<PAGE>

                                  FORM 10-QSB

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


(Mark one)

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

For the quarterly period ended     December 31, 1999
                                --------------------------

                                        OR

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

For the transition period from                  to
                               -----------------  --------------------

Commission file number      000-22501
                       -------------------




                           SPECTRUMEDIX CORPORATION
--------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

              Delaware                                  25-1686354
--------------------------------------------------------------------------------
   (State or other jurisdiction of                   (I.R.S. Employer
    incorporation or organization)                   Identification No.)



          2124 Old Gatesburg Road, State College, Pennsylvania  16803
--------------------------------------------------------------------------------
                   (Address of principle executive offices)

                                (814) 867-8600
--------------------------------------------------------------------------------
             (Registrant's telephone number, including area code)



--------------------------------------------------------------------------------
             (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.
Yes     X        No
     ---------      --------


     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 4,198,041 shares of Common
Stock, par value $.00115 per share, outstanding as of February 15, 2000.
<PAGE>

                            SPECTRUMEDIX CORPORATION

                                QUARTERLY REPORT
                        QUARTER ENDED DECEMBER 31, 1999


                                     CONTENTS


PART I.  FINANCIAL INFORMATION

<TABLE>
                                                                                                                Page
<S>                                                                                                        <C>
Item 1  Financial Statements

  Condensed Balance Sheets - December 31, 1999 and March 31, 1999........................................        1
  Condensed Statements of Operations - Nine and Three Months Ended December 31, 1999 and December 31,
   1998..................................................................................................        2
  Condensed Statements of Cash Flows - Nine Months Ended December 31, 1999 and December 31, 1998.........        3
  Notes to Financial Statements..........................................................................      4-7

Item 2  Management's Discussion and Analysis of Results of Operations and Financial Condition............        8

<CAPTION>
PART II.    OTHER INFORMATION
<S>                                                                                                        <C>
        Item 1.  Legal Proceedings.......................................................................       11
        Item 2.  Changes in Securities and Use of Proceeds...............................................       11
        Item 3.  Defaults Upon Senior Securities.........................................................       11
        Item 4.  Submission of Matters to a Vote of Security Holders.....................................       11
        Item 5.  Other Information.......................................................................       11
        Item 6.  Exhibits and Reports on Form 8-K........................................................    11-12
                 (a)  Exhibits...........................................................................       11

                 (b) Reports on Form 8-K.................................................................       12
</TABLE>
<PAGE>

                            SPECTRUMEDIX CORPORATION
                      CONDENSED BALANCE SHEETS (UNAUDITED)
                      DECEMBER 31, 1999 AND MARCH 31, 1999
                                     ASSETS

<TABLE>
<CAPTION>
                                                                                   December 31,                 March 31,
                                                                                       1999                       1999*
                                                                                    ----------                 ----------
<S>                                                                                <C>                        <C>
                                                                                                (Unaudited)
CURRENT ASSETS:
          Cash and cash equivalents                                                 $  681,312                 $   20,318
          Certificates of deposit                                                    2,041,638                          -
          Accounts receivable, net                                                      28,807                     55,319
          Inventories                                                                  582,381                    527,979
          Prepaid expenses                                                              17,695                      4,582
                                                                                    ----------                 ----------

          TOTAL CURRENT ASSETS                                                       3,351,833                    608,198
                                                                                    ----------                 ----------

PROPERTY AND EQUIPMENT, net                                                            464,340                    463,536
                                                                                    ----------                 ----------

OTHER ASSETS:
          Patent fees                                                                  419,398                    358,816
          License and license options, net                                              28,776                    106,343
          Security deposit                                                               8,479                      8,479
                                                                                    ----------                 ----------


          TOTAL OTHER ASSETS                                                           456,653                    473,638
                                                                                    ----------                 ----------

TOTAL ASSETS                                                                        $4,272,826                 $1,545,372
                                                                                    ==========                 ==========
<CAPTION>
                        LIABILITIES AND STOCKHOLDERS' DEFICIT
<S>                                                                                <C>                        <C>
CURRENT LIABILITIES:
          Accounts payable and accrued expenses                                    $  1,450,722                 $  2,389,486
          Current portion of long-term debt                                              31,916                       29,926
          Officer's note                                                                 83,307                      161,423
                                                                                   ------------                 ------------

          TOTAL CURRENT LIABILITIES                                                   1,565,945                    2,580,835
                                                                                   ------------                 ------------

NON-CURRENT LIABILITIES:
          Long-term debt, net of current portion                                         79,766                      103,273
          Deferred income                                                             2,722,222                            -
                                                                                   ------------                 ------------

          TOTAL NON-CURRENT LIABILITIES                                               2,801,988                      103,273
                                                                                   ------------                 ------------

