<PAGE>   1

                    U. S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
                For the quarterly period ended December 31, 1999

              For the transition period from __________ to________

                         Commission file number 0-28604

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

          COLORADO                                      84-1162056
-------------------------------             ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

                  4828 STERLING DRIVE, BOULDER, COLORADO 80301
                  --------------------------------------------
                    (Address of principal executive offices)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (303) 444-2600
       ------------------------------------------------------------------
                           (Issuer's telephone number)

CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION
13 OF 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

STATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON
EQUITY, AS OF THE LATEST PRACTICABLE DATE:

    COMMON STOCK, NO PAR VALUE                       5,383,507 SHARES
    ------------------------------------------------------------------------
              Class                        (outstanding at January 28, 2000)

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT

YES           NO    X
    --------     -------


                                       1
<PAGE>   2







                               ELECTROSCOPE, INC.

                                   FORM 10-QSB

                     FOR THE QUARTER ENDED DECEMBER 31, 1999

                                      INDEX

<TABLE>
<CAPTION>
                                                                                             Page
                                                                                            Number
                                                                                            ------
<S>       <C>                                                                               <C>
PART I.   FINANCIAL INFORMATION

   ITEM 1     -    Condensed Interim Financial Statements...............................        3
              -    Condensed Balance Sheets as of December 31,
                      1999 and March 31, 1999...........................................        3
              -    Condensed Statements of Operations for
                      the Three Months Ended December 31, 1999 and 1998.................        4
                   Condensed Statements of Operations for
                      the Nine Months Ended December 31, 1999 and 1998..................        5
              -    Condensed Statements of Cash Flows for
                      the Nine Months Ended December 31, 1999 and 1998..................        6
              -    Notes to Condensed Interim Financial
                      Statements........................................................        7

   ITEM 2     -    Management's Discussion and Analysis
                      of Financial Condition and Results of Operations..................       10

PART II.            OTHER INFORMATION

   ITEM 6     -    Exhibits and Reports on Form 8-K.....................................       15

   SIGNATURE ...........................................................................       16

   EXHIBIT INDEX.........................................................................      17
</TABLE>



                                       2
<PAGE>   3



PART I    FINANCIAL INFORMATION

ITEM 1 - CONDENSED INTERIM FINANCIAL STATEMENTS

                               ELECTROSCOPE, INC.

                            CONDENSED BALANCE SHEETS
                                   (Unaudited)

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

CURRENT ASSETS:
    Cash and cash equivalents                                        $    882,869      $  1,188,867
    Short-term investments, net                                         1,925,857         3,172,792
    Accounts receivable, net of allowance for doubtful
       accounts of $7,000 and $7,500, respectively                        329,158           278,533
    Inventory, net of reserve for obsolescence of $160,000
       and $125,000 respectively                                          549,286           439,218
    Prepaid expenses                                                       46,133            69,112
                                                                     ------------      ------------
              Total current assets                                      3,733,303         5,148,522
                                                                     ------------      ------------
EQUIPMENT, at cost:
    Furniture, fixtures and equipment                                     712,853           600,495
    Less- Accumulated depreciation                                       (525,894)         (455,426)
                                                                     ------------      ------------
              Equipment, net                                              186,959           145,069
                                                                     ------------      ------------
PATENTS, net of accumulated amortization of $21,440 and $17,204,          121,421           121,676
              respectively

OTHER ASSETS                                                               13,472            13,472
                                                                     ------------      ------------
              Total assets                                           $  4,055,155      $  5,428,739
                                                                     ============      ============

                   LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accounts payable                                                 $     87,804      $    144,212
    Accrued compensation                                                  109,380           135,996
    Other accrued liabilities                                             221,697           207,854
    Other current liabilities                                              25,236             9,960
                                                                     ------------      ------------
              Total current liabilities                                   444,117           498,022
                                                                     ------------      ------------
LONG-TERM LIABILITIES:
       Other long-term liabilities                                             --             2,335
                                                                     ------------      ------------
COMMITMENTS AND CONTINGENCIES (Notes 1 and 3)

