<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-Q


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

                     For The Quarter Ended October 1, 2000


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

        For the transition period from _____________ to ______________

                        Commission file number 0-19386


                          FISCHER IMAGING CORPORATION
            (Exact name of Registrant as specified in its charter)

        DELAWARE                                          36-2756787
(State of incorporation)                    (I.R.S. Employer Identification No.)

      12300 North Grant Street
          Denver, Colorado                                  80241
(Address of principal executive offices)                  (Zip Code)

      Registrant's telephone number, including area code: (303) 452-6800


Indicate by check mark whether the Registrant (i) 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 (ii) has been subject to such filing
requirements for the past 90 days.                Yes   X    No _____
                                                      -----


The number of shares of Registrants's Common Stock outstanding as of October 1,
2000 was 8,074,867.

<PAGE>

                          FISCHER IMAGING CORPORATION

                               TABLE OF CONTENTS


PART I.   FINANCIAL INFORMATION                                             Page
                                                                            ----


Item 1.   Consolidated Financial Statements

          Consolidated Balance Sheets --  (unaudited)
          October 1, 2000 and December 31, 1999                               3

          Consolidated Statements of Operations-- (unaudited)
          Three and Nine months ended October 1, 2000 and October 3, 1999     4

          Consolidated Statements of Cash Flows-- (unaudited)
          Nine months ended October 1, 2000 and October 3, 1999               5

          Notes to Consolidated Financial Statements (unaudited)              6

Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                          12

Item 3.   Quantitative and Qualitative Disclosures About Market Risk         18



PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings                                                  20
Item 2.   Changes in Securities and Use of Proceeds                          20
Item 3.   Defaults Upon Senior Securities                                    20
Item 4.   Submission of Matters to Vote of Security Holders                  20
Item 5.   Other Information                                                  20
Item 6.   Exhibits and Reports on Form 8-K                                   20


<PAGE>

                          FISCHER IMAGING CORPORATION
                          CONSOLIDATED BALANCE SHEETS
                   (Amounts in thousands except share data)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                         October 1,      December 31,
                                                                            2000            1999
                                                                        ------------    ------------
<S>                                                                     <C>             <C>
                               ASSETS
CURRENT ASSETS
  Cash and cash equivalents                                             $      1,324    $      1,056
  Trade accounts receivable, net of allowance for doubtful
    accounts of approximately $929 and $1,741 at October 1, 2000
    and December 31, 1999, respectively                                       12,945          15,897
  Inventories                                                                 18,186          15,064
  Prepaid expenses and other current assets                                      956             912
                                                                        ------------    ------------
        Total current assets                                                  33,411          32,929
                                                                        ------------    ------------
PROPERTY AND EQUIPMENT
  Manufacturing equipment                                                      8,051           9,641
  Office equipment and leasehold improvements                                  5,876           5,963
                                                                        ------------    ------------
                                                                              13,927          15,604
  Less- Accumulated depreciation and amortization                             11,421          11,730
                                                                        ------------    ------------
        Property and equipment, net                                            2,506           3,874
                                                                        ------------    ------------
INTANGIBLE ASSETS, net                                                         1,980           2,399
DEFERRED COSTS AND OTHER ASSETS                                                1,483           1,807
                                                                        ------------    ------------
        TOTAL ASSETS                                                    $     39,380    $     41,009
                                                                        ============    ============

            LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES
  Notes payable and current maturities of long-term debt                $         98    $      6,031
  Trade accounts payable                                                       5,120           3,671
  Accrued salaries and wages                                                   1,385           1,792
  Customer deposits                                                            1,210           1,289
  Accrued warranty and installation costs                                      1,496           1,672
  Deferred service revenue                                                       814           1,156
  Other current liabilities                                                    1,626           2,579
                                                                        ------------    ------------
        Total current liabilities                                             11,749          18,190

LONG-TERM DEBT                                                                   833           1,103

        TOTAL LIABILITIES                                                     12,582          19,293
                                                                        ------------    ------------
STOCKHOLDERS' INVESTMENT
  Common Stock, $.01 par value, 25,000,000 shares authorized,
    8,074,867 and 7,028,855 shares issued and outstanding at
    October 1, 2000 and December 31, 1999, respectively                           81              70
  Preferred Stock, 5,000,000 shares authorized:
    Series C Junior Participating Preferred Stock, $.01 par value,
      500,000 shares authorized, no shares issued and outstanding                 --              --
    Series D Convertible Preferred Stock, $.01 par value, 506,667
      shares authorized, issued and outstanding at October 1, 2000
      and December 31, 1999, respectively; liquidation preference
      of $3.8 million at October 1, 2000 and
      December 31, 1999, respectively (Note 6)                                     5               5
  Additional paid-in capital                                                  47,366          43,264
  Accumulated deficit                                                        (20,572)        (21,802)
  Accumulated other comprehensive income (foreign
    currency translation adjustments)                                            (82)            179
                                                                        ------------    ------------
        TOTAL STOCKHOLDERS' INVESTMENT                                        26,798          21,716
                                                                        ------------    ------------
        TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT                  $     39,380    $     41,009
                                                                        ============    ============
</TABLE>

  The accompanying notes are an integral part of these financial statements.


                                       3
<PAGE>

                          FISCHER IMAGING CORPORATION
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                 (Amounts in thousands except per share data)
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                    Three Months Ended              Nine Months Ended
                                                --------------------------      --------------------------
                                                October 1,      October 3,      October 1,      October 3,
                                                   2000            1999            2000            1999
                                                ----------      ----------      ----------      ----------
<S>                                             <C>             <C>             <C>             <C>
REVENUES
  Products and services                         $   11,767      $   12,692      $   37,456      $   43,552
  Sale of manufacturing license (Note 6)                --              --              --           6,200
                                                ----------      ----------      ----------      ----------
  Total                                             11,767          12,692          37,456          49,752


COST OF SALES
  Products and services                              5,743           7,779          19,289          27,628
  Sale of manufacturing license                         --              --              --             400
                                                ----------      ----------      ----------      ----------
  Total                                              5,743           7,779          19,289          28,028
                                                ----------      ----------      ----------      ----------
      Gross profit                                   6,024           4,913          18,167          21,724


OPERATING EXPENSES
  Research and development                           1,000           1,493           3,017           4,570
  Selling, marketing and service                     3,300           3,928          10,000          11,378
  General and administrative                         1,192           1,284           3,505           4,863
  Restructuring provision (Note 8)                      --              --              --             750
                                                ----------      ----------      ----------      ----------
      Total operating expenses                       5,492           6,705          16,522          21,561
                                                ----------      ----------      ----------      ----------

INCOME (LOSS) FROM OPERATIONS                          532          (1,792)          1,645             163

  Interest expense                                     (80)           (159)           (426)           (569)
  Interest income                                        7               3              37              72
  Other (expense) income, net                          (45)           (183)            (26)           (407)
                                                ----------      ----------      ----------      ----------

INCOME (LOSS) BEFORE INCOME TAXES                      414          (2,131)          1,230            (741)
  Benefit for income taxes                              --              --              --              --
                                                ----------      ----------      ----------      ----------
NET INCOME (LOSS)                               $      414      $   (2,131)     $    1,230      $     (741)
                                                ==========      ==========      ==========      ==========

NET INCOME (LOSS) PER SHARE
  Basic                                         $     0.06      $    (0.30)     $     0.17      $    (0.11)
                                                ==========      ==========      ==========      ==========
  Diluted                                       $     0.05      $    (0.30)     $     0.15      $    (0.11)
                                                ==========      ==========      ==========      ==========

SHARES USED TO CALCULATE
INCOME (LOSS) PER SHARE
  Basic                                              7,433           7,029           7,196           7,029
                                                ==========      ==========      ==========      ==========
  Diluted                                            8,169           7,029           7,981           7,029
                                                ==========      ==========      ==========      ==========
</TABLE>


  The accompanying notes are an integral part of these financial statements.


