---

---

SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

---

FORM 10-Q

|/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|--- | ----------------------------------------------------------------------------------------
|    | For The Quarterly Period Ended March 31, 2001                                           
|    | 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 000-23305

---

FIRST VIRTUAL COMMUNICATIONS, Inc.

(Exact name of registrant in its character)

Delaware(State or other jurisdiction of incorporation or organization)

77-0357037(I.R.S. Employer Identification Number)


3393 Octavius Drive
Santa Clara, CA 95054(Address of principal executive offices)

(408) 567-7200(Registrant's telephone number, including area code)

---

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 / /

|Common Stock, $0.001 par value(Class) |  | 17,429,183Outstanding as of May 10, 2001
|------------------------------------- |  | ----------------------------------------

---

---

---



First Virtual Communications, Inc.
Form 10-Q

Index

|              |  |                                                                                                    |  | PAGE
|------------- |  | -------------------------------------------------------------------------------------------------- |  | ----
|PART 1.       |  | FINANCIAL INFORMATION                                                                              |  |     
|Item 1.       |  | Financial Statements (unaudited)                                                                   |  |     
|              |  | Condensed Consolidated Balance Sheets at March 31, 2001 and December 31, 2000                      |  | 3   
|              |  | Condensed Consolidated Statements of Operations for the three months ended March 31, 2001 and 2000 |  | 4   
|              |  | Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2001 and 2000 |  | 5   
|              |  | Notes to Unaudited Condensed Consolidated Financial Statements                                     |  | 6   
|Item 2.       |  | Management's Discussion and Analysis of Financial Condition and Results of Operations              |  | 8   
|Item 3.       |  | Quantitative and Qualitative Disclosures About Market Risk                                         |  | 21  
|PART II.      |  | OTHER INFORMATION                                                                                  |  |     
|Item 1.       |  | Legal Proceedings                                                                                  |  | 22  
|Item 6.       |  | Exhibits and Reports on Form 8-K                                                                   |  | 22  
|SIGNATURES    |  | 23                                                                                                
|EXHIBIT INDEX |  | 25                                                                                                

2

---



PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

First Virtual Communications, Inc.  Condensed Consolidated Balance Sheets  (in thousands, except share data; unaudited)

|                                             |                                        | (Unaudited)                |       
|-------------------------------------------- | -------------------------------------- | -------------------------- | ------
|
|ASSETS                                       |                                        |                            |       
|Current assets:                              |                                        |                            |       
|                                             | Cash and cash equivalents              |                            | $     
|                                             | Short-term investments                 |                            |       
|                                             | Accounts receivable                    |                            |       
|                                             | Inventory                              |                            |       
|                                             | Prepaids and other current assets      |                            |       
|                                             |                                        |                            |       
|                                             |                                        | Total current assets       |       
|Property and equipment, net                  |                                        |                            | 2,607 
|Other assets                                 |                                        |                            | 2,192 
|                                             |                                        |                            |       
|                                             |                                        | $                          | 38,727
|                                             |                                        |                            |       
|LIABILITIES AND STOCKHOLDERS' EQUITY         |                                        |                            |       
|Current liabilities:                         |                                        |                            |       
|                                             | Current portion of long-term debt      |                            | $     
|                                             | Accounts payable                       |                            |       
|                                             | Accrued liabilities                    |                            |       
|                                             | Deferred revenue                       |                            |       
|                                             |                                        |                            |       
|                                             |                                        | Total current liabilities  |       
|Long-term debt, net of current portion       |                                        |                            | 73    
|Minority interest in consolidated subsidiary |                                        |                            | 253   
|Stockholders' equity:                        |                                        |                            |       
|                                             | Series A Convertible Preferred Stock   |                            |       
|                                             | Common stock                           |                            |       
|                                             | Additional paid-in capital             |                            |       
|                                             | Accumulated other comprehensive income |                            |       
|                                             | Accumulated deficit                    |                            |       
|                                             |                                        |                            |       
|                                             |                                        | Total stockholders' equity |       
|                                             |                                        |                            |       
|                                             |                                        | $                          | 38,727
|                                             |                                        |                            |       

See
accompanying notes to condensed consolidated financial statements.

3

---

First Virtual Communications, Inc.  Condensed Consolidated Statements of Operations  (in thousands, except per share data; unaudited)

|                                             |                                     | Three months ended
March 31 |       
|-------------------------------------------- | ----------------------------------- | --------------------------- | ------
|
|Revenues                                     |                                     | $                           | 4,382 
|Cost of revenues                             |                                     |                             | 2,587 
|                                             |                                     |                             |       
|                                             | Gross profit                        |                             |       
|                                             |                                     |                             |       
|Operating expenses:                          |                                     |                             |       
|                                             | Research and development            |                             |       
|                                             | Selling, general and administrative |                             |       
|                                             |                                     |                             |       
|                                             |                                     | Total operating expenses    |       
|                                             |                                     |                             |       
|Operating loss                               |                                     |                             | (8,645
|Other income, net                            |                                     |                             | 316   
|Minority interest in consolidated subsidiary |                                     |                             | (2    
|                                             |                                     |                             |       
|Net loss                                     |                                     | $                           | (8,331
|                                             |                                     |                             |       
|Net loss per share:                          |                                     |                             |       
|                                             | Basic and diluted                   |                             | $     
|Shares used to compute net loss per share:   |                                     |                             |       
|                                             | Basic and diluted                   |                             |       

See accompanying notes to condensed consolidated financial statements.

