<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
                            FOR ANNUAL AND TRANSITION
                    REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
                         OF THE SECURITIES EXCHANGE ACT

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

                   For the fiscal year ended December 31, 1999

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

                    For the transition period from __ to __.

                           Commission File No. 0-20698

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

         MASSACHUSETTS                                          04-2184792
        (State or other                                      (I.R.S.  Employer
incorporation or organization)                              Identification No.)

                 410 FIRST AVENUE, NEEDHAM, MASSACHUSETTS 02494
               (Address of principal executive offices)(Zip Code)

       Registrant's telephone number, including area code: (781) 449-4100

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

    Securities registered pursuant to Section 12(g) of the Act: Common Stock
                                                                (title of class)

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

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

        As of March 22, 2000, the aggregate market value of the voting stock
held by non-affiliates of the registrant was approximately $350.0 million, based
on the closing price of $33.25 on such date of the Company's common stock on the
Nasdaq ("Nasdaq") National Market System.

        As of March 22, 2000, 12,159,580 shares of common stock, $.01 par value
per share, were outstanding.
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                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of (i) the Company's Annual Report for the fiscal year ended
December 31, 1999 are incorporated into Part II of this Form 10-K and (ii) the
Company's Proxy Statement relating to the 2000 Annual Meeting of Shareholders of
the Company is incorporated into Part III of this Form 10-K.

                                   TRADEMARKS

         "TR114", "TR114 Series", "TR112", "TRNIC", "TR Series", "Universal
Port", "BTStack323", "ActiveCall", "VoiceSentence", "FaxVision", "TermView",
"SpeakIt", "ReadIt", "RealSpeech", "PowerBlock", "TR2001", "Real-Time Fax",
"TR1000", "Vantage Series" "TR2000 Series", "TRxStream", "TR2001 SDK",
"SpeechPac", "BTGateway", "Vantage DSPM", "Vantage PCI Series", "RDSP Series",
"Ensemble Series", "RTNI Series", "RFAX FRS Series", "Prelude Series", "RealCT
API", "Prompt Studio", "AccuCall Wizard", "AccuSwitch", "AccuSpan", "AccuLock",
"Vedit", "RDSPtest", "AccuTalk", "AccuDigit", "AccuCall", "AccuRate",
"AccuPitch", "AccuTone", "AccuPulse", "SMI API", and "AnyCall Software" are
trademarks of Brooktrout, Inc. "Brooktrout, Inc.", "Brooktrout Technology",
"TruFax", "Show N Tel", "Instant RAS Series", "IRAS Series", "Netaccess Series",
and "Instant ISDN Software" are registered trademarks of Brooktrout, Inc. "MVIP"
is a trademark of Natural MicroSystems, Inc. "Touch-Tone" is a registered
trademark and "UNIX"is a trademark of AT&T. "Merlin" is a registered trademark
and "Legend", "Merlin Legend", "Merlin Mail", "Merlin Multi-Lingual Version",
"RealCT" and "Partner Mail" are trademarks of Lucent Technologies Inc.
("Lucent", formerly a division of AT&T) "Microsoft" and "MS-DOS" are registered
trademarks and "Microsoft Windows Sound System" and "Windows NT" are trademarks
of Microsoft Corporation. "OS/2" is a registered trademark of International
Business Machines Corp. "UnixWare" is a trademark of Univel. "QNX" is trademark
of QNX, Inc. "Speedview", "Speedtrap", "Interspeed, Inc.", "Interspeed 1000",
and "Interspeed 500" are registered trademarks of Interspeed, Inc.

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                                     PART I

         This Annual Report contains certain statements that are
"forward-looking statements" as that term is defined under the Private
Securities Litigation Reform Act of 1995 (the "Act") and releases issued by the
Securities and Exchange Commission. The words "believe," "expect," "anticipate,"
"intend," "estimate" and other expressions which are predictions of or indicate
future events and trends and which do not relate to historical matters identify
forward-looking statements. Forward-looking statements involve known and unknown
risks, uncertainties and other factors, which may cause the actual results,
performance or achievements of the Company to differ materially from anticipated
future results, performance or achievements expressed or implied by such
forward-looking statements. The Company undertakes no obligation to publicly
update or revise any forward-looking statement, whether as a result of new
information, future events or otherwise.

ITEM 1.        BUSINESS

         Brooktrout, Inc. (the "Company") is a Massachusetts corporation founded
in 1984. During 1999, the Company changed its name from Brooktrout Technology,
Inc. to Brooktrout, Inc. The Company delivers communications hardware and
software products that enable applications for the new global telecommunications
network. The Company's mission is to collaborate with its customers so they can
bring innovative solutions to market quickly, increase business and expand into
new markets. The Company sells its products to system vendors, service
providers, and value-added resellers, or ("VARs"), both domestically and
internationally through a direct sales force and a two-tier distribution system.
The Company's international sales efforts, principally exports from the United
States, are initiated from corporate headquarters in the United States and
internationally located sales and support offices.

         The Company is organized and reports the results of its operations in
the following three business units: Brooktrout Technology, Brooktrout Software,
Inc. ("Brooktrout Software") and Interspeed, Inc. ("Interspeed"). These segments
are differentiated based upon the products and services provided to the
marketplace, the customers served, and the distribution channels.

         Brooktrout Technology delivers innovative hardware and software
platforms that enable applications ranging from Internet Protocol ("IP")
telephony and embedded voicemail to wireless messaging for the new global
communications network. While the majority of the Company's revenues were
generated by internally developed products, acquisitions have also contributed
to the Company's growth. On June 30, 1997, the Company acquired the assets and
assumed certain liabilities of Netaccess, Inc. ("Netaccess"), a worldwide
supplier of Primary Rate and Basic Rate ISDN network interface products and
multiport modem products for standards-based, open remote access and computer
telephony systems. On December 17, 1998, the Company acquired the assets and
assumed certain liabilities of the Computer Telephony Products ("CTP") business
of Lucent Technologies, Inc ("Lucent"). The CTP business provides technologies
for the voice processing industry and manufactures hardware and software
components that connect PCs and LANs with telephone networks.

         Brooktrout Software, which was acquired on May 26, 1996 as Technically
Speaking, Inc. ("TSI"), is a leading provider of voice solutions and services
for e-Business and the enterprise. Brooktrout Software's products reduce the
cost, time to market, and complexity of developing interactive voice response
("IVR"), Web/IVR, call management and unified messaging applications.
Additionally, Brooktrout Software has a professional services group that offers
Web/IVR and computer telephony integration ("CTI") consulting, custom voice
solution and application design and development, and systems integration.

         During 1997, the Company formed Interspeed, a subsidiary that designs,
develops, and markets advanced high-speed data communication solutions based on
digital subscriber line ("DSL") technology. Interspeed's products enable data
communication service providers such as competitive local exchange carriers,
Internet service providers, and owners of multi-tenant units ("MTUs") to deliver
high-speed data access solutions to their customers utilizing existing copper
wire infrastructure. On September 24, 1999, Interspeed sold 2 million shares of
its common stock in an initial public offering (the "Offering") at a price of
$12 per share pursuant to a registration statement on Form S-1 (333-81071), as
amended, under the Securities Act of 1933, as amended. In the Offering, the
Company sold an additional 1.5 million shares of Interspeed common stock. In
October, the Company sold an additional 425,000 shares of common stock of
Interspeed at a price of $12 per share pursuant to the underwriters'

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over allotment option. After these transactions, the Company owns 6.075 million
shares of Interspeed's outstanding common stock, or approximately 57% of
Interspeed's common shares outstanding as of December 31, 1999.

         The rapid evolution of the world's telecommunication systems has
created important market opportunities for the Company. One opportunity consists
of core technologies and platforms primarily for business premise products such
as fax, LanFax, and voice mail - Today's Network. Another opportunity - the New
Network - is the result of the global investments that are being made to expand
the capabilities of today's communication networks. These new capabilities allow
data, voice and fax information to be distributed using packet-based data
networks, such as the internet, for portions of the transmission and also be
distributed using the traditional circuit switched telephone network.

         Effective electronic communication over the New Network is dependent
upon network infrastructure technology to weave together the many disparate
systems and applications that already exist with the new and emerging
technologies. The Company markets many of its Switching and Access products to
customers that are creating the infrastructure to support the New Network. The
Company believes that another important market for its products is the unified
messaging market. Hardware and software applications enable users to integrate
their voice, fax and e-mail messages into one location, accessible from their
phone or laptop. An equally important New Network market segment is the growing
e-Commerce market. The Company believes that business-to-business automation,
both wired and wireless, is an important growth area for the new economy and for
the Company. E-commerce and unified messaging are examples of the enhanced
communication services that we anticipate will continue to be developed for the
New Network. Each of the Company's operating segments is delivering products
that permit the transformation from Today's Network to the New Network.

BROOKTROUT'S PRODUCTS

         Throughout its history the Company has looked beyond technology to
recognize niche opportunities and help customers exploit them. The Company
prides itself on learning about, meeting, and exceeding customer expectations
for features, standards support, scalability, reliability and price. The
Company's products are being used by customers that are developing products and
services for both Today's Network and the New Network. Brooktrout Technology's
products can be classified into the following product categories: switching and
access, messaging, and IP Telephony. This classification is based upon the
principle application enabled by the hardware and software products.  The
following table describes Brooktrout Technology's, Brooktrout Software's and
Interspeed's principal products and the markets that they serve:

BROOKTROUT TECHNOLOGY SWITCHING AND ACCESS PRODUCTS

<TABLE>
<CAPTION>
Products                                       Description                           Target Customers
--------                                       -----------                           ----------------
<S>                                            <C>                                   <C>
PRI/BRI WAN Interface boards                   Multi-span ISDN/T1/E1/BRI             OEMs and system
                                               boards for data, voice and video      integrators implementing
                                               applications available in             data networking and
                                               multiple bus types, including         computer telephony
                                               cPCI                                  applications

Instant RAS Open Remote Access                 A family of remote access             OEMs, VARs and system
Server boards                                  software and hardware for             integrators providing
                                               industry standard platforms           remote access solutions
                                               providing analog and digital          for office and
                                               connectivity                          departmental applications

RTNI Series boards                             Network interface cards that          OEMs and VARs adding voice
                                               provide from 2 T1/E1 to 24            processing and call
                                               analog interfaces; compatible         switching PC systems
                                               communication interfaces for the
                                               RDSP and Vantage Series
</TABLE>

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<TABLE>
<CAPTION>
<S>                                            <C>                                   <C>
TRNIC Series                                   Network interface cards that          Service provides, OEMs and
                                               provide up to 24 channels, in         VARs integrating fax and
                                               either ISA or PCI form factors,       voice systems with T1 lines
                                               for connecting fax and voice
                                               systems to T1 phone lines

