<PAGE>   1


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                                   (MARK ONE)

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE PERIOD ENDED March 31, 2000.

OR

(  ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD    From ________ to ________

                          Commission File number 0-935

                          AMPERSAND MEDICAL CORPORATION
             (Exact name of registrant as specified in its charter)

                 Delaware                                     36-4296006
    -------------------------------------             ------------------
       (State or other jurisdiction of                 (I.R.S. Employer
       incorporation or organization)                  Identification No.)

                       414 North Orleans Street, Suite 305
                                Chicago, IL 60610
                          ----------------------------
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (312) 222-9550
                        ------------------------------
              (Registrant's telephone number, including area code)


                   -------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)

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

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by the court. Yes       No
                                                     ----    ----

                      APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.

Common Stock, $0.001 par value per share-----29,058,228 shares as of
April 28, 2000


                                       1
<PAGE>   2
                                      INDEX

                 AMPERSAND MEDICAL CORPORATION AND SUBSIDIARIES

Part I.  Financial Information

         Item 1.  Financial Statements (Unaudited)

                  Consolidated Balance Sheets -- March 31, 2000 and December 31,
                  1999

                  Consolidated Statements of Operations -- Three months ended
                  March 31, 2000 and March 31, 1999

                  Consolidated Statements of Cash Flows -- Three months ended
                  March 31, 2000 and March 31, 1999

                  Notes to Consolidated Financial Statements -- March 31, 2000

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

         Item 3.  Quantitative and Qualitative Disclosure of Market Risk

Part II. Other Information

         Item 1.  Legal Proceedings

         Item 2.  Changes in Securities and Use of Proceeds

         Item 3.  Defaults on Senior Securities

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

         Item 5.  Other Information

         Item 6.  Exhibits and Reports on Form 8-K




                                       2
<PAGE>   3



Part I.  Financial Information
         Item 1.  Financial Statements

                 AMPERSAND MEDICAL CORPORATION AND SUBSIDIARIES
                      (Formerly Bell National Corporation)

                          CONSOLIDATED BALANCE SHEETS
                (Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                                MARCH 31,   DECEMBER 31,
                                                                  2000          1999
                                                               ---------   ------------
                                                              (UNAUDITED)
<S>                                                            <C>        <C>
ASSETS
  Current assets:

    Cash and cash equivalents                                  $   211    $    36
    Accounts receivable, net of allowance of $20                   325        398
    Inventories                                                    163         62
    Refundable taxes                                               102        131
    Prepaid expenses                                               156         54
                                                               -------    -------
        Total current assets                                       957        681

  Fixed assets, net                                                225        177

  Other assets:
    License, patents, and technology, net of amortization          691        696
    Goodwill, net                                                  265        317
                                                               -------    -------
        Total assets                                           $ 2,138    $ 1,871
                                                               =======    =======

LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities:
    Accounts payable                                           $ 1,169    $ 1,449
    Customer deposits                                               47         40
    Accrued payroll costs                                          302        450
    Accrued royalties                                              500        250
    Accrued expenses                                               358        399
    Deferred revenue                                                90         68
    Revolving line of credit                                        48        134
    Current maturities of notes payable - related party             75        125
    Current maturities of notes payable                            970        970
                                                               -------    -------
        Total current liabilities                                3,559      3,885

    Notes payable - related party, less current maturities        --           26

    Stockholders' equity (deficit)
    Common Stock, $0.001 par value;
        Authorized 50,000,000
        Issued and outstanding, 21,855,937 shares
          at March 31, 2000, 19,027,570 shares at
          December 31, 1999                                         22         19
    Additional Paid in capital                                   6,804      3,039
    Accumulated deficit                                         (8,154)    (5,015)
    Accumulated comprehensive loss -
        Cumulative translation adjustment                          (93)       (83)
                                                               -------    -------
        Total stockholders' equity (deficit)                    (1,421)    (2,040)
                                                               -------    -------
        Total liabilities and stockholders' equity (deficit)   $ 2,138    $ 1,871
                                                               =======    =======
</TABLE>



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




                                       3
<PAGE>   4


                 AMPERSAND MEDICAL CORPORATION AND SUBSIDIARIES
                      (Formerly Bell National Corporation)

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
                (Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>

                                                        THREE MONTHS      THREE MONTHS
                                                            ENDED             ENDED
                                                       MARCH 31, 2000    MARCH 31, 1999
                                                       --------------    --------------
<S>                                                    <C>             <C>
Net Sales                                              $        362    $        311

Cost and expenses:
     Cost of goods sold                                         190             157
     Research and development expenses                          806             225
     Selling, general and administrative ex                   2,483             464
                                                       ------------    ------------
                                                              3,479             846
                                                       ------------    ------------

Operating loss                                               (3,117)           (535)

