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

                                   Form 10-QSB
                                   (Mark One)


             [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                       For the period ended June 30, 2001


             [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
               For the transition period from _______ to _______.


                        Commission File Number 333-16031

                            FRONT PORCH DIGITAL INC.
                            ------------------------
           (Name of small business issuer as specified in its charter)

              Nevada                                              86-0793960
              ------                                              ----------
  (State or other jurisdiction                                 (I.R.S. Employer
of incorporation or organization)                            Identification No.)

                                3005 47th Street,
                                    Suite F3
                             Boulder, Colorado 80301
                             -----------------------
                    (Address of principal executive offices)

                                 (303) 443-3734
                                 --------------
                           (Issuer's telephone number)

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

As of July 31, 2001, 25,342,889 shares of the issuer's common stock, par value
$.001, were outstanding.

Transitional Small Business Disclosure Format (check one):  Yes [_]   No [X]

<PAGE>


                            FRONT PORCH DIGITAL INC.
                                   FORM 10-QSB
                                      INDEX


                                                                            PAGE
PART I.     Financial Information                                             3

Item 1.     Financial Statements (Unaudited):

            Balance Sheet - June 30, 2001                                     3


            Statements of Operations - Three Months ended June 30, 2001
            and 2000, Six Months ended June 30, 2001 and for the period
            beginning February 1, 2000 (commencement of operations) to
            June 30, 2000                                                     4

            Statements of Cash Flows - Six Months ended June 30, 2001
            and for the period beginning February 1, 2000
            (commencement of operations) to June 30, 2000                     5

            Notes to Financial Statements                                     6

Item 2.     Management's Discussion and Analysis or Plan of Operation         9

PART II.    Other Information:                                               14

Item 1.     Legal Proceedings                                                14


Item 2.     Changes in Securities and Use of Proceeds                        14

Item 6.     Exhibits and Reports on Form 8-K                                 14

Signatures                                                                   15


                                2
<PAGE>


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS -


                            Front Porch Digital, Inc.

                                  Balance Sheet

                                  June 30, 2001
                                   (Unaudited)

ASSETS
Current assets:
  Cash and cash equivalents                                         $   150,822
  Accounts receivable - affiliate                                         4,400
  Accounts receivable                                                   368,201
  Other current assets                                                  100,037
                                                                    -----------
Total current assets                                                    623,460

Property and equipment, net                                           1,369,560

Software development costs                                              121,974

Software and intellectual property, net of
accumulated amortization of $166,000                                  1,484,143

Excess cost over fair value of net assets acquired,
net of accumulated amortization of $549,000                           5,001,455

Other assets                                                             91,758
                                                                    -----------
Total assets                                                        $ 8,692,350
                                                                    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of note payable - employee                        $   160,000
  Notes payable                                                         200,000
  Accounts payable                                                      816,308
  Accrued expenses                                                      439,036
  Accrued expenses - employees                                          468,000
  Accrued vacation                                                      118,955
  Deferred revenue                                                      359,336
                                                                    -----------
Total current liabilities                                             2,561,635

Note payable - employee, net of current portion                         583,963

Stockholders' equity:
  Preferred stock, nonvoting,  $.001 par value,
  5,000,000 shares authorized, none issued or
  outstanding;                                                               --
  Common stock, $.001 par value; 50,000,000
  shares authorized, 24,697,781 shares issued and
  outstanding                                                            24,698
  Additional paid-in capital                                         18,568,106
  Accumulated deficit                                               (13,046,052)
                                                                    -----------
Total stockholders' equity                                            5,546,752
                                                                    -----------
Total liabilities and stockholders' equity                          $ 8,692,350
                                                                    ===========


SEE ACCOMPANYING NOTES.

                                       3
<PAGE>


                                Front Porch Digital, Inc.

