<PAGE>   1

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
--------------------------------------------------------------------------------
                                   FORM 10-QSB

(Mark One)

[X]     Quarterly Report under Section 13 or 15(d) of the Securities and
        Exchange Act of 1934

                For the quarterly period ended March 31, 2000

[ ]     Transition report under Section 13 or 15(d) of the Exchange Act

                For the transition period from __________ to __________

                        Commission File Number 000-19828

                                SPATIALIGHT, INC.
        (Exact name of small business issuer as specified in its charter)


              New York                                16-1363082
              --------                                ----------
   (State or other jurisdiction of                   (IRS Employer
         Identification No.)                  Incorporation or organization)


                 9 Commercial Blvd., Suite 200, Novato, CA 94949
                 -----------------------------------------------
                    (Address of principal executive offices)


                                 (415) 883-1693
                                 --------------
                           (Issuer's telephone number)


        Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]


                      APPLICABLE ONLY TO CORPORATE ISSUERS:

        State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 18,823,338 shares of common
stock as of May 8, 2000.

        Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]



<PAGE>   2

                        SPATIALIGHT, INC. AND SUBSIDIARY

                         Quarterly Report on Form 10-QSB
                      For the Quarter Ended March 31, 2000


                                Table of Contents

<TABLE>
<S>                                                                         <C>
PART I          FINANCIAL INFORMATION

        Item 1. Condensed Consolidated Financial Statements (unaudited)

                Condensed Consolidated Balance Sheets dated
                March 31, 2000 and December 31, 1999.........................3

                Condensed Consolidated Statements of Operations
                for the Three Months Ended March 31, 2000 and 1999...........4

                Condensed Consolidated Statements of Cash Flows
                for the Three Months Ended March 31, 2000 and 1999...........5

                Notes to Condensed Consolidated Financial Statements.........6

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

PART II         OTHER INFORMATION

        Item 2. Changes in Securities........................................16

        Item 6. Exhibits and Reports on Form 8-K.............................16
</TABLE>



                                       2
<PAGE>   3

PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)

SPATIALIGHT, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                       March 31,           December 31,
                                                                         2000                  1999
                                                                     ------------          ------------
<S>                                                                  <C>                      <C>
ASSETS

Current assets
  Cash and cash equivalents                                          $  4,018,296             1,236,609
  Accounts receivable                                                      23,636                     -
  Inventories                                                               5,036                 5,036
  Other current assets                                                     70,653                93,417
                                                                     ------------          ------------
          Total current assets                                          4,117,621             1,335,062

Property and equipment, net                                               489,303               321,853
Other assets                                                               27,967                22,670
                                                                     ------------          ------------

               Total assets                                          $  4,634,891             1,679,585
                                                                     ============          ============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities
  Accounts payable                                                   $    481,631               286,741
  Accrued expenses and other liabilities                                  695,731               728,990
                                                                     ------------          ------------
        Total current liabilities                                       1,177,362             1,015,731

Noncurrent liabilities
  Convertible notes                                                     1,256,157             1,216,337
  Long term capital lease obligations                                       8,408                 9,605
                                                                     ------------          ------------

               Total liabilities                                        2,441,927             2,241,673

Commitments and contingencies

Stockholders' equity (deficit):
  Common stock, $.01 par value:
     40,000,000 shares authorized;
     18,777,244 and 16,635,818 shares issued and outstanding
     at March 31, 2000 and December 31, 1999, respectively                187,772               166,359
Additional paid-in capital                                             25,578,245            20,649,563
Accumulated deficit                                                   (23,573,053)          (21,378,010)
                                                                     ------------          ------------
        Total stockholders' equity (deficit)                            2,192,964              (562,088)
                                                                     ------------          ------------

Total liabilities and stockholders' equity (deficit)                 $  4,634,891             1,679,585
                                                                     ============          ============
</TABLE>


See accompanying notes to condensed consolidated financial statements.