Other income (expense)
     Interest (expense) - related party                          (1)             (9)
     Interest (expense)                                         (20)           --
     Other, net                                                  (1)              1
                                                       ------------    ------------
                                                                (22)             (8)
                                                       ------------    ------------

Loss before income taxes                                     (3,139)           (543)

Income taxes                                                   --              --
                                                       ------------    ------------

Net loss                                               $     (3,139)   $       (543)
                                                       ============    ============

Basic and fully diluted net loss per common            $      (0.15)   $      (0.05)
                                                       ============    ============

Weighted average number of common shares outstanding     21,300,522      12,000,000
                                                       ============    ============
</TABLE>




The accompanying notes are an integral part of these consolidated financial
state



                                       4
<PAGE>   5


                 AMPERSAND MEDICAL CORPORATION AND SUBSIDIARIES
                      (Formerly Bell National Corporation)

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                           THREE MONTHS    THREE MONTHS
                                              ENDED           ENDED
                                          MARCH 31, 2000   MARCH 31, 1999
                                          --------------   --------------
<S>                                          <C>          <C>
Operating activities:

  Net loss                                   $(3,139)     $  (543)
  Adjustments to reconcile net loss to
    net cash used in operating activities;
    Depreciation and amortization                 88           41
    Stock, warrants, and options issued
      to non-employees for services              342         --
    Compensation expense related to
      stock appreciation rights                1,519         --
    Changes in assets and liabilities:
     Accounts receivable, net                     73         (143)
     Inventories                                (101)         (67)
     Deposits, prepaids and other asset          (73)        (152)
     Accounts payable                           (280)          86
     Customer deposits                             7          109
     Deferred revenue                             22           27
     Accrued royalties                           250         --
     Accrued expenses                           (189)         155
                                             -------      -------
Net cash used in operating activities         (1,481)        (487)

Cash used in investing activities
  Payments for acquisitions                     --           (508)
  Expenditure for license, patents and
    technology                                   (12)          (9)
  Purchase of fixed assets                       (65)         (42)
                                             -------      -------
Net cash used in investing activities            (77)        (559)

Cash flows from financing activities
  Proceeds from issuance of convertible         --            500
  Proceeds from revolving line of credit,
    net of payments                              (86)        --
  Payment of notes payable - related pa          (26)
  Proceeds from issuance of common stock,
    net of costs incurred                      1,855         --
                                               -----      -------
Net cash provided by financing activiti        1,743          500
Effect of exchange rate changes on cash          (10)         (59)
                                             -------      -------
Net increase (decrease) in cash and cas          175         (605)
Cash and cash equivalents at beginning            36          700
                                             -------      -------
Cash and cash equivalents at of period       $   211      $    95
                                             =======      =======

  Supplemental Disclosure of Cash Flow Information:
  Cash paid during the period for:
    Interest                                 $     2      $   -
                                             ========     =======

</TABLE>

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


                                       5
<PAGE>   6



                 AMPERSAND MEDICAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                           (Unaudited March 31, 2000)

NOTE A.  BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended March 31, 2000
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2000.

The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.

For further information, refer to the consolidated financial statements and
footnotes thereto included in the Ampersand Medical Corporation and
Subsidiaries' annual report on Form 10-K for the year ended December 31, 1999.

NOTE B.  OVERVIEW

Ampersand Medical Corporation ("Ampersand" and together with its subsidiaries
the "Company") was incorporated in Delaware on December 15, 1998, as a wholly
owned subsidiary of Bell National Corporation. At the Annual Meeting of Bell
National on May 25, 1999, the stockholders approved the merger of Bell National
into Ampersand. The merger was affected on May 26, 1999 and Bell National ceased
its existence. At the Annual Meeting, the stockholders also approved an increase
in the authorized shares of Common Stock of the Company from 20,000,000 to
50,000,000 shares.

From a historical perspective prior to its merger into Ampersand, Bell National
Corporation ("Bell National") was incorporated in California on October 1, 1958.
Through 1985, its principal subsidiary was Bell Savings and Loan Association
("Bell Savings"), a state chartered savings and loan association. On July 25,
1985, the Federal Home Loan Bank Board appointed the Federal Savings & Loan
Insurance Corporation ("FSLIC") as receiver of Bell Savings. At the same time,
the assets of Bell Savings were transferred to a new, unrelated, federally
chartered mutual savings and loan association, Bell Federal. The FSLIC's action
followed shortly after a determination that Bell Savings had a negative net
worth. On August 20, 1985, Bell National filed a voluntary petition under
Chapter 11 of the Bankruptcy Code. A plan of reorganization was approved by the
Bankruptcy Court, and became effective June 29, 1987.

