EXHIBIT 99.1

                              CAUTIONARY STATEMENT

      The  statements  contained  in  this  Form  10-K  include  forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 ("PSLRA"). When used in this Form 10-K and in future filings by the Company
with the Securities and Exchange  Commission,  in the Company's  press releases,
presentations  to  stockholders,  securities  analysts or investors,  or in oral
statements made by or with the approval of an executive  officer of the Company,
the words or phrases  "believes,"  "may,"  "will  likely  result,"  "estimates,"
"projects,"  "anticipates,"  "expects"  or similar  expressions  and  variations
thereof  are  intended  to  identify  such   forward-looking   statements.   Any
forward-looking  statement  involves  risks  and  uncertainties  that may have a
material  adverse  effect on the  business,  results  of  operations,  financial
condition or  prospects,  financial  or other,  of the Company and may cause the
Company's  actual results to differ  materially from  historical  results or the
results discussed in the forward-looking statements.

      The following  discussions  contain  cautionary  statements  regarding the
Company's  business that investors and others should  carefully  consider.  This
discussion is intended to take advantage of the "safe harbor"  provisions of the
PSLRA. In making these cautionary statements,  the Company is not undertaking to
address or update each factor in future filings or communications  regarding the
Company's business or results.

SEC / U.S. ATTORNEY INVESTIGATION

      In August 1999, the Company,  through its outside  counsel,  contacted the
Division of Enforcement of the  Securities  and Exchange  Commission  ("SEC") to
advise it of certain  matters  related to the Company's  restatement of earnings
for  interim  periods  of  fiscal  1999.  The  SEC  subsequently   conducted  an
investigation  of the  Company and certain  individuals,  including  current and
former  officers and  employees  of the  Company,  pursuant to a Formal Order of
Investigation.  The Company  cooperated with the SEC staff throughout the course
of the investigation.

      The Company has been  informed  that since January 2002 the SEC and/or the
United  States  Attorney's  Office for the  Southern  District  of New York have
served subpoenas upon and/or contacted  certain  individuals,  including current
and former  officers and employees of the Company,  and a current  Director,  in
connection  with this  matter.  On June 13,  2002,  the  Company  was advised by
counsel to David Schick, the Company's former chief executive officer,  that the
United  States  Attorney's  Office  for the  Southern  District  of New York had
notified  such  counsel  that Mr.  Schick  was a  target  of the  United  States
Attorney's investigation of this matter. The Company has cooperated with the SEC
staff and U.S. Attorney's Office.

      On November  14, 2003,  the SEC filed a civil action in the United  States
District  Court for the Eastern  District of New York against the  Company,  its
former  chief  executive  officer,  and its  former  vice  president  of sales &
marketing.  The SEC complaint alleged fraud, and books and records and reporting
violations under Sections 10(b),  13(a) and 13(b)(2) of the Securities  Exchange
Act and various rules  promulgated  thereunder in connection  with the financial
statements included in the Company's reports on Form 10-Q for the quarters ended
June 30,  September 30 and December 31, 1998. The SEC complaint sought to enjoin
the Company from future  violations of those  provisions of the Exchange Act and
the rules thereunder, as well as disgorgement of any allegedly ill-gotten gains.
With respect to the other defendants,  the complaint sought  injunctive  relief,
civil penalties, disgorgement and an officer/director bar.

      The Company has had discussions  with the  Enforcement  Staff of the SEC's
northeast  regional  office in an effort to resolve  the  complaint  against the
Company,  and the Company intends to continue such discussions.  On May 4, 2005,
the Court ordered that discovery in this case be suspended


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until June 18, 2005 to permit the  consideration  of settlement  proposals.  Any
settlement  would  require  approval by the  Commission  before it could  become
effective.  There can be no assurance that settlement  discussions will continue
and/or will be successful.

      During the three months ended  December 31, 2004,  the insurance  coverage
available to the Company for legal fee reimbursements and indemnification  costs
was fully depleted. If this matter remains unresolved, the Company will continue
to incur significant legal fees and may incur  indemnification  costs.  However,
the Company believes that the magnitude of such  expenditures will not adversely
affect its ongoing business operations.

