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                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                            ------------------------


                                   FORM 10-KSB

(Mark One)

/x/  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934 For the fiscal year ended December 31, 2000

                                  OR

/ /  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934 For the transition period from _____________ to ______________

                        Commission File Number: 000-21415
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                             CUseeMe Networks, Inc.
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                 (Name of Small Business Issuer in Its Charter)

          Delaware                                       04-3151064
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(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
Incorporation or Organization)

542 Amherst Street, Nashua, New Hampshire                  03063
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 (Address of Principal Executive Offices)               (Zip Code)

                                 (603) 886-9050
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                (Issuer's Telephone Number, Including Area Code)

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Securities registered under Section 12(b) of the Exchange Act:  None
                                                                ----

Securities registered under Section 12(g) of the Exchange Act:
Common Stock, Par Value $.01 Per Share
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Check whether the issuer: (1) filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days:  Yes   X    No
                                                       -----     ------

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to be
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB: [X].

State issuer's revenues for its most recent fiscal year:  $12,070,817.

The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the Registrant as of March 28, 2001, was $12,778,256, based on
a total of 10,760,637 shares held by non-affiliates and on the last published
sale price on the Nasdaq National Market of $1.1875.

The number of shares of the Registrant's common stock outstanding as of March
28, 2001 was 12,353,818.

Transitional Small Business Disclosure Format (check one):  Yes      No  X  .
                                                                ---     ---
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                                TABLE OF CONTENTS

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                                     PART I

<S>           <C>                                                                                                <C>
   ITEM 1.      DESCRIPTION OF BUSINESS...........................................................................1
   ITEM 2.      DESCRIPTION OF PROPERTY..........................................................................16
   ITEM 3.      LEGAL PROCEEDINGS................................................................................16
   ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............................................17

                                     PART II

   ITEM 5.      MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.........................................17
   ITEM 6.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND  RESULTS OF OPERATIONS...........18
   ITEM 7.      FINANCIAL STATEMENTS.............................................................................24
   ITEM 8.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND  FINANCIAL DISCLOSURE............24

                                    PART III

   ITEM 9.      DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;  COMPLIANCE WITH SECTION 16(a) OF
                THE EXCHANGE ACT.................................................................................25
   ITEM 10.     EXECUTIVE COMPENSATION...........................................................................27
   ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................................31
   ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................................................32
   ITEM 13.     EXHIBITS AND REPORTS ON FORM 8-K.................................................................32
   SIGNATURES ...................................................................................................34

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</TABLE>

     THIS ANNUAL REPORT CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING
OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934. ANY STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF
HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING
THE FOREGOING, THE WORDS "BELIEVES," "ANTICIPATES," "PLANS," "EXPECTS" AND
SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THE
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS THAT MAY CAUSE OUR ACTUAL RESULTS, PERFORMANCE AND ACHIEVEMENTS TO
DIFFER MATERIALLY FROM THOSE INDICATED BY THE FORWARD-LOOKING STATEMENTS,
INCLUDING THE FACTORS SET FORTH BELOW IN "ITEM 1. DESCRIPTION OF
BUSINESS--FACTORS THAT MAY AFFECT OUR OPERATING RESULTS AND STOCK PRICE."

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     CUSEEME is our registered trademark, and CUSEEME CONFERENCE SERVER and
CUSEEME WEB are our trademarks. This annual report also contains trademarks and
trade names of other companies.

<PAGE>

                                     PART I

ITEM 1.     DESCRIPTION OF BUSINESS

RECENT DEVELOPMENT

     On March 22, 2001, we entered into a merger agreement with First Virtual
Communications and its subsidiary, FVC Acquisition Corp. In this agreement, the
parties agreed that FVC Acquisition Corp. would merge with and into our company,
and our company would become a wholly owned subsidiary of First Virtual. The
merger is subject to a number of closing conditions, including approval by our
stockholders and by the stockholders of First Virtual.

     If the merger is completed, First Virtual will issue approximately 1.254
shares of its common stock in exchange for each outstanding share of our common
stock. The shares issued by First Virtual would represent approximately 47% of
First Virtual's outstanding shares after completion of the merger.

OVERVIEW

     We develop and market software products that enable voice and video
communications over the Internet and networks based on the Internet Protocol, or
IP. We provide integrated software solutions for large-scale deployments of
voice and video communications to computer desktops. These solutions facilitate
standards-based communications and collaboration, both between individual
participants and among groups of participants, over the Internet, corporate
intranets and virtual private networks.

     Our products include: CUseeMe Conference Server, a software-based
multipoint control unit, or MCU, that supports IP-based conferences among
multiple participants; and CUseeMe Pro, our IP-based desktop videoconferencing
client software. In late March 2001, we introduced CUseeMe Videoware, which
provides a rich media communications environment for desktop conferencing that
can be integrated with an enterprise's existing messaging and collaboration
environments such as Microsoft Exchange and Outlook. Our CUseeMe Web software
developer's toolkit, which is also an integrated component of CUseeMe Videoware,
enables web developers to embed interactive voice, video, collaboration and
conference control features into web pages or Internet-based applications.

     Our customers include enterprises--such as businesses (including service
providers and portals), educational institutions and government
organizations--as well as individual consumers. We sell our software products to
these customers and to original equipment manufacturers that bundle our software
with other products. We work with system integrators, value-added resellers and
other partners to deploy our solutions worldwide.

     We were incorporated under Delaware law in April 1992 under the name Visual
International Inc. We changed our name to White Pine Software, Inc. in December
1993 and to CUseeMe Networks, Inc. in May 2000.

INDUSTRY BACKGROUND

     Over the past decade, many large businesses have invested significantly in
dedicated, circuit-switched videoconferencing systems and supporting networks
maintained by dedicated technical support personnel. These businesses have
recognized the value of meeting face-to-face with key constituents such as
employees, customers and suppliers and, in particular, of facilitating
interaction with branch operations and remote workers. Many have sought to
justify the significant costs of these systems by the increased productivity
that can result from employees spending less time away from the office, as well
as reduced employee travel costs and shortened customer decision-making cycles.
Despite these benefits, however, the businesses typically have deployed these
circuit-switched systems on a limited basis, with use restricted principally to
specifically configured corporate locations that are accessible only by
higher-level managers. Because these systems are difficult and not intuitive to
use, even personnel with access typically use the systems only for limited
purposes.

     In recent years, businesses and other enterprises have begun to demand less
costly, broad-based implementations of real-time, group multimedia
communications. New communications standards and advances in computer
technology--including faster processors, better audio and video compression
schemes, and access to high


                                       1
<PAGE>

 speed broadband networks--have made it feasible to
integrate audio and video cost-effectively into the personal computing
environment.

     Moreover, as the Internet has continued to experience dramatic growth in
the number of users and as a means of conducting business, many enterprises have
begun to make substantial investments in developing the infrastructure necessary
to take advantage of the power and accessibility of the Internet and other
IP-based networks. These enterprises increasingly are seeking to leverage their
existing local and wide area networks as well as the Internet to bring voice,
video and data conferencing to their employees for use in a variety of business
applications or to enhance a variety of interactions.

     Hosted web collaboration services, for example, are frequently proprietary
and not interoperable with standards-based videoconferencing systems, preventing
enterprises from leveraging their earlier investments in videoconferencing
systems. Other existing IP-based solutions address only discrete voice, video or
web collaboration needs and do not support the broad, integrated range of
multimedia communications increasingly required by commercial enterprises. None
of these solutions, for example, offers interactive video. These stand-alone
solutions are not incorporated into an enterprise's workflow, and they are not
easily integrated with other communications solutions. As a result, the
implementation and maintenance of separate solutions for voice, video and data
communication needs can be complicated and expensive, requiring significant
information technology, or IT, resources from external vendors or internal
staff.

     To take advantage of the power and accessibility of IP-based networks for
conducting multimedia communications, enterprises require solutions that can
seamlessly provide voice, video and data collaboration, also known as rich media
communications. These rich media solutions must comply with existing and
emerging communications standards in order to be interoperable with rich media
client applications that are, or will become, available from a variety of
vendors.

OUR SOLUTION

     We develop and market software products that enable voice and video
communications over IP-based networks. All of our product offerings are built
upon our core client/server technologies. They are targeted, however, at
distinct audiences or environments that require particular applications,
features and integration capabilities. We are currently focusing on three target
markets:

     o    VIDEOCONFERENCING is the traditional market for MCUs. This market
          generally consists of enterprises that have already installed
          videoconferencing clients, either in conference rooms or on desktop
          computers, and that need MCUs to facilitate multipoint conferencing.
          Many of these enterprises are seeking to migrate from conferencing
          solutions based on the Integrated Services Digital Network, or ISDN,
          to IP-based conferencing. Our software-based MCU, CUseeMe Conference
          Server, supports conferences among groups of end-users and is offered
          with a number of options for additional conferencing functionality,
          including Continuous Presence, Streaming Media, Meeting Controller and
          Conferencing for Microsoft Exchange.

     o    VIDEOCHAT is the market for informal video communication over the
          Internet. This market generally consists of individual consumers who
          connect from their residences and who use the Internet to keep in
          touch with family and friends and to meet new people and participate
          in videochat rooms. Our desktop video collaboration software, CUseeMe
          Pro, and our public videochat site, CUseeMe World, facilitate these
          communications.

     o    VIDEOWARE is an emerging market that adds rich media communications to
          an existing workflow environment such as a enterprise's intranet,
          instant messaging platform or groupware package. Customers in this
          market typically have had little, if any, prior experience with
          videoconferencing and are seeking to enhance their existing
          communications environments through the addition of live voice and
          video and various forms of collaboration. In March 2001, we introduced
          CUseeMe Videoware, which includes both client and server technologies
          for enterprise-wide deployment of web-based voice and video
          communications and group collaboration to desktop computers. CUseeMe
          Videoware provides a rich media communications environment for desktop
          conferencing that can be integrated with an enterprise's existing
          messaging and collaboration systems.


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     We have designed our software products to provide the following benefits to
customers in our targeted markets:

     END-TO-END BREADTH. We believe that we are the only vendor to offer a
complete IP-based software voice and video communications solution for both
client and server applications. By enabling both an end-user's experience on a
desktop computer and back-end server functionality, our solutions are able to
offer control across the full spectrum of communications and collaboration. Our
end-to-end solution also enables a tighter integration of client and server
applications than is typically achieved with traditional mix-and-match
conferencing environments.

     SIGNIFICANT COST SAVINGS. Our software products enable enterprises to
increase the productivity of their employees, while reducing travel and
telecommunications costs. By offering voice and video communications products
that require no proprietary hardware we are able to offer our solutions at a
substantially lower price than vendors of traditional hardware-based systems.
Because our solutions are based on industry standards for interoperability,
enterprises can leverage their existing videoconferencing resources, especially
in environments that are making the transition from ISDN-based conferencing.
CUseeMe Videoware has been designed to provide a complete end-to-end solution
that avoids the need for "mix and match" component solutions and the attendant
installation and integration costs.

     EASE OF DEPLOYMENT AND USE. Our solutions are centrally deployed and
managed, which enables them to be implemented without the need to install and
configure software separately on every user's desktop computer. Our solutions
are designed to be easy to use by any end-user who is familiar with the
universal web browser interfaces. Our solutions essentially use the browser as a
default interface. In addition, by integrating our videoconferencing solution
with the calendar, scheduling, user directory and other capabilities of
Microsoft Exchange and Outlook, we are able to take advantage of users'
familiarity with these popular collaboration packages.

     SCALABILITY. Our solutions can be implemented efficiently and economically
across multiple locations because they are software-based and centrally
deployed. Our MCUs can be configured with different numbers of conferencing
ports and placed strategically throughout a network, mapping intelligently to
the network architecture to improve performance and lower bandwidth usage. Our
web-based client software can be widely deployed to desktop computers because it
is automatically installed the first time a user connects to a conference,
eliminating the need for a separate client installation on each desktop
computer.

     FLEXIBILITY AND CUSTOMIZATION. Our client technology provides a customer
with flexibility in defining end-users' conferencing experiences. By choosing
from a variety of standard web page templates or custom-creating specific user
interfaces, customers can adapt our client software in a way that fits
seamlessly within their existing web environments and meets their users' needs.
Our CUseeMe Web technology makes it possible for users to access different web
conferencing interfaces for different kinds of communications such as training
sessions, weekly team meetings and ad-hoc communications. Each web interface
that is created can be adapted to provide a number of video windows, and a
layout and mix of collaboration tools appropriate to meet the needs of a
particular conferencing environment.

     ENHANCED FUNCTIONALITY. In addition to our core client end server products,
we offer a variety of options intended to enhance the functionality of our
solution for different users. For example, we supplement our MCU offering with
options that include continuous presence, which provides enterprises with
increased flexibility and control by allowing users to view four video windows
simultaneously, rather than just a single window, and streaming media
integration, which enables interactive conferences to be streamed live to
view-only participants of recorded for playback on demand. Microsoft Outlook
scheduling is also available as an option with the MCU, allowing enterprises to
schedule, manage and update online conferencing within the Microsoft Outlook
environment. Similarly, CUseeMe Videoware provides seamless integration with the
Microsoft Exchange and Outlook environment.


                                       3
<PAGE>

OUR STRATEGY

     Our goal is to be the leading provider of software products that enable
voice and video communications over the Internet and IP-based networks. Our
strategies to achieve this objective include:

     MAINTAIN TECHNOLOGY LEADERSHIP. All of our software products are designed
and developed to operate within an IP environment, and we believe this approach
has provided us with technological advantages over other vendors, which must
migrate from traditional ISDN-based technologies to the IP environment. Industry
periodicals have recognized our technology leadership in granting awards to our
client and server products and technologies. We intend to build upon our
technology leadership by developing products that support important emerging
technologies such as multicast, which is already supported by the CUseeMe
Conference Server, and session initiation protocol or SIP, a new Internet
Engineering Task Force protocol for the establishment, modification and
termination of conferencing and telephany sessions over IP-based networks. SIP
offers the potential to be much faster, more scalable and easier to implement
that H.323, and we believe that it will become the predominant standard for
voice and video over the Internet.

     FACILITATE INTEGRATED VOICE AND VIDEO COMMUNICATIONS. We are focused on
providing software products that enhance existing modes of communication and
collaboration, rather than require users to learn complex videoconferencing
applications that force them to step outside of their everyday workflow. The
traditional approach of providing videoconferencing as a stand-alone application
has failed to make video communications compelling, easy-to-use or accessible on
a broad scale. Our approach will allow interactive rich media capabilities to be
added to a corporate network without introducing new applications on the
desktop. We are seeking to enhance existing forms of communication by
integrating desktop conferencing needs into existing directory services,
web-based intranets and groupware, as well as instant messaging and other
corporate communications applications deployed in an enterprise. Our CUseeMe
Videoware, which became commercially available in late March 2001, is designed
to provide a rich media communications environment that can interface with
enterprises' existing applications and workflow.

     SUPPORT STANDARDS IMPLEMENTATION FOR INTEROPERABILITY. All of our software
products are based on industry standards for interoperability. This allows them
to be interoperable with other clients and devices, either directly or via
gateways, so that an enterprise implementing our solutions can leverage its
legacy videoconferencing resources as well as communications beyond an IP-based
network. We will continue to implement standards-based functionality into
upcoming releases of our videoconferencing, videochat and videoware products.

     TARGET ENTERPRISE MARKETS. We believe that enterprises such as businesses,
educational institutions and government organizations will account for the most
significant growth in voice and video communications and collaboration for the
foreseeable future. Enterprises tend to be earlier adopters of new technologies
that provide significant productivity enhancements, and they present
opportunities for broad-scale deployments. We have developed functionality
within our products, such as centralized deployment, that targets the special
needs of enterprises. We will, however, selectively pursue opportunities in the
consumer market, since we believe our experience in selling software into this
market and in addressing the open Internet has provided us with a deeper
understanding of the needs of end-users and thereby helped us to make our
technologies easier to use and more robust.

     BROADEN SALES CHANNELS. As the result of our recent focus on integrated
voice and video communications and web collaboration, we are seeking to expand
our traditional channel program to include systems integrators, value-added
resellers, service providers, and original equipment manufacturers. For example,
in seeking to sell solutions based on desktop integration, we intend to work
with value-added resellers and systems integrators that deliver desktop
solutions to enterprises and those that provide integration for groupware
environments such as Microsoft Exchange and Outlook. Broader sales channels also
can provide us with opportunities to cost-effectively expand our selling efforts
both to particular segments of the enterprise market, such as governmental
institutions, and to enterprises located outside the United States. In March
2001, we announced our new channel program called Alliance Partners Excel, or
APEX, which is intended to enable system integrators, value-added resellers and
service providers worldwide to include integrated rich media communications in
the overall mix of their product and service offerings.


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<PAGE>

OUR PRODUCTS

     We develop and market software products that enable voice and video
communications over the Internet and IP-based networks. With over a decade of
IP-based communications experience, we are technology leaders in interactive
voice and video collaboration. Our award-winning technologies and products
facilitate standards-based collaborative communications, both between individual
participants and among groups of participants, over the Internet, corporate
intranets, and virtual private networks.

