SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) x
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR
  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For The Quarterly Period
  Ended: May 31, 2001o
  TRANSITION
  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For The Transition Period FromToCommission File Number:0-14779  MEDIA
  100 INC.(Exact name of
  registrant as specified in its charter)
  DELAWARE
  04-2532613(State or other
  jurisdiction of organization
  (I.R.S. Employer
  Identification Number)or incorporation)
  290
  DONALD LYNCH BOULEVARDMARLBOROUGH,
  MASSACHUSETTS(Address of principal
  executive offices)01752-4748(Zip code)(508)
  460-1600(Registrants
  telephone number, including area code)
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YesxNoo Indicate
the number of shares outstanding of each of the issuers classes of common
stock, as of the latest practicable date. Common
  Stock, par value $.01 per share
  12,309,157
  sharesClass
  Outstanding at June
  30, 2001
   MEDIA 100 INC. AND
SUBSIDIARIES

INDEX

PART I - FINANCIAL
  INFORMATIONITEM 1
  Consolidated Financial
  Statements:Consolidated Balance Sheets
  as of May 31, 2001 and November 30, 2000Consolidated
  Statements of Operations for the three and six months ended May 31, 2001
  and  May 31, 2000Consolidated
  Statements of Cash Flows for the six months ended May 31, 2001 and May 31,
  2000Notes to
  Consolidated Financial StatementsITEM
  2
  Managements
  Discussion and Analysis of Financial Condition and Results of OperationsITEM 3
  Quantitative and Qualitative Disclosures about
  Market RiskPART II - OTHER INFORMATIONITEM 1
  Legal ProceedingsITEM 4
  Submission of Matters to a Vote of Security
  HoldersITEM 6
  Exhibits and Reports on Form 8-KSIGNATURESEXHIBIT INDEXPART
I - FINANCIAL INFORMATION

MEDIA 100 INC.
AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)

May 31,
  2001
  November 30,
  2000ASSETSCurrent assets:Cash and cash
  equivalents
  $8,587
  $11,987Marketable securities
  1,087
  5,674Accounts receivable,
  net of allowance for doubtful accounts of $2,945 in 2001 and $3,812 in 2000
  5,845
  8,619Inventories
  3,466
  4,314Prepaid expenses and
  other current assets
  1,233
  1,180Total current assets
  20,218
  31,774Property and equipment, net
  5,284
  6,056Intangible assets, net
  6,703
  8,316Other assets, net
  1,131
  1,245Total assets
  $33,336
  $47,391LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
  $2,923
  $4,561Accrued expenses
  8,543
  8,231Note payable
  -
  1,492Deferred revenue
  4,616
  5,272Total current
  liabilities
  16,082
  19,556Contingencies (Note 9)Stockholders' equity:Preferred stock
  -
  -Common stock
  126
  123Capital in excess of
  par value
  217,404
  217,182Treasury stock
  (78)
  -Accumulated deficit
  (200,185)
  (189,380)Accumulated other
  comprehensive loss
  (13)
  (90)Total
  stockholders' equity
  17,254
  27,835Total liabilities and stockholders' equity
  $33,336
  $47,391The accompanying notes are an
  integral part of these consolidated financial statements.MEDIA 100
INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands, except per share data)

(unaudited)

Three Months Ended May 31,
  Six Months Ended May 31,2001
  2000
  2001
  2000Net sales:Products
  $9,856
  $18,277
  $21,173
  $33,932Services
  2,308
  2,300
  4,840
  4,565Total net sales
  12,164
  20,577
  26,013
  38,497Cost of sales
  5,893
  8,358
  11,489
  15,894Gross profit
  6,271
  12,219
  14,524
  22,603Operating expenses:Research and
  development
  4,078
  3,961
  7,960
  7,609Selling and
  marketing
  4,906
  5,516
  9,779
  10,643General and
  administrative
  1,432
  2,411
  3,341
  4,963Amortization and
  write-down of acquisition-related intangible assets
  1,355
  563
  3,361
  836Acquired in-process
  research and development
  -
  -
  -
  470Restructuring charge
  795
  -
  795
  -Merger related costs
  -
  2,007
  -
  2,007Total operating
  expenses
  12,566
  14,458
  25,236
  26,528Operating loss
  (6,295)
  (2,239)
  (10,712)
  (3,925)Interest income, net
  97
  275
  203
  591Other income (expense), net
  (611)
  (152)
  (296)
  (171)Loss before tax
  provision
  (6,809)
  (2,116)
  (10,805)
  (3,505)Tax provision
  -
  -
  -
  30Net loss
  $(6,809)
  $(2,116)
  $(10,805)
  $(3,535)Net loss per share:Basic
  $(.55)
  $(.18)
  $(.88)
  $(.30)Diluted
  $(.55)
  $(.18)
  $(.88)
  $(.30)Weighted average common shares outstanding:Basic
  12,359
  11,991
  12,346
  11,807Diluted
  12,359
  11,991
  12,346
  11,807The accompanying notes are an
  integral part of these consolidated financial statements.MEDIA 100
INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited)

