SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

   [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 No. 33-35580-D

                                 BURST.COM, INC.
              (Formerly known as Instant Video Technologies, Inc.)
             (Exact Name of Registrant as Specified in its Charter)


            Delaware                                            84-1141967
(State or Other Jurisdiction of                             (I.R.S. Employer
 Incorporation or Organization)                          Identification Number)

     500 Sansome Street, Suite 500
      San Francisco, California                                   94111
(Address of Principal Executive Offices)                        (Zip Code)

                                 (415) 391-4455
              (Registrant's Telephone Number, Including Area Code)

Securities Registered Under Section 12(b) of the Exchange Act:  None.
Securities  Registered  Under Section  12(g) of the Exchange  Act:  Common Stock
$.00001 Par Value

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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be  contained,  to the best of  registrant's  knowledge,  in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]

The  aggregate   market  value  of  the   Registrant's   Common  Stock  held  by
non-affiliates  on March  16,  2001 was  approximately  $5,468,881  based on the
closing  price of the Common  Stock as reported on The Nasdaq  Stock  Market for
that date.

As of March 16, 2001, there were 21,648,125  shares of the  Registrant's  Common
Stock outstanding.


<PAGE>

                                 BURST.COM, INC.

                          2000 FORM 10-K ANNUAL REPORT
                                TABLE OF CONTENTS


                                                                            Page
                                     PART I

Item 1.   Business                                                            3

Item 2.   Property                                                           14

Item 3.   Legal Proceedings                                                  14

Item 4.   Submission of Matters to a Vote of Security Holders                14

                                     PART II

Item 5.   Market for Registrant's Common Equity and Related
               Stockholder Matters                                           15

Item 6.   Selected Financial Data                                            15

Item 7.   Management's Discussion and Analysis of Financial Condition
               and Results of Operations                                     15

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk         24

Item 8.  Financial Statements and Supplementary Data                         24

Item 9.   Changes in and Disagreements with Accountants on Accounting
               and Financial Disclosure                                      24

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant                 25

Item 11.  Executive Compensation                                             27

Item 12.  Security Ownership of Certain Beneficial Owners and
               Management                                                    29

Item 13.  Certain Relationships and Related Transactions                     31

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form
               8-K                                                           35

          Signatures                                                         39


Instant Video(R), Burstware(R), Burstaid(R), Faster-Than-Real-Time(R), Burstware
Conductor(R),  Burstware  Player(R),  and  Burstware  Server(R)  are  registered
trademarks of BURST.COM,  INC. All other names are trademarks  and/or registered
trademarks of their respective owners.


                                       2
<PAGE>

               SPECIAL NOTICE REGARDING FORWARD-LOOKING STATEMENTS

     Some of the matters  discussed  under the  captions  "Prospectus  Summary,"
"Risk Factors," "Management's Discussion and Analysis of Financial Condition and
Results of  Operations,"  "Business"  and elsewhere in this  prospectus  include
forward-looking  statements.  We have based these forward-looking  statements on
our current expectations and projections about future events,  including,  among
other things:

      o     implementing our business strategy;

      o     maintaining sufficient cash balances to continue in operation;

      o     attracting and retaining customers;

      o     obtaining  and  expanding  market  acceptance  of the  products  and
            services we offer;

      o     forecasts  of  Internet  usage and the size and  growth of  relevant
            markets;

      o     rapid technological changes in our industry and relevant markets and

      o     competition in our market.

     In some cases, you can identify  forward-looking  statements by terminology
such as "may," "will," "should," "could," "predicts,"  "potential,"  "continue,"
"expects,"  "anticipates," "future," "intends," "plans," "believes," "estimates"
and similar  expressions.  These  statements  are based on our current  beliefs,
expectations  and  assumptions  and  are  subject  to  a  number  of  risks  and
uncertainties. Actual results, levels of activity, performance, achievements and
events  may  vary  significantly  from  those  implied  by  the  forward-looking
statements.  A description of risks that could cause our results to vary appears
under the  caption  "Risk  Factors"  and  elsewhere  in this  prospectus.  These
forward-looking  statements  are  made as of the  date of this  prospectus,  and
except as required under  applicable  securities law, we assume no obligation to
update them or to explain the reasons why actual results may differ.


                                     PART I

ITEM 1: BUSINESS.

THE COMPANY

     We are an independent  provider of  client/server  network software for the
delivery of video and audio information over networks.  Our office is located in
San Francisco,  California. Our software manages the delivery of video and audio
content over a variety of networks; optimizing network efficiency and quality of
service.  Our  Burstware(R)  suite of software  products  enables  companies  to
transmit  video  and  audio  files  at  Faster-Than-Real-Time(R)speed,  which is
accomplished  by utilizing  available  bandwidth  capacity to send more video or
audio data to users than the players are  consuming  in real time.  This data is
stored on the users' machine for playing on demand, thus isolating the user from
noise and other network  interference.  The result is high quality,  full-motion
video  and  CD-quality  audio to the  end-user.  Burstware(R)  utilizes  several
components   of   our   international    patent    portfolio,    including   the
Faster-Than-Real-Time(R) delivery method.

     We began as a research and  development  partnership in 1988,  with initial
activities  focused  upon  technical  investigations,   patent  development  and
research  pertaining to the viability of  transmitting  and receiving  video and
audio programming in faster-than-real-time over a variety of networks.

     In 1990,  we  incorporated,  changed  our name to Explore  Technology,  and
secured  $2.0  million in funding in order to  develop  prototype  hardware  and
software for demonstrating  faster-than-real-time  transmission and reception of
audio and video programming; we described this type of communication as "burst".
We hired an  engineering  firm in Palo Alto,  California  to construct a pair of
"burst" video/audio transceivers. At the time this work was undertaken, networks
capable of providing "burst speeds" at practical prices were not available.

     During the second  quarter of 1992,  we were  acquired by Catalina  Capital
Corporation, a small public company organized as a Delaware corporation on April
27, 1990. As a result of this transaction,  our original  shareholders  received
85% of the outstanding shares of Catalina Capital Corporation, which was renamed
Instant Video Technologies, Inc. in 1993.


                                       3
<PAGE>

     In the first half of 1995, we began  development of a software product that
would incorporate our patented intellectual  property for  faster-than-real-time
burst transmission of multimedia  content over computer networks.  At that time,
we  contracted  with a  consulting  firm to develop  this  software  product.  A
prototype was created to run on a variety of networks.  In 1996, we entered into
agreements  with three  customers for use of the software in their  products and
services.  We continued our product development through 1997 by contracting with
a third-party consulting firm.

     In September 1997, our co-founder,  Richard Lang, returned as Chairman, CEO
and  President.  As a result,  in the last quarter of 1997 we  restructured  our
management team, obtained funding to continue operations,  refocused our product
development, and brought technology development in-house.

     At the  end of the  third  quarter  of  1997,  we  suspended  sales  of our
prototype  software  to  customers  in  order  to  concentrate  our  efforts  on
developing  a new suite of  Burstware(R)  software  products  to position us for
future growth.  Resources were directed at product development to facilitate our
new strategy and resulted in no software license sales in 1998.

     In 1998,  we focused  on  developing  a  commercially  marketable  suite of
software products; raising the capital necessary to meet operating requirements,
and building our management team. We released a test version of the Burstware(R)
suite of software  products on  schedule  in March 1998 and began  testing  with
selected  companies  in April  1998.  New  versions  of the test  software  were
released in June and November 1998.

     We released our first product,  Burstware(R)  Version 1.1, to the public in
February 1999, and in November 1999 we released  Burstware(R) Version 1.2, which
contained the  Burst-Enabled(TM)  Windows  Media  Player.  In 1999, we recruited
sales,  marketing  and  development  staff and signed six  reseller  agreements.
Customer  evaluations  were undertaken  during the second half of 1999.  Initial
sales commenced in February 2000.

     In January  2000,  we changed our name from  "Instant  Video  Technologies,
Inc." to "Burst.com,  Inc." Our stock trades on the Nasdaq SmallCap Market under
the symbol "BRST".

     In  November  2000,  due to  insufficient  funds and sales to  support  our
organization,  we  laid  off 77  employees  out of a total  of 95 and  cut  back
drastically in our sales,  marketing and engineering spending. In March 2001, we
laid off all but five of the remaining employees,  and accepted the resignations
of Douglas Glen, John Lukrich,  and Edward Davis.  The Chief  Executive  Officer
position was assumed by our Chairman, Richard Lang, and our Controller,  Jeffrey
Wilson,  took  over as  Chief  Financial  Officer.  Unless  specifically  noted,
references to our executive  officers  throughout this annual statement refer to
the  officers  in place  at  December  31,  2000.  See  "Liquidity  and  Capital
Resources"  and "Risks and  Uncertainties"  under  "Management's  Discussion and
Analysis of Financial Condition and Results of Operations" in Item 7.


INDUSTRY BACKGROUND

     In recent years,  several related technologies have converged to enable the
distribution of video and audio content over electronic communications networks.
As  network   bandwidth,   data  storage,   processing  power,  and  compression
technologies  have become  increasingly  available,  the demand for high quality
video  and  audio  over the  Internet,  as well as over  intranet  and  extranet
networks,  has  expanded  rapidly.  According  to Piper  Jaffray,  the number of
households with broadband  access is estimated to be 6.6 million,  increasing to
21.7 million by 2002. The result of such developments has been the transition of
the Internet from a static,  text-oriented network to an interactive environment
filled with graphical and audio-visual content.

     Distributing audio-visual content over the Internet, or within an intranet,
offers  certain  advantages and  capabilities  not generally  available  through
traditional media, including consumer targeting and interactive  responsiveness.
As businesses have begun to recognize the cost,  inconvenience  and inefficiency
of  business  communication  tools such as audio and  videoconferencing,  online
communications   between    business-to-business,    business-to-consumer    and
business-to-employee  have become  commonplace.  Piper  Jaffray  estimates  that
streaming hours will grow at a compound rate of 124% in the next five years.

In order to capitalize on this explosion in Web-based  content and the large and
growing   number   of   Web-based    communication    channels   in   both   the
business-to-business  and  business-to-consumer  markets,  a number of companies
have developed  first  generation  software  solutions  intended to deliver such
content to the end user.  These first  generation  solutions  have commonly been
referred to as real-time streaming solutions that allow for the transmission and
remote playback of continuous  "streams" of media content,  including live video
and audio  broadcasts.  These  technologies  were  designed to deliver audio and
video  content  over  widely used 28.8 kbps


                                       4
<PAGE>

narrow  bandwidth  modems and,  to a limited  extent,  are capable of  utilizing
higher speed access provided by digital subscriber lines, cable modems and other
broadband emerging technologies.

MARKET OPPORTUNITY

     Although current streaming technology represents a significant  advancement
over  earlier  technologies,  it  remains  unable to  provide  the  client  with
reliable,   uninterrupted,   full-motion,   studio-quality  video,  particularly
video-on-demand,  or VOD,  and  CD-quality  audio.  That  is,  first  generation
solutions  rely upon a network  design in which  various  client  computers  are
connected to centralized server computers.  Typically, one server is intended to
service a multitude of clients.  During a typical session, a server must deliver
data in frequent and regular  intervals,  or just in time, for the length of any
real-time play of content. For example, a 30-minute video requires that constant
communication  between  servers  and  clients  be  maintained  for 30 minutes of
real-time viewing.  Moreover, in all cases involving real-time streaming, as the
number of end users expands, the number of server connections must also increase
at a ratio of 1 to 1.  Real-time  streaming  through such a network cannot scale
efficiently and, given the infrastructure requirements, remains costly.

     As real-time  streaming  expands  rapidly  online with  growing  demand for
audio-visual content,  client-centric delivery becomes increasingly  susceptible
to congestion and disruption within the established client-server universe. As a
result, a client's multimedia  experience  typically is interrupted or degraded.
Additionally,  the  number  of  real-time  connections  that  can be  maintained
simultaneously by the server is limited by processing power as well as bandwidth
availability.  This,  along  with  the  fact  that  a  server  tends  to  devote
disproportionate resources to the client with the most available bandwidth, also
reduces the quality as well as the  availability  of the video and audio content
to most users on the network.

     As a  result  of these  limitations,  plus the  fact  that  most  streaming
technology   involves   proprietary   encoding   schemes  and  limited  platform
acceptance,  widespread  dissemination of high-quality streaming content has yet
to occur within either the business-to-business or business-to-consumer  market.
Escalating  demand  within  these  markets  as  well  as the  need  for  quality
enhancement  of content  delivery  have  created a need for a software  solution
capable of  eliminating  network  disruptions  and  utilizing  client  bandwidth
efficiently.

THE BURST SOLUTION

     With our  patented  Burstware(R)  technology,  we  provide  a  server-based
intelligent  network  management  system  delivering  "Faster-Than-Real-Time(R)"
content  across a variety of networks.  Our software is designed to work equally
well  with  content  created  using any data  compression/decompression  (CODEC)
methodology.   The  Java-script  Burstware(R)  solution  ensures  a  consistent,
high-quality  experience over multiple platforms through optimization of network
resources and superior isolation of clients from network disturbances.

     In a Burst-Enabled(TM)  network, the server delivers "bursts" of content of
various  sizes and  frequencies,  as required,  into a  client-side  buffer at a
Faster-Than-Real-Time(R)  rate of  consumption.  On the client  side,  the local
buffer of stored, or cached, data acts as a reserve providing continuous play in
the event that data flow  across  the  network is  disrupted.  Once the  network
recovers, the local buffer is rapidly "topped off" at a Faster-Than-Real-Time(R)
rate.  Upon delivery  completion,  the server  disengages from the client and is
free  to  address  other  clients  awaiting  content   delivery,   with  service
prioritized based on the client's buffer level,  rate of consumption,  available
bandwidth and other variables.

     Under typical network conditions, demand for media content rises and falls.
Real-time streaming's  architecture must allocate network bandwidth for the peak
demand,  wasting  bandwidth during lower demand  occurrences.  Bursting tends to
average out the peaks and troughs using an intelligent buffer management system.
Buffers   are   replenished   in   anticipation   of   client   needs  at  rates
Faster-Than-Real-Time(R). This intelligent network management reduces demand for
bandwidth at peak times.

     With the same amount of allocated  bandwidth,  Burstware(R)  supports  more
users with less  infrastructure.  In a November 2000 study by Approach,  Inc., a
research firm  specializing in the digital media market,  Burstware(R) was shown
to be up to 25% more bandwidth efficient than Microsoft's Windows Media System.

     With a need-based delivery model and the ability to service the same number
of clients using fewer network  resources,  Burstware(R)  technology also offers
quantifiable  savings over a wide variety of end user environments.  Simulations
have shown that


                                       5
<PAGE>

Burstware's(R)  intelligent  network  management system can provide  significant
improvement in network  efficiency,  or  throughput,  when compared to real-time
streaming.  The Approach report also concluded that the return on investment for
a content  provider  using  Burstware(R)  was 16% to 43% more favorable than the
return on investment for a similar configuration using Windows Media System.

     During  all  phases  of  content  delivery,   Burstware's(R)  network-based
architecture  allows for continuous  monitoring of consumption  rates,  multiple
end-user needs, and changes in network conditions.  Using connection  acceptance
criteria,   Burstware(R)  can  determine  which  network  legs  or  servers  are
overburdened  and  then  shift  the  load  accordingly.   In  addition,  through
synchronizing  content  delivery  across  backup  servers  and  conductors,  the
Burstware(R) system creates a reliable failover for uninterrupted service in the
event of  component or network  failure,  thereby  eliminating  the need for the
client to request that the server resend the entire file.

     Developed with the flexibility of open standards,  the Burstware(R) network
management  elements are focused  exclusively on content delivery without regard
to proprietary CODEC or rendering  technologies,  leaving application developers
free to use  whichever  CODEC is  required  of their  application.  Burstware(R)
architecture  currently  supports numerous  encoding  schemes,  including MPEG1,
MPEG2,  MP3,  ASF, AVI and  QuickTime,  with the ability to adapt quickly to new
technologies as they are brought to market.  Moreover, the Burstware(R) solution
is platform and player neutral.  Burstware(R)  operates on Microsoft Windows NT,
Solaris and Linux platforms as well as a Burst-Enabled(TM)  Windows Media Player
and a Java-based player, or JMF.

     The intelligent  Burstware(R)  network resource  management features enable
multiple end user  applications  as well. With the capacity to deliver data in a
clear,  efficient and cost-effective manner, the Burstware(R) solution creates a
high-quality  audio-visual  experience  for the  end-user  and enables  powerful
business-to-business,      business-to-customer     and     business-to-employee
communication. Burstware(R) also gives producers, aggregators and developers the
ability to reach new markets with virtually  unlimited  access to vast libraries
of content.  With these various  applications,  Burstware's(R)  network delivery
mechanism  is  ideally   suited  for   numerous   industries   including   news,
entertainment,  retail  and  advertising  as well as local,  state  and  federal
governments and agencies.

BUSINESS OF THE COMPANY

Overview

     The  Company  intends  to  become a  worldwide  provider  and  licensor  of
Burstware(R)  software  and  intellectual  property  for use within  commercial,
multimedia,  and  interactive  networks.  The Company also intends to expand the
number of patents  contained within its patent portfolio and develop  additional
Burstware(R) products and applications.

     The potential  applications  and uses of the Company's  technology are wide
reaching  and  are  not  limited  to  software.  The  Company  also  intends  to
investigate  other  strategies to expand Burst's  technology to other  potential
applications  including  video  servers and  multimedia  hardware,  such as TVs,
network  appliances  and set top boxes,  multiplying  the potential  markets for
Burstware(R)-based products.

Burst Technology

     Burstware(R) is a client-server software product that manages and optimizes
the delivery of high quality video and audio (time-based media) across broadband
networks.  The heart of Burstware's(R)  capabilities is embodied in its patented
"Faster-Than-Real-Time(R)"  transfers  of  data  that  enable  interference-free
time-based media delivery and playback.  The commercial  product was released in
February 1999.

     The  Burstware(R)  video delivery  system  consists of one or more servers,
conductors  and  client-side  players  interconnected  by one or more  networks.
Burstware(R)  supports  a broad  array of  encoding  standards,  although  it is
neutral to specific compression technologies.  This multi-tiered,  client-server
system  provides   enterprise-class   failure  protection   combined  with  full
scalability,  and can  operate  over a  combination  of private  LANs and public
broadband networks.

     Burstware(R)  is  designed  to  benefit  customers  through  the  following
capabilities  of the  product:  1) more  simultaneous  users of video  and audio
within the same bandwidth used by the  competition;  2) highest  quality viewing
experience  without  disruptions;  3)  low  cost,  scalable  expansion  to  meet
increased  numbers of users;  and 4) control over the effects of video and audio
on the enterprise network.


                                       6
<PAGE>

Strategy

     Burst.com's goal is to be the leading provider of media delivery technology
to the broadband  industry.  We will pursue this goal by developing  proprietary
technology,  protecting that technology with international patents and licensing
the technology and patents to companies providing comprehensive  media-on-demand
solutions.

Develop Proprietary Technology

     Since its inception,  Burst.com has been a leader in developing  innovative
solutions to media delivery  problems.  Our Burstware(R)  architecture  provides
better  bandwidth   economies,   higher  reliability  and  a  superior  consumer
experience.  We will continue to enhance the technology underlying  Burstware(R)
to solidify our performance leadership position.  These enhancements include the
development of Burstware(R)  extensions supporting live events. This will permit
delivery  of live  events to Windows  Media  Player and other  industry-standard
players with pausing and "rewinding" functionality.

Extend our Patent Portfolio

     We regard  our  patent  portfolio  as  critical  to our  ability to realize
maximum value for our technology.  Since the company was first incorporated,  we
have had 33 U.S. and international patents issued, and we currently have another
nine pending. Several additional patents are in development.

     Burst  patents   address  our   Faster-Than-Real-Time(R)   media   delivery
mechanism,  our  approach  to network  resource  optimization,  and  elements of
client-side  functionality.  Burst.com patents have issues in the United States,
Australia, Europe, Korea, India, Japan and Canada.

License our Technology To Industry Leaders

     For the past several  years,  Burst has pursued a strategy of selling media
delivery software and hosting services. This strategy has not produced the level
of revenues necessary to sustain an effort by Burst to compete head-to-head with
powerful leaders such as Microsoft and RealNetworks.  Our revised strategy is to
license our technology software and patents to one or more of leading end-to-end
solution  providers.  We believe that  companies who license our  technology and
patents will obtain a  sustainable  competitive  advantage in terms of bandwidth
efficiency,  reliability and user experience.  We believe that Burst.com will be
able to maximize the value of its technology and  intellectual  property  assets
through such licensing arrangements.

     Target licensees include (i) marketers of server/client  software,  such as
Microsoft,  Apple and  RealNetworks;  (ii) Internet service  providers,  such as
America  On-Line  and  Excite@Home;  (iii)  infrastructure  providers,  such  as
telecommunications  and cable companies and (iv) marketers of enabling  hardware
for broadband media-on-demand businesses.

Engineering and Product Development

     We believe that our future success will depend in large part on our ability
to enhance Burstware(R) and maintain our technological  leadership.  Our product
development  organization  is  responsible  for  product  architecture  and core
technology.  Coding,  testing and quality assurance are outsourced.  As of March
01, 2001, our internal development organization consisted of two people.

     During  the past  three  years,  we have made  substantial  investments  in
product  development  and  related  hosting  activities   ($4,300,328  in  2000,
$4,076,700 in 1999 and $800,600 in 1998).  The current  version of  Burstware(R)
has been  developed  primarily  by our internal  engineering  staff and, in some
instances,  with the  assistance  of external  consultants.  In March  1998,  we
released a Beta version of  Burstware(R),  followed by subsequent  modifications
during the year.  We released our first  commercial  (GA)  Burstware(R)  product
suite in February 1999.  This release is a client-server  software  product that
manages and  optimizes  the  delivery  of high  quality  video and audio  across
broadband networks. The servers become intelligent network managers, efficiently
allocating  bandwidth and scheduling burst delivery of multimedia  content among
multiple users.  Microsoft  Corporation's Windows NT/95/98 operating systems are
supported  on client  machines,  with Windows NT and Sun  Microsystems'  Solaris
operating  systems  supported on servers in  client-server  networks.  In August
1999, we released  support for the Linux platform in our Version 1.1.3.  Also in
August 1999, we acquired  Timeshift-TV,  Inc. in a stock-only  transaction  from
Richard  Lang,  our Chairman  and then CEO,  Earl Mincer and Eric  Walters,  who
subsequently became


                                       7
<PAGE>

employees of ours.  Timeshift-TV holds assets,  including intellectual property,
in the area of time-shifted real-time  broadcasting,  which we plan to integrate
into our advanced  video and audio delivery  solutions.  We also plan to license
the   Timeshift-TV   intellectual   property   to  other   parties  for  various
applications.  We recorded  $1,333,000  in expense for  in-process  research and
development  costs  purchased in connection with this  acquisition.  In November
1999, we released the capability to Burst-Enable(TM) the Windows Media Player in
Version 1.2. In November 2000, due to insufficient  funding and sales to support
our organization,  we laid off all but two engineers and cut back drastically in
our product development spending.

