<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 April 30, 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: 5,216,979 shares outstanding
as of June 14, 1999.
<PAGE>
VERTEX INDUSTRIES, INC.
FORM 10-Q
April 30, 1999
I N D E X
PAGE
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets-
April 30, 1999 and July 31, 1998 . . . . . . . . . 3
Statements of Operations
three and nine months ended April 30, 1999
and 1998 . . . . . . . . . . . . . . . . . . . . . 5
Statements of Changes in
Stockholders' Equity - for the year ended
July 31, 1998 and nine months ended
April 30, 1999 . . . . . . . . . . . . . . . . . . 6
Statements of Cash Flows - nine months ended
April 30, 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 1. Legal Proceedings 16
Item 4. Submission of Matters to Vote of
Security Holders . . . . . . . . . . . . . . . . . 16
Item 6. Exhibits and Reports on form 8-K . . . . 17
Signatures . . . . . . . . . . . . . . . . . . . . 18
2
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<TABLE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VERTEX INDUSTRIES, INC.
BALANCE SHEETS
ASSETS
<CAPTION>
April 30, 1999 July 31, 1998
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $1,028,774 $631,362
Accounts Receivable, Less Allowance
for Doubtful Accounts of $70,785 and
$75,985 at April 30, 1999 and
July 31, 1998 1,068,314 837,399
Inventories 431,677 464,389
Investment Securities 353,518 452,502
Prepaid Expenses and
other current assets 96,560 88,692
---------- ----------
Total Current Assets 2,978,843 2,474,344
---------- ----------
PROPERTY, EQUIPMENT,
AND CAPITAL LEASES:
Property and Equipment 1,898,897 1,799,526
Capital Leases 141,757 141,757
---------- ----------
Total Property, Equipment and
Capital Leases 2,040,654 1,941,283
Less: Accumulated Depreciation and
Amortization (1,730,541) (1,653,962)
----------- ------------
Net Property, Equipment
and Capital Leases 310,113 287,321
----------- ------------
OTHER ASSETS:
Deferred tax asset 83,000 400,000
Other Assets 86,385 66,401
----------- ------------
Total Other Assets 169,385 466,401
----------- ------------
Total Assets $3,458,341 $3,228,066
=========== ============
<FN>
See notes to financial statements.
</TABLE>
3
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<TABLE>
VERTEX INDUSTRIES, INC.
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
April 30, 1999 July 31, 1998
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable 129,311 273,726
Accrued Expenses and Other Liabilities 301,269 262,735
Deferred Revenue 253,423 343,612
-------- --------
Total Current Liabilities 684,003 880,073
-------- --------
OTHER LIABILITIES: 6,785 11,424
-------- --------
Total Liabilities 690,788 891,497
-------- --------
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 5,226,979 and
5,156,979 shares at April 30, 1999
and July 31,1998 respectively 26,135 25,785
Additional paid-in capital 5,279,617 5,223,293
Accumulated Deficit (2,823,107) (3,296,401)
Accumulated other comprehensive income 330,077 429,061
----------- -----------
2,812,722 2,381,738
Less: Treasury stock, 10,000 ----------- -----------
shares at cost (45,169) (45,169)
----------- -----------
Total Stockholders' Equity 2,767,553 2,336,569
----------- -----------
Total Liabilities and
Stockholders' Equity $3,458,341 $3,228,066
=========== ===========
<FN>
See notes to financial statements.
</TABLE>
4
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<TABLE>
VERTEX INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended April 30, Nine Months Ended April 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
OPERATING REVENUES $1,190,271 $953,741 $6,194,751 $2,491,946
COST OF SALES 473,972 475,097 3,638,955 1,318,531
---------- --------- ----------- -----------
GROSS PROFIT 716,299 478,644 2,555,796 1,173,415
---------- --------- ----------- -----------
OPERATING EXPENSES:
Selling and Administrative 465,120 370,304 1,297,255 1,145,378
Research and Development 175,307 118,752 500,885 341,679
---------- --------- ---------- ----------
Total Operating Expenses 640,427 489,056 1,798,140 1,487,057
---------- --------- ---------- ----------
OPERATING INCOME (LOSS) 75,872 (10,412) 757,656 (313,642)
---------- --------- ---------- ----------
OTHER INCOME AND (EXPENSES):
Interest Income 14,141 5,423 38,934 18,968
Interest Expense (367) (590) (4,966) (2,292)
--------- --------- ---------- ----------
Net Other Income 13,774 4,833 33,968 16,676
--------- --------- ---------- ----------
Income (Loss) Before Income
Taxes 89,646 (5,579) 791,624 (296,966)
--------- --------- ---------- ----------
Income Tax Provision 36,805 0 318,330 0
--------- --------- ---------- ----------
Net Income (loss) $52,841 ($5,579) $473,294 ($296,966)
========= ========= ========== ==========
Net Income (loss) per share of
Common Stock
Basic $.01 ($0.00) $.09 ($.06)
Diluted $.01 ($0.00) $.08 ($.06)
Weighted Average Number of
Shares Outstanding
Basic 5,207,204 5,135,107 5,178,023 5,132,598
Diluted 5,777,957 5,135,107 5,838,382 5,132,598
<FN>
See notes to financial statements.
