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                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                     For the fiscal year ended June 30, 2000
                                       or

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

       For the transition period from _______________ to _________________

                         Commission file number 0-26972

                          SWISSRAY INTERNATIONAL, INC.
             (Exact Name of Registrant as Specified in Its Charter)

                         New York                       16-0950197
                (State or Other Jurisdiction of        (I.R.S. Employer
               Incorporation or Organization)          Identification No.)

             80 Grasslands Road, Elmsford, New York, New York 10523
               (Address of Principal Executive Office) (Zip Code)

         United States - 914-345-3700 Switzerland - 011 41 41 914 12 00
              (Registrant's Telephone Number, Including Area Code)

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

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

                     COMMON STOCK, PAR VALUE $.01 PER SHARE
                                (TITLE OF CLASS)

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

                                    Yes xx No

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The number of shares  outstanding of each of the Registrant's  classes of Common
Stock,  as of September 12, 2000 is  23,667,129  shares (1), all of one class of
common stock, $.01 par value. Of this number a total of 14,216,791 shares having
an aggregate  market  value of  $27,580,574,  based on the closing  price of the
Registrant's  common  stock of $1.94 on  September  12,  2000 as  quoted  on the
Electronic Over-the-Counter Bulletin Board ("OTC"), were held by non-affiliates*
of the Registrant.

                                       -1-

<PAGE>



* Affiliates  for the purpose of this item refers to the  Registrant's  officers
and  directors  and/or any persons or firms  (excluding  those  brokerage  firms
and/or  clearing  houses  and/or  depository   companies  holding   Registrant's
securities as record holders only for their  respective  clienteles'  beneficial
interest) owning 5% or more of the Registrant's Common Stock, both of record and
beneficially.

(1) Unless  otherwise  indicated  throughout  this Form 10-K,  all references to
number of  shares,  price per share  and data of a similar  and  related  nature
retroactively  reflect  and take into  consideration  a 1 for 10  reverse  stock
split, as effective October 1, 1998.

                               APPLICABLE ONLY TO
                 REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS
                         DURING THE PRECEDING FIVE YEARS

Indicate  by check mark  whether  the  Registrant  has filed all  documents  and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.
                                             Yes ___           No ___

Not Applicable

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the number of shares outstanding of each of the Registant's  classes of
common  stock,  as of the  latest  practicable  date:  23,667,129  shares  as of
September 12, 2000.

                       DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the part
of the Form 10-K  (e.g.,  Part I, Part II,  etc.)  into  which the  document  is
incorporated:  (1) any  annual  report  to  security  holders;  (2) any proxy or
information  statement;  and (3) any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933.

None  excepting for the  incorporation  by reference of the  Company's  Form S-1
Registration Statement (under File Number 333-59829 as declared effective August
14, 2000) and in particular  those  sections  therein  entitled  "Risk  Factors"
(which is herewith  incorporated  by  reference  to Part I, Item 1, of this Form
10-K) and  "Market  Prices and  Dividend  Policy"  subsection  entitled  "Nasdaq
Delisting" (which is herewith incorporated by reference into Part II, Item 5, of
this Form 10-K).


                                       -2-

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                                TABLE OF CONTENTS
                                                                           Page
                                                                          Number
PART I

Item 1.  Business                                                           4

Item 2.  Properties                                                         21

Item 3.  Legal Proceedings                                                  22

Item 4.  Submission of Matters to a Vote of Security Holders                23

PART II

Item 5.  Market For Registrant's Common Equity and Related
         Stockholder Matters                                                24

Item 6.  Selected Financial Data                                            26

Item 7.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                27

Item 7a. Quantitative and Qualitative Disclosures About Market
         Risk                                                               35

Item 8.  Financial Statements and Supplementary Data                        35

Item 9.  Changes in and Disagreements with Accountants on
         Accounting and Financial Disclosure                                36

PART III

Item 10. Directors and Executive Officers of the Registrant                 36

Item 11. Executive Compensation                                             38

Item 12. Security Ownership of Certain Beneficial Owners and
         Management                                                         43

Item 13. Certain Relationships and Related Transactions                     46

PART IV

Item 14. Exhibits, Financial Statement Schedules, and
         Reports on Form 8-K                                                47

SIGNATURES                                                                  48

SUPPLEMENTAL INFORMATION                                                    49


                                       -3-

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                                     PART I

ITEM 1.  BUSINESS

Background Summary

         The Registrant was incorporated under the laws of the State of New York
on January 2, 1968 under the name CGS Units Incorporated.  On June 15, 1994, the
Registrant merged with Direct Marketing  Services,  Inc. and changed its name to
DMS Industries,  Inc. In May of 1995 the Registrant  discontinued the operations
then being conducted by DMS Industries, Inc. and acquired all of the outstanding
securities  of SR Medical  AG, a Swiss  corporation  engaged in the  business of
manufacturing and selling X-ray equipment,  components and accessories.  On June
5, 1995 the  Registrant  changed its name to Swissray  International,  Inc.  The
Registrant's operations are being conducted principally through its wholly owned
subsidiaries,  Swissray  Medical AG (formerly known as SR Medical Holding AG and
SR Medical AG) a Swiss  corporation and its wholly owned  subsidiaries  Swissray
GmbH (formerly known as Swissray  (Deutschland)  Rontgentechnik GmbH, SR Medical
GmbH), a German limited  liability  company and Swissray  Romania SRL as well as
through the Company's other wholly owned subsidiaries, Swissray America, Inc., a
Delaware  corporation,  Swissray  Healthcare,  Inc., a Delaware  corporation and
Swissray Information Solutions, Inc. a Delaware corporation.

         Swissray  Medical AG (formerly SR Medical  Holding AG and SR Medical AG
until  renamed  in  June  1999  and  February  1998)  acquired  all  assets  and
liabilities,  effective July 1998, of its wholly owned subsidiaries,  SR Medical
AG (known as Teleray AG until renamed in February 1998), a Swiss corporation and
Teleray  Research and Development AG, a Swiss  corporation.  Swissray Medical AG
also absorbed all assets and  liabilities  of the  Company's  other wholly owned
subsidiary SR Management AG (formerly SR Finance AG), a Swiss corporation.

         Effective  as of July  1,  1999  Swissray  Medical   Systems,  Inc.,  a
Delaware corporation (formerly Swissray America Corporation) and Empower Inc., a
New York corporation, merged into Swissray America Inc., a Delaware corporation.
Unless  otherwise  specifically  indicated,  all  references  hereinafter to the
"Company" refer to the Registrant and its subsidiaries.

         The  Company  and  its  predecessors  have  been  in  the  business  of
manufacturing and selling X-ray equipment in Switzerland and Germany since 1988.
Beginning in 1991, the Company's predecessors began to expand into other markets
in Europe, the Middle East and Asia. In 1992, SR Medical AG entered into a first
Original Equipment  Manufacturing ("OEM") Agreement with Philips Medical Systems
GmbH  ("Philips  Medical   Systems")   providing  for  the  manufacturing  of  a
multi-radiography  system  ("MRS").  In 1996, this agreement was replaced with a
new OEM Agreement ("Philips OEM Agreement") which provides for the manufacturing
of  the  Bucky   Diagnost  TS  bucky  table  in  addition  to  the  MRS  System.
Simultaneously,  the Company developed the first SwissVision(R)  post-processing
system which was able to convert  analog  images  obtained in  fluoroscopy  into
digital  information.  Beginning in 1993,  the Company began the  development of
direct  digital  X-ray  technology  for  medical  diagnostic  purposes.  This is
currently the Company's primary focus (as opposed to the further  development of
conventional x-ray equipment).

         With  respect to  information  regarding  the  Company  acquisition  of
Empower Inc. and Service Support Group LLC on April 1, 1997 and October 17, 1997
respectively  and  subsequent  litigation  resulting  therefrom,   reference  is
herewith made to Item 1 subsections  entitled "Sale of Substantially  All of the
Assets of Empower,  Inc." and "Acquisition of Substantially All of the Assets of
Service Support Group LLC" respectively and Item 3 "Legal Proceedings"

         In October 1999 the Company was awarded a purchase  order for 32 of its
unique direct digital  Radiography  System from the Romanian  Ministry of Health
for  its   multifunctional   ddRMulti-System,   valued  at  over  US$13,800,000.
Installation  will be in  various  hospitals  throughout  Romania,  The  initial
payment

                                       -4-

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aggregating 15% of the aforesaid  total proceeds (i.e., $2,070,000) was received
by  the  Company  in  early  March  2000.   The  Company   sold  25  of  the  32
ddRMulti-Systems  through close of its fiscal year ended June 30, 2000 while the
balance of 7 Systems were sold during the first quarter of the Company's current
fiscal year. By virtue of the extent and nature of this  contract,  the Romanian
Ministry of Health is currently the Company's single largest customer.

         The Company's primary focus is currently on direct digital  radiography
("ddR") as opposed to conventional x-ray equipment. In that regard the Company's
German  subsidiary  (Swissray GmbH,  Wiesbaden,  Germany) sold its  conventional
x-ray business division in March 2000 to an unaffiliated third party in order to
more  extensively  focus upon sales and marketing of ddR  equipment.  The dollar
amount of sales from conventional  x-ray Systems for the fiscal years ended June
30, 2000 and June 30, 1999 were  $1,803,716  and  $2,664,722  respectively.  The
dollar amount of sales from conventional OEM business for the fiscal years ended
June 30, 2000 and June 30, 1999 were $3,883,257 and $9,806,402 respectively.

Overview

         The Company is active in the markets for diagnostic imaging devices for
the health care industry.  Diagnostic  imaging devices include X-ray  equipment,
computer  tomography  ("CT")  systems and  magnetic  resonance  imaging  ("MRI")
systems for three  dimensional  projections,  nuclear  medicine  ("NM")  imaging
devices and ultrasound devices. The Company is primarily engaged in the business
of  manufacturing  and selling  diagnostic  X-ray equipment for all radiological
applications other than mammography and dentistry.  In addition,  the Company is
in the business of selling  imaging  systems and components and  accessories for
X-ray equipment  manufactured by third parties and providing services related to
diagnostic imaging.

         X-rays  were  discovered  in 1895 by Wilhelm  Konrad  Rontgen.  Shortly
thereafter, X-ray imaging found numerous applications for medical diagnostic and
non-medical purposes. Today, medical X-ray imaging is a fundamental tool in bone
and soft tissue  diagnosis.  X-ray  diagnosis is primarily used in  orthopedics,
traumatology,  gastro-enterology,  angiography,  urology, pulmology, mammography
and dentistry. The principal elements of a diagnostic X-ray system are the X-ray
generator,  the X-ray tube and the bucky device.  The generator  generates  high
tension, which is converted into X-rays in the X-ray tube. The X-rays so created
then penetrate a patient's body and subsequently  expose a film contained in the
bucky device.  Following exposure, the film is chemically processed and dried in
a dark room. A typical  room used for general  X-ray  examinations  (bucky room)
contains  an  X-ray  system  which  includes  a table  with a bucky  device  for
examinations of recumbent  patients (bucky table) and a wall stand with a second
bucky  device for  examinations  of sitting and  standing  patients  (bucky wall
stand).

         The film  used in  conventional  X-ray  systems  has  certain  inherent
disadvantages,  including the significant  amount of time and operating expenses
associated  with the  handling,  processing  and storage  thereof,  the need for
chemicals  to  develop  films and the  environmental  concerns  related to their
disposal.  Additional  expenses and inconveniences  arise in connection with the
storage,  duplication and  transportation  of conventional  films. The following
X-ray  systems have been  developed to overcome  these  disadvantages:  scanning
devices,  phosphor plate or Computed  Radiography(TM)  ("CR") systems and direct
digital  radiography  ("ddR")  systems.  Scanning  devices  are used to  convert
existing  X-ray images into a digital  form.  While the use of scanning  devices
permits the electronic storage, retrieval and transmission of X-ray images, they
do not eliminate the other inconveniences of conventional films and add time and
expenses  associated with the scanning process. In a CR system the film cassette
is replaced with a phosophor plate which is electrically  charged by X-rays. The
electrical  charges  on this  phosphor  plate are then  converted  into  digital
information by a laser scanner.  Although this system has the advantage that the
phosphor plates are reusable and the  inconveniences  related to the development
of  X-ray  films  are  eliminated,  it does not  achieve  instant  images  and a
significant  amount of time and  operating  expenses are required in  connection
with the handling and scanning of the phosphor plates. Additional expenses arise
due to the fact that phosphor plates have a limited lifespan.


                                       -5-

<PAGE>



         ddR  technology  is  designed  to  eliminate  the   disadvantages   and
significant  operating costs associated with  conventional  X-ray systems and CR
systems.  With ddR  technology  digital  information  can be made  available for
diagnostic  purposes  within a few seconds after an X-ray image is taken without
any additional  steps,  thereby reducing  processing time and related  operating
expenses.  Direct digital X-ray  technology  uses either charge coupled  devices
("CCD") arrays,  amorphous  silicon/selenium panels or selenium drums to convert
X-rays into  digital  information.  To the  Company's  knowledge,  no silicon or
selenium-based  technology is currently  available for purposes of general X-ray
diagnosis.  To the  Company's  knowledge,  the only  CCD  based  direct  digital
technology  available for general  diagnostic  purposes is the Company's  Add-on
Bucky(R). While other CCD based direct digital X-ray systems are used for dental
X- ray imaging and chest  examinations,  the Company  believes that neither such
technologies  nor the  Psilotum  based  technology  used in a chest  examination
system  offered by one of the  Company's  competitors  can easily be adapted for
general diagnostic  purposes because none is capable of providing the resolution
necessary to obtain digital  information  with sufficient  diagnostic value on a
standard 14" by 17" X-ray image.

Products

         The Company's  marketing  strategy is to offer its customers a complete
package of products and services in the field of radiology, including equipment,
accessories and related  services such as consulting and  after-sales  services.
The Company's  products include a full range of conventional X-ray equipment for
all diagnostic purposes other than mammography and dentistry, the direct digital
ddRMulti-System   and  the   SwissVision(R)   line  of  DICOM   3.0   compatible
postprocessing work stations operating on a Windows NT platform. Currently, most
of the Company's X-ray  equipment is manufactured  and developed in Switzerland.
On March  8,  1999  Swissray  Medical  AG,  the  Company's  Swiss  research  and
development,  production and marketing  subsidiary  became ISO 9001 and EN 46001
certified.  Appendix II for CE -  Certification  was  completed in December 1999
thus  allowing the Company to use the  CE-Label,  including  the medical  device
numbers for all products  manufactured and/or sold through the Company. See also
"Products - Distribution of Agfa Products" and "Regulatory Matters".

         Digital ddRMulti-System/SwissVision

         The  ddRMulti-System  (which  includes the ddRCombi and ddRChest) and a
SwissVision(R)  workstation for the postprocessing of digital image data and the
transfer  of  such  data  through  central  networks  or via  telecommunications
systems,  is a complete  multi-functional  direct  digital  X-ray  system  which
combines the functions of a conventional bucky table and a bucky wall stand. The
Company's   own  estimates  and  research  into  this  area  indicate  that  the
ddRMulti-System  is the first direct digital  radiography system available which
allows for substantially all plane X-ray examinations on the recumbent,  upright
and  sitting  patient  necessary  in  orthopedics,  emergency  rooms  and  chest
examination rooms. The ddRMulti-System uses the Company's Add-on Bucky(R) as the
digital  detector.  The Add-on Bucky(R) is able to make available an X-ray image
in a direct  digital way for  diagnostic  study  within 16 to 20  seconds.  As a
consequence,  the  efficiency  and  the  throughput  of the  bucky  room  can be
increased.  The Company  believes that a significant  advantage of the Company's
ddRMulti-System  is the fact that a variety  of X-ray  examinations  can be made
with the use of only one digital  detector,  the most expensive part of an X-ray
system using direct digital technology.

         During the 100 years in which  X-ray  imaging has been used for medical
purposes,  there has been a continuous trend to improve image quality, to reduce
the  radiation  dose and to improve the ergonomic  features of X-ray  equipment.
Management  believes that the ddR technology  developed by the Company will take
this  development  to  the  next  level  because  the   ergonomically   advanced
ddRMulti-System  provides  excellent image quality with minimal  radiation doses
and at the same time  reduces  operating  expenses  through the  elimination  of
films,  cassettes or phosphor  plates and the handling,  development and storage
thereof.

          The Company's  line  of  SwissVision(R)  postprocessing   workstations
permits the postprocessing of

                                       -6-

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digital X-ray images, including section, zooming,  enlargement,  soft tissue and
bone structure  imaging,  accentuation  of the  limitation of the joints,  noise
suppression,  presentation  of different  fields of interest  within an area and
archiving   and   transferring   the   data   through   central   networks   and
telecommunication  systems.  In  addition,  the  SwissVision(R)  post-processing
workstations  are able to analyze  data  stored  with  respect  to a  particular
patient.  As a result,  consistent image quality of different images of the same
patient can be achieved.  The workstations  operate on a Windows NT platform and
are DICOM 3.0  compatible.  The Company is also  offering  products and services
related to networking,  archiving and electronic  distribution  of digital X-ray
images, including PACS.

       Conventional X-Ray Equipment, Imaging Systems, Components and Accessories

       The   Company  manufactures   and  sells  conventional  diagnostic  X-ray
equipment  for  all  radiological   applications   other  than  mammography  and
dentistry. The conventional X-ray equipment manufactured by the Company includes
X- ray  generators,  basic X-ray  equipment,  bucky table systems,  mobile X-ray
systems, mobile C-arm systems,  fluoroscopy systems,  urology systems and remote
controlled  examination  systems. In addition,  the Company sells components and
accessories  for X-ray systems.  In general,  the components and accessories for
X-ray  equipment  sold by the  Company are  manufactured  by third  parties.  In
Switzerland,  the  Company was the  exclusive  distributor  of CT  systems,  MRI
systems and NM systems  manufactured  by Elscint.  No sales were made under such
distributorship  arrangement  for the fiscal  year ended June 30, 1998 while for
the fiscal year ended June 30, 1997 revenues under such  agreement  approximated
12%  of  total  sales.   The  Company  does  not  currently  have  any  business
arrangements  with  Elscint in that such firm sold all or part of its company to
Picker  International Inc. and GE Medical Systems in the later part of 1998. See
also last paragraph to Item 1 - "Business - Background Summary".

         Original Equipment Manufacturing (OEM)

         On June 11, 1996,  the Company  entered into a new OEM  Agreement  (the
"Philips  OEM  Agreement")  with  Philips  Medical  Systems  which  replaced the
previous OEM Agreement with Philips  Medical  Systems,  dated July 29, 1992. The
Philips OEM  Agreement  provides for the  production of two  conventional  X-ray
systems,  the  Bucky  Diagnost  TS bucky  table and a Multi  Radiography  System
("MRS"),  which is approved by the World Health Organization  ("WHO") as a World
Health Imaging System for Radiology ("WHIS-RAD"). As a result, the Company's MRS
system may be tendered in projects financed by the World Bank. Under the Philips
OEM  Agreement  these two  products are  marketed  worldwide by Philips  Medical
Systems through its existing distribution network. The Company continues to deal
directly  with Philips with respect to its MRS and has  established  a Licensing
Agreement with respect to the Bucky Diagnost TS.

         Services

         The  services  offered by the  Company  include  the  installation  and
after-sales  servicing  of imaging  equipment  sold by the  Company,  consulting
services and application  training of radiographers.  In the United States,  the
Company offers consulting  services to hospital imaging  departments and imaging
centers,  including maintenance management, and after-sales services of products
manufactured by the Company and third parties.  Maintenance  management services
for imaging  equipment  include the  management  of  after-sales  services  with
respect to different  kinds and brands of imaging  equipment  (multi-vendor  and
multi-modality services).

         Distribution of Agfa Products

         In April of 1998 the Company entered into a OEM Agreement with Agfa for
the  distribution  of the  latter's  laser  imagers,  dry  printers and computed
radiography  systems.  By  virtue  of  having  entered  into  such  distribution
agreement,  the Company is able to offer a complete solution for a total digital
radiology  department.  Both Company  products  and Agfa  products are DICOM 3.0
compatible and can be used on a network or for point-to-point connections. Agfa,
a leading worldwide manufacturer of imaging products and systems, is part of the
Agfa-Gevaert  Group, with Agfa-Gevaert  being a wholly owned subsidiary of Bayer
AG.

                                       -7-

<PAGE>



The software license with Agfa is a worldwide,  non-exclusive,  non-transferable
license  to use and  distribute  the  Agfa  software  in  combination  with  the
AddOn-Bucky and is based upon certain minimum  purchase  requirements  which the
Company continues to meet and exceed.

         New Products

         To compliment its  ddRMulti-System,  the Company  developed two new ddR
Systems,  each of which were initially introduced at the Radiological Society of
North  America  ("RSNA")  annual  assembly  held in Chicago in November 1999 and
subsequently  exhibited at the European  Congress of Radiology  ("ECR-2000")  in
March 2000 in Vienna,  Austria. The Systems are known as the (a) ddRChest-System
and (b) ddRCombi-System.  Both Systems are based upon the patented technology of
the  ddRMulti-System.  The  ddRChest-System is a dedicated chest unit capable of
taking all chest examinations in a direct digital format. The ddRCombi-System is
a multi-functional  system able to perform  examinations on the seated,  upright
and  recumbent  patient,  can be coupled  with an  automated  or manual  ceiling
suspension or may be combined with an existing  ceiling  suspension  unit. It is
designed and suited for trauma and emergency room  applications.  Retail pricing
on each of these two units  approximates 80% of retail pricing for the Company's
ddRMulti-System.

         The initial  installation  of a ddRCombi  occurred in August 2000. Four
additional  ddRCombi-Systems  are currently considered backlog with installation
scheduled for  September/October  2000. As of September 12, 2000 the Company had
not contracted for the sale of any ddRChest-Systems.

         See also "Business - Research and Development" hereinafter.

Markets

         Product Markets

         The Company  estimates  that the global market for X-ray  equipment and
accessories is approximately $10 billion,  45% of which is in the United States,
26% in Western  Europe,  19% in Japan and 10% in the rest of the world (Sources:
National  Electrical  Manufacturers  Association;  Market  Line).  The Company's
principal markets for its X-ray equipment, components and accessories by country
are Switzerland,  the United States and Germany  constituting 73%, 23% and 4% of
the  Company's  sales  during the fiscal year ended June 30, 1999  respectively.
Business   conducted  in  the  U.S.,   Switzerland  and  Germany  accounted  for
approximately  29.8%,  68.8% and 1.4%  respectively  of total  sales  during the
fiscal year ended June 30,  2000.  Included in the 68.8%  indicated  in business
conducted in Switzerland is monies received as a result of contract entered into
with the  Romanian  Ministry  of Finance  due to the fact that the down  payment
received of  approximately  $2,070,000  was  guaranteed by the Swiss Export Risk
Guaranty  ("ERG") with  funding  coming from ABN AMRO Bank,  which  financed the
agreement.  The  Company  believes  that  because  of the need to bring  medical
services to Western  standards,  Eastern Europe  continues to offer  interesting
opportunities  as a market for the Company's  conventional  X-ray  equipment and
accessories.  The  Company has also been able to gain access to markets in Asia,
the Middle East and Africa. See "-- Sales and Marketing."

         The Company believes that the principal  markets for its direct digital
X-ray equipment are located in North America and Western Europe, where the first
sales of the  ddRMulti-System  have been made.  The Company  submitted  both its
Add-on Bucky(R) and the ddRMulti-System to the FDA for Section 510(k) clearance.
On November 21, 1997, the Company's Add-on Bucky(R), the direct digital detector
of the  ddRMulti-System,  received  FDA  approval  and on December  18, 1997 the
Company's  ddRMulti-System  received FDA  approval;  the Company thus  receiving
authorization  to  market  the  ddRMulti-System  in the  United  States.  Having
obtained  the  required  approval  from the  FDA,  the  Company  now  sells  the
ddRMulti-System  in  the  United  States  through  its  subsidiaries  and  other
channels. See" Business -- Regulatory Matters" hereinafter.

                                       -8-

<PAGE>



         The  percentage  of  revenues  for  fiscal  year  ended  June 30,  1999
attributed  to  product  markets  amounted  to 81.84%  while the  percentage  of
revenues for the fiscal year ended June 30, 2000  attributed to product  markets
amounted to 91.97%.

         Service Markets

         The Company estimates that the worldwide market for services related to
X-ray equipment,  including maintenance management is approximately $44 billion,
of which  approximately  $40.5 billion (or 92%) relate to after-sales  services.
The markets for  maintenance  management  and  capital  planning  amount to $3.4
billion or 8% of the total market for services related to X-ray  equipment.  The
principal markets for after-sales  services are the United States (45%), Western
Europe (26%) and Japan (19%).  The Company expects that as the installed base of
X-ray equipment  grows,  the market for  after-sales  services will also expand.
Additional  growth may  result  from a general  increase  in the demand for such
services.  To date, a significant market for maintenance  management and capital
planning has only  developed  in the United  States as a result of the impact of
managed care plans and health maintenance  organizations  ("HMOs") on the health
care  industry.  The Company  expects that in the future there will be a similar
trend in Europe, which may lead to the development of a market for such services
in Europe. See "-- Products" and "-- Sales and Marketing." The Company currently
intends to continue to concentrate its marketing efforts within  Switzerland and
the U.S. wherein  approximately 98.6% of all Company sales were concluded during
fiscal year ended June 30, 2000 (as  compared  to  approximately  96% for fiscal
year ended June 30, 1999),  with  Switzerland  accounting for 68.8% of all sales
and the U.S.  accounting  for 29.8% of such sales  (with the  balance of 1.4% of
sales being  conducted  in  Germany)  as compared to 73%,  23% and 4% of Company
sales for Switzerland, U.S. and Germany for fiscal year ended June 30, 1999. See
also Note 17 to audited financial statements.

         The  percentage  of  revenues  for  fiscal  year  ended  June 30,  1999
attributed to services  amounted to 18.16% while the  percentage of revenues for
the fiscal year ended June 30, 2000  attributed to service  markets  amounted to
8.03%.

Sales and Marketing

         The Company's customers are universities,  hospitals,  clinics, imaging
centers and physicians . The Company markets its products and services primarily
through  its own sales  force in the United  States,  Switzerland,  Germany  and
Eastern  Europe  and  through  resellers  in these and other  markets in Europe,
Middle East, Africa, Asia, and Latin America. See also "Distribution  Agreements
- The  Hitachi  Agreement"  as  relates  to  Hitachi's  distribution  of  SRMI's
ddRMulti-System to end users within certain defined  territories within the U.S.
The Company also offers products and services related to networking,  electronic
archiving and  distribution,  including PACS,  through the Swissray  Information
Solution division.

         Two of the Company's products, the MRS system and the Bucky Diagnost TS
system,  are distributed  worldwide through Philips Medical Systems;  the latter
pursuant to License Agreement.

         The Company  believes  that in the  foreseeable  future there will be a
continuous  world-wide  growth  in  the  markets  for  complete  X-ray  systems,
components,  accessories  and related  services  because of the  improvement  of
health  care  services  in  developing  countries  and  Eastern  Europe  and the
necessity to meet  increasingly  stricter  regulations with respect to radiation
dosage  and  other   safety   features   and   environmental   hazards  in  many
jurisdictions.  With the transition from  conventional to digital X-ray systems,
the demand for  products  and  services  related to  networking,  archiving  and
electronic  distribution  of digital  X-ray  images will grow in  industrialized
countries.  In these  markets  the  demand  for  conventional  X-ray  equipment,
accessories and related services will decrease over time. See "-- Markets."

         Contract with Department of Veteran Affairs

         In  May  1998   Swissray   Medical  Systems,  Inc.,  a  wholly    owned
subsidiary  of the  Company,  was  awarded a  contract  from the  Department  of
Veterans Affairs ("VA") for its Diagnostic X-ray system, the

                                       -9-

<PAGE>



ddRMulti-System,  with the VA  reserving  its  option to extend  the term of the
contract  up to March 31,  2001;  the  ddRMulti-System  being the first ever FDA
approved  multifunctional  direct digital radiography (ddR) system to be offered
worldwide.  With the official  contract  award in hand,  management has actively
pursued sales to various VA hospitals, medical centers and outpatient, community
and outreach clinics  throughout the United States.  Since receipt of such award
the Company has contracted for the sale of 5 ddRMulti-Systems (through September
12, 2000) to  different VA  institutions  and has  installed  and sold 4 of such
ddRMulti-systems, leaving a backlog of 1.

