UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                    FORM 10-Q

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

               For the quarterly period ended: December 31, 1998

                                       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 Number)

200 East 32nd Street, Suite 34-B, New York, New York        10016
(Address of principal executive offices)                  (Zip Code)

   New York (212) 545 0095                 Switzerland  011 41 41 914 12 00
              (Registrant's telephone number, including area code)

                                       N/A
              (Former name, former address and former fiscal year,
                          if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. [X] Yes [ ] No

                      APPLICABLE ONLY TO CORPORATE ISSUERS:



<PAGE>



The number of shares  outstanding of each of the issuer's class of common stock,
as of the latest practicable date.

The number of shares  outstanding of each of the registrant's  classes of common
stock, as of February 9, 1999 is 4,637,982 shares, all of one class of $.01 par
value common stock.


                                        1
<PAGE>   

TABLE OF CONTENTS                                                           Page


No.                                  PART I

Item 1.       Financial Statements                                         F1-F5

Item 2.       Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                      3-7

Item 3.       Quantitative and Qualitative Disclosures About Market Risk       8

                                     PART II

Item 1.       Legal Proceedings                                              8-9

Item 2.       Changes in Securities and Use of Proceeds                        9

Item 3.       Defaults Upon Senior Securities                                  9

Item 4.       Submission of Matters to a Vote of Security Holders              9

Item 5.       Other Information                                               10

Item 6.       Exhibits and Reports on Form 8-K                                10

Signatures                                                                    10



                                        2

<PAGE>
<TABLE>
<CAPTION>
                                         SWISSRAY INTERNATIONAL INC.
                                         CONSOLIDATED BALANCE SHEETS
                                                          

                                                        ASSETS
                                                                                December 31,                
                                                                                   1998                      June 30,  
                                                                                (Unaudited)                    1998      
                                                                                ------------              ------------
<S>                                                                             <C>                      <C>                     
CURRENT ASSETS
Cash and cash equivalents                                                       $  1,224,828              $   1,281,552
Accounts receivable, net of allowance for doubtful
accounts of $ 34,833 and $ 32,356                                                  4,567,610                  2,584,651
Inventories                                                                        8,321,841                  7,701,145
Prepaid expenses and sundry receivables                                            1,338,067                  1,501,909
                                                                                -------------             -------------            
TOTAL CURRENT ASSETS                                                              15,452,346                 13,069,257
                                                                                -------------             -------------
PROPERTY AND EQUIPMENT, at cost, net of accumulated depreciation
of $ 794,307 and $ 581,077                                                         6,004,371                  6,010,378
                                                                                -------------              ------------  
OTHER ASSETS
Loan receivable                                                                       18,031                     20,005
Licensing agreement, net of accumulated amortization of                            3,352,438                  3,600,766
$ 1,614,137 and $ 1,365,809
Patents and trademarks, net of accumulated amortization of                           214,936                    230,614
$ 98,394 and $ 82,716                                                             
Software development costs, net of accumulated amortization of                       402,210                    455,318
$ 175,000 and $ 121,892
Security deposits                                                                     31,146                     38,280
Note receivable - long-term, net of allowance of $ 30,733 and $ 30,733               513,643                    513,643
Goodwill, net of accumulated amortization of $ 223,939 and $ 136,939               1,709,336                  1,796,336
Debt issance costs on convertible debentures, net of accumulated
amortization of $ 207,333 and $ 60,000                                               103,667                    180,000
                                                                                -------------             -------------    
TOTAL OTHER ASSETS                                                                 6,345,407                  6,834,962
                                                                                -------------             -------------            
TOTAL ASSETS                                                                    $ 27,802,124             $   25,914,597
                                                                                =============             =============             
                                                                                