On June 15, 1990, Bell National purchased 100% of the Common Stock of Payne
Fabrics, Inc., a designer and distributor of decorative drapery and upholstery
fabrics, for a purchase price of $6,493,000 and the issuance of stock
appreciation rights. On August 4, 1997 Payne Fabrics, Inc. sold substantially
all of its assets and most of its liabilities related to the business of
designing and distributing decorative drapery and upholstery fabrics to Westgate
Fabrics, Inc. ("Westgate"), an unaffiliated third party (the "Asset Sale"). The
Asset Sale included the transfer to the buyer of the use and rights to the Payne
Fabrics name, accordingly, Payne Fabrics, Inc., changed its name to PFI National
Corporation ("PFI"). The Asset Sale left PFI without any substantial assets and
on August 4, 1997 all operations were ceased. Bell National's other wholly owned
subsidiaries, Bell Savings and Pacific Coast Holdings Insurance Company, had no
significant assets or liabilities. After the Asset Sale and before December
1998, the Company had no business operations and its only activities were
administrative.


                                       6
<PAGE>   7


On December 4, 1998, Bell National acquired InPath, LLC, a development-stage
company engaged in the design and development of medical instruments and related
tests. In the acquisition, Bell National issued 4,288,790 shares of Common Stock
and warrants to purchase 3,175,850 shares of Common Stock to the members of
InPath in exchange for their units of membership interest in InPath and the
senior executives of InPath assumed management control of Bell National.
Subsequent to the Annual Meeting of the stockholders on May 25, 1999, all of the
warrants were exercised and exchanged for shares of Common Stock in the company.

Based upon the terms of the acquisition agreement, for financial reporting and
accounting purposes the acquisition has been accounted for as a reverse
acquisition whereby InPath is deemed to have acquired Bell National. However,
Bell National was the continuing legal entity and registrant for both Securities
and Exchange Commission filing purposes and income tax filing purposes, until
its merger into Ampersand in May 1999. Because Bell National was a non-operating
public shell company with nominal assets and InPath was a private operating
company, the acquisition has been recorded as the issuance of stock for the net
monetary assets of Bell National, accompanied by a recapitalization and no
goodwill or other intangible assets were recorded

In December 1998, the Company formed a French limited liability company
subsidiary, Samba Technologies, Sarl ("Samba"), for the purpose of acquiring the
automated image cytometry and tele-medicine technology used in the business of
the Samba department of Unilog Regions, SA, a French company engaged in the
design, development and installation of commercial software programs and
networks for business application. Samba completed the acquisition of the
department's assets on January 4, 1999, and at the same time entered into
employment arrangements with the former department employees and assumed the day
to day operations. Since the acquisition, Samba has continued to develop and
market the image cytometry and tele-medicine products previously developed and
marketed by the department.

The Company has incurred significant net losses since its inception. The Company
expects that significant on-going operating expenditures will be necessary to
successfully implement its business plan and develop, manufacture and market its
products. These circumstances raise substantial doubt about the Company's
ability to continue as a going concern. Implementation of the Company's plans
and its ability to continue as a going concern may depend upon its acquiring
additional financing. Management's plans include efforts to obtain additional
capital. The Company was successful in raising approximately $1,855,000 during
the first three months of 2000, and an additional $4,190,000 during the month of
April 2000 (see Note G Subsequent Events) to finance its operations. In
addition, the holder of a Senior Subordinated Note converted the $50,000
principal and $1,250 in accrued interest due thereon into shares of Common Stock
thus reducing the Company's outstanding liabilities. On April 28, 2000 the
Company automatically converted $969,600 of 6% Convertible Subordinated Notes
Due 2000 plus $62,000 in accrued interest due thereon into Common Stock also
reducing the Company's outstanding liabilities (see Note G Subsequent Events).
However, there can be no assurance that the Company will continue to be
successful in raising capital should the need for such capital arise in the
future. If the Company is unable to obtain additional financing, should the need
arise, or generate profitable sales revenues, management may be required to
curtail the Company's product development and other activities and may be forced
to cease operations.

NOTE C.  NOTES PAYABLE RELATED PARTIES

On September 1, 1998 the Company issued a note payable in the amount of $175,000
to Mr. Peter P. Gombrich, its Chairman and CEO, in payment for funds advanced to
the Company. Principal payments in the amount of $130,000 and $19,000 were made
during 1999 and 1998 respectively. The remaining principal balance of $26,000
plus $15,600 in accrued interest over the entire life of the note was repaid
during the quarter.

On May 11, 1999 the Company borrowed $75,000 under a 6% Convertible Subordinated
Note to Leonard R. Prange, President, COO/CFO. The Note was issued under terms
identical to all 6% Convertible Subordinated Notes issued by the Company. The
Note plus accrued interest due thereon was automatically converted into Common
Stock of the Company on April 28, 2000 (see Note G Subsequent Events).