     All of our products are based upon our core technology suite. Our core
technologies are all software-based and can be applied to a variety of
applications, either "out-of-the-box" or customized for particular situations.
With these core technologies, we can enable web-based or stand-alone
applications for voice and video. We have extended and enhanced our core client
and server technologies through years of development and experience.

     All of our products support industry standards for interoperability, which
allows them to be interoperable with other clients and devices, either directly
or via gateways. As a result, an enterprise implementing our solutions can
leverage its legacy videoconferencing resources as well as communications beyond
an IP-based network. The key standards that our products support have been
established by the International Telecommunications Union, or ITU, and include:

     o    H.323 defines standards for the implementation of real-time voice and
          video communications and conferencing over packet-based networks and
          thereby provides a common protocol that allows communications products
          offered by different vendors to work together; and

     o    T.120 defines a protocol for whiteboard, application sharing and data
          collaboration for multipoint conferencing applications.

In addition, we support indirectly, via gateways, additional standards such as
ITU H.320, a protocol for the implementation of communication and conferencing
for ISDN-based products.

     We have created our own videochat web site, CUseeMe World, to showcase our
core technologies. CUseeMe World enables users to experience our technology by
participating in public videochat rooms. Users can join existing videochat rooms
or create their own videochat rooms on-the-fly. Since CUseeMe World became
available to the public in 1999, its membership has grown to nearly 340,000
users and videochat participation has increased to an average of approximately
300 concurrent users. CUseeMe World provides us with feedback on marketing and
development issues by allowing us to monitor behavior and usage. This feedback
has, for example, helped us make our technology and products more intuitive and
user-friendly. CUseeMe World has also provided an environment in which we can
perform pre-release testing of new products or product versions for scalability
and performance.

     CUSEEME WEB TOOLKIT

     We offer a software developer's toolkit that enables web developers to
embed interactive voice, video and text features into web pages or
Internet-based applications. This toolkit is part of our CUseeMe Web technology,
which is an iintegrated component of CUseeMe Videoware. The toolkit can be used
to enhance a web site or application by adding multimedia communications such as
videochat, videoconferencing and collaboration, interactive electronic commerce
and help desk functionality, and instant messaging. Developers can determine how
many video windows to include and whether users can send video and audio or
simply receive them. As a toolkit, this product allows developers to embed
multimedia components into web pages while maintaining the web site's own
branding, look and feel.

     The CUseeMe Web toolkit can be used by internal web development resources
to customize the CUseeMe Web technology underlying the toolkit and adapt that
technology into their current web environment. Alternatively, enterprises can
choose to have the entire process handled by a systems integrator or other
third-party vendor.

     After a web site has been enhanced using CUseeMe Web technology, end users
can access the embedded multimedia features through the web site, using a free
plug-in. The plug-in automatically installs on the user's desktop computer when
the user accesses a CUseeMe Web-enabled web page for the first time, eliminating
the need for a separate client installation or configuration on the end user's
desktop computer.


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<PAGE>

     CUseeMe Web has received a number of industry awards, including:

     o    Customer Interactions Solutions Magazine 2000 Product of the Year

     o    TMC Labs 2000 Innovation Award

     o    Call Center Solutions Magazine 1999 Product of the Year

     o    Internet Telephony Magazine 1999 Product of the Year

     o    1999 Fall Internet World Best of Show

     CUSEEME CONFERENCE SERVER

     CUseeMe Conference Server was introduced in December 2000 and represents
the third generation of our server product, or MCU. Our initial MCU software,
the Reflector, became commercially available in 1997. Its successor,
MeetingPoint, became commercially available in 1997 and was the first
H.323-based software MCU.

     CUseeMe Conference Server is a software-only MCU that enables rich media
group conferencing with a variety of clients. CUseeMe Conference Server can
create a virtual conference room over any IP-based network using H.323 and T.120
conferencing standards. In addition to being compatible with H.323 clients,
CUseeMe Conference Server is interoperable with standards-based voice-over-IP
audio clients and can connect, via gateways, to legacy ISDN-based H.320
videoconferencing clients and to standard phone connections. This
interoperability allows enterprises to leverage their existing conferencing
resources, especially in environments that are making the transition from ISDN
conferencing, and to extend communication beyond IP-based networks.

     Multiple CUseeMe Conference Servers can be linked together for large
conference deployments or to optimize the flow of data between branch offices
and other remote locations. As a result, it can scale to meet an enterprise's
growing requirements. CUseeMe Conference Server supports conferencing in a
number of server environments, including Windows NT, Windows 2000, Sun Solaris
and Linux operating systems.

     We offer a number of options to extend the functionality of CUseeMe
Conference Server:

     o    CONTINUOUS PRESENCE allows standard H.323 clients to receive up to
          four video windows simultaneously, instead of just one. If there are
          more than four participants in the conference, a user can choose to
          have the video switched by voice, displaying the last four active
          speakers, or by a specified increment of time. A user also can choose
          to anchor one or more specific participants and let the other video
          panes switch between the remaining participants.

     o    STREAMING MEDIA can be used to stream a live, interactive conference
          out to a large number of view-only participants or to record a
          conference for future playback on demand. The streaming media add-on
          provides a bridge between H.323-based conferencing and streaming media
          server/player technologies such as Microsoft's Windows media and Real
          Networks' RealPlayer. We believe that we are the only H.323 MCU vendor
          to offer streaming media integration.

     o    MEETING CONTROLLER provides a toolbar for controlling meeting
          interaction features for live, multipoint videoconferencing. This
          add-on gives each participant in the conference the ability to control
          the participant's experience, regardless of the H.323 client being
          used by the participant. Meeting Controller makes it easy for
          participants to join a conference and invite other participants to
          join. It also includes specialized features such as moderation and the
          ability to `lock in' selected participants's audio and video.

     o    MICROSOFT OUTLOOK SCHEDULING, which was introduced in December
          2000,.integrates CUseeMe Conference Server with a Microsoft Exchange
          2000 Conferencing Server. This add-on enables standards-based group
          conferencing to be scheduled, managed and updated by users within the
          Microsoft Outlook environment. Users can enter into a virtual
          conference room by clicking on the meeting in their calendar, making
          desktop conferencing more accessible to users through their standard
          workflow.


                                       6
<PAGE>

     CUseeMe Conference Server pricing begins at a suggested retail price of
$8,995 for a ten-port server. Continuous Presence and Streaming Integration
options are available as add-ons at a suggested retail price of $4,995 each, and
the Microsoft Outlook Scheduling option is available at a suggested retail price
of $3,995. The Meeting Controller option, available only for the Windows 2000/NT
version of the CUseeMe Conference Server, is priced beginning at $4,495 for ten
users.

     Our MCU software has received the following industry awards:

     o    Communications Solutions Magazine 2000 Product of the Year

     o    Internet Telephony Magazine 2000 Product of the Year

     o    Network Magazine 2000 Product of the Year

     o    Communications Solutions Magazine 1999 Product of the Year

     o    Internet Telephony Magazine 1998 Product of the Year

     o    CTI Magazine 1998 Product of the Year

     CUSEEME PRO

     CUseeMe Pro is our desktop video collaboration software for both Windows
and Macintosh operating systems. CUseeMe Pro installs on a desktop computer and
works with a variety of video cameras Users can display up to 12 video windows
and can share documents using applications sharing and whiteboard features. They
can connect to a virtual conference room via the CUseeMe Conference Server.

     CUseeMe Pro is targeted to the consumer market. It can also provide a
cost-effective alternative for professionals who do not require the enhanced
functionality and features offered by CUseeMe Web technology. CUseeMe Pro is
available at a suggested retail price of $69. CUseeMe Pro also may be included
in webcam bundles offered from time to time by third parties.

     CUSEEME VIDEOWARE

     CUseeMe Videoware, which became commercially available in late March 2001,
is a rich media communications environment that interfaces with existing
messaging and collaboration environments. CUseeMe Videoware includes both client
and server technologies for enterprise-wide deployment of web-based voice and
video communications and group collaboration to the desktop. CUseeMe Videoware
allows enterprises to leverage their legacy videoconferencing investments
because it is interoperable with standards-based clients, including H.323
clients, H.320 clients and plain telephone connections via gateways.

     While videoconferencing traditionally has been treated as a stand-alone
application, CUseeMe Videoware is designed to integrate with existing email,
scheduling and workflow environments, either through messaging and collaboration
packages such as Microsoft Exchange and Outlook or through an enterprise's
intranet or web-based instant messaging.

     CUseeMe Videoware currently includes technologies to enable web touring,
streaming media, continuous presence for non-web-based endpoints and web
templates for a variety of communications applications. We intend to add
integrated video instant messaging capabilities to the next version of CUseeMe
Videoware.

     CUseeMe Videoware is available in two versions: CUseeMe Videoware, which is
available for Windows NT, Windows 2000, Sun Solaris and Linux servers, and
CUseeMe Videoware for Microsoft Exchange, which is available only for Windows
2000 servers. Our pricing model for CUseeMe Videoware parallels pricing for
enterprise messaging and collaboration packages, including both an application
server license and user access licenses. CUseeMe Videoware pricing begins at
$39,995 for an application server license for 25 users; the required user access
licenses start at $79 per user.


                                       7
<PAGE>

RESEARCH AND DEVELOPMENT

     Since the sale of our legacy connectivity business line in February
2000, all of our research and development have been focused on group
conferencing technology. Our research and development expenditures totalled
$5.8 million in 2000 and $4.8 million in 1999, including expenditures on
research and development contractors of $404,000 in 2000 and $253,000 in 1999.

     We expect that our total expenditures for research and development in 2001
will be relatively flat as compared to 2000, although the actual amount will
depend on a number of factors, including the level of market acceptance of our
current products, our ability to fill personnel requisitions on a timely basis,
and the rate of technological change in the group conferencing industry.

MARKETING AND DISTRIBUTION

     We historically have marketed and sold our products through a combination
of strategic partners, distributors, original equipment manufacturers and
strategic partners, our direct sales organization, and directly over the
Internet. As the result of our recent focus on integrated voice and video
communications, we are seeking to expand our traditional channel program to
include systems integrators, value-added resellers, service providers and
original equipment manufacturers. Our new APEX channel program is intended to
enable system integrators, value-added resellers and service providers worldwide
to include integrated rich media communications in overall mix of their product
and service offerings.

     We have established distribution relationships in Australia, Austria,
Belgium, Egypt, Finland, France, Germany, Greece, Hong Kong, Hungary, Israel,
Italy, Japan, Korea, Netherlands, Norway, Slovania, South Africa, Spain, Sweden,
Switzerland and the United Kingdom. We have also formed original equipment
manufacturer or bundling relationships in order to provide customers with
turnkey solutions and to facilitate product sales through distribution channels.
Since 1996 we have engaged Tech Data and Ingram Micro as distributors to deliver
our desktop videoconferencing client software to consumers through retail
channels, including store chains and superstores. In March 2001 we received a
60-day termination notice from Tech Data. We do not expect that the termination
of our distribution relationship with Tech Date will have a material adverse
effect on our business.

     Our sales force is located in Nashua, New Hampshire, and La Gaude, France.
At March 1, 2001, we had 36 full-time sales and marketing employees.

     We maintain web sites where prospective customers can obtain information
about our products and services and download our multimedia conferencing
products. We conduct marketing programs, including direct mail, advertising,
public relations and product literature, to support each of our sale channels
and to position and promote our products and services. Marketing personnel
provide price lists and product descriptions and assist the direct sales force
through lead generation and sales training.

CUSTOMER SERVICE AND SUPPORT

     We are committed to maintaining customer satisfaction and loyalty. We
employ technical customer representatives located in Nashua, New Hampshire to
support and service our customer base. Some of our distributors and original
equipment manufacturer customers maintain separate customer support
organizations for their own customers. We provide second-tier support to those
organizations.

     We provide customer support via telephone, fax and e-mail during normal
business hours for our warranty product customers. We also offer a variety of
fee-based maintenance and support options, including a 24 x 7 option, and
automatic shipments of all enhancements and upgrades for licensed products. To
augment our optional support services, we provide searchable online frequently
asked questions, as well as a searchable knowledge base. We monitor a number of
third-party mail lists and related web sites in order to ensure technical
accuracy for our products. Customer support specialists diagnose and solve
technical problems related not only to our products but also to other hardware
and software with which our products may interact. We track all support
requests, including current status reports and historical customer interaction
logs, using a series of customer databases. We use customer feedback as a source
of ideas for product improvements and enhancements.


                                       8
<PAGE>

     We charge CUseeMe customers for technical support on a per-incident basis
if they are not covered by a maintenance contract.

PROPRIETARY RIGHTS

     Our success is heavily dependent upon our proprietary technology. We
currently have no patents and rely primarily on copyright, trademark and trade
secrets law, as well as employee and third-party non-disclosure agreements, to
protect our intellectual property. We have applied for a patent on a portion of
the technology underlying the continuous presence feature of CUseeMe Conference
Server. There can be no assurance that the steps taken by us to protect our
proprietary rights will be adequate to prevent misappropriation of our
technology or independent development by others of similar technology.
Litigation may be necessary to enforce our intellectual property rights or to
protect our trade secrets. Any such litigation could result in substantial costs
and diversion of resources and could have a material adverse effect on our
business, financial condition and results of operations. Moreover, while we
believe that our products and technology do not infringe the proprietary rights
of others, there can be no assurance that third parties will not assert
infringement and other claims against us or that such claims will not be
successful. See "Item 1. Business--Factors that May Affect Our Operating Results
and Stock Price--We may be unable to protect our proprietary technology."

     In 1998 we acquired ownership of some of the key technologies embedded in
our software offerings:

     o    In July 1998, we purchased intellectual property rights and other
          selected assets comprising T.120 whiteboard and data collaboration
          technology from Labtam Communications, an Australian corporation. We
          have incorporated the purchased T.120 technology into our CUseeMe
          Conference Server.

     o    Our multimedia conferencing products, CUseeMe Pro and CUseeMe
          Conference Server, are commercial, enhanced versions of Freeware
          CUseeMe and its related server. Freeware CUseeMe and its related
          server were developed by a research institute at Cornell University.
          In June 1995, we had entered into a software license agreement with
          the Cornell Research Foundation that granted us the exclusive
          worldwide right to develop, modify, market, distribute and sublicense
          commercial versions of Freeware CUseeMe and its related server, as
          well as the rights to appoint licensee distributors and to use the
          trademark "CUseeMe." In November 1998, we acquired the Cornell
          Research Foundation's trademark and other intellectual property rights
          in Freeware CUseeMe and the related server technology, in lieu of
          continuing to license those rights.

     o    In December 1998, we acquired from RADVision a one-time source code
          snapshot of a H.323 protocol stack. This acquisition has allowed us to
          modify and enhance source code embedded in our products.

COMPETITION

     The market for multimedia group conferencing products is extremely
competitive, and we expect that competition will intensify in the future. We
believe that the principal competitive factors in the multimedia group
conferencing industry are price, video and audio quality, interoperability,
functionality, reliability, service and support, hardware platforms supported,
and vendor and product reputation. We believe that our ability to compete
successfully will depend on a number of factors both within and outside our
control, including the adoption and evolution of industry standards, the pricing
policies of our competitors and suppliers, the timing of the introduction of new
software products and services by us and others, our ability to hire and retain
quality employees, and industry and general economic trends. In addition,
because the barriers to entry in our market are relatively low and the potential
market is large, we anticipate continued growth in the industry and the entrance
of new competitors in the future.

     In offering Internet communications products and services, we currently
compete, or expect to compete, directly or indirectly with the following
categories of providers:

     o    H.323 MCU vendors, such as Accord, Ezenia!, PictureTel and RADVision;

     o    videoconferencing client vendors, such as MicroSoft NetMeeting,
          Polycom, PictureTel, VTEL and VCON;


                                       9
<PAGE>

     o    non-videoconferencing collaborative product vendors, such as Astound,
          Centra, Placeware and WebEx; and

     o    application service providers, such as Evoke, PictureTel and WebEx.

     The H.323 MCU market encompasses two types of MCUs: a software-only server
and a hardware server. There is a substantial price variance between software
and hardware servers, which tends to dictate the suitability of one or the other
in specific situations. From a price and scalability standpoint, the software
server lends itself well to large, distributed and expandable deployments,
whereas the hardware server is often best suited to finite centralized
deployments. CUseeMe Networks, PictureTel, and Ezenia! market the only
software-only MCUs; Accord, Ezenia! and RADvision market hardware MCUs. Most of
these providers work with third-party clients. CUseeMe Networks and PictureTel
are the only vendors offering both client and server products.

     As with MCUs, client vendors can be split into software or hardware
categories. In the software client category, CUseeMe Pro competes with Microsoft
NetMeeting. PictureTel, Polycom, VCON and VTEL all provide hardware clients. The
hardware assist typically allows the hardware clients to demonstrate performance
superior to software-only clients, but these clients are marketed at a $1,000 to
$12,000 price point. PolyCom ViewStation and the PictureTel 900 series are
hardware-based endpoints. Sales of these products are targeted to the high-end
videoconferencing enterprise market. Integrators and value-added resellers wrap
solutions around hardware-based endpoints, using their application programmer
interface, along with CUseeMe Conference Server's application programmer
interface, to provide solutions to enterprises. This includes distance learning
and videoconferencing service offerings.