                                       3
<PAGE>   4

SPATIALIGHT, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                Three Months Ended
                                                                                                     March 31,
                                                                                             2000                   1999
                                                                                         ------------          ------------
<S>                                                                                      <C>                         <C>
Revenues                                                                                 $     38,400                31,500

Cost of revenues                                                                                7,125                 4,104
                                                                                         ------------          ------------
               Gross profits                                                                   31,275                27,396

  Selling, general and administrative expenses                                                479,205               399,247
  Stock-based general and administrative expenses                                              15,000               134,962
  Research and development expenses                                                           808,824               360,070
                                                                                         ------------          ------------
             Total operating expenses                                                       1,303,029               894,279

             Operating loss                                                                (1,271,754)             (866,883)

Other income (expense)

  Interest income                                                                              24,547                 3,291
  Interest expense                                                                            (22,820)              (49,898)
  Stock-based interest expense                                                               (317,913)               (3,268)
                                                                                         ------------          ------------
             Total other expense                                                             (316,186)              (49,875)
                                                                                         ------------          ------------

  Loss from operations before income taxes                                                 (1,587,940)             (916,758)

Income tax expense                                                                                800                   800
                                                                                         ------------          ------------

               Net loss                                                                  $ (1,588,740)             (917,558)

Incentive warrants issued                                                                   (606,303)                   --
                                                                                         ------------          ------------

Net loss available to common shareholders                                                  (2,195,043)             (917,558)
                                                                                         ============          ============

Net loss per share available to common shareholders - basic and diluted                  $      (0.13)                (0.08)
                                                                                         ============          ============

Weighted average shares used in computing net loss per share - basic and diluted           17,432,911            11,488,099
                                                                                         ============          ============
</TABLE>


See accompanying notes to condensed consolidated financial statements.



                                       4
<PAGE>   5


SPATIALIGHT, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                          Three Months Ended
                                                                                               March 31,
                                                                                        2000                1999
                                                                                    -----------          -----------
<S>                                                                                 <C>                     <C>
Cash flows from operating activities:

Net loss                                                                            $(1,588,740)            (917,558)
Adjustments to reconcile net loss to net cash used by operating activities:

  Depreciation and amortization                                                          45,532               24,196
  Stock-based general and administrative expense                                         15,000              134,962
  Stock-based interest expense                                                          317,913                3,268
  Changes in operating assets and liabilities:
     Accounts receivable                                                                (23,636)              18,967
     Inventories                                                                             --                4,105
     Other current assets                                                                22,764              (62,425)
     Accounts payable                                                                   194,890               (1,953)
     Accrued expenses and other current liabilities                                    (304,726)              42,044
     Other assets                                                                        (5,297)              51,212
                                                                                    -----------          -----------

            Net cash used by operating activities                                    (1,326,300)            (703,182)

Cash flows from investing activities:
  Purchase of property and equipment                                                   (212,982)             (25,714)
                                                                                    -----------          -----------

            Net cash used in investing activities                                      (212,982)             (25,714)

Cash flows from financing activities:
  Payments on capital lease obligations                                                  (7,823)              (7,271)
  Payments on notes                                                                          --              (50,000)
  Proceeds from issuance of convertible notes with warrants attached                         --              590,878
  Proceeds from exercise of warrants and options                                      4,328,792                   --
                                                                                    -----------          -----------

            Net cash provided by financing activities                                 4,320,969              533,607

Net increase (decrease) in cash                                                       2,781,687             (195,289)

Cash at beginning of period                                                           1,236,609              470,086
                                                                                    -----------          -----------
Cash at end of period                                                               $ 4,018,296              274,797
                                                                                    ===========          ===========

Non-cash financing activities:

Warrants issued to incite the exercise of certain warrants (note 5)                 $   606,303                   --
                                                                                    ===========          ===========
</TABLE>



See accompanying notes to consolidated financial statements.



                                       5
<PAGE>   6

                        SPATIALIGHT, INC. AND SUBSIDIARY
        Notes to Condensed Consolidated Financial Statements (Unaudited)

1.      Business Description

SpatiaLight, Inc. and its subsidiary ("SpatiaLight" or the "Company") are in the
business of designing and commercializing miniature, high-resolution active
matrix liquid crystal displays mounted directly on silicon chips. These displays
are also known as and commonly referred to as Liquid Crystal Displays ("LCD"),
Active Matrix Liquid Crystal Displays ("AMLCD"), Liquid Crystal on Silicon
("LCOS"), and Spatial Light Modulators ("SLM"). These displays are designed in a
manner that can potentially provide high-resolution images suitable for
computer, video and other applications while utilizing the existing
manufacturing processes of typical silicon and liquid crystal displays to obtain
economies of scale and thereby reduce costs. To date, the Company has only sold
small quantities of its displays to customers who are evaluating the displays
for use in their products.

The Company has identified a number of potential applications and markets for
products, which can utilize its display technology. Some of these applications
include: large-screen rear-projection television systems, in both standard
television format ("NTSC") and future High Definition Television ("HDTV")
formats; large-screen rear-projection computer monitors in a variety of
resolutions; video projectors for presentations; head-mounted displays which are
used for virtual reality systems, defense, aerospace and gaming applications;
and other potential applications such as point of purchase displays, optical
computing, data storage and holographic imaging systems.

