U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

     [X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
          OF 1934.

     [ ]  TRANSITION  REPORT  UNDER  SECTION  13 OR 15(d)  OF THE  SECURITIES
          EXCHANGE ACT OF 1934.

                     For Fiscal Year Ended December 31, 1996
                        Commission File Number: 333-09935

                          MULTIMEDIA ACCESS CORPORATION
        (Exact Name of Small Business Issuer as Specified in its Charter)

              Delaware                            75-2528700
      ------------------------       ------------------------------------
      (State of Incorporation)       (I.R.S. Employer Identification No.)

      2665 VILLA CREEK DRIVE, SUITE 200 DALLAS, TEXAS 75234 (972) 488-7200

            (Address  including  zip  code,  area code and  telephone  number of
Registrant's executive offices.)

Securities registered pursuant to Section 12(b) of the Act:            None

Securities registered pursuant to Section 12(g) of the Act:



Title of Each Class                    Name of Each Exchange on Which Registered
-------------------                    -----------------------------------------
Common Stock, $.0001 par value         NASDAQ
Redeemable Common Stock Purchase 
  Warrants                             NASDAQ

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  Exchange  Act  during the past 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      No X
                                                           ---    ---

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ X ]

Issuer's revenues for its most recent fiscal year:   $1,095,012
                                                     

As of March 25, 1997,  7,906,291  shares of the  Registrant's  common stock were
outstanding.

State the  aggregate  market  value of the voting  stock held by  non-affiliates
computed by reference  to the price at which the stock was sold,  or the average
bid and asked  prices of such stock,  as of a specified  date within the past 60
days: As of March 25, 1997 - $23,667,473.  This amount was computed by reference
to the average of the bid and asked prices of registrant's common stock.

Documents incorporated by reference:        Proxy Statement, Part III

<PAGE>


                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

Item No.                                                                                      Page
--------                                                                                      ----

             Glossary                                                                             3
                          Part I

<S>                                                                                        <C> 
     1.      Description of Business                                                         4 - 10

     2.      Description of Property                                                             10

     3.      Legal Proceedings                                                                   10

     4.      Submission of Matters to a Vote of Security Holders                                 10

                          Part II

     5.      Market for Registrant's Common Equity and Related Stockholder Matters               11

     6.      Management's Discussion and Analysis of Financial Condition and Results        11 - 12
             of Operations

     7.      Consolidated Financial Statements                                              13 - 32

     8.      Changes in and Disagreements with Accountants on Accounting and Financial           33
             Disclosure

                         Part III

     9.      Directors, Executive Officers, Promoters and Control Persons; Compliance            33
             with Section 16(a) of the Exchange Act

     10.     Executive Compensation                                                              33

     11.     Security Ownership of Certain Beneficial Owners and Management                      33

     12.     Certain Relationships and Related Transactions                                      33

     13.     Exhibits List and Reports on Form 8-K                                               33


</TABLE>

                                       2
<PAGE>



                                    GLOSSARY

Algorithm:                  A step-by-step problem solving procedure.

Asynchronous:              That which takes place in  different  time frames and
                           is accessed at the user's convenience.

Bandwidth:                 The  amount of  information  that can be  transmitted
                           across an information channel.

Frame Relay:               Packet data  protocol  with less error  correction to
                           speed up communication over high quality connections.

Intranet:                  A private Internet.

Internet:                  A network of computer networks using TCP/IP protocol.

ISDN:                      (Integrated  Services  Digital  Network)  - a digital
                           network  that  provides  seamless   communication  of
                           voice,  video  and text  between  desktop  and  group
                           systems.   ISDN  is  expected   to  replace   current
                           telephone lines.

Kilobits:                  A  thousand  bits;  a  measure  of the  rate  of data
                           transmission.

LAN:                       (Local  Area  Network) - a private  computer  network
                           connecting  computers in the same  building or campus
                           using coaxial cable, twisted pair or multimode fiber.

MBONE:                     Multimedia broadcast capability over the Internet.

Multimedia:                A combination of multiple digitized data types: text,
                           sound,  computer-generated  graphics and  animations,
                           photographs and video.

NTSC:                      The standard for scanning  television  signals in the
                           US, Canada and Japan.

Packet:                    A  grouping  of  data,  typically  from  one  to  512
                           characters  in size,  which  usually  represents  one
                           transaction.

PCI Bus:                   A fast 32 bit PC bus for peripherals.

Protocol:                  A set of  rules  for  data  communications;  a set of
                           rules and procedures for establishing and controlling
                           the exchange of data between computers.

S Bus:                     A   proprietary   high   speed   interface   for  Sun
                           workstations.

Switched Architecture:     Any network or device in which  switching  is present
                           and is used to direct messages from the sender to the
                           ultimate recipient.

TCP/IP:                    (Transmission Control  Protocol/Internet  Protocol) -
                           the protocol used for packet  oriented  communication
                           between networked computers.

UTP:                       (Unshielded  Twisted Pair) - standard building wiring
                           currently used to transmit voice (telephone) and data
                           throughout an office or building.

WAN:                       (Wide Area Network) - a computer  network  covering a
                           geographic  area  larger  than  a  campus,  generally
                           linking multiple LANs.

Whiteboard:                A shared  drawing or graphics  session or  capability
                           between two remote computers.

World Wide Web:            A very large  collection of linked  Internet  servers
                           using a standard linking and display language.

                                       3
<PAGE>



                                     PART I


Item 1.  Description of Business

GENERAL

      MultiMedia  Access   Corporation   develops  and  markets  advanced  video
communications  products for the PC and workstation  marketplaces.  Applications
include  desktop   videoconferencing   ("DVC"),   Internet  and  Intranet  video
communications,  video-based training, video surveillance, distance learning and
high quality  workgroup video  communications.  While the Company sells its core
video Codec and video switching  technologies to value-added  resellers ("VARs")
and systems  integrators,  its primary  strategy is to develop and market  video
communications applications using its technologies.

      The Company,  in September  1996,  entered into a reseller  agreement with
Unisys, a nationwide systems integrator and reseller, to purchase and resell the
Company's  Viewpoint  VBX(TM).  The Viewpoint VBX(TM) is a PC-based video switch
which provides workgroup video communications over existing telephone or network
wiring commonly found throughout office buildings. Unlike commercially available
competitive  products,  the Viewpoint VBX(TM) connects over 100 users per switch
and distributes full-motion video at distances up to 3,500 feet via existing UTP
wiring.

      The Company  entered into a licensing  agreement with Boca Research,  Inc.
(Boca), a major modem and PC peripheral supplier,  to manufacture and market the
Company's FamilyFone(TM) and its ISDN videoconferencing upgrades in January 1996
and  delivered  its  first  video  surveillance   system  to  Alcatel,  a  major
communications  systems  integration  company, in the first quarter of 1996. The
Company  believes  it  sells  the  only  currently  available   standards-based,
multi-algorithm  video and audio Codec product for WindowsNT and is developing a
multi-algorithm Codec for Sun workstations.

INDUSTRY BACKGROUND

      Videoconferencing  was introduced in the late 1970s with the establishment
of  videoconferencing  room systems.  To transmit "live" video images (which may
contain over 90 million bits per second of data) over telecommunications  lines,
the  video  data  must be  digitized  and  significantly  compressed  to fit the
capacity  of data  networks  and  telephone  lines  (as low as  28,800  bits per
second).  As video  data is  compressed,  redundant  data is  eliminated.  After
transmission, the video image is reconstructed for display at the receiving end.

      The  quality  of  the  reconstructed  image  is  a  function  of  (1)  the
sophistication of the video and audio compression algorithms,  (2) the amount of
real-time  data which can be  transmitted  over  networks,  (3) the power of the
video and audio coder-decoder  hardware,  and (4) the speed and power of PCs and
workstations.

      The Company believes  low-cost  videoconferencing  and other video network
services are now attainable  because the performance  and  capabilities of these
four  key  elements  have   recently   improved   significantly,   making  video
communications available at reasonable cost.

      Videoconferencing  room  systems use  expensive  digital  lines and permit
communication only between compatible  facilities.  These systems currently cost
between  $20,000  and  $100,000  and are  typically  used by large  corporations
primarily for  intra-company  communication  between  different  locations.  The
Company  believes that the high cost of  videoconferencing  room systems and the
logistical  problem of  scheduling  and  availability  have limited their use to
large corporations.

      According  to  industry  sources,  the video  communications  industry  is
forecast to be $3.6  billion by 1999 and the  emerging  desktop  segment of that
industry  is  forecast  to exceed $1.2  billion by 1999.  The PC  dominates  the
desktop  computing market with 1995 sales of over 57 million units worldwide and
an estimated 100 million new PCs projected to be sold annually by 1999. Industry
sources  estimate  that  over  30% of the  new PCs  sold  in  1996  (principally
multimedia  capable PCs) will be purchased by consumers for use in the home. The
Company believes it has developed products which position it to benefit from the
growth of these markets and which will have  functions,  performance and cost to
successfully  compete  in the  rapidly  emerging  desktop  video  communications
industry.

      The Company  currently  offers a variety of products with differing  video
quality  levels:  NTSC TV  quality  with the  Viewpoint  VBX(TM)  video  switch,
business quality with the Osprey-1000(TM)  using ISDN lines and consumer quality
video


                                       4
<PAGE>



with  FamilyFone(TM)  using modems over ordinary telephone lines. The resolution
and  framerate  of the video  varies with the  bandwidth  of the  communications
connection.  The Company has designed its products in response to the increasing
demand for low-cost desktop  videoconferencing  and for real-time  collaborative
computing  applications  using telephone and computer  networks.  The Company is
also  preparing  to  market  video  products  for  the  Internet  and  corporate
Intranets.

CORPORATE INTRANET VIDEO

      The Company first  demonstrated  its packet  (TCP/IP-based)  network video
technologies  on the  Internet's  MBONE and on corporate  Intranets in 1993. The
Company introduced its first commercial product,  Viewpoint-PRO(TM),  one of the
first TCP/IP-based  videoconferencing  systems designed specifically for LAN and
WAN  applications  in 1994.  This system  enables  users to engage in real-time,
full-color,   full-motion   video  over  their   existing   computer   networks.
Viewpoint-PRO(TM)  provides both  point-to-point  and up to five site multipoint
videoconferences.  The system does not require  expensive MCUs,  which typically
cost $20,000 or more, that ISDN-based  products require to complete a multipoint
vidcoconference.  Viewpoint-PRO(TM)  also  includes a  one-to-many  broadcasting
capability called ViewCast(TM).  With ViewCast(TM),  "live" broadcasts,  such as
corporate  briefings  or  news  broadcasts,  or  pre-recorded  content,  such as
training videos and product and services  information,  can be multicast over an
existing  corporate  data network.  Viewpoint-PRO(TM)  was the first  commercial
product  offering video multicast using both FTP Software,  Inc.'s and Microsoft
Corporation's  TCP/IP-multicast  PC software.  Each  Viewpoint-PRO(TM)  includes
software  to enable a Windows  PC with a sound  card to  receive  and  display a
ViewCast(TM). Viewpoint-PRO(TM) bundles, as an option, third-party collaborative
computing  software  which  allows  videoconference   participants  to  share  a
whiteboard or a PC application.

CONSUMER VIDEO

      The Company's  FamilyFone(TM)  and  WorkFone(TM)  products are expected to
provide affordable, good quality video communications capabilities to consumers,
small businesses and corporations  over standard  telephone lines with 28.8 Kbps
modems and over the Internet.  Examples of  FamilyFone(TM)  uses might  include:
families and grandparents  exchanging "live" video birthday  greetings with each
other,   college  students   videoconferencing   with  their  parents  or  small
office/home  office  business owners  accessing video training  courses over the
Internet.