                                       7
<PAGE>   8
On December 10, 1999 the Company borrowed $50,000 from Azimuth Corporation, a
company controlled by Alexander M. Milley, a director and significant
shareholder of the Company, under a convertible senior subordinated promissory
note. On February 22, 2000 Azimuth Corporation exercised its right to convert
the principal amount of the note plus accrued interest due thereon in the amount
of $1,250 into 256,250 shares of Common Stock of the Company.

NOTE D.  NOTES PAYABLE

On August 28, 1998, the Company issued a note payable in the amount of $75,000
to its former outside legal counsel, Holleb & Coff in payment for legal
services. The note is due on demand and interest accrues monthly at the rate of
12% per annum. The outstanding balance, plus accrued interest at March 31, 2000
is $89,250.

In January 1999, the Board of Directors authorized the Company to raise up to
$1,500,000 in new equity or debt to provide funding for current operations.
Subsequently, on various dates between March 1, 1999 and June 29, 1999, the
Company issued a series of interest bearing 6% Convertible Promissory Notes
totaling $969,600, including a Note in the amount of $500,000 issued to Seaside
Partners, L.P., a hedge fund which receives investment management services from
Seaside Advisors, L.L.C., of which Dr. Denis M. O'Donnell, a director of the
Company, is a member and manager, and a Note in the amount of $75,000 issued to
Leonard R. Prange, President, COO/CFO (see Note C above), in exchange for cash.
The maturity date of the Notes was January 28, 2000, subject to extension by the
Company to June 30, 2000. On January 25, 2000, the Company notified the
note-holders that it was extending the maturity date of the Notes until June 30,
2000. On April 28, 2000 the Company met the requirements for automatic
conversion and the Notes plus accrued interest due thereon converted into shares
of Common Stock (see Note G Subsequent Events).

In July 1999, the Company's wholly owned subsidiary, Samba, negotiated a
Revolving Credit Line ("Revolver") with the Banc National de Paris (BNP). The
terms of the Revolver provide that Samba may borrow, in the form of an advance
on payment against monthly billings, up to a maximum of 900,000 French Francs,
approximately $140,000. The terms of the Revolver require Samba to pay interest
at Euribor plus 2.5%, (currently equal to 7.85%) on advances outstanding under
the Revolver and grant BNP a security interest in Samba accounts receivable. The
Revolver is subject to renewal in June 2000. As of March 31, 2000 the amount
outstanding under the Revolver was approximately $48,000.

NOTE E.  STOCKHOLDERS EQUITY

During January 2000, upon receipt of cleared funds received under a 1999 Private
Placement Offering, the Company completed the sale of 1,712,120 shares of Common
Stock for total gross proceeds of $565,000.

In January 2000, the Board of Directors authorized the Company to raise a
minimum of $5,000,000 in new equity, at a price of $1.50 per share. As of March
31, 2000, the Company had sold 859,997 shares of Common Stock for total gross
proceeds of $1,290,000. The Offering was completed on April 28, 2000 (see Note G
Subsequent Events).

On February 22, 2000 Azimuth Corporation exercised its right to convert the
$50,000 principal amount of a Note plus $1,250 in accrued interest due thereon
into 256,250 shares of Common Stock of the Company, at a conversion price of
$0.20 per share.

The Company issued 250,000 options to purchase Common Stock to non-employees for
consulting services during 1999. The options vest over three years and have
exercise prices of $0.394 and $0.406. The Company issued these options to
consultants as consideration for services that commenced during 1999 and will be
completed in 2001. As the measurement date of these options had not been
determined at March 31, 2000 the value of these options will be determined at
the end of each interim until the measurement date is determined. Accordingly, a
fair value of $1,013,000 was calculated at March 31, 2000 using the
Black-Scholes method. This value is charged to consulting expense over the term
of the consulting agreement. The amount of expense to be ultimately recognized
will vary depending on the market value of



                                       8
<PAGE>   9



the Common Stock at the end of each period. For the three-month period ended
March 31, 2000 the Company recorded $226,000 as consulting expense.

In January 2000 the Company issued 25,000 options to purchase Common Stock to a
non-employee for consulting services. The options were for consulting services
completed as of the date of the grant. The options vested immediately and have
an exercise price of $0.921. The fair value of the options, as calculated using
the Black-Scholes method, was estimated at $23,000 as of the date of the grant.
The Company recorded the entire $23,000 amount as compensation expense for the
three-months ended March 31, 2000.

In August 1999, the Company awarded restricted shares of Common Stock to two
outside consultants in accordance with the provisions of the Plan. Each award of
50,000 shares vests over a period of time, ranging from the date of grant to
three years. The consultant must maintain the consulting relationship with the
Company, except in the case of change of control or termination by the Company
without cause, during the entire vesting period. The measurement date of these
shares had not been determined at March 31, 2000 and therefore the value of
these shares will be based on the market value of the Common Stock at the end of
each interim reporting period until the measurement date is determined.
Accordingly, a fair value of $418,000 was calculated at March 31, 2000 using the
Black-Scholes method. This value is charged to expense over the term of the
consulting agreement. For the three-month period ended March 31, 2000 the
Company recorded $93,000 as consulting expense.

