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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________to_________________________
Commission file number 0-26972
Swissray International, Inc.
(Exact name of registrant as specified in its charter)
New York 16-0950197
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
80 Grasslands Road, Elmsford, New York 10523
(Address of principal executive offices) (Zip Code)
New York (914) 345-3700 Switzerland 011 41 41 914 12 00
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of each of the issuer's class of common stock,
as of the latest practicable date.
The number of shares outstanding of each of the registrant's classes of common
stock, as of October 18, 2000 is 23,767,129 shares, all of one class of $.01 par
value common stock.
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TABLE OF CONTENTS
PART I
Item 1. Financial Statements F1-F6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 3-5
Item 3. Quantitative and Qualitative Disclosures About Market Risk 6
PART II
Item 1. Legal Proceedings 6-7
Item 2. Changes in Securities and Use of Proceeds 8
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
2
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SWISSRAY INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
ASSETS
September 30, June 30,
2000 2000
(Unaudited)
----------- -----------
CURRENT ASSETS
Cash and cash equivalents ....................... $ 1,859,298 $ 3,011,183
Restricted cash ................................. 1,385,600 1,385,600
Notes receivable - short-term ................... 300,000 300,000
Accounts receivable, net of allowance for doubtful
accounts of $ 167,139 and $ 170,883 ............. 1,620,090 3,185,399
Inventories ..................................... 4,751,270 4,637,152
Prepaid expenses and sundry receivables ......... 724,004 1,312,167
----------- -----------
Total Current Assets ............................ 10,640,262 13,831,501
----------- -----------
PROPERTY AND EQUIPMENT .......................... 6,454,175 6,300,616
----------- -----------
OTHER ASSETS
Loan receivable affiliates....................... 919,255 768,647
Licensing agreement ............................. 2,483,287 2,607,451
Patents and trademarks .......................... 165,314 171,866
Software develompent costs ...................... 231,231 256,380
Security deposits ............................... 36,640 36,873
Goodwill ........................................ 1,361,347 1,409,680
----------- -----------
TOTAL OTHER ASSETS .............................. 5,197,074 5,250,897
----------- -----------
Total Assets .................................... $22,291,511 $25,383,014
=========== ===========
F 1
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SWISSRAY INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' DEFICIT
September 30, June 30,
2000 2000
-------------------------
(Unaudited)
CURRENT LIABILITIES
Current maturities of long-term debt ............ $ 226,031 $ 229,700
Notes payable - banks ........................... 3,574,792 3,578,339
Notes payable - short-term ...................... 1,290,367 1,352,502
Loan payable .................................... 114,611 119,885
Accounts payable ................................ 3,363,833 4,340,033
Accrued expenses ................................ 4,534,238 10,727,576
Restructuring ................................... 29,830 100,000
Customer deposits ............................... 338,145 785,614
----------- -----------
TOTAL CURRENT LIABILITIES ....................... 13,471,847 21,233,649
----------- -----------
Convertible Debentures, net of conversion benefit 9,838,400 14,067,294
----------- -----------
LONG-TERM DEBT, less current maturities ......... 50,996 83,102
----------- -----------
COMMON STOCK SUBJECT TO PUT ..................... 319,985 319,985
----------- -----------
STOCKHOLDERS' DEFICIT
Convertible preferred shares - Series A ......... 7,000,000 --
Common stock .................................... 279,774 233,999
Additional paid-in capital ...................... 92,679,634 88,207,532
Treasury Stock .................................. (2,040,000) (2,040,000)
Deferred Compensation ........................... (665,599) (998,399)
Accumulated deficit ............................. (97,298,692) (94,130,543)
Accumulated other comprehensive loss ............ (1,024,849) (1,273,620)
Common stock subject to put ..................... (319,985) (319,985)
---------- -----------
TOTAL STOCKHOLDERS' DEFICIT ..................... (1,389,717) (10,321,016)
---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT ..... $ 22,291,511 $ 25,383,014
============ ===========
F 2
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SWISSRAY INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended
September 30,
2000 1999
(Unaudited) (Unaudited)
Restated
------------ ------------
NET SALES ......................... $ 4,928,825 $ 3,879,167
COST OF SALES ..................... 3,738,514 2,978,034
------------ ------------
GROSS PROFIT ...................... 1,190,311 901,133