Six Months Ended May 31,2001
  2000CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
  $(10,805)
  $(3,535)Adjustments to
  reconcile net loss to net cash (used in) operating activities:Depreciation and
  amortization
  1,601
  1,771Non-cash
  interest expense
  -
  44Acquired
  in-process research and development
  -
  470Amortization and
  write-down of acquisition-related intangible assets
  3,361
  836Loss on
  disposition of fixed asset
  -
  6Loss on sale of
  marketable securities
  9
  -Changes in assets and
  liabilities, excluding effects of acquisitions:Accounts
  receivable
  2,774
  (1,401)Inventories
  848
  (2,615)Prepaid expenses
  and other current assets
  (53)
  (358)Accounts payable
  (1,638)
  399Accrued expenses
  (1,438)
  175Deferred revenue
  (656)
  31Net cash used in
  operating activities
  $(5,997)
  $(4,177)CASH FLOWS FROM INVESTING ACTIVITIES:Acquisition of
  Wired, Inc., net of cash acquired
  -
  (1,487)Acquisition of
  21st Century Media Inc., net of cash acquired
  -
  (481)Purchases of
  property and equipment
  (751)
  (1,058)Other assets
  114
  (1,162)Purchase of
  intangible assets
  (75)
  (174)Net proceeds
  from sales of marketable securities
  4,577
  1,717Net cash provided by
  (used in) investing activities
  $3,865
  $(2,645)CASH FLOWS FROM FINANCING ACTIVITIES:Payment of note
  payable
  (1,492)
  -Proceeds from
  issuance of common stock pursuant to stock plans
  225
  3,770Purchase of
  treasury stock
  (78)
  -Net cash (used in)
  provided by financing activities
  $(1,345)
  $3,770EFFECT OF EXCHANGE RATE CHANGES ON CASH
  77
  (2)NET DECREASE IN CASH OF DIGITAL ORIGIN INC. FOR THE TWO MONTHS
  ENDED NOVEMBER 30, 1999
  -
  (1,483)NET (DECREASE)  INCREASE
  IN CASH AND CASH EQUIVALENTS
  $(3,400)
  $(4,537)CASH AND CASH EQUIVALENTS, beginning of period
  11,987
  13,858CASH AND CASH EQUIVALENTS, end of period
  $8,587
  $9,321

Six Months Ended May 31,2001
  2000SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash (received) paid
  for income taxes
  (42)
  1OTHER TRANSACTIONS NOT USING CASH:Change in value of
  marketable securities
  $(88)
  $(123)

Six Months Ended May 31,2001
  2000SUPPLEMENTAL
  DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:In connection with the
  acquisition of Wired, Inc., the following non-cash transaction occurred:Fair value of assets
  acquired
  $-
  $3,180Cash paid for
  acquisition and acquisition costs
  -
  1,487Note payable and
  liabilities assumed
  $-
  $1,693In connection with the
  acquisition of 21st Century Media, LLC, the following non-cash
  transaction occurred:Fair value of assets
  acquired
  $-
  $1,130Cash paid for
  acquisition and acquisition costs
  -
  481Common stock issued
  and liabilities assumed
  $-
  $649The accompanying notes are an
  integral part of these consolidated financial statements.MEDIA 100 INC. AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED, EXCEPT FOR NOVEMBER 30, 2000 AMOUNTS)

1.   Basis of Presentation

The accompanying interim consolidated
financial statements include the accounts of Media 100 Inc. (the Company), a
Delaware corporation, and its wholly owned subsidiaries.  The interim financial statements are
unaudited.  However, in the opinion of
management, the interim consolidated financial statements and disclosures reflect
all adjustments necessary for fair presentation. Interim results are not
necessarily indicative of results expected for a full year or for any other
interim period.  Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. These consolidated condensed financial
statements should be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's latest audited
financial statements, which are included in the Company's Annual Report on Form
10-K for the fiscal year ended November 30, 2000, filed with the Securities and
Exchange Commission.

The Companys preparation of financial
statements in conformity with generally accepted accounting principles 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.

The Company designs and sells software
applications, systems (comprising software and hardware) and services that
allow Internet-based (online) and traditional broadcasters, corporate
marketing professionals and educators to create and deliver high-quality video
programs as either traditional media or Internet-compatible streams (streaming
media).

2.  
Principles of Consolidation

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.

3.   Acquisitions

Digital
Origin, Inc.

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 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 were
expensed in the quarter ended May 31, 2000, upon consummation of the Digital
Origin merger.

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

DigitalMedia
  100
  Origin
  Eliminations
  CombinedThree
  months ended May 31, 2000 (a)Net sales
  $17,165
  $3,797
  $(385)
  $20,577Net (loss) income
  (2,175)
  (1)
  60
  (2,116)Six
  months ended May 31, 2000 (b)Net sales
  $31,647
  7,373
  (523)
  38,497Net loss
  (2,067)
  (1,436)
  (32)
  (3,535)




(a) Digital Origin results represent
March 1, 2000 through May 9, 2000.
(b) Digital Origin results represent December 1, 1999 through May 9, 2000.

4.  
Cash Equivalents and Marketable Securities

Cash equivalents are carried at cost,
which approximates market value, and have original maturities of less than
three months.  Cash equivalents include
money market accounts and repurchase agreements with overnight maturities.
Approximately $0.5 million of the cash and cash equivalents were restricted
under various letters of credit at May 31, 2001.

The Company accounts for marketable
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 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 marketable securities
are classified as available-for-sale.

Marketable securities held as of May 31,
2001 and November 30, 2000 consist of the following (in thousands):

Investments available for sale:
  Maturity
  May
  31,
  November
  30,2001
  2000U.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
  -
  507Total U.S. Agency Bonds
  
  -
  507Money Market Instruments
  less than 1 year
  673
  1,044Corporate Obligations
  less than 1 year
  50
  1,116Corporate Obligations
  1 - 5 years
  1,037
  1,512Total Corporate Obligations
  
  1,087
  2,628Total investments available for sale
  
  1,760
  6,718Less: cash and cash equivalents
  
  (673)
  (1,044)Total marketable securities
  
  $1,087
  $5,674Marketable securities had a cost of  $1,043 and $5,718, and a market value of
$1,087 and $5,674 at May 31, 2001 and November 30, 2000, respectively. To
adjust the carrying amount of the May 31, 2001 and November 30, 2000 marketable
securities portfolio to market value, unrealized losses have been reflected as
a component of accumulated other comprehensive loss in stockholders equity
pursuant to the provisions of SFAS No. 115.