      In January 1996,  the Company  signed a licensing  agreement with Boca. In
this multi-year contract, the Company licensed its hardware and related firmware
and application software for videoconferencing over standard telephone lines and
over the Internet.  Pursuant to the licensing  agreement,  the Company  receives
license  fees for the design and  on-going  royalties  for its  firmware and its
videoconferencing  applications  with every  shipment of the BocaPRO Video Phone
Elite,  which was introduced by Boca in August 1996 at a suggested  retail price
of $399.  The  Company's  prospects  will be  significantly  affected  by Boca's
ability  to  market  the  product  and  upon the  marketing  efforts  of  Boca's
resellers.

VIDEO CODECS

      The Company  develops  and markets  standards-based  video and audio Codec
products that enable multimedia applications for both PCs and workstations.  The
Osprey Codec captures, digitizes, compresses,  transmits, receives, decompresses
and displays  full-motion  video.  The  Osprey-1000(TM)  product  line  supports
multiple video and audio compression formats for both PCs and workstations which
are  equipped  with the now  standard  PCI-bus.  The Company is  developing  the
Osprey-1100(TM)  multi-algorithm  Codec for the existing  workstations  from Sun
that are equipped  with the S-bus.  The Company  believes it is the only company
currently  providing   standards-based,   multi-algorithm   Codec  products  for
WindowsNT.  The Osprey Codecs also support Windows 3.1,  Windows95,  Solaris and
UNIX operating systems.

      SLIC-Video(TM)  is a video  capture  product that enables Sun  workstation
users to view uncompressed,  high-quality video and to capture full-motion video
frames.  SLIC-Video(TM)  software  also provides  access to closed  caption data
which allows key words to act as filters and thereby  control video displayed on
the screen.  SLIC-Video's(TM)  compatibility  with standard Sun products  allows
this  product to support a wide  variety of video  applications  on existing Sun
workstations.

      The Company intends to continue to establish strategic product development
alliances  with  companies  whose  products  and  technologies   complement  the
Company's strategic direction.  With rapidly evolving  technologies in the areas
of  video,  audio and  networks,  the  Company  intends  to engage in  strategic
alliances that offer expanding access to key new  technologies  that can be part
of current and future products.

                                       5
<PAGE>


VIDEO SWITCHING HUB AND UTP VIDEO DISTRIBUTION

      The Company's  Viewpoint VBX(TM) product provides  high-quality  workgroup
video   communications   with  shared   gateways   to  WANs  and  legacy   video
teleconferencing  room systems.  The Viewpoint VBX(TM), a PC-based video switch,
employs a switched  architecture to distribute  uncompressed,  full-motion video
within a building or campus via existing UTP wiring.  Shared wide area  gateways
allow  other  Viewpoint  VBX(TM)  networks  to  be  interconnected   and  enable
connection to standards-based  room or desktop  videoconferencing  products from
third-party  manufacturers.  The  switching  architecture  employed by Viewpoint
VBX(TM) allows point-to-point, multipoint and broadcast modes of operation to be
supported.  Both small  workgroups  and large  building  or campus  networks  of
hundreds of users can be supported.

      The  Viewpoint  VBX(TM)  product line  includes a multimedia  switch,  WAN
interfaces and desktop  components.  The multimedia  switch utilizes standard PC
components and the Company's video switching  technology and software to provide
an expandable  solution for video  communications  within an office  building or
campus.  Video and audio are  distributed  with NTSC  quality by  utilizing  the
Company's  UTP  transceiver  technology  to send video over  existing  wiring at
distances of up to 3,500 feet. An existing LAN or telephone  system is used only
for non-video communications (control signals) between the multimedia switch and
each user,  eliminating  overload  of the  computer  network as  workgroups  are
video-enabled.

      The  Viewpoint  VBX(TM)  also  provides  shared-resource  access  to video
sources and storage devices located anywhere within the network. VCRs, videodisk
players,  broadcast or cable TV and Direct Broadcast Satellite (DBS) programming
sources may be connected to the switch over  unshielded  twisted pair or coaxial
cabling and distributed on-demand to any equipped desktop or room.

      Desktop PCs, TV monitors and room audio and video system  connections  are
accommodated  using the UTP  transceivers  which connect standard NTSC video and
audio  devices  to  existing  building  wiring  systems.  Viewpoint  VBX(TM)  is
compatible with standard NTSC cameras,  audio  components,  speakerphones and PC
video  peripherals  to form a complete  solution.  The Viewpoint  VBX(TM) client
software  allows users to place calls through a personal or system-wide  dialing
directory,  to originate  and  subscribe to "1ive" video  broadcasts,  to access
pre-recorded video content or to establish a multipoint videoconference.

INTERNET VIDEO

      The Company is developing  and plans to market a variety of Internet video
products  that take  advantage of the growing  popularity of the World Wide Web.
The popularity of the Web has resulted in  subscribers  seeking to improve their
Internet  access  capabilities  which in turn has driven growth in the installed
base of 28.8 Kbps modems, ISDN adapters and cable modems.  These improvements in
access  along  with  advances  in video and  audio  compression  technology  and
standards  make  possible  new  forms  of  motion-video   content  for  Internet
publishers and their target audiences.

      The Internet has taken on new dimensions including real-time communication
and  entertainment.  In both cases,  the Company  believes  video  communication
products and  technologies  will play an important role.  While certain types of
information on an Internet Web page can be conveyed with graphics, animation and
static images, others require or are enhanced by audio and motion-video.

      The Company is currently developing and plans to market three new Internet
video  products and software  players  (downloaded  freely to  end-users).  Each
product is an enhancement of or modification to existing  Company  designs,  but
incorporates  new software  and firmware  modules.  These  products  address the
rapid-growth,  emerging market  opportunity  for the Internet video  publishing,
Internet video  broadcasting and Internet video call center  applications  which
are described below.

INTERNET VIDEO PUBLISHING

      Internet  video  publishing  (or  video-on-demand)  is currently  the most
widespread  implementation of video on the Internet.  Video publishing refers to
stored-video  content,  designed  to  be  played  back  to a  user's  system  in
real-time.  The Company believes video publishing is becoming popular because it
is far less technically demanding than "live" video production and transmission.

                                       6
<PAGE>




      Internet video publishing  entails  compressing a video "clip" and storing
it on a server. The user is connected to the server by accessing a Web page that
holds the address for the target  video  server and then  establishing  a direct
connection  to that  server.  The  Company's  video Codec  technologies  will be
utilized  with  Internet  publishing  software   applications   currently  under
development by the Company.

INTERNET VIDEO BROADCASTING

      Video  broadcasting has recently come to the Internet and is characterized
by one-way "live" audio and motion-video.  Video broadcasting presents technical
challenges such as the limited bandwidth and multi-cast capabilities of most Web
sites.  However,  Internet video broadcasting is well suited to delivering video
to the office (without additional  hardware),  to distance learning sites and to
special interest broadcast recipients. The Company's proposed products are being
designed  to  work  in  conjunction   with  Web  server  software  to  establish
connections between multiple users and a broadcast source.

INTERNET VIDEO CALL CENTER

      The Internet video call center is a new concept to the Internet,  allowing
one-way  "live"  video and two-way  audio  across the  Internet.  The term "call
center" is used because the technology is well suited to replacing existing call
centers such as help devices,  catalog  ordering  centers,  reservation  systems
(hotels,  airlines) and corporate  receptionists.  The Company believes that the
entertainment possibilities are also significant. The Internet video call center
has the potential to increase on-line  purchases over the Internet.  The Company
believes its core technologies can be used in video call center applications and
is in the early stages of product development.

VIDEO SURVEILLANCE

      The  Company   believes  that  commercial  and   residential   video-based
surveillance products represent another strong business opportunity. The Company
is  creating   effective   solutions  for  customers  that  are  unique  in  the
marketplace.   In  the  Company's  opinion,  today's  expensive  closed  circuit
surveillance   systems  can  be  replaced   with   systems   that  include  more
functionality  at lower cost.  The  Company  intends to develop  alliances  with
communication  system integrators and security  resellers,  distributors  and/or
suppliers to address this market.

      The Company has delivered its first video surveillance  system to Alcatel,
a major  communications  systems integration company in Richardson,  Texas. This
industrial  surveillance  system  integrates  standard alarm and sensing devices
(e.g.  door magnets,  motion  detectors,  cameras,  etc.),  and allows a central
operator  to monitor and inspect  hundreds of remote  sites over the  customer's
existing frame relay computer network.

      Following an alarm, the surveillance system selects the appropriate camera
and one of its preset  positions and captures 10 frames of full  resolution NTSC
video.  The system also sends an alarm signal to a central  monitoring  computer
via a  frame  relay  packet  network.  The  security  personnel  at the  central
monitoring  station  can then  observe  the  remote  alarmed  location,  via the
network,  using the camera's  remote pan,  tilt and zoom  features.  The Company
believes  that high  quality  video  images will assist  security  personnel  in
verifying the accuracy of alarms and in prosecuting intruders.

      The  surveillance  system  delivered  to Alcatel  is based  upon  existing
Viewpoint-PRO(TM) technology.  Another version of the system designed to operate
over phone lines is scheduled to be available in early 1997.

MARKETING AND SALES

      The Company will market its products  primarily via third-party  resellers
including,  but not limited to, OEMs, VARs and system integrators.  In addition,
the  Company   plans  to  enter  into   strategic   alliances   with   carriers,
telecommunications suppliers and information providers.

      For mass market and high volume  products  the Company  will depend on its
major OEM customers who provide access to significant marketing channels.  These
OEMs have established  relationships  with  manufacturers and resellers and will
pay  licensing  fees and royalties to bring new leading edge products to market.
The Company also intends to establish distribution  relationships with resellers
and integrators who service corporate,  institutional and government  customers.
These  relationships are expected to be non-exclusive and may require that these
partners participate in the marketing,  advertising and technical support of the
Company's products.

                                       7
<PAGE>

      The Company believes its Viewpoint  VBX(TM) product will have an appeal to
resellers  such as PBX  suppliers,  carriers  (including  cable  companies)  and
network equipment suppliers.  The Company additionally intends to form strategic
alliances  with  resellers  outside the US, where it is especially  important to
partner with entrenched suppliers.

      The Company intends to expand its marketing  activities over the Internet.
The Company believes its products enable new and inventive ways to sell products
over the Internet. The Company intends to use its own products to increase sales
productivity  and to pursue alternate low cost selling  strategies.  The Company
plans to continue  modest  trade show  participation  and  advertising  in trade
publications.

      The Company's  Internet related products will be marketed primarily to Web
designers and early sales will be conducted  primarily through the Company's Web
page with minimal sales  support.  The Company plans to bundle its products with
other  popular  Web  development  products  and/or  license  its  subsystems  to
resellers to  integrate  with their Web  development  products.  Such  strategic
business  alliances are expected to provide Web developers  with a rich array of
innovative capabilities with the familiarity of existing tools.

TARGET MARKETS

      The Company's  target markets can be defined  broadly to be anywhere video
communications can be added as a peripheral to installed desktop  computers,  or
to  narrower  vertical  markets  in  distance  learning,  video-based  training,
multimedia authoring,  Internet and Intranet broadcasting and surveillance.  The
Company believes that the growth of video  communications  during the late 1990s
will  be as  significant  as the  growth  of LANs in the  1980s.  The  Company's
strategy  is to provide  video  communications  products  which will  connect to
available  networks,  including  standard telephone lines, data networks and the
Internet.  The Company  believes  that its video  communications  products  will
enhance  the  increasing  demand  for  connectivity  between  today's  homes and
offices.

      Strategic  alliances  with  large  OEMs,   communication-oriented   system
integrators and other resellers  should enhance the Company's  ability to supply
video  communication  products  to Fortune  1000  companies,  federal  and state
governments,  PC  manufacturers,   peripheral  suppliers  and  Internet  service
providers.

