As filed with the Securities and Exchange Commission on December 8, 1999
REGISTRATION NO. 333-59829
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SWISSRAY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
NEW YORK [3841] 16-0950197
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Number) Identification Number)
SWISSRAY INTERNATIONAL, INC.
320 WEST 77TH STREET, SUITE 1A
NEW YORK, NEW YORK 10024
UNITED STATES: (917) 441-7841
SWITZERLAND: 011-4141-914-1200
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
RUEDI G. LAUPPER,
CHAIRMAN OF THE BOARD AND PRESIDENT
SWISSRAY INTERNATIONAL, INC.
320 WEST 77TH STREET, SUITE 1A
NEW YORK, NEW YORK 10024
(917) 441-7841
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
GARY B. WOLFF, ESQ.
GARY B. WOLFF, P.C.
747 THIRD AVENUE
NEW YORK, NEW YORK 10017
(212) 644-6446
<PAGE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: At the
discretion of the converting shareholders after the effective date of the
Registration Statement.
* In accordance with Rule 429 of the General Rules and Regulations under
the Securities Act of 1933 this Registration Statement and the
Prospectus which is a part thereof relates, in part, and combines with
an earlier Registration Statement under Registration No. 333-50069
declared effective May 12, 1998.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box/X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE (4)
Proposed
Maximum Proposed
Amount to Offering Maximum
Title of Each Class of be Price Aggregate Amount of
Securities to be Registered Per Share Offering Registration
Registered (1) (2)(3) Price(1)(2) Fee
<S> <C> <C> <C> <C> <C>
Common Stock ($.01 par
value per share) 8,302,742 $6.3906 $53,059,503 $15,652.55(4)(5)
</TABLE>
(1) Includes (a) 2,837,462 shares for previously issued restrictive shares
pursuant to Convertible Debentures referred to under Registration Nos.
333-50069 and 333-59829, (b) 3,048,339 shares (inclusive of 315,833
shares as may be issued for interest earned) which are reserved for
issuance pursuant to currently issued and outstanding Convertible
Debentures which will be offered for resale by certain Selling Holders
under this Registration Statement, (c) 2.000,000 shares being
registered pursuant to certain "piggy-back" registration rights granted
to otherwise unaffiliated purchasers pursuant to terms of subscription
agreements and registration rights agreements (see Part II, Item 15
"Recent Sales of Unregistered Securities"), (d) 85,077 shares being
registered pursuant to certain "piggy-back" registration rights granted
to an otherwise unaffiliated lender pursuant to terms of a promissory
note (see "Description of Capital Stock - Promissory Note"), (e)
250,000 shares being registered which
<PAGE>
underlie certain outstanding Warrants (unrelated to aforementioned
convertible debentures and/or promissory notes) and (f) an aggregate of
81,864 shares being registered pursuant to certain "piggy-back"
registration rights granted to two otherwise unaffiliated firms in
exchange for services rendered by such firms to the Company. Also
registered hereunder (and included in the 8,302,742 shares) are shares
of Common Stock of the Registrant referred to above are (i) those
shares issuable in exchange for interest earned under Convertible
Debentures with interest calculated through respective mandatory
conversion dates and (ii) such additional shares as may be issued under
anti-dilution provisions contained in the aforesaid Convertible
Debentures and related Registration Rights Agreements. Such additional
shares do not and will not include any shares as may otherwise be
required to be issued as a result of adjustments to the conversion
price, stock dividends, stock splits or similar transactions as
Registrant is not relying upon Rule 416 with respect thereto.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 promulgated under the Securities Act of 1933. In
accordance with Rule 457(c) of Regulation C, the estimated price for
the Securities was based on the average of the high and low reported
prices on the Electronic Over-the-Counter Bulletin Board on December 6,
1999, an average of $6.3906.
(3) The number of shares referred to throughout this Registration Statement
unless otherwise specifically indicated gives retroactive effect to a 1
for 10 reverse stock split effective as of October 1, 1998.
(4) The number of securities being carried forward and the amount of the
filing fee associated with such securities that was previously paid
under earlier Registration No. 333-50069 was 1,477,008 shares of Common
Stock, $.01 par value, for which the registration fee of $2,859.40 was
paid. This information is provided in accordance with Rule 429(b) of
the 1933 Act and the number of securities being carried forward and the
amount of the filing fee associated with such securities that was
previously paid under earlier Registration No. 333- 50069 was an
additional 1,967,900 and under Registration No. 333-59829,10,532,503
shares and 85,077 shares pursuant to piggy-back registration rights for
which the registration fee of $9,628.93 was paid.
(5) Includes (a) 2,437,740 shares which are reserved for issuance pursuant
to currently issued and outstanding convertible debentures which will
be offered for resale by certain Selling Holders under Registration
Nos. 333-50069 and 333-59829 and (b) an additional aggregate of
8,873,201 shares as indicated in footnote 1(b) through (e) inclusive.
(6) Required filing fee already paid for greater number of shares sought to
be registered under prior amendment filed September 13, 1999.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS
<PAGE>
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
<TABLE>
<CAPTION>
SWISSRAY INTERNATIONAL, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K.
Registration Statement Item and Heading Prospectus Caption
<S> <C> <C>
1. Forepart of the Registration Statement and Outside Cover Page of Registration
Front Cover Page of the Prospectus Statement; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Inside Front and Outside
Prospectus Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors and Ratio of Prospectus Summary; Risk
Earnings to Fixed Charges Factors; The Company
4. Use of Proceeds Prospectus Summary; Use
of Proceeds
5. Determination of Offering Price Outside Front Cover Page
of Prospectus
6. Dilution Risk Factors; Dilution
7. Selling Security Holders Selling Holders and Plan
of Distribution
8. Plan of Distribution Outside Front Cover Page
of Prospectus; Selling
Holders and Plan of
Distribution
9. Description of Securities to be Registered Description of Capital Stock
10. Interests of Named Experts and Counsel Legal Matters; Independent
Auditors
11. Information with Respect to Registrant
(a) (1) Description of Business Prospectus Summary;
Management's Discussion and
Analysis of Financial Condition
and Results of Opertions;
Business; The Company
<PAGE>
Registration Statement Item and Heading Prospectus Caption
(2) Description of Property Business -- Description of Property
(3) Legal Proceedings Business -- Legal Proceedings
(4) Control of Registrant Not Applicable
(5) Nature of Trading Market Risk Factors; Selling
Holders and Plan of
Distribution
(6) Exchange Controls and Other Limitations Risk Factors; Description
Affecting Security Holders of Capital Stock
(7) Taxation Risk Factors
(8) Selected Financial Data Prospectus Summary;
Selected Consolidated
Financial Data
(9) Management's Discussion and Analysis of Management's Discussion
Financial Condition and Results of and Analysis of Financial
Operations Condition and Results of
Operations
(10) Directors and Officers of Registrant Management
(11) Compensation of Directors and Officers Management
(12) Options to Purchase Securities from Management
Registrant or Subsidiaries
(13) Interest of Management in Certain Certain Transactions
Transactions
(b) Financial Statements Financial Statements
12. Disclosure of Commission Position on Indemnification Information Not Required
for Securities Act Liabilities In Prospectus
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE
COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED
PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS
SHALL NOT CONSTITUTE
AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE
SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
DATED DECEMBER __, 1999
PROSPECTUS
SWISSRAY INTERNATIONAL, INC.
8,302,742 Shares of Common Stock
This prospectus ("Prospectus") relates to the offer and sale of up to
8,302,742 shares of common stock, $.01 par value per share (the "Common Stock"),
of Swissray International, Inc., a New York corporation ("Swissray
International, Inc." or the "Registrant"), which shares consist of (i) up to
3,048,339 shares of Common Stock which are issuable to certain persons (the
"Selling Holders") upon conversion of convertible debentures, issued in thirteen
(13) separate financings from June 1998 through November 1999, (the "Convertible
Debentures") and which shares are being registered hereby pursuant to
Registration Rights Agreements between the Registrant and the Selling Holders
named in this Prospectus under Registration No. 333-59829, (ii) 2,837,462
additional shares of Common Stock heretofore issued as restrictive shares to
certain Selling Holders upon conversion of
convertible debentures issued in March 1998, June 1998 and August 1998, (the
"Convertible Debentures") and which additional shares are being registered
hereby pursuant to Registration Rights Agreements between the Registrant and the
Selling Holders named in a Prospectus under Registration Nos. 333-50069 and
333-59829, (iii) 2,000,000 shares being registered pursuant to certain
"piggyback" registrants rights granted to four otherwise unaffiliated purchasers
of Company Common Stock pursuant to terms of Subscription and Registration
Rights Agreements (see Part II, Item 15 "Recent Sale of Unregistered
Securities"), (iv) 85,077 shares being registered pursuant to certain
"piggyback" registration rights granted to an otherwise unaffiliated lender
pursuant to terms of a promissory note (see "Description of Capital Stock -
Promissory Note"), (v) 250,000 shares being registered which underlie certain
outstanding Warrants (unrelated to aforementioned convertible debentures and/or
promissory notes) and (vi) an aggregate of 81,864 shares being registered
pursuant to certain "piggy-back" registration rights granted to two otherwise
unaffiliated firms in exchange for services rendered by such firms to the
Company. The up to 8,302,742 shares of Common Stock offered hereby are herein
referred to as the "Securities." For further and more specific information
identifying when each of the debentures referred to herein were issued and
itemizing the number of shares being registered for each of such debentures,
reference is made to risk factor entitled "Significant Number of Shares Issued
..".
<PAGE>
The number of shares being registered hereunder (exclusive of an
aggregate of 5,004,403 restrictive shares already issued as indicated in (ii),
(iii), (iv) and (vi) of preceding paragraph) when added to the 18,280,133 shares
of common stock currently issued and outstanding would increase total issued and
outstanding shares to 21,578,472 and would represent approximately 15% of all
outstanding shares of common stock. The registration of such a large percentage
of total outstanding securities may have a material adverse effect on the market
price of the Company's common stock. Those shares being registered hereunder in
accordance with aforementioned convertible debentures are to be issued in
accordance with private placements and reliance upon exemption afforded under
Regulation D and Section 4(6). The Company's common stock is currently listed
for trading on the Electronic Over-the-Counter Bulletin Board ("OTC") and the
closing bid price on December 3, 1999 was $6.84375. See also "Market Price and
Dividend Policy" hereinafter and in particular footnote 1 thereto.
The Securities may be offered and sold from time to time by the Selling
Holders named herein (or in Registration No. 333-50069 hereinafter "Selling
Holders" unless otherwise indicated or the Stockholder whose shares are being
registered pursuant to aforesaid piggy-back rights) or by their transferees,
pledgees, donees or their successors pursuant to the Prospectus. The Securities
may be sold by the Selling Holders from time to time directly to purchasers or
through agents, underwriters or dealers who may receive compensation in the form
of discounts, concessions or commissions from the Selling Holders or the
purchasers of the Securities for whom such agents, underwriters or dealers may
act. See "Selling Holders and Plan of Distribution." If required, the names of
any such agents or underwriters involved in the sale of the Securities and the
applicable agent's commission, dealer's purchase price or underwriter's
discount, if any, will be set forth in an accompanying supplement to this
Prospectus. The Registrant will not receive any of the proceeds from the sale of
the Securities by the Selling Holders.
The Selling Holders will receive all of the net proceeds from the sale
of the Securities and will pay all underwriting discounts and selling
commissions, if any, applicable to any such sale. The Registrant is responsible
for payment of all other expenses incident to the offer and sale of the
Securities. The Selling Holders and any broker-dealers, agents or underwriters
that participate in the distribution of the Securities may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Act"), and any profit on the sale of the Securities by the Selling Holders and
any commissions received by any such underwriters may be deemed to be
underwriting commissions or discounts under the Act. See "Selling Holders and
Plan of Distribution" for a description of indemnification arrangements.
All references herein to the "Company" refer to Swissray International,
Inc. and its subsidiaries. The executive offices of the Company are located at
Swissray International, Inc., 320 West 77th Street, Suite 1A, New York, New York
10024. The telephone number is 917-441-7841 and the fax number is 917-441-7842.
The address in Switzerland is Turbistrasse 25-27, CH-6280 Hochdorf, Switzerland
and the telephone number in Switzerland is 011-4141-914-1200.
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE
AND INVOLVE A HIGH DEGREE OF RISK. ACCORDINGLY, PROSPECTIVE INVESTORS
SHOULD BE PREPARED TO SUSTAIN THE LOSS OF THEIR ENTIRE INVESTMENT.
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<PAGE>
The Registrant has not taken any action to register or qualify the
Securities for offer and sale under the securities or "blue sky" laws of any
state of the United States. However, pursuant to the Registration Rights
Agreements among the Registrant and the Selling Holders (the "Registration
Rights Agreements"), the Registrant will use reasonable efforts to (i) register
and qualify the Securities covered by the Registration Statement under such
other securities or blue sky laws of such jurisdictions as the investors who
hold a majority interest of the Securities being offered reasonably request and
in which significant volumes of shares of Common Stock are traded, (ii) prepare
and file in those jurisdictions such amendments (including post- effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof at all times until the earliest
(the "Registration Period") of (A) the date that is two years after the Closing
Date, (B) the date when the Selling Holders may sell all Securities under Rule
144 or (C) the date the Selling Holders no longer own any of the Securities;
(iii) take such other actions as may be necessary to maintain such registrations
and qualification in effect at all times during the Registration Period, and
(iv) take all other actions reasonably necessary or advisable to qualify the
Securities for sale in such jurisdictions; provided, however, that the
Registrant shall not be required in connection therewith or as a condition
thereto to (A) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify, (B) subject itself to general taxation in any
such jurisdiction, (C) file a general consent to service of process in any such
jurisdiction, (D) provide any undertakings that cause more than nominal expense
or burden to the Registrant or (E) make any change in its articles of
incorporation or by-laws or any then existing contracts, which in each case the
Board of Directors of the Registrant determines to be contrary to the best
interests of the Registrant and its stockholders. Unless and until such times as
offers and sales of the Securities by Selling Holders are registered or
qualified under applicable state securities or "blue sky" laws, or are otherwise
entitled to an exemption therefrom, initial resales by Selling Holders will be
materially restricted. Selling Holders are advised to consult with their
respective legal counsel prior to offering or selling any of their Securities.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED ON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE DATE OF THIS PROSPECTUS IS ____________, 1999.
AVAILABLE INFORMATION
The Registrant is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed with the Commission can be inspected and
copied at the public reference facilities of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. Information may be obtained on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. Copies of this
material can also be obtained at prescribed rates from
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<PAGE>
the Public Reference Section of the Commission at its principal office at 450
Fifth Street, NW., Washington, D.C. 20549. The Commission maintains a World Wide
Web site that contains reports, proxy and information statements and other
information regarding issuers that file electronically with the Commission, such
as the Registrant. The address of such site is http:\\www.sec.gov.
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<PAGE>
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the
detailed information and financial information incorporated by reference herein
or appearing elsewhere in this Prospectus.
THE COMPANY
The Registrant was incorporated under the laws of the State of New York
on January 2, 1968 under the name CGS Units Incorporated. On June 15, 1994, the
Registrant merged with Direct Marketing Services, Inc. and changed its name to
DMS Industries, Inc. In May of 1995 the Registrant discontinued the operations
then being conducted by DMS Industries, Inc. and acquired all of the outstanding
securities of SR Medical AG, a Swiss corporation engaged in the business of
manufacturing and selling X-ray equipment, components and accessories. On June
5, 1995 the Registrant changed its name to Swissray International, Inc. The
Registrant's operations are being conducted principally through its wholly owned
subsidiaries, Swissray Medical AG (formerly known as SR Medical Holding AG and
SR Medical AG) a Swiss corporation and its wholly owned subsidiary Swissray
(Deutschland) Rontgentechnik GmbH (formerly known as SR Medical GmbH), a German
limited liability company as well as through the Company's other wholly owned
subsidiaries, Swissray America, Inc., a Delaware corporation, Swissray
Healthcare, Inc., a Delaware corporation and Swissray Information Solutions,
Inc. a Delaware corporation.
Swissray Medical AG (formerly SR Medical Holding AG and SR Medical AG
until renamed in June 1999 and February 1998) acquired all assets and
liabilities, effective July 1998, of its wholly owned subsidiaries, SR Medical
AG (known as Telray AG until renamed in February 1998), a Swiss corporation and
Telray Research and Development AG, a Swiss corporation. Swissray Medical AG
also absorbed all assets and liabilities of the Company's other wholly owned
subsidiary SR Management AG (formerly SR Finance AG), a Swiss corporation.
Effective as of July 1, 1999 Swissray Medical Systems, Inc., a Delaware
corporation (formerly Swissray America Corporation) and Empower Inc., a New York
corporation, have been merged into Swissray America Inc., a Delaware
corporation. Unless otherwise specifically indicated, all references hereinafter
to the "Company" refer to the Registrant and its subsidiaries.
The Company is active in the markets for diagnostic imaging devices for
the health care industry. The Company's products include a full range of
conventional X-ray equipment for all diagnostic purposes other than mammography
and dentistry, a direct digital multi-functional X-ray system - the
ddR-Multi-System (formerly known as the AddOn-Multi-System) and the
SwissVision(TM) line of DICOM 3.0 compatible postprocessing workstations
operating on a Windows NT platform for the processing of digital image data. In
addition, the Company is in the business of selling components and accessories
for X-ray equipment manufactured by third parties and providing services related
to imaging systems. The Company is also offering products, consulting and
services related to viewing, archiving, networking and transmitting of digital
X-ray images.
The services offered by the Company include the installation and
after-sales servicing of imaging equipment sold by the Company, consulting
services and application training of radiographers. In the United States, the
Company offers information and informatics solutions consulting services to
hospital imaging departments and imaging centers, maintenance management and
after sales-services of products manufactured by the Company and third parties
(multi-vendor, multi-modality services).
The Company and its predecessors have been in the business of
manufacturing and selling X-ray equipment in Switzerland and Germany since 1988.
Beginning in 1991, the Company's predecessors began to expand into other markets
in Europe, the Middle East and Asia. In 1992, the Company entered into a first
Original Equipment Manufacturing ("OEM") Agreement with Philips Medical Systems
GmbH ("Philips Medical Systems") providing for the manufacturing by the Company
of a Multi-Radiography System ("MRS"). Simultaneously, the Company developed the
first SwissVision(TM) image post-processing system, which was able to convert
analog images obtained in fluoroscopy into digital information.^ Beginning in
1993, the Company began the development of direct digital X-ray technology for
medical diagnostic purposes.
On April 1, 1997, the Company acquired Empower, Inc., a New York
corporation ("Empower") which since incorporation in 1985, had been engaged in
distributing and servicing diagnostic X-ray equipment and accessories in the New
York/New Jersey/Connecticut area. Certain details with respect to such
acquisition were reported in a Form 8-K and Form 8-K/A1 with date of report of
April 1, 1997. In February 1998 the Company entered into a letter of intent with
E.M. Parker Co., Inc., a Massachusetts corporation ("Parker") with respect to
the sale of Empower's film and x-ray accessories business. Thereafter, the
Company and its wholly owned subsidiary, Empower, Inc. ("Empower") entered into
an Asset Purchase Agreement with Parker pursuant to which the Company and
Empower sold and Parker purchased substantially all of the assets of Empower
(excluding certain excluded assets as defined in the Agreement) in consideration
of: (i) the assumption by Parker of certain liabilities of Empower; (ii) the
cash purchase price of $250,000 and (iii) the payment by Parker of approximately
$376,000 to a banking institution in satisfaction of certain outstanding
indebtedness of Empower. Empower has been merged into Swissray America, Inc.
effective July 1, 1999. The Company is currently engaged in litigation with the
former CEO of Empower. For information regarding such litigation reference is
made to "Business - Legal Proceedings".
On October 17, 1997, the Company acquired substantially all of the
assets of Service Support Group LLC ("SSG"), located in Gig Harbor, Washington.
SSG has been in the business of selling diagnostic imaging equipment and
providing services related thereto in the markets on the West Coast of the
United States since it was formed on October 16, 1996. SSG's operations are
currently being conducted through the following wholly owned Company
subsidiaries: Swissray Healthcare, Inc. and Swissray Information Solutions, Inc.
. The Company was recently engaged in litigation with three individuals who
formerly owned SSG which litigation was settled on August 31, 1999. For
information regarding such litigation and subsequent settlement terms with
respect thereto, reference is made to "Business - Legal Proceedings".
The following organizational chart graphically indicates the Company,
its wholly owned subsidiaries and certain additional information regarding each
of such firms including principal locations.
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<PAGE>
Organization Chart
SWISSRAY International, Inc.
New York
USA
Swissray Information
Swissray Medical AG Swissray America, Inc. Solutions, Inc.
Hochdorf Delaware Delaware
Switzerland USA USA
Swissray Rontentechnik Swissray Healthcare, Inc.
(Deutschland) GmbH Delaware
Wiesbaden USA
Germany
<TABLE>
<CAPTION>
THE OFFERING
<S> <C>
Common Stock Offered(1) Up to 8,302,742 shares of Common Stock.
Common Stock Outstanding
Before the Offering(2)(3) 18,280,133
Common Stock Outstanding
After the Offering(4) 21,578,472
Use of Proceeds The Registrant
will not receive any of the
proceeds from the sale of
any of the Securities.
Risk Factors The Securities
offered hereby involve a
high degree of risk. See
"Risk Factors" commencing
on page 8 hereof.
Electronic Over-the-Counter
Bulletin Board Symbol SRMI
</TABLE>
(1) Includes an aggregate of up to 3,048,339 shares of Common Stock
reserved for issuance upon the conversion of the Convertible
Debentures. See "Selling Holders and Plan of Distribution" and
"Description of Capital Stock." Also includes an aggregate of 2,837,462
additional shares of Common Stock heretofore issued as restrictive
shares upon conversion of Convertible Debentures issued in March 1998
and August 1998, which latter shares relate to Registration Nos.
333-50069 and 333-59829 in accordance with Rule 429 (b) of the 1933
Act. Also being registered hereunder in accordance with certain
"piggy-back" registration rights are (a) 85,077 restrictive shares
heretofore issued pursuant to terms of a convertible promissory note,
(b) 250,000 shares underlying certain outstanding Warrants (unrelated
to convertible
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<PAGE>
debentures), (c) an aggregate of 2,000,000 restrictive shares
heretofore issued pursuant to terms of subscription and registration
rights agreements and (d) an aggregate of 81,864 shares pursuant to
certain "piggy-back" registration rights granted to two otherwise
unaffiliated firms in exchange for services rendered by such firms to
the Company.
(2) Does not include (i) those shares referred to in footnote 1 above, (ii)
161,000 shares of Common Stock which may be issued upon the exercise of
outstanding options under the Registrant's 1996 Non-Statutory Stock
Option Plan (the "1996 Plan"), and (iii) 200,000 shares of Common Stock
reserved for issuance upon the exercise of options available for future
grant under the 1997 Non-Statutory Stock Option Plan (the "1997 Plan").
(3) As of the close of business on November 26, 1999 there were 18,280,133
shares issued and outstanding held by 487 stockholders of the
Registrant's Common Stock.
(4) While the Common Stock registered hereunder is being offered on a
delayed or continuous basis pursuant to Rule 415 under the Act, the
Registrant has quantified the number of shares that would be
outstanding if debentures were converted as of December 3, 1999 (while
taking into account interest earned through date of mandatory
conversion).
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<PAGE>
Summary Financial Data
The summary information below represents financial information of the
Registrant for (a) the fiscal years ended June 30, 1999, June 30, 1998 and June
30, 1997, which information was derived from the audited consolidated financial
statements of the Registrant and (b) financial information for the quarters
ended September 30, 1999 and September 30, 1998, which information was derived
from the unaudited consolidated financial statements of the Registrant.
<TABLE>
<CAPTION>
Three Months Ended
September 30, Year Ended
June 30,
-------- -------- -------- -------- --------
1999 1998 1999 1998 1997 *
-------- -------- -------- -------- --------
(In thousands, except per share data)
-------- -------- -------- -------- --------
Statement of Operations Data:
<S> <C> <C> <C> <C> <C>
Net Sales ......................... $ 3,879 $ 3,656 $ 17,296 $ 22,893 $ 13,151
Cost of goods sold ................ 2,978 2,837 13,529 18,082 8,445
-------- -------- -------- -------- --------
Gross profit ...................... 901 820 3,767 4,811 4,706
Selling, general and administrative 2,859 3,168 15,581 18,748 17,450
-------- -------- -------- -------- --------
Operating loss .................... (1,958)) (2,348) (11,814) (13,937) (12,744)
Other expenses (income) ........... (26) 183 (40) 281 (319)
Interest expense .................. 1,822 654 4,639 8,590 762
-------- -------- -------- -------- --------
Loss from continuing operations
before income taxes ............... (3,753) (3,186) (16,413) (22,808) (13,187)
Income tax provision (benefit) .... -- -- -- -- 110
-------- -------- -------- -------- --------
Loss from continuing operations ... $ (3,753) $ (3,186) $(16,413) $(22,808) $(13,297)
======== ======== ======== ======== ========
Loss from continuing operations
per common share .................. $ (0.25) $ (0.70) $ (2.52) $ (8.48) $ (8.41)
======== ======== ======== ======== ========
* Restated
</TABLE>
September 30, 1999
---------------------------------------------------
Actual Pro-Forma (1) As Adjusted(2)
----------- ------------ -------------
Balance Sheet Data:
Total assets 24,048 25,548 25,798
Long term debt 16,098 15,447 196
Common stock subject to put 320 320 320
(1) Includes October and November 1999 issuance of 1,000,000 shares of
common stock for $1,500,000.
(2) Adjusted to reflect conversion of convertible debentures and accrued
interest thereon, since such debentures contain a mandatory conversion
feature whereby any unconverted balance is automatically converted on
last date of debenture.
-8-
<PAGE>
RISK FACTORS
Investors should carefully consider the factors set forth below as well
as the other information set forth in this Prospectus before purchasing the
Securities.
History of Increasing Losses; Profitability Uncertain Working Capital Deficiency
As of June 30, 1995 the Registrant had accumulated losses on a
consolidated basis of approximately $6,000,000. A substantial part of such
losses resulted from activities unrelated to the Company's present operations.
Since June 30, 1995 and for the four fiscal years commencing July 1, 1995 and
concluding June 30, 1999, the Company incurred additional net losses aggregating
$61,700,405 ($17,246,028 of which was attributable to year ended June 30, 1999
as compared to $22,503,109 which was attributable to year ended June 30, 1998).
The Company incurred a further net loss of $3,753,416 as of quarter ended
September 30, 1999. As of September 30, 1999 the Company had a working capital
deficiency of $2,481,974. Such additional losses primarily resulted from the
significant expenses associated with the development of the Company's products,
primarily its direct digital X-ray system, the ddR-Multi-System, the building of
the Company's organization and market position as well as the costs of
amortization of debenture issuance costs and beneficial conversion feature (as
well as the absence of a significant increase in sales - during fiscal year
ended June 30, 1998 - as a result of the delay in the market introduction of
certain of the Company's products, which delays were for the purpose of assuring
product quality prior to introduction to industry). The likelihood of the
success of the Company must be considered in light of the problems, expenses,
difficulties, complications and past delays encountered in connection with the
development of any new products and the competitive environment in which the
Company operates. Although the Company is deriving operating revenue from its
current operations, such revenue has not been sufficient to make the Company's
operations profitable. There can be no assurance that the Company will be able
to develop significant additional sources of revenue or that it will become
profitable. Results of operations may fluctuate significantly and will depend
upon further successful introduction of the ddR-Multi-System, further market
acceptance of new product introductions in the future and competition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Products," "-- Research and Development" and "--
Competition."
Need for Continued Market Acceptance of the ddR-Multi-System
The Company's future performance will depend to a substantial degree
upon the continued market introduction and acceptance of the ddR-Multi-System.
The Company's marketing efforts to date have generated considerable awareness
about the ddR-Multi-System among radiologists. From October 1997 through June
30, 1999, the Company sold twelve ddR-Multi-Systems in the United States and
Europe. During the first five months of its current fiscal year the Company has
already contracted sales of 10 ddR-Multi-Systems which represents a 25% increase
in sales of such Systems over the entire preceding fiscal year (when eight
Systems were sold). The extent of, and rate at which, the market introduction,
acceptance and penetration can be achieved by the ddR-Multi-System are functions
of many variables, including, but not limited to, obtaining the necessary
governmental approvals (see "Government Regulation" hereinafter), price,
effectiveness, acceptance by potential
-9-
<PAGE>
customers and manufacturing, training capacity and marketing and sales efforts.
There can be no assurance that the ddR-Multi-System will achieve or maintain
acceptance in its target markets although management is pleased with the degree
of industry acceptance to date (especially reception and feedback received at ^
ECR convention in Vienna in March 1999, the Computer convention (SCAR) held in
Houston, Texas in May 1999 and at the most recent RSNA convention held in
Chicago in November 1999 . Similar risks may confront other products developed
by the Company in the future.
See "Business -- Products" and "-- Regulatory Matters."
Reliance on a Single Product
The Company has concentrated its efforts primarily on the development
of the ddR-Multi-System and will be dependent to a significant extent upon
acceptance of that product to generate additional revenues. There can be no
assurance that the ddR-Multi-System will be successfully commercialized
notwithstanding its recent successful introduction both within and without the
United States (as heretofore and hereinafter indicated) and the fact that more
Systems (10) have been sold during the first five months of the Company's
current fiscal year than were sold for the entire preceding fiscal year. There
can be no assurance that the Company's competitors will not succeed in
developing or marketing technologies and products that are more commercially
attractive than the ddR-Multi-System. See "Business -- Products" and "--
Competition."
Future Capital Needs and Uncertainty of Additional Financing
There can be no assurance that the Company will not be required to seek
additional equity or debt capital to finance its operations in the future. In
addition, there can be no assurance that any such financings, if needed, will be
available to the Company or that adequate funds for the Company's operations,
whether from the Company's revenues, financial markets, collaborative or other
arrangements with corporate partners or from other sources, will be available
when needed or on terms attractive to the Company. The inability to obtain
sufficient funds may require the Company to delay, scale back or eliminate some
or all of its research and product development programs, sales and marketing
efforts, manufacturing and slide processing operations, clinical studies and/or
regulatory activities or to grant licenses to third parties to commercialize
products or technologies that the Company would otherwise seek to market and
sell itself.
There can be no assurance that any additional source of financing at
reasonable terms or otherwise (be it debt and/or equity financing) will be
available to the Company in the future (notwithstanding availability of such
financings as recently as December 1999) or that absent such financing the
Company will have sufficient cash flow to maintain operations in the manner
contemplated. See also risk factor directly below regarding shares issued since
May of 1995 as a result of debt or equity financing.
Potential Adverse Effect Upon Stock Price as a Result of Registration of
Significant Number of Shares Issued as a Result of Equity and Debt Financings
Pursuant to Regulation S and Regulation D
-10-
<PAGE>
From May 1995 through November 1, 1999 the Company has engaged in a
significant number of equity (Regulation S) financings and debt (Regulation D)
financings. Appearing directly below is a chart indicating the number of shares
issued as a result of such finanicngs.
<TABLE>
<CAPTION>
Type of Date of Closing Market Number of Shares Proceeds Outstanding
Financing (6)(7) Financing Bid Price Discount Issued(3) Received Balance
Gross Net
<S> <C> <C> <C> <C> <C> <C>
Reg S- Off-Shore May 20, 1995 (4) 2,000,000 $4,250,000 $4,000,000 $ -0-
Reg S- Off-Shore Dec. 10, 1995 (4) 1,000,000 $________ $4,500,000 $ -0-
Reg S- Convertible Sept. 11, 1996 $4.125 1,872,707 $3,800,000 $2,774,000 $ -0-
Reg S- Convertibl Jan. 10, 1997 $3.00 2,395,709 $3,500,000 $3,085,000 $ -0-
Reg S- Off-Shore Mar. 5, 1997 $2.6875 1,000,000 $2,000,000 $1,925,000 $ -0-
Reg S - Prom. Note Apr. 28, 1997 $1.96875 800,00 $2,000,000 $1,822,500 $ -0-
Reg S- Convertible May 15, 1997 $2.40625 -- $2,000,000} $3,458,890} $ -0-
Reg S- Convertible June 15, 1997 $3.0625 -- $2,000,000} $ -0-
Reg S- Convertible July 31, 1997 $2.750 4,077,878 $4,262,500 $4,262,500 $ -0- (includes May and June 1997)(5)
Reg D- Convertible Aug. 19, 1997 $2.6875 20% 3,643,053 $5,000,000 $4,318,750 $1,850,000 rolled over
Reg D- Convertible Nov. 26, 1997 $1.84375 25% 4,397,081 $2,158,285 $2,158,285 $ -0-
Reg D- Convertible Dec. 11, 1997 $1.375 25% 7,735,099 $3,690,000 $3,000,000 $ -0-
Reg D- Convertible Mar. 16, 1998 $1.00 20% 7,075,138 $5,500,000 $4,915,000 $ -0-
Reg D- Convertible June 15, 1998 $.578 20% (1) $2,000,000 $1,760,000 $2,000,000
Reg D- Convertible Aug. 31, 1998 $.281 18% (1) $6,143,849 $5,832,849 $5,629,421
Reg D- Convertible Oct. 6, 1998 $.188 18% (1) $2,940,000 $2,100,000 $2,940,000
Reg D- Convertible May 13, 1999 $.500 18% (1)(2) $1,080,000 $1,080,000 $1,119,600
Reg D- Convertible Jan. 29, 1999 $.375 18% (1) $1,170,000 $1,020,000 $1,170,000
Reg D- Convertible May 31, 1999 $.437 18% (1)(2 $1,110,000 $1,110,000 $1,132,200
Reg D- Convertible} May 14, 1999 $2.875 20% (1) $ 500,000 $ 500,000 $ 500,000
Reg D- Convertible} May 21, 1999 $3.00 20% (1) $ 200,000 $ 200,000 $ 200,000
Reg D- Convertible} June 9, 1999 $2.625 20% (1) $ 150,000 $ 150,000 $ 150,000
Reg D- Convertible June 24, 1999 $.59375 18% (1)(2) $ 550,000 $ 561,000
Reg D- Convertible Aug. 23, 1999 $3.750 20% (1)(2) $1,100,000 $1,100,000 $1,148,400
Sale of Securities(8)Sept. 7, 1999 $2.50 -- 1,000,000 $1,000,000 $1,000,000 $ -0-
Sale of Securities(9)Oct. 19, 1999 $2.75 -- 500,000 $ 750,000 $ 750,000 $ -0-
Sale of Securities(9)Nov. 1, 1999 $3.312 -- 500,000 $ 750,000 $ 750,000 $ -0-
</TABLE>
(1) Utilizing the December 3, 1999 bid price for the Company's common stock
($6.84375) and assuming indicated discount from market, if all convertible
debentures were converted the number of shares required to be issued
(inclusive of 315,883 shares as may be issued for interest earned) would
amount to 3,048,339 shares. However, since (as indicated in ^ risk factor
entitled "Inability to Currently Determine Number of Shares .." appearing
hereinafter) the debenture agreements do not contain any "floor"
provisions, the number of shares as may actually be issued in the future
may significantly increase if there is a significant decline in the bid
price of the Company's common stock.
(2) Such shares as may be issued result from conversion of promissory notes
into debentures when notes were not paid at or before their respective due
dates. Outstanding balance amounts indicated include interest earned on
promissory notes as of due date, which due date then became date of
convertible debenture issuance. See also "Description of Capital Stock -
Convertible Promissory Notes Subsequently Converted Into Debentures -
December 1998, March 2, 1999, March 26, 1999, July 9, 1999 and August 11,
1999".
-11-
<PAGE>
(3) In accordance with the terms of the debentures and related agreements,
2,837,462 of these shares have been issued with restrictive legends and are
included in the number of shares being registered pursuant to this
Registration Statement.
(4) Date precedes initial NASDAQ listing when securities traded in "pink
sheets". While bid prices existed on the dates indicated such prices are
not currently known nor available to the Company. Transactions referred to
were determined in arms-length negotiations at the time of such financings.
(5) The July 31, 1997 transaction represents a renegotiated replacement,
inclusive of interest, of those prior two transactions which occurred on
May 15, 1997 and June 15, 1997 ($2,000,000 each).
(6) In each instance where a Regulation D financing was concluded the
Registrant was required to file a Form D with the SEC indicating to what
extent, if any, net proceeds were utilized as and for payments to"
officers, directors and affiliates" of the Registrant as opposed to
"payment to others". Each of the Forms D indicate that net proceeds
received were entirely allocated as "payments to others" ^ with a
substantial majority (approximately 95%) of such funds being allocated to
working capital and with the balance being utilized to extinguish
outstanding indebtedness and for repurchase of Company securities.
(7) Pursuant to terms of Convertible Debentures, the holders thereof may not
beneficially own more than 4.9% of outstanding Company shares (other than
as a result of mandatory conversion provisions). The 4.9% limitation is
only contractual in nature. The 4.9% limitation does not apply and,
accordingly, would not limit beneficial ownership in any manner in the
event that (a) 50% or more of the Company is acquired, (b) the Company is
merged into another company or (c) a change of control occurs.
(8) This transaction resulted in the sale of 1,000,000 restrictive shares of
Company common stock at $1.00 per share with the purchaser being given
certain "piggy-back" registration rights requiring the Company to register
such shares.
(9) This transaction resulted in the sale of 1,000,000 restrictive shares of
Company common stock at $1.50 per share with the purchasers being given
certain "piggy-back" registration rights requiring the Company to register
such shares.
These persons and/or firms owning convertible debentures may profit
from "shorting" (selling without ownership of underlying shares) the
Registrant's common stock by covering such short positions with registered
shares of Company common stock received upon debenture conversion.
There continues to exist the potential adverse effect on the market
price of the Company's securities as a result of the registering of the
significant number of additional shares being registered under this Registration
Statement.
Past History of Debt (Debenture) Fund Raising to Retire Existing Indebtedness
On two separate occasions during 1997 and 1998 the Company raised
monies in private placements partially to pay off holders of debentures from
previous private placements as hereinafter indicated. In the first instance the
August 19, 1997 debenture financing which resulted in gross proceeds of
$5,000,000 which had an outstanding balance of $1,850,000 was rolled over into a
November 26, 1997 debenture financing. Such outstanding balances including
interest (from August 19, 1997 financing) was paid to The Isosceles Fund
Limited, Otato Limited Partnership and Thomson Kernaghan & Co. Ltd. in the sums
of $583,630, $145,969 and $1,428,686 respectively. Similarly the
-12-
<PAGE>
March 16, 1998 debenture financing which resulted in gross proceeds of
$5,500,000 which had an outstanding balance of $4,000,000 was partially rolled
over into a August 31, 1998 debenture financing. $3,000,000 of such outstanding
balances as rolled over including interest (from the March 16, 1998 financing)
was paid to Atlantis Capital Fund, Ltd., Canadian Advantage Limited Partnership,
Dominion Capital Fund, Ltd. and Sovereign Partners LP in the sums of $191,642,
$421,613, $1,226,512 and $1,993,082 respectively.
Dilution; Effect of Outstanding Convertible Debentures on Certain Shares
The Registrant has outstanding convertible debentures and options to
purchase Common Stock at prices that are below the per share price to purchasers
of the Registrant's Common Stock in the market. The discount from market,
dependent upon the specific convertible debenture, ranges from 18% to 20% except
for one instance where the discount from market was 25% on a $145,969 debenture
(since entirely converted into shares of Company common stock). The exercise of
such convertible debentures or options would have a dilutive effect on the
investment of a holder of the Registrant's Common Stock. As of December 3, 1999
if all of the principal balance and interest earned on outstanding unconverted
convertible debentures, and warrants were converted (based on calculation
contained in this Registration Statement) the Registrant would be required to
issue 3,298,339 shares of its common stock thereby increasing total outstanding
from 18,280,133 to 21,578,742 and reducing percentage of all current
stockholders from 100% to approximately 85%. Historically the Company has met
(and intends to continue to meet) its convertible debenture obligations through
issuance of stock as opposed to cash payments (i.e., interest earned from
issuance of debenture to date of conversion has been paid in stock).
As and when conversion occurs regarding outstanding convertible
debentures referred to herein (and in prior risk factor entitled "Potential
Adverse Effect Upon Stock as a Result of Registration of Significant Number ..")
a number of new significant holders of Company common stock will necessarily
exist.
The market price of the Registrant's Common Stock may also be adversely
affected by sales of substantial amounts of Common Stock in the public market,
including sales of Common Stock under Rule 144 or after the expiration of any
other applicable holding period (by contract and/or statute). The sale of such
stock could also adversely affect the ability of the Registrant to sell Common
Stock for its own account. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Management -- Compensation of
Directors and Executive Officers," "Selling Holders and Plan of Distribution"
and "Description of Capital Stock."
Issuance of Significant Percentage of Securities Pursuant to Consulting
Agreement With Corresponding Dilution to Current Stockholders
In March of 1999 the Registrant issued an aggregate of 3,800,000 shares
of restrictive common stock pursuant to two separate consulting agreements and
in lieu of cash payment. At the time of such issuance these shares represented
approximately 32% of all outstanding shares and currently represent
approximately 26% of all outstanding securities. Accordingly, upon issuance of
such 3,800,000 shares, current stockholders percentage of ownership (100%)
decreased (by 32%) to
-13-
<PAGE>
68% of all then issued and outstanding shares. The Registrant has no current
plans to continue this practice. For further information regarding terms and
conditions relating to such consulting agreements, reference is herewith made to
"Business - Recent Developments".
Company's President Controls in Excess of One-Third of all Voting Securities
Ruedi G. Laupper, the Company's President, owns of record and
beneficially (and/or through corporations over which he exercises control; see
footnote 3 to "Principal Stockholders") approximately 16% of all issued and
outstanding shares of Company common stock. Additionally, in accordance with the
terms and conditions of a March 29, 1999 Consulting Agreement with Liviakis
Financial Communications, Inc. ("LFC"), pursuant to which LFC was issued and
owns 3,000,000 shares of Company common stock, the Company's President has sole
voting rights with respect to such 3,000,000 shares without any limitation
thereon so long as same are owned by LFC. LFC in turn may not sell any of such
shares for a period of one year subsequent to commencement of ownership and then
only in accordance and subject to volume limitations imposed in accordance with
the applicable provisions of Rule 144 under the Securities Act of 1933. By
virtue of the above the Company's President has voting control over
approximately 34% of all Company common stock.
Recent Issuance of Substantial Number of Shares to Company's President
In June of 1999 the Company issued 2,000,000 shares of its common stock
to its President in exchange for extinguishment of certain bonus rights
contained in his employment agreement (see "Management - Employment Agreement")
thereby increasing his percentage of ownership from 3% to 17%. Such increase in
percentage of interest created a corresponding decrease in percentage of
ownership of all other stockholders thereby diluting their percentage of
interest. It is possible that one or more officers or directors of the Company
may, in the future, receive material amounts of common stock as opposed to
regular monetary compensation and, accordingly, the potential for further
stockholder dilution exists.
Significant Portion of Company Assets Are Intangible Assets
As of September 30, 1999, and for the three months then ended, the
Company's licensing agreement, patents and goodwill (aggregating approximately
$4,700,000) are all intangibles and account for approximately 19.7% of all
Company assets. Amortization of such intangibles amounts to approximately
$205,000 or approximately 7.2% of total operating expenses. The Company
evaluates the recoverability of unamortized intangible assets based upon
expectations of nondiscounted cash flows and operating income. Impairments, if
any, would be recognized in operating results if a permanent diminution in value
were to occur.
Reliance on Large Customers
In the past, the Company has made a significant amount of sales to a
few large customers.
-14-
<PAGE>
Historically, the identity of the Company's largest customers and the volumes
purchased by them has varied. The loss of ^ the Company's current ^ largest
customer (Philips) who accounted for 54% of Company sales during fiscal year
ended June 30, 1999 (as compared to the second largest customer who only
accounted for 1% of Company sales during fiscal year ended June 30, 1999) or a
reduction of the volume purchased by such customer would have an adverse effect
upon the Company's sales until such time, if ever, as significant sales to other
customers can be made. The Company considers the relationship with its largest
customers to be satisfactory. The Company expects that as sales of its
ddR-Multi-System continues to increase, the Company's revenue will be less
dependent on one or a few large customers. See Notes to the Consolidated
Financial Statements of June 30, 1999, 1998 and 1997 and "Business -- Sales and
Marketing."
Risk of Currency Fluctuations, If Not Adequately Hedged Can Adversely Effect
Company Financial Condition
The Company is subject to risks and uncertainties resulting from
changes in currency exchange rates. Future currency fluctuations, to the extent
not adequately hedged, could have an adverse effect on the Company's business,
financial condition and results of operations. On occasion, the Company enters
into currency forward contracts as a hedge against anticipated foreign currency
exposures and not for speculation purposes. Such contracts, which are types of
financial derivatives limit the Company's exposure to both favorable and
unfavorable currency fluctuations. In the past the Company has used forward
contracts exclusively in connection with the purchase of material in currencies
other than Swiss Francs or U.S. dollars. For a discussion of these risks, see
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations - Effect of Currency on Results of Operations."
No Registration Under "Blue Sky" Laws
The Registrant has not taken any action to register or qualify the
Securities for offer and sale under the securities or "blue sky" laws of any
state of the United States. However, pursuant to the Registration Rights
Agreements, the Registrant will use reasonable efforts to (i) register and
qualify the Securities covered by the Registration Statement under such other
securities or blue sky laws of such jurisdictions as the investors who hold a
majority interest of the Securities being offered reasonably request and in
which significant volumes of shares of Common Stock are traded, (ii) prepare and
file in those jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof at all times until the earliest
(the "Registration Period") of (A) the date that is two years after the Closing
Date (B) the date when the Selling Holders may sell all Securities under Rule
144 or (C) the date the Selling Holders no longer own any of the Securities;
(iii) take such other actions as may be necessary to maintain such registrations
and qualification in effect at all times during the Registration Period and (iv)
take all other actions reasonably necessary or advisable to qualify the
Securities for sale in such jurisdictions; provided, however, that the
Registrant shall not be required in connection therewith or as a condition
thereto to (A) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify, (B) subject itself to general taxation in any
such jurisdiction, (C) file a general consent to service of process in any such
jurisdiction, (D)
-15-
<PAGE>
provide any undertakings that cause more than nominal expense or burden to the
Registrant or (E) make any change in its articles of incorporation or by-laws or
any then existing contracts, which in each case the Board of Directors of the
Registrant determines to be contrary to the best interests of the Registrant and
its stockholders. Unless and until such times as offers and sales of the
Securities by Selling Holders are registered or qualified under applicable state
securities or "blue sky" laws, or are otherwise entitled to an exemption
therefrom, initial resales by Selling Holders will be materially restricted.
Selling Holders are advised to consult with their respective legal counsel prior
to offering or selling any of their Securities.
Company International Operations Subject to Foreign Legal Regulatory
Requirements
The Company does business in ^ the United States, Switzerland and
Germany which accounted for approximately 23%, 73% and 4% respectively of total
sales for the fiscal year ended June 30, 1999. In addition to the currency risks
discussed above, the Company's international operations are subject to the risk
of new and different legal and regulatory requirements in local jurisdictions,
tariffs and trade barriers, potential difficulties in staffing and managing
local operations, credit risk of local customers and distributors, potential
inability to obtain regulatory approvals, different requirements as to product
standards, potential difficulties in protecting intellectual property, risk of
nationalization of private enterprises, potential imposition of restrictions on
investments or transfer of funds, potentially adverse tax consequences,
including imposition or increase of withholding and other taxes on remittances
and other payments by subsidiaries, and local economic, political and social
conditions, including the possibility of hyper-inflationary conditions, in
certain countries. Any adverse change in any of these conditions could have a
material adverse effect on the Company's business or financial condition. See
"-- Risk of Currency Fluctuations..," "-- Government Regulation," "Management's
Discussion and Analysis of Financial Condition and Results of Operations-Taxes,"
"-- Effect of Currency on Results of Operations" and "Business -- Regulatory
Matters."
Highly Competitive Market, Rapid and Significant Technological Change
The highly competitive markets in which the Company operates are
characterized by rapid and significant technological change, evolving industry
standards and new product introductions. The Company competes with numerous
competitors, many of which are well-established in the Company's markets. Most
competitors are divisions of larger companies with potentially greater financial
and other resources than the Company.
The Company's competitors can be expected to continue to improve the
design and performance of their products and to introduce new products with
competitive price and performance characteristics. Although the Company believes
that it has certain technological and other advantages over its competitors,
realizing and maintaining these advantages will require continued investment by
the Company in research and development, sales and marketing and customer
service and support. There can be no assurance that the Company will have
sufficient resources to continue to make such investments or that the Company
will be successful in maintaining such advantages. If the Company's products or
technologies become non-competitive or obsolete, it will have a material adverse
effect
-16-
<PAGE>
on the Company. See "Business -- Competition."
Dependence on Patents and Proprietary Technology
The Company has patented certain aspects of its proprietary technology
in certain markets and has filed patent applications for its direct digital
technology in key markets, including the United States. The European patent as
well as the U.S. patent for the Add-On Bucky have been granted and expire
January 2015. The duration of other patents range from 2000 to 2016. However,
there can be no assurance that other applications will be granted. There can be
no assurance that the Company's issued patents or other patents issued in the
future will afford protection from material infringement or that such patents
will not be challenged. The Company also relies on trade secrets and proprietary
and licensed know-how, which it protects, in part, through confidentiality
agreements with employees, consultants and other parties. There can be no
assurance that these agreements will not be breached, that the Company would
have adequate remedies for any breach or that the Company's trade secrets will
not otherwise become known to, or independently developed by, competitors.
There also can be no assurance that the Company's technology will not
infringe upon the patents of others. In the event that any such infringement
claim is successful, there can be no assurance that the Company would be able to
negotiate with the patent holder for a license, in which case the Company could
be prevented from practicing the subject matter claimed by such patent. In
addition, there can be no assurance that the Company would be able to redesign
its products to avoid infringement. The inability of the Company to practice the
subject matter of patents claimed by others or to redesign its products to avoid
infringement could have a material adverse effect on the Company.
^
Company Activities Subject to Government Regulation and Approvals
General
The Company's services, products and manufacturing activities are
subject to extensive and rigorous government regulation, including the
provisions of the Federal Food, Drug and Cosmetic Act. Commercial distribution
in certain foreign countries is also subject to government regulations. The
process of obtaining required regulatory approvals can be lengthy, expensive and
uncertain. Moreover, regulatory approvals, if granted, may include significant
limitations on the indicated uses for which a product may be marketed.
The Food and Drug Administration (the "FDA") actively enforces
regulations prohibiting marketing without compliance with the pre-market
approval provisions of medical devices. A Section 510(k) application is required
in order to market a new or modified medical device. If specifically required by
the FDA, a pre- market approval may be necessary. The FDA review process
typically requires extended proceedings pertaining to the safety and efficacy of
new products, which may delay or hinder a product's timely entry into the
marketplace.
On November 21, 1997, the AddOn Bucky(R), the direct digital detector
of the ddR -Multi-System received FDA approval. The Company also submitted the
ddR- Multi-System for Section
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<PAGE>
510(k) approval with the FDA and such approval was obtained on December 18, 1997
so that the ddR-Multi-System may be marketed in the United States.
The FDA also regulates the content of advertising and marketing
materials relating to medical devices. There can be no assurance that the
Company's advertising and marketing materials regarding its products are and
will be in compliance with such regulations. The Company is also subject to
other federal, state, local and foreign laws, regulations and recommendations
relating to safe working conditions, laboratory and manufacturing practices.
Failure to comply with applicable regulatory requirements can result in, among
other things, fines, suspensions of approvals, seizures or recalls of products,
operating restrictions and criminal prosecutions. Furthermore, changes in
existing regulations or adoption of new regulations could affect the timing of,
or prevent the Company from obtaining, future regulatory approvals. The effect
of government regulation may be to delay for a considerable period of time or to
prevent the marketing and full commercialization of future products or services
that the Company may develop and/or to impose costly requirements on the
Company. There can also be no assurance that additional regulations will not be
adopted or current regulations amended in such a manner as will materially
adversely affect the Company. See "-- Risks Associated With International
Operations," "Business -- Markets" and "-- Regulatory Matters."
The Company is in compliance with the following regulations:
USA 510(k) market clearance
UL/CSA (ENTELA)
- electrical and x-ray safety
- national regulations of Ministry of Health
- Quality System 21 CFR Part 820 and Part 820.72
(inspection) - identification (general labeling) 21
CFR Part 801.4 and 801.6
Canada CSA, ENTELA
- electrical and x-ray safety
- national regulations of Ministry of Health
Czech Republic - national regulations of Ministry of Health
EU (United Europe) (EWG 93/42 Appendix II class II B)
- CE MDD 0124 market clearance incl. electrical and
x-ray safety - national regulations of Ministry of
Health (RoV Rontgenverordnung) - national system ISO
9001 / EN 46001 (Medical)
Switzerland - national regulalions of Ministry of Health (BAG)
Market clearance
- quality system ISO 9001 / EN 46001 (Medical)
Sales to Highly Regulated Health Care Industry With Potential For Cost Reduction
Pressures Upon Company
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The Company's products are used exclusively in the health care
industry, which is highly regulated. The health care industry in certain markets
for the Company's products, including the United States, has experienced
significant pressure to reduce costs, which has led in some jurisdictions to
substantial reorganizations and consolidations of health care providers or
payors. Cost reduction efforts by the Company's customers may adversely affect
the potential markets for the Company's products and services. It is also
possible that legislation could be adopted in any of these jurisdictions which
could increase such pressures or which could otherwise result in a modification
of the private or public health care system or both or impose limitations on the
ability of the Company to market its products in any such jurisdiction. Any such
event or condition could have an adverse impact on the Company's business,
financial condition or results of operations. See "Business --Markets."
Reliance on Key Management
The Company's business is highly dependent on the principal members of
its management, marketing, research and development and technical staffs, and
the loss of their services might impede the achievement of the Company's
business objectives. In addition, the Company's future success will depend in
part upon its ability to retain highly qualified management, scientific,
technical and marketing personnel. There can be no assurance that the Company
will be successful in retaining such qualified personnel or hiring additional
qualified personnel. Losses of key personnel could have a material adverse
effect on the Company's business. The Company has no key man life insurance
policies with respect to any of its senior executives. See "Business -- Research
and Development" and "Management -- Directors and Executive Officers of the
Company."
Limited Manufacturing History with Respect to ddR-Multi-System
The Company has limited experience with the manufacture and assembly of
the ddR-Multi-System in the volumes that will be necessary for the Company to
generate significant revenues from the sale of the ddR-Multi-System. The Company
may encounter difficulties in scaling up its production or in hiring and
training additional personnel to manufacture the ddR-Multi-System. Future
interruptions in supply or other production problems could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business - Products".
Dependence on Sole Source Suppliers
The Company has only single sources for certain essential components of
the ddR-Multi-System. Interruptions in the supply of such components might
result in production delays, each of which could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"-- Reliance on A Single Product". To date no material interruptions have
occurred.
The percentage of Company revenues derived from products which included
components then only currently available from a single source supplier amounted
to 13.6% as of June 30, 1999 of which
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13.6% related to the single source supplier of certain camera electronics while
13.6% related to the single source supplier of optics (both items are included
in the same product). The agreement with the single source supplier of certain
camera electronics will be terminated December 31, 1999 due to the fact that its
manufacturing plant where the camera electronics had been manufactured is
scheduled to be permanently closed on such date and Company management was not
satisfied with proposals submitted to it by such supplier regarding the latters
intentions of establishing a new manufacturing plant. Company agreement with its
new supplier of camera electronics provides for avability of such camera
electronics to the Company commencing January 1, 2000. The Company currently has
160 CCD cameras in stock which will be used for the next 40 ddR-Systems, which
40 systems represent the number of ddRMulti-Systems orders as of November 26,
1999. New camera systems have been ordered for use in an additional 50
ddRMulti-Systems with an expected delivery date of such cameras in March 2000.
As orders for ddRMulti-Systems increase additional CCD cameras (four per system)
can be ordered; it being management's intention to have a sufficient number of
CCD cameras on hand to cover in excess of those immediately required to cover
orders. The Company has concluded negotiations with a satisfactory and
comparable source supplier and does not expect any material business
interruptions to occur regarding CCD camera availability in a timely manner nor
does it anticipate that change of supplier will have any affect upon quality of
its ddR-Systems. The agreement with the single source supplier of optics expires
in July 2002 and is subject to renegotiations which are expected to occur
assuming contract fulfillment continues to be concluded in a timely and
satisfactory manner with price and payment terms being comparable to those
currently being utilized and meeting Company capacity requirements. The
percentage of revenues from this single source supplier of optics amounted to
approximately 13.6% at fiscal year ended June 30, 1999. While management has no
current expectation or need to replace this supplier it does not envision
encountering any material difficulties in replacing such supplier (with a
different optics manufacturer having the ability to timely deliver comparable
optic quality) if necessary in the event of any unforeseen circumstances which
may require replacement. This agreement may not be terminated by either party
without cause.