STOCKHOLDERS' EQUITY (DEFICIT):
          Preferred stock, $.00115 par value, 2,000,000 shares                                2                            -
            authorized, 2,000 and 0 shares issued and outstanding, respectively
          Common stock, $.00115 par value, 23,000,000 shares authorized                   4,206                        4,059
            3,658,041 and 3,530,214 shares issued and outstanding, respectively
          Additional paid-in capital                                                 12,626,754                   10,631,756
          Accumulated deficit                                                       (12,570,286)                 (11,512,684)
                                                                                   ------------                 ------------
Total                                                                                    60,676                     (876,869)
          Less:  Deferred compensation                                                 (155,783)                    (261,867)
                                                                                   ------------                 ------------

          TOTAL STOCKHOLDERS' (DEFICIT)                                                 (95,107)                  (1,138,736)
                                                                                   ------------                 ------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                        $  4,272,826                 $  1,545,372
                                                                                   ============                 ============
</TABLE>
*Derived from audited financial statements
<PAGE>

                           SPECTRUMEDIX CORPORATION
                 CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
             NINE AND THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>


                                                   Nine Months Ended                 Three Months Ended
                                                      December 31,                      December 31,
                                         ---------------------------------------  ------------------------
                                                1999                1998             1999         1998
                                         ------------------  -------------------  -----------  -----------
<S>                                      <C>                 <C>                  <C>          <C>

REVENUES                                       $   107,523          $   163,482   $   11,803   $   31,992

COST OF REVENUES                                   284,734              346,879      127,472       91,198
                                               -----------          -----------   ----------   ----------

GROSS INCOME (LOSS)                               (177,211)            (183,397)    (115,669)     (59,206)
                                               -----------          -----------   ----------   ----------

OPERATING EXPENSES:
  Research and development costs, net              486,590              875,943      126,721      199,235
  General and administrative expenses              701,581            1,153,946      239,861      314,254
                                               -----------          -----------   ----------   ----------

  TOTAL OPERATING EXPENSES                       1,188,171            2,029,889      366,582      513,489
                                               -----------          -----------   ----------   ----------

OPERATING LOSS                                  (1,365,382)          (2,213,286)    (482,251)    (572,695)
                                               -----------          -----------   ----------   ----------

OTHER INCOME (EXPENSE):
  Interest income                                   57,875               15,965       32,551          562
  Interest expense                                 (27,873)              (4,558)      (4,077)      (2,294)
  Consulting income                                277,778                    -      166,667            -
                                               -----------          -----------   ----------   ----------

  TOTAL OTHER INCOME (EXPENSE)                     307,780               11,407      195,141       (1,732)
                                               -----------          -----------   ----------   ----------

NET LOSS                                       $(1,057,602)         $(2,201,879)  $ (287,110)  $ (574,427)
                                               ===========          ===========   ==========   ==========

WEIGHTED AVERAGE NUMBER OF
  SHARES OUTSTANDING                             3,646,166            3,515,214    3,658,041    3,515,214
                                               ===========          ===========   ==========   ==========

BASIC AND DILUTED LOSS PER
SHARE                                                $(.29)               $(.62)       $(.08)       $(.16)
                                               ===========          ===========   ==========   ==========

</TABLE>
<PAGE>

                            SPECTRUMEDIX CORPORATION
                 CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
                  NINE MONTHS ENDED DECEMBER 31, 1999 AND 1998



<TABLE>
<CAPTION>
                                                                                          1999           1998
                                                                                      -------------  -------------

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                   <C>            <C>
 Net loss                                                                              $(1,057,602)   $(2,201,879)
                                                                                       -----------    -----------
 Adjustments to reconcile net loss to net cash from operating activities:
  Depreciation and amortization                                                             97,392         54,083
  Amortization of sub-license income                                                      (277,778)             -
  Sub-license agreement                                                                  1,000,000              -
  Consulting agreement                                                                   2,000,000              -
  Non-cash compensation expense                                                            106,084        457,324
  Changes in assets and liabilities:
   (Increase) decrease in accounts receivable                                               26,512        (44,299)
   (Increase) in inventories                                                               (54,402)       (80,485)
   (Increase) in other assets                                                              (13,113)       (91,654)
   Increase (decrease) in accounts payable and accrued expenses                           (938,764)       406,313
   (Decrease) in customer deposits                                                               -         (5,960)
                                                                                       -----------    -----------

  Total adjustments                                                                      1,945,931        695,322
                                                                                       -----------    -----------

  NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES                                         888,329     (1,506,557)
                                                                                       -----------    -----------

CASH FLOWS USED BY INVESTING ACTIVITIES:
 Purchase of equipment                                                                     (71,471)      (143,588)
 Increase in patent fees                                                                   (62,555)             -
 Increase in certificates of deposit                                                    (2,041,638)             -
 Reimbursement of license costs                                                             52,815              -
                                                                                       -----------    -----------

   NET CASH USED BY INVESTING ACTIVITIES                                                (2,122,849)      (143,588)
                                                                                       -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from officer's notes                                                             222,031         25,000
 Repayment of notes payable - others                                                       (21,517)       (12,460)
 Repayment of officer's notes                                                             (300,000)             -
 Proceeds from sale of Preferred stock                                                   1,995,000              -
                                                                                       -----------    -----------