      The Company  cannot  predict the potential  outcome of this matter and its
impact on the Company and,  therefore,  has made no provision  relating to these
matters in the accompanying consolidated financial statements. If the outcome of
these  matters is not  favorable  with respect to the  Company,  it could have a
material adverse effect upon the Company. See Item 3 -- "Legal Proceedings."

DEPENDENCE ON PRODUCTS

      The Company's revenues are primarily  generated from sales of its suite of
CDR(R)  dental  imaging  products and, to a lesser  extent,  from sales of other
products,  including  accuDEXA(R) . There can be no assurance  that any of these
products,  or any of the products which the Company may sell in the future, will
not be  rendered  obsolete  or  inferior  as a result of  technological  change,
changing customer needs, new product  introductions or other developments,  each
of which would have a material  adverse  effect on the Company.  There can be no
assurance  that the  Company's  competitors  will not succeed in  developing  or
marketing  technologies  and/or  products  that  are  superior  to  and/or  more
commercially attractive than the Company's. The Company's success will depend in
part on its  ability to improve and  enhance  its  products in a timely  manner.
There can be no assurance that the Company will be able to do so. The failure to
enhance any of the  Company's  products in a timely manner could have a material
adverse effect on the Company.

DEPENDENCE ON EXCLUSIVE NORTH AMERICAN DISTRIBUTOR

      Since May 1, 2000,  the Company has  marketed and  distributed  its CDR(R)
product  line in the  United  States and Canada  exclusively  through  Patterson
Dental Company, Inc.  ("Patterson").  During fiscal 2002 through 2005, Patterson
was the single  largest  contributor  to the  Company's  revenues.  The  Company
anticipates that Patterson will continue to be the single largest contributor to
the  Company's  revenues in the coming  fiscal year.  While the  Distributorship
Agreement  between the Company and  Patterson  provided  for a minimum  purchase
quota during its initial three-year term,  Patterson did not meet such quota. At
the current time, there no longer is any minimum purchase quota in effect. There
can be no assurance that Patterson will purchase any specified  minimum quantity
of products from the Company or that it will continue to purchase any product at
all from the Company.  If Patterson  fails to purchase a  significant  volume of
product  from the  Company,  it could  have a  material  adverse  effect  on the
Company.

DEPENDENCE ON THIRD-PARTY DISTRIBUTORS OUTSIDE OF NORTH AMERICA

      Outside of North America,  the Company  distributes  its products  through
third-party  independent  distributors.   Historically,   a  limited  number  of
distributors have accounted for a significant portion of the Company's revenues.
In  general,  these  distributors  could  discontinue  marketing  the  Company's
products with little or no notice.  Certain of the Company's  distributors  also
could market products which compete with the Company's products.  The loss of or
significant  reduction  in  sales  volume  of  one  or  more  of  the  Company's
distributors could have a material adverse effect on the Company.


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UNCERTAINTIES ASSOCIATED WITH INTERNATIONAL MARKETS

      In fiscal 2005,  2004 and 2003,  sales to customers  outside of the United
States were  approximately  27%,  25% and 21%,  respectively,  of the  Company's
revenues,  and the Company anticipates that international sales will continue to
account for a significant  percentage of the Company's  revenues.  International
revenues are subject to a number of uncertainties,  including but not limited to
the following:  agreements may be difficult to enforce and receivables difficult
to collect;  foreign customers and distributors may have relatively long payment
cycles;  foreign countries may impose additional  withholding taxes or otherwise
tax the Company's foreign income,  impose tariffs or adopt other restrictions on
foreign trade;  fluctuations in exchange rates may affect product demand; United
States export  licenses may be difficult to obtain;  and  intellectual  property
rights in foreign countries may be difficult or impossible to enforce. Moreover,
many foreign countries have their own regulatory  approval  requirements for the
sale of the Company's products.  As a result, the Company's  introduction of new
products  into  international  markets  could be prevented  and/or costly and/or
time-consuming,  and there can be no assurance  that the Company will be able to
obtain the required regulatory approvals on a timely basis, if at all. There can
be no  assurance  that any of these  factors  will not have a  material  adverse
effect on the Company.