4

---



First Virtual Communicaions, Inc.  Condensed Consolidated Statements of Cash Flows  (in thousands; unaudited)

|                                                     |                                                                             | Three Months Ended
March 31,                                     |                                  
|---------------------------------------------------- | --------------------------------------------------------------------------- | ---------------------------------------------------------------- | ---------------------------------
|
|Cash flows from operating activities:                |                                                                             |                                                                  |                                  
|                                                     | Net loss                                                                    |                                                                  | $                                
|                                                     | Adjustments to reconcile net loss to net cash used in operating activities: |                                                                  |                                  
|                                                     |                                                                             | Depreciation and amortization                                    |                                  
|                                                     |                                                                             | Provision for doubtful accounts                                  |                                  
|                                                     |                                                                             | Stock compensation                                               |                                  
|                                                     |                                                                             | Provision for inventory                                          |                                  
|                                                     |                                                                             | Other                                                            |                                  
|                                                     |                                                                             | Changes in assets and liabilities net of effects of acquisitions |                                  
|                                                     |                                                                             |                                                                  | Accounts receivable              
|                                                     |                                                                             |                                                                  | Inventory                        
|                                                     |                                                                             |                                                                  | Prepaid expenses and other assets
|                                                     |                                                                             |                                                                  | Accounts payable                 
|                                                     |                                                                             |                                                                  | Accrued liabilities              
|                                                     |                                                                             |                                                                  | Deferred revenue                 
|                                                     |                                                                             |                                                                  |                                  
|                                                     |                                                                             |                                                                  |                                  
|                                                     |                                                                             |                                                                  |                                  
|Cash flows from investing activities:                |                                                                             |                                                                  |                                  
|                                                     | Acquisition of property and equipment                                       |                                                                  |                                  
|                                                     | Proceeds from sales of short-term investments                               |                                                                  |                                  
|                                                     | Repayment of shareholder notes receivable                                   |                                                                  |                                  
|                                                     |                                                                             |                                                                  |                                  
|                                                     |                                                                             | Net cash (used in) provided by investing activities              |                                  
|                                                     |                                                                             |                                                                  |                                  
|Cash flows from financing activities:                |                                                                             |                                                                  |                                  
|                                                     | Proceeds from issuance of stock, net                                        |                                                                  |                                  
|                                                     | Increase (repayment) of capital lease obligations                           |                                                                  |                                  
|                                                     |                                                                             |                                                                  |                                  
|                                                     |                                                                             | Net cash provided by financiing activities                       |                                  
|                                                     |                                                                             |                                                                  |                                  
|Net (decrease) increase in cash and cash equivalents |                                                                             |                                                                  | 4,356                            
|Cash and cash equivalents at beginning of period     |                                                                             |                                                                  | 7,077                            
|                                                     |                                                                             |                                                                  |                                  
|Cash and cash equivalents at end of period           |                                                                             | $                                                                | 11,433                           
|                                                     |                                                                             |                                                                  |                                  

See
accompanying notes to condensed consolidated financial statements.

5

---



First Virtual Communications, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Basis of Presentation

The unaudited condensed consolidated financial statements included herein reflect all adjustments, consisting only of normal recurring adjustments, which, in
the opinion of management, are necessary for a fair statement of First Virtual Communications, Inc. (the "Company") consolidated financial position, results of operations and cash flows for the
periods presented. These condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2000. The December 31, 2000 condensed consolidated balance sheet was derived from audited financial statements, but does
not include all disclosures required by generally accepted accounting principles. The results of operations for the period ended March 31, 2001 are not necessarily indicative of the results to
be expected for any subsequent quarter or for the entire fiscal year ending December 31, 2001.

2. Inventory

Inventories as of March 31, 2001 and December 31, 2000 were (in thousands):

|               |                 | March 31, 2001 |       | December 31, 2000
|-------------- | --------------- | -------------- | ----- | -----------------
|Raw materials  |                 | $              | 3,717 |                  
|Finished goods |                 |                | 6,693 |                  
|               |                 |                |       |                  
|               | Total inventory |                | $     | 10,410           
|               |                 |                |       |                  

3. Net Loss Per Share

Net loss per share is computed in accordance with Statement of Financial Accounting Standards No. 128 "Earnings Per Share" ("FAS 128").
FAS 128 requires the Company to report both basic earnings (loss) per share, which is based on the weighted-average number of common shares outstanding excluding contingently issuable or
returnable shares such as shares of unvested restricted common stock, and diluted earnings (loss) per share, which is based on the weighted-average number of common shares outstanding and dilutive
potential common shares outstanding.

As
a result of the losses incurred by the Company for the three months ended March 31, 2001 and 2000, all potential common shares were anti-dilutive and were
excluded from the diluted net loss per share calculations for such periods.

The
following table summarizes securities outstanding which were not included in the calculations of diluted net loss per share for the three months ended March 31, 2001 and
2000, since their inclusion would be anti-dilutive (in thousands):

|                                 |  | March 31,
|-------------------------------- |  | ---------
|
|Unvested restricted common stock |  |         
|Common stock options             |  | 8,125    
|Common stock warrants            |  | 1,016    
|Convertible preferred stock      |  | 3,430    

Unvested
restricted common stock represents stock that has been issued but which is subject to repurchase to the extent the holder does not remain associated with the Company until
such shares are vested. The common stock warrants are exercisable at $7.00 to $12.00 per share and expire at various

6

---

times from May 2001 through June 2005. The stock options outstanding at March 31, 2001, had a weighted average exercise price per share of $8.17, and expire beginning in
April 2001 through September 2010. Convertible preferred stock represents the number of shares of common stock that would result if the Series A Preferred Stock was converted at a
conversion rate of 125 for 1.

4. Comprehensive Loss

The Company's comprehensive loss for the three months ended March 31, 2001 and 2000 was $8,368,000 and $3,979,000, respectively.

5. Litigation

On or about April 9, 1999, several purported class action suits were filed in the United States District Court for the Northern District of California
alleging violations of the federal securities laws against the Company and certain of its officers and directors in connection with the Company's reporting of its financial results for the period
ended December 31, 1998. The court dismissed these actions without
leave to amend on February 14, 2000. The plaintiffs filed a notice of appeal with the Ninth U.S. Circuit Court of Appeals on March 29, 2000. The appeal has been fully briefed by all
parties and no date for oral argument has yet been set.

On
April 23, 2001, the Company received notice of a shareholder's derivative action filed in California Superior Court in the County of Santa Clara, alleging that, among other
things, certain directors and officers of the Company sold shares of the Company stock between January 21, 1999 and April 6, 1999, while in possession of material non-public
information pertaining to the Company. The Company is reviewing the action and due to the uncertainties that exist, the impact, if any, on the Company cannot be reasonably estimated based on facts
currently available to management.

6. Issuance of Convertible Preferred Stock

On June 8, 2000, the Company issued 27,437 shares of Series A Convertible Preferred Stock (the "Preferred Stock") in a private placement to
Vulcan Ventures Incorporated ("Vulcan") for an aggregate purchase price of $27,437,000. The Preferred Stock is convertible into 3,429,625 shares of common stock of the Company. The Company also issued
a five-year warrant to Vulcan to purchase 850,000 shares of the Company's common stock at an exercise price of $7.00 per share. On the date of issuance, the warrant had an approximate fair
market value of $3,700,000, determined using the Black-Scholes pricing model. The aggregate gross proceeds from the transaction exceed the fair value of the stock and warrants issued. The warrant
provides anti-dilution protection to Vulcan in the event that the Company issues additional shares of common stock at a price less than $7.00 per share, subject to certain exceptions.

