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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-K

|/x/ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Fiscal Year Ended: November 30, 2001

or

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from  to

Commission File Number: 0-14779

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MEDIA 100 INC.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
organization or incorporation)

04-2532613(I.R.S. Employer Identification Number)290 Donald Lynch Boulevard
Marlborough, Massachusetts 01752-4748(Address of principal executive offices, including zip code))


(508) 460-1600(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
(none)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value

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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 / /

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Registration S-K is not contained herein, and will not be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / /

The
aggregate market value of voting stock held by non-affiliates of the registrant, based upon the closing price of the Common Stock on January 31, 2002 as reported on the Nasdaq
National Market System, was approximately $28,294,828 Shares of Common Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded
in that such persons may be deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of January 31, 2002 registrant had
12,667,470 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The information required in response to certain portions of Part III of Form 10-K is hereby incorporated by reference from the specified portions of
the registrant's Proxy Statement for the Annual Meeting of Stockholders to be held in April 2002.

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PART I

This Report includes a number of forward-looking statements which reflect the Company's current views with respect to future events and financial performance.
These forward-looking statements are subject to certain risks and uncertainties, including those discussed in "Item 7, Management's Discussion and Analysis of Financial Condition and Results of
OperationsCertain Factors That May Affect Future Results" and elsewhere in this Report, that could cause actual results to differ materially from historical results of those currently
anticipated. In this Report, the words "anticipates," "believes," "expects," "intends," "future" and similar expressions identify forward-looking statements. Readers are cautioned not to place undo
reliance on these forward-looking statements, which speak only as of the date hereof.

Item 1.    Business

Company Overview

We design and sell advanced media systems for content design. Our products are personal computer-based workstations configured with proprietary software and
hardware that we engineer and manufacture. In some cases, particularly with our newly-introduced product844/Xwe sell our products as "turnkey" systems, meaning
we configure and ship the system to an end user, or reseller, with a host personal computer, our software and hardware, and disk storage; in other cases, we deliver only our software and hardware
("unbundled"), typically to an independent value-added reseller that configures the turnkey system themselves on behalf of an end user.

The
paramount characteristic that makes our media systems "advanced" is real-time performance. Our systems can perform many video, audio, graphics, and metadata processing
functions in real time. We believe software operating alone on personal computers cannot match this performance. Our experience is that even software operating on costly higher performance computing
platforms, such as Unix®, often cannot match the real-time performance of our systems. A second characteristic also makes our systems advanced: support for very high image and
audio output qualityin conjunction withreal-time throughout. Other currently available products reduce picture quality to support
real-time functions, or they maintain picture quality but render operationsrendering is an offline host processing
activity that routinely takes minutes, even hours. Rendering interrupts workflow and hinders productivity. In contrast, our systems, especially our latest development, 844/X, perform myriad concurrent
video, audio, graphics, and metadata operations in real time at a quality level we believe is currently unmatched in the industry, even where price is no object. The result is that our systems provide
our customers a workflow experience that is fast, fluid, and interactive. Using our products, they can exercise better creative judgment and get jobs done more quickly. Subsequently, creative
aspiration and the potential for economic advantage lead prospects to consider adopting our products.

The
customers for our products are media professionals. They fall into several segments. Many are full-time broadcast designers, visual effects artists, and video editors
operating as employees of professional television and post-production establishments, such as major networks, cable networks, independent post-production facilities, and small
creative boutiques. Others are full-time or part-time video editors operating at businesses, schools, government offices, hospitals, or non-profit institutions. In
some cases, our customers are "independent"; they are self-employed and operate on their own, independently, typically on behalf of both broadcast-related and non-broadcast or
industrial clients.

All
our customers have in common the need to create compelling and useful video programs. Their applications range from teaching, training, and basic communication to
high-profile entertainment, such as a television show or a segment like a commercial, promotional spot, or opening to a major program like the Super Bowl. The content that our customers
create, whether for industrial or broadcast use, is important and valuable. Therefore, our customers value the ease of use, speed, and quality. They seek products that help them develop compelling
creative ideas that they can incorporate into video programs in a reasonable time frame.

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Market

We believe our recent introduction of 844/X represents a new stage in our Company's development as we increase our focus on the content design market. As we begin
shipments of 844/X in fiscal 2002, we expect to further strengthen this focus.

We
are evolving our focus on content design from our original mission of selling nonlinear or "disk-based" systems for video editing. In our original mission, which began
with our first product shipments in 1993, we designed and sold nonlinear editing systems mainly to non-broadcast segments of the video industrybusinesses, schools, and other
institutions using audio/video equipment typically to teach, train, and communicate. In addition, we sold our products to some broadcast-related segments, particularly cable networks and smaller
post-production operations. This latter focus accounted for a lower percentage of total revenues, reflecting a conscious effort on our part to de-emphasize targeting
traditional customers, like the major networks or film studios, which were served well already by traditional equipment suppliers, like Sony® Corporation, and earlier developers of
disk-based systems, like Avid® Technology.

Today,
the broadcast and non-broadcast markets for nonlinear editing systems, now more than 12 years old, are fraught with the business challenges that might be
expected from a maturing market: there are many products from many vendors; increased competition is driving down selling prices and gross margins; and in the past two years, Apple
Computer® has introduced and marketed aggressively its own proprietary solutions for basic video editing, effects processing, and DVD production on the Macintosh, reducing third-party
market opportunity in the portion of the digital media market that is Macintosh based.

We
believe the 844/X and related products we have developed over the past four years incorporates remarkable next-generation media processing capabilities to enable content
design, a new application.

Content
design is the assembly or arrangement by an editor or artist of highly creative content combining layers and editing. "Editing" references our original business, nonlinear
editing, or disk-based editing that allows users to perform video-editing operations in real time. "Layers" refers to visual effects: video images that comprise many
elementsvideo images that are actually a composite of many video and graphic pictures, where some or all of them may be in motion.

Editing
and layering functions are difficult to bring together successfully in a single workflow. A significant reason is that editing, using today's personal computers, typically takes
place in real time, but visual effects are invariably quite slow to compute and manipulate. A personal computer will often stop accepting user input to the editing function for minutes, even hours, in
order to render or compute the blending of layers. This delay means users are unproductive and interrupts their creative flow as the user cannot interact quickly and easily to view results and make
changes. As a result, designing contentbeautiful evocative images or pictures with greater utilitarian valueis difficult technically, time consuming, and expensive.

We
are seeking to revolutionize the content design market by making this experience easier, faster, and less expensive, so more media professionals do it. We believe demand for content
design will increase as cable and satellite content grows, and as cable and satellite content providers increase their competition with traditional media outlets to attract and retain viewers in the
increasingly competitive global media market place.

During
fiscal 2002, we expect early adopters of 844/X to include cable networks, regional broadcast television stations, design boutiques, smaller post-production facilities,
creative agencies including ad agencies, and independent producers. We expect that these professionals will want to use 844/X to design highly creative, effects-intensive, high-layer-count
spots that are typically short formmeaning programs such as interstitials (promos, opens, bumpers, and teasers) and advertisements whose duration can be measured in seconds not minutes.
Beyond fiscal 2002, with successor versions of 844/X

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and other related new products, we expect to broaden our reach to include longer form projects, projects with higher spatial resolutions (high definition television or "HD"), and projects that
require encoding video for compressed digital delivery by future broadband content providers.

Strategy

Our strategy is to enable a larger content design market. We plan to do this by bringing fast visual effects to media professionals with visual and sound quality
significantly superior to competitors; and integrating this new, fast visual effects capability with real-time editing, and permitting the easy integration of our systems with existing
tools and facilities; and by being affordable, especially through the use of personal computers and standard disk storage.

Our
mission centers on the technical idea of bringing to the content design workflow the proven appeal of nonlinear performancespeed. We plan to give users speed without
requiring them to trade down picture and sound quality. On the contrary, the second facet of our strategy is to establish a new digital standard for quality, higher than any other
disk-based system, rivaling even advanced standard-definition digital videotape formats like D1® (Sony) and D5® (Panasonic®).

We
believe our customers will pay for real-time speed and superior quality in support of content design because these features translate directly to greater creative
flexibility and improved throughput and productivitybenefits that increase the value of our users, as professionals, while helping them make money.

Products

Our Company develops and sells three major product lines: 844/X, our system for content design that we announced on February 25, 2002, and plan to begin
shipping in the first half of 2002; Media 100 i, our family of dual-stream systems that use Macintosh; and iFinish, our family of dual-stream systems that use
Windows®. In addition, we sell technical support, software upgrades, and maintenance contracts, which we market under the brand name, Platinum.

844/X

844/X is a new fully digital system for content design that we announced on February 25, 2002, and plan to begin shipping in the first half of 2002. 844/X
results from years of research involving technical and market experts. We believe 844/X represents a new generation of technology and a new equipment categoryreal-time content
design on the desktop.

844/X
is for media professionals who need to design highly creative content combining layers and editing. 844/X performs image, graphics, and audio operations concurrently in real time
at high quality. From the start, our research to produce this product involved Media 100 customers as well as users of other renowned industry products, including Adobe® After
Effects®, Avid Media Composer®, and Discreet® Flame®. These customers included broadcast designers, visual effects artists, and online video editors.

The
engineering of 844/X was a "green field" endeavor meaning the 844/X development team designed virtually every line of software code and hardware component of the product from the
ground up. This approach allowed us to eschew aging components and software code, outdated architectures, and waning analog standards.

The
844/X development featured the design of a new hardware ASICs (application specific integrated circuits and a software architecture and user interface. The software architecture
permits optimum use of the processing power of the ASICS and it also provides our user interface software designers with an abstraction layer that gives them unbridled access to the power of the
hardware without having to control directly its complex real-time board-level, even chip-level, hardware activities. The software architecture incorporates a simplifying,
modular, and extensible API-based (application

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programming interface-based) software structure that we believe will facilitate productive continuing development of 844/X, and other related products, for many years. The 844/X user interface also
now integrates time-based editing and layer-based visual effects, along with advanced features for processing computer graphics and multi-track audio. We expect many new 844/X customers
from advanced members of the After Effects user community to adopt 844/X as a real-time editorial and layering complement to Adobe's venerated software design tool.

844/X
brings together the infinite possibilities of visual effects and the proven value of nonlinear editing. We believe this workflow integration, supported by real-time
GenesisEngine-based processing, is a breakthrough.

Nonlinear
editing, like story telling, is time based. Editors arrange video frames in time. Accordingly, the majority of existing nonlinear editing systems feature, as a central
workspace, a window called a timeline. The editing workflow is horizontal. In contrast, visual effects comprise layers: literally, artists and editors arrange pictures on top of each other and
manipulate and animate them; each video frame, computer graphic, or piece of text can be a layer; each resultant final video image is a composite of these layers. Advanced users may composite 50 or
more layers. The workflow to create these layered video frames is depth-based or vertical.

Because
nonlinear editing is inherently fast using standard personal computers and visual effects are inherently slowthe personal computer halts to render layers and the
more layers, the longer the stoppagethe successful marriage of editing and layering has not clearly materialized. Current solutions
mainly support either nonlinear video editing or working with layers to design visual effects; the latter is often called compositing. Bringing these separate workflows together is made complicated by
the real-time nature of editing video and the rendering-intensive nature of compositing layers.

We
plan to resolve these conflicting requirements by introducing a new integrated workflow that combines the dimensions of time and depth to give content designers myriad concurrent
effects possibilities in real time; access to unlimited layers with acceleration that is fast; professional nonlinear editorial speed throughout.

844/X
uses standard personal computers and disk storage and works well with third-party software. The system costs a fraction of many current solutions offering dual-stream
video editing or advanced visual effects.

We
believe the value proposition of 844/X, given its breakthroughs in workflow, speed, and quality, and the enormous future potential of the product as we further develop it, will compel
current and aspiring content designers to consider purchasing the product. In our marketing, we do not plan to position 844/X as a product that replaces other existing products; rather, we plan to
position 844/X as a new category of tool entirely, which is how we see it, that prospects should consider as an addition to the arsenal of post-production tools they use already to create
compelling and useful video programs.

Media 100 i Product Line

Media 100 i is our dual-stream product line that uses Macintosh as a host computer. We announced Media 100 i Version 8 (V8) at the Macworld exhibition
in early January 2002 and plan to ship it later this fiscal year.

V8
is a powerful OS X-native version of the Media 100 i product line that replaces Media 100 i version 7.5. OS X is the new operating system from Apple Computer that
they have introduced ultimately to replace the original Macintosh operating system, called Version 9. In addition to using OS X, V8 introduces a fresh new user interface for Media 100 i based
on Apple's new Aqua interface. V8 also provides expanded effects and sound design functions.

We
designed V8 with a new driver (software), new middleware software, and modernized interface architecture to take advantage of OS X® and Aqua® usability
improvements. The new effects design

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functions allow users to draft composites directly in the Media 100 i timeline, using newly expanded graphics tracks. Users can then export composites to Adobe After Effects or other third-party
applications for further finishing, returning the composites back to Media 100 i using our InstantMedia
technology. Sound design enhancements in V8 include the expansion of audio track mixing and processing to 24 simultaneous real-time tracks. V8 audio also features a new master audio track
as well as support for audio reverb and other audio effects.

Like
Media 100 i version 7.5, V8 incorporates streaming media features using EventStream technology for creating interactive streams operating with the Discreet
Cleaner® application. V8 also provides support for a wide range of analog and digital input and output interface standards for compatibility with most video equipment formats.

iFinish Product Line

iFinish is our dual-stream product line that uses Windows and Intel-standard personal computers as a host.

Functionally
similar to the Media 100 i products, the iFinish products provide video editors real-time functions supporting video editing, effects creation, graphics, and
sound mixing along with EventStream for creating interactive streams using the Cleaner application. The iFinish systems are designed to allow editors and artists to assemble video programs using
source material from virtually anywhere, analog or digital, then output their finished productions anywhereto the Web, to DVD, to tape, to cable, or to air. This workflow flexibility
means iFinish users can create valuable content once, then deliver it in many different forms as traditional or new media. The iFinish products give media professionals advanced performance, including
real-time editing, effects design and processing in real time, and real-time sound mixing of numerous, CD-quality audio tracks.

As
"dual-stream" systems, the Media 100 i and iFinish products operate by moving two or "dual" video streams in real time to and from disk. Like other dual-stream
systems, the Media 100 i and iFinish products use 8-bit quantization, compress video to simplify internal data transfers and conserve disk storage, and process layers (greater than the
dual video streams) by rendering them. We developed these dual-stream products in the 1990s to replace A/B roll videotape editing systems, which are videotape deck-based, not
disk-based, and employ two streams (transferred in a forward or backwardor "linear"direction off videotape). Media 100 i and iFinish thus target mainstream
professional video editors. To support content design, Media 100 i and iFinish products can be used in conjunction with third-party applications like Adobe After Effects. This approach to content
design requires switching between applications to perform virtually all content design functions other than editing, then rendering image operations. The rendering always takes extra time, but it is
less onerous if the number of layers is small; the rendering can be quite time consuming, taking minutes, even hours, for programs incorporating more layers. Historically, this fact has led many
content designers to opt for costly non-personal computer solutions, such as ones from Discreet (a division of Autodesk®, Inc.), and Quantel® Ltd.,
which use Unix workstations from Silicon Graphics®, Inc., or entirely proprietary platforms, to achieve faster rendering throughput.

Platinum Services

Our Platinum Services comprise technical support and service packages that we offer to our customers for a fee. Customers purchase our Platinum packages with
options such as: toll-free telephone technical support (either during business hours, five days a week, or 24 hours per day, seven days a week); automatic free software updates;
temporary replacement hardware; and extended warranty. In addition, we have from time to time offered hardware upgrades, replacement hardware, and new products to our Platinum subscribers at preferred
prices. We have also introduced the Platinum One-Stop service, in which subscribers can obtain telephone technical support for compatible third-party products integrated with their media
system.

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Technology

Our 844/X, Media 100 i, and iFinish systems all comprise software and hardware that we design and integrate to operate with personal computers.

844/X

844/X incorporates a new software architecture that includes several major software components: a newly-designed user interface compatible with Windows; support
for plug-ins compatible with Adobe After Effects; support for InstantMedia, our software design for using Apple QuickTime to allow third-party applications to directly access and use 844/X
media; a foundation (or abstraction) layer separating the user interface from complex hardware activities; a media and metadata core; and drivers that communicate directly with the
real-time operating system software and real-time hardware media processing functions of the GenesisEngine using Very Long Instruction Words (VLIW).

The
software architecture is an open, modular design that uses API commands for module-to-module communications. The modular approach to software development
permits multiple software engineers to work in unison simultaneously developing the product with high productivity.

The
844/X user interface integrates time-based editing and layer-based visual effects in a new workflow that also includes controls for designing and processing computer
graphics and mixing 16 tracks of real-time studio-quality 20- and 24-bit audio.

Media 100 i and iFinish

Like 844/X, our dual-stream products comprise software and hardware that we design and integrate for use with personal computersMedia 100
i with Macintosh and iFinish with Windows.

The
software includes a user interface application level of software and embedded system software. The user interface provides the operator with controls for performing video editing; it
also provides access to other applications for bringing computer graphics and specialized video and audio effects processing into the hub-editing environment. The embedded system software
controls real-time data movement in concert with the host computer operating system; it also serves to control hardware functions, acting as an intermediary between the application and the
hardware circuits.

Media
100 i and iFinish incorporate a media processing engine, called P6000 (formerly called "Vincent" and "Vincent 601"), which we have designed and manufacture. The P6000
supports essential video and audio processing functions and comprises one or two PCI cards that fit into the backplane of either a Windows or Macintosh computer. The P6000 includes broadcast-quality
video input and output decoder/encoder subsystems, a proprietary, dynamically-variable compression subsystem, a 16-bit multi-track compact disc-quality digital audio subsystem,
and two high-speed 32-bit microprocessors responsible for transferring digital audio and video data, at throughput rates of up to 30 megabytes per second, inside the host
computer's central processing unit ("CPU"). The P6000 engine is the primary technical facilitator of real-time, nonlinear video editing performance with output that provides
broadcast-quality video and compact disc-quality audio. An available auxiliary-processing card, when used in conjunction with the P6000 engine, enables the processing of a second stream of
video of similar quality. The output video is 30 frames per second, 60 fields per second (NTSC), or 25 frames per second, 50 fields per second (PAL), and synchronized with multiple tracks of
16-bit audio.

Sales and Distribution

We market and sell our products to end users through a worldwide channel of specialized value-added resellers ("VARs"), distributors, and direct to end users
through our internal telemarketing group and Web site. VARs and distributors account for the majority of our sales. Further, we expect to increase our focus on our VAR channel in the coming year as we
begin the first customer shipments of 844/X.

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VARs
typically sell, assemble, and install turnkey systems using personal computers, disk drives, and ancillary video equipment. For a further discussion of the risks and uncertainties
associated with our dependence on an indirect sales channel of independent VARs, see "Cautionary Statements" included in Part II, Item 7, of this Annual Report on Form 10-K.

Internationally,
we have adopted similar sales channels. In the United Kingdom, France, and Germany, our subsidiaries manage Web site sales, VAR networks, and contract with distributors
who may sell directly to end users or through VAR networks of their own. Elsewhere, we sell through distributors, which may sell directly to end users, or act as VARs, or manage VAR networks in their
respective territories. Sales of our products outside of the North America represented approximately 34%, 37% and 36% of our net sales for fiscal years 2001, 2000, and 1999, respectively. For
additional information as to revenue by geographic location, see Note 12 in the Notes to Consolidated Financial Statements. For a further discussion of the risks and uncertainties associated
with international operations, see "Cautionary Statements" included in Part II, Item 7 of this Annual Report on Form 10-K.

Competition

The digital media market is highly competitive. A large number of suppliers provide different types of products and services. In the market, there is continuous
pressure to reduce prices, incorporate new features, and improve functionality.

We
encounter competition primarily from Accom®, Inc., Adobe Systems Inc., Apple Computer, Inc., Avid Technology, Inc., Discreet (a division of
Autodesk, Inc.), Leitch®, Inc., Matrox® Electronic Systems Ltd., Pinnacle® Systems, Inc., and Quantel Ltd. Competition also comes
from Matsushita® Electric Industrial Company Ltd. ("Matsushita") and Sony Corporation ("Sony"), which have either introduced or announced plans to introduce disk-based
systems. Because the market is constantly changing, it is difficult to predict future sources of competition; however, competitors are likely to continue to include larger vendors, such as Apple
Computer, Matsushita, and Sony. Many of these competitors have substantially greater financial, technical, and marketing resources than Media 100 Inc. For a further discussion of the risks and
uncertainties associated with the competitive landscape for our products, see "Cautionary Statements" included in Part II, Item 7 of this Annual Report on Form 10-K.

Research and Development

We invest in research and development for new products and for enhancements to our existing products. As of January 31, 2002, we employed 77
full-time employees whose primary duties relate to product development and research on potential new products and technologies. Outside firms and consultants are selectively engaged to
develop or assist with development of products when favorable opportunities exist. In order to compete successfully, we believe we must attract and retain qualified personnel and maintain a program of
improvement for existing products, as well as the research and development of new products. For a further discussion of the risks and uncertainties associated with new product development, see
"Cautionary Statements" included in Part II, Item 7 of this Annual Report on Form 10-K.

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For the fiscal years ended November 30, 2001, 2000 and 1999, we invested approximately $10.5 million, $11.0 million and $12.5 million, respectively, on the
development of enhancements to our existing products and for the research and development of new products and technologies.

Manufacturing

Our manufacturing operations consist primarily of advanced surface-mount manufacturing and testing of printed circuit assemblies, final product assembly, quality
assurance and shipping. We have developed the operation specifically to address the business and technical challenge of building assemblies that are relatively highly complex, yet relatively low in
volume. The surface-mount operation can support fine 576-pin, 0.050" BGA (ball grid array), and 0.040" fine pitch BGA integrated circuits and ASIC devices, which is
required for assembling the GenesisEngine. We perform manufacturing functions at our facility located in Marlborough, Massachusetts.

We
believe that our control of manufacturing contributes significantly to hardware design improvements, allows for quicker development of products for shipment to market, results in
superior product quality, and lowers the total cost of goods (COGs) of our products. We periodically assess our production efficiencies against the benefits of out-sourcing certain
hardware production and have, on occasion, out-sourced certain products to third parties when we determined that out-sourcing was more cost effective than internally
manufacturing the product.