Product Offerings

Our suite of Burstware(R) software is summarized below:


<TABLE>
<CAPTION>
          Burstware Component                                        Features
          -------------------                                        --------
<S>                                                 <C>
Conductor:                                          o  Central management service
                                                    o  Monitors all servers
The Conductor  manages the distribution of          o  Centralized  point of control for
video player requests over multiple  servers,          and audio on network
providing scalability, load balancing and           o  Scalable deployment of servers reliable fail
over                                                o  Add and remove servers as needed
                                                    o  Asynchronous
                                                    o  No performance bottlenecks
                                                    o  Reliable fail over mechanism
                                                    o  Load balancing
                                                    o  Replicated conductors
                                                    o  Audit trail logging

Server:                                             o  Patented buffer management system
                                                    o  Provides  significant network  efficiencies and enhanced
The  server  "bursts"  media  files  to  player        viewer experience
memory or disk buffers in Faster-Than-Real-         o  Faster-Than-Real-Time(R)delivery
Time(R),  tracking buffer levels and allocating     o  Provides isolation from network problems
bandwidth accordingly.                              o  Traffic shaping
                                                    o  Limits bandwidth usage to the allocated bandwidth
                                                    o  Controls impact of video and audio on the network
                                                    o  Utilizes optimized  connection  acceptance  criteria for
                                                       guaranteed quality-of-service
                                                    o  CODEC-neutral
                                                    o  Replicated  server for load  balancing and reliable fail
                                                       over
                                                    o  Extensive logging of client session statistics
</TABLE>


                                        8
<PAGE>

<TABLE>
<S>                                                 <C>
Player:                                             Burst-Enabled(TM) Windows Media Player
                                                    o     Burstware  Server(R) delivers  content to  Windows  Media
Plays  data out of the local  buffer to the end           Player
user,  shielding  the  end  user  from  network     o     Provides both disk-based and RAM-based caching
disruptions.                                        o     Supports player scripting and high interactivity
                                                    o     Existing  Windows Media Player  applications  can easily
                                                          be burst-enabled
                                                    o     Works in a browser or in a standalone application
                                                    o     VCR-like functionality and controls
                                                    o     CODECS supported include:  MPEG-1,  MPEG-2, MP3, Windows
                                                          Media Audio, and Apple Quicktime ASF

                                                    Burstware(R)Java Based (JMF) Player
                                                    o     Player scripting
                                                    o     Works in a browser or in a standalone application
                                                    o     VCR-like functionality and controls
                                                    o     Supports many industry standard CODECs
</TABLE>

Architecture

     Burstware(R)  employs a multi-tier,  distributed  architecture to provide a
fully scalable and fault-tolerant  platform for high-quality multimedia delivery
and management.  The  architecture is designed to take advantage of the benefits
and minimize the  shortcomings of using an unreliable,  heterogeneous,  IP-based
network--such  as  the  Internet--for  reliable  multimedia  delivery  to a mass
audience.

Component Overview

     The central  management  component  of the  architecture  is the  Burstware
Conductor(R),  which manages and monitors the Burstware  Servers(R) and provides
the point of contact for burst-enabled client applications,  such as the Windows
Media Player.

     The Burstware  Server(R)  provides reliable media delivery to clients,  and
uses flow  optimization  algorithms to maximize  overall  bandwidth  throughput,
while  ensuring  that  each  client  is  allocated   sufficient   bandwidth  for
uninterrupted playback of video.

     Burst-enabled   client  applications   provide  an  intelligently   managed
client-side  cache,  and co-operate with the conductor and server to provide the
playback  of video and audio  exactly as the file was  encoded,  with no jitter,
dropped frames, or signal degradation.

Media Delivery Procedure

     When a  Burst-Enabled(TM)  client  requests  a media  file,  it  contacts a
conductor  with a request for service.  The conductor  intelligently  routes the
client to the server that offers the best point of service for the request.  The
client then establishes a two-way reliable TCP/IP connection to the server,  and
delivery and playback of the media file begins.

     The client continuously  provides feedback to the server about how fast the
media  file is  being  consumed,  the  state of the  client  buffer,  and  other
information.  This  data  from  all  clients  is  fed  into  the  server's  flow
optimization  algorithm  described above, and the server uses the flow algorithm
to  schedule  delivery  of data to  clients  at the rate that  maximizes  use of
network resources and minimizes the likelihood of buffer starvation.  Flow rates
are continuously adjusted as network conditions and server loads change.

Advantages

     Burstware's(R) multi-tiered architecture offers two key advantages over the
traditional two-tier streaming  architecture:  enterprise-class  scalability and
mission-critical fault tolerance.


                                       9
<PAGE>

Scalability

     The Burstware(R) system is highly scalable, and can grow from one server to
hundreds of servers in a manner that is completely transparent to clients. Since
only the conductors are aware of the location and number of servers, new servers
can be added and  existing  ones moved or removed  without any updates to client
applications.  One  conductor  can support and manage  hundreds of servers.  The
conductor  continually monitors server loads and routes incoming client requests
to the least loaded eligible server,  providing  intelligent load balancing that
goes far beyond such simple schemes as round robin routing.

     Because  client  interaction  with the  conductor is limited to the initial
request for service,  a single conductor domain can easily scale to support tens
of thousands of concurrent client connections.  Additionally  scalability can be
achieved by employing multiple  conductor domains,  which can be integrated with
third-party IP routing solutions.

Fault Tolerance

     Burstware(R) achieves complete  fault-tolerance,  including no single point
of failure,  by fully replicating all components in the system. The conductor is
replicated in kind, and  burst-enabled  clients can contact either conductor for
service.  Additionally,  each  server is  automatically  configured  to  provide
failover  protection  for all other servers  containing  the same media content.
Servers and conductors can be added and subtracted at runtime  without  shutting
down other system components.

     If a server  fails or becomes  unavailable  for any reason,  including  the
failure of a network  link from the client to the server,  all clients that have
lost  contact  with the  server  are  automatically  routed  to  other  servers.
Burstware(R)  establishes  a new  connection  to an  available  server  for each
client, and the new server picks up multimedia delivery exactly where the failed
server left off. Since the  client-side  buffer provides the ability for clients
to disconnect  and  re-connect  without  impacting the viewing  experience,  the
viewer is unaware that any failure has occurred.

Technology

     The design  mission for  Burstware(R)  technology is to provide the premier
platform for the  management  and delivery of digital  video and audio  content.
Burst.com  has  recognized  the  needs of the  marketplace  for a  product  that
provides  quality,  reliability  and  manageability  far  beyond  what  existing
streaming solutions can deliver.

     Burstware's(R) design takes advantage of emerging trends in technology such
as   available   client-side   storage  and  network   bandwidth  to  provide  a
forward-thinking,  flexible and highly effective approach to multimedia delivery
and  management.  Our  engineering  team has  extensive  experience  in  network
protocols,  distributed  multi-tiered  architectures,  digital video,  real-time
control  systems,  and  optimization   algorithms.   As  a  result,  we  believe
Burstware(R)  is well equipped to address the  escalating  demand for multimedia
applications.

Architected for Industry Trends

     By taking the caching model all the way to the client,  Burstware(R) is the
first  adopter  in a new  paradigm  for  multimedia  delivery,  and is  uniquely
positioned  to take  advantage  of the  trends  toward  broadband  networks  and
inexpensive  client storage.  Designed to optimize  expensive  resources such as
bandwidth and server-side  hardware by utilizing  freely  available  client-side
storage  resources,  Burstware(R)  provides an advanced  network  management and
optimization platform for audio and video content delivery.

     Central to the Burstware(R) technology are the scheduling algorithms in the
Burstware  Server(R),  which  schedule  bursts of data of varying  size and time
intervals  to  each  client.  The  Burstware(R)  Scheduler  employs  proprietary
algorithms to guarantee each client quality of service while  optimizing the use
of bandwidth and other network resources.

     The Burstware  Server(R)  Scheduling  Engine  consists of a Call  Admission
Control System, or CAC, a Flow Optimizer and a Flow Engine. The CAC ensures that
a new  client  is  accepted  onto the  network  only if its  admission  will not
compromise  quality of service to existing  clients or to the new client.  It is
worth noting that a configurable  "burst margin" of bandwidth is held in reserve
by the CAC for use by the Flow  Optimizer as described  below.  Clients that are
rejected by one Burstware Server(R) are transparently routed to another,  making
the end user  unaware  that one of the  Burstware  Servers(R)  has  reached  its
maximum utilization.

     The Flow Optimizer  calculates  the amount of data to deliver,  or the flow
rate, to each client in order to maximize Burstware  Server(R)  throughput while
ensuring  that each  client  receives  sufficient  data flow for  uninterrupted,
continuous playback. The burst


                                       10
<PAGE>

margin that is held in reserve by the CAC algorithm is available for  allocation
by the Flow Optimizer, which forces delivery of content in faster-than-real-time
even under heavy network load  scenarios.  Overall,  this process  exerts upward
pressure  on  client-side   buffer  levels,   ensuring  a  jitter-free   viewing
experience.

     The Flow Engine is a low level  sub-system  responsible  for  achieving the
session flow rates imposed by the Flow  Optimizer.  It advances  through disk or
cache  resident  content files and paces the  transmission  of the video data as
bursts over the outgoing  transmission  control protocol connections linking the
server to each player.  Incoming status  notifications  from each player provide
any needed feedback on actual flow rates and downstream buffer conditions.

     These  optimization  algorithms  enable a  single  Burstware  Server(R)  to
simultaneously  deliver  files  ranging the full  spectrum of encoded bit rates,
from ASF files  designed  for 28.8 modems to MPEG-2  files  encoded at 8 Mbps or
more, to a wide variety of clients with  radically  different  connectivity  and
other capabilities, while maintaining the highest quality viewing experience for
each client.

Application-Level Quality of Service in Unpredictable Networks

     One of the challenges of IP-based  video  delivery  systems is to provide a
smooth,  uninterrupted  video  experience in the face of the variable  bandwidth
capacities  and network  latencies  of a  packet-switched  network.  Traditional
streaming solutions,  by delivering data just in time for display to the client,
are highly sensitive to moment-to-moment variations in the network capacities at
each link  between the client and server.  Whenever  bandwidth  capacities  fall
below the encoding rate of the video, even briefly, video quality will suffer.

     As described in the above section,  Burstware(R)  is able to provide a high
quality of service by employing a sophisticated client  cache-management  scheme
and   delivering   video   data    faster-than-real-time    consumption.    This
application-level  quality of service is far less expensive  than  network-layer
quality of service, or QoS, schemes, which require that every router between the
client and server be able to guarantee  that bandwidth and latency fall within a
narrow,  specified range.  Application-level QoS has the additional advantage of
working across network segments that are not capable of providing  network-layer
QoS.

     Application-level   QoS  also  enables  the  use  of  higher-quality  video
encodings across channels with variable bandwidth capacity.  Real-time streaming
architecture  requires  that  videos be encoded at a rate less than the  minimum
bandwidth between the client and the server. Burstware(R), on the other hand, is
resilient to the average bandwidth between client and server,  allowing delivery
of higher bit rate encodings.

Network Management Capabilities

     A significant barrier to widespread adoption of streaming  technologies has
been reluctance on the part of network managers to subject their networks to the
unpredictable  and demanding  requirements of traditional  streaming  solutions.
With Burstware(R),  bandwidth use can be controlled at various levels, including
the entire Burstware domain, an individual Burstware Server(R) or locally on the
client side. Bandwidth limits can be adjusted  dynamically at runtime,  allowing
sophisticated traffic shaping over time and space.  Content-specific caching and
routing  controls  also provide  users with the  flexibility  needed for today's
applications.

     Client configuration  parameters include those for network optimization and
control,  content  protection,  and player  behavior.  These  parameters  can be
centralized  in  a  web  page  or  customized  by  individual  clients,   giving
application  developers  a high  degree  of  control  over  their  video-enabled
applications.

Open Architecture

     One of the  keys  to  adoption  of new  technologies  is a high  degree  of
interoperability  with  existing  hardware and software.  Burstware(R)  has been
designed from the ground up to have open  architecture  at every product  level,
allowing easy integration with a wide variety of third-party solutions.

     The ability to  interoperate  with other  applications  is  accomplished at
several different levels. A wide variety of  industry-standard  players, as well
as  other   applications,   can  be  Burst-enabled  using  our  Player  Software
Development   Kit.   Burst-enabled   players   retain  all  of  their   existing
functionality, thus facilitating integration of an existing Windows Media Player
web application,  for example, to the Burstware(R) delivery system.  Integration
with third-party  automated  billing and report generation tools is accomplished
with the


                                       11
<PAGE>

Burstware(R)  Log Toolkit,  which  provides  both an XML-based and an ODBC-based
data transfer capability. We also believe that external cache management systems
such as those  offered by Akamai and Inktomi  can  integrate  with  Burstware(R)
through our directory-based media management system.

     Portability  is  another   important   aspect  of  an  open   architecture.
Burstware(R)  is a  software-only  solution  and the  Burstware  Servers(R)  and
Conductors  are written  almost  entirely in Java,  allowing easy porting as new
hardware  and  OS  platforms  become   available.   Additionally,   interprocess
communication  is 100%  IP-based  and runs on nearly all modern  networks,  both
wired and wireless. This highly portable implementation allows Burstware to take
immediate  advantage  of  new  advances  in  hardware  such  as  multiprocessor,
multi-NIC, SMP Servers, advanced storage systems and wireless technologies.

Competition

     We compete in markets that are rapidly evolving and intensely  competitive.
We have experienced and expect to continue to experience increasing  competition
from current and potential competitors, many of which have significantly greater
financial, technical, marketing and other resources.

     In addition to Burst,  there are four significant media delivery  companies
that compete in similar  market  segments.  The  Burstware(R)  product is priced
similarly to products offered by our major competitors, but competition is based
primarily on features and functionality. Our competitors use real-time streaming
technology as opposed to our Faster-Than-Real-Time(R) solution. RealNetworks and
Microsoft have concentrated on the consumer  markets,  while Tektronix and Cisco
are primarily focusing on the business-to-business markets. RealNetworks,  Apple
and  Microsoft  are  moving  into the  business-to-business  markets  with large
clients  such as 3Com and  Northrup  Grumman.  Tektronix  and Cisco  address the
problem of network management,  although in a limited fashion.  Currently, there
is limited competition in the broadband arena.  Because of our patent portfolio,
we are able to offer  unique  network  efficiency  management,  scalability  and
reliability  features and functionality,  which combine to provide a competitive
advantage.  While we can deliver  multimedia  content in a real-time  mode,  our
architecture is ideally suited to capitalize on the growth in broadband networks
and inexpensive storage.

     RealNetworks

     RealSystem G2 is a fully integrated  encoder,  server,  splitter/cache  and
player  system.  RealNetworks  is  dominant in the  Internet  market and the low
bandwidth   applications,   which  have  primarily   centered  around  news  and
entertainment  markets.  With their  dominance in the consumer  market and brand
awareness,  they are gaining  ground in the  business  sector with  clients like
3Com,  Boeing  and  General  Electric.  We  believe  that  RealNetworks'  use of
real-time  streaming  technology,   its  lack  of  network  management  and  its
CODEC-dependence    will   give   us   a    competitive    advantage    in   the
business-to-business  market. To effectively deploy RealNetworks for a broadband
application,  the software must be bundled with Digital BitCasting,  and Inktomi
(or similar caching product.

     Windows Media

     Windows  Media  Technologies  7.0  provides  an  end-to-end   solution  for
streaming multimedia, from content authoring to delivery to playback.  Microsoft
is  building  brand  strength  by bundling  Windows  Media with other  Microsoft
Products.  Windows  Media's  presence  in  the  business-to-business  market  is
currently not significant. Windows Media Technologies is targeting the streaming
audio segment by being the only streaming  media  platform to feature  FM-stereo
quality  over  a  modem  and  improved  piracy  protection.  Like  RealNetworks,
Microsoft is focusing on the consumer  market by  attracting  content  providers
rather than developing their media delivery system.  Windows Media is relying on
streaming technology to deliver video and audio and offers no network management
solution.  Consumers with the Windows Media Player (a component of Windows Media
Technologies) can use the Burst-Enabled(TM) Windows Media Player to increase the
content quality, reliability and efficiency of their network.

     Tektronix

     Tektronix  has two product  lines,  Profile  video servers and Grass Valley
products that provide  communication  solutions  that are used to distribute and
store broadcast and post-production information. Tektronix is focusing primarily
on  Video-Centric  LAN/WAN  Networking  and  Broadcast  Production   Networking.
Tektronix is concentrating on the business-to-business markets primarily through
value added resellers,  direct sales,  service providers and Original  Equipment
Manufacturers.  Tektronix  does perform  minimal  network  management,  but uses
streaming technology.


                                       12
<PAGE>

     IP/TV

     Cisco Systems,  Inc.'s IP/TV claims its software offers  high-quality video
broadcasting   and  video  on  demand  services,   industry-leading   management
capabilities,  built-in  scalability,  network-friendly  technologies such as IP
Multicast, and an easy-to-use viewer interface. Cisco's IP/TV servers attempt to
provide  scalable,   turnkey   bandwidth-efficient   solutions.  Their  hardware
platforms  are  pre-configured  with the IP/TV  software,  creating  a  complete
network video  solution.  Cisco's  IP/TV is targeting  the  business-to-business
markets.  IP/TV is combining  streaming  technology  with its Content Manager to
balance  loads  and to track  specific  viewing  and  management  functions.  In
addition  to IP/TV,  Cisco  recently  announced  that it had  agreed to  acquire
SightPath,  Inc., a company that provides software permitting  end-users to more
easily broadcast live events over the Internet and centrally manage  engineering
designs or video for diagnosing medical conditions.

Others

     There are other  companies  who offer  streaming  media  solutions  for the
Internet and corporate  intranets.  Many claim to have streaming media solutions
for corporate training, distance education, health care, and entertainment. Some
companies  offer media  servers with the ability to stream  content to up to 500
desktops  at one time.  Others  offer  content  management  and  media  players.
Burstware(R)'s  potential  competitors  offer no or limited network  management.
This is a  rapidly  evolving  market  with no  barriers  to new  entrants.  Many
competitors,  current and potential,  may have access to more resources than are
available to us.

Sales and Marketing

     While we pursue  technology  licensing  arrangements  with streaming  media
industry  leaders,  we  will  continue  to  support  our  software  and  hosting
customers, as well as pursue new customers.  Such customers include any business
or  other  end-user  that  desires  to  send,   receive  or  effectively  manage
high-quality  video and audio  content over  networks.  Target  markets  include
corporate   communications,    education,    advertising,    entertainment   and
broadcasting.

     We market to our  customers  through a combination  of direct sales,  sales
representatives  and value added  resellers.  The  internal  sales  organization
consists of two individuals as of March 16, 2001.

     We do not  believe  that there is any  significant  seasonality  that would
affect  sales of our products or  services.  As of March 16, 2001,  there was no
backlog of unfilled orders for our products.

Patents and Trademarks

     Our business is highly dependent on our patent portfolio. We have nine U.S.
patents.  The early patents  describe a broad class of systems that allow a user
to view, edit, store video  information and send and receive the data associated
with that video information over networks in less time than is normally required
to  view or  listen  to the  content.  The  later  patents  describe  particular
distribution methods designed to deliver video information to remote systems.

     Our core patents  describe  systems that are able to receive a high quality
video signal, store received  information  locally,  manipulate that information
with editing,  processing,  compression  and  decompression  tools,  display the
signal for  viewing and re-send  the  manipulated  information  on to other such
machine  systems in  faster-than-real-time.  Our current  patents will expire on
various dates in 2007 through 2016.

     We have two European  patents that  incorporate  the subject  matter of the
first six U.S. patents,  three Australian patents,  one South Korean patent, one
Japanese patent, two Indian patents,  and one Canadian patent. We have filed for
a number of additional domestic and international patents.

     In addition to protecting the Burstware(R)  product offerings,  our patents
have  broader  application  as  various  market  applications  appear,  and  our
potential to license our intellectual  property expands into additional vertical
market segments.


                                       13
<PAGE>

     We view our portfolio as a critical component in gaining relationships with
strategic partners,  strongly positioning our products'  competitive  advantage.
Potential  licensees include companies such as server and client  manufacturers,
bandwidth providers,  content aggregators,  copyright owners, and other hardware
manufacturers.

     We  have  registered  the  trademarks  "INSTANT  VIDEO(R)",   BURSTWARE(R),
BURSTAID(R),   FASTER-THAN-REAL-TIME(R),   BURSTWARE   CONDUCTOR(R),   BURSTWARE
PLAYER(R) and BURSTWARE  SERVER(R)," in the United States, as well as in certain
countries in Europe and Asia.

Employees

     As  of  April  2,  2001,  we  have  five  full-time  employees  working  in
administration, finance and legal. We have never experienced a work stoppage and
no personnel are represented under collective bargaining agreements. We laid off
77  employees  in  November  2000 and 11 on April  1,  2001 due to  insufficient
funding and revenues to support our organization.  Several former employees have
agreed to avail  themselves  on a contract  basis,  should the need and  funding
arise.


ITEM 2.  PROPERTY.

     We presently occupy  approximately 8,000 square feet of office space at 500
Sansome Street, San Francisco, California, under a lease that expires at the end
of  October  2005.  The lease  provides  for rent of $27,000  per  month,  fully
serviced.  We have closed all our regional  sales  offices.  We believe that our
facilities are not suitable and are excessive for our needs. We are currently in
negotiations  to buy out the lease of the Sansome  Street  property and move our
offices to Santa Rosa, California.


ITEM 3. LEGAL PROCEEDINGS.

     On January 17, 2001, the Company filed for arbitration in an action against
Whit  SoundView  f/k/a  E*Offering.  The  action  was  filed  with the  American
Arbitration Association in San Francisco. The dispute involves the rescission of
an exclusive  investment banking agreement and return of fees. At this time, the
Company  estimates  that its  exposure  for legal and court costs  should not be
material.  We are not aware of any other material legal  proceedings  pending or
threatened against us.


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

None


                                       14
<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

MARKET INFORMATION

     Our Common Stock is traded on the Nasdaq  SmallCap  Market under the symbol
"BRST".  The  following  table sets forth the closing high and low bid prices of
the Common  Stock for the periods  indicated.  These  prices are  believed to be
representative  inter-dealer  quotations,  without  retail  markup,  markdown or
commissions, and may not represent prices at which actual transactions occurred.


                                                Bid
                                          ---------------
              1999                         High       Low
          ----------                      ------    -----
          1st Quarter                     $ 11.88   $  6.00
          2nd Quarter                     $  9.75   $  6.00
          3rd Quarter                     $  9.6875 $  5.875
          4th Quarter                     $  9.25   $  5.50

              2000
          1st Quarter                     $ 18.375  $  7.75
          2nd Quarter                     $  9.6875 $  4.75
          3rd Quarter                     $  8.625  $  4.625
          4th Quarter                     $  5.75   $  0.25


     The number of holders of record of the  Company's  $.00001 par value Common
Stock at December  31, 2000,  was  approximately  900. The closing  price of our
stock was $0.34 on March 16, 2001.

DIVIDENDS

     Holders  of  Common  and  Preferred  Stock are  entitled  to  receive  such
dividends as may be declared by our Board of Directors.  No dividends  have been
paid with respect to our stock and we  anticipate no dividends to be paid in the
foreseeable future. It is the present policy of the Board of Directors to retain
all earnings to provide for the growth of the Company. Payment of cash dividends
in the future  will  depend,  among  other  things,  upon our  future  earnings,
requirements for capital improvements and financial condition.