</TABLE>
5
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<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> <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 19,000 95 22,155 22,250
Other comprehensive income,
net of tax
Net income 48,446 48,446 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
Nine months ended April 30,
1999 (Unaudited)
Exercise of stock options 70,000 350 56,324 56,674
Other comprehensive
income, net of tax
Net income for the nine
months ended April
30, 1999 473,294 473,294 473,294
Unrealized loss on
investment securities (98,984) (98,984) (98,984)
---------
Comprehensive income 374,310
--------- ------- ---------- ------------ ========== -------- --------- ----------
BALANCE April 30, 1999 5,226,979 $26,135 $5,279,617 ($2,823,107) $330,077 ($45,169) $2,767,553
========= ======= ========== ============ ======== ========= ==========
<FN>
See notes to financial statements.
</TABLE>
6
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<TABLE>
VERTEX INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Nine Months Ended
April 30, 1999 April 30, 1998
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (loss) $473,294 ($296,966)
Adjustments to reconcile net income to ------------- ------------
net cash provided by operating activities:
Depreciation and amortization 76,579 119,956
Common Stock issued for services -- 8,750
Decrease in Treasury Stock -- 5,400
Deferred taxes 317,000 --
(Increase) or decrease in operating assets:
Accounts receivable, net (230,915) (69,295)
Inventories 32,712 134,398
Prepaid expenses and other
current assets (7,868) 35,893
Increase or (decrease) in operating
liabilities:
Accounts payable (144,415) 16,088
Deferred revenue (90,189) (24,138)
Accrued expenses and other liabilities 38,070 78,752
---------- -----------
Net adjustments to reconcile net income to
net cash (used for) provided by
operating activities (9,026) 305,804
---------- -----------
Net cash provided by operating activities 464,268 8,838
---------- -----------
Cash Flows from Investing Activities:
(Increase)additions to property
and equipment (99,371) (36,826)
(Increase) in other assets (19,984) (13,323)
Other -- 7,131
---------- ----------
Net cash used for investing activities (119,355) (43,018)
---------- ----------
Cash Flows from Financing Activities:
Payment of long term debt -- (2,100)
Payment of capitalized lease obligations (4,175) (13,210)
Proceeds from issuance of common stock 56,674 --
---------- -----------
Net cash provided by (used for)
financing activities 52,499 (15,310)
----------- -----------
Net Increase (decrease) in Cash 397,412 (49,490)
Cash and Cash Equivalents at Beginning of Year 631,362 608,553
----------- ----------
Cash and Cash Equivalents at End of Period $1,028,774 $559,063
<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
April 30, 1999 the Company had a deferred tax asset valuation
allowance of approximately $1.5 million with a net deferred tax
asset of approximately $83,000.
In assessing the realizability of the $83,000 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 $83,000 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 $330,077 as of April 30, 1999 based on the then
current stock price of $1.562 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 was prime plus 1%. The line expired on February 28, 1999.
9
<PAGE>
ITEM 2. Management's Discussion and Analysis of Consolidated
Financial Conditions and Results of Operations
Results of Operations
Three months ended April 30, 1999 compared with three months ended
April 30, 1998.
Overview
The Company experienced a 25% increase in operating revenues and
recorded net income of $52,841 or $.01 basic and diluted earnings per
share for the quarter ended April 30,1999, compared to a net loss of
$5,579 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 $52,841 for the quarter ended
April 30, 1999 as compared to a net loss of $5,579 for the same
period last year. The increase in net income is attributed to a
significant increase in operating revenues of approximately $236,530.
Operating expenses increased approximately $151,371 or 31% for the
three months ended April 30, 1999 compared to the same period last
year.
Operating Revenues
Operating Revenues increased $236,530 to $1,190,271 for the
quarter ended April 30, 1999, compared to $953,741 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. Revenue from the
NetWeave license agreement generated approximately $464,000 in
revenues for the quarter ended April 30, 1999 as compared to $288,000
for the same period in 1998. In addition, revenue from the Company's
weighing product line increased approximately $67,000 while the
Company's other product lines remained relatively flat for the
quarter ended April 30, 1999, as compared to 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.