5.  
Inventories

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

May
  31,
  November
  30,2001
  2000Raw materials
  $2,043
  $2,814Work-in-process
  931
  733Finished goods
  492
  767$3,466
  $4,314Work-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.

6.  
Property and Equipment, net

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

May
  31,
  November
  30,2001
  2000Machinery and
  equipment
  $13,879
  $13,308Purchased software
  6,063
  6,062Furniture and fixtures
  1,410
  1,733Vehicles
  9
  9Leasehold improvements
  1,787
  1,618$23,148
  $22,730Less accumulated
  depreciation and amortization
  (17,864)
  (16,674)$5,284
  $6,0567.
Intangible Assets

Intangible
assets consist of the following as of May 31, 2001 and November 30, 2000 (in
thousands):

May
  31,
  November
  30,2001
  2000Patents and Trademarks
  $506
  $431Acquired Technology
  3,460
  3,460Goodwill
  8,496
  7,625$12,462
  $11,516Less accumulated
  amortization
  (5,759)
  (3,200)$6,703
  $8,316Patents
and trademarks are being amortized over periods ranging from three to five
years, their estimated useful lives. 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 life.In connection with an earn-out
provision from a prior acquisition, the Company has accrued $1,750,000 in
contingent consideration, which will be paid by September 2001.  The entire amount has been recorded as
additional goodwill.  The Company will
amortize this additional goodwill over its remaining useful life.

The
Companyrecorded
an expense for the amortization and write-down of intangible assets of $2.0
million in the first fiscal quarter of 2001 compared to $.3 million in the
first fiscal quarter of fiscal 2000. 
Included in the $2.0 million was a write-down of goodwill of $.9 million
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 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 year 2001 and wrote off the remaining assets
(See Note 15).

8.   Net 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.

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

Three
  months ended May 31,
  Six
  months ended May 31,2001
  2000
  2001
  2000Weighted average shares
  of common stock Outstanding
  12,359
  11,991
  12,346
  11,807Effect of potential
  common shares - stock options and warrants outstanding (unless antidilutive)
  -
  -
  -
  -Weighted average
  shares and potential common shares outstanding
  12,359
  11,991
  12,346
  11,807The Company excludes potentially dilutive
securities from its diluted net 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. 
Options to purchase approximately 1,566,000 and 1,890,000 shares of
common stock at May 31, 2001 and May 31, 2000, respectively, were not included
in the computation of diluted net loss per share as a result of their
antidilutive effect.

9.   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.  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 have
now filed their third motion to dismiss.

(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
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. 
Deutsche Financial, Inc. has filed an appeal, which is expected to be
heard during 2001.

(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 injunctive relief, treble damages, interest,
costs and fees.  In November 1999, the
Company filed an answer and counterclaim denying any infringement.  The Company intends to vigorously defend the
lawsuit.

(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. 
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.  The
Company intends to vigorously defend the lawsuit.

(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.

10.   Capitalized Software Development Costs

The Company capitalizes certain computer
software development costs. Capitalization of costs commences upon establishing
technological feasibility.  There were
no capitalized costs at May 31, 2001. 
Capitalized costs, net of accumulated amortization, were $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.

11.  
Income Taxes

The Company has not provided for a tax
provision in the first six months of fiscal 2001 due to the net loss incurred
during the first six months of the fiscal year and its expectation for no
taxable income for the year.

12.  
Accrued Expenses

Accrued expenses at May 31, 2001 and
November 30, 2000 consist of the following (in thousands):

May
  31,
  November
  30,2001
  2000Payroll, payroll taxes
  and other taxes
  $2,600
  $2,242Accrued warranty
  561
  559Accrued restructuring
  150
  528Accrued inventory
  615
  763Accrued legal and
  professional services
  403
  692Accrued selling and
  marketing
  335
  301Accrued earn-out
  payment
  1,750
  -Accrued other
  2,129
  3,146$8,543
  $8,23113.  
Comprehensive loss

The Company records items of
comprehensive income or 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 loss are as follows (in thousands):



Three
  months ended May 31,
  Six
  months ended May 31,2001
  2000
  2001
  2000Net loss
  $(6,809)
  $(2,116)
  $(10,805)
  $(3,535)Cumulative translation
  adjustment
  -
  (3)
  (11)
  (2)Unrealized holding
  gain (loss) on  Available for sale
  securities
  42
  (20)
  88
  (123)Total comprehensive
  loss
  $(6,767)
  $(2,139)
  $(10,728)
  $(3,660)14. 
 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 software Internet tools, services and digital
video systems.

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 three and six
months ended May 31, 2001 and May 31, 2000 is as follows:

Software
  DigitalInternet
  VideoThree months ended May 31, 2001
  Tools
  Services
  Systems
  Corporate
  TotalNet sales from external customers
  $4,085
  $2,308
  $5,771
  $-
  $12,164Gross profit
  2,432
  1,788
  2,051
  -
  6,271Depreciation and amortization
  9
  72
  644
  -
  725Interest income, net
  -
  -
  -
  97
  97Six months ended May 31, 2001Net sales from external customers
  $8,974
  $4,840
  $12,199
  $-
  $26,013Gross profit
  5,612
  3,595
  5,317
  -
  14,524Depreciation and amortization
  162
  139
  1,300
  -
  1,601Interest income
  $-
  $-
  $-
  $203
  $203Three months ended May 31, 2000Net sales from
  external customers
  $9,744
  $2,300
  $8,533
  $-
  $20,577Gross profit
  5,715
  1,939
  4,565
  -
  12,219Depreciation and amortization
  157
  21
  709
  -
  887Interest income, net
  -
  -
  -
  275
  275Six months ended May 31, 2000Net sales from external customers
  $17,139
  $4,565
  $16,793
  $-
  $38,497Gross profit
  9,950
  3,933
  8,720
  -
  22,603Depreciation and amortization
  308
  39
  1,424
  -
  1,771Interest income
  $-
  $-
  $-
  $591
  $591Tax provision
  $
  $
  $
  $30
  $30

Interest income and income taxes are
considered corporate level activities and are, therefore, not allocated to
segments.  Management believes transfers
between geographic areas are accounted for on an arms length basis.

