<PAGE>   1
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

    For the quarter ended March 31, 2000         Commission File No. 000-26363

                         INTERNET PICTURES CORPORATION
             (Exact name of registrant as specified in its charter)


          DELAWARE                                      52-2213841
 (State or other jurisdiction of           (I.R.S. Employer Identification No.)
 incorporation or organization)

                            1009 COMMERCE PARK DRIVE
                           OAK RIDGE, TENNESSEE 37830
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, ZIP CODE)

       Registrant's telephone number, including area code: (865) 482-3000

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 [ ]

53,079,451 shares of $0.001 par value common stock outstanding as of April
30,2000

Page 1 of 28
Exhibit Index on Page 28
<PAGE>   2


                         INTERNET PICTURES CORPORATION
                                   FORM 10-Q
                      FOR THE QUARTER ENDED MARCH 31, 2000
                                     INDEX

<TABLE>

<S>                                                                                                         <C>
PART I--FINANCIAL INFORMATION

    Item 1.  Consolidated Financial Statements...........................................................   3-8

    Item 2.  Management's Discussion and Analysis of Financial Condition and
             Results of Operations.......................................................................   8-24

PART II--OTHER INFORMATION

    Item 1. Legal Proceedings............................................................................   25

    Item 2. Changes in Securities and Use of Proceeds....................................................   25

    Item 3. Defaults Upon Senior Securities..............................................................   25

    Item 4. Submission of Matters to a Vote of Security Holders..........................................   25

    Item 5. Other Information............................................................................   26

    Item 6. Exhibits and Reports on Form 8-K.............................................................   26

Signatures...............................................................................................   27

Exhibit Index............................................................................................   28
</TABLE>


                                       2


<PAGE>   3

PART I--FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

                         INTERNET PICTURES CORPORATION
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                         December 31,         March 31,
                                                                             1999               2000
                                                                         ------------        ----------
In thousands, except share data                                               (1)            (unaudited)

<S>                                                                      <C>                 <C>
ASSETS
Current assets:
Cash and cash equivalents                                                 $   18,627         $   12,076
Securities available-for-sale                                                 42,739             31,145
Accounts receivable, less allowance for doubtful accounts of
   $198 at December 31, 1998 and $481 at March 31,
   2000 (unaudited)                                                            3,356              4,235
Inventory, less reserve for obsolescence of $55 at December
   31, 1999 and $168 at March 31, 2000 (unaudited)                             1,059                601
Prepaid expenses and other current assets                                      7,211              7,909
                                                                          ----------         ----------
     Total current assets                                                     72,992             55,966
                                                                          ----------         ----------
Long-term securities available-for-sale                                       12,000              6,000
Property and equipment, net                                                    9,135             12,962
Other assets                                                                   1,676              1,323
                                                                          ----------         ----------
     Total assets                                                         $   95,803         $   76,251
                                                                          ==========         ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                                                          $    2,711         $    3,045
Accrued liabilities                                                            6,203             18,005
Deferred revenue                                                               5,262              7,309
Current portion of promissory note and obligations under
   capital lease                                                                 199                213
                                                                          ----------         ----------
     Total current liabilities                                                14,375             28,572
                                                                          ----------         ----------

Promissory note and obligations under capital lease, net
   of current portion                                                            387                340
Commitments and contingencies (Note 5)

Stockholders' equity:
Class B common stock, $0.001 par value; 7,421,536 shares
   authorized at December 31, 1998 and March 31, 2000 (unaudited);
   7,012,736 and 6,894,692 shares issued and outstanding at
   December 31, 1999 and March 31, 2000 (unaudited), respectively                  1                  1
Common stock, $0.001 par value; 150,000,000 shares authorized at
   December 31, 1999 and March 31, 2000 (unaudited); 38,231,581
   and 40,982,486 shares issued and outstanding at December 31,
   1999 and March 31, 2000 (unaudited), respectively                              38                 41
Additional paid-in capital                                                   187,829            189,491
Notes receivable from stockholders                                              (181)              (571)
Unearned stock-based compensation                                             (2,955)            (1,045)
Accumulated deficit                                                         (103,701)          (140,591)
Accumulated other comprehensive income                                            10                 13
                                                                          ----------         ----------
     Total stockholders' equity                                               81,041             47,339
                                                                          ----------         ----------
     Total liabilities and stockholders' equity                           $   95,803         $   76,251
                                                                          ==========         ==========
</TABLE>


(1) The December 31, 1999 balances were derived from the audited financial
    statements.

See accompanying notes to the unaudited condensed consolidated financial
statements


                                       3
<PAGE>   4

                         INTERNET PICTURES CORPORATION
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                       Three months ended
                                                                             March 31,
                                                                  -----------------------------
In thousands, except per share data                                  1999               2000
                                                                  ----------         ----------
                                                                            (unaudited)
<S>                                                               <C>                <C>
Product revenues                                                  $    1,318         $    8,283
Cost of product revenues                                                 661              4,766
                                                                  ----------         ----------
Gross profit                                                             657              3,517
                                                                  ----------         ----------
Operating expenses:
Sales and marketing                                                    4,058             15,507
Research and development                                                 792              2,365
General and administrative                                             2,013              5,478
Stock-based compensation                                               3,563              2,774
Merger expenses                                                           --             15,175
                                                                  ----------         ----------
Total operating expenses                                              10,426             41,299
Other income (expense), net                                               38                892
                                                                  ----------         ----------
Net loss                                                          $   (9,731)        $  (36,890)
                                                                  ==========         ==========

Basic and diluted loss per common share (Note 4)                  $    (1.15)        $    (0.79)
                                                                  ==========         ==========
</TABLE>


See accompanying notes to the unaudited condensed consolidated financial
statements