                                       4
<PAGE>

                          FISCHER IMAGING CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (Amounts in thousands)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                                    Nine Months Ended
                                                                                --------------------------
                                                                                October 1,      October 3,
                                                                                   2000            1999
                                                                                ----------      ----------
<S>                                                                             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net earnings/loss                                                             $    1,230      $     (741)
                                                                                ----------      ----------
  Adjustments to reconcile net income to net cash
  provided by (used in) operating activities--
    Noncash sale of manufacturing license                                               --          (6,200)
    Depreciation and amortization                                                    1,268           1,617
    Amortization of intangible assets                                                  419             419
    Provision for doubtful accounts                                                  1,196             358
    Write off of investment                                                             --             100
    Provision for excess and obsolete inventories                                      319             804
    Restructuring Provision                                                             --             750
    Restructuring costs                                                                 --          (1,015)
    Foreign exchange (losses) gains                                                   (197)            198
    Loss on Fixed Asset Retirement                                                     187              --
  Other changes in current assets and liabilities--
        Decrease in trade accounts receivable                                        1,756           1,522
        (Increase) Decrease in inventory                                            (3,441)          3,935
        (Increase) Decrease in prepaid expenses and other current assets               (44)             96
        Decrease in deferred costs and other assets                                    236             480
        Increase in trade accounts payable                                           1,449              70
        Decrease in accrued salaries and wages                                        (407)           (383)
        (Decrease) in customer deposits                                                (79)           (695)
        (Decrease) Increase in accrued warranty and installation costs                (176)            426
        (Decrease) in deferred service revenue                                        (342)           (404)
        (Decrease) in other current liabilities                                       (953)            (83)
        Other                                                                           --             (24)
                                                                                ----------      ----------
          Total Adjustments                                                          1,191           1,971
                                                                                ----------      ----------
          Net cash provided by operating activities                                  2,421           1,230
                                                                                ----------      ----------
CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds from Sale of Assets                                                         151              --
  Capital expenditures                                                                (125)           (562)
                                                                                ----------      ----------
          Net cash provided by (used in) investing activities                           26            (562)
                                                                                ----------      ----------
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from sales of common stock, net                                           4,088              90
  Net repayments under line of credit agreement                                     (5,803)           (423)
  Repayments of long-term debt                                                        (400)           (160)
                                                                                ----------      ----------
          Net cash used in financing activities                                     (2,115)           (493)
                                                                                ----------      ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                                                (64)             17
                                                                                ----------      ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS                                              268             192

CASH AND CASH EQUIVALENTS, beginning of period                                       1,056             929
                                                                                ----------      ----------
CASH AND CASH EQUIVALENTS, end of period                                        $    1,324      $    1,121
                                                                                ==========      ==========
</TABLE>


  The accompanying notes are an integral part of these financial statements.


                                       5
<PAGE>

                          FISCHER IMAGING CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

(1)  GENERAL

In management's opinion, the accompanying unaudited consolidated balance sheets
and statements of operations and cash flows contain all adjustments, consisting
only of normal recurring items, necessary to present fairly the financial
position of Fischer Imaging Corporation on October 1, 2000, its results of
operations for the three and nine months ended October 1, 2000 and

October 3, 1999 and its cash flows for the nine months ended October 1, 2000 and
October 3, 1999. Results of operations and cash flows for the interim periods
may not be indicative of the results of operations and cash flows for the full
fiscal year.

These unaudited consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all the
information and note disclosures required by generally accepted accounting
principles.  The financial statements should be read in conjunction with the
audited financial statements and notes thereto contained in our latest annual
report on Form 10-K for the year ended December 31, 1999.

Typically, and for the year ending December 31, 2000, we close the first three
fiscal quarters as of the Sunday closest to the end of March, June and
September.


(2)  INVENTORIES

Inventories include costs of materials, direct labor and manufacturing overhead.
Inventories are priced at the lower of cost (using primarily the last-in, first-
out ("LIFO") method of valuation) or market.  Writedowns for excess or obsolete
inventories are charged to expense in the period in which conditions giving rise
to the writedowns are first recognized.

Inventories consisted of the following components (in thousands):
<TABLE>
<CAPTION>
                                                                  October 1,    December 31,
                                                                    2000            1999
                                                                ------------    ------------
<S>                                                             <C>             <C>
                FIFO cost--
                     Raw materials, net                         $      8,995    $      6,878
                     Work in process and finished goods                9,498           8,493
                LIFO valuation adjustment                               (307)           (307)
                                                                ------------    ------------
                Inventories, net                                $     18,186    $     15,064
                                                                ============    ============
</TABLE>

(3)  OTHER CURRENT LIABILITIES

Other current liabilities consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                                  October 1,    December 31,
                                                                    2000            1999
                                                                ------------    ------------
<S>                                                             <C>             <C>
        Accrued sales, property, and
            other state and local taxes                         $        610    $        636
        Other                                                          1,016           1,943
                                                                ------------    ------------
        Total other current liabilities                         $      1,626    $      2,579
                                                                ============    ============
</TABLE>


                                       6
<PAGE>

                          FISCHER IMAGING CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                                  (Unaudited)

(4)  NOTES PAYABLE AND LONG-TERM DEBT

Notes payable and long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
                                                                  October 1,    December 31,
                                                                    2000            1999
                                                                ------------    ------------
<S>                                                             <C>             <C>
        Borrowing under bank revolving line of credit           $         --    $      5,803
        Capitalized lease obligations                                     81             475
        Loan on Cash Surrender Value of Life Insurance                   819             819
        Other                                                             31              37
                                                                ------------    ------------
                                                                         931           7,134
        Less--Current maturities                                         (98)         (6,031)
                                                                ------------    ------------
        Long-term debt                                          $        833    $      1,103
                                                                ============    ============
</TABLE>


See "Management's Discussion & Analysis - Liquidity and Capital Resources" for
further discussion of the Company's line of credit.


