<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
-------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________ to ______________________
Commission File Number: 0-26972
SWISSRAY International, Inc.
(Exact name of registrant as specified in its charter)
New York 16-0950197
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Gary B. Wolff, P.C., 747 Third Avenue, New York, NY 10017
(Address of principal executive offices) (Zip Code)
New York (212) 644-6446 Switzerland 011 41 41 919 90 50
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
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. [x] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
The number of shares outstanding of each of the registrant's classes of common
stock, as of November 27, 1996 is 14,518,327 shares, all of one class of $.01
par value common stock.
1
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
PART I
<S> <C> <C>
Item 1. Financial Statements F1-F5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations and Plan of Operations 3-6
PART II
Item 1. Legal Proceedings 7
Item 2. Changes in Securities 7
Item 3. Defaults Upon Senior Securities 7
Item 4. Submission of Matters to a
Vote of Security Holders 7
Item 5. Other Information 7
Item 6. Exhibits and Reports on Form 8-K 7
Signatures 8
</TABLE>
2
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SWISSRAY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
September 30, June 30,
1996 1996
---- ----
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,729,173 $ 3,252,685
Accounts receivable, net of allowance for doubtful accounts of
$99,875 (September 1996) and $109,843 (June 1996) 2,088,607 3,335,679
Accounts receivable - affiliates 31,533 31,533
Note receivable 962,500 962,500
Inventories 3,756,308 2,912,836
Prepaid expenses and sundry receivables 1,532,972 1,075,681
------------ ------------
TOTAL CURRENT ASSETS 10,101,093 11,570,914
------------ ------------
PROPERTY AND EQUIPMENT, at cost, net of accumulated
depreciation o $270,089 (September 1996) and $233,995 (June 1996) 1,184,522 1,138,282
------------ ------------
OTHER ASSETS:
Due from stockholders 17,414 17,414
Due from affiliates 335,898 186,676
Accounts receivable - long-term, net of discount and
allowance for doubtful account of $300,000 991,885 1,038,693
Licensing agreement, net of accumulated amortization of $496,657
(September 1996) and $372,493 (June 1996) 4,469,918 4,594,082
Patents and trademarks, net of accumulated amortization of $35,266
(September 1996) and $28,001 (June 1996) 214,379 220,018
Organization cost, net of accumulated amortization of $1,389
(September 1996) and $978 (June 1996) 6,996 7,407
Security deposits 19,983 19,952
------------ ------------
TOTAL OTHER ASSETS 6,056,473 6,084,242
------------ ------------
TOTAL ASSETS $ 17,342,088 $ 18,793,438
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ -- $ 511,101
Notes payable - banks 298,928 2,069,828
Loan payable 3,008,349 156,254
Accounts payable 2,686,563 4,186,092
Accounts payable - affiliates -- 1,541
Accrued expenses 1,474,489 1,135,693
Customer deposits 52,392 77,673
------------ ------------
TOTAL CURRENT LIABILITIES 7,520,721 8,138,182
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock 141,851 141,851
Additional paid-in capital 19,268,400 19,268,400
Accumulated deficit (8,758,706) (7,918,948)
Cumulative foreign currency translation adjustment (830,178) (836,047)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 9,821,367 10,655,256
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,342,088 $ 18,793,438
============ ============
</TABLE>
F-1
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SWISSRAY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------
1996 1995
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
NET SALES $ 2,467,175 $ 3,101,985
COST OF SALES 1,189,257 1,760,385
------------ ------------
GROSS PROFIT 1,277,918 1,341,600
------------ ------------
OPERATING EXPENSES:
Officers and directors compensation 127,211 64,057
Salaries 502,164 520,357
Selling 194,379 199,343
Research and development 499,522 183,960
General and administrative 279,456 435,801
Other operating expenses 331,902 218,576
Depreciation and amortization 172,958 28,126
------------ ------------
TOTAL OPERATING EXPENSES 2,107,592 1,650,220
------------ ------------
LOSS BEFORE OTHER INCOME
(EXPENSES) AND INCOME TAXES (829,674) (308,620)
OTHER INCOME (EXPENSES) (10,084) 20,906
------------ ------------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (839,758) (287,714)
INCOME TAX PROVISION -- --
------------ ------------
NET LOSS $ (839,758) $ (287,714)
============ ============
LOSS PER COMMON SHARE $ (.06) $ (.02)
============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 14,185,064 12,093,760
============ ============
</TABLE>
F-2
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SWISSRAY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Cumulative
Foreign
Additional Currency