Enhanced Call Control API                      An API which extends the TR           Service providers, OEMs and
                                               Series fax and voice development      VARs developing
                                               tools to incorporate high-speed       applications for different
                                               access products                       telephone systems worldwide

BROOKTROUT TECHNOLOGY MESSAGING PRODUCTS

Products                                       Description                           Target Customers
--------                                       -----------                           ----------------

TR1000 Series boards                           TRxStream Series high density         Service providers, OEMs and developers of
                                               messaging platform that supports      enhanced fax services
                                               MVIP and SCbus configurations

Vantage Series boards                          4 to 32 port ISA and PCI voice        OEMs, VARs, application developers, and
                                               and fax boards.  The PCI boards       system integrators developing highly
                                               also include an optional H.100        scalable voice/fax solutions
                                               interface

Prelude Series                                 Half-size, low-cost, full             VARs and OEMs developing voice processing
                                               featured voice processing             solutions
                                               platforms for PC systems that
                                               include the Duel 2-port analog
                                               half-size cards, and the Quartet
                                               4-port analog half-size cards


BROOKTROUT TECHNOLOGY MESSAGING PRODUCTS

Products                                       Description                           Target Customers
--------                                       -----------                           ----------------
RDSP Series                                    PC voice processing platforms         OEMs and VARs developing
                                               that include up to 24 ports of        computer telephony applications.
                                               voice                                 Service providers,
TR114 Series Intelligent Fax & Voice           Multichannel boards with advanced     OEMs and VARs implementing medium
boards                                         fax and voice processing              to high density fax and voice systems
                                               capabilities available with 2, 4,
                                               8, 12 or 16 channels/boards

TruFax Series Fax boards                       2 port fax boards providing an        OEMs and VARs implementing work
                                               entry port for fax server             group and medium-size business
                                               communications                        communication servers

RealComm 100                                   Software developers kit providing     Service providers, OEMs and VARs
                                               an open, standards-based, platform    developing computer telephony ("CT")
                                                                                     solutions
</TABLE>

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<TABLE>
<CAPTION>
<S>                                            <C>                                    <C>
RealCT Direct                                  Provides developers with direct        Service providers, OEMs and VARs
                                               access to any device in a CT           developing CT solutions
                                               environment

TR Series API                                  C-language application                 Service providers, OEMs and VARs
                                               development software for the TR        developing high performance fax
                                               Series, TruFax boards and IP           and voice applications with
                                               telephony products                     specific custom requirements

MerlinMail and                                 Voice messaging systems                Provided to Lucent on a private
PartnerMail systems for                        designed for Lucent's Merlin           label basis for sale to purchasers
Lucent                                         Partner and Merlin Legend              of Merlin Partner and Merlin
                                               Telephone switches                     Legend telephone systems

Ensemble Series                                A compact PC platform designed as      VARs and OEMs developing voice
                                               a host for compact voice               processing solutions
                                               processing solutions

BROOKTROUT TECHNOLOGY IP TELEPHONY PRODUCTS

Products                                       Description                           Target Customers
--------                                       -----------                           ----------------

TR2001 Series boards                           TrxStream Series high density IP      Service providers and OEMs
                                               Telephony platform that supports      implementing medium and high
                                               MVIP and SCbus configurations         density "gateways" and other
                                                                                     IP telephony systems

Real-Time Fax API                              An API that reduces the cost and      Service providers, OEMs and VARs
                                               complexity of developing              developing real-time fax gateways
                                               real-time IP/Fax gateways

BROOKTROUT SOFTWARE PRODUCTS

Products                                       Description                           Target Customers
--------                                       -----------                           ----------------

Show N Tel                                     Windows NT, GUI based, rapid          Service providers, OEMs and VARs
                                               application development platform      developing enterprise computer
                                               for computer  telephony               telephony systems seeking an
                                               applications                          easy-to-use application development
                                                                                     and prototyping tool

ActiveCall                                     An add-on tool to Show N Tel          Computer telephony system integrators
                                               allowing developers to extend voice   and VARs developing CTI and e-Business
                                               response systems with advanced CTI    solutions
                                               capabilities


SpeakIt                                        An add on module allowing             Computer telephony system integrators
                                               developers to add speech              and VARs developing CTI and
                                               interfaces                            e-Business solutions
</TABLE>

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<TABLE>
<CAPTION>
<S>                                            <C>                                   <C>
RealSpeech                                     An add on module allowing             Computer telephony system integrators and
                                               developers to add speech              VARs developing CTI and e-Business
                                               interfaces                            solutions

ReadIt                                         An add-on module that allows          Computer telephony system integrators and
                                               developers to add text-to-speech      VARs developing CTI and e-Business
                                               functionality                         solutions

TermView                                       An add-on module that allows          Computer telephony system integrators and
                                               developers to create                  VARs developing CTI and e-Business
                                               applications that can leverage        solutions
                                               data stored in mainframes

INTERSPEED PRODUCTS

Products                                       Description                           Target Customers
--------                                       -----------                           ----------------

Interspeed DART, Interspeed 500 and            Single system devices which           Internet service providers, owners
Interspeed 1000 DSL Access Routers             include products providing            of MTUs and competitive local
("DSLARs")                                     complete DSL aggregation,             exchange carriers
                                               switching, IP Routing, and
                                               Virtual Private Network ("VPN")
                                               functions
</TABLE>

BROOKTROUT TECHNOLOGY SWITCHING AND ACCESS PRODUCTS

         PRI/BRI ISDN/TI/E1 Interface Boards. The ISDN interface boards give
original equipment manufacturers ("OEMs") and systems integrators ease to
implement digital wide area network interface solutions. When combined with
Instant ISDN Software and Brooktrout's Simple Messaging Interface (SMI)
application programming interface, customers can develop data networking and
computer telephony solutions quickly with worldwide certifications. Boards are
available in several bus formats including ISA, PCI, and Compact PCI (cPCI) with
up to eight interfaces per board and include computer telephony interfaces such
as MVIP, H.100 and H.110.

         Instant Remote Access Server Products. Introduced originally as the
Multiport Modem product, the Instant RAS product family provides remote access
capability for industry standard platforms, such as Microsoft's Windows NT
Server. These products are designed for end users requiring economical access to
corporate networks through a variety of connection mechanisms, including analog
modem and digital ISDN interfaces. Instant RAS products provide reliable, easy
to install and maintain, and low price per port connections for small offices,
branch offices, departments of larger corporations, and small Internet Service
Providers. These products leverage the Company's expertise in developing network
interface products for its OEM partners.

         RTNI Series. This is a family of advanced telephony network interface
cards that offer OEM and VAR developers a reliable, flexible and scalable
solution for adding voice processing and call switching to PC systems. The RTNI
family includes: 2 T1 (48 channels), 2 E1 (60 channels), and 24 analog
interfaces. Each network interface card provides a T1/E1 compatible and analog
communication interface for the RDSP and Vantage Series voice and fax platforms
through the MVIP bus.

         TRNIC Series. Network interface cards that provide a seamless, easy
path to connect TR114 fax and voice systems to digital telephone lines. The
TRNIC's are single slot ISA and PCI add-in cards that provide an interface to a
North American T1 phone line for up to 24 fax and voice channels via the PEB or
MVIP telephony bus.

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         Enhanced Call Control API. The Company introduced an Enhanced Call
Control application programming interface ("API") which extends its TR Series
fax and voice development tools to incorporate the Company's Primary Rate and
Basic Rate ISDN products. The Enhanced Call Control API includes a set of high
level call control functions which enable developers to easily incorporate the
Company's ISDN products into their applications without requiring the developer
to learn ISDN or API specifics. This simplifies development by allowing
developers to write a single application that can be used in many different
system implementations, from low density to high density, using a variety of
telephony services.

BROOKTROUT TECHNOLOGY MESSAGING PRODUCTS

         TR1000 Series. The TR1000 is a high density messaging platform within
Brooktrout Technology's TrxStream Series. It supports up to 60 channels of voice
and intelligent fax support in a variety of port configurations. The TR1000
supports MVIP and SCbus configurations. In the past, developers of messaging
systems needed to use separate hardware for voice and separate hardware for fax,
increasing development complexity and system costs. By combining high density
voice and fax resources onto a single card, the TR1000 allows for simplified
development and faster time to market for enterprise and service provider
applications for the New Network. These New Network applications include unified
messaging, interactive voice response, digital recording, PC-PBX, call centers,
and web-based messaging services. The TRxStream platform is based on a common
architecture that scales from high-capacity service provider requirements down
to the lower-density requirements of the enterprise and workgroup markets.

         The Vantage Series. The Vantage Series are versatile voice processing
platforms for developing robust, highly scalable, high density applications on a
variety of platforms. The Vantage Series are universal port boards that provide
from 4 to 32 ports of voice on a single resource card, in either ISA or PCI form
factors. The industry-leading Vantage PCI series includes optional H.100 open
standards interfaces, international approvals including CTR-21, and is ideal for
messaging and digital recording applications. This provides OEMs, VARs,
application developers and system integrators the ability to offer voice
solutions which can be packaged to better meet market demand.

         Prelude Series. The Prelude series is a family of half-size, low-cost,
full featured voice processing platforms for PC systems. The Prelude Series
include the Duet 2-port analog half-size card, and the Quartet 4-port analog
half-size card that enables developers to build voice systems based on
"miniature" PC architecture, reducing overall costs while maintaining full voice
processing functionality.

         RDSP Series. The RDSP Series are PC voice processing platforms that
provide developers with proven voice processing for ISA bus-compatible
computers. The RDSP Series includes up to 24 ports of voice on a single resource
card that supports development of robust solutions for messaging, digital
recording, and other computer technology applications.

         TR114 Series. The TR114 Series Intelligent boards are designed for high
performance fax and fax & voice messaging systems, such as those used by
telecommunications service providers, messaging system vendors and network
communication server vendors. The TR114 Series Intelligent boards offer full fax
and voice processing on each channel of a multi-channel board. Advanced fax and
voice features, such as file conversions and file transfer protocols, are
supported on the TR114 Series. Boards are available in a range of
configurations; with two, four, eight, twelve or sixteen channels per board. The
TR114 Series boards are designed to be approved by telecommunications regulatory
agencies worldwide and have been approved for use in more than 30 countries
including the United States, Japan, England, France, and Germany.