                                    LIABILITIES AND STOCKHOLDERS' EQUITY      
CURRENT LIABILITIES
Current maturities of long-term debt                                            $    215,486             $      233,746
Notes payable - banks                                                              4,756,527                  3,551,091
Note payable                                                                       1,080,000                      - 
Loan payable                                                                         134,364                    125,029
Accounts payable                                                                   6,846,261                  5,030,449
Accrued expenses                                                                   1,501,005                  2,365,450
Restructuring                                                                        500,000                    500,000
Customer deposits                                                                     30,844                    176,583
Due to stockholders and officers                                                       -                          2,206
                                                                                -------------              ------------            
TOTAL CURRENT LIABILITIES                                                         15,064,487                 11,984,554
                                                                                -------------              ------------
CONVERTIBLE DEBENTURES                                                            12,229,818                  7,645,969
Conversion Benefit                                                                     -                       (315,327)
                                                                                -------------              ------------  
Net Convertible Debentures                                                        12,229,818                  7,330,642
                                                                                -------------              ------------
LONG-TERM DEBT, less current maturities                                              367,725                    440,674
                                                                                ------------               ------------
STOCKHOLDERS' EQUITY 
Common stock                                                                          46,380                     41,426
Additional paid-in capital                                                        59,657,215                 58,074,793
Treasury stock                                                                      (540,000)                     -     
Accumulated deficit                                                              (57,567,759)               (50,481,713)
Accumulated other comprehensive loss                                              (1,455,742)                (1,475,779)
                                                                                -------------              ------------- 
TOTAL STOCKHOLDERS' EQUITY                                                           140,094                  6,158,727
                                                                                -------------              -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                      $ 27,802,124             $   25,914,597
                                                                                =============             =============
                                                     F 1

</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                        SWISSRAY INTERNATIONAL INC.
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                                                                                    
                                                                   Three Months Ended
                                                                      December 31,
                                                          ---------------------------------------
                                                            1998                     1997                 
                                                                                    Restated              
                                                           Unaudited                Unaudited             
                                                          -----------              -----------             
<S>                                                     <C>                      <C>                                    

NET SALES                                                $  6,444,706             $  6,043,675          
COST OF SALES                                               5,132,428                5,277,856            
                                                          -----------              ------------             
GROSS PROFIT                                                1,312,278                  765,819            
                                                          -----------               -----------            
OPERATING EXPENSES
Officers and directors compensation                           241,707                  154,812              
Salaries                                                      979,391                1,305,092              
Selling                                                       925,482                1,186,167              
Research and development                                      437,551                  948,643              
General and administrative                                    260,178                  671,418              
Other operating expenses                                      296,518                  128,521
Bad debts                                                       7,383                  (25,046)                  
Depreciation and amortization                                 297,013                  237,923              
                                                           ----------                ---------            
TOTAL OPERATING EXPENSES                                    3,445,223                4,607,530            
                                                           ----------                ---------           

LOSS BEFORE OTHER INCOME (EXPENSES)
  AND INCOME TAXES                                         (2,132,945)              (3,841,711)          
                                                           -----------              -----------  
Other income (expenses)                                      (175,628)                  17,646              
Interest expense                                             (758,800)              (1,722,761)             
                                                           -----------              -----------                   
OTHER EXPENSES                                               (934,428)              (1,705,115)             
                                                           -----------              -----------          
LOSS FROM CONTINUING OPERATIONS                  
  BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS              (3,067,373)              (5,546,826)          

Income tax provision (benefit)                                  -                         (876)                 

Extraordinary income (expenses)                              (803,182)                 154,215                
                                                          ------------              -----------            
NET LOSS                                                 $ (3,870,555)             $(5,391,735)         
                                                          ============              ===========              
LOSS PER COMMON SHARE BASIC
Loss from continuing operations                          $      (0.66)             $     (2.22)         
Extraordinary items                                             (0.18)                    0.06                 
                                                          ------------              -----------             
NET LOSS                                                 $      (0.84)             $     (2.16)         
                                                          ------------              -----------          
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING                                          4,625,626                2,495,918          

                                    F 2

</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                        SWISSRAY INTERNATIONAL INC.
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                                                                                    
                                                                    Six Months Ended
                                                                      December 31,
                                                          ---------------------------------------
                                                            1998                     1997                 
                                                                                    Restated              
                                                           Unaudited                Unaudited             
                                                          -----------              -----------             
<S>                                                     <C>                      <C>                                    

