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UNITED STATES
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended September 30, 2004
Commission File Number 0-10832
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AFP Imaging Corporation
-----------------------
(Exact name of registrant as specified in its charter)
New York 13-2956272
------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
250 Clearbrook Road, Elmsford, New York 10523
--------------------------------------- -----
(Address of principal executive offices) (Zip Code)
914-592-6100
------------
(Registrant's telephone number, including area code)
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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes No X
------ ------
The registrant had 9,399,617 shares of Common Stock outstanding as of November
1, 2004.
1
This Quarterly Report on Form 10-Q contains certain forward-looking statements
within the meaning of the Private Securities Reform Act of 1995. Forward-looking
statements involve known and unknown risks and uncertainties and other factors
that could cause actual results of AFP Imaging Corporation (collectively with
its subsidiaries, the "Company") or achievements expressed or implied by such
forward-looking statements to not occur, not be realized or differ materially
from that stated in such forward-looking statements. Forward-looking statements
may be identified by terminology such as "may," "will," "could," "would,"
"project," "expect," "believe," "estimate," "anticipate," "intend," "continue,"
"potential," "opportunity" or similar terms, variations of such terms, or the
negative of such terms or variations. Potential risks, uncertainties and factors
include, but are not limited to:
o adverse changes in general economic conditions,
o the Company's ability to repay its debts when due,
o changes in the markets for the Company's products and services,
o the ability of the Company to successfully design, develop, manufacture and
sell new products,
o the Company's ability to successfully market its existing and new products,
o adverse business conditions,
o changing industry and competitive conditions,
o maintaining operating efficiencies,
o pricing pressures,
o risks associated with foreign sales,
o the Company's ability to attract and retain key personnel,
o difficulties in maintaining adequate long-term financing to meet the
Company's obligations and fund the Company's operations,
o changes in the nature or enforcement of laws and regulations concerning the
Company's products, services, suppliers, or the Company's customers,
o determinations in various outstanding legal matters,
o changes in currency exchange rates and regulations, and
o other factors set forth in this Quarterly Report on Form 10-Q, and the
Company's Annual Report on Form 10-K for the year ended June 30, 2004, and
from time to time in the Company's other filings with the Securities and
Exchange Commission.
Readers are urged to carefully review and consider the various disclosures made
by the Company in this Form 10-Q, the Company's Annual Report on Form 10-K for
the year ended June 30, 2004, and the Company's other filings with the SEC.
These reports attempt to advise interested parties of the risks and factors that
may affect the Company's business, financial condition and results of operations
and prospects. The forward-looking statements made in this Form 10-Q speak only
as of the date hereof and we disclaim any obligation to provide updates,
revisions or amendments to any forward-looking statements to reflect changes in
the Company's expectations or future events.
PART I. Financial Information
- ------------------------------
The consolidated financial statements included herein have been prepared by the
Company without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. While certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles in the United States have been condensed or
omitted pursuant to such rules and regulations, the Company believes that the
disclosures made herein are adequate to make the information presented not
misleading. It is recommended that these consolidated financial statements be
read in conjunction with the Company's consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 2004.
In the opinion of the Company, all adjustments necessary to present fairly the
Company's consolidated financial position as of September 30, 2004, and its
results of operations for the three month periods ended September 30, 2004 and
2003, and its cash flows for the three month periods then ended, consisting of
normal recurring adjustments, have been included.