The
components we use in the assembly of our hardware products are generally available from several distributors and manufacturers. However, we are dependent on single or limited source
suppliers for several key components used in our products that have no ready substitutes, including various audio and video signal processing integrated circuits manufactured in each case only by
Crystal Semiconductor® Corp., Fairchild Semiconductor® Corp., Gennum® Corporation, Toshiba, Kawasaki LSI USA® Inc., LSI Logic® Corp.,
Philips® Semiconductors or Zoran® Corp. The availability of many of these components is dependent on our ability to provide suppliers with accurate forecasts of our future
requirements, and certain components upon which we depend have been subject to industry-wide shortages. For a further discussion of the risks and uncertainties associated with our
dependence on single or limited source suppliers, see "Cautionary Statements" included in Part II, Item 7 of this Annual Report on Form 10-K.

Proprietary Rights

Our ability to compete successfully and achieve future revenue growth will depend, in part, on our ability to protect our proprietary technology and operate
without infringing the rights of others. We rely on a combination of patent, copyright, trademark and trade secret laws and other intellectual property protection methods to protect our proprietary
technology. In addition, we generally enter into confidentiality agreements with our employees and with third parties with whom we share our proprietary information, and limit access to and
distribution of such information. We own fourteen United States patents, beginning to expire in 2012, and have eight pending patent applications in the United States, none of which we believe is
material. Although we pursue a policy of obtaining patents for appropriate inventions, we believe that our success depends primarily on the proprietary know-how, innovative skills,
technical competence and marketing abilities of our employees, rather than upon the ownership of patents.

Certain
technology that we use in our products is licensed from third parties on a royalty-bearing basis. Generally, such agreements grant to us non-exclusive, worldwide
rights to the subject technology and are either renewable on a periodic basis or provide for fully paid-up non-cancellable rights upon the receipt of certain aggregate
payments. In certain cases the licensor may terminate the license for convenience, although we believe that the effect of any such termination would not be material.

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For
a further discussion of the risks and uncertainties associated with proprietary rights see "Cautionary Statements" included in Part II, Item 7 of this Annual Report on
Form 10-K and certain pending litigation, See Item 3, Legal Proceedings.

Backlog

Most customers (VARs) order products on an as-needed basis relying, in the case of most products, on the Company's five-day delivery
capability. As a result, the Company believes that its backlog at any point in time is not indicative of its future sales.

Employees

As of January 31, 2001, we employed approximately 176 persons worldwide. None of the employees is represented by a labor union and we believe we have good
relations with our employees.

Competition
for employees with the skills required by the Company is high in the geographic areas in which the Company's operations are located. We believe that our future success will
depend on our continued ability to attract and retain qualified employees, especially in research and development.

Other

844/X, Visual Voicing, Foss, Holmes, Hatalsky, GenesisEngine, Media 100, Media 100 i, iFinish, P6000, and Platinum are trademarks of Media 100 Inc. and may
be registered in certain jurisdictions. All other trademarks and registered trademarks are the property of their respective holders, and are hereby acknowledged.

Item 2.    Properties

The Company's principal executive, engineering, manufacturing, sales and marketing operations occupy approximately 56,500 square feet in a leased facility located
in Marlborough, MA. The lease for this facility terminates on March 31, 2002. Total rent expense including operating expenses pursuant to the lease agreement charged to operations with respect
to the Company's current Marlboro facility for fiscal years 2001, 2000 and 1999 was $1,049,000, $1,034,000 and $879,000. Rent expense including operating expenses pursuant to the lease agreement
charged to operations for the consolidated Company for fiscal years 2001, 2000 and 1999 was $1,321,000, $1,283,000 and $1,105,000, respectively.

In
January 2002, the Company signed an amendment to the lease allowing the Company to occupy approximately 45,534 square feet in a new facility in Marlborough, MA owned by the
same landlord. Under the amendment, the Company will continue to occupy its current space until the new space is available for occupancy. The Company expects the commencement date for occupancy at the
new building will be approximately April 1, 2002 and will continue for a term of forty (40) months with an annual base rent of approximately $444,000. Upon commencement of occupancy, all
obligations for its current space will terminate.

As
part of the acquisition of Terran in June 1999, the Company occupied additional office space located at 15951 Los Gatos Boulevard, Los Gatos, California. All of the Company's
operations relating to the streaming media software product line occupied this space. The Company has recorded a charge to discontinued operations, net of estimated sublease income for this lease
which will expire on September 30, 2004.

As
part of the shutdown of the Streamriver division, the Company recorded as a restructuring charge, rent expense, net of estimated sublease income associated with the lease for the
facility in North Hollywood, California which was used by the Streamriver division. The lease expires on November 30, 2005.

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The
Company also occupies sales and customer support facilities in or near Paris, France; Bracknell, England; and Munich, Germany.

Item 3.    Legal Proceedings

(i)
The Company provides accruals for all direct costs associated with the estimated resolution of known contingencies. The accrual is established at the earliest date at which it is
deemed probable that a liability has been incurred and the amount of such liability can be reasonably estimated.

(ii)
On June 7, 1995, a lawsuit was filed against the Company by Avid Technology, Inc. ("Avid") in the United States District Court for the District of Massachusetts. The
complaint generally alleges patent infringement by the Company arising from the manufacture, sale, and use of the Company's Media 100 products. The complaint includes requests for injunctive relief,
treble damages, interest, costs and fees. In July 1995, the Company filed an answer and counterclaim denying any infringement and asserting that the Avid patent in question is invalid. The
Company intends to vigorously defend the lawsuit. In addition, Avid is seeking reissue of the patent, including claims that it asserts are broader than in the existing patent, and these reissue
proceedings remain pending before the U.S. Patent and Trademark Office. On January 16, 1998, the court dismissed the lawsuit without prejudice to either party moving to restore it to the docket
upon completion of all matters pending before the U.S. Patent and Trademark Office.

On
August 16, 2000, the U.S. Patent and Trademark Office issued an Office Action rejecting all of the claims made by Avid in their latest request for reexamination of the patent
related to the aforementioned lawsuit. In addition, the Examiner at the U.S. Patent and Trademark Office designated the action as "final." On November 29, 2000, Avid filed a Notice of Appeal of
the Examiner's rejections to the U.S. Patent and Trademark Office Board of Patent Appeals and Interferences. That appeal has now been fully briefed and is awaiting argument and decision. The
litigation remains dismissed pending the outcome of the consolidated reissue/reexamination proceedings, and there can be no assurance that the Company will prevail in the appeal by Avid or that the
expense or other effects of the appeal, whether or not the Company prevails, will not have a material adverse effect on the Company's business, operating results and financial condition.

(iii)
On January 13, 1999 and January 28, 1999, Digital Origin and one of its former directors, Charles Berger, were named as defendants in two shareholder class action
lawsuits against Splash Technology
Holdings, Inc. ("Splash"), various directors and executives of Splash and certain selling shareholders of Splash. The lawsuit alleges, among other things, that the defendants made or were
responsible for material misstatements, and failed to disclose information concerning Splash's business, finances and future business prospects in order to artificially inflate the price of Splash
common stock. The complaint does not identify any statements alleged to have been made by Charles Berger or Digital Origin. The complaint further alleges that Digital Origin engaged in a scheme to
artificially inflate the price of Splash common stock to reap an artificially large return on the sale of the common stock in order to pay off its debt. Digital Origin and the former director
vigorously deny all allegations of wrongdoing and intend to aggressively defend themselves in these matters. Defendant's two initial motions to dismiss the action were granted with leave to amend, and
plaintiffs have again amended the complaint. Defendants filed their third motion to dismiss, which has been dismissed without, leave to amend. Plaintiffs have appealed this ruling to the
9th Circuit Court of Appeals.

(iv)
On July 18, 1997, Intelligent Electronics, Inc. filed a claim against Digital Origin alleging a breach of contract and related claims in the approximate amount of
$800,000, maintaining that Digital Origin failed to comply with various return, price protection, inventory balancing and marketing development funding undertakings. In 1997, Digital Origin filed an
answer to the complaint and cross-claimed against the plaintiffs and in October 1997 additionally cross claimed against Deutsche Financial, Inc., a factor in the account relationship
between the Company and the plaintiffs, seeking the

11

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recovery of existing accounts receivable of approximately $1.8 million. During May 2000, the trial was completed and the Court entered two judgments in favor of Digital Origin, one in
the amount of $314,000 plus interest against Intelligent Electronics and one in the amount of $1,491,000 plus interest against Deutsche Financial, Inc. In September 2000, Intelligent
Electronics, Inc. paid $314,000 plus interest of $139,000 and reimbursement of certain costs in the amount of $20,000 to the Company.

Pursuant
to APB Opinion No. 20,Accounting Changes, the Company revised its estimate of the allowance for doubtful accounts by
reversing $314,000 of the allowance in the three months ended August 31, 2000 by reducing the loss from discontinued operations. The Company considers the balance of the recovery from
Intelligent Electronics (interest and court costs) to be a gain contingency, as this term is defined in SFAS No. 5,Accounting for Contingencies.
Accordingly, the Company recorded the interest and court costs, as a reduction of the loss from discontinued operations, in the fourth quarter of 2000, the period in which the gain contingency was
realized.

On
August 15, 2001, Deutsche Financial, Inc. entered into a settlement agreement with Digital Origin, Inc. to pay $1,075,000 to the Company. Pursuant to APB Opinion
No. 20,Accounting Changes, the Company revised its estimate of the allowance for doubtful accounts by reversing $1,171,000 of the allowance in
the three months ended August 31, 2001 by reducing the loss from discontinued operations.

(v)
On October 12, 1999, a lawsuit was filed against the Company by McRoberts Software, Inc. in the United States District Court for the Southern District of Indiana. The
complaint alleges copyright infringement, breach of contract, and trade secret misappropriation. The complaint includes requests for unspecified monetary damages and enhanced damages, interest, costs
and fees. An unfavorable
verdict was filed on February 25, 2002 against the Company in the amount of $2.5 million. The Company plans to file post-trial motions with the trial court seeking to reverse
the judgement. If those post-trial motions are not successful, the Company will appeal the judgement. However, at November 30, 2001, the Company has recorded a liability in the
amount of $2.6 million that includes estimated legal fees associated with the litigation.

(vi)
On May 9, 2001, a lawsuit was filed against the Company by the former shareholders of Wired, Inc., a company acquired by the Company in December 1999 (see
Note 3 to the Consolidated Financial Statements included herein). The complaint alleges fraud, negligent misrepresentation, breach of express and implied-in-fact
contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty and violation of California business and professional code section 17200. The complaint
includes requests for compensatory and punitive damages, injunctive relief, and fees. No specific amount or punitive damages are alleged, other than compensatory damages in an amount to be proven at
trial, but not less than $25,000, the jurisdictional minimum for the court. The Company filed a demurrer challenging the legal sufficiency of the causes of action alleged. A hearing on that demurrer
occurred on November 6, 2001 and the Court sustained the demurrer to one cause of action, for negligent false promise. The matter has been referred for mediation, which is scheduled for
March 22, 2002. Discovery has been initiated and the Company has indicated it intends to vigorously defend the claims asserted.

(vii)
From time to time the Company is involved in other disputes and/or litigation encountered in its normal course of business. The Company does not believe that the ultimate impact of
the resolution of such other outstanding matters will have a material effect on the Company's business, operating results or financial condition.

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

There were no matters submitted to a vote of stockholders during the fourth quarter of fiscal year 2001.

12

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PART II

Item 5.    Market for the Registrant's Common Equity and Related Stockholder Matters

The common stock of the Company trades on the National Market tier of The NASDAQ Stock Market under the symbol "MDEA." The following table sets forth, for the
periods indicated, the high and low sales prices per share of the Company's common stock as reported on the NASDAQ National Market:

Fiscal year ended November 30,

High

Low2000:First Quarter

$
46.25

12.25Second Quarter

$
52.75

15.00Third Quarter

$
28.00

10.06Fourth Quarter

$
22.00

2.1252001:First Quarter

$
3.81

2.06Second Quarter

$
2.64

1.59Third Quarter

$
2.06

0.88Fourth Quarter

$
1.40

0.81


The
last reported sale price per share of the Company's common stock as reported on the NASDAQ National Market on January 31, 2002 was $2.82. As of January 31, 2002, there
were 1,838 stockholders of record based upon information provided by the Company's transfer agent. The Company has never paid a cash dividend on its common stock, and the Board of Directors does not
anticipate paying cash dividends in the foreseeable future.

13

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Item 6.    Selected Financial Data

The selected financial data should be read in conjunction with, and are qualified in their entirety by, the Company's consolidated financial statements, related
notes and other financial information included herein.

CONSOLIDATED STATEMENTS OF OPERATIONS DATA

|                                            |                                                                         | Fiscal Years Ended November 30, |        
|------------------------------------------- | ----------------------------------------------------------------------- | ------------------------------- | -------
|
|
|Net sales:                                  |                                                                         |                                 |        
|                                            | Products                                                                |                                 | $      
|                                            | Services                                                                |                                 |        
|                                            |                                                                         |                                 |        
|Total net sales                             |                                                                         |                                 | 31,245 
|Cost of sales                               |                                                                         |                                 | 16,181 
|                                            |                                                                         |                                 |        
|                                            | Gross profit                                                            |                                 |        
|Operating expenses:                         |                                                                         |                                 |        
|                                            | Research and development                                                |                                 |        
|                                            | Selling and marketing                                                   |                                 |        
|                                            | General and administrative                                              |                                 |        
|                                            | Amortization and write-off of intangible assets                         |                                 |        
|                                            | Acquired in-process research and development                            |                                 |        
|                                            | Restructuring                                                           |                                 |        
|                                            |                                                                         |                                 |        
|                                            |                                                                         | Total operating expenses        |        
|                                            |                                                                         |                                 |        
|                                            |                                                                         | Operating loss                  |        
|Interest income, net                        |                                                                         |                                 | 289    
|Other expense, net                          |                                                                         |                                 | (866   
|                                            |                                                                         |                                 |        
|                                            | Income (loss) from continuing operations before tax (benefit) provision |                                 |        
|Provision for (benefit from) income taxes   |                                                                         |                                 | (4,700 
|                                            |                                                                         |                                 |        
|Income (loss) from continuing operations    |                                                                         |                                 | (16,136
|Discontinued operations:                    |                                                                         |                                 |        
|                                            | Income (loss) from discontinued operations, net of tax effect           |                                 |        
|                                            |                                                                         |                                 |        
|                                            |                                                                         | Net income (loss)               |        
|                                            |                                                                         |                                 |        
|Basic income (loss) per share:              |                                                                         |                                 |        
|                                            | Continuing operations                                                   |                                 | $      
|                                            | Discontinued operations                                                 |                                 |        
|                                            |                                                                         |                                 |        
|Basic income (loss) per share               |                                                                         | $                               | (0.93  
|                                            |                                                                         |                                 |        
|Diluted income (loss) per share:            |                                                                         |                                 |        
|                                            | Continuing operations                                                   |                                 | $      
|                                            | Discontinued operations                                                 |                                 |        
|                                            |                                                                         |                                 |        
|Diluted income (loss) per share:            |                                                                         | $                               | (0.93  
|                                            |                                                                         |                                 |        
|Weighted average common shares outstanding: |                                                                         |                                 |        
|                                            | Basic                                                                   |                                 |        
|                                            |                                                                         |                                 |        
|                                            | Diluted                                                                 |                                 |        
|                                            |                                                                         |                                 |        

CONSOLIDATED BALANCE SHEET DATA

|                                                 |  | As of November 30,
|------------------------------------------------ |  | ------------------
|
|
|Cash, cash equivalents and marketable securities |  | $                 
|Working capital                                  |  |                   
|Total assets                                     |  |                   
|Stockholders' equity                             |  |                   

14

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion includes forward-looking statements, including, but not limited to, statements with respect to the Company's future financial
performance, operating results, plans and objectives, and actual results may differ materially from those currently anticipated depending upon a variety of factors, including those described below.
See "Certain Factors That May Affect Future Results" herein.

Overview

We design and sell advanced media systems for content design. Our products are personal computer-based workstations configured with proprietary software and
hardware that we engineer and manufacture. In some cases, particularly with our newly-introduced product844/Xwe sell our products as "turnkey" systems, meaning
we configure and ship the system to an end user, or reseller, with a host personal computer, our software and hardware, and disk storage; in other cases, we deliver only our software and hardware
("unbundled"), typically to an independent value-added reseller that configures the turnkey system themselves on behalf of an end user.

On
August 29, 2001, the Company signed an agreement to sell its streaming media software product line to Autodesk, Inc. for $16.0 million in cash of which
$2.0 million was deposited into an escrow account for a period of one year in case indemnification issues arise. The sale was completed on October 5, 2001. As a result of this
transaction, the net assets and liabilities of the discontinued streaming media software product line consisting of accounts receivable, inventory, equipment, intangible assets, and an income tax
payable have been separately classified as net assets of discontinued operations in the accompanying balance sheet at November 30, 2000. The net income (loss) from these operations and the gain
on sale of the streaming media software product line are included in the accompanying statements of operations under "discontinued operations" (see Note 13 to the Consolidated Financial
Statements included herein). The disposal date was October 5, 2001, the date the sale was completed. The Company's software product line consisted of products acquired in the Terran acquisition
and the merger with Digital Origin (see Note 3 to the Consolidated Financial Statements included herein).

The
Company recognizes revenue in accordance with Statement of Position 97-2, Software Revenue Recognitionas amended by SOP
98-9, Modification of SOP 97-2, Software Revenue Recognition, with respect to Certain Transactions. Net sales are recognized
following establishment of persuasive evidence of an arrangement, provided that the license fee is fixed or determinable, delivery of product has occurred via physical shipment or electronically, a
determination has been made by management that
collection is probable and the Company has no remaining obligations. Revenues under multiple element arrangements, which typically include products and maintenance sold together, are allocated to each
element using the residual method in accordance with SOP 98-9. The Company provides for estimated returns at the time of shipment. The Company recognizes maintenance revenue from the sale
of post-contract support services ratably over the life of the contract.

Digital Origin Merger and Other Acquisitions

On May 9, 2000, the Company completed its merger with Digital Origin. Under the terms of the agreement, Digital Origin's shareholders and option holders
received 0.5347 equivalent shares, or approximately 3.7 million Media 100 common shares, to effect the business combination. The transaction has been accounted for as a pooling of interests.
With the sale of the streaming media software product line in on October 5, 2001, the results from Digital Origin have now been classified as discontinued operations in the accompanying
statements of operations.

As
permitted by Accounting Principles Board Opinion No. 16Business Combinations(APB No. 16), the 1999 statements of
operations and cash flows presented for the combined companies are

15

---

the companies' respective fiscal years, which differ by two months. The results of operations for Digital Origin for the two months ended November 30, 1999 have been excluded from the
statement of operations and have been recorded directly to accumulated deficit as permitted by APB No. 16.

The
Company also acquired Terran in fiscal 1999 and Wired, J2 Digital Media, 21st Century Media and certain assets of Integrated Computing Engines, Inc. in fiscal
year 2000. Each of these acquisitions was accounted for as a purchase pursuant to APB No. 16. As a result, the operations of each acquired entity are reflected in the Company's consolidated
statement of operations from the date of acquisition. With the sale of the streaming media software product line on October 5, 2001, the results from Terran have now been classified as
discontinued operations in the accompanying statements of operations. For a further discussion of the Company's business combinations, see Note 3 in the accompanying consolidated financial
statements.

Results of Operations

The following table sets forth for the years indicated certain consolidated statements of operations data as a percentage of net sales.

|                                                              |                                                 | Fiscal Years Ended November 30, |     
|------------------------------------------------------------- | ----------------------------------------------- | ------------------------------- | ----
|
|Net sales:                                                    |                                                 |                                 |     
|                                                              | Products                                        |                                 | 72.0
|                                                              | Services                                        |                                 | 28.0
|                                                              |                                                 |                                 |     
|Total net sales                                               |                                                 | 100.0                           |     
|Cost of sales                                                 |                                                 | 51.8                            |     
|                                                              |                                                 |                                 |     
|                                                              | Gross profit                                    |                                 | 48.2
|                                                              |                                                 |                                 |     
|Operating expenses:                                           |                                                 |                                 |     
|                                                              | Research and development                        |                                 | 33.6
|                                                              | Selling and marketing                           |                                 | 38.0
|                                                              | General and administrative                      |                                 | 27.2
|                                                              | Amortization and write-off of intangible assets |                                 | 9.3 
|                                                              | Acquired in-process research and development    |                                 |    
|                                                              | Restructuring                                   |                                 | 4.9 
|                                                              |                                                 |                                 |     
|                                                              |                                                 | Total operating expenses        |     
|Operating loss                                                |                                                 | (64.8                           | )   
|Interest income, net                                          |                                                 | 0.9                             |     
|Other expense, net                                            |                                                 | (2.8                            | )   
|                                                              |                                                 |                                 |     
|Income (loss) from continuing operations before tax benefit   |                                                 | (66.7                           | )   
|Benefit from income taxes                                     |                                                 | (15.0                           | )   
|                                                              |                                                 |                                 |     
|Income (loss) from continuing operations                      |                                                 | (51.7                           | )   
|Income (loss) from discontinued operations, net of tax effect |                                                 | 15.0                            |     
|                                                              |                                                 |                                 |     
|Net income (loss)                                             |                                                 | (36.7                           | )%  
|                                                              |                                                 |                                 |     

Comparison of fiscal 2001 to fiscal 2000

Net sales.We derive our sales from the licensing of our content creation software, from the sale of our content creation
systems, and from services in the form of annual contracts supporting our

16

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software and systems. In the case of software and systems, we recognize revenue upon shipment or distribution over the Internet to a customer provided there exists persuasive evidence of an
arrangement, the license fee is fixed or determinable, a determination has been made by management that the collection is probable and the Company has no remaining obligations. In the case of services
that support our software and systems products, called Platinum services, we recognize revenue ratably over the life of the service contract.

Our
total net sales from continuing operations for fiscal 2001 decreased 33.8% to $31.2 million from $47.2 million for fiscal 2000. Net sales from products for fiscal 2001
decreased 39.8% to $22.5 million from $37.3 million for fiscal 2000. The decrease in net sales from products is due to a number of factors including lower unit sales of both the
Macintosh and Windows operating platforms and lower average selling prices for our content creation systems (decrease of $12.0 million) and lower sales of our MPEG-based products
(decrease of $1.6 million). We attribute the decrease in sales of our content creation systems to increased competition and lower demand and anticipate this trend in lower
year-over-year sales will continue for the Media 100 i and iFinish products currently shipping in fiscal 2002. Net sales from services for fiscal 2001 decreased 11.2% to
$8.8 million from $9.9 million for fiscal 2000. The decrease in net sales from services is the result of lower sales of service contracts due to lower unit sales of our content creation
systems and the elimination of encoding and hosting services. No customer accounted for more than 10% of the company's net sales in fiscal 2001 or fiscal 2000.