7. New Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133"). The standard requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value.
Under SFAS No. 133, gains or losses resulting from changes in the values of derivatives are to be reported in the statement of operations or as a deferred item, depending on the use of the
derivatives and whether they qualify for hedge accounting. The key criterion for hedge accounting is that the derivative must be highly effective in achieving offsetting changes in fair value or cash
flows of the hedged items during the term of the hedge. In June 1999, the FASB issued SFAS No. 137, "Deferral of the Effective Date of FASB Statement Number 133," to defer for one year

7

---

the effective date of implementation of SFAS No. 133. SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal years beginning after June 15, 2000, with earlier
application encouraged. The
adoption of SFAS No. 133 on January 1, 2001 did not have a material impact on the Company's financial position, results of operations or cash flows.

8. Pending merger with CUseeMe Networks, Inc.

On March 22, 2001, the Company, FVC Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of FVC ("Merger Sub"), and CUseeMe Networks,
Inc., a Delaware corporation ("CUseeMe") entered into an Agreement and Plan of Merger and Reorganization, dated as of March 22, 2001 (the "Merger Agreement"), pursuant to which Merger Sub
agreed to merge with and into CUseeMe (the "Merger"). Upon consummation of the Merger, Merger Sub will cease to exist, and CUseeMe will become a wholly owned subsidiary of FVC.

The
Company expects to issue in the Merger shares of its common stock which will represent approximately 47% of the outstanding shares of common stock of the combined company at an
exchange ratio of 1.254. In connection with the Merger Agreement, certain stockholders of the Company and CUseeMe, respectively, entered into Voting Agreements whereby they agreed to vote for the
approval of the Merger.

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

The following discussion of the financial condition and results of operations of First Virtual Communications, Inc. (the "Company") should be read in
conjunction with the Condensed Consolidated Financial Statements and the Notes thereto included in Item 1 of this Quarterly Report on Form 10-Q.

In
addition to the historical information contained in this Item, this Item contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. These forward-looking statements include, without limitation, statements
containing the words "believes," "anticipates," "expects," and words of similar import. Such forward-looking statements will have known and unknown risks, uncertainties and other factors that may
cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others: the Company's limited operating history and variability of operating results, market acceptance of video technology, including the
Company's new broadband video services business, dependence on ATM and other technologies, the Company's potential inability to maintain business relationships with telecommunications carriers,
distributors and suppliers, rapid technological changes, competition and consolidation in the video networking industry, the importance of attracting and retaining personnel, management of the
Company's growth, the risk that the merger with CUseeMe Networks will not be completed as anticipated, the failure to execute a definitive collaboration agreement with PictureTel Corporation and
CUseeMe Networks, consolidation and cost pressures in the video networking industry, dependence on key employees, and other risk factors set
forth below and described in this 10-Q report and in other documents the company files with the SEC. The Company assumes no obligation to update any forward-looking statements contained
herein.

Overview

Founded in 1993, First Virtual Communications, Inc., a Delaware corporation, provides equipment and services to deliver rich media applications over
broadband communications networks. The

8

---

Company combines its expertise in networking systems and real-time video technology to deliver end-to-end rich media communications solutions for a wide range of
enterprise video applications, including video calls, video conferences, video broadcasts and video on demand over converged multi-service networks. The Company's strategy is to become the leading
provider of high quality, cost-effective, rich media communications networking solutions in broadband Internet and intranet environments for telecommunications carriers and enterprise
customers. With over seven years of pioneering work in broadband video, the Company is a leading provider of rich media networking hardware, software and services.

Historically,
the Company has focused on providing video-networking systems to the government, education and healthcare markets, both through direct and indirect sales. FVC's original
equipment manufacturer ("OEM") distribution and system integration partners include Accord, Adaptive Broadband, Ameritech, Alcatel,AT&T, British
Telecommunications plc ("British Telecom" or "BT"), Cisco Systems, Inc. ("Cisco"), China Telecom, CUseeMe Networks, Electronic Data Systems Corporation ("EDS"), Ezenia!, France Telecom S.A.
("France Telecom"), Nortel Networks Corporation ("Nortel"), Polycom, Qwest Communications International, Inc. ("Qwest"), SBC Communications Inc., Shanghai Telecom, Telstra, Verizon
Communications ("Verizon") and other leading companies worldwide.

The
Company is leveraging its leadership position in video networking to capitalize on the rapidly emerging opportunity to provide broadband rich media communications solutions to
enterprise markets, either as systems sold through channels or services delivered through service providers. The Company's web-based Click To Meet software serves as the user
interface and is designed for the end-user's ease-of-use. To date, solutions sales announcements by the Company with service providers include expanded customer
relationships with AT&T, EDS, Wind, Noicom and China Telecom, all of which are deploying broadband video services using the Company's products and solutions. The Company's broadband rich media
communications solutions enable telecommunications carriers to deliver a comprehensive set of rich media applications over the carrier's existing broadband networks into conference rooms, as well as
to the users' desktops.

The
Company also markets its systems to enterprise customers, which include business customers, government users, education and healthcare providers, primarily through indirect sales
channels. To date, sales announced by the Company include enterprise customers such as DaimlerChrysler, the National Guard, and Saudi Aramco. For each of the quarters ended March 31, 2001 and
2000, approximately 77% of the Company's revenues were from enterprise customers, and 23% from service providers.

The
Company maintains a network of distributors in Europe and Asia licensed to sell its products under the FVC.COM name. Approximately 25% and 29% of the Company's revenues were
generated from customers outside of North America during the three months ended March 31, 2001 and 2000, respectively. The Company expects that direct sales from shipments to customers outside
of North America will continue to represent a significant portion of its future revenues. In addition, the Company believes that a small portion of its sales through some of its distribution partners
is sold to international end-users.

Revenues
from the Company's international operations are subject to various risks, including seasonality, longer payment cycles, changes in regulatory requirements and tariffs,
reduced protection of intellectual property rights, political and economic restraints, and currency risks, among others.