SHAREHOLDERS' EQUITY:
    Preferred stock, no par value, 10,000,000 shares authorized,
       no shares outstanding                                                   --                --
    Common stock, no par value, 100,000,000 shares authorized,
       5,383,507 and 5,383,507 shares outstanding, respectively        16,941,317        16,941,317
    Warrants to purchase common stock                                     290,400           290,400
    Accumulated deficit                                               (13,620,679)      (12,303,335)
                                                                     ------------      ------------
              Total shareholders' equity                                3,611,038         4,928,382
                                                                     ------------      ------------
              Total liabilities and shareholders' equity             $  4,055,155      $  5,428,739
                                                                     ============      ============
</TABLE>

      The accompanying notes are an integral part of these balance sheets.



                                       3
<PAGE>   4









                               ELECTROSCOPE, INC.

                       CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                 For the Three Months
                                                                   Ended December 31,
                                                             ----------------------------
                                                                1999             1998
                                                             -----------      -----------
<S>                                                          <C>              <C>
REVENUE, net                                                 $   572,841      $   405,007

COST OF SALES                                                    346,354          262,134
                                                             -----------      -----------
              Gross profit                                       226,487          142,873
                                                             -----------      -----------
OPERATING EXPENSES:
    Sales and marketing                                          392,878          374,938
    General and administrative                                   218,472          194,621
    Research and development                                     133,244          170,266
                                                             -----------      -----------
              Total operating expenses                           744,594          739,825
                                                             -----------      -----------
INCOME (LOSS) FROM OPERATIONS                                   (518,107)        (596,952)

OTHER INCOME:
    Interest income                                               31,668           73,585
    Other income (expense)                                        (2,468)          (1,203)
                                                             -----------      -----------
NET INCOME (LOSS)                                            $  (488,907)     $  (524,570)
                                                             ===========      ===========

NET INCOME (LOSS) PER SHARE (Note 2):
    Basic and diluted net income (loss) per common share     $     (0.09)     $     (0.10)
                                                             ===========      ===========
    Basic and diluted weighted average shares used in
      computing net income (loss) per common share             5,383,507        5,383,507
                                                             ===========      ===========
</TABLE>

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



                                       4
<PAGE>   5







                               ELECTROSCOPE, INC.

                       CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                         For the Nine Months
                                                                          Ended December 31,
                                                                    ----------------------------
                                                                        1999             1998
                                                                    -----------      -----------
<S>                                                                 <C>              <C>
REVENUE, net                                                        $ 1,491,295      $ 1,087,313

COST OF SALES                                                           899,805          772,039
                                                                    -----------      -----------
              Gross profit                                              591,490          315,274
                                                                    -----------      -----------
OPERATING EXPENSES:
    Sales and marketing                                                 972,128        1,021,430
    General and administrative                                          635,478          708,458
    Research and development                                            391,935          436,273
                                                                    -----------      -----------
              Total operating expenses                                1,999,541        2,166,161
                                                                    -----------      -----------
INCOME (LOSS) FROM OPERATIONS                                        (1,408,051)      (1,850,887)

OTHER INCOME:
    Interest income                                                      98,114          229,904
    Other income (expense)                                               (7,407)          (5,683)
                                                                    -----------      -----------
NET INCOME (LOSS)                                                   $(1,317,344)     $(1,626,666)
                                                                    ===========      ===========

NET INCOME (LOSS) PER SHARE (Note 2):
    Basic and diluted net income (loss) per common share            $     (0.24)     $     (0.30)
                                                                    ===========      ===========

    Basic and diluted weighted average shares used in computing
       net income (loss) per common share                             5,383,507        5,383,507
                                                                    ===========      ===========
</TABLE>

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



                                       5
<PAGE>   6




                               ELECTROSCOPE, INC.

