<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
Swissray International, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
<PAGE> 2
SWISSRAY INTERNATIONAL, INC.
747 THIRD AVENUE INDUSTRIESTRASSE 6
NEW YORK, NEW YORK 10017 CH 6285 HITZKIRCH
SWITZERLAND
January 31, 1997
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders
which will be held in New York, New York on Friday, March 7, 1997. By attending
the meeting, you will have an opportunity to hear a report on the operations of
your Company and to meet your directors and executives.
The enclosed notice of the meeting and proxy statement describe the matters
to be acted upon at the meeting, including the election of directors,
ratification of the appointment of auditors, change of state of incorporation to
Delaware, increase in authorized shares of Company common stock and transaction
of such other business as may properly come before the meeting.
Please read the proxy statement, then complete, sign, and return your proxy
in the enclosed envelope. Your vote is important.
Sincerely,
/s/ RUEDI G. LAUPPER
-----------------------
Ruedi G. Laupper, President
<PAGE> 3
SWISSRAY INTERNATIONAL, INC.
------------------------
NOTICE OF ANNUAL STOCKHOLDERS' MEETING
------------------------
January 31, 1997
TO THE HOLDERS OF SHARES OF COMMON STOCK:
NOTICE IS HEREBY GIVEN that pursuant to the call by its Directors the
regular annual meeting of stockholders of SWISSRAY International, Inc. will be
held at Hotel Intercontinental located at 111 E. 48th Street, New York, New
York, on Friday, March 7, 1997 at 4:30 p.m., local time, for the purpose of
considering and voting upon the following matters.
1. Election of Directors. To elect the five nominees listed in the Proxy
Statement dated January 31, 1997 as directors.
2. Ratification of the Board of Directors' action of the selection of Bederson &
Company LLP as independent auditor for the fiscal year ending June 30, 1997.
3. Approval of the proposal to reincorporate the Company in Delaware.
4. Approval of the proposal to increase the authorized shares of Common Stock of
the Company from 15,000,000 shares to 30,000,000 shares.
5. Transactions of such other business as may properly come before the Meeting
or any adjournment or postponement thereof.
By order of the Board of Directors
/s/ ULRICH ERNST
------------------------------
Ulrich Ernst
Chairman of the Board of Directors
WE URGE YOU TO MARK, SIGN, AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. IF YOU DO
ATTEND THE MEETING, YOU MAY THEN WITHDRAW YOUR PROXY. ALSO, YOU MAY REVOKE YOUR
PROXY AT ANY TIME PRIOR TO THE MEETING BY SUBMITTING A LATER SIGNED PROXY OR
UPON WRITTEN NOTIFICATION TO THE PRESIDENT.
<PAGE> 4
PROXY STATEMENT
SWISSRAY INTERNATIONAL, INC.
<TABLE>
<S> <C>
747 THIRD AVENUE INDUSTRIESTRASSE 6
NEW YORK, NEW YORK 10017 CH 6285 HITZKIRCH
SWITZERLAND
</TABLE>
This Proxy Statement is being furnished by SWISSRAY International, Inc.
(the "Company"), a New York corporation, to its stockholders in connection with
the solicitation by the Board of Directors of proxies to be voted at the Annual
Meeting of Stockholders to be held at 4:30 p.m. local time, on March 7, 1997
(the "Meeting"), at Hotel Intercontinental located at 111 E. 48th Street, New
York, New York and at any postponement or adjournment thereof.
In the course of discussions in this Proxy Statement of recommendations and
solicitations of votes, the term "Management" refers to the Board of Directors
of the Company, unless otherwise required by the context.
The approximate date on which this Proxy Statement is first being sent or
given to stockholders is January 31, 1997.
A COPY OF FORM 10-KSB (ANNUAL REPORT) FOR THE FISCAL YEAR ENDED JUNE 30,
1996, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BY THE COMPANY, MAY BE
OBTAINED BY STOCKHOLDERS WITHOUT CHARGE BY WRITTEN REQUEST TO JOSEF LAUPPER,
SECRETARY, SWISSRAY INTERNATIONAL, INC., INDUSTRIESTRASSE 6, CH 6285 HITZKIRCH,
SWITZERLAND.
VOTING, PROXY SOLICITATION AND REVOCATION
Your proxy is solicited by the Board of Directors of the Company for use at
the Meeting.
If the enclosed proxy is properly executed and returned prior to or at the
Meeting, and is not revoked prior to or at the Meeting, all shares represented
thereby will be voted at the Meeting as specified in the proxy by the persons
designated therein. If a signed proxy card is returned and the stockholder has
made no specifications with respect to voting matters, the shares will be voted
"FOR" the election of the nominees as directors, "FOR" ratification of the
auditors, "FOR" the proposal to reincorporate the Company in Delaware (the
"Reincorporation Proposal"), "FOR" the proposal to increase the number of
authorized shares of common stock of the Company from 15,000,000 to 30,000,000
shares (the "Increase in Common Stock Proposal"), and in accordance with the
judgement of the person or persons voting such proxies with respect to such
other matters, if any, as may properly come before the meeting. Abstentions and
broker nonvotes are counted only for purposes of determining whether a quorum is
present at the Meeting, but will not be considered as votes cast with respect to
any matter as to which the abstention or non-vote is indicated. The solicitation
of proxies will be by mail, but proxies may also be solicited by telephone,
telegraph or in person by officers and other employees of the Company. The
entire cost of this solicitation will be borne by the Company. Should the
Company, in order to solicit proxies, request the assistance of banks, brokerage
houses and other custodians, nominees or fiduciaries, the Company will reimburse
such persons for their reasonable expenses in forwarding the proxies and proxy
material to the beneficial owners of such shares. A stockholder may revoke his
proxy by a later proxy or by delivery of notice of revocation to the President,
in writing, at any time prior to the date and time of meeting or in open
meeting. Attendance at the Meeting will not in and of itself revoke a proxy.
SHARES ENTITLED TO VOTE
The Board of Directors has fixed the close of business on January 17, 1997,
as the record date for the determination of stockholders entitled to notice of
and to vote at the Meeting. At the close of business on such date, there were
outstanding and entitled to vote at the Meeting 15,000,000 shares of Common
Stock, par
<PAGE> 5
value $.01 per share. Each outstanding share is entitled to one vote at the
Meeting for all items set forth in the notice. Cumulative voting for the
nominees for director is not permitted.
If sufficient stockholders approve Proposal #3 (the reincorporation
proposal), the Board of Directors will merge the Company into a wholly-owned
Delaware subsidiary of the Company which would be the surviving corporation and
adopt the Certificate of Incorporation of the Delaware subsidiary attached as
Exhibit A hereto as the Certificate of Incorporation of the surviving
corporation, thereby reincorporating the Company in Delaware and authorizing the
increase in the number of authorized shares of Company Common stock in
accordance with proposal 4.
Pursuant to New York law, approval of the Reincorporation Proposal requires
the affirmative vote of no less than two-thirds of all outstanding shares
entitled to vote thereon, while approval of the other Proposals require the
affirmative vote of a majority of all outstanding shares entitled to be voted
thereon, in person or by proxy, at the meeting.
PRINCIPAL BENEFICIAL OWNERS OF COMMON STOCK
As of the January 17, 1997 record date, the following person(s) and/or
firm(s) were known to the Company to be the beneficial owner of more than five
percent of the Company's common stock. Such person(s) and/or firm(s) has
beneficial ownership of the shares and has sole voting power and sole investment
power with respect to the number of shares beneficially owned.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS(1)
- ------------------------------------------------------------ -------------------- -----------
<S> <C> <C>
Tomlinson Holding Inc.(2)................................... 3,200,000 21.33%
Postfach 925
6301 Zug
Switzerland
</TABLE>
- ---------------
(1) On the basis of 15,000,000 shares outstanding on January 17, 1997, the
record date.
(2) These shares are beneficially owned by the Company's President, Ruedi G.
Laupper.
In addition, the only record holder known by the Company to hold more than
five percent of the Company's Common stock is Cede & Co., P.O. Box 20, Bowling
Green Station, New York, New York 10004. As of the record date Cede & Co. held a
total of 3,952,325 shares of the Company's Common Stock, which represented
approximately 26% of the total number of shares outstanding. Cede & Co. is a
nominee of the Depositiory Trust Company, which held such shares of record on
behalf of various of its customers. The names of the beneficial owners of the
shares held by those stockholders are unknown to Management.
PROPOSAL NUMBER 1
ELECTION OF DIRECTORS
The Directors are elected annually by the stockholders of the Company. The
Certificate of Incorporation of the Company provides that the number of
Directors authorized to serve until the next annual meeting of stockholders
shall be the number established in the Company's Bylaws. The Bylaws provide that
the Board of Directors by resolution shall fix the number of directors. In
accordance with the Bylaws, the Board has fixed the number of directors at no
less than three or more than seven. In accordance therewith, a total of five
persons have been designated by the Board as nominees for election at the
Meeting and are being presented to the stockholders for election. The directors
to be elected at the Meeting shall be determined by a plurality vote of the
shares presented in person or by proxy, entitled to vote at the Meeting.
The Bylaws of the Company permit the Board of Directors by a majority vote,
between annual meetings of the stockholders, to increase the number of directors
and to appoint qualified persons to fill the vacancies created thereby.
2
<PAGE> 6
The persons named below are being proposed as nominees for election as
directors for the term expiring at the next annual meeting to be held in 1997,
and until their successors are elected and qualify. Each person, with the
exception of Ueli Laupper, is currently a director of the Company. The persons
named in the enclosed proxy intend to vote for such nominees for election as
directors, but if the nominees should be unable to serve, proxies will be voted
for such substitute nominees as shall be designated by the Board of Directors to
replace such nominees. It is believed that each nominee will be available for
election. The names of the nominees for election and certain information as to
each of them are as follows:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING NUMBER OF COMMON PERCENTAGE OF
DATE OF PAST FIVE YEARS OR MORE AND DIRECTOR SHARES BENEFICIALLY SHARES
NAME BIRTH OTHER DIRECTORSHIPS SINCE OWNED ON 1/17/97 (a) OUTSTANDING
- ---------------------- ------- --------------------------- -------- -------------------- -------------
<S> <C> <C> <C> <C> <C>
Ruedi G. Laupper...... 4-22-50 See below 1995 3,200,000(b) 21.33%
Josef Laupper......... 7-22-45 See below 1995 225,039(c) 1.50%
Dr. Erwin Zimmerli.... 7-22-47 See below 1995 -0- --%
Ulrich Ernst.......... 3-26-47 See below 1995 50,000 .33%
Ueli Laupper.......... 4-4-70 See below -- -0- --%
</TABLE>
- ---------------
(a) The information under this caption regarding ownership of securities is
based upon statements by the individual nominees, directors, and officers.
(b) These shares are owned of record by Tomlinson Holding Inc. and beneficially
by Ruedi G. Laupper.
(c) These shares are owned of record by Lairy Investment Inc. and beneficially
by Josef Laupper.
RUEDI G. LAUPPER has been President and a director of the Company since
May, 1995 and has been President and a director of both SR-Medical AG and
Teleray AG since their respective incorporations in 1988 and 1984 respectively.
Additionally, Ruedi G. Laupper has served as President of SR Finance AG, a
wholly owned subsidiary of the Company, since its incorporation in December
1995. He has approximately 16 years of experience in the field of radiology and
direct market knowledge as well as important business contacts throughout the
industry and with key clientele.
JOSEF LAUPPER is the brother of the Company's President and has been
Secretary and a director of the Company since May, 1995 maintaining comparable
positions with both SR-Medical AG and Teleray AG since their respective dates of
incorporation. Josef Laupper also serves as Managing Director of SR Finance AG
since its inception in December 1995. He is principally in charge of the
Company's financial, logistical and administrative tasks. As a former
entrepreneur in the medical supply business, Josef Laupper has in excess of 17
years of financial and marketing experience within the industry.
DR. ERWIN ZIMMERLI has been a director of the Company since May, 1995.
Since receiving his Graduate in law and economics degree from the University of
St. Gall, Switzerland (PhD) in 1979, Dr. Zimmerli has served as (a) head of the
White Collar Crime Department of the Zurich State Police (1980-86), (b) an
expert of a Parliamentary Commission for penal law and Lecturer at the
Universities of St. Gall and Zurich (1980-87), (c) Vice President of a leading
auditing firm (1987-1990) and (d) Executive Vice President of a multinational
aviation company (1990-92). Since 1992 he has been actively engaged in various
independent consulting capacities primarily within the legal community.
ULRICH ERNST has been Chairman of the Board of Directors and Treasurer of
the Company since May, 1995 and has had approximately 24 years of experience in
international business development in various industries with background
primarily in management consulting, financial advisory services and rendering
advice to new growth business ventures. Mr. Ernst received his Diploma in
Economic Studies in 1968 from the School of Economics and received his Masters
of Business Administration degree in 1973 from the University of Zurich.
UELI LAUPPER is the son of the Company's President with overall Company
responsibilities in the area of marketing and sales with approximately 3 years
experience within the international x-ray marketing industry.
All current directors and executive officers as a group beneficially own
3,475,039 shares as of January 17, 1997, which represents 23.17% of total shares
outstanding, exclusive of any Options exercisable within sixty days.
3
<PAGE> 7
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Directors, executive officers, and any beneficial owners of more than 10%
of a company's stock must, under Section 16(a) of the Securities Exchange Act of
1934, file certain periodic reports of changes in beneficial ownership of
Company securities. The Company endeavors to assist directors and executive
officers in filing the required reports. To the Company's knowledge all filing
requirements under the Securities Exchange Act during the fiscal year ended June
30, 1996 were satisfied.
BOARD MEETINGS AND COMMITTEES OF THE BOARD
During the fiscal year which ended June 30, 1996, there were three meetings
of the Board of Directors. Three of the four incumbent directors attended all
three meetings of the Board while the fourth incumbent director attended two of
the meetings. The Company has no standing audit, nominating, or compensation
committees. The Board of Directors performs all of the functions that might
otherwise be performed by such committees.
COMPENSATION OF DIRECTORS AND OFFICERS
BOARD OF DIRECTORS FEES
For the fiscal year ended June 30, 1996, members of the Board of Directors
did not receive any fees for attending meetings of the Board of Directors. The
Company's policy is to reimburse Board members for their expenses incurred to
attend Board meetings. Officers of the Company, who are also Directors, do not
receive any fees.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the chief executive
officers of the Company and compensation received for the fiscal year ended June
30, 1996.