(5)  NET INCOME PER SHARE

Basic income or loss per share is computed by dividing the net income or loss by
the weighted average number of shares of common stock outstanding.  Diluted
income or loss per share is determined by dividing the net income or loss by the
sum of: (1) the weighted average number of common shares outstanding; (2) if
dilutive, the number of shares of convertible preferred stock as if converted
upon issuance; and (3) if dilutive, the effect of outstanding stock options
determined utilizing the treasury stock method.


A reconciliation between the number of securities used to calculate basic and,
if dilutive, diluted income per share is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                           Three Months Ended               Nine Months Ended
                                                                        ------------------------        ------------------------
                                                                         Oct. 1,         Oct. 3,         Oct. 1,         Oct. 3,
                                                                          2000            1999            2000            1999
                                                                        --------        --------        --------        --------
<S>                                                                     <C>             <C>             <C>             <C>
Weighted average number of common shares outstanding
(Shares used in Basic Earnings Per Share Computation).................     7,433           7,029           7,195           7,029
                                                                        --------        --------        --------        --------
Shares of convertible preferred stock (as if converted)...............       507             507             507             775
Effect of stock options (treasury stock method).......................       229              --             279              --
                                                                        --------        --------        --------        --------
Shares used in Diluted Earnings Per Share Computation, if dilutive....     8,169           7,536           7,981           7,804
                                                                        ========        ========        ========        ========
</TABLE>

As of October 1, 2000 and October 3, 1999, there were, respectively, 1,617,075
and 1,058,925 outstanding options to purchase shares of Common Stock under our
current stock option plans.


                                       7
<PAGE>

                          FISCHER IMAGING CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                                  (Unaudited)

(6)  SALE OF MANUFACTURING LICENSE

On March 29, 1999, we announced an agreement with General Electric Company, on
behalf of GE Medical Systems, under which 826,666, or 62%, of the 1,333,333
shares of Series D Convertible Preferred Stock owned by GE Medical Systems were
exchanged for a non-exclusive right to manufacture the Tilt-C system.  The sale
of the manufacturing rights to the Tilt-C system was recorded at fair value,
estimated to be $6.2 million.  We completed manufacturing for GE Medical Systems
by the end of March 2000.

Subsequent to October 1, 2000, the company received notice from GE Medical
Systems of their desire to convert their remaining 506,667 shares of preferred
stock to common stock.  On October 5, 2000, the Company issued 506.667 shares of
common stock to GE Medical Systems in exchange for the remaining shares of
Series D Preferred Stock.

(7)  COMPREHENSIVE INCOME

Comprehensive income is defined as the change in equity of an enterprise other
than the change resulting from investments by or distributions to its owners.
Comprehensive income includes only net earnings or loss and foreign currency
translation adjustments, as follows:

<TABLE>
<CAPTION>
                                                              Three Months Ended                     Nine  Months  Ended
                                                           -------------------------             ---------------------------
                                                           Oct. 1,           Oct. 3,             Oct. 1,             Oct. 3,
                                                            2000              1999                2000                1999
                                                           -------           -------             -------             -------
<S>                                                        <C>               <C>                 <C>                 <C>
Net income / (loss)                                          414             (2,131)             1,230                (741)
Foreign currency translation adjustments                      52                  5               (261)                215
                                                            ----             ------              -----                ----
Comprehensive income / (loss)                                466             (2,126)               969                (526)
                                                            ====             ======              =====                ====
</TABLE>

(8)  RESTRUCTURING PROVISION AND PAYMENTS

During the third quarter of 1997, the Company decided to close its Addison,
Illinois manufacturing facility and, accordingly, recorded a $2.9 million
restructuring provision for the remaining lease obligations (net of estimated
sublease payments), facility closing costs, severance and other non-recurring
costs associated with this decision.  In January 1999, the Company fulfilled its
remaining facility obligations by agreeing to a $1.0 million lease buyout, over
an eight month period, completing the closure within the original $2.9 million
provision.

During the second quarter of 1999, the Company decided to discontinue a product
line previously produced in its Addison facility.  Accordingly, the Company
accrued an additional $750,000 provision for the closure of the Addison
facility, principally for the discontinuing of this product line and related
product acceptance issues.

During the nine months ended October 3, 1999 our restructuring payments were
approximately $1,015,000 including  required payments under the lease buyout.

                                       8
<PAGE>

FISCHER IMAGING CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                                  (Unaudited)

(9)  OPERATING AND GEOGRAPHIC SEGMENT INFORMATION

We operate in a single industry segment: the design, manufacture, and marketing
of x-ray imaging systems. Because of differences in distribution costs,
strategies, and aftermarket potential, we separately manage and report operating
results for products sold by us (proprietary) from those manufactured for sale
to other medical products companies under Original Equipment Manufacturer
("OEM") contracts. Our manufacturing and most of our distribution activities are
in the United States, including export sales to Europe, primarily, and
elsewhere. We also have marketing operations in Europe and Australia. The
following is a summary of our operations by segment (in thousands):

<TABLE>
<CAPTION>
                                                                 United States
                                                      -------------------------------------
                                                          Proprietary                           International
                                                      ------------------                     ------------------   Internal
                                                      Domestic   Export     OEM      Total   Australia   Europe    Sales     Total
                                                      --------  --------  -------   -------  ---------  -------   --------  -------
Three Months Ended October 1, 2000
----------------------------------
<S>                                                   <C>       <C>       <C>       <C>      <C>        <C>       <C>       <C>
  Revenues:
   Product  ....................................      $ 7,056   $ 1,375   $   211   $ 8,642   $    30   $   399   $  (422)  $ 8,649
   Service  ....................................        3,003        --        --     3,003        72        43        --     3,118
                                                      -------   -------   -------   -------   -------   -------   -------   -------
                                                       10,059     1,375       211    11,645       102       442      (422)   11,767
                                                      -------   -------   -------   -------   -------   -------   -------   -------
  Costs of sales:
   Product  ....................................        4,011       749        46     4,806        20        --       (23)    4,803
   Service  ....................................          406        --        --       406        21        37        --       464
                                                      -------   -------   -------   -------   -------   -------   -------   -------
   Allocated  ..................................        4,417       749        46     5,212        41        37       (23)    5,267
   Unallocated  ................................                                        476        --        --        --       476
                                                                                    -------   -------   -------   -------   -------
                                                                                      5,688        41        37       (23)    5,743
                                                                                    -------   -------   -------   -------   -------
  Gross profit  ................................                                      5,957        61       405      (399)    6,024
  Operating expenses  ..........................                                      5,565       108       218      (399)    5,492
                                                                                    -------   -------   -------   -------   -------
  Income (loss) from operations  ...............                                        392       (47)      187        --       532
  Interest expense  ............................                                        (79)       --        (1)       --       (80)
  Interest income  .............................                                          3         4        --        --         7
  Other (expense) income, net  .................                                        236      (274)       (7)       --       (45)
                                                                                    -------   -------   -------   -------   -------
  Net income (loss)  ...........................                                    $   552   $  (317)  $   179   $    --   $   414
                                                                                    =======   =======   =======   =======   =======
Three Months Ended October 3, 1999
----------------------------------
  Revenues:
   Product  ....................................      $ 6,025   $1,362    $2,502    $ 9,889   $   108   $   574   $  (574)  $ 9,997
   Service  ....................................        2,542       --        --      2,542        37       116        --     2,695
                                                      -------   ------    ------    -------   -------   -------   -------   -------
                                                        8,567    1,362     2,502     12,431       145       690      (574)   12,692
                                                      -------   ------    ------    -------   -------   -------   -------   -------
  Costs of sales:
   Product  ....................................        2,981      698     1,609      5,288        69       156      (156)    5,357
   Service  ....................................          520       --        --        520         8        19       (44)      503
                                                      -------   ------    ------    -------   -------   -------   -------   -------
   Allocated  ..................................        3,501      698     1,609      5,808        77       175      (200)    5,860
   Unallocated  ................................                                      1,919       --        --         --     1,919
                                                                                    -------   -------   -------   -------   -------
                                                                                      7,727        77       175      (200)    7,779
                                                                                    -------   -------   -------   -------   -------
  Gross profit  ................................                                      4,704        68       515      (374)    4,913
  Operating expenses  ..........................                                      6,438        76       565      (374)    6,705
  Income (loss) from operations  ...............                                     (1,734)       (8)      (50)       --    (1,792)
  Interest expense  ............................                                       (162)       --         3        --      (159)
  Interest income  .............................                                         --         3        --        --         3
  Other (expense) income, net  .................                                       (173)      (40)       30        --      (183)
                                                                                    -------   -------   -------   -------   -------
  Net income (loss)  ...........................                                    $(2,069)  $   (45)  $   (17)  $    --   $(2,131)
                                                                                    =======   =======   =======   =======   =======
</TABLE>