                       CONDENSED STATEMENTS OF CASH FLOWS

                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                          For the Nine Months
                                                                           Ended December 31,
                                                                     ----------------------------
                                                                         1999             1998
                                                                     -----------      -----------
<S>                                                                  <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income (loss)                                                $(1,317,344)     $(1,626,666)
    Adjustments to reconcile net income (loss) to net cash
       used in operating activities-
          Depreciation and amortization                                   74,704          185,110
          Amortization of discount                                       (53,481)        (133,028)
          Inventory Reserves                                              35,000               --
          Changes in operating assets and liabilities-
              Accounts receivable                                        (50,625)          51,453
              Inventory                                                 (145,068)          78,494
              Prepaid expenses and other assets                           22,979          (32,841)
              Accounts payable                                           (56,408)         (31,859)
              Accrued compensation and other current and accrued
                 liabilities                                               2,503          (31,094)
              Customer deposits                                               --           (4,376)
              Other non-current liabilities                               (2,335)          (1,940)
                                                                     -----------      -----------
                 Net cash used in operating activities                (1,490,075)      (1,546,747)
                                                                     -----------      -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchases of equipment                                              (112,358)         (30,014)
    Patent costs                                                          (3,981)         (12,467)
    Purchases of short-term investments, net                          (2,259,335)      (6,564,592)
    Sale of short-term investments                                     3,559,751        6,652,000
                                                                     -----------      -----------
                 Net cash provided by investing activities             1,184,077           44,927
                                                                     -----------      -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS                               (305,998)      (1,501,820)

CASH AND CASH EQUIVALENTS, beginning of period                         1,188,867        2,525,026
                                                                     -----------      -----------
CASH AND CASH EQUIVALENTS, end of period                             $   882,869      $ 1,023,206
                                                                     ===========      ===========
</TABLE>


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



                                       6
<PAGE>   7

                               ELECTROSCOPE, INC.

                 NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS

                                DECEMBER 31, 1999
                                   (Unaudited)

(1)  ORGANIZATION AND NATURE OF BUSINESS

Electroscope, Inc. (the "Company") was incorporated as a Colorado corporation on
February 1, 1991. The Company designs, develops, manufactures and markets a
patented shielded electrosurgical instrument system. The product monitors for
stray electrical energy during laparoscopic surgical procedures and deactivates
the electrosurgical unit when this energy creates potentially dangerous
conditions, thus enhancing patient safety for patients who undergo laparoscopic
surgery. The instrument systems are supplied in the most commonly used
five-millimeter format and have the protective shielding system fully integrated
in their design. The Company also offers adaptive shield products that can be
used with most laparoscopic electrosurgical instruments available today.

The Company's sales to date have been made principally in the United States.

The Company has incurred losses since its inception and has an accumulated
deficit of approximately $13.6 million at December 31, 1999. The Company's
operations are subject to certain risks and uncertainties, which include the
following: commercial acceptance of the Company's products will have to occur in
the marketplace, in significant volumes, before the Company can attain
profitable operations; the possibility of continued substantial operating losses
and limitations on future capital availability; current and potential
competitors with greater financial, technical and marketing resources; the
potential impact of a failure to comply with or changes in government
regulations; manufacturing being subject to Governmental regulations; dependence
on new product development and intellectual property rights; dependence on
single source suppliers and sub-contractors; the Company's limited manufacturing
experience for large-scale production; potential fluctuations in future
quarterly results; uncertainty of future efforts at health care reform; product
liability risk and limited insurance coverage against such risk; and dependence
on key personnel.

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
Such estimates and assumptions affect the reported amounts of assets and
liabilities as well as disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenue and
expense during the reporting period. Actual results could differ from those
estimates.

     Fair Value of Financial Instruments

The Company's financial instruments consist of cash, short-term investments and
short-term trade receivables and payables. The carrying values of cash,
short-term investments and short-term receivables and payables approximate their
fair value.

     Cash and Cash Equivalents

For purposes of presentation in the financial statements, the Company considers
all cash and highly liquid investments with an original maturity of three months
or less to be cash equivalents.


                                      7


<PAGE>   8



     Short-term Investments

As required under Statement of Financial Accounts Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," ("SFAS 115") management
determines the appropriate classification of its investments in debt securities
at the time of purchase. At December 31, 1999, the Company's short-term
investments consist primarily of government and corporate securities that the
Company classifies as held-to-maturity.