2
Item 1: FINANCIAL STATEMENTS
AFP Imaging Corporation and Subsidiaries
Consolidated Balance Sheets - September 30, 2004 and June 30, 2004
------------------------------------------------------------------
Assets September June 30, Liabilities and Shareholders' September June 30,
30, 2004 2004 Equity 30, 2004 2004
------------- ------------ ----------- -------------
(Unaudited) (Unaudited)
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash equivalents $354,046 $331,993 Current portion of
Accounts receivable, less allowance long-term debt $1,450,972 $1,451,094
for doubtful accounts of $93,200 Accounts payable 983,364 922,499
and $95,000, respectively 2,143,432 2,503,760 Accrued expenses 905,728 847,923
Inventories 3,196,375 2,704,009 ----------- -------------
Prepaid expenses and other current 111,491 267,380 Total current liabilities 3,340,064 3,221,516
assets ------------- ------------ ----------- -------------
Long Term Debt 155,556 222,223
Total current assets 5,805,344 5,807,142
------------- ------------ Deferred Rent 130,672 135,760
----------- -------------
Total liabilities 3,626,292 3,579,499
----------- -------------
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value;
PROPERTY, PLANT AND EQUIPMENT, authorized 30,000,000 shares,
At cost 1,549,172 1,502,811 issued and outstanding
Less accumulated depreciation (1,156,060) (1,114,540) 9,399,617 and 9,270,617
------------- ------------ shares at September 30, 2004,
and June 30, 2004, respectively 93,996 92,710
393,112 388,271
Common stock warrants 19,800 19,800
Paid-in capital in excess
Other Assets 61,610 49,482 of par 11,584,587 11,545,883
------------- ------------ Accumulated deficit (9,064,609) (8,992,997)
----------- -------------
$6,260,066 $6,244,895 Total shareholders' equity 2,633,774 2,665,396
============= ============ ----------- -------------
$6,260,066 $6,244,895
=========== =============
The accompanying notes to financial statements are an integral part of these statements.
3
AFP Imaging Corporation and Subsidiaries
Consolidated Statements of Operations
------------------------------------
(Unaudited)
Three Months Ended
September 30,
2004 2003
----------- -----------
NET SALES $4,655,471 $4,034,879
COST OF SALES 2,907,679 2,476,337
----------- -----------
Gross profit 1,747,792 1,558,542
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (Note 7) 1,676,425 1,276,576
RESEARCH AND DEVELOPMENT EXPENSES 88,699 108,593
----------- -----------
1,765,124 1,385,169
----------- -----------
Operating income/(loss) (17,332) 173,373
INTEREST EXPENSE, net 43,185 44,113
----------- -----------
Income/(loss) before income taxes (60,517) 129,260
PROVISION FOR INCOME TAXES 11,095 14,200
----------- -----------
NET INCOME/(LOSS) ($71,612) $115,060
=========== ===========
NET INCOME (LOSS) PER COMMON SHARE
Basic ($.01) $.01
=========== ===========
Diluted ($.01) $.01
=========== ===========
WEIGHTED AVERAGE OUTSTANDING COMMON STOCK
Basic 9,399,617 9,270,617
=========== ===========
Diluted 9,399,617 9,281,284
=========== ===========
The accompanying notes to consolidated financial statements are
an integral part of these statements.
4
AFP Imaging Corporation and Subsidiaries
Consolidated Statements of Shareholders' Equity
For the Three Months Ended September 30, 2004 and 2003
-------------------------------------------------------
(Unaudited)
Common Paid-in
Common Stock Capital In Accumulated
Stock Warrants Excess of Par Deficit Total
----- -------- ------------- ------- -----
Balance June 30, 2003 $92,710 $19,800 $11,545,883 $(10,338,464) $1,319,929
Net income for three months
ended September 30, 2003 --- --- --- 115,060 115,060
---------------------------------------------------------------------------------
Balance September 30, 2003 $92,710 $19,800 $11,545,883 $(10,223,404) $1,434,989
=========== =========== ============= ============= =============
Balance June 30, 2004 $92,710 $19,800 $11,545,883 $(8,992,997) $2,665,396
Issuance of 129,000 shares of
common stock in connection
with the exercise of stock
options 1,286 --- 38,704 --- 39,990
Net loss for three months
ended September 30, 2004 --- --- --- (71,612) (71,612)
---------------------------------------------------------------------------------
Balance September 30, 2004 $93,996 $19,800 $11,584,587 $(9,064,609) $2,633,774
=========== =========== ============= ============= =============
The accompanying notes to consolidated financial statements are an integral part of these statements.