         The range of the TR114 Series configurations allows developers
flexibility in designing systems from small corporate systems to large telephone
company service systems in a cost effective manner. The TR114 Series two and
four channel analog boards support loop start, DID, and Basic Rate ISDN
telephone service. The TR114 Series boards are designed to be used in ISA and
PCI-bus computers which may be used as platforms for smaller systems, and
special purpose computers providing expansion slots for up to 20 boards to serve
the needs of large service providers. TR114 Series four, eight, twelve and
sixteen channel digital boards with interfaces for popular Pulse Code Modulation
("PCM") highways, such as MVIP, SC Bus and PCM Expansion Bus ("PEB"), offer
developers

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options in designing systems for digital network services (such as T1, E1 and
ISDN) or with other resources, such as voice recognition, from other vendors.

         TruFax Series. The TruFax Series fax boards are fax processing boards
designed for small to medium scale, general purpose fax servers and systems.
TruFax Series products incorporate many of the functions that contribute to the
high reliability of TR114 Series products but do not support many of their
advanced fax features, or voice processing. TruFax Series products are
lower-priced than TR Series products. The first TruFax Series product, the
TruFax 200, is a two channel fax board. At the core of each channel is a fax
modem controlled by a microprocessor. The TruFax 200 is available with loop
start telephone system interfaces.

         RealComm 100. RealComm 100 is Brooktrout Technology's implementation of
the ECTF(TM)'s S.100 Revision 2 media server that meets customers' needs for
standards based communications servers. It is offered as a software developers
kit ("SDK"), providing developers with an open, standards-based platform for
developing computer telephony ("CT") applications. RealComm 100 enables
developers to build next generation innovative electronic communications
solutions for call centers, interactive voice response, enhanced call services,
automated attendant, directory services and unified messaging. The RealComm 100
communications reduces time to market and provides investment protection by
implementing rich resource management services and hardware abstraction that
enables scalable, distributed applications.

         RealCT Direct. Brooktrout Technology supports all major PC operating
systems through operating system device drivers. These drivers provide the
interface between the operating system and the Brooktrout Technology hardware.
The low level APIs for all operating systems are called the RealCT Direct APIs.
RealCT Direct is offered as a SDK and includes all the low-level APIs and
drivers. RealCT Direct provides developers with direct access to any device in a
computer telephony environment. This direct access enables developers to create
applications with fast execution time and direct control over all devices in the
system. The application has less code, resulting in faster execution and smaller
program size. Using this driver-level control, developers can create powerful,
robust applications that take full advantage of processor and other system
resources.

         TR Series API. The TR Series API enables developers to quickly develop
sophisticated fax and voice applications. This API is a complete C language
library of fax, voice, tone signaling and call processing function calls. It
also includes BTStack323 - an H.323 protocol stack, time-saving sample
applications, utilities and debugging tools. The API is operating-system
independent and will support most operating systems, including Windows NT, UNIX,
UnixWare, AIX, Solaris, QNX, OS/2, Windows 95 and MS DOS. Applications developed
with the API run on all of the Company's TR Series and TruFax Series products
that support the features.

         Merlin Legend Mail and Partner Mail. Since 1990, the Company has been
the supplier of the Merlin Mail, Partner Mail, and Merlin Legend Mail voice
messaging/automated attendant system for the Lucent Technology, Inc. ("Lucent")
Merlin small business telephone system. In mid 1999, Lucent released an internal
product that replaced the Company's products. Therefore, sales of this product
going forward will be limited to field replacement units and repairs.

         The Ensemble Series. The Ensemble Series is a flexible, low-cost
PC-based platform designed as an ideal host for compact voice processing
solutions. The Ensemble Line consists of various configurations of compact PC
platforms bundled with Brooktrout cards. This one-stop shopping solution
provides VARs and OEMs developing voice processing solutions a unique and
flexible combination, offering superior performance over other compact platforms
while priced less than if the components were sold separately.

BROOKTROUT TECHNOLOGY IP TELEPHONY PRODUCTS

         TR2001 Series. The TR2001, a product within Brooktrout Technology's
TRxStream Series, is a high density IP Telephony platform that allows developers
to create more reliable, scalable service provider-level IP Telephony gateways
and applications for the New Network. The TR2001 platform can operate in a dual
Pentium configuration that helps to minimize host processor loads and provides a
high degree of scalability. In addition, for developers who want the same degree
of reliability and scalability in a single chassis, the TR2001 now features
multi-board synchronization which allows four boards in a single chassis to
handle up to 240 simultaneous calls. TR2001 supports MVIP and Scbus
configurations. The TRxStream platform is based on a common architecture that

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scales from high-capacity service provider requirements to the lower-density
requirements of the enterprise and workgroup markets.

         Real-Time Fax API. Real-Time Fax API, when used with the Company's TR
Series fax and voice API and TR114 Series boards, reduces the complexity of
developing IP Fax gateways. Developers can develop and deploy a real-time IP Fax
system today and migrate seamlessly to future real-time IP Fax standards such as
T.Ifax2.

BROOKTROUT SOFTWARE PRODUCTS

         Show N Tel. Show N Tel is a leading Windows NT rapid application
development platform for interactive communication applications that integrate
phones, PCs and the Internet. Corporate professionals and integrators can
quickly and efficiently deliver reliable and powerful communication solutions
such as Wireless Web, Call Back, Contact Management and Unified Messaging. These
solutions allow web-based information to be shared with telephone users,
strengthening customer relationships while increasing profits and market share.

         ActiveCall. The Company introduced ActiveCall, an add-on to its Show N
Tel application development platform. ActiveCall includes server-side tools for
collecting, tracking, and managing call information and exchanging data with
client applications (screen pop); components for adding telephony functions to
both off-the-shelf help-desk and telemarketing software, as well as custom
applications; and switch "middleware" links via TSAPI, TAPI, and native PBX
APIs. ActiveCall addresses the growing market for call center automation and
telecommunications-based messaging solutions, allowing developers to extend
voice response systems with advanced CTI capabilities, and reduce the cost,
complexity, and time to market for delivering CTI solutions.

         SpeakIt. Add-on module that allows developers to add large vocabulary,
multi-language, speech interfaces to Show N Tel and ActiveCall applications.
This discrete speech recognition toolkit is based on Philips Speech Processing
technology.

         RealSpeech. Add-on module that allows developers to add large
vocabulary, multi-language, speech interfaces to Show N Tel and ActiveCall
applications. This natural language speech recognition toolkit is based on
Philips Speech Processing technology.

         ReadIt. Add-on module that allows developers to add text-to-speech
functionality to their Show N Tel and ActiveCall applications. This TTS toolkit
is based on L&H technology.

         TermView. Add-on module that allows developers to create Show N Tel and
ActiveCall applications that can leverage data stored in legacy mainframe
systems.

INTERSPEED PRODUCTS

         Interspeed DART, Interspeed 500 and Interspeed 1000 DSLARs. The
Interspeed DART is the industry's first complete, low-density DSL solution that
enables service providers to deliver high-speed Internet access and other
advanced IP applications to the stand-alone professional office market. The
Interspeed 500 is designed for larger MTU and campus environment deployments.
The Interspeed 1000 is ideal for central office applications. All three products
include complete DSL signal concentration, Layer 2 switching, IP Routing, and
VPN functions in a single device, eliminating the need for service providers to
purchase these components separately, saving significant cost. With these
advanced products, Interspeed can meet service providers' complete DSL access
requirements, ranging from a small eight-port application, to a large campus.

CUSTOMERS, SALES AND MARKETING

         The Company employs separate sales and marketing teams at Brooktrout
Technology, Brooktrout Software and Interspeed. Brooktrout Technology and
Interspeed market their products to OEMs, service providers, and to value-added
resellers ("VARs"). In addition to these customers, Brooktrout Software also
sells to certain end-users. Delivering Brooktrout Technology product to
enterprise customers is generally accomplished through a two-tier

                                       10
<PAGE>   11
distribution arrangement with Tech Data Corporation, a leading networking
supplier, and Ingram Micro, a leading wholesale distributor of computer
technology products and services.

         The Company ordinarily sells its products on the basis of purchase
orders received from customers. The Company has entered into agreements with
many of its customers, which establish terms and conditions for sales made under
these agreements from time to time. These agreements generally do not establish
any long-term fixed purchase or supply commitments for either party.

         In 1997, 1998 and 1999, sales to Lucent, the Company's largest
customer, accounted for 30%, 22%, and 12%, respectively, of the Company's total
revenues. The Company sells essentially all of its major products to a number of
separate business units within Lucent, although sales of the Merlin Legend Mail,
Merlin Mail Multi-Lingual Version and Partner Mail systems have constituted 82%,
83% and 65% of the revenue from Lucent in 1997, 1998 and 1999, respectively.
Merlin Legend Mail and Partner Mail and other products are sold to Lucent under
purchase orders issued by Lucent on an as-required basis. During 1999 Lucent
designed a product that will replace the Merlin Legend Mail and Partner Mail
products and as a result future sales of these products will be limited to field
replacement units and repairs. While no other single customer accounted for more
than 10% of the Company's total revenue in 1997, 1998 or 1999, approximately 62%
of Interspeed's revenue for 1999 was from Cabletron Systems, Inc.

Service Providers and Original Equipment Manufacturers (OEMs)

         Providers of enhanced telecommunications services develop, or purchase
from developers, large, complex systems incorporating the Company's products to
deliver electronic communications applications. These systems typically require
long development times and result in periodic deployments of large systems. OEMs
design, manufacture and market electronic communications systems that include
the Company's products. OEMs generally have long product design and development
processes that precede the release of products.

         Making sales to both of these types of customers can be a complex and
time-consuming process that is often focused on technical requirements. To serve
these customers in North America, the Company sells its products through a
direct sales force deployed throughout the United States.

Value-added Resellers (VARs)

         VARs typically purchase the Company's products for resale to an
end-user enterprise customer together with application software purchased from
an independent software vendor ("ISV"). The Company has established a network of
resellers, including many who are designated Brooktrout Authorized Resellers.
The Company employs direct sales people and manufacturers' representatives to
recruit, train and assist VARs. The Company also uses a two-tier distribution
system for some of its fax, voice, network interface and multiport modem
products, utilizing national distributors who then sell to VARs.

International

         The Company sells its products to service providers, OEMs and VARs
internationally through a direct sales force organized by region. The Company
has established sales offices in Belgium, England, Germany and Singapore.

         The Company's international sales efforts are initiated from corporate
headquarters in the United States and internationally located sales and support
offices. International sales, principally exports from the United States,
accounted for approximately $13.7 million, or 19% of revenue, for the year ended
December 31, 1997, $20.2 million, or 20% of revenue, for the year ended December
31, 1998 and $32.4 million, or 23% of revenue, for the year ended December 31,
1999.