------------ ------------
OPERATING EXPENSES
Officers and directors compensation 144,992 137,813
Salaries .......................... 991,353 1,022,441
Selling ........................... 840,963 753,532
Research and development .......... 611,647 465,232
General and administrative ........ 185,617 262,748
Other operating expenses .......... 78,864 85,548
Depreciation and amortization ..... 329,267 321,881
------------ ------------
TOTAL OPERATING EXPENSES .......... 3,182,703 3,049,195
------------ ------------
LOSS BEFORE OTHER INCOME (EXPENSES) (1,992,392) (2,148,062)
Other income....................... 77,282 26,258
Interest expense .................. (1,145,589) (2,421,613)
------------ ------------
OTHER EXPENSES..................... (1,068,307) (2,395,355)
------------ ------------
NET LOSS .......................... (3,060,699) (4,543,417)
Imputed preferred stock dividends.. (107,450) --
------------ -------------
Loss available to common share .... $ (3,168,149) $ (4,543,417)
============ =============
NET LOSS PER COMMON SHARE $ (0.12) $ (0.31)
============ =============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING ................ 26,042,877 14,786,198
------------ ------------
F 3
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SWISSRAY INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Three Months Ended
September 30,
2000 1999
---------- ----------
(Unaudited) (Unaudited)
Restated
Net Loss ................................... $ (3,060,699) $ (4,543,417)
Other Comprehensive income, net of tax 248,771 40,444
---------- -----------
Comprehensive loss $ (2,811,928) $ (4,502,973)
========== ===========
F 4
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SWISSRAY INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
September 30,
2000 1999
(Unaudited) (Unaudited)
Restated
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITES
Net loss ....................................... $ (3,060,699) $ (4,543,417)
Adjustment to reconcile net loss to net
cash used by operating activities
Depreciation and amortization ................ 346,498 332,865
Provision for bad debts ...................... (3,744) (7,827)
Operating expenses through issuance of stock
options and common stock to be issued...... 60,000 --
Issuance of common stock in lieu of
interest payments ......................... 954,688 34,244
Interest expense on Debt issuance cost and
conversion benefit ......................... -- 2,111,476
Amortization of deferred compensation ........ 332,800 427,500
(Increase) decrease in operating assets:
Accounts receivable .......................... 1,569,053 (136,921)
Inventories .................................. (114,118) 91,666
Prepaid expenses and sundry receivables ...... 588,163 117,007
Increase (decrease) in operating liabilities:
Accounts payable ............................. (976,200) (103,378)
Accrued expenses ............................. 306,662 638,593
Restructuring ................................ (70,170) --
Customers deposits ........................... (447,469) (145,520)
------------ ------------
NET CASH USED BY OPERATING ACTIVITIES .......... (514,536) (1,183,712)
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of property and equipment ........ (295,859) (43,585)
Capitalized computer software ................ -- (7,007)
Security deposits ............................ 233 1,410
Repayment of loan receivable ................. -- (1,039)
------------ ------------
NET CASH USED BY INVESTING ACTIVITIES .......... (295,626) (50,221)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings .......... (3,547) 22,305,507
Costs related to debentures conversions.... (333,155) --
Principal payment of short-term borrowings ... (71,078) (21,415,142)
Principal payment of long-term borrowings .... (32,106) 1,216
Loan receivable affiliates ................... (150,608) --
Issuance of common stock for cash ............ -- 2,748,827
Issuance of stock options for cash ........... -- 6,774
Purchase of treasury stock ................... -- (1,500,000)
------------ ------------
CASH PROVIDED (USED)BY FINANCING ACTIVITIES .... (590,494) 2,147,182
------------ ------------
EFFECT OF EXCHANGE RATE ON CASH ................ 248,771 (22,597)
------------ ------------
NET INCREASE (DECREASE)IN CASH ................. (1,151,885) 890,652
CASH AND CASH EQUIVALENTS - beginning of period 3,011,183 1,281,297
------------ ------------
CASH AND CASH EQUIVALENTS - end of period ...... $ 1,859,298 $ 2,171,949
============ ============
F 5
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000
(1)The accompanying financial statements are unaudited. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted, although the Registrant believes that the disclosures are
adequate to make the information presented not misleading. It is suggested that
these condensed consolidated financial statements be read in conjunction with
the financial statements and notes thereto included in the Registrant's annual
report on Form 10-K for the fiscal year ended June 30, 2000.