Common Stock Paid-in Accumulated Translation
Shares Amount Capital Deficit Adjustment Total
------ ------ ------- ------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE - July 1, 1995 12,035,064 $ 120,351 $ 12,719,998 $(6,027,336) $ (436,180) $ 6,376,833
For three months ended September 30, 1995:
Issuance of common stock for cash 200,000 2,000 698,000 -- -- 700,000
Foreign currency translation adjustment -- -- -- -- (308,305) (308,305)
Net loss for the period -- -- -- (287,714) -- (287,714)
---------- ----------- ------------ ----------- ----------- ------------
12,235,064 122,351 13,417,998 (6,315,050) (744,485) 6,480,814
Less: Receivable arising from stock
purchase agreement -- -- (400,000) -- -- (400,000)
---------- ----------- ------------ ----------- ----------- ------------
BALANCE - September 30, 1995 (unaudited) 12,235,064 $ 122,351 $ 13,017,998 $(6,315,050) $ (744,485) $ 6,080,814
========== =========== ============ =========== =========== ============
BALANCE - July 1, 1996 14,185,064 $ 141,851 $ 19,268,400 $(7,918,948) $ (836,047) $ 10,655,256
For the three months ended September 30, 1996:
Foreign currency translation adjustment -- -- -- -- 5,869 5,869
Net loss for the year -- -- -- (839,758) -- (839,758)
---------- ----------- ------------ ----------- ----------- ------------
BALANCE - September 30, 1996 (unaudited) 14,185,064 $ 141,851 $ 19,268,400 $(8,758,706) $ (830,178) $ 9,821,367
========== =========== ============ =========== =========== ============
</TABLE>
F-3
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SWISSRAY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------
1996 1995
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (839,758) $ (287,714)
Adjustment to reconcile net loss to net cash from operating activities:
Depreciation and amortization 172,958 28,126
Provision for bad debts (9,968) --
Foreign currency translation (376,054) (352,980)
(Increase) decrease in operating assets:
Accounts receivable 1,303,848 (1,070,506)
Accounts receivable - other -- 131
Inventories (843,472) (906,199)
Prepaid expenses and sundry receivables (457,291) 16,411
Security deposits (31) --
Increase(decrease) in operating liabilities:
Accounts payable (1,499,529) 1,487,880
Accounts payable - affiliates (1,541) --
Accrued expenses 338,796 35,572
Customer deposits (25,281) 767,847
----------- -----------
NET CASH USED BY OPERATING ACTIVITIES (2,237,323) (281,432)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (82,334) (197,908)
Patents and trademarks (1,626) (4,293)
Repayments from (advances to) affiliates (149,222) 6,614
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (233,182) (195,587)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowing 3,151,023 1,060,557
Principal payment of short-term borrowings (2,069,828) (2,711,187)
Principal payments of long-term borrowing (511,101) (2,695)
Issuance of common stock for cash -- 300,000
Repayment from stockholder -- 904
Repayment from officer -- 4,354
----------- -----------
NET CASH PROVIDED BY (USED BY) FINANCING ACTIVITIES 570,094 (1,348,067)
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 376,899 44,675
----------- -----------
NET DECREASE IN CASH (1,523,512) (1,780,411)
CASH AND CASH EQUIVALENTS - beginning of period 3,252,685 2,676,826
----------- -----------
CASH AND CASH EQUIVALENTS - end of period $ 1,729,173 $ 896,415
=========== ===========
</TABLE>
F-4
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SWISSRAY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the three month period ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the
year ending June 30, 1997. The unaudited consolidated financial
statements should be read in conjunction with the consolidated
financial statements and footnotes thereto included in the
Company's Form 10KSB for the year ended June 30, 1996.
F-5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Background
The Company acquired it wholly owned subsidiary, SR-Medical AG, in June
of 1995 in exchange for 7,000,000 shares of its common stock. The merger between
the Company and SR-Medical AG is considered for accounting purposes to be a
recapitalization of SR-Medical AG with SR-Medical AG as the acquirer. The
unaudited consolidated financial statements for all periods presented take into
account SWISSRAY International, Inc. - the Parent - as well as SR-Medical AG,
Telray AG, SR Medical GmbH and SR Finance AG.
This discussion summarizes the significant factors affecting the
consolidated operating results, financial condition and liquidity/cash flows of
the Company as at quarter ended September 30, 1996 and year ended June 30, 1996
with respect to the Company's consolidated balance sheets and the comparative
three month periods ended September 30, 1996 and September 30, 1995 based upon
information appearing in the Company's consolidated statements of operations and
related financial statements and should be read in conjunction with such
unaudited consolidated financial statements.