Net sales by geographic area for the
three and six months ended May 31, 2001and May 31, 2000 were as follows (in
thousands):

Three
  months endedMay
  31,
  May
  31,2001
  2000United States
  $8,036
  $12,754United Kingdom,
  Sweden, Denmark and Norway
  1,050
  1,419Germany, Austria and
  Switzerland
  579
  1,194France, Spain and
  Benelux
  610
  2,126Japan
  589
  782Other foreign
  countries
  1,300
  2,302$12,164
  $20,577

Six
  months endedMay
  31,
  May
  31,2001
  2000United States
  $17,494
  $23,399United Kingdom,
  Sweden, Denmark and Norway
  2,272
  2,905Germany, Austria and
  Switzerland
  1,131
  2,738France, Spain and
  Benelux
  1,488
  3,439Japan
  1,061
  1,556Other foreign
  countries
  2,567
  4,460$26,013
  $38,497Long-lived tangible assets by geographic
area for the quarters ended May 31, 2001 and November 30, 2000 consist of the
following (in thousands):

May
  31,
  November
  30,2001
  2000United States
  $4,989
  $5,718United Kingdom
  165
  194Germany
  41
  33Italy
  11
  16France
  78
  95$5,284
  $6,05615.  
Restructuring Expense

In
the second quarter of fiscal 2001, the Company implemented a restructuring plan
to reorganize the selling and marketing organizations and the shutdown of
Streamriver.  The restructuring charge
of $795,000 related to the elimination of approximately 49 employees across the
following functions: research and development (11), selling and marketing (28),
general and administrative (2) and Streamriver (8) and the write off of certain
assets associated with Streamriver.   At
May 31, 2001, approximately $150,000 of the accrued restructuring charge,
consisting of severance-related costs, remained. The total cash impact of the
restructuring was approximately $467,000, all of which will be paid by the end
of the third quarter in fiscal 2001.

MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Overview

Media
100 Inc., a Delaware corporation, (the Company) designs and sells software
applications, systems (comprising software and hardware), and services (for
encoding and hosting digital media) that allow Internet-based (online) and
traditional broadcasters, corporate marketing professionals, and educators to
create and deliver high-quality video programs as either traditional media or
Internet-compatible streams (streaming media).

The
Company recognizes revenue in accordance with Statement of Position, 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.  Net sales are recognized following
establishment of persuasive evidence of an arrangement, provided that the
license fee is fixed and 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.  Sales to certain resellers and distributors
are subject to agreements allowing certain rights of return and price
protection on unsold merchandise held by these resellers and distributors.  The Company provides for estimated returns
and refunds 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.  Revenue from hosting services is recognized
ratably over the term of the contract. 
Revenue from encoding services is recognized as the services are
performed using the percentage of completion method.  The Company has recently ceased the provision of hosting and
encoding services.

Digital Origin Merger

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 and Managements Discussion and Analysis of Financial
Condition and Results of Operations have been restated to reflect the combined
operations of the two companies.

The
Company also acquired Terran Interactive, Inc. (Terran) in fiscal 1999 and
Wired, Inc. (Wired), J2 Digital Media, Inc. (J2), 21st Century
LLC (21st Century) and certain strategic technology assets from
Integrated Computing Engines, Inc. (ICE) 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.

Results of Operations

The following table shows certain
consolidated statements of operations data as a percentage of net sales.

Three
  months ended May 31,
  Six
  months ended May 31,2001
  2000
  2001
  2000Net sales:Products
  81.0%
  88.8%
  81.4%
  88.1%Services
  19.0
  11.2
  18.6
  11.9Total net sales
  100.0
  100.0
  100.0
  100.0Cost of sales
  48.4
  40.6
  44.2
  41.3Gross profit
  51.6
  59.4
  55.8
  58.7Operating expenses:Research and development
  33.5
  19.2
  30.6
  19.8Selling and marketing
  40.3
  26.8
  37.6
  27.6General and administrative
  11.8
  11.7
  12.8
  12.9Amortization and write-down of
  acquisition-related intangible assets
  11.1
  2.7
  12.9
  2.2Acquired in-process research and
  development
  -
  -
  -
  1.2Restructuring charge
  6.5
  -
  3.1Merger related costs
  -
  9.8
  -
  5.2Total operating expenses
  103.3
  70.3
  97.0
  68.9Operating loss
  (51.8)
  (10.9)
  (41.2)
  (10.2)Interest income, net
  0.8
  1.3
  0.8
  1.5Other income
  (expense), net
  (5.0)
  (0.7)
  (1.1)
  (0.4)Loss before tax
  provision
  (56.0)
  (10.3)
  (41.5)
  (9.1)Tax provision
  -
  -
  -
  0.1Net loss
  (56.0)%
  (10.3)%
  (41.5)%
  (9.2)%Comparison
of Second Fiscal Quarter of 2001 to Second Fiscal Quarter of 2000

