UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q/A-3
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: December 31, 1999
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)
320 WEST 77TH Street, Suite 1A, New York, New York 10024
(Address of principal executive offices) (Zip Code)
New York (914) 441 7841 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 FEBRUARY 11, 1999 IS 20,989,669, all of one class of $.01 par value
common stock.
1
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TABLE OF CONTENTS Page
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No. PART I
Item 1. Financial Statements F1-F8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 3-6
Item 3. Quantitative and Qualitative Disclosures About Market Risk 6
PART II
Item 1. Legal Proceedings 7
Item 2. Changes in Securities and Use of Proceeds 7
Item 3. Defaults Upon Senior Securities 7
Item 4. Submission of Matters to a Vote of Security Holders 7
Item 5. Other Information 7
Item 6. Exhibits and Reports on Form 8-K 7
Signatures 8
</TABLE>
2
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SWISSRAY INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
ASSETS
December 31, June 30,
1999 1999
(Unaudited) (Restated)
------------ ----------
CURRENT ASSETS
Cash and cash equivalents ........................ $ 3,714,913 $ 1,281,297
Accounts receivable, net of allowance for doubtful
accounts of $ 202,942 and $ 219,993 .............. 2,586,887 2,448,879
Inventories ...................................... 6,546,931 7,332,401
Prepaid expenses and sundry receivables .......... 706,589 866,804
----------- -----------
TOTAL CURRENT ASSETS ............................. 13,555,320 11,929,381
PROPERTY AND EQUIPMENT ........................... 6,483,486 6,283,040
OTHER ASSETS
Loan receivable .................................. 15,267 15,948
Licensing agreement .............................. 2,855,780 3,104,109
Patents and trademarks ........................... 185,298 199,906
Software develompent costs ....................... 307,799 347,763
Security deposits ................................ 37,449 28,035
Goodwill ......................................... 1,506,341 1,603,007
----------- -----------
TOTAL OTHER ASSETS ............................... 4,907,934 5,298,768
----------- -----------
TOTAL ASSETS ..................................... $24,946,740 $23,511,189
=========== ===========
F 1
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December 31, June 30,
1999 1999
(Unaudited) (Restated)
------------ ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt ............ $ 191,655 $ 247,028
Notes payable - banks ........................... 5,231,860 3,667,159
Notes payable - short-term ...................... 772,767 1,700,000
Loan payable .................................... 117,332 126,006
Accounts payable ................................ 4,459,599 5,422,321
Accrued expenses ................................ 4,693,918 3,003,844
Restructuring ................................... 500,000 500,000
Customer deposits ............................... 227,490 278,507
------------ -----------
TOTAL CURRENT LIABILITIES ....................... 16,194,621 14,944,865
Convertible Debentures, net of conversion benefit 15,292,793 15,305,852
LONG-TERM DEBT, less current maturities ......... 181,141 195,095
COMMON STOCK SUBJECT TO PUT ..................... 319,985 1,819,985
STOCKHOLDERS' EQUITY
Common stock .................................... 206,120 140,062
Additional paid-in capital ...................... 83,765,653 69,028,013
Treasury Stock .................................. (2,040,000) (540,000)
Deferred Compensation ........................... (336,500) (1,282,500)
Accumulated deficit ............................. (86,610,897) (72,492,463)
Accumulated other comprehensive loss ............ (1,706,191) (1,787,735)
Common stock subject to put ..................... (319,985) (1,819,985)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY ...................... (7,041,800) (8,754,608)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...... $ 24,946,740 $ 23,511,189
============ ============
F 2
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SWISSRAY INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Six Months Ended
December 31,
1999 1998
---------- ----------
Unaudited Unaudited
NET SALES .................................. $ 6,957,028 $ 10,101,147
COST OF SALES .............................. 5,332,562 7,969,342
---------- ----------
GROSS PROFIT ............................... 1,624,466 2,131,805
OPERATING EXPENSES
Officers and directors compensation ........ 2,425,390 396,894
Salaries ................................... 2,423,131 2,064,577
Selling .................................... 2,372,488 1,438,281
Research and development ................... 895,072 843,589
General and administrative ................. 921,881 710,818
Other operating expenses ................... 571,720 561,007
Bad debts .................................. 16,001 7,383
Depreciation and amortization .............. 678,396 590,762
---------- ----------
TOTAL OPERATING EXPENSES ................... 10,304,079 6,613,311
---------- ----------
LOSS BEFORE OTHER INCOME (EXPENSES) ........ (8,679,613) (4,481,506)
Other income (expense) ..................... 20,489 (358,995)
Interest expense ........................... (5,368,310) (1,412,696)
---------- ----------
OTHER EXPENSES ............................. (5,347,821) (1,771,691)
---------- ----------
LOSS FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY ITEMS ............... (14,027,434) (6,253,197)
Extraordinary expenses ..................... -- (832,849)
---------- ----------
NET LOSS ................................... $(14,027,434) $ (7,086,046)
========== ==========
LOSS PER COMMON SHARE
Loss from continuing operations ............ $ (0.87) $ (1.35)
Extraordinary items ........................ 0.00 (0.18)
---------- ----------
NET LOSS ................................... $ (0.87) $ (1.54)
========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING ......................... 16,141,977 4,625,626
F 3
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SWISSRAY INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six Months Ended