         Distribution Agreements

         In October 1998 the Company entered into a distribution  agreement with
X-ray  Inc.  ("XRI"),   Warwick,  RI,  whereby  XRI  distributed  the  Company's
ddRMulti-System in the territories of Connecticut,  Rhode Island,  Vermont,  New
Hampshire,  Massachusetts  and Maine until termination of this one year contract
in October of 1999.  The Company  currently is conducting  its own  distribution
within these areas.

         In November  1998 the Company  reached an  agreement  with Data General
Corporation  of  Westborough,  MA,  effective  January  20,  1999  which  grants
authority  to Data  General to act as a  reseller  for the  Company's  family of
products.  Data General will sell the Company's  ddRMulti-System and Information
Solutions as a package with their PACS system.  This agreement remains in effect
but may be  terminated  by either  party  (with or  without  cause)  upon 30 day
notice.  Management  has no current  intentions to terminate  such agreement nor
does it  anticipate  that Data General will  exercise  such right as the parties
continue to maintain a good working relationship with each other.

         In  February  1999  the  Company   announced  entry  into  distribution
agreements  with three  medical  equipment  suppliers for  distribution  in both
domestic and international  markets. These firms - Medika International Inc., of
San Juan,  Puerto  Rico,  Radiographic  Equipment  Services  (RES) of San Diego,
California,  and H & H X-Ray  Corporation  of  Lancaster,  New  York,  agreed to
distribute  Swissray's direct digital radiography  system, the  ddRMulti-System.
H&H X-Ray,  which was to oversee  sales in New York,  Pennsylvania  and Ohio has
ceased  business  operations  and the Company is  currently  conducting  its own
distribution  in such areas.  Similarly,  the  Company's  contract  with RES has
terminated and the Company is conducting its own distribution.

         Medika,  will  cover   ddRMulti-Systems   sales  in  Puerto  Rico,  the
Caribbean,  Mexico and selected South American  markets.  The original  contract
with Medika expired October 1999 and was  automatically  renewed through October
2000.

         In April of 1999 the Company entered into distribution  agreements with
(a) Linear Medical Systems, Inc. ("Linear") for the territory of Arizona and (b)
Capital X-Ray, Inc.  ("Capital") for the territories of Alabama and Mississippi.
The Linear agreement  expired in February 2000 and the Company is conducting its
own distribution  within the territory indicated while the Capital agreement was
to have expired  December 31, 1999, was initially  renewed through July 31, 2000
and has been further renewed through July 31, 2001.

         Representative sales of ddRMulti-System

         In July of 1998 the Company  sold its  multifunctional  direct  digital
radiography (ddR) system,  the  ddRMulti-System,  to the largest  Diagnostic Out
Patient  Center in Warsaw,  Poland,  the Diagnostic  Center  Luxmed.  This order
represents   Swissray's   first  sale  within  the  Eastern   European   Market,
complementing  sales  previously  made in both  Western  Europe  and the  United
States.

         In  February  of 1999 the  Company  announced  the sale of three of its
ddRMulti-System,  to  Houston,  Texas - based  Kelsey-Seybold  Clinic and to the
Federal Maximum Security Facility in Florence,  Colorado. The two Kelsey-Seybold
systems  were  viewed in clinical  use by  attendees  of the annual  Society for
Computer  Applications  (SCAR) meeting in Houston in May 1999 while the Colorado
sale was made through

                                      -10-

<PAGE>



the above indicated contract with the Department of Veterans Affairs.

         The Hitachi Agreement

         In  August  of 1999 the  Company  signed a one  year  exclusive  sales,
marketing and service  agreement  with Hitachi  Medical  Systems  America,  Inc.
(HMSA),  a subsidiary  of Hitachi  Medical  Corporation.  Under the terms of the
agreement  HMSA  has  been  providing  sales,  marketing,  and  service  for the
distribution of Swissray's  ddRMulti-System  to end users within certain defined
territories within the United States.

         The  defined  territories  referred  to  consist  of  the  entire  U.S.
excepting  for (a) the states of  Alabama,  Arizona,  Connecticut,  Mississippi,
Maine,  Massachusetts,  New York, Rhode Island, Vermont and New Hampshire, (b) a
portion of New Jersey that includes the Atlantic City Expressway and north,  (c)
certain designated  counties within the state of Pennsylvania,  (d) the counties
Orange and San Diego within the state of  California,  and (e) the  Panhandle of
Florida - Tallahassee west.

         Additionally,  the Agreement  contains  provisions  whereby  additional
exclusions exist with respect to various  identified  customers  reserved to the
Company principally due to the Company's prior contact with and/or dealings with
such clientele.

         In addition  HMSA will  utilize and  promote the  Swissray  Information
Solutions  services and products  consisting of consulting and product solutions
for medical imaging informatics.

         In accordance with such  agreement,  the Company is required to provide
HMSA with service training, installation, technical support and spare parts. The
Company also  warrants to the End-User  that its product  (exclusive  of product
software)  will be free from  defects in  material  and  workmanship  at time of
delivery to End-User  and for a period of 12 months from date of  completion  of
product installation.

         While the HMSA  Agreement was to have expired on August 12, 2000,  same
remains in full force and effect in accordance with certain specific  provisions
thereof  which  provide that if after  August 12, 2000 the parties  nevertheless
continue to do business then such  Agreement  will continue in effect subject to
the terms and  conditions  contained  therein and will be  terminable  by either
party,  with or without  cause,  upon 30 days written notice to the other party.
Neither party has exercised any  termination  rights and, in fact,  are actively
engaged in negotiations with a view towards extending their  relationship for an
additional  period of time of no less than 1 year and  possibly  for a number of
years. It is anticipated,  although no assurance can be given, that entry into a
new formal agreement will occur during calendar year 2000.

         Percentage  of ddRMulti-Systems Sold Directly by Company as Compared To
         Its Distributors

         With  respect  to a total of 64  ddRMulti-Systems  contracted  for sale
during  fiscal  year ended June 30,  2000,  47 (73%) of same were made  directly
through the  efforts of the  Company's  internal  staff and sales team while the
balance  of 17 (27%) were made  through  the  efforts  of Company  distributors.
Hitachi  Medical  Systems  America,  Inc.  was  responsible  for 10 of  such  17
contracted  for  distributor  sales  with no  other  Company  distributor  being
responsible for more than two of such contracts.

         Additional Sales Information

         In the past, the Company has made a significant  amount of sales of its
X-ray  equipment  to a few large  customers.  For the fiscal year ended June 30,
1999 sales to the Company's single largest customer  accounted for approximately
54% of all revenues,  while for the fiscal year ended June 30, 2000 sales to the
Company  single  largest  customer  accounted  for  approximately  49.14% of all
revenues. The single largest customer for each year was a different entity.

         The Company considers the relationship with its largest customers to be
satisfactory.  Historically,the  identity of the Company's largest customers and
the volumes purchased by them has varied. The loss

                                      -11-

<PAGE>



of the Company's  current single  largest  customer or a reduction of the volume
purchased by it would have an adverse effect upon the Company's sales until such
time, if ever, as significant  sales to other customers can be made. The Company
expects that as sales of its  ddRMulti-System  increase,  the Company's  revenue
will be less dependent on a few large customers.

         In  August  1998 the  Company  entered  into a  global  distributorship
agreement for its ddRMulti-System with Elscint Ltd. of Haifa to sell and service
such product in 14 countries in Europe,  Canada,  South America and Africa. Soon
thereafter  almost  all of the  assets  of  Elscint  Ltd.  were  sold to  Picker
International and GE Medical Systems respectively.  Neither Picker International
nor GE Medical Systems have executed or honored the distributorship agreement as
of the date hereof and therefore the Company was unable to sell the  anticipated
75  ddRMulti-Systems  (partially  anticipated  to be sold through  Elscint Ltd.)
within the fiscal year 98/99 as originally planned.

Research and Development

         During  the  fiscal  year  ended  June 30,  2000 the  Company  incurred
expenses regarding research and development of $1,914,065 (accounting for 11% of
the Company's operating  expenses) compared to $1,808,107  (accounting for 9% of
the  Company's  operating  expenses)  for fiscal  year  ended June 30,  1999 and
compared to $3,542,149  (accounting for 19% of the Company's operating expenses)
for fiscal year ended June 30, 1998. The decrease of the Company's  research and
development  expenses  by 49% from the fiscal  year  ended June 30,  1998 to the
fiscal year ended June 30, 1999 resulted  primarily from the fact that principal
costs  associated with  development of the direct digital  detector,  the unique
Add-on-Bucky  have  been  completed.  See Item 7  "Management's  Discussion  and
Analysis of Financial Condition and Results of Operations."

         The Company will continue to have significant  research and development
expenses associated with the development of new products  (including  diagnostic
hardware and software  products and new digital X-ray products) and improvements
to existing products manufactured by the Company.

         New  products  developed by or on behalf of the Company  during  fiscal
year ended June 30, 2000 include a new direct digital chest  examination  system
(ddRChest-System),  a direct digital universal radiography system (ddRCombi) and
a multi-functional  floating table. Both the  ddRChest-System  and ddRCombi were
unveiled  (a)  domestically  in the  U.S.  at  the  scientific  assembly  of the
Radiological  Society of North America (RSNA) held in Chicago from November 28 -
December 2, 1999 and (b)  internationally  at the European Congress of Radiology
(ECR 2000) held in Vienna, Austria in early March 2000. The ddRChest-System is a
dedicated  chest  unit  capable  of taking  all chest  examinations  in a direct
digital format,  while the ddRCombi is a multi-functional  system in combination
with a ceiling suspend unit able to perform examinations on the seated,  upright
and recumbent patient.

         As of September  12, 2000,  the Company  employed 13 people in research
and  development.  The number of people employed in research and development has
increased  by 30% since  June 30,  1999.  The  Company  is  outsourcing  certain
research and  development  activities and intends to continue this policy in the
future.

         The Company has established a scientific  advisory board to support its
research  and  development  projects  and  to  enable  the  Company  to  develop
technologically  advanced products. The Company believes that the integration of
academic  institutions and hospitals will allow the Company to save research and
development  expenses and will provide it with access to clinical and scientific
experience and know-how.

Raw Materials and Suppliers

         The Company has a policy of outsourcing the manufacturing of components
for its X-ray  equipment  whenever such  outsourcing  is more efficient and cost
effective than in-house production. In particular,

                                      -12-

<PAGE>



components for which serial  production is available are produced by third-party
manufacturers  according  to  Company  specifications.   Generally,   the  X-ray
accessories sold by the Company are manufactured by third parties.

         There  is  virtually  no  stock  of  finished  X-ray  equipment  on the
Company's  premises  for any  extended  period of time since X-ray  equipment is
generally  manufactured  at a  customer's  request.  At June 30,  2000  finished
products  accounted  for  approximately  14.2% of inventory  while raw material,
parts and supplies  accounted for  approximately  57.8% of inventory and work in
process for approximately 28%.

         The percentage of Company revenues derived from products which included
components then only currently  available from a single source supplier amounted
to 64.2% as of June 30, 2000 all of which related to both single source supplier
of certain camera  electronics  and single source supplier of optics (since both
items are  included  in the same  product)  as  compared to 13.6% as of June 30,
1999. See below with respect to recent  commencement  of in-house  production of
camera electronics.

         (A)      Information With Respect to In-house Production of Camera
                  Electronics

         The  agreement  with the  single  source  supplier  of  certain  camera
electronics  terminated December 31, 1999 due to the fact that its manufacturing
plant where the camera  electronics had been manufactured  permanently closed on
such date and Company  management was not satisfied with proposals  submitted to
it by such supplier  regarding  the latters  intentions  of  establishing  a new
manufacturing  plant.  Company  agreement  with its then new  supplier of camera
electronics  provided for availability of such camera electronics to the Company
commencing  January 1, 2000.  In January of 2000 the Company  entered into a new
arms-length agreement with its CCD camera supplier  Laboratories  d'Electronique
Philips  S.A.S.  whereby the  Company  has  purchased,  from  available  working
capital, the production facility (including necessary tools equipment,  diagrams
and related knowhow) for approximately  250,000 Swiss Francs (US$161,290) and it
is management's  intention through such purchase) to have a sufficient number of
CCD  cameras on hand (four per  system) to cover in excess of those  immediately
required to cover orders.  Through in-house  production of key camera components
the Company has eliminated its reliance upon its former supplier,  looks forward
to  reduction  in camera  costs  because at a minimum the Company will no longer
have to fund its former suppliers profit margin and does not expect any material
business  interruptions  to occur regarding CCD camera  availability in a timely
manner nor does it anticipate that such in-house production will have any affect
upon quality of its ddR-Systems.

         (B)      Agreement With Single Source Supplier of Optics

         The agreement with the single source supplier of optics expires in July
2002,  may not be  terminated  by either party  without  cause and is subject to
renegotiations  which  are  expected  to  occur  assuming  contract  fulfillment
continues  to be concluded  in a timely and  satisfactory  manner with price and
payment terms being  comparable to those  currently  being  utilized and meeting
Company  capacity  requirements.  The  percentage  of revenues  from this single
source supplier of optics amounted to  approximately  13.6% at fiscal year ended
June 30, 1999 and 64.2% at fiscal year ended June 30, 2000. While management has
no current  expectation  or need to replace  this  supplier it does not envision
encountering  any material  difficulties  in  replacing  such  supplier  (with a
different optics  manufacturer  having the ability to timely deliver  comparable
optic quality) if necessary in the event of any unforeseen  circumstances  which
may require replacement.

Backlog

         Management  estimates  that as of the end of fiscal year ended June 30,
2000  the  Company  had an  order  backlog  of  $8,800,000  which  consisted  of
$2,080,000  in  conventional  x-ray  equipment  and  $6,720,000 in digital (i.e.
ddRMulti-Systems  and information  solutions) as compared to an order backlog of
$12,000,000  which consisted of $8,000,000 in  conventional  x-ray equipment and
$4,000,000  in digital  during  fiscal  year ended June 30,  1999 and as further
compared to an order backlog of  $13,000,000  which  consisted of $11,500,000 in
conventional x-ray equipment and $1,500,000 in ddRMulti-Systems as of the fiscal
year

                                      -13-

<PAGE>



ended June 30, 1998.  The Company had  previously  reported an order backlog for
its digital x-ray equipment as of June 30, 1997 of  $30,000,000;  $29,000,000 of
which related to a contract with a purchaser located in South Korea. As a result
of certain recent economic  problems in South Korea,  management  currently does
not expect  that such order  will be filled (to any  significant  degree) in the
current  calendar  year (if at all)  absent a dramatic  positive  change in such
economic conditions which currently is not expected to occur.  Accordingly,  the
Company no longer, for practicable purposes, considers such South Korea contract
to be part of its backlog.  The Company believes that  substantially  the entire
order backlog for conventional X-ray equipment will be filled during the current
fiscal  year.  While the Company  expects to  continue  to have a certain  order
backlog for conventional X-ray equipment  (exclusive of that indicated above) in
the future because of the Philips OEM  Agreement,  the order backlog for digital
X-ray equipment is likely to be substantially the same or increase in the future
as the Company estimates that orders for such equipment will increase due to the
Company's sales focus.

Competition

         X-Ray Equipment Market

         The markets in which the Company  operates are highly  competitive  and
are  characterized by rapid and significant  technological  change.  Most of the
Company's  competitors are significantly larger than the Company and have access
to  greater  financial  and other  resources  than the  Company.  The  principal
competitors for the Company's conventional X-ray equipment are General Electric,
Siemens, Toshiba, Trex Medical,  Shimatsu, Picker and Philips. In general, it is
the  Company's  strategy  to  compete  primarily  based  on the  quality  of its
products. In the market for conventional X-ray equipment, the Company's strategy
is to focus on niche products and niche markets.

         To the Company's  knowledge  the only direct  digital X-ray systems for
medical diagnostic purposes other than the  ddRMulti-System  currently available
are chest examination systems offered by Philips,  IMIX and Odelft. In addition,
there are several  direct digital X-ray systems  available for dental  purposes.
None of these systems is able to perform bone  examinations on  extremities.  To
the best of  management's  knowledge the Company's  ddRMulti-System  is the only
multi-functional  direct digital X-ray system  currently  available which allows
all plane X-ray  examinations  on the  recumbent,  upright  and sitting  patient
without the use of cassettes,  films, chemicals or phosphor plates. With respect
to such  ddRMulti-System,  management  does not believe  that it has any current
competition and is of the belief that the Company  continues to enjoy a lead for
serial  production units.  Notwithstanding  such beliefs the Company is aware of
the  fact  that a  number  of  companies,  including  certain  of the  Company's
competitors  in the markets for  conventional  X-ray  equipment,  are  currently
developing  direct  digital X-ray  detectors or direct digital X-ray systems for
specific applications (including mammography).  While, as aforesaid,  management
of the Company believes that the Company enjoys a significant  product lead over
its competitors as a result of its  ddRMulti-System's  industry acceptance,  its
competitors may, at any time, have significant  breakthrough(s) thereby reducing
and/or  eliminating the Company's lead.  Accordingly,  no assurance can be given
that  any  established  product  leads  will  not be  reduced  or  significantly
eliminated  within  the near  future  and if such  were to occur  the  Company's
ability to position  itself to capture the majority of what is estimated to be a
$10,000,000,000  total  worldwide  market would be materially  reduced.  See "--
Products," "-- Markets".

         Service Market

         In the markets for services related to imaging  equipment the Company's
competitors  are  equipment  manufacturers  (including  certain of the Company's
competitors   in  the  X-ray   equipment   market)   and   independent   service
organizations.  In the service markets,  it is the Company's strategy to build a
market  position  based on the confidence of its customers in the quality of its
products and service personnel. See "-- Products," "-- Markets".



                                      -14-

<PAGE>



Intellectual Property and Patents

         The Company has obtained  patent  protection for certain aspects of its
conventional  X-ray  technology.  The  Company  has  filed  patent  applications
covering  certain  aspects of its direct  digital  technology  in key markets in
Europe, North America and Asia, including the United States, Canada, Switzerland
and Germany.  The Company has obtained approval for one of its two patents,  the
U.S.  patent,  while the European patent is still pending.  Although the Company
believes that its products do not infringe patents or violate proprietary rights
of others, it is possible that infringement of proprietary  rights of others has
occurred,  may occur or may be  claimed.  In the event  the  Company's  products
infringe patents or proprietary rights of others, the Company may be required to
modify the design of its products or obtain a license. There can be no assurance
that the Company will be able to do so in a timely manner, upon acceptable terms
and  conditions or at all. The failure to do any of the  foregoing  could have a
material adverse effect upon the Company. In addition, there can be no assurance
that the Company will have the financial or other resources necessary to enforce
or defend a patent  infringement  action and the Company  could,  under  certain
circumstances,  become  liable  for  damages,  which  also could have a material
adverse effect on the Company.

         The Company also relies on  proprietary  know-how  and employs  various
methods to protect its concepts, ideas and technology. However, such methods may
not afford  complete  protection  and there can be no assurance that others will
not  independently  develop such  technology  or obtain  access to the Company's
proprietary know-how or ideas.  Furthermore,  although the Company has generally
entered into  confidentiality  agreements  with its employees,  consultants  and
other parties,  there can be no assurance that such arrangements will adequately
protect the Company. The Company has obtained licenses to use certain technology
which is essential  for certain of the  Company's  products,  including  certain
software  used  for  its  line of  SwissVision(R)  postprocessing  systems.  The
software license is a worldwide, non-exclusive,  non-transferable license to use
and  distribute  the Agfa software in  combination  with the Add-On Bucky and is
based upon certain minimum purchase  requirements which the Company continues to
meet and exceed.

         The Company considers the Swissray name as material to its business and
has  obtained,  or is in the process of obtaining,  trademark  protection in key
markets.  The  Company  is not  aware of any  claims  or  infringement  or other
challenges to the Company's  rights to use this or any other  trademarks used by
the Company which it considers to have any merit whatsoever.

         The Company has patented certain aspects of its proprietary  technology
in certain  markets and has filed  patent  applications  for its direct  digital
technology in key markets,  including the United States.  The European patent as
well as the U.S.  patent  for the  Add-On  Bucky  have been  granted  and expire
January  2015.  The duration of other  patents  range from 2000 to 2016. In many
instances  where  patents  are filed  the  "applicant"  is listed as a  specific
individual  (such as the  Company's  President)  while the patent  ownership  is
listed in the Company's name thereby  assuring that the exclusive  patent holder
is the Company.

         In March of 1999 the European  Patent Office issued patent No. EP 0 804
853 and in July of 1999 the U.S.  Patent Office  issued  patent No.  5,920,604 -
both for the Company's  Radiography  (ddR) detector,  the Add-on-Bucky (R) which
patent  relates to the optical  arrangement  and process  for  transmitting  and
converting  primary x-ray images,  which is the first of two  inventions for the
Add-on-Bucky(R).  The second  patent  application  for optical  arrangement  and
method for electronically  detecting an x-ray image was granted in March 2000 in
the U.S., while in Europe the patent is still pending.  The  Add-on-Bucky(R)  is
incorporated in Swissray's unique multifunctional ddRMulti-System.

         On September 30, 1999 the Company announced that the U.S. Patent Office
issued  patent  No. US  005920604A  for its  direct  digital  Radiography  (ddR)
detector,  the Add-on Bucky(R). The U.S. patent was awarded to Swissray pursuant
to application submitted by inventors R. G. Laupper, Chairman, President and CEO
of Swissray International, Inc. and Peter Waegli (Bremgarten,  Switzerland), for
the optical  arrangement  and process for  transmitting  and converting  primary
x-ray images generated on a two dimensional primary image array. The Company had
previously been awarded, in May 1999 the European patent for the

                                      -15-

<PAGE>



technology  indicated  herein.  The second  patent  application  for the optical
arrangement  and  method  for  electronical  detecting  an x-ray  image has been
submitted and is pending  approval in Europe while the U.S. patent therefore was
granted to the Company (Patent No. 6,038,286) in March 2000.

Regulatory Matters

         The Company's X-ray equipment,  components and related  accessories are
subject to  regulation  by national or  regional  authorities  in the markets in
which the Company operates. Pursuant to the Federal Food, Drug and Cosmetic Act,
X-ray  equipment  is a class II medical  device which may not be marketed in the
United States without prior approval from the FDA.

         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.  The Company
submitted both its  Add-on-Bucky(R)  and the  ddRMulti-System for Section 510(k)
clearance with the FDA. On November 21, 1997, the Company's AddOn Bucky(R),  the
direct  digital  detector of the  ddRMulti-System,  received FDA approval and on
December  18, 1997 the  Company's  ddRMulti-System  received FDA  approval;  the
Company thus receiving  authorization to market the  ddRMulti-System in the U.S.
The FDA also  regulates  the  content of  advertising  and  marketing  materials
relating  to  medical  devices.  There can be no  assurance  that the  Company's
advertising  and marketing  materials  regarding its products are and will be in
compliance with such regulations.

         The Company is also subject to other federal,  state, local and foreign
laws,  regulations  and  recommendations  relating to safe  working  conditions,
laboratory  and  manufacturing  practices.  The  electrical  components  of  the
Company's   products  are  subject  to  electrical   safety  standards  in  many
jurisdictions,  including  Switzerland,  EU, Germany and the United States.  The
Company  believes  that  it is in  compliance  in  all  material  respects  with
applicable   regulations.   Failure  to  comply   with   applicable   regulatory
requirements can result in, among other things, fines, suspensions of approvals,
seizures  or  recalls  of   products,   operating   restrictions   and  criminal
prosecutions.  The  effect  of  government  regulation  may  be to  delay  for a
considerable   period   of  time  or  to   prevent   the   marketing   and  full
commercialization  of future  products or services  that the Company may develop
and/or  to  impose  costly  requirements  on the  Company.  There can also be no
assurance that additional regulations will not be adopted or current regulations
amended  in such a manner  as will  materially  adversely  affect  the  Company.
Company product certifications may be briefly summarized as follows: On March 8,
1999  Swissray  Medical  AG,  the  Company's  Swiss  research  and  development,
production  and  marketing  subsidiary  became ISO 9001 and EN 46001  certified.
Appendix II for CE - Certification  was completed in December 1999 thus allowing
the Company to use the CE-Label,  including the medical  device  numbers for all
products manufactured and/or sold through the Company.

Environmental Matters

         The Company is subject to various environmental laws and regulations in
the  jurisdictions  in  which  it  operates,  including  those  relating  to air
emissions,  wastewater  discharges,  the  handling  and  disposal  of solid  and
hazardous  wastes and the remediation of  contamination  associated with the use
and disposal of hazardous substances.  The Company owns or leases properties and
manufacturing  facilities in  Switzerland,  the United  States,  Germany,  Czech
Republic and Romania. The Company, like its competitors,  has incurred, and will
continue  to incur,  capital  and  operating  expenditures  and  other  costs in
complying with such laws and regulations in both the United States and abroad as
may  specifically  apply to it. The Company  does not  believe  that it has been
involved  in  utilization  of any types of  substances  and/or  wastes  which it
considers  to be  hazardous  and  the  operation  of  its  business  (or  former
business),  accordingly, is not believed to have created any potential liability
involving  environmental  matters.  Although the Company  believes that it is in
substantial  compliance  with  applicable  environmental  requirements  and  the
Company  to date has not  incurred  material  expenditures  in  connection  with
environmental  matters,  it is possible that the Company could become subject to
additional  or changing  environmental  laws or  liabilities  in the future that
could  result in an  adverse  effect on the  Company's  financial  condition  or
results of operations.

                                      -16-

<PAGE>



Sale of Substantially All of the Assets of Empower, Inc.

         On April 1,  1997,  the  Company  acquired  Empower,  Inc.,  a New York
corporation  ("Empower") which since  incorporation in 1985, had been engaged in
distributing and servicing diagnostic X-ray equipment and accessories in the New
York/New   Jersey/Connecticut   area.  Certain  details  with  respect  to  such
acquisition  were  reported in a Form 8-K and Form 8-K/A1 with date of report of
April 1, 1997. In February 1998 the Company entered into a letter of intent with
E.M.  Parker Co., Inc., a Massachusetts  corporation  ("Parker") with respect to
the sale of  Empower's  film and x-ray  accessories  business.  Thereafter,  the
Company and its wholly owned subsidiary,  Empower, Inc. ("Empower") entered into
an Asset  Purchase  Agreement  with  Parker  pursuant  to which the  Company and
Empower  sold and Parker  purchased  substantially  all of the assets of Empower
(excluding certain excluded assets as defined in the Agreement) in consideration
of: (i) the  assumption by Parker of certain  liabilities  of Empower;  (ii) the
cash  purchase   price  of  $250,000;   and  (iii)  the  payment  by  Parker  of
approximately  $376,000  to a banking  institution  in  satisfaction  of certain
outstanding  indebtedness  of  Empower.  Empower  remains  a wholly  owned  (but
currently  inactive)  subsidiary  of the  Company.  Empower has been merged into
Swissray America,  Inc. effective July 1, 1999. The Company is currently engaged
in litigation with the former CEO of Empower,  to wit: J. Douglas  Maxwell.  For
information  regarding  such  litigation  reference  is made  to  Item 3  "Legal
Proceedings".

         Both the  original  purchase  and  subsequent  sale  referred to in the
preceding  paragraph  were  contracted  on an  arms-length  basis.  The  sale of
Empower's  assets  less  than one year  after  acquisition  of  Empower  related
primarily to the sale of film,  chemical and certain  servicing of  conventional
x-ray  equipment since these areas no longer  constituted  the Company's  "core"
business  which  revolves  around  its   ddRMulti-System  and  filmless  digital
technology. The original purchase of Empower was for $120,000 and the subsequent
sale referred to resulted in a gain of $55,000. Counsel representing the Company
with  respect  to this  transaction  determined  that such  transaction  was not
material,  did not require  stockholder  approval and advised  management  which
acted upon reliance of such legal advice.

