<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 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 No.)
80 Grasslands Road, Elmsford, New York, New York 10523
(Address of Principal Executive Office) (Zip Code)
United States - 914-345-3700 Switzerland - 011 41 41 914 12 00
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS)
Indicate by check mark whether the Registrant; (1) has filed all reports
required to be filed by Section 13 or 15(d) of the 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 past 90 days.
Yes xx No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The number of shares outstanding of each of the Registrant's classes of Common
Stock, as of September 12, 2000 is 23,667,129 shares (1), all of one class of
common stock, $.01 par value. Of this number a total of 14,216,791 shares having
an aggregate market value of $27,580,574, based on the closing price of the
Registrant's common stock of $1.94 on September 12, 2000 as quoted on the
Electronic Over-the-Counter Bulletin Board ("OTC"), were held by non-affiliates*
of the Registrant.
-1-
<PAGE>
* Affiliates for the purpose of this item refers to the Registrant's officers
and directors and/or any persons or firms (excluding those brokerage firms
and/or clearing houses and/or depository companies holding Registrant's
securities as record holders only for their respective clienteles' beneficial
interest) owning 5% or more of the Registrant's Common Stock, both of record and
beneficially.
(1) Unless otherwise indicated throughout this Form 10-K, all references to
number of shares, price per share and data of a similar and related nature
retroactively reflect and take into consideration a 1 for 10 reverse stock
split, as effective October 1, 1998.
APPLICABLE ONLY TO
REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes ___ No ___
Not Applicable
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the Registant's classes of
common stock, as of the latest practicable date: 23,667,129 shares as of
September 12, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933.
None excepting for the incorporation by reference of the Company's Form S-1
Registration Statement (under File Number 333-59829 as declared effective August
14, 2000) and in particular those sections therein entitled "Risk Factors"
(which is herewith incorporated by reference to Part I, Item 1, of this Form
10-K) and "Market Prices and Dividend Policy" subsection entitled "Nasdaq
Delisting" (which is herewith incorporated by reference into Part II, Item 5, of
this Form 10-K).
-2-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements have been prepared in accordance
with the requirements of Regulation S-X and supplementary financial information
included herein, if any, has been prepared in accordance with Item 301 of
Regulation S-K.
INDEX TO FINANCIAL STATEMENTS
Page
Audited Financial Statements for Fiscal Years Ended
June 30, 2000, 1999 and 1998:
Independent Auditors' Report F-1
Consolidated Balance Sheets at June 30, 2000 and 1999 F-2-3
Consolidated Statements of Operations for the years ended
June 30, 2000, 1999 and 1998 F-4
Consolidated Statements of Cash flows for the years ended
June 30, 2000, 1999 and 1998 F-5-6
Consolidated Statements of Stockholders Equity for the years
ended June 30, 2000, 1999 and 1998 F-7-8
Notes to Consolidated Financial Statements F-9-23
-35-
<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, 2000 and 1999 and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the three years then ended. These 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 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, 2000 and 1999, and the results of its operations
changes in stockholders' equity and cash flows for each of the three years then
ended in conformity with generally accepted accounting principles.
/s/ Feldman Sherb & Co., P.C.
Feldman Sherb & Co., P.C.