NET SALES                                                $ 10,101,147             $ 11,302,578          
COST OF SALES                                               7,969,342                8,590,947            
                                                          -----------              ------------             
GROSS PROFIT                                                2,131,805                2,711,631            
                                                          -----------               -----------            
OPERATING EXPENSES
Officers and directors compensation                           396,894                  250,547              
Salaries                                                    2,064,577                1,926,769              
Selling                                                     1,438,281                1,674,198              
Research and development                                      843,589                1,422,482              
General and administrative                                    710,818                  883,598              
Other operating expenses                                      561,007                  264,398
Bad debts                                                       7,383                  (25,046)                  
Depreciation and amortization                                 590,762                  436,646              
                                                           ----------                ---------            
TOTAL OPERATING EXPENSES                                    6,613,311                6,833,592            
                                                           ----------                ---------           

LOSS BEFORE OTHER INCOME (EXPENSES)
  AND INCOME TAXES                                         (4,481,506)              (4,121,961)          
                                                           -----------              -----------  
Other income (expenses)                                      (358,995)                 156,145              
Interest expense                                           (1,412,696)              (4,416,914)             
                                                           -----------              -----------                   
OTHER EXPENSES                                             (1,771,691)              (4,260,769)             
                                                           -----------              -----------          
LOSS FROM CONTINUING OPERATIONS                  
  BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS              (6,253,197)              (8,382,730)          

Income tax provision (benefit)                                  -                        -                 

Extraordinary income (expenses)                              (832,849)                 304,923                
                                                          ------------              -----------            
NET LOSS                                                 $ (7,086,046)             $(8,077,807)         
                                                          ============              ===========              
LOSS PER COMMON SHARE BASIC
Loss from continuing operations                          $      (1.35)             $     (3.36)         
Extraordinary items                                             (0.18)                    0.12                 
                                                          ------------              -----------             
NET LOSS                                                 $      (1.53)             $     (3.24)         
                                                          ------------              -----------          
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING                                          4,625,626                2,495,918          

                                    F 3
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                                 SWISSRAY INTERNATIONAL INC.
                            CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                        Six Months Ended
                                                                          December 31,
                                                                ---------------------------------
                                                                  1998                   1997                    
                                                                                       Restated                             
                                                                Unaudited              Unaudited                     
                                                                ---------              ---------              
<S>                                                        <C>                    <C>                     
                                                                                                                               
CASH FLOWS FROM OPERATING ACTIVITES

Net loss                                                     $ (7,086,046)          $ (8,077,807)                     
Adjustment to reconcile net loss to net
         cash used by operating activities    
         Depreciation and amortization                            617,486                471,094                 
         Provision for bad debts                                    2,477                (53,061)                 
         Financing costs incurred                                      -                 240,347                      
         Issuance of common stock in lieu of      
            interest payments                                          -                 93,254                      
         Interest expense on debt issuance cost and
           conversion benefit                                   1,297,158              4,033,747                        
          Early extinguishment of debt (gain)                     832,849               (304,923)                     
                                                                                     

         (Increase) decrease in operating assets:
         Accounts receivable                                   (1,985,436)            (1,145,294)               
         Inventories                                             (620,696)            (2,027,483)               
         Prepaid expenses and sundry receivables                  163,842               (356,224)               
         Increase (decrease) in operating liabilities:
         Accounts payable                                       1,815,812                869,883             
         Accrued expenses                                        (864,444)               (77,558)                
         Customers deposits                                      (145,739)              (141,436)                 
                                                               -----------            -----------             
NET CASH USED BY OPERATING ACTIVITIES                          (5,972,737)            (6,475,460)             
                                                               -----------            -----------                        
CASH FLOW FROM INVESTING ACTIVITIES
         Acquisition of property and equipment                   (207,223)              (252,119)                
         Patents and trademarks                                        -                 (37,430)
         Other intangibles                                             -                (138,327)
         Assets purchased net of cash acquired                         -                (591,108)                     
         Security deposits                                          7,134                  9,478                     
         Loans receivable                                           1,974                 (3,463)                     
                                                               -----------            -----------             
NET CASH USED BY INVESTING ACTIVITIES                            (198,115)            (1,012,969)               
                                                               -----------            -----------                        
CASH FLOWS FROM FINANCING ACTIVITIES
         Proceeds from short-term borrowings                   16,669,384                266,900               
         Proceeds from long-term borrowings                            -                 477,892                      
         Principal payment of short-term borrowings           (11,188,135)              (122,024)             
         Principal payment of long-term borrowings                (72,950)                    -                 
         Issuance of common stock for cash                      1,500,000              6,996,370
         Purchase of treasury stock                              (540,000)                    -                       
         Payments to stockholders and officers                     (2,207)               (70,590) 
                                                               -----------           -----------                 
CASH PROVIDED BY FINANCING ACTIVITIES                           6,366,092              7,548,547                 
                                                               -----------           -----------                         
EFFECT OF EXCHANGE RATE ON CASH                                  (251,964)                73,847                     
                                                               -----------           -----------              
NET INCREASE (DECREASE) IN CASH                                   (56,724)               133,965              
CASH AND CASH EQUIVALENT - beginning of period                  1,281,552              3,091,307               
                                                               -----------           -----------              
CASH AND CASH EQUIVALENTS - end of period                    $  1,224,828           $  3,225,272             
                                                               -----------           -----------              
                                                  F 4


