<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q

               Quarterly Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

                      For the quarter ended March 31, 2000

                         Commission File number: 1-14831

                                DIGITAL LAVA INC.
             (Exact name of registrant as specified in its charter)

          DELAWARE                                              95-4584080
          --------                                              ----------
(State or other jurisdiction of                           (IRS Employer Id. No.)
incorporation or organization)

                          13160 MINDANAO WAY, SUITE 350
                            MARINA DEL REY, CA 90292
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (310) 577-0200


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

As of April 27, 2000, the Registrant had 4,680,073 shares of its $.0001 par
value Common Stock issued and outstanding.


<PAGE>

<TABLE>
<CAPTION>

                                Digital Lava Inc.

                                Table of Contents

<S>     <C>                <C>                                                                            <C>
Part I                     FINANCIAL INFORMATION

         Item 1.           Financial Statements

                           Balance Sheet  at March 31, 2000 and December 31, 1999                         3

                           Statement of Operations, Three Months ended March 31, 2000                     4
                           and 1999

                           Statement of Cash Flows for the three months
                           ended March 31, 2000 and 1999                                                  5

                           Notes to Unaudited Financial Statements                                        6

         Item 2.           Management's Discussion and Analysis of
                              Financial Condition and Results of Operations                               9

Part II                    OTHER INFORMATION

         Item 1.           Legal Proceedings                                                              12

         Item 2.           Changes in Securities                                                          12

         Item 3.           Defaults upon Senior Securities                                                12

         Item 4.           Submission of Matters to Vote of Security Holders                              12

         Item 5.           Other Information                                                              12

         Item 6.           Exhibits and Reports on Form 8-K                                               12

Signature
</TABLE>


                                       2

<PAGE>

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                DIGITAL LAVA INC.
                                  BALANCE SHEET
                                   (UNAUDITED)
                                                                        MARCH 31,              DECEMBER 31,
                                                                          2000                    1999
                                                                       -----------             -----------
                                     ASSETS
<S>                                                                <C>                     <C>
Current Assets:
      Cash and cash equivalents...............................     $     1,604,804         $     708,031
      Short term investments..................................             988,292             2,956,287
      Accounts receivable.....................................             967,091             1,174,689
      Other current assets....................................              95,319               142,796
                                                                       -----------            ----------
              Total current assets............................           3,655,506             4,981,803
Fixed assets, net.............................................           1,252,096             1,204,578
Restricted cash...............................................             486,455               486,455
Other assets..................................................             221,670               237,462
                                                                       -----------            ----------
                                                                   $     5,615,727          $  6,910,298
                                                                       ===========            ==========
                                     LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
      Accounts payable........................................       $     286,574          $    186,362
      Current portion of capital lease........................              88,232                75,869
      Accrued expenses and other current liabilities..........             447,423               609,026
      Deferred rent...........................................             300,511               291,953
      Deferred revenue........................................             193,507               279,184
                                                                       -----------            ----------
              Total current liabilities.......................           1,316,247             1,442,394
                                                                       -----------            ----------

Long term portion of capital lease............................             182,558               166,382

Stockholders' equity:
      Convertible  preferred  stock - $.0001 par value;
           5,000,000 shares authorized; none outstanding
          at March 31, 2000 and December 31, 1999.............                 --                    --
      Common stock, $0.0001 par value; 35,000,000 shares
              authorized; 4,673,607 and 4,636,887 shares
              issued and outstanding at March 31, 2000 and
            December 31, 1999, respectively...................                466                    463
      Additional paid-in capital..............................          26,581,936            26,237,992
      Deferred compensation...................................             (10,157)              (16,928)
      Accumulated deficit.....................................         (22,447,688)          (20,904,991)
      Accumulated other comprehensive loss....................              (7,635)              (15,014)
                                                                       -----------            ----------
              Total stockholders' equity......................           4,116,922             5,301,522
                                                                       -----------            ----------
                                                                        $5,615,727          $  6,910,298
                                                                       ===========            ==========
</TABLE>

See accompanying notes to the unaudited financial statements.