Certified Public Accountants
New York, New York
August 4, 2000
F-1
<PAGE>
SWISSRAY INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
------------------------------
2000 1999
(Restated)
------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,011,183 $ 1,281,297
Restricted cash 1,385,600 -
Notes receivable - short-term 300,000 -
Accounts receivable, net of allowance for doubtful
accounts of $170,883 and $219,993 3,185,399 2,448,879
Inventories 4,637,152 7,332,401
Prepaid expenses and sundry receivables 1,312,167 866,804
------------------------------
TOTAL CURRENT ASSETS 13,831,501 11,929,381
------------------------------
PROPERTY AND EQUIPMENT 6,300,616 6,283,040
------------------------------
OTHER ASSETS
Loan receivable - 15,948
Loan receivable affiliates 768,647 -
Licensing agreement 2,607,451 3,104,109
Patents and trademarks 171,866 199,906
Software development costs 256,380 347,763
Security deposits 36,873 28,035
Goodwill 1,409,680 1,603,007
------------------------------
TOTAL OTHER ASSETS 5,250,897 5,298,768
------------------------------
TOTAL ASSETS $25,383,014 $23,511,189
==============================
</TABLE>
F-2
The accompanying notes are an integral part of these financial statements
<PAGE>
SWISSRAY INTERNATIONAL
CONSOLIDATED BALANCE SHEET (Continued)
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
------------------------------
2000 1999
(Restated)
------------------------------
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt $ 229,700 $ 247,028
Notes payable - banks 3,578,339 3,667,159
Notes payable - short-term 1,352,502 1,700,000
Loan payable 119,885 126,006
Accounts payable 4,340,033 5,422,321
Accrued expenses 10,727,576 3,003,844
Restructuring 100,000 500,000
Customer deposits 785,614 278,507
------------------------------
TOTAL CURRENT LIABILITIES 21,233,649 14,944,865
------------------------------
CONVERTIBLE DEBENTURES, net of conversion benefit 14,067,294 15,305,852
------------------------------
LONG-TERM DEBT, less current maturities 83,102 195,095
COMMON STOCK SUBJECT TO PUT 319,985 1,819,985
STOCKHOLDERS' DEFICIT
Common stock 233,999 140,062
Additional paid-in capital 88,207,532 69,028,013
Treasury stock (2,040,000) (540,000)
Deferred compensation (998,399) (1,282,500)
Accumulated deficit (94,130,543) (72,492,463)
Accumulated other comprehensive loss (1,273,620) (1,787,735)
Common stock subject to put (319,985) (1,819,985)
------------------------------
TOTAL STOCKHOLDERS' DEFICIT (10,321,016) (8,754,608)
------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 25,383,014 $ 23,511,189
==============================
</TABLE>
F-3
The accompanying notes are an integral part of these financial statements
<PAGE>
SWISSRAY INTERNATIONAL INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION> YEAR ENDED JUNE 30,
----------------------------------------------------
2000 1999 1998
(Restated) (Restated)
----------------------------------------------------
<S> <C> <C> <C>
NET SALES $ 22,030,124 $ 17,295,882 $ 22,892,978
COST OF SALES 16,499,996 13,529,301 18,081,786
----------------------------------------------------
GROSS PROFIT 5,530,128 3,766,581 4,811,192
----------------------------------------------------
OPERATING EXPENSES
Officers and directors compensation 2,831,662 5,014,293 569,816
Salaries 3,762,009 3,784,305 4,168,540
Selling 4,352,016 3,207,646 3,740,391
Research and development 1,914,065 1,808,107 3,542,149
General and administrative 1,816,828 2,484,756 2,612,262
Restructuring cost --- --- 500,000
Other operating expenses 883,835 1,066,039 1,735,877
Bad debts 93,570 706,877 133,196
Depreciation and amortization 1,357,112 1,273,916 1,745,498
----------------------------------------------------
TOTAL OPERATING EXPENSES 17,011,097 19,345,939 18,747,729
----------------------------------------------------
LOSS BEFORE OTHER INCOME (EXPENSES) (11,480,969) (15,579,358) (13,936,537)
Other income (expenses) 190,316 40,385 (281,227)
Interest expense (10,347,427) (5,638,928) (8,590,268)
----------------------------------------------------
OTHER EXPENSES (10,157,111) (5,598,543) (8,871,495)
----------------------------------------------------
LOSS FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY ITEMS (21,638,080) (21,177,901) (22,808,032)
Extraordinary income (expenses) --- (832,849) 304,923
----------------------------------------------------
NET LOSS $(21,638,080) $(22,010,750) $(22,503,109)
====================================================
LOSS PER COMMON SHARE BASIC
Loss from continuing operations (1.14) (3.24) (8.48)
Extraordinary items (0.00) (0.13) 0.11