(2)In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments, consisting of only a
normal and recurring nature, necessary to present fairly the financial position
of the Registrant as of September 30, 2000 and the results of operations and
cash flows for the interim period presented. Operating results for the three
months ended September 30, 2000 are not necessarily indicative of the results to
be expected for the full year ending June 30, 2001.
(3)INVENTORIES
Inventories are summarized by major classification as follows:
September 30, June 30,
---------------------------
2000 2000
---------- ----------
Raw materials, parts and supplies $3,707,279 $2,682,558
Work in process 386,335 1,295,575
Finished goods 657,656 659,019
---------- ----------
$4,751,270 $4,637,152
========== ==========
Inventories are stated at lower of cost or market, with cost being determined on
the first-in, first-out (FIFO) method. Inventory cost includes material, labor,
and overhead.
(4) Preferred Stock - During the quarter ended September 30, 2000, the
Company issued 7,000 shares of Series A Preferred Stock ("Series A"). These
shares were issued in accordance with terms and provisions of liquidated damage
provisions contained in underlying financing documents.
(5) Mandatory Conversion - In August 2000, in compliance with the
mandatory conversion requirements contained in the August 31, 1998 debtenture
agreement, the Company converted $3,930,594 principal amount of convertible
debentures plus accrued interest of $393,059 into 4,323,653 shares of the
Company's common stock.
F 6
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
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.
CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Statements in this discussion which are not historical facts may be
considered forward looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, including estimated cost savings to
be realized from restructuring activities and estimated proceeds from and timing
of facility sales. The words "believe," "expect," "anticipate," "estimate", and
similar expressions identify forward looking statements. Any forward looking
statements involve risks and uncertainties that could cause actual events or
results to differ, perhaps materially, from the events or results described in
the forward looking statements. Readers are cautioned not to place undue
reliance on these forward looking statements, which speak only as of their
dates. The Company undertakes no obligation to publicly update or revise any
forward looking statements, whether as a result of new information, future
events or otherwise. Risks associated with the Company's forward looking
statements include, but are not limited to, risks associated with the Company's
history of losses and uncertain profitability, need for market acceptance of the
ddR-Systems, reliance on a single product, reliance on large customers, risks
associated with the Company's international operations, currency fluctuations,
the risk of new and different legal and regulatory requirements, governmental
approvals, tariffs and trade barriers, risks associated with competition and
technological innovation by competitors, dependence on patents and proprietary
technology, general economic conditions and conditions in the healthcare
industry, reliance on key management, limited manufacturing history with respect
to the ddR-Systems, dependence on sole source suppliers, future capital needs
and uncertainty of additional financing, potential recalls and product
liability, dilution, effects of outstanding convertible debentures, limited
public market, liquidity, possible volatility of stock price, recently adopted
new listing standards for NASDAQ securities and environmental matters.
The following discussion and analysis should be read in conjunction
with the Consolidated Financial Statements, related notes and other information
included in this quarterly report on Form 10-Q.
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2000 COMPARED TO THREE-MONTH PERIOD ENDED
SEPTEMBER 30, 1999
RESULTS OF OPERATIONS
Net sales amounted to $4,928,825 for the three-month period ended
September 30, 2000, compared to $3,879,167 for the three-month period ended
September 30, 1999. The 27.06% increase in net sales was mainly due to the sale
of ddR-Systems increasing by 150.8% or 1,936,533. This significant increase was
slightly offset by a decrase in conventional x-ray of 83.5% ($420,104) and
conventional OEM-Business of 58.2% ($887,337). The decrease in conventional
x-ray and conventional OEM-Business is due to the Company's conscious effort of
promoting sales of ddR-Systems with a corresponding decline of interest in sales
of conventional x-ray and conventional OEM-Business.