         Most countries require technical approvals from their
telecommunications regulatory agencies for products which operate in conjunction
with the telephone system. Obtaining these approvals is generally a prerequisite
for sales in a given jurisdiction. Obtaining requisite approvals may require
from two months to a year or more

                                       11
<PAGE>   12
depending on the product and the jurisdiction. The Company cannot assure you
that it will not encounter delays in obtaining approval in a foreign
jurisdiction. The Company, its distributors or its customers have received
product approvals for the Company's fax and voice products from agencies in
Australia, Canada, France, Germany, Hong Kong, Korea, Italy, Japan, Malaysia,
the Netherlands, New Zealand, Singapore, Sweden, Switzerland, Mexico, Ireland,
Norway, Denmark, India, Czech Republic, the United Kingdom, Austria, Belgium,
Finland, Greece, Luxembourg, Portugal, Spain, China, Thailand, Argentina,
Israel, South Korea, Russia, South Africa, Iceland and the United States.

Brooktrout Technology Partner Connection Program

         Brooktrout Technology has established a Partner Connection Program for
OEMs, service providers and VARs. Brooktrout's mission is to be a true partner
in creating innovative solutions for the new global communications network.
Brooktrout Technology intends to assist its partners by collaborating with them
on new ideas, by helping them expand into new markets, by accelerating their
time to market for applications and by working together to deliver innovative
products and services. The participants in the Partner Connection Program
receive technical support, training, a quarterly newsletter and marketing
assistance on a priority basis; which the Company believes facilitates
development and deployment of their solutions throughout the world.

TECHNICAL SUPPORT

         The Company seeks to deliver unmatched support and service to
customers. By listening to customers and attempting to thoroughly understanding
their requirements, the Company believes it can provide innovative high-value
products which meet or exceed customer expectations. Beyond delivery, the
Company backs its products with responsive, engineering level support. Many of
the Company's technical support staff members hold bachelor's degrees in
electrical engineering or computer science. Staff members place the highest
priority on providing timely, accurate information as well as advice on how to
take advantage of the Company's sophisticated product line. The Company's
technical support personnel have been a source of product improvements and new
features and functions due to close working relationships with customers. The
Company's technical support activities represent an integral element of its
marketing strategy. The Company believes that its technical support capability
represents a significant competitive advantage.

         In March 2000, Brooktrout Technology increased the warranty on its
generally available network interface and signal processing products to five
years from the date of purchase from Brooktrout Technology. Products purchased
on or after January 1, 2000 will be covered under this new warranty. For
hardware products purchased before January 1, 2000, Brooktrout Technology
warrants against defects in materials and workmanship generally for twelve to
thirty-six months from the date of purchase. Brooktrout Software offers a one
year warranty on the hardware components within its systems and offers a limited
warranty on software. Both Brooktrout Technology and Brooktrout Software have
provided extended warranties to certain customers under contractual agreements
or for additional consideration.

         Interspeed warranties on products extend for twelve months from the
date of purchase from Interspeed. There are a variety of hardware maintenance
and support programs tailored to customers' specific requirements that are
available for products no longer under warranty. These programs include
agreements to provide service on a time and materials basis and annual service
contracts based on a percentage of the cost of the product. To date, Interspeed
revenues attributable to customer service and support services have been
immaterial.

PRODUCT DEVELOPMENT

         The market for electronic communications products is generally
characterized by rapid technological change, changes in customer requirements,
frequent new product introductions and enhancements and emerging industry
standards. The Company focuses significant resources on improving its products
in response to changes in operating systems, application software, computer and
telephony hardware, networking software, programming tools and computer language
technology. During the years ended December 31, 1997, 1998 and 1999, the Company
spent approximately $13.6 million, $22.1 million and $28.8 million, or 19%, 22%
and 20% of revenue, respectively, on research and development. Research and
development expenses have been charged to operations as incurred. The Company is
continuing its development efforts for its current products, as well as
developing next generation

                                       12
<PAGE>   13
versions of its current products. The Company believes significant investments
in product development are required to remain competitive. As a consequence, the
Company intends to continue to increase the dollar amount of its product
development expenditures in the future.

         The Company believes that its software and hardware development team
provides a significant competitive advantage for the Company. The team is
comprised of members with experience in voice telephony processing, device
driver development, object-oriented software development, graphical user
interface development, and computer networking. The Company believes this
assembly of diverse technical expertise contributes to the highly integrated
functionality of its products. The Company's ability to attract and retain
highly qualified employees will be one of the principal determinants of its
success in maintaining technological leadership.

COMPETITION

         The Company is in direct competition with companies offering similar
products or products responsive to similar applications. In addition, there is
always the potential for new entrants into the Company's markets by other
companies in related computer and communications companies including the
Company's customers and suppliers. The Company believes that the principal
competitive factors affecting the market for the Company's products and services
include product functionality and features, product quality, performance and
price, ease of product integration, and quality of customer support services.
The relative importance of each of these factors depends upon the specific
customer environment. Although the Company believes that its products and
services currently compete favorably with respect to such factors, there can be
no assurance that the Company can maintain its competitive position against
current and potential competitors.

         Many of the Company's current and potential competitors have longer
operating histories, significantly greater financial, technical, product
development and marketing resources, greater name recognition and larger
customer bases than the Company. The Company's present or future competitors may
be able to develop products comparable or superior to those developed by the
Company, adapt more quickly than the Company to new technologies, evolving
industry trends or customer requirements, or devote greater resources to the
development, promotion and license of their products than the Company.
Accordingly, there can be no assurance that competition will not intensify or
that the Company will be able to compete effectively in its market.

         The Company expects that it will face increasing pricing pressures from
its current competitors and new market entrants. The Company's competitors may
engage in pricing practices that cause the Company to reduce the average selling
prices of its products. To offset declining average selling prices, the Company
believes that it must successfully develop and introduce on a timely basis new
products or products that incorporate new features that can be sold at gross
margins comparable to those on existing products. To the extent that such new
products are not developed in a timely manner, do not achieve customer
acceptance, or do not generate comparable gross margins, the Company's
profitability may decline.

BACKLOG

         At December 31, 1999, the Company's backlog of orders for products and
services was approximately $9.4 million compared with approximately $9.0 million
at December 31, 1998. All of the backlog is expected to be shipped or provided
before the end of 2000. All orders believed to be firm for products or services
to be shipped or provided in the future are included in the backlog. The Company
regards all orders as firm orders and has experienced an order cancellation rate
in the past which the Company considers to be immaterial, although no assurance
can be given that adverse effects may not result from order cancellations in the
future. Because of the possibility of customer changes in delivery schedules or
cancellation of orders, the Company's backlog as of any particular date may not
be indicative of actual sales for any particular future period. The period of
time between placement of an order and delivery of the product varies from one
day for certain TR Series products to ten months for certain OEM systems
products.

MANUFACTURING

                                       13
<PAGE>   14
         The Company's manufacturing operations consist primarily of final
assembly and testing of components, systems and subsystems. The Company tests
its products at various stages in the manufacturing process. Each product
undergoes a final load and functional test at the Company's Needham,
Massachusetts, Salem, New Hampshire or North Andover, Massachusetts facility
prior to shipment.

         The Company uses independent manufacturers to perform printed circuit
board assembly and testing. The Company believes it has good relationships with
its subcontractors and has generally experienced timely delivery of products and
satisfactory quality with respect to products manufactured by subcontractors.
The Company's Needham, Massachusetts facility achieved ISO 9002 certification
and the Company's Salem, New Hampshire facility achieved ISO 9001 certification.

PROPRIETARY TECHNOLOGIES

         The Company does not hold patents on a large part of its product line.
The Company's software and firmware are protected by copyright laws. Because
on-board and downloadable firmware represent an important element of the value
of the Company's hardware products, the Company believes that it obtains
significant protection for its proprietary interest in its hardware products, as
well as its software products, from copyright laws. Certain design features,
including ASICs (application specific integrated circuits), software and
firmware, receive some protection under trade secret laws. Each employee of the
Company has executed a proprietary information agreement designed to protect the
trade secrets of the Company, inventions created in the course of employment
with the Company and other proprietary information of the Company. There can be
no assurance, however, that copyright and trade secret protection will be
sufficient to prevent competitors from developing software and other technology
similar to the software and other technology upon which the Company relies for a
significant portion of its revenue.

         The Company has acquired licenses under certain patents covering
aspects of voice processing technology, and licenses from third parties of
software for its voice and fax products. The Company pays royalties under these
licenses with respect to its sales of certain products. The licenses generally
extend for the life of the patent in question (in the case of patents) or in
perpetuity (in the case of software), and are subject to termination only in the
event of a breach. Royalties constitute a percentage of sales of particular
products or product elements, or a fixed amount per unit of hardware or software
distributed, and do not account for a material part of the Company's cost of
product sold.

         The Company has periodically received, and may receive in the future,
communications from third parties asserting patent rights with respect to
certain of the Company's products and features. The Company has entered into an
agreement in principal to settle one patent infringement case, which will not
have a material effect on the Company. There is no other pending litigation
against the Company regarding any of these claims, nor has the Company to date
believed it necessary to license any patent rights referred to in such
communications, except as described above and except for certain other minor
cases involving non payment of ongoing royalties.

EMPLOYEES
         As of December 31, 1999, the Company had 471 full-time employees, of
which 186 were engaged in engineering and product development, 170 in sales,
marketing and technical support, 67 in administration, and 48 in manufacturing.
None of the Company's employees are represented by any labor union and the
Company believes its relations with its employees are good.

EXECUTIVE OFFICERS

        The executive officers of the Company as of March 15, 2000 are as
follows:

                                       14
<PAGE>   15
<TABLE>
<CAPTION>
      Name                                                     Age                       Position
      ----                                                     ---                       --------
<S>                                                            <C>        <C>
Eric R. Giler...........................................       44         President and Director

David W. Duehren........................................       42         Vice President of Research and
                                                                          Development, Clerk and Director

Patrick T. Hynes........................................       41         Vice President of Advanced Product
                                                                          Engineering and Director

Robert C. Leahy.........................................       47         Vice President of Finance and Operations
                                                                          and Treasurer

R. Andrew O'Brien.......................................       41         Vice President of Business Development

Heather Magliozzi.......................................       37         Vice President of Corporate Communications

Michael Donoghue........................................       38         General Manager, IP/Fax Technology
                                                                          Division, Vice President

John Ison...............................................       44         General Manager, Voice Technology
                                                                          Division, Vice President

Jonathan J. Sirota......................................       58         General Manager, Data Technology Division,
                                                                          Vice President

John M. Faiman..........................................       46         Senior Vice President of Worldwide Sales

Mark D. Flanagan........................................       46         President, Brooktrout Software, Inc., Vice
                                                                          President, Brooktrout, Inc.
</TABLE>

         Eric R. Giler is a Company founder and has been President and a
Director of Brooktrout since the Company's inception in 1984. Prior to founding
the Company, Mr. Giler worked primarily in the area of technical marketing and
sales as a product manager with Teradyne, Inc. and an applications engineering
manager for Intec Corp. Mr. Giler is the former Chairman of the Massachusetts
Telecommunications Council and a current board member. He received a Bachelor of
Science degree from Carnegie-Mellon University and a Master of Business
Administration degree from the Harvard Business School. Mr. Giler serves on the
board of Interspeed, Inc. and Netegrity, Inc. Mr. Giler also is a director of
various privately-held high technology corporations.

