EXHIBIT 99.1
FOR IMMEDIATE RELEASE
VALLEY FORGE SCIENTIFIC REPORTS
SECOND QUARTER/SIX MONTHS FISCAL 2005 REVENUES AND EARNINGS
OAKS, Pa., May 13, 2005 -- Valley Forge Scientific Corp. (NASDAQ: VLFG; BSE:
VLF), a leading developer of bipolar electrosurgical systems, today announced
revenues and earnings for the second quarter and first six months of fiscal 2005
ended March 31, 2005.
Sales for the second quarter of $1,816,029 were 60 percent greater than
sales of $1,132,771 for the second quarter of fiscal 2004. Operating income was
$270,471 for the second quarter as compared to $13,612 for the second quarter of
fiscal 2004. Net income for the second quarter was $70,463, or $0.01 per basic
and diluted share, as compared to net income of $7,579, or $0.00 per basic and
diluted share, for the second quarter of fiscal 2004.
Sales for the first six months of $3,228,405 were 38 percent greater
than sales of $2,332,240 for the first six months of fiscal 2004. Operating
income was $376,153 for the first six months as compared to $135,470 for the
first six months of fiscal 2004. Net income for the first six months was
$138,884, or $0.02 per basic and diluted share, as compared to $80,558, or $0.01
per basic and diluted share, for the first six months of fiscal 2004.
"I am extremely pleased with Valley Forge's strong operating results
for the second quarter and first six months of fiscal 2005. As described in
further detail in this press release, Valley Forge's net income would have been
approximately $0.03 per share greater without the effect of certain one-time
expenses incurred for professional fees in connection with the merger agreement
with Synergetics, Inc. and to settle a lawsuit," said Jerry L. Malis, President
and CEO.
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"We are very excited about our planned merger with Synergetics, Inc.
and believe the merger will provide excellent opportunities for growth of the
combined company." Sales The increase in sales reflects new sales to Stryker
Corporation, pursuant to an exclusive supply and distribution agreement of the
lesion generator model the Company developed for the percutaneous treatment of
pain, and increased sales to Codman & Shurtleff, Inc., pursuant to an exclusive
distribution agreement.
For the quarter, sales to Stryker Corporation accounted for $413,020,
or 23 percent of sales, and for the first six months, sales to Stryker were
$788,049, or 24 percent of sales.
For the quarter, sales to Codman & Shurtleff, Inc. accounted for
$1,254,363, or 69 percent of sales, as compared to $975,012, or 86 percent of
sales, for the second quarter of fiscal 2004. For the first six months, sales to
Codman were $2,190,132, or 68 percent of sales, as compared to $2,000,977, or 86
percent of sales, for the first six months of fiscal 2004.
For the quarter, sales of dental products increased to $143,980, or 8
percent of sales, from $118,817, or 11 percent of sales, in the second quarter
of fiscal 2004. For the six months, sales of dental products were $219,176, or 7
percent of sales, compared to $288,867, or 12 percent of sales, for the six
months ended March 31, 2004. Product modifications and other strategies for
dental products are currently being considered.
Gross Margin
- ------------
Gross margin for the quarter and six months was 54 percent, as compared
to 55 percent for the second quarter of fiscal 2004, and 54 percent for the
first six months of fiscal 2004.
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative expenses were $490,028, or 27
percent of sales, for the second quarter, as compared to $470,208, or 41 percent
of sales, for the second quarter of fiscal 2004. For the first six months,
selling, general and administrative expenses were $920,442, or 29 percent of
sales, as compared to $868,545, or 37 percent of sales, for the first six months
of fiscal 2004.
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After the end of the second quarter, Valley Forge entered into a
combined sublease and lease, commencing on May 1, 2005, for a term of four and
one-half years, for approximately 13,500 square feet of office, assembly and
manufacturing space in Upper Merion Township, Pennsylvania. The move into this
new facility, which will combine Valley Forge's two existing facilities, will
take place in the third and fourth quarters of fiscal 2005. In connection with
this move, Valley Forge expects to incur moving and other one-time expenses, as
well as increased rent expenses.
Merger Related Professional Fees
- --------------------------------
Valley Forge incurred professional fees in connection with the merger
agreement with Synergetics, Inc., which was entered into on May 2, 2005, of
approximately $72,000, or $0.01 per share, for the second quarter, and
approximately $82,000, or $0.01 per share, for the first six months of fiscal
2005. It is expected that these fees will increase in the third and fourth
quarters of fiscal 2005 as additional professional fees and printing costs are
incurred in connection with the merger.