                                       4
<PAGE>   5

                         INTERNET PICTURES CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                           Three months ended
                                                                                                 March 31,
                                                                                         1999               2000
                                                                                      ----------         ----------
In thousands                                                                                   (unaudited)
<S>                                                                                   <C>                <C>
Cash flows from operating activities:
Net loss                                                                              $   (9,731)        $  (36,890)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation                                                                                 147                737
Provision for doubtful accounts receivable                                                    --                286
Gain on disposal of fixed assets                                                              (7)                --
Issuance of common stock in exchange for services                                            176                 --
Issuance of preferred stock in settlement of interest payable                                  9                 --
Issuance of options for common stock for services                                            742                 --
Accretion of available-for-sale discounts                                                    (12)              (158)
Provision for inventory obsolescence                                                          --                110
Non-cash compensation expense                                                              2,937              1,910
Changes in operating assets and liabilities:
   Accounts receivable                                                                      (381)            (1,165)
   Inventory                                                                                (109)               348
   Prepaid expenses and other current assets                                                (147)              (698)
   Other assets                                                                               77                340
   Accounts payable                                                                          201                334
   Accrued expenses                                                                          505             11,802
   Deferred revenue                                                                           92              2,047
                                                                                      ----------         ----------
      Net cash used in operating activities                                               (5,501)           (20,997)
                                                                                      ----------         ----------
Cash flows from investing activities:
Purchases of furniture and equipment                                                        (865)            (4,551)
Purchases securities available-for-sale                                                  (16,637)            (6,963)
Maturities of securities available-for-sale                                                   --             24,715
Proceeds from disposal of equipment                                                           42                 --
                                                                                      ----------         ----------
      Net cash provided by (used in) investing activities                                (17,460)            13,201
                                                                                      ----------         ----------
Cash flow from financing activities:
Proceeds from issuance of convertible notes payable                                        1,800                 --
Net proceeds from issuance of common stock                                                   127                 --
Net proceeds from issuance of preferred stock                                             37,629                 --
Repayments of capital lease obligation and notes payable                                      (2)               (33)
Proceeds from exercise of stock options                                                       --              1,665
Notes payable to stockholders                                                                 --               (390)
                                                                                      ----------         ----------
      Net cash provided by financing activities                                           39,554              1,242
                                                                                      ----------         ----------
Effect of exchange rate changes on cash                                                       10                  3
                                                                                      ----------         ----------
Net increase (decrease) in cash and cash equivalents                                      16,603             (6,551)
Cash and cash equivalents, beginning of period                                             1,494             18,627
                                                                                      ----------         ----------
Cash and cash equivalents, end of period                                              $   18,097         $   12,076
                                                                                      ==========         ==========
</TABLE>



No income taxes or interest payments were made in either period presented.

Noncash investing and financing activities:
   During March 1999, a $1,000,000 convertible debenture and accrued interest
   was converted into 174,535 shares of Series C preferred stock.

   Also during March 1999, the Company issued 105,142 shares of redeemable
   common stock for a portion of the placement fee in connection with the
   issuance of Series D preferred stock.



See accompanying notes to the unaudited condensed consolidated financial
statements


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<PAGE>   6

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.  UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated financial statements include
the accounts of Internet Pictures Corporation and its wholly-owned
subsidiaries, Interactive Pictures Corporation, Interactive Picture UK Limited
and Internet Pictures (Canada). The consolidation of these entities will
collectively be referred to as the Company. All significant intercompany
balances and transactions have been eliminated. These financial statements have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted. The
unaudited condensed consolidated financial statements should be read in
conjunction with the financial statements and notes thereto included in the
audited financial statements of the Company as of and for the period ended
December 31, 1999. The information furnished reflects all adjustments which
management believes are necessary for a fair presentation of the Company's
financial position as of March 31, 2000, and the results of its operations and
its cash flows for the three month periods ended March 31, 1999 and 2000. All
such adjustments are of a normal recurring nature.

2.  RESULTS OF OPERATIONS

The results of operations for the three-month periods ended March 31, 1999 and
2000, are not necessarily indicative of the results to be expected for the
respective full years.

3.  EQUITY AND RELATED TRANSACTIONS

On April 3, 2000, we acquired all of the capital stock of PictureWorks. We
issued 4,644,334 shares to the current stockholders of PictureWorks, based on
the average price of our common stock for the ten days ending the second
business day prior to March 31, 2000, which was $37.25 per share. We will
account for the transaction under the purchase method of accounting.

Also during April 2000, we acquired all of the capital stock of TBI Imaging,
Inc. and Opticom Corporation. We issued 222,237 shares with an aggregate fair
value of $8,120 to TBI and Opticom based on a 10-day average price of our common
stock in addition to $2,130 in cash considerations. We will account for these
transactions under the purchase method of accounting.

On May 4, 2000, the Company raised net proceeds of $67.5 million from our
follow-on offering of 6,000,000 shares of our common stock.

4.  LOSS PER SHARE

NET LOSS PER SHARE. The Company computes net loss per share in accordance with
SFAS No.128, Earnings Per Share, and SEC Staff Accounting Bulletin No. 98 ("SAB
98"). Under the provisions of SFAS No. 128 and SAB 98, basic and diluted net
loss per share is computed by dividing the net loss available to common
stockholders for the period by the weighted average number of shares of common
stock outstanding during the period. The calculation of diluted net loss per
share excludes potential common shares if the effect is antidilutive. Potential


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<PAGE>   7

common shares are composed of incremental shares of common stock issuable upon
the exercise of potentially dilutive stock options and warrants and upon
conversion of the Company's preferred stock and convertible debenture.

The following table sets forth the computation of basic and dilutive net loss
per share for the periods indicated:

<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED
                                                           MARCH 31,
                                                   ------------------------
In thousands, except per share data                 1999             2000
                                                   -------         --------
                                                         (UNAUDITED)
<S>                                                <C>             <C>
NUMERATOR:
Net loss                                           $(9,731)        $(36,890)

DENOMINATOR:
Weighted average shares                              8,464           46,645

NET LOSS PER SHARE:
Basic and diluted                                  $ (1.15)        $  (0.79)
</TABLE>


5.  COMMITMENTS AND CONTINGENCIES

In October 1998, a lawsuit was filed against the Company. This lawsuit alleged
that the Company breached a duty of confidence, made misrepresentations and
misappropriated trade secrets. The court removed this action to arbitration
upon the Company's motion and the Company cross-claimed alleging various
affirmative claims. The court dismissed the lawsuit in May 1999, upon motion of
the plaintiffs. However, arbitration is expected to take place in the spring of
2000. In May 1999, one of the original plaintiffs filed a second lawsuit
against the Company alleging patent infringement. Management believes that the
claims are without merit and intends to vigorously defend against such claims.
Since the plaintiffs have not specified in their lawsuit the amount of damages
they seek, an estimate of the ultimate potential liability of the Company
cannot be made. If the Company does not effectively defend against the claims,
the Company's financial condition, results of operations and cash flows could
be materially adversely affected.

The Company is subject to claims in the ordinary course of business. Management
believes the ultimate resolution of these matters will have no material impact
on the financial condition, results of operations or cash flows of the Company.