PRODUCTION AND SUPPLY

      The Company builds its current products in small quantities using contract
manufacturers  in Texas and North Carolina.  The operations  personnel in Dallas
are responsible for parts planning, procurement and final test and inspection to
quality standards.  While the Company believes its products are not difficult to
manufacture,  there  can be no  assurance  that the  Company's  products  can be
manufactured on a wide-scale basis on commercially  reasonable terms, or at all.
The Company plans for most high volume  production  to be handled  through large
OEMs or contract manufacturers.

      The Company has been and will  continue to be dependent  on third  parties
for the supply and manufacture of its components and electronic parts, including
standard and custom designed components. The Company generally does not maintain
supply agreements with such third parties but instead  purchases  components and
electronic parts pursuant to purchase orders in the ordinary course of business.
The  Company  is  substantially  dependent  on the  ability  of its  third-party
manufacturers  and suppliers to, among other things,  meet the Company's design,
performance and quality specifications.

      The electronics  industry from time to time experiences  short supplies of
certain high demand components, which may adversely affect the Company's ability
to meet its  production  schedules.  Failure of  manufacturers  or  suppliers to
supply, or delays in supplying,  the Company with components,  or allocations in
the  supply  of  certain  high-demand  components  could  adversely  affect  the
Company's  operations  and ability to meet  delivery  schedules  on a timely and
competitive basis.

INSTALLATION, SERVICE AND MAINTENANCE

      Many of the  Company's  new  products  will be customer  installable.  The
Company  plans to  contract  with  independent  third  parties to provide  field
installation  and support.  The Company also plans to maintain a small technical
support  group and will also depend on its  resellers to install and service its
products.

                                       8
<PAGE>

      The Company offers 12 to 36 month limited warranties covering  workmanship
and  materials,  during which period the Company or its  resellers  will replace
parts  or make  repairs.  The  Company  also  maintains  an  in-house  staff  of
engineering  personnel  and offers  telephone  support to assist  resellers  and
end-users during normal business hours.

RESEARCH AND DEVELOPMENT

      The Company's  development  efforts during 1995 were devoted to the design
and development of the Osprey-1000(TM)  PCI-based  multi-algorithm  video Codec,
the SLIC-Video(TM)  video capture card,  enhancements to the  Viewpoint-PRO(TM),
design and integration of the surveillance system delivered to Alcatel,  and the
development of the Viewpoint VBX(TM) video switching hub.

      Total research and  development  expense for 1996 was  approximately $ 2.0
million.

      The Company  utilizes its core  technologies to create  multiple  products
aimed at different markets. Software modularity is a major strategy which allows
the  Company  to develop  different  vertical  applications  using  modules  and
components  previously developed for other products.  The Company's products are
characterized  by rapidly  changing  technology  and evolving  standards,  often
resulting in product obsolescence or short product life cycles. Accordingly, the
Company's  ability  to  compete  will  depend in large  part on its  ability  to
introduce its products in a timely manner,  to  continually  enhance and improve
its hardware and software products and to maintain  development  capabilities to
adapt  to  technological  changes  and  advances  in  the  video  communications
marketplace.  There  can be no  assurance  that  competitors  will  not  develop
technologies  or products  that render the  Company's  systems  obsolete or less
marketable, or that the Company will be able to keep pace with the technological
demands of the marketplace or successfully  enhance and adapt its products to be
compatible with newly developed products,  technologies and software, or satisfy
industry standards and the needs of its consumers and potential consumers.

COMPETITION

      The market for DVC systems is highly  competitive and characterized by the
frequent introduction of new products based upon rapidly changing  technologies.
The Company competes with numerous well-established  manufacturers and suppliers
of videoconferencing,  networking,  telecommunications  and multimedia equipment
and products,  some of which dominate certain market segments. In addition,  the
Company  is  aware  of  others  that  are  developing,  and in some  cases  have
introduced,   new  DVC  systems.  Most  of  the  Company's  competitors  possess
substantially greater financial,  marketing,  personnel and other resources than
the  Company,   have  established   reputations   relating  to  product  design,
development,    manufacture,    marketing    and    service    of    networking,
telecommunications  and video  products and have  significant  budgets to permit
them to implement extensive  advertising and promotional campaigns to market new
products in response to competitors.  Among the Company's direct competitors are
Target  Technologies,  Inc., VIVO Software,  Inc.,  Zydacron,  Inc., VCON, Ltd.,
Corel  Corporation  and VideoLAN  Technologies,  Inc. In  addition,  electronics
manufacturers such as Intel actively compete for business in this market.

PATENTS, TRADEMARKS AND PROPRIETARY INFORMATION

      The Company  holds a United  States patent  covering  certain  fundamental
aspects  of  the   compressed   packet   video  Codec   incorporated   into  the
Viewpoint-PRO(TM)  system. The Company may apply for additional patents relating
to other aspects of its products. There can be no assurance as to the breadth or
degree of protection  which existing or future  patents,  if any, may afford the
Company,  that any patent  applications will result in issued patents,  that the
Company's  patents will be upheld,  if challenged,  or that competitors will not
develop  similar or superior  methods or products  outside the protection of any
patent issued to the Company.

      The Company believes that product recognition is an important  competitive
factor  and,   accordingly,   the  Company   promotes   the   Viewpoint-PRO(TM),
ViewCast(TM), MultiView(TM), Osprey-1000(TM), SLIC-Video(TM), Viewpoint-VBX(TM),
FamilyFone(TM)  and  WorkFone(TM)  names,  among others,  in connection with its
marketing activities, and has applied for trademark registration for such names.
The Company's  use of those marks may be subject to challenge by others,  which,
if successful, could have a material adverse effect on the Company.

      The Company also relies on confidentiality  agreements with its directors,
employees,  consultants and manufacturers and employs various methods to protect
the source codes, concepts, ideas, proprietary know-how and documentation of its
proprietary  technology.  However,  such  methods  may not  afford  the  Company
complete  protection,  and  there  can be no  assurance  that  others  will  not
independently  develop  similar  know-how  or  obtain  access  to the  Company's
know-how or

                                       9
<PAGE>

software codes,  concepts,  ideas and documentation.  Furthermore,  although the
Company has and expects to continue to have confidentiality  agreements with its
directors, employees, consultants, manufacturers, and appropriate vendors, there
can be no assurance that such arrangements will adequately protect the Company's
trade secrets.

      The Company  purchases  certain  components that are incorporated into its
products  from third party  suppliers and relies on their  assurances  that such
components do not infringe on the patents of others.  A successful claim against
any  components  used in the Company's  products could affect the ability of the
Company to  manufacture,  supply and support its products.  The Company uses its
best efforts to ensure third party supplied components are  non-infringing,  but
there can be no assurances against future claims.

GOVERNMENT REGULATION

      The  Company  is  subject  to  regulations   relating  to  electromagnetic
radiation from its products,  which impose compliance burdens on the Company. In
the event the Company redesigns or otherwise  modifies its products or completes
the  development  of new  products,  it will be required to comply with  Federal
Communications  Commission  regulations with respect to such products,  of which
there can be no assurance  prior to their  commercialization.  In addition,  new
legislation  and  regulations,  as  well  as  revisions  to  existing  laws  and
regulations,  at the  federal,  state and local  levels may be  proposed  in the
future  affecting the video  communications  industries.  Such  proposals  could
affect the Company's operations, result in material capital expenditures, affect
the  marketability of its products and limit  opportunities for the Company with
respect to  modifications  of its  products  or with  respect to new or proposed
products or  technologies.  Expansion into foreign  markets may also require the
Company  to comply  with  additional  regulatory  requirements.  The  technology
contained  in the  Company's  products may be subject to U.S.  export  controls.
There can be no assurance  that such export  controls,  either in their  current
form or as may be  subsequently  enacted,  will not  delay  introduction  of new
products or limit the Company's  ability to distribute  products  outside of the
United  States.  Further,  various  countries may regulate the import of certain
technologies  contained  in the  Company's  products.  Any such export or import
restrictions,  new  legislation  or  regulation  or  government  enforcement  of
existing  regulations  could have a  material  adverse  effect on the  Company's
business,  operating  results  and/or  financial  condition.  There  can  be  no
assurance  that the Company  will be able to comply with  additional  applicable
laws and regulations without excessive cost or business interruption, if at all,
and failure to comply could have a material adverse effect on the Company.

EMPLOYEES

      As of December 31, 1996,  the Company had 39  employees,  4 of whom are in
executive  positions,  23 of whom  are  engaged  in  engineering,  research  and
development,  6 of whom are engaged in marketing and sales  activities  and 6 of
whom are in administration.  None of the Company's employees is represented by a
labor union. The Company considers its employee relations to be satisfactory.

Item 2.  Description of Properties

      The Company's  executive  offices and assembly  operations and some of its
design and  development  activities are located in  approximately  16,159 square
feet of leased space in Dallas,  Texas.  The lease  expires in September of 1997
and provides for a base annual rent of $143,110. Osprey's design and development
activities  are located in  approximately  2,783  square feet of leased space in
Cary,  North Carolina.  The lease expires in December of 1997 and provides for a
base annual rent of $38,334.  The Company  leases an office suite in Burlingame,
California of approximately 100 square feet on a month-to-month basis for a base
annual rent of $4,800. The Company believes that its facilities are adequate for
its current and reasonably  foreseeable  future needs and its current facilities
can accommodate expansion, if required.

Item 3.  Legal Proceedings

      The Company is not  currently a party to any  litigation  that it believes
could have a material adverse effect on the Company or its business.

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

      None

                                       10
<PAGE>




                                     PART II

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

      At December 31, 1996, there was no public trading market for the Company's
Common Stock.

      On February 7, 1997, the Company  completed an initial public  offering of
its Common Stock and Redeemable  Common Stock Purchase Warrants (the "Redeemable
Warrants"). The Common Stock and Redeemable Warrants are currently listed on the
NASDAQ Small Cap Market under the Symbols "MMAC" and "MMACW".

      As of March 26, 1997, there were 107 registered  owners and  approximately
500 beneficial owners of the Common Stock of the Company.

      The Company  declared no cash  dividends in 1995 or 1996. The Company does
not  anticipate  paying  cash  dividends  in the  future as it intends to retain
earnings to finance the growth of the business.  The payment of future dividends
will  depend  on  such   factors  as  earnings   levels,   anticipated   capital
requirements,  the operating  and  financial  condition of the Company and other
factors deemed relevant by the Company's Board of Directors..

Item 6.  Management's Discussion and Analysis of Financial Condition and Results
of Operations

GENERAL

      MultiMedia  Access   Corporation   develops  and  markets  advanced  video
communications  products.  The  Company  delivers   high-performance,   low-cost
products and integrates  video  capabilities  into existing  desktop  computers,
applications and networks. The Company delivers  standards-based video solutions
to the PC and workstation marketplace.

RESULTS OF OPERATIONS

Year Ended December 31, 1996 compared to Year Ended December 31, 1995

      Net Sales.  Net sales for the year ended  December  31, 1996  increased to
$1,095,012  from $285,354  reported for the same period last year. This increase
is the  result  of an  increase  in system  and  product  sales for the  period,
particularly the  Osprey-1000(TM)  and the Viewpoint  VBX(TM),  neither of which
were  available  during the first  half of 1995 and  approximately  $106,000  of
consulting and custom programming revenues during the last half of 1996.

      Cost of Goods Sold. Cost of goods sold increased  $257,537 to $393,918 for
the year ended  December 31, 1996, an increase  that  primarily is the result of
increased product and system sales. The Company realized an overall gross margin
percentage  for 1996 of 64.0% which  represents a substantial  increase from the
52.2%  experienced  during 1995.  This increase can be  attributed  primarily to
consulting  and  custom  programming  revenues  in 1996 that were  substantially
greater than the same period in 1995 and which have little or no associated cost
of goods sold.