 NET CASH PROVIDED BY FINANCING ACTIVITIES                                               1,895,514         12,540
                                                                                       -----------    -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                       660,994     (1,637,605)

CASH AND CASH EQUIVALENTS - beginning of period                                             20,318      1,680,643
                                                                                       -----------    -----------

CASH AND CASH EQUIVALENTS - end of period                                              $   681,312    $    43,038
                                                                                       ===========    ===========

NON-CASH INVESTMENT AND FINANCING ACTIVITIES:
 During the nine months ended December 31, 1998, additional paid-in capital and
  deferred compensation increased by $735,850 from compensation stock options
  issued to non-employees. In addition, during the nine months ended December 31,
  1998, property and equipment of $100,720 was purchased and capital lease
  obligations of $100,720 were assumed. During the nine months ended December 31,
  1999, officer's notes decreased and common stock increased by $147 as a result of
  the exercise of stock options to purchase 127,827 common shares at $0.00115 per
  share
</TABLE>
<PAGE>

                            SPECTRUMEDIX CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998



NOTE 1 - BASIS OF PRESENTATION

     The accompanying unaudited condensed financial statements of SpectruMedix
     Corporation (the "Company") have been prepared in accordance with generally
     accepted accounting principles for interim financial information and with
     the instructions to Form 10-QSB.  Accordingly, they do not contain all of
     the information and footnotes required by generally accepted accounting
     principles for complete financial statements.  In the opinion of
     management, the accompanying unaudited financial statements contain all
     adjustments, consisting only of normal recurring adjustments, necessary to
     present fairly (a) the financial position as of December 31, 1999, (b) the
     results of operations for the nine months and three months ended December
     31, 1999 and 1998 and (c) changes in cash flows for the nine months ended
     December 31, 1999 and 1998.  For more information, refer to the audited
     financial statements for the fiscal year ended March 31, 1999, which were
     included in the Company's Annual Report on Form 10-KSB.

     Financial results for the interim periods ended December 31, 1999 and 1998
     may not be indicative of the financial results for the fiscal year ending
     March 31, 2000.

NOTE 2 - GENERAL

     The Company devotes substantially all of its resources to the development
     of its high-speed DNA/gene sequencing instrumentation (the "DNA
     Sequencer"), an instrument for the acquisition, analysis and management of
     complex genetic information.  The DNA Sequencer was developed in part from
     research efforts conducted at the United States Department of Energy and
     Ames Laboratories' Institute for Physical Research and Technology/Iowa
     State University.  The Company believes DNA sequencing has significant
     implications for medical, genetic and forensic science applications.

     At March 31, 1999, the Company has available carryforward losses applicable
     to the reduction of future Federal income taxes aggregating approximately
     $11,638,000, which expire on various dates through 2014.

NOTE 3 - ECONOMIC DEPENDENCY

     To date, all of the Company's revenues have been derived from sales of the
     Company's original product lines, which included mass spectrometers,
     luminoscopes, electronic components and software.  As noted above,
     currently, the Company is devoting substantially all of its resources to
     the development, commercialization and marketing of the DNA Sequencer.

     The Company achieved limited sales of its other product lines and such
     sales were materially dependent on a limited number of customers.  The
     nature of the Company's business was such that during any individual
     accounting period it sold its products to a limited number of significant
     customers.  The Company has not sold any DNA Sequencer units, but sales of
     the DNA Sequencer may also be characterized by sales to a limited number of
     customers during any individual accounting period.

     The Company's DNA Sequencer requires high quality raw materials and
     components that the Company purchases from third party suppliers. Certain
     raw materials or components may, however, from time to time, be difficult
     to obtain, which difficulties may result in production delays or require
     the Company to find alternate means of production.  In particular, both the
     lasers and capillaries used in the DNA Sequencer are each purchased from
     one manufacturer who only produces a limited number of units.  Such
     manufacturers may not be able to supply all of the Company's needs.  Thus,
     the Company's ability to manufacture its products will depend on its
     ability to establish and maintain commercial relationships with at least
     certain of such suppliers.  The Company does not currently maintain supply
     agreements with any of its suppliers.
<PAGE>

NOTE 4 - LEGAL PROCEEDINGS

     Rubin Matter

     On April 21, 1997, a complaint was filed in the Supreme Court of the State
     of New York alleging breach of contract.  Specifically, the plaintiff
     alleges that the Company defaulted under a promissory note issued to
     plaintiff on May 16, 1996 in the amount of $175,000 (the "Rubin Note") and
     that the Company is liable and indebted to plaintiff in the principal
     amount of $175,000, together with interest and expenses.  The Company, on
     May 2, 1997, paid the principal and interest due under the Rubin Note.

