000
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
Basic net income (loss) per common share is calculated by
dividing net income, by the weighted average common shares
outstanding during the period.
Diluted net income per common share is computed similar to
that of basic net income per common share except that the
denominator is increased to include the number of additional
common shares that would have been outstanding if all
potentially dilutive common shares, principally stock
options, were issued during the reporting period.
4. Comprehensive Income
In June 1997, the Financial Accounting Standards Board
(FASB) issued SFAS No. 130. Reporting Comprehensive Income,
which establishes standards for reporting and display of
comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include all
changes in equity except those resulting from investments by
owners and distribution to owners. Among other disclosures,
SFAS No. 130 requires that all items that are required to be
recognized under current accounting standards as components
of comprehensive income be reported in a financial
statement that is displayed with the same prominence as
other financial statements.
The Company has classified its investment securities as
available for sale. Such securities are measured at fair
value in the financial statements based on quoted market
prices with unrealized gains and losses included in
stockholders' equity. The company currently owns 226,251
shares of Mortgage Plus Equity and Loan Corp., (OTCBB:MPEH),
a mortgage banking company. The Company has reduced its
unrealized gain on investment securities to $169,688 as of
January 31, 1999 based on the then current stock price of
$.75 per share. The above unrealized gain is considered
comprehensive income and is a component of stockholders'
equity.
5. Loan Payable - Bank
In September 1998 the Company obtained a $600,000 working
capital line of credit from a New Jersey Bank. The interest
rate is prime plus 1%. The line expires on February 28, 1999
and the Company is restricted to using the line for the Bell
Atlantic contract. The line is secured by Company assets
which includes 226,251 shares of MPEH stock. As of January
31, 1999 there was no balance due on such loan.
9
<PAGE>
ITEM 2. Management's Discussion and Analysis of Consolidated
Financial Conditions and Results of Operations
Results of Operations
Three months ended January 31, 1999 compared with three months
ended January 31, 1998.
Overview
The Company experienced a 160% increase in operating
revenues and recorded net income of $184,467 or $.04 basic
earnings per share and $.03 diluted earnings per share for the
quarter ended January 31,1999, compared to a net loss of $23,724
or $.00 per share for the same period in 1998. The increase in
operating revenues is primarily due to the Company's contract to
upgrade Bell Atlantic's Data Collection devices and coin
collection systems. The increase in net income is due to the
increase in operating revenues from the above-mentioned contract.
Net Income
The Company recorded net income of $184,467 for the quarter
ended January 31, 1999 as compared to a net loss of $23,724 for
the same period last year. The increase in net income is
attributed to a significant increase in operating revenues of
approximately $1,426,298. Operating expenses increased
approximately $139,169 or 30% for the three months ended January
31, 1999 compared to the same period last year.
Operating Revenues
Operating Revenues increased $1,426,298 to S2,311,510 for
the quarter ended January 31, 1999, compared to $885,212 for the
same period last year. The increase in operating revenues is
attributed to the Company's contract with Bell Atlantic to
upgrade its data collection devices and coin collection software.
In addition, revenue from the Company's weighing product line
increased approximately $152,000 while the Company's other
product lines remained relatively flat for the quarter ended
January 31, 1999, as compared to the same period in 1998. The
NetWeave license agreement generated approximately $149,000 in
revenues for the quarter ended January 31, 1999 as compared to
$382,000 for the same period in 1998. The Company has added new
software and hardware products to its product offerings, which
include a complete warehouse management system, a message
brokering software product and an e-commerce product, "evolve".
The Company expects increased revenues in future periods from
these products.
10
<PAGE>
Cost of Sales
Cost of Sales increased to 61% of revenues for the second
quarter of fiscal 1999 compared to 51% for the same period last
year. The increase is due to a change in the sales mix from
higher margin products to lower margin products.
Operating Expenses
Operating expenses increased 30% to $604,775 for the second
quarter of fiscal 1999 compared to $465,606 for the same period
in 1998. Selling and administrative expenses increased
approximately $73,699 or 17% to $438,741 for the quarter ended
January 31, 1999 as compared to $365,042 for the same period in
1998. Research and development expenses increased $65,470 or 65%
to $166,034. The increase in selling and administrative expenses
is due to commissions on the Bell Atlantic contract, salary
increases and increases in normal operating expenses. The
increase in research and development expenses is due to the
hiring of additional personnel and consultants to develop and
support the Company's existing and future products. The Company
continues its effort to streamline operations and control
operating expenses in line with operating revenues.