6.  SEGMENTS

The Company has two reportable segments: 1) iPIX products, and 2) research and
development services for others. The accounting policies of the segments are
the same as those of the Company. The Company evaluates the performance of its
segments and


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<PAGE>   8

allocates resources to them based solely on evaluation of gross profit. There
are no inter-segment revenues. The Company does not make allocations of
corporate costs to the individual segments and does not identify separate assets
of the segments in making decisions regarding performance or allocation of
resources to them. Management believes the Company's future growth will occur in
the iPIX products segment. We did not have research and development services
revenues in the first quarter of 1999 or 2000.

7.  EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS

RECENT ACCOUNTING PRONOUNCEMENTS. In June 1998, the FASB issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS 133 is effective for fiscal years beginning after
June 15, 1999. SFAS 133 requires that all derivative instruments be recorded on
the balance sheet at their fair value. Changes in the fair value of derivatives
are recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designed as part of a hedge transaction
and, if so, the type of hedge transaction. We do not expect that the adoption
of SFAS No. 133 will have a material effect on our financial statements.

In December 1999, the Commission issued Staff Accounting Bulletin No. 101 or
SAB 101, "Revenue Recognition in Financial Statements," which provides guidance
on the recognition, presentation and disclosure of revenue in financial
statements filed with the Commission. SAB 101 outlines the basic criteria that
must be met to recognize revenue and provides guidance for disclosure related
to revenue recognition policies. We believe that the impact of SAB 101 will not
have a material effect on our financial position or results of operations.

8.  INCOME TAXES

Internal Revenue Code Section 382 stipulates an annual limitation on the amount
of Federal and State net operating losses incurred prior to a change in
ownership which can be utilized to offset the Company's future taxable income.
An ownership change occurred as a result of the consummation of the initial
public offering and as a result of the merger between bamboo.com, Inc. and
Interactive Pictures Corporation.

9.  BARTER REVENUES

Barter Revenues. Barter revenues come from barter sales of the Company's
products which are similar in nature to the Company's cash sales for the same
products. Barter revenues have resulted from the exchange by the Company of
certain products for advertising. Barter revenues are recognized in accordance
with APB 29, "Accounting for Nonmonetary Transactions." The Company records
barter revenue at fair value of the products exchanged for advertising.

Revenues and sales and marketing expenses arising from those transactions are
recorded at fair value as the Company has an established historical practice of
receiving cash for similar sales. In the first quarter of 1999 and 2000, the
Company recorded barter revenues of $0 and $1,213, respectively, which
represented approximately 0% and 14.6%, respectively of total revenues for
those periods. Sales and marketing expense arising from these barter
transactions is recognized when the advertising takes place which is typically
the same period in which the products are delivered.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

iPIX is a leading Internet infrastructure company that provides visual content
and other digital media solutions to facilitate commerce, communication and
entertainment. We offer both businesses and consumers complete end-to-end
solutions that include the capture, processing, hosting and distribution of
visual content and other digital media for the Internet. Our infrastructure
enables us to deliver digital media content to web sites


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accessed from a variety of platforms, including personal computers and wireless
devices. Our solutions help businesses increase the relevance and enjoyment of
users' web site visits, resulting in increased traffic and repeat usage. This,
in turn, provides our customers with increased e-commerce and advertising
revenue opportunities without requiring significant investment in digital media
infrastructure.

We are the result of the merger of Interactive Pictures and bamboo.com on
January 19, 2000. Interactive Pictures was founded in 1986 at the Oak Ridge
National Laboratory in Tennessee to develop remote robotic systems for the
United States Department of Defense, the Department of Energy, NASA and other
governmental agencies. bamboo.com was founded in 1995 in Toronto, Canada to
provide virtual tours of online residential real estate listings.

Since the completion of our merger, we have continued to establish new vertical
markets for our solutions by positioning ourselves to take advantage of the
demand for compelling digital media content on web sites. We have targeted the
following global vertical markets: real estate, travel and hospitality,
automotive, e-retail, electronic publishing, education and entertainment.

We generate revenues principally from our sale of digital media content as well
as iPIX keys and iPIX kits. Revenues from the sale of real estate immersive
images are recognized at the time an image is distributed to web sites selected
by the customer. Sales of iPIX kits and iPIX keys are recognized upon delivery
to the customer. We calculate a provision for returns based on historical
experience and make appropriate reserves at the time revenues are recognized.
To date, returns have been insignificant. We intend to provide end-to-end
solutions to customers who request digital media content to be hosted and
distributed to the Internet for extended time periods. Revenues generated from
the delivery of digital media content would be recognized net of the fair value
of the hosting services. Revenues associated with the hosting services would be
recognized ratably over the extended hosting and distribution term. Research
and development services revenues were historically generated under research
and development arrangements for others. We have de-emphasized these
activities, and have not engaged in any of those types of arrangements since
1998.

RECENT DEVELOPMENTS

On April 3, 2000, we acquired all of the capital stock of PictureWorks. We
issued 4,644,334 shares to the current stockholders of PictureWorks, based on
the average price of our common stock for the ten days ending the second
business day prior to March 31, 2000. We will account for the transaction under
the purchase method of accounting.

PictureWorks' Rimfire technology is an infrastructure solution that enables end
users to easily publish digital media such as video, audio, photographs and
other images on the Internet. Users can easily deliver content to a web site by
using their cursor to select the desired media and dragging that media to a
Rimfire supported web site. Rimfire automatically replicates the image or other
digital media content, stores the media on our


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web servers and appropriately formats the media file for distribution to the
target web site.

We believe our acquisition of PictureWorks will extend our digital media
content infrastructure and enable us to provide our solutions to a broader
range of customers that depend on user-submitted content including e-commerce
web sites, community web sites and Internet portals.

Also during April 2000, we acquired all of the capital stock of TBI Imaging,
Inc. and Opticom Corporation. We issued 222,237 shares with an aggregate fair
value of $8,120 to TBI and Opticom based on a 10-day average price of our
common stock in addition to $2,130 in cash considerations. We will account
for these transactions under the purchase method of accounting.

On May 4, 2000, the Company raised net proceeds of $67.5 million from our
follow-on offering of 6,000,000 shares of our common stock.


                                       10
<PAGE>   11

RESULTS OF OPERATIONS

The following table presents, for the periods indicated, the percent
relationship to total revenues of select items in our statements of operations.