     At December 31, 2000, we had an accumulated  deficit of  approximately  $57
million and,  until this deficit is eliminated,  will be prohibited  from paying
dividends.

RECENT SALES OF UNREGISTERED SECURITIES

     In November and December 2000, we entered into two  Convertible  Promissory
Notes  aggregating  $500,000.  These Notes are  convertible at the option of the
Noteholder  into a new  series of  Preferred  Stock to be  identified  as Series
A-2001 at a per share  conversion price of $5.00. The Notes bear interest at the
rate of six  percent  (6%) per  annum  and are  payable  in full on their  first
anniversary.


ITEM 6. SELECTED FINANCIAL DATA

     The following  selected  financial data should be read in conjunction  with
our financial  statements  and related notes and  "Management's  Discussion  and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this document. The statement of operations data for the years ended December 31,
1996 and 1997 and the balance  sheet data for December  31, 1996,  1997 and 1998
are  derived  from  financial  statements  that KPMG LLP has audited but are not
included in this filing.  The  statement of  operations  data for the year ended
December  31,  1998  is  derived  from  financial   statements  that  KPMG  LLP,
independent  accountants,  have  audited  and  are  included  elsewhere  in this
registration  statement.  The statements of operations  data for the years ended
December  31, 1999 and 2000 and the balance  sheets data as of December 31, 1999
and 2000 are derived from  financial  statements  audited by BDO  Seidman,  LLP,
independent  certified public  accountants,  and are included  elsewhere in this
document. Historical results are not necessarily indicative of the results to be
expected in the future.

<TABLE>
<CAPTION>
                                                                         Year Ended December 31,
                                            ----------------------------------------------------------------------------------------
                                                1996              1997               1998               1999               2000
                                             -----------       -----------       ------------       ------------       ------------
<S>                                          <C>               <C>               <C>                <C>                <C>
Statement of Operations
Data:

Revenue                                      $ 1,457,597       $   247,879       $     15,000       $         --       $    499,376
                                             ===========       ===========       ============       ============       ============


    Loss from operations                     $  (346,351)      $(1,928,637)      $ (4,663,867)      $(11,509,619)      $(19,556,700)
                                             ===========       ===========       ============       ============       ============

         Net loss                            $  (404,367)      $(2,062,373)      $ (6,916,420)      $(12,977,729)      $(19,609,984)
                                             ===========       ===========       ============       ============       ============

Beneficial conversion
feature of Series B
Preferred Stock                                       --                --         (8,762,425)
                                             -----------       -----------       ------------       ------------       ------------

Net loss applicable to
Common Stockholders                          $  (404,367)      $(2,062,373)      $(15,678,845)      $(12,977,729)      $(19,609,984)
                                             ===========       ===========       ============       ============       ============

Basic and  diluted net loss
per common share:                            $     (0.09)      $     (0.39)      $      (2.35)      $      (1.42)      $       (.98)
====================================================================================================================================


<CAPTION>
                                                                                 December 31,
                                            ---------------------------------------------------------------------------------------
                                                1996              1997               1998               1999               2000
                                             -----------       -----------       ------------       ------------       ------------
<S>                                          <C>               <C>               <C>                <C>                <C>
Balance Sheet Data:

Cash and cash
equivalents                                  $   208,613       $    20,551       $  2,212,141       $    302,979       $    296,584
Total assets                                     601,182           155,191          3,249,622          1,091,826          1,662,133
Long-term obligations                                 --            16,833                 --                 --                 --
Stockholders' equity
(deficit)                                         60,106          (983,267)         2,793,358         (5,464,646)        (1,192,730)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

We have not declared nor paid any cash dividends on our common stock.

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     Certain statements contained in the following  Management's  Discussion and
Analysis of Financial  Condition and Results of Operations,  including,  without
limitation,   statements   containing  the  words   "believes,"   "anticipates,"
"estimates," "expects," and words of similar meaning, constitute forward-looking
statements which involve risks and  uncertainties.  Burst's actual results could
differ


                                       15
<PAGE>

materially from those anticipated in these forward looking  statements as
a result of certain factors,  including those factors set forth under "Risks and
Uncertainties" below.

GENERAL

     We are an independent  provider of  client/server  network software for the
delivery of video and audio information over networks.  Our principal  executive
offices are  located in San  Francisco,  California.  Our  software  manages the
delivery  of video  and audio  content  over  various  networks,  including  the
Internet and corporate  intranets,  optimizing network efficiency and quality of
service.  Our  Burstware(R)  suite of software  products  enables  companies  to
transmit  video  and audio  files at  Faster-Than-Real-Time(R)  speed,  which is
accomplished  by utilizing  available  bandwidth  capacity to send more video or
audio data to users than the players are  demanding.  This data is stored on the
users'  machine for playing on demand,  thus  isolating  the user from noise and
other network  interference.  The result is high quality,  full-motion video and
CD-quality audio to the end-user.  Our revenue is derived from fees for software
licenses, content hosting and other consulting services.

     We have incurred significant losses since our inception, and as of December
31,  2000,  we had an  accumulated  deficit of  $57,045,878  and cash on hand of
$296,584.  Our  operating  expenses as of December  31, 2000 were  approximately
$450,000 per month.  As of April 2, 2001, we had  approximately  $62,000 cash on
hand.  As  previously  disclosed,  we have been  pursuing a  business  plan that
envisioned raising  significant  additional  capital to continue  developing and
marketing our products.  However, sales of our newly released products have been
slower than expected and we have not been  successful in raising the  additional
capital  necessary to implement our original  business  plan. We believe that in
view of the  limited  market  demand for our  products  and the change in market
conditions  that  emerging new  technology  companies  have faced since April of
2000,  it no longer  appears  realistic  for us to pursue such a  comprehensive,
capital intensive plan. As of April 2, 2001, we have reduced projected operating
expenses to approximately  $100,000 per month,  primarily by closing all but one
of our marketing  offices and reducing our workforce from 95 to 5. The remaining
staff is key administrative,  financial,  and legal, and is considered necessary
to preserve  continuity.  Our immediate goal is to seek additional  financing to
maintain  limited  operations  and seek a  combination  of our  business  with a
strategic partner or a sale of all or a portion of our technology.  There can be
no assurance  that we will be  successful in our efforts to raise capital or, if
successful,  that we will  succeed in efforts at combining  our business  with a
strategic partner or selling our technology,  in which case we would be required
to terminate our operations. See also "Liquidity and Capital Resources" below.

We received notice from Nasdaq Listing Qualifications Staff ("Staff")on December
21, 2000 that our common  stock  failed to maintain a minimum bid price of $1.00
over the previous 30 consecutive  trading days, as required by Marketplace  Rule
4310(c)(4) ("the Rule"). In accordance with Marketplace Rule 4310(c)(8)(B),  the
Company was given 90 days to regain  compliance with the Rule.  However,  within
the set time period,  the Company was unable to demonstrate such compliance.  On
March 22,  2001,  the  Company  received a  determination  letter from the Staff
stating that the Company had not  regained  compliance,  and that the  Company's
securities  would be delisted from the Nasdaq  SmallCap Market at the opening of
business on March 30, 2001. On March 29, 2001, the Company  appealed the Staff's
determination  pursuant to Marketplace  Rule 4820(a),  and a stay was granted on
March 30,  2001.  The Company has  requested a hearing  before a Nasdaq  Listing
Qualification  Panel to review the Staff  determination.  A hearing has been set
for May 11,  2001.  There  can be no  assurance  that the Panel  will  grant the
Company's  request for continued  listing.  In the event of a delisting from the
Nasdaq SmallCap Market, the Company would automatically continue to trade on the
Nasdaq OTCBB (Over-The-Counter Bulletin Board) market.

RESULTS OF OPERATIONS

Revenue

     During the year ended December 31, 2000, we earned revenue in the amount of
$499,376 compared to $0.00 for 1999. We completed the commercial  release of our
Burstware(R)  suite of products  in November  1999 and  commenced  shipments  in
February  2000.  During 2000, we also  introduced our content  hosting  service,
which enables our customers to store their audio-video  content on our Burstware
servers for  delivery to their  employees,  customers  or other  end-users  over
broadband  networks.  During 2000, our customer  Interzest  accounted for 60% of
revenues. No other single customer accounted for more than 10% of our revenues.

     We had no revenue or cost of revenue for the year ended  December 31, 1999,
compared  with  $15,000  revenue  for the same  period  in 1998.  These  minimal
revenues were the result of our  redirecting  our product and market activity to
the Burstware(R) family of products. We released our first product, Burstware(R)
Version 1.1, to the public in February  1999,  and in November  1999 we released
Burstware(R)  Version 1.2, which contained the  Burst-Enabled(TM)  Windows Media
Player. In 1999 we recruited key sales, marketing,  and development contributors
and signed six reseller agreements.  Customer evaluations were undertaken during
the second half of 1999 and initial sales commenced in February 2000.


                                       16
<PAGE>

Cost of Revenue

     The product cost of revenue  recorded for 2000  consisted  primarily of the
cost of equipment  purchased from a third-party,  which was resold to a customer
in connection with a software sale. Resale of equipment is not part of our sales
strategy, and we do not plan to make such sales to any significant degree in the
future. The Company had no cost of revenue for the years ended December 31, 1998
and 1999.

Operating Expenses

     Operating  expenses were $18,712,381 for the year ending December 31, 2000,
excluding  equipment  losses and  write-dowms  discussed  below,  as compared to
$11,509,619  during the same period in 1999.  This  resulted in total  operating
expenses  increasing by $7,202,762 for the year ending  December 31, 2000,  over
the same period in 1999. Research and development  increased by $223,596 for the
year  ending  December  31,  2000,  over the same  period  in 1999.  There  were
increases of $3,990,008  for sales and  marketing and  $2,989,158 in general and
administrative  for the year ending  December 31, 2000,  over the same period in
1999.  The  increased  costs were  primarily a result of an overall  increase in
business  activity  and the  establishment  and  expansion  of our sales  force,
marketing  programs  and  building  out  of  our  content  hosting  services  in
particular, as more fully explained below.

     During the year ended  December 31, 1999,  costs and expenses  increased to
$11,509,619,  as compared to $4,678,867 during the year ended December 31, 1998.
This  $6,830,752  increase  was a result of an  overall  expansion  in  business
activity, including growth in the research and development,  sales and marketing
departments,  as  well as a  non-recurring  charge  to  expense  related  to the
acquisition of Timeshift-TV.

Sales and Marketing

     For the year ending  December 31, 2000,  sales and marketing  expenses were
$8,175,525,  as compared to $4,185,517 during the same period in 1999. Sales and
marketing  expenses  consisted  primarily  of  advertising  and other  marketing
related expenses, compensation and employee-related expenses, sales commissions,
and travel costs. The increase in absolute dollars is primarily  attributable to
an  increase  in  advertising  costs  and  increases  in  compensation   expense
associated with growth in our direct sales force and marketing personnel.  As of
November 16, 2000 however,  over 70% of sales,  marketing,  support and business
development staff has been eliminated,  resulting in significant cost reductions
and revenue expectations going forward. As of April 2, 2001, all remaining sales
and marketing staff were laid off, and all sales offices have been shut down.

     During the year ended December 31, 1999, the  $3,354,500,  or 404% increase
in Sales and Marketing  over the year ended  December 31, 1998,  was primarily a
result of  increased  expenditures  relating  to the  commercial  release of our
Burstware(R)  product suite.  We added marketing staff and engaged in a targeted
marketing  campaign,  including print, radio and billboard  advertising,  public
relations,  collateral development, and participation in a number of major trade
shows.  These  promotional  activities  allowed  us to reach  specific  vertical
markets cost-effectively,  to support the efforts of the direct sales force, and
to generate publicity for us as a whole.

     The  marketing  campaign's   objectives  were  to  build  brand  awareness,
facilitate  name  recognition,  educate  the  market,  generate  sales leads and
develop   relationships  with  technology  partners,   systems  integrators  and
resellers. These expenditures continued as part of an overall plan to build upon
and expand the brand awareness we created in the marketplace.

     Sales  expenditures  increased  as a result of the  expansion  of our sales
force in conjunction with the launch of the Burstware(R)  suite of products.  We
had a sales and business  development office in Southern  California,  and sales
offices in Virginia, Colorado,  Michigan,  Metropolitan New York and Florida. We
also  partnered  with The EMS  Group,  Limited to  develop  sales and  marketing
channels in Europe.

Research and Development

     For the year ending December 31, 2000,  research and  development  expenses
were  $4,300,328  as  compared  to  $4,076,732  during the same  period in 1999.
Research and  development  expenses  consisted  primarily of payroll and related
expenses  incurred  for  enhancements  to and  maintenance  of our  Burstware(R)
technology and other operating  costs. The increase for the year ending December
31, 2000 is primarily  attributable to increases in the number of engineers that
developed and enhanced our software  technologies.  As of April 2, 2001, none of
the research and  development  staff remain as full-time  employees,  and we cut
back drastically in our product development spending.

     During the year ended December 31, 1999, the  $3,276,200,  or 409% increase
in Research and Development  expenditures over the year ended December 31, 1998,
resulted from the ramp-up in preparation for the initial  commercial release and
development and testing of enhanced features planned for subsequent  releases of
our product,  as well as  $1,330,000  of  in-process  research  and  development
acquired from Timeshift-TV  which was charged to expense.  The Quality Assurance
and Release Management  Department was established in 1999 to support subsequent
releases of  Burstware(R)  products.  Personnel were added to develop,  test and
complete  documentation of the product releases.  Major  development  activities
began  in the  areas  of  player  scripting,  incorporation  of a  database  for
replication, and various other features to be included in subsequent releases.

General and Administrative

     For the year ending December 31, 2000, general and administrative  expenses
were  $6,236,528  as  compared  to  $3,247,370  during the same  period in 1999.
General and  administrative  expenses consist primarily of compensation and fees
for professional  services, and the increase in absolute dollars is attributable
to increases in these areas. We believe that general and administrative expenses
will continue at reduced levels for the forseeable future.

     We had net loss from operations of $19,609,984 for the year ending December
31, 2000, as compared to $12,977,729  during the same period in 1999. This was a
51%  increase for the year ending  December  31,  2000,  over the same period in
1999.  The  increased  overall  year-to-date  loss  resulted  from the increased
expenditures discussed above.

     Total other expense net was $53,284 for the year ending  December 31, 2000,
as compared to $1,468,110 for the same period in 1999. The decrease in net other
expenses was due to a $1,414,826 decrease in interest.  The decrease in interest
expense was primarily due to reduction of debt and associated  interest  expense
through  conversion to common stock in our January 2000 private placement and an
increase in interest income earned on the proceeds of equity  financings.  These
decreases  in net other  expenses  were offset by non-cash  expense  recorded in
connection  with   additional   shares  of  common  stock  issued  without  cash
consideration to investors in our January 2000 financing.

     During the year ended  December  31,  1999,  we incurred a $200,100,  or 7%
increase in General and Administrative  expense over the year ended December 31,
1998, which resulted from additional  personnel,  equipment and facilities costs
to support the increased operations.


                                       17
<PAGE>

Impairment of Long Lived Assets

     We review our long-lived  assets for impairment  whenever events or changes
in  circumstances  indicate  that the  carrying  amount  of an asset  may not be
recoverable.  Recoverability  of  assets  to be held and used is  measured  by a
comparison of the carrying  amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired,  the
impairment  to be  recognized  is measured  by the amount by which the  carrying
amount of the assets exceeds the fair value of the assets.

     During the fourth  quarter of our fiscal year ending  December 31, 2000, we
recognized $1,312,931 of impairment in our leasehold improvements, computers and
equipment  assets  located  at our  principal  office  and at  seven  outsourced
Internet  hosting sites.  The reasons for the impairment  review were related to
the  layoff of 77  employees  (81% of our total  staff) in  November  2000,  the
closing down of six sales offices and  insufficient  net cash flows generated by
our hosting business.

     The  write-down  itself  includes  both  the net book  value  of  abandoned
equipment and leasehold  improvements and a reduction to estimated fair value of
certain remaining equipment and computers.


LIQUIDITY AND CAPITAL RESOURCES

     Our  immediate  goal is to seek  immediate  financing  to maintain  limited
operations and seek a combination of our business with a strategic  partner or a
sale of all or a portion of our technology.  We believe that we need at least $1
million in additional financing to continue our significantly reduced operations
through June 2001.  However,  any projection of future cash needs and cash flows
is subject to  substantial  uncertainty.  As of March 16,  2001,  we have raised
$350,000 in additional convertible debt subsequent to year-end.

     Operating  expenses to date have been  funded  primarily  through  debt and
equity financing.  As of December 31, 2000 we had cash reserves of $296,584. Our
operating  expenses as of  December  31, 2000 were  approximately  $450,000  per
month. As of April 2, 2001, we have approximately  $62,000 cash on hand. We have
reduced  projected  operating  expenses to  approximately  $300,000 per month by
closing  marketing  offices,  reducing our workforce by  approximately  80%, and
implementing a payroll deferral program.

     Based on our  inability  to reduce  expenditures  to a further  degree,  we
believe that operating  requirements  cannot currently be met without  immediate
additional  financing.  We are currently in  negotiations  to obtain  additional
financing of approximately $1 million through the issuance of debt,  convertible
into  preferred  stock,  licensing of our  software,  and the sale of our common
stock. We believe that if successful in obtaining this additional capital, based
upon our reduced  operating  costs,  we will be able to operate  until June 2001
without the need for additional financing.  During this period, we plan to focus
our efforts on  attracting  a large  strategic  partner and  investor  that will
enable us to  continue  to  develop  and  market  our  technology  to  customers
requiring the high-quality,  reliable delivery of video and audio over broadband
networks; and/or attracting one or more merger and/or acquisition candidates who
would be willing to pay the highest price for our technology.  In the event that
we are  unsuccessful  in obtaining this  additional  capital or in  successfully
negotiating  a  business  combination  or sale of our  technology,  we  would be
required to terminate our operations.


RECENT DEVELOPMENTS

     Subsequent  to December 31, 2000,  on January 30, 2001,  we sold  1,500,000
shares of common  stock to Eagle  Wireless  International,  Inc. in exchange for
400,000  shares of  ClearWorks.net,  Inc. (a wholly  owned  subsidiary  of Eagle
Wireless  International,  Inc.) common  stock.  In a separate  transaction,  the
Company  executed a software  license  agreement with Eagle Wireless in exchange
for 104,000  shares of Eagle  Wireless  Stock.  On January 30, 2001,  our common
stock was valued at $0.5625 and ClearWorks.net, Inc. was valued at $3.40.

RISKS AND UNCERTAINTIES

Liquidity

     The opinion from our auditors on our December 31, 2000 financial statements
contains a paragraph  suggesting that substantial doubt exists about our ability
to  continue  as a  "going  concern."  At  the  time  of  this  report,  we  had
insufficient cash reserves and receivables  necessary to meet forecast operating
requirements.  In the event we were to be  unsuccessful in our  fundraising,  we
would be required to  significantly  reduce  cash  outflows  through the further
reduction of  marketing  and sales,  development,  capital,  and  administrative
expenditures  resulting in decreased potential revenue and profitability and the
possibility of filing a petition for bankruptcy.


                                       18
<PAGE>

Risks Relating to Burst.Com, Inc.

We are not currently profitable and may not achieve profitability.

     We have a history of losses and expect to  continue  to incur net losses at
least through the year 2001. We expect to incur significant  operating  expenses
and,  as a  result,  will  need to  generate  significant  revenues  to  achieve
profitability,  which may not occur. Even if we achieve profitability, we may be
unable to sustain or increase  profitability  on a quarterly  or annual basis in
the future.

We will need immediate financing in order to continue our operations, and we may
not be able to raise immediate financing on favorable terms, or at all.

     We need to raise immediate capital to continue our operations and implement
our plans to  respond  to  competitive  pressures,  or  otherwise  to respond to
unanticipated requirements. We are currently offering shares of our common stock
in a  private  placement  directed  to  strategic  investors.  The terms of such
financing,  including the number of shares and the price per share, have not yet
been  determined  and  will  be  subject  to  negotiations  between  us and  the
prospective investors. If consummated, this financing could adversely affect the
market price of our common stock. In addition, we cannot be certain that we will
be able to obtain this or any other future financing on commercially  reasonable
terms or at all.  Our failure to obtain  immediate  financing,  or  inability to
obtain financing on acceptable terms, could require us to limit our plans, incur
indebtedness  that  has  high  rates  of  interest  or  substantial  restrictive
covenants,   issue  equity  securities  that  will  dilute  your  holdings,   or
discontinue all or a portion of our operations.

Our  future  success  depends  on our  ability  to keep pace with  technological
changes, which could result in a loss of revenues.

     The emerging video streaming and content  delivery and hosting  industry is
characterized by:

     o    rapidly changing technologies;

     o    frequent new product introductions; and

     o    rapid changes in customer requirements.

     Video streaming  technologies have reached  commercially  acceptable levels
only in the  last  several  years  and are  continuing  to  experience  numerous
changes.  As a result,  we must be able to maintain and extend our technological
edge in order to ensure that our products remain commercially viable.

     Our future  success  will  depend on our  ability to market and enhance our
existing  products  and to  develop  and  introduce  new  products  and  product
features.  These products and features must be cost-effective and keep pace with
technological  developments and address the increasingly  sophisticated needs of
our customers.  We may not be successful at these tasks.  We may also experience
difficulties   that  could   delay  or  prevent  the   successful   development,
introduction and marketing of these new products and features.

We may not be able to timely adopt emerging industry  standards,  which may make
our   products   unacceptable   to  potential   customers,   delay  our  product
introductions or increase our costs.

     Our products  must comply with a number of current  industry  standards and
practices  established by various  international  bodies.  Our failure to comply
with  evolving  standards,   including  industry  standard  CODECS,  will  limit
acceptance of our products by market participants.  If new standards are adopted
in our industry, we may be required to adopt those standards in our products. It
may  take us a  significant  amount  of  time to  develop  and  design  products
incorporating   these  new  standards.   We  may  also  become   dependent  upon
technologies  developed by third parties and have to pay royalty fees, which may
be substantial,  to the developers of the technology that  constitutes the newly
adopted standards.

     Our products are technologically complex and are designed to interface with
third-party  products,  such as  Microsoft's  Windows  Media  Player(R)  and the
QuickTime(R) Player using publicly disseminated  application program interfaces,
or APIs.  Modifications to the APIs for these third-party products could require
further  development  effort on our part to continue to make the interface  work
properly  or, in some  cases,  result in an  inability  of our  products to work
properly with third-party products. There is no assurance that these development
efforts or similar  kinds of changes will be  successful  or that we can develop
new products  effectively and quickly enough to avoid loss of revenues or market
share.

If we do not  develop  new  products  or new  product  features  in  response to
customer  requirements  or in a timely way,  customers may not buy our products,
which would seriously harm our business.


                                       19
<PAGE>

     The software  media  delivery  industry is rapidly  evolving and subject to
technological change and innovation. We must continue to enhance our products by
adding new product  features and  introduce new products in response to customer
requirements.  If we fail to do so or in a timely manner,  our customers may not
buy our products, resulting in serious harm to our business.

