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, 1999

                                       OR

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

          For the Transition period from ______________to______________

                        Commission file number 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 | | No |X|

     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. [X]

                                   ----------

     The aggregate  market value of Common Stock held by  non-affiliates  of the
registrant as of March 7, 2000 was  approximately  $ 18,220,731.  Such aggregate
market  value is  computed  by  reference  to the average of the closing bid and
asked prices of the Common Stock on such date.

    As of March 7, 2000, the number of shares outstanding of the Registrant's
             Common Stock, par value $.01 per share, was 10,136,113

                       DOCUMENT INCORPORATED BY REFERENCE

                                      NONE

<PAGE>



                                Table of Contents

<TABLE>
<CAPTION>
Item of Form 10-K                                                                                Page
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<S>                                                                                                <C>
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                            14

Part II

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

         Item 6.    Selected Financial Data                                                        16

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

         Item 7A.   Quantitative and Qualitative  Disclosures About Market Risk                    23

         Item 8.    Financial Statements and Supplementary Data                                    23

         Item 9.    Changes in and Disagreements with Accountants
                    On Accounting and Financial Disclosure                                         23

Part III

         Item 10.   Directors and Executive Officers of the Registrant                             23

         Item 11.   Executive Compensation                                                         27

         Item 12.   Security Ownership of Certain Beneficial Owners And Management                 31

         Item 13.   Certain Relationships and Related Transactions                                 33

Part IV

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

</TABLE>

<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 that required for  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 increased marketing activities; (ii) broadening the marketing
of  accuDEXA(R)  to the medical market through a combination of direct sales and
other  distribution  channels;  (iii) introducing new products based on patented
and  proprietary  APS technology for digital  mammography  and 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  believes 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  system.


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<PAGE>

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.
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
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


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<PAGE>

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

     Breast  cancer is the  leading  cause of cancer  death  among  women in the
United  States  between the ages of 40 and 55, and the second  leading  cause of
cancer  death among all women in the United  States.  According  to the American
Cancer Society,  approximately 180,200 new cases of breast cancer were diagnosed
and approximately  43,900 women died from the disease between 1997 and 1998. The
annual cost of breast cancer  screening and diagnosis in the United States alone
is estimated at $6 billion.  Successful  treatment of breast  cancer  depends in
large part on the early detection of malignant lesions in the breast.  According
to the National  Cancer  Institute,  the five year survival rate  decreases from
more than 90% to 72% after the cancer has spread to the lymph nodes,  and to 18%
after it has spread to other organs such as the lungs, liver or brain.

     Mammography  techniques  have not  changed  significantly  over the past 20
years,  although  slight  improvements  have been made in x-ray film quality.  A
major drawback of current  mammography systems is their limited ability to image
dense breast tissue,  typically found in women under the age of 50, resulting in
an  unduly  high rate of  `false  positive'  test  results  and the  concomitant
consequences:  unwarranted surgical biopsies, significant cost and great anxiety
and concern to the  patient.  According to the American  Cancer  Society,  women
under age 50  experience  significant  incidence of breast  cancer,  with 23% of
breast cancer cases detected in women under age 50.

     Another  limitation  of  conventional  mammography  is the  time  and  cost
required to develop the film.  Time is  particularly  problematic in the case of
stereotactic  needle  biopsies,  in which a hollow  needle is inserted  into the
breast to obtain a tissue sample of a suspected lesion. Multiple mammograms must
be  obtained  during the  procedure  in order to properly  position  the needle.
According to the National Center for Health Statistics' November 1998 report, in
1997-1998,  approximately  324,000 breast  biopsies were performed in the United
States, of which up to 208,000 were stereotactic needle biopsies.

     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.

     According to the 13th Edition of Medical & Healthcare Marketplace Guide, as
of 1998 there were approximately  14,000 screening  mammography  machines in the
United States located in approximately 9,500 facilities and the


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Company  believes  that there were  approximately  15,000  additional  screening
mammography  machines  in other  major  health  care  markets.  The  market  for
mammography machines is driven by increased awareness of breast cancer risk, the
emphasis on early detection,  the growing number of stereotactic needle biopsies
and the advancement of digital technology.

     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 "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 "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.

     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, 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.



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DEPENDENCE ON CUSTOMERS

     During fiscal 1999, a single customer,  Henry Schein,  Inc.,  accounted for
annual sales by the Company of $7.2 million,  or 15.8% of annual  sales.  During
fiscal 1998 and 1997, no single customer  accounted for more than ten percent of
the Company's  annual sales.  During fiscal 1999,  1998 and 1997,  respectively,
sales of approximately, $6.0 million, $7.1 million and $3.9 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.  5,582,647,
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 30, 2019. 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 two additional patent applications currently pending before
the United States Patent and Trademark Office.

     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 been issued PTO  trademarks by 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
(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.



                                       6
<PAGE>

     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 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.



                                       7
<PAGE>

     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.

     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


                                       8
<PAGE>

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 1999, 1998 and 1997,  research and development  expenses were
$4.4 million, $3.9 million and $1.4 million, respectively.


                                       9
<PAGE>

BACKLOG

     The  backlog of orders was  approximately  $2.1  million and $.7 million at
March  8,  2000  and  March  8,  1999,   respectively.   Such  figures   include
approximately $741,000 and $269,000 of orders on hold pending credit approval at
March 8, 2000 and March 8, 1999,  respectively.  Orders  included in backlog may
generally be cancelled or rescheduled by customers without significant penalty.

EMPLOYEES

     As of March 1, 2000,  the Company had 185 full-time  employees,  engaged in
the following  capacities:  sales and marketing (45); general and administrative
(32);  operations (89); 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 the United States,  the Company markets and sells its products through a
direct sales and third-party distribution system.

     The direct sales system  incorporates  dental trade shows and  professional
seminars, advertisements in dental periodicals, journals and other publications,
direct mail and product  announcements.  The Company  employs  approximately  33
direct sales  representatives  who are located  throughout the United States and
are  organized  into  territories.  A  sales  and  marketing  support  staff  of
approximately  10  individuals,  based at the  Company's  offices  in New  York,
supports the direct sales force by planning  events and  developing  promotional
and marketing materials.  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 55 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.

     During fiscal 1999, the Company broadened its sales strategy by negotiating
distribution   agreements,   both  domestically  and  internationally.   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.

     In addition the Company's  dental products are currently  marketed and sold
domestically  through a group of  approximately  24 independent  dealers.  These
sales  constitute  approximately  40% of the Company's  total  domestic sales of
dental products. Henry Schein, Inc.'s subsidiary,  Sullivan-Schein Dental Corp.,
sells the CDR(R)  system  abroad under its own trade name,  "easyray(TM),".  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 sells the  accuDEXA(R)  primarily  through a direct sales force
and, to a limited degree,  established  independent  distributors of medical and
radiological  equipment.  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


                                       10
<PAGE>

Lilly  Co.  and  Merck & Co.,  currently  have  FDA-approved  therapies  for the
treatment of  osteoporosis.  The Company  believes that several other companies,
including Procter & Gamble,  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.

     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's  sales  strategy will be to market its  mammography  devices
through  a  direct  sales  force as well as  through  third  parties,  including
established manufacturers in the mammography market.

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 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, Sorodex
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.



                                       11
<PAGE>

     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.

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.



                                       12
<PAGE>

     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 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 alleges, 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 seeks 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.

     The Company has retained counsel,  believes that these lawsuits are without
merit, and intends to vigorously defend them. On or about February 11, 2000, the
Company and the Individual  Defendants  filed a Motion to Dismiss the Complaint.
As these  actions  are in their  preliminary  stages,  the  Company is unable to
predict  their  ultimate  outcome.  The outcome,  if  unfavorable,  could have a
material adverse effect on the Company.

     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.
See "Item 7 -- Management's  Discussion and Analysis of Financial  Condition and
Results of Operations -- Matters Relating to Restatement of Financial  Results."
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.  This  matter  is in a  preliminary  stage and the
Company cannot predict its potential outcome.

     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,
governmental  investigations,  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  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.

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, 1999.




                                       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,  in accordance with
Nasdaq  Marketplace  Rules,  and was advised,  by letter dated October 25, 1999,
that the Nasdaq  Listing and Hearing  Review  Council  would  review the Panel's
decision and would likely issue its decision in April 2000.

     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 period indicated,  the high and low
sales prices of the  Company's  Common Stock,  as quoted on The Nasdaq  National
Market.

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, 1998             High                Low

First quarter                               n/a                 n/a
Second Quarter                              30.75               15.50
Third Quarter                               29.00               17.50
Fourth Quarter                              28.75               19.125


     On March 7,  2000,  the  closing  bid and  asked  prices  per  share of the
Company's Common Stock in the  over-the-counter  market, as reported by National
Quotation  Bureau  LLC,  were $ 2.50 and $ 2.54 per  share,  respectively.  Such
prices represent quotations between dealers,  without dealer mark-up,  mark-down
or  commission,  and may not represent  actual  transactions.  On March 7, 2000,
there were 181 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.

     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.


                                       14
<PAGE>

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.