      Selling,   General  and  Administrative  Expense.   Selling,  general  and
administrative  ("SG&A")  expense of $2,378,653  for the year ended December 31,
1996 was essentially unchanged from the same period of 1995.

      Research and  Development  Expense.  Research and  Development  expense of
$1,997,146 for the year ended December 31, 1996 was  essentially  unchanged from
the same period in 1995.

      Other  Income  (Expense).  For the year ended  December  31,  1996,  other
expense decreased approximately $330,073 to $513,219 compared to the same period
in 1995.  This decrease is primarily the result of decreased  interest  expense,
reflecting an overall decrease in average borrowings at a slightly lower blended
interest rate.

LIQUIDITY AND CAPITAL RESOURCES

      At  December  31,  1996,  the  Company  had a working  capital  deficit of
$(6,407,318).  Through  December 31, 1996,  the Company was dependent upon loans
from its principal  stockholders,  as well as private placements of its debt and
equity securities, to finance its working capital requirements.

                                       11
<PAGE>




      Net cash used in operating activities for the year ended December 31, 1996
was  $3,751,417.  Increases  in  inventory  were  a  result  of an  increase  in
production levels to meet anticipated sales.

      Cash used in  investing  activities  for the year ended  December 31, 1996
consisted of $184,076 of capital expenditures. At December 31, 1996, the Company
did not have any material commitments for capital expenditures.

      Cash provided by financing activities for the year ended December 31, 1996
was primarily a result of the receipt of the proceeds of the Secured Notes II in
January through February 1996, receipt of the proceeds of the Convertible Bridge
Debt in  September  1996 and the private  placement  of Common  Stock during the
second  quarter of 1996.  At December  31,  1996,  the Company had cash and cash
equivalents of $18,539.

      As discussed in the footnotes to the financial statements, during 1996 the
Company  was  primarily   dependent   upon  debt  financing  from  its  existing
shareholders  and the  private  placement  of  equity  securities  to  fund  its
operations.  The majority of this debt  financing  converted  into equity in the
Company's initial public offering.  On February 7, 1997 the Company completed an
initial public offering of its Common Stock and Redeemable Common Stock Purchase
Warrants and on March 13, 1997 sold the over-allotment  option,  raising a total
of  $5,342,000  of net proceeds.  It is  anticipated  that the proceeds from the
initial public  offering,  together with the cash flow generated from operations
in 1997 will be  sufficient  to fund the  operations of the Company for at least
the next twelve  months.  During 1997,  with the proceeds of the  offering,  the
Company will endeavor to build an effective  marketing  and sales  organization,
develop a network of independent  resellers and achieve market acceptance of its
products at prices and volumes which will,  in the future,  result in profitable
operations. However, the Company expects operating losses to continue until such
time,  if ever,  as gross  margins  from the sales of its  products  exceed  its
development,  selling, administrative and financing costs. In the event that the
Company's plans change or its assumptions change or prove to be inaccurate or if
the proceeds of this offering prove to be  insufficient  to fund operations (due
to  unanticipated  expenses or  difficulties  or otherwise),  the Company may be
required to seek additional  financing  sooner than currently  anticipated.  The
Company has no current  arrangements  with respect to, or sources of, additional
financing. There can be no assurance that existing stockholders will provide any
portion  of  the  Company's  future  financing  requirements.  There  can  be no
assurance  that any  additional  financing  will be  available to the Company on
acceptable terms, or at all. Additional equity financing may involve substantial
dilution to the Company's then existing stockholders.

      The Company  currently has no plans or agreements to seek loan  financing.
The  Company  may choose to seek  additional  financing  to  provide  additional
working capital at some time in the future.  Such financing may include loans or
lines of credit and could include  factoring  agreements.  However,  the Company
believes that the proceeds of the initial public  offering will be sufficient to
meet its capital requirements for at least the next twelve months.

      At December 31, 1996,  the Company had net operating  loss carry  forwards
for federal tax purposes of approximately $11,700,000,  utilization of prior net
operating loss carry forwards is limited after an ownership  change,  as defined
in Section 382, to an annual amount equal to the value of the loss corporation's
outstanding stock immediately before the date of the ownership change multiplied
by the federal  long-term  tax-exempt rate.  Beginning with 1994,  approximately
$790,000  of  the  carry  forward  is  limited  to  utilization  at  a  rate  of
approximately  $300,000  per year.  The  Company may in the future be subject to
further  significant  limitations  on the use of its net  operating  loss  carry
forwards.  In  the  event  the  Company  achieves  profitable  operations,   any
significant  limitation on the  utilization of net operating loss carry forwards
would have the effect of increasing the Company's tax liability and reducing net
income and available cash resources.




                                       12
<PAGE>





                                                                 

Item 7:  Financial Statements



                 MultiMedia Access Corporation and Subsidiaries

                   Index to Consolidated Financial Statements




Report of Independent Auditors................................................14

Consolidated Balance Sheets at December 31, 1995 and 1996.....................15

Consolidated Statements of Operations for the years ended
  December 31, 1995 and 1996..................................................16

Consolidated Statements of Stockholders' Equity (Deficit) for
  the years ended December 31, 1995 and 1996..................................17

Consolidated Statements of Cash Flows for the years ended
  December 31, 1995 and 1996..................................................18

Notes to Consolidated Financial Statements....................................19










                                       13

<PAGE>



                         Report of Independent Auditors



The Board of Directors
MultiMedia Access Corporation

We have  audited the  accompanying  consolidated  balance  sheets of  MultiMedia
Access  Corporation  and  subsidiaries as of December 31, 1995 and 1996, and the
related  consolidated  statements of operations,  stockholders' equity (deficit)
and cash flows for the years then  ended.  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.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  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  financial  position  of
MultiMedia  Access  Corporation and  subsidiaries at December 31, 1995 and 1996,
and the consolidated  results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting principles.




Dallas, Texas                                   ERNST & YOUNG LLP
March 10, 1997






                                       14


<PAGE>
<TABLE>
<CAPTION>
                                   MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
                                            CONSOLIDATED BALANCE SHEETS

                                                                                                                     PRO FORMA AT
                                                                                       DECEMBER 31,                   DECEMBER 31,
                                                                         ---------------------------------------        1996
                                                                                1995                1996            (SEE NOTE 12)
                                                                         -------------------   -----------------   -----------------
                               ASSETS                                                                                (UNAUDITED)
<S>                                                                       <C>                   <C>                 <C>            
Current assets:
  Cash and cash equivalents                                               $          16,605     $        18,539     $     5,899,577
  Accounts receivable, less allowance for  doubtful accounts of
    $30,000 and $43,000 at December 31, 1995 and 1996, respectively                   4,564             185,564             185,564
  Inventory                                                                         197,469             310,133             310,133
  Prepaid expenses                                                                   18,971              46,239              46,239
  Due from debt holder                                                              315,300
                                                                                                              -                   -
  Deferred charges                                                                   44,165             504,295
                                                                                                                            155,666
                                                                         -------------------   -----------------   -----------------
      Total current assets                                                          597,074           1,064,770           6,597,179

Property and equipment, net                                                         485,700             460,895             460,895
Software development costs, net                                                     143,795             147,321             147,321
Deposits                                                                             18,197              18,272              18,272
                                                                         -------------------   -----------------   -----------------

      Total assets                                                        $       1,244,766     $     1,691,258     $     7,223,667
                                                                         ===================   =================   =================

           LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
  Accounts payable                                                        $         580,160     $       682,689     $       622,778
  Accrued compensation                                                              354,268             239,707             239,707
  Deferred revenue                                                                   75,513              15,591              15,591
  Other accrued liabilities                                                         370,398             857,260             597,885
  Short-term debt, officer                                                          364,154             533,089             298,089
  Short-term debt, other                                                             66,633           1,966,202               8,654
  Current portion of long-term debt                                               2,677,550           3,177,550
                                                                                                                                  -
                                                                         -------------------   -----------------   -----------------
      Total current liabilities                                                   4,488,676           7,472,088           1,782,704

Long-term debt                                                                        8,654
                                                                                                              -                   -

Commitments

Stockholders' equity (deficit):
  Preferred stock, $.0001 par value:
    Authorized shares - 5,000,000
    Issued shares - none
                                                                                          -                   -                   -
  Common stock, $.0001 par value:
    Authorized shares - 20,000,000
    Issued and outstanding shares - 4,721,268 and 5,315,811
      at December 31, 1995 and 1996, respectively and 8,167,788
      pro forma at December 31, 1996 (unaudited)                                        472                 532                 817
  Additional paid-in capital                                                      4,736,933           6,602,572          17,824,080
  Accumulated deficit                                                           (7,978,063)        (12,372,028)        (12,372,028)
  Treasury stock,  261,497 shares at December 31, 1995 and 1996                    (11,906)            (11,906)            (11,906)
                                                                         -------------------   -----------------   -----------------
      Total stockholders' equity (deficit)                                      (3,252,564)         (5,780,830)           5,440,963
                                                                         -------------------   -----------------   -----------------

      Total liabilities and stockholders' equity (deficit)                $       1,244,766     $     1,691,258     $     7,223,667
                                                                         ===================   =================   =================
</TABLE>

                            See accompanying notes.

                                       15

<PAGE>
                 MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS



                                                     YEAR ENDED DECEMBER 31,
                                            ------------------------------------
                                               1995                     1996
                                            ----------------- ------------------


NET SALES                                    $       285,354     $    1,095,012

Cost of goods sold                                   136,381            393,918
                                            ----------------- ------------------

GROSS PROFIT                                         148,973            701,094

Operating expenses:
  Selling, general and administrative              2,297,497          2,378,653
  Research and development                         1,983,310          1,997,146
  Depreciation and amortization                      439,752            206,041
                                            ----------------- ------------------
      Total operating expenses                     4,720,559          4,581,840
                                            ----------------- ------------------

OPERATING LOSS                                   (4,571,586)        (3,880,746)

Other income (expense):
  Dividend and interest income                         5,372                 36
  Interest expense                                 (847,905)          (513,979)
  Other                                                (759)                724
                                            ----------------- ------------------
      Total other income (expense)                 (843,292)          (513,219)
                                            ----------------- ------------------

NET LOSS                                     $   (5,414,878)    $   (4,393,965)
                                            ================= ==================

NET LOSS PER SHARE                           $        (1.06)    $        (0.73)
                                            ================= ==================

WEIGHTED AVERAGE NUMBER OF  COMMON AND
  COMMON EQUIVALENT SHARES OUTSTANDING             5,124,411          5,999,752
                                            ================= ==================


                            See accompanying notes.