</TABLE>




<PAGE>
<TABLE>
<CAPTION>

SWISSRAY INTERNATIONAL, INC.
CONSOLITATED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED DECEMBER 31, 1998 and 1997 



                                                      Additional                                           Accumulated
                                    Common Stock       Paid-in     Common Stock              Accumulated     Other
                                 -----------------     Capital     to be reissued  Treasury     Deficit    Comprehensive  Total
                                  Shares     Amount   (Restated)    (Restated)       Stock    (Restated)      Loss       (Restated)
                                 -------- ----------  ------------ --------------  --------   ------------ ------------  ----------
<S>                            <C>        <C>        <C>         <C>              <C>      <C>           <C>            <C>

BALANCE - July, 1, 1997          1,969,443 $ 19,694  $35,957,659 $  1,122,973     $    -   $(27,978,604) $1,428,534)    $ 7,693,188

COMPREHENSIVE LOSS:
 Net loss                               -        -             -           -           -      8,077,807)         -       (8,077,807)
 Foreign currency
  translation 
  losses net of taxes $ -0-             -        -             -           -           -              -      (80,616)       (80,616)
                                                                                                                         -----------
 TOTAL COMPREHENSIVE LOSS               -        -             -           -           -              -           -      (8,158,423)
                                                                                                                         -----------
Issuance of common stock
 for cash                          651,708    6,517    5,096,716           -           -              -           -       5,100,233
Issuance of common stock
 for asset purchase                 33,333      333    1,499,664           -           -              -           -       1,499,997
Stock options exercised 
 for cash                           16,900      169      123,201           -           -              -           -         123,370
Shares issued to officers for 
 services                           48,259      483    1,122,490   (1,122,973)         -              -           -              -
Issuance of common stock
 in lieu of interest payment         9,599       96       93,158           -           -              -           -          93,254 
Beneficial conversion feature of 
 convertible debentures                 -        -     4,460,213           -           -              -           -       4,460,213
Early extinguishment of debt            -        -      (396,875)          -           -              -           -        (396,875)
                                 ---------- --------   ----------   ------------  ---------- ------------ -----------   ------------
BALANCE - December 31, 1997     2,792,242   27,292    47,953,226          -           -    (36,056,411)  (1,509,150)    10,414,957


BALANCE - July, 1, 1998          4,142,622   41,426    58,074,793          -           -    (50,481,713)  (1,475,779)     6,158,727

COMPREHENSIVE LOSS:
 Net loss                               -        -             -           -           -     (7,086,046)          -      (7,086,046)
 Foreign currency 
  translation
  gain net of taxes $ -0-               -        -             -           -           -             -        20,037         20,037
                                                                                                                         -----------
     TOTAL COMPREHENSIVE LOSS           -        -             -           -           -             -            -      (7,066,009)
                                                                                                                         -----------
Issuance of common stock
 for cash                          484,250    4,843     1,495,157          -           -             -            -       1,500,000 
Issuance of common stock
 in lieu of interest payment        11,110      111        34,153          -           -             -            -          34,264
Treasury stock - at cost                -        -             -           -       (540,000)         -            -        (540,000)
Beneficial conversion feature of                                                                                                    
 convertible debentures                 -        -         53,112          -           -             -            -          53,112
                                 ---------  ---------   ----------  -----------   ----------- ------------  ------------  ----------
BALANCE - December 31, 1998     4,637,982  $46,380  $ 59,657,215  $       -    $  (540,000) $(57,567,759) $(1,455,742)  $  140,094 
                                 ---------  ---------   ----------  -----------   ----------- ------------  ------------  ----------

                          F 5

</TABLE>
<PAGE>   
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1998

         (1)The accompanying financial statements are unaudited. Certain 
information and footnote disclosures normally included in financial  statements 
prepared in accordance with generally accepted  accounting  principles have been
condensed or omitted, although the Registrant believes that the disclosures are
adequate to make the information presented not misleading.  It is suggested that
these condensed  consolidated financial  statements be read in conjunction with
the financial statements and notes thereto included in the Registrant's  annual
report on Form 10-K for the fiscal year ended June 30, 1998.