<TABLE>
<CAPTION>
SECURITIES
SALARIES, FEES, OR PROPERTY, AGGREGATE OF
DIRECTORS' FEES, INSURANCE BENEFITS CONTINGENT
NAME OF CAPACITIES IN WHICH COMMISSIONS OR REIMBURSEMENT, FORMS OF
INDIVIDUAL SERVED AND BONUSES PERSONAL BENEFITS (3) REMUNERATION
- ------------------------- ------------------------ ---------------- --------------------- ------------
<S> <C> <C> <C> <C>
Ruedi Laupper............ President and a Director $176,085 -0- -0-
Josef Laupper............ Secretary and a Director $118,229 -0- -0-
Ulrich Ernst............. Treasurer and Chairman $113,197 -0- -0-
of the Board Directors
Erwin Zimmerli........... Director $ 8,385 -0- -0-
Peter Wagli.............. Former Officer of Telray $123,763 -0- -0-
AG (1)
Ueli Laupper............. (2) $ 73,117 -0- -0-
</TABLE>
- ---------------
(1) Mr. Wagli was neither an officer or director of the Company but was an
officer of Telray AG, a wholly owned subsidiary of SR-Medical AG, with the
latter being a wholly owned subsidiary of the Company. He no longer serves
in such capacity.
(2) Mr. Ueli Laupper is a key employee of the Company and a nominee to its Board
of Directors. His primarily activities relate to services rendered directly
to SR Medical AG, a wholly owned subsidiary of the Company.
(3) The Company's consolidated financial statements for fiscal year ended June
30, 1996 indicate that with respect to Swiss Mandated Pension Plan the
Company is required to contribute approximately 5% of eligible employees
salaries into a government pension plan and the fact that the Company
additionally contributes approximately 5% of eligible employees salaries
into a private pension plan with total
4
<PAGE> 8
contributions charged to operations. Total contributions for fiscal year
ended June 30, 1996 amounted to $198,722.
There are no current written employment agreements between the Company and
any of its officers and directors.
OPTIONS GRANTED TO JUNE 30, 1996
The Board of Directors has adopted a non-statutory stock option plan and
reserved 3,000,000 shares for issuance to eligible full and part-time employees,
officers, directors and consultants. Options are non-transferrable and are
exercisable during a term of not more than ten (10) years from the grant date.
The options are issuable in such amounts and at such prices as determined by the
Board of Directors, except that each option price of each grant will not be less
than twenty (20%) percent of the fair market value of such shares on the date
the options are granted.
The following table summarizes common stock options outstanding as of June
30, 1996.
<TABLE>
<CAPTION>
PRICE PER OPTIONS OPTIONS OPTIONS
DATE GRANTED SHARE GRANTED EXERCISED OUTSTANDING
- ----------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
September 20, 1995............................. $6.50 200,000 -- 200,000
June 8, 1996................................... 5.00 100,000 -- 100,000
March 11, 1996................................. 2.00 2,000,000 1,000,000 1,000,000
May 16, 1996................................... 4.75 35,000 -- 35,000
----- --------- --------- ---------
2,335,000 1,000,000 1,335,000
========= ========= =========
</TABLE>
On March 11, 1996 the Company granted options to purchase up to 50,000
shares at $1.00 per share to an individual who exercised all such options and
paid full cash consideration.
On July 22, 1996, the Company granted options to purchase up to 200,000
shares of the Company's common stock under the 1996 non-statutory stock option
plan with an exercise price of $.73 per share. As of January 17, 1997 only 1,000
of such 200,000 options have been exercised.
RETIREMENT PLAN
The Company, mandated by Swiss government regulations, is required to
contribute approximately five (5%) percent of eligible, as defined, employees'
salaries into a government pension plan. The Company also contributes
approximately five (5%) percent of eligible employee salaries into a private
pension plan. Total contributions charged to operations for the year ended June
30, 1996 was $198,772.
RELATED PARTY TRANSACTIONS
For the fiscal year ended June 30, 1996 there have not been any material
transactions between the Company and any director, executive officer, security
holder or any member of the immediate family of any of the aforementioned which
exceeded $60,000 other than as may be indicated in its Form 10-KSB and the
audited consolidated financial statements and notes thereto which are a part
thereof.
PROPOSAL NUMBER 2
PROPOSAL TO RATIFY THE BOARD OF DIRECTORS ACTION IN SELECTION OF
BEDERSON & COMPANY LLP AS INDEPENDENT AUDITOR FOR THE COMPANY
The Board of Directors has appointed Bederson & Company LLP, independent
certified public accountants, as auditor of the Company to examine the financial
statements for the fiscal year ending June 30, 1997; Bederson & Company LLP
having previously audited the Company's financial statements for the fiscal year
ended June 30, 1996. The firm has no relationship with the Company except the
existing professional relationship of independent auditor.
5
<PAGE> 9
Ratification of the employment of Bederson & Company LLP will require the
affirmative vote of the holders of a majority of the shares represented at the
Meeting in person or by proxy and entitled to vote. The Board of Directors
recommends a vote FOR Proposal Number 2. In the event the stockholders fail to
ratify this employment, it will be considered as a directive to the Board of
Directors to select other auditors for the current year.
Representatives of Bederson & Company LLP are expected to be present at the
Meeting, will have the opportunity to make a statement if they choose, and will
be expected to be available to respond to appropriate questions.
ADDITIONAL PROPOSALS 3 AND 4
The Company's Board of Directors has unanimously approved the
Reincorporation Proposal and the Increase in Common Stock Proposal which,
although related, will be voted upon separately by stockholders. Proposal Number
3 relates to the change of the Company's state of incorporation to Delaware from
New York, which will be effected by merging the Company with and into a
wholly-owned Delaware subsidiary of the Company (having the same name as the
Company) which would be the surviving corporation (the "Merger"). Proposal
Number 4 is the authorization of an additional 15,000,000 shares of Common Stock
which would be effected by retaining the capitalization of the Delaware
subsidiary as the capitalization of the surviving corporation, or by changing
the capitalization of the Company if the Reincorporation Proposal is not
approved.
If sufficient stockholders approve the Reincorporation Proposal and the
Increase in Common Stock Proposal the Board of Directors will consummate the
Merger and adopt the Certificate of Incorporation of the Delaware subsidiary
attached as Exhibit A hereto as the Certificate of Incorporation of the
surviving corporation, thereby reincorporating the Company in Delaware and
authorizing the additional shares of Common Stock. If the stockholders approve
the Increase in Common Stock Proposal, but fail to approve the Reincorporation
Proposal, the Board of Directors will consummate the capitalization by amending
its New York Certificate of Incorporation as may be required.
If sufficient stockholders approve the Reincorporation Proposal, but fail
to approve the Increase in Common Stock Proposal, the Board of Directors will
cause the Delaware subsidiary's Certificate of Incorporation to be amended prior
to the Merger so that its capitalization will be that of the Company and will
reflect those proposals that have been approved by stockholders. Even if
sufficient stockholders approve the Reincorporation Proposal, the Board of
Directors has reserved the right to terminate and abandon the Merger as
described below.
PROPOSAL NUMBER 3
CHANCE THE STATE OF INCORPORATION FROM NEW YORK TO DELAWARE
The proposed reincorporation will be effected by the merger of the Company
into a wholly-owned Delaware subsidiary of the Company organized for such
purpose (interchangeably, the "Delaware Company" or the "Surviving
Corporation"). The Delaware Company will be the surviving corporation in the
Merger. There will be no change in the business or properties of the Company and
the Delaware Company as a result of the Merger, and the Surviving Corporation
will assume all of the obligations of the Company. The directors and officers of
the Surviving Corporation will be the same as those of the Company.
The Plan of Merger (the "Merger Agreement"), in the form attached hereto as
Exhibit B, providing for the Merger has been unanimously approved by the Board
of Directors.
The Merger Agreement provides, however, that the Board of Directors may
terminate the Merger Agreement and abandon the Merger if for any reason,
including, but not limited, to the number of shares for which appraisal rights
have been exercised and the cost to the Company thereof, the Board of Directors
determines that it is inadvisable to proceed with the Merger. See "Rights of
Dissenting Stockholders" below.
6
<PAGE> 10
The Certificate of Incorporation for the Delaware Company (the "Delaware
Certificate") provides for the authorization of 30,000,000 shares of Common
Stock of the Company all of which are shares of Common Stock, $.0001 par value
per share. Pursuant to the Merger Agreement, each outstanding share of the
Company's Common Stock will be converted into a fully paid and non-assessable
share of Common Stock of the Surviving Corporation with identical rights
attached thereto, i.e. the holders of Common Stock (i) have equal ratable rights
to dividends from funds legally available therefore, when, as and if declared by
the Board of Directors of the Company; (ii) are entitled to share ratably in all
of the assets of the Company available for distribution to holders of Common
Stock upon liquidation, dissolution or winding up of the affairs of the Company;
(iii) do not have preemptive, subscription or conversion rights and there are no
redemption or sinking funds provisions applicable thereto; and (iv) are entitled
to one non-cumulative vote per share on all matters which stockholders may vote
on at all meetings of stockholders. Outstanding options and warrants to purchase
any number of shares of the Company's Common Stock will be converted into
options or warrants to purchase the same number of shares of the Surviving
Corporation's Common Stock at the same exercise price. IT WILL NOT BE NECESSARY
FOR STOCKHOLDERS TO EXCHANGE THEIR EXISTING STOCK CERTIFICATES FOR STOCK
CERTIFICATES OF THE SURVIVING CORPORATION. OUTSTANDING CERTIFICATES FOR SHARES
OF COMMON STOCK OF THE COMPANY SHOULD NOT BE DESTROYED OR SENT TO THE COMPANY.
The Common Stock of the Surviving Corporation will be listed on the NASDAQ
SmallCap Market. Delivery of certificates for the Company's Common Stock issued
prior to the effectiveness of the Merger will constitute "good delivery" of
shares in transactions subsequent to the Merger. Certificates representing
shares of the Surviving Corporation's Common Stock will be issued with respect
to transfers consummated after the Reincorporation. New certificates will also
be issued upon the request of any stockholder, subject to normal requirements as
to proper endorsement, signature guarantee, if required, and payment of
applicable taxes.
AT THE EFFECTIVE TIME OF THE MERGER, THE COMPANY WILL BE GOVERNED BY
DELAWARE LAW, BY A NEW CERTIFICATE OF INCORPORATION AND NEW BY-LAWS, EACH OF
WHICH WILL RESULT IN CHANGES IN THE RIGHTS OF THE STOCKHOLDERS.
For additional information and details relating to these and other changes,
reference is made to the Delaware Certificate, attached to this Proxy Statement
as Exhibit A, and the discussions in this Proxy Statement under "Principal
Reasons for Changing the State of Incorporation," "Principal Differences Between
New York and Delaware Corporation Laws" and "Changes in Certificate of
Incorporation and By-laws." The discussion herein of the provisions of the
Delaware Certificate is subject to, and qualified in its entirely by, reference
to all the provisions of the Delaware Certificate. Copies of the Certificate of
Incorporation and By-laws of the Company and the Certificate of Incorporation
and By-laws of the Delaware Company are available for inspection at the
principal office of the Company and copies will be sent to stockholders upon
written request.
PRINCIPAL REASONS FOR CHANGING THE STATE OF INCORPORATION
For many years, Delaware has followed a policy of encouraging incorporation
in that state and, in furtherance of that policy, has adopted comprehensive,
modern and flexible corporate laws which are periodically updated and revised to
meet changing business needs. As a result, many corporations initially choose
Delaware as their domicile and many others have reincorporated in Delaware in a
manner similar to that proposed by the Company. Because of Delaware's
long-standing policy of encouraging incorporation in that state, and its
consequent preeminence as the state of incorporation for many major
corporations, the Delaware courts have developed a considerable expertise in
dealing with corporate issues and a substantial body of case law has developed
construing Delaware law and establishing public policies with respect to
Delaware corporations.
It is anticipated that Delaware corporate law will continue to be
interpreted and explained in a number of significant court decisions which may
provide greater predictability with respect to the Company's corporate legal
affairs. Certain aspects of Delaware corporate law have, however, been publicly
criticized on the ground that they do not afford minority stockholders the same
substantive rights and protection as are available in a number of other states.
For a discussion of certain differences in stockholders' rights and the powers
of
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<PAGE> 11
management under the Delaware General Corporation Law (the "Delaware GCL") and
the New York Business Corporation Law (the "New York BCL") see "Principal
Differences Between New York and Delaware Corporation Laws" and "Changes in
Certificate of Incorporation and By-laws" below.
In the event the Reincorporation Proposal is not approved, the Company will
remain a New York corporation.
PRINCIPAL DIFFERENCES BETWEEN NEW YORK AND DELAWARE CORPORATION LAWS
The Merger will effect several changes in the rights of stockholders as a
result of differences between the New York BCL and the Delaware GCL. The
provisions of the New York BCL and Delaware GCL differ in many respects.
Summarized below are certain of the principal differences affecting the rights
of stockholders. This summary does not purport to be a complete statement of
differences affecting stockholders' rights under the New York BCL and the
Delaware GCL and is subject to, and qualified in its entirely by reference to,
all the provisions thereof.
DIVIDENDS
The Delaware GCL provides that a corporation may, unless otherwise
restricted by its certificate of incorporation, declare and pay dividends out of
surplus, or if no surplus exists, out of net profits for the current or
preceding fiscal year (provided that the amount of capital of the corporation is
not less than the aggregate amount of the capital represented by the issued and
outstanding stock of all classes having a preference upon the distribution of
assets). Under the New York BCL, dividends may be paid only out of surplus. The
Company does not now, and has not recently, paid any dividends on its Common
Stock. The payment by the Company of dividends, if any, in the future rests
within the discretion of its Board of Directors and will depend, among other
things, upon the Company's earnings, its capital requirements and its financial
condition, as well as other relevant factors. By reason of its present financial
status and its contemplated financial requirements, the Company does not
contemplate or anticipate paying any dividends upon its Common Stock in the
foreseeable future.
DISSENTERS' RIGHTS OF APPRAISAL
Under the New York BCL, dissenting stockholders who follow prescribed
statutory procedures are entitled to appraisal rights in connection with certain
mergers, consolidations and sales of all or substantially all the assets of a
corporation. The Delaware GCL provides similar rights and procedures for mergers
and consolidations only. Furthermore, under the Delaware GCL, even in those
cases, such rights are not provided in certain circumstances, including
transactions in which shares of the corporation being voted in a merger or
consolidation are listed on a national securities exchange (the Company's Common
Stock is, and the Delaware Company's Common Stock will be, listed on the NASDAQ
SmallCap Market) or are held of record by more than 2,000 stockholders and in
which the shares to be received in such merger or consolidation are shares of
the surviving corporation or are listed on a national securities exchange or are
held of record by more than 2,000 stockholders.