December 31,
1999 1998
---------- ----------
Unaudited Unaudited
NET LOSS ................................... $(14,027,434) $ (7,086,046)
Other Comprehensive income, net of tax 81,544 20,037
---------- -----------
Comprehensive loss $(13,945,890) $ (7,066,009)
========== ===========
F 4
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SWISSRAY INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended
December 31,
1999 1998
--------- ---------
Unaudited Unaudited
NET SALES .................................. $ 3,077,861 $ 6,444,706
COST OF SALES .............................. $ 2,354,527 5,132,428
--------- ---------
GROSS PROFIT ............................... 723,334 1,312,278
OPERATING EXPENSES
Officers and directors compensation ........ 2,287,577 241,707
Salaries ................................... 1,400,690 979,391
Selling .................................... 1,618,956 925,483
Research and development ................... 429,839 437,552
General and administrative ................. 659,136 260,177
Other operating expenses ................... 486,171 296,518
Bad debts .................................. 16,001 7,383
Depreciation and amortization .............. 356,515 297,013
--------- ---------
TOTAL OPERATING EXPENSES ................... 7,254,885 3,445,224
--------- ---------
LOSS BEFORE OTHER EXPENSES ................. (6,531,551) (2,132,946)
Other expenses ............................. (5,768) (175,628)
Interest expense ........................... (2,946,697) (758,800)
--------- ---------
OTHER EXPENSES ............................. (2,952,465) (934,428)
--------- ---------
LOSS FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY ITEMS ............... (9,484,016) (3,067,374)
Extraordinary expenses ..................... -- (803,182)
--------- ---------
NET LOSS ................................... $ (9,484,016) $ (3,870,556)
========= =========
LOSS PER COMMON SHARE
Loss from continuing operations ............ $ (0.55) $ (0.66)
Extraordinary items ........................ 0.00 (0.17)
--------- ---------
NET LOSS ................................... $ (0.55) $ (0.85)
========= =========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING ......................... 17,144,238 4,625,626
F 5
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SWISSRAY INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Three Months Ended
December 31,
1999 1998
---------- ----------
Unaudited Unaudited
NET LOSS ................................... $ (9,484,016) $ (3,870,556)
Other Comprehensive income (loss), net of tax 41,100 (86,967)
---------- -----------
Comprehensive loss $ (9,442,916) $ (3,957,523)
========== ===========
F 6
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SWISSRAY INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
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Six Months Ended
December 31,
1999 1998
Unaudited Unaudited
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITES
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Net loss .......................................... $(14,027,434) $ (7,086,046)
Adjustment to reconcile net loss to net
cash used by operating activities
Depreciation and amortization .................... 714,399 617,486
Provision for bad debts .......................... (17,050) 2,477
Operating expenses through issuance of
stock options and common stock ................... 355,561 --
Issuance of common stock in lieu of
interest payments ................................ 195,729 --
Interest expense on debt issuance cost and
conversion benefit ............................... 2,331,061 1,297,158
Interest expense on option value per black scholes 1,385,473 --
Amortization of deferred compensation ............ 3,309,375 --
Early extinguishment of debt (gain) ............. -- 832,849
(Increase) decrease in operating assets:
Accounts receivable .............................. (120,957) (1,985,436)
Inventories ...................................... 785,470 (620,696)
Prepaid expenses and sundry receivables .......... 160,216 163,842
Increase (decrease) in operating liabilities:
Accounts payable ................................. (962,723) 1,815,812
Accrued expenses ................................. 490,075 (864,444)
Customers deposits ............................... (51,017) (145,739)
--------- ---------
NET CASH USED BY OPERATING ACTIVITIES ............. (5,451,822) (5,972,737)
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of property and equipment ............ (500,902) (207,223)
Other intangibles ................................ (14,377) --
Security deposits ................................ (9,414) 7,134
Increase in loan receivable ...................... 681 1,974
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES ............. (524,012) (198,115)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings .............. 1,564,701 16,669,384
Expenses related to debentures ................... (13,059) --
Principal payment of short-term borrowings ....... (991,280) (11,188,135)
Principal payment of long-term borrowings ........ (13,954) (72,950)
Issuance of common stock for cash ................ 7,683,474 1,500,000
Issuance of stock options for cash ............... 1,598,024 --
Purchase of Treasury Stock ....................... (1,500,000) (540,000)
Payment to stockholders and officers ............. -- (2,207)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES ......... 8,327,906 6,366,092
--------- ---------
EFFECT OF EXCHANGE RATE ON CASH ................... 81,544 (251,964)
--------- ---------
NET INCREASE (DECREASE) IN CASH ................... 2,433,616 (56,724)
CASH AND CASH EQUIVALENT - beginning of period .... 1,281,297 1,281,552
--------- ---------
CASH AND CASH EQUIVALENTS - end of period ......... $ 3,714,913 $ 1,224,828
========= =========
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F 7
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999
(1)The financial statements included herein have been prepared by the
Registrant, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, 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, 1999.
