SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended December 31, 1997
Commission File Number 33-7693
___________________________________________________________________________
VERTEX COMPUTER CABLE & PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
___________________________________________________________________________
Delaware 11-2816128
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
920 Conklin Street, Farmingdale, New York 11735
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (516) 293-1610
Indicate 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 _______
On June 30, 1998, 25,304,000 shares of common stock, $.10 par value were
outstanding.
Note: This is Page 1 of a document consisting of 18 pages.
VERTEX COMPUTER CABLE & PRODUCTS, INC.
DEBTOR-IN-POSSESSION
TABLE OF CONTENTS
PAGE
PART I: FINANCIAL INFORMATION
ITEM 1: UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Balance Sheets - December 31, 1997 and June 30, 1997.............. 3
Statements of Operations - Six Months Ended
December 31, 1997 and 1996...................................... 4
Statements of Operations - Three Months Ended
December 31, 1997 and 1996...................................... 5
Statements of Cash Flows - Six Months Ended
December 31, 1997 and 1996...................................... 6
Notes to Condensed Consolidated Financial Statements............... 7-12
ITEM 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................... 13-14
PART II- OTHER INFORMATION........................................... 15
SIGNATURES........................................................... 16
VERTEX COMPUTER CABLE & PRODUCTS, INC.
DEBTOR-IN-POSSESSION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31, June 30,
1997 1997
ASSETS ------------- -------------
CURRENT ASSETS:
Cash....................................... $ (60,777) $ 194,462
Accounts receivable, net of allowance
for doubtful accounts of $122,000 and
$241,000 as of December 31, 1997 and
June 30, 1997, respectively.............. 894,894 1,866,423
Inventories, net........................... 1,491,566 2,781,650
Prepaid expenses and other current
assets............................ ...... 39,451 98,437
------------ -------------
TOTAL CURRENT ASSETS....................... 2,365,134 4,940,972
PROPERTY, PLANT AND EQUIPMENT, net........... 589,166 565,279
DEFERRED CHARGES AND OTHER ASSETS............ 107,686 156,613
------------ -------------
TOTAL ASSETS................................. $ 3,061,986 $ 5,662,864
============ =============
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)
Current portion of long-term debt.......... $ 768,376 $ 2,280,433
Accounts payable and accrued expenses...... 1,666,802 1,324,721
Due to Affiliate........................... 233,000 183,000
------------ ------------
TOTAL CURRENT LIABILITIES ......... 2,668,178 3,788,154
LONG-TERM DEBT, NET OF CURRENT PORTION....... 114,266 28,520
LIABILITIES SUBJECT TO COMPROMISE............ 6,191,880 6,191,880
SECURED SUBORDINATED DEBENTURES, net......... 2,239,489 2,182,347
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' (DEFICIENCY):
Redeemable, Cumulative, Convertible Preferred
stock, stated value $100 per share,
authorized 5,000,000 shares, 12,375 issued
and outstanding, net..................... 1,110,661 1,110,661
Common stock, par value $.10 per share;
authorized 40,000,000 shares; issued
and outstanding 12,652,000 shares ....... 1,265,200 1,265,200
Paid-in capital............................ 9,416,226 9,416,226
Accumulated Deficit........................ (19,943,914) (18,320,053)
Cumulative foreign currency translation
adjustment............................... - (71)
------------- ------------
TOTAL STOCKHOLDERS' (DEFICIENCY) (8,151,827) (6,528,037)
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
(DEFICIENCY)............................... $ 3,061,986 $ 5,662,864
============= ============
The accompanying notes are an integral part of these financial statements.
VERTEX COMPUTER CABLE & PRODUCTS, INC.