The amortized cost of debt securities classified as held-to-maturity is adjusted
for amortization of premiums and accretion of discounts to maturity. Such
amortization and accretion of discounts are included in interest income.

     Inventory

Inventory consists primarily of component parts and raw materials, and is valued
at the lower of cost (first-in, first-out basis) or market. Inventory consists
of the following:

<TABLE>
<CAPTION>
                                       December 31,     March 31,
                                           1999           1999
                                       ------------    ---------
<S>                                     <C>            <C>
     Raw materials                      $ 489,689      $ 393,606
     Finished goods                       219,597        170,612
                                        ---------      ---------
                                          709,286        564,218
     Less- Reserve for obsolescence      (160,000)      (125,000)
                                        ---------      ---------
                                        $ 549,286      $ 439,218
                                        =========      =========
</TABLE>


     Income Taxes

The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). SFAS No. 109 requires recognition of deferred income tax assets and
liabilities for the expected future income tax consequences, based on enacted
tax laws, of temporary differences between the financial reporting and tax bases
of assets and liabilities. SFAS No. 109 requires recognition of deferred tax
assets for the expected future tax effects of all deductible temporary
differences, loss carryforwards and tax credit carryforwards. Deferred tax
assets have been completely offset by a valuation allowance because the
realization criteria set forth in SFAS 109 are not currently satisfied,
primarily due to the Company's history of operating losses.

     Revenue Recognition

Revenue from product sales is recorded when the Company ships the product and
when the earnings process is complete. The Company recognizes revenue from sales
to stocking distributors if there is no right of product return other than for
normal warranty related matters.

     Comprehensive Income

The Company adopted the provisions of Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130") as of April
1, 1998. SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. For each period presented there are no differences between
Net Income (Loss) and Comprehensive Income (Loss).



                                       8


<PAGE>   9


     Segment Reporting

The Company adopted the provisions of Statement of Financial Accounting
Standards No. 131, "Disclosures About Segments of an Enterprise and Related
Information" ("SFAS No. 131") in the quarter ended December 31, 1998. SFAS No.
131 established standards for reporting information about the segments of
enterprises' business. The adoption of this statement had no impact on the
Company's financial statements as there are no material differences between
information reported to management and that contained in the financial
statements of the Company.

     Basic and Diluted Loss per Common Share

Loss per common share and common equivalent share for each period presented is
computed using the sum of the weighted average number of shares of common stock
outstanding. Fully diluted shares that would result from the exercise of common
stock options and warrants would be anti-dilutive and thus are not presented.

(3)  COMMITMENTS AND CONTINGENCIES

The Company is subject to regulation by the United States Food and Drug
Administration ("FDA"). The FDA provides regulations governing the manufacture
and sale of the Company's products and regularly inspects the Company and other
manufacturers to determine their compliance with these regulations. The Company
received a Quality System Regulation Inspection in November 1998, with no
regulatory follow-up indicated. The Company believes it has already corrected
any points noticed in the inspection.

Because of seasonal and other factors, including the continuing development of
the sales force and initial sales to new stocking distributors, the results of
operations for the quarter ended December 31, 1999 should not be taken as
indicative of the results of operations for all or any part of the balance of
the year.

The Company has recently increased its emphasis on selling through stocking
distributors. Selling directly to hospitals through independent sales
representative organizations continues successfully in selected regions. This
has increased the concentration of accounts receivable in a smaller number of
customers since the beginning of this fiscal year.

The accounts receivable balance of $336,158 at December 31, 1999 included the
following balances due from six major customers, primarily distributors: $60,184
(18% of total receivables), $48,800 (15%), $26,943 (8%), $24,483 (7%), $19,565
(6%) and $16,585 (5%). These customers are located in various parts of the
United States, in exclusive territories. The customers have been granted
extended payment terms for their initial orders and normal payment terms for
subsequent orders. The Company believes that amounts outstanding for these
customers will be collected. The Company's accounts receivable balances are
primarily domestic.

