SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D. C. 20549

                                    FORM 10-K

                                   (Mark One)

                {X} ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                    For the fiscal year ended March 31, 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 000-22673

                            SCHICK TECHNOLOGIES, INC.
             (Exact name of registrant as specified in its charter)

   Delaware                                                          11-3374812
   (State or other jurisdiction of                             (I.R.S. Employer
   incorporation or organization)                            Identification No.)

                  31-00 47th Avenue, Long Island City, NY 11101
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (718) 937-5765

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:

                     Common stock, par value $.01 per share

     Indicate by check mark whether the registrant (1) has filed all reports
   required to be filed by Section 13 or 15(d) of the Securities Exchange Act
   of 1934 during the preceding 12 months (or for such shorter period that the
   registrant was required to file such reports), and (2) has been subject to
                 such filing requirements for the past 90 days.

                                 Yes |X| 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 the 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 aggregate market value of Common Stock held by non-affiliates of the
       registrant as of June 13, 2000 was approximately $13,285,451. Such
    aggregate market value is computed by reference to the closing sale price
                        of the Common Stock on such date.

              As of June 13, 2000, the number of shares outstanding
                of the Registrant's Common Stock, par value $.01
                            per share, was 10,136,113

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      NONE

<PAGE>

                                Table of Contents

Item of Form 10-K                                                           Page
--------------------------------------------------------------------------------

Part I

         Item 1.    Business ..............................................   1

         Item 2.    Properties ............................................   12

         Item 3.    Legal Proceedings .....................................   12

         Item 4.    Submission of Matters to a Vote of Security Holders ...   13

Part II

         Item 5.    Market for the Registrant's Common Equity and Related
                    Stockholder Matters ...................................   14

         Item 6.    Selected Financial Data ...............................   15

         Item 7.    Management's Discussion and Analysis of Financial
                    Condition and Results of Operations ...................   16

         Item 7A.   Quantitative and Qualitative  Disclosures About Market
                    Risk ..................................................   21

         Item 8.    Financial Statements and Supplementary Data ...........   22

         Item 9.    Changes in and Disagreements with Accountants
                    On Accounting and Financial Disclosure ................   22

Part III

         Item 10.   Directors and Executive Officers of the Registrant ....   22

         Item 11.   Executive Compensation ................................   25

         Item 12.   Security Ownership of Certain Beneficial Owners And
                    Management ............................................   28

         Item 13.   Certain Relationships and Related Transactions ........   31

Part IV

         Item 14.   Exhibits, Financial Statement Schedules and Reports on
                    Form 8-K ..............................................  F-1

<PAGE>

                                     PART I

ITEM 1.  BUSINESS

     Schick   Technologies,   Inc.  (the   "Company")   designs,   develops  and
manufactures innovative digital radiographic imaging systems and devices for the
dental  and  medical  markets.  The  Company's  products,  which  are  based  on
proprietary  digital  imaging  technologies,   create  instant  high  resolution
radiographs with reduced levels of radiation.

     In the field of dentistry, the Company's CDR(R) computed dental radiography
imaging system was introduced in March 1994 and has become a leading  product in
its field.  The CDR system uses an intra-oral  sensor to produce  instant,  full
size,  high resolution  dental x-ray images on a color computer  monitor without
film or the need for chemical development,  while reducing the radiation dose by
up to 80% or more as compared  with  conventional  x-ray film.  The Company also
manufactures  and sells the CDRCam(R)  2000,  an  intra-oral  camera which fully
integrates with the CDR system, and the CDRPan(TM),  a digital panoramic imaging
device. The Company is also developing other products and devices for the dental
field in addition to newer versions of its current products.

     In the field of medical radiography, the Company manufactures and sells the
accuDEXA(R) bone  densitometer,  a low-cost and  easy-to-operate  device for the
assessment of bone mineral density and fracture risk. Additionally,  the Company
is developing a digital  mammography device which, it believes,  will offer high
quality   diagnostic   capability  at  a  reasonable  cost,  and  has  commenced
development of a general digital  radiography device for intended use in various
applications,  including  mobile  medicine,  orthopedics,  podiatry,  veterinary
medicine and industrial non-destructive testing.

     The  Company's  core  products  are  based  primarily  on  its  proprietary
active-pixel  sensor ("APS")  imaging  technology.  In addition,  certain of the
Company's  products  are based upon its  proprietary  enhanced  charged  coupled
device  ("CCD")  imaging  technology.  APS allows the  fabrication of large-area
imaging  devices with high  resolution at a fraction of the cost of  traditional
technologies.   APS  technology  was  originally  developed  by  the  California
Institute of Technology and licensed to Photobit Corporation;  it is sublicensed
to the Company for a broad range of health care applications.

     The Company's  objective is to be the leading  provider of high resolution,
low-cost  digital  radiography  products.  The  Company  plans to  leverage  its
technological  advantage in the digital imaging field to penetrate a broad range
of  diagnostic  imaging  markets.  The  Company  believes  that its  proprietary
technologies  and  expertise  in  electronics,  imaging  software  and  advanced
packaging may enable it to compete  successfully in these markets.  Key elements
of the  Company's  strategy  include (i) expanding  market  leadership in dental
digital   radiography   through   expanded  sales   channels,   further  product
enhancements  and  strategic  distribution  agreements  ;  (ii)  broadening  the
marketing of  accuDEXA(R)  to the medical market through a combination of direct
sales and increased marketing  activities;  (iii) introducing new products based
on patented and  proprietary  APS  technology  for other medical and  industrial
applications;   and  (iv)  enhancing  international  distribution  channels  for
existing and new products.

     The  Company's  business  was  founded in 1992 and it was  incorporated  in
Delaware in 1997.  On July 7, 1997,  the  Company  completed  an initial  public
offering of its Common  Stock.  Proceeds to the  Company  after  expenses of the
offering were approximately $33,508,000.

     On December 27, 1999, the Company established a strategic relationship with
Greystone  Funding  Corporation  ("Greystone") and entered into a Loan Agreement
with Greystone which provides for the establishment of a credit facility for the
Company in an amount of up to $7.5 million.  In connection  with this Agreement,
as amended and restated on March 17, 2000, Greystone designees were appointed to
the Company's  Board of Directors and key executive  management  positions.  The
Company  intends  that the  Greystone  line of credit will be used to provide it
with  working  capital  and  help  facilitate  future  growth.  See  "Item  7  -
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations."

     The Company's  offices are located at 31-00 47th Avenue,  Long Island City,
New York 11101. The Company's


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telephone   number   is   (718)   937-5765,   and  its  web  site   address   is
http://www.schicktech.com.

PRODUCTS / INDUSTRY

   Dental Imaging

     X-ray  imaging,  or  radiography,  is  widely  used as a  basic  diagnostic
technique in a broad range of medical  applications.  To produce a  conventional
radiograph,  a film  cassette  is placed  behind the  anatomy  to be  imaged.  A
generator,  which  produces high energy  photons known as x-rays,  is positioned
opposite the film  cassette.  The  transmitted  x-rays pass through soft tissue,
such as skin and muscle,  and are absorbed by harder  substances,  such as bone.
These x-rays then form a latent image upon the film. After exposure, the film is
passed through a series of chemicals and then dried.

     Film,  however,  has  certain  inherent  limitations,  including  the time,
operating   expense,   inconvenience   and  uncertainty   associated  with  film
processing,  as well as the cost of disposal of waste chemicals and the need for
compliance with  environmental  regulations.  Furthermore,  the radiation dosage
levels  required to assure  adequate  image quality in  conventional  film raise
concerns regarding the health risks associated with exposure to radiation. Also,
conventional film images cannot be electronically retrieved from patient records
or electronically  transmitted to health care providers or insurance carriers at
remote  locations,  a  capability  which has become  increasingly  important  in
today's managed care  environment.  While x-ray scanning  systems convert x-rays
into digital form, they add to the substantial time and expense  associated with
the  use of  conventional  film  and do not  eliminate  the  drawbacks  of  film
processing.

     Digital   radiography   products  have  been   developed  to  overcome  the
limitations of conventional  film. These systems replace the  conventional  film
cassette with an electronic receptor which directly converts the incident x-rays
to digital images.  The first system to employ certain aspects of this technique
was Computed Radiography(TM) ("CR"), a "near real time" system, in which a laser
scanner  reads the x-ray  image from a  specially  designed  cassette.  While CR
allows the images to be electronically displayed and stored, it does not achieve
instant results, and employs a large, costly scanning system. Other technologies
which  allow for instant  acquisition  of digital  x-rays  have been  developed,
including  CCD arrays and  amorphous  silicon  panels,  neither of which is well
suited for  imaging  large  areas due,  respectively,  to high cost and  limited
resolution.

     Dentists,  who typically  perform their own radiology  work,  represent the
single largest group of radiologists in the world and the dental industry is, in
terms  of unit  volume,  the  largest  consumer  of  radiographic  products  and
equipment.

     The Company believes that there is a potential market for approximately 1.1
million digital dental radiography devices worldwide.  According to the American
Dental Association,  there are approximately  150,000 practicing dentists in the
United States. The Company believes that each of them, on average,  operates 2.5
radiological  units,  creating  a  potential  market of 375,000  digital  dental
radiography devices in the United States. In addition, the Company believes that
there  are  approximately  600,000  practicing  dentists  in the  world's  major
healthcare  markets outside of the United States and, the Company  believes that
each of them, on average, operates 1.25 radiological units, creating a potential
market of 750,000 additional devices.

     The Company believes that dentists have a particularly strong motivation to
adopt digital  radiography.  Radiographic  examinations  are an integral part of
routine  dental  checkups  and the  dentist  is  directly  involved  in the film
development  process.  The use of digital radiography  eliminates delays in film
processing,   thus  increasing  the  dentist's   potential  revenue  stream  and
efficiency,  and reduces overhead expenses.  The use of digital radiography also
allows dentists to more effectively communicate diagnosis and treatment plans to
patients,  which the Company  believes has the potential to increase the rate of
patients'  treatment  acceptance  and resulting  revenues.  Finally,  the dosage
required to produce an intra-oral dental x-ray, which is high when compared with
other medical  radiographs,  can be reduced by up to 80% or more through the use
of digital radiography.

     The Company's principal  revenue-generating  product is its CDR(R) computed
dental  radiography  imaging


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system.  The Company's CDR(R) system is easy to operate and can be used with any
dental  x-ray  generator.  To produce a digital  x-ray image using  CDR(R),  the
dentist  selects  an  intra-oral  sensor of  suitable  size and places it in the
patient's  mouth.  The sensor  converts the x-rays into a digital  image that is
displayed on the computer monitor within five seconds and  automatically  stored
as part of the patient's  clinical  records.  CDR(R) system  software allows the
dentist to perform a variety of advanced diagnostic operations on the image. The
sensor  can  then be  repositioned  for the next  x-ray.  As the  x-ray  dose is
significantly lower than that required for conventional x-ray film, concern over
the potential  health risk posed by multiple x-rays is greatly  diminished.  The
process is easy and intuitive, enabling nearly any member of the dental staff to
operate the CDR(R) system with minimal training.

     The Company manufactures digital sensors in three sizes which correspond to
the three standard size conventional  x-ray films. Size 0 measures 31 x 22 x 5mm
and is designed for pediatric use; size 1 measures 37 x 24 x 5mm and is designed
for taking  anterior  dental  images;  and size 2 measures  43 x 30 x 5mm and is
designed to take bitewing  images.  All of the Company's  CDR(R)  sensors can be
sterilized  using  cold  solutions  or gas.  The  typical  CDR(R)  configuration
includes a computer,  display monitor and size 2 digital sensor. Since mid-1998,
the computers  sold by the company as a component part of the CDR(R) system have
been  manufactured  exclusively  by Dell  Computer  Corporation,  pursuant to an
agreement between the Company and Dell.

     The Company began selling its intra-oral  camera,  the CDRCam(R),  in early
1997 and introduced the CDRCam(R) 2000, a redesigned version of the product,  in
November  1999.  CDRCam(R)  fully  integrates  with the CDR(R) system to provide
color video images of the structures of the mouth.  Since their  introduction in
1991,  intra-oral cameras have become widely accepted as a dental  communication
and presentation tool. CDRCam(R) is "ETL Listed." ETL is a North American Safety
Mark indicating compliance with safety standard UL-2601-1.

     In March 1999,  the  Company  commenced  the sale of its digital  panoramic
imaging device, the CDRPan(TM). This device, which is designed to be retrofitted
into conventional panoramic dental x-ray machines, replaces film with electronic
sensors  and  a  computer.   This  obviates  the  need  for  film  and  provides
instantaneous  images,  thus offering  substantial  savings in terms of time and
costs.  Additionally,  the CDRPan easily integrates with practice management and
other computer software applications.

   Bone Mineral Density / Fracture Risk Assessment

     Assessment of bone mineral density ("BMD") is an essential component in the
diagnosis and monitoring of osteoporosis.  Osteoporosis is a disease that causes
progressive  loss of bone mass  which,  in  serious  cases,  may  result in bone
fractures and even death. Osteoporosis can develop over the course of many years
without apparent symptoms,  until bone is sufficiently degenerated and fractures
occur. The National Osteoporosis Foundation has estimated that approximately 200
million people suffer from the disease worldwide, which affects one out of three
postmenopausal  women and one out of ten men over the age of 70.  In the  United
States,  an estimated 28 million people suffer from the disease or have low bone
mass,  placing  them at increased  risk for  osteoporosis.  The total  estimated
health care cost of osteoporosis in the United States, including indirect costs,
is approximately $14 billion annually.

     Until  recently,   osteoporosis  was  considered   neither   treatable  nor
preventable.   Because  effective  treatments  are  now  available  and  because
osteoporosis may be preventable if detected in its early stages,  the demand for
BMD  diagnostic  equipment  has  significantly  increased.  Because of the large
population  segment which could benefit from BMD testing,  the Company  believes
that there is a need for a practical,  instant, cost effective, precise, compact
and easy-to-use BMD testing device for the primary care physician.  Primary care
physicians consist of internal medicine, family, geriatric and OB/GYN practices.
These practices represent  approximately  172,000 potential testing sites in the
United States alone.  Traditional BMD assessment devices have been large, costly
and difficult to operate, and are mainly found in large hospitals and diagnostic
imaging centers.  It is estimated that in 1999, there were  approximately  6,000
such BMD assessment devices in use in the United States.

     The Company has developed an  innovative  BMD  assessment  device to assist
doctors in the diagnosis of low bone density and  prediction  of fracture  risk.
The Company  believes that this  low-cost and highly  precise  diagnostic  tool,
which is marketed under the trade name  accuDEXA(R),  assesses BMD more quickly,
accurately and easily than


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any comparable product currently on the market,  while using a minimal radiation
dosage.  It is a  point-of-treatment  tool,  designed  for use by  primary  care
physicians as an integral part of a patient's regular physical  examination.  In
December  1997, the Company  received  clearance from the United States Food and
Drug Administration ("FDA") for the general use and marketing of the accuDEXA(R)
as a BMD  assessment  device;  in  June,  1998,  the  FDA  granted  the  Company
additional  clearance  for its  marketing of the  accuDEXA(R)  as a predictor of
fracture risk.

     Based on APS technology, accuDEXA(R) is a small self-contained unit capable
of instantly  assessing the BMD of a specific  portion of the patient's  hand, a
relative  indicator of BMD  elsewhere in the body.  This device is the first BMD
assessment  instrument that is virtually  automatic,  requiring  little operator
intervention,  calibration  or  interfacing  other  than the  entry of  relevant
patient data into a built-in touch sensitive LCD screen.  The device requires no
external x-ray  generator or computer and it exposes the patient to less than 1%
of the radiation of a single  conventional  chest x-ray. To perform a test using
the accuDEXA(R),  the patient places his or her hand into a positioner and, upon
activation by the operator,  the device automatically emits two low-dosage x-ray
pulses. The patient's bone density and fracture risk information is displayed on
the screen in less than 30 seconds.  The  accuDEXA(R)  is "ETL Listed." ETL is a
North American Safety Mark indicating compliance with safety standard UL-2601-1.

   Mammography

     Digital  mammography offers significant  advantages over current film-based
systems,  yielding  higher  contrast,  improved  resolution and lower  radiation
dosage.  Digital  mammography may be especially  useful in screening women under
the age of 50 because of its enhanced  ability to image the denser breast tissue
typically  found in younger  women.  Clinical  testing  has shown  that  digital
mammography,  as  compared  with  non-digital  devices,  can  increase  accurate
diagnosis by 20%. Digital  mammography also provides instant images allowing for
real time stereotactic needle biopsies.

     In January 2000,  General Electric Company received  clearance from the FDA
to  market  the  first  screening  digital  mammography   system.   Three  other
manufacturers,  Trex  Medical  Corporation,  Fuji  Medical  Systems  and Fischer
Imaging  Corporation,  are preparing  clinical trials for digital  devices.  The
Company  believes  that the price range for these  devices  will  likely  exceed
$250,000.


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     The  Company has  developed  a method of  producing  high  quality  digital
mammography  sensors at a cost which, it believes,  will be substantially  lower
than its competitors'  existing and proposed systems.  The Company believes that
its digital mammography sensors will yield higher contrast,  improved resolution
and lower radiation  dosage than current film based systems,  will be especially
useful in screening the denser breast tissue  typically found in women under the
age of 50 and will allow for real time  stereotactic  needle biopsies.  Clinical
testing  has  shown  that,  in  comparison  with  non-digital  devices,  digital
mammography can increase accurate diagnosis by 20%.

     The  Company's  proprietary  technology  allows  the  fabrication  of  high
resolution,  large-area  devices at low cost.  The  Company has  manufactured  a
prototype of an 10" x 6" sensor and currently plans to commence  clinical trials
this year. The Company has not yet filed for FDA clearance of this device. There
can be no assurance  that the Company  will file for such  clearance or that the
FDA will grant such clearance. See "Business - Government Regulation."

   General Digital Radiography

     The Company is also developing a mobile 8"x 10" digital  radiography system
for various  applications.  This unit is targeted primarily for peripheral x-ray
images,  such as  orthopedic  and  podiatric.  The  unit is  also  suitable  for
veterinary and non-destructive  testing  applications.  Management believes that
the unit will be available for sale by mid-2001,  pending  clearance by the FDA.
There can be no assurance  that the Company will file for such clearance or that
the FDA will grant such clearance. See "Business - Government Regulation."

   Schick X-Ray Corporation

     On September 24, 1997,  the Company  completed the  acquisition  of certain
assets of Keystone Dental X-Ray, Inc., a manufacturer of x-ray equipment for the
medical and dental  radiology  field,  for $1.5  million in cash.  The  acquired
assets were  integrated  into the  Company's  former  subsidiary,  Schick  X-Ray
Corporation ("Schick X-Ray"). In August 1999, Schick X-Ray was dissolved and its
operations absorbed by the Company.

MANUFACTURING

     The  Company's  products  are  manufactured  at its facility in Long Island
City, New York, which includes a 2,300 square foot controlled environment sensor
production facility. This facility is subject to periodic inspection by the FDA.
The Company has  invested in  automated  and  semi-automated  equipment  for the
fabrication and machining of parts and assemblies  incorporated in its products.
The  Company's  quality  assurance  program  includes  various  quality  control
measures  from  inspection  of raw  materials,  purchased  parts and  assemblies
through  in-process  and final  inspection and conforms to the guidelines of the
International  Quality  Standard,  ISO 9001.  In August  1998,  the  Company was
granted  ISO 9001  certification  and,  since  that  time,  has been  subject to
semi-annual audits to ensure the maintenance of such certification.

     The Company  manufactures  most of its custom components itself in order to
minimize  dependence  on  suppliers,  for quality  control  purposes and to help
maintain process  propriety.  While the Company does procure certain  components
from outside sources which are sole suppliers, it believes that those components
could be  obtained  from  additional  sources  without  substantial  difficulty,
although the need to change  suppliers or to alternate  between  suppliers might
cause  significant  delays in delivery or  significantly  increase the Company's
costs. The Company procures its APS and CCD semiconductor  wafers, a significant
component of its products,  each from a single supplier.  Extended interruptions
of this supply could have a material adverse effect on the Company's  ability to
produce its products and its results of operations.  The Company's manufacturing
processes  are, for the most part,


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vertically  integrated,  although  selective  outsourcing  is  employed  to take
advantage  of  economies  of scale at outside  manufacturing  facilities  and to
alleviate  manufacturing  bottlenecks.   Certain  components  used  in  existing
products of the Company, as well as products under development, may be purchased
from single sources.

DEPENDENCE ON CUSTOMERS

     During  fiscal  2000 and  1999,  a single  customer,  Henry  Schein,  Inc.,
accounted for annual sales by the Company of $2.6 and $7.2 million, or 11.7% and
15.8%,  respectively, of annual sales.  During  fiscal 1998, no single  customer
accounted for more than ten percent of the Company's annual sales. During fiscal
2000, 1999 and 1998,  respectively,  sales of approximately  $6.5 million,  $6.0
million, and $7.1 million were made to foreign customers.

PATENTS, TRADE SECRETS AND PROPRIETARY RIGHTS

     The  Company  seeks  to  protect  its   intellectual   property  through  a
combination  of patent,  trademark  and trade secret  protection.  The Company's
future success will depend in part on its ability to obtain and enforce  patents
for its products and processes,  preserve its trade secrets and operate  without
infringing the proprietary rights of others.

   Patents

     The Company has an active corporate patent program, the goal of which is to
secure patent  protection for its technology.  The Company  currently has issued
United States patents for an `Intra-Oral Sensor For Computer Aided Radiography,'
U.S.  Patent No.  5,434,418,  which  expires on October 16,  2012; a `Large Area
Image Detector,' U.S. Patent No. 5,834,782,  which expires on November 20, 2016;
a `Method and Apparatus for Measuring Bone Density,' U.S. Patent No.  5,852,647,
which expires on September 24, 2017;  an 'Apparatus  for Measuring  Bone Density
Using Active Pixel Sensors,' U.S. Patent No. 5,898,753, which expires on June 6,
2017;  a  'Dental  Imaging  System  with  Lamps and  Method,'  U.S.  Patent  No.
5,908,294,  which  expires on June 12, 2017;  an 'X-ray  Detection  System Using
Active Pixel Sensors,' U.S. Patent No. 5,912,942, which expires on June 6, 2017;
a `Dental  Imaging  System with White  Balance  Compensation,'  U.S.  Patent No.
6,002,424,  which  expires on June 12, 2017;  and `Dental  Radiography  Using an
Intraoral  Linear Array  Sensor,' U.S.  Patent No.  5,995,583,  which expires on
November 13, 2016;  and a `Method for Reading Out Data from an X-Ray  Detector,'
U.S.  Patent No.  6,069,935,  which  expires on June 6, 2017.  In addition,  the
Company is the licensee of U.S. Patent No. 5,179,579,  for a 'Radiograph Display
System with  Anatomical  Icon for Selecting  Digitized  Stored  Images,' under a
worldwide,  non-exclusive,  fully paid license.  The Company also has additional
U.S. and foreign patent applications currently pending.