DEPENDENCE UPON KEY PERSONNEL

      The success of the Company is dependent, in part, upon its ability to hire
and retain management, sales, technical, research and other personnel who are in
high demand and are often  subject to competing  employment  opportunities.  The
inability  of the Company to hire or retain key  management,  sales,  technical,
research or other personnel could have a material adverse effect on the Company.
At the current time,  only two of the Company's  executive  officers,  the Chief
Executive Officer and the Executive  Vice-President of Sales and Marketing,  are
employed pursuant to written employment  agreements with the Company.  There can
be no assurance that they or any of the Company's  other employees will continue
to be active with the Company.

LITIGATION AND INSURANCE

      The  Company  may be a  party  to a  variety  of  legal  actions,  such as
employment and employment discrimination-related suits, employee benefit claims,
breach  of  contract  actions,  tort  claims,  shareholder  suits,  governmental
investigations and intellectual  property related litigation.  In addition,  the
Company could be subject to a variety of legal actions  relating to its business
operations.  Recent court  decisions and  legislative  activity may increase the
Company's exposure for any of these types of claims. In some cases,  substantial
punitive damages could be sought.  The Company currently has insurance  coverage
for some of these potential liabilities.  Other potential liabilities may not be
covered by insurance,  insurers may dispute coverage, or the amount of insurance
may not be sufficient to cover the damages awarded.  In addition,  certain types
of  damages,  such as  punitive  damages,  may not be covered by  insurance  and
insurance  coverage for all or certain forms of liability may become unavailable
or prohibitively expensive in the future.

DEPENDENCE ON DEVELOPING AND MARKETING NEW PRODUCTS AND ENHANCEMENTS TO EXISTING
PRODUCTS

      The Company intends to develop and/or is currently developing new products
and  enhancements  to  existing  products.  There can be no  assurance  that the
Company will  initiate,  continue  with and/or  succeed in efforts to develop or
enhance such products.  The Company expects to file 510(k) applications with the
FDA in  connection  with its future  products and certain of its future  product
enhancements.  There can be no assurance that the Company will file applications
for or  obtain  regulatory  approval  from  the  FDA,  either  in the  form of a
pre-market clearance or a 510(k) clearance,  for any of its future products,  or
that in order to obtain FDA  clearance,  the  Company  will not be  required  to
submit   additional   data  or  meet  additional  FDA   requirements   that  may
substantially delay the application process and result in substantial additional
expense.  Moreover,  such pre-market clearance,  if obtained,  may be subject to
conditions  on  marketing  or  manufacturing  which could  impede the  Company's
ability to manufacture and/or market its


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products.  While the Company is engaged in research and  development  to develop
new products,  there can be no assurance  that the Company will be successful in
such  endeavors.  There can be no assurance that any products to be developed by
the Company will be approved by or receive  marketing  clearance from applicable
domestic and/or  international  governmental or regulatory  authorities.  If the
Company is unable to  develop,  obtain  regulatory  approval  for and market new
products and enhancements to existing products,  it will have a material adverse
effect on the Company.

RAPID AND SIGNIFICANT TECHNOLOGICAL CHANGE

      The  market  for the  Company's  products  is  characterized  by rapid and
significant  technological  change,  evolving industry standards and new product
introductions.  The Company's  products require  significant  planning,  design,
development  and testing  which  require  significant  capital  commitments  and
investment by the Company. There can be no assurance that the Company's products
or  proprietary  technologies  will not become  noncompetitive  or obsolete as a
result of  technological  change,  evolving  industry  standards  or new product
introductions  or that the Company will be able to generate any economic  return
on  its  investment  in  product  development.  If  the  Company's  products  or
technologies become noncompetitive or obsolete, it would have a material adverse
effect on the Company.

INTENSE COMPETITION

      Competition  relating  to the  Company's  current  products is intense and
includes various  companies,  both within and outside of the United States.  The
Company  anticipates  that  competition  for its  future  products  will also be
intense and  include  various  companies,  both within and outside of the United
States.  The  Company's  competitors  and  potential  competitors  include large
companies with substantially greater financial,  sales and marketing,  technical
and other  resources,  larger  and more  experienced  research  and  development
staffs, more extensive physical facilities and substantially  greater experience
in obtaining regulatory approvals and in marketing products than the Company. In
addition,  there can be no  assurance  that the  Company's  competitors  are not
currently developing, or will not attempt to develop,  technologies and products
that are more effective than those being  developed by the Company or that would
otherwise render the Company's existing and new technology and products obsolete
or  noncompetitive.  No assurance  can be given that the Company will be able to
compete  successfully.  The inability of the Company to compete  successfully or
the development by the Company's competitors of technology and products that are
more effective  than those being  developed by the Company would have a material
adverse effect on the Company.