5
AFP Imaging Corporation and Subsidiaries
Consolidated Statements of Cash Flows
For theThree Months Ended September 30, 2004 and 2003
-----------------------------------------------------
(Unaudited)
2004 2003
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income/(Loss) ($71,612) $115,060
--------- ---------
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization 57,896 58,100
Change in assets and liabilities:
Decrease in accounts receivable 360,328 654,090
(Increase)/decrease in inventories (492,366) 304,808
Decrease/(Increase) in prepaid expenses
and other assets 122,297 (35,049)
Increase/(decrease) in accounts payable 60,865 (429,659)
Increase/(decrease) in accrued expenses 57,805 (66,351)
--------- ---------
Total adjustments 166,825 485,939
--------- ---------
Net cash provided by operating activities 95,213 600,999
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (46,361) (7,576)
--------- ---------
Net cash used in investing activities (46,361) (7,576)
--------- ---------
CASH FLOW FROM FINANCING ACTIVITIES:
Borrowing of debt 70,711 ---
Repayment of debt (137,500) (847,385)
Exercise of common stock options 39,990 ---
--------- ---------
Net cash used by financing activities (26,799) (847,385)
--------- ---------
Net increase /(decrease) in cash and cash
equivalents 22,053 (253,962)
CASH AND CASH EQUIVALENTS, at beginning of period 331,993 658,138
--------- ---------
CASH AND CASH EQUIVALENTS, at end of period $354,046 $404,176
========= =========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the year for-
Interest $42,877 $46,865
Income taxes net of refunds $31,370 $6,500
The accompanying notes to consolidated financial statements are
an integral part of these consolidated statements.
6
AFP Imaging Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 2004
- ------------------
(Unaudited)
(1) General:
-------
AFP Imaging Corporation (together with its subsidiaries, the "Company") was
organized on September 20, 1978, under the laws of the State of New York. Since
such date, the Company has been engaged in the business of designing,
developing, manufacturing and distributing equipment for generating, capturing
and producing medical and dental images through digital technology as well as
the chemical processing of photosensitive materials. Medical, dental, veterinary
and industrial professionals use these products. The Company's products are
distributed to worldwide markets under various brand names through a network of
independent and unaffiliated dealers. The Company has only one business segment,
medical/dental.
The accounting policies followed during the interim periods reported on herein
are in conformity with accounting principles generally accepted in the United
States and are consistent with those applied for annual periods, as described in
the Company's consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended June 30, 2004.
(2) Stock Option Plans:
------------------
The Company currently has in effect two employee incentive stock option plans,
under which approximately 1,600,000 shares of Common Stock are authorized and
available for issuance. Under the terms of these plans, options to purchase
common stock of the Company may be granted at not less than 100% of the fair
market value of the stock on the date of grant, or 110% of the fair market value
if granted to persons owning more than 10% of the outstanding stock of the
Company. The Company accounts for these plans pursuant to Accounting Principles
Board Opinion No. 25 "Accounting for Stock Issued to Employees," under which no
compensation cost has been recognized. Had compensation cost for these plans
been determined based on the fair value at the grant dates consistent with SFAS
No. 123, "Accounting for Stock-Based Compensation" and SFAS No. 148, "Accounting
for Stock-Based Compensation-Transition and Disclosure-an Amendment of FASB
Statement No. 123," the Company's net income/(loss) and earnings/(loss) per
share would have been reduced by an insignificant amount for the period ended
September 30, 2003 and would not have been changed for the period ended
September 30, 2004. No stock options were issued in the three-month period ended
September 30, 2004.
(3) Basic and Diluted Income (Loss) Per Common Share:
------------------------------------------------
The computation of net income (loss) per common share is based upon the weighted
average number of common shares outstanding during the period, plus, in periods
in which they have a dilutive effect, the effect of shares contingently
issuable. The diluted weighted average number of shares outstanding does not
include 476,326 shares of common stock issuable upon exercise of outstanding
stock options in the three months ended September 30, 2004, as such shares are
antidilutive when there is a loss; the diluted weighted average number of shares
outstanding includes 10,667 shares of common stock issuable upon exercise of
outstanding stock options in the three months ended September 30, 2003. The
diluted weighted average number of shares outstanding does not include 78,082
shares of common stock issuable upon the exercise of outstanding warrants in the
three months ended September 30, 2004, as such shares are antidilutive when
there is a loss.