Revenues
are recognized upon shipment of product to customers, provided no significant obligations remain, collectibility is probable and returns are estimable. Revenues from sales to
certain

9

---

of the Company's resellers are subject to agreements allowing rights of return. In such cases, the Company provides reserves for estimated future returns upon revenue recognition. These reserves are
estimated based upon historical rates of returns and allowances, reseller inventory levels, the Company's estimates of sell through by resellers and other related factors. Actual results could differ
from these estimates. In the event of the inability to estimate returns from any reseller, the Company defers revenue recognition until the reseller has sold through the products. Advance payments
received from customers and gross margin deferred with respect to sales to resellers wherein the Company does not have the ability to estimate returns are recorded as deferred revenue. At
March 31, 2001, deferred revenue totaled $1,494,000.

The
Company has experienced, and is likely to experience in the future, fluctuations in revenues, gross margins and operating results. Various factors contribute to the fluctuations
in revenues, gross margins and operating results, including the Company's success in developing its rich media business and in developing, introducing and shipping new products and product
enhancements, the Company's success in accurately forecasting demand for new orders, which may have short lead-times before required shipment, product mix, percentage of revenues derived
from original equipment manufacturers, or OEMs, versus distributors or resellers, new product introductions and price reductions by competitors, the efforts of OEMs, distributors, resellers, and other
third parties on behalf of the Company, the Company's ability to attract, retain and motivate qualified personnel, the timing and amount of
research and development efforts and success, and selling, general and administrative expenditures. Further, a significant portion of the Company's expenses is fixed. The Company expects that
operating expenses will increase in the future to fund expanded operations, including the expansion of the Company's broadband video services to telecommunications carriers. To the extent these
increased expenses are not accompanied by an increase in revenues or gross margin, as is expected to be the case as the Company expands its broadband video services business, the Company's business,
financial condition and results of operations would be materially adversely affected. Due to all the foregoing factors, it is likely that in some future quarter, as at times in past quarters, the
Company's results of operations will be below the expectations of public market analysts and investors.

The
Company out-sources certain functions to independent service providers, and the majority of the Company's products are assembled and tested by subcontract
manufacturers, the largest subcontract manufacturer being Saturn Electronics and Engineering, Inc.

On
March 21, 2001, the Company entered into an agreement with CUseeMe Networks, Inc. pursuant to which a wholly owned subsidiary of the Company will be merged into
CUseeMe Networks and CUseeMe Networks will become a wholly owned subsidiary of the Company. CUseeMe Networks provides integrated end-to-end software solutions incorporating
innovative technologies that enable voice and visual communications over IP-based networks for large-scale deployments of video collaboration to enterprise desktops. It is anticipated that
the combined company will provide a broad range of integrated rich media communications solutions that run seamlessly across multiple network types, including IP, ISDN, ATM, PSTN, and DSL, to
enterprises and service providers worldwide. The merger is subject to the approval of the stockholders of both companies and to customary closing conditions.

The
Company agreed on May 7, 2001 to enter into an agreement with PictureTel Corporation and CUseeMe Networks for a strategic technology, marketing, and distribution alliance
that is expected to create a scalable and functional rich media communications solution by combining the three companies' audio, video, web collaboration, application server, multipoint server and
client technologies. The collaboration is subject to the completion of the merger between the Company and CUseeMe Networks and execution of a definitive agreement for the collaboration.

10

---

Results of Operations

The following table sets forth certain items from the Company's condensed consolidated statements of operations as a percentage of total revenues for the
periods indicated.

|                                             |                                     | Three months ended       |      
|-------------------------------------------- | ----------------------------------- | ------------------------ | -----
|
|
|Revenues                                     |                                     | 100.0                    | %    
|Cost of revenues                             |                                     | 59.0                     | %    
|                                             |                                     |                          |      
|                                             | Gross profit                        |                          | 41.0 
|                                             |                                     |                          |      
|Operating expenses:                          |                                     |                          |      
|                                             | Research and development            |                          | 91.0 
|                                             | Selling, general and administrative |                          | 147.3
|                                             |                                     |                          |      
|                                             |                                     | Total operating expenses |      
|Operating loss                               |                                     | (197.3                   | )%   
|Other income, net                            |                                     | 7.2                      | %    
|Minority interest in consolidated subsidiary |                                     | 0.0                      | %    
|                                             |                                     |                          |      
|Net loss                                     |                                     | (190.1                   | )%   
|                                             |                                     |                          |      

---

Revenues.Revenues were $4.4 million for the three months ended March 31, 2001, a decrease of 56.5% from
the three months ended March 31, 2001. The decreases in revenues resulted from lower product shipments to both enterprise customers and service providers. The slowing economy is causing many of
our customers to slow their purchase decision making process.

Gross Profit.Gross profit consists of revenues less the cost of revenues, which consists primarily of costs associated
with the manufacture of the Company's products by outside manufacturers and related costs of freight, inventory obsolescence, royalties and warranties. These manufacturers procure the majority of
materials, except for certain key components, which the Company purchases from third-party vendors.

Gross
profit for the three months ended March 31, 2001 decreased to 41.0%, from 45.0% in the comparable period of 2000. The decline in gross profit was primarily attributable
to the lower overall level of revenues and due to changes in product mix.

Research and Development.Research and development expenses consist primarily of personnel costs, costs of contractors
and outside consultants, supplies and materials expenses, equipment depreciation and overhead costs. Research and development expenses increased to 91.0% of revenues in the quarter ended
March 31, 2001, from 26.6% during the quarter ended March 31, 2000. The increase as a percentage of revenues was due to the reduction in revenues during the three months period of 2001
and due to increases in the dollar level of spending for research and development activities.

11

---

The increase in absolute dollars of spending in the three months ending March 31, 2001 was $1.3 million, compared to the comparable period of 2000. The increase was
principally due to the hiring of additional engineers and consultants for product development, including the expenses of the software development organization in Hyderabad, India and activities
associated with the Company's Click to Meet product. The Company believes that research and development expenses will continue to increase in absolute dollars for the foreseeable future. However, such
expenses will fluctuate depending on various factors, including the status of development projects.

