UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, 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~~JUNE 3130, 2001 OR

[ ]

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

For the transition period from _______, 19___ to ______, 19___.

Commission File Number: 33-35580-D

BURST.COM, INC.
(Exact Name of Small Business Issuer
as Specified in its Charter)

DELAWARE
(State or Other Jurisdiction of
Incorporation or Organization)

84-1141967
(I.R.S. Employer Identi-
fication Number)

613 FOURTH STREET, SUITE 201SANTA ROSA, CALIFORNIA 95404Address of Principal Executive Offices, Including Zip Code (707) 541-3870(Issuer’s Telephone Number, Including Area Code) Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] YES [ ] NO There were 21,648,125 shares of the Issuer’s $.00001 par value common stock outstanding as of ~~May~~August 1115, 2001

BURST.COM, INC. FORM 10-Q ~~MARCH~~JUNE 3130, 2001 TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION		3
ITEM 1. FINANCIAL STATEMENTS		3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		10
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		13
PART II - OTHER INFORMATION		14
ITEM 1. LEGAL PROCEEDINGS		14
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS		14
ITEM 3. DEFAULTS UPON SENIOR SECURITIES		14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		15
ITEM 5. OTHER INFORMATION		15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K		15
SIGNATURES		16

PART I —FINANCIAL INFORMATION ~~BURST.COM,~~ITEM ~~INC~~1. ~~AND~~Financial ~~SUBSIDIARIESCondensed~~Statements ~~Consolidated~~(These ~~Balance~~financial ~~SheetsMarch~~statements ~~31,~~have ~~2001~~not ~~and~~been ~~December~~reviewed 31by the Company’s auditors, ~~2000~~as required under the regulations governing Form 10Q. See Note (~~Unaudited~~1)). BURST.COM, INC. AND SUBSIDIARIESCondensed Consolidated Balance Sheets ASSETS

	MARCH 31,2001	DECEMBER 31,2000
	JUNE 30,2001	DECEMBER 31,2000
	(unaudited)
Current assets:
Cash and cash equivalents	$ 7057,~~284~~794	$ 296,584
Accounts receivable, net	2740,~~200~~000	295,795
Loans to officers, net	—	139,633
Marketable securities available for sale	484,744	—
Marketable securities - trading	12,538	—
Prepaid expenses and other current assets	6025,~~341~~704	42,084
Total current assets	~~642~~136,~~569~~036	774,096
Property and equipment, net	~~451~~164,~~887~~146	570,700
Other assets	~~281~~2,~~888~~700	317,337
Total assets	$ 1302,~~376,344~~882	$ 1,662,133

LIABILITIES AND STOCKHOLDERS’ ~~EQUITY~~DEFICIT

Current liabilities:
Notes payable	$ ~~758~~950,~~300~~000		$ 500,000
Accounts payable	1,~~886~~949,~~643~~539		1,550,573
Accrued expenses	2,~~750~~672,~~155~~414		515,873
Accrued interest	1124,~~091~~316		1,192
Deferred revenue	342,400		287,225
Total liabilities	5,~~748~~938,~~589~~669		2,854,863
Stockholders’ deficit:
Common stock, $.00001 par value, 100,000,000
shares authorized; 21,648,125 and 20,148,125 shares
issued and outstanding
issued and outstanding, respectively	216		201
respectively	216		201
Additional paid-in capital	57,162,682		55,852,947
Accumulated deficit	(6162,~~069~~798,~~029~~685	)	(57,045,878	)
Accumulated other comprehensive loss	(466,114	)	—
Total stockholders’ deficit	(5,635,787	)	(1,192,730	)
Total stockholders’ deficit	(4,372,245	)	(1,192,730	)
Total liabilities and stockholders’ deficit	$ 302,882		$ 1,662,133
Total liabilities and stockholders’ deficit	$ 1,376,344		$ 1,662,133

See accompanying notes to condensed consolidated financial statements.

BURST.COM, INC. AND SUBSIDIARIESCondensed Consolidated Statements of ~~OperationsFor the Three Months Ended March 31, 2001 and 2000~~Operations(Unaudited)

	2001		2000
	Three Months Ended				Six Months Ended
Revenue	$ 31,323		$ 75,012
	June 30,2001		June 30,2000		June 30,2001		June 30,2000
Cost of revenues	—		30,271
Revenue	$ 26,437		$ 311,136		$ 57,760		$ 386,149
	31,323		44,741
Cost of revenues	—		—		—		30,272
Costs and expenses:
	26,437		311,136		57,760		355,877
Research and development	147,542		933,975
Cost and expenses:
Sales and marketing	260,661		1,727,283
Research and development	11,360		1,284,763		158,902		2,218,738
General and administrative	3,477,328		1,151,649
Sales and marketing	28,547		3,356,785		289,208		5,084,068
Total costs and expenses	3,885,531		3,812,907
General and administrative	967,458		1,836,034		1,791,210		3,089,697
Loss from operations	(3,854,208	)	(3,768,166	)
Restructuring costs	258,896		—		2,964,762		—
Total costs and expenses	1,266,261		6,477,582		(5,204,082	)	10,392,503
Loss from operations	(1,239,824	)	(6,166,446	)	(5,146,322	)	(10,036,626	)
Other income (expense):
Interest expense	(23106,~~062~~968	)	(~~32,484~~212	)	(130,030	)	(32,696	)
Interest income	82,~~134~~344		~~104~~98,~~030~~957		10,478		202,987
Other, net	(152,548	)	(102,520	)
Other, net - including income (loss) on marketable securities	80,906		(192,563	)	(486,933	)	(192,978	)
Total other income (expense), net	(137,620	)	(30,974	)
Total other expense, net	(23,718	)	(93,818	)	(606,485	)	(22,687	)
Net loss	(41,~~023~~263,~~151~~542	)	(36,~~799~~260,~~140~~264	)	(5,752,807	)	(10,059,313	)
Other comprehensive loss	(466,114	)	0
Basic and diluted net loss per common share	$ (0.06	)	$ (0.33	)	$ (0.27	)	$ (0.59	)
Comprehensive loss	$(4,489,265	)	$(3,799,140	)
Shares used in per share computation	21,648,125		19,047,098		21,398,125		17,114,457
Basic and diluted net loss per common share	$ (0.21	)	$ (0.24	)
Shares used in per share computation	21,148,125		15,938,027

