S A ADVISORY November - December 1999


S.A. Advisory
2274 Arbor Lane #3
Salt Lake City, Utah 84117

AFP Imaging Corp.

On October 14, 1999, we recommended FCIN via e-mail @ $2.18 (in our opinion, FCIN has all the ingredients to be one of our stock picks for the year 00, based upon severely undervalued fundamentals).

The Company has been engaged in the business of designing, developing, manufacturing and distributing equipment for producing 'hard copy" images by chemical processing photosensitive materials as well as manufacturing other closely related electro/optical imaging equipment. These products have been adapted to medical, industrial, dental and graphic arts applications. The Company's products are distributed to worldwide markets through a network of dealers.

Principal Products and Services
Medical, Dental and Industrial X-Ray Processors & Accessories

The Company manufactures and distributes a line of freestanding and table top medical, dental and industrial x-ray film processors. These machines are capable of processing or developing films of various sizes. The exposed film is inserted into equipment and returned to the operator developed, fixed, washed and dried. The equipment can be located either in a dark room site or adapted to a daylight, loading system. These units are used for diagnostic x-ray imaging and industrial, non-destructive testing applications. The Company's products are distributed worldwide through an unaffiliated dealer network to doctors, dentists, hospitals, medical clinics, and other facilities.

Digital Dental Imaging Systems
The Company manufactures and distributes a filmless digital dental radiography system, based on X-rays and electronic imaging technology. Such technology generates a patient's dental images on a computer screen that operates in a Windows based software environment.

The Company manufactures and distributes intraoral video dental cameras. This product allows users to capture up to four intraoral dental images on a computer screen and features the mobility of the camera between operatories by "dockingÓ (plug in) directly into another chairside location. This system can be networked and is compatible with the Company's digital dental radiography system. A Proprietary Windows based software suite provides for selections, transmission and manipulation of the desired images by the dentist.

Diagnostic Imagers and Viewers
The Company manufactures a line of digital and analog multiformat compact cameras to permanently record and document the images produced during diagnostic examinations from several different applications. The cameras can produce anywhere from one to six images on films that can be processed and developed in Company manufactured film processors. The Company has the distribution rights to a line of European monitors specifically designed for the high-resolution needs of the medical display market.

X-Ray Systems
The Company has the distribution rights to a European dental x-ray machine for the North American market. The Company has also obtained the distribution rights to a Japanese panoramic dental x-ray machine for the North and South American markets. The x-ray film exposed by each of these units is then developed in the Company's processors. These x-ray products are a¦so compatible with the Company's digital X-ray unit.

Graphic Arts Processors
The Company distributes various sized graphic arts processors which develop different photosensitive materials such as rapid access film and papers. These processors are intended for use with phototypesetting, graphics and other pre-printing press applications. Newspapers, publishers and commercial printers are primary customers for these products.

Select Financial Data - AFPC
Year ended June 30th
  1997A 1998A 1999A 2000E
Revenue 37mil 33.7mil 29.3mil 25mil
Operating Income (loss) 2.1mil (2.8mil) (1.7mil) 500K
Net Income/sh
(loss) fully diluted
.16 (.34) (.24) .03
Shares outstanding 7.4mil 9.7mil 9.2mil 9.3mil
First Quarter Fiscal Year - September
  00 99    
Revenues 6.4mil 7.3mil    
Operating Income (loss) 115K (161K)    
Net Income/sh (loss) 0 (.02)    
Book value around 30¢ (does not inclue $2 million that remains as good will).


In our opinion, AFPC is on the verge of implementing the first profitable year in two years of business. Just recently AFPC released first quarter numbers for fiscal 00 resulting in a small but defined profit for the quarter. According to management, "significant improvements in corporate operations due to reduction of infrastructure expenses and realigning operation to match the current sales level were successfully implemented". In addition, total corporate debt has been reduced to $6.1 million, which is its lowest level since December 97. Research and development during 99 ($1.2 million) is anticipated to contribute to the successful turnaround in "new" sales and earnings for fiscal 00.

The Company continues to focus on building its sales distribution efforts and recently participated in two major dental shows, the American Dental Association (ADA) and the FDI World Dental Congress in Mexico. Both shows attract worldwide recognition, and the Company's products were well represented. Later this month, the Company will demonstrate its products at the Radiological Society of North America (RSNA) in Chicago and the Greater New York Dental Meeting.

Even though sales are anticipated to drop from $29 mil (99) to $25 mil (00), the quality of sales is what is important. Management was hesitant to estimate earnings for (00), but at the same time could live with our 3¢ net income/share for fiscal 00 ending June 30th (we believe that this number is very conservative).

We initially recommended AFPC via our super fast phone, preferred and regular e-mail on September 27, 1999 at 5/16. Realizing that you are buying shares in a company that has been in business for 21 years, reduced debt, trading near book value (we removed goodwill before we calculated this value), trading at its lowest level ever, introducing new products, has shown a positive operating income for the first time in two years, AFPC's price to sales estimate is only .15 (a value of 1 considered cheap)., sports an estimated PE of 11x fiscal 00 number and finally designs, develops and manufactures cutting-edge dental products that make our visits to dentists more pleasurable. When you consider all that you can buy for .34 to .375, in our opinion, it is worth the shot for more conservative oriented mini-micro investors. AFPC is all fully reporting with SEC. PS: the backlog as of June 30, 1999 is up almost 100% over 98, that is, $4.3 mil vs. 2.3 mil.

Website: www.afpimaging.com
Corporate # - 914-592-6100
Broker # - Mike Chesler @ 1-800-890-1629
We intend to monitor AFPC in our micro-cap portfolio for percentage gain.

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