                                       9
<PAGE>

                          FISCHER IMAGING CORPORATION
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                       United States
                                           -------------------------------------
                                               Proprietary                           International
                                           ------------------                     ------------------   Internal
                                           Domestic   Export     OEM      Total   Australia   Europe    Sales     Total
                                           --------  --------  -------   -------  ---------  -------   --------  -------
Nine Months Ended October 1, 2000
---------------------------------
<S>                                        <C>       <C>       <C>       <C>      <C>        <C>       <C>       <C>
  Revenues:
   Product................................ $ 21,303  $  6,011  $ 1,511   $28,825  $      30  $   932   $ (1,134) $28,653
   Service................................    8,471        --       --     8,471        186      146         --    8,803
                                           --------  --------  -------   -------  ---------  -------   --------  -------
                                             29,774     6,011    1,511    37,296        216    1,078     (1,134)  37,456
                                           --------  --------  -------   -------  ---------  -------   --------  -------
  Costs of sales:
   Product................................   11,661     3,252      681    15,594         21       --       (202)  15,413
   Service................................    1,112        --       --     1,112         63       66         --    1,241
                                           --------  --------  -------   -------  ---------  -------   --------  -------
   Allocated..............................   12,773     3,252      681    16,706         84       66       (202)  16,654
                                           --------  --------  -------
   Unallocated............................                                 2,635         --       --         --    2,635
                                                                         -------  ---------  -------   --------  -------
                                                                          19,341         84       66       (202)  19,289
                                                                         -------  ---------  -------   --------  -------
  Gross profit............................                                17,955        132    1,012       (932)  18,167
  Operating expenses......................                                16,134      1,012      308       (932)  16,522
                                                                         -------  ---------  -------   --------  -------
  Income (loss) from operations...........                                 1,821       (880)     704         --    1,645
  Interest expense........................                                  (423)        --       (3)        --     (426)
  Interest income.........................                                    23         13        1         --       37
  Other (expense) income, net.............                                   464          5     (495)        --      (26)
                                                                         -------  ---------  -------   --------  -------
  Net income (loss).......................                               $ 1,885  $    (862) $   207   $     --  $ 1,230
                                                                         =======  =========  =======   ========  =======
       Other information:
              Identifiable assets.........                               $37,162  $   1,114  $ 1,104             $39,380
              Capital expenditures........                                   125         --       --                 125
              Depreciation & Amortization.                                 1,150        113        5               1,268
              Amortization................                                   419         --       --                 419

Nine Months Ended October 3, 1999
---------------------------------
  Revenues:
    Product............................... $ 19,996  $  8,728 $  7,000   $35,724  $     129  $   805   $   (928) $35,730
    Service...............................    7,258        --       --     7,258        129      435         --    7,822
    Sale of manufacturing license.........    6,200        --       --     6,200         --       --         --    6,200
                                           --------  --------  -------   -------  ---------  -------   --------  -------
                                             33,454     8,728    7,000    49,182        192      498       (387)  49,752
                                           --------  --------  -------   -------  ---------  -------   --------  -------
  Costs of sales:
    Product...............................   10,385     7,601    1,716    23,146         82      315       (434)  20,952
    Service...............................    1,642        --       --     1,642         52       49       (120)   1,623
    Sale of manufacturing license.........      400        --       --       400         --       --         --      400
                                           --------  --------  -------   -------  ---------  -------   --------  -------
    Allocated.............................   12,427     5,942    4,662    23,031        134      364       (554)  22,975
                                           --------  --------  -------
    Unallocated...........................                                 5,053         --       --         --    5,053
                                                                         -------  ---------  -------   --------  -------
                                                                          28,084        134      364       (554)  28,028
                                                                         -------  ---------  -------   --------  -------
  Gross profit............................                                21,098        124      876       (374)  21,724
  Operating expenses......................                                21,014        292      629       (374)  21,561
                                                                         -------  ---------  -------   --------  -------
  Income (loss) from operations...........                                    84       (168)     247         --      163
  Interest expense........................                                  (468)        --     (101)        --     (569)
  Interest income.........................                                    66          6       --         --       72
  Other (expense) income, net.............                                  (203)       159     (363)        --     (407)
                                                                         -------  ---------  -------   --------  -------
  Net income (loss).......................                               $  (521) $      (3) $  (217)  $     --  $  (741)
                                                                         =======  =========  =======   ========  =======
       Other information:
              Identifiable assets.........                               $40,140  $   1,021  $   855             $42,016
              Capital expenditures........                                   562         --       --                 562
              Depreciation................                                 1,604         13       --               1,617
              Amortization................                                   419         13       --                 419
</TABLE>

                                       10
<PAGE>

(10) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Statement of Financial Accounting Standards No. 133 and No. 137. In June 1998,
the Financial Accounting Standards Board, or FASB, issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS 133 establishes accounting and reporting standards for
derivative financial instruments and hedging activities related to those
instruments as well as other hedging activities. It requires an entity to
recognize all derivatives as either assets or liabilities in the statement of
financial position and measures those instruments at fair value. In June 1999,
the FASB issued Statement of Financial Accounting Standards No. 137, "Accounting
for Derivative Instruments and Hedging Activities - Deferral of the Effective
Date of FASB Statement No. 133 - An amendment of FASB Statement No. 133." SFAS
No. 137 delays the effective date of SFAS No. 133 to financial quarters and
financial years beginning after June 15, 2000. We do not typically enter into
arrangements that would fall under the scope of Statement No. 133 and thus, we
believe that Statement No. 133 will not significantly affect our financial
condition and results of operations.