<TABLE>
<CAPTION>
                                                        THREE MONTHS
                                                           ENDED
                                                          MARCH 31,
                                               ------------------------------
                                                  1999                2000
                                               ----------          ----------
<S>                                            <C>                 <C>
Revenues                                            100.0%
                                                                        100.0%
Cost of revenues                                     50.2                57.5
                                               ----------          ----------
Gross profit                                         49.8                42.5
                                               ----------          ----------
Operating expenses
  Sales and marketing                               307.9               187.2
  Research and development                           60.1                28.6
  General and administrative                        152.7                66.1
  Stock-based compensation                          270.3                33.5
  Merger expenses                                      --               183.2
                                               ----------          ----------
     Total operating expenses                       791.0               498.6
                                               ----------          ----------
Other income (expense), net                           2.9                10.7
                                               ----------          ----------
     Net loss                                      (738.3)%            (445.4)%
                                               ==========          ==========
</TABLE>

QUARTER ENDED MARCH 31, 2000 COMPARED TO THE QUARTER ENDED MARCH 31, 1999

Revenues. Total revenues increased to $8,283,000 in the first quarter of 2000,
compared to $1,318,000 in the first quarter of 1999, an increase of $6,965,000
or 528.5%. This increase was due primarily to an increase of $4,150,000 in
sales of virtual tours and an increase of $2,212,000 in sales of iPIX kits and
iPIX keys, primarily to e-commerce and real estate customers. We did not have
research and development services revenues in the first quarter of 2000 or
1999.

Cost of Revenues. Cost of revenues consists of our direct expenses associated
with the capture, processing, hosting and distribution of virtual tours and the
costs of the digital camera and related components included in an iPIX kit. In
addition, cost of revenues


                                       11
<PAGE>   12

include transaction fees paid to affiliates who display our virtual tours on
their web sites and fees paid to resellers of our virtual tours. Cost of
revenues increased to $4,766,000 in the first quarter of 2000, compared to
$661,000 in the first quarter of 1999, an increase of $4,105,000. Cost of
revenues as a percentage of total revenues increased from 50.2% in the first
quarter of 1999 to 57.5% in the first quarter of 1999. This increase was the
result of the sale of a higher volume of virtual tours, the expansion of our
processing and hosting capacity and the cost of iPIX kits.

Sales and Marketing. Sales and marketing expenses consist primarily of salaries
for marketing, sales, business development and field operations personnel.
Sales and marketing expenses also include commissions and related benefits for
sales personnel and consultants, traditional advertising and promotional
expenses, trademark licensing and technology access and sponsorship fees paid
to affiliates in order to facilitate availability of our tours on their web
sites. Sales and marketing expenses increased to $15,507,000 in the first
quarter of 2000, compared to $4,058,000 in the first quarter of 1999, an
increase of $11,449,000, or 282.1%. This increase is due primarily to a
significant increase in our sales force, increased costs relating to technology
access and sponsorship fees and increased advertising and branding expenses.

Research and Development. Research and development expenses consist primarily
of personnel costs and fees paid to third party developers. Research and
development expenses increased to $2,365,000 in the first quarter of 2000,
compared to $792,000 in the first quarter of 1999, an increase of $1,573,000,
or 198.6%. This increase was due primarily to increased staffing associated
with expanding our research and development efforts to build and enhance our
digital media infrastructure.

General and Administrative Expenses. General and administrative expenses
consist primarily of salaries and related benefits for administrative and
executive staff, fees for professional services and general office and
occupancy expenses. General and administrative expenses increased to $5,478,000
in the first quarter of 2000, compared to $2,013,000 in the first quarter of
1999, an increase of $3,465,000 or 172.1%. This increase was due primarily to
an increase in personnel and related costs, professional services, expansion of
our leased facilities and other costs associated with being a public company.

Stock-based Compensation. Stock-based compensation expense consists of the
amortization of deferred compensation related to stock options granted to
employees and others prior to our initial public offering with an exercise
price below the deemed fair market value of our common stock on the date of
grant. The related compensation is amortized over the vesting period of the
options. Stock-based compensation expense decreased from $3,563,000 in the
first quarter of 1999, to $2,774,000 in the first quarter of 2000.

Merger Expenses. Merger expenses consist of direct costs incurred as a result
of the merger of Interactive Pictures and bamboo.com that occurred on January
19, 2000. Merger expenses in the first quarter of 2000 were $15,175,000 and
consisted primarily of underwriting, legal and accounting, and printer's fees.


                                       12
<PAGE>   13

Other Income (Expense). Other income (expense) consists primarily of interest
earned on cash and investments. Net interest and other income increased to
$892,000 in the first quarter of 2000, compared to $38,000 in the first quarter
of 1999, a change of $854,000. This change was due primarily to increased
earnings on our cash investments.


                                       13
<PAGE>   14

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have financed our operations primarily through our initial
public offerings, the private placements of capital stock and a convertible
debenture. In the first quarter of 1999, we raised $37,629,000 through the sale
of our preferred stock. At March 31, 2000, we had $12,076,000 of cash and cash
equivalents and $37,145,000 in securities available-for-sale.

Net cash used in operating activities was $5,501,000 for the three months ended
March 31, 1999 and $20,997,000 for the three months ended March 31, 2000. Net
cash used for operating activities in each of these periods is primarily a
result of net losses and changes in net operating assets. Net loss included
$2,937,000 and $1,910,000 for the three month periods ended March 31, 1999 and
2000, respectively, for non-cash stock-based compensation expense.

Net cash provided by/(used in) investment activities was $(17,460,000) for the
three months ended March 31, 1999 and $13,201,000 for the three months ended
March 31, 2000. Net cash provided by/(used in) investing activities was related
to the net purchases and maturities of short-term investments and the
acquisition of computer software and hardware and other equipment.

Net cash provided by financing activities was $39,554,000 for the three months
ended March 31, 1999 and $1,242,000 for the three months ended March 31, 2000.
The net cash provided by financing activities for these periods was due
primarily to the sale of shares of our common and preferred stock and the
exercise of stock options. Net cash also was provided by the issuance of
convertible subordinated promissory notes of $1,800,000 that converted into
preferred stock during the quarter ended March 31, 1999.


                                       14
<PAGE>   15

Although we have no material commitments for capital expenditures, we
anticipate an increase in the rate of capital expenditures and other expenses
consistent with our anticipated growth in personnel, operations and marketing
activities. We anticipate expanding our sales and marketing activities and
enhance our research and development. We may also use our cash resources to
acquire or license technology, products or business related to our current
business. We anticipate that our operating expenses will continue to grow as we
make investments in our sales and marketing and distribution capabilities and
that our operating expenses will be a material use of our cash resources for
the foreseeable future.

We believe that the net proceeds from our recently completed follow-on offering
of our common stock, together with existing cash and cash equivalents, will be
sufficient to meet our anticipated cash needs for working capital and capital
expenditures for at least the next twelve months. After these twelve months, we
may require additional funds to support our working capital requirements or for
other purposes and may seek to raise additional funds through public or private
equity financing, bank debt financing or from other sources. There can be no
assurance that this capital will be available in amounts or on terms acceptable
to us, if at all.