Inability to Currently Determine Number of Shares Which May be Issued Upon
Debenture Conversion; Potential For New Significant Stockholders and Potential
Significant Percentage Dilution to Existing Stockholders Which Would Result From
Significant Increase in Outstanding Shares
Any additional convertible debenture financings will result in
additional dilution to present Company shareholders by reducing their percentage
of interest in the Company. In the past the Company has issued (and currently
intends to issue when, as and if necessary) debt convertible into common stock
without any limits on the amount that can be converted over any specific period
of time. Since such conversion occurs at a negotiated discount from market
price, such conversion can have a negative impact upon the trading price of the
Company's common stock. Further, since there is no "floor" in the debt
convertibles (i.e., no bid price below which debentures may not be converted)
there is no specific limit on the number of shares that may be issued upon
conversion since such number of shares is dependent upon common share price at
time of conversion and, accordingly, a decline in common stock price will
necessarily result in the requirement to issue additional shares due to there
being no "floor" or "minimum" conversion price in their existing convertible
debenture agreements.
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Additionally, debenture conversion may result in a larger number of new
significant stockholders to the Company. The Company has continued to issue
convertible securities without a minimum price thereby continuing to subject
itself to the risks indicated herein, especially with respect to potential
decline in common stock price.
Potential Recalls and Product Liability
Any of the Company's products may be subject to recall for unforeseen
reasons. The medical device industry has been characterized by significant
malpractice litigation. As a result, the Company faces a risk of exposure to
product liability, errors and omissions or other claims in the event that the
use of its X-ray equipment, components, accessories or related services or other
future potential products is alleged to have resulted in a false diagnosis and
there can be no assurance that the Company will avoid significant liability.
There also can be no assurance that the Company will be able to retain its
current insurance coverage or that such coverage will continue to be available
at an acceptable cost, if at all. Consequently, such claims could have a
material adverse effect on the business or financial condition of the Company.
As of the date hereof, the Company continues to maintain what it considers to be
adequate product liability insurance so as to enable it to be compensated for
certain losses incurred as a result of product recalls and product liability
claims (but remains "at risk" if and to the extent that awarded damages exceed
coverage).
Limited Public Market; Liquidity; Possible Volatility of Stock Price
The Common Stock was quoted on the Nasdaq SmallCap Market System under
the symbol "SRMI" until its delisting on October 26, 1998 and is currently
quoted on the Electronic Over-the-Counter Bulletin Board under the same symbol.
There can be no assurance that an established public market for the Common Stock
can be established and/or sustained. The market price of the Common Stock has
been volatile and has fluctuated significantly and may continue to fluctuate
significantly as a result of the Company's financial results, regulatory
approval filings, clinical studies, technological innovations or new commercial
products introduced by the Company or its competitors, developments concerning
patents or proprietary rights, trends in the health care industry or in health
care generally, litigation, the adoption of new laws or regulations or new
interpretations of existing laws or regulations and other factors. In fact since
October 26, 1998 Nasdaq delisting (referred to below) when the Company's common
stock traded at $.188, the bid price for the Company's common stock has
fluctuated from a low of $.125 to a high of $5.875 on November 17, 1999.
Delisting Due To Non-Compliance With Certain NASDAQ Standards
The Nasdaq Stock Market recently adopted certain changes to the
standards for issuers with securities listed on Nasdaq. One of the changes
included increasing the quantitative maintenance requirements for continued
listing in the Nasdaq SmallCap Market, on which the Company's Common Stock was
then listed and traded under the symbol SRMI until October 26, 1998 delisting.
In order to maintain continued listing on Nasdaq the Company's Common Stock was
required to maintain a closing bid price at least equal to $1.00 per share. On
October 26, 1998 NASDAQ determined to delist Company's securities from The
NASDAQ Stock Market effective with the close of business October 26, 1998. The
advise (accompanying the delisting letter) indicated in pertinent part that (a)
the bid price of Company's common stock had fallen below $1.00 per share on
October 26, 1998 despite the
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Company having demonstrated ".. a closing bid price in excess of $1.00 for a
period of 17 consecutive trading days" and (b) the Company's 15 day extension
within which to timely file its Form 10-K for fiscal year ended June 30, 1998
had expired October 15, 1998 and, accordingly, "the Registrant is now deficient
in filing its 10-K for the fiscal year ended June 30, 1998". The Company filed
such Form 10- K on December 3, 1998 and attributed its entire delay to the fact
that its former auditors failed and refused to complete the necessary audit in a
timely (or otherwise) manner necessitating the Company's engagement of new
auditors. See also "Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure".
The NASDAQ Listing and Hearing and Review Council (" Council") may, on
its own motion, determine to review any NASDAQ Listing Qualifications Panel
("Panel") decision within 45 calendar days after issuance of a written decision.
The Council, by letter dated December 9, 1998, and on its own initiative, called
for review of the above referenced Panel's decision. The Council may affirm,
modify, reverse, dismiss, or remand the decision to the Panel. The Registrant
may also request the Council to review its decision and such request must be
made within 15 days of the date of this decision. The institution of a review,
whether by way of any request, or on the initiative of the Council, does not
operate as a stay of NASDAQ's October 26, 1998 delisting decision.
The Company formally requested a review of NASDAQ's decision in a timely manner
and such request was confirmed by NASDAQ on November 16, 1998 wherein NASDAQ
indicated that the Company had until January 15, 1999 for its submission of any
additional information it may deem pertinent for purposes of Council's
consideration. The Company understands that the Panel is prepared to and will
consider any and all additional information supplied to it by the Company that
did not exist at the time of delisting and, accordingly, the Company provided
certain new and significant information (in a timely manner) for NASDAQ's
consideration on January 14, 1999, April 30, 1999 and July 7, 1999; such
information primarily consisting of the fact that current bid price for common
stock met NASDAQ standards and that the Company was current with respect to its
Exchange Act reporting requirements and was accompanied by various literature
describing the Company's products and business prospects. Since filing of the
above mentioned Form 10-K on December 3, 1998 and the simultaneous filing on
such date of its Form 10-Q for quarter ended September 30, 1998, the Company has
filed all forms 10-Q and its most recent 10-K for fiscal year ended June 30,
1999 in a timely manner and on or before their mandated due dates.
On April 1, 1999 the Council issued a Decision whereby it reversed and
remanded the decision of the NASDAQ Panel with instructions, having found that
the Company was not provided with adequate notice and opportunity to respond to
all of the basis upon which the Panel apparently determined to delist the
Company's securities.
The Council's instructions directs NASDAQ staff and Panel to determine
whether the Company complies with all continued listing requirements for the
Nasdaq SmallCap Market and demonstrates the ability to maintain compliance with
these requirements in the long term. Such Council's decision directs the staff
to conclude its review and provide its findings to the Panel within 45 days from
April 1, 1999. The decision further states that "If, at the time of the staff's
review, the staff finds that the Company meets all of the requirements for
continued listing on The Nasdaq SmallCap Market, demonstrates the ability to
maintain compliance with these requirements in the long term, and there
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<PAGE>
are no new adverse developments, the Panel should relist the Company on the
SmallCap Market. If, however, the staff finds that the Company does not meet all
of the continued listing requirements or does not demonstrate the ability to
maintain compliance with these requirements for the long term, the Panel must
notify the Company of which requirement(s) it fails to satisfy." (providing the
Company with 15 days to respond).
The Panel, in its aforesaid decision, opined that the Company failed to
evidence compliance with all requirements for continued listing on the NASDAQ
SmallCap Market notwithstanding its acknowledgment that the Company met all
quantitative requirements (1) for continued listing. This opinion was based upon
the Panel's subjective determination that shareholder approval should have been
obtained prior to the Company's issuance on July 6, 1999 of 2,000,000
restrictive shares of its common stock to its President for and in consideration
of his waiving certain rights to performance based bonuses as contained in his
employment agreement with the Company. The Panel cited as a basis for such
determination the NASDAQ Marketplace rules which require shareholder approval
when shares issued exceed the lesser of 1% of the total shares outstanding at
the time of issuance or 25,000 shares. Notwithstanding the fact that the Company
was not on NASDAQ at the time of security issuance, the Panel indicating that
NASDAQ corporate governance rules make specific provision permitting review of
company activities on a case by case basis even while its securities are not
listed on NASDAQ.
As indicated above, the Council may, on its own motion, determine to
review this new Panel decision within 45 calendar days from November 5, 1999, at
which time it may affirm, modify, reverse, dismiss or remand (as the Council
previously did on April 1, 1999) the decision to the Panel and in such event the
Company would be immediately notified. Additionally, the Company is entitled to
request that the Council review the aforesaid November 5, 1999 Panel decision
and the Company perfected such request on November 12. 1999.
(1) Quantitative requirements refer to maintenance standards for continued
listing and primarily require at least (a) net tangible assets of
$2,000,000 or market capitalization of $35,000,000 or net income in two
of the last three years of $500,000 , (b) a public shares float of
500,000, (c) a market value of public float of $1,000,000, (d) a
minimum bid price of $1.00, (e) shareholders of 300, (f) two market
makers, (g) two independent directors and (h) an independent audit
committee.
No Dividends and None Anticipated
The Company has not paid any dividends upon its common stock since its
inception and by reason of its present financial condition and contemplated
financing requirements does not anticipate paying any dividends in the
foreseeable future but rather intends to retain earnings, if any, in order to
finance its further growth and development.
Environmental Matters
The Company is subject to various environmental laws and regulations in the
jurisdiction in
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which it operates. Although the Company believes that it is in substantial
compliance with applicable environmental requirements and the Company to date
has not incurred material expenditures in connection with environmental matters,
it is possible that the Company could become subject to additional or changing
environmental laws or liabilities in the future that could result in an adverse
effect on the Company's financial condition or results of operations. See "--
Environmental Matters" and "Business -- Environmental Matters."
Year 2000 Issue
Many currently installed computer systems and software products are
coded to accept only two-digit entries to represent years in the date code
field. Computer systems are products that do not accept four-digit year entries
and will need to be upgraded or replaced to accept four-digit entries to
distinguish years beginning with 2000 from prior years. Management is now
compliant with the Year 2000 requirements and believes that its management
information system complies with the Year 2000. The Company currently does not
anticipate that it will experience any material disruption to its operations as
a result of the failure of its management information system to be Year 2000
compliant. There can be no assurance, however, that computer systems operated by
third parties, including customers vendors, credit card transactions processors
and financial institutions, with which the Company's management information
system interface will continue to properly interface with the Company's system
and will otherwise be compliant on a timely basis with year 2000 requirements.
For relevant material (information and non-information technology) delivered by
third parties the Company received written assurances that their year 2000
compliance's is under control.. Any failure of the Company's management
information system or the systems of third parties to timely achieve Year 2000
compliance could have a material adverse effect on the Company's business,
financial condition, and operating results. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
THE COMPANY
The Registrant was incorporated under the laws of the State of New York
on January 2, 1968 under the name CGS Units Incorporated. On June 15, 1994, the
Registrant merged with Direct Marketing Services, Inc. and changed its name to
DMS Industries, Inc. In May of 1995 the Registrant discontinued the operations
then being conducted by DMS Industries, Inc. and acquired all of the outstanding
securities of SR Medical AG, a Swiss corporation engaged in the business of
manufacturing and selling X-ray equipment, components and accessories. On June
5, 1995 the Registrant changed its name to Swissray International, Inc. The
Registrant's operations are being conducted principally through its wholly owned
subsidiaries, Swissray Medical AG (formerly known as SR Medical Holding AG and
SR Medical AG) a Swiss corporation and its wholly owned subsidiary Swissray
(Deutschland) Rontgentechnik GmbH (formerly known as SR Medical GmbH), a German
limited liability company as well as through the Company's other wholly owned
subsidiaries, Swissray America, Inc., a Delaware corporation, Swissray
Healthcare, Inc., a Delaware corporation and Swissray Information Solutions,
Inc. a Delaware corporation.
Swissray Medical AG (formerly SR Medical Holding AG and SR Medical AG
until renamed in June 1999 and February 1998) acquired all assets and
liabilities, effective July 1998, of its wholly
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owned subsidiaries, SR Medical AG (known as Telray AG until renamed in February
1998, a Swiss corporation and Telray Research and Development AG, a Swiss
corporation. Swissray Medical AG also absorbed all assets and liabilities of the
Company's other wholly owned subsidiary SR Management AG (formerly SR Finance
AG), a Swiss corporation.
Effective as of July 1, 1999 Swissray Medical Systems, Inc., a Delaware
corporation (formerly Swissray America Corporation) and Empower Inc., a New York
corporation, have been merged into Swissray America Inc., a Delaware
corporation. Unless otherwise specifically indicated, all references hereinafter
to the "Company" refer to the Registrant and its subsidiaries.
The Company and its predecessors have been in the business of
manufacturing and selling X-ray equipment in Switzerland and Germany since 1988.
Beginning in 1991, the Company's predecessors began to expand into other markets
in Europe, the Middle East and Asia. In 1992, SR Medical AG entered into a first
Original Equipment Manufacturing ("OEM") Agreement with Philips Medical Systems
GmbH ("Philips Medical Systems") providing for the manufacturing of a
multi-radiography system ("MRS"). In 1996, this agreement was replaced with a
new OEM Agreement ("Philips OEM Agreement") which provides for the manufacturing
of the Bucky Diagnost TS bucky table in addition to the MRS System.
Simultaneously, the Company developed the first SwissVision(TM) post-processing
system which was able to convert analog images obtained in fluoroscopy into
digital information. Beginning in 1993, the Company began the development of
direct digital X-ray technology for medical diagnostic purposes.
On November 6, 1996, the Company formed Swissray Corporation (which has
since been renamed Swissray Medical Systems, Inc.), a Delaware corporation
located in Azusa, California, as the Company's principal authorizing division in
the United States.
On April 1, 1997, the Company acquired Empower, Inc., a New York
corporation ("Empower") which since incorporation in 1985, had been engaged in
distributing and servicing diagnostic X-ray equipment and accessories in the New
York/New Jersey/Connecticut area. Certain details with respect to such
acquisition were reported in a Form 8-K and Form 8-K/A1 with date of report of
April 1, 1997. In February 1998 the Company entered into a letter of intent with
E.M. Parker Co., Inc., a Massachusetts corporation ("Parker") with respect to
the sale of Empower's film and x-ray accessories business. Thereafter, the
Company and its wholly owned subsidiary, Empower, Inc. ("Empower") entered into
an Asset Purchase Agreement with Parker pursuant to which the Company and
Empower sold and Parker purchased substantially all of the assets of Empower
(excluding certain excluded assets as defined in the Agreement) in consideration
of: (i) the assumption by Parker of certain liabilities of Empower; (ii) the
cash purchase price of $250,000; and (iii) the payment by Parker of
approximately $376,000 to a banking institution in satisfaction of certain
outstanding indebtedness of Empower. Empower remains a wholly owned (but
currently inactive) subsidiary of the Company. Empower has been merged into
Swissray America, Inc. effective July 1, 1999. The Company is currently engaged
in litigation with the former CEO of Empower, to wit: J. Douglas Maxwell. For
information regarding such litigation reference is made to "Business - Legal
Proceedings".
Both the original purchase and subsequent sale referred to in the preceding
paragraph were
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contracted on an arms-length basis. The sale of Empower's assets less than one
year after acquisition of Empower related primarily to the sale of film,
chemical and certain servicing of conventional x-ray equipment since these areas
no longer constituted the Company's "core" business which revolves around its
ddR-Multi-System and filmless digital technology. The original purchase of
Empower was for $120,000 (in stock) and the subsequent sale referred to resulted
in a gain of $55,000. Counsel representing the Company with respect to this
transaction determined that such transaction was not material, did not require
stockholder approval and advised management which acted upon reliance of such
legal advice.
During the fiscal year ended June 30, 1997, the Company created a new
Information Solution Division known as Swissray Information Solutions, Inc.
which is engaged in services related to Picture Archiving and Communications
Systems ("PACS") as well as consulting activities. This division is located in
Gig Harbor, Washington and headed by Michael J. Baker, who has more than 20
years experience in radiology, most recently as head of Lockheed Martin's
Medical Imaging Systems division.
On October 17, 1997, the Company acquired substantially all of the
assets of Service Support Group LLC ("SSG") located in Gig Harbor, Washington
(in an arms-length transaction), principally in exchange for the payment of
approximately $622,000 in cash and issuance of 33,333 shares of its Common Stock
in equal thirds to each of SSG's then owners based upon certain warranties and
representations made by them. Counsel representing the Company with respect to
this transaction determined that such transaction was not material, did not
require stockholder approval and advised management which acted upon reliance of
such legal advice. Pursuant to the terms of the Asset Purchase Agreement and
related Registration Rights Agreement both dated October 17, 1997 (Exhibits 10.9
and 10.10 hereto), the holders of such Company shares were then given the right,
commencing June 30, 1998 and terminating April 16, 1999, to require the Company
to purchase any or all of such shares at $45.00 per share. Since its formation
on October 16, 1996, SSG has been in the business of selling diagnostic imaging
equipment and providing services related thereto in the markets on the West
Coast of the United States. Issues involving the aforesaid Company shares and a
number of other related matters became the subject of dispute and litigation
which was recently settled on August 31, 1999. See "Legal Proceedings". The
three former SSG owners relationship with the Company (and certain Company
subsidiaries with whom such persons held positions as officers, to wit: Swissray
Medical Systems, Inc. and Swissray Healthcare, Inc.) was terminated on July 20,
1998. As a result of such termination Ueli Laupper has been appointed Chief
Executive Officer of both Swissray Medical Systems, Inc. and Swissray
Healthcare, Inc. (with Michael J. Baker being appointed Deputy Chief Executive
Officer of both subsidiaries). See "Prospectus Summary", "Business --Research
and Development."
USE OF PROCEEDS
The Registrant will not receive any of the proceeds from the sale of the
Securities. All of the proceeds will be received by the Selling Holders. See
"Selling Holders and Plan of Distribution."
MARKET PRICES AND DIVIDEND POLICY
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The Registrant's common stock, $.01 par value (the "Common Stock") was
listed on the Nasdaq SmallCap Market and traded under the symbol SRMI until
October 26, 1998 delisting. Since January 1999 the Company's common stock has
been trading on the Electronic Over-the-Counter Bulletin Board under the same
symbol. The following table sets forth, for the periods indicated, the range of
high and low bid prices on the dates indicated for the Registrant's securities
indicated below for each full quarterly period within the two most recent fiscal
years (if applicable) and any subsequent interim period for which financial
statements are included and/or required to be included.
Fiscal Year Ended June 30, 1997 Quarterly Common Stock Price
By Quarter Ranges (1)(2)
Quarter Date High Low
1st September 30, 1996 $5.0625 $3.6875
2nd December 31, 1996 $4.000 $2.375
3rd March 31, 1997 $3.5625 $1.6875
4th June 30, 1997 $3.250 $1.4063
Fiscal Year Ended June 30, 1998 Quarterly Common Stock Price
By Quarter Ranges (1)(2)
Quarter Date High Low
1st September 30, 1997 $1.6375 $1.5625
2nd December 31, 1997 $1.250 $1.125
3rd March 31, 1998 $1.6875 $0.750
4th June 30, 1998 $1.000 $0.500
Fiscal Year Ended June 30, 1999 Quarterly Common Stock Price
By Quarter Ranges (1)(2)
Quarter Date High Low
1st September 30, 1998 (3) $.5625 $0.188
2nd December 31, 1998 $1.375 $0.875
3rd March 31, 1999 $1.25 $0.375
4th June 30, 1999 $2.812 $2.437
Fiscal Year Ended June 30, 2000 Quarterly Common Stock Price
By Quarter Ranges (1)(2)
Quarter Date High Low
1st September 30, 1999 $4.062 $1.875
(1) The Registrant's Common Stock began trading on the Nasdaq SmallCap market
on March 20, 1996 with an opening bid of $4.75. The following statement
specifically refers to the Common Stock activity, if any, prior to March
20, 1996 and subsequent to October 26, 1998 NASDAQ delisting. The
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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 Registrants's Common Stock took place, such transactions have
been limited to the over-the-counter market. Until March 20, 1996 and since
October 26, 1998, all prices indicated are as reported to the Registrant by
broker-dealer(s) making a market in its common stock in the National Quotation
Data Service ("pink sheets") and in the Electronic Over-the-Counter Bulletin
Board. During such dates the Registrant's Common Stock was not traded or quoted
on any automated quotation system other than as indicated herein. The
over-the-counter market and other quotes indicated reflect inter-dealer prices
without retail mark-up, mark-down or commission and do not necessarily represent
actual transactions.
(2) All prices indicated hereinabove for quarters up to but excluding quarter
ending December 31, 1998 reflect price ranges as they existed during the
quarters indicated but do not retroactively reflect a 1 for 10 reverse stock
split effective October 1, 1998.
(3) On the date of NASDAQ's delisting (October 26, 1998) the common stock price
was $.97 per share while on the date immediately prior to effectiveness of the
reverse stock split (October 1, 1998) the stock price was $.118 per share.
As of the close of business on November 26, 1999 there were 487
stockholders of the Registrant's Common Stock and 18,280,133 shares issued and
outstanding.
The payment by the Registrant 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 Registrant 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.
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CAPITALIZATION
The following table sets forth (i) the current liabilities and
capitalization of the Company as of June 30, 1999 and (ii) the pro forma
liabilities and capitalization as of June 30, 1998, adjusted to reflect the
conversion of the Convertible Debentures and accrued interest thereon subsequent
to such date.
<TABLE>
<CAPTION>
Proforma as
Actual Proforma (2) Adjusted (3)
<S> <C> <C> <C>
Current liabilities ............................ 15,238,080 13,838,080 12,673,080
Long-term liabilities, net of current portion .. 16,098,103 15,447,103 196,310
Total liabilities .............................. 31,336,183 29,285,183 12,869,389
Common stock subject to put .................... 319,985 319,985 319,985
Stockholders' equity:
Common stock, $.01 par value, 30,000,000 .. 159,083 184,702 217,685
shares authorized; 15,908,274 issued and
outstanding; 21,768,646 as adjusted (1)
Additional paid-in-capital ................ 68,290,897 72,250,278 89,482,136
Treasury stock ............................ (2,040,000) (2,040,000) (2,040,000)
Accumulated deficit ....................... (71,481,157) (71,915,157) (72,514,204)
Accumulated other comprehensive loss ...... (1,747,291) (1,747,291) (1,747,291)
Common stock subject to put ............... (319,985) (319,985) (319,985)
Deferred compensation ..................... (469,722) (469,722) (469,722)
Total stockholders' equity ..................... (7,608,175) (4,057,175) 12,608,619
Total liabilities and stockholders' equity ..... 24,047,993 25,547,993 25,797,993
</TABLE>
(1) Based on a conversion price of 80% to 82% of the average of the high and
low closing price on December 3, 1999.
(2) Includes October, Novermber 1999 sale of 1,000,000 shares of common stock
for $1,500,000.
(3) Adjusted to reflect conversion of convertible debentures and accrued
interest thereon..
-29-
<PAGE>
Swissray International
SELECTED CONSOLIDATED FINANCIAL DATA
(in thosands, except per share data)
The selected consolidated financial data presented below should be read in
conjunction with "Management's Discussion Analysis of Financial Condition and
Results of Operations" and the Consolidated Financial Statements and related
notes thereto included elsewhere in this Prospectus. The selected consolidated
financial data as of and for the fiscal years ended June 30, 1995 (six-month
period), June 30, 1996, June 30, 1997, June 30, 1998 and June 30, 1999 are
derived from the consolidated financial statements of the Company.
<TABLE>
<CAPTION>
Three Months Ended Year Ended
9/30/99 9/30/98 6/30/99 6/30/98 6/30/97 6/30/96 6/30/95 (1)
INCOME STATEMENT DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales .............................. $ 3,879 $ 3,656 17,296 22,893 13,151 10,899 3,806
Cost of goods sold ..................... 2,978 2,837 13,529 18,082 8,445 5,793 2,484
Gross profit ........................... 901 820 3,767 4,811 4,706 5,106 1,322
Gross profit margin (%) ................ 23% 31% 22% 21% 36% 47% 35%
Selling, general and administrative
expenses .......................... 2,859 3,168 15,581 18,748 17,450 14,966 2,307
Operating loss ......................... -1,958 -2,348 -11,814 -13,937 -12,744 -9,860 -985
Other expenses (income), net ........... -26 183 -40 281 -319 -1,004 3,054
Interest expense ....................... 1,822 654 4,639 8,590 762 194 122
Loss from continuing operations, before
income taxes $-3,753 $ -3,186 -16,413 -22,808 -13,187 -9,050 -4,161
Income tax provision (benefit) ......... -- -- -- -- 110 -365 -339
Loss from continuing operations, ....... $ -3,753 $ -3,186 -16,413 -22,808 -13,297 -8,685 -3,822
Loss per share from continuing
operations - basic ................ $ -0.25 $ -0.70 -2.52 -8.48 -8.41 -6.69 -4.80
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Working Capital (deficit) .............. -2,482 670 -2,015 1,085 2,633 3,433 1,185
Total assets ........................... 24,048 27,232 23,761 25,915 24,788 18,793 13,027
Short-term debt including current
portion of long-term debt ......... 6,644 5,803 5,740 3,910 4,211 2,737 2,954
Long-term debt ......................... 16,098 9,627 7,771 5,635 -- 705
Common stock subject to put ............ 31,985 1,820 1,820 1,820 320 -- --
Stockholders (deficit) equity .......... -7,608 3,781 -7,755 4,339 7,373 10,655 6,377
Total shares outstanding at year end (2) 15,908 4,510 14,006 4,143 1,969 1,419 1,204
</TABLE>
(1) In 1995, the Registrant changed its fiscal year end from December 31 to
June 30. As a result, the Company had a fiscal year beginning on January 1,
1995 and ending on June 30, 1995. Accordingly, the Summary Financial Data
for the period ended June 30, 1995 is for a six month period.
(2) On October 1, 1998 the Company declared a 1 for 10 reverse stock split. The
financial statements for all periods present have been retroactively
adjusted for the split.
* Restated
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
All references herein to the "Registrant" refer to Swissray International
Inc. All references herein to the "Company" refer to Swissray International,
Inc. and its subsidiaries.
GENERAL
The focus of the Company for the fiscal year ended June 30, 1999, was
mainly on the industrialization and commercialization of the newly developed
products ddRMulti-System and Bucky Diagnost TS and the building and
strengthening of its organization and distribution channels in the principal
markets USA and Europe. ^
In October 1997, the Company acquired substantially all of the assets
of Service Support Group LLC ("SSG"), a company active in the business of
selling diagnostic imaging equipment and providing services related thereto in
the markets on the West Coast of the United States. The Company also started its
activities, in the US and later in Europe, the business of information solutions
by providing a comprehensive package of consulting, services and products to
enable the Healthcare providers to perform the transition into filmless
Radiology. Significant amounts of money were invested in the opening of the
market of the Company's direct digital ddR-Multi- Systems, both in the US and in
Europe.
During the start-up of the production of the Company's newly developed
products, the ddR-Multi-System and the Bucky Diagnost TS, gross margins were
affected negatively because of the need of extra time for training the newly
hired production staff and implementation of the production run as well as
efforts made to improve and maintain the highest product quality. The Company
expects to lower costs and time needed for production of these systems in a
later stage of the learning curve due to positive impact of the optimized
production run. The sales of ddR-Multi-System was slowed down by certain
governmental requirements for the sale of Healthcare products, which differ from
one country to the other. On July 26, 1998 SR Medical AG, the Company's Swiss
marketing subsidiary, was ISO 9002 and EN46002 certified. On March 8, 1999,
Swissray Medical AG, the Company's Swiss research and development, production
and marketing subsidiary became ISO 9001 and EN 46001 certified. The Company
filed for CE approval of the ddR-Multi-System in July 1998. Appendix II for
CE-Certification was received November 1999, which allows the Company to use the
CE-Label, including the medical device numbers for all products manufactured
and/or sold through the Company.
The Company started a restructuring process in the fourth quarter of
its fiscal year ended June 30, 1998. With the sale of Empower's Film, Processor
and Chemistry Business to E.M. Parker, the Company continued its focus on
digital Radiography. The process of restructuring is ongoing and includes mainly
internal reorganization to achieve lean structures and cost savings.
-30-
<PAGE>
YEAR 2000 POLICY STATEMENT
The Company has conducted an extensive program to check the status of
its equipment (information and non-information technology) related to the
millennium.
For relevant material (information and non-information technology)
delivered by third parties the Company received written assurances that their
year 2000 compliance's is under control. The
Company is actually 100% compliant and is ready for Y2K.
In fact, 100% of the Company's installed base equipment (information
and non-information technology) fulfills year 2000 compliance.
The Year 2000 Statement of the Company has been published on its
website, http;//www.swissray.com, and all our customers have been informed.
Contingency plans have been worked out by the Company.
YEAR 2000 COMPLIANT LISTS
All products of the Company (information and non-information
technology) fulfill the compliance for Year 2000 and belong to Class A Systems.
The products listed have been tested on a stand alone basis and interfaced with
other products and systems in an operational environment test. This information
does not affect existing warranties, warranty exclusions, exclusive warranty
remedies or limitations of liability.
Class A Systems: Year 2000 Compliant
GEN-X-Generators: Mobile Systems:
TURNOMAT 500 Eurabil 5 Eurabil C-Arm Standard
GEN-X-500 Eurabil 15 Eurabil C-Arm Plus
GEN-X-650 Eurabil 30 Eurabil C-Arm Top
GEN-X-800
GEN-X-1000 Bucky Table Systems:
GEN-X-2000 Euramove 1
GEN-X-3000 Euramove 2
GEN-X-4000 Euramove 3
MRS - GENERATOR Euramove 4
Eurastat 2
Eurastat 4
Bucky-Diagnost TS
Atlas Systems:
Atlas-U - US 2000 Special Systems
Atlas-U - US 3000 Euralem 1400
Atlas-U - US 4000 Euralem 1500
Atlas-BV-Tomo Euralem 1800
MRS Stativ Euralem Tomo
-31-
<PAGE>
Urology Systems:
KU-100 Digital Bucky Systems:
KU-100 H ddR-Multi-System
KU-100 H Tomo
Fluoroscopy Systems:
Euroscop 3A
Euroscop 6, 6+, 6++
IT-Systems internally used
In its year 2000 project the Company has tested and asked for
statements about the year 2000 compliance. In fact 100% of IT-Systems
(Information Technology) within the Company are compliant and expected to
encounter no problems on January 1, 2000.
The operating system of the Company's IT-Systems are built on
Microsoft. (Windows 95 and/or Windows NT). SWISSRAY also uses the Microsoft
Office packages for its administration and therefore relies on the operating
system as well as the Microsoft Office package for the year 2000 compliance of
Microsoft for the above mentioned products.
IT-Systems Third Parties
The Company also asked all important partners (e.g. banks, suppliers, sales
channels) for statements about the year 2000 compliance. The Company has not
received any negative responses. All
these important partners fulfill the year 2000 compliance.
YEAR 2000 PROJECT COSTS
The Company has separated its cost in the following parts:
June 30, 1999
Test & Survey own Products $ 50,000
Test & Survey Third Parties Products $ 20,000
Modification own Products $ 20,000
Administration (Communication with Third Parties) $ 5,000
Consultant $ 5,000
TOTAL YEAR 2000 Project costs $100,000
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1999 COMPARED TO THREE-MONTH PERIOD
ENDED SEPTEMBER 30, 1998
RESULTS OF OPERATIONS
Net sales amounted to $3,879,167 for the three-month period ended September 30,
1999,
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<PAGE>
compared to $3,656,441 for the three-month period ended September 30, 1998. The
6.1% increase in net sales was mainly due to the sale of the ddRMulti-Systems.
Gross profit amounted to $901,133 or 23.2% of net sales for the
three-month period ended September 30, 1999, compared to $819,527 or 22.4% of
net sales for the three-month period ended September 30, 1998. The increase in
gross profit as a percentage of net revenues is attributable to the fact that
the percentage of sales of ddRMulti-Systems to total sales increased to 33.1%
for the three-month period ended September 30, 1999 from 9.2% for the
three-month period ended September 30, 1998.
Operating expenses were $2,859,194, or 73.7% of net revenues, for the
three-month period ended September 30, 199, compared to $3,168,088, or 86.6% of
net revenues for the three-month period ended September 30, 1998. The principal
items were salaries (net of officers and directors compensation) of $1,022,441
or 26.4% of net sales for the three-month period ended September 30, 1999
compared to $1,085,186 or 29.7% of net sales for the three-month period ended
September 30, 1998 and selling expenses of $603,532 or 15.6% of net sales for
the three-month period ended September 30, 1999 compared to $512,799 or 14.0% of
net sales for the three-month period ended September 30, 1998. Research and
development expenses were $465,232 or 12.0% of net sales for the three-month
period ended September 30, 1999 compared to $406,038 or 11.1% of net sales for
the three-month period ended September 30, 1998.
Interest expenses increased to $1,821,613 for the three month ended
September 30, 1999 compared to $653,896 for the three month ended September 30,
1998. This increase is primarily due the increase of interest expense for
amortization of Debenture issuance cost and Conversion Benefit.
FINANCIAL CONDITION
September 30, 1999 compared to June 30, 1999
Total assets of the Company on September 30, 1999 increased by $286,804
to $24,047,993 from $23,761,189 on June 30, 1999, primarily due to the increase
of Current Assets. Current Assets increased $826,725 to $12,756,106 on September
30, 1999 from $11,929,381 on June 30, 1999. The increase in current assets is
attributable to the increase of Cash and cash equivalents of $890,652 and the
increase of Accounts receivable of $144,747 offset by the decrease in prepaid
expenses and sundry receivables of $117,007 and the decrease in inventory of
$91,667. Other Assets decreased $449,929 to $5,098,839 on September 30, 1999
from $5,548,768 on June 30, 1998. The decrease is primarily attributable to the
amortization of the licensing agreement, patents & trademark, software
development cost and the goodwill.
On September 30, 1999, the Company had total liabilities of $31,656,168
compared to $31,515,797 on June 30, 1999. On September 30, 1999, current
liabilities were $15,238,080 compared to $13,944,865 on June 30, 1999. Working
capital at September 30, 1999 was $(2,481,974) compare to $(2,015,484) at June
30, 1999.
-33-
<PAGE>
CASH FLOW AND CAPITAL EXPENDITURES THREE MONTH PERIOD ENDED SEPTEMBER 30, 1999
COMPARED TO THREE MONTH PERIOD ENDED SEPTEMBER 30, 1998.
Cash used for operating activities for the three months ended September
30, 1999 was $1,183,712 compared to $2,301,255 for the three months ended
September 30, 1998. Cash used for investing activities was $50,221 for the three
months ended September 30, 1999 compared to $201,422 for the three months ended
September 30, 1998. Cash flow from financing activities for the three months
ended September 30, 1999 was $2,147,182 compared to $3,856,426 for three months
ended September 30, 1998.
YEAR ENDED JUNE 30, 1999 COMPARED YEAR ENDED JUNE 30, 1998
Results of operations
Net sales amounted to $17,295,882 for the year ended June 30, 1999,
compared to $22,892,978, a decrease of $5,597,096, or 24.4% from the year ended
June 30, 1998.Sales for the year ended June 30, 1998 include sales of the film
and processor business of Empower which was sold on June 30, 1998, of
$7,134,938. Net sales without the film and processor business of Empower
increased for the year ended June 30, 1999 by $1,537,842 or 9.8%. This increase
is due to the additional sales of ddRMulti-Systems.
Gross profit decreased by $1,044,611 or 21.7% to $3,766,581 for the
year ended June 30, 1999, from $4,811,192 for the year ended June 30, 1998.
Gross profit as a percentage of net revenues increased to 21.8% for the year
ended June 30, 1999 from 21% for the year ended June 30, 1998. The increase in
gross profit percentage is due to production efficiencies.
Operating expenses decreased by $3,166,512, or 16.9% to $15,581,217, or
90% of net revenues, for the year ended June 30, 1999, from $18,747,729, or
81.9% of net revenues for the year ended June 30, 1998. The principle items were
salaries (net of officers and directors compensation) of $3,784,305 or 21.9% of
net sales for the year ended June 30, 1999 compared to $4,168,540 or 18.2% of
net sales for year ended June 30, 1998 and officers compensation increasing
approximately $865,000, primarily from the issuance of common stock to its
President in exchange for extinguishment of certain bonus rights contained in
his employment agreement, selling expenses of $3,061,813 or 17.7% of net sales
for the year ended June 30, 1999 compared to $3,740,391 or 16.3% of net sales
for the year ended June 30, 1998. The decrease of depreciation and amortization
of $471,582 primarily due to the fact that the depreciable fixed assets were
less for 1999 since many of these assets were fully depreciated at June 30,
1998. The decrease in selling expenses was a result of the closing of Empower
which totaled approximately $476,000 of costs in 1998 and the reduction in
consulting fees of $213,000. Research and development expenses were $1,808,107
or 10.5% of net sales for the year ended June 30, 1999 compared to $3,542,149 or
15.5% of net sales for the year ended June 30, 1998. This decrease is primarily
due to the decrease in research and development related to AddOn-Bucky. Other
operating expenses decreased by approximately $670,000 from the comparable
period in 1998 primarily from the decrease due to the Empower closing of
$100,000 and the decrease in occupancy and insurance costs of approximately
$200,000. Principal costs associated with development of the ddR-Multi-System
have
-34-
<PAGE>
now been accomplished and research and development costs are expected to
continue regarding upgrades and new product development with respect to
associated and related products relating to the ddR-Multi-System.
Interest expense decreased to $4,638,928 for the year ended June 30,
1999 compared to $8,590,268 for the year ended June 30, 1998. This decrease is
primarily due the decrease of interest expense for amortization of Debenture
issuance cost and Conversion Benefit.
Loss on extinguishment of debt was $832,849 for the year ended June 30,
1999 compared to a gain of $304,923 for the year ended June 30, 1998. The
extinguishment gain or loss resulted from refinancing of Convertible debentures.
Financial Condition
June 30, 1999 compared to June 30, 1998
Total assets of the Company on June 30, 1999 decreased by $2,153,408 to
$23,761,189 from $25,914,597 on June 30, 1998, primarily due to the decrease in
current assets. Current assets decreased $1,139,876 to $11,929,381 on June 30,
1999 from $13,069,257 on June 30, 1998. The decrease in current assets is
primarily attributable to the decrease in inventories of $368,744 and the
decrease in prepaid expenses and sundry receivables of $635,105 primarily from
the collection of VAT receivable. Other assets decreased $1,286,194 to
$5,548,768 on June 30, 1999 from $6,834,962 on June 30, 1998. The decrease is
primarily attributable to the amortization of the licensing agreement, patents &
trademark, software development cost and the goodwill.
On June 30, 1999, the Company had total liabilities of $29,695,812
compared to $19,755,870 on June 30, 1998. On June 30, 1999, current liabilities
were $13,944,865 compared to $11,984,554 on June 30, 1998. Working capital at
June 30, 199 was ($2,015,484) compared to $1,084,703 at June 30, 1998.
CASH FLOW AND CAPITAL EXPENDITURES YEAR ENDED JUNE 30, 1999 COMPARED TO YEAR
ENDED JUNE 30, 1998.
Cash used for operating activities for the year ended June 30, 1999 was
$9,788,606 compared to $11,759,371 for the year ended June 30, 1998 primarily as
a result of losses sustained from operations, exclusive of non-cash
compensation. Cash used for investing activities was $879,303 for the year ended
June 30, 1999 compared to $4,517,140 for the year ended June 30, 1998 primarily
from the acquisitions of property and equipment. Cash flow from financing
activities for the year ended June 30, 1999 was $11,068,406 compared to
$14,799,200 for year ended June 30, 1998 as a result of the sale of common stock
and proceeds from the sale of debentures.
The Company does not have any material commitments for capital
expenditures as of June 30, 1999.
-35-
<PAGE>
Liquidity
The Company anticipates that its use of cash will be substantial for
the foreseeable future. In particular, management of the Company expects
substantial expenditures in connection with the production of the planned
increase of sales, the continuation of the strengthening and expansion of the
Company's marketing organization and, to a lesser degree, ongoing research and
development projects. The Company expects that funding for these expenditures
will be available out of the Company's, future cash flow and/or issuance of
equity and/or debt securities during the next 12 months and thereafter.
However, the availability of a sufficient future cash flow will depend
to a significant extent on the marketability of the Company's ddR-Multi-System.
Accordingly, the Company may be required to issue additional convertible
debentures or equity securities to finance such capital expenditures and working
capital requirements. There can be no assurance whether or not such financing
will be available on terms satisfactory to management.
On March 16, 1998, the Company issued $5,500,000 aggregate principal
amount of 6% convertible debentures (the "Convertible Debentures"), convertible
into Common Stock of the Company. After deducting legal fees of $35,000, and
placement agent fees of $550,000 directly attributable to such offering, the
Company received a net amount of $4,915,000. All Convertible Debentures were
issued to accredited investors as defined in Rule 501(a) of Regulation D
promulgated under the Act ("Regulation D") and the Company has received written
representations from each investor to that effect. One Hundred percent of the
face amount of the Convertible Debentures are convertible into shares of Common
Stock of the Company at the earlier of May 15, 1998 or the effective date of
this Registration Statement at a conversion price equal to 80% of the average
closing bid price for the ten trading days preceding the date of conversion. Any
Convertible Debentures not so converted are subject to mandatory conversion by
the Company on the 24th monthly anniversary of the date of issuance of the
Convertible Debentures. All of these debentures have been converted.
In June of 1998, the Company issued $2,000,000 aggregate principal
amount of 6% convertible debentures (the "Convertible Debentures"), convertible
into Common Stock of the Company. After deducting fees directly attributable to
such offering the Company received a net amount of $1,760,000. All Convertible
Debentures were issued to accredited investors as defined in Rule 501(a) of
Regulation D promulgated under the Act ("Regulation D") and the Company has
received written representation from each investor to that effect. One Hundred
percent of the face amount of the Convertible Debentures are convertible into
shares of Common Stock of the Company at the earlier of August 14, 1998 or the
effective date of this Registration Statement at a conversion price equal to 80%
of the average closing bid price for the ten trading days preceding the date of
conversion. Any Convertible Debentures not so converted are subject to mandatory
conversion by the Company on the 24th monthly anniversary of the date of
issuance of the Convertible Debentures. All of these debentures have been
converted.^
On August 31, 1998 the Company issued $3,832,849 aggregate principal
amount of 5% convertible debentures (the "Convertible Debentures") including a
25% premium and accrued interest, convertible into Common Stock of the Company.
The Company did not receive any cash proceeds from the offering of the
Convertible Debentures. The full amount was paid by investors to holders of the
Company's Convertible Debentures issued on March 16, 1998 holding $3,000,000 of
such Convertible
-36-
<PAGE>
Debentures as repayment in full of the Company's obligations under such
Convertible Debentures. During the same period the Company issued $2,311,000
aggregate principal amount of 5% Convertible Debentures, convertible into Common
Stock of the Company. After deducting fees, commissions and escrow fees in the
aggregate amount of $311,000 the Company received a net amount of $2,000,000.
The face amount of both Convertible Debentures are convertible into shares of
Common Stock of the Company commencing March 1, 1999 at a conversion price equal
to ^ 82% of the average closing bid price for the ten trading days preceding the
date of the conversion.^ Any convertible Debentures not so converted are subject
to mandatory conversion by the Company on the 24th monthly anniversary of the
date of issuance of the Convertible Debentures. As of December 3, 1999 an
unconverted balance of $4,980,594 remains outstanding.
On October 6, 1998 the Company issued $2,940,000 aggregate principal
amount of 5% convertible debentures (the "Convertible Debentures") including, as
part of the terms of this financing, $540,000 repurchase of stock (717,850 and
747,150 shares from Dominion Capital Fund, Ltd. and Sovereign Partners LP
respectively), convertible into Common Stock of the Company. After deducting
fees, commissions and escrow fees in the aggregate amount of $300,000 the
Company received a net amount of $2,100,000. The face amount of the Convertible
Debentures is convertible into shares of Common Stock of the Company any time
after the closing date at a conversion price equal to ^ 82% of the average
closing bid price for the ten trading days preceding the date of the
conversion.^ Any Convertible Debentures not so converted are subject to
mandatory conversion by the Company on the 24th monthly anniversary of the date
of issuance of the Convertible Debentures. None of these debentures have been
converted as of December 3, 1999.
The Registrant received gross proceeds of $1,080,000 in December, 1998,
pursuant to promissory notes bearing interest at the rate of 8% per annum for
the first 90 calendar days (through March 13, 1999) with the Company having the
option to extend the notes for an additional 60 days with interest increasing 2%
per annum during the 60 day period. The Company exercised its extension option.
As further consideration for the loan, the Company issued Lenders Warrants to
purchase up to 50,000 shares of the Company's common stock exercisable, in whole
or in part, for a period of up to 5 years at $.375 (the bid price for Company
shares on the date of closing). The promissory notes (held by Dominion Capital
Fund, Ltd. and Sovereign Partners) were not paid by their due date and the terms
of a Contingent Subscription Agreement, Debenture and Registration Rights
Agreement automatically went into effect with debentures bearing interest at the
rate of 5% per annum (payable in stock or cash at the Company's option) and
being convertible, at any time at ^ 82% of the 10 day average bid price for the
10 consecutive trading days immediately preceding the conversion date.^ The
documents also provide for certain Company redemption rights at percentages
ranging from 115% of the face amount of the Debenture to 125% of the face amount
of the debenture dependent upon redemption date, if any as more specifically set
forth in the last paragraph to this subsection.
The Company is also required to register those shares of common stock
underlying the convertible debentures. Accordingly, 231,426 shares are being
registered pursuant to the terms of such agreements .
On January 29, 1999 the Company issued a principal aggregate amount of
$1,170,000 of
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<PAGE>
convertible debentures ("Convertible Debenture"), convertible into Common Stock
of the Company at a conversion price of 82% of the average closing bid price for
the ten trading days preceding the date of conversion together with accrued
interest of 3% for the first 90 days, 3.5% for 91-120 days and 4% for 120 days
and thereafter. After deducing fees directly attributable to such offering the
offering the Company received a net amount of $1,020,000. All Convertible
Debentures were issued to accredited investors as defined in Rule 501(a) of
regulation D promulgated under the Act ("Regulation D") and the Company received
written representations from each investor to that effect. Any Convertible
Debenture not so converted are subject to mandatory conversion by the Company on
the 24th anniversary date of issuance of the Convertible Debentures. None of
these Convertible Debentures have been converted as of December 3, 1999.
On March 2, 1999 the Company entered into a second promissory note
(contingent convertible debenture financing) with the same lenders as the
December 1998 transaction described directly above (i.e., Dominion Investment
Fund LLC and Sovereign Partners LP) with terms and conditions identical to those
set forth above excepting (a) gross proceeds amounted to $1,110,000, (b) the
initial due date of such notes was May 31, 1999, (c) the potential 60 day
extension date on such promissory notes was July 30, 1999, but such extension
right was never utilized, (d) the conversion price is 80% of the 10 day average
closing bid price for the 10 consecutive trading days immediately preceding
conversion date and (e) Warrants were issued (similarly exercisable over 5
years) to purchase up to 50,000 shares of common stock at 125% of the average 5
day closing bid price of the Company's common stock immediately preceding the
date of closing but in no event at less than $1.00 per share. In all other
respects the terms and conditions of each of the documents executed with respect
to this transaction are identical in all material respects to those described
above regarding December 1998 transaction. The promissory notes were not paid by
their due date and the terms of a Contingent Subscription Agreement and
Registration Rights Agreement automatically went into effect and, accordingly,
the number of shares being registered for this transaction amounts to 234,031
shares.
On March 26, 1999 the Company entered into a third promissory note
(contingent convertible debenture financing) with terms and conditions identical
to those set forth in the March 2, 1999 promissory note financing referred to
directly above excepting (a) the lender is different, to wit: Aberdeen Avenue,
LLC, (b) gross proceeds amounted to $550,000, (c) the initial due date of such
note was June 25, 1999, (d) the potential 60 day extension date on such
promissory note was August 24, 1999 but such extension right was never utilized
(e) Warrants were issued (similarly exercisable over 5 years) to purchase up to
27,500 shares of common stock at 125% of the average 5 day closing bid price of
the Company's common stock immediately preceding the date of closing but in no
event at less than $1.00 per share. In all other respects the terms and
conditions of each of the documents executed with respect to this transaction
are identical to those described in the above referenced March 2, 1999
transaction. The promissory notes were not paid by their due date and the terms
of a Contingent Subscription Agreement and Registration Rights Agreement
automatically went into effect and, accordingly, the number of shares being
registered for this transaction amounts to 115,961 shares. ^
From May 14, 1999 to June 9, 1999 (in a single financing) the Company
issued a principal aggregate amount of $850,000 of convertible debentures
("Convertible Debentures"), convertible into
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Common Stock of the Company at a conversion price of 80% of the average closing
bid price for the ten trading days preceding the date of conversion together
with accrued interest of 5%. After deducing fees directly attributable to such
offering the offering the Company received a net amount of $772,727. All
Convertible Debentures were issued to accredited investors as defined in Rule
501(a) of regulation D promulgated under the Act ("Regulation D") and the
Company received written representations from each investor to that effect. Any
Convertible Debenture not so converted are subject to mandatory conversion by
the Company on the 24th anniversary date of issuance of the Convertible
Debentures. None of these Convertible Debentures have been converted as of
December 3, 1999.
On July 9, 1999 the Company entered into a fourth promissory note
(contingent convertible debenture financing) with terms and conditions identical
to those set forth in the March 2, 1999 promissory note financing referred to
directly above excepting (a) the lender is different, to wit: Southshore
Capital, Ltd. (b) gross proceeds amounted to $1,100,000, (c) the due date of
such note is August 23, 1999 with no right to extend and (d) the debenture
holder did not receive any warrants. ^ In all other respects the terms and
conditions of each of the documents executed with respect to this transaction
are identical to those described in the above referenced March 2, 1999
transaction. The promissory notes were not paid by their due date and the terms
of a Contingent Subscription Agreement, Convertible Debenture and Registration
Rights Agreement automatically went into effect and, accordingly, the number of
shares being registered for this transaction amounts to 230,729 shares.^
On August 11, 1999 the Company entered into a fifth promissory note
(contingent convertible debenture financing) with terms and conditions identical
to those set forth in the March 2, 1999 promissory note financing referred to
directly above excepting (a) the lender is different, to wit: Aberdeen Avenue,
LLC, (b) gross proceeds amounted to $1,400,000, (c) the due date of such note is
November 11, 1999 with no right to extend and (d) the debenture holder did not
receive any warrants. ^ In all other respects the terms and conditions of each
of the documents executed with respect to this transaction are identical to
those described in the above referenced March 2, 1999 transaction. The
promissory note was not paid on its due date and the terms of the Contingent
Subscription Agreement, Convertible Debenture and Registration Rights Agreement
automatically went into effect and, accordingly, the number of shares being
registered for this transaction amounts to 298,155 shares.^
In September 1999 and October/November 1999 the Company entered into
two separate transactions whereby in each instance it sold 1,000,000 restrictive
shares of its common stock at $1.00 per share in September 1999 and $1.50 per
share in October/November 1999. In accordance with the terms of such
Subscription Agreements and Registration Rights Agreements all 2,000,000 shares
sold are being registered herein.
EFFECT OF CURRENCY ON RESULTS OF OPERATIONS
The results of operations and the financial position of the Company's
subsidiaries outside of the United States are reported in the relevant foreign
currency (primarily in Swiss Francs) and then translated into US dollars at the
applicable foreign exchange rate for inclusion in the Company's
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consolidated financial statements. Accordingly, the results of operations of
such subsidiaries as reported in US dollars can vary significantly as a result
of changes in currency exchange rates (in particular the exchange rate between
the Swiss Franc and the US dollar).
YEAR ENDED JUNE 30, 1998 COMPARED TO YEAR ENDED JUNE 30, 1997
Net sales for the fiscal year ended June 30, 1998 were $22,892,978
compared to $13,151,701 for the fiscal year ended June 30, 1997.
The 74% increase in net sales was partially due to the acquisition of
Empower on April 1, 1997 (Sales of Empower were $7,134,938 for the fiscal year
ended June 30, 1998 compared to $2,000,603 for the fiscal year ended June 30,
1997), the Asset purchase of Service Support Group LLC on October 17, 1997
(Sales of Swissray Medical Inc. which started its selling activities after the
asset purchase of Service Support Group was $1,577,298 for the fiscal year ended
June 30, 1998 compared to $0 for the fiscal year ended June 30, 1997) and the
increase in sales made under the Philips OEM Agreement of $6,500,529. Also sales
to third parties in Switzerland almost doubled in the fiscal year ended June 30,
1998 compared with the previous fiscal year. These increases have been partially
offset by the decrease of $1,519,159 in sales of Elscint products and decreased
sales of $1,952,016 for Eastern Europe. The Company sold four of the
ddR-Multi-System during the fiscal year ended June 30, 1998.
Gross profits amounted to $4,811,192 or 21% of net sales for the fiscal
year ended June 30, 1998, compared to $4,706,287 or 35.8% of net sales for the
fiscal year ended June 30, 1997.The decrease in gross profits as a percentage of
net revenues is primarily attributable to the fact that sales of lower-margin
products increased substantially compared to the fiscal years ended June 30,
1997. This is mainly attributable to increased sales of accessories, which are
generally low-margin products, as a result of the acquisition of Empower (net
sales of Empower contributed approximately 31% to the Company's net sales). The
Company also sold a significant number of units of newly developed products,
where the Company is at the beginning of the learning curve in the production
process, which results in higher production costs than in a later stage of the
learning curve. These products are the Bucky Diagnost TS produced under the OEM
Agreement with Philips (which contributed approximately 22% to the Company's net
sales) and the ddR-Multi-System (which contributed approximately 6% to the
Company's net sales). The Company expects sales of accessories to be of a
smaller percentage of total sales for the fiscal year ending June 30, 1999
because of the sale of Empower's accessory business to E.M. Parker.
Operating expenses for the fiscal year ended June 30, 1998 were
$18,747,729 or 81.9% of net sales compared to $17,450,333 or 132.7% of net sales
for the fiscal year ended June 30, 1997. The principal items were selling
expenses of $3,740,391 or 16.3% of net sales compared to $1,873,389 or 14.2% of
net sales for the fiscal year ended June 30, 1997 and salaries (net of directors
and officers compensation) of $4,168,540 or 18.2% of net sales compared to
$2,059,396 or 15.6% of net sales for the fiscal year ended June 30, 1997.
Research and Development was $3,542,149 or 15.5% of net sales compared to
$5,786,158 or 44% of net sales for the fiscal year ended June 30, 1997.
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General and administrative expenses for the year ended June 30, 1997
include the value of stock options granted in the amount of $1,161,462, whereas
no stock options were granted during the fiscal year ended June 30, 1998. The
Company made an accrual of $500,000 for planned restructuring of its
organization. No such costs were accrued in the fiscal year ended June 30, 1997.
The increase of 102% in Salaries was mainly due to the acquisition of
Empower Inc. on April 1, 1997 (with salaries included in the consolidated
statement of operation only for one quarter of the fiscal year ended June 30,
1997) and the takeover of all of the employees of Service Support Group on
October 17, 1997. Both acquisitions were within the Company's marketing strategy
to build a strong market position with its own organization in one of its
principle markets. The number of employees in Switzerland was increased by 21
mainly to handle the significant rise in production volume.
The increase of 100% in selling expenses is the result of additional
significant efforts on the part of the Company to build a strong market position
in the United States and in Germany, the biggest European market as well as the
costs incurred for successful market introduction of the Company's direct
digital ddR-Multi-System. The Company also made efforts to lay the groundwork
for the market introduction of Swissray Information Solutions comprehensive
package of consulting, services and products.
Research and development expenses decreased by 39%. Management
considered the relative size of the research and development expenses for the
fiscal year ended June 30, 1997 as high. The main focus of the R&D was the
industrialization phase of the ddR-Multi-System and the development of
communication interfaces (DICOM 3.0, HL 7, Dicom Worklist etc.) to extend the
connectivity of the ddR-Multi-System to communication networks such as HIS, RIS,
and PACS. Another important task was to finalize the Tahoma TMSSM software and
go into beta-tests. The Tahoma TMSSM, technology management systems are based on
the premise that technology is a resource that can be managed to achieve
organizational objectives, like reducing operating expense and improving
clinical performance. Additional research and development expenses have also
been incurred to maintain the technological advantages of the Company's
conventional X-ray equipment. Significant research and development expenses will
continue to be incurred for the development of new technologically advanced
products and the continuing improvement of existing products.
