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

                                    FORM 10-Q
(Mark One)
             [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                           THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
                              QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000

                                       OR

             [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                            OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
                              TRANSITION PERIOD FROM __________ TO ___________

                         Commission File Number 0-26516

                                 EUPHONIX, INC.
             (Exact name of registrant as specified in its charter)

         California                                                77-0189481
(State or other jurisdiction of                                (I.R.S. Employer
incorporation or organization)                                dentification No.)

                     220 Portage Avenue, Palo Alto, CA 94306
                   (Address of principal executives, zip code)

                                 (650) 855-0400
              (Registrant's telephone number, including area code)

         Indicate by check mark whether the registrant has filed (1) 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
                         ___________                     __________


The  number  of  shares  outstanding  of the  registrant's  common  stock  as of
September 30, 2000 was 12,165,000 ($0.001 par value).


<PAGE>



                                 EUPHONIX, INC.

                                    FORM 10-Q
                                TABLE OF CONTENTS


                                                                        Page
PART I.  FINANCIAL INFORMATION

ITEM 1.  Condensed Consolidated Financial Statements:

         Condensed Consolidated Balance Sheets as of
          September 30, 2000 and December 31, 1999.........................3

         Condensed Consolidated Statements of Operations for the
          three and nine months ended September 30, 2000 and 1999..........4

         Condensed Consolidated Statements of Cash Flows
          for the nine months ended September 30, 2000 and 1999............5

         Notes to Condensed Consolidated Financial Statements..............6

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


PART II. OTHER INFORMATION

ITEM 6.  Exhibits and Reports on Form 8-K.................................16

Signatures................................................................17





                                       2
<PAGE>





PART I.           FINANCIAL INFORMATION

Item 1.           CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S>                                                <C>           <C>

                                 EUPHONIX, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)
                                   (unaudited)

                                                    September 30,  December 31,
                                                        2000           1999
                                                        ----           ----

                              ASSETS
   CURRENT ASSETS:
     Cash and cash equivalents..........................$  1,677      $   838
     Accounts receivable, (net of allowance for doubtful
       accounts of $102 in 2000 and $112 in 1999).......   1,440        2,354
     Inventories........................................   6,800        6,964
     Prepaid expenses and other current assets..........     266          174
                                                        -----------   ---------
   Total current assets.................................  10,183       10,330

   Property and equipment, net..........................   1,149        1,881
   Deposits and other assets............................     785           89
                                                        -----------   ---------
    Total assets........................................$ 12,117      $12,300
                                                        ===========   =========

               LIABILITIES AND SHAREHOLDERS' EQUITY
   CURRENT LIABILITIES:
     Accounts payable...................................$  1,997      $ 2,007
     Accrued liabilities................................   1,075        1,090
     Amount due to related party........................     407         ----
     Customer deposits..................................     774          240
                                                        -----------   ---------
   Total current liabilities............................   4,253        3,337

   Convertible notes payable............................   4,706        2,166
                                                        -----------   ---------
    Total liabilities...................................   8,959        5,503
                                                        -----------   ---------
   Commitments and contingencies (Note 3)

   SHAREHOLDERS' EQUITY:
   Preferred stock, $0.001 par value: 2,000,000 authorized
     shares, none issued and outstanding.................   ----         ----
   Common stock, $0.001 par value: 20,000,000 authorized
     shares, 12,165,000 and 11,591,000 shares issued and
     outstanding in 2000 and 1999, respectively..........     12           12
   Additional paid-in capital............................ 24,009       21,402
   Accumulated other comprehensive income................     42           42
   Accumulated deficit...................................(20,905)     (14,659)
                                                        ----------    ---------
   Total shareholders' equity............................  3,158        6,797
                                                        ----------    ---------
    Total liabilities and shareholders' equity..........$ 12,117     $ 12,300
                                                        ==========    =========
</TABLE>


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



                                       3
<PAGE>
<TABLE>
<CAPTION>
<S>                                   <C>         <C>         <C>      <C>

                                 EUPHONIX, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (in thousands, except per share amounts)
                                   (unaudited)


                                        Three Months Ended    Nine Months Ended
                                           September 30,         September 30,
                                         2000         1999      2000      1999
                                       ---------   ---------  --------  -------
Net revenues.......................... $  3,568   $  3,764  $ 10,645  $  8,784
Cost of revenues.......................   2,634      2,183     7,462     5,772
                                       ---------   ---------  --------  -------
Gross margin...........................     934      1,581     3,183     3,012
                                       ---------   ---------  --------  -------