                                 Statement of Operations
                                       (Unaudited)

<TABLE>
<CAPTION>
                                                                                     PERIOD BEGINNING
                                                                                     FEBRUARY 1, 2000
                                THREE MONTHS       THREE MONTHS       SIX MONTHS     (COMMENCEMENT OF
                                    ENDED             ENDED              ENDED         OPERATIONS) TO
                                JUNE 30, 2001     JUNE 30, 2000      JUNE 30, 2001     JUNE 30, 2000
                                ----------------------------------------------------------------------
<S>                               <C>                  <C>              <C>                <C>
Revenues:
Products                              $10,980            $31,122            $48,960            $38,722
Services                                6,090              1,954             57,900             14,735
Services - affiliate                       --                 --            169,716                 --
                                 ---------------------------------------------------------------------
Total revenue                          17,070             33,076            276,576             53,457

Cost of revenue:
Products                                5,500             19,110             22,998             23,550
Services                              243,326              3,408            470,411              1,458
                                 ---------------------------------------------------------------------
                                      248,826             22,518            493,409             25,008
                                 ---------------------------------------------------------------------
Gross margin                         (231,756)            10,558           (216,833)            28,449
                                 ---------------------------------------------------------------------

Selling, general and
  administrative expenses           1,584,440            473,732          3,026,013          1,142,059
Research and development              157,843                 --            410,064                 --
Depreciation                          133,271              7,784            283,085              8,662
Amortization                          256,756                 --            513,512                 --
                                 ---------------------------------------------------------------------
                                    2,132,310            481,516          4,232,674          1,150,721
                                 ---------------------------------------------------------------------

Loss from operations               (2,364,066)          (470,958)        (4,449,507)        (1,122,272)

Other income (expense):
Interest income                         4,898                 --             29,004                 --
Interest expense                       (4,500)           (16,125)            (9,000)           (18,375)
                                 ---------------------------------------------------------------------
                                          398            (16,125)            20,004            (18,375)
                                 ---------------------------------------------------------------------
Net loss                          ($2,363,668)         ($487,083)       ($4,429,503)       ($1,140,647)
                                 =====================================================================

Weighted average number
  of common shares
  outstanding-basic
  and diluted                      24,572,008         15,892,335         24,569,419         15,874,263
                                 =====================================================================

Loss per common share-basic
  and diluted                          ($0.10)            ($0.03)            ($0.18)            ($0.07)
                                 =====================================================================
</TABLE>


SEE ACCOMPANYING NOTES.

                                       4
<PAGE>


                            Front Porch Digital, Inc.

                             Statement of Cash Flows
                                   (Unaudited)


                                                                PERIOD BEGINNING
                                                                FEBRUARY 1, 2000
                                                 SIX MONTHS      (COMMENCEMENT
                                                   ENDED       OF OPERATIONS) TO
                                               JUNE 30, 2001     JUNE 30, 2000
                                                -----------       -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                        ($4,429,503)      ($1,140,647)
Adjustments to reconcile net loss to net
  cash used in operating activities:
   Depreciation and amortization                    796,597             8,662
   Stock option compensation cost                   654,056            36,920
   Changes in operating assets and liabilities:
      Decrease in accounts receivable - affiliate   218,010                --
      Increase in accounts receivable              (368,201)           (1,591)
      Increase in other current assets              (23,395)               --
      Increase in accounts payable                  334,900            93,641
      Increase in accrued expenses                   62,995           543,718
      Increase in accrued expenses - employees      200,000                --
      Increase in accrued vacation                   45,001                --
      Increase in deferred revenue                  359,336                --
      Other                                         (26,775)           (6,084)
                                                -----------       -----------
Net cash used in operating activities            (2,176,979)         (465,381)
                                                -----------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures                               (215,871)         (173,904)
Software development costs                         (121,974)               --
Other investing activities                          (28,881)               --
Purchase of investment                                   --          (300,000)
                                                -----------       -----------
Net cash used in investing activities              (366,726)         (473,904)
                                                -----------       -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable                              --           800,000
Proceeds from issuance of common stock              250,000           377,440
                                                -----------       -----------
Net cash provided by financing activities           250,000         1,177,440
                                                -----------       -----------

Net (decrease) increase in cash and
  cash equivalents                               (2,293,705)          238,155
Cash and cash equivalents, beginning of period    2,444,527            14,483
                                                -----------       -----------
Cash and cash equivalents, end of period           $150,822          $252,638
                                                ===========       ===========


SEE ACCOMPANYING NOTES.