Acquisition of Substantially All of the Assets of Service Support Group LLC

         On October 17,  1997,  the Company  acquired  substantially  all of the
assets of Service  Support Group LLC ("SSG")  located in Gig Harbor,  Washington
(in an  arms-length  transaction),  principally  in exchange  for the payment of
approximately $622,000 in cash and issuance of 33,333 shares of its Common Stock
in equal thirds to each of SSG's then owners based upon certain  warranties  and
representations  made by them. Counsel  representing the Company with respect to
this  transaction  determined that such  transaction  was not material,  did not
require stockholder approval and advised management which acted upon reliance of
such legal  advice.  Pursuant to the terms of the Asset  Purchase  Agreement and
related  Registration  Rights Agreement both dated October 17, 1997, the holders
of such Company shares were then given the right,  commencing  June 30, 1998 and
terminating  April 16,  1999,  to require the Company to purchase  any or all of
such shares at $45.00 per share.  Since its  formation on October 16, 1996,  SSG
has been in the business of selling  diagnostic  imaging equipment and providing
services  related thereto in the markets on the West Coast of the United States.
Issues  involving  the  aforesaid  Company  shares and a number of other related
matters became the subject of dispute and litigation  which was recently settled
on August  31,  1999.  See Item 3 - "Legal  Proceedings".  The three  former SSG
owners relationship with the Company (and certain Company subsidiaries with whom
such persons held positions as officers,  to wit: Swissray Medical Systems, Inc.
and Swissray  Healthcare,  Inc.) was terminated on July 20, 1998. As a result of
such termination Ueli Laupper has been appointed Chief Executive Officer of both
Swissray Medical Systems, Inc. and Swissray Healthcare, Inc.

Sale of Conventional X-Ray Division in Germany

         The Company's primary focus is currently on direct digital  radiography
("ddR") as opposed to conventional x-ray equipment. In that regard the Company's
German  subsidiary  (Swissray GmbH,  Wiesbaden,  Germany) sold its  conventional
x-ray business division in March 2000 to an unaffiliated third

                                      -17-

<PAGE>



party in  order to more  extensively  focus  upon  sales  and  marketing  of ddR
equipment. See also Item 1 - "Recent Developments" hereinafter.

Employees

         After  giving  effect  to the  Empower,  Inc.  transaction  hereinabove
referred to the Company has 114 employees  worldwide,  of which 20 were employed
by  subsidiaries  in the United States,  79 in  Switzerland,  and 15 in European
countries other than  Switzerland.  The Company  believes that its  relationship
with  employees is  satisfactory.  The Company has not suffered any  significant
labor problems during the last five years.

Restrictive Shares Issued In Accordance With Consulting Agreements

         Consulting Agreement with Liviakis Financial Communications, Inc.

         On  March  29,  1999 the  Company  entered  into a one year  Consulting
Agreement with Liviakis  Financial  Communications,  Inc.  ("LFC") In accordance
with the terms and conditions of the Consulting Agreement, the Consultant agreed
to provide  certain  specified  consulting  services in a diligent  and thorough
manner in return for which and as full and complete compensation thereunder, the
Company was required to and did compensate  the Consultant  through its issuance
and  delivery of  3,000,000  fully  vested,  and  non-forfeitable  shares of the
Company's  restrictive  common  stock.  As regards such shares of common  stock,
Consultant  has  agreed  that  throughout  the  period of time  that it  retains
beneficial ownership of all or any portion of such shares that it shall (a) vote
such shares in favor of Ruedi G. Laupper, the Company's President, continuing to
maintain his current  position(s) with the Company and (b) give Ruedi G. Laupper
and/or  his  designee  the  right to vote  Consultant's  shares  at all  Company
shareholder meetings. Notwithstanding the fact that the March 29, 1999 agreement
permitted  the  Company to extend same (for an  additional  year) under the same
terms and  conditions  excepting  for annual  remuneration,  the Company and LFC
agreed to  renegotiate  remuneration.  As a result thereof the parties (on March
29, 2000) entered into a new one year "Consulting Agreement", which Agreement is
virtually  identical  to the  initial  Agreement  (including  but not limited to
voting rights on shares issued as referred to directly above) excepting that (a)
the  "Remuneration"  section  provides for the issuance of 490,000  fully vested
non-forfeitable  shares of the Company's  common stock and further  provides for
the  issuance of 36,000  restrictive  shares of Company  common  stock (based on
3,000 shares per month)  throughout the period of  Consultant's  performance and
(b) LFC has agreed to "lock up" the original  3,000,000  shares issued to it and
not attempt to sell same through Rule 144 or otherwise despite being eligible to
do so with such "lock up" to  continue  to March 28,  2001  unless  the  current
consulting  agreement is terminated or the Company is acquired by another entity
prior to March 28, 2001. Since both the initial Agreement  referred to above and
the new  Agreement  entered into on March 29, 2000 are identical in all material
respects   excepting  as  indicated  above,   such  Consulting   Agreements  are
hereinafter  referred to collectively as "Consulting  Agreement".  The foregoing
does not purport to set forth each of the terms and  conditions of the aforesaid
Consulting  Agreement  but  rather is  designed  to  summarize  what  management
considers to be certain pertinent portions thereof.

         In  accordance  with  the  terms  of  the   aforementioned   consulting
agreement,  LFC  has  agreed  that  it  will  generally  provide  the  following
consulting  services:  (a)  advise and assist  the  Company  in  developing  and
establishing  an image for the Company in the  financial  community and creating
the foundation for subsequent financial public relations efforts, (b) advise and
assist the Company in communicating appropriate information regarding its plans,
strategy and  personnel to the  financial  community;  (c) assist and advise the
Company  with  respect  to its (i)  stockholder  and  investor  relations,  (ii)
relations with brokers,  dealers,  analysts and other investment  professionals,
and (iii)  financial  public  relations  generally,  (d) perform  the  functions
generally  assigned  to  investor/stockholder  relations  and  public  relations
departments  in  major  corporations,  (e)  upon  the  Company's  approval,  (i)
disseminate information regarding the Company to shareholders, brokers, dealers,
other investment  community  professionals  and the general investing public and
(ii) conduct  meetings  with  brokers,  dealers,  analysts and other  investment
professionals to advise them

                                      -18-

<PAGE>



of the Company's  plans,  goals and activities and (f) otherwise  perform as the
Company's financial relations and public relations consultant.

         The agreement  further  provides that in the event LFC introduces  SRMI
(a)  to  a  lender  or  equity  purchaser,  not  already  having  a  preexisting
relationship  with  SRMI,  with  whom SRMI  ultimately  finances  or causes  the
completion of such financing, SRMI shall compensate LFC for such services with a
"finder's  fee" in the amount of 2.5% of total  gross  funding  provided by such
lender or equity purchaser or (b) to an acquisition  candidate,  either directly
or indirectly  through  another  intermediary,  not already having a preexisting
relationship  with  SRMI,  with  whom SRMI  ultimately  acquires  or causes  the
completion of such acquisition, SRMI shall compensate LFC for such services with
a "finder's  fee" in the amount of 2% of total gross  consideration  provided by
such acquisition.  The compensation to LFC is to be payable in cash and is to be
paid  in full  at the  time  the  financing  or  acquisition  is  closed.  It is
specifically  understood  that  LFC is not nor does it hold  itself  out to be a
Broker/Dealer,  but is rather  merely a "Finder"  in  reference  to the  Company
procuring financing sources and acquisition candidates.

         LFC, founded in 1985 by John Liviakis, its President, is a full service
investor relations firm, providing services principally to micro through mid-cap
public  companies  listed  on the  Nasdaq,  American,  New York  Stock and OTCBB
Exchanges.  Such  services  include  financial  community  and media  relations,
editorial  services and interactive  communications,  as well as administrative,
consulting and advisory  services.  The overall purpose of LFC is to enhance its
corporate clients' recognition in the financial  community,  the media and among
shareholders.  In  furtherance of its agreement with the Company and in addition
to and/or in conjunction with those consulting services referred to above and in
the consulting  agreement  between the parties,  LFC has performed the following
services  on behalf of the  Company  in its  efforts  to assist  and  advise the
Company with respect to its  stockholder  and investor  relations as well as its
relations with brokers,  dealers,  analysts and other investment  professionals.
Specifically LFC has performed the following services:

1)  pro-actively  soliciting  sponsorship  for the  Company's  common stock from
stockholders,  institutions,  and analysts;
2) accepting  incoming  investor calls from brokers,  shareholders and financial
institutions;
3) assisting the Company in packaging its investor relations  materials;
4) assisting the Company in the writing and dissemination of its press releases;
5) assisting the Company in media relations; and
6) generally  advising  the  Company,  upon  request, on  matters of a corporate
financial nature.

         Additionally,  LFC has introduced the Company and subsequently  entered
into an investment  banking  relationship with Raymond James & Associates (since
terminated - see "Recent  Developments" below) in order to assist the Company in
evaluating  strategic  alternatives  including,  but not limited to, identifying
proposals from potential suitors or strategic partners as well as supporting the
Company's financing requirements.

         Consulting Agreement with Rolcan Finance Ltd.

         Additionally,  on March 29, 1999 the Company  entered  into an eighteen
month  Consulting  Agreement  with Rolcan Finance Ltd.  ("Rolcan"),  pursuant to
which Rolcan agreed to provide certain business and consulting  services outside
the United States and in return for which the Company became  obligated to issue
and did  issue as full  and  complete  compensation  thereunder,  800,000  fully
vested, and non-forfeitable restrictive shares of its common stock.

         In accordance with terms of aforementioned consulting agreement, Rolcan
has agreed to facilitate  the  endeavors of the  Company's  medium and long term
business  plans  through  services,  including  but not limited to,  introducing
Company management (i) to potential financial partners,  financial brokers,  and
assist in developing  market  awareness  within the financial  community with an
emphasis upon introductions to offshore investors in Europe, the Middle East and
the Far East and to the extent practicable assisting the

                                      -19-

<PAGE>



Company  in having  its stock  listed on  various  European  exchanges  and (ii)
continuing  to discuss  Company  financial  requirements  and types of financing
which may be available and/or appropriate under then existing circumstances.

         Rolcan has  advised  that it is  currently  continuing  to conduct  due
diligence activities with respect to locating  international banking enterprises
on behalf of the Company  with a view  towards  obtaining  financial  backing in
areas of lines of credit, equipment leasing,  receivable and inventory financing
and areas of a similar  nature.  Such  efforts if  successful,  are  intended to
alleviate cash flow  difficulties  that may arise as a result of substantial and
significant increase in the Company's business activities (and most specifically
in its  recent  major  increase  in the  sale of 32 of its  ddRMulti-Systems  to
Romania.  Rolcan,  established  in 1993 by its  Managing  Director  and  control
stockholder, Roland Kaufmann, is a business consulting firm primarily engaged in
the types of activities  enumerated  above with its principal  activities  being
conducted outside the U.S.

         The  issuance  of the above  referenced  restrictive  shares to LFC and
Rolcan  was  based  upon the then bid  price of $0.50 per share as quoted on the
date (March 29, 1999) that the parties  each  entered  into and  executed  their
respective Consulting Agreements.  The factors considered by the Company's Board
in  determining  the 10%  discount  from the bid price of $0.50  per share  when
issuing the above reference  shares to LFC and Rolcan was based upon the Board's
determination  that there is a difference  between the valuation of free trading
securities and restricted shares. The principal differences considered relate to
the facts that (a) restricted  shares may not be sold in the open market and (b)
restrictive  legend appearing on such restricted shares may not be removed for a
period of at least one year absent registration and then only in accordance with
Rule  144  (assuming  the  Company   continues  to  meet   necessary   reporting
requirements for utilization of Rule 144). The Board further considered the fact
that even if the above referenced Rule 144  requirements  were met the holder of
restricted shares remained subject to specific volume limitations (usually 1% of
outstanding  common  stock) with  respect to sales made within a 3 month  period
subsequent to 1 year holding period.  In addition to all of the above, the Board
also  considered  the fact  that the  Company's  shares  have had a  history  of
substantial and significant volatility.

         The  foregoing   summarizes  certain  pertinent  terms  and  conditions
contained in the Agreements  entered into by the Company with LFC and Rolcan but
does not purport to be a complete summary of either of such  Agreements.  Copies
of such Agreements are filed with the SEC in the Company's Form S-1 Registration
Statement under SEC file number 333-59829.  Accordingly, further information may
be obtained  through the  Commission's  World Wide Web site utilized for Issuers
(such as the Company) that file electronically with the Commission.  The address
of such site is http:\\www.sec.gov.

Recent Developments

         In July of 1999  the  Company  signed  a one  year  investment  banking
agreement  with Raymond James & Associates,  Inc.  (NYSE:RJE - news).  Under the
terms of the  agreement,  Raymond  James was to assist  Swissray  in  evaluating
strategic alternatives including, but not limited to, identifying and evaluating
proposals from potential  suitors or strategic  partners,  as well as supporting
the  Company's  financing  requirements.  On August 2, 2000 the Company  advised
Raymond  James  that it did not  intend to renew  the  agreement  and  forwarded
necessary notice of termination. As of date of termination no monies were due to
Raymond James other than for certain out of pocket  disbursements  which Raymond
James claims are due to it.

         In  August  of 1999 the  Company  signed a one  year  exclusive  sales,
marketing and service  agreement  with Hitachi  Medical  Systems  America,  Inc.
(HMA),  a  subsidiary  of Hitachi  Medical  Corporation.  Under the terms of the
agreement HMA will provide sales, marketing, and service for the distribution of
Swissray's  ddRMulti-System  to end users  within  certain  defined  territories
within the United States. In addition HMSA will utilize and promote the Swissray
Information Solutions services and products consisting of consulting and product
solutions  for  medical  imaging  informatics.  For  further  and more  specific
information  with  respect  to  this  agreement,  see  "Sales  and  Marketing  -
Distribution  Agreements - The Hitachi  Agreement".  With respect to the current
status of the HMSA  Agreement,  reference is herewith made to Item 1 "Business -
Sales

                                      -20-

<PAGE>



and Marketing - The Hitachi Agreement".

         In October 1999 the Company was awarded a purchase  order for 32 of its
unique direct digital  Radiography  Systems from the Romanian Ministry of Health
for  its   multifunctional   ddRMulti-System,   valued  at  over  US$13,800,000.
Installation  was made in various  hospitals  throughout  Romania,  The  initial
payment  aggregating 15% of the aforesaid  total proceeds  (i.e.,  approximately
$2,070,000) was received by the Company in early March 2000. The Company sold 25
of the 32 ddRMulti-Systems  through close of its fiscal year ended June 30, 2000
while  the  balance  of 7 Systems  were sold  during  the first  quarter  of the
Company's current fiscal year.

         In March 2000 the Company's  German  subsidiary  sold its  conventional
x-ray division to an  unaffiliated  third party in order to focus its attentions
upon sales and marketing efforts in the field of direct digital radiography. The
transaction  principally  consisted of the sale of inventory  and  equipment (at
costs  approximating  $53,000) and the  purchaser's  agreement to assume certain
fixed costs (approximating an additional $32,000).  There was no gain or loss to
the  Company  as a result  of this  transaction.  See also  Item 1  "Business  -
Background Summary".

         Notwithstanding   the  above   referenced   March   2000  sale  of  the
conventional x-ray division, management of the Company does not have any current
plans to sell its conventional OEM business.

CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

         As  heretofore  indicated on the cover page of this Form 10-K under the
heading "Documents  Incorporated by Reference" certain portions of the Company's
recently  declared  effective  (August 14, 2000)  Registration  Statement and in
particular, but not limited to, the section therein entitled "Risk Factors" have
been  incorporated by reference.  As a result thereof the following  "Cautionary
Statement" should be taken into careful consideration.

         Investment in the  securities of the Company  involves a high degree of
risk.  In evaluating  an  investment  in the  Company's  Common  Stock,  Company
stockholders and prospective investors should carefully consider the information
contained  in this Form 10-K for the fiscal year ended June 30, 2000  including,
without  limitation,  Item 1 "Business" and Item 6 "Management's  Discussion and
Analysis  of  Financial  Condition  and  Results  of  Operations",  as  well  as
information  incorporated by reference from the Company's aforesaid Registration
Statement.

         This Form 10-K  includes  forward-looking  statements  that reflect the
Company's current views with respect to future events and financial performance,
including  capital  expenditures,  strategic  plans and future cash  sources and
requirements.  These forward-looking statements are subject to certain risks and
uncertainties,  which  could  cause  actual  results to differ  materially  from
historical  results  of  those  anticipated.  The  words,  "believe",  "expect",
"anticipate",   "estimate"  and  similar  expressions  identify  forward-looking
statements.  Readers  are  cautioned  not  to  place  undue  reliance  on  these
forward-looking  statements,  which  speak only as of their  dates.  The Company
undertakes  no  obligation  to  publicly  update or revise  any  forward-looking
statements whether as a result of new information, future events or otherwise.

ITEM 2.  PROPERTIES

         On April 12, 1997,  the  production  facility  rented by the Company in
Hochdorf, Switzerland was affected by a fire in an adjacent facility. On May 15,
1997,  the  Company   purchased  a  new  office  and   production   facility  of
approximately  43,000  square  feet and  moved  its  entire  production  to this
facility and has since moved the offices and other  facilities  formerly located
in its Hitzkirch  facility to the new Hochdorf  facility.  The Company  believes
that its Hochdorf  facility  provides it with  sufficient  production and office
space to meet its demand in Switzerland in the foreseeable future.

                                      -21-

<PAGE>



         The Company  also  leases  office  space in  Westchester,  Brno,  Czech
Republic, Wiesbaden, Germany and Bucharest, Romania.

ITEM 3.  LEGAL PROCEEDINGS

Legal Proceedings

A. On or about October 3, 1997,  the Registrant  and Swissray  Healthcare,  Inc.
were served with a complaint  by a company  engaged in the business of providing
services related to imaging equipment  alleging that defendant received benefits
from breach of fiduciary duties and contract obligations and misappropriation of
trade secrets by certain former employees of such competitor.  Such company also
obtained a temporary  restraining  order  against the  Registrant  and  Swissray
Healthcare,  Inc. in the aforesaid  action  entitled  Serviscope  Corporation v.
Swissray  International,  Inc., and Swissray  Healthcare,  Inc. commenced in the
Supreme  Court of the State of New York under Index No.  605091/97.  On November
10,  1997,  the  Court  denied a Motion  for a  preliminary  injunction  and the
temporary  restraining  order was  vacated.  On December 1, 1997 and January 30,
1998 the Registrant answered the Complaint and Amended Complaint respectively by
denying the  allegations  contained  therein.  The  Plaintiff in such action (on
December 2, 1997) filed a Motion to reargue  and renew its prior  denied  Motion
for a Preliminary  Injunction  and such Motion was (by Order and Decision  dated
June 17, 1998) denied. The Company denied the allegations,  vigorously  defended
the  litigation  and  thereafter  settled such  litigation  and all  outstanding
matters with respect thereto in July 1998 for $60,000.

B.       Dispute  with Gary J. Durday ("Durday"), Kenneth R. Montler ("Montler")
and Michael E. Harle ("Harle").  On July  17, 1998, two  legal proceedings  were
commenced by Swissray,  and two of its subsidiaries against Durday,  Montler and
Harle. Harle and Montler are former Chief Executive Officers of Swissray Medical
Systems Inc.  and  Swissray  Healthcare  Inc.,  respectively,  and Durday is the
former  Chief  Financial  Officer of both of those  companies.  Each of them was
employed  pursuant  to an  Employment  Agreement  dated  October  17,  1997.  In
addition,  these  three  individuals  were  owners of a  company  by the name of
Service  Support  Group LLC  ("SSG"),  the assets of which were sold to Swissray
Medical Systems Inc. pursuant to an Asset Purchase Agreement dated as of October
17,  1997.  whereby  Messrs.  Durday,  Montler and Harle  received,  among other
consideration,  33,333  shares of Swissray's  common stock,  together with a put
option entitling these individuals to require Swissray to purchase any or all of
such shares at a purchase  price equal to $45.00 per share (on or after June 30,
1998 and until April 16, 1999).

         On July 17,  1998,  Swissray  and its  subsidiaries,  Swissray  Medical
Systems Inc. and Swissray  Healthcare Inc.  commenced an arbitration  proceeding
before the American Arbitration Association in Seattle,  Washington (Case No. 75
489 00196 98)  alleging  that  Messrs.  Durday,  Montler and Harle  fraudulently
induced  Swissray and its  subsidiaries to enter into the above referenced Asset
Purchase Agreement and otherwise  breached that Agreement.  The relief sought in
the arbitration  proceeding was the recovery of damages  suffered as a result of
this alleged wrongful conduct and a rescission of the put option provided for in
the Asset Purchase Agreement. Messrs. Durday, Montler and Harle responded to the
allegations  made  in the  arbitration  proceeding  and  asserted  counterclaims
against  Swissray  and its  subsidiaries  claiming  a  breach  by them of  their
obligations under the Asset Purchase Agreement and other relief. The arbitration
took place in Seattle on January 8-10, 1999; the proceeding concluded on January
27, 1999 after the submission of post-hearing  briefs. On February 23, 1999, the
Arbitrator  issued  his  ruling,  awarding  Messrs.  Durday,  Montler  and Harle
$1,500,000  and  ordering  them to  surrender  all  rights to  33,333  shares of
Swissray  common  stock.  On February  26, 1999,  Swissray and Swissray  Medical
Systems  Inc.  filed a petition in Supreme  Court,  New York  County  (Index No.
99/104017) to vacate the above referenced arbitration award. By order dated July
8, 1999 such motion was denied and the court confirmed the aforesaid arbitration
award.

         In addition to the above referenced  arbitration  proceeding,  Swissray
and its  subsidiaries  commenced an action against Messrs.  Durday,  Montler and
Harle  in the  Supreme  Court of the  State of New  York,  County  of New  York,
alleging that these individuals  breached the obligations  undertaken by them in
their respective Employment  Agreements.  Further,  Messrs.  Durday, Montler and
Harle commenced an action in Superior

                                      -22-

<PAGE>



Court  in  Pierce   County,   Washington   (September   1998  under   Cause  No.
98-2-10701-0), and asked that Court to adjudicate the issues raised in the above
referenced New York State Court action.  Swissray filed applications in both the
Washington and New York  litigations  urging that,  because the action was first
filed in New York, the New York court,  rather than the Washington court, should
decide where the litigation should proceed.  Messrs.  Durday,  Montler and Harle
initially  opposed  that  position  and  urged  the  Washington  State  court to
adjudicate all issues, but subsequently  withdrew their opposition to Swissray's
application and consented to a stay of all further proceedings in the Washington
State court  action  until after the New York court had reached a decision as to
whether it or the  Washington  court is the proper forum for  litigation  of the
parties' dispute.  By order dated June 1, 1999 filed in the Supreme Court of the
State of New York,  County of New York  (Index No.  603512/98)  Messrs.  Durday,
Montler and Harle's motion for an order dismissing  Swissray's complaint (on the
ground of forum non conveniens) was granted.  The aforesaid  action commenced by
Messrs.  Durday,  Montler  and  Harle in  Pierce  County,  Washington,  remained
pending.

         Parties to each of the aforesaid  proceedings  thereafter  entered into
settlement  negotiations resulting in Swissray agreeing to pay $1,500,000 as and
for full settlement of all outstanding claims; such settlement  agreement having
been executed on August 31, 1999. In accordance with such  settlement  agreement
the Company was required and has since paid the sum of $1,000,000 and is further
obligated to pay (in accordance  with the terms of an August 31, 1999 promissory
note and over a period of 24  consecutive  months) an aggregate of $500,000 with
interest at the rate of 9% per annum.  Payments with respect to such  promissory
note have been and remain current.

C.  Dispute  with J.  Douglas  Maxwell.  On or about  July 1, 1999 an action was
commenced in the Supreme Court, State of New York, County of New York (Index No.
113099/99)   entitled  J.   Douglas   Maxwell   ("Maxwell")   against   Swissray
International,  Inc.  ("Swissray"),  whereby Maxwell is seeking judgement in the
sum of $380,000  based upon his  interpretation  of various terms and conditions
contained in an Exchange Agreement between the parties dated July 22, 1996 and a
subsequent  Mutual  Release and Settlement  Agreement  between the parties dated
June 1,  1998.  Swissray  has  denied  the  material  allegations  of  Maxwell's
complaint  and  has  asserted  three  affirmative   defenses  and  two  separate
counterclaims  seeking  (amongst other  matters)  dismissal of the complaint and
recision of the settlement agreement. It is Swissray's management's intention to
contest this matter vigorously. An Order has been made on July 24, 2000 granting
Maxwell partial summary judgment on his claim for approximately $320,000 and the
balance of his claim has been severed for trial.

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

         No matters were submitted to a vote of Company  security holders during
the fourth quarter of its fiscal year ended June 30, 2000.

         The Company  held its Annual  Meeting of  Stockholders  for fiscal year
ended June 30, 1999 on July 12,  2000,  at which time  stockholders  (i) elected
each of  those  five  persons  nominated  to  serve  on the  Company's  Board of
Directors and (ii) approved the  appointment of Feldman Sherb & Co., P.C. as the
Company's independent  accountants for fiscal year ended June 30, 2000 - both by
an overwhelming majority approximating in excess of 98% of all votes cast.

         Moreover  stockholders approved (a) the proposal to adopt the Company's
2000 Stock Option Plan and (b) the proposal to increase authorized common shares
from 50,000,000 to  100,000,000.  In each instance votes for such approvals were
in excess of 96% of all votes cast (excluding abstentions).

         With   respect  to   certain   "shareholder   ratification"   proposals
(designated  3  and  4)  - in  excess  of  96%  of  all  votes  cast,  excluding
abstentions,  voted in favor of ratifying the issuance of 2,000,000  restrictive
shares  of  Company  common  stock  to its  President  in  exchange  for  and in
consideration  of  cancellation  of  certain  bonus   provisions   contained  in
employment  agreement  while  in  excess  of 95% of all  votes  cast,  excluding
abstentions,  voted in favor of  issuance  of  certain  other  shares of Company
common stock (aggregating

                                      -23-

<PAGE>



875,000 restrictive shares) to certain of its employees.  In each instance those
persons who had received  shares of Company  common stock for which  shareholder
ratification  was  sought   abstained  from  voting.   See  Item  11  "Executive
Compensation" as relates to the aforesaid issuance of 2,000,000 to the Company's
President  and Item 13  "Certain  Relationships  and  Related  Transactions"  as
relates to the issuance of the aforesaid 875,000  restrictive  shares of Company
common stock.

         The  number  of  shares of Common  Stock  voted at the  Annual  Meeting
approximated 95% of all issued and outstanding securities as of the record date.

         The Company has  established a tentative  date of November 30, 2000 for
holding its Annual Meeting of  Stockholders  for fiscal year ended June 30, 2000
with the  intention  that same be held in  Chicago,  Illinois  during the annual
Radiological  Society of North America  convention.  Specific plans as to agenda
have not yet been finalized.

                                     PART II

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

         (a)      Market Information

         The Registrant's  common stock, $.01 par value (the "Common Stock") was
listed on the Nasdaq  SmallCap  Market and  traded  under the symbol  SRMI until
October 26, 1998  delisting.  Since January 1999 the Company's  common stock has
been trading on the  Electronic  Over-the-Counter  Bulletin Board under the same
symbol. The following table sets forth, for the periods indicated,  the range of
high and low bid prices on the dates indicated for the  Registrant's  securities
indicated below for each full quarterly period within the two most recent fiscal
years (if  applicable)  and any subsequent  interim  period for which  financial
statements are included and/or required to be included.

Fiscal Year Ended June 30, 1999                  Quarterly Common Stock Price
           By Quarter                                    Ranges (1)(2)
-------------------------------                  ----------------------------
Quarter              Date                           High              Low

1st      September 30, 1998 (3)                    $0.5625           $0.188
2nd      December 31, 1998                         $1.375            $0.875
3rd      March 31, 1999                            $1.25             $0.375
4th      June 30, 1999                             $2.812            $2.437

Fiscal Year Ended June 30, 2000                  Quarterly Common Stock Price
           By Quarter                                    Ranges (1)(2)
-------------------------------                  ----------------------------
Quarter              Date                           High               Low

1st      September 30, 1999                        $4.062            $1.875
2nd      December 31, 1999                         $7.40625          $2.71875
3rd      March 31, 2000                            $9.937            $3.375
4th      June 30, 2000                             $4.05             $2.187

(1) The Registrant's Common Stock began trading on the Nasdaq SmallCap market on
March  20,  1996  with  an  opening  bid  of  $4.75.  The  following   statement
specifically  refers to the Common Stock  activity,  if any,  prior to March 20,
1996 and  subsequent  to October 26, 1998 NASDAQ  delisting.  The  existence  of
limited or sporadic  quotations  should not of itself be deemed to constitute an
"established  public trading  market." To the extent that limited trading in the
Registrants's  Common Stock took place,  such  transactions have been limited to
the  over-the-counter  market.  Until March 20, 1996 and since October 26, 1998,
all prices indicated

                                      -24-

<PAGE>



are as reported to the  Registrant  by  broker-dealer(s)  making a market in its
common stock in the National  Quotation Data Service ("pink  sheets") and in the
Electronic  Over-the-Counter  Bulletin Board. During such dates the Registrant's
Common Stock was not traded or quoted on any  automated  quotation  system other
than as indicated herein. The over-the-counter market and other quotes indicated
reflect inter-dealer prices without retail mark-up,  mark-down or commission and
do not necessarily represent actual transactions.