                                       3

<PAGE>


                                DIGITAL LAVA INC.
                             STATEMENT OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED MARCH 31,
                                                                           ---------------------------
                                                                           2000                   1999
                                                                           ----                   ----
<S>                                                                   <C>                       <C>
Revenues:
      Software licenses....................................           $   410,083               $ 92,158
      Services.............................................               625,361                 84,721
                                                                        ---------              ---------
              Total revenues...............................             1,035,444                176,879
                                                                        ---------              ---------
Cost of revenues:
      Cost of software licenses............................                 3,433                  2,044
      Cost of services.....................................               233,724                 38,426
                                                                        ---------              ---------
              Total cost of revenues.......................               237,157                 40,470
                                                                        ---------              ---------
              Gross profit.................................               798,287                136,409
                                                                        ---------              ---------
Operating costs and expenses:
      Selling, general and administrative..................             2,071,196              1,061,047
      Research and development.............................               303,128                134,463
                                                                        ---------              ---------
              Total operating costs and
                  expenses.................................             2,374,324              1,195,510
                                                                        ---------              ---------
              Loss from operations.........................            (1,576,037)            (1,059,101)

Other income/(expense), net................................                33,341               (177,434)
                                                                        ---------              ---------
          Loss before extraordinary item...................            (1,542,696)            (1,236,535)
Extraordinary loss on extinguishment of debt...............                    --             (3,672,656)
                                                                        ---------              ---------

Net loss...................................................           ($1,542,696)           ($4,909,191)
                                                                        =========              =========
Net loss available to common stockholders..................           ($1,542,696)           ($5,569,214)
                                                                        =========              =========
Basic and diluted net loss per share:

          Loss before extraordinary item...................               $  (.33)           $     (.99)
              Extraordinary loss on extinguishment of debt--                   --                 (1.93)
                                                                        ---------             ---------
Net loss...................................................                 ($.33)               ($2.92)
                                                                        =========             =========
Weighted average common shares
      used in basic and diluted loss per
        share..............................................             4,643,213              1,904,783
                                                                        =========              =========
</TABLE>


See accompanying notes to the unaudited financial statements.


                                       4

<PAGE>


                                DIGITAL LAVA INC.
                             STATEMENT OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                           THREE MONTHS ENDED MARCH 31,
                                                                            ---------------------------
                                                                            2000                  1999
                                                                            ----                  ----
<S>                                                                     <C>                  <C>
Cash flows used in operating activities:
    Net loss..................................................          $(1,542,697)         $(4,909,191)
    Adjustments to reconcile net loss
        to net cash used in operating activities:
           Extraordinary loss on extinguishment of debt.......                   --            3,672,656
            Deferred revenues.................................              (85,677)             (35,304)
            Depreciation and amortization.....................              109,080               13,177
            Amortization of debt discount.....................                   --              130,758
            Compensation from grant of non-employee
                 warrants.....................................                6,771                   --
        Changes in assets and liabilities
            affecting operating cash flows:
                Accounts receivable...........................              207,598              110,406
                Other assets..................................               63,269              (78,065)
                Accounts payable..............................              100,212             (555,006)
                Accrued interest..............................                   --             (523,952)
                Accrued expenses and other current liabilities             (161,603)            (359,364)
                Deferred rent.................................                8,558                   --
                                                                          ---------            ---------
Net cash used in operating activities.........................           (1,294,489)          (2,553,885)
                                                                          ---------            ---------
Cash flows used in investing activities:

    Purchases of short term investments.......................                   --           (5,368,446)
    Sales of short term investments...........................            1,975,374                   --
    Acquisition of fixed assets...............................             (108,008)             (52,478)
                                                                          ---------            ---------
Net cash used in investing activities.........................            1,867,366           (5,420,924)
                                                                          ---------            ---------
Cash flows from financing activities:

    Payments on capital lease obligations.....................              (20,051)                  --
    Repayment of notes payable................................                   --           (3,923,500)
    Proceeds from issuance of common stock ...................              343,947           19,831,011
    Cost of common stock issuance.............................                  ---           (2,832,482)
                                                                          ---------            ---------
Net cash provided by financing activities.....................              323,896           13,075,029
                                                                          ---------            ---------
Net increase in cash and cash equivalents.....................              896,773            5,120,220
Cash and cash equivalents at beginning of
    period....................................................              708,031               30,893
                                                                          ---------            ---------
Cash and cash equivalents at end of period....................          $ 1,604,804          $ 5,151,113
                                                                          =========            =========
</TABLE>

See accompanying notes to the unaudited financial statements.


                                       5

<PAGE>


                                DIGITAL LAVA INC.
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

1.   THE COMPANY

     Digital Lava Inc., a Delaware corporation (the "Company" or "Digital
Lava"), is a provider of software products and services related to the use of
rich mixed media for corporate training, communications, research and other
applications. Digital Lava's product line includes VideoVisor Professional
(vvPro), VideoVisorWeb (vvWeb), vPublisher and HotFoot. VideoVisorProfessional
and VideoVisorWeb are proprietary viewers that allow the user to access the
content published in the Digital Lava format. vPublisher is a proprietary
authoring software tool that allows the integration of text, data, voice, video
and web links into an interactive desktop application, known as a VideoCapsule.
VideoCapsule files are accessed by either the vvPro software viewer on compact
discs and private Intranets or via the vvWeb software viewer on the internet.
vvPro and vvWeb allow the user to individually manage, manipulate and navigate
the VideoCapsule information on their computer screen. Hotfoot allows users to
add streaming audio to Power Point presentations and deliver them electronically
to single or multiple recipients via email or hosting.