DEBTOR-IN-POSSESSION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended
December 31,
1997 1996
------------ ------------
Net sales.................................... $ 3,998,274 $14,820,319
Cost of goods sold........................... 3,726,809 12,261,144
------------ ------------
Gross profit................................. 271,465 2,559,175
Selling, general and administrative expenses. 1,533,960 3,874,932
Interest expense............................. 170,770 593,251
Other expense ............................... - 120,551
Loss on sale of corporate headquarters....... - 248,500
Loss on extinguishment of debt............... - 120,000
Chapter 11 Reorganization related expenses... 190,596 -
----------- -----------
Net loss .................................... (1,623,861) (2,398,059)
Dividends on preferred stock................. - 74,250
------------ ------------
Net loss attributable to common stock........ $(1,623,861) $(2,472,309)
============ ============
Share Information
Basic loss per share......................... $ (.13) $ (.20)
============= ============
Weighted average number of common shares
outstanding................................. 12,652,000 12,652,000
============= ============
The accompanying notes are an integral part of these financial statements.
VERTEX COMPUTER CABLE & PRODUCTS, INC.
DEBTOR-IN-POSSESSION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
December 31,
1997 1996
------------ ------------
Net sales.................................... $ 1,694,647 $ 7,076,388
Cost of goods sold........................... 1,642,379 5,967,474
------------ ------------
Gross profit................................. 52,268 1,108,914
Selling, general and administrative expenses. 809,642 1,943,785
Interest expense............................. 80,753 243,915
Other expense ............................... - 123,673
Loss on sale of corporate headquarters....... - 248,500
Loss on extinguishment of debt............... - 120,000
Chapter 11 Reorganization related expenses... 149,145 -
----------- ------------
Net loss .................................... (987,272) (1,570,959)
Dividends on preferred stock................. - 37,125
----------- ------------
Net loss attributable to common stock........ $ (987,272) $(1,608,084)
============ =============
Share Information
Basic loss per share......................... $ (.08) $ (.13)
============ ============
Weighted average number of common shares
outstanding................................. 12,652,000 12,652,000
============ ===========
The accompanying notes are an integral part of these financial statements.
VERTEX COMPUTER CABLE & PRODUCTS, INC.
DEBTOR-IN-POSSESSION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
December 31,
1997 1996
------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss attributable to common stock............ $(1,623,861) $ (2,472,309)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization.................. 170,206 419,779
Provision for losses on accounts receivable.... 15,000 80,000
Provision for slow-moving and obsolete
inventories.................................. 50,000 70,000
Loss on extinquishment of debt................. - 120,000
Change in operating assets and liabilities:
Decrease in accounts receivable................ 956,529 289,677
Decrease (increase) in inventories............. 1,240,084 (1,012,017)
Decrease in prepaid expenses and other current
assets....................................... 58,986 464,210
Decrease (increase) in other assets............ 48,927 (67,262)
Increase in accounts payable and
accrued expenses............................. 392,080 2,239,175
----------- ------------
Net cash provided by operating activities........ 1,307,951 131,253
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................ (136,950) (112,398)
Proceeds from sale of headquarters, net......... - 2,086,502
----------- -----------
Net cash (used in) provided by investing
activities...................................... (136,950) 1,974,104
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under debt and loan agreements....... 4,003,263 16,767,905
Debt repayments................................. (5,429,574) (18,607,141)
----------- ------------
Net cash (used in) financing activities.......... (1,426,311) (1,839,236)
----------- ------------
Effect of exchange rate changes on cash.......... 71 16,453
----------- ------------
NET (DECREASE) INCREASE IN CASH.................. (255,239) 282,574
CASH at beginning of period...................... 194,462 73,230
------------ ------------
CASH at end of period............................ $ (60,777) $ 355,804
============ ============
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 113,627 $ 528,432
============ ===========
The accompanying notes are an integral part of these financial statements.
VERTEX COMPUTER CABLE & PRODUCTS, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION & PETITION FOR RELIEF UNDER CHAPTER 11
Vertex Computer Cable & Products, Inc., operates primarily in one
business segment - distribution and assembly of electronic wire,
cable and related products used primarily for data communication and
distribution. The principal market for the Company's products is in
the United States.
The condensed consolidated balance sheet as of December 31, 1997 and the
related consolidated statements of operations and cash flows for the
three and six months ended December 31, 1997 have been prepared by the
Company without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present
fairly the consolidated financial position, results of operations and
changes in cash flows at December 31, 1997 and for all periods presented
have been made. Results of operations for the three and six months ended
December 31, 1997 are not necessarily indicative of results of
operations that may be expected for the year ending June 30, 1998.