Selling, General and Administrative.Selling, general and administrative (SG&A) expenses include personnel and related
overhead costs for sales, marketing, finance, human resources and general management. SG&A expenses also include costs of outside contractors, advertising trade shows, other marketing and promotional
expenses, and goodwill amortization. As a percentage of revenue, SG&A expenses increased to 147.3%, or $6.5 million during the quarter ended March 31, 2001, from 58.0%, or
$5.8 million during the quarter ended March 31, 2000. The increase in absolute dollars was primarily due to an increase in marketing and business development personnel. The increase in
SG&A as a percentage of revenues in the quarter ended March 31, 2001 reflected expense increases while revenues declined, including increased spending in administrative functions and spending
associated with activities in international markets.

Other Income, Net.Other income, net. consists primarily of interest income earned on short-term
investments and cash balances, offset by interest expense relating to the Company's credit facilities and long-term debt.  Other income, net. totaled $316,000 for the
three months ended March 31, 2001, compared to other income, net. of $93,000 for the three months ended March 31, 2000. The increase was due primarily to the result of interest income
from higher average cash balances in 2001.

Minority Interest in Consolidated Subsidiary.Minority interest reflects the interest of minority stockholders in the
operating results of the Company's consolidated subsidiary in the United Kingdom. The Company acquired a controlling interest in this entity in May 1999. For the three months ended
March 31, 2001 and 2000, the amounts reflect the portion of profits and losses in this subsidiary that were attributable to minority stockholders.

Income Taxes.The Company has incurred losses since inception. No tax benefit was recorded for any period presented, as
the Company believes that, based on the history of such losses and other factors, the weight of available evidence indicates that it is more likely than not that it will not be able to realize the
benefit of these net operating losses, and thus a full valuation reserve has been recorded.

Liquidity and Capital Resources

Since inception, the Company has financed its operations primarily through private and public placements of equity securities and to a lesser extent through
certain credit facilities and long-term debt. As of March 31, 2001, the Company had cash and cash equivalents and short-term investments of $18.4 million and
working capital of $29.6 million.

During
the three months ended March 31, 2001, the Company used $5.3 million in its operating activities. This was comprised of the loss of $8.3 million and
reductions in accounts payable ($0.9 million) and accrued liabilities ($0.6 million), increase in inventory ($3.5 million) and deferred revenue ($0.4 million), and
partially offset by reductions in accounts receivables. The reduction in receivables was due to collection activity and reduced revenues compared with the preceding quarter. During the three months
ended March 31, 2000, the Company used $1.8 million in operating activities. This was comprised of the loss of $4.0 million and a reduction in accounts payable of
$2.3 million, and deferred revenue ($1.0 million), partially offset by reductions in accounts receivable ($2.9 million),

12

---

inventory ($1.0 million), and changes in other assets and liability accounts. Net cash used in investing activities totaled $9.7 million for the three months ended March 31, 2001,
consisted primarily of $9.9 million in net sales of short-term investments and partially offset by $0.2 million used for the acquisition of property and equipment. Net cash
provided by investing activities for the three months ended March 31, 2000 totaled $1.8 million, primarily from proceeds from the sale of short term investments.

Cash
provided by financing activities was $10,000 for the three months ended March 31, 2001, principally from the increase in capital lease obligations. Cash provided by
financing activities was $1.5 million for the three months ended March 31, 2000, principally due to the exercise of employee stock options and purchases under the Company's employee
stock purchase plan.

The
Company believes that its cash and cash equivalents and short-term investments will provide adequate cash to fund its current operations for the next twelve months.

Risk Factors

In addition to the other information provided in this report, the following risk factors should be considered in evaluating the Company and its business.

The Company has a history of operating losses and will incur losses in the future. The Company may never generate sufficient revenue to achieve profitability.

The Company has incurred operating losses in each quarter since it commenced operations. The Company expects to devote substantial resources to expand its
research and development and sales and marketing activities. As a result, the Company expects that it will continue to incur operating losses for the foreseeable future. The Company's revenues
decreased from $10.1 million for the three months ended March 31, 2000 to $4.4 million for the three months ended March 31, 2001, while its net loss increased from
$4.0 million for the three months ended March 31, 2000 to $8.3 million for the three months ended March 31, 2001. At March 31, 2001, the Company had an accumulated
deficit of $64.0 million.

The Company's quarterly results are expected to fluctuate and may cause the price of Company common stock to fall.

The Company has experienced in the past, and is likely to experience, fluctuations in revenues, gross margins and operating results. Various factors could
contribute to the fluctuations in revenues, gross margins and operating results, including the Company's:



13

---



Additionally,
the Company's quarterly operating results may vary significantly depending on a number of factors outside of its control. Further, a significant portion of the Company's
expenses will be fixed. The Company expects that operating expenses will increase in the future to fund expanded operations. To the extent these increased expenses are not accompanied by an increase
in revenues or gross margin, the Company's business, financial condition and results of operations would be materially adversely affected. Due to all the foregoing factors, it is likely that in some
future quarter, as at times in past quarters, the Company's results of operations will be below the expectations of public market analysts and investors, resulting in a negative impact on the
Company's common stock price.

The Company's success depends in part on the market's acceptance of rich media and broadband video services.

The Company's success depends in part on the market's acceptance of rich media and broadband video services. Potential end-users must accept video
applications as a viable alternative to face-to-face meetings and conventional classroom based learning. New applications, such as the use of video in marketing, selling and
manufacturing, are still in the development stage. The Company has only recently entered into its first contracts with telecommunications service providers to provide broadband video services and does
not expect any material revenues from these services to be generated until the second half of
2001. If rich media and broadband video services fail to achieve broad commercial acceptance or if such acceptance is delayed, the Company's business, financial condition and results of operations
would be materially adversely affected.

Integration of the operations of the Company and CUseeMe Networks pursuant to the proposed merger of the companies may be difficult, expensive and lead to adverse effects.

The realization of the anticipated benefits of the proposed merger of the Company and CuseeMe Networks will depend in part on whether the Company and CUseeMe
Networks can integrate their operations in an efficient and effective manner. Integrating the Company and CUseeMe Networks will be a complex, time consuming and expensive process. Successful
integration will require combining the companies' respective:



The
Company and CUseeMe Networks may not accomplish this integration smoothly or successfully and the business synergies may not develop as quickly or to the extent currently
expected. The diversion of the attention of management to the integration effort and any difficulties encountered in combining operations could cause the interruption of, or a loss of momentum in, the
activities of

14

---

either or both of the companies' businesses. Furthermore, employee morale may suffer, and the combined company may have difficulties retaining key employees. In addition, the merger may result in a
loss of customers and suppliers. Some customers of the Company or CUseeMe may seek alternative sources of products or services after the merger due to, among other reasons, a desire not to do business
with the combined company. The Company anticipates that the combined company could experience some customer attrition after the merger. Difficulties in combining operations can also result in the loss
of suppliers. Steps by management to counter potential customer and supplier attrition may not be effective. If the combined company is unable to address any of the foregoing risks, it could
materially harm the combined company's business and impair the value of Company common stock after the merger. If the merger is not completed, the conditions for consummation of the collaboration
between the Company, PictureTel and CUseeMe Networks will not have been met.