The availability of appraisal rights to stockholders of the Company who
dissent from the Merger is discussed under "Rights of Dissenting Stockholders"
below.
ISSUANCE TO OFFICERS, DIRECTORS AND EMPLOYEES OF RIGHTS OR OPTIONS TO PURCHASE
SHARES
The New York BCL, requires the affirmative vote of a majority of the shares
entitled to vote in order to issue to officers, directors or employees options
or rights to purchase stock. The Delaware GCL does not require stockholders
approval of such transactions. However, the Company will remain subject to the
rules of NASDAQ which may require stockholders approval of the Company's option
plans and grants thereunder in certain instances.
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<PAGE> 12
VOTE REQUIRED
The New York BCL requires that certain mergers and consolidations and sales
of all or substantially all of the assets not in the ordinary course of business
be approved by the holders of not less than two- thirds of the outstanding stock
entitled to vote thereon. Under the Delaware GCL, such transactions require
approval by the holders of a majority of the outstanding stock entitled to vote
thereon, and a vote of the stockholders of the surviving corporation is not
necessary where, in the case of a merger, (i) no amendment of its certificate of
incorporation or change in its outstanding stock is involved and (ii) the merger
results in no more than a 20% increase in its outstanding common stock.
LOANS TO DIRECTORS
Under the Delaware GCL, loans may be made to employees or officers, even
those who are also directors if the Board of Directors finds that the loan may
benefit the corporation. The New York BCL requires that loans to directors be
authorized by an affirmative vote of stockholders.
REDEEMABLE SHARES
The Delaware GCL permits redeemable shares to be redeemed at the option of
the corporation or the stockholder, while the New York BCL generally permits
redemption only at the option of the corporation.
CORPORATE ACTION WITHOUT A STOCKHOLDERS' MEETING
The New York BCL permits corporate action without a stockholders' meeting
only upon the written consent of all stockholders entitled to vote on such
action. The Delaware GCL permits corporate action without a meeting of
stockholders upon the written consent of the holders of that number of shares
necessary to authorize the proposed corporate action being taken, unless the
certificate of incorporation expressly provides otherwise, and then requires the
corporation to provide notice of the actions taken through such procedure to the
stockholders who did not vote with respect to such action.
CONSIDERATION FOR SHARES
Under the New York BCL, neither obligations of the subscriber for future
payments nor obligations of the subscriber for future services constitutes
payment or part payment for shares of a corporation. Furthermore, certificates
for shares may not be issued until the full amount of the consideration therefor
has been paid (except in the case of shares purchased pursuant to stock options
under a plan permitting installment payments). Under the Delaware GCL, shares of
stock may be issued, and deemed to be fully paid and nonassessable, if the
corporation receives consideration (in the form of cash, services rendered,
personal property, real property, leases of real property, or a combination
thereof) having a value not less than the par value of such shares and the
corporation receives a binding obligation of the subscriber to pay the balance
of the subscription price.
CLASSIFICATION OF THE BOARD OF DIRECTORS
The New York BCL permits a classified board with as many as four classes
but forbids fewer than three directors in any class. The Delaware GCL permits a
classified board of directors with as many as three classes, provided that
separate classes of directors must have staggered terms of office with only one
class of directors coming up for election each year. Neither the Delaware
Certificate nor the Certificate of Incorporation of the Company provide for a
classified board of directors.
BUSINESS COMBINATION STATUTES
The New York BCL prohibits any "business combination" (as therein defined)
between a "domestic corporation" and an "interested stockholder" for five years
after the date that the interested stockholder became an interested stockholder
unless prior to that date the board of directors of the domestic corporation
approved the business combination or the transaction that resulted in the
interested stockholder becoming an
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<PAGE> 13
interested stockholder. After five years, such a business combination is
permitted only if (i) it is approved by a majority of the shares not owned by,
or by an affiliate of, the interested stockholder or (ii) certain statutory fair
price requirements are met. A "resident domestic corporation" is defined as any
corporation that (i) is incorporated in New York, (ii) has its principal
executive offices and significant business operations in New York or has at
least 250 or 25% of its employees in New York (including employees of its 80%
owned subsidiaries, if any), and (iii) has at least 10% of its stock
beneficially owned by New York residents. An "interested stockholder" is any
person who beneficially owns, directly or indirectly, 20% or more of the
outstanding voting stock of the corporation.
The Delaware GCL prohibits any "business combination" between a Delaware
corporation and an "interested stockholder" for three years following the date
that the interested stockholder became an interested stockholder unless (i)
prior to that date the board of directors approved the business combination or
the transaction that resulted in the interested stockholder becoming an
interested stockholder, (ii) upon consummation of the transaction that resulted
in the interested stockholder becoming an interested stockholder the interested
stockholder held at least 85% of the outstanding voting stock of the corporation
(not counting shares owned by officers and directors and certain shares in
employee stock plans), or (iii) on or subsequent to such date the business
combination is approved by the board of directors and at least two thirds of the
outstanding shares of voting stock not owned by the interested stockholder. The
Delaware GCL defines "interested stockholder" as any person who beneficially
owns, directly or indirectly, 15% or more of the outstanding voting stock of the
corporation. Unlike New York, Delaware does not require that the corporation's
principal executive offices or significant operations be located in Delaware in
order to be covered by this law.
NUMBER OF DIRECTORS
Under the Delaware GCL, a corporation may have as few as one director and
there are no maximum limits. The specific number may be fixed in the certificate
of incorporation but if so, it may be changed only with both board of directors
and stockholder approval. If the certificate of incorporation is silent as to
the number of directors, the board of directors may fix or change the authorized
number of directors pursuant to a provision of the by-laws.
Under the New York BCL, the number of directors may not be less than three,
and any higher number may be fixed by the by-laws or by action of the
stockholders or of the board of directors under specific provisions of the
by-laws adopted by the stockholders. The number of directors may be increased or
decreased by amendment of the by-laws or by action of the stockholders or of the
board of directors under the specific limitation of a by-law adopted by the
stockholders, subject to certain limitations.
INSPECTION OF STOCKHOLDER'S LIST
With respect to the inspection of stockholder's lists, the New York BCL
provides a right of inspection on at least 5 days written demand to (i) any
person who shall have been a stockholder for at least 6 months immediately
preceding his demand or (ii) any person holding, or thereunto authorized in
writing by, at least 5% of any class of outstanding shares. The corporation has
certain rights calculated to assure itself that the demand for inspection is not
for a purpose or interest other than that of the corporation.
The Delaware GCL permits any stockholder to inspect the stockholder's list
for a purpose reasonably related to such person's interest as a stockholder and,
during the 10 days preceding the stockholder's meeting, for any purpose germane
to that meeting.
CHANGES IN CERTIFICATE OF INCORPORATION AND BY-LAWS
The Delaware Certificate differs from the Certificate of Incorporation of
the Company primarily as a result of differences between the Delaware GCL and
the New York BCL. The By-laws of the two corporations likewise differ primarily
as a result of differences between the Delaware GCL and the New York BCL and the
Delaware Certificate and the Certificate of Incorporation of the Company. Set
forth below is a discussion of certain significant changes set forth in the
Delaware Certificate.
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<PAGE> 14
CHANGE OF COMPANY PURPOSES
The purpose for which the Company was formed as set forth in its
Certificate of Incorporation initially adopted in 1968 and subsequently amended
included certain activities in which the Company, in its present form is no
longer engaged. Moreover, the Company may elect to pursue other activities in
the future. The Delaware Certificate states broadly that the Company's purpose
is to engage in any lawful activity, which is the customary purpose clause for
modern corporations.
CHANGE IN PAR VALUE OF AUTHORIZED CAPITAL STOCK
The Delaware Certificate authorizes the Company to issue up to 30,000,000
shares of Common Stock and sets the par value of $.0001 per share instead of the
current $.01 par value per share of Common Stock. The purpose and effect of this
change in par value is to minimize the annual franchise tax payable by the
Company.
INDEMNIFICATION AND ELIMINATION OF LIABILITY
The Delaware Certificate and the By-laws of the Delaware Company contain
indemnification provisions eliminating the personal liability of directors to
the fullest extent permitted by the Delaware GCL. The provision is parallel to
the provision of the Company's Certificate of Incorporation eliminating the
liability of directors of the Company to the extent permitted by the New York
BCL.
TRANSACTIONS WITH AFFILIATES
The Delaware Certificate does not contain provisions requiring special
authorization in respect of certain transactions with affiliated stockholders,
since the purpose of the provisions to this effect in the Company's Certificate
of Incorporation is addressed by Section 203 of the Delaware GCL.
RIGHTS OF DISSENTING STOCKHOLDERS
Because the Company will not be technically the "surviving corporation,"
stockholders of the Company who do not vote in favor of the Reincorporation
Proposal may have the right to seek to obtain payment in cash of the fair value
of their shares by complying with the requirements of Section 623 of the New
York BCL. The dissenting stockholders must file with the Company before a taking
of the vote on the Reincorporation Proposal a written objection including a
statement of intention to demand payment for shares and stating such
stockholder's name and residence address, the number of shares of stock as to
which dissent is made and a demand for payment of the fair value of such shares
if the Merger is consummated. Such stockholder may not dissent as to less than
all shares owned. Within ten days after the vote of stockholders authorizing the
Reincorporation Proposal, the Company must give written notice of such
authorization to each such dissenting stockholder. Within twenty days after the
filing of such notice, any stockholder to whom the Company failed to give notice
of the Annual Meeting who elects to dissent from the Merger must file with the
Company a written notice of such election, stating such stockholder's name and
residence address, the number of shares of stock as to which dissent is made and
a demand for payment of the fair value of the shares. Such stockholder may not
dissent as to less than all shares owned. At the time of filing the notice of
election to dissent or within one month thereafter, dissenting stockholders must
submit certain certificates representing shares to the Company or its transfer
agent for notation thereon of the election to dissent, after which such
certificates will be returned to the stockholder.
Failure to submit the certificates may result in the loss of dissenter's
rights. Within 15 days after the expiration of the period within which
stockholders may file their notices of election to dissent, or within 15 days
after consummation of the Merger, whichever is later (but not later than ninety
days after the stockholders' vote authorizing the Merger), the Company must make
a written offer (which, if the Merger has not been consummated, may be
conditioned upon such consummation) to each stockholder who has filed such
notice of election to pay for the shares at a specified price which the Company
considers to be their fair value. If the Company and the dissenting stockholder
are unable to agree as to such value, Section 623 provides for judicial
determination of value. A negative vote on the Reincorporation Proposal does not
constitute a written
11
<PAGE> 15
objection required to be filed by an objecting stockholder. Failure by a
stockholder to vote against the Reincorporation Proposal, however, will not
constitute a waiver of rights under Section 623 provided that a written
objection has a been properly filed and such stockholder has not voted in favor
of the Reincorporation Proposal.
The foregoing does not purport to be a complete statement of the provisions
of Section 623 and is qualified in its entirety by reference to said Section.
Because the Reincorporation Proposal does not involve any change in the
nature of the Company's business but is a technical matter only, management
hopes that no stockholder will exercise dissenter's right. Under the Merger
Agreement, the Board of Directors may abandon the Merger, even after stockholder
approval, if for any reason the Board of Directors determines that it is
inadvisable to proceed with the Merger, including considering the number of
shares for which appraisal rights have been exercised and the cost to the
Company thereof. THE BOARD OF DIRECTORS CURRENTLY INTENDS TO ABANDON THE MERGER
IN THE EVENT THAT ITS CONSUMMATION WOULD RESULT IN STOCKHOLDERS REPRESENTING
MORE THAN A RELATIVELY NOMINAL NUMBER OF SHARES BEING ENTITLED TO APPRAISAL
RIGHTS.
FEDERAL INCOME TAX CONSEQUENCES
Holders of the Company's Common Stock who do not exercise their dissenter's
rights will not recognize gain or loss for federal income tax purposes as a
result of the Merger and the conversion of their shares into shares of the
Delaware Company. The basis of the shares of the Delaware Company in the hands
of each stockholder will be the same as the basis of the holder's shares of the
Company, and the holding period for shares of the Delaware Company will include
the holding period for shares of the Company, provided that the shares of the
Company were held as capital assets at the date of the Merger. Stockholders who
exercise their dissenters' rights to obtain payment for their shares will
recognize such gain or loss.
VOTE REQUIRED FOR APPROVAL OF THE REINCORPORATION PROPOSAL
Approval of the Reincorporation Proposal will require the affirmative vote
of two-thirds of the outstanding shares of Common Stock of the Company entitled
to vote thereon at the Annual Meeting. Proxies solicited by the Board of
Directors will be voted for the Reincorporation Proposal, unless stockholders
specify otherwise.
The Board of Directors unanimously recommends that stockholders vote FOR
the Reincorporation Proposal.
PROPOSAL NUMBER 4
INCREASE THE AUTHORIZED SHARES OF COMMON STOCK OF THE COMPANY BY 15,000,000
SHARES
The Company's Certificate of Incorporation currently authorizes the Company
to issue up to 15,000,000 shares of Common Stock all of which are issued and
outstanding as of January 17, 1997. In the past the Company had raised capital
needed to furnish its proposed growth primarily through the sale and issuance of
shares of Company Common stock for cash by means of equity financing and debt
financing. Due to the fact that all authorized shares have been issued as
referred to above, the number of authorized, non-designated shares of Common
Stock to be available for issuance by the Company in the future (for financing
purposes or otherwise) necessitates an increase in authorized shares. Hence,
much of the Company's flexibility with respect to possible future stock splits,
equity and/or debt financings, stock-for-stock acquisitions, stock dividends or
other transactions that involve the issuance of Common Stock would otherwise be
lost absent an increase in authorized shares. The Increase in Common Stock
Proposal, by increasing the shares of authorized Common Stock to 30,000,000 from
15,000,000, if adopted, will restore the Company's ability to take such actions
by increasing the number of authorized unissued and undesignated shares of
Common Stock of the Company.
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<PAGE> 16
If the Increase in Common Stock Proposal is adopted by the Company's
stockholders, such proposal will become effective on the date the Merger is
effected if the Reincorporation Proposal is approved by the Company's
stockholders, and on the date a certificate of amendment is filed in New York,
the Company's state of incorporation, if the Reincorporation Proposal is not so
approved.