The address and telephone number of the Company's principal executive offices
are 9 Commercial Boulevard, Suite 200, Novato, California 94949, (415) 883-1693.
The Company was organized under the laws of the State of New York in 1989 under
the name of "Sayett Acquisition Company, Inc."; it subsequently changed is name
to Sayett Group and in June 1996 changed its name to SpatiaLight, Inc. The
Company has a wholly owned subsidiary named SpatiaLight of California, Inc.

2.      Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB of item 310(b) of
Regulation S-B. Accordingly they do not include all of the information and
footnotes necessary for a fair presentation of financial condition, results of
operations and cash flows in conformity with generally accepted accounting
principles. In the opinion of management of SpatiaLight, the interim condensed
consolidated financial statements included herewith contain all adjustments
(consisting of normal recurring accruals and adjustments) necessary for their
fair presentation. The unaudited interim condensed consolidated financial
statements should be read in conjunction with the Company's Annual Report on
Form 10-KSB, which contains the audited financial statements and notes thereto,
together with the Management's Discussion and Analysis, for the years ended
December 31, 1999 and 1998.



                                       6
<PAGE>   7

3.      Per Share Information

Basic net loss per common share available to common shareholders excludes
dilution and is computed by dividing loss attributable to common stockholders by
the weighted-average number of common shares for the period. Diluted loss per
common share reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into common
stock. Excluded from the computation of diluted loss per share for the three
months ended March 31, 2000 and 1999, respectively are options and warrants to
acquire 7,630,312 and 3,953,000 shares of common stock, respectively, and
2,786,714 and 5,859,333 common share equivalents relating to convertible secured
notes, from the assumed exercise of such instruments because their effects would
be antidilutive. The weighted average exercise price as of March 31, 2000 for
the options, warrants and common share equivalents is $2.88, $2.42, and $.94,
respectively.

4.      Convertible Notes

Convertible notes at March 31, 2000 relate to notes from Argyle Capital
Management Corporation, a Company affiliated with Robert Olins, a Director of
the Company. The notes accrue interest at 6% and are due on June 30, 2001. The
notes are convertible into the Company's common stock at $.50 per share and are
secured by substantially all the assets of the Company. The Company has assumed
that the accrued interest, at a rate of 6% from September 1999 to March 31, 2000
will be converted into 84,348 shares of common stock. Using the March 31, 2000
closing price of $7.0625 to value such shares, the Company has accrued
stock-based interest expense of $595,707. Of this amount $277,794 had been
accrued at December 31, 1999.

5.      Issuance of Securities

On February 10, 2000, the Company issued warrants to purchase 170,815 shares of
the Company's common stock at an exercise price of $8.00 (the incentive
warrants) in consideration of and to incite the exercise of warrants originally
issued in August and September 1999. The incentive warrants, which expire on
February 10, 2002, were valued at $606,303 using the Black Scholes option
pricing model and the following assumptions: stock price $6.38, historical
volatility 114%, risk free rate 6%, a dividend yield of 0, and a contractual
term of two years. The value of these incentive warrants is reflected in the
statement of operations as a component of the net loss available to common
shareholders.

As a result of the issuance of the incentive warrants to a group of existing
warrant holders, during the first quarter of 2000, the Company issued 1,899,015
shares of common stock upon the exercise of the previously issued warrants. Net
cash proceeds received was $4,178,792.

During the first quarter of 2000, the Company issued 240,000 shares of common
stock upon the exercise of employee stock options and received cash proceeds of
$150,000. In addition, 2,307 shares of stock valued at $15,000 was issued in
exchange for services.

6.      Segment Information

The Company's chief operating decision-maker, Chief Executive Officer, reviews
the Company's financial information as a single "operating segment" to make
decisions about the Company's performance and resource allocation. Therefore,
the Company has determined that it operates in a single business segment. The
Company's revenue for 2000 and 1999 consisted of sales of prototypes and
developer kits, respectively.



                                       7
<PAGE>   8

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

This Form 10-QSB contains certain forward-looking statements within the meaning
of Section 21E of the Securities and Exchange Act of 1934, as amended, and are
subject to the Safe Harbor provisions created by that statute. In this report,
the words "anticipates," "believes," "expects," "future," "interests," and
similar expressions identify forward-looking statements. Such statements are
subject to certain risks and uncertainties, including, but not limited to, those
regarding product acceptance and manufacturing, those contained in this Item 2
as well as those discussed in the Company's Annual Report on Form 10-KSB as
filed with the Securities and Exchange Commission on April 14, 2000. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company undertakes no obligation to
publicly release the results of any revisions to these forward-looking
statements that may be needed to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.