(2) All prices  indicated  hereinabove for quarters up to but excluding  quarter
ending  December  31,  1998  reflect  price  ranges as they  existed  during the
quarters  indicated  but do not  retroactively  reflect a 1 for 10 reverse stock
split effective October 1, 1998.

(3) On the date of NASDAQ's  delisting (October 26, 1998) the common stock price
was $.97 per share while on the date  immediately  prior to effectiveness of the
reverse stock split (October 1, 1998) the stock price was $.118 per share.

         (b)      Holders

         As of the close of  business  on  September  12,  2000  there  were 516
stockholders of record of the  Registrant's  Common Stock and 23,667,129  shares
issued and outstanding.

         (c)      Dividends

         The payment by the Registrant of dividends, if any, in the future rests
within the  discretion  of its Board of Directors  and will depend,  among other
things, upon the Company's earnings,  its capital requirements and its financial
condition,  as well as other  relevant  factors.  The Registrant has not paid or
declared any dividends  upon its Common Stock since its inception and, by reason
of its present  financial  status and its contemplated  financial  requirements,
does not contemplate or anticipate paying any dividends upon its Common Stock in
the foreseeable future.

         (d)      Nasdaq Delisting

         On October 26, 1998 Nasdaq  determined to delist  Company's  securities
from The Nasdaq Stock Market  effective  with the close of business  October 26,
1998. The Nasdaq  Listing and Hearing and Review Council  ("Council") on its own
motion  on  December   9,  1998   determined   to  review  the  Nasdaq   Listing
Qualifications  Panel  ("Panel")  delisting  decision.  The Company,  on its own
initiative also timely perfected its appeal. On April 1, 1999 the Council issued
a decision  whereby it reversed  and  remanded  the decision of the Nasdaq Panel
with certain  instructions.  The Panel,  in a November 5, 1999 decision,  opined
that the  Company  failed  to  evidence  compliance  with all  requirements  for
continued  listing on the Nasdaq SmallCap Market and on June 1, 2000 the Council
affirmed  the decision of the Panel  indicating  that it agreed with the Panel's
various  conclusions.  Thereafter  and pursuant to NASD Rule  4850(a),  the NASD
Board of Governors declined to call this decision for review and the Company was
so notified on July 28, 2000.

         For  detailed  summarized   information   regarding  certain  pertinent
findings of both the Panel and Council from initial delisting through conclusion
of the Nasdaq appeal  process,  reference is herewith made to the Company's Form
S-1  Registration  Statement  as  declared  effective  August  14,  2000  and in
particular to that portion thereof  entitled "Market Prices and Dividend Policy"
subheading  "Continued Nasdaq Delisting".  See also cover page to this Form 10-K
under the heading "Documents Incorporated by Reference".



                                      -25-

<PAGE>



ITEM 6.           SELECTED FINANCIAL DATA

                             Swissray International
                      SELECTED CONSOLIDATED FINANCIAL DATA


      The selected consolidated financial data presented below should be read in

conjunction with  "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations" and the Consolidated Financial Statements and related
notes thereto  included  elsewhere in this document.  The selected  consolidated
financial  data as of and for the fiscal  years  ended June 30,  1996,  June 30,
1997,  June 30,  1998,  June 30,  1999 and June 30,  2000 are  derived  from the
consolidated financial statements of the Company.
<TABLE>
<CAPTION>


                                                                              Year Ended
                                                                               June 30,
                                             ------------- ---------------  ---------------- --------------   --------------
                                                2000           1999*             1998            1997*            1996
                                             ------------  ---------------  ---------------  --------------   --------------
                                                                           (in thosands, except per share data)
STATEMENT OF OPERATIONS DATA:
<S>                                               <C>              <C>              <C>             <C>              <C>
Net sales                                         22,030           17,296           22,893          13,151           10,899
Cost of goods sold                                16,500           13,529           18,082           8,445            5,793
                                             ------------  ---------------  ---------------  --------------   --------------

Gross profit                                       5,530            3,767            4,811           4,706            5,106
Gross profit margin (%)                              25%              22%              21%             36%              47%

Selling, general and administrative               17,011           19,346           18,748          17,450           14,966
                                             ------------  ---------------  ---------------  --------------   --------------
Operating loss                                   (11,481)         (15,579)         (13,937)        (12,744)          (9,860)
Other expense (income)                              (190)             (40)             281            (319)          (1,004)
Interest expense                                  10,347            5,639            8,590             762              194
                                             ------------  ---------------  ---------------  --------------   --------------

Loss from continuing operations
before income taxes                              (21,638)         (21,178)         (22,808)        (13,187)          (9,050)

Income tax provision (benefit)                      -                -                -                110             (365)
                                             ------------  ---------------  ---------------  --------------   --------------

Loss from continuing operations                  (21,638)         (21,178)         (22,808)        (13,297)          (8,685)

Loss from continuing operations
     per common share                              (1.14)           (3.24)           (8.48)          (8.41)           (6.69)
                                             ============  ===============  ===============  ==============   ==============

BALANCE SHEET DATA:
Total assets                                      25,383           23,511           25,915          24,788           18,793
Long-term liabilities                             14,470           15,501            7,771           5,635             -
Common stock subject to put                          320            1,820            1,820             320             -

</TABLE>

(1)  On October 1, 1998 the Company declared a 1 for 10 reverse stock split. The
     financial  statements  for all periods  presented  have been  retroactively
     adjusted for the split.

* Restated

                                      -26-

<PAGE>



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

     All references herein to the "Registrant"  refer to Swissray  International
Inc. All  references  herein to the "Company"  refer to Swissray  International,
Inc. and its subsidiaries.

GENERAL

         Throughout fiscal year ended June 30, 2000 the Company took a number of
important  steps to  strengthen  its  position  in the field of  radiology  with
specific emphasis upon its direct digital radiography line and additions thereto
so as to expand its dedicated  systems and so as to offer solutions to important
aspects of digital radiography.

         Market   penetration   of  the  Company's   flag  ship   product,   the
ddRMulti-System,  continued to increase as a result of the sales  efforts of the
Company's internal sales staff as well as the sales and distribution  efforts of
Hitachi  Medical  Systems  America,  Inc., the Company's  principal  distributor
within certain defined  territories in the U.S. While initial market penetration
resulted in the sale of 12  ddRMulti-Systems  during  fiscal year ended June 30,
1999,  fiscal year ended June 30, 2000 saw substantial  and significant  further
market   penetration  in  that  the  Company  contracted  for  the  sale  of  64
ddRMulti-Systems  (29 of which were contracted for sale in the U.S. and with the
balance  being   contracted   for  sale  outside  the  U.S.,   inclusive  of  32
ddRMulti-Systems contracted for sale to the Government of Romania). A balance of
8 of such 64 ddR  Systems  currently  remain on  backlog.  See below for updated
information with respect to sales to the Government of Romania.

         As  regards  sales  to  Romania, the Company  completed sale (primarily
during  fiscal year ended June 30,  2000),  of all 32  ddRMulti-Systems  and the
entire contract, valued at $13,800,000, has been paid in full.

         During its past fiscal  year,  the Company has  continued  to shift its
primary focus and emphasis from  conventional  x-ray equipment to direct digital
radiography,  with its German subsidiary selling its conventional x-ray business
division  (in  March  2000)  to an  unaffiliated  third  party  in order to more
extensively  focus  upon sales and  marketing  of ddR  equipment.  This shift in
emphasis has already proven  successful with such German  subsidiary  having (in
September 2000) contracted for the sale of two ddRMulti-Systems and one ddRCombi
(see below) to outpatient radiology clinics in Germany.

         With the  introduction  of two new  products,  the  ddRChest-System,  a
dedicated chest unit and the ddRCombi,  a multifunctional  unit perfectly suited
for Emergency Room applications, the Company has succeeded in positioning itself
with a high tech image and entered the new millennium with a substantial list of
potential ddR and  informatics  business  opportunities.  Both Systems are based
upon the patented technology of the ddRMulti-System. See also Item 1 - "Business
- New Products" for further information.

         So as to no longer be in a position  whereby it would have to rely upon
a single source supplier of certain camera electronics,  the Company, in January
of 2000,  entered  into an  agreement  with a CCD  camera  supplier,  whereby it
purchased a production facility (including necessary tools, equipment,  diagrams
and related knowhow) with the intention of commencing in-house production of key
camera  components  concurrently  with  eliminating  its  reliance  upon outside
suppliers and simultaneously reducing camera costs. In-house production has been
successful.

         The Company's efforts were again recognized for the second  consecutive
year (by unaffiliated  third parties) as evidenced by its having been chosen (in
August of 2000) as one of the 50 fastest growing technology companies in the New
York  City/Westchester/Rockland  County  areas.  This program was  sponsored by,
amongst  others,  NASDAQ/AMEX and Deloitte & Touche.  Additionally,  The Company
received two awards for its outstanding  marketing  campaign and presence at the
1999 RSNA meeting: the

                                      -27-

<PAGE>



Pro-Comm  1999 and the 2000 BMA tower  award,  both  sponsored  by the  Business
Marketing Association.

         Ongoing efforts in the Company's  research and  development  department
have  recently  led to the Company  being  issued  patents in both the U.S.  (in
September  1999) and in Europe (in May 1999) for the direct digital  Radiography
(ddR) detector, the AddOn-Bucky. These patents relate to the optical arrangement
and process for transmitting and converting  primary x-ray images generated on a
two  dimensional  primary  image array.  Furthermore,  the patent for the mirror
optics has been  approved in the U.S. in March 2000 for the optical  arrangement
and method for  electronically  detecting an x-ray image while a similar  patent
awaits European  approval.  For the aforesaid ddRCombi and  ddRChest-System  the
Company  was  granted a design  protection  in  Switzerland.  Additional  patent
applications  for the design  protection for both Systems have been submitted in
Sweden, Germany,  Benelux, France, Canada and the U.S. and are currently pending
approval.

         The Company  received its UL (July 1999) and CE  (December  1999) label
for its ddRMulti-System.  This certification is a public statement of compliance
with a known  standard and an extremely  stringent  approval  process  involving
assessment and  documentation of a product sample by an independent  third party
organization   followed  by  on-going   periodic  product   inspections  at  the
manufacturing site.

         Management  of the  Company  believes  that its unique  technology  and
vision for the future  have set the stage for  continued  growth in the years to
come and  anticipate  a continued  increase in demand for the  Company's  direct
digital  radiography  solutions,  which belief is based upon results of clinical
successes in the U.S. as well as in Europe.

YEAR 2000 POLICY STATEMENT AND COSTS

         The Company  conducted an extensive  program to check the status of its
equipment   (information  and   non-information   technology)   related  to  the
millennium.

         For relevant  material  (information  and  non-information  technology)
delivered by third parties the Company  received  written  assurances that their
year 2000 compliance's is under control.  The Company was 100% compliant and was
ready for Y2K and 100% of the Company's  installed base  equipment  (information
and  non-information  technology)  fulfilled year 2000 compliance.  Accordingly,
contingency plans worked out by the Company proved to be unnecessary.

         Total year 2000 costs  approximated  $100,000  with  approximately  50%
thereof  being  allocated  towards  testing  and  surveying  of the  Company own
products.

         Neither  Swissray  nor  any  third  party  with  whom  it has  material
relationships,  suffered any significant adverse consequences resulting from the
transition to Year 2000 or thereafter.

YEAR ENDED JUNE 30, 2000 COMPARED TO YEAR ENDED JUNE 30, 1999

RESULTS OF OPERATIONS

         Net sales  amounted to  $22,030,124  for the year ended June 30,  2000,
compared  to  $17,295,882  for the year  ended  June  30,  1999 an  increase  of
$4,734,242 or 27.4% from the year ended June 30, 1999. The 27.4% increase in net
sales  was  mainly  due to the sale of  ddRMulti-Systems increasing by 486.5% or
$11,728,441.  This  significant  increase was  slightly  offset by a decrease in
conventional  x-ray of 32.3% ($861,006) and  conventional  OEM-Business of 60.4%
($5,923,145).  The decrease in conventional x-ray and conventional  OEM-Business
is due to the Company's  conscious effort of promoting sales of ddRMulti-Systems
with a  corresponding  decline of  interest in sales of  conventional  x-ray and
conventional OEM-Business.

         In the past the Company has been  substantially  reliant  upon  Philips
Medical Systems ("Philips") but

                                      -28-

<PAGE>



at this stage of the  Company's  maturation  process  and as same  continues  to
develop, reliance upon Philips has correspondingly decreased.  Additionally, the
Company's  agreement with Philips relates to conventional  x-ray equipment which
has been a low  profit  margin  item.  More and more  this type of sale is being
replaced  by (a)  Company  sale of  conventional  x-ray  equipment  directly  to
purchasing  country and/or  hospital and/or to the ultimate user thereof and (b)
more  significantly and importantly by Company's sales of its ddRMulti- System -
its flagship product.

         Gross profit  increased by $1,763,547  or 46.8% to  $5,530,128  for the
year ended June 30,  2000,  from  $3,766,581  for the year ended June 30,  1999.
Gross  profit as a percentage  of net  revenues  increased to 25.1% for the year
ended June 30, 2000 from 21.8% for the year ended June 30, 1999. The increase in
gross profit as a percentage  of net revenues is  attributable  to the fact that
the percentage of sales of ddRMulti-Systems to total sales increased to 64.2% of
total  sales for the year ended June 30, 2000 from 13.9% for the year ended June
30, 1999.

         Operating expenses decreased by $2,334,842 or 12.1% to $17,011,097,  or
77.2% of net revenues,  for the year ended June 30, 2000,  from  $19,345,939  or
111.9% of net  revenues for the year ended June 30, 1999.  The  principal  items
were officers and directors compensation of $2,831,662 or 12.9% of net sales for
the year ended June 30, 2000  compared to $5,014,293 or 29% of net sales for the
year ended June 30, 1999, salaries (net of officers and directors  compensation)
of $3,762,009 or 17.1% of net sales for the year ended June 30,2000  compared to
$3,784,305  or 21.9% of net sales for the year ended June 30,  1999 and  selling
expenses  of  $4,352,016  or 19.8% of net sales for the year ended June 30, 2000
compared to  $3,207,646  or 18.5% of net sales for the year ended June 30, 1999.
Research and  development  expenses were $1,914,065 or 8.7% of net sales for the
year ended June 30, 2000  compared to  $1,808,107  or 10.5% of net sales for the
year ended June 30, 1999.  The increase is primarily due to the  development  of
the  ddrCombi  and  the  ddRChest  unit.  General  and  administrative  expenses
decreased by $667,928 or 26.9% to  $1,816,828  or 8.2% of net sales for the year
ended  June 30,  2000 from  $2,484,756  or 14.4% of net sales for the year ended
June 30, 1999. The decrease in officers and directors compensation of $2,182,631
or 43.5% is due to the fact that within  fiscal 1999 common  stock issued to the
President in exchange for  extinguishment  of certain bonus rights  contained in
his  employment  agreement  amounted to $4,320,000  whereas  common stock issued
within  fiscal year 2000 to directors  and  officers  for  services  amounted to
$2,165,625.  The decrease in selling and general administrative  expenses is due
to overall savings, primarily on professional fees and services. Other operating
expenses  decreased  by $182,204 or 17.1% to $883,835 or 4% of net sales for the
year ended June 30, 2000 from $1,066,039 or 6.2% of net sales for the year ended
June 30,  1999.  This  decrease  is  primarily  due to the  decrease in rent and
insurance costs.

         Interest expenses  increased to $10,347,427 for the year ended June 30,
2000 compared to $5,638,928  for the year ended June 30, 1999.  This increase is
primarily  due to the  increase  of  interest  expense  for  accrual  of penalty
interest on periodic payments  required by terms of financing  agreements and an
increase in amortization of Debenture issuance cost and Conversion Benefit.

         Loss on  extinguishment of debt was $0 for the year ended June 30, 2000
compared  to a  loss  of  $832,849  for  the  year  ended  June  30,  1999.  The
extinguishment gain or loss resulted from refinancing of Convertible debentures.

FINANCIAL CONDITION

June 30, 2000 compared to June 30, 1999

         Total assets of the Company on June 30, 2000 increased by $1,871,825 to
$25,383,014 from $23,511,189 on June 30, 1999,  primarily due to the increase of
current assets.  Current assets increased  $1,902,120 to $13,831,501 on June 30,
2000 from  $11,929,381  on June 30,  1999.  The  increase  in current  assets is
attributable  to the  increase  of cash  and  cash  equivalents  of  $1,729,886,
restricted  cash of  $1,385,600  and the  increase  of  accounts  receivable  of
$736,520   of  which   approximately   $1,840,250   arises   from  the  sale  of
ddRMulti-Systems  to  Romania  which was  partially  offset by the  decrease  in
inventory of $2,695,249 caused

                                      -29-

<PAGE>



by the sales of these units to Romania and the increase in prepaid  expenses and
sundry receivables of $445,363.  Other assets decreased $47,871 to $5,250,897 on
June 30, 2000 from  $5,298,768  on June 30,  1999.  The  decrease  is  primarily
attributable  to  the  amortization  of  the  licensing  agreement,   patents  &
trademark, software development cost and the goodwill.

         On June 30,  2000,  the Company had total  liabilities  of  $35,384,045
compared to $30,445,812 on June 30, 1999. On June 30, 2000, current  liabilities
were  $21,233,649  compared to $14,944,865 on June 30, 1999.  Working capital at
June 30, 2000 was $(7,402,148) compared to $(3,015,484) at June 30, 1999.

CASH FLOW AND CAPITAL  EXPENDITURES  YEAR ENDED JUNE 30,  2000  COMPARED TO YEAR
ENDED JUNE 30, 1999.

         Cash used for operating activities for the year ended June 30, 2000 was
$4,360,009  compared to $9,788,606  for the year ended June 30, 1999.  Cash used
for investing  activities was $639,778 for the year ended June 30, 2000 compared
to  $879,303  for the year  ended  June  30,  1999.  Cash  flow  from  financing
activities  for the  year  ended  June  30,  2000  was  $6,215,558  compared  to
$11,068,406 for year ended June 30, 1999.

Liquidity

         The Company  anticipates  that its use of cash will remain  substantial
for the  foreseeable  future.  In particular,  management of the Company expects
substantial  expenditures  in  connection  with the  production  of the  planned
increase of sales,  the continuation of the  strengthening  and expansion of the
Company's marketing  organization and, to a lesser degree,  ongoing research and
development  projects.  The Company expects that funding for these  expenditures
will be  available  out of the  Company's  future cash flow  and/or  issuance of
equity and/or debt securities during the next 12 months and thereafter.

         However,  the availability of a sufficient future cash flow will depend
to a significant  extent on the  marketability  of the Company's ddR Systems and
related products.  Accordingly,  the Company may be required to issue additional
convertible debentures or equity securities to finance such capital expenditures
and working capital requirements.  There can be no assurance whether or not such
financing will be available on terms satisfactory to management.

         On March 16, 1998, the Company issued  $5,500,000  aggregate  principal
amount of 6% convertible debentures (the "Convertible Debentures"),  convertible
into  Common  Stock of the Company to the  following  financing  participants  -
Atlantis Capital Fund, Ltd.,  Canadian Advantage Limited  Partnership,  Dominion
Capital Fund,  Ltd. and  Sovereign  Partners LP. After  deducting  legal fees of
$35,000,  and placement  agent fees of $550,000  directly  attributable  to such
offering, the Company received a net amount of $4,915,000.  The Company received
written  representations  from each  investor  to the effect that they were each
accredited  investors  as defined in Rule  501(a) of  Regulation  D. One Hundred
percent of the face amount of the Convertible  Debentures were  convertible into
shares of Common  Stock of the  Company at the  earlier  of May 15,  1998 or the
effective date of a Registration  Statement (since declared effective August 14,
2000) at a  conversion  price equal to 80% of the average  closing bid price for
the  ten  trading  days  preceding  the  date  of  conversion.  Any  Convertible
Debentures not so converted were subject to mandatory  conversion by the Company
on the 24th  monthly  anniversary  of the date of  issuance  of the  Convertible
Debentures. All of these debentures have been converted.

         In June of 1998,  the Company  issued  $2,000,000  aggregate  principal
amount of 6% convertible debentures (the "Convertible Debentures"),  convertible
into  Common  Stock of the Company to the  following  financing  participants  -
Canadian  Advantage  Limited  Partnership,   Dominion  Capital  Fund,  Ltd.  and
Sovereign  Partners LP.  After  deducting  fees  directly  attributable  to such
offering the Company  received a net amount of $1,760,000.  The Company received
written  representations  from each  investor  to the effect that they were each
accredited  investors  as defined in Rule  501(a) of  Regulation  D. One Hundred
percent of the face amount of the Convertible  Debentures were  convertible into
shares of Common Stock of the Company at

                                      -30-

<PAGE>



the earlier of August 14, 1998 or the effective date of a Registration Statement
(since declared effective August 14, 2000) at a conversion price equal to 80% of
the average  closing bid price for the ten trading  days  preceding  the date of
conversion.  Any  Convertible  Debentures  not  so  converted  were  subject  to
mandatory  conversion by the Company on the 24th monthly anniversary of the date
of issuance of the  Convertible  Debentures.  All of these  debentures have been
converted.

         On August 31, 1998 the Company issued  $3,832,849  aggregate  principal
amount of 5% convertible  debentures (the "Convertible  Debentures") including a
25% premium and accrued  interest,  convertible into Common Stock of the Company
to the following financing  participants - Atlantis Capital Fund, Ltd., Canadian
Advantage  Limited  Partnership,  Dominion  Capital  Fund,  Ltd.  and  Sovereign
Partners LP. The Company did not receive any cash  proceeds from the offering of
the Convertible Debentures.  The full amount was paid by investors to holders of
the Company's Convertible Debentures issued on March 16, 1998 holding $3,000,000
of such Convertible Debentures as repayment in full of the Company's obligations
under such  Convertible  Debentures.  During the same period the Company  issued
$2,311,000 aggregate principal amount of 5% Convertible Debentures,  convertible
into Common Stock of the Company.  After deducting fees,  commissions and escrow
fees in the  aggregate  amount of $311,000 the Company  received a net amount of
$2,000,000. The face amount of both Convertible Debentures were convertible into
shares of Common Stock of the Company  commencing  March 1, 1999 at a conversion
price  equal to 82% of the average  closing  bid price for the ten trading  days
preceding the date of the conversion or $1.00 whichever is less. Any convertible
Debentures  not so  converted  became  subject to  mandatory  conversion  by the
Company  on  the  24th  monthly  anniversary  of the  date  of  issuance  of the
Convertible  Debentures.  As  of  September  12,  2000  an  unconverted  balance
exclusive of interest and liquidated damages of $3,930,594  remains  outstanding
and is subject to conversion.

         On October 6, 1998 the Company issued  $2,940,000  aggregate  principal
amount of 5% convertible debentures (the "Convertible Debentures") including, as
part of the terms of this financing,  $540,000  repurchase of stock (717,850 and
747,150  shares from  Dominion  Capital  Fund,  Ltd. and  Sovereign  Partners LP
respectively),  convertible  into Common  Stock of the Company to the  following
financing  participants - Dominion Capital Fund, Ltd. and Sovereign Partners LP.
After  deducting fees,  commissions  and escrow fees in the aggregate  amount of
$300,000 the Company received a net amount of $2,100,000. The face amount of the
Convertible  Debentures  became  convertible  into shares of Common Stock of the
Company any time after the closing  date at a  conversion  price equal to 82% of
the average closing bid price for the ten trading days preceding the date of the
conversion  or  $1.00  whichever  is less.  Any  Convertible  Debentures  not so
converted  became  subject to  mandatory  conversion  by the Company on the 24th
monthly anniversary of the date of issuance of the Convertible Debentures. As of
September 12, 2000 none of these debentures have been converted.

         The Registrant received gross proceeds of $1,080,000 in December, 1998,
pursuant to promissory  notes  bearing  interest at the rate of 5% per annum for
the first 90 calendar days (through  March 13, 1999) with the Company having the
option to extend the notes for an additional 60 days with interest increasing 2%
per annum during the 60 day period.  The Company exercised its extension option.
As further  consideration  for the loan, the Company issued Lenders  Warrants to
purchase up to 50,000 shares of the Company's common stock exercisable, in whole
or in part,  for a period of up to 5 years at $.375  (the bid price for  Company
shares on the date of closing).  The promissory  notes (held by Dominion Capital
Fund, Ltd. and Sovereign Partners) were not paid by their due date and the terms
of a  Contingent  Subscription  Agreement,  Debenture  and  Registration  Rights
Agreement automatically went into effect with debentures bearing interest at the
rate of 5% per annum  (payable  in stock or cash at the  Company's  option)  and
being convertible, at any time at 82% of the 10 day average bid price for the 10
consecutive  trading days  immediately  preceding the  conversion  date or $1.00
whichever is less.  The documents  also provide for certain  Company  redemption
rights at  percentages  ranging from 115% of the face amount of the Debenture to
125% of the face amount of the debenture dependent upon redemption date, if any.
As of September 12, 2000 none of these debentures have been converted.

         On January 29, 1999 the  Company issued a principal aggregate amount of
$1,170,000 of convertible

                                      -31-

<PAGE>



debentures  ("Convertible  Debenture"),  convertible  into  Common  Stock of the
Company to the following  financing  participants - Dominion Capital Fund, Ltd.,
Dominion  Investment Fund LLC and Sovereign Partners LP at a conversion price of
82% of the average closing bid price for the ten trading days preceding the date
of conversion  together with accrued  interest of 3% for the first 90 days, 3.5%
for 91-120 days and 4% for 120 days and thereafter. As further consideration for
the loan, the Company issued Lenders Warrants to purchase up to 58,500 shares of
the Company's common stock exercisable,  in whole or in part, for a period of up
to 5 years at $1.00 per share. After deducing fees directly attributable to such
offering the Company  received a net amount of $1,020,000.  The Company received
written  representations  from each  investor  to the effect that they were each
accredited  investors as defined in Rule 501(a) of Regulation D. Any Convertible
Debenture not so converted are subject to mandatory conversion by the Company on
the 24th  anniversary  date of issuance of the Convertible  Debentures.  None of
these convertible debentures as of September 12, 2000 have been converted. As of
September 12, 2000 none of these debentures have been converted.

         On March 2, 1999 the  Company  entered  into a second  promissory  note
(contingent  convertible  debenture  financing)  with  the same  lenders  as the
December 1998 transaction  described directly above (i.e.,  Dominion  Investment
Fund LLC and Sovereign Partners LP) with terms and conditions identical to those
set forth above  excepting (a) gross proceeds  amounted to  $1,110,000,  (b) the
initial  due date of such  notes  was May 31,  1999,  (c) the  potential  60 day
extension  date on such  promissory  notes was July 30, 1999, but such extension
right was never utilized, (d) the conversion price was 80% of the 10 day average
closing bid price for the 10  consecutive  trading  days  immediately  preceding
conversion  date and (e)  Warrants  were issued  (similarly  exercisable  over 5
years) to purchase up to 50,000  shares of common stock at 125% of the average 5
day closing bid price of the Company's  common stock  immediately  preceding the
date of  closing  but in no event at less  than  $1.00 per  share.  In all other
respects the terms and conditions of each of the documents executed with respect
to this  transaction  are identical in all material  respects to those described
above regarding December 1998 transaction. The promissory notes were not paid by
their  due  date  and the  terms  of a  Contingent  Subscription  Agreement  and
Registration  Rights Agreement  automatically  went into effect. As of September
12, 2000 none of these debentures have been converted.

         On March 26,  1999 the Company  entered  into a third  promissory  note
(contingent convertible debenture financing) with terms and conditions identical
to those set forth in the March 2, 1999  promissory  note financing  referred to
directly above excepting (a) the lender is different,  to wit:  Aberdeen Avenue,
LLC, (b) gross proceeds  amounted to $550,000,  (c) the initial due date of such
note  was  June  25,  1999,  (d) the  potential  60 day  extension  date on such
promissory  note was August 24, 1999 but such extension right was never utilized
(e) Warrants were issued (similarly  exercisable over 5 years) to purchase up to
27,500  shares of common stock at 125% of the average 5 day closing bid price of
the Company's common stock  immediately  preceding the date of closing but in no
event at less  than  $1.00  per  share.  In all  other  respects  the  terms and
conditions  of each of the documents  executed with respect to this  transaction
are  identical  in all  material  respects  to  those  described  in  the  above
referenced  March 2, 1999  transaction.  The  promissory  notes were not paid by
their  due  date  and the  terms  of a  Contingent  Subscription  Agreement  and
Registration  Rights Agreement  automatically  went into effect. As of September
12, 2000 none of these debentures have been converted.