2.   BASIS OF PRESENTATION

     The accompanying balance sheet as of March 31, 2000 and the statements of
operations and cash flows for the three month periods ended March 31, 2000 and
1999 have been prepared by the Company without audit. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation have been included. The results of operations
for the three month period ended March 31, 2000 are not necessarily indicative
of the operating results for the full year.

     Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Company's Form 10-KSB for the year ended December 31, 1999.

3.   NET LOSS PER SHARE

         Basic loss per share is computed by dividing net loss available to
common stockholders by the weighted average number of common shares outstanding
during the period. Diluted loss per share gives effect to all dilutive potential
common shares outstanding during a period. In computing diluted loss per share,
the treasury stock method is used in determining the number of shares assumed to
be purchased from the conversion of common stock equivalents.

         Because their effects are anti-dilutive, diluted net loss per share for
the periods ended March 31, 2000 and 1999 do not include the effects of:


                                       6

<PAGE>

<TABLE>
<CAPTION>
                                                                           Three Months Ended March 31,
                                                                  ------------------------- ----------------------
                                                                            2000                    1999
                                                                  ------------------------- ----------------------
<S>                                                                             <C>                     <C>
Stock options outstanding ..................................                      907,734                242,897
Warrants to purchase common stock...........................                    2,248,444              1,921,421

                                                                  ------------------------- ----------------------
                             Total..........................                     3,156,178              2,164,318
                                                                  ========================= ======================
</TABLE>


     Net loss available to common stockholders in 1999 represents net loss for
the three months ended March 31, 1999 increased by a dividend of $660,023
recorded in February 1999 to the then holders of Series B and C convertible
preferred stock in conjunction with the change in conversion rates of such
shares.

4.       COMPREHENSIVE LOSS

     Statement of Financial Accounting Standards No. 130 requires disclosure of
the total non-stockholder changes in equity resulting from revenue, expense, and
gains and losses, including those that do not affect retained earnings. The
Company's accumulated other comprehensive loss included the following:

                                             Three Months Ended March 31
                                      ------------------------------------------
                                          2000                           1999
                                          ----                           ----
Net loss............................  $1,542,697                      $4,909,191

Unrealized gain on
 available for sale securities......       7,635                             --
                                     -----------                     -----------

Comprehensive loss..................  $1,550,332                      $4,909,191
                                      ==========                      ==========


5.   RECENT ACCOUNTING PRONOUNCEMENTS

      In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulleting ("SAB") No. 101, "Revenue Recognition in Financial
Statements". SAB No. 101 provides the SEC staff's views in applying generally
accepted accounting principles to selected revenue recognition issues. SAB. No.
101, as amended, is required to be adopted by registrants no later than their
second fiscal quarter of the fiscal year beginning after December 15, 1999. The
Company is currently analyzing SAB No. 101, but believes that adoption of this
new accounting principle will not have a material effect on the Company's
financial statements.


                                       7

<PAGE>




6.  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

     Accrued expenses and other current liabilities is comprised of the
following:

                                                2000                      1999
                                                ----                      ----
Accrued salaries and wage................    $  83,628                $  215,853
Accrued taxes - Other....................      150,000                   150,000
Other current liabilities................      213,795                   243,173
                                               -------                   -------
        Total............................     $447,423                  $609,026
                                              ========                  ========



7.  NON-CASH SUPPLEMENTAL DISCLOSURE

         Non-cash items occurring in the three-month period ended March 31, 2000
included the following:

<TABLE>
<CAPTION>
                                                                                         2000               1999
                                                                                   --------------     -----------------
<S>                                                                                 <C>                  <C>
Conversion of notes payable, plus accrued interest, to
  common stock..................................................................           --            $1,690,556
Extraordinary loss in conjunction with the conversion of debt, conversion of
     warrants to purchase series A convertible
     preferred stock and common stock...........................................           --            $3,672,656
Issuance of warrants to underwriter to purchase common stock and
     warrants to purchase redeemable common stock warrants......................           --            $1,892,400
Dividend to series B and series C convertible preferred stockholders in
     connection with modification of conversion rates...........................           --            $  660,023
Change in unrealized loss on available for sale securities......................    $   7,379                    --
Purchase of equipment under capital lease.......................................    $  48,591                    --
</TABLE>