     The aggregate net proceeds received by the Company from the Offering and as
a  result  of  the  exercise  of  the  Underwriters'   Option,  after  deducting
underwriting and commissions and expenses were $33,508,731. During the period of
July 1, 1997  through  March 31, 1999,  such net  proceeds  have been applied as
follows:  (i) $1,606,000 for leasehold  improvements;  (ii) $5,248,000 for plant
and equipment;  (iii)  $1,450,000 to purchase  certain assets of Keystone Dental
X-Ray Corp.;  (iv)  $1,250,000 to purchase a 5% interest in Photobit,  Inc.; (v)
$1,512,833  to pay the notes  payable and  interest in the amount of $144,296 to
Merck & Co., Inc.; and (vii) the remaining  $22,442,000 was used in its entirety
for working  capital  purposes and to fund the Company's  substantial  operation
losses in 1999. None of the net proceeds were paid,  directly or indirectly,  to
directors, officers, controlling stockholders, or affiliates of 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,
                                            -------------------------------------------------------
                                              1995        1996        1997       1998        1999
                                            --------    --------    --------    --------   --------
                                                      (in thousands, except per share data)
<S>                                         <C>         <C>         <C>         <C>        <C>
Statement of Operations Data:

Revenue, net                                $  2,726    $  6,804    $ 16,101    $ 38,451   $ 45,605
                                            -------------------------------------------------------

Cost of sales                                  1,501       3,343       7,907      17,658     34,611
Excess and obsolete inventory                     --          --         114          --      5,466
                                            -------------------------------------------------------
Total cost of sales                             1501       3,343       8,021      17,658     40,077
                                            -------------------------------------------------------

Gross profit                                   1,225       3,461       8,080      20,793      5,528
                                            -------------------------------------------------------
Operating expenses:
        Selling and marketing                    517       1,620       4,961      10,645     18,440
        General and administrative               560       1,388       2,054       3,954      7,338
        Research and development                 150         458       1,418       3,852      4,354
        Bad debt expense                          --          --          34         164      5,598
        Patent litigation settlement              --          --          --         600         --
                                            -------------------------------------------------------
        Total operating expenses               1,227       3,466       8,467      19,215     35,730
                                            -------------------------------------------------------
Income (loss) from operations                     (2)         (5)       (387)      1,578    (30,202)
Total other income (expense)                     (22)       (108)         35       1,111        244
                                            -------------------------------------------------------
Income (loss) before income taxes                (24)       (113)       (352)      2,689    (29,958)
Provision (benefit) for income taxes              --          --          --         328       (352)
                                            -------------------------------------------------------
        Net income (loss)                   $    (24)   $   (113)   $   (352)   $  2,361   ($29,606)
                                            -------------------------------------------------------
        Basic earnings (loss) per share     $  (0.00)   $  (0.02)   $  (0.05)   $   0.25   ($  2.96)
                                            -------------------------------------------------------
        Diluted earnings (loss) per share   $  (0.00)   $  (0.02)   $  (0.04)   $   0.24   ($  2.96)
                                            -------------------------------------------------------
</TABLE>


                                       15
<PAGE>

<TABLE>
<CAPTION>
                                                                 March 31,
                                          -------------------------------------------------------
                                            1995        1996        1997        1998       1999
                                          --------    --------    --------    --------   --------
<S>                                       <C>         <C>         <C>         <C>        <C>
Balance Sheet Data:
Cash and cash equivalents                 $    128    $    525    $  1,710    $  6,217   $  1,415
Working capital (deficiency)                    35       1,240       5,518      33,745      2,902
Total assets                                 1,615       4,395      11,060      51,674     29,386
Total liabilities                            1,289       3,026       4,973       9,565     16,850
Retained earnings (accumulated deficit)     (1,091)     (1,203)     (1,556)        805    (28,801)
Stockholders' equity                           326       1,369       6,087      42,109     12,536
</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
applciations.

     The Company's revenues during fiscal 1999 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.  International  sales are made
primarily through a network of independent foreign distributors. In fiscal 1999,
1998 and 1997,  sales to customers  within the United States were  approximately
87%, 82% and 76% 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.  Extended interruptions of this supply, however, such
as  occurred  during the fourth  quarter of fiscal  1998,  could have a material
adverse effect on the Company's results of operations.

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



                                       16
<PAGE>

     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:

                                                      Year  ended March 31,
                                                  -----------------------------
                                                  1999         1998        1997
                                                  -----       -----       -----

Revenue, net                                      100.0%      100.0%      100.0%
                                                  -----------------------------

Cost of sales                                      75.9%       45.9%       49.1%
Excess and obsolete inventory                      12.0%         --         0.7%
                                                  -----------------------------
Total cost of sales                                87.9%       45.9%       49.8%
                                                  -----------------------------
Gross Profit                                       12.1%       54.1%       50.2%
                                                  -----------------------------

Operating expenses:
      Selling and marketing                        40.4%       27.7%       30.8%
      General and administrative                   16.1%       10.3%       12.8%
      Research and development                      9.5%       10.0%        8.8%
      Bad debt expense                             12.3%        0.4%        0.2%
      Patent litigation settlement                   --         1.6%         --


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 has 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 has 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.
Customers  currently own  approximately  250 units of the initial  version.  The
Company   continues  to  work  to  improve  the   reliability  and  enhance  the
self-diagnostic capabilities of the CDR product.



                                       17
<PAGE>

     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.  The Company has taken 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  increased  127.0%  to  $40.0  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 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 $505,000 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.



                                       18
<PAGE>

     Interest  expense  increased  to $261,000  in fiscal  1999 from  $77,000 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  $349,000 to
earnings  representing  deferred  income taxes from fiscal 1998 which it may not
collect.

Fiscal Year Ended March 31, 1998 as Compared to Fiscal Year Ended March 31, 1997

     Net revenues  increased  138.8% to $38.5  million in fiscal 1998 from $16.1
million  in fiscal  1997.  This  increase  was  attributable  principally  to an
increase  in the  number of  CDR(R)  products  sold.  Also  contributing  to the
increase was the introduction of the Company's  accuDEXA(R) bone mineral density
assessment  device in  December  1997.  The number of CDR(R)  products  sold was
positively  affected  by the  Company's  increased  expenditures  on  sales  and
marketing, personnel recruiting, selling events and other promotional activities
and the increased use of domestic distributors of dental and medical products.

     Total  cost of sales  increased  120.0%  to  $17.7  million  (45.9%  of net
revenues)  in fiscal 1998 from $8.0  million  (49.8% of net  revenues) in fiscal
1997. The increase in cost of sales is directly  attributable to the increase in
sales of the  Company's  products.  Cost of sales as a  percentage  of  revenues
decreased   during   fiscal  1998  as  compared   with  1997  due  to  increased
manufacturing  efficiencies,  increased production yields, lower material costs,
improved fixed overhead  utilization,  product mix and decreased warranty costs.
The  effect  of  these  improvements  was  partially  offset  by  a  decline  in
manufacturing  labor  productivity   attributable  to  an  interruption  in  the
semiconductor  wafer supply flow from the supplier  during the fourth quarter of
fiscal 1998 and the increased use of domestic distributors.  The interruption in
supply resulted in manufacturing and product shipment delays and therefore lower
revenues than anticipated during the fourth quarter of 1998.

     Selling and marketing  expenses increased 114.6% to $10.6 million (27.7% of
net revenues) in fiscal 1998 from $5.0 million (30.8% of net revenues) in fiscal
1997. This increase was  attributable  principally to the hiring and training of
new  salespeople  as the Company  continued to increase the size of its national
sales force. In addition,  the Company  significantly  increased its promotional
activities to create greater market  awareness,  and developed market strategies
for new products.

     General and administrative  expenses increased 92.5% to $4.0 million (10.3%
of net  revenues)  in fiscal 1998 from $2.1 million  (12.8% of net  revenues) in
fiscal 1997.  The decrease as a percentage of revenues in 1998 was  attributable
principally to increases in sales of the Company's products and partially offset
by growth in  administrative  expenditures,  primarily  the hiring of additional
administrative personnel.

     Expenses for research and  development in fiscal 1998  increased  171.7% to
$3.9 million (10.0% of net revenues) from $1.4 million (8.8% of net revenues) in
fiscal 1997. This increase was  attributable  principally to increased  research
and development expenses associated with the development of accuDEXA(R),  a bone
mineral density assessment device and enhancements to the CDR(R) system, as well
as the  CDRCam(R),  and  continued  development  of a  mammography  system.  All
research and development costs are expensed as incurred.

     In July 1997,  the Company,  in connection  with the  settlement of certain
pending patent litigation involving a United States patent directed to a display
for digital dental  radiographs,  was granted a worldwide,  non-exclusive  fully
paid license  covering such patent in  consideration of a payment by the Company
of $600,000, which constituted a fiscal 1998 operating expense.

     Interest  income  increased to $1.2 million in fiscal 1998 from $196,000 in
fiscal 1997.  This increase was due to higher cash balances and  investments  in
short-term interest-bearing securities which were purchased from the proceeds of
the Company's initial public offering.



                                       19
<PAGE>

     Interest  expense  decreased  to $77,000 in fiscal  1998 from  $161,000  in
fiscal 1997. Interest expense was principally  attributable to a loan from Merck
& Co.,  Inc.  (the  "Merck  Loan")  which was repaid  upon  consummation  of the
Company's initial public offering in July 1997.

     Income tax expense for fiscal  1998  reflects a combined  federal and state
effective tax rate of 12.2%. The low effective rate in fiscal 1998 was primarily
due to the  utilization  of  net  operating  loss  carryforwards,  research  and
development  tax credits  generated in prior years and the reversal of valuation
reserves provided for deferred tax assets in prior years.

MATTERS RELATING TO RESTATEMENT OF FINANCIAL RESULTS

     In February 1999, the Company restated its financial  results for the first
and second  quarters  of fiscal  1999.  Such  restatements  were made to reflect
increased  reserves and allowances for sales returns and bad debts. In addition,
at that time, the Company  reanalyzed the timing of various sales  transactions,
which  resulted in certain  revenues  being  shifted  from the first  quarter of
fiscal 1999 to the second quarter of fiscal 1999 and the  elimination of certain
revenue recognized in the second quarter.