Other Income and Expenses
Net other income was $16,047 for the quarter ended January
31, 1999 compared to $6,210 for last year. The increase of
$9,837 is comprised of an increase in interest income of $12,273
and an increase in interest expense of $3,782, as compared to the
same period last year. The increase in interest income is due
the Company having additional funds invested in its money market
account. The increase in interest expense is due to the
Company's working capital line of credit.
Income Tax Provision
The Company recorded an income tax provision of $124,200 for
the quarter ended January 31, 1999 as compared to no income tax
provision for the same period last year. See footnote 2 on page
8 for additional information on income taxes.
11
<PAGE>
Six Month Ended January 31, 1999 compared with six months ended
January 31, 1998.
Overview
The Company's operating revenues increased substantially to
$5,004,480 for the six months ended January 31, 1999 as compared
to operating revenues of $1,538,205 for the same period in 1998.
The increase in operating revenues is primarily due to the Bell
Atlantic contract as previously disclosed. In addition, the
Company's weighing product line generated operating revenues of
approximately $728,150 for the six months ended January 31, 1999
as compared to $605,265 for the same period in 1998. The
Company's other product lines remained relatively flat. The
NetWeave product line generated operating revenues of
approximately $254,000 for the six months January 31, 1999 as
compared to $516,000 for the same period in 1998. The Company
recorded net income of $420,453 or $.08 per share basic and $.07
per share diluted for the six months ended January 31, 1999 as
compared to a net loss of $291,387 or $.06 per share basic and
diluted for the same period in 1998. The increase in net income
is attributed to an increase in operating revenues coupled with
an increase in operating expenses for the six months ended
January 31, 1999 as compared to the same period in 1998.
Net Income
The Company recorded net income of $420,453 or $.08 per
share basic and $.07 per share diluted for the six months ended
January 31, 1999, compared to a net loss of $291,387 or $.06 per
share for the same period in 1998. The increase in net income is
primarily attributed to the increase in operating revenues from
the Bell Atlantic contract.
Operating Revenues
Operating revenues increased $3,466,275 to $5,004,480 for
the six months ended January 31, 1999 compared to $1,538,205 in
the same period last year. The increase is due to operating
revenues from the Bell Atlantic contract and increased operating
revenues from the Company's weighing product line.
Cost of Sales
Cost of Sales increased to 63% of revenues for the six
months ended January 31, 1999, compared to 55% for the same
period in 1998. The increase in cost of sales is attributed to a
change in the sales mix from software related products to
hardware related products. The Bell Atlantic contract was
approximately 90% hardware and 10% software.
12
<PAGE>
Operating Expenses
Operating expenses increased 16% or $159,712 to $1,157,713
for the six months ended January 31, 1999 compared to $998,001
for the same period in 1998. The increase is comprised of an
increase of $57,061 or 7% in selling and administrative expenses.
The increase in selling and administrative expense is primarily
due to commissions associated with the Bell Atlantic contract and
salary increases. The increase is also comprised of an increase
in Research and Development expenses of $102,651 or 46% for the
six months ended January 31, 1999, as compared to the same period
in 1998. The increase is due to the hiring of additional
personnel in addition to the reduction in software related jobs
in which personnel within the R&D department would be working on
and would be allocated to cost of sales.
Net Other Income (Expenses)
Net other income increased $8,351 to $20,194 for the six
months ended January 31, 1999, compared to net other income of
$11,843 for the same period in 1998. The increase is due to an
increase of $11,248 in interest income coupled with an increase
of $2,897 in interest expense. The increase in interest income
is due to additional funds invested in the Company's money market
account. The increase in interest expense is from the Company's
working capital line of credit.
Year 2000
The Year 2000 issue arises because many computer hardware
and software systems use only two digits to represent the year.
As a result, these systems and programs may not process dates
beyond 1999, which may cause errors in information or systems
failures. Assessments of the potential effects of the Year 2000
issues vary markedly among different companies, governments,
consultants, economists and commentators, and it is not possible
to predict what the actual impact may be. Given this
uncertainty, the Company recognizes the need to remain vigilant
and is continuing its analysis, assessment and planning for the
various Year 2000 issues.
In early 1998, the Company developed a program to determine
Year 2000 compliance of its computer systems, products and
services, as well as computer hardware which it has sold but
which it did not manufacture. The Company's current product and
service offerings have been designed to be Year 2000 ready. A
Year 2000 committee was formed and several meetings have taken
place to address the Company's Year 2000 issues. The Company has
identified three areas of inquiry respecting Year 2000 compliance
- -- (1) the Company's internal finance and informational systems,
(2) software and hardware sold or licensed to customers, and (3)
third-party relationships, including vendors, suppliers and
customers.