Net
sales from customers outside of North America accounted for approximately 34% and 37% of net sales in fiscal 2001 and fiscal 2000, respectively. With the announcement of the
Company's recently introduced product, 844/X, we are continuing to develop our indirect distribution channels in North America, Europe, Asia and Latin America and currently anticipate that customers
outside the North America will continue to account for a substantial portion of our net sales, and as a percentage of net sales, to remain approximately the same.

Cost of sales.Cost of sales for products consists of the cost of manufacturing PCI hardware boards for our content creation
systems and royalties paid to third parties for their software that has been integrated into our systems. Cost of sales also includes the cost of manuals and other product documentation, shipping
costs and related labor.

Cost
of sales for our service offerings consists of salaries and related expenses for service personnel delivering the service to the customer, and warranty costs. Total cost of sales
decreased 25.7% to $16.2 million in fiscal 2001 from $21.8 million in fiscal 2000. The decrease in cost of sales is directly related to the lower unit sales of our content creation
systems.

Gross profit.Our gross profit from continuing operations decreased 40.7% to $15.1 million in fiscal 2001 from
$25.4 million in fiscal 2000. Overall gross profit as a percentage of net sales decreased to 48.2% in fiscal 2001 from 53.8% in fiscal 2000. Gross profit as a percentage of net sales of
products decreased to 36.4% in fiscal 2001 from 46.3% in fiscal 2000, while gross profit as a percentage of net sales of services decreased to 78.4% in fiscal 2001 from 82.5% in fiscal 2000. The
decrease in gross profit for products in fiscal 2001 over fiscal 2000 was the result of the reduction in average selling prices of our content creation systems as well as a decrease in overall unit
sales. The decrease in gross profit for services in fiscal 2001 over fiscal 2000 was the result of encoding and hosting services, which carry a lower gross profit than our Platinum services. The
Company no longer provides encoding and hosting services.

Research and development.Research and development expenses include costs incurred to develop and improve our existing
intellectual property and develop new intellectual property and are charged to expense as incurred. To date, development costs for our systems have been charged to expense as incurred, because the
costs incurred from the attainment of technological feasibility to general product release have not been significant. Our research and development costs may fluctuate from quarter to

17

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quarter due to the nature of the products under development. Some of our systems have PCI hardware included in the product and the costs associated with designing and developing this type of hardware
can be expensive. In addition, our software developers require this hardware in order to integrate the software code they develop with the hardware to create a fully integrated content creation
system.

Research
and development expenses decreased 4.5% to $10.5 million in fiscal 2001 from $11.0 million in fiscal 2000. The majority of the decrease in research and development
expenses represented lower development costs associated with our existing content creation systems, Media 100 i and iFinish. We currently anticipate our research and development expenses will decrease
in absolute dollars in fiscal 2002 versus fiscal 2001 because we believe that ongoing maintenance costs and costs of improvements to our recently announced product, 844/X, will not be as high in
fiscal 2002 as the development costs for the first version in prior years.

Selling and marketing.Selling and marketing expenses consist primarily of salaries and related benefits, travel, commissions
and marketing costs such as advertising, trade shows, marketing materials, lead generation activities and public relations. Our selling and marketing expenses may fluctuate from quarter to quarter
based on the timing of trade shows and sales commissions, which vary based on sales.

Selling
and marketing expenses decreased 12.8% to $11.9 million in fiscal 2001 from $13.6 million in fiscal 2000. As a result of lower sales of our content creation
systems, we reduced our expenses for salaries, employee-related costs, tradeshows, outside services, sales literature and direct mail. The decrease in selling and marketing expenses resulted primarily
from lower sales of our content creation systems as discussed above. We currently anticipate that our selling and marketing expenses will decrease in absolute dollars in fiscal 2002 versus fiscal 2001
as a result of our implementation of a restructuring and cost reduction plan implemented in the second half of fiscal 2001. This restructuring plan included reducing our European subsidiaries, which
are primarily comprised of selling and marketing personnel, from four to three and reducing personnel in the three remaining subsidiaries. Some of these cost savings will be offset by increased
marketing costs to introduce our recently announced product, 844/X. The increase in marketing spending for 844/X will include higher costs for advertising, sales and marketing collateral, and
seminars.

General and administrative.General and administrative expenses consist primarily of salaries and related benefits, travel
and outside services for human resources, finance, information technology, legal, and other administrative functions.

General
and administrative expenses increased 81.3% to $8.5 million in fiscal 2001 from $4.7 million in fiscal 2000. The increase in general and administrative expenses
resulted primarily from a legal accrual established for an unfavorable verdict in a lawsuit against the Company and estimated legal fees in the amount of $2.6 million, and increased expenses
for legal, audit, salaries and employee-related costs. We currently anticipate that our general and administrative expenses will decrease in fiscal 2002 compared to fiscal 2001 as we begin to realize
expense efficiencies as a result of our streamlining initiatives of the general and administrative functions, which occurred in the second half of fiscal 2001.

Amortization of intangible assets.We recorded expense for the amortization and write-off of intangible assets of
$2.9 million in fiscal 2001 related to the acquisitions of Wired, 21st Century Media, J2 Digital Media and certain assets of Integrated Computing Engines, Inc. In fiscal
2000, we recorded amortization expense of $1.2 million related to the acquisitions mentioned above. In fiscal 2002, we expect our amortization expense will be approximately $1.7 million
for these acquisitions and will amortize all remaining goodwill by the end of the fiscal year 2002.

Acquired in-process research and development.In connection with the acquisition of Wired, we allocated $470,000
of the purchase price to in-process research and development projects in fiscal 2000.

18

---

This allocation represented the estimated fair value based on risk-adjusted cash flows related to incomplete research and development projects. At the date of acquisition, the development
of these projects had not yet reached technological feasibility and the research and development in progress had no alternative future uses. Accordingly, these costs were expensed as of the
acquisition date. We did not incur any expense for acquired in-process research and development in fiscal 2001.

Restructuring.In fiscal 2001, we implemented a restructuring plan to better align our organization with our corporate
strategy and to reflect the consolidation of several companies we acquired in the past two years. We recorded $1.5 million of restructuring expense in fiscal 2001 to reduce operating expenses
in the organization. The major component of the restructuring charge relates to the termination of employment of personnel across these functions. At November 30, 2001, approximately $527,000
of the accrued restructuring charge remained to be paid, composed of severance-related costs associated with the termination of employment of personnel and rent expense, net of sublease income,
associated with the Streamriver division of approximately $230,000. The total cash impact of the restructuring amounted to approximately $1.2 million, of which approximately $673,000 was paid
in 2001. In fiscal 2000, we implemented a restructuring plan to reduce operating expenses and incurred a restructuring expense of $236,000. The major component of this restructuring charge related to
the termination of employment of personnel in the selling and marketing and general and administrative functions. At November 30, 2001, there was no remaining obligation under the fiscal 2000
restructuring plan.

Interest income, net.Interest income, net, decreased 69.6% to $0.3 million in fiscal 2001 from $1.0 million in
fiscal 2000. The decrease in interest income, net, resulted from lower cash and cash equivalents due primarily to the net loss incurred in fiscal 2001, the use of cash for the acquisitions of Terran,
Wired, 21st Century Media, J2 Digital Media, substantially all of the assets of ICE, the merger with Digital Origin and lower interest rates available on the financial instruments we
have chosen for investment.
We currently anticipate that interest income will decline in fiscal 2002 versus 2001 due to lower interest rates on the financial instruments we have chosen for investment.

Other expense, net.Other expense, net increased 29.6% to $0.9 million for fiscal 2001 compared to $0.7 million
for fiscal 2000. During the fourth quarter of fiscal 2001, we wrote off our investment of $1.0 million in Beatnik, an early stage company which was developing audio software solutions for
mobile devices, after management made a determination that this asset was no longer realizable. This determination was made due to a weakening market as well as weakened prospects for a liquidity
event. The remaining expense for fiscal 2001 and 2000 was primarily due to foreign currency transaction losses of $69,000 and $649,000, respectively, related to our four European subsidiaries. The
increase in 2001 over 2000 was primarily related to exchange fluctuations.

Tax benefit.We recorded a tax benefit in fiscal 2001 of $4.7 million on our loss from continuing operations. This was
offset by a net tax provision of $4.7 million on the gain from the sale of our streaming media software product line and the operating results of the discontinued operations. We did not require
a tax provision in fiscal 2000 due to the net loss recorded during the fiscal year ended November 30, 2001.

Net loss from continuing operation.As a result of the above factors, we recorded a net loss from continuing operations in
fiscal 2001 in the amount of $16.1 million, or $1.31 per share, compared to a net loss of $5.6 million, or $0.46 per share, in fiscal 2000.

Income (loss) from discontinued operations.Income (loss) from discontinued operations, net of taxes was $4.7 million,
or $0.38 per share, consisting of a gain on the sale of the streaming media software product line of $8.2 million, offset by a loss from discontinued operations of $3.5 million. In 2000,
the net loss from discontinued operations was $4.8 million, or $0.40 per share.

19

---

Comparison of fiscal 2000 to fiscal 1999

Net sales.Our total net sales from continuing operations for fiscal 2000 were $47.2 million compared to
$47.4 million for fiscal 1999. Net sales from products for fiscal 2000 decreased 3.1% to $37.3 million from $38.6 million for fiscal 1999. The decrease in net sales from products
was due primarily lower unit shipments and lower average selling price of our content creation systems, partially offset by sales from products from the acquisitions of Wired, Inc. and certain
assets of Integrated Computing Engines, Inc. No customer accounted for more than 10% of our net sales in fiscal 2000 or fiscal 1999.

Net
sales from services for fiscal 2000 increased 11.9% to $9.9 million from $8.8 million for fiscal 1999. The increase in net sales from services was primarily due to the
launch of new services for encoding and hosting digital media as a result of the acquisitions of 21st Century Media and J2 Digital Media.

Net
sales from customers outside of North America accounted for approximately 37% and 36% of net sales in fiscal 2000 and fiscal 1999, respectively.

Cost of sales.Cost of sales for products consists of the cost of manufacturing PCI hardware boards for our content creation
systems products and royalties paid to third parties for their software that has been integrated into our systems. Cost of sales also includes the cost of manuals and other product documentation,
shipping costs and related labor. Cost of sales for our service offerings consists of salaries and related expenses for service personnel delivering the service to the customer and warranty costs.
Total cost of sales decreased 12.2% to $21.8 million in fiscal 2001 from $18.4 million in fiscal 2000. The decrease in cost of sales is directly related to the lower unit sales of our
content creation systems.

Gross profit.Our gross profit from continuing operations decreased 12.2% to $25.4 million in fiscal 2000 from
$28.9 million in fiscal 1999. Overall gross profit as a percentage of net sales decreased to 53.8% in fiscal 2000 from 61.1% in fiscal 1999. Gross profit as a percentage of net sales of
products decreased to 46.3% in fiscal 2000 from 55.5% in fiscal 1999, while gross profit as a percentage of net sales of services decreased to 82.5% in fiscal 2000 from 85.6% in fiscal 1999. The
decrease in gross profit in fiscal 2000 over fiscal 1999 was a result of lower unit sales and lower average selling prices of our content creation systems. The decrease in gross profit for services in
fiscal 2000 over fiscal 1999 was due to the introduction of encoding and hosting services, which carry a lower gross profit than our Platinum services.

Research and development.Research and development expenses decreased 12.2% to $11.0 million in fiscal 2000 from
$12.5 million in fiscal 1999. The majority of the decrease in research and development expenses represented lower development costs due to the completion of iFinish, the Company's
high-performance Windows NT-based product line, which began shipping in the first quarter of fiscal 1999.

Selling and marketing.Selling and marketing expenses increased 2.1% to $13.6 million in fiscal 2000 from
$13.3 million in fiscal 1999. Selling expenses consist primarily of salaries and related benefits, travel, commissions, and marketing costs such as advertising, trade shows, marketing
materials, lead generation activities and public relations. The increase in selling and marketing expenses resulted primarily from higher employee and employee-related costs such as salaries and
benefits.

General and administrative.General and administrative expenses increased 27.8% to $4.7 million in fiscal 2000 from
$3.7 million in fiscal 1999. General and administrative expenses consist primarily of salaries and related benefits, travel and outside services for human resources, finance, information
technology,
legal and other administrative functions. The increase in general and administrative expenses resulted primarily from increased legal costs associated with two lawsuits.

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Amortization of intangible assets.We recorded an expense for the amortization of intangible assets of $1.2 million in
fiscal 2000 as a result of the acquisitions of Wired, Inc., 21st Century Media, J2 Digital Media and certain assets of Integrated Computing Engines, Inc. There was no
similar expense recorded in fiscal 1999 as all of these companies were acquired in fiscal 2000.

Acquired in-process research and development.In connection with the acquisition of Wired, Inc., we
allocated $500,000 of the purchase price to in-process research and development projects. This allocation represented the estimated fair value based on risk-adjusted cash flows
related to the incomplete research and development projects. At the date of acquisition, the development of these projects had not yet reached technological feasibility and the research and
development in progress had no alternative future uses. Accordingly, these costs were expensed as of the acquisition date.

Restructuring expense.In fiscal 2000, we implemented a restructuring plan to reduce operating expenses and incurred
restructuring expense of $236,000. The major component of the restructuring charge relates to the termination of employment of personnel in the selling and marketing and general and administrative
functions. At November 30, 2000, approximately $528,000 of the restructuring charge remained to be paid, composed entirely of severance-related costs. The $528,000 that remained to be paid
included accrued restructuring expense for discontinued operations of $292,000. In fiscal 1999, we recorded $424,000 of restructuring expense. The major component of the restructuring charge relates
to the termination of employment of personnel in the research and development, selling and marketing and general and administrative functions. All amounts under the plan have been paid.

Interest income, net.Interest income, net, decreased 31.4% to $1.0 million in fiscal 2000 from $1.4 million in
fiscal 1999. The decrease in interest income, net, is due primarily to lower average cash and cash equivalents in fiscal 2000 relative to fiscal 1999.

Other expense, net.Other expense, net, increased 235.7% to $0.7 million for fiscal 2000 from $0.2 million for
fiscal 1999. The expense for fiscal 2001 and 2000 was primarily due to foreign currency transactions losses related to our four European subsidiaries.

Tax benefit.We did not require a tax provision nor did we record a tax benefit in fiscal 2000 or fiscal 1999 due to the net
loss incurred for fiscal 2000 and the utilization of net operating loss carryforwards and tax credits available to the Company to offset against income for fiscal 1999.

Net income (loss) from continuing operations.As a result of the above factors, we recorded a net loss of $5.5 million
in fiscal 2000, or $0.46 per share, compared to net income of $190,000, or $0.02 per diluted share, in fiscal 1999.

Income (loss) from discontinued operations.The loss from discontinued operations was $4.8 million, or $0.40 per share
in 2000 compared to net income from discontinued operations of $6.2 million, or $0.52 per diluted share in 1999.

Liquidity and Capital Resources

We have funded our operations to date primarily from public offerings of equity securities and cash flows from operations, as well as the sale of our streaming
media software product line to Autodesk. As of November 30, 2001, our principal sources of liquidity included cash, cash equivalents and marketable securities totaling approximately
$17.6 million. This was a decrease of approximately $100,000 from the $17.7 million of cash, cash equivalents and marketable securities we had as of November 30, 2000. In addition
to the $17.6 million as of November 30, 2001, an additional $2.0 million is held in escrow until October 2002 as a result of the sale of our streaming media software
product line to Autodesk, Inc. in October 2001.

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During fiscal 2001, cash used in operating activities from continuing operations was approximately $7.7 million compared to cash used in operating activities from continuing
operations of approximately $5.5 million for fiscal 2000. Cash provided by discontinued operations for fiscal 2001 totaled $8.3 million compared to cash used in discontinued operations
for fiscal 2000 of $7.1 million. Cash used in continuing operations during fiscal 2001 included a net loss of $11.5 million including depreciation and amortization of $2.7 million
and amortization of acquisition-related intangible assets of $2.9 million. In addition, cash used in continuing operations was affected by changes in assets and liabilities including decreases
in inventories of $2.6 million, accounts receivable of $3.4 million, prepaid expenses and other current assets of $474,000 and an increase in accrued expenses of $858,000 offset by
reductions in accounts payable of $3.1 million and deferred revenue of $1.5 million. Net cash provided by investing activities for continuing operations was approximately
$5.8 million in fiscal 2001 compared to approximately $6.1 million for fiscal 2000. Cash provided by investing activities for continuing operations during 2001 was derived from the
proceeds from sales of marketable securities of $5.4 million and a reduction in other assets of $1.2 million, partially offset by purchases of capital equipment of $800,000 and the costs
for patents and trademarks of $47,000. Cash used in financing activities from continuing operations during 2001 was approximately $1.1 million compared to cash provided by financing activities
from continuing operations of $4.7 million for fiscal 2000. In 2001, cash used in financing activities from continuing operations included a payment of $1.5 million on a note payable and
the purchase of treasury stock of $100,000, partially offset by the proceeds from the issuance of common stock pursuant to stock plans of $500,000.

We
currently anticipate that our current cash and equivalents will be sufficient to fund our anticipated cash requirements for working capital and capital expenditures for at least the
next twelve months. We may need to raise additional funds, however, in order to fund expansion of our business, develop new and enhance existing products and services, or acquire complementary
products, businesses or technologies. If additional funds are raised through the issuance of equity or convertible debt securities, the percentage ownership or our stockholders may be reduced, our
stockholders may experience additional dilution, and such securities may have rights, preferences or privileges senior to those of our existing stockholders. Additional financing may not be available
on terms favorable to us, or at all. If adequate funds are not available or are not available on acceptable terms, our ability to fund expansion, take advantage of unanticipated opportunities or
develop or enhance our products or services would be significantly limited.

Cautionary Statements

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995 that
involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth in the
following cautionary statements and elsewhere in this Annual
Report on Form 10-K. If any of the following risks were to occur, our business, financial condition, or results of operations would likely suffer. In that event, the trading price
of our common stock would decline.

Risks Associated With Development and Introduction of New Products.If we are not successful in developing and introducing
new products to the markets we serve our business and operating results will suffer. In late February 2002, we announced our latest new product, 844/X, and currently anticipate this new product
will generate greater than 50% of the revenue from product sales in the current fiscal year. If the adoption of 844/X is slower than we anticipate or if there are delays in releasing 844/X, our
current revenue expectations may be too high and our operating results may be negatively affected. In addition, new product announcements by our competitors and other new product announcements by us
could have the effect of reducing customer demand for our existing products. Also, when we introduce new or enhanced products we must effectively manage the transitions from existing products to

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minimize disruption of orders from our customers. New product introductions require us to devote time and resources to the training of our sales channel in the features and target customers for such
new products, which efforts could result in less selling efforts being made by the sales channel during such training period. Our failure to effectively manage new product announcements or
introductions could contribute to significant quarterly fluctuations in operating results as orders for new products commence and orders for existing products decline and, as a result, our operating
results will suffer.

Significant Fluctuations and Unpredictability of Operating Results.Our quarterly operating results are difficult to predict,
have varied significantly in the past and are likely to vary significantly in the future for a number of reasons, including new product announcements and introductions by ourselves or our competitors,
changes in pricing, and the volume and timing of orders received during the quarter. Also, in the past, we have experienced delays in the development of new products and enhancements, and such delays
may occur in the future. These factors make the forecasting of revenue inherently uncertain. Additionally, a significant portion of our operating expenses is relatively fixed, and operating expense
levels are based primarily on internal expectations of future revenue. As a consequence, quarterly operating expense levels cannot be reduced rapidly in the event that quarterly revenue levels fail to
meet internal expectations. For these reasons, you should not rely on period-to-period comparisons of our financial results to forecast our future performance. It is likely
that in some future quarter or quarters our operating results will be below the expectations of securities analysts or investors. If quarterly revenue or earnings levels fail to meet internal or
external expectations, the market price of our common stock may decline significantly.

Emerging Markets.The markets in which we offer our systems products and services are intensely competitive and rapidly
changing. We are targeting the emerging market of broadcast designers, effects artists, and creative professionals. This market and the products utilized by these users are relatively new. Our success
in this emerging market will depend on the rate at which the market develops and our ability to penetrate that market. We will not succeed if we cannot compete effectively in this market and, as a
result, our business and operating results could be materially and adversely affected.

Rapid Technological Change.Rapidly changing technology, evolving industry standards and frequent new product introductions
characterize the market for our products. Our future success will depend in part upon our ability to enhance existing products and to introduce new products and features in a timely manner to address
customer requirements, respond to competitive offerings, adapt to new emerging industry standards and take advantage of new enabling technologies that could render our existing products obsolete. We
plan to continue to invest in research and development, in connection with our development strategy. Any delay or failure on our part in developing additional new products or features for existing
products or any failure of such new products or features to achieve market acceptance, could have a material adverse effect on our business and operating results and our stock price will suffer.

Competition.The market for our products is highly competitive and characterized by pressure to reduce prices, incorporate
new features and accelerate the release of new products. A number of companies currently offer products that compete directly or indirectly with our products, including Accom, Inc., Adobe
Systems Inc., Apple Computer, Inc., Avid Technology, Inc., Discreet (a division of Autodesk, Inc.), Leitch, Inc., Matrox Electronic Systems Ltd., Pinnacle
Systems, Inc. and Quantel Ltd. In addition, we expect much larger vendors, such as Matsushita Electric Industrial Company Ltd., Microsoft Corporation, and Sony Corporation, to
develop and introduce digital editing systems that may compete with our products. Many of these current and potential competitors have greater financial, technical and marketing resources than we
have, including, without limitation, larger and more established selling and marketing capabilities, greater brand recognition and a larger installed base of customers, and
well-established relationships with our existing and potential customers, complementary technology vendors and other business partners. As a result, our competitors may be

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able to develop products comparable to or superior to our own products, adapt more quickly than us to new technologies, evolving industry standards or customer requirements, or lower their product
costs and thus be able to lower prices to levels at which we could not operate profitably, the occurrence of any of which could have a material adverse effect on our business and operating results. In
this regard, we believe that we will continue to experience competitive pressure to reduce prices, particularly for our high data rate systems. We have historically realized higher gross profit on the
sale of these high data rate systems, and such continued competitive pricing pressure could result in lower sales and gross margin, which in turn could adversely affect our business and operating
results and negatively affect the price of our common stock.