----------------------------------------------------
NET LOSS (1.14) (3.37) (8.37)
====================================================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 18,927,303 6,525,423 2,690,695
============ ========= =========
</TABLE>
F-4
The accompanying notes are an integral part of these financial statements
<PAGE>
SWISSRAY INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION> YEAR ENDED JUNE 30,
----------------------------------------------------
2000 1999 1998
(Restated) (Restated)
----------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITES
Net loss $(21,638,080) $(22,010,750) $(22,503,109)
Adjustment to reconcile net loss to net
cash used by operating activities
Depreciation and amortization 1,438,719 1,327,395 1,874,206
Provision for bad debts (49,110) 931,146 (38,803)
Common stock and stock options issued for services 2,809,936 4,755,925 ---
Issuance of common stock in lieu of interest payments 279,600 128,107 449,376
Interest expense on debt issuance cost and
conversion benefit 1,131,061 3,070,784 7,905,225
Interest expense on option value per Black Scholes 1,066,536 91,763 ---
Settlement expense paid through issuance of common stock 675,000 --- ---
Amortization of deferred compensation 1,615,302 --- ---
Early extinguishment of debt (gain) --- 832,849 (304,923)
(Increase) decrease in operating assets:
Accounts receivable (687,410) (51,866) 2,887,427
Accounts receivable - long-term --- --- 163,680
Inventories 2,695,249 368,744 (3,790,038)
Prepaid expenses and sundry receivables (445,363) 635,106 434 229
Increase (decrease) in operating liabilities:
Accounts payable (1,082,288) 391,873 (306,300)
Accrued expenses 7,723,732 (361,606) 1,463,512
Restructuring (400,000) --- ---
Customers deposits 507,107 101,924 6,147
----------------------------------------------------
NET CASH USED BY OPERATING ACTIVITIES (4,360,009) (9,788,606) (11,759,371)
----------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of property and equipment (633,419) (692,954) (2,849,205)
Capitalized computer software --- (1,518) (225,174)
Patents and trademarks --- --- (52,386)
Goodwill --- --- (802,107)
Other intangibles (13,469) --- ---
Asset purchase net of cash received --- --- (591,108)
Increase in notes receivable --- (199,132) ---
Security deposits (8,838) 10,245 5,448
Increase(repayment)of loan receivable 15,948 4,056 (2,608)
----------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES (639,778) (879,303) (4,517,140)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (payments for) short-term borrowings-bank (88,820) 20,191,413 10,342,060
Proceeds related to debentures not funded --- (227,273) ---
Principal payment of short-term borrowings (370,947) (11,268,343) (3,852,075)
Principal payment of long-term borrowings (111,993) (245,580) (21,748)
Principal payment of long-term borrowings with stock --- --- (62,267)
Increase in restricted cash (1,385,600) --- ---
Note receivable - short-term (300,000) --- ---
Loan receivable - affiliates (768,647) --- ---
Issuance of common stock for cash 8,605,416 3,160,396 8,461,262
Exercise of stock options for cash 2,136,149 --- ---
Purchase of treasury stock (1,500,000) (540,000) ---
Payment to stockholders and officers --- (2,207) (68,032)
----------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES 6,215,558 11,068,406 14,779,200
----------------------------------------------------
EFFECT OF EXCHANGE RATE ON CASH 514,115 (400,752) (332,444)
----------------------------------------------------
NET INCREASE (DECREASE) IN CASH 1,729,886 (255) (1,809,755)
CASH AND CASH EQUIVALENT - beginning of year 1,281,297 1,281,552 3,091,307
----------------------------------------------------
CASH AND CASH EQUIVALENTS - end of year $ 3,011,183 $ 1,281,297 $ 1,281,552
====================================================
</TABLE>
F-5
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTAL CASH FLOW INFORMATION
YEAR ENDED JUNE 30,
----------------------------------------------------
2000 1999 1998
(Restated) (Restated)
----------------------------------------------------
<S> <C> <C> <C>
Cash paid for interest $ 154,157 $ 462,997 $ 161,093
DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES
Shares issued in lieu of interest paymnets 279,600 128,107 449,376
Stock issued for acquisition --- --- 1,499,997
Beneficial conversion feature recorded as additional paid-in
capital 1,131,061 1,633,164 5,738,149
Convertible debentures converted to common stock 1,238,558 --- ---
</TABLE>
F-6
The accompanying notes are an integral part of these financial statements
<PAGE>
SWISSRAY INTERNATIONAL, INC.
CONSOLITATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 2000, 1999 and 1998
<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, 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 1,673,110 -- --
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 4,300,000 -- --
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 69,028,013 -- (540,000)
COMPREHENSIVE LOSS:
Net loss of the year -- -- -- -- --
Foreign currency translation losses net of taxes $ -0- -- -- -- -- --
TOTAL COMPREHENSIVE LOSS -- -- -- -- --
Issuance of common stock for cash 6,269,621 62,696 9,781,278 -- --
Stock options exercised for cash 1,125,500 11,255 2,124,894 -- --
Issuance of common stock in lieu of interest payment 165,450 1,655 277,945 -- --
Issuance of common stock "Settlement" 150,000 1,500 673,500 --
Amortization of shares issued for services -- -- -- --
Shares issued to officers/employees for services 1,157,065 11,571 2,798,365 -- --
Shares issued for services 526,000 5,260 1,325,941 -- --
Purchase of 33,333 shares subject to put -- -- -- -- (1,500,000)
Beneficial conversion feature of convertible debentures -- -- 1,131,061 -- --
Interest expense on option value per Black Scholes -- -- 1,066,536 -- --
----------------------------------------------------------------------
BALANCE - JUNE 30, 2000 23,399,875 $ 233,999 $ 88,207,532 $ -- (2,040,000)
======================================================================
F-7
</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, 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 -- -- -- (1,499,985) (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 (22,010,750) -- -- -- (22,010,750)
Foreign currency translation losses net of taxes $ -0- -- -- (311,956) -- (311,956)
--------------
TOTAL COMPREHENSIVE LOSS -- -- -- -- (22,322,706)
Issuance of common stock for cash -- -- -- -- 3,160,397
Stock options exercised for services -- -- -- -- 7,300
Shares issued for services -- (1,282,500) -- -- 428,625
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 -- -- -- -- 4,320,000
Treasury stock - at cost -- -- -- -- (540,000)
Interest expense on option value per Black Scholes -- -- -- -- 91,763
---------------------------------------------------------------------
BALANCE - JUNE 30, 1999 (72,492,463) (1,282,500) (1,787,735) (1,819,985) (8,754,608)
COMPREHENSIVE LOSS:
Net loss of the year (21,638,080) -- -- -- (21,638,080)
Foreign currency translation losses net of taxes $ -0- -- -- 514,115 -- 514,115
----------
TOTAL COMPREHENSIVE LOSS -- -- -- -- (21,123,965)
Issuance of common stock for cash -- -- -- -- 9,843,974
Stock options exercised for cash -- -- -- -- 2,136,149
Issuance of common stock in lieu of interest payment -- -- -- -- 279,600
Issuance of common stock "Settlement" -- -- -- -- 675,000
Amortization of shares issued for services -- 1,282,500 -- -- 1,282,500
Shares issued to officers/employees for services -- -- -- -- 2,809,936
Shares issued for services -- (998,399) -- -- 332,802
Purchase of 33,333 shares subject to put -- -- -- 1,500,000 --
Beneficial conversion feature of convertible debentures -- -- -- -- 1,131,061
Interest expense on option value per Black Scholes -- -- -- -- 1,066,536
----------------------------------------------------------------------
BALANCE - JUNE 30, 2000 $(94,130,543) $ (998,399) $(1,273,620) $ (319,985) $(10,321,016)
======================================================================
</TABLE>
F-8
The accompanying notes are an integral part of these financial statements
<PAGE>
SWISSRAY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
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.
REVENUE RECOGNITION
Revenues from direct sales of products to end users are recorded when the
products are shipped, installed, collection of the purchase price is probable
and the Company has no significant further obligations to the customer. Revenues
from direct sales of products to distributors 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
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-9
<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.
Leasehold improvements are amortized over the shorter of the estimated useful
lives of the improvements, or the term of the facility lease.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews long-lived assets to assess recoverability from future
operations using undiscounted cash flows. When necessary, charges for
impairments of long-lived assets are recorded for the amount by which the
present value of future cash flows exceeds the carrying value of these assets.
INTANGIBLE ASSETS
Intangible assets are stated at cost and are being amortized using the straight
line method over the estimated useful lives of the respective assets.
F-10
<PAGE>
SOFTWARE DEVELOPMENT COSTS
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.
ADVERTISING AND PROMOTION
Advertising and promotion costs are expensed as incurred and included in
"Selling" expenses. Advertising and promotion expense for the years ended June
30, 2000, 1999 and 1998 were $ 2,601,410, $ 1,452,309 and $ 1,737,935,
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
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.
F-11
<PAGE>
ACCOUNTING FOR STOCK OPTIONS
The Company accounts for stock-based compensation using the intrinsic value
method as prescribed under Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees" and related Interpretations.
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 has adopted 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 did not
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 - RESTRICTED CASH
In association with the contract signed with the Romanian Ministry of Health in
October 1999, the Company had to post a performance bond of 10% of the total
contract of $13,856,000 or $1,385,600. The performance bond will be partially
reimbursed at 50% of its total value within 30 days of the presentation of
acceptance certificates for the first 16 units. The remaining balance will be
reimbursed 30 days after presentation of the acceptance certificate for the 32nd
and final unit. The amount for the performance bond is denoted in the financial
statements as restricted cash.