The Company's reliance on third party manufacturers and suppliers could adversely affect the Company's business.

The Company currently outsources the manufacturing of its products and purchases critical components for its products from single suppliers. The Company will
rely on several vendors to manufacture certain of its products. If one or more of these manufacturers experiences quality control or other problems, product shipments by the Company may be delayed.
The Company does not have long-term agreements with suppliers, and its current suppliers are not obligated to provide components to the Company for any specific period, in any specific
quantity or at any specific price, except as may be provided in a particular purchase order. Qualifying additional suppliers is a time consuming and expensive process, and there is a greater
likelihood of problems arising during a transition period to a new supplier. If the Company is required to find replacements for its manufacturers or suppliers, this could result in
short-term cost increases and delays in delivery, which could have a material adverse effect on the Company's business, financial condition and results of operations. The Company may not
be able to continue to negotiate arrangements with its existing, or any future, manufacturers or suppliers on terms favorable to the Company. Existing manufacturers and suppliers may not continue to
meet the Company's requirements for products and components.

The Company's success depends on the performance of participants in the Company's distribution channels.

The Company currently sells its products through OEMs, distributors and resellers. The Company's future performance will depend in large part on sales of its
products through these distribution relationships, such as SBC Communications, Verizon and other key partners. Past performance by the
Company should not be considered a reliable indicator of the future performance. Agreements with distribution partners generally provide for discounts based on the Company's list prices, and do not
require minimum purchases or restrict development or distribution of competitive products. Therefore, entities that distribute the Company's products may compete with the Company. In addition, OEMs,
distributors and resellers may not dedicate sufficient resources or give sufficient priority to selling the Company's products. The Company additionally depends on its respective distribution
relationships for most customer support, and expends significant resources to train its respective OEMs, distributors and resellers to support customers. These entities can generally terminate the
distribution relationship upon 30 days notice for a material breach. The loss of a distribution relationship or a decline in the efforts of a material distributor, or loss in business or
cancellation of orders from, significant changes in scheduled deliveries to, or decreases in the prices of products sold to, any of these distribution relationships, could have a material adverse
effect on the Company's results of operations.

15

---



The Company expects to rely on a limited number of large projects for its revenues in the future. Losing one or more of these customers may adversely affect the Company's
future revenue growth.

The Company depends on a limited number of large end-user projects for a majority of its revenues, which has resulted in, and may in the future
result in, significant fluctuations in quarterly revenues. The Company expects that revenues from the sale of products to large end-users will continue to account for a significant
percentage of its revenues in any particular quarter for the foreseeable future. Additionally, a significant portion of Company's sales of video networking products has historically been to
government-related agencies, such as military and educational institutions, or third parties using the Company's products on behalf of government agencies. Such government-related customers are often
subject to budgetary pressures and may from time to time reduce their expenditures and/or cancel orders. The loss of any major customer, or any reduction or delay in orders by such customer, or the
failure of the Company or its distribution partners to market the Company's products successfully to new customers could have a material adverse effect on the Company's business, financial condition
and results of operations.

Because sales of the Company's products require a lengthy sales effort and implementation cycle, revenues may be unpredictable and the Company's business may be harmed.

Sales of the Company's products has required and will continue to require an extended sales effort. The Company must first train the entities with which it has
distribution relationships to market its products. The period from an initial sales call to an end-user agreement typically ranges from six to twelve months, and can be longer. Therefore,
the timing of revenues may be unpredictable. A lengthy delay in recognizing revenue could have a material adverse effect on the Company's business, financial condition and results of operations.

Rapid technological change and evolving industry standards and regulations may impair the Company's ability to develop and market its services.

Rapid technological change and evolving industry standards characterize the market for the Company's respective products. The Company's success will depend, in
part, on its ability to maintain technological leadership and enhance and expand its existing product and services offerings. The Company's success also will depend in part upon its ability and the
ability of its strategic partners to comply with evolving industry standards. The Company's products must meet a significant number of domestic and international video, voice and data communications
regulations and standards, some of which are evolving as new technologies are deployed. The Company's products are currently in compliance with applicable regulatory requirements. However, as
standards evolve, the Company will be required to
modify its products, or develop and support new versions of its products. In addition, telecommunications service providers require that equipment connected to their networks comply with their own
standards, which may vary from industry standards.

The
Company's ability to compete successfully also is dependent upon the continued compatibility and interoperability of its products with products and architectures offered by
various vendors. The Company's business, financial condition and results of operations would be materially adversely affected if it were unable in a timely manner to comply with evolving industry
standards or to address compatibility issues. In addition, from time to time, the Company may announce new products, capabilities or technologies that have the potential to replace or shorten the life
cycle of the Company's existing product offerings. The announcement of product enhancements or new product or service offerings could cause customers to defer purchasing the Company's products. In
addition, the Company has experienced delays in the introduction of new products in the past and may experience such delays in the future. The failure of the Company to introduce successfully new
products, product enhancements or services, or customer delays in purchasing products in anticipation of new product

16

---

introductions or because of changes in industry standards, could have a material adverse effect on the Company's business, financial condition and results of operations.

The Company will face potential volatility in its common stock price.

The market price of Company common stock has been extremely volatile in the past and, like that of other technology companies, may be subject to significant
volatility, depending upon many factors, including:



One
or more of these factors could significantly harm the Company's business and decrease the price of its common stock in the public market. Severe price fluctuations in a company's
stock have frequently been followed by securities litigation. Such litigation can result in substantial costs and a diversion of management's attention and resources and therefore could have a
material adverse effect on the Company's business, financial condition and results of operations. Past financial performance of the Company should not be considered a reliable indicator of future
performance, and investors should not use historical trends to anticipate results or trends in future periods.