     The main remaining issue asserted by the plaintiff is whether, pursuant to
     an alleged related agreement, the plaintiff is entitled to 152,174 shares
     (adjusted to reflect stock splits) of common stock of the Company or,
     alternatively, $875,000.  Plaintiff alleges that the Company undertook to
     enter into a securities purchase agreement pursuant to which he should have
     received the aforementioned shares of common stock. The Company contends
     that such securities purchase agreement was never discussed and,
     accordingly, no agreement was reached with respect to the terms thereof.
     Such securities purchase agreement was not signed by either of the parties
     to the Rubin Note.  The Company believes that it has meritorious defenses
     to the above-described claims and it intends to defend the litigation
     vigorously.  However, due to the nature of litigation and because the
     lawsuit is in the initial stages, the Company cannot determine the total
     expense or possible loss, if any, that may ultimately be incurred either in
     the context of a trial or as a result of a negotiated settlement.  While
     management believes that the resolution of this matter will not have a
     material adverse effect on the Company's business, financial condition and
     results of operations, the results of these proceedings are uncertain and
     there can be no assurance to that effect.

NOTE 5 - STOCK OPTIONS

     In May 1999, the Company granted options to purchase 38,000 shares of its
     common stock to employees under the Company's Stock Incentive Plan (the
     "Plan") at an exercise price of $0.0938 per share, the estimated fair value
     of the common stock on the date of grant.  The options vest in four
     tranches, with the first tranche vesting in May 2000.  The stock options
     are exercisable for a period of ten years from the date of grant.

     Additionally, in May 1999, the Company provided to its employees an
     opportunity to exchange the options they previously received under the Plan
     for new options ("New Options"). The New Options have the same terms as the
     options granted under the Plan except that the exercise price has been
     changed from $4.60 to $0.0938 per share, the estimated fair value of the
     common stock on the date the New Options were granted. In connection with
     the exchange, 237,008 New Options were granted.

     In May 1999, an officer of the Company exercised stock options to purchase
     127,827 shares of the Company's common stock at $0.00115 per share.

     In December 1999, the Company granted options to purchase 200,956 shares of
     its common stock to employees under the Plan at an exercise price of
     $0.0938 per share, the estimated fair value of the common stock on the date
     of grant.  The options vest in four tranches, with the first tranche
     vesting in December 2000.  The stock options are exercisable for a period
     of ten years from the date of grant.

NOTE 6 - AMENDED LICENSE AGREEMENT AND SUBLICENSE  AGREEMENT, AND CONSULTING
          AGREEMENT

     Amended License Agreement and Sublicense

     Due to the Company's financial condition during fiscal year 1999, it was
     not able to make certain required payments under its license agreement with
     a major university relating to the DNA Sequencer. On July 30, 1999, Iowa
     State University Research Foundation (the "University") and the Company
     entered into an amendment to the license agreement ("Amended License"),
     pursuant to which the Company agreed to pay $500,000 under the Amended
     License and the University agreed to waive any defaults for the failure to
     pay overdue amounts. The parties agreed to a revised schedule of minimum
     royalties. Additionally, the University consented to the grant of a
     sublicense to a company, and the Company agreed to pay the
<PAGE>

     University a majority of the minimum royalties received under the
     sublicense for the first three years, and all of the minimum royalties
     thereafter. However, in the event royalties under the Sublicense exceed
     certain milestone amounts, such royalties will be shared equally with the
     University. The Company also granted the University a phantom stock award
     equal to 150,000 shares of the Company's Common Stock, which will have the
     right to participate in the increase in value of the Company's Common Stock
     between July 30, 1999 and the date of any sale of the Company. However, if
     the Company consummates one or more transactions in which it receives net
     cash proceeds of $25,000,000 or more, the Company will be obligated to pay
     to the University in the same calendar year and each year thereafter (i)
     100 percent of Sublicense fees up to $1,000,000 and (ii) 50 percent of
     Sublicense fees greater than $1,000,000.

     In the event the Company fails to make required payments to the University
     under the Amended License, the Amended License may be canceled. The
     University may then require the Company to grant to the University a non-
     exclusive license to any patents, trade secrets and other technology owned
     or developed by the Company in connection with its business of
     manufacturing, distributing and/or selling DNA sequencing equipment.  The
     University would be required to pay the Company 50 percent of all revenues
     received by the University in connection with any such license.

     Concurrently with entering into the Amended License with the University,
     the Company entered into a sublicense agreement pursuant to which the
     Company granted a company (the "Sublicensee") an exclusive sublicense to
     use certain patents for the development of DNA sequencing machines using 30
     or fewer   capillaries and using side entry illumination.  The Company also
     granted the Sublicensee a right of first refusal to sublicense such
     technology for use in DNA sequencing machines using more than 30
     capillaries.  On July 30, 1999, the Sublicensee paid the Company a non-
     refundable Sublicense issue fee of $1,000,000, and, commencing with the
     twelve-month period beginning August 1, 2001, the Sublicensee agreed to pay
     to the Company certain minimum annual royalties.  Such minimum royalties
     are non-refundable, but are credited against the earned royalties payable
     pursuant to the sublicense agreement. The non-refundable fee has been
     credited to deferred income in the accompanying financial statements.