The Company's operating loss increased to $13,936,537 for the fiscal
year ended June 30, 1998 from $12,744,046 for the fiscal year ended June 30,
1997. The increase in the Company's operating loss is due to the significant
expenses associated with the building of the Company's organization and market
position primarily in one of its principle markets, the USA. After taking into
account Interest expenses, other income, income tax benefits and extraordinary
items of income (loss) the resulting net loss of the Company for the fiscal year
ended June 30, 1998 increased to $22,503,109 from $13,685,188 for the fiscal
year ended June 30, 1997. The increase of net loss is mainly due to the
significant amount of interest expenses which resulted from the amortization of
issuance cost and beneficial Conversion features of Convertible debentures
issued for financing purposes, which amounted to $8,590,268 for the fiscal year
ended June 30, 1998 compared to $759,853 for the fiscal year ended June 30,
1997. Extraordinary income includes the Gain on early extinguishment of Debt
which resulted from refinancing of Convertible debentures.
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CASH FLOW AND CAPITAL EXPENDITURES
Cash used by operating activities for the fiscal year ended June 30,
1998 increased to $11,759,371 from $10,684,988 for the fiscal year ended June
30,1997 and cash used by investing activities increased to $4,517,140 for the
fiscal year ended June 30, 1998 from $3,668,196 for the fiscal year ended June
30, 1997. Cash flow from financing activities for the fiscal year ended June 30,
1998 was $14,799,200 compared to $14,752,928 for the fiscal year ended June 30,
1997.
The Company's capital expenditures totaled $2,849,205 for the fiscal
year ended June 30, 1998 compared to $3,431,375 for the fiscal year ended June
30, 1997. Capital expenditures were primarily for the improvements of the
Hochdorf facility and the purchase of equipment. The increased financing needs
resulted primarily from the building and strengthening of the Company's
organization and distribution channels in the US and Europe and the improvements
of the Hochdorf facility.
INFLATION
Inflation can affect the costs of goods and services used by the
Company. The competitive environment in which the Company operates limits
somewhat the Company's ability to recover higher costs through increasing
selling prices. Moreover, there may be differences in inflation rates between
countries in which the Company incurs the major portion of its costs and other
countries in which the Company sells its products, which may limit the Company's
ability to recover increased costs, if not offset by future increase of selling
prices. To date, the Company's sales to high-inflation countries have either
been made in Swiss Francs or US dollars. Accordingly, inflationary conditions
have not had a material effect on the Company's operating results.
SEASONALITY
The Company's business has historically experienced a slight amount of
seasonal variation with sales in the first fiscal quarter slightly lower than
sales in the other fiscal quarters due to the fact that the Company's first
quarter coincides with the summer vacations in certain of the Company's markets.
BACKLOG
Management estimates that as of the end of fiscal year ended June 30,
1999 the Company had an order backlog of $12,000,000 which consisted of
$8,000,000 in conventional x-ray equipment and $4,000,000 in digital (i,e.,
ddR-Multi-Systems and information solutions) as compared to an order backlog of
$13,000,000 which consisted of $11,500,000 in conventional x-ray equipment and
$1,500,000 in ddR-Multi-Systems as of the fiscal year ended June 30, 1998. As of
June 30, 1999 total backlog amounted to approximately $20,400,000 with
conventional x-ray equipment accounting for $4,500,000 and digital equipment
accounting for $15,900,000.
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NEW ACCOUNTING PRONOUNCEMENTS
in June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 103"), and No. 131, "Disclosure about Segments of an Enterprise and
Related Information" ("SFAS 131"). SFAS 130 established standards for reporting
and displaying comprehensive income, its components and accumulated balances.
SFAS 131 establishes standards for the way that public companies report
information about operating segments in annual financial statements and requires
reporting of selected information about operating segments in interim financial
statements issued to the public. Both SFAS 130 and SFAS 131 are effective for
periods beginning after December 15, 1997. The Company adopted these new
accounting standards in 1998, and their adoption had no effect on the Company's
financial statements and disclosures.
Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure.
Bederson & Company LLP ("Bederson") audited the books, records and
accounts of the Registrant for the fiscal year ended June 30, 1997. Bederson was
dismissed on November 7, 1997.
On November 7, 1997 the Board of Directors selected STG-Coopers &
Lybrand AG ("STG") as the Registrant's auditors for the fiscal year ending June
30, 1998 and this action was ratified by the stockholders at the Annual Meeting
held on December 23, 1997.
On November 2, 1998 (after having failed to complete the audit for
fiscal year ended June 30, 1998 in a timely manner or otherwise) STG advised the
Company that it had determined to cease to represent the Company. On November 6,
1998 the Company engaged Feldman Sherb Ehrlich & Co., P.C. ("FSE") as its new
independent accountants and such firm commenced and concluded its audit so that
the Company was able to file its Form 10-K on December 3, 1998. STG acknowledged
in its required letter to the SEC that there were no disagreements, as defined
by Rule 304 of Regulation S-K during the period that STG served as the Company's
auditors through the date of STG's resignation.
^
BUSINESS
Overview
The Company is active in the markets for diagnostic imaging devices for
the health care industry. Diagnostic imaging devices include X-ray equipment,
computer tomography ("CT") systems and magnetic resonance imaging ("MRI")
systems for three dimensional projections, nuclear medicine ("NM") imaging
devices and ultrasound devices. The Company is primarily engaged in the business
of manufacturing and selling diagnostic X-ray equipment for all radiological
applications other than mammography and dentistry. In addition, the Company is
in the business of selling imaging systems and components and accessories for
X-ray equipment manufactured by third parties and providing services
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related to diagnostic imaging.
X-rays were discovered in 1895 by Wilhelm Konrad Rontgen. Shortly
thereafter, X-ray imaging found numerous applications for medical diagnostic and
non-medical purposes. Today, medical X-ray imaging is a fundamental tool in bone
and soft tissue diagnosis. X-ray diagnosis is primarily used in orthopedics,
traumatology, gastro-enterology, angiography, urology, pulmology, mammography
and dentistry. The principal elements of a diagnostic X-ray system are the X-ray
generator, the X-ray tube and the bucky device. The generator generates high
tension, which is converted into X-rays in the X-ray tube. The X-rays so created
then penetrate a patient's body and subsequently expose a film contained in the
bucky device. Following exposure, the film is chemically processed and dried in
a dark room. A typical room used for general X-ray examinations (bucky room)
contains an X-ray system which includes a table with a bucky device for
examinations of recumbent patients (bucky table) and a wall stand with a second
bucky device for examinations of sitting and standing patients (bucky wall
stand).
The film used in conventional X-ray systems has certain inherent
disadvantages, including the significant amount of time and operating expenses
associated with the handling, processing and storage thereof, the need for
chemicals to develop films and the environmental concerns related to their
disposal. Additional expenses and inconveniences arise in connection with the
storage, duplication and transportation of conventional films. The following
X-ray systems have been developed to overcome these disadvantages: scanning
devices, phosphor plate or Computed Radiography(TM) ("CR") systems and direct
digital radiography ("ddR") systems. Scanning devices are used to convert
existing X-ray images into a digital form. While the use of scanning devices
permits the electronic storage, retrieval and transmission of X-ray images, they
do not eliminate the other inconveniences of conventional films and add time and
expenses associated with the scanning process. In a CR system the film cassette
is replaced with a phosophor plate which is electrically charged by X-rays. The
electrical charges on this phosphor plate are then converted into digital
information by a laser scanner. Although this system has the advantage that the
phosphor plates are reusable and the inconveniences related to the development
of X-ray films are eliminated, it does not achieve instant images and a
significant amount of time and operating expenses are required in connection
with the handling and scanning of the phosphor plates. Additional expenses arise
due to the fact that phosphor plates have a limited lifespan.
ddR technology is designed to eliminate the disadvantages and
significant operating costs associated with conventional X-ray systems and CR
systems. With ddR technology digital information can be made available for
diagnostic purposes within a few seconds after an X-ray image is taken without
any additional steps, thereby reducing processing time and related operating
expenses. Direct digital X-ray technology uses either charge coupled devices
("CCD") arrays, amorphous silicon/selenium panels or selenium drums to convert
X-rays into digital information. To the Company's knowledge, no silicon or
selenium-based technology is currently available for purposes of general X-ray
diagnosis. To the Company's knowledge, the only CCD based direct digital
technology available for general diagnostic purposes is the Company's AddOn
Bucky(R). While other CCD based direct digital X-ray systems are used for dental
X- ray imaging and chest examinations, the Company believes that neither such
technologies nor the silicium based technology used in a chest examination
system offered by one of
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the Company's competitors can easily be adapted for general diagnostic purposes
because none is capable of providing the resolution necessary to obtain digital
information with sufficient diagnostic value on a standard 14" by 17" X-ray
image.
Products
The Company's marketing strategy is to offer its customers a complete
package of products and services in the field of radiology, including equipment,
accessories and related services such as consulting and after-sales services.
The Company's products include a full range of conventional X-ray equipment for
all diagnostic purposes other than mammography and dentistry, the direct digital
ddR-Multi-System and the SwissVision(TM) line of DICOM 3.0 compatible
postprocessing work stations operating on a Windows NT platform. Currently, most
of the Company's X-ray equipment is manufactured and developed in Switzerland.
On March 8, 1999 Swissray Medical AG, the Company's Swiss research and
development, production and marketing subsidiary became ISO 9001 and EN 46001
certified. Appendix II for CE - Certification is expected to be completed in
September 1999, which allows the Company to use the CE-Label, including the
medical device numbers for all products manufactured and/or sold through the
Company. See also "Products - Distribution of Agfa Products" and "Government
Regulation".
Digital ddR-Multi-System/SwissVision
The ddR-Multi-System, which includes a SwissVision(TM) workstation for
the postprocessing of digital image data and the transfer of such data through
central networks or via telecommunications systems, is a complete multi-
functional direct digital X-ray system which combines the functions of a
conventional bucky table and a bucky wall stand. The Company's own estimates and
research into this area indicate that the ddR-Multi-System is the first direct
digital radiography system available which allows for substantially all plane
X-ray examinations on the recumbent, upright and sitting patient necessary in
orthopedics, emergency rooms and chest examination rooms. The ddR-Multi-System
uses the Company's AddOn Bucky(R) as the digital detector. The AddOn Bucky(R) is
able to make available an X-ray image in a direct digital way for diagnostic
study within 16 to 20 seconds. As a consequence, the efficiency and the
throughput of the bucky room can be increased. The Company believes that a
significant advantage of the Company's ddR-Multi-System is the fact that a
variety of X-ray examinations can be made with the use of only one digital
detector, the most expensive part of an X-ray system using direct digital
technology.
During the 100 years in which X-ray imaging has been used for medical
purposes, there has been a continuous trend to improve image quality, to reduce
the radiation dose and to improve the ergonomic features of X-ray equipment.
Management believes that the ddR technology developed by the Company will take
this development to the next level because the ergonomically advanced
ddR-Multi-System provides excellent image quality with minimal radiation doses
and at the same time reduces operating expenses through the elimination of
films, phosphor plates or cassettes and the handling, development and storage
thereof.
The Company's line of SwissVision(TM) postprocessing workstations permit
the postprocessing
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of digital X-ray images, including section, zooming, enlargement, soft tissue
and bone structure imaging, accentuation of the limitation of the joints, noise
suppression, presentation of different fields of interest within an area and
archiving and transferring the data through central networks and
telecommunication systems. In addition, the SwissVision(TM) post-processing
workstations are able to analyze data stored with respect to a particular
patient. As a result, consistent image quality of different images of the same
patient can be achieved. The workstations operate on a Windows NT platform and
are DICOM 3.0 compatible. The Company is also offering products and services
related to networking, archiving and electronic distribution of digital X-ray
images, including PACS.
Conventional X-Ray Equipment, Imaging Systems, Components and Accessories
The Company manufactures and sells conventional diagnostic X-ray
equipment for all radiological applications other than mammography and
dentistry. The conventional X-ray equipment manufactured by the Company includes
X- ray generators, basic X-ray equipment, bucky table systems, mobile X-ray
systems, mobile C-arm systems, fluoroscopy systems, urology systems and remote
controlled examination systems. In addition, the Company sells components and
accessories for X-ray systems. In general, the components and accessories for
X-ray equipment sold by the Company are manufactured by third parties. In
Switzerland, the Company was the exclusive distributor of CT systems, MRI
systems and NM systems manufactured by Elscint. No sales were made under such
distributorship arrangement for the fiscal year ended June 30, 1998 while for
the fiscal year ended June 30, 1997 revenues under such agreement approximated
12% of total sales. The Company does not currently have any business
arrangements with Elscint in that such firm sold all or part of its company to
Picker International Inc. and GE Medical Systems in the later part of 1998.
Original Equipment Manufacturing (OEM)
On June 11, 1996, the Company entered into a new OEM Agreement (the
"Philips OEM Agreement") with Philips Medical Systems which replaced the
previous OEM Agreement with Philips Medical Systems, dated July 29, 1992. The
Philips OEM Agreement provides for the production of two conventional X-ray
systems, the Bucky Diagnost TS bucky table and a Multi Radiography System
("MRS"), which is approved by the World Health Organization ("WHO") as a World
Health Imaging System for Radiology ("WHIS-RAD"). As a result, the Company's MRS
system may be tendered in projects financed by the World Bank. Under the Philips
OEM Agreement these two products are marketed worldwide by Philips Medical
Systems through its existing distribution network. The initial term of the
Philips OEM Agreement expires on December 31, 2000. See also risk factor
entitled "Reliance on Large Customers".
Services
The services offered by the Company include the installation and
after-sales servicing of imaging equipment sold by the Company, consulting
services and application training of radiographers. In the United States, the
Company offers consulting services to hospital imaging departments and imaging
centers, including maintenance management, and after-sales services of products
manufactured by the Company and third parties. Maintenance management services
for imaging
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equipment include the management of after-sales services with respect to
different kinds and brands of imaging equipment (multi-vendor and multi-modality
services).
Distribution of Agfa Products
In April of 1998 the Company entered into a OEM Agreement with Agfa for
the distribution of the latter's laser imagers, dry printers and computed
radiography systems. By virtue of having entered into such distribution
agreement, the Company is able to offer a complete solution for a total digital
radiology department. Both Company products and Agfa products are DICOM 3.0
compatible and can be used on a network or for point-to-point connections. Agfa,
a leading worldwide manufacturer of imaging products and systems, is part of the
Agfa-Gevaert Group, with Agfa-Gevaert being a wholly owned subsidiary of Bayer
AG.
Markets
Product Markets
The Company estimates that the global market for X-ray equipment and
accessories is approximately $5 billion, 45% of which is in the United States,
26% in Western Europe, 19% in Japan and 10% in the rest of the world (Sources:
National Electrical Manufacturers Association; Market Line). The Company's
principal markets for its X-ray equipment, components and accessories by country
are Switzerland, the United States and Germany constituting 73%, 23% and 4% of
the Company's sales during the fiscal year ended June 30, 1999 respectively. The
Company believes that because of the need to bring medical services to Western
standards, Eastern Europe continues to offer interesting opportunities as a
market for the Company's conventional X-ray equipment and accessories. The
Company has also been able to gain access to markets in Asia, the Middle East
and Africa. See "-- Sales and Marketing."
The Company believes that the principal markets for its direct digital
X-ray equipment are located in North America and Western Europe, where the first
sales of the ddR-Multi-System have been made. The Company submitted both its
AddOn Bucky(R) and the ddR-Multi-System to the FDA for Section 510(k) clearance.
On November 21, 1997, the Company's AddOn Bucky(R), the direct digital detector
of the ddR-Multi-System, received FDA approval and on December 18, 1997 the
Company's ddR-Multi-System received FDA approval; the Company thus receiving
authorization to market the ddR-Multi-System in the United States. Having
obtained the required approval from the FDA, the Company intends to sell the
ddR-Multi-System in the United States through its subsidiaries and other
channels. See "Risk Factors -- Government Regulation" and "Business --
Regulatory Matters."
Service Markets
The Company estimates that the worldwide market for services related to
X-ray equipment, including maintenance management is approximately $44 billion,
of which approximately $40.5 billion (or 92%) relate to after-sales services.
The markets for maintenance management and capital planning amount to $3.4
billion or 8% of the total market for services related to X-ray equipment. The
principal
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markets for after-sales services are the United States (45%), Western Europe
(26%) and Japan (19%). The Company expects that as the installed base of X-ray
equipment grows, the market for after-sales services will also expand.
Additional growth may result from a general increase in the demand for such
services. To date, a significant market for maintenance management and capital
planning has only developed in the United States as a result of the impact of
managed care plans and health maintenance organizations ("HMOs") on the health
care industry. The Company expects that in the future there will be a similar
trend in Europe, which may lead to the development of a market for such services
in Europe. See "-- Products" and "-- Sales and Marketing." The Company currently
intends to continue to concentrate its marketing efforts within Switzerland and
U.S. wherein approximately 90% of all Company sales were concluded during fiscal
year ended June 30, 1999, with Switzerland accounting for 73% of all sales and
the U.S. accounting for 23% of such sales (and with the balance of 4% of sales
being conducted in Germany). See also Note 19 to audited financial statements.
Sales and Marketing
The Company's customers are universities, hospitals, clinics, imaging
centers and physicians . The Company markets its products and services primarily
through its own sales force in the United States, Switzerland, Germany and
Eastern Europe and through resellers in these and other markets in Europe,
Middle East, Africa, Asia, and Latin America. The Company also offers products
and services related to networking, electronic archiving and distribution,
including PACS, through the Swissray Information Solution division.
Two of the Company's products, the MRS system and the Bucky Diagnost TS
system, are distributed worldwide through Philips Medical Systems.
The Company believes that in the foreseeable future there will be a
continuous world-wide growth in the markets for complete X-ray systems,
components, accessories and related services because of the improvement of
health care services in developing countries and Eastern Europe and the
necessity to meet increasingly stricter regulations with respect to radiation
dosage and other safety features and environmental hazards in many
jurisdictions. With the transition from conventional to digital X-ray systems,
the demand for products and services related to networking, archiving and
electronic distribution of digital X-ray images will grow in industrialized
countries. In these markets the demand for conventional X-ray equipment,
accessories and related services will decrease over time. See "-- Markets."
In August of 1999 the Company signed a one year exclusive sales,
marketing and service agreement with Hitachi Medical Systems America, Inc.
(HMSA), a subsidiary of Hitachi Medical Corporation. Under the terms of the
agreement HMSA will provide sales, marketing, and service for the distribution
of Swissray's ddR-Multi-System to end users within certain defined territories
within the United States.
The defined territories referred to consist of the entire U.S.
excepting for (a) the states of Alabama, Arizona, Connecticut, Mississippi,
Maine, Massachusetts, New York, Rhode Island, Vermont and New Hampshire, (b) a
portion of New Jersey that includes the Atlantic City Expressway and north,
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(c) certain designated counties within the state of Pennsylvania, (d) the
counties Orange and San Diego within the state of California, and (e) the
Panhandle of Florida - Tallahassee west.
Additionally, the Agreement contains provisions whereby additional
exclusions exist with respect to various identified customers reserved to the
Company principally due to the Company's prior contact with and/or dealings with
such clientele.
In addition HMSA will utilize and promote the Swissray Information
Solutions services and products consisting of consulting and product solutions
for medical imaging informatics.
In the past, the Company has made a significant amount of sales of its
X-ray equipment to a few large customers. For the fiscal year ended June 30,
1999 sales to the Company's single largest customer accounted for approximately
54% of all revenues.
The Company considers the relationship with its largest customers to be
satisfactory. Historically, the identity of the Company's largest customers and
the volumes purchased by them has varied. The loss of the Company's current
single largest customer or a reduction of the volume purchased by it would have
an adverse effect upon the Company's sales until such time, if ever, as
significant sales to other customers can be made. The Company expects that as
sales of its ddR-Multi-System increase, the Company's revenue will be less
dependent on a few large customers. See "Risk Factors -- Reliance on Large
Customers" and Notes to the Company's Consolidated Financial Statements.
In August 1998 the Company entered into a global distributorship
agreement for its ddR-Multi-System with Elscint Ltd. of Haifa to sell and
service such product in 14 countries in Europe, Canada, South America and
Africa. Soon thereafter almost all of the assets of Elscint Ltd. were sold to
Picker International and GE Medical Systems respectively. Neither Picker
International nor GE Medical Systems have executed or honored the
distributorship agreement as of the date hereof and therefore the Company was
unable to sell the anticipated 75 ddr-Multi-Systems (partially anticipated to be
sold through Elscint Ltd.) within the fiscal year 98/99 as originally planned.
Research and Development
During the fiscal year ended June 30, 1999 the Company incurred
expenses regarding research and development of $1,808,107 (accounting for 12% of
the Company's operating expenses) compared to $3,542,149 (accounting for 19% of
the Company's operating expenses) for fiscal year ended June 30, 1998 and
compared to $5,786,158 (accounting for 33% of the Company's operating expenses)
for fiscal year ended June 30, 1997. The decrease of the Company's research and
development expenses by 68% from the fiscal year ended June 30, 1997 to the
fiscal year ended June 30, 1999 resulted primarily from the fact that principal
costs associated with development of the direct digital detector, the unique
AddOn-Bucky have been completed. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations." During the quarter ended
September 30, 1999 the Company incurred additional research and development
expenses of $465,232 (accounting for approximately 16% of the Company's
operating expenses).
The Company will continue to have significant research and development
expenses associated
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with the development of new products (including diagnostic hardware and software
products and new digital X-ray products) and improvements to existing products
manufactured by the Company. New products currently being developed by or on
behalf of the Company include a new direct digital chest examination system
(ddRChest-System), a direct digital universal radiography system (ddRCombi) and
a multi-functional floating table.
As of September 30, 1999, the Company employed 11 people in research
and development. The number of people employed in research and development has
increased by 10% since June 30, 1998. The Company is outsourcing certain
research and development activities and intends to continue this policy in the
future.
The Company has established a scientific advisory board to support its
research and development projects and to enable the Company to develop
technologically advanced products. The Company believes that the integration of
academic institutions and hospitals will allow the Company to save research and
development expenses and will provide it with access to clinical and scientific
experience and know-how.
Raw Materials and Suppliers
The Company has a policy of outsourcing the manufacturing of components
for its X-ray equipment whenever such outsourcing is more efficient and cost
effective than in-house production. In particular, components for which serial
production is available are produced by third-party manufacturers according to
Company specifications. Generally, the X-ray accessories sold by the Company are
manufactured by third parties.
There is virtually no stock of finished X-ray equipment on the
Company's premises for any extended period of time since X-ray equipment is
generally manufactured at a customer's request. At September 30, 1999 finished
products accounted for approximately 10% of inventory while raw material, parts
and supplies accounted for approximately 72% of inventory and work in process
for approximately 18%.
The percentage of Company revenues derived from products which included
components then only currently available from a single source supplier amounted
to 13.6% as of June 30, 1999 of which 13.6% related to the single source
supplier of certain camera electronics while 13.6% related to the single source
supplier of optics (both items are included in the same product). The agreement
with the single source supplier of certain camera electronics will be terminated
December 31, 1999 due to the fact that its manufacturing plant where the camera
electronics had been manufactured is scheduled to be permanently closed on such
date and Company management was not satisfied with proposals submitted to it by
such supplier regarding the latters intentions of establishing a new
manufacturing plant. Company agreement with its new supplier of camera
electronics provides for avability of such camera electronics to the Company
commencing January 1, 2000. The Company currently has 160 CCD cameras in stock
which will be used for the next 40 ddR-Systems, which 40 systems represent the
number of ddRMulti-Systems orders as of November 26, 1999. New camera sysems
have been ordered for use in an additional 50 ddRMulti-Systems with an expected
delivery
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date of such cameras in March 2000. As orders for ddRMulti-Systems increase
additional CCD cameras (four per system) can be ordered; it being management's
intention to have a sufficient number of CCD cameras on hand to cover in excess
of those immediately required to cover orders. The Company has concluded
negotiations with a satisfactory and comparable source supplier and does not
expect any material business interruptions to occur regarding CCD camera
availability in a timely manner nor does it anticipate that change of supplier
will have any affect upon quality of its ddR-Systems. The agreement with the
single source supplier of optics expires in July 2002 and is subject to
renegotiations which are expected to occur assuming contract fulfillment
continues to be concluded in a timely and satisfactory manner with price and
payment terms being comparable to those currently being utilized and meeting
Company capacity requirements. The percentage of revenues from this single
source supplier of optics amounted to approximately 13.6% at fiscal year ended
June 30, 1999. While management has no current expectation or need to replace
this supplier it does not envision encountering any material difficulties in
replacing such supplier (with a different optics manufacturer having the ability
to timely deliver comparable optic quality) if necessary in the event of any
unforeseen circumstances which may require replacement. This agreement may not
be terminated by either party without cause.
Backlog
Management estimates that as of the end of fiscal year ended June 30,
1999 the Company had an order backlog of $12,000,000 which consisted of
$8,000,000 in conventional x-ray equipment and $4,000,000 in digital (i.e.,
ddR-Multi-Systems and information solutions) as compared to an order backlog of
$13,000,000 which consisted of $11,500,000 in conventional x-ray equipment and
$1,500,000 in ddR-Multi-Systems as of the fiscal year ended June 30, 1998. The
Company had previously reported an order backlog for its digital x-ray equipment
as of June 30, 1997 of $30,000,000; $29,000,000 of which related to a contract
with a purchaser located in South Korea. As a result of certain recent economic
problems in South Korea, management currently does not expect that such order
will be filled (to any significant degree) in the current calendar year (if at
all) absent a dramatic positive change in such economic conditions which
currently is not expected to occur. Accordingly, the Company no longer, for
practicable purposes, considers such South Korea contract to be part of its
backlog. The Company believes that substantially the entire order backlog for
conventional X-ray equipment (which consists primarily of orders under the
Philips OEM Agreement) will be filled during the current fiscal year. While the
Company expects to continue to have a certain order backlog for conventional
X-ray equipment (exclusive of that indicated above) in the future because of the
Philips OEM Agreement, the order backlog for digital X-ray equipment is likely
to be substantially reduced in the future as the Company estimates that orders
for such equipment will typically be filled within three months.
Competition
X-Ray Equipment Market
The markets in which the Company operates are highly competitive. Most
of the Company's competitors are significantly larger than the Company and have
access to greater financial and other resources than the Company. The principal
competitors for the Company's X-ray equipment are
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General Electric, Siemens, Toshiba, Trex Medical, Shimatsu, Picker and Philips.
In general, it is the Company's strategy to compete primarily based on the
quality of its products. In the market for conventional X-ray equipment, the
Company's strategy is to focus on niche products and niche markets.
To the Company's knowledge the only direct digital X-ray systems for
medical diagnostic purposes other than the ddR-Multi-System currently available
are chest examination systems offered by Philips, IMIX and Odelft. In addition,
there are several direct digital X-ray systems available for dental purposes.
None of these systems is able to perform bone examinations on extremities. To
the best of management's knowledge the Company's ddR-Multi-System is the only
multi- functional direct digital X-ray system currently available which allows
all plane X-ray examinations on the recumbent, upright and sitting patient
without the use of cassettes, films, chemicals or phosphor plates. A number of
companies, including certain of the Company's competitors in the markets for
conventional X-ray equipment, are currently developing direct digital X-ray
detectors or direct digital X-ray systems for specific applications (including
mammography). See "-- Products," "-- Markets," "Risk Factors --Competition."
Service Market
In the markets for services related to imaging equipment the Company's
competitors are equipment manufacturers (including certain of the Company's
competitors in the X-ray equipment market) and independent service
organizations. In the service markets, it is the Company's strategy to build a
market position based on the confidence of its customers in the quality of its
products and service personnel. See "-- Products," "-- Markets," "Risk Factors
- -- Competition."
Intellectual Property
The Company has obtained patent protection for certain aspects of its
conventional X-ray technology. The Company has filed patent applications
covering certain aspects of its direct digital technology in key markets in
Europe, North America and Asia, including the United States, Canada, Switzerland
and Germany. The Company has obtained for one of its two patents the European
patent as well as the U.S. patent. Although the Company believes that its
products do not infringe patents or violate proprietary rights of others, it is
possible that infringement of proprietary rights of others has occurred or may
occur. In the event the Company's products infringe patents or proprietary
rights of others, the Company may be required to modify the design of its
products or obtain a license. There can be no assurance that the Company will be
able to do so in a timely manner, upon acceptable terms and conditions or at
all. The failure to do any of the foregoing could have a material adverse effect
upon the Company. In addition, there can be no assurance that the Company will
have the financial or other resources necessary to enforce or defend a patent
infringement action and the Company could, under certain circumstances, become
liable for damages, which also could have a material adverse effect on the
Company.
The Company also relies on proprietary know-how and employs various
methods to protect its concepts, ideas and technology. However, such methods may
not afford complete protection and there can be no assurance that others will
not independently develop such technology or obtain access to the
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Company's proprietary know-how or ideas. Furthermore, although the Company has
generally entered into confidentiality agreements with its employees,
consultants and other parties, there can be no assurance that such arrangements
will adequately protect the Company. The Company has obtained licenses to use
certain technology which is essential for certain of the Company's products,
including certain software used for its line of SwissVision(TM) postprocessing
systems. The software license is a worldwide, non-exclusive, non-transferable
license recently extended to July 31, 2000 to use and distribute the Agfa
software in combination with the Add-On Bucky.
The Company considers the Swissray name as material to its business and
has obtained, or is in the process of obtaining, trademark protection in key
markets. The Company is not aware of any claims or infringement or other
challenges to the Company's rights to use this or any other trademarks used by
the Company. See "Risk Factors -- Dependence on Patents and Proprietary
Technology."
Regulatory Matters
The Company's X-ray equipment, components and related accessories are
subject to regulation by national or regional authorities in the markets in
which the Company operates. Pursuant to the Federal Food, Drug and Cosmetic Act,
X-ray equipment is a class II medical device which may not be marketed in the
United States without prior approval from the FDA.
The FDA review process typically requires extended proceedings
pertaining to the safety and efficacy of new products. A 510(k) application is
required in order to market a new or modified medical device. If specifically
required by the FDA, a pre-market approval ("PMA")may be necessary. Such
proceedings, which must be completed prior to marketing a new medical device,
are potentially expensive and time consuming. They may delay or hinder a
product's timely entry into the marketplace. Moreover, there can be no assurance
that the review or approval process for these products by the FDA or any other
applicable governmental authorities will occur in a timely fashion, if at all,
or that additional regulations will not be adopted or current regulations
amended in such a manner as will adversely affect the Company. Moreover, such
pre-marketing clearance, if obtained, may be subject to conditions on the
marketing or manufacturing of the ddR-Multi-System which could impede the
Company's ability to manufacture and/or market the product. The Company
submitted both its AddOn-Bucky(R) and the ddR-Multi-System for Section 510(k)
clearance with the FDA. On November 21, 1997, the Company's AddOn Bucky(R), the
direct digital detector of the ddR-Multi-System, received FDA approval and on
December 18, 1997 the Company's ddR-Multi-System received FDA approval; the
Company thus receiving authorization to market the ddR-Multi-System in the U.S.
The FDA also regulates the content of advertising and marketing materials
relating to medical devices. There can be no assurance that the Company's
advertising and marketing materials regarding its products are and will be in
compliance with such regulations.
The Company is also subject to other federal, state, local and foreign
laws, regulations and recommendations relating to safe working conditions,
laboratory and manufacturing practices. The electrical components of the
Company's products are subject to electrical safety standards in many
jurisdictions, including Switzerland, EU, Germany and the United States. The
Company believes that it is in compliance in all material respects with
applicable regulations. Failure to comply with applicable
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regulatory requirements can result in, among other things, fines, suspensions of
approvals, seizures or recalls of products, operating restrictions and criminal
prosecutions. The effect of government regulation may be to delay for a
considerable period of time or to prevent the marketing and full
commercialization of future products or services that the Company may develop
and/or to impose costly requirements on the Company. There can also be no
assurance that additional regulations will not be adopted or current regulations
amended in such a manner as will materially adversely affect the Company. See
"Risk Factors -- Risks Associated With International Operations," "-- Government
Regulations," "Business -- Markets" and "-- Regulatory Matters." Company product
certifications may be briefly summarized as follows: On March 8, 1999 Swissray
Medical AG, the Company's Swiss research and development, production and
marketing subsidiary became ISO 9001 and EN 46001 certified. Appendix II for CE
- - Certification is expected to be completed in September 1999, which allows the
Company to use the CE-Label, including the medical device numbers for all
products manufactured and/or sold through the Company. See also "Government
Regulation".
Environmental Matters
The Company is subject to various environmental laws and regulations in
the jurisdictions in which it operates, including those relating to air
emissions, wastewater discharges, the handling and disposal of solid and
hazardous wastes and the remediation of contamination associated with the use
and disposal of hazardous substances. The Company owns or leases properties and
manufacturing facilities in Switzerland, the United States and Germany. The
Company, like its competitors, has incurred, and will continue to incur, capital
and operating expenditures and other costs in complying with such laws and
regulations in both the United States and abroad as may specifically apply to
it. The Company does not believe that it has been involved in utilization of any
types of substances and/or wastes which it considers to be hazardous and the
operation of its business (or former business), accordingly, is not believed to
have created any potential liability involving environmental matters. Although
the Company believes that it is in substantial compliance with applicable
environmental requirements and the Company to date has not incurred material
expenditures in connection with environmental matters, it is possible that the
Company could become subject to additional or changing environmental laws or
liabilities in the future that could result in an adverse effect on the
Company's financial condition or results of operations. See "Risk Factors --
Environmental Matters."
Employeess
After giving effect to the Empower, Inc. transaction heretofore
initially referred to on page 5 of this Registration Statement, the Company has
101 employees worldwide, of which 25 were employed by subsidiaries in the United
States, 70 in Switzerland, and 6 in European countries other than Switzerland.
The Company believes that its relationship with employees is satisfactory. The
Company has not suffered any significant labor problems during the last five
years.
Description of Property
On April 12, 1997, the production facility rented by the Company in
Hochdorf, Switzerland was affected by a fire in an adjacent facility. On May 15,
1997, the Company purchased a new office and
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production facility of approximately 43,000 square feet and moved its entire
production to this facility and has since moved the offices and other facilities
formerly located in its Hitzkirch facility to the new Hochdorf facility. The
Company believes that its new Hochdorf facility provides it with sufficient
production and office space to meet its demand in Switzerland in the foreseeable
future.
The Company also leases office space in New York City, Brno, Czech
Republic, Gig Harbor, Washington and Wiesbaden, Germany.
Legal Proceedings
A. On or about October 3, 1997, the Registrant and Swissray Healthcare, Inc.
were served with a complaint by a company engaged in the business of providing
services related to imaging equipment alleging that defendant received benefits
from breach of fiduciary duties and contract obligations and misappropriation of
trade secrets by certain former employees of such competitor. Such company also
obtained a temporary restraining order against the Registrant and Swissray
Healthcare, Inc. in the aforesaid action entitled Serviscope Corporation v.
Swissray International, Inc., and Swissray Healthcare, Inc. commenced in the
Supreme Court of the State of New York under Index No. 605091/97. On November
10, 1997, the Court denied a Motion for a preliminary injunction and the
temporary restraining order was vacated. On December 1, 1997 and January 30,
1998 the Registrant answered the Complaint and Amended Complaint respectively by
denying the allegations contained therein. The Plaintiff in such action (on
December 2, 1997) filed a Motion to reargue and renew its prior denied Motion
for a Preliminary Injunction and such Motion was (by Order and Decision dated
June 17, 1998) denied. The Company denied the allegations, vigorously defended
the litigation and thereafter settled such litigation and all outstanding
matters with respect thereto in July 1998 for $60,000.
B. Dispute with Gary J. Durday ("Durday"), Kenneth R. Montler ("Montler") and
Michael E. Harle ("Harle"). On July 17, 1998, two legal proceedings were
commenced by Swissray, and two of its subsidiaries against Durday, Montler and
Harle. Harle and Montler are former Chief Executive Officers of Swissray Medical
Systems Inc. and Swissray Healthcare Inc., respectively, and Durday is the
former Chief Financial Officer of both of those companies. Each of them was
employed pursuant to an Employment Agreement dated October 17, 1997. In
addition, these three individuals were owners of a company by the name of
Service Support Group LLC ("SSG"), the assets of which were sold to Swissray
Medical Systems Inc. pursuant to an Asset Purchase Agreement dated as of October
17, 1997. whereby Messrs. Durday, Montler and Harle received, among other
consideration, 33,333 shares of Swissray's common stock, together with a put
option entitling these individuals to require Swissray to purchase any or all of
such shares at a purchase price equal to $45.00 per share (on or after June 30,
1998 and until April 16, 1999).
On July 17, 1998, Swissray and its subsidiaries, Swissray Medical Systems
Inc. and Swissray Healthcare Inc. commenced an arbitration proceeding before the
American Arbitration Association in Seattle, Washington (Case No. 75 489 00196
98) alleging that Messrs. Durday, Montler and Harle fraudulently induced
Swissray and its subsidiaries to enter into the above referenced Asset Purchase
Agreement and otherwise breached that Agreement. The relief sought in the
arbitration proceeding
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was the recovery of damages suffered as a result of this alleged wrongful
conduct and a rescission of the put option provided for in the Asset Purchase
Agreement. Messrs. Durday, Montler and Harle responded to the allegations made
in the arbitration proceeding and asserted counterclaims against Swissray and
its subsidiaries claiming a breach by them of their obligations under the Asset
Purchase Agreement and other relief. The arbitration took place in Seattle on
January 8-10, 1999; the proceeding concluded on January 27, 1999 after the
submission of post-hearing briefs. On February 23, 1999, the Arbitrator issued
his ruling, awarding Messrs. Durday, Montler and Harle $1,500,000 and ordering
them to surrender all rights to 33,333 shares of Swissray common stock. On
February 26, 1999, Swissray and Swissray Medical Systems Inc. filed a petition
in Supreme Court, New York County (Index No. 99/104017) to vacate the above
referenced arbitration award. By order dated July 8, 1999 such motion was denied
and the court confirmed the aforesaid arbitration award.
In addition to the above referenced arbitration proceeding, Swissray
and its subsidiaries commenced an action against Messrs. Durday, Montler and
Harle in the Supreme Court of the State of New York, County of New York,
alleging that these individuals breached the obligations undertaken by them in
their respective Employment Agreements. Further, Messrs. Durday, Montler and
Harle commenced an action in Superior Court in Pierce County, Washington
(September 1998 under Cause No. 98-2-10701-0), and asked that Court to
adjudicate the issues raised in the above referenced New York State Court
action. Swissray filed applications in both the Washington and New York
litigations urging that, because the action was first filed in New York, the New
York court, rather than the Washington court, should decide where the litigation
should proceed. Messrs. Durday, Montler and Harle initially opposed that
position and urged the Washington State court to adjudicate all issues, but
subsequently withdrew their opposition to Swissray's application and consented
to a stay of all further proceedings in the Washington State court action until
after the New York court had reached a decision as to whether it or the
Washington court is the proper forum for litigation of the parties' dispute. By
order dated June 1, 1999 filed in the Supreme Court of the State of New York,
County of New York (Index No. 603512/98) Messrs. Durday, Montler and Harle's
motion for an order dismissing Swissray's complaint (on the ground of forum non
conveniens) was granted. The aforesaid action commenced by Messrs. Durday,
Montler and Harle in Pierce County, Washington, remained pending.
Parties to each of the aforesaid proceedings thereafter entered into
settlement negotiations resulting in Swissray agreeing to pay $1,500,000 as and
for full settlement of all outstanding claims; such settlement agreement having
been executed on August 31, 1999. In accordance with such settlement agreement
the Company was required and has since paid the sum of $1,000,000 and is further
obligated to pay (in accordance with the terms of an August 31, 1999 promissory
note and over a period of 24 consecutive months) an aggregate of $500,000 with
interest at the rate of 9% per annum. Payments with respect to such promissory
note have been and remain current.
C. Dispute with J. Douglas Maxwell. On or about July 1, 1999 an action was
commenced in the Supreme Court, State of New York, County of New York (Index No.
113099/99) entitled J. Douglas Maxwell ("Maxwell") against Swissray
International, Inc. ("Swissray"), whereby Maxwell is seeking judgement in the
sum of $380,000 based upon his interpretation of various terms and conditions
contained in an Exchange Agreement between the parties dated July 22, 1996 and a
subsequent
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Mutual Release and Settlement Agreement between the parties dated June 1, 1998.
Swissray has denied the material allegations of Maxwell's complaint and has
asserted three affirmative defenses and two separate counterclaims seeking
(amongst other matters) dismissal of the complaint and recision of the
settlement agreement. It is Swissray's management's intention to contest this
matter vigorously. Maxwell has submitted a motion for Summary Judgment which
Swissray has opposed and as of December 3, 1999 no Court determination has been
made with respect thereto.
Recent Developments
In May 1998 Swissray Medical Systems, Inc., a wholly owned subsidiary
of the Company, was awarded a contract from the Department of Veterans Affairs
("VA") estimated at $400,000 for the base year for its Diagnostic X-ray systems,
the ddR-Multi-System, with the VA reserving its option to extend the term of the
contract up to March 31, 2001; the ddR-Multi-System being the first ever FDA
approved multifunctional direct digital radiography (ddR) system to be offered
worldwide. With the official contract award in hand, management intends to
actively pursue sales to various VA hospitals, medical centers and outpatient,
community and outreach clinics throughout the United States. Since receipt of
such award the Company has contracted for the sale of 4 ddR-Multi-Systems
(through December 3, 1999) to different VA institutions.
In July of 1998 the Company sold its multifunctional direct digital
radiography (ddR) system, the ddR-Multi-System, to the largest Diagnostic Out
Patient Center in Warsaw, Poland, the Diagnostic Center Luxmed. This order
represents Swissray's first sale within the Eastern European Market,
complementing sales previously made in both Western Europe and the United
States.
In October 1998 the Company entered into a distribution agreement with
X-ray Inc. ("XRI"), Warwick, RI. XRI will distribute the Company's
ddR-Multi-System in the territories of Connecticut, Rhode Island, Vermont, New
Hampshire, Massachusetts and Maine.
In November 1998 the Company reached an agreement with Data General
Corporation of Westborough, MA, which grants authority to Data General to act as
a reseller for the Company's family of products. Data General will sell the
Company's ddr-Multi-System and Information Solutions as a package with their
PACS system.
In February of 1999 the Company announced the sale of three of its
ddR-Multi-System, to Houston, Texas - based Kelsey-Seybold Clinic and to the
Federal Maximum Security Facility in Florence, Colorado. The two Kelsey-Seybold
systems are scheduled to be viewed in clinical use by attendees of the annual
Society for Computer Applications (SCAR) meeting in Houston in May 1999 while
the Colorado sale was made through the above indicated contract with the
Department of Veterans Affairs.
In February 1999 the Company announced entry into distribution
agreements with three medical equipment suppliers for distribution in both
domestic and international markets. These firms - Medika International Inc., of
San Juan, Puerto Rico, Radiographic Equipment Services (RES) of San Diego,
California, and H & H X-Ray Corporation of Lancaster, New York, have agreed to
distribute
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Swissray's direct digital radiography system, the ddr-Multi-System.
Medika, one of the largest medical equipment suppliers in the Southern
Hemisphere, will cover ddR-Multi-Systems sales in Puerto Rico, the Caribbean,
Mexico and selected South American markets. RES will represent Swissray in San
Diego and Orange Counties (California), and H&H X-Ray - with 28 years of
experience in medical imaging - will oversee sales in New York, Pennsylvania and
Ohio.
On March 29, 1999 the Company entered into a one year Consulting
Agreement (with option to extend for an additional period of one year) with
Liviakis Financial Communications, Inc. ("LFC") In accordance with the terms and
conditions of the Consulting Agreement, the Consultant agreed to provide certain
specified consulting services in a diligent and thorough manner in return for
which and as full and complete compensation thereunder, the Company is required
to compensate the Consultant through its issuance and delivery of 3,000,000
shares of the Company's restrictive common stock. As regards such shares of
common stock, Consultant has agreed that throughout the period of time that it
retains beneficial ownership of all or any portion of such shares that it shall
(a) vote such shares in favor of Ruedi G. Laupper continuing to maintain his
current position(s) with the Company and (b) give Ruedi G. Laupper and/or his
designee the right to vote Consultant's shares at all Company shareholder
meetings. In the event that the Company, in its sole discretion, exercises its
option to extend the Agreement for an additional period of one year,
remuneration for such second year has been set at $630,000 to be paid in
restrictive shares of Company common stock (with the number of shares to be
determined based upon the ten day average closing bid price for the ten
consecutive trading days preceding March 29, 2000). The foregoing does not
purport to set forth each of the terms and conditions of the aforesaid
Consulting Agreement but rather is designed to summarize what management
considers to be pertinent portions thereof.
In accordance with the terms of the aforementioned consulting
agreement, LFC has agreed that it will generally provide the following
consulting services: (a) advise and assist the Company in developing and
implementing appropriate plans and materials for presenting the Company and its
business plans, strategy and personnel to the financial community, establishing
an image for the Company in the financial community, and creating the foundation
for subsequent financial public relations efforts, (b) advise and assist the
Company in communicating appropriate information regarding its plans, strategy
and personnel to the financial community; (c) assist and advise the Company with
respect to its (i) stockholder and investor relations, (ii) relations with
brokers, dealers, analysts and other investment professionals, and (iii)
financial public relations generally, (d) perform the functions generally
assigned to investor/stockholder relations and public relations departments in
major corporations, (e) upon the Company's approval, (i) disseminate information
regarding the Company to shareholders, brokers, dealers, other investment
community professionals and the general investing public and (ii) conduct
meetings with brokers, dealers, analysts and other investment professionals to
advise them of the Company's plans, goals and activities and (f) otherwise
perform as the Company's financial relations and public relations consultant.
The agreement further provides that in the event LFC introduces SRMI
(a) to a lender or equity purchaser, not already having a preexisting
relationship with SRMI, with whom SRMI ultimately finances or causes the
completion of such financing, SRMI shall compensate LFC for such services with a
"finder's fee" in the amount of 2.5% of total gross funding provided by such
lender or equity
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purchaser or (b) to an acquisition candidate, either directly or indirectly
through another intermediary, not already having a preexisting relationship with
SRMI, with whom SRMI ultimately acquires or causes the completion of such
acquisition, SRMI shall compensate LFC for such services with a "finder's fee"
in the amount of 2% of total gross consideration provided by such acquisition.
The compensation to LFC is to be payable in cash and is to be paid in full at
the time the financing or acquisition is closed.
Additionally, on March 29, 1999 the Company entered into a five year
Consulting Agreement with Rolcan Finance Ltd. ("Rolcan"), pursuant to which
Rolcan agreed to provide certain business and consulting services outside the
United States and in return for which the Company became obligated to issue as
full and complete compensation thereunder, 800,000 restrictive shares of its
common stock.
In accordance with terms of aforementioned consulting agreement, Rolcan
has agreed to facilitate the endeavors of the Company's medium and long term
business plans through services, including but not limited to, introducing
Company management (i) to potential financial partners, financial brokers, and
assist in developing market awareness within the financial community with an
emphasis upon introductions to offshore investors in Europe, the Middle East and
the Far East and to the extent practicable assisting the Company in having its
stock listed on varous European exchanges and (ii) continuing to discuss Company
financial requirements and types of financing which may be available and/or
appropriate under then existing circumstances.
The issuance of the above referenced restrictive shares to LFC and
Rolcan was based upon the then bid price of $0.375 per share as quoted on the
date (March 22, 1999) that the parties each agreed to the terms and conditions
of their respective Consulting Agreements, notwithstanding the fact that when
such binding oral agreements were reduced to writing and executed on March 29,
1999 the closing bid price had risen to $0.906 per share.
In April of 1999 the Company entered into distribution agreements with (a)
Linear Medical Systems, Inc. for the territory of Arizona and (b) Capital X-Ray,
Inc. for the territories of Alabama and Mississippi.
In May of 1999 the European Patent Office issued patent No. EP 0 804
853 and in July of 1999 the U.S. Patent Office issued patent No. 5,920,604 -
both for the Company's Radiography (ddR) detector, the AddOn-Bucky (R) which
patent relates to the optical arrangement and process for transmitting and
converting primary x-ray images, which is the first of two inventions for the
AddOn-Bucky(R). The second patent application for optical arrangement and method
for electronically detecting an x-ray image has been submitted and as of
November 26, 1999 is pending approval. The AddOn-Bucky(R) is incorporated in
Swissray's unique multifunctional ddR-Multi-System.
In July of 1999 the Company signed an investment banking agreement with
Raymond James & Associates, Inc. (NYSE:RJE - news). Under the terms of the
agreement, Raymond James will assist Swissray in evaluating strategic
alternatives including, but not limited to, identifying and evaluating proposals
from potential suitors or strategic partners, as well as supporting the
Company's financing requirements.
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<PAGE>
In August of 1999 the Company signed a one year exclusive sales,
marketing and service agreement with Hitachi Medical Systems America, Inc.
(HMSA), a subsidiary of Hitachi Medical Corporation. Under the terms of the
agreement HMSA will provide sales, marketing, and service for the distribution
of Swissray's ddR-Multi-System to end users within certain defined territories
within the United States. In addition HMSA will utilize and promote the Swissray
Information Solutions services and products consisting of consulting and product
solutions for medical imaging informatics.
MANAGEMENT
Directors and Executive Officers of the Company
Set forth below is certain information concerning each current director
and executive officer of the Registrant, including age, position(s) with the
Registrant, present principal occupation and business experience during the past
five years.
<TABLE>
<CAPTION>
Name Age Position(s) Held
<S> <C> <C>
Ruedi G. Laupper 49 Chairman of the Board of Directors,
President and Chief Executive Officer,
Josef Laupper 54 Secretary, Treasurer and Director
Ueli Laupper 29 Vice President and Director
Dr. Erwin Zimmerli 52 Director and Member of the Independent Audit
Committee
Erich A. Kalbermatter 43 Chief Operating Officer *
Dr. Sc. Dov Maor 53 Director and Member of the Independent Audit
Committee
Michael Laupper 27 Chief Financial Officer
* Until his resignation in February 1999.
</TABLE>
Directors are elected to serve until the next annual meeting of
stockholders and until their successors have been elected and have qualified.
Officers are appointed to serve until the meeting of the Board of Directors
following the next annual meeting of stockholders and until their successors
have been elected and have qualified.
Ruedi G. Laupper has been President, Chief Executive Officer and a
director of the Registrant since May 1995 and Chairman of the Board of Directors
since March 1997. In addition, he is Chairman of the Board of Directors and
President of the Company's principal operating subsidiaries. Ruedi G. Laupper is
the founder of the predecessors of the Company and was Chief Executive Officer
of SR Medical AG from its inception in June 1988 until May 1995. He has
approximately 23 years of experience in the field of radiology. Ruedi G. Laupper
is the brother of Josef Laupper and the father of Ueli and Michael Laupper.
Josef Laupper has been Secretary, Treasurer (until January 1998 and
recommencing January
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<PAGE>
1999) and a director of the Registrant since May 1995 (with the exception of not
having served as Secretary from December 23, 1997 to February 23, 1998). He has
held comparable positions with SR Medical Holding AG, SR-Medical AG, and their
respective predecessors since 1990. He is principally in charge of the Company's
administration. Josef Laupper has approximately 19 years of experience within
the medical device business.
Ueli Laupper has overall Company responsibilities in the area of
international marketing and sales with approximately eight years of experience
within the international X-ray market. He has been a Vice President of the
Company since March 1997 and a director of the Registrant since March 1997. He
was Chief Executive Officer of SR Medical AG from July 1995 until June 30, 1997
having previously been employed by the Company from January 1993 to July 1995 as
Export Manager. Since the beginning of July 1998 he has been in charge of the
Company's U.S. operations and currently serves as CEO of both Swissray America
Inc. since its formation in September 1998 and Swissray Healthcare, Inc.
Dr. Erwin Zimmerli has been a director of the Registrant since May 1995
and, since March 1998, a member of the Registrant's Independent Audit Committee.
Since receiving his Ph.D. degree in law and economics from the University of St.
Gall, Switzerland in 1979, Dr. Zimmerli has served as head of the White Collar
Crime Department of the Zurich State Police (1980-86), as an expert of a Swiss
Parliamentary Commission for penal law and Lecturer at the Universities of St.
Gall and Zurich (1980-87), Vice President of an accounting firm (1987-1990) and
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 Swiss legal community.
Erich A. Kalbermatter, commenced serving the Company in the position of
Chief Operating Officer in April 1998 and held such position until February
1999. Mr. Kalbermatter whose background is principally as an internationally
experienced manager with expertise in the areas of electronics and
telecommunications, has also served as managing director of Private & Business
Communications of ASCOM Ltd., Berne, Switzerland being responsible for the
turn-over of more than 1 billion Swiss Francs, with approximately 4,800
employees worldwide. In addition, he was a member of ASCOM's Group Management,
an international communications corporation.
Dr. Sc. Dov Maor, was appointed as a member of the Registrant's Board of
Directors and a member of its Independent Audit Committee effective March 26,
1998. Dr. Sc. Dov Maor currently holds the position of Vice President for
Technology with ELBIT Medical Imaging, Haifa. Dr. Sc. Dov Maor is well
experienced in the field of Nuclear Medicine and medical imaging and has been
employed for over 10 years in a leading position in Research & Development.
Additionally, he was working in conjunction with the Max Planck Institute for
Nuclear Physics in Heidelberg within his field of experience. In addition to his
technical knowledge, Dr. Sc. Dov Maor is experienced in the commercial sector of
the industry.
Michael Laupper assumed the position of Interim Chief Financial Officer
of the Company effective January 1, 1999, having previously worked in
conjunction with the Company's former CFO and has been the Company's CFO since
August 1999. Michael Laupper completed his commercial education
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<PAGE>
in the chemical industry in 1991 in Switzerland and has additionally completed
studies in finance and accounting (in the United States during 1996-97). He has
served the Company in various management positions at SR Management AG and SR
Medical AG, Company subsidiaries since 1999 and prior to assuming his current
position.
The Board of Directors
The Board of Directors has responsibility for establishing broad
corporate policies and for overseeing the performance of the Registrant. Members
of the Board of Directors are kept informed of the Registrant's business by
various reports and documents sent to them in anticipation of Board meetings as
well as by operating and financial reports presented at Board meetings. The
Registrant pays its directors fees or compensation for services rendered in
their capacity as directors. The current Board of Directors was elected and
assumed office as of December 23, 1997 with the exception that Dr. Sc. Dov Maor
assumed his position on March 26, 1998.
The Board does not currently have a standing audit, nominating or
compensation committee or any committee or committees performing similar
functions, but acts, as a whole, in performing the functions of such committees
(except as may be indicated directly hereinafter). At a meeting of the Board of
Directors held on March 26, 1998, an Independent Audit Committee was
established.
Employment Agreements
Ruedi G. Laupper has entered into a five-year employment agreement with
Swissray Management AG, a wholly owned subsidiary of the Registrant, on December
18, 1997, which agreement will be automatically renewed for another five years
unless terminated by either party no later than December 31, 2001. Such
agreement provides for (i) an annual salary of 299,000 Swiss francs (or
$194,121), (ii) an annual bonus of 12,000 Swiss francs (or $8,377), and (iii) a
performance based bonus, based on the audited consolidated financial statements
of the Company as of the end of the fiscal year. The bonus shall be 25% of EBIT
(earnings before interest and taxes) payable in stock of Swissray International,
Inc. valued at the average of the closing prices during the five business days
following the filing of the 10-K. In addition, the agreement entitles Mr.
Laupper to a car allowance, five weeks of vacation, $698 per month for expenses
and a "Bel Etage" insurance which provides certain pension benefits not mandated
by Swiss law. If such employment agreement is terminated for reasons beyond the
employee's control, Ruedi Laupper will receive 2 million Swiss francs (or
$1,396,258) including any bonus. The Registrant guarantees the obligation of
Swissray Management AG in the event of a default.
Pursuant to June 1999 Board meeting the EBIT bonus provisions referred
to above were extinguished in exchange for (a) extending the duration of the
employment agreement to December 18, 2007 and (b) issuance to Ruedi G. Laupper
of 2,000,000 shares of restrictive Company common stock. Valuation assigned to
the aforesaid 2,000,000 shares was based upon Board members agreement that such
price would be based upon 75% of bid price at the time proposal was initially
made, i.e. 75% of $0.50 bid price on March 12, 1999. The Board resolution
approving the above referenced transaction (and utilizing the aforesaid agreed
to valuation date) occurred on June 30, 1999, at which time the bid price of the
common stock was $2.625.
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<PAGE>
Ueli Laupper and Josef Laupper have entered into three-year employment
agreements with Swissray Management AG on December 18, 1997, which agreements
will be automatically renewed for another three years unless notice is given six
months prior to the expiration date. Such agreements provide for salaries of
$84,924 and 119,700 Swiss francs (or $83,566) respectively with annual bonuses
of $7,077 and 9975 Swiss francs (or $6,964) respectively, $1,500 and 1000 Swiss
francs (or $698) per month for expenses respectively and 20 days and 25 days of
vacation respectively. The employment agreements of each of Ueli Laupper and
Josef Laupper also provide for a car allowance. If either of such employees is
terminated for reasons beyond the employees control he will receive 500,000
Swiss francs (or $349,065).