     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   ("CMOS")  active  pixel  sensor
technology  (collectively,  the "APS  Technology"),  which was  developed by the
California Institute of Technology and licensed to Photobit Corp. from which the
Company  obtained  its  sub-license.  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, as of the date of this filing, 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.
Additionally,  the agreement  between the Company and Photobit  Corp.  requires,
among other things, that the Company use all commercially  reasonable efforts to
timely introduce, improve and market and distribute licensed products. There can
be no  assurance  that the Company  will comply with its  obligations  under its
agreement  with Photobit  Corp. Any such failure to comply could have a material
adverse effect on the Company.

   Trademarks

     The Company  has  obtained  trademarks  from the United  States  Patent and
Trademark  Office  for the marks (i) "CDR" for its  digital  dental  radiography
product;  (ii) "CDRCam"  (both textual and stylized) for its  intra-oral  camera


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<PAGE>

(iii)  "QuickZoom"  (both  textual and  stylized)  for a viewing  feature in its
digital dental radiography  product;  and (iv) "accuDEXA" for its BMD assessment
product. The Company has three additional trademark  applications pending before
the PTO.

   Trade Secrets

     In  addition  to patent  protection,  the  Company  owns trade  secrets and
proprietary  know-how which it seeks to protect,  in part,  through  appropriate
Non-Disclosure,  Non-Solicitation,  Non-Competition  and Inventions  Agreements,
and, to a limited degree,  employment agreements,  with appropriate individuals,
including employees,  consultants,  vendors and independent  contractors.  These
agreements generally provide that all confidential  information  developed by or
made  known  to  the  individual  by  the  Company  during  the  course  of  the
individual's  relationship with the Company is the property of the Company,  and
is to be kept  confidential  and not  disclosed  to  third  parties,  except  in
specific limited  circumstances.  The agreements also generally provide that all
inventions  conceived by the  individual in the course of rendering  services to
the Company shall be the exclusive property of the Company.  However,  there can
be no assurances that these  agreements  will not be breached,  that the Company
would have  adequate  remedies  available  for any breach or that the  Company's
trade secrets will not otherwise become known to, or independently developed by,
its competitors.

GOVERNMENT REGULATION

     Products  that the Company is  currently  developing  or may develop in the
future are likely to require certain forms of governmental clearance,  including
marketing  clearance  by the United  States  Food and Drug  Administration  (the
"FDA").  The  FDA  review  process  typically   requires  extended   proceedings
pertaining to product safety and efficacy.  The Company believes that its future
success will depend to a large degree upon commercial sales of improved versions
of its current products and sales of new products;  the Company will not be able
to market such  products in the United States  without FDA marketing  clearance.
There can be no  assurance  that any  products  developed  by the Company in the
future will be given  clearance by applicable  governmental  authorities or that
additional  regulations  will not be adopted or current  regulations  amended in
such a manner as to adversely affect the Company.

     Pursuant to the Federal Food,  Drug and Cosmetic Act, as amended (the "FD&C
Act"),  the FDA  classifies  medical  devices  intended for human use into three
classes:  Class I, Class II,  and Class III.  In  general,  Class I devices  are
products  for which the FDA  determines  that  safety and  effectiveness  can be
reasonably  assured  by general  controls  under the FD&C Act  relating  to such
matters as adulteration,  misbranding,  registration,  notification, records and
reports. The CDRCam(R) is a Class I device.

     Class II devices are  products  for which the FDA  determines  that general
controls  are  insufficient  to  provide a  reasonable  assurance  of safety and
effectiveness,  and  that  require  special  controls  such as  promulgation  of
performance  standards,  post-market  surveillance,  patient  registries or such
other actions as the FDA deems  necessary.  The CDR(R)  system,  CDRPan(TM)  and
accuDEXA(R) have been classified as Class II devices.

     Class  III  devices  are  devices  for  which  the  FDA  has   insufficient
information to conclude that either general  controls or special  controls would
be sufficient to assure safety and effectiveness, and which are life-supporting,
life-sustaining,  of  substantial  importance in preventing  impairment of human
health, or present a potential  unreasonable risk of illness or injury.  Devices
in this case  require  pre-market  approval,  as  described  below.  None of the
Company's existing products are in the Class III category.

     The FD&C Act further provides that, unless exempted by regulation,  medical
devices may not be  commercially  distributed  in the United  States unless they
have been cleared by the FDA.  There are two review  procedures by which medical
devices can receive such  clearance.  Some  products  may qualify for  clearance
under a Section 510(k) procedure, in which the manufacturer submits to the FDA a
pre-market  notification  that it intends to begin  marketing  the product,  and
shows that the product is  substantially  equivalent to another legally marketed
product  (i.e.,  that it has the  same  intended  use and that it is as safe and
effective as a legally marketed device,  and does not raise different  questions
of safety and effectiveness than does a legally marketed device). In some cases,
the 510(k) notification


                                       7
<PAGE>

must include data from human clinical studies.

     Marketing may commence once the FDA issues a clearance  letter finding such
substantial equivalence. According to FDA regulations, the agency has 90 days in
which to respond to a 510(k) notification.  There can be no assurance,  however,
that the FDA will provide a timely response,  or that it will reach a finding of
substantial equivalence.

     If a product does not qualify for the 510(k)  procedure  (either because it
is not substantially  equivalent to a legally marketed device or because it is a
Class  III  device),   the  FDA  must  approve  a  Pre-Market  Approval  ("PMA")
application before marketing can begin. PMA applications must demonstrate, among
other things,  that the medical device is safe and effective.  A PMA application
is typically a complex submission that includes the results of clinical studies.
Preparation  of such an application  is a detailed and  time-consuming  process.
Once a PMA  application  has been  submitted,  the FDA's  review  process may be
lengthy and include requests for additional data. By statute and regulation, the
FDA may take 180 days to  review a PMA  application,  although  such time may be
extended.  Furthermore, there can be no assurance that a PMA application will be
approved by the FDA.

     In February  1994,  the FDA cleared the Company's  510(k)  application  for
general  use and  marketing  of the CDR(R)  system.  In November  1996,  the FDA
cleared the Company's  510(k)  application  for general use and marketing of the
CDRCam(R).  In December 1997, the FDA cleared the Company's  510(k)  application
for general use and marketing of  accuDEXA(R).  On June 4, 1998, the FDA granted
the  Company  additional  clearance  to market  accuDEXA(R)  as a  predictor  of
fracture  risk.  In  December  1998,  the  FDA  cleared  the  Company's   510(k)
application  for  CDRPan(TM).  The  Company  has  not  yet  submitted  a  510(k)
application for digital mammography sensors.  There can be no assurance that the
Company will submit such  application  or that it will obtain FDA  clearance for
such products.

     In addition to the requirements described above, the FD&C Act requires that
all medical device manufacturers and distributors register with the FDA annually
and provide the FDA with a list of those medical  devices which they  distribute
commercially.  The FD&C Act also  requires  that all  manufacturers  of  medical
devices comply with labeling  requirements  and  manufacture  their products and
maintain their documents in a prescribed  manner with respect to  manufacturing,
testing,  and quality  control  activities.  The FDA's Medical Device  Reporting
regulation  subjects medical devices to post-market  reporting  requirements for
death or serious injury,  and for certain  malfunctions  that would be likely to
cause or contribute to a death or serious injury if  malfunction  were to recur.
In addition,  the FDA prohibits a device which has received marketing  clearance
from being marketed for applications for which marketing  clearance has not been
obtained.  Furthermore,  the FDA  generally  requires  that medical  devices not
cleared for  marketing  in the United  States  receive FDA  marketing  clearance
before they are exported, unless an export certification has been granted.

     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, 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 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.


                                       8
<PAGE>

     The Company is currently developing new products for the dental and medical
markets.  The  Company  expects  to file  510(k)  applications  with  the FDA in
connection with the digital  mammography  sensors currently under development by
the  Company,   and  other  future  products,   including  its  general  digital
radiography  sensors.  There can be no assurance that the Company will file such
510(k)  applications  and/or will obtain  pre-market  clearance  for the digital
mammography  sensors or any other  future  products,  or that in order to obtain
510(k) clearance,  the Company will not be required to submit additional data or
meet additional FDA requirements that may substantially delay the 510(k) process
and  result  in  substantial  additional  expense.   Moreover,  such  pre-market
clearance,  if  obtained,  may be  subject to  conditions  on the  marketing  or
manufacturing  of  the  digital  mammography  sensors  which  could  impede  the
Company's  ability to  manufacture  and/or  market the product.  There can be no
assurance that the digital mammography or general digital radiography sensors or
any other  products which may be developed by the Company will be approved by or
receive marketing  clearance from applicable  governmental  authorities.  If the
Company is unable to obtain regulatory  approval for and market new products and
enhancements to existing products, it will have a material adverse effect on the
Company.

     Failure to comply with applicable regulatory  requirements can, among other
consequences, result in fines, injunctions, civil penalties, suspensions or loss
of  regulatory  approvals,  product  recalls,  seizure  of  products,  operating
restrictions and criminal prosecution. In addition, governmental regulations may
be established that could prevent or delay regulatory clearance of the Company's
products.  Delays in receipt of clearance,  failure to receive  clearance or the
loss of previously  received  clearance would have a material  adverse effect on
the Company's business, financial condition and results of operations.

     In addition  to laws and  regulations  enforced by the FDA,  the Company is
subject to government regulations applicable to all businesses, including, among
others, regulations related to occupational health and safety, workers' benefits
and  environmental  protection.  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's  business,  financial  condition and results of
operations.

     Distribution  of the Company's  products in countries other than the United
States may be subject to regulations in those countries.  These regulations vary
significantly  from  country to  country;  the Company  typically  relies on its
independent  distributors  in such  foreign  countries  to obtain the  requisite
regulatory approvals.  The Company has obtained the "CE mark," necessary for the
marketing of its products in the member  countries of the European Union. The CE
mark is a European Union symbol of adherence to quality assurance  standards and
compliance with the European Union's Medical Device Directives.  The Company has
developed and  implemented a quality  assurance  program in accordance  with the
guidelines of the International  Quality Standard,  ISO 9001. In August of 1998,
the Company was granted ISO 9001  certification.  The Company's current products
also have been  awarded  the "ETL"  and "CSA"  marks.  These are North  American
safety marks which indicate compliance with U.L. Standard 2601.

PRODUCT LIABILITY INSURANCE

     The Company is subject to the risk of product liability and other liability
claims in the event that the use of its products  results in personal  injury or
other claims.  Although the Company has not  experienced  any product  liability
claims to date, any such claims could have an adverse impact on the Company. The
Company maintains  insurance  coverage related to product liability claims,  but
there can be no assurance that product liability or other claims will not exceed
its  insurance  coverage  limits,  or that such  insurance  will  continue to be
available on commercially acceptable terms, or at all.

RESEARCH AND DEVELOPMENT

     During fiscal 2000, 1999 and 1998,  research and development  expenses were
$2.8 million, $4.4 million and $3.9 million, respectively.

BACKLOG

     The backlog of orders was  approximately  $2.0  million and $2.5 million at
June 1, 2000 and June 1, 1999,


                                       9
<PAGE>

respectively. Such figures include approximately $634,000 and $887,000 of orders
on hold pending credit approval at June 1, 2000 and June 1, 1999,  respectively.
Orders  included  in backlog  may  generally  be  cancelled  or  rescheduled  by
customers without significant penalty.

EMPLOYEES

     As of June 7, 2000, the Company had 153 full-time employees, engaged in the
following capacities: sales and marketing (30); general and administrative (31);
operations  (73); and research and development  (19). The Company  believes that
its relations with its employees are good. No Company  employees are represented
by a labor union or are subject to a collective  bargaining  agreement,  nor has
the Company experienced any work stoppages due to labor disputes.

SALES AND MARKETING

   Dental Products

     In April 2000,  the  Company and  Patterson  Dental  Company  ("Patterson")
entered into an exclusive  distribution  agreement  and, as of May 1, 2000,  the
Company began  marketing  and selling its CDR(R)  dental  products in the United
States and Canada through Patterson.  The Company believes that Patterson is one
of the largest distributors of dental products in North America,  with more than
1,000 field sales personnel in the U.S. and Canada. In addition, the Company has
an in-house sales program which focuses on universities and continuing education
programs.  As of March 1,  2000,  CDR(R)  had been  sold to 47 of the 54  dental
schools in the United  States.  The  Company  also  employs a  government  sales
program  to  sell  directly  to  the  Armed  Services,  Veterans  Administration
hospitals,  United States Public Health  Service and other  government-sponsored
health institutions.

     The Company employs approximately 17 area sales managers located throughout
the United States to interface with and assist  Patterson in its sales effort. A
sales and marketing  support staff of approximately 3 individuals,  based at the
Company's offices in New York,  supports the sales managers and the direct sales
force by planning events and developing promotional and marketing materials.

     In the  international  market,  the  Company  sells the  CDR(R)  system via
independent  regional  distributors.   There  are  currently   approximately  59
independent  CDR(R) dealers,  covering over 70 countries.  A dedicated  in-house
staff provides the foreign distributors with materials, technical assistance and
training, both in New York and abroad.

     The  Company's  goal is to utilize  its leading  position in the  industry,
secure as many  productive  sales channels as possible and to rapidly  penetrate
additional segments of the international market.

   BMD / Fracture Risk Assessment

     The Company  currently  sells the  accuDEXA(R)  primarily  through a direct
in-house  sales force and is exploring  alternative  sales avenues and potential
strategic  partnerships.  To date,  accuDEXA(R) sales have taken place primarily
within the United States, with a relatively small number of sales (less than 3%)
abroad.  The primary  end-users  for  accuDEXA(R)  are primary care  physicians,
including OB/GYN practices, and osteopathic and geriatric specialists.

     Pharmaceutical  companies are currently involved in wide-scale osteoporosis
education  and  awareness  programs  targeted  at  physicians.  A number of such
companies,  including Novartis Pharma AG, Wyeth-Ayerst  Laboratories,  Eli Lilly
Co., Merck & Co. and Procter & Gamble, currently have FDA-approved therapies for
the  treatment  of  osteoporosis.   The  Company  believes  that  several  other
companies,  including  Boehringer-Mannheim  GmbH,  Sanofi-Synthelabo,  Inc.  and
Pfizer Inc. , have  additional  products that are currently in clinical  trials.
The Company  expects  that the efforts of  pharmaceutical  companies  to develop
medicines  and  treatment  programs  will  result in the  expansion  of doctors'
involvement in initial screening and routine management of osteoporosis, thereby
increasing  the  market  for BMD  assessment  devices.  The  Company  intends to
capitalize on these efforts both in the United States and abroad.


                                       10
<PAGE>

     The Company has successfully completed a number of research studies and has
collected normative reference data for the accuDEXA(R) databases. These research
studies  addressed  issues of  long-term  importance  such as the  detection  of
osteoporosis  and patient risk for bone  fracture.  The Company has  established
normative  reference  databases  for  Asian  female,   African-American  female,
Hispanic female,  Caucasian female and Caucasian male  populations.  The Company
will  utilize  these  databases  to address the needs of  healthcare  markets in
different countries and regions and expects them to positively impact upon sales
of accuDEXA(R)  abroad. The Company is currently  conducting research studies to
investigate the accuDEXA's  ability to successfully  monitor a course of therapy
over a period of time.

   Mammography

     The  Company is  considering  several  possible  sales  strategies  for the
marketing and distribution of its mammography devices and has not yet determined
which strategies it will employ.

COMPETITION

     Competition  relating  to the  Company's  current  products  is intense and
includes various companies,  both within and outside of the United States.  Many
of the Company's  competitors  are large  companies  with  financial,  sales and
marketing, and other resources which are substantially greater than those of the
Company.  In  addition,  they  may  have  substantially  greater  experience  in
obtaining regulatory approvals than that of 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 of the Company or that would otherwise render the Company's  products
obsolete or  uncompetitive.  No assurance  can be given that the Company will be
able to compete successfully.

   Dental Products

     A number of companies  currently sell  intra-oral  digital dental  sensors.
These  include  Trex  Medical   Corporation's   Trophy  Radiologie   subsidiary,
Provisions Dental Systems,  Inc., Sirona Dental Systems.,  Cygnus Imaging, Inc.,
and DMD. In addition,  Dentsply  International  and Soredex  Corporation  sell a
storage-phosphor  based intra-oral dental system.  The Company believes that the
CDR(R)  system has thus far competed  successfully  against other  products.  If
other  companies  enter  the  digital  radiography  field,  it may  result  in a
significantly  more  competitive  market in the future.  Several  companies  are
involved in the manufacture and sale of intra-oral  cameras,  including Dentsply
International Inc.,  Welch-Allyn Co., Henry Schein Co., Ultra-Cam,  Air Technics
and DMD. Digital panoramic dental devices are manufactured by several companies,
including Sirona, Signet,  Instrumentarium  Imaging and Planmeca. Of those, only
the device  manufactured by Signet is designed to be incorporated  into existing
conventional panoramic devices.

   BMD / Fracture Risk Assessment

     Two other companies,  Lunar Corporation and Norland Medical Systems,  Inc.,
are  currently  marketing   peripheral  BMD  densitometers.   Several  companies
including Lunar,  Hologic,  Inc. and Norland are marketing peripheral ultrasound
devices.  A number of other companies have submitted 510(k)  applications to the
FDA  seeking   clearance  to  market  other  devices.   Two   companies,   Ostex
International  Inc.  and Metra  Biosystems,  Inc.,  have  developed  biochemical
markers which indicate the rate at which the body is resorbing  (i.e.,  breaking
down) bone.  Another  potential  competitor of the Company's  accuDEXA(R)is  the
Osteogram  2000,  manufactured  by CompuMed  Inc., a peripheral  screening  test
employing RA technology, conventional hand x-rays and computer analysis.

   Mammography

     The  companies  in the digital  mammography  market  include the  following
manufacturers of traditional  mammography  devices: GE Medical Systems,  Fischer
Imaging, Trex Medical, Instrumentarium Imaging, Philips and Siemens.


                                       11
<PAGE>

FORWARD-LOOKING STATEMENTS

     This Form 10-K  Annual  Report  contains  forward-looking  statements  that
involve  risk and  uncertainties.  All  statements,  other  than  statements  of
historical  facts,  included in this Annual Report  regarding  the Company,  its
financial position,  business strategy and plans and objectives of management of
the Company for future operations, are forward-looking  statements. When used in
this Annual Report, words such as "anticipate," "believe," "estimate," "expect,"
"intend,"  "objectives,"  "plans"  and  similar  expressions,  or the  negatives
thereof or variations  thereon or comparable  terminology  as they relate to the
Company, its products or its management,  identify  forward-looking  statements.
Such  forward-looking  statements  are  based on the  beliefs  of the  Company's
management,  as well as assumptions made by and information  currently available
to the Company's  management.  Actual results could differ materially from those
contemplated by the  forward-looking  statements as a result of various factors,
including,  but not limited to, those contained in "Management's  Discussion and
Analysis of Financial Condition and Results of Operations" in this Annual Report
and the "Risk  Factors"  set forth in  Exhibit  99 to this  Annual  Report.  All
subsequent  written  and oral  forward-looking  statements  attributable  to the
Company  or  persons  acting on its  behalf  are  expressly  qualified  in their
entirety by this paragraph.

ITEM 2.  PROPERTIES

     The Company presently leases approximately  103,000 square feet of space in
Long Island City, New York. This space houses the Company's  executive  offices,
sales and marketing  headquarters,  research and  development  laboratories  and
production and shipping facilities. The Company believes that such space will be
adequate for its needs for the foreseeable future.

ITEM 3.  LEGAL PROCEEDINGS

     The  Company  and/or  certain  of its  officers  and former  officers,  are
involved in the proceedings described below:

     I. The Company is a named  defendant in two lawsuits  instituted  by Trophy
Radiologie, S.A. (`Trophy S.A.'), a subsidiary of Trex Medical Corporation.  One
lawsuit was instituted in France and the other in the United States.

     The French  lawsuit was filed in November  1995,  in the tribunal de Grande
Instance de Bobigny,  the French patent court,  and originally  alleged that the
Company's  CDR(R)system  infringes French Patent No. 2,547,495,  European Patent
No. 129,451 and French Certificate of Addition No. 2,578,737. These patents, all
of which are  related,  are  directed to a CCD-based  intra-oral  sensor.  Since
filing its lawsuit,  Trophy S.A. has  withdrawn its  allegation of  infringement
with respect to the Certificate of Addition.  Trophy S.A. is seeking a permanent
injunction and  unspecified  damages,  including  damages for its purported lost
profits.  The  Company  believes  that  the  lawsuit  is  without  merit  and is
vigorously defending it.

     The  lawsuit in the United  States was filed in March 1996 by Trophy  S.A.,
Trophy  Radiology,  Inc., a United  States  subsidiary  of Trophy S.A.  (`Trophy
Inc.') and the named inventor on the patent in suit,  Francis  Mouyen,  a French
citizen.  The suit was  brought  in the  United  States  District  Court for the
Eastern  District of New York,  and alleges  that the  Company's  CDR(R)  system
infringes  United  States  Patent No.  4,593,400  (the `400  patent'),  which is
related to the patents in the French  lawsuit.  Trophy  S.A.,  Trophy  Inc.  and
Mouyen are seeking a permanent  injunction and  unspecified  damages,  including
damages for purported lost profits, enhanced damages for the Company's purported
willful  infringement  and an award of attorney fees. The Company  believes that
the  lawsuit is without  merit and is  vigorously  defending  it. The  Company's
counsel  in the United  States  suit has  issued a formal  opinion  that the CDR
system does not infringe the 400 patent.

     In addition,  the Company has counter-sued  Trophy S.A. and Trophy Inc. for
infringement of United States Patent No. 4,160,997,  an expired patent which was
exclusively  licensed to the Company by its inventor,  Dr. Robert Schwartz,  and
for false  advertising  and unfair  competition.  The Company  believes that its
counter-suit is meritorious, and is vigorously pursuing it.