     The disparate non-videoconferencing category encompasses semi-interactive
presentation software solutions. Semi-interactive presentation software
solutions is a broad term utilized here to represent products integrating
streaming with some form of limited interactive technology. These products
combine streaming media, shared text and separate telephony integration in one
solution.

     In the emerging application service provider market, PictureTel offers
conferencing services to its business-to-business customers, WebEx primarily
concentrates its services in the data collaboration area, and EVC offers
educational content conferencing services.

     H.323 is being rapidly adopted by the industry as the global standard for
group conferencing products. A number of companies, including Ezenia!,
PictureTel and RADVision, have announced standards-based server products that
compete directly with CUseeMe Conference Server. It is likely that other
companies will also enter this market in the near future.

     Many of our current and potential competitors, including Microsoft,
PictureTel and Ezenia!, have significantly longer operating histories and
significantly greater managerial, financial, marketing, technical and other
competitive resources, as well as greater name recognition, than we do. As a
result, our competitors may be able to adapt more quickly to new or emerging
technologies and changes in customer requirements or may be able to devote
greater resources to the promotion and sale of their products and services. We
cannot assure you that we will be able to compete successfully with existing or
new competitors. In addition, competition could increase if new companies enter
the market or if existing competitors expand their service offerings. An
increase in competition could result in material price reductions or loss of
market share by us and could have a material adverse effect on our business,
financial condition and results of operations.

     To remain competitive, we must continue to invest in research and
development and sales and marketing. We may not have sufficient resources to
make those investments or may not succeed in making the technological advances
necessary to be competitive. In addition, current and potential competitors have
established or may in the future establish collaborative relationships among
themselves or with third parties, including third parties with which we have a
relationship, to increase the visibility and utility of their products and
services. Accordingly, it is possible that new competitors or alliances may
emerge and rapidly acquire a significant market share. Such an eventuality could
have a material adverse effect on our business, financial condition and results
of operations.


                                       10
<PAGE>

EMPLOYEES

     At March 1, 2001, we had 126 full-time employees, including 55 in research
and development, 36 in sales and marketing, 14 in technical support, and 21 in
general and administrative and software manufacturing. Sixteen of these
employees were located in France and, in accordance with applicable French law,
were represented by a labor union. We also have seven part-time employees in the
United States. Our other employees were located in the United States and were
not represented by any labor organization. We have experienced no work stoppages
and believe that our relations with our employees are good.

FACTORS THAT MAY AFFECT OUR OPERATING RESULTS AND STOCK PRICE

WE HAVE INCURRED SUBSTANTIAL LOSSES AND MAY INCUR LOSSES IN THE FUTURE. IF WE DO
NOT ACHIEVE AND SUSTAIN PROFITABILITY, OUR FINANCIAL CONDITION AND STOCK PRICE
COULD DECLINE.

     We may never generate significant revenues or become profitable. Since
inception, we have incurred significant losses. Our total revenues increased
only slightly from $12.0 million in 1999 to $12.1 million in 2000, while our net
loss increased from $4.8 million in 1999 to $10.2 million in 2000. At December
31, 2000, we had an accumulated deficit of $43.9 million.

     We have never generated positive cash flow from operations and have relied
principally on private and public sales of equity to fund our operations. Our
negative cash flows from operations totalled $4.2 million in 1999 and $8.1
million in 2000.

OUR MULTIMEDIA IP-BASED COMMUNICATIONS PRODUCTS AND SERVICES MAY NOT ACHIEVE
BROAD MARKET ACCEPTANCE OR MARKET ACCEPTANCE MAY BE SLOWER THAN ANTICIPATED.

     We anticipate that virtually all of our revenue and growth in the
foreseeable future will come from the sale of the CUseeMe Conference Server and
related products and services. Broad market acceptance of the CUseeMe Conference
Server therefore is critical to our operating success. If sufficient demand for
the CUseeMe Conference Server does not develop, we may not generate sufficient
revenue to offset our costs and we may never become profitable.

OUR QUARTERLY RESULTS MAY FLUCTUATE AND CAUSE THE PRICE OF OUR COMMON STOCK TO
FALL.

     Our quarterly revenue and operating results are difficult to predict and
may fluctuate significantly from quarter to quarter. If our quarterly revenue or
operating results fall below the expectations of investors or public market
analysts, the price of our common stock could fall substantially. Our quarterly
operating results may vary significantly depending on a number of factors, some
of which are outside of our control. These factors include:

     o    the timing of the introduction or acceptance of new products offered
          by us or our competitors;

     o    changes in demand for Internet services;

     o    changes in the mix of products sold by us;

     o    announcements of new products, services or technologies by us or our
          competitors that cause customers to defer or cancel purchases of our
          products;

     o    changes in pricing strategies by us or competitors;

     o    changes in regulations affecting the multimedia group communications
          products and services industry; and

     o    changes in currency exchange rates.

     As a result of these factors, we may not be able to predict our operating
results accurately. In addition, the CUseeMe Conference Server continues to
undergo long evaluation and sale cycles by potential users. The lengths of these
cycles make it particularly difficult for us to predict the amount and timing of
revenue from this product.


                                       11
<PAGE>

     We base our expense levels on our product development plans and our
estimates of future revenue. To a large extent, our expenses are fixed. We may
be unable to adjust our spending in time to compensate for any unexpected
revenue shortfall, thus magnifying the adverse effect of any revenue shortfall.

WE FACE INTENSE COMPETITION FROM OTHER INDUSTRY PARTICIPANTS AND MAY NOT BE ABLE
TO COMPETE EFFECTIVELY.

     The market for multimedia group communications products and services is
extremely competitive. Because the barriers to entry in the market are
relatively low and the potential market is large, we expect continued growth in
the industry and the entrance of new competitors in the future. Many of our
current and potential competitors, particularly Microsoft, PictureTel and
Ezenia!, have significantly longer operating histories and significantly greater
managerial, financial, marketing, technical and other competitive resources, as
well as greater name recognition, than we do. As a result, these companies may
be able to adapt more quickly to new or emerging technologies and changes in
customer requirements and may be able to devote greater resources to the
promotion and sale of their conferencing products and services. In addition, to
the extent that competitors choose to bundle competing multimedia conferencing
applications with other products, the demand for our products and services might
be substantially reduced.

     As a result, we cannot assure you that we will be able to compete
successfully with existing or new competitors in the multimedia group
communications products and services market. We believe that our ability to
compete successfully in this market will depend on a number of factors both
within and outside our control, including:

     o    the adoption and evolution of industry standards;

     o    the pricing policies of our competitors and suppliers;

     o    the timing of the introduction of new software products and services
          by us and our competitors; and

     o    our ability to hire and retain highly qualified employees.

     To remain competitive in the multimedia group communications products and
services market, we must continue to invest heavily in research and development
and in sales and marketing. We may not have sufficient resources to make those
investments, or we may not be able to make the technological advances necessary
to continue to be competitive. In addition, current and potential competitors
have established or may establish collaborative relationships among themselves
and with third parties to increase the visibility and utility of their products
and services. Accordingly, it is possible that new competitors or alliances may
emerge and rapidly acquire significant market share, which could have a material
adverse effect on our business.

WE MUST HIRE AND RETAIN SKILLED PERSONNEL IN A COMPETITIVE LABOR MARKET.

     Qualified personnel are in great demand throughout the software and
Internet industries. Our success depends in large part upon our ability to
attract, train, motivate and retain highly skilled employees, particularly sales
and marketing personnel, professional services personnel and software engineers.
If we fail to attract and retain the highly trained technical personnel that are
integral to our sales, professional services and product development teams, the
rate at which we can generate sales and develop new products or services may be
limited. This could have a material adverse effect on our business, operating
results and financial condition.

IF WE LOSE THE SERVICES OF OUR CHIEF EXECUTIVE OFFICER, OUR BUSINESS COULD
SUFFER.

     Our future success depends to a significant degree on the skill, experience
and efforts of Killko Caballero, our chief executive officer and president.
Christine J. Cox, our chief financial officer and vice president of finance,
resigned effective March 30, 2001. Ms. Cox's departure and the loss of any other
key member of our management team could have a material adverse effect on our
business.

WE DEPEND ON THE CONTINUED USE AND EXPANSION OF THE INTERNET.

     Our business and revenues depend on the continued use and expansion of the
Internet. A decrease in the demand for Internet services or a reduction in the
currently anticipated growth for Internet services could adversely


                                       12
<PAGE>

affect our future revenues and liquidity. Only recently has the enterprise
sector begun significant use of the Internet and, more recently still, have
consumers begun using the Internet. Use of the Internet has grown dramatically,
but we cannot assure the continued use and expansion of the Internet as a medium
for communications and commerce.

OUR ATTRACTION AND RETENTION OF CUSTOMERS DEPENDS ON OUR ABILITY TO ANTICIPATE
AND ADAPT TO RAPIDLY CHANGING TECHNOLOGY AND ON THE COMPATIBILITY OF OUR
TECHNOLOGY WITH THE TECHNOLOGY OF OTHERS.

     The multimedia group communications products market is characterized by
rapid technological change resulting in dynamic customer demands and frequent
new product and service introductions. As a result of these technical
improvements, markets can change rapidly. Our future results will depend in
party on our ability to make timely and cost-effective enhancements and
additions to our products. Our new product introductions such as CUseeMe
Videoware may not achieve market acceptance.

WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY.

     Our business could be seriously harmed if we are unable to protect
adequately our proprietary software and our other proprietary intellectual
property rights. We may be unable to deter misappropriation of our proprietary
technology, detect unauthorized use and take appropriate steps to enforce our
intellectual property rights. Our competitors could, without violating our
proprietary rights, develop technologies that are as good or better than our
technology.

     Some of our multimedia conferencing products are licensed to customers
under "shrink wrap" licenses included as part of the product packaging. In most
cases our shrink wrap licenses are not negotiated with or signed by individual
licensees. Some of the provisions of our shrink wrap licenses, including
provisions limiting our liability and protecting us against unauthorized use,
copying, transfer and disclosure of the licensed program, may be unenforceable
under the laws of certain jurisdictions. Also, we have delivered technical data
and information relating to CUseeMe Pro and CUseeMe Conference Server to the
United States government, and as a result, the United States government may have
unlimited rights to use the technical data and information or to authorize
others to use the technical data and information. We cannot assure you that the
United States government will not authorize others to use our technical data and
information for purposes competitive with our products. In addition, the laws of
some foreign countries do not protect our proprietary rights to the same extent
as do laws in the United States.

CLAIMS BY OTHER COMPANIES THAT WE INFRINGE THEIR PROPRIETARY TECHNOLOGY COULD
PREVENT US FROM OFFERING OUR PRODUCTS OR OTHERWISE HURT OUR BUSINESS AND OUR
FINANCIAL CONDITION.

     Because the protection of intellectual property rights is often critically
important to the success of companies in the multimedia conferencing industry,
our competitors or others could assert claims that our technologies infringe
their proprietary rights. From time to time, we have received and may receive in
the future notice of claims of infringement of other parties' proprietary
rights. Many participants in the software industry have an increasing number of
patents and have frequently demonstrated a readiness to commence litigation
based on allegations of patent or other intellectual property infringement. We
may not have the financial resources necessary to pursue any resulting
litigation to a final judgment, and we may not prevail in any litigation. In
defending against such litigation, we could incur significant legal and other
expenses and our management could be distracted from our principal business
operations. If any party making a claim against us were to prevail in litigation
against us, we may have to pay substantial damages. The court could also grant
injunctive or other equitable relief that could prevent us from offering our
products and services without a license or other permission from others, which
may not be available on commercially available terms or at all. Any of these
outcomes could seriously harm our business and our financial condition.

WE FACE ADDITIONAL RISKS FROM OUR INTERNATIONAL OPERATIONS.

     Our international business involves a number of risks that could hurt our
operating results or contribute to fluctuations in those results. Our revenue
from international sales represented 41% of our total revenue in 2000 and 24% of
our total revenue in 1999. We intend to seek opportunities to expand our product
and service offerings into


                                       13
<PAGE>

additional international markets, although we cannot be certain that we will
succeed in developing localized versions of our products for new international
markets or in marketing or distributing products and services in those markets.

     The majority of our international sales are currently denominated in U.S.
dollars, but there can be no assurance that a significantly higher level of
future sales will not be denominated in foreign currencies. To the extent our
sales are denominated in currencies other than U.S. dollars, fluctuations in
exchange rates may render our products less competitive relative to local
product offerings or result in foreign exchange losses. We have no experience in
implementing hedging techniques that might minimize our risks from exchange rate
fluctuations.

     Our international business also involves a number of other difficulties and
risks, including risks associated with:

     o    changing economic conditions in foreign countries;

     o    export restrictions and export controls relating to technology;

     o    compliance with existing and changing regulatory requirements;

     o    tariffs and other trade barriers;

     o    difficulties in staffing and managing international operations;

     o    longer payment cycles and problems in collecting accounts receivable;

     o    software piracy;

     o    political instability;

     o    seasonal reductions in business activity in Europe and certain other
          parts of the world during the summer months; and

     o    potentially adverse tax consequences.

OUR SOFTWARE PRODUCTS MAY CONTAIN UNDETECTED DEFECTS.

     Software developed by us or developed by others and incorporated by us into
our products may contain significant undetected errors when first released or as
new versions are released. Although we test our software products before
commercial release, we cannot be certain that errors in the products will not be
found after customers begin to use the software. Any defects in our products,
whether offered currently or introduced in the future, may result in significant
decreases in revenue or increases in expenses because of adverse publicity,
reduced orders, product returns, uncollectible accounts receivable, delays in
collecting accounts receivable, and additional and unexpected costs of further
product development to correct the defects.

OUR SUCCESS DEPENDS ON THE PERFORMANCE OF PARTICIPANTS IN OUR DISTRIBUTION
CHANNELS.

     We market our group conferencing products by forming channel relationships
in key markets with major distributors. We also license our group conferencing
products to original equipment manufacturers, value-added resellers and
additional distributors for bundling with their products and services. We expect
that our future success will depend in large part upon these original equipment
manufacturers, value-added resellers and distributors. The performance of these
original equipment manufacturers, value-added resellers and distributors is
outside our control, and we are unable to predict the extent to which these
organizations will be successful in marketing and selling our group conferencing
products or products incorporating our group conferencing products. We cannot
assure you that we will be successful in establishing relationships with
original equipment manufacturers, value-added resellers and distributors, and if
we fail, our business could be seriously harmed.

     Our distributors typically carry the products of some of our competitors.
The distributors have limited capital to invest in inventory, and their
decisions to purchase our products and, in the case of retail stores, to give
them critical


                                       14
<PAGE>

shelf space, are partly a function of pricing, terms and special promotions
offered by our competitors, which we cannot predict or control.

     We distribute certain of our products directly over the Internet. By
distributing our products over the Internet, we may increase the likelihood of
unauthorized copying and use of our software.

WE MAY REQUIRE ADDITIONAL CAPITAL.

     We may need to raise additional capital in order to fund the development
and marketing of our products and services. We expect our cash, cash
equivalents and short-term investments to provide us with sufficient working
capital through at least the remainder of 2001. We currently expect that the
merger contemplated by our merger agreement with First Virtual Communications
and its subsidiary will be completed in mid-2001. If our stockholders do not
approve the merger or if the merger is not completed for any other reason, we
may need to obtain additional financing by 2001 or earlier, if our current
plans and projections prove to be inaccurate or our expected cash flow proves
to be insufficient to fund our operations because of product delays,
unanticipated expenses or other unforeseen difficulties. Our ability to
obtain additional financing will depend on a number of factors, including
market conditions, our operating performance and investor interest. These
factors may make the timing, amount, terms and conditions of any financing
unattractive. They may also result in our incurring additional indebtedness
or accepting stockholder dilution. If adequate funds are not available or are
not available on acceptable terms, we may have to forego strategic
acquisitions or investments, defer our development activities, or delay our
introduction of new products and services. Any of these actions may seriously
harm our business and operating results.

GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES MAY ADVERSELY AFFECT OUR BUSINESS.

     The application of existing laws to the Internet is uncertain and may take
years to resolve, particularly with respect to property ownership, user privacy,
freedom of expression, pricing, characteristics and quality of products and
services, taxation, advertising, intellectual property rights, information
security and the convergence of traditional telecommunications services with
Internet communications. Because the Internet is becoming increasingly popular,
various foreign or domestic governmental bodies may seek to adopt laws and
control use of the Internet. We cannot predict the nature of any such laws.
Legislation could subject us or our customers to potential liability or could
decrease the growth of the Internet, either of which could have an adverse
effect on our business.

THE MARKET PRICE OF OUR COMMON STOCK HAS BEEN EXTREMELY VOLATILE.

     The market price of our common stock has been extremely volatile in the
past, and may be expected to be volatile in the future for many reasons,
including:

     o    actual or anticipated variations in our revenue and operating results;

     o    announcements of the development of improved technology;

     o    changes in estimates of our financial performance, or the absence of
          coverage, by securities analysts;

     o    conditions and trends in the Internet and multimedia conferencing
          industries;

     o    adoption of new accounting standards; and

     o    general market conditions.