Mr. Kalbermatter in accordance with his Agreement with Swissray
Management AG assumed the position of Chief Operating Officer of the Company
effective April 14, 1998 at an annual salary equivalent to $153,333. Mr.
Kalbermatter shall also receive (a) an expense allowance equivalent to $12,000,
(b) an automobile allowance equivalent to $11,333, (c) 25 days of vacation and
(d) a "Bel Etage" inusrance which provides certain pension benefits. U.S. dollar
equivalents indicated above are based upon a Swiss Francs (CHF) exchange rate of
$1.50. This Agreement expired May 31, 1999.
All of these employment agreements are covered by Swiss law.
Compensation of Directors and Executive Officers
Summary Compensation Table
(A) The following Summary Compensation Table sets forth certain
information for the years ended June 30, 1997, 1998 and 1999 concerning the cash
and non-cash compensation earned by or awarded to the Chief Executive Oficer of
the Registrant, the three other most highly compensated executive officers of
the Registrant as of June 30, 1999 and the former Chairman of the Board of
Directors (the "Named Executive Officers").
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Fiscal Other Annual Stock All Other
Name and Principal Position Year Salary Bonus Compensation Options Compensation
<S> <C> <C> <C> <C> <C> <C> <C>
Ruedi G. Laupper 1999 $194,121 $8,377 $755,000 (1)(8) --- ---
President and Chief Executive 1998 $189,644 --- $15,000 (1) --- ---
Officer, Chairman of the 1998 --- --- $1,122,973 (7) --- ---
Board of Directors 1997 $146,983 --- $15,000 (1) 12,000(5) ---
Josef Laupper 1999 $ 83,566 $6,494 $12,000 (1) --- ---
Secretary, Treasurer 1998 $ 94,669 --- $12,000 (1) --- ---
1997 $ 96,861 --- $12,000 (1) --- ---
Ueli Laupper 1999 $ 94,924 $7,077 $10,000 (1) --- ---
Vice President International 1998 $ 95,685 --- $10,000 (1) --- ---
Sales (2) 1997 $ --- --- $ --- --- ---
Herbert Laubscher 1998 $ 79,244 --- $ --- --- ---
Chief Financial Officer 1997 $ --- --- $ --- --- ---
Ulrich R. Ernst (4) 1997 $ 96,979 --- $10,000 (1) --- ---
Erich A. Kalbermatter 1999 $153,333 --- $ --- --- ---
Chief Operating Officer 1998 $ 33,652 --- $ --- --- ---
- --------------------
</TABLE>
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<PAGE>
(1) Fees for service on the Board of Directors of the Company.
(2) Compensation did not exceed $100,000 in any fiscal year.
(3) Herbert Laubscher joined the Company in August of 1996 and served as
Treasurer from January 1998 until his resignation effective December 31,
1998. (4) Ulrich R. Ernst was Chairman of the Board of Directors from May
1995 until March 18, 1997.
(5) The options, which were fully vested on date of grant (6/13/97), were
issued in exchange for services to the Company as Chairman of the Board of
Directors. (6) Erich A. Kalbermatter joined the Company on April 14, 1998
and resigned in February 1999.
(7) Compensation paid in equivalent of 48,259 post reverse split shares of
Common Stock for cancellation of Common Stock held by officer, as follows:
Ruedi G. Laupper, the Company's President, surrendered for
cancellation an aggregate of 1,608,635 shares of common stock owned by
him in order for the Company to meet its obligations with respect to
various warrantees and representations made by it regarding
availability of a sufficient number of authorized but unissued shares
to timely meet convertible debenture conversions and avoid Company
default (regarding financings which occurred in or about September 1996
and January 1997). By surrendering such shares Ruedi G. Laupper lost
his holding period under Rule 144 which at that point would have
entitled him to utilize Rule 144 every three months to sell such
restrictive shares (as free trading) subject to volume limitation
imposed by Rule 144. In exchange for losing such valuable right and
once stockholders had increased the number of authorized shares of
Company common stock at a Special Meeting called for such purposes, Mr.
Laupper, as previously agreed to, received a number of shares equal to
30% (48,259 post reverse split shares) more than those previously
canceled (creating a brand new holding period for him for purposes of
Rule 144 transactions).At the time that the Company's President
surrendered his aforesaid 1,608,635 shares for cancellation (to wit:
March 7, 1997) the bid price of the Company's common stock was $2.6875
while at the time that such individual received ^ the 48,259 post split
shares referred to above (on June 30, 1997) the bid price for the
Company's common stock was $2.421875.
(8) Dollar value assigned to the 2,000,000 shares of Common Stock issued for
relinquishment of EBIT bonus based upon Board members agreement that such
price would be based upon 75% of bid price at the time proposal was
initially made, i.e., 75% of $0.50 bid price on March 12, 1999.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following tables set forth certain information concerning the grant
of options to purchase shares of the Common Stock to each of the executive
officers of the Registrant, as well as certain information concerning the
exercise and value of such stock options for each of such individuals. Options
generally become exercisable upon issuance and expire no later than ten years
from the date of grant.
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<PAGE>
<TABLE>
<CAPTION>
STOCK OPTIONS GRANTED IN FISCAL YEAR ENDED JUNE 30, 1997(1)
Percent of
Total Potential
Options Realization Value at
Granted Assumed Annual Rates
Number of to Exercise of Stock Appreciation
Securities Employees or Market For Option Term
Underlying in Base Price on
Options Fiscal Price Date of Expiration
Name Granted Year Per Share Grant Date 0% 5% 10%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ruedi G. Laupper 120,000(2) 30.4% $0.73(3) $2.94(4) 6/13/02 265,200 282,840 300,480
Josef Laupper(5) -- -- -- -- -- -- -- --
Ueli Laupper(5) -- -- -- -- -- -- -- --
Herbert Laubscher(5)-- -- -- -- -- -- -- --
Ulrich Ernst(5)(6) -- -- -- -- -- -- -- --
</TABLE>
(1) The options to purchase the Registrant's Common Stock were granted
under the Swissray International, Inc. 1996 Non-Statutory Stock Option
Plan.
(2) These options were owned indirectly through SR Medical Equipment Ltd.,
a corporation wholly owned by Mr. Laupper. They were immediately
exercisable on the date of grant but do not give effect to subsequent
October 1998 1 for 10 reverse stock split.
(3) The exercise price per share is contingent on purchase of the entire amount
of securities. (4) The market price on date of grant was based on the average of
the high and low reported
prices on the Nasdaq SmallCap Market on June 13, 1997. On October 26,
1998 the Company's securities were delisted by NASDAQ.
(5) These individuals own no stock options of the Registrant.
(6) Mr. Ernst was Chairman of the Board of Directors from May 1995 until March
18, 1997.
STOCK OPTION GRANTS IN FISCAL YEAR ENDED JUNE 30, 1998
With respect to the Named Executive Officers there were no granting of
stock options under either the Company's 1996 or 1997 Stock Option Plans (the
"Plans") during the fiscal year ended June 30, 1998.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END
OPTION VALUES(1)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-The-Money
Options Options
Name At Fiscal Year-End(#) At Fiscal Year-End($)
(A) Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
Ruedi G. Laupper 12,000/0(3) $1.79/0
Josef Laupper(4) 0/0 0/0
Ueli Laupper(4) 0/0 0/0
Herbert Laubscher(4) 0/0 0/0
Ulrich R. Ernst(4)(5) 0/0 0/0
</TABLE>
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<PAGE>
(1) No options were exercised by a Named Executive Officer during the fiscal
year ended June 30, 1997 and 1998.
(2) Options are in-the-money if the fair market value of the underlying
securities exceeds the exercise price of the option.
(3) Includes 12,000 options which are owned indirectly by Mr. Laupper through
SR Medical Equipment Ltd., a corporation which is wholly owned by Mr.
Laupper.
(4) These individuals own no stock options of the Registrant.
(5) Mr. Ernst was Chairman of the Board of Directors from May 1995 until March
18, 1997.
Stock Option Plans
On January 30, 1996, the Board of Directors adopted the Company's 1996
Non-Statutory Stock Option Plan (the "1996 Plan"). All of the options under such
1996 Plan have been granted. Consequently, the Board of Directors and the
Registrant's stockholders approved the Swissray International, Inc. 1997 Stock
Option Plan (the "Stock Option Plans").
The purpose of the Stock Option Plans is to provide directors, officers
and employees of, and consultants to the Company and its subsidiaries with
additional incentives by increasing their ownership interests in the Company.
Directors, officers and other employees of the Company and its subsidiaries are
eligible to participate in the Stock Option Plans. Options may also be granted
to directors who are not employed by the Company and consultants providing
valuable services to the Company and its subsidiaries. In addition, individuals
who have agreed to become an employee of, director of or a consultant to the
Company and its subsidiaries are eligible for option grants, conditional in each
case on actual employment, directorship or consultant status. Awards of options
to purchase Common Stock may include incentive stock options under Section 422
of the Internal Revenue Code ("ISOs") and/or non-qualified stock options
("NQSOs"). Grantees who are not employees of the Company or a subsidiary shall
only receive NQSOs.
The maximum number of options that may be granted under this Plan shall
be options to purchase 200,000 shares of Common Stock. As of December 3, 1999,
none of such options have been granted.
The Compensation Committee will administer the Stock Option Plans. The
Compensation Committee generally will have discretion to determine the terms of
any option grant, including the number of option shares, exercise price, term,
vesting schedule, the post-termination exercise period, and whether the grant
will be an ISO or NQSO. Notwithstanding this discretion: (i) the number of
shares subject to options granted to any individual in any calendar year may not
exceed 200,000; (ii) the term of any option may not exceed 10 years (unless
granted as an ISO to an individual or entity who possesses more than 10% of the
voting power of the Company, which term may not exceed five years); (iii) an
option will terminate as follows: (a) if such termination is on account of
permanent and
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<PAGE>
total disability (as determined by the Compensation Committee), such options
shall terminate one year thereafter; (b) if such termination is on account of
death, such options shall terminate six months thereafter; (c) if such
termination is for cause (as determined by the Compensation Committee), such
options shall terminate immediately; (d) if such termination is for any other
reason, such options shall terminate three months thereafter; and (iv) the
exercise price of each share subject to an ISO shall be not less than 100%, or,
in the case of an ISO granted to an individual described in Section 422(b)(6) of
the Code, 110% of the fair market value (determined in accordance with Section
422 of the Code) of a share of the Stock on the date such option is granted.
Unless otherwise determined by the Compensation Committee, (i) the exercise
price per share of Common Stock subject to an option shall be equal to the fair
market value of the Common Stock on the date such option is granted; (ii) all
outstanding options become exercisable immediately prior to a "change in
control" of the Company (as defined in the Stock Option Plans) and (iii) each
option shall become exercisable in three equal installments on each of the
first, second and third anniversary of the date such option is granted.
The Stock Option Plans may be amended, altered, suspended, discontinued
or terminated by the Board of Directors without further stockholder approval,
unless such approval is required by law or regulation or under the rules of the
stock exchange or automated quotation system on which the Common Stock is then
listed or quoted. Thus, stockholder approval will not necessarily be required
for amendments which might increase the cost of the Stock Option Plans or
broaden eligibility. The Stock Option Plans will remain in effect until
terminated by the Board of Directors. No ISO may be granted more than ten years
after such date.
Pursuant to February 1999 Board of Directors approval and subsequent
July 23, 1999 stockholder approval, the Registrant adopted its 1999 Non
Statutory Stock Option Plan, whereby it reserved for issuance up to 3,000,000
shares of its common stock. Thereafter in August 1999 the Registrant filed a
Registration Statement on Form S-8 (File No. 0-26972) so as to register those
shares of common stock underlying the aforesaid options. All of these options
have been granted.
The Registrant currently has outstanding non-statutory stock options to
purchase an aggregate of 161,000 shares of Common Stock. See "Management --
Compensation of Directors and Executive Officers" and Notes to the Consolidated
Financial Statements June 30, 1999, 1998 and 1997 .
Retirement and Long-Term Incentive Plans
The Swiss and German Subsidiaries, mandated by government regulations,
are required to contribute approximately five (5%) percent of eligible, as
defined, employees' salaries into a government pension plan. The subsidiaries
also contribute approximately five (5%) percent of eligible employee salaries
into a private pension plan. Total contributions charged to operations for the
years ended June 30, 1999, 1998 and 1997, were $509,959, $347,854 and $274,009,
respectively.
Director Compensation
Directors of the Registrant receive $10,000 annually for serving as directors
except for
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<PAGE>
Josef Laupper, who receives $12,000 and Ruedi Laupper, the Chairman of the Board
of Directors, who receives $15,000. Ruedi Laupper also received options to
acquire 12,000 shares of the Registrant's Common Stock on June 13, 1997 in
accordance with applicable provisions of the Company's 1996 Non-Statutory Stock
Option Plan. The exercise price for such options is $7.30 per share. The options
were fully vested on the date of grant.
Compensation Committee Interlocks and Insider Participation
The Company had no Compensation Committee during the last completed
fiscal year. The Corporation's executive compensation was supervised by all
members of the Company's Board of Directors and the following directors were
concurrently officers of the Company in the following capacities: Ruedi G.
Laupper (Chairman of the Board of Directors, President and Chief Executive
Officer); Josef Laupper (Secretary and Treasurer and director) and Ueli Laupper
(Vice President and director). No executive officer of the Company served as a
member of the Board of Directors or compensation committee of any entity which
has one or more executive officers who serve on the Company's Board of
Directors.
While the Company did not issue any shares of its Common Stock to any
of its officers during fiscal year ended June 30, 1998 it did issue 48,259
shares of Common Stock to a company controlled by Ruedi G. Laupper pursuant to
an agreement between Ruedi G. Laupper and the Company ^ in consideration of Mr.
Laupper's agreement to ^ cancellation of 160,863 post split shares of Common
Stock held by Ruedi G. Laupper or companies controlled by him. See also footnote
7 to Summary Compensation Table for additional material information regarding
this transaction.
The Company did not issue any shares of its Common Stock to any of its
officers during fiscal year ended June 30, 1999 excepting for the issuance of
2,000,000 restrictive shares to Ruedi G. Laupper in exchange for and in
consideration of cancellation of certain bonus provisions contained in
employment contract.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of November 26, 1999 (except where otherwise
noted) with respect to (a) each person known by the Registrant to be the
beneficial owner of more than five percent of the outstanding shares of Common
Stock, (b) each director of the Registrant, (c) the Registrant's executive
officers and (d) all officers and directors of the Registrant as a group (except
as indicated in the footnotes to the table, all of such shares of Common Stock
are owned with sole voting and investment power). The title of class of all
securities indicated below is Common Stock with $.01 par value per share.
<TABLE>
<CAPTION>
No. Of Shares Percentage of
Beneficially Shs. Benficially
Name and Address of Beneficial Owner (1) Owned (2) Owned (2)
<S> <C> <C> <C>
Ruedi G. Laupper (3)(11) 2,909,824 15.57%
Josef Laupper (4) 325,000 1.75%
Erwin Zimmerli (5) 255,000 1.38%
Ueli Laupper (13) 275,000 1.48%
Dov Maor (15) 50,000 *
Michael Laupper (14) 125,000 *
Dominion Capital Fund, Ltd. (12) 1,580,233 (6) 8.26%
Sovereign Partners LP (12) 2,214,397 (7) 11.36%
^
Liviakis Financial Communications, Inc. (LFC)(12) 3,000,000 (8) 16.41%
Rolcan Finance Ltd. (12) 800,000 (9) 4.38%
Parkdale LLC (16) 1,000,000 5.47%
All directors and officers as
a group (six persons) 3,939,824 (10) 20.03%
- --------------
o Represents less than 1% of the 18,280,133 shares outstanding as of November 26, 1999.
</TABLE>
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<PAGE>
(1) Unless otherwise indicated, the address for each named individual is in
care of SWISSRAY International, Inc., 320 West 77th Street, Suite 1A, New
York, New York 10024.
(2) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of the Common Stock beneficially owned by them. A person is deemed to be
the beneficial owner of securities which may be acquired by such person
within 60 days from the date indicated above upon the exercise of options,
warrants or convertible securities. Each beneficial owner's percentage
ownership is determined by assuming that options, warrants or convertible
securities that are held by such person (but not those held by any other
person) and which are exercisable within 60 days of the date indicated
above, have been exercised.
(3) Includes (i) 37,500 shares owned indirectly by Ruedi G. Laupper through SR
Medical Equipment Ltd., a corporation which is wholly owned by him; (ii)
460,324 shares owned indirectly by Ruedi G. Laupper through Tomlinson
Holding Inc., a corporation which is wholly owned by him, (iii) 12,000
shares which may be acquired upon exercise of immediately exercisable
options, which options are owned indirectly by Ruedi G. Laupper through SR
Medical Equipment Ltd., a corporation which is wholly owned by him and (iv)
an additional 400,000 shares which may be acquired upon exercise of
immediately exercisable options issued in October 1999.
(4) Includes (i) 50,000 shares owned indirectly by Josef Laupper through Lairy
Investment Inc., a corporation in which he is a majority shareholder and
(ii) 275,000 shares which may be acquired upon exercise of immediately
exercisable options issued in October 1999.
(5) Includes 255,000 shares which may be acquired upon exercise of immediately
exercisable options.
As of the November 26, 1999, an aggregate principal outstanding balance
(exclusive of interest) for those Convertible Debentures referred to below
amounts to $16,549,040. None of these convertible debentures are owned by
officers and/or directors of the Company.
(6) Includes 718,599 shares currently owned as well as up to 861,634 shares
which normally could be issued (inclusive of 86,613 shares as may be issued
for interest earned), at any time, upon conversion of previously issued
convertible debentures (the "Convertible Debentures"). The person or
persons having voting control are Livingstone Asset Management Ltd.,
Navigator Management Ltd. (President) and David Sims (director of
Navigator) - British Virgin Islands.
(7) Includes 993,668 shares currently owned as well as up to 1,220,729 shares
which normally could be issued (inclusive of 127,604 shares as may be
issued for interest earned), at any time, upon conversion of previously
issued convertible debentures (the "Convertible Debentures"). The person or
persons having voting control are Southridge Capital Management LLC, P.P.,
Steven Hicks (President) - Connecticut.
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The foregoing information contained in footnotes 6 and 7 above assumes
conversion based on 18% - 20% discount from market (dependent upon debenture)
based upon the last reported sales price on December 3, 1999. This number of
shares, if issued, would require disclosure of beneficial ownership of in excess
of 5%. However, pursuant to terms of Convertible Debentures, the holders thereof
may not beneficially own more than 4.99% of outstanding Company shares (other
than as a result of mandatory conversion provisions). The 4.99% limitation is
only contractual in nature. The 4.99% limitation does not apply and,
accordingly, would not limit beneficial ownership in any manner in the event
that (a) 50% or more of the Company is acquired, (b) the Company is merged into
another company or (c) a change of control occurs.
(8) Pursuant to written Agreement, the Registrant's President, Ruedi G.
Laupper, has sole voting rights with respect to these shares without any
limitation thereon so long as same are owned by LFC. LFC in turn may not
sell any of such shares for a period of one year subsequent to commencement
of ownership and then only in accordance and subject to volume limitations
imposed in accordance with the applicable provisions of Rule 144 under the
Securities Act of 1933.
(9) Roland Kaufmann, a control person of this firm has voting control over
these shares.
(10) Includes 1,392,000 shares issuable upon option exercise.
(11) When taking into account the number of shares owned beneficially by Ruedi
G. Laupper (2,909,824) as well as those shares over which he exercises
voting control (as indicated in footnote 8 above) Ruedi G. Laupper
exercises voting control over approximately 34% of all voting shares as of
November 26, 1999.
(12) The addresses for each of these entities are as follows: Dominion Capital
Fund, Ltd., c/o Thomson Kernaghan & Co. Ltd., 365 Bay Street, Toronto,
Ontario M5H 2V2, Canada; Sovereign Partners LP, 90 Grove Street, Suite 01,
Ridgefield, Connecticut 06877; Liviakis Financial Communications, Inc., 495
Miller Avenue, 3rd Floor, Mill Valley, CA 94914; and Rolcan Finance Ltd.,
Seestrasse 17, P.O. Box 53, CH-8702 Zollikon 2, Switzerland.
(13) Includes 275,000 shares which may be acquired upon exercise of immediately
exercisable options issued in October 1999.
(14) Includes 125,000 shares which may be acquired upon exercise of immediately
exercisable options issued in October 1999.
(15) Includes 50,000 shares which may be acquired upon exercise of immediately
exercisable options issued in October 1999.
(16) The person or persons having voting control Livingstone Asset Management
Ltd., Navigator Management Ltd. (President) and David Sims (director
of Navigartor)- British Virgin Islands.
CERTAIN TRANSACTIONS
Reference is herewith made to Compensation Committee Interlock, second
paragraph regarding (a) 48,259 restrictive shares of Company common stock issued
to its President during fiscal year ended June 30, 1998 and (b) 2,000,000
restrictive shares issued to its President during fiscal year ended June 30,
1999. For further information with respect to the latter transaction (which the
Company's Board determined to be as fair to the Company as could have been made
with unaffiliated parties and which transaction was unanimously approved by its
Board with the Company's President abstaining from voting) reference is herewith
made to "Management - Employment Agreements", second paragraph.
The Company made unsecured advances to its former Chairman of the Board
of Directors (a principal stockholder) during the fiscal year ended June 30,
1997 requiring interest at 6% per annum. The balance at June 30, 1997 was
$69,587. Interest charged to the stockholder for the fiscal year ended June 30,
1997 was $3,460. Such indebtedness was repaid in full in July 1997. See Notes to
the Consolidated Financial Statements June 30, 1998, 1997 and 1996.
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SELLING HOLDERS^
The Securities offered hereby may be sold from time to time to
purchasers directly by the Selling Holders (which term includes their
transferees, pledgees, donees or their successors). Any such transferee,
pledgee, donee or their successors may not offer the Securities pursuant to this
Prospectus until such holder is included as a Selling Holder in a supplement to
this Prospectus. The Securities consist of shares of Common Stock which are
issuable to Selling Holders upon conversion of the Convertible Debentures.
The Registrant has agreed to register the public offering of the
Securities by the Selling Holders under the Securities Act. The Registrant will
not receive any of the proceeds from the sale of the shares by the Selling
Holders.
The following table sets forth as of December 3, 1999, certain
information with respect to the Selling Holders, (who participated in financings
from June 1998 to November 1, 1999) including the number of shares that may be
offered by them. The number of shares which may actually be sold by the Selling
Holders will be determined from time to time by them and will depend upon a
number of factors, including, with respect to the shares underlying the
Convertible Debentures, the price of the Registrant's Common Stock from time to
time. Because the Selling Holders may offer all or none of the Securities that
they hold and because the offering contemplated by the Prospectus is not being
underwritten, no estimate can be given as to the number of Securities that will
be held by the Selling Holders upon termination of such offering. None of the
Selling Holders have had any material relationship with the Registrant other
than as purchasers of Convertible Debentures.
<TABLE>
<CAPTION>
Name of Selling Holder(3) Shares(1) % of Class(2)
<S> <C> <C>
Dominion Capital Fund Ltd. ....................... 861,634 4.50%
Sovereign Partners Ltd. Partnership .............. 1,220,729 6.26%
Dominion Investment Fund LLC ..................... 177,476 .96%
Aberdeen Avenue, LLC ............................. 115,962 .63%
Endeavour Capital Fund SA ........................ 100,456 .55%
Excaliber Limited Partnership .................... 40,183 .22%
Carbon Mesa Partners LLC ......................... 3,014 .02%
Southshore Capital Ltd. .......................... 528,885 2.89%
Parkdale LLC ..................................... 1,000,000 5.19%
Southridge Capital Management LLC ................ 333,334 1.79%
Striker Capital Ltd. ............................. 333,334 1.79%
Alfred Hahnfeldt ................................. 333,332 1.79%
Trianon Opus One Inc. (4) ........................ 85,077 .46%
Gary B. Wolff (5) ................................ 150,000 .81%
Dr. Erwin Zimmerli (6) ........................... 100,000 .54%
Display Presentations Ltd. (7) ................... 65,000 .35%
Live Marketing (8) ............................... 16,864 .09%
</TABLE>
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(1) Assumes conversion of the Convertible Debentures held by such Selling
Holders based on the reported closing prices on the Electronic
Over-the-Counter Bulletin Board on December 3, 1999 at an 18% to 20%
discount (as required) and including 315,833 shares which may be issued for
interest earned through mandatory conversion date.
(2) Based upon an aggregate of 18,280,133 shares arrived at by adding the
aggregate of those shares indicated in column designated "Shares" to those
shares issued and outstanding as of November 26, 1999.
(3) The names of those person(s) who have voting control over each of these
entities is as follows: (i) Dominion Capital Fund, Ltd. and Dominion
Investment Fund, LLC - Livingstone Asset Management Ltd., Navigator
Management Ltd. (President) and David Sims (director of Navigator) -
British Virgin Islands, (ii) Sovereign Partners Limited Partnership -
Southridge Capital Management LLC, G. P., Steven Hicks (President)
-Connecticut, (iii) Canadian Advantage Limited Partnership - Ian McKinnon,
General Partner, (iv) Aberdeen Avenue, LLC - Minglewood Capital LLC., CTC
Corporation Ltd., Bas Horsten (director of CTC) and (v) Southshore Capital
Ltd. - Citco Fund Services - Carl O'Connell.
(4) These shares are being registered pursuant to certain "piggy-back"
registration rights granted to an otherwise unaffiliated lender pursuant to
terms of a promissory note (see "Description of Capital Stock - Promissory
Note"). (5) The shares being registered underlie certain outstanding
warrants granted to such individual. (6) The shares being registered
underlie certain outstanding warrants granted to such individual. (7) These
shares were issued in accordance with October 8, 1999 agreement and as
partial consideration for services rendered and in accordance with certain
"piggy-back" registration rights granted to this otherwise unaffiliated
stockholder.
(8) These shares were issued in accordance with October 31, 1999 agreement and
as partial consideration for services rendered and in accordance with
certain "piggy-back" registration rights granted to this otherwise
unaffiliated stockholder.
Each of the Selling Holders referred to herein have indicated in
writing to the Company that they are neither broker-dealers nor affiliates
of broker-dealers.
Reference is herewith made to prior Registration Statement on Form S-1
as declared effective May 12, 1998 (Registration No. 333-50069) and in
particular the section therein entitled "Selling Holders and Plan of
Distribution". In that regard, and as heretofore indicated, and in accordance
with Rule 429 under the Securities Act of 1933, an aggregate of an additional
2,837,462 shares of Common Stock are being registered hereunder; which shares
were previously issued with restrictive legend. There is no remaining
unconverted balance on what was an aggregate principal amount of $5,500,000 in
Convertible Debentures issued in March 1998.
The Selling Holders of the Securities identified above may have sold,
transferred or otherwise disposed of, in transactions exempt from the
registration requirements of the Securities Act, all or a portion of the
Convertible Debentures or Securities since the date on which the information in
the preceding table is presented. Information concerning the Selling Holders may
change from time to time and any such changed information will be set forth in
supplements to this Prospectus if and when necessary.
PLAN OF DISTRIBUTION
^ Each Subscription Agreement and Debenture, as amended to date, contains a
contractual provision between Registrant and debenture holder whereby debenture
holder is limited in the amount of debenture it may convert and own. One
exception to such limitation (referred to as the mandatory conversion provision)
provides for the automatic conversion on last date of debenture with respect
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to any outstanding unconverted balances. Additional exceptions to such
limitation (i.e. where contractual limitation does not apply) relate to (i) if
there is a public announcement that 50% or more of the Company is being
acquired, (ii) a public announcement that the Company is being merged, or (iii)
a change in control. Excepting for such limitations, the debenture holder is
entitled to convert any Debentures solely to the extent that, after such
conversion, (a) the number of shares of common stock beneficially owned by the
debenture holder and its affiliates (other than shares of common stock which may
be deemed beneficially owned through the ownership of the unconverted portion of
the Debentures) and (b) the number of shares of common stock issuable upon such
conversion would result in beneficial ownership of no more than 4.99% of the
outstanding shares of common stock ^.
The sale of the Securities by the Selling Holders may be affected from
time to time in transactions on the Electronic Over-the-Counter Bulletin Board
in negotiated transactions, or through a combination of such methods of sale (a)
at fixed prices, which may be changed, (b) at market prices prevailing at the
time of sale, (c) at prices related to such prevailing market prices or (d) at
negotiated prices. The Selling Holders may effect such transactions by selling
the Securities directly to purchasers or to or through broker-dealers. Such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Holders and/or the purchasers of the Securities for
whom such broker-dealers may act as agents or to whom they sell as principals,
or both (which compensation as to a particular broker-dealer may be in excess of
customary commissions). The Selling Holders and any broker-dealers who act in
connection with the sale of the Securities hereunder may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act, and
any commissions received by them and profit on any resale of the Securities as
principals might be deemed to be underwriting discounts and commissions under
the Securities Act.
At the time a particular offering of the Securities is made, a
Prospectus Supplement, if required, will be distributed, which will set forth
the aggregate amount and type of Securities being offered and the terms of the
offering, including the name or names of any underwriters, broker/dealers or
agents, any discounts, commissions and other terms constituting compensation
from the Selling Holders and any discounts, commissions or concessions allowed
or reallowed or paid to broker/dealers.
To comply with the securities laws of certain jurisdictions, if
applicable, the Securities will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the Securities may not be offered or sold unless they have been
registered or qualified for sale in such jurisdictions or any exemption from
registration or qualification is available and is complied with. The Registrant
has not taken any action to register or qualify the Securities for offer and
sale under the securities or "blue sky" laws of any state of the United States.
However, pursuant to the Registration Rights Agreements among the Registrant and
the Selling Holders (the "Registration Rights Agreements"), the Registrant will
use reasonable efforts to (i) register and qualify the Securities covered by the
Registration Statement under such other securities or blue sky laws of such
jurisdictions as the Selling Holders who hold a majority in interest of the
Securities being offered reasonably request and in which significant volumes of
shares of Common Stock are traded, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof at all times until the earliest (the "Registration
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Period") of (A) the date that is two years after the Closing Date, (B) the date
when the Selling Holders may sell all Securities under Rule 144 or (C) the date
the Selling Holders no longer own any of the Securities, (iii) take such other
actions as may be necessary to maintain such registrations and qualification in
effect at all times during the Registration Period and (iv) take all other
actions reasonably necessary or advisable to qualify the Securities for sale in
such jurisdictions; provided, however, that the Registrant shall not be required
in connection therewith or as a condition thereto to (A) qualify to do business
in any jurisdiction where it would not otherwise be required to qualify, (B)
subject itself to general taxation in any such jurisdiction, (C) file a general
consent to service of process in any such jurisdiction, (D) provide any
undertakings that cause more than nominal expense or burden to the Company or
(E) make any change in its articles of incorporation or by-laws or any then
existing contracts, which in each case the Board of Directors of the Registrant
determines to be contrary to the best interests of the Company and its
stockholders. Unless and until such times as offers and sales of the Securities
by Selling Holders are registered or qualified under applicable state securities
or "blue sky" laws, or are otherwise entitled to an exemption therefrom, initial
resales by Selling Holders will be materially restricted. Selling Holders are
advised to consult with their respective legal counsel prior to offering or
selling any of their Securities.
The Selling Holders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Securities by the Selling
Holders. The foregoing may affect the marketability of the Securities.
Pursuant to the Registration Rights Agreements between the Registrant
and each of the Selling Holders all expenses of the registration of the
Securities will be paid by the Registrant, including, without limitation,
Commission filing fees and expenses of compliance with state securities or "blue
sky" laws; provided, however, that the Selling Holders will pay all underwriting
discounts and selling commissions, if any. The Selling Holders will be
indemnified by the Registrant against certain civil liabilities, including
certain liabilities under the Securities Act or will be entitled to contribution
in connection therewith.
RESTRICTIVE SHARES BEING REGISTERED PURSUANT TO CONTRACTUAL AGREEMENTS
An aggregate of 81,864 shares of Company common stock are being
registered hereunder in accordance with certain "piggy-back" registration rights
granted to two otherwise unaffiliated firms in exchange for services rendered by
such firms to the Company, as follows:
(a) On October 8, 1999 the Company entered into an agreement with
Display Presentations, Hauppauge, New York (hereinafter "Display"), whereby
Display agreed to provide certain construction and related services for purposes
of assisting the Company's establishment of its booth at the November 1999 RSNA
Convention held in Chicago, Illinois. Total costs in accordance with such
contract amounted to $415,000 with one-half of such costs ($207,500) having been
paid in cash and with the balance paid through issuance of 65,000 restrictive
shares of SRMI common stock, which shares were based upon a market valuation of
$3.192 per share (which was the bid price when the written agreement was orally
agreed to). In accordance with such written agreement the Company was required
to register such shares in this Registration Statement and (b) on October 31,
1999 the Company entered into an agreement with Live Marketing, Chicago,
Illinois (hereinafter "Live"), whereby
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Live agreed to provide certain video production, audio/video equipment rental,
lighting, on site personnel and related services for purposes related to SRMI's
booth at the 1999 RSNA Convention, Total costs in accordance with such contract
amounted to $156,180 of which $105,590 was paid in cash and with the balance of
$50,590 paid in 16,864 restrictive shares of SRMI common stock, which shares
were based upon market valuation of $3.00 per shares (which was the bid price
when the written agreement was orally agreed to). In accordance with such
written agreement the Company was required to register such shares in tis
Registration Statement.
DESCRIPTION OF CAPITAL STOCK
The following statements do not purport to be complete and are
qualified in their entirety by reference to the detailed provisions of the
Registrant's Certificate of Incorporation, as amended and By-Laws, copies of
which are incorporated by reference as exhibits to this Registration Statement.
Common Stock
On December 26, 1997 an amendment to the Certificate of Incorporation
with respect to an increase of the number of shares of Common Stock the
Registrant is authorized to issue from 30,000,000 to 50,000,000 was filed with
the Department of State of the State of New York. Accordingly, the Registrant
thereafter authorized to issue up to 50,000,000 shares of Common Stock, par
value $.01 per share. The amount of shares of Common Stock of the Registrant
issued and outstanding at the close of business on November 26, 1999 was
18,280,133 . In addition, the Registrant currently has reserved 2,837,462 shares
for previously issued restrictive shares pursuant to convertible debentures
referred to under Registration Nos. 333-50069 and 333-59829 and an additional
aggregate of 5,885,801 shares which are part of this Registration Statement and
are referred to in footnote 1 to the "Calculation of Registration Fee". The
Company has also reserved (i) 161,000 shares of Common Stock which may be issued
upon the exercise of outstanding options under the Registrant's 1996
Non-Statutory Stock Option Plan (the "1996 Plan") and (ii) 200,000 shares of
Common Stock reserved for issuance upon the exercise of options available for
future grant under the 1997 Non-Statutory Stock Option Plan (the "1997 Plan").
In accordance with stockholder approval received at Annual Meeting of
Stockholders held July 23, 1999, the Registrant filed on July 28, 1999 (with the
Department of State of the State of New York) a further amendment to its
Certificate of Incorporation pursuant to which it now has authority to issue up
to 1,000,000 shares of preferred stock, par value $.01 per share. None of such
shares have been issued and the authority regarding shares of common stock
remains at 50,000,000.
All of the issued and outstanding shares of Common Stock are fully paid
and non-assessable. The holders of Common Stock are entitled to one vote per
share for the election of directors and with respect to all other matters
submitted to a vote of stockholders. Shares of Common Stock do not have
cumulative voting rights, which means that the holders of more than 50% of such
shares voting for the election of directors can elect 100% of the directors if
they choose to do so and, in such event, the holders of the remaining shares so
voting will not be able to elect any directors. There is no classification of
the Board of Directors. The payment by the Registrant of dividends, if any, in
the future rests within the discretion of its Board of Directors and will
depend, among other things, upon
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the Registrant's earnings, its capital requirements and its financial condition,
as well as other relevant factors. The Registrant 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. The holders of the Common Stock have no preemptive or
conversion rights, and there are no redemption or sinking fund rights with
respect to the Common Stock. See "Market Prices and Dividend Policy."
Promissory Note
On or about April 28, 1997 an otherwise unaffiliated lender, Trianon
Opus One Inc. ("Trianon"), loaned the Company the sum of $2,000,000 bearing
interest at the rate of 6% per annum in accordance with the terms and conditions
of a certain convertible promissory note due April 28, 1998. In accordance with
the terms of such note both principal and interest were convertible into shares
of Company Common Stock one year from the date of the note at the higher of 80%
of bid price or $2.50 per share on the date of conversion. The note also
provided for certain "piggy-back" registration rights and, accordingly, the
85,077 restrictive shares of Company Common Stock issued upon conversion in
accordance with the terms of the note are herewith being registered hereunder
with Trianon being the selling shareholder.
Promissory Notes - Subsequently Converted Into Debentures
(a) December 1998
The Registrant received gross proceeds of $1,080,000 in December 1998
pursuant to promissory notes bearing interest at the rate of 8% per annum for
the first 90 calendar days (through March 13, 1999) with the Company having the
option to extend the notes for an additional 60 days with interest increasing 2%
per annum during the 60 day period. The Company exercised its extension option.
As further consideration for the loan, the Company issued Lenders Warrants to
purchase up to 50,000 shares of the Company's common stock exercisable, in whole
or in part, for a period of up to 5 years at $.375 (the bid price for Company
shares on the date of closing). The notes are secured by a second mortgage on
land and building . The promissory notes (held by Dominion Capital Fund, Ltd.
and Sovereign Partners) were not paid by their due date and the terms of a
Contingent Subscription Agreement, Debenture and Registration Rights Agreement
automatically went into effect with debentures bearing interest at the rate of
5% per annum (payable in stock or cash at the Company's option) and being
convertible, at any time at ^ 82% of the 10 day average bid price for the 10
consecutive trading days immediately preceding the conversion date^. The
documents also provide for certain Company redemption rights at percentages
ranging from 115% of the face amount of the Debenture to 125% of the face amount
of the debenture dependent upon redemption date, if any, as more specifically
set forth in the last paragraph to this subsection.
The Company is also required to register those shares of common stock
underlying the convertible debentures. Accordingly, 231,426 shares are being
registered pursuant to the terms of such agreements .
(b) March 2, 1999
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On March 2, 1999, the Company entered into a second promissory note
contingent convertible debenture financing with the same lenders as the December
1998 transaction described directly above (i.e., Dominion Investment Fund LLC
and Sovereign Partners LP) with terms and conditions identical to those set
forth above excepting (a) gross proceeds amounted to $1,110,000, (b) the initial
due date of such notes were May 31, 1999, (c) the potential 60 day extension
date on such promissory notes was July 30, 1999 but such extension right was
never utilized, (d) the conversion price is 80% of the 10 day average closing
bid price for the 10 consecutive trading days preceding conversion date and (e)
Warrants were issued (similarly exercisable over 5 years) to purchase up to
50,000 shares of common stock at 125% of the average 5 day closing bid price of
the Company's common stock immediately preceding the date of closing but in no
event at less than $1.00 per share. In all other respects the terms and
conditions of each of the documents executed with respect to this transaction
are identical in all material respects to those described above (in subparagraph
(a) regarding December 1998 transaction) . The promissory notes were not paid on
their due date and the terms of the Contingent Subscription Agreement and
Registration Rights Agreement automatically went into effect and, accordingly,
the number of shares being registered for this transaction amounts to 234,031
shares.
(c) March 26, 1999
On March 26, 1999 the Company entered into a third promissory note
(contingent convertible debenture financing) with terms and conditions identical
to those set forth in the March 2, 1999 promissory note financing referred to
directly above excepting (a) the lender is different, to wit: Aberdeen Avenue,
LLC, (b) gross proceeds amounted to $550,000, (c) the initial due date of such
note is June 25, 1999, (d) the potential 60 day extension date on such
promissory note was August 24, 1999 but such extension right was never utilized,
(e) Warrants were issued (similarly exercisable over 5 years) to purchase up to
27,500 shares of common stock at 125% of the average 5 day closing bid price of
the Company's common stock immediately preceding the date of closing but in no
event at less than $1.00 per share. In all other respects the terms and
conditions of each of the documents executed with respect to this transaction
are identical to those described in the above referenced March 2, 1999
transaction. The promissory notes were not paid on their due date and the terms
of the Contingent Subscription Agreement and Registration Rights Agreement
automatically went into effect and, accordingly, the number of shares being
registered for this transaction amounts to 115,961 shares.
(d) July 9, 1999
On July 9, 1999 the Company entered into a fourth promissory note
(contingent convertible debenture financing) with terms and conditions
substantially identical to those set forth in the March 2, 1999 promissory note
financing referred to directly above excepting (a) the lender is different, to
wit: Southshore Capital, Ltd., (b) gross proceeds amounted to $1,100,000, (c)
the due date of such note is August 23, 1999 with no right to extend and (d) the
debenture holder did not receive any warrants. In all other respects the terms
and conditions of each of the documents executed with respect to this
transaction are identical to those described in the above referenced March 2,
1999 transaction. The promissory note was not paid on its due date and the terms
of the Contingent Subscription Agreement, Convertible Debenture and Registration
Rights Agreement automatically went into effect and, accordingly, the number of
shares being registered for this transaction amounts to 230,729 shares.
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(e) August 11, 1999
On August 11, 1999 the Company entered into a fifth promissory note
(contingent convertible debenture financing) with terms and conditions identical
to those set forth in the March 2, 1999 promissory note financing referred to
directly above excepting (a) the lender is different, to wit: Aberdeen Avenue,
LLC, (b) gross proceeds amounted to $1,400,000, (c) the due date of such note is
November 11, 1999 with no right to extend and (d) the debenture holder did not
receive any warrants. In all other respects the terms and conditions of each of
the documents executed with respect to this transaction are identical to those
described in the above referenced March 2, 1999 transaction. The promissory note
was not paid on its due date and the terms of the Contingent Subscription
Agreement, Convertible Debenture and Registration Rights Agreement automatically
went into effect and, accordingly, the number of shares being registered for
this transaction amounts to 298,155 shares.
With respect to each debenture referred to in this subsection in
paragraphs designated (a) through (e) inclusive hereof, the Company has the
right to redeem debentures during the first four months thereof at the rate of
115% of the face amount of the debenture to be redeemed (plus accrued interest)
which percentage increase to 120% during the fifth and sixth months of the
debenture and which percentage further increases to 125% at any time after the
last day of the aforesaid sixth month. Additionally, with respect to each of
these debentures, the debenture holder may not require the Company to pay any
balance due in cash and it has been the Company's policy to pay such outstanding
indebtedness through issuance of shares of its common stock.
Registration Rights
The Convertible Debentures
The Registrant issued $18,549,040 aggregate principal amount of
Convertible Debentures from June of 1998 to November 1, 1999 . One Hundred
percent of the face amount of such Convertible Debentures is convertible into
shares of Common Stock of the Registrant at the earlier of the effective date of
a Registration Statement covering the underlying shares of Common Stock or
within 90 to 120 days from closing dependent upon the specific convertible
debenture at a conversion price equal to 18% to 20% except for one instance
where the discount from market was 25% on a $145,969 debenture (since entirely
converted into shares of Company common stock) of the average closing bid price
for the five to ten trading days preceding the date of conversion (dependent
upon the particular debenture). Any Convertible Debentures not so converted are
subject to mandatory conversion by the Registrant on the 24th monthly
anniversary of the date of issuance of the Convertible Debentures. Other than on
the date of such mandatory conversion provision (and certain other defined
circumstances regarding acquisition, merger and/or change of control as
summarized in the fifth paragraph to the section entitled "Selling Holders ^") ,
the Selling Holder shall not be entitled to convert any amount of Convertible
Debentures in excess of that amount upon conversion of which the sum of (i) the
number of shares of Common Stock beneficially owned by the Selling Holder and
its affiliates (other than the unconverted Convertible Debentures) and (ii) the
number of shares of Common Stock issuable upon conversion of the Convertible
Debentures would
-78-
<PAGE>
result in beneficial ownership by the Selling Holder and its affiliates of more
than 4.99% of the outstanding shares of Common Stock of the Registrant. This
conversion limitation is contractual in nature.
Reference is herewith made to chart appearing under "Selling Holders ^"
regarding specific percentages as same relate to debenture conversion price and
percent of beneficial ownership that Selling Shareholders may have at any one
time.
If at any time the number of shares of Common Stock into which the
Convertible Debentures may be converted exceeds the aggregate number of shares
of Common Stock then registered, the Registrant shall, within ten (10) business
days after receipt of written notice from any investor, either (i) amend the
registration statement filed by the Registrant, if such registration statement
has not been declared effective by the SEC at that time, to register all shares
of Common Stock into which the Debenture may be converted, or (ii) if such
registration statement has been declared effective by the Securities and
Exchange Commission (the "SEC") at that time, file with the SEC an additional
registration statement on Form S-1 to register the shares of Common Stock into
which the Convertible Debentures may be converted that exceed the aggregate
number of shares of Common Stock already registered.
Pursuant to the Registration Rights Agreements between the Registrant
and the Selling Holders, the Registrant is required to file with the SEC, within
a set time frame, a Registration Statement(s) covering a sufficient number of
shares of Common Stock for the Selling Holders into which the Convertible
Debentures would be convertible. Consequently, the Registrant is filing with the
Commission this Registration Statement on Form S-1 (the "Registration
Statement"), of which this prospectus is a part, to cover the sale of the Common
Stock issuable to the Selling Holders upon conversion of the Convertible
Debentures. The Registration Rights Agreements provide that the Registrant shall
keep the Registration Statement effective at all times until the earliest (the
"Registration Period") of (i) the date that is two years after the Closing Date,
(ii) the date when the Investors may sell all Securities under Rule 144 or (iii)
the date the Investors no longer own any of the Securities.
If the Registration Statement covering the Securities required to be
filed by the Registrant pursuant to the Registration Rights Agreements is not
filed by the agreed to date (which agreed to date was either 30, 45 or 60 days
from closing dependent upon Agreement) or if such Registration Statement is not
declared effective within 90 to 120 days of the closing date (dependent upon
applicable Registration Rights Agreement) (the "Initial Date"), the Registrant
shall make payments to the Selling Holders in such amounts and at such times as
shall be determined pursuant to the Registration Rights Agreements. In the event
a timely filing is not made, the Registrant shall pay the Selling Holder 2% of
the face amount of the Convertible Debenture for each 30 day period, or portion
thereof after 30 days following the Closing Date that the Registration Statement
is not filed. The amount to be paid by the Registrant to the Selling Holders in
the event the Registration Statement is not declared effective within the agreed
to number of days subsequent to closing date shall be determined as of each
Computation Date, and such amount shall be equal to two percent (2%) of the
purchase price paid by the Selling Holders for the Convertible Debentures
pursuant to the Registration Rights Agreements for the period from the Initial
Date to the first Computation Date, and two percent (2%) of the purchase price
for each Computation Date thereafter, to the date the
-79-
<PAGE>
Registration Statement is declared effective by the SEC (the "Periodic Amount").
The full Periodic Amount shall be paid by the Registrant in immediately
available funds within five business days after each Computation Date.
The Registrant has not paid any "periodic amounts" (notwithstanding
delays in anticipated effective date) nor has any demand for payment been made
upon the Registrant. Notwithstanding the foregoing, the amounts payable by the
Registrant pursuant to the Registration Rights Agreements shall not be payable
to the extent any delay in the effectiveness of the Registration Statement
occurs because of an act of, or a failure to act or to act timely by the Selling
Holders or their respective counsel.
"Computation Date" means the date which is the earlier of (i) 35 days
after the Registrant is notified by the SEC that the Registration Statement may
be declared effective or (ii) one hundred twenty (120) days after the Closing
Date and, if the Registration Statement required to be filed by the Registrant
pursuant to the Registration Rights Agreements has not therefore been declared
effective by the SEC, each date which is thirty (30) days after the previous
Computation Date until such Registration Statement is so declared effective.
The number of shares of Common Stock issuable upon conversion of the
Convertible Debentures depends on several factors, including the conversion
ratio and the date on which such shares are converted. As of December 3, 1999 if
all of the Convertible Debentures (issued from June 1998 to December 3, 1999, as
indicated in aforesaid chart) were converted based on a 18% to 20% discount to
the reported closing price on the Electronic Over-the-Counter Bulletin Board on
December 3, 1999, the Registrant would be required to issue 3,048,339 shares of
Common Stock (inclusive of shares which may be issued in exchange for interest
earned through mandatory conversion date).
Except for the total number of shares to which this Prospectus relates
as set forth above, references in this Prospectus to the "number of Shares
covered by this Prospectus," or similar statements, and information in this
Prospectus regarding the number of Securities issuable to or held by the Selling
Holders and percentage information relating to the Securities of the outstanding
capital stock of the Registrant, are based, with respect to the Convertible
Debentures. See "Selling Holders ^" and "Description of Capital Stock."
The Securities are being offered on a continuous basis pursuant to Rule
415 under the Securities Act of 1933, as amended (the "Securities Act"). No
underwriting discounts, commissions or expenses are payable or applicable in
connection with the sale of the Securities by the Selling Holders. The Common
Stock of the Registrant was quoted on the NASDAQ SmallCap Market ("NASDAQ")
under the symbol "SRMI" until October 26, 1998 delisting. See also risk factor
entitled "Delisting Due to Non-Compliance With Certain NASDAQ Standards". The
Securities offered hereby will be sold from time to time at the then prevailing
market prices, at prices relating to prevailing market prices or at negotiated
prices. On December 3, 1999, the last reported sale price of the Common Stock on
Electronic Over-the-Counter Bulletin Board was $6.84375 per share. This
Prospectus may be used by the Selling Holders or any broker-dealer who may
participate in sales of the Securities covered hereby.
Reference is herewith made to risk factor entitled "Potential Adverse
Effect Upon Stock Price
-80-
<PAGE>
as a Result of Registration of Significant Number of Shares .." and in
particular to the chart which is a part thereof. Reference is also made to risk
factor entitled "Past History of Debt (Debenture) Fund Raising to Retire
Existing Indebtedness" which indicates Company's need to raise funds partially
to retire certain existing debenture indebtedness.
Common Stock Reserved
The Registrant is required to reserve and keep available out of its
authorized but unissued Common Stock such number of shares of Common Stock as
shall from time to time be sufficient to effect conversion of all of the then
outstanding Convertible Debentures and exercise of options. While the Registrant
currently has a sufficient number of authorized but unissued shares for such
purposes in the event of any significant decrease in the bid price of the
Company's common stock additional authorized shares may be necessary in order to
meet its contractual commitments regarding conversion especially in view of the
fact that none of the Subscription Agreements or convertible debentures contain
any "floor", i.e., a bid price beneath which Debenture Holder may not convert.
In the event that additional authorized shares are necessary but not readily
available (which while currently appears unlikely cannot be discounted), the
Company intends to take such steps as are necessary in order to hold a Special
Meeting of Stockholders for the purpose of amending its Certificate of
Incorporation so as to increase its authorized shares.
Registrar and Transfer Agent
The registrar and transfer agent for the Registrant's Common Stock is
Continental Stock Transfer & Trust Company, New York, New York.
LEGAL MATTERS
The validity of the Securities will be passed upon for the Registrant by Gary B.
Wolff, P.C., counsel to the Company.
INDEPENDENT AUDITORS
The consolidated financial statements of the Registrant and its
subsidiaires for the years ended June 30, 1999 and June 30,1998 included herein
have been included in reliance upon the report of Feldman Sherb Horowitz & Co.,
P.C., independent accountants, appearing elsewhere herein and upon the authority
of said firm as experts in accounting and auditing.
The consolidated financial statements of the Registrant and its
subsidiaries for the two years ended June 30, 1997 and 1996 included herein have
been included in reliance upon the report of Bederson & Company LLP, independent
accountants, appearing elsewhere herein and upon the authority of said firm as
experts in accounting and auditing.
As set forth in the report of Bederson & Company LLP, the financial
statements of one of the Registrant's subsidiaries for the year ended June 30,
1997 were audited by other auditors whose report was furnished to Bederson &
Company LLP. The opinion of Bederson & Company LLP set forth in such report,
insofar as it relates to amounts included for that subsidiary, is based solely
on the
-81-
<PAGE>
report of the other auditors.
INTERIM FINANCIAL STATEMENTS
The information for the interim period ended September 30, 1999 is
unaudited but includes all adjustments considered necessary for a fair
presentation of the results.
-82-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Financial Statements for Fiscal Years Ended
June 30, 1999, 1998 and 1997
Independent Auditors' Reports ................................ F-1 - F-3
Consolidated Balance Sheets .................................. F-4
Consolidated Statements of Operations ........................ F-6
Consolidated Statements of Cash Flows ........................ F-7
Consolidated Statements of Stockholders' Equity .............. F-8
Notes to Consolidated Financial Statements ................... F-9 - F-25
Unaudited Financial Statements for Three Months Ended
September 30, 1999 and 1998 ....................... F-26 - F-29
-83-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
Swissray International, Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of Swissray
International, Inc. and subsidiaries as of June 30, 1999 and 1998, and the
related consolidated statements of operations, changes in stockholders' equity
(deficit) and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Swissray International, Inc.
and subsidiaries as of June 30, 1999 and 1998, and the results of its
operations, changes in stockholders' equity (deficit) and cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/ Feldman Sherb Horowitz & Co., P.C.
Feldman Sherb Horowitz & Co., P.C.
(Formerly Feldman Sherb Ehrlich & Co., P.C.)
Certified Public Accountants
New York, New York
August 6, 1999
F-1
<PAGE>
(LETTERHEAD OF BEDERSON & COMPANY LLP)
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, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years then ended. 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 did
not audit the financial statements of Swissray (Deutschland) Rontgentechnik
GmbH, a wholly owned subsidiary, which statements reflect total assets of
$437,021 as of June 30, 1997 and total revenues of $1,255,140 for the year then
ended. Those statements were audited by other auditors whose report has been
furnished to us, and our opinon, insofar as it related to the amounts included
for Swissray (Deutschland) Rontgentechnick GmbH, is based solely on the report
of the other auditors.
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 misstatements. 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 statements presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, based on our audit and the report of other auditors, the
consolidated financial statements referred to above present farily, in all
material respects, the financial position of Swissray International, Inc., and
its subsidiaries, at June 30, 1997 and 1996 and the results of their operations
and their cash flows for the year then ended, in conformity with generally
accepted accounting principles.
/s/ BEDERSON & COMPANY LLP
BEDERSON & COMPANY LLP
West Orange, New Jersey
September 16, 1997
Except for Notes 17, 20 and 22, as of March 6, 1998, and Note 1, 16, 23, 25, 26
27, 29, 30, 31 and 32, as of November 16, 1998
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors of
Swissray (Duetschland) Rontegentechnik Gmbh
Wiesbaden, Germany
We have audited the balance sheet of Swissray (Duetschland)
Rontegentechnik Gmbh as of June 30, 1997 and the related statements of income
and stockholder's equity for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on the financial statements based on our audit.
We conducted our audit in accordance to all laws governed by German
regulations and with generally accepted auditing standards promulgated by the
American Institute of Certified public accountants. Those standards require that
we plan and perform the audit to obtian reasonable assurance about whether the
financial statements are free of material misstatements. An audit includes
examining on a test basis, evidence supporting the amounts and disclosures in
the 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 preparation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Swissray
(Duetschland) Rontegentechnik Gmbh as of June 30, 1997 and the results of its
operations for the year then ended.