     On September 12, 1997,  after having been given  permission to do so by the
Court, the Company served two


                                       12
<PAGE>

motions for summary  judgment  seeking  dismissal  of the action  pending in the
United  States  District  Court for the  Eastern  District  of New York,  on the
grounds of  non-infringement  and patent invalidity.  On February 22, 2000, oral
argument  on these  motions was heard by the Court.  The  motions are  currently
pending.

     While the Company  believes such suits against it are without merit,  there
can be no assurance that the Company will be successful in its defense of any of
these actions,  or in its  counter-suit.  If the Company is  unsuccessful in its
defense of any of these  actions,  it could have a material  adverse effect upon
the Company. Moreover, regardless of their outcome, the Company may be forced to
expend  significant  amounts  of money in legal  fees in  connection  with these
lawsuits.

     II. In late 1998 through early 1999, nine shareholder complaints purporting
to be class action  lawsuits were filed in the United States  District Court for
the Eastern  District of New York.  Plaintiffs  filed a Consolidated and Amended
Complaint on or about May 27, 1999 and, on or about  November 24, 1999,  filed a
Second Amended and Consolidated Complaint (the "Complaint"). The Complaint names
as  defendants  the Company,  David B. Schick,  Thomas E.  Rutenberg,  and David
Spector   (collectively,    the   "Individual    Defendants"),    as   well   as
PricewaterhouseCoopers LLP.

     The Complaint alleged, inter alia, that certain defendants issued false and
misleading  statements  concerning the Company's  publicly  reported earnings in
violation of the federal securities laws. The Complaint sought  certification of
a class of persons who purchased the Company's Common Stock between July 1, 1997
and  February  19,  1999,  inclusive,  and did not specify the amount of damages
sought.

     On May 23, 2000,  the Company  entered into an agreement in principle  with
the  plaintiffs  for the  settlement  of the  class  action  lawsuit.  Under the
settlement  agreement,  reflected in a Memorandum of  Understanding,  all claims
against the Company and the Individual  Defendants  are to be dismissed  without
presumption or admission of any liability or wrongdoing.  The principal terms of
the settlement agreement call for payment to the Plaintiffs,  for the benefit of
the class, of the sum of $3.4 million. The settlement amount will be paid in its
entirety by the  Company's  insurance  carrier  and is not  expected to have any
material  impact on the  financial  results of the Company.  The  settlement  is
subject to approval by the Court.

     III. 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 has made a request for the voluntary
production of certain documents. The Company intends to cooperate fully with the
SEC staff and has  provided  responsive  documents  to it.  This  matter is in a
preliminary stage and the Company cannot predict its potential outcome.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of security  holders during the quarter
ended March 31, 2000.


                                       13
<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCK HOLDER MATTERS

     The  Company's  Common Stock began  trading on The Nasdaq  National  Market
under  the  symbol  "SCHK" on July 1,  1997.  Prior to such  date,  there was no
established public trading market for the Company's Common Stock.

     By letter dated  September 15, 1999,  the Company was advised by the Nasdaq
Stock  Market's  Listing  Qualifications  Panel (the "Panel") that the Company's
Common Stock would no longer be listed on the Nasdaq National  Market  effective
with the close of business on September 15, 1999.  The Panel's  action was based
on the Company's inability to timely file its Annual Report on Form 10-K for the
fiscal year ended  March 31,  1999 and Form 10-Q for the quarter  ended June 30,
1999, as well as the revenue  recognition and sales practices which had been the
subject of an  investigation  by the Audit  Committee of the Company's  Board of
Directors and had led to the filing delays and the need for the  restatement  of
the Company's  financial reports.  The Company timely requested a review of this
decision and, on May 25, 2000,  the Nasdaq  Listing and Hearing  Review  Council
informed the Company of its determination to affirm the Panel's decision.

     Since  the  delisting  of the  Company's  Common  Stock,  there has been no
established  trading  market  for such  stock,  which  has been  trading  in the
over-the-counter market.

     The following table sets forth, for the periods indicated, the high and low
sales prices of the  Company's  Common Stock,  as quoted on The Nasdaq  National
Market  through  September  15, 1999,  and in the  over-the-counter  market,  as
reported  on the "pink  sheets"  published  by  National  Quotation  Bureau LLC,
commencing September 16, 1999.

Fiscal Year Ended March 31, 1999                       High                Low
--------------------------------                      ------              -----

First Quarter                                         27.50              13.75
Second Quarter                                        19.50              14.50
Third Quarter                                         20.00               7.50
Fourth Quarter                                        10.375              3.938

Fiscal Year Ended March 31, 2000                       High                Low
--------------------------------                      ------              -----

First Quarter                                          5.75               2.438
Second Quarter (through 9/15/99 delisting)             2.875              1.75
Second Quarter (commencing 9/16/99)                     .625               .50
Third Quarter                                          1.50                .45
Fourth Quarter                                         2.625              1.00

     On June 6,  2000,  the  closing  bid and  asked  prices  per  share  of the
Company's Common Stock in the  over-the-counter  market, as reported as reported
on the "pink sheets" published by National  Quotation Bureau LLC, were $1.50 and
$1.75 per share, respectively. Such prices represent quotations between dealers,
without dealer mark-up,  mark-down or commission,  and may not represent  actual
transactions. On June 7, 2000, there were 186 holders of record of the Company's
Common Stock. However, the Company believes that the number of beneficial owners
of such stock is substantially higher.

     To date,  the Company has not paid any dividends on its Common  Stock.  The
Company  currently  intends to retain future  earnings to finance the growth and
development  of the  Company's  business  and does  not  anticipate  paying  any
dividends  in the  foreseeable  future.  The payment of  dividends is within the
discretion  of the  Board of  Directors  and  will  depend  upon  the  Company's
earnings,  its capital  requirements,  financial  condition  and other  relevant
factors.


                                       14
<PAGE>

     On July 7, 1997, the Company's  initial public offering (the "Offering") of
1,750,000  shares of its common  stock,  $.01 par value per share  (the  "Common
Stock")  was  completed.  The  Company's  registration  statement  on  Form  S-1
(Registration  No.  333-33731)  was  declared  effective by the  Securities  and
Exchange  Commission  on June 30,  1997.  As part of the  Offering,  the Company
granted to the  Underwriters  over-allotment  options to  purchase up to 262,500
shares of Common Stock ("the  "Underwriters'  Option").  On July 10,  1997,  the
underwriters  exercised the Underwriters'  Option  purchasing  262,500 shares of
Common Stock from the Company.

ITEM 6.  SELECTED FINANCIAL DATA

     The following  selected  financial data are derived from, and are qualified
by reference to, the audited financial  statements of the Company for the period
indicated.  The information  presented below should be read in conjunction  with
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  in ITEM 7 and the Financial  Statements  included in ITEM 8 of this
Report.
<TABLE>
<CAPTION>
                                                                                       Year Ended March 31,
                                                                  1996           1997           1998          1999           2000
                                                                --------       --------       --------      --------       --------
                                                                               (in thousands, except per share data)
<S>                                                             <C>            <C>            <C>           <C>            <C>
Statement of Operations Data:

Revenue, net                                                    $  6,804       $ 16,101       $ 38,451      $ 45,605       $ 21,989
                                                                --------       --------       --------      --------       --------

Cost of sales                                                      3,343          7,907         17,658        34,611         15,393
Excess and obsolete inventory                                         --            114             --         5,466            898
                                                                --------       --------       --------      --------       --------
Total cost of sales                                                3,343          8,021         17,658        40,077         16,291
                                                                --------       --------       --------      --------       --------
Gross profit                                                       3,461          8,080         20,793         5,528          5,698
                                                                --------       --------       --------      --------       --------
Operating expenses:
               Selling and marketing                               1,620          4,961         10,645        18,440          7,636
               General and administrative                          1,388          2,054          3,954         7,338          7,330
               Research and development                              458          1,418          3,852         4,354          2,830
               Bad debt expense                                       --             34            164         5,598              9
               Patent litigation settlement                           --             --            600            --             --
                                                                --------       --------       --------      --------       --------
               Total operating costs                               3,466          8,467         19,215        35,730         17,805
                                                                --------       --------       --------      --------       --------
Income (loss) from operations                                         (5)          (387)         1,578       (30,202)       (12,107)

Total other income (expense)                                        (108)            35          1,111           244           (224)
                                                                --------       --------       --------      --------       --------
Income (loss) before income taxes                                   (113)          (352)         2,689       (29,958)       (12,331)

Provision (benefit) for income taxes                                  --             --            328          (352)            --
                                                                --------       --------       --------      --------       --------
               Net income (loss)                                $   (113)      $   (352)      $  2,361      $(29,606)      $(12,331)
                                                                ========       ========       ========      ========       ========
               Basis earnings (loss) per share                  $  (0.02)      $  (0.05)      $   0.25      $  (2.96)      $  (1.23)
                                                                ========       ========       ========      ========       ========
               Diluted earnings (loss) per share                $  (0.02)      $  (0.05)      $   0.24      $  (2.96)      $  (1.23)
                                                                ========       ========       ========      ========       ========
</TABLE>


                                       15
<PAGE>
<TABLE>
<CAPTION>
                                                                                           March 31,
                                                                                           ---------
                                                              1996            1997            1998            1999            2000
                                                            --------        --------        --------        --------        --------
<S>                                                         <C>             <C>             <C>            <C>             <C>
Balance Sheet Data:
Cash and cash equivalents                                   $    525        $  1,710        $  6,217       $  1,415        $  1,429
Working capital                                                1,240           5,518          33,745          2,902             841
Total assets                                                   4,395          11,060          51,674         29,386          16,290
Total liabilities                                              3,026           4,973           9,565         16,850          14,974
Retained earnings (accumulated deficit)                       (1,203)         (1,556)            805        (28,801)        (41,132)
Stockholders' equity                                           1,369           6,087          42,109         12,536           1,316
</TABLE>


ITEM 7.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
          RESULTS OF OPERATIONS

     The  following   discussion   should  be  read  in  conjunction   with  the
Consolidated  Financial  Statements  included  elsewhere  in this  Report.  This
discussion  contains  forward-looking  statements based on current  expectations
that involve risks and  uncertainties.  Actual results and the timing of certain
events may differ  significantly  from those  projected in such  forward-looking
statements due to a number of factors,  including those set forth in "Results of
Operations"  in this Item and elsewhere in this Report.  See "ITEM 1 -- Business
-- Forward-Looking Statements" and Exhibit 99 to this Report.

   Overview

     The Company designs,  develops and manufactures digital imaging systems for
the dental and  medical  markets.  In the field of  dentistry,  the  Company has
developed  and  currently   manufactures  and  markets  an  intra-oral   digital
radiography  system.  The Company  has also  developed  a bone  mineral  density
assessment  device to assist in the  diagnosis  and  treatment of  osteoporosis,
which was  introduced  in  December  1997.  The  Company  is also  developing  a
radiographic  imaging  device  for  digital   mammography,   and  has  commenced
development of a general digital  radiography device for intended use in various
applications.

     The Company's revenues during fiscal 2000 were derived primarily from sales
of its CDR(R) and accuDEXA(R) products.  The Company recognizes revenue on sales
of its products at the time of shipment to its customers and when no significant
vendor obligations exist and collectability is probable. Revenues from the sales
of extended  warranties are recognized on a straight-line basis over the life of
the  extended  warranty,  which is  generally  a one-year  period.  The  Company
utilizes  both a direct  sales force and a limited  number of  distributors  for
sales of its  products  within the United  States.  Effective  May 1, 2000,  the
Company entered into an exclusive  distribution  agreement with Patterson Dental
Company and terminated its existing domestic dealer arrangements.  International
sales are made primarily through a network of independent foreign  distributors.
In fiscal 2000, 1999, and 1998, sales to customers within the United States were
approximately  68%, 87% and 82% of total revenues,  respectively.  The Company's
international  sales are made  primarily  to  distributors  in  Western  Europe,
Russia,  Australia and South America. The Company intends to expand its business
in other international  markets,  including Asia. All of the Company's sales are
denominated in United States dollars.

     Costs  of  sales  consists  of  raw  materials  and  computer   components,
manufacturing labor,  facilities overhead,  product support,  warranty costs and
installation costs. The Company procures its APS and CCD semiconductor wafers, a
significant component of its products,  each from a single supplier. The Company
believes that  sourcing  from a single  supplier  provides  certain  competitive
advantages to the Company.

     Excess  and  obsolete  inventory  expense  relates to the  overstocking  or
obsolescence  of various dies and/or  obsolete X-Ray  inventory that the Company
may not use or  otherwise  salvage  and from  changes in  technology,


                                       16
<PAGE>

including  sensors,   cameras  and  associated  electronics  and  the  Company's
phase-out of production of its CCD sensors (as well as its first  generation APS
sensors) in favor of its new APS sensors.

     Operating  expenses  include  selling and marketing  expenses,  general and
administrative  expenses  and research and  development  expenses,  and bad debt
expense.  Selling and marketing  expenses  consist of salaries and  commissions,
advertising, promotional and sales events and travel. General and administrative
expenses include executive salaries,  professional fees,  facilities,  overhead,
accounting,   human  resources,  and  general  office  administration  expenses.
Research and development  expenses are comprised of salaries,  consulting  fees,
facilities overhead and testing materials used for basic scientific research and
the  development  of new and  improved  products  and their uses.  Research  and
development  costs are  expensed  as  incurred.  Development  costs  incurred to
establish the technological feasibility of software applications are expensed as
incurred.  Bad  debt  expense  is a  result  of  product  shipments  which  were
determined to be uncollectible or not collected.

   Results Of Operations

     The following  table sets forth,  for the fiscal years  indicated,  certain
items  from  the  Statement  of  Operations  expressed  as a  percentage  of net
revenues:
<TABLE>
<CAPTION>
                                                                 Year ended March 31,
                                                                 --------------------
                                                   2000                 1999                 1998
                                                   -----                -----                -----
<S>                                                <C>                  <C>                  <C>
Revenue, net                                       100.0%               100.0%               100.0%
                                                   -----                -----                -----


Cost of sales                                       70.0%                75.9%                45.9%
Excess and obsolete inventory                        4.1%                12.0%                  --
                                                   -----                -----                -----
Total cost of sales                                 74.1%                87.9%                45.9%
                                                   -----                -----                -----

Gross profit                                        25.9%                12.1%                54.1%

Operating expenses:
        Selling and marketing                       34.7%                40.4%                27.7%
        General and administrative                  33.3%                16.1%                10.3%
        Research and development                    12.9%                 9.5%                10.0%
        Bad debt expense                              --                 12.3%                 0.4%
        Patent litigation settlement                  --                   --                  1.6%
</TABLE>

Fiscal Year Ended March 31, 2000 as Compared to Fiscal Year Ended March 31, 1999

     Net  revenues  decreased  51.8% to $22.0  million in fiscal 2000 from $45.6
million  in  fiscal  1999.  The  revenue  decline  is due to lower  sales of the
Company's CDR(R) dental product and accuDEXA(R) bone mineral density  assessment
device.  Fiscal 2000  revenues  were  reduced due to a  reduction  of  marketing
activity for the  Company's  products,  reduction  of credit  granting to select
dealers,  hospitals,  universities  and  governmental  agencies and, the Company
believes, by the negative perception that existed in the marketplace  concerning
the  Company's  viability  and  long-term  ability to upgrade  and  service  its
products.

     The rate of  return  in  fiscal  2000 for the  Company's  CDR and  accuDEXA
products  decreased  significantly  to 4.3% of gross  sales in fiscal  2000 from
28.6% of gross sales in fiscal 1999.  The  decreased  return rate for the CDR is
believed to be  attributable  to several  factors  including  the  resolution of
certain  technical  problems  in  transitioning  its CDR  product  line from CCD
sensors to APS sensors.  Second,  the Company's  single user CDR System requires
minimal  installation.  Commencing in September  1998,  the Company  initiated a
program  in  coordination  with its  computer  supplier,  in which the  supplier
installed all  single-user  CDR Systems.  As a result of logistical  problems in
implementing this program, the supplier's installations  experienced significant
delays, which led to a higher than normal rate of return for single user systems
shipped in this period.  Starting in January 1999,  the Company  resumed  direct
management of its single user CDR installations.


                                       17
<PAGE>

     The  Company  also  experienced  a higher  than  normal  rate of returns of
accuDEXA  units.  The  Company  believes  that these  returns are due to several
factors, including the following: First, early shipments of accuDEXA experienced
a higher than expected failure rate due to several reasons,  including  shipping
damage,  as well as humidity and temperature  sensitivity of several  components
included in the initial design of the product. The Company took steps to address
these  problems and  believes  that  failure  rates  relating to such damage and
sensitivity have dropped  significantly.  In this regard,  the Company currently
expects to implement a number of additional improvements to accuDEXA, to further
increase  reliability,  in the first half of fiscal  2001.  Second,  the Company
initiated a change in its sales policy which  affected  accuDEXA sales made from
May 1998  through  November  1998.  During  that time,  the  Company  waived its
customary  10% deposit  which it had charged to  customers  prior to shipment of
goods.  In December  1998,  the Company  changed  its credit  policy,  requiring
prepayment from non-dealer customers.

     Total  cost of  sales  decreased  59.4%  to  $16.3  million  (74.1%  of net
revenues) in fiscal 2000 from $40.1  million  (87.9% of net  revenues) in fiscal
1999.  The total cost of sales is  decreased  due to lower  direct and  indirect
labor costs, warranty  expenditures,  material costs, royalty costs and overhead
costs as a result of  decreased  revenues  and a decrease in the  provision  for
excess and  obsolete  inventory.  The decrease in the  provision  for excess and
obsolete  inventory  from  1999  to  2000  is  primarily   attributable  to  the
obsolescence  of  inventory  in the third and fourth  quarter of 1999 due to the
introduction of the new APS sensors. In January 1999, in an effort to streamline
operations and reduce expenses, and as a result of more efficient  manufacturing
processes  and a higher  rate of  outsourcing,  the  Company  reduced its direct
manufacturing  labor force from 101 to 64 employees and relocated the operations
of its  wholly-owned  subsidiary,  Schick  X-Ray,  Corp.  from its  facility  in
Roebling,  New Jersey to the  Company's  headquarters  in Long Island City,  New
York. In August 1999, Schick X-Ray was dissolved and its operations  absorbed by
the Company.

     Selling and marketing  expenses  decreased  58.6% to $7.6 million (34.7% of
net  revenues)  in fiscal 2000 from $18.4  million  (40.4% of net  revenues)  in
fiscal 1999. This decrease is due to decreased  selling  expenses in the CDR and
accuDEXA  product lines,  trade show expenses and other marketing  expenses as a
result of decreased revenues. Additionally, the Company reduced its direct sales
force and associated overhead expenses as a result of decreased revenues.

     General and administrative  expenses remained at $7.3 million, 33.3% of net
revenues  in fiscal  2000 and 16.1% of net  revenues  in fiscal  1999.  However,
general and  administrative  expenses  increased as a percent of sales primarily
due to an increase in  professional  services  rendered in  connection  with the
restatement of the Company's interim financial  statements for fiscal 1999. This
increase was partially offset by decreases in payroll and related costs.

     Research and development expenses decreased 35.0% to $2.8 million (12.9% of
net  revenues) in fiscal 2000 from $4.4 million (9.5% of net revenues) in fiscal
1999. This decrease was largely  attributable  to decreased  payroll and related
costs due to a reduction  in personnel  partially  offset by an increase in test
services and supply expenses. All research and development costs are expensed as
incurred.

     Bad debt  expenses were $9 thousand in fiscal 2000 compared to $5.6 million
(12.3% of net revenues) in fiscal 1999.  The Company  believes that the decrease
is attributable to the Company's tightened credit policy as described above.

     Interest income decreased to $.1 million in fiscal 2000 from $.5 million in
fiscal  1999  due to  the  utilization  of  cash  balances  and  investments  in
short-term  interest-bearing  securities in support of the  Company's  operating
deficiencies.

     Interest  expense  increased to $.9 million in fiscal 2000 from $.3 million
in fiscal 1999 due to the cost of financing  provided by DVI Financial  Services
Inc. under the Company's Capital Lease and term note financing  arrangements and
by Greystone Funding Corporation's secured credit facility.


                                       18
<PAGE>

Fiscal Year Ended March 31, 1999 as Compared to Fiscal Year Ended March 31, 1998

     Net  revenues  increased  18.6% to $45.6  million in fiscal 1999 from $38.5
million  in fiscal  1998.  This  increase  was  principally  attributable  to an
increase in sales of the Company's  accuDEXA(R) bone mineral density  assessment
device  that rose to $12.8  million  from $4.1  million in sales in fiscal  1998
following the product's introduction in December 1997.

     Fiscal 1999 revenues were  negatively  impacted by a rate of return for the
Company's  products,  which was higher than the  historical  return rate for the
Company's  products.  In  addition,  revenues  were  negatively  affected  by an
increase in reserves  for goods which may be returned in the future.  Provisions
for returns are comprised of actual  returns and  estimates for future  returns.
The  increased  return rate for CDR is believed  to be  attributable  to several
factors including the following:

     The Company experienced technical problems in transitioning its CDR product
line from CCD sensors to APS sensors. Shipments of the Company's initial version
of its new APS sensor for the CDR product,  which were primarily  delivered from
April  1998  through  August  1998,  exhibited  a high  failure  rate and  other
technical  problems.  The Company  provided for  replacements  of systems  where
practical  and  provided  for  anticipated  returns  for  units  which  were not
upgradeable.  In September 1998, the Company began shipping a new version of the
APS sensor which has exhibited a lower failure rate than the initial version.

     The  Company's  single  user  CDR  System  requires  minimal  installation.
Commencing in September  1998, the Company  initiated a program in  coordination
with its computer supplier,  in which the supplier installed all single-user CDR
Systems.  As a result of logistical  problems in implementing this program,  the
supplier's  installations  experienced significant delays, which led to a higher
than  normal  rate of return for single  user  systems  shipped in this  period.
Starting in January 1999, the Company  resumed  direct  management of its single
user CDR installations.

     The  Company  also  experienced  a higher  than  normal  rate of returns of
accuDEXA  units.  The  Company  believes  that these  returns are due to several
factors, including the following:

     First,  shipments of accuDEXA  experienced a higher than  expected  failure
rate due to several reasons,  including shipping damage, as well as humidity and
temperature  sensitivity of several components included in the initial design of
the product.

     Second,  the Company  initiated a change in its sales policy which affected
accuDEXA sales made from May 1998 through  November 1998.  During that time, the
Company waived its customary 10% deposit which it had charged to customers prior
to shipment of goods.  In December 1998, the Company  changed its credit policy,
requiring prepayment from non-dealer customers.