                                       5
<PAGE>


                            Front Porch Digital, Inc.
                          Notes to Financial Statements
                                   (Unaudited)


1.   ORGANIZATION AND BASIS OF PRESENTATION

Front Porch  Digital Inc. (the  "Company") is in the emerging  market of digital
information  asset  management.  The  Company  utilizes  a suite of  proprietary
products  and  services  that enable  customers  to migrate data from nearly any
media type and data  format to any other  media type and  format.  Incorporating
software-based  methodologies and intellectual  property  throughout its service
offerings allows content to be captured,  converted,  managed and distributed in
digital form efficiently and cost effectively.

The Company's customers are primarily located within the United States.

On May 2, 2000, the Company,  formerly  Empire  Communications,  Inc., and Front
Porch Digital Inc., a Delaware  corporation which was formed on February 1, 2000
("Front Porch"),  executed an Agreement and Plan of  Reorganization  pursuant to
which 100% of Front  Porch's stock was  effectively  exchanged for a controlling
interest in a publicly-held  "shell"  corporation that concurrently  changed its
name to Front Porch Digital Inc. This  transaction is commonly  referred to as a
"reverse acquisition".  For financial accounting purposes,  this transaction has
been  treated  as the  issuance  of stock  for the net  monetary  assets  of the
Company,  accompanied by a recapitalization  of Front Porch, with no goodwill or
other intangible assets recorded.

For financial  reporting  purposes,  Front Porch is considered  the acquirer and
therefore the historical  operating results of Empire  Communications,  Inc. are
not presented.  The accompanying  financial  information includes the results of
operations  and cash flows of Front Porch for the period  beginning  February 1,
2000 (commencement of operations) to May 2, 2000.

The  financial  statements  of the Company have been prepared on a going concern
basis,  which  contemplates  the  realization  of assets and  liabilities in the
normal course of business.  Accordingly, the financial statements do not include
any adjustments that might be necessary should the Company be unable to continue
in  existence.  For the six months  ended June 30,  2001,  the Company  incurred
losses and negative  cash flows from  operating  activities  of $4.4 million and
$2.2 million,  respectively.  These factors create significant uncertainty about
the Company's ability to continue as a going concern.

During 2001, the Company has been focused on completing  the  development of its
products and service offerings that facilitate the distribution of digital video
content.  The  Company  has also  been  marketing  its  suite of data and  video
solutions to the marketplace and has begun  discussions  with several  potential
customers  to begin  testing the beta  versions of the  digital  video  archive.
During the second quarter, the Company was awarded a $2.5 million contract to be
completed  in 2002,  to  convert  in  excess of one  billion  check  images  and
associated data to a single standard  digital format.  Management of the Company
recognizes  that  additional  resources  will be required to continue as a going
concern and has been seeking additional sources of capital.  Management believes
that these actions will enable the Company to obtain sufficient cash to continue
as a going concern.  There can be no assurance that  additional  capital will be
available on terms that are acceptable to the Company.

                                       6
<PAGE>


The accompanying unaudited financial statements have been prepared in accordance
with accounting  principles  generally accepted in the United States for interim
financial  information  and  pursuant  to  the  rules  and  regulations  of  the
Securities  and Exchange  Commission.  Accordingly,  they do not include all the
information and footnotes required by generally accepted  accounting  principles
for complete financial  statements.  Management of the Company believes that the
disclosures  are adequate to make the information  presented not misleading.  In
the opinion of  management,  all  adjustments  considered  necessary  for a fair
presentation  have  been  included  and such  adjustments  are of a  normal  and
recurring nature. For further information, refer to the financial statements and
footnotes  included in the  Company's  Annual Report on Form 10-KSB for the year
ended December 31, 2000.