Net sales.  Total net sales for the second fiscal
quarter ended May 31, 2001 decreased 40.9% to $12.2 million from $20.6 million
for the second quarter of fiscal 2000. 
Net sales from products for the second fiscal quarter ended May 31, 2001
decreased 46.1% to $9.9 million from $18.3 million for fiscal 2000.  The decrease in net sales from products is
due to a number of factors including lower unit sales and average selling
prices for our digital video systems ($4.3 million), lower sales of software
editing products acquired through the merger with Digital Origin, Inc. ($3.1
million), lower sales of the accelerated version of Cleaner, named Powersuite,
and other third party products ($1.5 million), and lower sales of the
MPEG-based products acquired in the acquisition of Wired, Inc. ($.6 million).  Net sales from products acquired from
Integrated Computing Engines, Inc. in August 2000 totaled $1.0 million in the
second quarter of fiscal 2001 versus $0 for the second quarter of fiscal
2000.  Net sales of software Internet
tools for the second quarter ended May 31, 2001 decreased 58.2% to $4.1 million
from $9.8 million for the second quarter of fiscal 2000.  Of the $5.7 million decrease in net sales of
software Internet tools, $3.1 million was due to a reduction in sales of
products acquired as part of the merger with Digital Origin, Inc.  We anticipate this trend of lower
year-over-year net sales to continue for the remainder of this year.  Net sales of digital video systems for the
second quarter ended May 31, 2001 decreased 31.8% to $5.8 million from $8.5
million for the second quarter of fiscal 2000. 
We attribute the decrease in sales to lower units and average selling
prices of our digital video systems due to increased competition and lower
demand and anticipate this trend in lower year-over-year sales will continue
for the remainder of fiscal 2001.  Net
sales from services for the second fiscal quarter ended May 31, 2001 were $2.3
million, flat with the second quarter of fiscal 2000.   During the second quarter of fiscal 2001, we closed our encoding
and hosting services division, named Streamriver, and sold certain assets
related to the business.   Net sales
from Streamriver were $0.1 million in the second quarter of fiscal 2001 and
2000.

Gross profit.  Gross profit decreased 48.7% to $6.3 million
in the second fiscal quarter of 2001 from $12.2 million in the second quarter
of fiscal 2000.  Overall gross profit as
a percentage of net sales decreased to 51.6% in the second fiscal quarter of
2001 from 59.4% in the second quarter of fiscal 2000.  Specifically, gross profit as a percentage of net product sales
decreased to 45.5% in the second fiscal quarter of 2001 from 56.2% in the
second quarter of fiscal 2000, while gross profit as a percentage of net sales
of services decreased to 77.5% in the second fiscal quarter of 2001 from 84.3%
in the second quarter of fiscal 2000. 
The percentage decrease in services resulted from increased costs
related to encoding and hosting services. 
Gross profit as a percentage of net product sales decreased due to lower
average selling prices for our digital video systems.  We currently forecast overall gross profit as a percentage of net
sales will be relatively stable over the next several quarters, however, due to
uncertainty regarding the level of sales and potential fluctuations in the mix
of products sold, gross profit as a percentage of net sales may vary from one
quarter to another.

Research
and development.  Research and
development expenses increased 3.0% to $4.1 million in the second fiscal
quarter of 2001 from $4.0 million in the second quarter of fiscal 2000.  Research and development expenses consist
primarily of salaries and related benefits, consultants, outside services,
occupancy and depreciation. At this time, we anticipate research and
development expenses will remain relatively stable, in dollar terms, over the
next several quarters as we continue to develop new products and maintain
existing products.

Selling
and marketing.  Selling and marketing
expenses decreased 11.1% to $4.9 million in the second fiscal quarter of 2001
from $5.5 million in the second quarter of fiscal 2000.  Selling expenses consist primarily of
salaries and related benefits, commissions, travel, occupancy and depreciation.  Marketing expenses consist primarily of
salaries and related benefits, trade shows, seminars, advertising, sales
literature and lead generation activities. 
The decrease in selling and marketing expenses resulted primarily from
reduced marketing expenses including salaries and related benefits, advertising
and lead generation activities.  We
currently anticipates that our selling and marketing expenses will decrease
over the next several quarters due to the closing of Streamriver and more
generally we intend to take action to decrease our other selling and marketing
expenses to be more in line with our forecasted lower level of sales.

General
and administrative.  General and
administrative expenses decreased 40.6% to $1.4 million in the second fiscal
quarter of 2001 from $2.4 million in the second quarter of fiscal 2000.  General and administrative expenses include
the cost of human resources, finance, information technology, legal and other
administrative functions of the Company. 
The decrease in general and administrative expenses resulted primarily
from lower employee, employee-related and legal expenses.  We currently anticipates that our general
and administrative expenses will decrease over the next several quarters as we
reduce our expense structure and reduce our general and administrative expenses
to be more in line with our forecasted lower level of sales.

As
a result of the merger with Digital Origin, Inc. on May 9, 2000, we assumed a
significant allowance for doubtful accounts balance of $3,803,000 related to
several old, uncollected amounts owed to Digital Origin, Inc.   As of November 30, 2000, the allowance for
doubtful accounts totaled $3,812,000, of which $3,401,000 relates to Digital
Origin.  As of May 31, 2001, our allowance
for doubtful accounts totals $2,945,000 of which $2,458,000 relates to Digital
Origin.  During the second quarter of
2001, we wrote-down $213,000 of the remaining balance against the allowance for
doubtful accounts.  One account
represents approximately $2.2 million of the allowance account and is awaiting
resolution in pending litigation (See Note 9).

Amortization and write-down of
acquisition-related intangible assets. 
We recorded an expense for the amortization and write-down of
acquisition-related intangible assets of $1.4 million in the second fiscal
quarter of 2001 compared to $.6 million in the second quarter of fiscal
2000.  Included in the $1.4 million was
amortization expense associated with acquisitions that took place subsequent to
Q2 2000 and contingent purchase price associated with the Terran acquisition.