F-12
<PAGE>
NOTE 3 - INVENTORIES
Inventories are summarized by major classification as follows:
June 30,
2000 1999
--------------- ----------------
Raw materials, parts and supplies $ 2,682,558 $ 5,558,330
Work in process 1,295,575 1,048,197
Finished goods 659,019 725,874
----------------- ----------------
$ 4,637,152 $ 7,332,401
================= ================
NOTE 4 - PREPAID EXPENSES AND SUNDRY RECEIVABLES
Prepaid expenses and sundry receivables consist of the following:
June 30,
2000 1999
------------------- -----------------
Prepaid expenses, deposits and
advance payments $ 892,077 $ 229,236
Insurance claim for fire damage - 389,220
Prepaid and refundable taxes 414,090 240,368
Employee loans 6,000 7,980
------------------- -----------------
$ 1,312,167 $ 866,804
=================== =================
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
Estimated June 30,
Useful Lives
(years) 2000 1999
------------ ----------- -----------
Land - $ 596,982 $ 5,501,853
Building 30 4,976,657 -
Equipment 5 1,866,720 1,448,961
Office furniture and equipment 3-5 253,946 333,596
------------- -------------
7,694,305 7,284,410
Less: Accumulated depreciation 1,393,689 1,001,370
------------- -------------
$ 6,300,616 $ 6,283,040
============= =============
Depreciation and amortization expense, for property and equipment, for the years
ended June 30, 2000, 1999 and 1998 were $ 615,873, $ 547,693 and $ 1,077,074
respectively.
F-13
<PAGE>
NOTE 6 - INTANGIBLE ASSETS
Intangible Assets at June 30, 2000 and 1999 consisted of the following
Estimated June 30,
Useful Lives
(Years) 2000 1999
---------- --------- ------------
Excess of cost over fair value
of net assets acquired 10 $ 1,933,275 $ 1,933,275
Licensing (a) 10 4,966,575 4,966,575
Software development cost 5-8 592,198 578,729
Patents and Trademarks 10 313,330 313,330
------------ ------------
7,805,378 7,791,909
Less: Accumulated amortization 3,360,001 2,537,125
------------ ------------
$ 4,445,377 $ 5,254,784
============ ============
Amortization expense, for Intangible Assets, for the years ended June 30, 2000,
1999 and 1998 were $ 822,876, $ 830,194 and $ 1,227,719, respectively.
(a) 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 total cost of the license was $4,966,575.
This agreement is for an indefinite term or until all of the proprietary
information becomes public knowledge and the patent rights expire.
NOTE 7 - 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 $ 440,263. The Company has also
negotiated an agreement for up to $ 1,206,200 for the issuance of guarantees and
letters of credit, both with a commission of 15% per $ 1,000,000, quarterly
while outstanding. There were $ 596,896 in outstanding guarantees and $ -0- in
letter of credits as of June 30, 2000. The Company also negotiated a fixed line
of credit for up to $ 2,352,090 with an agreed repayment of $ 60,310 per 180
days first time applicable as of June 30, 2000. All lines of credit are based on
the Exchange rate in effect on June 30, 2000.
F-14
<PAGE>
Notes payable are summarized as follows:
June 30,
2000 1999
------------- --------------
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, 2000 and 1999 were
$ -0- and $ 485,367, respectively. $ - $ 798,730
Migros Bank, on demand with six week
notice, with interest as of June 30,
2000 and 1999 at 3.7/8% and 4% per annum,
collateralized by land and building 2,231,470 2,529,930
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,
2000 and 1999 were $ 2,429,258 and $ 627,625,
respectively 1,346,869 338,499
--------------- -----------
$ 3,578,339 $ 3,667,159
=============== ===========
NOTE 8 - LOAN PAYABLE
The Company has negotiated a 4% demand loan from a private foundation fund. The
loan balance payable at June 30, 2000 and 1999 was $ 119,885 and $ 126,006
respectively.
NOTE 9 - SHARES ISSUED FOR COMPENSATION
In June 1999, the Company incurred additional compensation to the President of
the Company of 2,000,000 fully vested, nonforfeitable shares with a fair market
value of $2.16 per share or $4,320,000 (based on the bid price of $2.40 per
share on the date of issuance less a 10% discount for restrictions on the resale
of such shares). 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 fully vested, nonforfeitable shares of
common stock with a fair market value of $.45 per share or $1,710,000 (based on
the bid price of $.50 per share on the date of issuance less a 10% discount for
restrictions on the resale of such shares) to consultants for services to be
rendered over a term of one year to eighteen months. Such amount has been
deferred and is being amortized over the term of the consulting agreements.