Operating expenses:
  Research and development.............     834      1,084     2,590     3,452
  Sales and marketing..................   1,210      1,422     3,917     4,088
  General and administrative...........     407        290     1,333       951
                                       ----------  ---------  --------  -------
Total operating expenses...............   2,451      2,796     7,840     8,491
                                       ----------  ---------  --------  -------

Operating loss.........................  (1,517)    (1,215)   (4,657)   (5,479)

Interest and other income..............    ----       ----        41        12
Interest expense and other charges.....    (105)       (64)   (1,604)      (90)
                                       -----------  --------  --------  -------

Loss before equity in net income/(loss)
 of investee...........................  (1,622)     (1,279)  (6,220)   (5,557)
Equity in net income/(loss) of investee       8        ----      (26)     ----
                                       -----------  --------- --------- -------
Net loss...............................$ (1,614)   $ (1,279) $(6,246)  $(5,557)
                                       ===========  ========= ========  =======

Basic and diluted net loss per share...$  (0.13)   $  (0.16) $ (0.52)  $ (0.71)
                                       ===========  ========= ========  =======

Shares used in computing basic and
  diluted net loss per share...........12,158,443 7,956,595 11,966,039 7,834,055
                                       ========== ========= ========== =========

</TABLE>




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








                                       4
<PAGE>

<TABLE>
<CAPTION>
<S>                                                   <C>           <C>

                                 EUPHONIX, INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)
                                                           Nine Months Ended
                                                             September 30,
                                                          2000           1999
                                                          ----           ----

Cash flows from operating activities:
Net loss...............................................  $ (6,246)    $ (5,557)
                                                        -----------  ----------
Adjustments to reconcile net loss to net cash used in
operating activities:
  Depreciation and amortization........................       454          470
  Write-off of property and equipment..................        30          ---
  Allowance for doubtful accounts......................       (10)        (210)
  Beneficial conversion feature on convertible notes
   payable.............................................     1,279          ---
  Deferred compensation amortization...................        58           50
  Transfer of demonstration equipment to inventory.....       253          ---
  Transfer of property and equipment to investee.......       152          ---
  Changes in assets and liabilities:
    Accounts receivable................................       924           31
    Inventory..........................................       164         (947)
    Prepaid expenses, other current assets, deposits,
     and other.........................................      (429)        (127)
    Accounts payable...................................       (10)        (405)
    Accrued liabilities................................       233         (200)
    Customer deposits..................................       534          231
                                                       ------------   ---------
Total adjustments......................................     3,632       (1,107)
                                                       ------------   ---------
Net cash used in operating activities..................    (2,614)      (6,664)
                                                       ------------   ---------

Cash flows from investing activities:
Proceeds from sales of available-for-sale securities...       ---          601
Purchase of property and equipment.....................      (157)        (824)
                                                       ------------   ---------
Net cash used in investing activities..................      (157)        (223)
                                                       ------------   ---------

Cash flows from financing activities:
Proceeds from issuance of convertible notes............     2,300        4,100
Proceeds from sale of common stock.....................       800        1,304
Proceeds from exercise of stock options................       110          ---
Proceeds from related party............................       400          ---
                                                       ------------   ---------
Net cash provided by financing.........................     3,610        5,404
                                                       ------------   ---------

Net increase (decrease) in cash and cash equivalents...       839       (1,483)
Cash and cash equivalents at beginning of period.......       838        1,637
                                                       ------------   ---------
Cash and cash equivalents at end of period.............   $ 1,677     $    154
                                                       ============   =========
</TABLE>


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






                                       5
<PAGE>







                                 EUPHONIX, INC.
                NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)


1.       The Company and Summary of Significant Accounting Policies

         The Company

         Euphonix,  Inc. (the "Company") was incorporated on July 6, 1988 in the
state of California.  Euphonix  develops,  manufactures  and supports  networked
digital audio systems for music,  film & TV post  production,  broadcast,  sound
reinforcement and multimedia applications.

         Basis of Presentation

         The accompanying  unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q. According-
ly, they do not include all of the information and footnotes required by
generally accepted accounting  principles  for  complete  financial  statements.
In the opinion of management,  all adjustments  (consisting only of normal
recurring  adjustments) considered  necessary  for a fair  presentation  have
been  included.  Operating results for the nine-month period ended September 30,
2000 are not necessarily indicative of the results that may be expected for the
entire  year  ending December 31, 2000.