YEAR 2000 ISSUES

Prior to January 1, 2000, there was significant uncertainty regarding the
ability of computers to properly recognize dates in the 21st century. The
uncertainty was primarily due to the fact that most computer systems only
utilized a two digit field for date recognition. Since the passing of January
1, 2000, most computer systems have continued to function normally and the
compliance and remediation work conducted prior to year 2000 was effective in
preventing widespread problems. In particular, we have not experienced any
material problems in our computer systems related to the year 2000. Computer
experts have worried, however, that not all residual consequences of the year
2000 problem may have surfaced. Problems may still arise through
miscalculations, data corruption, system failures or disruptions of operations.
Any lingering year 2000 difficulties like these could result in the loss of
sales or availability of our products and services. In addition, if year 2000
difficulties occur, we could be subject to litigation by customers or
shareholders. In addition, because our internal systems utilize third party
hardware and software, residual year 2000 problems affecting third parties'
hardware and software could cause our internal systems to fail.

If residual year 2000 problems cause the failure of any of the technology,
software or systems necessary to use our products or operate our business, we
could lose customers, suffer significant disruptions in our business, lose
revenues and incur substantial liabilities and expenses. This would harm our
business, financial condition and results of operation.


                                       15
<PAGE>   16

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133
is effective for fiscal years beginning after June 15, 1999. SFAS 133 requires
that all derivative instruments be recorded on the balance sheet at their fair
value. Changes in the fair value of derivatives are recorded each period in
current earnings or other comprehensive income, depending on whether a
derivative is designed as part of a hedge transaction and, if so, the type of
hedge transaction. We do not expect that the adoption of SFAS No. 133 will have
a material effect on our financial statements.

In December 1999, the Commission issued Staff Accounting Bulletin No. 101 or
SAB 101, "Revenue Recognition in Financial Statements," which provides guidance
on the recognition, presentation and disclosure of revenue in financial
statements filed with the Commission. SAB 101 outlines the basic criteria that
must be met to recognize revenue and provides guidance for disclosure related
to revenue recognition policies. We believe that the impact of SAB 101 will not
have a material effect on our financial position or results of operations.

INFLATION

Inflation has not had a significant impact on our operations to date.

             ADDITIONAL FACTORS THAT MAY AFFECT OUR FUTURE RESULTS

RISKS RELATING TO OUR BUSINESS, FINANCES AND OPERATIONS

OUR FUTURE PROFITABILITY IS UNCERTAIN BECAUSE WE HAVE A LIMITED OPERATING
HISTORY

As a result of our limited operating history, we have limited meaningful
historical financial data upon which to base planned operating expenses. Thus,
our expense levels are based in part on our expectations of future revenues. We
cannot assure you that we will be able to accurately predict our revenues,
particularly in light of our limited operating history as a combined company.
In addition, our prospects must be considered in light of the risks, expenses
and difficulties frequently encountered by companies in an early stage of
development, particularly companies like ours that operate in new and rapidly
evolving industries.

OUR QUARTERLY RESULTS MAY FLUCTUATE, WHICH COULD CAUSE THE PRICE OF OUR COMMON
STOCK TO DROP

We believe that our quarterly operating results could vary significantly in the
future and that quarter-to-quarter comparisons should not be relied upon as
indications of future performance. In some future quarterly periods the
operating results may fall below the expectations of securities analysts and
investors, which could significantly harm or


                                       16
<PAGE>   17

depress the trading price of our common stock. Among the factors which could
significantly affect our future performance are: the uncertainty of market
acceptance of our products or services; the introduction of new or enhanced
products and services, or changes in pricing policies by us or our competitors;
cyclical economic swings in the real estate market that are caused by various
factors, including changes in interest rates, changes in economic conditions
and seasonal changes in geographic regions; the rate at which we can recruit,
train and integrate employees; our ability to manage multiple relationships
among various customers and strategic partners; our ability to expand sales,
marketing and customer service operations; our ability to maintain our research
and development activities; and economic conditions specific to the Internet or
all or a portion of the technology sector.

WE HAVE INCURRED SUBSTANTIAL LOSSES AND OUR EXPENSES CONTINUE TO INCREASE; THUS
WE MAY NEVER BECOME PROFITABLE

We have incurred substantial net losses and experienced negative cash flow, and
we expect our operating losses and negative cash flow to continue. Although our
revenues have increased over the past years, we may not be able to sustain
future revenue growth. In addition, our expenses continue to increase as we
expand our sales and marketing efforts, increase the number of employees and
invest in an expansion of services and product development. Further, as of
March 31, 2000, we had an accumulated deficit of $140.6 million. Accordingly,
we cannot offer any assurances that revenues will ever exceed expenses or that
we will become profitable.

WE MAY BE UNABLE TO COMBINE THE BUSINESS AND OPERATIONS OF INTERACTIVE PICTURES
AND BAMBOO.COM SUCCESSFULLY OR ACHIEVE THE ANTICIPATED BENEFITS OF THE MERGER

The merger of Interactive Pictures and bamboo.com, which was completed in
January 2000, requires us to integrate the businesses and operations of two
different companies into a single company. We may not be able to successfully
integrate the operations, products, services, personnel and customers of the
two constituent companies into our combined enterprise. Additionally, we may
fail to achieve the anticipated benefits from the merger, including marketing,
product development, distribution and other operational efficiencies. The
integration process may further strain our existing financial and managerial
controls and reporting systems and procedures. This may result in the diversion
of management and financial resources from our core business objectives. In
addition, we are not experienced in managing significant facilities or
operations in geographically distant areas. Finally, we cannot be certain that
we will be able to retain the key employees from either company.


OUR ATTEMPTS TO EXPAND THROUGH BUSINESS COMBINATIONS AND STRATEGIC ALLIANCES
MAY NOT BE SUCCESSFUL AND MAY HARM OUR OPERATIONAL EFFICIENCY, FINANCIAL
PERFORMANCE AND RELATIONSHIPS WITH EMPLOYEES AND THIRD PARTIES


                                       17
<PAGE>   18

We plan to continue to expand our operations and market presence by entering
into business combinations, investments, joint ventures or other strategic
alliances with Internet companies, digital camera manufacturers or other
companies both in the United States and internationally. For example, we
completed the acquisition of all of the capital stock of PictureWorks on April
3, 2000. Our ability to expand may be limited due to the many financial and
operational risks accompanying these transactions. For example:

-   we may have difficulty assimilating the operations, technology and personnel
    of the acquired companies;
-   our business may be disrupted by the allocation of resources to consummate
    these transactions;
-   we may experience difficulty retaining key technical and managerial
    personnel from acquired companies;
-   we may experience one-time in-process research and development charges and
    ongoing expenses associated with amortization of goodwill and other
    purchased intangible assets;
-   investors may experience further dilution if we issue equity to fund these
    transactions;
-   acquired businesses may initially be unprofitable, causing additional
    operating losses and increased expenses; and
-   our relationships with existing employees, customers and business partners
    may be weakened or terminated as a result of these transactions.