The Company, operating through its subsidiaries (i.e., its wholly owned
subsidiary, SR-Medical AG, and the latter's wholly owned subsidiaries, Teleray
AG (a Swiss corporation) and SR-Medical GmbH (a German corporation), as well as
through the Company's wholly owned subsidiary, SR Finance AG, (a Swiss
corporation) remains engaged in the diagnostic X-ray medical equipment market,
wherein it develops, assembles and sells worldwide, both directly and indirectly
under its label SWISSRAY as well as to Original Equipment Manufacturers (OEM)
partners, X-ray units and accessories. Recently, substantial efforts have been
concentrated upon its newly developed digital imaging processing system called
"SwissVision" designed to enhance X-ray diagnosis with computer assistance by
(integrating computer technology with radiology in order to support the
radiologist in diagnostic functions) utilizing a Digital, recently developed,
"Add-on" Bucky which allows for direct digitalization of the radiology process
(and eliminates the need for the use and subsequent storage and/or retrieval of
X-ray film). In that respect and as heretofore indicated in the Company's Form
10-KSB the Company had expended during fiscal year ended June 30, 1996, in
excess of $1,700,000 for research and development expenditures, which
expenditures accounted for approximately 20% of all operating expenses during
fiscal year ended June 30, 1996. The Company's research and development
expenditures during the quarter ended September 30, 1996 amounted to $499,522 or
approximately 24% of all operating costs during such quarter.
Consolidated Statements of Operations
Net sales for the three month period ended September 30, 1996 were
$2,467,175 as compared to net sales of $3,101,985 for the comparative three
month period ended September 30, 1995, while cost of sales decreased from the
comparative three month period ended September 30, 1995 from $1,760,385 to
$1,189,257 resulting in a gross profit for the three month period ended
September 30, 1996 of $1,277,918 (representing approximately 52% of net sales)
3
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as compared to $1,341,600 for the comparative three month period ended September
30, 1995 (representing approximately 43% of net sales). Accordingly, gross
profits for the comparative periods decreased by $63,682 (a decrease of
approximately 5% from the comparative three month period ended September 30,
1995). Operating expenses increased by $457,372 (from $1,650,220 to $2,107,592)
during the comparative three month periods while the single largest items of
operating expenses continued to be represented by the aggregate of officers and
directors compensation and salaries which represented approximately 35% of all
operating expenses for the three month period ended September 30, 1995 and
represented approximately 30% of all operating expenses for the three month
period ended September 30, 1996. Research and development expenses for the three
month period ended September 30, 1995 represented approximately 11% of total
operating expenses and increased to approximately 24% of total operating
expenses for the comparative three month period ended September 30, 1996.
Primarily as a result of the above, net losses increased from $(287,714) for the
three month period ended September 30, 1995 to $(839,758) for the three month
period ended September 30, 1996; an increase in losses of $552,044 - an
approximate increase of close to 300% in net losses.
Consolidated Balance Sheets
Total assets of the Company at the three month period ended September
30, 1996 and fiscal year ended June 30, 1996 were $17,342,088 and $18,793,438
respectively; a decrease of $1,451,350, with total current assets decreasing
from $11,570,914 at June 30, 1996 to $10,101,093 at September 30, 1996 - a
decrease of $1,469,821. The decrease in total current assets is relatively
comparable to the aforesaid decrease in total assets, since property and
equipment increased by $46,240 at quarter ended September 30, 1996 while other
assets decreased by $27,769 at quarter ended September 30, 1996.
Total current liabilities of the Company at the three month period
ended September 30, 1996 and fiscal year ended June 30, 1996 were $7,520,721 and
$8,138,182 respectively, a decrease of $617,461.
At September 30, 1996 there were no long term liabilities.
Working capital at September 30, 1996 was $2,580,372 as compared to
working capital of $3,432,732 at June 30, 1996; a decrease of $852,360 (as a
result of the aforesaid decreases of $1,469,821 in total current assets and
$617,461 in total current liabilities.
The functional currencies of SR Medical AG, Teleray AG and SR Finance
AG (Swiss corporations) are Swiss Francs while the functional currency of SR
Medical GmbH (a German corporation) is German Marks. Gains and losses resulting
from foreign currency transactions which are included in operations have been
insignificant for all periods reported. However, the effects of exchange rate
fluctuations on translating foreign currency assets and liabilities and results
of operations from functional currency to Unites States dollars has been
significant although the cumulative foreign currency translation adjustment
(loss) to stockholders' equity decreased from $(836,047) at June 30, 1996 to
$(830,178) at September 30, 1996 (and accordingly had minimal impact for the
quarter ended September 30, 1996).
4
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Discussion and Analysis
Revenues for the first quarter of the current fiscal year have been
lower than expected by management due to the postponement of deliveries to
Eastern European countries out of a contract with the Swiss Government. With the
commencement of the above mentioned deliveries together with orderly sales a
significant rise in sales revenue is expected for the second quarter of the
fiscal year. Within the third quarter of the fiscal year, the beginning of
deliveries of Official Equipment Manufacturers ("OEM") products for Philips is
expected to lead to a further increase in revenues. Additional growth is
expected to be generated as a result of exclusive sales rights for Switzerland
granted to a world leading firm in the business of nuclear medicine and computer
tomography.