We will not be able to sell  sufficient  quantities of our products to sustain a
viable  business if the market for software  media  delivery  products  does not
develop or if a competing technology displaces our products.

     The software media delivery market is in the early stage of development and
is  still  evolving.  For  example,  telecommunication  companies  such  as  SBC
Communications,  Inc.  intend to develop  products and  services for  delivering
video  content to their  customers  through  digital  subscriber  line,  or DSL,
networks.  While we believe that our products can be  successfully  incorporated
into DSL and other  broadband  networks,  further testing and development of our
products in a DSL network and other  broadband  environments  will be necessary.
There can be no assurance  that our products  can be  successfully  incorporated
into DSL or other broadband  networks or that companies  operating such networks
will purchase our products. Our lack of product  diversification exposes us to a
substantial  risk of loss in the event that the software media  delivery  market
does not  develop or if a  competing  technology  replaces  our  software.  If a
competing  technology  replaces  or  takes  significant  market  share  from the
products that our software support,  we will not be able to sell our products in
quantities sufficient to grow our business.

We rely upon our sales of a small number of products, and the failure of any one
of our products to be  successful in the market could  substantially  reduce our
revenue.

     We rely on sales of a small  number of products  to generate  substantially
all of our revenue. We are developing  additional  software products,  but there
can be no assurance that we will be successful in doing so. Consequently, if our
existing products are not successful, our sales could decline materially,  which
harm our financial performance.

Our products generally have long sales cycles and implementation  periods, which
increase  our costs in  obtaining  orders and reduce the  predictability  of our
earnings.

     Our products are technologically  complex.  Prospective customers generally
must make a  significant  commitment  to test and  evaluate  our software and to
integrate  it into  their  products.  As a result,  our sales  process  is often
subject to delays  associated  with lengthy  approval  processes.  For these and
other  reasons,  the initial sales cycles of our new software  products has been
lengthy,  recently averaging approximately four to six months from initiation in
late  1999 to  completion  in 2000.  We  expect  that  future  sales  will  also
experience lengthy sales cycles.

     Our  products are often  embedded in our  customers'  web pages.  Since the
proper  development of video enabled web pages requires a relatively  high level
of technological  expertise,  we may be required to provide professional service
support to our customers in this area. There can be no assurance that we will be
able to continue to staff  adequately for and deliver the level of  professional
services required, or that we will be able to charge the customer fully for this
work. The result could be further  impediments to sales and possibly higher than
anticipated costs of sales.

     Long sales  cycles are also subject to a number of  significant  risks over
which we have  little or no control and that are not  usually  encountered  in a
short sales span.  These risks  include our  customers'  budgetary  constraints,
internal  acceptance reviews and cancellation.  In addition,  orders expected in
one  quarter  could  shift to another  because  of the timing of our  customers'
procurement  decisions.  The time  required to  implement  our products can vary
significantly  with the needs of our customers  and generally  lasts for several
months;  larger  implementations  can  take  several  calendar  quarters.   This
complicates our planning process and reduces the predictability of our financial
results.

We may be subject to potential legal  liabilities for  distributing  information
from our Website.

      We may be  subjected  to  claims  based on  negligence  or other  theories
relating to the  information  we distribute  from our Website  hosting  service.
Similarly,  we may be  subjected  to  claims  for  defamation  or  copyright  or
trademark  infringement  relating to the information we provide in our products.
These types of claims have been brought, sometimes successfully, against on-line
services as well as print  publications  in the past. We could also be subjected
to claims based upon the content that is  accessible  from our products  through
links to other  websites.  These  types of claims  could be  time-consuming  and
expensive to defend,  and could result in the diversion of our management's time
and  attention.  In  addition,  if our  products  provide  faulty or  inaccurate
information,  or fail to


                                       20
<PAGE>

provide  all the  information  a user  expects,  we  could be  subject  to legal
liability.  Our insurance and contractual  provisions with users and information
providers may not protect us against these types of claims.

We may not be successful in protecting our intellectual property.

     Our  success  will  depend,   in  part,  on  our  ability  to  protect  the
intellectual property that we have developed through patents,  trademarks, trade
secrets, copyrights,  licenses and other intellectual property rights. We cannot
guarantee  that we will be able to protect  our  intellectual  property.  We are
subject to a number of risks relating to intellectual property rights, including
the following:

     o    the means by which we seek to protect our  proprietary  rights may not
          be adequate to prevent others from  misappropriating our technology or
          from  independently  developing or selling technology or products with
          features based on or similar to ours;

     o    Legal standards relating to the validity,  enforceability and scope of
          protection of proprietary  rights in  Internet-related  businesses are
          uncertain and still evolving.

     o    our  products  may be sold in  foreign  countries  that  provide  less
          protection  to  intellectual  property  than is  provided  under U.S.,
          Japanese or European community laws;

     o    our  intellectual  property  rights  may be  challenged,  invalidated,
          violated or  circumvented  and may not provide us with any competitive
          advantage; and

     o    our  patents  pending  may not be  approved  or may be only  partially
          approved.

As a result,  we cannot predict the future viability or value of our proprietary
rights and those of other companies within the industry.

If our proprietary technology infringes upon the intellectual property rights of
others,  our costs could  increase and our ability to sell our products could be
limited.

     We are not aware of any activity  that may be  infringing  any  proprietary
right of a third party. There can be no assurance,  however, that aspects of our
technology  would not be found to violate the  intellectual  property  rights of
other parties. The resulting risks include the following:

     o    other  companies  may hold or obtain  patents or may  otherwise  claim
          proprietary rights to technology that is necessary to our business;

     o    if we violate the  intellectual  property rights of other parties,  we
          may be required to modify our products or intellectual  property or to
          obtain a license to permit their continued use; and

     o    any future  litigation to defend us against  allegations  that we have
          infringed upon the rights of others could result in substantial  costs
          to us, even if we ultimately prevail.

     There are a number of companies  that hold  patents for various  aspects of
the technology  incorporated in our industry's standards (i.e. technologies that
deliver or manage audio and video  content such as Java,  Video,  Audio,  Vector
Graphics,  Shockwave,  and  Cursors.) We expect that  companies  seeking to gain
competitive  advantages will increase their efforts to enforce any patent rights
that they may have.  The  holders  of patents  from  which we have not  obtained
licenses  may take the  position  that we are  required to obtain a license from
them.  We cannot be certain that we would be able to negotiate any license at an
acceptable  price.  Our  inability  to do so could  substantially  increase  our
operating  expenses  or  require us to seek and  obtain  alternative  sources of
technology necessary to produce our products.

We began our current  product line of software  only  recently and, as a result,
your ability to evaluate our prospects may be limited.

     Although we have been operating since 1993, we have only recently commenced
sales of our present  product  line of media  delivery  software.  Prior to that
time, we sold custom  designed  software  products,  which we do not  anticipate
selling in the future. Our limited operating history with respect to our current
software may limit your ability to evaluate our prospects because of:

     o    our limited historical financial data relating to sales of our current
          software;

     o    our unproven potential to generate profits; and

     o    our limited  experience in addressing  emerging trends that may affect
          our software business.


                                       21
<PAGE>

     As a young  company that  recently  commenced a new product  line,  we face
risks and  uncertainties  relating to our ability to implement our business plan
successfully.  You should consider our prospects in light of the risks, expenses
and difficulties we may encounter.

We may experience  fluctuations in our future operating results, which will make
predicting our future results difficult.

     These fluctuations may result from a variety of factors, including:

     o    market  acceptance  of our products,  including  changes in order flow
          from our largest  customers,  and our  customers'  ability to forecast
          their needs;

     o    the timing of new product announcements by us and our competitors;

     o    the lengthy sales cycle of our products;

     o    increased  competition,  including  changes  in  pricing  by us or our
          competitors;

     o    delays in deliveries by our suppliers and subcontractors;

     o    currency exchange rate fluctuations; and

     o    general  economic  conditions  in the  geographic  areas  in  which we
          operate.

     Accordingly,  any  revenues or net income in any  particular  period may be
lower than our  revenues  and net income in a preceding  or  comparable  period.
Period-to-period comparisons of our results of operations may not be meaningful,
and you should not rely upon them as indications of our future  performance.  In
addition,  our  operating  results may be below the  expectations  of securities
analysts and investors in future periods. Our failure to meet these expectations
will likely cause our share price to decline.

Our products could contain  defects,  which would reduce sales of those products
or result in claims against us.

     We develop  complex  software for media  delivery,  content  management and
storage.  We have  recently  commenced  sales of our  first  commercial  product
released in late 1999 and have yet to achieve very large commercial deployments.
Despite  testing,  software  errors have been found in our product  and, in some
cases, our product's  performance  when initially  deployed has not met customer
expectations.  To date,  we believe that all of the errors in question have been
resolved. There can be no assurance,  however, that other errors will not occur,
as errors such as these are common in the  development of any software  product.
Additional errors in our product could result in, among other things, a delay in
recognition or loss of revenues, loss of market share, failure to achieve market
acceptance  or  substantial  damage to our  reputation.  We could be  subject to
material claims by customers,  and we may need to incur substantial  expenses to
correct any product  defects.  We do not have  product  liability  insurance  to
protect us against losses caused by defects in our products,  and we do not have
"errors and omissions" insurance.  As a result, any payments that we may need to
make to satisfy our customers may be substantial.

Our success  depends  upon our ability to  attract,  train and retain  qualified
engineers, sales and marketing and technical support personnel.

     We will need to hire  additional  engineers  and highly  trained  technical
support  personnel in order to succeed.  We will need to increase our  technical
staff to support new customers and the expanding needs of existing customers, as
well as our continued research and development operations.  We will need to hire
additional  sales and  marketing  personnel to target our  potential  customers.
Hiring  engineers,  sales and marketing and technical  support personnel is very
competitive in our industry  because of the limited  number of people  available
with  the  necessary  skills  and   understanding  of  our  products.   This  is
particularly true in California where the competition for qualified personnel is
intense. If we are unable to hire and retain necessary  personnel,  our business
will not develop and our operating results will be harmed.


                                       22
<PAGE>

                         Risks Relating to Our Industry

If software media  technology or our method of  implementing  this technology is
not accepted, we will not be able to sustain or expand our business.

      Our future  success  depends on the  growing use and  acceptance  of video
applications  for PCs and  set-top  boxes  including  the growth of video on the
Internet.  The market for these  applications is new, and may not develop to the
extent necessary to enable us to expand our business.  We have recently invested
and  expect  to  continue  to  invest  significant  time  and  resources  in the
development  of new  products  for this  market.  If the  target  market for our
solution does not grow, we may not obtain any benefits from these investments.

The  markets  in  which  we  operate  are  highly  competitive,  and many of our
competitors have much greater  resources than we do, which may make it difficult
for us to become profitable.

     Competition  in our  industry  is  intense,  and we expect  competition  to
increase.  Competition  could force us to charge lower prices for our  products,
reduce demand for our products and reduce our ability to recover development and
manufacturing costs.

     Some of our competitors:

     o    have greater financial, personnel and other resources than ours;

     o    offer a broader range of products and services than ours;

     o    may be able to  respond  faster  to new or  emerging  technologies  or
          changes in customer requirements than we can;

     o    may have a more substantial distribution network than ours;

     o    benefit from greater purchasing economies than we do;

     o    offer more aggressive pricing than we do; and

     o    devote  greater  resources to the promotion of their  products than we
          do.

     We will not be able to  compete  effectively  if we are not able to develop
and implement appropriate strategies to address these factors.

Internal development efforts by our customers and new entrants to the market may
increase competition.

     In the future,  some of our customers may internally  develop products that
will replace the  products  that we currently  sell to them.  In addition,  some
leading  companies,  with  substantially  greater  resources  than we have,  may
attempt to enter our market.  The recent growth in the market for media delivery
and related technologies is attracting large entrants.

We depend on the continued growth and commercial acceptance of the Internet.

     Our  business  will be  adversely  affected  if usage of the  Internet  and
broadband  access does not continue to grow as  anticipated.  This growth may be
inhibited by a number of factors, such as:

     o    inadequate network infrastructure;

     o    inconsistent quality of service;

     o    lack of cost-effective broadband high-speed services;

     o    lack of cost-effective storage; and

     o    security concerns.

     Even  if  Internet   use  and   broadband   access   grows,   the  Internet
infrastructure  may not be able to  support  future  growth  adequately  and its
reliability and quality of service may suffer.  In addition,  numerous  websites
have experienced service interruptions due to outages and other delays occurring
internally and throughout the Internet network infrastructure.  If these outages
or delays occur  frequently in the future,  Internet  usage, as well as usage of
our products, could grow more slowly or decline.

     Delivery of video using the Internet is an emerging  business.  Many of our
customers are new companies that are innovating and counting on  Burstware(R) to
provide a  technological  edge.  Because many of these companies are early stage
enterprises  without  revenues,  they  may  delay  payment  or  fail  to pay our
invoices. For this reason, we have deferred a substantial portion of revenue


                                       23
<PAGE>

booked until  collectibility  has been assured.  There is no assurance that this
revenue will ultimately be collected and recognized or that future bookings will
not be deferred.

We may face  government  regulation  and  legal  uncertainties  relating  to the
Internet.

     Currently,  there are few laws or regulations  that  specifically  regulate
communications or commerce on the Internet. However, laws and regulations may be
adopted   that   address   issues  such  as  user   privacy,   pricing  and  the
characteristics  and quality of  products  and  services.  For  example,  recent
federal  legislation  prohibits the transmission of certain types of information
and content over the Internet. In addition, several telecommunications companies
have petitioned the Federal  Communications  Commission to regulate Internet and
on-line  service  providers  in a  manner  similar  to long  distance  telephone
carriers and to impose access fees on such  providers.  This could  increase the
cost of  transmitting  data over the  Internet.  Moreover,  it may take years to
determine the extent to which  existing laws relating to issues such as property
ownership, libel and personal privacy apply to the Internet.  Finally, state tax
laws and regulations relating to the provision of products and services over the
Internet are still developing. If individual states impose taxes on products and
services  provided over the Internet,  the cost of our products and services may
increase and we may not be able to increase the price we charge for our products
to cover these costs.  Any new laws or  regulations  or new  interpretations  of
existing laws and regulations  relating to the Internet could  adversely  affect
our business.

ITEM  7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     At December 31, 2000, we had no money  invested in money market funds.  The
primary objective of our investment  activities is to preserve our capital until
it is required to fund operations while at the same time achieving a market rate
of return without significant risk. Since no funds were invested, a 10% movement
in market  interest  rates  would not have a  material  impact on the total fair
value of our portfolio as of December 31, 2000.

ITEM  8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The Report of the Auditors and the  accompanying  financial  statements and
notes to the  financial  statements  are on pages F-1  through  F-17.  Financial
Statement schedules are not required and have been omitted.


ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
      FINANCIAL DISCLOSURE.

     On December 17, 1999,  KPMG LLP,  who was  previously  engaged to audit our
financial  statements  for the years  ended  December  31,  1997 and 1998 as our
independent  accountants resigned.  During 1997 and 1998 and through the date of
resignation,  there were no disagreements  between us and KPMG LLP on any matter
of accounting  principles  or  practices,  financial  statement  disclousure  or
auditing scope or procedure  which if not resolved to their  satisfaction  would
have caused them to make reference to the subject matter of the  disagreement in
connection with their report.

     The audit report  prepared by KPMG LLP did not contain any adverse  opinion
or  disclaimer of opinion,  nor was it qualified or modified as to  uncertainty,
audit scope or accounting principles,  except as follows: KPMG LLP's independent
auditors'  report on our  consolidated  financial  statements as of December 31,
1998 and 1997 and for the years  then  ended,  contained  a  separate  paragraph
stating that "the Company has suffered  recurring losses from operations and has
negative cash flows from operating activities that raise substantial doubt about
its  ability to  continue as a going  concern.  Management's  plans in regard to
these  matters  include  raising  sufficient  capital  to allow the  Company  to
complete  development  and  successful  commercialization  of its products." The
consolidated  financial  statments  do not  include any  adjustments  that might
result from the outcome of this uncertainty.

     KPMG advised our Audit  Committee  in May 1998  regarding  certain  matters
involving internal control that it considered to be reportable  conditions under
standards established by the American Institute of Certified Public Accountants.
Such matters involved the inappropriate  recognition of revenue during the first
quarter of 1997 and an alleged misappropriation of funds.

     On January 24, 2000,  Burst.com,  Inc.  appointed  BDO Seidman,  LLP as the
Company's independent auditors.  Prior to engaging BDO Seidman, LLP, neither the
Company nor anyone on its behalf  consulted with BDO Seidman,  LLP regarding (i)
the  application  of accounting  principles to a specified  transaction,  either
completed  or proposed;  or the type of audit  opinion that might be rendered on
the  Company's  financial  statements,  or (ii) any  matter  that was either the
subject of a disagreement or a reportable event.


                                       24
<PAGE>

                                    PART III

ITEM  10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     Burst's Executive  Officers and Directors and their ages as of December 31,
2000, are as follows:

           Name                   Age                Position
---------------------------       ---     -------------------------------------

Richard Lang...............       47      Chairman

Douglas Glen...............       53      President, Chief Executive Officer and
                                          Director

Edward H. Davis............       48      General Counsel, Vice President of
                                          Strategic Alliances and Secretary

John C. Lukrich............       48      Chief Financial Officer



           Name                   Age                Position
---------------------------       ---     --------------------------------------
Trevor Bowen (1) (2).......       51      Director
John J. Micek III (1)......       48      Director
Brian Murphy (2)...........       45      Director
Joseph Barletta (1)(2).....       64      Director
Mark Hubscher..............       48      Director

(1)  Member of the compensation committee

(2)  Member of the audit committee


The following sets forth biographical  information as to the business experience
of each  Executive  Officer  and  Director  of the  Company  for the year  ended
December 31, 2000:


     Richard Lang is our Chairman of the Board.  From September 1997 through the
end of May 2000 he served as President and from September 1997 through September
2000 he served as Chief Executive Officer.  From January 31, 1997 through August
1997, Mr. Lang served as one of our  directors.  Mr. Lang served as our Chairman
of the Board and Treasurer  until January 31, 1997. He had served as Chairman of
the Board, Chief Executive Officer and Treasurer from December 1993 to September
1995  and as a  Director  since  August  1992.  He has  been a  Director  of our
subsidiary,  Explore  Technology,  Inc.,  since February 1990, and served as its
President  from  February  1990 to August 1992.  Mr. Lang has presided  over the
development of our patent  portfolio.  He is the inventor of record for the bulk
of our Intellectual Property. Mr. Lang was also a co-founder of Go-Video,  Inc.,
Scottsdale,  Arizona and co-inventor of Go-Video's  patented dual-deck VCRs. Mr.
Lang received his A.A. degree from Scottsdale  College.  Starting April 1, 2001,
Mr. Lang has again become Chief Executive Officer as a result of the resignation
of Douglas Glen.

     Douglas Glen has been President since June 2000,  Chief  Executive  Officer
since  September  2000 and a director  since October  1999.  Mr. Glen is general
partner  of Pro  Ven  Private  Equity's  Global  Rights  Fund,  a  $250  million
investment  fund  focused  on  under-exploited  brands,   copyrights  and  media
properties.  Previously,  Mr. Glen was senior  vice  president,  chief  strategy
officer  of  Mattel,  Inc.  Before  joining  Mattel,  Mr.  Glen was  group  vice
president,  business  development  and  strategic  planning for Sega of America.
Prior to joining  Sega,  Mr. Glen was general  manager of Lucasfilm  Games,  the
consumer software division of George Lucas' entertainment  company. Mr. Glen has
a Bachelors Degree in Business from Massachusetts  Institute of Technology and a
Ph.D. from Somerset University.  Mr. Glen has resigned his position as President
and Chief  Executive  Officer and his seat on the Board of  Directors  effective
April 1, 2001.

     Edward H. Davis  currently  serves as General  Counsel,  Secretary and Vice
President of  Strategic  Alliances  and has been with us since August 1998.  Mr.
Davis was elected as our Secretary in October  1999.  From 1987 to July 1998 Mr.
Davis was  Corporate  Counsel for Pacific  Telesis  Group,  or PTG. As Corporate
Counsel he advised PTG consolidated companies, including Pacific Bell,


                                       25
<PAGE>

     Nevada Bell, Tele-TV, Pacific Bell Video Services, Pacific Bell Information
Services,  and Pacific Bell Directory.  He has significant experience in mergers
and acquisitions,  taxation,  intellectual property and criminal prosecution. He
holds a Bachelor of Arts Degree in History and  Political  Science  from Gonzaga
University; a Juris Doctorate Degree from the University of San Francisco, and a
post graduate Masters of Laws in Taxation from Golden Gate University. Mr. Davis
has resigned his position effective April 1, 2001.

     John C. Lukrich  became our Chief  Financial  Officer in June 2000.  He has
extensive   experience  in  mergers  and  acquisitions,   operations,   business
development,  and venture  capital  strategies.  From 1992 to 1996,  Mr. Lukrich
served  as  CFO  and  Executive  Vice   President  of  Great  Bear   Technology,
Inc./StarPress,   Inc.,   publisher  and   distributor  of   entertainment   and
education-based  CD-ROM titles.  He was responsible for the required filings for
the  publicly-traded  company  (GTBR),  and for  the  merger,  acquisition,  and
transition  of five  software  companies  into  Great  Bear.  In 1996 he  joined
Intervista  Software,  Inc,  as Chief  Financial  Officer  and  Chief  Operating
Officer,  and was later  appointed  President  where he served  until  1999 when
Intervista was sold to Platinum Technology,  Inc. (PLAT). From 1998 to 2000, Mr.
Lukrich served as interim director for  RateXchange.com  (RTX), and as a part of
the senior  management team with Chief Financial  Officer  responsibilities  for
NetAmerica.com (NAMI), an incubator for Internet business-to-business  startups.
Mr. Lukrich is a CPA, and practiced  with Ernst & Young.  He received BS degrees
in Accounting and in Finance from the University of California,  Berkeley and an
MBA from Golden Gate University. Mr. Lukrich has resigned his position effective
April 1, 2001, at which time the Chief Financial  Officer position was filled by
our Controller, Jeffrey D. Wilson.

     Trevor  Bowen is a partner  in  Principle  Management  Limited,  an artiste
management company with offices in Dublin and New York. He was a partner in KPMG
LLP for eleven years before joining  Principle  Management  Limited in 1996. Mr.
Bowen holds a number of directorships  in companies in the media,  entertainment
and film business. Mr. Bowen also holds a number of non-executive  directorships
and is Chairman of an  international  consulting  group.  Mr.  Bowen  received a
Bachelor of Business  Studies degree from Trinity College Dublin and is a Fellow
of The Institute of Chartered  Accountants  in Ireland.  He has also completed a
Corporate Finance Course at Harvard University.