(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 December 31, 1999 and the results of operations and cash
flows for the interim period presented. Operating results for the six months
ended December 31, 1999 are not necessarily indicative of the results to be
expected for the full year ending June 30, 2000.
(3)INVENTORIES
Inventories are summarized by major classification as follows:
December 31, June 30,
---------------------------
1999 1999
---------- ----------
Raw materials, parts and supplies $3,888,797 $5,558,330
Work in process 1,205,428 1,048,197
Finished goods 1,452,706 725,874
---------- ----------
$6,546,931 $7,332,401
========== ==========
Inventories are stated at lower of cost or market, with cost being determined on
the first-in, first-out (FIFO) method. Inventory cost include material, labor,
and overhead.
(4) Common Stock
In October 1999 the Company issued 875,000 fully vested, nonforfeitable shares
of common stock with a fair market value of $2.475 per share or $2,165,625
(based on the bid price of $2.75 per share on the date of issuance less a 10%
discount for restrictions on the resale of such shares) to officers and/or
directors as additional compensation. Such amount has been expensed and is
included in results of operations.
F 8
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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
ddRMulti System, 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 ddRMulti-System, 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.
3
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RESULTS OF OPERATIONS
(a)THREE-MONTH PERIOD ENDED DECEMBER 31, 1999 COMPARED TO THREE-MONTH
PERIOD ENDED DECEMBER 31, 1998
Net sales amounted to $3,077,861 for the three-month period ended
December 31, 1999, compared to $6,444,706 for the three-month period ended
December 31, 1998, an decrease of $3,366,845, or 52.24% form the three-month
period ended December 31, 1998. The 52.24% decrease in net sales was manly due
to the decrease in conventional x-ray of 71.68% and conventional OEM-Business of
63% whereas sales of ddRMulti-Systems increase of 10.37%.
Gross profit amounted to $723,334 or 23.5% of net sales for the
three-month period ended December 31, 1999, compared to $1,312,278 or 20.36% of
net sales for the three-month period ended December 31, 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 increased to 29.18% of total sales
for the three-month period ended December 31, 1999 from 12.63% for the
three-month period ended December 31, 1998.
Operating expenses were $7,254,885, or 235.7% of net revenues, for the
three-month period ended December 31, 1999, compared to $3,445,224, or 53.46% of
net revenues for the three-month period ended December 31, 1998. The principal
items were officers and directors compensation of $2,287,390 or 74.3% of net
sales for the three-month period ended December 31, 1999 compared to $241,707 or
3.8% of net sales for the three-month period ended December 31, 1998, salaries
(net of officers and directors compensation) of $1,400,690 or 45.5% of net sales
for the three-month period ended December 31, 1999 compared to $979,391 or 15.2%
of net sales for the three-month period ended December 31, 1998 and selling
expenses of $1,618,956 or 52.6% of net sales for the three-month period ended
December 31, 1999 compared to $925,483 or 14.4% of net sales for the three-month
period ended December 31, 1998. Research and development expenses were $429,839
or 13.97% of net sales for the three-month period ended December 31, 1999
compared to $437,552 or 6.79% of net sales for the three-month period ended
December 31, 1998 and general and administrative expenses were $659,136 or 21.4%
of net sales for the three-month period ended December 31, 1999 compared to
$260,177 or 4.0%% of net sales for the three-month period ended December 31,
1998. The increase in officers and directors compensation and salaries is due to
the issuance of common stock to certain employees and directors. The increase in
selling and general administrative expenses is due to the amortization of
deferred compensation for those shares issued to consultants for services
currently being rendered.