     Recently the stock markets have experienced extreme price and volume
fluctuations that have dramatically affected the market prices of the stocks of
many technology companies, particularly companies associated with the Internet.
These fluctuations often have been unrelated or disproportionate to the
operating performance of those companies. These factors may adversely affect the
market price of our common stock.


                                       15
<PAGE>

VOLATILITY IN OUR STOCK PRICE MAY LEAD TO LITIGATION AGAINST US.

     Stockholders frequently commence securities class action litigation against
a company after a significant decrease in the company's stock price. If our
stock price drops and our stockholders commence litigation against us, we could
incur significant legal and other expenses defending the litigation and our
management could be distracted from our principal business operations. Either of
these outcomes could seriously harm our business.

DELAWARE LAW AND OUR CHARTER DOCUMENTS CONTAIN ANTI-TAKEOVER AND INDEMNIFICATION
PROVISIONS THAT MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR STOCK.

     Section 203 of the Delaware General Corporation Laws and our charter and
by-laws contain provisions that might enable our management to resist a takeover
of our company. These provisions might discourage, delay or prevent a change in
the control of our company or a change in our management. These provisions could
also discourage proxy contests and make it more difficult for you and other
stockholders to elect directors and take other corporate actions. The existence
of these provisions could limit the price that investors might be willing to pay
in the future for shares of our common stock.

ITEM 2.     DESCRIPTION OF PROPERTY

     We conduct our operations from our headquarters in Nashua, New Hampshire
and La Gaude, France. Our facility in New Hampshire contains approximately
27,000 square feet, including 23,500 square feet for engineering and office
space, 2,500 square feet for production space and 1,000 square feet for storage.
We lease our office in New Hampshire from an unaffiliated party under the terms
of a five-year lease ending July 2001 pursuant to which we are responsible for
maintenance, repairs, taxes, insurance and utilities. Base rent is $82,000 for
the first half of 2001. In February 2001, we exercised a renewal option for one
two-year term. Base rent for the renewal is estimated to be $84,000 for 2001,
$168,000 for 2002 and $84,000 for 2003.

     We previously leased an additional 7,000 square feet of office space in
Nashua, New Hampshire from an unaffiliated party under the terms of a three-year
lease ending April 2003. We terminated this lease effective February 2001 with
no penalty.

     The facility in La Gaude, France contains approximately 8,000 square feet
of engineering and office space. We lease our office in France from several
unaffiliated parties under a series of similar leases ending on December 31,
2001, under which we are responsible for maintenance, repairs, taxes, insurance
and utilities. Base rent for this space is $7,200 for 2001.

     We previously occupied 5,000 square feet of engineering and office space at
a site in San Jose, California. This space is subleased to an unaffiliated party
under the terms of a five-year lease ending December 31, 2001. Base rent for
this space is $89,000 for 2001. Our base income under the sublease exceeds our
base rent under the primary lease.

     We previously occupied approximately 560 square feet of network operation
center space facility in Somerville, Massachusetts. The space was subleased from
an unaffiliated party under the terms of a three-year lease ending April 2003.
On January 5, 2001, this lease was terminated with no penalty.

     We expect to extend or renew the leases for our main facility in New
Hampshire and our facilities in France and to continue to occupy those
facilities for the foreseeable future. If we are unable to extend or renew those
leases on acceptable terms, we believe that alternative space would be available
at acceptable rates.

ITEM 3.     LEGAL PROCEEDINGS

     From time to time, we have received and may receive in the future notice of
claims of infringement of other parties' proprietary rights. Although we believe
that our products and technology do not infringe the proprietary rights of
others, there can be no assurance that additional third parties will not assert
infringement and other claims


                                       16
<PAGE>

against us or that any infringement claims will not be successful. See "Item 1.
Business--Factors that may Affect Our Operating Results or Stock Price--We may
be unable to protect our proprietary technology."

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matter was submitted to a vote of our securities holders during the
fourth fiscal quarter of 2000.

                                     PART II

ITEM 5.     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our common stock commenced trading on the Nasdaq National Market on October
11, 1996 under the symbol "WPNE." In connection with a change in our corporate
name, our common stock commenced trading on the Nasdaq National Market on May
15, 2000 under the symbol "CUSM." The following table sets forth the high and
low sales prices for our common stock for each quarter during the past two
years, as reported by the Nasdaq National Market.

<TABLE>
<CAPTION>

                                                                                           High           Low
                                                                                        ------------  ------------
<S>                                                                                       <C>           <C>
1999
----
Fiscal quarter ended April 2, 1999......................................................    $ 4.343      $ 1.875
Fiscal quarter ended July 2, 1999.......................................................      9.437        3.125
Fiscal quarter ended October 1, 1999....................................................      7.875        4.000
Fiscal quarter ended December 31, 1999..................................................     29.625        6.625

2000
----
Fiscal quarter ended March 31, 2000.....................................................     49.625       18.875
Fiscal quarter ended June 30, 2000......................................................      37.00         7.75
Fiscal quarter ended September 29, 2000.................................................     11.875        3.875
Fiscal quarter ended December 31, 2000..................................................      4.968        0.718

</TABLE>

     As of March 28, 2001, there was one nominee holder of record of common
stock who held an aggregate of 10,760,637 shares of common stock as nominees for
an undisclosed number of beneficial holders. The closing sales price for our
common stock on March 28, 2001 was $1.1875.

     We have never declared or paid any cash dividends on our capital stock. We
currently anticipate that we will retain future earnings, if any, to fund the
development and growth of our business, and therefore do not expect to pay any
cash dividends in the foreseeable future. Payment of future dividends, if any,
will be at the discretion of our board of directors after taking into account
various factors, including our financial condition, results of operations,
current and anticipated cash needs, and plans for expansion.


                                       17
<PAGE>

ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

OVERVIEW

     We develop and market software products that enable voice and video
communications over the Internet and IP-based networks. In order to focus
exclusively on these products, we sold the assets of our legacy connectivity
business to a subsidiary of Powerlan, a publicly held Australian company, in
February 2000.

     We derive revenue from the sale of software product licenses and from
related services. Software license fees are derived from licenses for CUseeMe
Pro, our videoconferencing client software; CUseeMe Conference Server (and its
earlier release, CUseeMe MeetingPoint), our group conferencing server; and the
CUseeMe Web toolkit, we have our software developer's toolkit for embedding
multimedia components into web pages. Our services revenues are derived solely
from services relating to CUseeMe Conference Server and consist principally of
post-contract customer support fees.

     We recognize revenue in accordance with Statement of Position No. 97-2,
SOFTWARE REVENUE RECOGNITION, as amended. Software license revenue is
recognized upon receipt of a firm customer order and shipment of the
software, net of allowances for estimated future returns, provided that no
significant obligations remain on our part, the fee is fixed and
determinable, and collection of the related receivable is deemed probable by
management. If conditions for acceptance apply subsequent to delivery,
revenue is recognized upon customer acceptance if such acceptance is not
deemed to be perfunctory. Service maintenance fees, which generally are
payable in advance and are non-refundable, are recognized ratably over the
service period, typically twelve months. Revenue from training and consulting
services is recognized as services are provided. Software license fees,
consulting fees and training fees that have been prepaid or invoiced but that
do not yet qualify for recognition as revenue under our policy, and prepaid
maintenance fees not yet recognized as revenue, are reflected as deferred
revenue. Our software arrangements sometimes contain multiple elements, such
as software products, services and post-contract customer support. Revenue
earned on software arrangements involving multiple elements that qualify for
separate element treatment is allocated to each element based on the relative
fair values of those elements based on vendor specific objective evidence.
Vendor specific objective evidence is limited to the price charged when the
element is sold separately or, in the case of post-contract customer support,
the renewal rate. For transactions where vendor specific objective evidence
exists for undelivered elements but not for delivered elements, we use the
residual method in accordance with Statement of Position 98-9, MODIFICATION
OF SOP 97-2, WITH RESPECT TO CERTAIN TRANSACTIONS. Under the residual method,
the total fair value of the undelivered elements, as indicated by
vendor-specific objective evidence, is deferred and subsequently recognized
in accordance with the relevant sections of SOP 97-2, and the difference
between the total arrangement fee and the amount deferred for the undelivered
elements is recognized as revenue related to the delivered elements.

     Software development costs meeting recoverability tests are capitalized
under Statement of Financial Accounting Standards No. 86, ACCOUNTING FOR THE
COSTS OF COMPUTER SOFTWARE TO BE SOLD, LEASED OR OTHERWISE MARKETED. The
costs incurred between the point at which technological feasibility is
established and general release to the public were not material. As a result,
no software costs were capitalized in 1999 or 2000.

     On November 27, 2000, we announced that we had reorganized our workforce in
order to control costs and maximize our resource management. As a result of this
reorganization, we laid off 26 employees on that date and eliminated 10
additional positions that were open due to attrition in the ordinary course of
business. At this time, we also announced the consolidation of our service
operations center and our two satellite offices into our corporate
headquarters. In connection with the restructuring, we incurred operating
expenses totalling $185,000, all of which were recorded in the fourth fiscal
quarter of 2000.

RESULTS OF OPERATIONS:  YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED
DECEMBER 31, 2000

     The following table sets forth statement of operations data expressed as
percentages of total revenues for 2000 and 1999.

<TABLE>
<CAPTION>

                                                                                  Year Ended December 31,
                                                                                  -----------------------
                                                                                     2000          1999
                                                                                     ----          ----
<S>                                                                                 <C>          <C>
Revenue:
     Software license fees....................................................        83.0%        89.3%
     Services and other.......................................................        17.0         10.7
                                                                                    ------       ------
         Total revenue........................................................       100.0        100.0
Total cost of revenue.........................................................        32.1         21.2
                                                                                    ------       ------
     Gross margin.............................................................        67.9         78.8
                                                                                    ------       ------
Operating expenses:
     Sales and marketing......................................................        83.5         60.5
     Research and development.................................................        48.4         39.7
     General and administrative...............................................        35.7         19.7
                                                                                    ------       ------
         Total operating expenses.............................................       167.6        119.9
                                                                                     -----        -----
Loss from operations..........................................................       (99.7)       (41.1)
Other income (expense), net...................................................        15.3          0.7
                                                                                     -----       ------
         Net loss.............................................................       (84.4)%      (40.4)%
                                                                                     =====        =====

</TABLE>


                                       18
<PAGE>

     The following table sets forth, for 2000 and 1999, the cost of software
license revenue as percentages of software license revenue and the cost of
services and other revenue as percentages of services and other revenue.

<TABLE>
<CAPTION>

                                                                                  Year Ended December 31,
                                                                                  -----------------------
                                                                                     2000          1999
                                                                                     ----          ----

<S>                                                                                  <C>          <C>
Cost of software license revenue..............................................        24.4%        22.0%
Cost of services and other revenue............................................        69.7         14.4

</TABLE>

     REVENUE

     Total revenue was $12.0 million in 1999 and $12.1 million in 2000.
Revenue from our legacy connectivity product line, which we sold in February
2000, totalled $2.2 million in 1999 compared with $171,000 in 2000. Total
revenue from our continuing product lines, which excludes legacy connectivity
revenue, increased 22% from $9.8 million in 1999 to $11.9 million in 2000.

     Software license revenue decreased 6% from $10.7 million in 1999 to $10.0
million in 2000. Software license revenue from our continuing product line, net
of software license revenue from our legacy connectivity product line, increased
11% from $8.9 million in 1999 to $9.9 million in 2000.

     o    Software license revenue from CUseeMe Conference Server increased 16%
          from $5.7 million in 1999 to $6.6 million in 2000. In 2000, we
          increased the number of our transactions with original equipment
          manufacturers. These transactions were largely responsible for an
          increase in the number of server ports licensed, but the resulting
          revenue gains were offset in part by the lower average price per port
          attributable to the volume purchases made by the manufacturers.

     o    Software license revenue from CUseeMe Pro (including bundled camera
          kits), net of reserve for returns, decreased 41% from $2.9 million in
          1999 to $1.7 million in 2000. Significantly increased pricing
          pressures were reflected in discounts and rebates that led to a
          decrease of approximately 30% in the average selling price of our
          CUseeMe Pro bundled kits. This decrease was offset slightly by an
          increase in the number of bundled kits shipped in 2000.

     o    The CUseeMe Web toolkit began shipping in the first fiscal quarter of
          2000 and contributed $1.6 million of software license revenue in 2000.
          More than one-half of this revenue was derived from a sale to a single
          vendor in the Pacific Rim.

     Service and other revenue increased 33% from $1.5 million in 1999 to
$2.0 million in 2000. Post-contract customer support revenue, excluding
revenue associated with our legacy connectivity products, increased 33% from
$1.0 million in 1999 to $1.4 million in 2000. This increase reflected the
significant growth in 1999 in our sales of licenses for the prior release of
CUseeMe Conferencing Server. The remaining $466,000 of the increase in
service and other revenue from 1999 to 2000 was derived principally from
training and professional services and one-time development projects.

     Revenue from sales outside the United States comprised 24% of total revenue
in 1999 and 41% of total revenue in 2000. See "Item 1. Business--Factors that
may Affect Our Operating Results or Stock Price--We face additional risks from
our international operations."


                                       19
<PAGE>

     COST OF REVENUE

     Cost of revenue consists principally of royalties and associated
amortization of paid license fees relating to third-party software included
in our products, as well as costs of product media, manuals, packaging
materials, cameras, duplication and shipping. Total cost of revenue increased
52% from $2.5 million in 1999 to $3.9 million in 2000. Total cost of revenue
for legacy connectivity products totalled $75,000 in 1999 compared with
$6,000 in 2000. Total cost of revenue for our continuing product lines, which
excludes legacy connectivity cost of revenue, increased 56% from $2.5 million
in 1999 to $3.9 million in 2000.

     Cost of software license revenue was $2.4 million in both 1999 and 2000.
Our increased shipments of CUseeMe Pro bundled kits in 2000 resulted in
higher dollar costs.

     Cost of services and other revenue was increased from $186,000 in 1999
to $1.4 million in 2000. The significant increase in dollar and margin costs
results primarily from the inclusion in 2000 of $866,000 of technical support
expense and $334,000 of professional services expense. In prior years, we
regarded technical support expense as a marketing activity and reported it as
an operating expense, since we provided technical support for freeware
product. In 2000, our technical support expense became directly associated
with post-contract customer support revenue, as we implemented per-call
charges for technical support customers not party to a maintenance contract.
As the result of changes in our service delivery, we began to report
technical support expense in cost of services and other revenue in 2000,
rather than reporting it as an operating expense as we had in 1999 and
earlier years. Professional service expense was allocated proportionately on
the basis of ports utilized by paying customers versus internally deployed
for our CUseeMe World portal site.

     We intend to continue our strategy of improving the features and
functionality of our products, particularly CUseeMe Conference Server and future
products incorporating CUseeMe Conference Server technology, through the
incorporation of third-party software. As a result, our cost of software license
revenue as a percentage of software license revenue may fluctuate in the future.

     SALES AND MARKETING

     Sales and marketing expense primarily consists of costs associated with
personnel, sales commissions, trade shows, advertising and promotional
materials. Sales and marketing expense increased by 39% from $7.3 million in
1999 to $10.1 million in 2000. This increase was attributable principally to:

     o    costs of bandwidth and infrastructure and other expenses incurred in
          operating CUseeMe World, which became available to the public in 1999;

     o    personnel costs attributable to an increase in average headcount from
          1999 to 2000; and

     o    expenses resulting from increased participation in marketing programs
          and trade shows in 2000.

The increase was offset in part by the inclusion of technical support expense in
2000 in cost of services and other revenue, as described above. Technical
support expense of $820,000 was included in sales and marketing expense in 1999.

     RESEARCH AND DEVELOPMENT EXPENSE

     Research and development expense consists primarily of costs of
personnel and noncapitalized supplies and tools. Research and development
expense increased by 23% from $4.8 million in 1999 to $5.8 million in 2000.
This increase was attributable to the hiring of additional research and
development personnel, the engagement of contractors for product development,
and personnel-related expenses associated with special developmental projects
for original equipment manufacturers and strategic partners.

                                       20
<PAGE>

     GENERAL AND ADMINISTRATIVE EXPENSE

     General and administrative expense consists of costs of administrative,
financial and general management activities, including legal, accounting and
other professional fees. General and administrative expense increased by 83%
from $2.4 million in 1999 to $4.3 million in 2000. This increase included:

     o    $348,000 incurred in expanding our management information systems
          department from 3 employees in 1999 to 9 employees in 2000 in order to
          accommodate the needs of our growing infrastructure and increased IT
          reporting and management requirements;

     o    $390,000 incurred for management consulting and information systems
          consulting;

     o    $110,000 incurred to engage a third-party billing vendor to track
          sales in our web-based storefront in 2000;

     o    $469,000 of legal, insurance and other professional service fees;
          and

     o    $200,000 of additional facilities expense in 2000 associated with our
          services operation center in Somerville, Massachusetts and
          supplemental office space in Nashua, New Hampshire, both of which have
          been closed and consolidated into our main headquarters in Nashua.

The increase in general and administrative expense in 2000 also reflected
several smaller matters relating to foreign tax withholdings, depreciation on
capital additions, salary increases for executive management and increased
travel expense.