Vote Required For Approval of the Increase in Common Stock Proposal
Approval of the Increase in Common Stock Proposal requires the affirmative
vote of a majority of the outstanding shares of Common Stock of the Company
entitled to vote thereon at the Annual Meeting. Proxies solicited by the Board
of Directors will be voted for the Increase in Common Stock Proposal, unless
stockholders specify otherwise.
The Board of Directors unanimously recommends a vote FOR the authorization
of additional shares of Common Stock.
STOCKHOLDER PROPOSALS
The Company anticipates that the 1997 Annual Meeting will be held on or
about October 10, 1997 and that the proxy materials for the 1997 Annual Meeting
will be mailed on or about September 10, 1997. If any security holder wishes a
proposal to be considered for inclusion in the 1997 Proxy Statement, this
material must be received by the Chief Executive Officer no later than June 12,
1997.
OTHER MATTERS
Management does not know of any other matters which may come before the
Meeting. However, if any matters properly come before the Meeting, it is the
intention of the persons named in the enclosed proxy to vote such proxy in
accordance with the recommendations of the Board of Directors. It is important
that proxies be returned promptly. Therefore, stockholders who do not expect to
attend in person are urged to mark, date, sign and return the enclosed proxy in
the accompanying envelope.
By Order of the Board of Directors
/s/ ULRICH ERNST
------------------------------
Ulrich Ernst
Chairman of the Board of Directors
Dated: January 31, 1997
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<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------------
<S> <C>
Exhibit A Delaware Certificate of Incorporation
Exhibit B Agreement and Plan of Merger of SWISSRAY International, Inc. (New York) and
SWISSRAY International, Inc. (Delaware)
</TABLE>
14
<PAGE> 18
CERTIFICATE OF INCORPORATION
OF
SWISSRAY INTERNATIONAL, INC.
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisi and subject to the requirements of the Laws of the
State of Delaware (particularly Chapter 1 Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the "Corporation")
is SWISSRAY International, Inc.
SECOND: The address, including street number, city and county, of the
registered office of the Corporation in the State of Delaware is Corporation
Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, and
the name of the registered agent of the Corporation in the State of Delaware at
such address is The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
The foregoing provisions of this Article THIRD shall be construed both as
purposes and powers and each as an independent purpose and power. The foregoing
enumeration of specific purposes and powers shall not be held to limit or
restrict in any manner the purposes and powers of the Corporation, and the
purposes and powers herein specified shall, except when otherwise provided in
this Article THIRD, be in no wise limited or restricted by reference to, or
inference from, the terms of any provision of this or any other Article of this
Certificate of Incorporation; provided, that the Corporation shall not conduct
any business, promote any purpose, or exercise any power or privilege within or
without the State of Delaware which, under the laws thereof, the Corporation may
not lawfully conduct, promote, or exercise.
FOURTH: The total number of shares of Common Stock which the Corporation
shall have authority to issue is Thirty Million (30,000,000) shares all of which
shall be Common Stock, par value $.0001 per share without cumulative voting
rights and without any preemptive rights.
FIFTH: The name and mailing address of the incorporator is as follows:
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
- ----------------- ----------------------------------
<S> <C>
Ruedi G. Laupper c/o SWISSRAY International, Inc.
747 Third Avenue
New York, New York 10017
</TABLE>
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, agree to any compromise or arrangement and to reorganization of
this Corporation as
1
<PAGE> 19
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, and/or on all the stockholders or class of stockholders, of
this Corporation, as the case may be, and also on this Corporation.
EIGHTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and regulation
of the powers of the Corporation and of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of
the Corporation shall be vested in its Board of Directors. The number of
Directors which shall constitute the whole Board of Directors shall be
fixed by, or in the manner provided in, the By-Laws. The phrase "whole
Board" and the phrase "total number of Directors" shall be deemed to have
the same meaning, to wit, the total number of Directors which the
Corporation would have if there were no vacancies. No election of Directors
need be by written ballot.
2. After the original or other By-Laws of the Corporation have been
adopted, amended or repealed as the case may be, in accordance with the
provisions of Section 109 of the General Corporation Law of the State of
Delaware, and, after the Corporation has received any payment for any of
its stock, the power to adopt, amend, or repeal the By-Laws of the
Corporation may be exercised by the Board of Directors of the Corporation;
provided, however, that any provision for the classification of Directors
of the Corporation for staggered terms pursuant to the provisions of
subsection (d) of Section 141 of the General Corporation Law of the State
of Delaware shall be set forth in an initial By-Law or in a By-Law adopted
by the stockholders entitled to vote of the Corporation unless provisions
for such classification shall be set forth in this Certificate of
Incorporation.
3. Whenever the Corporation shall be authorized to issue only one
class of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote at, any meeting of stockholders. Whenever
the Corporation shall be authorized to issue more than one class of stock
no outstanding share of any class of stock which is denied voting power
under the provisions of the Certificate of Incorporation shall entitle the
holder thereof to the right to vote at any meeting of stockholders except
as the provisions of paragraph (c)(2) of Section 242 of the General
Corporation Law of the State of Delaware shall otherwise require; provided,
that no share of any such class which is otherwise denied voting power
shall entitle the holder thereof to vote upon the increase or decrease in
the number of authorized shares of said class.
NINTH: The Corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of the State of Delaware, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have power
to indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any By-Law, agreement,
vote of stockholders or disinterested Directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
TENTH: From time to time any of the provisions of this Certificate of
Incorporation may be amended, altered or repealed, and other provisions
authorized by the Laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the Corporation by this
Certificate of Incorporation are granted subject to the provisions of this
Article TENTH.
ELEVENTH: No Director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the
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<PAGE> 20
Director's duty of loyalty to the Corporation or its stockholders; (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) for the payment of unlawful dividends or
unlawful stock repurchases or redemptions under Section 174 of the Delaware
General Corporation Law; or (iv) for any transaction from which the Director
derived an improper personal benefit.
TWELFTH: The effective date of the Certificate of Incorporation of the
Corporation, and the date upon which the existence of the Corporation shall
commence, shall be its date of filing.
Signed: New York, New York
February , 1997
--------------------------------------
Ruedi G. Laupper, Incorporator
3
<PAGE> 21
AGREEMENT AND PLAN OF MERGER
OF
SWISSRAY INTERNATIONAL, INC. (A NEW YORK CORPORATION)
AND
SWISSRAY INTERNATIONAL, INC. (A DELAWARE CORPORATION)
AGREEMENT AND PLAN OF MERGER, dated as of January , 1997, by and between
SWISSRAY International, Inc. a New York corporation ("SRMI"), and SWISSRAY
International, Inc., a Delaware corporation ("Surviving Corporation").
WITNESSETH:
SRMI is a corporation duly organized and existing under the laws of the
State of New York.
Surviving Corporation is a corporation duly organized and existing under
the laws of the State of Delaware.
The authorized number of shares of SRMI is 15,000,000 shares of Common
Stock, $.01 par value.
The authorized number of shares of Surviving Corporation is 30,000,000
shares of Common Stock, $.0001 par value.
The Boards of Directors of SRMI and Surviving Corporation deem it advisable
for the mutual benefit of SRMI and Surviving Corporation, and their respective
shareholders, that SRMI be merged with and into Surviving Corporation and have
approved this Agreement and Plan of Merger (the "Agreement").
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, agreements and provisions hereinafter contained, the parties hereto
agree that, in accordance with the applicable laws of the States of New York and
Delaware, SRMI shall be, at the Effective Date of the Merger (as hereinafter
defined), merged with and into Surviving Corporation, which shall be the
surviving corporation, and that the terms and conditions of such merger and the
mode of carrying it into effect shall be as follows:
ARTICLE I
MERGER
1.1 On the Effective Date of the Merger, SRMI shall be merged with and into
Surviving Corporation. The separate existence of SRMI shall cease and Surviving
Corporation shall continue in existence and, without other transfer, succeed to
and posses all the properties, rights, privileges, immunities, powers, purposes
and franchises, of a public, as well as of a private nature, and shall be
subject to all of the obligations, liabilities, restrictions, disabilities and
duties of SRMI and Surviving Corporation, all without further act or deed, as
provided in Section 259 of the Delaware General Corporation Law.
1.2 All rights of creditors and all liens upon the property of either SRMI
or Surviving Corporation shall be preserved unimpaired by the Merger, and all
debts, liabilities, obligations and duties, including, but not limited to, the
obligations of SRMI pursuant to any existing guarantees, leases, stock options
or other contracts or agreements, of either SRMI or Surviving Corporation shall,
on the Effective Date of the Merger, become the responsibility and liability of
Surviving Corporation, and may be enforced against it to the same extent as if
said debts, liabilities, obligations and duties had been incurred or contracted
by it. All corporate acts, plans (including but not limited to stock option
plans), policies, arrangements, approvals and authorizations of SRMI, its
shareholders, board of directors, officers and agents, which were valid and
effective immediately prior to the Effective Date of the Merger, shall be taken
for all purposes as the acts, plans, policies, arrangements, approvals and
authorizes of Surviving Corporation and shall be as effective and binding
thereon as the same were with respect to SRMI.
1.3 Prior to the Effective Date of the Merger, SRMI and Surviving
Corporation shall taken all such action as shall be necessary or appropriate in
order to effectuate the Merger. In case at any time after the
1
<PAGE> 22
Effective Date of the Merger Surviving Corporation shall determine that any
further conveyance, assignment or other documents or any further actions
necessary or desirable to vest in or confirm to Surviving Corporation full title
to all the properties, assets, rights, privileges and franchises of SRMI, the
officers and directors of SRMI, at the expense of Surviving Corporation, shall
execute and deliver all such instruments and take all such action as Surviving
Corporation may determine to be necessary or desirable in order to vest in and
confirm to Surviving Corporation title to and possession of all such properties,
assets, rights, privileges and franchises, and otherwise to carry out the
purposes of this Agreement.
ARTICLE II
TERMS AND CONDITIONS OF THE MERGER
The terms and conditions of the Merger, including the manner and basis of
converting the shares of capital stock of SRMI into shares of capital stock of
Surviving Corporation shall be as follows:
2.1 Certificate of Incorporation. From and after the Effective Date of the
Merger and until thereafter amended as provided by law, the Certificate of
Incorporation of Surviving Corporation in effect on the date hereof, as set
forth in Exhibit A shall be the Certificate of Incorporation of Surviving
Corporation.
2.2 By-laws. The By-laws of SRMI and/or Surviving Corporation, as the case
may be, in effect on the Effective Date of the Merger shall continue in force
and be the By-laws of Surviving Corporation until altered, amended or repealed.
2.3 Directors and Officers. The directors and officers of SRMI in office
on the Effective Date of the Merger shall continue in office as, and be an
constitute, the directors and officers of Surviving Corporation, each to hold
office as provided by the By-laws until his successor shall have been elected
and shall have qualified or until his earlier death, resignation or removal.
2.4 Conversion of Outstanding Shares, Rights and Options. The manner and
basis of converting the shares, rights and options to purchase shares of SRMI
into shares, rights and options to purchase shares of Surviving Corporation, and
the cancellation and retirement of shares of Surviving Corporation, shall be as
follows:
2.4.1 Each share of Common Stock, par value $.01 per share, of SRMI issued
and outstanding, or held in the treasury of SRMI, on the Effective Date of the
Merger shall forthwith and without the surrender of stock certificates or any
other action, be converted into the fully-paid and non-assessable share of
Common Stock, par value $.0001 per share, of Surviving Corporation, issued and
outstanding or held in the treasury of Surviving Corporation, as the case may
be.
2.4.2 Each option or right to purchase shares of Common Stock, par value
$.01 per share, of SRMI which has been granted pursuant to any stock option plan
or financing of any nature of SRMI or otherwise, on the Effective Date of the
Merger shall forthwith and without any action by the holder of such option or
right, be converted into an option to purchase the same number of shares of
Common Stock, par value $.0001 per share, of Surviving Corporation on the same
terms and with the same exercise price as such options contained immediately
prior to the Effective Date of the Merger.
2.5 Dividends. The holders of shares of Common Stock of SRMI shall be
entitled to receive from Surviving Corporation (i) those dividends, if any,
which were declared by the Board of Directors of SRMI prior to, but not yet
paid, as of the Effective Date of the Merger and (ii) those dividends which may
be declared by the Board of Directors of Surviving Corporation subsequent to the
Effective Date of the Merger pursuant to the Certificate of Incorporation of
Surviving Corporation, and no holder of shares of Common Stock of SRMI shall be
entitled to any other dividends which might otherwise accrue on or prior to the
Effective Date of the Merger.
2
<PAGE> 23
ARTICLE III
PROCEDURES REGARDING STOCK CERTIFICATES
From and after the Effective Date, each outstanding stock certificate
theretofore representing shares of Common Stock of SRMI shall represent the same
number of shares of Common Stock of Surviving Corporation. Each holder of a
certificate or certificates theretofore representing shares of Common Stock of
SRMI may, but shall not be required to, surrender the same to Surviving
Corporation for cancellation and exchange or transfer, and each share such
holder or his transferee shall be entitled to receive certificates representing
one share of the Common Stock of Surviving Corporation for each of Common Stock
of SRMI represented by the certificates surrendered. Until so surrendered for
cancellation and exchange or transfer each outstanding certificate which, prior
to the Effective Time, represented shares of Common Stock of SRMI, shall be
deemed and treated for all purposes to represent the ownership of the same
number of shares of the Common Stock of Surviving Corporation as though such
surrender had taken place.
ARTICLE IV
EFFECTIVE DATE
This Agreement shall be submitted to the stockholder of Surviving
Corporation and the shareholders of SRMI at meetings which shall be convened on
or prior to March 7, 1997, or such other dates as may be agreed on by the
parties, as provided by the applicable laws of the States of New York and
Delaware. If this Agreement is duly authorized and adopted by the requisite
votes of the holder of Common Stock of Surviving Corporation and holders of
Common Stock of SRMI and this Agreement is not terminated pursuant to the
provisions of Article V hereof, then a certificate of merger shall be filed in
accordance with the laws of the State of Delaware and a certificate of merger
shall be filed in accordance with the laws of the State of New York. The Merger
shall become effective upon the filing of the certificates of merger with the
Secretaries of State of the States of New York and Delaware (the "Effective Date
of the Merger").
ARTICLE V
APPROVAL OF SHAREHOLDERS -- TERMINATION
5.1 This Agreement shall be submitted to the shareholders of SRMI and the
stockholder of Surviving Corporation as provided by law, and it shall take
effect and be deemed and be taken to be the Agreement and Plan of Merger of SRMI
and Surviving Corporation upon the approval or adoption thereof by the
shareholders of SRMI and the stockholder of Surviving Corporation, in accordance
with the requirements of the laws of the State of New York and the State of
Delaware, and upon the execution, filing and recording of such documents and the
doing of such other acts and things as shall be required for accomplishing the
merger under the provisions of the applicable statutes of the State of New York
and of the State of Delaware.
