EXHIBIT 99.3








                           FOCUS Enhancements Restates
                           Prior Financial Statements
            Restatement Will Not Affect Fiscal 1997 Operating Results



SUDBURY,  MASS.,  October 20, 1997 - FOCUS  Enhancements,  Inc.  (NASDAQ:  FCSE,
FCSEW) announced today that the Company will restate previously issued financial
statements  for the  fiscal  year  ended  December  31,  1996 as well as for the
quarters ended March 31, 1997 and June 30, 1997.

The prior period  adjustments  result from a review of the  Company's  financial
statements  conducted by The Nasdaq Stock Market. As a result of the review, the
Company  concluded that its recording of barter credits  totaling  approximately
$1.2  million as "Other  Assets" at  December  31,  1996 was  inconsistent  with
generally accepted  accounting  principles.  The Company had recorded the barter
credits as an asset based on the estimated fair value of the inventory exchanged
which was  determined by  management's  interpretation  and  application  of the
accounting  literature.  The Nasdaq Stock  Market  disagreed  with  management's
application  of the  accounting  literature,  and as a result,  the Company will
reduce the amount  reported as "Other Assets" by  approximately  $1.2 million on
the balance sheets for December 31, 1996, March 31, 1997, and June 30, 1997.

In connection  with the  restatements,  the Company will also record at December
31, 1996 additional reserves,  totaling  approximately  $400,000,  for potential
stock  balancing and other  product  return  transactions.  Although the Company
provides  allowances  for  potential  uncollectible  amounts,  estimated  future
returns,  exchanges  and  price  protection  credits  (as noted in Note 2 of the
Company's  audited  financial  statements),  it  did  not  provide  for  returns
resulting from stock balancing  transactions  as required by generally  accepted
accounting  principles.  As a result of the Company's  discussions  with Nasdaq,
management agreed to provide additional reserves for estimated returns resulting
from stock balancing transactions and amended its revenue recognition accounting
policy.

As  restated,  the  Company's  net loss  for  fiscal  1996  will  increase  from
$9,208,431  to  $10,772,410.  The  restatements  will not affect  the  operating
results for the quarters ended March 31, 1997 and June 30, 1997.

          (a table summarizing the impact of the restatements follows)


<PAGE>



FOCUS Enhancements, Restate Prior Financial Statements                 Page 2

<TABLE>
<CAPTION>
                                             FOCUS Enhancements, Inc.
                                       Restatements of Financial Statements


                                                             Three Months     Three Months        Three Months      Three Months
                             Year Ended       Year Ended       Ended            Ended               Ended              Ended
                            December 31,     December 31,     March 31,        March 31,           June 30,            June 30,
                                1996             1996           1997             1997                1997                1997
                             As Reported     As Restated     As Reported      As Restated         As Reported        As Restated
                             -----------     -----------     -----------      -----------         -----------        -----------

<S>                         <C>             <C>             <C>                <C>                <C>                <C>         
Net sales                   $ 15,076,368    $ 15,076,368    $  4,801,550       $  4,801,550       $  6,124,867       $  6,124,867
Net income (loss)             (9,208,431)    (10,772,410)         16,476             16,476            231,707            231,707
Net income (loss)                                                                                                   
     Primary                $      (1.01)   $      (1.18)   $          0       $          0       $        .02       $        .02
     Fully diluted          $      (1.01)   $      (1.18)   $          0       $          0       $        .02       $        .02
Total current assets           6,246,669       5,846,669       8,926,570          8,525,570         10,070,488          9,644,998
Total assets                   9,471,346       7,907,367      12,319,747         10,755,768         13,533,748         11,969,769
Total current liabilities      6,854,178       6,854,178       7,669,750          7,669,750          8,670,640          8,670,840
Total liabilities              6,934,844       6,934,844       7,744,597          7,744,597          8,711,426          8,711,426
Total liabilities and                                                                                               
  stockholders' equity         9,471,346       7,907,367      12,319,747         10,755,768         13,533,748         11,969,769
                                                                             
</TABLE>

FOCUS Enhancements,  Inc. is an industry leader in the development and marketing
of  advanced,  proprietary  video  scan  conversion  products  for  the  rapidly
converging,   multi-billion  dollar  computer  and  television  industries.  The
Company's   products,   which  are  sold  globally  through  Original  Equipment
Manufacturers  (OEMs)  and  resellers,  merge  computer-generated  graphics  and
television   displays   for   presentations,    training,    education,    video
teleconferencing,  internet viewing,  and home gaming markets. In addition,  the
Company  is  developing  a family of  products  that  will  enable  the  current
installed base of  televisions,  VCRs,  and  camcorders to remain  functional in
upcoming HDTV environments.

Forward-looking  statements  in this  release  are made  pursuant  to the  "safe
harbor"  provisions  of the Private  Securities  Litigation  Reform Act of 1995.
Investors are cautioned that such  forward-looking  statements involve risks and
uncertainties  including,  without  limitation,   continued  acceptance  of  the
Company's  products,  increased  levels  of  competition  for the  Company;  new
products and technological  changes,  the Company's  dependence upon third-party
suppliers,  intellectual  property  rights and other risks detailed from time to
time in the Company's  periodic  reports filed with the  Securities and Exchange
Commission.

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