                                                                 8

<PAGE>


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

     The statements contained in this document that are not purely historical
are forward-looking statements concerning the business and products of the
Company. Actual results may differ from those projected or implied by such
forward-looking statements depending on a number of risks and uncertainties
including, but not limited to, the following: market acceptance of Digital
Lava's products and services, the amount of resources Digital Lava devotes to
investments in its products, the resources Digital Lava devotes to marketing and
selling its services and its brand promotions and other factors. Other risks
inherent in the business of the Company are described in the Company's
prospectus dated February 17, 1999 on Form SB-2. The Company undertakes no
obligation to revise or update any forward-looking statements after the date
hereof.

OVERVIEW

     Digital Lava invested significant resources in sales, marketing, and
development activities during the quarter ended March 31, 2000. Digital Lava
believes that its success depends largely on building superior technology and
quality into its products, extending its technological lead on the competition,
development of new products and developing brand recognition early in a
product's life cycle. Accordingly, Digital Lava expects to continue spending
heavily on these activities in the near future. Despite these heavy investments
in marketing and product development, growth in software license fees and
service revenue may not occur in the future. In light of Digital Lava's limited
operating history, rapid changes in technology and increased marketing of its
products, Digital Lava believes that period-to-period comparisons of its
revenues and operating results, including its gross profit and operating
expenses as a percentage of total net revenues, are not necessarily meaningful
and should not be relied upon as indications of future performance.

     Digital Lava has incurred significant net losses and negative cash flows
from operations since inception, and as of March 31, 2000, had an accumulated
deficit of $22,447,688. Digital Lava intends to continue to invest heavily in
marketing and promotion, expanding its sales operations, and technology
development. As a result, Digital Lava believes that it will continue to incur
operating losses and negative cash flows from operations for the foreseeable
future. There can be no assurance that Digital Lava will be able to achieve or
sustain revenue growth, profitability, or positive cash flow on either a
quarterly or annual basis.

RESULTS OF OPERATIONS

COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2000 TO THE THREE MONTHS ENDED
MARCH 31, 1999

   REVENUES

     Revenues increased to $1,035,444 for the quarter ended March 31, 2000 from
$176,879 for the quarter ended March 31, 1999. The increase of $858,565 or
485.4% was due to increases in software license sales due in part to sales of
vPublisher software licenses, as well as an increase in publishing services
provided. Software license revenues accounted for approximately 39.6% and 52.1%
of revenues for the quarter ended March 31, 2000 and 1999, respectively.
Services revenues accounted for approximately 60.4% and 47.9% of revenues for
the quarter ended March 31, 1999, respectively.


                                        9


<PAGE>

Two customers accounted for 57.3% of revenues for the three months ended March
31, 2000 while a separate customer accounted for 19.2% of revenues for the three
months ended March 31, 1999. Digital Lava anticipates that services and software
license revenue will begin to contribute equally to total revenues for the
foreseeable future as the Company begins to sell it's vPublisher and HotFoot
products.

   COST OF REVENUES

     Cost of revenues consist primarily of the cost of materials, freight and
applicable labor incurred for the delivery of the product or service. Costs of
revenues increased to $237,157, or 22.9% of revenues, for the quarter ended
March 31, 2000 from $40,470, or 22.9% of revenues, for the quarter ended March
31, 1999. The increase was primarily due to the labor and benefit cost
associated with the increased level of services related revenue during the
quarter.

   OPERATING COSTS AND EXPENSES

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses consist primarily of salaries, taxes and benefits and
related costs for general corporate functions, including executive management,
finance, accounting, facilities, legal, fees for professional services and
depreciation and amortization. Selling, general and administrative expenses
increased to $2,071,196 for the quarter ended March 31, 2000 from $1,061,047 for
the quarter ended March 31, 1999. The increase was primarily due to the increase
in fixed infrastructure and additional personnel expenses. Digital Lava expects
that selling, general and administrative expenses will increase in absolute
dollars as Digital Lava continues to invest in expanded marketing activities and
incurs expense related to the growth of the business; however, selling, general
and administrative expense are presently anticipated to decline as a percentage
of revenues.

     RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
consist of expenditures related to technology and software development expenses.
Research and development expenses increased to $303,128, or 29.3% of revenues,
for the quarter ended March 31, 2000 from $134,463, or 76.0% of revenues, for
the quarter ended March 31, 1999. The dollar increase was primarily due to the
increased level of personnel employed after the IPO in February 1999. Digital
Lava believes that significant investments in technology and content development
are required to maintain a technological lead and remain competitive and,
therefore, expects that its research and development expenses will increase in
absolute dollars for the foreseeable future; however, research and development
expenses are presently anticipated to decline as a percentage of revenues.