         From May 14, 1999 to June 9, 1999 (in a single  financing)  the Company
issued a  principal  aggregate  amount of  $850,000  of  convertible  debentures
("Convertible Debentures"),  convertible into Common Stock of the Company to the
following  financing  participants - Endeavor Capital Fund SA, Excaliber Limited
Partnership  and Carbon Mesa  Partners LLC at a  conversion  price of 80% of the
average  closing  bid  price  for the ten  trading  days  preceding  the date of
conversion  together with accrued  interest of 5%. After deducting fees directly
attributable to such offering the Company received a net amount of $772,727. The
Company received written  representations  from each investor to the effect that
they were each  accredited  investors as defined in Rule 501(a) of Regulation D.
Any Convertible  Debenture not so converted are subject to mandatory  conversion
by the  Company on the 24th  anniversary  date of  issuance  of the  Convertible
Debentures.  As of  September  12,  2000 an  unconverted  balance  exclusive  of
interest and liquidated  damages of $471,200 remains  outstanding and is subject
to conversion.

                                      -32-

<PAGE>



         On July 9,  1999 the  Company  entered  into a fourth  promissory  note
(contingent convertible debenture financing) with terms and conditions identical
to those set forth in the March 2, 1999  promissory  note financing  referred to
above excepting (a) the lender is different,  to wit: Southshore  Capital,  Ltd.
now assigned to Parkdale LLC (b) gross proceeds amounted to $1,100,000,  (c) the
due date of such note was  August  23,  1999 with no right to extend and (d) the
debenture  holder did not receive any warrants.  In all other respects the terms
and  conditions  of  each  of  the  documents  executed  with  respect  to  this
transaction  are  identical in all material  respects to those  described in the
above referenced March 2, 1999  transaction.  The promissory notes were not paid
by  their  due  date  and the  terms  of a  Contingent  Subscription  Agreement,
Convertible Debenture and Registration Rights Agreement  automatically went into
effect. As of September 12, 2000 none of these debentures have been converted.

         On August 11, 1999 the Company  entered  into a fifth  promissory  note
(contingent convertible debenture financing) with terms and conditions identical
in all material respects to those set forth in the March 2, 1999 promissory note
financing  referred  to above  excepting  (a) the lender is  different,  to wit:
Aberdeen  Avenue,  LLC, (b) gross proceeds  amounted to $1,400,000,  (c) the due
date of such note was  November  11,  1999  with no right to extend  and (d) the
debenture  holder did not receive any warrants.  In all other respects the terms
and  conditions  of  each  of  the  documents  executed  with  respect  to  this
transaction  were identical in all material  respects to those  described in the
above referenced March 2, 1999 transaction.  The promissory note was not paid on
its due date and the terms of the Contingent Subscription Agreement, Convertible
Debenture and Registration  Rights Agreement  automatically went into effect. As
of September 12, 2000 none of these debentures have been converted.

         Pursuant to an agreement entered into on September 2, 1999, the Company
authorized  a purchaser to purchase  1,000,000  shares at $1.00 per share (which
occurred on September 7, 1999) and up to an additional 2,000,000 shares at $1.50
per share so long as the first  1,000,000  shares  were  purchased  on or before
September 30, 1999 and as long as the purchaser purchased at least an additional
1,000,000  shares within 60 days of its first purchase.  The first purchase,  as
aforesaid,  was made on  September  7, 1999 (at $1.00 per share)  while the next
1,000,000 shares were purchased on October 19, 1999 (500,000 shares at $1.50 per
share) and November 1, 1999 (500,000 shares at $1.50 per share).  Having met the
purchase  requirements,  the purchaser was entitled  (through  March 1, 2000) to
purchase  the  balance of the  shares  referred  to at $1.50 but only  purchased
666,667  shares at such price in  December  1999.  The  investment  participants
involved in the above  transactions  and the number of shares (an  aggregate  of
2,666,667 shares) and purchase price per share paid by each of such participants
is as follows:  Parkdale  LLC - 1,000,000  shares at $1.00,  Southridge  Capital
Management  LLC - 333,334 shares at $1.50,  Striker  Capital - 833,334 shares at
$1.50,  Alfred  Hahnfeldt - 333,332 shares at $1.50 and  Greenfield  Investments
Consultants LLC - 166,667 shares at $1.50.

         In  February  2000 the  Company  entered  into an  additional  separate
transaction  whereby it sold 333,333  restrictive  shares of its common stock at
$3.00 per share to Dundurn Street LLC.

EFFECT OF CURRENCY ON RESULTS OF OPERATIONS

         The results of operations  and the financial  position of the Company's
subsidiaries  outside of the United States are reported in the relevant  foreign
currency  (primarily in Swiss Francs) and then translated into US dollars at the
applicable  foreign  exchange rate for  inclusion in the Company's  consolidated
financial   statements.   Accordingly,   the  results  of   operations  of  such
subsidiaries  as reported in US dollars  can vary  significantly  as a result of
changes in currency  exchange rates (in particular the exchange rate between the
Swiss Franc and the US dollar).

YEAR ENDED JUNE 30, 1999 COMPARED YEAR ENDED JUNE 30, 1998

Results of operations

         Net sales amounted to $17,295,882 for  the  year  ended  June 30, 1999,
compared to  $22,892,978,

                                      -33-

<PAGE>



a decrease of $5,597,096,  or 24.4% from the year ended June 30,  1998.Sales for
the year ended June 30, 1998 include sales of the film and processor business of
Empower  which was sold on June 30, 1998, of  $7,134,938.  Net sales without the
film and  processor  business of Empower  increased  for the year ended June 30,
1999 by $1,537,842  or 9.8%.  This  increase is due to the  additional  sales of
ddRMulti-Systems.

         Gross profit  decreased by $1,044,611  or 21.7% to  $3,766,581  for the
year ended June 30,  1999,  from  $4,811,192  for the year ended June 30,  1998.
Gross  profit as a percentage  of net  revenues  increased to 21.8% for the year
ended June 30, 1999 from 21% for the year ended June 30,  1998.  The increase in
gross profit percentage is due to production efficiencies.

         Operating  expenses  increased  by $598,210 or 3.2% to  $19,345,939  or
111.9% of net revenues,  for the year ended June 30, 1999, from $18,747,729,  or
81.9% of net revenues for the year ended June 30, 1998. The principal items were
salaries (net of officers and directors  compensation) of $3,784,305 or 21.9% of
net sales for the year ended June 30, 1999  compared to  $4,168,540  or 18.2% of
net sales for year  ended June 30,  1998 and  officers  compensation  increasing
$4,444,477,  primarily  from the  issuance of common  stock to its  President in
exchange for  extinguishment of certain bonus rights contained in his employment
agreement,  selling  expenses of  $3,207,646  or 18.5% of net sales for the year
ended June 30, 1999  compared to  $3,740,391  or 16.3% of net sales for the year
ended June 30, 1998. The decrease of depreciation  and  amortization of $471,582
primarily due to the fact that the  depreciable  fixed assets were less for 1999
since many of these assets were fully depreciated at June 30, 1998. The decrease
in  selling  expenses  was a result of the  closing  of  Empower  which  totaled
approximately  $476,000.  Research and  development  expenses were $1,808,107 or
10.5% of net sales for the year ended June 30, 1999  compared to  $3,542,149  or
15.5% of net sales for the year ended June 30, 1998.  This decrease is primarily
due to the decrease in research and development  related to  AddOn-Bucky.  Other
operating  expenses  decreased by  approximately  $670,000  from the  comparable
period  in 1998  primarily  from the  decrease  due to the  Empower  closing  of
$100,000 and the  decrease in occupancy  and  insurance  costs of  approximately
$200,000.  Principal costs  associated with  development of the  ddRMulti-System
have now been  accomplished  and research and development  costs are expected to
continue  regarding  upgrades  and  new  product  development  with  respect  to
associated and related products relating to the ddRMulti-System.

         Interest  expense  decreased to $5,638,928  for the year ended June 30,
1999 compared to $8,590,268  for the year ended June 30, 1998.  This decrease is
primarily  due to the  increase  of  interest  expense  for  accrual  of penalty
interest  on periodic  payments  required by term of  financing  agreements  and
decrease in amortization of Debenture issuance cost and Conversion Benefit.

         Loss on extinguishment of debt was $832,849 for the year ended June 30,
1999  compared  to again of  $304,923  for the year  ended  June 30,  1998.  The
extinguishment gain or loss resulted from refinancing of Convertible debentures.

Financial Condition

June 30, 1999 compared to June 30, 1998

         Total assets of the Company on June 30, 1999 decreased by $2,403,408 to
$23,511,149 from $25,914,597 on June 30, 1998,  primarily due to the decrease in
current assets.  Current assets decreased  $1,139,876 to $11,929,381 on June 30,
1999 from  $13,069,257  on June 30,  1998.  The  decrease  in current  assets is
primarily  attributable  to the  decrease in  inventories  of  $368,744  and the
decrease in prepaid expenses and sundry  receivables of $635,105  primarily from
the  collection  of  VAT  receivable.   Other  assets  decreased  $1,536,194  to
$5,298,768 on June 30, 1999 from  $6,834,962  on June 30, 1998.  The decrease is
primarily attributable to the amortization of the licensing agreement, patents &
trademark, software development cost and the goodwill.

         On June 30,  1999,  the Company had total  liabilities  of  $30,445,812
compared to $19,755,870 on June 30, 1998. On June 30, 1999, current  liabilities
were $14,944,865 compared to $11,984,554 on June

                                      -34-

<PAGE>
30,  1998.  Working  capital  at June  30,  199  was  ($3,015,484)  compared  to
($1,084,703) at June 30, 1998.

CASH FLOW AND CAPITAL  EXPENDITURES  YEAR ENDED JUNE 30,  1999  COMPARED TO YEAR
ENDED JUNE 30, 1998.

         Cash used for operating activities for the year ended June 30, 1999 was
$9,788,606 compared to $11,759,371 for the year ended June 30, 1998 primarily as
a  result  of  losses   sustained   from   operations,   exclusive  of  non-cash
compensation. Cash used for investing activities was $879,303 for the year ended
June 30, 1999 compared to $4,517,140  for the year ended June 30, 1998 primarily
from the  acquisitions  of  property  and  equipment.  Cash flow from  financing
activities  for the  year  ended  June  30,  1999 was  $11,068,406  compared  to
$14,799,200 for year ended June 30, 1998 as a result of the sale of common stock
and proceeds from the sale of debentures.

         The  Company  does  not  have  any  material  commitments  for  capital
expenditures as of June 30, 1999.

INFLATION

         Inflation  can  affect  the  costs of goods  and  services  used by the
Company.  The  competitive  environment  in which the  Company  operates  limits
somewhat  the  Company's  ability to recover  higher  costs  through  increasing
selling  prices.  Moreover,  there may be differences in inflation rates between
countries in which the Company  incurs the major  portion of its costs and other
countries in which the Company sells its products, which may limit the Company's
ability to recover  increased costs, if not offset by future increase of selling
prices.  To date, the Company's  sales to  high-inflation  countries have either
been made in Swiss Francs or US dollars.  Accordingly,  inflationary  conditions
have not had a material effect on the Company's operating results.

SEASONALITY

         The Company's business has historically  experienced a slight amount of
seasonal  variation with sales in the first fiscal  quarter  slightly lower than
sales in the other  fiscal  quarters  due to the fact that the  Company's  first
quarter coincides with the summer vacations in certain of the Company's markets.

BACKLOG

         Management  estimates  that as of the end of fiscal year ended June 30,
2000  the  Company  had an  order  backlog  of  $8,800,000  which  consisted  of
$2,080,000 in  conventional  x-ray  equipment and  $6,720,000 in digital  (i,e.,
ddRMulti-Systems  and information  solutions) as compared to an order backlog of
$12,000,000  which consisted of $8,000,000 in  conventional  x-ray equipment and
$4,000,000 in ddRMulti-Systems as of the fiscal year ended June 30, 1999.

NEW ACCOUNTING PRONOUNCEMENTS

         The Company has adopted Statement of Financial  Accounting Standard No.
133  ("SFAS  No.   133"),"Accounting  for  Derivative  Instruments  and  Hedging
Activities"  for the year ended June 2000.  SFAS No. 133 establishes a new model
for accounting for derivatives and hedging  activities and supersedes and amends
a number of existing standards. The application of the new pronouncement did not
have a material impact on the Company's financial statements.

ITEM 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Not applicable.

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The  following  financial  statements  have been prepared in accordance
with the requirements of Regulation S-X and supplementary  financial information
included  herein,  if any,  has been  prepared  in  accordance  with Item 301 of
Regulation S-K.
                          INDEX TO FINANCIAL STATEMENTS

                                                                        Page

Audited Financial Statements for Fiscal Years Ended
         June 30, 2000, 1999 and 1998:

Independent Auditors' Report                                            F-1

Consolidated Balance Sheets at June 30, 2000 and 1999                   F-2-3

Consolidated Statements of Operations for the years ended
         June 30, 2000, 1999 and 1998                                   F-4

Consolidated Statements of Cash flows for the years ended
         June 30, 2000, 1999 and 1998                                   F-5-6

Consolidated Statements of Stockholders Equity for the years
         ended June 30, 2000, 1999 and 1998                             F-7-8

Notes to Consolidated Financial Statements                              F-9-23

                                      -35-

<PAGE>

                          INDEPENDENT AUDITORS' REPORT


To the Stockholders and Board of Directors
Swissray International, Inc.
New York, New York

We have  audited  the  accompanying  consolidated  balance  sheets  of  Swissray
International,  Inc.  and  subsidiaries  as of June  30,  2000  and 1999 and the
related consolidated  statements of operations,  changes in stockholders' equity
and  cash  flows  for  each of the  three  years  then  ended.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall consolidated  financial statement
presentation.  We believe  that our audit  provides a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Swissray  International,  Inc.
and subsidiaries as of June 30, 2000 and 1999, and the results of its operations
changes in stockholders'  equity and cash flows for each of the three years then
ended in conformity with generally accepted accounting principles.




                                      /s/ Feldman Sherb & Co., P.C.
                                      Feldman Sherb & Co., P.C.
                                      Certified Public Accountants

New York, New York
August 4, 2000
                                       F-1
<PAGE>


                          SWISSRAY INTERNATIONAL INC.
                           CONSOLIDATED BALANCE SHEET

                                     ASSETS

<TABLE>
<CAPTION>
                                                                         ------------------------------
                                                                              2000              1999
                                                                                             (Restated)
                                                                         ------------------------------

<S>                                                                       <C>                 <C>
CURRENT ASSETS
Cash and cash equivalents                                                 $ 3,011,183       $ 1,281,297
Restricted cash                                                             1,385,600              -
Notes receivable - short-term                                                 300,000              -
Accounts receivable, net of allowance for doubtful
accounts of $170,883 and $219,993                                           3,185,399         2,448,879
Inventories                                                                 4,637,152         7,332,401
Prepaid expenses and sundry receivables                                     1,312,167           866,804
                                                                         ------------------------------
TOTAL CURRENT ASSETS                                                       13,831,501        11,929,381
                                                                         ------------------------------

PROPERTY AND EQUIPMENT                                                      6,300,616         6,283,040
                                                                         ------------------------------

OTHER ASSETS
Loan receivable                                                                  -               15,948
Loan receivable affiliates                                                    768,647              -
Licensing agreement                                                         2,607,451         3,104,109
Patents and trademarks                                                        171,866           199,906
Software development costs                                                    256,380           347,763
Security deposits                                                              28,035            28,035
Goodwill                                                                    1,409,680         1,603,007
                                                                         ------------------------------
TOTAL OTHER ASSETS                                                          5,250,897         5,298,768
                                                                         ------------------------------
TOTAL ASSETS                                                              $25,383,014       $23,511,189
                                                                         ==============================
</TABLE>

                                       F-2
    The accompanying notes are an integral part of these financial statements
<PAGE>
                            SWISSRAY INTERNATIONAL
                    CONSOLIDATED BALANCE SHEET (Continued)


                      LIABILITIES AND STOCKHOLDERS' DEFICIT

<TABLE>
                                                                         ------------------------------
                                                                              2000              1999
                                                                                             (Restated)
                                                                         ------------------------------


<S>                                                                       <C>                 <C>
CURRENT LIABILITIES
Current maturities of long-term debt                                      $   229,700       $   247,028
Notes payable - banks                                                       3,667,159         3,667,159
Notes payable - short-term                                                  1,352,502         1,700,000
Loan payable                                                                  119,885           126,006
Accounts payable                                                            4,340,033         5,422,321
Accrued expenses                                                           10,727,576         3,003,844
Restructuring                                                                 100,000           500,000
Customer deposits                                                             785,614           278,507
                                                                         ------------------------------
TOTAL CURRENT LIABILITIES                                                  21,233,649        14,944,865
                                                                         ------------------------------

CONVERTIBLE DEBENTURES, net of conversion benefit                          14,067,294        15,305,852
                                                                         ------------------------------

LONG-TERM DEBT, less current maturities                                        83,102           195,095

COMMON STOCK SUBJECT TO PUT                                                   319,985         1,819,985

STOCKHOLDERS' DEFICIT
Common stock                                                                  233,999           140,062
Additional paid-in capital                                                 88,207,532        69,028,013
Treasury stock                                                             (2,040,000)         (540,000)
Deferred compensation                                                        (998,399)       (1,282,500)
Accumulated deficit                                                       (94,130,543)      (72,492,463)
Accumulated other comprehensive loss                                       (1,273,620)       (1,787,735)
Common stock subject to put                                                  (319,985)       (1,819,985)
                                                                         ------------------------------
TOTAL STOCKHOLDERS' DEFICIT                                               (10,321,016)       (8,754,608)
                                                                         ------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                     $ 25,383,014      $ 23,511,189
                                                                         ==============================
</TABLE>

                                       F-3
    The accompanying notes are an integral part of these financial statements
<PAGE>
                           SWISSRAY INTERNATIONAL INC.
                      CONSOLIDATED STATEMENT OF OPERATIONS


<TABLE>
<CAPTION>                                                 YEAR ENDED JUNE 30,
                                          ----------------------------------------------------
                                              2000                1999                1998
                                                               (Restated)          (Restated)
                                          ----------------------------------------------------
<S>                                       <C>                 <C>                 <C>
NET SALES                                 $ 22,030,124        $ 17,295,882        $ 22,892,978
COST OF SALES                               16,499,996          13,529,301          18,081,786
                                          ----------------------------------------------------
GROSS PROFIT                                 5,530,128           3,766,301           4,811,192
                                          ----------------------------------------------------

OPERATING EXPENSES
Officers and directors compensation          2,831,662           5,014,293             569,816
Salaries                                     3,762,009           3,784,305           4,168,540
Selling                                      4,352,016           3,207,646           3,740,391
Research and development                     1,914,065           1,808,107           3,542,149
General and administrative                   1,816,828           2,484,756           2,612,262
Restructuring cost                                 ---                 ---             500,000
Other operating expenses                       883,835           1,066,039           1,735,877
Bad debts                                       93,570             706,877             133,196
Depreciation and amortization                1,357,112           1,273,916           1,745,498
                                          ----------------------------------------------------
TOTAL OPERATING EXPENSES                    17,011,097          19,345,939          18,747,729
                                          ----------------------------------------------------

LOSS BEFORE OTHER INCOME (EXPENSES)        (11,480,969)        (15,579,358)        (13,936,537)

Other income (expenses)                        190,316              40,385            (281,227)
Interest expense                           (10,347,427)         (5,638,928)         (8,590,268)
                                          ----------------------------------------------------
OTHER EXPENSES                             (10,157,111)         (5,598,543)         (8,871,495)
                                          ----------------------------------------------------
LOSS FROM CONTINUING OPERATIONS
  BEFORE EXTRAORDINARY ITEMS               (21,638,080)        (21,177,901)        (22,808,032)

Extraordinary income (expenses)                    ---            (832,849)            304,923
                                          ----------------------------------------------------
NET LOSS                                  $(21,638,080)       $(22,010,750)       $(22,503,109)
                                          ====================================================

LOSS PER COMMON SHARE BASIC
Loss from continuing operations                  (1.14)              (3.24)              (8.48)
Extraordinary items                              (0.00)              (0.13)               0.11
                                          ----------------------------------------------------
NET LOSS                                         (1.14)              (3.37)              (8.37)
                                          ====================================================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING                          18,927,303           6,525,423           2,690,695
                                          ============           =========           =========
</TABLE>


                                       F-4
    The accompanying notes are an integral part of these financial statements
<PAGE>

                           SWISSRAY INTERNATIONAL INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>                                                                           YEAR ENDED JUNE 30,
                                                                     ----------------------------------------------------
                                                                        2000                1999                1998
                                                                                          (Restated)          (Restated)
                                                                     ----------------------------------------------------
<S>                                                                 <C>                 <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITES
Net loss                                                            $(21,638,080)       $(22,010,750)       $(22,503,109)
Adjustment to reconcile net loss to net
        cash used by operating activities
        Depreciation and amortization                                  1,438,719           1,327,395           1,874,206
        Provision for bad debts                                          (49,110)            931,146             (38,803)
        Common stock and stock options issued for services             2,809,936           4,755,925                 ---
        Issuance of common stock in lieu of interest payments            279,600             128,107             449,376
        Interest expense on debt issuance cost and
          conversion benefit                                           1,131,061           3,070,784           7,905,225
        Interest expense on option value per Black Scholes             1,066,536              91,763                 ---
        Settlement expense paid through issuance of common stock         675,000                 ---                 ---
        Early extinguishment of debt (gain)                                  ---             832,849            (304,923)

        (Increase) decrease in operating assets:
        Accounts receivable                                             (687,410)            (51,866)          2,887,427
        Accounts receivable - long-term                                      ---                 ---             163,680
        Inventories                                                    2,695,249             368,744          (3,790,038)
        Prepaid expenses and sundry receivables                         (445,363)            635,106             434 229
        Increase (decrease) in operating liabilities:
        Accounts payable                                              (1,082,288)            391,873            (306,300)
        Accrued expenses                                               7,723,732            (361,606)          1,463,512
        Customers deposits                                               507,107             101,924               6,147
                                                                    ----------------------------------------------------
NET CASH USED BY OPERATING ACTIVITIES                                 (4,360,009)         (9,788,606)        (11,759,371)
                                                                    ----------------------------------------------------

CASH FLOW FROM INVESTING ACTIVITIES
        Acquisition of property and equipment                           (633,419)           (692,954)         (2,849,205)
        Capitalized computer software                                     (1,518)             (1,518)           (225,174)
        Patents and trademarks                                               ---                 ---             (52,386)
        Goodwill                                                             ---                 ---            (802,107)
        Other intangibles                                                (13,469)                ---                 ---
        Asset purchase net of cash received                                  ---                 ---            (591,108)
        Increase in notes receivable                                         ---            (199,132)                ---
        Security deposits                                                 (8,838)             10,245               5,448
        Increase(repayment)of loan receivable                             15,948               4,056              (2,608)
                                                                    ----------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES                                   (639,778)           (879,303)         (4,517,140)

CASH FLOWS FROM FINANCING ACTIVITIES
        Proceeds from (payments for) short-term borrowings-bank          (88,820)         20,191,413          10,342,060
        Proceeds related to debentures not funded                            ---            (227,273)                ---
        Principal payment of short-term borrowings                      (370,947)        (11,268,343)         (3,852,075)
        Principal payment of long-term borrowings                       (111,993)           (245,580)            (21,748)
        Principal payment of long-term borrowings with stock                 ---                 ---             (62,267)
        Increase in restricted cash                                   (1,385,600)                ---                 ---
        Note receivable - short-term                                    (300,000)                ---                 ---
        Issuance of common stock for cash                              8,605,416           3,160,396           8,461,262
        Exercise of stock options for cash                             2,136,149                 ---                 ---
        Purchase of treasury stock                                    (1,500,000)           (540,000)                ---
        Payment to stockholders and officers                                 ---              (2,207)            (68,032)
                                                                    ----------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES                                  6,215,558          11,068,406          14,779,200
                                                                    ----------------------------------------------------
EFFECT OF EXCHANGE RATE ON CASH                                          514,115            (400,752)           (332,444)
                                                                    ----------------------------------------------------
NET INCREASE (DECREASE) IN CASH                                        1,729,886                (255)         (1,809,755)
CASH AND CASH EQUIVALENT - beginning of year                           1,281,297           1,281,552           3,091,307
                                                                    ----------------------------------------------------
CASH AND CASH EQUIVALENTS - end of year                             $  3,011,183        $  1,281,297        $  1,281,552
                                                                    ====================================================
</TABLE>

                                      F-5
    The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
<CAPTION>

                       SUPPLEMENTAL CASH FLOW INFORMATION
                                                                                      YEAR ENDED JUNE 30,
                                                                     ----------------------------------------------------
                                                                        2000                1999                1998
                                                                                          (Restated)          (Restated)
                                                                     ----------------------------------------------------
<S>                                                                 <C>                 <C>                 <C>
Cash paid for interest                                              $    154,157        $    462,997        $   161,093

DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES

Shares issued in lieu of interest paymnets                               279,600             128,107            449,376
Stock issued for acquisition                                                 ---                 ---          1,499,997
Beneficial conversion feature recorded as additional paid-in
   capital                                                             1,131,061           1,633,164          5,738,149
Convertible debentures converted to common stock                       1,238,558                 ---                ---
</TABLE>






















                                       F-6
   The accompanying notes are an integral part of these financial statements
<PAGE>


SWISSRAY INTERNATIONAL, INC.
CONSOLITATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                                                                             Common
                                                                                        Additional            Stock
                                                                                          Paid-in             to be
                                                                  Common Stock            Capital             issued     Treasury
                                                              Shares         Amount      (Restated)         (Restated) )   Stock
                                                             --------------------------------------------------------------------
<S>                                                          <C>             <C>         <C>            <C>             <C>
BALANCE - JULY 1, 1997                                       1,969,443    $     19,694   $ 35,957,659   $  1,122,973    $      --

COMPREHENSIVE LOSS:
     Net loss of the year                                           --              --             --             --           --
     Foreign currency translation losses net of taxes $ -0-         --              --             --             --           --

     TOTAL COMPREHENSIVE LOSS                                       --              --             --             --           --

Issuance of common stock for cash                            2,013,688          20,137     13,581,739             --           --
Stock options exercised for cash                                16,900             169        123,201             --           --
Shares issued to officers for services                          48,259             483      1,122,490     (1,122,973)          --
Issuance of common stock in lieu of interest payment            60,999             610        448,766             --           --
Beneficial conversion feature of convertible debentures             --              --      5,738,149             --           --
Early extinguishment of debt                                        --              --       (396,875)            --           --
Issuance of common stock for asset purchase                     33,333             333      1,499,664             --           --
Common Stock subject to put                                         --              --             --             --           --
                                                             --------------------------------------------------------------------
BALANCE - JUNE 30, 1998                                      4,142,622          41,426     58,074,793            --            --


COMPREHENSIVE LOSS:
     Net loss of the year                                           --              --             --             --           --
     Foreign currency translation losses net of taxes $ -0-         --              --             --             --           --

     TOTAL COMPREHENSIVE LOSS                                       --              --             --             --           --

Issuance of common stock for cash                            3,861,287          38,613      3,121,784             --           --
Stock options exercised for services                             1,000              10          7,290             --           --
Shares issued for services                                   3,801,500          38,015      1,673,110             --           --
Issuance of common stock in lieu of interest payment           199,830           1,998        126,109             --           --
Beneficial conversion feature of convertible debentures             --              --      1,633,164             --           --
Shares issued to officers for services                       2,000,000          20,000      4,300,000             --           --
Treasury stock - at cost                                            --              --             --             --     (540,000)
Interest expense on option value per Black Scholes                  --              --         91,763             --           --
                                                            ----------------------------------------------------------------------
BALANCE - JUNE 30, 1999                                     14,006,239         140,062     69,028,013             --     (540,000)

COMPREHENSIVE LOSS:
     Net loss of the year                                           --              --             --             --           --
     Foreign currency translation losses net of taxes $ -0-         --              --             --             --           --