Staff Accounting Bulletin No. 101.  In December 1999, the Securities and
Exchange Commission staff released Staff Accounting Bulletin No. 101, "Revenue
Recognition," (SAB 101). SAB 101 provides interpretive guidance on the
recognition, presentation and disclosure of revenue in financial statements. The
accounting impact of SAB 101 is required to be determined no later than the our
fourth fiscal quarter of 2000. We have concluded that our current revenue
recognition policies are in compliance with the guidance provided by SAB 101,
and thus believes that SAB 101 will not significantly affect our financial
condition and results of operations.

                                      11
<PAGE>

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of financial condition and results of operations should
be read in conjunction with our Consolidated Financial Statements and Notes
thereto appearing in the company's Annual Report on Form 10-K for the year ended
December 31, 1999 (the "Form 10-K").  This Form 10-Q, including the information
incorporated by reference herein, contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended.   For this purpose,
statements contained herein that are not statements of historical fact may be
considered forward-looking statements.  Without limiting the foregoing, the
words "believes", "expects", "anticipates", "plans", "estimates," and similar
words and expressions are intended to identify such statements.  These forward-
looking statements include statements about:

 .    resolutions of deficiencies noted by the FDA;

 .    the adequacy of financial resources;

 .    future revenues, expenses, and other operating results;

 .    sales under the company's strategic alliances, marketing arrangements, and
     other agreements pertaining to Mammotest, digital radiography, and other
     products;

 .    the status of SenoScan and other new products in development;

 .    the size and growth of the company's markets;

 .    the success of efforts to reduce manufacturing and other costs;

 .    manufacturing capacity and capabilities;

 .    submissions to the FDA and receipt of FDA approvals and clearances;

 .    the availability of raw materials and components; and

 .    other matters.

These forward-looking statements involve risks and uncertainties.  The actual
results that the company achieves may differ materially from those discussed in
such forward-looking statements due to the risks and uncertainties set forth:

(1)  in the Business section of the Company's annual report on Form 10-K for the
     year ended December 31, 1999 under the headings: "Risks Associated with OEM
     Agreements," "Sales and Marketing," "International Operations," "Strategic
     Alliances," "Risks of Technological Change and New Products," "Risks of New
     Product Development and Market Acceptance," "Competition," "Government
     Regulation," "Government Reimbursement," `Manufacturing and Operating
     Risks," "Product Liability, Market Withdrawal, and Product Recalls,"
     "Patents and Intellectual Property," "Risk of Dependence on Key Personnel,"

(2)  in the "Market for Registrant's Common Equity and Related Stockholder
     Matters" section of the Company's annual report on Form 10-K for the year
     ended December 31, 1999 under the headings "Risk of Price Volatility of
     Common Stock," `Risks of Fluctuations in Quarterly Results of Operations,"
     "Risks of Fluctuations in Quarterly Results of Operations," Risks
     Associated with Shares Eligible for Future Sale," "Risks Associated with
     Control by Management and Certain Stockholders," and "Certain Anti-Takeover
     Effects,"

(3)  in the Management's Discussion and Analysis of Financial Condition and
     Results of Operations section of the Form 10-K for the year ended December
     31, 1999 under the "Overview," "Quantitative and Qualitative Disclosures
     About Market Risk," "FDA Regulations," and "Recent Developments" headings,

                                      12
<PAGE>

(4)  elsewhere in the Business, Management's Discussion & Analysis, and other
     sections of the Company's annual report on Form 10-K for the year ended
     December 31, 1999,

(5)  and in this Form 10-Q under the "Management's Discussion and Analysis of
     Financial Conditions and Results of Operations--Overview," section of MD&A
     and elsewhere.


Overview

Risk of Operating Losses

We design, manufacture and market specialty and general purpose medical imaging
systems for the diagnosis and treatment of disease. Our newer products are
directed towards medical specialties, such as diagnosing and treating breast
cancer, heart disease and vascular disease, in which image-guided, minimally
invasive therapies are replacing open surgical procedures.

We have experienced annual losses from operations for four of the past five
fiscal years. Significant factors giving rise to these losses include: costs
associated with excessive manufacturing capacity; intense competition for some
of our products; declining margins and demand for OEM products; and a general
slowdown in capital expenditures by hospitals. We have taken steps to reduce
costs and improve sales, including:

 .    entering into distribution partnerships in 1997 and 1998 with Ethicon Endo-
     Surgery for the marketing and sale of Mammotest breast biopsy systems in
     the United States and in Europe;

 .    entering into a strategic alliance with Analogic Corporation for the
     marketing and sale of digital radiography products under Kodak's name and
     distribution system;

 .    closure of the Company's Addison, Illinois manufacturing facility;

 .    a workforce reduction of approximately 20% in the third and fourth quarters
     of 1999; and

 .    other actions to reduce operating expenses and manufacturing costs.

Sustained return to profitability will depend on many factors, including:

 .    sufficient demand for our products to offset the effects of the
     reductions in OEM business;

 .    the adequacy of financial resources;

 .    our ability to maintain or improve gross margins;

 .    the effectiveness of efforts to control manufacturing and other costs;

 .    effective negotiation and implementation of product distribution
     arrangements;

 .    effective implementation of domestic and international marketing and sales
     strategies; and

 .    the development and introduction of new products that compete successfully.

We expect continued fluctuations in quarterly and annual revenues, operating
results and net income, depending on factors such as:

 .    delays in the development projects;

 .    the timing of large system product orders;

 .    new product introductions or marketing initiatives by us or our
     competitors;

 .    the effects of managed healthcare on capital expenditures and
     reimbursement;

 .    increases in marketing, research, and other costs in relation to sales;

 .    regulatory clearance of new products;

 .    the effect of general economic conditions of our markets;

 .    seasonal patterns and other timing issues affecting customer purchasing
     decisions; and

                                      13
<PAGE>

 .    the outcome of claims against us.

These factors can occur unexpectedly and, because many of our costs are fixed,
we may not be able to sufficiently reduce its costs in periods when revenues are
less than anticipated and may, as a result, suffer unexpected losses.

Over the past several years, we have attempted to expand our international sales
and marketing efforts. Our exposure to foreign currency and other international
business risk may increase as our international business grows. We attempt to
minimize these risks by: (1) generally requiring payments in U.S. dollars; (2)
using letters of credit; and (3) requiring advance deposits and through other
means. There can be no assurance, however, that international sales efforts will
be successful or that associated risks can be minimized.