Dependence on Propriety Technology.Our ability to compete successfully and achieve future revenue growth will depend, in
part, on our ability to protect our proprietary technology and operate without infringing the rights of others. Previously, we have received, and may in the future continue to receive, communications
suggesting that our products may infringe on the patents or other intellectual property rights of third parties. Our policy is to investigate the factual basis of such communications and negotiate
licenses where appropriate. While it may be necessary or desirable in the future to obtain licenses relating to one or more products, or relating to current or future technologies, there can be no
assurance that we will be able to do so on commercially reasonable terms or at all. There can be no assurance that these or other future communications can be settled on commercially reasonable terms
or that they will not result in protracted and costly litigation. Any failure to secure the necessary intellectual property right of third parties on commercially reasonable terms may adversely affect
our business and operating results and negatively affect the price of our common stock.

Risks of Third-Party Claims of Infringement.There has been substantial industry litigation regarding patent, trademark and
other intellectual property rights involving technology companies. In the future, litigation may be necessary to enforce any patents issued to us or to enforce trade secrets, trademarks and other
intellectual property rights owned by us, to defend ourselves against claimed infringement of the rights of others and to determine the scope and validity of the proprietary rights of others. For a
description of certain pending litigation instituted against the Company, see Item 3, Legal Proceedings of Part I, Other Information and Note 7 to the Consolidated Financial Statements
included herein. Any such litigation could be costly and a diversion of management's attention, which could adversely affect our business and operating results and our financial condition. Adverse
determinations in any such litigation could result in the loss of our proprietary rights, subject us to significant liabilities, require us to seek licenses from third parties or prevent us from
manufacturing or selling our products, any of which could adversely affect our business and operating results and our financial condition.

Dependence on Single or Limited Source Suppliers.The Company is dependent on single or limited source suppliers for several
key components used in its products that have no ready substitutes, including various audio and video signal processing integrated circuits manufactured in each case only by Crystal Semiconductor
Corp., Fairchild Semiconductor Corp., Gennum Corporation, Toshiba, Kawasaki LSI USA Inc., LSI Logic Corp., Philips Semiconductors or Zoran Corp. The availability of many of these components is
dependent on our ability to provide suppliers with accurate forecasts of our future requirements, and certain components we use to build our products have been subject to industry-wide
shortages. We do not carry significant inventories of these components and have no guaranteed supply arrangements with such suppliers. There can be no assurance that our inventory levels will be
adequate to meet production needs during any interruption of supply. Our inability to develop alternative supply sources, if required, or a reduction or stoppage in supply, could delay product
shipments until new sources of supply become available, and any such delay could adversely affect our business and operating results in any given period and negatively affect the price of our common
stock.

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Dependence on Key Personnel.Competition for employees with the skills required by us is intense in the geographic areas in
which we maintain physical operations. We believe that our future success will depend on our continued ability to attract and retain qualified employees, especially in research and development. Any
significant delay in hiring key personnel could have a material adverse affect on our business and operating results and negatively affect the price of our common stock.

Dependence on and competition with Apple Computer, Inc.As a competitor, Apple Computer, Inc. ("Apple") could,
in the future, inhibit our ability to develop our products that operate on the Macintosh platform. Additionally, new products and enhancements to existing products from Apple such as Final Cut Pro
could cause customers to delay purchases of our products or alter their purchase decision altogether. Furthermore, as the sole supplier of Macintosh computers, any disruption in the availability of
these computers could cause customers to defer or alter their purchase of our products. We rely on access to key information from Apple to continue development of our products and any failure to
continue supplying our engineers with this information could have a material adverse affect on our business and financial results and negatively affect the price of our common stock.

Dependence on Microsoft Corporation.Many of our products operate in the Windows environment and our engineers depend upon
access to information in advance from Microsoft Corporation ("Microsoft"). Any failure to continue supplying our engineers with this information could have a material adverse affect on our business
and financial results and negatively affect the price of our common stock.

Dependence on Distributors and Resellers.We rely primarily on our worldwide network of independent distributors and
value-added resellers ("VARs") to distribute and sell our products to end-users. Our distributors and resellers generally offer products from several different companies, including in some
cases products that are competitive with our own products. In addition, many of the VARs are small organizations with limited capital resources. There can be no assurance that our distributors and
resellers will continue to purchase products from us, or that our efforts to expand our network of distributors and resellers will be successful. Any significant failure on our part to maintain or
expand our network of distributors and resellers could have a material adverse effect on our business and operating results and negatively affect the price of our common stock.

Reliance on International Sales.International sales and operations may be subject to risks such as the imposition of
government controls, export license requirements, restrictions on the export of critical technology, less effective enforcement of proprietary rights; currency exchange fluctuations, generally longer
collection periods, political instability, trade restrictions, changes in tariffs, difficulties in staffing and managing international operations, potential insolvency of international resellers and
difficulty in collecting accounts receivable. Our international sales are also subject to more seasonal fluctuation than domestic sales. In this regard, the traditional summer vacation period, which
occurs during our third fiscal quarter, may result in a decrease in sales, particularly in Europe. There can be no assurance that these factors will not have an adverse effect on our future
international operations and consequently, on our business and operating results. This fluctuation may be material and negatively affect the price of our common stock.

Merger and Acquisition Related Risks.During the fiscal year ended November 30, 2000, we completed the merger with
Digital Origin and the acquisitions of Wired, 21st Century Media, and J2 Digital Media. In addition, we completed the acquisition of certain assets of Integrated Computing
Engines, Inc. Our business and results of operations could be materially adversely affected in the event we fail to complete publicly announced acquisitions or to successfully integrate the
business and operations of the merger or the acquisitions. In the future, we may continue to acquire or merge with existing businesses, products, and technologies to enhance and expand our line of
products. Such mergers and acquisitions may be material in size and in scope. There can be no assurance that we will be able to identify, acquire, or profitably manage additional businesses or
successfully integrate any

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acquired businesses into our business without substantial expenses, delays, or other operational or financial problems. Acquisitions involve a number of special risks and factors, including
increasing competition for attractive acquisition candidates in our markets, the technological enhancement and incorporation of acquired products into existing product lines and services, the
assimilation of the operations and personnel of the acquired companies, failure to retain key acquired personnel, adverse short-term effects on reported operating results, the amortization
of acquired intangible assets, the
assumption of undisclosed liabilities of any acquired companies, the failure to achieve anticipated benefits such as cost savings and synergies, as well as the diversion of management's attention
during the acquisition and integration process. We may not be able to operate the acquired businesses properly and may not be able to successfully recover amounts paid for such businesses. Some or all
of these special risks and factors may have a material adverse impact on our business, operating results, and financial condition and, as a result, may negatively affect the market price of our common
stock.

Similarly,
we may dispose of assets, either assets we have historically used in the business or that we have acquired. Our business and results of operations could materially change
depending on whether or not we are able to dispose of assets in an advantageous manner. In addition to obtaining an advantageous price for the assets to be disposed of, dispositions involve a number
of special risks and factors, including searching for appropriate acquirers; managing the effect of the disposition on existing and proposed product lines and services, the divestiture of operations
and personnel, adverse short-term effects on reported operating results, potential post-divestiture indemnification or liability for liabilities of divested operations, as well
as the diversion of management's attention during the disposition process. Some or all of these special risks and factors may have a material adverse impact on our business, operating results, and
financial condition and, as a result, may negatively affect the market price of our common stock.

History of Losses.We have incurred substantial operating losses during the current year and in three of the past four fiscal
years. We incurred an operating loss from continuing operations of approximately $16.1 million for fiscal 2001 and as of November 30, 2001, we had an accumulated deficit of approximately
$200.8 million. Over the past four years we have significantly increased our research and development expenses as a percentage of total sales and we plan to continue to invest in new
technology, and as a result, we may incur operating losses in future periods. We will need to generate increases in our current sales levels to achieve profitability and we may not be able to do so.
If our sales grow more slowly than we anticipate or if our operating expenses increase more than we expect or cannot be reduced in the event of lower revenue, our business will be significantly and
adversely affected. Our failure to achieve profitability or achieve the level of profitability expected by investors and securities analysts may adversely affect the market price of our common stock.

Stock Price Volatility.The trading price of our common stock has been highly volatile and has fluctuated significantly in
the past. During fiscal 2001, our stock price fluctuated between a low of $0.81 per share and a high of $3.81 per share. We believe that the price of our common stock may continue to fluctuate
significantly in the future in response to a number of events and factors relating to our company, our competitors, and the market for our products and services, many of which are beyond our control,
such as, variations in our quarterly operating results; changes in financial estimates and recommendations by securities analysts; changes in market valuations of companies in our markets;
announcements by us or our competitors of significant products, acquisitions, or strategic partnerships; failure to complete significant business transactions; departures of key personnel; purchases
or sales of common stock or other securities by us; or news relating to trends in our markets. In addition, the stock market in general, and the market for technology companies in particular, have
experienced extreme volatility over the past twelve months. This volatility has often been unrelated to the operating performance of particular companies. These broad and industry fluctuations may
adversely affect the market price of our common stock, regardless of our operating performance.

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Euro Conversion.On January 1, 1999, 11 of the 15 member countries of the European Union established fixed conversion
rates between their existing sovereign currencies and the Euro. As of January 1, 2002, the transition to the Euro was completed. We maintain operations within the European Union and prepared
for the Euro conversion and the costs associated with the transition were not material. However, the overall effect of the transition to the Euro may have a material adverse affect on our business,
financial condition and financial results.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

Derivative Financial Instruments, Other Financial Instruments and Derivative Commodity Instruments. The Company is not a party to any derivative financial
instruments or other financial instruments for which the fair value disclosure would be required under Statement of Financial Accounting Standards No. 107Derivative
Financial Instruments, Other Financial Instruments and Derivative Commodity Instruments (SFAS No. 107). All of the Company's investments are in short-term,
investment grade commercial paper, certificates of deposit and U.S. Government and agency securities that are carried at fair value on the Company's books. Accordingly, the Company believes that the
market risk of such investments is minimal.

Primary
Market Risk Exposures. The Company's primary market risk exposures are in the area of interest rate risk and foreign currency exchange rate risk. The Company's investment
portfolio of cash equivalents is subject to interest rate fluctuations, but the Company believes this risk is immaterial due to the short-term nature of these investments. The Company's
business in Europe is conducted in local currency. In Asia, business is conducted in U.S. currency. The Company has no foreign exchange contracts, option contracts or other foreign hedging
arrangements. However, the Company estimates that any market risk associated with its foreign operations is not significant and is unlikely to have a material adverse effect on the Company's business,
results of operations, or financial condition.

New Accounting Standards.

July 2001,
the Financial Accounting Standards Board (FASB) issued SFAS No. 141, "Business Combinations". SFAS No. 141 supercedes APB No. 16 "Business
Combinations" and FASB Statement No. 38 "Accounting for Preacquisition Contingencies of Purchased Enterprises." SFAS 141 requires all business combinations initiated after
June 30, 2001 to be accounted for using the purchase method. Accordingly, the Company will be adopting the provisions of this statement upon any business combination entered into after
June 30, 2001.

In
July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets." This statement applies to goodwill and intangible assets acquired after June 30,
2001, as well as goodwill and intangible
assets previously acquired. Under this statement goodwill as well as certain other intangible assets, determined to have an indefinite life, will no longer be amortized. These assets will be reviewed
for impairment on a periodic basis. This statement is effective for the Company in the first quarter of fiscal year 2003. Management is currently evaluating the impact that this statement will have on
the Company's financial statements.

In
June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." This statement addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement applies to all entities. It applies to legal obligations associated
with the retirement of long-lived assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived asset, except for certain
obligation of lessees. This statement amends FASB Statement No. 19 and is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company does not
believe that the adoption of this standard will have a material impact on the Company's financial statements.

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In
August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which supercedes SFAS 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS 144 further refines the requirements of SFAS No. 121 that companies
(1) recognize an impairment loss only if the carrying amount of a long-lived asset is not recoverable based on its undiscounted future cash flows and (2) measure an
impairment loss as the difference between the carrying amount and fair value of the asset. In addition, SFAS No. 144 provides guidance on accounting and disclosure issues surrounding
long-lived assets to be disposed of by sale. The Company will be required to adopt SFAS 144 no later than the fiscal year beginning on December 1, 2002. The Company does not
expect the adoption of SFAS 144 to have a material effect on its financial condition or results of operations.

Emerging
Issues Task Force (EITF) Issue No. 01-09, "Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor's
Products,"issued during November 2001, codifies previously issued EITF Issue No. 00-25, "Vendor Income Statement
Characterization of Consideration Paid to a Reseller of the Vendor's Products."EITF Issue No. 00-25 addresses various aspects of the accounting for
consideration given by a vendor to a customer or a reseller of the vendor's products. Consideration includes sales incentives such as discounts, coupons, rebates, free products or services, slotting
fees, coop advertising and buydowns. Pursuant to EITF 00-25, such consideration is presumed to be a reduction of revenue unless certain criteria are met. The Issue should be applied no
later than in annual or interim financial statements for periods beginning after December 15, 2001 and requires retroactive restatement. The Company currently records coop advertising expenses
and other sales incentives to resellers within sales and marketing expense in the statement of operations. The Company will adopt EITF Issue No. 01-09 in its interim period ended
February 28, 2002. Management is currently evaluating the impact that this statement will have on the Company's financial statements.

Item 8.    Financial Statements and Supplementary Data

The Company's financial statements, together with the auditors' report thereon, appear on pages F-1 through F-36 of this Annual Report on
Form 10-K.

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

PART III

Item 10. Directors and Officers of the Registrant

The Company will furnish to the Securities and Exchange Commission not later than 120 days after the close of its fiscal year ended November 30,
2001 a definitive Proxy Statement (the "Proxy Statement") for the Annual Meeting of Stockholders to be held in April 2002. The information required by this Item is incorporated herein by
reference to "Election of Directors," "Executive Officers" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement.

Item 11.    Executive Compensation

The information required by this Item is incorporated herein by reference to "Election of Directors" and "Executive Compensation" in the Proxy Statement.

Item 12.    Security Ownership of Certain Beneficial Owners and Management

The information required by this Item is incorporated herein by reference to "Security Ownership of Certain Beneficial Owners and Management" in the Proxy
Statement.

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Item 13.    Certain Relationships and Related Transactions

The information required by this Item is incorporated herein by reference to "Certain Relationships and Related Transactions" in the Proxy Statement.

Item 14.    Exhibits, Financial Statement Schedules and Reports on Form 10-K

The following documents are filed as part of this report:

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| | (a) (1) Consolidated Financial Statements. |     
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|2.07 |  | Merger Agreement (the "Merger Agreement") dated as of December 21, 1995 among Radius Inc., Splash Technology, Inc., Summit Subordinated Debt Fund, L.P., Summit Ventures IV, L.P., Summit
Investors II, L.P., Splash Technology Holdings, Inc. and Splash Merger Company, Inc. (2)                                                          
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.08 |  | Amendment No. 1 to Merger Agreement dated as of January 30, 1996. (2)                                                                                                                                                                                                                                                                       
|2.09 |  | Agreement and Plan of Reorganization dated December 28, 1999 with Media 100, Inc.                                                                                                                                                                                                                                                           
|2.10 |  | Asset Purchase Agreement by and among Media 100 Inc. and Autodesk, Inc, and with respect to Section 9.5 of Article IX only Computershare Trust Company, Inc. dated August 29, 2001 (filed as
exhibit 2.10 of the Company's Quarterly Report of Form 10-Q for the fiscal quarter ended August 31, 2001 and incorporated by reference herein).
|3.1  |  | Restated Certificate of Incorporation of Media 100 Inc. (filed as Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1996 and incorporated by reference
herein).                                                                                                                                
|3.2  |  | By-laws of Media 100 Inc., as amended through June 17, 1998 (filed as Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended May 31,1998 and incorporated by
reference herein).                                                                                                                            
|4    |  | Specimen Certificate representing the Company's Common Stock (filed as Exhibit 4 to the Company's Registration Statement on Form S-1, File No. 2-94121 and incorporated by reference herein).                                                                                                                                               
|4.03 |  | A    Warrant dated September 13, 1995 between IBM Credit Corporation and the Digital Origin Inc. (8)                                                                                                                                                                                                                                        

29

---

|       |  | B    Warrant dated October 13, 1996, between Mitsubishi Electronics America, Inc. and the Digital Origin Inc. (9)                                                                                                                                          
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.04   |  | Form of Registration Rights Agreement between the Digital Origin Inc. and certain shareholders. (8)                                                                                                                                                        
|10.1*  |  | Key Employee Incentive Plan (1982), as amended through November 15, 1996 (filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1996 and incorporated
by reference herein).                             
|10.2*  |  | 1986 Employee Stock Purchase Plan, as amended through June 12, 2001 (filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 2001 and incorporated
by reference herein).                              
|10.3*  |  | Key Employee Incentive Plan (1992), as amended through June 12, 2001 (filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 2001 and incorporated
by reference herein).                             
|10.4*  |  | Media 100 Inc. 401(k) Savings Plan (filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1997 and incorporated by reference herein).                                                                   
|10.5.1 |  | Lease dated January 31, 1997 relating to 290 Donald Lynch Boulevard, Marlboro, MA (filed as Exhibit 10.5.1 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1996
and incorporated by reference herein).                  
|10.5.2 |  | License Agreement dated as of January 31, 1997 relating to 290 Donald Lynch Boulevard, Marlboro, MA (filed as Exhibit 10.5.2 to the Company's Annual Report on Form 10-K for the fiscal year ended
November 30, 1996 and incorporated by reference herein).
|10.5.3 |  | Amendment to Lease dated January 8, 2002 relating to 290 Donald Lynch Blvd, Marlboro, MA and 450 Donald Lynch Blvd, Marlboro, MA.                                                                                                                          
|10.6.1 |  | Agreement d Distribution dated as of November 19, 1996 with Data Translation II, Inc. (DTI) (filed as Exhibit 10.8.1 to the Company's Annual Report on Form 10-K for the fiscal year ended
November 30, 1996 and incorporated by reference herein).        
|10.6.2 |  | Intellectual Property Agreement dated as of December 2, 1996 with DTI (filed as Exhibit 10.8.2 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1996 and incorporated
by reference herein).                              
|10.6.3 |  | Corporate Services Agreement dated as of December 2, 1996 with DTI (filed as Exhibit 10.8.3 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1996 and incorporated by
reference herein).                                 
|10.6.4 |  | Amendment to Corporate Services Agreement dated November 18, 1997 (filed as Exhibit 10.6.4 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1997 and incorporated by
reference herein).                                  
|10.9   |  | Offer Letter from the Company to B. Robert Feingold (filed as Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 31,1998 and incorporated by reference
herein).                                               
|10.10  |  | Agreement and Plan of Merger and Reorganization, dated May 6, 1999 with Terran Interactive, Inc. (filed as Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
May 31, 1999 and incorporated by reference herein).   
|10.11  |  | Asset Purchase Agreement, dated December 17, 1999 with Wired, Inc. (filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K for the year ended November 30, 1999 and incorporated by
reference herein).                                         
|10.12  |  | A*    Digital Origin Inc.'s 401(k) Savings and Investment Plan. (6)                                                                                                                                                                                        

30

---

|       |  | B*    Amendment to Digital Origin Inc.'s 401(k) Savings and Investment Plan. (1)                                                                                                                                                     
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |  | C*    Digital Origin Inc.'s 401(k) Savings and Investment Plan Loan Policy. (1)                                                                                                                                                      
|10.13* |  | Digital Origin Inc.'s 1995 Stock Option Plan. (1)                                                                                                                                                                                    
|10.14* |  | Form of Stock Option Agreement and Exercise Request as currently in effect under 1995 Stock Option Plan. (1)                                                                                                                         
|10.15* |  | Digital Origin Inc.'s 1994 Directors' Stock Option Plan. (1)                                                                                                                                                                         
|10.16  |  | Form of Indemnity Agreement with Directors. (5)                                                                                                                                                                                      
|10.17* |  | Employment Agreement by and between Digital Origin Inc. and Mark Housley dated December 20, 1996. (10)                                                                                                                               
|10.18* |  | Employment Termination and Release Agreement with Mark Housley dated November 3, 2000 (filed as Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended November 30, 2000 and
incorporated by reference herein).
|10.19  |  | Asset Purchase Agreement dated as of August 7, 1998 between Korea Data Systems America, Inc. and the Digital Origin Inc. (11)                                                                                                        
|10.20  |  | Amended and Restated License Agreement dated as of August 7, 1998 between Korea Data Systems America, Inc. and the Digital Origin Inc. (11)                                                                                          
|10.21  |  | Asset Purchase Agreement dated as of November 23, 1998 between Post Digital Software, Inc. and the Digital Origin Inc. (12)                                                                                                          
|10.22  |  | Asset Sale Agreement dated as of December 4, 1998 between Splash Technology Holdings, Inc. and the Digital Origin Inc. (12)                                                                                                          
|10.23  |  | Supplement to the License and Asset Purchase Agreement dated December 4, 1998 between Korea Data Systems America, Inc. and the Digital Origin Inc. (12)                                                                              
|10.24  |  | Lease agreement by and between Digital Origin Inc. and Eliane Ortuno, Trustee, Donald T. Kitts Trust dated January 8, 1999. (460 East Middlefield Road, Mountain View, California offices). (13)                                     
|10.25  |  | Digital Origin Inc.'s 1999 Employee Stock Purchase Plan and related documents. (14)                                                                                                                                                  
|21     |  | Subsidiaries of Media 100 Inc. (filed as Exhibit 21 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1997 and incorporated by reference herein).                                                   
|23     |  | Consent of Arthur Andersen LLP.                                                                                                                                                                                                      
|23.2   |  | Consent of Ernst & Young LLP.                                                                                                                                                                                                        
|24     |  | Power of Attorney (included in the signature page of this Annual Report on Form 10-K).                                                                                                                                               





31

---



32

---



INDEX TO FINANCIAL STATEMENTS

|                                |                                                                                                            | Page
|------------------------------- | ---------------------------------------------------------------------------------------------------------- | ----
|Media 100 Inc. and Subsidiaries |                                                                                                            |     
|                                | Report of Independent Public Accountants of Media 100, Inc.                                                |     
|                                | Report of Independent Public Accountants of Digital Origin, Inc.                                           |     
|                                | Consolidated Balance Sheets as of November 30, 2001 and 2000                                               |     
|                                | Consolidated Statements of Operations
for the Fiscal Years Ended November 30, 2001, 2000 and 1999          |     
|                                | Consolidated Statement of Stockholders' Equity
for the Fiscal Years Ended November 30, 2001, 2000 and 1999 |     
|                                | Consolidated Statements of Cash Flows
for the Fiscal Years Ended November 30, 2001, 2000 and 1999          |     
|                                | Notes to Consolidated Financial Statements                                                                 |     

F-1

---

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Media 100 Inc.:

We
have audited the accompanying consolidated balance sheets of Media 100 Inc. (a Delaware corporation) and subsidiaries as of November 30, 2001 and 2000 and the related
consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended November 30, 2001. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. As discussed in Note 3, on May 9, 2000, Media 100 Inc.
merged with Digital Origin, Inc. in a transaction that has been accounted for as a pooling-of-interests in the accompanying consolidated financial statements. We did not
audit the financial statements of Digital Origin, Inc. as of or for the year ended September 30, 1999. Such statements are included in the consolidated financial statements of Media
100 Inc. and reflect total revenues of $13,353,000 and net income of $5,849,000, and such amounts are included in income from discontinued operations for the year ended November 30,
1999. The financial statements of Digital Origin, Inc. were audited by other auditors whose report has been furnished to us and our opinion, insofar as it relates to amounts included for
Digital Origin, Inc., is based solely upon the report of the other auditors.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe
that our audits and the report of other auditors provide a reasonable basis for our opinion.