See accompanying notes to condensed consolidated financial statements

BURST.COM, INC. AND SUBSIDIARIESCondensed Consolidated Statements of Stockholders’ Equity (Deficit)For the ~~Three~~Six Months Ended ~~March~~June 3130, 2001(Unaudited)

	Common Stock		AdditionalPaid-in		Accumulated		~~Valuation~~
	Shares	Amount	Capital		deficit		~~Reserve~~Total		~~Total~~
Balance at December 31, 1999	20,148,125	$201	$55,852,947		$(57,045,878	)	$ —		$(1,192,730	)
Balance at December 31, 2000	20,148,125	$201	$55,852,947		$(57,045,878	)	$(1,192,730	)
Common stock exchange	1,500,000	15	843,735		—		—843,750		~~843,750~~
Unrealized losses on marketable securities available for sale							(466,114	)	(466,114	)
Stock-based composition	—	—	366,000		—		366,000
Stock-based composition	—	—	366,000		—		—		366,000
Warrants issued with debt	—	—	100,000		—		100,000
Warrants issued with debt	—	—	100,000		—		—		100,000
Net loss	—	—	—		(5,752,807	)	(5,752,807	)
Net loss	—	—	0	)	(4,023,151)				(4,023,151)	)
Balance at June 30, 2001	21,648,125	$216	$57,162,682		$(62,798,685	)	$(5,635,787	)
Balance at March 31, 2000	21,648,125	$216	$57,162,682		$(61,069,029	)	$(466,114	)	$(4,372,245	)

See accompanying notes to condensed consolidated financial statements

BURST.COM, INC. AND SUBSIDIARIESCondensed Consolidated Statements of Cash FlowsFor the ~~Three~~Six Months Ended ~~March~~June 3130, 2001 and 2000(Unaudited)

	2001		2000
Cash flows from operating activities:
Net loss	$(45,~~023~~752,~~151~~807	)	$(310,~~799~~059,~~140~~313	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	4859,~~195~~716		95258,~~425~~374
Amortization of loan discount	8100,~~300~~000		—
Non-cash stock-based compensation expense	366,000		100,289
Writedowns and losses on disposed if fixed assets	56,584		—
Stock Option Compensation	—		235,906
Writedowns and losses on disposal of fixed assets	332,996		—
Reserve against loan to officer	157,190		—
Realized losses on sale of available securities	96,817		—
Realized and unrealized losses on marketable trading securities	452,260		—
Changes in operating assets and liabilities:
Accounts receivable	~~(18~~255,~~630~~795	)	(~~361~~329,~~987~~027	)
Loans to officers	(17,557	)	—
Prepaid expenses and other current assets	~~(17~~16,~~192~~380	)	(~~161~~203,~~752~~288	)
Accounts payable	~~336~~398,~~070~~966		(~~165~~259,~~433~~465	)
Accrued expenses	2,234,282		336,816
Notes payable	—		(4,834,847	)
Accrued interest	9,899		31,628
Accrued expenses	2,156,541		857,639
Deferred revenue	(20,000	)	326,675
Accrued interest	23,124		(114,277)
Net cash used in operating activities	(708,809	)	(3,597,479	)
Deferred revenue	20,000		368,836
Net cash used in operating activities	(1,431,396	)	(13,979,173	)
Cash flows from investing activities:
Proceeds from sale of marketable securities	~~118~~701,~~475~~353		—
Proceeds from sale of property and equipment	1441,~~034~~253		—
Purchases of property and equipment	—		(~~426~~1,~~320~~211,561	)
Net cash provided by (used in) investing activities	~~132~~742,~~509~~606		(~~426~~1,~~320~~211,561	)
Cash flows from financing activities:
Proceeds from sale of common stock	—		1218,~~795~~059,~~145~~992
Proceeds from notes payable	~~350~~550,000		~~430,000~~—
Proceeds from exercise of warrants and stock options	—		45,000
Note payable repaid	(100,000	)	—
Net cash provided by financing activities	350,000		13,270,145
Proceeds from exercise of warrants and stock options	—		305,058
Increase (decrease) in cash and cash equivalents	(226,300	)	9,246,346
Net cash provided by financing activities	450,000		18,365,050
Increase (decrease) in cash and cash equivalents	(238,790	)	3,174,316
Cash and cash equivalents, beginning of period	296,584		302,979
Cash and cash equivalents, end of period	$ 7057,~~284~~794		$ 93,~~549~~477,~~325~~295