13
<PAGE>
The Company has conducted a review of the above areas to
determine exposure to Year 2000 issues. In the financial and
information system areas, a number of applications have been
identified as being Year 2000 compliant due to their recent
implementation. The Company's core financial and reporting
systems are Year 2000 compliant. Tests on the remaining systems
are being performed. The Company anticipates completing these
tests in early 1999.
In the software and hardware area, the Company has
identified areas of exposure. The original version of Netweave,
which is no longer sold, has been determined not to be Year 2000
compliant.
The Company is presently developing an upgrade to the old
version of Netweave, which is Year 2000 compliant, which will be
supplied to the customers currently using this old version of
Netweave.
The Company will supply all BridgeNet customers with the
processing code to insure Year 2000 compliance. Both of the
above upgrades will be available in 1999.
In the third-party area, the Company is in the process of
assessing the Year 2000 readiness of its key suppliers,
subcontractors and business partners. This project has been
undertaken with a view toward assuring that the Company has adequate
resources for required supplies and components, and to enable the
Company to identify potential Year 2000 non-compliance problems
with hardware which it has sold but did not manufacture. The Company
plans to complete this project in the first six months of 1999.
Letters and questionnaires have been sent out and the Company is
waiting for responses.
The Year 2000 readiness of the Company's customers varies
and the Company is actively encouraging its customers to prepare
their own systems for the Year 2000. The Company's major
customer, Bell Atlantic, has tested the Company supplied
software, BridgeNet, in conjunction with their internal systems
and found BridgeNet to be Year 2000 compliant. Efforts by
customers to address Year 2000 issues may absorb a substantial
part of their information technology budgets in the near term and
customers may either delay or accelerate the deployment and
implementation of new applications and systems. This could
potentially decrease demand for the Company's products and
services and thereby effect the Company's operating revenues.
Although the Company believes its costs in steps addressing
any Year 2000 issues (for testing, third party inquiries, and
remedies) shall be minimal and will not have a material adverse
impact on the Company's financial position, any failure or delay
in addressing the issues could result in the disruption of
business in the Year 2000. In addition, the Company is aware of
the potential for claims against it and other companies for
damages arising from products and services
provided by the Company that were not Year 2000 ready. The
Company continues to believe that any such claims against it
would be without merit.
14
<PAGE>
The Company has reviewed all internal equipment (excluding
computer equipment) which may have embedded systems which could
be date sensitive and determined that there would be no adverse
affect on Company operations if these systems were determined not
to be Year 2000 compliant.
The Company has developed a contingency plan appointing a
trouble shooting team of employees to quickly evaluate and remedy
a Year 2000 problem when one may occur upon reaching that year.
Finally, the Year 2000 presents a number of other risks and
uncertainties that could effect the Company, including utilities
failures, competition for its personnel skilled in the resolution
of Year 2000 issues, building systems failures, environmental
systems failures, office equipment failures, and the nature of
government responses to Year 2000 issues, among others. While
the Company continues to believe that the Year 2000 matters
discussed above will not have a material impact on its business,
financial condition or results of operations, it remains
uncertain whether or to what extent the Company may be effected.
Liquidity and Capital Resources
At January 31, 1999 the Company had $1,008,191 in cash and
cash equivalents compared to $631,362 at July 31, 1998. Working
Capital and the current ratio were $1,994,621 and 2.28 to 1 at
January 31, 1999 versus $1,594,271 and 2.81 to 1 at July 31,
1998. Net cash provided by operating activities was $441,955 in
the first six months of fiscal 1999.
Capital expenditures were approximately $77,649 and $20,509
for the six month periods ended January 31, 1999 and 1998,
respectively. Capital expenditures are primarily computer
equipment and computer related products. For the six months
ended January 31, 1999 the Company spent approximately $16,000 on
leasehold improvements to its existing facility in Clifton, NJ.
In addition, the Company purchased furniture and fixtures of
approximately $46,000. The above purchases were made with future
expansion plans of the Company.
In September 1998 the Company obtained a $600,000 capital
working capital line of credit from a New Jersey bank. The
interest rate is prime plus 1% and the line expires on February
28, 1999. The Company is restricted to using the line of credit
for the Bell Atlantic contract. The Company intends to extend
the line upon the February 28, 1999 expiration date.
15
<PAGE>
VERTEX INDUSTRIES, INC.
Part II - Other Information
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, 1999
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/ Ronald C. Byer
Ronald C. Byer
President, Chief Executive Officer
March 15, 1999
17
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-END> JAN-31-1999
<CASH> 1,008,191
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0
0
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</TABLE>