     On September 3, 1999, the Company announced  restated financial results for
the  first,  second  and third  quarters  of  fiscal  1999.  These  restatements
reflected the findings of an  investigation  initiated by the Audit Committee of
the Company's Board of Directors  concerning the Company's  revenue  recognition
and sales  practices.  The  investigation  was conducted by independent  outside
counsel with the assistance of Ernst and Young LLP. The restatements  arose from
certain  previously  reported  sales  transactions  which  had  been  recognized
prematurely,  or improperly recorded,  during interim periods of fiscal 1999. In
addition to the required  adjustments  to revenues,  reserves for sales  returns
were restated to reflect actual return rates associated with certain promotional
programs which had not previously been considered in the Company's  estimates of
sales returns. These restatements revised the restated financial results for the
first and second quarters announced by the Company in February 1999.

QUARTERLY RESULTS

     The  following  table  sets forth  certain  unaudited  quarterly  financial
information  for each of the eight  quarters in the period ended March 31, 1999.
This  information  is  presented  on the  same  basis as the  audited  financial
statements  appearing  elsewhere  in this  Report  and,  in the  opinion  of the
Company,   includes  all  adjustments   (consisting  only  of  normal  recurring
adjustments)  necessary to present fairly the unaudited  quarterly results.  The
quarterly  results should be read in conjunction  with the audited  consolidated
financial  statements  of the Company and related notes  thereto.  The operating
results for any quarter are not necessarily  indicative of the operating results
for any future period. In addition, the Company's CDR(R) products are subject to
seasonal  variations.  Historically  the Company has  experienced  higher  sales
growth  rates in its first and third  fiscal  quarters  than in its  second  and
fourth fiscal quarters.

     The Company's  Financial  Statements for the fiscal quarters ended June 30,
1998,  September 30, 1998 and December 31, 1998 are being restated and set forth
in the following table, from amounts  previously  reported by the Company in its
Forms 10-Q for those respective quarters.

<TABLE>
<CAPTION>

                                                                       (in thousands)

                                June 30,     Sept. 30,    Dec. 31,   March 31,   June 30,     Sept. 30,    Dec. 31,     Mar. 31,
                                  1997         1997        1997        1998        1998         1998         1998         1999
                                --------     --------    --------    --------    --------     --------     --------     --------
<S>                             <C>          <C>         <C>         <C>         <C>          <C>          <C>          <C>
Statement of Operations Data:
Revenue, net                    $  6,040     $  8,224    $ 11,912    $ 12,275    $ 10,439     $ 12,309     $ 15,540     $  7,317
Total cost of sales                2,831        3,867       5,529       5,431       5,636        8,004       14,772       11,665
Gross Profit                       3,209        4,357       6,383       6,844       4,803        4,305          768       (4,348)
Gross Profit Margin                 53.1%        53.0%       53.6%       55.8%       46.0%        35.0%         4.9%       (59.4%)
Operating expenses                 3,912        3,910       5,384       6,009       6,702        6,987       10,383       11,658
Income (loss) from Operations       (703)         447         999         835      (1,899)      (2,682)      (9,615)     (16,006)
Net income (loss)               $   (697)    $  1,010    $  1,225    $    823    $ (1,691)    $ (2,537)    $ (9,004)    $(16,374)
</TABLE>



                                       20
<PAGE>

     The Company  may in the future  experience  significant  quarter-to-quarter
fluctuations in its results,  which may result in volatility in the price of the
Company's  common  stock.  Quarterly  results of  operations  may fluctuate as a
result of a variety of factors, including demand for the Company's products, the
introduction  of new or enhanced  products  by the  Company or its  competitors,
market acceptance of new products, the timing of significant marketing programs,
the commencement of new product development  programs,  supply and manufacturing
delays, the extent and timing of the hiring of additional personnel, competitive
conditions in the industry and general  economic  conditions.  See Exhibit 99 to
this Report.

LIQUIDITY AND CAPITAL RESOURCES

     At  March  31,  1999,  the  Company  had  $1.4  million  in cash  and  cash
equivalents, $360 thousand in short-term investments and $2.9 million in working
capital, compared to $6.2 million in cash and cash equivalents, $14.0 million in
short term investments and $33.7 million in working capital at March 31, 1998.

     The  decrease  in  working   capital  at  March  31,  1999,   is  primarily
attributable to the loss from operations for the year then ended. Ongoing losses
in fiscal 2000 have further  reduced working  capital.  As of December 31, 1999,
the Company's working capital deficiency was $3.7 million.

     DVI Financial  Services,  Inc.  ("DVI") has provided the Company with loans
and advances up to $6.222 million in the aggregate (the "Bridge Loan"), which is
secured by first priority liens on collateral (the  "Collateral")  consisting of
all of the Company's  now-owned and  hereafter-acquired  tangible and intangible
personal property including,  without limitation,  cash, marketable  securities,
accounts  receivable,   inventories,   contract  rights,  patents,   trademarks,
copyrights and other general intangibles,  machinery, equipment and interests in
real estate of the Company,  together with all products and proceeds thereof. In
connection  with  the  Bridge  Loan,  and  reflecting  the  Company's  repayment
obligations  thereunder as well as the security  interest created thereby in the
Collateral,  the  Company  executed  a Secured  Promissory  Note and a  Security
Agreement  (the  "Security  Agreement")  dated January 25, 1999, and executed an
Amended and Restated  Secured  Promissory Note dated July 30, 1999. The Security
Agreement provides, in part, that the Company may not permit the creation of any
lien or encumbrance on the Company's  property or assets.  The Company is not in
compliance  with  certain  financial  covenants  and other terms and  provisions
contained in the Bridge Loan. The Company and DVI have entered into a commitment
letter for the restructuring of its Bridge Loan.

     In December  1999,  the Company  entered into a Loan Agreement (as amended,
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.  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 Company's  Common  Stock at an exercise  price of
$0.75 per share.  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"),  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  $1,000,000  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,  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 the


                                       21
<PAGE>

     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 Company has also undertaken  various  cost-cutting  measures  including
reduction  of  facilities  and  personnel by over 40% 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 and believes it has  strengthened  customer  support  services to its
customers.

     In spite of the Company's cost  reductions,  refinancing  and tightening of
credit, there can be no assurance that the Company will achieve profitability or
generate  sufficient  working  capital  to permit  its  continuation  as a going
concern. See Note 2 to The Consolidated Financial Statements. The ability of the
Company to satisfy its cash  requirements  is dependent in part on the Company's
ability  to attain  adequate  sales and profit  levels  and to control  warranty
obligations  by  increasing  warranty  revenues  and  reducing  warranty  costs.
Management  currently  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,  the  restructuring  of the DVI Bridge Loan is not completed 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.

Year 2000 Compliance

     The Year 2000  problem  is the  result of  computer  programs  having  been
written  using two digits  rather  than four to define the  applicable  year.  A
computer  program that has date  sensitive  software may  recognize a date using
"00" as the year 1900 rather than the year 2000.  Should systems fail to process
date  information  correctly  because  of the  calendar  year  change  to  2000,
significant  problems  could occur as a result.  Through the filing date of this
Report,  the Company has not experienced any material adverse effects  resulting
from or relating to the Year 2000 computer problem.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The DVI Bridge Loan bears an annual  interest  rate based on the prime rate
plus 2.5%. 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.


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:


                                       22
<PAGE>

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 38, 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
                              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  President,  and
                              as   Managing   Director   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.

                                       23
<PAGE>

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 Shareholders  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.

(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>
                                                                                           Officer
Name                                   Age     Position                                    Since
----                                   ---     --------                                    -----
<S>                                    <C>     <C>                                         <C>
David B. Schick...................     38      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, Esq................     37      Secretary and General Counsel               1992

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

William Rogers....................     59      Vice President of Operations                1999

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,  Esq.,  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 1998 to 2000,  Mr.  Rogers  was the  Company's
     Director of Materials and Manufacturing Engineering. From


                                       24
<PAGE>

     1995 to 1998,  Mr. Rogers was Director of  Operations at Vecco  Instruments
     Co., and from 1993 to 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 1993 to 2000,  Mr. Stone was General
     Manager of the Dental  Division of  Welch-Allyn  Company,  and from 1989 to
     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.

ITEM 11. EXECUTIVE COMPENSATION

     The following table sets forth certain information concerning  compensation
received  for the  fiscal  years  ended  March  31,  1999,  1998 and 1997 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,
1999.



                                       25
<PAGE>

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                                                                  Long-Term
                                                                                                Compensation
                                                        Annual Compensation                         Awards
                                                        -------------------                         ------
                                                                              Other
                                                                             Annual        Securities         All Other
     Name and Principal        Fiscal                                       Compensa-     Underlying          Compensa-
          Position              Year      Salary($)           Bonus($)         tion       Options(#)(2)      tion($)(3)
-------------------------------------------------------------------------------------------------------------------------
<S>                            <C>        <C>               <C>                    <C>         <C>             <C>
  David B. Schick              1999       $217,500          $   --               --(1)         12,251          $   --
  Chairman of the Board
  and Chief  Executive         1998        143,385            39,692              --            3,267             4,569
  Officer
                               1997        140,308             5,890              --            5,715             2,000
-------------------------------------------------------------------------------------------------------------------------

  Fred Levine                  1999        179,167            47,500(4)           --           12,055              --
  Former Vice President of
  Sales and Marketing and      1998        137,318            23,826(4)           --            1,000             4,031
  Former Director
                               1997        105,846            42,353              --             --                --
-------------------------------------------------------------------------------------------------------------------------

  Jonathan Singer              1999        131,667              --                --           12,695              --
  Former Vice President of
  Engineering and Former       1998        109,423              --                --            2,027             1,812
  Director
                               1997         90,569             5,993              --             --                --
-------------------------------------------------------------------------------------------------------------------------

  Zvi N. Raskin, Esq           1999        132,500              --                --           17,006              --
  General Counsel and
  Secretary                    1998         99,539            25,000              --            2,343             3,113

                               1997         84,000             5,365              --             --               1,100
-------------------------------------------------------------------------------------------------------------------------

  George C. Rough, Jr          1999         13,846(5)        150,000(6)           --          100,000(7)           --
  Former Chief Financial
  Officer                      1998           --                --                --             --                --

                               1997           --                --                --             --                --
-------------------------------------------------------------------------------------------------------------------------
</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
     1997,  1998 and 1999,  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
     1997, 1998 and 1999.