/s/ Theo Lepper
Theo Lepper
Certified Public Accountant
Wiesbaden, Germany
August 8, 1997
F-3
<PAGE>
SWISSRAY INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999 and 1998
ASSETS
<TABLE>
<CAPTION>
------------------------------
1999 1998
------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,281,297 $ 1,281,552
Accounts receivable, net of allowance for doubtful
accounts of $219,993 and $32,356 2,448,879 2,584,651
Inventories 7,332,401 7,701,145
Prepaid expenses and sundry receivables 866,804 1,501,909
------------------------------
TOTAL CURRENT ASSETS 11,929,381 13,069,257
------------------------------
PROPERTY AND EQUIPMENT 6,283,040 6,010,378
------------------------------
OTHER ASSETS
Loan receivable 15,948 20,005
Licensing agreement 3,104,109 3,600,766
Patents and trademarks 199,906 230,614
Software development costs 347,762 455,318
Security deposits 28,035 38,280
Note receivable - net of allowance of $544,376 and $30,733 --- 513,643
Goodwill 1,603,007 1,796,336
Debt issuance costs on convertible --- 180,000
------------------------------
TOTAL OTHER ASSETS 5,298,768 6,834,962
------------------------------
TOTAL ASSETS $23,511,189 $25,914,597
==============================
</TABLE>
F-4
The accompanying notes are an integral part of these financial statements
<PAGE>
SWISSRAY INTERNATIONAL
CONSOLIDATED BALANCE SHEET (Continued)
JUNE 30, 1999 and 1998
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
------------------------------
1999 1998
------------------------------
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt $ 247,028 $ 233,746
Notes payable - banks 3,667,159 3,551,091
Notes payable - short-term 1,700,000 ---
Loan payable 126,006 125,029
Accounts payable 5,422,321 5,030,449
Accrued expenses 2,003,844 2,365,450
Restructuring 500,000 500,000
Customer deposits 278,507 176,583
Due to stockholders and officers --- 2,206
------------------------------
TOTAL CURRENT LIABILITIES 13,944,865 11,984,554
------------------------------
CONVERTIBLE DEBENTURES, net of conversion benefit 15,305,852 7,330,642
------------------------------
LONG-TERM DEBT, less current maturities 195,095 440,674
COMMON STOCK SUBJECT TO PUT 1,819,985 1,819,985
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 140,062 41,426
Additional paid-in capital 64,688,013 58,074,793
Treasury stock (540,000) ---
Deferred compensation (707,222) ---
Accumulated deficit (67,727,741) (50,481,713)
Accumulated other comprehensive loss (1,787,735) (1,475,779)
Common stock subject to put (1,819,985) (1,819,985)
------------------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (7,754,608) 4,338,742
------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 23,511,189 $ 25,914,597
==============================
</TABLE>
F-5
The accompanying notes are an integral part of these financial statements
<PAGE>
SWISSRAY INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF OPERATIONS
YEARS ENDED JUNE 30, 1999, 1998 and 1997
<TABLE>
<CAPTION>
----------------------------------------------------
1999 1998 1997
(Restated) (Restated)
----------------------------------------------------
<S> <C> <C> <C>
NET SALES $ 17,295,882 $ 22,892,978 $ 13,151,701
COST OF SALES 13,529,301 18,081,786 8,445,414
----------------------------------------------------
GROSS PROFIT 3,766,301 4,811,192 4,706,287
----------------------------------------------------
OPERATING EXPENSES
Officers and directors compensation 1,434,293 569,816 1,816,879
Salaries 3,784,305 4,168,540 2,059,396
Selling 3,061,813 3,740,391 1,873,389
Research and development 1,808,107 3,542,149 5,786,158
General and administrative 2,445,867 2,612,262 2,879,257
Restructuring cost --- 500,000 ---
Other operating expenses 1,066,039 1,735,877 1,645,800
Bad debts 706,877 133,196 619,160
Depreciation and amortization 1,273,916 1,745,498 770,294
----------------------------------------------------
TOTAL OPERATING EXPENSES 15,581,217 18,747,729 17,450,333
----------------------------------------------------
LOSS BEFORE OTHER INCOME (EXPENSES)
AND INCOME TAXES (11,814,636) (13,936,537) (12,744,046)
Other income (expenses) 40,385 (281,227) 318,763
Interest expense (4,638,928) (8,590,268) (762,168)
----------------------------------------------------
OTHER EXPENSES (4,598,543) (8,871,495) (443,405)
----------------------------------------------------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND
EXTRAORDINARY ITEMS (16,413,179) (22,808,032) (13,187,451)
INCOME TAX PROVISION --- --- 110,223
----------------------------------------------------
LOSS FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY ITEMS (16,413,179) (22,808,032) (13,297,674)
Extraordinary income (expenses) (832,849) 304,923 (384,514)
----------------------------------------------------
NET LOSS $(17,246,028) $(22,503,109) $(13,685,188)
====================================================
LOSS PER COMMON SHARE BASIC
Loss from continuing operations (2.52) (8.48) (8.41)
Extraordinary items (0.13) 0.11 (0.24)
----------------------------------------------------
NET LOSS (2.65) (8.37) (8.65)
====================================================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 6,525,423 2,690,695 1,581,757
============ ========= =========
</TABLE>
F-6
The accompanying notes are an integral part of these financial statements
<PAGE>
SWISSRAY INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
----------------------------------------------------
1999 1998 1997
----------------------------------------------------
(Restated)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITES
Net loss $(17,246,028) $(22,503,109) $(13,685,188)
Adjustment to reconcile net loss to net
cash used by operating activities
Depreciation and amortization 1,327,395 1,874,206 770,294
Provision for bad debts 931,146 (38,803) 552,725
Write-off of affiliate receivable --- --- 166,384
Common stock and stock options issued for services 991,203 --- 2,309,435
Issuance of common stock in lieu of interest payments 128,107 449,376 132,950
Interest expense on Debt issuance cost and
conversion benefit 2,778,006 7,905,225 511,125
Interest expense on option value per Black Scholes 91,763 --- ---
Early extinguishment of debt (gain) 832,849 (304,923) ---
Deferred compensation (707,222) --- ---
(Increase) decrease in operating assets:
Accounts receivable (51,866) 2,887,427 (1,857,662)
Accounts receivable - others --- --- 31,533
Accounts receivable - long-term --- 163,680 283,603
Inventories 368,744 (3,790,038) (998,271)
Prepaid expenses and sundry receivables 635,106 434 229 (860,457)
Increase (decrease) in operating liabilities:
Accounts payable 391,873 (306,300) 1,601,074
Accounts payable-affiliates --- --- (1,541)
Accrued expenses (361,606) 1,463,512 266,245
Customers deposits 101,924 6,147 92,763
----------------------------------------------------
NET CASH USED BY OPERATING ACTIVITIES (9,788,606) (11,759,371) (10,684,988)
----------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of property and equipment (692,954) (2,849,205) (3,431,375)
Capitalized computer software (1,518) (225,174) (352,036)
Patents and trademarks --- (52,386) (12,925)
Goodwill --- (802,107) (299,837)
Asset purchase net of cash received --- (591,108) ---
Increase in notes receivable (199,132) --- ---
Collection of note receivable --- --- 448,857
Security deposits 10,245 5,448 (23,776)
(Repayment of) loan receivable 4,056 (2,608) 2,896
----------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES (879,303) (4,517,140) (3,668,196)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings 20,191,413 10,342,060 9,198,821
Proceeds from long-term borrowings --- --- 248,987
Proceeds related to debentures not funded (227,273) --- ---
Principal payment of short-term borrowings (11,268,343) (3,852,075) (2,093,074)
Principal payment of long-term borrowings (245,580) (21,748) (442,681)
Principal payment of long-term borrowings with stock --- (62,267) ---
Issuance of common stock for cash 3,160,396 8,461,262 7,753,222
Purchase of treasury stock (540,000) --- ---
Repayment from (payment to) stockholders and officers (2,207) (68,032) 87,653
----------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES 11,068,406 14,779,200 14,752,928
----------------------------------------------------
EFFECT OF EXCHANGE RATE ON CASH (400,752) (332,444) (561,122)
----------------------------------------------------
NET INCREASE (DECREASE) IN CASH (255) (1,809,755) (161,378)
CASH AND CASH EQUIVALENT - beginning of period 1,281,552 3,091,307 3,252,685
----------------------------------------------------
CASH AND CASH EQUIVALENTS - end of period $ 1,281,297 $ 1,281,552 $ 3,091,307
====================================================
</TABLE>
F-7
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------------------------
1999 1998 1997
----------------------------------------------------
<S> <C> <C> <C>
Cash paid for interest $ 462,997 $ 161,093 $ 122,427
Cash paid for taxes --- --- 56,562
DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES
Stock options, warrants and common stock issued for services 1,732,163 --- 2,287,935
Shares issued in lieu of interest paymnets 126,107 449,376 132,950
Stock issued for acquisition --- 1,499,997 120,000
Beneficial conversion feature recorded as additional paid-in
capital 1,633,164 5,738,149 1,000,000
</TABLE>
F-8
<PAGE>
SWISSRAY INTERNATIONAL, INC.
CONSOLITATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Common
Additional Stock
Paid-in to be
Common Stock Capital issued Treasury
Shares Amount (Restated) (Restated) ) Stock
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE - July 1, 1996 1,418,506 $ 14,185 $ 25,770,534 $ -- $ --
COMPREHENSIVE LOSS:
Net loss of the year -- -- -- -- --
Foreign currency translation losses net of taxes $ -0- -- -- -- -- --
TOTAL COMPREHENSIVE LOSS -- -- -- -- --
Issuance of common stock for cash 519,776 5,197 7,630,495 -- --
Stock options exercised for cash 16,100 161 117,369 -- --
Issuance of common stock in lieu of interest payment 7,061 71 132,879 -- --
Beneficial conversion feature of convertible debentures -- -- 1,000,000 -- --
Stock options granted as compensation -- -- 25,000 -- --
Stock options granted for services -- -- 1,161,462 -- --
Shares to be issued to officers for services -- -- -- 1,122,973 --
Purchase of subsidiary for stock 8,000 80 119,920 -- --
Common stock subject to put -- -- -- -- --
--------------------------------------------------------------------
BALANCE - JUNE 30, 1997 1,969,443 19,694 35,957,659 1,122,973 --
COMPREHENSIVE LOSS:
Net loss of the year -- -- -- -- --
Foreign currency translation losses net of taxes $ -0- -- -- -- -- --
TOTAL COMPREHENSIVE LOSS -- -- -- -- --
Issuance of common stock for cash 2,013,688 20,137 13,581,739 -- --
Stock options exercised for cash 16,900 169 123,201 -- --
Shares issued to officers for services 48,259 483 1,122,490 (1,122,973) --
Issuance of common stock in lieu of interest payment 60,999 610 448,766 -- --
Beneficial conversion feature of convertible debentures -- -- 5,738,149 -- --
Early extinguishment of Debt -- -- (396,875) -- --
Issuance of common stock for asset purchase 33,333 333 1,499,664 -- --
Common Stock subject to put -- -- -- -- --
--------------------------------------------------------------------
BALANCE - JUNE 30, 1998 4,142,622 41,426 58,074,793 -- --
COMPREHENSIVE LOSS:
Net loss of the year -- -- -- -- --
Foreign currency translation losses net of taxes $ -0- -- -- -- -- --
TOTAL COMPREHENSIVE LOSS -- -- -- -- --
Issuance of common stock for cash 3,861,287 38,613 3,121,784 -- --
Stock options exercised for services 1,000 10 7,290 -- --
Shares issued for services 3,801,500 38,015 913,110 -- --
Issuance of common stock in lieu of interest payment 199,830 1,998 126,109 -- --
Beneficial conversion feature of convertible debentures -- -- 1,633,164 -- --
Shares issued to officers for services 2,000,000 20,000 720,000 -- --
Treasury stock - at cost -- -- -- -- (540,000)
Interest expense on option value per Black Scholes -- -- 91,763 -- --
----------------------------------------------------------------------
BALANCE - JUNE 30, 1999 14,006,239 $ 140,062 $ 64,688,013 $ -- $(540,000)
======================================================================
F-9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Accumulated Other
Deficit Deferred Comprehensive Common Stock Total
(Restated) Compensation Loss Subject to Put (Restated)
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE - July 1, 1996 $(14,293,416) $ -- $ (836,047) $ -- $10,655,256
COMPREHENSIVE LOSS:
Net loss of the year (13,685,188) -- -- -- (13,685,188)
Foreign currency transaction losses net of taxes $ -0- -- -- (592,487) -- (592,487)
--------------
TOTAL COMPREHENSIVE LOSS -- -- -- -- (14,277,675)
--------------
Issuance of common stock for cash -- -- -- -- 7,635,692
Stock options exercised for cash -- -- -- -- 117,530
Issuance of common stock in lieu of interest payment -- -- -- -- 132,950
Beneficial conversion feature of convertible debentures -- -- -- -- 1,000,000
Stock options granted as compensation -- -- -- -- 25,000
Stock options granted for services -- -- -- -- 1,161,462
Shares to be issued to officers for services -- -- -- -- 1,122,973
Purchase of subsidiary for stock -- -- -- -- 120,000
Common Stock subject to put -- -- -- (320,000) (320,000)
---------------------------------------------------------------------
BALANCE - JUNE 30, 1997 (27,978,604) -- (1,428,534) (320,000) 7,373,188
COMPREHENSIVE LOSS:
Net loss of the year (22,503,109) -- -- -- (22,503,109)
Foreign currency transaction losses net of taxes $ -0- (47,245) -- (47,245)
--------------
TOTAL COMPREHENSIVE LOSS -- -- -- -- (22,550,354)
Issuance of common stock for cash -- -- -- -- 13,601,876
Stock options exercised for cash -- -- -- -- 123,370
Shares issued to officers for services -- -- -- -- --
Issuance of common stock in lieu of interest payment -- -- -- -- 449,376
Beneficial conversion feature of convertible debentures -- -- -- -- 5,738,149
Early extinguishment of Debt -- -- -- -- (396,875)
Issuance of common stock for asset purchase -- -- -- -- 1,499,997
Common Stock subject to put -- -- -- (1,499,983) (1,819,985)
----------------------------------------------------------------------
BALANCE - JUNE 30, 1998 (50,481,713) -- (1,475,779) (1,819,985) 4,338,742
COMPREHENSIVE LOSS:
Net loss of the year (17,246,028) -- -- -- (17,246,028)
Foreign currency translation losses net of taxes $ -0- -- -- (311,956) -- (311,956)
--------------
TOTAL COMPREHENSIVE LOSS -- -- -- -- (17,557,984)
Issuance of common stock for cash -- -- -- -- 3,160,397
Stock options exercised for services -- -- -- -- 7,300
Shares issued for services -- (707,222) -- -- 243,903
Issuance of common stock in lieu of interest payment -- -- -- -- 128,107
Beneficial conversion feature of convertible debentures -- -- -- -- 1,633,164
Shares issued to officers for services -- -- -- -- 740,000
Treasury stock - at cost -- -- -- -- (540,000)
Interest expense on option value per Black Scholes -- -- -- -- 91,763
---------------------------------------------------------------------
BALANCE - JUNE 30, 1999 $(67,727,741) $ (707,222) $ (1,787,735) $(1,819,985) $ (7,754,608)
======================================================================
</TABLE>
F-10
The accompanying notes are an integral part of these financial statements
<PAGE>
SWISSRAY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997
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 CGS Units Incorporated. On June 6, 1994, the Company
merged with Direct Marketing Services, Inc. and changed its name to DMS
Industries, Inc. In May of 1995 the Company discontinued the operations of DMS
Industries, Inc. and acquired all of the outstanding stock of SR Medical AG, a
Swiss corporation engaged in the business of manufacturing and selling X-ray
equipment, components and accessories. On June 5, 1995 the Company changed its
name to Swissray International, Inc. The Company's operations are conducted
principally through its wholly owned subsidiaries.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated. Investments which are recorded on an equity
method and have operated at a loss in excess of equity are carried at a zero
value.
BUSINESS ACQUISITION
On April 1, 1997, the Company exchanged 8,000 shares of common stock at the then
quoted market price of $120,000 ($15 per share) for all the outstanding shares
of Empower, Inc.The consolidated financial statements presented include the
accounts of Empower, Inc.(whose assets were substantially sold in June 1998),
from April 1, 1997 (date of acquisition) to June 30, 1998. The acquisition has
been accounted under the purchase accounting method. The contract requires the
Company to repurchase the 8,000 shares of common stock at $40 per share for a
period of one year commencing two years from the date of the contract at the
option of the former owner of Empower, Inc.
On October 17, 1997, the Company acquired substantially all of the assets and
assumed certain liabilities of Service Support Group, LLC (SSG) located in Gig
Harbor, Washington pursuant to an asset purchase agreement. The acquisition has
been accounted for under the purchase method of accounting. SSG is in the
business of selling diagnostic imaging equipment and related services in markets
on the West Coast of the United States. The purchase price consisted of (1) cash
in the amount of $621,892, (2) 33,333 shares of the Company's common stock, (3)
an amount equal to fifty percent of certain accounts receivable net of certain
accounts payable and (4) the assumptions of certain other liabilities. As a
result of this transaction, the Company recorded goodwill of $1,933,275. The
contract requires the Company to repurchase the 33,333 common shares at $45 per
share during the period June 30, 1998 to April 17, 1999 at the option of the
former owners of SSG.
In connection with the abovementioned acquisitions, the Company has recorded put
options totaling $1,819,985. Such amount is excluded from permanent equity. As
of June 30, 1999, both options were exercised and subject to dispute. (See
Litigation footnote)
REVENUE AND INCOME RECOGNITION POLICIES
Revenues from the sale of products are recorded when the products are shipped,
collection of the purchase price is probable and the Company has no significant
further obligations to the customer. Cost of remaining insignificant company
obligations, if any, are accrued as costs of revenue at the time of revenue
recognition.
USE OF ESTIMATES IN THE PREPARATION OF THE FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles require management to make estimates and assumptions that
affect 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.
F-11
<PAGE>
WARRANTY
The company accrues a warranty allowance at the time of sale. The warranty
allowance is based upon the companies experience and varies between 0.5 and 2%
of the net sales amount.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standard No. 107 "Disclosures about Fair Value
of Financial Instruments" (SFAS 107) requires the disclosure of fair value
information about financial instruments whether or not recognized on the balance
sheet, for which it is practicable to estimate the value. Where quoted market
prices are not readily available, fair values are based on quoted market prices
of comparable instruments. The carrying amount of cash and equivalents, accounts
receivable and accounts payable approximates fair value because of the short
maturity of those instruments.
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 the lower of cost or market, with cost being
determined on the first-in, first-out (FIFO) method. Inventory costs include
material, labor, and overhead.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of the respective assets,
which are three years for Computers and Telecommunication Equipment, five to ten
years for Equipment, Office Furniture and Equipment and Office and Leasehold
Improvements and thirty years for Buildings. Leasehold improvements are
amortized over the shorter of the estimated useful lives of the improvements, or
the term of the facility lease.
Expenditures for repairs and maintenance are charged to expense as incurred. The
cost of major renewals and betterment's are capitalized and depreciated over
their useful lives. Upon disposition, the cost and related accumulated
depreciation of property and equipment are removed from the accounts and any
resulting gain or loss is reflected in operations.
The Company is required to review long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable, in accordance with the provisions of Statement of
Financial Accounting Standards No.121, "Accounting for Impairment of Long-Lived
Assets and Long-Lived Assets to Be Disposed Of" ("SFAS 121"). Accordingly, when
indicators of impairment are present, the Company evaluates the carrying value
of property, plant, and equipment and intangibles using projected undiscounted
future cash flows and operating income for each subsidiary to determined whether
material impairment of these assets exists.
INTANGIBLE ASSETS
Excess of cost over fair value of net assets acquired ("goodwill") resulting
from the acquisition of SSG is being amortized over ten years from the date of
acquisition using the straight-line method. Patents and Trademarks are
capitalized and are amortized using the straight-line method over their
estimated useful lives (10 year).Debt issuance costs are amortized using the
straight-line method over the term of the related debt, which range from two to
six months. Periods of amortization are evaluated periodically to determine
whether later events and circumstances warrant revised estimates of useful
lives. At each balance sheet date, the Company evaluates the recoverability of
unamortized goodwill based upon expectations of nondiscounted cash flows and
operating income. Impairments, if any, would be recognized in operating results
if a permanent diminution in value were to occur.
Capitalization of software development costs begins upon the establishment of
technological feasibility of new or enhanced software products. Technological
feasibility of a computer software product is established when the Company has
completed all planning, designing, coding and testing that is necessary to
establish that the software product can be produced to meet design
specifications including functions, features and technical performance
requirements. All costs incurred prior to establishing technological feasibility
of a software product are charged to research and development as incurred. The
F-12
<PAGE>
Company amortizes capitalized software development costs over straight-line
method over the estimated remaining economic life of the software products,
generally five to eight years.
All cost incurred by the Company in connection with incorporation of
subsidiaries have been capitalized and are being amortized over a period up to
60 months.
ADVERTISING AND PROMOTION
Advertising and promotion cost are expensed as incurred and included in "Selling
Expenses". Advertising and promotion expense for the years ended June 30, 1999,
1998 and 1997 were $ 1,452,309, $ 1,737,935, and $ 781,189, respectively.
RESEARCH AND DEVELOPMENT
Costs associated with research, new product development, and product cost
improvements are treated as expenses when incurred.
CONVERTIBLE DEBT
Convertible debt is recorded as a liability until converted into common stock,
at which time it is recorded as equity.
INCOME TAXES
Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amounts expected to be realized.
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
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings Per Share",
which established new standards for computation of earnings per share. SFAS No.
128 requires the presentation on the face of the income statement of "basic"
earnings per share and "diluted" earnings per share.
Basic earnings per share is computed by dividing the net income (loss) available
to common shareholders by the weighted average number of outstanding common
shares. The calculation of diluted earnings per share is similar to basic
earnings per share except the denominator includes dilutive common stock
equivalents such as stock options and convertible debentures. Common stock
options and the common shares underlying the convertible debentures are not
included as their effect would be anti-dilutive.
ACCOUNTING FOR STOCK OPTIONS
The Company adopted Statement of Financial Accounting Standards No. 123 ("SFAS
123"), "Accounting for Stock Based Compensation". SFAS 123 encourages the use of
a fair-value-based method of accounting for stock-based awards under which the
fair value of stock options is determined on the date of grant and expensed over
the vesting period. Under SFAS 123, companies may, however, measure compensation
costs for those plans using the method prescribed by Accounting Principles Board
Opinion No. 25, ("APB No.25"), "Accounting for Stock Issued to Employees."
Companies that apply APB No. 25 are required to include pro forma disclosures of
net earnings and earnings per share as if the fair-value-based method of
accounting had been applied. The Company elected to account for such plans under
the provisions of APB No. 25.
RECLASSIFICATIONS
Certain reclassifications have been made to prior year's financial statements to
conform to the June 30, 1999 presentation.
F-13
<PAGE>
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of subsidiaries operating in foreign countries are
translated into U.S. dollars using both the exchange rate in effect at the
balance sheet date or historical rate, as applicable. 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 (Accumulated
other comprehensive loss), while gains and losses resulting from foreign
currency transactions are included in operations.
NEW ACCOUNTING PRONOUNCEMENTS
The Company will adopt Statement of Financial Accounting Standard No. 133 ("SFAS
No. 133"), "Accounting for Derivative Instruments and Hedging Activities" for
the year ended June 30, 2000. SFAS No. 133 establishes a new model for
accounting for derivatives and hedging activities and supersedes and amends
a number of existing standards. The application of the new pronouncement is not
expected to have a material impact on the Company's financial statements.
STOCK SPLIT
On October 1, 1998 the Company declared a 1 for 10 reverse stock split. The
financial statements for all periods presented have been retroactively adjusted
for the stock split.
NOTE 2 - NOTE RECEIVABLE
On June 20, 1996 the Company sold marketable securities for a 5% promissory note
in the amount of $962,500 originally due on October 20, 1996 of which $100,000
was paid on December 10, 1996. On January 15, 1997, the Company renegotiated the
terms of the unpaid balance. A new note in the amount of $862,500 was
renegotiated, with interest at 6% cumulative and payable when the note matures
on January 1, 2000. At June 30, 1997, principal payments of $348,857 were
received leaving a balance due of $513,643. The $513,643 was written off during
the year ended June 30, 1999..
NOTE 3 - INVENTORIES
Inventories are summarized by major classification as follows:
<TABLE>
<CAPTION>
June 30,
---------------------------------------------
1999 1998
------------------- --------------------
<S> <C> <C>
Raw materials, parts and supplies $ 5,558,330 $ 7,047,001
Work in process 1,048,197 160,064
Finished goods 725,874 494,080
------------------- --------------------
$ 7,332,401 $ 7,701,145
=================== ====================
</TABLE>
NOTE 4 - PREPAID EXPENSES AND SUNDRY RECEIVABLES
Prepaid expenses and sundry receivables consist of the following:
<TABLE>
<CAPTION>
June 30,
------------------------------------
1999 1998
-------------- ---------------
<S> <C> <C>
Prepaid expenses, deposits and advance payments $ 229,236 $ 616,183
Insurance claim for fire damage 389,220 165,655
Prepaid and refundable taxes 240,368 708,246
Employee loans 7,980 11,825
-------------- ---------------
$ 866,804 $ 1,501,909
============== ===============
</TABLE>
F-14
<PAGE>
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
June 30,
----------------------------------------
1999 1998
----------------- ----------------
<S> <C> <C>
Land and building $ 5,501,853 $ 4,956,328
Equipment 1,448,961 1,305,092
Office furniture and equipment 333,596 330,035
----------------- ----------------
7,284,410 6,591,455
Less: Accumulated depreciation and amortization 1,001,370 581,077
----------------- ----------------
$ 6,283,040 $ 6,010,378
================= ================
</TABLE>
Depreciation and amortization expense, for property and equipment, for the years
ended June 30, 1999, 1998 and 1997 were $ 547,693, $1,077,074 and $233,040
respectively.
NOTE 6 - INTANGIBLE ASSETS
Intangible Assets at June 30, 1999 and 1998 consisted of the following
<TABLE>
<CAPTION>
June 30,
---------------------------------------------
1999 1998
------------------- -----------------
<S> <C> <C>
Excess of cost over fair value of net
assets acquired $ 1,933,275 $ 1,933,275
Licensing 4,966,575 4,966,575
Software development cost 578,729 577,210
Patents and Trademarks 313,330 313,330
Other -- 8,385
------------------- -----------------
7,791,909 7,798,775
Less: Accumulated amortization 2,537,125 1,715,741
------------------- -----------------
$ 5,254,784 $ 6,083,034
=================== =================
</TABLE>
Amortization expense, for Intangible Assets, for the years ended June 30, 1999,
1998 and 1997 were $ 830,194, $ 1,227,719 and $ 537,254, respectively.
NOTE 7 - 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 66,000 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.
The Licensing Agreement is amortized using the straight-line method over the
estimated remaining economic life, generally ten years. At each balance sheet
date, the Company evaluates the recoverability of the unamortized License Fee
based upon expectations of nondiscounted cash flows and operating income of its
US-Operation. Impairments, if any, would be recognized in operating results if a
permanent diminution in value were to occur.
F-15
<PAGE>
NOTE 8 - NOTES PAYABLE - BANKS
The Company has negotiated a revolving line-of-credit agreement with Migros Bank
of Switzerland, dated March 23, 1998, for up to $1,314,924. The company has also
negotiated an agreement for up to $1,314,924 for the issuance of guarantees and
letters of credit, both with a commission of 15% per $ 1,000,000, quarterly
while outstanding. There were $ 1,052,906 in outstanding guarantees and $ -0- in
letter of credits as of June 30, 1999. The Company also negotiated a fixed line
of credit for up to $2,630,000 with an agreed repayment of $65,750 per 180 days
first time applicable as of June 30, 1999. All lines of credit are based on the
Exchange rate in effect on June 30, 1999.
Notes payable are summarized as follows:
<TABLE>
<CAPTION>
June 30,
----------------------------------------
1999 1998
------------- -------------------
<S> <C> <C>
Migros Bank revolving line of credit, due on demand,with interest at 4.75% per
annum, collateralized by certain accounts receivable, and a cash deposit at
Migros Bank as of June 30, 1999 of $485,367 $ 798,730 $ 408,786
Migros Bank, on demand with six week notice, with interest as of June 30, 1999
and 1998 at 3.7/8% and 4% per annum, collateralized by land and building 2,529,930 2,630,000
Union Bank of Switzerland, due on demand, with interest at 8% per annum,
collateralized by the cash on deposit at Union Bank of Switzerland and accounts
receivable. Cash balances on deposit at Union Bank of Switzerland at June 30,
1999 and 1998 were $332,812 and $627,625, respectively 338,499 512,305
------------- -------------------
$ 3,667,159 $ 3,551,091
============= ===================
</TABLE>
NOTE 9 - LOAN PAYABLE
The Company has negotiated a 5% demand loan from a private foundation fund. The
loan balance payable at June 30, 1999 and 1998 was $126,006 and $125,029
respectively.
NOTE 10 - SHARES ISSUED FOR COMPENSATION
Pursuant to agreements between the President of the Company and the Company,
dated as of December 1996 and June 1997, the Company incurred additional
compensation to the officer payable as 48,259 shares with a fair value of
$1,122,973. The compensation was in consideration of the officer's agreement for
F-16
<PAGE>
the cancellation of 1,608,633 shares of common stock held by the officer or
companies controlled by him which allowed the Company to maintain a sufficient
number of shares of common stock to meet certain obligations of the Company to
issue common stock and to permit certain financings prior to the increase in the
number of authorized shares of common stock from 15,000,000 to 30,000,000
shares. The shares were issued by the Company on July 22, 1997. In June 1999 the
Company incurred additional compensation to the President of the Company of
2,000,000 shares with a fair value of $740,000. The compensation was in
consideration of the President's agreement to extinguish his rights contained in
his employment agreement which entitled him to a 25% bonus of the Company's
earnings (as defined).
In 1999 the Company issued 3,800,000 shares of common stock with a fair value of
$95,000 to consultants for services to be rendered over a term of one year. Such
amount has been deferred and is being amortized over the term of the consulting
agreements.
NOTE 11 - CONVERTIBLE DEBENTURES
Convertible debentures consist of the following:
<TABLE>
<CAPTION>
June 30,
------------------------------------
1999 1998
----------------- ---------------
<S> <C> <C>
Convertible debenture dated December 11, 1997. The debenture was converted
into 327,101 shares in Fiscal 1999. $ - $ 145,969
Convertible debenture dated March 14, 1998. A total of $2,500,000 was converted
into 2,482,656 shares in Fiscal 1999. The remaining balance of $3,000,000 was
refinanced. (See August 31, 1998 debenture) - 5,500,000
Convertible debenture dated June 15, 1998 and due June 15, 2000 with interest at
6% per annum. The debentures are convertible into common shares at a price
equal to eighty (80%) of the average closing bid price for the ten (10) trading
days preceding the date of conversion. All of the debentures are convertible
at the earlier of a registration effective date or August 15, 1998. Any
debenture not so converted is subject to mandatory conversion on June 15, 2000.
Debt issuance cost was $240,000, beneficial conversion feature was $420,436. 2,000,000 2,000,000
Convertible debenture of $6,143,849 dated August 31, 1988 and due August
31, 2000 with interest of 5% per annum. The debentures are convertible into
common shares at a price equal to the lesser of eighty-two (82%) of the average
closing bid price for the ten trading days preceding the date of the conversion.
All debentures are convertible at the earlier of a registration effective
date or March 1, 1998. Any debenture not so converted is subject to mandatory
conversion on August 31, 2000. The company at its sole direction can redeem the
debenture at 115% of the face amount up to the fourth month, at 120% within the
fifth and sixth month and at 125% after the sixth month following the closing
date. $514.428 of the balance was converted into 1,051,529 shares in Fiscal 1999
. Debt issuance cost was $311,000, beneficial conversion feature was $-0-. 5,629,421 -
F-17
<PAGE>
Convertible debenture including $ 540,000 repurchase of stock dated October 6,
1988 and due October 6, 2000 with interest of 5% per annum.The debentures are
convertible into common shares at a price equal to the lesser of eighty-two
(82%) of the average closing bid price for the ten trading days preceding the
date of the conversion. All debentures are convertible at the earlier of
a registration effective date or October 6, 1998. Any debenture not so
converted is subject to mandatory conversion on October 6, 2000. The Company
at its sole direction can redeem the debenture at 115% of the face amount up to
the fourth month, at 120% within the fifth and sixth month and at 125% after the
sixth month following the closing date. Debt issuance cost was $300,000,
beneficial conversion feature was $53,112. 2,940,000 -
Convertible debenture dated January 29, 1999 and due January 29, 2001 with
interest of 3% per each 30 days for the first ninety days, 3.5% per each 30 days
for the ninety-first to the one hundred-twentieth day and 4% per each 30 days
from the hundred-twenty-first day until the earlier of conversion or redemption
The debentures are convertible into common shares at a price equal to the lesser
of eighty-two (82%) of the average closing bid price for the ten trading days
preceding the date of the conversion. All debentures are convertible at the
earlier of a registration effective date or January 29, 1999. Any debenture
not so converted is subject to mandatory conversion on January 29, 2001. The
Company at its sole direction can redeem the debentures at any time. Debt
issuance cost was $150,000, beneficial conversion feature was $-0-. 1,170,000 -
Convertible debenture dated May 13, 1999 and due May 13, 2001 with interest of
5% per annum. The debentures are convertible into common shares at a price
equal to the lesser of eighty (80%) of the average closing bid price for the ten
trading days preceding the date of the conversion. All debentures are
convertible at the earlier of a registration effective date or May 13, 1999.
Any debenture not so converted is subject to mandatory conversion on May
13, 2001. The company at its sole direction can redeem the debenture at 115%
of the face amount up to the fourth month, at 120% within the fifth and sixth
month and at 125% after the sixth month following the closing date. Debt
issuance cost was $80,000, interest rollover was $39,600, beneficial conversion
feature was $735,025. 1,119,600 -
Convertible debenture dated May 31, 1999 and due May 31, 2001 with interest of
5% per annum. The debentures are convertible into common shares at a price
equal to the lesser of eighty (80%) of the average closing bid price for the ten
trading days preceding the date of the conversion. All debentures are
convertible at the earlier of a registration effective date or May 31, 1999.
Any debenture not so converted is subject to mandatory conversion on May
31, 2001. The company at its sole direction can redeem the debenture at 115%
of the face amount up to the fourth month, at 120% within the fifth and sixth
month and at 125% after the sixth month following the closing date.Debt issuance
cost was $110,000, interest rollover was $22,200, beneficial conversion feature
was $140,049. 1,132,200 -
Convertible debenture dated June 26, 1999 and due June 26, 2001 with interest of
5% per annum. The debentures are convertible into common shares at a price
equal to the lesser of eighty (80%) of the average closing bid price for the ten
trading days preceding the date of the conversion. All debentures are
convertible at the earlier of a registration effective date or June 26, 1999.
Any debenture not so converted is subject to mandatory conversion on June
26, 2001. The company at its sole direction can redeem the debenture at 115%
of the face amount up to the fourth month, at 120% within the fifth and sixth
month and at 125% after the sixth month following the closing date.Debt issuance
cost was $50,000, interest rollover was $11,000, beneficial conversion feature
was $281,005. 561,000 -
F-18
<PAGE>
Convertible debenture dated May 5, May 24 and June 10, 1999 and due May 5, May
24 and June 10, 2001, respectively with interest of 5% per annum. The debentures
are convertible into common shares at a price equal to eighty (80%) of the
average closing bid price for the ten trading days preceding the date of the
conversion. The investor shall not be allowed to convert any portion of the
Debentures for 120 days from the Closing date, unless the bid price is greater
than $5.50. Every 30-day period after the Closing date, the investor shall
be allowed to convert and sell based upon if the bid price is over $1.50 then
15% of the original face amount can be converted, if the bid price is over
$7.50 then 20% of the original face amount can be converted. No conversion
can be made for 300 days if the bid price is below $1.50 All debentures
are convertible at the earlier of a registration effective date or May 5, May
24 and June 10, 1999, respectively. Any debenture not so converted is subject
to mandatory conversion on May 5, May 24 and June 10, 2001, respectively.
The company at its sole direction can redeem the debenture at 120% of the face
amount including interest. Debt issuance cost was $100,000, beneficial
conversion feature was $423,973. 850,000 -
----------------- ---------------
15,402,221 7,645,969
Less: discount due to beneficial conversion features, net of
accumulated amortization of $327,604 and $310,559
respectively (96,369) (315,327)
----------------- ---------------
$ 15,305,852 $ 7,330,642
================= ===============
</TABLE>
The Company is currently in violation of certain covenants in their debenture
agreements. Such covenants have been waived by the holders.
NOTE 12 - NOTES PAYABLE - SHORT-TERM
Notes payable - short-term consists of the following
<TABLE>
<CAPTION>
June 30,
-------------------------------------------------
1999 1998
-------------------- ---------------------
<S> <C> <C>
Promissory note, dated June 11, 1999 $654,000,
due September 9, 1999, collateralized by inventory $ 600,000 $ --
Promissory note, dated April 1999, currently in default,
personally guaranteed by the Company's president and
collateralized by 428,259 shares owned by the Company's
president. Subsequent to June 30, 1999, the collateral
was transferred to the lenders. The Company agreed to
issue the president 535,324 shares to replace the
collateral shares. 1,100,000 --
-------------------- ---------------------
$ 1,700,000 $ --
==================== =====================
</TABLE>
F-19
<PAGE>
NOTE 13 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30,
-------------------------------------------------
1999 1998
-------------------- ---------------------
<S> <C> <C>
Note payable - Edward Coyne, in weekly
installments of $817, including principal and
interest at 8% per annum, maturing on October 9, 2002 $ 122,175 $ 153,603
Note payable - Union Bank of Switzerland, related
to the acquisition of equipment sold to a customer,
in monthly installments of $12,589 with imputed interest at
6.0% per annum, maturing on September 30, 2000 188,907 335,062
Capitalized leases related to the acquisition of
various computer and office equipment in payable
monthly installments over periods through 2001,
with interest imputed at rates ranging from 9.1% to 28.3% 131,041 185,755
-------------------- ---------------------
442,123 674,420
Less: Current portion (247,028) (233,746)
-------------------- ---------------------
$ 195,095 $ 440,674
==================== =====================
</TABLE>
The aggregate long-term debt principal payment are as follows:
Year Ending June 30,
2000 $ 247,028
2001 144,578
2002 40,006
2003 10,511
NOTE 14 - SHAREHOLDERS' EQUITY
Authorized Shares
On March 12, 1997, the Company amended its certificate of incorporation to
change the number of authorized common shares from 15,000,000 to 30,000,000 of
$.01 par value common shares. On December 26, 1997, the Company amended its
certificate of incorporation to change the number of authorized common shares
from 30,000,000 to 50,000,000 of $.01 par value common shares.
Preferred Stock
In July 1999, the Company amended its Certificate of Incorporation to authorized
the issuance of 1,000,000 shares of preferred stock, $.01 par value per share.
Stock Option
The Stock Option Plans provide for the grant of options to officers, directors,
employees and consultants. Options may be either incentive stock options or
non-qualified stock options, except that only employees may be granted incentive
stock options.The maximum number of shares of Common Stock with respect to which
options may be granted under the Stock Option Plans is 500,000 shares. Options
vest at the discretion of the Board of Directors. All options granted in 1999
and 1997 vested immediately. The maximum term of an option is ten years. The
1996 Stock Option Plan will terminate in January, 2006, though options granted
prior to termination may expire after that date. The 1997 Stock Option Plan will
terminate at the discretion of the Board of Directors.In Fiscal 1998, there were
no grants or vesting of stock options. In Fiscal 1997, had compensation cost
for the Stock Option Plans been determined based on the fair value at the grant
dates for awards under the Stock Option Plans, except for grants to consultants
for which compensation expense has been recognized consistent with the method
of SFAS No. 123, as discussed in Note 1, the Company's net loss and net loss per
share would have increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Fiscal 1997
----------------------------------------
As Pro
Reported Forma
------------------- -------------------
<S> <C> <C>
Nel loss (in thousands) ($13,685) ($13,959)
Basic and diluted net loss per share ($8.65) ($8.82)
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black Scholes option-pricing method with the following weighted average
assumptions used for grants in 1997; dividend yield 0%, expected volatility
61.6%, risk-free interest rate 6.25%, expected lives in years 1%.
The weighted average fair value of stock options granted during the year ended
June 30, 1997 was $22.80. No employee stock options were granted in fiscal 1999
and 1998.
F-20
<PAGE>
A summary of the status of the Stock Option Plans at June 30, 1999, 1998 and
1997 and the changes during the years then ended is presented below:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------ ------------------------------ ----------------------------
Weighted Weighted Weighted
Shares Average Shares Average Shares Average
Underlying Exercise Underlying Exercise Underlying Exercise
Options Price Options Price Options Price
-------------- --------------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding
at beginning 180,000 $23.40 196,900 $23.40 133,500 $25.20
of year
Granted 15,500 $.44 - $0.00 $17.80
79,500
Exercised (1,000) $7.30 (16,900) $7.30 $0.00
(16,100)
-------------- --------------- -------------- -------------- -------------- ------------
Outstanding
at end of year 194,500 $24.30 180,000 $24.30 196,900 $23.40
============== =============== == ============== ============== ==== ============== ============
Exercisable at
end of year 194,500 $24.30 180,000 $24.30 196,900 $23.40
============== =============== == ============== ============== ==== ============== ============
</TABLE>
The following table summarizes information about stock options under the Stock
Option Plans at June 30, 1999:
<TABLE>
<CAPTION>
Options Outstanding and Exercisable
----------------------------------------------------------------------------------
Weighted Average
Number Remaining Contractual Weighted Average
Range of Exercise Pr Outstanding Life Exercise Price
- -------------------------------- ----------------- --------------------------- -----------------------
<S> <C> <C> <C>
$.01 - $.44 15,500 9.5 $0.44
$7.30 - $10.00 18,000 8.4 $8.00
$20.00 - $40.00 127,500 7.8 $22.10
$47.50 - $65.00 33,500 7.5 $58.70
-----------------
194,500
=================
</TABLE>
Stock Warrants
In Fiscal 1999, the Company issued 462,500 warrants. The Company recognized
interest cost for the warrants issued of $92,000. Such value was determined
using the Black-Scholes method. The following table summarized information about
stock warrants at June 30, 1999:
<TABLE>
<CAPTION>
Warrants Outstanding and Exercisable
-- ------------------------------------------------------------------------------------------
Range of Exercise Price Number Outstanding Remaining Contractual Life Average Exercise Price
- ----------------------------- ------------------------ -------------------------------- --------------------------
<S> <C> <C> <C> <C> <C>
$.375 - $9.38 462,500 4.5 $.96
</TABLE>
NOTE 15 - DEFINED CONTRIBUTION PLANS
The Swiss and German Subsidiaries, mandated by government regulations, are
required to contribute approximately five (5%) percent of all eligible, as
defined, employees' salaries into a government pension plan. The subsidiaries
also contribute approximately five (5%) percent of eligible employee salaries
into a private pension plan. Total contributions charged to operations for the
years ended June 30, 1999, 1998 and 1997, were $ 509,959, $347,854 and $274,009,
respectively.
F-21
<PAGE>
NOTE 16 - OTHER INCOME (EXPENSES)
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------------
1999 1998 1997
------------------- ------------------ ---------------
<S> <C> <C> <C>
Interest income $60 $58,902 $68,950
Interest income-stockholder and officer - - 4,351
Foreign currency income (9,097) (87,148) 484,846
Miscellaneous income 49,422 60,648 6,833
Loss from investments - - (246,217)
Loss on sale of certain asset and liabilities - (313,629) -
------------------- ------------------ ---------------
Total other income (expenses) $40,385 ($281,227) $318,763
=================== ================== ===============
</TABLE>
NOTE 17 - INCOME TAXES
Deferred income tax assets as of June 30, 1999 of $12,500,000 as a result of net
operating losses, have been fully offset by valuation allowances. The valuation
allowances have been established equal to the full amounts of the deferred tax
assets, as the Company is not assured that it is more likely than not that these
benefits will be realized.
A reconciliation between the statutory United States corporate income tax rate
(34%) and the effective income tax rates based on continuing operations is as
follows:
<TABLE>
<CAPTION>
Year Ended June 30,
1999 1998 1997
------------------ ----------------- -----------------
<S> <C> <C> <C>
Statutory federal income tax (benefit) $ (5,600,000) $ (7,754,000) $ (4,101,913)
Foreign income tax (benefit) in excess
of domestic rate 377,000 543,000 509,203
Benefit not recognized on operating 3,693,000 5,111,000 2,816,057
loss
Permanent and other differences 1,530,000 2,100,000 886,886
------------------ ----------------- -----------------
$ - $ - $ 110,233
================== ================= =================
</TABLE>
Net operating loss carryforwards at June 30, 1999 were approximately as follows:
United States (expiring through June 30, 2014) $ 21,000,000
Switzerland (expiring through June 30, 2009) 21,000,000
-------------------
$ 42,000,000
===================
F-22
<PAGE>
NOTE 18 - EXTRAORDINARY ITEMS
On April 12, 1997, the Company sustained significant fire damage at a leased
production and office facility in Hochdorf, Switzerland, resulting in an
extraordinary loss, net of insurance proceeds, of $387,514 ($ 0.24) per share),
net of income taxes of $-0-.
On July 31, 1997 the Company refinanced Convertible debentures issued in May and
June 1997. A gain on extinguishment of debt of $154,212 resulted from that
transaction net of income taxes of $-0-.
In December, 1997 the Company refinanced part of the Convertible debentures
issued in August 1997. A gain on extinguishment of debt of $150,711 resulted
from that transaction net of income taxes of $-0-.
In Fiscal 1999 the Company recognized a loss from early extinguishment of debt
NOTE 19 SIGNIFICANT CUSTOMER AND CONCENTRATION OF CREDIT RISK
The Company sells its products to various customers primarily in Europe and the
USA. The company performs ongoing credit evaluations on its customers and
generally does not require collateral. Export sales are usually made under
letter of credit agreements. The company establishes reserves for expected
credit losses and such losses, in the aggregate, have not exceeded management's
expectations.
The Company maintains its cash balances with major Swiss, United States and
German financial institutions. Funds on deposit with financial institutions in
the United States are insured by the Federal Deposits Insurance Corporation
("FDIC) up to $ 100,000.
During the years ended June 30, 1999. 1998 and 1997 there were sales to
customers that exceeded 10% of net consolidated sales. Sales to these customers
were: 1999 customer A, $9,253,480 (54%), 1998 customer A $ 7,647,354 (33%),
1997 customer A, $1,899,084 (14%) customer B $2,389,613 (18%).The company
operates in a single industry segment, providing x-ray medical equipment.
The Company derives all of its revenues from its subsidiaries located in the
United States, Switzerland and Germany. Sales by geographic areas for the years
ended June 30, 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------- ----------------- ----------------
<S> <C> <C> <C>
United States $ 4,026,931 $ 9,127,569 $ 2,000,608
Switzerland 12,625,381 12,851,115 2,184,161
Germany 643,570 914,294 1,393,072
Other export sales - - 7,573,860
==================== ================= ================
$ 17,295,882 $ 22,892,978 $ 13,151,701
==================== ================= ================
</TABLE>
The following summarizes identifiable assets by geographic area:
<TABLE>
<CAPTION>
1999 1998
--------------------- -----------------
<S> <C> <C>
United States $ 7,522,543 $ 8,075,151
Switzerland 16,007,209 17,454,379
Germany 231,437 385,067
--------------------- -----------------
$ 23,763,188 $ 25,914,597
===================== =================
</TABLE>
F-23
<PAGE>
The following summarizes operating losses before provision for income tax:
<TABLE>
<CAPTION>
1999 1998 1997
------------------ ------------------- -------------------
<S> <C> <C> <C>
United States $ (10,685,663) $ (13,962,842) $ (175,254)
Switzerland (5,392,436) (8,803,842) (12,678,800)
Germany (243,317) (42,184) (333,397)
------------------ ------------------- -------------------
$ (16,321,416) $ (22,808,868) $ (13,187,451)
================== =================== ===================
</TABLE>
NOTE 20 - COMMITMENTS
The Company leases various facilities and vehicles under operating lease
agreements expiring through September 2003. The company has excluded all vehicle
leases in its presentation because they are deemed to be immaterial. The
facilities lease agreements provide for a base monthly payment of $22,285 per
month. Rent expense for the years ended June 30, 1999, 1998 and 1997 was
325,000, $ 324,726 and $ 297,926 respectively. Future minimum annual lease
payments, based on the exchange rate in effect on June 30, 1999, under the
facilities lease agreements are as follows: 2000 $173,549, 2001 $162,526, 2002
$166,995, 2003 $137,994, Thereafter $0.
The Company has employment agreements with three of its executives. Minimum
compensation under these agreements are as follows:
Year Ended
June 30, 2000 $ 382,321
June 30, 2001 299,326
June 30, 2002 202,498
June 30, 2003 109,037
--------------------
$ $993,182
====================
NOTE 21 - LITIGATION
An arbitrator awarded judgement in favor of SSG in February of 1999, which order
was confirmed by the Supreme Court of the State of NY on July 8, 1999. The
judgement of $1,500,000 has been recorded in the financial statements and is
included in common stock subject to put.
On or about July 1, 1999 an action was commenced in the Supreme Cout, State of
New York, County of New York entitled J. Douglas Maxwell ("Maxwell") against the
Company, whereby Maxwell is seeking judgement in the sum of $380,000 based upon
his interpretation of various terms and conditions contained in an Exchange
Agreement between the parties dated July 22, 1996 and a subsequent Mutual
Release and Settlement Agreement between the parties dated June 1, 1998.
Swissray has denied the material allegations of Maxwell's complaint and has
asserted three affirmative defenses and two separate counteclaims seeking
(amongst other matters) dismissal of the complaint and and recision of the
settlement agreement. It is Swissray's management's intention to contest this
matter vigorously. The $380,000 has been recorded in the financial statements
and is included in common stock subject to put.
NOTE 22 - RESTRUCTURING
During the year ended June 30, 1998 the Company recorded restructuring charges
of $500,000, as a result of its decision to relocate two facilities. The charges
consist primarily of the present value of the remaining lease obligations of
those facilities.
F-24
<PAGE>
NOTE 23 - UNAUDITED PROFORMA CONDENSED COMBINED STATEMENT OF
OPERATIONS
The following unaudited proforma condensed combined statements of operations for
the years ended June 30, 1998 and 1997 give retroactive effect of the
acquisition of Empower, Inc. on April 1, 1997 and SSG on October 17, 1997, which
were accounted for as purchases. The unaudited proforma condensed combined
statements of operations give retroactive effect to the foregoing transaction as
if it had occurred at the beginning of each year presented. The proforma
statements do not purport to represent what the Company's results of operations
would actually have been if the foregoing transactions had actually been
consummated on such dates or project the Company's results of operations for any
future period or date.
The proforma statements should be read in conjunction with the historical
financial statements and notes thereto.
<TABLE>
<CAPTION>
SWISSRAY INTERNATIONAL, INC
UNAUDITED PROFORMA CONDENSED COMBINED CONSOLIDATED STATEMENT
OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1998 AND JUNE 30, 1997
Year Ended June 30,
-----------------------------------------------------
1998 1997
------------------------ -------------------
<S> <C> <C>
Revenues $ 23,837,000 $ 21,223,000
Loss before extraordinary items (21,963,000) (13,568,000)
Net Loss (22,403,000) (13,956,000)
Loss per share (8.33) (8.79)
Weighted average number of shares 2,690,695 1,587,757
outstanding
</TABLE>
It was not practicable to include information for SSG for the year ended
June 30, 1997
NOTE 24-VALUATION AND QUALIFYING ACCOUNTS
Balance at Additions Balance at
Beginning Charged to End of
of Year Expenses Deductions Year
Allowance for doubtful acounts:
Year ended December 30, 1999 $954,498 $706,877 $897,006 ------
Year ended December 30, 1998 $912,568 $133,169 $141,266 $954,498
Year ended December 30, 1997 $409,843 $619,160 $ 66,465 $962,568
F-25
<PAGE>
SWISSRAY INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
ASSETS
September 30, June 30,
1999 1999
(Unaudited)
----------- -----------
CURRENT ASSETS
Cash and cash equivalents ....................... $ 2,171,949 $ 1,281,297
Accounts receivable, net of allowance for doubtful
accounts of $ 212,166 and $ 219,993 ............. 2,593,626 2,448,879
Inventories ..................................... 7,240,734 7,332,401
Prepaid expenses and sundry receivables ......... 749,797 866,804
----------- -----------
Total Current Assets ............................ 12,756,106 11,929,381
----------- -----------
PROPERTY AND EQUIPMENT .......................... 6,193,048 6,283,040
----------- -----------
OTHER ASSETS
Loan receivable ................................. 16,987 15,948
Licensing agreement ............................. 2,979,945 3,104,109
Patents and trademarks .......................... 192,441 199,906
Software develompent costs ...................... 328,167 347,762
Security deposits ............................... 26,625 28,035
Goodwill ........................................ 1,554,674 1,603,007
TOTAL OTHER ASSETS .............................. 5,098,839 5,548,768
----------- -----------
Total Assets .................................... $24,047,993 $23,511,189
=========== ===========
F 26
<PAGE>
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Current maturities of long-term debt ............ $ 226,726 $ 247,028
Notes payable - banks ........................... 4,060,490 3,667,159
Notes payable - short-term ...................... 2,230,908 1,700,000
Loan payable .................................... 125,590 126,006
Accounts payable ................................ 5,318,943 5,422,321
Accrued expenses ................................ 2,642,437 2,003,844
Restructuring ................................... 500,000 500,000
Customer deposits ............................... 132,986 278,507
----------- -----------
TOTAL CURRENT LIABILITIES ....................... 15,238,080 13,944,865
----------- -----------
Convertible Debentures, net of conversion benefit 15,901,793 15,305,852
----------- -----------
LONG-TERM DEBT, less current maturities ......... 196,310 195,095
----------- -----------
COMMON STOCK SUBJECT TO PUT ..................... 319,985 1,819,985
----------- -----------
STOCKHOLDERS' DEFICIT
Common stock .................................... 159,083 140,062
Additional paid-in capital ...................... 68,290,897 64,688,013
Treasury Stock .................................. (2,040,000) (540,000)
Deferred Compensation ........................... (469,722) (707,222)
Accumulated deficit ............................. (71,481,157) (67,727,741)
Accumulated other comprehensive loss ............ (1,747,291) (1,787,735)
Common stock subject to put ..................... (319,985) (1,819,985)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIT ..................... (7,608,175) (7,754,608)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT ..... $ 24,047,993 $ 23,511,189
=========== ===========
F 27
<PAGE>
SWISSRAY INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended
September 30,
1999 1998
Unaudited Unaudited
------------ ------------
NET SALES ......................... $ 3,879,167 $ 3,656,441
COST OF SALES ..................... 2,978,034 2,836,914
------------ ------------
GROSS PROFIT ...................... 901,133 819,527
------------ ------------
OPERATING EXPENSES
Officers and directors compensation 137,813 155,187
Salaries .......................... 1,022,441 1,085,186
Selling ........................... 603,532 512,799
Research and development .......... 465,232 406,038
General and administrative ........ 222,747 450,640
Other operating expenses .......... 85,548 264,489
Depreciation and amortization ..... 321,881 293,749
------------ ------------
TOTAL OPERATING EXPENSES .......... 2,859,194 3,168,088
------------ ------------
LOSS BEFORE OTHER INCOME (EXPENSES)
AND EXTRAORDINARY ITEM ......... (1,958,061) (2,348,561)
Other income (expenses) ........... 26,258 (183,367)
Interest expense .................. (1,821,613) (653,896)
------------ ------------
OTHER INCOME (EXPENSES) ........... (1,795,355) (837,263)
------------ ------------
LOSS FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY ITEM ....... (3,753,417) (3,185,824)
Extraordinary expense ............. -- (29,667)
------------ ------------
NET LOSS .......................... $ (3,753,417) $ (3,215,491)
============ ============
LOSS PER COMMON SHARE
Loss from continuing operations ... ($ 0.25) ($ 0.70)
Extraordinary items ............... 0.00 (0.01)
------------ ------------
NET LOSS .......................... ($ 0.25) ($ 0.71)
============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING ................ 14,786,198 4,510,201
------------ ------------
F 28
<PAGE>
SWISSRAY INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
September 30,
1999 1998
Unaudited Unaudited
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITES
Net loss ....................................... $ (3,753,416) $ (3,215,491)
Adjustment to reconcile net loss to net
cash used by operating activities
Depreciation and amortization ................ 332,865 306,906
Provision for bad debts ...................... (7,827) --
Issuance of common stock in lieu of
interest payments ......................... 34,244 587,197
Interest expense on Debt issuance cost and
conversion benefit ......................... 1,511,476 --
Amortization of deferred compensation ........ 237,500
Early extinguishment of debt (gain) ......... -- 29,667
(Increase) decrease in operating assets:
Accounts receivable .......................... (136,921) 222,819
Inventories .................................. 91,666 (814,733)
Prepaid expenses and sundry receivables ...... 117,007 223,577
Increase (decrease) in operating liabilities:
Accounts payable ............................. (103,378) 236,533
Accrued expenses ............................. 638,592 276,803
Customers deposits ........................... (145,520) (154,533)
------------ ------------
NET CASH USED BY OPERATING ACTIVITIES .......... (1,183,712) (2,301,255)
------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of proberty and equipment ........ (43,585) (201,422)
Capitalized computer software ................ (7,007) --
Security deposits ............................ 1,410 --
(Repayment of) loan receivable ............... (1,039) --
------------ ------------
NET CASH USED BY INVESTING ACTIVITIES .......... (50,221) (201,422)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings .......... 22,305,507 13,582,986
Principal payment of short-term borrowings ... (21,415,142) (11,204,161)
Principal payment of long-term borrowings .... 1,216 (22,399)
Issuance of common stock for cash ............ 2,748,827 1,500,000
Issuance of stock options for cash ........... 6,774 --
Purchase of treasury stock ................... (1,500,000) --
------------ ------------
CASH PROVIDED BY FINANCING ACTIVITIES .......... 2,147,182 3,856,426
------------ ------------
EFFECT OF EXCHANGE RATE ON CASH ................ (22,597) (376,024)
------------ ------------
NET INCREASE IN CASH .......................... 890,651 977,725
CASH AND CASH EQUIVALENTS - beginning of period 1,281,297 1,281,552
------------ ------------
CASH AND CASH EQUIVALENTS - end of period ...... $ 2,171,949 $ 2,259,277
============ ============
F 29
<PAGE>
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
Page
Available Information ..................................................... 3
Prospectus Summary ........................................................ 5
Risk Factors .............................................................. 10
The Company ............................................................... 25
Use of Proceeds ........................................................... 27
Market Prices and Dividend Policy ......................................... 27
Capitalization ............................................................ 30
Selected Consolidated Financial Data ...................................... 31
Management's Discussion and Analysis Of Financial Condition and
Results of Operations ................................................... 32
Business .................................................................. 45
Management ................................................................ 62
Stock Options and Stock Appreciation Rights ............................... 66
Stock Options Granted in 1997 ............................................. 67
Stock Options Granted in 1998 ............................................. 67
Aggregated Option Exercises in Last Fiscal Year and Year-End
Option Values ........................................................... 67
Principal Stockholders .................................................... 70
Certain Transactions ...................................................... 72
Selling Holders ^ ......................................................... 73
Plan of Distribution ...................................................... 74
Description of Capital Stock .............................................. 77
Legal Matters ............................................................. 83
Independent Auditors ...................................................... 83
Interim Financial Statements .............................................. 84
Index to Consolidated Financial Statements ................................ 85
-84-
<PAGE>
SWISSRAY INTERNATIONAL, INC.