DEPENDENCE ON KEY SUPPLIERS; VOLATILITY OF SEMICONDUCTOR MARKET

      The Company relies on key suppliers for various critical  components.  The
Company procures certain components,  including the substantial  majority of the
sensor chips used in the Company's  manufacturing  process, from outside sources
which are sole suppliers.  The availability and price of these components may be
subject to change due to interruptions in production, changing market conditions
and other events.  Furthermore,  availability  may be adversely  impacted if the
Company  fails to make  timely  payments to its key  suppliers.  There can be no
assurance  that the Company  would be able to enter into  purchase  arrangements
with other suppliers, or that if the Company were to do so, such suppliers would
be able to deliver such components at an acceptable price or in a timely manner,
if at all. If the Company were unable to develop  reasonably-priced  alternative
sources  in a timely  manner,  or if the  Company  encountered  delays  or other
difficulties  in the  supply of such  products  and other  materials  from third
parties, there could be a material adverse effect on the Company. In past years,
semiconductors  have been subject to significant price  fluctuations.  While the
Company has, in the past,  attempted  to mitigate the effects of such  potential
fluctuations,  there can be no assurance that the Company will continue to do so
or that it will be able to  successfully  mitigate  the  effect of future  price
increases on its results of operations and financial condition.


<PAGE>

RELIANCE ON PATENTS AND PROPRIETARY TECHNOLOGY; RISK OF PATENT INFRINGEMENT

      The  Company   currently  has  issued  and  allowed   patents  and  patent
applications, as described in Item 1 -- "Business," of this Form 10-K. There can
be no assurance that any of the Company's  patents,  any of the patents of which
the Company is a licensee or any patents which may issue to the Company or which
the  Company  may  license  in the  future,  will  provide  the  Company  with a
competitive  advantage or afford the Company protection against  infringement by
others, or that the patents will not be successfully  challenged or circumvented
by third parties, including competitors of the Company.

      The Company is the exclusive  sub-licensee for use in medical  radiography
applications of certain patents,  patent applications and other know-how related
to complementary metal oxide  semiconductor  active pixel sensor technology (the
"APS Technology"), which was developed by the California Institute of Technology
and  sublicensed  to  the  Company.  The  Company's  exclusive  rights  to  such
technology are subject to government  rights to use,  noncommercial  educational
and research  rights to use by California  Institute of  Technology  and the Jet
Propulsion  Laboratory,  and the right of a third party to obtain a nonexclusive
license  from the  California  Institute  of  Technology  with  respect  to such
technology. The Company believes that, except for such third party's exercise of
its right to obtain a  nonexclusive  license  to use APS  Technology  in a field
other than medical radiography,  none of the foregoing parties have given notice
of their exercise of any of their respective rights to the APS Technology. There
can be no  assurance  that  this  will  continue  to be the  case,  and any such
exercise could have a material adverse effect on the Company.

      The Company is also the owner of certain trade secrets,  which it seeks to
protect by, among other things,  entering into non-disclosure,  confidentiality,
non-solicitation  and  non-competition  agreements.  However,  there  can  be no
assurance  that the  duties  imposed  by these  agreements,  such as the duty to
maintain  confidentiality and the duty not to compete,  will not be breached, or
that such breaches will not have a material adverse effect on the Company.

      There  also can be no  assurance  that  the  technology  practiced  by the
Company  will not  infringe  upon the  patents of others.  In the event that any
future  infringement claim against the Company is successful,  there would be no
assurance that the Company would be able to negotiate with the patent holder for
a license,  in which case the Company  could be prevented  from  practicing  the
subject  matter  claimed by the subject  patent.  In  addition,  there can be no
assurance  that the  Company  would be able to  redesign  its  products to avoid
infringement.  The  inability of the Company to practice  the subject  matter of
patents  claimed by others or to redesign  its  products  to avoid  infringement
could have a material adverse effect on the Company.