In applying the Black-Scholes method, the Company has used an expected dividend
yield of zero, a risk-free interest rate of 5%, a volatility factor of 185% and
a fair value of the underlying common shares of $4.1875 for options and
restricted stock issued to consultants and the closing market price on the date
of grant for warrants issued to consultants. The expected life equaled the term
of the options or restricted shares.

At March 31, 2000 and December 31, 1999, the Company had 450,000 stock
appreciation rights (SAR's) outstanding. These SAR's, issued in 1989, have an
exercise price of $0.30 and can be exercised through November 20, 2001. In
general, each SAR entitles the holder to receive upon exercise an amount equal
to the excess, if any, of the market value per share of Common Stock at the date
of exercise over the exercise price of the SAR, plus any dividends or
distributions per share made by the Company prior to the exercise date. In lieu
of making cash payments, the Company may elect to issue shares of Common Stock
on a one share for one SAR basis. The Company has recorded a compensation
expense in the amount of $1,518,750 for the three-months March 31, 2000 to
reflect the difference between the respective closing market prices of the
Company's common stock at March 31, 2000 and December 31, 1999 and the exercise
price of the SAR's.

NOTE F.  EQUITY INCENTIVE PLAN AND EMPLOYEE STOCK PURCHASE PLAN

The Ampersand Medical Corporation 1999 Equity Incentive Plan provides that the
Board may grant various forms of equity incentives, including but not limited to
Incentive Stock Options, Non - Qualified Stock Options, Stock Appreciation
Rights, and Restricted Stock Awards, to employees, directors, and consultants of
the Company.

General terms of the Plan are as follows:

Exercise Price. Fair market value based on the average bid and asked prices for
a share of the Company's common stock on the Over The Counter Bulletin Board for
a specified number of consecutive trading days prior to the grant date.

Vesting Period. Grants may be vested immediately or on varying schedules not
exceeding six years from the date of the grant.

Shares Available The maximum number of shares that may be issued under the 1999
Plan is 2,000,000.

A summary of the Company's stock option activity as of March 31, 2000 follows:


                                       9
<PAGE>   10

<TABLE>

                                                                                     Weighted Average
                                                                    Options            Exercise Price
                                                                 -----------          ---------------
<S>                                                                <C>                    <C>
Outstanding at Beginning of year                                   1,020,000              $0.3964
Granted during the quarter                                           125,000              $0.9210
Exercised                                                                ---
Forfeited                                                                ---
                                                                 -----------
Outstanding at March 31, 2000                                      1,145,000              $0.4537
                                                                 ===========
</TABLE>


The Ampersand Medical Employee Stock Purchase Plan offers employees the
opportunity to purchase shares of Common Stock of the Company, through a payroll
deduction plan, at 85% of the fair market value of such shares at specified
enrollment measurement dates. The aggregate number of shares available for
purchase under the Plan is 200,000. As of March 31, 2000 there was no activity
in the Plan.

NOTE G.  SUBSEQUENT EVENTS

Between April 1, 2000 and April 30, 2000 the Company sold 2,793,333 shares of
Common Stock at $1.50 generating total gross proceeds to the Company of
$4,190,000. These sales completed the Private Placement Offering begun in
January 2000.

As of result of the completion of the above Private Placement Offering, the
Company met the minimum new funding requirement specified in the 6% Convertible
Subordinated Note Agreement. $969,600 of the Notes and $61,658 of accrued
interest due thereon, was automatically converted into 5,156,294 shares of
Common Stock at a conversion price of $0.20 per share. The conversion price was
computed in accordance with the provisions of the Notes and represented an
adjustment of the original conversion price.

On April 10, 2000 the Company received $23,100 to exercise a warrant held by The
Research Works to purchase 70,000 of Common Stock at an exercise price of $0.33
per share.

NOTE H.  COMMITMENTS AND CONTINGENCIES

On March 29, 2000, to resolve a dispute between InPath and AccuMed
International, Inc. (AccuMed) over a Patent and Technology License Agreement
(the "License") dated September 4, 1998, including related payments due
thereunder, the Company and AccuMed signed a Letter Agreement amending the
License. The License, covering certain "Point of Care" related applications,
requires the payment of a minimum license fee of $500,000, against which InPath
had made payments of $400,000, a 7% royalty rate, and minimum royalty payments.
InPath is also required to make guaranteed minimum royalty payments of
$1,000,000 each during the second and third years of the License, $1,500,000
each during the fourth and fifth years, and $2,000,000 each year thereafter. The
License cannot be cancelled by InPath without the occurrence of a breach by
AccuMed, prior to the payment of $5,000,000 in royalties or 5 years, whichever
comes first. InPath may elect to terminate its exclusivity under the License
upon written notice to AccuMed at which time its obligation to make the minimum
required royalty payments cease. InPath would then only be obligated to make
royalty payments based on actual sales of products.