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

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

(6)  At or about the time of his  commencement of employment with the Company in
     March 1999, Mr. Rough was


                                       26
<PAGE>

     paid a bonus of $150,000.

(7)  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 were returned to
     the Company.

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
annual 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,  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, as a result, the 100,000 stock options awarded to
him have since terminated.




                                       27
<PAGE>

Compensation of Directors

     Directors  who  are  also  employees  of the  Company  are  not  separately
compensated  for any services  they provide as directors.  In fiscal 1999,  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 entitled 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,  1999 were Howard  Wasserman,
D.D.S.  and Mark Bane,  Esq. (who resigned as member of the Board of Director as
of February 18, 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, 1999,  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. No person who served as a
member  of the  Executive  Compensation  Committee  was a party to any  material
transaction set forth under "Certain 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, 1999
to each of the Named Executives.

                          Option Grants in Fiscal 1999

                                Individual Grants

<TABLE>
<CAPTION>
                Number of          Percent of
                Securities       Total Options
                Underlying         Granted to        Exercise
                 Options          Employees in        Price      Expiration      Grant Date
Name            Granted(#)       Fiscal 1999(1)     ($/Share)       Date          Value(2)
--------------------------------------------------------------------------------------------
<S>               <C>                  <C>            <C>       <C>               <C>
David B.           2,251                .4%           $27.72     4/01/2003        $ 39,000
Schick            10,000               1.9%            19.33    10/01/2003         119,000


Fred Levine        2,055               .39%            25.20     4/01/2008          36,000
                  10,000               1.9%            17.58    10/01/2008         122,000

Jonathan           2,695               .52%            25.20     4/01/2008          48,000
Singer            10,000               1.9%            17.58    10/01/2008         122,000

Zvi N. Raskin      2,006               .39%            25.20     4/01/2008          63,000
                   5,000               .96%            17.96     7/29/2008          63,000
                  10,000               1.9%            17.58    10/01/2008         122,000

George C.        100,000              19.2%             4.91       3/01/09         342,000
Rough, Jr.
</TABLE>


(1)  The Company granted employees options to purchase a total of 520,523 shares
     of Common Stock in fiscal 1999.



                                       28
<PAGE>

(2)  Grant  date  value  was   determined   on  the  date  of  grant  using  the
     Black-Scholes  option  pricing  model based on the  following  assumptions:
     volatility - 85%; expected life - 5 years;  risk-free interest rate - 4.13%
     to 5.46%; and no dividend yield.

Option Exercises and Year-End Value Table

     The following table sets forth information  regarding the exercise of stock
options during fiscal 1999 and the number and value of unexercised  options held
at March 31, 1999 by each Named Executive.

                   Aggregated Option Exercises in Fiscal 1999
                     and Fiscal 1999 Year-End Option Values

<TABLE>
<CAPTION>
                                                                    Number of
                                                                   Securities              Value of
                                                                   Underlying             Unexercised
                                                                   Unexercised          "In-the-Money"
                                                                   Options at             Options at
                             Shares                              March 31, 1999         March 31, 1999
                           Acquired on           Value            Exercisable/           Exercisable/
  Name                     Exercise(#)        Realized ($)        Unexercisable        Unexercisable(1)
  ----                     -----------        ------------        -------------        ----------------
<S>                            <C>                 <C>         <C>                     <C>
  David B. Schick              --                  --          10,412(2) / 10,821              0 / 0
------------------------------------------------------------------------------------------------------------

  Fred Levine                  --                  --            56,250 / 12,805      130,760(3) / 0
------------------------------------------------------------------------------------------------------------

  Jonathan Singer              --                  --            6,880 / 14,215(4)             0 / 0
------------------------------------------------------------------------------------------------------------

  Zvi N. Raskin                --                  --             585 / 18,764                 0 / 0
------------------------------------------------------------------------------------------------------------

  George C. Rough,             --                  --              0 / 100,000                 0 / 0
  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  $4.125 per share,  the closing price per
     share on March 31, 1999, 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)  The fiscal 1997 stock option grant of 6,373 stock  options to Mr. Singer 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.



                                       29
<PAGE>

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 March 7, 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.

<TABLE>
<CAPTION>
                                                      Number of Shares                 Percentage of
Name                                                  Beneficially Owned(1)            Outstanding Shares
----                                                  ---------------------            ------------------
<S>                                                     <C>                                     <C>
David B. Schick(2) ...............................      2,192,843(3)                            21.6%

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

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

Zvi N. Raskin(2) .................................        115,722(8)                             1.1%

Jonathan Singer(2) ...............................        329,639(9)                             3.2%

Euval S. Barrekette(10) ..........................        116,490(11)                            1.2%

Allen Schick(12) .................................        534,374(13)                            5.3%

Jeffrey T. Slovin(2) .............................        750,000(14)                            6.9%

Robert Barolak(15) ...............................           --                                 --

Greystone Funding Corp.(16) ......................      4,250,000(17)                           29.5%

All current executive Officers and Directors as a
group ............................................      7,959,429(18)                           41.2%
</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 March 7, 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; 4,285
     shares issuable upon the exercise of stock options granted to Mr. Schick in
     July 1996; 1,632 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.



                                       30
<PAGE>

(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.

(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;  1,170 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;  1,250  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)  Consists of 320,000  shares held jointly by Mr. Singer and his wife;  4,779
     shares issuable upon the exercise of stock options granted to Mr. Singer in
     July 1996; 1,012 shares issuable upon the exercise of stock options granted
     to Mr.  Singer in July 1997;  1,347  shares  issuable  upon the exercise of
     stock  options  granted  to Mr.  Singer in April  1998;  and  2,500  shares
     issuable  upon the  exercise  of stock  options  granted  to Mr.  Singer in
     October 1998, pursuant to the 1996 Employee Stock Option Plan.

(10) Dr. Barrekette's address is 90 Riverside Drive, New York, New York 10024.

(11) Consists of 115,240 shares held by Dr. Barrekette, and 1250 shares issuable
     upon the exercise of stock options granted to Dr. Barrekette in July, 1998,
     pursuant to the 1997 Directors Stock Option Plan.

(12) Dr.  Schick's  address is 1222 Woodside  Parkway,  Silver Spring,  Maryland
     20910.

(13) 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;  and 1,250  shares  issuable  upon the  exercise  of stock  options
     granted to Dr. Schick in July 1998,  pursuant to the 1997  Directors  Stock
     Option Plan. Dr. Schick disclaims beneficial ownership of the 44,800 shares
     held as custodian.

(14) Consists of 750,000  shares  issuable upon the exercise of warrants held by
     Mr. Slovin.

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

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

(17) Consists of 4,250,000 shares issuable upon the exercise of warrants held by
     Greystone.

(18) Includes the shares underlying warrants described in Note 14 as well as the
     shares subject to options held by officers and directors.

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 Registrant  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 stockholder  options  available for grant to employees by
750,000.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         None


                                       31
<PAGE>

                                     PART IV

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


SCHICK TECHNOLOGIES, INC.
Index to Consolidated Financial Statements

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

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

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

Consolidated Balance Sheets as of March 31, 1999 and 1998  ......................................    F-4

Consolidated Statements of Operations for the years ended March 31, 1999, 1998 and 1997  ........    F-5

Consolidated Statements of Changes in Stockholders' Equity for the years ended March 31,
     1999, 1998 and 1997  .......................................................................    F-7

Consolidated Statements of Cash Flows for the years ended March 31, 1999, 1998 and 1997  ........    F-7

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


                                      F-1
<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,  Valuation and Qualifying  Accounts,  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-2
<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  sheet  of  Schick
Technologies,  Inc.  (the  "Company")  as of  March  31,  1999  and the  related
consolidated statements of operations,  changes in stockholders' equity and cash
flows for the year then ended. 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 audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the United States. 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 audit  provides 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, 1999, and the consolidated  results of their
operations  and  their  consolidated  cash  flows for the year  then  ended,  in
conformity with accounting principles generally accepted in the United States.

We have also audited Schedule II of Schick Technologies, Inc. for the year ended
March 31, 1999. In our opinion,  this schedule  presents fairly, in all material
respects, the information required to be set fourth therein.

The  accompanying  consolidated  financial  statements  and financial  statement
schedule have been  prepared  assuming that the Company will continue as a going
concern. As more fully described in Note 2, the Company has incurred significant
losses for the year ended March 31, 1999. In addition,  as more fully  described
in Note 13, the Company has been named as a defendant in several  putative class
action lawsuits that have been  consolidated  into an amended  complaint.  These
conditions raise  substantial doubt about the Company's ability to continue as a
going concern.  Management's plans in regard to these matters are also described
in Note  2.  The  consolidated  financial  statements  and  financial  statement
schedule do not include any  adjustments to reflect the possible  future effects
on  the   recoverability  and  classification  of  assets  or  the  amounts  and
classification  of  liabilities  that  may  result  from  the  outcome  of  this
uncertainty.