5.2 At any time prior to the filing of the certificates of merger with the
Secretaries of State of the States of Delaware and New York, this Agreement may
be terminated by the board of directors of either SRMI or Surviving Corporation,
notwithstanding the approval of this Agreement by either or both of the
shareholders of SRMI and the stockholder of Surviving Corporation, if for any
reason the board of directors of SRMI or Surviving Corporation determines that
it is inadvisable to proceed with the Merger, including, without limitation,
giving consideration to the number of shares for which appraisal rights have
been exercised and the cost to SRMI thereof.
5.3 In the event of the termination and abandonment of this Agreement
pursuant to the provisions of Section 5.2, this Agreement shall become null and
void and have no effect, without any liability on the part of either SRMI or
Surviving Corporation or any of their respective shareholders, stockholders,
directors or officers.
3
<PAGE> 24
ARTICLE VI
CERTAIN AGREEMENTS OF SURVIVING CORPORATION
6.1 Surviving Corporation, as the surviving corporation, hereby agrees that
it may be served with process in the State of New York in any proceeding for the
enforcement of any liability or obligation of SRMI or of the rights of
dissenting shareholder of SRMI.
6.2 Surviving Corporation, as the surviving corporation, hereby irrevocably
appoints the Secretary of the State of New York as its agent to accept service
of process in any action or proceeding described in Section 6.1.
6.3 Surviving Corporation, as the surviving corporation, hereby agrees that
it will promptly pay to dissenting shareholders, if any, of SRMI the amount, if
any, to which such dissenting shareholders shall be entitled pursuant to the
laws of the State of New York.
ARTICLE VII
MISCELLANEOUS
7.1 This Agreement may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.
7.2 The headings of the several articles herein have been inserted for
convenience of reference only and are not intended to be a part or to affect the
meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, each of SRMI and Surviving Corporation, pursuant to
authority duly given by resolutions adopted by its Board of Directors has caused
these presents to be executed in its name by its President or a Vice-President
and its corporate seal to be affixed and attested by its Secretary or an
Assistant Secretary.
(Corporate Seal) SWISSRAY INTERNATIONAL, INC.
(New York)
Attest:
By:
- ------------------------------------
Josef Laupper, Secretary
(Corporate Seal) SWISSRAY INTERNATIONAL, INC.
(Delaware)
Attest:
By:
- ------------------------------------
Josef Laupper, Secretary
4
<PAGE> 25
SWISSRAY INTERNATIONAL, INC.
------------------------
1996
ANNUAL REPORT
TO
SHAREHOLDERS
------------------------
<PAGE> 26
[SWISSRAY INTERNATIONAL INC. LOGO]
January 31, 1997
Dear Shareholders:
The changing climate in the health care industry has had a great impact on
Swissray's business strategy. Future success is contingent on innovative
marketing, a flexible approach and taking into account of relevant market
parameters. We have geared our strategic approach accordingly. In the past
financial years the Swissray Group has acquired additional equity capital
amounting to US$7.25 million as a result of various injections of new funds.
These funds were used for developing our products (AddOn-Bucky and the
associated SwissVision imaging processing system as well as conventional x-ray
units), investments and strengthening our sales network. These projects produce
innovations with considerable market potential in these sectors.
By concluding cooperation agreements with reputable manufacturers, we have
ensured optimal use of our capacity in the conventional x-ray sector for the
next four years. We intend to increasingly pursue this strategy of forming
strategic alliances with major customers in the future.
By becoming more competitive in all the fields of radiology, we have
anticipated considerable internal growth already in the coming financial year.
These strategic and timely actions are intended to turn Swissray into a
formidable group of companies in the foreseeable future.
We have intensified our sales efforts in all our target markets. In the
USA, we have started to open up the market through an initial acquisition and
will pursue the expansion of the American market in the coming financial year.
Thanks to our product range, we possess innovative and competitive x-ray
products in a technologically highly sophisticated market. Our constant
endeavors to invest in new markets and innovative products form the basis for a
successful long-term future.
Ueli Ernst
/s/ UELI ERNST
---------------------------------
Chairman, Swissray International, Inc.
<PAGE> 27
[SWISSRAY INTERNATIONAL INC. LOGO]
January 31, 1997
SWISSRAY, A GENUINE ALTERNATIVE:
The health care industry is undergoing fundamental changes worldwide. Even
one of the most important sectors -- medicine -- cannot escape from the
consequences of the strained economic situation, which is leaving its mark.
Cost-cutting measures are being introduced in an attempt to balance the economic
and social objectives of the health care sector. Nevertheless, demand for
innovative and low-cost equipment from the manufacturers and suppliers persists.
In order to meet these global requirements, companies must research and
make use of new technologies which respond to the needs of the market.
Telecommunications, for example, offer new opportunities for the health care
sector. The continuous exchange of data via electronic networks has become
common place in modern medicine. Health care has been inexorably drawn into the
growth of the information society. For radiology, the use of digital imaging
reveals opportunities that will revolutionize radiological diagnosis.
With the development of the digital AddOn-Bucky and the associated
SwissVision image processing system Swissray has succeeded in producing a global
innovation. This system is the first diagnostic x-ray imaging acquisition
technology which allows the direct digitalization of x-ray information without a
need for cassettes. This product was created in cooperation with three
international corporations. The development took longer than we first expected.
However, we are pleased to be able to supply the first units in spring 1997.
Swissray products in conventional radiology have always been characterized
by innovation and a high technical standard. This was also true in the past
year. Thanks to our consistently excellent performance, we were able to conclude
a cooperation agreement for a period of several years with the international
corporation Philips Medical Systems. This offers extremely promising strategies
in development, production and worldwide distribution. With this OEM contract,
Swissray has secured the manufacture of 1350 conventional x-ray units for the
next four years. We were also able to sign a CHF 8 million contract with the
Federal Foreign Trade Office involving the support of Federal development
programs.
Warm thanks are due to our staff, who support Swissray's philosophy by
their high motivation and commitment. Jointly, we will successfully pursue our
dynamic and innovative approach. I would also like to thank our customers and
business partners, whose loyalty and trust are the groundwork for our success.
Ruedi G. Laupper
/s/ RUEDI G. LAUPPER
------------------------------
President, Swissray International,
Inc.
<PAGE> 28
SELECTED FINANCIAL DATA
The selected financial information set forth below is derived from the
Company's certified consolidated financial statements included in its annual
report on Form 10-KSB. The information set forth below should be read in
conjunction with such financial statements and notes thereto.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER 31,
JUNE 30, 1996 JUNE 30, 1995 1994
------------- ------------- ------------
<S> <C> <C> <C>
Statement of Operations
Net Sales......................................... $ 10,899,222 $ 3,806,313 $8,617,604
Net Loss.......................................... $ (1,891,612) $ (3,406,145) $ (196,592)
Net Loss Per Share................................ $ (.15) $ (.13) $ (.03)
</TABLE>
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS
ENDED JUNE 30,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
Balance Sheet
Total Assets.................................................... $18,793,438 $13,027,356
Total Liabilities............................................... $ 8,138,182 $ 6,650,523
Working Capital................................................. $ 3,432,732 $ 1,185,148
Accumulated Deficit............................................. $(7,918,948) $(6,027,336)
Total Stockholders' Equity...................................... $10,655,256 $ 6,376,833
</TABLE>
DIRECTORS AND OFFICERS
Ulrich Ernst, Chairman of the Board
Ruedi G. Laupper, President and Director
Josef Laupper, Secretary-Treasurer and Director
Dr. Erwin Zimmerli, Director
1
<PAGE> 29
MARKET INFORMATION
The Company's common stock is listed on the Nasdaq SmallCap Market and its
securities are traded under the symbol SRMI. The following table sets forth, for
the periods indicated, the range of high and low bid prices on the dates
indicated for the Company's common stock for each full quarterly period within
the two most recent fiscal years and any subsequent interim period for which
financial statements are included and/or required to be included.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30, QUARTERLY COMMON
1995 STOCK PRICE
BY QUARTER RANGES(1)
------------------------------ -------------------
QUARTER DATE HIGH LOW
------- ------------------ ------- -------
<S> <C> <C> <C> <C>
1st September 30, 1994............................................ $1.50 $1.00
2nd December 31, 1994............................................. $2.00 $1.0625
3rd March 31, 1995................................................ $1.00 $ .625
4th June 30, 1995................................................. $6.50 $1.00
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30, QUARTERLY COMMON
1996 STOCK PRICE
BY QUARTER RANGES(1)
------------------------------ -------------------
QUARTER DATE HIGH LOW
------- ------------------ ------- -------
<S> <C> <C> <C> <C>
1st September 30, 1995............................................ $6.8125 $6.00
2nd December 31, 1995............................................. $7.875 $5.50
3rd March 31, 1996................................................ $7.25 $4.4375
4th June 30, 1996................................................. $6.50 $5.25
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30, QUARTERLY COMMON
1997 STOCK PRICE
BY QUARTER RANGES(1)
------------------------------ -------------------
QUARTER DATE HIGH LOW
------- ------------------ ------- -------
<S> <C> <C> <C> <C>
1st September 30, 1996............................................ $5.0625 $3.6875
</TABLE>
- ---------------
(1) The Company's common stock was assigned the symbol SRMI on the Electronic
Bulletin Board maintained by Nasdaq on June 13, 1995 and subsequently began
trading on the Nasdaq SmallCap market on March 20, 1996 with an opening bid
of $4.75. The following statement specifically refers to Company common
stock activity, if any, prior to March 20, 1996. The existence of limited or
sporadic quotations should not of itself be deemed to constitute an
"established public trading market". To the extent that limited trading in
the Company's Common Stock has taken place, such transactions have been
limited to the over-the-counter market except as otherwise indicated herein.
Until March 20, 1996, all prices indicated herein are as reported to the
Company by broker-dealer(s) making a market in its securities in the
National Quotation Data Service ("pink sheets") and in the Electronic
Over-the-Counter Bulletin Board. Through such date the aforesaid securities
were not traded or quoted on any automated quotation system other than as
indicated herein. The over-the-counter market quotes indicated above (as
well as other quotes indicated above) reflect inter-dealer prices, without
retail mark-up, mark-down or commission, and may not necessarily represent
actual transactions.
As of January 17, 1997 the approximate number of shareholders of the
Company's common stock was 770.
DIVIDENDS
The payment by the Company of dividends, if any, in the future rests within
the discretion of its Board of Directors and will depend, among other things,
upon the Company's earnings, its capital requirements and its financial
condition, as well as other relevant factors. The Company has not paid or
declared any dividends upon its Common Stock since its inception and, by reason
of its present financial status and its contemplated financial requirements,
does not contemplate or anticipate paying any dividends upon its Common Stock in
the foreseeable future.
2
<PAGE> 30
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
consolidated financial statements for all periods presented take into account
SWISSRAY International, Inc. -- the Parent -- (from June 6, 1995 through June
30, 1996), 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 during the fiscal year ended June 30, 1996 and the 18 month period
ended June 30, 1995 (with respect to the Company's consolidated balance sheets)
and such comparative periods as are practicable based upon information appearing
in the Company's consolidated statements of operations and related financial
statements and/or notes thereto and should be read in conjunction with such
consolidated financial statements and notes thereto included in its report.
The Company changed its year end from calendar year ended December 31 to
fiscal year ended June 30 and June 30, 1996 represents the first instance when
such fiscal year has been utilized. Accordingly, the consolidated statements of
operations do not contain comparative information for fiscal year ended June 30,
1996 with the 12 month period ended June 30, 1995.
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 hereinafter indicated, the Company has
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.
Consolidated Statements of Operations
Net sales for the fiscal year ended June 30, 1996 were $10,899,222 while
costs of sales amounted to $5,793,306 resulting in a gross profit of $5,105,916
(i.e. approximating 47% of net sales). Operating expenses totalled $8,591,679
with the two principal expenses of salaries (exclusive of officers and directors
compensation) and research and development accounting for approximately 21% and
20% of such operating expenses. Accordingly, an aggregate of $3,561,037 (41%) of
all operating expenses are attributed to these two principal operating expense
items. Primarily as a result of the above (and after taking into account certain
other income, losses from continuing operations and after giving effect to
certain extraordinary items the Company incurred a net loss for fiscal year
ended June 30, 1996 of $(1,891,612); an amount fairly comparable to the amount
spent on the research and development operating expenses heretofore referred to.
While there are no comparative results in the consolidated statements of
operations for the 12 month period ended June 30, 1995 (due to change in Company
year end) the aforesaid research and development expense of $1,731,502 is
$1,394,743 more than the aggregate of $336,759 spent during the preceding 18
month period (i.e. January 1, 1994 to June 30, 1995) on research and
development. The in excess of 400% increase in research and development expense
during fiscal year ended June 30, 1996 as compared to the preceding 18 month
period may be primarily attributable to the Company's on-going efforts to
further develop and improve upon the qualities of its SwissVision and Add-on
Bucky and related computer programs and peripherals.
3
<PAGE> 31
Consolidated Balance Sheets
Total Assets of the Company at periods ended June 30, 1996 and June 30,
1995 were $18,793,438 and $13,027,356 respectively; an increase of $5,766,082.
Total Current Assets increased by $4,440,278 (as a result of increases in (a)
cash and cash equivalents of $575,859, (b) various accounts receivables of
$504,862, (c) notes receivable of $962,500, (d) inventories of $1,420,393 and
(e) prepaid expenses of $976,664) while property and equipment increased by
$790,583 and Other Assets increased by $535,221 (principally as a result of an
increase in long-term accounts receivable of $1,038,693 which more than offset
decreases of (a) $175,646 in due from stockholders, officers and affiliates and
(b) $372,493 in Licensing Agreement.
Total Current Liabilities of the Company at periods ended June 30, 1996 and
June 30, 1995 respectively were $8,138,182 and $5,945,488 respectively; an
increase of $2,192,694 which increase is attributable to increases in (a)
accounts payable of $1,514,465, (b) accrued expenses of $855,041, (c) current
maturities of long-term debt of $424,031, (d) customer deposits of $38,874 and
(e) accounts payable -- affiliates of $1,541 offset by decreases in notes
payable-banks and loan payable -- aggregating $641,258.