Operating  results for the three and six month  periods  ended June 30, 2001 are
not necessarily indicative of the operating results expected for the year ending
December 31, 2001.

2.   RELATED PARTY TRANSACTIONS

The Company  leases office space on a  month-to-month  basis from Formal Systems
America Inc. ("FSAI"). Certain shareholders of FSAI are also shareholders of the
Company.  Rent expense on this lease for the three and six months ended June 30,
2001 was approximately $35,000 and $70,000 respectively.

3.   PER SHARE DATA

The  Company  reports  its  earnings  (loss)  per share in  accordance  with the
Statement of Financial Accounting Standards No.128, "Accounting for Earnings Per
Share"  ("FAS  128").  Basic  loss per  share is  calculated  using the net loss
divided by the  weighted  average  common  shares  outstanding.  Shares from the
assumed  conversion  of  outstanding  warrants  and options are omitted from the
computations of diluted loss per share because the effect would be antidilutive.

4.   PENDING ACCOUNTING CHANGES

In July 2001,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standard (SFAS) No. 142,  "Goodwill and Other  Intangible
Assets".  This  statement  addresses  financial  accounting  and  reporting  for
acquired goodwill and other intangible  assets. The provisions of this statement
become effective for the Company  beginning  January 1, 2002 and are required to
be  applied  to all  goodwill  and other  intangible  assets  recognized  in the
Company's financial  statements at the date of adoption.  At that time, goodwill
will no  longer  be  amortized,  but will be  tested  for  impairment  annually.
Impairment losses for goodwill and indefinite-lived intangible assets that arise
due to the initial  application of this statement would be reported as resulting
from a change in accounting  principle.  The Company is currently  assessing the
impact this statement will have on the Company's financial statements when it is
adopted at the beginning of 2002.

5.   NOTES PAYABLE

At June 30, 2001,  the Company had a $200,000  unsecured note payable that bears
interest at 9% per annum and is payable on demand. In addition,  the Company had
a non-interest  bearing note payable to an employee of  approximately  $744,000.
This note is payable  based on a percentage  of revenue from the media  services
operations,  ranging  between 2% and 3% per year. In the event the Company exits
the media conversion  business prior to December 31, 2004, the remaining balance
of this note is payable on demand.

                                       7
<PAGE>


6.  SIGNIFICANT CUSTOMERS

For the six  months  ended  June 30,  2001,  revenue  from two  customers,  each
exceeding 10% of total revenue, aggregated 65% and 11%, respectively. There were
no accounts  receivable from these customers as of June 30, 2001. The Company is
a subcontractor for its largest customer,  which owned  approximately 25% of the
Company's outstanding common stock as of June 30, 2001.

7.  STOCKHOLDERS' EQUITY

In June  2001,  the  Company  sold 5 units in a  private  placement,  each  unit
consisting  of 25,000  shares of  unregistered  common  stock  and  warrants  to
purchase  25,000  shares of  unregistered  common stock at an exercise  price of
$3.00 per share.  These warrants  expire on June 30, 2004. The Company  received
aggregate proceeds of $250,000 from this offering.

In July 2001, the Company sold 25.5  additional  units in the private  placement
under the same terms.  The Company received  aggregate  proceeds of $1.3 million
from this offering.

                                       8
<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

GENERAL

When used in this discussion, the words "believes", "anticipates", "expects" and
similar expressions are intended to identify  forward-looking  statements.  Such
statements  are  subject to certain  risks and  uncertainties  that could  cause
actual results to differ materially from those projected.

The Company's  business and results of operations are affected by a wide variety
of factors that could materially and adversely affect the Company and its actual
results, including, but not limited to: (1) the availability of additional funds
to enable  the  Company  to  successfully  pursue  its  business  plan;  (2) the
uncertainties related to the effectiveness of the Company's technologies and the
development of its products and services; (3) the Company's ability to maintain,
attract and integrate  management  personnel;  (4) the ability of the Company to
complete the  development of its proposed  products in a timely manner;  (5) the
Company's  ability to  effectively  market and sell its products and services to
current and new customers;  (6) the Company's  ability to negotiate and maintain
suitable strategic partnerships and corporate  relationships;  (7) the intensity
of competition;  and (8) general economic  conditions.  As a result of these and
other  factors,  the  Company may  experience  material  fluctuations  in future
operating  results on a quarterly or annual basis,  which could  materially  and
adversely affect its business, financial condition,  operating results and stock
price.