See accompanying notes to condensed consolidated financial statements

BURST.COM, INC. AND SUBSIDIARIESCondensed Consolidated Statements of Cash Flows, ContinuedFor the ~~Three~~Six Months Ended ~~March~~June 3130, 2001 and 2000(Unaudited)

	2001	2000
Supplemental disclosure of cash flow information:

Cash paid for state franchise tax	$ 504	$ 850


Cash paid for interest	$ —	$ —


Supplemental schedule of non-cash financing activities:

Debt converted into 1,333,750 shares of common stock	$ —	$5,335,000

Discount related to warrants granted in conjunction with debt	$100,000	$ —

Offset of deferred revenue against accounts receivable	$287,225	$ —

Exchange of common stock for marketable securities	$843,750	$ —

Exchange of common stock for licensing agreement — credited to deferred revenue	$322,400	$ —

See accompanying notes to condensed consolidated financial statements.

BURST.COM, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)

(1) ~~CHANGE~~BASIS OF ~~NAME~~PRESENTATION AND GOING CONCERN

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

~~(2)~~The ~~BASIS~~accompanying OFfinancial ~~PRESENTATION~~statements ~~AND~~include ~~GOING~~the ~~CONCERN~~accounts of the Company and its wholly-owned subsidiaries, Explore Technology, Inc. and Timeshift-TV. All significant intercompany transactions and accounts have been eliminated in consolidation. These financial statements have not been reviewed by independent certified public accountants as required under the regulations governing Form 10Q. The Company intends to amend this report upon completion of their SAS 71 review.

Through June 30, 2001, the Company had sustained recurring losses from operations and, at June 30, 2001, had a stockholders’ deficit of $5,635,787 and a net working capital deficiency of $5,106,000. As discussed in Note 5, the Company has also closed most of its operating facilities and has laid off all but five of its employees. These conditions raise substantial doubt about the ability of the Company to continue as a going concern. The ~~accompanying~~opinion of our independent certified public accountants on the audited financial statements ~~include~~for the ~~accounts~~year ofended December 31, 2000 also contained an explanatory paragraph regarding doubt about our ability to continue as a going concern. During fiscal 2001, the Company ~~and~~expects to meet its ~~wholly-owned~~working ~~subsidiaries,~~capital ~~Explore~~and ~~Technology~~other cash requirements with cash derived from operations and sale of marketable securities, ~~Inc.~~and is in negotiations to obtain additional funding through sale of assets and/or ~~Timeshift-TV~~new shares of common stock. ~~All~~However, ~~significant~~there ~~intercompany~~can ~~transactions~~be no assurance that the Company’s efforts to achieve and ~~accounts~~maintain ~~have~~profitable ~~been~~operations ~~eliminated~~will inbe ~~consolidation~~successful. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

~~Through~~(2) ~~March~~INTERIM ~~31,~~FINANCIAL 2001, the Company had sustained recurring losses from operations and, at March 31, 2001, had a stockholders’deficit of $4,372,000 and a net working capital deficiency of $5,106,000. As discussed in Note 6, the Company has also closed most of its operating facilities and has laid off all but three of its employees. These conditions raise substantial doubt about the ability of the Company to continue as a going concern. During fiscal 2001, the Company expects to meet its working capital and other cash requirements with cash derived from operations and sale of marketable securities, and is in negotiations to obtain additional funding through sale of assets and/or new shares of common stock. However, there can be no assurance that the Company’s efforts to achieve and maintain profitable operations will be successful. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.INFORMATION

~~(3)~~The ~~INTERIM~~accompanying ~~FINANCIAL~~financial ~~INFORMATION~~statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions for Form 10-Q and Article 10 of Regulation S-X. In the Company’s opinion, the financial statements include all adjustments, consisting of normal recurring adjustments, that the Company considers necessary to fairly state the Company’s financial position and the results of operations and cash flows. The balance sheet at December 31, 2000, has been derived from the Form 10-K and the audited financial statements at that date but does not include all of the necessary informational disclosures and footnotes as required by generally accepted accounting principles. The accompanying financial statements should be read in conjunction with the financial statements and notes thereto included with the Company’s Form 10-K filed April 17, 2001 and other documents filed with the Securities and Exchange Commission. The results of the Company’s operations for any interim period are not necessarily indicative of the results of the Company’s operations for any other interim period or for a full fiscal year.