     Consulting Agreement

     On July 30, 1999, the Company and the Sublicensee entered into a three-year
     consulting agreement pursuant to which the Company will provide consulting
     services to the Sublicensee.  In connection with such agreement, the
     Company received a lump sum fee of $2,000,000, which was credited to
     deferred income. Such consulting fees are being credited to income over the
     three-year term of the agreement.

NOTE 7 - SERIES A PREFERRED STOCK

     On July 30, 1999, the Company completed the sale and issuance of 2,000
     shares of Series A Preferred Stock ("Series A Preferred") at $1,000 per
     share, providing gross proceeds of $2,000,000 and net proceeds, after
     expenses paid by the Company, of $1,995,000.

     The holders of Series A Preferred are entitled to (i) share in dividends on
     a pro-rata basis with common stockholders on an as-converted basis; (ii) a
     liquidation preference equal to the sum of the price paid per share and all
     declared and unpaid dividends (the "Liquidation Preference"); (iii)
     optional redemption by the Company of the Liquidation Preference with
     notice of at least 20 days; (iv) vote on all matters on an as converted
     basis; and (v) convert to Common Stock at the Liquidation Preference Amount
     multiplied by the shares to be converted divided by the conversion price
     (the "Conversion Price") per share. The initial Conversion Price is equal
     to $2.50 per share of Common Stock, and is subject to adjustment in the
     event that shares of Common Stock are issued without consideration or for
     consideration per share less than the conversion price.

NOTE 8 - SUBSEQUENT EVENTS

     As of January 1, 2000, Stephen J. Wertheimer, a managing director of Credit
     Research & Trading LLC, was appointed to the Board of Directors of the
     Company. Mr. Wertheimer was granted 100,000 shares of Common Stock, having
     a fair market value of $0.125 per share, in connection with such
     appointment and in recognition of the consulting services he provided to
     the Company on an uncompensated basis since August 1999.
<PAGE>

     On January 13, 2000, the Company amended and restated the promissory note
     it issued to Dr. Joseph K. Adlerstein in respect of amounts advanced to the
     Company since December 1998. Dr. Adlerstein advanced funds to the Company
     to pay payroll and for other working capital purposes at a time when the
     Company did not have sufficient funds to meet its expenses and could not
     obtain capital from any other sources. The amended note extended the term
     of the loans to December 31, 2000 and provided that each $1,000 of
     principal amount and accrued but unpaid interest outstanding under the
     amended note may be converted into one share of the Company's Series B
     Preferred Stock. On January 13, 2000, Dr. Adlerstein converted $103,125
     outstanding under the note into 103.125 shares of the Company's Series B
     Preferred Stock.

     The Series B Preferred Stock have a liquidation preference of $1,000 per
     share and rank junior to the Series A Preferred Stock in the event of a
     dissolution of the Company. Each share of Series B Preferred Stock is
     convertible into 8,000 shares of Common Stock, subject to adjustment for
     stock splits, reclassifications and recombinations. Except as otherwise
     required by law, the Series B Preferred Stock votes together with the
     Common Stock and each share of Series B Preferred Stock is entitled to
     80,000 votes per share, subject to adjustment for stock splits,
     reclassifications and recombinations.

     In recognition of his efforts on behalf of the Company during 1999, on
     January 13, 2000, the Board of Directors of the Company granted Dr.
     Adlerstein 100,000 shares of Common Stock, having a fair market value of
     $0.125 per share. Also, on January 13, 2000, Dr. Adlerstein was granted an
     option to purchase 100,000 shares of Common Stock with an exercise price
     equal to the closing price of the Common Stock on January 13, 2000. The
     options vest in three equal installments if certain performance goals are
     met during calendar year 2000.

     On January 3, 2000, the Company also sold 340,000 shares of its common
     stock for $0.125 per share, the closing market price of the Company's
     common stock on such date, to certain of its consultants and advisors,
     including 40,000 shares to a consultant who has been acting in the capacity
     of the Company's chief financial officer.
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

The following discussion and analysis should be read in conjunction with
SpectruMedix Corporation's (the "Company") Consolidated Financial Statements and
Notes thereto included elsewhere in this Quarterly Report on Form 10-QSB.
Except for the historical information contained herein, the discussion in this
Quarterly Report contains certain forward-looking statements, within the meaning
of Section 27A of the Securities Act and Section 27E of the Exchange Act, that
involve risks and uncertainties, such as statements of the Company's plans,
objectives, expectations and intentions.  Forward-looking statements are based
on management's current expectations and are subject to a number of risks and
uncertainties that could cause actual results to differ materially from expected
results.  The cautionary statements made in this Quarterly Report should be read
as being applicable to all related forward-looking statements wherever they
appear in this Quarterly Report.  Factors that could cause or contribute to such
differences include, the ability of the Company to market the DNA Sequencer, the
availability of the necessary capital to fund the Company's plans, and the
availability of specialized components necessary to manufacture the DNA
Sequencer, as well as those factors discussed under the heading "Risk Factors"
and elsewhere herein.