     TOTAL COMPREHENSIVE LOSS                                       --              --             --             --           --

Issuance of common stock for cash                            6,269,621          62,696      9,781,278             --           --
Stock options exercised for cash                             1,125,500          11,255      2,124,894             --           --
Issuance of common stock in lieu of interest payment           165,450           1,655        277,945             --           --
Issuance of common stock "Settlement"                          150,000           1,500        673,500             --
Amortization of shares issued for services                          --              --             --             --
Shares issued to officers/employees for services             1,157,065          11,571      2,798,365             --           --
Shares issued for services                                     526,000           5,260      1,325,941             --           --
Purchase of 33,333 shares subject to put                            --              --             --             --   (1,500,000)
Beneficial conversion feature of convertible debentures             --              --      1,131,061             --           --
Interest expense on option value per Black Scholes                  --              --      1,066,536             --           --
                                                            ----------------------------------------------------------------------
BALANCE - JUNE 30, 2000                                     14,006,239    $    140,062   $ 69,028,013   $         --     (540,000)
                                                            ======================================================================
                                      F-7
</TABLE>
<PAGE>


<TABLE>
<CAPTION>
                                                             Accumulated                  Other
                                                               Deficit    Deferred    Comprehensive  Common Stock      Total
                                                              (Restated) Compensation      Loss      Subject to Put  (Restated)
                                                            --------------------------------------------------------------------
<S>                                                          <C>           <C>           <C>            <C>          <C>

BALANCE - JULY 1, 1997                                       $(27,978,604) $      --     $(1,428,534)   $ (320,000)  $  7,373,188

COMPREHENSIVE LOSS:
     Net loss of the year                                     (22,503,109)        --             --            --     (22,503,109)
     Foreign currency transaction losses net of taxes $ -0-            --         --         (47,245)          --         (47,245)
                                                                                                                    --------------
     TOTAL COMPREHENSIVE LOSS                                          --         --             --            --     (22,550,354)

Issuance of common stock for cash                                      --         --             --            --      13,601,876
Stock options exercised for cash                                       --         --             --            --         123,370
Shares issued to officers for services                                 --         --             --            --              --
Issuance of common stock in lieu of interest payment                   --         --             --            --         449,376
Beneficial conversion feature of convertible debentures                --         --             --            --       5,738,149
Early extinguishment of debt                                           --         --             --            --        (396,875)
Issuance of common stock for asset purchase                            --         --             --            --       1,499,997
Common Stock subject to put                                            --         --             --    (1,499,985)     (1,819,985)
                                                            ----------------------------------------------------------------------

BALANCE - JUNE 30, 1998                                       (50,481,713)        --      (1,475,779)   (1,819,985)      4,338,742

COMPREHENSIVE LOSS:
     Net loss of the year                                     (22,010,750)        --             --            --     (22,010,750)
     Foreign currency translation losses net of taxes $ -0-         --            --        (311,956)           --        (311,956)
                                                                                                                    --------------
     TOTAL COMPREHENSIVE LOSS                                       --            --             --            --     (22,322,706)

Issuance of common stock for cash                                   --            --             --            --       3,160,397
Stock options exercised for services                                --            --             --            --           7,300
Shares issued for services                                          --       (1,282,500)         --            --        428,625
Issuance of common stock in lieu of interest payment                --            --             --            --         128,107
Beneficial conversion feature of convertible debentures             --            --             --            --       1,633,164
Shares issued to officers for services                              --            --             --            --       4,320,000
Treasury stock - at cost                                            --            --             --            --        (540,000)
Interest expense on option value per Black Scholes                  --            --             --            --          91,763
                                                            ---------------------------------------------------------------------
BALANCE - JUNE 30, 1999                                       (72,492,463)   (1,282,500)  (1,787,735)   (1,819,985)    (8,754,608)

COMPREHENSIVE LOSS:
     Net loss of the year                                     (21,638,080)          --            --           --     (21,638,080)
     Foreign currency translation losses net of taxes $ -0-         --              --       514,115           --         514,115
                                                                                                                       ----------
     TOTAL COMPREHENSIVE LOSS                                       --              --            --           --     (21,123,965)

Issuance of common stock for cash                                   --              --            --           --       9,843,974
Stock options exercised for cash                                    --              --            --           --       2,136,149
Issuance of common stock in lieu of interest payment                --              --            --           --         279,600
Issuance of common stock "Settlement"                               --              --            --           --         675,000
Amortization of shares issued for services                          --        1,282,500           --           --       1,282,500
Shares issued to officers/employees for services                    --              --            --           --       2,809,936
Shares issued for services                                          --         (998,399)          --           --         332,802
Purchase of 33,333 shares subject to put                            --              --            --     1,500,000             --
Beneficial conversion feature of convertible debentures             --              --            --           --       1,131,061
Interest expense on option value per Black Scholes                  --              --            --           --       1,066,536
                                                            ----------------------------------------------------------------------
BALANCE - JUNE 30, 2000                                      $(94,130,543) $   (998,399) $(1,273,620)   $ (319,985)  $   (540,000)
                                                            ======================================================================
</TABLE>

                                       F-8

   The accompanying notes are an integral part of these financial statements
<PAGE>

SWISSRAY INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED JUNE 30, 2000, 1999 AND 1998


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The Company was incorporated  under the laws of the State of New York on January
2, 1968  under the name CGS Units  Incorporated.  On June 6, 1994,  the  Company
merged  with  Direct  Marketing  Services,  Inc.  and  changed  its  name to DMS
Industries,  Inc. In May of 1995 the Company  discontinued the operations of DMS
Industries,  Inc. and acquired all of the outstanding  stock of SR Medical AG, a
Swiss  corporation  engaged in the business of  manufacturing  and selling X-ray
equipment,  components and accessories.  On June 5, 1995 the Company changed its
name to Swissray  International,  Inc. The  Company's  operations  are conducted
principally through its wholly owned subsidiaries.

PRINCIPLES OF CONSOLIDATION

The consolidated  financial  statements  include the accounts of the Company and
its  wholly-owned  subsidiaries.   All  significant  intercompany  balances  and
transactions have been eliminated.

REVENUE RECOGNITION

Revenues  from  direct  sales of  products  to end users are  recorded  when the
products are shipped,  installed,  collection of the purchase  price is probable
and the Company has no significant further obligations to the customer. Revenues
from direct sales of products to distributors are recorded when the products are
shipped,  collection  of the  purchase  price is probable and the Company has no
significant further obligations to the customer. Cost of remaining insignificant
Company  obligations,  if any,  are  accrued  as costs of revenue at the time of
revenue recognition.

USE OF ESTIMATES

The preparation of financial  statements in conformity  with generally  accepted
accounting  principles require management to make estimates and assumptions that
affect the  reported  amounts  of assets  and  liabilities  and  disclosures  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amounts of revenue and expenses during this period.  Actual results
could differ from those estimates.

                                      F-9
<PAGE>

WARRANTY

The  company  accrues a warranty  allowance  at the time of sale.  The  warranty
allowance is based upon the companies  experience  and varies between 0.5 and 2%
of the net sales amount.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standard No. 107 "Disclosures about Fair Value
of  Financial  Instruments"  (SFAS 107)  requires the  disclosure  of fair value
information about financial instruments whether or not recognized on the balance
sheet,  for which it is practicable  to estimate the value.  Where quoted market
prices are not readily available,  fair values are based on quoted market prices
of comparable instruments. The carrying amount of cash and equivalents, accounts
receivable  and accounts  payable  approximates  fair value because of the short
maturity of those instruments.

CASH EQUIVALENTS

The Company considers all highly liquid  investments  purchased with an original
maturity of three months or less to be cash equivalents.

INVENTORIES

Inventories  are  stated  at the  lower  of  cost or  market,  with  cost  being
determined on the first-in,  first-out  (FIFO) method.  Inventory  costs include
material, labor, and overhead.

PROPERTY AND EQUIPMENT

Property  and  equipment  are  stated  at cost  and are  depreciated  using  the
straight-line  method over the estimated useful lives of the respective  assets.
Leasehold  improvements  are amortized over the shorter of the estimated  useful
lives of the improvements, or the term of the facility lease.

IMPAIRMENT OF LONG-LIVED ASSETS

The  Company  reviews  long-lived  assets to assess  recoverability  from future
operations  using   undiscounted  cash  flows.   When  necessary,   charges  for
impairments  of  long-lived  assets  are  recorded  for the  amount by which the
present value of future cash flows exceeds the carrying value of these assets.

INTANGIBLE ASSETS

Intangible  assets are stated at cost and are being amortized using the straight
line method over the estimated useful lives of the respective assets.

                                      F-10
<PAGE>


SOFTWARE DEVELOPMENT COSTS

Capitalization  of software  development  costs begins upon the establishment of
technological  feasibility of new or enhanced software  products.  Technological
feasibility of a computer  software  product is established when the Company has
completed  all  planning,  designing,  coding and testing  that is  necessary to
establish   that  the   software   product   can  be  produced  to  meet  design
specifications   including   functions,   features  and  technical   performance
requirements. All costs incurred prior to establishing technological feasibility
of a software product are charged to research and development as incurred.

ADVERTISING AND PROMOTION

Advertising  and  promotion  costs are  expensed  as  incurred  and  included in
"Selling"  expenses.  Advertising and promotion expense for the years ended June
30,  2000,  1999  and  1998  were $  2,601,410,  $  1,452,309  and $  1,737,935,
respectively.

RESEARCH AND DEVELOPMENT

Costs  associated  with  research,  new product  development,  and product  cost
improvements are treated as expenses when incurred.

CONVERTIBLE DEBT

Convertible  debt is recorded as a liability  until converted into common stock,
at which time it is recorded as equity.

INCOME TAXES

Deferred  tax assets and  liabilities  are  determined  based on the  difference
between the financial  statement and tax basis of assets and  liabilities  using
enacted tax rates in effect for the year in which the  differences  are expected
to affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amounts expected to be realized.

EXPENSES RELATED TO SALES AND ISSUANCE OF SECURITIES

All costs  incurred in connection  with the sale of the  Company's  common stock
have been capitalized and charged to additional paid-in capital.

NET LOSS PER COMMON SHARE

Basic earnings per share is computed by dividing the net income (loss) available
to common  shareholders  by the weighted  average number of  outstanding  common
shares.  The  calculation  of  diluted  earnings  per share is  similar to basic
earnings  per share  except  the  denominator  includes  dilutive  common  stock
equivalents  such as stock  options and  convertible  debentures.  Common  stock
options and the common shares  underlying  the  convertible  debentures  are not
included as their effect would be anti-dilutive.

                                      F-11

<PAGE>

ACCOUNTING FOR STOCK OPTIONS

The Company  accounts for  stock-based  compensation  using the intrinsic  value
method as prescribed  under  Accounting  Principles  Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees" and related Interpretations.

FOREIGN CURRENCY TRANSLATION

Assets and  liabilities  of  subsidiaries  operating  in foreign  countries  are
translated  into U.S.  dollars  using  both the  exchange  rate in effect at the
balance sheet date or historical rate, as applicable.  Results of operations are
translated using the average exchange rates prevailing  throughout the year. The
effects of exchange rate fluctuations on translating foreign currency assets and
liabilities into U.S. dollars are included in stockholders  equity  (Accumulated
other  comprehensive  loss),  while  gains and  losses  resulting  from  foreign
currency transactions are included in operations.

NEW ACCOUNTING PRONOUNCEMENTS

The Company has adopted  Statement  of  Financial  Accounting  Standard  No. 133
("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging Activities"
for the year  ended June 30,  2000.  SFAS No.  133  establishes  a new model for
accounting for  derivatives  and hedging  activities and supersedes and amends a
number of existing  standards.  The application of the new pronouncement did not
have a material impact on the Company's financial statements.

STOCK SPLIT

On October 1, 1998 the  Company  declared a 1 for 10 reverse  stock  split.  The
financial statements for all periods presented have been retroactively  adjusted
for the stock split.

NOTE 2 - RESTRICTED CASH

In association with the contract signed with the Romanian  Ministry of Health in
October  1999,  the Company had to post a  performance  bond of 10% of the total
contract of $13,856,000 or $1,385,600.  The  performance  bond will be partially
reimbursed  at 50% of its  total  value  within 30 days of the  presentation  of
acceptance  certificates for the first 16 units.  The remaining  balance will be
reimbursed 30 days after presentation of the acceptance certificate for the 32nd
and final unit. The amount for the performance  bond is denoted in the financial
statements as restricted cash.

                                      F-12
<PAGE>

NOTE 3 - INVENTORIES

Inventories are summarized by major classification as follows:

                                                        June 30,
                                              2000                   1999
                                          ---------------       ----------------
      Raw materials, parts and supplies $       2,682,558     $        5,558,330
      Work in process                           1,295,575              1,048,197
      Finished goods                              659,019                725,874
                                        -----------------       ----------------
                                        $       4,637,152     $        7,332,401
                                        =================       ================


NOTE 4  - PREPAID EXPENSES AND SUNDRY RECEIVABLES

Prepaid expenses and sundry receivables consist of the following:


                                                         June 30,
                                               2000                  1999
                                        -------------------    -----------------
      Prepaid expenses, deposits and
        advance payments                    $       892,077  $           229,236
      Insurance claim for fire damage                     -              389,220
      Prepaid and refundable taxes                  414,090              240,368
      Employee loans                                  6,000                7,980
                                        -------------------    -----------------
                                     $            1,312,167  $           866,804
                                        ===================    =================

NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment consist of the following:


                                     Estimated               June 30,
                                    Useful Lives
                                      (years)         2000               1999
                                    ------------   -----------       -----------
      Land                                -      $    596,982      $   5,501,853
      Building                           30         4,976,657              -
      Equipment                           5         1,866,720          1,448,961
      Office furniture and equipment    3-5           253,946            333,596
                                                  -------------    -------------
                                                    7,694,305          7,284,410
Less: Accumulated depreciation                      1,393,689          1,001,370
                                                  -------------    -------------
                                                 $  6,300,616      $   6,283,040
                                                  =============    =============


Depreciation and amortization expense, for property and equipment, for the years
ended June 30,  2000,  1999 and 1998 were $ 615,873,  $ 547,693  and $ 1,077,074
respectively.

                                      F-13
<PAGE>



NOTE 6 - INTANGIBLE ASSETS

Intangible Assets at June 30, 2000 and 1999 consisted of the following


                                        Estimated              June 30,
                                       Useful Lives
                                         (Years)         2000            1999
                                       ----------      ---------    ------------
      Excess of cost over fair value
        of net assets acquired             10      $   1,933,275    $  1,933,275
      Licensing (a)                        10          4,966,575       4,966,575
      Software development cost           5-8            592,198         578,729
      Patents and Trademarks               10            313,330         313,330
                                                    ------------    ------------
                                                       7,805,378       7,791,909
      Less: Accumulated amortization                   3,360,001       2,537,125
                                                    ------------    ------------
                                                   $   4,445,377    $  5,254,784
                                                    ============    ============


Amortization  expense, for Intangible Assets, for the years ended June 30, 2000,
1999 and 1998 were $ 822,876, $ 830,194 and $ 1,227,719, respectively.

(a) The  Company  entered  into a  licensing  agreement  in June of 1995 with an
unaffiliated individual.  The agreement is for an exclusive field-of-use license
within  the  United  States  and  Canada  to use  the  proprietary  information,
including the patent rights, for certain technology regarding the integration of
computer  technology  with  diagnostic  x-ray and  radiology  medical  equipment
through digital imaging  systems.  The total cost of the license was $4,966,575.
This  agreement  is for an  indefinite  term  or  until  all of the  proprietary
information becomes public knowledge and the patent rights expire.

NOTE 7 - NOTES PAYABLE - BANKS

The Company has negotiated a revolving line-of-credit agreement with Migros Bank
of Switzerland,  dated March 23, 1998, for up to $ 440,263. The Company has also
negotiated an agreement for up to $ 1,206,200 for the issuance of guarantees and
letters of credit,  both with a  commission  of 15% per $  1,000,000,  quarterly
while outstanding.  There were $ 596,896 in outstanding  guarantees and $ -0- in
letter of credits as of June 30, 2000. The Company also  negotiated a fixed line
of credit for up to $  2,352,090  with an agreed  repayment  of $ 60,310 per 180
days first time applicable as of June 30, 2000. All lines of credit are based on
the Exchange rate in effect on June 30, 2000.


                                      F-14

<PAGE>



Notes payable are summarized as follows:


                                                           June 30,
                                                   2000                1999
                                              -------------       --------------

Migros Bank revolving line of credit,
due on demand,with  interest at 4.75% per
annum,  collateralized  by certain  accounts
Receivable,  and a cash deposit at Migros
Bank as of June 30, 2000 and 1999 were
 $ -0-  and $ 485,367, respectively.          $           -       $      798,730

Migros  Bank,  on demand with six week
notice,  with  interest as of June 30,
2000 and 1999 at 3.7/8% and 4% per annum,
collateralized by land and building               2,231,470            2,529,930

Union  Bank of  Switzerland,  due on
demand,  with  interest  at 8% per  annum,
collateralized  by the cash on deposit at
Union Bank of Switzerland and accounts
receivable.  Cash balances on deposit at
Union Bank of  Switzerland  at June 30,
2000 and 1999 were $ 2,429,258 and $ 627,625,
respectively                                       1,346,869             338,499

                                                ---------------      -----------
                                              $    3,578,339      $    3,667,159
                                                ===============      ===========

NOTE 8 - LOAN PAYABLE

The Company has negotiated a 4% demand loan from a private  foundation fund. The
loan  balance  payable  at June 30,  2000 and 1999 was $  119,885  and $ 126,006
respectively.

NOTE 9 - SHARES ISSUED FOR COMPENSATION

In June 1999, the Company incurred  additional  compensation to the President of
the Company of 2,000,000 fully vested,  nonforfeitable shares with a fair market
value of $2.16  per  share or  $4,320,000  (based  on the bid price of $2.40 per
share on the date of issuance less a 10% discount for restrictions on the resale
of such  shares).  The  compensation  was in  consideration  of the  President's
agreement to extinguish his rights  contained in his employment  agreement which
entitled him to a 25% bonus of the Company's earnings (as defined).

In 1999 the Company  issued  3,800,000  fully vested,  nonforfeitable  shares of
common stock with a fair market value of $.45 per share or $1,710,000  (based on
the bid price of $.50 per share on the date of issuance  less a 10% discount for
restrictions  on the resale of such  shares) to  consultants  for services to be
rendered  over a term of one  year to  eighteen  months.  Such  amount  has been
deferred and is being amortized over the term of the consulting agreements.

In October 1999 the Company issued 1,050,000 fully vested, nonforfeitable shares
of common  stock  with a fair  market  value of $2.475  per share or  $2,165,625
(based on the bid price of $2.75  per share on the date of  issuance  less a 10%
discount  for  restrictions  on the resale of such  shares) to  officers  and/or
directors  as  additional  compensation.  Such amount has been  expensed  and is
included in results of operations.

                                      F-15

<PAGE>

On April 4, 2000 the Company issued 490,000 fully vested,  nonforfeitable shares
of common  stock with a fair  market  value of $2.5308  per share or  $1,240,092
(based  on the bid price of $.50 per  share on the date of  issuance  less a 10%
discount for  restrictions  on the resale of such  shares) to a  consultant  for
services to be rendered over twelve months commencing April 1, 2000. Such amount
has been  deferred  and is  being  amortized  over  the  term of the  consulting
agreement.  In  addition  the  agreement  provides  for the  issuance  of 36,000
restrictive  shares of Company  Common  stock  (based on 3,000 shares per month)
throughout the period of the Consultant's performance.

NOTE 10 - CONVERTIBLE DEBENTURES

Convertible debentures consist of the following:



                                                               June 30,
                                                        2000              1999
                                                     ----------       ----------

Convertible debenture dated June 15, 1998.
The debenture was converted into 851,970
shares in Fiscal 2000.                                    -           2,000,000

Convertible debenture of $6,143,849 dated
August 31, 1988 and due August 31, 2000 with
interest of 5% per annum.The debentures are
convertible into common shares at a price
equal to the lesser of eighty-two (82%) of
the average closing bid price for the ten
trading days preceding the date of the
conversion.All debentures are convertible at
the earlier of a registration effective date
or March 1, 1998.Any debenture not so converted
is subject to mandatory conversion on August 31,
2000.The Company at its sole discretion can redeem
the debenture at 125% after the sixth month
following  the  closing  date. $1,698,827 and
$514,428 of the balance was converted into
1,383,604 and  1,051,529 shares in
Fiscal 2000 and 1999 respectively.
Debt issuance cost was $311,000, beneficial
conversion feature was $-0-.                           3,930,594      5,629,421

Convertible debenture including $540,000
repurchase of stock dated October 6, 1988 and
due October 6, 2000 with  interest of 5% per
annum.The debentures are convertible into common
shares at a price equal to the lesser of
eighty-two (82%) of the average closing bid
price for the ten trading days  preceding  the
date of the conversion.All debentures are
convertible at the earlier of a registration
effective date or October 6, 1998. Any debenture
not so converted is subject to mandatory
conversion on October 6, 2000.The Company at
its sole discretion can redeem the debenture at
125% after the sixth month following the closing
date. Debt issuance cost was $300,000, beneficial
conversion feature was $53,112.                        2,940,000      2,940,000

Convertible debenture dated January 29, 1999 and
due January 29, 2001 with interest of 3% per each
30 days for the first ninety days, 3.5% per each
30 days for the  ninety-first to the one hundred-
twentieth day and 4% per each 30 days from the
hundred-twenty-first day until the earlier of
conversion or redemption. The debentures are
convertible into common shares at a price equal to
the lesser of eighty-two (82%) of the average
closing bid price for the ten trading days
preceding the date of the conversion or $1.00. All
debentures are convertible at the earlier of a
registration effective date or January 29, 1999.
Any debenture not so converted is subject to
mandatory conversion on January 29, 2001. The
Company at its sole discretion can redeem the
debentures at any time. Debt issuance cost was
$150,000, beneficial conversion feature was $-0-.      1,170,000      1,170,000

                                      F-16
<PAGE>

Convertible debenture dated May 13, 1999 and due
May 13, 2001 with interest of 5% per annum. The
debentures are convertible into common shares at
a price equal to the lesser of eighty (80%) of
the average closing bid price for the ten trading
days preceding the date of the conversion or $1.00.
All debentures are convertible at the earlier of a
registration effective date or May 13, 1999. Any
debenture not so converted is subject to mandatory
conversion on May 13, 2001.The company at its sole
discretion can redeem the debenture at 125%
after the sixth month following the closing date.
Debt issuance cost was $80,000, interest rollover
was $39,600, beneficial conversion feature was
$735,025.                                              1,119,600      1,119,600

Convertible debenture dated May 5, May 24 and
June 10, 1999 and due May 5, May 24 and June 10,
2001, respectively with interest of 5% per annum.
The debentures are convertible into common shares
at a price equal to eighty (80%) of the average
closing bid price for the ten trading  days
preceding the date of the conversion.The investor
shall not be allowed to convert any portion of the
Debentures for 120 days from the Closing date,
unless the bid price is greater than $5.50.Every
30-day period after the Closing date, the investor
shall be allowed to convert and sell based upon if
the bid price is over $1.50 then 15% of the
original face amount can be converted, if the bid
price is over $7.50 then 20% of the original face
amount can be converted. No conversion can be made
for 300 days if the bid price is below $1.50 All
debentures are convertible at the earlier of a
registration effective date or May 5, May 24 and
June 10, 1999, respectively.Any debenture not so
converted is subject to mandatory conversion on May
5, May 24 and June 10, 2001, respectively.The
Company at its sole discretion can redeem the
debenture at 120% of the face amount including
interest. $310,500 of the balance was converted
into 142,332 shares in Fiscal 2000.  Debt issuance
cost was $100,000, beneficial conversion feature
was $423,973.                                          539,500          850,000

Convertible debenture dated May 31, 1999 and due
May 31, 2001 with interest of 5% per annum. The
debentures are convertible into common shares at
a price equal to the lesser of eighty (80%) of the
average  closing  bid price for the ten trading
days preceding the date of the conversion or $1.00.
All debentures are convertible at the earlier of a
registration effective date or May 31, 1999. Any
debenture not so converted is subject to mandatory
conversion on May 31, 2001.The company at its sole
discretion can redeem the debenture at 125% after
the sixth month following the closing date. Debt
issuance cost was $110,000, interest rollover was
$22,200, beneficial conversion feature
was $140,049.                                          1,132,200      1,132,000

Convertible debenture dated June 26, 1999 and due
June 26, 2001 with interest of 5% per annum. The
debentures are convertible into common shares at
a price equal to the lesser of eighty (80%) of the
average closing bid price for the ten trading days
preceding the date of the conversion or $1.00.
All debentures are convertible at the earlier of a
registration effective date or June 26, 1999. Any
debenture not so converted is subject to mandatory
conversion on June 26, 2001.The company at its sole
discretion can redeem the debenture at 125% after
the sixth month following the closing date.Debt
issuance cost was $50,000, interest rollover was
$11,000, beneficial conversion feature was $281,005.   561,000          561,000

                                      F-17
<PAGE>

Convertible debenture dated August 23, 1999
and due August 23, 2001 with interest of 5% per
annum. The debentures are convertible into
common shares at a price equal to the lesser
of eighty  (80%) of the average  closing bid
price for the ten trading days  preceding the
date of the  conversion.  All debentures are
convertible immediately.  Any debenture not so
converted is subject to mandatory conversion
on August 23, 2001.  The company at its sole
discretion can redeem the debenture  at 125%
after the sixth month following the closing date.
Debt issuance cost was $100,000, beneficial
conversion feature was $717,243.                       1,148,400            -

Convertible debenture dated November 11, 1999
and due November 11, 2001 with interest of 5%
per annum. The debentures are convertible into
common shares at a price equal to the lesser of
eighty (80%) of the average closing bid price for
the ten trading days preceding the date of the
conversion.  All debentures are convertible
immediately.  Any debenture not so converted is
subject to mandatory conversion  on November
11, 2001.  The company at its sole  discretion can
redeem the debenture at 125% after the sixth month
following the closing date.  Debt issuance cost
was $140,000, beneficial conversion feature
was $510,187.                                          1,526,000            -
                                                      -----------   ------------
                                                       14,067,294    15,402,221
Less:  Discount due to beneficial conversion
features, net of accumulated amortization
of $ -0- and $327,604                                         -         (96,369)
                                                      ------------  ------------

                                                     $ 14,067,294   $15,305,852
                                                      ============  ============
The Company is currently in  violation of certain  covenants in their  debenture
agreements. Such covenants have been waived by the holders through July 1, 2002.

NOTE 11 - NOTES PAYABLE - SHORT-TERM

                                                               June 30,
                                                         2000            1999
                                                     -----------    ------------
Promissory note, dated June 11, 1999, $654,000,
due September 9, 1999,  collateralized by
inventory.                                         $   350,000      $   600,000

Promissory note, dated August 31, 1999, $500,000,
with interest at 8%, payable monthly through
August 15, 2001.(a)                                    302,502             -

Promissory note, dated May 2000, with interest
payable at 3% per month due December 31, 2000.         500,000             -

Promissory note, dated June 2000, with interest
payable at 3% per month due December 31, 2000.         200,000             -

Promissory note, dated April 1999, the note was
converted into debentures in Fiscal 2000.            1,050,000        1,100,000
                                                    -----------     ------------
                                                   $ 1,352,502      $ 1,700,000
                                                    ===========     ============

(a) This  promissory  note is a  settlement  agreement  with  former  owners  of
Swissray America, Inc.



                                      F-18

<PAGE>

NOTE 12 - LONG-TERM DEBT

Long-term debt consists of the following:

                                                            June 30,
                                                    2000               1999
                                             --------------      ---------------
Note payable - Other                          $    87,450          $   122,175

Note payable - Union Bank of Switzerland,
in monthly installments of $12,589 with
imputed interest at 6.0% per annum,
maturing on September 30, 2000                    163,824               188,907

Capitalized leases                                 61,528               131,040
                                             --------------         ------------
                                                  312,802               442,123
Less: Current portion                            (229,700)             (247,028)
                                             --------------         ------------
                                              $    83,102          $    195,095
                                             ==============         ============

The aggregate long-term debt principal payment are as follows:

                Year Ending June 30,
                        2001                    $          229,700
                        2002                                72,591
                        2003                                10,511

NOTE 13 - SHAREHOLDERS' EQUITY

Authorized Shares

On March 12, 1997,  the Company  amended its  certificate  of  incorporation  to
change the number of authorized  common shares from  15,000,000 to 30,000,000 of
$.01 par value common  shares.  On December 26,  1997,  the Company  amended its
certificate of  incorporation  to change the number of authorized  common shares
from 30,000,000 to 50,000,000 of $.01 par value common shares. On July 20, 2000,
the Company  amended its  certificate of  incorporation  to change the number of
authorized common shares from 50,000,000 to 100,000,000 of $.01 par value common
shares.