     Total  cost of sales  increased  127.0%  to  $40.1  million  (87.9%  of net
revenues) in fiscal 1999 from $17.7  million  (45.9% of net  revenues) in fiscal
1998.  The  increase in cost of sales is  attributable  to (1) change in product
sales mix and customer mix; (2) expense to upgrade  products for CDR  customers;
(3) increased  warranty  expenses;  (4) greater than expected  returns;  and (5)
excess  capacity  resulting  from  expansion  of  the  Company's  personnel  and
facilities in support of sales  projections  that were not achieved.  Excess and
obsolete  inventory reserve provisions were $5.5 million (12.0% of net revenues)
in fiscal 1999  compared to none in fiscal 1998.  These  reserves  arose largely
from the  overstock of various dies and/or  obsolete  X-Ray  inventory  that the
Company  may not use or  otherwise  salvage  and  from  changes  in  technology,
including sensors,  cameras and associated electronics,  including the Company's
phase-out of production of its CCD sensors (as well as its first  generation APS
sensors) in favor of its new APS sensors.

     Selling and marketing  expenses  increased 73.2% to $18.4 million (40.4% of
net  revenues)  in fiscal 1999 from $10.6  million  (27.7% of net  revenues)  in
fiscal 1998. This increase was attributable primarily to the hiring and training
of new  salespeople  and a  significant  expansion  in the  Company's  marketing
activities in support of sales projections that were not achieved.

     General and administrative  expenses increased 85.6% to $7.3 million (16.1%
of net  revenues)  in fiscal 1999 from $4.0 million  (10.3% of net  revenues) in
fiscal 1998. The increase was attributable  primarily to increase in


                                       19
<PAGE>

payroll and facilities  expenses as the Company expanded its capacity in support
of sales  projections  that were not achieved,  as well as certain  professional
expenses that had not been anticipated.

     Research and development  expenses increased 13.0% to $4.4 million (9.5% of
net revenues) in fiscal 1999 from $3.9 million (10.0% of net revenues) in fiscal
1998.  This  increase was  attributable  principally  to increased  research and
development  expenses  associated  with the  enhancement  of the accuDEXA,  bone
mineral  density  assessment  device and to the CDR system as well as  continued
development  of a mammography  system.  All research and  development  costs are
expensed as incurred.

     Bad debt expenses were $5.6 million  (12.3% of net revenues) in fiscal 1999
compared to $.2 million (.4% of net  revenues)  in fiscal 1998.  The increase is
attributable  to (1)  shipments to a  distributor  which were  determined  to be
uncollectible during fiscal 1999 ($1.0 million);  and (2) other sales which were
not collected  subsequently  and for which  provision for doubtful  accounts was
established at March 31, 1999.

     Interest  income  decreased  to $505 in fiscal  1999 from $1.2  million  in
fiscal  1998  due to  the  utilization  of  cash  balances  and  investments  in
short-term  interest-bearing  securities in support of the  Company's  operating
deficiencies.

     Interest  expense  increased to $261 in fiscal 1999 from $77 in fiscal 1998
due to the cost of financing  provided by DVI Financial  Services Inc. under the
Company's Capital Lease and Bridge Loan arrangements.  Bridge Loan costs include
lease termination expense related to the cancellation and return of system sales
financed by DVI.

     Current  income tax benefit for fiscal  1999  reflects  the refund of taxes
paid by the Company in fiscal year 1998.  The Company has not provided  deferred
income benefit of future income tax carryforwards  because there is no certainty
that such  benefits  will be utilized.  The Company has charged $349 to earnings
representing deferred income taxes from fiscal 1998 which it may not collect.

Liquidity and Capital Resources

     At  March  31,  2000,  the  Company  had  $1.4  million  in cash  and  cash
equivalents and working capital of $.8 million  compared to $1.4 million in cash
and cash equivalents,  $.4 million in short-term investments and $2.9 million in
working  capital at March 31, 1999. The decrease in working capital is primarily
attributable to the loss from operations during fiscal 2000.

     During  fiscal 2000 cash used in  operations  was $2.1 million  compared to
$20.4  million used in  operations  during  fiscal 1999.  Increases in cash were
primarily  provided by the sale of a portion of the Company's  investment  stock
and by the initial  draw down of the  Company's  loan  facility  with  Greystone
Funding Corporation. This cash was used to fund the Company's operating loss and
accounts payable reduction,  which exceeded  reductions in accounts  receivable,
inventory  and  collection  of  refundable  income  taxes.  Accounts  receivable
decreased  to $1.5  million at March 31, 2000  compared to $4.2 million at March
31, 1999 due to reduced sales and restricted  credit granting to select dealers,
hospitals, universities and governmental agencies. Inventories decreased to $5.6
million at March 31, 2000 compared to $10.7 million at March 31, 1999 due to the
Company's planned reduction of inventory levels.  The Company received estimated
tax payment and net operating loss refunds of $2.4 million during fiscal 2000.

     The Company's capital expenditures  decreased to $.1 million in fiscal 2000
from $2.8 million in fiscal 1999.  Fiscal 2000 expenditures  included  leasehold
improvements, computers and production equipment.

     DVI Financial  Services,  Inc.  ("DVI") has provided the Company with notes
payable  for  $6.6  million  which  is  secured  by  first   priority  liens  on
substantially all of the Company's  assets.  The Company issued promissory notes
and security  agreements that provide,  in part, that the Company may not permit
the creation of any additional lien or encumbrance on the Company's  property or
assets. The notes are due in varying  installments through fiscal 2006. Interest
is paid monthly at the prime rate (9% at March 31, 2000) plus 2.5%.

     In December  1999,  the Company  entered into a Loan  Agreement  (the "Loan
Agreement") with Greystone  Funding  Corporation  ("Greystone") to provide up to
$7.5  million of  subordinated  debt in the form of a secured  credit


                                       20
<PAGE>

facility.  Pursuant to the Loan Agreement, and to induce Greystone to enter into
said Agreement,  the Company issued to Greystone and its designees,  warrants to
purchase  3,000,000 shares of the Company's Common Stock at an exercise price of
$.75 per share.  The Company agreed to issue Greystone and additional  2,000,000
shares at an exercise price of $.75 per share in connection  with a cash payment
of $1 million by Greystone to the Company in consideration of a sale of Photobit
stock by the  Company  to  Greystone.  The sale of the  Photobit  stock was made
subject to a right of first refusal held by Photobit and it founders.  By letter
dated February 17, 2000, counsel for Photobit informed the Company that Photobit
considers the Company's  sale of its shares to Greystone to be void on the basis
of the Company's  purported  failure to properly comply with Photobit's right of
first refusal.

     On March 17, 2000,  the Company and Greystone  entered into and Amended and
Restated  Loan  Agreement  effective as of December 17, 1999 (the  "Amended loan
Agreement"),  which amended and restated the Loan  Agreement,  pursuant to which
Greystone agreed to provide up to $7.5 million of subordinated  debt in the form
of a secured  credit  facility.  The $1 million  cash payment to the Company was
converted  as of December 27, 1999 into an initial  advance of $1 million  under
the Amended Loan Agreement. Pursuant to the Amended Loan Agreement and to induce
Greystone to enter into said Agreement, the Company issued warrants to Greystone
and its designees, consisting of those warrants previously issued under the Loan
Agreement and Photobit stock sale arrangement, to purchase 5,000,0000 shares, of
the Company's Common Stock at an exercise price of $0.75 per share,  exercisable
at any time after  December 27,  1999.  Under the Amended  Loan  Agreement,  the
Company also issued to  Greystone or its  designees  warrants  (the  "Additional
Warrants") to purchase an additional  13,000,000  shares of common stock,  which
Additional  Warrants  will vest and be  exercisable  at a rate of two  shares of
Common Stock for each dollar advanced under the Amended Loan Agreement in excess
of the initial draw of $1 million.  Any additional  warrants,  which do not vest
prior to  expiration  or surrender of the line of credit,  will be forfeited and
canceled. In connection with the Greystone secured credit facility, effective as
of February 15, 2000,  DVI  consented to the  Company's  grant to Greystone of a
second  priority lien  encumbering  the Company's  assets,  under and subject in
priority  and right of payment to all liens  granted by the  Company to DVI.  To
date, no additional funds have been advanced under the Amended Loan Agreement in
excess of the initial draw of $1 million.

     The Company has also undertaken  various  cost-cutting  measures  including
reduction of facilities and personnel. By approximately 40% and 60% respectively
from peak levels of fiscal 1999. The Company  discontinued  certain  promotional
programs which had resulted in increased credit risk, and concomitantly  limited
credit to selected  domestic  dealers.  The company continues efforts to improve
its  products  and  methods of  production.  Effective  May 1, 2000 the  Company
entered an  exclusive  distribution  agreement  with  Patterson  Dental  Company
("Patterson").  Under the terms of this agreement the Company  discontinued  all
direct  domestic  sales of its dental  products,  with the exception of those to
governmental  agencies  and  universities.  As a result  of the  agreement,  the
Company   further   reduced   its  sales   force.   Remaining   domestic   sales
representatives have become manufacturer representatives charged with support of
the  Patterson  sales  effort.   The  Company  terminated  all  existing  dealer
agreements including its agreement with Henry Schein, Inc.

     The Company  believes that its cost  reductions,  refinancing and new sales
arrangement, should permit the Company to generate sufficient working capital to
meet its obligations as they mature. The ability of the Company to meet its cash
requirements is dependent,  in part, on the Company's ability to attain adequate
sales and profit levels and to satisfy its existing warranty obligations without
incurring  expenses  substantially  in excess of related warranty revenue and to
collect its accounts  receivable  on a timely  basis.  Management  believes that
existing capital resources and sources of credit, including the Greystone credit
facility,  are adequate to meet its current cash requirements.  However,  if the
Company's  cash needs are  greater  than  anticipated  or the  Company  does not
satisfy drawdown  conditions under the Amended Loan Agreement,  the Company will
be required to seek additional or alternative financing sources. There can be no
assurance that such financing will be available or available on terms acceptable
to the Company.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The DVI term  notes  bear an annual  interest  rate based on the prime rate
plus 2.5%,  provided however,  that if any payments to DVI are past due for more
than 60 days,  interest  will  thereafter  accrue at the prime  rate plus  5.5%.
Because the interest rate is variable,  the Company's cash flow may be adversely
affected by increases in interest rates.  Management does not, however,  believe
that any risk inherent in the variable-rate nature of the loan is likely to have
a material effect on the Company's interest expense or available cash.


                                       21
<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The response to this item is included as a separate  section of this Annual
Report on Form 10-K.

ITEM 9.   CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DATA

     Information  responsive  to  this  item  was  previously  reported  in  the
Company's Current Reports on Form 8-K, dated September 2, 1999 and September 24,
1999.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a)      The Directors of the Company are as follows:

Euval Barrekette, Ph.D.  Age 69, has served as a Director of the  Company  since
                         April 1992. Dr. Barrekette's current term on the Board,
                         which  was   initially   scheduled  to  expire  at  the
                         Company's Annual Meeting of Stockholders in 1999, shall
                         expire once his successor is elected and qualified. Dr.
                         Barrekette is a licensed  Professional  Engineer in New
                         York  State.  Since  1986  Dr.  Barrekette  has  been a
                         consulting  engineer and  physicist.  From 1984 to 1986
                         Dr.   Barrekette   was  Group   Director   of   Optical
                         Technologies of the IBM Large Systems Group.  From 1960
                         to 1984 Dr.  Barrekette  was  employed  at  IBM's  T.J.
                         Watson Research Center in various capacities, including
                         Assistant  Director  of  Applied  Research,   Assistant
                         Director of Computer  Science,  Manager of Input/Output
                         Technologies  and Manager of Optics and  Electrooptics.
                         Dr.  Barrekette  holds  an A.B.  degree  from  Columbia
                         College, a B.S. degree from Columbia  University School
                         of  Engineering,  an M.S.  degree from its Institute of
                         Flight   Structures  and  a  Ph.D.  from  the  Columbia
                         University  Graduate  Faculties.  Dr.  Barrekette  is a
                         fellow of the American  Society of Civil  Engineers,  a
                         Senior   Member  of  the   Institute  of  Electronic  &
                         Electrical  Engineers,  and a  member  of The  National
                         Society of Professional  Engineers,  The New York State
                         Society of Professional Engineers,  The Optical Society
                         of America  and The New York  Academy of  Science.  Dr.
                         Barrekette  is the  uncle of David  B.  Schick  and the
                         brother-in-law of Dr. Allen Schick.

David B. Schick          Age 39,  is a founder  of the  Company  and,  since its
                         inception  in April 1992,  has served as the  Company's
                         Chief  Executive  Officer and  Chairman of the Board of
                         Directors.  From the  Company's  inception  to December
                         1999,   Mr.   Schick  also  served  as  the   Company's
                         President.  Mr.  Schick's  current  term  on the  Board
                         expires at the Company's Annual Meeting of Stockholders
                         in 2000.  Mr.  Schick  is also a member of the Board of
                         Directors of Photobit Corporation.  From September 1991
                         to April 1992,  Mr. Schick was employed by Philips N.V.
                         Laboratories,  where he served as a consulting engineer
                         designing  high-definition  television equipment.  From
                         February  1987 to August 1991,  Mr. Schick was employed
                         as a senior engineer at Cox and Company, an engineering
                         firm in New York  City.  From  January  1985 to January
                         1987, Mr. Schick was employed as an electrical engineer
                         at Grumman Aerospace Co. Mr. Schick holds a B.S. degree
                         in  electrical   engineering  from  the  University  of
                         Pennsylvania's Moore School of Engineering.  Mr. Schick
                         is the son of Dr.  Allen  Schick  and the nephew of Dr.
                         Barrekette.

Allen Schick, Ph.D.      Age 65, has served as a Director of the  Company  since
                         April  1992.  Dr.  Schick's  current  term on the Board
                         expires at the Company's Annual Meeting of


                                       22
<PAGE>

                         Stockholders in 2000. Since 1981, Dr. Schick has been a
                         professor at the  University of Maryland and since 1988
                         has   been  a   Visiting   Fellow   at  the   Brookings
                         Institution.  Dr. Schick holds a Ph.D. degree from Yale
                         University.  Dr. Schick is David B. Schick's father and
                         the brother-in-law of Dr. Barrekette.

Jeffrey T. Slovin        Age 35, has served as the Company's  President and as a
                         Director since December 1999. Mr. Slovin's current term
                         on the Board expires at the Company's Annual Meeting of
                         Stockholders   in  2001.  Mr.  Slovin  is  currently  a
                         Managing Director of Greystone & Co., Inc. From 1996 to
                         1999, Mr. Slovin served in various executive capacities
                         at  Sommerset   Investment   Capital   LLC,   including
                         Managing Director, and as President of Sommerset Realty
                         Investment Corp.  During 1995, Mr. Slovin was a Manager
                         at  Fidelity  Investments  Co.  From 1991 to 1994,  Mr.
                         Slovin was Chief  Financial  Officer of  SportsLab  USA
                         Corp.  and,  from 1993 to 1994,  was also  President of
                         Sports and  Entertainment  Inc. From 1987 to 1991,  Mr.
                         Slovin was an associate  at Bear  Stearns & Co.,  Inc.,
                         specializing in mergers and  acquisitions and corporate
                         finance.  Mr.  Slovin  holds an MBA degree from Harvard
                         Business School.

Robert Barolak           Age 46, has served as a Director of the  Company  since
                         December 1999. Mr. Barolak's  current term on the Board
                         expires at the Company's Annual Meeting of Stockholders
                         in 2001.  Since 1989,  Mr. Barolak has been employed at
                         Greystone & Co. in various executive capacities and has
                         been its Executive Vice President since 1995. From 1979
                         to 1989,  Mr.  Barolak  was an  attorney at the firm of
                         Ballard Spahr Andrews & Ingersoll, LLP in Philadelphia.
                         Mr. Barolak holds a J.D.  degree from the University of
                         Pennsylvania School of Law.

Jonathan Blank, Esq.     Age 55, has served as a Director of the  Company  since
                         April  2000.  Mr.  Blank's  current  term on the  Board
                         expires at the Company's Annual Meeting of Stockholders
                         in 2002. Since 1979, Mr. Blank has been a member of the
                         law firm of Preston Gates Ellis & Rouvelas Meeds LLP, a
                         managing partner of the firm since 1995 and a member of
                         the  Executive  Committee  of Preston  Gates  Ellis LLP
                         since 1995.  Mr. Blank is also a member of the Board of
                         Directors of Marine  Transport  Corporation  and of its
                         Audit Committee.

(b)  The following  table shows the names and ages of all executive  officers of
the  Company,  the  positions  and offices  held by such  persons and the period
during which each such person  served as an officer.  The term of office of each
person is generally not fixed since each person serves at the  discretion of the
Board of Directors of the Company.

<TABLE>
<CAPTION>
     Name                                   Age     Position                                   Officer
     ----                                   ---     --------                                    Since
                                                                                               -------
<S>                                         <C>     <C>                                         <C>
     David B. Schick...................     39      Chairman of the Board and Chief
                                                    Executive Officer                           1992

     Jeffrey T. Slovin.................     35      President and Director                      1999

     John Pauley.......................     53      Chief Operating Officer                     1999

     Zvi N. Raskin.....................     37      Secretary and General Counsel               1992

     Stan Mandelkern...................     40      Vice President of Engineering               1999

     William Rogers....................     59      Vice President of Operations                1999
</TABLE>

                                       23
<PAGE>
<TABLE>
<CAPTION>
<S>                                         <C>     <C>                                         <C>

     Michael Stone.....................     47      Vice President of Sales and Marketing       2000
</TABLE>

     The  business  experience  of each of the  executive  officers who is not a
Director is set forth below.

     JOHN  PAULEY has served as the  Company's  Chief  Operating  Officer  since
     October  1999.  From  1985 to 1999,  Mr.  Pauley  was  President  and Chief
     Executive Officer of PFCM Corporation,  a management-consulting  firm. From
     1983 to 1985,  Mr.  Pauley was  Director of  Construction  Engineering  and
     Facilities  Operations at NBC,  Inc. and, from 1979 to 1983,  was President
     and  Chief  Executive  Officer  of  Hospital  Energists,  Inc.  / Oak Ridge
     Associated  Universities.  Mr. Pauley holds a B.A.  Degree in Biology and a
     B.S. Degree in Chemistry from the University of Tennessee.

     ZVI N. RASKIN has served as Secretary  of the Company  since April 1992 and
     as General  Counsel of the Company since September 1995. From April 1992 to
     May 1996, Mr. Raskin was a Director of the Company.  Mr. Raskin is admitted
     to practice law before the Bars of the State of New York, the United States
     District Courts for the Southern and Eastern  Districts of New York and the
     United States Court of Appeals for the Second  Circuit.  From 1992 to 1995,
     Mr.  Raskin  was a senior  associate  at the New York law firm of Townley &
     Updike.  From 1990 to 1992, Mr. Raskin was an associate at the New York law
     firm of Dornbush  Mandelstam & Silverman.  Mr.  Raskin holds a J.D.  degree
     from Yale Law School.

     STAN  MANDELKERN  has served as the Company's Vice President of Engineering
     since  November 1999.  From 1998 to 1999, Mr.  Mandelkern was the Company's
     Director of Electrical Engineering, and was a Senior Electrical Engineer at
     the  Company  from 1997 to 1998.  From 1996 to 1997 Mr.  Mandelkern  was at
     Satellite  Transmission  Systems as Project  Leader for the  Digital  Video
     Products  Group.  From 1989 to 1996 Mr.  Mandelkern held various design and
     management  positions at Loral Corp. Mr.  Mandelkern holds a M.S. Degree in
     electrical engineering from Syracuse University.

     WILLIAM  ROGERS has served as the  Company's  Vice  President of Operations
     since  January 2000.  From August 1998 to January 2000,  Mr. Rogers was the
     Company's  Director of Materials and Manufacturing  Engineering.  From June
     1995 to August  1998,  Mr.  Rogers  was  Director  of  Operations  at Veeco
     Instruments  Co.,  and from  May 1993 to  February  1995  was  Director  of
     Manufacturing for Scully Signal Company.  Mr. Rogers holds a B.S. Degree in
     electrical engineering from Northeastern University.

     MICHAEL  STONE has  served as the  Company's  Vice  President  of Sales and
     Marketing  since January 2000.  From  September  1993 to January 2000,  Mr.
     Stone was General  Manager of the Dental  Division of Welch-Allyn  Company,
     and from  October 1989 to  September  1993 was  Director of  Marketing  for
     Welch-Allyn.  Mr.  Stone  holds  an  MBA  degree  from  the  University  of
     Rochester.

Section 16(A) Beneficial Ownership Reporting Compliance

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive  officers and directors and persons who beneficially own more than 10%
of the Company's  Common Stock to file initial  reports of ownership and reports
of changes  in  ownership  with the  Commission.  Such  executive  officers  and
directors and greater than 10% beneficial owners are required by the regulations
of the  Commission  to furnish  the Company  with  copies of all  Section  16(a)
reports they file.

     Based  solely on a review of the copies of such  reports  furnished  to the
Company and written  representations  from the executive officers and directors,
the Company  believes that all Section 16(a) filing  requirements  applicable to
its executive officers and directors and greater than 10% beneficial owners were
complied with, except that the Form 3 for Mr. Stone, Vice President of Sales and
Marketing, was not timely filed.


                                       24
<PAGE>

ITEM 11.  EXECUTIVE COMPENSATION

     The following table sets forth certain information concerning  compensation
received  for the  fiscal  years  ended  March  31,  2000,  1999 and 1998 by the
Company's chief executive  officer and each of the current and former  executive
officers  of the  Company  whose total  salary and other  compensation  exceeded
$100,000  (the "Named  Executives")  for  services  rendered  in all  capacities
(including service as a director of the Company) during the year ended March 31,
2000.