In
our opinion, based on our audit and the report of the other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of
Media 100 Inc. and subsidiaries as of November 30, 2001 and 2000 and the results of their operations and their cash flows for each of the three years in the period ended
November 30, 2001, in conformity with accounting principles generally accepted in the United States.



Boston,
Massachusetts
January 7, 2002
(except with respect to the matter discussed in Note 7(b)(v),
as to which the date is February 25, 2002)

F-2

---

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

THE BOARD OF DIRECTORS AND SHAREHOLDERS
DIGITAL ORIGIN, INC.

We
have audited the consolidated statements of income, convertible preferred stock and shareholders' equity, and cash flows for the year ended September 30, 1999 (not presented
separately herein) of Digital Origin, Inc. Our audit also included the financial statement schedule (not presented separately herein). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of Digital
Origin, Inc. for the year ended September 30, 1999, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.



San
Jose, California
November 3, 1999

F-3

---



MEDIA 100 INC.    CONSOLIDATED BALANCE SHEETS        (in thousands, except per share amounts)

|                                              |                                                                                              | November 30,                                                                                                                            |      
|--------------------------------------------- | -------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------- | -----
|
|ASSETS                                        |                                                                                              |                                                                                                                                         |      
|Current assets:                               |                                                                                              |                                                                                                                                         |      
|                                              | Cash and cash equivalents                                                                    |                                                                                                                                         | $    
|                                              | Available for sale securities, at fair value                                                 |                                                                                                                                         |      
|                                              | Due from escrow (Note 13)                                                                    |                                                                                                                                         |      
|                                              | Accounts receivable, net of allowance for doubtful accounts of $512 in 2001 and $334 in 2000 |                                                                                                                                         |      
|                                              | Inventories, net                                                                             |                                                                                                                                         |      
|                                              | Prepaid expenses and other current assets                                                    |                                                                                                                                         |      
|                                              | Net assets of discontinued operations (Note 13)                                              |                                                                                                                                         |      
|                                              |                                                                                              |                                                                                                                                         |      
|                                              |                                                                                              | Total current assets                                                                                                                    |      
|Property and equipment, net                   |                                                                                              |                                                                                                                                         | 3,843
|Intangible assets, net                        |                                                                                              |                                                                                                                                         | 1,880
|Other assets, net                             |                                                                                              |                                                                                                                                         |     
|                                              |                                                                                              |                                                                                                                                         |      
|                                              |                                                                                              | Total assets                                                                                                                            |      
|                                              |                                                                                              |                                                                                                                                         |      
|LIABILITIES AND STOCKHOLDERS' EQUITY          |                                                                                              |                                                                                                                                         |      
|Current liabilities:                          |                                                                                              |                                                                                                                                         |      
|                                              | Accounts payable                                                                             |                                                                                                                                         | $    
|                                              | Accrued expenses                                                                             |                                                                                                                                         |      
|                                              | Note payable (Note 3)                                                                        |                                                                                                                                         |      
|                                              | Deferred revenues                                                                            |                                                                                                                                         |      
|                                              |                                                                                              |                                                                                                                                         |      
|                                              |                                                                                              | Total current liabilities                                                                                                               |      
|                                              |                                                                                              |                                                                                                                                         |      
|Commitments and contingencies (Notes 6 and 7) |                                                                                              |                                                                                                                                         |      
|Stockholders' equity:                         |                                                                                              |                                                                                                                                         |      
|                                              | Preferred stock, $0.01 par value,                                                            |                                                                                                                                         |      
|                                              |                                                                                              | Authorized1,000 shares, none issued                                                                                                    |      
|                                              | Common stock, $0.01 par value,                                                               |                                                                                                                                         |      
|                                              |                                                                                              | Authorized100,000 shares                                                                                                               |      
|                                              |                                                                                              | Issued and outstanding12,575 shares issued and outstanding at November 30, 2001 and 12,265 issued and outstanding at
November 30, 2000 |      
|                                              | Capital in excess of par value                                                               |                                                                                                                                         |      
|                                              | Accumulated deficit                                                                          |                                                                                                                                         |      
|                                              | Treasury stock, 30 shares at cost                                                            |                                                                                                                                         |      
|                                              | Accumulated other comprehensive loss                                                         |                                                                                                                                         |      
|                                              |                                                                                              |                                                                                                                                         |      
|                                              | Total stockholders' equity                                                                   |                                                                                                                                         |      
|                                              |                                                                                              |                                                                                                                                         |      
|                                              | Total liabilities and stockholders' equity                                                   |                                                                                                                                         | $    
|                                              |                                                                                              |                                                                                                                                         |      

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

F-4

---



MEDIA 100 INC.        CONSOLIDATED STATEMENTS OF OPERATIONS        (in thousands, except per share amounts)

|                                                                                   |                                                 | Fiscal Years Ended November 30, |        
|---------------------------------------------------------------------------------- | ----------------------------------------------- | ------------------------------- | -------
|
|Net sales:                                                                         |                                                 |                                 |        
|                                                                                   | Products                                        |                                 | $      
|                                                                                   | Services                                        |                                 |        
|                                                                                   |                                                 |                                 |        
|Total net sales                                                                    |                                                 |                                 | 31,245 
|Cost of sales                                                                      |                                                 |                                 | 16,181 
|                                                                                   |                                                 |                                 |        
|                                                                                   | Gross profit                                    |                                 |        
|                                                                                   |                                                 |                                 |        
|Operating expenses:                                                                |                                                 |                                 |        
|                                                                                   | Research and development                        |                                 |        
|                                                                                   | Selling and marketing                           |                                 |        
|                                                                                   | General and administrative                      |                                 |        
|                                                                                   | Amortization and write-off of intangible assets |                                 |        
|                                                                                   | Acquired in-process research and development    |                                 |        
|                                                                                   | Restructuring                                   |                                 |        
|                                                                                   |                                                 |                                 |        
|                                                                                   |                                                 | Total operating expenses        |        
|                                                                                   |                                                 |                                 |        
|                                                                                   |                                                 | Operating loss                  |        
|Interest income, net                                                               |                                                 |                                 | 289    
|Other expense, net                                                                 |                                                 |                                 | (866   
|                                                                                   |                                                 |                                 |        
|Income (loss) from continuing operations before tax benefit                        |                                                 |                                 | (20,836
|Benefit from income taxes                                                          |                                                 |                                 | (4,700 
|                                                                                   |                                                 |                                 |        
|Income (loss) from continuing operations                                           |                                                 |                                 | (16,136
|Income (loss) from discontinued operations, net of tax provision of $4,700 in 2001 |                                                 |                                 | 4,680  
|                                                                                   |                                                 |                                 |        
|Net income (loss)                                                                  |                                                 | $                               | (11,456
|                                                                                   |                                                 |                                 |        
|Income (loss) per share (Note 2j):                                                 |                                                 |                                 |        
|Basic                                                                              |                                                 |                                 |        
|Continuing operations                                                              |                                                 | $                               | (1.31  
|                                                                                   |                                                 |                                 |        
|Discontinued operations                                                            |                                                 | $                               | 0.38   
|                                                                                   |                                                 |                                 |        
|Total                                                                              |                                                 | $                               | (0.93  
|                                                                                   |                                                 |                                 |        
|Diluted                                                                            |                                                 |                                 |        
|Continuing operations                                                              |                                                 | $                               | (1.31  
|                                                                                   |                                                 |                                 |        
|Discontinued operations                                                            |                                                 | $                               | 0.38   
|                                                                                   |                                                 |                                 |        
|Total                                                                              |                                                 | $                               | (0.93  
|                                                                                   |                                                 |                                 |        
|Weighted average common shares outstanding:                                        |                                                 |                                 |        
|Basic                                                                              |                                                 |                                 | 12,330 
|                                                                                   |                                                 |                                 |        
|Diluted                                                                            |                                                 |                                 | 12,330 
|                                                                                   |                                                 |                                 |        

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

F-5

---



MEDIA 100 INC.        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

|                                                                                       |                                                  |   |         | Common Stock
$.01 Par Value |        |   |   |     |   |   |         |   |  
|-------------------------------------------------------------------------------------- | ------------------------------------------------ | - | ------- | --------------------------- | ------ | - | - | --- | - | - | ------- | - | -
|
|
|
|
|Balance, November 30, 1998                                                             |                                                  |   |        |                             | 11,234 |   | $ | 113 |   | $ | 209,989 |   | $
|Issuance of common stock under stock plans                                             |                                                  |   |        |                             | 299    |   |   | 3   |   |   | 850     |   |  
|Purchase of treasury stock, cost                                                       |                                                  |   |        |                             | (56    | ) |   | (1  | ) |   |        |   |  
|Comprehensive income:                                                                  |                                                  |   |         |                             |        |   |   |     |   |   |         |   |  
|Net income                                                                             |                                                  |   | 6,419   |                             |       |   |   |    |   |   |        |   |  
|                                                                                       | Unrealized loss on available for sale securities |   |         | (482                        | )      |  |   |     |  |   |         |  |  
|                                                                                       | Translation adjustment                           |   |         | (12                         | )      |  |   |     |  |   |         |  |  
|                                                                                       |                                                  |   |         |                             |        |   |   |     |   |   |         |   |  
|Comprehensive income                                                                   |                                                  | $ | 5,925   |                             |       |   |   |    |   |   |        |   |  
|                                                                                       |                                                  |   |         |                             |        |   |   |     |   |   |         |   |  
|Balance, November 30, 1999                                                             |                                                  |   |        |                             | 11,477 |   |   | 115 |   |   | 210,839 |   |  
|Issuance of common stock under stock plans                                             |                                                  |   |        |                             | 686    |   |   | 7   |   |   | 4,661   |   |  
|Exercise of warrants for common stock                                                  |                                                  |   |        |                             | 10     |   |   |    |   |   | 28      |   |  
|Issuance of common stock for acquisitions                                              |                                                  |   |        |                             | 92     |   |   | 1   |   |   | 1,614   |   |  
|Digital Origin Inc. share issuance for the two months ended November 30, 1999 (Note 3) |                                                  |   |        |                             |       |   |   |    |   |   | 40      |   |  
|Digital Origin loss for the two months ended November 30, 1999 (Note 3)                |                                                  |   |        |                             |       |   |   |    |   |   |        |   |  
|Comprehensive loss:                                                                    |                                                  |   |         |                             |        |   |   |     |   |   |         |   |  
|Net loss                                                                               |                                                  |   | (10,381 | )                           |       |   |   |    |   |   |        |   |  
|                                                                                       | Unrealized gain on available for sale securities |   |         | 167                         |        |  |   |     |  |   |         |  |  
|                                                                                       | Translation adjustment                           |   |         | (51                         | )      |  |   |     |  |   |         |  |  
|                                                                                       |                                                  |   |         |                             |        |   |   |     |   |   |         |   |  
|Comprehensive loss                                                                     |                                                  | $ | (10,265 | )                           |       |   |   |    |   |   |        |   |  
|                                                                                       |                                                  |   |         |                             |        |   |   |     |   |   |         |   |  
|Balance, November 30, 2000                                                             |                                                  |   |        |                             | 12,265 |   |   | 123 |   |   | 217,182 |   |  
|Issuance of common stock under stock plans                                             |                                                  |   |        |                             | 310    |   |   | 3   |   |   | 501     |   |  
|Purchase of treasury stock, cost                                                       |                                                  |   |        |                             |       |   |   |    |   |   |        |   |  
|Comprehensive loss:                                                                    |                                                  |   |         |                             |        |   |   |     |   |   |         |   |  
|Net loss                                                                               |                                                  |   | (11,456 | )                           |       |   |   |    |   |   |        |   |  
|                                                                                       | Unrealized gain on available for sale securities |   |         | 44                          |        |  |   |     |  |   |         |  |  
|                                                                                       | Translation adjustment                           |   |         | 15                          |        |  |   |     |  |   |         |  |  
|                                                                                       |                                                  |   |         |                             |        |   |   |     |   |   |         |   |  
|Comprehensive loss                                                                     |                                                  | $ | (11,397 | )                           |       |   |   |    |   |   |        |   |  
|                                                                                       |                                                  |   |         |                             |        |   |   |     |   |   |         |   |  
|Balance, November 30, 2001                                                             |                                                  |   |         |                             | 12,575 |   | $ | 126 |   | $ | 217,683 |   | $
|                                                                                       |                                                  |   |         |                             |        |   |   |     |   |   |         |   |  

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

F-6

---



MEDIA 100 INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                                                              |                                                                       | Fiscal Years Ended
November 30, |        
|----------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------- | ------------------------------- | -------
|
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                         |                                                                       |                                 |        
|Net income (loss)                                                                                                             |                                                                       | $                               | (11,456
|Net (income) loss from discontinued operations                                                                                |                                                                       |                                 | (4,680 
|                                                                                                                              |                                                                       |                                 |        
|Income (loss) from continuing operations                                                                                      |                                                                       |                                 | (16,136
|Adjustments to reconcile net income (loss) from continuing operations to net cash (used in) provided by operating activities: |                                                                       |                                 |        
|                                                                                                                              | Depreciation and amortization                                         |                                 |        
|                                                                                                                              | Noncash interest expense                                              |                                 |        
|                                                                                                                              | Acquired in-process research and development                          |                                 |        
|                                                                                                                              | Amortization and write-down of acquisition-related intangible assets  |                                 |        
|                                                                                                                              | Loss (gain) on sale of marketable securities                          |                                 |        
|                                                                                                                              | Changes in assets and liabilities, excluding effects of acquisitions: |                                 |        
|                                                                                                                              | Accounts receivable                                                   |                                 |        
|                                                                                                                              | Inventories                                                           |                                 |        
|                                                                                                                              | Prepaid expenses and other current assets                             |                                 |        
|                                                                                                                              | Accounts payable                                                      |                                 |        
|                                                                                                                              | Accrued expenses                                                      |                                 |        
|                                                                                                                              | Deferred revenue                                                      |                                 |        
|                                                                                                                              |                                                                       |                                 |        
|Net cash (used in) provided by operating activities                                                                           |                                                                       |                                 | (7,704 
|                                                                                                                              |                                                                       |                                 |        
|Net cash provided by (used in) discontinued operations                                                                        |                                                                       |                                 | 8,262  
|                                                                                                                              |                                                                       |                                 |        
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                         |                                                                       |                                 |        
|Acquisition of Wired, Inc., net of cash acquired                                                                              |                                                                       |                                 |       
|Acquisition of 21st Century Media, LLC, net of cash acquired                                                                  |                                                                       |                                 |       
|Acquisition of J2 Digital Media, Inc., net of cash acquired                                                                   |                                                                       |                                 |       
|Acquisition of certain assets of Integrated Computing Engines, Inc.                                                           |                                                                       |                                 |       
|Net purchases of equipment                                                                                                    |                                                                       |                                 | (790   
|Purchases of intangible assets                                                                                                |                                                                       |                                 | (47    
|Decrease (increase) in other assets                                                                                           |                                                                       |                                 | 1,245  
|Net proceeds from sales of marketable securities                                                                              |                                                                       |                                 | 5,423  
|                                                                                                                              |                                                                       |                                 |        
|Net cash provided by investing activities                                                                                     |                                                                       |                                 | 5,831  
|                                                                                                                              |                                                                       |                                 |        
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                         |                                                                       |                                 |        
|Proceeds from issuance of common stock and warrants                                                                           |                                                                       |                                 | 504    
|Payment on note payable                                                                                                       |                                                                       |                                 | (1,492 
|Purchase of treasury stock                                                                                                    |                                                                       |                                 | (78    
|Proceeds from sale of treasury stock                                                                                          |                                                                       |                                 |       
|                                                                                                                              |                                                                       |                                 |        
|Net cash (used in) provided by financing activities                                                                           |                                                                       |                                 | (1,066 
|                                                                                                                              |                                                                       |                                 |        
|EFFECT OF EXCHANGE RATE CHANGES ON CASH                                                                                       |                                                                       |                                 | 59     
|                                                                                                                              |                                                                       |                                 |        
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                                              |                                                                       |                                 | 5,382  
|CASH AND CASH EQUIVALENTS, beginning of period                                                                                |                                                                       |                                 | 11,987 
|                                                                                                                              |                                                                       |                                 |        
|CASH AND CASH EQUIVALENTS, end of period                                                                                      |                                                                       | $                               | 17,369 
|                                                                                                                              |                                                                       |                                 |        

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

F-7

---



SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

|                                                                                                                                        |  | Fiscal Years Ended November 30, |    
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ---
|
|Cash (received) paid for income taxes                                                                                                   |  | $                               | (42
|                                                                                                                                        |  |                                 |    
|OTHER TRANSACTIONS NOT PROVIDING (USING) CASH:                                                                                          |  |                                 |    
|Change in value of available for sale securities                                                                                        |  | $                               | 44 
|                                                                                                                                        |  |                                 |    
|SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:                                                                                |  |                                 |    
|In connection with the acquisition of Wired, Inc., the following noncash transaction occurred:                                          |  |                                 |    
|Fair value of assets acquired                                                                                                           |  | $                               |   
|Cash paid for acquisition and acquisition costs                                                                                         |  |                                 |   
|                                                                                                                                        |  |                                 |    
|Note payable and liabilities assumed                                                                                                    |  | $                               |   
|                                                                                                                                        |  |                                 |    
|In connection with the acquisition of 21st Century Media, LLC, the following noncash transaction occurred:                              |  |                                 |    
|Fair value of assets acquired                                                                                                           |  | $                               |   
|Cash paid for acquisition and acquisition costs                                                                                         |  |                                 |   
|                                                                                                                                        |  |                                 |    
|Common stock issued and liabilities assumed                                                                                             |  | $                               |   
|                                                                                                                                        |  |                                 |    
|In connection with the acquisition of J2 Digital Media, Inc., the following noncash transaction occurred:                               |  |                                 |    
|Fair value of assets acquired                                                                                                           |  | $                               |   
|Cash paid for acquisition and acquisition costs                                                                                         |  |                                 |   
|                                                                                                                                        |  |                                 |    
|Liabilities assumed                                                                                                                     |  | $                               |   
|                                                                                                                                        |  |                                 |    
|In connection with the acquisition of certain assets of Integrated Computing Engines, Inc., the following noncash transaction occurred: |  |                                 |    
|Fair value of assets acquired                                                                                                           |  | $                               |   
|Cash paid for acquisition and acquisition costs                                                                                         |  |                                 |   
|                                                                                                                                        |  |                                 |    
|Common stock issued                                                                                                                     |  | $                               |   
|                                                                                                                                        |  |                                 |    

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

F-8

---



MEDIA 100 INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        NOVEMBER 30, 2001

1.    OPERATIONS

Media 100 Inc. and subsidiaries (the Company) designs and sells advanced media systems for content design. Our products are personal computer-based
workstations configured with proprietary software and hardware that we engineer and manufacture. In some cases, we sell our products as "turnkey" systems, meaning we configure and ship the system to
an end user, or reseller, with a host personal computer, our software and hardware, and disk storage; in other cases, we deliver only our software and hardware ("unbundled"), typically to an
independent value-added reseller that configures the turnkey system themselves on behalf of an end user.

On
August 29, 2001, the Company signed an agreement to sell its streaming media software product line to Autodesk, Inc. for $16.0 million in cash of which
$2.0 million was deposited into an escrow account for a period of one year in case indemnification issues arise. As a result of this transaction, the net assets of the discontinued streaming
media software product line consisting of accounts receivable, inventory, equipment, intangible assets, and an income tax payable have been separately classified as net assets of discontinued
operations in the accompanying balance sheet at November 30, 2000. The net income (loss) from these operations is included in the accompanying statements of operations under "discontinued
operations" (see Note 13 of the Consolidated Financial Statements). The disposal date was October 5, 2001, the date the sale was completed. The Company's streaming media software product
line consisted of products acquired in the Terran acquisition and the merger with Digital Origin (see Note 3 of the Consolidated Financial Statements).

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries after elimination of significant
intercompany transactions and balances. These consolidated financial statements reflect the use of the following significant accounting policies, as described below and elsewhere in the notes to the
consolidated financial statements. These consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States.

The
preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

(a)    Cash, Cash Equivalents and Available for Sale Securities

Cash equivalents are carried at cost, which approximates fair market value, and have original maturities of less than ninety days. Cash equivalents include money
market accounts and repurchase agreements with overnight maturities. Approximately $100,000 of the cash and cash equivalents was restricted under various letters of credit at November 30, 2001.

The
Company accounts for securities in accordance with Statement of Financial Accounting Standards (SFAS) No. 115,Accounting for Certain Investments in
Debt and Equity Securities. Under this standard, the Company is required to classify all investments in debt and equity securities into one or more of the following three
categories: held-to-maturity, available-for-sale or trading. Available-for-sale

F-9

---

securities are recorded at fair market value with unrealized gains and losses excluded from earnings and included as a component of stockholders' equity. All of the Company's securities are
classified as available for sale.