In October 1999 the Company issued 1,050,000 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-15
<PAGE>
On April 4, 2000 the Company issued 490,000 fully vested, nonforfeitable shares
of common stock with a fair market value of $2.5308 per share or $1,240,092
(based on the bid price of $.50 per share on the date of issuance less a 10%
discount for restrictions on the resale of such shares) to a consultant for
services to be rendered over twelve months commencing April 1, 2000. Such amount
has been deferred and is being amortized over the term of the consulting
agreement. In addition the agreement provides for the issuance of 36,000
restrictive shares of Company Common stock (based on 3,000 shares per month)
throughout the period of the Consultant's performance.
NOTE 10 - CONVERTIBLE DEBENTURES
Convertible debentures consist of the following:
June 30,
2000 1999
---------- ----------
Convertible debenture dated June 15, 1998.
The debenture was converted into 851,970
shares in Fiscal 2000. - 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 discretion can redeem
the debenture at 125% after the sixth month
following the closing date. $1,698,827 and
$514,428 of the balance was converted into
1,383,604 and 1,051,529 shares in
Fiscal 2000 and 1999 respectively.
Debt issuance cost was $311,000, beneficial
conversion feature was $-0-. 3,930,594 5,629,421
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 discretion can redeem the debenture 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 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 or $1.00. 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 discretion can redeem the
debentures at any time. Debt issuance cost was
$150,000, beneficial conversion feature was $-0-. 1,170,000 1,170,000
F-16
<PAGE>
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 or $1.00.
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
discretion can redeem the debenture 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 1,119,600
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 discretion can redeem the
debenture at 120% of the face amount including
interest. $310,500 of the balance was converted
into 142,332 shares in Fiscal 2000. Debt issuance
cost was $100,000, beneficial conversion feature
was $423,973. 539,500 850,000
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 or $1.00.
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
discretion can redeem the debenture 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 1,132,000
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 or $1.00.
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
discretion can redeem the debenture 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. 561,000 561,000
F-17
<PAGE>
Convertible debenture dated August 23, 1999
and due August 23, 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 immediately. Any debenture not so
converted is subject to mandatory conversion
on August 23, 2001. The company at its sole
discretion can redeem the debenture at 125%
after the sixth month following the closing date.
Debt issuance cost was $100,000, beneficial
conversion feature was $717,243. 1,148,400 -
Convertible debenture dated November 11, 1999
and due November 11, 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
immediately. Any debenture not so converted is
subject to mandatory conversion on November
11, 2001. The company at its sole discretion can
redeem the debenture at 125% after the sixth month
following the closing date. Debt issuance cost
was $140,000, beneficial conversion feature
was $510,187. 1,526,000 -
----------- ------------
14,067,294 15,402,221
Less: Discount due to beneficial conversion
features, net of accumulated amortization
of $ -0- and $327,604 - (96,369)
------------ ------------
$ 14,067,294 $15,305,852
============ ============
The Company is currently in violation of certain covenants in their debenture
agreements. Such covenants have been waived by the holders through July 1, 2002.
NOTE 11 - NOTES PAYABLE - SHORT-TERM
June 30,
2000 1999
----------- ------------
Promissory note, dated June 11, 1999, $654,000,
due September 9, 1999, collateralized by
inventory. $ 350,000 $ 600,000
Promissory note, dated August 31, 1999, $500,000,
with interest at 8%, payable monthly through
August 15, 2001.(a) 302,502 -
Promissory note, dated May 2000, with interest
payable at 3% per month due December 31, 2000. 500,000 -
Promissory note, dated June 2000, with interest
payable at 3% per month due December 31, 2000. 200,000 -
Promissory note, dated April 1999, the note was
converted into debentures in Fiscal 2000. 1,050,000 1,100,000
----------- ------------
$ 1,352,502 $ 1,700,000
=========== ============
(a) This promissory note is a settlement agreement with former owners of
Swissray America, Inc.
F-18
<PAGE>
NOTE 12 - LONG-TERM DEBT
Long-term debt consists of the following:
June 30,
2000 1999
-------------- ---------------
Note payable - Other $ 87,450 $ 122,175
Note payable - Union Bank of Switzerland,
in monthly installments of $12,589 with
imputed interest at 6.0% per annum,
maturing on September 30, 2000 163,824 188,907
Capitalized leases 61,528 131,040
-------------- ------------
312,802 442,123
Less: Current portion (229,700) (247,028)
-------------- ------------
$ 83,102 $ 195,095
============== ============
The aggregate long-term debt principal payment are as follows:
Year Ending June 30,
2001 $ 229,700
2002 72,591
2003 10,511
NOTE 13 - 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. On July 20, 2000,
the Company amended its certificate of incorporation to change the number of
authorized common shares from 50,000,000 to 100,000,000 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 2000,
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:
Fiscal 2000
As Pro
Reported Forma
Net loss (in thousands) ($21,638) ($22,616)
Basic and diluted net loss per share ($1.22) ($1.27)
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 2000; dividend yield 0%, expected volatility 50%,
risk-free interest rate 5.7%, expected lives in years-1 year.