The new Agreement provides for the assignment of the License to the Company,
elimination of the minimum royalty payment schedule, and a reduction in the
royalty rate to 4%. Upon signing the new Agreement, the Company paid AccuMed the
remaining $100,000 minimum license fee, and agreed to make additional payments
totaling $500,000, issue a $100,000 convertible promissory note due one year
from the date the License Amendment is signed, and issue 128,571 shares of
Common Stock to AccuMed. The note is convertible at AccuMed's option into Common
Stock, at a conversion price of $3.50 per share and the Company has agreed to
provide AccuMed with price protection equal to $3.50 per share on the 128,571
shares of Common Stock until a measurement date 60 days following the date on
which the shares are registered and freely tradable. The additional cash
payments are characterized as advanced non-refundable royalty payments. The
$100,000 principle amount of the note and the 128,571 shares of Common Stock to
a value of $450,000 are also characterized as advanced non- refundable royalty
payments. The Company has also agreed to license an additional patent, software
and related technology on a non-exclusive basis for


                                       10
<PAGE>   11


use in certain automated screening applications. The Company will pay AccuMed
$100,000 as a one time license fee 90 days after signing of the new license or
at the time the patent, software, and related technology, is delivered to and
accepted by the Company.

Since the amendment to the License was not executed as of March 31, 2000, the
Company has continued to expense the minimum royalty payments, including
$250,000 during the three-months ended March 31, 2000, due under the License.



                                       11
<PAGE>   12



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


RESULTS OF OPERATIONS

OVERVIEW

See Note B to the Consolidated Financial Statements for background and
historical information on the Company. The Company is primarily engaged in the
design and development of new products to serve the market for cancer screening.
With the exception of the software products and services marketed by the
Company's wholly owned subsidiary, Samba Technologies, Sarl, all other products
have not as yet been introduced to the market for sale.

REVENUES

The Company's revenue for the three-months ended March 31, 2000 amounting to
$362,000 was derived entirely from the sale of Samba products and services, and
represents an increase of 16% over revenues of $311,000 for the three-months
ended March 31, 1999. The average exchange rate between the U.S. Dollar and the
Euro (the currency to which Samba's operating currency, the French Franc, is
fixed) reflects a decline in the value of the Euro to the U.S. Dollar of over
13% from the three-months ended March 31, 1999 to the three-months ended March
31, 2000. This decline in currency value reduced the translated value of Samba
revenue by approximately $50,000 and therefore reduced the percentage increase
in revenue for the quarter by approximately 50%.

COST AND EXPENSES

         COST OF GOODS SOLD

Cost of goods sold for the three-months ended March 31, 2000 amounted to
$190,000 an increase of 21% over the $157,000 reported for the quarter ended
March 31, 1999. The costs for both periods were entirely related to Samba
products and services. The slight reduction in gross profit on a quarter to
quarter comparison reflects a small change in the hardware software/service mix.

         RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses were $806,000 for the three-months ended March
31, 2000. These costs represent contracted development and consulting services,
manufacturing design services, contract research, and in-house development
personnel, laboratory expense, and research administration. R & D costs for the
three-months ended March 31, 1999 were $225,000. The increase of $581,000, or
258%, represents increased development cost of the instrument and disposable
components of the Company's InPath System for cervical cancer screening. The
development ramp-up began in the third quarter of 1999 and has continued at a
pace intended to get the Company's products into clinical trials as soon as
possible. During the three-months ended March 31, 2000 the Company also recorded
non-cash R & D consulting expense of $319,000 to reflect the current market
value of options and restricted stock granted to non-employee consultants during
1999. The options and stock are related to services to be performed by the
consultants over a three-year period and the charge for the 2000-quarter
reflects the adjusted amortization of their current value over the period.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses were $2,483,000 for the
three-months ended March 31, 2000, an increase of $2,019,000, or 435%, over the
$464,000 reported for the three-months ended March 31, 1999. During the
three-months ended March 31, 2000 the Company recorded a non-cash compensation
charge of $1,519,000 to reflect the value of outstanding SARs at March 31, 2000.
The Company recorded an additional non-cash compensation charge of $23,000 to
reflect the fair value of options granted to a non-




                                       12
<PAGE>   13



employee consultant for services already completed. The Company also recorded
$250,000 in royalty expense related to the Patent and Technology License (see
Note H Commitments and Contingencies). These three charges represent
approximately 89% of the total quarter to quarter increase. The balance of the
increase reflects the larger scale of operations of the Company during the
period.