~~The~~(3) ~~accompanying~~PROPERTY ~~financial~~AND statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions for Form 10-Q and Article 10 of Regulation S-X. In the Company's opinion, the financial statements include all adjustments, consisting of normal recurring adjustments, that the Company considers necessary to fairly state the Company's financial position and the results of operations and cash flows. The balance sheet at December 31, 2000, has been derived from the Form 10-K and the audited financial statements at that date but does not include all of the necessary informational disclosures and footnotes as required by generally accepted accounting principles. The accompanying financial statements should be read in conjunction with the financial statements and notes thereto included with the Company's Form 10-K filed April 17, 2001 and other documents filed with the Securities and Exchange Commission. The results of the Company's operations for any interim period are not necessarily indicative of the results of the Company's operations for any other interim period or for a full fiscal year.EQUIPMENT

(4) PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

	March 31,2001		December 31,2000
	June 30,2001		December 31,2000
Computer equipment	$ ~~413~~100,~~410~~000		$ 509,191
Furniture	8315,~~875~~000		94,426
Office equipment	5,000		5,000
Software	55,000		55,000
Trade show booth	5,000		5,000
Leasehold improvements	—		—
	180,000		668,617
	562,286		668,617
Less accumulated
depreciation	(~~110~~15,~~399~~854	)	(97,917	)
	$ 451,887		$ 570,700
	$ 164,146		$ 570,700

During the ~~three~~six months ended ~~March~~June 3130, 2001, management determined that certain computers and other equipment were not recoverable at their current book value, and certain leasehold improvements and other assets had been abandoned when sales offices were closed. Accordingly, losses and writedowns totaling $52329,~~290~~366 have been included in Restructuring costs of the accompanying ~~consolidated~~Consolidated Statements of Operations.

(54) DEBT

NOTES PAYABLE TO STOCKHOLDERS	~~March~~June 3130,2001		December31, 2000
6% Convertible note payable to Mercer Management, Inc.,
interest and principal due December 28, 2001	$ ~~650~~850,000		$500,000
6% Convertible notes payable to Draysec Finance Limited	100,000		—
6% Convertible notes payable to Draysec Finance Limited,
interest and principal due in February and March 2002	100,000		—
10% Note payable to Robert Schacter, secured by 100,000 shares
Notes Payable	$ 950,000		$500,000
of Eagle Wireless International, Inc. common stock, interest and
principal due September 12, 2001	100,000		—
Unamortized discount on Schacter note	(91,700	)	—
Notes Payable	$ 758,300		$500,000

The 6% notes payable are convertible into a new series of Preferred Stock to be identified as Series A-2001 at a per share conversion price of Five Dollars ($5.00) at the option of the note holders.

In connection with the Schacter note issuance, in March 2001 the Company repriced 98,870 existing $5.00 warrants and issued an additional 50,000 new warrants to purchase a total of 148,870 shares of common stock at $0.875. The warrants and repricings were valued at $100,000, resulting in a discount to Notes Payable amortized over the life of the loan. The loan was repaid in full in May 2001.

(65) ACCRUED LIABILITIES

	March 31,2001	December31, 2000
	June 30,2001	December31, 2000
Accrued leasehold costs on abandoned leases	$1,229,726	$ —
Accrued severance costs	807,850	—
Accrued wages and vacation	~~563~~488,804	350,723
Other	~~148~~146,~~775~~034	165,150
Accrued Liabilities	$2,~~750~~672,~~155~~414	$515,873

During the first quarter of 2001, the Company closed and abandoned its sales offices. It also began moving out of its San Francisco headquarters, completing the move to new smaller Santa Rosa, California facilities in ~~early~~late April. Additionally, all but ~~three~~five of the remaining employees had been laid off by March 31, 2001. The related accrued leasehold costs and accrued severance costs are included in Restructuring costs in the accompanying Consolidated Statements of Operations. Certain of the terms in the severance agreements, considered in accrued severance costs at June 30, 2001, have been approved by management but not yet ratified by the Board.

(76) EQUITY FINANCING AND INVESTMENT IN MARKETABLE SECURITIES ~~AVAILABLE FOR SALE~~

In ~~February~~January 2001, the Company exchanged 1,500,000 shares of its common stock valued at $843,735 for 400,000 shares of Eagle Wireless International, Inc. common stock. In addition, ~~during~~ the ~~quarter the~~ Company entered into a licensing agreement with Eagle Wireless whereby Eagle Wireless issued 104,000 of its common shares valued at $322,400 in exchange for a two-year license for certain technology rights. The license agreement is effective the earlier of January 2002 or the commercial deployment of any products incorporating the technology licensed from Burst. Accordingly, at March 31, 2001, the entire $322,400 is included in Deferred Revenues.

During the quarter ended March 31, 2001, the Company sold 93,200 of the Eagle Wireless shares, resulting in a realized loss of $96,817 included in other ~~income and~~ expense. The remaining shares were reduced to their market value as of March 31, 2001, resulting in ~~unrealized~~additional losses of $466,114, also included in other expense. By July 25, 2001, all Eagle shares had been sold or exchanged for services realizing cumulative losses of $453,541.

The Company completed a sale of its common stock and warrants to purchase common stock in January 2000. In addition to the conversion of notes outstanding referred to above, the Company received $13,898,500 in cash from various investors, including some directors and employees of the company, in exchange for 4,808,375 shares of common stock and 4,808,375 warrants to purchase common stock, offset by approximately $1,103,000 in transactions costs. The price per share of common stock was $4.00, which included the issuance of one warrant for each share of stock sold. Each warrant is exercisable for one share of common stock at an exercise price of $5.00 per share and expires 5 years from the date of issue. Compensation expense of $77,726 was recorded as a result of sales of stock to employees for the excess of fair value over the price paid. In connection with the offering, 98,870 five-year warrants to purchase common stock at $8.4375 per share were issued to the placement agent.