Grant Thornton LLP
New York, New York
March 8, 2000 (except for the last paragraph in Note 19 as to which the date is
March 17, 2000)


                                      F-3
<PAGE>


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

<TABLE>
<CAPTION>
                                                                                 March 31,
                                                                          ------------------------
                                                                            1999            1998
                                                                          --------        --------
<S>                                                                       <C>             <C>
Assets
Current assets
      Cash and cash equivalents                                           $  1,415        $  6,217
      Short-term investments                                                   360          14,022
      Accounts receivable, net of allowance for
            doubtful accounts of $4,512 and $200, respectively               4,205          10,173
      Inventories                                                           10,686          12,152
      Income taxes receivable                                                2,720            --
      Prepayments and other current assets                                     321             746
                                                                          --------        --------
                Total current assets                                        19,707          43,310
                                                                          --------        --------
Equipment, net                                                               7,221           5,801
Investments                                                                  1,250           1,000
Deferred tax asset                                                            --               349
Other assets                                                                 1,208           1,214
                                                                          --------        --------
                Total assets                                              $ 29,386        $ 51,674
                                                                          ========        ========
Liabilities and Stockholders' Equity
Current liabilities
      Accounts payable and accrued expenses                               $  8,946        $  7,010
      Bridge note payable                                                    5,000            --
      Accrued salaries and commissions                                       1,296           1,473
      Deferred revenue                                                         564             362
      Deposits from customers                                                  513             331
      Warranty obligations                                                     402             245
      Income taxes payable                                                    --               144
      Capital lease obligations, current                                        84            --
                                                                          --------        --------
                Total current liabilities                                   16,805           9,565
                                                                          --------        --------
Capital lease obligations, long term                                            45            --
                                                                          --------        --------
                Total liabilities                                           16,850           9,565
Commitments and contingencies
Stockholders' equity
      Preferred stock ($0.01 par value; 2,500,000
            shares authorized; none issued and outstanding)                   --              --
      Common stock ($.01 par value; 25,000,000 shares authorized;
            10,059,384 and 9,992,057 shares issued and outstanding)            101             100
      Additional paid-in capital                                            41,236          41,204
      (Accumulated deficit)  retained earnings                             (28,801)            805
                                                                          --------        --------
            Total stockholders' equity                                      12,536          42,109
                                                                          --------        --------
            Total liabilities and stockholders' equity                    $ 29,386        $ 51,674
                                                                          ========        ========
</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,
                                                           ----------------------------------------
                                                             1999            1998            1997
                                                           --------        --------        --------
<S>                                                        <C>             <C>             <C>
Revenues, net                                              $ 45,605        $ 38,451        $ 16,101
                                                           --------        --------        --------

Cost of sales                                                34,611          17,658           7,907
Excess and obsolete inventory                                 5,466            --               114
                                                           --------        --------        --------
Total cost of sales                                          40,077          17,658           8,021
                                                           --------        --------        --------

                Gross profit                                  5,528          20,793           8,080
                                                           --------        --------        --------
Operating expenses
         Selling and marketing                               18,440          10,645           4,961
         General and administrative                           7,338           3,954           2,054
         Research and development                             4,354           3,852           1,418
         Bad debt expense                                     5,598             164              34
         Patent litigation settlement                          --               600            --
                                                           --------        --------        --------
                Total operating expenses                     35,730          19,215           8,467
                                                           --------        --------        --------
                (Loss) income from operations               (30,202)          1,578            (387)
                                                           --------        --------        --------
Other income (expense)
         Interest income                                        505           1,188             196
         Interest expense                                      (261)            (77)           (161)
                                                           --------        --------        --------
                Total other income                              244           1,111              35
                                                           --------        --------        --------
                (Loss) income before income taxes           (29,958)          2,689            (352)
                                                           --------        --------        --------
                (Benefit) provision for income taxes           (352)            328            --
                                                           --------        --------        --------
                Net (loss) income                          $(29,606)       $  2,361        $   (352)
                                                           ========        ========        ========
                Basic (loss) earnings per share            $  (2.96)       $   0.25        $  (0.05)
                                                           ========        ========        ========
                Diluted (loss) earnings per share          $  (2.96)       $   0.24        $  (0.04)
                                                           ========        ========        ========
</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, 1996                                7,052,870     $       71     $    2,502     $   (1,204)     $    1,369
      Issuance of common stock upon
            conversion of notes payable                   376,446              4            729           --               733
      Issuance and sale of common
            stock and warrants                            526,470              5          4,307           --             4,312
      Issuance of compensatory
            stock options to employees                       --             --               13           --                13
      Issuance of compensatory
            common stock to an employee                     1,445           --               12           --                12
      Net loss                                               --             --             --             (352)           (352)
                                                       ----------     ----------     ----------     ----------      ----------
Balance at March 31, 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
                                                       ==========     ==========     ==========     ==========      ==========
</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,
                                                                                           ------------------------------------
                                                                                             1999          1998          1997
                                                                                           --------      --------      --------
<S>                                                                                        <C>           <C>           <C>
Cash flows from operating activities
      Net (loss) income                                                                    $(29,606)     $  2,361      $   (352)
      Adjustments to reconcile net (loss) income to
            net cash used in operating activities
                Depreciation and amortization                                                 1,710           943           318
                Provision for excess and obsolete inventory                                   5,466          --             114
                Provision for bad debts                                                       5,598           164            34
                Stock and option grant compensation                                            --              35            25
                Accrued interest on investments                                                --            (428)          (53)
                Non-cash interest expense                                                      --            --              98
                Changes in assets and liabilities, net of effects of business acquired
                    Accounts receivable                                                         370        (8,409)       (1,017)
                    Inventories                                                              (4,000)       (9,474)         (667)
                    Prepayments and other current assets                                     (2,295)         (419)         (167)
                    Other assets                                                               (148)          (61)         (115)
                    Deferred income taxes                                                       349          (349)         --
                    Accounts payable and accrued expenses                                     1,916         5,757         1,212
                    Income taxes payable                                                       (144)          144          --
                    Deferred revenue                                                            202           221           141
                    Deposits from customers                                                     182           194            53
                    Accrued interest on notes payable                                          --            (102)          102
                                                                                           --------      --------      --------

                          Net cash used in operating activities                             (20,400)       (9,423)         (274)
                                                                                           --------      --------      --------

Cash flows from investing activities
      Capitalization of software development costs                                             --            (165)         --
      Business acquisition                                                                     --          (1,450)         --
      Purchase of minority interest in Photobit Corporation                                    (250)       (1,000)         --
      Purchase of held-to-maturity investments                                              (10,588)      (23,425)       (6,619)
      Purchase of available-for-sale investments                                               --            --            (990)
      Proceeds from maturities of held-to-maturity investments                               24,250        12,144         4,359
      Proceeds from redemption of available-for-sale investments                               --             490           500
      Capital expenditures                                                                   (2,777)       (4,668)       (1,082)
                                                                                           --------      --------      --------

                          Net cash provided by (used in) investing activities                10,635       (18,074)       (3,832)
                                                                                           --------      --------      --------

Cash flows from financing activities
      Net proceeds from issuance and sale of common stock and warrants                         --            --           4,312
      Net proceeds from issuance and sale of common stock                                        33        33,626          --
      Proceeds from issuance of long-term notes                                                --            --           1,000
      Proceeds from issuance of short-term notes                                              5,000          --            --
      Principal payments on capital lease obligations                                           (70)         (109)          (21)
      Repayment of notes payable                                                               --          (1,513)         --
                                                                                           --------      --------      --------

                          Net cash provided by financing activities                           4,963        32,004         5,291
                                                                                           --------      --------      --------

Net (decrease) increase in cash and cash equivalents                                         (4,802)        4,507         1,185
Cash and cash equivalents at
      beginning of year                                                                       6,217         1,710           525
                                                                                           --------      --------      --------

Cash and cash equivalents at
      end of year                                                                          $  1,415      $  6,217      $  1,710
                                                                                           ========      ========      ========
</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
                                        1999           1998           1997
                                        ----           ----           ----
     CDR                                  71%            90%           100%
     accuDEXA                             29%            10%           --
                                         ---            ---            ---
                                         100%           100%           100%
                                         ===            ===            ===

     The  consolidated  financial  statements  of the Company at March 31, 1999,
     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.   Basis of Presentation

     The accompanying financial statements have been prepared in conformity with
     generally accepted accounting principles, which contemplate continuation of
     the Company as a going concern.  However,  the Company incurred significant
     operating losses for the year ended March 31, 1999 and in each of the first
     three  quarters  of fiscal  2000.  At March 31,  1999,  the  Company had an
     accumulated  deficit of $28,801 and working capital of $2,902.  Such losses
     are principally  attributable to significant product returns, bad debts and
     excess  and  obsolete  inventory   resulting  from  (a)  a  change  in  the
     semiconductor  technology  utilized in the Company's CDR(R) dental products
     during fiscal 1999,  (b) product  reliability  issues  associated  with the
     Company's  production of the accuDEXA(R) bone  densitometer in fiscal 1999,
     (c) a change  in the  Company's  installation  methodology  for its  CDR(R)
     dental products and (d)  insufficient  credit and collections  policies and
     procedures.  Further, the Company and certain of its directors and officers
     have been named as defendants in several shareholder  complaints purporting
     to be Class Action  lawsuits which have been  consolidated  into an amended
     complaint (see Note 13). In March 1999, the Company secured a $5,000 bridge
     loan (See Note 10),  which was  scheduled to mature on July 30,  1999.  The
     maturity of the bridge loan was  extended and the  principal  amount of the
     note was increased to $6,222 effective July 30, 1999. As further  described
     in Note  19,  the  Company  is not in  compliance  with  certain  financial
     covenants,  and other terms and provisions contained in the extended bridge
     loan and is currently in the process of restructuring the obligation.