3
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Gross profit amounted to $1,190,311 or 24.2% of net sales for the
three-month period ended September 30, 2000, compared to $901,130 or 23.2% of
net sales for the three-month period ended September 30, 1999. The increase in
gross profit as a percentage of net revenues is attributable to the fact that
the percentage of sales of ddR-Systems to total sales increased to 65.3% for the
three-month period ended September 30, 2000 from 33.1% for the three-month
period ended September 30, 1999.
Operating expenses were $3,182,703, or 64.6% of net revenues, for the
three-month period ended September 30, 2000, compared to $3,049,194, or 78.6% of
net revenues for the three-month period ended September 30, 1999. The principal
items were salaries (net of officers and directors compensation) of $991,353 or
20.1% of net sales for the three-month period ended September 30, 2000 compared
to $1,022,441 or 26.4% of net sales for the three-month period ended September
30, 1999 and selling expenses of $840,963 or 17.1% of net sales for the
three-month period ended September 30, 2000 compared to $753,532 or 19.4% of net
sales for the three-month period ended September 30, 1999. Research and
development expenses were $611,647 or 12.4% of net sales for the three-month
period ended September 30, 2000 compared to $465,232 or 12.0% of net sales for
the three-month period ended September 30, 1999.
Interest expense decreased to $1,145,589 for the three months ended
September 30, 2000 compared to $2,421,613 for the three months ended September
30, 1999. This decrease is primarily due to the decrease of interest expense for
accrual of penalty interest on periodic payments required by terms of financing
agreements and an decrease in amortization of Debenture issuance cost and
Conversion Benefit.
FINANCIAL CONDITION
September 30, 2000 compared to June 30, 2000
Total assets of the Company on September 30, 2000 decreased by
$3,091,503 to $22,291,511 from $25,383,014 on June 30, 2000, primarily due to
the decrease of Current Assets. Current Assets decreased $3,191,239 to
$10,640,262 on September 30, 2000 from $13,831,501 on June 30, 2000. The
decrease in current assets is attributable to the decrease of Cash and cash
equivalents of $1,151,885, the decrease of Accounts receivable of $1,565,309 and
the decrease in Prepaid expenses and sundry receivables of $588,163 slightly
offset by the increase in inventory of $114,118. Other Assets decreased $53,823
to $5,197,074 on September 30, 2000 from $5,250,897 on June 30, 2000. The
decrease is primarily attributable to the amortization of the licensing
agreement, patents & trademark, software development cost and the goodwill.
4
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On September 30, 2000, the Company had total liabilities of $23,681,228
compared to $35,704,030 on June 30, 2000. On September 30, 2000, current
liabilities were $13,471,847 compared to $21,233,649 on June 30, 2000. Working
capital at September 30, 2000 was $(2,831,585) compared to $(7,402,148) at June
30, 2000.
CASH FLOW AND CAPITAL EXPENDITURES THREE MONTH PERIOD ENDED SEPTEMBER 30, 2000
COMPARED TO THREE MONTH PERIOD ENDED SEPTEMBER 30, 1999.
Cash used for operating activities for the three months ended September
30, 2000 was $514,536 compared to $1,183,712 for the three months ended
September 30, 1999. Cash used for investing activities was $295,626 for the
three months ended September 30, 2000 compared to $50,221 for the three months
ended September 30, 1999. Cash used from financing activities for the three
months ended September 30, 2000 was $590,494 compared to Cash flow of $2,147,182
for three months ended September 30, 1999.
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.
However, the availability of a sufficient future cash flow will depend
to a significant extent on the marketability of the Company's ddR-Systems.
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.
Reference is herewith made to the Company's Form 10-K for fiscal year
ended June 30, 2000 and in particular to the Mangagement's Discussion and
Analysis section thereof which summarizes most recent financing activities.
The Company has not engaged in any additional financing activities
during the quarter ended September 30, 2000.
EFFECT OF CURRENCY ON RESULTS OF OPERATIONS
The result of operations and the financial position of the Company's
subsidiaries outside of the United States is 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 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).
5
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
A. 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 0019
6 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 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.
6
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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.
B. 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 judgment 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
counterclaims seeking (amongst other matters) dismissal of the complaint and
recision of the settlement agreement. An order was made on July 24, 2000
granting to Maxwell partial summary judgement on portion of his claim for
approximately $320,000 plus interest. The court is presently considering
Maxwell's application for judgement on the balance of his claim and Swissray's
application for dismissal of that portion of plaintiff's claim.