         For further information,  refer to the audited financial statements and
footnotes  thereto  included in the Company's annual report on Form 10-K for the
year ended December 31, 1999.

         Recently Issued Accounting Pronouncements

         In June 1998, the Financial Accounting Standards Board issued Statement
of  Financial   Accounting   Standards  No.  133,   "Accounting  for  Derivative
Instruments  and  Hedging  Activities"  ("SFAS  133"),  which is  required to be
adopted in years  beginning after June 15, 2000. The adoption of SFAS 133 is not
expected to materially  impact the Company's  results of  operations,  financial
position or cash flows.

         In  December  1999,  the SEC staff  issued  Staff  Accounting  Bulletin
("SAB") No. 101,  "Revenue  Recognition." The SEC staff addresses several issues
in SAB No.  101,  including  the timing for  recognizing  revenue  derived  from
selling arrangements that involve contractual customer acceptance provisions and
installation  of the product  occurs after  shipment and transfer of title.  The
Company's  existing revenue  recognition  policy is to recognize  revenue at the
time the customer takes title to the product, generally at the time of shipment,
because the Company has routinely met its installation  obligations and obtained
customer acceptance. Applying the requirements of SAB No. 101 to the present
selling arrangements used by the Company  for the  sale of  equipment  may
require  a  change  in the  Company's accounting policy for revenue recognition
and the deferral of the recognition of revenue from such equipment sales until
installation is complete and accepted by the  customer.  The effect of such a
change,  if any,  must be  recognized  as a cumulative  effect of a change in
accounting no later than the Company's fourth quarter of its fiscal year ending
on December 31, 2000. The Company is currently evaluating the impact.




                                       6
<PAGE>

                                 EUPHONIX, INC.
           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - -(Continued)
                                  (unaudited)




<TABLE>
<CAPTION>
<S>                                                <C>             <C>




2.       Balance Sheet Components (in thousands):
         (a) Inventories:
                                                    September 30,   December 31,
                                                         2000           1999
                                                         ----           ----


               Raw materials........................  $  2,289        $  2,878
               Work-in-process......................     1,785           1,494
               Finished goods.......................     2,726           2,592
                                                      ------------   ----------
                                                      $  6,800        $  6,964
                                                      ============   ==========


         (b) Accrued liabilities:
                                                    September 30,   December 31,
                                                         2000           1999
                                                         ----           ----
       Accrued compensation and related.............  $    357        $    429
       Accrued warranty.............................        87             244
       Accrued commissions..........................        70              83
       Sales tax payable............................        93              91
       Deferred revenue, net of deferred cost.......       264             ---
       Other........................................       204             243
                                                      -------------  ----------
                                                      $  1,075        $  1,090
                                                      =============  ==========
</TABLE>


         (c) Convertible notes payable:

On February  22,  2000,  the Company  executed  promissory  notes with  existing
investors under which the Company borrowed $1,500,000. The notes accrue interest
at 10% per annum with  principal and accrued  interest due at February 22, 2001.
The  assets of the  Company  are  pledged  as  collateral.  The notes  contain a
conversion feature, to allow the holder to convert the note into common stock of
the  Company at a rate of $ 2.531 per share.  In addition  this note  provides
that upon conversion, if such conversion occurs, the Company will issue warrants
to purchase  1,185,185  shares of common stock at prices  ranging from $3 to $5.
The warrants,  if issued,  will be exercisable at any time and from time to time
in part or in full on or before February 1, 2003.  At the date of issuance of



                                       7
<PAGE>


                                 EUPHONIX, INC.
            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - -(Continued)
                                  (unaudited)

the note, the quoted  market price of the Company's common stock was $2.531 per
share, resulting in a beneficial conversion feature in the amount of $1,279,000.
The beneficial conversion was recorded as a credit to equity and a charge to
interest expense at the time the notes were issued.

On April 14, 2000, the Company executed promissory notes with existing investors
under which the Company borrowed $800,000.  The notes accrue interest at 10% per
annum with principal and accrued  interest due at January 1, 2001. The assets of
the company are pledged as collateral.  The notes contain a conversion  feature,
which is subject to shareholder approval, and if approved, will allow the holder
to convert  the note into  common  stock of the  Company at a rate of $3.625 per
share. Shareholder approval had not been obtained as of September 30, 2000.