     OTHER INCOME (EXPENSE), NET

     Other income (expense), net increased from $82,000 in 1999 to $1.8 million
in 2000. This increase principally reflected:

     o    an increase in interest income from $178,000 in 1999 to $1.1 million
          in 2000 as the result of our investment of our net proceeds from
          private placements of common stock in December 1999; and

     o    a gain of $776,000 in 2000 from our sale of our legacy connectivity
          line of business to Powerlan USA.

LIQUIDITY AND CAPITAL RESOURCES

     We used $12.7 million in cash and cash equivalents in 2000 and generated
cash of $15.7 million in 1999. Cash used in 2000 primarily comprised our net
loss of $10.2 million, purchases of computer equipment and third-party
software licenses for $3.1 million, and investment in short-term securities
in the amount of $3.0 million. These uses were offset in part by depreciation
and amortization of $2.3 million and proceeds from the exercise of stock
options in the amount of $784,000. Cash generated in 1999 principally
represented our receipt of $19.7 million in net proceeds from our private
placement of common stock in December 1999, partially offset by our net loss
of $4.8 million and a net increase in accounts receivable of $2.1 million.

     Our capital expenditures in 2000 consisted principally of purchases of
computer equipment for $1.5 million and software for $596,000. We plan on
investing approximately $750,000 in capital equipment in 2001 to upgrade
computer equipment and to build out and strengthen our information systems
infrastructure. Our capital requirements may vary materially from those we now
anticipate, depending on a number of factors including:

     o    the level of our research and development activities;

     o    the rate of market acceptance of our software offerings; and

     o    the success of our sales, marketing and distribution strategy.

     At December 31, 2000, we had cash and cash equivalents of $9.3 million,
short-term investments of $3.3 million and working capital of $12.9 million. At
February 28, 2001, we had cash and cash equivalents of $8.1 million, short-term
investments of $3.3 million and working capital of $10.7 million. We continue to
experience a


                                       21
<PAGE>

negative cash flow from operations in each fiscal quarter. We are not currently
a party to any bank credit arrangements or other loan facility. We believe that
our current cash, cash equivalents and short-term investments will be sufficient
to fund our operations and capital expenditures through the fourth quarter of
2001. If we do not complete the proposed merger with First Virtual
Communications, our liquidity after the fourth quarter of 2001 will depend on
our internally generated funds and our ability to obtain funds from additional
equity or debt financings from external sources. Moreover, if we do not meet our
goals with respect to revenue or if our costs are higher than anticipated, we
may require substantial additional funds at an earlier date.

INFLATION

     Although certain of our expenses increase with general inflation in the
economy, inflation has not had a material effect on our financial condition or
results of operations to date.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No.133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES, which requires companies to record derivatives on their
balance sheet as assets or liabilities, measured at fair value. Gains or losses
resulting from changes in the values of those derivatives would be accounted for
depending on the use of the derivative and whether it qualifies for hedge
accounting. As initially issued, SFAS 133 was effective for fiscal years
beginning after June 15, 1999. In July 1999, the FASB issued SFAS 137,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES-DEFERRAL OF THE
EFFECTIVE DATE OF SFAS NO 133. SFAS 137 deferred the effective date of SFAS 133
until the first fiscal quarter beginning after June 15, 2000. The adoption of
SFAS 133 and 137 is not expected to have a material effect on our financial
position or results of operations.




                                       22
<PAGE>

ITEM 7.     FINANCIAL STATEMENTS

     The following statements are included after page 33 of this annual report
and form a part hereof:

<TABLE>
<CAPTION>

                                                                                                                Page
                                                                                                                ----
<S>                                                                                                            <C>
         Report of Independent Auditors..........................................................................F-1
         Consolidated Balance Sheets as of December 31, 2000 and 1999............................................F-2
         Consolidated Statements of Operations for the years ended December 31, 2000 and 1999....................F-4
         Consolidated Statements of Stockholders' Equity for the years ended December 31, 2000 and 1999..........F-5
         Consolidated Statements of Cash Flows for the years ended December 31, 2000 and 1999....................F-6
         Notes to Consolidated Financial Statements..............................................................F-7

</TABLE>

ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE

     There were no changes or disagreements with accountants on accounting or
financial disclosure matters during 2000 or 1999.


                                       23
<PAGE>

                                    PART III

ITEM 9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
            COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

DIRECTORS AND EXECUTIVE OFFICERS

     Our directors and executive officers, and their ages and positions as of
March 31, 2001, are as follows:

<TABLE>
<CAPTION>

NAME                                               AGE     POSITION
----                                               ---     --------

<S>                                              <C>      <C>
Killko A. Caballero.......................         41      Chief Executive Officer, President and Director
Robert B. Scott...........................         42      Chief Operating Officer
David O. Bundy............................         42      Chief Technical Officer
Raymond F. Cavanagh.......................         50      Vice President of Worldwide Sales
Gregory C. Loycano........................         35      Controller and Acting Vice President of Finance
Joseph J. Esposito (1)....................         49      Director
Jonathan G. Morgan (1)(2).................         47      Director
Adam Stettner (2).........................         37      Director
 .........
(1)......Member of the compensation committee.
(2)......Member of the audit committee.

</TABLE>

     KILLKO A. CABALLERO was appointed as chairman of our board of directors on
January 18, 2000. He has served as our chief executive officer since December
1998 as our president since August 1997. Mr. Caballero has served as one of our
directors since November 1995. Mr. Caballero served as interim president during
June and July 1997, and as our senior vice president of research and development
and chief technology officer from November 1995 until June 1997. Mr. Caballero
was one of the co-founders of CUseeMe Networks, Europe, formerly About Software,
and served its president, chief executive officer and chairman from July 1991 to
November 1995.

     ROBERT B. SCOTT has served as our chief operating officer since October
2000. From December 1999 to October 2000, Mr. Scott served as vice president,
strategic planning and operations at Wired Empire, Inc. From March 1999 to
December 1999, Mr. Scott served as interim president at CMG Direct Corporation.
From November 1997 to March 1999, he served as vice president, Internet
marketing services at CMG Direct. Mr. Scott served as director of Internet
products at Interactive Training, Inc from September 1996 to November 1997 and
as president of NewMarket Forum from January 1996 to August 1996.

     DAVID O. BUNDY has served as our chief technology officer since July 1998.
Mr. Bundy served as our vice president of engineering from January 1994 to July
1998. From August 1993 to December 1993, Mr. Bundy was our vice president and
principal engineer. From September 1991 until its merger with our company, Mr.
Bundy served as vice president and principal engineer of Visual T.I., Inc.

     RAYMOND F. CAVANAGH has served as our vice president of worldwide sales
since February 2001. From October 1999 to February 2001, Mr. Cavanagh served as
director of global channel sales of Aprisma Management Technologies, a Cabletron
company. From May 1998 to October 1999, he served as vice president of worldwide
sales and marketing of Newpoint Technologies. From May 1995 to May 1998, he
served as director of sales and marketing of PictureTel Corporation.

     GREGORY C. LOYCANO has served as our controller since April 1998 and as our
controller and acting vice president of finance since April 2001. From February
1997 to April 1998, Mr. Loycano served as manufacturing controller at Nova
Biomedical. Mr. Loycano served as division controller at General Automation
(formerly Sequoia Systems) from October 1996 to February 1997 and manufacturing
controller of Sequoia Systems. from December 1994 to October 1996.

     JONATHAN G. MORGAN has served as one of our directors since May 1996. From
June 1993 to January 2001, Mr. Morgan was a managing director of Prudential
Securities Incorporated, an investment banking firm. Since


                                       24
<PAGE>

January 2001, Mr. Morgan has served as a financial consultant to privately held
companies in high technology industries.

     ADAM STETTNER has served as one of our directors since March 1999. Mr.
Stettner has been the managing director of the Special Situations Technology
Fund since April 1997. He has also served as the president of Stettner
Consultants, Inc., a computer consulting company since 1989. Special Situations
Technology Fund and affiliated funds beneficially own 11.3% of our common stock.
See "Item 11. Security Ownership of Certain Beneficial Owners and Management."

     JOSEPH J. ESPOSITO has served as one of our directors since January 2000.
He was the president and chief executive officer of Tribal Voice, a provider of
instant messaging, interactive communications and online community solutions,
until it was sold to CMGI late in 1999. Currently he works as a consultant,
focusing on strategy for the communications and information industries. Prior to
joining Tribal Voice, Mr. Esposito worked in the publishing industry, with
tenures at Simon & Schuster and Random House. Mr. Esposito also served as chief
executive officer of Encyclopedia Britannica.

     Directors are elected to serve until the next annual meeting of
stockholders (or special meeting in lieu thereof) and until their successors are
duly elected and qualified. Executive officers are appointed by and serve at the
discretion of the board of directors.

     The board of directors has a compensation committee, which provides
recommendations concerning salaries and incentive compensation for our
directors, officers, employees and consultants, and an audit committee, which
reviews the results and scope of the audit and other services provided by our
independent auditors.

COMPENSATION OF DIRECTORS

     We do not pay fees to members of our board of directors and presently have
no plans to pay directors' fees. Our non-employee directors are eligible to
receive stock options under our 1997 Director Stock Option Plan. Our director
stock option plan was initially adopted by our board of directors in August 1997
and approved by our stockholders in September 1997. The plan was amended in
March 2000 to increase from 15,000 to 35,000 the number of shares covered by
options to be granted to non-employee directors upon initial election to the
board and to increase from 10,000 to 20,000 the number of shares covered by
options to be granted to non-employee directors upon re-election.

     Under the current terms of the director stock option plan, we grant
automatic formula stock options to non-employee directors as follows:

     o    upon the initial election of any non-employee director to the board of
          directors, such director is entitled to receive a stock option to
          purchase 35,000 shares of our common stock (subject to adjustment as
          provided in the director stock option plan); and

     o    upon the re-election of any non-employee director to our board of
          directors, such director is entitled to receive a stock option to
          purchase 20,000 shares of our common stock (subject to adjustment as
          provided in the director stock option plan), provided that he or she
          has served as one of our directors for at least the three months
          immediately preceding that meeting.

     The exercise price of the options granted under the director stock option
plan must equal the fair market value of our common stock on the grant date.
Each option granted under the director stock option plan is subject to vesting
under the terms of such plan and expires upon the earlier of (a) the tenth
anniversary of the grant date and (b) the first anniversary of the date on which
the option holder ceased serving as an director.

     During the fiscal year ended December 31, 2000, we granted non-statutory
stock options to purchase shares of our common stock to the non-employee members
of our board of directors as follows: Joseph Esposito received options in
January 2000 to purchase 15,000 shares at an exercise price of $24.875 per
share, in connection with his initial election to the board. Mr. Esposito,
Jonathan Morgan and Adam Stettner each received options in August 2000 to
purchase 20,000 shares at an exercise price of $5.9375 per share, in connection
with their re-election to the


                                       25
<PAGE>

board. Please see "Item 12. Certain Relationship and Related Transaction" for a
description of options issued to Mr. Esposito in his role as a consultant to our
company.

SECTION 16(a) REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and officers, and persons who own more than 10% of our common stock, to file
with the Securities and Exchange Commission reports of ownership on Form 3 and
reports of changes in ownership on Forms 4 and 5.

     Except as described below and based solely on our review of the copies of
such forms received or written representations from certain reporting persons,
we believe that during 2000, our directors, officers and 10% stockholders
complied with all applicable Section 16(a) filing requirements.

ITEM 10.    EXECUTIVE COMPENSATION

     The following table sets forth certain information concerning the
compensation earned by our chief executive officer and the other three executive
officers whose compensation for services rendered in all capacities to our
company exceeded $100,000 during 2000. These executive officers are sometimes
referred to as the named executive officers.

     All of the options described in the following table have a maximum term of
seven to ten years, subject to earlier termination in the event of the
optionee's cessation of service with us. The options are exercisable during the
optionee's lifetime only by the optionee; they are exercisable by the optionee
only while the optionee is one of our employees or advisors and for certain
limited periods of time thereafter in the event of termination of employment.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                                                                                        Long-Term
                                                                                                  Compensation Awards
                                                                                                  -------------------
                                                                   Annual Compensation      Securities
                                                                   -------------------      Underlying         All Other
Name and Principal Position                            Year       Salary($)    Bonus($)     Options(#)       Compensation($)
-----------------------------                          ----       ---------    --------     ----------       ---------------
<S>                                                   <C>         <C>          <C>           <C>              <C>
Killko A. Cabellero................................    2000       $217,877          --        74,750                 --
     Chief Executive Officer and President             1999        155,140     $45,000       115,000(1)              --
                                                       1998        150,445          --        35,000                 --

David O. Bundy.....................................    2000        147,379      10,000        19,500                 --
     Chief Technology Officer                          1999        128,546      25,000        30,000                 --
                                                       1998        132,405          --        20,000             20,000(2)

Christine J. Cox (3)...............................    2000        145,012          --        32,500                 --
     Chief Financial Officer and Vice President of     1999        112,470      20,000        66,000                 --
         Finance                                       1998        105,467          --        20,000                 --

  John E. Kelly (4)................................    2000        119,925          --        75,000                 --
     Vice President of Worldwide Sales and Marketing   1999        140,905          --            --                 --
                                                       1998             --          --            --                 --

</TABLE>

(1)  Forfeited voluntarily by Mr. Caballero on January 31, 2001 without
     consideration.
(2)  Represents amounts paid in connection with Mr. Bundy's relocation, at our
     request, to New Hampshire.
(3)  Resigned in March 2001.
(4)  Resigned in July 2000.


                                       26
<PAGE>

OPTION GRANTS AND EXERCISES

     The following table summarizes (a) option grants to the named executive
officers during 2000 and (b) the value of the options held by the named
executive officers at December 31, 2000. The amounts shown in the last two
columns represent hypothetical gains that could be achieved for the respective
options if exercised at the end of their option terms. These gains are based on
assumed rates of stock appreciation of five percent and ten percent, compounded
annually from the date the respective options were granted to the date of their
expiration. The gains shown are net of the option price, but do not include
deductions for taxes or other expenses that may be associated with the exercise.
Actual gains, if any, on stock option exercises will depend on future
performance of the common stock, the option holders' continued employment
through the option term and the date on which the options are exercised.

<TABLE>
<CAPTION>

                        OPTION GRANTS IN LAST FISCAL YEAR

                                                          Individual Grant
                                      ----------------------------------------------------------
                                      Percent of                                                 Potential Realizable Value
                                      Securities      Total                                        at Assumed Annual Rates of
                                      Underlying     Options         Exercise or                 Stock Price Appreciation for
                                      Number of      Granted to      Base Price                           Option Term
                                       Options      Employees in     Per Share       Expiration  ------------------------------
Name                                   Granted       Fiscal Year       ($/sh)           Date          5%             10%
----------------------------           -------       -----------       ------           ----          --             ---
<S>                                     <C>          <C>            <C>           <C>              <C>          <C>
Killko A. Caballero..........            6%           74,750        $14.625         04/24/10         $687,519     $1,742,309
David O. Bundy...............            2            19,500         14.625         04/24/10          179,353        454,515
Christine J. Cox.............            3            32,500         14.625         04/24/10          298,921        757,526
John E. Kelly................           --             --              --                             --              --

</TABLE>

        AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
                                  OPTION VALUES

     The following table sets forth information with respect to the exercise of
stock options by the named executive officers during the year ended December 31,
2000 and unexercised options held by the named executive officers on December
31, 2000. The closing sale price for our common stock as reported on the Nasdaq
National Market on December 29, 2000, the last trading day in 2000, was $1.00.
For purposes of the last column in the table, value is calculated on the basis
of the difference between the option exercise price and $1.00, multiplied by the
number of shares of common stock underlying the options.

<TABLE>
<CAPTION>

                                                                Unexercised Options at Fiscal      In-the-Money Options at
                                                                        Year End (#)                 Fiscal Year End ($)
                                                                        ------------                 -------------------
                                 Shares
                                 Acquired on     Value
Name                             Exercise(#)     Realized($)   Exercisable    Unexercisable     Exercisable   Unexercisable
----                             -----------     -----------   -----------    -------------     -----------   -------------
<S>                                <C>           <C>             <C>              <C>             <C>            <C>
Killko A. Caballero..........           --              --         93,094          181,656          $0.00          $0.00
David O. Bundy...............        5,000        $ 67,813         69,938           59,562          $0.00          $0.00
Christine J. Cox.............        6,000         224,538         51,938           94,562          $0.00          $0.00
John E. Kelly................       18,750         650,391             --               --          $0.00          $0.00

</TABLE>

EMPLOYMENT AND RETENTION AGREEMENTS

     We entered into a nondisclosure and noncompetition agreement with David O.
Bundy dated February 15, 1996. Pursuant to the agreement, Mr. Bundy agreed that
while employed by us and for a period of 19 months following the termination of
his employment with us for any reason, he will not, directly or indirectly,
compete with us or solicit any of our employees, contractors, suppliers,
existing customers or prospective customers on behalf of himself or any other
entity that engages in the sale, distribution or development of or research
concerning computer software and technology in breach of the agreement. Either
party may terminate the agreement by giving the other party thirty days' prior
written notice. If Mr. Bundy's employment is terminated without cause during the
term of the


                                       27
<PAGE>

agreement, he will be entitled to his base salary for six months or until he
becomes employed elsewhere, whichever occurs first; provided, however, that if
his new salary is lower than his base salary at our company, we will pay the
difference for the balance of this six-month period.