Interest expenses increased to $2,946,697 for the three-months ended
December 31, 1999 compared to $758,800 for the three-months ended December 31,
1998. This increase is primarily due the increase of interest expense for
accrual of penalty interest on periodic payments required by terms of financing
agreements and an increase in amortization of Debenture issuance cost and
Conversion Benefit.
Loss on extinguishment of Debt was $-0- for the three-months ended
December 31, 1999 compared to a loss of $803,182 for the three-months ended
December 31, 1998. The extingushment loss resulted from refinancing of
Convertible debentures.
(b)SIX-MONTH PERIOD ENDED DECEMBER 31, 1999 COMPARED TO SIX-MONTH PERIODS
ENDED DECEMBER 31, 1998
RESULTS OF OPERATIONS
Net sales amounted to $6,957,028 for the six-month period ended
December 31, 1999, compared to $10,101,147 for the six-month period ended
December 31, 1998, an decrease of $3,144,119, or 31.13% form the six-month
period ended December 31, 1998. The 31.13% decrease in net sales was manly due
to the decrease in conventional x-ray of 51.55% and conventional OEM-Business of
48.39% whereas sales of ddRMulti-Systems increased 53.6%.
Gross profit amounted to $1,624,466 or 23.35% of net sales for the
six-month period ended December 31, 1999, compared to $2,131,805 or 21.1% of net
sales for the six-month period ended December 31, 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 increased to 31.36% of total sales for
the six-month period ended December 31, 1999 from 14.06% for the sixe-month
period ended December 31, 1998.
Operating expenses were $10,304,079 or 148.1% of net revenues, for the
six-month period ended December 31, 1999, compared to $6,613,311 or 65.5% of net
revenues for the six-month period ended December 31, 1998.
4
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The principal items were officers and directors compensation of $2,425,390 or
34.9% of net sales for the six-month period ended December 31, 1999 compared to
$396,894 or 3.9% of net sales for the six-month period ended December 31, 1998,
salaries (net of officers and directors compensation) of $2,423,131 or 34.8% of
net sales for the six-month period ended December 31, 1999 compared to
$2,064,577 or 20.4% of net sales for the six-month period ended December 31,
1998 and selling expenses of $2,372,488 or 34.1% of net sales for the six-month
period ended December 31, 1999 compared to $1,438,281 or 14.2% of net sales for
the six-month period ended December 31, 1998. Research and development expenses
were $895,072 or 12.9% of net sales for the six-month period ended December 31,
1999 compared to $843,589 or 8.4%% of net sales for the six-month period ended
December 31, 1998 and general and administrative expenses were $921,881 or 13.3%
of net sales for the six-month period ended December 31, 1999 compared to
$710,818 or 7.0%% of net sales for the six-month period ended December 31, 1998.
The increase in officers and directors compensation and salaries is due to the
issuance of common stock to certain employees and directors. The increase in
selling and general administrative expenses is due to the amortization of
deferred compensation for those shares issued to consultants for services
currently being rendered.
Interest expenses increased to $5,368,310 for the six-months ended
December 31, 1999 compared to $1,412,696 for the six-months ended December 31,
1998. This increase is primarily due the increase of interest expense for
accrual of penalty interest on periodic payments required by terms of financing
agreements and an increase amortization of Debenture issuance cost and
Conversion Benefit.
Loss on extinguishment of Debt was $-0- for the six-months ended
December 31, 1999 compared to a loss of $832,849 for the six-months ended
December 31, 1998. The extingushment loss resulted from refinancing of
Convertible debentures.
FINANCIAL CONDITION
December 31, 1999 compared to June 30, 1999
Total assets of the Company on December 31, 1999 increased by
$1,435,551 to $24,946,740 from $23,511,189 on June 30, 1999, primarily due to
the increase in current assets. Current assets increased $1,625,939 to
$13,555,320 on December 31, 1999 from $11,929,381 on June 30, 1999. The increase
in current assets is primarily attributable to the increase in cash and cash
equivalents of 2,433,616 and the increase in accounts receivable of $138,008
which was partially offset by the decrease in inventory of $785,470 and the
decrease in prepaid expenses and sundry receivables of $160,215. Other assets
decreased $390,834 to $4,907,934 on December 31, 1999 from $5,298,768 on June
30, 1999. The decrease is primarily attributable to the amortization of the
licensing agreement, patents & trademark, software development cost and the
goodwill.