Overview

Currently, the Company devotes substantially all of its resources to the
development of high-speed DNA/gene sequencing instrumentation (the "DNA
Sequencer"), an instrument for the acquisition, analysis and management of
complex genetic information.  The DNA Sequencer was developed in part from
research efforts conducted at the United States Department of Energy and Ames
Laboratories' Institute for Physical Research and Technology/Iowa State
University ("Ames Laboratories").  The Company believes DNA sequencing has
significant implications for medical, genetic and forensic science applications.

During the period from April 1992 (inception) through June 1992, the Company was
engaged in organizational activities, including negotiating agreements with the
Bankruptcy Court in Harrisburg, Pennsylvania to lease, on a temporary basis, the
assets and facilities of Nuclide Corporation ("Nuclide") and Measurement and
Analytic Systems, Inc. ("MAAS"). In December 1992, pursuant to a court order,
the Company acquired the assets of Nuclide and MAAS. In April 1993, the Company
acquired all the assets of Lab Data, including an inventory of computer hardware
and a complete line of data acquisition and instrument control software.  From
June 1992 until mid-1998, the Company devoted substantially all of its resources
to upgrade and improve the Company's line of instrumentation (mass
spectrometers, Luminoscopes, etc.), electronic components and software.  The
Company sold a line of magnetic sector mass spectrometers, new and improved
luminoscope add-ons, and high-performance software for a variety of applications
in the petrochemical, environmental and geochemical areas, among others.  The
Company was not able to achieve meaningful sales of these products.

Accordingly, the Company has shifted its focus to the commercialization of the
DNA Sequencer, and, as discussed above, currently devotes substantially all of
its resources to the commercialization and marketing of the DNA Sequencer. To
date, the Company has not sold any DNA Sequencer units.

The Company has not been profitable since inception and had an accumulated
deficit of $12,570,286 at December 31, 1999. Successful future operations depend
upon the Company's ability to develop and commercialize its products.

The Company has financed its operations primarily through the private sale and
issuance of equity securities and proceeds from an initial public offering (the
"Public Offering") of equity securities during September 1997.  All such funds
have been utilized by the Company and, from December 1998 through July 1999, the
Company has relied on cash infusions from its Chief Executive Officer.  On July
30, 1999, the Company restructured its license agreement with Iowa State
University Research Foundation, an affiliate of Ames Laboratories ("ISURF"), for
technology used to develop the DNA Sequencer, and entered into a sublicense
agreement relating to certain of such technology with PE Biosystems ("PE Bio").
In connection with the sublicense agreement, PE Bio made an investment in the
Company and retained the Company as a consultant.

The aggregate gross proceeds from the sublicense and related agreements with PE
Bio will provide the Company with additional liquidity and allow it to pay
amounts owing under its license agreements, and, the Company believes, allow it
to meet its current obligations over the next twelve months.  There can be no
assurance, however,
<PAGE>

that such funds will be sufficient. In order to proceed with the realization of
its plans for development and growth, the Company anticipates that over the next
twelve months it will need significant additional capital to greatly expand its
manufacturing capabilities, and launch a substantial sales and marketing
campaign. There can be no assurance, however, that the Company will be able to
obtain such capital on terms acceptable to it.

Results of Operations - Nine Months Ended December 31, 1999 and 1998

The Company had total revenues of $107,523 and $163,482 for the nine months
ended December 31, 1999 and 1998, respectively.  Revenues for both periods
reflect sales of products from product lines other than the DNA Sequencer. The
decrease in revenues of $55,959, or approximately 34%, was due primarily to the
increased focus of the Company on the commercialization of the DNA Sequencer and
to the lack of a full time sales and marketing staff. Cost of revenues were
$284,734 and $346,879 during the nine months ended December 31, 1999 and 1998,
respectively, a decrease of $62,145, or approximately 18%. The reason for the
decrease in the cost of revenues is due to decreased revenues.

Of the total revenues discussed above, revenues derived from the sale of the
Company's services totaled $19,889 and $27,249 for the nine months ended
December 31, 1999 and 1998, respectively.  The decrease in service revenue of
$7,360, or approximately 27%, was due primarily to the increased focus of the
Company on the commercialization of the DNA Sequencer and to the lack of a full
time sales and marketing staff.

Research and development expenses decreased $389,353 in 1999 to $486,590 from
$875,943 in 1998, due primarily to grants of $328,346 during 1999 (compared to
$395,319 during the nine months ended December 31, 1998) which decreased the
costs borne by the Company.  In addition, during the nine months ended December
31, 1998 the Company incurred additional research and development expenses in
connection with a project that was substantially completed in early 1999.