At June 30, 1996 there were no long term liabilities as the long term
liabilities of the preceding 12 months which then amounted to $705,035 were
either repaid (as to $281,004) or are now listed under current liabilities (as
to the balance of $511,101) as current maturities of long term debt.
Working capital at June 30, 1996 was $3,432,732 as compared to working
capital of $1,185,148 at June 30, 1995; an increase of $2,247,584 (primarily for
the reasons indicated herein).
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. The cumulative foreign currency translation adjustment (loss) to
stockholders' equity has increased from $(436,180) at June 30, 1995 to
$(836,047) at June 30, 1996.
Financing
Raising of capital required to finance the proposed growth out of cash flow
over an approximate 5 year period has been accomplished during fiscal year ended
June 30, 1996 through (a) sale and issuance of 1,100,000 shares of Company
common stock for an aggregate cash consideration of $5,200,000 and (b) receipt
of $2,050,000 as a result of options exercised for the purchase of 1,050,000
shares of Company common stock.
The Company maintains a line of credit with a leading Swiss financial
institution for $798,100 in excess of cash balances on deposit, which cash
balances amounted to $1,596,200 as of June 30, 1996.
From time to time certain Company stockholders, officers and/or affiliates
have received sums of money from the Company as unsecured advances. The balance
due to the Company, as at June 30, 1996 was $204,090 as compared to $379,736 as
of June 30, 1995.
When considering the fact that working capital as of June 30, 1996 amounted
to $3,432,732 management of the Company does not envision any immediately
foreseeable material liquidity and/or capital resource problems. Management does
not anticipate any significant long term liquidity needs and anticipates being
able to finance long term operations through income derived from sale of its new
(Add-on Bucky and related SwissVision) products. However, if an unforeseen need
arises, management contemplates being able to satisfy same through an as yet
undetermined combination of debt and/or equity financing and/or bank loans.
Recent Developments, Backlog and Projections
An installation of the Company's Add-on Bucky was effectuated in April-May
1996 in the Radiology Department of a hospital located in Langenthal,
Switzerland. As a result of such successful installation, management anticipates
additional installations will be made in the near future at comparable
facilities and other reference sites in different countries. Management expects
to receive significant orders for Add-on
4
<PAGE> 32
Bucky and SwissVision in the coming month(s) and further expects to be able to
commence significant deliveries in the last quarter of this year. It is expected
that these anticipated deliveries will result in substantially increased
revenues and a corresponding increase in profit margins.
Management believes that at the present time there is no significant
competition for the Company's Add-on Bucky within its designated market segment.
At the recent Radiological Society of North American show, only one other firm
was exhibiting a product for filmless digitalization of a x-ray image but did
not expect to commence marketing prior to 1998/99, thereby leaving the Company
with an approximate two year market lead advantage. Management expects that the
technological developments incorporated in its Add-on Bucky will enable the
Company to eventually become a leading supplier of both conventional and digital
x-ray systems for hospitals, small and medium sized radiology centers and/or
individual doctors and accordingly made a major expenditure of in excess of
$1,700,000 (approximately 20% of all operating costs for fiscal year ended June
30, 1996) towards future research and development in this and related areas.
Management is currently evaluating certain potential strategic
relationships within the U.S. with certain multinational companies who have
expressed an interest in the Company's digital imaging systems. 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 exist. At the same time, and throughout Europe and Asia,
the Company intends to continue to develop its relationships within its own
marketing network and with additional OEM Partners.
The Company has recently (primarily during the fourth quarter of its fiscal
year ended June 30, 1996) increased its staff in the areas of project
management, research and development and in the assembly production center in
order to comply with projected increased production output requirements.
Correspondingly, its sales organization has been enlarged with additional
offices and sales staff in place in Europe, with further expansion planned for
the U.S. during fiscal year ended June 30, 1997.
Sales continue to grow with orders from the Swiss Government for Eastern
European countries and the continued existence and expansion upon the Phillips
contract with revenues estimated at $40,000,000 over the next four years. Order
backlog (by the end of June 1996) is in excess of $25,000,000 for conventional
X-ray equipment and approximately $30,000,000 for the digital Add-on Bucky and
related paraphernalia. Management anticipates the need for lead time of
approximately 12 to 18 months in order to comply with and fulfill these orders.
As a result of significant research and development expenditures, new products
are being successfully developed for marketing. Once such product is the
floating table with tomographic picture acquiring technique. Other products
expected to be marketed are intended to incorporate innovative solutions in
order to simplify and make conventional X-ray technology more efficient. These
developments were made possible due to a strong research and development
department and the expenditures incurred therein as well as in cooperation with
OEM partners like Phillips.
The Company has incurred delay in the production of the Add-on Bucky due to
the need to optimize all components of this high technology picture acquiring
device reflecting the limits of current feasible technological possibilities in
the field of chips, camera and optics. A high resolution has now been reached of
2048 x 1750 pixels and is very well qualified to do high resolutions exams.
Company products have received endorsements from hospitals, doctors and the
press and the Add-on Bucky has received the European approvals indicating that
it has met the technical requirements of the EEC countries. It is expected that
the revenues from the Add-on Bucky will be generated initially in Europe and
hopefully in the U.S. once FDA approval is received.
Production of the Add-on Bucky has commenced and management expects to be
in a position to deliver products within the next three months with the
expectation that such delivery will result in significant revenues and the
requirements of increased production in order to meet anticipated demand for
such product(s).
5
<PAGE> 33
SWISSRAY INTERNATIONAL, INC. AND
SUBSIDIARIES
REPORT ON AUDIT OF CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
<PAGE> 34
LOGO
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Swissray International, Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of Swissray
International, Inc., and its subsidiaries, as of June 30, 1996 and 1995, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years ended June 30, 1996 and December 31, 1994 and the six months
ended June 30, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the 1996, 1995 and 1994 consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Swissray International, Inc., and its subsidiaries, at June 30, 1996
and 1995 and the results of their operations and their cash flows for the years
ended June 30, 1996 and December 31, 1994 and the six months ended June 30,
1995, in conformity with generally accepted accounting principles.
BEDERSON & COMPANY LLP
/s/ BEDERSON & COMPANY LLP
West Orange, New Jersey
September 20, 1996
F-1
<PAGE> 35
SWISSRAY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS
1996 1995
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents....................................... $ 3,252,685 $ 2,676,826
Accounts receivable, net of allowance for doubtful accounts of
$109,843 for 1996 and $73,137 for 1995....................... 3,335,679 2,840,212
Accounts receivable -- affiliates............................... 31,533 --
Accounts receivable -- other.................................... -- 22,138
Note receivable................................................. 962,500 --
Inventories..................................................... 2,912,836 1,492,443
Prepaid expenses and sundry receivables......................... 1,075,681 99,017
----------- -----------
TOTAL CURRENT ASSETS............................................ 11,570,914 7,130,636
----------- -----------
PROPERTY AND EQUIPMENT............................................ 1,138,282 347,699
----------- -----------
OTHER ASSETS:
Due from stockholders........................................... 17,414 154,114
Due from officers............................................... -- 4,354
Due from affiliates............................................. 186,676 221,268
Accounts receivable -- long-term, net of discount and allowance
for doubtful account of $300,000............................. 1,038,693 --
Licensing agreement, net of accumulated amortization of $372,493
for June 1996................................................ 4,594,082 4,966,575
Patents and trademarks, net of accumulated amortization of
$28,001 for June 1996........................................ 220,018 202,710
Organization cost, net of accumulated amortization of $978 for
June 1996.................................................... 7,407 --
Security deposits............................................... 19,952 --
----------- -----------
TOTAL OTHER ASSETS.............................................. 6,084,242 5,549,021
----------- -----------
TOTAL ASSETS...................................................... $18,793,438 $13,027,356
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt............................ $ 511,101 $ 87,070
Notes payable -- banks.......................................... 2,069,828 2,709,965
Loan payable.................................................... 156,254 157,375
Accounts payable................................................ 4,186,092 2,671,627
Accounts payable -- affiliates.................................. 1,541 --
Accrued expenses................................................ 1,135,693 280,652
Customer deposits............................................... 77,673 38,799
----------- -----------
TOTAL CURRENT LIABILITIES....................................... 8,138,182 5,945,488
----------- -----------
LONG-TERM DEBT, less current maturities........................... -- 705,035
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock.................................................... 141,851 120,351
Additional paid-in capital...................................... 19,268,400 12,719,998
Accumulated deficit............................................. (7,918,948) (6,027,336)
Cumulative foreign currency translation adjustment.............. (836,047) (436,180)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY...................................... 10,655,256 6,376,833
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................ $18,793,438 $13,027,356
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE> 36
SWISSRAY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER 31,
JUNE 30, 1996 JUNE 30, 1995 1994
------------- ------------- ------------
<S> <C> <C> <C>
NET SALES........................................... $ 10,899,222 $ 3,806,313 $8,617,604
COST OF SALES....................................... 5,793,306 2,484,253 5,362,698
----------- ----------- ----------
GROSS PROFIT........................................ 5,105,916 1,322,060 3,254,906
----------- ----------- ----------
OPERATING EXPENSES:
Officers and directors compensation............... 612,776 155,214 275,512
Salaries.......................................... 1,829,535 734,389 1,127,474
Selling........................................... 1,140,604 619,735 507,783
Research and development.......................... 1,731,502 233,084 103,675
General and administrative........................ 1,161,291 55,684 149,061
Other operating expenses.......................... 1,098,346 453,934 748,157
Bad debts......................................... 491,487 30,847 223,084
Depreciation and amortization..................... 526,138 24,344 40,523
----------- ----------- ----------
TOTAL OPERATING EXPENSES.......................... 8,591,679 2,307,231 3,175,269
----------- ----------- ----------
INCOME (LOSS) BEFORE OTHER INCOME (EXPENSES) AND
INCOME TAXES...................................... (3,485,763) (985,171) 79,637
OTHER INCOME (EXPENSES)............................. 810,003 (3,175,644) (252,117)
----------- ----------- ----------
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
AND EXTRAORDINARY ITEMS........................... (2,675,760) (4,160,815) (172,480)
INCOME TAX PROVISION (BENEFIT)...................... (364,648) (338,975) 24,112
----------- ----------- ----------
LOSS FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY
ITEMS............................................. (2,311,112) (3,821,840) (196,592)
EXTRAORDINARY ITEMS, net of income tax of
approximately $343,000 for 1996 and $340,000 for
1995.............................................. 419,500 415,695 --
----------- ----------- ----------
NET LOSS............................................ $ (1,891,612) $ (3,406,145) $ (196,592)
=========== =========== ==========
LOSS PER COMMON SHARE:
Loss from continuing operations................... $ (.18) $ (.18) $ (.03)
Extraordinary item................................ .03 .05 --
----------- ----------- ----------
NET LOSS.......................................... $ (.15) $ (.13) $ (.03)
=========== =========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING....... 12,926,722 8,017,242 7,850,064
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 37
SWISSRAY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
COMMON STOCK ADDITIONAL CURRENCY
--------------------- PAID-IN ACCUMULATED TRANSLATION
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT TOTAL
---------- -------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE -- January 1, 1994.......... 7,850,064 $ 78,501 $ 1,911,848 $(2,424,599) $ 4,893 $ (429,357)
For year ended December 31, 1994:
Foreign currency translation
adjustment...................... -- -- -- -- (172,550) (172,550)
Net loss for the year............. -- -- -- (196,592) -- (196,592)
---------- -------- ----------- ----------- --------- -----------
BALANCE -- December 31, 1994........ 7,850,064 78,501 1,911,848 (2,621,191) (167,657) (798,499)
For the six months ended June 30,
1995:
Issuance of common stock for
services........................ 1,525,000 15,250 3,034,750 -- -- 3,050,000
Issuance of common stock for
licensing agreement............. 660,000 6,600 3,793,400 -- -- 3,800,000
Issuance of common stock for
cash............................ 2,000,000 20,000 3,980,000 -- -- 4,000,000
Foreign currency translation
adjustment...................... -- -- -- -- (268,523) (268,523)
Net loss of the period............ -- -- -- (3,406,145) -- (3,406,145)
---------- -------- ----------- ----------- --------- -----------
BALANCE -- June 30, 1995............ 12,035,064 120,351 12,719,998 (6,027,336) (436,180) 6,376,833
Issuance of common stock for
cash............................ 1,100,000 11,000 5,189,000 -- -- 5,200,000
Stock options exercised for
cash............................ 1,050,000 10,500 2,039,500 -- -- 2,050,000
Foreign currency translation
adjustment...................... -- -- -- -- (399,867) (399,867)
Public offering expenses.......... -- -- (680,098) -- -- (680,098)
Net loss for the year............. -- -- -- (1,891,612) -- (1,891,612)
---------- -------- ----------- ----------- --------- -----------
BALANCE -- June 30, 1996............ 14,185,064 $141,851 $19,268,400 $(7,918,948) $(836,047) $10,655,256
========== ======== =========== =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 38
SWISSRAY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER 31,
JUNE 30, 1996 JUNE 30, 1995 1994
------------- ------------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(1,891,612) $(3,406,145) $ (196,592)
Adjustment to reconcile net loss to net cash from
operating activities:
Depreciation and amortization........................... 526,138 24,344 40,523
Provision for bad debts................................. 336,706 30,847 223,084
Gain on extinguishment of debt.......................... -- (755,695) --
Gain on sale of marketable securities................... (762,500) -- --
Foreign currency translation............................ 273,137 (129,282) (193,378)
Operating expenses through issuance of common stock..... -- 3,050,000 --
(Increase) decrease in operating assets:
Accounts receivable................................... (1,870,866) (2,199,013) 205,631
Accounts receivable -- affiliates..................... (31,533) -- --
Accounts receivable -- other.......................... 22,138 742,262 (628,316)
Inventories........................................... (1,420,393) (38,806) (206,536)
Prepaid expenses and sundry receivables............... (976,664) (40,533) 56,595
Increase(decrease) in operating liabilities:
Accounts payable...................................... 1,514,465 1,361,262 24,500
Accounts payable -- affiliates........................ 1,541 -- --
Accrued expenses...................................... 855,041 156,681 (54,376)
Customer deposits..................................... 38,874 38,799 --
----------- ----------- -----------
NET CASH USED BY OPERATING ACTIVITIES..................... (3,385,528) (1,165,279) (728,865)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment..................... (932,066) (80,714) (88,600)
Licensing agreement....................................... -- (885,571) --
Purchase of marketable securities......................... (200,000) -- --
Patents and trademarks.................................... (45,309) -- --
Organization cost......................................... (8,385) -- --
Investments in affiliates................................. -- -- 23,989
Security deposits......................................... (19,952) -- --
Repayments from affiliates................................ 34,592 4,906 32,604
----------- ----------- -----------
NET CASH USED BY INVESTING ACTIVITIES..................... (1,171,120) (961,379) (32,007)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowing........................ 2,069,828 2,730,898 2,728,093
Proceeds from long-term borrowing......................... -- 90,681 83,720
Principal payment of short-term borrowings................ (2,711,086) (1,950,393) (2,030,574)
Principal payments of long-term borrowing................. (281,004) -- --
Issuance of common stock for cash......................... 7,250,000 4,000,000 --
Repayment from (advances to) stockholder.................. 136,700 (16,522) (83,720)
Repayment from (advances to) officer...................... 4,354 (4,354) --
Public offering expenses.................................. (680,098) -- --
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES................. 5,788,694 4,850,310 697,519
----------- ----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH..................... (656,187) (139,241) 20,828
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH............................. 575,859 2,584,411 (42,525)
CASH AND CASH EQUIVALENTS -- beginning of period............ 2,676,826 92,415 134,940
----------- ----------- -----------
CASH AND CASH EQUIVALENTS -- end of period.................. $ 3,252,685 $ 2,676,826 $ 92,415
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 39
SWISSRAY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995 AND DECEMBER 31, 1994
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company was incorporated under the laws of the State of New York on
January 2, 1968 under the name "C.G.S. Units, Inc." On May 23, 1994, the Company
acquired 100% of the outstanding securities of Direct Marketing Services, Inc.,
a company incorporated in the State of Delaware on June 3, 1993. On June 6,
1994, the Company merged with Direct Marketing Services, Inc. and the surviving
corporation changed its' name to DMS Industries, Inc. DMS Industries, Inc. was
principally engaged in the promotion and sales of its proprietary brand of
cigarettes on a commission basis. In May of 1995 the Company discontinued its'
operations and changed its' name to Swissray International, Inc.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Swissray International, Inc. (Parent), and its' wholly owned subsidiaries SR
Medical AG and SR Finance AG (both Swiss corporations) and SR Medical AG's
wholly owned subsidiaries Teleray AG (a Swiss Corporation) and SR Medical GmbH
(a German corporation). All material intercompany transactions and balances have
been eliminated in consolidation.