Research and Development
- ------------------------
Research and development expenses were $138,750, or 8 percent of sales,
for the second quarter as compared to $127,013, or 11 percent of sales, for the
second quarter of fiscal 2004. For the first six months, research and
development expenses were $346,445, or 11 percent of sales, as compared to
$240,908, or 10 percent of sales, for the first six months of fiscal 2004.
Research and development expenses in the second quarter and first six months
reflect the continued development of our new multifunctional bipolar
electrosurgical generator and instrumentation. In addition, research and
development expenses for the first six months of fiscal 2005 reflect the
completion of the lesion generator model currently being sold to Stryker
Corporation.
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Settlement of Lawsuit
- ---------------------
In the second quarter of fiscal 2005, Valley Forge recorded an expense
of $150,000, or approximately $0.02 per share, in connection with the settlement
of a previously disclosed lawsuit in which Valley Forge was one of the
defendants. In April 2005, without admitting liability in this disputed claim,
and as a precondition to Valley Forge's merger agreement with Synergetics, a
settlement agreement and release was entered into, subject to court approval, in
which Valley Forge paid $150,000 towards the plaintiffs' expenses in the
lawsuit.
Agreement with Codman
- ---------------------
On October 15, 2004, Valley Forge entered into a new agreement with
Codman defining the business relationship between the parties from October 1,
2004 through December 31, 2005. This Agreement was amended effective March 1,
2005. On May 6, 2005, in accordance with the terms of the amendment, Valley
Forge notified Codman that effective July 15, 2005, Codman would be the
nonexclusive worldwide distributor of Valley Forge's existing products in the
fields of neurocranial and neurospinal surgery through December 31, 2005. Prior
to July 15, 2005, Codman will continue to be the exclusive worldwide distributor
of Valley Forge's existing products in those fields.
Merger Agreement with Synergetics, Inc.
- ---------------------------------------
As previously announced, on May 2, 2005, Valley Forge entered into a
merger agreement with Synergetics, Inc., a privately-held corporation, that is
involved in the development, manufacture and sales of durable and disposable
instruments for use in retina surgery, neurosurgery and other microsurgery
markets. Pursuant to the terms of the merger agreement, Synergetics'
shareholders will receive, in the aggregate, approximately 16 million fully paid
and nonassessable shares of Valley Forge's common stock, no par value, which
will represent approximately 66 percent of Valley Forge's then outstanding
common stock on a fully diluted basis. Completion of the merger is subject to
several conditions, including approval by shareholders of each company,
effectiveness of a Form S-4 registration statement to be filed with the
Securities and Exchange Commission, and other customary closing conditions.
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Contract to Sell Manufacturing Facility
- ---------------------------------------
In addition, subsequent to the end of the second quarter, Valley
Forge's wholly-owned subsidiary, Diversified Electronics Company, Inc., entered
into a contract of sale, subject to certain contingencies, for the sale of the
Philadelphia, Pennsylvania manufacturing and assembly facility for a sales price
of $200,000.
Management of Valley Forge Scientific will discuss the second quarter
of fiscal 2005 financial results on Friday, May 13, 2005 in a conference call
scheduled for 10:30 a.m. ET. Those who wish to participate in the conference
call may do so by calling (877) 356-9134 approximately 10 minutes prior to the
start time and providing confirmation code 612760 to the conference operator.
For callers outside the United States, the number is (706) 643-3775. An
audiotape replay will be available by telephone at (800) 642-1687, confirmation
code 3987956, approximately two hours following the conclusion of the call
through May 27, 2005. International callers can access this replay at (706)
645-9291.
Valley Forge has established itself as a leading developer and
manufacturer of bipolar electrosurgical systems and related instrumentation.
Based on its DualWave(TM) technology, these systems provide surgeons with the
ability to safely cut and coagulate tissue in the most critical areas of the
brain and spinal cord. Valley Forge's bipolar electrosurgical systems are based
on technology developed in conjunction with Leonard I. Malis, MD, Professor and
Chairman Emeritus of the Mount Sinai School of Medicine Department of
Neurosurgery. For more information on DualWave(TM) technology, Valley Forge's
bipolar electrosurgery systems, or other Valley Forge products, please visit our
Web site at http://www.vlfg.com.
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VALLEY FORGE SCIENTIFIC CORP.