                                       16
<PAGE>

                 MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES

            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                 FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996

<TABLE>
<CAPTION>

                                                                      ADDITIONAL        STOCK
                                               COMMON STOCK            PAID-IN      SUBSCRIPTIONS   ACCUMULATED       TREASURY
                                          SHARES       PAR VALUE       CAPITAL       RECEIVABLE       DEFICIT          STOCK
                                       ------------   ------------   ------------   ------------    ------------    ------------

<S>                                     <C>          <C>            <C>            <C>             <C>             <C>
BALANCE,  DECEMBER 31, 1994               3,507,231   $        350   $  1,163,274   $       (191)   $ (2,563,185)   $       --

  Payment of stock subscriptions                 --             --             --            191              --            --


  Repurchase of 255,880 shares
    of common stock at par                       --             --             --             --              --           (26)


  Sale of common stock, net
    of expenses                             833,333             83      2,166,811             --              --            --

  Satisfaction of trade receivable
    for 5,617 shares of common stock             --             --             --             --              --       (11,880)

  Exchange of short-term debt
    for common stock                        380,704             39      1,406,848             --              --            --

  Net loss                                       --             --             --             --      (5,414,878)           --

                                       ------------   ------------   ------------   ------------    ------------    ------------
BALANCE,  DECEMBER 31, 1995               4,721,268            472      4,736,933             --      (7,978,063)      (11,906)

  Exchange of short term debt for
    common stock                            221,195             22        571,167             --              --              --

  Sale of common stock,  net of
    of expenses                             304,016             31        896,481             --              --              --

  Exchange of trade payables for
    common stock                             69,332              7        207,991             --              --              --

  Fair market value of warrants
     issued for consulting services
     and inducement of debt                      --             --        190,000             --              --              --

  Net loss                                       --             --             --             --      (4,393,965)             --

                                       ------------   ------------   ------------   ------------    ------------    ------------

BALANCE,  DECEMBER 31, 1996               5,315,811   $        532   $  6,602,572   $       --      $(12,372,028)   $    (11,906)
                                       ============   ============   ============   ============    ============    ============
</TABLE>

<PAGE>

                 MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES

            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                 FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
                                  (Continued)

                                            TOTAL
                                          STOCKHOLDERS'
                                         EQUITY (DEFICIT)
                                          ------------

BALANCE,  DECEMBER 31, 1994               $ (1,399,752)

  Payment of stock subscriptions
                                                   191

  Repurchase of 255,880 shares
    of common stock at par
                                                   (26)

  Sale of common stock, net
    of expenses                              2,166,894

  Satisfaction of trade receivable
    for 5,617 shares of common stock           (11,880)

  Exchange of short-term debt
    for common stock                         1,406,887

  Net loss                                  (5,414,878)

                                          ------------
BALANCE,  DECEMBER 31, 1995                 (3,252,564)

  Exchange of short term debt for
    common stock                               571,189

  Sale of common stock,  net of
    of expenses                                896,512

  Exchange of trade payables for
    common stock                               207,998

  Fair market value of warrants
     issued for consulting services
     and inducement of debt                    190,000

  Net loss                                  (4,393,965)

                                          ============

BALANCE,  DECEMBER 31, 1996               $ (5,780,830)
                                          ============

                            See accompanying notes.

                                       17
<PAGE>
                 MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                     YEAR ENDED DECEMBER 31,
                                                                           ---------------------------------------------
                                                                              1995                     1996
                                                                           ----------------------  ----------------------
<S>                                                                         <C>                     <C>
OPERATING ACTIVITIES:
  Net loss                                                                  $        (5,414,878)    $        (4,393,965)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
      Depreciation of fixed assets                                                       126,443                 155,233
      Amortization of software development                                               222,632                  50,809
      Amortization of patent                                                              90,677                       -
      (Gain) Loss on asset dispositions                                                    1,955                   (687)
      Non-cash charges to interest expense                                               264,777                 165,001
      Inventory reserve adjustment                                                       220,000                 (5,000)
      Write off of deferred charges                                                      376,633                       -
      Changes in operating assets and liabilities:
        Accounts receivable                                                               32,208               (181,000)
        Inventory                                                                       (52,366)               (107,664)
        Prepaid expenses                                                                  17,360                (27,268)
        Due from debt holder                                                           (315,300)                 315,300
        Deferred charges                                                                  38,089               (527,531)
        Deposits                                                                           (368)                    (75)
        Accounts payable                                                                 147,537                 310,527
        Accrued compensation                                                             100,513                  13,220
        Deferred revenue                                                                  58,042                (59,922)
        Other accrued liabilities                                                        219,696                 541,605
                                                                           ----------------------  ----------------------
               Net cash used in operating activities                                 (3,866,350)             (3,751,417)
                                                                           ----------------------  ----------------------

INVESTING ACTIVITIES:
  Purchase of property and equipment                                                   (108,143)               (132,910)
  Software development costs                                                           (156,171)                (54,335)
  Other                                                                                   28,076                   3,169
                                                                           ----------------------  ----------------------
               Net cash used in investing activities                                   (236,238)               (184,076)
                                                                           ----------------------  ----------------------

FINANCING ACTIVITIES:
  Net proceeds from issuance (repayment) of short-term
    debt                                                                               1,096,000               2,550,000
  Net proceeds from issuance (repayment) of short-term
    debt-officer                                                                         345,000                       -
  Other                                                                                  (8,270)                 (9,085)
  Proceeds from issuance of long term-debt                                               500,115                 500,000
  Purchase of treasury stock                                                            (11,906)                       -
  Net proceeds from sale of common stock                                               2,166,894                 896,512
                                                                           ----------------------  ----------------------
               Net cash provided by financing activities                               4,087,833               3,937,427
                                                                           ----------------------  ----------------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                    (14,755)                   1,934

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                            31,360                  16,605
                                                                           ----------------------  ----------------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                    $             16,605    $             18,539
                                                                           ======================  ======================

</TABLE>

                            See accompanying notes.

                                       18
<PAGE>


                 MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)



1. THE COMPANY AND DESCRIPTION OF  BUSINESS

         The accompanying consolidated financial statements include the accounts
of MultiMedia  Access  Corporation  (MMAC),  and its wholly-owned  subsidiaries,
Viewpoint Systems,  Inc.  (Viewpoint),  VideoWare,  Inc.  (VideoWare) and Osprey
Technologies,  Inc.  (Osprey)  (collectively,  the  Company).  MMAC,  Viewpoint,
VideoWare and Osprey were  incorporated  in Delaware in February 1994,  November
1992, September 1994 and September 1995,  respectively.  The Company operates in
one business  segment and is engaged in developing and marketing  advanced video
communications  products that integrate video capabilities into existing desktop
computers,  applications and networks. The Company markets its products directly
to end-users,  through  value-added  resellers and computer system  integrators,
primarily in the continental United States.

         In February 1997, the Company completed an underwritten  initial public
offering of 1,400,000 shares of its Common Stock and 1,400,000 Redeemable Common
Stock Purchase  Warrants (Public  Warrants).  The shares of Common Stock and the
Public  Warrants were sold on the basis of one Public  Warrant for each share of
Common  Stock at a unit  price  to the  public  of  $4.60,  and were  separately
transferable  immediately upon issuance. Each Public Warrant entitles the holder
to purchase one share of Common Stock at $4.50 per share,  subject to adjustment
under certain circumstances,  at any time commencing six months from the date of
the Prospectus through and including five years from the date of the Prospectus.
The Public Warrants are redeemable by the Company, at any time commencing twelve
months  from the date of the  Prospectus,  upon  notice of not less than  thirty
days, at a price of $.10 per Public Warrant,  provided that the closing price or
bid price of the Common  Stock for any twenty  trading  days  within a period of
thirty  consecutive  trading  days  ending  on the fifth day prior to the day on
which the Company gives notice of redemption  has been at least 150%  (currently
$6.75,  subject to adjustment) of the initial public offering price per share of
Common Stock.

          The Company  received net proceeds of $5,342,000  during  February and
March 1997 related to this sale.  The proceeds,  net of expenses  related to the
offering,  are to be used primarily for marketing  activities in connection with
the Company's  products,  to complete the development of additional  product and
software  applications,  for  repayment of certain loans and to fund its working
capital requirements (See Note 12).

         During  1997,  with the  proceeds of the  offering,  the  Company  will
endeavor  to build an  effective  marketing  and sales  organization,  develop a
network of independent  resellers and achieve market  acceptance of its products
at  prices  and  volumes  which  will,  in  the  future,  result  in  profitable
operations. However, the Company expects operating losses to continue until such
time,  if ever,  as gross  margins  from the sales of its  products  exceed  its
development,  selling, administrative and financing costs. In the event that the
Company's  plans  change or prove to be  inaccurate  or if the  proceeds  of the
offering  prove to be  insufficient  to fund  operations,  the Company  could be
required to seek additional financing sooner than currently  anticipated.  There
can be no  assurance  that any  additional  financing  will be  available to the
Company on acceptable terms, or at all. The possible inability to obtain further
financing  would  have a  material  adverse  effect  on the  Company,  including
possibly requiring the Company to curtail or cease its activities.

         Prior to December 31, 1996,  the Company's  financial  statements  were
presented as those of a development stage company.


                                       19

<PAGE>

                 MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)





2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPALS OF CONSOLIDATION

         The  consolidated  financial  statements  include  the  accounts of the
Company and all of its  subsidiaries.  All material  inter-company  accounts and
transactions have been eliminated in consolidation.


CASH AND CASH EQUIVALENTS

         The Company considers all highly liquid  investments  purchased with an
initial maturity of three months or less to be cash equivalents.

INVENTORY

         Inventory  consists  primarily of purchased  electronic  components and
computer  system  products,  along with the  related  documentation  manuals and
packaging  materials.  Inventory  is  carried  at the  lower of cost or  market.
Effective  January 1, 1995, the Company changed its method of costing  inventory
from  the  first-in,  first-out  method  to  the  standard  cost  method,  which
approximates  average cost. This change did not result in any material change in
the valuation of inventory.

PROPERTY AND EQUIPMENT

         Property and equipment is recorded at cost.  Depreciation is determined
using the straight-line  method over the estimated useful lives,  generally five
years,  of the related  assets.  Leasehold  improvements  are amortized over the
lives of the  related  leases.  Expenditures  for repairs  and  maintenance  are
charged to operations as incurred; renewals and betterments are capitalized.

SOFTWARE DEVELOPMENT COSTS

         Costs of developing new software products and substantial  enhancements
to existing  software  products  are  expensed as incurred  until  technological
feasibility has been established, after which time additional costs incurred are
capitalized in accordance with Statement of Financial  Accounting  Standards No.
86,  "Accounting  for the Costs of  Computer  Software  to be Sold,  Leased,  or
Otherwise  Marketed."  Amortization of capitalized  software  development  costs
begins when  products are available  for general  release to  customers,  and is
computed using the straight-line method over a period not to exceed three years.
Amortization expense for the years ended December 31, 1995 and 1996 was $222,632
(including  $155,597 to fully amortize  remaining  costs of a Viewpoint  product
line) and $50,809, respectively.

PATENT

         The Company holds a patent  related to its  proprietary  technology and
trade secrets. The costs associated with obtaining and defending the patent were
amortized on the straight-line  basis over its estimated  remaining life, not to
exceed five years.  During 1995, the Company fully  amortized its patent.  Total
amortization expense for the year ended December 31, 1995 was $90,677.

                                       20


<PAGE>


                 MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)




REVENUE RECOGNITION

         Revenue from the sale of video  communication  systems and licensing of
the related software is recognized upon shipment to customers. With pre-approval
by a return merchandise  authorization,  a customer may return undamaged product
to the Company,  subject to a 30-day money back guarantee. The Company maintains
an accrued warranty reserve for products which are returned defective during the
warranty period.

NET LOSS PER SHARE

         Net loss per share is computed based on the weighted  average number of
common and common equivalent shares outstanding. The Company has computed common
and  common  equivalent  shares in  determining  the  number  of shares  used in
calculating  earnings  per  share  for all  periods  presented  pursuant  to the
Securities and Exchange  Commission Staff Accounting  Bulletin (SAB) No. 83. SAB
No. 83 requires  the Company to include all common  shares and all common  share
equivalents  issued in the 12 month  period  preceding  the  filing  date of the
initial  public  offering  in its  calculation  of the number of shares  used to
determine  earnings  per share as if the  shares  had been  outstanding  for all
periods presented.  Options and warrants issued more than 12 months prior to the
initial public offering have been excluded since their effect is antidilutive.

         Supplemental  loss per share is $.71 for year ended  December 31, 1996,
assuming (1)  issuance of the  securities  sold in February  1997 in the initial
public  offering,  receipt by the Company of the net proceeds thereof and use of
the proceeds to repay $377,548  principal  amount of secured and demand notes at
December 31, 1996, and to repay $247,250  principal  amount of convertible  debt
and (2) weighted  average common and common  equivalent  shares of 6,138,596 for
the year ended December 31, 1996.