Cost of Sales
Cost of Sales decreased to 40% of revenues for the third quarter
of fiscal 1999 compared to 50% for the same period last year. The
decrease is due to a change in the sales mix from lower margin
products to higher margin products.
10
<PAGE>
Operating Expenses
Operating expenses increased 31% to $640,427 for the third
quarter of fiscal 1999 compared to $489,056 for the same period in
1998. Selling and administrative expenses increased approximately
$94,816 or 26% to $465,120 for the quarter ended April 30, 1999 as
compared to $370,304 for the same period in 1998. Research and
development expenses increased $56,555 or 48% to $175,307 as compared
to $118,752 for the same period in 1998. 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 $13,774 for the quarter ended April 30,
1999 compared to $4,833 for last year. The increase of $8,941 is
comprised of an increase in interest income of $8,718 and a decrease
in interest expense of $223, 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.
Income Tax Provision
The Company recorded an income tax provision of $36,805 for the
quarter ended April 30, 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>
Nine Month Ended April 30, 1999 compared with nine months ended April
30, 1998.
Overview
The Company's operating revenues increased substantially to
$6,194,751 for the nine months ended April 30, 1999 as compared to
operating revenues of $2,491,946 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
$1,122,738 for the nine months ended April 30, 1999 as compared to
$932,491 for the same period in 1998. The Company's other product
lines remained relatively flat. The NetWeave product line generated
operating revenues of approximately $718,200 for the nine months
April 30, 1999 as compared to $804,335 for the same period in 1998.
The Company recorded net income of $473,294 or $.09 per share basic
and $.08 per share diluted for the nine months ended April 30, 1999
as compared to a net loss of $296,966 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 nine months ended April 30,
1999 as compared to the same period in 1998.
Net Income
The Company recorded net income of $473,294 or $.09 per share
basic and $.08 per share diluted for the nine months ended April 30,
1999, compared to a net loss of $296,966 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 $3,702,805 to $6,194,751 for the
nine months ended April 30, 1999 compared to $2,491,946 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 59% of revenues for the nine months
ended April 30, 1999, compared to 53% 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 21% or $311,083 to $1,798,140 for
the nine months ended April 30, 1999 compared to $1,487,057 for the
same period in 1998. The increase is comprised of an increase of
$151,878 or 13% 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 $159,206 or 47% for the nine months ended April 30, 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 $17,292 to $33,968 for the nine
months ended April 30, 1999, compared to net other income of $16,676
for the same period in 1998. The increase is due to an increase of
$19,966 in interest income coupled with an increase of $2,674 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
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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 had been
completed in 1999 and the company is satisfied that the systems are
Year 2000 compliant.
In the software and hardware area, the Company has identified
areas of exposure. All versions of NetWeave have been determined to
be Year 2000 compliant, provided they are operating on a Year 2000
compliant operating system. All customers have been notified of the
necessity of ascertaining the Y2K compliance of their operating
system from the respective vendors. The Company has prepared
versions of NetWeave which will operate on the Year 2000 compliant
operating systems, and ships them to Customers who request such
upgrades.
The Company will supply all BridgeNet customers with the
processing code to insure Year 2000 compliance.
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
14
<PAGE>
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.
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 April 30, 1999 the Company had $1,028,774 in cash and cash
equivalents compared to $631,362 at July 31, 1998. Working Capital
and the current ratio were $2,294,840 and 4.36 to 1 at April 30, 1999
versus $1,594,271 and 2.81 to 1 at July 31, 1998. Net cash provided
by operating activities was $464,268 in the first nine months of
fiscal 1999.
Capital expenditures were approximately $99,371 and $36,826 for
the nine month periods ended April 30, 1999 and 1998, respectively.
Capital expenditures are primarily computer equipment and computer
related products. For the nine months ended April 30, 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 $50,000. 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 was prime plus 1%. The line expired on February 28, 1999.
15
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VERTEX INDUSTRIES, INC.
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.
The Company challenged its having been named as a party to
the arbitration in the United Stated District Court.
On or about August 18, 1998 the Court dismissed Channel's
arbitration claim against Vertex. Channel has appealed the Court's
decision.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held an Annual Meeting of Stockholders on April
15, 1999.
(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 4,770,340 1,000 2,500
Ronald C. Byer 4,770,340 1,000 2,500
Wilbur Highleyman 4,770,340 1,000 2,500
George Powch 4,770,340 1,000 2,500
Irwin Dorros 4,770,340 1,000 2,500
16
<PAGE>
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
April 30, 1999
17
<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
June 14, 1999
18
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<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-END> APR-30-1999
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0
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