         (2)In  the   opinion  of   management,   the   accompanying   unaudited
consolidated financial statements contain all adjustments,  consisting of only a
normal and recurring nature,  necessary to present fairly the financial position
of the  Registrant as of December  31, 1998 and the results of  operations  and
cash flows for the interim  periods  presented.  Operating  results for the six
months ended December 31, 1998 are not necessarily indicative of the results to
be expected for the full year ending June 30, 1999.

         (3)INVENTORIES

                  Inventories are summarized by major classification as follows:

<TABLE>
<CAPTION>
                                                     December 31,      June 30,
                                                     ---------------------------
                                                        1998             1998
                                                     ----------       ----------
<S>                                                  <C>              <C>
Raw materials, parts and supplies                    $7,199,118       $7,047,001
      Work in process                                   287,008          160.064
      Finished goods                                    835,715          494.080
                                                     ----------       ----------
                                                     $8,321,841       $7,701,145
                                                     ==========       ==========
</TABLE>

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


                                       F 6
<PAGE>  
Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS


            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.

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

         Statements in this  discussion  which are not  historical  facts may be
considered  forward looking  statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, including estimated cost savings to
be realized from restructuring activities and estimated proceeds from and timing
of facility sales. The words "believe," "expect," "anticipate," "estimate",  and
similar  expressions  identify forward looking  statements.  Any forward looking
statements  involve  risks and  uncertainties  that could cause actual events or
results to differ,  perhaps materially,  from the events or results described in
the  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.  Risks  associated  with the  Company's  forward  looking
statements include,  but are not limited to, risks associated with the Company's
history of losses and uncertain profitability, need for market acceptance of the
AddOn Multi System,  reliance on a single product,  reliance on large customers,
risks  associated  with  the  Company's   international   operations,   currency
fluctuations,  the risk of new and different legal and regulatory  requirements,
governmental  approvals,  tariffs  and trade  barriers,  risks  associated  with
competition and technological  innovation by competitors,  dependence on patents
and proprietary  technology,  general economic  conditions and conditions in the
healthcare industry,  reliance on key management,  limited manufacturing history
with respect to the  AddOn-Multi-System,  dependence  on sole source  suppliers,
future capital needs and uncertainty of additional financing,  potential recalls
and product liability,  dilution, effects of outstanding convertible debentures,
limited public market,  liquidity,  possible volatility of stock price, recently
adopted new listing standards for NASDAQ securities and environmental matters.

         The following  discussion  and analysis  should be read in  conjunction
with the Consolidated Financial Statements,  related notes and other information
included in this quarterly report on Form 10-Q.

GENERAL

     At the recent annual conference of the Radiological Society of North 
America (RSNA 98), the Company announced thet its premier product, the AddOn-
Multi-System has been renamed ddr-Multi-System.  The recent name change is much
more in line with the overall system concept and strategy of the Company.
                                        3
<PAGE>   
RESULTS OF OPERATIONS

     (a)THREE-MONTH PERIOD ENDED DECEMBER 31, 1998 COMPARED TO
THREE-MONTH PERIOD ENDED DECEMBER 31, 1997 

         Net sales  amounted to  $6,444,706  for the  three-month  period  ended
December 31, 1998,  compared to  $6,043,675, an increase of $401,031, or 6.6%
from the  three-month  period ended December 31, 1997. Net sales of $6,043,675
for the three month period ended December 31, 1997 includes sales of the film
and processor  business of Empower which was sold on June 30, 1998, of
$1,973,557 Net sales without the film and processor business of Empower 
increased for the three-month  period ended December 30, 1998 by $2,374,588 or
58.3%.