8,302,742 SHARES OF
COMMON STOCK
PROSPECTUS
December____, 1999
-85-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SECURITIES AND EXCHANGE COMMISSION REGISTRATION FEE .... $ 9,628.93
PRINTING EXPENSES ...................................... 15,000.00
ACCOUNTING FEES AND EXPENSES ........................... 85,000.00
LEGAL FEES AND EXPENSES ................................ 160,000.00
TRANSFER AGENT AND REGISTRATION FEES ................... 1,500.00
BLUE SKY FEES AND EXPENSES ............................. 15,000.00
MISCELLANEOUS EXPENSES ................................. 5,000.00
Total ...................................... $ 291,128.93
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 721 of the New York Business Corporation Law provides that the
indemnification and advancement of expenses of directors and officers may be
provided by the certificate of incorporation or by-laws of a corporation, or
when authorized by the certificate of incorporation or by-laws, a resolution of
shareholders, a resolution of directors or an agreement providing for
indemnification (except in cases where a judgment or other final adjudication
establishes that such acts were committed in bad faith or were the result of
active or deliberate dishonesty and were material to the cause of action so
adjudicated or that a person personally gained in fact a financial profit or
other advantage to which he was not legally entitled).
Section 722 of the New York Business Corporation Law provides that a
corporation may indemnify any person made, or threatened to be made, a party of
an action or proceeding other than one by or in the right of the corporation to
procure a judgment in its favor, whether civil or criminal, including an action
by or in the right of any other corporation, partnership, joint venture, trust,
employee benefit plan or other entity which any director or officer of the
corporation served in any capacity at the request of the corporation, by reason
of the fact that he was a director or officer of the corporation or served such
other corporation, partnership, joint venture, trust, employee benefit plan or
other entity in any other capacity, against judgments, fines, amounts paid in
settlement and reasonable expenses if such director or officer acted, in good
faith, for a purpose which he reasonably believed to be in, or in the case of
service for any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, not opposed to, the best interests of the
corporation and, in criminal acts or proceedings, in addition, had no reasonable
cause to believe that his conduct was unlawful.
Section 722 of the New York Business Corporation Law also states that a
corporation may indemnify any person made, or threatened to be made, a party to
an action by or in the right of the
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corporation to procure a judgment in its favor by reason of the fact that he is
or was a director or officer of the corporation or any other corporation,
partnership, joint venture, trust, employee benefit plan or other entity at the
request of the corporation, against amounts paid in settlement and reasonable
expenses actually and necessarily incurred by him in connection with the defense
or settlement of such action, or in connection with an appeal therein if such
director or officer acted, in good faith, for a purpose which he reasonably
believed to be in, or in the case of service for any other corporation,
partnership, joint venture, employee benefit plan or other entity, not opposed
to, the best interests of the corporation, except that no indemnification shall
be made in respect to a threatened or pending action which is settled or
otherwise disposed of, or any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation, unless the court
determines the person is fairly and reasonably entitled to indemnity for such
portion of the settlement amount and expenses as the court deems proper.
Section 726 of the New York Business Corporation Law provides that a
corporation shall have the power to purchase and maintain insurance for
indemnification of directors and officers. However, no insurance may provide for
any payment, other than cost of defense, to or on behalf of any director or
officer for a judgment or a final adjudication adverse to the insured director
or officer if (i) a judgment or other final adjudication establishes that his
acts of active and deliberate dishonesty were material to the cause of action
adjudicated or that he personally gained a financial profit or other advantage
to which he was not legally entitled or (ii) if prohibited under the insurance
law of New York.
Section 724 of the New York Business Corporation Law provides that
indemnification shall be awarded by a court to the extent authorized under
Sections 722 and 723 (a) of the New York Business Corporation Law
notwithstanding the failure of a corporation to provide indemnification, and
despite any contrary resolution of the board or of the shareholders.
The By-Laws of the Registrant provide for indemnification as follows:
(a) Any person made a party to any action, suit or proceeding, by
reason of the fact that he, his testator or intestate representative is or was a
director, officer or employee of the Corporation, or of any Corporation in which
he served as such at the request of the Corporation, shall be indemnified by the
Corporation against the reasonable expenses, including attorney's fees, actually
and necessarily incurred by him in connection with the defense of such action,
suit or proceedings, or in connection with any appeal therein, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding, or in connection with any appeal therein that such officer, director
or employee is liable for negligence or misconduct in the performance of his
duties.
(b) The foregoing right of indemnification shall not be deemed
exclusive of any other rights to which any officer or director or employee may
be entitled apart from the provisions of this section.
(c) The amount of indemnity to which any officer or any director may be
entitled shall be fixed by the Board of Directors except that in any case where
there is no disinterested majority of the Board available, the amount shall be
fixed by arbitration pursuant to the then existing rules of the
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American Arbitration Association.
The Certificate of Incorporation of the Registrant, as amended,
provides for indemnification as follows:
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for damages for any breach of duty in such
capacity, provided that nothing contained in this Article shall eliminate or
limit the liability of any director if a judgment or final adjudication adverse
to him establishes that his acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law to which he was not legally
entitled or that his acts violated Section 719 of the New York Business
Corporation Law.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On May 20, 1995, the Registrant issued 2,000,000 shares of Common Stock to
non-U.S. persons in reliance on Regulation S promulgated under the Securities
Act for an aggregate consideration of $4,250,000. Placement agents were
Interfinance Investment Co., Ltd., Berkshire Capital Management Corp. and Rolcan
Finance Ltd. Net proceeds received by the Company after costs related to the
financing were $4,000,000.
On December 10, 1995, the Registrant issued 1,000,000 shares of Common
Stock to non-U.S. persons in reliance on Regulation S. Placement agent was
Berkshire Capital Management Corp. Net proceeds received by the Company were
$4,500,000.
On September 11, 1996, the Registrant issued $3,800,000 aggregate
principal amount of convertible debentures to non-U.S. persons in reliance on
Regulation S. The convertible debentures were all converted into shares of
Common Stock at a conversion price equal to 81% of the average closing bid price
for the five trading days preceding the date of conversion. The Registrant
received net proceeds of $2,774,000.
On January 10, 1997, the Registrant issued $3,500,000 aggregate
principal amount of convertible debentures to non-U.S. persons in reliance on
Regulation S. Placement agent was Targas Trading Ltd. Such convertible
debentures were all converted into shares of Common Stock at a conversion price
equal to 81% of the average closing bid price for the five trading days
preceding the date of conversion. Any convertible debentures not so converted
are subject to mandatory conversion by the Registrant on the 36th monthly
anniversary of the date of issuance of the convertible debentures. Net proceeds
received by the Registrant were $3,085,000.
On March 5, 1997, the Registrant issued 1,000,000 shares of Common
Stock for an aggregate price of $2,000,000 to non-U.S. persons in reliance on
Regulation S under the Securities Act. The placement agent for such shares was
Rolcan Finance Ltd. The Registrant received net proceeds of $1,925,000.
On April 28, 1997, the Registrant issued $2,000,000 aggregate principal
amount of convertible
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debentures, which were all converted into shares of Common Stock of the
Registrant at a conversion price equal to the higher of 80% of the average
closing bid price on the date of conversion or $2.50 per share. The Registrant
received net proceeds of $1,822,500.
On each of May 15, 1997 and June 15, 1997, the Registrant issued
$2,000,000 principal amount of 6% convertible debentures convertible into Common
Stock on terms similar to those of the April 28, 1997 issuance to accredited
investors as defined in Rule 501(a) of Regulation D. Placement agent for such
convertible debentures was Rolcan Finance Ltd. The aggregate offering price for
such convertible debentures was $4,000,000. After deducting underwriting
discounts, commissions and escrow fees in the aggregate amount of $528,610, the
Registrant received an aggregate net amount of $3,458,890. Such convertible
debentures were refinanced on July 31, 1997, with the proceeds of $4,262,500
principal amount of convertible debentures issued to non-U.S. persons under
Regulation S.
On July 31, 1997, the Registrant issued $4,262,500 of 7% convertible
debentures. The proceeds of such issuance were used to refinance $4,000,000
principal amount of 6% convertible debentures dated May 15, 1997 and June 13,
1997 plus interest. The Registrant did not receive any cash proceeds from this
transaction. Such convertible debentures, due July 31, 2000, were all converted
into shares of Common Stock at a price equal to 80% of the average closing bid
price for the five (5) trading days preceding the date of conversion.
On August 19, 1997, the Registrant issued $5,000,000 aggregate
principal amount of 6% convertible debentures, convertible into Common Stock of
the Registrant. Placement Agent for such convertible debentures was Rolcan
Finance Ltd. The aggregate offering price of such convertible debentures was
$5,000,000. After deducting underwriting discounts, commissions and escrow fees
in the aggregate amount of $681,250 the Registrant received a net amount of
$4,318,750. All such convertible debentures were issued to accredited investors
as defined in Rule 501(a) of Regulation D promulgated under the Act ("Regulation
D") and the Registrant has received written representations from each investor
to that effect. The placement agent for such convertible debentures was Rolcan
Finance, Ltd. Fifty percent of the face amount of such convertible debentures
were convertible into shares of Common Stock of the Registrant at any time after
November 3, 1997 and the remaining 50% of the face value of such convertible
debentures were convertible into shares of Common Stock of the Registrant after
December 3, 1997, in each case at a conversion price equal to 80% of the average
closing bid price for the five trading days preceding the date of conversion.
Any such convertible debentures not so converted are subject to mandatory
conversion by the Registrant on the 36th monthly anniversary of the date of
issuance of such Convertible Debentures. All conversions have been competed (or
rolled over as indicated below).
Between November 26, 1997 and December 11, 1997, the Company issued
$2,158,285 aggregate principal amount of 5% convertible debentures (the
"Convertible Debentures") including a 15% premium, and accrued interest,
convertible into Common Stock of the Company. The Registrant did not receive any
cash proceeds from the offering of the Convertible Debentures. An amount of
$2,158,285 was paid by investors to holders of the Company's Convertible
Debentures issued on August 19, 1997 holding $1,850,000 of such Convertible
Debentures as repayment in full of the
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Company's obligations under such Convertible Debentures. During the same period
the Company issued $3,690,000 aggregate principal amount of 8% Convertible
Debentures, convertible into Common Stock of the Company. After deducting fees,
commissions and escrow fees in the aggregate amount of $690,000 the Company
received a net amount of $3,000,000. All Convertible Debentures were issued to
accredited investors as defined in Rule 501(a) of Regulation D promulgated under
the Act ("Regulation D") and the Company has received written representation
from each investor to that effect. The placement agent for such convertible
debentures was Rolcan Finance, Ltd. Twenty-five percent of the face amount of
both Convertible Debentures are convertible into shares of Common Stock of the
Company as at the effective date of a registration statement covering the
underlying shares of Common Stock, to wit: March 12, 1998. An additional
twenty-five percent of the face amount of both Convertible Debentures may be
converted each 30 days thereafter, in each case at a conversion price equal to
75% of the average closing bid price for the five trading days preceding the
date of the conversion. Any Convertible Debenture not so converted are subject
to mandatory conversion by the Company on the 24th monthly anniversary of the
date of issuance of the Convertible Debentures. As of March 31, 1999 all
conversions were completed.
In March of 1998, the Company issued $5,500,000 aggregate principal
amount of 6% convertible debentures (the "Convertible Debentures"), convertible
into Common Stock of the Company. After deducting legal fees of $35,000 and
placement agent fees of $550,000 directly attributable to such offering the
Company received a net amount of $4,915,000. All Convertible Debentures were
issued to accredited investors as defined in Rule 501(a) of Regulation D
promulgated under the Act ("Regulation D") and the Company has received written
representations from each investor to that effect. The placement agent for such
convertible debentures was Rolcan Finance, Ltd. One Hundred percent of the face
amount of the Convertible Debentures are convertible into shares of Common Stock
of the Company at the earlier of May 15, 1998 or the effective date of this
Registration Statement at a conversion price equal to 80% of the average closing
bid price for the ten trading days preceding the date of conversion. Any
Convertible Debentures not so converted are subject to mandatory conversion by
the Company on the 24th monthly anniversary of the date of issuance of the
Convertible Debentures. As of December 3, 1999 all conversions were completed.
In June of 1998, the Company issued $2,000,000 aggregate principal
amount of 6% convertible debentures (the "Convertible Debentures"), convertible
into Common Stock of the Company. After deducting fees directly attributable to
such offering the Company received a net amount of $1,760,000. All Convertible
Debentures were issued to accredited investors as defined in Rule 501(a) of
Regulation D promulgated under the Act ("Regulation D") and the Company has
received written representation from each investor to that effect. The placement
agent for such convertible debentures was Net Financial International, Ltd. One
Hundred percent of the face amount of the Convertible Debentures are convertible
into shares of Common Stock of the Company at the earlier of August 14, 1998 or
the effective date of this Registration Statement at a conversion price equal to
80% of the average closing bid price for the ten trading days preceding the date
of conversion. Any Convertible Debentures not so converted are subject to
mandatory conversion by the Company on the 24th monthly anniversary of the date
of issuance of the Convertible Debentures. ^All of these debentures have been
converted as of December 3, 1999.
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On August 31, 1998 the Company issued a principal aggregate total
amount of $6,143,849 of 5% convertible debentures ("Convertible Debentures"),
convertible into Common Stock of the Company at a conversion price of 82% of the
average closing bid price for the ten trading days preceding the date of
conversion as follows: (a) The Company issued $3,832,849 aggregate principal for
which the Company received no cash; investors having paid the holders of
$3,000,000 in Convertible Debentures (originally issued in March 1998) together
with 25% premium and accrued interest; and (b ) the Company issued new
Convertible Debentures convertible into shares of Company Common Stock. After
deducing fees directly attributable to such offering the Company received a net
amount of $ 2,000,000. All Convertible Debentures were issued to accredited
investors as defined in Rule 501(a) of Regulation D promulgated under the Act
("Regulation D") and the Company has received written representations from each
investor to that effect. The placement agent for such convertible debentures was
Net Financial International, Ltd. Any Convertible Debentures not so converted
are subject to mandatory conversion by the Company on the 24th anniversary of
the date of issuance of the Convertible Debentures. ^ As of December 3, 1999 an
unconverted balance of $4,980,595 remains outstanding.
On October 6, 1998 the Company issued a principal aggregate amount of
$2,940,000 of 5% convertible debentures ("Convertible Debentures"), convertible
into Common Stock of the Company at a conversion price of 82% of the average
closing bid price for the ten trading days preceding the date of conversion.
After deducting fees directly attributable to such offering (including the
Company's repurchase of 1,465,000 pre-split shares (717,850 and 747,150 shares
from Dominion Capital Fund, Ltd. and Sovereign Partners LP respectively) of its
common stock for a cash consideration of $540,000) the Company received a net
amount of $ 2,100,000. All Convertible Debentures were issued to accredited
investors as defined in Rule 501(a) of Regulation D promulgated under the Act
("Regulation D") and the Company has received written representations from each
investor to that effect. There was no placement agent involved in this
financing. Any Convertible Debentures not so converted are subject to mandatory
conversion by the Company on the 24th anniversary of the date of issuance of the
Convertible Debentures. ^ None of these Convertible Debentures have been
converted as of December 3, 1999.
The Registrant received gross proceeds of $1,080,000 in December 1998
pursuant to promissory notes bearing interest at the rate of 8% per annum for
the first 90 calendar days (through March 13, 1999) with the Company having the
option to extend the notes for an additional 60 days with interest increasing 2%
per annum during the 60 day period. The Company exercised its extension option.
As further consideration for the loan, the Company issued Lenders Warrants to
purchase up to 50,000 shares of the Company's common stock exercisable, in whole
or in part, for a period of up to 5 years at $.375 (the bid price for Company
shares on the date of closing). The notes are secured by a second mortgage on
land and building . The promissory notes (held by Dominion Capital Fund, Ltd.
and Sovereign Partners) were not paid by their due date and the terms of a
Contingent Subscription Agreements, Debentures and Registration Rights
Agreements automatically went into effect with debentures in the principal sum
of $1,119,600 (inclusive of interest on aforesaid promissory notes) bearing
interest at the rate of 5% per annum (payable in stock or cash at the Company's
option) and being convertible, at any time at ^ 82% of the 10 day average bid
price for the 10 consecutive trading days immediately preceding the conversion
date^. The documents also provide
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for certain Company redemption rights at percentages ranging from 115% of the
face amount of the Debenture to 125% of the face amount of the debenture
dependent upon redemption date, if any. ^ None of these convertible debentures
have been converted as of December 3, 1999,
On January 29, 1999 the Company issued a principal aggregate amount of
$1,170,000 of convertible debentures ("Convertible Debentures"), convertible
into Common Stock of the Company at a conversion price of 82% of the average
closing bid price for the ten trading days preceding the date of conversion
together with accrued interest of 3% for the first 90 days, 3.5% for 91-120 days
and 4% for 120 days and thereafter. After deducing fees directly attributable to
such offering the Company received a net amount of $ 1,020,000. All Convertible
Debentures were issued to accredited investors as defined in Rule 501(a) of
Regulation D promulgated under the Act ("Regulation D") and the Company has
received written representations from each investor to that effect. The
placement agent for such convertible debentures was Rolcan Finance, Ltd. Any
Convertible Debentures not so converted are subject to mandatory conversion by
the Company on the 24th anniversary of the date of issuance of the Convertible
Debentures. ^ None of these Convertible Debentures have been converted as of
December 3, 1999.
On March 2, 1999, the Company entered into a second promissory note
contingent convertible debenture financing with the same lenders as the December
1998 transaction described directly above (i.e., Dominion Investment Fund LLC
and Sovereign Partners LP) with terms and conditions identical to those set
forth above excepting (a) gross proceeds amounted to $1,110,000, (b) the initial
due date of such notes were May 31, 1999, (c) the potential 60 day extension
date on such promissory notes was July 30, 1999 but such extension right was
never utilized, (d) the conversion price is 80% of the 10 day average closing
bid price for the 10 consecutive trading days preceding conversion date and (e)
Warrants were issued (similarly exercisable over 5 years) to purchase up to
50,000 shares of common stock at 125% of the average 5 day closing bid price of
the Company's common stock immediately preceding the date of closing but in no
event at less than $1.00 per share. In all other respects the terms and
conditions of each of the documents executed with respect to this transaction
are identical in all material respects to those described above (in subparagraph
(a) regarding December 1998 transaction) There was no placement agent involved
in this financing. The promissory notes were not paid on their due date and the
terms of the Contingent Subscription Agreements, Debentures and Registration
Rights Agreements automatically went into effect with debentures in the
principal sum of $1,132,200 (inclusive of interest on aforesaid promissory
notes) going into effect. ^ None of these Convertible Debentures have been
converted as of December 3, 1999.
On March 26, 1999 the Company entered into a third promissory note
(contingent convertible debenture financing) with terms and conditions identical
to those set forth in the March 2, 1999 promissory note financing referred to
directly above excepting (a) the lender is different, to wit: Aberdeen Avenue,
LLC, (b) gross proceeds amounted to $550,000, (c) the initial due date of such
note is June 25, 1999, (d) the potential 60 day extension date on such
promissory note was August 23, 1999 but such extension right was never utilized,
(e) Warrants were issued (similarly exercisable over 5 years) to purchase up to
27,500 shares of common stock at 125% of the average 5 day closing bid price of
the Company's common stock immediately preceding the date of closing but in no
event at less than $1.00 per share. In all other respects the terms and
conditions of each of the documents
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executed with respect to this transaction are identical to those described in
the above referenced March 2, 1999 transaction. There was no placement agent
involved in this financing. The promissory notes were not paid on their due date
and the terms of the Contingent Subscription Agreement, Debenture and
Registration Rights Agreement automatically went into effect with debentures in
the principal sum of $561,000 (inclusive of interest on aforesaid promissory
notes) going into effect. ^ None of these Convertible Debentures have been
converted as of December 3, 1999.
From May 14, 1999 to June 9, 1999 (in a single financing) the Company
issued a principal aggregate amount of $850,000 of convertible debentures
("Convertible Debenture"), convertible into Common Stock of the Company at a
conversion price of 80% of the average closing bid price for the ten trading
days preceding the date of conversion together with accrued interest of 5%.
After deducing fees directly attributable to such offering the offering the
Company received a net amount of $772,727. All Convertible Debentures were
issued to accredited investors as defined in Rule 501(a) of regulation D
promulgated under the Act ("Regulation D") and the Company received written
representations from each investor to that effect. There was no placement agent
involved in this financing. Any Convertible Debenture not so converted are
subject to mandatory conversion by the Company on the 24th anniversary date of
issuance of the Convertible Debentures. ^ None of these Convertible Debentures
have been converted as of December 3, 1999.
On July 9, 1999 the Company entered into a fourth promissory note
(contingent convertible debenture financing) with terms and conditions
substantially identical to those set forth in the March 2, 1999 promissory note
financing referred to directly above excepting (a) the lender is different, to
wit: Southshore Capital, Ltd., (b) gross proceeds amounted to $1,100,000, (c)
the due date of such note is August 23, 1999 with no right to extend and (d) the
debenture holder did not receive any warrants. In all other respects the terms
and conditions of each of the documents executed with respect to this
transaction are identical to those described in the above referenced March 2,
1999 transaction. There was no placement agent involved in this financing. The
promissory note was not paid on its due date and the terms of the Contingent
Subscription Agreement, Convertible Debenture and Registration Rights Agreement
automatically went into effect with debentures in the principal sum of
$1,148,400 (inclusive of interest on aforesaid promissory note) going into
effect. ^ None of these Convertible Debentures have been converted as of
December 3, 1999.
On August 11, 1999 the Company entered into a fifth promissory note
(contingent convertible debenture financing) with terms and conditions
substantially identical to those set forth in the March 2, 1999 promissory note
financing referred to directly above excepting (a) the lender is different, to
wit: Aberdeen Avenue, LLC, (b) gross proceeds amounted to $1,400,000, (c) the
due date of such note is November 11, 1999 with no right to extend and (d) the
debenture holder did not receive any warrants. In all other respects the terms
and conditions of each of the documents executed with respect to this
transaction are identical to those described in the above referenced March 2,
1999 transaction. There was no placement agent involved in this financing. The
terms of the Contingent Subscription Agreement, Convertible Debenture and
Registration Rights Agreement went into effect on November 11, 1999 with the
principal sum of the Convertible Debenture being $1,484,000. No portion of this
Convertible Debenture has been converted as of December 3, 1999.
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In September 1999 and October/November 1999 the Company entered into
two separate transactions whereby in each instance it sold 1,000,000 restrictive
shares of its common stock at $1.00 per share in September 1999 and $1.50 per
share in October/November 1999. In accordance with the terms of such
Subscription Agreements and Registration Rights Agreements all 2,000,000 shares
sold are being registered herein.
With respect to each of the above referenced financings, to the extent
required, the Company has filed Forms D with the SEC indicating the manner in
which net proceeds received were utilized. Such Forms D require that distinction
be made for net proceeds utilized as "payments to officers, directors and/or
affiliates" as opposed to "payment to others". In each instance the Forms D, as
filed, indicate "payment to others".
Item 16. Exhibits and Financial Statement Schedules
Exhibit
<TABLE>
<CAPTION>
No. Description
<S> <C>
2.1 Acquisition Agreement, dated May 1995, by and between Registrant, a New
York corporation (now Swissray International, Inc.); Berkshire
International Finance, Inc., SR-Medical AG (a Swiss corporation), Teleray
AG (a Swiss corporation) and others (Incorporated by reference to Exhibit
6(a) of the Registrant's Registration Statement on Form 10SB, Registration
No . 0-26972, effective February 14, 1996).
2.2 Exchange Agreement, dated as of November 22, 1996 by and between the
Registrant and Douglas Maxwell ("Maxwell"); Registration Rights Agreement,
dated as of March 13, 1997, between the Registrant and Maxwell; Assignment
and Assumption Agreement, dated March 13, 1997, between the Registrant and
Maxwell; Option Agreement, dated January 24, 1997, granting options for
125,000 shares of the Registrant to Maxwell (Incorporated by reference to
Exhibit 2.2 of the Registrant's Annual Report for the fiscal year ended
June 30, 1997 on Form 10-KSB filed on September 30, 1997).
3.1 Registrant's Certificate of Incorporation, dated December 20, 1967
(Incorporated by reference to Exhibit 2(a) of the Registrant's Registration
Statement on Form 10SB, Registration No. 0- 26972, effective February 14,
1996).
3.2 Amendment to Registrant's Certificate of Incorporation, dated September 19,
1968 (Incorporated by reference to Exhibit 2(b) of the Registrant's
Registration Statement on Form 10SB, Registration No. 0-26972, effective
February 14, 1996).
3.3 Amendment to Registrant's Certificate of Incorporation, dated September 8,
1972 (Incorporated by reference to Exhibit 2(c) of the Registrant's
Registration Statement on Form 10SB, Registration No. 0-26972, effective
February 14, 1996).
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3.4 Amendment to Registrant's Certificate of Incorporation, dated October 30,
1981 (Incorporated by reference to Exhibit 2(d) of the Registrant's
Registration Statement on Form 10SB, Registration No. 0-26972, effective
February 14, 1996).
3.5 Certificate of Merger of Direct Marketing Services, Inc. and CGS Units
Incorporated into CGS Units Incorporated, dated June 16, 1994 (Incorporated
by reference to Exhibit 2(e) of the Registrant's Registration Statement on
Form 10SB, Registration No. 0-26972, effective February 14, 1996).
3.6 Amendment to Registrant's Certificate of Incorporation, dated August 10,
1994 (Incorporated by reference to Exhibit 3.6 of Registrant's Annual
Report for the fiscal year ended June 30, 1997 on Form 10-KSB, filed
September 30, 1997).
3.7 Certificate of Correction of Certificate of Merger of Direct Marketing
Services, Inc. and CGS Units Incorporated into CGS Units Incorporated,
filed August 5, 1994 (Incorporated by reference to Exhibit 2(f) of the
Registrant's Registration Statement on Form 10SB, Registration No. 0-26972,
effective February 14, 1996). 3.8 Amendment to Registrant's Certificate of
Incorporation, dated May 24, 1995 (Incorporated by reference to Exhibit
2(g) of the Registrant's Registration Statement on Form 10SB, Registration
No. 0-26972, effective February 14, 1996)
3.9 Amendment to Registrant's Certificate of Incorporation, dated August 29,
1996 (Incorporated by reference to Exhibit 3.9 of Registrant's Annual
Report for the fiscal year ended June 30, 1997 on Form 10-KSB, filed
September 30, 1997).
3.10 Amendment to Registrant's Certificate of Incorporation, dated December 13,
1996 (Incorporated by reference to Exhibit 3.10 of Registrant's Annual
Report for the fiscal year ended June 30, 1997 on Form 10-KSB, filed
September 30, 1997).
3.11 Amendment to Registrant's Certificate of Incorporation, dated March 12,
1997 (Incorporated by reference to Exhibit 3.11 of Registrant's Annual
Report for the fiscal year ended June 30, 1997 on Form 10-KSB, filed
September 30, 1997).
3.12 Registrant's By-Laws (Incorporated by reference to Exhibit 2 (h) of the
Registrant's Registration Statement on Form 10SB, Registration No. 0-26972,
effective February 14, 1996).
3.13 Amendment to Registrant's Certificate of Incorporation, dated December 26,
1997 (Incorporated by reference to Exhibit 3.13 of Registrant's Form S-1
Registration Statement, Registration No. 333-43401, effective March 12,
1998).
3.14 Amendment to Registrant's Certificate of Incorporation, dated July 28,
1999.
5.1 Opinion of Gary B. Wolff, P.C., counsel to the Registrant (Incorporated by
reference to Exhibit 5.1 of Registrant's first amendment to filing of Form
S-1 Registration Statement, Registration No. 333-59829 filed April 27,
1999).
II-10
<PAGE>
5.1(a) Opinion of Gary B. Wolff, P.C., counsel to the Registrant.
5.1(b) Opinion of Gary B. Wolff, P.C., counsel to the Registrant.
10.1 License Agreement, dated June 24, 1995, by and between the Registrant and
Hans-Jurgen Behrendt (Incorporated by reference to Exhibit 6(b) of
Registrant's Registration Statement on Form 10SB, Registration No. 0-26972,
effective February 14, 1996).
10.2 1996 Swissray International Corporation, Inc. Non-Statutory Stock Option
Plan. (Incorporated by reference to Exhibit 10.2 of Registrant's Amendment
No. 1 to Form S-1 Registration Statement, Registration No. 333-38229, filed
December 17, 1997).
10.3 Agreement, dated June 11, 1996 between the Registrant and Philips Medical
Systems (Incorporated by reference to Exhibit 10.3 of Registrant's Annual
Report for the fiscal year ended June 30, 1997 on Form 10-KSB, filed
September 30, 1997).
10.4 License Agreement, dated as of July 18, 1997, by and between the Registrant
and Agfa-Gevaert N.V., certain portions of which are filed under a request
for confidential treatment pursuant to Rule 24b-2 promulgated pursuant to
the Securities Exchange Act of 1934, as amended, and Rule 80(b)(4) of
Organization; Conduct and Ethics; and Information and Requests adopted
under the Freedom of Information Act, under Rule 406 of the Securities Act
of 1933, as amended, and the Freedom of Information Act (Incorporated by
reference to Exhibit 10.4 of Registrant's Annual Report for the fiscal year
ended June 30, 1997 on Form 10-KSB/A2, filed December 3, 1997).
10.5 Agreement, dated July 14, 1995, by and between Teleray AG and Optische
Werke G. Roderstock, certain portions of which are filed under a request
for confidential treatment pursuant to Rule 24b-2 promulgated pursuant to
the Securities Exchange Act of 1934, as amended, and Rule 80(b)(4) of
Organization; Conduct and Ethics; and Information and Requests adopted
under the Freedom of Information Act, under Rule 406 of the Securities Act
of 1933, as amended, and the Freedom of Information Act (Incorporated by
reference to Exhibit 10.5 of Registrant's Annual Report for the fiscal year
ended June 30, 1997 on Form 10-KSB/A2, filed December 3, 1997).
10.6 Agreement, dated as of June 30, 1997, between the Registrant and Ruedi G.
Laupper. (Incorporated by reference to Exhibit 10.2 of Registrant's
Amendment No. 1 to Form S-1 Registration Statement, Registration No.
333-38229, filed December 17, 1997).
10.7 Form of Registration Rights Agreement, dated as of August , 1997, by and
between Swissray International, Inc. and the person named on the signature
page hereto. (Incorporated by reference to Exhibit 10.2 of Registrant's
Amendment No. 1 to Form S-1 Registration Statement, Registration No.
333-38229, filed December 17, 1997).
II-11
<PAGE>
10.8 Form of Debenture of Swissray International, Inc. (Incorporated by
reference to Exhibit 10.2 of Registrant's Amendment No. 1 to Form S-1
Registration Statement, Registration No. 333-38229, filed December 17,
1997).
10.9 Asset Purchase Agreement, dated as of October 17, 1997 by and among
Swissray Medical Systems, Inc., Swissray International, Inc., Service
Support Group LLC, Gary Durday, Michael Harle and Kenneth Montler
(Incorporated by reference to Exhibit 2.1 of the Registrant's Current
Report on Form 8-K, filed November 4, 1997).
10.10Registration Rights Agreement, dated as of October 17, 1997, by and among
Swissray International, Inc., Service Support Group, LLC, Gary Durday,
Michael Harle and Kenneth Montler (Incorporated by reference to Exhibit 2.2
of the Registrant's Current Report on Form 8-K, filed November 4, 1997).
10.11Employment Agreement between the Registrant and Ruedi G. Laupper, dated as
of December , 1997 (Incorporated by reference as Exhibit 10.11 to
Registrant's initial filing of Form S-1 Registration Statement,
Registration No. 333-43401 filed December 29, 1997).
10.12Employment Agreement between the Registrant and Josef Laupper, dated as of
December , 1997 (Incorporated by reference as Exhibit 10.12 to Registrant's
initial filing of Form S-1 Registration Statement, Registration No.
333-43401 filed December 29, 1997).
10.13Employment Agreement between the Registrant and Herbert Laubscher, dated
as of December , 1997 (Incorporated by reference as Exhibit 10.13 to
Registrant's initial filing of Form S-1 Registration Statement,
Registration No. 333-43401 filed December 29, 1997).
10.14Employment Agreement between the Registrant and Ueli Laupper, dated as of
December , 1997 (Incorporated by reference as Exhibit 10.14 to Registrant's
initial filing of Form S-1 Registration Statement, Registration No.
333-43401 filed December 29, 1997).
10.15Form of Registration Rights Agreement, dated as of November , 1997
(Incorporated by reference as Exhibit 10.15 to Registrant's initial filing
of Form S-1 Registration Statement, Registration No. 333-43401 filed
December 29, 1997).
10.16Form of Debenture of Swissray International, Inc., dated November , 1997
(Incorporated by reference as Exhibit 10.16 to Registrant's initial filing
of Form S-1 Registration Statement, Registration No. 333-43401 filed
December 29, 1997).
10.17Form of Subscription Agreement, dated November , 1997 (Incorporated by
reference as Exhibit 10.17 to Registrant's initial filing of Form S-1
Registration Statement, Registration No. 333-43401 filed December 29,
1997).
II-12
<PAGE>
10.18Form of Registration Rights Agreement (rollover), dated as of November ,
1997 (Incorporated by reference as Exhibit 10.18 to Registrant's initial
filing of Form S-1 Registration Statement, Registration No. 333-43401 filed
December 29, 1997).
10.19Form of Debenture of Swissray International, Inc. (rollover), dated
November , 1997 (Incorporated by reference as Exhibit 10.19 to Registrant's
initial filing of Form S-1
Registration Statement, Registration No. 333-43401 filed December 29, 1997).
10.20Form of Subscription Agreement (rollover), dated November , 1997
(Incorporated by reference as Exhibit 10.20 to Registrant's initial filing
of Form S-1 Registration Statement, Registration No. 333-43401 filed
December 29, 1997).
10.21Agreement Regarding August, 1997 Regulation D offering (Incorporated by
reference as Exhibit 10.21 to Registrant's initial filing of Form S-1
Registration Statement, Registration No. 333-43401 filed December 29,
1997).
10.22Form of Subscription Agreement dated March , 1998 (Incorporated by
reference as Exhibit 10.22 to Registrant's initial filing of Form S-1
Registration Statement, Registration No. 333-50069 filed April 14, 1998).
10.23Form of Registration Rights Agreement dated March , 1998 (Incorporated by
reference as Exhibit 10.23 to Registrant's initial filing of Form S-1
Registration Statement, Registration No. 333-50069 filed April 14, 1998).
10.24Form of Debenture dated March , 1998 (Incorporated by reference as Exhibit
10.24 to Registrant's initial filing of Form S-1 Registration Statement,
Registration No. 333- 50069 filed April 14, 1998).
10.25 This Exhibit Number skipped.
10.26Form of Subscription Agreement dated June, 1998 (Incorporated by reference
as Exhibit 10.26 to Registrant's initial filing of Form S-1 Registration
Statement, Registration No. 333-59829 filed July 24, 1998).
10.27Form of Registration Rights Agreement dated June, 1998 (Incorporated by
reference as Exhibit 10.27 to Registrant's initial filing of Form S-1
Registration Statement, Registration No. 333-59829 filed July 24, 1998).
10.28Form of Debenture dated June, 1998 (Incorporated by reference as Exhibit
10.28 to Registrant's initial filing of Form S-1 Registration Statement,
Registration No. 333- 59829 filed July 24, 1998)..
10.29Form of Subscription Agreement dated August, 1998 with March 17, 1999
amendment (Incorporated by reference as Exhibit 10.29 to Registrant's first
amendment to filing of Form S-1 Registration Statement, Registration No.
333-59829 filed April 27, 1998).
II-13
<PAGE>
10.30Form of Registration Rights Agreement dated August, 1998 (Incorporated by
reference as Exhibit 10.30 to Registrant's first amendment to filing of
Form S-1 Registration Statement, Registration No. 333-59829 filed April 27,
1998).
10.31Form of Debenture dated August, 1998 with March 17, 1999 amendment
(Incorporated by reference as Exhibit 10.31 to Registrant's first amendment
to filing of Form S-1 Registration Statement, Registration No. 333-59829
filed April 27, 1998).
10.32Form of Subscription Agreement dated October, 1998 with March 17, 1999
amendment (Incorporated by reference as Exhibit 10.32 to Registrant's first
amendment to filing of Form S-1 Registration Statement, Registration No.
333-59829 filed April 27, 1998).
10.33Form of Registration Rights Agreement dated October, 1998 (Incorporated by
reference as Exhibit 10.33 to Registrant's first amendment to filing of
Form S-1 Registration Statement, Registration No. 333-59829 filed April 27,
1998).
10.34Form of Debenture dated October, 1998 with March 17, 1999 amendment
(Incorporated by reference as Exhibit 10.34 to Registrant's first amendment
to filing of Form S-1 Registration Statement, Registration No. 333-59829
filed April 27, 1998).
10.35Form of Promissory Note dated December, 1998 (Incorporated by reference as
Exhibit 10.35 to Registrant's first amendment to filing of Form S-1
Registration Statement, Registration No. 333-59829 filed April 27, 1998).
10.36Form of Contingent Subscription Agreement dated December, 1998 with March
17, 1999 amendment (Incorporated by reference as Exhibit 10.36 to
Registrant's first amendment to filing of Form S-1 Registration Statement,
Registration No. 333-59829 filed April 27, 1998).
10.37Form of Registration Rights Agreement dated December, 1998 (Incorporated
by reference as Exhibit 10.37 to Registrant's first amendment to filing of
Form S-1 Registration Statement, Registration No. 333-59829 filed April 27,
1998).
10.38Form of Debenture dated December, 1998 with March 17, 1999 amendment
(Incorporated by reference as Exhibit 10.38 to Registrant's first amendment
to filing of Form S-1 Registration Statement, Registration No. 333-59829
filed April 27, 1998).
10.39Form of Warrant dated December, 1998 (Incorporated by reference as Exhibit
10.39 to Registrant's first amendment to filing of Form S-1 Registration
Statement, Registration No. 333-59829 filed April 27, 1998).
II-14
<PAGE>
10.40Form of Subscription Agreement dated January, 1999 (Incorporated by
reference as Exhibit 10.40 to Registrant's first amendment to filing of
Form S-1 Registration Statement, Registration No. 333-59829 filed April 27,
1998).
10.41Form of Registration Rights Agreement dated January, 1999 (Incorporated by
reference as Exhibit 10.41 to Registrant's first amendment to filing of
Form S-1 Registration Statement, Registration No. 333-59829 filed April 27,
1998).
10.42Form of Debenture dated January, 1999 (Incorporated by reference as
Exhibit 10.42 to Registrant's first amendment to filing of Form S-1
Registration Statement, Registration No. 333-59829 filed April 27, 1998).
10.43Form of Warrant dated January 28, 1999 with March 17, 1999 amendment
(Incorporated by reference as Exhibit 10.43 to Registrant's first amendment
to filing of Form S-1 Registration Statement, Registration No. 333-59829
filed April 27, 1998).
10.44Form of Promissory Note dated March 2, 1999 (Incorporated by reference as
Exhibit 10.44 to Registrant's first amendment to filing of Form S-1
Registration Statement, Registration No. 333-59829 filed April 27, 1998).
10.45Form of Contingent Subscription Agreement dated March 2, 1999
(Incorporated by reference as Exhibit 10.45 to Registrant's first amendment
to filing of Form S-1 Registration Statement, Registration No. 333-59829
filed April 27, 1998).
10.46Form of Registration Rights Agreement dated March 2, 1999 (Incorporated by
reference as Exhibit 10.46 to Registrant's first amendment to filing of
Form S-1 Registration Statement, Registration No. 333-59829 filed April 27,
1998).
10.47Form of Debenture dated March 2, 1999 (Incorporated by reference as
Exhibit 10.47 to Registrant's first amendment to filing of Form S-1
Registration Statement, Registration No. 333-59829 filed April 27, 1998).
10.48Form of Warrant dated March 2, 1999 (Incorporated by reference as Exhibit
10.48 to Registrant's first amendment to filing of Form S-1 Registration
Statement, Registration No. 333-59829 filed April 27, 1998).
10.49Form of Promissory Note dated March 26, 1999 (Incorporated by reference as
Exhibit 10.49 to Registrant's first amendment to filing of Form S-1
Registration Statement, Registration No. 333-59829 filed April 27, 1998).
10.50Form of Contingent Subscription Agreement dated March 26, 1999
(Incorporated by reference as Exhibit 10.50 to Registrant's first amendment
to filing of Form S-1 Registration Statement, Registration No. 333-59829
filed April 27, 1998). 10.51 Form of Registration Rights Agreement dated
March 26, 1999 (Incorporated by reference as Exhibit 10.51 to Registrant's
first amendment to filing of Form S-1 Registration Statement, Registration
No. 333-59829 filed April 27, 1998).
II-15
<PAGE>
10.52Form of Debenture dated March 26, 1999 (Incorporated by reference as
Exhibit
10.52 to Registrant's first amendment to filing of Form S-1 Registration Statement,
Registration No. 333-59829 filed April 27, 1998).
10.53Form of Warrant dated March 26, 1999 (Incorporated by reference as Exhibit
10.53
to Registrant's first amendment to filing of Form S-1 Registration Statement,
Registration No. 333-59829 filed April 27, 1998).
10.54 Form of Subscription Agreement dated May , 1999.
10.55 Form of Registration Rights Agreement dated May , 1999.
10.56 Form of Debenture dated May , 1999.
10.57 Form of Promissory Note dated July 9, 1999.
10.58 Form of Security Agreement dated July 9, 1999.
10.59 Form of Contingent Subscription Agreement dated July 9, 1999.
10.60 Form of Registration Rights Agreement dated July 9, 1999.
10.61 Form of Debenture dated August 23, 1999
10.62 Form of Promissory Note dated August 11, 1999.
10.63Consulting Agreement between Registrant and Liviakis Financial
Communications, Inc. dated March 24, 1999 with exhibit thereto entitled
Voting Trust Agreement.
10.64 Contract between Registrant and Rolcan Finance Ltd. Dated April 14, 1999.
10.65Master Supplier Agreement between Registrant and Data General Corporation
effective January 20, 1999.
10.66 Form of Registrant's Authorized Distributor Agreement.
10.67 Subscription Agreement dated September 7, 1999
10.68 Registration Rights Agreement dated September 7, 1999
10.69 Form of Subscription Agreement dated October/November 1999
II-16
<PAGE>
10.70 Form of Registration Rights Agreement dated October/November 1999
10.71 Form of Contingent Subscription Agreement dated August 11, 1999. *
10.72 Form of Registration Rights Agreement dated August 11, 1999. *
10.73 Form of Debenture dated November 11, 1999 *
10.74 Agreement with Display Presentations
10.75 Agreement with Live Marketing
10.76 Sales, Marketing and Service Agreement with Hitachi Medical Systems America Inc.
21.1 List of Subsidiaries (Incorporated by reference to Exhibit 21 of Registrant's Annual
Report for the fiscal year ended June 30, 1997 on Form 10-KSB, filed September 30,
1997).
23.1 Consent of Bederson & Company LLP
23.1(a) Consent of Bederson & Company LLP.
23.1(b) Consent of Bederson & Company LLP.
23.2 Consent of Gary B. Wolff, P.C. (included in Exhibit 5.1a).
23.2(a) Consent of Gary B. Wolff, P.C. (included in Exhibit 5.1b).
23.3 Consent of Feldman Sherb Ehrlich & Co., P.C.
23.3(a) Consent of Feldman Sherb Horowitz & Co., P.C.
23.3(b) Consent of Feldman Sherb Horowitz & Co., P.C.
27 FINANCIAL DATA SCHEDULES
</TABLE>
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling
II-17
<PAGE>
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to the Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the
maximum aggregate offering price, set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
(iii)To include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-offering amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Hochdorf, Country of Switzerland, on December 6, 1999.
SWISSRAY INTERNATIONAL, INC.
/S/RUEDI G. LAUPPER/
By:_______________________
Name: Ruedi G. Laupper
Title: Chairman of the Board of
Directors, President &
Principal Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/Ruedi G. LAUPPER/ Chairman of the Board of Dated: Dec. 6, 1999
Reudi G. Laupper Directors, President &
Principal Executive Officer
/JOSEF LAUPPER/ Secretary, Treasurer and a Dated: Dec. 6, 1999
Josef Laupper Director
/MICHAEL LAUPPER/ Principal Financial Officer Dated: Dec. 6, 1999
Michael Laupper & Controller
/UELI LAUPER/ Vice President and a Director Dated: Dec. 6, 1999
Ueli Laupper
/DR, ERWIN ZIMMERLI/ Director Dated: Dec. 6, 1999
Dr. Erwin Zimmerli
/DR. SC. DOV MAOR/ Director Dated: Dec. 6, 1999
Dr. Sc. Dov Maor
II-19
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit
No. Description
<S> <C>
2.1 Acquisition Agreement, dated May 1995, by and between
Registrant, a New York corporation (now Swissray
International, Inc.); Berkshire International Finance, Inc.,
SR-Medical AG (a Swiss corporation), Teleray AG (a Swiss
corporation) and others (Incorporated by reference to
Exhibit 6(a) of the Registrant's Registration Statement on
Form 10SB, Registration No . 0-26972, effective February 14,
1996).
2.2 Exchange Agreement, dated as of November 22, 1996 by and
between the Registrant and Douglas Maxwell ("Maxwell");
Registration Rights Agreement, dated as of March 13, 1997,
between the Registrant and Maxwell; Assignment and Assumption
Agreement, dated March 13, 1997, between the Registrant and
Maxwell; Option Agreement, dated January 24, 1997, granting
options for 125,000 shares of the Registrant to Maxwell
(Incorporated by reference to Exhibit 2.2 of the Registrant's
Annual Report for the fiscal year ended June 30, 1997 on Form
10-KSB filed on September 30, 1997).
3.1 Registrant's Certificate of Incorporation, dated December 20,
1967 (Incorporated by reference to Exhibit 2(a) of the
Registrant's Registration Statement on Form 10SB, Registration
No. 0- 26972, effective February 14, 1996).
3.2 Amendment to Registrant's Certificate of Incorporation, dated
September 19, 1968 (Incorporated by reference to Exhibit 2(b)
of the Registrant's Registration Statement on Form 10SB,
Registration No. 0-26972, effective February 14, 1996).
3.3 Amendment to Registrant's Certificate of Incorporation, dated
September 8, 1972 (Incorporated by reference to Exhibit 2(c)
of the Registrant's Registration Statement on Form 10SB,
Registration No. 0-26972, effective February 14, 1996).
3.4 Amendment to Registrant's Certificate of Incorporation, dated
October 30, 1981 (Incorporated by reference to Exhibit 2(d) of
the Registrant's Registration Statement on Form 10SB,
Registration No. 0-26972, effective February 14, 1996).
3.5 Certificate of Merger of Direct Marketing Services, Inc. and
CGS Units Incorporated into CGS Units Incorporated, dated June
16, 1994 (Incorporated by reference to Exhibit 2(e) of the
Registrant's Registration Statement on Form 10SB, Registration
No. 0-26972, effective February 14, 1996).
3.6 Amendment to Registrant's Certificate of Incorporation, dated
August 10, 1994 (Incorporated by reference to Exhibit 3.6 of
Registrant's Annual Report for the fiscal year ended June 30,
1997 on Form 10-KSB, filed September 30, 1997).
3.7 Certificate of Correction of Certificate of Merger of Direct
Marketing Services, Inc. and CGS Units Incorporated into CGS
Units Incorporated, filed August 5, 1994
<PAGE>
(Incorporated by reference to Exhibit 2(f) of the Registrant's
Registration Statement on Form 10SB, Registration No. 0-26972,
effective February 14, 1996).
3.8 Amendment to Registrant's Certificate of Incorporation, dated
May 24, 1995 (Incorporated by reference to Exhibit 2(g) of the
Registrant's Registration Statement on Form 10SB, Registration
No. 0-26972, effective February 14, 1996)
3.9 Amendment to Registrant's Certificate of Incorporation, dated
August 29, 1996 (Incorporated by reference to Exhibit 3.9 of
Registrant's Annual Report for the fiscal year ended June 30,
1997 on Form 10-KSB, filed September 30, 1997).
3.10 Amendment to Registrant's Certificate of Incorporation, dated
December 13, 1996 (Incorporated by reference to Exhibit 3.10
of Registrant's Annual Report for the fiscal year ended June
30, 1997 on Form 10-KSB, filed September 30, 1997).
3.11
Amendment to Registrant's Certificate of Incorporation,
dated March 12, 1997 (Incorporated by reference to Exhibit
3.11 of Registrant's Annual Report for the fiscal year ended
June 30, 1997 on Form 10-KSB, filed September 30, 1997).
3.12
Registrant's By-Laws (Incorporated by reference to Exhibit 2
(h) of the Registrant's Registration Statement on Form 10SB,
Registration No. 0-26972, effective February 14, 1996).
3.13 Amendment to Registrant's Certificate of Incorporation, dated
December 26, 1997 (Incorporated by reference to Exhibit 3.13
of Registrant's Form S-1 Registration Statement, Registration
No. 333-43401, effective March 12, 1998).
3.14
Amendment to Registrant's Certificate of Incorporation,
dated July 28, 1999.
5.1
Opinion of Gary B. Wolff, P.C., counsel to the Registrant
(Incorporated by reference to Exhibit 5.1 of Registrant's
first amendment to filing of Form S-1 Registration
Statement, Registration No. 333-59829 filed April 27, 1999).
5.1(a) Opinion of Gary B. Wolff, P.C., counsel to the Registrant.
5.1(b) Opinion of Gary B. Wolff, P.C., counsel to the Registrant.
10.1
License Agreement, dated June 24, 1995, by and between the
Registrant and Hans-Jurgen Behrendt (Incorporated by
reference to Exhibit 6(b) of Registrant's Registration
Statement on Form 10SB, Registration No. 0-26972, effective
February 14, 1996).
10.2
1996 Swissray International Corporation, Inc. Non-Statutory
Stock Option Plan. (Incorporated by reference to Exhibit
10.2 of Registrant's Amendment No. 1 to Form S-1
Registration Statement, Registration No. 333-38229, filed
December 17, 1997).
<PAGE>
10.3 Agreement, dated June 11, 1996 between the Registrant and
Philips Medical Systems (Incorporated by reference to Exhibit
10.3 of Registrant's Annual Report for the fiscal year ended
June 30, 1997 on Form 10-KSB, filed September 30, 1997).
10.4 License Agreement, dated as of July 18, 1997, by and between
the Registrant and Agfa-Gevaert N.V., certain portions of
which are filed under a request for confidential treatment
pursuant to Rule 24b-2 promulgated pursuant to the Securities
Exchange Act of 1934, as amended, and Rule 80(b)(4) of
Organization; Conduct and Ethics; and Information and Requests
adopted under the Freedom of Information Act, under Rule 406
of the Securities Act of 1933, as amended, and the Freedom of
Information Act (Incorporated by reference to Exhibit 10.4 of
Registrant's Annual Report for the fiscal year ended June 30,
1997 on Form 10-KSB/A2, filed December 3, 1997).
10.5 Agreement, dated July 14, 1995, by and between Teleray AG and
Optische Werke G. Roderstock, certain portions of which are
filed under a request for confidential treatment pursuant to
Rule 24b-2 promulgated pursuant to the Securities Exchange Act
of 1934, as amended, and Rule 80(b)(4) of Organization;
Conduct and Ethics; and Information and Requests adopted under
the Freedom of Information Act, under Rule 406 of the
Securities Act of 1933, as amended, and the Freedom of
Information Act (Incorporated by reference to Exhibit 10.5 of
Registrant's Annual Report for the fiscal year ended June 30,
1997 on Form 10-KSB/A2, filed December 3, 1997).
10.6
Agreement, dated as of June 30, 1997, between the Registrant
and Ruedi G. Laupper. (Incorporated by reference to Exhibit
10.2 of Registrant's Amendment No. 1 to Form S-1
Registration Statement, Registration No. 333-38229, filed
December 17, 1997).
10.7 Form of Registration Rights Agreement, dated as of August ,
1997, by and between Swissray International, Inc. and the
person named on the signature page hereto. (Incorporated by
reference to Exhibit 10.2 of Registrant's Amendment No. 1 to
Form S-1 Registration Statement, Registration No. 333-38229,
filed December 17, 1997).
10.8
Form of Debenture of Swissray International, Inc.
(Incorporated by reference to Exhibit 10.2 of Registrant's
Amendment No. 1 to Form S-1 Registration Statement,
Registration No. 333-38229, filed December 17, 1997).
10.9 Asset Purchase Agreement, dated as of October 17, 1997 by and
among Swissray Medical Systems, Inc., Swissray International,
Inc., Service Support Group LLC, Gary Durday, Michael Harle
and Kenneth Montler (Incorporated by reference to Exhibit 2.1
of the Registrant's Current Report on Form 8-K, filed November
4, 1997).
10.10 Registration Rights Agreement, dated as of October 17, 1997,
by and among Swissray International, Inc., Service Support
Group, LLC, Gary Durday, Michael Harle and Kenneth Montler
(Incorporated by reference to Exhibit 2.2 of the Registrant's
Current Report on Form 8-K, filed November 4, 1997).
10.11 Employment Agreement between the Registrant and Ruedi G.
Laupper, dated as of
<PAGE>
December , 1997 (Incorporated by reference as Exhibit 10.11 to
Registrant's initial filing of Form S-1 Registration
Statement, Registration No. 333-43401 filed December 29,
1997).
10.12 Employment Agreement between the Registrant and Josef Laupper, dated as of
December , 1997 (Incorporated by reference as Exhibit 10.12 to Registrant's initial
filing of Form S-1 Registration Statement, Registration No. 333-43401 filed
December 29, 1997).
10.13 Employment Agreement between the Registrant and Herbert Laubscher, dated as of
December , 1997 (Incorporated by reference as Exhibit 10.13 to Registrant's initial
filing of Form S-1 Registration Statement, Registration No. 333-43401 filed
December 29, 1997).
10.14 Employment Agreement between the Registrant and Ueli Laupper, dated as of
December , 1997 (Incorporated by reference as Exhibit 10.14 to Registrant's initial
filing of Form S-1 Registration Statement, Registration No. 333-43401 filed
December 29, 1997).
10.15 Form of Registration Rights Agreement, dated as of November ,
1997 (Incorporated by reference as Exhibit 10.15 to
Registrant's initial filing of Form S-1 Registration
Statement, Registration No. 333-43401 filed December 29,
1997).
10.16 Form of Debenture of Swissray International, Inc., dated November , 1997
(Incorporated by reference as Exhibit 10.16 to Registrant's initial filing of Form S-1
Registration Statement, Registration No. 333-43401 filed December 29, 1997).
10.17 Form of Subscription Agreement, dated November , 1997
(Incorporated by reference as Exhibit 10.17 to Registrant's
initial filing of Form S-1 Registration Statement,
Registration No. 333-43401 filed December 29, 1997).
10.18 Form of Registration Rights Agreement (rollover), dated as of November , 1997
(Incorporated by reference as Exhibit 10.18 to Registrant's initial filing of Form S-1
Registration Statement, Registration No. 333-43401 filed December 29, 1997).
10.19 Form of Debenture of Swissray International, Inc. (rollover), dated November , 1997
(Incorporated by reference as Exhibit 10.19 to Registrant's initial filing of Form S-1
Registration Statement, Registration No. 333-43401 filed December 29, 1997).
10.20 Form of Subscription Agreement (rollover), dated November , 1997 (Incorporated by
reference as Exhibit 10.20 to Registrant's initial filing of Form S-1 Registration
Statement, Registration No. 333-43401 filed December 29, 1997).