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                                                                           Long-Term
                                                                              Annual Compensation        Compensation
                                                                              -------------------           Awards
                                                                                                            ------

                                                                                              Other
                                                                                              Annual      Securities      All Other
       Name and Principal                                Fiscal                               Compensa    Underlying      Compensa
            Position                                      Year   Salary($)      Bonus($)      tion(1)     Options(#)(2)   tion($)(3)
            --------                                      ----   ---------      --------      -------     -------------   ---------

------------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>    <C>           <C>               <C>        <C>          <C>
                                                          2000   $184,442      $   --            --            --        $  3,802
    David B. Schick
    Chairman of the Board and                             1999    217,500          --            --          12,251         3,980
    Chief  Executive Officer
                                                          1998    143,385        39,692          --           3,267         4,569
------------------------------------------------------------------------------------------------------------------------------------
                                                          2000    165,769          --            --            --           3,144
    Fred Levine
    Former Vice President of                              1999    179,167        47,500(4)       --          12,055         4,366
    Sales and Marketing and
    Former Director
                                                          1998    137,318        23,826(4)       --           1,000         4,031
------------------------------------------------------------------------------------------------------------------------------------
                                                          2000    160,577        10,000          --            --           4,265
    Zvi N. Raskin, Esq
    General Counsel and                                   1999    132,500          --            --          17,006         3,286
    Secretary
                                                          1998     99,539        25,000          --           2,343         3,113
------------------------------------------------------------------------------------------------------------------------------------
    George C. Rough, Jr                                   2000    139,385(5)       --            --            --            --
    Former Chief Financial
    Officer                                               1999     13,846(6)    150,000(7)       --         100,000(8)       --

                                                          1998       --            --            --            --            --
</TABLE>

----------------

(1)  Aggregate  amount does not exceed the lesser of $50,000 or 10% of the total
     annual salary and bonus for the named officer.

(2)  Represents options to purchase shares of Common Stock granted during fiscal
     1998,  1999 and 2000,  pursuant to the Company's 1996 Employee Stock Option
     Plan.

(3)  Reflects  amounts  contributed  by the  Company  in the  form  of  matching
     contributions to the Named  Executive's  Savings Plan account during fiscal
     1998, 1999 and 2000.

(4)  Represents a commission  received by Mr. Levine in connection  with certain
     sales targets that were met or exceeded.

----------------

                                       25
<PAGE>

(5)  Reflects  payment of salary to Mr.  Rough from  April 1, 1999  through  the
     termination of his employment with the Company in October 1999.

(6)  Reflects  payment  of  salary  to  Mr.  Rough  from  March  1,  1999,  upon
     commencement of his employment with the Company, through March 31, 1999.

(7)  In connection with commencement of his employment with the Company in March
     1999, Mr. Rough was paid a bonus of $150,000.

(8)  Upon his  employment  with the  Company  on March 1,  1999,  Mr.  Rough was
     granted  stock  options to  purchase  100,000  shares,  25% of which  stock
     options were to vest on March 1, 2000,  25% on March 1, 2001,  25% on March
     1,  2002,  and the  remaining  25% on March 1, 2003,  pursuant  to the 1996
     Employee Stock Option Plan. Upon his  termination  from employment with the
     Company in October 1999, all such options terminated.

Employment Agreements and Termination of Employment Arrangement

     In  February  2000,  the  Company  entered  into  a  three-year  employment
agreement  with David Schick,  pursuant to which Mr. Schick is employed as Chief
Executive  Officer  of the  Company.  The  term of the  agreement  is  renewable
thereafter  on a  year-to-year  basis unless  either party gives 60-day  written
notice of termination before the end of the then-current term. Mr. Schick's base
annual salary is $200,000,  subject to annual  increases of at least ten percent
(10%).  In addition to base  salary,  Mr.  Schick is eligible to receive  annual
merit  or  cost-of-living  increases  as may  be  determined  by  the  Executive
Compensation  Committee of the Board of Directors.  Mr. Schick will also receive
incentive  compensation  in the  form of a bonus  which  is  calculated  using a
formula  based on the  Company's  EBITDA as a percentage  of the  Company's  net
revenues.  Additionally,  all Company stock options held by, or to be issued to,
Mr. Schick will  immediately  vest in the event that the Company has a change in
control or is acquired by another company or entity.

     In  February  2000,  the  Company  entered  into  a  three-year  employment
agreement  with Zvi  Raskin,  effective  January 1, 2000,  pursuant to which Mr.
Raskin is employed as General  Counsel of the Company.  Mr. Raskin's annual base
annual salary is $200,000. In addition to base salary, Mr. Raskin will receive a
minimum bonus of $20,000 per calendar year and is eligible to receive additional
performance  bonuses  at  the  sole  discretion  of the  Executive  Compensation
Committee of the Board of Directors.  Mr. Raskin was also awarded  75,000 shares
of the Company's Common Stock,  subject to a risk of forfeiture which expires as
to 25,000 shares on each of December 31, 2000,  2001 and 2002.  Upon the sale of
any such  vested  shares,  Mr.  Raskin is required to pay the Company the sum of
$1.32 per share sold within 30 days  following  such sale. In the event that Mr.
Raskin is terminated  from  employment  with the Company without cause, he would
receive 12 months of severance pay.

     In August  1999,  the Company and Fred Levine  entered  into a  Separation,
Severance  and  General  Release  Agreement.  The  Agreement  provided  that Mr.
Levine's  employment  at the Company and  membership  on the Board of  Directors
would cease as of August 27, 1999, and that he would receive  continued  payment
of his then-current  salary, in the gross annual amount of $170,000,  as well as
continued  medical  and  dental  insurance  coverage,  for a period  of one year
following  such  cessation of  employment.  The Agreement also provided that the
Company  stock  options  granted to Mr. Levine in fiscal 1996 could be exercised
until  their  expiration  on  December  31,  2000.  Mr.  Levine also agreed to a
24-month non-competition covenant.  Additionally,  the parties mutually released
one  another  from any  current or future  claims  arising  out of Mr.  Levine's
employment  with the Company,  his separation  from such  employment  and/or his
compensation.

     In  February  1999,  the  Company  entered  into  a  three-year  employment
agreement  with George C. Rough,  Jr. to commence on March 1, 1999,  pursuant to
which Mr. Rough was employed as Chief Financial  Officer and  Vice-President  of
the  Company.   The  term  of  the  agreement  was  renewable  thereafter  on  a
year-to-year  basis unless  either party were to give 60-day  written  notice of
termination  before the end of the  then-current  term.  Mr. Rough's base annual
salary  was  $240,000,  subject to annual  increases  at the  discretion  of the
Company's  Chief  Executive  Officer,  contingent upon approval by the Executive
Compensation  Committee of the Board of  Directors.  In addition to base salary,
Mr. Rough also received  compensation  in the form of a bonus,  in the amount of
$150,000,  paid to him in April 1999 and was also to receive a guaranteed annual
bonus of $40,000,  payable at the end of each fiscal year during the term of his
employment. Mr. Rough was also awarded, upon commencement of his employment with
the Company,


                                       26
<PAGE>

100,000  Incentive  Stock Options under the Company's 1996 Employee Stock Option
Plan, as amended. In October,  1999, Mr. Rough resigned from his position at the
Company and the 100,000 stock options awarded to him terminated.

Compensation of Directors

     Directors  who  are  also  employees  of the  Company  are  not  separately
compensated  for any services  they provide as directors.  In fiscal 2000,  each
non-employee  director  of the Company  was  eligible  to receive  $500 for each
meeting of the Board of  Directors  attended,  $300 for each  committee  meeting
attended,  and an annual  retainer of $1,200.  The Company may, but did not, pay
such fees in Common Stock. In addition,  non-employee  directors are eligible to
receive  annual  grants of stock options  under the  Company's  Directors  Stock
Option Plan.

Compensation Committee Interlocks and Insider Participation

     The  Executive  Compensation  Committee  reviews and makes  recommendations
regarding the  compensation for top management and key employees of the Company,
including  salaries  and  bonuses.  The  members of the  Executive  Compensation
Committee  during the fiscal year ended  March 31,  2000 were Howard  Wasserman,
D.D.S.  (until Mr.  Wasserman  resigned as a member of the Board of Directors in
November 1999) and Robert J. Barolak  (commencing upon Mr. Barolak's election to
the Board of Directors in December, 1999). None of such persons is an officer or
employee,  or  former  officer  or  employee,  of  the  Company  or  any  of its
subsidiaries.  No interlocking relationship existed during the fiscal year ended
March 31,  2000,  between the members of the  Company's  Board of  Directors  or
Compensation  Committee and the board of directors or compensation  committee of
any other company,  nor had any such  interlocking  relationship  existed in the
past. Mr. Barolak is an executive officer of Greystone,  a lender to the Company
under the Amended and Restated Loan Agreement between the Company and Greystone.
See "Item 7 -  Management's  Discussion  and  Analysis -  Liquidity  and Capital
Resources" and "Item 13 - Certain Relationships and Related Transactions."

Stock Option Grants

     The following table sets forth  information  regarding grants of options to
purchase  Common Stock made by the Company  during the year ended March 31, 2000
to each of the Named Executives.

                                       Option Grants in Fiscal 2000
<TABLE>
<CAPTION>
                                                         Individual Grants
                               Number of
                               Securities   Percent of Total
                               Underlying    Options Granted   Exercise
                                Options     to  Employees in     Price       Expiration     Grant Date
        Name                   Granted(#)     Fiscal 2000(1)   ($/Share)        Date          Value
        ----                   ----------   ----------------   --------      ----------     ----------

<S>                                <C>             <C>            <C>            <C>            <C>
     David B. Schick               --              --             --             --             --

                                   --              --             --             --             --
     Fred Levine

     Zvi N. Raskin                 --              --             --             --             --


     George C
     Rough, Jr                     --              --             --             --             --
</TABLE>

(1)  The Company granted employees options to purchase a total of 681,866 shares
     of Common Stock in fiscal 2000.


                                       27
<PAGE>

Option Exercises and Year-End Value Table

     The following table sets forth information  regarding the exercise of stock
options during fiscal 2000 and the number and value of unexercised  options held
at March 31, 2000 by each Named Executive.

<TABLE>
<CAPTION>
                                                   Aggregated Option Exercises in Fiscal 2000
                                                      and Fiscal 2000 Year-End Option Values


                                                                         Number of
                                                                         Securities            Value of
                                                                         Underlying          Unexercised
                                                                        Unexercised         "In-the-Money"
                                                                         Options at           Options at
                                         Shares                         March 31, 2000      March 31, 2000
                                       Acquired on        Value          Exercisable/        Exercisable/
       Name                            Exercise(#)     Realized ($)     Unexercisable      Unexercisable(1)
       ----                            -----------     ------------     -------------      ----------------


<S>                                        <C>              <C>        <C>                      <C>
     David B. Schick                       --               --         11,536(2) / 9,696         $ -- / --


     Fred Levine                           --               --           56,000(3) / 0          18,760 / 0


     Zvi N. Raskin                         --               --          6,425 / 12,673            -- / --


     George C. Rough,                      --               --              0/0(4)                -- / --
     Jr
</TABLE>


(1)  Options  are  "in-the-money"  if the fair  market  value of the  underlying
     securities exceeds the exercise price of the options. The amounts set forth
     represent the difference  between  $2.125 per share,  the closing price per
     share on March 31, 2000, and the exercise  price of the option,  multiplied
     by the applicable number of options.

(2)  The fiscal 1997 stock option grant of 5,715 stock  options to Mr. Schick is
     a time-vesting  option.  Twenty-five  percent of such option vested on July
     22, 1997, 25% vested on July 22, 1998, 25% vested on July 22, 1999, and the
     remaining 25% vests on July 22, 2000. The stock option was exercisable upon
     grant.

(3)  Includes  options to purchase  56,000 shares of Common Stock at an exercise
     price of $1.79 a share  granted to Mr.  Levine in fiscal 1996 in connection
     with Mr. Levine's commencement of employment with the Company, of which all
     options are vested. Such options expire on December 31, 2000.

(4)  Upon his termination  from employment with the Company in October 1999, all
     the stock options granted to Mr. Rough upon his employment with the Company
     on March 1, 1999, terminated and were returned to the Company.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The following  table sets forth certain  information  regarding  beneficial
ownership of the  Company's  Common Stock as of June 13, 2000 by (i) each person
who is known by the  Company  to own  beneficially  more  than 5% of the  Common
Stock,  (ii) each director,  (iii) each Named  Executive of the Company and (iv)
all directors and executive officers of the Company as a group. Unless otherwise
noted,  the  stockholders  listed in the table have sole  voting and  investment
powers with respect to the shares of Common Stock owned by them.


                                       28
<PAGE>
<TABLE>
<CAPTION>
                                                    Number of Shares                                              Percentage of
     Name                                           Beneficially Owned(1)                                         Outstanding Shares
     ----                                           ---------------------                                         ------------------
<S>                                                 <C>                                                                <C>
     David B. Schick(2) .........................   2,195,090(3).......................................................21.6%

     George C. Rough Jr.(4) .....................   --(5)..............................................................--

     Fred Levine(6) .............................   97,792(7)..........................................................*

     Zvi N. Raskin(2) ...........................   117,557(8).........................................................1.2%

     Euval S. Barrekette(9) .....................   127,740(10)........................................................1.3%

     Allen Schick(11) ...........................   545,624(12)........................................................5.4%

     Jeffrey T. Slovin(2) .......................   760,000(13)........................................................7.0%

     Robert Barolak (14) ........................   10,000(15).........................................................*

     Jonathan Blank(16) .........................   110,075(17)........................................................1.1%

     Greystone Funding Corp.(18) ................   4,250,000(19)......................................................29.5%

     All current executive Officers and Directors
     as a group(20)..............................   3,905,036..........................................................35.5%
</TABLE>

*    Less than 1%

(1)  Beneficial  ownership  is  determined  in  accordance  with  rules  of  the
     Securities  and  Exchange  Commission  and  includes  voting  power  and/or
     investment power with respect to securities. Shares of Common Stock subject
     to options or warrants currently  exercisable or exercisable within 60 days
     of June 13, 2000 are deemed  outstanding  for  computing the number and the
     percentage of outstanding  shares  beneficially owned by the person holding
     such options but are not deemed  outstanding  for computing the  percentage
     beneficially owned by any other person.

(2)  Such person's business address is c/o Schick Technologies, Inc., 31-00 47th
     Avenue, Long Island City, New York 11101.

(3)  Consists of 2,183,300 shares held jointly by Mr. Schick and his wife; 5,715
     shares issuable upon the exercise of stock options granted to Mr. Schick in
     July 1996; 2,450 shares issuable upon the exercise of stock options granted
     to Mr. Schick in July 1997; 1125 shares issuable upon the exercise of stock
     options granted to Mr. Schick in April 1998; and 2,500 shares issuable upon
     the  exercise  of stock  options  granted to Mr.  Schick in  October  1998,
     pursuant to the 1996 Employee Stock Option Plan.

(4)  Such  person's  business  address is c/o  PricewaterhouseCoopers  LLP, 1301
     Avenue of the Americas, New York, New York 10036.

(5)  Upon his  employment  with the  Company  on March 1,  1999,  Mr.  Rough was
     granted  stock  options to  purchase  100,000  shares,  25% of which  stock
     options were to vest on March 1, 2000,  25% on March 1, 2001,  25% on March
     1,  2002,  and the  remaining  25% on March 1, 2003,  pursuant  to the 1996
     Employee Stock Option Plan. Upon his  termination  from employment with the
     Company in October 1999,  all such options  terminated  and reverted to the
     Company.
----------


                                       29
<PAGE>

(6)  Such person's address is 3 Cottonwood Lane, Wesley Hills, New York 10901.

(7)  Consists of 41,792  shares  held  jointly by Mr.  Levine and his wife,  and
     56,000 shares  issuable upon the exercise of options  granted to Mr. Levine
     in fiscal 1996.

(8)  Consists  of 34,800  shares  held  jointly by Mr.  Raskin and his wife;  an
     additional 75,000 shares (the "Shares") issued by the Company to Mr. Raskin
     on February 6, 2000,  which are subject to the  following  restrictions  on
     their sale or transfer:  (i) none of the Shares may be sold or  transferred
     prior to December 31, 2000, (ii) one-third (i.e., 25,000) of the Shares may
     be sold or transferred  on or after December 31, 2000,  (iii) an additional
     one-third  (i.e.,  an  additional  25,000)  of the  Shares  may be  sold or
     transferred  on or after  December 31, 2001,  and (iv) the final  one-third
     (i.e.,  the final  25,000) of the Shares may be sold or  transferred  on or
     after December 31, 2002. The aforementioned  75,000 shares are subject to a
     risk of  forfeiture  which  expires as to 25,000 shares on each of December
     31, 2000,  2001 and 2002;  1,755 shares issuable upon the exercise of stock
     options granted to Mr. Raskin in July 1997;  1,002 shares issuable upon the
     exercise  of options  granted to Mr.  Raskin in April  1998;  2,500  shares
     issuable  upon the exercise of options  granted to Mr. Raskin in July 1998;
     and 2,500  shares  issuable  upon the  exercise  of options  granted to Mr.
     Raskin in October 1998, pursuant to the 1996 Employee Stock Option Plan.

(9)  Such person's address is 90 Riverside Drive, New York, New York 10024.

(10) Consists of 115,240 shares held by Dr.  Barrekette;  2,500 shares  issuable
     upon the exercise of stock options granted to Dr. Barrekette in July, 1998;
     and 10,000 shares  issuable  upon the exercise of stock options  granted to
     Dr.  Barrekette in June, 2000,  pursuant to the 1997 Directors Stock Option
     Plan.

(11) Such person's  address is 1222 Woodside  Parkway,  Silver Spring,  Maryland
     20910.

(12) Consists of 488,324 shares held jointly by Dr. Schick and his wife;  44,800
     shares  held by Dr.  Schick as  custodian  for the minor  children of David
     Schick; 2,500 shares issuable upon the exercise of stock options granted to
     Dr. Schick in July 1998;  and 10,000  shares  issuable upon the exercise of
     stock  options  granted to Dr. Schick in June,  2000,  pursuant to the 1997
     Directors Stock Option Plan. Dr. Schick disclaims  beneficial  ownership of
     the 44,800 shares held as custodian.

(13) Consists of 750,000  shares  issuable upon the exercise of warrants held by
     Mr. Slovin (which Mr. Slovin  received as designee of Greystone) and 10,000
     shares issuable upon the exercise of stock options granted to Mr. Slovin in
     June, 2000, pursuant to the 1997 Directors Stock Option Plan.

(14) Such  person's  business  address  is c/o  Greystone  & Co.,  152 West 57th
     Street, New York, New York 10019.

(15) Consists of 10,000  shares  issuable  upon the  exercise  of stock  options
     granted to Mr. Barolak in June, 2000,  pursuant to the 1997 Directors Stock
     Option Plan.

(16) Such person's  business address is c/o Preston Gates Ellis & Rouvelas Meeds
     LLP, 1735 New York Avenue, N.W., Washington, D.C. 20006.

(17) Consists of 100,075  shares held by Mr. Blank;  and 10,000 shares  issuable
     upon the  exercise  of stock  options  granted  to Mr.  Blank in June 2000,
     pursuant to the 1997 Directors Stock Option Plan.

(18) Greystone's address is 152 West 57th Street, New York, New York 10019.

(19) Consists of 4,250,000 shares issuable upon the exercise of warrants held by
     Greystone.  Does not include  13,000,000  shares  issuable upon exercise of
     warrants held by Greystone  which vest as  additional  amounts are advanced
     under the Greystone Loan Agreement.  See "Item 7 - Management's  Discussion
     and Analysis - Liquidity and Capital Resources."

(20) Includes  the shares  underlying  warrants  described in Note 13 as well as
     shares subject to options held by current officers and directors.


                                       30
<PAGE>

     In  connection  with,  and as a  condition  to,  the  Loan  Agreement  with
Greystone on December 27, 1999, the Company,  David B. Schick,  Allen Schick and
Greystone entered into a Stockholders  Agreement (the "Stockholders  Agreement")
dated  as  of  December  27,  1999.  (David  B.  Schick  and  Allen  Schick  are
collectively referred to herein as the "Stockholders")  pursuant to which, among
other things,  (i) the  Stockholders  agree to vote shares of Common Stock which
they or family  members  or  certain  affiliates  own or which the  Stockholders
control (the "Stockholder  Shares") as necessary to cause the Company's Board of
Directors  (the  "Board")  to consist of a minimum of six  members or such other
number as required by the Loan Agreement;  (ii) the  Stockholders  agree to vote
the  Stockholder  Shares in favor of the election or  reelection of designees of
Greystone  for the number of seats on the Board  (initially  two) as provided in
the Loan  Agreement;  (iii) the  Stockholders  agree to take  action and vote to
appoint a  Greystone  designee to fill any vacancy on the Board by reason of the
death,  resignation or removal of a Greystone  designee;  (iv) the  Stockholders
agree not to vote  Stockholder  Shares to remove a Greystone  designee  from the
Board;  (v) each  Stockholder  who is a director of the Company  agrees,  in his
capacity as director  (and subject to his  fiduciary  duties),  to cause Jeffrey
Slovin to hold the office of President of the Registrant and to vote as provided
in clauses (i) through  (iv) above,  as well as to vote to elect or reelect (and
not vote to remove)  individuals  appointed by Greystone to the audit  committee
and compensation committee of the Board, as provided in the Loan Agreement.  The
Stockholders have also agreed to vote all of their respective Stockholder Shares
in favor of a proposal to increase  the number of stock  options  available  for
grant to employees by 750,000.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     In connection with the Loan Agreement with Greystone, the Company issued to
Greystone  4,250,000  warrants to purchase the Company's  Common  Stock,  and to
Jeffrey  Slovin,  as  Greystone's  designee,  750,000  warrants to purchase  the
Company's  Common Stock.  Mr. Slovin is the company's  President and serves as a
Director as Greystone's  designee.  Messrs.  Slovin and Robert Barolak, who also
serves  as a  Director  as  Greystone's  designee,  are  executive  officers  of
Greystone.  See "Item 7 -  Management's  Discussion and Analysis - Liquidity and
Capital Resources."


                                       31
<PAGE>

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>
SCHICK TECHNOLOGIES, INC.
Index to Consolidated Financial Statements
                                                                                                                                Page
<S>                                                                                                                              <C>
Index to Consolidated Financial Statements ...................................................................................   F-1

Report of Independent Certified Public Accountants ...........................................................................   F-2

Report of Independent Accountants ............................................................................................   F-3

Consolidated Balance Sheets as of March 31, 2000 and 1999 ....................................................................   F-4

Consolidated Statements of Operations for the years ended March 31, 2000, 1999 and 1998 ......................................   F-5

Consolidated Statements of Changes in Stockholders' Equity for the years ended March 31,
         2000, 1999 and 1998 .................................................................................................   F-6

Consolidated Statements of Cash Flows for the years ended March 31, 2000, 1999 and 1998 ......................................   F-7

Notes to Consolidated Financial Statements ...................................................................................   F-8
</TABLE>


                                      F-1
<PAGE>

               Report of Independent Certified Public Accountants

To the Board of Directors
and Stockholders of Schick Technologies, Inc.