3.      Contingencies

        From time to time, the Company may have certain  contingent  liabilities
that  arise in the  ordinary  course of its  business  activities.  The  Company
accrues contingent liabilities when it is probable that future expenditures will
be made and such  expenditures  can be reasonably  estimated.  In the opinion of
management,  there are no pending  claims of which the  outcome is  expected  to
result in a material  adverse  effect in the  financial  position  or results of
operations of the Company.

4.      Joint Venture

        On  February  18,  2000,  the  Company  entered  into a joint  venture
arrangement with Audio Exports George Neumann & Company Gmbh ("Audio  Exports").
The joint venture was formed by the  contribution by the Company of property and
equipment  with a net book value of  $297,000  to its wholly  owned  subsidiary,
Euphonix Europe.  Concurrently,  Audio Exports  contributed  $680,000 in cash in
exchange  for  common  stock  of  Euphonix  Europe,   representing  70%  of  the
outstanding  common stock of Euphonix  Europe after the  transaction.  The joint
venture  arrangement  included a Shareholder  Agreement  between the Company and
Audio  Exports and a  distribution  agreement  between the Company and  Euphonix
Europe.  In  addition,  on February  18, 2000,  the  President of Audio  Exports
purchased  240,000  shares of the  Company's  common  stock from the Company for
$300,000 in cash. The sale of the 240,000 shares was at a $360,000 discount from
the quoted market price of the Company's common stock on that date. The total of
the discount and the net book value of the property and equipment contributed of
$657,000  was  recorded  as  "Investment  in  Euphonix  Europe".  The  Company's
investment  and  ownership  interest in Euphonix  Europe  represents  30% of the
outstanding  shares of Euphonix  Europe,  and was accounted for using the equity
method  commencing  April 1,  2000,  the  effective  date of the  joint  venture
arrangement.  The  Company's  equity in the net loss of the investee was $26,000
for the nine months ended September 30, 2000.



                                       8
<PAGE>



5.       Sale of Common Stock

         On June 1, 2000,  the Company  received  $500,000  from the sale to
existing  investors  of 147,928  shares of common stock at $3.38 per share.


































                                       9
<PAGE>



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

         This Quarterly Report on Form 10-Q contains forward-looking  statements
within the meaning of Section 27A of the  Securities Act of 1933 and Section 21E
of  the  Securities  Exchange  Act of  1934.  These  forward-looking  statements
represent the Company's  expectations  or beliefs  concerning  future events and
include  statements,  among  others,  concerning  sales of the  System 5 digital
console,  sales to significant  customers,  the development of new products, the
ability to gain market share in the music market segment,  the ability to retain
key suppliers and the  availability  of future capital by way of debt and equity
financing.  The  Company's  actual  results  may differ  significantly  from the
results discussed in the  forward-looking  statements.  Factors that might cause
such a  difference  include,  but are not limited  to,  those  discussed  in the
section entitled "Factors Affecting Future Operating Results."

Results of Operations

Net Revenues

         Net revenues  decreased  to $3.6 million in the third  quarter in 2000
down from $3.8 million in the third quarter of 1999,  representing a decrease of
5.2%.  The decrease in the  Company's net revenues for the third quarter of 2000
as compared to 1999, resulted primarily from the discounts in Japan sales.

         Net  revenues  increased  to $10.6  million in the first nine months of
2000 up from $8.8  million in the first  nine  months of 1999,  representing  an
increase of 21.2%.  The increase in the Company's net revenues in the first nine
months of 2000 as compared to 1999, resulted primarily from the sale of System 5
digital  consoles  from 8 units in the first nine  months of 1999 to 19 units in
the first nine months of 2000.

         Domestic sales of the Company's products for the third quarter of 2000
and  1999  were  $2.3  million  and  $2.7  million,   respectively,   comprising
approximately  63.9%  and  72.2% of the  Company's  net  revenues  for the third
quarter of 2000 and 1999, respectively. Domestic sales of the Company's products
for the first nine months of 2000 and 1999 were $6.5  million and $6.0  million,
comprising  approximately  60.7% and 68.8% of the Company's net revenues for the
first nine months of 2000 and 1999, respectively. Export sales were $1.3 million
and $1.1  million,  comprising  approximately  36.1% and 27.8% of the  Company's
revenues for the third quarter of 2000 and 1999, respectively. Export sales were
$4.1 million and $2.8 million  comprising  approximately  39.3% and 31.2% of the
Company's  revenues  for the first nine  months of 2000 and 1999,  respectively.
Export  sales as a percent of net revenues  increased  in the third  quarter and
first nine months of 2000 due to increased sales in Asia Pacific, as compared to
the third quarter and first nine months of 1999.