The weighted average fair value of stock options granted during the year ended
June 30, 2000 was $ 2.36.
F-19
<PAGE>
A summary of the status of the Stock Option Plans at June 30, 2000, 1999 and
1998 and the changes during the years then ended is presented below:
<TABLE>
<CAPTION>
2000 1999 1998
----------------------------- ------------------------------- --------------------------------
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
Of year 194,500 $ 23.40 180,000 $ 23.40 196,900 $ 23.40
Granted 2,987,000 $ 2.36 15,500 $ .44 - $ 0.00
Exercised (1,130,500) $ 1.93 (1,000) $ 7.30 (16,900) $ 7.30
------------- ------------ --------------- ------------ ------------- -------------
Outstanding
At end of year 2,051,000 $ 4.60 194,500 $ 23.40 180,000 $ 23.40
============= ============ =============== ============ ============= =============
Exercisable at
End of year 2,051,000 $ 4.60 194,500 $ 23.40 180,000 $ 23.40
============= ============ =============== ============ ============= =============
</TABLE>
The following table summarizes information about stock options under the Stock
Option Plans at June 30, 2000
Options Outstanding and Exercisable
---------------------------------------------------------------------
Weighted Average Weighted
Number Remaining Contractual Average
Range of Exercise Pr Outstanding Life Exercise Price
---------------------- --------------- -------------------- ---------------
$.01 - $.44 15,500 8.5 $0.44
$2.625 - $2.625 1,856,500 9.2 $2.625
$7.30 - $10.00 18,000 7.4 $8.00
$20.00 - $40.00 127,500 6.8 $22.10
$47.50 - $65.00 33,500 6.5 $58.70
--------------
2,051,000
==============
Stock Warrants
In Fiscal 1999, the Company issued 462,500 warrants. The Company recognized
compensation cost for the warrants issued of $92,000. Such value was determined
using the Black-Scholes method with the following weighted average assumptions;
dividend yield 0%, expected volatility 70%, risk-free interest rate 7%, expected
lives in years 1. The following table summarized information about stock
warrants at June 30, 2000:
Warrants
Outstanding
and
Exercisable
Range of Number Remaining Contractual Average Exercise
Exercise Price Outstanding Life Price
$.375 - $9.38 462,500 4.5 $.96
NOTE 14 - 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, 2000, 1999 and 1998, were $ 475,176, $509,959 and $347,854,
respectively.
F-20
<PAGE>
NOTE 15 - INCOME TAXES
Deferred income tax assets as of June 30, 2000 of $22,700,000 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,
-------------------------------------------------------------------
2000 1999 1998
------------------- ------------------ ------------------
<S> <C> <C> <C>
Statutory federal income tax (benefit) $ (7,400,000) $ (5,600,000) $ (7,754,000)
Foreign income tax (benefit) in excess of
domestic rate (77,000) 377,000 543,000
Benefit not recognized on operating loss 5,127,000 3,693,000 5,111,000
Permanent and other differences 2,350,000 1,530,000 2,100,000
------------------- ------------------ ------------------
$ - $ - $ -
=================== ================== ==================
</TABLE>
Net operating loss carryforwards at June 30, 2000 were approximately as follows:
United States (expiring through June 30, 2015) $ 40,000,000
Switzerland (expiring through June 30, 2010) 33,000,000
----------
$ 77,000,000
==========
NOTE 16 - EXTRAORDINARY ITEMS
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
of $832,849, net of income taxes of $-0-.
NOTE 17 - 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, 2000, 1999 and 1998 there were sales to
customers that exceeded 10% of net consolidated sales. Sales to these customers
were: 2000 customer A, $ 8,180,866 (23 %) and customer C $ 10,825,000 (49 %),
1999 customer A, $9,253,480 (54%), 1998 customer A, $ 7,647,354 (33%) customer B
$2,389,613 (18%). The company operates in a single industry segment, providing
x-ray medical equipment.