General and administrative expenses were $701,581 and $1,153,946 during the nine
months ended December 31, 1999 and 1998, respectively, a decrease of $452,365,
or approximately 39%.  Approximately 55% and 75% of the total general and
administrative expenses for the nine months ended December 31, 1999 and 1998,
respectively, were attributable to payroll, payroll taxes, employee benefits and
professional and consulting services.  Prior to July 30, 1999, the Company did
not have the financial ability to hire and retain necessary personnel,
consultants and advisors. As a result, the Company has reported a lower general
and administrative expense than would otherwise have been incurred. Currently,
the Company has sufficient funds to retain such staff and intends to do so in
the near future. Accordingly, the Company expects to report higher general and
administrative expenses in the future. There can be no assurance, however, that
the Company will be able to attract and retain the necessary personnel,
consultants and advisors. The Company's reduced staffing levels have adversely
impacted the Company. In particular, the Company does not have a sufficient
marketing staff.

Interest expense was $27,873 and $4,558 for the nine months ended December 31,
1999 and 1998, respectively, an increase of 512%.  Interest expense increased
primarily as a result of increased borrowings to fund operations, which
borrowings were substantially repaid during the quarter ended September 30,
1999.

Three Months Ended December 31, 1999 and 1998

The Company had total revenues of $11,803 and $31,992 for the three months ended
December 31, 1999 and 1998, respectively, a decrease of $20,189, or
approximately 63%. Revenues for both periods reflect sales of products from
product lines other than the DNA Sequencer. The decrease in total revenues was
due primarily to the increased focus of the Company on the commercialization of
the DNA Sequencer and to the lack of a full time sales and marketing staff. Cost
of revenues were $127,472 and $91,198 during the three months ended December 31,
1999 and 1998, respectively, an increase of $36,274, or approximately 40%.

Of the total revenues, revenues derived from the sale of the Company's services
totaled $5,700 and $3,338 for the three months ended December 31, 1999 and 1998,
respectively, an increase of $1,862, or approximately 56%. The increase in
service revenues was due primarily to a one-time service project.

Research and development expenses decreased 36% to $126,721 for the three months
ended December 31, 1999 from $199,235 for the three months ended December 31,
1998. Grants of $112,955 and $251,623 during the three months ended December 31,
1999 and 1998 respectively decreased the costs borne by the Company. In
addition,
<PAGE>

during the three months ended December 31, 1998 the Company incurred additional
research and development expenses in connection with a project that was
substantially completed in early 1999. The Company anticipates that research and
development expenses will increase for fiscal year 2000 as a result of expenses
relating to its license agreement with ISURF and its license and research and
development agreements with the University of Pennsylvania. The Company expects
to fund certain of such activities from the proceeds of the sale of preferred
stock.

General and administrative expenses decreased 24% to $239,861 for the three
months ended December 31, 1999 from $314,254 for the three months ended December
31, 1998. Prior to July 30, 1999, the Company did not have the financial ability
to hire and retain necessary personnel, consultants and advisors. As a result,
the Company has reported a lower general and administrative expense than would
otherwise have been incurred. Currently, the Company has sufficient funds to
retain such staff and intends to do so in the near future. Accordingly, the
Company expects to report higher general and administrative expenses in the
future. There can be no assurance, however, that the Company will be able to
attract and retain the necessary personnel and advisors. The Company's reduced
staffing levels have adversely impacted the Company. In particular, the Company
does not have a sufficient marketing staff.

Interest expense of $4,077 and $2,294 for the three months ended December 31,
1999 and 1998, respectively, resulted from borrowings. Interest expense during
the three months ended December 31, 1999 increased over the three months ended
December 31, 1998 primarily as a result of loans from the Company's Chief
Executive Officer made prior to July 30, 1999.

Liquidity and Capital Resources

Historically, the Company has financed its operations primarily through the sale
of equity securities and loans, most of which loans were repaid with the
proceeds from the Company's initial public offering.  All of such funds were
expended on the development and commercialization of the Company's products,
primarily its mass spectrometers and luminoscopes.  From December 1998 through
July 30, 1999, the Company has been dependent primarily on funds advanced by its
Chief Executive Officer to meet payroll and expenses, and the Company has failed
to make payments under its license agreements.  As a result of its financial
condition, the Company was not able to exercise or renew its option with the
University of California, Berkeley relating to diagnostic kinetics technology.

On July 30, 1999, the Company restructured its license agreement with ISURF for
technology used to develop the Company's DNA Sequencer and entered into a
sublicense agreement relating to certain of such technology with PE Bio.  In
connection with the sublicense agreement, PE Bio made an investment in the
Company.  PE Bio also retained the Company as a consultant.

The aggregate $5,000,000 in gross proceeds received July 30, 1999 from the
sublicense and sale of preferred stock to PE Bio, and other agreements, will
provide the Company with additional liquidity, allow it to pay amounts owing
under its license agreement with ISURF, complete the initial commercialization
of the DNA Sequencer and, the Company believes, meet all of its existing
obligations over the next twelve months.  There can be no assurance, however,
that such funds will be sufficient.  In order to further develop and expand the
business in accordance with its plans, the Company anticipates that over the
next twelve months it will need significant additional capital to greatly expand
its manufacturing capabilities, launch a substantial sales and marketing
program, pay various required license and milestone fees, establish third-party
collaborations and pursue additional research and development.  The Company's
capital requirements depend on many factors, including the status of the
development of its products, obtaining manufacturing capabilities to produce its
products in volume, prosecuting and enforcing its intellectual property rights,
competing technological and market developments, and the ability of the Company
to develop new collaborative and licensing arrangements.