         As described in Note 12,  substantially  all the Company's  outstanding
short-term  and  long-term  debt was  converted to common stock in the Company's
initial public offering.  Had those  conversions taken place at the beginning of
1996,  or date of  issuance  of the debt if later,  supplemental  loss per share
would have been $.58 for the year ended December 31, 1996.

DEFERRED CHARGES AND OTHER ASSETS

         During 1995,  the Company  incurred  $333,106 of legal,  accounting and
underwriting  costs in connection with a private placement of common stock which
have been charged against the proceeds from the sale of the common stock. During
1995, the Company wrote off deferred  charges  consisting of legal,  accounting,
underwriting  and printing costs incurred in connection with a canceled  initial
public  offering of common stock which  resulted in a charge  against  income of
$376,633.

         Deferred charges at December 31, 1996 consist of legal,  accounting and
other expenses associated with the initial public offering which was consummated
in February 1997, as well as expenses  incurred in connection  with the issuance
of 8% debt in July through December of 1996.

         During  September  1995,  the  Company  advanced  a debt  holder of the
Company $315,300 which was repaid in the first quarter of 1996.


                                       21

<PAGE>



                 MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


CONCENTRATION OF CREDIT RISK

         The Company invests its cash with financial institutions that include a
Texas  commercial  bank and a commercial  brokerage  firm.  The  brokerage  firm
maintains  accounts in several  banks  throughout  the country and in government
securities.  Cash  balances  at the Texas  commercial  bank are  insured  by the
Federal Deposit  Insurance  Corporation up to $100,000.  The Company believes it
has no significant concentration of credit risk.

USE OF ESTIMATES

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the amounts  reported in the financial  statements  and
accompanying  notes.  Actual results could differ from those  estimates. 


INCOME TAXES

         The Company  utilizes the  liability  method of  accounting  for income
taxes as set forth in  Statement  of  Financial  Accounting  Standards  No. 109,
"Accounting  for Income  Taxes."  Under  this  method,  deferred  tax assets and
liabilities  are  determined  based upon the  differences  between the financial
statement  and tax bases of assets and  liabilities,  as measured by the enacted
tax rates expected to be in effect when these differences reverse.

FAIR VALUE OF FINANCIAL INSTRUMENTS

         The initial public offering  resulted in the conversion to common stock
or  settlement  in  cash  of  substantially  all  of the  Company's  outstanding
short-term and long-term debt. However,  because the initial public offering had
not yet been  completed,  management  was unable to estimate  the fair values at
December 31, 1996 of its short-term and long-term debt.

3.  INVENTORY

         Inventory consists of the following:

                                                        DECEMBER 31,
                                            -----------------------------------
                                                   1995          1996
                                            -----------------------------------

            Purchased materials                  $144,986      $180,149
            Finished goods                         52,483       129,984
                                            -----------------------------------
                                                 $197,469      $310,133
                                            ===================================


         Results  of  operations  for 1995  reflects  a charge of  $220,000  for
technological obsolescence of component parts and finished goods associated with
one of the Company's  early-developed  product lines.  Inventory at December 31,
1995  and  1996  is  presented  net  of a  reserve  of  $220,000  and  $215,000,
respectively.


                                       22

<PAGE>
                 MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)





4. PROPERTY AND EQUIPMENT

         Property and equipment, at cost, consists of the following:

                                                         December 31,
                                             ----------------------------------
                                                     1995            1996
                                             ----------------------------------
      Computer equipment                          $455,055         $519,966
      Software                                      79,552          141,841
      Leasehold improvements                        36,985           36,985
      Office furniture and equipment                85,090           87,630
                                             ----------------------------------
                                             ----------------------------------
                                                   656,682          786,422
      Less accumulated depreciation
        and amortization                          (170,982)        (325,527)
                                             ----------------------------------
                                         
                                                  $485,700         $460,895
                                             ==================================

5. SHORT-TERM DEBT

         Short-term debt consists of the following:
<TABLE>
<CAPTION>


                                                                                          December 31,
                                                                                -------------------------------
                                                                                      1995           1996
                                                                                -------------------------------
<S>                                                                                  <C>           <C>    
          Officer:
            Secured note payable to an officer and affiliate of  
             the Company, due on demand with interest at 15%. 
             Collateralized by all assets of the Company.
                                                                                     $364,154       $533,089
                                                                                ===============================

          Other:
            Secured note payable to an individual investor, due on
             demand with interest at 15%. Collateralized  by all
             assets of the Company.                                                  $ 22,548       $ 22,548


            Convertible  secured debt payable to a principal  
             stockholder of the Company, due on demand 10 days
             subsequent to an initial public offering or 180 
             days after  date of issue,  with  interest  at 8%.
             Collateralized by all assets of the Company.
                                                                                            -        500,000

            Unsecured notes payable to principal stockholders of the 
             Company, due on demand 10 days  subsequent to an initial
             public  offering or 180 days after date of issue, with 
             interest at 8%                                                                 -      1,315,000

            Unsecured , non-interest bearing note payable to
              the Company's underwriter                                                35,000        120,000

            Other                                                                       9,085          8,654
                                                                                -------------------------------
                     Total short-term debt, other                                    $ 66,633     $1,966,202
                                                                                ===============================

</TABLE>

                                       23

<PAGE>

                 MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)




         Between  February and May 1995,  the Company  issued  $1,096,000 of 15%
90-day  secured notes to existing  stockholders,  an officer and director of the
Company and two individual  investors.  The secured notes were collateralized by
all assets of the  Company.  As an  incentive  to lend the  secured  debt to the
Company,  an officer and director  and two former  directors of the Company (all
three founders and  significant  stockholders  of the Company),  sold 202,750 of
their common  shares to the lenders at par value.  The excess of the fair market
value of the shares of $.50 per share as  determined  by  independent  appraisal
sold to the note holders over their purchase price,  was charged to expense over
the term of the notes as additional interest expense.

         During June and July 1995,  $310,000 of 15% unsecured demand notes were
issued to existing stockholders, note holders and an officer and director of the
Company. As an incentive to lend the unsecured debt to the Company,  the Company
issued 77,500 three-year warrants to purchase common stock at $1.00 per share to
the  lenders.  The fair  market  value  of the  warrants  of $.50  per  share as
determined by independent  appraisal,  was charged to interest  expense over the
term of the notes.

         In December  1995,  $791,000 of the secured  notes and  $250,000 of the
unsecured  notes,  along with accrued  interest of $101,109,  were exchanged for
380,704  shares of common  stock plus  520,500  three-year  warrants to purchase
common stock at $1.00 per share.  As determined by  independent  appraisal,  the
fair market value of the equity instruments exchanged equaled the carrying value
of the debt and accrued interest and, accordingly, no gain or loss was recorded.

         Additionally,  in December  1995,  in  connection  with the exchange of
secured notes for demand notes, the Company issued 109,500  three-year  warrants
to  purchase  common  stock at $1.00 per share to the holders of the secured and
unsecured notes remaining outstanding.  103,500 of these warrants were issued to
the Company's Chief Executive Officer.  Based on an independent  appraisal,  the
fair  market  value of these  warrants of $.60 per share was charged to interest
expense.

         In January and February 1996, the Company issued $650,000 of 10% 90-day
secured  notes to an existing  stockholder  of the  Company.  As an incentive to
advance these notes,  the  stockholder  received 65,000  three-year  warrants to
purchase  Company stock at $3.00 per share.  Based on an independent  appraisal,
the fair  market  value of these  warrants  of $.50 per  share  was  charged  to
interest expense over the term of the notes.

         In July 1996,  the Company  issued  $500,000 of 8% secured  convertible
debt to a principal  stockholder of the Company.  The convertible debt is due on
demand 10 days subsequent to an initial public offering of the Company's  equity
securities  or 180 days from date of issue.  As an  incentive  to advance  these
notes, the stockholder  received 50,000 three-year  warrants to purchase Company
stock at $3.00 per share.  Based on an  independent  appraisal,  the fair market
value of these  warrants of $.50 per share is being charged to interest  expense
over the term of the debt.

         Between  September and December of 1996, the Company issued  $1,315,000
of 8% unsecured notes to existing stockholders of the Company. The notes are due
on demand 10 days  subsequent  to an initial  public  offering of the  Company's
equity securities or 180 days from date of issue. As an incentive to advance the
notes, the stockholders received 131,500 three-year warrants to purchase Company
stock at $3.00 per share.  Based on an  independent  appraisal,  the fair market
value of these warrants of $1.00 per share is being charged to interest  expense
over the term of the notes.

         In October 1996, the Company  converted  salary and bonuses of $127,781
and  accrued  interest  of $41,154  owing to its Chief  Executive  Officer  into
$168,935 principal amount of 15% secured notes due in February of 1998.

         Interest  paid was $23,811 and $1,287 for the years ended  December 31,
1995 and 1996, respectively.


                                       24

<PAGE>


                 MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


6. LONG-TERM DEBT

         Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                         December 31,
                                                               ----------------------------------
                                                                        1995            1996
                                                               ----------------------------------

<S>                                                                 <C>              <C>       
                Convertible notes                                   $2,567,300       $2,567,300

                Short-term notes converted
                  to convertible notes                                 110,250          110,250

                Convertible  secured debt
                 payable to a principal  
                 stockholder of the Company,   
                 due January 1998 with interest  
                 at 8% collateralized by all
                 assets of the Company                                       -          500,000

                Other                                                    8,654                -
                                                               ----------------------------------
                                                                     2,686,204        3,177,550
                Less: current portion
                  of convertible notes                               2,677,550        3,177,550
                                                               ----------------------------------
                                                                    $    8,654       $        -
                                                               ==================================
</TABLE>



         In September 1994 the Company began a private  placement of convertible
debt (the  Agreements)  and through  March 31, 1995,  received  $2,567,300.  The
unsecured  convertible  promissory  notes,  which were sold in units of $10,000,
bear  interest at 8%. As of December 31, 1995 and 1996,  all of the  convertible
notes were  scheduled to mature within twelve months and,  therefore,  have been
classified as a current liability.

         The Agreements allow  convertible note holders,  upon a public offering
of the Company's equity securities with proceeds exceeding $2,000,000, the right
to convert  their notes to  registered  equity  securities of the Company at the
public  offering  price and receive  5,000  three-year  warrants to purchase the
Company's common stock at $3.00 per share for each $10,000 unit.  Alternatively,
the convertible note holders may elect to request  repayment of their notes from
the proceeds of the public  offering and receive  3,334  three-year  warrants to
purchase the  Company's  common stock at $3.00 for each $10,000 unit. In June of
1996, holders of $2,430,300 principal amount of the convertible notes elected to
convert into securities hereby and holders of $247,250  principal amount elected
to be repaid from the proceeds of the  offering.  In addition,  by virtue of the
aforementioned  elections,  the  convertible  notes,  which  originally  matured
between March and July of 1996, were extended to the closing date of the initial
public offering.

         In July of 1996, the Company issued $500,000 of 18-month 8% convertible
debt to a principal stockholder of the Company. As an incentive to advance these
notes,  the  stockholder  was  granted  50,000  three-year  warrants to purchase
Company stock at $3.00 per share.  Based on an independent  appraisal,  the fair
market  value of these  warrants of $.50 per share is being  charged to interest
expense over the term of the notes.