         David W. Duehren is a Company founder and has been Vice President of
Research and Development and a Director of Brooktrout since the Company's
inception in 1984. Mr. Duehren is the former chairman of the Telecommunications
Industry Association Committee TR29.1, the subcommittee responsible for Group 3
fax enhancements, and also contributes to worldwide International
Telecommunications Union -- Telephony (ITU-T) facsimile standards. Mr. Duehren
is also a member of the Institute of Electrical Electronic Engineers (IEEE) and
has been a member of the ECTF work group on facsimile API standards. Mr. Duehren
received a Bachelor of Science degree and Master of Science degree in Electrical
Engineering from the Massachusetts Institute of Technology.

         Patrick T. Hynes is a Company founder and has been Vice President of
Advanced Product Engineering since January 1994 and a Director of Brooktrout
from the Company's inception in 1984. Mr. Hynes was Vice President of
Engineering from the Company's inception to December 1993. Mr. Hynes is a member
of the Institute of Electrical Electronic Engineers (IEEE). Mr. Hynes received a
Bachelor of Science degree in Electrical

                                       15
<PAGE>   16
Engineering from the Massachusetts Institute of Technology and a Master of
Science degree in Electrical Engineering from Columbia University.

         Robert C. Leahy has been Vice President of Finance and Operations and
Treasurer of Brooktrout since March 1988. Prior to joining Brooktrout, Mr. Leahy
held the position of corporate controller and treasurer for Cambridge Robotics.
Mr. Leahy is an active member in the Financial Executive Institute. Mr. Leahy
received a Bachelor of Science degree in accounting and a Master of Business
Administration degree from Bentley College.

         R. Andrew O'Brien has been Vice President of Business Development of
Brooktrout since July 1998 and Vice President of Marketing and Business
Development from July 1993 to June 1998. Mr. O'Brien was Director of Marketing
and Business Development from January 1993 to June 1993. Prior to joining
Brooktrout, Mr. O'Brien was a consultant with McKinsey & Company, Inc. from
September 1986 to January 1993. Mr. O'Brien received a Bachelor of Arts degree
from Yale University and a Master of Business Administration degree from the
Harvard Business School.

         Heather Magliozzi has been Vice President of Corporate Communications
of Brooktrout since August 1997. Ms. Magliozzi was Director of Marketing from
April 1996 to July 1997 and was Marketing Communications Manager from August
1994 to April 1996. Prior to joining Brooktrout, Ms. Magliozzi was a Marketing
Manager for NEC Technologies from January 1985 to July 1994. Ms. Magliozzi
received a Bachelor of Arts degree in English and Communications from Boston
College.

         Michael Donoghue has been General Manager of the IP/Fax Technology
Division and Vice President of Brooktrout since March 1999. Mr. Donoghue was
Vice President of Worldwide Sales from January 1997 to March 1999 and has held
several other key positions since joining Brooktrout in 1987. Mr. Donoghue
received a Bachelor of Science degree from the University of Massachusetts.

         John Ison has been General Manager of the Voice Technology Division and
Vice President of Brooktrout since April 1999. Prior to joining Brooktrout, Mr.
Ison was Vice President of Marketing at Live Picture, Inc. and President and CEO
at Newfire, Inc. Mr. Ison received a Bachelor of Science and a Master of Science
in Management from the Massachusetts Institute of Technology and a Master of
Science in Engineering from Dartmouth College.

         Jonathan J. Sirota has been General Manager of the Data Technology
Division and Vice President of Brooktrout since September 1998. Mr. Sirota was
Vice President of Engineering from January 1994 to August 1998. Prior to joining
Brooktrout, Mr. Sirota was Senior Vice President of Engineering and Operations
for ERGO Computing, Inc. from March 1989 to January 1994. Mr. Sirota received a
Bachelor of Science degree in Electrical Engineering from Rensselaer Polytechnic
Institute and a Master of Science degree in Electrical Engineering from
Massachusetts Institute of Technology.

         John M. Faiman has been Senior Vice President of Worldwide Sales since
November 1999. Prior to joining Brooktrout, Mr. Faiman was Senior Vice President
of Sales and Marketing for Simple Technology. Mr. Faiman has also held sales
management positions with Mountain Network Solutions, Arrow Electronics, and
Tech Data Corporation. Mr. Faiman received a Bachelor of Science degree in
economics from City University of New York.

         Mark D. Flanagan has been Vice President of Brooktrout and President of
Brooktrout Software since January 1998. Prior to joining Brooktrout, Mr.
Flanagan was executive vice president of Lernout & Hauspie's Dictation Division
and general manager of its PC Applications Group. Previously, he held senior
management positions with International Data Group, Lotus Development
Corporation and International Thomson Organization. Mr. Flanagan holds a
Bachelor of Arts degree from the University of Rochester and he also attended
The Graduate School of Management at Boston College.

                                       16
<PAGE>   17
                                  RISK FACTORS


         You should carefully consider the following risk factors before you
decide to buy the Company's common stock. The Company's business, financial
condition or results of operations could be harmed by any of the following
risks.


THE COMPANY'S OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY AND CAUSE
THE COMPANY'S STOCK PRICE TO BE VOLATILE WHICH COULD CAUSE THE VALUE OF YOUR
INVESTMENT TO DECLINE.

         The Company's operating results are likely to fluctuate in the future
due to a variety of factors, many of which are outside of its control. If the
Company's operating results do not meet the expectations of securities analysts,
the trading price of the Company's common stock could significantly decline.
This may cause the value of your investment in the Company to decline. In
addition, the value of your investment could be impacted by investor perception
of the Company's industry or its prospects generally, independent of the
operating performance of the Company. Some of the factors that could affect the
Company's operating results or impact the market price of the common stock
include:

         -        the Company's ability to develop, manufacture, market and
                  support its products and product enhancements;

         -        the timing and amount of, or cancellation or rescheduling of,
                  orders for the Company's products;

         -        the Company's ability to hire, train and retain key
                  management, sales and marketing and engineering personnel;

         -        announcements or technological innovations by the Company's
                  competitors or in competing technologies;

         -        the Company's ability to obtain sufficient supplies of sole or
                  limited source components for the Company's products;

         -        a decrease in the demand for the Company's stock;

         -        a decrease in the average selling prices of the Company's
                  products;

         -        changes in costs of components which the Company includes in
                  its products; and

         -        the mix of products that the Company sells and the mix of
                  distribution channels through which they are sold.

         Due to these and other factors, revenues, expenses and results of
operations could vary significantly in the future, and period-to-period
comparisons should not be relied upon as indications of future performance.

IF THE COMPANY IS UNABLE TO ATTRACT OR RETAIN KEY PERSONNEL, IT MAY BE UNABLE TO
SUCCESSFULLY OPERATE ITS BUSINESS.

         The Company's success depends on a large part upon the continued
contributions of its key management, sales and marketing and engineering
personnel, many of whom perform important-functions and would be difficult to
replace. The Company does not have employment contracts with its key personnel.
In addition, in order to grow its business, the Company must increase the number
of engineering, sales, customer support and administrative personnel. There is
intense competition in the Company's industry for qualified personnel, and, at
times, the Company has experienced difficulty in recruiting qualified personnel.
The Company may not be able to attract and retain the necessary personnel to
accomplish its business objectives, and it may experience constraints that will
adversely affect its ability to satisfy customer demand in a timely fashion or
to support its customers and operations.

                                       17
<PAGE>   18
The Company's inability to hire qualified personnel on a timely basis, or to
retain its key personnel, could materially adversely affect the Company's
business, financial condition and results of operations.

THE COMPANY'S MARKETS ARE HIGHLY COMPETITIVE, AND THE COMPANY MAY NOT BE ABLE TO
COMPETE SUCCESSFULLY AGAINST NEW ENTRANTS AND ESTABLISHED COMPANIES WITH GREATER
RESOURCES.

         The market for telecommunications equipment is highly competitive. If
the Company is unable to differentiate its products from existing and future
offerings of its competitors, and, thereby, effectively compete in the market
for telecommunications equipment, the Company's results of operations could be
materially adversely affected. Many of the Company's current and potential
competitors have significantly greater selling and marketing, technical,
manufacturing, marketing, financial, and other resources. Moreover, the
Company's competitors may have greater access to components necessary to
manufacture their products. The strength and capabilities of the Company's
competitors may be increased as a result of the trend toward consolidation in
the telecommunications market. Capitalizing on and maintaining the Company's
technological advantage will require a continued high level of investment in
research and development, marketing and customer service and support. Due to the
rapidly evolving markets in which the Company competes, additional competitors
with significant market presence and financial resources may enter those
markets, thereby further intensifying competition. The Company may not have
sufficient resources to continue to make the investments or achieve the
technological advances necessary to compete successfully with existing
competitors or new entrants.

INTERNAL DEVELOPMENT EFFORTS BY THE COMPANY'S CUSTOMERS MAY ADVERSELY AFFECT
DEMAND FOR ITS PRODUCTS.

         Many of the Company's customers, including the large OEM's on which the
Company focuses a significant portion of its sales and marketing efforts, have
the technical and financial ability to design and produce components replicating
or improving on the functionality of most of its products. These customers often
consider in-house development of technologies and products as an alternative to
doing business with the Company. For example, during 1999, Lucent designed a
product that will replace the Merlin Legend Mail and Partner Mail products
manufactured by the Company. As a result, future sales of these products will be
limited to field replacement units and repairs. The Company cannot assure that
its existing customers or potential customers will do business with the Company,
rather than attempting to develop similar technology and products internally or
obtaining them through acquisition. The Company cannot be certain that it will
be able to find customers to replace the revenues lost as a result of customers
developing technologies or products in house. Any such occurrence could have a
material adverse effect on the Company's business, financial condition or
results of operations.