10.21 Agreement Regarding August, 1997 Regulation D offering (Incorporated by reference
as Exhibit 10.21 to Registrant's initial filing of Form S-1 Registration Statement,
Registration No. 333-43401 filed December 29, 1997).
<PAGE>
10.22 Form of Subscription Agreement dated March , 1998
(Incorporated by reference as Exhibit 10.22 to Registrant's
initial filing of Form S-1 Registration Statement,
Registration No. 333-50069 filed April 14, 1998).
10.23 Form of Registration Rights Agreement dated March , 1998
(Incorporated by reference as Exhibit 10.23 to Registrant's
initial filing of Form S-1 Registration Statement,
Registration No. 333-50069 filed April 14, 1998).
10.24 Form of Debenture dated March , 1998 (Incorporated by reference as Exhibit 10.24
to Registrant's initial filing of Form S-1 Registration Statement, Registration No. 333-
50069 filed April 14, 1998).
10.25 This Exhibit Number skipped.
10.26 Form of Subscription Agreement dated June, 1998 (Incorporated
by reference as Exhibit 10.26 to Registrant's initial filing
of Form S-1 Registration Statement, Registration No. 333-59829
filed July 24, 1998).
10.27 Form of Registration Rights Agreement dated June, 1998
(Incorporated by reference as Exhibit 10.27 to Registrant's
initial filing of Form S-1 Registration Statement,
Registration No. 333-59829 filed July 24, 1998).
10.28 Form of Debenture dated June, 1998 (Incorporated by reference
as Exhibit 10.28 to Registrant's initial filing of Form S-1
Registration Statement, Registration No. 333- 59829 filed July
24, 1998)..
10.29 Form of Subscription Agreement dated August, 1998 with March 17, 1999 amendment
(Incorporated by reference as Exhibit 10.29 to Registrant's first amendment to filing
of Form S-1 Registration Statement, Registration No. 333-59829 filed April 27,
1998).
10.30 Form of Registration Rights Agreement dated August, 1998 (Incorporated by
reference as Exhibit 10.30 to Registrant's first amendment to filing of Form S-1
Registration Statement, Registration No. 333-59829 filed April 27, 1998).
10.31 Form of Debenture dated August, 1998 with March 17, 1999 amendment (Incorporated
by reference as Exhibit 10.31 to Registrant's first amendment to filing of Form S-1
Registration Statement, Registration No. 333-59829 filed April 27, 1998).
10.32 Form of Subscription Agreement dated October, 1998 with March
17, 1999 amendment (Incorporated by reference as Exhibit 10.32
to Registrant's first amendment to filing of Form S-1
Registration Statement, Registration No. 333-59829 filed April
27, 1998).
10.33 Form of Registration Rights Agreement dated October, 1998
(Incorporated by reference as Exhibit 10.33 to Registrant's
first amendment to filing of Form S-1
<PAGE>
Registration Statement, Registration No. 333-59829 filed April 27, 1998).
10.34 Form of Debenture dated October, 1998 with March 17, 1999 amendment
(Incorporated by reference as Exhibit 10.34 to Registrant's first amendment to filing
of Form S-1 Registration Statement, Registration No. 333-59829 filed April 27,
1998).
10.35 Form of Promissory Note dated December, 1998 (Incorporated by
reference as Exhibit 10.35 to Registrant's first amendment to
filing of Form S-1 Registration Statement, Registration No.
333-59829 filed April 27, 1998).
10.36 Form of Contingent Subscription Agreement dated December, 1998 with March 17,
1999 amendment (Incorporated by reference as Exhibit 10.36 to Registrant's first
amendment to filing of Form S-1 Registration Statement, Registration No. 333-59829
filed April 27, 1998).
10.37 Form of Registration Rights Agreement dated December, 1998 (Incorporated by
reference as Exhibit 10.37 to Registrant's first amendment to filing of Form S-1
Registration Statement, Registration No. 333-59829 filed April 27, 1998).
10.38 Form of Debenture dated December, 1998 with March 17, 1999 amendment
(Incorporated by reference as Exhibit 10.38 to Registrant's first amendment to filing
of Form S-1 Registration Statement, Registration No. 333-59829 filed April 27,
1998).
10.39 Form of Warrant dated December, 1998 (Incorporated by reference as Exhibit 10.39
to Registrant's first amendment to filing of Form S-1 Registration Statement,
Registration No. 333-59829 filed April 27, 1998).
10.40 Form of Subscription Agreement dated January, 1999 (Incorporated by reference as
Exhibit 10.40 to Registrant's first amendment to filing of Form S-1 Registration
Statement, Registration No. 333-59829 filed April 27, 1998).
10.41 Form of Registration Rights Agreement dated January, 1999 (Incorporated by
reference as Exhibit 10.41 to Registrant's first amendment to filing of Form S-1
Registration Statement, Registration No. 333-59829 filed April 27, 1998).
10.42 Form of Debenture dated January, 1999 (Incorporated by
reference as Exhibit 10.42 to Registrant's first amendment to
filing of Form S-1 Registration Statement, Registration No.
333-59829 filed April 27, 1998).
10.43 Form of Warrant dated January 28, 1999 with March 17, 1999 amendment
(Incorporated by reference as Exhibit 10.43 to Registrant's first amendment to filing
of Form S-1 Registration Statement, Registration No. 333-59829 filed April 27,
1998).
<PAGE>
10.44 Form of Promissory Note dated March 2, 1999 (Incorporated by
reference as Exhibit 10.44 to Registrant's first amendment to
filing of Form S-1 Registration Statement, Registration No.
333-59829 filed April 27, 1998).
10.45 Form of Contingent Subscription Agreement dated March 2, 1999
(Incorporated by reference as Exhibit 10.45 to Registrant's
first amendment to filing of Form S-1 Registration Statement,
Registration No. 333-59829 filed April 27, 1998).
10.46 Form of Registration Rights Agreement dated March 2, 1999 (Incorporated by
reference as Exhibit 10.46 to Registrant's first amendment to filing of Form S-1
Registration Statement, Registration No. 333-59829 filed April 27, 1998).
10.47 Form of Debenture dated March 2, 1999 (Incorporated by
reference as Exhibit 10.47 to Registrant's first amendment to
filing of Form S-1 Registration Statement, Registration No.
333-59829 filed April 27, 1998).
10.48 Form of Warrant dated March 2, 1999 (Incorporated by reference as Exhibit 10.48
to Registrant's first amendment to filing of Form S-1 Registration Statement,
Registration No. 333-59829 filed April 27, 1998).
10.49 Form of Promissory Note dated March 26, 1999 (Incorporated by
reference as Exhibit 10.49 to Registrant's first amendment to
filing of Form S-1 Registration Statement, Registration No.
333-59829 filed April 27, 1998).
10.50 Form of Contingent Subscription Agreement dated March 26, 1999 (Incorporated by
reference as Exhibit 10.50 to Registrant's first amendment to filing of Form S-1
Registration Statement, Registration No. 333-59829 filed April 27, 1998).
10.51 Form of Registration Rights Agreement dated March 26, 1999 (Incorporated by
reference as Exhibit 10.51 to Registrant's first amendment to filing of Form S-1
Registration Statement, Registration No. 333-59829 filed April 27, 1998).
10.52 Form of Debenture dated March 26, 1999 (Incorporated by reference as Exhibit
10.52 to Registrant's first amendment to filing of Form S-1 Registration Statement,
Registration No. 333-59829 filed April 27, 1998).
10.53 Form of Warrant dated March 26, 1999 (Incorporated by reference as Exhibit 10.53
to Registrant's first amendment to filing of Form S-1 Registration Statement,
Registration No. 333-59829 filed April 27, 1998).
10.54 Form of Subscription Agreement dated May , 1999.
10.55 Form of Registration Rights Agreement dated May , 1999.
10.56 Form of Debenture dated May , 1999.
10.57 Form of Promissory Note dated July 9, 1999.
<PAGE>
10.58 Form of Security Agreement dated July 9, 1999.
10.59 Form of Contingent Subscription Agreement dated July 9, 1999.
10.60 Form of Registration Rights Agreement dated July 9, 1999.
10.61 Form of Debenture dated August 23, 1999
10.62 Form of Promissory Note dated August 11, 1999.
10.63 Consulting Agreement between Registrant and Liviakis Financial Communications, Inc.
dated March 24, 1999 with exhibit thereto entitled Voting Trust Agreement.
10.64 Contract between Registrant and Rolcan Finance Ltd. Dated April 14, 1999.
10.65 Master Supplier Agreement between Registrant and Data General Corporation
effective January 20, 1999.
10.66 Form of Registrant's Authorized Distributor Agreement.
10.67 Subscription Agreement dated September 7, 1999
10.68 Registration Rights Agreement dated September 7, 1999
10.69 Form of Subscription Agreement dated October/November 1999
10.70 Form of Registration Rights Agreement dated October/November 1999
10.71 Form of Contingent Subscription Agreement dated August 11, 1999. *
10.72 Form of Registration Rights Agreement dated August 11, 1999. *
10.73 Form of Debenture dated November 11, 1999 *
10.74 Agreement with Display Presentations
10.75 Agreement with Live Marketing
10.76 Sales, Marketing and Service Agreement with Hitachi Medical Systems America Inc. -
confidentiality requested
21.1 List of Subsidiaries (Incorporated by reference to Exhibit 21 of Registrant's Annual
Report for the fiscal year ended June 30, 1997 on Form 10-KSB, filed September 30,
1997).
23.1 Consent of Bederson & Company LLP
<PAGE>
23.1(a) Consent of Bederson & Company LLP.
23.1(b) Consent of Bederson & Company LLP.
23.2 Consent of Gary B. Wolff, P.C. (included in Exhibit 5.1a).
23.2(a) Consent of Gary B. Wolff, P.C. (included in Exhibit 5.1b).
23.3 Consent of Feldman Sherb Ehrlich & Co., P.C.
23.3(a) Consent of Feldman Sherb Horowitz & Co., P.C.
23.3(b) Consent of Feldman Sherb Horowitz & Co., P.C.
27 FINANCIAL DATA SCHEDULES
* To be filed by amendment.
</TABLE>
Exhibit 5.1 b
December 8, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: SWISSRAY International, Inc. (the "Company")
Registration Statement on Form S-1 File No. 333-59829
Relating to shares of the Company's Common Stock, par
value $.01 per share underlying Convertible Debentures
Gentlemen:
I have been requested by the Company, a New York corporation, to
furnish you with my opinion as to the matters hereinafter set forth in
connection with the above captioned Registration Statement (the "Registration
Statement") covering all of the shares which will be offered by the Selling
Shareholders who acquired the shares under various agreements including, but not
limited to, Subscription Agreement, Convertible Debenture and related
Registration Rights Agreement - the number of shares being as indicated on the
calculation chart to the cover page of the Company's aforementioned S-1
Registration Statement.
In connection with this opinion, I have examined the Registration
Statement, the Certificate of Incorporation and By-Laws of the Company, each as
amended to date, copies of the records of corporate proceedings of the Company,
and copies of such other agreements, instruments and documents as I have deemed
necessary to enable me to render the opinion hereinafter expressed.
Based upon and subject to the foregoing, I am of the opinion that the
shares referred to above when sold in the manner described in the Registration
Statement, will be legally issued, fully paid and non-assessable.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to my name under the caption "Legal
Matters" in the prospectus included in the Registration Statement.
Very truly yours,
/Gary B. Wolff/
Gary B. Wolff, P.C.
----------------------------------
SWISSRAY INTERNATIONAL, INC.
----------------------------------
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Maximum Offering: $1,000,000
This offering consists of $1,000,000 shares of Swissray International, Inc.
common stock
--------------------
SUBSCRIPTION AGREEMENT
-------------------
SUBSCRIPTION PROCEDURES
A TOTAL OF 1,000,000 SHARES (THE "SHARES") OF THE COMMON STOCK OF SWISSRAY
INTERNATIONAL, INC.. (the "Company") are being offered in an aggregate amount
not to exceed $1,000,000. The Shares will be transferable to the extent that any
such transfer is permitted by law. This offering is being made in accordance
with the exemption from registration under Section 4(2) of the Securities Act of
1933, as amended (the "Act") and Rule 506 of Regulation D promulgated under the
Act (the "Offering").
The Investor Questionnaire is designed to enable the Investor to
demonstrate the minimum legal requirements under federal and state securities
laws to purchase the Shares. The Signature Page for the Investor Questionnaire
and the Subscription Agreement contain representations relating to the
subscription.
Also included is an Internal Revenue Service Form W-9: "Request for
Taxpayer Identification Number and Certification" for U.S. citizens or residents
of the U.S. for U.S. federal income tax purposes only. (Foreign investors should
consult their tax advisors regarding the need to complete Internal Revenue
Service Form W-9 and any other forms that may be required).
If you are a foreign person or foreign entity, you may be subject to a
withholding tax equal to 30% of any dividends paid by the Company. In order to
eliminate or reduce such withholding tax you may submit a properly executed
I.R.S. Form 4224 (Exemption from Withholding of Tax on Income Effectively
Connected with the Conduct of a Trade or Business in the United States) or
I.R.S. Form 1001 (Ownership Exemption or Reduced Trade Certificate), claiming
exemption from withholding or eligibility for treaty benefits in the form of a
lower rate of withholding tax on interest or dividends.
Payment must be made by wire transfer as provided below:
Immediately available funds should be sent via wire transfer to the escrow
account stated below and the completed subscription documents should be
forwarded to the Escrow Attorney. Your subscription funds will be deposited into
a non-interest bearing escrow account of Joseph B. LaRocco, Esq., Escrow Agent,
at First Union Bank of Connecticut, Stamford, Connecticut. In the event of a
termination of the Offering or the rejection of this subscription, all
subscription funds will be returned without interest. The wire instructions are
as follows:
First Union Bank of Connecticut
Executive Office
300 Main Street, P. O. Box 700
Stamford, CT 06904-0700
ABA #: 021101108
Swift #: FUNBUS33
Account #: 20000-2072298-4
Acct.Name: Joseph B. LaRocco, Esq. Trustee Account
<PAGE>
SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
TO: SWISSRAY INTERNATIONAL, INC.
This Subscription Agreement is made between Swissray International,
Inc., ("Company" or "Seller") a New York corporation, and the undersigned
prospective purchaser ("Purchaser") who is subscribing hereby for the Company's
shares of common stock (the "Shares"). The Shares being offered will be
separately transferable, to the extent that any such transfer is permitted by
law. This subscription is submitted to you in accordance with and subject to the
terms and conditions described in this Subscription Agreement together with any
Exhibits thereto, relating to an offering (the "Offering") of up to 1,000,000
Shares. This Offering is comprised of an offering of the Shares to accredited
investors in accordance with the exemption from registration under Section 4(2)
of the Securities Act of 1933, as amended (the "Act"), and Rule 506 of
Regulation D promulgated under the Act ("Regulation D").
1. SUBSCRIPTION.
(a) The undersigned hereby irrevocably subscribes for and agrees to
purchase 1,000,000 Shares for $1,000,000. The Purchaser entering into this
Subscription Agreement shall pay the purchase price for the Shares by delivering
immediately available good funds in United States Dollars per the written
instructions of the Company or it's attorney. The closing shall be deemed to
have occurred on the date the funds are wired out per the Company or its
attorney's written instructions, which date the parties agree was September 7,
1999.
(b) Upon receipt by the Company of the requisite payment for the Shares
being purchased the Shares so purchased will be forwarded by the Company to the
Purchaser and the name of such Purchaser will be registered on the Shares
transfer books of the Company as the record owner of such Shares. The Escrow
Agent shall not be liable for any action taken or omitted by him in good faith
and in no event shall the Escrow Agent be liable or responsible except for the
Escrow Agent's own gross negligence or willful misconduct. The Escrow Agent has
made no representations or warranties in connection with this transaction and
has not been involved in the negotiation of the terms of this Agreement or any
matters relative thereto. Seller and Purchaser each agree to indemnify and hold
harmless the Escrow Agent from and with respect to any suits, claims, actions or
liabilities arising in any way out of this transaction including the obligation
to defend any legal action brought which in any way arises out of or is related
to this Agreement. The Escrow Agent is not rendering securities advice to anyone
with respect to this proposed transaction; nor is the Escrow Agent opining on
the compliance of the proposed transaction under applicable securities law.
2. REPRESENTATIONS AND WARRANTIES.
The undersigned hereby represents and warrants to, and agrees with, the
Company as follows:
(a) The undersigned has been furnished with, and has carefully read the
applicable form of Registration Rights Agreement ANNEXED HERETO AS EXHIBIT A
(THE "REGISTRATION RIGHTS AGREEMENT"), AND is familiar with and understands the
terms of the Offering. With respect to tax and other economic considerations
involved in his investment, the undersigned is not relying on the Company. The
undersigned has carefully considered and has, to the extent the undersigned
believes such discussion necessary, discussed with the undersigned's
professional legal, tax, accounting and financial advisors the suitability of an
investment in the Company, by purchasing the Shares, for the undersigned's
particular tax and financial situation and has determined that the investment
being made by the undersigned is a suitable investment for the undersigned.
(b) The undersigned acknowledges that all documents, records, and books
pertaining to this investment which the undersigned has requested includes Form
10-KSB for the fiscal year ended June 30, 1997 and 10K for fiscal year ended
June 30, 1998 inclusive of any and all amendments thereto and Form 10-Q for the
quarters ended December 31, 1997, March 31, 1998, September 30, 1998 and
December 31, 1998 inclusive of any and all amendments thereto (the "Disclosure
Documents") have been made available for inspection by the undersigned or the
undersigned has access to the Disclosure Documents.
(c) The undersigned has had a reasonable opportunity to ask questions
of and receive answers from a person or persons acting on behalf of the Company
concerning the Offering and all such questions have been answered to the full
satisfaction of the undersigned.
(d) The undersigned will not sell or otherwise transfer the Shares
without registration under the Act or applicable state securities laws or an
exemption therefrom. The Shares have not been registered under the Act or under
the securities laws of any states. The Shares are to be registered by the
Company pursuant to the terms of the Registration Rights Agreement attached
hereto as Exhibit A and incorporated herein and made a part hereof. The
undersigned represents that the undersigned is purchasing the Shares for the
undersigned's own account, for investment and not with a view to resale or
distribution except in compliance with the Act. The undersigned has not offered
or sold any portion of the Shares being acquired nor does the undersigned have
any present intention of dividing the Shares with others or of selling,
distributing or otherwise disposing of any portion of the Shares either
currently or after the passage of a fixed or determinable period of time or upon
the occurrence or non-occurrence of any predetermined event or circumstance in
violation of the Act. Except as provided in the Registration Rights Agreement,
the Company has no obligation to register the Shares.
(e) The undersigned recognizes that an investment in the Shares
involves substantial risks, including loss of the entire amount of such
investment.
(F) LEGENDS.
(i) The undersigned acknowledges that each
certificate representing the Shares unless registered pursuant
to the Registration Rights Agreement, shall be stamped or
otherwise imprinted with a legend substantially in the
following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE
OFFERED OR SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT (i) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT
(OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (iii) IF AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
NOTWITHSTANDING THE FOREGOING, THESE SECURITIES ARE ALSO
SUBJECT TO THE REGISTRATION RIGHTS SET FORTH IN EACH OF THAT
CERTAIN SUBSCRIPTION AGREEMENT AND REGISTRATION RIGHTS
AGREEMENT BY AND BETWEEN THE HOLDER HEREOF AND THE COMPANY, A
COPY OF EACH IS ON FILE AT THE COMPANY'S PRINCIPAL EXECUTIVE
OFFICE.
(ii) The Shares shall contain the following legend
until the effectiveness of Registration Statement:
"No sale, offer to sell or transfer of the securities
represented by this certificate shall be made unless a
registration statement under the Federal Securities Act of
1933, as amended, with respect to such securities is then in
effect or an exemption from the registration requirement of
such Act is then in fact applicable to such securities."
(iii) After the effective date of the Registration
Statement the Shares shall not bear any restrictive legend.
(g) If this Subscription Agreement is executed and delivered on behalf
of a corporation, (i) such corporation has the full legal right and power and
all authority and approval required (a) to execute and deliver, or authorize
execution and delivery of, this Subscription Agreement and all other instruments
(including, without limitation, the Registration Rights Agreement) executed and
delivered by or on behalf of such corporation in connection with the purchase of
the Shares and (b) to purchase and hold the Shares: (ii) the signature of the
party signing on behalf of such corporation is binding upon such corporation;
and (iii) such corporation has not been formed for the specific purpose of
acquiring the Shares, unless each beneficial owner of such entity is qualified
as an accredited investor within the meaning of Rule 501(a) of Regulation D and
has submitted information substantiating such individual qualification.
(h) The undersigned shall indemnify and hold harmless the Company and
each stockholder, executive, employee, representative, affiliate, officer,
director, agent (including Counsel) or control person of the Company, who is or
may be a party or is or may be threatened to be made a party to any threatened,
pending or contemplated action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of or arising from any actual or
alleged misrepresentation or misstatement of facts or omission to represent or
state facts made or alleged to have been made by the undersigned to the Company
or omitted or alleged to have been omitted by the undersigned, concerning the
undersigned or the undersigned's subscription for and purchase of the Shares or
the undersigned's authority to invest or financial position in connection with
the Offering, including, without limitation, any such misrepresentation,
misstatement or omission contained in this Subscription Agreement, the
Questionnaire or any other document submitted by the undersigned, against
losses, liabilities and expenses for which the Company, or any stockholder,
executive, employee, representative, affiliate, officer, director, agent
(including Counsel) or control person of the Company has not otherwise been
reimbursed (including attorneys' fees and disbursements, judgments, fines and
amounts paid in settlement) actually and reasonably incurred by the Company, or
such officer, director stockholder, executive, employee, agent (including
Counsel), representative, affiliate or control person in connection with such
action, suit or proceeding.
(i) The undersigned is not subscribing for the Shares as a result of,
or pursuant to, any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or meeting.
(j) The undersigned or the undersigned's representatives, as the case
may be, has such knowledge and experience in financial, tax and business matters
so as to enable the undersigned to utilize the information made available to the
undersigned in connection with the Offering to evaluate the merits and risks of
an investment in the Shares and to make an informed investment decision with
respect thereto.
(k) The Purchaser is purchasing the Shares for its own account for
investment, and not with a view toward the resale or distribution thereof.
Purchaser is neither an underwriter of, nor a dealer in, the Shares or the
Common Stock issuable upon conversion thereof and is not participating in the
distribution or resale of the Shares.
(l) There has never been represented, guaranteed, or warranted to the
undersigned by any broker, the Company, its officers, directors or agents, or
employees or any other person, expressly or by implication (i) the percentage of
profits and/or amount of or type of consideration, profit or loss to be
realized, if any, as a result of the Company's operations; and (ii) that the
past performance or experience on the part of the management of the Company, or
of any other person, will in any way result in the overall profitable operations
of the Company.
3. SELLER REPRESENTATIONS.
(A) CONCERNING THE SECURITIES.The issuance, sale and delivery of the
Shares have been duly authorized by all required corporate action on the part of
Seller, and when issued, sold and delivered in accordance with the terms hereof
and thereof for the consideration expressed herein and therein, will be duly and
validly issued and enforceable in accordance with their terms, subject to the
laws of bankruptcy and creditors' rights generally.
(B) AUTHORITY TO ENTER AGREEMENT. This Agreement has been duly
authorized, validly executed and delivered on behalf of Seller and is a valid
and binding agreement in accordance with its terms, subject to general
principals of equity and to bankruptcy or other laws affecting the enforcement
of creditors' rights generally.
(C) NON-CONTRAVENTION. The execution and delivery of this
Agreement and the consummation of the issuance of the Shares, and the
transactions contemplated by this Agreement do not and will not conflict with or
result in a breach by Seller of any of the terms or provisions of, or constitute
a default under, the articles of incorporation or by-laws of Seller, or any
indenture, mortgage, deed of trust, or other material agreement or instrument to
which Seller is a party or by which it or any of its properties or assets are
bound, or any existing applicable law, rule, or regulation of the United States
or any State thereof or any applicable decree, judgment, or order of any Federal
or State court, Federal or State regulatory body, administrative agency or other
United States governmental body having jurisdiction over Seller or any of its
properties or assets.
(D) COMPANY COMPLIANCE. The Company represents and warrants that the
Company and its subsidiaries are: (i) in full compliance, to the extent
applicable, with all reporting obligations under either Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; excepting that the Company acknowledges
that it did not timely file its Form 10-K for its fiscal year ended June 30,
1998, and its Form 10-Q for the fiscal quarter ended September 30, 1998, both of
which were subsequently filed on December 3, 1998, (ii) not in violation of any
term or provision of its Certificate of Incorporation or by-laws; (iii) not in
default in the performance or observance of any obligation, agreement or
condition contained in any bond, debenture (excepting for reservation of number
of shares required if all Debentures were to be converted and excepting for
registration of underlying shares as same relates to preexisting debentures),
note or any other evidence of indebtedness or in any mortgage, deed of trust,
indenture or other instrument or agreement to which they are a party, either
singly or jointly, by which it or any of its property is bound or subject.
Furthermore, the Company is not aware of any other facts, which it has not
disclosed which could have a material adverse effect on the business, condition,
(financial or otherwise), operations, earnings, performance, properties or
prospects of the Company and its subsidiaries taken as a whole.
(E) PENDING LITIGATION. Except as otherwise disclosed in Exhibit B,
there is (i) no action, suit or proceeding before or by any court, arbitrator or
governmental body now pending or, to the knowledge of the Company, threatened or
contemplated to which the Company or any of its subsidiaries is or may be a
party or to which the business or property of the Company or any of its
subsidiaries is or may be bound or subject, (ii) no law, statute, rule,
regulation, order or ordinance that has been enacted, adopted or issued by any
Governmental Body or that, to the knowledge of the Company, has been proposed by
any Governmental Body adversely affecting the Company or any of its
subsidiaries, (iii) no injunction, restraining order or order of any nature by a
federal, state or foreign court or Governmental Body of competent jurisdiction
to which the Company or any of its subsidiaries is subject issued that, in the
case of clauses (i), (ii) and (iii) above, (x) is reasonably likely, singly or
in the aggregate, to result in a material adverse effect on the business,
condition, (financial or otherwise), operations, earnings, performance,
properties or prospects of the Company, and its subsidiaries taken as a whole or
(y) would interfere with or adversely affect the issuance of the Shares or would
be reasonably likely to render this Subscription Agreement or the Shares, or any
portion thereof, invalid or unenforceable.
(F) ISSUANCE OF THE Shares. No action has been taken and no law,
statute, rule, regulation, order or ordinance has been enacted, adopted or
issued by any Governmental Body that prevents the issuance of the Shares; no
injunction, restraining order or order of any nature by a federal or state court
of competent jurisdiction has been issued that prevents the issuance of the
Shares in any jurisdiction; and no action, suit or proceeding is pending against
or, to the best knowledge of the Company, threatened against or affecting, the
Company, any of its subsidiaries or, to the best knowledge of the Company,
before any court or arbitrator or any Governmental Body that, if adversely
determined, would prohibit, materially interfere with or adversely affect the
issuance or marketability of the Shares or render the Subscription Agreement or
the Shares, or any portion thereof, invalid or unenforceable.
(g) The Company shall indemnify and hold harmless the Purchaser and
each stockholder, executive, employee, representative, affiliate, officer,
director or control person of the Purchaser, who is or may be a party or is or
may be threatened to be made a party to any threatened, pending or contemplated
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of or arising from any actual or alleged
misrepresentation or misstatement of facts or omission to represent or state
facts made or alleged to have been made by the Company to the Purchaser or
omitted or alleged to have been omitted by the Company, concerning the Purchaser
or the Purchaser's subscription for and purchase of the Shares or the Purchaser
's authority to invest or financial position in connection with the Offering,
including, without limitation, any such misrepresentation, misstatement or
omission contained in this Subscription Agreement, the Questionnaire or any
other document submitted by the Company, against losses, liabilities and
expenses for which the Purchaser, or any stockholder, executive, employee,
representative, affiliate, officer, director or control person of the Purchaser
has not otherwise been reimbursed (including attorneys' fees and disbursements,
judgments, fines and amounts paid in settlement) actually and reasonably
incurred by the Purchaser, or such officer, director, stockholder, executive,
employee, representative, affiliate or control person in connection with such
action, suit or proceeding.
(H) NO CHANGE. Other than filings required by the Blue Sky or federal
securities law and/or NASDAQ Rules and Regulations, no consent, approval or
authorization of or designation, declaration or filing with any governmental or
other regulatory authority on the part of the Company is required in connection
with the valid execution, delivery and performance of this Agreement. Any
required qualification or notification under applicable federal securities laws
and state Blue Sky laws of the offer, sale and issuance of the Shares, has been
obtained on or before the date hereof or will have been obtained within the
allowable period thereafter, and a copy thereof will be forwarded to Counsel for
the Purchaser.
(I) TRUE STATEMENTS. Neither this Agreement nor any of the "Disclosure
Documents", as hereinafter defined, contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements contained herein or therein not misleading in the light of the
circumstances under which such statements are made. There exists no fact or
circumstances which, to the knowledge of the Company, materially and adversely
affects the business, properties or assets, or conditions, financial or
otherwise, of the Company, which has not been set forth in this Subscription
Agreement or disclosed in such documents.
(j) The Purchaser has been advised that the Company has not retained
any independent professionals to review or comment on this Offering or otherwise
protect the interests of the Purchaser. Although the Company has retained its
own counsel, neither such counsel nor any other firm, including Joseph B.
LaRocco, Esq., has acted on behalf of the Purchaser, and the Purchaser should
not rely on the Company's legal counsel or Joseph B. LaRocco, Esq. with respect
to any matters herein described.
(K) PRIOR SHARES ISSUED UNDER OR REGULATION D. In the past nine months
the Company raised $7,081,200 in Regulation D offerings, including redemptions
and rollovers.
(L) CURRENT AUTHORIZED SHARES. As of September 1, 1999 there were
50,000,000 authorized shares of Common Stock of which approximately 14,540,737
shares were issued and outstanding.
(M) DISCLOSURE DOCUMENTS. The Disclosure Documents are all the
documents (other than preliminary materials) that the Company has been required
to file with the SEC from June 30, 1997, to the date hereof, exclusive of such
registration statements as have been filed in accordance with certain
registration rights agreements. As of their respective dates, and/or dates of
amended filings with respect thereto, none of the Disclosure Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and no material event has occurred since the Company's filing on
Form 10-K and 10-K/A for the year ended June 30, 1998 and Form 10-Q for quarters
ended September 30, 1998 and December 31, 1998 which could make any of the
disclosures contained therein (as subsequently amended and/or restated)
misleading The financial statements of the Company included in the Disclosure
Documents have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the audit adjustments) the consolidated financial position
of the Company and its consolidated subsidiaries as at the dates thereof and the
consolidated results of their operations and changes in financial position for
the periods then ended.
(N) INFORMATION SUPPLIED. The information supplied by the Company to
Purchaser in connection with the offering of the Shares does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements, in the light of the circumstances in which they were
made, not misleading. There exists no fact or circumstances which, to the
knowledge of the Company, materially and adversely affects the business,
properties, assets, or conditions, financial or otherwise, of the Company, which
has not been set forth in this Agreement or disclosed in such documents.
(O) NON-CONTRAVENTION. The execution and delivery of this Agreement by
the Company, the issuance of the Shares, and the consummation by the Company of
the other transactions contemplated by this Agreement, do not and will not
conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under, the (i) certificate of
incorporation or by-laws of the Company, (ii) any indenture, mortgage, deed of
trust, or other material agreement or instrument to which the Company is a party
or by which it or any of its properties or assets are bound, (iii) any material
existing applicable law, rule, or regulation or any applicable decree, judgment,
or (iv) order of any court, United States federal or state regulatory body,
administrative agency, or other governmental body having jurisdiction over the
Company or any of its properties or assets, except such conflict, breach or
default which would not have a material adverse effect on the transactions
contemplated herein.
(P) NO DEFAULT. Except as may be set forth in the Company's report on
form 10-K for the fiscal year ending June 30, 1998, the Company is not in
default in the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of trust or
other material instrument or agreement to which it is a party or by which it or
its property is bound, and neither the execution of, nor the delivery by the
Company of, nor the performance by the Company of its obligations under, this
Agreement or the Shares, other than the conversion provision thereof, will
conflict with or result in the breach or violation of any of the terms or
provisions of, or constitute a default or result in the creation or imposition
of any lien or charge on any assets or properties of the Company under, (i) any
material indenture, mortgage, deed of trust or other material agreement
applicable to the Company or instrument to which the Company is a party or by
which it is bound, (ii) any statute applicable to the Company or its property,
(iii) the Certificate of Incorporation or By-Laws of the Company, (iv) any
decree , judgment, order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or its properties, or (v) the
Company's listing agreement, if any, for its Common Stock.
(q) Use of Proceeds. The Company represents that the net proceeds of
this offering will be primarily used for working capital.
(r) The Company hereby represents that it shall be paying consultant a
fee of __________ .
4. ISSUANCE OF SHARES AND REGISTRATION.
(A) LEGEND. Upon registration of the Shares, the Company shall deliver
to the Purchaser, or per the Purchaser's instructions, the shares of Common
Stock, subject to the following restrictive legend:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN INCLUDED IN THE COMPANY'S
REGISTRATION STATEMENT INITIALLY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ON ____________, 1999, AND MAY BE SOLD IN
ACCORDANCE WITH THE COMPANY'S PROSPECTUS DATED ________, 1999, WHICH
FORMS A PART OF SUCH REGISTRATION STATEMENT, OR AN OPINION OF COUNSEL
OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.
(b) Opinion Letter. It shall be the Company's responsibility
to take all necessary actions and to bear all such costs to issue the
Certificate of Common Stock as provided herein, including the responsibility and
cost for delivery of an opinion letter to the transfer agent, if so required.
The person in whose name the certificate of Common Stock is to be registered
shall be treated as a shareholder of record on and after the date of issuance.
Upon surrender of any Share certificates that are to be sold in part, the
Company shall issue to the Purchaser new Share Certificates equal to the unsold
amount.
(c) Once the Common Stock has been registered, if the Common
Stock is not delivered per the written instructions of the Purchaser, within 5
(five) business days after the Company receives the Share certificates from the
Purchaser, then in such event the Company shall pay to Purchaser one-half of one
percent (.50%) in cash, of the purchase price of the Shares delivered to the
Company per each day after the fifth business day following the receipt by the
Company that the Common Stock is not delivered. The Company acknowledges that
its failure to deliver the Common Stock within said five (5) business days will
cause the Initial Investor to suffer damages in an amount that will be difficult
to ascertain. Accordingly, the parties agree that it is appropriate to include
in this Agreement a provision for liquidated damages. The parties acknowledge
and agree that the liquidated damages provision set forth in this section
represents the parties' good faith effort to quantify such damages and, as such,
agree that the form and amount of such liquidated damages are reasonable and
will not constitute a penalty. The payment of liquidated damages shall not
relieve the Company from its obligations to register the Common Stock and
deliver the Common Stock pursuant to the terms of this Agreement and the
Subscription Agreement.
The Company shall make any payments incurred under this Section 4(c) in
immediately available funds within three (3) business days from the date of
issuance of the applicable Common Stock. Nothing herein shall limit a
Purchaser's right to pursue actual damages for the Company's failure to issue
and deliver Common Stock to the Purchaser within five (5) business days after
registration and after the Company receives the Share certificates from the
Purchaser.
(d) The Company shall at all times reserve and have available
all Common Stock necessary for registration of all the Shares purchased by all
Purchasers of the Shares. If, at any time the Company does not have sufficient
authorized but unissued shares of Common Stock available for registration
("Default", the date of such default being referred to herein as the "Default
Date"), the Company shall issue to the Purchaser all of the shares of Common
Stock which are available. The Company shall provide notice of such Default
("Notice of Default") to all Purchasers, within one (1) business day of such
default (with the original delivered by overnight or two day courier).
The Company agrees to pay to all Purchasers of outstanding Shares
payments for a Default ("Default Payments") in the amount of (N/365) x (.24) x
the initial issuance price of the outstanding Shares held by each Purchaser
where N = the number of days from the Default Date to the date (the
"Authorization Date") that the Company authorizes a sufficient number of shares
of Common Stock to effect of all remaining Shares. The Company shall send notice
("Authorization Notice") to each Purchaser of outstanding Shares that additional
shares of Common Stock have been authorized, the Authorization Date and the
amount of Purchaser's accrued Default Payments. The accrued Default shall be
paid in cash which payments shall be made to such Purchaser of outstanding
Shares by the fifth day of the following calendar month following registration
of all the Shares.
5. LIMITS ON AMOUNT OF CONVERSION AND OWNERSHIP.
Notwithstanding the provisions hereof, in no event except with respect
to a conversion pursuant to redemption by the Company if there is (a) a public
announcement that 50% or more of the Company is being acquired, (b) a public
announcement that the Company is being merged, or (c) a change in control, shall
the Purchaser be entitled to own the number of shares of Common Stock
beneficially owned by the Purchaser and its affiliates, and, would result in
beneficial ownership by the Purchaser and its affiliates of more than 4.99% of
the outstanding shares of Common Stock. For purposes of the proviso to be
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), except as otherwise provided in clause (1) of such proviso.
The Purchaser further agrees that if the Purchaser transfers or assigns any of
the Shares to a party who or which would not be considered such an affiliate,
such assignment shall be made subject to the transferee's or assignee's specific
agreement to be bound by the provisions of this Section as if such transferee or
assignee were a signatory to the Subscription Agreement.
6. DELIVERY INSTRUCTIONS.
Prior to or on the Closing Date the Company shall deliver to the Escrow
Agent an opinion letter signed by counsel for the Company in the form attached
hereto as Exhibit C. Also, prior to or on the Closing Date the Company shall
deliver to the Escrow Agent a signed Registration Rights Agreement in the form
attached hereto as Exhibit A.
7. UNDERSTANDINGS.
The undersigned understands, acknowledges and agrees with the Company
as follows:
FOR ALL SUBSCRIBERS:
(a) This Subscription may be rejected, in whole or in part, by the
Company in its sole and absolute discretion at any time before the date set for
closing unless the Company has given notice of acceptance of the undersigned's
subscription by signing this Subscription Agreement.
(b) No U.S. federal or state agency or any agency of any other
jurisdiction has made any finding or determination as to the fairness of the
terms of the Offering for investment nor any recommendation or endorsement of
the Shares.
(c) The representations, warranties and agreements of the undersigned
and the Company contained herein and in any other writing delivered in
connection with the transactions contemplated hereby shall be true and correct
in all material respects on and as of the date of the sale of the Shares, and as
of the date of the conversion and exercise thereof, as if made on and as of such
date and shall survive the execution and delivery of this Subscription Agreement
and the purchase of the Shares.
(d) IN MAKING AN INVESTMENT DECISION, PURCHASERS MUST RELY ON THEIR OWN
EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THE SHARES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF ANY
MEMORANDUM OR THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
(e) The Regulation D Offering is intended to be exempt from
registration under the Securities Act by virtue of Section 4(2) of the
Securities Act and the provisions of Regulation D thereunder, which is in part
dependent upon the truth, completeness and accuracy of the statements made by
the undersigned herein and in the Questionnaire.
(f) It is understood that in order not to jeopardize the Offering's
exempt status under Section 4(2) of the Securities Act and Regulation D, any
transferee may, at a minimum, be required to fulfill the investor suitability
requirements thereunder.
(g) THE SHARES MAY NOT BE TRANSFERRED, RESOLD OR OTHERWISE DISPOSED OF
EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. PURCHASERS SHOULD BE
AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT
FOR AN INDEFINITE PERIOD OF TIME.
(H) NASAA UNIFORM LEGEND
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT
BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT OF 1933 AND THE APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
9. LITIGATION.
(A) FORUM SELECTION AND CONSENT TO JURISDICTION. Any litigation based
thereon, or arising out of, under, or in connection with, this agreement or any
course of conduct, course of dealing, statements (whether oral or written) or
actions of the Company or Purchaser shall be brought and maintained exclusively
in the courts of the State of New York. The Company hereby expressly and
irrevocably submits to the jurisdiction of the state and federal courts of the
State of New York for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation. The Company further irrevocably consents to the
service of process by registered mail, postage prepaid, or by personal service
within or without the State of New York. The Company hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in any inconvenient forum. To the extent that the
Company has or hereafter may acquire any immunity from jurisdiction of any court
or from any legal process (whether through service or notice, attachment prior
to judgment, attachment in aid of execution or otherwise) with respect to itself
or its property, the Company hereby irrevocably waives such immunity in respect
of its obligations under this agreement and the other loan documents.
(B) WAIVER OF JURY TRIAL. The Purchaser and the Company hereby
knowingly, voluntarily and intentionally waive any rights they may have to a
trial by jury in respect of any litigation based hereon, or arising out of,
under, or in connection with, this agreement, or any course of conduct, course
of dealing, statements (whether oral or written) or actions of the Purchaser or
the Company. The Company acknowledges and agrees that it has received full and
sufficient consideration for this provision and that this provision is a
material inducement for the Holder entering into this agreement.
(C) SUBMISSION TO JURISDICTION. Any legal action or proceeding in
connection with this Agreement or the performance hereof may be brought in the
state and federal courts located in the State of New York and the parties hereby
irrevocably submit to the non-exclusive jurisdiction of such courts for the
purpose of any such action or proceeding.
10. MISCELLANEOUS.
(a) All pronouns and any variations thereof used herein shall be deemed
to refer to the masculine, feminine, impersonal, singular or plural, as the
identity of the person or persons may require.
(b) Neither this Subscription Agreement nor any provision hereof shall
be waived, modified, changed, discharged, terminated, revoked or canceled,
except by an instrument in writing signed by the party effecting the same
against whom any change, discharge or termination is sought.
(c) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, addressed: (i) if to the
Company, at SWISSRAY INTERNATIONAL, INC., 200 EAST 32ND Street, Suite 34B, New
York, New York 10017 with a copy by facsimile and mail to Gary B. Wolff, P.C.,
747 Third Avenue, 25th Floor, New York, NY 10017and (ii) if to the undersigned,
at the address for correspondence set forth in the Questionnaire, or at such
other address as may have been specified by written notice given in accordance
with this paragraph 10(c).
(d) This Subscription Agreement shall be enforced, governed and
construed in all respects in accordance with the laws of the State of New York,
as such laws are applied by New York courts to agreements entered into, and to
be performed in, New York by and between residents of New York, and shall be
binding upon the undersigned, the undersigned's heirs, estate, legal
representatives, successors and assigns and shall inure to the benefit of the
Company, its successors and assigns. If any provision of this Subscription
Agreement is invalid or unenforceable under any applicable statue or rule of
law, then such provisions shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any provision hereof that may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
(e) This Subscription Agreement, together with Exhibits A, B, and C
attached hereto and made a part hereof, constitute the entire agreement between
the parties hereto with respect to the subject matter hereof and may be amended
only by a writing executed by both parties hereto. An executed facsimile copy of
the Subscription Agreement shall be effective as an original.
11. SIGNATURE.
The signature of this Subscription Agreement is contained as part of
the applicable Subscription Package, entitled "Signature Page."
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
SWISSRAY INTERNATIONAL, INC.
CORPORATION QUESTIONNAIRE
INVESTOR NAME: _______________
The information contained in this Questionnaire is being furnished in
order to determine whether the undersigned CORPORATION'S Subscription to
purchase the Shares described in the Subscription Agreement may be accepted.
ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED
CONFIDENTIALLY. The undersigned CORPORATION understands, however, that the
Company may present this Questionnaire to such parties as it deems appropriate
if called upon to establish that the proposed offer and sale of the Shares is
exempt from registration under the Securities Act of 1933, as amended. Further,
the undersigned CORPORATION understands that the offering is required to be
reported to the Securities and Exchange Commission, NASDAQ and to various state
securities and "blue sky" regulators.
IN ADDITION TO SIGNING THE SIGNATURE PAGE, THE UNDERSIGNED CORPORATION
MUST COMPLETE FORM W-9 ATTACHED HERETO.
I. PLEASE CHECK EACH OF THE STATEMENTS BELOW THAT APPLIES TO THE CORPORATION.
1. The undersigned CORPORATION: (a) has total assets in excess
of $5,000,000; (b) was not formed for the specific purpose of
acquiring the Shares and (c) has its principal place of
business in ___________.
2. Each of the shareholders of the undersigned CORPORATION is
able to certify that such shareholder meets at least one of
the following three conditions:
(A) the shareholder is a natural person whose individual net worth* or
joint net worth with his or her spouse exceeds $1,000,000; or
(B) the shareholder is a natural person who had an individual income* in
excess of $200,000 in each of 1997 and 1998 and who reasonably expects
an individual income in excess of $200,000 in 1999; or
(C) Each of the shareholders of the undersigned CORPORATION is able to
certify that such shareholder is a natural person who, together with
his or her spouse, has had a joint income in excess of $300,000 in
each of 1997 and 1998 and who reasonably expects a joint income in
excess of $300,000 during 1999; and the undersigned CORPORATION has
its principal place of business in ___________________.
* For purposes of this Questionnaire, the term "net worth" means the excess of
total assets over total liabilities. In determining income, an investor should
add to his or her adjusted gross income any amounts attributable to tax-exempt
income received, losses claimed as a limited partner in any limited partnership,
deductions claimed for depletion, contributions to IRA or Keogh retirement plan,
alimony payments and any amount by which income from long-term capital gains has
been reduced in arriving at adjusted gross income.
3. The undersigned CORPORATION is:
(A) a bank as defined in Section 3(a)(2) of the Securities
Act; or
(B) a savings and loan association or other institution as
defined in Section 3(a)(5)(A) of the Securities Act
whether acting in its individual or fiduciary capacity;
or
(C) a broker or dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934; or
(D) an insurance company as defined in Section 2(13) of the
Securities Act; or
(E) An investment company registered under the Investment
Company Act of 1940 or a business development company
as defined in Section 2(a)(48) of the Investment
Company Act of 1940; or
(F) a small business investment company licensed by the
U.S. Small Business Administration under Section 301
(c) or (d) of the Small Business Investment Act of
1958; or
(G) a private business development company as defined in
Section 202(a) (22) of the Investment Advisors Act of
1940. II. OTHER CERTIFICATIONS.
By signing the Signature Page, the undersigned certifies the following:
(A) That the CORPORATION'S purchase of the Shares will be solely for
the CORPORATION'S own account and not for the account of any
other person or entity; and
(B) that the CORPORATION'S name, address of principal place of
business, place of incorporation and taxpayer identification
number as set forth in this Questionnaire are true, correct and
complete.
III. GENERAL INFORMATION
(A) PROSPECTIVE PURCHASER (THE CORPORATION)
Name:
Principal Place of Business: ________________________________________
- ----------------------------------------------------------------
ADDRESS FOR CORRESPONDENCE (IF DIFFERENT): SAME
(Number and Street)
- ----------------------------------------------------------------
(City) (State) (Zip Code)
Telephone Number:________________________________________________
(Area Code) (Number)
Jurisdiction of Incorporation:_________________________________________
Date of Formation:_________________________________________________
Taypayer Identification Number:______________________________________
Number of Shareholders:____________________________________________
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE
CORPORATION.
Name:___________________________________________________________
Position or Title:__________________________________________________
<PAGE>
SWISSRAY INTERNATIONAL, INC.
CORPORATION SIGNATURE PAGE
YOUR SIGNATURE ON THIS CORPORATION SIGNATURE PAGE EVIDENCES THE
AGREEMENT BY THE PURCHASER TO BE BOUND BY THE QUESTIONNAIRE AND THE SUBSCRIPTION
AGREEMENT.
1. The undersigned hereby represents that (a) the information contained
in the Questionnaire is complete and accurate AND (B) THE PURCHASER WILL NOTIFY
SWISSRAY INTERNATIONAL, INC. immediately if any material change in any of the
information occurs PRIOR TO THE ACCEPTANCE OF THE UNDERSIGNED PURCHASER'S
SUBSCRIPTION AND WILL PROMPTLY SEND SWISSRAY INTERNATIONAL, INC. written
confirmation of such change.
2. The undersigned officer of the Purchaser hereby certifies that he
has read and understands this Subscription Agreement.
3. The undersigned officer of the Purchaser hereby represents and
warrants that he has been duly authorized by all requisite action on the part of
the Corporation to acquire the Shares and sign this Subscription Agreement on
behalf of _______________ and, further, that ____________________ has all
requisite authority to purchase the Shares and enter into this Subscription
Agreement.
- -------------------------- --------------------------
Number of Shares subscribed for Date
_____________________
(Purchaser)
By: _______________________
(Signature)
Name: ____________________
(Please Type or Print)
Title: _____________________
(Please Type or Print)
THE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT.
COMPANY ACCEPTANCE PAGE
This Subscription Agreement accepted
and agreed to this ____ day of September, 1999
SWISSRAY INTERNATIONAL, INC.
BY______________________________________
Ruedi G. Laupper, its Chairman and President
duly authorized
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of September __, 1999,
("this Agreement"), is made by and between SWISSRAY INTERNATIONAL, INC. a New
York corporation (the "Company"), and the person named on the signature page
hereto (the "Initial Investor").
W I T N E S S E T H:
WHEREAS, UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF THE
SUBSCRIPTION AGREEMENT, between the Initial Investor and the Company (the
"Subscription Agreement"), the Company has agreed to issue and sell to the
Initial Investor 1,000,000 shares of the company's common stock, $.01 par value
(the "Shares"), of the Company upon the terms and subject to the conditions set
forth in the Subscription Agreement; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Subscription Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the
Conversion Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agrees as follows:
I. Definitions.
(a) As used in this Agreement, the following terms shall have the
following meaning:
(i) "Closing Date" means the date the funds are wired out per the
Company or its attorney's written instructions, which the parties agree was
September 7, 1999.
(ii) "Investor" means the Initial Investor and any transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(iii) "Register," "Registered" and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iv) "Registrable Securities" means the Shares.
(v) "Registration Statement" means a registration statement of the
Company under the Securities Act.
(b) As used in this Agreement, the term Investor includes (i) each
Investor (as defined above) and (ii) each person who is a permitted transferee
or assignee of the Registrable Securities pursuant to Section 9 of this
Agreement.
(c) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Subscription Agreement.
2. REGISTRATION.
(A) MANDATORY REGISTRATION. The Company hereby grants to the Initial
Investor piggy-back registration rights in the Company's most recent
Registration Statement. The Company shall include in its current Registration
Statement the Registrable Securities. Such Registration Statement shall state
that, in accordance with the Securities Act, it also covers such indeterminate
number of additional shares of Common Stock as may become issuable to prevent
dilution resulting from Stock splits, or stock dividends.
(B) UNDERWRITTEN OFFERING. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Investors acting by majority in interest of the Registrable Securities subject
to such underwritten offering shall have the right to select one legal counsel
to represent their interests, and an investment banker or bankers and manager or
managers to administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company. The
Investors who hold the Registrable Securities to be included in such
underwriting shall pay all underwriting discounts and commissions and other fees
and expenses of such investment banker or bankers and manager or managers so
selected in accordance with this Section 2(b) (other than fees and expenses
relating to registration of Registrable Securities under federal or state
securities laws, which are payable by the Company pursuant to Section 5 hereof)
with respect to their Registrable Securities and the fees and expenses of such
legal counsel so selected by the Investors.
(C) PAYMENT BY THE COMPANY. If the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) hereof is not declared effective within ninety (90) calendar days following
the Closing Date, then the Company shall pay the Initial Investor 2% of the
purchase price paid by the Initial Investor for the Registrable Securities
pursuant to the Subscription Agreement for every thirty day period, or portion
thereof, following the ninety (90) calendar day period until the Registration
Statement is declared effective. Notwithstanding the foregoing, the amounts
payable by the Company pursuant to this provision shall not be payable to the
extent any delay in the effectiveness of the Registration Statement occurs
because of an act of, or a failure to act or to act timely by the Initial
Investor or its counsel. The above damages shall continue until the obligation
is fulfilled and shall be paid within 5 business days after each 30 day period,
or portion thereof, until the Registration Statement is declared effective.
Failure of the Company to make payment within said 5 business days shall be
considered a default.
The Company acknowledges that its failure to have the Registration
Statement declared effective within said ninety (90) calendar day period
following the Closing Date, will cause the Initial Investor to suffer damages in
an amount that will be difficult to ascertain. Accordingly, the parties agree
that it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty. The payment of
liquidated damages shall not relieve the Company from its obligations to
register the Common Stock and deliver the Common Stock pursuant to the terms of
this Agreement and the Subscription Agreement.
3. OBLIGATION OF THE COMPANY. In connection with the registration of
the Registrable Securities, the Company shall do each of the following:
(a) Either include the Registrable Securities in the Company's current
Registration Statement or file an amendment to the Company's current
Registration Statement to include the Registrable Securities, and thereafter use
its best efforts to cause such Registration Statement relating to Registrable
Securities to become effective the earlier of (i) five business days after
notice from the Securities and Exchange Commission that the Registration
Statement may be declared effective, or (b) ninety (90) days after the Closing
Date, and keep the Registration Statement effective at all times until the
earliest (the "Registration Period") of (i) the date that is two years after the
Closing Date (ii) the date when the Investors may sell all Registrable
Securities under Rule 144 or (iii) the date the Investors no longer own any of
the Registrable Securities, which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) Furnish to each Investor whose Registrable Securities are included
in the Registration Statement and its legal counsel identified to the Company,
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such other documents,
as such Investor may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Investor;
(d) Use reasonable efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such other securities or
blue sky laws of such jurisdictions as the Investors who hold a majority in
interest of the Registrable Securities being offered reasonably request and in
which significant volumes of shares of Common Stock are traded, (ii) prepare and
file in those jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof at all times during the
Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualification in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale IN SUCH JURISDICTIONS:
PROVIDED, HOWEVER, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such jurisdiction,
(C) file a general consent to service of process in any such jurisdiction, (D)
provide any undertakings that cause more than nominal expense or burden to the
Company or (E) make any change in its articles of incorporation or by-laws or
any then existing contracts, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders;
(e) As promptly as practicable after becoming aware of such event,
notify each Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes any untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and uses its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request;
(f) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of any notice of effectiveness or any stop order or other suspension of
the effectiveness of the Registration Statement at the earliest possible time;
(g) Use its commercially reasonable efforts, if eligible, either to (i)
cause all the Registrable Securities covered by the Registration Statement to be
listed on a national securities exchange and on each additional national
securities exchange on which securities of the same class or series issued by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii) secure
designation of all the Registrable Securities covered by the Registration
Statement as a National Association of Securities Dealers Automated Quotations
System ("NASDAQ") "Small Capitalization" within the meaning of Rule 11Aa2-1 of
the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the quotation of the Registrable Securities on the The Nasdaq Stock
Market or if, despite the Company's commercially reasonable efforts to satisfy
the preceding clause (i) or (ii), the Company is unsuccessful in doing so, to
secure NASD authorization and quotation for such Registrable Securities on the
over-the-counter bulletin board and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with respect
to such Registrable Securities;
(h) Provide a transfer agent for the Registrable Securities not later
than the effective date of the Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the Registration Statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts as the case may be, as the Investors may reasonably
request and registration in such names as the Investors may request; and, within
five (5) business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) a form of appropriate
instruction and opinion of such counsel acceptable for use for each conversion;
and
(j) Take all other reasonable actions necessary to expedite and
facilitate distribution to the Investor of the Registrable Securities pursuant
to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the registration of
the Registrable Securities, the Investors shall have the following obligations;
(a) It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall timely
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall timely execute such
documents in connection with such registration as the Company may reasonably
request. At least five (5) days prior to the first anticipated filing date of
the Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information") if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration Statement. If at least two (2) business
days prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and, if
so directed by the Company, such investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. EXPENSES OF REGISTRATION. All reasonable expenses, other than
underwriting discounts and commissions incurred in connection with
registrations, filing or qualifications pursuant to Section 3, but including,
without limitations, all registration, listing, and qualifications fees,
printers and accounting fees, the fees and disbursements of counsel for the
Company, shall be borne by the Company.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations of the
Registration Statement or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or any prospectus included therein or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation under the
Securities Act, the Exchange Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). The
Company shall reimburse the Investors, promptly as such expenses are incurred
and are due and payable, for any reasonable legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a) shall not (i) apply to
a Claim arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of any Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(b) hereof; (ii) with respect to any preliminary
prospectus, inure to the benefit of any such person from whom the person
asserting any such Claim purchased the Registrable Securities that are the
subject thereof (or to the benefit of any person controlling such person) if the
untrue statement or omission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or supplemented, if
such prospectus was timely made available by the Company pursuant to Section
3(b) hereof; (iii) be available to the extent such Claim is based on a failure
of the Investor to deliver or cause to be delivered the prospectus made
available by the Company; or (iv) apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Each Investor will
indemnify the Company, its officers, directors and agents (including Counsel)
against any claims arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company, by or on behalf of such Investor, expressly for use in connection with
the preparation of the Registration Statement, subject to such limitations and
conditions as are applicable to the Indemnification provided by the Company to
this Section 6. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.