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended June 30, 1997.
On January 10, 1997, the Company filed petitions for relief under
Chapter 11 of the federal bankruptcy laws in the United States
Bankruptcy Court for the Eastern District of New York. As a result
of the Chapter 11 proceedings (as described in Note 2), the Company
petitioned to liquidate or settle liabilities for amounts other than
those reflected in the accompanying consolidated financial statements.
Furthermore, as a result of the Company's plan of reorganization being
approved, it is likely that substantial adjustments will be made to
the carrying amount of assets and liabilities by adjusting their
values as of the date of the plan of reorganization (the
Confirmation Date).
The Company's condensed consolidated financial statements have been
presented in conformity with the AICPA's Statement of Position 90-7,
Financial Reporting By Entities In Reorganization Under the
Bankruptcy Code, issued November 19, 1990 (SOP 90-7). SOP 90-7
requires a segregation of liabilities subject to compromise by the
Bankruptcy Court as of the bankruptcy date (January 10, 1997) and
identification of all transactions and events that are directly
associated with the reorganization of the Company.
Prior years comparative balances have not been classified to conform
with the current year's balances stated under SOP 90-7. The most
significant difference between the current year's and prior year's
presentations is the reclassification of certain outstanding debt to
current liabilities and pre-petition accounts payable to liabilities
subject to compromise (see Note 4).
VERTEX COMPUTER CABLE & PRODUCTS, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. CHAPTER 11 BANKRUPTCY PROCEEDINGS
Under Chapter 11, certain claims against the Debtor in existence prior
to the filing of the petitions for relief under the federal bankruptcy
laws are stayed while the Debtor continues business operations as
debtor-in-possession (DIP). Additional claims (liabilities
subject to compromise) may arise subsequent to the filing date
resulting from rejection of executory contracts, including leases, and
from the determination by the courts (or agreed to by parties in
interest) of allowed claims for contingencies and other disputed
amounts. Claims secured against the Debtor's assets (secured
claims) also are stayed, although the holders of such claims have
the right to move the court for relief from the stay. Secured claims
are secured primarily by liens on the Debtor's property, plant and
equipment, accounts receivable and inventories.
The Company received approval from the Bankruptcy Court to pay or
otherwise honor certain of its prepetition obligations, including
wages. The Company continued to manage its affairs and operate its
business as a DIP, subject to the supervision of the Bankruptcy Court
while the case was pending.
In January 1997, the Company's revolving credit facility provided DIP
Financing (the DIP Financing) under a court-approved order. The
cost to secure the DIP Financing was $50,000. TW Cable LLC (TW),
whose owner is a director of the Company and a holder of secured
subordinated debentures, provided $350,000 of cash collateral to the
Company's revolving credit lender in an effort to support the
Company's cash flow requirements.
On May 7, 1997, the Company entered into an agreement (the Asset
Purchase Agreement) that was subject to Bankruptcy Court approval,
with TW, pursuant to which TW would acquire the Company's distribution
business product lines and all of its assets used in connection
therewith.
VERTEX COMPUTER CABLE & PRODUCTS, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. PLAN OF REORGANIZATION
On October 30, 1997, the Company's second amended plan of
reorganization and disclosure statement (the Plan) was confirmed
by the United States Bankruptcy Courts in Westbury, New York. The
confirmed Plan became effective on January 12, 1998 concurrent with
the Company's consummation of exit financing (see below).
The Plan calls for unsecured creditors with claims greater than $1,000
(Class 7) to receive 13.5% of their claim in quarterly
installments over the next twelve months and future distributions
based on cash flow (as defined) over the next five years. Unsecured
creditors with claims less than $1,000 (Class 6) will receive a
distribution of 20% of their claim. The initial distribution payments
and certain other administrative claims are guaranteed by TW
Communication Corp. (the Affiliate). Under the Plan, the
Company's wholly-owned subsidiary, Vertex Technologies, Inc., merged
into the Company, and the Company changed its name to Vertex Computer
Cable & Products, Inc. Under the Plan, 25.3 million of the Company's
40 million authorized shares of common stock will be issued and
outstanding. Effective December 29, 1997, each five shares of the
Company's common stock outstanding were exchanged for one share of the
surviving entity. As a result, holders of the Company's currently
outstanding 12,652,000 common stock shares will receive 2,530,400
post-reorganization shares. Further, the preferred shareholders
exchanged such outstanding preferred stock and forgave accrued
dividends for 22,773,600 common stock shares, representing 90% of the
post-reorganization outstanding common stock. The effect of the
January 12, 1998 reorganization will be accounted for financial
reporting purposes as of January 1, 1998.
