THIS DOCUMENT IS A COPY OF THE 10-Q FILED ON FEBRUARY 13, 1996
PURSUANT TO A RULE 202(d) CONTINUING HARDSHIP EXEMPTION.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to ________________
Commission File Number: 001-10382
VALLEY FORGE SCIENTIFIC CORP.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-2131580
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
136 Green Tree Road, Oaks, Pennsylvania 19456
(Address of principal executive offices and zip code)
Telephone: (610) 666-7500
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 _____
At February 7, 1996 there were 8,229,384 shares outstanding of the
Registrant's no par value Common Stock.
____________
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VALLEY FORGE SCIENTIFIC CORP.
INDEX TO FORM 10-Q
December 31, 1995
Part I - Financial Information
Item 1. Financial Statements:
Balance Sheets - December 31, 1995 and September 30, 1995.
Statements of Operations for the three months
ended December 31, 1995 and December 31, 1994.
Statements of Cash Flows for the three months
ended December 31, 1995 and December 31, 1994.
Notes to Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Part II - Other Information
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<TABLE>
<CAPTION>
VALLEY FORGE SCIENTIFIC CORP.
AND SUBSIDIARY
BALANCE SHEETS
December 31, September 30,
1995 1995
(Unaudited) (Audited)
__________________________________
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $543,182 $515,234
Accounts receivable trade (net) 695,481 705,012
Inventory 1,440,240 1,448,365
Prepaid items and other cash assets 114,841 60,244
Recoverable income taxes 170,371 170,371
Current portion of deferred income
tax benefit 174,791 153,188
_________ _________
Total Current Assets 3,138,906 3,052,414
Property, Plant and Equipment, net 317,957 324,296
Intangible Assets, net of accumulated
amortization 975,814 998,370
Deferred Income Tax Benefit, net
of current portion 414 414
Other Assets 4,372 4,372
TOTAL ASSETS $4,437,463 $4,379,866
___________ ___________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
<S> <C> <C>
Current Liabilities:
Current portion of notes payable $183,242 $180,678
Accounts payable and accrued expense 182,461 75,445
Income taxes payable 0 0
_________ __________
Total Current Liabilities 365,703 256,123
Long Term Liabilities:
Notes Payable 0 0
_________ __________
Total Liabilities 365,703 256,123
Commitments and Contingencies
Stockholders' Equity:
Preferred stock 0 0
Common stock (no par, 10,000,000 shares
authorized, 8,229,384 shares issued and
outstanding at December 31, 1995 and
September 30, 1995) 4,051,698 4,051,698
Retained earnings 20,062 72,045
_________ _________
Total Stockholders' Equity 4,071,760 4,123,743
Total Liabilities and Stockholders' Equity $4,437,463 $4,379,866
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VALLEY FORGE SCIENTIFIC CORP. AND SUBSIDIARY
STATEMENTS OF OPERATIONS
For the Three Months Ended December 31,
(Unaudited)
1995 1994
<S> <C> <C>
Net Sales $668,388 $286,150
Cost of Sales 343,395 136,973
__________ __________
Gross Profit 342,993 149,177
__________ __________
Other Costs:
Selling general and administrative 360,257 321,969
Research and development 20,093 19,474
Amortization 22,556 22,542
_________ _________
Total Other Costs 402,906 363,985
_________ _________
Income (loss) from Operations (77,913) (214,808)
Other Income:
Interest Income 4,327 4,219
__________ __________
Income (loss) before income taxes (73,586) (210,589)
Provision for (Benefit of) income taxes (21,603) (86,186)
__________ __________
Net Income (Loss) $(51,983) $(124,403)
__________ __________
Primary earnings (loss) per share
of common stock $(.01) $(.01)
Fully diluted earnings (loss) per share $(.01) $(.01)
Primary common shares outstanding 8,312,648 8,286,198
Fully diluted common shares outstanding 8,312,648 8,286,198
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VALLEY FORGE SCIENTIFIC CORP. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
For the Three Months Ended December 31,
(unaudited)
1995 1994
_____________________________________
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $(51,983) $(124,403)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 35,523 36,991
Changes in assets and liabilities,
net of effect from:
Decrease in accounts receivable 9,531 551,461
Decrease (Increase) in inventory 8,125 (230,423)
Increase in deferred income tax
benefit (21,603) (96,906)
Increase in accounts payable and
accrued expenses 107,016 17,630
Decrease in income taxes payable - (19,082)
Increase in prepaid items and other
current assets (54,597) (20,937)
__________ ___________
Net cash provided by operating
activities 32,012 114,331
__________ ____________
Cash Flows from Investing Activities:
Purchase of property, plant and equipment (6,628) -
__________ ___________
Net cash used in investing activities (6,628) -
__________ ___________
Cash Flows from Financing Activities:
Principal payments on notes payable - (47,188)
Increase in notes payable 2,564 -
____________ __________
Net cash provided by (used in)
financing activities 2,564 (47,188)
____________ ___________
Net Increase in Cash and Cash Equivalents 27,948 67,143
Cash and Cash Equivalents, beginning
of period 515,234 660,010
____________ ___________
Cash and Cash Equivalents, end of period $543,182 $727,153
____________ ___________
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Income taxes $ - $ 25,000
___________ _________
</TABLE>
<PAGE>
VALLEY FORGE SCIENTIFIC CORP. AND SUBSIDIARY
Notes to Financial Statements
December 31, 1995
1. Valley Forge Scientific Corp. ("VFSC") is engaged in the business of
developing, manufacturing and selling medical devices and products. On August
18, 1994, VFSC formed a wholly-owned subsidiary, Diversified Electronics
Company, Inc. ("DEC"), a Pennsylvania corporation, in order to continue the
operations of Diversified Electronics Corporation, a company which was merged
with and into VFSC on August 31, 1994. Collectively, VFSC and DEC are referred
to herein as the "Company".