Securities
held as of November 30, 2001 and 2000 consist of the following (in thousands):

Maturity

2001

2000Investments available for sale:U.S. Treasury Notes

less than 1 year

$


$
509U.S. Treasury Notes

1  5 years





2,030Total U.S. Treasury Notes







2,539U.S. Agency Bonds

less than 1 year





507Money Market Instruments

less than 1 year





1,044Corporate Obligations

less than 1 year





1,116Corporate Obligations

1  5 years


241


1,512Total Corporate Obligations




241


2,628Total Investments available for sale




241


6,718Less: Cash equivalents







(1,044
)Total marketable securities



$
241

$
5,674


Marketable
securities had a cost of $241 and $5,718 at November 30, 2001 and 2000, respectively, and a fair market value of $241 and $5,674, respectively. To adjust the carrying
amount of the November 30, 2001 and 2000 marketable securities portfolio to market value, unrealized losses have been reflected as a component of accumulated other comprehensive income (loss)
in the statement of stockholders' equity pursuant to the provisions of SFAS No. 115.

(b)    Accumulated Other Comprehensive Income (Loss)

The Company records items of comprehensive income (loss) in accordance with SFAS No. 130,Reporting Comprehensive
Income, and presents such information in the statement of stockholders' equity. The components of accumulated other comprehensive income (loss) are as follows (in thousands):

Cumulative
Translation
Adjustment
(Note 2(h))

Unrealized
Gain (Loss) on
Available for
Sale Securities
(Note 2(a))

Accumulated
Other
Comprehensive
Income (Loss)November 30, 1998

$
17

$
271

$
288Current period change


(12
)

(482
)

(494
)November 30, 1999


5


(211
)

(206
)Current period change


(51
)

167


116November 30, 2000


(46
)

(44
)

(90
)Current period change


15


44


59November 30, 2001

$
(31
)
$


$
(31
)


F-10

---

(c)    Inventories

Inventories, net at November 30, 2001 and 2000 are stated at the lower of first-in, first-out (FIFO) cost or market and consist of
the following (in thousands):

2001

2000Raw materials

$
811

$
2,597Work-in-process


161


662Finished goods


248


530$
1,220

$
3,789


Work-in-process
and finished goods inventories include material, labor and manufacturing overhead. Management performs periodic reviews of inventory and disposes of items not required by
their manufacturing plan.

(d)    Depreciation and Amortization

The Company provides for depreciation and amortization, using the straight-line method by charges to operating expenses in amounts that allocate the cost of the
property and equipment over the following estimated useful lives:

Description

Useful LivesMachinery and equipment

3 to 5 yearsPurchased software

3 to 5 yearsFurniture and fixtures

3 to 7 yearsVehicles

3 yearsLeasehold improvements

Estimated Life of Lease


(e)    Property and equipment, net

Property and equipment, net at November 30, 2001 and 2000 is stated at cost, less accumulated depreciation and amortization, and consists of the following
(in thousands):

2001

2000Machinery and equipment

$
4,169

$
12,894Purchased software


1,666


6,037Furniture and fixtures


908


1,603Vehicles





9Leasehold improvements


1,728


1,559$
8,471

$
22,102Accumulated depreciation and amortization


(4,628
)

(16,486
)$
3,843

$
5,616


F-11

---

(f)    Intangible Assets

Intangible assets, net at November 30, 2001 and 2000 consist of the following (in thousands):

2001

2000Patents and trademarks

$
454

$
407Developed technology


1,900


1,900Goodwill


2,757


3,992$
5,111

$
6,299Accumulated amortization


(3,231
)

(1,391
)$
1,880

$
4,908


The
Company amortizes goodwill and developed acquired technology related to its acquisitions using a straight-line method over periods ranging from 2 to 3 years, their
estimated useful lives. Patents and trademarks are being amortized over 3 years, their estimated useful life.

During
the fiscal year ended November 30, 2001, the Company recorded a write-down of $880,000 related to the acquisitions of 21st Century LLC and J2
Digital Media, Inc. These two companies were combined to form Streamriver, which was launched in June 2000. During the first quarter of fiscal year 2001, the goodwill from these two
acquisitions was determined to be impaired due to continued operating losses in Streamriver and the uncertainty surrounding the Company's ability to recover the goodwill through future cash flows. The
Company shutdown the Streamriver division in the second quarter of fiscal 2001 and wrote off the remaining assets (see Note 2 (l) and Note 3 of the Consolidated Financial
Statements).

(g)    Long-Lived Assets

The Company follows the provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets To Be Disposed Of, and Accounting Principles Board (APB) Opinion No. 17,Intangible Assets.
SFAS No. 121 and APB Opinion No. 17 require that long-lived and intangible assets be reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. Any write-downs are to be treated as permanent reductions in the carrying amount of the assets and are determined based on the fair value of the
assets. The Company had previously invested in Beatnik, an early stage company which was developing audio software solutions for mobile devices. During the fourth quarter of 2001, the Company wrote
off the investment of $1.0 million in Beatnik after management made a determination that this asset was no longer realizable. This determination was made due to a weakening market as well as
weakening prospects for a liquidity event. The Company believes that the carrying values of its remaining long-lived and intangible assets are realizable as of November 30, 2001.

F-12

---

MEDIA 100 INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOVEMBER 30, 2001

(h)    Foreign Currency

The financial statements of the Company's subsidiaries are translated from their functional currency into U.S. dollars using the current rate method in accordance
with SFAS No. 52,Foreign Currency Translation. Accordingly, assets and liabilities of the Company's foreign subsidiaries are translated at the
rates of exchange in effect at year-end. Revenues and expenses are translated using exchange rates in effect during the year. Gains and losses from foreign currency translation are
credited or charged to "Translation adjustment" included as a component of accumulated other comprehensive income in the statements of stockholders' equity. In connection with the implementation of
the fourth quarter restructuring plan (Note 2 (l)), the Company wrote off the remaining cumulative translation adjustment of $35,000 related to its subsidiary in Italy in accordance with
Emerging Issues Task Force (EITF) Issue No. 01-05,Application of FASB Statement No. 52 to an Investment Being Evaluated for Impairment That Will Be
Disposed Of. The Company realized net foreign currency transaction losses of $69,000, $649,000 and $77,000 in 2001, 2000 and 1999, respectively. Such amounts are included in
other expenses, net caption in the accompanying consolidated statements of operations.

(i)    Revenue Recognition

The Company recognizes revenue in accordance with Statement of Position 97-2, Software Revenue
Recognition(SOP 97-2), as amended by SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition, with respect
to Certain Transactions (SOP 98-9). Net sales are recognized following establishment of persuasive evidence of an arrangement, provided that the license fee is
fixed or determinable, delivery of product has occurred via physical shipment or electronically, a determination has been made by management that collection is probable and the Company has no
remaining obligations. Revenues under multiple element arrangements, which typically include products and
maintenance sold together, are allocated to each element using the residual method in accordance with SOP 98-9. The Company provides for estimated returns at the time of shipment. The
Company recognizes maintenance revenue from the sale of post-contract support services ratably over the life of the contract.

(j)    Net Income (Loss) Per Common Share

The Company computes earnings per share pursuant to SFAS No. 128,Earnings Per Share. In accordance with
SFAS No. 128, basic net income (loss) per share is computed using the weighted-average number of common shares outstanding. Diluted income per share is computed using the weighted-average
number of common shares outstanding and potential common shares from the assumed exercise of stock options and warrants outstanding during the period, if any, using the treasury stock method.

F-13

---

The
following is a reconciliation of the shares used in the computation of basic and diluted earnings per share (in thousands):

Fiscal Years Ended
November 30,2001

2000

1999Basic weighted average shares of common stock outstanding

12,330

11,998

11,307Effect of potential common sharesstock options and warrants outstanding (unless antidilutive)





573Diluted weighted average shares outstanding

12,330

11,998

11,880


The
Company excludes potentially dilutive securities from its diluted net income (loss) per share computation when either the exercise price of the securities exceeds the fair value of
the Company's common stock or when the Company reports a net loss and the effect of including such securities would be antidilutive. During fiscal years 2001, 2000 and 1999, options to purchase
approximately 1,717,000, 1,317,000 and 461,000 weighted average shares of common stock, respectively, were not included in the computation of diluted net income (loss) per share as a result of their
antidilutive effect.

(k)    Capitalized Software Development Costs

The Company capitalizes certain computer software development costs. Capitalization of costs commences upon establishing technological feasibility. There were no
capitalized software development costs at November 30, 2001. Capitalized costs, net of accumulated amortization, were approximately $29,000 as of November 30, 2000 and are included in
other assets. These costs are amortized on a straight-line basis over two years, which approximates the economic life of the product. Amortization expense, included in cost of sales in the
accompanying consolidated statements of operations, was approximately $29,000 for the year ended November 30, 2001 and $120,000 for the year ended November 30, 2000.

(l)    Restructuring Expense

In the second quarter of fiscal 2001, the Company implemented a restructuring plan to reorganize the organization and the shutdown of Streamriver. The
restructuring charge of $568,000 related to the elimination of approximately 17 employees across the following functions: research and development (5), selling and marketing (4), and Streamriver
(8) and the write-off of certain assets associated with Streamriver. The total cash impact of the restructuring was approximately $240,000, all of which was paid in 2001.

In
the third quarter of fiscal 2001, the Company implemented an additional restructuring plan to better align its operating costs with its anticipated future revenue stream. The
restructuring charge of $310,000 related to the elimination of approximately 42 employees across all functions: operations (14), research and development (4), selling and marketing (16), and general
and administrative (8). The total cash impact of the restructuring was approximately $310,000, all of which was paid in 2001.

In
the fourth quarter of fiscal 2001, the Company implemented a restructuring plan to better align its operating costs with its anticipated future revenue stream. The restructuring
charge of $662,000

F-14

---

related to the elimination of approximately 11 employees across the following functions: operations (2), selling and marketing (7), general and administrative (2). The charge also includes estimated
lease losses, net of sublease income, associated with the Streamriver division of approximately $230,000 and
professional fees relating to the restructuring. At November 30, 2001, $527,000 of the accrued restructuring charge remained, of which approximately $218,000 is severance-related costs that
will be paid in fiscal 2002, $230,000 of lease obligations to be paid over the next four years and $79,000 of other costs associated with the restructuring. The total cash impact of the restructuring
was approximately $662,000.

In
the fourth quarter of fiscal 2000, the Company implemented a restructuring plan to better align its organization with its corporate strategy and to reflect the consolidation of
several companies acquired in the past fiscal year. The restructuring charge of $236,000 related to the elimination of 3 employees across the following functions: selling and marketing (2) and
general and administrative (1). The balance of accrued restructuring at November 30, 2000 of $528,000 consisted of $236,000 for continuing operations and $292,000 for discontinued operations.
The severance related costs included in the restructuring were $236,000 for continuing operations and $237,000 for discontinued operations. The total cash impact of the restructuring was approximately
$528,000, all of which was paid by the end of the first quarter in fiscal 2001.

In
the third quarter of fiscal 1999, the Company implemented a restructuring plan to better align its organization with its corporate strategy. Substantially all of the restructuring
charge of $424,000 relates to the elimination of approximately 12 employees across the following functions: research and development (4), selling and marketing (7) and general and
administration (1). The entire charge of $424,000 had an impact on cash. Of this amount, $192,000 was paid in fiscal year 1999; the balance of $232,000 was accrued for at November 30, 1999, and
was paid in the first quarter of fiscal year 2000.

(m)    Financial Instruments and Concentration of Credit Risk and Significant Customers

SFAS No. 107,Disclosures about Fair Value of Financial Instruments, requires disclosure of the fair value
of financial instruments. The Company has estimated the fair value of instruments using available market information and appropriate valuation methodologies. The carrying value of cash, cash
equivalents, marketable securities, accounts receivable, and accounts payable approximate fair market value due to the short-term nature of these financial instruments. Securities
available for sale are recorded at fair value. The Company maintains its cash, cash equivalents and marketable securities with established financial institutions. The Company does not believe it has
accounts receivable collection risk in excess of existing reserves and no customer balance accounted for more than 10% of total accounts receivable at either November 30, 2001 or 2000. No
customer accounted for more than 10% of the company's net sales for the fiscal years 2001, 2000 or 1999.

(n)    Single or Limited Source Suppliers

The Company currently is dependent on single or limited source suppliers for several key components used in its products that have no ready substitutes, including
various audio and video signal processing integrated circuits. These components are purchased through purchase orders from time to time. The Company generally does not carry significant inventories of
these single or limited source components
and has no guaranteed supply arrangements for them. Although there are a limited number of manufacturers of the key components, management believes that the other suppliers could provide similar
components on comparable terms. An extended interruption in its source of supply,

F-15

---

however, could cause a delay in manufacturing and a possible loss of sales, which would affect operating results adversely.

(o)    Reclassifications

Certain amounts in the prior years' financial statements have been reclassified to conform to the current year's presentation.

(p)    New Accounting Standards

In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, "Business Combinations." SFAS No. 141 supercedes
Accounting Principles Board (APB) No. 16 "Business Combinations" and FASB Statement No. 38 "Accounting for Preacquisition Contingencies of Purchased Enterprises." SFAS No. 141
requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. Accordingly, the Company will be adopting the provisions of this statement upon
any business combination entered into after June 30, 2001.

In
July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets." This statement applies to goodwill and intangible assets acquired after June 30,
2001, as well as goodwill and intangible assets previously acquired. Under this statement goodwill as well as certain other intangible assets, determined to have an indefinite life, will no longer be
amortized. These assets will be reviewed for impairment on a periodic basis. This statement is effective for the Company in the first quarter of fiscal year 2003. Management is currently evaluating
the impact that this statement will have on the Company's financial statements.

In
June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." This statement addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement applies to all entities. It applies to legal obligations associated
with the retirement of long-lived assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived asset, except for certain
obligation of lessees. This statement amends FASB Statement No. 19 and is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company does not
believe that the adoption of this standard will have a material impact on the Company's financial statements.

In
August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which supercedes SFAS 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS 144 further refines the requirements of SFAS No. 121 that companies
(1) recognize an impairment loss only if the carrying amount of a long-lived asset is not recoverable based on its undiscounted future cash flows and (2) measure an
impairment loss as the difference between the carrying amount and fair value of the asset. In addition, SFAS No. 144 provides guidance on accounting and disclosure issues surrounding
long-lived assets to be disposed of by sale. The Company will be required to adopt SFAS 144 no later than the fiscal year beginning on December 1, 2002. The Company does not
expect the adoption of SFAS 144 to have a material effect on its financial condition or results of operations.

EITF
Issue No. 01-09, "Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor's
Products,"issued during November 2001, codifies previously issued EITF Issue No. 00-25, "Vendor Income Statement
Characterization of Consideration Paid to a Reseller of the Vendor's Products."

F-16

---

EITF Issue No. 00-25 addresses various aspects of the accounting for consideration given by a vendor to a customer or a reseller of the vendor's products. Consideration includes
sales incentives such as discounts, coupons, rebates, free products or services, slotting fees, coop advertising and buydowns. Pursuant to EITF 00-25, such consideration is presumed to be
a reduction of revenue unless certain criteria are met. The Issue should be applied no later than in annual or interim financial statements for periods beginning after December 15, 2001 and
requires retroactive restatement. The Company currently records coop advertising expenses and other sales incentives to resellers within sales and marketing expense in the statement of operations. The
Company will adopt EITF Issue No. 01-09 in its interim period ended February 28, 2002. Management is currently evaluating the impact that this statement will have on the
Company's financial statements.

3.    ACQUISITIONS

Wired, Inc.

In December 1999, the Company acquired Wired, Inc. (Wired). In connection with the acquisition, the Company paid $3,000,000 in cash for all
outstanding shares of Wired common stock. The first payment in the amount of $1,454,000 was paid upon completion of the acquisition and the remaining $1,487,000 was paid in December 2000. The
net present value of this payment has been recorded as a note payable at November 30, 2000. Pursuant to an earn-out provision, the purchase price could increase depending on Wired's
net sales and operating income over the next two years. Any contingent payments based on meeting the earn-out conditions will be considered additional goodwill. The Company has treated the
acquisition as a purchase for accounting purposes; accordingly, the Company has recorded the results
of Wired's operations since the acquisition date. The Company has not included pro forma results, as they are deemed to be immaterial. The aggregate price consisted of the following (in thousands):

Description

AmountCash

$
1,454Liabilities assumed


298Note payable


1,395Acquisition costs


33Total purchase price

$
3,180


The
purchase price has been allocated to the acquired assets as follows (in thousands):

Current assets

$
239Equipment and other assets


38Developed technology


900In-process research and development


470Goodwill


1,533$
3,180


F-17

---

MEDIA 100 INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOVEMBER 30, 2001

Amounts allocated to tangible and intangible assets, including acquired in-process research and development, were based on the results of an independent appraisal. The amount
allocated to developed technology is being amortized on a straight-line basis over an expected useful life of three years. In connection with the acquisition, the Company allocated
$470,000 of the purchase price to in-process research and development projects. These allocations represented the estimated fair value based on risk-adjusted cash flows related
to the incomplete research and development projects. At the date of acquisition, the development of these projects had not yet reached technological feasibility and the research and development in
progress had no alternative future uses. Accordingly, these costs were expensed as of the acquisition date.

The
Company allocated values to the in-process research and development (R&D) based on an in-depth assessment of the R&D projects. The value assigned to these
assets was limited to significant research projects for which technological feasibility had not been established, including development, engineering and testing activities associated with the
introduction of the acquired next-generation technologies.

The
value assigned to purchased in-process technology was determined by estimating the costs to develop the purchased in-process technology into commercially
viable products, estimating the resulting net cash flows from the projects and discounting the net cash flows to their present value. The revenue projection used to value the in-process
research and development was based on estimates of relevant market sizes and growth factors, expected trends in technology and the nature and expected timing of new product introductions by the
Company and its competitors.

On
May 9, 2001, a lawsuit was filed against the Company by the former shareholders of Wired, Inc. (see Note 7 (b) (vi) Commitment and Contingencies).

21st Century Media, LLC.

In April 2000, the Company acquired 21st Century Media, LLC (21st Century). In connection with the acquisition, the Company
paid $500,000 in cash and issued 30,000 shares of common stock for all outstanding shares of 21st Century common stock. Pursuant to an earn-out provision, the purchase price
could increase depending on 21st Century's net sales and operating income over the next two years. Any contingent payments based on meeting the earn-out conditions will be
considered additional goodwill. The Company has treated the acquisition as a purchase for accounting purposes; accordingly, the Company has recorded the results of operations of 21st
Century's operations since the acquisition date. The Company has not included pro forma results, as they are deemed to be immaterial.

The
aggregate purchase price consisted of the following (in thousands):

Description

AmountCash

$
449Liabilities assumed


11Common stock


638Acquisition costs


32Total purchase price

$
1,130


F-18

---

The
purchase price has been allocated to the acquired assets as follows (in thousands):

Current assets

$
35Equipment and other assets


100Goodwill


995$
1,130


During
the fiscal year ended November 30, 2001, the Company recorded a write-down of $719,000 related to the acquisition of 21st Century. This company,
along with J2 Digital Media, Inc., was combined to form Streamriver, which was launched in June 2000. During the first quarter of fiscal year 2001, the goodwill from this acquisition was
determined to be impaired due to continued operating losses in Streamriver and the uncertainty surrounding the Company's ability to recover the goodwill through future cash flows. The Company shutdown
the Streamriver division in the second quarter of fiscal 2001 and wrote off the remaining assets (see Note 2 (f) and (l) of the Consolidated Financial Statements).

J2 Digital Media, Inc.

In June 2000, the Company acquired substantially all of the assets of J2 Digital Media, Inc. (J2 Digital Media), a New York-based
encoding, hosting and streaming media services provider for $152,000 in cash. The Company has treated the acquisition as a purchase for accounting purposes; accordingly, the Company has recorded the
results of operations of J2's operations since the acquisition date. The Company has not included pro forma results, as they are deemed to be immaterial.

The
aggregate purchase price consisted of the following (in thousands):

Description

AmountCash

$
150Liabilities assumed


128Acquisition costs


2Total purchase price

$
280


The
purchase price has been allocated to the acquired assets as follows (in thousands):

Current assets

$
44Equipment and other assets


22Goodwill


214$
280


During
the fiscal year ended November 30, 2001, the Company recorded a write-down of $161,000 related to the acquisition of J2 Digital Media. This company, along with
21st Century Media, was combined to form Streamriver, which was launched in June 2000. During the first quarter of fiscal year 2001, the goodwill from this acquisition was
determined to be impaired due to continued operating losses in Streamriver and the uncertainty surrounding the Company's ability to recover the goodwill through future cash flows. The Company shutdown
the Streamriver division in the second quarter of

F-19

---

fiscal 2001 and wrote off the remaining assets (see Note 2 (f) and (k) of the Consolidated Financial Statements).

Digital Origin

On May 9, 2000, the Company completed its merger with Digital Origin, Inc. (Digital Origin). Under the terms of the agreement, Digital Origin's
shareholders and option holders received 0.5347 equivalent shares, or approximately 3.7 million Media 100 common shares, to effect the business combination. The transaction has been accounted
for as a pooling of interests. As a result, all periods presented have been restated to reflect the combined operations of the two companies. As discussed in Note 1, on October 5, 2001,
the Company sold the streaming media software product line including the operations of Digital Origin. Accordingly, the operating results of Digital Origin for all periods presented are included in
discontinued operations. The 1999 statements of operations and cash flows presented for the combined companies are based on the companies' respective fiscal years, which differ by two months. In
fiscal 2000, the balance sheet is as of November 30, 2000 for the combined companies and the statements of operations and cash flows represent the year ended November 30, 2000 for both
companies. The results of operations for Digital Origin for the two months ended November 30, 1999 have been excluded from the statement of operations and have been recorded directly to
accumulated deficit as permitted by APB No.16. Net cash flows for Digital Origin for the two months ended November 30, 1999 have been included in the statement of cash flows in the net cash
provided by (used in) discontinued operations line item. Also, Digital Origin received proceeds of $40,000 from the exercise of stock options in the two months ended November 30, 1999, which
are presented as a separate line item in the accompanying statement of stockholders' equity.

Results
for Digital Origin for the two-month period ended November 30, 1999, which have been recorded directly to accumulated deficit, were as follows (in thousands):

Two Months Ended
November 30, 1999Sales

$
1,953Cost of sales


719Gross profit


1,234Operating expenses


1,695Operating loss


(461
)Other expense, net


(41
)Net loss

$
(502
)


As
part of the transaction, the Company incurred direct, merger-related costs of approximately $2.0 million, consisting primarily of investment banking fees, legal and accounting
fees. All such costs have been expensed in the quarter ended May 31, 2000, upon consummation of the Digital Origin merger. These expenses are included as part of the loss on discontinued
operations for the year ended November 30, 2001.