(87) STOCK OPTIONS

In January 2001 the Company granted options to purchase 150,000 shares of common stock exercisable at $0.3125 to an independent contractor. In addition, existing options for employees under variable plan accounting and unvested options being earned by contractors were revalued, resulting in a net reduction in stock-based compensation of $250,000 as of March 31, 2001.

As a result of severance agreements with certain senior officials, the lives of their options were extended to one year after termination or the full contractual life instead of expiring within a ~~certain~~shorter time ~~period after termination~~. These extensions, which have been approved by management but not yet ratified by the Board, resulted in a stock-based compensation charge of $616,000. ~~All~~The severance-related portion of stock-based compensation is included in ~~General~~Restructuring ~~and~~costs ~~Administrative expense~~ in the accompanying ~~consolidated~~Consolidated Statements of Operations.

The Company granted options to purchase 90,250 shares of common stock to employees on February 1, 2000. Of these options, options to purchase 45,125 shares were issued with an exercise price of $4.00 per share and expiring on April 30, 2000. The remaining options to purchase 45,125 shares were issued with an exercise price of $5.00 per share and expire 5 years from the issue date. To the extent that any of the options with an exercise price of $4.00 per share were not exercised by April 30, 2000, then options to purchase an equal number of shares at an exercise price of $5.00 ~~will terminate~~terminated. As a result of these grants, the Company recorded compensation expense of $22,563 for the excess of the grant date fair value over the exercise price.

(98) OTHER RELATED PARTY TRANSACTIONS

In connection with the severance agreements referred to in ~~Note~~Notes 6 and 8 and the officer’s employment agreement, a $157,190 loan to the Company’s former President has been fully reserved. The Company has not released the officer from this obligation.

~~(10)~~In ~~SUBSEQUENT~~May ~~EVENTS~~2001, the Company received $200,000 promissory note financing from Gordon Rock. Mr. Rock took a security interest in the assets of the Company. Mr. Rock was a member of our Board at that time, but refrained from any actions taken by the Board regarding the financing. Mr. Rock has since resigned his seat on our Board.

In(9) ~~May~~SUBSEQUENT ~~2001, the Company signed an agreement with Eagle Wireless International Inc.~~EVENTS

9On August 10, 2001 the Company received $150,000 promissory note financing from Gordon Rock, secured by assets of the Company.

Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion of the financial condition and results of operations of Burst.com, Inc. should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and the Notes thereto for the year ended December 31, 2000 included in the Company’s Form 10-K. CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS Some of the matters discussed in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this quarterly report on Form 10-Q include forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events, including, among other things:

•ITEM ~~implementing~~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 Burst.com, Inc. should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and the Notes thereto for the year ended December 31, 2000 included in the Company’s Form 10-K. CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS Some of the matters discussed in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this quarterly report on Form 10-Q include forward-looking statements. We have based these forward-looking statements on our ~~business~~current ~~strategy;~~expectations and projections about future events, including, among other things:

• attracting immediate financing, merger or acquisition partners and/or ~~retaining~~a ~~customers~~sale of assets;

•

delivering quality product that meets customer expectations;

•

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

•

responding quickly to technological challenges from third parties;

•

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

•

rapid technological changes in our industry and relevant markets; and

•

competition in our market.

In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar expressions. These statements are based on our current beliefs, expectations and assumptions and are subject to a number of risks and uncertainties. Actual results, levels of activity, performance, achievements and events may vary significantly from those implied by the forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause our results to differ materially from those discussed. These risks and uncertainties include, but are not limited to, those described under the caption “Factors That May Impact Future Results” below. Additional information concerning factors that may impact future results can be found in the Risk Factors section of the above referenced S-1 Registration Statement filed on April 17, 2000. These forward-looking statements are made as of the date of this report, and except as required under applicable securities law, we assume no obligation to update them or to explain the reasons why actual results may differ. ~~The~~We ~~Company~~believe ~~believes~~ that period-to-period comparisons of its operating results, including its revenues, cost of sales, gross margins, expenses, and capital expenditures may not necessarily provide meaningful results and should not be relied upon as indications of future performance. The Company does not believe that its historical growth rates are indicative of future growth or trends. The Company has incurred significant losses since its inception, and as of ~~March~~June 3130, 2001, it had an accumulated deficit of $5962,~~205~~798,~~740~~685. There can be no assurance that the Company will achieve or sustain profitability and the Company believes that it will continue to incur net losses in 2001. Overview We are an independent provider of client/server network software for the delivery of video and audio information over networks. Our principal executive offices recently relocated to Santa Rosa, California and we have closed all other offices. Our software manages the delivery of video and audio content over various networks, including the Internet and corporate intranets, optimizing network efficiency and quality of service. Our Burstware® suite of software products enables companies to transmit video and audio files at Faster-Than-Real-Time™® speed, which is accomplished by utilizing available bandwidth capacity to send more video or audio data to users than the players are demanding. This data is stored on the users’ machine for playing on demand, thus isolating the user from noise and other network interference. The result is high quality, full-motion video and CD-quality audio to the end-user. Our revenue is derived from fees for software licenses, content hosting and other consulting services. 1011