Business Combination and Restatement
On June 6, 1995, Swissray International, Inc. exchanged 7,000,000 shares of
common stock for all of the outstanding shares of SR Medical AG. The merger
between Swissray International Inc. 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 consolidated financial statements for all periods presented
include the accounts of Swissray International, Inc. (from June 6, 1995 thru
June 30, 1996), SR Medical AG, Teleray AG, SR Medical GmbH and SR Finance AG.
The stockholders' equity of SR Medical AG has been retroactively restated for
the equivalent number of shares received in the merger.
SR Medical AG (a Swiss corporation) was organized in 1988 and develops,
assembles and markets diagnostic x-ray medical equipment.
Teleray AG (a Swiss corporation) was organized in 1994 and is engaged in
research and development activities related to diagnostic x-ray medical
equipment and accessories.
SR Medical GmbH (a German corporation) was organized in 1988 and is engaged
in sales and marketing of diagnostic x-ray medical equipment and accessories.
SR Finance AG (a Swiss corporation) was organized in December of 1995 as a
service oriented company serving only the other companies within the
consolidated group in the areas of consultation, bookkeeping, logistics, and
employment services.
Basis of Accounting
The Company maintains its records on the accrual basis of accounting.
Revenues are recognized when the products are delivered and expenses are
recorded when incurred.
Changes in Accounting Year
On July 7, 1995 the Board of Directors approved the changing of the
Company's accounting year from December 31 to a June 30 fiscal year end.
F-6
<PAGE> 40
SWISSRAY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995 AND DECEMBER 31, 1994 -- (CONTINUED)
Certain Significant Risk and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles require management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during this period.
Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Inventories
Inventories are stated at lower of cost or market, with cost being
determined on the first-in, first-out (FIFO) method. Inventory cost include
material, labor, and manufacturing overhead.
Property and Equipment
Property and equipment including significant betterments, are recorded at
cost. Upon retirement or disposal of properties, the cost and accumulated
depreciation are removed from the accounts, and any gain or loss is included in
income. Maintenance and repair costs are charged to expense as incurred.
Depreciation
Depreciation of property and equipment is provided for over the estimated
useful lives of the respective assets. Depreciation is recorded on the
straight-line method. The estimated useful lives of each asset category are as
follows:
<TABLE>
<CAPTION>
<S> <C>
Equipment........................................... 5-10
Office furniture and equipment...................... 5-10
Leasehold improvements.............................. 10
</TABLE>
Intangible Assets
Patents and trademarks are stated at cost less accumulated amortization
computed on the straight-line method over its estimated economic life of 10
years. Amortization commenced on July 1, 1995, therefore, no amortization
expense has been provided for the year ended December 31, 1994 and for the six
months ended June 30, 1995. Amortization expense, for patents and trade marks,
for the year ended June 30, 1996 was $28,001.
Licensing agreement is stated at fair value (cost less imputed interest)
net of accumulated amortization computed on the straight-line method over its
estimated economic life of 10 years. Amortization commenced on October 1, 1995
upon the initial sale of the Company's products within the defined territories
of the agreement. No amortization expense has been provided for the year ended
December 31, 1994 and the six months ended June 30, 1995. Amortization expense,
for licensing agreement, for the year ended June 30, 1996 was $372,493.
All cost incurred by the Company in connection with incorporation of
subsidiaries have been capitalized and are being amortized over a period of
sixty (60) months. Amortization expense, for organization cost, for the year
ended June 30, 1996 was $978 and for the six months ended June 30, 1995 and year
ended December 31, 1994 were $-0-.
F-7
<PAGE> 41
SWISSRAY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995 AND DECEMBER 31, 1994 -- (CONTINUED)
Research and Development
Cost associated with research, new product development, and product cost
improvements are treated as expenses when incurred. Research and development
costs expended for the year ended June 30, 1996, six months ended June 30, 1995,
and year ended December 31, 1994 were $1,731,502, $233,084 and $103,675,
respectively.
Expenses Related to Sales and Issuance of Securities
All costs incurred in connection with the sale of the Company's common
stock have been capitalized and charged to additional paid-in capital.
Net Loss Per Common Share
Loss per common share is computed by dividing the net loss by the weighted
average number of shares of common stock outstanding during the periods.
Foreign Currency Translation
Assets and liabilities of subsidiaries operating in foreign countries are
translated into U.S. dollars using the exchange rate in effect at the balance
sheet date. Results of operations are translated using the average exchange
rates prevailing throughout the year. The effects of exchange rate fluctuations
on translating foreign currency assets and liabilities into U.S. dollars are
included in stockholders' equity, while gains and losses resulting from foreign
currency transactions are included in operations.
NOTE 2 -- CONCENTRATION OF CREDIT RISK AND RISK ARISING FROM CASH DEPOSITS IN
EXCESS OF INSURED LIMITS
The Company sells its products to various customers primarily in Europe,
Asia and Africa. The Company performs ongoing credit evaluations on its
customers and generally does not require collateral. The Company maintains
reserves for potential credit losses and such losses have been within
management's expectations.
The Company maintains its cash balances with major Swiss financial
institutions. The cash balances at June 30, 1996 are not insured.
NOTE 3 -- DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company measures its financial assets and liabilities in accordance
with generally accepted accounting principles. For certain of the Company's
financial instruments, including cash and cash equivalents, trade and other
accounts receivable, notes receivable, accounts payable, accrued expenses, notes
and loans payable, the carrying amounts approximate fair value due to their
short term maturities. The amount shown for long-term receivables also
approximate fair value.
Investments in affiliated companies for which there is no quoted market
price are accounted for by the equity method resulting in no carrying value
which the Company considers a fair value.
NOTE 4 -- ACCOUNTS RECEIVABLE -- AFFILIATES
The Company has sold merchandise to affiliated sales companies in the
normal course of business. The amounts due to the Company at June 30, 1996 were
$31,533.
F-8
<PAGE> 42
SWISSRAY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995 AND DECEMBER 31, 1994 -- (CONTINUED)
NOTE 5 -- ACCOUNTS RECEIVABLE -- LONG-TERM
The Company sold merchandise to a customer in 1995 and in 1996 negotiated
payment terms over an extended period of time. The agreed upon terms require the
customer to pay the Company approximately $5,000 to $30,000 per month. The
balance at June 30, 1996 was $1,038,693 after applying a discount for imputed
interest and a provision for doubtful collection.
NOTE 6 -- NOTE RECEIVABLE
On June 20, 1996 the Company sold marketable securities for a 5% promissory
note in the amount of $962,500 due on October 20, 1996.
NOTE 7 -- DUE FROM AFFILIATES
The Company has made non-interest bearing advances to affiliated sales
companies as follows:
<TABLE>
<CAPTION>
JUNE 30,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Swissray Medical GmbH, Willich...... $ 186,676 $ 180,455
Teleray S.R.O. Brno................. -- 34,199
---------- ----------
$ 186,676 $ 214,654
========== ==========
</TABLE>
NOTE 8 -- INVENTORIES
Inventories are summarized by major classification as follows:
<TABLE>
<CAPTION>
JUNE 30,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Raw materials, parts and supplies... $1,854,322 $ 945,257
Work-in process..................... 853,657 130,605
Finished goods...................... 204,857 416,581
---------- ----------
$2,912,836 $1,492,443
========== ==========
</TABLE>
NOTE 9 -- PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
JUNE 30,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Equipment........................... $1,031,849 $ 140,407
Office furniture and equipment...... 121,404 145,840
Leasehold improvements.............. 219,024 153,964
---------- ----------
1,372,277 440,211
Less: Accumulated depreciation and
amortization...................... 233,995 92,512
---------- ----------
$1,138,282 $ 347,699
========== ==========
</TABLE>
Depreciation and amortization expense, for property and equipment, for the
years ended June 30, 1996, six months ended June 30, 1995 and year ended
December 31, 1994 were $103,176, $24,344 and $40,523, respectively.
F-9
<PAGE> 43
SWISSRAY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995 AND DECEMBER 31, 1994 -- (CONTINUED)
NOTE 10 -- DUE FROM STOCKHOLDER
The Company has made unsecured advances to its' President (a principal
stockholder) requiring interest only payments at 6% per annum. The balance at
June 30, 1996 and 1995 was $17,414 and $154,114, respectively. Interest charged
the stockholder for the year ended June 30, 1996, for the six months ended June
30, 1995 and for the year ended December 31, 1994 were $12,530, $2,312 and
$5,744, respectively.
NOTE 11 -- DUE FROM OFFICER
In June of 1995, the Company made an unsecured advance to an officer in the
amount of $4,354 requiring interest only payments at 6% per annum. The advance
was repaid in 1996.
NOTE 12 -- INVESTMENTS
The Company has made various investments which are recorded on the equity
method. These entities have operated at a loss in excess of equity, therefore,
the Company is carrying these investments as follows:
<TABLE>
<CAPTION>
OWNERSHIP COST AT CARRYING
% JUNE 30, 1996 VALUE
--------- ------------- --------
<S> <C> <C> <C>
Swissray SR Medical GmbH, Willich.................... 34% $16,892 $ --
Swissray Medical, s.r.o., Bratislaua................. 34% 6,757 --
Swissray Medical s.r.o., Brno........................ 34% 6,757 --
Teleray s.r.o., Willich.............................. 49% 28,362 --
Teleray s.r.o., Brno................................. 34% 6,757 --
Digitec GmbH, Neuss.................................. 20% 11,484 --
------- ---
Total.............................................. $77,009 $ --
======= ===
</TABLE>
NOTE 13 -- LICENSING AGREEMENT
The Company entered into a licensing agreement in June of 1995 with an
unaffiliated individual. The agreement is for an exclusive field-of-use license
within the United States and Canada to use the proprietary information,
including the patent rights, for certain technology regarding the integration of
computer technology with diagnostic x-ray and radiology medical equipment
through digital imaging systems. The agreement required a fee of $5,000,000
consisting of $1,200,000 in cash and 660,000 shares of the Company's common
stock. The cash payment requirement consisted of $900,000 upon the signing of
the agreement and the $300,000 balance due on December 31, 1996. The fee has
been discounted at 7.5% for imputed interest of $33,425 resulting in a net
capitalized cost of $4,966,575. This agreement is for an indefinite term or
until all of the proprietary information becomes public knowledge and the patent
rights expire.
NOTE 14 -- NOTES PAYABLE -- BANK
The Company has negotiated a line-of-credit agreement with the Union Bank
of Switzerland for $798,100, based on the exchange rate in effect on June 30,
1996, in excess of cash balances on deposit with the
F-10
<PAGE> 44
SWISSRAY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995 AND DECEMBER 31, 1994 -- (CONTINUED)
bank. The line-of-credit is secured by accounts receivable. Cash balances on
deposit at June 30, 1996 with the bank were $1,596,200.
Notes payable are summarized as follows:
<TABLE>
<CAPTION>
JUNE 30,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Union Bank of Switzerland, due on demand, with interest at
8% per annum, collateralized by accounts receivable..... $2,069,828 $1,711,255
Credit Suisse Bank, due on demand, with interest at 8% per
annum, collaterized by accounts receivable.............. -- 905,570
Cantonal Bank of Lucerne, due on demand, with interest at
8% per annum, collateralized by accounts receivable..... -- 93,140
---------- ----------
$2,069,828 $2,709,965
========== ==========
</TABLE>
NOTE 15 -- LOAN PAYABLE
The Company has negotiated a 5% demand loan from a private foundation fund.
The balance at June 30, 1996 and 1995 were $156,254 and $157,375, respectively.
NOTE 16 -- LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Note payable -- licensing agreement, due December 31, 1996,
bearing interest at 7 1/2% per annum. (See Note 13.)....... $ -- $281,004
Note payable -- Carba, AG, due July 1, 1996, requiring
interest only payments at 6% per annum with no current
amortization required...................................... 293,426 293,426
Note payable -- Carbamed-Ruegge Reduktion, due July 1, 1996,
requiring interest only payments at 6% per annum with no
current amortization required.............................. 130,605 130,605
Note payable -- Dr. Zeman-Wiegand Helga, due on demand,
requires interest only payments at 7% per annum with no
current amortization required.............................. 87,070 87,070
---------- ----------
511,101 792,105
Less: Current portion........................................ 511,101 87,070
---------- ----------
$ -- $705,035
========== ==========
</TABLE>
NOTE 17 -- COMMON STOCK
On June 6, 1994, the Company amended its certificate of incorporation to
change the number of authorized common shares from 50,000,000 to 15,000,000 of
$.01 par value common stock.