     We entered into a letter agreement dated August 5, 1997 with Christine J.
Cox with respect to her employment as our vice president of finance. The letter
agreement established a base salary of $100,000 per year and provides for a
maximum annual incentive bonus of $15,000, based upon achievement of specific
milestones to be established by us. Ms. Cox resigned effective March 31, 2001.

     We entered into executive retention agreements with each of Messrs.
Caballero, Cavanagh, Bundy and Scott and Ms. Cox. The agreements have an initial
expiration date of December 31, 2003, except for Mr. Cavanagh's agreement, which
has an initial expiration date of March 31, 2004. All of the agreements,
however, are automatically renewed each year thereafter for one additional term
unless we give the executive six months' notice that his or her agreement will
not be renewed. The agreements are not employment contracts and do not specify
any terms or conditions of employment. Rather, the agreements provide for
certain severance benefits to the executive if, during the 12 months following a
change in control of CUseeMe, the executive's employment is terminated by us,
other than for cause, or the executive terminates his employment for good
reason.

     The terms "change in control," "cause" and "good reason" are each defined
in the agreements. Change in control means, in summary: the acquisition by a
person or a group of 30% or more of our outstanding stock; a change, without the
approval of our board of directors, of a majority of the members of our board of
directors; the acquisition of our company by means of a reorganization, merger,
consolidation or asset sale; or the approval of a liquidation or dissolution of
our company. Cause means, in summary: the executive's willful and continued
failure to substantially perform his reasonable assigned duties, which failure
continues after a 30-day cure period; or the executive's willful engagement in
illegal conduct or gross misconduct injurious to us. Good reason means, in
summary with respect to Mr. Caballero: a diminution in the executive's position,
authority or responsibilities; a reduction in his salary or benefits; a
relocation of the executive; or the failure of a successor entity to assume and
agree to perform the executive retention agreement. Good reason means, in
summary with respect to Messrs. Cavanagh, Bundy and Scott and Ms. Cox: a
reduction in salary or benefits or the failure of a successor entity to assume
and agree to perform the executive retention agreement.

     The benefits provided to the executive officers if the executive's
employment is terminated by us without cause or by the executive for good reason
within 12 months following a change in control are as follows:

     o    KILLKO CABALLERO: (1) acceleration of Mr. Caballero's outstanding
          options such that each outstanding option to purchase common stock
          becomes immediately exercisable in full; (2) a severance payment equal
          to the Mr. Caballero's annual base salary through the date of
          termination and a pro rata portion of his annual bonus paid; (3) a
          continuation of all employee benefits during the one year period
          following employment termination; (4) any other post-termination
          benefits which the executive is eligible to receive under any of our
          plans or programs and (5) an amount equal to Mr. Caballero's highest
          base salary during the five-year period prior to the change in
          control.

     o    MR. CAVANAGH: (1) acceleration of Mr. Cavanagh's outstanding options
          by one year; (2) a severance payment equal to the Mr. Cavanagh's
          annual base salary through the date of termination and a pro rata
          portion of his annual bonus paid; (3) a continuation of all employee
          benefits during the one year period following employment termination;
          (4) any other post-termination benefits which the executive is
          eligible to receive under any of our plans or programs; and (5) an
          amount equal to Mr. Cavanagh's highest base salary during the
          five-year period prior to the change in control.

     o    MR. BUNDY: (1) acceleration of Mr. Bundy's outstanding options such
          that each outstanding option to purchase common stock becomes
          immediately exercisable in full; (2) a severance payment equal to the
          Mr. Bundy annual base salary through the date of termination and a pro
          rata portion of his annual bonus paid; (3) a continuation of all
          employee benefits during the one year period following employment
          termination; (4) any other post-termination benefits which the
          executive is eligible to receive under any of our plans or programs
          and (5) an amount equal to Mr. Bundy's highest base salary during the
          five-year period prior to the change in control.


                                       28
<PAGE>

     o    MR. SCOTT: (1) acceleration of Mr. Scott's outstanding options by one
          year; (2) a severance payment equal to the Mr. Scott's annual base
          salary through the date of termination and a pro rata portion of his
          annual bonus paid; (3) a continuation of all employee benefits during
          the one year period following employment termination; (4) any other
          post-termination benefits which the executive is eligible to receive
          under any of our plans or programs and (5) an amount equal to Mr.
          Scott's highest base salary during the five-year period prior to the
          change in control.

     o    MS. COX: (1) acceleration of Ms. Cox's outstanding options such that
          each outstanding option to purchase common stock becomes immediately
          exercisable in full; (2) a severance payment equal to the Ms. Cox's
          annual base salary through the date of termination and a pro rata
          portion of his annual bonus paid; (3) a continuation of all employee
          benefits during the one year period following employment termination;
          (4) any other post-termination benefits which the executive is
          eligible to receive under any of our plans or programs and (5) an
          amount equal to Ms. Cox's highest base salary during the five-year
          period prior to the change in control.

     The agreements provide that the amount of severance benefits payable to the
executive shall be reduced by an amount necessary to avoid triggering the excise
tax provisions of Sections 280G and 4999 of the Internal Revenue Code of 1986,
only if such reduction results in greater net after-tax benefits to the
executive.


                                       29
<PAGE>

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of March 31, 2001, by (a) each
person (or group of affiliated persons) known by us to own beneficially more
than five percent of the outstanding shares of common stock, (b) each of our
directors, (c) each of the named executive officers and (d) all of our directors
and executive officers as a group. Unless otherwise noted:

     o    The address of all persons who are executive officers or directors is
          in care of CUseeMe Networks, Inc., 542 Amherst Street, Nashua, New
          Hampshire 03063.

     o    Each person or group identified in the table possesses sole voting and
          investment power with respect to such shares, subject to community
          property laws, where applicable. Shares not outstanding but deemed
          beneficially owned by virtue of the right of a person or group to
          acquire them within 60 days of March 31, 2001 are treated as
          outstanding only for purposes of determining the amount and
          percentages beneficially owned by such person or group.

<TABLE>
<CAPTION>

                                                                       Shares Beneficially     Percent Beneficially
Name and Address                                                              Owned                   Owned
--------------------------                                             ------------------      ---------------------
<S>                                                                       <C>                        <C>
Austin W. Marxe and David Greenhouse.................................       1,399,300                  11.3%
153 East 53 Street, 51st Floor
New York, New York 10022

Consortium de Realisation............................................         820,330                   6.6
27-29 RUE Le Peletier
75009 Paris, France

Killko A. Caballero..................................................         432,263                   3.5

Adam Stettner........................................................          25,000                   *
153 East 53 Street, 51st Floor
New York, New York 10022

David O. Bundy.......................................................          79,251                   *

Jonathan G. Morgan...................................................          65,000                   *

Christine J. Cox.....................................................          57,438                   *

John E. Kelly........................................................          18,750                   *

Joseph J. Esposito...................................................          40,000                   *

All directors and executive officers as a group (seven persons)......       1,079,293                   8.3
</TABLE>
------------
* Represents less than 1% of the outstanding shares of common stock.

     The information reported regarding Messrs. Marxe and Greenhouse is based on
Amendment No. 3 to Schedule 13G, filed with the SEC on February 15, 2001 by
Special Situations Fund III, L.P., MGP Advisers Limited Partnership, Special
Situations Technology Fund, L.P., SST Advisers, L.L.C., Special Situations
Cayman Fund, L.P., AWM Investment Company, Inc., Special Situations Private
Equity Fund, L.P., AWM Investment Company, Inc., MG Advisors L.L.C., Austin W.
Marxe and David Greenhouse. Of the 1,399,300 shares, (a) 962,000 shares are
beneficially owned by Special Situations Fund III, L.P., (b) 124,300 shares are
beneficially owned by Special Situations Technology Fund, L.P., and (c) 313,000
shares are beneficially owned by Special Situations Cayman Fund, L.P. Messrs.
Marxe and Greenhouse, who serve as officers, directors and members or principal
shareholders of the four investment advisers, claim sole voting and dispositive
powers for all 1,399,300 shares.


                                       30
<PAGE>

     The shares deemed to be beneficially owned by Mr. Stettner exclude the
shares described in the preceding paragraph, except for the 124,300 shares owned
by Special Situations Technology Fund, L.P., of which he is the managing
director. Mr. Stettner is an employee of an entity controlled by Messrs. Marxe
and Greenhouse. He disclaims ownership of all of the shares deemed to be owned
by Messrs. Marxe and Greenhouse, other than the 124,300 shares owned by Special
Situations Technology Fund, L.P. and except to the extent of his pecuniary
interest, if any.

     The information reported regarding the Consortium de Realisation is based
on a Schedule 13G filed with the SEC on October 2, 1997 by Consortium de
Realisation, CDR Enterprises and Land Free Investment. All of the 820,330 shares
are directly owned by Land Free Investment, which is a direct subsidiary of CDR
Enterprises and an indirect subsidiary of Consortium de Realisation. All of the
reporting parties claim shared voting and dispositive powers for all of the
820,300 shares.

     The information reported regarding the directors and executive officers
includes options, exercisable by the following, within 60 days of March 31,
2001, to purchase the indicated numbers of shares of common stock:

Killko A. Caballero............................................      79,938
David O. Bundy.................................................      79,251
Adam Stettner..................................................      25,000
Jonathan G. Morgan.............................................      65,000
Christine J. Cox...............................................      57,438
Joseph Esposito................................................      40,000
Robert B. Scott................................................      12,500

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     In December 1999, we sold 78,125 shares of common stock to Special
Situations Private Equity Fund, L.P., 65,104 shares of common stock to Special
Situations Cayman Fund, L.P., and 182,292 shares of common stock to Special
Situations Fund III, L.P., at a price of $15.36 per share. Under SEC
regulations, these funds may be deemed to be affiliated with Austin W. Marxe and
David Greenhouse, who beneficially owned 11.3% of our common stock as of March
31, 2001, and Adam Stettner, one of our directors. The shares sold to these
funds were sold on terms identical to the terms under which we sold an
additional 976,563 shares of common stock to third parties in December 1999.

     From February to June 2000, Joseph Esposito, one of our directors,
performed a variety of consulting services in connection with the operations of
our company. As compensation for these services, we paid Mr. Esposito a total of
$140,000 and we issued to him non-statutory stock options to purchase an
aggregate of 25,000 shares of our common stock at an exercise price of $14.625
per share.

     For a description of employment arrangements between us and some of our
executive officers, see "Item 10. Executive Compensation - Employment
Agreements."

ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits

<TABLE>
<CAPTION>

  EXHIBIT NO.  DESCRIPTION
  -----------  -----------
<S>           <C>
    3.1(1)     Amended and Restated Certificate of Incorporation of CUseeMe Networks, Inc.
    3.2(1)     Amended and Restated By-Laws of CUseeMe Networks, Inc.
    4.1(1)     Specimen certificate for common stock, $.01 par value, of CUseeMe Networks, Inc.
   10.1(1)     Standard Office Lease-Gross (American Industrial Real Estate
               Association) dated October 24, 1996 by and between PBP Limited
               Partnership, as lessor and CUseeMe Networks Software, Inc., as
               lessee.
   10.2(1)     Indenture of Lease dated May 15, 1996 by Nash-Tamposi Limited Partnership, Five N Associates, Ballinger
               Properties, L.L.C. and CUseeMe Networks, Inc.
   10.3(1)     CUseeMe Networks, Inc. Stock Option Plan (1993), as amended
   10.4(1)     CUseeMe Networks, Inc. Stock Option Plan (1994)
   10.5(1)     CUseeMe Networks, Inc. Stock Option Plan (1995), as amended


                                       31
<PAGE>

   10.6(1)     CUseeMe Networks, Inc. Stock Option Plan (1996)
   10.7(1)     CUseeMe Networks, Inc. 1996 Incentive and Nonqualified Stock Option Plan
   10.8(5)     CUseeMe Networks, Inc. 1996 Amended and Restated Employee Stock Purchase Plan
   10.9(3)     CUseeMe Networks, Inc. 1997 Director Stock Option Plan
   10.10(3)    Severance Agreement dated June 4, 1997 between CUseeMe Networks, Inc. and Howard R. Berke
   10.11(1)    Nondisclosure and Noncompetition Agreement dated February 15, 1996 with David O. Bundy
   10.12(3)    Severance Agreement dated March 16, 1998 between CUseeMe Networks, Inc. and Robert Hadden
   10.13(5)    Letter agreement dated August 5, 1997 between CUseeMe Networks, Inc. and Christine J. Cox
   10.14       Executive Retention Agreement dated December 1, 2000 between CUseeMe Networks, Inc. and Killko A.
               Caballero
   10.15       Executive Retention Agreement dated December 1, 2000 between CUseeMe Networks, Inc. and David O. Bundy
   10.16       Executive Retention Agreement dated December 1, 2000 between CUseeMe Networks, Inc. and Robert B. Scott
   10.17       Executive Retention Agreement dated December 1, 2000 between CUseeMe Networks, Inc. and Raymond F.
               Cavanagh
   10.18       Executive Retention Agreement dated December 1, 2000 between CUseeMe Networks, Inc. and Christine J. Cox
   10.19(1)    Stock Purchase Agreement dated March 19, 1996 among certain investors and CUseeMe Networks, Inc., as
               amended
   10.20(1)    Stock Purchase Agreement dated April 17, 1996 between J.F. Shea, Co., Inc. and CUseeMe Networks, Inc.,
               as amended
   10.21(1)    Amended and Restated Registration Rights Agreement dated March 19, 1996 among certain stockholders of
               White Pine Software, Inc. and CUseeMe Networks, Inc., as amended
   10.22(1)    Acquisition Agreement dated October 10, 1995 among former stockholders of About Software Corporation
               S.A. and CUseeMe Networks, Inc.
   10.23(1)    Sale of Assets Agreement dated as of July 6, 1998 by and among CUseeMe Networks, Inc., Labtam
               Communications Pty. Ltd., Creative Software Technologies Pty. Ltd., Dawson Noy Johns and Anthony  James
               Oxley
   10.24(5)    Technology Transfer Agreement dated as of November 11, 1998 between CUseeMe Networks, Inc. and Cornell
               Research Foundation, Inc.
   21.1(3)     List of subsidiaries of CUseeMe Networks, Inc.
   23.1        Consent of Ernst & Young LLP

</TABLE>

----------
(1)  Incorporated by reference to the Registration Statement on Form SB-2 (File
     No. 333-09525) of CUseeMe Networks, Inc. in the form in which it was
     declared effective by the Securities and Exchange Commission.
(2)  Incorporated by reference to the Annual Report on Form 10-KSB of CUseeMe
     Networks, Inc. for the fiscal year ended December 31, 1996.
(3)  Incorporated by reference to the Annual Report on Form 10-KSB of CUseeMe
     Networks, Inc. for the fiscal year ended December 31, 1997.
(4)  Incorporated by reference to the Current Report on Form 8-K of CUseeMe
     Networks, Inc. filed on July 23, 1998.
(5)  Incorporated by reference to the Annual Report on Form 10-KSB of CUseeMe
     Networks, Inc. for the fiscal year ended December 31, 1999.

     (b) Reports on Form 8-K

     None.


                                       32
<PAGE>

                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, as of April 2, 2001.

                                        CUSEEME NETWORKS, INC.

                                        By: /s/ KILLKO A. CABALLERO
                                           -------------------------------------
                                           Killko A. Caballero
                                           Chief Executive Officer and President


                                        By: /s/ GREGORY C. LOYCANO
                                           -------------------------------------
                                           Gregory C. Loycano
                                           Controller and Acting Vice President
                                           of Finance

     Each person whose signature appears below hereby appoints Killko A.
Caballero and Gregory C. Loycano and each of them severally, acting alone and
without the other, his (or her) true and lawful attorney-in-fact with the
authority to execute in the name of each such person, and to file with the
Securities and Exchange Commission, together with any exhibits thereto and other
documents therewith, any and all amendments to this Annual Report on Form 10-KSB
necessary or advisable to enable the Registrant to comply with the rules,
regulations, and requirements of the Securities Act of 1934, as amended, in
respect thereof, which amendments may make such other changes in the Annual
Report as the aforesaid attorney-in-fact executing the same deems appropriate.

     In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant, and in the capacities
indicated, as of April 2, 2001.

            SIGNATURE                               TITLE
            ---------                               -----

/s/ KILLKO A. CABALLERO         Chairman, Chief Executive Officer and President
---------------------------     (Principal Executive Officer)
Killko A. Caballero


/s/ GREGORY C. LOYCANO          Controller and Acting Vice President of Finance
---------------------------     (Principal Financial and Accounting Officer)
Gregory C. Loycano


/s/ JOSEPH J. ESPOSITO          Director
---------------------------
Joseph J. Esposito


/s/ JONATHAN G. MORGAN          Director
---------------------------
Jonathan G. Morgan


/s/ ADAM STETTNER               Director
---------------------------
Adam Stettner


                                       33
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

BOARD OF DIRECTORS
CUSEEME NETWORKS, INC.
(formerly known as White Pine Software, Inc.)