If the Company's common stock price consistently trades below $1.00 per share, the Company will face potential delisting from The Nasdaq National Market. If delisting occurs,
the market price and market liquidity of the Company's common stock may be adversely affected.

The Company's common stock is listed on The Nasdaq National Market. Pursuant to Nasdaq rules, Nasdaq may commence procedures to delist any shares trading below
$1.00 per share on The Nasdaq National Market for a period of 30 trading days. The Company's common stock has at times been trading below $1.00 per share. If the Company's common stock price
consistently trades below $1.00 per share, the Company will face potential delisting from The Nasdaq National Market.

If
delisting occurs, the trading of the Company's common stock is likely to be conducted on the OTC Bulletin Board which may have an adverse affect on the market price of the common
stock and on the ability of stockholders and investors to buy and sell the common stock.

The Company will face intense competition from other industry participants and may not be able to compete effectively.

The market for multimedia group communications and networking products and services is extremely competitive. Because the barriers to entry in the market are
relatively low and the potential market is large, the Company expects continued growth in the industry and the entrance of new competitors in
the future. Many of the Company's current and potential competitors have significantly longer operating histories and significantly greater managerial, financial, marketing, technical and other

17

---

competitive resources, as well as greater name recognition, than that of the Company. As a result, these companies may be able to adapt more quickly to new or emerging technologies and changes in
customer requirements and may be able to devote greater resources to the promotion and sale of their conferencing products and services. In addition, to the extent that competitors choose to bundle
competing multimedia conferencing applications with other products, the demand for the Company's products and services might be substantially reduced.

As
a result, the Company may not be able to compete successfully with existing or new competitors in the multimedia group communications products and services market. The Company
believes that its ability to compete successfully in this market will depend on a number of factors both within and outside its control, including:



The Company's business may be harmed if it is unable to protect its proprietary rights.

The Company's success and ability to compete in the video networking industry depends, in part, upon its ability to protect its proprietary technology. The
Company may be unable to deter misappropriation of its proprietary technology, detect unauthorized use and take appropriate steps to enforce its intellectual property rights. In addition, the
Company's competitors could, without violating its proprietary rights, develop technologies that are as good or better than its technology. The development of alternative technologies by third parties
could adversely affect the competitiveness of the Company's products.

The
Company does not rely on patent protection for, and does not hold, any patents relating to its products, although it has filed one patent application related to its recently
developed video services technology. This application may not issue, however, and even if issued by the United States Patent and Trademark Office, it may not give the Company an advantage over
competitors. The Company's adherence to industry-wide technical standards and specifications may limit its opportunities to provide proprietary product features. The Company currently
licenses certain technology from third parties, and plans to continue to do so in the future. The commercial success of the Company will depend, in part, on its ability to continue to obtain licenses
to third-party technology for use in its products.

The
Company relies upon a combination of trade secret, copyright and trademark laws and contractual restrictions to establish and protect proprietary rights in its products. The
Company also enters into confidentiality and invention assignment agreements with its employees and enters into non-disclosure agreements with its suppliers, distributors and customers to
limit access to and disclosure of its proprietary information.

However,
these statutory and contractual arrangements may not be sufficient to deter misappropriation of the Company's proprietary technologies. In addition, independent third parties
may develop similar or superior technologies to those of the Company. Furthermore, the laws of some foreign countries do not provide the same degree of protection of the Company's proprietary
information as do the laws of the United States.

18

---

Claims by third parties that the Company infringes their proprietary technology could prevent the Company from offering its products or otherwise hurt its business and
financial condition.

The commercial success of the Company also will depend, in part, on the Company not breaching the Company's current and future licenses of third-party
technology used in certain of its products. The Company is, however, subject to the risk of litigation alleging infringement of third party intellectual
property rights from the Company's licensed and proprietary technology. A number of companies have developed technologies or received patents on technologies that may be related to or be competitive
with the Company's technologies. The Company has not conducted a patent search relating to the technology used in its respective products. In addition, since patent applications in the United States
are not publicly disclosed until the patent issues, applications may have been filed which, if issued as patents, would relate to the Company's products. The Company's lack of patents may inhibit the
Company's ability to negotiate or obtain licenses from or oppose patents of third parties, if necessary.

Given
the rapid development of technology in the video networking industry, it is possible that the Company's existing or future products may in the future infringe upon the existing
or future proprietary rights of others. The Company is subject to the risk of litigation alleging infringement of third party intellectual property rights by the Company. The Company could incur
substantial costs in defending itself and its customers against any such claims, regardless of the merits of such claims. The Company may also be required by contract or by statutory implied
warranties to indemnify its distribution partners and end-users against third-party infringement claims. Parties making infringement claims against the Company may be able to obtain
injunctive or other equitable relief which could effectively block the Company's ability to sell its products in the United States and abroad, and could result in an award of substantial damages. In
the event of a successful claim of infringement, the Company, its customers and end-users may be required to obtain one or more licenses from third parties. The Company, or its customers,
may not be able to obtain necessary licenses from third parties at a reasonable cost, or at all. The defense of any lawsuit could result in time-consuming and expensive litigation,
damages, license fees, royalty payments and restrictions on the Company's ability to sell its products, any of which could have a material adverse effect on the Company's business, financial
condition, and results of operations.

The Company will be dependent on key personnel and must hire and retain skilled personnel.

The Company's success is significantly dependent on the contributions of a number of its key personnel. The Company's success depends to a significant degree
on the services of Ralph Ungermann, its chairman of the board of directors chief executive officer and president. The loss of the services of Mr. Ungermann or any of the Company's key personnel
could have a material adverse effect on the Company. The Company believes that its future success also will depend upon its ability to attract and retain additional highly skilled technical,
managerial, manufacturing, sales and marketing personnel. Competition for these personnel is intense. The Company may not be able to anticipate accurately, or to obtain, the personnel that it may
require in the future.

The Company's inability to secure additional funding could adversely effect its business.

In order to meet the Company's anticipated working capital and capital expenditure requirements, the Company may need to raise additional funds through the
issuance of equity securities in the future. If additional funds are raised through the issuance of equity securities, the percentage ownership of the stockholders of the Company will be reduced,
stockholders may experience additional dilution, or the new equity securities may have rights, preferences or privileges senior to those of the holders of the Company's common stock. Additional
financing may not be available when needed or on terms
favorable to the Company, or at all. If adequate funds are not available or are not available on acceptable terms, the Company may be required to delay, reduce or eliminate some or all of its
development programs for its products or services, and may be unable to take advantage of future

19

---

opportunities or respond to competitive pressures, which could have a material adverse effect on the Company's business, financial condition or operating results.

