SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934. [FEE
REQUIRED]
For the fiscal year ended September 30, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. [FEE
REQUIRED]
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
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on
which Registered
- -------------------------------------------------------------------------
Common Stock, no par value Boston Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 or Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
The aggregate market value of voting stock held by non-affiliates of the
registrant, computed by reference to the closing bid and ask prices as
reported by the NASDAQ system on December 16, 1997 as
$17,714,332.
At December 16, 1997 there were 8,229,384 shares of the Registrant's
Common Stock outstanding.
<PAGE> 2
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The directors and executive officers of the Company are as follows:
Director
Name Age Position(s) Since
Jerry L. Malis 65 Chairman of the Board and
President 1980
Thomas J. Gilloway 60 Executive Vice President,
Secretary, 1984
Treasurer and Director
Leonard I. Malis 78 Director 1989
Bruce A. Murray 61 Director 1992
Bernard H. Shuman 73 Vice President and Director 1994
Robert H. Dick 54 Director 1997
Jerry L. Malis has served as President or Vice-President and a
Director of the Company since its inception in March 1980. As of June
30, 1989, Mr. Malis was elected as Chairman of the Board of the
Company. He has published over fifty articles in the biological science,
electronics and engineering fields, and has been issued twelve United
States patents. Mr. Malis coordinates and supervises the development,
engineering and manufacturing of the Company's products and is in
charge of the daily business operations of the Company. He devotes
substantially all his business time to the business of the Company.
Thomas J. Gilloway has been Executive Vice President and a
Director of the Company since December 1984, and as of June 30, 1989
was appointed Secretary and Treasurer of the Company. From the
Company's inception in March 1980 to December 21, 1984, Mr.
Gilloway served in capacities as a Vice-President and Treasurer. Mr.
Gilloway received his undergraduate degree from LaSalle University in
1959 and his graduate degree from Temple University in 1963. Prior to
his involvement with the Company, Mr. Gilloway was employed in a
marketing capacity for Scott Paper Company, C.R. Bard, Inc., and
CheckPoint Systems as Director of Marketing. He is involved with
marketing, regulatory and contract administration matters for the
Company and devotes substantially all his business time to the business
of the Company.
Leonard I. Malis, M.D., a consultant to the Company since its
inception in March 1980, has been a director since June 30, 1989. Dr.
Malis was Professor and Chairman of the Department of Neurosurgery
at Mount Sinai School of Medicine, New York, New York, from 1971
until 1993, and is currently Professor and Chairman Emeritus at Mount
Sinai School of Medicine. Dr. Malis designed and built the first
commercial bipolar coagulator in 1955, and his original units were the
standard in neurosurgery for many years. Dr. Malis has been issued five
United States patents and has designed and trademarked over one
hundred instruments. He has published over one hundred articles in
medical journals and reviews and is the author of ten chapters in
textbooks on neurosurgery.
Bruce A. Murray has been a director of the Company since
October 14, 1992. He is a Managing Member of The Change
Management Group, LLC, a management consulting company; and a
Principal of Adair & Murray Associates, Inc., a management consulting
company. From 1991 to May 1993, he was a senior consultant with the
management consulting firm of Rath and Strong. From 1984 to August
1991, Mr. Murray held positions within the Pfizer Hospital Products
Group, as Director of Engineering-Surgical Products, Corporate Vice
President - Research and Development, and Senior Vice President and
Business Manager - Surgical Products. He has also held senior
management positions with Valleylab, Inc., Picker Corporation
Electronics Division, Ball Brothers Research Corporation and IIT
Research Institute. Mr. Murray received both his B.S. in Engineering and
his M.B.A. from the Illinois Institute of Technology, and is an adjunct
instructor in business strategies at the University of Colorado.
<PAGE> 3
Bernard H. Shuman has been a director and Vice President of the
Company since September 1, 1994. Mr. Shuman is currently Vice
President-Technology. Prior to September 1, 1994, Mr. Shuman served
as President and director of Diversified Electronic Corporation
("Diversified"), a specialty electronics manufacturer which merged into
the Company on August 31, 1994.
Robert H. Dick has been a director of the Company since 1997.
He is a partner in Boles & Company, an investment banking firm. Prior
to becoming a partner in Boles & Company in April 1996, he was
President, CEO and CFO of two Boles & Company clients: BioMagnetic
Therapy Systems, Inc. (from September 1995 to April 1996) and Pharmx,
Inc. (from May 1994 to May 1995). From April 1987 to May 1994, Mr.
Dick served as Vice President-International for Codman & Shurtleff, Inc.,
a Johnson & Johnson subsidiary, where he was responsible for new
business development and sales and marketing in non-U.S. markets. Mr.