These  forward-looking  statements speak only as of the date hereof. The Company
undertakes  no  obligation  to publicly  release the results of any revisions to
these  forward-looking  statements  that  may  be  made  to  reflect  events  or
circumstances   after  the  date  hereof  or  to  reflect  the   occurrence   of
unanticipated events.


OVERVIEW

The Company is establishing  itself as a leading provider in the emerging market
for the  conversion and formatting of data,  images,  audio,  graphics and video
from any  format to any other  format,  for  access  via any  digital  platform,
including  broadband,  Internet,  DVD and HDTV.  The Company is also  seeking to
capitalize on its enterprise media services operations status as one of the only
providers of onsite,  offline  information  migration services to businesses and
governmental  agencies that seek to migrate tape and optical  assets from old to
new formats.


The  Company  intends  to  use  these  and  other  proprietary  technologies  to
accelerate  revenue  growth and generate  positive  cash flows.  Management  has
recently  focused on (i) completing the  development of its products and service
offerings  that are designed to  facilitate  the  distribution  of digital video
content (ii) developing  sales and marketing  programs to build awareness of the
Company's  product and service  offerings and (iii)  building an  infrastructure
that is capable of  effectively  meeting  anticipated  demand for the  Company's
products and services.

The  Company is in the early  stages of  executing  its  business  strategy  and
anticipates  beginning numerous new engagements during the next 12 months.  This
expansion is contingent  upon several  factors,  including the  availability  of
adequate cash resources,  the price of its products and services relative to its
competitors, and general economic and business conditions, among other factors.

                                       9
<PAGE>


RESULTS OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2001 AND 2000.


For the three  months ended June 30,  2001,  the Company  reported a net loss of
$2.4 million, or ($.10) per share, compared to a net loss of $487,000, or ($.03)
per share, for the three months ended June 30, 2000.

Total  revenue for the three  months  ended June 30,  2001 of  $17,000,  has not
changed  significantly  from total revenue of $33,000 for the three months ended
June 30, 2000.  For the three months  ended June 30,  2001,  $11,000,  or 65% of
total revenue,  was attributable to sales of software and related products.  The
remaining  $6,000,  or 35%,  was  attributable  to  data  and  video  conversion
services.  For the three months ended June 30, 2000,  substantially  all revenue
was attributable to sales of software and related products. Substantially all of
the Company's revenue has been derived from customers in the United States.

Total gross margin was negative  $(232,000) or (1,358)% of total revenue for the
three months ended June 30, 2001 compared to $11,000 or 32% of total revenue for
the three  months  ended June 30,  2000.  The decrease in total gross margin was
principally  due to  excess  capacity  within  the  Company's  service  delivery
function.  In June 2001,  the Company  reduced its headcount  within the service
delivery  group by 45% and took  other  actions to reduce  costs.  For the three
months ended June 30, 2001, sales of software and related  products  resulted in
gross  margins of 50% and the  provision of data and video  conversion  services
resulted in negative gross margins of (3,896%).  For the three months ended June
30, 2000,  substantially all of the Company's gross margins were attributable to
video  conversion  services.  The Company  plans to  significantly  increase its
revenue,  and  therefore  expects  expenses in this  category  to also  increase
substantially.