(4)  MANAGEMENT'S REPRESENTATIONS

The condensed interim financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures made
are adequate to make the information presented not misleading. The condensed
interim financial statements and notes thereto should be read in conjunction
with the financial statements and the notes thereto, included in the Company's
Annual Report to the Securities Exchange Commission, for the fiscal year ended
March 31, 1999, filed on Form 10-KSB.

The accompanying condensed interim financial statements have been prepared, in
all material respects, in conformity with the standards of accounting
measurements set forth in Accounting Principles Board Opinion No. 28 and
reflect, in the opinion of management, all adjustments, which are of a normal
recurring nature, necessary to summarize fairly the financial position and
results of operations for such periods. The results of operations for such
interim periods are not necessarily indicative of the results to be expected for
the full year.




                                      9


<PAGE>   10


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

     GENERAL

The Company manufactures and markets a line of proprietary electrosurgical
products that are designed to enhance patient safety for patients who undergo
minimally invasive electrosurgery (MIS). The Company believes that its patented
Electroshield(R) Monitoring System offers surgeons significant advantages
compared to other electrosurgical systems in use because of its ability to
dynamically monitor for stray electrical energy out of the view of the surgeon
during MIS procedures. The Company has received five FDA Form 510(k)
notifications for its products and obtained patent protection for its products'
basic shielding and monitoring features.

The Company recognizes that market awareness and acceptance of the hazards
inherent in monopolar electrosurgery and acceptance of the Company's products to
address such hazards has been slower to occur than the Company had believed
would be the case. The Company has modified its marketing strategies to address
the issues of market acceptance of the technology. The Company has also
undertaken efforts to broaden the product line offerings beyond the original
electronic monitoring product and its accessories. The Company has developed
disposable scissors products and intends to continue explore additional product
development and acquisition opportunities from third parties.

The Company is continuing to develop its sales distribution network in the US,
and to expand its effective sales coverage across the entire country. This
ongoing process requires continual investments in training the sales personnel
of stocking distributors and independent representative organizations to
effectively present the Company's product line as well as understanding the
nature of the risks inherent in laparoscopic surgery. The Company believes that
it has sufficient cash resources on hand to successfully complete the
development of the sales force, and that it has attracted and can continue to
attract the additional human resources necessary to manage the development of
the sales force, the increased marketing efforts, and the general growth of the
business. There can be no assurance however, that the Company's efforts in this
area will result in increased revenues or the achievement of profitability.

Statements herein that are not historical facts, including statements about the
Company's strategies and expectations about new and existing products and market
demand and acceptance of new and existing products, technologies and
opportunities, market and industry segment growth, and return on investments in
products and markets are forward looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward looking
statements involve substantial risks and uncertainties that may cause actual
results to differ materially from those indicated by the forward looking
statements. These forward-looking statements should be read in conjunction with
the risk factors discussed in the Form 10-KSB filed by the Company on June 4,
1999. All forward looking statements are based on information available to the
Company on the date of this document and the Company assumes no obligation to
update such forward looking statements.

     Historical Perspective and Outlook

The Company was organized in February 1991. During its first two years, the
Company developed the EM-2 Electronic Monitor and adaptive sheaths to work with
traditional electrosurgical instruments. During this period, the Company applied
for patents with the United States Patent Office. The Company also continued
work on its patent applications and formulated development plans for shielded
hinged tip and fixed tip electrosurgical instruments. This development program
required the expenditure of significant resources and engaged a combination of
electrical and mechanical engineering skills. The first major instrument systems
containing AEM(R) technology were introduced in November 1995. Expansion and
refinement of the instrument systems has continued with additional introductions
up to the present.



                                     10


<PAGE>   11



The installed base of the Company's EM-2 Electronic Monitor has continued to
increase since the introduction of the product in 1994. The Company expects that
the sales of electrosurgical instruments and accessories should increase as
additional EM-2 Electronic Monitors are installed. The Company continues to
devote resources to increasing market awareness of the inherent hazards of
monopolar electrosurgery. There can be no assurance, however, as to the rate of
market acceptance of the EMS. Given the system's short history of usage, the
Company cannot predict the rate of its electrosurgical instrument sales.