OUR FUTURE SUCCESS IS DEPENDENT UPON KEY DISTRIBUTION AFFILIATES

The ability to broadly distribute digital media content over the Internet,
especially online immersive tours of real estate, is vital to our business. Our
online tours can currently be viewed through the web sites of our distribution
affiliates, which include real estate destination sites such as HomeSeekers.com,
Microsoft HomeAdvisor and Realtor.com. Through agreements between our affiliates
and third parties, our online tours may also be viewed on AOL, Excite@Home
Network, GO Network/Infoseek, MSN, and Yahoo! We must continue to have access to
these sites and maintain existing relationships in order to maintain a
competitive advantage for our business. If we lose any of our distribution
affiliates or if any of our distribution affiliates loses its relationship with
any major Internet portal, it could have a material adverse effect on our
business.

WE DEPEND UPON THIRD-PARTY RELATIONSHIPS FOR ASSISTANCE IN MARKETING AND
HOSTING DIGITAL MEDIA CONTENT

The success of our business in the real estate market depends on establishing
and maintaining commercial relationships with traditional real estate brokerage
companies, multiple listing services and technology providers. We expect to
continue to encounter competition for these relationships with real estate
brokerage companies. We depend upon a third party Internet service provider to
host and maintain our production servers for all of our digital media content.
As part of our end-to-end solutions, our servers host digital media content for
some of our customers. The performance of our web hosting


                                       18
<PAGE>   19

facility systems is critical to our business and reputation. Any system
failure, including network, software or hardware failure, that causes an
interruption in the delivery of digital media content or a decrease in
responsiveness of web site service could result in reduced revenue, and could
be harmful to our reputation and brand. Our Internet service provider does not
guarantee that its Internet access will be uninterrupted, error free or secure.
Any disruption or decreased response time in Internet access by our provider
could significantly harm our business. Further, our insurance may not
adequately compensate us for any losses that may occur due to any failures in
the system or interruptions in the service.

IF OUR OFFERINGS ARE NOT ACCEPTED BY THE BUSINESS AND CONSUMER MARKETS, OUR
FUTURE GROWTH WOULD BE LIMITED

We currently sell the overwhelming majority of our offerings to the business
market. We are dependent upon the continued and expanded use of our offerings
by the business market and the acceptance of our offerings by individual
consumers. We have only made limited sales to individual consumers and cannot
assure that they will be willing to purchase and use our offerings. Thus, both
the timing and growth of market acceptance for our offerings are subject to a
high level of uncertainty.

    -   Acceptance of our offerings is highly dependent on a number of factors,
        including: the availability, quality and price of competing products
        and services;
    -   the development of technologies that will facilitate the use of our
        offerings by businesses and consumers;
    -   the ease-of-use and performance of our offerings; and
    -   the success of our marketing efforts.

WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, AND THESE RIGHTS
MAY BE CHALLENGED BY OTHERS, WHICH COULD SUBJECT US TO SIGNIFICANT LIABILITY
FOR DAMAGES AND INVALIDATION OF OUR INTELLECTUAL PROPERTY RIGHTS

We rely on a combination of patent, trademark and trade secret laws,
non-disclosure agreements and other contractual provisions to protect our
intellectual property rights. Our success is heavily dependent upon our ability
to enforce and protect these rights, and we cannot assure you that we will be
successful in protecting these rights. Also, our patents, service marks or
trademarks may be challenged and invalidated or circumvented. In addition, we
are exposed to infringement of our intellectual property in foreign markets
because our intellectual property is protected under United States laws that
may not extend to foreign uses. We have been involved in litigation relating to
the protection of intellectual property rights and could be involved in future
litigation as third parties develop products that we believe infringe on our
patents and other intellectual property rights. We have experienced attempts to
misappropriate our technology, and we expect those attempts may continue. We
are currently involved in litigation in which our rights to technology have
been challenged. A determination against us in this lawsuit would have a
material adverse effect on our business.


                                       19
<PAGE>   20

OUR MARKET IS HIGHLY COMPETITIVE, AND OUR BUSINESS MAY FAIL IF WE ARE UNABLE TO
COMPETE SUCCESSFULLY

The market for visual content and other digital media solutions is new and
rapidly evolving. We currently compete with other providers of immersive
imaging technology, including Be Here Corp. and MGI Software. Each of these
companies develops and markets imaging products and services that provide a
panoramic image experience.

We cannot assure you that others will not develop technologies that are similar
or superior to our technologies, duplicate our technologies or design around
our patents. To compete effectively, we must:

-   introduce new versions of, and enhancements to, our products and services;
-   price our products and services at appropriate and competitive levels;
-   and provide strong marketing support to promote our products and services.

Some of our competitors have greater financial, marketing, distribution and
technical resources than we do. In addition, we compete with other companies in
the traditional two-dimensional photography industry. Traditional photographs
have significant and established customer acceptance. Our success will be
dependent on our ability to compete with companies offering similar immersive
imaging products and with companies in the traditional photography industry. If
we are unable to compete effectively, our business may fail.

WE HAVE EXPERIENCED, AND ANTICIPATE THAT WE WILL CONTINUE TO EXPERIENCE, RAPID
GROWTH, WHICH PLACES SIGNIFICANT STRAIN ON OUR MANAGEMENT SYSTEMS AND RESOURCES

Over the last 12 months, our employee base has grown significantly, and we
expect that the number of our employees will continue to increase in the
future. This growth has placed, and is expected to continue to place, a
significant strain on our management and resources. To manage the expected
growth of operations and personnel, we must continue to improve or replace
existing operational, accounting and information systems, procedures and
controls. In connection with the audit of bamboo.com for the fiscal year ended
December 31, 1999, our independent accountants identified a reportable
condition in bamboo.com's internal controls with respect to the reconciliation
of deferred revenues. While management instituted action to correct the
condition prior to the completion of the audit, failure by the integrated
company to maintain strong internal controls in the future would harm our
business. In addition, we need to rapidly expand, train, integrate and manage
our employees, particularly those in our technical, accounting, financial and
sales and marketing organizations. We cannot assure you that we will be able to
manage our growth successfully, and our failure to do so could cause our
business to fail.