Dick has also held other business development and sales and marketing
positions with Codman & Shurtleff, Inc., and product management
positions with USCI Surgical Products, a division of C.R. Bard.
Jerry L. Malis and Dr. Leonard I. Malis are brothers. The
Company's executive officers are elected annually by the Company's
directors and shall continue to serve until their successors are elected and
qualified.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
For the 1997 fiscal year, Robert H. Dick failed to file one report
with the Securities and Exchange Commission involving one transaction
and Leonard I. Malis failed to file one report with the Securities and
Exchange Commission involving two transactions regarding the Common
Stock of the Company.
Item 11. EXECUTIVE COMPENSATION.
The following table sets forth the compensation paid by the
Company to its executive officers for the three fiscal years ended
September 30, 1997.
SUMMARY COMPENSATION TABLE
Number of Shares
of Common Stock
Name and Underling
Principal Position Fiscal Year Salary (1) Options Granted
- ------------------------------------------------------------------------------
Jerry L. Malis, 1997 $179,951 ---
President 1996 163,592 ---
1995 163,592 50,000
Thomas J. Gilloway, 1997 $153,598 ---
Executive Vice President 1996 139,634 ---
1995 139,634 50,000
Bernard H. Shuman 1997 $105,000 ---
Vice President - Technology 1996 105,000 25,000
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(1) Non-cash compensation did not exceed the lesser of $50,000 or 10%
of the cash compensation for the named individual.
<PAGE> 4
Effective July 1, 1994, the Company entered into employment
agreements with Jerry L. Malis, President, and Thomas J. Gilloway,
Executive Vice President for a term of 63 months. The agreements
provide for annual base salaries to Mr. Malis and Mr. Gilloway of
$148,720 and $126,940, respectively, in 1994, with annual base salary
increases of 10% commencing on October 1, 1994. For the year ended
September 30, 1996, Messrs. Malis and Gilloway waived their right to
the 10% increase of base salary for that year. The base salaries for the
years ended September 30, 1996 and 1995 were $163,592 for Jerry L.
Malis and $139,634 for Thomas J. Gilloway. The base salaries for Jerry
L. Malis and Thomas J. Gilloway for the year ended September 30, 1997
were $179,951 and $153, 598, respectively. The agreements also provide
that Messrs. Malis and Gilloway may each receive such other cash and
stock bonuses as may be determined from time to time by the Board of
Directors. The employment agreements may be terminated for cause. In
addition, the agreements provide that in the event of a change of control
(as defined in the Securities Exchange Act of 1934) of the Company, the
employee may terminate his employment for "good reason" and shall be
entitled to receive a payment equal to the lesser of (i) 2.99 times the
employee's average annual compensation (including bonuses, if any)
during the three years preceding the date of termination; or (ii) the
compensation payable for the remaining term of the agreement. The term
"good reason" includes the assignment to the employee of duties
inconsistent with the employee's then position, a relocation of the
Company's office more than 30 miles from the Company's present offices,
a failure of the Company to continue in effect any benefit or
compensation plan, depriving the employee of any fringe benefit, or the
failure of any successor entity to assume the employment agreement.
On August 31, 1994, the Company entered into an employment
agreement with Bernard H. Shuman, Vice President-Technology, for a
term of 59 months. The agreement provides for an annual salary to Mr.
Shuman of $50,000 for the period from September 1, 1994 to July 31,
1995, and a salary of $105,000 for each twelve month period thereafter.
The agreement provides that Mr. Shuman may receive additional
compensation and benefits as may be determined from time to time by the
Board of Directors. The agreement provides for certain death and
disability benefits. The employment agreement may be terminated for
cause.
DIRECTORS' COMPENSATION
Directors of the Company do not receive any compensation for
their services as members of the Board of Directors, but Directors who
are not officers of the Company are entitled to reimbursement for
expenses incurred in connection with their attendance at meetings and are
entitled to participate in the Company's Stock Option Plan.
401(k) PLAN AND PROFIT SHARING PLAN
Effective January 1, 1990, the Company adopted a 401(k) Plan and
Profit Sharing Plan that covers full-time employees who have attained
age 21 and have completed at least one year of service with the
Company. Under the 401(k) Plan, an employee may contribute an amount
up to 25% of his compensation to the 401(k) Plan on a pre-tax basis not
to exceed $9,500 per year (adjusted for cost of living increases).
Amounts contributed to the 401(k) Plan are non-forfeitable.