Gross Margin

         The Company's gross margin  decreased to 26.2% in the third quarter of
2000 down from 42.0% in the third quarter of 1999.  For the first nine months of
2000,  gross margin was $3.2 million,  or 29.9% of net  revenues,  compared with
$3.0 million,  or 34.3% of net revenues,  for the first nine months of 1999. The
decrease  in  gross  margin  for the  third  quarter  was due to a write  off of
inventory and higher  discounts on sales with Japan and in the first nine months
in 2000 was primarily due to the change in sales mix.



                                       10
<PAGE>

Research and Development Expenses

          Research and development  expenses  decreased to $834,000 in the third
quarter of 2000,  down 23.1% from $1.1 million in the third quarter of 1999. For
the first nine months in 2000, research and development expenses of $2.6 million
decreased  25.0%  from $3.5  million  in 1999.  The  decrease  in  research  and
development expenses in the third quarter and first nine months of 2000 from the
corresponding  periods in 1999 was  primarily  due to the  reduction  of project
expenses  for the new R-1  Multitrack  Recorder  and the new  System  5  digital
console, and a reduction in personnel in the first nine months in 2000.

Sales and Marketing Expenses

         Sales and marketing  expenses were $1.2 million and $1.4 million in the
third  quarter of 2000 and 1999,  respectively. Sales and marketing  expenses
decreased by 14.9% in the third quarter of 2000 as compared to the third quarter
of 1999.  Sales and  marketing  expenses were $3.9 million  and  $4.1   million
in  the  first  nine  months  of  2000  and  1999, respectively.  Sales and
marketing  expenses decreased  by 4.2% in the first nine months of 2000 as
compared with the first nine  months of 1999,  primarily due to the cessation
of sales out of the UK branch (which was replaced by Euphonix Europe).

General and Administrative Expenses

          General and administrative expenses increased to $407,000 in the third
quarter of 2000 from  $290,000  in the third  quarter of 1999,  representing  an
increase of 40.3%. General and administrative expenses increased to $1.3 million
in the first nine months of 2000 from $951,000 in the first nine months of 1999,
representing an increase of 40.1%.  The increase in the third quarter of 2000 as
compared  with 1999 was  attributable  to an increase in legal and  professional
fees.  The  increase in the first nine months of 2000 as compared  with 1999 was
attributable  to a decrease  in bad debt  expense  due to a reversal of bad debt
expense in 1999, and an increase in legal and professional fees.

Interest expense and other charges

         Interest  expense and other charges  increased to $105,000 in the third
quarter of 2000 from $64,000 in the third  quarter of 1999,  due to the interest
expense on additional  convertible  notes  payable.  Interest  expense and other
charges  increased to $1.6 million in the first nine months of 2000 from $90,000
in the first nine months of 1999,  due to the beneficial  conversion  feature of
$1.3 million associated with the promissory notes issued February 22, 2000.

Equity in net income / loss in investee

        The  Company  recorded  a credit of $8,000  for equity in net income of
investee,  Euphonix Europe, in the third quarter of 2000 and a charge of $26,000
for equity in net loss of investee, Euphonix Europe, in the first nine months of
2000.  There was no such  credit or charge for the third  quarter and first nine
months of 1999.




                                       11
<PAGE>


Provision  for Income Taxes

        For the  first  nine  months of 2000 and 1999,  the  Company  did not
recognize  the tax benefit of its  operating  losses.  Management  believes that
sufficient  uncertainty  exists  with regard to the  realizability  of these tax
assets such that a full valuation allowance is necessary.  These factors include
the  lack of a  significant  history  of  consistent  profits  and  the  lack of
carryback  capacity to realize these assets.  Based on this absence of objective
evidence,  management  is unable to assert  that it is more likely than not that
the Company will generate sufficient taxable income to realize the Company's net
deferred tax assets.

Liquidity and Capital Resources

       The Company has funded its  operations to date  primarily  through cash
flows from operations,  the private sale of equity  securities,  the issuance of
convertible  notes  payable and the  initial  public  offering  of Common  Stock
completed in September 1995.