The following is a discussion and analysis of the consolidated financial
condition of the Company as of March 31, 2000, and the results of operations for
the Company for the three months ended March 31, 2000 and 1999. The following
should be read in conjunction with the unaudited consolidated financial
statements and related notes appearing elsewhere herein.


OVERVIEW

We design microdisplays that provide high resolution images suitable for
applications such as rear projection computer monitors, high definition
television and video projectors, and potential applications such as use in
wireless communication devices, portable games and digital assistants. As
potential customers evaluated our displays during 1999, we began development of
the fifth generation display. This new display was intended to incorporate the
best specifications of our previous display, and new technical capabilities that
our potential customers wanted for incorporation in their products. It was
designed for mass production. Our fifth generation display began shipping in the
first quarter of 2000.

In January 2000 we began the conversion of our accounting system into a fully
integrated accounting and manufacturing software and hardware solution. We
initiated this change so that we could efficiently handle the expected
accounting and manufacturing issues related to the change from our previous
focus on research and development, to our new focus on manufacturing and sales.
This conversion will cost approximately $250,000. We expect this conversion to
be completed in the second quarter of this year.

LIQUIDITY AND CAPITAL RESOURCES

Most of our revenues to date have been derived from sales of our prototypes and
developer kits. Although we are producing displays in anticipation of mass
production, we have not yet completed our goal of mass production. Delays in
development may result in the introduction of products later than anticipated,
which may have an adverse effect on both our financial and competitive position.
Moreover, we may never be successful in developing or manufacturing a
commercially viable display, and in addition, we may never be able to
manufacture adequate quantities of our displays at commercially acceptable cost
levels or on a timely basis.

We are experiencing negative cash flow from operations, resulting in the need to
fund ongoing operations from financing activities. We have raised capital
through issuance of convertible notes and the sale of warrants to purchase the
Company's common stock. Our business may not ultimately generate sufficient
revenue to fund the Company's operations on a continuing basis.



                                       8
<PAGE>   9
As of March 31, 2000, we had approximately $4,000,000 in cash and cash
equivalents. This was, in large part a result of the issuance of incentive
warrants to a group of existing warrant holders during the first quarter of 2000
whereby we received cash proceeds of approximately $4,000,000. Our net working
capital at March 31, 2000 was approximately $2,900,000.

Net cash used in operating activities totaled approximately $1,326,000 and
$703,000 for the three months ended March 31, 2000 and 1999, respectively. Cash
was used primarily to fund the operating loss.

Net cash provided by financing activities in the three months ended March 31,
2000 was approximately $4,300,000, as compared to approximately $530,000 for the
three months ended March 31, 1999. Cash was provided primarily from proceeds
from the exercise of warrants to purchase our common stock and the exercise of
options to acquire our common stock.

As of March 31, 2000, we had an accumulated deficit of approximately
$23,573,053. We have realized significant losses in the past and we expect that
these losses will continue at least through 2000. We have generated limited
revenues and no profits from operations. The development, commercialization and
marketing of our products will require substantial expenditures for the next 12
to 24 months. Consequently, we may continue to operate at a loss during this
period and there can be no assurance that our business will operate on a
profitable basis.

RESULTS OF OPERATIONS

Revenues. Total revenues were $38,400 for the three months ended March 31, 2000,
and $31,500 for the three months ended March 31, 1999. These revenues were
related to the sales of our fourth generation developer kits in 1999, and our
fifth generation developer kits in 2000, and are not indicative of anticipated
revenues to be realized upon sales of displays produced in quantity.

Cost of Sales. Cost of sales represents product costs associated with the
production of display prototypes. Total cost of sales for prototypes was $7,125
for the three months ended March 31, 2000 and $4,104 for the three months ended
March 31, 1999. Gross margins associated with sales are not indicative of the
gross margins that we expect to realize on sales of units produced in quantity.
Prototypes and developer kits have a higher unit price than mass-produced units
due to the time and effort spent with the customer.

Selling, general and administrative costs. Selling, general and administrative
costs were approximately $480,000 and $400,000 for the three months ended March
31, 2000 and 1999, respectively. The increase of $80,000 relates primarily to
costs incurred in implementing our new accounting system.