In its efforts to increase its market presentation and increase revenues the
Company continues to develop its distribution network and expand its market
coverage in the US, has begun to develop market coverage in Europe and will
continue to introduce new products with the expectation that these measures will
provide the basis for increased revenues and will ultimately lead to profitable
operations. Management does not expect that profitable revenue levels will be
reached in fiscal year 2000, and there can be no assurance that these measures,
or any others that the company may adopt, will result in either increased
revenues or profitable operations.

The Company has incurred losses from operations since inception and has an
accumulated deficit of $13,620,679 as of December 31, 1999. Due to the need to
continue the development and training of a sales and distribution network, the
Company believes that it may continue to operate at a net loss for several
quarters. The Company believes its results of operations may fluctuate on a
quarterly basis as a result of the size and frequency of sales through the
independent sales network and the development of its internal sales force,
resulting in increased sales expenses. Such fluctuations may be significant, and
may result in the Company operating at a loss in any one period even after a
period of profitability.

     RESULTS OF OPERATIONS

For the three months ended December 31, 1999 compared to the three months ended
December 31, 1998.

Net revenues. Revenues for the three months ended December 31, 1999 were
$572,841 compared to $405,007 for the three months ended December 31, 1998, an
increase of 41%. The increase is attributable to the increased sales coverage
provided by the stocking distributors and the conversion to AEM by a hospital
in the Southeastern United States. The Company's strategy of selling to
stocking distributors who in turn resell to hospitals has begun to show
positive results. New stocking distributors place initial orders to provide
inventory for their sales to hospitals, and these initial orders may be
significant (see the discussion of the Results of Operations for the nine
months ended December 31, 1999). However, initial stocking orders from new
stocking distributors were only approximately $12,000 compared to $70,000 in
the comparable quarter of the prior year indicating that the distributor base
was becoming increasingly effective in reselling product to hospitals. While
there can be no assurance that the arrangements with the stocking distributors
will continue to result in recurring business, the Company believes that the
distributors will be effective marketing partners in their territories. The
contracts with the stocking distributors do not provide a right of return for
products sold to the distributors other than for normal warranty related
matters and certain demonstration equipment (all sales of such demonstration
equipment have been fully reserved). The Company anticipates revenue growth for
the fiscal year ended March 31, 2000 ("Fiscal Year 2000"), compared to fiscal
year 1999 as the Company's continuing development of its distribution network
and marketing programs mature and result in increased market coverage and
increased sales. There can be no assurance, however, that the Company's sales
and marketing efforts will lead to increased revenues

Gross Profit. Gross profit for the three months ended December 31, 1999 was
$226,487 compared to the three months ended December 31, 1998 gross profit of
$142,873, an increase of 59%. Gross profit as a percentage of revenue (Gross
Margin) increased to 40% for the three months ended December 31, 1999 from 35%
in the three months ended December 31, 1998. The increase in gross profit
resulted from the increased volume of sales, which resulted in increased
utilization of manufacturing capacity. Gross profit and gross margin can be
expected to fluctuate from quarter to quarter, as a result of product sales mix
and sales volume. Gross margins, while improved, are expected to be higher at
higher levels of production and sales. These higher gross margins are currently
not being achieved because of the expenses related to manufacturing capacity,
which is currently underutilized and other, generally fixed, manufacturing
costs.



                                     11


<PAGE>   12



Sales and marketing expenses. Sales and marketing expenses for the three months
ended December 31, 1999 were $392,878 compared to $374,938 for the three months
ended December 31, 1998, an increase of 5%. The increase is a result of
headcount additions in Sales & Marketing and increased spending on programs
designed to increase awareness of the Company's products. In addition, initial
sales and marketing efforts were begun in Europe, in anticipation of the Company
obtaining the necessary certifications to allow it to sell its products in
Europe. These increases were partially offset by the shift from independent
sales representatives (who were paid commissions on their sales) to stocking
distributors (who buy products from the Company at a discount, but who are not
paid commissions by the Company).