                                       25

<PAGE>
                 MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)



8. INCOME TAXES

         The Company  accounts for income taxes in accordance  with Statement of
Financial  Accounting  Standards (SFAS) No. 109,  "Accounting for Income Taxes."
SFAS No. 109  requires a valuation  allowance  to be  recorded  when it is "more
likely than not that some  portion or all of the deferred tax assets will not be
realized."  In the  opinion of  management,  realization  of the  Company's  net
operating loss carryforward is not reasonably assured, and a valuation allowance
of $2,966,000 and $4,625,000  has been provided  against  deferred tax assets in
excess of deferred tax liabilities in the  accompanying  consolidated  financial
statements at December 31, 1995 and 1996, respectively.


         The components of the Company's net deferred taxes are as follows:


<TABLE>
<CAPTION>
                                                                            December 31,
                                                                 -----------------------------------
                                                                       1995              1996
                                                                 -----------------------------------
<S>                                                                 <C>               <C>         
           Deferred tax assets:
                Net operating loss carryforward                     $  2,860,000      $  4,349,000
                Excess of tax over financial statement
                  basis of patent                                         45,000            41,000
                Accruals deductible for tax purposes
                  when paid                                              156,000           236,000
                Excess of  tax over financial statement
                  basis of software development costs                          -            42,000
                                                                 -----------------------------------
                          Total deferred tax assets                    3,061,000         4,668,000
           Less: valuation allowance                                  (2,966,000)       (4,625,000)
                                                                 -----------------------------------
                                                                          95,000            43,000
           Deferred tax liabilities:
                Excess of financial statement over tax
                  basis of property and equipment                         42,000            43,000
                Excess of financial statement over tax
                  basis of software development costs                     53,000                 -
                                                                 -----------------------------------
                          Total deferred tax liabilities                  95,000            43,000
                                                                 ===================================
           Net deferred taxes                                       $          -      $          -
                                                                 ===================================
</TABLE>


         A reconciliation  between the federal income tax benefit  calculated by
applying  U.S.  federal  statutory  rates to net loss and the  absence  of a tax
benefit reported in the  accompanying  consolidated  financial  statements is as
follows:

                                       26

<PAGE>

                 MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

<TABLE>
<CAPTION>

                                                                              December 31,
                                                                 -----------------------------------
                                                                        1995          1996
                                                                 -----------------------------------


<S>                                                                <C>               <C>           
           U.S. federal statutory rate applied to pretax           $  (1,841,000)    $  (1,494,000)
           loss

           Accrued compensation and other accruals                         2,500           (19,000)
           Amortization of patent                                         27,500            (3,000)
           Depreciation of property and equipment                        (27,000)           (5,000)
           Software development costs for financial
              reporting purposes                                         (29,000)          (11,000)
           Net operating loss carryforward not recognized
              for financial reporting purposes                         1,714,000         1,476,000
           Inventory and doubtful account reserves                        50,500             3,000
           Non-deductible interest expenses                               90,000            46,000
           Other                                                          12,500             7,000
                                                                 ===================================
                                                                   $           -     $           -
                                                                 ===================================

</TABLE>

         The Company has a federal income tax net operating loss carryforward of
approximately  $11,700,000  at  December  31,  1996.  Approximately  $2,700,000,
$4,700,000,  and $4,300,000 of the  carryforward  will expire in 2009, 2010, and
2011,  respectively.  The  Company  is  subject to  limitations  existing  under
Internal  Revenue  Code  Section  382  (Change  of  Control)   relating  to  the
availability   of  the  operating  loss   carryforward.   Beginning  with  1994,
approximately  $790,000 of the carryforward  that will expire in 2009 is limited
to utilization at a rate of approximately $300,000 per year.

          No income taxes were paid for the years ended December 31, 1994,  1995
and 1996.


9. STOCKHOLDERS' EQUITY (DEFICIT)

COMMON STOCK

         In  September  1995,  the Company  began a private  placement  of up to
2,666,667 shares of common stock to qualified investors.  In September 1995, the
Company  sold  833,333  shares to an  existing  stockholder  at $3.00 per share.
Proceeds  to the  Company  were  $2,166,894  net of  related  offering  costs of
$333,106.  The  offering  costs have been  charged  against  additional  paid-in
capital.  As  described  in Note 6, in  December  1995 and March  1996,  certain
secured and demand note holders of the Company exchanged $1,805,698 of notes and
accrued  interest for 601,899 shares of common stock and 520,500 warrants in the
offering.  In April through June of 1996, the Company sold 304,016 shares of the
offering to  individual  investors  at $3.00 per share.  Proceeds to the Company
were  $912,054.  Additionally,  in May and June of 1996,  the Company  converted
$208,000 of accounts payable into 69,332 shares of the offering at $3 per share.


                                       27

<PAGE>
                 MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)



STOCK OPTION PLAN

         In April  1995,  the  Company  adopted  its 1995 Stock Plan (1995 Stock
Option  Plan) under which  2,000,000  shares of the  Company's  common stock are
reserved for issuance to officers, key employees and consultants of the Company.
The objectives of the stock plan are to attract and retain  qualified  personnel
for  positions  of  substantial   responsibility,   and  to  provide  additional
incentives to employees and  consultants to promote the success of the Company's
business.  Options  granted  under the plan may be  incentive  stock  options or
non-qualified stock options. The plan is administered by the Board of Directors.
The options are granted at the discretion of the Board of Directors at an option
price per share not less than fair market  value,  as determined by the Board of
Directors, at the date of grant.

         In April 1995,  the Company also adopted the 1995 Director  Option Plan
under which  250,000  shares of the  Company's  common  stock are  reserved  for
issuance to outside directors of the Company. The objective of the director plan
is to attract and retain qualified personnel for service as outside directors of
the  Company,  and to  encourage  their  continued  service to the  Board.  Only
non-qualified stock options may be granted.  Grants under the plan are automatic
and nondiscretionary,  and are issued at an option price per share not less than
fair market value, as determined the Board of Directors, at the date of grant.

         Following is a summary of stock option  activity from December 31, 1994
through December 31, 1996:

<TABLE>
<CAPTION>

                                                                         Stock Options
                                                   ---------------------------------------------------------
                                                                                              Weighted-
                                                                                               Average
                                                          Number            Price Per       Exercise Price
                                                        of Shares             Share           Per Share
                                                   ---------------------------------------------------------
<S>                                                        <C>            <C>                    <C>           
       Outstanding at December 31, 1994                    1,643,536      $ .04 - 3.00           $2.25

       Granted                                               693,258              3.00            3.00
       Exercised                                                   -                 -               -
       Forfeited                                             507,020       2.20 - 3.00            2.46
                                                   ---------------------
       Outstanding at December 31, 1995                    1,811,774        .04 - 3.00            2.48

       Granted                                               870,400       3.00 - 4.00            3.32
       Exercised                                                   -
       Forfeited                                             588,213        .20 - 3.00            2.55
                                                   ---------------------
        Outstanding at December 31, 1996                   2,093,961      $ .04 - 4.00           $2.81
                                                   =====================
</TABLE>

         The weighted average grant-date fair value of options granted was $0.76
and $0.86 for the years ended December 31, 1995 and 1996, respectively.

         At December 31, 1996, 727,928 stock options at prices ranging from $.04
to $3.00 with a weighted-  average exercise price of $2.29 and  weighted-average
remaining contractual life of 8.50 years were exercisable.


                                       28

<PAGE>


                 MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


WARRANTS

         The Company has issued warrants to purchase common stock of the Company
in  connection  with  certain  notes  payable  (as  described  in Note 5) and as
compensation  for  services  rendered  by various  consultants  and a  financial
consulting  firm  controlled by an officer,  director,  and  stockholder  of the
Company.  All  warrants  issued  prior  to 1995  have  been  exercised  with the
exception of the rights  available to  convertible  debt holders as described in
Note 6. The  following is a summary of warrant  activity  from December 31, 1994
through December 31, 1996:

<TABLE>
<CAPTION>


                                                                             Warrants
                                                    -----------------------------------------------------------
                                                                                                Weighted-
                                                                                                 Average
                                                         Number of          Price Per        Exercise Price
                                                          Shares              Share               Share
                                                    -----------------------------------------------------------
<S>                                                       <C>             <C>                     <C>                  
        Outstanding at December 31, 1994                          -       $       0.00            $   0.00
                                                                                  

        Granted                                           1,147,500        1.00 - 3.00                1.77
        Exercised                                                 -                  -                   -
                                                    --------------------
        Outstanding at December 31, 1995                  1,147,500        1.00 - 3.00                1.77

        Granted                                             376,505               3.00                3.00
        Exercised                                                 -                  -                   -
                                                    --------------------
        Outstanding at December 31, 1996                  1,524,005      $ 1.00 - 3.00            $   2.07
                                                    ====================
</TABLE>

         At December 31, 1996,  1,449,005  warrants at prices ranging from $1.00
to $3.00 with a weighted-average exercise price of $2.02 were exercisable.

         Statement of Financial  Accounting  Standards No. 123,  "Accounting For
Stock Based  Compensation,"  (SFAS123)  requires the disclosure of pro forma net
income  and  earnings  per share  information  computed  as if the  Company  had
accounted for its employee stock options granted subsequent to December 31, 1994
under the fair  value  method  set forth in SFAS 123.  The fair  value for these
options  was  estimated  at the date of grant  using  the  Black-Scholes  option
pricing model with the following weighted-average assumptions for 1995 and 1996,
respectively:  risk-free  interest  rates of 6.4% and 6.1%,  expected  life of 5
years,  zero dividend yield.  Because the Company was not a public company until
February  1997,  the minimum value method  provided by SFAS 123 was utilized for
1995 and 1996 assuming no volatility.

         The  Black-Scholes  option  valuation  model was  developed  for use in
estimating the fair value of traded  options which have no vesting  restrictions
and are fully  transferable.  In addition,  option  valuation models require the
input of highly  subjective  assumptions.  Because the Company's  employee stock
options  have  characteristics  significantly  different  from  those of  traded
options,  and because changes in the subjective input assumptions can materially
affect the fair value estimated, in management's opinion, the existing models do
not  necessarily  provide a  reliable  single  measure  of the fair value of its
employee  stock  options.  In addition,  because SFAS 123 is applicable  only to
options  granted  subsequent  to December  31, 1994,  the pro forma  information
presented  below is not  necessarily  indicative  of the effects on reported net
income in future years.


                                       29

<PAGE>

                 MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)



         For purposes of pro forma disclosures,  the estimated fair value of the
options is  amortized  to expense  over the options  vesting  period.  Pro forma
information for the years ended December 31, 1995 and 1996 is as follows:
<TABLE>
<CAPTION>

                                                          DECEMBER 31,
                                                   1995                 1996
                                           -------------------- -------------------
<S>                                            <C>                 <C>          
         Pro forma net loss                    $ (5,506,909)       $ (4,597,827)
         Pro forma net loss per share          $      (1.09)       $      (0.78)
</TABLE>



10. COMMITMENTS AND CONTINGENCIES

         The Company leases office  facilities  under  non-cancelable  operating
leases  extending  through 1998 with an average  monthly rental of $15,793.  The
landlords  pay all  operating  costs and real estate taxes  associated  with the
office leases,  which are subject to cost  escalation not to exceed 4% annually.
The  Company  is  amortizing  the total rent  payments  over the lease term on a
straight-line  basis.  The  Company  also  leases  certain  office and  computer
equipment under non-cancelable  operating leases. Future minimum operating lease
payments with initial or remaining terms of one year or more are as follows:

                                                      OPERATING
                                                        LEASES
                                                   ----------------

             Year ended December 31:
                1997                                   $176,715
                1998                                     14,843
                                                   ----------------
             Total minimum lease payments              $191,558
                                                   ================

         Rent expense was $233,305 and $247,765 for the years ended December 31,
1995 and 1996, respectively.