Financial Highlights
For the Three For the Six
Months Ended Months Ended
(Unaudited) (Unaudited)
------------------------ ------------------------
3/31/05 3/31/04 3/31/05 3/31/04
----------- ----------- ----------- -----------
Net sales $ 1,816,029 $ 1,132,771 $ 3,228,405 $ 2,332,240
Gross profit $ 981,369 $ 620,907 $ 1,745,624 $ 1,265,072
Selling, general and
administrative expenses $ 490,028 $ 470,208 $ 920,442 $ 868,545
Merger related professional
fees $ 71,946 -- $ 82,236 --
Research and development
expenses $ 138,750 $ 127,013 $ 346,445 $ 240,908
Operating income $ 270,471 $ 13,612 $ 376,153 $ 135,470
Other Expenses - litigation
settlement $ (150,000) -- $ (150,000) --
Provision for income taxes $ (58,826) $ (11,402) $ (104,193) (65,950)
Net income $ 70,463 $ 7,579 $ 138,884 $ 80,558
Basic income per share $ 0.01 $ 0.00 $ 0.02 $ 0.01
Diluted income per share $ 0.01 $ 0.00 $ 0.02 $ 0.01
Common shares outstanding:
Basic 7,913,712 7,913,712 7,913,712 7,913,712
Diluted 7,956,915 7,977,448 7,967,048 7,971,722
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Sales Highlights
Unaudited
Sales by Field
The table below sets forth total sales and sales by medical field of Valley
Forge's "Generators, Irrigators and Other Products" and "Disposable Products"
for the three and six months ended March 31, 2005 and 2004. Sales of
"Generators, Irrigators and Other Products" in "Other fields" represent sales to
Stryker Corporation, and sales of "Disposable Products" in "Other fields"
represent sales to Boston Scientific Corporation and direct sales to hospitals.
For the Three Months For the Six Months
Ended March 31, Ended March 31,
----------------------- -----------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Generators, Irrigators
and Other Products
- ------------------
Neurosurgery field $ 733,174 $ 441,235 $1,214,199 $1,048,626
Dental field 125,767 104,590 187,276 256,630
Other fields 412,500 15,000 787,500 15,000
---------- ---------- ---------- ----------
Total of all fields: $1,271,445 $ 560,825 $2,188,975 $1,320,256
========== ========== ========== ==========
Disposable Products
- -------------------
Neurosurgery field $ 450,296 $ 433,139 $ 862,106 $ 804,724
Dental field 18,213 14,227 29,532 32,237
Other fields 2,716 25,426 13,236 28,285
---------- ---------- ---------- ----------
Total of all fields: $ 471,225 $ 472,792 $ 904,874 $ 865,246
========== ========== ========== ==========
Sales by Customer
The table below sets forth Valley Forge's sales to Codman & Shurtleff,
Inc. and Stryker Corporation as a percentage of total sales for each of the
periods set forth below.
For the Three For the Six
Months Ended Months Ended
----------------------- -----------------------
3/31/05 3/31/04 3/31/05 3/31/04
---------- ---------- ---------- ----------
Codman & Shurtleff, Inc. 69% 86% 68% 86%
Stryker Corporation 23% 1% 24% 1%
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Forward-Looking Statements
Some statements in this announcement may be "forward-looking statements" for the
purposes of the Private Securities Litigation Reform Act of 1995. In some cases,
forward-looking statements can be identified by words such as "believe,"
"expect," "anticipate," "plan," "potential," "continue" or similar expressions.
Such forward-looking statements are based upon current expectations and beliefs
and are subject to a number of factors. These forward-looking statements are
subject to risks and uncertainties that may cause actual results to differ
materially from those indicated in the forward-looking statements, including but
not limited to: competitive, regulatory and market conditions; the performance
of new products and the continued acceptance of current products in the
marketplace; the execution of strategic initiatives and alliances; disruptions
caused by Valley Forge moving its assembly and manufacturing facility; the
market penetration by third parties who distribute and sell Valley Forge's
products; Valley Forge's ability to maintain a sufficient supply of products;
product liability claims; the uncertainties associated with intellectual
property protection for these products; the possibility that the merger
transaction with Synergetics will not close or that the closing will be delayed
due to the regulatory review or other factors; the challenges and costs of
combining the operations and personnel of Synergetics with Valley Forge; the
ability to attract and retain highly qualified employees; competitive factors,
including pricing pressures; reactions of customers of Valley Forge and
Synergetics and end-users of their products and related risks of maintaining
pre-existing relationships of Valley Forge and Synergetics; fluctuating current
exchange rates; adverse changes in general economic or market conditions; other
one-time events; and other important factors disclosed previously and from time
to time in Valley Forge's filings with the SEC and to be more specifically set
forth in the Joint Proxy Statement/Prospectus to be filed by Valley Forge and
Synergetics with the SEC. Therefore, the reader is cautioned not to rely on
these forward-looking statements. Valley Forge disclaims any intent or
obligation to update these forward-looking statements.
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