Vertex Interactive Announces Profitable Fiscal Third Quarter Results


SOUTH PLAINFIELD, N.J., Aug. 23, 2004 (PRIMEZONE) -- Vertex Interactive Inc. (OTCBB:VETX), a leading provider of software technology for order fulfillment and warehouse management, today announced operating results for the fiscal third quarter ended June 30, 2004.

Third Quarter Financial Results

For the fiscal third quarter ended June 30, 2004, Vertex announces a net profit of $588,464 or $0.01 per share compared to a net loss of $840,000 or $0.02 per share in the same period last year and a net loss of $186,000 in the preceding quarter. Results announced include the impact of $1,042,739 of extraordinary gains recognized from the settlement of claims in the quarter.

Operating revenues were $706,000, compared with $518,000 in the fiscal second quarter ended March 31, 2004 and $1 million for the same period last year.

Gross margin improved significantly to 52% from 38% for the same quarter last year due to an increase in high margin software sales.

Operating losses were substantially reduced to $188,000 (or breakeven on a per share basis), a substantial improvement over the $594,000 (or $.02 per share) loss for the same period last year and a sequential improvement over the $262,000 loss in the previous quarter. Selling and Administrative expenses fell 43% to $520,000 from $909,000 last year. (Included in the $504,000 of operating expenses for the current quarter is approximately $100,000 of expenses relating to the filing of a Registration Statement on Form S-1, which was filed to register shares underlying the issuance of $3 million of convertible notes subscribed for by the NIR Group.)

In addition, the Company had $567,000 in cash, cash equivalents and restricted cash on June 30, 2004.

Other Highlights

Funding

$3 million of convertible debentures were sold. The last tranche of this funding, $750,000, was received on August 12, 2004

New Business

During the quarter the company completed installation in China of the previously announced $300,000 follow on order for one of the largest technology companies in the world.

Pipe line activity increased significantly during the period.

New Products

In July, Vertex announced Release 4.0 of its eWMS Warehouse Management Solution incorporating our event management tool, the Spontaneous Event Engine or SEE product.

Also in July, the company announced the Release 3.0 of its Linux Order-Fulfillment System.

Management

Management has been strengthened by the addition of Jim Kanaley as Vice President, Sales, a 15 year veteran from Cisco Systems and Juniper Networks, among others.

Commenting on the results, Nicholas Toms, CEO, said, "We are gratified to be able to finally report a profitable quarter on the back of a sequential revenue increase. The recent $3 million of new capital raised in conjunction with the agreement by MidMark to convert approximately $7.2 million of debt into new equity is having a powerful effect in enabling the company to stabilize the balance sheet and our business. Nonetheless during the long slow down, we managed to continue our new product development program, which has resulted in a wide array of new product announcements over the past few months, which are being well received in the marketplace. Expect movement in this vein in the near future. The addition of Jim Kanaley, with his wealth of experience from Cisco and Juniper Networks, among others will strengthen our team and product offerings."

About Vertex Interactive

Vertex Interactive is an international provider of supply chain management technologies. Vertex offers a comprehensive range of software systems and tools, from point solutions to integrated end-to-end hardware and software solutions, for enterprise-wide and collaborative supply chain optimization.

Safe Harbor

Certain statements contained herein may be forward-looking in nature and are therefore subject to risks and uncertainties that could cause actual results to differ materially. The company's recent acquisition history, progress toward completing the integration of its acquisitions, history of operating losses, current expense levels compared with its sales, and the state of development of its product portfolio, coupled with the overall economic and competitive operating environments pose a number of risks investors should take into consideration in connection with assessing the company's financial and operating results. A more detailed discussion of these and other important risk factors can be found in the documents filed with the Securities and Exchange Commission on forms 10-K and 10-Q.

Towards the end of each fiscal quarter, Vertex Interactive will have a 'Quiet Period' when Vertex Interactive and its representatives will not comment concerning previously published financial expectations, and the company disclaims any obligation to update during the Quiet Period. The public should not rely on previously published expectations during the Quiet Period. Investors should not expect that these forward-looking statements will be updated or supplemented as a result of changing circumstances or otherwise, and Vertex Interactive disavows and disclaims any obligation to do so.