         OTHER INCOME AND EXPENSE

The Company incurred approximately $21,000 in interest expense during the
three-month period ended March 31, 2000, an increase of $12,000, or 133%, over
the $9,000 reported for the three-months ended March 31, 1999. The increase
reflects the higher amount of 6% Convertible Notes outstanding during the three
months ending March 31, 2000 compared to the three months ending March 31, 1999.

         NET LOSS

The net loss for the three-months ended March 31, 2000 was $3,139,000, or $0.15
per share on 21,300,522 weighted average shares outstanding. The net loss for
the three-months ended March 31, 1999 was $543,000, or $0.05 per share on
12,000,000 shares outstanding. $1,816,000, or 70%, of the net loss increase in
the 2000-quarter is directly related to the recording of non-cash compensation
and consulting expenses related to options, restricted stock, and outstanding
SARs.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary cash requirements continue to be for research, development
and design expenses of its InPath System products and the conversion of those
designs through the process of clinical trials and manufacturing. At March 31,
2000 the Company had cash on hand of $211,000, an increase of $175,000 over cash
on hand at the previous year-end. During April 2000, the Company received an
additional $4,190,000 in total gross proceeds from the sale of Common Stock in a
Private Placement Offering.

During January 2000, upon receipt of $565,000 the Company completed the sale of
Common Stock under a 1999 Private Placement Offering.

In January 2000, the Board of Directors authorized the Company to raise a
minimum of $5,000,000 in new equity, at a price of $1.50 per share. As of March
31, 2000 the Company had received $1,290,000 in total gross proceeds under this
offering.

On February 22, 2000 Azimuth Corporation exercised its right to convert the
$50,000 principal amount of a note plus $1,250 in accrued interest into shares
of Common Stock of the Company.

On April 10, 2000 the Company received $23,100 to exercise a warrant to purchase
Common Stock held by The Research Works (see Note G Subsequent Events).

As a result of the completion of the above mentioned $5,000,000 Private
Placement Offering, $969,600 in principal of 6% Convertible Subordinated Notes
Due 2000 plus $61,658 in accrued interest was automatically converted into
Common Stock of the Company (see Note G Subsequent Events).

During the three months ended March 31, 2000 the Company's wholly owned
subsidiary, Samba Technologies, Sarl, reduced borrowings under its revolving
credit by $86,000.

On March 29, 2000, to resolve a dispute between InPath and AccuMed
International, Inc. (AccuMed) over a Patent and Technology License Agreement
(the "License") dated September 4, 1998, including related payments due
thereunder, the Company and AccuMed signed a Letter Agreement amending the
License. The License, covering certain "Point of Care" related applications,
requires the payment of a minimum license fee of $500,000, against which InPath
had made payments of $400,000, a 7% royalty rate, and minimum royalty payments.
InPath is also required to make minimum royalty payments of $1,000,000 each
during the second and third years of the License, $1,500,000 each during the
fourth and fifth years, and $2,000,000 each year thereafter. The License cannot
be cancelled by InPath without the occurrence of


                                       13
<PAGE>   14


a breach by AccuMed, prior to the payment of $5,000,000 in royalties or 5 years,
whichever comes first. InPath may elect to terminate its exclusivity under the
License upon written notice to AccuMed at which time its obligation to make the
minimum required royalty payments cease. InPath would then only be obligated to
make royalty payments based on actual sales of products.

The new Agreement provides for the assignment of the License to the Company,
elimination of the minimum royalty payment schedule, and a reduction in the
royalty rate to 4%. Upon signing the new Agreement, the Company paid AccuMed the
remaining $100,000 minimum license fee, and agreed to make additional payments
totaling $500,000, issue a $100,000 convertible promissory note due one year
from the date the License Amendment is signed, and issue 128,571 shares of
Common Stock to AccuMed. The note is convertible at AccuMed's option into Common
Stock, at a conversion price of $3.50 per share and the Company has agreed to
provide AccuMed with price protection equal to $3.50 per share on the 128,571
shares of Common Stock until a measurement date 60 days following the date on
which the shares are registered and freely tradable. The additional cash
payments are characterized as advanced non-refundable royalty payments. The
$100,000 principle amount of the note and the 128,571 shares of Common Stock to
a value of $450,000 are also characterized as advanced non- refundable royalty
payments. The Company has also agreed to license an additional patent, software
and related technology on a non-exclusive basis for use in certain automated
screening applications. The Company will pay AccuMed $100,000 as a one time
license fee 90 days after signing of the new license or at the time the patent,
software, and related technology, is delivered to and accepted by the Company.

Since the amendment to the License was not executed as of March 31, 2000, the
Company has continued to expense the minimum royalty payments, including
$250,000 during the three-months ended March 31, 2000, due under the License.