       On  February  18,  2000,  the  Company  entered  into a  joint  venture
arrangement with Audio Exports George Neumann & Company Gmbh ("Audio  Exports").
The joint venture was formed by the  contribution by the Company of property and
equipment  with a net book value of  $297,000  to its wholly  owned  subsidiary,
Euphonix Europe.  Concurrently,  Audio Exports  contributed  $680,000 in cash in
exchange  for  common  stock  of  Euphonix  Europe,   representing  70%  of  the
outstanding  common stock of Euphonix  Europe after the  transaction.  The joint
venture  arrangement  included a Shareholder  Agreement  between the Company and
Audio  Exports and a  distribution  agreement  between the Company and  Euphonix
Europe.  In  addition,  on February  18, 2000,  the  President of Audio  Exports
purchased  240,000  shares of the  Company's  common  stock from the Company for
$300,000 in cash. The sale of the 240,000 shares was at a $360,000 discount from
the quoted market price of the Company's common stock on that date. The total of
the discount and the net book value of the property and equipment contributed of
$657,000  was  recorded  as  "Investment  in  Euphonix  Europe".  The  Company's
investment  and  ownership  interest in Euphonix  Europe  represents  30% of the
outstanding  shares of Euphonix  Europe,  and was accounted for using the equity
method as of April 1, 2000, the effective date of the joint venture arrangement.

       On February 22, 2000,  the Company  executed  promissory  notes with
existing investors under which the Company borrowed $1,500,000. The notes accrue
interest at 10% per annum with  principal  and accrued  interest due at February
22, 2001. The assets of the company are pledged as collateral. The notes contain
a conversion  feature, to allow the holder to convert the note into common stock
of the Company at a rate of $2.531 per share.  In addition  this note provides
that upon conversion, if such conversion occurs, the Company will issue warrants
to purchase  1,185,185  shares of common stock at prices  ranging from $3 to $5.
The warrants, if issued, will be exercisable at any time and from time to time
in part or in full on or before February 1, 2003. At the date of issuance of the
note,  the quoted  market  price of the  Company's  common  stock was $2.531 per
share, resulting in a beneficial conversion feature in the amount of $1,279,000.
The  beneficial  conversion  was  recorded as a credit to equity and a charge to
interest expense at the time the notes were issued.

      On April  14,  2000,  the  Company  executed  promissory  notes  with
existing investors under which the Company borrowed  $800,000.  The notes accrue
interest at 10% per annum with principal and accrued  interest due at January 1,
2001. The assets of the Company are pledged as  collateral.  The notes contain a
conversion feature,  which is subject to shareholder approval,  and if approved,



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<PAGE>


will allow the holder to convert the note into common  stock of the Company at a
rate of $3.625 per share. Shareholder approval had not been obtained as of
September 30, 2000.

      On June 1, 2000,  the Company  received  $500,000  from the sale to
existing  investors  of 147,928  shares of common stock at $3.38 per share. On
September 7, 2000, the Company received $400,000 from an existing investor.

      For  the  third  quarter  ended  September  30,  2000,  cash  and  cash
equivalents  increased by $839,000 to approximately $1.7 million.  Also, during
this period, working capital  decreased by $1.1 million to  approximately  $5.9
million.

      The Company's operating  activities  used cash of  approximately  $2.6
million and $6.7 million for the nine months ended  September 30, 2000 and 1999,
respectively. Cash used in operating activities for 2000 was comprised primarily
of net loss and a beneficial conversion feature on notes payable, an increase in
prepaid  expenses  and  other  assets,  offset  partially  by  depreciation  and
amortization,  a decrease  in  accounts  receivable and  inventory, and an
increase in customer deposits.  Cash used in operating activities for 1999 was
comprised primarily of net loss and an increase in inventories,  prepaid
expenses and other assets, a decrease in accounts payable and other accrued
liabilities, offset partially by depreciation and amortization,  an increase in
accounts receivable, and customer deposits.

      The Company's  investing  activities used cash of $157,000 and $223,000
in the first nine months ended September 30, 2000 and 1999, respectively. In the
first nine months of 2000, $157,000 was used to purchase property and equipment.
In the first nine months of 1999 the Company used $824,000 to purchase  property
and equipment,  and the Company received  $601,000 in proceeds from the sales of
short term investments.

      The Company's  financing  activities  provided cash of $3.6 million and
$5.4  million  in the first  nine  months of 2000 and  1999,  respectively.  The
Company  received  $2.3  million in proceeds  from the  issuance of  convertible
notes,  $800,000  from the sale of common  stock,  $110,000 from the exercise of
stock options and $400,000 from  proceeds  from related  parties.  For the first
nine months ended  September 30, 1999 proceeds from the issuance of  convertible
notes  provided $4.1 million and proceeds from the sale of common stock provided
$1.3 million.