The Company's outstanding shares of common stock of $.01 par value at June
30, 1996 and 1995 were 14,185,064 and 12,035,064, respectively. The shares
include the retroactive effect given to the June 6, 1995 merger between Swissray
International, Inc. and SR Medical AG which was recorded as a recapitalization
of SR Medical AG.
F-11
<PAGE> 45
SWISSRAY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995 AND DECEMBER 31, 1994 -- (CONTINUED)
NOTE 18 -- ISSUANCE OF COMMON STOCK FOR CASH
The Company issued 2,000,000 shares of common stock for $4,000,000 during
the six month period ended June 30, 1995 and 2,150,000 shares for $7,250,000
(includes 1,050,000 shares for $2,050,000 issued under stock option plan) for
the year ended June 30, 1996.
NOTE 19 -- PENSION PLAN
The Company, mandated by government regulations, is required to contribute
approximately five (5%) percent of eligible, as defined, employees' salaries
into a government pension plan. The Company also contributes approximately five
(5%) percent of eligible employee salaries into a private pension plan. Total
contributions charged to operations for the year ended June 30, 1996, six months
ended June 30, 1995, and year ended December 31, 1994 were $198,722, $96,718 and
$194,837, respectively.
NOTE 20 -- OTHER INCOME (EXPENSES)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER 31,
JUNE 30, 1996 JUNE 30, 1995 1994
------------- ------------- ------------
<S> <C> <C> <C>
Licensing income........................... $ 482,138 $ -- $ --
Interest income............................ 131,166 -- --
Interest income -- stockholder and
officer.................................. 12,530 4,376 5,744
Foreign currency income.................... 377,587 16,158 10,948
Miscellaneous income....................... 512 4,544 320
Loss from investments...................... -- (16,909) (28,652)
Consulting fees -- related party........... -- (3,050,000) --
Interest expense........................... (193,930) (121,987) (237,013)
Miscellaneous expenses..................... -- (11,826) (3,464)
----------- ----------- -----------
TOTAL OTHER INCOME (EXPENSES).............. $ 810,003 $ (3,175,644) $ (252,117)
=========== =========== ===========
</TABLE>
NOTE 21 -- INCOME TAXES
The Company adopted Statement of Financial Accounting Standard 109
("SFAS"). SFAS 109 provides for an asset and liability approach to accounting
for income taxes that require the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
recognized in the Company's financial statements or tax returns.
In estimating future consequences, SFAS 109 generally considers all
expected future events other than proposed changes in the tax law or rates prior
to enactment.
The provisions for deferred taxes for the year ended June 30, 1996, six
months ended June 30, 1995, and year ended December 31, 1994 were $1,028,075,
$367,900 and $-0-, respectively, as a result of foreign net operating losses,
and have been fully offset by a valuation allowance for each period. The
valuation allowances have been established equal to the full amounts of the
deferred tax assets, as the Company is not assured that it more likely than not
that these benefits will be realized.
F-12
<PAGE> 46
SWISSRAY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995 AND DECEMBER 31, 1994 -- (CONTINUED)
A reconciliation between the statutory federal income tax rate (34%) and
the effective income tax rates based on continuing operations is as follows:
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER 31,
JUNE 30, 1996 JUNE 30, 1995 1994
------------- ------------- ------------
<S> <C> <C> <C>
Statutory federal income tax (benefit)..... $ (1,067,008) $ (1,414,600) $(58,600)
State income tax........................... -- -- --
Foreign income tax (benefit) in excess of
domestic rate............................ (325,715) (457,760) (18,973)
Benefit not recognized on operating loss... -- 1,165,485 101,685
Valuation allowance........................ 1,028,075 367,900 --
----------- ----------- ---------
$ (364,648) $ (338,975) $ 24,112
=========== =========== =========
</TABLE>
Foreign net operating loss carryforwards for the year ended June 30, 1996,
six months ended June 30, 1995, and year ended December 31, 1994 were
approximately $1,600,000, $3,400,000 and $-0-, respectively. Foreign net
operating losses carryforward indefinitely.
The income tax related to the extraordinary gain on extinguishment of debt
was approximately $340,000 for the six months ended June 30, 1995.
The income tax related to the extraordinary gain on sale of marketable
securities was approximately $343,000 for the year ended June 30, 1996.
NOTE 22 -- EXTRAORDINARY GAINS
During 1995, the Company extinguished, at a discount, a $1,659,497 note
obligation. The transaction resulted in an extraordinary gain of $415,695 ($.05
per share), net of income taxes of approximately $340,000.
In June of 1996, the Company sold marketable securities for $962,500, at a
cost of $200,000, resulting in an extraordinary gain of $419,500 ($.03 per
share), net of income taxes of approximately $343,000.
NOTE 23 -- SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for the year ended June 30, 1996, six months ended June 30,
1995, and year ended December 31, 1994 include interest of $193,930, $121,987
and $237,013, respectively, and income taxes of $-0-, $1,025 and $24,112,
respectively.
Non-cash operating activities consisted of issuance of common stock for
services for the six months ended June 30, 1995 in the amount of $3,050,000.
Non-cash investing and finance activities for the six months ended June 30,
1995 consisted of the acquisition of a licensing agreement for $4,966,575 for
$885,571 in cash, a note obligation for $281,004, and the issuance of common
stock for $3,800,000. Total cash paid was $885,571. For year ended June 30, 1996
the Company received a note receivable for $962,500 from the sale of marketable
securities. No cash was received.
NOTE 24 -- STOCK OPTIONS
The Board of Directors has adopted a non-statutory stock option plan and
reserved 3,000,000 shares for issuance to eligible full and part-time employees,
officers, directors and consultants. Options are non-transferrable and are
exercisable during a term of not more than ten (10) years from the grant date.
The options are issuable in such amounts and at such prices as determined by the
Board of Directors, except that
F-13
<PAGE> 47
SWISSRAY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995 AND DECEMBER 31, 1994 -- (CONTINUED)
each option price of each grant will not be less than twenty (20%) percent of
the fair market value of such shares on the date the options are granted.
The following table summarizes common stock options outstanding as of June
30, 1996.
<TABLE>
<CAPTION>
PRICE PER OPTIONS OPTIONS OPTIONS
DATE GRANTED SHARE GRANTED EXERCISED OUTSTANDING
--------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
September 20, 1995..................... $6.50 200,000 -- 200,000
June 8, 1996........................... 5.00 100,000 -- 100,000
March 11, 1996......................... 2.00 2,000,000 1,000,000 1,000,000
May 16, 1996........................... 4.75 35,000 -- 35,000
--------- --------- ---------
2,335,000 1,000,000 1,335,000
========= ========= =========
</TABLE>
On July 22, 1996, the Company granted 200,000 shares of the Company's
common stock under the 1996 non-statutory stock option plan with an exercise
price of $.73 per share.
NOTE 25 -- SIGNIFICANT CUSTOMER AND GEOGRAPHIC AREAS
The Company presently has no domestic operations and derives all of its'
revenues from its subsidiaries located in Switzerland and Germany. Domestic
(Switzerland and Germany) and export sales were as follows:
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER
JUNE 30, JUNE 30, 31,
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
Switzerland................................... $ 2,002,374 $1,980,606 $1,165,730
Germany....................................... 4,976,503 1,029,413 2,334,265
Other export sales............................ 3,920,345 796,294 5,117,609
----------- ---------- ----------
$10,899,222 $3,806,313 $8,617,604
=========== ========== ==========
</TABLE>
The following summarizes customers sales in excess of 10% or more of the
total revenues:
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER
JUNE 30, JUNE 30, 31,
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Three largest customers:
Sales........................................ $4,499,893 $1,938,937 $4,894,201
Percentage................................... 41% 51% 57%
Single largest customer:
Sales........................................ $1,603,631 $1,431,705 $3,232,206
Percentage................................... 15% 38% 38%
</TABLE>
The accounts receivable balance at June 30, 1996 from the three largest
customers amounted to approximately $1,650,000 representing approximately 48% of
total trade accounts receivable with the single largest customer balance of
approximately $1,500,000 representing approximately 44% of total trade
receivables. The accounts receivable balance at June 30, 1995 from the three
largest customers amounted to approximately $1,200,000 representing
approximately 44% of total trade accounts receivable with the single largest
customer balance of approximately $900,000 representing approximately 34% of
total trade accounts receivable.
F-14
<PAGE> 48
SWISSRAY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995 AND DECEMBER 31, 1994 -- (CONTINUED)
The following summarizes operating profit (losses) before provision for
income tax by geographic areas:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED YEAR ENDED
JUNE 30, JUNE 30, DECEMBER
1996 1995 31, 1994
----------- ----------- ----------
<S> <C> <C> <C>
Switzerland.................................. $(2,312,087) $(4,095,783) $ (295,805)
Germany...................................... (63,673) (65,032) 123,325
----------- ----------- ----------
$(2,375,760) $(4,160,815) $ (172,480)
=========== =========== ==========
</TABLE>
The following summarizes identifiable assets by geographic area:
<TABLE>
<CAPTION>
JUNE 30,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
Switzerland............................................... $18,369,530 $12,513,262
Germany................................................... 664,076 514,094
----------- -----------
$19,033,606 $13,027,356
=========== ===========
</TABLE>
NOTE 26 -- COMMITMENTS
The Company leases various facilities and vehicles under operating lease
agreements expiring through September 2002. The Company has excluded all vehicle
leases in the schedule below because they are deemed to be immaterial. The
facilities lease agreements provide for a base monthly payment of $15,884 per
month. Rent expense for the year ended June 30, 1996, six months ended June 30,
1995, and year ended December 31, 1994 were $242,658, $148,818 and $185,459,
respectively.
Future minimum annual lease payments, based on the exchange rate in effect
on June 30, 1996, under the facilities lease agreements are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
--------------------------------------------------
<S> <C>
1997.............................................. $190,611
1998.............................................. 190,611
1999.............................................. 178,759
2000.............................................. 143,204
2001.............................................. 129,065
Thereafter........................................ 143,658
</TABLE>
NOTE 27 -- LITIGATION
On or about July 7, 1995, the Company commenced litigation against a former
officer and director of a corporate predecessor alleging certain improprieties
on the part of such officer and seeking monetary compensation as a result
thereof. Such defendant responded (in September 1995) by filing certain
affirmative defenses and counterclaims against the Company and others and
subsequently brought (together with certain of his family members) an action
against the Company in the same court which action raised issues and claims
substantially similar to those raised in the aforesaid counterclaims. The two
actions were assigned to the same judge and the Company moved successfully to
dismiss both the counterclaims and the second action. Leave to replead both
claims were granted and amended counterclaims and an amended complaint were
served and filed and the Company again successfully moved to dismiss both
pleadings. Following the most recent dismissal, counsel for the Company and the
aforesaid former officer entered into settlement discussions which continue to
date and to date no new pleadings have been served. Owing to the above set of
facts
F-15
<PAGE> 49
SWISSRAY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995 AND DECEMBER 31, 1994 -- (CONTINUED)
regarding the current status of the litigation and further owing to the fact
that discovery proceedings have not even been scheduled as yet, it is virtually
impossible to determine, with any degree of certainty, the final outcome of this
litigation although the Company fully expects to prevail on all material aspects
of this law suit.
NOTE 28 -- RELATED PARTY TRANSACTIONS
The Company entered into agreements with Berkshire Capital Management Ltd.,
(Berkshire), a stockholder, whereby Berkshire would render consulting and
related services towards and in regards with the acquisition of SR Medical AG
and subsidiaries. Berkshire received 1,525,000 shares of the Company's
restricted common stock in full payment of service rendered in June of 1995
which were valued at $3,050,000 ($2 per share).
F-16
<PAGE> 50
SWISSRAY INTERNATIONAL, INC.
PROXY FOR 1996 ANNUAL MEETING
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
KNOW ALL MEN BY THESE PRESENTS that I (we), the undersigned Stockholder(s)
of SWISSRAY International, Inc. (the "Company"), do hereby nominate, constitute
and appoint Ruedi G. Laupper and Josef Laupper or either of them (with full
power to act alone), my true and lawful attorney(s) with full power of
substitution, for me and in my name, place and stead to vote all the Common
Stock of said Company, standing in my name on the books on the record date,
January 17, 1997, at the Annual Meeting of its Stockholders to be held at Hotel
Intercontinental located at 111 E. 48th Street, New York, New York, on March 7,
1997, at 4:30 p.m., local time, or at any postponement or adjournments thereof,
with all the powers the undersigned would possess if personally present.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTE AS DIRECTED BELOW. IN THE
ABSENCE OF ANY DIRECTION, THE SHARES REPRESENTED HEREBY WILL BE VOTED FOR THE
(A) ELECTION OF THE NOMINEES LISTED, (B) RATIFICATION OF THE APPOINTMENT OF THE
AUDITORS, (C) APPROVAL OF THE PROPOSAL TO REINCORPORATE THE COMPANY IN DELAWARE
AND (D) APPROVAL OF THE PROPOSAL TO INCREASE THE AUTHORIZED SHARES OF COMMON
STOCK OF THE COMPANY.
[ ] Please mark your votes in this example.
1. Election of Directors. Election of the five nominees, Ruedi G. Laupper, Josef
Laupper, Dr. Erwin Zimmerli, Ulrich Ernst and Ueli Laupper.
[ ] For All Nominees [ ] Withhold From All Nominees
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES. IF YOU DO NOT WISH
YOUR SHARES VOTED FOR A PARTICULAR NOMINEE, DRAW A LINE THROUGH THAT PERSON'S
NAME ABOVE.
2. Approval of the appointment of Bederson & Company LLP, as independent
auditors of the Company for the fiscal year ending June 30, 1997.
[ ] For [ ] Against [ ] Abstain
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL.
<PAGE> 51
3. Approval of the proposal to reincorporate the Company in Delaware.
[ ] For [ ] Against [ ] Abstain
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL.
4. Approval of the proposal to increase the authorized shares of Common Stock of
the Company from 15,000,000 shares to 30,000,000 shares.
[ ] For [ ] Against [ ] Abstain
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL.
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before such meeting or adjournment or
postponement thereof.
<TABLE>
<S> <C>
SIGNATURE(S)
-------------------------------
-------------------------------
DATE
-----------------------------------------
</TABLE>
NOTE: PLEASE SIGN EXACTLY AS THE NAME(S) APPEAR HEREON. JOINT OWNERS SHOULD
SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE, OR
GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