On December 31, 1999, the Company had total liabilities of $31,668,555
compared to $30,445,812 on June 30, 1999. On December 31, 1999, current
liabilities were $16,194,621 compared to $14,944,865 on June 30, 1999. Working
capital at December 31, 1999 was $(2,639,301) compared to $(3,015,484) at June
30, 1999.
CASH FLOW AND CAPITAL EXPENDITURES SIX MONTHS PERIOD ENDED DECEMBER 31, 1999
COMPARED TO SIX MONTHS PERIOD ENDED DECEMBER 31, 1998
Cash used for operating activities for the six-months ended December
31, 1999 was $5,451,822 compared to $5,972,737 for the six-months ended December
31, 1998. Cash used for investing activities was $524,012 for the six-months
ended December 31, 1999 compared to $198,115 for the six-months ended December
31, 1998. Cash flow from financing activities for the six-months ended December
31, 1999 was $8,327,906 compared to $6,366,092 for six-months ended December 31,
1998.
5
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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-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 July 9, 1999 the Company entered into a promissory note (contingent
convertible debenture financing) with Southshore Capital, Ltd. for gross
proceeds of $1,100,000 and with a due date of August 23, 1999 with no right to
extend. The debenture contains a 20% discount from market conversion provision
based upon the 10 day average closing bid price for the 10 consecutive dates
preceding conversion date. 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 November
11, 1999. Any Convertible Debentures remaining unconverted at maturity (i.e. 2
years from date of issuance) are subject to mandatory conversion by the Company.
On August 11, 1999 the Company entered into a promissory note
(contingent convertible debenture financing) with terms and conditions
substantially identical to those set forth in the July 9, 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 and (c) the
due date of such note is November 11, 1999 with no right to extend. In all other
respects the material terms and conditions of each of the documents executed
with respect to this transaction are identical to those described in the above
referenced July 9, 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 $1,484,000 (inclusive of interest on aforesaid promissory note) going
into effect. None of these Convertible Debentures have been converted as of
November 11, 1999. Any Convertible Debentures remaining unconverted at maturity
(i.e. 2 years from date of issuance) are subject to mandatory conversion by the
Company.
In September 1999 and October/November 1999 and December 1999 the
Company entered into two separate transactions whereby it sold 1,000,000,
1,000,000 and 666,667 restrictive shares of its common stock respectively at
$1.00 per share in September 1999 and $1.50 per share in October/November 1999
and December 1999.
EFFECT OF CURRENCY ON RESULTS OF OPERATIONS
The result of operations and the financial position of the
Company'ssubsidiaries outside of the United States is reported in the relevant
foreigncurrency (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).
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable
6
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None excepting that certain legal proceedings commenced in July 1998
against SRMI and two of it subsidiaries by Gary J. Durday, Kenneth R. Montler
and Michael E. Harle (hereinafter "Plaintiffs") heretofore summarized in SRMI's
Form 10-K for fiscal year ended June 30, 1999 were subsequently settled in
accordance with the terms and conditions of Settlement Agreement executed on
August 31, 1999 pursuant to which SRMI was required to pay and has since paid
the sum of $1,000,000 to Plaintiffs and is further obligated pursuant to terms
of August 31, 1999 promissory note to pay (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.
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. Maxwell has submitted a motion for Summary
Judgment which Swissray has opposed and as of January 31, 2000 no Court
determination has been made with respect thereto. It is Swissray's management's
intention to contest this matter vigorously.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable
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. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders for fiscal year
ended June 30, 1998 on July 23, 1999, at which time stockholders (i) elected
each of those five persons nominated to serve on the Company's Board of
Directors, (ii) approved the appointment of Feldman Sherb Horowitz & Co., P.C.
as the Company's independent accountants for fiscal year ended June 30, 1999,
(iii) voted in favor of adopting an amendment to its Certificate of
Incorporation so as to authorize the creation of a class of Preferred Stock; and
(iv) approved the proposal to adopt the Company's 1999 Stock Option Plan.
The proposal to re-incorporate the Company in Delaware was not approved
notwithstanding the fact that approximately 74% of all votes cast voted in favor
of such proposal. Such votes only represented approximately 62% of all
outstanding shares while approval of the proposal required an affirmative vote
of at least two-thirds of all outstanding shares.
The number of shares of Common Stock voted at the Annual Meeting
approximated 84% of all issued and outstanding securities as of the record date.
Item 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - NONE-
(b) Reports on Form 8-K - NONE-
7
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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: July 25, 2000
8