UNLESS THE COMPANY IS ABLE TO KEEP PACE WITH THE EVOLUTION OF THE
TELECOMMUNICATIONS HARDWARE AND SOFTWARE MARKET, THE COMPANY'S BUSINESS MAY BE
ADVERSELY IMPACTED.

         The telecommunications hardware and software market is characterized
by:

         -        rapid technological advances:

         -        evolving industry standards;

         -        changes in customer requirements;

         -        frequent new product introductions;

         -        emerging competition; and

         -        evolving offerings by telecommunications service providers.

         The Company believes that its future success will depend, in part, on
its ability to offer products that address the sophisticated and varied needs of
its current and prospective customers and to respond to technological advances
and evolving industry standards on a timely and cost-effective basis. The
Company intends to continue to invest significantly in product and technology
development. The development of new or enhanced products is a

                                       18
<PAGE>   19
complex and uncertain process. The Company may experience design, manufacturing,
marketing and other difficulties that could delay or prevent its development,
introduction or marketing of new products and enhancements. The Company may also
not be able to incorporate new technologies on a cost effective or timely basis.
This may result in unexpected expenses. The introduction of new or enhanced
products also requires that the Company manage the transition from older
products to minimize the disruption to customers and ensure that adequate
supplies of new products can be delivered to meet anticipated customer demand.
The Company's inability to develop on a timely basis new products or
enhancements to existing products, or the failure of such new products or
enhancements to achieve market acceptance, could have a material, adverse effect
on the Company's business, financial condition and results of operations.

THE COMPANY'S DEPENDENCE ON SOLE AND SINGLE SOURCE SUPPLIERS AND INDEPENDENT
MANUFACTURERS EXPOSES IT TO SUPPLY INTERRUPTIONS THAT COULD RESULT IN PRODUCT
DELIVERY DELAYS.

         Although the Company generally uses standard parts and components for
its products, some key components are purchased from sole or single source
vendors for which alternative sources are not currently available or are
difficult to obtain. The Company's inability to obtain sufficient quantities of
these components may result in future delays or reductions in product shipments
which could materially adversely affect its business, financial condition and
results of operations. The Company currently purchases proprietary components
from a number of suppliers for which there are no direct substitutes. These
components could be replaced with alternatives from other suppliers, but that
could involve redesign of the Company's products. If such redesign was required,
the Company would incur considerable time and expenses. The Company currently
enters into purchase orders with its suppliers for materials based on forecasts
of need, but has no guaranteed supply arrangements with these suppliers.

         In addition, the Company currently uses a number of independent
manufacturers to manufacture printed circuit boards, chassis and subassemblies
to its design. The Company's reliance on independent manufacturers involves a
number of risks, including the potential for inadequate capacity, unavailability
of, or interruptions in access to, process technologies, and reduced control
over delivery schedules, manufacturing yields and costs. If the Company's
manufacturers are unable or unwilling to continue manufacturing its components
in required quantities and qualities, the Company will have to transfer
manufacturing to acceptable alternative manufacturers whom it has identified,
which could result in significant delays in shipment of products to customers.
Moreover, the manufacture of these components is extremely complex, and the
Company's reliance on the suppliers of these components exposes it to potential
production difficulties and quality variations, which could negatively impact
cost and timely delivery of its products. The Company currently enters into
purchase orders with independent manufacturers of materials based on forecasts
of need, but has no guaranteed arrangements with these manufacturers. Any
significant interruption in the supply, or degradation in the quality, of any
component would have a material adverse effect on the Company's business,
financial condition and results of operations.

THE COMPANY'S REVENUE GROWTH DEPENDS SIGNIFICANTLY ON THE TIMELY DEVELOPMENT AND
LAUNCH OF NEW PRODUCTS AND PRODUCT ENHANCEMENTS, AND THE COMPANY CANNOT BE SURE
THAT ITS NEW PRODUCTS WILL GAIN WIDE MARKET ACCEPTANCE.

         The telecommunications equipment and services market is characterized
by rapid technological change, which requires continual development and
introduction of new products and product enhancements that respond to evolving
customer needs and industry standards on a timely and cost-effective basis.
Successfully developing new products requires the Company to accurately
anticipate technological evolution in the telecommunications industry as well as
the technical and design needs of its customers. In addition, new product
development and launch require significant commitments of capital and personnel.
Failure to successfully update and enhance current products and to develop and
launch new products would harm the Company's business. In addition, failure of
the market to accept the Company's new products could negatively impact the
Company's business, results of operations and financial condition.

DEFECTS IN THE COMPANY'S PRODUCTS OR PROBLEMS ARISING FROM THE USE OF ITS
PRODUCTS MAY SERIOUSLY HARM ITS BUSINESS AND REPUTATION.

         Products as complex as the Company's may contain known and undetected
errors or performance problems. Defects are frequently found during the period
immediately following introduction and initial

                                       19
<PAGE>   20
implementation of new products or enhancements to existing products. Although
the Company attempts to resolve all errors that it believes would be considered
serious by its customers before implementation, the Company's products may not
be error-free. The Company also provides warranties against defects in materials
and workmanship on its products that range, depending on the product, generally
from twelve months to five years. However, errors or performance problems could
result in lost revenues or customer relationships and could be detrimental to
the Company's business and reputation generally. Additionally, reduced market
acceptance of the Company's services due to errors or defects in its technology
would harm its business by reducing its revenues and damaging its reputation. In
addition, the Company's customers generally use its products together with their
own products and products from other vendors. As a result, when problems occur,
it may be difficult to identify the source of the problem. These problems may
cause the Company to incur significant warranty and repair costs, divert the
attention of its engineering personnel from the Company's product development
efforts and cause significant customer relations problems. To date, defects in
the Company's products or those of other vendors' products with which its
products are used by its customers have not had a material negative effect on
its business. However, the Company cannot be certain that a material negative
effect will not occur in the future.

CHANGES TO REGULATIONS AFFECTING THE TELECOMMUNICATIONS OR INTERNET INDUSTRIES
COULD REDUCE DEMAND FOR THE COMPANY'S PRODUCTS OR INCREASE ITS COSTS.

         Laws and regulations governing telecommunications, electronic commerce
and the Internet are beginning to emerge, but remain largely unsettled, even in
the areas where there has been some legislative action. Any changes to existing
laws or the adoption of new regulations by federal or state regulatory
authorities or any legal challenges to existing laws or regulations relating to
the telecommunications industry, could have a material adverse effect upon the
market for the Company's products. Moreover, the Company's VARs or other
customers may require, or the Company may otherwise deem it necessary or
advisable, that it alter its products to address actual or anticipated changes
in the regulatory environment. The Company's inability to alter its products or
address any regulatory changes could have a material adverse effect on its
business, financial condition or results of operations.

         The Company is unable to predict the impact, if any, that future
legislation, legal decisions or regulations relating to telecommunications or
the internet may have on its business, financial condition and results of
operations. Regulation may focus on, among other things, assessing access or
settlement charges, or imposing tariffs or regulations based on the
characteristics and quality of products and services, either of which could
restrict the Company's business or increase its cost of doing business.

PROVISIONS IN THE COMPANY'S CHARTER AND BY-LAWS MAY DISCOURAGE TAKEOVER ATTEMPTS
AND, THUS, DEPRESS THE MARKET PRICE OF THE COMMON STOCK.

         Provisions in the Company's Charter may have the effect of delaying or
preventing a change of control or changes in the Company's management or Board
of Directors. These provisions include:

         -        right of the Board of Directors, without stockholder approval,
                  to issue shares of preferred stock and to establish the voting
                  rights, preferences, and other terms thereof;

         -        the right of the Board of Directors to elect a director to
                  fill a vacancy created by the expansion of the Board of
                  Directors;

         -        the ability of the Board of Directors to alter the Company's
                  by-laws without prior stockholder approval;

         -        the election of three classes of directors to each serve three
                  year staggered terms;

         -        the elimination of stockholder voting by consent;

         -        the removal of directors only for cause;

                                       20
<PAGE>   21
         -        the vesting of exclusive authority in the Board of Directors
                  (except as otherwise required by law) to call special meetings
                  of stockholders; and

         -        certain advance notice requirements for stockholder proposals
                  and nominations for election to the Board of Directors.

         These provisions discourage potential takeover attempts and the ability
of stockholders to change management and the Board of Directors. These
anti-takeover measures could adversely affect the market price of the Company's
common stock. In addition, even if you desired to participate in a tender offer,
change of control or takeover attempt of the Company that the Company's
management and Board of Directors opposed, these provisions may prevent you from
doing so.

THE COMPANY'S ABILITY TO ADEQUATELY PROTECT ITS PROPRIETARY RIGHTS MAY PREVENT
IT FROM RETAINING ITS COMPETITIVE ADVANTAGE AND NEGATIVELY IMPACT ITS FUTURE
OPERATING RESULTS.

         The Company's success and its ability to compete are dependent, in
part, upon its proprietary technology. Taken as a whole, the Company believes
its intellectual property rights are significant and any failure to adequately
protect the unauthorized use of its proprietary rights could result in the
Company's competitors offering similar products, potentially resulting in loss
of a competitive advantage and decreased revenues. The Company relies upon a
combination of trademark law, trade secret protections, copyright law and
confidentiality agreements with consultants and third parties to protect its
proprietary rights. Notwithstanding its efforts, third parties may infringe or
misappropriate the Company's proprietary rights. In addition, each employee of
the Company has executed a proprietary information agreement designed to protect
the trade secrets of the Company, inventions created in the course of employment
with the Company and other proprietary information of the Company. Moreover,
effective trademark, copyright or trade secret protections may not be available
in every country in which the Company operates or intends to operate to the same
extent as the laws of the United States. Also, it may be possible for
unauthorized third parties to copy or reverse engineer aspects of the Company's
products, develop similar technology independently or otherwise obtain and use
information that it regards as proprietary. Furthermore, detecting unauthorized
use of the Company's proprietary rights is difficult. Litigation may be
necessary in the future to enforce the Company's proprietary rights. Such
litigation could result in the expenditure of significant financial and
managerial resources and could have a material adverse effect on the Company's
future operating results.

INTELLECTUAL PROPERTY CLAIMS AGAINST THE COMPANY CAN BE COSTLY AND NEGATIVELY
IMPACT THE COMPANY'S BUSINESS.