     John J. Micek III has been one of our directors since April 1990, Secretary
and Treasurer since January 1994, and served as our President from April 1990 to
August 1992.  Mr.  Micek  currently  serves as  President of Universal  Warranty
Insurance located in Palo Alto, California,  and Omaha,  Nebraska.  From 1994 to
1997, Mr. Micek served as general counsel for U.S.  Electricar in San Francisco,
California.  From January 1989 to March 1994,  Mr. Micek  practiced  law in Palo
Alto, California.  He has served as a Director of Armanino Foods of Distinction,
Inc., a publicly-held specialty food manufacturer in Hayward,  California, since
February 1988. He also serves as a Director of Universal Group,  Inc., a Midwest
group  of  insurance   companies,   and  Cole  Publishing  Company  in  northern
California. He received a Bachelor of Arts Degree in History from the University
of Santa Clara and a Juris Doctorate from the University of San Francisco School
of Law.

     Brian Murphy has been one of our  directors  since  January  1997.  He is a
partner in O.J. Kilkenny & Company,  Chartered  Accountants  specializing in the
entertainment industry with offices in London, England and Dublin,  Ireland. The
firm  provides a wide range of services to their  clients,  consisting  of major
international  entertainment artists, covering all areas of financial management
and audit and accountancy  advise. Mr. Murphy is involved at the executive level
with a number of companies in the media and entertainment business, particularly
in the  field of  digital  post-production,  film  and  television.  Mr.  Murphy
received a Bachelors  Degree in Commerce  from Dublin  University,  and became a
fellow of the Institute of Chartered Accountants in Ireland,  England and Wales.
Mr.  Murphy  became one of our directors as  representative  of Draysec  Finance
Limited, one of our principal stockholders.

     Joseph  Barletta has been one of our directors  since September 1998. He is
of counsel  with the firm  Seyfarth,  Shaw,  Fairweather,  and  Geraldson in San
Francisco.  He has served as the CEO or COO of six major  companies in the media
industry  including TV Guide magazine,  Thomson Newspapers and the San Francisco
Newspaper Agency  (Chronicle and Examiner),  and he currently sits on the boards
of several  companies.  Mr.  Barletta  received  his Juris  Doctor  Degree  from
Duquensne University and Bachelor of Arts Degree from Marietta College.

     Mark Hubscher has been one of our directors since August 2000. He currently
serves as Executive Director, Broadband Marketing, for SBC Communications,  Inc.
("SBC") in San Antonio, Texas. In this capacity, Mr. Hubscher is responsible for
overseeing  the  development  of  products  associated  with SBC's DSL  service,
including but not limited to its basic DSL transport product, voice over DSL and
video over DSL. Mr. Hubscher has been with SBC (and Ameritech,  Inc.) since 1984
in various capacities,  including strategic planning,  business  development and
product  management.  From 1976 to 1984,  Mr.  Hubscher  has held  various  vice
presidential  positions  in  subsidiaries  of W.R.  Grace.  Mr.  Hubscher  has a
Bachelor of Commerce  Degree from McGill  University  in Montreal,  Canada and a
Masters of Management  Degree from the Kellogg School of Business,  Northwestern
University.


                                       26
<PAGE>

ITEM  11. EXECUTIVE COMPENSATION AND OTHER MATTERS.

     Summary of  Compensation.  The following table sets forth all  compensation
earned  or paid for  services  rendered  to us in all  capacities  by our  Chief
Executive  Officer  and by our five  other  most  highly  compensated  executive
officers  who earned more than  $100,000 in salary and bonus for the fiscal year
ended  December 31, 2000.  These officers are referred to  collectively  in this
prospectus as the "named executive officers."

<TABLE>
<CAPTION>
                                      Summary Compensation Table
                                                                   Long-Term
                                          Annual Compensation      Compensation
                                    -------------------------------------------
                                                                   Securities
        Name and Principal                                         Underlying        All Other
             Position                Year    Salary     Bonus      Options (#)    Compensation($)
-------------------------------------------------------------------------------------------------
<S>                                  <C>    <C>         <C>         <C>            <C>
Richard Lang, Chairman               2000   $330,616     $--          269,594      $ 12,000(1)
of  the  Board  and  former  Chief   1999    240,000      --             --            --
Executive Officer                    1998    170,000      --        1,011,000          --

Douglas Glen, Chief Executive        2000    188,294      --          941,470        69,000(2)
Officer, President and Director      1999       --        --          100,000          --
                                     1998       --        --             --            --

John Lukrich, Chief Financial        2000     93,397      --          403,905         9,000(1)
Officer                              1999       --        --             --            --
                                     1998       --        --             --            --

Kyle Faulkner, former Chief          2000    236,268      --           18,500          --
Technology Officer                   1999    206,583    10,000         50,000          --
                                     1998     25,000      --          205,716       283,940(3)

Thomas Koshy,  former President of   2000    200,000      --          134,205          --
International Operations             1999    142,000      --          270,000          --
                                     1998       --        --           24,000          --

Edward Davis, General                2000    164,590      --           85,292          --
Counsel, Vice President              1999    159,375      --             --            --
and Secretary                        1998     56,250      --          150,000          --
</TABLE>

(1)  Represents  monthly  auto  allowance  payments  made  to Mr.  Lang  and Mr.
     Lukrich.

(2)  Represents monthly housing and auto allowance payments made to Mr. Glen.

(3)  Represents  payments  made  to  Mr.  Faulkner  as  a  contractor  prior  to
     employment with the Company

     Option Grants.  The following table sets forth  information with respect to
stock options granted during 2000 to the executive officers named in the Summary
Compensation  Table. In accordance with the rules of the Securities and Exchange
Commission,  also shown below is the potential realizable value over the term of
the  option  based  on  assumed  rates  of  stock  appreciation  of 5% and  10%,
compounded annually. We assume that:

     o    the  fair  market  value  of our  common  stock  on the  date of grant
          appreciates at the indicated  annual rate compounded  annually for the
          entire term of the option; and

     o    the option is  exercised  and sold on the last day of its term for the
          appreciated stock price.


                                       27
<PAGE>

     These  amounts  are  based  on  assumed  rates of  appreciation  and do not
represent  our estimate of future stock price.  Actual  gains,  if any, on stock
option  exercises  will be  dependent  on the future  performance  of our common
stock.

             Option Grants in Last Fiscal Year Individual Grants(1)

<TABLE>
<CAPTION>
                                                % of Total                                 Potential Realizable Value at
                               Number of         Options                                   Assumed Rates of Stock Price
                              Securities        Granted to                                       Appreciation for
                              Underlying        Employees                                        Option Term($)
                                Options             in         Exercise      Expiration    ----------------------------
          Name               Granted(#)(1)      2000(%)(2)     Price($)         Date             5%            10%
-------------------------- ------------------ --------------- ------------ --------------- -------------- -------------
<S>                           <C>                 <C>          <C>         <C>                <C>            <C>
Richard Lang                  269,594(3)           3.13%       $0.281      2/02 - 1/06        $ 617,558      $ 805,821
Douglas Glen                  941,470(4)          10.12%       $0.281      2/02 - 6/05        $  57,870      $ 125,866
John Lukrich                  403,905(5)           4.68%       $0.281      2/02 - 6/05        $  23,432      $  50,876
Kyle Faulkner                  18,500               .21%       $5.00          06/05           $  13,750      $  41,575
Thomas Koshy                  134,205(6)           1.56%       $0.281      2/02 - 6/05        $   4,231      $   8,885
Edward Davis                   85,292(7)            .99%       $0.281      2/02 - 6/05        $   1,900      $   3,910

</TABLE>

(1)  All options were granted  under either our 1992,  1998 or 1999 Stock Option
     Plan.

(2)  Based on an aggregate of 8,621,242 options granted to employees,  officers,
     directors and consultants in fiscal 2000.

(3)  52,908 options originally granted at $5.00 and repriced in November 2000 at
     a price of $0.281. In addition, 1,382,167 options granted in prior years at
     $0.90 to $3.75 were also repriced to $0.281

(4)  797,000  options  originally  granted  at $4.50 and $5.00 and  repriced  in
     November 2000 at a price of $0.281. In addition, 100,000 options granted in
     1999 at $6.625 were also repriced to $0.281.

(5)  315,000  options  originally  granted  at $4.50 and $5.00 and  repriced  in
     November 2000 at a price of $0.281.

(6)  45,300  options  originally  granted  at $4.50 and $5.00  and  repriced  in
     November 2000 at a price of $0.281. In addition, 300,000 options granted in
     1998 and 1999 at $2.91 to $6.25 were also repriced to $0.281.

(7)  7,500 options  originally granted at $5.00 and repriced in November 2000 at
     a price of $0.281. In addition,  150,000 options granted in 1998 at $3.1563
     were repriced to $0.281.

              Aggregated Option Exercises in Last Fiscal Year and
                         Fiscal Year End Option Values

The following table sets forth  information  concerning option exercises and the
aggregate  value of  unexercised  options for the year ended  December 31, 2000,
held by each executive  officer named in the summary  compensation  table above.
None of these officers exercised any stock options in 2000.

<TABLE>
<CAPTION>
                                                       Number of Securities Underlying        Value of Unexercised In-the Money
                                                           Unexercised Options at                       Options at
                           Shares        Value                December 31, 2000                     December 31, 2000(1)
                         Acquired on   realized   ---------------------------------------- --------------------------------------
         Name            Exercise(#)      ($)       Exercisable(#)     Unexercisable(#)      Exercisable($)   Unexercisable($)
----------------------- -------------- ---------- ------------------- -------------------- ----------------- --------------------
<S>                          <C>           <C>        <C>                  <C>                 <C>               <C>
Richard Lang                 --            --         1,425,445            226,316             $       --        $       --
Douglas Glen                 --            --           291,401            840,069             $       --        $       --
John Lukrich                 --            --            87,960            315,945             $       --        $       --
Thomas Koshy                 --            --           218,906            215,299             $       --        $       --
Edward Davis                 --            --           169,096             66,196             $       --        $       --
</TABLE>

(1)  The value  realized  on  exercised  options  and the  value of  unexercised
     in-the-money  options at December 31, 2000 is based on a value of $0.25 per
     share,  the closing bid price of our common  stock at  December  31,  2000,
     minus the per share  exercise  price,  multiplied  by the  number of shares
     underlying the options.


                                       28
<PAGE>

                           Ten-Year Option / Repricing

The following table sets forth  information  concerning all repricing of options
for the year ended December 31, 2000,  held by each  executive  officer named in
the summary compensation table above.

<TABLE>
<CAPTION>
                                                                                                                Length of Original
                                                      Market Price of                                              Option Term
                                                     Stock on Date of   Exercise Price on     New Exercise      Remaining at Date
Name                                                      Reprice       Date of Repricing        Price            of Repricing
----------------------- -------------- ------------ ------------------ ------------------- ----------------- --------------------
<S>                     <C>             <C>             <C>              <C>                 <C>                     <C>
Richard Lang            11/21/00        1,435,075       $ 0.2812         $ 0.90 - 5.00       $ 0.2812                2 to 7 years

Douglas Glen            11/21/00          987,000       $ 0.2812         $ 2.80 - 6.625      $ 0.2812                2 to 4 years

John Lukrich            11/21/00          315,000       $ 0.2812         $ 4.50 - 5.00       $ 0.2812                     4 years

Kyle Faulkner                 --               --       $     --                    --       $    --                           --

Thomas Koshy            11/21/00          345,300       $ 0.2812         $ 2.91 - 6.63       $ 0.2812                2 to 4 years

Edward Davis            11/21/00          157,500       $ 0.2812         $ 3.15 - 5.00       $ 0.2812                2 to 4 years
</TABLE>


                            STOCK PERFORMANCE GRAPH
                           (To Be Filed By Amendment)


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The  following  table sets forth  information  with  respect to  beneficial
ownership of our common stock by:

     o    each person who beneficially owns more than 5% of our common stock;

     o    each of our executive officers;

     o    each of our directors; and

     o    all executive officers and directors as a group.

     Except as otherwise noted, the address of each 5% stockholder listed in the
table is c/o Burst.com,  Inc., 500 Sansome Street, Suite 500, San Francisco,  CA
94111.  Beneficial  ownership is determined in accordance  with the rules of the
Securities and Exchange Commission and includes voting and investment power with
respect to shares. To our knowledge,  except under applicable community property
laws or as otherwise indicated,  the persons named in the table have sole voting
and sole investment control with respect to all shares  beneficially  owned. The
applicable  percentage of ownership for each  stockholder is based on 21,648,125
shares of common stock  outstanding  on March 16, 2001 together with  applicable
options and warrants for that stockholder.  Shares of common stock issuable upon
exercise of options and other rights  beneficially  owned are deemed outstanding
for the purpose of computing  the  percentage  ownership  of the person  holding
those options and other rights, but are not deemed outstanding for computing the
percentage ownership of any other person.

<TABLE>
<CAPTION>
                                                                       Number of Shares          Percentage of
              Name and Address of Beneficial Owner                    Beneficially Owned       Outstanding Shares
------------------------------------------------------------------ ------------------------- -----------------------
<S>                                                                  <C>                        <C>
         5% Stockholders

         Draysec Finance Limited                                     2,041,678 (1)                9.43%
         Storie Partners LLP                                         3,543,167 (2)               16.37%
         Mercer Management                                           2,065,769 (3)                9.54%
         SBC Venture Capital Corporation                             1,715,266 (4)                7.92%
         Stuart Rudick                                               1,279,000 (5)                5.91%
         Chelsey Capital                                             1,519,750 (6)                7.02%
         Robert London                                               1,130,915 (7)                5.22%
         Ravinia Capital                                             1,199,829 (8)                5.54%
</TABLE>


                                       29
<PAGE>

<TABLE>
<CAPTION>
                                                                       Number of Shares          Percentage of
              Name and Address of Beneficial Owner                    Beneficially Owned       Outstanding Shares
------------------------------------------------------------------ ------------------------- -----------------------
<S>                                                                  <C>                        <C>
         Executive Officers and Directors

         Richard Lang                                                2,599,222 (9)               12.01%
         Trevor Bowen                                                1,826,578 (10)               8.44%
         John J. Micek III                                              371,750 (11)              1.71%
         Brian Murphy                                                1,945,033 (12)               8.98%
         Joseph Barletta                                                141,174 (13)                *
         Douglas Glen                                                   434,591 (14)              2.00%
         John C. Lukrich                                                138,990 (15)                 *
         Edward H. Davis                                                214,592 (16)                 *

         All officers and directors as a group (8 persons)           7,665,680 (17)              35.41%
</TABLE>

         *  Represents less than a one (1) percent interest

(1)  Includes  1,525,769 shares held,  options to purchase  200,000 shares,  and
     warrants to  purchase  46,109  shares of our common  stock.  Also  includes
     options to purchase 100,000 shares of our common stock held by Trevor Bowen
     and options to purchase  169,800  shares of our common  stock held by Brian
     Murphy, each of who represents Draysec Finance on our Board of Directors.

(2)  Includes  2,913,167  shares held and warrants to purchase 630,000 shares of
     our common stock.

(3)  Includes  1,025,204 shares held,  options to purchase  500,000 shares,  and
     warrants to purchase 540,565 shares of our common stock.

(4)  Includes  857,633  shares held and a warrant to purchase  857,633 shares of
     our common stock.

(5)  Includes  1,150,000 shares held by Mindful Partners,  75,000 shares held by
     Delaware  Charter  Guaranty  Trust  Company,  20,000  shares held by Stuart
     Rudick,  Trustee,  and 1,500 shares held by Martin  Rudick.  Also  includes
     warrants  to  purchase  32,500  shares of our common  stock held by Mindful
     Partners.

(6)  Includes  769,750  shares of our  common  stock and  warrants  to  purchase
     750,000 shares of our common stock.

(7)  Includes  913,279  shares of our  common  stock and  warrants  to  purchase
     217,636 shares of our common stock.

(8)  Includes  609,129  shares of our  common  stock and  warrants  to  purchase
     593,000 shares of our common stock.

(9)  Includes 922,346 shares of our common stock in the name of the Lisa Walters
     and Richard Lang Revocable Trust,  options to purchase  1,554,876 shares of
     our common  stock held by Richard  Lang,  and options to  purchase  122,000
     shares of our common stock held by Lisa Walters, Mr. Lang's spouse.

(10) Includes  1,771,878 shares of our common stock held beneficially by Draysec
     Finance and options to purchase 54,700 shares of our common stock.

(11) Includes  69,432 shares of our common stock held by Mr. Micek and immediate
     family, 50,000 shares of our common stock held by Universal Warranty Corp.,
     and 12,829  shares held by Universal  Assurors  Agency,  Inc. Also includes
     options to purchase  179,866  shares of our common stock held by Mr. Micek,
     warrants to purchase  37,498 shares of our common stock held by the Miceks,
     warrants to purchase  6,500  shares of our common  stock held by  Universal
     Warranty  Corp.  and warrants to purchase  15,625  shares held by Universal
     Assurors Agency, Inc.

(12) Includes  1,771,878 shares of our common stock held beneficially by Draysec
     Finance and options to purchase  173,155 shares of our common stock held by
     Mr. Murphy.

(13) Includes   25,658  shares  of  our  common  stock  held   beneficially   by
     Independence  Properties,  options to purchase  84,266 shares of our common
     stock held by Mr.  Barletta,  and warrants to purchase 31,250 shares of our
     common stock held by Independence Properties.


                                       30
<PAGE>

(14) Includes  25,658  shares of our common stock,  options to purchase  377,683
     shares of our common stock,  and warrants to purchase  31,250 shares of our
     common stock.

(15) Consists of options to purchase 138,990 shares of common stock.

(16) Consists of options to purchase 214,592 shares of our common stock.

(17) 4,649,679 shares of our common stock,  options to purchase 2,900,128 shares
     of our common stock,  and warrants to purchase 115,873 shares of our common
     stock.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Since April 1, 1997,  there has not been, nor is there currently  proposed,
any transaction or series of similar  transactions to which we were or are to be
a party in which the amount involved  exceeds $60,000 and in which any director,
executive officer or holder of more than 5% of our common stock, or an immediate
family  member of any of the  foregoing,  had or will have a direct or  indirect
interest other than:

     o    compensation  arrangements,  which are described  where required under
          "Management"; and

     o    the transactions described below.

Sale of Common Stock and Warrant in August and September 2000.

     In August 2000, we sold to SBC Venture Capital Corporation, an affiliate of
SBC Communications,  Inc. ("SBC  Communications"),  857,633 shares of our common
stock at a  purchase  price of $5.83  per  share  and a  three-year  warrant  to
purchase  857,633 shares of our common stock with an exercise price of $5.83 per
share.  The  aggregate  purchase  price  of these  shares  and the  warrant  was
$5,000,000.  In connection with this transaction,  Mr. Mark Hubscher,  Executive
Director, Broadband Marketing, of SBC, was elected to our Board of Directors. In
September 2000, we issued for no additional cash  consideration  an aggregate of
126,626  shares  of our  common  stock to the  purchasers  in the  January  2000
financing,  discussed below, pursuant to certain rights granted to them in their
registration rights agreement.

Sale of Common Stock and Warrants in January 2000.

     In  January  2000 we sold  4,808,375  shares of common  stock at a purchase
price of  $4.00  per  share,  for an  aggregate  gross  purchase  price of $19.2
million. We raised $13.9 million in cash in the offering,  before offering costs
totaling  $1,103,000 for this offering and the debt conversion  described below,
and the remaining $5.3 million consisted of the conversion of notes payable. The
purchasers  also  received  warrants to purchase up to an aggregate of 4,843,371
shares  of our  common  stock,  at an  exercise  price of $5.00 per  share.  The
warrants are exercisable for a term of five years from the date of issuance. The
following directors,  executive officers and principal stockholders participated
in this transaction:

Cash Purchases:

               Investor         Amount Invested    Common Shares     Warrants
------------------------------- ----------------  ---------------- -------------
Special Situations Funds           $ 4,000,000         1,000,000       1,000,000
Chelsey Capital                      3,000,000           750,000         750,000
BayStar Capital                      3,000,000           750,000         750,000
Ravinia Capital Ventures             2,374,000           593,500         593,500
Kyle Faulkner                          250,000            62,500          62,500
Douglas Glen                           100,000            25,000          25,000


Conversion of Notes Payable:
                 Investor         Notes Converted   Common Shares    Warrants
------------------------------- ----------------- --------------- --------------
Storie Partners                    $2,000,000         500,000          500,000
Mercer Management                   1,550,000         387,500          387,500


                                       31
<PAGE>

     In  connection  with  the  above  financing,  holders  of all  of our  then
outstanding  shares of preferred  stock  voluntarily  converted such shares into
4,496,609 shares of our preferred stock.

Transactions with Draysec Finance Limited

     During 1997,  Draysec Finance Limited,  one of our principal  stockholders,
invested  $200,000 for the purchase of investment  units,  consisting of 200,000
shares of our  preferred  stock and warrants to purchase  200,000  shares of our
common  stock at an exercise  price of $1.00 per share.  Our Board of  Directors
extended the exercise date for these warrants to February 1999 and increased the
exercise  price to $1.50 per share  after  January  1998.  These  warrants  were
exercised in February 1999.  Additionally,  Draysec Finance  Limited  provided a
loan of $80,000 in consideration for a six month promissory note from us with an
interest  rate of 10.5% and a warrant to  purchase  16,000  shares of our common
stock at an exercise price of $1.00 per share.

     In 1998, Draysec Finance provided us two loans, in the aggregate  principal
amount of $50,000,  convertible into our common stock at $1.00 per share.  These
loans included  warrants to purchase  10,000 shares of our common stock at $1.00
per share.  Draysec Finance loaned us an additional  $75,000 in 1998 in the form
of a line of  credit at an  interest  rate  equal to the prime  rate plus 2% and
received a warrant to purchase  15,000  shares of our common  stock at $2.36 per
share.

     Also in  1998,  Draysec  Finance  converted  $78,596  in debt  and  accrued
interest  into 39,298  shares of our  preferred  stock and  warrants to purchase
5,109  shares  of our  common  stock at $2.00  per share  Draysec  Finance  also
converted an additional  $137,054 of convertible  debt and accrued interest into
137,054 shares of our common stock at $1.00 per share.

     In February 1999,  Draysec Finance exercised the warrants issued in 1997 to
purchase 200,000 shares of our common stock for $300,000 cash.

     In January 2000,  239,298 shares of preferred stock held by Draysec Finance
were  converted  to 239,298  shares of our  common  stock in  connection  with a
private placement financing.

Transactions with Mercer Management

     During 1997,  Mercer  Management  Inc., one of our principal  stockholders,
converted  300,000 shares of our preferred stock into a like number of shares of
our  common  stock.  Also in 1997,  Mercer  Management  invested  an  additional
$200,000 for the purchase of investment  units  consisting of 200,000  shares of
our preferred stock and warrants to purchase  200,000 shares of our common stock
at an exercise  price of $1.00 per share.  Our Board of  Directors  extended the
exercise  date for these  warrants to February  1999 and  increased the exercise
price to $1.50 per share after January 26, 1998.  These  warrants were exercised
in February 1999.

     In order to provide  bridge  financing  for us during  the last  quarter of
1997, Mercer Management loaned us $100,000 cash. In consideration for this loan,
we  issued  Mercer  Management  a  six-month  promissory  note in the  amount of
$100,000 at an interest rate of 10.5%. Additional  consideration was provided by
us in the form of a warrant to purchase  20,000 shares of our common stock at an
exercise price of $1.00 per share.