         Gross  profit  increased  by  $546,459  or  71.4% to $1,312,278 for the
three-month  period ended  December 31, 1998,  from $765,819 for the three-month
period ended December 31, 1997.  Gross profit as a percentage of net revenues
increased to 20.4% for the  three-month  period ended December  31, 1998 from
12.7% for the  three-month  period ended  December 31, 1997.

         Operating expenses decreased by $1,162,307, or 25.2% to $3,445,223, or
53.5% of net revenues, for the three-month period ended December 31, 1998,
from $4,607,530, or 76.2% of net revenues for the three-month  period ended
December 31, 1997. The principal  items were salaries (net of officers and
directors  compensation) of $979,391 or 15.2% of net sales for the  three-month
period ended Dcecember 31, 1998 compared to $1,305,092 or 21.6% of net sales for
the  three-month  period ended  December 31, 1997 and selling expenses of
$925,483 or 14.4% of net sales for the  three-month  period ended December 31,
1998 compared to $1,186,167 or 19.6% of net sales for the  three-month  period
ended  December  31, 1997. Research and development  expenses were $437,551 or
6.8% of net sales for the three-month  period ended December 31, 1998 compared
to $948,643 or 15.7% of net sales for the  three-month  period ended  December
31, 1997.

     Interest expense  decreased to $758,800 for the three months ended 
December 31, 1998  compared to  $1,722,761  for the three months ended 
December 31, 1997. This decrease is primarily  due the decrease of interest 
expense for amortization  of Debenture issuance cost and Conversion Benefit.

     Loss on extinguishment of debt was $803,182 for the three months ended
December 31, 1998 compared to a gain of $154,215 for the three months ended 
December 31, 1997.  The extinguishment gain or loss resulted from refinancing of
Convertible debentures.
                                    4    

<PAGE>

 (b)SIX-MONTH PERIOD ENDED DECEMBER 31, 1998 COMPARED TO
SIX-MONTH PERIOD ENDED DECEMBER 31, 1997 

         Net sales  amounted to  $10,101,147  for the  six-month  period  ended
December 31, 1998,  compared to  $11,302,578, a decrease of $1,201,431, or 10.6%
from the  six-month  period ended December 31, 1997. Net sales of $11,302,578
for the six month period ended December 31, 1997 includes sales of the film and
processor  business of Empower which was sold on June 30, 1998, of $3,949,854.
Net sales without the film and processor business of Empower increased for the
six-month  period ended December 30, 1998 by $2,748,423 or 37.4%.

         Gross  profit  increased  by  $579,826  or  21.4% to $2,131,805 for the
six-month  period ended  December 31, 1998,  from $2,711,631 for the six-month
period ended December 31, 1997.  Gross profit as a percentage of net revenues
decreased to 21.1% for the  six-month  period ended December  31, 1998 from
24% for the  six-month  period ended  December 31, 1997.

         Operating expenses decreased by $220,281, or 3.2% to $6,613,311, or
65.5% of net revenues, for the six-month period ended December 31, 1998,
from $6,833,592, or 60.5% of net revenues for the six-month  period ended
December 31, 1997. The principle  items were salaries (net of officers and
directors  compensation) of $2,064,577 or 20.4% of net sales for the  six-month
period ended Dcecember 31, 1998 compared to $1,926,769 or 17% of net sales for
the  six-month  period ended  December 31, 1997 and selling expenses of
$1,438,281 or 14.2% of net sales for the  six-month  period ended December 31,
1998 compared to $1,674,198 or 14.8% of net sales for the  six-month  period
ended  December  31, 1997. Research and development  expenses were $843,589 or
8.4% of net sales for the six-month  period ended December 31, 1998 compared
to $1,422,482 or 12.6% of net sales for the  six-month  period ended  December
31, 1997.

     Interest expense  decreased to $1,412,696 for the six months ended 
December 31, 1998  compared to  $4,416,914  for the six months ended 
December 31, 1997. This decrease is primarily  due the decrease of interest 
expense for amortization  of Debenture issuance cost and Conversion Benefit.