Stock-based general and administrative expenses. Stock-based general and
administrative expenses were approximately $15,000 and $135,000 in the three
months ended March 31, 2000 and 1999, respectively. The amounts incurred relate
to the valuation of common stock, stock options, and options issued in exchange
for services and warrants issued in exchange for services and other
consideration. The amount incurred in 2000 relates to stock issued in exchange
for services. The amount incurred in the first quarter of 1999 relates to
consulting services rendered in advising the Company as to feasible capital
structures and identifying capital resources.

Research and development costs. Research and development costs were
approximately $808,000 and $360,000 for the three months ended March 31, 2000
and 1999, respectively. The increase in these costs was due primarily to an
increase in salaries and consulting and other costs associated with the design
and implementation of a new product.



                                       9
<PAGE>   10

Interest expense. Interest expense for the three months ended March 31, 2000 and
1999 was approximately $23,000 and $50,000, respectively. The decrease resulted
primarily from the conversion of interest expense associated with certain
convertible notes to equity that was reclassified as stock-based interest
expense. In addition, capital lease obligations are nearing termination
resulting in lower interest expense in 2000.

Stock-based interest expense. Stock-based interest was approximately $318,000
and $3,300 in the three months ended March 31, 2000 and 1999, respectively. The
amounts incurred in 2000 relate to the assumption that the interest on certain
convertible notes will be converted to equity based on the fair market value of
the stock on March 31, 2000. Amounts incurred in 1999 relate to warrants issued
in connection with a note extension.

BUSINESS RISKS AND UNCERTAINTIES

OUR DISPLAYS MAY NOT SUCCEED COMMERCIALLY.

Our microdisplays may not be accepted by a widespread market. Even if we
successfully mass-produce a display that is used in a retailed product, our
customers may determine not to introduce or may terminate products utilizing the
technology for a variety of reasons, including the following:

        -       superior technologies developed by our competitors;

        -       price considerations;

        -       lack of anticipated or actual market demand for the products;
                and

        -       difficulties in inducing companies to begin using our product.

A MARKET FOR OUR PRODUCTS MAY NOT DEVELOP.

Various target markets for our micro-displays, including projectors, monitors,
high-definition televisions, and portable micro-displays, are uncertain, may be
slow to develop, or could utilize competing technologies. High-definition
television has only recently become available to consumers, and widespread
market acceptance is uncertain. In addition, the commercial success of the
portable microdisplay market is uncertain. Gaining acceptance in this market may
prove difficult because of the radically different approach of microdisplays to
the presentation of information. In order for us to succeed, not only must we
sell to those manufacturers that produce end-products microdisplays that are
better and cheaper than the alternatives they would otherwise use, but also, the
manufacturers themselves must develop products that are successful commercially.
Our failure to sell to manufacturers or the failure of the ultimate target
markets to develop as we expect will impede our anticipated growth.



                                       10
<PAGE>   11

WE MAY EXPERIENCE DIFFICULTIES MASS-PRODUCING MICRODISPLAYS.

We need to work closely with our manufacturing sources to commence volume
production of our current prototype. Problems in implementing volume production
or lower than expected manufacturing yields could significantly and adversely
affect us because we will have already incurred the costs for the materials used
in the microdisplay manufacturing process. These problems could cause delays
that might lead our potential customers to seek other sources.

We currently obtain silicon backplanes from the Far East. Some Asian countries
are subject to earthquakes and typhoons. Unless we obtain a second source, any
disruption or termination of our silicon manufacturing operations in Taiwan or
air transportation with the Far East could adversely affect our operations.

Our silicon backplanes are assembled in Hong Kong with electronic components to
create microdisplays. Because our assembly contract is relatively new we
anticipate that technical issues in the manufacturing process will need to be
resolved. The design and manufacture of LCDs and display modules are highly
complex processes that are sensitive to a wide variety of factors, including the
level of contaminants in the manufacturing environment, impurities in the
materials used, and the performance of personnel and equipment. Contract
manufacturers do not guarantee their manufacturing yields. In addition, the
complexity of manufacturing processes will increase along with increases in the
sophistication of our display modules. Low manufacturing yields or delivery
problems could adversely affect our operating results.

WE ARE INCURRING SUBSTANTIAL RESEARCH AND DEVELOPMENT COSTS.

We currently have over ten engineers based in California working on prototype
microdisplays. This staffing creates significant research and development costs
that may not be recouped. We have sold our current prototypes to a number of
companies that have indicated they may be willing to incorporate them into
products if they could buy such displays in volume. As we begin the process of
working with third parties to manufacture our designs in volume, we are
continuing to use our engineers to develop subsequent generations of our
microdisplays. As a result, our overhead is expected to increase.

