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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 11, 1999
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AFP Imaging Corporation
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(Exact name of registrant as specified in its charter)
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New York 0-10832 13-2956272
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or File Number) Identification No.)
organization)
250 Clearbrook Road, Elmsford, New York 10523
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 592-6100
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(Former name or former address, if changed since last report)
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Item 5. Other Events:
On August 11, 1999, AFP Imaging Corporation ("Company") successfully
reduced and restructured both of its Subordinated Promissory Notes,
which were issued in 1997, as part of the financing of two
independent acquisitions. The restructuring was accomplished by means
of negotiation or mediation between the Company and each of the
parties. No additional equity, warrants or options were issued in
conjunction with the reduction and restructuring of these
Subordinated Promissory Notes.
In December 1997, the Company acquired all of the assets and defined
liabilities of ProDen Medical Systems ("ProDen"), a Vancouver, WA
manufacturer of intraoral (dental) video cameras and related
products, from its sole shareholder. The purchase price was $3.5
million of which $1.1 million was paid, and the Company issued a
Subordinated Promissory Note ("December Note") for $2.4 million to be
paid in five, semi-annual payments beginning January 1, 1999. The
Company did not make the required $500,000 payments due January 1,
1999 and July 1, 1999, and invoked the provision for negotiation and
mediation, as reported in the Company's Current Report Form 8K filing
of April 14, 1999. On August 11, 1999, the Company and the sole
shareholder of ProDen agreed to an immediate reduction and
restructuring of the December Note. The Company will not be obligated
to pay the two $500,000 installments which were past due and in
dispute. The Company agreed and paid $150,000 to the sole shareholder
of ProDen and the December Note was reduced to $850,000 in total, to
be paid over a six year period. Interest only will be paid quarterly,
for the first three years, effective January 1, 2000, followed by
thirty-six equal monthly payments of $23,611.11 plus interest, paid
quarterly, on the unpaid balance. Interest was fixed at 7.75% per
annum for the six year period. There are no other contingent payments
or further amendments to the Purchase and Sale Agreement.
In April 1997, the Company acquired all of the shares of a Swedish
manufacturer of digital, dental imaging systems from ACG
Nystromgrupen AB ("Nystrom"). The initial purchase price was $2.9
million which consisted of cash, notes payable and a royalty. The
Company issued to Nystrom a Subordinated Promissory Note ("April
Note") for $1.0 million due April 17, 2000, with interest at LIBOR
plus 2%. At August 10, 1999 this rate was 7.226%. On August 11, 1999,
the Company and Nystrom agreed to an immediate reduction and
restructuring of the April Note. The Company paid $100,000 to Nystrom
plus accrued interest from April 17, 1999 to August 10, 1999, and the
principal amount of the amended April Note was reduced to $800,000 in
total, to be paid over a six year period. Interest only will be paid
quarterly for the first three years, followed by thirty-six equal
monthly payments of $22,222.22 plus interest, paid quarterly, on the
unpaid balance. Interest will remain at LIBOR + 2% for the six year
period. A royalty payment, contingent on sales, as per the original
Stock Purchase Agreement is due Nystrom on April 17, 2000 but has
been capped at a maximum of $30,000. There are no other contingent
payments or further amendments to the Stock Purchase Agreement.
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The reduction in the carrying value of the December Note will be
recorded in the quarter ended June 30, 1999, as this settlement
represents the resolution of a contingency arising during fiscal
1999. While this transaction will result in a gain, the total amount
of this gain will be almost, if not entirely, offset by impairment
charges associated with the residual long-lived assets of ProDen.
The reduction in the carrying value of the April Note will be
recorded in the first quarter of fiscal 2000.
There are no other unresolved issues with Nystrom or ProDen.
SIGNATURES
Pursuant to the requirements 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.
AFP Imaging Corporation
Dated: August 11, 1999 By: /s/ David Vozick
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David Vozick,
Chairman of the Board