In November 1999, Kodak announced that Analogic Corp., in conjunction with us
and Direct Radiography Corp., would build digital radiography products for
Kodak.  In February 2000, Analogic provided a $5.4 million purchase order for
more than 50 systems.  We delivered twenty-seven systems under this purchase
order during the first nine months of 2000.  While Kodak, Analogic, and us
continue to work together to deliver these systems, there is no formal agreement
between the companies at this time. We are currently negotiating an agreement
with the companies and believe that such an agreement will be reached in the
near future.

We are also a party to litigation from time to time, as both plaintiff and
defendant. As plaintiff, we are pursuing a patent infringement case and certain
other matters. As defendant, we are involved in several litigation matters with
OEM and other customers, among others, and accrued $866,000 in the first quarter
of 1999 in relation to several of these matters. As of October 1, 2000, we have
have made payments of $337,000 relating to settlement of these lawsuits.

FDA Regulation

We are subject to periodic inspections by the Food and Drug Administration,
whose primary purpose is to audit our compliance with Quality System
Regulations, which include testing, quality control and documentation
procedures. In March 1995, our Denver facility received a Warning Letter from
the FDA concerning documentation and other deficiencies. We rectified these
deficiencies and resolved the matter with the FDA in June 1995. In December
1996, following an inspection of the Denver facility, the FDA issued
Inspectional Observations Form 483 and a subsequent Warning Letter regarding
manufacturing practices. As required, we responded as to planned corrective
actions and obtained a favorable third-party certification of manufacturing and
quality systems. In October 1998, following a subsequent inspection, the FDA
issued a Form 483 regarding possible deficiencies in manufacturing, quality, and
documentation practices. We submitted our response to the Form 483 and are
instituting corrective actions. We continue to implement corrective actions and
anticipates that an inspection of the Denver facility by the FDA will take place
in the near future. The recent issuance of another Form 483 increases the
possibility that one or more of the sanctions described below could be imposed.

Failure to satisfy FDA requirements can result in: (1) our inability to receive
awards of federal government contracts; (2) an inability to receive new
marketing or export clearances; or (3) FDA enforcement actions including, among
other things, product seizure, injunction, and/or criminal or civil proceedings
which could be initiated without further notice. Although we believe we have
instituted policies and procedures allowing it to operate within FDA
requirements, however,

                                      14
<PAGE>

there can be no assurance that deficiencies can be corrected or that we can
satisfy future FDA compliance concerns. Sanctions resulting from FDA compliance
reviews or related delays in product clearances could have a material adverse
effect on us.

Results of Operations, Excluding Restructuring Charge and Other One-Time Items

Our results of operations on a normalized basis for the three and nine months
ended October 1, 2000 and October 3, 1999, respectively, are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                                Increase (Decrease)
                                                        ------------------------------------------------------------------
                                                                             Gross          Operating           Net Income
                                                        Revenues             Profit         Expenses              (Loss)
                                                        --------             -------        ---------           ----------
<S>                                                     <C>                  <C>            <C>                 <C>
Three Months Ended October 1, 2000:
   Reported results of operations                        $11,767             $ 6,024         $ 5,493              $   414
                                                         =======             =======         =======              =======
Three Months Ended October 3, 1999:
   Reported results of operations                        $12,692             $ 4,913         $ 6,705              $(2,131)
                                                         =======             =======         =======              =======

Nine Months Ended October 1, 2000:
   Reported results of operations                        $37,456             $18,167         $16,552              $ 1,230
                                                         =======             =======         =======              =======
Nine Months Ended October 3, 1999:
   Reported results of operations                        $49,752             $21,724         $21,561              $  (741)
   Restructuring provision (1)                                --                  --            (750)                 750
   Sale of manufacturing license (2)                      (6,200)             (5,800)             --               (5,800)
   Accruals for contractual issues (3)                        --                  --            (886)                 886
                                                         -------             -------         -------              -------
   Normalized results of operations                      $43,552             $15,924         $19,925              $(4,905)
                                                         =======             =======         =======              =======
</TABLE>

(1)  During the second quarter of 1999, we have decided to discontinue a product
     line previously produced in its Addison, Illinois manufacturing facility
     and recorded an additional facility closing charge of $750,000, primarily
     for related product acceptance issues.

(2)  During the first quarter of 1999, we sold G. E. Medical Systems a non-
     exclusive right to manufacture the Tilt-C system, in exchange for 826,666
     shares of Series D Convertible Preferred Stock previously owned by G. E.
     Medical Systems. See Note 6 to Notes to Consolidated Financial Statements.

(3)  Based upon legal activities occurring during the first quarter of 1999,
     management concluded that it was probable that we will incur settlement
     costs to resolve contractual issues with respect to two product
     installations.

The remainder of Management's Discussion and Analysis of Results of Operations
will be based on results of operations for the nine months ended October 1, 2000
and normalized results of operations for the nine months ended October 3, 1999.

Results of Operations

Overview.  Third quarter 2000 revenues and net income were $11,767,000 and
$414,000, respectively, as compared to revenues of $12,692,000 and a net loss of
$2,131,000 for the third quarter of 1999.  The revenue decrease reflected
primarily the planned reductions in OEM product shipments.  Gross margin as a
percentage of revenues increased from 38.7% in the third quarter of 1999 to
51.2% in the third quarter of 2000, primarily due to three factors: (1)
efficiencies derived from our corporate right-sizing and reorganization, as well
as the implementation of a flattened manufacturing process, (2) a continued
shift towards higher margin direct sales versus dealer and OEM sales and (3) an
increase in production of higher margin mammography and digital radiology
products.  Operating expenses were significantly lower in the third quarter of
2000, as compared to the third quarter of 1999 due to lower legal, marketing and
headcount expenses.  As a result of these factors, the net income increased to
$414,000 in the third quarter of 2000 as compared to a net loss of $2,131,000 in
the third quarter of 1999.

                                      15
<PAGE>

The following table sets forth the percentage of revenues represented by certain
data included in the Company's statements of operations for the periods
indicated:

<TABLE>
<CAPTION>
                                                       Three Months Ended                         Nine Months Ended
                                                 -------------------------------           -------------------------------
                                                 October 1,           October 3,           October 1,           October 3,
                                                    2000                 1999                 2000                 1999
                                                 ----------           ----------           ----------           ----------
<S>                                              <C>                  <C>                  <C>                  <C>
Revenues                                           100.0%               100.0%               100.0%               100.0%
Gross margin                                        51.2                 38.7                 48.5                 36.6
Research and development                             8.5                 11.8                  8.1                 10.5
Selling, marketing and service                      28.0                 30.9                 26.7                 26.1
General and administrative                          10.1                 10.1                  9.4                  9.1
Income (Loss) from Operations                        4.5                (14.1)                 4.4                 (9.2)
Benefit for income taxes                              --                   --                   --                   --
Net income (loss)                                    3.5                (16.8)                 3.3                (11.3)
</TABLE>

*    Based on normalized results of operations. See "Results of Operations,
     Excluding Restructuring Charge and Other One-Time Items" on Page 15 of this
     Form 10-Q.