(4) Long and Short Term Debt:
------------------------
On September 21, 2004, the Company renewed its senior secured credit facility
(the "Renewed Revolving Credit Loan"), with its existing senior secured lender,
for an additional three-year period. The Renewed Revolving Credit Loan consists
of a $2.5 million revolving line of credit, which is secured by all of the
Company's inventory, accounts receivable, equipment, officer life insurance
policies and proceeds thereof, trademarks, licenses, patents and general
intangibles. The Renewed Revolving Credit Loan has an interest rate of 1.375%
over the prime rate, currently at 4-1/2 %, has a specific formula to calculate
available funds based on eligible accounts receivable and inventory, and has
certain reporting requirements to the senior secured lender. The Renewed
Revolving Credit Loan requires that certain financial ratios and net worth
amounts be maintained. The Renewed Revolving Credit Loan provides for increases
in the interest rate charged on monies outstanding under specific circumstances.
As of September 30, 2004, the amount outstanding under the Renewed Revolving
Credit Loan was $1,113,472 and the Company was in compliance with all the terms
7
and conditions of the Renewed Revolving Credit Loan except for the EBITDA
covenant. The Company's senior secured lender amended the Renewed Revolving
Credit Loan on October 29, 2004, and the Company was in compliance with the
amended covenant at September 30, 2004.
The Revolving Credit Loan is classified as a current liability in accordance
with EITF 95-22 (Balance Sheet Classification of Borrowings Outstanding Under
Revolving Credit Agreements That Include Both a Subjective Acceleration Clause
and a Lock-Box Arrangement) since the Loan and Security Agreement contains a
subjective acceleration clause and contractual provisions that require the cash
receipts of the Company be used to repay amounts outstanding under the revolving
credit facility.
Included in debt are two subordinated promissory notes related to prior
acquisitions. These notes total $493,056 at September 30, 2004, of which
approximately $337,500 has been classified as a current liability.
The Company is dependent upon the renewed Revolving Credit Loan to finance its
overall operations. It is believed that the Revolving Credit Loan is sufficient
to finance the Company's ongoing working capital requirements for the
foreseeable future. At November 5, 2004, the Company had available approximately
$1,621,670 of unused credit under the Renewed Revolving Credit Loan.
(5) Inventory:
---------
Inventories, which include material, labor and manufacturing overhead, are
stated at the lower of cost (first-in, first-out) or market (net realizable
value). The Company uses a standard cost accounting system in conjunction with
an actual perpetual inventory system to properly account for, control, and
maintain the movement of all inventory components. All standard costs are
reviewed periodically and updated accordingly to verify that the standard costs
approximate the actual costs. At September 30, 2004 and June 30, 2004,
inventories consist of the following:
September 30, 2004 June 30, 2004
------------------ -------------
Raw materials and sub-component parts $1,543,843 $1,354,424
Work-in-process and finished goods 1,652,532 1,348,585
--------- ---------
$3,196,375 $2,704,009
========== ==========
(6) Income Taxes:
------------
Income taxes are accounted for under the asset and liability method. No income
tax benefits related to the losses reported in prior years and during the
current interim period have been recorded, in recognition of the uncertainty
regarding the ultimate amount of income tax benefits to be derived from the net
operating losses. The Company's income tax provisions for the Fiscal 2005 and
Fiscal 2004 three-month periods relate to state income and capital taxes, net of
any refunds received.
(7) Commitments and Contingencies:
-----------------------------
On October 4, 2004, the Company joined a group of third party defendants who
made a settlement offer to resolve their liability related to the offsite
disposition of trash and waste in a landfill in New Jersey. Selling, General and
Administrative expenses for the period ended September 30, 2004, includes a
provision of $75,000, which represents the Company's entire potential liability
under this settlement offer, net of the Company's insurance carrier's agreed
upon contribution towards the total settlement. There can be no assurances that
the settlement offer will be accepted.
8
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operation
Capital Resources and Liquidity
- -------------------------------
The Company's working capital at September 30, 2004 decreased by approximately
$120,346 from June 30, 2004. This decrease principally is due to the loss from
operations, reductions in the subordinated debt, increases in inventory levels,
and decreases in accounts receivable.