(b) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel MUTUALLY SATISFACTORY TO THE
INDEMNIFYING PARTY AND THE INDEMNIFIED PERSON OR THE INDEMNIFIED PARTY, AS THE
CASE MAY BE; PROVIDED, HOWEVER, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the reasonable fees and
expenses to be paid by the indemnifying party, if, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person or Indemnified Party and the indemnifying party would
be inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this Section
6, except to the extent that the indemnifying party is prejudiced in its ability
to defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under SECTION 6 TO THE FULLEST EXTENT PERMITTED BY LAW; PROVIDED,
HOWEVER, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation; and (c)
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to use its reasonable best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of in excess of fifty
(50%) percent or more of the Registrable Securities (or all or any portion of
any Debenture of the Company which is convertible into such securities) only if:
(a) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein. In the event of any delay in filing or
effectiveness of the Registration Statement as a result of such assignment, the
Company shall not be liable for any damages arising from such delay, or the
payments set forth in Section 2(c) hereof.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and investors who hold a majority in interest of
the Registrable Securities. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Investor and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company received conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
(by hand, by courier, by telephone line facsimile transmission, receipt
confirmed, or other means) or sent by certified mail, return receipt requested,
properly addressed and with proper postage pre-paid (i) if to the Company,
SWISSRAY International, Inc., 320 West 77th Street, Suite 1A, New York, New York
10024 with copy by fax and mail to Gary B. Wolff, P.C., 747 Third Avenue, 25th
Floor, New York, NY 10017; (ii) if to the Initial Investor, at the address set
forth under its name in the Subscription Agreement, with a copy to its
designated attorney and (iii) if to any other Investor, at such address as such
Investor shall have provided in writing to the Company, or at such other address
as each such party furnishes by notice given in accordance with this Section
11(b), and shall be effective, when personally delivered, upon receipt and, when
so sent by certified mail, four (4) business days after deposit with the United
States Postal Service.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York. Each of the parties consents to the
jurisdiction of the state and federal courts of the State of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based ON FORUM NON COVENIENS, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not effect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement.
(e) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
SWISSRAY INTERNATIONAL, INC.
By: ____________________________________
Name: Ruedi G. Laupper
Title: Chairman and President
PARKDALE LLC
By: ____________________________________
Name:
Title:
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SWISSRAY INTERNATIONAL, INC.
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THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Maximum Offering: $1,500,000
This offering consists of 1,000,000 shares of Swissray International, Inc.
Common Stock
--------------------
SUBSCRIPTION AGREEMENT
-------------------
SUBSCRIPTION PROCEDURES
A TOTAL OF 1,000,000 SHARES (THE "SHARES") OF THE COMMON STOCK OF SWISSRAY
INTERNATIONAL, INC.. (the "Company") are being offered in an aggregate amount
not to exceed $1,500,000. The Shares will be transferable to the extent that any
such transfer is permitted by law. This offering is being made in accordance
with the exemption from registration under Section 4(2) of the Securities Act of
1933, as amended (the "Act") and Rule 506 of Regulation D promulgated under the
Act (the "Offering").
The Investor Questionnaire is designed to enable the Investor to
demonstrate the minimum legal requirements under federal and state securities
laws to purchase the Shares. The Signature Page for the Investor Questionnaire
and the Subscription Agreement contain representations relating to the
subscription.
Also included is an Internal Revenue Service Form W-9: "Request for
Taxpayer Identification Number and Certification" for U.S. citizens or residents
of the U.S. for U.S. federal income tax purposes only. (Foreign investors should
consult their tax advisors regarding the need to complete Internal Revenue
Service Form W-9 and any other forms that may be required).
If you are a foreign person or foreign entity, you may be subject to a
withholding tax equal to 30% of any dividends paid by the Company. In order to
eliminate or reduce such withholding tax you may submit a properly executed
I.R.S. Form 4224 (Exemption from Withholding of Tax on Income Effectively
Connected with the Conduct of a Trade or Business in the United States) or
I.R.S. Form 1001 (Ownership Exemption or Reduced Trade Certificate), claiming
exemption from withholding or eligibility for treaty benefits in the form of a
lower rate of withholding tax on interest or dividends.
Payment must be made by wire transfer as provided below:
Immediately available funds should be sent via wire transfer to the escrow
account stated below and the completed subscription documents should be
forwarded to the Escrow Attorney. Your subscription funds will be deposited into
a non-interest bearing escrow account of Joseph B. LaRocco, Esq., Escrow Agent,
at First Union Bank of Connecticut, Stamford, Connecticut. In the event of a
termination of the Offering or the rejection of this subscription, all
subscription funds will be returned without interest. The wire instructions are
as follows:
First Union Bank of Connecticut
Executive Office
300 Main Street, P. O. Box 700
Stamford, CT 06904-0700
ABA #: 021101108
Swift #: FUNBUS33
Account #: 20000-2072298-4
Acct.Name: Joseph B. LaRocco, Esq. Trustee Account
<PAGE>
SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BE APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
TO: SWISSRAY INTERNATIONAL, INC.
This Subscription Agreement is made between Swissray International,
Inc., ("Company" or "Seller") a New York corporation, and the undersigned
prospective purchaser ("Purchaser") who is subscribing hereby for the Company's
shares of common stock (the "Shares"). The Shares being offered will be
separately transferable, to the extent that any such transfer is permitted by
law. This subscription is submitted to you in accordance with and subject to the
terms and conditions described in this Subscription Agreement together with any
Exhibits thereto, relating to an offering (the "Offering") of up to 1,000,000
Shares. This Offering is comprised of an offering of the Shares to accredited
investors in accordance with the exemption from registration under Section 4(2)
of the Securities Act of 1933, as amended (the "Act"), and Rule 506 of
Regulation D promulgated under the Act ("Regulation D").
1. SUBSCRIPTION.
(a) The undersigned hereby irrevocably subscribes for and agrees to
purchase ___________ Shares for $___________. Joseph B. LaRocco, Esq. shall act
as escrow agent and notify the Purchaser when he has received the signed
Subscription Agreement (and Exhibits thereto), signed Registration Rights
Agreement and Common Stock from the Company, at which time the Purchaser shall
wire the Purchase Price to the escrow agent. The Purchaser entering into this
Subscription Agreement shall pay the Purchase Price for the Shares by delivering
immediately available good funds in United States Dollars to the escrow agent
per the wire instructions set forth on page three (3) of this Subscription
Agreement. Once the escrow agent is in receipt of the Common Stock, and Purchase
Price he shall deliver the Common Stock to the Purchaser and wire the funds,
less consulting fees and escrow fees, to the Company. The closing shall be
deemed to have occurred on the date the Purchase Price less the consulting fee
and escrow fee, is wired to the Company per the Company's written instructions
(the "Closing Date")
(b) Upon receipt by the Company of the requisite payment for the Shares
being purchased the Shares so purchased will be forwarded by the Company to the
Purchaser and the name of such Purchaser will be registered on the Shares
transfer books of the Company as the record owner of such Shares. The Escrow
Agent shall not be liable for any action taken or omitted by him in good faith
and in no event shall the Escrow Agent be liable or responsible except for the
Escrow Agent's own gross negligence or willful misconduct. The Escrow Agent has
made no representations or warranties in connection with this transaction and
has not been involved in the negotiation of the terms of this Agreement or any
matters relative thereto. Seller and Purchaser each agree to indemnify and hold
harmless the Escrow Agent from and with respect to any suits, claims, actions or
liabilities arising in any way out of this transaction including the obligation
to defend any legal action brought which in any way arises out of or is related
to this Agreement. The Escrow Agent is not rendering securities advice to anyone
with respect to this proposed transaction; nor is the Escrow Agent opining on
the compliance of the proposed transaction under applicable securities law.
2. REPRESENTATIONS AND WARRANTIES.
The undersigned hereby represents and warrants to, and agrees with, the
Company as follows:
(a) The undersigned has been furnished with, and has carefully read the
applicable form of Registration Rights Agreement ANNEXED HERETO AS EXHIBIT A
(THE "REGISTRATION RIGHTS AGREEMENT"), AND is familiar with and understands the
terms of the Offering. With respect to tax and other economic considerations
involved in his investment, the undersigned is not relying on the Company. The
undersigned has carefully considered and has, to the extent the undersigned
believes such discussion necessary, discussed with the undersigned's
professional legal, tax, accounting and financial advisors the suitability of an
investment in the Company, by purchasing the Shares, for the undersigned's
particular tax and financial situation and has determined that the investment
being made by the undersigned is a suitable investment for the undersigned.
(b) The undersigned acknowledges that all documents, records, and books
pertaining to this investment which the undersigned has requested includes Form
10-K for the fiscal year ended June 30, 1999 and Forms 10-Q for the three
preceding quarters (the "Disclosure Documents") have been made available for
inspection by the undersigned or the undersigned has access to the Disclosure
Documents.
(c) The undersigned has had a reasonable opportunity to ask questions
of and receive answers from a person or persons acting on behalf of the Company
concerning the Offering and all such questions have been answered to the full
satisfaction of the undersigned.
(d) The undersigned will not sell or otherwise transfer the Shares
without registration under the Act or applicable state securities laws or an
exemption therefrom. The Shares have not been registered under the Act or under
the securities laws of any states. The Shares are to be registered by the
Company pursuant to the terms of the Registration Rights Agreement attached
hereto as Exhibit A and incorporated herein and made a part hereof. The
undersigned represents that the undersigned is purchasing the Shares for the
undersigned's own account, for investment and not with a view to resale or
distribution except in compliance with the Act. The undersigned has not offered
or sold any portion of the Shares being acquired nor does the undersigned have
any present intention of dividing the Shares with others or of selling,
distributing or otherwise disposing of any portion of the Shares either
currently or after the passage of a fixed or determinable period of time or upon
the occurrence or non-occurrence of any predetermined event or circumstance in
violation of the Act. Except as provided in the Registration Rights Agreement,
the Company has no obligation to register the Shares.
(e) The undersigned recognizes that an investment in the Shares
involves substantial risks, including loss of the entire amount of such
investment.
(F) LEGENDS.
(i) The undersigned acknowledges that each
certificate representing the Shares unless registered pursuant
to the Registration Rights Agreement, shall be stamped or
otherwise imprinted with a legend substantially in the
following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE
OFFERED OR SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT (i) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT
(OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE
DISPOSITION OF SECURITIES), OR (iii) IF AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
NOTWITHSTANDING THE FOREGOING, THESE SECURITIES ARE ALSO
SUBJECT TO THE REGISTRATION RIGHTS SET FORTH IN EACH OF THAT
CERTAIN SUBSCRIPTION AGREEMENT AND REGISTRATION RIGHTS
AGREEMENT BY AND BETWEEN THE HOLDER HEREOF AND THE COMPANY, A
COPY OF EACH IS ON FILE AT THE COMPANY'S PRINCIPAL EXECUTIVE
OFFICE.
(ii) The Shares shall contain the following legend
until the effectiveness of Registration Statement:
"No sale, offer to sell or transfer of the securities
represented by this certificate shall be made unless a
registration statement under the Federal Securities Act of
1933, as amended, with respect to such securities is then in
effect or an exemption from the registration requirement of
such Act is then in fact applicable to such securities."
(iii) After the effective date of the Registration
Statement the Shares shall not bear any restrictive legend.
(g) If this Subscription Agreement is executed and delivered on behalf
of a corporation, (i) such corporation has the full legal right and power and
all authority and approval required (a) to execute and deliver, or authorize
execution and delivery of, this Subscription Agreement and all other instruments
(including, without limitation, the Registration Rights Agreement) executed and
delivered by or on behalf of such corporation in connection with the purchase of
the Shares and (b) to purchase and hold the Shares: (ii) the signature of the
party signing on behalf of such corporation is binding upon such corporation;
and (iii) such corporation has not been formed for the specific purpose of
acquiring the Shares, unless each beneficial owner of such entity is qualified
as an accredited investor within the meaning of Rule 501(a) of Regulation D and
has submitted information substantiating such individual qualification.
(h) The undersigned shall indemnify and hold harmless the Company and
each stockholder, executive, employee, representative, affiliate, officer,
director, agent (including Counsel) or control person of the Company, who is or
may be a party or is or may be threatened to be made a party to any threatened,
pending or contemplated action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of or arising from any actual or
alleged misrepresentation or misstatement of facts or omission to represent or
state facts made or alleged to have been made by the undersigned to the Company
or omitted or alleged to have been omitted by the undersigned, concerning the
undersigned or the undersigned's subscription for and purchase of the Shares or
the undersigned's authority to invest or financial position in connection with
the Offering, including, without limitation, any such misrepresentation,
misstatement or omission contained in this Subscription Agreement, the
Questionnaire or any other document submitted by the undersigned, against
losses, liabilities and expenses for which the Company, or any stockholder,
executive, employee, representative, affiliate, officer, director, agent
(including Counsel) or control person of the Company has not otherwise been
reimbursed (including attorneys' fees and disbursements, judgments, fines and
amounts paid in settlement) actually and reasonably incurred by the Company, or
such officer, director stockholder, executive, employee, agent (including
Counsel), representative, affiliate or control person in connection with such
action, suit or proceeding.
(i) The undersigned is not subscribing for the Shares as a result of,
or pursuant to, any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or meeting.
(j) The undersigned or the undersigned's representatives, as the case
may be, has such knowledge and experience in financial, tax and business matters
so as to enable the undersigned to utilize the information made available to the
undersigned in connection with the Offering to evaluate the merits and risks of
an investment in the Shares and to make an informed investment decision with
respect thereto.
(k) The Purchaser is purchasing the Shares for its own account for
investment, and not with a view toward the resale or distribution thereof.
Purchaser is neither an underwriter of, nor a dealer in, the Shares or the
Common Stock issuable upon conversion thereof and is not participating in the
distribution or resale of the Shares.
(l) There has never been represented, guaranteed, or warranted to the
undersigned by any broker, the Company, its officers, directors or agents, or
employees or any other person, expressly or by implication (i) the percentage of
profits and/or amount of or type of consideration, profit or loss to be
realized, if any, as a result of the Company's operations; and (ii) that the
past performance or experience on the part of the management of the Company, or
of any other person, will in any way result in the overall profitable operations
of the Company.
3. SELLER REPRESENTATIONS.
(A) CONCERNING THE SECURITIES.The issuance, sale and delivery of the
Shares have been duly authorized by all required corporate action on the part of
Seller, and when issued, sold and delivered in accordance with the terms hereof
and thereof for the consideration expressed herein and therein, will be duly and
validly issued and enforceable in accordance with their terms, subject to the
laws of bankruptcy and creditors' rights generally.
(B) AUTHORITY TO ENTER AGREEMENT. This Agreement has been duly
authorized, validly executed and delivered on behalf of Seller and is a valid
and binding agreement in accordance with its terms, subject to general
principals of equity and to bankruptcy or other laws affecting the enforcement
of creditors' rights generally.
(C) NON-CONTRAVENTION. The execution and delivery of this
Agreement and the consummation of the issuance of the Shares, and the
transactions contemplated by this Agreement do not and will not conflict with or
result in a breach by Seller of any of the terms or provisions of, or constitute
a default under, the articles of incorporation or by-laws of Seller, or any
indenture, mortgage, deed of trust, or other material agreement or instrument to
which Seller is a party or by which it or any of its properties or assets are
bound, or any existing applicable law, rule, or regulation of the United States
or any State thereof or any applicable decree, judgment, or order of any Federal
or State court, Federal or State regulatory body, administrative agency or other
United States governmental body having jurisdiction over Seller or any of its
properties or assets.
(D) COMPANY COMPLIANCE. The Company represents and warrants that the
Company and its subsidiaries are currently: (i) in full compliance, to the
extent applicable, with all reporting obligations under either Section 13(a) or
15(d) of the Securities Exchange Act of 1934; (ii) not in violation of any term
or provision of its Certificate of Incorporation or by-laws; (iii) not in
default in the performance or observance of any obligation, agreement or
condition contained in any bond, debenture (excepting for reservation of number
of shares required if all Debentures were to be converted and excepting for
registration of underlying shares as same relates to preexisting debentures),
note or any other evidence of indebtedness or in any mortgage, deed of trust,
indenture or other instrument or agreement to which they are a party, either
singly or jointly, by which it or any of its property is bound or subject.
Furthermore, the Company is not aware of any other facts, which it has not
disclosed which could have a material adverse effect on the business, condition,
(financial or otherwise), operations, earnings, performance, properties or
prospects of the Company and its subsidiaries taken as a whole.
(E) PENDING LITIGATION. Except as otherwise disclosed in Exhibit B,
there is (i) no action, suit or proceeding before or by any court, arbitrator or
governmental body now pending or, to the knowledge of the Company, threatened or
contemplated to which the Company or any of its subsidiaries is or may be a
party or to which the business or property of the Company or any of its
subsidiaries is or may be bound or subject, (ii) no law, statute, rule,
regulation, order or ordinance that has been enacted, adopted or issued by any
Governmental Body or that, to the knowledge of the Company, has been proposed by
any Governmental Body adversely affecting the Company or any of its
subsidiaries, (iii) no injunction, restraining order or order of any nature by a
federal, state or foreign court or Governmental Body of competent jurisdiction
to which the Company or any of its subsidiaries is subject issued that, in the
case of clauses (i), (ii) and (iii) above, (x) is reasonably likely, singly or
in the aggregate, to result in a material adverse effect on the business,
condition, (financial or otherwise), operations, earnings, performance,
properties or prospects of the Company, and its subsidiaries taken as a whole or
(y) would interfere with or adversely affect the issuance of the Shares or would
be reasonably likely to render this Subscription Agreement or the Shares, or any
portion thereof, invalid or unenforceable.
(F) ISSUANCE OF THE Shares. No action has been taken and no law,
statute, rule, regulation, order or ordinance has been enacted, adopted or
issued by any Governmental Body that prevents the issuance of the Shares; no
injunction, restraining order or order of any nature by a federal or state court
of competent jurisdiction has been issued that prevents the issuance of the
Shares in any jurisdiction; and no action, suit or proceeding is pending against
or, to the best knowledge of the Company, threatened against or affecting, the
Company, any of its subsidiaries or, to the best knowledge of the Company,
before any court or arbitrator or any Governmental Body that, if adversely
determined, would prohibit, materially interfere with or adversely affect the
issuance or marketability of the Shares or render the Subscription Agreement or
the Shares, or any portion thereof, invalid or unenforceable.
(g) The Company shall indemnify and hold harmless the Purchaser and
each stockholder, executive, employee, representative, affiliate, officer,
director or control person of the Purchaser, who is or may be a party or is or
may be threatened to be made a party to any threatened, pending or contemplated
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of or arising from any actual or alleged
misrepresentation or misstatement of facts or omission to represent or state
facts made or alleged to have been made by the Company to the Purchaser or
omitted or alleged to have been omitted by the Company, concerning the Purchaser
or the Purchaser's subscription for and purchase of the Shares or the Purchaser
's authority to invest or financial position in connection with the Offering,
including, without limitation, any such misrepresentation, misstatement or
omission contained in this Subscription Agreement, the Questionnaire or any
other document submitted by the Company, against losses, liabilities and
expenses for which the Purchaser, or any stockholder, executive, employee,
representative, affiliate, officer, director or control person of the Purchaser
has not otherwise been reimbursed (including attorneys' fees and disbursements,
judgments, fines and amounts paid in settlement) actually and reasonably
incurred by the Purchaser, or such officer, director, stockholder, executive,
employee, representative, affiliate or control person in connection with such
action, suit or proceeding.
(H) NO CHANGE. Other than filings required by the Blue Sky or federal
securities law and/or NASDAQ Rules and Regulations, no consent, approval or
authorization of or designation, declaration or filing with any governmental or
other regulatory authority on the part of the Company is required in connection
with the valid execution, delivery and performance of this Agreement. Any
required qualification or notification under applicable federal securities laws
and state Blue Sky laws of the offer, sale and issuance of the Shares, has been
obtained on or before the date hereof or will have been obtained within the
allowable period thereafter, and a copy thereof will be forwarded to Counsel for
the Purchaser.
(I) TRUE STATEMENTS. Neither this Agreement nor any of the "Disclosure
Documents", as hereinafter defined, contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements contained herein or therein not misleading in the light of the
circumstances under which such statements are made. There exists no fact or
circumstances which, to the knowledge of the Company, materially and adversely
affects the business, properties or assets, or conditions, financial or
otherwise, of the Company, which has not been set forth in this Subscription
Agreement or disclosed in such documents.
(j) The Purchaser has been advised that the Company has not retained
any independent professionals to review or comment on this Offering or otherwise
protect the interests of the Purchaser. Although the Company has retained its
own counsel, neither such counsel nor any other firm, including Joseph B.
LaRocco, Esq., has acted on behalf of the Purchaser, and the Purchaser should
not rely on the Company's legal counsel or Joseph B. LaRocco, Esq. with respect
to any matters herein described.
(K) PRIOR SHARES ISSUED UNDER REGULATION D. In the past nine months the
Company raised $8,081,200 in Regulation D offerings, including redemptions and
rollovers.
(L) CURRENT AUTHORIZED SHARES. As of October 5, 1999 there were
50,000,000 authorized shares of Common Stock of which approximately 14,577,036
shares were issued and outstanding.
(M) DISCLOSURE DOCUMENTS. The Disclosure Documents are all the
documents (other than preliminary materials) that the Company has been required
to file with the SEC from June 30, 1997, to the date hereof, exclusive of such
registration statements as have been filed in accordance with certain
registration rights agreements. As of their respective dates, and/or dates of
amended filings with respect thereto, if any, none of the Disclosure Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and no material event has occurred since the Company's filing on
Form 10-K for the year ended June 30, 1999 which could make any of the
disclosures contained therein (as subsequently amended and/or restated)
misleading The financial statements of the Company included in the Disclosure
Documents have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the audit adjustments) the consolidated financial position
of the Company and its consolidated subsidiaries as at the dates thereof and the
consolidated results of their operations and changes in financial position for
the periods then ended.
(N) INFORMATION SUPPLIED. The information supplied by the Company to
Purchaser in connection with the offering of the Shares does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements, in the light of the circumstances in which they were
made, not misleading. There exists no fact or circumstances which, to the
knowledge of the Company, materially and adversely affects the business,
properties, assets, or conditions, financial or otherwise, of the Company, which
has not been set forth in this Agreement or disclosed in such documents.
(O) NON-CONTRAVENTION. The execution and delivery of this Agreement by
the Company, the issuance of the Shares, and the consummation by the Company of
the other transactions contemplated by this Agreement, do not and will not
conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under, the (i) certificate of
incorporation or by-laws of the Company, (ii) any indenture, mortgage, deed of
trust, or other material agreement or instrument to which the Company is a party
or by which it or any of its properties or assets are bound, (iii) any material
existing applicable law, rule, or regulation or any applicable decree, judgment,
or (iv) order of any court, United States federal or state regulatory body,
administrative agency, or other governmental body having jurisdiction over the
Company or any of its properties or assets, except such conflict, breach or
default which would not have a material adverse effect on the transactions
contemplated herein.
(P) NO DEFAULT. Except as may be set forth in the Company's report on
form 10-K for the fiscal year ending June 30, 1999, the Company is not in
default in the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of trust or
other material instrument or agreement to which it is a party or by which it or
its property is bound, and neither the execution of, nor the delivery by the
Company of, nor the performance by the Company of its obligations under, this
Agreement or the Shares, other than the conversion provision thereof, will
conflict with or result in the breach or violation of any of the terms or
provisions of, or constitute a default or result in the creation or imposition
of any lien or charge on any assets or properties of the Company under, (i) any
material indenture, mortgage, deed of trust or other material agreement
applicable to the Company or instrument to which the Company is a party or by
which it is bound, (ii) any statute applicable to the Company or its property,
(iii) the Certificate of Incorporation or By-Laws of the Company, (iv) any
decree , judgment, order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or its properties, or (v) the
Company's listing agreement, if any, for its Common Stock.
(q) Use of Proceeds. The Company represents that the net proceeds of
this offering will be primarily used for working capital.
(r) The Company hereby represents that it shall be paying
consultant a fee of __________ for services being rendered.
4. ISSUANCE OF SHARES AND REGISTRATION.
(A) LEGEND. Upon registration of the Shares, the Company shall deliver
to the Purchaser, or per the Purchaser's instructions, the shares of Common
Stock, subject to the following restrictive legend:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN INCLUDED IN THE COMPANY'S
REGISTRATION STATEMENT INITIALLY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ON ____________, 1999, AND MAY BE SOLD IN
ACCORDANCE WITH THE COMPANY'S PROSPECTUS DATED ________, 1999, WHICH
FORMS A PART OF SUCH REGISTRATION STATEMENT, OR AN OPINION OF COUNSEL
OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.
(b) Opinion Letter. It shall be the Company's responsibility to take
all necessary actions and to bear all such costs to issue the Certificate of
Common Stock as provided herein, including the responsibility and cost for
delivery of an opinion letter to the transfer agent, if so required. The person
in whose name the certificate of Common Stock is to be registered shall be
treated as a shareholder of record on and after the date of issuance. Upon
surrender of any Share certificates that are to be sold in part, the Company
shall issue to the Purchaser new Share Certificates equal to the unsold amount.
(c) Once the Common Stock has been registered, if the Common Stock is
not delivered per the written instructions of the Purchaser, within 5 (five)
business days after the Company receives the Share certificates from the
Purchaser, then in such event the Company shall pay to Purchaser one-half of one
percent (.50%) in cash, of the purchase price of the Shares delivered to the
Company per each day after the fifth business day following the receipt by the
Company that the Common Stock is not delivered. The Company acknowledges that
its failure to deliver the Common Stock within said five (5) business days will
cause the Initial Investor to suffer damages in an amount that will be difficult
to ascertain. Accordingly, the parties agree that it is appropriate to include
in this Agreement a provision for liquidated damages. The parties acknowledge
and agree that the liquidated damages provision set forth in this section
represents the parties' good faith effort to quantify such damages and, as such,
agree that the form and amount of such liquidated damages are reasonable and
will not constitute a penalty. The payment of liquidated damages shall not
relieve the Company from its obligations to register the Common Stock and
deliver the Common Stock pursuant to the terms of this Subscription Agreement.
The Company shall make any payments incurred under this Section 4(c) in
immediately available funds within three (3) business days from the date of
issuance of the applicable Common Stock. Nothing herein shall limit a
Purchaser's right to pursue actual damages for the Company's failure to issue
and deliver Common Stock to the Purchaser within five (5) business days after
registration and after the Company receives the Share certificates from the
Purchaser.
(d) The Company shall at all times reserve and have available all
Common Stock necessary for registration of all the Shares purchased by all
Purchasers of the Shares. If, at any time the Company does not have sufficient
authorized but unissued shares of Common Stock available for registration
("Default", the date of such default being referred to herein as the "Default
Date"), the Company shall issue to the Purchaser all of the shares of Common
Stock which are available. The Company shall provide notice of such Default
("Notice of Default") to all Purchasers, within one (1) business day of such
default (with the original delivered by overnight or two day courier).
The Company agrees to pay to all Purchasers of outstanding Shares
payments for a Default ("Default Payments") in the amount of (N/365) x (.24) x
the initial issuance price of the outstanding Shares held by each Purchaser
where N = the number of days from the Default Date to the date (the
"Authorization Date") that the Company authorizes a sufficient number of shares
of Common Stock to effect of all remaining Shares. The Company shall send notice
("Authorization Notice") to each Purchaser of outstanding Shares that additional
shares of Common Stock have been authorized, the Authorization Date and the
amount of Purchaser's accrued Default Payments. The accrued Default shall be
paid in cash which payments shall be made to such Purchaser of outstanding
Shares by the fifth day of the following calendar month following registration
of all the Shares.
5. LIMITS ON AMOUNT OF CONVERSION AND OWNERSHIP.
Notwithstanding the provisions hereof, in no event except with respect
to a conversion pursuant to redemption by the Company if there is (a) a public
announcement that 50% or more of the Company is being acquired, (b) a public
announcement that the Company is being merged, or (c) a change in control, shall
the Purchaser be entitled to own the number of shares of Common Stock
beneficially owned by the Purchaser and its affiliates, and, would result in
beneficial ownership by the Purchaser and its affiliates of more than 4.99% of
the outstanding shares of Common Stock. For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), except as otherwise provided in clause (1) of such proviso.
The Purchaser further agrees that if the Purchaser transfers or assigns any of
the Shares to a party who or which would not be considered such an affiliate,
such assignment shall be made subject to the transferee's or assignee's specific
agreement to be bound by the provisions of this Section as if such transferee or
assignee were a signatory to the Subscription Agreement.
6. DELIVERY INSTRUCTIONS.
Prior to or on the Closing Date the Company shall deliver to the Escrow
Agent an opinion letter signed by counsel for the Company in the form attached
hereto as Exhibit C. Also, prior to or on the Closing Date the Company shall
deliver to the Escrow Agent a signed Registration Rights Agreement in the form
attached hereto as Exhibit A.
7. UNDERSTANDINGS.
The undersigned understands, acknowledges and agrees with the Company
as follows:
FOR ALL SUBSCRIBERS:
(a) This Subscription may be rejected, in whole or in part, by the
Company in its sole and absolute discretion at any time before the date set for
closing unless the Company has given notice of acceptance of the undersigned's
subscription by signing this Subscription Agreement.
(b) No U.S. federal or state agency or any agency of any other
jurisdiction has made any finding or determination as to the fairness of the
terms of the Offering for investment nor any recommendation or endorsement of
the Shares.
(c) The representations, warranties and agreements of the undersigned
and the Company contained herein and in any other writing delivered in
connection with the transactions contemplated hereby shall be true and correct
in all material respects on and as of the date of the sale of the Shares, and as
of the date of the conversion and exercise thereof, as if made on and as of such
date and shall survive the execution and delivery of this Subscription Agreement
and the purchase of the Shares.
(d) IN MAKING AN INVESTMENT DECISION, PURCHASERS MUST RELY ON THEIR OWN
EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THE SHARES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF ANY
MEMORANDUM OR THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
(e) The Regulation D Offering is intended to be exempt from
registration under the Securities Act by virtue of Section 4(2) of the
Securities Act and the provisions of Regulation D thereunder, which is in part
dependent upon the truth, completeness and accuracy of the statements made by
the undersigned herein and in the Questionnaire.
(f) It is understood that in order not to jeopardize the Offering's
exempt status under Section 4(2) of the Securities Act and Regulation D, any
transferee may, at a minimum, be required to fulfill the investor suitability
requirements thereunder.
(g) THE SHARES MAY NOT BE TRANSFERRED, RESOLD OR OTHERWISE DISPOSED OF
EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. PURCHASERS SHOULD BE
AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT
FOR AN INDEFINITE PERIOD OF TIME.
(H) NASAA UNIFORM LEGEND
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT
BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT OF 1933 AND THE APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
8. LITIGATION.
(A) FORUM SELECTION AND CONSENT TO JURISDICTION. Any litigation based
thereon, or arising out of, under, or in connection with, this agreement or any
course of conduct, course of dealing, statements (whether oral or written) or
actions of the Company or Purchaser shall be brought and maintained exclusively
in the courts of the State of New York. The Company hereby expressly and
irrevocably submits to the jurisdiction of the state and federal courts of the
State of New York for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation. The Company further irrevocably consents to the
service of process by registered mail, postage prepaid, or by personal service
within or without the State of New York. The Company hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in any inconvenient forum. To the extent that the
Company has or hereafter may acquire any immunity from jurisdiction of any court
or from any legal process (whether through service or notice, attachment prior
to judgment, attachment in aid of execution or otherwise) with respect to itself
or its property, the Company hereby irrevocably waives such immunity in respect
of its obligations under this agreement and the other loan documents.
(B) WAIVER OF JURY TRIAL. The Purchaser and the Company hereby
knowingly, voluntarily and intentionally waive any rights they may have to a
trial by jury in respect of any litigation based hereon, or arising out of,
under, or in connection with, this agreement, or any course of conduct, course
of dealing, statements (whether oral or written) or actions of the Purchaser or
the Company. The Company acknowledges and agrees that it has received full and
sufficient consideration for this provision and that this provision is a
material inducement for the Holder entering into this agreement.
(C) SUBMISSION TO JURISDICTION. Any legal action or proceeding in
connection with this Agreement or the performance hereof may be brought in the
state and federal courts located in the State of New York and the parties hereby
irrevocably submit to the non-exclusive jurisdiction of such courts for the
purpose of any such action or proceeding.
9. MISCELLANEOUS.
(a) All pronouns and any variations thereof used herein shall be deemed
to refer to the masculine, feminine, impersonal, singular or plural, as the
identity of the person or persons may require.
(b) Neither this Subscription Agreement nor any provision hereof shall
be waived, modified, changed, discharged, terminated, revoked or canceled,
except by an instrument in writing signed by the party effecting the same
against whom any change, discharge or termination is sought.
(c) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, addressed: (i) if to the
Company, at SWISSRAY International, Inc., 320 West 77th Street, Suite 1A, New
York, New York 10024 with a copy by facsimile and mail to Gary B. Wolff, P.C.,
747 Third Avenue, 25th Floor, New York, NY 10017and (ii) if to the undersigned,
at the address for correspondence set forth in the Questionnaire, or at such
other address as may have been specified by written notice given in accordance
with this paragraph 9(c).
(d) This Subscription Agreement shall be enforced, governed and
construed in all respects in accordance with the laws of the State of New York,
as such laws are applied by New York courts to agreements entered into, and to
be performed in, New York by and between residents of New York, and shall be
binding upon the undersigned, the undersigned's heirs, estate, legal
representatives, successors and assigns and shall inure to the benefit of the
Company, its successors and assigns. If any provision of this Subscription
Agreement is invalid or unenforceable under any applicable statue or rule of
law, then such provisions shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any provision hereof that may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
(e) This Subscription Agreement, together with Exhibits A, B, and C
attached hereto and made a part hereof, constitute the entire agreement between
the parties hereto with respect to the subject matter hereof and may be amended
only by a writing executed by both parties hereto. An executed facsimile copy of
the Subscription Agreement shall be effective as an original.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
SWISSRAY INTERNATIONAL, INC.
CORPORATION QUESTIONNAIRE
INVESTOR NAME: _______________
The information contained in this Questionnaire is being furnished in
order to determine whether the undersigned CORPORATION'S Subscription to
purchase the Shares described in the Subscription Agreement may be accepted.
ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED
CONFIDENTIALLY. The undersigned CORPORATION understands, however, that the
Company may present this Questionnaire to such parties as it deems appropriate
if called upon to establish that the proposed offer and sale of the Shares is
exempt from registration under the Securities Act of 1933, as amended. Further,
the undersigned CORPORATION understands that the offering is required to be
reported to the Securities and Exchange Commission, NASDAQ and to various state
securities and "blue sky" regulators.
IN ADDITION TO SIGNING THE SIGNATURE PAGE, THE UNDERSIGNED CORPORATION
MUST COMPLETE FORM W-9 ATTACHED HERETO.
I. PLEASE CHECK EACH OF THE STATEMENTS BELOW THAT APPLIES TO THE CORPORATION.
1. The undersigned CORPORATION: (a) has total assets in excess
of $5,000,000; (b) was not formed for the specific purpose of
acquiring the Shares and (c) has its principal place of
business in ___________.
2. Each of the shareholders of the undersigned CORPORATION is
able to certify that such shareholder meets at least one of
the following three conditions:
(A) the shareholder is a natural person whose individual
net worth* or joint net worth with his or her spouse
exceeds $1,000,000; or
(B) the shareholder is a natural person who had an
individual income* in excess of $200,000 in each of
1997 and 1998 and who reasonably expects an individual
income in excess of $200,000 in 1999; or
(C) Each of the shareholders of the undersigned CORPORATION
is able to certify that such shareholder is a natural
person who, together with his or her spouse, has had a
joint income in excess of $300,000 in each of 1997 and
1998 and who reasonably expects a joint income in
excess of $300,000 during 1999; and the undersigned
CORPORATION has its principal place of business in
___________________.
* For purposes of this Questionnaire, the term "net worth" means the excess of
total assets over total liabilities. In determining income, an investor should
add to his or her adjusted gross income any amounts attributable to tax-exempt
income received, losses claimed as a limited partner in any limited partnership,
deductions claimed for depletion, contributions to IRA or Keogh retirement plan,
alimony payments and any amount by which income from long-term capital gains has
been reduced in arriving at adjusted gross income.
3. The undersigned CORPORATION is:
(A) a bank as defined in Section 3(a)(2) of the Securities
Act; or
(B) a savings and loan association or other institution as
defined in Section 3(a)(5)(A) of the Securities Act
whether acting in its individual or fiduciary capacity;
or
(C) a broker or dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934; or
(D) an insurance company as defined in Section 2(13) of the
Securities Act; or
(E) An investment company registered under the Investment
Company Act of 1940 or a business development company
as defined in Section 2(a)(48) of the Investment
Company Act of 1940; or
(F) a small business investment company licensed by the
U.S. Small Business Administration under Section 301
(c) or (d) of the Small Business Investment Act of
1958; or
(G) a private business development company as defined in
Section 202(a) (22) of the Investment Advisors Act of
1940.
II. OTHER CERTIFICATIONS.
By signing the Signature Page, the undersigned certifies the following:
(A) That the CORPORATION'S purchase of the Shares will be solely for the
CORPORATION'S own account and not for the account of any other person
or entity; and
(B) that the CORPORATION'S name, address of principal place of business,
place of incorporation and taxpayer identification number as set forth
in this Questionnaire are true, correct and complete.
III. GENERAL INFORMATION
(A) PROSPECTIVE PURCHASER (THE CORPORATION)
Name:
Principal Place of Business: ________________________________________
- ----------------------------------------------------------------
ADDRESS FOR CORRESPONDENCE (IF DIFFERENT): SAME
(Number and Street)
- ----------------------------------------------------------------
(City) (State) (Zip Code)
Telephone Number:________________________________________________
(Area Code) (Number)
Jurisdiction of Incorporation:_________________________________________
Date of Formation:_________________________________________________
Taypayer Identification Number:______________________________________
Number of Shareholders:____________________________________________
(b) INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE ON BEHALF OF THE
CORPORATION.
Name:___________________________________________________________
Position or
Title:________________________________
SWISSRAY INTERNATIONAL, INC.
CORPORATION SIGNATURE PAGE
YOUR SIGNATURE ON THIS CORPORATION SIGNATURE PAGE EVIDENCES THE
AGREEMENT BY THE PURCHASER TO BE BOUND BY THE QUESTIONNAIRE AND THE SUBSCRIPTION
AGREEMENT.
1. The undersigned hereby represents that (a) the information contained
in the Questionnaire is complete and accurate AND (B) THE PURCHASER WILL NOTIFY
SWISSRAY INTERNATIONAL, INC. immediately if any material change in any of the
information occurs PRIOR TO THE ACCEPTANCE OF THE UNDERSIGNED PURCHASER'S
SUBSCRIPTION AND WILL PROMPTLY SEND SWISSRAY INTERNATIONAL, INC. written
confirmation of such change.
2. The undersigned officer of the Purchaser hereby certifies that he
has read and understands this Subscription Agreement.
3. The undersigned officer of the Purchaser hereby represents and
warrants that he has been duly authorized by all requisite action on the part of
the Corporation to acquire the Shares and sign this Subscription Agreement on
behalf of _______________ and, further, that ____________________ has all
requisite authority to purchase the Shares and enter into this Subscription
Agreement.
- -------------------------- --------------------------
Number of Shares subscribed for Date
_____________________
(Purchaser)
By: _______________________
(Signature)
Name: ____________________
(Please Type or Print)
Title: _____________________
(Please Type or Print)
THE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
UNLESS SUCH SECURITIES ARE INCLUDED IN AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT.
COMPANY ACCEPTANCE PAGE
This Subscription Agreement accepted
and agreed to this ____ day of October, 1999
SWISSRAY INTERNATIONAL, INC.
BY______________________________________
Ruedi G. Laupper, its Chairman and President
duly authorized
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of October __, 1999,
("this Agreement"), is made by and between SWISSRAY INTERNATIONAL, INC. a New
York corporation (the "Company"), and the person named on the signature page
hereto (the "Initial Investor").
W I T N E S S E T H:
WHEREAS, UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF THE
SUBSCRIPTION AGREEMENT, between the Initial Investor and the Company (the
"Subscription Agreement"), the Company has agreed to issue and sell to the
Initial Investor shares of the company's common stock, $.01 par value (the
"Shares"), of the Company upon the terms and subject to the conditions set forth
in the Subscription Agreement; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Subscription Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the
Conversion Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agrees as follows:
I. Definitions.
(a) As used in this Agreement, the following terms shall have the
following meaning:
(i) "Closing Date" means the date the funds are wired to the
Company or its attorney.
(ii) "Investor" means the Initial Investor and any transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(iii) "Register," "Registered" and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iv) "Registrable Securities" means the Shares.
(v) "Registration Statement" means a registration statement of the
Company under the Securities Act.
(b) As used in this Agreement, the term Investor includes (i) each
Investor (as defined above) and (ii) each person who is a permitted transferee
or assignee of the Registrable Securities pursuant to Section 9 of this
Agreement.
(c) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Subscription Agreement.
2. REGISTRATION.
(A) MANDATORY REGISTRATION. The Company hereby grants to the Initial
Investor piggy-back registration rights in the Company's most recent
Registration Statement. The Company shall include in its current Registration
Statement the Registrable Securities. Such Registration Statement shall state
that, in accordance with the Securities Act, it also covers such indeterminate
number of additional shares of Common Stock as may become issuable to prevent
dilution resulting from Stock splits, or stock dividends.
(B) UNDERWRITTEN OFFERING. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Investors acting by majority in interest of the Registrable Securities subject
to such underwritten offering shall have the right to select one legal counsel
to represent their interests, and an investment banker or bankers and manager or
managers to administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company. The
Investors who hold the Registrable Securities to be included in such
underwriting shall pay all underwriting discounts and commissions and other fees
and expenses of such investment banker or bankers and manager or managers so
selected in accordance with this Section 2(b) (other than fees and expenses
relating to registration of Registrable Securities under federal or state
securities laws, which are payable by the Company pursuant to Section 5 hereof)
with respect to their Registrable Securities and the fees and expenses of such
legal counsel so selected by the Investors.
(C) PAYMENT BY THE COMPANY. If the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) hereof is not declared effective within ninety (90) calendar days following
the Closing Date, then the Company shall pay the Initial Investor 2% of the
purchase price paid by the Initial Investor for the Registrable Securities
pursuant to the Subscription Agreement for every thirty day period, or portion
thereof, following the ninety (90) calendar day period until the Registration
Statement is declared effective. Notwithstanding the foregoing, the amounts
payable by the Company pursuant to this provision shall not be payable to the
extent any delay in the effectiveness of the Registration Statement occurs
because of an act of, or a failure to act or to act timely by the Initial
Investor or its counsel. The above damages shall continue until the obligation
is fulfilled and shall be paid within 5 business days after each 30 day period,
or portion thereof, until the Registration Statement is declared effective.
Failure of the Company to make payment within said 5 business days shall be
considered a default.
The Company acknowledges that its failure to have the Registration
Statement declared effective within said ninety (90) calendar day period
following the Closing Date, will cause the Initial Investor to suffer damages in
an amount that will be difficult to ascertain. Accordingly, the parties agree
that it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty. The payment of
liquidated damages shall not relieve the Company from its obligations to
register the Common Stock and deliver the Common Stock pursuant to the terms of
this Agreement and the Subscription Agreement.
3. OBLIGATION OF THE COMPANY. In connection with the registration of
the Registrable Securities, the Company shall do each of the following:
(a) Either include the Registrable Securities in the Company's current
Registration Statement or file an amendment to the Company's current
Registration Statement to include the Registrable Securities, and thereafter use
its best efforts to cause such Registration Statement relating to Registrable
Securities to become effective the earlier of (i) five business days after
notice from the Securities and Exchange Commission that the Registration
Statement may be declared effective, or (b) ninety (90) days after the Closing
Date, and keep the Registration Statement effective at all times until the
earliest (the "Registration Period") of (i) the date that is two years after the
Closing Date (ii) the date when the Investors may sell all Registrable
Securities under Rule 144 or (iii) the date the Investors no longer own any of
the Registrable Securities, which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) Furnish to each Investor whose Registrable Securities are included
in the Registration Statement and its legal counsel identified to the Company,
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such other documents,
as such Investor may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Investor;
(d) Use reasonable efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such other securities or
blue sky laws of such jurisdictions as the Investors who hold a majority in
interest of the Registrable Securities being offered reasonably request and in
which significant volumes of shares of Common Stock are traded, (ii) prepare and
file in those jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof at all times during the
Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualification in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale IN SUCH JURISDICTIONS:
PROVIDED, HOWEVER, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such jurisdiction,
(C) file a general consent to service of process in any such jurisdiction, (D)
provide any undertakings that cause more than nominal expense or burden to the
Company or (E) make any change in its articles of incorporation or by-laws or
any then existing contracts, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
stockholders;
(e) As promptly as practicable after becoming aware of such event,
notify each Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes any untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and uses its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request;
(f) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of any notice of effectiveness or any stop order or other suspension of
the effectiveness of the Registration Statement at the earliest possible time;
(g) Use its commercially reasonable efforts, if eligible, either to (i)
cause all the Registrable Securities covered by the Registration Statement to be
listed on a national securities exchange and on each additional national
securities exchange on which securities of the same class or series issued by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii) secure
designation of all the Registrable Securities covered by the Registration
Statement as a National Association of Securities Dealers Automated Quotations
System ("NASDAQ") "Small Capitalization" within the meaning of Rule 11Aa2-1 of
the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the quotation of the Registrable Securities on the The Nasdaq Stock
Market or if, despite the Company's commercially reasonable efforts to satisfy
the preceding clause (i) or (ii), the Company is unsuccessful in doing so, to
secure NASD authorization and quotation for such Registrable Securities on the
over-the-counter bulletin board and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with respect
to such Registrable Securities;
(h) Provide a transfer agent for the Registrable Securities not later
than the effective date of the Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the Registration Statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts as the case may be, as the Investors may reasonably
request and registration in such names as the Investors may request; and, within
five (5) business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) a form of appropriate
instruction and opinion of such counsel acceptable for use for each conversion;
and
(j) Take all other reasonable actions necessary to expedite and
facilitate distribution to the Investor of the Registrable Securities pursuant
to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the registration of
the Registrable Securities, the Investors shall have the following obligations;
(a) It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall timely
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall timely execute such
documents in connection with such registration as the Company may reasonably
request. At least five (5) days prior to the first anticipated filing date of
the Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Information") if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration Statement. If at least two (2) business
days prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the Company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and, if
so directed by the Company, such investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. EXPENSES OF REGISTRATION. All reasonable expenses, other than
underwriting discounts and commissions incurred in connection with
registrations, filing or qualifications pursuant to Section 3, but including,
without limitations, all registration, listing, and qualifications fees,
printers and accounting fees, the fees and disbursements of counsel for the
Company, shall be borne by the Company.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations of the
Registration Statement or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or any prospectus included therein or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation under the
Securities Act, the Exchange Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). The
Company shall reimburse the Investors, promptly as such expenses are incurred
and are due and payable, for any reasonable legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a) shall not (i) apply to
a Claim arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of any Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(b) hereof; (ii) with respect to any preliminary
prospectus, inure to the benefit of any such person from whom the person
asserting any such Claim purchased the Registrable Securities that are the
subject thereof (or to the benefit of any person controlling such person) if the
untrue statement or omission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or supplemented, if
such prospectus was timely made available by the Company pursuant to Section
3(b) hereof; (iii) be available to the extent such Claim is based on a failure
of the Investor to deliver or cause to be delivered the prospectus made
available by the Company; or (iv) apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Each Investor will
indemnify the Company, its officers, directors and agents (including Counsel)
against any claims arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company, by or on behalf of such Investor, expressly for use in connection with
the preparation of the Registration Statement, subject to such limitations and
conditions as are applicable to the Indemnification provided by the Company to
this Section 6. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.
(b) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel MUTUALLY SATISFACTORY TO THE
INDEMNIFYING PARTY AND THE INDEMNIFIED PERSON OR THE INDEMNIFIED PARTY, AS THE
CASE MAY BE; PROVIDED, HOWEVER, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the reasonable fees and
expenses to be paid by the indemnifying party, if, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person or Indemnified Party and the indemnifying party would
be inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this Section
6, except to the extent that the indemnifying party is prejudiced in its ability
to defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under SECTION 6 TO THE FULLEST EXTENT PERMITTED BY LAW; PROVIDED,
HOWEVER, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation; and (c)
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to use its reasonable best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of in excess of fifty
(50%) percent or more of the Registrable Securities, only if: (a) the Investor
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (b) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (i) the name and
address of such transferee or assignee and (ii) the securities with respect to
which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein. In the event of any delay in filing or
effectiveness of the Registration Statement as a result of such assignment, the
Company shall not be liable for any damages arising from such delay, or the
payments set forth in Section 2(c) hereof.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and investors who hold a majority in interest of
the Registrable Securities. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Investor and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company received conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
(by hand, by courier, by telephone line facsimile transmission, receipt
confirmed, or other means) or sent by certified mail, return receipt requested,
properly addressed and with proper postage pre-paid (i) if to the Company,
SWISSRAY INTERNATIONAL, INC., 320 WEST 77TH Street, Suite 1A, New York, New York
10024 with copy by fax and mail to Gary B. Wolff, P.C., 747 Third Avenue, 25th
Floor, New York, NY 10017; (ii) if to the Initial Investor, at the address set
forth under its name in the Subscription Agreement, with a copy to its
designated attorney and (iii) if to any other Investor, at such address as such
Investor shall have provided in writing to the Company, or at such other address
as each such party furnishes by notice given in accordance with this Section
11(b), and shall be effective, when personally delivered, upon receipt and, when
so sent by certified mail, four (4) business days after deposit with the United
States Postal Service.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York. Each of the parties consents to the
jurisdiction of the state and federal courts of the State of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based ON FORUM NON COVENIENS, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not effect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement.
(e) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
SWISSRAY INTERNATIONAL, INC.
By: ____________________________________
Name: Ruedi G. Laupper
Title: Chairman and President
By: ____________________________________
Name:
Title:
AGREEMENT entered into this 8th day of October, 1999 by and between
SWISSRAY INTERNATIONAL, INC. LOCATED AT 320 WEST 77TH Street, Suite 1A, New
York, New York 10024, Swissray America, Inc. located at 5801 Soundview Drive,
Suite 50, Gig Harbor, Washington 98335 (such two firms hereinafter collectively
referred to as "Swissray") and Display Presentations located at 175 Kennedy
Drive, Hauppauge, New York 11788 (hereinafter "Display").
WHEREAS, Display has warranted and represented that they are in the
business of providing the type of services indicated on their October 4, 1999
six page "quotation" addressed to Swissray, a copy of which is annexed hereto,
made a part hereof and marked Exhibit A; and
WHEREAS, Display warrants and represents that it will complete the
services proposed to be performed and detailed in aforesaid Exhibit A in a
timely manner and for the price indicated; and
WHEREAS, Swissray wishes to utilize Display's services in the manner
set forth in aforesaid Exhibit A for purposes of its establishment of its
Swissray booth at the November 1999 RSNA Convention to be held in Chicago.
Now therefore it is herewith agreed as follows:
1. The aforesaid October 4, 1999 Quotation (Exhibit A) hereinabove
referred to is herewith made a part of this Agreement as if fully set
forth herein and Display agrees to perform in a timely manner each of
the services enumerated therein so as to allow Swissray sufficient time
so as to establish its booth sufficiently in advance of commencement of
the RSNA Convention.
2. Swissray agrees to compensate Display for the services referred to in
Exhibit A and Display agrees to accept such compensation in the manner
set forth herein so that total compensation shall amount to $415,000
(plus applicable sales tax) and shall be paid in the following manner:
a. Fifty percent of such payment ($207,500) shall be made through
the issuance of 65,000 restrictive shares of Swissray common
stock based upon a market valuation of $3.192 bid price as
existed on October 1999 - the time this written Agreement was
orally agreed to;
b. Swissray acknowledges that it currently has a Registration
Statement on file with the Securities and Exchange Commission for
purposes of registering shares of its common stock and warrants.
represents and agrees that it will register the aforementioned
65,000 restrictive shares of its common stock being issued into
Display's name in its next amendment to its current Registration
Statement so that upon effectiveness of such Registration
Statement Display will be in a position, if it so desires, to
sell all or any portion of such 65,000 shares without restrictive
legend appearing thereon; and
c. The balance of $207,500 shall be paid in the following manner:
<PAGE>
i. Twenty percent (i.e. $83,000) shall be payable as
work progresses upon shop viewing of same by Swissray
and acceptance by Swissray that work is progressing
as agreed to; and
ii. The balance of thirty percent (i.e. $124,500)
together with applicable sales tax shall be paid on
the first day of the RSNA Convention.
d. On December 3, 1999, after New York Stock Market closing, the value of
the 65,000 shares as per Paragraph 2, will be evaluated. In case the
total value of these 65,000 shares will not amount to $200,000, the
difference will be paid in additional non-restrictive, registered
Swissray common stock at the stock price as per closing date December
3, 1999.
SWISSRAY INTERNATIONAL, INC.
/Ueli Laupper/
BY:
Ueli Laupper, Vice President
SWISSRAY AMERICA INC.
/Ueli Laupper/
BY:
Ueli Laupper, CEO
DISPLAY PRESENTATIONS
/Michael Fabian/
` BY:
Michael Fabian, Vice President
AGREEMENT entered into this 31st day of October, 1999 by and between
SWISSRAY INTERNATIONAL, INC. LOCATED AT 320 WEST 77TH Street, Suite 1A, New
York, New York 10024, Swissray America, Inc. located at 5801 Soundview Drive,
Suite 50, Gig Harbor, Washington 98335 (such two firms hereinafter collectively
referred to as "Swissray") and Live Marketing located at 1201 North Clark, Suite
201, Chicago, Illinois 60610 (hereinafter "Live").
WHEREAS, Live has warranted and represented that they are in the
business of providing the type of services and products indicated on their
revised October 14, 1999 three page "quotation" addressed to Swissray, a copy of
which is annexed hereto, made a part hereof and marked Exhibit A; and
WHEREAS, Live warrants and represents that it will complete the
services proposed to be performed and detailed in aforesaid Exhibit A in a
timely manner and for the price indicated; and
WHEREAS, Swissray wishes to utilize Live's services in the manner set
forth in aforesaid Exhibit A for utilization by SRMI at the November 1999 RSNA
Convention to be held in Chicago.
Now therefore it is herewith agreed as follows:
1. The aforesaid October 4, 1999 Quotation (Exhibit A) hereinabove
referred to is herewith made a part of this Agreement as if fully set
forth herein and Live agrees to perform in a timely manner each of the
services enumerated therein so as to allow Swissray sufficient time so
as to accomplish in advance of commencement of the RSNA Convention.
2. Swissray agrees to compensate Live for the services referred to in
Exhibit A and Live agrees to accept such compensation in the manner set
forth herein so that total compensation shall amount to $156,180
($15,000 of which is herewith acknowledged as being already paid) and
the balance of $141,180 of which shall be paid in the following manner:
a. $20,000 payable immediately upon execution of this Agreement;
b. $50,590 shall be made through the issuance of 16,864 restrictive
shares of Swissray common stock based upon a market valuation of
$3.00 bid price;
c. Swissray acknowledges that it currently has a Registration
Statement on file with the Securities and Exchange Commission for
purposes of registering shares of its common stock and warrants.
represents and agrees that it will register the aforementioned
16,864 restrictive shares of its common stock being issued into
Live's name in its next amendment to its current Registration
Statement so that upon effectiveness of such Registration
Statement Live will be in a position, if it so desires, to sell
all or any portion of such 16,864 shares without restrictive
legend appearing thereon; and
d. The sum of $36,000 to be paid on November 15, 1999;
e. The balancer of $34,590 shall be paid on November 28, 1999; and
<PAGE>
f. If the bid price for SRMI's common stock at market closing on
December 3, 1999 is less than $3.00 per share, SRMI agrees to
issue such additional restrictive shares to Live so that the
value thereof, based upon the last bid price on December 3,
1999, equals $50,590. Such additional shares, if and when
issued, shall similarly be included in SRMI's Registration
Statement in the same manner as heretofore indicated in
paragraph "c" of this Agreement.
SWISSRAY INTERNATIONAL, INC.
/Ueli Laupper/
BY:
Ueli Laupper, Vice President
SWISSRAY AMERICA INC.
/Ueli Laupper/
BY:
Ueli Laupper, Vice President
LIVE MARKETING
/Arlen Rubin/
` BY:
Arlen Rubin, CFO
36-3004117
Federal Tax I.D. No.
ON LETTERHEAD
Exhibit 23.3(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion of our report dated November 20, 1998 of our audit
of the financial statement of Swissray International, Inc. for the year ended
June 30, 1998 in Swissray International, Inc.'s Amendment No. 3 to Form S-1
filed December 8, 1999.
/S/Feldman Sherb Horowitz & Co., P.C.
FELDMAN SHERB HOROWITZ & CO., P.C.
New York, New York
December 8, 1999
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