WE ARE RELIANT ON OUR CUSTOMERS' AWARENESS OF OUR BRAND AND MAY HAVE TO EXPEND
SIGNIFICANT RESOURCES TO MAINTAIN OR ACCOMPLISH OUR BRAND AWARENESS


                                       20
<PAGE>   21

We believe that establishing and maintaining our brand of visual content
solution is important to our efforts to increase our customer base. We intend
to make significant expenditures to create and maintain distinct brand
awareness through traditional media advertising campaigns such as print,
billboards and television and by increasing sales and marketing activities. If
customers do not perceive our existing products and services to be of high
quality or if we introduce new products and services or enter into new business
ventures that are not favorably received or ultimately successful, the value of
our brand could be diluted, which could adversely affect the attractiveness of
our products and services. If we fail to increase our revenue as a result of
our branding efforts or fail to promote our brand successfully, or if we incur
excessive expenses in an attempt to promote and maintain our brand without a
corresponding increase in sales, our business could be harmed.

IF OUR VISUAL CONTENT SOLUTIONS AND IMMERSIVE IMAGES FOR E-COMMERCE DO NOT
ACHIEVE WIDESPREAD MARKET ACCEPTANCE, OUR BUSINESS WILL NOT GROW

Our success will depend in large part on widespread market acceptance of
immersive imaging for e-commerce and of online tours to display real estate
properties. If the online market for these products develops more slowly than
expected, or if our visual content solutions do not achieve widespread market
acceptance, our business will grow more slowly than expected.

Our future growth, if any, will depend on the following critical factors:

-   the growth of the Internet as a tool used in the process of buying and
    selling products marketed with the help of immersive imaging, particularly
    residential real estate;
-   our ability to successfully and cost-effectively market our visual content
    products and services to a sufficiently large number of web sites,
    including real estate portals, e-commerce web sites and new media sites;
    and
-   our ability to consistently deliver high quality products and fast and
    convenient service at competitive prices.

A SIGNIFICANT AMOUNT OF OUR SALES COMES FROM A FEW VERTICAL MARKETS, INCLUDING
THE REAL ESTATE MARKET

Currently, a significant portion of our revenue is derived from businesses in
the real estate and e-commerce vertical markets. For example, in 1999, 47.0% of
our combined revenues were related to the real estate industry. Our inability
to continue to sell to customers in these vertical markets could result in a
significant reduction in our total revenues and negatively affect our ability
to become profitable. The volume of sales that we generate from customers
within these and other vertical markets is likely to vary from year to year.

IF WE LOSE KEY MEMBERS OF OUR PERSONNEL, OUR FUTURE SUCCESS COULD BE LIMITED


                                       21
<PAGE>   22

Our future success depends on our ability to attract and retain key management,
scientific, technical and other personnel. In addition, we must recruit
additional qualified management, scientific, technical, marketing and sales and
support personnel for our operations. Competition for this type of personnel is
intense, and there can be no assurances that we will be successful in
attracting or retaining personnel. In addition, some members of our management
team are not bound by non-compete agreements if they are no longer employed by
us. The loss of the services of one or more members of our management group or
other key employees or the inability to hire additional qualified personnel
will limit our ability to grow our business.

OUR SUCCESS IS DEPENDENT UPON OUR ABILITY TO ADAPT TO TECHNOLOGICAL CHANGES,
AND IF WE FAIL TO ADAPT TO TECHNOLOGICAL CHANGES, OUR OFFERINGS MAY BECOME
OBSOLETE

We compete in a market characterized by rapidly changing technology, evolving
industry standards, frequent new service and product announcements,
introductions and enhancements and changing customer demands. These market
characteristics are intensified by the emerging nature of the Internet and the
multitude of companies offering Internet-based products and services. Thus, our
success depends on our ability to adapt to rapidly changing technologies, to
adapt our offerings to evolving industry standards and to continually improve
the performance, features and reliability of our offerings in response to
competitive products and shifting demands of the marketplace. In addition,
widespread changes in Internet, networking or telecommunications technologies
or other technological alterations could require substantial expenditures to
modify our products, services or infrastructure. Failure to adapt to new
technology in any of these areas could have a material adverse effect on our
business, results of operations and financial condition.


WE MAY NOT BE SUCCESSFUL IN EXPANDING OUR VISUAL CONTENT SOLUTIONS INTO
INTERNATIONAL MARKETS

A part of our long-term strategy is to expand into international markets. The
success of any additional foreign operations will be substantially dependent
upon our entering and succeeding in those markets. We may experience difficulty
in managing international operations as a result of competition, technical
problems, distance, language or cultural differences.

As we expand our international efforts, we will be subject to a number of
risks, including the following:

-   failure of foreign countries to rapidly adopt the Internet and digital
    imaging;
-   unexpected changes in regulatory requirements, especially regarding the
    Internet;
-   slower payment and collection of accounts receivable than in our domestic
    market; and


                                       22
<PAGE>   23

-   political and economic instability. We can not assure you that we will be
    able to successfully market our products in foreign markets.


WE ARE SUSCEPTIBLE TO BREACHES OF ONLINE COMMERCE SECURITY

A party able to circumvent our security measures could misappropriate
proprietary database information or cause interruptions in operations. As a
result, we may need to expend significant capital and other resources to
protect against security breaches or to alleviate problems caused by security
breaches. This additional expense could harm our business, financial condition
and results of operation.


WE MAY ENTER INTO BARTER TRANSACTIONS THAT DO NOT GENERATE CASH REVENUE

Barter revenues come from our exchange of our products and services with third
parties, primarily for advertising rather than cash. Although revenues from
barter transactions accounted for approximately 2.0% of our revenues in the
fiscal year ended December 31, 1999, and 14.6% of our revenues in the quarter
ended March 31, 2000, our use of barter transactions may increase in future
periods. Barter transactions do not generate any cash for us. In addition, we
determine the value of barter revenues based on historical experience. If our
assumptions are wrong, we might have to reduce the amounts of barter revenues
recognized, which could harm our stock price.