     Loss on extinguishment of debt was $832,849 for the six months ended
December 31, 1998 compared to a gain of $304,923 for the six months ended 
December 31, 1997.  The extinguishment gain or loss resulted from refinancing of
Convertible debentures.
                                        

FINANCIAL CONDITION

December 31, 1998 compared to June 30, 1998

         Total  assets  of the  Company  on  December  31,  1998  increased  by
$1,887,527 to $27,802,124  from  $25,914,597 on June 30, 1998,  primarily due to
the  increase in current  assets. Current  assets increased  $2,383,089 to 
$15,452,346  on December 31, 1998 from  $13,069,257 on June 30, 1998. The 
increase in current assets is primarily  attributable  to the increase in  
accounts rerceivable of $1,982,959 and the increase in inventory of $620,696 
which was offset by the decrease in prepaid  expenses and sundry receivables of
$163,842  and the  decrease in  cash and cash equivalents of $56,724. Other
assets decreased $489,555 to $6,345,407 on December 31, 1998 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 December 31, 1998, the Company had total liabilities of $27,662,029
compared to  $19,755,870  on June 30,  1998.  On  December  31,  1998,  current
liabilities were $15,064,487  compared to $11,984,554 on June 30, 1998.  Working
capital at December  31, 1998 was $387,859  compared to $1,084,703 at June 30,
1998.


                                        5
<PAGE>   
CASH FLOW AND CAPITAL EXPENDITURES SIX MONTH PERIOD ENDED
DECEMBER 31, 1998 COMPARED TO SIX MONTH PERIOD ENDED DECEMBER 31, 1997.

         Cash used for operating activities for the six months ended December
31, 1998 was  $5,972,737  compared to $6,475,460  for the six months ended
December 31, 1997.  Cash used for investing activities was $198,115  for the
six months ended December 31, 1998 compared to $1,012,969 for the six months
ended December 31, 1997. Cash flow from financing  activities  for the six
months ended December 31, 1998 was $6,366,092 compared to $7,548,547 for six
months ended December 31, 1997.

     The Company anticipates that its use of cash will be 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.  
                        
     However, the availability of a sufficient future cash flow will depend to a
significant  extent on the  marketability  of the Company's  ddR-Multi-System.
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 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. 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 14,  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 are convertible into
shares of Common Stock of the Company  commencing  March 1, 1999 at a conversion
price  equal to the lesser of 82% of the  average  closing bid price for the ten
trading  days  preceding  the date of the  conversion  or $1.00 per  share.  Any
Convertible  Debentures not so converted are subject to mandatory  conversion by
the  Company on the 24th  monthly  anniversary  of the date of  issuance  of the
Convertible Debentures.

     On October 6, 1998 the Company issued $2,940,000  aggregate  principal
amount of 5% convertible  debentures (the  "Convertible  Debentures")  including
$540,000 repurchase  of  stock,  convertible  into  Common  Stock of the  
Company.  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 is convertible into shares of Common Stock
of the Company any time after the closing date at a conversion price equal to 
the lesser of 82% of the average  closing bid price for the ten trading days 
preceding the date of the conversion or $1.00. Any Convertible Debentures not 
so converted are subject to mandatory  conversion by the Company on the 24th
monthly anniversary of the date of issuance of the Convertible Debentures.
                                   6

<PAGE>
     On or about December 11, 1998 the Company entered into Promissory Note
Agreements aggrerating $1,080,000 together with certain related Security
Agreements and Contingent Convertible Debentures, Subscription Agreements,
Registration Rights Agreements and exhibits thereto, pursuant to which it
borrowed $1,080,000 with interest at the rtae of eight percent (8%) per annum
(for the first ninety (90) calendar days) with the Company having the option to
extend the terms of the Promissory Note for an additional sixty (60) calendar
days (with the interest rate increasing to ten percent (10%) per annum).  As 
further consideration for such loans the Lenders received Warrants to purchase
an aggregate of 50,000 shares of the Company's common stock exercisable (for a
period of up to five (5) years) at the bid price for Company shares at the date
of the closing.  In the event that the Company does not repay the above 
referenced sum within the time period indicated (i.e. on or before May 7, 1999)
then in that event the terms and conditions of the above referenced Contingent
Convertible Debenture and related documents would go into effect, permitting
Lendedrs, at theuir option, to convert the face amount of each debenture at the
lesser of (a) eighty-two percent (82%) of the ten (10) day average closing bid
price for Company common stock for the ten (10) consecutive trading days 
immediately preceding the applicable conversion date or (b) $1.00 per share. 
The foregoing is a brief summary of what management considers to be certain
pertinent terms and conditions of thew above referenced summarized transaction
and does not purport to be a complete summary thereof (partially in view of the
fact that there is no certainty that the Contingent Convertible Debentures and
related documents will go into effect).  In the event that the Company fails to
repay such indebtedness on or before its extended due date and the contingent
documents theresfter go into effec, each of such documents are intended to be
filed as exhibits to the Registration Statement which the Company would be
required to file (in accordance with the Registration Rights Agreement).
     