Restructuring
charge.  During the second fiscal
quarter of 2001, we recorded a restructuring charge of $795,000 in connection
with a reorganization of the selling and marketing organizations that resulted
in severance payments to terminated employees and the closing of
Streamriver.  There was no similar
expense recorded in the second fiscal quarter of 2000.

Interest
income, net.  Interest income decreased
64.7% to $.1 million in the second fiscal quarter of 2001 from $.3 million in
the second quarter of fiscal 2000.  The
decrease in interest income is due to lower cash and cash equivalent balances
in fiscal 2001 versus 2000.  During
fiscal 2000, we purchased several companies utilizing our existing cash and
cash equivalents to pay for these acquisitions.  We currently anticipates interest income will decline in fiscal
2001 versus 2000 due to lower cash balances.

Other
income (expense), net.  Other expense
was $.6 million in the second fiscal quarter of 2001 compared to other expense
of $.02 million in the second quarter of fiscal 2000.  The increase is due to foreign exchange losses on intercompany
transactions with our foreign subsidiaries.

Tax
provision. We did not provide for a tax provision in the second fiscal quarter
of 2001 due to the net loss incurred during the quarter and our expectation of
no taxable income for the year.

Net
loss.  As a result of the above factors,
we had a loss for the second fiscal quarter of 2001 in the amount of ($6.8)
million, or ($0.55) per share, compared to a net loss of ($2.1) million, or
($0.18) per share, in the second quarter of fiscal 2000.

Comparison
of First Six Months of Fiscal 2001 to First Six Months of Fiscal 2000

Net sales.  Total net sales for the first six months
ended May 31, 2001 decreased 32.4% to $26.0 million from $38.5 million for the
first six months of fiscal 2000.  Net
sales from products for the first six months ended May 31, 2001 decreased 37.6%
to $21.2 million from $33.9 million for fiscal 2000.  The decrease in net sales from products is due to a number of
factors including lower unit sales and average selling prices for our digital
video systems ($6.1 million), lower sales of software editing products acquired
through the merger with Digital Origin, Inc. ($5.2 million), lower sales of the
accelerated version of Cleaner, named Powersuite, and other third party
products ($1.8 million), and lower sales of the MPEG-based products acquired in
the acquisition of Wired, Inc.  Net
sales from products acquired from Integrated Computing Engines, Inc. in August
2000 totaled $2.1 million in the first six months of fiscal 2001 versus $0 for
the first six months of fiscal 2000. 
Net sales of software Internet tools for the first six months ended May
31, 2001 decreased 47.4% to $9.0 million from $17.1 million for the first six
months of fiscal 2000.  Of the $8.1
million decrease in net sales of software Internet tools, $5.2 million was due
to a reduction in sales of products acquired as part of the merger with Digital
Origin, Inc.  We anticipate this trend
of lower year-over-year net sales to continue for the remainder of this
year.  Net sales of digital video
systems for first six months ended May 31, 2001 decreased 27.4% to $12.2
million from $16.8 million for the first six months of fiscal 2000.  We attribute the decrease in sales to lower
unit sales and average selling prices of our digital video systems due to
increased competition and lower demand and anticipate this trend in lower
year-over-year sales will continue for the remainder of fiscal 2001.  Net sales from services for first six months
ended May 31, 2001 were $4.8 million, an increase of $.2 million from the first
six months of fiscal 2000.    During the
second quarter of fiscal 2001, we closed our encoding and hosting services
division, named Streamriver, and sold certain assets related to the
business.   Net sales from Streamriver
were $0.3 million in the first six months of fiscal 2001.

Gross profit.  Gross profit decreased 35.7% to $14.5
million in the first six months of 2001 from $22.6 million in first six months
of fiscal 2000.  Overall gross profit as
a percentage of net sales decreased to 55.8% in the first six months of 2001
from 58.7% in the first six months of fiscal 2000.  Specifically, gross profit as a percentage of net product sales
decreased to 51.6% in the first six months of 2001 from 55.0% in the first six
months of fiscal 2000, while gross profit as a percentage of net sales of
services decreased to 74.3% in the first six months of 2001 from 86.2% in the
first six months of fiscal 2000.  The
percentage decrease in services resulted from increased costs related to
encoding and hosting services.  Gross
profit as a percentage of net product sales decreased due to lower average
selling prices for our digital video systems. 
We currently forecast overall gross profit as a percentage of net sales
will be relatively stable over the next several quarters, however, due to
uncertainty regarding the level of sales and potential fluctuations in the mix
of products sold, gross profit as a percentage of net sales may vary from one
quarter to another.

Research
and development.  Research and
development expenses increased 4.6% to $8.0 million in the first six months of
2001 from $7.6 million in the first six months of fiscal 2000.  Research and development expenses consist
primarily of salaries and related benefits, consultants, outside services,
occupancy and depreciation. At this time, we anticipate research and
development expenses will remain relatively stable, in dollar terms, over the
next several quarters as we continue to develop new products and maintain
existing products.

Selling
and marketing.  Selling and marketing
expenses decreased 8.1% to $9.8 million in the first six months of fiscal 2001
from $10.6 million in the first six months of fiscal 2000.  Selling expenses consist primarily of
salaries and related benefits, commissions, travel, occupancy and
depreciation.  Marketing expenses
consist primarily of salaries and related benefits, trade shows, seminars,
advertising, sales literature and lead generation activities.  The decrease in selling and marketing
expenses resulted primarily from reduced marketing expenses including salaries
and related benefits, advertising and lead generation activities.  We currently anticipates that our selling
and marketing expenses will decrease over the next several quarters due to the
closing of Streamriver and more generally we intend to take actions to decrease
our other selling and marketing expenses to be more in line with our forecasted
lower level of sales.