On September 21, 2004, the Company renewed its senior secured credit facility
(the "Renewed Revolving Credit Loan"), with its existing senior secured lender,
for an additional three-year period. The maximum borrowing permitted under the
Renewed Revolving Credit Loan is lower than that under the original credit
facility with the lender, based on the Company's current requirements. However,
the Renewed Revolving Credit Loan has more favorable terms, including a lower
interest rate and less stringent reporting requirements, than that under the
prior credit facility and gives the Company the ability to borrow on a specific
amount of foreign accounts receivable. The Renewed Revolving Credit Loan
consists of a $2.5 million revolving line of credit, which is secured by all of
the Company's inventory, accounts receivable, equipment, officer life insurance
policies and proceeds thereof, trademarks, licenses, patents and general
intangibles. The Renewed Revolving Credit Loan has an interest rate of 1.375%
over the prime rate, currently at 4-1/2 %, has a specific formula to calculate
available funds based on eligible accounts receivable and inventory, and has
certain reporting requirements to the senior secured lender. The Renewed
Revolving Credit Loan requires that certain financial ratios and net worth
amounts be maintained. The Renewed Revolving Credit Loan provides for increases
in the interest rate charged on monies outstanding under specific circumstances.
As of September 30, 2004, the amount outstanding under the Renewed Revolving
Credit Loan was $1,113,472 and the Company was in compliance with all the terms
and conditions of the Renewed Revolving Credit Loan except for the EBITDA
covenant. The Company's senior secured lender amended the Renewed Revolving
Credit Loan on October 29, 2004, and the Company was in compliance with the
amended covenant at September 30, 2004.
Included in debt are two subordinated promissory notes related to prior dental
company acquisitions. These notes total $493,056 in principal amount at
September 30, 2004, of which approximately $337,500 has been classified as a
current liability. One of the notes has a balance of $70,833 as of September 30,
2004, and will be repaid in full as of December 31, 2004. The Company is current
on all principal and interest payments due the note holders.
The Company's historical operating cash flows generally have been positive;
however, the Company is dependent upon the Renewed Revolving Credit Loan to
finance its ongoing operations. It is believed that the Revolving Credit Loan is
sufficient to finance the Company's ongoing working capital requirements for the
foreseeable future. The Company expects its working capital requirements will
continue to be financed by operations and from borrowings, including the Renewed
Revolving Credit Loan. The Company currently believes that there are no
significant trends, demands, commitments or contingencies, other than the
ongoing litigation cases, which are reasonably likely to result in a material
increase or decrease in its liquidity or capital resources in the foreseeable
near-term future. As of November 5, 2004, the Company had available
approximately $1,621,670 of unused credit under the Renewed Revolving Credit
Loan.
Capital expenditures for the first three months of Fiscal 2005 were $46,361,
consisting of tooling, foundry and test equipment expenditures related to the
design, development and production of the new imaging products, computer
workstation upgrades, and the purchase of a new trade show booth for national
dental exhibitions. Where practical, the Company continues to conserve its cash.
The Company expects to continue to finance any future capital requirements
principally from internally generated funds. Capital expenditures are limited
under the terms of the Revolving Credit Loan.
Results of Operations - Three Months Fiscal 2005 Versus Three Months Fiscal 2004
- --------------------------------------------------------------------------------
Sales increased approximately $620,600 or 15.4% between the Fiscal 2005 and
Fiscal 2004 three-month periods. Approximately 65% of this increase is
attributable to the continued growth of the Company's digital products in both
the domestic and international marketplaces. The Company's digital products were
first marketed in Fiscal 2003. The balance of the increase in sales is mainly
attributable to increased domestic x-ray sales. Sales of the Company's remaining
medical and dental products stayed relatively constant between the two three
month-periods.
Gross profit as a percent of sales decreased 1.1 percentage points between the
Fiscal 2005 and Fiscal 2004 three-month periods. This decrease can be attributed
to a small increase in the cost of purchased materials, mainly due to the
increase in the value of the Euro in this current period. There were no
significant differences in labor and overhead costs, which are included in cost
of sales.
9
Selling, general, and administrative costs increased approximately $400,000 or
31%, between the Fiscal 2005 and Fiscal 2004 three-month periods. This increase
is due to several different factors. As of September 30, 2004, the Company
recorded a $75,000 contingent liability for their portion of a potential
settlement of the environmental waste haulage claim in New Jersey. There were
also incremental public relation consulting costs related to exploring various
acquisition opportunities in the current period. Marketing and sales costs
increased approximately $220,000 in the current period due to the Company
aggressively pursuing various sales opportunities in both the domestic and
international markets, including increased travel costs, attendance at several
national and regional veterinarian exhibitions, and increased operating costs.