WE MAY REQUIRE ADDITIONAL FUNDING WHICH MAY NOT BE AVAILABLE ON FAVORABLE TERMS
OR AT ALL

Although we believe that the net proceeds of our recently completed follow-on
offering, combined with our cash balances, cash equivalents, maturities of our
securities available-for-sale and cash generated from operations, will be
adequate to fund our operations for at least the next 12 months, these sources
may prove to be inadequate. We may need additional funds in the future to
support our working capital requirements or for other purposes and we may seek
to raise additional funds through public or private equity financing, bank debt
financing or from other sources. Adequate funds may not be available when
needed or may not be available on favorable terms. If we raise additional funds
by issuing equity securities, existing stockholders may be diluted. If funding
is insufficient at any time in the future, we may not be able to develop or
enhance our products or services, take advantage of business opportunities or
respond to competitive pressures, any of which could harm our business. Our
future capital requirements depend upon many factors, including the following:

-   the occurrence, timing, size and success of future acquisitions;
-   the cost of transitioning customers to our brand or building brand
    awareness;
-   the extent to which we develop and upgrade our technology;
-   the rate at which we expand our operations both domestically and
    internationally; and


                                       23
<PAGE>   24

-   the response of competitors to our product and service offerings.

OUR CERTIFICATE OF INCORPORATION AND BYLAWS CONTAIN ANTI-TAKEOVER PROVISIONS
THAT MAY MAKE IT MORE DIFFICULT OR EXPENSIVE TO ACQUIRE US IN THE FUTURE, WHICH
COULD NEGATIVELY AFFECT OUR STOCK PRICE

Our amended and restated certificate of incorporation and amended and restated
bylaws and applicable provisions of Delaware law contain several provisions
that may make it more difficult for a third party to acquire control of us
without the approval of our board of directors. The provisions of our
certificate and bylaws and the Delaware General Corporation Law may make it
more difficult or expensive for a third party to acquire a majority of our
outstanding voting common stock or delay, prevent or deter a merger,
acquisition, tender offer or proxy contest, which may negatively effect our
stock price.


                           FORWARD-LOOKING STATEMENTS

This quarterly report contains statements about future events and expectations
which are characterized as forward-looking statements. Forward-looking
statements are based on our management's beliefs, assumptions and expectations
of our future economic performance, taking into account the information
currently available to them. These statements are not statements of historical
fact. Forward-looking statements involve risks and uncertainties that may cause
our actual results, performance or financial condition to be materially
different from the expectations of future results, performance or financial
condition we express or imply in any forward-looking statements. Factors that
could contribute to these differences include those discussed in "Risk Factors"
of our prospectus dated May 4, 2000 and those under Additional Factors That May
Affect Our Future Results.

The words "believe", "may", "will", "should", "anticipate", "estimate",
"expect", "intends", "objective" or similar words or the negatives of these
words are intended to identify forward-looking statements. We qualify any
forward-looking statements entirely by these cautionary factors.


                                       24
<PAGE>   25

PART II -- OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

LITIGATION

On October 28, 1998, Minds-Eye-View, Inc. and Mr. Ford Oxaal filed a lawsuit
against us in the United States District Court for the Northern District of New
York. Minds-Eye alleged in its lawsuit that we breached a duty of confidence to
them, made misrepresentations and misappropriated trade secrets. The plaintiffs
alleged that our technology wrongfully incorporated trade secrets and other
know-how gained from them in breach of various duties. The court removed this
action to arbitration upon our motion, and we cross-claimed alleging various
affirmative claims, including trade secret theft. Minds-Eye and Mr. Oxaal filed
a motion to dismiss the suit, and the court dismissed the lawsuit on May 19,
1999. Although the lawsuit was dismissed, we anticipate that the arbitration
will proceed in Knoxville, Tennessee in the summer of 2000 to decide our
affirmative claims against Mr. Oxaal. On May 20, 1999, Mr. Oxaal filed a
lawsuit against us, Kodak, Nikon and Cendant in the same court alleging that
our technology infringes upon a patent claim for 360(degrees) spherical visual
technology held by him. Mr. Oxaal claims that this alleged infringement is
deliberate and willful and is seeking treble damages against us in an
unspecified amount plus interest, an accounting by us, costs and attorney's
fees, in addition to a permanent injunction prohibiting the alleged
infringement of his patent by us. We have asserted defenses to Mr. Oxaal's
claims as we believe we did not infringe any valid claims of his patent. We
believe that Mr. Oxaal's claims are without merit and we intend to vigorously
defend against his claims. However, if Mr. Oxaal were to prevail in this
lawsuit, our financial condition, results of operations and cash flows could be
materially adversely affected.

We are not currently a party to any other legal proceedings the adverse outcome
of which, individually or in the aggregate, we believe could have a material
adverse effect on our business, financial condition or results of operations.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

On January 7, 2000, we issued warrants to two of our distribution partners
exercisable for an aggregate of 200,000 shares of common stock with an exercise
price equal to ninety percent of the average closing price of our common stock
in The Wall Street Journal, calculated over the fifteen trading days
immediately preceding January 7, 2000.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

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

On January 19, 2000, bamboo.com and Interactive Pictures Corporation both held
special meetings of their stockholders to vote upon an agreement and plan of
merger that was


                                       25
<PAGE>   26
entered into by both companies. Both companies' stockholders approved the
agreement and plan of merger by a majority vote. Under the agreement and plan of
merger, Interactive Pictures Corporation and bamboo.com were merged together,
with each stockholder of Interactive Pictures receiving 1.369 shares of
bamboo.com stock for each share the stockholder owned. The combined company
changed its name to Internet Pictures Corporation. In addition, the stockholders
of bamboo.com., by a majority vote, approved the following items: an amendment
to its 1998 Option Plan that increased the number of shares available from 1.4
million to 2.8 million; increased the number of shares available for purchase
under its 1999 Stock Purchase Plan from 700,000 to 1.4 million; and amended its
certificate of incorporation to increase the number of authorized shares from 70
million to 150 million.

ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

a.       Exhibits
         Exhibit 27.1                       Financial Data Schedule
b.       Reports on Form 8-K
         (1) February 10, 2000; Item 5
         (2) March 14, 2000; Item 5


                                       26
<PAGE>   27


                         INTERNET PICTURES CORPORATION

                                   SIGNATURES

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


DATE: May 15, 2000                  INTERNET PICTURES CORPORATION
                                            (Registrant)



                                               /s/ John J. Kalec
                                            ----------------------------------
                                            John J. Kalec
                                            Authorized Officer
                                            Chief Financial Officer and
                                            Chief Accounting Officer


                                       27
<PAGE>   28

                         INTERNET PICTURES CORPORATION

                        INDEX TO EXHIBITS FOR FORM 10-Q

                        FOR QUARTER ENDED MARCH 31, 2000

<TABLE>
<CAPTION>
EXHIBIT NO.                                 EXHIBIT DESCRIPTION
-----------                                 -------------------
<S>                                         <C>
      27.1                                  Financial Data Schedule (for SEC use only)
</TABLE>


                                       28