General
and administrative.  General and
administrative expenses decreased 32.7% to $3.3 million in the first six months
of fiscal 2001 from $5.0 million in first six months of fiscal 2000.  General and administrative expenses include
the cost of human resources, finance, information technology, legal and other
administrative functions of the Company. 
The decrease in general and administrative expenses resulted primarily
from lower employee, employee-related and legal expenses.  We currently anticipates that our general
and administrative expenses will decrease over the next several quarters as we
reduce our expense structure and reduce our general and administrative expenses
to be more in line with our forecasted lower level of sales.

As
a result of the merger with Digital Origin, Inc. on May 9, 2000, we assumed a
significant allowance for doubtful accounts balance of $3,803,000 related to
several old, uncollected amounts owed to Digital Origin, Inc.   As of November 30, 2000, the allowance for
doubtful accounts totaled $3,812,000, of which $3,401,000 relates to Digital
Origin.  As of May 31, 2001, our
allowance for doubtful accounts totals $2,945,000 of which $2,458,000 relates
to Digital Origin.  During the second
quarter of 2001, we wrote-down $213,000 of the remaining balance against the
allowance for doubtful accounts.  One
account represents approximately $2.2 million of the allowance account and is
awaiting resolution in pending litigation (See Note 9).

Amortization and write-down of
acquisition-related intangible assets. 
We recorded an expense for the amortization and write-down of
acquisition-related intangible assets of $3.4 million in the first six months
of fiscal 2001 compared to $.8 million in the first six months of fiscal
2000.  Included in the $3.4 million was
amortization expense associated with acquisitions that took place subsequent to
Q2 2000, contingent purchase price associated with the Terran acquisition and a
write-down of goodwill of $.9 million related to the acquisitions of 21st
Century Media LLC and J2 Digital Media, Inc. 
These two acquisitions were combined to form Streamriver, which was
launched in June 2000.  During the first
quarter of fiscal 2001, the goodwill from these two acquisitions was determined
to be impaired due to continued operating losses in Streamriver and the
uncertainty surrounding our ability to recover the goodwill through future cash
flows.  During the second quarter of
fiscal 2001, we closed Streamriver and sold some of the assets related to the
business.

Restructuring
charge.  During the first six months of
fiscal 2001, we recorded a restructuring charge of $795,000 in connection with
a reorganization of the selling and marketing organizations that resulted in
severance payments to terminated employees and the closing of Streamriver.  There was no similar expense recorded in the
first six months of fiscal 2000.

Interest
income, net.  Interest income decreased
65.7% to $.2 million in the first six months of fiscal 2001 from $.6 million in
the first six months of fiscal 2000. 
The decrease in interest income is due to lower cash and cash equivalent
balances in fiscal 2001 versus 2000. 
During fiscal 2000, we purchased several companies utilizing our
existing cash and cash equivalents to pay for these acquisitions.  We currently anticipate interest income will
decline in fiscal 2001 versus 2000 due to lower cash balances.

Other
income (expense), net.  Other expense
was $.3 million in the first six months of fiscal 2001 compared to other
expense of $.02 million in the first six months of fiscal 2000.  The increase is due to foreign exchange
losses on intercompany transactions with our foreign subsidiaries.

Tax
provision. We did not provide for a tax provision in the first six months of
fiscal 2001 due to the net loss incurred during the period and our expectation
of no taxable income for the year.

Net
loss.  As a result of the above factors,
we had a loss for the first six months of fiscal 2001 in the amount of ($10.8)
million, or ($0.88) per share, compared to a net loss of ($3.5) million, or
($0.30) per share, in the first six months of fiscal 2000.Comparison of First
Fiscal Quarter of 2001 to First Fiscal Quarter of 2000

Liquidity and Capital Resources

We
have funded our operations to date primarily from public offerings of equity
securities and cash flows from operations. 
As of May 31, 2001, the Companys principal sources of liquidity
included cash and cash equivalents and marketable securities totaling
approximately $9.7 million.

For
the six months ended May 31, 2001, cash used in operating activities was
approximately $5,997,000 compared to approximately $4,177,000 for the same
period a year ago.  The Company incurred
a net loss of $10,805,000 offset by significant non-cash items, including
depreciation and amortization, in the amount of $4,961,000.   A significant portion of the cash used in
operating activities is attributable to a significant reduction in accounts
payable of $1,638,000.  Accounts
receivable provided cash in operating activities in the amount of $2,774,000
due to the timing of sales in the quarter and the subsequent collection of
those sales, which resulted in days sales outstanding of 45.   Inventory provided cash in operating
activities in the amount of $848,000 during the first six months of fiscal
2001, compared with inventory utilizing cash in operating activities of
$2,615,000 in the year ago period.

Net
cash provided by investing activities was approximately $3,865,000 during the
six months of fiscal 2001, compared to cash used in investing activities of
approximately $2,645,000 for the same period a year ago.  Cash provided by investing activities during
the first six months of fiscal 2001 consisted of net proceeds from the sale of
marketable securities.  The proceeds
from the sales of marketable securities was used to fund purchases of equipment
and working capital needs due to the net loss incurred the first six months of
fiscal 2001.

Cash
used in financing activities during the first six months of fiscal 2001 was
approximately $1,345,000, compared to cash provided by financing activities of
$3,770,000 for the same period a year ago. 
Cash used in financing activities resulted from the non-recurring
payment of an acquisition-related note payable in the amount of $1,492,000, offset
by $225,000 from proceeds from the issuance of common stock pursuant to stock
plans.  The reduction in cash provided
by financing activities that came from proceeds from the issuance of common
stock pursuant to stock plans is due to a significantly lower price for the
Companys common stock in the first six months of fiscal 2001 versus the same
period a year ago.  Given the recent
reduced price of the Companys common stock, we do not currently expect cash
provided by proceeds from the issuance of common stock pursuant to stock plans
to be a significant source of liquidity in fiscal 2001.