We  have  audited  the  accompanying   consolidated  balance  sheets  of  Schick
Technologies,  Inc.  (the  "Company")  as of March 31,  2000 and  1999,  and the
related consolidated  statements of operations,  changes in stockholders' equity
and cash flows for each of the two years in the  period  ended  March 31,  2000.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  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
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the consolidated financial position of Schick
Technologies,  Inc. as of March 31, 2000 and 1999, and the consolidated  results
of their operations and their  consolidated cash flows for each of the two years
in the period ended March 31, 2000, in  conformity  with  accounting  principles
generally accepted in the United States of America.

We have also audited  Schedule II - Valuation and Qualifying  Accounts of Schick
Technologies, Inc. for each of the two years in the period ended March 31, 2000.
In our opinion,  this schedule  presents fairly, in all material  respects,  the
information required to be set forth therein.



Grant Thornton LLP
New York, New York
June 16, 2000

                                      F-2
<PAGE>


                        Report of Independent Accountants


To the Board of Directors and Stockholders of
Schick Technologies, Inc.

In our opinion,  the  accompanying  consolidated  balance  sheet and the related
consolidated statements of operations, of changes in stockholders' equity and of
cash flows present fairly,  in all material aspects,  the financial  position of
Schick  Technologies,  Inc. and its  subsidiaries  (the  "Company") at March 31,
1998,  and the results of their  operations and their cash flows for each of the
two years in the period  ended March 31, 1998,  in  conformity  with  accounting
principles generally accepted in the United States. In addition, in our opinion,
Schedule II for the years ended March 31, 1998 and 1997 presents fairly,  in all
material  respects,  the  information set forth therein when read in conjunction
with the related consolidated  financial statements.  These financial statements
are the  responsibility of the Company's  management;  our  responsibility is to
express  an  opinion  on these  financial  statements  based on our  audits.  We
conducted our audits of these  statements in accordance with auditing  standards
generally accepted in the United States,  which 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,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe  that our audits  provide a reasonable  basis for the opinion  expressed
above.




PricewaterhouseCoopers LLP
New York, New York
June 9, 1998


                                      F-3

<PAGE>

Schick Technologies, Inc.
Consolidated Balance Sheets
(In thousands, except share amounts)

<TABLE>
<CAPTION>
                                                                                                        March 31,
                                                                                                        ---------
                                                                                                           2000              1999
                                                                                                           ----              ----
<S>                                                                                                      <C>               <C>
Assets
Current assets
     Cash and cash equivalents                                                                           $  1,429          $  1,415
     Short - term investments                                                                                   8               360
     Accounts receivable, net of allowance for doubtful accounts of
        $2,449 (2000) and $4,512 (1999), respectively                                                       1,535             4,205
     Inventories                                                                                            5,612            10,686
     Income taxes receivable                                                                                  127             2,720
     Prepayments and other current assets                                                                     166               321
                                                                                                         --------          --------
                     Total current assets                                                                   8,877            19,707
                                                                                                         --------          --------
Equipment, net                                                                                              5,206             7,221
Investments                                                                                                   815             1,250
Other assets                                                                                                1,392             1,208
                                                                                                         --------          --------
                     Total assets                                                                        $ 16,290          $ 29,386
                                                                                                         ========          ========



Liabilities and Stockholders' Equity
Current liabilities
     Current maturities of long term debt                                                                $    245          $  5,000
     Accounts payable and accrued expenses                                                                  4,255             8,946
     Accrued salaries and commissions                                                                         878             1,296
     Deferred revenue                                                                                       1,681               564
     Deposits from customers                                                                                  666               513
     Warranty obligations                                                                                     278               402
     Capital lease obligations, current                                                                        33                84
                                                                                                         --------          --------
                     Total current liabilities                                                              8,036            16,805
                                                                                                         --------          --------

Long term debt                                                                                              6,938                --
Capital lease obligations                                                                                      --                45
                                                                                                         --------          --------
                     Total liabilities                                                                     14,974            16,850
                                                                                                         --------          --------
Commitments and contingencies                                                                                  --                --
Stockholders' equity
     Preferred stock ($0.01 par value; 2,500,000
          shares authorized; none issued and outstanding)                                                      --                --
     Common stock ($0.01 par value; 25,000,000 shares authorized: 10,134,884
          and 10,059,384 shares issued and outstanding at March 31, 2000 and
          1999, respectively)                                                                                 101               101
     Additional paid-in capital                                                                            42,347            41,236
     (Accumulated deficit)                                                                                (41,132)          (28,801)
                                                                                                         --------          --------
                     Total stockholders' equity                                                             1,316            12,536
                                                                                                         --------          --------
                     Total liabilities and stockholders' equity                                          $ 16,290          $ 29,386
                                                                                                         ========          ========
</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                      F-4
<PAGE>

Schick Technologies, Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                                    Year Ended March 31,
                                                                                         ------------------------------------------
                                                                                           2000             1999             1998
                                                                                         --------         --------         --------
<S>                                                                                      <C>              <C>              <C>
Revenue, net                                                                             $ 21,989         $ 45,605         $ 38,451
                                                                                         --------         --------         --------


Cost of sales                                                                              15,393           34,611           17,658
Excess and obsolete inventory                                                                 898            5,466               --
                                                                                         --------         --------         --------
Total cost of sales                                                                        16,291           40,077           17,658
                                                                                         --------         --------         --------

                             Gross profit                                                   5,698            5,528           20,793
                                                                                         --------         --------         --------

Operating expenses:
          Selling and marketing                                                             7,636           18,440           10,645
          General and administrative                                                        7,330            7,338            3,954
          Research and development                                                          2,830            4,354            3,852
          Bad debt expense                                                                      9            5,598              164
          Patent litigation settlement                                                         --               --              600
                                                                                         --------         --------         --------
                             Total operating costs                                         17,805           35,730           19,215
                                                                                         --------         --------         --------

                             (Loss) income from operations                                (12,107)         (30,202)           1,578
                                                                                         --------         --------         --------

Other income (expense)
          Gain from sale of investment                                                        565               --               --
          Interest income                                                                     101              505            1,188
          Interest expense                                                                   (890)            (261)             (77)
                                                                                         --------         --------         --------
                             Total other income (expense)                                    (224)             244            1,111
                                                                                         --------         --------         --------

                             (Loss) income before income taxes                            (12,331)         (29,958)           2,689

                             (Benefit) provision for income taxes                              --             (352)             328
                                                                                         --------         --------         --------

                             Net (loss) income                                           $(12,331)        $(29,606)        $  2,361
                                                                                         ========         ========         ========


                             Basis (loss) earnings per share                             $  (1.23)        $  (2.96)        $   0.25
                                                                                         ========         ========         ========
                             Diluted (loss) earnings per share                           $  (1.23)        $  (2.96)        $   0.24
                                                                                         ========         ========         ========
</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                      F-5
<PAGE>

Schick Technologies, Inc.
Consolidated Statements of Changes in Stockholders' Equity
(In thousands, except share amounts)
----------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                                         (Accumulated
                                                                    Common Stock              Additional    Deficit)       Total
                                                                    ------------              Paid -in     Retained    Stockholders'
                                                                       Shares      Amount      Capital      Earnings      Equity
                                                                     ---------   ----------   ----------   ----------    ----------
<S>                                                                  <C>         <C>          <C>          <C>           <C>
Balance at April 1, 1997                                             7,957,231   $       80   $    7,563   $   (1,556)   $    6,087

           Issuance and sale of common stock in initial
                public offering                                      2,012,500           20       33,488           --        33,508
           Issuance of common stock upon
                exercise of stock options                                2,479           --           18           --            18
           Issuance of common stock upon
                exercise of warrants                                    19,847           --          100           --           100
           Issuance of compensatory
                stock options to employees                                  --           --           35           --            35
           Net income                                                       --           --           --        2,361         2,361
                                                                     ---------   ----------   ----------   ----------    ----------
Balance at March 31, 1998                                            9,992,057          100       41,204          805        42,109
           Issuance of common stock upon
                exercise of stock options                                3,848           --           32           --            32
           Issuance of common stock upon
                exercise of warrants                                    63,479            1           --           --             1
           Net loss                                                         --           --           --      (29,606)      (29,606)
                                                                     ---------   ----------   ----------   ----------    ----------
Balance at March 31, 1999                                           10,059,384          101       41,236      (28,801)       12,536
           Issuance of warrants                                             --           --        1,111           --         1,111
           Issuance of common stock, net                                75,000           --           --           --            --
           Net loss                                                         --           --           --      (12,331)      (12,331)
                                                                     ---------   ----------   ----------   ----------    ----------
Balance at March 31, 2000                                           10,134,384   $      101   $   42,347   $  (41,132)   $    1,316
                                                                    ==========   ==========   ==========   ==========    ==========
</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                      F-6
<PAGE>



Schick Technologies, Inc.
Consolidated Statements of Cash Flows
(In thousands)
-------------------------------------
<TABLE>
<CAPTION>
                                                                                                        Year ended March 31,
                                                                                                        --------------------
                                                                                                     2000        1999        1998
                                                                                                   --------    --------    --------
<S>                                                                                                <C>         <C>         <C>
Cash flows from operating activities
     Net (loss) income                                                                             $(12,331)   $(29,606)   $  2,361
       Adjustments to reconcile net (loss) income to net cash used in operating activities
               Depreciation and amortization                                                          2,186       1,710         943
               Provision for excess and obsolete inventory                                              898       5,466          --
               Provision for bad debts                                                                    9       5,598         164
               Stock and option grant compensation                                                       --          --          35
               Accrued interest on investments                                                           --          --        (428)
               Amortization of debt discount and deferred financing costs                               181          --          --
               Gain from sale of investment                                                            (565)         --          --
               Other                                                                                    146
               Changes in assets and liabilities:
                        Accounts receivable                                                           2,661         370      (8,409)
                        Inventories                                                                   4,176      (4,000)     (9,474)
                        Income taxes receivable                                                       2,443      (2,720)         --
                        Prepayments and other current assets                                            155         425        (419)
                        Other assets                                                                    137        (148)        (61)
                        Deferred income taxes                                                            --         349        (349)
                        Account payable and accrued expenses                                         (3,355)      1,759       5,841
                        Income taxes payable                                                             --        (144)        144
                        Deferred revenue                                                              1,117         202         221
                        Deposits from customers                                                         153         182         194
                        Warranty obligations                                                           (124)        157         (84)
                        Accrued interest on notes payable                                                --          --        (102)
                                                                                                   --------    --------    --------
                                   Net cash used in operating activities                             (2,113)    (20,400)     (9,423)
                                                                                                   --------    --------    --------
Cash flows from investing activities
     Capitalization of software development costs                                                        --          --        (165)
     Business acquisition                                                                                --          --      (1,450)
     Purchase of minority interest investment                                                            --        (250)     (1,000)
     Proceeds from sale of investment                                                                 1,000          --          --
     Purchase available-for-sale investments                                                             --     (10,588)    (23,425)
     Proceeds from maturities of held-to-maturity investments                                           352      24,250      12,144
     Proceeds from redemption of available-for-sale investments                                          --          --         490
     Capital expenditures, net                                                                         (129)     (2,777)     (4,668)
                                                                                                   --------    --------    --------
                                   Net cash provided by (used in) investing activities                1,223      10,635     (18,074)
                                                                                                   --------    --------    --------
Cash flows from financing activities
     Net proceeds from issuance and sale of common stock                                                 --          33      33,626
     Proceeds from issuance of short-term notes                                                          --       5,000          --
     Proceeds from long term borrowings                                                               1,000          --          --
     Principal payments on capital lease obligations                                                    (96)        (70)       (109)
     Repayment of notes payable                                                                          --          --      (1,513)
                                                                                                   --------    --------    --------
                                   Net cash provided by financing activities                            904       4,963      32,004
                                                                                                   --------    --------    --------

Net increase (decrease) in cash and cash equivalents                                                     14      (4,802)      4,507
Cash and cash equivalents at beginning of year                                                        1,415       6,217       1,710
                                                                                                   --------    --------    --------

Cash and cash equivalents at end of year                                                           $  1,429    $  1,415    $  6,217
                                                                                                   ========    ========    ========
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                      F-7
<PAGE>

Schick Technologies, Inc.
Notes to Consolidated Financial Statements
(Amounts In thousands, except share and per share amounts)
----------------------------------------------------------

1.        Organization and Business

     Schick Technologies,  Inc. (the "Company") designs, develops,  manufactures
     and markets innovative digital radiographic imaging systems and devices for
     the dental and medical markets that utilize low dosage radiation to produce
     instant computer generated,  high-resolution,  electronic x-ray images. The
     Company's products are sold worldwide.

     The  Company  operates  in one  reportable  segment - digital  radiographic
     imaging  systems.  The  Company's  principal  products  include  the CDR(R)
     computed  digital  radiography  imaging  system  and the  accuDEXA(R)  bone
     densitometer.

     The  following is a summary of the  Company's  revenues  from its principal
     products:

                                       % Of Total Revenue
                                            2000           1999            1998
                                            ----           ----            ----
     CDR                                     88%             71%             90%
     accuDEXA                                12%             29%             10%
                                            ---             ---             ---
                                            100%            100%            100%
                                            ===             ===             ===


     The  consolidated  financial  statements  of the Company at March 31, 2000,
     include the  accounts of the  Company and its wholly-  owned  subsidiaries,
     Schick New York and Schick X-Ray Corporation.  In August 1999, Schick X-Ray
     was dissolved and its operations absorbed by the Company.

2.        Liquidity

     The Company  incurred net losses of $12,331 and $ 29,606 in the years ended
     March 31, 2000 and 1999,  respectively,  and has an accumulated  deficit of
     $41,132 and working capital of $841 at March 31, 2000.

     In response to the losses  incurred,  management  has  implemented  certain
     corrective  actions,  which  include,  but are not limited to, (1) reducing
     staff, space and other overhead expenditures,  (2) curtailing certain sales
     promotions,   (3)  tightening   credit  policies  and  payment  terms,  (4)
     aggressively collecting past-due balances from customers, (5) consolidating
     and reducing its sales force, by entering into new distribution agreements,
     (6) implementing programs to increase warranty revenue and recover warranty
     costs from the Company's  customers,  (7)  employing new senior  management
     including  a Vice  President  of Sales and  Marketing  and Chief  Operating
     Officer,  (8)  improving  inventory  yields  and  disposing  of excess  and
     obsolete  inventory and, (9) modifying and improving the Company's products
     to improve reliability and reduce warranty expenditures.

     Additionally,  the  Company  has  taken  the  following  steps  to  improve
     operations and provide for adequate resources to fund the Company's capital
     needs for the next twelve months.

          o    In  December  1999,  the Company  secured a $ 7.5 million  credit
               facility  expiring  December 2004 for working capital purposes of
               the Company (See Note 11).

          o    In  April  2000,   the   Company   entered   into  an   exclusive
               distributorship  agreement with Patterson  Dental Company,  which
               grants  Patterson the rights to distribute  the Company's  dental
               products in the United States and Canada.

          o    In June 2000, the Company  renegotiated a $ 6.2 million term note
               payable  increasing the principal  balance to $ 6.6  (refinancing
               certain  trade  payables  on  a  long  term  basis),  eliminating
               principal   payments  through  January  2001  and  extending  the
               maturity date from March 2001 to April 2005.


                                      F-8
<PAGE>

          o    In May 2000,  the Company  entered into an agreement,  subject to
               court  approval,  for the  settlement  of a class action  lawsuit
               against the Company.  The  settlement  amount will be paid in its
               entirety, by the Company's insurance carrier. (See Note 14).

     In view of the matters  described in the preceding  paragraphs,  management
     believes the Company has the ability to meet its financing  requirements on
     a continuing basis. However, if the Company's fiscal 2001 planned cash flow
     projections are not met, management could consider the reduction of certain
     discretionary  expenses and sale of certain assets. In the event that these
     plans  are not  sufficient  and the  Company's  credit  facilities  are not
     available, the Company's ability to operate could be adversely affected.


3.        Restructuring and Recapitalization

     In connection with the Company's  initial public offering (the "IPO") under
     the  Securities  Act of  1933,  as  amended,  the  Company  engaged  in the
     following restructuring and recapitalization  transactions.  In April 1997,
     the Company and its wholly- owned subsidiary,  STI Acquisition  Corporation
     ("STI")  were  formed  under the  General  Corporation  Law of the State of
     Delaware  for the  purpose of forming a holding  company and  changing  the
     state of incorporation of Schick Technologies, Inc., a New York Corporation
     ("Schick New York" or the  "Predecessor  Corporation").  Effective  June 4,
     1997 (pursuant to a merger  agreement  among the Company,  the  Predecessor
     Corporation  and STI),  the Company issued  7,957,231  shares of its common
     stock for all the outstanding common stock of the Predecessor  Corporation.
     STI and the Predecessor  Corporation merged and the Predecessor Corporation
     was the survivor of the merger, and became a wholly owned subsidiary of the
     Company.  In connection with the restructuring  and merger,  the holders of
     the Predecessor  Corporation's  outstanding  warrants and options converted
     such  warrants  and options to similar  warrants and options of the Company
     (based on the same ratio of exchange, 2.8 shares for 1 share, applicable to
     the common stock exchange).

     The  Company  amended  the  1996  Stock  Option  Plan  of  the  Predecessor
     Corporation and the shares available for issuance pursuant to the Plan were
     adjusted to 470,400.  The Company  also  implemented  its 1997 Stock Option
     Plan for Non-Employee Directors ("the Directors Plan") whereby nonqualified
     options to purchase up to 35,000 shares of the  Company's  common stock may
     be  granted  to  non-employee  directors.  Each  option  granted  under the
     Directors Plan becomes  exercisable on the second  anniversary  date of its
     grant and must have an exercise price equal to the fair market value of the
     Company's common stock on the date of grant.

     All common  shares,  stock  options,  warrants  and  related per share data
     reflected in the accompanying  financial  statements and notes thereto have
     been  presented  as if the  recapitalization  had  been  effective  for all
     periods presented.

     References herein to the operations and historical financial information of
     the  "Company"  prior  to  the  date  of  the  restructuring  refer  to the
     operations  and  historical   financial   information  of  the  Predecessor
     Corporation.

4.        Summary of Significant Accounting Policies

     Basis of Consolidation

     The accompanying  consolidated financial statements include the accounts of
     the Company and its wholly owned  subsidiaries.  All material  intercompany
     accounts and transactions have been eliminated in consolidation.

     Use of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported amounts of assets and liabilities and
     the  disclosure of  contingent  assets and  liabilities  at the date of the
     financial  statements  and the  reported  amounts of


                                      F-9
<PAGE>

     revenues and expenses  during the reporting  period.  Actual  results could
     differ from those estimates.

     Cash equivalents

     Cash equivalents  consist of short-term,  highly liquid  investments,  with
     original maturities of less than three months when purchased and are stated
     at cost.

     Investments

     Investments  with  original  maturities  greater than three months and less
     than one year when  purchased are  classified  as  short-term  investments.
     Investments  are  categorized  as  held-to-maturity   and  are  carried  at
     amortized cost,  without  recognition of gains or losses that are deemed to
     be  temporary,  as the  Company has both the intent and the ability to hold
     these investments until they mature (see Note 8).

     Inventories

     Inventories  are  stated at the lower of cost  (determined  on a  first-in,
     first-out  basis) or market value.  Cost is determined  principally  on the
     standard cost method for manufactured  goods and on the average cost method
     for  other  inventories,  each of  which  approximates  actual  cost on the
     first-in, first-out method.

     Equipment

     Equipment is stated at cost.  Depreciation and amortization are provided on
     the  straight-line  method over the lesser of the estimated useful lives of
     the related assets or, where appropriate, the lease term.

     Revenue Recognition

     Revenues  from sales of the  Company's  hardware and software  products are
     recognized  at the time of shipment to customers,  and when no  significant
     obligations exist and collectibility is probable.  The Company provides its
     customers with a 30-day return policy but allows for an additional 15 days,
     and, accordingly,  recognizes allowances for estimated returns by customers
     pursuant  to such  policy  at the time of  shipment.  During  1999,  due to
     various  operational  issues,  the  Company  accepted  product  returns for
     products shipped during 1999 beyond the standard return policy. The Company
     has  recognized  allowances  at March 31,  1999 for  estimated  returns  by
     customers  pursuant to the extended  return period.  Amounts  received from
     customers in advance of product  shipment are  classified  as deposits from
     customers.  Revenues from the sale of extended  warranties on the Company's
     products  are  recognized  on a  straight-line  basis  over the life of the
     extended  warranty,  which is  generally  for a one-year  period.  Deferred
     revenues relate to extended warranty fees which have been paid by customers
     prior to the performance of extended warranty services.

     Advertising Costs

     Advertising  costs included in selling and marketing  expenses are expensed
     as  incurred  and were $580,  $1,494,  $1,484 for the years ended March 31,
     2000, 1999 and 1998, respectively.

     Warranties

     The Company  provides its customers with a limited  product  warranty for a
     period of one year  subsequent  to the sale of its  products.  The  Company
     recognizes estimated costs associated with the limited warranty at the time
     of sale of its products.

     Research and Development

     Research and  development  costs  consist of  expenditures  covering  basic
     scientific  research  and the  application


                                      F-10
<PAGE>

     of scientific  advances to the development of new and improved products and
     their uses. Research and development costs are expensed as incurred.

     Software  development  costs for external use software  incurred  after the
     establishment of technological feasibility are capitalized and amortized to
     cost of revenues on a straight-line  basis over the expected useful life of
     the software.  Software  development costs incurred prior to the attainment
     of  technological  feasibility are considered  research and development and
     are  expensed as  incurred.  Costs of software  developed  for internal use
     incurred  during the  development of the  application  are  capitalized and
     amortized to operating  expense on a straight-line  basis over the expected
     useful life of the software.

     The Company did not capitalize any software  development  costs during 2000
     and 1999. The Company capitalized $165 of software development costs during
     the year ended March 31, 1998 and recorded  amortization expense related to
     such  capitalized  costs of $55,  $35 and $7  during  2000,  1999 and 1998,
     respectively.

     Income Taxes

     Income  taxes are  accounted  for under  the  asset and  liability  method.
     Deferred  income  taxes are  recorded  for  temporary  differences  between
     financial  statement  carrying  amounts  and the tax  basis of  assets  and
     liabilities.  Deferred  tax assets and  liabilities  reflect  the tax rates
     expected  to be in  effect  for the  years in  which  the  differences  are
     expected to reverse. A valuation allowance is provided if it is more likely
     than not that some or the entire deferred tax asset will not be realized.

     Fair Value of Financial Instruments

     The  carrying  value  of cash and cash  equivalents,  accounts  receivable,
     accounts  payable and debt  approximates  fair value due to the  relatively
     short maturity  associated with its cash,  accounts receivable and accounts
     payable and the interest rates associated with its debt.