Revenues.  Third quarter 2000 revenues were $11,767,000, a 7% decrease from
third quarter 1999 revenues of $12,692,000.  The decrease reflects planned
reductions in OEM product shipments.  OEM shipments decreased from $2,502,000 in
the third quarter of fiscal 1999 to $211,000 in the third quarter of fiscal
2000.  There was an increase in the domestic and export sales channels
partially offsetting the decrease in OEM shipments.

For the nine months ended October 1, 2000, revenues were $37,456,000, or about
14% lower than normalized revenues of $43,552,000 for the nine months ended
October 3, 1999.  This decrease reflected decreases in OEM and Large Systems,
partly offset by an increase in mammography, service, and general radiography
revenues.  The decrease in product sales were primarily in the International
Dealer and OEM channels of distribution, partly offset by increase in
international direct, U. S. direct and service channels.


Gross Profit.   For the third quarter of 2000, gross profit expressed a
percentage of revenues was 51.2%, as compared to 38.7% for the third quarter of
1999.  For the nine months ended October 1, 2000, gross profit as a percentage
of revenues was 48.5%, as compared to normalized gross profit of 36.6% for the
nine months ended October 3, 1999.  The increase in gross margin was primarily
due to efficiencies derived from our corporate right-sizing and reorganization,
the implementation of a flattened manufacturing process, a continued shift
towards higher margin direct sales versus dealer and OEM sales and an increase
in production of higher margin mammography and digital radiology products.

Research and Development Expenses.  Research and development expenses for the
third quarters of 2000 and 1999 were $1,000,000 and $1,493,000, respectively, or
8.5% and 11.8% of revenues, respectively.  For the nine months ended October 1,
2000 and October 3, 1999, research and development expenses were $3,017,000 and
$4,570,000, respectively, or 8.1% and 10.5%, respectively, of revenues.  The
decrease in the three and nine month periods ended October 1, 2000 and October
3, 1999 reflect reductions in staffing and related engineering expenses.
We have

                                      16
<PAGE>

reduced our customization of existing products and have delivered a more
standard product to our customers. This has driven the reduction in engineering
staffing and costs.

Selling, Marketing and Service Expenses. Selling, marketing and service expenses
for the third quarters of 2000 and 1999 were $3,300,000 and $3,928,000,
respectively, or 28.0% and 30.9%, respectively, of revenues.  For the nine
months ended October 1, 2000 and October 3, 1999, selling, marketing and service
expenses were $10,000,000 and $11,378,000, respectively, or 26.7% and 26.1%,
respectively, of revenues.  As compared to the same three and nine month period
in 1999, selling, marketing and service expenses decreased as a result of lower
headcount, reduced commissions and reduced travel expenses.

General and Administrative Expenses.  General and administrative expenses for
the third quarters of 2000 and 1999 were $1,192,000 and $1,284,000,
respectively, or 10.1% and 10.1%, respectively, of revenue. For the nine months
ended October 1, 2000 and October 3, 1999, general and administrative expenses
were $3,505,000, and $4,863,000, respectively, or 9.4% and 9.1% of revenues,
respectively. For the nine month period, the reduction was primarily due to
lower legal costs in 2000 related to our patent infringement lawsuit against
Trex Medical Corporation as well as the reduction in headcount of certain
general and administrative staff.

Interest Expense / Interest Income.  Interest expense for the three months ended
October 1, 2000 and October 3, 1999 was $80,000 and $159,000, respectively and,
for the nine month periods then ended was $426,000 and $569,000, respectively.
Interest income for the third quarters of 2000 and 1999 was $7,000 and $3,000,
respectively and, for the nine months ended October 1, 2000 and October 3, 1999
was $37,000 and $72,000, respectively.  The decrease in interest expense, in the
three and nine months ended October 1, 2000 as compared to the three and nine
months ended October 3, 1999 is due primarily to lower levels of borrowings
under our line of credit during the third quarter ending October 1, 2000.  At
the end of the third quarter 2000, there were no outstanding borrowings on the
line of credit.

Net Income/Loss.  Net income for the third quarter of 2000 was $414,000 as
compared to a net loss for the third quarter of 1999 of $2,131,000.  For the
nine months ended October 1, 2000, net income was $1,230,000 as compared to a
$741,000 normalized net loss for the nine months ended October 3, 1999.  For the
three and nine months ended October 1, 2000, net income increased relative to
the three and nine months ended October 3, 1999 primarily as the result of an
increase in production of higher margin mammography and digital radiology
products and efficiencies and cost savings derived from corporate right-sizing
and reorganization.

Income Taxes

Estimated effective tax rate for the year ended December 31, 2000 is currently
0%.  Accordingly, no income tax benefit or provision has been recorded for the
three or nine month periods ended October 1, 2000.  This rate was determined
based upon the anticipated 2000 results of operations includable in the domestic
consolidated tax return and upon projected net temporary differences between
operating results reflected in the financial statements and those required to be
reflected in the 2000 domestic consolidated tax return.  As of December 31,
1999, we had valuation allowances of approximately $10.3 million, reducing net
deferred tax assets to $0.  The realizability of net deferred tax assets is
dependent on our ability to generate future taxable income, and estimate of
realizable deferred tax assets may change in the near future.

                                      17
<PAGE>

No income tax provisions have been recognized for foreign tax jurisdictions and
no income tax benefits have been recognized for subsidiary losses outside the
domestic consolidated return because they are not expected to reverse in the
foreseeable future.

Liquidity and Capital Resources

Net cash provided by operating activities for the nine months ended October 1,
2000 was $2.4 million compared to $1.2 million provided by operations in the
comparable nine month period of 1999.  The change in cash provided by operations
was due primarily to net income of $1,230,000.

Net cash provided by investing activities was $26,000 for the nine months ended
October 1, 2000, an increase of $588,000 from the comparable nine month period
in 1999. The Company anticipates that the level of spending for capital
expenditures in the third quarter of 2000 will continue, although there
currently are no material commitments for capital expenditures.

Net cash used in financing activities for the nine months ended October 1, 2000
was $2.1 million, principally resulting from the reduction in borrowings under
the Company's bank revolving line of credit, made possible by the decrease in
accounts receivable improved profitability discussed above, and the purchase of
1,000,000 shares of previously unissued stock in the company, resulting in a
$4,000,000 cash inflow.

As of October 1, 2000, the Company had $1.3 million in cash and cash
equivalents, working capital of $21.7 million, and a $8.0 million bank revolving
line of credit facility, which is subject to restrictions as to availability
based on eligible receivables and inventory, as defined.  As of October 1, 2000,
$8.0 million was available under this line.  The line of credit is secured by
the Company's tangible assets and is for a term of three years. The borrowings
under the agreement are subject to interest at the bank's prime rate of
interest, 9.5%, at October 1, 2000.