Results of Operations Revenue recorded for the three ~~months~~and six month periods ended ~~March~~June 3130, 2001 was $3126,~~323~~437 and $57,760, respectively, versus 75$311,~~012~~136 and $386,149 during the same periods in 2000. The revenue decline was due to curtailment of sales, support and product marketing activity occurring in November 2000 and March 2001. The cost of revenue recorded for the quarter ended ~~March~~June 3130, 2001 was zero. The 2000 cost of revenue of $30,~~271~~272 consisted primarily of the cost of equipment purchased from a third-party, which was resold to a customer in connection with a software sale. Resale of equipment is not part of our sales strategy, and we do not plan to make such sales to any significant degree in the future. Research & development expenditures during the three ~~months~~and six month periods ended ~~March~~June 3130, 2001 were $~~147~~11,~~542~~360 and $158,902, respectively, as compared to $~~933~~1,~~975~~284,763 and $2,218,738 during the ~~three~~same ~~months~~periods ~~ended~~in ~~March 31,~~ 2000. The decrease resulted from personnel reductions and curtailment of new product development and testing. There was no significant amount of research and development that would qualify for capitalization under SFAS 86. ~~Major development activities began later in 1999 and continued until November 2000.~~ Sales & marketing expenses during the three ~~months~~and six month periods ended ~~March~~June 3130, 2001 were $~~260~~28,~~661~~547 and $289,208, respectively, as compared to $13,~~727~~356,~~283~~785 and $5,084,068 during the ~~three~~same ~~months~~periods ~~ended~~in ~~March 31,~~ 2000. The $1,466,622 decrease was primarily a result of staff reductions and curtailment of sales, support and product marketing activity in November 2000 and during the first quarter of 2001 as part of our restructuring. During the three ~~months~~and six month periods ended ~~March~~June 3130, 2001, general and administrative ~~expense~~expenses were $3967,~~477~~458 and $1,~~328~~791,210, respectively, as compared to $1,~~151~~836,~~649~~034 and $3,089,697 during ~~those~~the ~~months~~same periods in 2000. The ~~$2,325,679~~decrease ~~increase~~ was primarily due to the slowdown in our operations and termination of employees both in November 2000 and March 2001 as part of our restructuring. Also contributing to the decrease was a $~~807~~250,~~750~~000 reduction in stock-based compensation resulting from a revaluation of ~~severance~~options ~~costs~~for employees under variable accounting and $1certain unvested options being earned by contractors. During the six months ended June 30,~~269~~ 2001,~~929~~ due to shortage of ~~lease~~funds, ~~termination~~we ~~costs~~entered ~~incurred~~into ina ~~2001~~plan to severely curtail and ~~stock-based~~exit ~~compensation~~substantially ~~charges~~all of our development and ~~credits~~marketing ~~netting~~operations. toWe anclosed ~~expense~~and abandoned all of ~~$366~~our sales offices,~~000~~ began a move out of our San Francisco headquarters, and laid off all but five of our remaining employees. InThe ~~addition~~resulting restructuring charge of $2,964,762 ~~administrative~~represents accrued severance and leasehold costs ~~have~~on ~~declined~~abandoned ~~more~~premises, ~~slowly~~losses ~~because~~and ofwritedowns ~~the~~on ~~ongoing~~abandoned ~~efforts~~equipment, and stock-based compensation charges related to ~~market~~extension ~~the~~of ~~Company’s~~options ~~technology~~for ~~and~~certain ~~form~~executive ~~strategic~~management ~~alliances~~personnel in connection with their severance agreements. We had a net loss from operations of $31,~~854~~239,~~208~~824 and $5,146,322, respectively, during the three ~~months~~and six month periods ended ~~March~~June 3130, 2001, as compared to $36,~~768,~~166,446 and $10,392,503 during the same ~~three~~periods ~~months~~ in 2000. The ~~increased~~decreased ~~loss~~losses resulted from ~~the increased expenditures and charges offset by the~~ reduction in workforce ~~ands~~and operations discussed above. Other expense, net was $~~137~~23,~~620~~718 and $606,485, respectively, for the three ~~months~~and six month periods ended ~~March~~June 3130, 2001;, as compared to $3093,~~974~~818 ~~net~~and ~~other~~$22,687 ~~income~~during ~~for~~ the ~~three~~same ~~months~~periods ~~ended~~in ~~March 31,~~ 2000. This decline was primarily due to reduced interest income, as the January 2000 stock offering and debt conversion resulted in a significant influx of cash during that period. Cash balances during ~~the~~ 2001 ~~quarter~~ were significantly smaller. In addition, ~~the~~ 2001 ~~quarter~~ includes recognized losses of $~~96817~~440,254 on sales of Eagle Wireless common stock and unrecognized losses of $12,006 representing the reduction to market value of the Eagle Wireless stock remaining at June 30, 2001. Liquidity and Capital Resources The opinion of our independent certified public accountants on the audited financial statements for the year ended December 31, 2000 contained an explanatory paragraph regarding doubt about our ability to continue as a going concern. Although we have been successful in our fundraising efforts to meet previous operating requirements, there can be no guarantee that we will be successful in future fundraising efforts. During the ~~three~~six months ended ~~March~~June 3130, 2001, ~~the~~we ~~Company~~ raised $~~350~~450,000 (net) in cash by issuing notes payable and $1,166,150 in marketable securities by issuing common stock and a licensing agreement. In January 2000, we raised approximately $12,796,000 in cash, net of $1,103,000 in costs, and converted $5,335,000 of debt (including $430,000 in new debt raised in January 2000), by issuing 4,808,375 shares of our common stock. As of ~~March~~June 3130, 2001, we had cash reserves of approximately $7057,~~284~~794, which will, when supplemented by proceeds of the sale of our remaining marketable securities and a subsequent issuance of $150,000 in notes payable to a stockholder, meet current operating requirements for approximately ~~three~~one ~~months~~month at our current spending rate, assuming no revenue. We are currently in negotiations to obtain additional outside funding through the sale of shares of our common stock in a private placement directed at both “strategic” and “financial” investors, and have ~~just~~explored ~~signed~~the apotential ~~letter~~sale of ~~intent~~substantially all of our assets. Any new funding raised may have a dilutive effect on our existing shareholders. In the event we ~~were~~are ~~to be~~ unsuccessful in our additional fundraising efforts and projected revenues were significantly lower than expected, we would be required to further reduce significantly cash outflows, ~~through~~and ~~the~~would ~~reduction~~be orunable ~~elimination~~to ofrestore marketing and sales activities, development, capital, and administrative expenditures resulting in decreased potential revenue and potential profitability. Changes in Financial Position As of ~~March~~June 3130, 2001, we had a working capital deficit of $5,~~106~~802,~~020~~633 as compared to a deficit of $2,080,767 at December 31, 2000. This $3,~~025~~721,~~253~~866 decrease reflects a $~~131~~638,~~527~~060 decrease in current assets and an increase in current liabilities of $23,~~893~~083,~~726~~806. The reason for the decrease was the continued high level of administrative cost as well as lease termination costs and severance accompanying staff reductions and office closings. 1112