Selling, general and administrative expenses for the three months ended June 30,
2001 were $1.6 million  compared to $474,000 for the three months ended June 30,
2000. The increase in these expenses was primarily related to the acquisition of
the media  services  operations of  StorageTek in October 2000,  the addition of
several key senior managers,  the creation of a sales and marketing  department,
and the  establishment  of the  corporate  headquarters.  Selling,  general  and
administrative  expenses  for the three  months  ended June 30,  2001  consisted
primarily of  $1,155,000  for salaries and related  benefits for  employees  not
directly  related to the production of revenue,  $146,000 in professional  fees,
$114,000 for travel, $88,000 of facilities costs, and $82,000 for general office
expenses. Should the Company secure additional funding, it plans to increase its
sales and  marketing  efforts  and,  to a lesser  extent,  continue to build its
infrastructure  and,  therefore,  expects  expenses in this category to increase
significantly.


Research and development  expenses for the three months ended June 30, 2001 were
$158,000  compared to a nominal amount for the three months ended June 30, 2000.
The  increase was due to the  development  of software  tools and products  that
facilitate  the  conversion  and  migration of data from legacy media to current
technology,  convert analog content to multiple digital formats,  and manage and
reformat digital content on demand.

                                       10
<PAGE>


Depreciation  and  amortization  expense was $390,000 for the three months ended
June 30,  2001  compared  to $8,000 for the three  months  ended June 30,  2000.
Amortization  expense  consisted of amortization of the excess cost of the media
services  operations  over the fair value of the net assets  acquired  and other
intangible assets.  Depreciation  expense consists of depreciation of furniture,
equipment,  software  and  improvements.  The  increase  in these  expenses  was
primarily   attributable  to  the  assets  acquired  in  conjunction   with  the
acquisition of the media services operations of StorageTek in October 2000.

Interest expense was $4,500 for the three months ended June 30, 2001 compared to
$16,000 for the three months ended June 30, 2000.  Interest expense  represented
interest  on the notes  payable.  The  outstanding  balance  on these  notes was
$200,000 and $800,000 as of June 30, 2001 and 2000, respectively.


FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND FOR THE PERIOD BEGINNING  FEBRUARY 1,
2000 (COMMENCEMENT OF OPERATIONS) TO JUNE 30, 2000

For the six months ended June 30, 2001, the Company  reported a net loss of $4.4
million, or ($.18) per share,  compared to a net loss of $1.1 million, or ($.07)
per share, for the period ended June 30, 2000.

Total revenue for the six months ended June 30, 2001 was  $277,000,  an increase
of 417% from total  revenue of $53,000 for the period ended June 30,  2000.  The
increase  in total  revenue  was  primarily  due to the  completion  of  ongoing
projects  acquired in  conjunction  with the  acquisition  of the media services
operations of Storage Technology Corporation ("StorageTek") in October 2000. For
the six months  ended  June 30,  2001,  $49,000,  or 18% of total  revenue,  was
attributable to sales of software and related products.  The remaining $227,000,
or 82%, was attributable to data and video conversion  services.  For the period
ended June 30, 2000, $39,000, or 72% of total revenue, was attributable to sales
of  software  and  related  products.   The  remaining  $15,000,   or  28%,  was
attributable to video conversion  services.  Substantially  all of the Company's
revenue has been derived from customers in the United States.

Total gross margin was negative  $(217,000),  or (78)% of total revenue, for the
six months ended June 30, 2001 compared to $28,000, or 53% of total revenue, for
the  period  ended  June 30,  2000.  The  decrease  in total  gross  margin  was
principally  due to the excess capacity  within the Company's  service  delivery
function.  In June 2001,  the Company  reduced its headcount  within the service
delivery group by 45% and took other actions to reduce costs. For the six months
ended June 30, 2001,  sales of software and related  products  resulted in gross
margins of 53% and the provision of data and video conversion  services resulted
in negative gross margins of (107%).  For the period ended June 30, 2000,  sales
of  software  and  related  products  resulted  in gross  margins of 39% and the
provision of video  conversion  services  resulted in gross  margins of 90%. The
Company  plans to  significantly  increase its revenue,  and  therefore  expects
expenses in this category to also increase substantially.