With ongoing significant research and development expenditures new
products are being successfully developed for marketing. One such product is the
Digital AddOn System, the first complete digital x-ray system. This is a
completely newly developed system using the latest knowledge in construction and
ergonomic design. The AddOn Bucky, which is designed to be used with systems
already existing, is integrated in the new Digital AddOn System. The new system,
which is an important extension of the Company's range of products will be
presented at the forthcoming Congress of Radiological Society of North America
("RSNA") exhibition in Chicago during the first week of December 1996.
The Company has recently (primarily during the fourth quarter of its
fiscal year ending June 30, 1996) increased its staff in the areas of research
and development, project management and in the assembly production center in
order to comply with projected increased production output requirements in the
first quarter of the current fiscal year. Dr. Markus Meier commenced activities
as manager of the Company's Research and Development division. Dr. Meier has a
degree in physics, had been project manager at Asea Brown Boveri ("ABB") and
Professor at Technical University in Switzerland with extensive experience in
the field of Optics and Bulk Optics. During the same time period, Herbert
Laubscher started as manager in the finance department. Mr. Laubscher has a
degree in economics from the University of St. Gall. He was employed at Price
Waterhouse for several years and had been CFO of a Holding Company in Germany.
During the second quarter of the fiscal year a new Company corporation
is intended to be formed in the United States. With this operational unit in the
United States, management expects to have an excellent starting point for the
commercial exploitation of its products. The Company is still evaluating certain
potential strategic relationships in the United States with multinational
companies who have expressed an interest in the Company's digital imaging
system. Successful culmination of ongoing negotiations would enable the Company
to sell its products under its own brand name, through partnerships and/or joint
ventures and/or through OEM Partners thereby potentially opening more markets to
the Company than currently exists.
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During the second quarter of the current fiscal year the Company
established a Scientific Advisory Board, an independent counsel of renowned
experts in radiology. Current board members include: Dr. Michael Meves,
Professor of Clinical Radiology in Berlin's Freien Universitat and the
Johannes-Gutenberg University in Mainz, Germany; Hans Jurgen Berendt, General
Manager of Elscint GmbH, a company which specializes in the field of radiology
in Wiesbaden, Germany; Dr. Hanfried Weigand, head of the Dr.
Horst-Schmidt-Kliniken and St. Josef-Hospital Radiological centers in Wiesbaden,
Germany and Dr. Paul Jegge, Co-head of the Lagenthal Regional Hospital in
Switzerland. Management of the Company continues to identify radiology experts
in the United States to be invited to join the Scientific Advisory Board. The
knowledge of the board will directly flow into the research and development of
the Company thereby adding material competence to its research and contributing
to the Company's leading role in producing high-tech digital x-ray equipment.
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PART II
<TABLE>
<S> <C> <C>
Item 1. Legal Proceedings - *
Item 2. Changes in Securities - 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 and Reports on Form 8-K - None
</TABLE>
* Reference is herewith made to Form 10-K for fiscal year ended June 30,
1996 and financial statements included therein and in particular to
Part I, Item 3 and Note 27 to the consolidated financial statements,
the full contents of which are herewith incorporated by reference in
accordance with Rule 12b-23 of the General Rules and Regulations under
the Securities Exchange Act of 1934.
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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.
SWISSRAY INTERNATIONAL, INC.
By /s/ Ruedi G. Laupper
---------------------------
Ruedi G. Laupper, President
Dated: December 4, 1996
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) BALANCE
SHEETS STATEMENT OF OPERATIONS AND STATEMENT OF STOCKHOLDERS EQUITY.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,729,173
<SECURITIES> 0
<RECEIVABLES> 2,188,482
<ALLOWANCES> 99,875
<INVENTORY> 3,756,308
<CURRENT-ASSETS> 10,101,093
<PP&E> 1,454,611
<DEPRECIATION> 270,089
<TOTAL-ASSETS> 17,342,088
<CURRENT-LIABILITIES> 7,520,721
<BONDS> 0
0
0
<COMMON> 141,851
<OTHER-SE> 9,679,516
<TOTAL-LIABILITY-AND-EQUITY> 17,342,088
<SALES> 2,467,175
<TOTAL-REVENUES> 2,467,175
<CGS> 1,189,257
<TOTAL-COSTS> 1,189,257
<OTHER-EXPENSES> 2,107,592
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,982
<INCOME-PRETAX> (839,758)
<INCOME-TAX> 0
<INCOME-CONTINUING> (839,758)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (839,758)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