General and administrative expenses. General and administrative expenses for the
three months ended December 31, 1999 were $218,472 compared to $194,621 for the
three months ended December 31, 1998, an increase of 12%. The increase is
primarily due to increased spending in preparation for the Company's programs to
attain ISO 9001 and CE marking certifications, in preparation for the Company's
expected entrance into the European marketplace in fiscal 2001.

Research and development expenses. Research and development expenses for the
three months ended December 31, 1999 were $133,244 compared to $170,266 for the
three months ended December 31, 1998, a decrease of 22%. The primary
contributors to the lower level of spending were reductions in headcount due to
completion of some engineering projects, lower levels of inventory consumption
required to test and modify products and lower levels of outside services.

     RESULTS OF OPERATIONS

For the nine months ended December 31, 1999 compared to the nine months ended
December 31, 1998.

Net revenues. Revenues for the nine months ended December 31, 1999 were
$1,491,295 compared to $1,087,313 for the nine months ended December 31, 1998,
an increase of 37%. The increase is attributable to the Company continuing to
develop its own sales and marketing efforts including the signing of new
stocking distributors (new stocking distributors placed initial stocking orders
of approximately $170,000 compared to $70,000 in the comparable nine months of
the prior year). The Company anticipates revenue growth for fiscal year 2000
compared to fiscal year 1999 as the Company's efforts to develop its
distribution network and marketing programs mature and result in increased
market coverage and increased sales. There can be no assurance, however, that
the Company's sales and marketing efforts will lead to increased revenues.

Gross Profit. Gross profit for the nine months ended December 31, 1999 was
$591,490 compared to the gross profit of $315,274 for the nine months ended
December 31, 1998, an increase of 88%. Gross profit as a percentage of revenue
(Gross Margin) increased to 40% for the nine months ended December 31, 1999
compared to 29% for the nine months ended December 31, 1998. The increase in
gross profit is the result of increased sales volumes, which more fully utilized
manufacturing capacity plus reductions in manufacturing headcount and spending
reduction programs. Gross profit and gross margin can be expected to fluctuate
from quarter to quarter, as a result of product sales mix and sales volume.
Gross margins, while improved, are expected to be higher at higher levels of
production and sales. These higher gross margins are currently not being
achieved because of the expenses related to manufacturing capacity, which is
currently underutilized and other, generally fixed, manufacturing costs.

Sales and marketing expenses. Sales and marketing expenses for the nine months
ended December 31, 1999 were $972,128 compared to $1,021,430 for the nine months
ended December 31, 1998 a decrease of 5%. The decrease is the result of the
Company's change from a sales force consisting of direct employees and
independent sales representatives (paid only on a commission basis) to one
primarily made up of stocking distributors who purchase the Company's products
at a discount but who are not paid commissions. Some of the reduced levels of
spending were offset by the reassignment of certain personnel from
Administration and Operations to marketing and customer support roles plus
additional spending on programs designed to increase market awareness of the
Company's products. The Company believes that sales and marketing expenses will
decrease as a percentage of net revenue with increasing sales volume. There can
be no assurance, however, that such decrease will occur.



                                     12



<PAGE>   13


General and administrative expenses. General and administrative expenses for the
nine months ended December 31, 1999 were $635,478 compared to $708,458 for the
nine months ended December 31, 1998, a decrease of 10%. The reductions resulted
from lower headcount, the reassignment of certain personnel to Marketing and
Sales functions, elimination of Directors fees and lower costs for outside
services.

Research and development expenses. Research and development expenses for the
nine months ended December 31, 1999 were $391,935 compared to $436,273 for the
nine months ended December 31, 1998, a decrease of 10%. The decrease is the
result of a decrease in headcount, reflecting the completion of certain
engineering projects, a reduction in the utilization of outside consulting
services, reduced consumption of inventories and supplies used in testing and
modifying products and the absence of write-offs of certain legal fees incurred
in connection with the exploration of a possible patent on a product the Company
has decided not to pursue.