F-20

---

Separate
and combined results of Media 100 and Digital Origin during the periods preceding the merger were as follows (in thousands):

Media 100

Digital
Origin

Eliminations

Combined(Fiscal Year November 30, 2000)(a)Net sales

$
66,055

$
7,373

$
(562
)
$
72,866Net income (loss)


(8,945
)

(1,436
)




(10,381
)(Fiscal Year November 30, 1999)Net sales

$
51,479

$
13,353




$
64,832Net income


570


5,849





6,419


---

On
August 29, 2001, the Company signed an agreement to sell its streaming media software product line to Autodesk, Inc. for $16.0 million in cash. As a result of
this transaction, the net assets consisting primarily of accounts receivable, inventory, equipment, intangible assets, and income taxes payable of the streaming media software product line to be
discontinued have been separately classified in the accompanying balance sheet at November 30, 2000. The net income (loss) from these operations is included in the accompanying statements of
operations under "discontinued operations" (see Note 13 of the Consolidated Financial Statements). The disposal date was October 5, 2001, the date the sale was completed. The Company's
streaming media software product line consisted of products acquired in the Terran acquisition and the merger with Digital Origin.

Integrated Computing Engines

In August 2000, the Company acquired certain strategic technology assets and intellectual properties from Integrated Computing Engines, Inc. (ICE).
ICE was a leading provider of acceleration solutions for streaming media from the desktop. In connection with the acquisition, the Company paid approximately $1,797,000 in cash and issued 61,577
shares of the Company's common stock for certain assets of ICE. The Company has treated the acquisition as a purchase for accounting purposes; accordingly, the Company has recorded the results of
operations of ICE's operations since the acquisition date. The Company has not included pro forma results, as they are deemed to be immaterial.

The
aggregate purchase price consisted of the following (in thousands):

Description

AmountCash

$
1,735Common stock


978Acquisition costs


62Total purchase price

$
2,775


F-21

---

MEDIA 100 INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOVEMBER 30, 2001

The purchase price has been allocated to the acquired assets as follows (in thousands):

Current assets

$
503Goodwill and developed technology


2,272$
2,775


Amounts
allocated to tangible and intangible assets were based on results of an independent appraisal. The amount allocated to developed technology is being amortized on a
straight-line basis over an expected useful life of two years.

Terran Interactive, Inc.

On June 28, 1999, the Company acquired Terran Interactive, Inc. (Terran) of Los Gatos, CA, a leading supplier of software tools for high quality
Internet and DVD video. In connection with the acquisition,
the Company paid $1,850,000 in cash for all outstanding shares of Terran's common stock. The acquisition was accounted for under the purchase method of accounting. Accordingly, the results of Terran's
operations and the fair market value of the acquired assets and assumed liabilities have been included in the financial statements of the Company as of the acquisition date. During fiscal 2000, the
Company paid an additional $3,532,000 resulting from Terran exceeding certain financial thresholds in the purchase agreement. These payments have been considered additional goodwill and are being
amortized over the appropriate remaining useful life.

The
aggregate purchase price, including the earn-out payments, consisted of the following (in thousands):

Description

AmountCash

$
5,382Liabilities assumed


668Acquisition costs


40Total purchase price

$
6,090


The
purchase price has been allocated to the acquired assets and assumed liabilities as follows (in thousands):

Current assets

$
278Equipment and other assets


189Developed technology


1,560In-process research and development


430Goodwill


3,633$
6,090


Amounts
allocated to tangible and intangible assets, including acquired in-process research and development, were based on results of an independent appraisal. The amount
allocated to developed technology is being amortized on a straight-line basis over an expected useful life of three years. In connection with the acquisition, the Company allocated
$430,000 of the purchase price to in-process

F-22

---

research and development projects which is included in the income from discontinued operations in the accompanying statement of operations for the year ended November 30, 1999. This allocation
represented the estimated fair value based on risk-adjusted cash flows related to the incomplete research and development projects. At the date of acquisition, the development of these
projects had not yet reached technological feasibility and the research and development in progress had no alternative future uses. Accordingly, these costs were expensed as of the acquisition date.

The
Company allocated values to the in-process research and development based on an in-depth assessment of the R&D projects. The values assigned to these assets
were limited to significant research projects for which technological feasibility had not been established, including development, engineering and testing activities associated with the introduction
of the acquired next-generation technologies.

The
value assigned to purchased in-process technology was determined by estimating the costs to develop the purchased in-process technology into commercially
viable products, estimating the resulting net cash flows from the projects and discounting the net cash flows to their present value. The revenue projection used to value the in-process
research and development was based on estimates of relevant market sizes and growth factors, expected trends in technology and the nature and expected timing of new product introductions by the
Company and its competitors.

On
August 29, 2001, the Company signed an agreement to sell its streaming media software product line to Autodesk, Inc. for $16.0 million in cash. As a result of
this transaction, the net assets consisting
primarily of accounts receivable, inventory, equipment, intangible assets, and income taxes payable of the streaming media software product line to be discontinued have been separately classified in
the accompanying balance sheet at November 30, 2000. The net income (loss) from these operations is included in the accompanying statements of operations under "discontinued operations" (see
Note 13 of the Consolidated Financial Statements). The disposal date was October 5, 2001, the date the sale was completed. The Company's streaming media software product line consisted
of products acquired in the Terran acquisition and the merger with Digital Origin.

4.    STOCKHOLDERS' EQUITY

(a)    Stock option plans

In 1992, the Company adopted the 1992 Key Employee Incentive Plan (the 1992 Plan). The number of shares of common stock reserved for issuance under the 1992 Plan
is 4,200,000. Options granted pursuant to the 1992 Plan may, at the discretion of the Board, be incentive stock options as defined by the Internal Revenue Code. Subject to the provisions of the 1992
Plan, options granted are at a price as specified by the Board. The Board has, to date, issued options under the 1992 Plan at not less than 100% of fair market value. The options become exercisable at
a rate of 25% per year beginning one year from the date of grant unless otherwise specified by the Board. The Board will determine when the options will expire, but in no event will the option period
exceed ten years. No options may be granted under the 1992 Plan on or after February 28, 2002.

In
October 2000, the Board of Directors approved a non-qualified employee stock plan for the issuance of 500,000 shares of common stock.

F-23

---

Information
concerning stock options for each of the three years ended November 30, 2001 follows:

|                                         |                  | Number of
Options |            | Option
Price Ranges |             | Weighted Average
Price per Share
|---------------------------------------- | ---------------- | ----------------- | ---------- | ------------------- | ----------- | --------------------------------
|Outstanding at November 30, 1998         |                  | 1,840,861         |            | $2.68203.39        |             | $                               
|                                         | Granted          |                   | 930,403    |                     | 1.5816.25  |                                 
|                                         | Exercised        |                   | (169,752   | )                   | 1.588.77   |                                 
|                                         | Expired/canceled |                   | (256,111   | )                   | 1.58182.34 |                                 
|                                         |                  |                   |            |                     |             |                                 
|Outstanding at November 30, 1999         |                  | 2,345,401         |            | $1.58203.39        |             | $                               
|                                         | Granted          |                   | 2,818,374  |                     | 8.1936.24  |                                 
|                                         | Exercised        |                   | (600,982   | )                   | 1.5823.26  |                                 
|                                         | Expired/canceled |                   | (677,802   | )                   | 1.58203.39 |                                 
|                                         |                  |                   |            |                     |             |                                 
|Outstanding at November 30, 2000         |                  | 3,884,991         |            | $1.5836.00         |             | $                               
|                                         | Granted          |                   | 3,130,396  |                     | 0.8520.44  |                                 
|                                         | Exercised        |                   | (3,300     | )                   | 1.454.25   |                                 
|                                         | Expired/canceled |                   | (3,901,595 | )                   | 1.0736.00  |                                 
|                                         |                  |                   |            |                     |             |                                 
|Outstanding at November 30, 2001         |                  | 3,110,492         |            | $0.8526.77         |             | $                               
|                                         |                  |                   |            |                     |             |                                 
|Exercisable at November 30, 2001         |                  | 1,566,841         |            | $0.8526.77         |             | $                               
|                                         |                  |                   |            |                     |             |                                 
|Exercisable at November 30, 2000         |                  | 951,458           |            | $1.5836.00         |             | $                               
|                                         |                  |                   |            |                     |             |                                 
|Exercisable at November 30, 1999         |                  | 874,071           |            | $1.58203.39        |             | $                               
|                                         |                  |                   |            |                     |             |                                 
|Available for grant at November 30, 2001 |                  | 1,208,406         |            |                     |             |                                 
|                                         |                  |                   |            |                     |             |                                 

The
weighted average fair market value of the options as of the date of grant for the periods ended November 30, 2001, 2000 and 1999 is $1.79, $15.83 and $5.76, respectively.

The
Company also issues shares of common stock to employees pursuant to the terms of the 1986 Employee Stock Purchase Plan (the Plan). The Company has reserved 1,500,000 shares of common
stock for issuance under the Plan, as amended. Effective July 1, 1995, employees who have worked for the Company for at least one month are eligible to participate in the Plan. The Plan allows
participants to purchase common stock of the Company at 85% of the fair market value as defined. Under the Plan, the Company issued 306,957, 71,727 and 112,064 shares in fiscal years 2001, 2000 and
1999, respectively. At November 30, 2001, there were 415,510 shares available for issuance under the Plan.

The
Company has issued three outstanding warrants to purchase its common stock. Two, in denominations of 32,082 and 2,674, were issued in 1996 in connection with the Company's
debt-for-equity exchange with various creditors at an exercise price of $18.70 per share and expired in September and October 2000, respectively. The third warrant was
issued in November 1998 in connection with the Company's acquisition of certain technology and allows for a purchase up to 26,735 shares of the Company's common stock at an exercise price of
$2.81 per share. The warrant is fully exercisable and non-forfeitable and expires on November 23, 2002.

In
October 1995, the FASB issued SFAS No. 123,Accounting for Stock-Based Compensation, which requires the measurement of
the fair market value of stock options or warrants to be included in the statement of operations or disclosed in the notes to the financial statements. As permitted by SFAS

F-24

---

No. 123, the Company will continue to account for stock-based compensation for employees under APB No. 25Accounting for Stock Based
Compensationand has elected the disclosure-only alternative under SFAS No. 123 for options granted using the Black-Scholes option pricing model prescribed
by SFAS No. 123.

The
weighted average assumptions are as follows:

Fiscal Years Ended November 30,2001

2000

1999Risk-free interest rate

3.91%5.17%

5.7%6.7%

4.6%6.0%Expected dividend yield





Expected lives

6 years

46 years

46 yearsExpected volatility

118.8%

156.3%

152.0%154.6%


The
table below presents pro forma net income (loss) and income (loss) per share had compensation cost for the Company's stock-based employee compensation plans been determined using the
provisions of SFAS No. 123 (in thousands, except per share amounts):

Fiscal Years Ended November 30,2001

2000

1999Net income (loss):As reported

$
(11,456
)
$
(10,381
)
$
6,419Pro forma


(6,074
)

(20,528
)

3,952Net income (loss) per share:Basic:As reported

$
(0.93
)
$
(0.87
)
$
0.57Pro forma


(0.49
)

(1.71
)

0.35Diluted:As reported

$
(0.93
)
$
(0.87
)
$
0.54Pro forma


(0.49
)

(1.71
)

0.33


The
following table summarizes information about options outstanding at November 30, 2001:

Options Outstanding

Options ExercisableRange of
Exercise Price

Number
Outstanding

Weighted Average
Remaining
Contractual Life

Weighted Average
Exercise Price
per Share

Number
Outstanding

Weighted Average
Exercise Price
per Share$0.85$1.75

2,001,319

5.66

$
1.42

741,031

$
1.462.064.25

353,593

2.82


3.50

253,031


3.854.9110.52

554,558

4.18


6.31

433,849


2.63$12.62$26.77

201,022

3.49


18.97

138,930


18.443,110,492



$
3.60

1,566,841

$
4.69


(b)    Stock option replacement program

In January 2001, the Company offered employees the opportunity to participate in an option-replacement program, pursuant to which each employee could elect
to replace his or her then outstanding options with exercise prices ranging from $2.06 to $36.00 per share with new options on a

F-25

---

one-for-one basis. The new options were granted six months and one day following the cancellation of the existing options (July 2001) and the per share exercise price
of the replacement options was $1.45 which was the fair value of the Company's stock on the date of grant. The replacement options are exercisable as follows: 25% of the replacement options in
July 2001 will be fully vested and immediately exercisable. After July 2001, an additional 6.25% of the replacement options will vest every three months over the next three years and all
replacement options expire ten years after the new grant date. An aggregate of 2,237,973 options were cancelled in January 2001 in connection with this program. The Company issued approximately
2,189,000 options on July 20, 2001 related to this repricing. Since the exercise price was equal to the fair market value of the Company's common stock on July 20, 2001, and the Company
met the six-month waiting period specified in FASB Interpretation No. 44, the Company did not record any compensation cost in connection with this program.

5.    RETIREMENT PLAN

In November 1985, the Company adopted an employee savings plan (the Savings Plan) in compliance with Section 401(k) of the Internal Revenue Code.
Effective April 1, 1995, the Savings Plan provides for annual Company contributions of up to 15% of the first 6% of total compensation per participant. Effective January 1, 1998, these
contributions vest in full after a three-year period of service. Effective January 1, 1999, the Savings Plan was amended to provide for annual contributions of up to 40% of the
first 6% of total compensation, with a maximum matching contribution of $3,000 annually. The Company's contributions to the Savings Plan were $221,000, $231,000 and $203,000 in 2001, 2000 and 1999,
respectively.

As
part of the merger with Digital Origin, the Company had a separate employee savings plan, in which all eligible former Digital Origin employees could defer up to 15% of their
pre-tax compensation, but not more than statutory limits. Digital Origin, and subsequently the Company, was allowed to make contributions as defined in the 401(k) Plan and as approved by
the Board of Directors. Contributions to the Savings Plan were $44,000, $65,000 and $47,000 in 2001, 2000 and 1999, respectively. Digital Origin matched a specified portion of the employee
contributions up to a maximum of $1,000 per employee per year. The Company expects to terminate this employee savings plan sometime in fiscal 2002 because there are currently no active participants
remaining in the plan due to the sale of the Company's software product line to Autodesk on August 29, 2001.

The
Company does not provide postretirement benefits to any employees as defined under SFAS No. 106,Employers' Accounting for Postretirement Benefits
Other Than Pensions.

6.    BANK FACILITIES

The Company renewed an irrevocable standby letter of credit agreement for a sum not to exceed $137,945 effective April 1, 2001. This facility was entered
into in connection with the lease of the Company's office and manufacturing facility (see Note 7(a) of the Consolidate Financial Statements). The letter of credit, which was to expire
March 31, 2002, has been extended to June 1, 2002.

F-26

---

MEDIA 100 INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOVEMBER 30, 2001

7.    COMMITMENTS AND CONTINGENCIES

(a)    Commitments

The Company's principal executive, engineering, manufacturing and sales operations occupy approximately 56,500 square feet in a leased facility located in
Marlborough, MA. The lease for this facility terminates on March 31, 2002. Total rent expense including operating expenses pursuant to the lease agreement charged to operations with respect to
the Company's current Marlboro facility for fiscal years 2001, 2000 and 1999 was $1,049,000, $1,034,000 and $879,000. Rent expense including operating expenses pursuant to the lease agreement charged
to operations for the consolidated Company for fiscal years 2001, 2000 and 1999 was $1,321,000, $1,283,000 and $1,105,000, respectively.

In
January 2002, the Company signed an amendment to the lease allowing the Company to occupy approximately 45,534 square feet in a new facility in Marlborough, MA owned by the
same landlord. Under the amendment, the Company will continue to occupy the current space until the new space is available for occupancy. The Company expects the commencement date for occupancy at the
new building will be approximately April 1, 2002 and will continue for a term of forty (40) months with an annual base rent of approximately $444,000. Upon commencement of occupancy, all
obligations for the Company's current lease will terminate. In connection with the signing of the lease amendment, the Company has revised the estimated useful life of leasehold improvements and
certain furniture and fixtures that will not be moved the new facility. The remaining net book value of the leasehold
improvements and furniture and fixtures of approximately $1,288,000 will be depreciated during the first two quarters of fiscal 2002.

As
part of the acquisition of Terran in June 1999, the Company occupied additional office space located at 15951 Los Gatos Boulevard, Los Gatos, California. All of the Company's
operations relating to the streaming media software product line division occupied this space. The Company has recorded a charge to discontinued operations, net of estimated sublease income of
$348,000 for this lease which will expire on September 30, 2004. The future minimum lease payments are included in the table below.

As
part of the shutdown of the Streamriver division, the Company recorded as a restructuring charge, rent expense, net of estimated sublease income of $230,000 associated with the lease
for the facility in North Hollywood, CA which was used by the Streamriver division. The lease expires on November 30, 2005 and the future minimum lease payments are included in the table below.

The
Company also occupies sales and customer support facilities in or near Paris, France; Bracknell, England; and Munich, Germany.

Future
minimum lease payments, excluding operating costs, under all operating leases are as follows (in thousands):

Fiscal Years Ending November 30,

Amount2002

$
1,2202003


1,0242004


8952005


436Total minimum lease payments

$
3,575


F-27

---

(b)    Contingencies

(i)
The Company provides accruals for all direct costs associated with the estimated resolution of known contingencies. The accrual is established at the earliest date at which it is
deemed probable that a liability has been incurred and the amount of such liability can be reasonably estimated.

(ii)
On June 7, 1995, a lawsuit was filed against the Company by Avid Technology, Inc. (Avid) in the United States District Court for the District of Massachusetts. The
complaint generally alleges patent infringement by the Company arising from the manufacture, sale, and use of the Company's Media 100 products. The complaint includes requests for injunctive relief,
treble damages, interest, costs and fees. In July 1995, the Company filed an answer and counterclaim denying any infringement and asserting that the Avid patent in question is invalid. The
Company intends to vigorously defend the lawsuit. In addition, Avid is seeking reissue of the patent, including claims that it asserts are broader than in the existing patent, and these reissue
proceedings remain pending before the U.S. Patent and Trademark Office. On January 16, 1998, the court dismissed the lawsuit without prejudice to either party moving to restore it to the docket
upon completion of all matters pending before the U.S. Patent and Trademark Office.

On
August 16, 2000, the U.S. Patent and Trademark Office issued an Office Action rejecting all of the claims made by Avid in their latest request for reexamination of the patent
related to the aforementioned lawsuit. In addition, the Examiner at the U.S. Patent and Trademark Office designated the action as "final." On November 29, 2000, Avid filed a Notice of Appeal of
the Examiner's rejections to the U.S. Patent and Trademark Office Board of Patent Appeals and Interferences. That appeal has now been fully briefed and is awaiting argument and decision. The
litigation remains dismissed pending the outcome of the consolidated reissue/reexamination proceedings, and there can be no assurance that the Company will prevail in the appeal by Avid or that the
expense or other effects of the appeal, whether or not the Company prevails, will not have a material adverse effect on the Company's business, operating results and financial condition.

(iii)
On January 13, 1999 and January 28, 1999, Digital Origin and one of its former directors, Charles Berger, were named as defendants in two shareholder class action
lawsuits against Splash Technology Holdings, Inc. (Splash), various directors and executives of Splash and certain selling shareholders of Splash. The lawsuit alleges, among other things, that
the defendants made or were responsible for material misstatements, and failed to disclose information concerning Splash's business, finances and future business prospects in order to artificially
inflate the price of Splash common stock. The complaint does not identify any statements alleged to have been made by Charles Berger or Digital Origin. The complaint further alleges that Digital
Origin engaged in a scheme to artificially inflate the price of Splash common stock to reap an artificially large return on the sale of the common stock in order to pay off its debt. Digital Origin
and the former director vigorously deny all allegations of wrongdoing and intend to aggressively defend themselves in these matters. Defendant's two initial motions to dismiss the action were granted
with leave to amend, and plaintiffs have again amended the complaint. Defendants filed their third motion to dismiss, which has been dismissed without leave to amend. Plaintiffs have appealed this
ruling to the 9th Circuit Court of Appeals.

(iv)
On July 18, 1997, Intelligent Electronics, Inc. filed a claim against Digital Origin alleging a breach of contract and related claims in the approximate amount of
$800,000, maintaining that Digital Origin failed to comply with various return, price protection, inventory balancing and marketing development funding undertakings. In 1997, Digital Origin filed an
answer to the complaint and cross-claimed against the plaintiffs and in October 1997 additionally cross claimed against Deutsche

F-28

---

Financial, Inc., a factor in the account relationship between the Company and the plaintiffs, seeking the recovery of existing accounts receivable of approximately $1.8 million. During
May 2000, the trial was completed and the Court entered two judgments in favor of Digital Origin, one in the amount of $314,000 plus interest against Intelligent Electronics and one in the
amount of $1,491,000 plus interest against Deutsche Financial, Inc. In September 2000, Intelligent Electronics, Inc. paid $314,000 plus interest of $139,000 and reimbursement of
certain costs in the amount of $20,000 to the Company.

Pursuant
to APB Opinion No. 20,Accounting Changes, the Company revised its estimate of the allowance for doubtful accounts by
reversing $314,000 of the allowance in the three months ended August 31, 2000 by reducing the loss from discontinued operations. The Company considers the balance of the recovery from
Intelligent Electronics (interest and court costs) to be a gain contingency, as this term is defined in SFAS No. 5,Accounting for Contingencies.
Accordingly, the Company recorded the interest and court costs, as a reduction of the loss from discontinued operations, in the fourth quarter of 2000, the period in which the gain contingency was
realized.

On
August 15, 2001, Deutsche Financial, Inc. entered into a settlement agreement with Digital Origin to pay $1,075,000 to the Company. Pursuant to APB Opinion
No. 20, the Company revised its estimate of the allowance for doubtful accounts by reversing $1,171,000 of the allowance in the three months ended August 31, 2001 by reducing the loss
from discontinued operations.

(v)
On October 12, 1999, a lawsuit was filed against the Company by McRoberts Software, Inc. in the United States District Court for the Southern District of Indiana. The
complaint alleges copyright infringement, breach of contract, and trade secret misappropriation. The complaint includes requests for unspecified monetary damages and enhanced damages, interest, costs
and fees. An unfavorable verdict was filed on February 25, 2002 against the Company in the amount of $2.5 million. The Company plans to file post-trial motions with the trial
court seeking to reverse the judgement. If those post-trial motions are not successful, the Company will appeal the judgement. However, at November 30, 2001, the Company has
recorded a liability in the amount of $2.6 million that includes estimated legal fees associated with the litigation.