Management monitors and controls the level of discretionary spending in line
with current sales levels and opportunities.
Research and development costs decreased approximately $19,900 or 18%, between
the Fiscal 2005 and Fiscal 2004 three-month periods. This decrease is mainly due
to the timing of expenditures relating to the Company's continued investment in
the design, development and refinement of its new imaging products. The Company
continues to invest in sustaining engineering and related costs for its existing
products. Research and development costs are expected to continue to fluctuate
between reporting periods.
Interest expense, net stayed relatively constant between the Fiscal 2005 and
Fiscal 2004 three-month periods. There was approximately the same amount in the
average monthly revolving credit borrowings for the current three-month period
ended September 30, 2004 and the prime rate of borrowing, upon which interest
rates for all senior debt is based, did not change significantly in the
comparative three-month periods.
The income tax provisions for the three-month periods in Fiscal 2005 and Fiscal
2004 primarily reflect certain state income and capital taxes. No tax benefit
has been recognized for the losses incurred in prior years and during the
current interim period.
Item 3: Quantitative and Qualitative Disclosures About Market Risk.
- ---------------------------------------------------------------------
Not Applicable.
Item 4: Controls and Procedures.
- ---------------------------------
a) Evaluation of disclosure controls and procedures.
-------------------------------------------------
Our co-chief executive officers and chief financial officer have reviewed and
evaluated the effectiveness of the Company's disclosure controls and procedures
(as defined in Rule 13a - 15 (e) of the Securities Exchange Act of 1934 (the
"Act")). Based on their review and evaluation, the co-chief executive officers
and chief financial officer have concluded that, as of September 30, 2004, the
Company's disclosure controls and procedures were adequate and effective to
ensure that information required to be disclosed by the Company in the reports
that it files or submits under the Act is recorded, processed, summarized and
reported, within the time periods specified in the rules and forms of the
Securities and Exchange Commission.
(b) Changes in internal controls.
-----------------------------
During the quarter ended September 30, 2004, there were no significant changes
in the Company's internal controls over financial reporting or in other factors
that could materially affect, or is reasonably likely to materially affect,
these internal controls, nor were there any significant deficiencies or material
weaknesses in these internal controls requiring corrective actions. As a result,
no corrective actions were taken.
Part II Other Information
- -------------------------
Item 1: Legal Proceedings
- ----------------------------
Reference is made to Item 3 in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 2004, and to the references therein, for a discussion
of all material pending legal proceedings to which the Company and its
subsidiaries are parties.
On October 4, 2004, the Company joined a group of third party defendants who
made a settlement offer with respect to their alleged liability related to the
offsite disposition of trash and waste in a landfill in New Jersey. The
Company's financial statements for the period ended September 30, 2004, include
a provision of $75,000, which represents the Company's entire potential
10
liability for the settlement offer, net of the Company's insurance carrier's
agreed upon contribution towards the total settlement. There can be no
assurances that the settlement offer will be accepted.
A separate environmental claim, by a plaintiff, relating to alleged property
contamination in New Jersey that was owned by the Company from 1984 to 1985 is
scheduled to go to trial in early December 2004.
Item 2: Unregistered Sales in Equity Securities and Uses of Proceeds.
- -----------------------------------------------------------------------
None
Item 3: Defaults Upon Senior Securities.
- -------------------------------------------
None
Item 4: Submission of Matters to a Vote of Security Holders.
- ---------------------------------------------------------------
None
Item 5: Other Information.
- -----------------------------
None
Item 6: Exhibits.
- --------------------
(a) Exhibits:
---------
31.1, 31.2, 31.3 - Certifications pursuant to Exchange Act Rule 13a - 15 (e)
32.1, 32.2, 32.3 - Certifications pursuant to 18 U.S.C. Section 1350 of the
Sarbanes - Oxley Act of 2002.
11
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.
AFP IMAGING CORPORATION
_________/s/________________
David Vozick
Chairman of the Board
Secretary, Treasurer
Date: November 15, 2004
_________/s/________________
Donald Rabinovitch
President
(Principal Executive Officer)
Date: November 15, 2004
__________/s/_______________
Elise Nissen
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: November 15, 2004
12