      Management intends to rely upon internally generated cashflows. However
should  there be a decline in  revenues,  the Company  would  either have to cut
expenses or go to outside  sources of financing.  There can be no assurance that
outside sources of financing would be available to the Company.

Factors Affecting Future Operating Results

      You should  carefully  consider the risks described below before making an
investment  decision.  The risks and  uncertainties  described below are not the
only ones facing us.  Additional risks and  uncertainties not presently known to
us or that we currently deem  immaterial may also impair the Company's  business
operations.  If  any  of the  following  risks  actually  occur,  the  Company's
business,  results of operations or cash flows could be adversely  affected.  In
these cases,  the trading price of our common stock could  decline,  and you may
lose all or part of your investment.


                                       13
<PAGE>

      Historically,  the Company has derived  virtually all of its revenues from
sales of its digitally  controlled  audio mixing console system,  which is based
upon its  hardware  platform.  The Company  believes  that sales of this system,
along with enhancements  thereof,  and the R-1 recorder and new System 5 digital
console will  continue to  constitute  a  significant  portion of the  Company's
revenues.  It is expected that in the foreseeable  future,  a greater portion of
the  Company's  revenue  will  come  from  the new  System  5  digital  console.
Accordingly,  any factor adversely affecting the Company's base system,  whether
technical, competitive or otherwise, could have a material adverse effect on the
Company's business and results of operations.

      The Company has expended and will continue to expend  substantial funds to
introduce  its new System 5 digital  console  around the  world.  The  Company's
ability  to  fund  operations  through  September  30,  2001 is  dependent  upon
achievement  of its operating  plan. If the Company did not attain its operating
plan it would have to obtain additional  financing or cut expenses.  The Company
believes  that  additional  debt or  equity  financing  will be  available  from
existing  investors  and others.  However,  there can be no  assurance as to the
terms and  conditions of any such financing and no certainty that funds would be
available when needed. The inability to obtain additional financing,  if needed,
would be likely to have a material adverse effect on the Company.  To the extent
that any future financing  involves the sale of the Company's equity securities,
the Company's then existing shareholders could be substantially diluted.

      A limited  number of the Company's  system sales  typically  account for a
substantial  percentage  of  the  Company's  quarterly  revenue  because  of the
relatively  high average  sales price of such systems.  Moreover,  the Company's
expense  levels  are  based  in  part on its  expectations  of  future  revenue.
Therefore, if revenue is below expectations, the Company's operating results are
likely  to be  adversely  affected.  In  addition,  the  timing  of  revenue  is
influenced  by a number of other  factors,  including  the timing of  individual
orders and shipments,  industry trade shows,  seasonal customer buying patterns,
changes in product  development  and sales and  marketing  expenditures,  custom
financing arrangements, production limitations and international sales activity.
Because the Company's operating expenses are based on anticipated revenue levels
and a high  percentage of the  Company's  expenses are  relatively  fixed in the
short  term,  variations  in the timing of  recognition  of revenue  could cause
significant  fluctuations  in operating  results from quarter to quarter and may
result in unanticipated quarterly earnings shortfalls or losses.

      The  markets  for the  Company's  system  are  characterized  by  changing
technologies  and new product  introductions.  The Company's future success will
depend in part upon its  continued  ability  to  enhance  its base  system  with
features  including new software and hardware  add-ons and to develop or acquire
and  introduce  new  products  and  features  which meet new market  demands and
changing  customer  requirements  on a timely  basis.  The Company is  currently
designing  and  developing  new  products,  primarily in the areas of recording,
editing  and mixing  functions  of sound  production  as well as  digital  audio
processing and networking systems.  In addition,  there can be no assurance that
products  or  technologies  developed  by others  will not render the  Company's
products or technologies non-competitive or obsolete.

      Historically,  the Company's  primary market success has been in the music
segment of the professional  audio market. In order for the Company to grow, the


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<PAGE>

Company  believes that it must continue to gain market share in the music market
segment,  as well as in its other  targeted  markets.  There can be no assurance
that the Company will be able to compete  favorably in all market segments.  The
Company's inability to compete favorably could have a material adverse effect on
its business and results of operations.  The markets for the Company's  products
are intensely  competitive and characterized by significant  price  competition.
The Company believes that its ability to compete depends on elements both within
and  outside  its  control,  including  the  success  and timing of new  product
development  and  introduction  by the  Company  and  its  competitors,  product
performance  and price,  distribution,  availability of lease or other financing
alternatives, resale of used systems and customer support.