As
of May 31, 2001, the Companys principal sources of liquidity included cash and
marketable securities.  The Company
believes that its current cash, marketable securities and cash provided by
future operations will be sufficient to meet the Companys working capital and
anticipated capital expenditures requirements for at least the next twelve
months.  Although operating activities
may provide cash in certain periods, to the extent the Company experiences
growth in the future, its operating and investing activities may require
significant cash.  Consequently, any
such future growth may require the Company to obtain additional equity or debt
financing.  In addition, we may consider
the sale of certain assets to raise capital.

Cautionary
Statements

This
Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q.  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.

Merger and Acquisition Related Risks.During fiscal year ended November 30, 2000,
we completed the merger with Digital Origin and the acquisitions of Wired, 21st
Century, and J2. In addition, we completed the acquisition of certain assets of
ICE.  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 business or
successfully integrate any 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 determine to
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 on existing and proposed product lines and services,
the divestiture of operations and personnel of the acquired companies, 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.

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 software
and systems products and services are intensely competitive and rapidly changing.  We are targeting the emerging market of new
Internet-based broadcasters that are building streaming media web sites and
businesses and institutions that are adding Internet video to their web sites.  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.

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 addition, new
product announcements by our competitors and 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 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.

Rapid Technological Change.The market for our products is characterized
by rapidly changing technology, evolving industry standards and frequent new
product introductions.  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., AnyStream,
Inc., Adobe Systems Inc., Apple Computer Inc., Avid Technology, Inc., Discreet
(a division of Autodesk, Inc.), FAST Electronic GmbH, Loudeye Technologies,
Inc., Matrix Electronic Systems Ltd., Pinnacle Systems, Inc., Real Networks
Inc., and Sonic Foundry, Inc.  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 us,
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 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 it 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 and competition with Apple Computer, Inc.As a competitor, Apple Computer, Inc.
(Apple) could, in the future, inhibits 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 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., Raytheon Company, 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.

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 1, Legal Proceedings of
Part II, Other Information and Note 9 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 Distributors and
Resellers.We rely primarily on our worldwide network
of independent distributors and VARs to distribute and sell our products to
end-users.  Our distributors and
resellers generally offer products of 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 or 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.



Internet-based Sales.In
the second half of fiscal 1999, we implemented e-commerce systems allowing
customers to purchase our products directly from one of our web sites.  Since implementation of the e-commerce
system, our sales through this channel have increased as a percentage of our
total sales. There can be no assurances that our customers will continue to
purchase our products from one of our web sites or that these web sites will
not experience technical difficulties thereby causing customers to delay
purchases.  Any significant technical
difficulties could have a material adverse affect on our business and operating
results and negatively affect the price of our common stock.

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.

History of Losses.We have incurred substantial operating
losses during the current year and in each of the past five fiscal years.  We incurred operating losses of
approximately $10.7 million for the first six months of fiscal 2001 and $10.9
million, $2.0 million, $13.9 million, $27.2 million and $16.0 million for
fiscal 2000, 1999, 1998, 1997 and 1996, respectively.  As of May 31, 2001, we had an accumulated deficit of
approximately $200.2 million.  Over the
past three 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 2000, our stock price
fluctuated between a low of $2.125 per share and a high of $52.75 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.

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 will be
complete.  We maintain operations within
the European Union and have prepared for the Euro conversion.  We do not expect the costs associated with
the transition to be 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 3.  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 or accounting would be required under Statement
of Financial Accounting Standards No. 133Accounting for Derivative Instruments and Hedging
Activities ( SFAS No. 133).  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.

PART
II.  OTHER INFORMATION

Item
1. Legal Proceedings

i) 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.  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.

(ii) 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 have
now filed their third motion to dismiss.

(iii)        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 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.
Deutsche Financial, Inc. has filed an appeal, which is expected to be heard
during 2001.

(iv)       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 injunctive relief, treble damages, interest, costs and fees.  In November 1999, we filed an answer and
counterclaim denying any infringement. 
We intend to vigorously defend the lawsuit.

(vi) On May 9, 2001, a lawsuit was filed
against the Company by Wired, a California general partnership, in the Santa
Clara County Superior Court.  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.  The Company intends to vigorously
defend the lawsuit.

(v) 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

The Company held an annual meeting of
stockholders on June 12, 2001, at which the stockholders approved the following
proposals by the number of shares of Common Stock voted below:

Proposal

(1)  Election of Directors
  Number
  of SharesVoted
  For
  AgainstJohn A. Molinari
  10,920,348
  35,181Maurice L. Castonguay
  10,847,404
  108,125Carl Rosendahl
  10,758,789
  196,740Paul J. Severino
  10,920,740
  34,789

Number of Shares(2)
  Voted
  For
  Voted
  Against
  AbstainedIncrease the number of
  shares of Common Stock Authorized for issuance under the 1986 Employee Stock
  Purchase Plan by 500,000 shares to 1,700,000
  10,153,937
  313,661
  487,931Item
6. Exhibits and Reports on Form 8-K

a)  Exhibits

Exhibits required as part of this
Quarterly Report on Form 10-Q are listed in the exhibit index on page 28.

b)  Reports on Form 8-K

There
were no reports on Form 8-K during the quarter ended May 31, 2001.

SIGNATURES

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

Media
100 Inc.Date:
  July
  16, 2001
  By:
  /s/
  Steven D. SheaSteven
  D. SheaChief Financial OfficerTreasurerEXHIBIT INDEX



Number
  Description10.2
  1986
  Employee Stock Purchase Plan, as amended through June 12, 2001.10.3
  Key
  Employee Incentive Plan (1992), as amended through June 12, 2001.