         In the telecommunications business, there is frequent litigation based
on allegations of patent infringement. As the number of entrants in the
Company's market increases and the functionality of its products is enhanced and
overlaps with the products of other companies, the Company may become subject to
claims of infringement or misappropriation of the intellectual property rights
of others. As a result, from time to time, third parties may claim exclusive
patent or other intellectual property rights to technologies that the Company
uses. The Company has recently entered into an agreement in principal to settle
such litigation. Although the Company believes that its proprietary rights do
not infringe on the intellectual property of others, any claims asserting that
the Company's products infringe or may infringe proprietary rights of third
parties, if determined adversely to the Company, could have a material adverse
effect on its business, financial condition or results of operations. Any
claims, with or without merit, could be time-consuming, result in costly
litigation, divert the efforts of the Company's engineering and management
personnel, cause delays in product shipments or require the Company to enter
into royalty or licensing agreements, any of which could have a material adverse
affect upon the Company's operating results. If any legal action claiming patent
infringement is commenced against it, the Company cannot assure you that it
would prevail in such litigation given the complex technical issues and inherent
uncertainties in patent litigation. In addition, the Company may be required to
obtain a license or royalty agreement under the intellectual property rights of
those parties claiming the infringement. In the event a claim against the
Company was successful, and it could not obtain a license on acceptable terms or
license a substitute technology or redesign to avoid infringement, the Company
may be unable to market its affected products. This could have a material
adverse effect on the Company's business, financial condition and results of
operations.

                                       21
<PAGE>   22
THE COMPANY'S PRODUCTS DEPEND UPON THE CONTINUED AVAILABILITY OF LICENSED
TECHNOLOGY FROM THIRD PARTIES.

         The Company currently licenses and will continue to license certain
technology integral to its products and services from third parties. For
example, the Company has obtained licenses from third parties of software for
its voice and fax products. While the Company believes that much of this
technology is available from multiple sources, any difficulties in acquiring
third-party technology licenses, or integrating the related third-party
technology into its products, could result in delays in product development or
upgrade until equivalent technology can be identified, licensed and integrated.
The Company may require new licenses in the future as its business grows and
technology evolves. The Company cannot assure you that these licenses will
continue to be available to it on commercially reasonable terms, if at all,
which could have a material adverse effect on the Company's business, financial
condition and results of operations.

THE COMPANY'S PRODUCTS TYPICALLY HAVE LONG SALES CYCLES, CAUSING THE COMPANY TO
EXPEND SIGNIFICANT RESOURCES BEFORE RECOGNIZING REVENUE.

         The length of the Company's sales cycle typically ranges from six to
eighteen months and varies substantially from customer to customer. Prospective
customers generally must commit significant resources to test and evaluate the
Company's products and integrate them into larger systems. This evaluation
period is often prolonged due to delays associated with approval processes that
typically accompany the design and testing of new communications equipment by
the Company's customers. In addition, the rapidly emerging and evolving nature
of the markets in which the Company and its customers compete may cause
prospective customers to delay their purchase decisions as they evaluate new
technologies and develop and implement new systems. During the period in which
the Company's customers are evaluating whether to place an order with the
Company, it often incurs substantial sales and marketing expenses, without any
assurance of future orders or their timing. Even after a customer places an
order with the Company and its product is expected to be utilized in a product
or service offering being developed by our customer, the timing of the
development, introduction and implementation of those products is controlled by,
and can vary significantly with the needs of, the Company's customers In some
circumstances, the customer will not require the product for several months.
This complicates the Company's planning processes and reduces the predictability
of the Company's earnings. If sales forecasted from a specific customer for a
particular quarter are not realized in that quarter, the Company may fail to
achieve its revenue goals.

THE AVERAGE SELLING PRICES OF THE COMPANY'S PRODUCTS MAY DECREASE, WHICH COULD
ADVERSELY AFFECT GROSS MARGINS AND REVENUES.

         Competitive pressures and rapid technological change may cause
decreases of the average selling prices of the Company's products and services.
In addition, as many of the Company's target customers are large OEM's with
significant market power, the Company may face pressure from them for steep
discounts in its pricing. Any significant erosion in the Company's average
selling prices could impact its gross margins and have a material adverse effect
on the Company's business, financial condition and results of operations.

THE COMPANY'S REVENUE GROWTH DEPENDS SIGNIFICANTLY ON THE TIMELY DEVELOPMENT AND
LAUNCH OF NEW PRODUCTS AND PRODUCT ENHANCEMENTS, AND THE COMPANY CANNOT BE SURE
THAT ITS NEW PRODUCTS WILL GAIN WIDE MARKET ACCEPTANCE.

         The telecommunications equipment and services market is characterized
by rapid technological change, which requires continual development and
introduction of new products and product enhancements that respond to evolving
customer needs and industry standards on a timely and cost-effective basis.
Successfully developing new products requires the Company to accurately
anticipate technological evolution in the telecommunications industry as well as
the technical and design needs of its customers. In addition, new product
development and launch require significant commitments of capital and personnel.
Failure to successfully update and enhance current products and to develop and
launch new products would harm the Company's business. In addition, failure of
the market to accept the Company's new products could negatively impact the
Company's business, results of operations and financial condition.

                                       22
<PAGE>   23
THE COMPANY DERIVES A SIGNIFICANT PORTION OF ITS REVENUES FROM INTERNATIONAL
SALES.

         Sales to customers outside North America accounted for approximately
23%, 20% and 19% of the Company's revenues in 1999, 1998 and 1997 respectively
and the Company believes a material portion of its domestic sales results in the
use of its products outside North America. Risks arising from the Company's
international business include currency fluctuation, political instability in
other countries, the imposition of trade and tariff regulations by foreign
governments and the difficulties in managing operations across disparate
geographic areas. In addition, most countries require technical approvals from
their telecommunications regulatory agencies for products which operate in
conjunction with the telephone system. Obtaining these approvals is generally a
prerequisite for sales in a given jurisdiction. Obtaining requisite approvals
may require from two months to a year or more depending on the product and the
jurisdiction. The Company cannot assure a shareholder that it will not encounter
delays in obtaining approval in a foreign jurisdiction. These or other factors
may limit the Company's ability to sell its products and services in other
countries, which could have a material adverse effect on the Company's business,
financial condition and results of operations.

DEFECTS IN THE COMPANY'S PRODUCTS OR PROBLEMS ARISING FROM THE USE OF ITS
PRODUCTS MAY SERIOUSLY HARM ITS BUSINESS AND REPUTATION.

         Products as complex as the Company's may contain known and undetected
errors or performance problems. Defects are frequently found during the period
immediately following introduction and initial implementation of new products or
enhancements to existing products. Although the Company attempts to resolve all
errors that it believes would be considered serious by its customers before
implementation, the Company's products may not be error-free. The Company also
provides warranties against defects in materials and workmanship on its products
that range, depending on the product, generally from twelve months to five
years. However, errors or performance problems could result in lost revenues or
customer relationships and could be detrimental to the Company's business and
reputation generally. Additionally, reduced market acceptance of the Company's
services due to errors or defects in its technology would harm its business by
reducing its revenues and damaging its reputation. In addition, the Company's
customers generally use its products together with their own products and
products from other vendors. As a result, when problems occur, it may be
difficult to identify the source of the problem. These problems may cause the
Company to incur significant warranty and repair costs, divert the attention of
its engineering personnel from the Company's product development efforts and
cause significant customer relations problems. To date, defects in the Company's
products or those of other vendors' products with which its products are used by
its customers have not had a material negative effect on its business. However,
the Company cannot be certain that a material negative effect will not occur in
the future.

                                       23
<PAGE>   24
ITEM 2.        PROPERTIES

         The Company's Brooktrout Technology operation has its principal
locations in leased facilities in Needham, Massachusetts, in Salem, New
Hampshire and in Los Gatos, California. In Needham, Massachusetts the Company
leases two stand-alone facilities, a 31,000 square foot manufacturing facility
and a 38,000 square foot office that accommodates corporate headquarters as well
as engineering, sales and marketing. Both Needham, Massachusetts facilities are
leased until 2006. In Los Gatos, California the Company leases an office of
approximately 33,000 square feet for engineering, sales, marketing and
administration. This lease expires on February 28, 2006. In Salem, New Hampshire
a 26,000 square foot leased facility is used for engineering, manufacturing,
sales, marketing and administrative operations. This lease expires on August 31,
2000.

         The Company has recently signed a lease for approximately 22,000 square
feet of additional office space in Needham, Massachusetts to accommodate
corporate headquarters. This lease expires on March 31, 2005 with an option to
extend for seven years.

         The Company has also signed operating leases for sales and support
offices in Belgium, Singapore, and the United Kingdom.

         Brooktrout Software leases approximately 16,515 square feet in
Southborough, Massachusetts. This facility accommodates engineering, sales and
marketing, and technical support. The lease for this facility expires on April
30, 2001.

         Interspeed leases a facility consisting of approximately 36,000 square
feet in North Andover, Massachusetts, under a lease expiring in 2004.

         The Company believes that its present facilities are adequate for its
current needs and that suitable additional space will be available as needed.

ITEM 3.        LEGAL PROCEEDINGS

         On September 22, 1998, Syntellect Technology Corp. ("Syntellect")
served the Company with notice that it intended to pursue arbitration of a claim
based on an alleged infringement and breach of a patent license agreement. On
October 22, 1998, Syntellect filed a demand for arbitration, with the American
Arbitration Association in which Syntellect asserted that the Company failed to
pay certain royalties under the patent license agreement. On June 15, 1999,
Aspect Telecommunications Corporation joined the arbitration as a claimant.

         On January 31, 2000, Syntellect and the Company reached an
understanding on terms under which the matter would be settled. This settlement,
if completed, will not have a material impact on the Company's consolidated
financial position or results of operations. The arbitration proceedings have
been stayed pending final resolution of this settlement.

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

         Not applicable.

                                       24
<PAGE>   25
                                     PART II

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

         Information in response to this item appears under the caption "Stock
Market Information" of the Company's Annual Report for the year ended December
31, 1999, which is incorporated in this report by reference.

ITEM 6.        SELECTED FINANCIAL DATA

         Information in response to this item appears under the caption
"Selected Consolidated Financial Data" of the Company's Annual Report for the
year ended December 31, 1999, which is incorporated in this report by reference.

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

         Information in response to this item appears under the caption
"Management's Discussion & Analysis of Financial Condition and Results of
Operations" contained in the Company's Annual Report for the year ended December
31, 1999, which is incorporated in this report by reference.

ITEM 7A.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Information in response to this item appears under the caption
"Quantitative and Qualitative Disclosures about Market Risk" contained in the
Company's Annual Report for the year ended December 31, 1999, which is
incorporated in this report by reference.

ITEM 8.        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Information in response to this item is contained in the Company's
Annual Report for the year ended December 31, 1999, which is incorporated in
this report by reference.