WE MUST FINANCE THE GROWTH OF OUR BUSINESS AND THE DEVELOPMENT OF NEW PRODUCTS.

To remain competitive, we must continue to make significant investments in
research and development, equipment and facilities. Our failure to generate
sales to offset our costs would adversely affect our ability to continue
operating.

We anticipate the need for additional equity or debt financing to provide for
the capital expenditures required to maintain our research and development and
to move to production. We cannot predict the timing or amount of any such
capital requirements at this time. If such financing is not available on
satisfactory terms, we may be unable to expand our business at the rate desired
and our operating results may suffer. Equity financing could result in
additional dilution to existing stockholders. Debt financing increases expenses,
must be repaid regardless of operating results, and is secured against our
assets, potentially leaving fewer resources available for the repayment of
equity holders.



                                       11
<PAGE>   12

OUR OPERATING RESULTS ARE NEGATIVE AND SUBJECT TO FLUCTUATIONS.

We have not achieved profits in the past five years and have experienced cash
shortages. We will need to achieve substantial sales to support our cost
structure before we can begin to recoup our operating losses and accumulated
deficit. Any progress toward profitability may not be steady and may be subject
to significant periodic or seasonal quarterly fluctuations due to factors
including the following:

        -       introductions of displays and market acceptance of new or new
                generations of displays;

        -       timing of expenditures in anticipation of future orders;

        -       changes in our cost structure;

        -       availability of labor and components;

        -       pricing and availability of competitive products and services;

        -       the timing of orders;

        -       the volume of orders relative to the capacity we can contract to
                produce;

        -       evolution in the life cycles of customers' products; and

        -       changes or anticipated changes in economic conditions.

WE ARE SUBJECT TO LENGTHY DEVELOPMENT PERIODS AND PRODUCT ACCEPTANCE CYCLES.

Our business model requires us to develop microdisplays that perform better than
existing technologies, contract with one or more third-party manufacturers to
manufacture our prototypes in bulk, and sell the resulting displays to original
equipment manufacturers that will then incorporate it into their products. OEMs
make the determination during their product development programs whether or not
to incorporate our display modules in their products. This requires us to invest
significant amounts of time and capital in designing display modules well before
our customers introduce their products incorporating these displays and before
we can be sure that we will generate any significant sales to our customers or
even recover our investment. Even if a product is successful for a short period,
competition from other sellers could limit the length of time it is successful.

SHORTAGES OF COMPONENTS AND MATERIALS MAY DELAY OR REDUCE OUR SALES AND INCREASE
OUR COSTS.

Our inability to obtain sufficient quantities of components and other materials
necessary to produce our displays could result in reduced or delayed sales or
lost orders. Any delay in or loss of sales could adversely impact our operating
results. We obtain many of the materials we use in the manufacture of our
displays from a limited number of foreign suppliers, particularly suppliers
located in the Far East, and we do not have long-term supply contracts with any
of them. As a result, we are subject to economic instability and currency
fluctuations in these countries as well as to increased costs, supply
interruptions, and difficulties in obtaining materials. Our customers also may
encounter difficulties or increased costs in obtaining from others the materials
necessary to produce their products into which our product solutions are
incorporated.



                                       12
<PAGE>   13

WE DEPEND ON THE MARKET ACCEPTANCE OF THE PRODUCTS OF OUR CUSTOMERS.

We do not sell any products to end-users. Instead, we design and manufacture
various product solutions that our customers incorporate into their products. As
a result, our success depends almost entirely upon the widespread market
acceptance of our customers' products. Any significant slowdown in the demand
for our customers' products would adversely affect our business.

Our dependence on the success of the products of our customers exposes us to a
variety of risks, including our needs to do the following:

        -       maintain customer satisfaction with our design and manufacturing
                services;

        -       match our design and manufacturing capacity with customer demand
                and to maintain satisfactory delivery schedules;

        -       anticipate customer order patterns, changes in order mix, and
                the level and timing of orders that we can meet; and

        -       adjust to the cyclical nature of the industries and markets we
                serve.

Our failure to address these risks may cause us to lose sales or for sales to
decline.

WE FACE INTENSE COMPETITION.

We serve intensely competitive industries that are characterized by price
erosion, rapid technological change, and competition from major domestic and
international companies. This intense competition could result in pricing
pressures, lower sales, reduced margins, and lower market share. Some of our
competitors have greater market recognition, larger customer bases, and
substantially greater financial, technical, marketing, distribution and other
resources than we possess. As a result, they may be able to introduce new
products and respond to customer requirements more quickly than we can.