2. In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the financial
position as of December 31, 1995 and September 30, 1995 and the statements of
operations for the three months ended December 31, 1995 and 1994 and the
statements of cash flows for the three months ended December 31, 1995 and 1994.
The statements of operations for the three months ended December 31, 1995 and
1994 are not necessarily indicative of results for the full year.
While the Company believes that the disclosures presented are adequate to make
the information not misleading, these financial statements should be read in
conjunction with the financial statements and accompanying notes included in
the Company's Annual Report Form 10-K for the fiscal year ended
September 30, 1995.
3. Earnings per share are based on the weighted average number of common
shares outstanding including common stock equivalents.
<PAGE>
VALLEY FORGE SCIENTIFIC CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Results of Operations for the Three Months Ended December 31, 1995
Compared to the Three Months Ended December 31, 1994.
Sales of $668,388 for the three months ended December 31, 1995 were
134% greater than sales in the corresponding period in 1994. Gross profit of
$324,993 for the three months ended December 31, 1995 represented a 118%
increase, from gross profit for the corresponding period in 1994. Although the
sales increase in the December 1995 quarter reflected an increase in sales to
Johnson & Johnson Professional, Inc. ("J & J") from the corresponding quarter
in 1994, sales of generators were at lower than anticipated levels as J & J
reduced its inventories of existing generators being replaced by two new
generators developed by the Company in fiscal 1995.
Selling, general and administrative expenses for the three months ended
December 31, 1995 were $360,257, representing a 12% increase from the amounts
for the corresponding period in 1994. Selling, general and administrative
expenses were impacted by costs associated with new generators and disposable
products which the Company is preparing to market in the fields of urology,
neurosurgery, gynecology, plastic and reconstructive surgery and orthopedics.
Subsequent to the end of the December 31, 1995 quarter, the Company
received permission from the U.S. Food and Drug Administration to market its new
VFS 300 bipolar electrosurgical generator which enables a surgeon to cut tissue
and/or coagulate blood vessels while the electrodes are totally submerged in
electrically conducted fluids, such as saline.
The Company had a loss from operations of $77,913 for the three months
ended December 31, 1995, as compared to a loss from operations of $214,808
for the corresponding period in 1994. The Company's benefit of income taxes
was $21,603 for the three months ended December 31, 1995, as compared to $86,186
for the three months ended December 31, 1994.
As a result of the foregoing, net loss was $51,983 for the three
months ended December 31, 1995, as compared to net loss of $124,403 for the
three months ended December 31, 1994. Primary and fully diluted loss per share
was $.01 for the three months ended December 31, 1995 and the three months
ended December 31, 1994.
Liquidity and Capital Resources
The primary measures of the Company's liquidity are cash balances
(including short-term investments), accounts receivable and inventory balances,
as well as its borrowing ability. During the three months ended December
31, 1995, the Company's working capital decreased by $23,088 to $2,773,203.
The Company provided $32,012 from operating activities for the first
three months of fiscal 1996 principally from an increase in accounts payable
and accrued expenses of $107,016, less the Company's net loss (as adjusted
for depreciation and amortization) of $16,460, and an increase in prepaid
and other current assets of $54,597 and an increase in deferred income tax
benefit of $21,603.
Investing activities for the first three months of fiscal 1996
used a total of $6,628 for the purchase of equipment while financing activities
for the first three months of fiscal 1996 provided $2,564 for the increase in
notes payable. As a result of the foregoing, cash increased by $27,948 in the
first three months of fiscal 1996, leaving a balance of $543,182 in the
Company's cash and cash equivalents at December 31, 1995.
The Company has no long-term debt. The Company believes it has
available all funds needed for operations, research and development and capital
expenditures as they may arise in the future. However, should it be necessary,
the Company believes it could borrow adequate funds at competitive rates and
terms.
<PAGE>
VALLEY FORGE SCIENTIFIC CORP.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holding
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
The Registrant did not file any reports on Form 8-K during
the quarter ended December 31, 1995.
<PAGE>
VALLEY FORGE SCIENTIFIC CORP.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VALLEY FORGE
SCIENTIFIC CORP.
Date: February 12, 1996 By: Jerry L. Malis
Jerry L. Malis, President
(principal financial officer)