     In 1998,  Mercer  Management  loaned us an additional  $525,000.  The first
$100,000  was in the  form  of a  six-month  promissory  note in the  amount  of
$100,000 at an interest rate of 10.5%. This promissory note was convertible into
shares  of our  common  stock at the  conversion  rate of $1.00  per  share.  An
additional  $200,000 was provided in exchange for a second promissory note. This
note provided for an interest  rate of prime plus 2% payable  monthly in arrears
and had a due  date of July  15,  1998.  Additional  consideration  for the note
included  40,000  shares  of our  common  stock  and a warrant  to  purchase  an
additional  40,000  shares of common  stock at the  exercise  price of $1.00 per
share.  The  $200,000  note also  provided for an  automatic  extension  through
December 31, 1998 for additional  consideration  in the form of 40,000 shares of
our common stock and a warrant to purchase an additional 40,000 shares of common
stock at the exercise price of $1.00 per share.  Also in 1998, Mercer Management
loaned us an additional $75,000 in the form of a line of credit at prime plus 2%
and was granted a warrant to purchase 15,000 shares of our common stock at $2.31
per share.


                                       32
<PAGE>

Subsequently  in 1998,  Mercer provided  additional  credit of $150,000 at prime
plus 2% and was granted a warrant to purchase  30,000 shares of our common stock
at $1.70 per share.

     Also, during March 1998, Mercer Management  elected to exercise its 200,000
warrants to purchase  common  stock  pursuant to an offering by us to reduce the
exercise  price of said warrants for the period from February 1998 to March 1998
to $0.75 per share. As a result of the exercise of these  warrants,  we received
$150,000  from  Mercer  Management  Inc.,  and Mercer  Management  was issued an
additional  200,000  shares of our  common  stock.  In 1998,  Mercer  Management
converted  $431,758  debt  and  accrued  interest  into  215,879  shares  of our
preferred stock and 28,065 warrants to purchase common stock at $2.00 per share.

     During 1999, we received  $1,550,000 from Mercer Management in exchange for
notes payable  convertible  into our common stock,  due in one year, and bearing
interest at 7.75%. The conversion rate for the notes was the lower of (1) $6.50,
(2) 80% of the average  closing  price of our publicly  traded  shares in the 20
trading days immediately  preceding the closing of an ongoing private placement,
or (3) the price agreed in that private placement.

     In connection with a private placement  financing,  in January 2000, all of
the Mercer  Management  notes were converted into 387,500 shares of common stock
at a conversion rate of $4.00 per share and warrants to purchase  387,500 shares
of our  common  stock at an  exercise  price of  $5.00;  and  415,879  shares of
Preferred Stock were converted to common stock.

     During 2000, we received $500,000 from Mercer Management,  Inc. in exchange
for Notes payable,  convertible into preferred stock due in one year and bearing
interest at 6%. All  principal  under these Notes will  convert at the option of
Mercer Management into equity of the Company, prior to a change in control, into
a new series of Preferred Stock at a per share  conversion  price of $5.00 and a
liquidation preference of $7.50 per share.  Notwithstanding  Mercer's conversion
rights set forth above,  in lieu of issuing  Preferred Stock the Company has the
right to redeem the Notes for an amount equal to the liquidation preference.

Transactions with Storie Partners LLP

     In February 1996,  Storie Partners LLP, one of our principal  stockholders,
invested  $700,000 for the purchase of  investment  units  consisting of 700,000
shares of our  preferred  stock and warrants to purchase  700,000  shares of our
common  stock at an exercise  price of $1.00 per share.  In April  1997,  Storie
Partners exercised these warrants to purchase 400,000 shares of common stock for
$400,000.  Our Board of Directors  extended the exercise date for these warrants
to  February  1999 and  increased  the  exercise  price to $1.50 per share after
January 1998.

     In 1998,  Storie  Partners  1,000,000  shares of our preferred  stock,  and
warrants  to  purchase  130,000  additional  shares  of our  common  stock at an
exercise price of $2.00 per share.

     During 1999, we received  $2,000,000  from Storie  Partners in exchange for
notes payable  convertible  into our common stock,  due in one year, and bearing
interest at 7.75%. The conversion rate for the notes was the lower of (1) $6.50,
(2) 80% of the average  closing  price of our publicly  traded  shares in the 20
trading days immediately  preceding the closing of an ongoing private placement,
or (3) the price agreed in that private placement.

     In connection with a private placement financing in January 2000 all of the
Storie  Partners  notes were  converted into 500,000 shares of common stock at a
conversion rate of $4.00 per share and warrants to purchase shares of our common
stock at an exercise price of $5.00 per share; and 1,700,000 shares of preferred
stock held by Storie Partners were converted to common stock.

Transactions with Stuart Rudick and Affiliates

     In 1996,  Mindful  Partners LLP, an affiliate of Stuart Rudick,  one of our
principal  stockholders,  invested $300,000 for the purchase of investment units
consisting  of 300,000  shares of our  preferred  stock and warrants to purchase
300,000  shares of our  common  stock at an  exercise  price of $1.00 per share.
Rudick Asset Management,  another affiliate of Mr. Rudick received an additional
100,000  units and  warrants to purchase  100,000  shares of common  stock at an
exercise price of $1.00 per share as a finders' fee relating to the placement of
this  offering.  Additionally,  Rudick  Asset  Management  invested  $75,000 for
investment  units consisting of 75,000 shares of preferred stock and warrants to
purchase 75,000 shares of common stock at $1.00 per share, issued in the name of
Delaware  Charter  Guaranty Trust Company.  Our Board of Directors  extended the
exercise  date for these  warrants to February  1999 and  increased the exercise
price to $1.50 per share after January 1998.


                                       33
<PAGE>

     In 1998,  Mindful  Partners  invested  $500,000  for 250,000  shares of our
preferred stock, and warrants to purchase 32,500 additional shares of our common
stock at $2.00 per share.

     In February 1999,  Mindful  Partners,  Rudick Asset Management and Delaware
Charter Guaranty Trust Company exercised the warrants issued in 1996 to purchase
450,000,  100,000 and 75,000 shares of our common stock for $675,000,  $150,000,
and $112,500 in cash, respectively.

     In January 2000, 870,000 shares of preferred stock held by Mindful Partners
and Rudick Asset  Management  were  converted  into 870,000 shares of our common
stock in connection with a private placement financing.

Transactions with Robert London

     In  1996,  Robert  London,  one of  our  principal  stockholders,  invested
$100,000 for the purchase of investment  units  consisting of 100,000  shares of
our preferred stock and warrants to purchase  100,000 shares of our common stock
at an exercise  price of $1.00 per share.  Our Board of  Directors  extended the
exercise date for the warrants to February 1999 and increased the exercise price
to $1.50 per share after January 1998. .

     In 1998, Mr. London  invested  $500,000 for 250,000 shares of our preferred
stock, and warrants to purchase 32,500  additional shares of our common stock at
an  exercise  price of $2.00 per  share.  Mr.  London  also  provided  us with a
$225,000  loan  convertible  into shares of our common stock at $0.75 per share.
This loan together with accrued  interest was converted  into 318,555  shares of
common stock in October 1998.  Mr.  London later  provided us with an additional
$75,000 and  $150,000 in loans in the form of a line of credit at the prime rate
plus 2%, and warrants to purchase  15,000 and 30,000  shares of our common stock
at $2.31 and $2.15 per share, respectively. Later, Mr. London converted $232,864
in loans and accrued  interest into 116,432  shares of our  preferred  stock and
warrants to purchase  5,136 shares of our common  stock at an exercise  price of
$2.00 per share.

     During  1999,  we  received  $500,000  from  Mr.  London  in  exchange  for
promissory notes convertible into our common stock, due in one year, and bearing
interest at 7.75%. The conversion rate for the notes was the lower of (1) $6.50,
(2) 80% of the average  closing  price of our publicly  traded  shares in the 20
trading days immediately  preceding the closing of an ongoing private placement,
or (3) the price agreed in that private placement.

     In connection  with a private  placement  financing in January 2000, all of
the London notes were converted into 125,000 shares of common stock and warrants
to purchase 125,000 shares of our common stock at an exercise price of $5.00 per
share;  and 366,432 shares of preferred stock held by London were converted into
366,432 shares of our common stock.

Transactions with Richard Lang

     On  August  3,  1999,  we  acquired  Timeshift-TV,  Inc.  in  a  stock-only
transaction  from Richard Lang,  our Chairman and then CEO, Earl Mincer and Eric
Walters,  who  subsequently  became employees of ours. Mr. Walters is Mr. Lang's
brother-in-law.  Mr. Lang and the other  parties  were not employed by us at the
time they formed Timeshift-TV.  Our Board of Directors  unanimously approved our
acquisition of Timeshift-TV.  Timeshift-TV holds assets,  including intellectual
property, in the area of time-shifted real-time  broadcasting,  which we plan to
integrate into our advanced video and audio delivery solutions.  We also plan to
license the  Timeshift-TV  intellectual  property  to other  parties for various
applications.

Transactions with Kyle Faulkner

     We paid  consulting  fees to Kyle  Faulkner,  our former  Chief  Technology
Officer,  through his consulting company,  DuoDesign, of $283,940 in 1998, prior
to his employment with us.

     In January 2000, Mr.  Faulkner  invested  $250,000 for 62,500 shares of our
common stock and 5-year warrants to purchase 62,500 shares of common stock at an
exercise  price of  $5.00  per  share in  connection  with a  private  placement
financing.


                                       34
<PAGE>

Transactions with Thomas Koshy

     In January 2000, Mr. Thomas Koshy, then Chief Operating  Officer,  invested
$40,000 for 10,000 shares of common stock and 5-year warrants to purchase 10,000
shares of our common stock at an exercise price of $5.00 per share in connection
with a private placement financing.

Transactions with Douglas Glen

     In January 2000,  Douglas Glen  invested  $100,000 for 25,000 shares of our
common stock and 5-year  warrants to purchase  25,000 shares of our common stock
at an exercise price of $5.00 per share in connection  with a private  placement
financing.  In May 2000, as part of the employment  agreement with Mr. Glen, the
Company  agreed to loan $100,000  initially and $5,000 monthly  thereafter,  the
balance  bearing  interest  at 7%. The loan  balance  at  December  31,  2000 is
$139,663  including  interest.  The loan may be  forgiven  if Mr.  Glen  remains
employed  with the Company for 3 years or is terminated  involuntarily  before 3
years.

Transactions with John J. Micek III

     In January 2000, John J. Micek III, one of our directors,  invested $25,000
for 6,250 shares of common stock and 5-year warrants to purchase 6,250 shares of
our common stock at an exercise  price of $5.00 per share in  connection  with a
private placement financing.

     In December 1999, we received  $50,000 from Universal  Assurance,  of which
Mr. Micek is a principal,  in exchange for notes  payable  convertible  into our
common stock,  due in one year,  and bearing  interest at 7.75%.  The conversion
rate for the notes was the lower of (1) $6.50,  (2) 80% of the  average  closing
price of our publicly traded shares in the 20 trading days immediately preceding
the closing of an ongoing  private  placement,  or (3) the price  agreed in that
private placement.  The Universal notes were subsequently  converted into 12,500
shares of our common stock in January 2000.

Transactions with Joseph Barletta

     In January 2000, we received $100,000 from Independence  Properties LLC, of
which Joseph  Barletta,  one of our directors,  is a principal,  in exchange for
notes payable  convertible  into our common stock,  due in one year, and bearing
interest at 7.75%. The conversion rate for the notes was the lower of (1) $6.50,
(2) 80% of the average  closing  price of our publicly  traded  shares in the 20
trading days immediately  preceding the closing of an ongoing private placement,
or (3) the price agreed in that private  placement.  The notes were subsequently
converted  into  25,000  shares of our  common  stock at the end of  January  in
connection with a private placement financing.


                                     PART IV

ITEM 14.  EXHIBITS AND REPORTS ON FORM 8-K

a)  Exhibits

                                  EXHIBIT INDEX

Exhibit                    Description
-------     --------------------------------------------------------------------
2.1**       State of  Arizona,  Articles  of Merger of Video  Press,  Inc.  into
            Explore Technology,  dated December 28, 1990;  Agreement and Plan of
            Merger dated August 29, 1993.

2.2**       Action  by  Unanimous  Consent  of Board  of  Directors  of  Explore
            Technology, Inc., July 15, 1992.

2.3**       Certificate of Merger of Time Shift TV, Inc. into IVT Delaware, Inc.
            dated July 26, 1999.


                                       35
<PAGE>

2.4**       Agreement  and  Plan  of   Reorganization   between   Instant  Video
            Technologies, Inc., IVT, Delaware, and Time Shift TV dated August 3,
            1999.

3.1.1**     Certificate of  Incorporation  of Catalina Capital Corp. dated April
            27, 1990.

3.1.2**     Certificate  of Amendment to the  Certificate  of  Incorporation  of
            Catalina   Capital   Corp.   changing  its  name  to  Instant  Video
            Technologies, Inc. dated August 17, 1992.

3.1.3**     Amended and Restated  Certificate of Incorporation dated January 27,
            2000.

3.2.1**     Bylaws of Catalina Capital Corp. dated April 27, 1990; Amendment No.
            1 dated April 5, 1993.

3.3.2**     Amended and Restated Bylaws dated January 27, 2000.

3.3.3**     Certificate of Status Foreign Corporation dated March 12, 1993.

3.34        Certificate of Status Foreign Corporation dated August 29, 2000.

4.1**       Specimen common stock certificate.

4.2**       Prospectus for Catalina Capital Corp. dated October 17, 1990.

4.3**       SEC Form S-18 for Catalina Capital Corp. dated June 29, 1990.

4.4**       Amendment No. 1 to SEC Form S-18 for Catalina  Capital  Corp.  dated
            August 10, 1990.

4.5**       Amendment No. 2 to SEC Form S-18 for Catalina  Capital  Corp.  dated
            September 28, 1990.

4.6**       Certificate  of Designation  for Catalina  Capital Corp. of Series A
            Preferred Stock dated Aug. 4, 1992.

4.7**       Certificate of Designation for Catalina Capital Corp. of Series B-1,
            B-2, B-3 and B-4 Convertible Preferred Stock, dated August 4, 1992.

4.8**       Certificate  of Designation  for Catalina  Capital Corp. of Series C
            Preferred Stock, dated August 4, 1992.

4.9**       Certificate of Designation for Instant Video  Technologies,  Inc. of
            Series D Convertible Preferred Stock, dated December 23, 1992.

4.10**      Certificate of Designation for Instant Video  Technologies,  Inc. of
            Series E Convertible Preferred Stock, dated May 9, 1995.

4.11**      Certificate of Designation for Instant Video  Technologies,  Inc. of
            Series F Convertible Preferred Stock, dated February 13, 1996.

4.12**      Certificate  of  Designation  of Instant  Video  Technologies,  Inc.
            filing  Certificate  of  Elimination  of Series A  Preferred  Stock,
            Series B-1,  B-2, B-3, B-4  Convertible  Preferred  Stock,  Series C
            Preferred Stock,  Series D Convertible  Preferred Stock and Series E
            Convertible Preferred Stock dated November 6, 1998.

4.13**      Amended Certificate of Designation, Statement of Establishing Series
            F  Convertible  Preferred  Stock  AND  Certificate  of  Designation,
            Statement  Establishing  Series B Convertible  Preferred Stock filed
            January 1, 1999

4.14**      Stock Purchase Agreement (Series B Stock) with Exhibit A (Warrant to
            Purchase  Shares  of  Common  Stock),   Exhibit  B  (Certificate  of
            Designation), Exhibit C (Registration Rights Agreement), and Exhibit
            D (Voting and Right of First Refusal)

4.15**      Unit  Purchase  Agreement  between  Instant Video  Technologies  and
            Investors (Storie Partners,  Mindful  Partners-Stuart  Rudick,  Reed
            Slatkin, Robert London) dated February 14, 1996.


                                       36
<PAGE>

4.16**      Securities  Purchase  Agreement  by and  among  the  registrant  and
            certain investors dated as of January 27, 2000.

4.17**      Registration  Rights  Agreement  by and  among  the  registrant  and
            certain investors dated as of January 27, 2000.

4.18**      Form of Warrant to purchase shares of common stock issued to certain
            investors on January 27, 2000

4.19**      Form of Lock-up  Agreement  entered into between the  registrant and
            each of certain  officers,  directors and principal  shareholders in
            January 2000.

10.1**      RMSI Reseller License Agreement.

10.2**      RMSI End-User Software License Agreement.

10.3**      I-Stream TV Reseller Agreement.

10.4**      Clover Technologies, Inc. Reseller license Agreement.

10.5**      Service Agreement with The EMS Group.

10.6**      Lease  at 500  Sansome  Street,  San  Francisco,  CA with  ten  (10)
            Amendments.

10.7**      Lease for sales office in Livonia, Michigan.

10.8**      Lease for sales office in Golden, Colorado.

10.9**      Lease for sales office in Alexandria, Virginia.

10.10**     Lease for sales office in Mount Holly, New Jersey.

10.11**     Pat Meir Assoc. contract.

10.12**     Employment Agreement with Richard Lang.

10.13**     Employment Agreement with Thomas Koshy.

10.14**     Employment Agreement with Edward Davis.

10.15**     Employment Agreement with Richard Jones.

10.16**     Employment Agreement with Kyle Faulkner.

10.17**     Employment Offer Letter to David Morgenstein.

10.18**     Employment Offer Letter to Frank Schwartz.

10.19**     Employment Offer Letter to June White.

10.20**     Employment Agreement with Doug Glen.

10.21**     Employment Agreement with George Zraick.

10.22**     Employment Agreement with Dave Egan.

10.23**     Employment Agreement with John C. Lukrich.


                                       37
<PAGE>

10.24       Eagle Wireless International, Inc. Securities Purchase Agreement

10.25       License Agreement with InterZest.

10.26       Eagle Wireless International, Inc. License Agreement

21.1**      Subsidiaries of the registrant.

24.1**      Power of Attorney (included in signature page)

--------
** Previously filed.

b)    Reports on Form 8-K during quarter ended December 31, 2000:

      Form 8(k) filed on October 2, 2000, announcing that the common stock would
      commence  trading on Nasdaq's  SmallCap  Market under the symbol "BRST" on
      Monday, October 2, 2000.


                                       38
<PAGE>

                                   SIGNATURES

In accordance  with the  requirements  of Section 13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.

                                       BURST.COM, INC.

Dated:  April 17, 2001                 By   /s/        Richard Lang
                                            ----------------------------------
                                            Chairman and Chief Executive Officer

In accordance with the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following  persons on behalf of the Registrant and
in the capacities and on the dates indicated:

        Signature                Title                                 Date
        ---------                -----                                 ----

/s/ Trevor Bowen             Director                             April 17, 2001
--------------------------
Trevor Bowen


/s/ John J. Micek            Director                             April 17, 2001
--------------------------
John J. Micek III



/s/ Brian Murphy             Director                             April 17, 2001
--------------------------
Brian Murphy


/s/ Mark Hubscher            Director                             April 17, 2001
--------------------------
Mark Hubscher



/s/ Jeffrey D. Wilson        Chief Financial Officer and          April 17, 2001
--------------------------     Principal Accounting Officer
Jeffrey D. Wilson


                                       39
<PAGE>

                                  EXHIBIT INDEX

Exhibit                    Description
-------     --------------------------------------------------------------------
2.1**       State of  Arizona,  Articles  of Merger of Video  Press,  Inc.  into
            Explore Technology,  dated December 28, 1990;  Agreement and Plan of
            Merger dated August 29, 1993.

2.2**       Action  by  Unanimous  Consent  of Board  of  Directors  of  Explore
            Technology, Inc., July 15, 1992.

2.3**       Certificate of Merger of Time Shift TV, Inc. into IVT Delaware, Inc.
            dated July 26, 1999.

2.4**       Agreement  and  Plan  of   Reorganization   between   Instant  Video
            Technologies, Inc., IVT, Delaware, and Time Shift TV dated August 3,
            1999.

3.1.1**     Certificate of  Incorporation  of Catalina Capital Corp. dated April
            27, 1990.

3.1.2**     Certificate  of Amendment to the  Certificate  of  Incorporation  of
            Catalina   Capital   Corp.   changing  its  name  to  Instant  Video
            Technologies, Inc. dated August 17, 1992.

3.1.3**     Amended and Restated  Certificate of Incorporation dated January 27,
            2000.

3.2.1**     Bylaws of Catalina Capital Corp. dated April 27, 1990; Amendment No.
            1 dated April 5, 1993.

3.3.2**     Amended and Restated Bylaws dated January 27, 2000.

3.3.3**     Certificate of Status Foreign Corporation dated March 12, 1993.

3.34        Certificate of Status Foreign Corporation dated August 29, 2000.

4.1**       Specimen common stock certificate.

4.2**       Prospectus for Catalina Capital Corp. dated October 17, 1990.

4.3**       SEC Form S-18 for Catalina Capital Corp. dated June 29, 1990.

4.4**       Amendment No. 1 to SEC Form S-18 for Catalina  Capital  Corp.  dated
            August 10, 1990.

4.5**       Amendment No. 2 to SEC Form S-18 for Catalina  Capital  Corp.  dated
            September 28, 1990.

4.6**       Certificate  of Designation  for Catalina  Capital Corp. of Series A
            Preferred Stock dated Aug. 4, 1992.

4.7**       Certificate of Designation for Catalina Capital Corp. of Series B-1,
            B-2, B-3 and B-4 Convertible Preferred Stock, dated August 4, 1992.

4.8**       Certificate  of Designation  for Catalina  Capital Corp. of Series C
            Preferred Stock, dated August 4, 1992.

4.9**       Certificate of Designation for Instant Video  Technologies,  Inc. of
            Series D Convertible Preferred Stock, dated December 23, 1992.

4.10**      Certificate of Designation for Instant Video  Technologies,  Inc. of
            Series E Convertible Preferred Stock, dated May 9, 1995.

4.11**      Certificate of Designation for Instant Video  Technologies,  Inc. of
            Series F Convertible Preferred Stock, dated February 13, 1996.

4.12**      Certificate  of  Designation  of Instant  Video  Technologies,  Inc.
            filing  Certificate  of  Elimination  of Series A  Preferred  Stock,
            Series B-1,  B-2, B-3, B-4  Convertible  Preferred  Stock,  Series C
            Preferred Stock,  Series D Convertible  Preferred Stock and Series E
            Convertible Preferred Stock dated November 6, 1998.

4.13**      Amended Certificate of Designation, Statement of Establishing Series
            F  Convertible  Preferred  Stock  AND  Certificate  of  Designation,
            Statement  Establishing  Series B Convertible  Preferred Stock filed
            January 1, 1999

4.14**      Stock Purchase Agreement (Series B Stock) with Exhibit A (Warrant to
            Purchase  Shares  of  Common  Stock),   Exhibit  B  (Certificate  of
            Designation), Exhibit C (Registration Rights Agreement), and Exhibit
            D (Voting and Right of First Refusal)

4.15**      Unit  Purchase  Agreement  between  Instant Video  Technologies  and
            Investors (Storie Partners,  Mindful  Partners-Stuart  Rudick,  Reed
            Slatkin, Robert London) dated February 14, 1996.


                                       40
<PAGE>

4.16**      Securities  Purchase  Agreement  by and  among  the  registrant  and
            certain investors dated as of January 27, 2000.