Preferred Stock

In July 1999, the Company amended its Certificate of Incorporation to authorized
the issuance of 1,000,000 shares of preferred stock, $.01 par value per share.

Stock Option

The Stock Option Plans provide for the grant of options to officers,  directors,
employees  and  consultants.  Options may be either  incentive  stock options or
non-qualified stock options, except that only employees may be granted incentive
stock  options.  The maximum  number of shares of Common  Stock with  respect to
which  options may be granted  under the Stock Option  Plans is 500,000  shares.
Options vest at the discretion of the Board of Directors. All options granted in
1999 and 1997 vested  immediately.  The maximum  term of an option is ten years.
The 1996 Stock  Option Plan will  terminate  in January,  2006,  though  options
granted prior to  termination  may expire after that date. The 1997 Stock Option
Plan will terminate at the discretion of the Board of Directors. In Fiscal 2000,
had  compensation  cost for the Stock Option Plans been determined  based on the
fair value at the grant dates for awards  under the Stock Option  Plans,  except
for grants to consultants  for which  compensation  expense has been  recognized
consistent  with  the  method  of SFAS  No.  123,  as  discussed  in Note 1, the
Company's net loss and net loss per share would have  increased to the pro forma
amounts indicated below:

                                                  Fiscal 2000
                                             As                 Pro
                                          Reported             Forma
Net loss (in thousands)                   ($21,638)          ($22,616)
Basic and diluted net loss per share        ($1.22)            ($1.27)

The fair value of each option  grant is estimated on the date of grant using the
Black  Scholes   option-pricing  method  with  the  following  weighted  average
assumptions used for grants in 2000; dividend yield 0%, expected volatility 50%,
risk-free interest rate 5.7%, expected lives in years-1 year.

The weighted  average fair value of stock options  granted during the year ended
June 30, 2000 was $ 2.36.

                                      F-19
<PAGE>

A summary of the status of the Stock  Option  Plans at June 30,  2000,  1999 and
1998 and the changes during the years then ended is presented below:
<TABLE>
<CAPTION>
                                       2000                           1999                            1998
                           ----------------------------- ------------------------------- --------------------------------
                                             Weighted                        Weighted                         Weighted
                              Shares          Average        Shares           Average       Shares            Average
                            Underlying       Exercise      Underlying        Exercise     Underlying          Exercise
                             Options           Price        Options            Price       Options             Price
                           -------------    ------------ ---------------    ------------ -------------      -------------
<S>                             <C>            <C>           <C>               <C>         <C>                  <C>
      Outstanding
      At beginning
      Of year                   194,500  $     23.40         180,000     $     23.40       196,900       $      23.40

      Granted                 2,987,000  $      2.36          15,500     $       .44         -           $       0.00

      Exercised              (1,130,500) $      1.93          (1,000)    $      7.30       (16,900)      $       7.30
                           -------------    ------------ ---------------    ------------ -------------      -------------
      Outstanding
      At end of year          2,051,000  $      4.60         194,500     $     23.40       180,000       $      23.40
                           =============    ============ ===============    ============ =============      =============
      Exercisable at
      End of year             2,051,000  $      4.60         194,500     $     23.40       180,000       $      23.40
                           =============    ============ ===============    ============ =============      =============

</TABLE>

The following table summarizes  information  about stock options under the Stock
Option Plans at June 30, 2000

                       Options Outstanding and Exercisable
      ---------------------------------------------------------------------
                                             Weighted Average        Weighted
                             Number       Remaining Contractual      Average
  Range of Exercise Pr     Outstanding            Life            Exercise Price
  ---------------------- ---------------   --------------------  ---------------
         $.01 - $.44           15,500                8.5              $0.44
       $2.625 - $2.625      1,856,500                9.2             $2.625
       $7.30 - $10.00          18,000                7.4              $8.00
       $20.00 - $40.00        127,500                6.8             $22.10
       $47.50 - $65.00         33,500                6.5             $58.70
                          --------------
                            2,051,000
                          ==============

Stock Warrants

In Fiscal 1999,  the Company  issued 462,500  warrants.  The Company  recognized
compensation cost for the warrants issued of $92,000.  Such value was determined
using the Black-Scholes  method with the following weighted average assumptions;
dividend yield 0%, expected volatility 70%, risk-free interest rate 7%, expected
lives in years  1.  The  following  table  summarized  information  about  stock
warrants at June 30, 2000:

                       Warrants
                      Outstanding
                         and
                      Exercisable
    Range of             Number        Remaining Contractual    Average Exercise
 Exercise Price       Outstanding            Life                      Price

 $.375 - $9.38          462,500              4.5                       $.96

NOTE 14 - DEFINED CONTRIBUTION PLANS

The Swiss and German  Subsidiaries,  mandated  by  government  regulations,  are
required to  contribute  approximately  five (5%)  percent of all  eligible,  as
defined,  employees'  salaries into a government  pension plan. The subsidiaries
also contribute  approximately  five (5%) percent of eligible  employee salaries
into a private pension plan. Total  contributions  charged to operations for the
years ended June 30, 2000, 1999 and 1998, were $ 475,176, $509,959 and $347,854,
respectively.

                                      F-20

<PAGE>

NOTE 15 - INCOME TAXES

Deferred income tax assets as of June 30, 2000 of $22,700,000 as a result of net
operating losses, have been fully offset by valuation allowances.  The valuation
allowances have been  established  equal to the full amounts of the deferred tax
assets, as the Company is not assured that it is more likely than not that these
benefits will be realized.

A  reconciliation  between the statutory United States corporate income tax rate
(34%) and the effective  income tax rates based on  continuing  operations is as
follows:


<TABLE>
<CAPTION>


                                                                                Year Ended June 30,
                                                         -------------------------------------------------------------------
                                                                2000                  1999                      1998
                                                         -------------------    ------------------        ------------------
   <S>                                                          <C>                   <C>                       <C>
   Statutory federal income tax (benefit)         $          (7,400,000)     $     (5,600,000)      $        (7,754,000)
   Foreign income tax (benefit) in excess of
   domestic rate                                                (77,000)              377,000                   543,000
   Benefit not recognized on operating loss                   5,127,000             3,693,000                 5,111,000
   Permanent and other differences                            2,350,000             1,530,000                 2,100,000
                                                         -------------------    ------------------        ------------------
                                                  $              -           $          -              $          -
                                                         ===================    ==================        ==================
</TABLE>

Net operating loss carryforwards at June 30, 2000 were approximately as follows:



United States (expiring through June 30, 2015)          $ 40,000,000

Switzerland (expiring through June 30, 2010)              33,000,000
                                                          ----------
                                                        $ 77,000,000
                                                          ==========

NOTE 16 - EXTRAORDINARY ITEMS

On July 31, 1997 the Company refinanced Convertible debentures issued in May and
June 1997.  A gain on  extinguishment  of debt of  $154,212  resulted  from that
transaction net of income taxes of $-0-.

In December,  1997 the Company  refinanced  part of the  Convertible  debentures
issued in August 1997.  A gain on  extinguishment  of debt of $150,711  resulted
from that transaction net of income taxes of $-0-.

In Fiscal 1999 the Company  recognized a loss from early  extinguishment of debt
of $832,849, net of income taxes of $-0-.

NOTE 17 -  SIGNIFICANT CUSTOMER AND CONCENTRATION OF CREDIT RISK

The Company sells its products to various customers  primarily in Europe and the
USA. The company  performs  ongoing  credit  evaluations  on its  customers  and
generally  does not require  collateral.  Export  sales are  usually  made under
letter of credit  agreements.  The company  establishes  reserves  for  expected
credit losses and such losses, in the aggregate,  have not exceeded management's
expectations.

The Company  maintains  its cash  balances  with major Swiss,  United States and
German financial  institutions.  Funds on deposit with financial institutions in
the United  States are insured by the  Federal  Deposits  Insurance  Corporation
("FDIC) up to $ 100,000.

During  the  years  ended  June 30,  2000,  1999 and 1998  there  were  sales to
customers that exceeded 10% of net consolidated  sales. Sales to these customers
were:  2000 customer A, $ 8,180,866  (23 %) and customer C $ 10,825,000  (49 %),
1999 customer A, $9,253,480 (54%), 1998 customer A, $ 7,647,354 (33%) customer B
$2,389,613 (18%). The company operates in a single industry  segment,  providing
x-ray medical equipment.

                                      F-21
<PAGE>

The Company  derives all of its revenues  from its  subsidiaries  located in the
United States,  Switzerland and Germany. Sales by geographic areas for the years
ended June 30, 2000, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>

                                                   2000                           1999                      1998
                                           ---------------------           --------------------       ------------------
       <S>                                           <C>                             <C>                      <C>
       United States                    $             6,561,669         $            4,026,931     $          9,127,569
       Switzerland                                   15,164,707                     12,625,381               12,851,115
       Germany                                          303,748                        643,570                  914,294
                                           ---------------------           --------------------       ------------------
                                        $            22,030,124         $           17,295,882     $         22,892,978
                                           =====================           ====================       ==================
</TABLE>

The following summarizes identifiable assets by geographic area:


                                   2000                    1999
                              -----------------    ------------------
   United States         $        8,344,431        $     7,270,543
   Switzerland                   16,782,132             16,009,209
   Germany                          184,157                231,437
   Romania                           72,293                   -
                              -----------------    ------------------
                         $       25,383,014        $    23,511,189
                              =================    ==================

The following summarizes operating losses before provision for income tax:

<TABLE>
<CAPTION>


                                          2000                         1999                          1998
                                   -------------------          --------------------          -------------------
       <S>                            <C>                              <C>                          <C>
       United States            $     (16,801,696)           $      (14,542,148)        $        (13,962,842)
       Switzerland                     (4,277,240)                   (5,392,436)                  (8,803,006)
       Germany                           (409,272)                     (243,317)                     (42,184)
                                         (149,872)                         -                            -
                                   ------------------           --------------------          -------------------
                                $     (21,638,080)        $         (20,177,901)        $        (22,808,032)
                                   ===================          ====================          ===================


</TABLE>

NOTE 18 - COMMITMENTS

The Company leases various facilities under operating lease agreements  expiring
through  September  2003. The  facilities  lease  agreements  provide for a base
monthly payment of $22,285 per month.  Rent expense for the years ended June 30,
2000, 1999 and 1998 was $ 361,757, $ 325,000 and $ 324,726 respectively.  Future
minimum annual lease payments,  based on the exchange rate in effect on June 30,
2000, under the facilities lease agreements are as follows: 2000 $173,549,  2001
$162,526, 2002 $166,995, 2003 $137,994, Thereafter $0.

The Company has  employment  agreements  with three of its  executives.  Minimum
compensation under these agreements are as follows:


                       Year Ended
                      June 30, 2001                      $            299,326
                      June 30, 2002                                   202,498
                      June 30, 2003                                   109,037
                                                            ------------------
                                                         $            610,861
                                                            ==================


                                      F-22
<PAGE>

NOTE 19 - RESTRUCTURING

During the year ended June 30, 1998 the Company recorded  restructuring  charges
of $500,000, as a result of its decision to relocate two facilities. The charges
consisted  primarily of the present value of the remaining lease  obligations of
those facilities. The balance at June 30, 2000 is $100,000.

NOTE 20 - UNAUDITED PROFORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

The following unaudited proforma condensed combined statements of operations for
the years ended June 30, 1998 give retroactive  effect of the SSG on October 17,
1997,  which were accounted for as purchase.  The unaudited  proforma  condensed
combined  statements  of  operations  give  retroactive  effect to the foregoing
transaction as if it had occurred at the beginning of each year  presented.  The
proforma  statements do not purport to represent  what the Company's  results of
operations  would actually have been if the foregoing  transactions had actually
been  consummated  on such dates or project the Company's  results of operations
for any future period or date.

The  proforma  statements  should  be read in  conjunction  with the  historical
financial statements and notes thereto.

                           SWISSRAY INTERNATIONAL, INC
          UNAUDITED PROFORMA CONDENSED COMBINED CONSOLIDATED STATEMENT
                                  OF OPERATIONS
                        FOR THE YEARS ENDED JUNE 30, 1998

                                                            Year Ended
                                                             June 30,
                                                               1998
                                                    ------------------------
Revenues                                         $          23,837,000
Loss before extraordinary items                            (21,963,000)
Net Loss                                                   (22,403,000)
Loss per share                                                   (8.33)
Weighted average number of shares outstanding    $           2,690,695


NOTE 21-VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
                                           Balance at         Additions        Deductions       Balance at End
                                           Beginning         Charged to                             of Year
                                            of Year           Expenses
                                          ---------------------------------------------------------------------
<S>                                            <C>                 <C>             <C>                  <C>
Allowance for doubtful accounts:
   Year ended December 30, 2000        $       219,993  $          93,570  $       142,680  $           170,883
   Year ended December 30, 1999        $        32,356  $         706,877  $       519,240  $           219,993
   Year ended December 30, 1998        $       148,390  $         133,169  $       249,230  $            32,356
</TABLE>

NOTE 22 - RESTATEMENT

The accompanying  financial statements have been restated to properly record the
accounting for the value of common stock issued to an officer and consultants as
compensation  during  the  year  ended  June  30,  1999  and the  accrual  of an
additional  $1,000,000 for interest  expense for the accrual of penalty interest
on periodic payments required by terms of financing agreements.

The effect of such restatements on the Company's 1999 financial  statement is as
follows:
                                   As                                  As
                                Reported       Adjustments          Restated
Balance Sheet Adjustments

   Assets
                             $  23,761,189    $  (250,000)      $   23,511,189
   Liabilities
                                29,695,812        750,000           30,445,812
Statement of Operations

   Adjustments

     Operating expenses
                             $  15,581,217    $ 3,764,722       $   19,345,939
      Loss from continuing
         Operations            (16,413,179)     4,764,722          (21,177,901)

      Net Loss                 (17,246,028)     4,764,722          (22,010,750)

      Net loss per common
         Share basic         $       (2.65)   $     (0.72)      $        (3.37)


                                      F-23


<PAGE>




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

         None -  during  the  Company's  two  most  recent  fiscal  years or any
subsequent interim period.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Set forth below is certain information concerning each current director
and executive  officer of the Registrant,  including age,  position(s)  with the
Registrant, present principal occupation and business experience during the past
five years.

         Name           Age              Position(s) Held
         ----           ---              ----------------
Ruedi G. Laupper        50               Chairman of the Board of Directors,
                                         President and Chief Executive Officer,
Josef Laupper           55               Secretary, Treasurer and Director
Ueli Laupper            30               Vice President and Director
Dr. Erwin Zimmerli      53               Director and Member of the Independent
                                         Audit Committee
Erich A. Kalbermatter   44               Chief Operating Officer *
Dr. Sc. Dov Maor        53               Director and Member of the Independent
                                         Audit Committee
Michael Laupper         27               Chief Financial Officer

*        Until his resignation in February 1999.

         Directors  are  elected  to serve  until  the next  annual  meeting  of
stockholders  and until their  successors  have been elected and have qualified.
Officers  are  appointed  to serve until the  meeting of the Board of  Directors
following the next annual  meeting of  stockholders  and until their  successors
have been elected and have qualified.

         Ruedi G.  Laupper has been  President,  Chief  Executive  Officer and a
director of the Registrant since May 1995 and Chairman of the Board of Directors
since March 1997.  In  addition,  he is Chairman of the Board of  Directors  and
President of the Company's principal operating subsidiaries. Ruedi G. Laupper is
the founder of the  predecessors of the Company and was Chief Executive  Officer
of SR  Medical  AG from its  inception  in June  1988  until  May  1995.  He has
approximately 23 years of experience in the field of radiology. Ruedi G. Laupper
is the brother of Josef Laupper and the father of Ueli and Michael Laupper.

         Josef Laupper has been  Secretary,  Treasurer  (until  January 1998 and
recommencing January 1999) and a director of the Registrant since May 1995 (with
the  exception  of not having  served as  Secretary  from  December  23, 1997 to
February 23, 1998). He has held comparable positions with SR Medical Holding AG,
SR Medical AG, and their respective  predecessors  since 1990. He is principally
in charge of the Company's  administration.  Josef Laupper has  approximately 19
years of experience within the medical device business.

         Ueli  Laupper  has  overall  Company  responsibilities  in the  area of
international  marketing and sales with approximately  eight years of experience
within the  international  X-ray  market.  He has been a Vice  President  of the
Company since March 1997 and a director of the  Registrant  since March 1997. He
was Chief Executive  Officer of SR Medical AG from July 1995 until June 30, 1997
having previously been employed by the Company from January 1993 to July 1995 as
Export  Manager.  Since the  beginning of July 1998 he has been in charge of the
Company's U.S.  operations and currently  serves as CEO of both Swissray America
Inc. since its formation in September 1998 and Swissray Healthcare, Inc.

         Dr. Erwin Zimmerli has been a director of the Registrant since May 1995
and, since March 1998, a

                                      -36-

<PAGE>



member of the  Registrant's  Independent  Audit  Committee.  Since receiving his
Ph.D.  degree in law and economics from the University of St. Gall,  Switzerland
in 1979, Dr. Zimmerli has served as head of the White Collar Crime Department of
the  Zurich  State  Police  (1980-86),  as an  expert  of a Swiss  Parliamentary
Commission for penal law and Lecturer at the Universities of St. Gall and Zurich
(1980-87),  Vice President of an accounting firm  (1987-1990) and Executive Vice
President of a multinational aviation company (1990-92).  Since 1992 he has been
actively engaged in various independent  consulting  capacities primarily within
the Swiss legal community.

         Erich A. Kalbermatter, commenced serving the Company in the position of
Chief  Operating  Officer in April 1998 and held such  position  until  February
1999. Mr.  Kalbermatter  whose  background is principally as an  internationally
experienced   manager   with   expertise  in  the  areas  of   electronics   and
telecommunications,  has also served as managing  director of Private & Business
Communications  of ASCOM Ltd.,  Berne,  Switzerland  being  responsible  for the
turn-over  of  more  than 1  billion  Swiss  Francs,  with  approximately  4,800
employees worldwide.  In addition,  he was a member of ASCOM's Group Management,
an international communications corporation.

         Dr. Sc. Dov Maor, was appointed as a member of  the Registrant's  Board
of Directors and a member of its Independent Audit Committee effective March 26,
1998.  Dr. Sc. Dov Maor  currently  holds the  position  of Vice  President  for
Technology  with  ELBIT  Medical  Imaging,  Haifa.  Dr.  Sc.  Dov  Maor  is well
experienced  in the field of Nuclear  Medicine and medical  imaging and has been
employed  for over 10 years in a leading  position  in  Research &  Development.
Additionally,  he was working in conjunction  with the Max Planck  Institute for
Nuclear Physics in Heidelberg within his field of experience. In addition to his
technical knowledge, Dr. Sc. Dov Maor is experienced in the commercial sector of
the industry.

         Michael Laupper assumed the position of Interim Chief Financial Officer
of  the  Company   effective  January  1,  1999,  having  previously  worked  in
conjunction  with the Company's  former CFO and has been the Company's CFO since
August 1999. Michael Laupper completed his commercial  education in the chemical
industry  in 1991 in  Switzerland  and has  additionally  completed  studies  in
finance and accounting (in the United States during 1996-97).  He has served the
Company in various  management  positions at SR Management AG and SR Medical AG,
Company subsidiaries since 1999 and prior to assuming his current position.

The Board of Directors

         The  Board of  Directors  has  responsibility  for  establishing  broad
corporate policies and for overseeing the performance of the Registrant. Members
of the Board of  Directors  are kept  informed of the  Registrant's  business by
various reports and/or  documents sent to them in anticipation of Board meetings
as well as by operating and financial reports  presented at Board meetings.  The
Registrant  pays its directors  fees or  compensation  for services  rendered in
their  capacity as  directors.  The current  Board of Directors  was elected and
assumed  office as of December 23, 1997 with the exception that Dr. Sc. Dov Maor
assumed his position on March 26, 1998.

         The Board does not currently have a standing nominating or compensation
committee or any committee or committees performing similar functions, but acts,
as a whole, in performing the functions of such committees.  At a meeting of the
Board of Directors  held on March 26, 1998, an Independent  Audit  Committee was
established.

Section 16(a) Beneficial Ownership Reporting Compliance

         Section  16(a) of the Exchange Act  requires the  Company's  directors,
officers  and  persons  who own  more  than  10% of a  registered  class  of the
Company's equity securities, to file initial reports of ownership and reports of
changes  in  ownership  with  the  Securities  and  Exchange   Commission   (the
"Commission").  Such  persons  are  required  by the  Commission  to furnish the
Company  with copies of all Section  16(a) forms they file.  Based solely on its
review of the copies of Forms 3, 4 and 5 received by it, the Company believes

                                      -37-

<PAGE>



that,  with the  exception of those  persons  indicated  below,  all  directors,
officers and 10% stockholders complied with such filing requirements.

         According to the Company's records, the following filings appear not to
have been timely made: one initial  statement of beneficial  ownership on Form 3
and three statements of changes in beneficial  ownership on Form 5 covering four
transactions  (such  Form 5  representing  a  delinquent  Form 4) were not filed
timely by Ruedi G. Laupper;  one initial  statement of beneficial  ownership was
not filed timely by Ueli Laupper;  one initial statement of beneficial ownership
on Form 3 and two  statements  of  changes  in  beneficial  ownership  on Form 5
covering two  transactions  (such Form 5 representing a delinquent  Form 4) were
not filed timely by Tomlinson Holding, Inc.; one initial statement of beneficial
ownership on Form 3 was not filed timely by Josef Laupper; one initial statement
of  beneficial  ownership  was not filed  timely by Ulrich  Ernst;  one  initial
statement of  beneficial  ownership  was not filed  timely by Berkshire  Capital
Management and one initial statement of beneficial  ownership,  one statement of
changes in beneficial  ownership on Form 5 covering one transaction (such Form 5
representing  a delinquent  Form 4) were not filed timely by Erwin  Zimmerli and
one initial  statement of  beneficial  ownership on Form 3 and one  statement of
changes in beneficial  ownership on Form 5 covering one transaction (such Form 5
representing a delinquent Form 4) was not filed timely by Michael Laupper.

ITEM 11. EXECUTIVE COMPENSATION

Employment Agreements

         Ruedi G. Laupper  entered into a five-year  employment  agreement  with
Swissray Management AG, a wholly owned subsidiary of the Registrant, on December
18, 1997, which agreement  provided for automatic renewal for another five years
unless  terminated  by  either  party no later  than  December  31,  2001.  Such
agreement  also  provided for (i) an annual  salary of 299,000  Swiss francs (or
$200,878),  (ii) an annual bonus of 12,000 Swiss francs (or $8,377), and (iii) a
performance based bonus, based on the audited consolidated  financial statements
of the Company as of the end of the fiscal year. The bonus was calculated at 25%
of EBIT  (earnings  before  interest  and taxes)  payable  in stock of  Swissray
International,  Inc. valued at the average of the closing prices during the five
business  days  following  the filing of the 10-K.  In addition,  the  agreement
entitles Mr. Laupper to a car allowance,  five weeks of vacation, $698 per month
for expenses and a "Bel Etage" insurance which provides certain pension benefits
not  mandated by Swiss law.  If such  employment  agreement  is  terminated  for
reasons  beyond the  employee's  control,  Ruedi  Laupper will receive 2 million
Swiss  francs  (or  $1,206,200  at June  30,  2000)  including  any  bonus.  The
Registrant guarantees the obligation of Swissray Management AG in the event of a
default.

         Pursuant  to June 30, 1999 Board  meeting  (attended  by the  Company's
President, Ruedi G. Laupper, who absented himself from the meeting prior to vote
upon and adoption of resolutions)  the EBIT bonus  provisions  referred to above
were  extinguished  in exchange for (a) extending the duration of the employment
agreement to December 18, 2007 and (b) issuance to Ruedi G. Laupper of 2,000,000
fully vested, and non- forfeitable shares of restrictive Company common stock in
exchange for and in consideration of his agreeing to cancel the above referenced
EBIT  provisions in his employment  contract which otherwise would have entitled
him to receive 25% of all Company  earnings  before  interest and taxes ("EBIT")
payable in shares of Company  Common Stock  during each year of such  employment
contract,  which contract  expires  December,  2007 EBIT, in thousands,  for the
years  ended  June 30,  1997,  1998,  1999 and  2000 was  $(12,425),  $(14,218),
$(15,539),  $(10,294)  and  $(11,291)  respectively.  Accordingly,  no bonus was
payable.  Valuation  assigned  to the  aforesaid  2,000,000  fully  vested,  and
non-forfeitable  shares was based upon Board members  agreement  that such price
would be based upon 75% of bid price at the time proposal was initially made and
agreed to on March 12, 1999,  i.e. 75% of $0.50 bid price on March 12, 1999. The
Board resolution  approving the above referenced  transaction (and utilizing the
aforesaid agreed to valuation date) occurred on June 30, 1999, at which time the
bid price of the common stock was $2.625 and at which time the above  referenced
shares  were issued to Mr.  Laupper.  In  accordance  with SEC  guidelines  (and
notwithstanding  the  percentage  discount from bid price  discussed  above) the
Company's  financial  statements reflect a 10% (as opposed to 25%) discount from
bid price with respect to this transaction at date of issuance.

                                      -38-

<PAGE>



         At such June 30, 1999 Board meeting  members  expressed their consensus
that while the Company  had not, as yet,  had any  earnings,  that its  business
(after  significant and ongoing  infusions of capital) had now reached the point
where it was  expected  that  "breakeven"  (earnings  before  interest and taxes
("EBIT") being $0) was reasonably foreseeable within the current fiscal year and
that it was further  expected that in both the near term (i.e.,  within the next
two fiscal years) and long term (i.e., the period of time commencing  subsequent
to the  close  of  fiscal  year  ended  June  30,  2002)  that  substantial  and
significant  earnings would be forthcoming as a result of its development of its
ddRMulti-System (and related products) and the industry's  acceptance of same as
reflected by  substantial  sales  increases and the then  anticipated  sale of a
significant  number of its  ddRMulti-Systems  to the Government of Romania.  The
contract  for sale of  ddRMulti-Systems  was entered  into in October  1999 as a
result of the Romanian Bidding  Commission  having accepted the Company's tender
(in  September  1999) as made to the  Ministry  of Health of the  Government  of
Romania. As a result thereof the Company entered into the aforesaid contract for
the  sale  of 32 of  its  ddRMulti-Systems  with a  valuation  of in  excess  of
$13,800,000.  An initial  payment  aggregating  15% of the aforesaid total gross
proceeds (i.e. a sum approximating  $2,070,000) due under such contract was made
to  the  Company  in  early  March  2000.   The  Company   sold  25  of  the  32
ddRMulti-Systems  through close of its fiscal year ended June 30, 2000 while the
balance of 7 Systems  have been sold during the first  quarter of the  Company's
current fiscal year.

         Based upon the above,  Board members  reaffirmed  their aforesaid March
12,  1999  agreement  that it  would  be in the best  interests  of all  parties
concerned  (and  especially   Company   stockholders)  to  eliminate  the  above
referenced EBIT  provisions so that what might  otherwise  amount to significant
earnings being paid to the Company's  President in stock (pursuant to the 25% of
EBIT bonus  provisions) be replaced with a permanent one time  solution.  It was
then  resolved  and  subsequently  accepted  by  the  Company's  President  that
2,000,000  restrictive  shares of the Company's Common Stock be issued to him in
exchange for  cancellation of the above  referenced 25% of EBIT bonus provisions
and in accordance with March 12, 1999 original agreement.

         The  above  referenced  proposal  was  initially  orally  made  to  the
Company's  President  by its Board of  Directors  on March 12,  1999 and the key
meeting  with  respect to  discussion  thereon  occurred on such date,  and such
agreement was subsequently  finalized (i.e. reduced to writing) at the Company's
June 30, 1999 Board meeting wherein  discussions were basically limited to those
set forth above and at which the only persons  present were Board members and at
which time Board members again agreed that  valuation  assigned to shares issued
would reflect price at time of initial  proposal as previously  agreed to. There
were no offers or  counter-offers  between  the Company  and its  President  but
rather  directors  agreed  to and  voted  in  favor  of  issuance  of the  above
referenced 2,000,000  restrictive shares and the Company's President (abstaining
himself  from  such  vote)  agreed  to such  resolution.  All  material  factors
considered  by the Board  consisted of those  referred to above and were what it
considered to be "positive" factors without any negative factors or implications
being  discussed.  The Company has quantified all material factors to the extent
practicable.