NASDAQ DELISTING

      The Company's  Common Stock was delisted from the Nasdaq National  Market,
effective at the close of business on September 15, 1999. From that date through
January 29, 2002, the Company's stock traded in the over-the-counter  market, as
reported on the "pink sheets"  published by Pink Sheets LLC  (formerly  known as
National Quotation Bureau LLC). Commencing January 30, 2002, the Company's stock
has been quoted on the  Over-The-Counter  Bulletin Board.  The Nasdaq  delisting
could  have a  material  adverse  effect  upon the  Company in a number of ways,
including  its ability to raise  additional  capital,  and could have a negative
effect upon the trading  price of the Company's  Common  Stock.  There can be no
assurance  that the  Company's  Common  Stock  will be  relisted  on the  Nasdaq
National  Market at any  future  date or that such  stock  will be listed on any
market system.

REGULATORY AND LEGISLATIVE RISKS

      The Company must obtain certain approvals by and marketing clearances from
governmental  authorities,  including the FDA and similar health  authorities in
foreign  countries to market and sell its products in those  countries.  The FDA
regulates the marketing, manufacturing, labeling, packaging,


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advertising,  sale and distribution of `medical  devices,' as do various foreign
authorities  in their  respective  jurisdictions.  The FDA  enforces  additional
regulations  regarding the safety of equipment utilizing x-rays.  Various states
also impose  similar  regulations.  The  Company's  CDR(R)  system is  currently
regulated by such  authorities  and certain of the  Company's  new products will
require   approval  by  or  marketing   clearance   from  various   governmental
authorities, including the FDA. In addition, various additional requirements are
imposed  upon the  Company to make it  eligible  to sell  products to the United
States Government.

      The FDA review process typically requires extended proceedings  pertaining
to the safety and efficacy of new products.  A 510(k) application is required in
order to market a new or modified  medical device.  If specifically  required by
the FDA, a pre-market approval ("PMA") may be necessary. Such proceedings, which
must be  completed  prior to  marketing a new medical  device,  are  potentially
expensive and time consuming.  They may delay or hinder a product's timely entry
into the  marketplace.  Moreover,  there can be no assurance  that the review or
approval  process  for  these  products  by  the  FDA or  any  other  applicable
governmental  authorities  will occur in a timely  fashion,  if at all,  or that
additional  regulations  will not be adopted or current  regulations  amended in
such a manner as will adversely  affect the Company.  The FDA also regulates the
content of  advertising  and marketing  materials  relating to medical  devices.
Failure  to comply  with such  regulations  may  result in a delay in  obtaining
approval for the marketing of such  products or the  withdrawal of such approval
if previously obtained. There can be no assurance that the Company's advertising
and  marketing  materials  regarding  its products are and will be in compliance
with such regulations.  The Company is also subject to other federal,  state and
local laws, regulations and recommendations relating to safe working conditions,
laboratory and manufacturing practices. The extent of government regulation that
might result from any future  legislation  or  administrative  action  cannot be
accurately predicted.  Failure to comply with regulatory requirements could have
a material adverse effect on the Company.  International  sales of the Company's
products are subject to the regulatory agency product registration  requirements
of each country in which the Company's  products are sold. The regulatory review
process  varies  from  country to  country  and may in some  cases  require  the
submission of clinical data. The Company typically relies on its distributors in
foreign countries to obtain the required regulatory approvals.

      There can be no assurance,  however,  that any of the foregoing  approvals
will be  obtained,  or that  the  Company  would be able to  satisfy  any of the
foregoing  requirements  on a timely basis, if at all. The failure to obtain any
of such approvals or to comply with any of such  requirements  on a timely basis
could have a material  adverse  effect on the Company.  The Company's  customers
operate in the health care industry,  which is highly  regulated.  Both existing
and  future  governmental   regulations  could  adversely  impact  the  Company.
Additionally,  cost-containment efforts by health maintenance  organizations may
adversely affect the potential market for the Company's devices.

PRODUCT WARRANTIES

      The Company  generally  warrants each of its products  against  defects in
materials  and  workmanship  for a period  of up to two  years  from the date of
shipment plus any extended  warranty period purchased by the customer.  The need
for warranty  service  could have a material  adverse  effect on the Company by,
among other things, requiring additional expenditures for parts and personnel as
well as damaging the Company's reputation and goodwill.