     In view of the matters described in the preceding paragraph, recoverability
     of a major portion of the recorded asset amounts shown in the  accompanying
     balance sheet is dependent upon continued operations of the Company,  which
     in turn is  dependent  upon the  Company's  ability  to meet its  financing
     requirements  on a continuing  basis,  to maintain  present  financing,  to
     succeed in its future operations,  and satisfactorily settle legal matters.
     The  financial  statements do not include any  adjustments  relating to the
     recoverability  and


                                      F-8
<PAGE>

     classification  of recorded asset amounts or amounts and  classification of
     liabilities  that  might be  necessary  should  the  Company  be  unable to
     continue in existence.

     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
     its sales force, (6) implementing programs to increase warranty revenue and
     recover  warranty  parts  from  the  Company's  customers,   (7)  obtaining
     additional financing from Greystone Funding Corporation ("Greystone"),  (8)
     renegotiating  repayment terms with the secured  lender,  (9) employing new
     senior  management  including Vice  President of Sales and  Marketing,  and
     Chief  Operating  Officer,  (10)  curtailing  inventory   acquisitions  and
     disposing  of  excess  and  obsolete  inventory  and,  (11)  modifying  and
     improving the Company's products to improve reliability and reduce warranty
     expenditures.

3.   Restatement of Interim  Periods and Fourth Quarter  Adjustments  (unaudited
     and not reviewed)

     In February 1999, the Company restated its financial  results for the first
     and second fiscal quarters of 1999. Such  restatements were made to reflect
     increased  reserves  and  allowances  for sales  returns and bad debts.  In
     addition,  at that time, the Company reanalyzed the timing of various sales
     transactions,  which  resulted in certain  revenues  being shifted from the
     first  quarter of fiscal 1999 to the second  quarter of fiscal 1999 and the
     elimination of certain revenue recognized in the second quarter.

     In June 1999, the Company became aware that certain sales  transactions  of
     both its CDR and  accuDEXA  systems  had  been  recognized  prematurely  or
     improperly  recorded  during  interim  periods  of fiscal  1999.  The Audit
     Committee of the  Company's  Board of Directors  subsequently  initiated an
     investigation of the Company's revenue recognition and sales practices.  As
     a result  of the  findings  of the  investigation  and the  year-end  audit
     process, the Company's financial statements for the first, second and third
     quarters of fiscal 1999 have been restated from those previously  announced
     by the Company in February 1999. In addition to the required adjustments to
     revenue,  reserves for sales returns were restated to reflect actual return
     rates  associated  with certain  promotional  programs.  These  promotional
     programs had not been previously  considered in the Company's  estimates of
     sales returns.

     The following  table sets forth the effect of the prior period  adjustments
     for the quarters  ended June 30, 1998,  September 30, 1998 and December 31,
     1998:

                                             Unaudited and not reviewed
                                                 Three Months Ended
                                         --------------------------------------
                                         June 30,   September 30,  December 31,
                                          1998         1998           1998
                                         --------   -------------  ------------
     Revenues                            $(5,541)     $(1,927)       $(1,550)
     Cost of sales                         1,581       (1,069)           501
                                         -------      -------        -------

     Gross profit (loss)                  (3,960)      (2,996)        (1,049)
     Total operating expenses               (162)         221           --
                                         -------      -------        -------

     Gain (loss) from operations          (4,122)      (2,775)        (1,049)
     Income tax benefit                      948           68           --
                                         -------      -------        -------
     Net loss                            $(3,174)     $(2,707)       $(1,049)
                                         =======      =======        =======

     The  adjustments  to  revenues  in the  quarter  ended June 30, 1998 result
     primarily  from  premature  revenue  recognition  related  to "Bill & Hold"
     transactions  and promotional  programs whereby the customer was provided a
     trial period prior to the actual purchase of the Company's CDR and accuDEXA
     systems.  Revenues  were  initially  recognized  upon  shipment of products
     subject to the trial period versus at the expiration of the trial period or
     upon  confirmation  from the customer of their  acceptance of the purchase.
     The adjustments resulted in $3,295 of revenues being shifted from the first
     fiscal  quarter to the  second  fiscal  quarter.  Revenues  of $2,246  were
     reduced in the first quarter of 1999  resulting from the accrual of returns
     from the fourth quarter of 1999.



                                      F-9
<PAGE>

     Revenues in the second quarter of 1999 were increased by the $3,295 shifted
     from the  first  quarter.  Such  increase  was  offset by the  reversal  of
     revenues  in  the  amount  of  $1,998  related  to  consignment   sales  to
     distributors  and shipments for which the customer did not accept delivery.
     In addition, $700 of revenues related to product shipments subject to trial
     periods was shifted from the second  quarter to the third quarter of fiscal
     1999.  Revenues  in the amount of $413  related to  shipments  of  products
     subject to trial periods where the customer never  confirmed  acceptance of
     the product and subsequently  returned the product were reversed.  Revenues
     of $2,111 were  reduced in the second  quarter of 1999  resulting  from the
     accrual of returns from the fourth quarter of 1999.

     Adjustments  to  revenues in the third  quarter of fiscal  1999  include an
     increase of $700 related to the revenues  shifted from the second  quarter.
     Revenues in the amount of $353 were recognized during the third quarter for
     consignment  sales to  distributors.  These revenues were  recognized  upon
     payment by the  respective  distributor.  These  increases in revenues were
     offset by $90 of  revenues  related to product  shipments  subject to trial
     periods,  which were shifted to the fourth quarter of 1999. Revenues in the
     amount of $357 related to shipments  of products  subject to trial  periods
     where  the  customer  never   confirmed   acceptance  of  the  product  and
     subsequently  returned the product were  reversed.  Revenues of $2,149 were
     reduced in the third quarter of 1999  resulting from the accrual of returns
     from the fourth quarter of 1999.

     Beginning in the quarter  ended  September  30,  1998,  the rate of product
     returns  increased  significantly.  The increase in product returns and bad
     debt expense is attributable to (a) change in the semiconductor  technology
     utilized in the  Company's  CDR dental  products  during  fiscal 1999,  (b)
     product reliability issues associated with the Company's  production of the
     accuDEXA(R) bone densitometer in fiscal 1999, (c) a change in the Company's
     installation  methodology for its CDR dental products and, (d) insufficient
     credit and collections  policies and procedures.  Also  contributing to the
     increase in returns were certain promotional  programs.  These programs had
     not been considered in the Company's previous estimates of sales returns.

     The  actual   rate  of  returns   and   accounts   receivable   charge-offs
     significantly  exceeded the  respective  provisions  and reserves for sales
     returns and bad debts.  The restated  results of operations  for the first,
     second and third quarters of fiscal 1999 reflect the actual rate of returns
     versus the Company's initial estimates.

     The previously  reported  results of operations for the quarters ended June
     30, 1998,  September  30, 1998 and  December 31, 1998,  as reported on Form
     10-Q with the Securities and Exchange  Commission,  will be amended for the
     restated  results.  The  effect of such  prior  period  adjustments  on the
     Company's previously reported quarters are as follows:

<TABLE>
<CAPTION>
                                         -----------------------------Unaudited and not reviewed---------------------
                                         Three months ended         Three months ended         Three months ended
                                         June 30, 1998              September 30, 1998         December 31, 1998
                                         ---------------------      ---------------------      ----------------------
                                         As                         As                         As
                                         originally   As            originally   As            originally    As
                                         reported     restated      reported     restated      reported      restated
                                         --------     --------      --------     --------      --------      --------
<S>                                      <C>          <C>           <C>          <C>           <C>           <C>
     Revenues, net                       $ 15,980     $ 10,439      $ 14,236     $ 12,309      $ 17,090      $ 15,540
     Total cost of sales                    7,217        5,636         6,935        8,004        15,273        14,772
                                         --------     --------      --------     --------      --------      --------
     Gross Profit                           8,763        4,803         7,301        4,305         1,817           768
     Total operating expenses               6,540        6,702         7,208        6,987        10,383        10,383
                                         --------     --------      --------     --------      --------      --------
     Income (loss) from operations          2,223       (1,899)           93       (2,682)       (8,566)       (9,615)
     Total other Income                       243          243           180          180            46            46
                                         --------     --------      --------     --------      --------      --------
     Income (loss) before taxes             2,466       (1,656)          273       (2,502)       (8,520)       (9,569)
     Provision for (benefit from)
       income taxes                           983           35           103           35          (565)         (565)
                                         --------     --------      --------     --------      --------      --------

     Net income (loss)                   $  1,483     $ (1,691)     $    170     $ (2,537)     $ (7,955)     $ (9,004)
                                         ========     ========      ========     ========      ========      ========
     Basic earnings (loss) per share     $   0.15     $  (0.17)     $   0.02     $  (0.25)     $  (0.80)     $  (0.90)
                                         ========     ========      ========     ========      ========      ========
     Diluted earnings (loss) per
       share                             $   0.14     $  (0.17)     $   0.02     $  (0.25)     $  (0.80)     $  (0.90)
                                         ========     ========      ========     ========      ========      ========
</TABLE>


                                      F-10
<PAGE>

The fourth quarter of 1999 includes certain charges as described below:

Provision for obsolete and slow moving inventory                          $2,725
Provision for bad debts                                                    3,050
Reserve for returns and allowances                                         1,100
Write off of refundable income tax                                           143
                                                                          ------
                                                                          $7,018
                                                                          ======

4.   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 1996 Stock Option Plan of the  Predecessor  Corporation  was amended by
     the Company 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.

5.   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.