Pursuant to SOP 90-7, the Company will adopt Fresh Start reporting
on January 12, 1998, the effective date of the Plan. Under Fresh
Start reporting, the reorganization value of the new entity is
allocated to the new entity's assets. If any portion of the
reorganization value cannot be attributed to specific tangible or
identified intangible assets of the emerging entity, such amounts are
to be reported as reorganization value in excess of amounts
allocable to identifiable assets and amortized over future periods.
As a result of adopting Fresh Start reporting, the new entity's
financial statements will not be comparable to the historical
financial statements.
VERTEX COMPUTER CABLE & PRODUCTS, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. LIABILITIES SUBJECT TO COMPROMISE
The Company's liabilities subject to compromise at December 31, 1997
were recorded at the amounts which had been allowed or were expected
to be allowed by the Bankruptcy Court rather than the amounts for
which the claims will be settled under the Plan of Reorganization. In
some cases the amounts that are expected to be allowed will differ
from the amounts at which the liabilities were recorded prior to the
Chapter 11 case because of negotiations and resulting agreements in
the Bankruptcy Court which determines the allowed amounts. Liabilities
subject to compromise of $6,191,880 include approximately $93,000 in
accrued interest, $165,000 of accrued preferred stock dividends in
arrears and the balance represents trade payables.
If the Company's Plan of Reorganization had become effective (out of
Chapter 11 status) by December 31, 1997, the amount of liabilities
subject to compromise would have been reduced to approximately
$898,000.
5. INVENTORIES
Inventory consists principally for products held for sale. The
Company regularly reviews its inventory for obsolete and slow-moving
items which includes reviews of inventory levels of certain product
lines and an evaluation of the inventory based on changes in
technology and markets. As of December 31, 1997 and June 30, 1997,
the reserve was approximately $625,000 and $575,000, respectively.
December 31, June 30,
1997 1997
------------ ------------
Raw Materials $ 68,924 $ 80,142
Work in Process 24,668 46,885
Finished Goods 1,447,974 2,654,623
------------ ------------
Inventories, net $1,541,566 $2,781,650
============ ============
VERTEX COMPUTER CABLE & PRODUCTS, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. LONG-TERM DEBT
Long-term debt consists of the following: December 31, June 30,
1997 1997
------------- ----------
Revolving asset-based loan (a).............. $ 753,496 $2,253,774
Capitalized lease obligations (b)........... 129,146 55,179
------------- ----------
882,642 2,308,953
Less current portion of long-term debt...... 768,376 2,280,433
------------- ----------
$ 114,266 $ 28,520
============= ==========
a. On February 10, 1995, the Company entered into an amended and restated
revolving credit agreement with a lending institution. Such agreement
provided for a revolving credit facility with maximum available of
$10,000,000 and expires on December 31, 1997. Under the terms of the
credit facility, the Company is required to pay interest at prime plus 2
3/4% (11.25% at December 31, 1997) and a commitment fee of 1/2% per annum
on the daily unused portion of the credit. The agreement also provides
for termination fees as a result of default or early termination of .5% of
the maximum credit if such termination occurs before December 31, 1997,
respectively. Under the terms of the agreement, borrowings are limited to
80% of eligible accounts receivable (constituting those amounts
outstanding 90 days or less) and 50% of eligible accounts receivable
outstanding between 91 and 120 days, and 40% of regular inventories and
20% of slow moving inventory. As of December 31, 1997 and June 30, 1997,
the Company had $1,093,000 and $2,453,000 availability under the
eligibility terms of the facility, of which $753,000 and $2,254,000 was
outstanding on such dates, respectively. This loan is collateralized by
substantially all of the assets of the Company not otherwise
collateralized. In connection with its revolving credit facility, the
Company is subject to restrictive covenants which impose certain
limitations with respect to the Company's incurrence of indebtedness,
capital expenditures, creation or recurrence of liens, declaration or
payment of dividends or other distributions, mergers, consolidations and
sales or purchases of substantial assets. In general, the Company is not
allowed to incur further indebtedness or create additional liens on its
assets except for unsecured current liabilities incurred in the ordinary
course of business or liabilities incurred in the ordinary course of
business secured by purchase money security interest not to exceed an
aggregate of $750,000. The Company is not allowed to make loans or
investments or provide guarantees or to prepay indebtedness. The Company
is prohibited from paying dividends on common stock and may not enter into
a merger, consolidation or sale of all or substantially all of its assets.