Selling,  general and administrative  expenses for the six months ended June 30,
2001 were $3.0  million  compared to $1.1  million for the period ended June 30,
2000. The increase in these expenses was primarily due to the acquisition of the
media services operations of StorageTek in October 2000, the addition of several
key senior managers,  the creation of a sales and marketing department,  and the
establishment of the corporate headquarters. Selling, general and administrative
expenses  for  the six  months  ended  June  30,  2001  consisted  primarily  of
$2,062,000 for salaries and related  benefits for employees not directly related
to the  production  of revenue,  $272,000 in  professional  fees,  $265,000  for
travel,  $168,000 of facilities costs, $227,000 for general office expenses, and
$24,000 for leased equipment.  Should the Company secure additional  funding, it
plans to increase  its sales and  marketing  efforts  and,  to a lesser  extent,
continue to build its infrastructure  and,  therefore,  expects expenses in this
category to increase significantly.

                                       11
<PAGE>


Research  and  development  expenses for the six months ended June 30, 2001 were
$410,000  compared to a nominal  amount for the period ended June 30, 2000.  The
increase  was  due to the  development  of  software  tools  and  products  that
facilitate  the  conversion  and  migration of data from legacy media to current
technology,  convert analog content to multiple digital formats,  and manage and
reformat digital content on demand.

Depreciation and amortization expense was $797,000 for the six months ended June
30, 2001  compared to $9,000 for the period  ended June 30,  2000.  Amortization
expense  consisted  of  amortization  of the excess  cost of the media  services
operations over the fair value of the net assets  acquired and other  intangible
assets.  Depreciation expense consists of depreciation of furniture,  equipment,
software  and  improvements.  The  increase  in  these  expenses  was  primarily
attributable to the assets  acquired in conjunction  with the acquisition of the
media services operations of StorageTek in October 2000.

Interest  expense was $9,000 for the six months ended June 30, 2001  compared to
$18,000  for the  period  ended  June 30,  2000.  Interest  expense  represented
interest  on the notes  payable.  The  outstanding  balance  on these  notes was
$200,000 and $800,000 as of June 30, 2001 and 2000 respectively.

FINANCIAL CONDITION

The  Company's  principal  sources  of  liquidity  have  been its cash  reserves
received from a private  placement  completed by the Company in October 2000. At
June 30, 2001, the Company had $151,000 of cash and cash equivalents.

The Company used net cash of $2.2 million in operating activities during the six
months  ended June 30,  2001  compared  to  $465,000  for the  period  beginning
February 1, 2000  (commencement  of operations) to June 30, 2000.  This increase
was  primarily  due to the  acquisition  of the  media  services  operations  of
StorageTek in October  2000,  the addition of several key senior  managers,  the
creation  of a sales and  marketing  department,  and the  establishment  of the
Company's corporate headquarters.

The Company  used net cash of $367,000 in  investing  activities  during the six
months ended June 30, 2001, which consisted of $216,000 for capital expenditures
and $122,000 for software development costs. For the period ended June 30, 2000,
the Company used net cash of $474,000 in investing  activities,  which consisted
of $174,000 for capital  expenditures and a $300,000  investment in an unrelated
company.  The Company expects  capital  expenditures  to be  approximately  $1.0
million during the next twelve months.

Financing  activities  provided net cash of $250,000 during the six months ended
June 30, 2001 due to the sale of 125,000  shares of common stock and warrants to
purchase  125,000  shares of common stock.  Financing  activities for the period
ended June 30, 2000  provided net cash of $1.2  million,  of which  $800,000 was
proceeds  received from notes payable and $377,000 was received from the sale of
187,500 shares of common stock.

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<PAGE>


It is  expected  that the  Company's  principal  uses of cash will be to provide
working capital, to finance capital  expenditures and product  development,  and
for other general corporate purposes.  The amount of spending in each respective
area will be dependent upon the total capital available to the Company.