     Reclassifications

     Certain prior year amounts have been reclassified to conform to the current
     year presentation.

5.        Earnings (Loss) Per Share

     Basic  earnings per share  ("Basic  EPS") are  computed by dividing  income
     available to common stockholders by the  weighted-average  number of common
     shares outstanding during the period.  Diluted earnings per share ("Diluted
     EPS") gives  effect to all dilutive  potential  common  shares  outstanding
     during  the  period.  The  computation  of  Diluted  EPS  does  not  assume
     conversion,  exercise or contingent  exercise of securities that would have
     an antidilutive effect on earnings.


                                      F-11
<PAGE>

     The  computations  of basic (loss)  earnings  per share and diluted  (loss)
     earnings per share for the years ended March 31, 2000, 1999 and 1998 are as
     follows:
<TABLE>
<CAPTION>
                                                                                  2000                 1999                 1998
                                                                              ------------         ------------         ------------
<S>                                                                           <C>                  <C>                  <C>
(Loss) income for basic and diluted earnings per share                        $    (12,331)        $    (29,606)        $      2,361
                                                                              ============         ============         ============

Weighted-average shares outstanding for basic
      (loss) earnings per share                                                 10,071,884           10,013,061            9,474,590

Dilutive effect of stock options and warrants                                           --                   --              339,464
                                                                              ------------         ------------         ------------

Weighted-average shares outstanding for diluted
      (loss) earnings per share                                                 10,071,884           10,013,061            9,814,054
                                                                                ==========           ==========            =========

Basic (loss) earnings per share                                               $      (1.23)        $      (2.96)        $       0.25
                                                                              ------------         ------------         ------------

Diluted (loss) earnings per share                                             $      (1.23)        $      (2.96)        $       0.24
                                                                              ------------         ------------         ------------
</TABLE>

At March 31, 2000 and 1999,  outstanding options to purchase 992,605 and 593,466
shares of common stock,  respectively and exercise prices, ranging from $1.00 to
$27.72 per share in fiscal  2000 and $1.79 to $27.72 in fiscal  1999,  have been
excluded  from  the   computation   of  diluted  loss  per  share  as  they  are
antidilutive.  Outstanding warrants to purchase 5,650,000 shares of common stock
with exercise prices of $0.75 per share were also antidilutive and excluded from
the computation of diluted loss per share at March 31, 2000.

6.        Recent Accounting Pronouncement

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin  (SAB) 101,  "Revenue  Recognition  in  Financial  Statements".  When a
company's terms of sale include customer acceptance  provisions or an obligation
of the seller to install the product, SAB 101 requires deferral of revenue until
such conditions  have been satisfied.  SAB 101 requires that the Company conform
their revenue  recognition  practices to the requirements  therein no later than
the first quarter of fiscal 2001.  The Company does not expect SAB 101 to have a
material effect on the Company's financial position or results of operations.

7.        Inventories

Inventories  at March 31,  2000 and  1999,  net of  provisions  for  excess  and
obsolete inventories, are comprised of the following:

                                                 2000                     1999
                                                -------                 -------
          Raw materials                         $   973                 $ 2,203
          Work-in-process                         3,278                   3,763
          Finished goods                          1,361                   4,720
                                                -------                 -------

               Total inventories                $ 5,612                 $10,686
                                                =======                 =======


                                      F-12
<PAGE>

8.   Equipment

Equipment at March 31, 2000 and 1999 is comprised of the following:
<TABLE>
<CAPTION>
                                                                            2000                1999
                                                                          --------            --------
<S>                                                                       <C>                 <C>
          Production equipment                                            $  5,007            $  5,188
          Computer and communications equipment                              2,106               2,055
          Demonstration equipment                                              860                 803
          Leasehold improvements                                             1,898               1,921
          Other equipment                                                      121                 116
                                                                          --------            --------

          Total equipment                                                    9,992              10,083
          Less - accumulated depreciation and amortization                  (4,786)             (2,862)
                                                                          --------            --------
          Equipment, net                                                  $  5,206            $  7,221
                                                                          ========            ========
</TABLE>


     At March 31, 2000 and 1999, computer equipment included  approximately $199
     of  equipment  acquired  under  capital  leases.  Accumulated  depreciation
     related  to these  assets  approximated  $83 and $17 at March 31,  2000 and
     1999, respectively.

9.   Investments in Debt Securities

     Held-to-maturity   securities  at  March  31,  2000  and  1999  consist  of
     short-term  U.S.  Treasury and government  agency debt securities of $8 and
     $360,  on an amortized  cost basis,  with  maturity  dates of less than one
     year. The gross  unrealized  gains and losses at March 31, 2000 and 1999 on
     held-to-maturity securities were insignificant.

10.  Accounts payable and accrued expenses

     Accounts payable and accrued expenses is summarized as follows at March 31,
     2000:


               Legal and other professional fees           $  863
               Accounts payable and accrued expenses        3,392
                                                           ------
                                                           $4,255
                                                           ======

11.  Debt

     Long-term debt is summarized as follows:

                                                    March 31,
                                                 2000       1999
                                                ------     ------
               Term notes                        6,596     $5,000
               Secured credit facility             587         --
                                                ------     ------
                                                 7,183      5,000
               Less current maturities             245      5,000
                                                ------     ------
                                                $6,938     $   --
                                                ======     ======


     Term Notes

     In June 2000,  the Company  amended its term note  increasing its principal
     balance to $6,596 ("the amended note"). The term note was originally issued
     in March 1999 for $5,000 and renewed in July 1999 for $6,222


                                      F-13
<PAGE>

     (the "renewed note").  The increase in the principal  amounts resulted from
     the  conversion  of certain  trade  payables  owed to the  lender  into the
     principal balance of the notes.

     The amended note is segregated  into two term loans;  Term Loan A amounting
     to $5,000 and Term Loan B amounting to $1,596.

     Term Loan A

     The  principal  balance of term loan A is  payable  in 49 monthly  payments
     commencing  April 15, 2001, with interest payable monthly at the prime rate
     plus 2.5% commencing April 15, 2000.

     Term Loan B

     The  principal  balance of term loan B is  payable  in 27 monthly  payments
     commencing January 15, 2001 with interest payable monthly at the prime rate
     plus 2.5% commencing April 15, 2000.

     The Company is also required to make additional principal payments equal to
     fifty  percent of the  "positive  actual cash flow",  as defined.  The term
     loans have been  classified  based upon the terms of the amended note.  The
     tangible and intangible assets of the Company, as defined collateralize the
     term loans.

     In connection with the renewed note, the Company granted the lender 650,000
     warrants at an exercise  price of $2.19  expiring on November 15, 2004. The
     fair value of the warrants amounted to $596, and are being accounted for as
     deferred  financing costs. The costs are, included in "Other Assets" in the
     accompanying balance sheet and are being amortized on a straight-line basis
     over  the  life of the  renewed  note  (17  months).  Interest  expense  of
     approximately $170 relating to this warrant issuance was recognized for the
     year ending March 31, 2000.

     In connection  with the amended  note,  the  warrants'  exercise  price was
     reduced  to  $.75  and the  expiration  date  extended  to  December  2006.
     Additional  deferred  financing  costs of $130  were  incurred  and will be
     amortized over the five-year life of the amended note.

     Secured Credit Facility

     In December  1999,  the Company  entered into a Loan  Agreement  (the "Loan
     Agreement") with Greystone Funding Corporation  ("Greystone") to provide up
     to $7.5  million  of  subordinated  debt in the  form of a  secured  credit
     facility.   Under  the  Loan  Agreement,   the  Company  appointed  two  of
     Greystone's executive officers, one as President of the Company and both as
     Directors. Pursuant to the Loan Agreement, and to induce Greystone to enter
     into said  Agreement,  the Company  issued to Greystone,  or its designees,
     warrants to purchase  3,000,000  shares of the Company's Common Stock at an
     exercise price of $0.75 per share.  The President  of  the Company has been
     issued  750,000  warrants as a Greystone  designee.  The Company  agreed to
     issue to  Greystone  or its  designees  warrants to purchase an  additional
     2,000,000 shares at an exercise price of $0.75 per share in connection with
     a cash payment of $1 million by  Greystone to the Company in  consideration
     of a sale of Photobit  stock by the Company to  Greystone.  The sale of the
     Photobit  stock  was  made  subject  to a right of  first  refusal  held by
     Photobit and its founders.  By letter dated February 17, 2000,  counsel for
     Photobit informed the Company that Photobit considers the Company's sale of
     its shares to Greystone to be void on the basis of the Company's  purported
     failure to properly comply with Photobit's right of first refusal.

     On March 17, 2000,  the Company and  Greystone  entered into an Amended and
     Restated  Loan  Agreement  effective as of December 27, 1999 (the  "Amended
     Loan  Agreement")  pursuant to which Greystone agreed to provide up to $7.5
     million of subordinated debt in the form of a secured credit facility.  The
     $1 million  cash  payment to the Company was  converted  as of December 27,
     1999  into  an  initial  advance  of  $1,000,000  under  the  Amended  Loan
     Agreement. Pursuant to the Amended Loan Agreement, and to induce Greystone,
     and its  designees,  to enter  into  said  Agreement,  the  Company  issued
     warrants  to  Greystone  or its  designees,  consisting  of those  warrants
     previously issued under the Loan Agreement, to purchase 5,000,000 shares of
     the  Company's  Common  Stock at an  exercise  price of  $0.75  per  share,
     exercisable  at any time after  December 27,  1999.  Under the Amended Loan
     Agreement, the Company also issued to Greystone (or its designees) warrants
     (the "Additional  Warrants") to purchase an additional 13,000,000 shares of
     common stock,  which Additional  Warrants will vest and be exercisable at a
     rate of two  shares of  Common  Stock for each  dollar  advanced  under


                                      F-14
<PAGE>

     the Amended Loan Agreement in excess of the initial draw of $1,000,000. Any
     additional warrants,  which do not vest prior to expiration or surrender of
     the line of credit, will be forfeited and canceled.  In connection with the
     Greystone  secured credit facility,  effective as of February 15, 2000, DVI
     consented to the  Company's  grant to Greystone of a second  priority  lien
     encumbering the Company's  assets,  under and subject in priority and right
     of payment to all liens granted by the Company to DVI.

     The $1 million  proceeds of the initial draw has been allocated to the loan
     and 15 million  warrants  issued,  based upon their relative fair values at
     issuance.  The carrying  value of the note of $575 is being accreted to the
     face value of the $1 million using the interest  method over the seven-year
     term of the loan.  However,  in the event that the loan is paid sooner, the
     Company will recognize a charge for the unamortized  discount  remaining in
     such period. The fair value of 3 million warrants issued in connection with
     the  agreement,  amounting  to $90,  is  being  accounted  for as  deferred
     financing cost. This cost,  included in "Other Assets" in the  accompanying
     balance  sheet,  is  being  amortized  on a  straight-line  basis  over the
     five-year  life of the loan.  Interest under the credit line is due monthly
     at an annual rate of 10% until December 2004 when the  outstanding  loan is
     due to be repaid.

     The term notes and secured credit facility are subject to various financial
     and  restrictive  covenants  including,  among others,  interest  coverage,
     current ratio, and EBITDA.

     Principal maturities of long-term debt are as follows:

                   Year ending March 31,
                   ---------------------
                            2001                            $200
                            2002                           1,400
                            2003                           1,600
                            2004                           1,000
                            2005                           1,800
                      Thereafter                           1,200
                                                          ------
                                                          $7,200
                                                          ======

12.  Income Taxes

     The components of the Company's  (benefit) provision for income taxes is as
     follows:

<TABLE>
<CAPTION>
                                                            March 31
                                                            --------
                                       2000                    1999                    1998
                                      -----                   -----                   -----
<S>                                   <C>                     <C>                     <C>
     Current
           Federal                    $  --                   $(531)                  $ 415
           State                         --                    (170)                    262
                                      -----                   -----                   -----
                                         --                    (701)                    677
                                      -----                   -----                   -----
     Deferred
           Federal                      282                    (282)
           State                         --                      67                     (67)
                                      -----                   -----                   -----
                                         --                     349                    (349)
                                      -----                   -----                   -----
                                      $  --                   $(352)                  $ 328
                                      =====                   =====                   =====
</TABLE>

The  reconciliation  between the U.S.  federal  statutory rate and the Company's
effective tax rate is as follows:
<TABLE>
<CAPTION>
                                                                                            2000           1999          1998
                                                                                            -----          -----          -----
<S>                                                                                         <C>            <C>             <C>
     Tax expense (benefit) at Federal statutory rate                                        (34.0%)        (34.0)%         34.0%
     State income tax expense (benefit), net of Federal tax                                  (8.1)          (0.2)           8.0
     Non-deductible expenses                                                                  0.5           16.7            4.9
     Research and development tax credit                                                      1.5            0.8          (11.2)
     Net operating loss and credits generated in the current year
          in which there is no benefit                                                       40.1           15.6          (23.5)
                                                                                            -----          -----          -----
     Effective tax rate                                                                         -%          (1.1)%         12.2%
                                                                                            =====          =====          =====
</TABLE>


                                      F-15
<PAGE>

Significant  components of the Company's  deferred tax assets  (liabilities)  at
March 31, 2000, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
                                                                                    2000              1999              1998
                                                                                  --------          --------          --------
<S>                                                                               <C>               <C>               <C>
     Net operating loss carryforwards                                             $ 11,218          $  5,701          $     --
     Reserves and allowances for inventory                                           2,947             2,702                --
     Accounts receivable and warranties                                              2,360             3,488               355
     Tax credit carryforwards                                                          962                --                --
     Depreciation and other                                                           (192)             (445)             (211)
     Other accrued expenses not currently deductible                                    --                --               205

     Other                                                                             328               409                --
                                                                                  --------          --------          --------
                                                                                    17,623            11,855               349
     Valuation allowance                                                           (17,623)          (11,855)               --
                                                                                  --------          --------          --------
     Net deferred tax asset                                                       $     --          $     --          $    349
                                                                                  ========          ========          ========
</TABLE>


     Management has established a full valuation allowance for the amount of the
     deferred tax asset based on  uncertainties  with  respect to the  Company's
     ability to generate  future  taxable  income.  Management  will continue to
     assess the  realizability  of the  deferred  tax asset at the  interim  and
     annual balance date based upon actual and forecasted operating results.

     At March 31, 2000, the Company has a U.S.  federal income tax net operating
     loss carryforward of $26,710 available to offset future taxable income. The
     carryforward has various expiration dates beginning in 2018.

     Under current tax law, the utilization of the Company's tax attributes will
     be restricted if an ownership  change, as defined,  were to occur.  Section
     382  of  the  Internal  Revenue  Code  provides,  in  general,  that  if an
     "ownership  change" occurs with respect to a corporation with net operating
     and other loss  carryforwards,  such  carryforwards  will be  available  to
     offset taxable income in each taxable year after the ownership  change only
     up to the "Section 382 Limitation" for each year (generally, the product of
     the  fair  market  value  of the  corporation's  stock  at the  time of the
     ownership  change,  with  certain  adjustments,  and a specified  long-term
     tax-exempt bond rate at such time).  The Company's  ability to use its loss
     carryforwards  would  probably  be  limited  in the  event of an  ownership
     change.

13.  Concentration of Risks and Customer Information

     Substantially  all of the  Company's  sales  are to  domestic  and  foreign
     dentists  and  doctors,  distributors  of dental and medical  supplies  and
     equipment, and third party financing companies. Financial instruments which
     potentially  subject  the  Company  to  concentrations  of credit  risk are
     primarily accounts receivable, cash equivalents and short-term investments.
     The Company  generally does not require  collateral and the majority of its
     trade  receivables are unsecured.  The Company is directly  affected by the
     financial well-being of the dental and medical industries. During 1999, the
     Company  recorded  significant  charges for bad debt expense due to product
     reliability  issues,  customer service issues and  insufficient  credit and
     collection  policies.  The  Company  has  undertaken  steps to correct  the
     deficiencies that resulted in the bad debt charges.  The Company places its
     cash  equivalents  in  short-term  money  market  instruments.   Short-term
     investments consist of U.S. Treasury and government agency debt obligations
     (see Note 8).

     The Company  currently  relies on two vendors to supply each of its primary
     raw materials,  the  active-pixel  sensor  ("APS") and the charged  coupled
     device ("CCD")  semiconductor  wafers.  During the fourth quarter of fiscal
     1998,  the  Company  experienced  a delay in the  supply  flow from its CCD
     vendor,  which  resulted in  manufacturing,  and product  shipment  delays.
     Although  there are a number of  manufacturers  capable of supplying  these
     materials,  which the Company believes could provide for its  semiconductor
     requirements on comparable terms, such delays could occur again.

     Approximately  $6,545,  $5,961 and $7,085 of the  Company's  sales in 2000,
     1999, and 1998,  respectively,  were to foreign customers.  The majority of
     such foreign sales were to customers in Europe. During 2000 and 1999, sales
     of $2,570  and $7,187  were to a single  distributor.  In 1998 no  customer
     accounted for 10% or more of sales.


                                      F-16
<PAGE>

     On April 6, 2000,  the Company  entered into and agreement  with  Patterson
     Dental Company which grants  Patterson  exclusive  rights to distribute the
     Company's  dental products in the United States and Canada effective May 1,
     2000.

14.  Commitments and Contingencies

     Employment Agreements

     The  Company  maintains   employment   agreements  with  certain  executive
     officers.  As of March 31,  2000  minimum  compensation  obligations  under
     active employment agreements are as follows:

          Year ending March 31,
          ---------------------
          2000                                       $  915
          2001                                          735
          2002                                          150
                                                     ------
                                                     $1,800
                                                     ======


     In addition,  certain of the Company's  agreements provide for the issuance
     of common  stock  and/or  common  stock  options  to the  executives  which
     generally  vest  ratably  over  the  term of the  agreements  (2-3  years).
     Additionally, certain executives may earn bonus compensation based upon the
     specific terms of the respective agreements, as defined.

     Severance agreements

     The Company has  severance  agreements  with three  former  employees  that
     provide for compensation aggregating $380 through August 2000. At March 31,
     2000,  accrued  severance  relating to these  agreements  amounted to $127.
     Additionally,  pursuant  to the  agreements,  the  Company  granted  19,978
     options to two of the former  employees at option prices  between $2.67 and
     $14.81 per share,  which expire in December  2000. The charge to operations
     relating to these options is not material to the financial statements.

     Operating and Capital Leases

     The Company leases its facilities under operating lease agreements expiring
     from February  2001 to August 2004.  Rent expense for the years ended March
     31, 2000, 1999, and 1998 was $1,095, $718, and $383, respectively.

     Future  minimum  payments  on a  fiscal  year  basis  under  non-cancelable
     operating and capital leases are as follows:

<TABLE>
<CAPTION>
                                                                       Operating    Capital
                                                                       ---------    -------
<S>                                                                     <C>         <C>
          2001                                                          $  469      $   38
          2002                                                             486          --
          2003                                                             488          --
          2004                                                             204          --
                                                                        ------      ------

                           Total minimum lease payments                 $1,647          38
                                                                        ======      ------

          Less: Amounts representing interest                                            5
                                                                                    ------
          Present value of future minimum lease payments                                33
          Less: Current maturities                                                      33


          Capital lease obligations - long term                                     $   --
                                                                                    ======
</TABLE>


                                      F-17
<PAGE>

     Product Liability

     The Company is subject to the risk of product liability and other liability
     claims in the event that the use of its products results in personal injury
     or other  claims.  Although  the  Company has not  experienced  any product
     liability  claims to date,  any such claims could have an adverse impact on
     the Company.  The Company maintains  insurance  coverage related to product
     liability  claims,  but there can be no  assurance  that  product  or other
     claims  will  not  exceed  its  insurance  coverage  limits,  or that  such
     insurance will continue to be available on commercially  acceptable  terms,
     or at all.

     SEC Investigation and Other

     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.  The SEC has  made a  voluntary  request  for the  production  of
     certain  documents.  The Company  intends to  cooperate  fully with the SEC
     staff  and  has   provided   responsive   documents  to  it.  In  addition,
     investigators  associated with the U.S. Attorneys Office have made inquires
     of certain former and current employees,  apparently in connection with the
     same event. The inquiries are in a preliminary stage and the Company cannot
     predict their potential outcome.

     Litigation

     In May 2000,  the Company  entered into an agreement for the  settlement of
     the class action  lawsuit  naming the Company,  certain of its officers and
     former  officers and various third parties as  defendants.  . The complaint
     alleged that certain  defendants  issued  false and  misleading  statements
     concerning  the Company's  publicly  reported  earnings in violation of the
     federal  securities laws. The complaint sought  certification of a class of
     persons who purchased  the Company's  common stock between July 1, 1997 and
     February  19, 1999,  inclusive,  and does not specify the amount of damages
     sought.  Under the  settlement  agreement,  reflected  in a  memorandum  of
     understanding,  all claims against the Company and the other defendants are
     to be  dismissed  without  presumption  or  admission  of any  liability or
     wrongdoing.  The  principal  terms  of the  settlement  agreement  call for
     payment to the plaintiffs, for the benefit of the class, of the sum of $3.4
     million.  The  settlement  amount  will  be  paid  in its  entirety  by the
     Company's insurance carrier and is not expected to have any material impact
     on the financial  results of the Company.  The terms of the  settlement are
     subject to approval by the Court.

     During  1996,  the Company was named as  defendant  in patent  infringement
     litigation  commenced by a competitor in the United States and France.  The
     Company  is  vigorously  defending  itself  against  such  allegations  and
     believes  the  claims  to  be  without  merit.  The  Company  has  filed  a
     countersuit  against the competitor for infringement of a U.S. Patent which
     has been  exclusively  licensed to the Company.  The Company has obtained a
     formal opinion of  intellectual  property  counsel that its products do not
     infringe on the competitor's U.S. patent. The Company has filed motions for
     Summary  Judgment seeking the dismissal of the action in the United States.
     Such motions are  currently  pending.  The Company is unable to predict the
     ultimate outcome of this  litigation.  The outcome,  if unfavorable,  could
     have a material  adverse  effect on the  financial  position and results of
     operations  of the Company.  No provision  has been made for any  potential
     losses at March 31, 2000 and 1999 and as the range of  potential  loss,  if
     any cannot be reasonably estimated.

     During  1997,  the Company was named as a  defendant  in patent  litigation
     involving  a  patent  directed  to a  display  system  for  digital  dental
     radiographs.  In July 1997 the Company reached a settlement  under which it
     paid $600 for a world  wide,  non-exclusive  license  for the  patent.  The
     license fee was expensed during 1998.