The Company faces additional risks from its international operations.

The Company's international business will involve a number of risks that could hurt its operating results or contribute to fluctuations in those results. The
Company's revenue from international sales represented 25% of its total revenue in the quarter ended March 31, 2001, 12% of its total revenue in 2000 and 14% of its total revenue in 1999. The
Company intends to seek opportunities to expand its product and service offerings into additional international markets, although the Company may not succeed in developing localized versions of its
products for new international markets or in marketing or distributing products and services in those markets.

The
majority of the Company's international sales are currently denominated in U.S. dollars. However, it is possible that a significantly higher level of future sales of the Company
may be denominated in foreign currencies. To the extent that the Company's sales are denominated in currencies other than U.S. dollars, fluctuations in exchange rates may render the Company's products
less competitive relative to local product offerings or result in foreign exchange losses. The Company does not have experience in implementing hedging techniques that might minimize the Company's
risks from exchange rate fluctuations.

The
Company's international business also will involve a number of other difficulties and risks, including risks associated with:



The Company's software products may contain potential undetected defects.

Software developed by the Company or developed by others and incorporated by the Company into its products may contain significant undetected errors when first
released or as new versions are released. Although the Company's software products will be tested before commercial release, errors in the products may be found after customers begin to use the
software. Any defects in the Company's current or future products may result in significant decreases in revenue or increases in expenses because of adverse publicity, reduced orders, product returns,
uncollectible accounts receivable, delays in collecting accounts receivable, and additional and unexpected costs of further product development to correct the defects.

20

---

If the Company issues additional shares of stock in the future, it may have a dilutive effect on the Company's stockholders existing at the time of issuance.

The Company's board of directors has approved and its stockholders are being asked to approve an amendment to the Company's certificate of incorporation to
increase the number of authorized shares of common stock from 35,000,000 to 100,000,000. This increase in authorized shares will provide the Company with the flexibility to issue Company common stock
for proper corporate purposes, which may include making acquisitions through the use of stock, adopting additional equity incentive plans and raising equity capital. Any subsequent issuance of Company
common stock may result in immediate dilution of the Company's then current stockholders.

Control By Insiders

As of May 10, 2001, the Company's executive officers, directors and their affiliates beneficially owned approximately 7,692,432 shares or 34.1% of the
outstanding shares of the Company's common stock. As a result, these persons may have the ability to effectively control the Company and direct its affairs and business, including the election of
directors and approval of significant corporate transactions. This concentration of ownership may also have the effect of delaying, deferring or preventing a change in control of the Company, and
making certain transactions more difficult or impossible absent the support of these stockholders, including proxy contests, mergers involving the Company, tender offers, open-market
purchase programs or other purchases of common stock that could give stockholders of the Company the opportunity to realize a premium over the then prevailing market price for shares of common stock.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company's market risk exposures as set forth in its Annual Report on Form 10-K for the year ended December 31, 2000, have not
materially changed.

21

---



PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On or about April 9, 1999, several purported class action suits were filed in the United States District Court for the Northern District of California
alleging violations of the federal securities laws against us and certain of our officers and directors in connection with our reporting of our financial results for the period ended
December 31, 1998. The court dismissed these actions without leave to amend on February 14, 2000. The plaintiffs filed a notice of appeal with the Ninth U.S. Circuit Court of Appeals on
March 29, 2000. The appeal has been fully briefed by all parties and no date for oral argument has yet been set.

On
April 23, 2001, we received notice of a shareholder's derivative action filed in California Superior Court in the County of Santa Clara, entitled Emma L. Flayer,
Derivatively, On Behalf of First Virtual Communications, Inc., Plaintiff, vs. Ralph Ungermann, et. al, Defendants, And First Virtual Communications, Inc., Nominal Defendant. The
Plaintiff alleges that, among other things, certain directors and officers of First Virtual Communications sold shares of our stock between January 21, 1999 and April 6, 1999, while in
possession of material non-public information pertaining to First Virtual Communications. The Plaintiff alleges that we are entitled to recover damages from the defendants by reason of
their alleged acts and that the plaintiff is entitled to recover her attorney fees. We currently are reviewing the action.

Item 6. Exhibits and Reports on Form 8-K



|Exhibit Number |  | Description                                                                                                                                           
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1            |  | Agreement and Plan of Merger and Reorganization among the Registrant, FVC Acquisition Corp. and CUseeMe Networks, Inc., dated as of March 22, 2001 (1)
|3.1            |  | Amended and Restated Certificate of Incorporation (2)                                                                                                 
|3.1(i)         |  | Certificate of Ownership and Merger, effective August 3, 1998 (3)                                                                                     
|3.1(ii)        |  | Certificate of Designation of Series A Convertible Preferred Stock (5)                                                                                
|3.2            |  | Amended Bylaws of the Registrant (4)                                                                                                                  
|4.1            |  | Specimen Common Stock Certificate (3)                                                                                                                 
|4.2            |  | Specimen Series A Convertible Preferred Stock Certificate (5)                                                                                         

---

22

---





23

---



SIGNATURES

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

|Date: May 15, 2001 |  | FIRST VIRTUAL COMMUNICATIONS, Inc.
|------------------ |  | ----------------------------------
|                   |  | By:                               

24

---



Exhibit Index

|Exhibit Number |  | Description                                                                                                                                           
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1            |  | Agreement and Plan of Merger and Reorganization among the Registrant, FVC Acquisition Corp. and CUseeMe Networks, Inc., dated as of March 22, 2001 (1)
|3.1            |  | Amended and Restated Certificate of Incorporation (2)                                                                                                 
|3.1(i)         |  | Certificate of Ownership and Merger, effective August 3, 1998 (3)                                                                                     
|3.1(ii)        |  | Certificate of Designation of Series A Convertible Preferred Stock (5)                                                                                
|3.2            |  | Amended Bylaws of the Registrant (4)                                                                                                                  
|4.1            |  | Specimen Common Stock Certificate (3)                                                                                                                 
|4.2            |  | Specimen Series A Convertible Preferred Stock Certificate (5)                                                                                         

---

25

---

QuickLinks