The current level of cash flows from operating  activities are not sufficient to
enable the Company to continue to operate and to execute its business  strategy.
As a result,  the Company is seeking  additional  capital.  In the interim,  the
Company is managing its investments (and its growth) in infrastructure  based on
its cash position and the near term cash flow  generated from its media services
operations.  Additionally,  in July 2001,  the Company  sold  637,500  shares of
common  stock and  warrants  to  purchase  637,500  shares of common  stock in a
private placement which the Company received aggregate proceeds of $1.3 million.
The Company  anticipates  having sufficient cash to continue  operations through
the fourth quarter of 2001. These conditions raise  substantial  doubt about the
Company's ability to continue as a going concern. The Company's actual financial
results may differ materially from the stated plan of operations.  Factors which
may cause a change from the  Company's  plan of  operations  vary,  but include,
without limitation, decisions of the Company's management and board of directors
not to pursue the stated plan of  operations  based on its  reassessment  of the
plan, and general economic  conditions.  If the Company is successful in raising
additional  capital,  the Company  anticipates that its operating  expenses will
increase  over the next 12 months as it  accelerates  execution  of its business
strategy. There can be no assurance that additional capital will be available on
terms  that  are  acceptable  to  the  Company.  Additionally,  there  can be no
assurance  that the  Company's  business  will  generate  cash flows at or above
current levels. Accordingly,  the Company may seek other means to gain cash flow
flexibility.

As of June 30, 2001,  the Company had liquid  assets (cash and cash  equivalents
and  accounts  receivable)  of $523,000 and current  assets of  $623,000.  These
assets were primarily derived from operating activities.

Long-term  assets of $8.1 million at June 30, 2001,  consisted  primarily of the
excess of cost  over  fair  value of the media  services  assets  acquired  from
StorageTek of $5.0 million,  software and intellectual  property of $1.5 million
and property and equipment of $1.4 million.

Current  liabilities  of $2.6 million at June 30, 2001  consisted of $816,000 of
accounts payable; $439,000 of accrued expenses;  $468,000 of accrued expenses to
employees,  of which  $168,000 is payable to an employee  upon the closing of an
offering which raises gross  proceeds of at least $5.0 million,  and $300,000 of
bonuses payable to select  employees;  $359,000 of deferred  revenue on projects
currently in process; $200,000 of a note payable due on demand; $160,000 for the
current  portion of a note  payable to an  employee  that was  assumed  upon the
acquisition of the media services operations and $119,000 of accrued vacation.

The Company's  working  capital deficit was $1.9 million as of June 30, 2001 for
the reasons described above.

                                       13
<PAGE>


PART II.  OTHER INFORMATION


ITEM 1.   LEGAL PROCEEDINGS -
          The Company is not subject to any material legal proceedings.

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

In June  and  July  2001,  the  Company  sold to six  accredited  investors,  an
aggregate of 30.5 units in a private  placement,  each unit consisting of 25,000
shares of  unregistered  common stock and warrants to purchase  25,000 shares of
unregistered  common stock at an exercise price of $3.00 per share.  The Company
received  aggregate  proceeds  of  $1,525,000  from this  offering.  The Company
intends to use the net proceeds from this private placement  primarily for sales
and marketing expenses; research and development; the purchase of equipment; and
working capital and general  corporate  purposes.  Such transaction was effected
pursuant to Rule 506 under the Securities Act of 1933, as amended.



ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K:

          The following exhibits are filed herewith:

          (a)  Exhibits

Exhibit
Number       Title of Document
------       -------------------------------------------------------

10.1      Employment Agreement dated as of May 1, 2001 between the Company and
          Jean Reiczyk.

10.2      Consulting Agreement dated as of May 1, 2001 between the Company and
          Timothy M. Petry.

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


          (b)  Current Reports on Form 8-K or 8-K/A
               None.

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<PAGE>


                                   SIGNATURES


     In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


Dated:  August 13, 2001                     FRONT PORCH DIGITAL INC.

                                            By: /s/ Jean Reiczyk
                                                -------------------------------
                                                 Jean Reiczyk
                                                 Chief Executive Officer


                                            By: /s/ Timothy M. Petry
                                                -------------------------------
                                                 Timothy M. Petry
                                                 Chief Financial Officer

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