EFFECT OF CURRENCY ON RESULTS OF OPERATIONS

         The result of operations  and the  financial  position of the Company's
subsidiaries outside of the United  States is 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).
                                       7
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk

         Not Applicable

PART II  OTHER INFORMATION

Item 1.  Legal Proceedings

Onor 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.  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. 

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  Purchased  Agreement  dated as of October 17,  1997,
whereby Messrs.  Durday,  Montler and Harle received,  among other consideration
33,333  shares  of the  Company'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 per share (on or after June 30,  1998
and until April 16, 1999, subject to certain  adjustments set forth in the Asset
Purchase Agreement).  The number of shares and purchase price indicated both
give retroactive effect to a reverse stock split of Company common stock which 
occurred on October 1, 1998.  See Part II, Item 4.

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 is 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

                                       8
<PAGE>



a breach by them of their  obligations  under the Asset  Purchase  Agreement and
other relief.

     The current  status with respect to this matter is that an  arbitration
Hearing has been concluded and under the rules of the American Arbitration 
Association it is expected that the Arbitrator should render his Award on or
before March 1, 1999.

     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  state court in Pierce County, Washington and asked
that Court to afjudicate 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 has reached a decision as to whether it or
the Washington court is the proper forum for litigation of the parties dispute.
The New York court has not yet rendered a decision on this issue.

    It is Swissray's management's intention to contest these matters  vigorously
since  Swissray  believes that its claims are meritorious, and that it has
meritorious defenses to the claims asserted against them.


Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

         Not applicable

Item 3. DEFAULTS UPON SENIOR SECURITIES

         Not applicable

Item 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS

     As indicated in the Company's Form 10-K for fiscal year ended June 30, 1998
the Company held a Special  Meeting of  Stockholders on August 31, 1998, at
which time Company stockholders were asked to consider and act upon proposals to
(1) reverse stock split the currently issued and outstanding shares of Company
Common Stock on the basis of no less than 1 : 4 and no greater than 1 for 10;
the exact number, (if any) within such parameter to be determined by the Board
of Directors in its  discretion  and (2) authorize the creation of a class of
Preferred  Stock.  The number of shares of Common Stock voted at the Special
Meeting  approximated  75 % of all issued and  outstanding  securities as of the
record  date  and  approximately  88 % of  those  shares  voted  in favor of the
aforesaid  reverse  stock  split  proposal  (while the Company did not receive a
sufficient number of affirmative votes for the creation of a

                                       9
<PAGE>



class of Preferred Stock).

     At a Special  Meeting of the Board of Directors on September 21, 1998, a 
reverse stock  split on the basis of 1 for 10 was  approved  with an  effective
date of October 1, 1998.

     The Company has tentatively established that its Annual Meeting of 
Stockholders will be held on March 24, 1999 and in that regard intends to 
utilize the record date of February 17, 1999 and a mailing date of February 19,
1999.  Proxy, Notice of Meeting, Proxy Statement and exhibits thereto were all
preliminarily filed with the securities and Exchange Commission on February 9, 
1999.

Item 5. OTHER INFORMATION

         Not applicable

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits                                - NONE-

         (b) Reports  on  Form  8-K  8-K             8-K and 8-K/A each with 
                                                     date of report of November
                                                     3, 1998 filed November 6,
                                                     1998 and November 27, 1998
                                                     respectively,indicating
                                                     change of auditors

SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
Registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                              SWISSRAY INTERNATIONAL, INC.

                              By: /s/  RUEDI G. LAUPPER
                                  ---------------------------------
                        Ruedi G. Laupper, Chairman of the
                        Board of Directors, President and
                                  Chief Executive Officer

Date:  February 10, 1999


                                        10