     We have audited the accompanying consolidated balance sheets of CUseeMe
Networks, Inc. (formerly known as White Pine Software, Inc.) and subsidiary
(the Company) as of December 31, 2000 and 1999, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the years
then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of CUseeMe
Networks, Inc. and subsidiary at December 31, 2000 and 1999, and the
consolidated results of their operations and their cash flows for the years
ended December 31, 2000 and 1999, in conformity with accounting principles
generally accepted in the United States.

                                                           /s/ ERNST & YOUNG LLP

Boston, Massachusetts
February 1, 2001, except for
Note 11 as to which the date
is March 22, 2001


                                      F-1
<PAGE>

                      CUSEEME NETWORKS, INC. AND SUBSIDIARY
                  (formerly known as White Pine Software, Inc.)

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                                        DECEMBER 31,
                                                                                                        ------------
                                                                                                   2000             1999
                                                                                                   ----             ----
                                           ASSETS

<S>                                                                                          <C>             <C>
Current assets:
     Cash and cash equivalents........................................................        $  9,342,754    $ 22,087,638
     Short-term investments...........................................................           3,251,717              --
     Accounts receivable, less allowance of $135,000 at December 31, 2000 and $176,000 at
         December 31, 1999............................................................           2,688,297       4,158,603
     Inventories......................................................................             196,626          53,769
     Prepaid expenses.................................................................             718,190         237,628
     Other current assets.............................................................             231,212          79,337
                                                                                                   -------          ------
         Total current assets.........................................................          16,428,796      26,616,975
                                                                                                ----------      ----------
Property and equipment:
     Computer equipment...............................................................           2,779,054       1,278,157
     Furniture and fixtures...........................................................             509,866         240,596
     Software.........................................................................           1,221,443         625,699
     Equipment........................................................................             117,135          87,691
     Property.........................................................................             147,500              --
     Leasehold improvements...........................................................             198,439         202,689
                                                                                                   -------         -------
                                                                                                 4,973,437       2,434,832
        Accumulated depreciation .....................................................          (2,195,072)     (1,274,302)
                                                                                                ----------      ----------
               Property and equipment, net................................................       2,778,365       1,160,530

Other assets:
     Third-party licenses, less accumulated amortization of $744,000 at December 31, 2000
         and $432,000 at December 31, 1999............................................             785,306         559,844
     Purchased software, less accumulated  amortization of $1,136,000 at December 31, 2000
         and $608,000 at December 31, 1999............................................           1,805,048       2,533,352
     Trademarks, less accumulated amortization  of $174,000 at December  31, 2000 and
         $93,000 at December 31, 1999.................................................             790,352         870,728
     Goodwill, less accumulated amortization of $1,193,000 at December 31, 2000 and
         $995,000 at December 31, 1999................................................                  --         198,845
     Other assets.....................................................................             112,437         105,908
                                                                                                   -------         -------
               Total other assets.....................................................           3,493,143       4,268,677
                                                                                                 ---------       ---------
Total assets..........................................................................         $22,700,304     $32,046,182
                                                                                               ===========     ===========

</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                      F-2
<PAGE>

                            CUSEEME NETWORKS, INC. AND SUBSIDIARY
                        (formerly known as White Pine Software, Inc.)

                           CONSOLIDATED BALANCE SHEETS (continued)
                            LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

<S>                                                                                          <C>             <C>
Current liabilities:
     Accounts payable.................................................................          $  563,100      $  717,932
     Accrued liabilities..............................................................           2,091,675       2,253,800
     Deferred revenue.................................................................             902,647         695,147
     Current portion of long-term debt................................................                  --           7,067
                                                                                                 ---------           -----
         Total current liabilities....................................................           3,557,422       3,673,946

Other long term liabilities...........................................................             300,000         600,000

Stockholders' equity:
     Preferred stock, $0.01 par value; 5,000,000 shares authorized; no shares issued or
         outstanding..................................................................                  --              --
     Common stock, $0.01 par value:
     Authorized shares - 30,000,000; issued and outstanding shares - 12,350,818 at December
         31, 2000 and 12,049,476 at December 31, 1999.................................             123,508         120,495
     Additional paid-in capital.......................................................          62,886,797      61,269,773
     Accumulated deficit..............................................................         (43,895,724)    (33,710,591)
     Accumulated other comprehensive (loss) income:
       Cumulative translation adjustment..............................................             (20,416)        (92,559)
       Unrealized holding loss on available-for-sale securities.......................            (251,283)             --
                                                                                                ----------      ----------
         Total accumulated other comprehensive (loss) income..........................            (271,699)         92,559
                                                                                                ----------      ----------
           Total stockholders' equity.................................................          18,842,882      27,772,236
                                                                                                ----------      ----------

Total liabilities and stockholders' equity............................................        $ 22,700,304    $ 32,046,182
                                                                                              ============    ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                                      F-3
<PAGE>

                      CUSEEME NETWORKS, INC. AND SUBSIDIARY
                   (formerly known as White Pine Software, Inc.)

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                                                  YEAR ENDED DECEMBER 31,
                                                                                                  -----------------------
                                                                                                   2000             1999
                                                                                                   ----             ----
<S>                                                                                         <C>             <C>
Revenue:
     Software license fees...........................................................         $  10,022,329   $  10,714,541
     Services and other..............................................................             2,048,488       1,287,077
                                                                                                  ---------       ---------

         Total revenue...............................................................            12,070,817      12,001,618
Cost of revenue:
     Software license fees...........................................................             2,440,576       2,361,930
     Services and other..............................................................             1,428,274         185,579
                                                                                                  ---------         -------

         Total cost of revenue.......................................................             3,868,850       2,547,509
                                                                                                  ---------       ---------
Gross profit.........................................................................             8,201,967       9,454,109
Operating expenses:
     Sales and marketing.............................................................            10,082,666       7,265,224
     Research and development........................................................             5,836,931       4,761,107
     General and administrative......................................................             4,313,118       2,359,341
                                                                                                  ---------       ---------

         Total operating expenses....................................................            20,232,715      14,385,672
                                                                                                 ----------      ----------
Loss from operations.................................................................           (12,030,748)     (4,931,563)
Other income (expense):
     Interest income.................................................................             1,099,827         177,679
     Gain on sale of assets of legacy connectivity business..........................               775,589              --
     Other, net......................................................................               (29,801)        (95,624)
                                                                                                    -------         -------
             Total other income......................................................             1,845,615          82,055
                                                                                                  ---------          ------
Net loss.............................................................................         $ (10,185,133)  $  (4,849,508)
                                                                                              ==============  ==============

Net loss per share - basic and diluted...............................................         $       (0.84)  $       (0.46)
                                                                                              =============   ==============
Weighted average number of common shares outstanding.................................            12,193,786      10,619,696
                                                                                                 ==========      ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                                      F-4
<PAGE>



                      CUSEEME NETWORKS, INC. AND SUBSIDIARY
                  (formerly known as White Pine Software, Inc.)

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                  ---------------------                                  Accumulated
                                                    Common stock           Additional                       other         Total
                                                  ---------------------     paid-in     Accumulated    comprehensive stockholders'
                                                  Shares      Par value     capital       deficit      (loss) income     equity
                                                  ------      ---------     -------       -------      -------------     ------
<S>                                           <C>             <C>        <C>          <C>               <C>          <C>
BALANCES AT DECEMBER 31, 1998                  10,460,227      $104,602   $41,137,186  $(28,861,083)     $34,043      $12,414,748
Common stock issued upon exercise of stock
     options...............................       225,530         2,256       315,556                                     317,812
Common stock issued under Employee Stock
     Purchase Plan.........................        61,635           616       107,641                                     108,257
Common stock issued in private placement...     1,302,084        13,021    19,709,390                                  19,722,411
Net loss...................................                                              (4,849,508)                   (4,849,508)
Cumulative translation adjustment..........                                                               58,516           58,516
                                                                                                                      -----------
Comprehensive loss.........................                                                                            (4,790,992)
                                               ----------       -------    ----------   -----------     --------      -----------
BALANCES AT DECEMBER 31, 1999                  12,049,476       120,495    61,269,773   (33,710,591)      92,559       27,772,236
Common stock issued upon exercise of stock
     options...............................       264,399         2,644       781,365                                     784,009
Common stock issued under Employee Stock
     Purchase Plan.........................        36,943           369       150,080                                     150,449
Acceleration of options vesting in
     connection with sale of assets of
     legacy connectivity business..........                                   668,144                                     668,144
Other......................................                                    17,435                                      17,435
Net loss...................................                                             (10,185,133)                  (10,185,133)
Unrealized loss on available-for-sale
     securities............................                                                             (251,283)        (251,283)
Cumulative translation adjustment..........                                                             (112,975)        (112,975)
                                                                                                                      -----------
Comprehensive loss.........................                                                                           (10,549,391)
                                               ----------      --------   -----------  ------------    ---------      -----------
BALANCES AT DECEMBER 31, 2000                  12,350,818      $123,508   $62,886,797  $(43,895,724)   $(271,699)     $18,842,882
                                               ==========      ========   ===========  ============    =========      ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                                      F-5
<PAGE>



                      CUSEEME NETWORKS, INC. AND SUBSIDIARY
                  (formerly known as White Pine Software, Inc.)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                             YEAR ENDED DECEMBER 31,
                                                                                             -----------------------
                                                                                          2000                   1999
                                                                                          ----                   ----

<S>                                                                               <C>                  <C>
OPERATING ACTIVITIES
Net loss..................................................................         $     (10,185,133)   $      (4,849,508)
Adjustments to reconcile net loss to net cash used in operating activities:
     Bad debt expense                                                                         60,000               65,374
     Depreciation ........................................................                   936,558              454,258
     Amortization of intangible assets....................................                 1,352,065            1,301,234
     Gain on sale of assets of legacy connectivity business...............                  (775,589)                  --
     Changes in operating assets and liabilities:
         Accounts receivable..............................................                 1,274,013           (2,098,404)
         Inventories......................................................                  (189,449)              11,735
         Prepaid expenses.................................................                  (480,940)              88,485
         Other current assets.............................................                  (160,990)              49,221
         Accounts payable.................................................                  (149,567)             245,177
         Accrued expenses and other accrued liabilities...................                  (150,565)             172,819
         Deferred revenue.................................................                   369,290              351,018
                                                                                             -------              -------
Net cash used in operating activities.....................................                (8,100,307)          (4,208,591)
                                                                                          ----------           ----------
INVESTING ACTIVITIES
Purchase of property and equipment........................................                (2,577,972)            (276,158)
Purchase of third party licenses..........................................                  (569,999)                  --
Purchase of short-term investments........................................                (3,003,000)                  --
Proceeds received from sale of assets of legacy connectivity business.....                   984,788                   --
                                                                                             -------             --------
Net cash used in investing activities.....................................                (5,166,183)            (276,158)
                                                                                          ----------             --------
FINANCING ACTIVITIES

Principal payments on long-term debt and third-party licenses.............                    (7,067)             (25,136)
Payments on software/trademark purchase...................................                  (300,000)                  --
Proceeds from other stock related activities..............................                    17,435                   --
Proceeds from common stock issued upon exercise of stock options..........                   784,009              317,812
Proceeds from common stock issued under Employee Stock Purchase Plan......                   150,448              108,257
Proceeds from private placements, net.....................................                        --           19,722,411
                                                                                          ----------           ----------
Net cash provided by financing activities.................................                   644,825           20,123,344
                                                                                             -------           ----------
Currency translation effect on cash and cash equivalents..................                  (123,219)              28,357
                                                                                            --------               ------
   Net increase (decrease) in cash and cash equivalents...................               (12,744,884)          15,666,952
Cash and cash equivalents at beginning of period..........................                22,087,638            6,420,686
                                                                                          ----------            ---------
Cash and cash equivalents at end of period................................         $       9,342,754    $      22,087,638
                                                                                   =================    =================
SIGNIFICANT NON-CASH TRANSACTION:
Equity securities received in connection with sale of assets of legacy
   connectivity business..................................................         $         500,000                   --

</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                                      F-6
<PAGE>



                      CUSEEME NETWORKS, INC. AND SUBSIDIARY
                  (formerly known as White Pine Software, Inc.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2000

1.       ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

     CUseeMe Networks, Inc. and its subsidiary ("the Company") operate in one
business segment, which develops, markets and supports multi-platform desktop
multimedia software that facilitates worldwide video and audio communication and
data collaboration across the Internet, intranets and other networks using
Internet protocol.

     The Company markets and sells its products in the United States, Canada,
Europe, and the Pacific Rim through distributors, a combination of strategic
partners and original equipment manufacturers, and its direct sales
organization, as well as over the Internet.

PRINCIPLES OF CONSOLIDATION AND PRESENTATION

     The consolidated financial statements include the accounts of the Company
and its wholly-owned foreign subsidiary, CUseeMe Networks, Europe. All
significant intercompany accounts and transactions have been eliminated in
consolidation.

     Amounts included in footnotes have been rounded to thousands.

USE OF ESTIMATES

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

CASH AND CASH EQUIVALENTS

     Cash and cash equivalents consist of cash on deposit with banks,
investments in high grade commercial paper, and overnight repurchase
agreements that are readily convertible into cash and have maturities of
three months or less when purchased.

SHORT-TERM INVESTMENTS

     Short-term investments consist of equity securities and corporate bonds.
The Company accounts for short-term investments in accordance with Statement
of Financial Accounting Standards No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS
IN DEBT AND EQUITY SECURITIES (SFAS 115). SFAS 115 establishes the accounting
and reporting requirements for all debt securities and for investments in
equity securities that have readily determinable fair values. Management
determines the appropriate classification of investments in debt and equity
securities as trading, available-for-sale, or held-to-maturity at the time of
purchase and reevaluates such designation as of each balance sheet date.
Investments in common stock are classified as available-for-sale and are
stated at market value as determined by the most recently traded price of the
security at the balance sheet date. Unrealized holding gains and losses are
reported as a separate component of accumulated other comprehensive (loss)
income in stockholders' equity. Investments in corporate bonds are classified
as held-to-maturity and are carried at amortized cost, which approximates
fair value.

CONCENTRATIONS OF CREDIT RISK

     Financial instruments that potentially subject the Company to
significant concentrations of credit risk primarily consist of cash, cash
equivalents, short-term investments and accounts receivable. Cash and cash
equivalents are maintained with high credit quality financial institutions.

                                      F-7
<PAGE>

                      CUSEEME NETWORKS, INC. AND SUBSIDIARY
                  (formerly known as White Pine Software, Inc.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2000


     The Company performs ongoing credit evaluations of its customers and
generally requires no collateral. The Company maintains reserves for
potential credit losses; historically, such losses have not been material and
have been within management's expectations. Two customers accounted for
approximately 48% and 38% of accounts receivable at December 31, 2000 and
1999, respectively, and 18% and 13% of total revenue for the years ended
December 31, 2000 and 1999, respectively.

INVENTORIES

     Inventories are stated at the lower of cost (first-in, first-out method) or
market and primarily consist of gateways and software packaging.

PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost and are being depreciated
using the straight-line and accelerated methods over the estimated useful
lives of two to seven years. Leasehold improvements are stated at cost and
are being amortized over the lesser of the term of the lease or the estimated
useful life of the asset. Depreciation expense includes amortization of
leasehold improvements.

THIRD-PARTY LICENSES

     The cost of agreements entered into with third-parties to use the
technology of others in the Company's products is amortized on a straight-line
basis over the lives of the agreements, or the expected life of technology,
whichever is less.

PURCHASED SOFTWARE

     Purchased software is stated at cost and is being depreciated using the
straight-line method over the estimated useful lives of two to three years.

TRADEMARKS

     The cost of trademarks is amortized on a straight-line basis over the
projected economic life of the trademark, which is estimated to be twelve
years.

CAPITALIZED SOFTWARE

     Software development costs meeting recoverability tests are capitalized
under Statement of Financial Accounting Standards No. 86, ACCOUNTING FOR THE
COSTS OF COMPUTER SOFTWARE TO BE SOLD, LEASED OR OTHERWISE MARKETED. The cost of
software capitalized is amortized based on its estimated economic life. The
costs incurred between the point where technological feasibility is established
and general release to the public are not material. As a result, no software
costs were capitalized in 1999 or 2000.

ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS

     The Company continually reviews amortization periods and the carrying
value of long-lived assets, including computer equipment, furniture and
fixtures, software, and intangible assets to determine whether there are any
indications of reduction in useful lives or impairment losses. If indications
of impairment of long-lived assets are present, the estimated future
undiscounted cash flows associated with the corresponding assets would be
compared to its carrying amount to determine if a change in useful life or a
write-down to fair value is necessary.

STOCK OPTION PLANS

     The Company has elected to follow Accounting Principles Board Opinion No.
25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB 25") and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
statement No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, requires use of
option valuation models that were not developed for use in valuing employee
stock options. No compensation expense is recognized under APB 25, because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant.

INCOME TAXES

     Deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.