               VERTEX INTERACTIVE, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED BALANCE SHEETS

                                              June 30,   September 30,
                                                2004         2003
                                             (Unaudited)
                                             ----------   ----------
                         ASSETS
 CURRENT ASSETS:
 Cash and cash equivalents,                  $  164,654   $   25,265
 Restricted Cash - short-term                   225,000           --
 Accounts receivable, less
  allowance for doubtful accounts
  of $456,358 at June 30, 2004
  and September 30, 2003                        198,225      639,208
 Inventories, net of valuation allowance        414,231      537,337
 Prepaid expenses and other current assets       22,921       20,103
                                             ----------   ----------
 Total current assets                         1,025,031    1,221,913

 Equipment and improvements, net of
  accumulated depreciation and
  amortization of $1,351,779 at
  June 30, 2004 and $1,320,152
  at September 30, 2003                          38,602       70,249

 Capitalized software costs, net of
  accumulated amortization of $318,331 at
  June 30, 2004 and $231,513 at
  September 30, 2003                             28,938      115,756
 Restricted cash - long-term                    193,750           --
 Deferred financing costs,
  net of accumulated amortization
  of $26,250                                    550,745           --
 Other assets                                   111,270      111,273
                                             ----------   ----------
 Total assets                                $1,948,336   $1,519,191
                                             ==========   ==========

     See notes to condensed consolidated financial statements.


               VERTEX INTERACTIVE, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED BALANCE SHEETS

                                          June 30,      September 30,
                                            2004            2003
                                       -------------    -------------
                                        (Unaudited)

              LIABILITIES AND STOCKHOLDERS'
                        DEFICIENCY
 CURRENT LIABILITIES:
 Notes payable - unrelated parties     $   1,227,500    $   1,869,236
 Notes payable - related parties           4,233,187        4,095,848
 Convertible notes payable
  - related parties                        2,294,324        2,294,324
 Accounts payable                          3,800,769        4,533,875
 Net liabilities associated with
  subsidiaries in liquidation              7,572,880        8,511,077
 Payroll and related benefits
  accrual                                  2,063,721        2,622,354
 Litigation related accruals               3,655,323        4,077,665
 Other accrued expenses and
  liabilities                              5,153,916        4,870,759
 Deferred revenue                            386,251          305,243
                                       -------------    -------------
 Total current liabilities                30,387,871       33,180,381

 Long term convertible notes
  payable - unrelated parties              2,250,000                0
                                       -------------    -------------
 Total liabilities                        32,637,871       33,180,381
                                       -------------    -------------
 COMMITMENTS AND CONTINGENCIES

 STOCKHOLDERS' DEFICIENCY:
  Series A preferred stock, par value
   $.01 per share; 2,000,000  shares
   authorized, 1,356,852 shares issued
   and outstanding ($10,000,000
   aggregate liquidation preference)          13,569           13,569
  Series B preferred stock, par value
   $0.01 per share; 1,000 shares
   authorized, 1,000 shares issued and
   outstanding ($1,000,000 aggregate
   liquidation preference)                        10               10
  Series C preferred stock, par value
   $0.01 per share; 10,000 shares
   authorized, 997 shares issued and
   outstanding ($997,000 aggregate
   liquidation preference)                        10               10
  Common stock, par value $.005 per
   share; 75,000,000 shares authorized;
   48,201,978 shares issued and
   outstanding                               241,011          241,011
  Additional paid-in capital             155,778,295      155,364,295
  Unearned income                           (400,000)        (400,000)
  Accumulated deficit                   (184,588,430)    (184,332,055)
  Accumulated other comprehensive loss    (1,666,760)      (2,480,790)
  Less: Treasury stock, 87,712 shares
   of common stock (at cost)                 (67,240)         (67,240)
                                       -------------    -------------
  Total stockholders' deficiency         (30,689,535)     (31,661,190)
                                       -------------    -------------

  Total liabilities and stockholders'
   deficiency                          $   1,948,336    $   1,519,191
                                       =============    =============

     See notes to condensed consolidated financial statements.

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