4.17**      Registration  Rights  Agreement  by and  among  the  registrant  and
            certain investors dated as of January 27, 2000.

4.18**      Form of Warrant to purchase shares of common stock issued to certain
            investors on January 27, 2000

4.19**      Form of Lock-up  Agreement  entered into between the  registrant and
            each of certain  officers,  directors and principal  shareholders in
            January 2000.

10.1**      RMSI Reseller License Agreement.

10.2**      RMSI End-User Software License Agreement.

10.3**      I-Stream TV Reseller Agreement.

10.4**      Clover Technologies, Inc. Reseller license Agreement.

10.5**      Service Agreement with The EMS Group.

10.6**      Lease  at 500  Sansome  Street,  San  Francisco,  CA with  ten  (10)
            Amendments.

10.7**      Lease for sales office in Livonia, Michigan.

10.8**      Lease for sales office in Golden, Colorado.

10.9**      Lease for sales office in Alexandria, Virginia.

10.10**     Lease for sales office in Mount Holly, New Jersey.

10.11**     Pat Meir Assoc. contract.

10.12**     Employment Agreement with Richard Lang.

10.13**     Employment Agreement with Thomas Koshy.

10.14**     Employment Agreement with Edward Davis.

10.15**     Employment Agreement with Richard Jones.

10.16**     Employment Agreement with Kyle Faulkner.

10.17**     Employment Offer Letter to David Morgenstein.

10.18**     Employment Offer Letter to Frank Schwartz.

10.19**     Employment Offer Letter to June White.

10.20**     Employment Agreement with Doug Glen.

10.21**     Employment Agreement with George Zraick.

10.22**     Employment Agreement with Dave Egan.

10.23**     Employment Agreement with John C. Lukrich.


                                       41
<PAGE>

10.24       Eagle Wireless International, Inc. Securities Purchase Agreement

10.25       License Agreement with InterZest.

10.26       Eagle Wireless International, Inc. License Agreement

21.1**      Subsidiaries of the registrant.

24.1**      Power of Attorney (included in signature page)

--------
** Previously filed.


                                       42

<PAGE>



                                 BURST.COM, INC.
                                AND SUBSIDIARIES



                        Consolidated Financial Statements



                           December 31, 2000 and 1999




                   (With Independent Auditors' Report Thereon)


                                       43
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors and Stockholders
Burst.com, Inc.:

We have audited the accompanying  consolidated balance sheets of Burst.com, Inc.
and subsidiaries  (the Company) as of December 31, 2000 and 1999 and the related
consolidated statements of operations,  stockholders' equity (deficit), and cash
flows for each of the two years in the period  ending  December 31, 2000.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
generally accepted in the United States of America. 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 consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of Burst.com,  Inc. and
subsidiaries  as of  December  31,  2000  and  1999,  and the  results  of their
operations  and their cash flows for each of the two years in the period  ending
December 31, 2000 in conformity with accounting principles generally accepted in
the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated  financial  statements,  the Company has suffered  recurring losses
from operations and has a net capital deficit that raise substantial doubt about
its  ability to  continue as a going  concern.  Management's  plans in regard to
these  matters  are  also  described  in  Note  1.  The  consolidated  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.

                                                BDO SEIDMAN, LLP

San Francisco, California
April 9, 2001


                                       44
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


The Board of Directors and Stockholders
Burst.com, Inc. (formerly Instant Video Technologies, Inc.):

We  have  audited  the  accompanying   consolidated  statements  of  operations,
stockholders' (deficit) equity, and cash flows of Burst.com, Inc. and subsidiary
(the Company) for the year ended December 31, 1998. These consolidated financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  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 consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position of Instant  Video
Technologies,  Inc. and  subsidiary as of December 31, 1998,  and the results of
their  operations  and their cash flows for the year ended  December 31, 1998 in
conformity with generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company  will  continue as a going  concern.  The Company has  suffered
recurring  losses from  operations  and has negative  cash flows from  operating
activities that raise substantial doubt about its ability to continue as a going
concern.   Management's  plans  in  regard  to  these  matters  include  raising
sufficient  capital to allow the Company to complete  development and successful
commercialization of its products.  The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

                                                KPMG LLP

San Francisco, California
April 13, 1999


                                       45
<PAGE>

                        BURST.COM, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                          ----------------------------
                                                                              2000            1999
                                                                          ------------    ------------
<S>                                                                       <C>             <C>
                                                 ASSETS
Current assets:
   Cash and cash equivalents                                              $    296,584    $    302,979
   Accounts receivable, net of allowance $20,419                               295,795            --
   Loans to officers                                                           139,633            --
   Prepaid expenses and other current assets                                    42,048          63,893

         Total current assets                                                  774,096         366,872

Property and equipment, net                                                    570,700         725,412

Other assets                                                                   317,337          36,457
                                                                          ------------    ------------

                                                                          $  1,662,133    $  1,128,741
                                                                          ============    ============


                                  LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:

   Notes payable to principal stockholders                                $    500,000    $  4,834,847
   Accounts payable                                                          1,550,573       1,384,289
   Accrued expenses                                                            515,873         208,374
   Accrued interest                                                              1,192         114,277
   Deferred revenue                                                            287,225          51,600
                                                                          ------------    ------------

         Total current liabilities                                           2,854,863       6,593,387
                                                                          ------------    ------------

Commitments and contingencies

Stockholders' (deficit) equity:
   Convertible Preferred stock, $.00001 par value, 20,000,000 shares
      authorized:
   Series A (Renamed from Series F), 2,025,000
      shares issued and outstanding in 1999,
      liquidation preference of $2,025,000                                        --                20
   Series B, 2,476,609 shares issued and outstanding in 1999,
      liquidation preference at December 31, 1999 of $20,803,516                  --                25
   Common stock, $.00001 par value, 100,000,000 shares
      authorized; 20,148,125 and 9,535,527 shares issued and
      outstanding in 2000 and 1999                                                 201              95
   Additional paid-in-capital                                               55,852,947      31,971,108
   Accumulated deficit                                                     (57,045,878)    (37,435,894)
                                                                          ------------    ------------

         Stockholders' deficit                                              (1,192,730)     (5,464,646)
                                                                          ------------    ------------


                                                                          $  1,662,133    $  1,128,741
                                                                          ============    ============
</TABLE>

See accompanying notes to consolidated financial statements


                                       46
<PAGE>

                          BURST, INC. AND SUBSIDIARIES

                      Consolidated Statements of Operations

              For the years ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                              2000            1999            1998
                                                          ------------    ------------    ------------
<S>                                                       <C>             <C>             <C>
Revenue                                                   $    499,376    $         --    $     15,000
Cost of revenues                                                30,764              --              --
                                                          ------------    ------------    ------------

                                                               468,612              --              --
                                                          ------------    ------------    ------------

Costs and expenses:
   Research and development                                  4,300,328       4,076,732         800,567
   Sales and marketing                                       8,175,525       4,185,517         830,998
   Losses on abandonment, disposition
      and write-downs of equipment                           1,312,931              --              --
   General and administrative                                6,236,528       3,247,370       3,047,302
                                                          ------------    ------------    ------------

         Total costs and expenses                           20,025,312      11,509,619       4,678,867
                                                          ------------    ------------    ------------

         Loss from operations                              (19,556,700)    (11,509,619)     (4,663,867)

Other income (expense):
   Interest expense, net                                        40,899      (1,468,110)     (2,252,553)
   Other income (expense)                                      (94,183)             --              --
                                                          ------------    ------------    ------------

         Net other                                             (53,284)     (1,468,110)     (2,252,553)
                                                          ------------    ------------    ------------

         Net loss                                          (19,609,984)    (12,977,729)     (6,916,420)
                                                          ------------    ------------    ------------

         Beneficial conversion feature of
             Series B Preferred Stock                               --              --      (8,762,425)
                                                          ------------    ------------    ------------

         Net loss applicable to Common Stockholders       $(19,609,984)   $(12,977,729)   $(15,678,845)
                                                          ============    ============    ============

Basic and diluted net loss per common share:              $       (.98)   $      (1.42)   $      (2.35)
                                                          ============    ============    ============


Weighted average shares used in per share computation       20,058,693       9,121,947       6,658,738
                                                          ============    ============    ============
</TABLE>


See accompanying notes to consolidated financial statements.


                                       47
<PAGE>

                        BURST.COM, INC. AND SUBSIDIARIES
            Consolidated Statements of Stockholders' (Deficit) Equity
              For the years ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                Common Stock         Preferred Stock        Additional
                                            --------------------  ---------------------      Paid-in     Accumulated
                                              Shares     Amount     Shares       Amount      capital       deficit        Total
                                            ----------  --------  ----------    -------    -----------  ------------  ------------
<S>                                         <C>         <C>        <C>          <C>        <C>          <C>           <C>
Balance at December 31, 1997                5,703,553   $     59   2,125,000    $    22    $ 7,795,972  $ (8,779,320) $   (983,267)

Series B Preferred Stock issuances                 --         --   2,105,000         21      3,873,979            --     3,874,000
Warrants used in connection with
    the issuance of Series B Preferred             --         --          --         --        336,000            --       336,000
Stock
Common stock issuance                          14,921         --          --         --         10,000            --        10,000
Exercise of stock options                     139,501          1          --         --      1,138,951            --     1,138,952
Exercise of warrants                          700,000          6          --         --        749,994            --       750,000
Conversion of debt and accrued interest     1,082,991         10     371,609          3      1,736,983            --     1,736,996
Warrants issued with the
    conversion of convertible debt                                                             172,000                     172,000
Value assigned to warrants and
    stock upon issuance of debt               200,000          2          --         --      1,947,369            --     1,947,371
Stock options issued for services performed        --         --          --         --        727,726            --       727,726
Conversion of Series A Preferred
    Stock to common stock                     100,000          1    (100,000)        (1)            --            --            --
Beneficial conversion feature of
    Series B Preferred Stock                                                                 8,762,425    (8,762,425)           --
Net loss                                           --         --          --         --             --    (6,916,420)   (6,916,420)
                                           ----------   --------  ----------    -------    -----------  ------------  ------------
Balance at December 31, 1998                7,940,966         79   4,501,609         45     27,251,399   (24,458,165)    2,793,358

Exercise of stock options                     111,800          1          --         --        112,549            --       112,550
Exercise of warrants                        1,277,262         13          --         --      1,537,487            --     1,537,500
Value assigned to warrants and
     beneficial conversion feature
     upon issuance of debt                         --         --          --         --      1,467,146            --     1,467,146
Stock and options issued for
     services performed                           499         --          --         --        272,529            --       272,529
Conversion of Series A Preferred Stock
    to common stock                             5,000         --      (5,000)        --             --            --            --
Purchased research and development costs      200,000          2          --         --      1,329,998            --     1,330,000
Net loss                                           --         --          --         --             --   (12,977,729)  (12,977,729)
                                           ----------   --------  ----------    -------    -----------  ------------  ------------
Balance at December 31, 1999                9,535,527   $     95   4,496,609         45    $31,971,108   (37,435,894)   (5,464,646)

Common stock offering, net of costs         3,474,625         35          --         --     13,486,460            --    13,486,495
Compensation related to options                    --         --          --         --        332,563            --       332,563
Compensation related to
    sale of common stock to employees              --         --          --         --         77,726            --        77,726
Conversion of debt to common stock,
    net of costs                            1,333,750         13          --         --      5,106,684            --     5,106,697
Conversion of preferred stock to
    common, net of costs                    4,496,609         45  (4,496,609)       (45)      (533,200)           --      (533,200)
Exercise of warrants                           50,000          1          --         --         49,999            --        50,000
Stock options  issued for
    services performed                             --         --          --         --        235,905            --       235,905
Common stock offering, net of costs           857,633          9          --         --      4,539,777            --     4,539,786
Exercise of stock options                     273,355          2          --         --        393,591            --       393,593
Penalty shares issued                         126,626          1          --         --        192,334            --       192,335
Net loss                                           --         --          --         --             --   (19,609,984)  (19,609,984)
                                           ----------   --------  ----------    -------    -----------  ------------  ------------

Balance at December 31, 2000               20,148,125   $    201          --    $    --    $55,852,947  $(57,045,878) $ (1,192,730)
                                           ==========   ========  ==========    =======    ===========  ============  ============
</TABLE>



See accompanying notes to consolidated financial statements.


                                       48
<PAGE>

                        BURST.COM, INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
              For the years ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                                                      2000            1999           1998
                                                                                  ------------    ------------    -----------
<S>                                                                               <C>             <C>             <C>
 Cash flows from operating activities:
  Net loss                                                                       $(19,609,984)   $(12,977,729)   $(6,916,420)
   Adjustments to reconcile net loss to net cash used in operating activities:
       Depreciation and amortization                                                   592,494         209,198         58,531
       Loss on abandonment, disposition and write-down of equipment                  1,312,931              --          5,133
       Non-cash interest expense                                                     1,396,993       2,228,940
       Stock and options issued for services performed                                 235,905         272,529        727,726
       Compensation from stock and option awards to employees                          410,289              --      1,137,499
       Purchased research and development                                                   --       1,330,000             --
       Conversion of legal fees to note payable                                             --          25,000             --
       Issuance of penalty shares                                                      192,335              --             --
   Changes in operating assets and liabilities:
       Accounts receivable                                                            (295,795)             --             --
       Prepaid expenses and other current assets                                      (117,824)        (57,485)         6,164
       Other assets                                                                   (280,880)             --             --
       Accounts payable                                                                166,284       1,132,245        218,018
       Accrued expenses                                                                307,499          26,890         88,702
       Accrued interest                                                               (113,085)        114,277        (43,044)
                                                                                                                  -----------
       Deferred revenue                                                                235,625          51,600             --
                                                                                  ------------    ------------    -----------

             Net cash used in operating activities                                 (16,964,206)     (8,476,482)    (2,488,751)
                                                                                  ------------    ------------    -----------

Cash flows from investing activities:
   Purchases of property and equipment                                              (1,772,133)       (749,994)      (162,669)
   Sales of property and equipment                                                      21,420              --             --
                                                                                  ------------    ------------    -----------
             Net cash used in investing activities                                  (1,750,713)       (749,994)      (162,669)
                                                                                  ------------    ------------    -----------

Cash flows from financing activities:
   Payment of receivables from Series B Convertible stock offering                          --         810,000             --
   Proceeds from sale of stock, net of costs                                        17,868,131              --      3,410,000
   Exercise of warrants and stock options                                              443,593       1,650,050        751,453
   Payment of costs in connection  with conversion of preferred stock to common       (533,200)             --             --
   Proceeds from debt financing                                                        930,000       4,880,000      1,572,736
   Repayment of debt                                                                        --         (22,736)      (891,179
                                                                                  ------------    ------------    -----------

             Net cash provided by financing activities                              18,708,524       7,317,314      4,843,010
                                                                                  ------------    ------------    -----------

Increase (decrease) in cash and cash equivalents                                        (6,395)     (1,909,162)     2,191,590

Cash and cash equivalents, beginning of year                                           302,979       2,212,141         20,551
                                                                                  ------------    ------------    -----------

Cash and cash equivalents, end of year                                            $    296,584    $    302,979    $ 2,212,141
                                                                                  ============    ============    ===========

Supplemental disclosure of cash flow information:
   Cash paid for state franchise tax                                              $        800    $        800    $       800
                                                                                  ============    ============    ===========

   Cash paid for interest                                                         $         --    $      7,374    $    65,935
                                                                                  ============    ============    ===========

   Supplemental schedule of non-cash investing and financing activities:

   In 2000, 1,333,750 shares of common stock were issued for $5,335,000 face
    amount of debt.

   In 1999, six notes payable  issued in exchange for $335,000  were issued
    with front end warrants resulting in a discount to notes payable of $70,153

   In 1999, 5,000 shares of Series A Preferred  Stock were  converted to 5,000
    shares of common stock

   In 1998, debt and accrued interest of $1,736,996 was converted to Series B
    Preferred Stock and common stock

   In 1998, 100,000 shares of preferred stock were converted to 100,000
    shares of common stock
</TABLE>


See accompanying notes to consolidated financial statements.


                                       49
<PAGE>

                        BURST.COM, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     CHANGE OF NAME

     On January 27,  2000,  the  Company  changed  its name from  Instant  Video
     Technologies, Inc. to Burst.com, Inc.

     DESCRIPTION OF BUSINESS

     Burst.com,  Inc. (the Company) licenses burst transmission software for use
     within  commercial,  multimedia  and  interactive  environments.  The burst
     technology   allows  for  time   compression  and  burst   transmission  of
     video/audio  programming that results in time-savings,  network  efficiency
     and superior quality products.

     LIQUIDITY

     Since  inception,  the Company  has  incurred  development  costs and other
     expenses  resulting in  cumulative  losses of  $57,045,878.  The  Company's
     current  liabilities  exceed  current  assets by $2,080,767 at December 31,
     2000. In November 2000,  the Company  reduced its head count from 97 to 20.
     On April 1, 2001, the number of employees was reduced to 5.

     There is  substantial  doubt about the  Company's  ability to continue as a
     growing  concern.   Management  recognizes  that  the  Company  must  raise
     immediate  capital to enable it to continue its  operations.  Management is
     attempting  to raise  sufficient  capital to allow the  company to complete
     development  and  successful   commercialization   of  its  products.   The
     accompanying  financial  statements  have been prepared  contemplating  the
     Company will continue as a going  concern.  No assurances can be given that
     the Company will be  successful  in raising  immediate  capital or that the
     Company will achieve profitability or positive cash flow. If the Company is
     unable to obtain  adequate  additional  financing  and bring the Company to
     profitability  or positive cash flow, there can be no assurance the Company
     can continue as a going concern.

     BASIS OF PRESENTATION

     The accompanying  financial  statements  include the accounts of Burst.com,
     Inc.  and its wholly  owned  subsidiaries,  Explore  Technology,  Inc.  and
     Timeshift-TV.  All significant intercompany  transactions and accounts have
     been eliminated in consolidation.

     CASH EQUIVALENTS

     Cash  equivalents  consist of money market  accounts  and other  short-term
     investments with an original remaining term of three months or less.

     REVENUE RECOGNITION

     The Company's revenue in 1998 consisted of one  non-recurring  sale of test
     software that was recognized upon delivery.

     Effective  January 1, 1998, the Company  adopted the American  Institute of
     Certified Public  Accountants'  Statement of Position (SOP) No. 97-2, which
     provided  revised  guidance  for  recognizing  revenue on certain  software
     transactions.  No revenue is recognized  until  evidence of an  arrangement
     exists,  delivery  has  occurred,  the fee is  fixed  or  determinable  and
     collection  is  probable.  Adoption  of  the  new  SOP  had  no  effect  on
     recognition of revenue, results of operations or financial position.

     License  fees and  services  are  recognized  as revenue  ratably  over the
     license period.  No revenue is recognized  until evidence of an arrangement
     exists,  delivery  has  occurred,  the fee is  fixed  or  determinable  and
     collection is probable.


                                       50
<PAGE>

     PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost.  Depreciation  is computed using
     the straight-line method over the estimated useful lives of the assets that
     range from three to five years.

     RESEARCH AND DEVELOPMENT

     Research and development  costs are charged to operations as incurred until
     such time as both  technological  feasibility  is  established  and  future
     economic  benefit  is  assured.  To  date,  such  conditions  have not been
     satisfied, and, accordingly, all software engineering and development costs
     have been expensed as incurred.  See note 4 for certain in-process research
     and development purchased in 1999.

     ADVERTISING COSTS

     The Company expenses  advertising  costs as incurred.  The Company incurred
     $1,489,842 of advertising in 2000, $587,000 in 1999 and none in 1998.

     INCOME TAXES

     Income  taxes are  accounted  for under  the  asset and  liability  method.
     Deferred  tax  assets and  liabilities  are  recognized  for the future tax
     consequences  attributable to differences  between the financial  statement
     carrying amount of existing assets and  liabilities,  and, their respective
     tax bases and  operating  loss and tax credit  carryforwards.  Deferred tax
     assets and  liabilities  are measured  using enacted tax rates  expected to
     apply to taxable income in the years in which those  temporary  differences
     are expected to be recovered or settled.  The effect on deferred tax assets
     and  liabilities  of a change in tax rates is  recognized  in income in the
     period that includes the enactment date. A valuation  allowance is recorded
     for  deferred tax assets if it is more likely than not that some portion or
     all of the deferred tax assets will not be realized.

     LOSS PER SHARE AND DILUTIVE SECURITIES

     Basic net loss per share is based on the weighted  average number of shares
     of common  stock  outstanding.  Diluted  net loss per share is based on the
     weighted average number of shares of common stock  outstanding and dilutive
     common equivalent  shares from stock options and warrant  outstanding using
     the treasury stock method.

     The following is a summary of the securities that could potentially  dilute
     basic  loss  per  share  in  the  future  that  were  not  included  in the
     computation   of  diluted  loss  per  share  because  to  do  so  would  be
     antidilutive.

                                         Year Ended December 31,
                                   2000           1999           1998
                               -----------    -----------    -----------
  Convertible Preferred                 --      4,496,609      4,501,609

  Options                        8,716,659      6,925,863      6,289,263

  Warrants                       6,435,396        905,384      2,010,210
                               -----------    -----------    -----------

     Total                      15,152,055     12,327,856     12,801,082
                               ===========    ===========    ===========


                                       51
<PAGE>

     FAIR VALUE OF FINANCIAL INSTRUMENTS

     The Company's financial  instruments consist of cash equivalents,  accounts
     receivable,  accounts payable,  and debt. The Company believes the reported
     amounts of its financial  instruments  approximates fair value,  based upon
     the short maturity of cash equivalents, accounts receivable and payable and
     based on the current rates available to the Company or similar debt issuer.

     STOCK-BASED COMPENSATION

     The Company accounts for its stock-based  compensation  plans for employees
     using the intrinsic value method. As such, compensation expense is recorded
     if on the  measurement  date,  which is  generally  the date of grant,  the
     current fair value of the underlying stock exceeds the exercise price.

     The equity  instruments  issued to non-employees  are accounted for at fair
     value.  The fair value of the equity  instrument is determined using either
     the fair value of the underlying stock or the Black-Scholes  option pricing
     model.

     USE OF ESTIMATES

     Management  of the Company has made a number of estimates  and  assumptions
     relating to the reporting of assets and  liabilities  and the disclosure of
     contingent assets and liabilities to prepare these financial  statements in
     conformity with generally accepted  accounting  principles.  Actual results
     could differ from those estimates. The Company's most significant estimates
     are those related to the valuation of stock, stock options, and warrants in
     connection with equity and financing transactions.

     COMPREHENSIVE INCOME

     The  Company  has no  component  of  comprehensive  income  other  than its
     reported amounts of net loss applicable to holders of common stock.

     RECLASSIFICATIONS

     Certain   items  have  been   reclassified   to  conform  to  current  year
     presentation.