         Management obtained stockholder  ratification  regarding this matter on
July 12, 2000 after  advising  stockholders  that even absent  ratification  the
Board,  in all  likelihood,  would leave the  agreement  in effect,  as is. Such
ratification  was  sought  and  received  in an  effort to  comply  with  NASDAQ
Marketplace  Rule  4310(c)(25)(H)(i)(a).  Notwithstanding  ratification the NASD
Board of  Governors on July 28, 2000 advised the Company that it had declined to
review the June 1, 2000  decision  of the Nasdaq  Council.  See also Items 4 and
5(d).

         Ueli Laupper and Josef Laupper have entered into three-year  employment
agreements with Swissray  Management AG on December 18, 1997,  which  agreements
will be automatically renewed for another three years unless notice is given six
months prior to the expiration  date.  Such  agreements  provide for salaries of
$114,494 and 119,700 Swiss francs (or $109,468) respectively with annual bonuses
of $7,077 and 9975 Swiss francs (or $6,964) respectively,  $1,500 and 1000 Swiss
francs (or $698) per month for expenses  respectively and 20 days and 25 days of
vacation  respectively.  The  employment  agreements of each of Ueli Laupper and
Josef Laupper also provide for a car  allowance.  If either of such employees is
terminated for

                                      -39-

<PAGE>



reasons  beyond the employees  control he will receive  500,000 Swiss francs (or
$301,550 at June 30, 2000).

         Mr.  Kalbermatter  in  accordance  with  his  Agreement  with  Swissray
Management  AG assumed the  position of Chief  Operating  Officer of the Company
effective  April 14,  1998 at an  annual  salary  equivalent  to  $153,333.  Mr.
Kalbermatter shall also receive (a) an expense allowance  equivalent to $12,000,
(b) an automobile  allowance  equivalent to $11,333, (c) 25 days of vacation and
(d) a "Bel Etage" insurance which provides certain pension benefits. U.S. dollar
equivalents indicated above are based upon a Swiss Francs (CHF) exchange rate of
$1.50.  This  Agreement  was to  expire  in May 31,  1999  but Mr.  Kalbermatter
resigned in February 1999.

         All of these employment agreements are covered by Swiss law.

         Summary Compensation Table

         (A)  The  following  Summary  Compensation  Table  sets  forth  certain
information  for the years ended June 30, 1997,  1998,  1999 and 2000 concerning
the cash and non-cash  compensation  earned by or awarded to the Chief Executive
Officer of the  Registrant,  the three other most highly  compensated  executive
officers of the  Registrant  as of June 30, 2000 and the former  Chairman of the
Board of Directors (the "Named Executive Officers").
<TABLE>
<CAPTION>

                                            Annual Compensation                           Long-Term Compensation
                                            -------------------                           ----------------------
                                    Fiscal                                Other Annual      Stock       All Other
Name and Principal Position          Year       Salary        Bonus       Compensation     Options     Compensation
---------------------------         -----   --------------    -----       ------------     -------     ------------

<S>                                 <C>     <C>                           <C>        <C>   <C>
Ruedi G. Laupper                    2000    $200,878          ---         $695,625(1)(6)   181,250(7)     ---
  President and Chief Executive     1999    $194,121          $8,377    $4,335,000(1)(5)     ---          ---
  Officer, Chairman of the          1998    $173,587         $16,057       $15,000(1)        ---          ---
  Board of Directors

Josef Laupper                       2000    $109,468           ---        $383,250(1)(6)   200,000(7)     ---
  Secretary, Treasurer              1999    $ 83,566          $6,494       $12,000(1)        ---          ---
                                    1998    $ 94,669           ---         $12,000(1)        ---          ---

Ueli Laupper                        2000    $114,494           ---        $628,750(1)(6)   218,750(7)     ---
  Vice President International      1999    $ 94,924          $7,077       $10,000(1)        ---          ---
  Sales (2)                         1998    $ 95,685           ---         $10,000(1)        ---          ---

Michael Laupper                     2000    $ 80,600           ---        $371,250(6)      125,000(7)     ---
  Chief Financial Officer

Herbert Laubscher                   1998    $ 79,244           ---               ---         ---          ---
  Chief Financial Officer (2)(3)

Erich A. Kalbermatter               1999    $153,333           ---               ---         ---          ---
  Chief Operating Officer  (4)      1998    $ 33,652           ---               ---         ---          ---
</TABLE>

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

(1)      Fees for service on the Board of Directors of the Company.
(2)      Compensation did not exceed $100,000 in any fiscal year.
(3)      Herbert  Laubscher  joined the  Company in August of 1996 and served as
         Treasurer from January 1998 until his  resignation  effective  December
         31, 1998.
(4)      Erich A. Kalbermatter joined the Company on April 14, 1998 and resigned
         in February 1999.
(5)      Dollar value assigned to the 2,000,000 shares  of  Common Stock  issued

         for  relinquishment  of EBIT bonus based upon Board members   agreement
         that such  price  would  be  based upon 90% of  bid  price  at the time
         proposal  was initially  made, i.e., 90% of the  $2.40 average price on
         June 30, 1999 - the date of the Board of Directors meeting.

(6)      Includes 275,000,  150,000,  250,000 and 150,000 shares of common stock
         issued to Ruedi G.  Laupper,  Josef  Laupper,  Ueli Laupper and Michael
         Laupper  respectively,  all of which  shares  were valued at $2.475 per
         share.
(7)      See "Stock Option Grants in Fiscal Year Ended June 30, 2000".

                                      -40-

<PAGE>



                   STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

         The following  sets forth certain  information  concerning the grant of
options to purchase shares of the Common Stock to each of the executive officers
of the Registrant,  as well as certain  information  concerning the exercise and
value of such stock  options  for each of such  individuals.  Options  generally
become  exercisable  upon  issuance  and expire no later than ten years from the
date of grant.

             STOCK OPTION GRANTS IN FISCAL YEAR ENDED JUNE 30, 1998
         With respect to the Named Executive  Officers there were no granting of
stock options  under either the  Company's  1996 or 1997 Stock Option Plans (the
"Plans") during the fiscal year ended June 30, 1998.

             STOCK OPTION GRANTS IN FISCAL YEAR ENDED JUNE 30, 1999

         With respect to the Named Executive  Officers there were no granting of
stock options under either the Company's  1996,  1997 or 1999 Stock Option Plans
(the "Plans") during the fiscal year ended June 30, 1999.

             STOCK OPTION GRANTS IN FISCAL YEAR ENDED JUNE 30, 2000

         With respect to the named Executive  Officers there were no granting of
stock options under either the Company's  1996,  1997. 1999 or 2000 Stock Option
Plans (the "Plans") during fiscal year ended June 30, 2000 excepting for options
granted  (October  27, 1999 when the bid price was $2.625) from the 1999 Plan as
follows:  Ruedi G.  Laupper,  Josef  Laupper,  Ueli Laupper and Michael  Laupper
181,250, 200,000, 218,750 and 125,000 options respectively.  All of such options
are exercisable at $2.625 per share for a period of three years.

         AGGREGATED OPTION EXERCISES IN FISCAL YEAR ENDED JUNE 30, 1999
                          AND YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>

                                                    Number of
                                                   Securities                                       Value of
                                                   Underlying                                      Unexercised
                                                   Unexercised                                    In-The-Money
                                                     Options                                         Options
                                              At Fiscal Year-End(#)                           At Fiscal Year-End($)
         Name                               Exercisable/Unexercisable                       Exercisable/Unexercisable

<S>                                                <C>    <C>                                        <C>   <C>
Ruedi G. Laupper                                   12,000/0(3)                                       $1.79/0
Josef Laupper(4)                                       0/0                                             0/0
Ueli Laupper(4)                                        0/0                                             0/0
Herbert Laubscher(4)                                   0/0                                             0/0
Ulrich R. Ernst(4)(5)                                  0/0                                             0/0
</TABLE>

(1)      No options  were  exercised  by a Named  Executive  Officer  during the
         fiscal year ended June 30, 1997, 1998 and 1999.
(2)      Options  are  in-the-money if  the fair  market value of the underlying
         securities exceeds the exercise price of the option.
(3)      Includes 12,000  options  which a re  owned  indirectly  by Mr. Laupper
         through SR Medical Equipment Ltd., a  corporation which is wholly owned
         by Mr. Laupper.
(4)      These individuals own no stock options of the Registrant.
(5)      Mr. Ernst was Chairman of the Board of Directors  from  May 1995  until
         March 18, 1997.




                                      -41-

<PAGE>



Stock Option Plans

         On January 30, 1996, the Board of Directors  adopted the Company's 1996
Non-Statutory Stock Option Plan (the "1996 Plan"). All of the options under such
1996 Plan have  been  granted.  Consequently,  the  Board of  Directors  and the
Registrant's  stockholders approved the Swissray International,  Inc. 1997 Stock
Option Plan (the "Stock Option Plans").

         The purpose of the Stock Option Plans is to provide directors, officers
and  employees  of, and  consultants  to the Company and its  subsidiaries  with
additional  incentives by increasing  their ownership  interests in the Company.
Directors,  officers and other employees of the Company and its subsidiaries are
eligible to participate  in the Stock Option Plans.  Options may also be granted
to  directors  who are not  employed by the Company  and  consultants  providing
valuable services to the Company and its subsidiaries. In addition,  individuals
who have agreed to become an employee  of,  director of or a  consultant  to the
Company and its subsidiaries are eligible for option grants, conditional in each
case on actual employment,  directorship or consultant status. Awards of options
to purchase  Common Stock may include  incentive stock options under Section 422
of the  Internal  Revenue  Code  ("ISOs")  and/or  non-qualified  stock  options
("NQSOs").  Grantees who are not employees of the Company or a subsidiary  shall
only receive NQSOs.

         The maximum number of options that may be granted under this Plan shall
be options to purchase 200,000 shares of Common Stock. As of September 12, 2000,
none of such options have been granted.

         The Compensation  Committee will administer the Stock Option Plans. The
Compensation  Committee generally will have discretion to determine the terms of
any option grant,  including the number of option shares,  exercise price, term,
vesting schedule,  the  post-termination  exercise period, and whether the grant
will be an ISO or NQSO.  Notwithstanding  this  discretion:  (i) the  number  of
shares subject to options granted to any individual in any calendar year may not
exceed  200,000;  (ii) the term of any option  may not  exceed 10 years  (unless
granted as an ISO to an individual or entity who possesses  more than 10% of the
voting  power of the Company,  which term may not exceed five  years);  (iii) an
option will  terminate  as  follows:  (a) if such  termination  is on account of
permanent and total  disability (as determined by the  Compensation  Committee),
such options shall terminate one year thereafter;  (b) if such termination is on
account of death,  such options shall  terminate six months  thereafter;  (c) if
such  termination  is for cause (as determined by the  Compensation  Committee),
such options shall  terminate  immediately;  (d) if such  termination is for any
other reason, such options shall terminate three months thereafter; and (iv) the
exercise  price of each share subject to an ISO shall be not less than 100%, or,
in the case of an ISO granted to an individual described in Section 422(b)(6) of
the Code,  110% of the fair market value  (determined in accordance with Section
422 of the  Code) of a share of the Stock on the date  such  option is  granted.
Unless  otherwise  determined by the  Compensation  Committee,  (i) the exercise
price per share of Common Stock  subject to an option shall be equal to the fair
market  value of the Common  Stock on the date such option is granted;  (ii) all
outstanding  options  become  exercisable  immediately  prior  to a  "change  in
control" of the Company  (as defined in the Stock  Option  Plans) and (iii) each
option  shall  become  exercisable  in three equal  installments  on each of the
first, second and third anniversary of the date such option is granted.

         The Stock Option Plans may be amended, altered, suspended, discontinued
or terminated by the Board of Directors  without further  stockholder  approval,
unless such  approval is required by law or regulation or under the rules of the
stock exchange or automated  quotation  system on which the Common Stock is then
listed or quoted.  Thus,  stockholder  approval will not necessarily be required
for  amendments  which  might  increase  the cost of the Stock  Option  Plans or
broaden  eligibility.  The Stock  Option  Plans  will  remain  in  effect  until
terminated by the Board of Directors.  No ISO may be granted more than ten years
after such date.

         Pursuant to February  1999 Board of Directors  approval and  subsequent
July  23,  1999  stockholder  approval,  the  Registrant  adopted  its  1999 Non
Statutory  Stock Option  Plan,  whereby it reserved for issuance up to 3,000,000
shares of its common  stock.  Thereafter in August 1999 the  Registrant  filed a
Registration  Statement on Form S-8 (File No.  0-26972) so as to register  those
shares of common stock underlying the

                                      -42-

<PAGE>



aforesaid  options.  As of September  12, 2000,  2,909,000 of these options have
been granted.

         Pursuant to October  1999 Board of Directors  approval  and  subsequent
July  12,  2000  stockholder  approval,  the  Registrant  adopted  its  2000 Non
Statutory  Stock Option  Plan,  whereby it reserved for issuance up to 4,000,000
shares of its common  stock.  Thereafter in August 2000 the  Registrant  filed a
Registration  Statement on Form S-8 (File No.  0-26972) so as to register  those
shares of common stock underlying the aforesaid  options.  None of these options
have been granted through September 12, 2000.

         The Registrant currently has outstanding non-statutory stock options to
purchase an aggregate of 161,000  shares of Common  Stock.  See  "Management  --
Compensation of Directors and Executive  Officers" and Notes to the Consolidated
Financial Statements June 30, 2000, 1999 and 1998.

Retirement and Long-Term Incentive Plans

         The Swiss and German Subsidiaries,  mandated by government regulations,
are required to  contribute  approximately  five (5%)  percent of  eligible,  as
defined,  employees'  salaries into a government  pension plan. The subsidiaries
also contribute  approximately  five (5%) percent of eligible  employee salaries
into a private pension plan. Total  contributions  charged to operations for the
years ended June 30, 2000, 1999 and 1998,  were $475,176,  $509,959 and $347,854
respectively.

Director Compensation

         Directors of the  Registrant  receive  $10,000  annually for serving as
directors except for Josef Laupper,  who receives $12,000 and Ruedi Laupper, the
Chairman of the Board of Directors, who receives $15,000.

Compensation Committee Interlocks and Insider Participation

         The Company had no  Compensation  Committee  during the last  completed
fiscal year.  The  Corporation's  executive  compensation  was supervised by all
members of the Company's  Board of Directors and the  following  directors  were
concurrently  officers  of the  Company in the  following  capacities:  Ruedi G.
Laupper  (Chairman  of the Board of  Directors,  President  and Chief  Executive
Officer);  Josef  Laupper  (Secretary,  Treasurer and director) and Ueli Laupper
(Vice President and director).  No executive  officer of the Company served as a
member of the Board of Directors or  compensation  committee of any entity which
has  one or  more  executive  officers  who  serve  on the  Company's  Board  of
Directors.

         While the Company  did not issue any shares of its Common  Stock to any
of its  officers  during  fiscal  year ended June 30,  1998 it did issue  48,259
shares of Common Stock to a company  controlled by Ruedi G. Laupper  pursuant to
an agreement  between Ruedi G. Laupper and the Company in  consideration  of Mr.
Laupper's agreement to cancellation of 160,863 post split shares of Common Stock
held by Ruedi G. Laupper or companies controlled by him.

         The Company did not issue any shares of its Common  Stock to any of its
officers  during  fiscal year ended June 30, 1999  excepting for the issuance of
2,000,000  restrictive  shares  to  Ruedi  G.  Laupper  in  exchange  for and in
consideration  of  cancellation  of  certain  bonus   provisions   contained  in
employment  contract.  See Item 11 -  "Employment  Agreements".  With respect to
shares of common stock issued to officers and directors during fiscal year ended
June 30, 2000 see Item 13.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of September 12, 2000 (except  where  otherwise
noted)  with  respect  to (a)  each  person  known by the  Registrant  to be the
beneficial  owner of more than five percent of the outstanding  shares of Common
Stock,  (b) each  director of the  Registrant,  (c) the  Registrant's  executive
officers and (d) all officers and

                                      -43-

<PAGE>



directors of the  Registrant  as a group except as indicated in the footnotes to
the table,  all of such  shares of Common  Stock are owned with sole  voting and
investment power. The title of class of all securities indicated below is Common
Stock with $.01 par value per share.
<TABLE>
<CAPTION>

                                                              No. Of Shares             Percentage of
                                                                Beneficially            Shs. Beneficially
Name and Address of Beneficial Owner                            Owned (1)                  Owned (1)
------------------------------------                          --------------            ------------

<S>              <C>                                          <C>                        <C>
Ruedi G. Laupper (2)(10)                                      2,941,074                  12.34%
c/o SWISSRAY International, Inc.
Turbistrasse 25-27
CH 6280 Hochdorf
Switzerland

Josef Laupper (3)                                               325,000                   1.36%
c/o SWISSRAY International, Inc.
Turbistrasse 25-27
CH 6280 Hochdorf
Switzerland

Erwin Zimmerli (4)                                              218,750                     *
c/o SWISSRAY International, Inc.
Turbistrasse 25-27
CH 6280 Hochdorf
Switzerland

Ueli Laupper (11)                                               443,750                   1.86%
80 Grasslands Road
Elmsford, New York 10523

Dov Maor (13)                                                    31,250                     *
c/o SWISSRAY International, Inc.
Turbistrasse 25-27
CH 6280 Hochdorf
Switzerland

Michael Laupper (12)                                            250,000                   1.05%
c/o SWISSRAY International, Inc.
Turbistrasse 25-27
CH 6280 Hochdorf
Switzerland

Dominion Capital Fund, Ltd.                                   4,436,359 (5)              16.30%
c/o Thomson Kernaghan & Co. Ltd.
365 Bay Street
Toronto, Ontario M5H 2V2
Canada

Sovereign Partners LP                                         5,587,506 (6)              20.05%
90 Grove Street - Suite 01
Ridgefield, New Jersey   06877

Liviakis Financial Communications, Inc. (LFC)                 3,526,000 (7)              14.90%
495 Miller Avenue - 3rd Floor
Mill Valley, California   94914




                                      -44-

<PAGE>



Rolcan Finance Ltd.                                             780,000 (8)               3.30%
Seestrasse 17
P.O. Box 53
CH 8702 Zollikon 2
Switzerland

Parkdale LLC (14)                                             2,723,195(14)              10.73%
c/o Thomson Kernaghan & Co. Ltd.
365 Bay Street
Toronto, Ontario M5H 2V2
Canada

All directors and officers as
 a group (six persons)                                        4,209,824 (9)              17.18%
</TABLE>

*    Represents  less  than  1%  of  the  23,667,129  shares  outstanding  as of
     September 12, 2000.

(1)  Unless otherwise indicated,  the Company believes that all persons named in
     the table have sole voting and investment  power with respect to all shares
     of the Common  Stock  beneficially  owned by them. A person is deemed to be
     the  beneficial  owner of  securities  which may be acquired by such person
     within 60 days from the date indicated  above upon the exercise of options,
     warrants or convertible  securities.  Each  beneficial  owner's  percentage
     ownership is determined by assuming that options,  warrants or  convertible
     securities  that are held by such  person  (but not those held by any other
     person)  and which  are  exercisable  within 60 days of the date  indicated
     above, have been exercised.

(2)  Includes (i) 37,500 shares owned  indirectly by Ruedi G. Laupper through SR
     Medical  Equipment  Ltd., a corporation  which is wholly owned by him; (ii)
     460,324  shares  owned  indirectly  by Ruedi G. Laupper  through  Tomlinson
     Holding  Inc., a  corporation  which is wholly  owned by him,  (iii) 12,000
     shares  which may be  acquired  upon  exercise of  immediately  exercisable
     options,  which options are owned indirectly by Ruedi G. Laupper through SR
     Medical Equipment Ltd., a corporation which is wholly owned by him and (iv)
     an additional 156,250 shares which may be acquired upon exercise of balance
     of  immediately  exercisable  options  issued in October 1999. (3) Includes
     175,000   shares  which  may  be  acquired  upon  exercise  of  balance  of
     immediately  exercisable  options  issued in  October  1999.  (4)  Includes
     168,750   shares  which  may  be  acquired  upon  exercise  of  balance  of
     immediately exercisable options.

     As of the September 12, 2000, an aggregate  principal  outstanding  balance
     (exclusive of interest) for those Convertible  Debentures referred to below
     amounts to $13,998,994.  None of these convertible  debentures are owned by
     officers and/or directors of the Company.

(5)  Includes  880,781 shares  currently owned as well as up to 3,555,578 shares
     which normally could be issued  (exclusive of interest),  at any time, upon
     conversion of previously  issued  convertible  debentures (the "Convertible
     Debentures").  Dominion Capital Fund, Ltd. is managed and directed by David
     Sims, its sole director.  Voting control of Dominion  Capital Fund,  Ltd.'s
     shares is exercised by  Livingstone  Asset  Management  Limited,  a Bahamas
     Company controlled by David Sims.


(6)  Includes  670,733 shares  currently owned as well as up to 4,196,773 shares
     which normally could be issued  (exclusive of interest),  at any time, upon
     conversion of previously  issued  convertible  debentures (the "Convertible
     Debentures").  The person or persons  having voting  control are Southridge
     Capital Management LLC, P.P., Steven Hicks (President) - Connecticut.

     The  foregoing  information  contained in  footnotes 5 and 6 above  assumes
     conversion  based  on  18% -  20%  discount  from  market  (dependent  upon
     debenture)  based upon the last reported sales price on September 12, 2000.
     This number of shares,  if issued,  would require  disclosure of beneficial
     ownership  of in excess of 5%.  However,  pursuant to terms of  Convertible
     Debentures, the holders thereof may not

                                      -45-

<PAGE>



     beneficially own more than 4.99% of outstanding  Company shares (other than
     as a result of mandatory  conversion  provisions).  The 4.99% limitation is
     only  contractual  in  nature.  The 4.99%  limitation  does not apply  and,
     accordingly,  would not limit  beneficial  ownership  in any  manner in the
     event that (a) 50% or more of the Company is  acquired,  (b) the Company is
     merged into another company or (c) a change of control occurs.

(7)  Pursuant  to  written  Agreements,  the  Registrant's  President,  Ruedi G.
     Laupper,  has sole voting  rights with respect to these shares  without any
     limitation  thereon  so long as same  are  owned by LFC.  LFC in turn  (and
     pursuant to  agreement  with the  Company)  may not sell any of such shares
     until March 28, 2001 and then only in  accordance  with and subject to such
     volume  limitations  as are  imposed  in  accordance  with  the  applicable
     provisions of Rule 144 under the Securities Act of 1933.

(8)  Roland  Kaufmann,  Managing  Director and a control person of this firm has
     voting control over these shares.

(9)  Includes 837,000 shares issuable upon option exercise.

(10) When taking into account the number of shares owned  beneficially  by Ruedi
     G.  Laupper  (2,772,824)  as well as those  shares over which he  exercises
     voting  control  (as  indicated  in  footnote  7 above)  Ruedi  G.  Laupper
     exercises voting control over  approximately 27% of all voting shares as of
     September 12, 2000.

(11) Includes  193,750  shares which may be acquired upon exercise of balance of
     immediately exercisable options issued in October 1999.

(12) Includes  100,000  shares which may be acquired upon exercise of balance of
     immediately exercisable options issued in October 1999.

(13) Includes  31,250 shares which may be acquired upon exercise of  immediately
     exercisable options issued in October 1999.

(14) Includes 1,000,000 shares currently owned as well as up to 1,723,195 shares
     which normally could be issued  (exclusive of interest),  at any time, upon
     conversion of previously  issued  convertible  debentures (the "Convertible
     Debentures").  Parkdale LLC is managed and directed by Navigator Management
     Ltd.,  its sole  director.  Voting  control  of  Parkdale  LLC's  shares is
     exercised  by  Livingstone  Asset  Management  Limited,  a Bahamas  Company
     controlled by David Sims.

     As indicated in footnotes 5 and 14 thereto,  Livingstone  Asset  Management
     Limited, a Bahamas Company controlled by David Sims has voting control over
     both Dominion  Capital Fund,  Ltd. and Parkdale LLC. These persons or firms
     having  voting  control  (i.e.,   Livingstone  Asset  Management   Limited,
     controlled  by David  Sims) do not own any  Company  shares of  record  but
     rather have been given the right to vote by Dominion  Capital and  Parkdale
     with  respect to those  shares owned by such  entities.  Accordingly,  such
     persons  and/or firms  (referred  to in this  paragraph)  exercise,  in the
     aggregate, as of September 12, 2000 the right to vote over 1,880,781 shares
     owned in the aggregate by Dominion Capital and Parkdale.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Reference is herewith made to Compensation Committee Interlock,  second
paragraph regarding (a) 48,259 restrictive shares of Company common stock issued
to its  President  during  fiscal  year  ended June 30,  1998 and (b)  2,000,000
restrictive  shares  issued to its  President  during fiscal year ended June 30,
1999. For further  information with respect to the latter transaction  reference
is herewith made to "Management - Employment Agreements", second paragraph. With
respect to both  transactions  referred to herein the Company's Board determined
same to be as fair to the  Company  as could  have been  made with  unaffiliated
parties and both of such  transactions  were  unanimously  approved by its Board
with the Company's President abstaining from voting.

         Subsequent  to June 30, 1999 year end,  497,824  restrictive  shares of
Company  common stock were issued to  corporations  controlled  by the Company's
President in  consideration  of his  pledging as  collateral  (and  subsequently
forfeiting)  shares of Company common stock owned by corporations  controlled by
him in order to enable the Company to obtain financing.


                                      -46-

<PAGE>



         During October of 1999 and in accordance  with unanimous Board approval
the Company  issued an  aggregate  of 875,000  shares to certain of its officers
and/or directors as consideration for services rendered as per Board resolution.
Such shares were issued as follows:

                                                                     No. Of
         Name                       Position                         Shares

         Ruedi G. Laupper           Chairman, President &            275,000
                                    Chief Executive
                                    Officer
         Josef Laupper              Secretary, Treasurer             150,000
                                    & a Director
         Michael Laupper            Chief Financial Officer,         150,000
                                    Controller
         Ueli Laupper               Vice President & a               250,000
                                    Director
         Erwin Zimmerli             Director                          50,000

         The Company made unsecured advances to its former Chairman of the Board
of  Directors (a  principal  stockholder)  during the fiscal year ended June 30,
1997  requiring  interest  at 6% per annum.  The  balance  at June 30,  1997 was
$69,587.  Interest charged to the stockholder for the fiscal year ended June 30,
1997 was $3,460. Such indebtedness was repaid in full in July 1997.

                                     PART IV

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

         (a)      Reference  is  herewith  made  to  the  consolidated financial
statements and notes thereto included in this Form 10-K.

         (b)      No exhibits are being filed with this Form 10-K.

         (c)      During the last  quarter of the  Company's  fiscal  year ended
                  June 30, 2000, the following Forms 8-K were filed.

                  1)       None.


                                      -47-

<PAGE>



                                   SIGNATURES



         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                               SWISSRAY INTERNATIONAL, INC.


Dated: September 18, 2000                      By:/s/Ruedi G. Laupper
                                               Name: Ruedi G. Laupper
                                               Title:Chairman of the Board of
                                                     Directors, President &
                                                     Principal Executive Officer



         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.


Signature                    Title                         Date



/s/Ruedi G. Laupper          Chairman of the Board of      Dated: Sept. 18, 2000
   Ruedi G. Laupper          Directors, President &
                             Principal Executive Officer

/s/Josef Laupper             Secretary, Treasurer and a    Dated: Sept. 18, 2000
   Josef Laupper             Director


/s/Michael Laupper           Principal Financial Officer   Dated: Sept. 18, 2000
   Michael Laupper           & Controller


/s/Ueli Laupper              Vice President and a Director Dated: Sept. 18, 2000
Ueli Laupper


/s/Dr. Erwin Zimmerli        Director                      Dated: Sept. 18, 2000
   Dr. Erwin Zimmerli


Dr. Sc. Dov Maor             Director                      Dated: Sept.   , 2000





                                      -48-

<PAGE>


Supplemental Information

         Supplemental Information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Act by  Registrants  Which Have Not  Registered  Securities
Pursuant to Section 12 of the Act.

Not Applicable.


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