                                      F-11
<PAGE>

     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 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 9).

     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 $1,494,  $1,484 and $906 for the years ended March 31,
     1999, 1998 and 1997, 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.



                                      F-12
<PAGE>

     Research and Development

     Research and  development  costs  consist of  expenditures  covering  basic
     scientific  research  and the  application  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 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 $35 and $7 during 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 all of the deferred tax asset will not be realized.

     Fair Value of Financial Instruments

     The  carrying  value  of cash and cash  equivalents,  accounts  receivable,
     accounts  payable,  accrued expenses and bridge notes payable  approximates
     fair value due to the relatively short maturity of these instruments.

     Reclassifications

     Certain  prior year  amounts  have been  reclassified  to conform  with the
     fiscal 1999 presentation.

6.   Earnings (Loss) Per Share

     Basic  earnings  per share  ("Basic  EPS") is 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.

     The loss per share for the year ended March 31, 1997 has been  restated for
     the  adoption  of  SFAS  128.  The  adoption  of SFAS  128  did not  have a
     significant impact on the loss per share of the period.

     The  computations  of basic (loss)  earnings  per share and diluted  (loss)
     earnings per share for the years ended March 31, 1999, 1998 and 1997 are as
     follows:


                                      F-13
<PAGE>

<TABLE>
<CAPTION>
                                                           1999              1998             1997
                                                       ------------      ------------     ------------
<S>                                                    <C>               <C>              <C>
Net (loss) income available to common stockholders     $    (29,606)     $      2,361     $       (352)
Interest on convertible notes                                  --                --                 23
                                                       ------------      ------------     ------------
(Loss) income for diluted earnings per share           $    (29,606)     $      2,361     $       (329)
                                                       ============      ============     ============
Weighted-average shares outstanding for basic
      (loss) earnings per share                          10,013,061         9,474,590        7,643,307

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

Weighted-average shares outstanding for diluted
      (loss) earnings per share                          10,013,061         9,814,054        7,643,307
                                                       ============      ============     ============

Basic (loss) earnings per share                        $      (2.96)     $       0.25     $      (0.05)
                                                       ============      ============     ============

Diluted (loss) earnings per share                      $      (2.96)     $       0.24     $      (0.04)
                                                       ============      ============     ============
</TABLE>

     At March 31, 1999, outstanding options to purchase 593,466 shares of common
     stock,  with exercise  prices ranging from $1.79 to $27.72 per share,  have
     been  excluded from the  computation  of diluted loss per share as they are
     antidilutive.  Outstanding  warrants to purchase  297,150  shares of common
     stock with exercise  prices ranging from $7.86 to $8.93 per share were also
     antidilutive and excluded from the computation of diluted loss per share at
     March 31, 1999.

7.   Inventories

     Inventories  at March 31, 1999 and 1998,  net of provisions  for excess and
     obsolete inventories, are comprised of the following:

                                                       1999           1998
                                                     -------        -------

     Raw materials                                   $ 2,203        $ 7,108
     Work-in-process                                   3,763          3,466
     Finished goods                                    4,720          1,578
                                                     -------        -------

                 Total inventories                   $10,686        $12,152
                                                     =======        =======

8.   Equipment

     Equipment at March 31, 1999 and 1998 is comprised of the following:

                                                           1999          1998
                                                         --------      --------

     Production equipment                                $  5,188      $  3,300
     Computer and communications equipment                  2,055         1,096
     Demonstration equipment                                  803           934
     Leasehold improvements                                 1,921         1,169
     Other equipment                                          116           608
                                                         --------      --------

                 Total equipment                           10,083         7,107

     Less - accumulated depreciation and amortization      (2,862)       (1,306)
                                                         --------      --------

                 Equipment, net                          $  7,221      $  5,801
                                                         ========      ========


                                      F-14
<PAGE>

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

9.   Investments in Debt Securities

     Held-to-maturity   securities  at  March  31,  1999  and  1998  consist  of
     short-term U.S.  Treasury and government agency debt securities of $360 and
     $14,022,  on an amortized cost basis,  with maturity dates of less than one
     year. The gross  unrealized  gains and losses at March 31, 1999 and 1998 on
     held-to-maturity securities were insignificant.

10.  Bridge Note Payable

     In March 1999, the Company issued a secured  short-term  promissory note in
     the principal  amount of $5,000 to a third party.  The note,  which matured
     July 30, 1999, bore interest at the rate of prime plus one-half percent per
     annum.  Interest on the note was payable  monthly.  The note was secured by
     the Company's  tangible and  intangible  assets.  During 1999,  the Company
     recognized $14 of interest expense related to the note.  Effective July 30,
     1999,  the maturity of the note was extended and the  principal of the note
     was increased to $6,222 (See Note 19).

11.  Income Taxes

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

                                                     March 31,
                                        -----------------------------------
                                         1999          1998          1997
                                        -----         -----         -------

     Current
           Federal                      $(531)        $ 415         $  --
           State                         (170)          262            --
                                        -----         -----         -------
     Total                               (701)          677         $  --

     Deferred
           Federal                        282          (282)           --
           State                           67           (67)           --
                                        -----         -----         -------
                                          349          (349)           --
                                        -----         -----         -------

                                        $(352)        $ 328         $  --
                                        =====         =====         =======


     The  reconciliation  between  the  U.S.  federal  statutory  rate  and  the
     Company's effective tax rate is as follows:

<TABLE>
<CAPTION>
                                                                 1999         1998         1997
                                                                ------       ------       ------
<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       (0.2)         8.0         (9.0)
     Non-deductible expenses                                      16.7          4.9         10.3
     Research and development tax credit                           0.8        (11.2)       (20.6)
     Valuation allowance on deferred tax assets                   15.6        (23.5)        53.3
                                                                ------       ------       ------

     Effective tax rate                                           (1.1)%       12.2%        --
                                                                ======       ======       ======
</TABLE>


                                      F-15
<PAGE>

     Significant  components of the  Company's  deferred tax assets at March 31,
     1999, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>
                                                           1999          1998          1997
                                                         --------      --------      --------
<S>                                                      <C>           <C>           <C>
     Net operating loss carryforwards                    $  5,701      $   --        $    241
     Reserves and allowance for inventory                   2,702          --             212
     Accounts receivable and warranties                     3,488           355          --
     Depreciation and other                                  (445)         (211)         --
     Other accrued expenses not currently deductible         --             205            48
     Other                                                    409          --             122
                                                         --------      --------      --------


                                                           11,855           349           623
     Valuation allowance                                  (11,855)         --            (623)
                                                         --------      --------      --------

     Net deferred tax asset

                                                         $   --        $    349      $   --
                                                         ========      ========      ========
</TABLE>

     At March 31, 1999, the Company had a deferred tax asset of $11,855  (before
     valuation  allowance)  consisting primarily of the future tax benefits from
     net  operating  loss  carryforwards,  temporary  differences  and other tax
     credits.  Realization  of the deferred tax asset  depends on the  Company's
     ability to generate future U.S. taxable income.

     Under Statement of Financial  Accounting Standards No. 109, "Accounting for
     Income Taxes" ("SFAS No. 109"), the Company is required to recognize all or
     a portion  of its net  deferred  tax asset if it  believes  that it is more
     likely than not, given the weight of all available evidence,  that all or a
     portion of the benefits of the carryforward  losses and tax credits will be
     realized.  Management  believes  that it is more  likely  than not that the
     Company will not realize any  benefits  from its net deferred tax asset and
     has recorded a 100% reserve against the asset at March 31, 1999. 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, 1999, the Company has a U.S.  federal income tax net operating
     loss carryforward of $13,574 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.

12.  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 9).



                                      F-16
<PAGE>

     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  $5,961,  $7,085 and $3,867 of the  Company's  sales in 1999,
     1998 and 1997,  respectively,  were to foreign  customers.  The majority of
     such  foreign  sales were to customers  in Europe.  During  1999,  sales of
     $7,187  were  to a  single  distributor.  In 1998  and  1997,  no  customer
     accounted for 10% or more of sales.

13.  Commitments and Contingencies

     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, 1999, 1998 and 1997 was $718, $383 and $193, respectively.

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

                                                      Operating    Capital
                                                      ---------    -------

       2000                                             $  971     $  125
       2001                                                981         48
       2002                                                839       --
       2003                                                873       --
       2004                                                907       --
       Thereafter                                          393       --
                                                        ------     ------

             Total minimum lease payments               $4,964     $  173
                                                        ======     ------


     Less: Amounts representing interest                               44
                                                                   ------
     Present value of future minimum lease payments                   129
     Less: Current maturities                                          84
                                                                   ------

     Capital lease obligations - long term                         $   45
                                                                   ======


     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


                                      F-17
<PAGE>

     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  employees,  apparently in connection  with the
     same event. The inquiries are in a preliminary stage and the Company cannot
     predict their potential outcome.

     Litigation

     During fiscal 1999,  several  shareholder  class action lawsuits were filed
     against the Company.  In May 1999 a  consolidated  and amended class action
     complaint was filed naming the Company,  certain of its officers and former
     officers and various third  parties as  defendants.  The complaint  alleges
     that certain defendants issued false and misleading  statements  concerning
     the  Company's  publicly  reported  earnings  in  violation  of the federal
     securities  laws. The complaint seeks  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. The
     Company intends to defend itself  vigorously  against such  allegations and
     believes  the claims to be without  merit.  As these  actions  are in their
     preliminary  stages,  the Company is unable to predict the ultimate outcome
     of these claims. The outcome, if unfavorable, could have a material adverse
     effect on the financial position and results of operations of the Company.

     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, 1999 and 1998 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  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.

14.  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

                                      F-18
<PAGE>

     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, 1999, all shares are exercisable
     under such option.