POTENTIAL FOR PRODUCT RECALL AND PRODUCT LIABILITY CLAIMS

      Products  such as those sold by the  Company  may be subject to recall for
unforeseen  reasons.  In addition,  certain  applications,  including  projected
applications,  of the Company's  products  entail the risk of product  liability
claims.  Such risks will exist  even with  respect to those  products  that have
received, or in the future may receive, regulatory approval for commercial sale.
These  claims may be made by  consumers,  distributors  or others.  Although the
Company has maintained  insurance  coverage related to product liability claims,
no  assurance  can be given  that  product  liability  insurance  coverage  will
continue


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to be available or, if available,  that it can be obtained in sufficient amounts
or at reasonable cost or that it will be sufficient to cover any claims that may
arise. The Company does not maintain any insurance relating to potential recalls
of its products.  Costs  associated  with potential  product  recalls or product
liability claims could have a material adverse effect on the Company.

DEPENDENCE ON THIRD-PARTY REIMBURSEMENT

      Third-party   payors,    including   government   health    administration
authorities,  private health care insurers and other organizations  regulate the
reimbursement  of fees  related  to  certain  diagnostic  procedures  or medical
treatments.  Third-party  payors  are  increasingly  challenging  the  price and
cost-effectiveness  of medical  products and services.  While the Company cannot
predict what effect the policies of  government  entities and other  third-party
payors  will have on future  sales of the  Company's  products,  there can be no
assurance  that such policies  would not have a material  adverse  effect on the
Company.

POTENTIALLY SIGNIFICANT FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; SEASONALITY

      Several factors may significantly affect the Company's revenues,  expenses
and results of operations  from quarter to quarter,  including the timing of new
product  introductions  by the Company or its  competitors the ability to supply
products to meet customer  demand and  fluctuations in  manufacturing  costs. In
addition, the Company's CDR(R) products have been subject to seasonal variations
at various times in the past. Consequently,  quarterly results of operations may
fluctuate.  Such  fluctuations in quarterly results of operation could adversely
affect the market price of the Common Stock.

VOLATILITY OF STOCK PRICE

      The  stock  market  historically  has  experienced  volatility  which  has
affected  the market  price of  securities  of many  companies  and which may be
unrelated to the operating performance of such companies.  The market prices for
securities  of  medical  technology  companies  have  historically  been  highly
volatile. Future technological  innovations or new commercial products,  results
of clinical testing, changes in regulation, litigation and public concerns as to
product safety as well as period-to-period fluctuations in financial performance
and fluctuations in securities markets generally could cause the market price of
the Common Stock to fluctuate substantially. These broad market fluctuations may
adversely affect the market price of the Common Stock.

CONTROL OF THE COMPANY BY CERTAIN STOCKHOLDERS; CONFLICTS OF INTEREST

      Currently,   the   executive   officers  and   directors  of  the  Company
collectively  beneficially own approximately 15.4% of the Company's  outstanding
shares of Common Stock; in addition,  Greystone Funding Corporation beneficially
owns  approximately  28.2% of the Company's  outstanding shares of Common Stock.
Accordingly,  they  may  effectively  have  the  ability  to  exert  significant
influence  over the Company  and/or to elect all or some of the directors of the
Company and determine the outcome of other matters submitted for the approval of
the  stockholders.  A former  employee of Greystone is currently  serving as the
President  and  Chief  Executive  Officer  of  the  Company.   Accordingly,  the
relationship with Greystone involves potential conflicts of interest.

AUTHORIZATION OF PREFERRED STOCK

      The Company's  certificate of  Incorporation  authorizes the issuance of a
series  or  designation  of  Preferred  Stock  with  such  rights,  preferences,
privileges  and  restrictions  as may be  determined  from  time  to time by the
Company's Board of Directors.  Accordingly, the Board of Directors is empowered,
without  the need  for  shareholder  approval,  to issue  Preferred  Stock  with
dividend, liquidation,  conversion, voting or other rights which could adversely
affect the voting power or other rights of the holders of the  Company's  Common
Stock. There currently are no shares of Preferred Stock designated or issued.