                                      F-8
<PAGE>

                      CUSEEME NETWORKS, INC. AND SUBSIDIARY
                  (formerly known as White Pine Software, Inc.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2000


REVENUE RECOGNITION

     The Company's revenue is derived from software license fees and fees for
services related to its software products, primarily postcontract customer
support ("PCS") fees. The Company recognizes revenue in accordance with the
provisions of AICPA Statement of Position No. 97-2, SOFTWARE REVENUE
RECOGNITION, as amended. The Company adopted Statement of Accounting Bulletin
101, REVENUE RECOGNITION ("SAB 101") in the fourth quarter of the year,
effective January 1, 2000. The adoption of SAB 101 did not affect the Company's
financial position or results of operations.

     Software license revenue is recognized upon receipt of a firm customer
order and shipment of the software, net of allowances for estimated future
returns, provided that no significant obligations remain on our part, the fee is
fixed and determinable, and collection of the related receivable is deemed
probable.

     Fees from maintenance service contracts, or PCS, generally are payable
in advance, are non-refundable, and are recognized ratably over the service
period, typically twelve months. Revenues from training and consulting
services are recognized as the services are provided.

     Software license fees, consulting fees, training fees, and prepaid
maintenance fees that have been prepaid or invoiced but that do not yet
qualify for recognition as revenue under the Company's policy are reflected
as deferred revenue.

     The Company's software arrangements sometimes contain multiple elements,
such as software products, services and PCS. Revenue earned on software
arrangements involving multiple elements that qualify for separate element
treatment is allocated to each element based on the relative fair values of
those elements based on vendor specific objective evidence. Vendor specific
objective evidence is limited to the price charged when the element is sold
separately or, in the case of PCS, the renewal rate. For transactions where
vendor specific objective evidence exists for undelivered elements but not
for delivered elements, the Company uses the residual method as discussed in
SOP 98-9, MODIFICATION OF SOP 97-2, WITH RESPECT TO CERTAIN TRANSACTIONS.
Under the residual method, the total fair value of the undelivered elements,
as indicated by vendor specific objective evidence, is deferred and
subsequently recognized in accordance with the relevant sections of SOP 97-2,
and the difference between the total arrangement fee and the amount deferred
for the undelivered elements is recognized as revenue related to the
delivered elements.

SHIPPING AND HANDLING COSTS

     Shipping and handling costs are included in cost of revenue.

ADVERTISING COSTS

     Costs related to advertising the Company's products are expensed in the
period incurred. Amounts charged to expense were $274,000 and $252,000 during
the years ended December 31, 2000 and 1999, respectively.

FOREIGN CURRENCY TRANSLATION

     The financial statements of the Company's foreign subsidiary have been
translated into U.S. dollars in accordance with Statement of Financial
Accounting Standards No. 52, FOREIGN CURRENCY TRANSLATION. The local currency
of the subsidiary is considered the functional currency. Accordingly, balance
sheet amounts have been translated using the exchange rates in effect at the
balance sheet date and statement of operations amounts have been translated
using average exchange rates during the year. Changes in exchange rates on
the translation of the subsidiary's financial statements have been reported
as a separate component of accumulated other comprehensive (loss) income in
the statement of stockholders' equity.

                                      F-9
<PAGE>

                      CUSEEME NETWORKS, INC. AND SUBSIDIARY
                  (formerly known as White Pine Software, Inc.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2000


EARNINGS (LOSS) PER SHARE

     The Company computes earnings per share in accordance with Statement of
Financial Accounting Standards No. 128, EARNINGS PER SHARE ("SFAS 128") and
related interpretations. SFAS 128 requires calculation and presentation of
basic and diluted earnings per share. Basic earnings per share is calculated
based on the weighted average number of common shares outstanding and
excludes any dilutive effects of warrants, stock options or other type
securities. Potentially dilutive securities include stock options, warrants
and related securities calculated using the treasury stock method. Dilutive
securities have been excluded from the Company's calculation of diluted
earnings per share as their effect is antidilutive due to the existence of
net losses in all periods presented.

RECENT ACCOUNTING PRONOUNCEMENTS

         In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard (SFAS) No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. This statement revises
accounting and reporting standards for derivative instruments, including
derivative instruments embedded in other contracts, and for hedging
activities. SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, is
effective for fiscal quarters of fiscal years beginning after June 15, 2000.
The Company will adopt the standard in the first quarter of fiscal 2001 and
does not expect the adoption to have a material effect on its financial
condition or results of operations.

RECLASSIFICATIONS

     Certain amounts in prior years have been reclassified to conform to the
2000 presentation.

2.       SALE OF ASSETS OF LEGACY CONNECTIVITY BUSINESS

     The Company sold the assets of its legacy connectivity business to a
publicly traded Australian company on February 29, 2000 for $1,000,000 in
cash and 467,730 ordinary shares of the Australian company. These shares were
valued at U.S. $500,000, the fair market value of the shares on the sale
date. The net book value of the assets sold was $709,200. Transaction-related
costs such as legal fees were approximately $15,200. The Company realized a
$775,589 net gain on the sale of assets of the legacy connectivity business,
which is included in the statement of operations.

3.       SHORT-TERM INVESTMENTS

     Short-term investments consist of investments in equity securities and
corporate bonds. The investment in equity securities is classified as
available-for-sale and has a fair value of $248,717 at December 31, 2000. The
related cost basis of this investment is $500,000 and the $251,283 unrealized
holding loss is included in a separate component of accumulated other
comprehensive (loss) income. The unrealized holding loss is accounted for as
a temporary decline in fair market value.

     The investment in corporate bonds is classified as held-to-maturity and
has a fair value that approximates amortized cost. These bonds mature on
September 25, 2001.

4.       TECHNOLOGY ACQUISITIONS

ACQUISITION FROM CORNELL RESEARCH FOUNDATION, INC.

     During 1998, the Company obtained certain trademark and intellectual
property rights to the CUseeMe name and the underlying CUseeMe Conference
Server technology from Cornell Research Foundation, Inc. The purchase price
for these rights consisted of (i) a note in the principal amount of $900,000,
of which $300,000 is due on each of June 30, 2000, June 30, 2001 and June 30,
2002, and (ii) warrants to purchase 150,000 shares of the Company's common
stock at a price of $1.00 per share. The Company recorded as a trademark a
total of $964,500 in connection with the acquisition, consisting of the
$900,000 principal amount of the obligation and $64,500 attributable to the
warrants, which were valued in accordance with SFAS 123.


     These trademark and intellectual property rights were capitalized and
are being amortized over their estimated economic life of twelve years.

                                      F-10
<PAGE>
                      CUSEEME NETWORKS, INC. AND SUBSIDIARY
                  (formerly known as White Pine Software, Inc.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2000


5.       LONG-TERM DEBT

     The Company had no debt at December 31, 2000. During 2000, the Company
paid the remaining installments related to a note payable due in August, 2000.

     Total interest expense was approximately $5,000 and $3,000 for the years
ended December 31, 2000 and December 31, 1999 and is included in other expense.

6.       ACCRUED LIABILITIES

     Accrued liabilities consist of the following:

<TABLE>
<CAPTION>

                                                                                               DECEMBER 31,
                                                                                          ---------------------
                                                                                          2000             1999
                                                                                          ----             ----

<S>                                                                                  <C>            <C>
Accrued compensation and related benefits........................................     $   957,000    $  1,001,000
Current portion of payable for CUseeMe trademark and
  intellectual property rights...................................................         450,000         300,000
Accrued royalties................................................................          37,000         106,000
Other accrued expenses...........................................................         648,000         847,000
                                                                                          -------         -------
                                                                                       $2,092,000      $2,254,000
                                                                                       ==========      ==========

</TABLE>

7.       INCOME TAXES

Significant components of the Company's deferred tax assets and liabilities for
federal and state income taxes consist of the following at December 31, 2000:

<TABLE>
<CAPTION>

Deferred tax assets:
<S>                                                          <C>
   Net operating loss carryforwards.......................   $12,754,000
   Depreciation and amortization..........................       404,000
   Other, net.............................................       481,000
                                                            ------------
Total deferred tax assets, net............................    13,639,000
Valuation allowance for deferred tax assets...............   (13,639,000)
                                                            ------------
Net deferred tax asset..................................     $       --
                                                            ============
</TABLE>


     The Company believes that, based on a number of factors, the available
objective evidence creates sufficient uncertainty regarding the realization of
the deferred tax assets such that a full valuation allowance has been recorded.
The Company recorded a valuation allowance of $13,639,000 and $10,150,000 at
December 31, 2000 and 1999, respectively. The Company will continue to assess
the realization of the deferred tax assets based on actual and forecasted
operating results.


     At December 31, 2000, the Company had cumulative federal net operating loss
carryforwards of approximately $37,511,000 for income tax purposes. The
availability of the net operating loss carryforwards to offset future taxable
income is subject to significant annual limitations. The loss carryforwards
expire in future years as follows:

2001 - 2005................................................          $4,175,000
2006 - 2010................................................             328,000
2011 - 2015................................................           7,922,000
2016 - 2020................................................          25,086,000
                                                            --------------------
                                                                    $37,511,000
                                                            ====================

                                      F-11
<PAGE>

                      CUSEEME NETWORKS, INC. AND SUBSIDIARY
                  (formerly known as White Pine Software, Inc.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2000


8.       LEASE COMMITMENTS

     The Company leases its office facilities under operating leases expiring
at various times through fiscal 2003. Future minimum annual noncancelable
rental commitments under the lease agreements for the years ending December
31 are as follows:

         2001............................................    $   502,000
         2002............................................        327,000
         2003............................................        109,000
                                                                 -------
                                                             $   938,000
                                                             ===========


     Total rent expense for the years ended December 31, 2000 and 1999 was
approximately $413,000 and $229,000, respectively.

9.       GEOGRAPHICAL SALES

     The Company's sales by geographic location are summarized below:

<TABLE>
<CAPTION>

                                                                                              DECEMBER 31,
                                                                                         ----------------------
                                                                                         2000              1999
                                                                                         ----              ----
<S>                                                                               <C>               <C>
United States and Canada.........................................................  $   7,506,000     $  9,494,000
Europe...........................................................................      1,945,000        1,533,000
Pacific Rim......................................................................      2,620,000          975,000
                                                                                   -------------     ------------
                                                                                   $  12,071,000     $ 12,002,000
                                                                                   =============     ============

</TABLE>

10.      EMPLOYEE BENEFITS

401(k) PLAN

     The Company has a Profit Sharing Plan (the "Plan") under Section 401(k) of
the Internal Revenue Code for all employees meeting age and service
requirements. Eligible employees may elect to contribute up to 16% of their
compensation, subject to limitations established by the Internal Revenue Code.
The Company may elect to contribute a discretionary amount to the Plan which
would be allocated to the employees based upon the employees' contributions to
the Plan. There have been no discretionary contributions to date.

EMPLOYEE STOCK PURCHASE PLAN

     The Company sponsors an employee stock purchase plan (the "ESPP"). Under
the ESPP, an aggregate of 100,000 shares of Common Stock are reserved for
purchase by qualified employees at 85% of the lower of the market price in
effect on the day the offering starts or the day the offering terminates.
Purchases are made through employee payroll deductions ranging from 1% to 6%
of their base pay. Compensation expense is not recognized by the Company
because the ESPP is a non-compensatory plan under Section 423 of the Internal
Revenue Code. In 1999, the Company issued 61,635 shares, of which 48,500
shares were issued at $0.82 per share and 13,135 shares were issued at $5.10
per share. In 2000, the Company issued 36,943 shares, of which 7,942 shares
were issued at $9.24 per share and 29,001 shares were issued at $2.66 per
share.

                                      F-12
<PAGE>

                      CUSEEME NETWORKS, INC. AND SUBSIDIARY
                  (formerly known as White Pine Software, Inc.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2000


1996 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN

     The Company administers the White Pine Software, Inc. 1996 Incentive and
Nonqualified Stock Option Plan (the "1996 Plan"). Under the 1996 Plan,
550,000 shares of Common Stock are available for grant to employees. On
August 2, 2000, the Company amended the 1996 Plan to increase the number of
shares available thereunder from 1,000,000 to 2,400,000. Option prices and
exercise periods are determined by the Board of Directors on the date of
grant. Options granted under the 1996 Plan become exercisable in installments
over a three to four year period commencing from the date of grant and expire
ten years from the date of grant.

1997 DIRECTOR STOCK OPTION PLAN

     The Company administers the White Pine Software, Inc. 1997 Director
Stock Option Plan (the "Directors' Plan"). The Company has reserved 150,000
shares of Common Stock under the Directors' Plan. The Directors' Plan
authorizes a one-time automatic grant of options to acquire 15,000 shares of
Common Stock as an initial award for being a director. Each subsequent year,
at re-election, directors are granted an additional 10,000 options. The
Directors' Plan was amended in March 2000 to increase from 15,000 to 35,000
the number of shares covered by options to be granted to non-employee
directors upon initial election to the board and to increase from 10,000 to
20,000 the number of shares covered by options to be granted to non-employee
directors upon re-election. All options granted are exercisable at the next
annual meeting subsequent to being granted. Options expire ten years from the
date of grant and have an exercise price equal to the fair market value of
the Company's Common Stock on the date of grant.

SFAS 123 DISCLOSURES

     Pro forma information regarding net loss and loss per share is required
by SFAS 123, which requires that the information be determined as if the
Company has accounted for its employee stock options under the fair value
method. The fair value of options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions:

<TABLE>
<CAPTION>

                                                                  OPTIONS                           ESPP
                                                            ---------------------            -------------------
                                                            2000             1999            2000           1999
                                                            ----             ----            ----           ----
<S>                                                        <C>               <C>              <C>            <C>
Expected life (years).............................          4.19              4.66            0.32            0.50
Interest rate.....................................          4.97%             5.75%           4.97%           5.75%
Expected volatility of stock price................          1.29              1.23            1.29            1.23
Expected dividend yield...........................             0%                0%              0%              0%

</TABLE>

     The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

     For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information is as follows (in thousands, except for per share
information):


                                      F-13
<PAGE>

                      CUSEEME NETWORKS, INC. AND SUBSIDIARY
                  (formerly known as White Pine Software, Inc.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2000


<TABLE>
<CAPTION>

                                                                                           2000            1999
                                                                                           ----            ----
<S>                                                                                   <C>                <C>
         Pro forma net loss.......................................................     $(20,258)          $(5,474)
         Pro forma net loss per share - basic and diluted.........................      $ (1.66)          $(0.52)

</TABLE>

     Option activity under the Company's stock option plans is summarized below:

<TABLE>
<CAPTION>

                                                                2000                              1999
                                                      ---------------------------       ---------------------------
                                                                      WEIGHTED
                                                                      AVERAGE                       WEIGHTED AVERAGE
                                                      SHARES       EXERCISE PRICE       SHARES       EXERCISE PRICE
                                                      ------       --------------       ------       --------------

<S>                                                  <C>               <C>              <C>              <C>
Outstanding at beginning of year............          1,656,204         $  9.63          1,108,644        $ 1.88
Granted.....................................          1,217,487            9.58           895,000          17.51
Expired or canceled.........................           (490,386)          12.39          (121,910)         12.05
Exercised...................................           (264,399)           2.97          (225,530)          1.41
                                                  ---------------                   ---------------
Outstanding at end of year..................          2,118,906            9.85         1,656,204           9.63
                                                  ===============                   ===============
Exercisable at end of year..................            656,990          $ 7.29           471,190         $ 2.00

</TABLE>

     The following table presents weighted-average price and life information
about significant option groups outstanding at December 31, 2000:

<TABLE>
<CAPTION>

                                                          AVERAGE
                                                         REMAINING        WEIGHTED                        WEIGHTED
                                          NUMBER        CONTRACTUAL       AVERAGE          NUMBER         AVERAGE
      RANGE OF EXERCISE PRICE           OUTSTANDING         LIFE       EXERCISE PRICE   EXERCISABLE    EXERCISE PRICE
      -----------------------           -----------         ----       --------------   -----------    --------------

<S>                                         <C>                <C>          <C>              <C>            <C>
     $0.50 - 1.50                             133,691            4.59         $0.93            88,215         $0.76
      1.56                                    343,000            9.91          1.56                 -             -
      1.88                                    226,843            7.96          1.88           136,709          1.88
      2.00 - 2.38                              30,559            6.79          2.26            17,205          2.27
      2.50                                    221,732            6.50          2.50           174,585          2.50
      2.88 - 5.94                             228,750            9.29          3.94            36,875          3.57
      6.00 - 14.38                            117,224            8.73          7.34            40,230          6.96
     14.63                                    348,431            9.31         14.63            57,386         14.63
     16.75 - 25.00                             39,000            9.08         23.81             3,064         23.01
     25.38 - 45.38                            429,676            8.99         26.48           102,721         25.95
                                      ----------------                                 ---------------
                                            2,118,906                                         656,990
                                      ===============                                  ===============

</TABLE>

11.      SUBSEQUENT EVENT

     On March 22, 2001, the Company announced a merger with First Virtual
Communications, Inc. ("First Virtual"). The transaction will be effected as a
stock for stock merger and is subject to the approval of the stockholders of
both companies and to customary closing conditions. First Virtual will issue
approximately 1.254 shares of its common stock for each outstanding share of
Common Stock of the Company. The transaction is expected to be completed in
the second quarter of 2001.


                                      F-14