Additionally, the Company is required to maintain consolidated net worth,
amended on March 15, 1996, to include subordinated debentures, of not less
than $750,000 and to maintain consolidated working capital, defined as
current assets less current liabilities and debt outstanding under the
credit facility, of not less than a negative $1.5 million.
As of December 31, 1997, the Company is in default of certain covenants of
the aforementioned agreement. The lender continues to provide DIP
financing under an approved order from the United States Bankruptcy Court.
VERTEX COMPUTER CABLE & PRODUCTS, INC.
DEBTOR-IN-POSSESSION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 (CONTINUED)
b. The Company leases its telephone system under agreements accounted for as
capital leases. The obligation for the telephone system requires the
Company to make monthly payments of $1,963 through December 1997. The
Company also leases certain warehouse and manufacturing equipment
accounted for as capital leases. The obligation for the warehouse
equipment requires the Company to make monthly payments of $1,240 through
May 2000. During the six month period, the Company leased certain
manufacturing equipment totaling approximately $85,000 that require the
Company to make monthly payments of $2,885 through August 2000.
The following is a summary of the aggregate annual maturities of long-term
debt (excluding the secured subordinated debentures, as described in Note
7):
December 31, Total
------------- ------------
1998 $ 802,991
1999 49,494
2000 30,157
-------------
$ 882,642
=============
7. COMMITMENTS AND CONTINGENCIES
a. Leases
The Company's minimum annual lease commitments under noncancellable
operating leases for premises at December 31, 1997 are as follows:
December 30:
1998 189,939
1999 126,436
2000 120,783
----------
$ 437,158
==========
Rent expense, including related real estate taxes and other operating
charges, was approximately $172,767 and $333,664 for the six months
ended December 31, 1997 and 1996, respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DEBTOR-IN-POSSESSION
Results of Operations
Six Months Ended December 31, 1997 and 1996
Net sales for the six months ended December 31, 1997 decreased $10,822,000
or 73.0% to $3,998,000 compared to $14,820,000 for the six months ended
December 31, 1996. The decrease is a result of the Company focusing on
manufacturing sales only since filing Chapter 11 (Note 1). The prior year
six months includes distribution sales of approximately $8,354,000.
Gross profit for the six months ended December 31, 1997 decreased
$2,288,000 or 89.4% to $271,000 from $2,559,000 for the six months ended
December 31, 1996. Gross profit as a percentage of sales was 6.8% for the
six months ended December 31, 1997 compared to 17.3% for the six months
ended December 31, 1996. The decrease in gross profit is due to the
decrease in sales. A provision of $50,000 for slow-moving and obsolete
inventory is included for the six months ended December 31, 1997.
Selling, general and administrative expenses decreased $2,341,000 or 60%
to $1,534,000 for the six months ended December 31, 1997 from $3,875,000
for the six months ended December 31, 1996 due to the Company decreasing
payrolls and other expenses as a result of filing Chapter 11 (Note 1).
Interest expense, including dividends on preferred stock, decreased
$617,000 or 78.3% to $171,000 for the six months ended December 31, 1997
from $788,000 for the six months ended December 31, 1996. This reduction
is due to the reduced borrowing levels of the Company's credit facility.