(2)  PROPERTY AND EQUIPMENT

     Property and equipment consists of the following:

                                                        December 31,
                                                 -------------------------
                                                   2000            1999
                                                 ---------       ---------
     Computer equipment                          $ 509,191       $ 671,870
     Furniture                                      94,426          55,666
     Office equipment                                5,000           7,867
     Software                                       55,000          95,724
     Trade show booth                                5,000          92,637
     Leasehold improvements                             --          72,417
                                                 ---------       ---------

                                                   668,617         996,181
     Less accumulated depreciation                 (97,917)       (270,769)
                                                 ---------       ---------

                                                 $ 570,700       $ 725,412
                                                 =========       =========

During the fourth quarter of 2000,  management determined that certain computers
and other  equipment  were not  recoverable  at their  current  book value,  and
certain  leasehold  improvements  and other assets had been abandoned when sales
offices were closed. Accordingly, losses and writedowns totaling $1,312,932 have
been included in the accompanying consolidated statements of operations.


                                       52
<PAGE>

(3)  DEBT

<TABLE>
<CAPTION>
         NOTES PAYABLE TO PRINCIPAL STOCKHOLDERS                           2000           1999
                                                                       -----------    -----------
<S>                                                                    <C>            <C>
     6% note payable to Mercer Management, Inc., interest and
     principal due December 28, 2001                                   $   500,000    $        --

     7.75% note payable to Storie Partners, interest and principal              --      2,000,000
     due July in varying amounts July through October, 2000

     7.75% note payable to Mercer  Management, Inc., interest and
     principal due in varying amounts  September  through  December, 2000       --      1,350,000


     7.75% note payable to Robert S. London, interest and principal             --        500,000
     due July 15, 2000

     7.75% note payable to Reed Slatkin, interest and principal due             --        520,000
     July 16, 2000

     7.75% notes payable to various lenders, interest and principal
     due in varying amounts April through December, 2000                        --        535,000
                                                                       -----------    -----------
                                                                           500,000      4,905,000

     Unamortized original issue discount on notes payable resulting from
     front end warrants issued with 6 of the notes payable                      --        (70,153)
                                                                       -----------    -----------
                                                                           500,000      4,834,847


     Less current portion                                                 (500,000)    (4,834,847)
                                                                       -----------    -----------

     Long-term portion                                                 $        --    $        --
                                                                       ===========    ===========
</TABLE>

     The note issued during 2000 is  convertible  into a new series of Preferred
     Stock to be identified as Series A-2001 at a per share  conversion price of
     Five Dollars ($5.00) at the option of the note holder.

     During  January,  2000 the Company  received  $430,000  evidenced  by notes
     payable convertible into common stock, due in one year. The conversion rate
     was the lower of: (1) $6.50,  (2) 80% of the average  closing  price of the
     Company's  publicly  traded  shares  in the  20  trading  days  immediately
     preceding the closing of a then ongoing private placement, or (3) the price
     agreed in that private placement.  Upon completion of the private placement
     discussed in Note 5 below, these and all other notes outstanding,  totaling
     $5,335,000,  were  converted  into  1,333,750  shares of common stock as of
     January 31, 2000. The conversion  price was $4.00 per share of common stock
     plus one warrant per share of common  stock  acquired by  conversion.  Each
     warrant has an exercise price of $5.00 and expires five years from the date
     of issue.

     All of the notes issued during 1999 were  convertible  at a price which was
     the  lower  of (1)  $6.50,  (2) 80% of the  average  closing  price  of the
     Company's  publicly  traded  shares  in the  20  trading  days  immediately
     preceding  the closing of an ongoing  private  placement,  or (3) the price
     agreed in that private  placement.  Interest expense of $1,396,993 has been
     recorded for the beneficial  conversion feature of these notes. In addition
     six of the notes  payable  issued in exchange for $335,000 were issued with
     front end  warrants  this has  resulted in a discount  to notes  payable of
     $70,153.

(4)  EQUITY

     Common Stock

     The Company  completed a sale of its common  stock and warrants to purchase
     common  stock in January  2000.  In  addition  to the  conversion  of notes
     outstanding,   the  Company  received  $13,898,500  in  cash  from  various
     investors,  including  some  directors  and  employees of the  company,  in
     exchange for  3,474,625  shares of common stock and  3,474,625  warrants to
     purchase common stock,  offset by approximately  $1,103,000 in transactions
     costs.  The price per share of common stock was $4.00,  which  included the
     issuance  of one  warrant  for each share of stock  sold.  Each  warrant is
     exercisable for one share of common stock at an exercise price of $5.00 per
     share and expires 5 years from the date of issue.  Compensation  expense of
     $77,726  was  recorded as a result of sales of stock to  employees  for the
     excess of fair value over the price paid. In connection  with the offering,
     98,870  five-year  warrants to purchase  common  stock at $8.4375 per share
     were issued to the placement agent.


                                       53
<PAGE>

     The  Company  also  completed  a sale of its common  stock and  warrants to
     purchase  common stock in August 2000. The Company  received  $5,000,000 in
     cash from SBC  Venture  Capital  Corp.  in exchange  for 857,633  shares of
     common stock at a price of $5.83 per share and 857,633 warrants to purchase
     common stock,  offset by approximately  $460,214 in transaction costs. Each
     warrant is  exercisable  for one share of common stock at an exercise price
     of $5.83 per share and expires 3 years from the date of issue.

     During 2000,  options were  exercised to purchase  283,289 shares of common
     stock at a weighted  average  price of $1.91.  Warrants  were  exercised to
     purchase  50,000  shares of common stock at $1.00.  See also Note 7. During
     1999, the Company issued 499 shares of common stock to a contractor in lieu
     of  services  performed.  An expense of $4,054 was  recorded  as swales and
     marketing expense, based on the fair value of the shares issued.

     During 1999 the Company  acquired  certain  intellectual  property owned by
     Timeshift-TV  inc. for 200,000 shares of common stock. The Company recorded
     $1,330,000 of expense for the  in-process  research and  development  costs
     purchased  in  connection  with this  acquisition.  Timeshift-TV  Inc.  and
     inactive  corporation that owned patented rights sought by the Company, was
     owned at the time of purchase  by the  Company's  president  and two of the
     Company's management employees.

     Convertible Preferred Stock

     In 1998,  the Company issued  2,105,000  shares of $0.01 par value Series B
     Convertible  Preferred Stock (Series B Preferred  Stock),  with warrants to
     purchase  321,960 shares of the Company's  common Stock at $2.00 per share.
     The Company has allocated $336,000 of the cash proceeds from the $4,210,000
     of Series B Preferred  Stock to  warrants  using the  Black-Scholes  option
     pricing model.  The preferred stock  agreements  provide for the holders of
     preferred  stock  to  participate  in  dividends  declared  on  common  and
     preferred  stock and the right to elect one director to the Company's board
     of Directors.  The preferred  stockholders  have the right to convert their
     shares  into  the  Company's  common  stock  on a 1 for 1  basis  and  have
     liquidation  preference  increasing over time from $7.50 to $9.30 per share
     after  3  years.  The  preferred  stock  has  antidilution  provisions  and
     registration rights.

     Warrants and Stock Issued With Debt

     During 1998,  the Company  issued debt of $1,550,000  and added  conversion
     features to $743,216 of debt. In  connection  with these  transactions  the
     Company  issued  stock  and  warrants.  The  Company  valued  these  equity
     instruments  using either the underlying stock prices or the  Black-Scholes
     option pricing model,  as  applicable,  resulting in the Company  recording
     interest expense of $1,947,371.

     Series B Preferred Stock

     The Company  issued Series B Preferred  Stock at $2.00 per share to several
     individuals  at various times  through the fourth  quarter of 1998 when the
     market prices ranged from $3.19 to $8.44. The issued stock can be converted
     at any time after the date of issuance into shares of common stock on a one
     for one basis.  As a result,  the Company  recorded a charge to accumulated
     deficit of $8,762,425 for this beneficial conversion feature.

     Stock Options

     On November 6, 1992 and April 29, 1998, the Board of Directors  adopted the
     1992 Stock Incentive Plan and the 1998 Stock Incentive Plan,  respectively.
     Under the plans,  the Board may grant options to officers,  key  employees,
     directors and  consultants.  Incentive  stock options may be granted at not
     less that 100% of the fair market value of the stock on the date the option
     is granted.  The option price of stock not intended to qualify as incentive
     stock options may not be less than 85% of the fair market value on the date
     of grant.  The maximum term of the options cannot exceed ten years. A total
     of 3,500,000 and 4,000,000  shares has been reserved for issuance under the
     plans, respectively.

     On August 23, 1999, the Board of Directors adopted the 1999 Stock Incentive
     Plan.  Under  the  plan,  the Board may  grant  options  to  officers,  key
     employees,  directors  and  consultants.  Incentive  stock  options  may be
     granted at not less than 100% of the fair market  value of the stock on the
     date the option is  granted.  The  option  price of stock not  intended  to
     qualify as  incentive  stock  options  may not be less than 85% of the fair
     market value on the date of grant.  The maximum term of the options  cannot
     exceed  ten years.  A total of  3,000,000  shares  have been  reserved  for
     issuance under the plan.  Certain options are still  outstanding from prior
     1992 and 1998 plans that carried similar terms.

     During 1998,  the Company issued stock options in lieu of cash for services
     performed,  covering  approximately  550,000 shares of the Company's common
     stock at exercise  prices  ranging from $1.00 to $2.90 per share,  expiring
     between  September  2000 and  December  2003.  $727,726  was  recorded as a
     general  and  administrative  expense  based on the fair value of the stock
     options issued.

     During 1999,  the Company issued stock options in lieu of cash for services
     performed,  covering  120,621  shares  of the  Company's  common  stock  at
     exercise  prices  ranging from $2.19 to $9.72 per share,  expiring  between
     February  2000 and  December  2004.


                                       54
<PAGE>

     $105,805 was recorded as a general and administrative expense, $160,588 was
     recorded as a sales and  marketing  expense,  and $2,082 was  recorded as a
     research  and  development  expense  based on the fair  value of the  stock
     options issued.

     In November 2000, the Company repriced all options held by the 20 remaining
     employees. The revised exercise price was $0.2812 per share.

     During 2000,  the Company issued stock options in lieu of cash for services
     performed,  covering  8,621,242  shares of the  Company's  common  stock at
     exercise  prices  ranging  from  $.2812 to $4.50  per  share,  expiring  by
     December 2005. $332,563 was recorded as general and administrative expenses
     based on the fair value of the stock options issued.

     The per share weighted  average fair value of stock options  granted during
     2000, 1999 and 1998 was $1.43, $5.23 and $1.73 respectively, on the date of
     grant  using the  Black-Scholes  option  pricing  model with the  following
     weighted   average   assumptions:   volatility  of  251%,  117%,  and  136%
     respectively,  expected dividend yield 0% for all years, risk free interest
     rate of approximately  6%, 6% and 5% respectively,  and an expected life of
     2.5 years for both 2000 and 1999, and 1.5 years for 1998.

Stock option activity for 2000, 1999, and 1998 is as follows:


                                                              WEIGHTED
                                             NUMBER OF         AVERAGE
                                              SHARES       EXERCISE PRICE
                                             ---------     --------------

          Balance on December 31, 1997      2,538,630            $1.85

          Options granted                   4,117,101             3.01
          Options exercised                  (139,501)            2.28
          Options expired                    (105,719)            2.65
          Options forfeited                  (121,248)            1.56
                                            ---------            -----

          Balance on December 31, 1998      6,289,263             2.52

          Options granted                   1,302,000             6.65
          Options exercised                  (111,800)            1.01
          Options expired                    (200,000)            1.00
          Options forfeited                  (353,600)            2.78
                                            ---------            -----

          Balance on December 31, 1999      6,925,863             3.36

          Options granted                   8,664,742             1.33
          Options exercised                  (273,355)            1.91
          Options expired                     (94,225)            1.86
          Options forfeited                (6,506,366)            4.09
                                            ---------            -----

          Balance on December 31, 2000      8,716,659            $1.04
                                            =========            =====

Stock options  outstanding  and  exercisable at December 31, 2000 from the 1992,
1998 and 1999 Plans consisted of:

                               Outstanding                     Exercisable
                ---------------------------------------  ----------------------
                                             Weighted
                               Weighted       Average                  Weighted
                   Shares       Average      Remaining      Shares      Average
     Price       Outstanding     Price         Life       Outstanding    Price
-------------   -------------------------  ------------  ------------  ---------
        $0.28    5,718,661       $0.28          3.25       3,105,644      $0.28
 $0.50 -$1.00    1,378,125       $.9853         4.43       1,348,125     $.9961
 $1.37 -$3.00      768,534       $2.19          2.93         768,534      $2.19
 $3.13-$5.00       494,631       $3.87          3.89         428,881      $3.75
 $5.75-$9.72       356,708       $6.31          3.10         274,208      $7.28
                                                           ---------
Total            8,716,659       $1.04          3.44       5,925,392      $1.27
                                 =====          ====       =========      =====


Had the  Company  determined  compensation  cost  based on the fair value at the
grant date for its stock  options  consistent  with SFAS 123, the  Company's net
loss  applicable to common  stockholders  and net loss per share would have been
increased to pro forma amounts indicated below:

                                   2000              1999              1998
                             --------------    --------------    --------------
     Net loss as reported    $  (19,609,984)   $  (12,977,729)   $  (15,678,845)

       Pro forma                (23,422,527)   $  (17,356,482)   $  (16,960,138)


     Net loss per share as
       reported              $        (0.98)   $        (1.42)   $         2.35

       Pro forma             $        (1.17)   $        (1.90)   $         2.55


                                       55
<PAGE>

(5)  ACCRUED EXPENSES

     Accrued  expenses as of  December  31,  2000 and 1999 is  comprised  of the
     following:


                                                       2000            1999
                                                   --------        --------
     Accrued compensation                          $350,723        $163,828
     Professional services                          117,247          44,546
     Other accrued expenses                          47,903              --
                                                   --------        --------
     Total                                         $515,873        $208,374
                                                   ========        ========

(6)  LEASE COMMITMENTS

     The Company leases its office space under a five year operating lease. Rent
     expense for the years ended  December  31, 2000 and 1999 was  $299,077  and
     $104,969, respectively.

     The following is a summary of future  minimum lease  payments for operating
     leases:

                                                  OPERATING
         Years ending December 31:                 LEASES
         -------------------------               ----------
         2001                                    $  733,628
         2002                                       223,761
         2003                                       165,610
         2004                                       170,615
         2005                                       145,167
                                                 ----------
         Total lease payments                    $1,438,781
                                                 ==========

     The Company  entered into a one year  sublease  agreement in February  2001
     under which the Company will receive $347,014.

(7)  INCOME TAXES

     At December 31, 2000, the Company had net operating loss  carryforwards for
     federal income tax purposes of approximately $41,182,000, which are subject
     to annual  limitations,  and are available to offset future taxable income,
     if any, through 2020 and net operating loss  carryforwards for state income
     tax purposes of  approximately  $18,075,000,  which are available to offset
     future state taxable income through 2010.

     The  temporary  differences  that  give rise to  deferred  tax  assets  and
     liabilities at December 31, 2000 and 1999 are as follows:

<TABLE>
<CAPTION>
                                                               2000           1999
                                                           ------------    -----------
<S>                                                        <C>             <C>
     Deferred tax assets:
        Net operating losses                               $ 15,599,800    $ 8,838,300
        Depreciation, amortization and basis differences        107,400        110,300
        Compensation accruals                                   759,400        418,700
        Research and experimentation credit                     421,900        421,900
        State income tax effect on federal                     (647,500)      (385,200)
        Other                                                    61,100         21,800
                                                           ------------    -----------

              Total net deferred tax assets                  16,302,100      9,425,800

     Less valuation allowance                               (16,302,100)    (9,425,800)
                                                           ------------    -----------

              Net deferred tax assets                      $          0    $         0
                                                           ============    ===========
</TABLE>

     The net change in the valuation  allowance for the years ended December 31,
     2000 and 1999 was an increase of $6,876,300  and an increase of $4,178,000,
     respectively.  In  assessing  the  amount  of  deferred  tax  assets  to be
     recognized,  management  considers  whether it is more likely than not that
     some portion or all of the deferred tax assets will not be realized.  It is
     not  possible at this time


                                       56
<PAGE>

     to  determine  that the  deferred tax assets are more likely to be realized
     than not; accordingly,  a full valuation allowance has been established for
     all periods presented.

     The  Tax  Reform  Act  of  1986  imposed  substantial  restrictions  on the
     utilization  of net  operating  losses  and tax  credits in the event of an
     "ownership  change," as defined by the Internal  Revenue Code.  All federal
     and state net operating loss  carryforwards  are subject to limitation as a
     result of these  restrictions.  If there should be a  subsequent  ownership
     change,  as defined,  the  Company's  ability to utilize its  carryforwards
     could be reduced.

(8)  BUSINESS RISKS AND SEGMENT DISCLOSURES

     The  Company's  primary  source of revenue is from the  licensing  of Burst
     technology,  and its success is largely dependent on this product.  Changes
     in desirability of the product in the marketplace may significantly  affect
     the Company's future operating results.

     The Company  operates in one segment and  accordingly has provided only the
     required  enterprise  wide  disclosure.  The Company  recognized no foreign
     revenues in 2000, 1999 or 1998.

(9)  RECENTLY ISSUED ACCOUNTING STANDARDS

     In March 1998,  The  American  Institute of  Certified  Public  Accountants
     issued Statement of Position ("SOP") No. 98-1,  Accounting for the Costs of
     Computer  Software  Developed or Obtained  for  Internal  Use. SOP No. 98-1
     requires  that  certain  costs  related to the  development  or purchase if
     internal-use  software be  capitalized  and  amortized  over the  estimated
     useful  life of the  software.  SOP No.  98-1 is  effective  for  financial
     statements  issued for fiscal years  beginning after December 15, 1998. The
     adoption  of SOP No.  98-1  did not have a  material  impact  on  financial
     condition or results of operations.

     In June 1998, the Financial  Accounting  Standards Board (FASB) issued SFAS
     No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS
     No. 133 requires companies to recognize all derivative  contracts as either
     assets or  liabilities  in the  balance  sheet and to measure  them at fair
     value.  If certain  conditions  are met, a derivative  may be  specifically
     designated  as a hedge,  the  objective  of which is to match the timing of
     gain or loss recognition on the hedging  derivative with the recognition of
     (i) the changes in the fair value of the hedged assets or liabilities  that
     are  attributable  to the hedged  risk or (ii) the  earnings  effect of the
     hedged forecasted transaction. For a derivative not designated as a hedging
     instrument,  the gain and loss is  recognized  in income  in the  period of
     change.  In June  1999,  the FASB  issued  SFAS  No.  137,  Accounting  for
     Derivative  Instruments and Hedging  Activities - Deferral of the Effective
     Date of FASB  Statement No. 133,  which amends SFAS No. 133 to be effective
     for all fiscal  quarters of all fiscal years beginning after June 15, 2000.
     In June 2000,  the FASB  issued  SFAS No. 138,  Accounting  for  Derivative
     Instruments  and Hedging  Activities - An Amendment of FASB  Statement  No.
     133, which addressed certain implementation issues of SFAS No. 133.

     Historically,  the Company has not entered into derivative contracts either
     to hedge  existing  risks or for  speculative  purposes.  Accordingly,  the
     Company does not expect the adoption of the new standard to have a material
     impact on the Company's financial position,  results of operations, or cash
     flows.

     In December 1999, the SEC staff  released Staff  Accounting  Bulletin (SAB)
     No. 101,  Revenue  Recognition  in  Financial  Statements,  which  provides
     interpretive guidance on the recognition,  presentation,  and disclosure of
     revenue in  financial  statements.  SAB 101 must be  applied  to  financial
     statements no later than the quarter ended September 30, 2000. There was no
     material impact from the application of SAB 101 on the Company's  financial
     position, results of operations, or cash flows.

     In March 2000, the FASB issued  Interpretation No. 44 (FIN 44),  Accounting
     for Certain Transactions Involving Stock Compensation, an interpretation of
     APB Opinion No. 25. FIN 44 clarifies the  application of Opinion No. 25 for
     (a) the definition of an employee for purposes of applying  Opinion No. 25,
     (b)  the  criteria  for   determining   whether  a  plan   qualifies  as  a
     non-compensatory   plan,  (c)  the  accounting   consequences   of  various
     modifications to the terms of a previously fixed stock option or award, and
     (d) the  accounting  for an  exchange  of stock  compensation  awards  in a
     business  combination.  FIN 44 became  effective  July 2, 2000, but certain
     conclusions  cover  specific  events that occur after  either  December 15,
     1998,  or January 12,  2000.  FIN 44 did not have a material  impact on the
     Company's financial position, results of operations, or cash flows.


                                       57
<PAGE>

(10) SUBSEQUENT EVENTS

     In February,  2001, the Company received from Eagle Wireless  International
     504,000  shares  of their  common  stock.  In  exchange  the  Company  gave
     1,500,000  newly issued common shares in Burst.com,  Inc. to Eagle Wireless
     International, Inc.

     In February and March, 2001, the Company received $250,000 in cash upon the
     issuance of notes payable  bearing  interest at six percent (6%),  interest
     and principal due in January and February,  2002. The notes are convertible
     into shares of Preferred  Stock to be  identified as Series A-2001 at a per
     share conversion price of five dollars ($5.00).

     In March,  2001, the Company received $100,000 in cash upon the issuance of
     a  note  payable  bearing  interest  at ten  percent  (10%),  interest  and
     principal due  September 12, 2001.  The Company has pledged as security one
     hundred thousand common shares of Eagle Wireless International, Inc.


(11)  QUARTERLY INFORMATION (UNAUDITED)

     The  summarized  quarterly  financial  data  presented  below  reflect  all
adjustments  which, in the opinion of management,  are of a normal and recurring
nature  necessary to present  fairly the results of  operations  for the periods
presented.

<TABLE>
<CAPTION>
                                                    First         Second         Third         Fourth
                                                   Quarter       Quarter        Quarter        Quarter          1999
                                                 ----------     ----------     ----------     ----------     -----------
                    Year Ended 1999
<S>                                              <C>            <C>            <C>            <C>            <C>
Net revenue                                      $       --     $       --     $       --     $       --     $        --

Gross profit                                             --             --             --             --              --
Operating loss                                   (1,579,121)    (2,621,256)    (4,090,618)    (3,218,624)    (11,509,619)

Net loss                                         (1,572,499)    (2,596,903)    (4,928,890)    (3,879,437)    (12,977,729)

      Basic and diluted loss per common share    $    (0.18)    $    (0.28)    $    (0.53)    $    (0.43)    $     (1.42)
                                                 ----------     ----------     ----------     ----------     -----------

<CAPTION>
                                                    First         Second         Third         Fourth
                                                   Quarter       Quarter        Quarter        Quarter          2000
                                                 ----------     ----------     ----------     ----------     -----------
                    Year Ended 2000
<S>                                              <C>            <C>            <C>            <C>            <C>
Net revenue                                     $    75,012    $   311,136    $    94,377    $    18,851    $    499,376

Gross profit                                         44,714        311,136         93,891         18,851         468,612
Operating loss                                   (3,768,166)    (6,166,446)    (4,613,669)    (5,008,419)    (19,556,700)

Net loss                                         (3,799,140)    (6,260,264)    (4,680,188)    (4,870,392)    (19,609,984)


      Basic and diluted loss per common share   $     (0.24)   $     (0.33)   $     (0.24)   $     (0.17)   $      (0.98)
                                                -----------    -----------    -----------    -----------    ------------
</TABLE>

Significant 2000 fourth quarter adjustments included losses and writedowns fixed
assets (See Note 2)


                                       58