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

         Not applicable.

                                       25
<PAGE>   26
                                    PART III

ITEM 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Directors. The information appearing under the caption "Information
Regarding Nominees and Directors" of the Company's Proxy Statement for its 2000
Annual Meeting of Stockholders is incorporated in this report by reference.

         Executive Officers. Information with respect to executive officers
appears under the caption "Executive Officers" in Item 1 of this report.

ITEM 11.       EXECUTIVE COMPENSATION

         Information in response to this Item appears under the caption
"Executive Compensation" of the Company's Proxy Statement for its 2000 Annual
Meeting of Stockholders, which is incorporated in this report by reference.

ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Information in response to this Item appears under the caption
"Ownership of Equity Securities" of the Company's Proxy Statement for its 2000
Annual Meeting of Stockholders, which is incorporated in this report by
reference.

ITEM 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Information in response to this Item appears under the caption "Certain
Relationships" of the Company's Proxy Statement for its 2000 Annual Meeting of
Stockholders, which is incorporated in this report by reference.

                                       26
<PAGE>   27
                                     PART IV

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

         (a) (1)  Financial Statements

         The following is included in Part II of this report, incorporated by
reference from the Company's Annual Report for the year ended December 31, 1999
filed as Exhibit 13 hereto:

<TABLE>
<CAPTION>
                                                                                                                   Page No.
                                                                                                                   --------
<S>                                                                                                                <C>
        Independent Auditors' Report......................................................................
        Consolidated Balance Sheets as of December 31, 1999 and 1998......................................
        Consolidated Statements of Income for the Years Ended
               December 31, 1999, 1998 and 1997...........................................................
        Consolidated Statements of Comprehensive Income (Loss) for
               the Years Ended December 31, 1999, 1998 and 1997
        Consolidated Statements of Stockholders Equity for the
               Years Ended December 31, 1999, 1998 and 1997...............................................
        Consolidated Statements of Cash Flows for the
               Years Ended December 31, 1999, 1998 and 1997...............................................
        Notes to Consolidated Financial Statements........................................................
</TABLE>

         (a) (2)  Financial Statement Schedule

         The following are contained on the indicated pages of this annual
report on Form 10-K:

<TABLE>
<CAPTION>
                                                                                                                   Page No.
                                                                                                                   --------
<S>                                                                                                                <C>
        Independent Auditors' Report on Schedule..........................................................
        Schedule IX Valuation and Qualifying Accounts.....................................................
</TABLE>

         Schedules not listed above are omitted because they are not required or
because the required information is given in the Consolidated Financial
Statements or Notes thereto.

         (a) (3)  Exhibits

         The following exhibits are filed as part of this report. Where such
filing is made by incorporation by reference to a previously filed statement,
such statement is identified.

                               Additional Exhibits

<TABLE>
<CAPTION>
Exhibit
  No.           Title                                                                                 Page No.
  ---           -----                                                                                 --------
<S>             <C>                                                                                   <C>
2.1             Asset Purchase Agreement by and among BTGP, Inc. and Brooktrout
                Technology Europe Limited dated December 17, 1998 is hereby
                incorporated by reference from the Company's current report on
                form 8-K filed with the Securities and Exchange Commission
                ("SEC") on December 29, 1998 (File No. 000-20698)

2.2             Asset Purchase Agreement by and among BTINH Operating Company, Inc. and
                Netaccess, Inc. dated June 30, 1997 is hereby incorporated by reference
                from the Company's current report on form 8-K filed with the SEC on July
                14, 1997 (File No. 000-20698)
</TABLE>

                                       27
<PAGE>   28
<TABLE>
<CAPTION>
Exhibit
  No.           Title                                                                                 Page No.
  ---           -----                                                                                 --------
<S>             <C>                                                                                   <C>
2.3             Amended and Restated Agreement and Plan of Merger by and among Brooktrout
                Technology, Inc. and Technically Speaking, Inc. is hereby incorporated by
                reference from the Company's current report on form 8-K filed with the SEC
                on June 13, 1996 (File No. 000-20698)

3.1             Restated Articles of Organization of the Company are filed herewith

3.2             Articles of Amendment to the Restated Articles of Organization of the
                Company are filed herewith

3.3             Amended and Restated By-laws of the Company is hereby incorporated by
                reference from the Company's Registration Statement on Form S-1 with
                respect to its initial public offering of Common Stock as initially filed
                with the SEC on August 28, 1992 (File No. 33-51424)

10.1            Lease between the Company and Trustees of Needham 152 Second Avenue Trust
                dated April 7, 1997 is hereby incorporated by reference from the Company's
                Annual Report on Form 10-K for the Fiscal year ended December 31, 1997, as
                filed with the SEC on March 30, 1998 (File No. 000-20698)

10.2            Lease between the Company and NAM Partners, L.P. dated December 28, 1998
                is hereby incorporated by reference from the Company's Annual Report on
                Form 10-K for the Fiscal year ended December 31, 1998, as filed with the
                SEC on March 30, 1999 (File No. 000-20698)

10.3            Assignment and Assumption of Lease between the Company and Lucent
                Technologies Inc. dated December 17, 1998 is hereby incorporated by
                reference from the Company's Annual Report on Form 10-K for the Fiscal
                year ended December 31, 1998, as filed with the SEC on March 30, 1999
                (File No. 000-20698)

10.4            Lease between the Company and Pacific Gateway Properties, Inc., dated
                August 15, 1995, as amended is hereby incorporated by reference filed from
                the Company's Annual Report on Form 10-K for the Fiscal year ended
                December 31, 1998, as filed with the SEC on March 30, 1999 (File No.
                000-20698)

10.5            Brooktrout, Inc. 1992 Stock Incentive Plan is hereby incorporated by
                reference from the Company's Registration Statement on Form S-8 filed with
                the SEC on September 19, 1996 (File No. 333-12313)

10.6            Brooktrout, Inc. Amended and Restated 1992 Stock Purchase Plan is hereby
                incorporated by reference from the Company's Registration Statement on
                Form S-8 filed with the SEC on September 4, 1998 (File No. 333-62959).
</TABLE>

                                       28
<PAGE>   29
<TABLE>
<CAPTION>
Exhibit
  No.           Title                                                                                 Page No.
  ---           -----                                                                                 --------
<S>             <C>                                                                                   <C>
10.7            First Amendment to Brooktrout, Inc. Amended and Restated 1992 Stock
                Purchase Plan is hereby incorporated by reference from the Company's
                Registration Statement on Form S-8 filed with the SEC on September 4, 1998
                (File No. 333-62959)

10.8            Second Amendment to Brooktrout, Inc. 1992 Stock Incentive Plan is hereby
                incorporated by reference from the Company's Registration Statement on
                Form S-8 filed with the SEC on September 4, 1998 (File No. 333-62959)

10.9            Third Amendment to Brooktrout, Inc. 1992 Stock Incentive Plan incorporated
                by reference from the Company's Registration Statement on Form S-8 filed
                with the SEC on October 12, 1999 (File No. 333-88803)

10.10           December 1999 Amendment to the 1992 Stock Incentive Plan is filed herewith

10.11           Brooktrout, Inc. 1999 Stock Incentive Plan is filed herewith

13              1999 Annual Report of Brooktrout, Inc. is filed herewith

21              List of Subsidiaries of the Company is filed herewith

23              Independent Auditors' Consent is filed herewith

27              Financial Data Schedule is filed herewith
</TABLE>

                                       29
<PAGE>   30
                                   SIGNATURES

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

                                             BROOKTROUT, INC.

                                             By: /s/ Eric R. Giler
                                                -------------------------------
                                                  Eric R. Giler
                                                  President

Date: March 29, 2000

                                   SIGNATURES

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

<TABLE>
<CAPTION>
              Signatures                                    Title                                  Date
              ----------                                    -----                                  ----
<S>                                           <C>                                             <C>
/s/ Eric R. Giler                             President and Director (Principal               March 29, 2000
----------------------------------------      Executive Officer)
Eric R. Giler


/s/ Robert C. Leahy                           Vice President of Finance                       March 29, 2000
----------------------------------------      and Operations and Treasurer
Robert C. Leahy                               (Principal Financial and
                                              Accounting Officer)


/s/ David W. Duehren                          Vice President and Director                     March 29, 2000
----------------------------------------
David W. Duehren


/s/ Patrick T. Hynes                          Vice President and Director                     March 29, 2000
----------------------------------------
Patrick T. Hynes


/s/ Robert G. Barrett                         Director                                        March 29, 2000
----------------------------------------
Robert G. Barrett


/s/ David L. Chapman                          Director                                        March 29, 2000
----------------------------------------
David L. Chapman


/s/ W. Brooke Tunstall                        Director                                        March 29, 2000
----------------------------------------
W. Brooke Tunstall
</TABLE>

                                       30
<PAGE>   31
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Stockholders of
    Brooktrout, Inc.:

We have audited the consolidated financial statements of Brooktrout, Inc. and
subsidiaries (the "Company") as of December 31, 1999 and 1998, and for each of
the three years in the period ended December 31, 1999, and have issued our
report thereon dated February 3, 2000, which is incorporated by reference in
this Annual Report on Form 10-K. Our audits also included the financial
statement schedule of Brooktrout, Inc., listed in Item 14(a)(2) of this Annual
Report on Form 10-K. This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.

/s/ Deloitte & Touche LLP

Deloitte & Touche LLP
Boston, Massachusetts
February 3, 2000

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<PAGE>   32
                                                                     SCHEDULE IX

                                BROOKTROUT, INC.

                        VALUATION AND QUALIFYING ACCOUNTS
                                 (In Thousands)
<TABLE>
<CAPTION>
                                              BALANCE AT      CHARGED TO                                      BALANCE
                                               BEGINNING       COST AND                          OTHER        AT END
                                              OF YEAR($)      EXPENSES($)   DEDUCTIONS($)      ADDITIONS     OF YEAR($)
                                              ----------      -----------   -------------     ----------    ----------
<S>                                           <C>             <C>           <C>               <C>            <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
For the year ended December 31, 1997              524            748           (108)               --         1,164

For the year ended December 31, 1998            1,164            958           (447)              638(1)      2,313

For the year ended December 31, 1999            2,313            824           (671)               --         2,466

ACCRUED WARRANTY COSTS:
For the year ended December 31, 1997              446            672           (268)               --           850

For the year ended December 31, 1998              850            948           (484)               --         1,314

For the year ended December 31, 1999            1,314            519           (529)               --         1,304
</TABLE>

(1)  Allowance for doubtful accounts recorded in connection with the CTP
     acquisition.


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