The Company has incurred significant net losses since its inception. The Company
expects that significant on-going operating expenditures will be necessary to
successfully implement its business plan and develop, manufacture and market its
products. These circumstances raise substantial doubt about the Company's
ability to continue as a going concern. Implementation of the Company's plans
and its ability to continue as a going concern may depend upon its acquiring
additional financing. Management's plans include efforts to obtain additional
capital. The Company has been successful in raising new equity and reducing debt
through the conversion of notes and accrued interest into Common Stock as
outlined above. However, there can be no assurance that the Company will
continue to be successful in raising capital should the need for such capital
arise in the future. If the Company is unable to obtain additional financing,
should the need arise, or generate profitable sales revenues, management may be
required to curtail the Company's product development and other activities and
may be forced to cease operations.

The Company's internally used computer equipment is Year 2000 compliant. The
software suites and systems currently sold by the Samba are also Year 2000
compliant. Older installations of the Samba software suite may not be Year 2000
compliant, and Samba has been contracted by some customers to upgrade their
systems to Year 2000 compliance. The Company does not anticipate that it will
incur any additional material costs related to compliance with Year 2000 issues.



                                       14
<PAGE>   15



CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
                   SECURITIES LITIGATION REFORM ACT OF 1995.

Certain statements throughout this report are forward looking. These statements
are based on the Company's current expectations and involve many risks and
uncertainties. Some of these risks and uncertainties are factors that affect all
international businesses, while others are specific to the Company and the areas
of the medical products industry in which it operates.

The factors below in some cases have affected and could affect the Company's
actual results, causing results to differ, possibly materially, from those
expressed in this report's forward-looking statements. These factors include:
economic conditions; technological advances in the medical field; demand and
market acceptance risks for new and existing products, technologies, and
healthcare services; the impact of competitive products and pricing;
manufacturing capacity; new plant start-ups; U.S. and international regulatory,
trade, and tax policies; product development risks, including technological
difficulties; ability to enforce patents; and unforeseen foreign regulatory and
commercialization factors.

Currency fluctuations are also a significant variable for global companies,
especially fluctuations in local currencies where hedging opportunities are
unreasonably expensive or unavailable. If the value of the U.S. dollar
strengthens relative to the currencies of the countries in which the Company
markets or intends to market its products, the Company's ability to achieve
projected sales and net earnings in such countries could be adversely affected.

The Company believes that its expectations with regard to forward-looking
statements are based upon reasonable assumptions within the bounds of its
knowledge of its business and operations, but there can be no assurance that the
actual results or performance of the Company will conform to any future results
or performance expressed or implied by such forward-looking statements.

         Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The market risk inherent in the Company's financial statements is the potential
loss in fair value arising from adverse changes in interest rates. The Company
does not engage in any hedge transactions or use derivative financial
instruments to reduce its exposure to interest rate changes since all of the
Company's indebtedness is financed at fixed rates. At March 31, 2000, the
carrying amount of the Company's debt instruments approximated their fair value.
In addition, as of March 31, 2000, the Company was not exposed to any material
foreign-currency, commodity-price, equity-price or other type of market or price
risk. The Company's wholly owned subsidiary, Samba, conducts the majority of its
operations in Europe using EURO and local European currencies. At March 31, 2000
the Company has recorded a negative cumulative translation adjustment of
($83,000) reflecting the current valuation of the Company's investment in and
current account with Samba.




                                       15
<PAGE>   16




Part II. Other Information

         Item 1   Legal Proceedings

                  None

         Item 2   Changes in Securities

During the three-month period ended March 31, 2000, the Company sold 2,572,117
shares of Common Stock to several private investors for a total cash sales price
of $1,855,000. The parties relied on the exemption contained in Section 4(2) of
the Act to exempt the shares from registration under the Act. The Company did
not engage in any general solicitation or advertising in connection with the
sale. The private investors were "accredited investors" under the Act and were
given access to the types of information that registration would disclose.

On February 22, 2000, Azimuth Corporation, a company controlled by Alexander M.
Milley, a director and significant stockholder, exercised its right to convert
the $50,000 principal plus $1,250 in interest due on a convertible note payable
into 256,250 shares of Common Stock of the Company. The parties relied on the
exemption contained in Section 4(2) of the Act to exempt the shares from
registration under the Act.

         Item 3   Defaults on Senior Securities

                  None

         Item 4    Submission of Matters to Vote of Security Holders

                  None

         Item 5    Other Information

                  None

         Item 6   Exhibits and Reports on Form 8-K

                  Exhibits          The following exhibits are filed herewith:

                           Exhibit Number            Description
                                 27                  Financial Data Schedule

                  Reports on Form 8-K

                           None



                                       16
<PAGE>   17




                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                      Ampersand Medical Corporation

                                      /s/ Leonard R. Prange
                                      ---------------------
                                      Leonard R. Prange
                                      ---------------------
                                      President, Chief Operating Officer, Chief
                                         Financial Officer and Secretary
                                               Principal Accounting Officer

Date:    May 15, 2000
         ------------