Net cash used in operating activities totaled $~~708~~1,~~809~~431,396 during the ~~three~~six months ended ~~March~~June 3130, 2001, as compared to net cash used in operating activities of $313,~~597~~979,~~479~~173 during the ~~three~~six months ended ~~March~~June 3130, 2000. In the Company’s efforts to conserve cash it financed many expenditures through the expansion of accounts payable and accrued expense rather than paying currently. In addition, increases in non-cash stock-based compensation and accruals for leasehold abandonment costs and severance costs in 2001 incresased the reported loss while not actually using cash during the quarter. Net cash provided by investing activities during the ~~three~~six month period ended ~~March~~June 3130, 2001 totaled $~~132~~742,~~509~~606 as compared to using $~~426~~1,~~320~~211,561 during the ~~three~~six month period ended ~~March~~June 3130, 2000. Investing activities in the current period consisted of disposition of property and equipment and marketable securities, while the prior period consisted of purchases. Cash flow provided by financing activities during the ~~three~~six month period ended ~~March~~June 3130, 2001 totaled $~~350~~450,000 as compared to $1318,~~270~~365,~~145~~050 during the same period in 2000. This decrease was due to the Company’s fundraising efforts resulting in only minimal debt and equity financing proceeds in 2001. Factors That May Impact Future Results We develop complex software for media delivery, content management and storage. We have recently commenced sales of our first commercial product released late last year and have yet to achieve very large commercial deployments. Despite testing, software errors have been found in our product and, in some cases, our product’s performance when initially deployed has not met customer expectations. To date, we believe that all of the errors in question have been resolved. However, there can be no assurance that other errors will not occur, as errors such as these are common in the development of any software product. Additional errors in our product could result in, among other things, a delay in recognition or loss of revenues, loss of market share, failure to achieve market acceptance or substantial damage to our reputation. As a ~~young~~ company that recently commenced a new product line, we face risks and uncertainties relating to our ability to implement our business plan successfully. Our future success depends on the growing use and acceptance of video applications for PCs and set-top boxes, including the growth of video on the Internet. The market for these applications is new, and may not develop to the extent necessary to enable us to expand our business. We have recently invested and expect to continue to invest significant time and resources in the development of new products for this market. If the target markets for our products do not grow, we may not obtain any benefits from these investments. Our products are technologically complex and are designed to effectively interface with third-party products such as Microsoft’s Windows Media Player (WMP) and the QuickTime Player using publicly published application program interfaces (APIs). Modifications to the publicly published APIs for these third-party products could require further development effort on our part to continue to make the interface work properly or, in some cases, could disallow our products interoperability. There is no assurance that these kinds of changes will not occur or that we can develop new products effectively and quickly enough to avoid loss of revenues or market share. Prospective customers generally must make a significant commitment to test and evaluate our software and to integrate it into their products. As a result, our sales process is often subject to delays associated with lengthy approval processes. For these and other reasons, the initial sales cycles of our new software products has been lengthy, recently averaging approximately four to six months from initiation in late 1999 to completion in 2000. We expect that future sales will also experience lengthy sales cycles. It has been our experience that our product is often embedded in our customers’ web pages. Since the proper development of video enabled web pages takes a high level of sophistication, we may be required to provide professional service support to our customers in this area. There can be no assurance that we will be able to adequately staff for and deliver the level of professional services required, or that we will be able to charge the customer fully for this work. The result could be further impediments to sales and possibly higher than anticipated cost of sales. Delivery of video using the internet is an emerging business. Many of our customers are new companies that are innovating and counting on Burstware® to provide a technical edge. Because many of these companies are early stage enterprises without revenues, they may delay payment or fail to pay our invoices. For this reason, we have deferred a substantial portion of revenue booked until collectibility has been assured. There is no assurance that this revenue will ultimately be collected and recognized, or that future bookings may also be deferred. 1213