      Currently, the Company uses many sole or limited source suppliers, certain
of which are critical to the integrated  circuits included in the Company's base
system. Major delays or terminations in supplies of such components could have a
significant  adverse  effect on the Company's  timely  shipment of its products,
which in turn would  adversely  affect the  Company's  business  and  results of
operations.  The Company  also  relies on single  vendors to  manufacture  major
subassemblies for its products.  Any extended  interruption in the future supply
or increase in the cost of  subassemblies  manufactured  by its primary or other
third  party  vendors  could have a  material  adverse  effect on the  Company's
business and results of operations.

      In  addition,  as  different  electrical,  radiation  or  other  standards
applicable  to the Company's  products are adopted in  countries,  including the
United  States,  or groups of countries in which the Company sells its products,
the failure of the Company to modify its products, if necessary,  to comply with
such standards would likely have an adverse effect on the Company's business and
results of operations.

      The Company  generally relies on a combination of trade secret,  copyright
law and trademark law, contracts and technical measures to establish and protect
its proprietary  rights in its products and technologies.  However,  the Company
believes that such measures  provide only limited  protection of its proprietary
information,  and there is no assurance  that such  measures will be adequate to
prevent misappropriation. In addition, significant and protracted litigation may
be necessary to protect the Company's intellectual property rights, to determine
the scope of the  proprietary  rights of others or to defend  against  claims of
infringement.  There  can  be no  assurance  that  third-party  claims  alleging
infringement  will not be asserted  against the Company in the future.  Any such
claims  could have a  material  adverse  effect on the  Company's  business  and
results of operations.

      The Company's success depends, in part, on its ability to retain key
management and in addition, the Company's ability to manage any growth will
require it to continue to improve and expand its  management,  operational  and
financial systems and controls. If the Company's  management is unable to manage
growth  effectively, its business and results of operations will be adversely
affected.

      In December 1999, the SEC staff issued Staff  Accounting  Bulletin ("SAB")
No. 101,  "Revenue  Recognition."  The SEC staff addresses several issues in SAB
No. 101,  including  the timing for  recognizing  revenue  derived  from selling
arrangements  that  involve  contractual  customer  acceptance   provisions  and
installation  of the product  occurs after  shipment and transfer of title.  The
Company's  existing revenue  recognition  policy is to recognize  revenue at the


                                       15
<PAGE>

time the customer takes title to the product, generally at the time of shipment,
because the Company has routinely met its installation  obligations and obtained
customer  acceptance.  Applying the  requirements  of SAB No. 101 to the present
selling arrangements used by the Company for the sale of equipment may require a
change in the  Company's  accounting  policy  for  revenue  recognition  and the
deferral  of  the  recognition  of  revenue  from  such  equipment  sales  until
installation  is complete  and  accepted by the  customer.  The effect of such a
change,  if any,  must be  recognized  as a  cumulative  effect  of a change  in
accounting no later than the Company's  fourth quarter of its fiscal year ending
on December 31, 2000. The Company is currently evaluating the impact.

      As a result  of these and  other  factors,  the  Company  has  experienced
significant  quarterly  fluctuations in operating  results and anticipates  that
these  fluctuations  will continue in future periods.  There can be no assurance
that  the  Company  will  be   successful  in   maintaining   or  improving  its
profitability  or avoiding  losses in any future period.  Further,  it is likely
that in some future period the Company's net revenues or operating  results will
be below the expectations of public market securities analysts and investors. In
such event,  the price of the Company's  Common Stock would likely be materially
adversely affected.



PART II.  OTHER INFORMATION


Item 6:  Exhibits and Reports on Form 8-K/A

         (a) Exhibits.

                  Exhibit 27 - Financial Data Schedule (page 18)

                  The  exhibit  listed  on the  accompanying  index  immediately
                  following the signature page is filed as part of this report.

         (b)      Reports on Form 8-K Filed on October 27, 2000












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SIGNATURES


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



                                              Euphonix, Inc.




Date:    November 13, 2000                     By:/s/ STEVE VINING
         ------------------                       ----------------
                                                  Steve Vining, Chief Executive
                                                  Officer

















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