7
<PAGE>
Item 2. CHANGES IN SECURITIES
At the Company's 1998 Annual Meeting of Stockholders held on July 23,
1999, stockholders approved a proposal and adopted an amendment to the Company's
Certificate of Incorporation so as to authorize the creation of a class of
Preferred Stock. The amendment to the Company's Certificate of Incorporation
reflecting such stockholder adoption was filed with the New York State Secretary
of State on July 28, 1999. Approval of such proposal provided for the issuance
of up to 1,000,000 shares of Preferred Stock, par value $.01 per share in one or
more series with the designations, preferences, conversion rights, cumulative,
relative, participating, or other rights,including voting rights,
qualifications, limitations or restrictions thereof of the Preferred Stock to be
determined by the Company's Board of Directors in their sole discretion, with no
further authorization by security holders being required for the creation and
issuance thereof.
Subsequent thereto and in accordance with the above, the Company's
Board created a class of Series A Preferred Stock authorizing the issuance of up
to 7,000 shares of A Preferred Stock. The Series A Preferred Shares were
authorized and created for purposes of issuance to certain financing
participants and/or their assignees in accordance with terms and provisions of
liquidated damage provisions contained in underlying financing documents; such
financing documents being heretofore filed with the SEC as exhibits (principally
debenture agreements) may be obtained from the Commission's web site. The
address of such site is http:\\www.sec.gov.
With respect to the designations, preferences and other rights or
limitations thereon as are contained in the Series A Preferred Stock, reference
is herewith made to the Company's Certificate of Amendment to its Certificate of
Incorporation as filed with the New York State Secretary of State on October 24,
2000, a copy of which is attached hereto and marked as an exhibit in accordance
with Item 6(a) hereof entitled "Exhibits"..
Item 3. DEFAULTS UPON SENIOR SECURITIES
None excepting for such penalties as have accrued with respect to
certain conditions and requirements contained in outstanding convertible
debentures pursuant to which the Company was required, in accordance with
related registration rights agreement, to file a Registration Statement by a
specific date and to have same declared effective (so as to register shares of
common stock underlying debentures) by a specified and agreed to date - which if
not timely accomplished results in commencement of penalty provisions.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders for fiscal year
ended June 30, 1999 on July 12, 2000. With proxies being received for in excess
of 95% of all shares entitled to vote, stockholders elected each of the 5
nominees to the Company's Board of Directors by an overwhelming majority
approximating in excess of 98% of all votes cast.
Stockholders also overwhelmingly approved the appointment of Feldman
Sherb & Co., P.C. as independent auditors for fiscal year ended June 30, 2000
with such firm similarly receiving in excess of 98% of all votes cast.
With respect to the shareholder ratification as related to Proposals 3
and 4 - in excess of 96% of all votes cast, excluding abstentions, voted in
favor of ratifying the issuance of shares issued to the Company's President
while in excess of 95% of all votes cast, excluding abstentions, voted in favor
of issuance of certain other shares of Company common stock to certain of its
employees. In each instance those persons who had received shares of Company
common stock for which shareholder ratification was sought abstained from
voting.
Stockholders also overwhelmingly approved (a) the proposal to adopt the
Company's 2000 Stock Option Plan and (b) the proposal to increase authorized
common shares from 50,000,000 to 100,000,000. In each instance votes for such
approvals were in excess of 96% of all votes cast (excluding abstentions).
The Company currently intends to hold its Annual Meeting of
Stockholders for fiscal year ended June 30, 2000 on November 30, 2000 at the
Hyatt Regency McCormick Place Hotel in Chicago, Illinois.
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Item 5. OTHER INFORMATION
Not applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this report:
EXHIBIT DESCRIPTION
3.4 Amendment to Registrant's Certificate of Incorporation,
dated October 26, 2000
(b) Reports on Form 8-K None
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SWISSRAY INTERNATIONAL, INC.
By:\S\Ruedi G. Laupper
Ruedi G. Laupper, Chairman of the
Board of Directors, President and
Chief Executive Officer
Date: November 6, 2000
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