     The  Company may be a party to a variety of legal  actions (in  addition to
     those   referred   to   above),   such   as   employment   and   employment
     discrimination-related  suits,  employee benefit claims, breach of contract
     actions,  tort claims,  shareholder suits,  including securities fraud, and
     intellectual  property  related  litigation.  In  addition,  because of the
     nature of its  business,  the  Company  is  subject  to a variety  of legal
     actions  relating to its business


                                      F-18
<PAGE>

     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  may 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.

15.  Stock Option Plan, Stock Grants and Defined Contribution Plan

     Stock Option Plan and Stock Grants

     In April 1996,  the  Company  implemented  its 1996 Stock  Option Plan (the
     "Plan") whereby incentive and  non-qualified  options to purchase shares of
     the  Company's  common  stock may be granted to  employees,  directors  and
     consultants. In September 1998, the Plan was amended to increase the number
     of  shares  of  Common  Stock  issuable  under  the Plan  from  470,400  to
     1,000,000.  The  exercise and vesting  periods and the  exercise  price for
     options  granted  under the Plan are  determined by the Board of Directors.
     The Plan  stipulates  that the  exercise  price  of  non-qualified  options
     granted  under the Plan must have an exercise  price equal to or  exceeding
     85% of the fair market value of the  Company's  common stock as of the date
     of grant of the  option and no option  may be  exercisable  after ten years
     from the date of grant.  Options granted under the plan generally vest over
     a period of four years.

     During fiscal 1996, prior to implementation of the Plan, an employee of the
     Company was granted an option to purchase  56,000  shares of the  Company's
     common  stock at $1.79 per  share,  determined  by the  Company's  Board of
     Directors to be the fair market value of the Company's  common stock at the
     date of the option grant.  As of March 31, 2000, all shares are exercisable
     under such option. This option expires in December 2000.

     During  1998,  the Company  adopted the  Directors  Plan. A total of 35,000
     shares  of  Common  Stock  have  been  authorized  for  issuance  under the
     Directors  Plan.  At March 31,  2000 and 1999,  25,000  options to purchase
     Common Stock pursuant to the Directors Plan were outstanding.

     The Company applies Accounting Principles Board Opinion No. 25, "Accounting
     for Stock Issued to Employees," and related  interpretations  in accounting
     for its plans and other  stock-based  compensation  issued to employees and
     directors.  During the years ended March 31, 2000 and 1999, the Company did
     not recognize compensation expense for options granted to employees. During
     1998 the Company has recognized  compensation expense in the amount of $36,
     for options granted to employees.  Had compensation  cost for option grants
     to employees  been  determined  based upon the fair value at the grant date
     for awards under the Plan consistent with the methodology  prescribed under
     Statement  of  Financial  Accounting  Standards  No. 123,  "Accounting  for
     Stock-Based  Compensation,"  ("SFAS  123") the  Company's  net loss in 2000
     would have increased by approximately $626 ($.06 per basic share), net loss
     in 1999 would have been  increased  by  approximately  $759 ($.08 per basic
     share),  and net income in 1998 would have been decreased by  approximately
     $164 ($.02 per basic share).

     The fair value of options  granted to employees  during 2000,  1999and 1998
     has  been  determined  on  the  date  of the  respective  grant  using  the
     Black-Scholes  option-pricing model based on the following weighted-average
     assumptions:
<TABLE>
<CAPTION>
                                                              2000                  1999                 1998
                                                              ----                  ----                 ----
<S>                                                      <C>                    <C>                  <C>
          Dividend yield                                      None                  None                 None
          Risk-free interest rate on date of grant       5.35% - 6.36%          4.13% - 5.48%        5.43% - 5.55%
          Forfeitures                                         None                  None                 None
          Expected life                                     5 years                5 years              5 years
          Volatility                                          91%                    85%                  75%
</TABLE>


                                      F-19
<PAGE>

The following  table  summarizes  information  regarding stock options for 2000,
1999 and 1998:

<TABLE>
<CAPTION>
                                    ------------------------------------------------------------------------------------------------
                                               1998                             1999                               2000
                                    ------------------------------------------------------------------------------------------------
                                    Shares           Weighted-         Shares           Weighted-         Shares          Weighted-
                                    Under             Average           Under           average            Under           average
                                    Option           Exercise          Option           exercise          Option           exercise
                                                       Price                             price                               price
                                    ------------------------------------------------------------------------------------------------
<S>                                 <C>               <C>              <C>               <C>             <C>                <C>
     Options outstanding,
      Beginning of year             130,953           $ 4.85           223,411           $11.46           593,466           $10.87
     Options granted                 97,902            20.87           420,523            10.76           681,866             1.17
     Options exercised               (2,479)            7.14            (3,848)            7.14              --
     Options forfeited               (2,965)           20.88           (46,620)           20.44          (282,727)           16.05
                                    -------                            -------                            -------

     Options outstanding,
              end of year           223,411            11.46           593,466            10.87           992,605             2.73
                                    =======                            =======                            =======

<CAPTION>
     Range of exercise price                               Options outstanding                     Weighted-average remaining
                                                            at March 31, 2000                       contractual life (years)
                                                            -----------------                       ------------------------
     <S>                                                        <C>                                            <C>
     At $ 1.79                                                   56,000                                        1.0
     $ 1.00 to $ 2.67                                           661,888                                        9.6
     $ 4.91 to $ 7.86                                           130,156                                        8.0
     $14.81 to $22.97                                           104,866                                        7.6
     $25.75 to $27.72                                            39,695                                        8.0
</TABLE>

     At March 31 2000, there are 88,395 options  available for grant pursuant to
     the Company's option plans. Of the 992,605 options outstanding at March 31,
     2000, 118,701 are exercisable at such date at a  weighted-average  exercise
     price of $13.59.

     Defined Contribution Plan

     Effective  October 1996,  the Company  implemented  a defined  contribution
     savings plan,  which qualifies under Section 401(k) of the Internal Revenue
     Code, for employees meeting certain service requirements.  Participants may
     contribute up to 15% of their gross wages not to exceed, in any given year,
     a limitation  set by the Internal  Revenue  Service  regulations.  The plan
     provides for mandatory matching  contributions to be made by the Company to
     a maximum  amount  of 2.5% of a plan  participant's  compensation.  Company
     contributions  to the plan  approximated  $164, $218 and $111 in 2000, 1999
     and 1998, respectively.

16.  Supplemental Cash Flow Information

     Cash payments for interest were $424,  $174 and $144 in 2000, 1999 and 1998
     respectively. The Company paid $533 for income taxes in 1998. There were no
     payments for income taxes in 2000 and 1999.

     During  fiscal 1999,  the Company  acquired  $199 of computer  equipment of
     production equipment under capital leases.

17.  Stockholders' Equity

     In July 1997, the Company  completed the IPO,  selling  2,012,500 shares of
     common stock at a price of $18.50 per share providing gross proceeds to the
     Company of $37,231  and net  proceeds,  after  underwriting  discounts  and
     commissions and offering expenses payable by the Company, of $33,508.

     During  1999,  warrants to  purchase  204,680  shares of common  stock were
     exercised using cashless  exercises  pursuant to which 63,479 shares of the
     Company's  common  stock were  issued.  During  1998,  warrants to purchase
     24,640 shares of the Company's  common stock were  exercised.  Exercises of
     11,200 of such  warrants,  for which  11,200  shares of common  stock  were
     issued,  provided the Company with net proceeds of

                                      F-20

<PAGE>

     approximately  $100. The remaining  13,440 warrant  exercises were cashless
     exercises pursuant to which 8,647 shares of the Company's common stock were
     issued.  During the year ended  March 31,  2000,  the  balance of  unissued
     warrants expired.

     In February  2000, an executive was awarded  75,000 shares of the Company's
     Common Stock,  subject to a risk of forfeiture,  which expires as to 25,000
     shares on each of December  31, 2000,  2001 and 2002.  Upon the sale of any
     such vested  shares,  the employee is required to pay the Company $1.32 per
     share sold within 30 days following such sale. The Company  recorded a note
     receivable  which is presented as a reduction of Paid in Capital  amounting
     to $99 relating to the stock issuance. The charge to operations relating to
     this stock award is not material to the financial statements.

18.  Acquisition and Investment

     Keystone Acquisition

     On September  24, 1997,  the Company  acquired  certain  assets of Keystone
     Dental X-Ray Inc.  ("Keystone"),  a manufacturer of x-ray equipment for the
     medical and dental radiology  field,  for $1,450.  The acquisition had been
     accounted  for using the  purchase  method,  and the Company  had  recorded
     goodwill in the amount of $750,  which is  included in other  assets and is
     being  amortized  on a  straight-line  basis  over  7  years.  The  Company
     recognized   $107  for   amortization   of   goodwill  in  2000  and  1999,
     respectively, and $55 in 1998.

     Investment in Photobit Corporation

     In September  1997,  the Company  purchased a minority  interest of 5%, for
     $1,000 in Photobit  Corporation,  a developer of complementary  metal-oxide
     semiconductor  ("CMOS"), APS imaging technology.  In July 1998, the Company
     invested an  additional  $250 in Photobit  Corporation,  bringing its total
     investment in Photobit to $1,250.  The Company is the exclusive licensee of
     the APS technology for medical  applications and utilizes the technology in
     its bone-mineral  density  assessment device and certain  components of its
     computed dental x-ray imaging system. The Company carries the investment at
     cost. At March 31, 2000, it is not  practicable  to estimate the fair value
     of this  investment  because  of the lack of quoted  market  prices and the
     inability to estimate  fair value without  incurring  excessive  costs.  No
     dividends were paid on this investment. In September 1999, the Company sold
     250,000 shares of Photobit stock for $1,000 and recorded an investment gain
     of approximately $565.

                                      F-21

<PAGE>

     Schedule II

                            Schick Technologies, Inc.
                        Valuation and Qualifying Accounts

<TABLE>
<CAPTION>
                                                                                      Additions
                                                       Balance at     Charged to      Charged to                         Balance at
                                                       Beginning      Costs and         Other                               End
                                                       of Period       Expenses        Accounts        Deductions        of Period
                                                       ---------      ----------      ----------       ----------        ---------
<S>                                                   <C>             <C>            <C>             <C>                <C>
     ALLOWANCE FOR DOUBTFUL ACCOUNTS
        For the year ended March 31, 1998             $    50,000     $   163,866    $        --     $    13,866(a)     $   200,000
        For the year ended March 31, 1999                 200,000       5,598,000             --       1,286,000(a)       4,512,000
        For the year ended March 31, 2000               4,512,000           9,000             --       2,072,000(a)       2,449,000

     RESERVE FOR OBSOLETE / SLOW-MOVING INVENTORY
        For the year ended March 31, 1998             $   113,714     $        --    $        --     $   113,714(e)     $        --
        For the year ended March 31, 1999                      --       5,466,000             --              --          5,466,000
        For the year ended March 31, 2000               5,466,000         898,000             --          32,000(e)       6,332,000

     VALUATION ALLOWANCE - DEFERRED TAX ASSET
        For the year ended March 31, 1998             $   623,000     $        --    $        --     $   623,000(c)     $        --
        For the year ended March 31, 1999                      --              --     11,855,000(b)           --         11,855,000
        For the year ended March 31, 2000              11,855,000              --      5,035,000(b)           --         16,890,000

     PROVISION FOR WARRANTY OBLIGATIONS
        For the year ended March 31, 1998             $   329,426     $        --    $        --     $    84,517(d)     $   244,909
        For the year ended March 31, 1999                 244,909         157,091             --              --            402,000
        For the year ended March 31, 2000                 402,000              --             --         124,000(d)         278,000
</TABLE>

     (a)  Accounts receivable written off

     (b)  Increase in allowance resulting from increased deferred tax asset

     (c)  Reduction of allowance due to realization of deferred tax asset

     (d)  Reduction of warranty obligations outstanding

     (e)  Inventory written off

                                      F-22

<PAGE>

                                                                            Page
                                                                            ----

     (a)  Documents filed as a part of this Report

          (1)  Consolidated Financial Statements filed as part
               of this Report:

               Index to the Financial Statements                            F-1

               Report of Independent Certified Public Accountants           F-2

               Report of Independent Accounts                               F-3

               Consolidated Balance Sheet at March 31, 2000 and 1999        F-4

               Consolidated Statement of Operations for the years ended
               March 31, 2000, 1999 and 1998                                F-5

               Consolidated Statement of Changes in Stockholders'
               Equity for the years ended March 31, 2000, 1998 and 1998     F-6

               Consolidated Statement of Cash Flows for the year ended
               March 31, 2000, 1999 and 1998                                F-7

               Notes to Consolidated Financial Statements                   F-8

          (2)  Financial statement schedules filed as part of this Report

     Schedule II      Valuation and Qualifying Accounts                     F-22

Schedules  other than that  mentioned  above are omitted  because the conditions
requiring  their filing do not exist,  or because the information is provided in
the financial statements filed herewith, including the notes thereto.

     (b)  Reports on Form 8-K

     A Form 8-K was filed on January 11, 2000 and reported on the Loan Agreement
entered  into on December  27, 1999  between the Company and  Greystone  Funding
Corporation (the "parties") and on the Stock Purchase  Agreement entered into by
the parties,  pursuant to which  Greystone  purchased  468,000 shares of capital
stock of Photobit Corporation from the Company.

     (c)  The following Exhibits are included in this report:

            Number                 Description

        *   3.1    Amended and  Restated  Certificate  of  Incorporation  of the
                   Company.

       **   3.2    Bylaws of the Company, as amended.

        *   4.1    Form of Common Stock certificate of the Company.

        *   4.2    Form of Warrant of the Company.

        *   4.3    Agreement  and Plan of Merger  dated as of May 15, 1997 among
                   Schick  Technologies,  Inc., a New York  corporation,  Schick
                   Technologies Inc., a Delaware corporation and STI Acquisition
                   Corp, a Delaware corporation.

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<PAGE>

        *   10.1   Schick Technologies, Inc. 1996 Employee Stock Option Plan.

        *   10.2   Schick  Technologies,  Inc.  1997 Stock  Option  Plan for Non
                   Employee Directors.

        *   10.3   Form   of   Non-Disclosure,    Solicitation,    Solicitation,
                   Non-Competition  and  Inventions  Agreements  between  Schick
                   Technologies,   Inc.   and   Named   Executives   of   Schick
                   Technologies, Inc.

        *   10.5   Service  and  License  Agreement  between  Photobit,  LLC and
                   Schick Technologies, Inc. dated as of June 24, 1996.

            10.9   Asset  Purchase  Agreement  dated  September  24,  1997 among
                   Keystone Dental X-Ray, Inc.,  DisCovery X-Ray Corporation and
                   Imaging Sciences,  Inc. (Incorporated by reference to Exhibit
                   10.1 to the Registrant's  Report on Form 8-K dated October 9,
                   1997).

      ***   10.10  Secured Promissory Note between Schick Technologies, Inc. and
                   DVI Financial Services, Inc., dated as of January 25, 1999.

      ***   10.11  Allonge  to Secured  Promissory  Note by and  between  Schick
                   Technologies, Inc. and DVI Financial Services, Inc., dated as
                   of March 4, 1999.

      ***   10.13  Security Agreement between Schick Technologies,  Inc. and DVI
                   Affiliated Capital, dated January 25, 1999.

      ***   10.14  Employment  Agreement between Schick  Technologies,  Inc. and
                   George C. Rough, Jr., dated February 25, 1999.

      ***   10.15  Employment  Agreement  between Schick  Technologies  Inc. and
                   David Schick, dated February 29, 2000.

      ***   10.16  Employment Letter Agreement between Schick  Technologies Inc.
                   and Zvi Raskin, dated February 6, 2000.

      ***   10.17  Employment Letter Agreement between Schick  Technologies Inc.
                   and Michael Stone, dated January 12, 2000.

      ***   10.18  Employment Letter Agreement between Schick  Technologies Inc.
                   and William F. Rogers, dated December 31, 1999.

      ***   10.19  Separation,  Severance and General Release  Agreement between
                   Schick  Technologies  Inc. and Fred Levine,  dated August 27,
                   1999.

      ***   10.20  Separation,  Severance and General Release  Agreement between
                   Schick  Technologies Inc. and Avi Itzhakov,  dated August 20,
                   1999.

            10.21  Loan  Agreement,  dated  December  27,  1999,  by and between
                   Schick  Technologies,  Inc., a Delaware  corporation,  Schick
                   Technologies,  Inc., a New York  corporation,  and  Greystone
                   Funding Corporation  ("Greystone"),  a Virginia  corporation.
                   (Filed as Exhibit 1 to the Company's Report on Form 8-K dated
                   December 27, 1999.)

            10.22  Stockholders'  Agreement,  dated  December 27,  1999,  by and
                   between Schick  Technologies,  Inc., a Delaware  corporation,
                   David B.  Schick,  Allen  Schick  and  Greystone.  (Filed  as
                   Exhibit 2 to the Company's  Report on Form 8-K dated December
                   27, 1999.)

            10.23  Stock  Purchase  Agreement,  dated  December 27, 1999, by and
                   between Schick Technologies,

                                       35

<PAGE>

                   Inc.,  a  Delaware  corporation,  and  Greystone.  (Filed  as
                   Exhibit 3 to the Company's Report on Form 8-K dated  December
                   27, 1999.)

            10.24  Form of Warrant  Certificate  Issued to Greystone to Purchase
                   Shares  of  Common  Stock of  Schick  Technologies,  Inc.,  a
                   Delaware  Corporation.  (Filed as Exhibit 4 to the  Company's
                   Report on Form 8-K dated December 27, 1999.)

     ****   10.25  Amended and Restated Loan Agreement, dated March 17, 2000 and
                   made effective as of December 27, 1999, by and between Schick
                   Technologies,    Inc.,   a   Delaware   corporation,   Schick
                   Technologies,  Inc., a New York  corporation,  and  Greystone
                   Funding Corporation, a Virginia corporation.

            10.26  Agreement to Rescind Stock Purchase, dated March 17, 2000 and
                   made  effective  as of  December  27,  1999,  by and  between
                   Greystone Finding Corp., a Virginia  corporation,  and Schick
                   Technologies, Inc., a Delaware corporation.

            10.27  Registration  Rights Agreement  between Schick  Technologies,
                   Inc. and Greystone, dated as of December 27, 1999.

            10.28  Second Amended and Restated  Secured  Promissory Note between
                   Schick Technologies,  Inc. and DVI Financial Services,  Inc.,
                   in the principal amount of  $5,000,000,dated  as of March 15,
                   2000.

            10.29  Second Amended and Restated  Secured  Promissory Note between
                   Schick Technologies,  Inc. and DVI Financial Services,  Inc.,
                   in the principal  amount of $1,596,189,  dated as of
                   March 15, 2000.

            10.30  Security Agreement between Schick Technologies,  Inc. and DVI
                   Financial Services, Inc., dated as of March 15, 2000.

            10.31  Amended  and  Restated  Security   Agreement  between  Schick
                   Technologies, Inc. and DVI Financial Services, Inc., dated as
                   of March 15, 2000.

            10.32  Form of Warrant Certificate Issued to DVI Financial Services,
                   Inc.  to  Purchase  Shares of Schick  Technologies,  Inc.,  a
                   Delaware Corporation.

            10.33  Registration  Rights Agreement  between Schick  Technologies,
                   Inc. and DVI Financial Services,  Inc., dated as of March 15,
                   2000.

            10.34  Distributorship  Agreement,  dated  April  6,  2000,  by  and
                   between  Schick  Technologies,   Inc.  and  Patterson  Dental
                   Company.

            21     List of Subsidiaries of Schick Technologies, Inc.

            23.1   Consent of PricewaterhouseCoopers LLP.

            23.2   Consent of Grant Thornton LLP.

            24     Powers  of  Attorney  (included  on  signature  page  of this
                   Report).

            27.1   Financial Data Schedule [filed in electronic format only].

            99     Cautionary  Statement  for  Purposes  of  the  "Safe  Harbor"
                   Provisions of the Private Securities Litigation Reform Act of
                   1995

     *    Filed  as  the  same  exhibit  number  as  part  of  the  registrant's
          Registration  Statement  on Form S-1  (File  No.  333-33731)  declared
          effective by the Securities  and Exchange  Commission on June 30, 1997
          and incorporated by reference herein.

                                       36

<PAGE>

     **   Filed as the same exhibit  number as part of the  registrant's  Annual
          Report on Form 10-K for the year ended March 31, 1998,  filed with the
          Securities and Exchange Commission on June 29, 1998.

     ***  Filed as the same exhibit  number as part of the  registrant's  Annual
          Report on Form 10-K for the year ended March 31, 1999,  filed with the
          Securities and Exchange Commission on March 21, 2000.

     **** Filed as the same exhibit number as part of the registrant's Quarterly
          Report on Form 10-Q for the quarter  ended  December 31,  1999,  filed
          with the Securities and Exchange Commission on March 24, 2000.


                                       37

<PAGE>

                                   SIGNATURES

Pursuant  to the  requirements  of the  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,  in the City of Long
Island City, State of New York, on June 28, 2000.

                                             SCHICK TECHNOLOGIES, INC


                                             By: /s/ David B. Schick
                                             --------------------------------

                                             David B. Schick
                                             Chairman of the Board and
                                             Chief 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 indicated on June 28, 2000.

KNOW ALL PERSONS BY THESE  PRESENTS,  that each person whose  signature  appears
below  constitutes  and  appoints  David B. Schick and Zvi N. Raskin  (with full
power to act alone), as his true and lawful  attorneys-in-fact  and agents, with
full powers of substitution and  resubstitution,  for him in his name, place and
stead to sign an Annual Report on Form 10-K of Schick Technologies,  Inc, and to
file the same,  with all exhibits  thereto,  and other  documents in  connection
therewith,  with the  Securities  and Exchange  Commission,  granting  unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents  and  purposes as he or she might or could do in person,
hereby ratifying and confirming all that said  attorneys-in-fact  and agents, or
their  substitute  or  substitutes,  lawfully  do or cause to be done by  virtue
hereof.

Signature                                      Title
---------                                      -----
/s/ David B. Schick
--------------------------------               Chairman of the Board
David Schick                                      and Chief Executive Officer

/s/ Jeffrey Slovin
--------------------------------               Director and President
Jeffrey Slovin

/s/ Allen Schick
--------------------------------               Director
Allen Schick

/s/ Euval Barrekette
--------------------------------               Director
Euval Barrekette

/s/ Jonathan Blank
--------------------------------               Director
Jonathan Blank

/s/ Robert Barolak
--------------------------------               Director
Robert Barolak


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