If the Company is unable to obtain the necessary funds, by issuing equity or
debt securities, entering into collaborative agreements or obtaining grants, it
will not be able to complete the commercialization of, and effectively market
and manufacture, its DNA Sequencer and may not be able to continue its
operations.
<PAGE>

PART II  OTHER INFORMATION

Item 1.  Legal Proceedings.
         -----------------

  Robert M. Rubin v. SpectruMedix Corporation et. al. On April 21, 1997, a
complaint was filed in the Supreme Court of the State of New York alleging
breach of contract. Specifically, the plaintiff alleges that the Company
defaulted under a promissory note issued to plaintiff on May 16, 1996 in the
amount of $175,000 (the "Rubin Note") while such Note was outstanding and
therefore that the Company is liable and indebted to plaintiff in the principal
amount of $175,000, together with interest and expenses. The Company, on May
2,1997, paid the principal and interest due under the Rubin Note. The main
remaining issue asserted by the plaintiff is whether, pursuant to an alleged
related agreement, the plaintiff is entitled to 152,174 shares (adjusted to
reflect stock splits) of Common Stock or, alternatively, $875,000.  Plaintiff
alleges that the Company undertook to enter into a securities purchase agreement
pursuant to which he should have received the aforementioned shares of Common
Stock. The Company contends that such securities purchase agreement was never
discussed and therefore that no agreement was reached with respect to the terms
thereof.  Such securities purchase agreement was not signed by either of the
parties to the Rubin Note. The Company believes that it has meritorious defenses
to the above-described claims and it intends to defend the litigation
vigorously. However, due to the nature of litigation and because the lawsuit is
in the initial stages, the Company cannot determine the total expense or
possible loss, if any, that may ultimately be incurred either in the context of
a trial or as a result of a negotiated settlement. While management believes
that the resolution of this matter will not have a material adverse effect on
the Company's business financial condition and results of operations, the
results of these proceedings are uncertain and there can be no assurance to that
effect. Regardless of the ultimate outcome of the litigation, it could result in
significant diversion of time by the Company's personnel.


  Other than the foregoing, the Company is not a party to any other material
legal proceedings.

Item 2.  Changes in Securities and Use of Proceeds.
         -----------------------------------------
         (a)  Change in Securities.  None.
              --------------------
         (b)  Use of Proceeds.  None
              ---------------
Item 3.  Defaults Upon Senior Securities.  None.
         -------------------------------
Item 4.  Submission of Matters to a Vote of Security Holders.  None.
         ---------------------------------------------------
Item 5.  Other Information.  None.
         -----------------
Item 6.  Exhibits and Reports on Form 8-K.
         --------------------------------
         (a)  Exhibits.
              --------
              The following documents are referenced or included in this report:

              Exhibit No.
              -----------
              3.1  Certificate of Designation of Rights and Preferences of
                   Series B Preferred Stock of SpectruMedix Corporation, filed
                   with the Secretary of State of the State of Delaware on
                   February 22, 2000

              10.1 Amended and Restated Promissory Note, dated as of December
                   31, 1998, made by SpectruMedix Corporation in favor of Dr.
                   Joseph K. Adlerstein

              10.2 Option Agreement, dated January 13, 2000, between
                   SpectruMedix Corporation and Dr. Joseph K. Adlerstein

              27   Financial Data Schedule.
<PAGE>

         (b)  Reports on Form 8-K.
              -------------------
              On December 15, 1999 the Company filed Form 8-K stating the
              resignation of its auditors PricewaterhouseCoopers with the
              Commission.

                                   SIGNATURES
                                   ----------



     In accordance with the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed in its
behalf by the undersigned thereunto duly authorized.



                                  SPECTRUMEDIX CORPORATION



DATED:  February 22, 2000     By:   /s/ Joseph K. Adlerstein
                                   -------------------------------------------

                                  Joseph K. Adlerstein
                                  President, Chief Executive Officer and
                                  Chairman of the Board (Principal Executive and
                                  Accounting Officer)
<PAGE>

                               INDEX TO EXHIBITS



Exhibit No.      Description
-----------      -----------
3.1              Certificate of Designation of Rights and Preferences of Series
                 B Preferred Stock of SpectruMedix Corporation, filed with the
                 Secretary of State of the State of Delaware on February 22,
                 2000

10.1             Amended and Restated Promissory Note, dated as of December 31,
                 1998, made by SpectruMedix Corporation in favor of Dr. Joseph
                 K. Adlerstein

10.2             Option Agreement, dated January 13, 2000, between SpectruMedix
                 Corporation and Dr. Joseph K. Adlerstein

27               Financial Data Schedule.