         The Company  has entered  into an  employment  contract  with its Chief
Executive  Officer  through  February  1999 that  provides for a minimum  annual
salary and  incentives  based  generally  on the  Company's  performance.  Total
compensation,  including  incentives,  which was accrued and included in accrued
compensation in the accompanying  consolidated  financial statements at December
31, 1995 was  $112,929.  No amounts  were accrued at December 31, 1996 (See Note
5).

11. RELATED PARTY TRANSACTIONS AND OTHER MATTERS

         In February  1994 the Company  entered  into two  five-year  consulting
agreements  with two of its  former  directors,  pursuant  to which the  Company
agreed to pay monthly  consulting  fees of $5,000 to each  individual.  In March
1995 one of these consulting  agreements was canceled with no further  liability
to the Company.  In June 1996, the Company converted $80,000 of accounts payable
owed on the remaining consulting agreement into 26,666 shares of common stock at
$3.00 per share. By mutual agreement, effective May 1, 1996 consulting fees from
the remaining consulting contract were suspended until the effective date of the
initial public offering.  Consulting fees charged to expense with respect to the
aforementioned  agreements  for the years ended  December 31, 1995 and 1996 were
$72,500  and  $20,000,  respectively.  Consulting  fees of $72,500  and  $12,500
remained accrued at December 31, 1995 and 1996, respectively.


                                       30

<PAGE>


                 MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


         In May 1996, the Company issued 5,005  three-year  warrants to purchase
Company  stock at $3.00 per share to a company  which is partially  owned by the
Chief   Executive   Officer  of  the  Company.   The  warrants  were  issued  as
consideration  for  consulting  services  rendered  during 1996. The fair market
value of the warrants of $.50 as determined by independent appraisal and fees of
$2,503  were  charged to expense  during  1996.  Consulting  fees of $11,692 and
$8,130  remained  accrued  at  December  31,  1995 and  1996,  respectively  for
consulting  services rendered during 1994.  Additionally,  $12,500 and $3,562 of
consulting fees were paid in 1995 and 1996, respectively for consulting services
rendered in 1994.

         From October  1994 through  January  1995,  the Company  issued to four
principal stockholders,  a principal stockholder and director of the Company and
the spouse of another  principal  stockholder and former  director,  convertible
notes totaling  $1,905,000  under the terms described in Note 6. Holders of this
debt elected to convert their convertible notes into common stock of the Company
at the initial offering price per share upon  consummation of the initial public
offering.

         From February  through April 1995, the Company issued to five principal
stockholders  of the Company secured notes totaling  $1,070,000  under the terms
described in Note 5. During December 1995,  $781,000 of these secured notes were
exchanged for equity securities of the Company under the terms described in Note
5.

         During  June and July  1995,  the  Company  issued  to three  principal
stockholders  of the Company  demand  notes  totaling  $310,000  under the terms
described in Note 5. During December 1995,  $250,000 of these secured notes were
exchanged for equity securities of the Company under the terms described in Note
5.

         In  January  and  February  1996,  the  Company  issued to a  principal
stockholder of the Company,  secured notes totaling  $650,000 under the terms as
described in Note 5. During March 1996,  these secured notes were  exchanged for
equity securities of the Company under the terms described in Note 5.

         During July 1996, the Company issued $1,000,000 of secured  convertible
debt to a principal  stockholder  of the  Company.  The  convertible  debt bears
interest at 8% . Principal of $500,000  matures on demand 10 days  subsequent an
initial public offering of the Company's equity securities or 180 days from date
of issue,  and the balance matures in 18 months.  As an incentive to advance the
debt, the stockholder was issued 100,000 three-year warrants to purchase Company
stock at $3.00 per share.

         During  July  1996,  the  Company  issued to a  stockholder  and former
director of the Company, 75,000 three-year warrants to purchase Company stock at
$3.00 per share  pursuant  to the terms of a  consulting  agreement  more  fully
described in Note 10. Based on an independent  appraisal,  the fair market value
of these warrants of $15,000 was charged to consulting fees in 1996.

         During October 1996, the Chief Executive  Officer of the Company agreed
to defer  receipt of  $164,154  principal  amount of Secured  and Demand  Notes,
accrued  interest of $41,154 and  accrued  salary and bonuses of $127,781  until
February of 1998 under the terms described in Note 5.

         In November  and  December  of 1996,  the  Company  issued  $700,000 of
unsecured debt to two principal  stockholders of the Company. The unsecured debt
bears  interest  at 8% and  matures on demand 10 days  subsequent  to an initial
public offering of the Company's equity  securities or 180 days from the date of
issue. As an incentive to advance the debt, the stockholder's were issued 70,000
three-year warrants to purchase Company stock at $3.00 per share.

                                       31


<PAGE>


                 MULTIMEDIA ACCESS CORPORATION AND SUBSIDIARIES

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)



12. Subsequent Events and Pro Forma Adjustments to Balance Sheet (Unaudited)

         In January  and  February  of 1997,  the  Company  issued  $600,000  of
unsecured debt to two principal  stockholders of the Company. The unsecured debt
bears  interest  at 8% and is due on demand  10 days  subsequent  to an  initial
public offering of the Company's equity  securities or 180 days from the date of
issue. As an incentive to advance the debt, the stockholders  were issued 60,000
three-year warrants to purchase Company stock at $3.00 per share.

         The pro forma balance sheet as of December 31, 1996  (unaudited)  gives
effect to the  following  transactions  in  connection  with the initial  public
offering which occurred in February 1997:

o  Issuance of $600,000 of additional 8% bridge notes.
o  Receipt of net proceeds of $5,342,000  from the issuance of 1,400,000  shares
   of Common Stock and 1,400,000 Public Warrants in the initial public offering,
   and 210,000 shares of Common Stock and 210,000 Public  Warrants upon exercise
   of the underwriters over-allotment option.
o  Conversion of $5,345,300  principal  amount of  convertible  and bridge notes
   together with accrued  interest of $367,827 into  1,241,977  shares of Common
   Stock and Public Warrants in the offering.
o  Repayment  of $247,250  principal  amount of  convertible  notes and $377,548
   principal  amount of secured and demand  notes  together  with total  accrued
   interest of $209,473.










                                       32
<PAGE>

Item  8.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
          Financial Disclosure

     There  have been no  disagreements  concerning  any  matter  of  accounting
principle  or  financial  statement  disclosure  between  the  Company  and  its
independent auditors.


                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        with Section 16 (a) of the Exchange Act.

     The  information  required by this item is  incorporated  by  reference  to
disclosure in the Company's  Proxy  Statement cl to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A within 120 days after the end
of the fiscal year covered by this report ("Proxy Statement").

Item 10. Executive Compensation
               
     The  information  required by this item is incorporated by reference to the
Proxy Statement.

Item 11. Security Ownership of Certain Beneficial Owners and Management

     The  information  required by this item is incorporated by reference to the
Proxy Statement.

Item 12.  Certain  Relationships  and  Related  Transactions

     The infomation  required by this item is  incorporated  by reference to the
Proxy Statement.
               
Item 13.  Exhibits and Report on Form 8-K

     a)  Exhibits

         See Exhibit index.

     b)  Reports on Form 8-K 

         None





                                       33


<PAGE>




                                   SIGNATURES
                                ---------------

     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

               Date                    MultiMedia Access Corporation
              ------

        March 28, 1997                 By: /s/ William S. Leftwich
                                          ------------------------------------
                                           William S. Leftwich
                                           Chief Financial Officer and
                                           Asst.  Secretary


     In  accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  registrant and in the capacities and on
the dates indicated.

               Date                     MultiMedia Access Corporation
              ------

           March 28, 1997               By: /s/ Glenn A. Norem
                                           ------------------------------------
                                            Glenn A. Norem
                                            Director and Chief Executive Officer


           March 28, 1997               By: /s/ William S. Leftwich
                                           ------------------------------------
                                            William S. Leftwich
                                            Chief Financial Officer and
                                            Asst.  Secretary


           March 28,1997                By: /s/ William D. Jobe
                                           ------------------------------------
                                            William D. Jobe
                                            Director and Chairman of the Board


           March 28, 1997               By: /s/ Joe C. Culp
                                           ------------------------------------
                                            Joe C. Culp
                                            Director




                                       34


<PAGE>



                                  EXHIBIT INDEX

                                                                    Sequential
Exhibit                                                              Page
Page No                      Description of Exhibit                  Number
-------                                                             ----------

1       Form of Underwriting Agreement (1)
2       Agreement and Plan of Merger and Reorganization (1)
3(a)    Certificate of Incorporation (1)
3(b)    Amendment to Certificate of Incorporation (1)
3(c)    Restated  By-Laws (1)
4(a)    Form of Common Stock  Certificate  (1)
4(b)    Form of Warrant  Certificate (1)
4(c)    Form of Warrant  Agreement  between the Company and
        Continental Stock Transfer & Trust Company (1)
4(d)    Form of  Representative's Warrant Agreement (1)
5       Opinion of The Stoppelman Law Firm, P.C. on Legality
        of Securities Being Registered (1)
9(a)    Voting Trust  Agreement  between Robert M. Sterling,
        Jr. and Thomas E. Brown (1)
9(b)    Voting Trust  Agreement  between  Robert P. Bernardi
        and Richard Bernardi (1)
9(c)    Form of Lock-Up Agreement (1)
9(d)    Lock-Up Agreement with Robert Sterling Trust (1)
9(e)    Lock-Up Agreement with Robert Bernardi Trust (1)
9(f)    Lock-Up Agreement with Michael Nissenbaum (1)
10(a)   Modified  Employment  Agreement  between the Company
        and Glenn A. Norem (1)
10(b)   Modified  Consulting  Agreement  between the Company
        and Sterling Capital Group Inc. (1)
10(c)   Form  of   Indemnification   Agreement  between  the
        Company and Executive Officers and Directors (1)
10(d)   1995 Stock Option Plan (1)
1O(e)   1994 Stock Option Plan (1)
10(f)   1993  Viewpoint  Stock Plan (1) 
10(g)   1995  Director Option Plan (1)
10(h)   Lease  Agreement   between  the  Company  and  Metro
        Squared, L P(1)
10(i)   Employee  Stock Purchase Plan (1)
10(j)   Licensing  Agreement  between  the  Company and Boca
        Research, Inc. (1)
10(k)   Agreement  between the Company and UniSyS(TM)  (1)  
10(l)   Employment  Agreement between the Company and Philip
        M. Colquhoun (1)
10(m)   Employment Agreement between the Company and William
        S. Leftwich (1)
10(n)   Employment  Agreement  between the Company and David
        T. Stoner (1)
10(o)   Employment  Agreement  between  the Company and Neal
        Page (1)
10(p)   Employment  Agreement  between  the  Company  and A.
        David Boomstein (1)
1O(q)   Employment  Agreement between the Company and Daniel
        W. Dodson (1)
10(r)   Lease  between  the  Company  and  Burlingame   Home
        Office, Inc. (1)
10(s)   Lease   between  the   Company   and  Family   Funds
        Partnership (1)
10(t)   Agreement between the Company and Catalyst Financial
        Corporation (1)
10(u)   Promissory  Note by the  Company  payable  to Robert
        Rubin dated September 5, 1996. (1)
10(v)   Promissory Note by the Company payable to M. Douglas
        Adkins dated November 15, 1996. (1)
1O(w)   Promissory  Note  by the  Company  payable  to  H.T.
        Ardinger dated November 15, 1996. (1)
1O(x)   Promissory  Note  by the  Company  payable  to  H.T.
        Ardinger dated January 15, 1997. (1)
10(y)   Promissory  Note by the  Company  payable  to Adkins
        Family Partnership, Ltd. dated January 15, 1997. (1)
11      Calculation of Net Loss Per Share 
21      List of Subsidiaries of the Company (1) 
27      Financial Data Schedule




(1)Incorporated by reference to the Registration  Statement on Form SB-2 and all
   amendments thereto as declared effective on February 4, 1997.



                             35