Our competitive position could suffer if one or more of our customers decide to
design and manufacture their own display modules, to contract with our
competitors, or to use alternative technologies. In addition, our customers
typically develop a second source. Second source suppliers may win an increasing
share of a program by competing primarily on price rather than on design.

Our ability to compete successfully depends on a number of factors, both within
and outside our control. These factors include the following:

        -       our success in designing and manufacturing new display
                technologies;

        -       our ability to address the needs of customers;

        -       the quality, performance, reliability, features, ease of use,
                pricing, and diversity of our display products;

        -       foreign currency fluctuations, which may cause a foreign
                competitor's products to be priced significantly lower than our
                displays;

        -       the quality of our customer services;



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<PAGE>   14

        -       the efficiency of our production sources;

        -       the rate at which customers incorporate our displays into their
                own products; and

        -       products or technologies introduced by our competitors.

WE DO NOT HAVE LONG-TERM PURCHASE COMMITMENTS FROM OUR PROSPECTIVE CUSTOMERS.

Our prospective customers have not yet provided us with firm or long-term volume
purchase commitments. Although we have begun to negotiate with our customers, we
currently do not have any contracts with our customers. Because we have no firm,
long-term volume purchase commitments we do not have clear order lead times or
basis for inventory allocations. In addition, our prospective customers can
cancel purchase commitments or reduce or delay orders at any time. The
cancellation, delay, or reduction of customer commitments could result in our
holding excess and obsolete inventory or having unabsorbed manufacturing
overhead. Our sales to customers in the electronics industry, which is subject
to severe competitive pressures, rapid technological change, and product
obsolescence, increases our inventory and overhead risks.

OUR COMMON STOCK MAY NOT BE LIQUID.

We are currently traded on the over-the-counter bulletin board. Our stockholders
may find that it is more difficult to sell our capital stock than shares listed
on an exchange or a national market. The trading volume of our shares may be
limited in part due to the marketability of our stock. Any swing in the price of
our stock may be magnified into a material reduction in price because relatively
few buyers may be available to purchase our stock.

THE ELECTRONICS INDUSTRY IS CYCLICAL.

The electronics industry has experienced significant economic downturns at
various times, characterized by diminished product demand, accelerated erosion
of average selling prices, and production over-capacity. In addition, the
electronics industry is cyclical in nature. We may experience substantial
period-to-period fluctuations in future operating results because of general
industry conditions or events occurring in the general economy.

WE MUST EFFECTIVELY MANAGE OUR GROWTH.

The failure to manage our growth effectively could adversely affect our
operations. Our ability to manage our planned growth effectively will require us
to:

        -       enhance our operational, financial, and management systems;

        -       expand our facilities and equipment; and

        -       successfully hire, train, and motivate additional employees,
                including technical staff.

As we expand our overhead and selling expenses will increase. We also may be
required to increase staffing and purchase capital equipment. Customers,
however, generally do not commit to firm production schedules for more than a
short time in advance. Any increase in expenditures in anticipation of future
sales that do not materialize would adversely affect our profitability.



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<PAGE>   15

WE MUST PROTECT OUR INTELLECTUAL PROPERTY.

We believe that our continued success depends in part on protecting our
proprietary technology. Third parties could claim that we are infringing their
patents or other intellectual property rights. In the event that a third party
alleges that we are infringing its rights, we may not be able to obtain licenses
on commercially reasonable terms from the third party, if at all, or the third
party may commence litigation against us. The failure to obtain necessary
licenses or other rights or the institution of litigation arising out of such
claims could materially and adversely affect us.

We rely on a combination of patent law, trade secret law, attempts to limit
disclosure of our confidential information and contractual provisions to protect
our intellectual property. Trade secret laws and contractual provisions afford
only limited protection. We face risks associated with our intellectual
property, including the following:

        -       pending patent applications may not be issued;

        -       patents issued to us may be challenged, invalidated, or
                circumvented;

        -       unauthorized parties may obtain and use information that we
                regard as proprietary despite our efforts to protect our
                proprietary rights;

        -       others may independently develop similar technology or design
                around any patents issued to us;

        -       intellectual property laws may not protect our intellectual
                property; and

        -       effective protection of intellectual property rights may be
                limited or unavailable in some foreign countries, such as China,
                in which we may operate.

WE DEPEND ON KEY PERSONNEL.

Our development and operations depend substantially on the efforts and abilities
of our senior management and technical personnel. The competition for qualified
management and technical personnel is intense. The loss of services of one or
more of our key employees or the inability to add key personnel could have a
material adverse affect on us.