We have experienced significant losses in four of the last five years ended
December 31, 1999 and have also had negative cash flows from operations in three
of those years. We have taken actions to improve its liquidity and reduce the
level of operating losses. Most notably, we have entered into a line of credit
with a bank for $8.0 million and have significantly reduced the workforce in the
third and fourth quarters of 1999.

We believe our current cash and cash equivalent balances, our available
borrowings under the line of credit, and cash generated from operations will be
sufficient to satisfy its liquidity needs for the remainder of 2000. We may need
to obtain additional debt or equity financing to fund our long-term growth
needs.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk:
--------------------------------------------------------------------

Market risk represents the risk of loss that may impact the financial position,
results of operations or cash flows due to adverse changes in financial and
commodity market prices and rates. We are exposed to market risk in the areas of
changes in United States interest rates and changes in foreign currency exchange
rates as measured against the United States dollar. These exposures are directly
related to our normal operating and funding activities.

                                      18
<PAGE>

Historically and as of October 1, 2000, we have not used derivative instruments
or engaged in hedging activities.

Interest Rate Risk

The interest payable on the revolving line of credit is variable based on the
prime rate and, is therefore, affected by changes in market interest rates. At
October 1, 2000, there was no outstanding balance on the line of credit.  We
attempt to manage interest rate risk by aggressively reducing its borrowings
with cash generated from operations.

Foreign Currency Risk

We have wholly-owned subsidiaries in Australia, Germany and France.  Local
assets and liabilities, principally intercompany debt to the parent company, are
recorded in local currencies, thereby creating exposures to changes in exchange
rates. These changes may positively or negatively affect the Company's operating
results. As disclosed in Note 9 to Notes to Consolidated Financial Statements,
revenues in foreign currency through all foreign subsidiaries constituted less
than 3.3% of the total revenues for the nine month periods ended October 1, 2000
and October 3, 1999.  We therefore do not believe that foreseeable near-term
changes in exchange rates will have in a material effect on future earnings,
fair values or cash flows and have chosen not to enter into foreign currency
hedging instruments.  There can be no assurance that such an approach will prove
to have been successful, especially in the event of a significant and sudden
decline in the value of any of the applicable local currencies.

                                      19
<PAGE>

                          PART II.  OTHER INFORMATION


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

     Not applicable.

Item 2.  Changes in Securities and Use of Proceeds:
---------------------------------------------------

     On August 28, 2000, the Company sold 1,000,000 shares of unregistered
common stock at a price per share of $4.00 to certain investors for aggregate
cash consideration of $4 million. The Company relied on Regulation D, Rule 506,
of the Securities Act in connection with the sale of these shares. The sale of
the common stock was made in compliance with all the terms of Rules 501 and 502
of Regulation D and each investor was an accredited investor.

Item 3.  Defaults Upon Senior Securities:
-----------------------------------------

     Not applicable.

Item 4.  Submission of Matters to a Vote of Security Holders:
-------------------------------------------------------------

     A meeting of the shareholders was convened on July 27, 2000 at 1:00 pm. A
motion was made to approve an amendment to the 1991 Stock Option Plan increasing
the number of shares of Common Stock authorized for issuance over the term of
the 1991 Stock Option Plan by an additional 500,000 shares. The results of the
vote were as follows:

<TABLE>
<S>             <C>
     For        2,878,354
     Against      952,288
     Abstain       73,642
     Passing         73.7%
</TABLE>

There being no other matters before the Stockholders meeting, the meeting was
adjourned.

Item 5.  Other Information:
---------------------------

     Not applicable.

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

     (a) Documents filed as part of this report:

         1. Financial Statements.

            See pages 3 through 5 of this Form 10-Q.

         2. Financial Statement Schedules.

            None

         3. Exhibits.

            The following are filed as part of this report:

Exhibit
Number                            Description of Exhibit
-------                           ----------------------
3.1       Certificate of Incorporation of the Company(1)

3.2       Bylaws of the Company(1)

                                      20
<PAGE>

4.1       Amended and Restated Rights Agreement, dated as of November 3, 1994,
          between the Company and American Securities Transfer, Inc. which
          includes the Certificate of Designation for the Series C Junior
          Participating Preferred Stock as Exhibit A and the form of Right
          Certificate as Exhibit B(4)

4.2       Certificate of Designation for the Series D Convertible Preferred
          Stock(4)

10.1      Agreement, dated October 5, 1990, between the Company and Dornier
          Medizintechnik GmbH(1)

10.2      Purchase Agreement, dated August 29, 1994, between the Company and
          General Electric Company on behalf of GE Medical Systems(4)

10.3      Nonemployee Director Stock Option Plan, as amended(5)

10.4      Stock Option Plan(1)

10.5      Retention Bonus Plan(3)

10.6      Lease Agreement, dated July 31, 1992, between the Company and JN
          Properties(2)

10.7      Stock Purchase Agreement, dated as of June 20, 1995, between the
          Company and General Electric Company, acting through its GE Medical
          Systems Division ("GEMS")(4)

10.8      Registration Rights Agreement, dated as of June 20, 1995, between the
          Company and GEMS(4)

10.9      Manufacturing and License Agreement, dated as of June 20, 1995,
          between the Company and GEMS(4)

10.10     Amendment, dated as of June 20, 1995, to Purchase Agreement, dated as
          of August 29, 1994, between the Company and GEMS(4)

10.11     Agreement dated October 10, 1997, between the Company and Ethicon
          Endo-Surgery, Inc. with Addendum dated January 28, 1998.(5)

27        Financial Data Schedule(6)

----------------
(1)       Incorporated by reference to the Company's Registration Statement on
          Form S-1, File No. 33-41537, as filed with the Securities and Exchange
          Commission (the "Commission") on July 3, 1991.

(2)       Incorporated by reference to the Company's Form 10-K for the year
          ended December 31, 1992, as filed with the Commission.

(3)       Incorporated by reference to the Company's Form 10-K for the year
          ended December 31, 1994, as filed with the Commission on April 14,
          1995.

(4)       Incorporated by reference to the Company's Form 8-K, as filed with the
          Commission on July 3, 1995.

(5)       Incorporated by reference to the Company's Form 10-K for the year
          ended December 31, 1997, as filed with the Commission on March 31,
          1998.

(6)       Filed herewith.

          (b) Reports on Form 8-K

              None

          (c) Exhibits

          See Item 6(a)(3) of this Form 10-Q.

          (d) Financial Statement Schedules

              None

                                      21
<PAGE>

                                  SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report on Form 10-Q for the quarter
ended October 1, 2000 to be signed on its behalf by the undersigned thereunto
duly authorized.


                            FISCHER IMAGING CORPORATION



                            /s/ LOUIS E. RIVELLI
                            --------------------
                            Louis E. Rivelli
                            President and Chief Operating Officer



November 15, 2000

                                      22