     OTHER INCOME/(EXPENSE), NET. Other income includes income earned from the
short term investments of cash balances. Other expense includes gains and losses
on sales of investments and interest expense related to Digital Lava's financing
obligations in 1999. Other income increased to a net income of $33,341 for the
quarter ended March 31, 2000 from a net expense level of $177,434 for the
quarter ended March 31, 1999. The decrease in expense was primarily due to
reduced interest expense due to the retirement of notes payable issued by
Digital Lava in conjunction with the completion of the initial public offering.
The other income was derived primarily from the interest on short term
investments.


                                       10
<PAGE>

     EXTRAORDINARY  ITEM. In the quarter ended March 31, 1999, the Company
recorded an extraordinary  charge of $3,672,656  associated with the
extinguishment of debt.

     NET LOSS. For the quarter ended March 31, 2000, Digital Lava's loss from
operations totaled $1,542,697 as compared to $4,909,191 for the quarter ended
March 31, 1999.

LIQUIDITY AND CAPITAL RESOURCES

     On February 22, 1999, Digital Lava completed an initial public offering of
1,200,000 units, each unit consisting of two shares of common stock and one
redeemable warrant, and received aggregate proceeds of $18,120,000 and net
proceeds of $14,596,446. On March 30, 1999 Digital Lava completed the exercise
by its underwriter of the over-allotment option of 113,312 units and received
aggregate proceeds of $1,711,011 and net proceeds of $1,513,567. During the
period from completion of the offering through March 31, 2000, Digital Lava has
used approximately (1) $4,489,000 of the proceeds to repay notes; (2) $1,309,000
for product development expenses; (3) $3,137,000 for sales and marketing
expenses; (4) $1,812,000 for facilities and other capital expenditures; and (5)
$2,770,000 for working capital and general corporate purposes.

     Net cash used in operating activities was $1,265,950 for the three months
ended March 31, 2000 as compared to $2,553,885 for the three months ended March
31, 1999. The decrease in use of cash from operations was primarily due to the
reduction in the net loss incurred, the collection of receivables and reduced
payments of accounts payable partially offset by the elimination of the
extraordinary loss.

     Cash flows used in investing activities was $1,818,776 for the three months
ended March 31, 2000 as compared to $5,420,924 for the three months ended March
31, 1999 resulting primarily from the decrease in purchases of short-term
securities partially offset by the increase in the sales of short-term
securities.

     Net cash provided by financing activities was $343,947 for the three months
ended March 31, 2000 as compared to $13,075,029 for the three months ended March
31, 1999. The decrease was primarily due to the net proceeds received from the
completion of the Company's initial public offering and the underwriter's
exercise of their over-allotment option in 1999, while only minor exercises of
outstanding warrants and options took place in 2000.

     Digital Lava's capital requirements depend on numerous factors, including
market acceptance of Digital Lava's products and services, the amount of
resources Digital Lava devotes to investments in its products, the resources
Digital Lava devotes to marketing and selling its services and its brand
promotions and other factors. Digital Lava has experienced a substantial
increase in its operations and capital expenditures since its inception
consistent with the growth in Digital Lava's operations and staffing, and
anticipates that this will continue for the foreseeable future. Additionally,
Digital Lava will continue to evaluate possible investments in businesses,
products and technologies, and plans to expand its sales and marketing programs
and conduct more aggressive brand promotions.

     Digital Lava currently anticipates that current cash balances, short-term
investments and cash provided by operations will be sufficient to meet its
anticipated needs for working capital and capital expenditures for at least the
next 6 months. Digital Lava anticipates it will be required to seek additional
funding either through additional public or private sales of its securities or
through debt financing. Such options are currently under consideration, however
the outcome of such efforts to raise working capital cannot be assured.


                                       11

<PAGE>


                                     Part II

                                Other Information

Item 1        Legal Proceedings                                             NONE

Item 2        Changes in Securities                                         NONE

Item 3        Defaults upon 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
                Ex-27 Financial Data Schedule


                                       12

<PAGE>


                                 SIGNATURE PAGE

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.

                                                     DIGITAL LAVA INC.
              Dated: May 15, 2000

                               by: /S/ DANNY GAMPE
                                   ---------------------------------------------
                                   Danny Gampe
                                   Chief Financial Officer
                                   (Principal Accounting and Financial Officer)
                                   and Vice President, Finance


                                       13