     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, 1999,  25,000 options to purchase Common Stock
     pursuant  to the  Directors  Plan were  outstanding.  There were no options
     outstanding at March 31, 1998.

     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 year  ended  March 31,  1999,  the  Company  did not
     recognize  compensation  expense for options  granted to employees.  During
     1998 and 1997,  the  Company  has  recognized  compensation  expense in the
     amounts of $36 and $13, respectively, 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 1999 would have been  increased by  approximately
     $759 ($.08 per basic share),  net income in 1998 would have been  decreased
     by approximately $164 ($.02 per basic share) and the net loss in 1997 would
     have been increased by approximately $45 ($.01 per basic share).

     The fair value of options  granted to employees  during 1999, 1998 and 1997
     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>
                                                      1999               1998                1997
                                                  -------------      -------------      --------------
<S>                                               <C>                <C>                <C>
     Dividend yield                               None               None               None
     Risk-free interest rate on date of grant     4.13% - 5.48%      5.43% - 5.55%      6.27%

     Forfeitures                                  None               None               None
     Expected life                                5 years            5 years            5 years
     Volatility                                   85%                75%                --
</TABLE>

     The following  table  summarizes  information  regarding  stock options for
     1999, 1998 and 1997:


                                      F-19
<PAGE>

<TABLE>
<CAPTION>
                                          1997                      1998                        1999
                                 -----------------------    -----------------------      ----------------------
                                 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,         56,000      $    1.79      130,953      $    4.85      223,411      $   11.46
      beginning of year

     Options granted              79,338           7.14       97,902          20.87      420,523          10.76



     Options exercised              --             --         (2,479)          7.14       (3,848)          7.14

     Options forfeited            (4,385)          7.14       (2,965)         20.88      (46,620)         20.44
                                 -------                     -------                     -------      ---------

     Options outstanding,
      end of year                130,953      $    4.85      223,411      $   11.46      593,466      $   10.87
                                 =======                     =======                     =======      =========
</TABLE>


                              Options outstanding    Weighted-average remaining
Range of exercise price        at March 31, 1999      contractual life (years)
-----------------------        -----------------      ------------------------

At $  1.79                             56,000                   6.8
$  4.91 to $  7.86                   316,460                    9.4
$15.81 to $22.97                     155,502                    8.9
$24.75 to $27.72                       65,504                   8.9


     At March 31, 1999,  there are 491,207 options  available for grant pursuant
     to the Company's option plans. Of the 593,466 options  outstanding at March
     31,  1999,  115,274  are  exercisable  at such  date at a  weighted-average
     exercise price of $7.96.

     The Company  issued 1,445 shares of its common stock to an employee  during
     the year ended March 31, 1997 for services  rendered by the employee to the
     Company.  The employee was immediately  vested in the shares.  The Board of
     Directors  of the Company  has  determined  the fair  market  value of such
     shares to be $8.16 per share. The Company recognized expense of $12 for the
     year ended March 31, 1997 related to the grant.

     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 $218, $111 and $38 in 1999, 1998 and
     1997, respectively.

15.  Supplemental Cash Flow Information

     Cash payments for interest were $174,  $144 and $56 in 1999, 1998 and 1997,
     respectively.  The  Company  paid $533 and $7 for income  taxes in 1998 and
     1997, respectively. There were no payments for income taxes in 1999.

     During  fiscal  1999  and  1997,  the  Company  acquired  $199 of  computer
     equipment  and $95 of  production  equipment,  respectively,  under capital
     leases.

16.  Related Parties

     In  July  1997,  the  Company  loaned  its  President,  who is a  principal
     stockholder,  $200. Such loan bore interest at a rate of 8% and was due and
     payable on June 15,  1998.  The loan,  along with  accrued  interest in the
     amount of $1, was repaid in August 1997.

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.



                                      F-20
<PAGE>

     During 1997, the Company  completed a private offering of 520,315 units, as
     defined in such  offering,  at a price per unit ranging from $7.86 to $8.93
     based on the quantity of units purchased.  Each unit consisted of one share
     of the Company's  common stock,  $.01 par value,  and a warrant to purchase
     one  additional  share of the  Company's  common stock at a price per share
     equal to the  purchase  price of the unit,  on or before May 3,  1999.  The
     offering  provided net proceeds of $4,312. In conjunction with the offering
     the Company issued 6,155 units, as a placement fee, to certain  individuals
     who  assisted  the  Company  in selling  the units.  The fair value of such
     units,  in the  amount of $55,  or $8.93 per unit has been  reflected  as a
     reduction of paid in capital.

     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 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.  At March 31,
     1999,  the  Company has  reserved  297,150  shares of its common  stock for
     issuance upon the exercise of outstanding warrants.

18.  Acquisition and Investment

     Keystone Acquisition

     On September 24, 1997, the Company's wholly-owned subsidiary,  Schick X-Ray
     Corporation  ("Schick  X-Ray"),  a Delaware  corporation,  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.  Schick
     X-Ray was formed on September  24, 1997,  for the sole purpose of acquiring
     the assets of Keystone.  Schick  X-Ray  acquired  inventory,  manufacturing
     equipment,  tooling and  intellectual  property.  The  acquisition has been
     accounted  for using the  purchase  method,  and Schick  X-Ray has 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 and $55 for  amortization  of  goodwill  in 1999 and 1998,
     respectively.

     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, 1999, 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 $580.

19.  Subsequent Events

     Bridge Note Payable

     Effective  July 30, 1999,  the Company  secured an extension to the secured
     promissory note it initially issued in March 1999.  Pursuant to the amended
     and restated note,  the principal of the note was increased to $6,222.  The
     increase in the principal  amount  resulted from the  conversion of certain
     trade payables owed to the third party lender into the principal balance of
     the note. The amended and restated note bears interest at the rate of prime
     plus two and  one-half  percent per annum.  Interest on the note is payable
     monthly and the note is secured by the  Company's  tangible and  intangible
     assets.  The  principal  is payable  in  quarterly  installments  of $1,000
     commencing  December  31,  1999.  The  Company  is  also  required  to make
     additional  principal  payments  equal  to 25% of the net  proceeds  of any
     equity or debt  financing  or asset sale (other than sales of  inventory in
     the


                                      F-21
<PAGE>

     ordinary  course  of  business)  to the  extent  that 25% of such  proceeds
     exceeds the $1,000  principal  installment due at the end of the quarter in
     which the  financing or asset sale is  completed.  In  connection  with the
     amended and  restated  note,  the Company  issued  650,000  warrants to the
     note-holder.  The warrants are exercisable for a period of 5 years and each
     have an  exercise  price of $2.19.  The Company is not in  compliance  with
     certain financial  covenants,  and other terms and provisions  contained in
     the extended bridge loan and is currently in the process of refinancing the
     obligation.

     NASDAQ Delisting

     On September 15, 1999, the Company received notice from the Nasdaq Listings
     Qualifications Panel that its 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  public  interest   concerns   regarding  the  Company's  revenue
     recognition and sales practices.

     Greystone Funding Corporation

     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.  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 $0.75 per share. The Company agreed to issue to Greystone
     and 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
     to enter into said Agreement,  the Company issued warrants to Greystone and
     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 and 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 $1,000,000.  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.


                                      F-22
<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, 1997      $    35,000     $    33,933     $      --          $    18,933(a)     $    50,000
        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


RESERVE FOR OBSOLETE/SLOW MOVING INVENTORY

        For the year ended March 31, 1997      $      --       $   113,714     $      --          $      --          $   113,714
        For the year ended March 31, 1998          113,714            --              --              113,714               --
        For the year ended March 31, 1999             --         5,466,000            --                 --
                                                                                                                       5,466,000


VALUATION ALLOWANCE - DEFERRED TAX ASSET

        For the year ended March 31, 1997      $   490,000     $      --     $   133,000(b)     $      --          $   623,000
        For the year ended March 31, 1998          623,000            --              --              623,000(c)            --
        For the year ended March 31, 1999             --              --      11,855,000                            11,855,000(c)


PROVISION FOR WARRANTY OBLIGATIONS

        For the year ended March 31, 1997      $   130,055     $   199,371     $      --          $      --          $   329,426
        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
</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


                                      F-23
<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 Accounts                                     F-2

         Report of Independent Certified Public Accountants                 F-3

         Consolidated Balance Sheet at March 31, 1999 and 1998              F-4

         Consolidated Statement of Operations for the years ended
            March 31, 1999, 1998 and 1997                                   F-5

         Consolidated Statement of Stockholders' Equity for the year
            ended March 31, 1999, 1998 and 1997                             F-6

         Consolidated Statement of Cash Flows for the year ended
            March 31, 1999, 1998 and 1997                                   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-23

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

     No reports on Form 8-K were filed during the quarter ended March 31, 1999.

(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.

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



                                       32
<PAGE>

*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

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

10.12     Amended and Restated Promissory Note between Schick Technologies, Inc.
          and DVI Financial Services, Inc., as of July 30, 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 Current Report on Form 8-K dated December 27, 1999.)



                                       33
<PAGE>

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
          Current Report on Form 8-K dated December 27, 1999.)

10.23     Stock  Purchase  Agreement,  dated  December 27, 1999,  by and between
          Schick  Technologies,  Inc., a Delaware  corporation,  and  Greystone.
          (Filed as Exhibit 3 to the Company's  Current 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  Current Report on Form 8-K dated
          December 27, 1999.)

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.

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





                                       34
<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 March 20, 2000.

                                            SCHICK TECHNOLOGIES, INC


                                            By: /a/  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 March 20, 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 and Chief
David B. Schick                                  Executive Officer

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

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

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

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


                                       35