Valaentec Systems Inc (fka VSYN)

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Valentec Systems Signs Term Sheet to Acquire Mast Technology for $12 Million

PR Newswire "US Press Releases "

MINDEN, La., Jan. 22 /PRNewswire-FirstCall/ -- Valentec Systems, Inc. (OTC Bulletin Board: VSYN.OB), a supplier of mission-critical conventional ammunition, pyrotechnic and related defense products, announced today that it has signed a binding term sheet (the "Term Sheet") to acquire Mast Technology, Inc. ("MAST"), a Missouri based company specializing in the manufacturing of ammunition and ordnance for the United States Government.

The structure of the transaction has not yet been finalized, though terms between both parties have been reached. The Company has agreed to acquire MAST for an aggregate consideration of $12 million, of which $9 million will be paid in cash, $1.5 million will be paid through the issuance of Valentec common shares and the remaining $1.5 million will be held by Valentec and released in cash to MAST shareholders in accordance with a three-year earn-out. For specific terms of the agreement, please refer to the Company's Form 8-K on file with the Securities and Exchange Commission.

"We are extremely pleased to reach this important milestone after many months of discussion with MAST shareholders," said Robert A. Zummo, Chairman, President and CEO of Valentec. "The synergies between our companies should yield significant cost savings and result in a dramatic increase in both revenues and profitability. Additionally, by adding MAST's product lines, manufacturing and engineering capabilities and highly qualified and experienced personnel to our team, we strengthen all facets of our business and position our company for greater success in the years ahead."

Founded in 1990, MAST Technology, Inc. is a manufacturer of ammunition and ordnance for the United States Government and other customers. The Company specializes in tight propellant charge tolerances and produces 40mm training practice rounds, igniters for demolitions and training and other specialty ammunition products. MAST is headquartered and has operations and production facilities in Independence, Missouri. The Company is ISO-9000 certified, has approximately 115 employees and anticipates 2006 sales of approximately $17 million.

Zummo continued, "This acquisition is also synergistic in that we currently sell, to many of the same customers and believe we can offer a more complete solution to meet the growing needs of the U.S. Government and military forces. We expect the combined entity to have approximately $40-$45 million in sales in the coming year and potentially higher as we look to build our core product portfolio."

The Company announced today that as part of the agreement, Gerald Pickens, President and CEO of MAST will join Valentec Systems as Chief Operating Officer. Mr. Pickens has enjoyed a 35+year career in the defense sector, working in the areas of manufacturing, product development, operations, logistics, quality control and finance. Before his appointment to President of CEO of MAST, he served as Director of Operations and prior to, was Operations Manager at Day and Zimmerman, Inc. Mr. Pickens is a member of the National Management Association, American Management Association and National Defense Industrial Association and received a Bachelors of Science (B.S.) from Sam Houston State University.

Additionally, the Company disclosed that Jay Bell, formerly Vice President of Sales and Marketing has been appointed President of MAST Technology, a position he will assume upon closing of the transaction. Mr. Bell had previously served as President and CEO from 1999-2004 before taking on sales and marketing responsibilities when Gerald Pickens was appointed to that role. Mr. Bell is active in a number of defense, operations and financial institutions and is a member of the NDIA Small Arms Committee. He holds a Bachelors of Arts (B.A.) from the University of Southern California.

The Company anticipates that this transaction will close within 120 days, though there can be no assurances. If no definitive agreement is executed within such 120 day period, the parties' obligations under the term sheet will automatically expire unless otherwise extended by mutual written agreement.

Mallon & Associates and Carter Investments served as financial advisors to Valentec Systems, Inc. on this transaction.

About Valentec Systems, Inc.

Valentec Systems, Inc., headquartered in Minden, LA is a supplier of mission-critical conventional ammunition, pyrotechnic and related defense products. The company markets its products to the United States Army, Israeli Defense Forces and other Ministries of Defense in friendly nations around the world. Valentec's business lines can be classified in three distinct segments including Systems Management / Integration, Energetic Manufacturing and Metal Parts Manufacturing. For more information on the Company, please visit our website, http://www.valentec.net or our most recent filings with the Securities and Exchange Commission (SEC).

Safe Harbor Language

Information provided in this press release may contain statements relating to current expectations, estimates, forecasts and projections about future events that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to the company's plans, objectives and expectations for future operations and are based upon management's current estimates and projections of future results or trends. Actual future results may differ materially from those projected as a result of certain risks and uncertainties. For a discussion of such risks and uncertainties, please refer to our most recent filings with the Securities and Exchange Commission, including but not limited to Valentec's Annual Report on Form 10-KSB filed on April 17, 2006. These forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

For More Information, Contact:

Glenn Wiener, GW Communications

212-786-6011 / [e-mail]

SOURCE Valentec Systems, Inc.