F-21
<PAGE>
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, 2000, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
2000 1999 1998
--------------------- -------------------- ------------------
<S> <C> <C> <C>
United States $ 6,561,669 $ 4,026,931 $ 9,127,569
Switzerland 15,164,707 12,625,381 12,851,115
Germany 303,748 643,570 914,294
--------------------- -------------------- ------------------
$ 22,030,124 $ 17,295,882 $ 22,892,978
===================== ==================== ==================
</TABLE>
The following summarizes identifiable assets by geographic area:
2000 1999
----------------- ------------------
United States $ 8,344,431 $ 7,270,543
Switzerland 16,782,132 16,009,209
Germany 184,157 231,437
Romania 72,293 -
----------------- ------------------
$ 25,383,014 $ 23,511,189
================= ==================
The following summarizes operating losses before provision for income tax:
<TABLE>
<CAPTION>
2000 1999 1998
------------------- -------------------- -------------------
<S> <C> <C> <C>
United States $ (16,801,696) $ (14,542,148) $ (13,962,842)
Switzerland (4,277,240) (5,392,436) (8,803,006)
Germany (409,272) (243,317) (42,184)
(149,872) - -
------------------ -------------------- -------------------
$ (21,638,080) $ (20,177,901) $ (22,808,032)
=================== ==================== ===================
</TABLE>
NOTE 18 - COMMITMENTS
The Company leases various facilities under operating lease agreements expiring
through September 2003. The facilities lease agreements provide for a base
monthly payment of $22,285 per month. Rent expense for the years ended June 30,
2000, 1999 and 1998 was $ 361,757, $ 325,000 and $ 324,726 respectively. Future
minimum annual lease payments, based on the exchange rate in effect on June 30,
2000, 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, 2001 $ 299,326
June 30, 2002 202,498
June 30, 2003 109,037
------------------
$ 610,861
==================
F-22
<PAGE>
NOTE 19 - 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
consisted primarily of the present value of the remaining lease obligations of
those facilities. The balance at June 30, 2000 is $100,000.
NOTE 20 - UNAUDITED PROFORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
The following unaudited proforma condensed combined statements of operations for
the years ended June 30, 1998 give retroactive effect of the SSG on October 17,
1997, which were accounted for as purchase. 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.
SWISSRAY INTERNATIONAL, INC
UNAUDITED PROFORMA CONDENSED COMBINED CONSOLIDATED STATEMENT
OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1998
Year Ended
June 30,
1998
------------------------
Revenues $ 23,837,000
Loss before extraordinary items (21,963,000)
Net Loss (22,403,000)
Loss per share (8.33)
Weighted average number of shares outstanding $ 2,690,695
NOTE 21-VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Additions Deductions Balance at End
Beginning Charged to of Year
of Year Expenses
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 30, 2000 $ 219,993 $ 93,570 $ 142,680 $ 170,883
Year ended December 30, 1999 $ 32,356 $ 706,877 $ 519,240 $ 219,993
Year ended December 30, 1998 $ 148,390 $ 133,169 $ 249,230 $ 32,356
</TABLE>
NOTE 22 - RESTATEMENT
The accompanying financial statements have been restated to properly record the
accounting for the value of common stock issued to an officer and consultants as
compensation during the year ended June 30, 1999 and the accrual of an
additional $1,000,000 for interest expense for the accrual of penalty interest
on periodic payments required by terms of financing agreements.
The effect of such restatements on the Company's 1999 financial statement is as
follows:
As As
Reported Adjustments Restated
Balance Sheet Adjustments
Assets
$ 23,761,189 $ (250,000) $ 23,511,189
Liabilities
29,695,812 750,000 30,445,812
Statement of Operations
Adjustments
Operating expenses
$ 15,581,217 $ 3,764,722 $ 19,345,939
Loss from continuing
Operations (16,413,179) 4,764,722 (21,177,901)
Net Loss (17,246,028) 4,764,722 (22,010,750)
Net loss per common
Share basic $ (2.65) $ (0.72) $ (3.37)
F-23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SWISSRAY INTERNATIONAL, INC.
Dated: October 31, 2000 By:/s/Ruedi G. Laupper
Name: Ruedi G. Laupper
Title:Chairman of the Board of
Directors, President &
Principal Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/Ruedi G. Laupper Chairman of the Board of Dated: October 31,2000
Ruedi G. Laupper Directors, President &
Principal Executive Officer
/s/Josef Laupper Secretary, Treasurer and a Dated: October 31,2000
Josef Laupper Director
/s/Michael Laupper Principal Financial Officer Dated: October 31,2000
Michael Laupper & Controller
/s/Ueli Laupper Vice President and a Director Dated: October 31,2000
Ueli Laupper
/s/Dr. Erwin Zimmerli Director Dated: October 31,2000
Dr. Erwin Zimmerli
Dr. Sc. Dov Maor Director Dated: October , 2000
-48-