Chapter 11 Reorganization related expense for the six months ended December
31, 1997 of $191,000 includes fees for legal, accounting, financing and
consulting services, as well as court fee and printing expenses.
Results of Operations
Quarter Ended December 31, 1997 and 1996
Net sales for the quarter ended December 31, 1997 decreased $5,381,000 or
76.0% to $1,695,000 compared to $7,076,000 for the quarter ended December
31, 1996. The decrease is a result of the Company focusing on
manufacturing sales only since filing Chapter 11 (Note 1). The prior year
quarter includes distribution sales of approximately $3,869,000.
Gross profit for the quarter ended December 31, 1997 decreased $1,057,000
or 95.3% to $52,000 from $1,109,000 for the quarter ended December 31,
1996. Gross profit as a percentage of sales was 3.0% for the quarter ended
December 31, 1997 compared to 15.7% for the quarter ended December 31,
1996. The decrease in gross profit is due to the decrease in sales. A
provision of $50,000 for slow-moving and obsolete inventory is included
for the three months ended December 31, 1997.
Selling, general and administrative expenses decreased $1,134,000 or 58%
to $810,000 for the quarter ended December 31, 1997 from $1,944,000 for
the quarter ended December 31, 1996 due to the Company decreasing payrolls
and other expenses as a result of filing Chapter 11 (Note 1).
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DEBTOR-IN-POSSESSION
Results of Operations
Quarter Ended December 31, 1997 and 1996
(continued)
Interest expense, including dividends on preferred stock, decreased
$320,000 or 79.8% to $81,000 for the quarter ended December 31, 1997 from
$401,000 for the quarter ended December 31, 1996. This reduction is due
to the reduced borrowing levels of the Company's credit facility.
Chapter 11 Reorganization related expense for the six months ended December
31, 1997 of $191,000 includes fees for legal, accounting, financing and
consulting services, as well as court fee and printing expenses.
Liquidity and Financial Condition
As of December 31, 1997
Current assets have decreased $2,576,000 or 52% to $2,365,000 at December
31, 1997 from $4,941,000 at June 30, 1997. This decrease resulted
primarily from a decrease in accounts receivable (decreased sales),
inventory, cash and prepaid expenses and other current assets, as well as
an addition to the provision for slow-moving and obsolete inventory of
$50,000. The Company has net working capital deficiency $6,495,000 at
December 31, 1997, which includes liabilities subject to compromise, as
compared to $5,039,000 at June 30, 1997 due to the reclassification of the
Company's revolving asset based loan to current portion of long term debt
in the current period and also due to a decrease in accounts receivable.
Total borrowings outstanding were $3,122,000 at December 31, 1997 as
compared to $4,491,000 at June 30, 1997. The decrease was due to the
Company reducing the amount outstanding under the Company's revolving
credit facility by approximately $1,500,000, offset by an increase of
capitalized lease equipment of approximately $86,000.
On January 12, 1998, the Company entered into a Loan and Security
Agreement (the Loan Agreement) with it's current lender (see Note
6). The Loan Agreement replaced the court approved DIP financing and
extended the Company's credit facility for a 90 day period through April
12, 1998. The terms of the Loan Agreement are similar to its prior loan
except for a reduction to 75% on advances of eligible accounts
receivables and a reduction to 24% on advances of eligible inventory.
As part of the Loan Agreement, TW provided additional cash collateral of
$500,000 in order for the Company to fund the Plan. The Company is
presently seeking to secure long-term financing prior to the
aformentioned expiration date.
The uncertainty as to the Company's ability to raise additional capital
or secure adequate long-term financing and sustain profitable operations
raises substantial doubt about the Company's ability to continue as a
going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
PART II- OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
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 Computer Cable & Products, Inc.
(DEBTOR-IN-POSSESSION)
By: /s/ Edward Goodstein
Chief Executive Officer
By: /s/ Nicholas T. Hutzel
V.P. & Controller
Dated: September 25, 1998
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<CGS> 3727
<TOTAL-COSTS> 5261
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 171
<INCOME-PRETAX> (1624)
<INCOME-TAX> (1624)
<INCOME-CONTINUING> (1624)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1624)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
</TABLE>