(vi)
On May 9, 2001, a lawsuit was filed against the Company by the former shareholders of Wired, a company acquired by the Company in December 1999 (see Note 3of
the Consolidated Financial Statements). The complaint alleges fraud, negligent misrepresentation, breach of express and implied-in-fact contract, breach of the implied covenant
of good faith and fair dealing, breach of fiduciary duty and violation of California business and professional code section 17200. The complaint includes requests for compensatory and punitive
damages, injunctive relief, and fees. No specific
amount or punitive damages are alleged, other than compensatory damages in an amount to be proven at trial, but not less than $25,000, the jurisdictional minimum for the court. The Company filed a
demurrer challenging the legal sufficiency of the causes of action alleged. A hearing on that demurrer occurred on November 6, 2001 and the Court sustained the demurrer to one cause of action,
for negligent false promise. The matter has been referred for mediation, which is scheduled for March 22, 2002. Discovery has been initiated and the Company has indicated it intends to
vigorously defend the claims asserted.

(vii)
From time to time the Company is involved in other disputes and/or litigation encountered in its normal course of business. The Company does not believe that the ultimate impact of
the resolution of such other outstanding matters will have a material effect on the Company's business, operating results or financial condition.

F-29

---

8.    INCOME TAXES

The Company accounts for income taxes in accordance with the provisions of SFAS No. 109,Accounting for Income
Taxes.The components of the net deferred tax asset recognized in the accompanying consolidated balance sheets are as follows:

As of November 30,2001

2000(in thousands)Net operating loss carryforwards

$
32,625

$
31,628Other temporary differences, principally nondeductible accruals


5,621


4,328Research and development credit carryforwards


6,292


6,292Subtotal


44,538


42,248Valuation allowance


(44,538
)

(42,248
)Net deferred tax assets

$


$



Due
to the uncertainty surrounding the realization of the benefits of its favorable tax attributes in future income tax returns, the Company has placed a valuation allowance against its
deferred tax assets, except for previously paid taxes that the Company believes are refundable. These deferred tax assets are included as a component of other assets, net on the accompanying
consolidated balance sheets.

Net
operating loss and tax credit carryforwards expire at various dates through 2021. The Tax Reform Act of 1986 contains provisions that may limit the net operating loss and tax credit
carryforwards available to be used in any given year in the event of significant changes in ownership, as defined.

The
income (loss) from continuing operations before tax provision in the accompanying consolidated statements of operations consisted of the following:

Fiscal Years Ended November 30,2001

2000

1999(in thousands)United States

$
(15,511
)
$
(7,227
)
$
(1,754
)Foreign


(625
)

1,692


1,944$
(16,136
)
$
(5,535
)
$
190


F-30

---

The
income tax provision (benefit) related to continuing operations shown in the accompanying consolidated statements of operations consists of the following:

Fiscal Years Ended November 30,2001

2000

1999(in thousands)Federal:Current

$


$


$
(224
)Deferred


(4,100
)




224(4,100
)




State:Current








Deferred


(600
)




(600
)




ForeignCurrent








$
(4,700
)
$


$



The
effective income tax rate varies from the amount computed using the statutory U.S. income tax rate as follows:

Fiscal Years Ended November 30,2001

2000

1999Tax provision (benefit) at statutory rate

(34.0)
%
(34.0)
%
34.0
%State taxes

(6.0
)
(6.0
)
6.0Change in valuation allowance

17.4

40.0

(40.0
)Tax benefit

(22.6)
%

%

%


9.    ACCRUED EXPENSES

Accrued expenses at November 30, 2001 and 2000 consist of the following:

2001

2000(in thousands)Payroll and payroll-related taxes

$
942

$
2,242Accrued warranty


561


559Accrued restructuring


527


528Accrued inventory


323


763Accrued selling and marketing


361


301Accrued legal


3,067


501Accrued other


2,219


2,248$
8,000

$
7,142


F-31

---

10.    VALUATION AND QUALIFYING ACCOUNTS

The following table sets forth activity in the Company's accounts receivable reserve account:

Balance at
Beginning of
Fiscal Year

Charges to Cost
and Expense

Deductions

Balance at End
of Fiscal Year(in thousands)For the Fiscal Year Ended November 30, 1999

$
395

$
177

$
170

$
402For the Fiscal Year Ended November 30, 2000

$
402

$
266

$
334

$
334For the Fiscal Year Ended November 30, 2001

$
334

$
487

$
309

$
512


F-32

---

MEDIA 100 INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOVEMBER 30, 2001

11.    SELECTED QUARTERLY INFORMATION (UNAUDITED)

|                                           |                         | Fiscal 2001 |       
|------------------------------------------ | ----------------------- | ----------- | ------
|
|
|Net sales                                  |                         | $           | 9,601 
|                                           |                         |             |       
|Gross profit                               |                         | $           | 5,336 
|                                           |                         |             |       
|Income (loss) from continuing operations   |                         | $           | (3,321
|                                           |                         |             |       
|Income (loss) from discontinued operations |                         | $           | (675  
|                                           |                         |             |       
|Net income (loss)                          |                         | $           | (3,996
|                                           |                         |             |       
|Income (loss) per sharebasic              |                         |             |       
|                                           | Continuing operations   |             | $     
|                                           |                         |             |       
|                                           | Discontinued operations |             | $     
|                                           |                         |             |       
|                                           | Total                   |             | $     
|                                           |                         |             |       
|Income (loss) per sharediluted            |                         |             |       
|                                           | Continuing operations   |             | $     
|                                           |                         |             |       
|                                           | Discontinued operations |             | $     
|                                           |                         |             |       
|                                           | Total                   |             | $     
|                                           |                         |             |       
|Sharesnet income (loss) per sharebasic   |                         |             | 12,333
|                                           |                         |             |       
|Sharesnet income (loss) per sharediluted |                         |             | 12,333
|                                           |                         |             |       

|                                           |                         | Fiscal 2000 |       
|------------------------------------------ | ----------------------- | ----------- | ------
|
|
|Net sales                                  |                         | $           | 11,398
|                                           |                         |             |       
|Gross profit                               |                         | $           | 6,702 
|                                           |                         |             |       
|Income (loss) from continuing operations   |                         | $           | (507  
|                                           |                         |             |       
|Income (loss) from discontinued operations |                         | $           | (912  
|                                           |                         |             |       
|Net income (loss)                          |                         | $           | (1,419
|                                           |                         |             |       
|Income (loss) per sharebasic              |                         |             |       
|                                           | Continuing operations   |             | $     
|                                           |                         |             |       
|                                           | Discontinued operations |             | $     
|                                           |                         |             |       
|                                           | Total                   |             | $     
|Income (loss) per sharediluted            |                         |             |       
|                                           | Continuing operations   |             | $     
|                                           |                         |             |       
|                                           | Discontinued operations |             | $     
|                                           |                         |             |       
|                                           | Total                   |             | $     
|                                           |                         |             |       
|Sharesnet income per sharebasic          |                         |             | 11,700
|                                           |                         |             |       
|Sharesnet income per sharediluted        |                         |             | 11,700
|                                           |                         |             |       

F-33

---

MEDIA 100 INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOVEMBER 30, 2001

12.    SEGMENT INFORMATION

The Company applies the provisions of SFAS No. 131,Disclosures about Segments of an Enterprise and Related
Information,which establishes standards for public companies to report operating segment information in annual and interim financial statements. Operating segments are defined
as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief decision maker, or decision making group, in deciding how to allocate
resources and in assessing performance. The Company's chief operating decision making group is composed of the Chief Executive Officer and members of senior management. The Company's reportable
operating segments are digital video systems, services and corporate.

The
accounting policies of the segments are the same as those described in the summary of significant accounting policies. Revenues are attributed to geographic areas based on where the
customer is located. Segment information for the years November 30, 2001, 2000 and 1999, is as follows (in thousands):

|                              |                                                 | Digital
Video
Systems |       | Services |   | Corporate |       | Total
|----------------------------- | ----------------------------------------------- | --------------------- | ----- | -------- | - | --------- | ----- | -----
|1999                          |                                                 |                       |       |          |   |           |       |      
|                              | Net sales external customers                    |                       | $     | 38,567   |   | $         | 8,817 |      
|                              |                                                 |                       |       |          |   |           |       |      
|                              | Gross profit                                    |                       | $     | 21,390   |   | $         | 7,544 |      
|                              |                                                 |                       |       |          |   |           |       |      
|Depreciation and amortization |                                                 | $                     | 3,470 |          | $ | 70        |       | $    
|                              |                                                 |                       |       |          |   |           |       |      
|                              | Restructuring                                   |                       | $     |         |   | $         |      |      
|                              |                                                 |                       |       |          |   |           |       |      
|                              | Interest income, net                            |                       | $     |         |   | $         |      |      
|                              |                                                 |                       |       |          |   |           |       |      
|2000                          |                                                 |                       |       |          |   |           |       |      
|                              | Net sales external customers                    |                       | $     | 37,345   |   | $         | 9,865 |      
|                              |                                                 |                       |       |          |   |           |       |      
|                              | Gross profit                                    |                       | $     | 17,278   |   | $         | 8,142 |      
|                              |                                                 |                       |       |          |   |           |       |      
|                              | Depreciation and amortization                   |                       | $     | 2,599    |   | $         | 110   |      
|                              |                                                 |                       |       |          |   |           |       |      
|                              | Amortization of acquisition related intangibles |                       | $     |         |   | $         |      |      
|                              |                                                 |                       |       |          |   |           |       |      
|                              | Acquired in-process research and development    |                       | $     |         |   | $         |      |      
|                              |                                                 |                       |       |          |   |           |       |      
|                              | Restructuring                                   |                       | $     |         |   | $         |      |      
|                              |                                                 |                       |       |          |   |           |       |      
|                              | Interest income, net                            |                       | $     |         |   | $         |      |      
|                              |                                                 |                       |       |          |   |           |       |      
|2001                          |                                                 |                       |       |          |   |           |       |      
|                              | Net sales external customers                    |                       | $     | 22,487   |   | $         | 8,758 |      
|                              |                                                 |                       |       |          |   |           |       |      
|                              | Gross profit                                    |                       | $     | 8,194    |   | $         | 6,870 |      
|                              |                                                 |                       |       |          |   |           |       |      
|                              | Depreciation and amortization                   |                       | $     | 2,540    |   | $         | 178   |      
|                              |                                                 |                       |       |          |   |           |       |      
|                              | Amortization of acquisition related intangibles |                       | $     |         |   | $         |      |      
|                              |                                                 |                       |       |          |   |           |       |      
|                              | Restructuring                                   |                       | $     |         |   | $         |      |      
|                              |                                                 |                       |       |          |   |           |       |      
|                              | Interest income, net                            |                       | $     |         |   | $         |      |      
|                              |                                                 |                       |       |          |   |           |       |      

F-34

---

Interest income, amortization expense, restructuring costs, and income taxes are considered corporate-level activities and are, therefore, not
allocated to segments. Net sales by geographic area for the years ended November 30, 2001, 2000 and 1999 were as follows:

2001

2000

1999(in thousands)North America

$
20,551

$
29,733

$
30,542United Kingdom, Sweden, Denmark and Norway


3,132


4,688


4,816France, Spain, Benelux, Italy


2,691


3,942


4,686Germany, Austria and Switzerland


1,118


2,040


2,681Asia, Japan and other foreign countries


3,753


6,807


4,659$
31,245

$
47,210

$
47,384


Long-lived
tangible assets by geographic area for the years ended November 30, 2001 and 2000, were as follows:

2001

2000(in thousands)United States

$
3,651

$
5,278United Kingdom


123


194Germany


1


33Italy





16France


68


95$
3,843

$
5,616


13.    DISCONTINUED OPERATIONS

On August 29, 2001, the Company signed an agreement to sell its streaming media software product line to Autodesk, Inc. for $16.0 million in
cash, of which $2 million is due from escrow and is payable on August 29, 2002. As a result of this transaction, the net assets consisting primarily of accounts receivable, inventory,
equipment, intangible assets, and income taxes payable of the streaming media software product line to be discontinued have been separately classified in the accompanying balance sheet at
November 30, 2000. The disposal date was October 5, 2001, the date the sale was completed. The Company's streaming media software product line consisted of products acquired in the
Terran acquisition and the merger with Digital Origin.

F-35

---

The
net income (loss) from these operations is included in the accompanying statements of operations under "Income (loss) from discontinued operations." Operating results of the software
product line for the fiscal years ended November 30, 2001, 2000 and 1999 are as follows:

2001

2000

1999(in thousands)Net sales of discontinued operations

$
11,062

$
25,656

$
17,449Income (loss) from operations of discontinued software product line, net of income tax benefit of $400 in 2001

$
(3,122
)
$
(4,846
)
$
6,229Gain on sale of software product line, net of income tax provision of $5,100 in 2001


7,802





Income (loss) from discontinued operations

$
4,680

$
(4,846
)
$
6,229


Net
assets from discontinued operations at November 30, 2001 and 2000 consist of the following:

November 30,2001

2000(in thousands)Accounts receivable

$


$
2,298Inventory





525Property and equipment, net





440Intangible assets, net





3,408Income taxes payable





(1,089
)$


$
5,582


F-36

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Media 100 Inc. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on February 28, 2002.

| |  | MEDIA 100 INC.
| |  | --------------
| |  | By:           

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that each of the undersigned officers and directors of Media 100 Inc., a Delaware corporation (the "Company"), hereby
constitutes and appoints John A. Molinari and Steven D. Shea, and each of them, with full power to act without the other, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (until revoked in writing) to sign the Company's Annual Report on
Form 10-K for the fiscal year ended November 30, 2001, and any and all amendments thereto, and to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully for all intents and purposes as he might or could do in person, thereby ratifying and confirming all that said
attorneys-in-fact and agents or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

---

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                     |  | Title                                                                              |  | Date             
|--------------------------------------------- |  | ---------------------------------------------------------------------------------- |  | -----------------
|                                              |  |                                                                                    |  |                  
|JOHN A. MOLINARIJohn A. Molinari              |  | Chief Executive Officer, President and Director
(Principal Executive Officer)      |  | February 28, 2002
|/s/STEVEN D. SHEASteven D. Shea               |  | Chief Financial Officer and
Treasurer (Principal
Financial and Accounting Officer) |  | February 28, 2002
|/s/MAURICE L. CASTONGUAYMaurice L. Castonguay |  | Director                                                                           |  | February 28, 2002
|/s/PAUL J. SEVERINOPaul J. Severino           |  | Director                                                                           |  | February 28, 2002
|/s/ROGER REDMONDRoger Redmond                 |  | Director                                                                           |  | February 28, 2002

---

EXHIBIT INDEX

|Exhibit
Number |  | Description                                                                                                                                                                                                                                                                                                                                 
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.07           |  | Merger Agreement (the "Merger Agreement") dated as of December 21, 1995 among Radius Inc., Splash Technology, Inc., Summit Subordinated Debt Fund, L.P., Summit Ventures IV, L.P., Summit Investors II, L.P.,
Splash Technology Holdings, Inc. and Splash Merger Company, Inc. (2)                                                          
|2.08           |  | Amendment No. 1 to Merger Agreement dated as of January 30, 1996. (2)                                                                                                                                                                                                                                                                       
|2.09           |  | Agreement and Plan of Reorganization dated December 28, 1999 with Media 100, Inc. (filed as exhibit 2.09 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 2000 and
incorporated by reference herein).                                                                                                     
|2.10           |  | Asset Purchase Agreement by and among Media 100 Inc. and Autodesk, Inc, and with respect to Section 9.5 of Article IX only Computershare Trust Company, Inc. dated August 29, 2001 (filed as
exhibit 2.10 of the Company's Quarterly Report of Form 10-Q for the fiscal quarter ended August 31, 2001 and incorporated by reference herein).
|3.1            |  | Restated Certificate of Incorporation of Media 100 Inc. (filed as Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1996 and incorporated by reference
herein).                                                                                                                                
|3.3            |  | By-laws of Media 100 Inc., as amended through June 17, 1998 (filed as Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended May 31,1998 and incorporated by
reference herein).                                                                                                                            
|4              |  | Specimen Certificate representing the Company's Common Stock (filed as Exhibit 4 to the Company's Registration Statement on Form S-1, File No. 2-94121 and incorporated by reference herein).                                                                                                                                               
|4.03           |  | A    Warrant dated September 13, 1995 between IBM Credit Corporation and the Digital Origin Inc. (8)                                                                                                                                                                                                                                        
|               |  | B    Warrant dated October 13, 1996, between Mitsubishi Electronics America, Inc. and the Digital Origin Inc. (9)                                                                                                                                                                                                                           
|4.04           |  | Form of Registration Rights Agreement between the Digital Origin Inc. and certain shareholders. (8)                                                                                                                                                                                                                                         
|10.1*          |  | Key Employee Incentive Plan (1982), as amended through November 15, 1996 (filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1996 and incorporated
by reference herein).                                                                                                              
|10.2*          |  | 1986 Employee Stock Purchase Plan, as amended through June 12, 2001 (filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 2001 and incorporated
by reference herein).                                                                                                               
|10.3*          |  | Key Employee Incentive Plan (1992), as amended through June 12, 2001 (filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 31, 2001 and incorporated
by reference herein).                                                                                                              
|10.4*          |  | Media 100 Inc. 401(k) Savings Plan (filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1997 and incorporated by reference herein).                                                                                                                                                    
|10.5.1         |  | Lease dated January 31, 1997 relating to 290 Donald Lynch Boulevard, Marlboro, MA (filed as Exhibit 10.5.1 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1996 and
incorporated by reference herein).                                                                                                   

---

|10.5.2 |  | License Agreement dated as of January 31, 1997 relating to 290 Donald Lynch Boulevard, Marlboro, MA (filed as Exhibit 10.5.2 to the Company's Annual Report on Form 10-K for the fiscal year ended
November 30, 1996 and incorporated by reference herein).
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.5.3 |  | Amendment to Lease dated January 8, 2002 relating to 290 Donald Lynch Blvd, Marlboro, MA and 450 Donald Lynch Blvd, Marlboro, MA.                                                                                                                          
|10.6.1 |  | Distribution Agreement dated as of November 19, 1996 with Data Translation II, Inc. (DTI) (filed as Exhibit 10.8.1 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30,
 1996 and incorporated by reference herein).         
|10.6.2 |  | Intellectual Property Agreement dated as of December 2, 1996 with DTI (filed as Exhibit 10.8.2 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1996 and incorporated
by reference herein).                              
|10.6.3 |  | Corporate Services Agreement dated as of December 2, 1996 with DTI (filed as Exhibit 10.8.3 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1996 and incorporated by
reference herein).                                 
|10.6.4 |  | Amendment to Corporate Services Agreement dated November 18, 1997 (filed as Exhibit 10.6.4 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1997 and incorporated by
reference herein).                                  
|10.9   |  | Offer Letter from the Company to B. Robert Feingold (filed as Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended August 31,1998 and incorporated by reference
herein).                                               
|10.10  |  | Agreement and Plan of Merger and Reorganization, dated May 6, 1999 with Terran Interactive, Inc. (filed as Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
May 31, 1999 and incorporated by reference herein).   
|10.11  |  | Asset Purchase Agreement, dated December 17, 1999 with Wired, Inc. (filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K for the year ended November 30, 1999 and incorporated by
reference herein).                                         
|10.12  |  | A*    Digital Origin Inc.'s 401(k) Savings and Investment Plan. (6)                                                                                                                                                                                        
|       |  | B*    Amendment to Digital Origin Inc.'s 401(k) Savings and Investment Plan. (1)                                                                                                                                                                           
|       |  | C*    Digital Origin Inc.'s 401(k) Savings and Investment Plan Loan Policy. (1)                                                                                                                                                                            
|10.13* |  | Digital Origin Inc.'s 1995 Stock Option Plan. (1)                                                                                                                                                                                                          
|10.14* |  | Form of Stock Option Agreement and Exercise Request as currently in effect under 1995 Stock Option Plan. (1)                                                                                                                                               
|10.15* |  | Digital Origin Inc.'s 1994 Directors' Stock Option Plan. (1)                                                                                                                                                                                               
|10.16  |  | Form of Indemnity Agreement with Directors. (5)                                                                                                                                                                                                            
|10.17* |  | Employment Agreement by and between Digital Origin Inc. and Mark Housley dated December 20, 1996. (10)                                                                                                                                                     
|10.18* |  | Employment Termination and Release Agreement with Mark Housley dated November 3, 2000 (filed as exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended November 30, 2000 and
incorporated by reference herein).                      
|10.19  |  | Asset Purchase Agreement dated as of August 7, 1998 between Korea Data Systems America, Inc. and the Digital Origin Inc. (11)                                                                                                                              
|10.20  |  | Amended and Restated License Agreement dated as of August 7, 1998 between Korea Data Systems America, Inc. and the Digital Origin Inc. (11)                                                                                                                

---

|10.21 |  | Asset Purchase Agreement dated as of November 23, 1998 between Post Digital Software, Inc. and the Digital Origin Inc. (12)                                                                     
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.22 |  | Asset Sale Agreement dated as of December 4, 1998 between Splash Technology Holdings, Inc. and the Digital Origin Inc. (12)                                                                     
|10.23 |  | Supplement to the License and Asset Purchase Agreement dated December 4, 1998 between Korea Data Systems America, Inc. and the Digital Origin Inc. (12)                                         
|10.24 |  | Lease agreement by and between Digital Origin Inc. and Eliane Ortuno, Trustee, Donald T. Kitts Trust dated January 8, 1999. (460 East Middlefield Road, Mountain View, California offices). (13)
|10.25 |  | Digital Origin Inc.'s 1999 Employee Stock Purchase Plan and related documents. (14)                                                                                                             
|21    |  | Subsidiaries of Media 100 Inc. (filed as Exhibit 21 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1997 and incorporated by reference herein).              
|23    |  | Consent of Arthur Andersen LLP.                                                                                                                                                                 
|23.2  |  | Consent of Ernst & Young LLP.                                                                                                                                                                   
|24    |  | Power of Attorney (included in the signature page of this Annual Report on Form 10-K).                                                                                                          

(c)    Reports
on Form 8-K.

No
reports on Form 8-K were filed during the last quarter of the period covered by this report.



---

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