WeITEM ~~have increased our focus on the Internet applications for our product~~3. Competitors at times will provide their products at little or no cost to customers in order to establish market share. There is a risk that we may be forced to lower our prices substantially, at least initially, to gain market share. This may negatively impact our own revenue and earnings potential in the near future. Quantitative and Qualitative Disclosures About Market Risk At ~~March~~June 3130, 2001 we had approximately $~~484~~12,~~744~~538 invested in Eagle Wireless International, Inc. common stock. The primary objective of our investment activities is to preserve our capital until it is required to fund operations while at the same time achieving a market rate of return without significant risk. However, we ~~are~~were ~~required~~limited by agreement to sell the stock in stages until June 1, 2001. 1314

PART II —OTHER INFORMATION

Item 1. Legal Proceedings

We have no material legal proceedings against us or in process nor are we aware of any other legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect.

Item 2. Changes in Securities.

Since ~~January~~December 131, 2000, the Company has sold the following unregistered securities. Such sales were exempt in reliance on Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder.

As(a) ofIn ~~January~~February 312001, ~~2000~~ we sold 41,~~808~~500,~~375~~000 shares of our common stock valued at ~~a purchase price of~~ $~~4.00 per share~~843,735 ~~for~~to anEagle ~~aggregate~~Wireless ~~purchase~~International, ~~price of $19~~Inc.2 ~~million. We raised $13.9 million~~ in ~~cash~~exchange infor ~~the offering~~400,000 ~~and the remaining $5.3 million was conversion of notes payable. In addition to the common~~ shares, ~~purchasers also received warrants to purchase up to an aggregate~~ of ~~4,808,375~~Eagle’s ~~shares of our~~ common stock~~, at an exercise price of $5~~.~~00 per share. The warrants are exercisable for a term of five years from the date of issuance.~~

~~Cash~~(b) ~~Purchases~~In February 2001, we entered into two Convertible Notes payable to Draysec Finance Limited, aggregating $100,000, which Notes are convertible into a new series of Preferred Stock to be identified as Series A-2001 at a per share conversion price of $5.00 at the option of the noteholder.

Investor	Amount Invested	Common Shares	Warrants
Special Situations Funds	$ 4,000,000	1,000,000	1,000,000
Chelsey Capital	3,000,000	750,000	750,000
BayStar Capital	3,000,000	750,000	750,000
Ravinia Capital Ventures	2,374,000	593,500	593,500
Erik Franklin	400,000	100,000	100,000
Dorothy Lyddon	200,000	50,000	50,000
Kyle Faulkner	250,000	62,500	62,500
Doug Glen	100,000	25,000	25,000
Others (under $100,000)	574,500	143,625	143,625
Total Cash Purchases	$13,898,500	3,474,625	3,474,625

(c)

In March 2001, in connection with a $100,000 promissory note issued to an existing stockholder, we repriced 98,870 existing warrants and issued 50,000 new warrants to purchase an aggregrate of 148,870 shares of our common stock at $0.875 per share.

Conversion of Notes Payable

Investor	NotesConverted	Common Shares	Warrants
Storie Partners	$2,000,000	500,000	500,000
Mercer Management	1,550,000	387,500	387,500
Reed Slatkin	520,000	130,000	130,000
Robert London	500,000	125,000	125,000
Independence Properties LLC	100,000	25,000	25,000
Others (under $100,000)	665,000	166,250	166,250
Total Note Conversions	$5,335,000	1,333,750	1,333,750

During January 2000, we received an additional $430,000 evidenced by notes payable convertible into our common stock, due in one year. The conversion rate was the lower of (1) $6.50, (2) 80% of the average closing price of our publicly traded shares in the 20 trading days immediately preceding the closing of an ongoing private placement, or (3) the price agreed in that private placement. These shares were converted to common stock as part of the above transactions at a conversion price of $4.00 per share.

During February 2000, we issued 94,711 shares of common stock in connection with a cashless exercise of 104,645 options.

Item 3. Defaults upon Senior Securities

None

1415

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

None

Item 5. Other Information

~~None~~In May 2001, the Company received $200,000 promissory note financing from Gordon Rock. Mr. Rock took a security interest in the assets of the Company. In August 2001, Mr. Rock provided an additional $150,000 promissory note financing under the same terms.

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

(a)

Exhibits.

4None.~~20 Dreysec Finance Ltd. Convertible Promissory Notes~~

(b)

Reports on Form 8-K.

None.

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

Date: May 21, 2001 BURST.COM, INC. By: /s/ Richard Lang—————————————— Richard Lang, ChairmanChief Executive Officer and President By: /s/ Jeffrey D. Wilson—————————————— Jeffrey D. WilsonChief Financial Officer

~~INDEX~~SIGNATURES TOIn ~~EXHIBITS~~accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ExhibitNumber		Description
4.20		Dreysec Finance Ltd. Convertible Promissory Notes

Date: August 20, 2001		BURST.COM, INC. By: /s/ Richard Lang —————————————— Richard Lang, Chairman and Chief Executive Officer
		By: /s/ Jeffrey D. Wilson —————————————— Jeffrey D. Wilson Chief Financial Officer

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