AFP Imaging Reports Record Profitable Second Quarter and Six Month Results for Fiscal Year Ending June 30, 2005 Monday February 14, 9:26 am ET ELMSFORD, N.Y.--(BUSINESS WIRE)--Feb. 14, 2005--AFP Imaging Corporation (OTCBB:AFPC - News) today reported recent record sales and earnings for the second quarter and six months ended December 31, 2004. Net Revenues increased 30% for the quarter and 23% for the six months, Adjusted Income from Operations increased 50% for the quarter and 20% for the six months. Net revenues for the second quarter were $6.1 million, an increase of $1.4 million or 30%, compared to $4.7 million in the same period last year. Net revenues for the six months ended December 31, 2004 were $10.7 million, an increase of $2.0 million or 23%, compared to $8.7 million in the same period last year. The second quarter revenues were the highest quarterly revenues in four years. Adjusted Income from Operations for the second quarter was $727,700, an increase of $243,000 or 50%, compared to $484,700 for the same period last year. Adjusted Income from Operations for the six months ended December 31, 2004 was $788,600, an increase of $130,500 or 20%, compared to $658,100 in the same period last year. Adjusted Income from Operations was calculated by excluding charges related to the settlement of environmental lawsuits from Operating Income. During the second quarter Fiscal 2005, the Company settled one of its outstanding environmental lawsuits relating to activities in 1985. There was approximately $226,800 in associated costs, which have been excluded from Adjusted Income from Operations. During the first quarter Fiscal 2005, the Company incurred approximately $78,200 in associated costs related to the potential settlement of a separate lawsuit. These combined expenses total $305,000 for the six months ended December 31, 2004. These two complaints related to property the Company owned in New Jersey from August 1984 to June 1985, through a graphic arts camera-manufacturing subsidiary whose operations were terminated in 1986. For the second quarter of Fiscal 2005, Adjusted Net Income, which excludes the above costs associated with the lawsuits, would have been $683,777 or $.07 per basic and diluted share, an increase of $285,300 or 72%, compared to Net Income of $398,444 or $.04 per basic and diluted share for the same period last year. Net Income for the second quarter of Fiscal 2005 was $457,024 or $.05 per basic and diluted share. For the six months ended December 31, 2004, Adjusted Net Income, which excludes the above costs associated with the lawsuits, would have been $690,358 or $.07 per basic and diluted share, an increase of $176,800 or 34%, compared to Net Income of $513,504 or $.07 per basic and $.06 per diluted share for the same period last year. Net Income for the six months ended December 31, 2004 was $385,412 or $.04 per basic and diluted share. At December 31, 2004, the Company had $1.29 million in total debt, as compared to $1.67 million at June 30, 2004, the end of the Company's prior fiscal year. The Company continues to have positive cash flow and primarily use internally generated funds to reduce debt, and has repaid in full, one of two subordinated notes related to prior dental acquisitions. The Company's working capital was $2.83 million at December 31, 2004 compared to $2.58 million at June 30, 2004, an increase of 10%. The Company continues to exhibit at several major national trade shows in the current quarter including the Radiological Society of North America, the American Dental Association in Orlando, the Greater New York Dental Show, the Wild Wild West Show (veterinary) in Reno, and the Atlantic Coast Veterinary Conference in Atlantic City. All costs associated with these shows were recorded in the second quarter Fiscal 2005. The Company believes that each of these shows has created significant interest in the Company's products, which is reflected in the growth of sales. David Vozick, Chairman said, "We are pleased with the positive results the Company has achieved as a result of a strategic plan management put into effect eighteen months ago. Our new products have been well received and we continue build upon internal growth, as well as to search for additional external business opportunities." AFP Imaging Corporation's quality assurance program is ISO 9001 certified, an international standard. The Company designs, develops, manufactures, and distributes radiographic imaging equipment whose products are widely utilized in dental and medical diagnostics. The Company's new products and imaging technology is providing the gateway for future growth. AFP's products are used by medical, dental, veterinary and industrial professionals. The Company's products include x-ray units, digital x-ray sensors, film processors, chemistry, and panoramic units. The Company's products are sold worldwide under various brand names, which include AFP, DENT-X, and EVA®. For additional product information please visit our web sites at www.afpimaging.com and www.dent-x.com. Three Months Ended Six Months Ended December 31, December 31 2004 2003 2004 2003 ----------- ----------- ------------ ----------- Net Sales $6,082,235 $4,680,557 $10,737,706 $8,715,436 ----------- ----------- ------------ ----------- Adjusted Operating Income (1) $727,745 $484,744 $788,598 $658,117 Environmental Lawsuits Charges (1) $226,753 - $304,938 - Operating Income $500,992 $484,744 $483,660 $658,117 Income Before Taxes $461,869 $445,716 $401,352 $574,976 Provision for Taxes $4,845 $47,272 $15,940 $61,472 Net Income $457,024 $398,444 $385,412 $513,504 Environmental Lawsuits Charges (1) $226,753 - $304,938 - Adjusted Net Income (1) $683,777 $398,444 $690,358 $513,504 Net Income per share Basic $.05 $.04 $.04 $.06 Fully Diluted $.05 $.04 $.04 $.05 Weighted average shares outstanding Basic 9,399,702 9,271,054 9,360,507 9,271,054 Fully Diluted 9,917,431 9,522,350 9,943,100 9,402,036 ----------- ----------- ------------ ----------- (1) Excluded from Adjusted Operating Income and Adjusted Net Income for the three months and six months ended December 31, 2004 respectively, are specific non-operating charges of $226,800 and $305,000 respectively, both accrued and/or incurred, associated with settling the outstanding environmental lawsuits. The remarks contained in this press release and presented elsewhere by management from time to time contain forward-looking statements, which involve risks and uncertainties, including statements regarding the Company's plans, objectives, expectations and intentions. The Company's actual results may differ significantly from the results discussed in this press release or in other forward-looking statements presented by management. Among the factors that could cause actual results to differ materially include failure of revenue on new products to develop as estimated, regulatory delays, loss of existing customers, the Company's inability to meet increasing demand for its new products, general downward trends in the Company's industry and other risk factors as described in the Company's filings with the Securities and Exchange Commission. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change in the Company's expectation or any change in events, conditions or circumstances on which such statement is based.