Under the Profit Sharing Plan, a participant in the plan participates
in the Company's contributions to the Plan as of December 31 in any
year, with allocations to individual accounts based on annual
compensation. An employee does not fully vest an interest in the plan
until completion of three years of employment. The Board of Directors
determines the Company's contributions to the plan on a discretionary
basis. The Company has not made any contributions to date.
<PAGE> 5
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth as of January 16, 1998, certain
information with respect to the beneficial ownership of Common Stock,
by each person known to the Company to own beneficially 5% or more
of the outstanding Common Stock, by each director and nominee, and by
all officers and directors as a group.
Amount of
Name and Address of Beneficial Percentage
Beneficial Owners (1) Ownership Owned
- --------------------- ---------- ----------
Jerry L. Malis (2)(3) 1,282,276 15.3%
Thomas J. Gilloway(2)(3) 1,001,375 12.0%
Dr. Leonard I. Malis(2) 892,242 10.7%
Bernard H. Shuman(2)(4) 126,467 1.5%
Bruce A. Murray(2)(5) 11,500 *
Robert H. Dick(2)(6) 2,000 *
All officers and directors
as a group (6 persons) 3,305,860 38.6%
- ---------------
* less than 1%
(1) Except as indicated in the footnotes to this table, the persons
named in the table have sole voting and investment power with respect
to all shares of Common Stock shown as beneficially owned by them.
(2) The mailing address of Messrs. Malis, Gilloway, Shuman, Murray
and Dick and Dr. Malis, directors of the Company, is 136 Green Tree
Road, P.O. Box 1179, Oaks, Pennsylvania 19456-1179.
(3) Includes 50,000 shares of Common Stock which may be
purchased by each of Jerry L. Malis and Thomas J. Gilloway through the
exercise of stock options issued pursuant to the Company's
Non-Qualified Stock Option Plan at a per share exercise price of $1.56;
50,000 shares of Common Stock which may be purchased by each of
Jerry L. Malis and Thomas J. Gilloway through the exercise of stock
options at a per share exercise price of $3.625; and 50,000 shares of
Common Stock which may be purchased by each of Jerry L. Malis and
Thomas J. Gilloway through the exercise of stock options at a per share
exercise price of $2.375.
(4) Includes 25,000 shares of Common Stock which may be purchase
by Mr. Shuman through the exercise of stock options issued pursuant to
the Company's Non-Qualified Stock Option Plan at a per share exercise
price of $2.31. The record owner of 101,467 shares of Common Stock
is The Bernard H. Shuman Living Trust, a trust in which Mr. Shuman is
designated as the sole trustee and for which he possesses the power to
vote the shares.
(5) Includes 5,000 shares of Common Stock which may be purchased
by Mr. Murray through the exercise of stock options issued pursuant to
the Commpany's Non-Qualified Stock Option Plan at a per share exercise
price of $3.625; 1,000 shares of Common Stock which may be purchased
at a per share exercise price of $4.25; 1,000 shares of Common Stock
which may be purchased at a per share exercise price of $2.50 ; 2,500
shares of Common Stock which may be purchased at a per share exercise
price of $2.31; and 2,000 shares of Common Stock which may be
purchased at a per share exercise price of $3.375.
(6) Includes 2,000 shares of Common Stock which may be purchased
by Mr. Dick through the exercise of stock options issued pursuant to the
Company's Non-Qualified Stock Option Plan at a per share exercise price
of $3.375.
<PAGE> 6
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Since the late 1960's, Dr. Leonard I. Malis, a director of the
Company, on an individual basis, has been a party to royalty
arrangements with Johnson & Johnson Professional, Inc. ("J&J"),
formerly known as Codman & Shurtleff, Inc., a principal customer of the
Company. Dr. Malis has developed and in the future may develop passive
hand instruments for J&J with no pecuniary benefits to the Company.
The Company has entered into a five year lease commencing on
July 1, 1995 for approximately 4,200 square feet of office and warehouse
space at a base monthly rent of $4,362 with GMM Associates, a
Pennsylvania general partnership, whose partners are Jerry L. Malis,
Thomas J. Gilloway and Leonard I. Malis, principal shareholders,
directors and/or officers of the Company. The related expense for this
lease for the year ended September 30, 1997 was $52,937. The
Company believes the rental payments reflect fair rental value for the
space.
For fiscal 1997, the Company paid legal fees in the amount of
$75,216 to a law firm in which a son-in-law of Jerry L. Malis is a
partner.
<PAGE> 7
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) 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 on this 26th day of January, 1998.
VALLEY FORGE SCIENTIFIC CORP.
By: /s/ Jerry L. Malis
Jerry L. Malis, President