THE MARKET PRICE OF OUR COMMON STOCK MAY BE VOLATILE.

The market price of our common stock has been extremely volatile, reflecting
reported losses, receipt of additional financing and changes to management.
Other companies have found similar volatility correlates with class action
securities law suits. The trading price of our common stock in the future could
continue to be subject to wide fluctuations in response to various factors,
including the following:

        -       quarterly variations in our operating results;

        -       actual or anticipated announcements of technical innovations or
                new product developments by us or our competitors;

        -       public announcements regarding our business developments;



                                       15
<PAGE>   16

        -       changes in analysts' estimates of our financial performance;

        -       general conditions in the electronics industry; and

        -       worldwide economic and financial conditions.

In addition the stock market has experienced extreme price and volume
fluctuations that have particularly affected the market prices for many
high-technology companies and that often have been unrelated to the operating
performance of these companies. These broad market fluctuations and other
factors may adversely affect the market price of our common stock.

SALES OF LARGE NUMBERS OF SHARES COULD ADVERSELY AFFECT THE PRICE OF OUR COMMON
STOCK.

Many of our outstanding shares are freely tradable without restrictions or
further registration. Sales of substantial amounts of common stock by our
stockholders, or even the potential for such sales, may affect the market price
of our common stock and could impair our ability to raise capital through the
sale of our equity securities.

WE COULD BE LIABLE IN CONNECTION WITH PRODUCT LIABILITY CLAIMS.

Product liability claims may be asserted against us in the event that the use of
our products, or products which incorporate our products, are alleged to cause
injury or other adverse effects. Our product liability insurance may not be
adequate to protect us against potential claims. As a result a successful claim
against us could materially affect our financial stability. In addition, our
reputation may be affected by product liability claims regardless of the merit
or eventual outcome of the claim.

WE FACE RISKS ASSOCIATED WITH INTERNATIONAL TRADE AND CURRENCY EXCHANGE.

Political and economic conditions abroad may adversely affect the foreign
manufacture and sale of our displays. Protectionist trade legislation in either
the United States or foreign countries, such as a change in the current tariff
structures, export or import compliance laws, or other trade policies, could
adversely affect our ability to manufacture or sell displays in foreign markets
and to purchase materials or equipment from foreign suppliers.

WE DO NOT PAY CASH DIVIDENDS.

We have never paid any cash dividends on our common stock and do not anticipate
that we will pay cash dividends in the near term. Instead, we intend to apply
earnings to the expansion and development of our business.



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<PAGE>   17

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

        Tony Romano and Magellin Entertainment, Inc. (Plaintiffs) filed an
action against us in San Francisco Superior Court on January 10, 2000.
Director's Michael Burney and Robert Olins were also named. The complaint
relates to an alleged engagement of Plaintiffs by SpatiaLight in January 1998 to
increase public awareness of SpatiaLight, in return of our securities. The
complaint seeks specific performance for the transfer of an additional 75,000
shares of stock. SpatiaLight denies the allegations in the complaint. We do not
believe we have any liability to the Plaintiffs arising from the litigation. No
reserves have been established for potential losses from the litigation.

ITEM 2. Changes in Securities

        During the first quarter of 2000 the Company issued warrants to purchase
170,815 shares of its common stock with an exercise price of $8.00. These
warrants were issued in exchange for the exercise of previously issued warrants,
and expire on February 10, 2002.

ITEM 6. Exhibits

3.1  Amended and Restated Certificate of Incorporation (1)

3.2  Bylaws (2)

27  Financial Data Schedule



(1) Incorporated by reference to Exhibit 3.1 of the Company's Registration
Statement on Form S-3, File No. 333-91225, filed November 18, 1999

(2) Incorporated by reference to Exhibit 4.2 of the Company's Registration
Statement on Form S-1, as amended, filed on February 13, 1992.



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<PAGE>   18

SIGNATURES

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

                                            Date: May 12, 2000
                                                 -------------------------------
                                            SpatiaLight, Inc.



                                            By:    /s/ MICHAEL H. BURNEY
                                               ---------------------------------
                                               Michael H. Burney
                                               Chief Executive Officer
                                               Principal Executive, Financial
                                               and Accounting Officer)



                                       18

<PAGE>   19

<TABLE>
<CAPTION>
EXHIBIT
NO.          DESCRIPTION
-------      -----------
<S>          <C>
3.1          Amended and Restated Certificate of Incorporation (1)

3.2          Bylaws (2)

27           Financial Data Schedule
</TABLE>



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