     LIQUIDITY AND CAPITAL RESOURCES

The Company has historically satisfied its cash requirements principally
through sales of Common Stock which approximated $17.2 million through December
31, 1999, and, to a substantially lesser degree, funds provided by sales of the
Company's products. Historically, these funds have been used for working
capital and general corporate purposes including research and development. The
Company may use working capital to build inventories to ensure that orders can
be filled in a timely manner, to support the sales efforts of the Company's
sales force and to accommodate anticipated growth. While the remaining net
proceeds from the Company's initial public offering are currently invested
primarily in money market instruments, government and corporate securities, the
Company may also use a substantial portion of those net proceeds for the
acquisition or development of complementary products or businesses, if such
acquisition or development opportunities arise. The Company currently has no
understanding, commitment or agreement with respect to any such acquisition or
development program.

Capital expenditures historically have been relatively minor, and have consisted
of specialized equipment, manufacturing equipment, office equipment and
leasehold improvements. The Company anticipates that its cash on hand will be
sufficient to fund its operations, working capital and capital requirements for
at least the next twelve months.

The Company's Common Stock trades on the Over the Counter Bulletin Board.

     INCOME TAXES

Net operating loss carryforwards totaling approximately $12.4 million are
available to reduce taxable income as of December 31, 1999. The net operating
loss carryforwards expire, if not previously utilized, at various dates
beginning in the year 2006. The Company has not paid income taxes since its
inception. The Tax Reform Act of 1986 and other income tax regulations contain
provisions which may limit the net operating loss carryforwards available to be
used in any given year, if certain events occur, including changes in ownership
interests. The Company has established a valuation allowance for the entire
amount of its deferred tax asset since inception due to its history of operating
losses.



                                       13

<PAGE>   14


     YEAR 2000

Computer programs that rely on two-digit date codes to perform computations and
decision-making functions may cause computer systems to malfunction due to an
inability of such programs to interpret the date code "00" as the year 2000.
Products manufactured by the Company do not incorporate any computer programs
that rely on two-digit date codes. The cost to replace hardware and computer
software used by the Company that was not Year 2000 compliant did not exceed
$10,000.

The Company has experienced no problems caused by the failure of its computer
systems to accurately recognize the year 2000. The Company has not been informed
of any such problems experienced by its vendors or its customers, nor by any of
the municipal agencies that provide services to the Company.

Nevertheless, it is too soon to conclude that there will not be any problems
arising from the Year 2000 problem, particularly at some of the Company's
vendors. The Company will continue to monitor its significant vendors of goods
and services with respect to Year 2000 problems they may encounter as those
issues may effect the Company's ability to continue operations, or might
adversely affect the Company's financial position, results of operations and
cash flows. The Company does not believe at this time that these potential
problems will materially impact the ability of the Company to continue its
operations, however, no assurance can be given that this will be the case.

The expectations of the Company contained in this section on Year 2000 are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and involve substantial risks and uncertainties
that may cause actual results to differ materially from those indicated by the
forward looking statements. All forward looking statements in this section are
based on information available to the Company on the date of this document, and
the Company assumes no obligation to update such forward looking statements.



                                       14

<PAGE>   15


PART II.  OTHER INFORMATION

     ITEM 1 - Not Applicable

     ITEM 2 - Not Applicable

     ITEM 3 - Not Applicable

     ITEM 4 - Not Applicable

     ITEM 5 - Not Applicable

     ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

              (a)  Exhibits

                   27  - Financial Data Schedule.

              (b)  The Registrant did not file any reports on Form 8-K during
                   the quarter ended December 31, 1999.


                                       15

<PAGE>   16




                                    SIGNATURE

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

<TABLE>
<CAPTION>
          Name                          Title                          Date
-----------------------      ------------------------------      ----------------
<S>                          <C>                                 <C>


  /s/ David W. Newton        Acting Chief Executive Officer      January 28, 2000
-----------------------
      David W. Newton
</TABLE>


                                       16

<PAGE>   17


                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
                                                                             Sequentially
Exhibit No.                    Description                                   Numbered Page
-----------                    -----------                                   -------------
<S>                       <C>                                                     <C>
    27                    Financial Data Schedule                                  18
</TABLE>




                                       17